Recovering Statutory Debts in Victoria: A Practical Guide for Councils
Victorian municipal councils regularly undertake works and incur expenses in circumstances where legislation permits those costs to be recovered from a responsible person. This may occur where a landowner fails to comply with a statutory notice, where a council undertakes works to address a public safety issue, or where a person's failure to comply with a legislative obligation requires council intervention.
Recovering a statutory debt requires the careful observation of the procedural requirements contained in the relevant statute to ensure the relevant power has been properly exercised. Strict compliance with the legislation is often required.
This article provides a practical overview of the key issues councils should consider when seeking to recover statutory debts.
What is a statutory debt?
A statutory debt is an amount recoverable because legislation provides for such. This differs from an ordinary civil debt, where liability usually arises from a contractual relationship between parties.
Although the recovery process may ultimately involve civil proceedings, the foundation of the claim is the statutory provision creating the entitlement to recover.
Identifying the statutory basis for recovery
Before commencing recovery action, councils must identify the precise statutory basis on which the debt is claimed. Key questions include:
What provision authorises the council to incur the expense?
What provision permits council to recover that expense?
Who is liable for payment?
When does the debt arise?
Are there any pre-conditions for recovery (for instance, notice requirements)?
The precise wording of the relevant legislation is critical to all of the above considerations. As the recoverability of a statutory debt often depends on the validity of the steps taken before the debt arises, council needs to understand and comply with the procedural requirements from the outset (i.e. before they incur any expense). A council that fails to comply with procedural requirements may find itself unable to recover costs, even where the underlying works were reasonable and necessary.
Maintaining clear records and evidence throughout the process is an essential part of demonstrating compliance with the statutory power being relied on.
Commencing recovery proceedings
Where payment is not made voluntarily, councils may commence civil proceedings to recover the statutory debt. Councils should ensure they can produce evidence supporting both liability and quantum. The ability to demonstrate clearly the basis for the debt and the quantum of the debt often determines whether a claim resolves efficiently or becomes the subject of contested litigation.
Council statutory debt claims commonly face the following challenges in relation to liability and quantum:
Whether the council had authority to act:
A defendant may argue that the council did not have power to undertake the works, or that the statutory pre-conditions were not satisfied. This highlights the importance of ensuring the legislative pathway is clearly established and precisely followed before any works commence which recovery is to be later pursued.
Whether the costs are recoverable:
A respondent may dispute whether particular expenses fall within the statutory entitlement. Councils should carefully distinguish between costs directly associated with undertaking the works and broader administrative expenses that may not be recoverable.
Whether the costs are reasonable:
Even where liability is established, the amount claimed may be challenged. Councils should maintain sufficient documentation to explain why works were necessary, how contractors were selected, and how costs were calculated.
Unpaid Rates Debt Regime
Unpaid rates is a common type of statutory liability owed by landowners to council with its own unique statutory regime, including its own recovery mechanisms which recognise a connection between the liability and the land itself.
That specialised regime imposes quite strict procedural preconditions, which are far more onerous than those applying to many other statutory debts.
For example, under Part 8 the Local Government Act 1989 (Vic) (which remains in force and has not yet been repealed by the Local Government Act 2020 (Vic)), a council must not commence court proceedings to recover unpaid rates unless:
it has first notified the ratepayer in writing of the arrears and advised of available payment options, including deferrals and payment plans; and
at least 24 months have elapsed since that notification.
Further, before a council can exercise its powers to sell land to recover a rates debt, the arrears must be not less than three years old.
Given these timing requirements, it is imperative that councils ensure that its processes and record keeping are well refined so that they do not find themselves in a the regrettable position of trying to enforce a rates debt years down the track, only to receive advice that they have not strictly complied with their notice obligations, effectively restarting the clock on what is already a lengthy process.
Conclusion
Statutory debt recovery is an important mechanism allowing councils to recover expenditure incurred in performing essential regulatory functions. However, recovery depends on more than establishing that a council incurred costs. The statutory foundation for the claim must be identified, procedural requirements must be followed, and the amount claimed must be capable of proof.
For councils, the most effective recovery strategy begins at the earliest stage of the enforcement process. Properly drafted notices, accurate record-keeping and careful consideration of the statutory framework will significantly improve the prospects of successful recovery.
For more information, please contact:
James Hickey
Associate
T 03 5225 239
E jhickey@ha.legal
Ali Erskine
Principal
M 0419 884 992 | T 03 5225 5208
E aerskine@ha.legal
