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High Court limitation period ruling stops Council rates recovery

For how long can a Council chase unpaid rates?

How long does a council have to commence court proceedings to recover unpaid rates from ratepayers? This question was the subject of the High Court’s recent decision in Brisbane City Council v Amos.

Background to the case

Mr Amos owned seven lots of rateable land in Brisbane. In 2009, Brisbane City Council commenced proceedings in the Supreme Court of Queensland against Mr Amos for unpaid rates notices, the earliest being issued in 1999. Mr Amos argued that he did not have to pay all the rates notices, as some were statute-barred because proceedings were commenced after the six year limitation period. Mr Amos submitted the proceedings were ‘an action to recover a sum recoverable by virtue of any enactment, other than a penalty or forfeiture’, under section 10(d) of the Limitation of Actions Act 1974 (Qld) (‘LAA’).

Council argued that the proceedings fell under section 26(1) of the LAA, which applied to actions ‘to recover a principal sum of money secured by a mortgage or other charge on property whether real or personal’. The limitation period in section 26 was 12 years, meaning Council would be able to recover all the outstanding rates.

Decision for Council overturned on appeal

At first instance, the Supreme Court of Queensland ruled in favour of Council but this was overturned in the Court of Appeal, which found that the relevant limitation period was six years, not 12. Council then lodged an appeal to the High Court of Australia. The High Court ruled in favour of Mr Amos, affirming the Court of Appeal decision.

Rates claim a personal claim not against land

The claim to recover the rates was held to be a personal claim, as opposed to an action against the land. This is because although overdue rates are a charge on the land, the court proceedings to recover the unpaid rates is an action in debt against the ratepayer. This technical distinction was significant in the Court’s ruling.

Council had argued that the limitation period in section 26 applied because it was a specific provision, whereas section 10 was a general provision. Council sought to invoke a rule of statutory interpretation where a specific provision would exclude the effect of a general provision, meaning the relevant limitation period to recover the rates as a debt would be 12 years.

High Court rejects Council’s argument

The High Court rejected this, saying Council’s approach was incorrect because it ignored the legislative and judicial history of limitation laws. The High Court then noted that when Parliament passes legislation that adopts words with an established and well-understood meaning in earlier legislation, the words in the later legislation are taken to have the same meaning as in the earlier legislation. As a result, the personal action against Mr Amos was statute-barred by s 10 of the LAA, and was not extended by the longer limitation period under section 26, which governed actions against the land. As Council’s proceedings were only against Mr Amos personally, the rates notices falling outside the limitation period could not be recovered. The appeal was dismissed.

Outcome

If councils fail to commence proceedings against a ratepayer personally within six years, they may be left with no option other than to exercise their powers against the land, such as sale or acquisition of the land. This may be an undesirable option for councils where the sums of outstanding money are small or where the exercise of those powers may cause undue hardship.

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Please note that this article has been prepared by Margaret Miller, partner of Bell Legal Group, for information purposes only. It is not legal advice nor should it be relied upon as such.