Christine Deborah Anderson v The Council of the City of Lismore
[2011] NSWSC 1058
•12 August 2011
Supreme Court
New South Wales
Medium Neutral Citation: Christine Deborah Anderson v The Council of the City of Lismore & anor [2011] NSWSC 1058 Hearing dates: 11 and 12 August 2011 Decision date: 12 August 2011 Jurisdiction: Common Law Before: Brereton J Decision: Declare the resolutions of Lismore City Council of 12 October 2010 insofar as they relate to the property of Ms Anderson, and the contract between Lismore City Council and Mr Meuleman made on 14 May 2011, void.
Order that Lismore City Council be restrained from taking any further step in pursuance of such resolutions or contract.
Order that Lismore City Council pay one-third of Ms Anderson's costs
Catchwords: ADMINISTRATIVE LAW - Local government - Local Government Councils have power to sell ratepayer's real property under (NSW) Local Government Act s 713 if ratepayers fail to pay rates for five or more years - Local Government Act s 582 affords Councils a discretion to waive outstanding rates for pensioner ratepayers - defendant Council has policy to not exercise power to sell land of pensioners' who have not paid rates except in 'exceptional circumstances' - pensioner does not pay rates for 10 years - Council sells property - policy gives rise to legitimate expectation Council would not sell property - if Council proposed to sell pensioner's property contrary to policy obliged to inform pensioner as to what 'exceptional circumstances' alleged and to afford pensioner opportunity to make submissions as to why policy should not be departed from - Council fails to afford pensioner opportunity to make submissions - pensioner denied procedural fairness.
ADMINISTRATIVE LAW - Remedies - where act or decision contrary to natural justice - discussion of authorities - decisions contrary to natural justice are retrospectively void ab initio - if relief discretionary, circumstances of current case including illness of pensioner plaintiff and absence of manifest prejudice to second defendant would not warrant declining relief.Legislation Cited: (NSW) Local Government Act, s 377, s 582, s 583, s 713, s 715, s 716, s 718, s 719, s 720, s 722, s 725, s 726
(NSW) Local Government (General) Regulations 2005Cases Cited: Annetts v McCann (1990) 170 CLR 596
Calvin v Carr [1979] 1 NSWLR 1
Carson v Legal Services Commissioner [2000] NSWSC 308
Forbes v New South Wales Trotting Club Limited (1979) 143 CLR 242
Haoucher v Minister of State for Immigration and Ethnic Affairs (1990) 169 CLR 648
Kioa v West (1985) 159 CLR 550
Minister of State for Immigration and Ethnic Affairs v Ah Hin Teoh (1995) 183 CLR 273
Quzag v Gunning Shire Council [2005] NSWSC 970Category: Principal judgment Parties: Ms Christine Deborah Anderson (plaintiff)
The Council of the City of Lismore (first defendant)
Mr Nathan Henry Meuleman (second defendant)Representation: Counsel:
Mr Van Aalst (plaintiff)
Mr Atkin (first defendant)
Mr Doyle Gray (second defendant)
Solicitors:
Northern Rivers Community Legal Centre (plaintiff)
Riley & Riley (first defendant)
Woodward Lawyers (second defendant)
File Number(s): 2011/00212948
Judgment (ex tempore)
HIS HONOUR: The plaintiff Christine Deborah Anderson, a disability pensioner, claims a declaration that a contract made between the first defendant Lismore City Council ('Council') as vendor, and the second defendant Nathan Meuleman as purchaser, for sale of her home at Elliott Street, South Lismore, purportedly pursuant to the power of sale conferred by (NSW) Local Government Act 1993, s 713, in respect of outstanding rates, is void, and an injunction restraining the Council from completing that contract. She alleges that the contract is void by reason that it was not executed in compliance with the Council's resolution - said to require that it be executed under Common Seal by the Mayor and General Manager - whereas it was executed by the General Manager alone, contrary to Local Government Act, s 377(1)(h). She also argues that the contract is void on the ground that she was denied procedural fairness (often, and incorrectly, in the course of argument described as "due process") in connection with the sale; most particularly, that she was not given a reasonable opportunity to enter into an arrangement satisfactory to the Council of the type referred to in Local Government Act, s 715(2)(b).
Local government councils are given power to sell land for the purposes of recovering overdue rates under Local Government Act , Chapter 17, Part 2, Division 5, which contains the relevant following provisions:
713 Sale of land for unpaid rates and charges
(1) For the purposes of this Division, a rate or charge is overdue if:
(a) in the case of vacant land, it has remained unpaid for more than one year, or
(b) in the case of any other land, it has remained unpaid for more than 5 years,
from the date on which it became payable.
(2) A council may, in accordance with this Division:
(a) sell any land (including vacant land) on which any rate or charge has remained unpaid for more than 5 years from the date on which it became payable, and
(b) sell any vacant land on which any rate or charge has remained unpaid for more than one year but not more than 5 years from the date on which it became payable, but only if:
(i) the council obtains a valuation of the land from the Valuer-General, and
(ii) the total amount of unpaid rates or charges on the land exceeds the valuation, and
(iii) the council sells the land within 6 months after the date when the council received the valuation.
