City Of South Perth and Minister for Local Government - [2012] WASAT 177

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: DEVELOPMENT & RESOURCES

ACT: LOCAL GOVERNMENT ACT 1995 (WA)

CITATION: CITY OF SOUTH PERTH and MINISTER FOR LOCAL GOVERNMENT [2012] WASAT 177

MEMBER: JUDGE D R PARRY (DEPUTY PRESIDENT)

HEARD: 16 AUGUST 2012

DELIVERED : 23 AUGUST 2012

FILE NO/S: DR 252 of 2012

BETWEEN: CITY OF SOUTH PERTH
Applicant
AND
MINISTER FOR LOCAL GOVERNMENT
Intervener

Catchwords:

Local government Service charge Underground power Question of general interest as to whether service charge was imposed in accordance with the Local Government Act 1995 (WA) Whether service charge may only be imposed when adopting annual budget Whether service charge imposed other than when adopting annual budget is invalid and of no effect Project Blue Sky Inc v Australian Broadcasting Authority[1998] HCA 28; (1998) 194 CLR 355 principle Whether service charge should be quashed Declaration of invalidity

Legislation:

Local Government Act 1995 (WA), s 1.7, s 6.1, s 6.2(3), s 6.2(4), s 6.3, s 6.11, s 6.15(1), s 6.15(1)(a)(ii), s 6.16(3), s 6.19, s 6.41, s 6.32(1), s 6.32(2), s 6.32(3)(b), s 6.38, s 6.38(1), s 6.38(2), s 6.39, s 6.39(1), s 6.41, s 6.44, s 6.57, s 6.82, s 6.82(1), s 6.82(3), Pt 6
State Administrative Tribunal Act 2004 (WA), s 37(3), s 91

Result:

Declaration made that the Salter Point underground power service charge was not imposed in accordance with the Local Government Act 1995 (WA) and is invalid and of no effect
Salter Point underground power service charge quashed

Category: B

Representation:

Counsel:

Applicant: Mr DW McLeod
Intervener: Mr CS Bydder

Solicitors:

Applicant: McLeods
Intervener: State Solicitor's Office

Case(s) referred to in decision(s):

AB and State of Western Australia & Anor [2011] HCA 42; (2011) 244 CLR 390; (2011) 85 ALJR 1233
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The City of South Perth sought a declaration as to the validity of a service charge it purported to impose to recoup its contribution for the conversion of the overhead electricity system in an area to an underground system. The Minister for Local Government was given leave to intervene in the proceeding and contended that the service charge was invalid because it was purportedly imposed by the City of South Perth other than when the City adopted its annual budget.
The Tribunal determined that, on its proper interpretation, s 6.38 of the Local Government Act 1995 (WA) only permits the imposition of a service charge by a local government when adopting the annual budget or, if a service charge is quashed by SAT or a court, when adopting a budget in a form and manner similar to the annual budget. The Tribunal also determined that the City of South Perth did not, in substance, impose the service charge when it adopted the 2011/2012 annual budget, because it did not know, at that time, how much individual landowners who were to pay the service charge were liable to pay. Rather, the City of South Perth purported to impose the service charge about two and a half months after it adopted the annual budget.
Applying the principles in Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 198 CLR 355, the Tribunal held that the service charge was invalid and of no effect. The Tribunal discerned a legislative intention in the Local Government Act 1995 to invalidate a service charge purportedly imposed by a local government other than when adopting the annual budget, because:
•the imposition of a service charge is a serious matter, requiring a landowner or occupier to pay a potentially significant amount to meet the cost of providing a prescribed service, irrespective of whether the owner or occupier wishes the service to be provided;
•the consideration and imposition of a service charge is an essential element of the annual budgeting process for a local government;
•there is an expectation on the part of landowners and occupiers that a service charge will only be imposed when adopting the annual budget; and
•there is not likely to be any significant public inconvenience if a service charge is quashed, as the legislation requires a new service charge to be imposed.
The Tribunal made a declaration that the service charge was not imposed in accordance with the Local Government Act 1995 and is invalid and of no effect. The Tribunal also made an order quashing the service charge.

Introduction

The City of South Perth (City or Council) seeks a declaration as to the validity of the Salter Point underground power service charge (Salter Point UGP service charge) which the City imposed on property owners in the Salter Point area. The Salter Point UGP service charge is intended to recoup the City's contribution to the conversion of the overhead electricity system to an underground system in Salter Point (Salter Point UGP project). Western Power and the Office of Energy are contributing the balance of the cost for the Salter Point UGP project.
Section 6.82(1) of the Local Government Act 1995 (WA) (LG Act) confers jurisdiction on the Tribunal in the following terms:
Where there is a question of general interest as to whether a rate or service charge was imposed in accordance with this Act, the local government or any person may refer the question to the State Administrative Tribunal to have it resolved.
Section 6.82(3) of the LG Act confers the following power on the Tribunal:
The State Administrative Tribunal dealing with a matter referred to it under this section may make an order quashing a rate or service charge which in its opinion has been improperly made or imposed.
Section 91 of the State Administrative Tribunal Act 2004 (WA) (SAT Act) enables the Tribunal, when constituted by a judicial member, to 'make a declaration concerning any matter in a proceeding instead of any orders it could make, or in addition to any orders it makes, in the proceeding'.
The City commenced this proceeding under s 6.82 of the LG Act to resolve the validity of the Salter Point UGP service charge. Quite properly, in the application, the City sought orders in the alternative either that the Salter Point UGP service charge was validly imposed, or that the Salter Point UGP service charge was not validly imposed and be quashed. Although the City's preferred position was that the Salter Point UGP service charge was validly imposed, it foreshadowed in the application and subsequently filed submissions in support of both of the alternative positions. The City's conduct in this respect was entirely appropriate given that there was no contradictor to its preferred position.
At the directions hearing on 20 July 2012, I directed the City to file and serve on the State Solicitor's Office, on behalf of the State of Western Australia, a bundle of documents relevant to the matter and the City's written submissions. I also ordered that the State of Western Australia, or any relevant department or officer of the State, is to advise the Tribunal and the City whether it wished to be joined as a party and, if so, to file and serve on the City its written submission in relation to the substantive matter.
On 7 August 2012, the Minister for Local Government (Minister) sought leave to intervene in the proceeding pursuant to s 37(3) of the SAT Act. On 8 August 2012, by consent, I granted leave to the Minister to intervene in the proceeding.

