Meriton Property Services Pty Ltd v Council of the City of Sydney
[2012] NSWLEC 1308
•02 November 2012
Land and Environment Court
New South Wales
Medium Neutral Citation: Meriton Property Services Pty Ltd v Council of the City of Sydney [2012] NSWLEC 1308 Hearing dates: 9,10 October 2012 Decision date: 02 November 2012 Jurisdiction: Class 1 Before: Pearson C Decision: See paragraph [106]
Catchwords: DEVELOPMENT MODIFICATION - Affordable housing contribution - Change of use from residential apartments to serviced apartments - Whether use as serviced apartment is use for residential purposes - Whether contributions made can be refunded - Whether conditions should be modified Legislation Cited: Environmental Planning and Assessment Act 1979
Interpretation Act 1987
State Environmental Planning Policy No 70 -Affordable Housing (Revised Schemes)
South Sydney Local Environmental Plan 1998Cases Cited: Arkibuilt Pty Ltd v Ku-ring-gai Council [2006] NSWLEC 502
Chamwell Pty Ltd v Strathfield Council [2007] NSWLEC 114; 151 LGERA 400
Council of City of Sydney v Waldorf Apartments Hotel Sydney Pty Ltd [2008] NSWLEC 97
Derring Lane Pty Ltd v Port Phillip City Council (No 2) [1999] VSC; 108 LGERA 129
Dooralong Residents Action Group Pty Ltd v Wyong Shire Council [2011] NSWLEC 251;186 LGERA 274
Fairfield City Council v N & S Olivieri Pty Ltd [2003] NSWCA 41
Foodbarn v Solicitor General of New South Wales (1973) 32 LGRA 157
GrainCorp Operations Pty Ltd v Liverpool Plains Shire Council [2012] NSWLEC 143
House of Peace v Bankstown City Council [2000] NSWCA 44
Kendall Street Developments Pty Ltd v Byron Shire Council (No 2) [2004] NSWLEC 530
KJD York Management Services Pty Ltd v Sydney City Council [2006] NSWLEC 218; 148 LGERA 117
Klefend Pty Ltd v Santom Pty Ltd [1994] NSWLEC 201
Mirvac Projects Pty Ltd v Ku-ring-gai Municipal Council [2007] NSWLEC 540
North Sydney Municipal Council v Sydney Serviced Apartments Pty Ltd (1990) 21 NSWLR 532
1643 Pittwater Road Pty Ltd v Pittwater Council [2004] NSWLEC 685
Progress and Securities Pty Ltd v North Sydney Municipal Council (1988) 66 LGRA 236
Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355
Willoughby City Council v Dasco Design and Construction Pty Ltd [2000] NSWLEC 257Category: Principal judgment Parties: Meriton Property Services Pty Ltd (Applicant)
Council of the City of Sydney (Respondent)Representation: Counsel
Mr D Russell QC with Mr M Seymour (Applicant)
Mr P Tomasetti SC (Respondent)
Solicitors
Ms K Mihail, Meriton Group (Applicant)
Mr A Hawkes, City of Sydney (Respondent)
File Number(s): 10529 of 2012 10724 of 2012
Judgment
There are two appeals before the Court pursuant to s 97AA of the Environmental Planning and Assessment Act 1979 (the Act) in relation to determinations of the Council of the City of Sydney (the Council) of applications made by Meriton Property Services Pty Ltd (Meriton) under s 96(1A) of the Act to modify development consents relating to two sites.
Appeal 10529 of 2012 relates to the property at 807 South Dowling Street Waterloo, also known as 30 Danks Street Waterloo (the ACI site). Appeal 10724 of 2012 relates to the property at 8 Defries Avenue Zetland (the VSQ site). On 25 July 2012 Biscoe J ordered that both appeals be heard together.
Both the ACI site and the VSQ site are located within the Green Square Redevelopment Area identified under the South Sydney Local Environmental Plan 1998 (the SSLEP). Both sites are in the Zone No 10(b) - Mixed Uses "B" Zone under the SSLEP, and development for the purposes of "multiple dwellings" and "serviced apartments" is permissible with development consent. The initial development consents granted for both sites authorised construction of development including residential units; and both sites are now the subject of development consents authorising the change of use of those units to serviced apartments.
The issues in both appeals relate to the calculation of the rate of the affordable housing contribution required under the SSLEP, whether amounts already contributed can be repaid, and whether the conditions imposing affordable housing contributions should be modified to reduce the contributions required.
Background
The background to the development on both sites, the history of development consents and modifications, and the conditions sought to be modified, is as follows.
ACI site
The ACI site is located on the eastern edge of Waterloo, and is divided into precincts. The appeal relates to Precinct C, which is located on the corner of South Dowling Street and Crescent Street Waterloo. On 22 September 2004 the Council granted consent (D/2003/927) for the construction of a mixed use development comprising 243 residential units, one retail shop/café, 15 SOHO units and 256 car parking spaces in Precinct C. Conditions 29 and 30 of D/2003/927 were as follows:
29.In accordance with Clause 27Q of Local Environmental Plan 1998 (Amendment No. 6) - Green Square, and before issue of a Construction Certificate under the Environmental Planning and Assessment Act 1979, the applicant must provide evidence that a monetary contribution towards the provision of affordable housing has been paid at the office of the Department of Infrastructure, Planning and Natural resources (DIPNR), 20 Lee Street, Sydney, or a bank guarantee in favour of DIPNR to the value of the required contribution has been lodged. The contribution shall be $3,380,007.20 based on the in lieu monetary contribution rate for non-residential development at $38.61 per square metre of total floor area 923.9 square metres and $115.84 per square metre of residential development with a total floor area of 28,730.3m2. Contributions may be indexed in accordance with the formula set out below.
30. Before the issue of an Occupation Certificate under the Environmental Planning and Assessment Act 1979, the applicant must provide evidence that the bank guarantee referred to in clause 29 above has been redeemed as payment of this contribution. If the contribution is paid after 1 March of the year in which the consent is granted, the amount of the contribution will be indexed in accordance with the formula set out below.
Notes:
If any GST is liable for the affordable housing contribution(s), such GST component must be paid by the applicant.
Form A - Bank Guarantees must be lodged with the Housing Market Team, DIPNR, 20 Lee Street, Sydney. All Forms B and C - Bank Cheques to be lodged with cashier at DIPNR.
The contributions will be adjusted accordingly on the basis of the Established House Price Index for Sydney as published by the Australian Bureau of Statistics.
Contributions at Time of Payment = C x HPI 2/HPI 1, where:
C is the original contribution as shown above;
HPI 2 is the Established House Price Index: All Groups Index for Sydney available from the Australian Bureau of Statistics at the time of the payment; and
HPI 2 is the Established House Price Index: All Groups Index for Sydney available from the Australian Bureau of Statistics at the date of the consent being 1 March 2004;
There are four buildings in Precinct C, Buildings A, B, C and D. On 13 January 2006 the Council consented to an amendment of the development consent (D/2003/927/J (DU03/00927/J)) which contemplated a change in use of Buildings C and D to dual key serviced apartments upon the partial surrender of consent D/2003/927. Condition 1e was added, which provided:
1e. Approval of the dual key apartments is contingent upon the partial surrender of this consent (D/2003/927) for use of buildings C and D as permanent residential apartments - as required by development consent D/2005/1989. No works to the existing apartments proposed under Section 96 application D/2003/927/J shall be carried out until the residential consent is surrendered in accordance with Section 80A (1)(b) of the EP&A Act and Clause 97 of the EP&A Regulations 2000.
