Council rates declared invalid by Supreme Court

In a landmark decision, the Queensland Supreme Court has declared that rates and charges levied by Fraser Coast Regional Council are invalid due to the failure of the Council to properly adopt the rates and charges levied.

Implications

• Local governments must levy rates and charges in accordance with the Local Government Act 2009 (Act).
• Under the Act, rates and charges must be adopted by resolution at the local government’s budget meeting each year.
• In the case of Fraser Coast Regional Council (Council), the Council adopted a budget at its budget meeting, which included reference to rates and charges, but the Council did not expressly adopt the rates and charges by separate resolution.
• In considering a challenge against the validity of the rates and charges by an aggrieved landowner, the Supreme Court (Court) found it was not sufficient for the Council to include the rates and charges as part of the general budget documents and it was necessary for the Council to expressly and separately adopt the rates and charges to be levied.
• The Court found that the Council had failed to comply with the Act and as a consequence the rates and charges adopted by the Council were invalid.
• The case highlights the critical importance of local governments correctly following the procedures and processes set out in the Act to adopt rates and charges which are a primary source of revenue for local governments in Queensland

Decision

The case of Linville Holdings P/L v Fraser Coast Regional Council [2017] QSC 252 was brought by a landowner challenging the lawfulness of rates imposed by the Council.

The case centred on whether the Council had followed the proper process under the Act to adopt its rates and charges for the 2014/15, 2015/16 and 2016/17 financial years and, if the Council had not followed the proper process, what was the legal consequence of the Council’s failure.

Under the Act, local governments are required to adopt rates and charges by resolution at the local government’s budget meeting each year. In this case, the Council had adopted a budget each year at its budget meeting. This included the rates and charges to be levied each year which were included in the budget documents. The Council however did not expressly adopt the rates and charges by a specific resolution (i.e. the rates and charges were simply included as part of the general package of budget documents adopted by the Council).

In considering the relevant requirements under the Act, including section 94(2), the Court found it was not sufficient to include the rates and charges as part of the general budget documents and it was necessary for the Council to expressly and separately adopt the rates and charges to be levied.

As the Council had not expressly adopted the rates and charges by resolution at the relevant budget meetings, the Court found that the Council had not complied with the process imposed by the Act.

The Court then went onto consider whether this non-compliance invalidated the rates and charges. Having regard to the legislative scheme under the Act, the nature of the rates and charges as a form of taxation and relevant case law, the Court considered that there was no doubt that charges and rates imposed without compliance with the requirements under the Act are invalid.

Accordingly, the Court declared that for each of the 2014/15, 2015/16 and 2016/17 financial years, the Council had failed to validly make and levy rates and charges because it did not decide by resolution at its budget meeting what rates and charges were to be levied as required by section 94(2) of the Act.

Response

Rates and charges are a major source of funding for local governments and the Court’s decision has significant implications for Council and any other local governments who may have made similar mistakes in the adoption of their rates and charges.

The Council has reportedly described the situation as a ‘technical oversight’ and is said to be seeking legal advice as to whether to appeal the decision. The Council has also indicated it is not proposing to refund rates and is encouraging ratepayers to continue to pay rates to avoid penalties.

The Local Government Association of Queensland which is the peak body representing local government has stated that it does not believe this issue affects other local governments but is continuing to make inquiries with its members.

Given the financial implications of the Court’s decision and subject to any further appeal, it is likely that local government will seek State intervention to retrospectively validate rates and charges levied.

However, with the Queensland Parliament still dissolved due to the recent State election, any legislative solution will have to wait to after the reappointment of Parliament and will be at the discretion of the new State government.

Authored by:
Stafford Hopewell, Partner
Elton Morais, Senior Associate