Gray v Sutherland Shire Council

[2016] NSWLEC 64

Land and Environment Court

New South Wales

Medium Neutral Citation:	Gray v Sutherland Shire Council [2016] NSWLEC 64
Hearing dates:	8 October 2015
Date of orders:	01 June 2016
Decision date:	01 June 2016
Jurisdiction:	Class 1
Before:	Craig J
Decision:	(1) Appeal upheld. (2) The decision and orders of the Commissioner made on 21 April 2015 are set aside. (3) The proceedings are remitted to be determined by the Commissioner in accordance with the decision of this Court. (4) The respondent must pay the appellant’s costs of the appeal unless within 14 days from the date of this judgment it files a notice of motion seeking a different order.
Catchwords:	APPEAL – appeal against Commissioner’s decision on questions of law – refusal of development consent for boarding house – determination by Commissioner that necessary development consent condition could not lawfully be imposed – whether Commissioner’s finding that condition could not lawfully be imposed an error of law – whether Commissioner’s finding that condition not for proper planning purpose an error of law – whether Commissioner’s finding that condition manifestly unreasonable an error of law
Legislation Cited:	Anti-Discrimination Act 1977 (NSW) Boarding Houses Act 2012 (NSW) Environmental Planning and Assessment Act 1979 (NSW) Land and Environment Court Act 1979 (NSW) State Environmental Planning Policy (Affordable Rental Housing) 2009 Sutherland Shire Local Environmental Plan 2006
Cases Cited:	Andrews v Botany Bay City Council [2008] NSWLEC 96; 158 LGERA 451 Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 Botany Bay City Council v Saab Corp Pty Ltd [2011] NSWCA 308; 82 NSWLR 171 Community Association DP 270253 v Woollahra Municipal Council [2013] NSWLEC 184; 211 LGERA 412 Dogild Pty Ltd v Warringah Council [2008] NSWLEC 53; 158 LGERA 429 Gray v Sutherland Shire Council [2015] NSWLEC 1102 Marrickville Metro Shopping Centre Pty Ltd v Marrickville Council [2009] NSWLEC 109 Marrickville Metro Shopping Centre Pty Ltd v Marrickville Council [2010] NSWCA 145; 174 LGERA 67 Minister for Immigration and Citizenship v Li [2013] HCA 18; 249 CLR 332 Newbury District Council v Secretary of State for the Environment [1981] AC 578 Sydney Water Corporation v Caruso [2009] NSWCA 391; 170 LGERA 298 Western Australian Planning Commission v Temwood Holdings Pty Ltd [2004] HCA 63; 221 CLR 30
Category:	Principal judgment
Parties:	Robert Gray (Appellant) Sutherland Shire Council (Respondent)
Representation:	Counsel: C R Ireland (Appellant)  J Walker (Respondent)  Solicitors: McKees Legal Solutions (Appellant)  Sutherland Shire Council (Respondent)
File Number(s):	150659 of 2016 (Formerly 15/10428)
Decision under appeal	Court or tribunal: Land and Environment Court Jurisdiction: Class 1 Citation: [2015] NSWLEC 1102 Date of Decision: 21 April 2015 Before: Morris C File Number(s): 10639 of 2014

Judgment

1. Robert Gray, the appellant, sought development consent from Sutherland Shire Council (the Council) to demolish two existing dwellings on land at 58-60 Karimbla Road, Miranda and to erect in their place a two storey boarding house and associated facilities. The proposed boarding house was to have 23 boarding rooms, one of which was to be a manager’s room. The application for consent was made under the provisions of Pt 4 of the Environmental Planning and Assessment Act 1979 (the EPA Act).

2. The application was refused by the Council. Being dissatisfied with the refusal of his application, the appellant appealed to the Court pursuant to s 97(1) of the EPA Act. His appeal ws heard by a Commissioner of the Court who, in a reserved judgment delivered on 21 April 2015, dismissed his appeal and refused consent to his development application (Gray v Sutherland Shire Council [2015] NSWLEC 1102).

