A very recent decision of the District Court of Queensland has the ability to cause a lot of angst among bodies corporate and Body Corporate Managers.
It has always been understood that there is a positive obligation on a Body Corporate, contained within the Body Corporate and Community Management legislation, to recover outstanding contributions from a lot owner and to start proceedings to recover the amount if the amount has been outstanding for 2 years. The obligation is worded such that the proceedings must be started within 2 months of the end of that 2 year period. (Section 145 of the Standard Module and equivalent sections in the other Modules). This has widely been considered to mean that although, strictly speaking, the legislation requires the Body Corporate to commence proceedings in that time, this time frame was to ensure that the money was, in fact, recovered in timely fashion.
The decision of Body Corporate for Mount Saint John Industrial Park CTS 18632 v Superior Stairs and Joinery Pty Ltd has clarified this obligation and the Judge has ruled that if the action is not commenced within that 2 year and 2 month time frame, any recovery action is actually statute barred.
This goes against the industry understanding that, whilst the Body Corporate is compelled to take action in a certain time period to be fair to lot owners who have paid, it is still open to commence recovery action at any time within the 6 years provided for in the Limitation of Actions Act.
The Judge has made a comparison between section 145 of the Standard Module and s242 of the Body Corporate and Community Management Act, which is headed “Time Limit on certain adjudication applications” and come to the conclusion that as the wording used in both sections is basically the same, the time frame in s145 of the Standard Module (and equivalent sections in the other Modules) is a strict time limit.
The Judge states in the reasons for decision:
“The plain reading of s145 of the Standard Module means that if a Body Corporate does not commence proceedings before two years and two months from when the levy became outstanding, then the body corporate is precluded from commencing proceedings and is not entitled to recover relief from a lot owner by a proceeding.”
A failure to comply with the requirements of the legislation in a strict sense, has sometimes been excused by adjudicators and judges in other decisions on the basis of common sense and that to hold a committee or body corporate to a strict compliance with the legislation may be impractical, often due to ignorance. However, the Judge in this decision has not entertained that reasoning here. As matter of “statutory construction” the wording is clear.
In practice moving forward this means that all Body Corporates (and Body Corporate Managers) must keep a tight rein on outstanding debts and be prepared to commence proceedings within the stated time frame of 2 years and 2 months.
Other ramifications from having a body corporate debt would, it is assumed, still apply to the lot owner.
If you would like assistance with strategies to ensure the debts do not “go stale” or if you would like any further information on this, or other body corporate matters, please contact Jane Macdonnell of McColm Matsinger Lawyers.