McLaughlan Holdings Pty Ltd v Darwin City Council - [2000] NTCA 11

McLaughlan Holdings Pty Ltd & Ors v Darwin City Council [2000] NTCA 11
PARTIES:McLAUGHLAN HOLDINGS PTY LTD & ORS

v
DARWIN CITY COUNCIL

TITLE OF COURT:  COURT OF APPEAL OF THE NORTHERN TERRITORY
JURISDICTION:  APPEAL FROM SUPREME COURT EXERCISING TERRITORY JURISDICTION
FILE NO:AP2 of 2000 (9808330)
DELIVERED:  26 October 2000
HEARING DATES:  14 September 2000
JUDGMENT OF:  ANGEL A/CJ, THOMAS AND
RILEY JJ

REPRESENTATION:
Counsel:
Appellant:Mr. J. Waters QC
Respondent:  Mr. B. Hayes QC with Mr. R. Bruxner
Solicitors:
Appellant:De Silva Hebron
Respondent:  Cridlands
Judgment category classification:    B
Judgment ID Number:  ril0022
Number of pages:  15

ril0022
IN THE COURT OF APPEAL
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN
McLaughlan Holdings Pty Ltd & Ors v Darwin City Council [2000] NTCA 11
No. AP2 of 2000 (9808330)

BETWEEN:
McLAUGHLAN HOLDINGS PTY LTD & ORS

Appellants
AND:
DARWIN CITY COUNCIL

Respondent

CORAM: ANGEL A/CJ, THOMAS AND RILEY JJ
REASONS FOR JUDGMENT
(Delivered 26 October 2000)
The Court

The appellants in these proceedings are owners of land situated within a defined area of Darwin’s Central Business District.

On 7 August 1996 the respondent caused to be published in the Government Gazette the declaration of rates and charges for the years 1996/1997 under the Local Government Act. That declaration followed a resolution of the respondent on 30 July 1996. In the process the respondent declared a local rate for the area which included the land owned by the appellants. That rate was described as the “City Promotion Local Rate” and was declared to be intended for the function of “developing and marketing the Darwin Central Business District”.