3. As will be seen, the grounds of appeal arise from the decision of the Commissioner that the site was not suitable for the proposed development by reason of adverse social impact. She determined that a proposed condition of consent, requiring compliance with a plan of management limiting the occupants of the boarding house to those with a nominated minimum weekly income, was a condition that could not lawfully be imposed.

4. Although expressed more fully in the summons commencing the appeal, the grounds of appeal are usefully summarised in the appellant’s submissions in the following terms:

“1.   The Commissioner was in error in finding that the condition could not be lawfully imposed;

2.   The Commissioner erred in finding that the condition was not for a planning purpose while simultaneously finding that its purpose was to address social impacts;

3.   The Commissioner erred in finding that the imposition of the condition would be legally unreasonable;

4.   The Commissioner erred in finding based on the above reasoning that as the Condition could not be lawfully imposed the development was unsuitable for the site.”

5. The development application

6. The land on which the development was proposed had a total site area of 1284m², comprising two adjoining allotments on the south eastern corner of Karimbla Road and Mooki Street, Miranda. Single storey dwelling houses existed on the development site and were to be demolished to allow for the redevelopment of the site.

7. A modern two story dwelling house adjoined the site to the east and a single storey dwelling house with an attached carport was located on the adjoining allotment to the south. Development on the northern side of Karimbla Road comprised a mix of detached housing and two storey multi-unit dwellings. The majority of housing in Mooki Street was made up of single storey detached dwelling houses.

8. The development application submitted to the Council sought consent for a two storey 23 room boarding house. Prior to the appeal being heard by the Commissioner, the applicant sought and was granted leave to rely on amended plans, reducing the number of boarding rooms to 22. A maximum of 37 residents were to be accommodated in the boarding house, all of whom would be subject to an occupancy agreement complying with the Boarding Houses Act 2012 (NSW).

Relevant planning controls

9. The relevant statutory land use controls applicable to the development of the land were those found in Sutherland Shire Local Environmental Plan 2006 (the LEP). The proposed development was identified as being within Zone 4 – Local Housing. Under the zoning table for land so zoned, development for the purpose of a boarding house was “allowed only with consent”. The objectives in Zone 4 include:

“(a)   to allow low density residential buildings that complement the predominantly urban landscape setting of the zone, characterised by dwelling houses on single lots of land,

(b)   to ensure the character of the zone, as one comprised predominantly of dwelling houses, is not diminished by the cumulative impacts of development,

(c)   to allow development that is of a scale and nature that preserves the streetscape and neighbourhood character of the zone,

(d)   to allow residential buildings that provide a variety of housing choices for the needs of the local community,

(e)   to allow non-residential buildings that provide necessary services to the local community without adversely affecting the residential amenity of the zone.”

10. Clause 33 of the LEP fixed a height for development applicable to the subject land. The proposed boarding house complied with that clause. Clause 35 of the LEP fixed a maximum floor space ratio (FSR) of 0.45:1 for land within Zone 4. However, the development application was identified as being made under the provisions of State Environmental Planning Policy (Affordable Rental Housing) 2009 (the ARH SEPP). Clause 29(1)(c)(i) of that Policy had the effect of allowing a total FSR for development on the land of 0.95:1. As the FSR of the proposed boarding house was 0.59:1, not only did the development comply with that clause, that FSR could not be used as a basis upon which to refuse development consent: cl 29(1).

11. The Council had prepared and exhibited a draft local environmental plan for its local government area. That draft had been forwarded to the Minister following a Council resolution on 10 November 2014. The draft plan proposed to rezone the site and surrounding land to R3 – Medium Density Residential. Boarding houses were to remain permissible development, with consent, in that zone.

12. The decision of the Commissioner

13. At [22] the Commissioner identified the issues before her as being:

“ … the social impact and crime risk associated with the development; density and impact on adjoining residents; impact on trees, failure to provide a satisfactory [plan of management] and the issues raised by residents who objected to the application”.

14. The Commissioner acknowledged that a plan of management (the POM) had been prepared for the purpose of the hearing before her. Also tendered before her were draft conditions of development consent, apparently settled between the parties and intended to be imposed, in the event that the appeal was upheld and development consent granted.

