Australia: Council water utility charges upheld by the Queensland Court of Appeal

Last Updated: 29 September 2018
Article by Troy Webb

WHO SHOULD READ THIS

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

THINGS YOU NEED TO KNOW

  • Water Utility charges that are based wholly according to water used can have a fixed amount which entitles the consumer to use up to a fixed volume of water.
  • Any non-adherence to the general 'local government principles' will not invalidate a water utility charge that otherwise complies with the regulations.

WHAT YOU NEED TO DO

  • Review the basis upon which water utility charges are levied in light of the clarifying precedent established by the Mount Isa case.

On 18 September 2018 the Queensland Court of Appeal handed down its decision in Mount Isa City Council v The Mount Isa Irish Association Friendly Society Ltd [2018] QCA 222.

The Court of Appeal comprising Sofronoff P, Gotterson and Philippides JJA unanimously overturned the decision of Daubney J at first instance.

The case concerned a judicial review challenge by the Mount Isa Irish Association Friendly Society Ltd (Friendly Society) to a decision of Mount Isa City Council (Council) relating to the levying of a water utility charge.

There were three primary issues to be determined:

  • The lawfulness of the utility charges for water levied under ss 101(1)(a) and 101(2)(b)(ii) of the Local Government Regulation (2012) (Qld) (LGR)
  • If the charges were unlawful, whether they remain valid under s 101(3) of the LGR; and
  • The extent to which the 'local government principles' required more information to be included in a Revenue Statement and whether non-adherence to a local government principle could invalidate water utility charges.

Council had determined utility charges for water on the basis of a fixed amount per property according to its use, plus an amount for each unit, or part of a unit, of water that is used over a stated quantity. The focus of the appeal was whether the Friendly Society's utility charges for water were charged "wholly according to the water used" under s 101(1)(a) LGR.

The appeal was allowed, orders made at first instance set aside, and costs ordered in favour of Council.

Facts and legislative regime

Under s 94 of the Local Government Act 2009 (Qld) (LGA), a Council has the power to levy utility charges. Chapter 4, Part 7 of the LGR deals specifically with the levying of utility charges. In particular s 99 of the LGR provides a Council with a broad discretion to determine an appropriate method for levying utility charges on ratepayers. A utility charge is defined in s 92 LGA and includes water.

The framework for charging for water utilities is provided in s 101 of the LGR. Section 101(1) provides that a utility charge for water must be charged either "wholly according to the water used" or "partly according to the water used, using a 2-part charge".

Section 101(2) of the LGR provides two options for ascertaining the utility charges depending on whether or not the water is measured by a water meter. Where measured using a water meter, Council must calculcate the charges on the basis of either "an amount for each unit, or part of a unit, of water that is used" or "a fixed amount plus an amount for each unit, or part of a unit, of water that is used over a stated quantity".

Under s 101(3) of the LGR, water utility charges are not invalid only because Council does not comply with Chapter 4, Part 7.

It was agreed between the parties that the Friendly Society's properties used a water meter, and that Council's method of levying did not constitute a '2-part charge' under s 41(4) of the LGR.

In July 2016, Council determined a formula to levy water utility charges for the 2016/2017 financial year.

The approach adopted in the Revenue Statement can be summarised as:

  • each property would be classified and allocated a certain number of 'units', entitling the land owner to a fixed amount of water consumption of 112.5kL;
  • a set amount per unit would be charged ($202); and
  • additional charges would be incurred at a rate of $2.60 per kilolitre (or part thereof) for water consumed in excess of the allocated allowance.

In August 2016, the Friendly Society was given rates notices for its land totalling $49,187 in water utility charges following the above approach. The Friendly Society then commenced judicial review proceedings challenging the validity of the charges.

Findings of Daubney J at first instance

The Friendly Society brought an application submitting the water utility charges were invalid because they were not 'wholly according to the water used', as per s 101(1)(a) of the LGR. In response, Council submitted the charges were valid because they accorded with s 101(2)(b)(ii) of the LGR, that is, where water used was measured by a water meter, the charges comprised "a fixed amount plus an amount for each unit ... that is used over a stated quantity".

His Honour held there was "an apparent conflict" between ss 101(1)(a) and 101(2)(b)(ii) of the LGR. His Honour rejected Council's submission that the former must be interpreted by reference to the latter. His Honour said that to do so would render the words "wholly according to the water used" a nullity. His Honour accepted s 101(1)(a) of the LGR as the "leading provision".

