Farriss v Minister Administering the Crown Lands Act 1989

Case •

[2010] NSWLEC 206

•

18 October 2010

No judgment structure available for this case.
Reported Decision: 179 LGERA 283

Land and Environment Court


of New South Wales


CITATION: Farriss v Minister Administering the Crown Lands Act 1989 [2010] NSWLEC 206
PARTIES: APPLICANT
Shelley Margaret Farriss
RESPONDENT
Minister Administering the Crown Lands Act 1989
FILE NUMBER(S): 30798 of 2009
CORAM: Pain J
KEY ISSUES: APPEAL :- appeal against redetermination of rent of licence of domestic waterfront Crown land under Crown Lands Act 1989 - extent of jurisdiction of court in appeal - whether Minister has power to vary rate of return in rent formula recommended by IPART for purposes of s 143(2) of Crown Lands Act - whether court has jurisdiction to vary the rate of return within rent formula recommended by IPART under s 143(3) of Crown Lands Act - difficulty in construction of recommendation not found in a statutory instrument
LEGISLATION CITED: Crown Lands Act 1989 s 6, s 10, s 12, s 34, s 45, s 50, s 142, s 143
Crown Lands Legislation Amendment Act 2005
Independent Pricing and Regulatory Tribunal Act 1992 s 5, s 9, s 15
Interpretation Act 1987 s 33
Land and Environment Court Act 1979 s 39
Land and Environment Court Rules 2007 r 7.1
CASES CITED: Codlea Pty Limited v Byron Shire Council [1999] NSWCA 399; (1999) 105 LGERA 370
Cooper Brookes (Wollongong) Pty Ltd v FCT [1981] HCA 26; (1981) 147 CLR 297
Goldberg v Waverly Council [2007] NSWLEC 259; (2007) 156 LGERA 27
Kogarah Municipal Council v Kent (1981) 46 LGRA 334
North Sydney Municipal Council v PD Mayoh Pty Limited (1988) 14 NSWLR 740
Owners Corporation of Strata Plan 30859 v Roads and Traffic Authority of NSW [2009] NSWLEC 135; (2009) 168 LGERA 30
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
Shellhabour Municipal Council v Rovili Pty. Limited (1989) 16 NSWLR 104
Strathfield Municipal Council v Drew (1985) 1 NSWLR 338
Sydney City Council v Claude Neon Limited (1989) 15 NSWLR 724
Sydney City Council v Ipoh Pty Limited [2006] NSWCA 300; (2006) 68 NSWLR 411
DATES OF HEARING: 10 August 2010
11 August 2010
12 August 2010
 
DATE OF JUDGMENT: 
18 October 2010
LEGAL REPRESENTATIVES: APPLICANT
Mr I Hemmings
SOLICITOR
Hones La Hood

RESPONDENT
Mr J Maston
SOLICITOR
Crown Solicitor's Office

JUDGMENT:

      THE LAND AND
      ENVIRONMENT COURT
      OF NEW SOUTH WALES

      Pain J

      18 October 2010

      30798 of 2009 Farriss v Minister Administering the Crown Lands Act 1989

      JUDGMENT

1 Her Honour: This is an appeal against the decision of the Minister administering the Crown Lands Act dismissing the Applicant's objection to the redetermination of rent payable under a domestic waterfront licence granted under the Crown Lands Act 1989 (the CL Act). The right of appeal to this Court is available under s 142(5)(b) of the CL Act where the redetermined rent exceeds $10,000. The appeal was commenced within the time allowed by the Land and Environment Court Rules 2007 (the Court Rules) r 7.1(1)(a).

2 The Applicant's objection is to the redetermination of the annual rent for 2009-2010 under licence No 318462 granted under s 34 of the CL Act, known as a domestic waterfront licence, to occupy Crown land within Pittwater adjoining the Applicant’s property in Pittwater Road Bayview NSW. The amount of rent as redetermined by the Minister was $14,596 per annum (plus GST) effective from 13 December 2009.

3 Based on the Applicant’s statement of facts and contentions dated 18 December 2009 (exhibit B), the Crown land the subject of the licence consists of a grassed area adjoining the Applicant’s property which is retained by a sandstone sea wall with a timber jetty protruding into Pittwater (Pittwater is located generally to the north of the site). The site has an area of approximately 520.90m2. The site is irregular in shape, the grassed reclaimed area being generally triangular in shape (28.875m x 19.76m x 41.49m) and having an area of 437.8m2 and the jetty generally being 1.17m wide and 69.6m long having an area of 83.1m2.

4 The licence was granted on 3 May 2000 and provides that:

      a. the Crown land may be used for reclaimed land and a jetty;
      b. the commencement date is 13 December 1999;
      c. the initial rent is $2,370;
      d. the first market rent review date is to be 11 January 2002; and
      e. the Market Rent review period is three years.

5 In October 2003 the then Premier requested the Independent Pricing and Regulatory Tribunal of New South Wales (IPART) to review and report on the rent that the Government should charge for use of land below the mean high water mark, that is, the seabed in harbours and estuaries. IPART carried out the review as requested. In April 2004 it produced a report on its findings containing various recommendations including, amongst others, a recommended formula for determining rents.

