Challenge to higher rates levied on tourist rental properties dismissed

Rating powers are broad and discretionary

In Island Resorts (Apartments) Pty Ltd v Gold Coast City Council [2021] QCA 19, the Queensland Court of Appeal dismissed a challenge to Council decisions determining rating categories and levying general rates, by reference to whether land is rented to 'permanent residents' or to 'itinerants' (i.e. tourists).

King & Company Solicitors represented the Council in defending the challenge.  The decision confirms the broad discretionary power of a local government to make rating decisions.

Background

In each relevant financial year, the Council:

• adopted a revenue statement which stated that it considered land used for tourism and tourism-related business and industry should generate a greater contribution to general rate revenue than land that is not used for a commercial purpose;
• decided to create rating category 2T for certain types of residential lots used to provide rental accommodation to 'permanent residents';
• decided to create rating Category 3T for the same types of residential lots used to provide rental accommodation to  'itinerants'; and
• decided to levy a higher differential general rates on residential lots in Category 3T (itinerants) than the same types of residential lots in Category 2T (Permanent Residents).

Supreme Court dismisses challenge

Before the Supreme Court at first instance, the land owner argued that those rating decisions involved the Council taking an irrelevant consideration into account being the personal characteristics of the person in occupation of the property rather than an attribute or characteristic of the rateable land.

The primary judge (Applegarth J) rejected that argument, finding that the use of property to provide rental accommodation to 'itinerants' was an attribute of the property.

The land owner's challenge was dismissed by the primary judge with costs.

The land owner then appealed against that decision to the Queensland Court of Appeal.

Court of Appeal upholds that dismissal

Before the Queensland Court of Appeal (Jackson J, McMurdo JA and Boddice J):

• the land owner relied on the decision in Xstrata Coal Qld Pty Ltd v Council of the Shire of Bowen [2010] QCA 170 as supporting its argument that the challenged rating categories turned on the 'personal characteristics' of the occupier and not on any inherent attribute or quality of the rateable land or its improvements.
• Justice Jackson analysed the decision in Xstrata and found that he would not treat that decision as 'binding authority requiring that a rating category must be decided by reference only to an attribute of the land' [65].
• Justice Jackson noted the commencement in 2014 of section 94(1A) of the Local Government Act 2009 which permits a local government to decide differential rating categories "according to whether or not the land is the principal place of residence of the owner" and concluded that:

'In my view, the introduction of s 94(1A) throws light on the true view or meaning of s 94(1), by the aim and provision of s 94(1A)' [69]

Subject to exceptions, 'it should be accepted that ...use of land in one way or another may be selected as a basis for a rating category, including a category that distinguishes between a non business use and a business use or one that distinguishes between one non-business use and another non-business use by reference to factors going to intensity or duration of use' (emphasis added) [70].

It followed that ' ...the selection of whether residential land is used to provide rental accommodation for permanent residents for one rating category and to itinerants for another rating category is not outside the scope of the legislative power conferred' (emphasis added) [71].

• Justice Jackson then rejected a 'possible exception' to the above "statements of generality" based upon the adopted definition of "permanent resident" applicable to Category 2T. [72] - [87].

Ultimately the land owner's appeal was unanimously dismissed by the Court of Appeal with costs awarded to the Council.

High Court refuses special leave application

On 17 June 2021, the High Court of Australia dismissed an application by the land owner for special leave to Appeal the decision of the Queensland Court of Appeal, with costs awarded to the Council.

Implications

The Court of Appeal decision serves to clarify that guidance provided in earlier related court decisions such as the Xstrata decision cannot be elevated into placing restrictions upon the relevant discretionary powers that are neither expressed nor necessarily implied by the relevant statutory text and context.

King & Company has extensive experience in acting for Council clients in disputes concerning the exercise of local government rating powers.  Those matters have included by and far the most significant Queensland court decisions over the past twenty five years concerning this area of law.

If you would like to know more about this Court of Appeal decision, or how our firm may be able to assist with rating issues then please contact John Butt or Tim Fynes-Clinton, or call us now on (07) 3243 0000.