Karimbla Properties (No 13) Pty Limited v The Council of the City of Sydney; Meriton Apartments Pty Limited v The Council of the City of Sydney; Karimbla Properties

How rates are levied

1. The applicable rate levied for each category is determined by a council to operate within a particular financial year, being a financial year running from 1 July in one year to 30 June of the following year.
2. It is to be observed that rates are levied pursuant to this rating system as a variable charge based on a valuation for rating purposes through a statutory valuation process, a process which reviews those statutory values on a regular basis and makes appropriate adjustments. However, as a consequence of the categorisation process, different percentages of the value of a property are used to strike the rate levy for each property. Relevantly here, rates struck for properties categorised as "residential" have a lower rate levied as a percentage in each dollar of the value than properties that are categorised as "business".
3. As noted, a property which is categorised as "residential" will be liable to pay a lower rate to a council than if the same property was to be categorised as "business". With respect to each of the three properties engaged with these proceedings, the serviced apartment properties had remained categorised as "business" from the time of their construction completion and occupation, when they might otherwise have been amenable to being re-categorised as "residential" (a topic dealt with in Bayside Council v Karimbla Properties (No 3) Pty Ltd (2018) 236 LGERA 1; [2018] NSWCA 257) (Bayside Council).

The specifics of these proceedings

1. These proceedings concern categorisation of three properties within the Sydney City local government area. Each property is owned by a different company in the Meriton Property Development Group.
2. Relevant to each of these proceedings, there is a dispute between each owning company and the Council of the City of Sydney (the Council) concerning the categorisation of that owning company's serviced apartment property for rating purposes. The dispute is, in each instance, not one relating to what is the appropriate category to be declared to be applicable to each property (that being agreed by the Council to be "residential") but the operative date from which a declaration of "residential" categorisation for each property should apply.
3. Although there are three separate owning companies (one in each of the proceedings), the issues are common. Where appropriate, I refer to the owning companies collectively as the "Meriton interests".

The Council's re-categorisations of the properties

1. In each instance, the owning company applied to the Council to re-categorise that company's property from "business" to "residential". The relevant proposed operative dates are later set out in the list of relevant factual information concerning each property.
2. In each instance, the Council determined that the requested re-categorisation should be made for the property. However, it did not accept, in each instance, the operative date proposed by the relevant owning company. The Council determined, in each instance, that the operative date for the re-categorisation should take effect from 1 July 2017 - that is, from the commencement of the 2017-2018 rating year.
3. In each instance, the owning company was dissatisfied with that outcome and has appealed to the Court seeking to have the re-categorisation apply from the operative date sought by each company in its re-categorisation application to the Council. The statutory framework within which the applications arise is later described.
4. Although there is a jurisdictional issue with respect to whether or not one of the appeals was filed within a mandated statutory time period, as later explained it is unnecessary for me to determine that issue given the broader conclusion I have reached that, as a matter of discretion, it would be inappropriate, in each instance, to grant the retrospective operative date for each re-categorisation as sought by each owning company.

The relevant statutory framework

1. In Bayside Council at [79] to [84], Emmett AJA helpfully summarised the relevant elements of the statutory framework here applicable. I gratefully adopt his Honour's summary. He said: 79 Section 520 provides that a council must give notice to each rateable person of the category declared for each parcel of land for which the person is rateable. Relevantly for present purposes, the rateable person is the owner of land, namely, the Landowners. Such a notice must state that the person has the right to apply to the council for a review of the declaration that the land is within the category stated in the notice. Under s 521, a declaration that a parcel of land is within a particular category takes effect from the date specified for that purpose in the declaration. Under s 522, a declaration that a parcel of land is within a particular category ceases when a subsequent declaration concerning the land takes effect. 80 Section 523(1) provides that a council need not review annually a declaration that a parcel of land is within a particular category. However, it may review a declaration as part of a general review of the categorisation of all or a number of parcels of land, or because it has reason to believe that a parcel of land should be differently categorised. Under s 524, a rateable person must notify the council within 30 days after the person's rateable land changes from one category to another. Section 523(2) provides that a council must review a declaration if required to do so by a person who is rateable in respect of the land to which the declaration applies. 81 Under s 525(1), a rateable person may apply to the council at any time for a review of a declaration that the person's rateable land is within a particular category, or to have a person's rateable land declared to be within a particular category. Section 525(2) provides that an application must nominate the category the applicant considers the land should be within. 82 Under s 525(3), the council must declare the land to be within the category nominated in the application unless it has reasonable grounds for believing that the land is not within that category. If the council has reasonable grounds for believing that the land is not within the nominated category, it may, under s 525(4), notify the applicant of any further information it requires in order to be satisfied that the land is within the category. After considering any such information, the council must declare the category for the land. Section 525(5) requires the council to notify the applicant of its decision, which must include the reasons for the decision if it declares the land is not within the category nominated in the application. 83 Section 526 provides that a rateable person who is dissatisfied with the date on which a declaration is specified to take effect, or a declaration of a council under s 525, may appeal to the L&E Court. An appeal must be made within 30 days after the declaration is made. On appeal, the L&E Court may declare the date on which a declaration is to take effect or the category for the land, or both, as the case requires. 84 Under s 527, a council must make an appropriate adjustment of rates paid or payable by a rateable person following a change in category of land.

