Macedonian Orthodox Church Incorporated and Act Planning And Land Authority (Administrative Review) - [2012] ACAT 21

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

MACEDONIAN ORTHODOX CHURCH INCORPORATED & ACT PLANNING AND LAND AUTHORITY (Administrative Review) [2012] ACAT 21

AT 11/123
Catchwords: ADMINISTRATIVE REVIEW – Lease variation to allow subdivision following de-concessionalising of a lease issued under the Church Lands Leases Ordinance 1924 - Change-of-Use Charge (CUC) worked out in accordance with section 277 of Planning and Development Act 2007 - whether Clauses 3(a) and 3(b) of draft lease for one of the subdivided blocks require the construction of development works for which approval has been given – whether Clauses 3(a) and 3(b) are ambiguous – the Parol Evidence Rule - whether development approval constitutes extrinsic material that may be used to interpret any ambiguity - whether the estimated cost of constructing those works should be deducted from the V₂(After Value) in working out the CUC .

List of Legislation:

Land (Planning & Environment) Act 1991
(Repealed),

ss 159, 161, 184A and 245
Planning and Development Act 2007, ss 238, 276, 277 and 471
Church Lands Leases Ordinance 1924 (Repealed), s 3

List of Cases Bowler v Hilda Pty Limited [2001] FCA 342
Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
DTR Nominees Pty Ltd v Mona Homes Pty Ltd
(1978) 138 CLR 423
Macedonian Orthodox Church Inc v Paxevanos
[2009] ACTSC 166
Paxevanos & ACT Planning and Land Authority
[2008] ACTAAT 20

Tribunal: Dr D. McMichael, Senior Member
Mr A. Anforth, Senior Member

Date of Orders:  27 April 2012
Date of Reasons for Decision:         27 April 2012
AUSTRALIAN CAPITAL TERRITORY          )
CIVIL & ADMINISTRATIVE TRIBUNAL     )          AT 11/123
BETWEEN:
MACEDONIAN ORTHODOX CHURCH
INCORPORATED
Applicant

AND:

ENVIRONMENT AND SUSTAINABLE DEVELOPMENT

DIRECTORATE
Respondent

Tribunal: Dr D. McMichael, Senior Member
Mr A. Anforth, Senior Member

DATE:27 April 2012

ORDER

The part of the decision under review specifying the Before and After Values, and the CUC arising there from, is varied by substituting for it the following words:
The CUC has been determined in accordance with the formula CUC = V₁ – V₂x 75% as provided by the Planning and Development Act 2007 as follows:
After Value (V₁)  $5,540,000

Before Value (V₂)  $2,795,000
Added Value  $2,745,000
75% of Added Value  $2,058,750
CUC Payable  $2,058,750

………………………………..
Ms L. Crebbin
General President
For
Dr D. McMichael
Senior Member
For and on behalf of the Tribunal

REASONS FOR DECISION

The Macedonian Orthodox Church Incorporated (“the applicant”) has sought review of a decision of the ACT Planning and Land Authority, now contained within the Environment and Sustainable Development Directorate (“the respondent”) to determine a Change of Use Charge (“CUC”) in the amount of $2,055,000 in relation to the variation of the lease of Block 11, Section 100, Narrabundah (“the subject land”).
The determination was made by the respondent on 18 November 2011 based on the advice of the Australian Valuation Office (“AVO”) that the V₂or Before Value of the land was $3,310,000, the V₁ or After Value was $6,050,000 and therefore the Added Value was $2,740,000. The CUC is worked out at 75% of the Added Value.
The applicant contended that the Before and After Values had been calculated incorrectly and that the respondent, in calculating the CUC, had not taken into account the cost of approved works associated with the Macedonian Orthodox Church (“the Church works”) which, it maintained, were a requirement of the varied Crown lease, nor the cost of de-concessionalising the original Crown lease. It submitted that its valuers (FPB Consultancy) had calculated the Before Value as $3,300,000 and the After Value as $5,492,000, giving an Added Value of $2,192,000. The cost of the Church works to be undertaken was estimated by Mr M Phillips, a quantity surveyor with Davis Langdon to be $6,622,210 (excluding GST) which, if deducted, would reduce the Added Value to zero.
The respondent did not accept that the works to be undertaken were a requirement of the Crown lease, nor that the cost of the works should be deducted from the Added Value.
During the course of the hearing, the parties conferred and reached agreement that a Before Value of $2,795,000 and an After Value of $5,540,000 should be adopted. This yielded an Added Value of $2,745,000, which would have the effect of increasing the CUC to $2,058,750 if the 75% formula were applied without any deduction. It was also agreed that the relevant date for the valuation was the date on which the de-concessionalising charge had been paid,
viz 6 April 2011. However, there was no agreement was to whether or not the cost of the works should be allowed as a deduction, save to the extent that if they were to be allowed, they would exceed the Added Value and would indeed reduce the CUC to zero.
The issue of deducting the $300,000 paid to deconcessionalise the lease, although included in the application for review, was not raised by the applicant in its Facts and Contentions or at hearing. Thus, the only matters for decision by the Tribunal were whether or not the Church works were a requirement of the varied Crown lease and if so, whether they should be allowed as a deduction from the Added Value.