His Honour concluded that s 101(2)(b)(ii) of the LGR should be interpreted as only applying to 2-part charges – a conclusion which His Honour claimed was supported by the example in the section. Accordingly, the Court at first instance found that Council had failed to comply with s 101(1)(a) of the LGR when it levied the water utility charges on the Friendly Society for the rates period.

His Honour also had to consider whether s 101(3) of the LGR protected the Council's charges from invalidity. His Honour accepted the Friendly Society's submission that the charges were invalid due to the combined failure of Council to comply with s 101(1) of the LGR, and s 94 of the LGA, which required Council to levy rates and charges in a manner consistent with the 'local government principles' in s 4 of the LGA. One of those principles relate to transparent and effective processes, and decision-making in the public interest.

It was held at first instance that Council's water utility charges were invalid. The Friendly Society was entitled to the relief sought.

The Grounds of Appeal

Council appealed the decision on seven grounds:

  • Grounds 1 to 4 concerned the proper construction of ss 101(1)(a) and 101(2)(b)(ii) of the LGR, and the validity of the water utility charges as levied under those provisions. In particular, Council submitted that there was no conflict between ss 101(1)(a) and 101(2)(b)(ii) of the LGR, and on a proper construction of those provisions its water utility charges complied with s101 of the LGR as a whole;
  • Ground 6 was to the effect that Council did not fail to comply with ss 4 and 94 of the LGA; and
  • Grounds 5 and 7 focused upon s 101(3) of the LGR. Council submitted that even if the water utility charges did not comply with s 101(1) and (2) of the LGR, there was no other noncompliance with relevant provisions in the LGR or LGA to justify invalidity.

The findings of the Court of Appeal

Gotterson JA wrote the lead judgment and the reasons and orders His Honour proposed were agreed to by Sofronoff P and Philippides JA.

In determining grounds 1 to 4, His Honour inferred from the structure of s 101 that "wholly" is intended to make clear that, other than in the case of a 2-part-charge, water utility charges are to be charged wholly according to the water used as worked out by one of the methods for which s 101(2) of the LGR provides. In this sense, s 101(2) is complementary to s 101(1) – s 101(1)(a) cannot be disassociated from s 101(2).

His Honour held that there was no conflict between ss 101(1) and 101(2)(b)(ii) of the LGR. The fixed amount to which s 101(2)(b)(ii) refers is a fixed monetary amount which entitles the ratepayer to use up to a fixed volume of water. It is not a fixed infrastructure usage-charge of the kind described in the definition of a 2-part charge. The variable charge is applicable only to water used over a stated quantity.

For those reasons, His Honour held that the water utilities charges complied with s 101(2)(b)(ii) of the LGR, and those grounds were upheld.

As the charges complied with Part 7 of the LGR, His Honour did not consider it necessary to deal with ground 5 in relation to s 101(3) of the LGR, which operates to avoid invalidity for noncompliance.

Grounds 6 and 7 concerned the finding of invalidity by the primary judge for non-compliance with ss 4 and 94 of the LGA. His Honour considered the approach of the primary judge to be misplaced. Council did not have to include in the Revenue Statement the range of available charging options for water and reasons for its choice. His Honour held that such a requirement is neither expressed nor implied in the local government principles. His Honour considered transparency was demonstrated by the Revenue Statement, Council's statement that the units generally reflected "the relative costs of service", and the adoption of the charges at a special budget meeting.

His Honour further provided that in even non-adherence with a local government principle would not result in invalidty of the charges.

For those reasons, grounds 6 and 7 were upheld.

As grounds 1 to 4, 6 and 7 were successful, the appeal was allowed. The declaration and orders made made at first instance were set aside; the relief sought refused; and the Friendly Society ordered to pay Council's costs both on appeal and at first instance.

Key takeaways

This case demonstrates the broad discretion Councils have in determining how they charge ratepayers for utility services.

The Appeal decision provides guidance to Councils as to how s 101 of the LGR is to be interpreted.

This case guides the expectations for what is necessary to satisfy local government principles in the context of levying rates and charges. Compliance with the statutory provisions relating to the levying of rates and charges will continue to be paramount. If such compliance exists then whether there is non-adherence to a general local government principle is a moot point.

In light of the clarifying precedent set by the Mount Isa case, Queensland Councils may wish to consider reviewing the basis upon which its water utility charges have been levied.

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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