Debt Disputes – The Grove Decision Case Study
A ‘debt dispute’ is a dispute about the recovery of a debt under the Act by a body corporate from an owner. Generally speaking, a body corporate may commence QCAT or court proceedings to recover debts owed by an owner and, while a debt dispute may be brought to our office for conciliation, our adjudicators do not have jurisdiction to deal with debt disputes.
This gives rise to a relatively common question about whether a dispute can proceed to adjudication if the owner has already paid an amount to the body corporate and the owner is seeking reimbursement? Adjudicators’ decisions generally indicate that disputes about reimbursement of an amount that has already been paid by an owner to a body corporate may fall within an adjudicator’s jurisdiction.
However, a 2019 QCAT decision held that an amount paid by an owner to a body corporate may not be recoverable if it was paid voluntarily despite the owner believing they did not owe the amount, or without regard to whether they had a legal obligation to pay the amount. The QCAT decision related to a 2017 adjudication application by a lot owner at The Grove seeking reimbursement of an amount paid to the body corporate for cleaning. The application was considered by the adjudicator and an order made in favour of the owner for the reimbursement. However, this decision was subsequently overturned in QCAT because the owner had paid the amount to the body corporate voluntarily, and not as a mistake.
Read about an adjudicator’s order which was successfully appealed at QCAT regarding an owners request to seek reimbursement for a cleaning bill.
You can also read more about debt recovery and debt disputes on our website:
· Practice direction 24 – Debt disputes
The Body Corporate for The Grove CTS9356 v Comerford [2019] QCATA 172 (The Grove)
The Grove appeal decision by the Queensland Civil and Administrative Tribunal (QCAT) is one to consider! In what was in essence a dispute over who should pay a cleaning bill, QCAT decided that the owner who had paid the bill could only be reimbursed if the payment had been made ‘under a mistake’ – and overturned the adjudicator’s decision.
What were the facts?
The owner had done some renovations, causing release of hazardous silica dust. A Queensland Government inspector issued an improvement notice to the body corporate to clean up the dust.
The body corporate cleaned up the dust and then issued the lot owner with a cleaning bill for over $4000, which he paid, and then later disputed through a Body Corporate and Community Management (BCCM) adjudication application.
In The Grove [2018] QBCCMCmr 157 the adjudicator ordered that the body corporate reimburse the lot owner because it had no basis under the BCCM legislation to charge the lot owner the cost of the cleaning.
What did QCAT decide?
QCAT agreed with the adjudicator that there was no basis under the BCCM legislation for the body corporate to charge the lot owner the cost of the cleaning. However, QCAT further decided that, as the lot owner had not made the payment ‘under a mistake’, the adjudicator’s order for the body corporate to reimburse the owner should be overturned.
QCAT considered the lot owner’s payment of the cleaning bill had been voluntary because he had been prepared to pay the bill either on the assumption that he was obliged to or, regardless of whether this was the case, because the body corporate believed it was entitled to the lot owner’s payment. It stated: “A payment which is ‘voluntary’ will not be recoverable on the ground of mistake. This reflects the policy that the law wishes to uphold bargains and enforce compromises freely entered into. A ‘voluntary’ payment is one made in satisfaction of an honest claim.” [para 26, citations removed]
Has the decision been applied since?
In Unison At Waterfront, Newstead [2020] QBCCMCmr 86, the adjudicator dismissed an owner’s dispute application seeking reimbursement for lost discounts, penalty interest and recovery costs for “want of jurisdiction”, on the basis that the application amounted to a debt dispute within the meaning of section 229A of the Body Corporate and Community Management Act 1997. However, the Adjudicator did also comment that even if he had not made that finding, he would have considered The Grove decision and “…likely would have dismissed the application anyway…[as] it appears that Mr Wilson voluntarily paid the disputed amount to the body corporate despite his misgivings about whether the body corporate was truly entitled to it.” [para 7]
What does this mean?
This means that if an owner or occupier voluntarily pays an amount that they do not think the body corporate is entitled to charge them, they may not be entitled to later recover the amount. There is now precedent that even where the amount in dispute could never have been claimed under the BCCM legislation, a payment of the disputed amount made voluntarily and not as a mistake may not be ordered to be reimbursed. It’s worth considering before you pay.