The Hearing

This matter was heard on 13 March 2012. Because the Tribunal was advised soon after the commencement of the hearing that the valuers for the parties had reached agreement on the Before and After Values, it was agreed that there was no need for a view, as the only matters in contention were questions of statutory interpretation and construction. The applicant was represented by Mr P Walker of Counsel and the respondent by Mr W Sharwood of Counsel. No witnesses were called to give evidence, but the Tribunal had before it the documents on which the respondent had relied in reaching its decision on the CUC (the T-Docs); the decision on the approval of the development (the ST1-Docs); and the decision on the de-concessionalising of the lease (the ST2-Docs) as well as the written Facts and Contentions of the parties. In order to understand this matter, some brief background information is necessary.
Background
The Macedonian Orthodox Church Incorporated is the lessee of the subject land, holding a lease granted under the former Church Lands Leases Ordinance 1924 [1] commencing on 25 August 1982 for “church purposes” in perpetuity. The subject land is 16,940m² in area and on it is built the distinctive St Kliment of Ohrid Church, situated adjacent to Hindmarsh Drive near its intersection with Dalrymple Street. It is located between the Regent Terrace residential development to the west, and Mountain View Aged Care Facility and the Greengate residential development in Leahy Close to the east.
[1] The Church Lands Leases Ordinance 1924 became an Act after ACT self government and was repealed by the
On 17 October 2002, Mr N McDonald Crowley of McCann Property and Planning sought agreement on behalf of the applicant from the respondent’s predecessor, Planning and Land Management (PALM), to de-concessionalise the lease, in order to allow for its subdivision. The aim was to permit redevelopment of the site in two ways:
· To enable the Macedonian Orthodox Church to establish its Australian headquarters by building a Bishop’s residence and community hall and associated car parking on a portion of the land to be retained by the applicant (“the Church block”); and
· To permit construction of a multi unit residential complex of 55 units on the remainder of the land (“the residential block”).
The then Minister for Planning approved the de-concessionalising of the lease on 8 August 2003 subject to the lessee paying an amount equal to the current market value of the lease. Following consideration and approval of the development proposal outlined below, on 15 February 2008 the respondent advised that the amount required to pay out the lease was $300,000.
In February 2006, Development Application (“DA”) No 200600518 was lodged by BDA Architects Pty Ltd on behalf of the applicants seeking subdivision of the lease and changes to the purpose clauses of the new leases that would allow development of the Church works on the Church block and of 56 residential units with basement car parking on the residential block. The Church works then proposed included construction of a bell tower, a baptismal pool and re-cladding of the dome of the existing Church building, as well as construction of the Bishop’s residence and the community hall.
In December 2007, the applicant entered into a conditional contract with Project Co-ordination (Australia) Pty Ltd (“Project Co-ordination”) under which Project Co-ordination undertook to carry out the Church works on the Church block and pay the cost of de-concessionalising the lease and any CUC, in consideration for which the applicant undertook to subdivide the land and exercise a call option that would transfer the residential block to Project Co-ordination at nil cost. In effect, the applicant planned to treat the transfer of the residential block to Project Co-ordination as payment for the building of the Church works.
On 28 September 2007, the respondent approved DA 200600518 including that the development was to be carried out in accordance with specified drawings and some revised plans and drawings for both the Church works and the residential development, and subject to a range of other conditions, including that the approval would not take effect until the applicant had paid the current market value for the site in order to de-concessionalise the Crown lease.
The subdivision was to yield a block of 6,700m² for the Church block and another of 10,240m² for the residential block, but variation of the lease could not occur until the CUC had been paid, in accordance with section 184A(1) of the Land (Planning and Environment) Act 1991 (“the Land Act”) which was then in force. The approval was accompanied by two draft Crown leases with appropriately revised purpose clauses for the blocks following subdivision, as well as clauses about the commencement and completion of development on the blocks. We will return to these below.
The decision to approve the DA was reviewed by the former ACT Administrative Appeals Tribunal (“the AAT”) and on 19 August 2008 the approval was set aside by the AAT and the DA refused (Paxevanos & ACT Planning and Land Authority [2008] ACTAAT 20). However, on appeal to the ACT Supreme Court, on 16 December 2009 the decision of the respondent was re-instated, except for that part of it which approved the residential development (Macedonian Orthodox Church Inc v Paxevanos [2009] ACTSC 166).
On 6 April 2011, Project Co-ordination paid the $300,000 de-concessionalising fee and negotiations commenced about the amount of the CUC. Following a series of discussions and receipt of submissions from CB Richard Ellis (V) Pty Ltd (“CBRE”) (29 June 2011) and the Australian Valuation Office
(15 June 2011, 29 July 2011, 15 September 2011, and 14 November 2011) the respondent determined the CUC at $2,055,000 and advised CBRE (who were by then acting for the applicant) accordingly. A different valuation firm (FPB Consultants) acted for the applicant in connection with the hearing. As outlined above, following discussion between the parties at the hearing, it was agreed that the Added Value was $2,745,000, which would have the effect of increasing the CUC to $2,058,700 if the 75% formula were applied without any deduction.
In summary, the applicant has approval to vary the now de-concessionalised lease, to subdivide the land and proceed with the Church works but cannot proceed further until the lease has been varied and that cannot happen until the CUC is paid in accordance with section 276(1) of the Planning and Development Act 2007 (“the Planning Act”). Its contract with Project Co‑ordination remains afoot and that company has apparently submitted a further DA for a residential development of 49 residential units (DA No 201018582) which the respondent has approved (T192). The only remaining impediment to the development proceeding is determination of the CUC which is the subject of this review.