(3) The council must not sell any such land unless the general manager or the public officer certifies in writing:
(a) what rates and charges (including overdue rates and charges) are payable on the land, and
(b) when each of those rates and charges was made and how it was levied, and
(c) when each of those rates and charges became payable, and
(d) what amounts are payable by way of overdue rates and charges on the land, and
(e) what amounts are payable by way of rates and charges (other than overdue rates and charges) on the land.
(4) The council may, in the case of adjoining parcels of land (whether in the same or different ownerships) each of which may be sold under this Division:
(a) sell them separately or as a single parcel and under whatever conditions of sale it considers proper, and
(b) do such things as it considers appropriate for the purpose of selling the land at its full value.
...
715 Notice of proposal to sell land
(1) Before selling land under this Division, the council must:
(a) fix a convenient time (being not more than 6 months and not less than 3 months from the publication in a newspaper of the advertisement referred to in paragraph (b)) and a convenient place for the sale, and
(b) give notice of the proposed sale by means of an advertisement published in the Gazette and in at least one newspaper, and
(c) take reasonable steps to ascertain the identity of any person who has an interest in the land, and
(d) take reasonable steps to notify each such person (and the Crown, if the land concerned is owned by the Crown) of the council's intention to sell the land under this Division.
(2) If, before the time fixed for the sale:
(a) all rates and charges payable (including overdue rates and charges) are paid to the council, or
(b) an arrangement satisfactory to the council for payment of all such rates and charges is entered into by the rateable person,
the council must not proceed with the sale.
716 Sale of land by public auction
(1) Any sale of land under this Division must be by way of public auction, except as provided by this section.
(2) Land that fails to sell at public auction may be sold by private treaty.
(3) Land may be sold under this Division to the council, a councillor, a relative of a councillor, a member of staff of the council or any relative of a member of staff of the council in the case of sale by public auction, but may not be so sold in the case of sale by private treaty.
...
718 Application of purchase money
The council must apply any purchase money received by it on the sale of land for unpaid rates and charges in or towards payment of the following purposes and in the following order:
(a) firstly, the expenses of the council incurred in connection with the sale,
(b) secondly, any rate or charge in respect of the land due to the council, or any other rating authority, and any debt in respect of the land (being a debt of which the council has notice) due to the Crown as a consequence of the sale on an equal footing.
719 What if the purchase money is less than the amounts owing?
If the purchase money is insufficient to satisfy all rates, charges and debts referred to in section 718 (b):
(a) the amount available is to be divided between the rates, charges and debts in proportion to the amounts owing on each, and
(b) the rates, charges and debts are taken to have been fully satisfied.
720 What if the purchase money is more than the amounts owing?
(1) Any balance of the purchase money must be paid into the council's trust fund and held by the council in trust for the persons having estates or interests in the land immediately before the sale according to their respective estates and interests.
(2) The council may pay the balance of the purchase money or any part of the balance to or among the persons who are, in its opinion, clearly entitled to it, and the receipt of the person to whom any payment is so made is an effectual discharge to the council for it.
...
722 Conveyance or transfer of the land
The council, on payment to it of the purchase money, may convey or transfer the land to the purchaser without any other authority than that conferred by this section
...
725 Transfers not invalid because of procedural irregularities
A transfer or conveyance issued by a council under this Division is not invalid merely because the council has failed to comply with a requirement of this Division with respect to the sale of the land to which the transfer or conveyance relates.
726 Registration of transfer of land under the Real Property Act 1900
(1) On lodgment of a transfer of land under the Real Property Act 1900 , the Registrar-General is to make such recordings in the Register kept under that Act as are necessary to give effect to this Division.
(2) The transfer does not operate at law until it is registered under the Real Property Act 1900 .
Councils have a discretion to make concessions in respect of the recovery of rates in the case of pensioners. Section 582 and 583 relevantly provide as follows:
582 Abandonment of pensioners rates and charges
A council may waive or reduce rates, charges and interest due by any person prescribed by the regulations who is in receipt of a pension, benefit or allowance under the Social Security Act 1991 of the Commonwealth.
583 Writing off of pensioners rates and charges
(1) A council is to write off amounts of rates, charges and interest which are reduced or waived under this Division.
(2) A council may not take proceedings to recover an amount so written off unless the amount has been written off because of a wilfully false statement in an application under this Division or except as provided by section 584.
This Council adopted a policy, contained in its Policy Manual of 12 May 2009 as policy number 1.5.11, and entitled "Rates and Charges Hardship", the objective of which is stated in it to be "To provide assistance to those ratepayers who are experiencing financial hardship in paying their rates and charges". The policy relevantly provides as follows (emphasis added):
Background.
The Local Government Act 1993 provides for Councils to make concessions to ratepayers experiencing financial hardship. The purpose of this policy is to provide guidance as to how Council would respond to ratepayer requests for assistance because the payment of rates and charges would cause financial hardship.
1. Pensioners
In accordance with Council's Debt Recovery Policy and section 582 of the Local Government Act 1993 (LGA) ratepayers that have satisfied the eligibility criteria for a pensioner rebate are not subject to legal action or sale of land for unpaid rates. Variations to this process due to exceptional circumstances are reported to the Council.
As with any other assessment, an annual Rates Notice and three Instalment Notices are issued to the owner and reminder letters are forwarded if an instalment remains outstanding.