No change was proposed or made to conditions 29 and 30. The required partial surrender of consent was provided on 20 January 2006 (exhibit E).
On 2 February 2006 the Council granted consent to development application D/2005/1989 for the change in use of all apartments in Buildings C and D to serviced apartments. Condition 5 of that development consent provides:
With the grant of this consent the approved use shall be serviced apartments only and the prior use for permanent residential units no longer applies. In this regard, a separate development application will need to be lodged to return the building to permanent residential use in the future.
Condition 8 provides:
The following restriction applies to all levels of Buildings C and D approved for use as serviced apartments, as part of this development application:
(a) Buildings C and D must be used as serviced apartment accommodation only and not for the purposes of permanent residential accommodation.
(b) A restrictive covenant is to be created pursuant to s88E of the Conveyancing Act 1919, restricting any change of use of the Buildings C and D from a serviced apartment use as detailed above in (a). The covenant is to be executed prior to issue of an Occupation Certificate under the Environmental Planning and Assessment Act 1979. All costs for the preparation and registration of all associated documentation are to be borne by the applicant.
Conditions 29 and 30 were not considered in the Development Application Assessment report (exhibit 1, p90), and were not affected by development consent D/2005/1989. The restrictive covenant as registered is in evidence (exhibit D).
On 7 December 2006 the Council refused an application (D/2003/927/M) to modify Condition 29 to reduce the imposed Affordable Housing Contribution rate.
On 14 December 2006 Meriton paid the sum of $3,248,408.56 to the Department of Planning, and Form B: Receipt to Release Certificate of Construction after payment by Bank Cheque was issued (exhibit 1, p17). By letter dated 8 May 2012 addressed to the Council's solicitor (exhibit 1, p25), City West Housing Pty Ltd advised that funds received by it in 2006 "have been fully utilised for the development of affordable housing units for long term rental". The letter noted that City West Housing Pty Ltd is a not for profit organisation established to provide long term secure affordable rental housing for people in need within the City of Sydney local government area.
On 21 March 2012 Meriton appleid (D/2003/927/T) under s96(1A) of the Act to modify condition 29 of the development consent granted in 2004. The Statement of Environmental Effects stated that the purpose of the modification was to:
(a) Correctly represent the actual landuses occurring on the site in accordance with the relevant consents that apply to the land; and
(b) Correct the actual affordable housing payments due in accordance with those approved landuses.
This is as follows:
* Residential: Buildings A and B with Total Floor Area of 8,797.31 sqm (as per definition in South Sydney Council - Affordable Housing DCP).
$115.84 x 8,797.31 sqm = $1,019,080.39
*Non-Residential: Buildings C and C with Total Floor Area of 20,614.20 sqm.
$38.61 x 20,614.29 sqm = $795,917.74
This results in total affordable housing payments of $1,814,997.93, which are subject to indexation in accordance with the condition.
Meriton lodged an appeal against the deemed refusal to modify the consent on 1 June 2012. The Council refused the modification application on 21 June 2012.
It was common ground that Buildings C and D have never been occupied as residential apartments and are presently used as serviced apartments. A copy of the Apartment Registration Form completed by each guest on registration is in evidence (exhibit B), as is a copy of signage stating Meriton requirements relating to parties and excessive noise (exhibit A).
VSQ site
The VSQ site is located within the Victoria Park redevelopment, 1km east of the Green Square railway station. On 11 November 2010 the Council approved development application D/2010/639 for a mixed use development including three residential flat buildings and one 22 storey tower accommodating 331 apartments (186 x 1 bedroom units, 103 x 2 bedroom units and 42 x 3 bedroom units) and one retail unit.
D/2010/639 included condition 40 as follows:
40.In accordance with Clause 27P of South Sydney Local Environmental Plan 1998 (as amended), and prior to a Construction Certificate being issued, the applicant must provide evidence that a monetary contribution towards the provision of affordable housing has been paid at the office of the Department of Planning or a bank guarantee in favour of the Department of Planning to the value of the required contribution has been lodged. The contribution is $3,665,005.20 based on the in lieu monetary contribution rate for non-residential development at $40.45 per square metre of total floor area 126sqm, and for residential development at $121.39 per square metre of total residential floor area 30,150sqm. Contributions will be indexed in accordance with the formula set out below.
Prior to an Occupation Certificate being issued or the use commencing, whichever is earlier, the applicant must provide evidence that the bank guarantee referred to above has been redeemed as payment of this contribution. If the contribution is paid after the indexation period in which the consent is granted 1 March 2010 to 28 February 2011, the amount of the contribution will be indexed in accordance with the formula set out below.
Notes:
(a) Applicants have two payment options:
Option 1 is payment by bank cheque using 'Form B - Receipt to Release Certificate of Construction after payment by Bank Cheque'. Form B must be obtained from the City of Sydney, and then must be lodged with a bank cheque with the NSW Department of Planning.
Option 2 is lodgement of a bank guarantee using 'Form A - receipt to release Certificate of Construction after lodgement of Bank Guarantee'. Form A must be obtained from the City of Sydney, and then must be lodged with a Bank Guarantee with the NSW Department of Planning.
Where Form A has been used, an occupation certificate will not be released until payment by bank cheque using 'Form C - Receipt to Release Certificate of Occupancy after payment by Bank Cheque'. Form C must be obtained from the City of Sydney and then must be lodged with a bank cheque with the NSW Department of Planning.
(b) Applicants are made aware that the contribution amount quoted in this condition may not be final and that a correct indexed affordable housing contribution amount can be obtained from the relevant Form A, B or C at time of payment.
(c) Forms A, B or C for payment of the affordable housing contribution can only be obtained from the City of Sydney, 456 Kent Street Sydney. Quote the development application number and the relevant Council officer will provide the applicant with an indexed contribution amount which must be paid to the Department of Planning. To arrange payment, contact the Housing Policy team, NSW Department of Planning on Ph: 9228 6111 or Fax: 9228 6455 to arrange a time for payment.
(d) The contribution will be indexed on the basis of the Established House Price Index for Sydney as published by the Australian Bureau of Statistics.
(e) Contributions at Time of Payment = C x HPI 2/HPI 1, where:
(i) C is the original contribution amount as shown above;
(ii) HPI 2 is the Established House Price Index: All Groups Index for Sydney available from the Australian Bureau of Statistics at the time of the payment; and
(iii) HPI 1 is the Established House Price Index: All Groups Index for Sydney available from the Australian Bureau of Statistics that applied at the date of the consent 1 March 2010 to 28 February 2011.
The amount of monetary contribution is calculated on the total floor area (not a percentage of it). Contribution = (total residential floor area sqm) x residential rate ($) + (total non-residential floor area (sqm) x non-residential rate ($) + (total non-residential floor area (sqm) x non-residential rate ($).
Condition 41 imposed a requirement to provide monetary contributions under s94 of the Act.
There are four buildings presently under construction on the site, Buildings L, M, N and O, which are close to completion.
