Loading...
Queensland Judgments

beta

Authorised Reports & Unreported Judgments
Exit Distraction Free Reading Mode
  • Unreported Judgment

Tarong Energy Corporation Ltd v South Burnett Regional Council

 

[2011] QSC 74

Reported at [2012] 1 Qd R 171

 

SUPREME COURT OF QUEENSLAND 

 

CITATION:

Tarong Energy Corporation Ltd v South Burnett Regional Council [2011] QSC 74

PARTIES:

TARONG ENERGY CORPORATION LIMITED
ACN 078 848 736
(applicant)
v
SOUTH BURNETT REGIONAL COUNCIL (FORMERLY NANANGO SHIRE COUNCIL
ABN 62 619 672 017)
(respondent)

FILE NO:

BS7937 of 2007

DIVISION:

Trial Division

PROCEEDING:

Application for statutory order of review

DELIVERED ON:

7 April 2011

DELIVERED AT:

Brisbane 

HEARING DATE:

30 November and 1-2 December 2010

JUDGE:

Mullins J

ORDER:

The application is dismissed

CATCHWORDS:

ADMINISTRATIVE LAW – JUDICIAL REVIEW – Grounds of review – UNREASONABLENESS – where local government empowered to make and levy differential general rates – where only the applicant’s land included in the Power Generation category – whether the minimum general rate that applied to the Power Generation category was manifestly unreasonable – whether the proportion of the general rates levied on land in the Power Generation category was manifestly unreasonable

ADMINISTRATIVE LAW – JUDICIAL REVIEW – Grounds of review – ERROR OF LAW – where local government empowered to make and levy differential general rates – where only the applicant’s land included in the Power Generation category – whether local government made decision on the differential general rate that applied to land in the Power Generation category by reference to irrelevant considerations – where local government took into account the number of employees engaged by the applicant in the business conducted from the land – where local government had information about gross rates liability of a power station in another local government area – where local government took into account the applicant’s use of the land for substantial income generating enterprise – whether local government made and levied the differential general rate on the basis of the applicant’s capacity to pay the general rates  

REAL PROPERTY – RATING OF LAND – RATES UNDER LOCAL GOVERNMENT LEGISLATION – MAKING AND LEVYING RATE – making rate – Queensland – where respondent made and levied differential general rates under Local Government Act 1993 (Qld) – where only the applicant’s land included in the Power Generation category – whether the respondent lawfully decided the minimum general rate and the differential general rate levy that applied to land in the Power Generation category  

Judicial Review Act 1991, s 20, s 21. s 23

Local Government Act 1993, s 513A, s 513B, s 518, s 519, s 520, s 520A, s 963, s 966, s 967, s 976, s 977, s 978, s 979

Local Government Finance Standard 2005, s 12

Marrickville Metro Shopping Centre Pty Ltd v Marrickville Council [2010] NSWCA 145; 174 LGERA 67, considered

Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24, followed

Prasad v Minister for Immigration and Ethnic Affairs  (1985) 65 ALR 549, considered

Sunwater v Burdekin Shire Council [2002] QSC 433;  125 LGERA 263, considered

Xstrata Coal Qld P/L & Ors v Council of the Shire of Bowen [2010] QCA 170, considered

COUNSEL:

M D Hinson SC and P W Telford for the applicant

R W Gotterson QC and S P Fynes-Clinton for the respondent

SOLICITORS:

Clayton Utz for the applicant

King & Company Solicitors for the respondent

  1. The applicant is the owner and operator of the Tarong Power Station and the Tarong North Power Station which are situated on land, having a total area of 1,341 hectares, that is within the local government area of the respondent. At all material times the unimproved value of the land was $215,000. For the year ended 30 June 2007, the annual general rates for the land was $4,384. The applicant applies for statutory orders of review under the Judicial Review Act 1991 (JRA) in respect of three groups of rating decisions made by the respondent (which includes its predecessor Nanango Shire Council for the 2007/2008 year) that increased the general rate payable by the applicant for each of the years ended 30 June 2008, 2009 and 2010.

The decisions

  1. The first group of decisions arises out of the inclusion of the land in the newly established “Power Generation” rating category, the setting of the minimum general rate for the Power Generation category as $375,000, and the issuing of a rate notice by the respondent for the rating period 1 July 2007 to 31 December 2007 for $187,500, equating to a yearly rate of $375,000. The applicant’s land was the only land in the Power Generation category. Although the amended application expressly seeks the review of the decision to include the applicant’s land in the Power Generation category, the applicant did not pursue the challenge the categorisation of its land.
  1. In September 2008 the respondent issued a rate notice in respect of the land for the 2008/2009 financial year which was based on a reduction of the minimum general rate from $375,000 to $250,000 for the Power Generation category, but increased the general rate for land in that category to 174.4186 cents in the dollar on the unimproved value of the land, thereby maintaining the previous annual levy of $375,000, but on a different basis. This is the second group of decisions.
  1. The respondent maintained the minimum general rate of $250,000 for the Power Generation category for the 2009/2010 financial year. The respondent issued a rate notice in August 2009 which increased the differential general rate on the land to the sum of $199,912.48, equating to an annual rate of $399,824.96 (calculated at a rate of 185.9651 cents in the dollar). This is the third group of decisions.

Grounds for review

  1. The applicant relies on s 20(2)(e) (and s 21(2)(e)) of the JRA, as particularised in s 23(g), to claim that the respondent improperly exercised the power conferred by s 967 of the Local Government Act 1993 (the 1993 Act) in that the exercise of the power, as it resulted in an increase of at least 8,553% in the applicant’s gross rates liability, was so unreasonable that no reasonable person could have exercised the power in that manner. 
  1. The applicant also relies on s 20(2)(f) (and s 21(2)(f)) of the JRA to claim that each of the decisions involved an error of law in that an irrelevant consideration was taken into account by the respondent in making each of the decisions, being either the applicant’s capacity to pay the rate, the number of employees engaged by the applicant at the site, or the general rates paid by Gladstone and other large power stations and other large enterprises outside the respondent’s area.

Relevant statutory provisions

  1. Provisions enabling a local government to make and levy differential general rates were first introduced into the 1993 Act by the Local Government Act Amendment Act 1985.  According to the second reading speech of the relevant Minister on 27 March 1985 the Bill was introduced to address the difficulties that could face a local authority in devising an equitable rating system following a complete revaluation of lands in its area.  The Minister stated at p 4558 of Hansard:

“Nevertheless, it is considered desirable to provide local authorities with increased flexibility to make and levy general rates in a manner that will meet their individual requirements for an equitable rating structure.

The first principle contained in the Bill addresses this aspect by empowering a local authority to make and levy differential general rates.  In a nutshell, the new system of rating will permit a local authority to categorise rateable land in its area, or in each financial division, if the area is so divided, into various categories based on such factors as land useage or land type and then levy general rates at different levels on rateable land in each category.”