15. Condition 1 of the draft conditions required that the development “be undertaken substantially in accordance with the details and specifications” set out in plans and documents identified in a table to that condition. Reference is made in that table to the “Operational Plan of Management incorporating the Boarding House Rules for a Boarding House” on the land. The condition also provided that the “Operational Plan of Management” became part of the consent and “is attached at A”. Condition 37 of the draft conditions provided:

“The approved Operational Plan of Management for the boarding house as identified in condition 1 shall be adhered to at all times and is appended to the conditions of consent.”

16. For present purposes, the critical requirements of the POM are those found in cll 5 and 6. Those clauses provided:

“5.   Border Eligibility Requirements

Rental and employment history background checks will be undertaken for all potential boarders upon application (as allowable under the Boarding Houses Act 2012). A potential boarder will need to comply with the following requirements to be eligible to sign an Occupancy Agreement:

Persons in receipt of an income support payment from the Commonwealth Government will not be accepted as boarders. This provision excludes students attending nearby education facilities (e.g. Gymea TAFE) who may be in receipt of student support payments (e.g. Youth Allowance, AusStudy, AB Study).

All boarders must be over the age of 18 years.

No boarder is to pay greater than 30% of their gross income in rental payments. Subject to Section 6 below, this equates to a minimum wage of $43,340 per annum.

Boarder to be made aware of required weekly rent rate.

6.   Rent

Rent is to be set at the market rent ($250-$280/week as of December 2014), to be adjusted in accordance with the CPI on an annual basis.

Regardless of the above, the rent shall not rise above 30% of the Moderate Household Weekly Income Band, being between 80% and 120% of the median personal weekly income for New South Wales.”

17. The Commissioner recorded the fact that she inspected the site and heard evidence from residents, identifying the issues they had raised. She also recorded the evidence of the town planning experts and their ultimate agreement that, subject to the condition requiring adherence to the POM being validly imposed, adherence to that condition would “adequately address operational matters and assist in minimising impacts of the proposal on the amenity of neighbouring properties and the locality”:[31].

18. At [53] the Commissioner acknowledged that the proposal was “fully compliant with the standards for boarding houses in Div 3 of ARH SEPP. At [54] the Commissioner said:

“54   The other contentions in the case, apart from the social impact have been resolved through the changes to the plans and the POM. The experts agree that the changes made to the plans and POM would ensure that the development would not contribute to the locational disadvantage of the area provided the income limits were imposed. In the event that the Court found the condition could be imposed, the evidence is that the development proposes the provisions of a type of housing that is currently not represented in the area. The boarding house would contribute to the range of housing provided in the locality and introduce moderate income earners. The site is well located to public transport and employment opportunities, particularly those which employ key workers such as Sutherland Hospital, Kareena Private Hospital, schools and emergency services. Proximity to the regional shopping centre would also be a likely source of employment according to the social planning evidence.”

19. The Commissioner’s recounting of the social planning evidence reflects the evidence that she had summarised at [32]. In the latter paragraph the Commissioner recorded the conclusion expressed by the social planning experts that “subject to the proposed conditions on occupancy”, being those identified in cll 5 and 6 of the POM, “the development ought be approved”. That agreement between the experts is repeated by the Commissioner at [43].

20. As all issues, save for the issue directed to social impact, had been resolved, the Commissioner then turned to consider her power to impose the condition requiring adherence to the POM, effectively imposing a requirement that eligibility for occupation of a room in the proposed boarding house be that reflected in cll 5 and 6 of the POM. At [45] she identified s 80A of the EPA Act as being the source of power to impose conditions of development consent. Without further reference to the provisions of that section or any other provision of the EPA Act, the Commissioner identified at [45] the test for imposition of a valid condition as being that stated in Newbury District Council v Secretary of State for the Environment [1981] [AC 578]. She identified the test as requiring “a condition to be for a planning purpose, to relate to the permitted development and to be not so unreasonable that no reasonable planning authority would impose it.”

