Nash Bros Builders Pty Ltd v Riverina Water County Council (No 2)

[2015] NSWLEC 156

Land and Environment Court

New South Wales

Medium Neutral Citation:	Nash Bros Builders Pty Ltd v Riverina Water County Council (No 2) [2015] NSWLEC 156
Hearing dates:	2 and 3 September 2014
Date of orders:	02 October 2015
Decision date:	02 October 2015
Jurisdiction:	Class 4
Before:	Pepper J
Decision:	Second further amended summons dismissed with costs.
Catchwords:	JUDICIAL REVIEW: Whether water authority has power to levy development servicing charge for the provision of water supply to a retirement village – whether the certificate of compliance required by applicants – whether if charges unlawfully levied the applicants can recover the amounts paid to the water authority – application dismissed with costs.
Legislation Cited:	Civil Procedure Act 2005, s 148B, 148E Environment Planning and Assessment Act 1979, ss 80A, 79C(1), 94, 109J Interpretation Act 1987, s 33 Local Government (General) Regulation 2005, cl 21 Local Government Act 1993, ss 64, 68, 306, 387, 400, 501, 552, 608, 610, 610A, 610B, 610C, 610D Plumbing and Drainage Act 2011, s 15 Recovery of Imposts Act 1963, ss 2, 4 Water Management (General) Regulation 2011, cls 223, 224, 306 Water Management (Water Supply Authorities) Regulation 2004, cls 117, 118 Water Management Act 2000, ss 283, 305, 306, 307, 308
Cases Cited:	Adrenaline Pty Ltd v Bathurst Regional Council [2015] NSWCA 123 Air Caladonie International v The Commonwealth of Australia [1988] HCA 61; (1988) 165 CLR 462 Airservices Australia v Canadian Airlines International Limited [1999] HCA 62; (1999) 202 CLR 133 Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 Allandale Blue Metal Pty Ltd v Road and Maritime Services [2013] NSWCA 103; (2013) 195 LGERA 182 Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia [1932] HCA 9; (1932) 47 CLR 1 ANZ Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662 Auburn Municipal Council v Szabo (1971) 67 LGRA 427 Bardsley-Smith Penrith City Council [2013] NSWCA 200; (2013) 195 LGERA 34 Baulkham Hills Shire Council v Koveda Holiday Park Estate Ltd [2009] NSWCA 160; (2009) 167 LGERA 395 Baulkham Hills Shire Council v Wrights Road Pty Ltd [2007] NSWCA 152; (2007) 153 LGERA 219 Botany Bay City Council v Saab Corp Pty Ltd [2011] NSWCA 308; (2011) 183 LGERA 228 Certain Lloyd’s Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 379 Commissioner of Police (NSW) v Eaton [2013] HCA 2; (2013) 252 CLR 1 Commissioner of Taxation v Consolidated Media Holdings (ACN 009 071 167) Ltd [2012] HCA 55; (2012) 250 CLR 503 David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 Fairfield City Council v N & S Olivieri Pty Ltd [2003] NSWCA 41 House of Peace Pty Ltd v Bankstown City Council [2000] NSWCA 44; (2000) 48 NSWLR 498 John Holland Pty Ltd v Industrial Court of New South Wales [2010] NSWCA 338 K and M Prodanovski Pty Ltd v Wollongong City Council [2013] NSWCA 202; (2013) 195 LGERA 23 M70/2011 v Minister for Immigration and Citizenship [2011] HCA 32 Maitland City Council v Anambah Homes Pty Ltd [2005] NSWCA 455; (2005) 64 NSWLR 695 Meriton Apartments Pty Ltd v Council of the City of Sydney (No 3) [2011] NSWLEC 65; (2011) 80 NSWLR 541 Minister for Immigration and Multicultural and Indigenous Affairs v Nystrom [2006] HCA 50; (2006) 228 CLR 566 Minister for Urban Affairs and Planning v Rosemount Estates Pty Ltd (1996) 91 LGERA 31 Nash Bros Builders Pty Ltd v Riverina Water County Council [2014] NSWLEC 140 Ovidio Carrideo Nominees Pty Ltd v Dog Depot Pty Ltd [2006] VSCA 6; (2006) V ConvR Parks and Playgrounds Movement Inc v Newcastle City Council [2010] NSWLEC 231; (2010) 179 LGERA 346 Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 Regional Express Holdings Limited v Dubbo City Council (No 3) [2014] NSWLEC 87 Reysson Pty Ltd v Roads and Maritime Services [2012] NSWLEC 17; (2012) 188 LGERA 252 Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516 Sydney Serviced Apartments Pty Ltd v North Sydney Municipal Council (No 2) (1993) 78 LGERA 404 Taylor v Smith [1926] HCA 6; (1926) 38 CLR 48 Taylor v The Owners – Strata Plan No 11564 [2014] HCA 9; (2014) 88 ALJR 473 Thiess v Collector of Customs [2014] HCA 13; (2014) 250 CLR 669 VAW (Kurri Kurri) Pty Ltd v Scientific Committee (Established Under s 127 of the Threatened Species Conservation Act 1995) [2003] NSWCA 297; (2003) 58 NSWLR 631 Westfield Management Ltd v Perpetual Trustee Company [2006] NSWCA 245 Woolwich Equitable Building Society v Inland Revenue Commissioners [1992] 3 All ER 737; [1993] AC 70
Category:	Principal judgment
Parties:	Nash Bros Builders Pty Ltd (ACN 145 518 378) (First Applicant) Nash Bros Constructions Pty Ltd (ACN 001 752 405) (Second Applicant) Riverina Water Country Council (Respondent)
Representation:	Counsel: Mr A Galasso SC with Mr T Prince (First and Second Applicants) Mr R Lancaster SC with Mr N Eastman (Respondent)     Solicitors: Bradley Allen Love (First and Second Applicants) Local Government Legal (Respondent)
File Number(s):	14/40028

Table of Contents

TOPIC

Paragraph No

Riverina Charges Nash Bros Development Servicing Charges for the Supply of Water to a Retirement Village

[1]

Application to Amend the Summons Refused

[6]

Jurisdiction of the Court to Grant the Relief Sought

[9]

The Retirement Village Development and the Imposition of the Charges

[11]

Issues for Determination

[83]

Statutory Framework

[84]

Does Riverina Have the Power to Levy the Development Servicing Charges?

(Issues (a) to (e))

[90]

Relevant Principles of Statutory Construction

[90]

Power to Impose the Development Servicing Charge Under s 608 of the LGA

[101]

Power to Impose the Development Servicing Charge Under s 306 of the WMA

[133]

Riverina Cannot Recover the Development Servicing Charges Already Paid

(Issue (f))

[179]

Conclusion and Orders

[204]

Judgment

Riverina Charges Nash Bros Development Servicing Charges for the Supply of Water to a Retirement Village

1. The applicants, Nash Bros Builders Pty Ltd (“Nash Bros”) and Nash Bros Constructions Pty Ltd (“NBC”), seek a declaration that the respondent, Riverina Water County Council (“Riverina”), has no power to impose development servicing charges in relation to the supply of water to the Grange Retirement Village, a seniors living residential development at Lake Albert, a suburb of Wagga Wagga (“the retirement village”). Nash Bros also seeks recovery of $127,234 (plus interest) in development servicing charges it has previously paid Riverina.

2. The proceedings raise two principal questions for resolution. First, whether Riverina has any statutory authority to impose the development servicing charges. And second, if it does not, whether Nash Bros can recover the development servicing charges it has already paid.

3. Riverina contends that the proceedings should be dismissed because it has the legislative power to charge the applicants development servicing charges conferred either by s 608 of the Local Government Act 1993 (“the LGA”) and/or s 306 of the Water Management Act 2000 (“the WMA”). Originally Riverina also contended that s 552 of the LGA empowered it to levy the charges, but this was abandoned at the outset of the hearing.

4. Further, Riverina asserts that no order for repayment ought to be made because, in addition to the argument that Riverina was empowered to receive payment for the development servicing charges, the applicants have received, and continues to receive, a material benefit as consideration for the payments that they have made to Riverina, namely, the benefit of water supplied to the retirement village. Riverina asserts that it has not been unjustly enriched by receipt of the charges and that it would therefore be inequitable to require repayment to the applicants. Riverina also submits that the applicants have not discharged their onus of establishing that they have not passed on the charges to other persons, in which case, s 4 of the Recovery of Imposts Act 1963 (“the Recovery Act”) provides a defence to the claim for repayment, or in the alternative, that the payments were made under compulsion or colour of office, so as to enliven any right of recovery or restitution of the payments.

5. In my opinion, the applicants’ appeal must be dismissed because Riverina has the legislative power under both s 608 of the LGA and s 306 of the WMA to impose the development servicing charges. Furthermore, even if it did not, s 4 of the Recovery Act would preclude recovery of the charges because the fees have been recovered from another person, namely, the owner of the land upon which the retirement village is being developed, The Grange Lifestyle Village Pty Ltd (“Grange”) .

Application to Amend the Summons Refused

6. On the second day of a two day hearing, the applicants applied for leave to amend their further amended summons (“the summons”) and points of claim to add as a third applicant, viz, Grange, in order to claim repayment of $107,159. That application was dismissed for the reasons given in Nash Bros Builders Pty Ltd v Riverina Water County Council [2014] NSWLEC 140 (especially at [21]).

7. An application to amend the originating process to increase the amount claimed by Nash Bros from Riverina from $93,710 to $127,234 was, however, allowed, with the consent of the parties.

8. A further application to amend the points of claim to add a claim in contract, which was not sufficiently disclosed by the current state of the pleadings, was ultimately not pursued by Riverina.

Jurisdiction of the Court to Grant the Relief Sought

9. Initially there was a dispute between the parties as to whether or not the Court had jurisdiction to grant the relief sought in the summons. In order to avoid the argument, Nash Bros commenced a separate proceeding in the Supreme Court of New South Wales seeking identical relief, and on 23 April 2014, that proceeding was transferred to this Court pursuant to s 148B(2) of the Civil Procedure Act 2005 (“the CPA”).

10. The effect of that order, together with s 148E of the CPA, was to confer on this Court the jurisdiction of the Supreme Court in relation to the matter thereby resolving all outstanding concerns as to the Court’s jurisdiction to grant the relief prayed for in the summons by the applicants.

The Retirement Village Development and the Imposition of the Charges

11. Subject to one preliminary matter, the facts upon which the application was brought were largely uncontentious and were contained in an agreed statement of facts, an agreed chronology and an eight part tender bundle.