The obligation to notify the Council

1. As noted above in [80] of Bayside Council, there is an obligation placed on a property owner pursuant to s 524 of the Local Government Act to notify a council within 30 days when any rateable land changes from one category to another.
2. This section is in the following terms: 524 Notice of change of category A rateable person (or the person's agent) must notify the council within 30 days after the person's rateable land changes from one category to another.
3. As can be seen, in terms, this provision expressly mandates notification to the Council of such a triggering event and a time limit within which this obligation must be fulfilled in order to permit the correct rating category to be applied in a timely fashion.

The failures of the Meriton interests to notify the Council

1. In all three instances involved in these proceedings, no approach was made to the Council, pursuant to s 524 of the Local Government Act to effect a re‑categorisation from "business" to "residential" within 30 days of the relevant triggering date. The extent of the delay for each property can be seen from the details set out at [25] to [27] for the various applications made to the Council. The delays cannot be regarded as minor temporal slippages.
2. With respect to two of these properties, the company owning each property had the obligation to do so within 30 days of the date of the relevant triggering event, whilst, in the third instance, ownership was acquired by the present owning company some time (that time difference now being irrelevant) after the relevant triggering event for that property. The ownership change in the third instance is noted in the later-set-out details of the different claims, as is the operative date proposed for that property.

The provision concerning re-categorisation and the Council

1. Unlike the position arising from s 524 of the Local Government Act (where a mandated obligation is placed on the owner of the land to notify the relevant council that a change of category has been triggered), there is no such mandating provision applicable to a council. This is clear from the terms of s 523 of the Local Government Act, a provision in the following terms: 523 When are the declarations of categories reviewed? (1) A council need not annually review a declaration that a parcel of land is within a particular category, but may review a declaration: (a) as part of a general review of the categorisation of all or a number of parcels of land, or (b) because it has reason to believe that a parcel of land should be differently categorised. (2) A council must review a declaration if required to do so in accordance with section 525 by a person who is rateable in respect of a parcel of land to which the declaration applies.

The companies' applications for re-categorisation

1. Each of the owning companies applied to the Council to have the category of its property changed to "residential". Each application was made pursuant to s 525(1) of the Local Government Act. That provision is in the following terms: 525 Application for change of category (1) A rateable person (or the person's agent) may apply to the council at any time: (a) for a review of a declaration that the person's rateable land is within a particular category for the purposes of section 514, or (b) to have the person's rateable land declared to be within a particular category for the purposes of that section.

The Council's power to determine the operative date for a re-categorisation

1. The Council dealt with each application and re-categorised each owning company's property as "residential". The Council determined that the appropriate date from which the re-categorisation was to apply was to be from 1 July 2017, in lieu of the date for which each owning company had contended was appropriate in its re-categorisation application.
2. The Council's re-categorisation declarations and their single operative date were made effective as a consequence of the terms of s 521 of the Local Government Act, a provision in the following terms: 521 When does the declaration of a category take effect? A declaration that a parcel of land is within a particular category takes effect from the date specified for the purpose in the declaration.
3. In each instance, the operative date sought by the owning company was significantly earlier than 1 July 2017.

Introduction

1. In each of the proceedings, the present owning company had applied for a variation of the date from which the Council's re-categorisation determination commenced to operate. There is no common, earlier date sought in the three proceedings, with the extent of retrospectivity varying from a little over four years to nearly 12 years. I set out below the details of each of the three claims and the owning company now seeking a retrospective operative date on appeal.
2. The Campbell Street property - Matter No 350949 of 2017 Name of Company Address of property Date from which currently seeking to be re-categorised Date on which applied to be re-categorised for current purposes Date on which change in categorisation occurred Total amount of money sought to be repaid Karimbla Properties (No 25) Pty Limited 4-10 Campbell Street 15 May 2013 28 September 2017 1 July 2017 $410,694.34 Haymarket ***

*** The previous owner (Karimbla Properties (No 2)) had applied, on 9 June 2017, to have the land re-categorised, seeking re-categorisation to take effect from 18 November 2011. 15 May 2013 is when Karimbla Properties (No 25) purchased the property.