Background

At the City's Special Council Meeting held on 12 July 2011, the Council resolved, by an absolute majority, that:
The Statutory Annual Budget for the year ending 30 June 2012 comprising Sections 1 and 2 of the 2011/2012 Annual Budget as distributed with this Agenda and tabled at this meeting, be adopted; … [and]
The Schedule of Fees and Charges as set out in Section 7 of the Annual Budget for the year ending 2012 be adopted[.]
The report by Mr Michael Kent, Director Financial Information Services of the City, to the Special Council Meeting on 12 July 2011, which proposed the adoption of the 2011/2012 Annual Budget for the City, stated that the expenditure program proposed for 2011/2012 included '5.30M for Stage 5 UGP project' and that the budget included funding in terms of 'Loan Borrowings UGP Project of $2,000,000'. 'Stage 5 UGP project' and 'UGP Project' refer to the Salter Point UGP project. However, there was no direct reference to the Salter Point UGP project in the Council's resolution and no reference to the imposition of a service charge to recoup the City's contribution to this project in either the officer's report or the resolution passed by the Council.
The City's 2011/2012 Annual Budget document contains four or five direct or indirect references to the Salter Point UGP project. First, section 4.7 of the Budget Foreword identifies 'Underground Power Stage 5 UGP Project', with an expenditure of $5.3 million, as a 'major capital expenditure project' in the 2011/2012 Budget. Second, at page 2.02, the Budget includes 'Service Charges' of $4.8 million as 'operating revenue' in the 2012 Budget. Third, at page 4.15, the Budget identifies 'UGP Stage 5' in the amount of $5.3 million as an item of 'capital expenditure' in the Adopted Budget for 2011/2012 .
Fourth, item 14 of the 'notes to and forming part of the Budget', at page 2.22, which is entitled 'Service Charge Information', states as follows:
Underground Power
As part of the roll out of the Underground Power Program, the City is partnering Western Power and the Office of Energy in a project to convert the overhead electricity system in Salter Point (the Stage 5 UGP project area).
Project Area
The Stage 5 Underground Power project area is shown in the map opposite.
The UGP project area is bounded by the following streets[:]
Hope Ave
Challenger Ave
Manning Rd
Elderfield Rd
Salter Point Parade
River Way
Redmond St
Aquinas College
Edgewater Rd
Roebuck Drive
Mt Henry Rd.
Project Cost
The project will be jointly funded by the state government and the City. The City's contribution towards the project will be $4,800,000 in cash plus 'in kind' costs of approximately $300,000.
Project Funding
This will be raised from property owners in the affected area via a Service Charge levied for the purpose of Underground Power. The charge will be levied in late 2011 and will be repayable either in full or by a deferred instalment payment plan over 3 years. Interest will be charged at the rate of 11% payable on the outstanding balance for those opting to use the instalment payment option.
The cash flow impacts of this option require the City to borrow $2.0M over a 3 year term as the cash outflows all occur in the first year. These borrowings are accommodated in the 2011/2012 Annual Budget and the borrowing costs will be met from the interest raised on the instalment payment option.
Charges and Concessions
Whilst the aggregate project cost/funding model is known, the final funding model for individual properties is yet to be determined (as at the date of adoption of this Budget). However, indicative costs have been advised to property owners in the affected area. Appropriate concessions will be included in accordance with Office of Energy Guidelines.
[Map of the Stage 5 Underground Project Area not reproduced]
Finally, the adopted 'Schedule of Fees and Charges 2011/2012' includes 'Underground Power Instalment Admin Fee' of $5 and 'Underground Power Interest Charge on O/S Balance' of 10% per annum. The City contended that this fee and interest charge applies to the Salter Point UGP project. The Minister contended that this fee and interest charge applies to other stages of the Underground Power Project. There are references in the Annual Budget to earlier stages of the Underground Power Project at page 2.22, which states that:
Provision has been made in the Budget for the anticipated cash flow effects of the deferred instalment option for Service Charge that was separately levied on properties within the Como East (Stage 3) Underground Power Project area in May 2008
and at page 4.15, which identifies the 2010/2011 budget and projection for works in relation to 'UGP Stage 4'.
It appears that the 'Underground Power Instalment Admin Fee' applies to the Salter Point UGP project, as the earlier stages of the Underground Power Project had been completed. However, the 'Underground Power Interest Charge on O/S Balance' cannot apply to the Salter Point UGP project, because the nominated interest rate of 10% is different to the interest rate of 11% specifically foreshadowed in item 14 of the notes for outstanding balances in relation to that project. Rather, it appears that the 'Underground Power Interest Charge on O/S Balance' applies to Stage 3 (referred to at page 2.22) and, possibly, to Stage 4 outstanding balances.
About three weeks after the 2011/2012 Annual Budget was adopted by the Council, the City received the 'Final Detailed Budget' for the Salter Point UGP project from Western Power. The Final Detailed Budget identified the City's share of the cost of converting the overhead electricity system to an underground system in Salter Point as $4,696,176.
At the Ordinary Council Meeting held on 27 September 2011, the Council received a report from Mr Les Croxford, Manager Engineering Infrastructure of the City, which stated that the report 'provides the basis for determining the service charge to be adopted by Council for the Round 5 SUPP project at Salter Point'. The 'Round 5 SUPP project at Salter Point' is a reference to the Salter Point UGP project. Under 'Financial Implications', the report stated as follows:
The total project cost of the Round 5 SUPP at Salter Point is $9,392,352 excluding powder coating the street light poles. The SUPP is a shared funding arrangement between the State Government (through the Office of Energy and Western Power) and Local Government.The Cities [sic] contribution of $4,736,332 will be funded by a service charge against property owners plus an allocation from the Annual Budget.
At the Ordinary Council Meeting on 27 September 2011, the Council accepted Mr Croxford's recommendation and resolved, by absolute majority, as follows:
The Service Charge Schedule at Attachment 10.2.2, comprising a network charge be adopted by the Council.
The Service Charge Schedule at Attachment 10.2.2 divides the 1,020 properties in the Salter Point UGP project area into 74 categories, identifies the number of properties in each category, prescribes a particular network charge, connection charge and service charge for each category, and states the total revenue for all properties in each category.
In March 2012, the City issued rate notices to the owners of each property in the Salter Point UGP project area requiring payment of the Salter Point UGP service charge. The owners of 665 (65.2%) properties have paid the service charge in full and the owners of 307 (30.1%) properties are paying by instalments. Over 95% of the landowners in the relevant area have, therefore, accepted the service charge and have either paid in full or have made arrangements to pay by instalments. The amount paid by landowners in the project area to the City to date is $3,186,892 or 71.74% of the total amount to be generated by imposition of the service charge.

