Australia: Court finds utility charges for water services invalid, due to failure to comply with legislative requirements and failure to exercise power to levy utility charges in accordance with Act

Last Updated: 14 October 2018
Article by Ian Wright and Nadia Czachor

In brief

The case of The Mount Isa Irish Association Friendly Society Ltd v Mount Isa City Council [2017] QSC 316 concerned two applications to the Supreme Court of Queensland (Court) by The Mount Isa Irish Association Friendly Society (Applicant). The Applicant sought declarations that the Mount Isa City Council (Council) invalidly levied almost $50,000 of utility charges for water services for two of the Applicant's properties.

The Court considered the proper construction of section 101 of the Local Government Regulation 2012 (LGR), which deals with the working out of utility charges for water services, to determine whether the Council had complied with the requirements under the LGR. The Court found that the Council had not complied with requirements about how utility charges for water services are to be worked out under the LGR.

Further the Court determined that the Council had failed to exercise its power to levy utility charges for water services in a transparent and efficient manner and that the exercise of the power in this manner was inconsistent with section 4 of the Local Government Act 2009 (LGA), in particular with the local government principles contained in that section of the Act.

The Court consequentially found that the Council's utility charges for water services were invalid.

The Council adopted a rate of $202 per unit for water services

The Council had a broad power and discretion in respect of levying rates and charges. The general power to levy rates and charges was contained in section 94 of the LGA with further matters being set out in the LGR. Importantly section 101 of the LGR prescribed how utility charges for water services were to be worked out as follows:

  1. " The utility charges for a water service must be charged–
    1. wholly according to the water used; or

    ...

    1. partly according to the water used, using a 2-part charge.
  1. The utility charges for the water used must be worked out on the basis of–
  2. ...

    1. if the water used is measured by a water meter–
      1. an amount for each unit, or part of a unit, of water that is used; or
      2. a fixed amount plus an amount for each unit, or part of a unit, of water that is used over a stated quantity.

    ..."

For the 2016/2017 financial year, the Council adopted a rate per unit charge or service for water of $202 for a set water entitlement of 112.5kL,with a further charge per kL applicable for water consumed above the entitlement. The number of units allocated to different types of properties was determined on the basis of the classification of the property, for example a Dwelling – single house/dwelling was allocated 8 units in Mount Isa. The Council's Revenue Statement noted that the "units applied to different types of properties have been established for many years and Council is generally satisfied that they reflect the relative costs of service".

It is relevant to note that it was agreed by the parties that this charging arrangement was not a 2-part charge under section 101(1)(b) of the LGR.

The Court was required to determine the proper construction of section 101 of the LGR

The Applicant argued that the Council's decision to impose a rate of $202 per unit meant that the Council had not complied with the requirement under section 101(1)(a) of the LGR to charge for water wholly according to the water used.

The Council argued that its decision to charge a rate per unit complied with section 101(1) as its utility charges for water services had been worked out in accordance section 101(2)(b)(ii) of the LGR which provided for utility charges for water services to be worked out on the basis of a fixed amount plus an amount per unit of water.

The Court considered the apparent conflict in section 101 of the LGR between the need for a water service to be charged wholly according to use and the ability for charges to worked out on the basis of a fixed amount. The Court, referring to the High Court's judgement in Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28 (Project Blue Sky), noted that reconciling conflicting provisions often requires a determination of the hierarchy of the provisions, specifically which of the provisions is the leading provision and which is the subordinate provision.

The Court found that section 101(1) of the LGR was the leading provision and that the ability to work out charges in accordance with section 101(2)(b)(ii) of the LGR was only available in circumstances where the Council had adopted a 2-part charge under section 101(1)(b) of the LGR. As a 2-part charge had not been adopted by the Council it had failed to comply with section 101(1) of the LGR when it levied water charges on the Applicant.

The Court considered whether the failure to comply with the LGR rendered the utility charges for water invalid

Having determined that the Council had not complied with section 101 of the LGR, the Court was required to consider the effect of this non-compliance. Again referring to the High Court's judgment in Project Blue Sky, the Court noted that the failure to comply with a condition regulating the exercise of statutory power will not necessarily invalidate the act done under the power. There must be a legislative intent to invalidate the act where there is a failure to comply with the condition.

In the context of section 101 of the LGR there was an express statement made by the subordinate legislature in section 101(3) of the LGR that "[u]tility charges for water are not invalid only because the local government does not comply with this part" [our emphasis].

The inclusion of the words "only because" led the Court to distinguish the circumstances before it from those before the High Court in Minister for Immigration and Multicultural Affairs v Palme (2003) 216 CLR 212 where the words of the Migration Act 1958 (Cth) clearly provided that a failure to comply with a provision of that Act should not invalidate the decision. By contrast, section 101(3) of the LGR left open the possibility of invalidity where non-compliance was combined with another factor.

The Court found that the Council failed to exercise its power under section 94 of the LGA in a manner consistent with the local government principles

The LGA required anyone performing a responsibility under that Act to do so in accordance with the local government principles stated in section 4 of the LGA. The local government principles relevantly included a requirement for "transparent and effective processes, and decision-making in the public interest".

The Applicant argued that the charges were invalid as not only had the Council failed to comply with section 101 of the LGR but the Council's decision to levy rates and charges under section 94 of the LGA had been made in a manner which was inconsistent with the local government principles in section 4 of the LGA.

The Court found that the Council had not exercised its power in a manner consistent with section 4 of the LGA in particular the principles in respect of transparency and effective processes and decision making. The Court did not find the Council's explanation in its Revenue Statement, or the other material before the Court, about the adopted method for determining the amounts of levied water charges or the allocation of units to different classes of land to be indicative of a transparent or effective process.

The Court stated that section 4 of the LGA is more than merely aspirational and noted as follows:

"That language clearly places a duty on any decision-maker before performing a responsibility, or exercising a power, under the Act to at least turn his or her mind to the principles, especially where such a decision concerns compliance with a procedure imposed by legislation" (see [49]).

The Court stated that the Council "should have turned its mind to the local government principles in the LGA when it resolved to determine its utility charges for the rates period" (see [48]).

The combination of the Council's non-compliance with the LGR and its failure to exercise its power to levy utility charges in accordance with the local government principles led to the Court invalidating the utility charges for water services

The Court found that the non-compliance with section 101 of the LGR combined with the failure to exercise its power to levy utility charges under section 94 of the LGA in a manner consistent with the local government principles meant that the Council's utility charges for water services were invalid.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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