  1. Under s 513A and s 513B of the 1993 Act a local government was required for each financial year to prepare and adopt a revenue policy that complied with s 12 of the Local Government Finance Standard 2005 which required a local government’s revenue policy for a financial year to include details of the principles applied by it for the year for making and levying rates and charges.
  1. Under s 518 of the 1993 Act a local government was required to adopt for each financial year a budget for its operating fund and a revenue statement. Section 519(2) of the 1993 Act required the budget of a local government to be developed consistently with its revenue policy.  Section 520 relevantly provided:

“(1)A local government’s budget developed for its operating fund must specify the following matters for the financial year –

  1. its estimated costs in total, and for each of its significant activities;
  1. the sources of funds necessary for spending provided for in the budget.

(2)The budget also must specify the matters mentioned in subsection (1), in general terms, for the next 2 financial years.

(3)The budget must be the basis on which rates are to be made and levied by the local government for the financial year.”

  1. The requirements and content of the revenue statement were specified in s 520A of the 1993 Act. Section 520A(2) provided:

“A revenue statement must state each of the following matters –

if the local government makes and levies a differential general rate for the financial year –

(i) the categories into which rateable land in its area is to be categorised; and

(ii)the criteria by which land is to be categorised;

if the local government makes and levies a special rate or charge, for the financial year, for a service, facility or activity supplied by another local government under arrangements entered into under section 59 – a summary of the terms of the arrangements;

if the local government fixes a regulatory fee for the financial year – the criteria used to decide the amount of all regulatory fees fixed for the year.”

  1. Section 963 of the 1993 Act permitted a local government for a financial year to make and levy a general rate or differential general rates and minimum general rate levies. The provision also empowered a local government to make and levy separate rates and charges, special rates and charges and utility charges. Section 966 of the 1993 Act permitted the local government to make and levy a differential general rate only if rateable land was categorised into two or more categories under part 3 of chapter 14 of the 1993 Act. Section 966(2) provided:

“A differential general rate made and levied on rateable land in a category may be the same as or different to the differential general rate made and levied on land in another category.”

  1. Section 967 of the 1993 Act relevantly provided:

“(1)A local government may identify rateable land for the purpose of making and levying a minimum general rate levy in any way it considers appropriate.

  1. Subject to subsection (3) and sections 968 and 969, a local government may, for a financial year, make and levy not more than 1 minimum general rate levy on rateable land.
  2. However, if a local government makes and levies a differential general rate for the financial year, the local government –

(a)may make and levy different minimum general rate levies on rateable land in different categories; but

(b)must not make and levy more than 1 minimum general rate levy for rateable land in a category.”

  1. Categorisation of land for differential rating was dealt with in part 3 of chapter 14 of the 1993 Act (s 976 to s 982). Under s 976 a local government could make and levy a differential general rate for a financial year only if all the rateable land in its area had been categorised under part 3. Section 977 provided:

“Before making and levying a differential general rate for a financial year, a local government must decide by resolution –

(a)the categories into which rateable land in its area is to be categorised; and

(b)the criteria by which land is to be categorised.”

  1. A local government that was making a differential general rate was required under s 978 of the 1993 Act to categorise all rateable land in the local government’s area in accordance with the categories and criteria that had been decided by the local government.  Section 979(1) provided:

“If a local government resolves to make and levy a differential general rate, the resolution must specify the categories in which rateable land is to be included.”

The decision-making steps undertaken by the respondent

  1. Although Mr Anthony Hayward did not commence as the chief executive officer of the respondent until 14 July 2008, he had previously held positions with local authorities throughout Queensland and New South Wales for 20 years and was able to describe in general terms the budget process for local authorities which was also relevant to the respondent’s 2007/2008 budget.  He stated (at Transcript 2-17) that in general terms the Council puts together the expenditure components of the budget, considers the revenue that will be received from Federal and State grants and subsidies and generated from services for which the Council charges a fee, and works out the revenue that needs to be derived from the general rates.  He acknowledged (at Transcript 2-18) that the aim of the process is to produce a balanced budget, but that is not always achievable.
  1. The respondent concedes that for the 2007/2008 year that the Nanango Shire Council informed itself, at least corporately, about the level of general rates imposed on other power stations, and particularly the Gladstone power station, in other local government areas, before making its decision about the differential general rate and minimum rate applicable to the applicant’s land.  The respondent also concedes that before the 2007/2008 rating decisions were made, the Council, in its corporate possession, had a copy of a report prepared by consultant Mr Alan Morton relating to the differential rating of mining operations which referred to employee numbers as a possible factor for consideration in setting differential rates.    
  1. The Nanango Shire Council adopted its Revenue Policy 2007/2008 at its budget meeting on 3 July 2007. The opening statement in the section on general rates at p 3 stated:

“The principal (sic) of user pays in the general fund is not considered practical given that all residents of the Shire do not receive the same services, although they do have access to these services.  Accordingly, it is considered that a system of differential rating better achieves Council’s aims.

  1. The minimum general rate will be set at a level that reflects the standard of service that is received for that rate from the general fund.
  1. Each parcel of land in the Nanango Shire will be Categorised for differential rating into one of the adopted categories based on the DNR&M land use code and/or land use.  Differential rating shall be on the basis of the following ten categories:-”
  1. The ten proposed categories were then set out in the Policy. The tenth category is “Power Generation” which applies to land primarily used or intended for use for the purpose of electricity generation.
  1. The Council also adopted its Revenue Statement 2007/2008 at the budget meeting. The purpose of the Revenue Statement (as set out on p 3) was to provide an outline of the revenue raising measures adopted by the Council to meet the financial resource needs of its programs in accordance with its objectives. In relation to the levying of differential general rates, the Council noted at p 3 of the Revenue Statement that it was required to raise an amount of revenue that was appropriate to maintain assets and provide services to the Shire as a whole. The following statement was made about the minimum general rate at p 4 of the Revenue Statement:

Minimum General Rate

In order to ensure a reasonable contribution to the recurrent and capital costs of operation of the Council, Council has determined that it will levy a minimum general rate to apply to all properties in the Shire. The charge level may be different in each category.

The level of Minimum General Rate will be set at an amount, which in the opinion of Council represents a fair and reasonable minimum contribution, by any landholder to the services available, in accordance with Section 967(i) of the Local Government Act 1993.”

  1. On 31 August 2007 the then chief executive officer of Nanango Shire Council, Mr Shane Gray, together with another Council employee, Ms Frank, met with the Finance Manager Operations of the applicant, Mr Paul Pace, and the Operations Manager of the applicant, Mr William Renshaw. Mr Pace exhibited to his affidavit filed on 21 January 2008 the file note which he had made of the meeting which the respondent does not dispute is an accurate record of what occurred. Mr Pace recorded that Mr Gray had explained that the Council had looked at what other Shires with power stations were charging and considered what the applicant should pay in comparison. (This had been anticipated by an email sent by Mr Gray to the applicant’s chief executive on 26 June 2007 in which reference was made to the Council considering a rate increase and having “researched other power stations and mines” and that Gladstone appeared to be a comparable site and he expected “they will follow suit.”) Mr Pace also recorded that Mr Gray had advised that the Council had engaged a consultant to look at a number of different rate models which the Council could adopt and one model which could be used was to set a fee per employee/contractor engaged by the applicant per year. Mr Pace noted that Mr Gray did not confirm that was the basis of the calculation of the new general rate levy.
  1. The budget for the 2008/2009 year was the first budget of the South Burnett Regional Council which was formed upon the amalgamation of four local government areas including Nanango Shire. The respondent held its first budget meeting for the 2008/2009 year on 13 August 2008 at which it embraced the differential rating system and maintained the minimum general rate of $375,000 for the Power Generation category.
  1. The respondent’s Revenue Policy 2008/2009 was adopted at the meeting on 13 August 2008.  In the section of the policy dealing with the principles used in making and levying rates and charges the following statements were made:

“The Council will try to achieve an equitable distribution of the cost of its operations between different groups of ratepayers.  It will achieve this by balancing the conflicting principles of User Pays where the cost of a service is born by each user of the service in proportion to the benefit that particular user obtains from the service, and Ability to Pay where the level of contribution to services provided for the benefit of the whole community is collected according to a measure of the funds likely to be available to each payer.