Meriton provided a bank guarantee in favour of the Department of Planning for the affordable housing levy (exhibit 2, p265). The bank guarantee is dated 25 March 2011 and is for an amount not exceeding $4,177,133.17. The Form A: Receipt to release Certificate of Construction after lodgement of Bank Guarantee in the Council records dated 31 March 2011 (exhibit 2 p 267) indicates that this amount is the base contribution amount of $3,665,005.20 together with the indexation amount of $512,127,97.
On 14 December 2011 the Council granted consent to development application D/2011/1610 for the change in use of 188 apartments in Buildings M and O to serviced apartments. Condition 2 imposed a restriction on the use and a requirement to register a restrictive covenant in terms similar to those in condition 8 of the ACI consent. On 6 March 2012 the Council granted consent to D/2012/108 for the change in use of 146 apartments in Buildings L and N to serviced apartments. Condition 2 of that consent imposed a restriction on the use of Buildings L and N so that use as serviced apartments be in conjunction with the use of Buildings M and O as serviced apartments, and a requirement to register a restrictive covenant. The restrictive covenant as registered is in evidence (exhibit C). Condition 40 of the consent granted in 2010 was not considered in the Development Application Assessment reports (exhibit 2, tabs 5 and 6), or affected.
On 7 September 2011 the Council approved (D/2010/639/D) two additional 2 bedroom residential units in Buildings O and N, and condition 41A was imposed to require additional monetary contributions under s94 of the Act. On 22 May 2012 the Council approved (D/2010/639/K) a change in apartment mix in Buildings N and O, and condition 41B was imposed to require additional s94 contributions.
On 23 April 2012 Meriton applied (D/2010/639/L) under s96(1A) of the Act to modify conditions 2, 4, 12, 13, 17, 18, 19, 40, 41 and 41A of development consent D/2010/639. Meriton lodged an appeal against the deemed refusal of the modification application on 13 July 2012. On 17 July 2012 the Council approved the modification of conditions other than the conditions relating to s94 contributions, and condition 40 relating to the affordable housing contribution.
In the course of the hearing the parties resolved the issues in dispute relating to s94 contributions, and the only issue in the appeal relates to condition 40. Meriton is seeking a modification of condition 40 in the same terms as that sought for condition 29 of the ACI consent.
Evidence
The hearing of the appeals commenced with a view of both sites, including three apartments and storage and housekeeping areas in Block C of the ACI site, and three apartments in Building M of the VSQ site.
Ms Sandra Robinson provided expert planning evidence on behalf of Meriton, and Mr Greg New, Mr Dean Dransfield, and Mr Tim Wise provided expert planning evidence on behalf of the Council. Mr New and Mr Dransfield provided statements of evidence (exhibits 3, 4 and 8). Joint reports relating to conferencing between the experts were in evidence (exhibits 5, 6 and 7).
The experts continued their discussions during the first day of the hearing and the issues in dispute in relation to the s94 contributions for the VSQ site were resolved; Meriton did not press its contentions 10 and 11 relating to modification of conditions 41 and 41A for the VSQ site.
None of the expert witnesses were required for cross examination.
Ms Robinson's statement of evidence (exhibit F) addressed the issues relating to the s94 contributions, and the affordable housing contributions. In relation to the latter, at [23] of her statement of evidence Ms Robinson stated that a serviced apartment has very different characteristics to a residential apartment: it provides short to medium term self contained accommodation on a commercial basis to tourists or visitors who have their principal place of residence elsewhere; is cleaned or serviced by the owner or manager of the building or an agent, including a laundry service; provides accommodation on a nightly, weekly or monthly basis and guests do not have a residential tenancy agreement; is supported by a manager, reception/concierge, on-site security, porters, on-site cleaners/maintenance and other staff; is supported by back of house areas and storage space for management, linen and housekeeping; is fully furnished and kitchens include utensils and cooking equipment; guests arrive with a suitcase and other luggage only; guests are charged a rate that includes all overheads such as utilities, council rates; is typically advertised in print and electronic media as a visitor oriented product; and provides a centralised workforce to service the needs of guests.
Affordable housing provisions
The Act provides for conditions requiring dedication of land or contributions for affordable housing in s94F and 94G:
94F Conditions requiring land or contributions for affordable housing
(1) This section applies with respect to a development application for consent to carry out development within an area if a State environmental planning policy identifies that there is a need for affordable housing within the area and:
(a) the consent authority is satisfied that the proposed development will or is likely to reduce the availability of affordable housing within the area, or
(b) the consent authority is satisfied that the proposed development will create a need for affordable housing within the area, or
(c) the proposed development is allowed only because of the initial zoning of a site, or the rezoning of a site, or
(d) the regulations provide for this section to apply to the application.
(2) Subject to subsection (3), the consent authority may grant consent to a development application to which this section applies subject to a condition requiring:
(a) the dedication of part of the land, or other land of the applicant, free of cost to be used for the purpose of providing affordable housing, or
(b) the payment of a monetary contribution to be used for the purpose of providing affordable housing,
or both.
(3) A condition may be imposed under this section only if:
(a) the condition complies with all relevant requirements made by a State environmental planning policy with respect to the imposition of conditions under this section, and
(b) the condition is authorised to be imposed by a local environmental plan, and is in accordance with a scheme for dedications or contributions set out in or adopted by such a plan, and
(c) the condition requires a reasonable dedication or contribution, having regard to the following:
(i) the extent of the need in the area for affordable housing,
(ii) the scale of the proposed development,
(iii) any other dedication or contribution required to be made by the applicant under this section or section 94.
(4) A consent authority that proposes to impose a condition in accordance with this section must take into consideration any land or other sum of money that the applicant has previously dedicated free of cost, or previously paid, for the purpose of affordable housing within the area otherwise than as a condition of a consent.
(5) Nothing in this section prevents the imposition on a development consent of other conditions relating to the provision, maintenance or retention of affordable housing. Such conditions may require, but are not restricted to, the imposition of covenants (including positive covenants) or the entering into of contractual or other arrangements.
(6) A condition is not to be imposed under this section in relation to development that is within a special contributions area (within the meaning of Division 6).
94G Provision of affordable housing
(1) Land dedicated in accordance with a condition imposed under this Division must:
(a) be made available by the consent authority for the purposes of affordable housing within a reasonable time, or
(b) be transferred by the consent authority in accordance with any applicable direction under subsection (3).
(2) A consent authority must:
(a) hold any monetary contribution paid in accordance with a condition imposed under this Division (and any additional amount earned from its investment) for the purpose for which the payment was required and apply the money for the purposes of affordable housing in the area or an adjoining area within a reasonable time, or
(b) pay the monetary contribution in accordance with any applicable direction under subsection (3).
(3) The Minister may give a direction, that applies generally or in any particular case or class of cases, to a consent authority:
(a) requiring it to transfer land to a person nominated by the Minister, if it imposes a condition under this Division requiring dedication of the land, or
(b) requiring it to pay a monetary contribution to a person nominated by the Minister, if it imposes a condition under this Division requiring the payment of the monetary contribution.
(4) A person nominated under this section by the Minister must:
(a) make available any land transferred to the person under this Division for the purposes of affordable housing within a reasonable time, and
(b) apply any monetary contribution paid to the person under this Division (and any additional amount earned from its investment) for the purposes of affordable housing in the area concerned or in an adjoining area within a reasonable time.