12. That matter concerned the relationship between NBC and Nash Bros. NBC was incorporated in 1979 and Nash Bros was incorporated in 2010. The evidence of Mr Chris Nash, a director and shareholder of both Nash Bros and NBC, was, however, that when Nash Bros was incorporated in 2010, it became the main trading entity and effectively, but not legally, took over all of NBC’s obligations in respect of the retirement village development. As part of this arrangement, invoices issued to NBC by Riverina were paid by Nash Bros on behalf of NBC.

13. Other evidence relied upon by the parties included, on behalf of the applicants: two affidavits of Mr Chris Nash (affirmed on 20 May 2014 and 18 June 2014), one affidavit deposed to by Mr Scott Nash, Mr Chris Nash’s brother, (affirmed 18 June 2014), and an affidavit by Ms Alison Pearce (affirmed 16 June 2014). And on behalf of Riverina, an affidavit of Mr Tamarin Langley (sworn 29 May 2014) and an affidavit of Ms Natalie Eisenhauer, the Works Engineer at Riverina from 16 November 2006 to 22 March 2013 (sworn 26 May 2014).

14. Riverina is a county council established in 1997 under s 387 of the LGA. It exercises water supply functions under Div 2 of Pt 3 of Ch 6 of the LGA.

15. The proclamation constituting Riverina indicates that its functions are to “comprise the functions of a council for the provision, care, control and management of water supply works, services and facilities within its area of operations”. The principle objectives of Riverina are to be a successful business, to protect the environment by conducting its operations in compliance with the principles of ecologically sustainable development, and, in respect of the supply of potable water, to protect public health by supplying safe drinking water to its customers and other members of the public.

16. By reason of s 400(1) the LGA, the LGA applies to Riverina in the same way as it applies to a local council:

400 Application of Act to county councils

(1) This Act (except Part 1 and Divisions 1 and 2 of Part 2 of Chapter 9, Chapter 10, section 365 and the provisions of Chapter 15 concerning the making and levying of ordinary rates) applies:

(a) to county councils in the same way as it applies to councils, and

(b) to the members of county councils in the same way as it applies to the councillors of councils,

with such exceptions and modifications (if any) as the regulations may provide.

17. NBC and, more recently, Nash Bros, acted for Grange in obtaining the approvals necessary to carry out the retirement village development on behalf of Grange. The development of the retirement village involved, upon the construction of the dwellings, units and community centre, the connection of those buildings to water and sewerage. Riverina is the provider of the water supply. It owns the water supply infrastructure and it installs and activates the connections between the water supply works and the development.

18. In August 2004 the Riverina Water Council County Development Servicing Plans for Water Supply was published. The “Introduction” to that document stated as follows:

Section 64 of the Local Government Act1993 enables a local government council to levy developer charges for water supply, sewerage and stormwater. This derives from a cross-reference in that Act to section 306 of the Water Management Act2000.

A Development Servicing Plan (DSP) is a document which details the water supply developer charges to be levied on development areas utilising a Council’s water supply infrastructure.

This document contains four DSPs that together cover water supply developer charges for the areas served by Riverina Water County Council (RWCC).

These DSPs has been prepared in accordance with the Developer Charges Guidelines for Water Supply, Sewerage and Stormwater (December 2002) issued by the Minister for Land and Water Conservation (now Minister for Energy and Utilities), pursuant to section 306(3) of the Water Management Act 2000.

These DSPs supersede any other requirements related to water supply developer charges for the area covered by the DSPs. These DSPs take precedence over any of Council’s codes or policies where there are any inconsistencies relating to water supply developer charges.

19. Section 3 concerned the “Developer Charges Process”, namely, the process by which developer charges were levied. It provided that:

3.1 Introduction

Developer charges are up-front charges levied to recover part of the infrastructure costs incurred in servicing new developments or additions/changes to existing developments. Developer charges serve two related functions:

•   They provide a source of funding for infrastructure required for new urban development.

•   They provide signals regarding the cost of urban development and thus encourage less costly forms and areas of development.

The Developer Charges calculation is based on the net present value (NPV) approach adopted by the Independent Pricing and Regulatory Tribunal (IPART) for the metropolitan water utilities. The fundamental principle of the NPV approach is that the investment in assets for serving a development area is fully recovered from the development. The investment is recovered through up-front charges (i.e. developer charges) and the present value (PV) of that part of annual bills received from the development in excess of operation, maintenance and administration (OMA) costs.

i.e. Developer Charge = Capital Charge (cost of providing the assets) - Reduction Amount (cost recovered through annual bills).

The Capital Charge and Reduction Amount are discussed further in the following sections. The developer charges process is described fully in the Developer Charges Guidelines for Water Supply, Sewerage and Stormwater (December 2002).

NSW local water utilities (LWUs) which propose to levy developer charges for water supply and/or sewerage need to prepare development servicing plans (DSPs). The DSP details the calculation of the developer charges and is required to be fair and transparent.

LWUs need to calculate and report developer charges in accordance with section 306 (3) of the Water Management Act 2000 and the Guidelines, and to register their DSPs with MEU by 30 June 2004.

Developer charges relating to a particular DSP should be reviewed by the LWU after a period of 5 to 6 years. If the review indicates that the developer charges in the DSP remain valid, the DSP will apply for a further 5 to 6 years after the utility releases a public notice to this effect. However, if it is considered that a new DSP is warranted a new DSP shall be prepared, exhibited and registered.

If a major change occurs in the LWUs circumstances such as the need for significant capital works that had not been included in the DSP, the LWU may carry out a review in less than 5 years, subject to approval by the Department of Energy, Utilities and Sustainability.

20. In February 2007 the City of Wagga Wagga Development Servicing Plan for Sewerage was published.

21. On 3 March 2008, Mr Chris Nash wrote to Riverina seeking a copy of the schedule of fees and conditions for the supply water to the proposed retirement village.

22. In July 2008 the Riverina Water County Council Management Plan 2008/2009 commenced. The “Introduction” to that document stated that Riverina was responsible for the water supply within the Lockhart, Wagga Wagga, Urana, and Part Greater Hume local government areas. Furthermore, it stated that Riverina “provides a comprehensive service in the location, treatment, storage, movement and delivery of drinking quality water, and associated services”. Its “Principal Activities” were set out in section 2 “Capital Works” and a list of services described in in section 3 “Services to be Provided”

23. Section 11 saliently dealt with “Finance and Revenue – Charges and Fees”, including “Connection Costs” in 11.1:

11.1 Connection Costs

Connection fees have two basic components – a development servicing charge (a contribution towards infrastructure based on the potential increase in demand on the system), and a Service Connection Fee (the (averaged) cost of physically installing the connection and meter). Land developers are also required to meet the reticulation costs.

24. And, importantly for the purpose of these proceedings, the “Development Servicing Charge” in 11.2:

11.2 Development Servicing Charge

A Development Servicing Plan (DSP) was prepared in accordance with DECC guidelines and placed on public exhibition during 2004. The DSP was formally adopted by Council on 21st October 2004).

In accordance with the DSP, the Developer Charge for 2008/09 is $3,400 per E.T. (Equivalent Tenement).

Equivalent Tenement figures for developments will be determined in accordance with “Section 64 Determinations of equivalent tenements guidelines” published by the NSW Water Directorate.

In applying these guidelines the following multipliers will be used to determine Local E.T.’s:-

•   Single Residential:	Local E.T.= recommended E.T	(Table 1 of Guidelines)
•   Multi Residential:	Local E.T.= 0.6 x suggested E.T.
•   Rural (Stock and Domestic) up to 25mm Service:
Local E.T. = recommended E.T. and will typically be that for a large residential Lot > 2000m2		(Table 1 of Guidelines)
•   Rural (Stock and Domestic) greater than 25mm Service
Local E.T. = (meter size)2 x recommended E.T. 252		(Table 1 of Guidelines)
•   Commercial/Industrial:
Local E.T. = 0.6 x recommended E.T.		(Table 2 and 3 of Guidelines)
OR = Assessed Peak days Demand ÷ 5 kl whichever is higher

The developer Charge for any newly created parcel of land or development will be based on a minimum of one E.T.

The extra connection fee to serve the rural residential areas south of Red Hill Road is to remain at $1,200 per allotment. This is to meet the additional cost of supply mains to such areas, and the same principle is applied to other areas, remote from the existing capacity of the reticulation. Its application to all new subdivisions in rural residential zones will recognise the additional demand and infrastructure costs of this type of development.

25. In addition, there were various “Service Connection Fees” set out in sections 11.4 to 11.6, and the “Retriculation Mains Construction Costs” were passed on to land developers in section 11.7.

26. The “Urban (Residential)” “Recommended Development Servicing Charges” were set out for various lots in section 11.8.1.

27. On 21 July 2008 NBC obtained development consent (no DA05/0258) (“the development consent”) from Wagga Wagga City Council (“the council”) for a residential development for seniors living comprising 185 detached residential dwellings, 63 assisted living units, community care centre, recreational facilities and associated landscaped gardens/open space, car parking, internal roadways and an access road on the land described as lot 15 DP 1143209 and known as 74 Gregadoo Road, Lake Albert (“the land”).

28. The land is owned by Grange as trustee for The Grange Lifestyle Village Unit Trust (“the unit trust”).

29. The development consent was subsequently amended by modification on 1 December 2010, 17 June 2011 and 29 March 2012, ultimately providing for 196 detached residential dwellings, 63 assisted living units and a community centre.

30. By letter dated 27 October 2008, Riverina advised the applicants’ consulting engineers, Hughes Trueman, of the details of these various fees and charges, including the development servicing charges and connection fees for the provision of a water supply to the retirement village, which included $353,830 for development servicing charges.

31. Riverina further advised Hughes Trueman of updated fees and charges by letters dated 15 December 2009 and 22 March 2010.

32. In early 2009, Mr Chris Nash made an arrangement with the council for development servicing charges in relation to sewerage and stormwater for the retirement village to be paid on a pro rata basis.

33. Construction of the development commenced in April 2009. It was originally intended to carry out the development in stages. However, the modification of the development consent on 17 June 2011 enabled Nash Bros to build units in various locations to meet demand as required, without the need to complete one stage before proceeding with the next.

34. On 12 May 2009 Mr Colin Fough from the council confirmed to Mr Chris Nash, by email, the arrangement for the payment of development servicing charges for sewerage and stormwater.

35. In July 2009 the Riverina Water County Council Management Plan 2009/2010 commenced.

36. On 23 February 2010 the applicants paid an amount of $38,180 to Riverina for service connection fees and $362,800 for development servicing charges pursuant to invoice no 3879 issued to NBC.