1. The Pitt Street property - Matter No 226551 of 2017 Name of Company Address of property Date from which currently seeking to be re-categorised Date on which applied to be re-categorised for current purposes Date on which change in categorisation occurred Total amount of money sought to be repaid Karimbla Properties (No 13) Pty Limited 329 Pitt Street 12 April 2011 9 June 2017 1 July 2017 $897,887.62 Sydney

1. The Liverpool Street property - Matter No 226569 of 2017 Name of Company Address of property Date from which currently seeking to be re-categorised Date on which applied to be re-categorised for current purposes Date on which change in categorisation occurred Total amount of money sought to be repaid Meriton Apartments Pty Limited 95 Liverpool Street 1 September 2005 9 June 2017 1 July 2017 $1,634,976.36 Sydney

1. The amount said to be the relevant overpayment is also shown in the above tables.

The issue of adjustment

1. In addition, there is a dispute between each owning company and the Council as to whether or not, if I was to conclude that an adjustment was triggered, what would be needed because of the operation of s 527 of the Local Government Act. This dispute would require determination of whether or not I had the power to determine how that adjustment should be made (particularly, whether I had the power to order the Council to repay the relevant amount to the relevant owning company).
2. The amount that would be required to be made as an adjustment to the rates paid pursuant to s 527 of the Local Government Act would total a little over $2.94 million.
3. This issue arises because Sheahan J had held, in Karimbla Properties v Council of the City of Sydney; Bayside City Council; and North Sydney Council [2017] NSWLEC 75 at [107] to [124], that this Court did have such a power. It is to be noted however that, in Bayside Council at [152], Emmett AJA indicated his reservation as to whether such a power was available to this Court but indicated that, given the overall outcome of those proceedings, that issue did not require to be determined.
4. Given the conclusion that I have reached, that each appeal should be dismissed on discretionary grounds, it is unnecessary to express any view on this point.

The rights of appeal of each company

1. It is sufficient, at this point, to note that, although each property is presently categorised as "residential", each owning company has commenced proceedings pursuant to s 526(1)(a) of the Local Government Act seeking to have the Court impose an earlier effective date for the re-categorisation from "business" to "residential" than the Council had determined is appropriate. The terms of this provision are: 526 Appeal against declaration of category (1) A rateable person who is dissatisfied with: (a) the date on which a declaration is specified, under section 521, to take effect, or (b) …, may appeal to the Land and Environment Court. (2) An appeal must be made within 30 days after the declaration is made. (3) The Court, on an appeal, may declare the date on which a declaration is to take effect or the category for the land, or both, as the case requires.

The issues in dispute

1. The issues in the proceedings can be summarised as being: 1. What operative date for re-categorisation of each property should apply if I am satisfied that it is appropriate to disturb the date determined by the Council of 1 July 2017. Although the Council concedes that, in at least the cases concerning the Pitt Street property and the Liverpool Street property, a minor earlier adjustment might be made, it is not necessary for me to address this proposition, given the broad conclusion I have otherwise reached; 2. Whether I would have the power, on the basis of s 527 of the Local Government Act, to order a refund be made to the relevant owning company of the amount set out in the relevant table at [26] to [28] above; and 3. The extent (if any) to which the Recovery of Imposts Act 1963 might apply in such circumstances. It is to be noted that, given the conclusion I have reached as to why each proceedings should be dismissed, it is unnecessary to consider this issue.

The question of discretion engaged by s 526(3) of the Local Government Act

Introduction

1. I am satisfied that the appropriate course to follow is that I should take each owning company's case at its highest, ignoring any jurisdictional issues, and proceed direct to the consideration of discretionary matters. I do this, as I am satisfied that, on a discretionary basis in each instance, it is not appropriate for me to make the order sought by each owning company.
2. Although it was submitted on behalf of the Meriton interests that questions of discretion had not been pleaded in the various Agreed Statements of Issues, I put Mr McEwen on notice from early on the first day of the hearing (at least from Transcript, 18 June 2019, page 27, line 24) that matters of discretion were of concern to me and did require to be addressed.
3. This requirement for discretionary consideration arises from the terms of s 526(3) set out above where it is made clear that I may determine an earlier date for which a re-categorisation declaration should be operative but I am not mandated to do so.