6 On 11 August 2009 the Minister issued the Notice of Redetermination of Rent (the Notice) in which the Minister stated that rent for the area was $14,596 (plus GST) effective from 13 December 2009. The Notice stated that “This determination has regard to statutory land values and the rent formula recommended by the Independent Pricing & Regulatory Tribunal (IPART)”.

7 By letter dated 3 September 2009 addressed to the Minister the Applicant objected to the Notice. On or about 29 September 2009 the Minister rejected the objection and reaffirmed the amount of rent identified in the Notice.


      Crown Lands Act 1989

8 Crown land is managed in accordance with the CL Act. Section 6 of the CL Act provides:

          Crown land shall not be occupied, used, sold, leased, licensed, dedicated or reserved or otherwise dealt with unless the occupation, use, sale, lease, licence, reservation or dedication or other dealing is authorised by this Act or the Crown Lands (Continued Tenures) Act 1989.

9 Section 10 of the CL Act provides:

          The objects of this Act are to ensure that Crown land is managed for the benefit of the people of New South Wales and in particular to provide for:
          (a) a proper assessment of Crown land,
          (b) the management of Crown land having regard to the principles of Crown land management contained in this Act,
          (c) the proper development and conservation of Crown land having regard to those principles,
          (d) the regulation of the conditions under which Crown land is permitted to be occupied, used, sold, leased, licensed or otherwise dealt with,
          (e) the reservation or dedication of Crown land for public purposes and the management and use of the reserved or dedicated land, and
          (f) the collection, recording and dissemination of information in relation to Crown land.

10 Section 12(1) states that the Minister is responsible for achieving the objects of this Act.

11 Part 4 deals with the sale or lease of Crown land. Division 1 s 34(1) provides:

          (1) The Minister may, in such manner and subject to such terms and conditions as the Minister determines:
              (a) sell, lease, exchange or otherwise dispose of or deal with Crown land, or
              (b) grant easements or rights-of-way over, or licences or permits in respect of, Crown land,
          on behalf of the Crown.

12 Division 4 considers licences. Section 45 provides:

          (1) Without limiting section 34A, a licence may authorise the use or occupation of Crown land for such purposes as the Minister thinks fit.
          (2) A licence may be granted for such term as the Minister thinks fit.
          …

13 Sections 50(1) and (2) of the CL Act provide:

          (1) A licence may be granted subject to the payment of such rent, royalty, fees or other amount as the Minister may determine in respect of the licence.
          (2) The conditions attached to a licence may include such provisions for the determination or redetermination of any rent, royalty, fee or other amounts as the Minister thinks fit.

14 Division 3 considers the determination of rent. Sections 142 and 143 provide:

          142 Objections and appeals against determinations or redeterminations of rent
          (1) This Division applies to:
              (a) a lease or licence the conditions of which provide for the redetermination of the rent by the Minister (unless those conditions provide that this section is not to apply to the lease or licence), and
              (a1) a redetermination of rent under Division 3A, and
              (b) a redetermination of the rent of a lease or licence under section 136 (6) (a), and
              (c) a determination or redetermination of rent under section 61, 62, 63 or 72 (enclosure permits).

          (2) The Minister shall give notice of a determination or redetermination of the rent of a lease, licence or enclosure permit to the holder.

          (3) The notice must indicate that the holder may object to the determined or redetermined rent.

          (4) The Minister shall consider any objection lodged and by written notice inform the objector:
              (a) whether the determined or redetermined rent is to stand or be varied, and
              (b) of the name of the tribunal to which, under subsection (5), the objector may appeal if dissatisfied with the Minister’s decision.
          (5) An appeal against the Minister’s decision lies:
              (a) to the local land board if the determined or redetermined annual rent does not exceed $10,000 or such greater amount as may be prescribed, or
              (b) in any other case, to the Land and Environment Court.

          (6) On such an appeal, the local land board or the Court may affirm the Minister’s determination or redetermination or substitute its own.

          (7) A redetermination of rent of a lease or licence takes effect in accordance with the conditions of the lease or licence even if an objection or an appeal has been lodged.

          (8) A determination or redetermination of rent by the Minister under section 61, 62, 63 or 72 (enclosure permits) takes effect from the date of the determination even if an objection or an appeal has been lodged.

          (8A) A redetermination of rent under Division 3A takes effect from the date of the redetermination even if an objection or appeal has been lodged. [note: inserted 2005 by the Crown Lands Legislation Amendment Act 2005 No 58 commencing 15 July 2005]