Clause 9 of State Environmental Planning Policy No 70-Affordable Housing (Revised Schemes) identifies that there is a need for affordable housing in the City of Sydney and City of South Sydney local government areas.
It was common ground that s94F(1) of the Act is met and that conditions 29 and 40 are authorised in accordance with s94F(3) under the provisions of Part 4 of the SSLEP.
Part 4 of the SSLEP contains special provisions for development at Green Square, in Division 2: Development at Green Square (cll 27A-27K); Division 2A: Green Square Town Centre (cll 27KA-27KL); and Division 3: Affordable Housing at Green Square (cll 27L-27R).
The Affordable Housing aims and objectives are provided in cl 27L:
27L Affordable housing aims and objectives
Because land values in Green Square may reasonably be expected to increase when land in the area is developed in accordance with this plan, development in Green Square should provide different kinds of housing, including affordable housing, to ensure that households on very low to moderate incomes may live in the area.
Development in Green Square should promote and retain a socially diverse residential population representative of all income groups.
Clause 27M contains definitions of "affordable housing", "affordable housing provisions" and "total floor area".
Clause 27N provides Green Square affordable housing principles. Clause 27O provides matters for consideration by a consent authority in determining applications for development of land within Green Square in a number of zones, including 10(b).
Clause 27P provides for affordable housing conditions:
27P Affordable housing conditions
(1) Before granting consent to the carrying out of development (other than subdivision) on land in Green Square within Zone No 10 (a), 10 (b), 10 (c), 10 (d), 10 (e), 11 (a) or 11 (b), the consent authority must consider whether an affordable housing condition should be imposed on the consent.
(2) The following are affordable housing conditions:
(a) A condition requiring the payment of a monetary contribution to the consent authority by the applicant to be used for the purpose of providing affordable housing in accordance with the Green Square affordable housing principles and the affordable housing provisions that is the value, calculated in accordance with those provisions, of the following total amount:
(i) 3% of so much (if any) of the total floor area to which the development application relates as is intended to be used exclusively for residential purposes, and
(ii) 1% of so much (if any) of that total floor area as is not intended to be used exclusively for residential purposes.
(b) If that total amount is sufficient, a condition requiring:
(i) the dedication in favour of the consent authority, free of cost, of land of the applicant comprised of one or more complete dwellings with a total floor area of not more than that total amount, each dwelling having a total floor area of not less than 50 square metres, and
(ii) if the amount of total floor area of the complete dwelling or dwellings is less than that total amount, the payment of a monetary contribution to the consent authority by the applicant that is the value, calculated in accordance with the affordable housing provisions, of the total floor area equivalent to the difference between those amounts,
to be used for the purpose of providing affordable housing in accordance with the Green Square affordable housing principles and the affordable housing provisions.
(3) To remove any doubt:
(a) it does not matter whether the total floor area concerned was in existence before, or is created after, the commencement of this Division, or whether the area concerned replaces a previously existing area, and
(b) demolition of a building or a change in the use of land does not give rise to a claim for a refund of any amount that has been contributed under this clause for use for affordable housing.
(4) This clause authorises the imposition of an affordable housing condition when the consent authority grants consent to the carrying out of development (other than subdivision) on land in Green Square within Zone No 10 (a), 10 (b), 10 (c), 10 (d), 10 (e), 11 (a) or 11 (b), subject to section 94F (3) (c) and (4) of the Act and clauses 27Q and 27R.
(5) However, a consent authority is not authorised to impose an affordable housing condition unless at least one of the circumstances described in section 94F (1) (a)-(d) of the Act exists.
(6) This clause and any condition imposed under it are subject to section 94G of the Act.
Clause 27Q provides:
27Q Development exempted from affordable housing conditions
This Division does not authorise an affordable housing condition to be imposed in the case of a development application seeking consent for development:
(a) for residential purposes, if the proposed development will result in the creation of less than 200 square metres of total floor area, or
(b) for non-residential purposes, if the proposed development will result in the creation of less than 60 square metres of total floor area, or
(c) for the purpose of public housing, or
(d) for the purpose of affordable housing, if the applicant for consent is a community housing or non-profit organisation, or
(e) for the purpose of community facilities, or
(f) for the purpose of a public road, or a public utility undertaking or facility,
and for no other purpose.
Clause 27R provides:
27R Affordable housing conditions after initial development
An affordable housing condition is not authorised to be imposed with respect to an amount of total floor area if the consent authority is satisfied that a condition of consent has previously been imposed pursuant to this Division with respect to the same or an equivalent amount of total floor area.
Issues
The issues as identified by Meriton are:
(a) whether the now approved use for the purpose of serviced apartments is a use "exclusively for residential purposes" for the purposes of the application of cl 27P of the SSLEP;
(b) whether, if development for the purposes of serviced apartments is not exclusively for residential purposes, condition 29 of the ACI Consent and condition 40 of the VSQ Consent ought to be modified so that the affordable housing contribution is levied on 1% of the total floor area rather than 3%; and
(c) whether, if conditions 29 and 40 ought to be modified, the Court would be precluded from doing so as a result of cl 27P(3)(b) of the SSLEP.
The Council's position is that because cl 27P(3)(b) operates to preclude recovery of any contribution made for affordable housing, the issue of whether use for the purpose of serviced apartments is a use "exclusively for residential purposes" is hypothetical, and determination of that issue would be futile.
Consideration
Whether there is utility in the appeals
The Council submits that there is no utility in the appeals. The provisions of cl 27P(3) make the quantum of the affordable housing levy a hypothetical question as the amount that has been paid cannot be recovered. The Court should not deal with a hypothetical question, and accordingly the Court should not address the issue of whether use as serviced apartments is a use "for a residential purpose". In the case of the ACI site, the development consent was granted years ago and the money paid. Meriton cannot rely on s94F(4) of the Act because the money was paid as a condition of a consent and the modification of the consent does not operate retrospectively. The draft local environmental plan for the City of Sydney zones the sites B4 Mixed Use zone, and the planning provisions that will apply in the future could be different, emphasising the hypothetical nature of the question that Meriton is raising.
Meriton submits if cl 27P(3) does apply, the government agency to which the contributions were made is not a party to these proceedings, and the matter of any refund or future consideration are matters which are not for the Court in these proceedings. It is not possible to know what position the government might take and it cannot be said that any decision of the Court as to the proper imposition of the affordable housing contributions would lack utility. If the Council's interpretation as to whether use for serviced apartments is incorrect, it is in the public interest to have an interpretation that is in accordance with the law.
Neither party was aware of any other applications pending which might turn on an interpretation of whether use as serviced apartments is for residential purposes in applying cl 27P(2).
I accept the Council's submission that there is clear authority for the proposition that the Courts are reluctant to deal with hypothetical questions unrelated to facts (see Klefend Pty Ltd v Santom Pty Ltd [1994] NSWLEC 201). However, given my conclusion on the application of cl 27P(3)(b) to contribution levied in relation to the VSQ site, discussed below at [95], the issues of whether the now approved use as serviced apartments is a use for "residential purposes", and if not, whether condition 40 should be modified, are live issues and in my view there is utility in determining them.