 

The Council will ensure that the rates and charges made are sufficient to cover the cost of its operations and that it is able to continue to provide services to the community at a level consistent with the growth and development of the area.

 

Council is endeavouring to meet the significant new demands being placed on it, including the demands generated through the local government reform process.  However, with limited increases in grants from the State or Federal Governments and the requirement to develop and renew infrastructure, it will not be possible to satisfy all needs.

 

Council is committed to ensuring that it has in place a rating regime that ensures Equity by providing the same treatment for ratepayers with similar circumstances.  However Council recognises that prior to the local government reform process each of the former Local Governments had in place disparate rating regimes.  Council considers that moving to common rates in the dollar for similar lands would have an adverse impact on some sections of the community.”

  1. A further budget meeting of the respondent was held on 27 August 2008 at which the respondent repealed some of its earlier 2008/2009 budget resolutions (but not the Revenue Policy 2008/2009) and re-adopted the budget, incorporating amendments in respect of certain rating categories, including the Power Generation category. The respondent’s Revenue Statement 2008/2009 was adopted at the meeting on 27 August 2008. The general principle for determining rates and charges was set out in paragraph 2.1.1:

“The general principle adopted by Council in determining rates and charges for the financial year 2008/2009 shall be that wherever possible, charges shall relate directly to the services provided, everything Water Supply, Water, Refuse Collection, etc.  Costs which are not able to be recovered by regulatory fees, commercial fees or utility charges shall be met by the levying of a differential general rate as hereinafter described.”

  1. The respondent dealt with the reasons for adopting differential rating as the basis for the respondent’s general revenue raising and stated in paragraph 2.1.2(a) of the Revenue Statement 2008/2009:

“The commercial, industrial and residential categories are further subdivided to reflect differing classes of land within those broader categories.  This will allow a more equitable distribution of the cost of operations given that the unimproved value of the land does not fully reflect operational demands and service levels in various sectors of the community.”

  1. The respondent explained at paragraph 2.1.2(b) of the Revenue Statement that general rates were used to fund the general operations of the respondent after allowing for the income from all other rates and charges and grants and subsidies. The reason for setting a minimum general rate was set out in paragraph 2.1.3(a) of the Revenue Statement:

“The Council recognises that all parcels of land will receive a benefit from services provided and that, in some instances, the levying of a rate based on the valuation will result in some lands not contributing to the cost of such services in proportion to the benefit received.”

  1. It was stated in paragraph 2.1.3(b) of the Revenue Statement that the minimum general rates will be determined “based on the level of services provided in the budget for that year.” The respondent provided for a minimum general rate of $250,000 for the Power Generation category and a general rate in the dollar of 174.4186 cents for the 2008/2009 year.
  1. The respondent continued to embrace the differential rating system at its budget meeting for the 2009/2010 year held on 29 July 2009. The Power Generation category for rateable land within the former Nanango Shire area was maintained. The principles adopted by the respondent to guide revenue raising were listed in the Revenue Policy 2009/2010 as:

“Council’s legislative obligations.

The needs and expectations of the general community as determined by formal and informal consultation and survey processes.

The cost of maintaining existing facilities and necessary services.

The need for additional facilities and services.

Equity.”

  1. The principles used by the respondent in making and levying general rates for the 2009/2010 year were set out in the Revenue Policy and referred again to the need for the respondent to raise revenue to maintain assets and provide services which were otherwise not able to be funded by the funds received through subsidies, grants, contributions or donation or not provided for by other levies or charges. Reference was made to the respondent’s opinion that “the differential general rating scheme provides the most equitable basis for the distribution of the general rate burden.” The following additional principles were referred to:

“In formulating the differential rating scheme the Council has considered equity by implementing the general rate based on the land use. …

Further Council needs to ensure that there is a measure of equity in the rates paid by similar types of properties in the (sic) each of the former local government areas.  To achieve this council has considered the capacity to pay of each community by referring to published Australian Bureau of Statistics information as well as the Unimproved Capital Value of land in each section of the Shire.”

  1. The respondent set out in table 1 in the Revenue Policy the rating categories adopted for 2009/2010 and the average general rate levy in each category. Following table 1 was set out the explanation for how the unimproved capital valuation of land was used in determining the amount of the general rate levied:

“The Unimproved Capital Valuation for each property is the basis for determining the amount of the general rate levied and in general terms Council seeks to ensure that total revenue raised from any sector maintains a nexus with the unimproved capital value of the land in that sector. This is difficult and challenging given the rating regimes that existed in each of the former local government areas. It is also complicated by the fact that some of the major industries in the area are established in lands that attract a comparatively low Unimproved Capital Value. In these circumstances council considers the demands placed upon its services and infrastructure by a particular industry and strikes general rates and minimum general rates to raise the revenue needed to ensure Council has the capacity to service its residents as well as its commercial and industrial sectors.”

  1. Paragraph 2.1.1 of the respondent’s Revenue Statement 2009/2010 explained that the respondent’s general principle for determining rates and charges was that, wherever possible, charges must relate directly to the services provided, such as water supply, water, refuse collection etc, and costs which were not able to be recovered by regulatory fees, commercial fees or utility charges must be met by the levying of a general rate. In paragraph 2.1.2 of the Revenue Statement the respondent set out its reasons for why differential rating should form the basis of its general revenue raising. These reasons (which were the same that were expressed in the Revenue Statement 2008/2009) were that different classes of land may receive differing levels or require differing levels of service, and similar classes of land in different parts of the newly created local government area had historically different levels of general rating in place.
  1. The following explanation was given at paragraph 2.1.3(a) of the Revenue Statement 2009/2010 for calculating the minimum general rate for each category based on the level of services provided in the budget for that year:

“The Council recognises that all parcels of land will receive a benefit from services provided and that, in some instances; the levying of a rate based on the valuation will result in some lands not contributing to the cost of such services in proportion to the benefit received.”

  1. For the 2009/2010 year the respondent maintained the minimum general rate for the Power Generation category as $250,000 and provided for a general rate in the dollar of 185.96510 cents.
  1. On 22 March 2010 the Department of Environment and Resource Management increased the unimproved value of the applicant’s land to $3.1m, effective from 30 June 2010.