          (9) On completion of the objection and appeal process, any necessary adjustments may be made.
          143 Determination or redetermination of rent—principles
          (1) In redetermining the rent of a lease or licence (the conditions of which provide for the redetermination of the rent) or determining or redetermining rent for the purposes of section 61, 62, 63 or 72 (enclosure permits), the Minister, the local land board and the Land and Environment Court shall apply the following principles:
              (a) the rent shall be the market rent for the land comprised in the lease, licence or enclosure permit having regard to any restrictions, conditions or terms to which it is subject,
              (b) any improvements on the land which were made by the holder, or are owned or in the course of being purchased from the Crown by the holder, shall be disregarded,
              (c) regard may be had to any additional value which, because of the lease, licence or enclosure permit, has accrued, or may reasonably be expected to accrue, to other land held by the holder,
              (d) regard may be had to the duration of the time for which the rent determined will be payable.
          (2) Despite subsection (1), if the Independent Pricing and Regulatory Tribunal makes a recommendation in relation to the rent of any such lease, licence or enclosure permit (or class of any such lease, licence or enclosure permit), the Minister may:
              (a) in redetermining the rent of any lease or licence that is the subject of the recommendation, or
              (b) in determining or redetermining the rent of any enclosure permit that is the subject of the recommendation,
                apply the recommendation. [note: inserted 2005 by the Crown Lands Legislation Amendment Act 2005 No 58 commencing 15 July 2005]
          (3) If the recommendation of the Independent Pricing and Regulatory Tribunal is applied by the Minister in determining or redetermining the rent concerned, the local land board and the Land and Environment Court are, despite subsection (1), to apply the recommendation in determining any appeal against the Minister’s decision. [inserted 2005 by the Crown Lands Legislation Amendment Act 2005 No 58 commencing 15 July 2005]

      Crown Lands Legislation Amendment Act 2005

15 The Crown Lands Legislation Amendment Act 2005 commenced on 15 July 2005, and by Sch 1 inserted a new subsection into s 142 (subsection 8A) and subsections 2-4 in s 143 of the CL Act.

16 Section 143 sets out the relevant principles for redetermination of rent. Section 143(3) applies in this appeal as the Minister applied the IPART rent formula recommendation in redetermining the rent.

      Independent Pricing and Regulatory Tribunal Act 1992

17 IPART was established under the Independent Pricing and Regulatory Tribunal Act 1992 (the IPART Act). Under s 5 it has functions conferred or imposed on it. Section 9(1)(b) provides:

          (1) The Tribunal may enter into arrangements with any government agency, or other body or person (whether in the public or private sector):
              …
              (b) for the provision of assistance by the Tribunal to the agency or other body or person by means of the provision of services that are within the Tribunal’s field of expertise and relevant to its functions.

18 Section 15 identifies a list of twelve matters to be considered by IPART when making recommendations which include the appropriate rate of return on public sector assets, the need to maintain ecologically sustainable development and the social impact of any recommendations.

      Land and Environment Court Act 1979

19 Section 39(2) of the Land and Environment Court Act 1979 (the Court Act) provides:

          In addition to any other functions and discretions that the Court has apart from this subsection, the Court shall, for the purposes of hearing and disposing of an appeal, have all the functions and discretions which the person or body whose decision is the subject of the appeal had in respect of the matter the subject of the appeal.
      Evidence relevant to preliminary issue of jurisdiction of the Court

20 The following evidence was tendered which is relevant to the preliminary issue that arises of what jurisdiction the Court exercises in this appeal:

      (i) Applicant’s statement of facts and contentions (exhibit B)
      (ii) Letter dated 25 September 2009 the Land and Property Management Authority (LPMA) to Waterfront Action Group (exhibit F)
      (iii) Sections of the Auditor-General’s performance audit report (exhibit G)
      (iv) KPMG Issues paper “Rate of Return Review for Domestic Waterfront Properties” dated 12 November 2009 (exhibit H)
      (v) LPMA letter dated 11 June 2009 to Mrs Farriss (plus bundle of photographs) (exhibit J)
      (vi) Manly Council Information Package (exhibit K)
      (vii) Minister’s bundle of documents (exhibit 1)
      (viii) Minister’s statement of facts and contentions (exhibit 3)
      (ix) Macro precinct sketch (exhibit 4)
      (x) Instruction note from the Minister’s department to the Minister‘s counsel (exhibit 5)
      (xi) Letter dated 12 August 2010 from the Chief Executive of LPMA confirming Minister’s instructions (exhibit 6)
      Terms of licence L318462 granted under s 34 CL Act

21 Clause 28 of the licence provides the terms relevant to the payment of rent, and by reference to Column 2 Sch 1 of the licence provides the particulars of the commencement date, initial rent, first market rent review date and the market rent review period (see par 4 above).


      Review into Rentals for Waterfront Tenancies on Crown Land in NSW 2004

22 The “Review into Rentals for Waterfront Tenancies on Crown Land in NSW” was undertaken in 2004 (the IPART review). IPART’s terms of reference for the review required IPART to determine a suitable approach for setting rentals for domestic waterfront tenancies over land owned or administered by the Waterways Authority and the Department of Lands (now the LPMA) since 1 July 2009). The IPART review was prepared pursuant to a referral under s 9(1)(b) of the IPART Act.

23 The IPART review contained a number of recommendations. Recommendation 2 stated that:

            A general formula be used to set occupancy rentals that reflect the market value of the occupancy. This formula incorporates a 3.05 per cent rate of return and a 50 per cent discount factor. The rate of return will need to be regularly reviewed. Thus:
      General rent ($)=[Precinct SLV ($/m2)] x [Occupancy area (m2)] x [Rate of return (3.05%)] x [Discount Factor (50%)]
            To maintain currency, rentals should be calculated annually using latest SLV available and precincts should be defined as homogeneous water front areas

24 The Notice of Redetermination of Rent was issued on 11 August 2009. Paragraph 6 above identifies the relevant details of the notice.