21. The Commissioner then returned to the facts at [46], stating that the proposed eligibility criteria in the POM “and adopted as a condition of consent has a purpose of avoiding the proposed development providing social housing or [sic] for the very low to low income housing”. Reference was then made to the evidence of the social planners in which they had agreed that there was a disproportionate number of people in the locality who were socially and financially disadvantaged with the consequence that additional social housing had “the potential to add negatively to the existing cumulative impact in this residential area”. Their evidence, as summarised by the Commissioner, was that the level of reported anti-social behaviour attributed to those disadvantaged groups indicated “that the current levels of social housing has reached its maximum threshold in this locality”. Their thesis for supporting the boarding house development proposed by the appellant was reflected in the judgment at [54], being the paragraph that I have earlier quoted.

22. Having referred to the evidence of the social planners and their support of the development application contingent upon the eligibility criteria of the POM being enforceable by a condition of consent, the Commissioner identified the planning principles directed to the imposition of a condition requiring adherence to a plan of management. After referring to the cases in which those principles had been discussed, she added that “the POM requires absolute compliance to achieve an acceptable outcome for the proposal”.

23. The Commissioner referred at [47] to the decision of McHugh J in Western Australian Planning Commission v Temwood Holdings Pty Ltd [2004)] HCA 63; 221 CLR 30, directed to the identification of a “planning purpose”. She recorded the appellant’s reference to the aims of ARH SEPP as being relevant to the “planning purpose” and noted that the definition of “affordable housing” in that Policy was the same as that in the EPA Act, namely “housing for very low income households, low income households or moderate income households, being such households as are prescribed by the regulations or as are provided for in an environmental planning instrument”. The Commissioner then said at [50]:

“The policy seeks to provide housing to income groups ranging from very low to moderate rather than exclude two of the three groups. I do not consider that the exclusion of those groups is for a proper planning purpose, rather, it is to seek to address the social impacts that have been identified.”

24. At [52] the Commissioner addressed the “third test in Newbury” as requiring that “the eligibility criterion should not be so unacceptably unreasonable that no reasonable planning authority would impose it”. The proposed condition was identified by her as intending “to exclude a large range of persons who may be seeking affordable housing”, as a consequence of which she was not satisfied that the issue of reasonableness had been addressed.

25. At [56] the Commissioner did not accept that the condition required to ensure the outcome identified by the social planners “can be reasonably imposed nor is it for a planning purposes [sic] for the reasons outlined above”, undoubtedly being those reasons expressed at [50] and [52]. She continued in [56]:

“I would only accept that it would be appropriate to set a maximum, rather than minimum income level so as to ensure the housing would deliver the aims of SEPPARH as to do so would be for a planning purpose, that is to deliver the objects of that policy. That is not what is proposed, it is the converse and I do not consider that it would be a reasonable condition to impose.”

26. As a consequence of those findings, the Commissioner determined at [57] that she was “not satisfied, having regard to the evidence, that the site is suitable for the proposed development”.

Grounds of Appeal

27. The summons at ground 1 identifies the decision made by the Commissioner on a question of law material to her determination to refuse development consent. This was the decision that the proposed condition of consent, requiring adherence to the POM and therefore the boarder eligibility requirements in cll 5 and 6, could not lawfully be imposed.

28. The appellant submitted that this was the overarching legal error made by the Commissioner. The Commissioner’s decision that the proposed condition could not lawfully be imposed had two bases, being those articulated as appeal grounds 2 and 3. The first basis was the Commissioner’s finding that the proposed condition was not for a proper planning purpose. The second basis was the Commissioner’s finding that the proposed condition was manifestly unreasonable. These findings reflect two of the three requirements for a lawful condition articulated in Newbury and adopted by the High Court in Temwood. At [51] the Commissioner accepted that the proposed condition would “fair and reasonably relate to the development proposed”.

29. As the appellant submitted, if the Commissioner erred in law in finding both that the proposed condition was not for a proper planning purpose and was manifestly unreasonable, then it must follow that the Commissioner erred in her ultimate determination that the proposed condition could not lawfully be imposed (appeal ground 1).

30. The respondent submitted, citing Sydney Water Corporation v Caruso [2009] NSWCA 391; 170 LGERA 298 at [136]-[137], that the Commissioner’s decision need not be set aside if the Commissioner only erred in one of the above two findings, as both were independently capable of supporting the Commissioner’s decision that the proposed condition could not lawfully be imposed. Therefore, the respondent asserted that the appellant needed to succeed on both grounds 2 and 3 to establish appellable error in the Commissioner’s decision. Ground 4 of the summons challenges a finding of the Commissioner consequential upon her determination that the proposed condition could not lawfully be imposed.

