Body Corporate San Miguel Community Titles Scheme 12076 v. Wilcox & Ors [2009] QDC 400 (18 December 2009)

Last Updated: 21 December 2009

DISTRICT COURT OF QUEENSLAND

[1] The plaintiff is the Body Corporate for the San Miguel Community Titles Scheme (the body corporate). The defendants (Nelson Mandela Constructions Pty Ltd, Albert Noel Wilcox and Janice Maree Wilcox) each own a lot in the scheme, which is a small scheme of six lot owners. Mr Craig Wilcox is a director of the defendant company, and the son of the other defendants. The body corporate’s claim is for unpaid sinking fund and other contributions and default interest and charges. It commenced recovery action against the defendants in 2007 in separate claims in the Maroochydore Magistrates Court. The claims were consolidated and transferred to this Court because the claims exceeded the monetary jurisdiction of the Magistrates Court.

[2] The trial proceeded before me on 30 November 2009 and Mr Craig Wilcox represented all defendants. His mother was present with him at the Bar table.

[3] The body corporate’s case at trial was very straight forward. Mr Hansen (the director of the corporate manager for the body corporate) has sworn an affidavit in which he calculates the indebtedness of both defendants as at 30 November 2009. The defendants made no effort to challenge his calculations. Their defence rests on the proposition that an Extraordinary General Meeting (EGM) held on 18 January 2006 was not held lawfully, and therefore resolutions passed at that meeting including a resolution to impose a special levy on each lot owner to carry out urgent repairs to the common property, were unlawful. Therefore they argued, as this special levy forms the basis for the claim, the body corporate’s claim should be dismissed. The body corporate’s response is to plead that the defendants are estopped from again claiming that the EGM was unlawfully held because this issue has been resolved against them by adverse decisions of adjudicators and a dismissed appeal in this court pursuant to rights given to the defendants under the Body Corporate and Community Management Act 1997 (Qld) (the Act). If I am against them on that submission, the body corporate submits that the EGM was lawfully called and a special sinking fund contribution lawfully imposed.

[4] At a time when the defendants were legally represented their solicitors filed a defence in which they plead a response to the body corporate’s plea of issue estoppel and res judicata.

A relevant history

[5] It is common ground that in 2005, the common property was in urgent need of repair. Some repairs were undertaken in July 2005. On 29 July 2005 the body corporate received a report from JTC Consulting Engineers. The engineers’ report was based on a visual inspection which was limited to “access and safety considerations to the external sections of the roof surfeit and façade”. The engineers recommended immediate replacement of existing façade and supporting frames, surfeit sheeting and roof.

[6] In early November 2005, after heavy rain, a large section of the asbestos sheeting surfeit fell from the roof structure and the engineers were again called in. In their second report dated 9 November 2005 they refer to their earlier report. It can be assumed that the major repairs recommended earlier had not been undertaken. The second report made it very clear to the body corporate that the roof structure was not structurally stable, and that urgent (and extensive) repairs (which the engineers enumerated) were recommended.

[7] On 15 November 2005 the body corporate’s insurer rejected its claim for the repairs on the basis that the repairs were not necessary as a result of accidental damage but as a result of long term deterioration of the common property of the building.

[8] The body corporate then proceeded to obtain quotes for the repairs. It is clear from the letters annexed to Mr Hansen’s affidavit that the body corporate encountered some difficulties in obtaining quotes. However it received one from T A Taylor on 8 December 2006 and another faxed to it by Hans Heystraten. Mr Heystraten’s quotation which is exhibited to Mr Hansen’s affidavit is not dated but has a fax date of 10 January 2006. Taylor’s quote was $91,388 and Mr Heystraten’s was for $70,167.90. The then body corporate manager called the EGM to be held on 18 January 2006 by giving notice to lot owners by letter dated 16 January 2006. It can be accepted that the notices were received very late by the defendants and that family circumstances prevented them from attending the meeting. They did however complete proxy forms which were received and counted as votes at the meeting.

[9] The EGM resolved (by four to two – the defendants being the dissenters) to accept Mr Heystraten’s quote (and a quote from the engineer to supervise the work) and to impose a special levy on each lot owner to pay for the repairs. The Notice of Motion proposed a $14,000 special levy contribution per lot entitlement but the members present at the meeting increased that to $16,500 payable by one instalment. Notice was given to the defendants of a contribution of $16,500 if paid by 23 February 2006 and $20,625 if not paid by that date.

[10] There is no doubt that the building work was carried out by Mr Heystraten and that the body corporate paid the builder and the engineer. The defendants have never paid any part of the special levy contribution. One of their contentions is that Mr Heystraten’s quote was excessive. Based on a quote obtained the following year (after the work had been done) the defendants have maintained that the special levy per lot should have been approximately $7,400. Despite this position they have never paid anything by way of a special sinking fund contribution despite obviously having had the benefit of the repairs for many years.