25 A letter from the Chief Executive of LPMA to the Court dated 12 August 2010 (exhibit 6) was also tendered which stated:

          1. KPMG on behalf of Land and Property Management Authority invited public submissions in 2009 on what was called an “Issues Paper: rate of return, review for domestic waterfront properties.
          2. Departmental officers currently consider that any review of the IPART Report must be carried out by IPART.
          3. As at the effective date of the rent redetermination by the Minister (13 December 2009) there had been no review of the rate of return in the general formula for redetermination of rent by IPART or the Government or the Land and Property Management Authority.
          4. To date that remains the position.
          5. IPART has previously determined the general formula for redetermination of the rents of waterfront licences. The Minister is seeking government endorsement for IPART to be requested to undertake a review of the rate of return in the general formula. This process is already in train.
      Applicant’s additional evidence

26 A letter from Department of Lands to Mrs Farriss dated 11 June 2009 was tendered as exhibit J which stated that, in accordance with the terms and conditions of the licence agreement, the redetermination of rent and any notices or accounts that have been issued in compliance with the Crown Lands Act. The letter also stated:

          To ensure a fair and transparent approach to the rate of return review, external experts will be engaged and stakeholders will be consulted and briefed as part of that process.
      The letter concludes that any future correspondence received from Mrs Farriss about these issues will be read and filed but not responded to.

27 Extracts from the Auditor-General’s September 2009 report of a performance audit on the administration of domestic waterfront tenancies administered by the LPMA and Maritime Authority of NSW were tendered (exhibit G). The foreword to the report identifies that the audit examined how well the LPMA and Maritime Authority have implemented the Government’s policy to align domestic waterfront leases with market value, and was a response to concerns about how rents were being calculated. The audit found that:

          … both agencies have yet to review the net rate of return. They are planning to do this jointly in 2009. This will be over five years since the implementation of the IPART recommendation. The IPART report stated that: ‘The net rate of return will need to be regularly reviewed’. In response to the request from Maritime, the IPART advised in November 2007 that the review of the rate of return should commence around the middle of 2008.

      The Auditor-General recommended, amongst others, that:
          Lands and Maritime should jointly review the net rate of return in an open and consultative manner by December 2009. The review should include assessment of the net rate of return from a location and time specific perspective, similar to the approach taken for assessing the statutory land value of precincts.

      Included in the Auditor-General’s report is a response from the LPMA Chief Executive Officer (dated 11 September 2009) which stated his belief that:
          … a staged review of the IPART formula components has placed LPMA in a better position to properly review the rate of return and phase in any changes in a controlled manner. This review is currently being undertaken and involves the engagement of an external expert, with stakeholder consultation as part of the process.

28 The KPMG issues paper “Rate of Return Review for Domestic Waterfront Properties” dated 12 November 2009 was tendered which stated:

          Process of the review
          This Issues Paper is the first step in the public consultation process of this review. Following receipt of submissions from stakeholders, KPMG will undertake selected face-to-face consultation with key stakeholders. KPMG will consider the views of stakeholders and will undertake its own independent analysis of the RoR and the discount factor using relevant data and literature. KPMG is to submit a final report to the LPMA by mid December for consideration in setting rents in 2010.
      Determination of threshold issue: jurisdiction of the Court in this appeal

29 A threshold issue arises before the valuation evidence and issues of the parties can be considered and that concerns the jurisdiction of the Court in this appeal. At issue is whether the rate of return of 3.05 per cent in the recommendation in the IPART rent formula can be varied by the Court in this appeal. Much of the valuation evidence was directed to what the appropriate rate of return should be if the Court can vary the rate of return.

30 According to the Auditor-General’s report, there are approximately 8,500 domestic waterfront licences of Crown land in NSW administered by the LPMA and the Waterways Authority. A number of appeals have been lodged against redeterminations of rent by the Minister. At least two appeals have been heard by the local land board, as provided for by s 142(5)(a). This is the first appeal under s 142(5)(b) to be heard in this Court.


      Applicant’s submissions

31 The formula recommended by IPART provides for a rate of return of 3.05 per cent. It also states that the rate of return should be regularly reviewed. No review of the rate of return has been published since 2004 by any government or other body. The only limitation on the Court’s powers is to apply the IPART recommendation, s 143(3). That recommendation includes the statement that the “rate of return will need to be regularly reviewed”. As the Minister has the power to undertake a review of the rate of return so does the Court in this appeal.

32 That the Minister considers he has that power is demonstrated by the commencement of the review of the rate of return at the request of LPMA commenced by KPMG in November 2009. It is also clear from the Auditor-General’s report in 2009 that the two authorities with responsibility for administering licences of Crown land considered they had responsibility to undertake the review. That was also the Auditor-General’s view in interpreting the IPART recommendations as identified at p 7 of the Auditor-General’s report.

33 The IPART review (and recommendations in it) is not a statutory instrument which has been prepared in accordance with the usual strictures of statutory drafting which would in turn enable the application of the usual rules of statutory construction. It is a report of a statutory body. If the usual rules of statutory construction were to be applied to it, it is necessary to look at the meaning of the words within the scope, purpose and objects of the Act. Words should not be read into it. The recommendation does not say that IPART will review the rate of return, suggesting that the Minister can. The terms of reference for the IPART review were to provide advice on the calculation of rents for domestic waterfront licences on Crown land administered by the Waterways Authority and the Department of Lands now LMPA. The terms of reference confirm that IPART is telling those bodies what to do in its recommendations.