The parties' submissions

1. Mr McEwen SC, for the Meriton interests, relies on Pain J's finding in Meriton Apartments Pty Limited v Parramatta City Council [2003] NSWLEC 309 (Meriton v Parramatta), at [34], to advance the proposition that s 526(3) does not fetter the Court's discretion in any way. Her Honour's finding is set out below: 34 Section 526(3) does not fetter the Court's discretion in any way. It states: the Court, on an appeal, may declare the date on which a declaration is to take effect or the category for the land, or both, as the case requires. Section 525 provides that a rateable person can apply to the Council at any time for a review. The fact that an application can be made at any time and that there is a 30 day limit for an appeal to be lodged under s 526(2) should not be interpreted as limiting the period of a declaration made by the Court to the date of the application for review made to the Council. Nothing in the legislation suggests such a limitation should be applied. How the Court's discretion is exercised in making any declaration sought will depend on the circumstances of each case. If the circumstances warrant a change in the rating category I consider it would generally be appropriate to make such a change from the time sought in the absence of any "disentitling" conduct by an applicant. It is not necessary to consider the issue of unjust enrichment raised by Meriton's submissions. In this case there is no reason why the Court's discretion should not be exercised to make a declaration commencing from 1 July 2002.
2. Mr McEwen also made the following submission regarding that paragraph of Pain J's judgment (Transcript, 18 June 2019, page 28, line 45 to page 29, line 2): Her Honour in that matter did not regard as any disentitling conduct of the fact that there had been a late application that brought for a change in the category of the land. So we say there is no relevant fetter of the Court's discretion in 526(3). And indeed, your Honour, it would be difficult to find an appropriate source for the power in 526(3) to make a declaration as to the date on which it is to take effect or the category or both, as the case requires, if it were not correct to say - as we submit it is - that the date is critical.
3. In the quoted paragraph, Pain J found that nothing in the legislation suggesting a limitation on when the Court could exercise discretion in making a declaration sought absent disentitling conduct by the applicant in those proceedings.
4. It appears from the judgment that her Honour had not been taken to s 524 of the Local Government Act. The list of sections of the Local Government Act said to be referred to in her Honour's decision did not include s 524. There is no express or implied mention of this provision in the body of her judgment. It follows that her Honour did not consider whether a failure to notify as required by s 524 of the Local Government Act could give rise to a conclusion of disentitlement.
5. On this basis, her Honour's decision is to be distinguished from the current proceedings, where the Council presses that the obligations arising from s 524 which fell on each owning company had not been met; were necessary to have been met; and the failure should be regarded as disentitling.
6. Therefore, I do not accept the submission of Mr McEwen that her Honour's finding, in [34] in Meriton v Parramatta, is applicable and it is not necessary to be applied in each of these current proceedings.
7. Mr McEwen further submitted that (Transcript, 18 June 2019, page 44, lines 4 to 10): This is not a case of the category changing. It's a case of the category always should have been residential. So that we say there is a distinction there - the fact that the parties and each of them did not - in the applicant's case - enforce its rights, and in the respondent's case, did not undertake its obligations by reference to the scheme of the Act in observing that being used for the purposes of service apartments should zoned it - should have categorised it as residential.
8. Mr Clay SC, for the Council, unsurprisingly took a diametrically opposite position to that advanced by Mr McEwen. Mr Clay submitted (Transcript, 18 June 2019, page 50, lines 34 to 43): Now, it was somewhat boldly said, in my respectful submission, that council had an obligation to categorise in a particular way. But that's plainly not what the Act says. There is undoubtably an obligation on a landowner under s 524 to notify the council when it changes from one category to another. What is plain, as I went through before, is under s 523, what the obligations of council are. "Council need not annually review a declaration, but may" - may, not must - "but may review a declaration as part of a general review, or because it has reason to believe that a parcel of land should be differently categorised". And under (2), "The only obligation to review is in response to an application under s 525".
9. Mr Clay also submitted that I did not have the jurisdiction to make the declaration of the operative date sought by relevant owning company. His submission was in the following terms (Transcript, 18 June 2019, page 11, lines 29 to 48): The relief available under 526(3) is consequential, as distinct from substantive, and what the applicant wants to do here is to turn the relief in 526(3) to a matter of substance, where that substance - that is, creating - the right of appeal must be limited to the application made under 525, and where the 525 relates only to the category - can't use a 525 application and a consequential power in relation to the declaration of the date, to turn the appeal into something which doesn't exist. That is, the date upon which a declaration should have effect. And that is consistent with the whole language of using the present tense, and why there must be a consequence of nominating a date is because if the appeal succeeds and it returns to a previous category, then 521 says you need to put in a date. And the case may require - ie, an appeal succeeds. And remembering that the beginning of (3) identifies by reference to (1)(a) and(1)(b) - declare the date - it's an appeal in respect of the date, or the category for the land. That's an appeal under 525(1)(b). And then "or both, as the case requires". The case would require, when one is changing a category, the new declaration would nominate the date. And that's a power - a consequential power - rather than creating a substantive right. The substantive right is created by 525.