Issues and parties' contentions

The following two principal issues arise for determination in this proceeding:
1)Whether the Salter Point UGP service charge was imposed by the City in accordance with the LG Act.
2)If issue 1 is answered in the negative, what order, if any, should the Tribunal make under s 6.82 of the LG Act and s 91 of the SAT Act?
The City contended that the Salter Point UGP service charge was imposed in accordance with the LG Act for two reasons.
First, the City submitted that s 6.38 of the LG Act, which enables a local government to impose a service charge, allows the imposition of a service charge at any time, not just at the time of adopting the annual budget. Section 6.38(1) of the LG Act is in the following terms:
A local government may impose on
(a)owners; or
(b)occupiers,
of land within the district or a defined part of the district a service charge for a financial year to meet the cost to the local government in the provision of a prescribed work, service or facility in relation to the land.
Section 6.32(1) of the LG Act states as follows:
When adopting the annual budget, a local government
(a)in order to make up the budget deficiency, is to impose* a general rate on rateable land within its district, which rate may be imposed either
(i)uniformly; or
(ii)differentially;
and
(b)may impose* on rateable land within its district
(i)a specified area rate; or
(ii)a minimum payment;
and
(c)may impose* a service charge on land within its district.
* Absolute majority required.
The City submitted that a service charge can be imposed at any time, not just at the time of adopting the annual budget, for the following reasons:
(a)The definition of Service Charge in section 6.1 'means a service charge imposed under s 6.38' not a service charge imposed under section 6.32;
(b)Section 6.38 does not prescribe that a service charge may be imposed by a local government only when adopting the annual budget; …
(c)The provision in section 6.32 that a local government when adopting the annual budget 'may impose a service charge' does not preclude the possibility that a service charge may be imposed at another time[; and]
[(d)]The primary purpose of section 6.32 is not to give power to impose a service charge, but rather to provide for what must be, and what may be, included in the Annual Budget. See also section 6.2(4).
In contrast, the Minister contended that, on the proper interpretation of s 6.38 of the LG Act, read in the context of the legislation as a whole:
A service charge may only be imposed by a local government in two circumstances:
(1)at the time of the adoption by the local government of its annual budget; and
(2)after a service charge is quashed.
Secondly, the City submitted that, even if a service charge may only be imposed under the LG Act at the time of the adoption of the annual budget, the Council did, in substance, impose the Salter Point UGP service charge as part of the adoption of the 2011/2012 annual budget. In support of this contention, the City relied on the five parts of the 2011/2012 Annual Budget referred to earlier in these reasons.
In contrast, the Minister submitted that the Salter Point UGP service charge was not imposed when the City adopted the 2011/2012 annual budget, and could not have been imposed at that time, because the City did not then know how much any particular landowner would be required to pay under the service charge. Rather, the Minister submitted that the City purported to adopt the Salter Point UGP service charge, for the first and only time, at its Ordinary Council Meeting held on 27 September 2011.
In relation to the issue of what order, if any, the Tribunal should make if it finds that the Salter Point UGP service charge was not imposed in accordance with the LG Act, it was common ground between the City and the Minister that this finding would not automatically lead to an order quashing the service charge under s 6.82(3) of the LG Act. As McHugh, Gummow, Kirby and Hayne JJ held in Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 (Project Blue Sky) at [91]:
An act done in breach of a condition regulating the exercise of a statutory power is not necessarily invalid and of no effect. Whether it is depends upon whether there can be discerned a legislative purpose to invalidate any act that fails to comply with the condition. The existence of the purpose is ascertained by reference to the language of the statute, its subject matter and objects, and the consequences for the parties of holding void every act done in breach of the condition. Unfortunately, a finding of purpose or no purpose in this context often reflects a contestable judgment. The cases show various factors that have proved decisive in various contexts, but they do no more than provide guidance in analogous circumstances. There is no decisive rule that can be applied; there is not even a ranking of relevant factors or categories to give guidance on the issue. [Citations omitted]