The appellants commenced proceedings in the Supreme Court seeking a declaration that the City Promotion Local Rate was void. In addition the appellants challenged the power of the respondent to pursue activities described in an agreement entered into with Darwin City Heart Promotions Limited (DCHP) whereby DCHP undertook to promote and market the City Centre of Darwin. Other relief was sought.
The contractual arrangement with DCHP originated in July 1994 when the respondent entered into a written agreement pursuant to which DCHP undertook to promote and market the Darwin City Centre and, in consideration therefore, the respondent agreed to pay to DCHP monies raised in the levying of a local rate imposed upon the owners of rateable land within the Darwin Central Business District. Under that agreement, which was expressed to run from 1 July 1994 until 30 June 1999 unless otherwise determined, the respondent was obliged to pay to DCHP all monies received from the City Promotion Local Rate less an administration fee.
The matter came before the Supreme Court for the purpose of dealing with preliminary issues prior to the trial of the proceeding. The questions posed for resolution in that process were as follows:
“(1) Does the Defendant have the power to:
(i)declare a rate pursuant to Section 69 of the Local Government Act (1993) for the purpose of ‘developing and marketing’ part of the municipality of Darwin (as defined in the declaration)?
(ii)apply the whole of the funds recovered by such a rate (less a 4% administration fee) to a company incorporated by guarantee known as Darwin City Heart Promotions Limited which has contracted with the Defendant to:
(a)promote and market the City Centre and the services and facilities available within the City Centre;
(b)initiate, develop and implement policies as it considers conducive to the promotion, development and best interest of the City Centre and to lobby government and other bodies in relation to such policies;
(c)co-ordinate and encourage co-operation between the building owners, retailers, providers of professional services and other users of facilities within the City Centre, government, civic and other authorities for the purpose of improving the City Centre and its facilities?
and to use the whole of the said funds accordingly?
(2)Did the Defendant’s resolution dated 30 July 1996, in the following terms:
Further, the amount which Council intends to raise for City Promotion purposes by way of rates is $747,919.12 and, further, that a City Promotion Local Rate of 0.65205% will be levied on the owners of property of the Unimproved Capital Value of all rateable land within the specified part of the municipality. The City Promotion Local Rate will be levied for a number of complete financial years yet to be determined but specifically for the year ending 30 June 1997. Proceeds of the City Promotion Local Rate will be applied to the General Fund of Council and used for the function of developing and marketing the Darwin Central Business District. Appeals against an assessment of a City Promotion Local Rate may be made in accordance with Section 63 of the Local Government Act.
comply with the requirements of s 69(3)(b) and (c) of the Local Government Act 1993?”
The Court answered each of those questions in the affirmative and the appellants appeal from that decision.
The Scheme of the Act
Section 58 of the Local Government Act provides that “a municipal council shall rate all land within its municipality for the purpose of raising money to be spent for or in relation to the performance of its functions.” The Act requires the declaration of those rates by resolution at a meeting of the council. By virtue of s 64 the resolution must declare the amount the council intends to raise for general purposes by rates and whether those rates will be raised by the application of a uniform rate, differential rates, a flat rate per parcel or a combination of differential and flat rates. It is clear from the requirements of s 58 that all money so raised must be spent “for or in relation to the performance of (the council’s) functions”. The Act does not permit rates to be raised for any other purpose.
By virtue of s 121 of the Act the functions of a municipal council are the functions given to it by the Administrator under the Local Government Act or provided for pursuant to some other legislation. The functions available under the Local Government Act are identified by reference to a list of fifty-three functions set out in Schedule 2 to the Act. In relation to the functions identified in Schedule 2 to the Act the municipal council has only those functions of local government that are specified in a notice published in the Government Gazette.
Section 115 of the Act permits a municipal council to “do all things necessary or convenient to be done for, in connection with or incidental to the purpose of performing its functions”.
Section 117 permits a municipal council to enter into contracts for the purposes, and in the course, of carrying out its functions.
The Act deals with the various types of rates available to a municipal council and identifies the matters that must be dealt with in declaring these rates in sections 66 through to 73.
Section 69 of the Act deals with the declaration of a local rate and is in the following terms:
“(1)   Subject to this section, a municipal council may, at a meeting referred to in section 64(1) or at any other meeting, by resolution declare a local rate and it may declare that the rate be based on the assessed value of the rateable land within -
(a)     a specified part of its municipality for the purpose of -
(i)defraying the expense of or in relation to the performance of a function of the council within that part of its municipality; or
(ii)repaying, with interest, an advance made to, or debt incurred or loan raised by, the council in relation to the performance of a function of the council within that part of its municipality,
where, in the opinion of the council, the performance of that function is, or would be, of special benefit to the ratepayers of that part; or
(b)     a part of its municipality which, under section 30(1), has been annexed to the municipality, for the purpose of meeting a debt or liability for which the council has become liable as a consequence of that part being so annexed.
(2)     A council may declare that a local rate be determined otherwise than on the assessed value of the rateable land within that part of the municipality in relation to which the local rate is declared.
(3)     The resolution by which a local rate is declared shall specify -
(a)the part of the municipality in relation to which the local rate is declared;
(b)the class of owner or occupier on which the local rate is levied;
(c)the number of complete financial years for which the local rate will be payable;
(d)the manner in which the local rate shall be assessed and levied; and
(e)the manner in which an appeal, if made, may be made against an assessment.
(4)The resolution may provide for the payment, by a person on whom a local rate may be levied, of an amount in advance, which shall be accepted in full discharge and satisfaction of any liability to pay the local rate for the period determined in accordance with the resolution, and a payment so made shall relieve the person of any liability to pay the local rate in relation to the period so determined.”
For present purposes the matters required to be specified by the respondent at the meeting declaring the City Promotion Local Rate are set out in s 69(3). It is to be noted that the section does not require the municipal council to identify the function in relation to which the money raised is to be spent.
Question 1(i)
It is the submission of the appellants that in the circumstances of this matter the declaration of the City Promotion Local Rate and the application of the funds raised by that local rate offend against the precise limitations imposed on the functions that the respondent is authorised to perform by the Local Government Act. In particular it is said that the declaration of the local rate and the later dealing by the respondent with DCHP went beyond power on this occasion.
Reference to the notice in the Government Gazette of the declaration of rates reveals that the respondent intended to raise the City Promotion Local Rate for the purpose of applying the proceeds of that rate “to the General Fund of Council” and for those funds to be “used for the function of developing and marketing the Darwin Central Business District”. The appellants submit that the identified purpose of the rate is the developing and marketing of the CBD and that there is no function identified in the Local Government Act or elsewhere that would specifically give the respondent the “function of developing and marketing the CBD”. It was submitted that the whole thrust of the Local Government Act is to confine municipal councils to the performance of only those functions specifically granted and no others. The local rate as declared must therefore be invalid as it is not for the performance of a function of the respondent. Further, it was submitted that it is not possible to elevate the “development and marketing” of the CBD to the status of a separate function of the respondent by reference to the incidental power contained in s 115 or the responsibility given to the respondent to provide for the “peace, order and good government” of its municipal area under s 120. Each of those provisions is to be read as limited to the performance of such functions as have been granted. They do not expand the power of the respondent beyond the functions specified in Schedule 2 and granted to the respondent.
