Posted on February 13, 2015 by 1

Can a Council make a long term agreement with a developer about rates liability?

The NSW Court of Appeal has held that a contractual clause purporting to levy a rate “in accordance with the Local Government Act 1993” (the Act) impermissibly fettered the discretion of the Council from undertaking its statutory duty of assessing rates each year.

The decision reaffirms the principles that a statutory body may not enter into contracts:

• that are incompatible with the due exercise of their powers or the discharge of their statutory duties; or
• if it constitutes an anticipatory fetter on the future exercise of a statutory power or discretion.

Facts

In Peregrine Mineral Sands Pty Ltd v Wentworth Shire Council [2014] NSWCA 429 the Minister for Planning granted consent to Bemax Pty Ltd for the development of a mineral sands mine, and construction and operation of the associated surface facilities. The four appellants were the parties to the joint venture for the operation of the mine (Appellants).

A condition of consent was that the Appellants enter into an agreement with Wentworth Shire Council (Council) regarding the construction and maintenance of a road from the mine site to the Silver City Highway.

The Council entered into a Roads Agreement with Pooncarrie Operations Pty Ltd as agent for the remaining Appellants. Clause 3.1(a) provided that the Appellants would:

[P]ay to Council…land rates of $100,000.00 per annum commencing 1^st January 2006 and adjusted annually in accordance with the Local Government Act.

The LG Act

Section 494(1) of the Act provides that councils must make and levy an ordinary rate for each year on all rateable land in its area.

Section 534 provides that each rate or charge is to be made for a specified year, being the year in which the rate or charge is made or the next year.

A council is required to prepare management plans in respect of its revenue policy for the next year (s402), and the plan is required to include a statement with respect of each ordinary rate proposed to be levied (s404(1)), and the ad valorem amount of that rate (s404(2)).

Submissions

The Council contended at both the trial and in the appeal proceedings, even if it was, by cl 3.1(a) of the Roads Agreement on its true construction, agreeing to levy rates of $100,000 per annum for 20 years, that clause could not stand because it impermissibly fettered the Council from undertaking its statutory duties each year in accordance with the Act.

The Appellant submitted that the Council had power to enter into the Roads Agreement for the benefit of its local government area. The Appellant further submitted that the provisions of the Act did not preclude levying of rates by reference to a previous rating decision.

Decision

McColl JA held (at [24]) that in order for a council to satisfy the mandatory requirements of its rate making functions, it must

Undertake that exercise annually, that it do so after setting out its proposals for its revenue policy in a draft management plan which is explicit as to proposed ordinary rates, including the proposed ad valorem rate, that that plan is subject to public scrutiny and only adopted after any public submissions received have been considered.

The Court therefore held that clause 3.1(a) of the Roads Agreement was invalid because:

• it purported to operate over 20 years, thus avoided the mandatory obligation to make and levy rates annually;
• it was not levied on the land value of the land in question; and
•  it was not included in a draft management plan on which interested parties had the opportunity to make submissions.

Implications

While councils are bodies corporate, and they have broad powers to enter into contracts, these powers do not extend to contravening or fettering the mandatory requirements imposed by the Act, in particular in relation to rating.