Posted on May 19, 2015 by
Can a council contract out of its statutory obligations when fixing fees for services?
The New South Wales Court of Appeal has issued an important reminder that a council’s general power to enter into contracts does not allow it to charge fees other than those struck in accordance with the mandatory procedures for the fixing of fees for services as set out in the Local Government Act 1993 (LG Act).
In an earlier post, I discussed the judgment of the Court of Appeal in Peregrine Mineral Sands Pty Ltd v Wentworth Shire Council  NSWCA 429 where the Court held that a council could not contract out of the statutory requirements imposed upon it by the LG Act when determining rates payable. The Court ultimately took a similar view in Adrenaline Pty Ltd v Bathurst Regional Council  NSWCA 123 (Adrenaline) when considering whether a council was obliged to comply with Part 10 of Chapter 15 of the LG Act when entering into a contract fixing a fee for services to be provided over a period of time.
In Adrenaline, the parties came to an agreement whereby the appellant would pay Council a fee of $250,000 per annum for the right to use the Mount Panorama Motor Racing Circuit.
The ‘Track Hire Agreement’ (Agreement) was entered into following amendments to the Mount Panorama Motor Racing Act 1989 which allowed Council to apply to the Minister for a permit for up to five races a year. The permit gave the Council various powers, including the power to enter into contracts or arrangements ‘in accordance with the Local Government Act 1993‘.
Permits were obtained for each of the events held in 2007 – 2011. A ‘negotiated fee’ of $247,178 was paid for the first year, with escalating fees. The fees were determined without being publicly notified thereby preventing the opportunity for submissions to be made by the public.
Issues on appeal
At trial, Council accepted it had not complied with Part 10 of Chapter 15 of the LG Act, but had entered into the Track Hire Agreement under its ‘general power to enter into contracts‘. On appeal, Council maintained that it was not necessary to comply with Part 10 of Chapter 15 of the LG Act as the fees had been struck by negotiation. This blog focuses on the findings in relation to that point of the appeal.
Part 10 of Chapter 15 of the LG Act
Council’s may charge and recover an approved fee for any service which it provides (s608(1)). An ‘approved fee’ must be determined in accordance with Division 2 or 3 of Part 1o of Chapter 15 of the Act.
Under Division 3, a council must not determine the amount of a fee until it has given public notice of the fee, and has considered any submissions duly made to it during the period of public notice (s610F(1)). The fee must be publicly notified in the draft operational plan for the year in which the fee is to be made (610F(2)).
Can a council enter into contracts to fix fees for services?
Council argued that the decision to enter into the Track Hire Agreement without complying with Part 10 of Chapter 15 was valid but this was unanimously rejected. Leeming JA said that ‘it is quite plain that Divisions 2 and 3 of Part 10 of Chapter 15 exhaust the universe of fees which Council may impose’ (at ).
The Court highlighted the importance of the mandatory requirements for exhibition and consultation of proposed fees, citing Spigelman CJ in Smith v Wyong Shire Council  NSWCA 322 at . Public participation in determining fees for services is as important as it is in determining rates and charges. Both forms of a council’s revenue are required to be included in a draft management plan. In this respect, the Court said that the LG Act ‘imposes substantially the same level of transparency and consultation upon all fees for services as is imposed on rates and charges’ (at ). The fact that the former are consensual and the latter are mandatory was said to be immaterial.
Finally, the Court again clarified the limit of a council’s capacity to enter into contracts under s220 when subject to mandatory obligations under the LG Act. The Court said, at  that ‘even when the Local Government Act confers a power in terms upon councils to reach an agreement or arrangement with a landowner, the price it can charge for work performed by it remains subject to Part 10 of Chapter 15. To that extent at least, the ‘general power to contract’ cannot permit a council to escape the statutory restrictions upon it.’
The case serves as a further reminder by the Courts that a council entering into a contract may only do so subject to the mandatory provisions in the LG Act.