Applicable Law

Although the DA was lodged and the approval was given under the Land Act, the passage of time resulting from the appeals to the AAT and the Supreme Court mean that the applicable law is now the Planning Act.
Variation of leases is dealt with in Part 9.6 of the Planning Act while Division 9.6.3 deals with Variation of Nominal Lease Rentals and includes the matters relating to the CUC at sections 276 - 277. The relevant parts of sections 276 - 277 (as the Act was prior to 1 July 2011) [2] read:
[2]   The Act was amended in July 2011 to vary the arrangements for charging for lease variations, but transitional provisions (section 471) provide that where the application to vary the lease was made prior to1 July 2011 and the planning authority had not worked out the CUC for the variation immediately before 1 July 2011, the amendments do not apply. Such is the case here.
Section 276       Variation of nominal rent lease—change of use
                     charge
(1) The planning and land authority must not execute a variation of a nominal rent lease unless the lessee has paid the Territory any change of use charge worked out by the authority, less any remission under section 278, plus any increase under section 279.
Note     The change of use charge is worked out under s 277.

(2)   A variation of a lease has no effect if the change of use charge payable under subsection (1) for the variation is not paid.

(3)   This section does not apply to a variation of a nominal rent lease if—
(a) the only effect of the variation would be to alter a common boundary between 2 or more adjoining leases; and
(b) the land comprised in each adjoining lease is leased for
the same purpose; and
(c) none of the adjoining leases is a rural lease.
Section 277   Working out change of use charge
(1)     The planning and land authority works out the change of use charge for a variation of a lease as follows:

CUC = (V₁ – V₂) x 75%

(2)In this section:

CUC means the change of use charge payable for the \variation of the lease.