Application of cl 27P(2)
The issue is whether the now approved use for serviced apartments as opposed to residential apartments is "intended to be used exclusively for residential purposes". If it is, cl 27P(2)(a)(i) would require that the affordable housing contribution should be calculated at the rate of 3% of total floor area; if not, it would be 1% under cl 27P(2)(a)(ii).
Meriton's submissions
Meriton submits that the correct approach is to consider what is the area of the whole of the premises the subject of the development application that is used exclusively for residential purposes. The definitions in Sch 1 of the SSLEP do not include serviced apartments as a type of residential use. The relevant definitions in Sch 1 are:
dwelling means a room or suite of rooms occupied or used or so constructed or adapted as to be capable of being occupied or used as a separate domicile.
non-residential use, within Green Square, means a use not defined in this plan as a residential use.
residential use, within Green Square, means use for long-term residential accommodation and includes use for boarding houses, dwelling houses, dwellings used in conjunction with and attached to a building used or intended to be used for another use, and multiple dwellings.
serviced apartment means a self-contained dwelling (in a building containing three or more self-contained dwellings) which is cleaned or serviced by the owner or manager of the building (or the agent of the owner or manager), and which provides short-term accommodation for persons who have their principal place of residence elsewhere, but does not include a backpackers' hostel, boarding house, bed and breakfast or private hotel.
Meriton submits that "serviced apartments" contain "dwellings"; a "serviced apartment" includes a "self-contained dwelling" that provides short-term accommodation, and not long-term accommodation; and as "serviced apartments" do not provide long-term accommodation they are not a "residential use" as defined in the SSLEP.
Meriton submits that the authorities consistently hold that environmental planning instruments and development consents that refer to "residential buildings" do not, in terms, extend to include a use for the purpose of serviced apartments, because serviced apartments lack the necessary quality of a domicile, or home, which is an essential element of a residence and hence necessary to qualify a use as residential. There is nothing in the text or structure of cl27P of the SSLEP to suggest a different conclusion should follow in this case.
Meriton relies on the requirement in the development consents that approved the change of use to serviced apartments that a restrictive covenant be registered on title restricting any change of use from serviced apartments; such conditions would serve no purpose if serviced apartments are a form of residential use.
Meriton also relies on the Assessment Reports provided by Council officers which consistently refer to the serviced apartment use as a non-residential or commercial use, and the Assessment Report on the s96 modification application made in 2006 in relation to the ACI site which states that any proposed change of use of the apartments would require a separate development application.
Meriton submits that cl 43 of the SSLEP recognises that serviced apartments (and backpackers' hostels) may affect "primarily residential areas", implying that they are not in themselves a residential use. Clause 43 provides:
43 Development for the purpose of a backpackers' hostel or serviced apartment
(1) A person must not carry out development for the purpose of a backpackers' hostel or serviced apartment, except with the consent of the Council.
(2) In determining an application for development consent to carry out development for the purpose of a backpackers' hostel or serviced apartment, the Council must consider:
(a) the need to maintain the stock of low-cost, long-term rental accommodation in the City of South Sydney, particularly (but not exclusively) accommodation in the form of boarding houses, and
(b) the need to control the establishment of backpackers' hostels and serviced apartments in the City of South Sydney, and
(c) the need to prevent the reduction in residential amenity associated with the encroachment of backpackers' hostels and serviced apartments into primarily residential areas.
Meriton submits that in a commonsense and practical way, serviced apartments are to be characterised as a form of tourist or visitor accommodation, providing short to medium-term lodging, and are therefore a non-residential use. Meriton relies for support on the definitions in cl 1.8 of the Visitor and Tourist Accommodation Development Control Plan, which include in the definition of "tourist accommodation" the statement that "tourist and visitor accommodation includes serviced apartments".
Meriton submits that it is necessary to consider how the proposed use or buildings will be structured and how they will operate in practice. A use that is "exclusively residential" must involve only the one set of activities and processes involved in the residential habitation of a structure; by comparison, under the serviced apartment consent there are a range of people involved in the occupation and use of the buildings. That is because a serviced apartment use involves short term accommodation by people in transit, rather than people having permanency or domicile in the building; regular cleaning and management by staff, which is occupation by others inconsistent with the exclusive occupation anticipated for an exclusively residential use; storage of goods or materials within the buildings for the use of staff in supplying services to guests but not available to guests as of right; a fee for services provided including accommodation, that is, a commercial use by the owner of the building that is inconsistent with an exclusively residential use; and advertising, which is similarly a commercial use by the owner of the building that is inconsistent with an ordinary and exclusively residential use. Further, there are physical differences including the linen chutes and storage rooms, goods lift, and back of house facilities that would not be present for residential buildings.
Council's submissions
The Council submits that "residential purposes" is not the same as "residential use". Statutory construction requires that the whole instrument be considered, and that meaning be given to every word. Section 33 of the Interpretation Act 1987 requires a purposive approach to construction of the SSLEP: in this instance the purpose is stated in cl 27L of the SSLEP.
The Council relies on the aims and objectives stated in cl 27L, and submits that development in Green Square was to promote and retain a socially diverse residential population representative of all income groups. Residential development represents the highest and best use of land in Green Square and thus the contribution required for re-development for residential purposes is higher. Under s 5(a)(viii) of the Act an object of the Act is to encourage the provision and maintenance of affordable housing, a term which is defined in s 4. Part 4 of the Act contains Division 6A which contains s94F and 94G. Under those provisions, the Act creates a statutory trust, and no allowance is made for repayment. To do so would create budgetary chaos and undermine the scheme to provide affordable housing.
The Council submits that the definitions in cl 27KC are relevant, including the definition of "residential development":
residential development means development for any of the following purposes:
bed and breakfasts; boarding houses; child care centres; community centres; dwelling houses; educational establishments; home industries; local businesses; local shops; multiple dwellings; professional consulting rooms; serviced apartments.
The Council acknowledges that cl 27KC is in Div 2A Green Square Town Centre, and the sites are not within the Green Square Town Centre; however, for the purposes of development in Green Square, of which the Green Square Town Centre forms part, Div 2A is strongly suggestive that serviced apartment development is development for residential purposes. The phrase "residential purposes" is used in cl 27P rather than "residential use". The former phrase is not defined, however it is not interchangeable with "residential use". In the Council's submission, that is clear from the definition of "private hotel" in Sch 1 of the SSLEP:
private hotel means a hotel used primarily for short-term residential purposes which does not constitute premises licensed under the Liquor Act 1982, and is not a boarding house, bed and breakfast or backpackers' hostel.
A private hotel is a "residential purpose" within the meaning of that phrase in cl 27P, and short and long-term residential uses are a use of land within the meaning of the SSLEP for residential purposes.
The Council submits that the definition of "serviced apartments" refers to short-term accommodation for people who have their principal place of residence elsewhere; while staying in the serviced apartment the occupant is using the place as a place of residence, albeit not their principal place of residence. Residence and domicile are not synonymous, and a person can have two places of residence but only one domicile. Residence or to reside somewhere merely requires bodily presence as an inhabitant in a given place, at a given time, whereas domicile requires presence coupled with the intention to make it one's permanent home.