27. It is therefore appropriate to consider grounds 2 and 3 before turning to grounds 1 and 4.

28. Ground of appeal 2: Condition not for a planning purpose

29. In her judgment at [50] the Commissioner stated that the proposed condition “seeks to address the social impacts” of the proposed development by limiting tenant eligibility to those in the moderate income household band. The Commissioner did not consider this to be a proper planning purpose because two affordable housing income groups (very low and low) were deliberately excluded.

30. Appellant’s submissions

31. The appellant contended that the Commissioner erred in finding that the condition was not for a proper planning purpose. Although the Commissioner correctly identified (at [47]) the principle in Temwood at [93], that a planning purpose is to be discerned by reference to the relevant legislation and not “some preconceived general notion of what constitutes planning”, the subsequent reasoning of the Commissioner plainly demonstrated that she departed from that principle.

32. The social impacts of the proposed development was a mandatory relevant consideration pursuant to s 79C(1)(b) of the EPA Act. As the purpose of the eligibility requirements in the POM, encompassed by the condition of consent, was to address the social impacts of the development, the appellant submitted that the condition was logically made for a planning purpose relating to that mandatory relevant consideration. It was said therefore that the Commissioner’s reasoning, that the condition was not for a proper planning purpose, was contrary to the Temwood principle that a proper planning purpose is one discerned by reference to the relevant legislation.

33. The appellant submitted that the Commissioner’s finding that the proposed condition was not for a proper planning purpose was predicated upon an erroneous interpretation of ARH SEPP. The Commissioner stated at [50] that the purpose of that Policy was to “provide housing to income groups ranging from very low to moderate [income households] rather than [to] exclude two of the three groups”. The appellant submitted that in promoting affordable housing, ARH SEPP did not require any given proposed affordable housing development to be available for rent to those falling within all three categories of income level (very low, low and moderate) identified in ARH SEPP and the EPA Act definition of “affordable housing”.

34. The appellant contended that the use of the disjunctive to separate “very low”, “low” and “moderate” (“housing for very low income households, low income households or moderate income households”) in the statutory definition of “affordable housing”, militates against the Commissioner’s finding at [56], that ARH SEPP did not support any provision of affordable housing exclusively for “moderate income households”. Rather, the appellant submitted that the Policy, as is apparent from its aims (cll 3(b) and 3(f)) to provide affordable housing for workers, seeks to increase the pool of affordable housing in all its manifestations.

35. Respondent’s submissions

36. The respondent submitted the mere fact that the condition may indirectly have the effect of alleviating the negative social impacts of the development was insufficient to make it a condition imposed for a proper planning purpose. Viewed objectively, the proposed condition was a condition regulating social security status and the income levels of the occupants of the proposed development. It is not a condition that, properly understood, serves a legitimate planning purpose.

37. The respondent claimed that a condition excluding persons in receipt of government benefits, and persons on annual incomes of less than $43,340, from occupying a development could not be said to be imposed for a proper planning purpose. Rather, it was submitted that considerations of income are only incorporated into ARH SEPP for a limited purpose: to permit positive discrimination and to promote, encourage and provide bonuses and incentives to developments providing accommodation for persons who are on very low to moderate incomes. Taken as a whole, the planning policy embodied in ARH SEPP had the purpose of improving housing supply for persons whose income was below a specified threshold, not to provide three different housing types, one for very low, one for low and one for moderate income households.

38. Yet, the respondent also submitted that despite the absence of separate definitions for very low, low and moderate income households, it would not be inconsistent with the aims of ARH SEPP to propose a development aimed only at the most disadvantaged group. That point was said to have been accepted by the Commissioner at [56] in her judgment, where she noted that it would only be appropriate to set a maximum rather than a minimum eligibility income level.