V₁ –
(a)…..

(b)      for a variation that is a consolidation or subdivision, means the
         capital sum that the new lease or leases to be granted under the
           consolidation or subdivision might be expected to realize if –

(i)        the consolidation or subdivision were to take place as
                      proposed; and

(ii)        the new lease or leases were genuinely offered for sale
          immediately after the variation on the reasonable terms
  and conditions that a genuine seller would require; and
(iii)the rent payable throughout the term of the new lease or leases were a nominal rent.

V₂ –
(a)…….
(b)for a variation that is a consolidation or subdivision, means the capital sum that the lease or leases to be surrendered under the consolidation or subdivision might be expected to realize if –

(i)       no consolidation or subdivision were to take place
  during the remainder of the term of the surrendered
  lease or leases; and

(ii)       the lease or leases were genuinely offered for sale
  immediately before the consolidation or subdivision on
  the reasonable terms that a genuine seller would
  require; and
(iii)the rent payable throughout the term of the lease, or lease to be surrendered, were a nominal rent.
(3)     If the amount worked out as V₁ is equal to or less than the capital value assessed as V₂ no change of use charge is payable.
The amendments to the Planning Act that were made in July 2011 (but which do not apply to this lease variation) included a new section 277A which provided that in working out V₁ and V₂ under section 277, an improvement in relation to land comprised in the lease must not be taken into account, while improvement was defined to include “a building or structure” that is “required as a condition of development approval”. No similar provision is to be found in the Land Act or the Planning Act as it was prior to the 2011 amendments.
In the present case V₁ is the post subdivisional sum of the values of the Church
block and the residential block.
Submissions on behalf of the applicant
Mr Walker submitted that the Territory required the Church works to be built and therefore their cost should be deducted from the After Value. The consequence of this would be that the After Value was less than the Before Value and in accordance with section 184A(4) of the Land Act (or section 277(3) of the Planning Act) no CUC was payable.
Mr Walker relied on the wording of a clause in the Draft lease for the Church block and one of the Conditions attaching to the approval of the DA to support his submission. The Draft lease included the following Clause 3:
3.    THE LESSEE FURTHER COVENANTS WITH THE COMMONWEALTH as follows:
COMMENCEMENT
OF DEVELOPMENT      (a) That the Lessee shall within twelve (12)
   months from the date of commencement of
   the lease or within such further time as may
   be approved in writing by the authority for
  that purpose commence to erect an approved
  development in accordance with plans and
  specifications prepared by the Lessee and
   previously submitted to and approved in
   writing by the Authority;

COMPLETION
OF DEVELOPMENT       (b) That the Lessee shall within twenty four (24)
  months from the date of commencement of
  the lease or within such further time as may
  be approved in writing by the Authority
  complete the erection of the said approved
   development in accordance with the said
  plans and specifications and in accordance
   with every Statute Ordinance or Regulation
  applicable thereto;
The approval of the DA included Condition 11 which read:
Completion

11.that the approved development shall be completed within 24 months from the date of this approval or within such further time as may be approved in writing by the Planning and Land Authority.