[11] On 13 April 2006 each defendant made a dispute resolution application under the Act to the Commissioner for Body Corporate and Community Management. One of the secondary objects of the Act is to provide an efficient and effective dispute resolution process, and one of the responsibilities of the Commissioner is to provide a dispute resolution service. Department adjudicators are dispute resolution officers appointed under s 236 of the Act. The Commissioner recommended (pursuant to s 248) that the disputes be resolved by departmental adjudication, and the disputes were referred to different departmental adjudicators pursuant to s 267 of the Act.

[12] The company defendant’s application sought orders that the EGM be declared invalid as did the application made by the other two defendants. Other complaints were made which are not relevant now. It is clear that by 29 May 2006 Mr Craig Wilcox had retained solicitors who wrote on that day to the Commissioner and concluded a submission in support of the application. The complaint of the defendants then (as now) was that there was no need to hold the EGM on such short notice because the body corporate was aware of the problem with the common property for many months.

[13] The departmental adjudicators dismissed the defendant’s application. The first in time was a decision of Mr Misknis dated 13 September 2006 in respect of the application made by Mr and Mrs Wilcox, and the second was by Mr Dowling dated 16 October 2006 in respect of the company’s application.

[14] As required by the Act, the defendants were advised of their right of appeal to this Court on a question of law pursuant to s 289 of the Act. Each of them did appeal to this Court by Notice of Appeal filed 26 October 2006 in proceedings D 296/06. The Notice of Appeal was prepared and filed by solicitors on behalf of the defendants.

[15] The notice alleged a number of failures by the adjudicators to comply with the Act and to accord procedural fairness and sought orders that the decision be set aside and a declaration that the EGM and any resolutions passed at it were invalid. Outlines of Submissions were filed and the appeal was set down for hearing before me on 8 June 2007. On that day the defendant’s solicitors indicated that their clients did not wish to proceed with the appeal and it was dismissed with indemnity costs.

[16] Pursuant to s 25(1) of the then applicable Body Corporate and Community Management (Small Schemes Module) Regulation 1997 (Qld), a General Meeting must be held at least 21 days after notice to lot owners “unless the body corporate otherwise decides”; and pursuant to subsection (2), such a decision “must be fair and reasonable in the circumstances of the Community Titles Scheme”. The defendant’s position before the adjudicator in its appeal and in its defence to these proceedings is that because the body corporate knew about the problem with the building for approximately six months it was not “fair and reasonable” for it to decide to hold the EGM on such short notice and contrary s 25(1) of the Regulations.

Discussion

(a) Issue estoppel and res judicata

[17] Before dealing with the arguments of the parties it is necessary for me to refer briefly to some of the law in what is a vexed and complex area. The leading authority is Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. The distinction between res judicata and issue estoppel is not always clear. The general principle was described by Dixon J in Blair v Curran [1939] HCA 23 ; [1939] 62 CLR 464 at 531;

“A judicial determination directly involving an issue of fact or of law disposes once and for all the issue, so that it cannot afterwards be raised between the same parties or their privies.”

[18] In its pleading the body corporate (for example at 13(l)(m) and (n) and 14 of the Further Amended Statement of Claim in Claim M 174/07) seeks to rely on both, however Mr Blaxland has concentrated on res judicata which he submits arises by virtue of the dismissal of the appeal by this Court following upon decisions of the adjudicator. I have some doubts about the argument (pleaded in 14(b) that the determination of a departmental adjudicator on its own gives rise to a res judicata. In French & Anor v NPN Group Pty Ltd [2008] QCA 217 , the appellants sought to obtain specific performance of a clause in a building agreement in the Supreme Court in circumstances in which they had already pursued rights in the Consumer and Credit Tribunal based on the contract. The Consumer Credit Tribunal had determined the application and the applicants then unsuccessfully sought to enforce the clause (described as a “guarantee”) in separate proceedings in the Supreme Court. At first instance the court held that the contractual rights under the guarantee had merged in the orders of the Tribunal and dismissed the claim. On appeal the appellant’s submission proceeded on the assumption that “theoretically at least the doctrine of merger may apply to orders of the Tribunal”. The Court of Appeal made it clear that in dismissing the appeal it was not deciding the correctness of that assumption.

