A recent Supreme Court case makes clear for councils the steps they must follow in order to properly exercise their powers of sale under s713 of theLocal Government Act 1993 (NSW) (“LGA”).
In Harden Shire Council v Richardson [2012] NSWSC 622, Harden Shire Council (“Council”) commenced proceedings pursuant to s60 of the Real Property Act 1900(NSW) (“RPA”) for possession of land, having sold the relevant property by exercising its power under s713 of the LGA due to outstanding rates and charges.
Section 550 of the LGA give councils a charge over land for unpaid rates and charges. Division 5 of Part 2 of the LGA (ss713-726) gives councils the power to sell land where rates and charges are unpaid.
One of the bases upon which the defendant landowner opposed Council’s application was that Council had not complied with its obligations under s715 of the LGA and therefore could not properly exercise its power of sale under s713. Section 715(2) provides that if, before the time fixed for the sale:
“(a) all rates and charges payable (including overdue rates and charges) are paid to the council, or
(b) an arrangement satisfactory to the council for payment of all such rates and charges is entered into by the rateable person,
the council must not proceed with the sale”.
On the day before the auction of the property, the defendant landowner, who had up until the commencement of proceedings masqueraded as the tenant in its dealings with Council, made an offer to pay “$3000 off the rates today and the rest later”. It was submitted on behalf of the defendant that this arrangement should have been sufficient for Council not to proceed with the sale.
The presiding judge rejected this argument and was not satisfied that the actions of the defendant landowner were sufficient to trigger the need for Council to consider whether the offer was a satisfactory arrangement. The Court applied the reasoning in the cases of Quzag v Gunning Shire Council [2005] NSWSC 970 and Annetts v McCann (1990 )CLR 596 and confirmed that what Council determines to be a “satisfactory arrangement” is discretionary, not open to challenge or subject to review.
The Court found that a charge on land under s550 of the LGA is a “mortgage” for the purposes of the RPA, and is therefore created to secure the payment of a debt. The judge affirmed the observations of Brereton J in the case of Anderson v Lismore CityCouncil [2011] NSWSC 1058 and held that Council’s power to sell under s713 of the LGA is akin to a mortgagee’s power of sale, given to Council as creditor to enforce a debt due.
The Court also found that in the circumstances Council was a mortgagee within the meaning of s109(1)(a) of the Conveyancing Act 1919; and that a charge under s550 of the LGA fell within the definition of a mortgage under the Conveyancing Act 1919.
Despite there being no explicit provision in the LGA giving Council entitlement to possession of the land, the Court found that it was entirely consistent with the statutory scheme under the LGA that Council be entitled to obtain possession of the property for the purpose of giving vacant possession to the ultimate purchaser on completion of sale. In any event, s550(2) of the LGA authorises relief via s60 of the RPA, under which Council brought its application.
The Council was successful in its application to obtain possession of the land.