Expert evidence

  1. Although both parties adduced expert evidence, there was agreement that the opinions of those witnesses on the decisions made by the respondent mainly provided only indirect assistance to the court: their opinions provided background information on the fixing of general rates against which the court may evaluate the outcome, or the process, of the respondent’s decision-making.
  1. The applicant called evidence from economist Mr Jeffrey Lassen. The respondent relied on evidence from Mr Morton who is a qualified engineer and provides advice to local authorities in Queensland in relation to rating strategies, particularly in terms of differential rating.  Mr Morton was not involved in the respondent’s decision-making that is the subject of this judicial review.  Both Mr Lassen and Mr Morton provided written reports and gave oral evidence.
  1. The first report of Mr Morton dated 18 February 2008 was directed at justifying the setting of the minimum general rate of $375,000 by the Nanango Shire Council for the Power Generation category for the 2007/2008 year. Mr Morton (at p 3) made reference to five factors that he described as “typically seen by councils as relevant in making a decision on differential rate categories and rate levels.” It was clarified during Mr Morton’s cross-examination on another report that he had prepared for Wambo Shire in April 2007 on “Review of General Rating” (exhibit 4) that those five factors were identified in the LGAQ Commentary on the 1993 Act. Those five factors were:

“(a) the rateable value of land and the equity or otherwise of the level of rates which would be payable under an ordinary system;

  1. relative valuation as between different types of land;
  2. the level of services provided to that land as compared to the rates burden it would carry under an ordinary system; and
  3. use of the land in so far as it relates to the extent of utilisation of or benefit from Council services; and
  4. ability to pay, including whether or not the land is revenue producing (bearing in mind that revenues provide a source of funds which is relevant to the net impact on the landowner, and also that most revenue producing lands are used for a business for which rates will be tax deductible).”
  1. Mr Morton referred (at p 4) to the information he obtained from the applicant’s website that between 450 and 550 people plus contractors were employed on site, although he understood that more than half of them resided in other local authority areas. He noted (at pp4-5) that there were many direct and indirect impacts from such a large employer being located within a rural locality, including non-residents’ use of Council services such as the road network, parking, parks, gardens, cultural services and public amenities.
  1. At p 7 of his report, Mr Morton suggested that the reason for the use by local authorities of high minimum rates for intensive activities such as major industry, mines, shopping centres and resorts is related to the fact the unimproved valuation does not fairly reflect the nature of the site use which is the determinant of relative impact on the local authority’s services. Mr Morton’s opinion was expressed in his summary of findings at p 12 of this report:

“4. The minimum general rate of $375,000 is a reasonable contribution from this major sector of the economy which has a workforce estimated to be equivalent to 16% of the resident workforce of the Shire. The levy results in 6.9% of the general rate levy of the shire as a whole being placed on this major activity. The amount of the levy is not unreasonable when measured against rate levies on similarly intense activities in other council areas. It is not an undue burden on Tarong Energy in terms of ability to pay relative to other ratepayers. It is also not unreasonably high relative to the general rates levied per employee on an average commercial or industrial establishment within Queensland.”

  1. Mr Lassen’s first report dated 1 April 2008 also dealt with the setting of the minimum general rate of $375,000 for the Power Generation category for the 2007/2008 year. Mr Lassen’s methodology was to calculate the effective tax rate imposed on the applicant, to compare average effective rates across the different rate categories in the Nanango Shire and to compare the effective tax rate imposed on the applicant with tax rates imposed in other circumstances. The effective tax rate represents the actual rate of the tax paid by a taxpayer by reference to the tax base.
  1. Mr Lassen treated the unimproved value of the applicant’s land as the tax base, as he characterised the general rate as a form of land tax. He therefore calculated that the effective tax rate for the 2007/2008 year was 174 cents per dollar of unimproved value of the applicant’s land. He also calculated the average effective rate in each category of land for the Nanango Shire in the same year by dividing the actual revenues collected by the total unimproved land value for each category. This resulted in the average effective rate applied to the Power Generation category being far higher than the average effective rate for all other rate categories in the Nanango Shire.
  1. Mr Lassen noted at p 4 of his first report that it was his experience that “it is rare for a tax to yield revenue which exceeds the value of the tax base, that is, a rate in excess of 100%.” He also disagreed with Mr Morton’s approach, as he considered that comparison of tax burdens should be made within the structure of the tax and not by reference to irrelevant factors, such as the number of employees of the taxpayer at the site. He concluded at p 13 of his first report that from an economic and taxation perspective the effective tax rate that had been applied to the applicant was unreasonable because it exceeded both on an annual and recurring basis the value of the asset that was being taxed. Mr Lassen confirmed in oral evidence (at Transcript 2-4) his opinion that the annual rate was unreasonable if it exceeded the unimproved value of the land that was being rated, particularly in the context of Nanango Shire where the effective tax rate applied to the applicant’s land was far higher than for the general rates paid by any other rate payer in the Shire or for any other Queensland power station.
  1. Mr Lassen prepared a second report that dealt with the decisions made by the respondent for the 2008/2009 and 2009/2010 years. Mr Lassen was of the view that the rate of tax for general rates that applied to the applicant remained “extraordinarily high.” Mr Lassen confirmed at paragraph 4 of his second report that it was his opinion that the appropriate approach to compare tax burdens is to calculate effective tax rates by dividing actual revenues collected by the respondent by the total unimproved capital value for each rating category and then compare the statutory and effective rates with tax rates imposed by other governments. Table 1 in his second report did those calculations for the 2009/2010 year. The average effective rate for the Power Generation category was 185.9651. Apart from the Extractive B category for which the average effective rate was 70.0531, the average effective rates for all the other categories of land ranged between 1.7207 and 7.8042.
  1. Mr Morton’s second report dated 26 February 2010 confirmed the opinion that he had given in relation to the 2007/2008 year and dealt with the respondent’s decisions for the following two years. Mr Morton made the point at paragraph 3.2 that the actual general rate levied for the 2008/2009 year on the applicant’s land was the same gross levy that it had applied in the 2007/2008 year, when the general rate increase across the respondent’s area for the 2008/2009 year was 9%. He noted at paragraph 3.4 that the gross annual general rate levy for the applicant’s land for the 2009/2010 year represented a 6.6% increase over the levy for the previous year, when the general rate increase across the whole of the respondent’s area was 7.5%. Mr Morton noted at paragraph 3.6 that the gross general rate levy for the respondent’s area in 2009/2010 amounted to $18m and that the general rate levy on the applicant’s land represents 2.2% of the respondent’s general rate levies in 2009/2010.
  1. Mr Morton disputed Mr Lassen’s conclusion that the effective rate of tax for general rates applied to the applicant was “extraordinarily high” and sought to illustrate that by reference in paragraph 5.2 to a number of examples of Queensland local government areas where the relevant council levied a tax rate in excess of 100% of the unimproved valuation for the 2009/2010 year. The examples involved land use for production of gas, petroleum and/or oil, gas refinery and mining. Mr Morton observed at paragraph 5.5 of the second report:

“The problem for Queensland councils is that unimproved valuation may not always reflect the intensity of use of land or its potential impact on council costs, particularly relative to other land uses with a similar UV.”

