October 2015 – Case Law: Council’s power to impose development servicing charges

The Land and Environment Court recently handed down a decision which is of importance to all local councils and county councils who exercise water management functions.

1. In Nash Bros Builders Pty Ltd v Riverina Water County Council (No. 2) [2015] NSWLEC 156, Local Government Legal acted for Riverina Water County Council (RWCC) in the proceedings which successfully defended a challenge to the Council’s power to impose development servicing charges.
2. In the proceedings which were heard by Justice Pepper, the Applicants sought a declaration that RWCC had no power to impose development servicing charges in relation to the supply of water to The Grange Retirement Village. Nash Bros. also sought recovery of $127,234.00 (plus interest) in development servicing charges it had previously paid to RWCC.
3. RWCC had defended the proceedings, contending that they should be dismissed because it had the legislative power to charge the Applicant development servicing charges conferred either by section 608 of the Local Government Act 1993 (the LG Act) and/or section 306 of the Water Management Act 2000 (the WM Act). Council also submitted that the Applicants had not discharged their onus of establishing that they had not passed on the charges to other persons, in which case, section 4 of the Recovery of Impost Act 1963 (the Recovery Act), provided a defence to the claim for the payments made.
4. The Applicants had submitted that section 608 of the LG Act did not authorise RWCC to charge it development servicing charges for two principle reasons. The first was that on its terms, section 608 only authorised RWCC to charge a “fee for any service it provides” and that at a minimum it must be possible to identify some service provided to the payee of the fee for which the fee is payable. They submitted that no service was provided by RWCC to the Applicants for the fees charged.
5. At paragraph 123 of the Judgement, Her Honour held that a “relevant service” was provided by RWCC to the Applicants. She further found that there was no justification for confining the term “services” in section 608 of the LG Act in the manner proposed by the Applicants to exclude the activities and functions “such as ongoing infrastructure, maintenance costs, or the monitoring or delivery of the water” undertaken by RWCC in exchange for the development servicing charge.
6. The second limb of the Applicant’s argument that section 608 was not a valid source of power to levy the development servicing charge was that section 64 of the LG Act, when read together with subsections 305 to 307 of the WM Act, and in particular section 306 of the WM Act, provides for a specific regime by which a contribution towards the cost of water management works, including the development servicing charges, can be imposed, which displaced the more general power contained in section 608 of the LG Act.
7. However, Her Honour found that the two statutes (the LG Act and the WM Act) sit comfortably together and there is no necessity to read the LG Act down to accommodate the more prescriptive criteria in the WM Act. She found that Council could avail itself of either section 608 of the LG Act or subsections 305 to 307 of the WM Act when levying the development servicing charge. At paragraph 130, she also indicated that an act purporting to be carried out under one statutory power maybe supported by another statutory power, and RWCC could rely on any available valid source of power to impose a development servicing charge, even it had been previously mistaken as the source of power.
8. The Applicants had also submitted that section 306 of the WM Act had not been engaged because there had been no application by the Applicants, in writing or otherwise, for a Certificate of Compliance under section 305 of the WM Act.   Therefore, the Applicants submitted that there was no power to require the Applicant to pay any development servicing charges as a pre condition to granting a Certificate of Compliance for the development. They also submitted that there was no legal or practical obligation on the Applicants to obtain a Certificate of Compliance as the subdivision of the development was not being sought.
9. On the other hand, RWCC had argued that the Applicants were obliged to obtain a Certificate of Compliance from RWCC pursuant to condition 3 and/or paragraph (f) of condition 62 of the Development Consent. RWCC had also argued that there had been various applications in writing by the Applicants for such Certificates.
10. At paragraph 151, Her Honour found that the Applicants were obliged under condition 3 of the Development Consent to obtain a Certificate of Compliance from RWCC, and that as a precondition to the grant of a Certificate of Compliance, RWCC had the statutory power to require payment of a development servicing charge.
11. At paragraph 176, Her Honour found that the Applicants had not applied for a Certificate of Compliance under section 305 of the WM Act. However, she went on to indicate that although there was no actual request for a Certificate of Compliance, the Applicants were none the less aware of the need to obtain such a Certificate as a condition of development approval, and the prospect of a future application was a sufficient basis upon which the power in section 306(2) of the WM Act could be exercised.
12. At paragraph 178, Her Honour found that the power to impose a development servicing charge as a precondition to the grant of a Certificate of Compliance, which Nash Bros was required to obtain as a condition of development approval, was not only lawfully available to RWCC under section 306 of the WM Act, on the facts, she found that the power was lawfully engaged.
13. In relation to the Applicant’s claim to recover monies already paid, Her Honour found that the Applicants were not entitled to recover any of the money paid to RWCC in the form of the development servicing charges. In addition to the fact that the charges were lawfully charged, she held that the Applicants had not discharged their onus of demonstrating that each payment was made under compulsion to enliven any recovery or restitution of the payments. In addition, she found that by operation of section 4 of the Recovery Act, the Applicants were precluded from recovering the money because the evidence disclosed that the Applicants had passed the cost onto another party, being the family trusts. For these reasons, she found that the order for repayment of $127,234 in the Summons could not be made.
14. At paragraph 204, Her Honour concluded that “because the development servicing charges had been lawfully opposed on the Applicants, the application for relief must be dismissed“. She also noted as that the proceedings were Class 4 Proceedings where costs generally follow the event, costs ought to be awarded in RWCC’s favour. Therefore, she dismissed the proceedings with costs.

Note: This information is not to be relied upon as legal advice.