On 31 July 2018, the Queensland Court of Appeal decided that the deadline for bodies corporate to commence a proceeding against a lot owner for outstanding contributions is six years.
In Body Corporate for Mount Saint John Industrial Park CTS 18632 v Superior Stairs & Joinery Pty Ltd, the Body Corporate issued a notice of contribution to the Defendant for $19,367.31 payable by 16 September 2009.
The Defendant did not pay the amount in the notice and the Body Corporate commenced proceedings on 8 May 2013 against the Defendant to recover the amount.
The Defendant applied to have the part of the Body Corporate’s claim that related to the $19,367.31 removed from the claim on the basis that the Body Corporate was not able to recover a contribution (or contribution instalment) against the Defendant that was outstanding for longer than two years and two months.
The judge ultimately agreed with the Defendant and considered that:
- section 145(2) of the Standard Module imposed a specific time limit on bodies corporate to commence proceedings to recover the amount of a contribution (or contribution instalment) that has been outstanding for two years;
- the limitation period of six years provided in the Limitation of Actions Act 1974 (LAA) to recover a sum of money was overridden by the specific time limit in the Standard Module.
The Body Corporate successfully appealed the original decision and the Body Corporate is entitled to recover the amount of the September 2009 notice against the Defendant.
In reaching this decision, the Court of Appeal said:
“…the intended purpose of s145(2) [of the Standard Module] is to impose a duty upon the body corporate, rather than to serve any of the purposes for which limitation periods are enacted.”
This means that the time period in s145(2) has the effect of imposing a positive duty on the Body Corporate to commence a proceeding to recover outstanding contributions (or contribution instalments) that have been outstanding for two years, rather than imposing a specific time limit that prevents bodies corporate from recovering after that time.
The effect of this appeal decision is that the time limit of six years in the LAA is the time by which bodies corporate must commence proceedings to recover outstanding contributions (or contribution instalments).
While this decision is positive news for bodies corporate in Queensland, it does emphasise the need to:
- implement a tight debt recovery policy to ensure that bodies corporate remain financially sustainable and do not lose the ability to recover outstanding contributions;
- ensure that the processes for raising a levy and issuing notices of contribution are in strict accordance with the Act.
Written by Duane Williams, Partner, and Brendan Pitman, Associate, at MBA Lawyers.