  1. Mr Morton relied on the assessment in 2008 by the Productivity Commission of the revenue raising capacity of local government and, in particular, the conclusions quoted at paragraph 5.6 of his second report to the effect that rates revenue is not constrained by limits on the range of land valuation methods available to councils or the specific type of land valuations methods available to councils or the specific type of land valuation method applied, because councils can adjust the rate in the dollar to achieve their revenue requirements. Mr Morton illustrated this by reference to States such as South Australia and Victoria where capital valuation is used for levying general rates in contrast to Queensland where a local authority must use unimproved valuation.  It followed from this that in Queensland the rate in the dollar must be substantially higher than the rate in the dollar in South Australia or Victoria to achieve the same level of general rate from a similar land use.  Mr Morton stated at paragraph 5.12 of the second report:

“The unimproved valuation of the Tarong Power station site is extremely low. The site is occupied by the largest electricity generation capacity complex in Queensland. In my opinion, the council would not be properly balancing the benefit and ability to pay principles noted above across the whole council area without significantly increasing the rate in the dollar relative to other uses.”

  1. Mr Morton noted at paragraph 6.4 of his second report that with the creation of the respondent, a greater percentage of the applicant’s workforce was within the respondent’s area which could be one reason to reduce the minimum rate from that which had previously been levied by Nanango Shire Council. Mr Morton still considered, however, that the 2007/2008 minimum levy of $375,000 was not excessive and did not regard the current minimum of $250,000 as excessive. His view was based on practice across the State in the rating of relatively large employment activities, including those of an industrial nature.
  1. To the extent that is necessary to express a preference for the expert evidence of one witness or the other, I have difficulty with Mr Lassen’s narrow and arbitrary approach to the respondent’s decision-making. The use of Mr Lassen’s analytical tool of effective tax rates that is confined to the structure of the tax where the tax base is the unimproved value of the land gives no recognition to the discretion that a local authority had under the 1993 Act in fixing the differential rate and the flexibility in revenue raising that differential rating was intended by the Legislature to confer on a local authority. Mr Lassen’s view that an effective tax rate greater than 100% of the unimproved value of the land is likely to be unreasonable does not take into account the relationship between the local authority’s total revenue from annual general rates and budgeted expenditure to be met from that general rates revenue and the discretion that applies to apportioning that total general rates revenue among the differential rate categories. The use of the effective tax rate as the test for the reasonableness of the general rate levy makes no allowance for the use made of the land in the particular category which must be a relevant consideration, particularly when it was the basis for the creation of the differential general rate categories, and is not necessarily reflected by the unimproved valuation of the land that applied for the relevant rating year. The limitation of Mr Lassen’s use of the effective tax rate is illustrated by his opinion (at Transcript 2-12) that because the unimproved value of the land changed significantly for the 2010/2011 year, annual general rates in the vicinity of $400,000 for an unimproved value of $3.1m would be reasonable, but not for the preceding years where the unimproved value was $215,000.
  1. The applicant relies on Mr Morton’s evidence for another purpose. The opinion of Mr Morton on what factors a local authority could consider in setting differential general rates was also available to the respondent in a report that the respondent concedes was in its possession prior to the making of the first group of decisions. That report made a reference to the use of employee numbers as a possible factor for the making of the differential general rate which the respondent asserts is an irrelevant consideration. The respondent had Mr Morton’s first report before it made the second and third groups of decisions. The applicant relies on the fact that in this proceeding the respondent has sought to justify its decisions by reference to the opinions of Mr Morton, including Mr Morton’s view that differential rating might occur by reference to the number of employees engaged by the landholder. The applicant submits that the court should infer that the respondent’s decisions were influenced by the opinion of Mr Morton.

Other evidence

  1. At the time the respondent made the first group of decisions, the applicant made no demand on Council services, in relation to waste, sewerage, water and recycling, other than those which were the subject of additional service charges. Those types of Council services are not covered by the general rate, but if provided can be the subject of separate charges levied by the respondent for those services.
  1. Mr Pace exhibited to his affidavit filed on 21 January 2008 a schedule of sponsorships and donations made by the applicant voluntarily to community organisations in the Nanango Shire for the period 1 June 2006 to 20 September 2007. The donations were for a total sum of $36,742.
  1. In his affidavit filed on 21 January 2008 Mr Renshaw set out the applicant’s number of employees as 350. He clarified in his oral evidence (at Transcript 1-10) that, in addition to the employees, there were on average 20 contractors per week working for the applicant, making a maximum workforce at any one time of 400 persons.
  1. As part of the statement of agreed facts for the purpose of this application, the parties relied on the following table which set out a comparison of the rates charged in respect of the applicant’s land for the 2007/2008 and 2008/2009 years compared with certain other power stations and industrial activities in Queensland:

 

Entity

General rate in
the $
(2007/2008)

General rate $
amount
(2007/2008)

General rate in
the $
(2008/2009)

General rate $
amount
(2008/2009)

Tarong

3.84 c/$
(UV:  $215,000)

$375, 000
(minimum)

185.9651 c/$
(UV: $215,000)

$399,824.96

Fairleigh
Sugar Mill

94 c/$

$138,200

10.2617 c/$
(UV: $900, 000)

$136,332
(minimum)

Rolleston
Coal Mine

10.95 c/$

$263,351

10. 9982 c/$

 

Blackwater
Coal Mine

20. 48 c/$

$2,112,000

16.9027c/$
(UV: 18, 000, 00)

 

Callide
(CS Energy)

7.2 c/$
(UV:  $642,000)

$46,224

12.974 c/$
(UV: $610,000)

$79,141.40

Gladstone 

10. 44 c/$
(UV: $4M)

$417,600

5.12 c/$
(UV:  $8.2M)

$414840

Stanwell

3.21 c/$
(UV:  $2M)

$64,200

3.75c/$
(UV:  $2M)

$75,000

Relevant authorities

  1. There has been judicial consideration of other local authority decisions in Queensland striking a differential general rate:  Sunwater v Burdekin Shire Council (2002) 125 LGERA 263 (Sunwater), and Xstrata Coal Qld P/L & Ors v Council of the Shire of Bowen [2010] QCA 170 (Xstrata). 
  1. Sunwater, the applicant in Sunwater, conducted a commercial enterprise controlling the supply of water in the relevant local authority area.  The Council adopted a differential rating system for the 2002 financial year.  Category G was for land used for purposes of and incidental to commercial water delivery and drainage.  Sunwater had all the land which fell into category G.  On a judicial review application, Sunwater challenged the decisions of the Council in categorising Sunwater’s lands in category G and in striking a general rate of 46.289 cents in the dollar and a minimum general rate of $15,000 for lands in category G on the basis of Wednesbury unreasonableness.
  1. Cullinane J noted at [35]:

“It is the local authority which has the statutory function of determining whether a differential rating system should be adopted and if so, what are the relevant criteria to be applied in determining the relevant categories of land. Substantial latitude must be allowed a local authority in choosing such criteria for the purposes of achieving an equitable sharing of the general rate revenue burden across the ratepayers as a whole.”