37. On 4 March 2010 Mr Chris Nash and Mr Scott Nash met with Mr Greg Finlayson from the council, and Ms Eisenhauer from Riverina, to discuss the requirements for access and payment of water services. According to the written evidence of Mr Scott Nash, the applicants were told by Riverina that the development would be treated as a subdivision for the purpose of levying fees.

38. After some discussion, agreement was reached between the parties on 4 March 2010 for the applicants to pay the development servicing charges and connection fees as respective villas were constructed, and that works on the water extension and connections would commence upon payment of 50% of the fees applicable in respect of that work.

39. Mr Scott Nash was cross-examined on the content of the discussion that took place at that meeting. He stated that:

1. he could not recall a specific discussion of “section 64 fees” (that is, fees charged by Riverina under the WMA) or contributions but accepted, by reference to his notes of the meeting, that such a discussion occurred (T48.20);

2. neither Ms Eisenhauer nor Mr Finlayson referred to certificates of compliance (T48.43); and

3. the calculation and imposition of the water connection fees was discussed in detail. It was his understanding that Riverina would charge service connection fees and development servicing charges (which were calculated on the size of each residence being built) during the course the development of the retirement village and that for the retirement village to proceed the fees and charges would have to be paid (T50.37-50.49).

40. Ms Eisenhauer was also questioned on the substance of the discussion. Overall, she could not recollect much about the detail of the debate. However, she was able to state that:

1. she could not recall seeing the development consent granted by the council for the retirement village and that she had not been provided with a copy of it (T56.35);

2. there was discussion on the topic of certificates of compliance to be issued by Riverina once all the villas were built (T54.05 – 54.20);

3. Riverina now had an application form for a compliance certificate issued under the WMA (T58.40);

4. other developers, apart from Nash Bros, contacted her to specifically ask for a certificate of compliance (T59.15);

5. Nash Bros did not ask for a certificate of compliance (T62.08) but it was discussed in general terms (T59.27-59.40). However, she conceded that there was no reference to certificates of compliance in her “extensive notes” of the meeting on 4 March 2010;

6. it was accepted by Nash Bros and Riverina that in relation to the water main trunk extension to the development, the fees and development servicing charges could be paid in two instalments, namely, 50% before Riverina started the work and 50% upon the completion of the work (T62.25);

7. subsequent to that, the invoicing proceeded upon an individual basis for the constructed dwellings (T63.20);

8. there has still been no certificate of compliance issued in respect of the development site (T64.30) either as a whole, or in respect of any individual dwellings (T64.33);

9. she understood that Riverina was levying the development servicing charges under s 64 of the LGA, which provided that the WMA applied to Riverina (T65.25); and

10. Riverina charged for the use and availability of the water, in addition to the connection to its infrastructure.

41. On 22 March 2010 Riverina provided NBC with a further updated costing for the provision of water supply to the retirement village in the total amount of $498,974, of which $359,440 was for development servicing charges, $101,354 was for the extension of the service main in Gregadoo Rd, and $38,180 for service connection fees.

42. On the next day, the applicants paid Riverina a further amount of $12,497 which, together with the earlier payment of $38,180, brought the total amount paid to $50,677, which was 50% of the estimated cost of extending the water main in order to service the development.

43. On 23 March 2010 Riverina issued tax invoice no 3951 to NBC in the sum of $502,334 in respect of the development of the retirement village. The invoice included development servicing charges totalling $362,800, calculated by Riverina for the development of the whole of the retirement village.

44. In July 2010 the Riverina Water County Council Operation Plan 2010/2011 commenced.

45. Riverina completed the supply of the water services to the development in early October 2010. Service connection was installed and connected to the development on 27 October 2010.

46. In July 2010 the Riverina Water County Council Operational Plan 2011/2012 commenced.

47. During the period from August 2008 to March 2012, the applicants and Riverina had various communications by email, letter and face-to-face discussions, in relation to the water services at the retirement village, including the imposition and payment of connection fees and the development servicing charges. These are discussed in greater detail below.

48. The applicants were not required by Riverina to pay invoice no 3951 in full. On 15 March 2012 Riverina issued the applicants with a further updated costing for the provision of water supply to the retirement village in the total amount of $155,494.00, made up of $101,354.00 for the extension of the service main in Gregadoo Road, $46,960.00 for developer servicing charges and $7,180.00 for service connection fees for the 32 villas that had been completed to that date. The costing included credit in the amount of $50,677.00, being the amount already paid by NBC for half of the cost of the extension of the service main in Gregadoo Road, and $4,200.00 credit for “1 equivalent tenement”.

49. On nine occasions between March 2012 and March 2013 the applicants paid development servicing charges without any objection.

50. In July 2012 the Riverina Water County Council Operational Plan 2012/2013 commenced.

51. Between July 2012 to July 2013, various invoices were issued by Riverina to the applicants, which included development servicing charges. These were paid by the applicants.

52. In July 2013 the Riverina Water County Council Operational Plan 2013/2014 commenced. Development servicing charges were charges described at paragraph 13.1 of this Plan as “a system”.

53. The development servicing charges were described as a “capital charge” in Riverina’s Development Servicing Plan for Water Supply (July 2013), in order to “reflect the costs of assets for servicing new development” (paragraph 8.3).

54. In its publication, Water Prices – effective 1st July 2013 to 30th June 2014, Riverina stated (at p 7):

With the introduction of a Development Servicing Plan, Connection Fees have two basic components – a Development Servicing Charge (a contribution towards infrastructure based on the potential increase in demand on the system), and a Service Connection Fee (the (averaged) cost of physically installing the connection and metre). Land developers are also required to meet the reticulation costs.

55. On 15 July 2013, Mr Chris Nash had a conversation with Ms Langley, the then Acting Works Engineer at Riverina, where he expressed his concern and frustration at the amounts being charged by Riverina for the water services to the retirement village, particularly the amount of the increase in the development servicing charges in the July 2013 invoice.

56. In her affidavit, Ms Langley deposed that she informed Mr Chris Nash on 15 July 2013 that:

1. each financial year the fees are recalculated and published for members of the public to comment upon, in local newspapers, on Riverina’s website, and at Riverina’s public office; and

2. the reason for the large increase in 2013/2014 was because Riverina simultaneously reviewed the council’s Developer Servicing Plan, whereupon it became apparent that units and villas had been charged based on a commercial discount factor that had since been removed. This brought the fees back into alignment with the Water Directorate Guidelines and Riverina’s adopted fee structure. The review had been published and comment sought from the public.

57. In a follow up email later that day, Ms Langley said to Mr Chris Nash that:

As per our earlier conversation I have attached to this email a copy of the Water Prices for the new financial year. As we discussed, I have also summarised our conversation on various aspects of the Grange Development below.

In regards to your concerns pertaining to the increase in development services charges for The Grange, the following applies: in previous pricing RWCC left units to be classified as commercial / industrial properties. This meant that a unit, classified in accordance with the Water Directorate Guidelines, assumed a commercial factor of 0.6 therefor, a three bedroom unit 0.8 ET became 0.8 * 0.6 * $3800 = 1825 (Nearest $5) per 3 bedroom until. This was amended and clarified with the adoption of RWCC’s new DSP the start of this financial year which now ensures a housing unit is classified as a standard residential tenancy, not multiplied with a commercial factor. A 3 bedroom unit is therefore now calculated as 0.8ET * $4800 = $3840. No Commercial factor applies as it is a standard residential property.

In addition to all of the above, I have looked into the way payment and invoicing is currently being done for The Grange development. It appears as though previously the release of meters has occurred prior to payment being made. This is not standard protocol. Payment must be made and receipted prior to the release of any meters. I have issued an the administration and store sections of RWCC will ensure the standard protocols are followed from this point forward. Please ensure that if you wish to connect units you send your request to RWCC and allow enough time for an invoice to be sent back to you and paid for prior to notice being given to the RWCC store to allow for the collection of meters.

It also appears as though staging for The Grange development is not currently being followed and that units are being connected in small amounts, scattered over the entire development. RWCC requires an entire stage to be paid for upfront i.e. The Grange Stage 3 – 15 Lots, for both Development Servicing Charges and Service Connection Fees prior to any connection within that stage taking place. RWCC’s role is not to allow connection of single units as individual sales are made or connections required.

I will review all of the current connections and the originally provided staging plan and provide more information on what fees are outstanding and need to be paid. Additionally, any future connections will be reviewed to ensure they are part of a stage which has been fully paid for, or to ensure calculation and invoicing of the outstanding amount payable prior to connection.

I will contact you to further discuss once I have had a more in-depth look into exactly what Development Servicing Charges and Connection Fees have been paid for the development, including DSC’s for things such as amenities blocks.

I will also contact you to further discuss once I have had a more in-depth look into exactly what Development Servicing Charges and Connection Fees have been paid for the development, including DSC’s for things such as amenities blocks.

Should you have any further questions or concerns in relation to this matter, do not hesitate to contact me on my details below.

58. According to Ms Langley’s oral evidence, by this email she intended to convey to Mr Chris Nash, not that Nash Bros had to pay fees and development servicing charges according to various stages of the development, but rather as villas were connected in one stage, fees and charges would be imposed on Nash Bros, and that all villas were to be completed in a particular stage before work was to be undertaken on another stage of the development.

59. She determined that this was how the charging should occur based on information contained in Riverina’s file, searching through various invoices, looking at an overall staging plan and discussions with officers at the time (T80.35-81.31). She denied that it was to “up the ante” with Nash Bros (T81.36).

60. On 26 September 2013 the solicitor for Nash Bros wrote to Riverina for the first time objecting to the payment of the charges and stating that it considered that Riverina had no power to impose the charges in respect of the retirement village development.

61. By way of written reply, on 2 October 2013, Ms Langley stated that Riverina annually revised its prices and charges and that it would decline to repay past fees and development servicing charges on the basis that they were a mandatory requirement for the connection of water and that they were necessary for Riverina to permit the use of water at the development or at individual premises. Further, she stated that “any further connections will require the payment of both the DSC [development servicing charge] and Connection Fee component in accordance with Riverina Water’s pricing structure.”

62. In cross-examination Ms Langley reluctantly accepted that she had told Nash Bros that if it withdrew payment of the fees and charges that there would be no connection (T82.25).

63. On 4 October 2013 Mr Scott Nash, a director of Nash Bros and NBC, and Ms Pearce, a clerical assistant at Nash Bros, on behalf of Nash Bros, met with Ms Langley at Riverina’s office to discuss water services for villas 38 and 118. At the meeting Ms Langley informed Mr Scott Nash that Nash Bros had to pay the development servicing charges for the villas before Riverina would provide water meters. Mr Scott Nash informed Ms Langley that he would pay the charges “under protest”. An email to similar effect was sent by Ms Pearce to Ms Langley later that day.