The Council submits that nothing turns on the word "exclusively" in cl 27P, and the use is not to be understood by examining the individual activities of people in the building such as reception staff or cleaners or building janitors.
The expression in cl 27P is "residential purposes" which is deliberately not the same as "residential use", the latter being the defined phrase. The Council submits that it must be assumed that the draftsperson deliberately used the expression "residential purposes" rather than "residential use" in cl 27P, and accordingly the distinction between long-term and short-term residential accommodation is immaterial.
The Council submits that the construction that a serviced apartment is exclusively for residential purposes is supported by considering how s 27Q operates. If a contribution was paid at 1% for non-residential purposes and then consent was granted to change the use to residential apartments, if no extra floor area was created cl 27Q(a) would preclude a requirement for an additional 2%. Clause 27R also prevents a requirement for an additional contribution.
As a consequence, the Council submits that the scheme is that redevelopment of Green Square will increase land values; on a social policy basis the SSLEP requires payment for affordable housing to redress consequence of that; and because the contributions are obtained on trust for a third party (s94G), if the use changes from residential to clearly non-residential the scheme operates so that the developer cannot get the money back.
Findings
It was common ground that with the exception of additional facilities for such things as storage, housekeeping and laundry (including in the VSQ development chutes for laundry from each floor to the basement area), the serviced apartments do not differ physically from those initially approved as residential apartments. It was common ground that the authorised use, and the actual development, falls within the definition of "serviced apartments" in the SSLEP. Exhibit B, the Apartment Registration form used for the ACI site, identifies the occupant signing the form as "a guest of Meriton", and requires details of arrival and departure dates and total nights. There was no direct evidence as to the average period of stay for the ACI site, or that expected for the VSQ site, however it was not in dispute that the use of the serviced apartments was and will be for short-term stays consistent with the definition of "serviced apartments".
The physical structure of the buildings is relevant, but not determinative, and it is the categorisation of the use to which they are put that is determinative: North Sydney Municipal Council v Sydney Serviced Apartments Pty Ltd (1990) 21 NSWLR 532 at 535; Council of City of Sydney v Waldorf Apartments Hotel Sydney Pty Ltd [2008] NSWLEC 97 at [36].
In Chamwell Pty Ltd v Strathfield Council [2007] NSWLEC 114; 151 LGERA 400, Preston CJ held:
27 In planning law, use must be for a purpose: Shire of Perth v O'Keefe (1964) 110 CLR 529 at 534-535 and Minister Administering the Crown Lands Act v New South Wales Aboriginal Land Council (1993) 80 LGRA 173 at 188. The purpose is the end to which land is seen to serve. It describes the character which is imparted to the land at which the use is pursued: Shire of Perth v O'Keefe (1964) 110 CLR 529 at 534.
28 In determining whether land is used for a particular purpose, an enquiry into how that purpose can be achieved is necessary: Council of the City of Newcastle v Royal Newcastle Hospital (1957) 96 CLR 493 at 499-500. The use of land involves no more than the "physical acts by which the land is made to serve some purpose": at 508.
The development consents granted in 2004 for the ACI site and 2010 for the VSQ site authorised both the construction of the apartments and their use as residential apartments, and it is not relevant that there has been no actual physical occupation of the units on either site for that purpose. Clause 27P(2)(a) refers to "intended" use, and thus requires consideration as at the date of the grant of development consent. The issue is whether the development consents granted in 2006 for the ACI site and 2011 and 2012 for the VSQ site for the change of use of the apartments to serviced apartments means that the total floor area in each of the buildings represented by the serviced apartments "is intended to be used exclusively for residential purposes" from that time, or not.
The principles of construction to be applied are settled. In Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355, McHugh, Gummow, Kirby and Hayne JJ held:
69.The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of the provision must be determined "by reference to the language of the instrument viewed as a whole". In Commissioner for Railways (NSW) v Agalianos, Dixon CJ pointed out that "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed". Thus, the process of construction must always begin by examining the context of the provision that is being construed.
70. A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions. Reconciling conflicting provisions will often require the court "to determine which is the leading provision and which the subordinate provision, and which must give way to the other". Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme.
71. Furthermore, a court construing a statutory provision must strive to give meaning to every word of the provision. In The Commonwealth v Baume Griffith CJ cited R v Berchet to support the proposition that it was "a known rule in the interpretation of Statutes that such a sense is to be made upon the whole as that no clause, sentence, or word shall prove superfluous, void, or insignificant, if by any other construction they may all be made useful and pertinent".
Starting with the words used in cl 27P, I agree with the Council (but for different reasons), that nothing relevantly turns on the use of the word "exclusively" in cl 27P(2)(a). Planning law accepts that premises may be used for more than one purpose, with an inquiry sometimes required as to whether one or more such uses is ancillary to a dominant use, or whether each use is independent: Foodbarn v Solicitor General of New South Wales (1973) 32 LGRA 157. The calculation of the affordable housing levy is based on the total floor area identified in any building, and asks what proportion of that total floor area is used either exclusively for residential purposes, or not exclusively for residential purposes. A part of the building used for more than one purpose, only one of which was properly characterised as being for residential purposes, would fall within cl 27P(2)(a)(ii). The relevant issue in the present proceedings is whether the use for serviced apartments is a use "for residential purposes".
Clause 27P should be read in its context. Clause 27P is contained in Div 3 of Part 4 of the SSLEP, which together with Divs 2 and 2A, apply to development in Green Square. The definition of "residential development" in cl 27KC applies to Div 2A of the SSLEP, the provisions relating to Green Square Town Centre, and it therefore does not in terms apply to Div 3, including cl 27P. The definition in Sch 1 to the SSLEP of "residential use" applies "in this Plan", and because the definition of "residential use" is expressly limited to be "within Green Square", would apply to development on both sites. That definition in terms means use "for long-term residential accommodation", and includes "multiple dwellings".
There are difficulties in accepting the Council's approach, and using the definition of "residential development" in cl 27KC in the interpretation of cl 27P. Even disregarding the limited application of cl 27KC to Div 2A of Part 4, the Div 2A provisions are directed to the specific objective of regulating development in one part of the larger Green Square area, namely the Green Square Town Centre, providing architectural design standards, gross floor area and height limits. The provisions of Div 3 are focussed instead on affordable housing, both its provision and retention, and financial contributions to achieve it, with the objectives clearly stated in cl 27L. It is difficult to see how the definition of "residential development" in cl 27KC could necessarily assist in the application of the affordable housing provisions: that definition, for example, includes "educational establishments", "local shops", and "professional consulting rooms", none of which could reasonably be described as for a "residential purpose". The definition of "private hotel" in Sch 1, on which the Council relied, reinforces the difficulty. It is correct to say, as the Council submits, that this definition uses the phrase "residential purposes", and that it expressly refers to use primarily for "short-term" residential purposes. However, "private hotels" are included as a form of "commercial development", as opposed to "residential development", in cl 27KC. While Divs 2, 2A and 3 together relate generally to the redevelopment of the Green Square area, the statutory scheme gives each different work to do, and in my view it would not be appropriate to rely on the definitions in cl 27KC in interpreting cl 27P.
