When is it too late to commence proceedings to recover overdue rates?

How long does a council have to commence court proceedings to recover unpaid rates from ratepayers? This question was the subject of the High Court’s recent decision in Brisbane City Council v Amos.[1] 

In this article, we summarise the Court’s decision and consider the implications it has for councils looking to recover overdue rates.

The background

Mr Amos was the owner of seven lots of rateable land in Brisbane. In 2009, Brisbane City Council commenced proceedings in the Supreme Court of Queensland against Mr Amos for unpaid rates notices, the earliest of which had been issued in 1999.

In his defence, Mr Amos argued that he was not required to pay all of the rates notices, as some were statute-barred, with proceedings having been commenced after the six year limitation period. Mr Amos contended that this was because the proceedings were properly characterised as ‘an action to recover a sum recoverable by virtue of any enactment, other than a penalty or forfeiture’, pursuant to s 10(d) of the Limitation of Actions Act 1974 (Qld) (LAA).

Council submitted that the proceedings fell under s 26(1) of the LAA, which applied to actions ‘to recover a principal sum of money secured by a mortgage or other charge on property whether real or personal’. The limitation period in s 26 was 12 years, meaning Council would be able to recover the entirety of the outstanding rates.

At first instance, the Supreme Court of Queensland ruled in favour of Council. However, this was overturned in the Court of Appeal, which found that the relevant limitation period was six years, not 12. Council then lodged an appeal to the High Court of Australia.

The High Court’s decision

The High Court ruled in favour of Mr Amos, affirming the reasons of the Court of Appeal.

The claim to recover the rates was a personal claim, as opposed to an action against the land (described as an action in personam rather than an action in rem).[2] This is because although overdue rates are a charge on the land, the court proceedings to recover the unpaid rates is an action in debt against the ratepayer.[3] This technical distinction was significant in the Court’s ruling.

Council had argued that the limitation period in s 26 applied because it was a specific provision, whereas s 10 was a general provision. Council sought to invoke a rule of statutory interpretation whereby a specific provision would exclude the effect of a general provision, meaning the relevant limitation period to recover the rates as a debt would be 12 years.

The High Court rejected this. Kiefel CJ and Edelman J (with whom Gageler, Keane and Nettle JJ each generally agreed in separate judgments), stated Council’s approach was incorrect because it ignored the legislative and judicial history of limitation laws. In the 1899 case of Barnes v Glenton,[4] the UK Court of Appeal held that the limitation period for a personal action to recover a sum secured by mortgage was independent of any action against the land. As such, the shorter limitation period that applied to the personal action would not be extended by the fact that a party could still commence an action against the land. Equally, the fact that a party was time-barred from commencing a personal action did not prohibit that party commencing an action against the land, if the relevant limitation period for the latter had not expired.[5]

The High Court then noted that when Parliament enacts legislation that adopts words that have an established and well-understood meaning in earlier legislation, the words in the later legislation will be taken to have the same meaning as in the earlier legislation. As the LAA had adopted the language of earlier limitation statutes, which mirrored the relevant legislation in Barnes v Glenton, the same interpretation adopted in Barnes v Glenton should apply to the LAA.

Therefore, the personal action against Mr Amos was statute-barred by s 10 of the LAA, and was not extended by the longer limitation period under s 26, which governed actions against the land. Consequently, as Council’s proceedings were only against Mr Amos personally, the rates notices falling outside the limitation period could not be recovered.

The appeal was dismissed.

Implications for councils collecting overdue rates

Councils should be wary of the risks in delaying the commencement of proceedings for unpaid rates.

If councils fail to commence proceedings against the ratepayer personally within six years, they may be left with no option other than to exercise their powers against the land (such as sale or acquisition of the land).[6] This may be undesirable where councils do not wish to exercise their powers against the land (e.g. sale of the land), for example where the sums of outstanding money are small or where the exercise of those powers may cause undue hardship.