December 2019

A stitch in time: Don’t delay when recovering unpaid rates

The saying goes that “a stitch in time saves nine”. That is certainly the case when recovering unpaid rates following the recent High Court decision in Brisbane City Council v Amos.

The story dates back to 2009, when Brisbane City Council commenced an action to recover unpaid rates owed by Mr Amos, the oldest notices for which stretched back to 1999. In what turned out to be a significant oversight, the proceedings did not involve an application to sell the land to pay the debt.

Mr Amos defended part of the claim by asserting that the Council couldn’t recover the rates that were payable before 2003 because such action was statute-barred by the Queensland equivalent of section 14(d) of the Limitation Act 1969.

The Act provides that “a cause of action to recover money recoverable by virtue of an enactment, other than a penalty or forfeiture” must be started within 6 years of the date on which the cause of action first accrued. In relation to rates, this would mean within 6 years from when payment was first due.

However, our readers will know that rates levied under the Local Government Act 1993 (including interest and costs awarded by a court) are a charge on the land to which the rates relate.

That brings into play section 42(1) of the Limitation Act 1969, which allows 12 years to bring an action to recover money secured by mortgage (noting that “mortgage” includes a charge on any property for securing money).

So it would seem that a council has 12 years, not the 6 claimed by Mr Amos, in which to bring proceedings to recover unpaid rates.

In fact, that is what Brisbane City Council initially successfully counter-claimed, pointing to a provision in the Limitation of Actions Act 1974 (Qld) that is similar to section 42(1) and also stipulates a 12-year time limit.

Mr Amos then went to the Court of Appeal, which ruled in his favour. Brisbane City Council then appealed to the High Court.

The High Court also ruled in favour of Mr Amos. Following an English case decided in 1899, the High Court held that because the claim brought by the Council was independent of an action against the land, it was a personal claim only, covered by the 6 year time limit in the equivalent of section 14(d). It didn’t matter that the debt was secured over the land.

Conversely, just because the period to bring proceedings to only recover the debt might have expired, the Council would not have been prevented from taking proceedings to enforce its charge over the land and have the debt repaid from the proceeds of sale.

The takeaway for councils is not to delay proceedings for unpaid rates on the assumption that they have 12 years to make a claim. After 6 years the only course available will be action to enforce against the ratepayer’s land (using the powers in Chapter 17, Part 2, Division 5 of the Local Government Act 1993). That course inevitably entails delays, expense and other complications that are to be avoided, especially if the debt is relatively small or if adverse publicity might result.

Author: David Creais 

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