Published tribunal order
Tenancy Tribunal case 9052384 — Tenancy dispute in Red Beach, Red Beach
Decided 25 Jul 2024 · Published 25 Jul 2024 · Application 9052384
Landlord favoured
- Unit Titles
Order
- The unit address is amended to reflect the correct unit address, being 19 The Grove, Red Beach, Red Beach 0932.
- Paul William Wallace and Samuel Christopher Wallace must pay Body Corporate 160768 $24,920.47 immediately, calculated as follows: DescriptionsApplicantRespondent Overdue levies – Sam Wallace$4,297.70 Interest to 26 June 2024 - Sam Wallace $672.33 Overdue levies - Paul Wallace$2,062.90 Interest to 26 June 2024 - Paul Wallace $322.72 Body Corporate Secretary debt collection charges $1,092.50 Section 124 costs including GST and disbursements $15,684.82 Appearance at hearing ($250.00 per hour x1 hour, plus GST) $287.50 Filing Fee$500.00 Total award$24,920.47 Total payable by Respondent to Applicant $24,920.47
Reasons
- The hearing was held by teleconference on 26 June 2024. Ms Briar Dobson attended the hearing as the representative for the applicant. Mr Sam Wallace, the respondent, attended the hearing. Mr Paul Wallace, the respondent, did not attend the hearing but provided written submissions for the Tribunal to consider.
- The Body Corporate has applied for recovery of unpaid levies, interest, costs and the filing fee from the Unit Owners.
- Prior to the hearing, Mr Sam Wallace requested that he be removed as a co- respondent to the application as he has no shares or other ownership in the property. He noted that he is only listed on the Certificate of Title as Executor (of the Estate of the late Eric William Wallace); and does not personally have any financial interests in the property. Nor has he been invoiced for any of the charges brought by the applicant; nor has the applicant requested or demanded any payments from him.
- I accept Ms Dobson’s submission that Mr Sam Wallace is correctly named as a co- respondent as per section 124(2) Unit Titles Act 2010 which states: The amount of any unpaid levy, together with any reasonable costs incurred in collecting the levy, is recoverable as a debt due to the body corporate by the person who was the unit owner at the time the levy became payable or by the person who is the unit owner at the time the proceedings are instituted.
- As Mr Sam Wallace is the registered joint owner of Unit Q and Accessory Unit 17 Deposited Plan 160768 he is named as a respondent in this order.
Does the Unit Owner owe the levies claimed?
- A Unit Owner must pay all Body Corporate levies and outgoings payable for the unit. See sections 80(1)(f) and 121(1) Unit Titles Act 2010.
- The Body Corporate has determined the levies payable and Unit Owner’s share has been calculated according to their utility interest.
- The Body Corporate has fixed the due date for the levies to be paid, and the Unit Owners have not paid the levies by that date. See section 124(1) Unit Titles Act 2010. The Body Corporate has provided records to prove the amount claimed.
- The respondents raise a number of procedural concerns with the application. However, I do not consider they are determinative of the issues at hand. Nor do I consider they render the application defective.
- Broadly, the Unit Owner could challenge the claim if they could show that there were procedural defects with the process in which the levies were struck, but the respondents have not identified any. In my assessment the levies were raised by way of delegated authority from the Body Corporate in the usual way, so I accept the levies were correctly raised.
- I am satisfied the relevant invoices were emailed to the addresses registered with the Body Corporate. Ultimately, the onus remains on the Unit Owner to pay levies when due and to enquire if demand for payment of levies may have gone astray.
- I find the matters raised by the respondents do not raise any arguable defence.
Is the Unit Owner liable for interest?
- If a Unit Owner fails to pay levies by the due date, interest accrues on the unpaid balance. A Body Corporate may charge interest up to 10% per annum. See section 128 Unit Titles Act 2010.
- The Body Corporate has resolved to charge interest at 10 % per annum on unpaid levies. The Body Corporate has proved the amount of interest owing from the due date to the hearing date.
Is the Unit Owner liable for costs?
