By Prof Graham Paddock
What if owners are not informed of levies raised?
Q1a. Hi Professor,
In terms of s37(2), liability for contributions levied under subsection (1) accrues from the passing of a resolution by the trustees and may be recovered by the BC by action in court. In addition, PMR 31(3) requires that owners are advised in writing within 14 days after the AGM as to what contributions are payable, and such amounts become payable in instalments, as determined by the trustees.
My question: If the resolution had been passed as required but the owners were not informed in writing as to what is payable (the instalments), would it be possible for a difficult owner to refuse to pay the contributions as he or she was not advised in writing as required per PMR 31(3)? It would seem to me that s37(2) is the overriding factor in the liability to pay the contributions even if payment has to be made in a lump sum, if necessary, on later written notification rather than the instalments indicated per PMR 31(3).
A1a. Section 37(2) of the Act, as you say, provides that the resolution of the trustees is the legal act that gives rise to owners’ legal liability for levies, but does not provide for notice to owners. So in order to complete a “cause of action” by the body corporate against owners, a notification or demand is required.
PMR 31(3) complements section 37(2) of the Act by providing specifically for that notification, specifying the period in which it must given, calculated from the end of the AGM, and further providing for the possibility that the amount may not be due as one capital sum but in instalments determined by the trustees – which is, of course, the normal situation.
I suppose that one could re-phrase your query as: “If trustees pass the resolution but do not send out notices to owners, is the amount due and payable in one lump sum?” In that case, the trustees could not start collection until a demand for payment had been given to owners. The demand would have to be sufficient in the particular circumstances to allow the owners to know what amount or amounts have to be paid and what the due dates are.
Q1b. Thank you Professor,
Therefore if the required notice or demand had not been sent, this could be done at a later stage and the payment could be stipulated as an initial lump sum to cover the outstanding and unpaid contributions for the initial period prior to the giving of notice, and in addition the balance of the accrued contributions payable in instalments on specific dates. Should an owner not perhaps have some responsibility in law to ask for a notice in this case? This is not a real-time situation that I have described but just an interesting possibility.
A1b. Yes, the notice could be sent out later. Although a 14-day period is specified, the levies will not be invalid if the notice is sent out later. And yes, the notice could deal with the amounts due for the period prior to its dispatch and separately for the balance of the financial year.
In practice, owners will have payment arrangements in place and the annual implementation of a new levy in any event occurs some time after the end of the financial year, so the initial payment required in terms of the notice could be designed to require payment of a “topping up” amount to account for an increase.
Owners will certainly know that levies must continue. But they are not under a legal obligation to ask for a notice. The body corporate is the party that needs to ensure that the notice is given.
No vote in certain circumstances / forming a quorum
Q2: Good morning Graham,
My question relates to PMR 64, which sets out when an owner is disqualified from voting. Where an owner is disqualified but is present at a meeting, do they still form part of the quorum? I know that PMR 57 says that “present and entitled to vote” – but since they are still entitled to vote in certain circumstances I am confused. This question raises its head so often and I would really like to have a definitive, professional answer!
A2: The requirement in PMR 57(2) reflects the common law rule that in order to be counted for the purposes of establishing a quorum, a person needs to be entitled to vote.
In the situation where some persons present at a general meeting are entitled to vote for special or unanimous resolutions but not for ordinary resolutions, the quorum requirements will change depending on what type of business is on the table. So it a meeting may be “quorate” for some items of business but not for others.
In practice, if a meeting gets to an item of business and finds that it is not competent to deal with it because of a lack of a quorum, the meeting could be adjourned to get the necessary level of owner representation. This is the time to get on the cellphone! But if an adjournment is not likely to cure the problem, the item cannot be dealt with and must be abandoned for the time being.
Article reference: Paddocks Press: Volume 6, Issue 3, Page 5
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