Australia: Queensland Supreme Court dismisses challenge to differential rating categories

WHO SHOULD READ THIS

  • Council CEOs, CFOs, Council finance managers, Council corporate services and governance managers and in-house legal counsel

THINGS YOU NEED TO KNOW

  • As it is budget time for Queensland Local Governments, the article provides guidance on the exercise of establishing rating categories for differential rating and challenges that may occur to decisions made.

WHAT YOU NEED TO DO

  • Councils should carefully consider, as part of the budgeting process:
    • how differential rating categories are established and described
    • the procedures to be adopted for the identification of rateable land into rating categories and any need for delegation of Council's statutory powers
    • the definitions used in a Revenue Statement.

Update
On 15 June 2017, Mullins J of the Supreme Court of Queensland handed down her decision in Ugarin Pty Ltd v Lockyer Valley Regional Council [2017] QSC 122 (Ugarin's Case). Our firm acted for Council.

The Ugarin's Case dealt with a judicial review challenge of two decisions made by Lockyer Valley Regional Council (Council) relating to differential general rates. The first decision was made by Council on 28 July 2015 under sections 80 and 81 of the Local Government Regulation 2012 (Qld) (LGR) to adopt categories of rateable land and different rates for different categories at its budget meeting.

The second decision made by Council between 28 July and 10 August 2015 under section 81(4) of the LGR related to the identification of differential general rates by applying 'category 8' as the rating category applicable to the applicant's land.

The application for judicial review was dismissed and costs were ordered in favour of Council.

Facts and legislative regime
The applicant owned land within Council's local government area upon which the Plainland Shopping Centre was located.

Under the Local Government Act 2009 (Qld) (LGA) every local government in Queensland must levy general rates on all rateable land and may also categorise rateable land and decide differential rates for rateable land.

Under sections 81(1),(2) and (3) of the LGR any local government which adopts a differential rating system must do the following at its budget meeting:

  1. decide the different categories of rateable land in the local government area;
  2. make that decision by resolution at Council's budget meeting;
  3. ensure that the resolution states:
    1. the rating categories of rateable land in the local government area; and
    2. a description of each of the rating categories.

The above process requires a local government to embark on an exercise of setting out the 'description' of rating categories for rateable land and decisions must be made by resolution.

Separately, under section 81(4) of the LGR after the rating categories and descriptions have been decided, the local government must identify the rating category to which each parcel of rateable land in the local government's area belongs. Council may do so in any way it considers appropriate.

This process is typically understood to be the 'identification' exercise which does not need to occur at Council's budget meeting but can occur after that meeting, often by Council officers exercising powers under delegation.

The adoption of Council's 2015/2016 budget
At Council's budget meeting held on 28 July 2015, Council resolved to adopt 45 rating categories. The category that was under scrutiny in Ugarin's Case was as follows:

8 Shopping Centres >7,000 sq m Land used or capable of being used for a Shopping Centre that has a property land area greater than 7,000 sq metres, or more than 120 onsite carparking spaces. Includes all land of the relevant size with land use code 16 and as otherwise identified by the Chief Executive Officer.

Council's Revenue Statement contained a definition of 'land use code' which meant 'those land use codes approved by the Lockyer Valley Regional Council effective from 1 July 2015'. The term 'Shopping Centre' was also defined in that Revenue Statement to mean land which has a 'predominant use' of major retail activities or retail warehouses or to which land use code 16 applies.

Grounds for review
There were a number of grounds for review but the primary argument in relation to the first decision under challenge involved answering the following two questions summarised by Her Honour:

  • was the 'land use code' an integral component of the description of category 8?
  • if so, did the 'land use code' have to be approved by resolution of the respondent?

The grounds of challenge generally related to allegations of Council taking into account irrelevant considerations and that the decisions being so unreasonable that no reasonable Council would make them.

Land use code
Council regularly received 'land use code' information by the Department of Natural Resources and Mines (DNRM). Evidence was provided by Council that its rating system is linked to the land valuation process administered by DNRM. DNRM maintains a State-wide database of Queensland Valuation and Sales Information (QVAS). The QVAS information in this case was replicated in Council's land record which is a fully electronic record and is updated and reviewed from time to time.

The applicant's land was assigned, land use code no. 16 'Drive In Shopping Centre' and that information for that land was included in Council's land record database.

It was conceded by Council that there was no document setting out the land use codes before the meeting when the first decision was made and that the identification of category 8 for the applicant's land was based on the content of Council's electronic land record and was a decision not made at Council's budget meeting or any other ordinary meeting.