[19] At the hearing Mr Blaxland had difficulty in finding any authority in support of the argument that by virtue of the dismissal of the appeal from the adjudicator’s decisions the defendants reliance upon the invalidity issue merged with the judgment of this Court. Certainly Chesterman J’s (as his Honour then was) decision in J Hutchinson Pty Ltd v Galform Pty Ltd & Ors [2008] QSC 205 is not authority for that proposition. In obiter remarks, his Honour observed (at [35]), in relation to the process of adjudication, adjudication certificates and registration of such certificates as a judgment in a court of competent jurisdiction under the Building and Construction Industry Payments Act 2004 (Qld), that it gave rise “to a res judicata and indeed issue estoppel”. Mr Blaxland has forwarded a supplementary submission (copy of which was forwarded to the defendants) in which he seeks to rely on a decision of the Court of Appeal of New South Wales in Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508. In that case there had been proceedings between the same parties in Victoria. In those proceedings the appellant had sued the respondent for a sum of money and the respondent had lodged a defence and had counter claimed. At trial the respondent did not appear and judgment was entered for the appellant on its claim and counter claim.

[20] The following year the respondent commenced proceedings in the Supreme Court against the appellant which raised in its defence issue estoppel and res judicata. A comparison of the pleadings in both actions revealed that indeed the respondent was suing on the same subject matter as it had pleaded in its dismissed counter claim.

[21] The argument advanced by the respondent unsuccessfully before the Court of Appeal is essentially the same argument that is raised in the defence of the defendants i.e. because the appeal was dismissed there had been no determination on the merits. As an aside, I note that the defence incorrectly (at 11(c)) refers to the appeal being dismissed “by consent”. Mr Blaxland is quite correct in observing that the appeal was dismissed because the defendants decided not to prosecute it. Obviously a judgment of the Court of Appeal of New South Wales is highly persuasive.

[22] There can be no doubt that the dismissal of the appeal finally disposed of the defendant’s rights under the Act. The only question that remains is whether or not the issue at the heart of the defence in these proceedings i.e. the alleged invalidity of the January meeting was indeed the subject of the final judgment in this Court in dismissing the appeal. This requires a comparison between the grounds in the Notice of Appeal and the defence. There can be no doubt that the alleged invalidity of the meeting is at the heart of the defence (see paragraph 4). Whether it is also at the heart of the Notice of Appeal is another question.

[23] Certainly the appeal seeks as part of the prayer for relief (at 4) an order that the resolutions made at the meeting be declared invalid.

[24] The so-called “errors of law” raised in the Notice however concentrate on alleged failures by the adjudicators to observe procedural fairness requirements and to investigate the claims made by the defendants that there was no need to hold an early meeting. It seems to me that the order of this Court does not finally determine the issue of validity at the meeting. I am not prepared to hold that the adjudicator’s decisions constitute a final judgment which would support the plaintiff’s plea of issue estoppel and/or res judicata against the defendants.

(b) The merits hearing

[25] As I have noted Mr Hansen gave evidence in the form of an affidavit which was filed by leave at the hearing and which was sworn on 30 November 2009. Mr Hansen was cross examined by Mr Wilcox. The defendants called Mr Doug Wakefield the manager of the Alexandra Surf Club Supporters Association which I am told is the owner of the other (4) lots.

[26] Mr Hansen’s evidence was largely unchallenged. His evidence was supported by Mr Wakefield’s evidence. Based on paragraph 8(a)-(j) of his affidavit, I am satisfied that it was fair and reasonable for the body corporate to have abridged the time required for Notice of a General Meeting and that the resolutions passed at the EGM on 18 January 2006 were valid resolutions.

[27] It would follow that the body corporate is entitled to judgment on its claim. The amounts claimed are “body corporate debts” within the meaning of the Body Corporate and Community Management (Small Schemes Module) Regulation 2008 (Qld). These Regulations replace the regulations which existed at the time of the EGM.

[28] Pursuant to s 79 of the Regulations the amounts may be recovered as a debt. The amounts referred to in s 79 include contributions, penalties for non-payment and recovery of costs. The body corporate’s claim is for contributions, penalty interest pursuant to s 78 and recovery costs. In accordance with s 80(6) of the Regulation, the body corporate may allow a discount. In this particular case the body corporate has claimed a special contribution of $20,625. A perusal of the minutes of the EGM demonstrates that a special levy of $16,500 was voted on and passed. Levy notices went out on the basis that the levy would be $16,500 if paid on time but $20,625 if paid late. I agree with Mr Blaxland that as the defendants have not paid on time they should be required to pay the greater sum. As I have noted earlier, the defendants have always argued that the appropriate amount of the levy is $7,400 per lot (see paragraph 4 (of the defence)) but they have not even paid that. In his affidavit Mr Hansen sets out the basis of the amount claimed against each defendant. This was not challenged. The indebtedness of Mr and Mrs Wilcox is calculated (at page 9) at $49,712.18 inclusive of penalty interest up to 30 November 2009 and interest on that amount is calculated at $21.92 per day until payment. The company’s indebtedness is $49,824.62 with interest at $22.15 per day as and from 30 November 2009.

[29] The body corporate is entitled to judgments accordingly against both defendants. I will hear the parties on the form of the orders and costs.