Debt Recovery – Counter Claim as a Defence?

Committees are commonly faced with many challenges when it comes to recovering outstanding Body Corporate debts from Owners. There are times when the debtor argues that they should not need to pay their levies due to a fault of the Body Corporate. On 26 May 2022, the District Court confirmed in The Body Corporate for the Anchorage One v Huang [2022] QDC 119, that this argument will not be successful when disputing Body Corporate levy debt.

In the case of The Body Corporate for the Anchorage One v Huang the Body Corporate filed a claim and statement of claim against the Defendant for the outstanding levy and recovery costs amounting to just under $23,000. However, the Defendant filed a counterclaim stating that the Body Corporate built an office structure and paved pathway that they had failed to maintain which forced water runoff into her Lot subsequently causing damage. The counterclaim pleads a number of causes of action which include negligence, nuisance and breach of duties under the Body Corporate and Community Management Act and Accommodation Module. The Defendant was claiming $459,000 for damage to the Lot and loss of income as the Lot was used for commercial purposes and was tenanted.

The main concern for the Judge was whether the initial claim and statement of claim and the counterclaim are related disputes. The Judge held that, ‘It is clear, in my view, that the subject matter of the counterclaim (being the damage to the Lot) … is not related in any way to the Plaintiff’s claim for recovery of the contributions’ and should instead be referred to dispute resolution under Chapter 6 of the Act.

To summarise, if a Defendant is to seek a set-off amount for an alleged failure by the Body Corporate, the competing claims would not arise out of the same facts and there would be no sufficient connection between them to permit any set-off. This is great news for Bodies Corporate as it affirms that all outstanding levies and recovery costs will need to be paid to the Body Corporate despite an alleged failure of the Body Corporate to maintain.

This article was contributed by Jason Carlson, Partner and Jessica Cannon, Partner Grace Lawyers.