Is Your Service Charge Invalid?


The case of City of South Perth and Minister for Local Government [2012] WASAT 177 in the State Administrative Tribunal (SAT), clarified that a service charge may only be imposed by a local government when adopting an annual budget or, if a service charge is quashed by the SAT or a court, when adopting a budget in form and manner similar to the annual budget.

The City of South Perth Decision

The City of South Perth sought a declaration as to the validity of a service charge it imposed to recoup its contribution for Salter Point underground electrical power system.

The City did not impose the service charge when it adopted the 2011/2012 annual budget in July 2011, primarily because it did not know at that time how much individual landowners, who were to pay the service charge, were liable to pay.

After the annual budget was adopted the City received a report from Western Power identifying the City’s share of the cost for the underground power system (UGP) in Salter Point.

At an Ordinary Meeting of Council in September 2011 the Council resolved to impose a service charge on the Salter Point residents. In March 2012 the City issued rate notices to the owners of each property requiring payment of the Salter Point UGP service charge.

The City argued that section 6.38 of the Local Government Act 1995 (LGA), which enables a local government to impose a service charge, allows the imposition of a service charge at any time, not just at the time of imposing the annual budget. Section 6.38(1) LGA is in the following terms:

A local government may impose on — 

(a) owners; or
(b) occupiers,

of land within the district or a defined part of the district a service charge for a financial year to meet the cost to the local government in the provision of a prescribed work, service or facility in relation to the land.

The City also argued that the wording in section 6.32(1)(c) LGA that “when adopting the annual budget a local government … (c) may impose a service charge on land within its district” does not preclude the possibility that a service charge may be imposed at another time.

The Tribunal dismissed these arguments. In considering the proper interpretation of section 6.38 LGA. The Tribunal stated that the inclusion of the words “for a financial year” in section 6.38(1) suggest that a service charge is only to be imposed in an annual budget, rather than during the course of a financial year.

The Tribunal took the view that the wording in section 6.32(1) LGA “when adopting an annual budget…” serves to restrict the time when a local government may impose a service charge under section 6.38 LGA to when a local government is adopting the annual budget.

The Tribunal stated, amongst other things, that it could not have been the intention of parliament to enable the requirement for an absolute majority under section 6.32(1) LGA to impose a service charge to be avoided by allowing a service charge to be imposed under section 6.38 other than when adopting an annual budget.

If a service charge that has purportedly been imposed other than when adopting the annual budget is invalid and quashed, section 6.32(3)(b) LGA requires that the relevant local government impose a new service charge. Under section 6.3 LGA the local government must prepare and adopt a budget in form and manner similar to the annual budget with such modification as are necessary.

Findings of the Tribunal

The Tribunal determined that, on its proper interpretation, section 6.38 of the LGA only permits the imposition of a service charge by a local government when adopting the annual budget or, if a service charge is quashed by the SAT or a court, when adopting a budget that is in a form and manner similar to the annual budget.

The Tribunal found that the City did not impose the Salter Point UGP service charge when adopting its annual budget for 2011/2012, rather it purported to impose the service charge two and a half months after it had adopted its annual budget. The Salter Point UGP service charge was not therefore imposed in accordance with the LGA.

There is a legislative purpose discerned from the LGA to invalidate any service charge purportedly imposed by local government other than when adopting its annual budget.

The Tribunal declared the Salter Point UGP service charge invalid and of no effect, and quashed it.

Lessons for Local Government

A local government may only impose a service charge when adopting its annual budget. To seek to impose a service charge outside the annual budget will risk a declaration from the SAT or a court declaring the service charge invalid and quashing it. The local government will then be required to impose a new service charge.

For more information on this update or any other local government matter please contact Philip Mavor on (08) 9321 3755.

The information published on this website is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.