Interest charges accrue in respect of any outstanding rates and charges at the rate determined each year by Council within the rating structure.
If circumstances change and the applicant no longer qualifies for a rebate, Council will negotiate a re-payment plan for the accrued arrears.
As has been mentioned, Ms Anderson is a disability pensioner. She therefore meets the eligibility requirements for a pensioner rebate, and so much is admitted because she, in fact, receives the pensioner rebate and has done so since 2003.
Ms Anderson appears to have had a satisfactory payment history until about 2000, but has not paid rates since then. By July 2010, she was in arrears for a total of $16,226.18, including accumulated interest, over a period of ten years. Of that total, some $6,723.33 had been outstanding for, at least, five years. In 2007, apparently before the adoption of the hardship policy referred to above, the Council had issued debt recovery proceedings against her and obtained a default judgment for $8,932.95 on 21 April 2008. However, following adoption of the policy, no enforcement action was pursued.
On 24 August 2010, the Council's debt collection officer, Ms Holland, wrote to Ms Anderson, as follows:
I refer to the outstanding rates arrears of $14,981.29 on the above property.
These arrears represent more than five years of unpaid rates. Council records indicate you have not made a payment since August 2000 with interest accruing at 9% per annum. Section 713 of the Local Government Act 1993 (LGA) permits Council to sell land on which the rates and/or charges have been outstanding for more than five years.
Your property is one of the large rate debts we need to address and will be included in a report to the Council meeting on October 12, 2010 to consider the sale of your property for unpaid rates.
This being the case, I would like to discuss payment arrangement options with you to prevent your property being sold. From Council's perspective, we will accept a long term payment arrangement. Best case scenario, the payment plan would require a substantial upfront payment and regular weekly or fortnightly payments.
It is understood that you are a pensioner and for this reason I am writing to offer you an interest free payment arrangement under Council's Hardship Policy. If you choose to accept this arrangement, your rate arrears would not accrue interest, as long as a regular payment is made either weekly, fortnightly or monthly. Your account would be assessed after three months and if the payments are regular the interest free period would be extended another six months when it would be assessed again. This will continue as long as you maintain your payments. If your payments cease without explanation, then the interest free period will end immediately.
If you accept this offer, the payments will need to be significant amounts. For example, you are looking at a debt of approximately $1,400 per year over ten years, equals fortnightly payments of $55.00. This does not take into account your current years rates. You may even consider a lump sum payment each year or approximately $500 and continue with the $55.00 per fortnight, which would then cover some of each current year's rates. There are various options you could choose and I would be happy to discuss this with you.
It's not taken lightly by Council to sell somebody's home and the longer this debt is left, the harder it will be to ever catch up. Please contact me on XX XXXX XXXX to discuss this matter.
I do not accept that this letter constituted an offer by the Council. It was not capable of immediate acceptance. It was an invitation to treat and no more, proposing various alternative payment arrangements which might be considered acceptable by Council.
Subsequently, no response having been received to that letter, during October 2010, Ms Holland prepared and Council's finance manager Mr Rino Michael Santin and the General Manager Mr Paul O'Sullivan approved, a report to Council, entitled "Sale of Land For Unpaid Rates", which recommended that Council commence proceedings to recover the rates from 17 assessments, totalling approximately $283,721.14, by sale of the relevant land. Ms Anderson's property was one of them.
The report asserted that all avenues to reach an acceptable recovery position had been explored and failed. Relevantly, it made the following observations:
Council has a policy to not take legal action to recover outstanding rates from pensioners, but that any variation is to be determined by the Council. Pensioners with outstanding rates, and there are many, only receive rates notices, instalment notices and reminder letters ...
Some of these properties are owned by pensioners and legal action would not normally be taken, as is Council's policy, but there are extenuating circumstances in this situation and the matter is brought to Council for determination.
Just what those "extenuating" circumstances were, was not expressly stated in the report; as the power of sale arises only after five years of arrears (except in the case of vacant land), the fact that rates had been outstanding for more than five years could not of itself be exceptional. The report concluded with recommendations that Council sell the subject properties; that the General Manager certify, in accordance with s 713(3), the amount of outstanding rates, that the General Manager, by delegated authority, determine the date of the sale and be authorised to accept an arrangement for payment of the outstanding rates and to determine the place of the sale and appoint an auctioneer; and that the Mayor and General Manager be authorised to sign any requisite documents, including the contract and transfer, to be executed under Common Seal.
The report was accompanied by a document entitled "Certificate under s. 713(2)" - which was plainly intended to be a certificate under Local Government Act, s 713(3) - relating to the plaintiff's land (and, presumably, similar documents relating to the other properties proposed to be sold), and a short summary of Ms Anderson's payment history and dealings with the Council. The report also mentioned that, if it were desired to discuss individual circumstances, that would more appropriately be done in closed Council meeting.
At its ensuing meeting on 12 October 2010, in accordance with the recommendations contained in the report, the Council resolved:
1. In accordance with Section 713 of the Local Government Act 1993, Council sells the properties covered by assessment numbers 471, 754, 1632, 1789, 3344, 3621, 5193, 6365, 7782, 10570, 11723, 13229, 14623, 15156, 15499 and 18773.