Introduction

1. I am unable to accept Mr Clay's jurisdictional submission. Mr McEwen's submissions are to be preferred on the broad nature of the discretion given by s 526(3) - but I do not accept what he submits is the consequence to arise from this.
2. I have reached this conclusion concerning Mr Clay's submission because s 526(1)(a) specifically provides for a right of appeal against the operative date upon which a declaration that land is to be re-categorised in a fashion for which an application has been made. The present appeals are four-square within the scope of this provision. The appeal provision is not, in its terms, confined to one that is confined to addressing the nature of characterisation itself. The first specific element of the provision noted does engage with the question of the operative date of such a declaration and the right to appeal against a Council's declaration of such a date when it is not acceptable to an applicant for re-categorisation. This is made clear by the express terms of s 526(1)(a) earlier set out.
3. However, that is not the end of the matter. This is as a consequence of the terms of s 526(3), a provision also earlier set out.
4. This provision expressly vests in the Court, when determining such an appeal, discretion as to what should be the operative date upon which a re‑categorisation declaration should take effect. The provision's terms are not confined and they make it clear that I may determine an earlier date than that which has been adopted by the Council in each re-categorisation declaration. However, it is also clear that I am not mandated to do so. It is necessary for me to consider relevant factors which arise to be weighed in determining whether or not to exercise the discretion in favour of the operative date proposed by the owning company in its relevant proceedings.

The necessary consequence of retrospective re-categorisation

1. The Local Government Act mandates the consequences of a re‑categorisation. It does so in s 527, a provision in the following terms: A council must make an appropriate adjustment of rates paid or payable by a rateable person following a change in category of land.
2. Although there is a dispute between the Meriton interests and the Council as to whether or not this Court has any power to determine how the consequences of any retrospective reclassification should be effected, there can be no doubt that there would be financial consequences for the Council of any change to the present operative date, in each instance, of the category of the relevant site being changed from "business" to "residential".
3. It is sufficient, for present purposes, to note that, if the position of all three companies is accepted and adopted, the total claimed by the companies as the Council's liability to them collectively is of the order of $2.94 million. The precise individual detail of the asserted Council liability, in each instance, if that company was successful, was set out earlier in the details of the claim for each property.
4. It is clear that, however effected, if I was to make a retrospective adjustment to the re-categorisation operative date in each instance, it would be necessary for the Council to make revenue adjustments in some fashion totalling the noted overall amount in favour of the Meriton interests.
5. These changes, over time, are, in my assessment, a matter of determinative significance in my consideration as to whether or not (on the assumption that the Meriton interests' cases on antecedent points should be taken at its highest) to exercise discretion pursuant to s 526(3) of the Local Government Act and order retrospective re-categorisation in each of the three proceedings I am here determining.