39. In response to the appellant’s submission that the POM would provide affordable housing to those in the moderate income group of households by limiting tenancy to those earning income in a prescribed band, the respondent said that there was nothing in the POM to prevent persons on a higher income taking advantage of the low rent. Although cl 6 of the POM did impose a limit on rental increase, the evidence of Prof Ryan, the appellant’s social planner before the Commissioner, was that workers earning more than $100,000 per annum would qualify under the eligibility and rent clauses to reside in the boarding house. Therefore, as the proposed condition failed to promote affordable housing or any other legitimate legislative objective, the condition could not be said to be for a proper planning purpose.

40. Although the appellant submitted that the POM would ensure that the boarding house remained affordable, by stipulating that the rent was never to exceed 30% of the occupant’s weekly income, the respondent claimed that the effect of cl 5 of the POM was not to reduce the rent when the occupant’s income drops below $43,340, but rather to make that occupant ineligible to stay at the boarding house. This strict exclusion of very low and low income boarders was said to be a perverse kind of conditional affordable housing.

41. Consideration

42. I agree that the Commissioner was in error in determining that the imposition of a condition requiring adherence to the POM that included cll 5 and 6 was not a condition imposed for a planning purpose. I express this agreement essentially for the reasons advanced by the appellant.

43. Applying the principle in Temwood at [93] that a planning purpose is discerned by reference to the legislation and not “some preconceived general notion of what constitutes planning”, determining whether the proposed condition was for a proper planning purpose requires focus upon the relevant provisions of the EPA Act, principally ss 79C and 80A. The need for that focus is exemplified in the decision of the Court of Appeal in Botany Bay City Council v Saab Corp Pty Ltd [2011] NSWCA 308 where at [9] Basten said:

“Section 80A [of the EPA Act] empowers the consent authority to impose a condition if ‘it relates to any matter referred to in s 79C(1) of relevance to the development the subject of the consent’: s 80A(1)(a). Section 79C(1) identifies general matters for consideration by the consent authority in determining a development application. Those matters include ‘the likely impacts of that development...on both the natural and built environments and social and economic impacts in the locality’: s 79C(1)(b)…In respect of any specific condition, there may be a question as to how distant, remote or indirect the relationship may be between that development and the likely impacts on the environment.”

48. The evidence of the social planners, as summarised by the Commissioner, made clear that it would not be desirable for public housing to be increased in the area, given the density of such housing already present in that area and the associated anti-social behaviour problems said by the social planners to be associated with that public housing. The eligibility requirements in the POM were considered by the experts as essential if the development was not to exacerbate these social problems. The condition was therefore directly referable to a mandatory relevant consideration pursuant to s 79C(1)(b) of the EPA Act, namely the social impact of the development in the locality, and, consequently, was for a proper planning purpose. The acknowledgment by the Commissioner at [50] that the condition seeks “to address the social impacts of the development” supports that conclusion.

49. The Commissioner’s finding that the proposed condition was not for a proper planning purpose was based on her characterisation of the purpose of the eligibility condition as being to exclude those from the “very low” or “low” income group as eligible boarders. However, the proper characterisation of the purpose of the condition was to prevent unacceptable social impacts arising from the provision of new affordable housing. That is to say, the exclusion of “very low income” or “low income” boarders from the proposed affordable housing development was an effect of the condition rather than its purpose.

50. The appellant is correct in its submission that the definition of “affordable housing” does not mandate the provision of facilities for all three income groups identified in the definition in order for that development to be characterised as “affordable housing” within the meaning of ARHSEPP. The disjunctive “or” separating reference to the three income groups makes that proposition apparent.

51. For those reasons, the Commissioner was in error when she concluded that the condition was not made for a proper planning purpose. This ground of appeal is upheld.

52. Ground of appeal 3: Condition manifestly unreasonable

53. The third ground of appeal challenges the conclusion of the Commissioner that the proposed condition was “manifestly unreasonable”, as used in the Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 (“Wednesbury”) and Newbury sense.

54. Appellant’s submissions

55. The appellant submitted that the Commissioner’s conclusion was contrary to law because it involved a misunderstanding of the high bar that must be overcome before a finding of legal unreasonableness will be made. He submitted that such a finding requires a finding that the relevant decision was devoid of plausible justification, or so unreasonable that no reasonable decision maker could have reached it. Moreover, it was submitted that overwhelming proof of unreasonableness or illogicality is required for a finding of Wednesbury unreasonableness (see Marrickville Metro Shopping Centre Pty Ltd v Marrickville Council [2009] NSWLEC 109 at [113]-[116]; Marrickville Metro Shopping Centre Pty Ltd v Marrickville Council [2010] NSWCA 145; 174 LGERA 67 at [105]-[110]).