34 The only part of the formula that can be reviewed is the rate of return as that is the only part of the formula where IPART states in the recommendation that a regular review should be undertaken. The narrative in the recommendation is just as much a part of the recommendation as the formula. By reviewing the objects of the report it is clear who the recommendation is directed at. It is a common sense recommendation that the rate of return be regularly reviewed. This is confirmed by the terms of reference for the KPMG issues paper which states they were to submit a final report for use in setting rents in 2010.

35 That the Minister can request IPART to review the rate of return is not conclusive that the Minister cannot also review the rate of return. The possibility of a dual process does not prevent the Minister having the power to undertake the review of the rate of return and therefore the Court having that power in this appeal to apply a different rate of return to that in the IPART rent formula.

36 The rules of commonsense otherwise apply to construction of such a document. Commonsense suggests that the recommendation is directed to action by the authorities administering domestic waterfront licences in aid of whom the IPART review was prepared.

37 Contrary to the Minister’s submissions there is no limitation in s 50 of the CL Act which would prevent the Minister from undertaking a review of the rate of return in the context of the IPART formula. Under s 143(3)(1) the Minister has wide discretion to determine rents. His powers in applying the IPART recommendations include the carrying out of a review of the rate of return.

38 The Minister’s submissions that the Court’s powers are limited and do not include undertaking a review with the effect of altering policy are incorrect. If there is the power to apply the recommendation to regularly review then the Court sitting as a quasi-judicial valuer can undertake that review in its redetermination.


      Minister’s submissions

39 The Minister contends that:

      (i) as a consequence of the Minister applying the IPART recommendations for the purpose of redetermination of rent pursuant to s 143(2) of CL Act, this Court is also bound to apply it: s 143(3) of the CL Act;
      (ii) the stated rate of return in the IPART recommended formula is 3.05 per cent and in the absence of any other recommended rate of return, 3.05 per cent must be applied;
      (iii) as a matter of law this Court lacks jurisdiction or power to carry out such a review having regard to the provisions of the CL Act, the judicial functions of appeal under the CL Act, and the executive/policy character of the timing and nature of the discretion to instigate a review of the rate of return;
      (iv) the only section of the IPART review called up by the provisions of the CL Act is that comprising the relevant recommendations. The stated recommendations must be “applied” not varied, reviewed or supplemented.

40 Only IPART can review the rate of return and vary the figure of 3.05 per cent. The members of IPART have particular expertise suggesting the review of the rate of return is a function they can undertake. The Minister has no power/ability to do so under the CL Act.

41 The IPART Act provides that IPART is not subject to the control and direction of the Minister in respect of the contents of any determination or recommendation by IPART. Section 15 identifies those matters which IPART should consider in undertaking its reporting functions. These considerations involve business considerations and social policy which travel beyond land valuation questions.

42 Under s 39(2) of the Court Act the Court has all the functions and discretions which the person or body whose decision is the subject of appeal had in respect of the subject matter of the appeal. The Minister applied the IPART rent formula recommendation and so must the Court in this appeal.

43 On p 2 of the IPART review (exhibit 1, tab 8) the first recommendation of IPART appears at par 1.2. It provides:

          [IPART] recommends … the use of the following formula for calculating rentals.

      The general rent formula is then set out. There is no reference to the review of any element of the formula in this part of the review.

44 The next reference to the formula is on p 19 of the review in par 6 entitled “General Formula for Calculating Rents”. It states:

          The Tribunal has developed a general formula for calculating rentals to align rentals with the market value of the occupancy, and maintain this alignment over time . The formula is …

      and the general formula is then set out. The review states that IPART believes that the formula should be used as the basis for establishing the level of rental for all current and future rights holders. There is no reference in this section of the IPART review to the undertaking of a review of the rate of return.

45 The first reference to that matter is in par 6.3 on p 21 of the review. After explaining the data which was considered by IPART, it states:

          The Tribunal believes a 3.05% rate of return is appropriate. However, this rate of return will need to be reviewed regularly.
      There is no indication anywhere in the report as to the regularity of “review”, nor what the review might entail. The language of the comment does not include the word “recommend” or recommendation. Nor is there any indication when in future the rate of return will need to be regularly reviewed.

46 The recommendation for use of the general formula as a means of maintaining the alignment of rentals over time including the rate of return of 3.05 per cent is a discrete complete recommendation in itself capable of being applied. The reference to the future need for review of the rate of return is by comparison with the highly prescriptive elements of the general formula, in the nature of comment. The comment contains no information as to the means by which the rate of return could be reviewed.

47 There are two possibilities:

        (a) it is an indication that IPART will or is willing to undertake a future review; or
        (b) it may be seen as an invitation to the Minister administering the IPART Act to instigate or request a future investigation and review by IPART.
        In either case, the applicability of the formula containing the rate of return of 3.05 per cent stands unless and until review takes place.