64. That same day, Ms Pearce went to Riverina’s office and requested that Nash Bros make payment for some villas at the retirement village. She did not have an invoice. According to Ms Langley’s affidavit evidence, she informed Ms Pearce that while payment would be permitted on this occasion, the standard process was that all payments taken by Riverina had to paid against an already raised invoice or statement of fees rendered pursuant to an ‘application for water supply’. Ms Pearce stated “we will do that from now on.” Ms Pearce also reiterated that Nash Bros were paying “under duress” and that Mr Chris Nash would keep disputing the fee. Ms Langley’s response was that “if you choose to pay we assume you want to go ahead with water connection to those villas” and that “by paying it [the payment for the two villas] it is assumed that the fees are agreed to and you are requesting to go ahead with water supply to those villas”.

65. Ms Langley also emailed Ms Pearce that day stating that Riverina was entitled to charge fees for connection to Riverina infrastructure and that if Nash Bros had concerns, it was the responsibility of Nash Bros to refrain from applying for a connection. The email was in the following terms:

Thank you for the correspondence.

Please note that when requesting connection to RWCC infrastructure, RWCC may impose fees, charges and conditions.

Should Nash Bros have concern about accepting and proceeding with terms or conditions, it is the responsibility of Nash Bros to refrain from applying for a connection and hold further discussions with Riverina Water in relation to the concerns, and ensure they are satisfied to proceed.

Should Nash Bros have concerns in regards to the services that were payed for today or wish to revoke the connections RWCC can provide a refund as they have not yet been scheduled or connected.

Additionally, I have attached to this email an “Application for Water Supply”. This form should be used for all future requests in regards to service connections or upgrades.

Please submit this application, and allow time for a Statement of fees and Invoice to be generated prior to payment being made.

66. During questioning, while not resiling from the plain words of the email, Ms Langley indicated that in this email she was giving Nash Bros the opportunity to have further discussions about the fees and charges but that this “opportunity was never taken by Nash Bros” (T83.20).

67. Contrary (and somewhat disingenuously, in my view) to the content of the email, and her earlier communications with the applicants, Ms Langley initially refused to accept the proposition that if Nash Bros did not want to pay the total amount invoiced by Riverina, including the development servicing charges, that she would not authorise any connection to the water supply. She confirmed that she remained the person responsible for authorising connections to the retirement village (T83-83.40).

68. Eventually however, she accepted that if Nash Bros wanted to connect a dwelling but was only willing to pay the connection fee in respect of any invoiced rendered, and not the development servicing fee, she would not authorise the connection to the water supply (T84.04). Moreover, if the amount of the tax invoice issued by Riverina was not paid, then there would be “outstanding matters on the development” and a directive would be issued that certificates of compliance were not to be referred by Riverina to the council (T84.25).

66. On 23 January 2014 Nash Bros commenced these proceedings.

67. On 3 February 2014, Ms Langley sent an email to Mr Chris Nash advising him that villas were being constructed and potentially occupied using Riverina water without holding all of the necessary approvals and compliances. She also informed the council and Mr Stephen Baker, the certifier of the development, of this fact.

68. That same day, Mr Bernie Walsh, a licensed plumber subcontracted by the applicants, informed Mr Chris Nash that Riverina “are not going to provide water meters to us anymore unless all of their charges have been paid”.

69. On 14 March 2014 the solicitor for Riverina sent a letter to the solicitor for Nash Bros, alleging that Nash Bros had continued to develop villas at the retirement village, including connecting water to the villas, without approval and without paying the development servicing charges.

70. Between 15 March 2012 and 14 July 2014, Riverina issued tax invoices to NBC totalling $309,657.46, including total development servicing charges of $189,614. The development servicing charges were imposed on a pro rata basis as parts of the development were completed. The invoices included amounts for development servicing charges as well as other charges which are not the subject of this proceeding.

71. According to the written evidence of Ms Langley, the invoices were authorised by her and all components of the invoices, including the development servicing charges, were raised based on an application, either written or verbal, by the developer, or a person acting on its behalf, such as a plumber, for the connection of individual villas to Riverina’s water supply system.

72. It was also her written evidence that applications had been made for certificates of compliance for each of the villas that had been completed and connected to the council’s water supply. It was only once the development was entirely completed that a “Certificate of Compliance – Water Supply” would be issued. That is to say, as a precondition to requesting a connection to the water supply, proceeding with a connection, and becoming and remaining a customer of Riverina, a certificate of compliance had to be issued upon completion of the development.

73. During cross-examination, Ms Langley was taken to a number of documents that she maintained were applications for compliance certificates by Nash Bros, or its representative, Mr Walsh, and the certificates issued pursuant to those applications (see the documents at Ex D, Part 7, for example, pp 1006, 1007, 1010 and 1182). All of the documents that the Court was specifically taken to bore the name, signature, or both, of Mr Walsh.

74. In respect of the certificates of compliance, Ms Langley stated during questioning that:

1. as far as she was concerned certificates of compliance were issued when a plumber or certifier approached Riverina and requested occupancy for a specific villa (T70.25);

2. some of the certificates of compliance comprised standard forms produced by New South Wales Fair Trading, thus bearing that logo, but they were issued by Riverina to the council (T71.49 and 84.12);

3. a certificate of compliance was issued for every villa constructed, and a certificate of compliance would be issued for the entire development upon its completion (T72.23). This latter certificate of compliance was required as a condition of the development consent (T72.31), in particular condition 3 (T74.05 and 85.07);

4. later she agreed that the documents that she claimed were certificates of compliance were certificates issued after the construction certificate had been issued, or in other words after the work had been completed (T75.05):

5. the certificates of compliance relied upon by her in Ex D Part 7 were certificates referred to in condition 62 of the development consent (T78.48) and item f) under “Plumbing Section” in that approval (T79.21); and

6. it was her belief that the certificates of compliance related to condition 3 of the development consent by reason of the change in practice in the application of the condition when the applicants approached Riverina to alter the way the fees and charges were to be paid. Typically the condition was satisfied by Riverina requiring a large lump sum upfront payment, however, it was agreed that the payments would be deferred and charged on a per villa basis. As a result, the certificates of compliance were issued per individual villa and after there had been a request to connect to the water supply. Once these steps had been completed, condition 3 of the consent was met and Riverina would issue a certificate of compliance in respect of the entirety of the development (T85.17-85.43). However, she later conceded that this evidence, namely, that when it was agreed that payment of the fees and development servicing charges would be deferred, the certificate of compliance would also be deferred, was not based on her direct knowledge but on her “interpretation of reviewing the documents” (T86.19-86.31).

78. From 15 March 2012 to date, the applicants have paid all of the invoices referred to above. In particular, Nash Bros has paid total development services charges of $189,614 to Riverina, including a total amount paid of $254,781.36 for services. This latter payment includes development servicing charges and payments for other services.

79. Of the total amount of development servicing charges paid by Nash Bros to Riverina, $26,795 was paid between 23 January 2013 and 23 January 2014 (the 12 month period before the proceedings were commenced), and $100,439 was paid between 23 January 2014 and the present.

80. The total amount development servicing charges paid by Nash Bros to Riverina in the period since 23 January 2013, is $127,234.

81. According to the evidence of Ms Eisenhauer, there was no application form at the council for a compliance certificate issued under the WMA. A developer who wished to use the council’s water infrastructure contacted the council and the council issued a quote setting out the fees and charges, including development servicing charges. Once the developer paid the fees and charges, the council would undertake the necessary works to enable water services to be provided to the development. It was only once the connection of the services to the development had occurred that a certificate of compliance was issued under the WMA.

82. Riverina intends to levy or charge the applicants with further development servicing charges in relation to the continuing development of the retirement village.

Issues for Determination

83. By agreement between the parties, the following issues must be determined in order to resolve the existing controversy the subject of these proceedings:

1. does s 608 of the LGA authorise Riverina to charge or levy either or both of the applicants with a charge in the nature of a development servicing charge?

2. does condition 3 and/or paragraph f) on p 37 under “Plumbing Section” of the development consent granted to NBC by the council require NBC to obtain a certificate of compliance from Riverina in relation to the water management works being carried out at the retirement village?

3. are either or both of the applicants required to apply to the respondent for a certificate of compliance under s 305 of the WMA?

4. have either or both of the applicants applied to Riverina for a certificate of compliance under s 305 of the WMA?

5. are the applicants legally obliged to pay an amount specified pursuant to s 306(2)(a) of the WMA if they do not wish to be granted a certificate of compliance under Div 5 of Pt 2 of Ch 6 of the WMA?

6. can Nash Bros recover from Riverina the amount of development servicing charges, or some part of it, paid to Riverina on the ground that:

1. the said charges were paid by mistake; and/or

2. the said charges were paid by reason of the effective compulsion created by Riverina’s demand for payment colore officii; and/or

3. the said charges were paid by reason of Riverina’s ultra vires demands for payment?

Statutory Framework

84. Sections 64, 68, 501, 608, 610 and 610A-D of the LGA relevantly provide as follows:

64 Construction of works for developers

Division 5 of Part 2 of Chapter 6 of the Water Management Act 2000 applies to a council exercising functions under this Division in the same way as it applies to a water supply authority exercising functions under that Act.

…

68 What activities, generally, require the approval of the council?

(1) A person may carry out an activity specified in the following Table only with the prior approval of the council, except in so far as this Act, the regulations or a local policy adopted under Part 3 allows the activity to be carried out without that approval.

(2)    This section does not apply to the carrying out of an activity specified in Part B of the following Table:

(a)    on land within the area of operations of the Sydney Water Board under the Sydney Water Act 1994 , or

(b)    on land within the area of operations of the Hunter Water Board under the Hunter Water Act 1991.

(3)    This section does not apply to the carrying out of an activity specified in item 1, 2, 3, 4 or 6 of Part B of the following Table on land within the area of operations of a water supply authority constituted under the Water Management Act 2000.

Table Approvals

Part A Structures or places of public entertainment

1 Install a manufactured home, moveable dwelling or associated structure on land

Part B Water supply, sewerage and stormwater drainage work

1    Carry out water supply work

2    Draw water from a council water supply or a standpipe or sell water so drawn

3    Install, alter, disconnect or remove a meter connected to a service pipe

4    Carry out sewerage work

5    Carry out stormwater drainage work

6    Connect a private drain or sewer with a public drain or sewer under the control of a council or with a drain or sewer which connects with such a public drain or sewer

…

501 For what services can a council impose an annual charge?

(1)    A council may make an annual charge for any of the following services    provided, or proposed to be provided, on an annual basis by the council:

•    water supply services

•    sewerage services

•    drainage services

•    waste management services (other than domestic waste management services)

•    any services prescribed by the regulations.