56. It was submitted that the condition requiring compliance with the POM did not meet this high threshold of unreasonableness, particularly as the Commissioner noted that the purpose of the condition was to address the social impacts of social and public housing in the locality of the proposed development. On any view, so the appellant argued, that finding must amount to at least a plausible justification for the condition.

57. The appellant noted that the plurality in Minister for Immigration and Citizenship v Li [2013] HCA 18; 249 CLR 332 (“Li”) has held (at [67]) that “the legal standard of reasonableness must be the standard indicated by the true construction of the statute”. The Commissioner’s finding, that the imposition of the condition would be unreasonable, was said to be based on a flawed understanding or misconstruction of the definition of “affordable housing” in the EPA Act and ARH SEPP namely, that the definition of “affordable housing” requires any affordable housing development to be available for rental by all three categories of very low, low and moderate income households. The appellant therefore asserted that the concept of legal reasonableness, as articulated in Li, revealed the error in the Commissioner’s finding that the condition was manifestly unreasonable.

58. Respondent’s submissions

59. In addition to the authorities cited by the appellant, the respondent referred to the decision of Basten JA in Botany Bay City Council v Saab Corp Pty Ltd in which his Honour said at [15]:

“…an exercise of discretionary power may be capable of challenge as manifestly unreasonable, in the Wednesburysense. However, that assessment will usually involve a comparison of the condition imposed with the scope and operation of the power being exercised. In circumstances where the condition must, for the purposes of the first test, be reasonably related to the purposes for which the power may be exercised, the practical significance of this test may be limited to cases where the severity of the burden placed on the applicant is disproportionate to the consequences attributable to the proposed development.” 

60. The respondent also cited two authorities of this Court to demonstrate that the unreasonableness threshold, although high, is “not impossible to reach”. In Community Association DP 270253 v Woollahra Municipal Council [2013] NSWLEC 184; 211 LGERA 412, Pain J held that a condition requiring the applicant to build and maintain at its own cost a public thoroughfare through its development to the foreshore of Sydney Harbour was unreasonable because it imposed an unduly onerous burden on the applicant. Similarly, the condition at issue in Dogild Pty Ltd v Warringah Council [2008] NSWLEC 53; 158 LGERA 429 required the applicant to provide a right of carriageway for the benefit of adjacent commercial properties. Biscoe J held that the imposition of this burden upon the applicant was unreasonably onerous and, consequently, failed the reasonableness requirement of the Newbury test.

61. The proposed condition at issue in this appeal was said to be similarly unreasonable, although in a different way, because its operation in relation to would-be occupants of the development would be harsh and discriminatory. The respondent did not contend that the condition would constitute unlawful discrimination under the Anti-Discrimination Act 1977 (NSW) or any Commonwealth anti-discrimination laws. However, the condition would nevertheless discriminate against people on the grounds that they have a low income, or are in receipt of social security payments, or both.

62. Evidence provided by the social planners assumed that the subject boarding house would exacerbate problems associated with social housing in the Miranda locality if the proposed POM eligibility requirements were not imposed. The Commissioner rightly concluded that the proposed condition was of its nature unreasonable, regardless of its possible effectiveness in addressing the social problems identified by the social planners. A condition setting a minimum income threshold inevitably operates in a harsh and discriminatory way against persons on low incomes or on welfare and effectively treats all such persons as anti-social, which is clearly not accurate.

63. Furthermore, the respondent argued that the proposed condition would exclude people from the development on the assumption that it is problematic for them to pay more than 30% of their income in rent, rather than allowing such people the freedom to choose what proportion of their income they are willing to pay as rent. The proposed condition would also operate without regard to the fact that a person’s income and social security status does not necessarily represent the sum total of their economic resources.