- Pursuant to section 124 UTA, and as resolved at meetings of the Body Corporate, the Body Corporate is entitled to recover any reasonable costs incurred by it in collecting unpaid levies as a debt due by the owner to the Body Corporate. In accordance with the judgments (of the District Court and Court of Appeal respectively) in Body Corporate 162791 v Cheah DC Auckland, CIV2014-004- 0120, 24 June 2014 and Body Corporate 162791 v Gilbert [2015] NZCA 185, the Tribunal must order that the reasonable costs incurred by the Body Corporate in recovering the levies, objectively assessed, be paid by a defaulting Unit Owner.
- More recently, the District Court in Body Corporate 85928 v Sherry [2022] NZDC 11535, Body Corporate 45131 v 88 Chi Limited [2023] NZDC 9036 and Body Corporate 346799 v Gueirard & Vu [2023] NZDC 19645 endorsed the Body Corporate’s recovery of full solicitor/client costs under section 124 UTA.
- In this case, the respondents consider the costs claimed are excessive and unreasonable in all circumstances.
- As the Unit Owner failed to pay the outstanding levies at the time they fell due, the outstanding levies together with interest and collection costs are recoverable as a debt due to the Body Corporate.
- Following the judgments of the District Court and Court of Appeal set out above, the Tribunal must order that the reasonable costs incurred by the Body Corporate in recovering the levies be paid by a defaulting Unit Owner.
- It is reasonable to expect full and timely compliance by all Unit Owners on the levies payable when they fall due otherwise a burden is carried disproportionately by those who have paid the levies on time.
- In Gilbert v Body Corporate 162791 [2016] NZSC 61, the Supreme Court affirmed the judgment of the Court of Appeal and held at [57] that section 124 is of considerable relevance in that “it indicates that those who default in the payment of levies are responsible for the costs of collection. The alternative would be to impose some or all of those costs on the other unit owners.”
- The Court of Appeal judgment in Gilbert emphasised at [78] that “section 124(2) of the Unit Titles Act provides that the amount of any unpaid levy, together with any reasonable costs incurred in collecting that levy, is recoverable as a debt due to the body corporate. The use of the words “reasonable costs” does not compel the conclusion that solicitor/client costs cannot be recovered. Rather it compels the conclusion that it is only reasonable solicitor/client costs, objectively assessed, that can be recovered.”
- In York Trustees Limited v Body Corporate Number 166208 [2017] NZDC 7961 the District Court, dealing with a cross-appeal on costs from the Tenancy Tribunal, quashed the Tribunal decision awarding only a contribution of 60 percent of the total legal costs claimed by the Body Corporate. DCJ Sharp held that the Tribunal misdirected itself as to the legal position in respect of reasonable solicitor/client costs and the Tribunal should have determined that the Body Corporate was entitled to its actual reasonable costs (on a solicitor/client basis) of $32,563.05. Notably at [22], Judge Sharp stressed that the Court of Appeal judgment in Gilbert is binding on the Tribunal (and on the District Court) in that “there is no discretion” available to the Tribunal to award anything less than the full reasonable legal costs charged by the solicitor to its client, the Body Corporate, when it comes to the concept of “reasonable costs incurred in collecting that levy” under section 124 UTA.
- In the upshot, section 124 UTA prescribes a statutory debt in favour of the Body Corporate once levies are properly raised and payable; equally, legal and collection costs and interest become a statutory debt which accords no discretion on the Tribunal to waive or discount.
- Having perused the Body Corporate counsel’s time records and Body Corporate Manager’s invoices, I am satisfied that the collection and solicitor-client costs ordered above are reasonable. They were incurred in respect of the proceedings; all of the legal costs claimed constituted expenses incurred in pursuing the claim for recovery of unpaid levies under section 124. I do not have any discretion to waive any of those costs in favour of defaulting Unit Owner no matter how high they appear in relation to the unpaid levies in question.
- It is unfortunate that the costs that followed the non-payment of the levy have greatly inflated the total owed. However, I am unable to accept the respondents’ submissions as the basis not to accede to the Body Corporate’s claim for legal fees. The Tribunal has a duty to follow legal authorities set by the higher courts on an award of solicitor-client costs in favour of the Body Corporate.
- As the Body Corporate has succeeded with the claim, I must reimburse the filing fee. Section 176(1) Unit Titles Act 2010 and section 102(4) Residential Tenancies Act 1986.