Receivers can take comfort from a recent High Court decision confirming that they are not personally liable to pay body corporate levies.
In Body Corporate 162791 v Gilbert, the body corporate of a unit title development pursued personally the receiver of a unit owner for unpaid levies incurred post-receivership.
Unsurprisingly, the Court declined to impose personal liability on the receiver for the levies under section 32(5) of the Receiverships Act 1993.
It's unsurprising because a receiver's personal liability under section 32(5) for "rent and other payments" only exists where such payments are "due under an agreement", and relate to "the use, possession or occupation by the grantor of the property in receivership".
The levies in question did not fit within either requirement as:
- the obligation to pay was imposed on owners by the Unit Titles Act 2010, rather than by agreement, and
- the levies arose as an incident of ownership, rather than as a result of use, possession or occupation. An owner is liable to pay levies regardless of whether it uses, possesses or occupies the unit. In addition, receivers are not generally liable for rates, which are also an incident of ownership.
Accordingly, the decision confirms what has been widely understood by insolvency practitioners and lawyers. However, although receivers are not personally liable, such charges will usually be paid for practical reasons. The purchaser of a body corporate unit will be liable for any levies outstanding at the time of sale, so if the vendor does not pay, the purchaser will generally take into account such unpaid levies in agreeing the purchase price and pay the levies following settlement. Levies and rates can therefore be contrasted with other unsecured obligations that tend to be 'left behind' in, and unpaid by, an insolvent entity.
The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.