If you have further body corporate questions you can submit an enquiry or phone the information service on 1800 060 119 (freecall).
This article was contributed by The Office of the Commissioner for Body Corporate and Community Management
If you would like further information or have a question about this article, please contact the Office of the Commissioner for Body Corporate and Community Management by phone on 1800 060 119 or by submitting an online enquiry at www.qld.gov.au/bodycorporatequestion
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Thankyou Commissioner for an excellent article. Beware however Bodies Corporate that think they are not accountable for mistaken claims! A close analysis of ‘David Securities’, and the cases after it, makes clear that the guiding principle for a ‘voluntary’ payment is not ignorance or sloth, but volition. The ‘Grove’ is a little unique in that both parties were self-represented on appeal, and despite being asked to, Mr Comerford did not put on the crucial evidence; that but for his mistaken understanding that he was legally obliged to pay, he would not have made the payment; see para [32] of the decision.
That crucial shortcoming in the evidence left the door open for what is, in practice, an unusual circumstance; the only evidence before the Tribunal being that the debtor had turned their mind to the obligation to pay, had disputed payment but had decided to pay anyway.
Those acts on Mr Comerford’s part, without any other evidence, invited the inference that he made the payment voluntarily. Had he but told the Tribunal, when asked, that he would not have made the payment unless he was legally obliged to and because he believed he was legally obliged to, he did, then the outcome would likely have been different.
It is also important to note, that sloth (or sheer inattention) in not challenging a payment is not enough to defend a claim for payment made under a mistake. In concrete terms, owners simply paying a levy (contribution) notice, without enquiry as to whether it must be paid, is not a defence to a later claim by a lot owner for repayment of (say) improperly calculated amounts. Putting aside the obvious moral peril of a Body Corporate wishing to rely on such a defence, it is not supported by ‘David Securities’. With respect to the learned Tribunal members in the ‘Grove’, the High Court’s analysis of the earlier cases on ‘voluntary payment’ (including payments made through sheer inattention) were concerned with the differences between mistakes of fact and law; they were not an exercise in the High Court synthesising and proposing a formulation for when a payment is voluntary through sloth or inattention.
The majority of the court in ‘David Securities’ found at [43] that the old distinction between mistakes of fact and law was no longer valid, and ‘the payer will be entitled prima facie to recover moneys paid under a mistake if it appears that the moneys were paid by the payer in the mistaken belief that he or she was under a legal obligation to pay the moneys or that the payee was legally entitled to payment of the moneys. Such a mistake would be causative of the payment.’
A lot owner who pays a levy (contribution) notice without challenging it is not making the payment ‘voluntarily’ in a way that overcomes that prima facie right that the High Court says the lot owner has.
In the overwhelming majority of cases, lot owners who pay levy (contribution) notices, do so on the basis that they believe that they are legally obliged to pay them. If it later transpires they were not under that legal obligation, all the lot owner need do is to adduce evidence that they would not have made the payment had they known they were not legally obliged to do so.
There is a world of difference between that, and the facts of ‘Groves’, which I for one expect will have a very specific application when used properly; that is, for cases where despite a dispute about liability, a payment is made anyway in compromise of the dispute.
The real danger for lot owners disputing claims, is that the orthodox advice at present to them is to pay what the body corporate has demanded, and then dispute liability later. The reason being to stop the (in some cases) unnecessary and punitive proliferation of recovery costs. Those costs being recoverable from the lot owner on effectively an indemnity basis.
Lot owners in that situation should beware the impact of the ‘Grove’ and take expert legal advice promptly. Making compromise payments could well cause difficulties for those lot owners in the future.
It is foreseeable that the ‘Grove’ will lead to bigger and more protracted levy (contribution) recovery disputes, because the safest course for lot owners with legitimate concerns about a body corporate debt will be to refuse payment until their arguments are finally determined. Bodies Corporate for their part (or in some cases their lawyers) may simply not care, having the advantage of the current recovery costs rules in their favour.
I for one hope to see reform in the area of recovery costs, whether through more judicial scrutiny of, frankly absurd, levels of recovery costs incurred for very minor debts, or some alternate statutory formulation to the current rule, which places a higher onus on a Body Corporate to show that their recovery costs are reasonable (and perhaps, dare I say it, proportional!).
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