The appellants submitted that, as the local rate declared on this occasion makes no reference to any identified and granted function of the respondent (eg for developing and marketing tourism or land development or the like) it was not a rate declared for a function of the respondent and is therefore void.
The appellants contended that there was nothing to stop the respondent from declaring a rate in relation to one or more of its granted functions and then relying upon the incidental power to use the money raised for the purposes of development and marketing of activities within the bounds of the identified functions. Further it was said that the declaration of the rate would have survived if it had been expressed to be for the development and marketing of functions granted to the respondent by Government Gazette number 36 of 13 September 1989. However, because the expression used in the declaration of the rate on this occasion was “the function of developing and marketing the Central Business District” and there is no such function then the declaration of the rate could not survive. The declaration of a local rate for such a purpose is ultra vires.
The Act permits a municipal council to raise revenue by way of different types of rates. Each of those differing rate regimes identifies the requirements which must be fulfilled in order to levy the rate. Underlying all of those rating schemes is the requirement found in s 58 of the Act that they are to raise money “to be spent for or in relation to the performance of its functions”. It is clear that the respondent cannot expend its revenue other than for the functions identified in the Local Government Act or other relevant legislation. To expend its rate revenue for purposes or functions other than those authorised by statute would be to act ultra vires.
The first question posed for the Court was whether the respondent had the power to declare a rate pursuant to s 69 of the Act for the purpose of “developing and marketing part of the Municipality of Darwin.” That question requires a consideration of the application of s 69 of the Act. The section permits the declaration of a rate by a municipal council within “a specified part of its municipality”. That is what the respondent sought to do on this occasion.
In order to bring itself within s 69 the respondent had to comply with the requirements of that section. As the respondent to this appeal submitted, that has occurred. A meeting of the respondent was called and a resolution declaring a local rate was passed. Section 69(3) sets out what that resolution shall specify and it can be seen by reference to the subsection and to the resolution that the provisions of the subsection have been complied with. In particular:
(a)the part of the municipality in relation to which the local rate is declared has been specified and is to be found in paragraph 5 of the notice published in the Northern Territory Government Gazette No. G32, 7 August 1996;
(b)the class of owner or occupier on which the local rate is levied is identified as being upon “the owners of property on the unimproved capital value of all rateable land within the specified part of the municipality”;
(c)the number of complete financial years for which the local rate will be payable is expressed to be “specifically for the year ending 30 June 1997”;
(d)the manner in which the local rate shall be assessed and levied is specified as being a rate “of 0.65205%” on the unimproved capital value of all rateable land within the area; and finally
(e)the manner in which an appeal may be made is said to be in accordance with s 63 of the Local Government Act.
Section 69 does not require the respondent to identify the function or functions for which the rate has been raised. The assumption which underlies the raising of the rate is that the funds so raised will be spent for or in relation to the performance of the functions of the municipal council but there is no requirement in s 69 that such functions be identified or mentioned in the declaration process. In the circumstances s 69 has been complied with in all respects.
Accepting that there has been compliance with s 69 in the sense described by the respondent, the appellants say that there still must be compliance with s 69(1)(a)(i) in that the rate must be raised for the purpose of defraying the expense of or in relation to the performance of a function of the respondent within that part of its municipality. The appellants submit that, in relation to the particular local rate referred to in this case, the respondent has spelled out the purpose of the rate and that is “for the function of developing and marketing the Darwin Central Business District” a purpose which is not one of the identified functions of the respondent. The appellants submit that, although the resolution does not have to mention the purpose, it has done so in this case and it is a purpose that is ultra vires.
This submission ignores the fact that the monies raised by the rate are required to be spent for or in relation to the performance of the functions of the respondent. There is no dispute that the authorised functions of the respondent are capable of being developed and marketed in the Darwin Central Business District. That is the purpose of the rate. If the money raised is spent in the development or marketing of something which is not an authorised function of the respondent then that expenditure may be ultra vires. That point has not been reached at the time when the local rate is declared. We are here dealing only with the declaration of the rate and that has been effected in compliance with Part 4 of the Local Government Act.
The learned trial Judge was correct in answering question 1(i) in the affirmative.
Question 1(ii)
In July 1994 the respondent entered into an agreement with DCHP for the purposes of carrying out some of its functions. That contract was said to be authorised by s 117 of the Local Government Act.
Pursuant to the contract DCHP undertook to promote, market and develop the Darwin Central Business District. For that purpose the respondent was obliged to pay over to DCHP all monies received from the City Promotion Local Rate less a small administration fee. The obligations of the parties to the contract can be seen by the terms of clause 3.1 of the Agreement. Those terms are as follows:
“3.1In consideration of the payment by the Council to the Company of the amount received by the Council for and on account of the Local Rate, the Company covenants and agrees to:
3.1.1promote and market the City Centre and the services and facilities available within the City Centre;
3.1.2initiate, develop and implement policies as it considers conducive to the promotion, development and best interests of the City Centre and to lobby government and other bodies in relation to such policies;
3.1.3co-ordinate and encourage co-operation between building owners, retailers, providers of professional services and other users of facilities within the City Centre, government, civic and other authorities for the purpose of improving the City Centre and its facilities,
and to utilise the payments received from the Council pursuant to this Agreement in undertaking such works and pursuing such objectives provided that the Company shall not undertake any action or do anything contrary to the policies of the Council as determined from time to time.”
As the learned trial Judge observed, DCHP is a company limited by guarantee. Its members comprise “property owning members” (persons and companies who own rateable land in the CBD), “trader members” (persons who carry on business on or at rateable land in the CBD) and “other members” (the respondent and bodies who in the opinion of DCHP’s board are representative of the interests of some or all of the property owning members and trading members). The Board of Directors of DCHP consists of four persons appointed annually at the annual general meeting by the property owning members, four persons appointed annually by the trader members, two nominated representatives of the respondent and one person appointed annually by the other members.
It was the submission of the appellants that the arrangement entered into by the respondent and DCHP was contrary to the principle delegatus non potest delegare. It was submitted that an authority entrusted with a function is required to perform that function itself and is not permitted to delegate its performance to another in the absence of an express power to do so. Further, it was submitted that because the agreement did not identify the responsibility of DCHP as being related to any of the functions of the respondent as contained in Schedule 2 of the Local Government Act it was therefore not a contract for the carrying out of a function of the respondent. Whilst s 117 of the Local Government Act permits the respondent to enter into contracts, that power is limited to entering into contracts “for the purposes, and in the course, of carrying out its functions”. It was said that this agreement “identifies no functions and the reference to promoting and marketing the City Centre and its services and facilities gives no clue at all to which of the respondent’s appointed functions it might relate”. It was submitted the contract was therefore ultra vires.