64. Consideration

65. I accept that the decision of the Commissioner determining the conditions in question to be unreasonable such as to found invalidity of those conditions was erroneous. However, in reaching that conclusion I do not fully embrace the submissions of the appellant.

66. The appellant’s reliance upon statements such that there is a “high bar” that must be hurdled if successful challenge to an administrative decision is founded upon unreasonableness, or that a ground of unreasonableness will only be made out if the decision is one that is so unreasonable that no reasonable decision-maker could reach it, requires reconsideration in light of the decision of the High Court in Minister for Immigration and Citizenship v Li [2013] HCA 18; 249 CLR 332. The second way in which I have articulated the appellants submission certainly addresses the test articulated in Newbury, adopting as the judgment does, the formulation of a test of unreasonableness articulated by Lord Greene MR in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1KB 223 at 230. It is the test that the Commissioner applied at [45].

67. The articulation of “reasonableness” as a basis for challenge to the validity was addressed in Li. The plurality in that case said of the test formulated by reference to Lord Greene’s statement in Wednesbury that it was not “the starting point for the standard of reasonableness, nor should it be considered the end point” (at [68]). Their Honours continued”

“The legal standard of unreasonableness should not be considered as limited to what is in effect an irrational, if not bizarre, decision – which is to say one that is so unreasonable that no reasonable person could have arrived at it – nor should Lord Greene MR be taken to have limited unreasonableness in this way in his judgment in Wednesbury. This aspect of his Lordship’s judgment may more sensibly be taken to recognise that an inference of unreasonableness may in some cases be objectively drawn even where a particular error in reasoning cannot be identified.”

68. However, the appellant was correct in referring to the decision of the plurality in Li at [67] where their Honours did state that the legal standard of reasonableness “must be the standard indicated by the construction of the statute.” That “reasonableness” is to be judged by reference to the statutory provisions being considered was also identified in the judgment of French CJ at [23]-[24] and by Gageler J [88]-[90]. At [105] Gageler J indicated that when reviewing the reasonableness of a decision made by a repository of power, one of the factors to be considered was whether the decision “falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law”.

69. The basis upon which the Commissioner determined that the condition requiring adherence to cll 5 and 6 of the POM was that it would exclude those in the “very low” and “low” income levels for occupying development that was intended as “affordable housing”. That reasoning, as I have already indicated, is derived from an incorrect understanding of the definition of “affordable housing”. It assumes that in all development engaging ARH SEPP consent could only be granted or a condition imposed if it was directed to persons satisfying any one of these income bands referred to in the definition. That interpretation is erroneous.

70. I have already held that the condition in question has a planning purpose, namely one directed to addressing the unacceptable social impacts that boarding house development may otherwise have in the locality. As a means of giving effect to that purpose, it could not be said that the condition was one that fell outside the range of means by which the objective could be achieved. It is a defensible condition, having regard to the social impact evidence that was accepted by the Commissioner, considered in the context of ss 79C(1)(b) and 80A(1)(a) of the EPA Act.

71. The condition was not unreasonable in the sense intended by the third limb of the Newbury test. This ground of appeal is therefore upheld.

72. Ground of appeal 1: whether the Condition could be lawfully imposed

73. Grounds 2 and 3 identified the two bases for the Commissioner’s decision that are the subject of ground 1. Having upheld both of those grounds, the appellant must also succeed on the first ground of appeal.

68. Ground of appeal 4: suitability of the site for the proposed development

69. This ground of appeal was based on the Commissioner’s error on the question of law as to whether the proposed condition was lawful. That error having been sustained, the conclusion at [57] of the Commissioner’s judgment that the site was not suitable for the proposed development, can no longer be sustained, being expressly based on her antecedent reasoning as to the lawfulness of the relevant condition.

70. This ground of appeal must also be upheld.

71. Conclusion

72. For the reasons that I have given the orders that I make are as follows:

1. Appeal upheld.

2. The decision and orders of the Commissioner made on 21 April 2015 are set aside.

3. The proceedings are remitted to be determined by the Commissioner in accordance with the decision of this Court.

4. The respondent must pay the appellant’s costs of the appeal unless within 14 days from the date of this judgment it files a notice of motion seeking a different order.

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Decision last updated: 02 June 2016