The absence of explanations

1. I have earlier set out the sequence of statutory provisions requiring consideration in these proceedings. For the purposes of discussion leading to the disposition of the proceedings, it is first appropriate to repeat the terms of s 524 of the Local Government Act. This provision reads: 524 Notice of change of category A rateable person (or the person's agent) must notify the council within 30 days after the person's rateable land changes from one category to another.
2. During the course of the first day of the hearing of these matters, I enquired of Mr McEwen what evidence there was explaining why there had been no notifications to the Council, for each of the properties, as mandated by this statutory provision. The transcript records the following exchange (Transcript, 18 June 2019, page 38, line 39 to page 39, line 32): HIS HONOUR: Is there any evidence as to why the claim was not made? MCEWEN: There is no evidence of that matter, your Honour. The application was made when it was made. There is no evidence one way or the other as to why the application was not made. There is in the same way as there was no evidence before your Honour as to why the - given that plainly the council was aware that the property was being operated as serviced apartments - why the council did not categorise it as residential when - HIS HONOUR: I understand that. I mean, I may well be asking Mr Clay the same question in a slightly obverse fashion shortly. MCEWEN: Yes. HIS HONOUR: But, I mean, conventionally in other types of proceedings, one would say, "Please explain the delay". MCEWEN: Yes. HIS HONOUR: And that's why I say to you, I'm going to ask Mr Clay as well, is there any evidence from his side as to why - that explains that delay. Now if there is what one might describe as an equality of guilt or inadvertence, then they may cancel each other out. That's just - I'm simply putting the proposition to explore now that those are matters to be equally engaged on a 526(3) discretion, that are irrelevant on the appropriate adjustment question, it seems to me. MCEWEN: Yes, your Honour. I accept that, and I agree with your Honour we should deal with that exercise of the discretion under 526(3) on the assumption that your Honour was with the applicant in respect of that - HIS HONOUR: Power. MCEWEN: --respect of that power, correct. Your Honour, the next question is whether the Court has power under s 527 to make an order for adjustment and repayment of rates. In the applicant's primary submissions, we address this firstly at paras 25 to 28. We rely upon the decision of Sheahan J at first instance in Bayside, and we observe that the Court of Appeal did not overturn that finding. We identify further in our reply submissions at para 11, and we put forward the proposition which I know your Honour is fully familiar with, that it needs to be demonstrated that the decision of Sheahan J was plainly wrong, rather than there being some strong disagreement. And we refer your Honour in para 11 to the decision of Pepper J in The Fullerton Cove Resident Action Group, where she summarised the position…
3. As can be seen, Mr McEwen made no direct response to my request for an explanation as to why the Meriton interests had not complied with their mandated obligations arising from s 524 of the Local Government Act.
4. On the second day of the hearing, I returned to this point. The transcript records (Transcript, 19 June 2019, page 1, lines 22 to 28): HIS HONOUR: So I just want to confirm that my note made yesterday that there is no evidence with respect to each of the three proceedings explaining why there was a delay until the relevant dates in making the re-categorisation applications to Mr Clay's client. MCEWEN: Yes, the only conclusion your Honour would reach would be it must have been an oversight by my client in understanding the position.
5. It is, therefore, the acknowledged position on behalf of each of the Meriton interests that there is no evidence explaining why there has been a failure by the relevant corporate entity to comply with the express statutory obligation created by s 524 of the Local Government Act to notify the Council, within the statutorily mandated time in each instance, of the change in circumstances that warranted re-categorisation of the relevant property.
6. On the other hand, I have also earlier reproduced the terms of s 523 of the Local Government Act, this being the provision that makes it clear that the Council has no mandated responsibility to undertake investigative processes concerning whether instances of re-categorisation of any particular property within the Council's local government area was warranted.
7. Whilst it is clear that the statute permits the Council to undertake such a process should the Council consider that there is some reason why it should do so in a particular instance or instances, the statute certainly does not require the Council to do so.