The authorities which have considered the interpretation of phrases such as "residential buildings", and similar expressions in other planning instruments and development consents, have most recently been considered by Lloyd AJ in GrainCorp Operations Pty Ltd v Liverpool Plains Shire Council [2012] NSWLEC 143. In that case, the term used in the relevant local environmental plan was "residential buildings", and the development the subject of the proceedings was workforce accommodation provided for mining employees in self-contained "village style" facilities.
Lloyd AJ noted that in North Sydney Municipal Council v Sydney Serviced Apartments Pty Ltd (1990) 21 NSWLR 532 the Court of Appeal had considered whether letting a number of units containing residential units as serviced apartments was use as a "residential building", holding (at 537-538 per Mahoney JA, Priestley and Handley JJA concurring) that the definition of that term in the Cumberland Planning Scheme Ordinance envisaged a significant degree of permanency of habitation or occupancy. On the facts in that case, where the most common period of stay was 13 days and some 67% of occupants stayed for two weeks or less, the use as serviced apartments did not have that degree of permanence.
North Sydney was applied by Pain J in Dooralong Residents Action Group Pty Ltd v Wyong Shire Council [2011] NSWLEC 251;186 LGERA 274, in holding (at [110]) that proposed inpatient accommodation of up to six to ten months duration at a Salvation Army Recovery Centre did not have sufficient permanency to satisfy the requirement of "residential accommodation" in the relevant planning instrument.
Serviced apartments were the subject of two further decisions, KJD York Management Services Pty Ltd v Sydney City Council [2006] NSWLEC 218; 148 LGERA 117 (Lloyd J) and Sydney City Council v Waldorf Apartments Hotel Sydney Pty Ltd [2008] NSWLEC 97; 158 LGERA 67 (Pain J). In KJD York, the relevant definition of "residential flat building" included the phrase "...constructed, designed or adapted as to be capable of being occupied or used as a separate domicile". Lloyd J applied North Sydney, and also noted that the ordinary meaning of "domicile" implies a degree of permanence. The same definition of "residential flat building" was considered in Waldorf Apartments Hotel, and Pain J applied North Sydney and KJD York, holding that a development consent for use as "flats" did not authorise the use for serviced apartments.
Having regard to these authorities, to the decision of Balmford J in the Victorian Civil and Administrative Tribunal in Derring Lane Pty Ltd v Port Phillip City Council (No 2) [1999] VSC; 108 LGERA 129 to which Pain J referred in Waldorf Apartments Hotel, and to dictionary definitions of the terms "residential", "residence" and "reside", Lloyd AJ concluded in GrainCorp:
27 I am persuaded by the authorities mentioned above together with the dictionary meanings. I accept that the decisions in KJD York and in Waldorf Apartment Hotel turned, at least in part, on the use of the word "domicile" in the definition of "flat". However, the reasons of Mahoney JA in Sydney Serviced Apartments, of Balmford J in Derring Lane together with the authorities upon which her Honour relied, noted at [23] and [24] above, together with the dictionary definitions - particularly the word "residential" - all lead to the conclusion that there must be an element of permanence or residence for a considerable time, or having the character of a person's settled or usual abode.
Lloyd AJ concluded that the proposed development was not within the meaning of the compound term "residential buildings": the facility was intended to accommodate a transient population; it did not have the physical characteristics of a residence, having a communal kitchen, a restaurant, a retail area, a manager's office, and the absence of any facilities in the individual units other than an en-suite bathroom; there was nothing in the evidence to suggest that returning occupants were allotted the same unit on a recurring basis, and nothing to suggest that a lease would be entered into with each individual occupant; and none of the occupiers would regard the facility as their settled or usual abode, or the place where they lived.
The evidence of Ms Robinson as to the differences between a serviced apartment and a residential apartment (summarised at [30] above), was not disputed, and was consistent with the view. Having regard to that evidence, I am satisfied that apart from the provision of a kitchen and laundry facilities, the serviced apartments the subject of these proceedings share the attributes identified by Lloyd AJ in GrainCorp.
It is correct, as the Council submitted, that these authorities, including GrainCorp, were in relation to terms and phrases defined in other planning instruments, which have no direct application to the phrase used in cl 27P(2) of the SSLEP. However, they support an interpretation of the word "residential" as used in cl 27P(2) to require a degree of permanency or residence for a considerable period of time, or as a person's settled or usual abode.
Such an interpretation is consistent with the definition of "residential use" in Sch 1, being for long-term accommodation, which applies specifically in Green Square.
In my view, it is immaterial that cl 27P uses the term "residential purposes" rather than "residential use". The common element is "residential", and as Chamwell makes clear, any use must be for a purpose, which is the end to which the land is seen to serve.
I am satisfied that the use for the purpose of a serviced apartment, being for short-term accommodation for people whose residence is elsewhere, is not a use "for residential purposes" and that cl 27P(a)(ii) would apply to the calculation of affordable housing contributions.
Whether cl 27P(3)(b) precludes a claim for a refund of contributions made
The Council submits that the contribution required for the ACI site has been paid, not to the Council but to the Department; and the Department has paid that money to City West Housing Pty Ltd, which has spent it. For the VSQ site, the guarantee from a financial institution is equivalent to payment; Meriton cannot withdraw from it and it is an enforceable obligation, so the argument is the same as for ACI. In both cases, cl 27P(3)(b) applies so that the change in the use of the land to serviced apartments does not give rise to a claim for a refund.
Meriton submits that while the affordable housing contribution has been paid in respect of the ACI site, in the VSQ appeal no contribution has been paid by Meriton, although the amount to be paid has been secured by the supply of a bank guarantee. In any event, cl 27P(3) does not apply in respect of either appeal to require that the conditions not be modified, for three reasons: no claim for refund has been made in either appeal; neither of the sites has ever been occupied and hence "used" for residential purposes so there has been no change in the use of either building; and if cl 27P(3) precludes a refund being given, it does not preclude a lesser amount being paid before the contribution is to be paid (in respect of the VSQ appeal) or prevent a credit being granted in the event of an overpayment (in respect of the ACI appeal). In any event, a credit for any overpayment would be required to be accounted for in any subsequent development application lodged with the Council by Meriton for another site due to s94F(4) of the Act.
Findings
Meriton submits that cl 27P(3)(b) does not apply because there has been no "change" of use: the buildings at both sites have never been occupied as residential apartments. As noted above, the development consents granted in 2004 for the ACI site and 2010 for the VSQ site authorised both the construction of the apartments and their use as residential apartments, and it is not relevant that there has been no actual physical occupation of the units on either site for that purpose. The development consents granted in 2006 for the ACI site and in 2011 and 2012 for the VSQ site authorised a change in the use.
It was not in dispute that the affordable housing contribution required under condition 29 of the development consent granted for the ACI site in 2004, calculated in accordance with cl 27P(2)(a)(i) at 3% of total floor area, was paid to the Department of Planning in 2006, and, based on the letter from City West Housing Pty Ltd, has been spent.
The effect of the bank guarantee provided in 2011 in relation to the affordable housing contribution required under condition 40 of the development consent granted in 2010 for the VSQ site was disputed. Meriton submits that until the bank guarantee is redeemed, or a bank cheque provided, the contribution has not been paid. The Council's position is that the bank guarantee is an unconditional undertaking by the financial institution to pay the Department of Planning "on written demand" up to $4,177,133.17. The provision of a bank guarantee benefits the developer by enabling construction to commence, and benefits the Department which can rely on this amount in order to budget.