For the purposes of considering these submissions it is necessary to assume the validity of the local rate. If the rate was not valid there would be nothing to pass on to DCHP. The question is whether the respondent, having levied a valid rate to obtain funds, is able to use those funds for the performance of its functions by entering into a contractual undertaking with a third party to deal with certain aspects of those functions, in this case promoting and marketing the City Centre. The answer is that it may do so.
As the respondent points out, what is involved in this instance is not a delegation of any power or even a delegation of a function. It is not disputed that promotion may be a part of the carrying out of the functions granted to the respondent. The respondent has adopted a means by which the respondent itself chooses to undertake the promotion of the City Centre for the purposes and in the course of carrying out its functions. Section 117 of the Act enables the respondent to enter into contracts for that very purpose. Effectively the respondent has taken a part of its obligations and responsibilities and engaged DCHP to carry them out. The respondent retains the ability to ensure the expenditure of monies is for the purposes of the respondent by obliging DCHP to comply with the policies of the respondent as determined from time to time (clause 3.1). DCHP is not able to enter into any “long term liability” without the consent and approval of the respondent and that restriction precludes it from entering into any agreement, contract, lease or undertaking the term of which extends beyond the term of the agreement between the respondent and DCHP.
The effect of the agreement is that DCHP is obliged to do what the respondent itself is empowered to do and it must do so in accordance with the respondent’s policies. It is, as the respondent submits, a contract under s 117 of the Act for the purposes of carrying out some of its functions.
It follows that the answer to question 1 (ii) is yes.
Question 2
This question calls for a consideration of parts of the resolution declaring the local rate. That matter has been dealt with in the course of considering question 1 and for the reasons there discussed must be answered in the affirmative.
Conclusion
In our opinion the learned trial judge was correct when he answered each of the preliminary questions in the affirmative. The appeal is dismissed.

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