Overdue Rates and Charges - Don't Take it Personally!

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Published by Preston Law on 05/09/2019

The High Court handed down its decision in Brisbane City Council v Amos [2019] HCA 27 on 4 September 2019 which clarifies the legal position and time frames that will apply where a local government commences legal proceedings to recover overdue rates and charges against a landowner as a debt.

Brief Facts and Circumstances

Mr Amos lived in Brisbane and was the owner of rateable land. However, Mr Amos had failed to pay rates and charges to Brisbane City Council (BCC) from 30 April 1999 up to 9 January 2012 so BCC commenced legal proceedings against Mr Amos, as a defaulting ratepayer, to recover the outstanding rates and charges plus interest as a debt.  As you all know, rates and charges are taken to be a charge on land under section 95 of the Local Government Act 2009 (LGA).

Legislative Framework

Any action to commence legal proceedings against a debtor for recovery of a debt can be limited to the time frames which are set out in the  Limitations of Actions Act 1974 (Act).  If an action to recover a debt is not commenced within the prescribed time frames, the debtor can argue that the person seeking recovery of the debt is just out of time and out of luck.

In this case, BCC was of the view that under the Act, it had 12 years to commence an action against Mr Amos for the recovery of the overdue rates, charges and also the interest accruing over that period. Mr Amos had a different view. He argued that under the Act, a 6 year limitation period applied and that any monies owing for the period outside the 6 year limitation period, were not recoverable by BCC.

On that basis, the matter proceeded to the Court for a decision to be made and eventually made it all the way to the High Court.

The Act relevantly contains 2 provisions dealing with limitation periods which can overlap:

  1. A 12 year limitation period will apply to an action to recover a principal sum of money secured by a mortgage or other charge on a property. This can be a “real” or “personal claim”. (section 26(1) of the Act)
  2. A 6 year limitation period will apply to an action to recover a debt which is payable under a simple contract or a  “personal” claim. (section 10 of the Act)

Needless to say, there can be an overlap as in some cases there can be a real claim because of the security held over land and a personal claim against the debtor i.e defaulting ratepayer which could be covered by both sections 10 and  26(1) of the Act.

BCC argued that only one limitation period can apply for any action and that section 26(1) of the Act was the appropriate section that applied here as the action being taken was for the recovery of overdue rates and charges which are a charge on the land.  BCC accepted that in this instance, the legal proceedings against Mr Amos for recovery of the overdue rates, charges and interest could also be a personal claim against Mr Amos as a debtor.

Naturally, BCC was arguing 12 years and Mr Amos was arguing 6.

What Was the View of the High Court

The High Court was unanimous in its decision. Mr Amos was successful in his argument that a limitation period of 6 years applied and that BCC could not recover overdue rates, charges or interest for any period outside the 6 year limitation period. This left BCC 6 years short and a bit out of pocket.

According to the High Court, the issue of overlapping claims was decisively dealt with by the Courts over a century ago in 1899 in Barnes v Glenton well prior to the enactment of the current Act in 1974. In 1899, the Court held that where both limitations period could apply to a claim, the defendant could plead the shorter limitation period. In this case, the High Court formed the view that no argument had been put by BCC which would alter this position which had “been consistently followed by judicial authority and textbook writers, and hence practitioners for more than a century” (Kiefel, CJ and Edelmann, JJ).

What does this mean for local government?

Don’t wait around before commencing legal proceedings for recovery of debts and particularly with respect to overdue rates and charges. While a local government can sell land for arrears of rates after 3 years under the Local Government Regulation 2012, once the land is sold or acquired, the landowner has no further liability for overdue rates and charges under section 135 of the LGA.  If there is a shortfall from the sale or acquisition of the property, local government has no ability to recover the shortfall as an overdue debt.

For further information or assistance with debt recovery, get in touch with the government team at Preston Law. 

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