Applicant's arguments
The applicant argued that the reference to 'land use codes' is essential to determining which of the potential rating categories apply to the applicant's land. It was argued that Council is required to approve the 'land use codes' by resolution. The applicant argued that Council was stymied by its own definition of 'land use codes' in its Revenue Statement and that the reference to 'approved' meant 'approved by resolution'.

The way the categories were structured, there were a number of inclusionary and exclusionary words and it was submitted that the applicant's land could fall within either category 6 or category 8 (if the reference to the land use codes was not included in those categories).

Council's arguments
It was argued that the fully accurate description of category 8 is the first part of what appears next to category 8 in the resolution, namely 'land used or capable of being used for a Shopping Centre that has a property land area of greater than 7,000 sq m, or more than 120 onsite carparking spaces'.

It was submitted that the concluding words 'includes all land of the relevant size with land use code 16 and as identified by the Chief Executive Officer' are an explanatory inclusion but that becomes irrelevant if the subject land falls within the primary description of land within category 8.

Council noted in its submission that what it did by adding in the description of category 8 the words of inclusion was to commence undertaking the 'identification exercise' that was otherwise delegated to the Chief Executive Officer. This resulted in a conflation by Council of the description and the identification processes.

In response to the argument that the 'land use codes' had to be approved by resolution, authority was provided that the word 'approved' should not be construed in an overly technical way. Context was provided in that those codes were included in Council's land record database and there was no uncertainty or ambiguity as to what land use codes were referred to in the description of the categories of differential general rates.

Findings of the court
The Court noted that most of the categories established by Council in its resolutions contain references to the relevant 'land use codes' in the description of the categories.

Her Honour noted that there may have been some conflation by Council in setting out the description for each rating category between description and identification, but Council elected to use 'land use codes' in the descriptions which assist in adding another criterion to the description of the category. It was held that the reference to the 'land use codes' within the description for a differential category of rateable land must therefore be categorised as part of the description of that category.

In dealing with the issue of whether land use codes needed to be approved by resolution, Her Honour noted the evidence provided by Council that it is unequivocal that the 'land use codes' obtained by Council from DNRM were in use in Council's land record database when the descriptions for the categories were approved by resolution of Council.

Her Honour acknowledged that perhaps the definition of 'land use codes' in the Revenue Statement could have been more precise. However, in context Council's existing statutory land record database (of which the councillors must have been taken to be aware) and the incorporation of the 'land use codes' in the descriptions of the differential rating categories must be construed as a reference to those 'land use codes' used by Council in the descriptions, and thereby approved.

Her Honour found that the use of the word 'approved' in this context within the Revenue Statement does not mandate any separate resolution being required for Council adopting the 'land use codes' with the 'effective date' according to the timing of the relevant resolutions required under the LGR.

Her Honour also found that the reference in the description of each differential rating category to the effect of 'as identified by the Chief Executive Officer', in context, is merely a reference to the process of identification. Her Honour also did not consider that use of 'rateable value' as a criterion for some categories resulted in the categorisation being unreasonable.

In relation to the second decision of Council, Her Honour, in finding that the reference to the 'land use codes' in the description of the differential rating categories is valid, found no difficulty in classifying the applicant's land as category 8. Her Honour stated that the land is used for shopping centre, as that term is defined in the Revenue Statement and fulfils all the other criteria that are set out in the description, including being land with the land use code of 16.

Her Honour then proceeded to dismiss the application and ordered the applicant to pay Council's costs.

Key takeaways
The case demonstrates the broad discretion that a Queensland local government has in deciding the different categories of rateable land and how it goes about describing each of the categories.

The case also shows that references to terms such as 'land use codes' which can be defined in a 'Revenue Statement' need to be considered in the context of a relevant local government land record system in terms of how those land use codes are incorporated. In that context, subject to how a relevant 'Revenue Statement' deals with this issue (if at all), the reference to how codes of this nature are 'approved', may not involve them needing to be 'approved by resolution'. In this regard, the Court took an approach of councillors at the budget meeting being taken to have been aware of matters associated with Council's land record and any incorporation of 'land use codes' into that record.

Queensland local governments, in preparing its rating categories as part of the budgeting process, should bear in mind the differences set out in section 81 of the LGR in terms of the 'description exercise' and the 'identification exercise'. It would be better to avoid any conflation of those two concepts when a rating category is established.

The 'identification exercise' is not typically undertaken at Council's budget meeting but is a power that is delegated to Council's Chief Executive Officer (and ordinarily sub-delegated to managers).

Overall, Ugarin's Case is consistent with a fairly established line of authority in Queensland that demonstrates difficulties for a ratepayer in challenging differential general rating category resolutions under judicial review.

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