  1. The general rate in each of categories A to E was between 1.949 cents in the dollar and 2.109 cents in the dollar. Category F which applied to land used for sugar mills had a general rate of 14.442 cents in the dollar. Even though the general rate adopted for category G land was a much higher rate per dollar than adopted for any other category, Cullinane J did not find that the respondent had used its powers in striking the general rate for category G land unreasonably, observing at [48]:

“No doubt there are cases in which the effect of adopting a particular differential rating system is to throw an excessively high proportion of the overall rates upon a particular rate payer or group of rate payers or cases in which a rate per dollar is itself so high that it can be regarded as capricious and outside the boundaries of a reasonable exercise of a local authority's powers to make and levy rates. Although the general rate is certainly a high one I am not persuaded that it can be regarded as so lacking in any rational justification as to invalidate it.”

  1. Sunwater was successful only in relation to the decision on the setting of the minimum general rate in relation to Category G lands. Cullinane J stated at [49]-[50]:

“I think a different conclusion ought however to be reached in relation to the minimum general rate in relation to category G lands.  The application of such a rate in this case produces results so anomalous that they can be regarded as unreasonable in the relevant sense.

In this case, where the minimum general rate has been applied, general rates have been levied in virtually all cases at a sum which exceeds the valuation of the land concerned rising to a high of 700 per cent of that value in one case.”

  1. In Xtrata, the appellants owned and operated two coal mines within the area that was formerly the Bowen Shire.  The relevant Council adopted a revenue statement for 2007/2008 which included a policy of charging differential general rates for the year.  The appellants owned all the land which fell within four of the categories of land that was used for coal mining.  As a result of the differential general rates fixed for these four categories, the general rates for the appellant’s land for the half year increased by more than 400% over the rates levied for the previous half year.  The appellants sought judicial review of the fixing of the differential general rates for these four categories on the basis that the Council took irrelevant considerations into account.
  1. The appellants’ application was dismissed at first instance. The primary judge found that the Council took into account the appellants’ capacity to pay the increased rates when resolving to levy differential general rates for the relevant four categories of land, but found that was not an irrelevant consideration. On appeal, the issue was whether the differential rates were set by reference to the appellants’ personal capacity to pay rates or by reference to the capacity of the land in the separate categories to produce the capacity to pay.
  1. The Council argued on appeal that it had a right to take into account in setting the differential rates the financial circumstances of its ratepayers, but limited to a comparison between the financial circumstances of coal mine owners within the Shire and the financial circumstances of the owners of land in the Shire not used for coal mining. Chesterman JA (with whom the other members of the court agreed) observed at [34]:

“The limitation, that comparative wealth between owners of various categories of land might be taken into account in fixing a differential rate, did not appear in the Council's documents supporting and leading up to its resolution of 27 June 2007, nor does it appear in its Chief Executive Officer's evidence. The trial judge did not mention it in his reasons. The Council documents and the reasons both refer to a capacity to pay as being a relevant factor without restricting that capacity to ownership of a particular category of land or by comparison with the capacity of other ratepayers.”

  1. Chesterman JA stated at [36]:

“A ratepayer's wealth is irrelevant to the process of deciding what rates should be levied on its property. That proposition is undoubted. The comparative wealth of the owner of a particular type of land, in this case coal mines, as against the wealth of owners of other uses of land, is likewise irrelevant. In both cases what forms the reference point for the levying of the rate is the worth of the land owner, not the value or some other attribute of the property to be rated.”

  1. Chesterman JA found at [37] that by the Council taking into account the appellants’ wealth in fixing the rates, the Council’s decision-making process was affected by legal error and the appeal was allowed.
  1. The decisions of a local authority under the New South Wales rating legislation to create a sub-category of land otherwise in the rateable land category of business to the land on which the Marrickville Metro Shopping Centre (the Centre) was conducted and to fix the ad valorem rate applicable to that sub-category were the subject of the decision of the New South Wales Court of Appeal in Marrickville Metro Shopping Centre Pty Ltd v Marrickville Council (2010) 174 LGERA 67 (Marrickville).
  1. The relevant New South Wales legislation limited the income that could be generated by the local authority each year from rates and that statutory constraint was relevant to the local authority’s decision-making process which was explained at [28] and [29] of Marrickville.  The broad options that were available to the relevant local authority (set out at [32]) were to allow the movement of land values to flow on to the rate structure or to maintain the yield for each rating category and apply the new land values within each category to redistribute the rate burden within rating categories, but maintain the overall relativity between each category.  The general manager of the local authority was requested by the councillors to report on the possible introduction of a separate rate for large shopping centres (which would apply only to the Centre).  The general manager provided a written report which included a table of possible rates for the Centre land with the consequential rates calculation for other land within the business general category.  The councillors debated the report and ultimately decided on introducing a separate rate for the Centre land and determined the rate in the dollar for the new sub-category.
  1. Tobias JA (with whom the other members of the court agreed) noted at [93] that:

“… it is plain that the relevant provisions of the Act expressly permit differential rating between categories and sub-categories and, therefore, discrimination in the imposition of rates between those categories and sub-categories.”

  1. In relation to the original decisions to create the sub-category of land applying to the Centre and to fix the rate for that sub-category, Tobias JA concluded at [110] that:

“There was nothing absurd, irrational or implausible with respect to those decisions that were, in any event, supported by information and arguments.  Whether or not one might disagree with those arguments is irrelevant where a merits review of the Council’s decisions is impermissible.”    

  1. Basten JA dealt with the argument that the creation of the sub-category for the Centre land was manifestly unreasonable at [208]:

“To describe a decision as irrational or arbitrary, so as not to constitute a valid exercise of a statutory power, will usually involve a comparison between the actual outcome and that which might have been expected, in the rational exercise of the power. To avoid asking the Court to exceed its powers, which are confined to ensuring that the legal boundaries of the power are not exceeded or disregarded, a claim of irrationality is usually a claim that there must have been a legally erroneous step taken, although it is not possible (particularly in the absence of reasons) to identify the precise error. Where it can be seen that the power has been exercised for a proper purpose, and no mandatory considerations have been ignored, nor impermissible considerations taken into account, the challenge of irrationality will be hard to make good. Particularly is that so where the legal limits of the power assume that there will be an apportionment of the burden of rates between different categories of landholder and where there is no objective standard against which to judge a particular result. While it may be accepted that the test of manifest unreasonableness is available with respect to the exercise of a discretionary power, such as that under challenge in the present case, the challenge was correctly rejected.”

What were the respondent’s reasons for its decisions?