2. The General Manager certify in accordance with Section 713(3) of the Local Government Act, 1993 that the properties covered by Council assessment numbers 471, 754, 1632, 1789, 3344, 3621, 5193, 6365, 7782, 10570, 11723, 13229, 14623, 15156, 15499 and 18773 have five or more year's outstanding rates.
3. The General Manager, by delegated authority, determine the date of the sale, subject to the provisions and timeframe set out in Section 715(1)(a) of the Local Government Act 1993.
4. The General Manager, by delegated authority, be authorised to accept an arrangement to pay the outstanding rates and charges and/or withdraw any assessment from the proposed sale at his discretion.
5. The General Manager be authorised to determine the place of the sale and appoint an auctioneer to carry out the sale.
6. That the Mayor and the General Manager be authorised to sign any documents required by and relating to the sale of land for unpaid rates including the contract of sale and transfer, and to be executed under the Common Seal of Council.
On 26 October 2010, the General Manager gave notice by letter to Ms Anderson that the process of selling her property to recover unpaid rates had commenced, and that a public auction would be conducted in 2011. The letter pointed out that rates of $15,481.66 were outstanding, and that all attempts at settling the overdue debt had been unsatisfactory, and stated:
Accordingly, I have to inform you that the Council has authorised me to commence proceedings to sell your property to recover all outstanding rates and charges.
...
As indicated, the sale of your property is a last resort, but it will proceed unless Council's stated debt is paid. I encourage you to immediately contact the debt recovery officer, Cathy Holland, or the Finance Manager, Rino Santin... to discuss the situation and to examine any alternative approach which will enable the outstanding debt to be satisfied.
On 2 February 2011, the Council informed Ms Anderson by letter that the sale of the property would be notified in the Government Gazette on 4 February 2011 and in a local newspaper on 5 February 2011, and that Ray White would be the auctioneer for the auction to take place on 14 May 2011 at a venue to be advised. The letter repeated that the sale of the property was a last resort, but would proceed unless Council's debt was paid and encouraged the plaintiff to immediately contact Ms Holland or Mr Santin (for whom telephone numbers were provided), to discuss the situation and to examine any alternative approach which would enable the outstanding debt to be satisfied.
On 4 March 2011, the Council again notified Ms Anderson that, as the unpaid rates remained outstanding, the property would be auctioned on 14 May 2011 and that Ray White, Lismore, had been appointed the auctioneer. The letter again reiterated that sale of the property was a last resort and would proceed unless the debt was paid, or a satisfactory payment arrangement made. It encouraged Ms Anderson to discuss the situation with the Council officers to examine any alternative approach which would enable the debt to be satisfied.
On 24 March 2011, the Council, by Ms Holland, wrote to Ms Anderson, acknowledging her recent telephone call and proposing a five year payment plan involving a lump sum payment of $5000 and fortnightly payments of $158.06 over a five year period. The letter again reiterated that sale of the property was a last resort, but would proceed unless the debt was paid, or a satisfactory payment arrangement made and encouraged Ms Anderson to discuss the situation with Council officers to examine any alternative approach.
On 7 April 2011, the Council, in another letter to Ms Anderson, noted that as the unpaid rates remained outstanding and no satisfactory payment arrangement was in place, the property would be auctioned on 14 May, and advised that the auctioneer would commence the advertising campaign on 15 April. Yet again, the letter reiterated that sale of the property was a last resort, but would proceed unless the debt was paid, or a satisfactory payment arrangement made and encouraged Ms Anderson to discuss the situation with Council officers to examine any alternative approach.
By early April, Ms Anderson had commenced steps to endeavour to procure the release of her superannuation, to enable her to make the lump sum payment proposed by the Council; this involved obtaining medical reports to establish that she was permanently incapacitated which would, naturally enough, take some time. This process was interrupted when, on 25 April 2011, she was admitted to Lismore Base Hospital. Upon her discharge from hospital (on or about 1 May 2011), she sought the assistance of her friends, David and Robyn Slatter, to discuss the matter with Ms Holland on her behalf, and relay to Council that she could not afford instalments of $158 a fortnight, but was applying to have sufficient funds released from her superannuation benefits to pay the lump sum of $5,000.
In an attempt to arrive at a satisfactory repayment arrangement, Mr and Mrs Slatter had discussions with Ms Holland and Mr Santin and informed the Council officers that Ms Anderson could not afford instalments of $158 a fortnight, and about her application to have funds released from her superannuation fund to make up a lump sum payment of $5,000. On or about 9 May 2011, Mrs Slatter delivered to the Council a direct debit authority on behalf of Ms Anderson for the payment of instalments of $55 per fortnight to the Council. On 12 May 2011, Mr Slatter, on behalf of Ms Anderson, delivered to the Council Ms Anderson's letter offering to pay a $5,000 lump sum when it became available from her superannuation, together with $55 fortnightly instalments.
However, these arrangements were not satisfactory to the Council, which insisted on actual payment of a lump sum equivalent to, at least, half the outstanding debt, if the sale were not to proceed. Thus, on 14 May 2011, the property was offered for sale at auction, when it was passed in. After the auction, Mr Meuleman agreed to purchase the property by private treaty, and the contract was executed by the General Manager of the Council, purportedly on behalf of the Council, for the purposes of the exchange.