This Condition 11 followed a number of conditions setting out in detail the works that were approved, or for which revised plans or drawings were required, including those which were Church works.
Mr Walker submitted that this Clause and these conditions taken together should be interpreted as a requirement of the lease for the lessee to build those parts of the approved development which were Church works, on the Church block. He noted that in this case, the Church works were approved by the decision of the respondent of 28 September 2007 and this part of the approval was restored by the decision of the Supreme Court. Further, there were other detailed conditions concerning the Church site improvements - in Clause 9 Church site (a) to (f) - of the approval. Therefore, he contended, both Condition 11 of the Decision and Clause 3(a) of the draft Crown lease required the applicant to commence the approved development within 12 months of the date on which the approval took effect, that is, 6 April 2011, when the de-concessioning charge was paid.
He submitted that if that contention was correct, then it followed that the hypothetical buyer envisaged by section 277 of the Planning Act would take that obligation into account and reduce the price offered for the Church block lease. In his submission, it was important to note that the hypothetical “After Value” sale required by section 277 requires the Tribunal to assume that the lease had been varied and to determine the sale price. He contended that that sale would take place in the light of all the existing facts, including that the approval had been given with all its attendant benefits and burdens.
Mr Walker rejected the respondent’s contention that the wording of Clause 3(a) of the Crown lease – that there was no obligation to build the development for which approval had been sought and given – because such an interpretation would make Clause (3) futile. What, he asked, would be the point of the clause if it could be circumvented by the simple expedient of obtaining development approval for the most minuscule development such as covering a walkway or a small area of hardstand parking? It was, he suggested, surely not put in the lease just so any improvement was constructed in 24 months, with the respondent not having a care in the world what it was.

He submitted that the Church works were in contemplation from the beginning; there was only one application - both to vary the lease by subdivision and to undertake the developments - and the respondent had given one approval. While the applicant had not sought the inclusion of a clause requiring the Church works to be built, that is what it had been offered.
He contended that a consideration in agreeing to de-concessionalise the lease had been that there was a public benefit in doing so, in that the applicants would develop its national headquarters on the Church block which involved a range of improvements valued at over $6 million. These would be paid for by Project Co-ordination and would be in substitution for payment of a CUC. The developer would not get the residential block for nothing; on the contrary it would have to spend a great deal of money in doing so.
In support of this submission, Mr Walker contended that if a contractual term is ambiguous, objective background facts, known to both parties, may be admissible to construe the term, citing Mason J who, in Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 351‑2, adopted what he had said in DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 429:
A court may admit evidence of surrounding circumstances in the form of ‘mutually known facts’ ‘to identify the meaning of a descriptive term’ and it may admit evidence of the ‘genesis’ and objectively the ‘aim’ of a transaction to show that the attribution of a strict legal meaning would ‘make the transaction futile’
Mr Walker observed that Codelfa was endorsed by Gyles J in Bowler v Hilda Pty Limited [2001] FCA 342 in relation to ACT Crown leases (even though the full Federal Court expressed its disapproval of referring to extrinsic evidence to construe ACT Crown leases) when he said:
This is not to suggest that extrinsic evidence as to a registered lease may never be considered. Evidence, for example, might be relevant to identify the land and the parties or to give context to particular covenants in the ordinary way.
He submitted that the genesis of this transaction has always been that the subdivision of the land would result in substantial improvements to the Church block and that aim or genesis has always been known to both parties.
He further submitted that that it appeared the original intention was that the leases would be issued under section 161 of the Land Act (now section 238 of the Planning Act) and drew attention to paragraph 161(2)(a) of the Land Act (and now paragraph 238(3)(a) of the Planning Act) both of which read:
(2) A lease granted under this section may include provisions –
(a)requiring the lessee to develop the land comprised in the lease , or any unleased Territory land, in a specified way…
while section 159 of the Land Act defined “building and development provision” in relation to a lease as a provision of the lease that requires the lessee “to carry out specified works on the land”, noting that the Planning Act defined “building and development conditions’ in the same terms except that it used “stated works” rather than “specified works”.
He contended that Clause 3 (a) was a “building and development provision” and the fact that it required construction of the specified works is expressly contemplated in the Act under which approval was given. If the respondent had wished to provide that there was an obligation to build without specifying in any particular way what was to be built, it could have used the more customary building and development covenant “that within X months the lessee will construct improvements to the value of $Y on the land”.
Mr Walker further submitted that Condition 11 of the development approval undoubtedly relates to the works covered by the approval and requires those works to be undertaken. It cannot be severed from the approval which has been given. It is not possible, he contended, for the lessee to take the benefit of that part of the development approval which permits the variation to the lease, but not Condition 11.
He noted that a condition such as this was expressly authorised by
paragraph 245(3) (c) of the Land Act which permits the specification of a period during which a development is to be carried out. He contended that Condition 11 was not merely to place a time band around the construction period such as 24 months from the date of commencement of works, but to require the approved development to be completed within 24 months from the date of the approval.
Mr Walker observed that if the varied lease was to be sold, the seller and a purchaser would be cognisant of Condition11 and they would take it into account in the “reasonable terms and conditions” that would be required to make the sale. In his submission, until such times as the improvements are constructed and the obligation discharged, a purchaser would have to be paid to take the new Church block lease.