(2)    A council may make a single charge for two or more such services.

(3)    An annual charge may be levied on each parcel of rateable land for which the service is provided or proposed to be provided.

…

608 Council fees for services

(1)    A council may charge and recover an approved fee for any service it provides, other than a service provided, or proposed to be provided, on an annual basis for which it is authorised or required to make an annual charge under section 496 or 501.

(2)    The services for which an approved fee may be charged include the following services provided under this Act or any other Act or the regulations by the council:

•    supplying a service, product or commodity

•    giving information

•    providing a service in connection with the exercise of the council’s regulatory functions-including receiving an application for approval, granting an approval, making an inspection and issuing a certificate

•    allowing admission to any building or enclosure.

…

610 Effect of other Acts

(1)    If the amount of a fee for a service is determined under another Act:

(a)    a council may not determine an amount that is inconsistent with the amount determined under the other Act, and

(b) a council may not charge a fee in addition to the amount determined under the other Act.

(2)    If the charging of a fee for a service is prohibited under another Act, a council must not charge a fee for the service under this Act.

…

610A Application of Division

(1)    This Division applies to a fee charged by a council for any service relating to the following activities:

…

(c) the carrying out of a water supply or sewerage service (other than a service provided, or proposed to be provided, on an annual basis for which the council is authorised or required to make an annual charge under section 501), …

(2)    This Division does not apply to a fee charged by a council for a service relating to the following activities:

(a) the issuing of a certificate under Part 4A of the Environmental Planning and Assessment Act 1979,

(b)    an activity prescribed by the regulations for the purposes of this subsection.

610B Fees to be determined in accordance with pricing methodologies

(1) A council may determine a fee to which this Division applies only in accordance with a pricing methodology adopted by the council in its operational plan prepared under Part 2 of Chapter 13.

(2) However, a council may at any time determine a fee otherwise than in accordance with a pricing methodology adopted by the council in its operational plan, but only if the determination is made by a resolution at an open meeting of the council.

610C Application of Division

This Division applies to a fee for a service other than a fee to which Division 2 applies.

610D How does a council determine the amount of a fee for a service?

(1)    A council, if it determines the amount of a fee for a service, must take into consideration the following factors:

(a) the cost to the council of providing the service,

(b) the price suggested for that service by any relevant industry body or in any schedule of charges published, from time to time, by the Department,

(c) the importance of the service to the community,

(d) any factors specified in the regulations.

(2) The cost to the council of providing a service in connection with the exercise of a regulatory function need not be the only basis for determining the approved fee for that service.

(3)    A higher fee or an additional fee may be charged for an expedited service provided, for example, in a case of urgency.

85. Clause 21 of the Local Government (General) Regulation 2005 (“the Local Government Regulations”) is in the following terms:

21    Inspection and certification of water supply, sewerage and       stormwater drainage work

An approval referred to in item 1, 4, 5 or 6 of Part B of the Table to section 68 of the Act is subject to the following conditions:

(a)    a person must not put into use a soil, waste or house drain pipe, or cover up or conceal from view an underground or enclosed water supply, sewerage or stormwater drainage work or put into use such a work, until the work has been inspected and certified:

(i)    by the council or a suitably qualified person determined by the council, or

(ii)    if the work is of a type for which the approval of the Minister for Utilities is required under section 60 of the Act-in accordance with subparagraph (i) or, if that Minister has specifically authorised inspection and certification by another suitably qualified person, by that person, as having been constructed in accordance with the Act and this Regulation,

As having been constructed in accordance with the Act and this Regulation,

(b) any such inspection and certification must be carried out in accordance with the Plumbing Code of Australia and the requirements of the council,

(c)    a person undertaking the construction of a water supply, sewerage or stormwater drainage work must provide every reasonable facility and all necessary information to enable inspection of the work for the purposes of paragraph (a),

(d)    in particular, such a person must, if required to do so by a person carrying out an inspection for the purposes of paragraph (a), produce the plan (if any) of the work for that person to look at,

(e)    a person carrying out water supply, sewerage or stormwater drainage work must immediately rectify to the satisfaction of the council any defect revealed by an inspection under paragraph (a).

86. Sections 283 of the WMA defines the following terms:

283 Definitions

In this part:

"water management work" means a water supply work, drainage work, sewage work or flood work, and includes a work in the nature of a water supply work (being a work that receives water from a water supply work under the control or management of a water supply authority).

"service charge" means any of the following:

(a)    a water service charge,

(b)    a sewerage service charge,

(c)    a drainage service charge,

(d)    a loan service charge,

(e)    a developmental works service charge,

(f)    a flood mitigation service charge,

(g)    a river management service charge, or

(h)    a special industry service charge,

that may be levied under Division 6. 

87. Sections 305 to 307 of the WMA concern certificates of compliance and relevantly state that:

305 Application for certificate of compliance

(1) A person may apply to a water supply authority for a certificate of compliance for development carried out, or proposed to be carried out, within the water supply authority’s area.

(2) An application must be accompanied by such information as the regulations may prescribe.

…

306 Authority may impose certain requirements before granting certificate of compliance

(1)    This section applies to such kinds of development as are prescribed by the regulations for the purposes of this section.

(2)    As a precondition to granting a certificate of compliance for development, a water supply authority may, by notice in writing served on the applicant, require the applicant to do either or both of the following:

(a)    to pay a specified amount to the water supply authority by way of contribution towards the cost of such water management works as are specified in the notice, being existing works or projected works, or both,

(b)    to construct water management works to serve the development.

(3)    In calculating an amount for the purposes of subsection (2)(a):

(a)    the value of existing water management works and the estimated cost of projected water management works may be taken into consideration, and

(b)    the amount of any government subsidy or similar payment is not to be deducted from the relevant value or cost of the water management works, and

(c)    consideration is to be given to any guidelines issued for the time being for the purposes of this section by the Minister. …

…

307 Granting of certificates of compliance

(1) A water supply authority must grant a certificate of compliance for development:

(a) within 60 days after an application for the granting of such a certificate is made, or

(b) if, within that period, the water supply authority imposes a requirement on the applicant under this Division, as soon as it is satisfied that the requirement has been complied with.

(2)    A water supply authority may be satisfied that a requirement under this Division has been complied with if the applicant lodges with the water supply authority such security for compliance with the requirement as the water supply authority may approve.

(3)    If a water supply authority fails or refuses to give a compliance certificate within the period of 60 days after an application is duly made in that regard, the applicant may appeal to the Land and Environment Court, within 12 months after the expiration of that period, against the failure or refusal.

88. The relevant regulations for the purposes of s 306(1) of the WMA are cls 223 and 224 of the Water Management (General) Regulation 2011 (“the Water Management Regulations”), which replaced cls 117 and 118 of the Water Management (Water Supply Authorities) Regulation 2004 respectively (which were materially identical):

223 Information to accompany applications under section 305

For the purposes of section 305 (2) of the Act, an application for a certificate of compliance for development must be accompanied:

(a)    by information as to whether or not the development is the subject of development consent or a complying development certificate under the Environmental Planning and Assessment Act 1979 , and

(b)    if it is so subject, by a copy of the development consent or complying development certificate.

224 Development that may be subject to section 306 requirements

For the purposes of section 306 (1) of the Act, the following kinds of development are prescribed as development to which that section applies:

(a)    the erection, enlargement or extension of a building or the placing or relocating of a building on land,

(b)    the subdivision of land,

(c)    the change of use of land or of any building situated on the land.

89. In addition, 109J(1)(e) and (4) of the Environment Planning and Assessment Act 1979 (“the EPAA”) relevantly state as follows:

109J Restriction on issue of subdivision certificates

(1)    A subdivision certificate must not be issued for a subdivision unless:

…

(e)    in the case of subdivision that relates to land within a water    supply authority’s area of operations, the applicant has    obtained a certificate of compliance from the water supply    authority with respect to the subdivision of the land…

…

(4) In this section: "certificate of compliance" , in relation to a water supply authority, means a certificate of compliance issued by the water supply authority under the Act under which the water supply authority is constituted. "water supply authority" means:

(a)    the Sydney Water Corporation, the Hunter Water Corporation or a water supply authority within the meaning of the Water Management Act 2000 , or

(b) a council or county council exercising water supply, sewerage or stormwater drainage functions under Division 2 of Part 3 of Chapter 6 of the Local Government Act 1993 .

Does Riverina Have the Power to Levy the Development Servicing Charges? (Issues (a) to (e))

Relevant Principles of Statutory Construction

90. At the core of almost all questions concerning the existence of legislative power to exercise an administrative function is an issue of statutory interpretation. This case is no exception.

91. The modern principles of statutory construction are well known. In short, the task of construction of any provision must begin with the consideration of the text itself and only then should recourse be had to its context, which will include the general purpose and policy of the provision in question and of the enactment itself (and see s 33 of the Interpretation Act 1987). The determination of the purpose of the particular provision or statute may be found not only in an express statement of the purpose in the statute itself, but also by reference to textual and structural indicators, and where appropriate, by reference to extrinsic material. The task is one of ascertaining the objective, and not the subjective, intention of those who drafted and promulgated the legislation (see generally the principles summarised in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 at [47]; Commissioner of Taxation v Consolidated Media Holdings (ACN 009 071 167) Ltd [2012] HCA 55; (2012) 250 CLR 503 at [39], Certain Lloyd’s Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 379 at [23]–[26], Taylor v The Owners – Strata Plan No 11564 [2014] HCA 9; (2014) 88 ALJR 473 at [65]–[66], Thiess v Collector of Customs [2014] HCA 13; (2014) 250 CLR 669 at [22] and [23]).

92. There are two particular aspects of the interpretative task that were relied upon by the parties which warrant specific attention in this instance. The first was the principle of the harmonious construction of statutes enacted by the same legislature. That is to say, the presumption that the legislature did not intend to contradict itself but intended that both statutes should operate contemporaneously (Commissioner of Police (NSW) v Eaton [2013] HCA 2; (2013) 252 CLR 1 at [98] per Gageler J).

93. The principle was succinctly summarised by Biscoe J in Parks and Playgrounds Movement Inc v Newcastle City Council [2010] NSWLEC 231; (2010) 179 LGERA 346 (at [83]-[85]):

83.    The question of conflict has been expressed in various ways: whether the two items of legislation can stand or live together, whether there is contrariety or direct conflict, whether they are irreconcilable: Shergold at [35].

