This case concerned the proper construction of s 145(2) Body Corporate and Community Management (Standard Module) Regulation 2008. The issue was whether that provision imposed a limitation period requiring a body corporate to start proceedings for recovery of an unpaid contribution within a certain time period. The Court of Appeal held that, on its proper construction, the provision did not impose a limitation period. Instead the purpose of the provision was to impose a duty on body corporates to ensure their proper financial management. Accordingly, the appeal was allowed.
McMurdo JA and Mullins and Bond JJ
31 July 2018
The appellant is the body corporate of a community titles scheme in Townsville. The respondent is an owner of one of the lots. . In 2009 the appellant levied a contribution, with payment to be made in September of that year. The respondent has not paid that amount. In May 2013 the appellant commenced proceedings to recover that amount. –.
In the proceedings below, the District Court gave summary judgment in favour of the respondent, on the ground that the claim was made outside of a limitation period as prescribed by s 145(2) of the Body Corporate and Community Management (Standard Module) Regulation 2008 (“the Regulation”). . That section provides:
“If the amount of a contribution or contribution instalment has been outstanding for 2 years, the body corporate must, within 2 months from the end of the 2-year period, start proceedings to recover the amount.”
The only question in this appeal was whether s 145(2), properly construed, did actually prescribe a limitation period. . The Court of Appeal unanimously held that it did not. McMurdo JA gave the reasons of the Court, with which Mullins and Bond JJ agreed. –.
Whether s 145(2) of the Regulation prescribes a limitation period
McMurdo JA began by noting that while s 145(2) imposed a duty on a body corporate to start proceedings to recover the amount within the specified period, “it does not expressly provide that a failure to do so will bar a subsequent proceeding”. .
In considering whether it had that effect, his Honour looked to the purpose of the provision. Firstly, he noted that the provision did not appear to have a purpose of providing a limitation period. In that regard, his Honour quoted a decision in which McHugh J had identified four broad rationales for the enactment of limitation periods. In summary, they are (at ):
- Because relevant evidence is lost as time goes by.
- Because it is oppressive to allow an action to be brought long after the circumstances.
- Because people have an interest in knowing that they have no liabilities beyond a definite period.
- Because it is in the public interest that disputes be settled quickly.
The first three of those rationales are concerned with the interests of potential defendants. However, in the context of s 145(2), “[t]here is no discernible feature of a claim for outstanding contributions under s 145 which would indicate why any of those purposes requires a limitation period of two years two months, rather than six years as provided by … the Limitation of Actions Act”. Further, there did not appear to be a reason why the public interest would require a claim under s 145 to be settled more quickly than any other debt. .
His Honour then identified what he considered to be the real purpose of the provision: “to compel the body corporate to bring a proceeding, rather than to impose a time limit, for the benefit of a defendant, upon any proceeding which a body corporate might see fit to commence”. . That was supported by the Explanatory Notes, which indicated that the amendment was one of a range of measures designed to ensure proper management of finances by a body corporate. . The duty to bring the proceeding within a time period was fortified by another provision of the Act, which required a body corporate to comply with obligations under the regulations. Further, in the event the body corporate did not discharge the duty, the duty could be enforced by a lot owner. .
In summary, the purpose of s 145(2) was to impose a duty aimed at achieving proper financial management by body corporates, not to provide a limitation period for a proceeding of the present kind. –. Accordingly, the primary judge had erred in summarily dismissing the claim. The appeal was allowed. .