Subsequently, on 9 June 2011, Ms Anderson's superannuation trustee, Colonial Mutual, indicated that it would accede to Ms Anderson's application for release of her superannuation; ultimately, she received $14,411.81 on 28 June 2011, of which she paid $5,000 to the Council on 5 July 2011.
Ms Anderson abandoned an allegation originally advanced in her pleadings that an arrangement satisfactory to the Council for the purposes of s 715(2)(b) had been made, but she argued that she had been denied "due process " (which I take to mean procedural fairness), in that she was not afforded a reasonable opportunity to reach a satisfactory arrangement, short of payment in full to the Council, within s 715(2)(b).
In Annetts v McCann (1990) 170 CLR 596 , Mason CJ, Deane J and McHugh J, said (at 598) :
It can now be taken as settled that, when a statute confers power upon a public official to destroy, defeat, or prejudice a person's rights, interests, or legitimate expectations, the rules of natural justice regulate the exercise of that power unless they are excluded by plain words of necessary intendment.
Notwithstanding this wide description of the application of the rules of natural justice, I am unable to accept Ms Anderson's argument that the Council, having decided to exercise the power of sale and having notified her of that decision, was then under some subsequent obligation to afford the ratepayer a reasonable opportunity to make a "satisfactory arrangement", within the meaning of s 715(2)(b). Local Government Act, s 715, prescribes in detail the procedure to be followed in connection with the submission of a property for sale and the relevant timeframe, including what notice needs to be given to persons beneficially interested. After the sale process has been initiated, the ratepayer has an opportunity to avert sale by paying the debt in full, under s 715(2)(a). In addition to that, the statute provides for Council to grant the ratepayer an indulgence by accepting a "satisfactory arrangement" short of payment in full, in which case the Council must not proceed with the sale. But what is a "satisfactory arrangement" in that context is a question of which the Council is the sole judge, and its decision is not subject to review [ Quzag v Gunning Shire Council [2005] NSWSC 970, [85]]. The provision for a "satisfactory arrangement" is an indulgence granted to a debtor in default, and imports no obligation on the Council to afford the ratepayer a reasonable opportunity to make an acceptable arrangement, beyond that provided for in s 715. It suffices that the Council complies with the requirements of s 715(1). In any event, the rules of procedural fairness do not attend decisions of parties to arm's length negotiations as to whether or not to accept an offer made by the other. There is no denial of procedural fairness in the Council failing to allow opportunities, beyond those required by s 715(1), to make a "satisfactory arrangement". Moreover, the history of the correspondence set out above, from December 2010 onwards, demonstrates that she was afforded ample opportunity to make such an arrangement. It would be inconsistent with the scheme of s 715 to conclude that Council was bound, absent compliance with s 715(2), to defer a sale.
The act or decision which in this case might potentially attract the operation of the rules of procedural fairness is the sale on 14 May 2011 of the subject property, consequent upon the decision made by Council on 12 October 2010. Before I turn to that in further detail, I should deal with the argument, advanced on behalf of the second defendant, that this was not advanced in the pleadings. I agree that it was not distinctly raised on the pleadings, and I agree also that it was not adverted to in opening, although the pleadings did refer in passing to the hardship policy, and to the resolution for sale. It was however touched on in discussion between the bench and Ms Anderson's counsel yesterday on the first day of the hearing, and elaborated in further discussion with all counsel before and during submissions today. As I indicated in the course of those discussions, if it were an issue which might be met by further evidence or by further argument in the event of an adjournment, an application for an adjournment for that purpose would have been entertained by the Court, with a predisposition to view it very favourably. No such application was made, by either defendant.
The argument was also fairly put, particularly by counsel for the second defendant Mr Meuleman, that Mr Meuleman had made a commercial decision about the extent to which he would engage in the litigation and oppose Ms Anderson's claim for relief, on the basis of the pleadings as they stood. I accept that, to that extent, raising this issue now may occasion Mr Meuleman some prejudice in that sense. On the other hand, failing to consider it would occasion Ms Anderson considerable prejudice. It therefore becomes a question of balancing the prejudice to the parties in the context where, although there may be some prejudice to Mr Meuleman, it is not such as to deprive him of a defence which might otherwise be available, whereas the prejudice to Ms Anderson would be the loss of a viable claim. In those circumstances, while conscious of the prejudice to Mr Meuleman, which may be relevant on questions of costs, I have concluded that I should not decline to entertain the argument.
I would not accept that the act of exercising a power of sale under s 713, or the decision to exercise that power would, of itself, ordinarily be attended by a requirement to comply with the rules of procedural fairness. The Council's power to sell under s 713 is akin to a mortgagee's power of sale; it is given to Council as a creditor to enforce a debt, due to the Council, that is charged by statute on the land. It is triggered, relevantly, by rates being overdue for a period of at least five years. Without more, a decision to exercise it would not attract the operation of the rules of procedural fairness: the nature and purpose of the power and the context in which it appears is such as (at least implicitly) to exclude the operation of those rules, notwithstanding the width of the test enunciated by the High Court in cases such as Kioa v West (1985) 159 CLR 550 and Annetts v McCann .
However, in this case there is more. The Rates and Charges Hardship Policy of the Council amounts to a formal statement by the Council to ratepayers - and, in particular, to pensioners - to the effect that, in the case of a pensioner ratepayer, Council will, as a matter of policy, not exercise its power of sale for overdue rates under s 713, other than in exceptional circumstances.