84.    Conflict between statutory provisions can be present even where there is no direct contradiction between them. For example, where it appears, as a matter of construction, that special provisions were intended exhaustively to cover their particular subject matter and where general provisions, if held to be applicable to the particular subject matter, would constitute a departure from that intention by encroaching on that subject matter: Fernance v Nominal Defendant (1989) 17 NSWLR 710 at 720 per Gleeson CJ (Clarke JA agreeing at 731), quoting Refrigerated Express Lines (Australasia)Pty Ltd v Australian Meat and Live-stock Corporation (No 2) [1980] FCA 38; (1980) 44 FLR 455 at 468-469 (Deane J).

85.    Where there is conflict between Acts of the same legislature, courts endeavour to reconcile their texts. If they cannot do so, they resort to established canons of construction including priority to the law made later in time (Goodwin v Phillips [1908] HCA 55; (1908) 7 CLR 1 at 7; Travinto Nominees Pty Ltd v Vlattas [1973] HCA 14; (1973) 129 CLR 1 at 33-34) and priority to a more specific law over a more general law (Smith v The Queen [1994] HCA 60; (1994) 181 CLR 338 at 348; Minister for Immigration and Multicultural and Indigenous Affairs v B [2004] HCA 20, 219 CLR 365 at [176]; Ferdinands v Commissioner for Public Employment [2006] HCA 5, 225 CLR 130 at [106]; Hillpalm Pty Ltd v Heaven’s Door Pty Ltd [2004] HCA 59, 220 CLR 472 at [100]).

94. The second, which in truth is an aspect of the first, is that when a statute confers a power subject to qualifications and conditions, general expressions in that statute are to read as subject to those qualifications and conditions. This canon has otherwise become known as the principle in Anthony Hordern, after the basic approach was stated by Duffy CJ and Dixon J in Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia [1932] HCA 9; (1932) 47 CLR 1 (at 7 per Gavan Duffy CJ and Dixon J):

When the Legislature explicitly gives a power by a particular provision which prescribes the mode in which it shall be exercised and the conditions and restrictions which must be observed, it excludes the operation of general expressions in the same instrument which might otherwise have been relied upon for the same power.

95. That decision and subsequent authorities were considered in Minister for Immigration and Multicultural and Indigenous Affairs v Nystrom [2006] HCA 50; (2006) 228 CLR 566 and was described as follows (at [59] per Gummow and Hayne JJ, footnotes omitted):

59.    Anthony Hordern and the subsequent authorities have employed different terms to identify the relevant general principle of construction. These have included whether the two powers are the "same power", or are with respect to the same subject-matter, or whether the general power encroaches upon the subject-matter exhaustively governed by the special power. However, what the cases reveal is that it must be possible to say that the statute in question confers only one power to take the relevant action, necessitating the confinement of the generality of another apparently applicable power by reference to the restrictions in the former power. In all the cases considered above, the ambit of the restricted power was ostensibly wholly within the ambit of a power which itself was not expressly subject to restrictions.

96. The principle has been described as one of “obvious good sense” (Nystrom at [59]). It reflects the maxim expressum facit cessare tacitum. But like all canons of construction, it must be applied subject to the particular text, context and purpose of the statute to be construed (M70/2011 v Minister for Immigration and Citizenship [2011] HCA 32 at [50] per French CJ).

97. The principle has been frequently applied (see the cases referred to in Fairfield City Council v N & S Olivieri Pty Ltd [2003] NSWCA 41 at [12]-[15]). More recently it was discussed by the New South Wales Court of Appeal in Adrenaline Pty Ltd v Bathurst Regional Council [2015] NSWCA 123 (at [50]-[52]):

50. It is also a basal principle of construction that when a statute confers a power subject to qualifications and conditions, general expressions in the statute are to be read as subject to those qualifications and conditions. The basic approach was stated by Gavan Duffy CJ and Dixon J in Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia [1932] HCA 9; (1932) 47 CLR 1 at 7:

“When the Legislature explicitly gives a power by a particular provision which prescribes the mode in which it shall be exercised and the conditions and restrictions which must be observed, it excludes the operation of general expressions in the same instrument which might otherwise have been relied upon for the same power.”

51. The principle has been applied on many occasions, such that it must be taken to be appreciated by the Legislature. The joint judgment in Plaintiff S4/2014 v Minister for Immigration and Border Protection [2014] HCA 34; 88 ALJR 847 referred at [43] to what had become known as the Anthony Hordern principle to the effect that:

“[A]n enactment in affirmative words appointing a course to be followed usually may be understood as importing a negative, namely, that the same matter is not to be done according to some other course.”

52. Here, there is elaborate affirmative language imposing conditions and restrictions on local councils, which the Council seeks to outflank by resort to another source of power. It is a very clear case where the principle applies.

98. In Adrenaline, the council was authorised by the Minister for Sport to enter into contracts or arrangements in relation to the holding of motor events at Mount Panorama Motor Racing Circuit in accordance with the LGA. The council entered into a five year agreement with the appellant under which the appellant paid an annual fee of $250,000 for the use of the circuit for five days in December. The appellant commenced proceedings alleging breach of contract, misleading and deceptive conduct, rectification, and the recovery of the fees on the basis that they had been paid under the mistaken belief that the council was authorised to enter into the contract. It was common ground that if Ch 15 Pt 10 of the LGA applied, it had not been complied with.

99. The primary judge dismissed the proceedings finding that the council had a general power to contract in connection with the exercise of its functions that was not governed by the LGA.

100. The appeal was confined to the claim for recovery of fees paid under mistake. It was dismissed. However, the Court of Appeal held that the council’s general power to contract did not empower it to charge fees outside the mechanisms established by Ch 15 Pt 10 of the LGA. Nevertheless, the appellant had received good consideration for the fees paid by it. The decision is discussed in further detail below.

Power to Impose the Development Servicing Charge Under s 608 of the LGA

101. It was uncontentious that the power in s 608 applies to Riverina in the same way it applies to councils (see s 400(1) of the LGA).

102. There was no issue that the development servicing charges were determined, as required by s 610B of the LGA, in accordance with various pricing methodologies set out and adopted by Riverina in its 2004 Riverina Water Council County Development Servicing Plans for Water Supply (and the 2007 version), the Riverina Water County Council Management Plan 2008/2009 (section 11.2. It was uncontentious that the subsequent Management Plans did not materially differ from each other), and the Riverina Water County Council Operational Plan 2010/2011 (and again in 2011/2012 and the Riverina Water County Council Delivery Program and Operational Plan 2012/2013).

103. The 2004 Riverina Water Council County Development Servicing Plans for Water Supply set out the basis for the calculation of the charges in accordance with the relevant guidelines (see section 3.1). They were upfront charges imposed to pay for the infrastructure costs in the servicing of new developments.

104. It is not contended that the preparation of the various Development Servicing Plans and Operational Plans were not a valid exercise of power by Riverina. Nor is it asserted that the actual development servicing charges were not calculated in accordance with those plans.

105. The applicants submitted that, properly construed, s 608 of the LGA did not authorise Riverina to charge development servicing charges for two principal reasons.

106. The first was that on its terms, s 608 only authorises a council to charge a “fee for any service it provides” and that at a minimum it must be possible to identify some service provided to the payee of the fee for which the fee is payable. Unlike the water connection fees and fees for water meters, no service was provided by Riverina to the applicants for the fees charged. Rather, the fees were no more than a contribution towards infrastructure based on the potential increase in demand on the system. In other words, a capital contribution directed towards defraying Riverina’s current and future infrastructure costs.

107. On its face, as the applicants accepted, s 608 provides a wide power to Riverina to charge fees for services. There are few words of limitation in the text of s 608(1) and there are no constraints in sub-sec (2), which provides a non-exhaustive list of services for which a fee may be charged (Regional Express Holdings Limited v Dubbo City Council (No 3) [2014] NSWLEC 87 at [112] and [116] per Pain J).

108. Furthermore, there are no contextual indicators that suggest that the expansive power contained in s 608 of the LGA to levy the development servicing fee should be confined in a manner inconsistent with its text.

109. The applicants relied upon ss 501 and 610 of the LGA to argue to the contrary. In relation to s 501, the applicants submitted that because it covered the types of charges encapsulated in the development servicing charge, this was an indicator that the power to levy such a charge could not be found in s 608 of the LGA. In other words, the power to charge fees for water supply, sewerage and drainage service had been specifically carved out of the subject-matter of s 608 of the LGA.

110. However, the preferable view is that s 501 of the LGA is an alternative source of power available to a council to impose levies in respect of water supply services. The natural and ordinary meaning of s 608(1) is that to the extent that a council seeks to levy charges for the provision of water supply services, it can either do so on an annual basis pursuant to s 501 on rateable land, or it can do so more frequently and on a piecemeal basis under s 608(1). Rather than acting in derogation, the powers complement each other.

111. With respect to s 610 of the LGA, the applicants contended that because there was a regime for collecting the development servicing charge under another Act, viz, the WMA, s 608(1) should be commensurately read down to exclude the power to levy the charge under the LGA. That a council was precluded from charging a fee for a service under the LGA if that fee for a service was prohibited under another Act, served to reinforce the limited ambit of the power contained in s 608 and emphasised that the provision was not intended as a stand alone source of power to levy the development serving charge.

112. There are several difficulties inherent in this analysis. First, s 610(1) is plainly concerned with the quantum of the fee and not the power to levy it. Its meaning and effect is to prevent any inconsistency in, or a doubling up of, fees being charged. The provision does not detract from the council’s power to impose a fee for a service under a different Act, or under s 608. Second, s 610(2) confirms the existence of the broad power under s 608. If the latter power did not separately exist as described, there would be no need to expressly prohibit its exercise where a cognate prohibition occurred in another statute. Third, and in any event, it is not the case, as the applicants inferred, that all other enactments that regulate the imposition of fees for the provision of water supply services should be taken to be some form of prohibition precluding the exercise by the council of its power under s 608 of the LGA. On any view, this would be a gross distortion of the term ‘prohibit’ in s 610(2). In addition, it would result in s 610(1)(a) having no work to do.

113. In reply, Riverina relied upon s 610D of the LGA to argue that if a council has the power to determine the amount of a fee for service, which includes both direct and indirect costs to the council (Meriton Apartments Pty Ltd v Council of the City of Sydney (No 3) [2011] NSWLEC 65; (2011) 80 NSWLR 541 at [46]), then by analogy, the recoupment of infrastructure costs under s 608 of the LGA should be confirmed.

