The Year of the ‘Sovereign Citizen’ - Guidance for Finance and Rating Staff

12 October 2023

Some of our readers may remember or at least heard of, the numerous challenges in or around 2007 about council powers to declare rates, based on constitutional grounds.

The Supreme Court of South Australia in Maurici & Anor v the State of South Australia [2008] SASC 145 considered a representative action, where a group of ratepayers who were refusing to pay council rates, challenged the validity of the powers to impose and recover rates. The claim was dismissed on the grounds that there was no reasonable basis for the challenge. The decision, by Burley J affirmed that councils were acting within their powers and in accordance with law in requiring the ratepayers to pay their council rates, fines and interest.

Now, with some sense of déjà vu, 2023 appears to be the year of the ‘Sovereign Citizen’ being people challenging councils rate declaration powers and refusing to pay rates and charges. The common grounds are:

1. the ratepayer has not entered into a contract with the council and has never agreed to sign any contract;
2. the Corporations Act 2001 and The Bills of Exchange Act 1909 apply;
3. the rates notice is not legally binding; and
4. rates are unlawful and illegal.

Based on the above reasoning, a number of councils have been inundated with baseless correspondence demanding that a response be provided.

The correspondence that we have seen indicates a fundamental misunderstanding of the law and the legislative rating framework in particular. However, regardless of the reasoned explanations provided by councils, seeking to inform and educate the ratepayers, there is continuing refusal to pay rates. This has, of course, placed councils in the position whereby they have had no option but to commence debt recovery proceedings, usually in the minor civil jurisdiction of the Magistrates’ Court. However, this is a jurisdiction that permits legal representation only in special circumstances. The result being that council officers are being required to appear on behalf of their council, including in those matters that proceed to trial.

For a council officer who finds themselves faced with the prospect of being the court advocate for their council in the Magistrates’ Court, the following arguments are available to them to make.

1. The articulated reasons for not paying rates is without any legal basis. The imposition of council rates is lawful and legal, it accords with the legislative framework that provides the power, as set out in the Local Government Act 1999 (the Act). The council is required to comply with the Act which provides power to declare rates and/or impose charges, as per section 147 of the Act which establishes that all land in the council area is rateable unless expressly exempted.
2. Whilst certain other Acts provide statutory relief from rates, no other legislation deals with the declaration and imposition of rates. The absence of a contract is implicit from the framework that Chapter 10 of the Act establishes.
3. Rates are a tax. There is no ability to opt out of payment of a tax and it is an absurdity to suggest that it is a tax that is only payable on the basis of a pre-existing contract.
4. A commercial contract cannot be produced, because such does not exist – and nor is one required to exist to establish the liability for rates/charges. No Government authority enters into a contract with a taxpayer for the payment of taxes.
5. If the ratepayer provides a publication from the Australian Government Solicitor related to execution clauses, that is an irrelevancy because there is no document, in particular a contract or a deed that is or is required to be entered into with a council before the rates/charge impost becomes payable.
6. A ratepayer experiencing difficulty in paying rates should be invited to make contact with the council to ascertain if any rate relief is available in their individual circumstances.
7. There is no existing legal precedent that supports ratepayers relying upon the types of spurious assertions or grounds that are being advances to avoid or to delay the payment of rates, meaning that the liability for the rates and additional fines, interest and legal costs (Maurici & Anor v the State of South Australia [2008] SASC 145) will be, properly, due to the council.

Where the ‘Sovereign Citizen’ ratepayers continue to assert a misplaced ability to not pay rates/charges, the council must continue to issue rates notices to them as they do to all other ratepayers in the area (even though the ‘Sovereign Citizens’ may choose to return them). The service/delivery of rates notices by post is sufficient, as per section 279 of the Act.

It is available to any council, acting as a reasonable and responsible public authority, having already provided reasons, explanations and responses, to advise that continued challenging correspondence expressing the same or similar position, will be noted only and retained in the corporate records management system, without any further response of substance. That is, a council will only consider a response to information that is fundamentally new or different to previous communications.

A continued refusal to pay rates or charges, fines and interest will leave councils with few options. The decision then available to councils will be whether to commence debt recovery processes by way of a claim against the ratepayer or to await the statutory 3 year time period and to proceed under section 184 of the Act to sell the rateable property. Any ratepayer aggrieved by a council’s response to rate arrears should be directed to the State Ombudsman.

Any council that finds itself the type of circumstances set out above, should contact us. As lawyers who have been involved in these or similar matters previously and to date, we have seen and dealt with the different nuances and are in a position to either represent the council, including by way of application for transfer to a more appropriate jurisdiction or by way of assisting and preparing an officer who is required to attend Court.

Do not hesitate to contact us if we can assist further:

Natasha Jones on 08 8113 7102 or njones@kelledyjones.com.au

Michael Kelledy on 08 8113 7103 or michael@kelledyjones.com.au