48 The IPART review (p 39) recommends that where annual rentals are calculated with the formula these should be phased in over six years. This suggests that contextually six years is the appropriate period of regularity for a review. This suggests a review in 2010 is preferable. This appeal is for 2009.

      Meaning of apply

49 To apply something, it must be capable of being applied to the task at hand by use of an existing principle, law or rule. Applying a principle, law or rule does not involve the formulation of a different rule or “reviewing” the stated principle. This indicates that s 143 was referring to a function or discretion which depended on an existing test.

50 One indication that the rate of return was not to be reviewed by this Court is the use of the word “regularly”. The Court decides appeals only when they are commenced by applicants. A decision as to when a review should take place cannot be “applied”. It is a condition precedent to instigating the carrying out of a review. If the formula is altered by review by the Court rather than by a further report of IPART, then the Court’s decision would affect every licence of the same class.

51 Section 39(2) of the Court Act cannot provide a basis for the Court to undertake the review. Other cases such as Codlea Pty Limited v Byron Shire Council [1999] NSWCA 399; (1999) 105 LGERA 370 and others referred to in the Minister’s written submissions consider different circumstances.


      Finding on threshold issue

52 The conditions of the licence No 318462 of domestic waterfront Crown land adjacent to the Applicant’s land provide for the payment of rent as calculated under the terms of the licence and for its redetermination. The Minister administering the CL Act when redetermining that rent as provided for under the terms of the licence must apply the principles specified in s 143(1). If however the Minister applies a recommendation of IPART to the redetermination of rent of any licence under s 143(2) then that recommendation must be applied by the Court in any appeal under s 143(3).

53 The Applicant has appealed to the Court against the Minister’s redetermination of rent of domestic waterfront Crown land under s 142(5)(b) of the CL Act. On appeal, the Court may affirm the Minister’s redetermination or substitute its own; s 142(6). The Court’s jurisdiction to determine this matter on appeal is limited by virtue of s 143(3) because the Minister redetermined the annual rent for the Crown land the subject of the Applicant’s licence by applying the rent formula referred to in the 2004 IPART review, as provided for in s 143(2)(a).

54 The Court’s power in an appeal is defined by s 39(2) of the Court Act which states that the Court has all the functions and discretions of the person or body appealed against.

55 The terms of the IPART rent formula recommendation applied in the redetermination of the rent in issue are set out above in par 23. The recommendation consists of narrative text and a formula in a box. The issue which arises in this appeal is whether the words “the rate of return should be regularly reviewed” mean that the Minister has the power to review the rate of return of 3.05 per cent identified in the formula. If so, according to the Applicant the Court can exercise that power in this appeal and vary the rate of return if it chooses of 3.05 per cent from that in the formula.

56 The usual rules of statutory construction can be applied to s 143 of the CL Act. A construction which promotes the objects and purpose of the Act whether explicit or implicit should be given effect, as required by s 33 of the Interpretation Act 1987 and numerous authorities, for example Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355. The broad objects of the CL Act are identified in s 10, set out above in par 9. The issues raised in this appeal are not readily resolved by reference to the broad objects of the CL Act. Section 6 provides that Crown land must not be licensed unless authorised by the CL Act. No issue arises in this appeal concerning that section.

57 In relation to the language used in s 143, in Cooper Brookes (Wollongong) Pty Ltd v FCT [1981] HCA 26; (1981) 147 CLR 297 Gibbs CJ at 305 held:

          … if the language of a statutory provision is clear and unambiguous, and is consistent and harmonious with the other provisions of the enactment, and can be intelligibly applied to the subject matter with which it deals, it must be given its ordinary and grammatical meaning, even if it leads to a result that may seem inconvenient or unjust. To say this is not to insist on too literal an interpretation, or to deny that the court should seek the real intention of the legislature.
      Stephen J at 310, Mason and Wilson JJ at 320, agreed on this point in separate judgments. Aicken J, in dissent, agreed on this point at 336. This passage has been cited in numerous cases before this Court, see for example, Owners Corporation of Strata Plan 30859 v Roads and Traffic Authority of NSW [2009] NSWLEC 135; (2009) 168 LGERA 30 at [50].

58 The ordinary and grammatical meaning of words used in a section can be readily given effect where the drafting is clear. The challenge of construction arises more acutely where the words of a statute are unclear or ambiguous. The wording in s 143(2) and (3) is not unclear or ambiguous in relation to the matters raised by the parties. In particular, the words “recommendation of IPART” can be given their plain and ordinary meaning in order to interpret the subsections.

59 The difficulty in construction arises apart from the terms of s 143(2) and (3) because the recommendation by IPART in question appears in a separate document which is not a statutory instrument or rule. The recommendation appears in the 2004 IPART review, prepared before s 143(2) and (3) were introduced into the CL Act in 2005. The review was undertaken as part of the functions carried out by IPART under s 9 of the IPART Act. Section 143(3) is clear in its terms that the Court’s power in this appeal is limited to applying the recommendation of IPART. There is no disagreement between the parties on that point. The issue between them is what part of the recommendation the Court must apply. That requires consideration of the IPART recommendation and its construction. The functions of IPART under the IPART Act to review matters referred to it and in doing so to take into account the wide range of matters referred to in s 15 of the IPART Act do not require it to present its reports in any particular terms.