114. In my opinion, however, little assistance can be derived from s 610D of the LGA, because, as s 610C makes clear, it does not apply to Div 2, in which s 608 is located.

115. Rather, in my view, upon analysis of the text and context of s 608, the narrow definition of “services” posited by the applicants is not warranted having regard to the almost plenary language of that provision. This is all the more acute when regard is had to the wide range of matters constituting services contained in s 608(2) of the Act. More specifically, s 608(2) expressly states that “services for which an approved fee” may be charged include a “supplying a service, product or commodity”. The continuing supply of water to a residential development is, on any reasonable construction, the supply of either a product or a commodity.

116. In support of its submission that the development servicing charges were not fees for the provision of services, but amounted to a contribution to the provision and maintenance of infrastructure, the applicants relied upon the decisions in Air Caladonie International v The Commonwealth of Australia [1988] HCA 61; (1988) 165 CLR 462 (at 469-470) and Airservices Australia v Canadian Airlines International Limited [1999] HCA 62; (1999) 202 CLR 133 (at [132]-[135]).

117. In Airservices, Gaudron J opined the following (at [133]-[134]):

133. Once it is appreciated that, for the purposes of s 67 of the Act, the matters to which the charges fixed by the Determination relate are, respectively, facilities and services relating to an aerodrome, generally, and air route and airways services, generally, it follows that the relationship required was not a relationship between a charge and the cost of the particular service or services provided, but a relationship between the charge and the expenses incurred or to be incurred with respect to the provision generally of the services and facilities to which the charge related.

134. As the landing and en-route charges were calculated to produce an aggregate return covering the costs of the services and facilities to which each charge related together with a profit calculated at 7.5 per cent of that proportion of the Authority's assets allocated to those services and facilities, which assets did not include those used for its regulatory functions, it cannot be said that the charges were not reasonably related to the expenses incurred or to be incurred in relation to the matters to which they related. And because each charge was fixed by reference to services and facilities generally, it is irrelevant that it was not reasonably related to the cost of supplying a particular service or particular services to a particular user.

118. But these authorities arose in very different statutory context, where the principal issue was whether or not the fee constituted a tax or a fee for service. The charges here do not constitute a tax (Meriton (No 3) at [106]-[121]).

119. There can be no doubt that the development servicing charge was levied to recover infrastructure costs, both current and future (see, for example, section 3.1 of the 2004 Riverina Water Council County Development Servicing Plans for Water Supply, section 11.1 of the Riverina Water County Council Management Plan 2008/2009, Part 7 of the Water Prices – effective 1st July 2013 to 30th June 2014 and paragraph 8.3 of the Development Servicing Plan for Water Supply). But broadly described, these costs include (according to the Riverina Water County Council Management Plan 2008/2009) the treatment, storage, movement and delivery of the water. Plainly enough these activities require, amongst other things, continuing infrastructure, including the maintenance, monitoring and repair of that infrastructure, the testing and monitoring of the quality of the water within that infrastructure, and the delivery of the water to its destination utilising the infrastructure, which includes providing water a certain pressure and flow rate. That is to say, the development services charges are for “a system” (paragraph 13.1 of the Riverina Water Country Council Operation Plan 2013/2014).

184. The applicants accepted that the Recovery Act applied to any action to recover the charges and that pursuant to s 2 of the that Act, Nash Bros could not recover any payment made by it to Riverina prior to 12 months from the commencement of these proceedings, that is to say, payments made on or before 28 January 2013.

185. According to the written evidence of Mr Chris Nash (contained in his first affidavit), Nash Bros had not passed on the costs of the development servicing charges to the purchasers of the villas. The price for the villas in the retirement village was determined by the market and Nash Bros had “no ability to increase the price of the villas to pass on the development servicing charge to purchasers”.

186. However, the evidence disclosed that the applicants have in fact passed on the development servicing charges to another person, viz, Grange. This was conceded by Mr Chris Nash during his cross-examination, wherein he stated that:

1. while NBC and Nash Brothers both acted for Grange in obtaining approvals and carrying out the development, Nash Bros was the current principal company carrying out the development and NBC had “fallen into the background” in terms of the day to day operation of the development (T38.45);

2. the land is owned by Grange as trustee of the unit trust. The units in the unit trust are owned by two family trusts, one controlled by Mr Scott Nash and the other controlled by Mr Chris Nash, or their respective families, namely, Mr Chris Nash and his wife and Mr Scott Nash and his wife (T34.15 – 34.45);

3. it was his understanding that the trustee company provided for the reimbursement to Grange of all costs and expenses incurred in respect of the management and operation of the trust (T35.25);

4. the accommodation in the retirement village was occupied on a loan and lease agreement, part of which comprised a non-refundable contribution from each resident covering fixed costs which was stipulated by the retirement village (T35.40);

5. the purpose of the trustee company (Grange) was to make a profit out of the development for the benefit of its unit holders. The trustee company stipulated the required contributions from incoming residents in order to eventually make a profit out of the development (T35.45 – 36.15);

6. both NBC and Nash Brothers had been paid for the services rendered in respect of carrying out the development of the retirement village. The agreement entered into between NBC, Nash Brothers and Grange, was a construction management contract on a ‘cost-plus’ basis. In other words, Nash Brothers and NBC provided services, incurred costs, and recouped their expenses, plus a profit, from the trustee by way of management fee (T39.10);

7. the management fee comprised overheads, including all of the fees and development servicing charges that Nash Brothers or NBC were required to pay Riverina in respect of the development. This included the recovery of all money paid as development servicing charges to Riverina. Nash Bros or NBC had issued invoices to Grange for recovery of the development servicing charges to Riverina, and they were not out of pocket in relation to development servicing charges charged by Riverina. In other words, the costs for the development services charges paid had already been recovered from another entity (T40.27– T40.42);

8. Nash Bros and NBC were bringing a claim seeking repayment for amounts paid by someone else, namely, Grange, on the basis that Grange was out of pocket (T40.45);

9. his statement that “Nash Brothers has not passed on the costs of the development servicing charges to purchases of the villas” was not correct for a number of reasons (T42.32 – T43.31):

Q.     You said there, "Nash Brothers has not passed on the costs of the development servicing charges to purchasers of villas."  Do you see that?

A.     Yes.

Q.    You couldn't pass it on to a purchaser of the villa, I suggest to you, for a number of reasons.  Firstly, as you've told me, there aren't any purchasers of the villas, it's a loan and rental and payback arrangement?

A.     Yep.

Q.     Do you accept that correction?

A.     Yep.

Q.     I suggest to you the second reason it couldn't be right is that Nash Bros is not the vendor or the lessor of these residences, that role is exercised by the trustee company that owns the land, Grange.  Do you accept that?

A.     Yes.

Q.     So that's another reason that sentence can't be correct; do you agree?

A.     Yeah.  Well – yeah

Q.     When you wrote in the first sentence of paragraph 41, "Nash Bros has not passed on the costs of the development," you did that for the purpose of indicating to the Court, I suggest to you, that the costs of the development were costs that Nash Bros had to pay and continued to have a liability for and was out of pocket to that extent.  That's what you were trying to suggest, wasn't it?

A.     Well, there's a difference in the entity but, you know, the family is the family, I guess.  Yes, we're out of pocket.

Q.  You know enough about commercial life to know that companies are separate legal personalities, don't you?

A.     Yes.

Q.  You know enough about the obligations of a director and that the directors of particular companies are to exercise their duties for the best interests of the shareholders of that company?

A.     Yes.

Q.  The shareholders of the Grange trustee company exercised their powers for the purpose of furthering the best interests of the unit trust beneficiaries by their independent decision‑making.  That's your understanding, isn't it?

A.     Pretty well.

Q.     You know quite well, don't you, that Nash Bros is not the entity that controls the arrangements by which a resident comes into the retirement village?

A.     Yep.

Q.     It's quite wrong of you to have suggested implicitly in the first sentence of paragraph 1 that Nash Bros remains out of pocket for these costs.  Do you accept that?

A.     Yep.

10. Nash Brothers has recovered from Grange “every last cent” of the cost of the money that it paid to Riverina (T44.03 – T44.15); and

11. his explanation for not stating in his affidavit that the development servicing charges for which the applicants claim repayment had already been paid to the applicants was as follows (T44.29 – T44.40):

Q.  What explanation are you willing to offer to the Court for not saying in your affidavit that the development servicing charges for which you claim repayment have already been paid to the applicant companies?

A.     Yeah.  I would explain that I've not been in a proceeding like this before and I have not appreciated the subtle difference in that.

Q.  The subtle difference between the two applicant building companies and the trustee company of the unit trust.  Is that what you're referring to?

A.     Yep.

Q.    Do you have any other explanation or is that your explanation?

A.     That's pretty well it.

189. It is tolerably clear, based on this evidence, therefore that any recovery by the applicants of the developer servicing charges is precluded by the operation of s 4(1) of the Recovery Act.

190. Accordingly, the applicants attempted to argue that there was a relationship of agency created by contract between the applicants (as agents) and Grange (as principal) which enabled the applicants to sue on behalf of Grange to recover the charges pursuant to s 4(2) of the Recovery Act (citing Taylor v Smith [1926] HCA 6; (1926) 38 CLR 48 at 55 per Knox CJ).

191. However there was no evidence proffered to demonstrate that Grange is a predecessor, successor or assignee of either Nash Bros or NBC. And other than the bare facts that NBC and Nash Brothers had both acted for Grange in obtaining approvals and carrying out the development, for which they had been paid pursuant to a ‘costs-plus’ agreement for the services they had rendered in developing the retirement village, there was no evidence that either NBC or Nash Bros were acting as Grange’s agent, ostensible or otherwise. Nowhere was it pleaded in the points of claim, and the applicants are plainly acting on their own behalf in these proceedings. In addition, no authority was provided to the Court to support the principle that an overpayment in the nature of the development servicing charges can be recovered by an agent on behalf of a principal. The decision in Taylor v Smith does not stand for this proposition. The argument must be rejected. In my opinion, s 4 of the Recovery Act provides a defence to the claim of repayment.

192. In the alternative, the applicants submitted that the payments were recoverable on the basis of the principle recognised in England the decision of in Woolwich Equitable Building Society v Inland Revenue Commissioners [1992] 3 All ER 737; [1993] AC 70. Under this principle, a payment made by a person as a result of an invalid demand by a public official, are recoverable.

