Landowners win against council in rating categorisation dispute

In a major win for the owners of two Bunnings warehouses in Ipswich, the Court of Appeal has held that the Ipswich City Council wrongly categorised their properties for rating purposes. The decision highlights the financial impact, as well as the difficulties, that can arise in applying differential rating categories to land.

The long running dispute in BWP Management Limited & Anor v Ipswich City Council [2020] QCA 104 dates back to the council’s 2015-2016 budget.

From each of the appellant’s respective land at Springfield and West Ipswich, a Bunnings retail business was operated from a standalone warehouse with substantial parking – a not unfamiliar weekend sight for many of us (although at the time, presumably a ‘Bunnings sausage’ could safely be consumed and there was far less queuing).

At the heart of the dispute was whether the properties were a single shop or a shopping centre as defined by the rating categories adopted by the council.

Known as ‘differential rates’, councils in Queensland have the power to levy general rates that differ for different categories of rateable land. Governed by the Local Government Act and regulation, in order to do so, councils must decide the different rating categories and provide a description for each category.

Property owners have no right to object against the rating categories or the amount of rates levied on each category by councils.

Owners however have the limited right to object on the basis that the owner considers the land should belong to a different rating category.

The Bunnings Warehouses

For the 2015-2016 budget, the council categorised both Bunnings properties as ‘Category 52a’ Drive-In-Shopping Centre.

The description for a category 52a property is one “which meets all of the following criteria:

1. 1. Has any of the Primary Council Land Use Codes for this rating category
   2. Is primarily for a drive-in shopping centre with a GLA of 10,000m² to less than 20,000m²
   3. Has a land area of less than 200,000m².”

A “drive-in shopping centre” was defined in the 2015-2016 budget as “a premises or cluster of premises that:

1. 1. Is used wholly or predominately for carrying out a retail business; and
   2. Is contained within one or more buildings or structures on one or more levels; and
   3. Provides off-street parking for customer vehicles.”

It was not disputed that the predominant use of both properties was a “retail business”.

However, the owners both argued that their properties should more correctly be categorised as ‘Category 44b’ Shop – Single. A ‘Category 44b’ property is described as “Land used for a commercial purpose with a rateable value of $5,000,000 or greater” which included the description of “land that meets the criteria:

1. 1. Has any of the Primary Council Land Use Codes for this rating category
   2. Is primarily for a commercial use
   3. Has a rateable value of $5,000,000 or greater.”

One of Primary Council Land Use Codes (PCLUC) for this category is ‘Shop – Single’.

Single Shop v Shopping Centre

The council initially refused the owners’ objections following which the owners successfully appealed to the Land Court.

In the Land Court, the Member:

• Said the properties both fell “squarely within all the elements of Category 44b, PCLUC 11 Shop – Single”.
• Said a single business would not be a shopping centre as that term is commonly used, but common usage was irrelevant due to the specific definition in the Budget and was satisfied that a single shop could be Drive-In-Shopping Centre and “that there was no doubt that each Bunnings falls within Category 52a”.
• Determined that where two categories could apply, the ‘deadlock’ was to be “resolved by an outcome that has the least impact on the taxpayer” and therefore found that the category for the property should be changed to Category 44b.

The council then appealed to the Land Appeal Court which overturned the Land Court’s decision.

Land Appeal Court

The Land Appeal Court determined:

• there could only be one category and therefore there was no ‘deadlock’;
• that where “conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions”;
• in order to reconcile that conflict the court must “determine which is the leading provision and which the subordinate” and had regard to:
  • “Drive-In-Shopping Centre” was a defined term, whereas “Shop – Single” was not;
  • there were 31 Primary Council Land Use Codes identified for Category 44b but only 10 rating categories for Drive-In Shopping Centre with only the gross lettable area and the land area distinguishing those categories; and
  • the “obvious point of distinction” being the requirement for off-street car parking; and
• that Category 44b was a more general provision which “should give way” to the more specific Category 52a.

The owners of both properties appealed the decision of the Land Appeal Court to the Court of Appeal.

Court of Appeal

The Court of Appeal held that it was necessary to resolve the dispute by implying a qualification to the words of one of the Primary Council Land Use Code or the other adopted by the council. This came down to a choice between:

• implying the expression ‘Shop – Single’ to not include a shop with off-street carparking for customers (council position); or
• implying that a drive-in shopping centre as defined does not include a single shop (owners’ position).

In a unanimous decision and a significant win for the owners, the Court of Appeal:

• considered it was unlikely intended that a single shop with no car spaces as opposed to a single shop with only one or two car spaces was intended to be a “critical distinction”;
• examined the notion that “the ordinary meaning of a defined word or expression… may properly influence, or colour, the interpretation of the definition” and the use of the expression “drive-in shopping centre” was of relevance in identifying the categories;
• concluded that the relevant “intent” of the instrument was to “distinguish between land which is principally used for a single shop and land which is principally used for purposes involving more than a single shop”; and
• determined that the properties are within Category 44b being Shop – Single.

The Court of Appeal also ordered that the council pay the owners’ legal costs in the proceedings in the Court of Appeal, Land Appeal Court and Land Court.

Key takeaway

Queensland’s differential rating system provides councils with a broad discretion to determine different rating categories with differing amounts of rates. Councils, however, need to carefully consider the language used in defining the different rating categories as the consequences of overlap can have costly implications.

The protracted litigation concerning whether Bunnings warehouses were a single shop or shopping centre as defined under the council’s budget shows that while these documents may not be drafted with the same precision as legislation, they are subject to the same rules of statutory interpretation and it is essential that councils ensure that their differential rating categories are precisely defined.

For property owners, if you believe your property is in the wrong rating category, you should consider lodging an objection as the financial impacts are potentially substantial.

Authored by:

Stafford Hopewell, Partner
Gail Black, Partner