The City contended, on the basis of essentially seven submissions addressed later in these reasons, that, on the application of the Project Blue Sky principles, if the Tribunal finds that the Salter Point UGP service charge was not imposed by the City in accordance with the LG Act, the Tribunal would not make an order quashing the service charge in the circumstances. In contrast, the Minister contended that the application of the Project Blue Sky principles would lead to the conclusion that the service charge imposed by the City is invalid and of no effect and, therefore, to the quashing of the service charge.

Was the Salter Point UGP service charge imposed by the City in accordance with the LG Act?

In my view, the Minister is correct in his submission that, on the proper interpretation of s 6.38 of the LG Act, a service charge may only be imposed by a local government when adopting the annual budget.
It is common ground that the source of a local government's power to impose a service charge is s 6.38, not s 6.32, of the LG Act. As noted earlier, s 6.38(1) of the LG Act is in the following terms:
A local government may impose on
(a)owners; or
(b)occupiers,
of land within the district or a defined part of the district a service charge for a financial year to meet the cost to the local government in the provision of a prescribed work, service or facility in relation to the land.
and s 6.32(1) of the LG Act is in the following terms:
When adopting the annual budget, a local government
(a)in order to make up the budget deficiency, is to impose* a general rate on rateable land within its district, which rate may be imposed either
(i)uniformly; or
(ii)differentially;
and
(b)may impose* on rateable land within its district
(i)a specified area rate; or
(ii)a minimum payment;
and
(c)may impose* a service charge on land within its district.
* Absolute majority required.
It is correct that s 6.38(1) of the LG Act does not expressly provide that a service charge may only be imposed by a local government when adopting the annual budget. However, as Mr CS Bydder submitted on behalf of the Minister, 'the inclusion of the words "for a financial year'' in section 6.38(1) … suggests that a service charge is only to be imposed in an annual budget, rather than during the course of a financial year'.
Furthermore, the term 'service charge' is defined in s 6.1 of the LG Act to mean, in the whole of Pt 6 of the Act, unless the contrary intention appears, 'a service charge imposed under section 6.38'. The term 'service charge' relevantly appears in Pt 6 of the LG Act in s 6.2(4)(b), s 6.3, s 6.15(1)(a), s 6.32(1) and s 6.32(3)(b). A contrary intention to the application of the defined meaning of the term 'service charge' does not appear in any of these provisions and so, in each of those subsections, 'service charge' means 'a service charge imposed under section 6.38'. It is apparent from these subsections that 'a service charge imposed under section 6.38' can only be imposed when adopting an annual budget (except where a service charge is quashed by SAT or a court, in which case a new service charge can be imposed under a budget authorised by s 6.3).
Section 6.2 of the LG Act is in the following terms:
(1)During the period from 1 June in a financial year to 31 August in the next financial year, or such extended time as the Minister allows, each local government is to prepare and adopt*, in the form and manner prescribed, a budget for its municipal fund for the financial year ending on the 30 June next following that 31 August.
* Absolute majority required.
(2)In the preparation of the annual budget the local government is to have regard to the contents of the plan for the future of the district made in accordance with section 5.56 and to prepare a detailed estimate for the current year of
(a)the expenditure by the local government; and
(b)the revenue and income, independent of general rates, of the local government; and
(c)the amount required to make up the deficiency, if any, shown by comparing the estimated expenditure with the estimated revenue and income.
(3)For the purposes of subsections (2)(a) and (b) all expenditure, revenue and income of the local government is to be taken into account unless otherwise prescribed.
(4)The annual budget is to incorporate
(a)particulars of the estimated expenditure proposed to be incurred by the local government; and
(b)detailed information relating to the rates and service charges which will apply to land within the district including
(i)the amount it is estimated will be yielded by the general rate; and
(ii)the rate of interest (if any) to be charged by the local government on unpaid rates and service charges;
and
(c)the fees and charges proposed to be imposed by the local government; and
(d)the particulars of borrowings and other financial accommodation proposed to be entered into by the local government; and
(e)details of the amounts to be set aside in, or used from, reserve accounts and of the purpose for which they are to be set aside or used; and
(f)particulars of proposed land transactions and trading undertakings (as those terms are defined in and for the purpose of section 3.59) of the local government; and
(g)such other matters as are prescribed.
(5)Regulations may provide for
(a)the form of the annual budget; and
(b)the contents of the annual budget; and
(c)the information to be contained in or to accompany the annual budget.
(Emphasis in bold added)
Section 6.15(1)(a)(ii) of the LG Act includes 'service charges' within the 'revenue or income' of a local government. As s 6.2(3) requires that all revenue and income (including from service charges) is to be taken into account for the preparation of the detailed estimate of revenue and income of the local government in the preparation of the annual budget, and as s 6.2(4) requires the annual budget to incorporate detailed information relating to service charges which will apply to land within the district, s 6.2 clearly contemplates that a service charge imposed under s 6.38 can only be imposed as part of the annual budget.
Section 6.32(3) of the LG Act states, in part, as follows:
A local government
…
(b)is to, after a court or the State Administrative Tribunal has quashed a general valuation, rate or service charge, impose* a new general rate, specified area rate or service charge.
* Absolute majority required.
Section 6.3 of the LG Act is in the following terms:
A local government is required to prepare and adopt* a budget in a form and manner similar to the annual budget with such modifications as are necessary to meet the case
(a)where required to do so in consequence of the quashing of
(i)a general valuation; or
(ii)a rate or service charge,
by a court or by the State Administrative Tribunal; or
(b)if, at any time after the imposition of rates in a financial year it intends to impose a supplementary general rate or specified area rate for the unexpired portion of the financial year.
* Absolute majority required.
Section 6.3 of the LG Act also contemplates that a service charge imposed under s 6.38 can only be imposed as part of an annual budget (except for a new service charge to replace one quashed by SAT or a court), because it specifically requires and authorises the adoption of a budget 'in a form and manner similar to the annual budget with such modifications as are necessary to meet the case' where a local government is required to do so in consequence of the quashing of a service charge by SAT or a court. The requirement that a local government may only impose a replacement service charge for one that has been quashed by preparing and adopting a budget, in a form and manner similar to the annual budget, strongly indicates that a service charge imposed under s 6.38 can only be imposed when adopting the annual budget (or, under s 6.3, when adopting a budget in a form and manner similar to the annual budget, in order to replace a quashed service charge).
Furthermore, as noted earlier, s 6.32(1) of the LG Act states that 'when adopting the annual budget, a local government … (c) may impose a service charge on land within its district'. As a 'service charge' in this provision means, under s 6.1, 'a service charge imposed under section 6.38', s 6.32(1) clearly contemplates that a service charge can only be imposed under s 6.38 when adopting the annual budget. While s 6.32(1) is not the source of a local government's power to impose a service charge (the source being s 6.38 of the LG Act), it serves to restrict the time when a local government may impose a service charge under s 6.38 to when the local government is adopting the annual budget.
Mr DW McLeod sought, on behalf of the City, to draw a distinction between the use of the permissive words ('may impose a service charge') in para (c) of s 6.32(1) of the LG Act with the mandatory words ('is to impose a general rate') in para (a) of that subsection. Mr McLeod submitted that the use of permissive words in relation to a service charge when adopting the annual budget indicates that a local government may also impose a service charge at another time. However, it appears that the reason for the difference in language between paras (a) and (c) of the subsection lies in the fact that, whereas general rates are a central element of a local government's revenue and income, necessary to make up the budget deficiency, a service charge is only imposed by a local government when it is necessary to provide a particular service. Whereas the imposition of a general rate would be required in each financial year (hence the mandatory language), the imposition of a service charge may or may not be required in any given year (hence the permissive language).
Furthermore, as the High Court of Australia held in AB and State of Western Australia & Anor [2011] HCA 42; (2011) 244 CLR 390; (2011) 85 ALJR 1233 at [10]:
What is comprehended by [a legislative provision] falls to be determined by construing its terms in the context of the [legislation] as a whole and by reference to its evident purposes. (Citations omitted)
Section 6.38(2) of the LG Act states as follows:
…
(2)A local government is required to
(a)use the money from a service charge in the financial year in which the charge is imposed; or
(b)to place it in a reserve account established under section 6.11 for the purpose of that work, service or facility.
Section 6.32(2) clearly contemplates that a service charge is to be imposed for a particular financial year and, hence, that it can only be imposed when adopting the annual budget, because it requires a local government to 'use the money from a service charge in the financial year in which the charge is imposed' or otherwise to place it in a reserve account established under s 6.11. The requirement that a local government is to use the money from a service charge in the financial year in which the charge is imposed (or otherwise to place it in a reserve account) is consistent with the requirement in s 6.2 of the LG Act for the preparation of the annual budget to be informed by a detailed estimate of the expenditure, revenue and income of the local government for the relevant year, including expenditure related to, and revenue or income derived from, service charges.
Furthermore, as found earlier, s 6.2, s 6.3 and s 6.32(1) of the LG Act each clearly contemplate that a service charge imposed under s 6.38 can only be imposed when adopting the annual budget (unless a service charge is quashed by SAT or a court, in which case its reimposition requires the preparation and adoption of a budget in a form and manner similar to the annual budget under s 6.3).
There are three further indications in the legislative context which suggest that a service charge may only be imposed under s 6.38 when adopting the annual budget.
First, s 6.32(1) of the LG Act requires an absolute majority for a local government to impose a service charge. It could not have been the intention of Parliament to enable the requirement for an absolute majority to be avoided by allowing a service charge to be imposed under s 6.38 other than when adopting an annual budget.
Second, as noted earlier, s 6.15(1)(a)(ii) of the LG Act includes 'service charges' within the 'revenue or income' of a local government. That subsection also, in para (a)(iii), includes 'fees and charges' within the 'revenue or income' of a local government. Section 6.16(3) of the LG Act states as follows:
Fees and charges are to be imposed when adopting the annual budget but may be
(a)imposed* during a financial year; and
(b)amended* from time to time during a financial year.
* Absolute majority required
The fact that the LG Act expressly provides that 'fees and charges are to be imposed when adopting the annual budget but may [also] be … imposed [by absolute majority] during a financial year', but does not expressly provide that service charges may be imposed during a financial year, provides a strong contextual indication that a local government does not have power to impose a service charge other than when adopting the annual budget (or where required to do so in consequence of the quashing of a service charge, by preparing and adopting a budget in a form and manner similar to the annual budget, under s 6.3).