In Haoucher v Minister of State for Immigration and Ethnic Affairs (1990) 169 CLR 648, Deane J said (at 654-655):
The proceedings before the Tribunal in the present case were instituted and determined in the context of a government policy relating to the deportation of persons convicted of criminal offences. That policy provided that "recommendations of the ... Tribunal should be overturned by the Minister only in exceptional circumstances and only when strong evidence can be produced to justify the decision" ... For as long as that published policy was operative, a deportee would reasonably be expected to see it as providing a critical reference point in determining the desirability and effectiveness of an application to the Tribunal for review of a deportation order. It has not been suggested on behalf of the respondent Minister that that policy was treated as inapplicable to the circumstances of the appellant's case. That being so, it is clear that the Minister engaged in a quite distinct and well-defined process of executive decision-making before determining that the Tribunal's recommendation "should be overturned". That decision-making process dealt with issues ("exceptional circumstances"; "strong evidence") which had never before arisen for consideration. It was in the course of the Minister's purported discharge of the statutory obligation to reconsider the deportation order in the light of the Tribunal's recommendation. It directly affected the appellant's rights, interests, status and legitimate expectations in his individual capacity. Indeed, it directly related to him alone and, effectively, determined the course of his future life ... In those circumstances, the justice of the common law demanded that the appellant be accorded an opportunity of being heard on the questions whether the "recommendations of the ... Tribunal should be overturned" by reason of "exceptional circumstances" and whether "strong evidence can be produced to justify" such an overturning of the Tribunal's recommendation. The failure to accord to the appellant such an opportunity vitiated the Minister's decision that the deportation order should stand.
Toohey J said (at 669-670):
But, more importantly, the notion of legitimate expectation is not dependant upon any principle of estoppel. Whether the Minister can be estopped in the exercise of his discretion is another question; it was not a question raised by the appellant. Legitimate expectation does not depend upon the knowledge and state of mind of the individual concerned, although such an expectation may arise from the conduct of a public authority towards an individual.
His Honour continued (at 671):
The situation has changed because the Minister accepted that the Tribunal's recommendation brought Part 4 of the criminal deportation policy into operation. The appellant was entitled to an opportunity to be heard if the Minister had in mind to act to the appellant's disadvantage, in particular, the appellant was entitled to be heard as to whether the circumstances were exceptional and the evidence strong. If he were not given that opportunity, the reference to the Tribunal was little more than an empty ritual and the policy statement mere rhetoric.
McHugh J said (at 683-684):
After the recommendation of the AAT, the appellant had a legitimate expectation that the Minister would revoke the order for his deportation unless exceptional circumstances existed and strong evidence was produced to justify a decision not to give effect to the recommendation. If exceptional circumstances and strong evidence were alleged to exist, the appellant was entitled to know what was the nature of the material relied upon by the Minister to defeat his legitimate expectation.
...
A legitimate expectation of a benefit or privilege is not a right to that benefit or privilege. Consequently, the holder of a legitimate expectation knows, or will be held to know that the expectation is liable to be defeated. Nevertheless, as cases like F.A.I. Insurances v Winneke show, he or she is entitled to be informed of the matters which are relied upon to defeat his or her expectation.
In the present case, the policy expressly spells out the circumstances which are liable to defeat the expectations of a person who has a recommendation from the A.A.T. in his or her favour. Accordingly, the appellant was entitled to know what were the matters which constituted "exceptional circumstances" and "strong evidence".
The High Court further eludicated these issues in its subsequent decision in Minister of State for Immigration and Ethnic Affairs v Ah Hin Teoh (1995) 183 CLR 273. In that case, the majority (Mason CJ and Deane, Toohey and Gaudron JJ; McHugh J dissenting), held that ratification of the United Nations Convention on the Rights of the Child, which provided that in all actions concerning children, the best interests of the child shall be a primary consideration, gave rise to a legitimate expectation that the Minister would act in conformity with it and treat the best interests of the appellant's children as a primary consideration. A consequence of that was that if the Minister proposed to act otherwise than in conformity with the Convention, a person affected was entitled, as a matter of procedural fairness, to an opportunity to present a case against a decision inconsistent with the legitimate expectation.
Mason CJ and Deane J said (at 291):
The existence of a legitimate expectation that a decision-mater will act in a particular way does not necessarily compel him or her to act in that way. That is the difference between the legitimate expectation and a binding rule of law.
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But, if a decision-maker proposes to make a decision inconsistent with a legitimate expectation, procedural fairness requires that the persons affected should be given notice and an adequate opportunity of presenting a case against the taking of such a course. So, here, if the delegate proposed to give a decision which did not accord with the principle that the best interests of the children were to be a primary consideration, procedural fairness called for the delegate to take the steps just indicated.
Toohey J said (at 301):
Ratification [of the Convention] of itself does not make the obligation enforceable in the courts; legislation, not executive act, is required. But the assumption of such an obligation may give rise to legitimate expectations in the minds of those who are affected by administrative decisions on which the obligation has some bearing. It is not necessary for a person in the position of the respondent to show that he was aware of the ratification of the convention. Legitimate expectation in this context does not depend upon the knowledge and state of mind of the individual concerned. The matter is to be assessed objectively, in terms of what expectation might reasonably be engendered by any undertaking that the authority in question has given, whether itself or, as in the present case, by the government of which it is part.