60 The issue between the parties hinges on whether the reference to the application of the IPART recommendation by the Minister in the Notice of Redetermination of Rent is a reference solely to the formula as identified in the box in the recommendation (which leaves less room for the Court to do much in this appeal) or must include the application of the additional words in the narrative part of the recommendation (set out in par 23 above). If the formula in the box is all that the Court can apply (and is what the LPMA applied in their redetermination), the rate of return is fixed and the Court is not able to vary it by virtue of s 143(3) in this appeal. If the words in the narrative “the rate of return will need to be regularly reviewed” are part of the recommendation, the Applicant argues that the Minister could undertake the necessary review and therefore so can the Court under s 39(2) of the Court Act.

61 At the time the Minister determined the 2009 rent payable by the Applicant no review of the rate of return had been undertaken by the LPMA, the Minister or his delegate. There is evidence of a process of review being commenced by the LPMA through the consultant KPMG in 2009.

62 The fundamental assumption that underpins the Applicant’s submissions about the phrase “the rate of return must be regularly reviewed” in the narrative part of the recommendation is that it provides a statutory power under the CL Act to the Minister to undertake the review for the purposes of s 143(2) of the CL Act. The phrase “the rate of return must be regularly reviewed” provides no guidance on frequency of review and does not specify who is to undertake the review. If the Applicant is correct, by virtue of s 143(2) and (3), that general phrase potentially becomes part of the statutory framework for the redetermination of rent under the CL Act.

63 There is no assistance in the IPART recommendation or generally in the 2004 review as to who should undertake the regular review of the rate of return or when that should be done. The Minister’s submissions summarised above at par 43-45 refer to parts of the IPART review which discuss the recommendation. To the extent the review can provide context for the recommendation, the description at page 19 par 6 states that the general formula is to align rentals with the market value of the occupancy and maintain this alignment over time. As submitted by the Minister there is no indication in the review of when the review should be undertaken other than regularly. While there is evidence that the two relevant authorities (the LPMA and the Waterways Authority) have thought that was within their area of responsibilities given the statements made in the report of the Auditor-General and the process commenced by KPMG, that is not conclusive of how s 143(2) and (3) of the CL Act are to operate. Given the lack of precision as to implementation of that phrase in the recommendation, it is unlikely that such words would be given statutory force by virtue of the 2005 amendments adding s 143(2) and (3) to the CL Act.

64 The Applicant submitted that because the recommendation does not state that IPART is to undertake the review it must be the Minister as the terms of reference of IPART are directed to providing advice to the two authorities which administer domestic waterfront licences.

65 I agree with the Minister’s submissions that the phrase is general and essentially advisory. It cannot provide a basis for a statutory power residing in the Minister, and hence this Court, to apply the recommendation by undertaking a review of the rate of return in the rent formula. As submitted by the Minister’s counsel (par 49–50 above), for the Court to apply something, it must be capable of being applied through the use of an existing principle, law or rule. Section 143(3) refers to a function or discretion which depends on an existing test. “Regularly” is imprecise and does not enable the Court to apply a review of the rate of return in this appeal, as the Minister submitted.

66 At the time the IPART review was prepared in 2004 the amendments to the CL Act which give the IPART rent formula recommendation statutory force had not been made. It is a quantum leap in construction to suggest these words provide a basis for the Court to undertake the review of the rate of return under s 143(3). There is no basis for such a leap established by the words of the CL Act or the IPART review itself. That the LPMA (and the Auditor-General) has considered that task sits with it as a matter of policy does not mean that the Minister through his department has a statutory power for the purposes of applying the recommendation under s 143(2) to review the rates of return set by IPART on the basis of the general words that the rate should be reviewed regularly.

67 A further consideration of the application of s 143(3) in this appeal is certainty of application of s 143 as a whole, which on one view aids in the regulation of conditions under which Crown land is licensed and one of the objects of the CL Act specified in s 10(d). Under s 143(1) principles are identified which the Minister and the Court on appeal must apply to any redetermination of rent. The principles do not apply if the IPART rent recommendation is used by the Minister in any redetermination, as he may do under s 143(2). It is in the interests of certainty of application of the CL Act for the Minister to apply an IPART recommendation under s 142(2)(a) so that the application of the recommendation is certain. A construction of the IPART recommendation as confined to the rent formula in the box aids certainty in the application of the CL Act. That formula identifies the rate of return as 3.05 per cent.

68 Under s 143(1) the Minister can adopt a wider approach to the redetermination of market rent of a licence than under s 143(2). That approach allows a case by case analysis of each redetermination of rent. On appeal the Court’s powers would also be broader in applying the principles in s 143(1). The application of an IPART recommendation under s 143(2) provides a means for the Minister, and therefore the Court under s 143(3), to adopt a defined, and confined, approach to the redetermination of rent. In this case the application of the IPART recommended rent formula by the Minister results in a similar approach to all rent redeterminations for domestic waterfront licences. If on appeal the rate of return can be varied in every case by the Court, the certainty in applying the formula to any redetermination would be largely lost as the Court would be determining the rate of review anew on a case by case basis.