Finally, the LG Act requires that 'local public notice' (see s 1.7) is to be provided in respect of resolutions of a local government dealing with specified financial matters, if those financial matters were not addressed in the annual budget. Section 6.19 requires local public notice to be given if a local government wishes to impose any fees or charges after the annual budget, s 6.20(2) requires local public notice to be given of a proposal to borrow money under s 6.20(1), details of which were not included in the annual budget, and s 6.20(3) requires local public notice to be given if a local government wishes to use money for a purpose other than that for which it was borrowed (if the change of purpose has not been disclosed in the annual budget: s 6.20(4)). As Mr Bydder submitted:
The absence of any provision providing for public notice in respect of the imposition of a service charge other than at the time of the adoption of the annual budget suggests that the [LG] Act does not empower a local government to impose a service charge other than:
(a)at the time of the adoption of the annual budget; and
(b)after the quashing of a service charge (when a budget similar to an annual budget must be prepared).
It follows that, on its proper interpretation, s 6.38 of the LG Act only permits the imposition of a service charge by a local government when the local government is adopting an annual budget or, if a service charge is quashed by SAT or a court, when adopting a budget in a form and manner similar to the annual budget.
Furthermore, the City did not, in substance, impose the Salter Point UGP service charge when it adopted the 2011/2012 Annual Budget, but rather purported to impose the service charge, for the first and only time, at its Ordinary Council Meeting on 27 September 2011.
The 2011/2012 Annual Budget identified the Salter Point UGP project as a capital expenditure project for 2011/2012, with a budgeted expenditure by the City of $5.3 million (it is unclear why this amount was greater than the amount of $4.8 million in cash plus 'in kind' costs of approximately $300,000 stated as the City's contribution towards the project cost in item 14 of the notes, although nothing turns on this), and identified 'Service Charges' of $4.8 million as part of the City's operating revenue for 2011/2012. Item 14 of the notes to the budget also referred to the payment of interest at the rate of 11% on outstanding balances for property owners paying the service charge for underground power in Salter Point by instalments and stated that the 2011/2012 Annual Budget accommodated borrowings of $2 million over three years, required as all the cash outflows for the Salter Point UGP project will occur over the first year, whereas income will be received, in part, by instalments over three years.
However, as Mr Bydder submitted, the 2011/2012 Annual Budget could not have, and did not, impose the Salter Point UGP service charge, because, at the time of the adoption of the annual budget, the City did not know how much any particular property owner would be required to pay under the service charge. Item 14 of the notes to the budget stated that:
Whilst the aggregate project cost/funding model is known, the final funding model for individual properties is yet to be determined (as at the date of adoption of this Budget).
Furthermore, as noted earlier, there are 74 different categories of property types, each with a prescribed network charge, connection charge and service charge, in the schedule of charges adopted by the Council on 27 September 2011. Mr Cliff Frewing, the City's Chief Executive Officer, responded to Mr McLeod's inquiry as to whether the Salter Point UGP service charge varied from one property to another as follows:
Yes, the service charge did vary from one property to another on the basis of a number of factors including whether or not the properties were already served by an underground power connection (from the property line), whether there were high tension lines in the vicinity, whether the property owners were pensioners etc. The service charge was not levied on the basis of property valuations.
As Mr Bydder submitted, there are four textual indications in the LG Act to the effect that in order to 'impose' a service charge, a local government must be able to show how much any particular property owner (or occupier) will be required to pay under the service charge.
First, as noted earlier, s 6.38(1) of the LG Act states that 'a local government may impose on … owners … of land within the district or a defined part of the district a service charge for a financial year to meet the cost of providing a prescribed service in relation to the land'. A service charge cannot be imposed on owners of land to meet the cost of providing a prescribed service in relation to the land unless the amount of the service charge is known.
Second, s 6.39(1) of the LG Act states as follows:
As soon as practicable after a local government has resolved to impose rates in a financial year it is to ensure that a record is compiled, at the time and in the form and manner prescribed, for that financial year of
(a)all rateable land in its district; and
(b)all land in its district on which a service charge is imposed.
In order to ensure that a record is compiled for the financial year of all land in the district on which a service charge is imposed, it is necessary to know the amount payable by way of the service charge for relevant land.
Third, s 6.41 of the LG Act states, in part:
(1)A local government is required to give to
…
(b)the owner or occupier, as the case requires, of land on which a service charge is imposed,
a rate notice stating the date the rate notice was issued and incorporating or accompanied by the details and particulars prescribed.
(2)The rate notice is to be given
(a)as soon as practicable after
(i)the rate record of the land is completed; …
As Mr Bydder submitted, s 6.41 could not be complied with unless the amount of the service charge in respect of a particular property the subject of the charge is known.
Finally, s 6.44(1) of the LG Act states as follows:
The owner for the time being of land on which a rate or service charge has been imposed is liable to pay the rate or service charge to the local government.