Submissions on behalf of the respondent

Mr Sharwood accepted that Clause 3(a) of the draft Church block lease imposes an obligation on the applicant to construct an approved development on the Church block and noted that a similar obligation is found in the draft residential block lease, but in his submission this was a general form of words and not meant to be specific.
He noted that Clauses 3(d) to 3(f) all used similar wording to that in
Clause 3(a), requiring certain things to be done “in accordance with plans and specifications prepared by the Lessee and previously submitted to and approved in writing by the Authority” which lent weight to his submission that this is a general form of words. If the intention had been to require specific works to be undertaken, the draft lease could have referred to particular plans.
He submitted that it was the Church’s decision to apply for lease variation (sub-division) and development all together and the respondent had an obligation to deal with them all at once. In doing so, they were not making any judgement about the public benefit (if any) of the proposal (and he reminded the Tribunal that the Minister’s decision to allow de-concessionalising was made in 2003).
Mr Sharwood submitted that the decision of the Supreme Court (Macedonian Orthodox Church at [44] and [54]) made it clear that the AAT was required to consider each element of the DA as against the Territory Plan separately, that is, that the various elements of the approval could be disaggregated, and this Tribunal was similarly bound.
He also contended that Condition 11 of the development approval did not require the lessee of the subdivided and varied Church block lease to undertake the development works on the Church block, but rather that an approved development was permissible. He contended that it was open to the applicant to propose a different and less costly development which could be completed within the specified time limits or even to vary the lease condition.
He rejected the applicant’s submission that the estimated cost of the Church works must be taken into account when determining the After Value. He further submitted that the conditional sale contract with Project Co-ordination had no relevance to the determination of the CUC. In carrying out the CUC determination, a valuer (or the Tribunal) needed to consider the definitions set out in section 277 of the Planning Act, not some proposed commercial agreement with a developer. He said that to allow the costs of that work, as contended by the applicant, would allow for CUCs to be avoided by applicants adding applications for additional works to applications for change of use lease variations and then entering into agreements such as that with Project Co-ordination in this case.

Consideration of the issues

44.The Tribunal stands in the shoes of the decision maker and is bound by the provisions of section 277 of the Planning Act in arriving at the After Value. In this case, because there would be two leases following the subdivision, but only one After Value to be worked out, we agree with the approach adopted by the valuers, that the After Values of the two resulting leases should be worked out independently and then added together. We do not dispute the agreement that the sum of the After Values of the two leases is $5,540,000 although we were not provided with the specific values agreed for each of the subdivided leases.

