Posted on October 13, 2015 by Stuart Simington

Recovery of development servicing charges as a fee for service under the Local Government Act 1993

A recent case indicates that councils which are also water supply authorities may require development servicing charges (DS Charges) to be paid as a fee for services under s608 of the Local Government Act 1993 (LG Act) as an alternative to requiring them to be paid as a preconditions to the issue of certificates of compliance under the Water Management Act 2000 (WM Act).

To properly levy DS Charges through a development consent, a council must impose a condition requiring a certificate of compliance to be obtained under the WM Act. The council can then levy the DS Charges as a precondition to the granting of that certificate under s306 of the WM Act.

However if a council does not require a certificate of compliance to be obtained as a condition of consent, or no such opportunity arises (for example because the development of concern is exempt development), then some councils have experienced difficulty in recovering DS Charges.

In respect of subdivisions, the issue does not generally arise as s109J(1) of the Environmental Planning and Assessment Act 1979 (EPA Act) requires that a certificate of compliance be obtained for the subdivision before a subdivision certificate can be issued for the development.

However, not all development involves subdivision.

Nash Bros Builders Pty Ltd v Riverina Water County Council (No 2) [2015] NSWLEC 156 concerned a seniors living development being carried out in stages.

The developers had paid DS Charges of $127,234 to Riverina Water County Council (Riverina).  However, relations deteriorated and the developers subsequently argued that Riverina had had no power to impose the DS Charges and sought recovery of the charges paid (plus interest).  The developer argued that it had made no application for a certificate of compliance and therefore the DS Charges could not have been lawfully required by Riverina. The payments of concern were said by the developers, effectively, to have been paid in the face of Riverina’s unlawful demand to allow units in the seniors living development to be connected to the water supply.

Pepper J held, however, that the statutory regime for the levying of DS Charges is not limited to the powers granted to a water supply authority by s306 of the WM Act.

Rather, the Court held (amongst other things) that:

  • s 608 of the LG Act provides a wide power to councils to charge fees for services, subject to compliance with the procedures set out in the LG Act;
  • there are a wide range of matters that constitute ‘services’;
  • the supply of water by Riverina was clearly a service provided by it;
  • although the DS Charge was being levied to recover infrastructure costs, it was in respect of the system that enabled the supply of water and the costs of the system were therefore a part of the service;
  • it did not matter that the service also benefited third persons, namely, the owners of the villas in the retirement village; because the Court has previously held that councils have the power under s 608(1) of the LG Act to charge a fee for the provision of passenger security screening services notwithstanding that the service is not provided to the airline, but to the individual passengers;
  • the regime for levying DS Charges under the WM Act did not mean that the general power under s 608(1) of the LG Act should be read down to exclude the power to levy DS Charges as a fee for service under the LG Act.

The last proposition is probably the most potentially contentious.  Section 610 of the LG Act provides as follows:

610 Effect of other Acts

(1)    If the amount of a fee for a service is determined under another Act:

(a)    a council may not determine an amount that is inconsistent with the amount determined under the other Act, and

(b) a council may not charge a fee in addition to the amount determined under the other Act.

(2)    If the charging of a fee for a service is prohibited under another Act, a council must not charge a fee for the service under this Act.

Pepper J held that s610 did not preclude the imposition of a fee for service under the LG Act, despite the fact that the WM Act deals with DS Charges. This was for a number of reasons including that:

  • s 610(1) is concerned with the amount of the fee and not the power to levy it (which is in the WM Act);
  • the intent of s610 is to prevent any inconsistency in, or a doubling up of, fees being charged, and is not to detract from the council’s power to impose a fee for a service under a different Act, or under s 608;
  • the regime under the WM Act provides for, amongst other things, a power to require a payment as a condition associated with obtaining a certificate of compliance but these provisions are directed to a different subject-matter than the broad power to charge a fee for a service under s 608 of the LG Act and it was entirely conceivable, for example, that a certificate of compliance could be granted absent any requirement to pay a fee.

Assuming the case is not reversed on appeal,  the benefit of the decision for councils is that if there is no opportunity to impose a condition requiring a certificate of compliance, or council has simply failed to do so, then DS Charges can still be recovered, simply by issuing an invoice. Council could take legal action to recover the amount in the invoice if the DS Charges are not paid.

So to do, councils exercising powers as a water supply authority should include the pricing methodology for DS Charges in their development servicing plan as well as specifying it as the methodology of a fee for service in the operational plan.