193. The principle in Woolwich, and its likely application in Australia (it has not yet been applied here) was discussed in Meriton (No 3) (at [155]-[160]):

155. …In that case a building society paid tax oninterest and dividends that Inland Revenue had statutorily demanded. Woolwich successfully challenged the validity of the regulation pursuant to which the tax was levied. In the interim it paid the tax to avoid any adverse publicity and to avoid penalties and interest. By majority, the House of Lords held that the tax ought to be repaid by reason of an absence of consideration for the payment (at 166, 197–198 and 201–202). Their Lordships cited the constitutional principle enshrined in the Bill of Rights 1688 (Imp) (1 Will & Marysess 2 c 2) that taxes ought not be imposed absent the authority of Parliament.Lord Goff, in particular, relied on the principles of unjust enrichment andnoted the injustice of Inland Revenue retaining the interest earned on money towhich it was never lawfully entitled.

156.    Woolwich has been subsequently endorsed by the House of Lords (DeutschMorgan Grenfell Group plc v Inland Revenue Commissioners [2006] UKHL49; [2007] 1 AC 558) and the Canadian Supreme Court in relation to taxesdemanded under an unconstitutional law (Kingstreet Investments Ltd v NewBrunswick [2007] 1 SCR 3; (2007) 276 DLR (4th) 342. Cf Air Canada).

157.    In Australia, the principle in Woolwich has not been recognised by the HighCourt, although I note that it is the view of the learned authors of Mason &Carter’s Restitution Law in Australia 2nd ed (2008) LexisNexis Butterworths,Australia that it will be (at [2020]–[2032]). They also offer the opinion that the principle espoused in Woolwich extends to local government bodies, such ascouncils (at [2034]). Having said this, the authors go on to note that even if Woolwich is applicable in Australia, not all unlawful imposts will berecoverable, and more significantly, as is discussed below, some imposts willreadily attract defences obviating repayment irrespective of their invalidity.

158.    In my opinion, it is neither necessary nor desirable to resolve whether or notthe principle in Woolwich should be applied to the present facts. Suffice it tosay, that the application of s 4 of the Imposts Act and a defence to therestitutionary claim Meriton makes in relation to the fees, means that this issuecan be left for another day. Thus whatever the position is at common law, s 4of the Imposts Act makes it tolerably clear that Meriton’s recovery of the feesis limited to the extent that fees have not, and will not, be passed on.

159. Accordingly, in Avon Product Pty Ltd v Commissioner of Taxation [2006]HCA 29; (2006) 230 CLR 356 the High Court stated (at [9]–[10]) in relation to Commonwealth legislation that was not materially different from s 4 of theImposts Act and a sales tax not materially different from the fees:

“[9]     That sales tax is expected to be passed on depends upon the circumstance that sales of goods occur within an economy geared to making profit. It is the profit-making motive of business which, in the nature of things, generally results in sales tax being passed on. This is because, leaving aside rare cases where sales tax is separately identified and superadded to the invoice price after sale, sales tax can only be passed on indirectly through the price mechanism. In a profit-making structure, businesses will set prices so as to ensure at least that all foreseeable costs are recovered, anything above this being conceptualised as a margin of profit. Because sales tax is levied upon the vendor prior to the ultimate sale by retail in the manner explained by Dixon J in Ellis & Clark, it forms part of the cost structure of doing business. There is nothing extraordinary in the proposition that in the usual course of things sales tax will be passed on.

[10]     As has been explained, it is for the taxpayer to establish a circumstanceout of the ordinary, namely that the amount of the overpayment of sales tax has not been passed on. Where the whole or part of the economic burden of sales tax may have been passed on indirectly through prices, the inquiry in this regard is likely to be complex. The complexity arises because prices may be set with reference to a wide range of factors (including considerations of cost of production, competitive advantage, operational cash flow and customer goodwill). However the starting point must be the seller’s pricing policy and practice.” (Citations omitted)

[160]In light of the limited recourse that ought to be made to extrinsic materials inconstruing statutes (Saeed v Minister for Immigration and Citizenship [2010]HCA 23; (2010) 241 CLR 252 at [32]–[34]), I note only in passing that thereasoning articulated by the High Court is consistent with the ExplanatoryNote to the Limitation of Actions (Recovery of Imposts) Amendment Bill1993. It is this Bill that amended the Imposts Act to made it explicit (at 2) “thats 4 prevents recovery of taxes unless the claimant satisfies the court that theyhave not been passed on, and will not be passed on, to another person.”

194. Given the passing reference to this principle in the applicants’ written submissions, and their refusal to elaborate upon it any further despite a request by the Court for further assistance, I need only repeat and endorse the observations the Court made in Meriton (No 3) above, especially the sentiment expressed at [158].

195. Fourth, as discussed above in the context of s 608 of the LGA, the applicants have received a material benefit in consideration of the payments made to Riverina. The development has been connected to a potable water supply and Riverina has continued to provide that water supply, together with all of the commensurate infrastructure, management, and maintenance required for the provision of that service, for use by the residential villas in the retirement village. Thus even if there was no legal obligation upon the applicants to pay the development servicing charges, they have received a substantial benefit from the supply of water services to the constructed components of the development in exchange for their payments. It would therefore be inequitable for the applicants to recover charges while retaining the past and present benefit of the water supply.

196. Fifth, and somewhat related, Riverina has not been unjustly enriched by the payment of the development servicing charges. As the evidence discloses, it has provided, and continues to provide, the supply of water, with all that this service entails, in consideration for the charges.

197. In its written submission in reply the applicants opaquely submitted that “the concept of unjust enrichment is not a principle capable of application to a particular case”. But belying this bold statement is the triumvirate of decisions in Meriton (No 3), Ovidio Carrideo Nominees Pty Ltd v Dog Depot Pty Ltd [2006] VSCA 6; (2006) V ConvR (at [16]-[21], [31] and [45]-[47]), and more recently, Adrenaline.

198. In Ovidio an order was made that the landlord pay its tenant, Dog Depot Pty Ltd, almost $65,000 by way of restitution, this sum being the amount that the tenant claimed was mistakenly paid by it as rent under a commercial lease. The claim was based on s 8(2) of the Retail Tenancies Reform Act 1998 (Vic), which stated that the tenant was not liable to pay the rent attributable to the period before the landlord gave the tenant a copy of the disclosure statement. The tenant claimed that, never having received a copy of the disclosure statement, it had paid rent in ignorance of its rights under the provision.

199. After discussing the leading authorities (such as Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, ANZ Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662, David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48;(1992) 175 CLR 353 and Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516) the Victorian Court of Appeal held that the landlord had a good defence to the tenant’s claim for restitution because, unlike the position of the payees in David Securities or Roxborough, the tenant had received good consideration for the money it paid, namely, exclusive possession of the premises that were of use and benefit to it. Justice Chernov said (at [21]):

21.    As I have said, I consider that the landlord has a good defence to the tenant’s restitutionary claim and that is because, broadly, it seems to me, it would not be unjust or unconscionable for it to retain the money in question notwithstanding that it was paid under a genuine mistake. I say this for the following reasons. First, I think that, unlike the position of the payers in David Securities and Roxborough, the tenant here has received good consideration for the money it paid, namely, exclusive possession of the premises that were obviously of use and benefit to it, as is demonstrated not only by the fact that it occupied them since entry for its business purposes, but also by its continued possession of them after it became entitled to terminate the lease pursuant to s.8(2)(c) of the Act. And it is irrelevant that the landlord might have been under an obligation to provide the premises under the lease. The question is not whether the landlord was under such an obligation, but rather whether the tenant gained or accepted a benefit in the form of exclusive use of the premises (as a quid pro quo for the payments in question). As I have said, on the evidence, it is apparent that the tenant received such a benefit and, thus, from its point of view, it received good consideration for its payments. Moreover, it has not been suggested that the contents of the disclosure statement had any relevant bearing on the benefit that the tenant secured under the lease. For instance, there was no suggestion that the statement revealed that the premises, or any matter relating to them, have been misdescribed in the lease, or during the negotiations leading to its execution, such that it would now be unconscionable for the landlord to retain the money.

200. And as Nettle JA (as he then was) put it (at [33]):

33 ... Whereas in Davids Securities the borrower got nothing in return for its payment of the grossing-up amount, and in Roxborough v Rothmans of Pall Mall the tobacco retailer got nothing in return for its payment of the tobacco licence fees, in this case the respondent got the benefit of the use and occupation of the demised premises in return for the rent which it paid. As I see it, that is the benefit which it had in view — the benefit for which it bargained — when it agreed to pay the rent. It is true that the respondent was not under a legal duty to pay the rent and, therefore, it is true that the payment of what it perceived to be rent did not discharge it from an obligation to pay rent. But as I have said, I do not consider that s 8(2) prohibits the lessor receiving or recovering any consideration in respect of the lessee’s use and occupation of the demised premises. There does not seem to be any statutory imperative for concluding that the tenant was intended to have the benefit of free use and occupation. And it is to be noted that no other basis has been suggested. It follows, in terms of a conventional analysis, there has not been a total failure of consideration.

201. Finally, as was observed by Leeming JA in Adrenaline, helpfully summarising the result in Meriton (No 3) (at [83]):

83. The authors of Mason and Carter’s Restitution Law in Australia (2nd ed, LexisNexis Butterworths, 2008) write at [2041] that “[r]ecovery of the (invalid) licence fee after enjoyment of the right for which it was the consideration would result in unjust enrichment, not its prevention”. That passage was applied by Pepper J in Meritonat [172] to conclude that the developer’s recovery of fees would be inequitable where Meriton had enjoyed the benefit of the exclusive use of the kerb and road for its construction.

202. In that case, the Court of Appeal similarly held that the appellant had received precisely what it had bargained for and that it would create an unjust enrichment were the appellant, having enjoyed the benefit of the Mount Panorama circuit over five years, to recover the fees it had agreed to pay, and did pay, to secure that benefit (at [84]). Hence the Court concluded (at [86]):

86. Accordingly, Trackcorp must be taken to have received precisely what it bargained for (for it did not seek to reagitate its failed claims for breach and rectification on appeal). It obtained good consideration for the fees it paid each year. Irrespective of whether its claim was extinguished by the Recovery of Imposts Act, there can be no injustice in Council retaining the monies paid by Trackcorp for services bargained for and received by Trackcorp.

203. For these reasons, the order for repayment of $127,234 in the summons (as amended) cannot be made.

Conclusion and Orders

204. It follows that because the development servicing charges having been lawfully imposed on the applicants, the application for relief must be dismissed.

205. Furthermore, these being Class 4 proceedings where costs generally follow the event, costs ought to be awarded in Riverina’s favour.

206. The formal orders of the Court are therefore that:

1. the second further amended summons is dismissed;

2. the first and second applicants are to pay the respondent’s costs of the proceedings; and

3. the exhibits are to be returned.

**********

Decision last updated: 02 October 2015