In late September, a District Court judge delivered a very important decision considerably shortening the previously accepted limitation period in which a body corporate can commence legal proceedings to recover a body corporate debt.
Judge Durward determined that the 2 year 2 month period provided for under the relevant Regulation Module prevailed over the 6 year period under the Limitation of Actions Act.
What does this mean for you and your bodies corporate? Unless and until there is any successful appeal:
- bodies corporate must commence proceedings within 2 years and 2 months to recover any body corporate debt;
- the decision leaves it open to argue that period commences to run from the issuing of the contribution notice, not the due date identified on the notice;
- the decision leaves it open to argue that bodies corporate who have resolved to impose a penalty for overdue levies, must commence proceedings to recover any penalty within 2 years (not 2 years and 2 months) after the issuing of the contribution notice; and
- if a body corporate fails to commence proceedings within those times, the body corporate is precluded from commencing proceedings and the lot owner isn’t liable to pay.
We strongly recommend that a review be undertaken of all outstanding ledgers and instructions secured to urgently commence proceedings in the event that any lot owner has:
- an unpaid body corporate debt which is approaching 2 years and 2 months old; and/or
- an unpaid penalty which is approaching 2 years old.
Your bodies corporate may also want to implement a protocol to ensure that proceedings are commenced within time. We recommend that this protocol extend to considering and managing repayment arrangements to ensure that these new time limits are adhered to. Indeed, a body corporate should refuse to enter into any repayment arrangement which sees unpaid body corporate debts or unpaid penalties beyond their limitation dates.
There are aspects of this decision which warrant clarification from a higher court and we will monitor and report on any appeal.
If you would like to discuss any of the above further, we are more than happy to assist, please telephone either Troy Hawthorn, Andrew Suttie or Bronwyn Ablett on (07) 3226 3944.
Troy heads our Commercial Litigation and Dispute Resolution Division and is responsible for the litigation and resolution of disputes in all Courts. Having more than twenty years experience, he has had exposure to the full spectrum of commercial disputes, from high-profile litigation, to representing clients in specialised Tribunals.
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