Although the present zoning of the subject land under the Territory Plan is Residential, use of the block in question is limited by the Purpose Clause of the current lease to “Church purposes” and of the proposed post-subdivision Church block lease to “Community Use limited to place of worship and/or religious associated use”. Consequently, the original estimates of the Before and After Values of the Church block by the AVO were based on an analysis of comparative sales of land zoned for Community purposes, in particular
Block 23, Section 117, Kaleen which showed a vacant land sale rate of $165/m² of site area. This they adopted for the Before Value of the undivided 16,949m²block, to which they added the value of the improvements (320m² at $1,600/m²). Mr Brodrick accepted and adopted these rates, giving a total Before Value of the undivided block of $3,308,580, which was rounded to $3,310,000. However, the valuers subsequently agreed to reduce the Before Value to $2,975,000 by excluding the values of the existing improvements from their calculations (as they would be the same in both the Before and the After Values).
If, following subdivision, the Church block were to be given a separate Before Value, for 6,700m² at $165/m²_, it would be a total of $1,105,500 (excluding the existing improvements).
After subdivision, the Church block had additional permissible uses added to its draft purpose clause, viz the words “and/or religious associated use” which by definition covered the proposed Bishop’s residence, Community Hall, Bell Tower and Baptismal pool. The valuers each adopted a figure of $200/m² for the Church block land following subdivision, presumably to reflect the added value of these additional rights, giving that block an After Value of $1,340,000.
The Tribunal sees no reason to dispute this additional value. It assumes that the hypothetical purchaser envisaged by section 277(2)V₂(b)(ii) of the Planning Act wanting to buy the Block with an extant Church on it and with rights to undertake further development for religious purposes would be prepared to pay more for it than without those additional rights. It seems unlikely to the Tribunal that anyone other than another religious organisation would contemplate buying the land if it were for sale given its restricted Purpose Clause, even though it is located in a Residential Zone.
But the question to be decided is, would that hypothetical purchaser decide against purchasing it if they considered they would be obliged to construct works worth around $6 million on the land? The answer to that question depends on whether Clauses 3(a) and 3(b) of the draft Crown Lease impose an obligation on the lessee to build the particular works described in the original DA and if so, at what cost.
Mr Walker’s submissions were to the effect that the Tribunal could take into account extrinsic material in construing ambiguous provisions in a lease, in this case Clause 3(a) and 3(b) relying on the authority of Bowler v Hilda. In this case, the extrinsic materials relied upon by him are the DA and the development approval of 9 February 2006.
The draft Crown lease is a form of contract between the Commonwealth and the applicant and, in construing its terms, the law of contract applies. It is well established, under the Parol Evidence Rule that, where a contract is wholly in writing, extrinsic evidence will not be admissible unless there is ambiguity about the meaning of a term.
There is no ambiguity about the purpose in Clause 3(c), but it is arguable that Clauses 3(a) and 3(b) are ambiguous or this matter would not be before the Tribunal. The question is - do the words “an approved development” in these two subclauses imply the development for which development approval was sought and given?
We do not think they do. Clauses including these words are commonplace in ACT Crown leases, for example in the original lease of the subject land (T610-615). In that case, six months was allowed to commence construction and six years to complete it, but with a right to seek an extension of time in both Clauses (as in the draft leases under consideration here). No doubt such Clauses are inserted to try to ensure that land acquired under lease does not remain vacant in a “land bank” but is used for the purpose specified in the lease within a reasonable time. In the event of failure to do so, subclauses 5(a)(i) and 5(a)(ii) expressly provide that the lease could be terminated, but we are not aware whether that ever happens and in the present case, it seems most unlikely that it would, given the existing Church on the land.
Further, we do not think that the words “an approved development” are ambiguous. In their natural meaning they require that any development that is to be built must be approved by the respondent, but the word “an” leaves open the possibility of more than one acceptable development. Had the development proposed in the DA been intended, the word “the” could have been used.
In relation to the Church block, recognising that the draft lease was prepared at the time the development was approved in 2006, Mr Sharwood stated that because it was already developed with a Church building, nowadays such requirements (to commence and complete construction) would not be imposed in the new Church block lease, but he did not support this claim with any evidence.
Nor do we think that Condition 11 in the development approval can be regarded as obliging the applicant to undertake the development proposed in the DA. There can be little doubt that approval of the proposal to subdivide the land was to enable the applicant to dispose of the residential block and use the proceeds of its sale to develop its national headquarters, including a Bishop’s residence and a community hall (at least). But that does not mean that the subdivision was contingent upon a particular development proposal. As the Supreme Court made clear in Macedonian Orthodox Church, the several elements of the DA are to be considered separately against the provisions of the Territory Plan, and so the approval to subdivide the land is not necessarily tied to the approval to develop the resulting Church block, any more than it is tied to the approval to develop the residential block which has been set aside by the AAT and the Supreme Court.
It would be open to the applicant to seek to vary the new lease if it was unable to meet the time constraints imposed by Clauses 3(a) and 3(b), or to submit a different and perhaps less costly development proposal, or to seek to amend the existing approval in some way. Whatever the course of action that might be undertaken by the applicant, it cannot be taken into account in any meaningful way in arriving at a CUC.