  1. Because the applicant asserts that the respondent was influenced by the opinions of Mr Morton or fixed the differential general rates for the applicant by reference to the gross general rates liability of the Gladstone power station, it is necessary to decide on the evidence adduced on this application what were the respondent’s reasons for each group of decisions.
  1. The statutorily prescribed documents contain explanations in general terms for the groups of decisions made by the respondent. The applicant seeks to go behind those explanations and place weight on the email communication by Mr Gray to the applicant’s chief executive on 26 June 2007 and comments made in the meeting held between Mr Gray and representatives of the applicant on 31 August 2007. In fact, the applicant proposes an interpretation of these communications which is one of a number of possible interpretations. The applicant submits that the communications from Mr Gray show that the respondent increased the general rate levy payable in respect of the applicant’s land for 2007/2008 by reference to the gross general rates liability for the Gladstone power station.  The references to the Gladstone power station could also have been consistent with levying a general rate that was more appropriate to the nature and size of the income-producing enterprise conducted from the land with its consequential impact on the Council’s services that had to be funded from general rates.  These communications from Mr Gray merely confirm that the respondent had available to it the information referred to in the communications.
  1. It does not follow from the fact that the respondent had available to it information from Mr Morton about use of possible criteria such as employee numbers in making a differential general rate or had information about the applicant’s employee numbers or the gross annual general rates levied by other local authorities in respect of land used for power stations or large industrial enterprises that it should be inferred that information was the reason for the respondent’s decisions, rather than the respondent’s more generally stated policy reasons in the context of the respondent’s budgeted expenditure that had to be covered by general rates revenue. When there is no mention of employee numbers or rates payable by power stations in other local government areas in the respondent’s budget documents, it is more likely than not that the respondent made its decisions that affected the differential general rates payable by the applicant for the general policy reasons.
  1. Similarly, it does not follow from the fact that the respondent seeks now to justify the reasonableness of its decisions by reference to the opinion of Mr Morton that it proves that the respondent based its decisions in relation to the differential general rates applicable to the applicant’s land on Mr Morton’s opinion.
  1. Although I will have regard to the fact that additional information was available to the respondent that is not referred to in the budget documents including the Revenue Policy and the Revenue Statement for each of the relevant years, I will proceed on the basis that the reasons for the respective decisions are those that are disclosed in or to be inferred from the respondent’s documents that record those decisions.
  1. The parties’ submissions also dispute some aspects of the interpretation that should be given to the reasons disclosed in the respondent’s documents for each group of decisions.
  1. The reasons for the Council’s decisions for the 2007/2008 year have to be considered in the context that the applicant conducted a large enterprise on its land that was income-producing. The total of the Council’s general rates for that year was required to fund the services that were to be available for all residents of the Nanango Shire and those services included some, as identified in Mr Morton’s evidence, which would be used by non-residents of which the applicant contributed to a significant number through employees and contractors who did not live in the Shire. The reasons given by the Council in the Revenue Policy and Revenue Statement for the 2007/2008 year for the first group of decisions are in very brief and general terms only. The purpose of the minimum general rate was in order “to ensure a reasonable contribution to the recurrent and capital costs of operation of the Council” and to represent “a fair and reasonable minimum contribution by any landholder to the services available.” The minimum general rate of $375,000 for 2007/2008 year equated to the actual general rate levy payable by the applicant which was about 6.9% of the total annual general rates revenue and was therefore the council’s decision as to what was a reasonable contribution from the applicant’s land.
  1. The respondent’s budget for 2008/2009 was considerably larger upon the amalgamation of the four local government areas. The context applying to the applicant’s use of the land continued. The Revenue Policy is in general terms and reflects the difficulties experienced by the respondent arising from the amalgamation of four local government areas. The applicant has focused on the reference to “Ability to Pay” in the Revenue Policy. Consistent with the requirement in s 12 of the Local Government Finance Standard 2005, it is a statement of the principles at a high level of generality applied by the respondent for the relevant year in making and levying rates and charges and I do not interpret it as a reference to the ability to pay of individual rate payers in each of the differential general rate categories.  The aim of the respondent was expressed generally to achieve “an equitable distribution of the cost of its operations between different groups of ratepayers.”  The respondent made it clear in the Revenue Statement that the differential general rates had to meet the costs of the respondent that remained to be funded after taking into account charges received for services provided and no reference was made to “Ability to Pay.”  There was no reason given for the fixing of the minimum general rate for the applicant’s land at $250,000, apart from the general reason given for fixing minimum general rates based on the level of services provided in the budget for that year.  The actual general rates levy of $375,000 exceeded the minimum general rate for the Power Generation category which removed the significance of the minimum general rate.  It is the actual general rates of $375,000 which was the applicant’s share of the general rates revenue for 2008/2009.  The evidence did not deal precisely with what proportion that was of the total annual general rates revenue, but it appears that it was a lesser proportion than 6.9% of the total general rates revenue for the amalgamated local government areas under the control of the respondent.
  1. Similar general reasons supplemented by additional explanations were given by the respondent for its differential general rate levies for the 2009/2010 year where the context of the applicant’s use of the land continued. The applicant focused on the reference in the Revenue Policy to “the capacity to pay of each community” which I interpret as a clear reference to the capacity to pay of the different communities that had been brought together in the one local government area. There was specific acknowledgement in the Revenue Policy of the need to redress the problem for raising general rates revenue where major industries were conducted on land with a comparatively low unimproved value which was apt to refer to the applicant’s land. The actual general rates of $399,824.96 for the applicant’s land exceeded the minimum general rate of $250,000 and amounted to 2.2% of the respondent’s total general rates revenue for the 2009/2010 year.

Did the decisions involve manifest unreasonableness?

  1. The approach to determining whether there was manifest unreasonableness is constrained by the limited role of the court in reviewing the exercise of an administrative discretion: Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24, 40, 42.  At the latter reference Mason J stated:

“So too in the context of administrative law, a court should proceed with caution when reviewing an administrative decision on the ground that it does not give proper weight to relevant factors, lest it exceed its supervisory role by reviewing the decision on its merits.” 

