Council Reminded to Play by the Rules in Recent Decision

A recent decision of the Supreme Court, rendering a local government’s utility charges for water invalid, suggests that the ostensibly broad powers of local governments to levy utility charges may be more constricted than previously thought.

Much of the commentary in the aftermath of the decision has focused on the principles of statutory interpretation; however, of broader relevance are the Court’s comments with respect to the local government’s non-compliance with both the Local Government Act 2009 (Qld) (‘LGA’) and the Local Government Regulation 2012 (Qld) (‘LGR’).

The Mount Isa Irish Association Friendly Society Ltd v Mount Isa City Council [2017] QSC 316, concerned an application to the Supreme Court by a ratepayer challenging the validity of the Respondent Council’s rates notices that had been issued with respect to land for which it was the registered owner. The Applicant sought declarations that the rates notices were invalid (in so far as they related to water) and that the Applicant was therefore not liable to make payment as demanded. In short, the rates levied by the Council did not comply with the LGR in that the rates were not calculated according to the water used.

The Applicant argued that compliance with the LGR was a pre-requisite to the exercise of power to charge rates for utility charges in accordance with the LGA. Council relied on a provision of the LGR which expressly states that ‘utility charges for water are not invalid only because the local government does not comply with this part’ (emphasis added). Council also pointed to a further provision of the LGR which provides that a local government may levy utility charges ‘on any basis the local government considers appropriate’.

While the Court accepted submissions from Council that there was an express intention on the subordinate legislature’s part to limit the invalidity of charges where a local government fails to comply with the LGR, the Court said that the use of the words ‘only because’ in the relevant provision meant that, in drafting the legislation, Parliament had left open the possibility that invalidity may arise in circumstances where a local government failed to comply with that specific provision of the LGR and that was coupled with some other non-compliance in terms of the LGR or LGA.

Interestingly, the Court found that there had been an additional non-compliance on the part of Council in that they had failed to comply with the local government principles set out in the LGA. The LGA provides that any person who is performing a responsibility under the LGA must do so in accordance with the local government principles. The local government principles are:

• Transparent and effective processes, and decision-making in the public interest; and
• Sustainable development and management of assets and infrastructure, and delivery of effective services; and
• Democratic representation, social inclusion and meaningful community engagement; and
• Good governance of, and by, local government; and
• Ethical and legal behaviour of councillors and local government employees.

Council had unsuccessfully attempted to argue that adherence to the local government principles was not strictly required as they were merely aspirational. Here, the Court was satisfied that Council had not exercised its power to levy utility charges for water in a way that reflected ‘transparent and effective processes, and decision-making in the public interest’. In arriving at this conclusion, the Court had regard to Council’s 2016/2017 Revenue Statement which attempted to explain the rates levied on the basis that Council was ‘generally satisfied’ that the amounts levied for utility charges reflected ‘the relative costs of service’. His Honour Justice Daubney stated:

‘Nowhere on the material before me was there an explanation as to why the respondent chose to adopt a method for determining the utility charges for water which did not give any consideration to charging for (at least partly) the water used by the ratepayer in a case where it is conceded a water meter existed.’

The decision serves as a timely reminder for local governments to turn their minds to the local government principles when devising their rates policies. If you would like to know more about the laws relating to local governments please do not hesitate to contact Dan Morton or William McKenzie.