Conclusion

It is the lessee of the original (undivided) block who sought lease variation in the form of subdivision and because he/she gains a benefit, it is that lessee who must pay any CUC. Until it is paid, the lease cannot be varied (section 276(1) of the Planning Act), but once it is paid, the lease must be varied in accordance with section 165A of that Act. The Tribunal agrees that, in determining the overall After Value, it is necessary to determine the After Value of each subdivided block and add them together, so that the lessee can discharge the CUC obligation, but once that is done, the two leases become separate entities and can be dealt with separately.
If the Macedonian Orthodox Church was able to pay the determined CUC, it would then hold two separate leases – one limited to religious and associated use and the other allowing residential development. It could then sell the latter at market value and build its religious associated buildings. We were provided with no evidence as to whether that would be possible or not.
In the case of a subdivision such as this, there is no reason to assume that there is just one hypothetical purchaser of both leases. The wording of the Planning Act (sub-section 277(2) V₁(b)) does not limit the sale to a single purchaser – it only refers to the seller who must be the original lessee, and it seems to this Tribunal that the ordinary interpretation of the sub-section would not require there to be just one purchaser. (The position is, of course, different for a lease consolidation or a purpose clause variation, where in each case a single lease ensues and there could be only one purchaser.)
Consequently, the Tribunal considers that if the value of the Church work was required to be deducted, it could only be deducted from the After Value of the Church block and, assuming it is in the order of $6,000,000, reduce it to zero, leaving the After Value of the residential block unaffected. However, for the
reasons set out above, we do not accept that the value of the Church works should be deducted because in our view they are not a burden on the original lessee (they were sought by that lessee), nor would they necessarily be a burden on any purchaser (who could only be another Church-type organisation given the purpose clause).
In our opinion, a Church-type organization wanting to buy the Church block would pay the After Value of that block because they wanted to buy an extant Church and possibly extend it with a residence and a community hall and they would see this is an ideal site for that purpose, given the additional uses which the varied lease permits. They would not see Clause 3(a) as a disadvantage, but may want to seek approval to a different development, rather than the one presently approved.
Having considered the submissions made on behalf of the parties the Tribunal is not persuaded that either Clauses 3(a) and 3 (b) of the draft Crown lease for the Church block, or Condition 11 of the development approval, oblige the applicant to build any specific development proposal and we conclude that the hypothetical purchaser would not be dissuaded from buying the Church block lease at the agreed After Value. We see no basis on which the estimated cost of the Church works proposed in the DA can be deducted from the Added Value of the two blocks following subdivision.
However, because of the agreement reached at the hearing as to the amended     Before and After Values, it is necessary to set aside that part of the decision under review specifying these Values and the CUC arising therefrom and substitute for it the following words:
The CUC has been determined in accordance with the formula CUC = V₁ – V₂x 75% as provided by the Planning and Development Act 2007 as follows:
After Value (V₁)  $5,540,000

Before Value (V₂)  $2,795,000
Added Value  $2,745,000
75% of Added Value  $2,058,750
CUC Payable  $2,058,750
………………………………..
Ms L. Crebbin
General President
For Dr D. McMichael
Senior Member
For and on behalf of the   Tribunal

PUBLICATION DETAILS

TO BE PUBLISHED

To be completed by Tribunal Staff

PART A

FILE NUMBER:	AT 11/123
PARTIES, APPLICANT:	Macedonian Orthodox Church Inc
PARTIES, RESPONDENT:	Environment & Sustainable Development Directorate
COUNSEL APPEARING, APPLICANT	Mr P. Walker
COUNSEL APPEARING, RESPONDENT	Mr W. Sharwood
SOLICITORS FOR APPLICANT	Mr Harris, O’Connor Harris & Co
SOLICITORS FOR RESPONDENT	Ms Tomlins, ACT Government Solicitor
TRIBUNAL MEMBERS:	Dr D. McMichael, Senior Member Mr A. Anforth, Senior Member
DATES OF HEARING:	13, 14, 15, 16 March 2012
PLACE OF HEARING:	Canberra

PART B

RECOMMENDATION:

FULL REPORT ( ) CASE NOTE ( ) UNREPORTED DECISION ( )

COMMENTS:

Land (Planning and Environment) Consequential Provisions

Act 1991.