  1. The approach to the issue of manifest unreasonableness is also affected by the nature of the decision-making undertaken by the respondent. Unlike cases such as Prasad v Minister for Immigration and Ethnic Affairs (1985) 65 ALR 549 (Prasad) which are concerned with “quasi-judicial” administrative decisions, as they involve the making of findings of fact by reference to the evidence before the decision-maker, the respondent’s decision-making was tantamount to performing a “quasi-legislative” function in setting a tax that was permitted by statute to involve differentiation:  Marrickville at [99].  The applicant’s submission based on Prasad (where the Minister had to decide on the evidence before him whether a marriage was a sham) that the issue of manifest unreasonableness is tested by reference to a consideration of the material that was actually or constructively before the decision-maker, is not applicable in this case, because of the different nature of the respondent’s decision-making.         
  1. The nub of the applicant’s contention that manifest unreasonableness was involved is the submission that for each of the relevant years the respondent purported to levy from the applicant a general rate that substantially exceeds the value of the rateable asset, so that in each rateable year the respondent effectively undertook a compulsory acquisition on account of general rates. The applicant’s approach is therefore to look at the result of the decision-making from its viewpoint as the payer and to reason by reference to the result that it was a manifestly unreasonable decision.
  1. In contrast, the respondent’s approach is to put the decision-making in the context that the fixing of the minimum general rate for the Power Generation category and the rate in the dollar for that category is part of the respondent’s decision-making about how much of the overall general rate burden should be apportioned to lands in the Power Generation category. The respondent points out that the respondent’s decision of how much of the general rate burden is apportioned to land in one category is also a decision affecting the proportion of the general rate burden that is borne by the lands in all the other categories. The respondent accepts, however, that the subject decisions are constrained by the requirement that they are not unreasonable in the Wednesbury sense.
  1. As a starting point, the statutory regime that regulated the decision-making for the three groups of decisions allowed for the making and levying of differential general rates and there is no issue about the allocation of the applicant’s land to the Power Generation category. Subject to any issue of Wednesbury unreasonableness, there was nothing in the 1993 Act which expressly or impliedly imposed a statutory ceiling on the total amount of general rates which a local authority could raise generally or from any differential category, except to the extent that the statutory regime related revenue to expenditure.  The general rates in any of the relevant years had to fund the respondent’s expenditure that was not covered by grants, subsidies, donations or the fees or charges for specific services.  In each year, the respondent was limited to the total of the unimproved values of the land in the respondent’s area from which to source that balance of the respondent’s revenue that was required to meet the budgeted expenditure.
  1. It is misleading for the applicant to equate the annual general rates levied against the applicant’s land in each of the relevant years as undertaking an acquisition of the “rateable asset.” The applicant’s improved land is significantly more valuable than its unimproved value. Although the unimproved value is a necessary part of the formula for calculating general rates, the differential general rates have been determined by reference to the use made of the applicant’s land that has been improved by two power stations.
  1. Although the applicant’s challenge to each group of decisions is by reference to the general rate levy against the applicant’s land, the substance of the applicant’s complaint is that the applicant’s land had to bear too much of the general rates revenue for the relevant year which in turn means that the respondent should have increased the general rate burden on other categories. There is a lack of evidence for any of the relevant years of any disproportionate contribution from the general rates levied against applicant’s land in comparison to the general rates borne by the other categories of land. The very substantial increase in general rates levied against the applicant’s land between the 2006/2007 year and the 2007/2008 year was no doubt of great concern to the applicant, but does not determine the issue of whether there was manifest unreasonableness in the decision-making for the 2007/2008 year. The generosity of the applicant in donating to community organisations within the respondent’s area does not bear on the relative apportionment of the general rates burden across the various differential general rate categories.
  1. The observations made by Basten JA in Marrickville at [208] about the difficulty in showing unreasonableness where the exercise of the power requires the burden of rates to be apportioned between different categories of landholder and where there is no objective standard against which to judge the result is applicable to the respondent’s decision-making. 
  1. The decision in Sunwater about the unreasonableness of the minimum general rate that applied to category G, where all land was owned by Sunwater and where the annual rate for one of the pieces of land was seven times the unimproved value of the land, was determined by reference to the extreme result of the Council’s decision in the circumstances of that case.
  1. Objectively speaking, the respondent’s decision-making on the proportion of the total general rates levied against the applicant’s land in each of the relevant years did not produce an extreme or outrageous result. I am not persuaded that there was manifest unreasonableness involved in each of the groups of decisions.

Did the decisions involve an error of law?

  1. The applicant submits that the respondent did not levy the general rates against the applicant’s land by reference to the inherent quality of the land. This is based on an assumption that differential general rates must be set solely by reference to the inherent quality of the land for which there is no warrant in the 1993 Act or in the Revenue Policy, Revenue Statement or other budget documents for each of the relevant years.
  1. The applicant seeks to characterise the respondent’s consideration of the use to which the applicant puts its land as basing its decision to levy the relevant differential rate against the applicant on the capacity of the applicant to pay that rate. The applicant relies on Xstrata to submit that such a decision is impermissible.  The applicant submits that any decision by the respondent to set a differential rate based on the number of employees engaged by the applicant or by reference to a comparative analysis of gross rates paid by other Queensland power stations is vitiated by the same error found in Xstrata of setting rates by reference to the individual quality of the rate payer.
  1. Any local government that exercised the powers conferred by the 1993 Act to make and levy differential general rates did not do so in a vacuum. The nature of the functions and responsibilities of local government mean that those powers were exercised in the context of information of what was happening in or proposed for the local government area. In order to categorise the land for the purpose of levying differential general rates, the respondent must have considered the use to which the applicant’s land was put. By virtue of the area of the applicant’s land and the substantial enterprise comprising two power stations that was conducted from the land, all decisions of the respondent were made with knowledge of the use of the land and the approximate size of its enterprise, whether by reference to its activities or to the obviously large numbers of employees that would have been apparent from the applicant’s operations, such as a visual inspection or traffic to and from the applicant’s land.
  1. The respondent’s knowledge of Mr Morton’s opinion that the differential general rates levy could be rationalised on the basis of a fee per employee engaged at the site does not logically lead to the conclusion that the respondent made its decisions on the basis of a formula applied to the applicant’s employee numbers. In the absence of any reference in the budget documents to the applicant’s employee numbers being used for such purpose, I cannot conclude that the respondent made its decisions in that manner.
  1. The fact that the respondent had information about general rates paid by power stations in other local government areas, particularly Gladstone power station, and also other large enterprises, was part of the respondent not making its differential general rates decisions without being aware of how other local governments were addressing the issue of balancing the general rates burden among the differential categories. There is nothing in the budget documents that suggests that the respondent in any of the relevant years used that information to determine the proportion of its general rates burden that would be borne by the land in the Power Generation category.
  1. I have accepted Mr Morton’s evidence about the relevance of the intensity of use of land and the consequential impact on Council services that are funded by general rates in setting the differential general rates levy for each category which reflects the contemplation of the 1993 Act that the level of differential general rates for each category would relate to the use of land in that category. The Court of Appeal’s decision and observations in Xtrata were made against the background of an express finding of the primary judge that the appellants’ personal capacity to pay rates, or wealth, had been taken into account in setting differential general rates.  There is no evidence of such an approach by the respondent to its decision-making.
  1. It cannot be said, however, in the context of the respondent’s decision-making that in determining what proportion of rates should be borne by the Power Generation category that it is irrelevant that it is land used, or available for use, for large-scale income-producing activity, where there are other categories of land in the respondent’s area that do not have that potential. In that respect and in relation to the impacts on Council services from the intensity of the applicant’s use of the land, it cannot be said that the respondent has taken into account irrelevant considerations by having regard to information that points to these matters (such as employee numbers or the nature of the business of a power station) in determining its apportionment in any of the relevant years of the general rates burden between the Power Generation category and the other categories of land. Taking into account the use of the land where differential rate categories have been determined by reference to the use of land does not equate with taking into account the applicant’s personal capacity to pay general rates.
  1. I am therefore not satisfied that there was any error of law made by the respondent in any of the groups of decisions.

Orders

  1. It follows that the application must be dismissed. Subject to hearing any submissions that the parties wish to make on the issue of costs, I propose that the applicant pay the respondent’s costs of the application, including reserved costs, to be assessed.
Close

Editorial Notes

  • Published Case Name:

    Tarong Energy Corporation Ltd v South Burnett Regional Council

  • Shortened Case Name:

    Tarong Energy Corporation Ltd v South Burnett Regional Council

  • Reported Citation:

    [2012] 1 Qd R 171

  • MNC:

    [2011] QSC 74

  • Court:

    QSC

  • Judge(s):

    Mullins J

  • Date:

    07 Apr 2011

Litigation History

Event Citation or File Date Notes
Primary Judgment [2012] 1 Qd R 171 07 Apr 2011 -

Appeal Status

No Status