As Mr Bydder submitted, given that this provision imposes an obligation on the part of a landowner to pay a service charge that 'has been imposed' to the local government, a service charge cannot be 'imposed' until the amount that the owner is required to pay is known.
In the present case, the City could not have lawfully imposed the Salter Point UGP service charge until the City knew how much individual landowners who are to pay the service charge are liable to pay. It was not sufficient to include the aggregate estimated amount of revenue from the service charge in the budget and leave 'the final funding model for individual properties' to be determined later. As the evidence in this case shows, there are considerable variations between the amounts that different landowners in the area are required to pay.
Furthermore, neither the terms of Council's resolutions made on 12 July 2011, when it adopted the 2011/2012 annual budget, nor the 2011/2012 Annual Budget document, purported to impose a service charge. Indeed, the language of item 14 of the notes to the budget indicates that, while the imposition of a service charge was foreshadowed, a service charge was not actually imposed at that time. The item stated that 'the charge will be levied in late 2011'.
Although Mr McLeod submitted that the word 'levied' in this sentence means 'billed', it is apparent from the context that it relevantly means 'imposed'. The previous sentence stated: 'This [that is, Project Funding] will be raised from property owners in the affected area via a service charge levied for the purpose of Underground Power'. At page 2.22, the document states that provision had been made for the anticipated cash flow effect of the deferred instalment option for 'Service Charge that was separately levied on properties' in East Como in 2008. It is apparent from these sentences that, in the 2011/2012 Annual Budget document, the word 'levied' is used in the sense of 'imposed', rather than 'billed'.
The Tribunal finds that the City purported to impose the Salter Point UGP service charge, for the first and only time, on 27 September 2011, once it knew how much individual landowners were required to pay under the service charge.
It follows that the Salter Point UGP service charge was not imposed in accordance with the LG Act, because it was not imposed when the Council adopted the annual budget. The validity and effect of the Salter Point UGP service charge is, therefore, to be determined by the application of the principles in Project Blue Sky.