Consideration of discretion

1. In the Council's written submissions (in the Pitt Street proceedings), the following was said, at [25] to [27]: 25 However, in the present case, the Applicant's failure to notify the Council, and the financial consequences of that failure, is explained in the affidavit of Suzanne Flynn affirmed 21 May 2019 (Flynn). As Ms Flynn explains at [9] of that affidavit, if a ratable person fails to notify the Council of a change in rating category that will lower its amount payable until the following year's rates are levied, and if the Council is required to then alter the full levy for the current year or even prior years, then the opportunity for the Council to achieve its total permissible income from across its rating base is forever lost. There is no provision to catch-up income lost as a result of category changes. This in turn impacts adversely upon the Council's carefully calibrated long term financial capacity to continue delivering high quality services, facilities and infrastructure to the community: Flynn [11]-[12]. 26 That financial harm will befall the Council in the present case because of the Applicant's failure to notify the Council of a change in rating category until 28 September 2017 when the Request was made (despite on its own case, the change occurred as early as 27 February 2012, the date the final occupation certificate was issued). The Applicant failed to so notify the Council of this change despite that rates notices for the Land stating at all material times that if the rating category changes, the Applicant was required to notify the Council within thirty days: Flynn [10]; see also the rate notices in the Respondent's Bundle of Documents filed on 3 June 2019. 27 In those circumstances, the Court ought find the Applicant's failure to notify to be conduct disentitling it from receiving the benefit of a refund on the terms of Order 3 sought in the Class 3 Application.
2. Although not set out in precisely the same paragraph numbers in each proceedings (as matters of detail and, hence, paragraph numbering differed between them), the Council's submissions in substance were the same in each instance.
3. The owning company's reply submissions (concerning the Pitt Street property) dealt with these elements of the Council's submissions in the following terms: 2 In reply to RS [21], the Respondent appears to accept that, if the Applicant's contentions in relation to the other issues are accepted, and there are no discretionary reasons to decline the relief sought, that the choice between 12 April 2011 and 9 June 2017 is that the 12 April 2011 date is appropriate. 3 The only issue that appears to arise in relation to the first issue and the second issue, as is apparent from the Respondent's submissions, relates to discretion. However, the propositions which the respondent puts at RS [25]-[26] are not identified or pleaded in its Amended Statement of Facts and Contentions. Discretion is not pleaded. The Respondent ought not be permitted to raise these matters as the Applicant has been denied the opportunity to respond with any appropriate evidence. 4 A similar argument was put in Bayside First Instance. The argument was put in reliance on evidence of the same kind identified and discussed in RS [25] and [26]. The position in the present appeal is therefore no different to that position argued in Bayside First Instance, and it was rejected by the Court. Accordingly, for the reasons set out in Bayside First Instance, there are no valid discretionary reasons to decline relief.
4. Although dealing with the issue of refund, the above submissions are equally applicable to the broader discretion issue.
5. In Bayside at first instance, Sheahan J dealt with the question of discretion that arises from the interrelationship between ss 524 and 526(3) of the Local Government Act. He said, at [125] to [127]: 125 The applicants concede their failures to notify within 30 days (s 524), and that any such failure might enliven the Court's exercise of discretion, but they point out, correctly, that no prejudice to any council has been the subject of evidence. 126 However, the respondents counter that a council on a 12-month financial cycle would self-evidently be prejudiced by having to find the resources in the current year to refund possibly a substantial sum accumulated over a number of previous years, particularly when they argue the difficulty in the so-called "catch-up" provisions (ss 511 and 511A). Councils' orderly financial management arrangements will be disrupted. 127 I do not find the applicants' failure to notify to be "disentitling conduct" in this case. It has proven to be a costly oversight in some of the cases; it is often not adequately explained; and it possibly dates from 2009, but I do not accept that it ought disqualify the applicants from a refund.
6. As a consequence of the Court of Appeal setting aside his Honour's primary finding - the finding that led to his Honour's consideration of discretion and the above passage from his Honour's decision - the Court of Appeal did not need to address, amongst other matters, the issue of discretion as it did not become engaged.
7. His Honour's reasoning in the above paragraphs is brief and it does not appear that he interrogated the Meriton interests involved in those proceedings as to why there had been a failure to comply with the mandated requirements of s 524 of the Local Government Act.
8. It is also clear, from [127] of his Honour's decision, that he was making an express finding based on the factual circumstances of those proceedings. As a consequence, I do not consider that I am, in any way, bound to follow his conclusion as a matter of comity as the facts and circumstances in these proceedings have embraced matters of broader consideration.

Conclusion on discretion

1. Although, in strictly formal terms, the financial burden of any rate readjustment in favour of the Meriton interests, pursuant to s 527 of the Local Government Act, would fall on the legal entity, the Council of the City of Sydney, as a matter of practical effect a different position applies on a correct understanding of the position.
2. I have reached the conclusion, as a matter of discretion, that it is not appropriate to grant the varying degrees of retrospectivity sought by each of the owning companies. It is sufficient for me to have explained (as I have earlier done) why I am satisfied that I would have the power to make such a retrospective operative determination in each instance and to assume, for these purposes, that there were no other statutory impediments to me doing so.
3. There can be no doubt that the rating base or rate roll (the properties within the boundaries of the City of Sydney local government area liable to pay rates to the Council) comprises a dynamic and constantly shifting list of individuals or entities upon whom the rate-raising financial burden falls from time to time. The composition of this rate roll will vary, not only as a consequence of changes in ownership of properties within the Council's local government area, but also any re-categorisations which might arise as a result of ongoing development/redevelopment activities within that area.
4. Although there is no evidence in these proceedings as to the precise extent, over time, of the compositional change of the rating base, it is not necessary to have, for these purposes, information on this of any precision. It is sufficient to make the assumption (as I do) that such changes will not be insignificant ones.
5. In adopting this approach, I take the statutory case as advanced by the Meriton interests at its highest (although disregarding, as it does not become engaged in light of my discretionary conclusion, the question of what power, if any, might be available to this Court arising out of s 527 of the Local Government Act concerning adjustments as my conclusion on discretion means that no adjustment becomes necessary).
6. Although I have some limited evidence as to the extent to which the Council might have the potential to absorb the impact of such adjustmentowning as might be required to be effected as a consequence of s 527 of the Local Government Act, if I was to find that any or all of the retrospective re‑categorisation was appropriate to be mandated as a matter of discretion because the Council could:

• spread any adjustment over a number of future years; and/or
• make upward adjustments to ad valorem rates (in a fashion about which I do not need to speculate) within the rate-capping limit imposed on the Council by State government policy, this position, it seems to me, although a factor to be considered on the exercise of discretion, it is a factor that is but of limited assistance to the Meriton interests in this regard.

1. This position arises because, I am satisfied it is appropriate to assume, the revenue raised by the Council over the various periods of time since each of the owning companies failed to comply with its relevant statutory duty pursuant to s 524 of the Local Government Act, the Council's total rate revenue for each year has been appropriately dealt with through the Council's budgetary processes and either expended or accumulated for purposes consistent with the Council's functions and responsibilities with which it is charged by the Local Government Act and by other relevant enactments.
2. To the extent that adjustment would be required to be effected, if retrospective re-categorisation was granted to any or all of the owning companies involved in these proceedings, could have the fiscal consequences of such adjustment accommodated by future council budgetary positions addresses only the power to follow that path, rather than the appropriateness of the Council needing to follow that path.
3. It seems to me that if the consequence of these proceedings was to be the necessity for some budgetary adjustment by the Council of up to approximately $2.94 million, such adjustment would result in unacceptable negative impacts to that extent because:

• the Council's ability to deliver services to its ratepayers and/or discharge its other statutory functions in future would be diminished to the extent of $2.94 million spread over one or more years; or
• the Council would need to increase the rates on other current or future ratepayers over that period of such forward adjustments being made in order to compensate the Council's revenues (and thus maintain services) for what would otherwise be the revenue that would have accrued to the Council had such s 527 mandated adjustments not been required to be effected.

1. Each owning company proposed, in its written submissions, that the earlier quoted observations by Sheahan J were applicable and that any disruption to Council finances occasioned by an adjustment of rates under s 527 of the Local Government Act ought not trump each owning company's right to the proper assessment and levying of rates according to the appropriate rating category.
2. In this context, although the additional burden which might be imposed on individual ratepayers might be comparatively modest, it is nonetheless appropriate to have regard to the fact that the consequences of the necessity for future adjustment, in some fashion, would fall, either indirectly or directly, on all ratepayers in the Council's local government area.
3. Had the Meriton interests each made a timely application, as mandated by s 524 of the Local Government Act, the Council would have been able to plan for future consequences of that and how that should fall on its then existing rate base. The Council has been denied that opportunity solely because of the entirely unexplained failure of each owning company to meet its statutory obligation to inform the Council.
4. That the Council should now be required, if I was to make each retrospective operative re-categorisation date sought by an owning company, to adjust its future rating to accommodate the consequences of unexplained delays of varying between some four and twelve years and imposing that burden on the present rate roll of the Council is simply inappropriate. In the complete absence of any evidence as to why the Meriton interests were dilatory (or extremely so) in the discharge of their statutory duty pursuant to s 524 of the Local Government Act, I am satisfied that it would be inappropriate to exercise discretion in favour of any of the owning companies.
5. It therefore follows that each appeal should be dismissed.

Orders

1. In Matter No 226551 of 2017, the orders of the Court are: 1. The application for earlier operation than 1 July 2017 of the date of re‑categorisation of 329 Pitt Street, Sydney from "business" to "residential" is refused: and 2. Costs are reserved.
2. In Matter No 226569 of 2017, the orders of the Court are: 1. The application for earlier operation than 1 July 2017 of the date of re‑categorisation of 95 Liverpool Street, Sydney from "business" to "residential" is refused: and 2. Costs are reserved.
3. In Matter No 350949 of 2017, the orders of the Court are: 1. The application for earlier operation than 1 July 2017 of the date of re‑categorisation of 4-10 Campbell Street, Haymarket from "business" to "residential" is refused: and 2. Costs are reserved.

Amendments 18 October 2019 - Amendment of typographical error nominating s 256(3) in the Table of Contents and at page 14, in the heading 'The question of discretion engaged by ...', rather than s 526(3).

Amended 18 October 2019. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 October 2019