Unpaid rates and charges can be a significant burden on the resources of Councils.
As all Councils are aware, local governments may recover unpaid rates and charges by commencing court proceedings, selling the land, or acquiring the land. The most appropriate course of action will depend on the circumstances of each case.
There are no time limits for commencing sale or acquisition procedures under the Local Government Regulation 2012 (“LGR”), however the Limitations of Actions Act 1974 (Qld) does limit the time Council can commence proceedings in a Court to recover unpaid debts.
A new case has shone light on exactly how much time Council has to commence proceedings for unpaid rates, Amos v Brisbane City Council [2018] QCA 11.
Snapshot
- The current state of play is that a local government must commence court proceedings to recover rates and charges no later than 6 years from the date the rates and charges fell overdue;
- Amos has been appealed to the High Court of Australia – so watch this space!
The Case
Brisbane City Council commenced proceedings in the Supreme Court of Queensland for the recovery with interest, of overdue and unpaid rates, utilities and interest charges exceeding $494,000 levied from the period 30 April 1999 – 9 January 2012. Council was successful in the Supreme Court however Mr Amos appealed that decision on two points:-
- Whether the Primary Judge erred in holding that the 12 year limitation period in section 26(1) of the Limitations of Actions Act 1974 (Qld) applied to the exclusion of the 6 year limitation period in section 10(1)(d) and section 26(5) of that Act.
- Whether the Primary Judge erred in finding the Appellants liable for utility charges levied by the Respondent because the Appellant asked for these utilities to be provided.
The Court of Appeal found that the 6-year limitation period applied and Council was barred from recovering rates, charges and interest overdue for more that 6 years.
On the second point, the Court of Appeal upheld the decision of the Supreme Court, deciding that a positive request for services is not required, an implicit request is sufficient.
The legislation considered in relation to this matter is the City of Brisbane Act 2010 and the City of Brisbane (Finance Plans and Reporting) Regulation 2010 (Qld), however the Local Government Act 2009 and the Local Government Regulation 2012 contains substantially the same provisions as considered in this Appeal and the decision is applicable to all Queensland local governments.
Background
The Defendant was the registered owner of 7 lots of rateable land. Council was owed rates and charges which, with interest, exceeded $494,000.00. Council had commenced the action in 2009 and the debt was incurred within 12 years of Council commencing the action.
At first instance His Honour Justice Bond found that the 12-year limitation period applied, and the Defendant was ordered to pay all outstanding rates and charges, including any interest payable.
On Appeal, the Appellant argued that section 10 of the Limitations of Actions Act 1974 (Qld) barred Council from bringing an action to recover rates and levies that were brought after the expiration of 6 years from the date the cause of action arose. That provision relevantly provides:-
“(1) The following actions shall not be brought after the expiration of 6 years from the date on which the cause of action arose:-
…
(d) an action to recover a sum recoverable by virtue of an enactment, other than a penalty or forfeiture or sum by way of a penalty or forfeiture.”
Council argued that section 26 of the Limitations of Actions Act 1974 (Qld) applied. Subsection (1) of section 26 relevantly provides:-
“(1) An action shall not be brought to recover a principal sum of money secured by a mortgage or other charge on property whether real or personal nor to recover proceeds of the sale of land after the expiration of 12 years from the date on which the right to receive the money accrued….”
The Court of Appeal agreed with the Appellant on this point, deciding that the 6-year limitation period could be pleaded to bar Council from bringing an action to recover overdue rates and charges at a point 6 years after the right to recover accrued.[1]
The majority judgment emphasised that the point that the Limitations of Actions Act 1974 (Qld) do not permit action within a certain time but prohibits bringing of an action after a certain time has passed.[2] The judgement considered the history of limitations acts in England and in Australia and considered that even if the action was brought to recover a debt, which was also charged on the land, the limitation period would still be the shorter period of 6 years, not the greater period of 12 years because that provision was prohibitory and was an act to limit, not enlarge, existing limitations periods relating to the recovery of debts charged on land.
Council did recover the rates and charges that were less than 6 years old.
Can Council levy utility charges on people who do not ask for the service to be supplied?
Water and sewerage services were supplied to a structure on the property. The Appellant argued that section 59 of the Regulation placed a positive obligation on Council to not supply services to any structure unless expressly “asked”. That provision relevantly states:-
“(1) Subject to sub-section 94, the following persons are liable to pay rates and charges:-
…
(b) for a service that is supplied to a structure, or to land that is not rateable land: the entity who asked for the service to be supplied.
…”
At first instance, the Supreme Court found that Mr Amos must be regarded as having asked for the services because, on the evidence, there was an implicit request by the Appellant for continued supply of water and sewerage services. The Court of Appeal unanimously agreed with the Supreme Court decision on this point. Mr Amos was therefore liable for the utilities charged within the 6-year limitation period.
On 14 September 2018, the High Court granted special leave to Brisbane City Council to appeal the decision to the High Court.
Considerations
Whilst we will await the High Court decision, the case is a reminder to Councils to review its outstanding debts and ensure that any court action contemplated to recover rates and charges, or other debts, must be commenced prior to 6 years from the date on which the cause of action arose.
This decision did not consider whether a Council could sell or acquire the land to recover overdue rates and charges under Chapter 4 subdivision 2 and 3 of the LGR.
Court proceedings are generally not required to sell land under the LGR to recover overdue rates. Therefore the Limitations of Actions Act 1974 (Qld) will have no effect on this type of recovery. However, we recommend that you obtain legal advice prior to commencing an action to recover unpaid rates that are more that 6 -years old.
Should you wish to discuss this article further, please do not hesitate to contact Martin Wright of Preston Law.
[1] Her Honour Justice Dolson, whom Philippides agreed, delivered the majority judgment. Justice Fazer provided a minority decision on this point agreeing with the decision of the Supreme Court but deciding that an action for interest levied on overdue rates was only available within the 6-year limitation period.
[2] See the Statement per Romer LJ in Barnes v Clinton at p891, “the Statutes do not say that debts may be recovered under certain conditions, but they negative the rights of creditors to bring actions after a certain time has elapsed”.