A recent decision of the New South Wales Court of Appeal highlights the need for council’s to set fees and charges for services in accordance with the requirements laid out in the Local Government Act 1993 (LG Act). Not doing so creates risks for council’s financial affairs because council’s revenue raising may be flawed.
Adrenaline Pty Limited (Adrenaline) and Bathurst Regional Council (Council) entered into a Track Hire Agreement (Agreement) for the use of the Mount Panorama Motor Racing Circuit together with a suite of ancillary services to support the racing events. Under the Agreement, significant fees were payable by Adrenaline.
The Agreement was made possible following the amendments to the Mount Panorama Motor Racing Act 1989 (NSW), which increased the maximum number of motor sports events from two to five. Adrenaline obtained a permit from Council for each of the events held from 2007 to 2011.
Before the Courts
Adrenaline brought proceedings in the Supreme Court of New South Wales questioning the obligation to pay the fees. Adrenaline alleged that the fees had not been publicly exhibited so as to permit members of the public to make submissions on them in accordance with the requirements of the LG Act. Nevertheless, Adrenaline continued to pay for fees and conduct race meetings in accordance with the Agreement.
Council accepted that it had not complied with the requirements of the LG Act, but argued that it could rely on the Council’s ‘general power to enter into contracts’ to support the enforceability of the fees payable under the Agreement.
The Primary judge dismissed Adrenaline’s claim.
Issues on appeal
Adrenaline took the matter to the New South Wales Court of Appeal in respect of one claim only. Adrenaline alleged it was entitled to a refund of the money paid to Council under a mistake.
Council again maintained that it was not necessary to comply with requirements of the LG Act, and instead, argued that it had a general contractual power to enter into the Agreement. Council also argued that the fees were not fees for services and that the LG Act did not apply in instances were fees were negotiated.
Decision and reasoning
The NSW Court of Appeal rejected Council’s arguments.
The NSW Court of Appeal held that Council was required to comply with the requirements of the LG Act in setting fee payable under the Agreement (including public exhibition and invitation of submissions) even though the fee had been the subject of commercial negotiations between parties. Relevant comments from the NSW Court of Appeal include:
- The LG Act needs to be construed as a whole.
- There is a distinction between rates and charges on one hand, and fees for services on the other hand. However, the LG Act imposes substantially the same level of transparency and consultation upon all fees for services as it imposes on rates and charges.
- The importance of consultation and public exhibition is paramount. It indicates the significance attached by Parliament to such public involvement in order to ensure and uphold the integrity of the statutory process.
- It is a basic principle of statutory construction that, where a statute confers a power subject to qualifications and conditions, general provisions in the statute are read as being subject to those qualifications and conditions. In this case, this meant that Council could not avoid the obligation imposed by section 601F of the LG Act to give public notice of a fee for a service by relying on its general power to enter into contracts;
- The permits granted under the Mount Panorama Motor Racing Act expressly allowed Council to enter into contracts or arrangements in accordance with the LG Act, and therefore Council cannot side-step the provisions of the LG Act relating to fees and charges and replaced them with a general power to enter into any contract it chooses.
- Commercial negotiations involving fees did not take Council outside the ambit of the statutory scheme which regulated the charging of fees for services.
The New South Wales Court of Appeal found that Council had entered into the contract in breach of its statutory obligations in relation to charging of fees for a service contained in the LG Act.
Take home message
The New South Wales Court of Appeal’s decision means that councils must ensure they comply with the requirements of the LG Act with regard to the setting of fees and charges even if agreements under which those fees and charges are payable are authorised by specific legislation (like the Mount Panorama Motor Racing Act) and not the LG Act. It is recommended that council’s review contracts they have entered into that involve the provision of a service (including licences for the use of council land) to ensure that the fees payable have been imposed in accordance with the LG Act to be satisfied with the financial integrity of those contracts.
The decision proves as a timely reminder to council’s that they cannot rely on a general power to enter into contracts to justify negotiated fees that are not in line with the fees and charge struck in accordance with the mandatory procedures for fixing fees for services as set out in the LG Act.