Gaudron J said (at 305):
There is a want of procedural fairness if there is no opportunity to be heard on matters in issue. And there is no opportunity to be heard if the person concerned neither knows, nor is in a position to anticipate, what the issues are. That is also the case if it is assumed that a particular matter is not in issue and the assumption is reasonable in the circumstances. In my view and for the reasons already given, it is reasonable to assume that, in a case such as the present, the best interests of the children would be taken into account as a primary consideration and as a matter of course. That being so, procedural fairness required that, if the delegate were considering proceeding on some other basis, she should have informed Mr Teoh in that regard and given him an opportunity to persuade her otherwise.
The cases and passages to which I have referred establish the following principles of relevance to this case:
- Statements by public authorities of policies as to how discretions or powers will be exercised are liable to create "legitimate expectations" that those policies will be applied;
- It is not necessary that a person affected subjectively entertain such an expectation; it suffices that objectively the policy was calculated to engender such an expectation;
- A legitimate expectation does not found a right to have it fulfilled, but where the authority proposes to depart from the policy, so as to defeat a "legitimate expectation", a person affected is entitled to be heard as to why there should not be a departure from the policy;
- Where the policy admits of departure in "exceptional circumstances" and the authority proposes to invokes such circumstances, a person affected is entitled to be informed of the circumstances relied upon.
I have gone to some length on this point because although, as Mr Doyle-Gray has pointed out, the matter was not clearly raised in Ms Anderson's pleadings, the principles to which I have referred are firmly established by the highest authority and in cases that are very well-known. The point cannot be said to be an obscure one. It is, and for two decades has been, a notorious principle of administrative law.
In my view, consistent with Haoucher and Teoh and the principles I have endeavoured to summarise above, the effect of the Council's Rates and Charges Hardship Policy was to create on the part of ratepayers, and in particular pensioner ratepayers, a legitimate expectation that the Council would not sell a pensioner's property under s 713 at least other than in exceptional circumstances, so that, if it proposed to do so, the Council was obliged first to afford the ratepayer an opportunity to know and address the alleged exceptional circumstances that were suggested to take the ratepayer outside the policy, and to make submissions as to why the policy should not be departed from.
The only notice given to Ms Anderson of Council's intention to consider exercising its power of sale before its decision to do so was made was the letter of 24 August 2010, reproduced above. While that letter referred incidentally to the power of sale under s 713, mentioned that the property would be included in a report to Council on 12 October to consider its sale for unpaid rates, expressed an understanding that Ms Anderson was a pensioner, offered an interest-free payment arrangement under "Council's Hardship Policy" and proposed possible terms; it did not refer to the fact that Council had a standing policy not to exercise power of sale in respect of pensioners' properties, except in exceptional circumstances; it did not identify any "exceptional circumstances" to be relied on to take her case outside the policy; and it did not invite her to make submissions as to why there should be no departure from the policy in her case; or why she should not be excluded from the beneficial operation of the policy.
In my view, no-one reading that letter would have apprehended that it was notice of an opportunity to make submissions to the Council on or before 12 October 2010 as to why she should not be excluded from the benefit of the policy. As in Haoucher , she was not afforded a reasonable opportunity to be heard when a decision adverse to her legitimate expectation was under consideration. That amounted to a denial of procedural fairness.
The next question is the consequence of that conclusion for the relevant decision and act of the Council. Mr Doyle Gray submitted that a declaration that the contract was void would not be appropriate.
In Calvin v Carr [1979] 1 NSWLR 1, Lord Wilberforce, giving the judgment of the Privy Council, said (at 8):
Their Lordships' opinion would be, if it became necessary to fix upon one or other of these expressions [that is void or voidable], that a decision made contrary to natural justice is void, but that, until it is so declared by a competent body or court, it may have some effect, or existence, in law. This condition might be better expressed by saying that the decision is invalid or vitiated.
In Forbes v New South Wales Trotting Club Limited (1979) 143 CLR 242, Aickin J said (at 277):
That which is done without compliance with applicable principles of natural justice, in circumstances where the relevant authority is obliged to comply with such principles, is not to be regarded as void ab initio so that what purports to be an act done is totally ineffective for all purposes. Such an act is valid and operative unless and until duly challenged but upon such challenge being upheld it is void, not merely from the time of a decision to that effect by a court, but from its inception. Thus, though it is merely voidable, when it is declared to be contrary to natural justice the consequence is that it is deemed to have been void ab initio. Accordingly, it does not follow from the fact that an act is done without compliance with the principles of natural justice that it must be regarded as no act at all and supportable (if at all), as an effective act only on some other basis.
In Carson v Legal Services Commissioner [2000] NSWCA 308, Sheller JA, with whose judgment Giles JA agreed, considered those passages, but (at [38]) found it unnecessary, ultimately, to resolve the issue.
The gravamen of what both Lord Wilberforce in the Privy Council and Aickin J in the High Court said, is that a decision made contrary to natural justice, once held to be contrary to natural justice, is retrospectively void ab initio, although it may have had some effect in the meantime. In this case, while the relevant decision was made on 24 October 2010, the actual exercise of power by the Council was the act of sale on 14 May 2011. It follows from the above that that act of sale, having been found to have been done in contravention of the rules of procedural fairness, once so held, is void ab initio.