69 The role of IPART should also be considered as relevant context for considering the recommendation to which s 143(3) applies. As submitted by the Minister the role of IPART identified in the IPART Act is to undertake a broad analysis of a given topic, possibly employing public consultation and including consideration of matters identified in s 15. The 2004 review considered a wide range of public submissions and discusses a range of matters. These matters informed IPART’s recommendation for the rent formula. These are considerations and measures beyond those which this Court can undertake in this appeal, which is essentially conducted as a valuation exercise. The Court’s role in this appeal is limited to exercising those functions which the Minister exercised. Where the Minister chooses to apply the IPART recommendation, variation of that recommendation in this statutory context lies with IPART not this Court.

70 It is unnecessary for the Court to review the authorities on the operation of s 39(2) of the Court Act such as Codlea for the reasons given by the Minister. Several decisions such as Codlea; Kogarah Municipal Council v Kent (1981) 46 LGRA 334; Strathfield Municipal Council v Drew (1985) 1 NSWLR 338; North Sydney Municipal Council v PD Mayoh Pty Limited (1988) 14 NSWLR 740; Sydney City Council v Claude Neon Limited (1989) 15 NSWLR 724; Shellhabour Municipal Council v Rovili Pty. Limited (1989) 16 NSWLR 104; Sydney City Council v Ipoh Pty Limited [2006] NSWCA 300; (2006) 68 NSWLR 411; Goldberg v Waverly Council [2007] NSWLEC 259; (2007) 156 LGERA 27 have considered the ambit of s 39(2) of the Court Act, as identified in the Minister’s submissions.

71 In those cases s 39(2) of the Court Act has been held to include closely associated functions of an original decision maker so that the Court on appeal can exercise those functions and discretions. The present case differs from these cases in that s 143(3) of the CL Act limits the powers of the Court on appeal. The Applicant also submitted that the operation of s 39(2) would not assist in the resolution of this matter. The Court’s powers on appeal as defined in s 39(2) are defined in turn by the CL Act. As submitted by the Minister, the Minister’s responsibilities are identified in s 12 of the CL Act as the achievement of the objects of the CL Act. No express power to review IPART recommendations is there provided. The Court’s power in this appeal is otherwise limited by s 143(3).

72 While s 50(2) of the CL Act specifies that the conditions attached to the licence may include such provisions for the determination or redetermination of any rent as the Minister sees fit, that refers to the content of the licence condition, as the Minister submitted. I do not consider that section provides a basis for reviewing the rate of return formula made by IPART in view of s 143(2) and (3). Section 143 deals expressly with the redetermination of rent and the applicable principles which the Minister must apply. Where s 143(3) applies, as it does in this case, the Court’s powers on appeal are limited.

73 The Applicant relies on the history identified in the evidence, pointing to the conclusions in the report by the Auditor-General and the commencement of a review process by KPMG consultants on behalf of the LPMA as evidence that the Minister acting through the relevant authorities considers that he has the power to undertake the rate of return and consequently so does the Court in this appeal. The Minister through the LPMA advised the Applicant for the first time at the appeal hearing that IPART alone was the appropriate body to undertake the review of the rate of return as found in the letter of instructions of the LPMA provided to the Court (exhibit 6, set out in full in par 25 above).

74 The correspondence in evidence from the LPMA to the Applicant (par 26 above) and to the Waterfront Action Group dated 25 September 2009 refers specifically to the review of the rate of return by the LPMA being underway and states that further resolution of issues would await the outcome of that review. Given the Minister’s submissions in this appeal to the effect that the Minister cannot vary the rate of return determined by IPART, the statutory purpose of that review process, if any, is unclear. There was no clarification on this matter from the Minister at the hearing. The Applicant no doubt will consider this circumstance unsatisfactory in light of the advice received to date. The fact that a review has been commenced by the LPMA does not provide any support relevant to the legal issue I must determine for the Applicant’s construction of s 143(3) of the CL Act however.


      Conclusion

75 I do not consider I have the power under s 143(3) of the CL Act to review the rate of return in the IPART rent formula recommendation in this appeal.

76 The parties prepared valuation evidence in case the Court considered that it could review the rate of return. This evidence included the joint valuers’ report (exhibit A), Mr Chaloner’s report (exhibit C), Professor Eves report (exhibit D), Mr Lunney’s report dated 2 July 2010 (exhibit 2) and a joint valuers’ report by Eves, Lunney and Chaloner dated 9 August 2010 (exhibit E). The evidence of the parties’ valuers, Mr Chaloner for the Applicant and Mr Lunney for the Minister, was that if the IPART formula was applied with a rate of return of 3.05 per cent the redetermination of rent of the Applicant’s domestic waterfront licence the subject of this appeal was correct.

77 For these reasons the Applicant’s appeal must be dismissed.


      Orders

78 The Court makes the following orders:

      1. The Applicant’s application dated 28 October 2009 is dismissed.
      2. Costs reserved.
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Cases Citing This Decision

1

Farriss v Minister Administering the Crown Lands Act 1989 [2011] NSWCA 275
Cases Cited

9

Statutory Material Cited

6

Codlea Pty Ltd v Byron Shire Council [1999] NSWCA 399
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28
Amalgamated Society of Engineers v Adelaide Steamship Co Ltd [1920] HCA 54