Local Councils have a statutory duty of assessing rates each year in accordance with the Local Government Act 1993 (LG Act). The Court of Appeal in Peregrine Mineral Sands Pty Ltd v Wentworth Shire Council [2014] NSWCA 429 has found that a clause in an agreement obliging the Council to levy rates of $100K per annum for 20 years was invalid.
The council entered into a “Road Agreement” with a company intending to operate sand mining activities in the Shire under which the council would acquire certain lands and the company would design, construct and maintain a road for public use. The Agreement included the following clause 3.1(a):
“… the Company will: (a) Pay to Council in respect of the Gingho Mine, land rates of $100,000.00 per annum commencing 1 January 2006 and adjusted annually in accordance with the Local Government Act.”
The Agreement was entered into prior to the Council receiving a land valuation which took into account the mineral content of the land. After a valuation was received by the Valuer-General, the Council increased the rates.
The Court of Appeal (Meagher JA , McColl and Ward JA) unanimously dismissed the appeal, holding that:
- the Agreement was incompatible with the LG Act because the clause impermissibly fettered the Council from undertaking its statutory duty of assessing rates each year in accordance with the LG Act.
- LG Act does not authorise an antecedent agreement capping future rates in advance.
Note: This information is not to be relied upon as legal advice.