In that context, it is difficult to see room for the operation of the equitable defence of laches. However, the cases contain indications that even in a case of denial of procedural fairness, there may be a discretion to decline relief. If there is such a discretion, it is a limited one, exercised typically when it is clear that there was no possibility of a different decision, or where the defect has been cured by a sufficient right of appeal. In the current case, it certainly cannot be said that no submissions made by Ms Anderson could have made a difference to the Council's decision. Having regard to Ms Anderson's explanation for her delay in instituting proceedings (being her illness and incapacity during the relevant period and that she did not know she had a viable cause of action) in circumstances where she has made out a denial of procedural fairness on the one hand and, on the other, that while Mr Meuleman will lose the benefit of a contract into which he has entered, that contract has not been carried to completion (and, as I apprehend from what the Court was informed yesterday, finance for it has not yet been finalised) and there is no evidence of material economic prejudice from loss of the contract, I would not decline relief on discretionary grounds.
It follows that the appropriate remedy must be a declaration that the relevant decision and acts of the Council, including the contract, are void.
The conclusion I have reached on the natural justice issue relieves me of the necessity to resolve the issue about execution of the contract by the General Manager, which has some complexities. As a body politic, the Council can only act by its officers or agents. But s 377(1)(h) expressly excludes delegation of the power of sale. The (NSW) Local Government (General) Regulations 2005 authorise affixation (which constitutes a formal act of the Council) of its seal only pursuant to a resolution of Council and in the presence of the Mayor and General Manager. I cannot accept that the resolution of 12 October was itself a sale within s 377(1)(h); a sale occurred only by the contract of 14 May. In my view, the effect of s 377(1)(h) is that the contract had to be sealed in accordance with the Regulations as an act of Council, and not left to the delegated authority of the General Manager. Accordingly, I incline to the view that there was no valid exercise by the Council of its power of sale on this ground also.
Ms Anderson has succeeded, but on an issue that was not pleaded distinctly, if at all, and which occupied but a little portion of the evidence and only a little more of the argument. Much time, effort and no doubt money has been expended in the course of the case on issues on which the plaintiff did not succeed; in particular, originally, the allegation that a satisfactory agreement had been reached (which was abandoned at the beginning of the trial), and the procedural fairness argument in respect of the opportunity to make a satisfactory arrangement for payment, which failed. The execution point also arose only belatedly, and accounts for little of the evidence.
To get some sense of the scale of the wasted effort, it can fairly be said that, had Ms Anderson's legal representatives run the case only on the issue on which she succeeded, it would have been over in half a day rather than two days; virtually none of the affidavit evidence that was read would have been required; and all the cross-examination, including the cost of a videolink, would probably have been avoided.
In those circumstances, while Ms Anderson's success brings with it the prima facie position that she should recover her costs, the way in which other issues on which she has failed contributed to the costs of the defendants justify a substantial limitation on that outcome. The defendants ought not have to bear the additional costs she incurred on issues on which she failed. While it is a broad-axe approach, I would allow Ms Anderson one-third of her costs
Mr Meuleman, as I foreshadowed earlier in these reasons, says, reasonably enough, that he made some commercial decisions about participating in the litigation on the basis of the case as it was pleaded, as distinct from the case on which Ms Anderson ultimately succeeded. However, ultimately, Mr Meuleman's interest was in asserting that, by reason of the contract of 14 May, he had acquired rights which ought not be disturbed. It is difficult to perceive any distinction in this respect between Mr Meuleman's position in respect of the natural justice argument that was pleaded, and the different natural justice argument on which Ms Anderson ultimately succeeded. I do not accept that Mr Meuleman would not have been an active defendant, had the case that ultimately succeeded been distinctly pleaded. Mr Meuleman always had the option of filing a submitting appearance; instead, he chose to assume the risk of becoming an active party. But for the following considerations, I would not have exempted him from liability for one-third of Ms Anderson's costs.
The Council has, however, contributed to Mr Meuleman not only incurring costs, but also potentially incurring a costs liability to Ms Anderson. There is force in the argument advanced by Mr Doyle-Gray that Mr Meuleman is an innocent party - albeit, one who has elected to participate in the fight. While there is something to be said for the view that any question of costs as between the Council and Mr Meuleman (who are not in suit in any cross-claim in these proceedings) might be left to some later suit between them, there might never be any such later suit.
In principle, I incline to the view that both defendants should be jointly and severally liable for one-third of Ms Anderson's costs, but that the Council should indemnify Mr Meuleman in respect of his costs liability to Ms Anderson. But as there is no reason to doubt Lismore City Council's solvency, the pragmatic approach is simply to order that the Council pay one-third of Ms Anderson's costs.
My orders are as follows:
1. Declare that the resolutions of the first defendant of 12 October 2010 insofar as they relate to the property of Ms Anderson, and the contract between the first defendant and the second defendant made on 14 May 2011, are void.
2. Order that the first defendant be restrained from taking any further step in pursuance of such resolutions or contract.
3. Order that the first defendant pay one-third of the plaintiff' costs, and that there otherwise be no order as to costs.
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Decision last updated: 09 September 2011
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