What order, if any, should the Tribunal make?

The Minister contended that the failure to comply with the LG Act 'should lead to the invalidity of the service charge because ss 6.32 and 6.38 deal with [a] serious matter of imposing a tax'. The Minister submitted that it is 'therefore unlikely that Parliament would have intended a service charge to be valid if it failed to comply with the timing requirement imposed with respect to the imposition of the service charge'.
The Minister acknowledged that inconvenience is a relevant factor for consideration in applying the principles in Project Blue Sky. In that case, the Court observed at [97] that:
Courts have always accepted that it is unlikely that it was a purpose of the legislation that an Act done in breach of a statutory provision should be invalid if public inconvenience would be a result of the invalidity of the Act. (Citations omitted)
However, Mr Bydder submitted on behalf of the Minister that 'it is far from clear that there would in fact be significant inconvenience to the local government … if the Tribunal were to quash the service charge'. Mr Bydder observed that, if the Tribunal were to quash the service charge, then the City would be obligated by s 6.32(3)(b) to 'impose a new … service charge' by absolute majority. As noted earlier, this would require the Council to prepare and adopt a budget in a form and manner similar to an annual budget, with such modifications as are necessary to meet the case, under s 6.3 of the LG Act. As the new (replacement) service charge is likely to be in the same terms as the service charge purportedly imposed on 27 September 2011, there would be no requirement to amend the rate record under s 6.39 of the LG Act and, therefore, no obligation to issue a fresh notice requiring payment under s 6.41 of the LG Act. In consequence, there would be no requirement to refund any payments that have been made, although the City would have to pay interest on amounts paid purportedly in relation to the service charge before the service charge was lawfully imposed under s 6.32(3)(b) and s 6.3 of the LG Act.
Mr McLeod presented essentially seven submissions in support of the City's contention that there cannot be discerned a legislative purpose to invalidate any act that fails to comply with the condition that a service charge may only be imposed when adopting the annual budget. First, Mr McLeod submitted that 'any noncompliance related only to the timing of the imposition by the City of the service charge'. However, the timing for the imposition of a service charge, in particular the requirement that a service charge can only be imposed when adopting the annual budget, is an essential requirement in Pt 6 of the LG Act. The timing of imposition of a service charge is not simply a procedural requirement, but reflects a substantive requirement that the revenue or income derived from service charges, and associated expenditure, is to be the subject of a detailed estimate and used in the preparation of the annual budget (s 6.2(2) and s 6.2(3)). Furthermore, the annual budget is required by s 6.2(4) to incorporate detailed information relating to service charges which will apply to land within the district. Thus, the consideration and imposition of service charges is an essential element of the annual budgeting process under the LG Act.
Second, Mr McLeod submitted that 'there is no apparent adverse effect on the public interest generally or, in particular, on any member of the public … in having the service charge imposed later in 2011 rather than at the time of the adoption of the City's Annual Budget'. However, for reasons set out immediately above, the preparation of a detailed estimate of revenue or income from service charges, and associated expenditure, is intended to inform the preparation of the annual budget and the annual budget is to contain detailed information in relation to service charges. Furthermore, there is an expectation on the part of property owners and occupiers, created by the requirement for service charges to only be imposed when adopting the annual budget, that service charges will not be imposed at any other time.
Third, Mr McLeod referred to the 'inconvenience to the City, and prejudice to individual owners or occupiers of property, … likely to result from a finding of invalidity because payments have already been made, and property transactions … have or are likely to have taken place, relying on the validity of the service charge'. However, there is not likely to be any inconvenience to the City, other than an obligation to impose a new service charge and to pay interest to property owners until that occurs. Furthermore, because the City is obligated by s 6.32(3)(b) to impose a new service charge if SAT quashes a service charge, and because the amount of the service charge is likely to be the same, there would not be any prejudice to individual owners or occupiers of property if the Salter Point UGP service charge were invalid and of no effect.
Fourth, Mr McLeod referred to s 6.32(3)(b) of the LG Act. However, this provision in fact indicates a legislative purpose to invalidate any service charge that fails to comply with the requirement for a service charge to only be imposed when adopting the annual budget. The fact that a local government is obligated to impose a new service charge when a service charge is quashed under s 6.32(3)(b), and is not required to await the adoption of the next annual budget, indicates a legislative intention to invalidate a service charge not imposed when adopting the annual budget, because it avoids the inconvenience to a local government of not being able to impose a new service charge for a period of time.
Fifth, Mr McLeod submitted that the City's response to the legislation was not unreasonable, given that s 6.38 does not expressly require a service charge to only be imposed when adopting the annual budget. However, a local government is required to comply with the LG Act on its proper interpretation. As found earlier, the requirement that a service charge may only be imposed when adopting the annual budget is essential under Pt 6 of the LG Act.
Sixth, Mr McLeod submitted that the noncompliance was innocent and that the estimate in item 14 of the notes to the 2011/2012 Annual Budget was higher than the actual cost of the project. However, the question for determination under the principles discussed in Project Blue Sky is 'whether there can be discerned a legislative purpose to invalidate any act that fails to comply with the condition' (emphasis added). The fact that, in this particular case, the City acted innocently and that the foreshadowed estimate of the project cost in the budget was somewhat greater than the final cost, does not demonstrate a legislative purpose not to invalidate a service charge imposed other than when adopting the annual budget.
Finally, Mr McLeod referred the Tribunal to s 6.57 of the LG Act which states as follows:
In proceedings by or on behalf of a local government for the recovery of an amount due in respect of a rate or service charge, failure by the local government to comply in respect of the rate or service charge with the provisions of this Act, is not a defence, if it appears that it had the power to impose, and did in fact assent to the imposition of, the rate or service charge.
However, the fact that, in proceedings by or on behalf of a local government for the recovery of an amount in respect of a service charge, failure by the local government to comply with the provisions of the Act in relation to the service charge is not a defence 'if it appears that it had the power to impose, and did in fact assent to the imposition of, the … service charge' does not demonstrate a legislative purpose not to invalidate the imposition of a service charge other than when adopting the annual budget. As the Minister submitted, the current proceeding does not arise in a context where the City is seeking to recover an amount due and, for reasons given earlier, the City did not have the power to impose the service charge when it purported to do so.
In my view, applying the principles discussed in Project Blue Sky, the LG Act discloses a legislative purpose to invalidate any service charge imposed by a local government at a time other than when adopting the annual budget (other than a new service charge imposed under s 6.3), for the following four reasons.
First, whether a service charge has the character of a tax or not, the imposition of a service charge is a serious matter, requiring a landowner or occupier to pay a potentially significant amount to meet the cost of providing a prescribed service, irrespective of whether the owner or occupier wishes the service to be provided.
Second, the consideration and imposition of service charges is an essential element of the annual budgeting process under the LG Act.
Third, the LG Act creates an expectation on the part of landowners and occupiers that a service charge will only be imposed when adopting the annual budget and not subsequently in a financial year.
Fourth, there is not likely to be any significant public inconvenience if a service charge that has purportedly been imposed other than when adopting the annual budget is invalid and quashed, as s 6.32(3)(b) of the LG Act requires the relevant local government to impose a new service charge in these circumstances and s 6.3 facilitates the imposition of the new service charge.
It follows that the Salter Point UGP service charge is invalid and of no effect. It is appropriate for the Tribunal to make a declaration, pursuant to s 91 of the SAT Act, and to order that the Salter Point UGP service charge is quashed, pursuant to s 6.82(3) of the LG Act.

Conclusion

The City did not impose the Salter Point UGP service charge when adopting its annual budget for 2011/2012. Rather, the City purported to impose this service charge on 27 September 2011, some two and a half months after it had adopted its annual budget. The Salter Point UGP service charge was, therefore, not imposed by the City in accordance with the LG Act.
Furthermore, there is a legislative purpose discerned from the LG Act to invalidate any service charge purportedly imposed by local government other than when adopting its annual budget. The Salter Point UGP service charge is, therefore, invalid and of no effect.
It is appropriate to make a declaration, pursuant to s 91 of the SAT Act, that the Salter Point UGP service charge is invalid and of no effect, and to quash the service charge, pursuant to s 6.82(3) of the LG Act, as it was improperly imposed.

Orders

For these reasons, the Tribunal makes the following orders:
1.The Tribunal declares that the Salter Point underground power service charge was not imposed in accordance with the Local Government Act 1995 (WA) and is invalid and of no effect.
2.The Salter Point underground service charge is hereby quashed.

I certify that this and the preceding [91] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
JUDGE D R PARRY, DEPUTY PRESIDENT