Lodgment of a bank guarantee is one of the two "payment options" identified in condition 40 before the issue of a Construction Certificate, the other being payment of a monetary contribution at the office of the Department of Planning. Condition 40 requires that if a bank guarantee has been lodged, before an Occupation Certificate can be issued or the use commenced, the applicant must provide evidence that the bank guarantee "has been redeemed as payment of this contribution", and provides that the amount will be indexed.
Section 94F of the Act, and cl 27P of the SSLEP, authorise conditions requiring payment of a monetary contribution, or dedication of land to be used for the purpose of providing affordable housing. Section 94G(2) makes it clear that a consent authority holds any monetary contribution paid for the purpose for which payment was required, and must apply that money for the purposes of affordable housing within a reasonable time. The Minister has power under s94G(3) to give a direction to a consent authority requiring it to pay a monetary contribution to a person nominated by the Minister. The parties proceeded on the basis that the requirement for payment to the Department of Planning rather than to the Council in conditions 29 and 40 was consequent to such a direction under s94G(3).
Clause 27P(3)(b) does not in terms refer to payment of money, but rather to "any amount that has been contributed under this clause for use for affordable housing". Noting the caution expressed by Mason P in House of Peace v Bankstown City Council [2000] NSWCA 44, and Lloyd AJ in GrainCorp, as to the use of dictionaries in statutory interpretation, I note that the Macquarie Dictionary (online edition) defines "contribute" to mean:
"-verb (t) 1. to give in common with others; give to a common stock or for a common purpose: to contribute money, time, help; 2. to furnish to a magazine or journal; -verb (i) 3. to make contribution; furnish a contribution ;
and "contribution" to mean:
"1. the act of contributing; 2. something contributed; 3. an article contributed to a magazine or the like; 4. an impost or levy; 5. Law a payment made in recognition of a shared liability, such as the payment by one insurer to another in the case of double insurance".
Clause 27P(3)(b) must be construed in its context, which is as part of a scheme for pooling and expenditure of funds obtained from a number of developers for a common purpose of providing affordable housing. It is consistent with the scheme in Div 3 of Part 4 of the SSLEP and the aims and objectives in cl 27L, that the Department of Planning can rely on the availability of funds either actually paid, or committed in the form of a bank guarantee, in budgeting for the disbursement of funds to the providers of affordable housing, and to have a choice as to when to call on funds committed by a bank guarantee.
Whether or not the reference to "any amount that has been contributed" is to be construed as restricted to actual payment of money, or more broadly to include a commitment to pay, I am satisfied that the contribution in relation to the ACI site would be covered by cl 27P(3)(b) and there can be no claim for a refund.
In relation to the VSQ site, the Department of Planning could have required payment of the sum covered by the bank guarantee at any time since 25 March 2011. That has not occurred. The provision of a bank guarantee is, in this circumstance, a promise to pay (albeit by a third party) and not the making of a payment; and given the indexation provisions, the total amount payable in accordance with condition 40 would not be known until the moment of payment. In my view, the reference in cl 27P(3)(b) to "any amount that has been contributed", in particular the use of the past tense, is a reference to direct payment or payment by the redemption of a bank guarantee. Clause 27P(3)(b) would apply to preclude a claim for a refund only at that time, and does not apply in the circumstances to the contribution required for the VSQ site.
However, that conclusion is not the end of the inquiry. Meriton submits further that in any event it is not seeking a refund, and that s94F(4) would support a claim that the amounts contributed be taken into account in any future consideration by a consent authority proposing to impose a condition requiring payment of a monetary contribution for affordable housing. I agree with the Council that s94F(4) does not apply. The contributions made in relation to the ACI site and those required in relation to the VSQ site were in accordance with the obligations imposed by conditions 29 and 40 respectively. It was not in dispute that those conditions were properly imposed at the time the original development consents were granted. The development consents granted in 2006 in relation to the ACI site, and 2011 and 2012 in relation to the VSQ site, to authorise the change of use to serviced apartments, did not have any retrospective operation. If conditions 29 and 40 are modified as sought by Meriton, that modification would not have any retrospective operation: see Willoughby City Council v Dasco Design and Construction Pty Ltd [2000] NSWLEC 257; Mirvac Projects Pty Ltd v Ku-ring-gai Municipal Council [2007] NSWLEC 540; Kendall Street Developments Pty Ltd v Byron Shire Council (No 2) [2004] NSWLEC 530. The monetary contributions required by conditions 29 and 40 were not made or required "otherwise than as a condition of consent", and accordingly, s 94F(4) would not apply.
Clause 27P needs to be read together with cll 27Q and 27R. Both Meriton and the Council relied in support of their preferred interpretation on the potential for abuse of the affordable housing levy scheme. Meriton submits that if a condition is imposed only at the time of determination of a development application and then unable to be modified as a result of a change of use, a person could apply for consent to erect a building with a non-residential use and later apply to change the use to a residential one; to the contrary, the orderly planning system would require that had the original application been for serviced apartments with contributions assessed by reference to cl 27P(2)(a)(ii) and then an application to change the use to one that was exclusively residential, then a liability for contributions under cl 27P(2)(a)(i) would be attracted. The Council submits that if somehow Meriton could claim the money back, and then change the use again back to residential apartment use, it would no doubt argue that an additional levy was not payable as under cl 27Q there was no additional floor space created in the change of use: if Meriton is right the affordable housing scheme becomes unworkable.
I agree that, subject to a possible difficulty for Meriton's argument with cl 27R, both scenarios are possible, in particular in circumstances such as these where no additional floor area has been created. The safeguard for abuse would include the requirement for any development application to be assessed under s79C of the Act, including the additional considerations identified in cl 43 of the SSLEP in the case of a development application for use as serviced apartments.
For the above reasons, I am satisfied that cl 27P(3)(b) would preclude a claim for a refund of the affordable housing contribution made in relation to the ACI site, and would not apply to the contribution required under condition 40 in relation to the VSQ site.
Whether the conditions should be modified
The applications to modify conditions 29 and 40 were made under s96(1A) of the Act, which confers a discretion. The limits of discretion conferred will be defined by the matters raised for consideration by the application: 1643 Pittwater Road Pty Ltd v Pittwater Council [2004] NSWLEC 685 at [51]. In these proceedings, the focus has been on the provisions of the Act, and those of the SSLEP, which is a relevant factor under s79C(1)(a) of the Act (s96(3)).
In both appeals, the terms of the modifications sought are to substitute different (and lesser) amounts based on the calculation of total floor area.
Meriton submits that a reasonable condition to be imposed on the development on the two sites is one imposed by reference to cl 27P(2)(a)(ii) for the purpose of s94F(3)(c) of the Act. A condition reflective of the actual use of the building would be consistent with the aims, objects and purposes of the planning system and hence consistent with "orderly" planning under s 5(a)(ii) of the Act. The modification should be made, because if the use of the buildings is not one exclusively for residential purposes then it should follow that the proper intent of the planning system is that the contribution be assessed on the non-residential rate. That would not involve any deprivation of funds to the Council, both because the Council is not a recipient of the funds raised under s94F of the Act and because the recipient of the funds raised under s94F only anticipates receiving that which is properly and lawfully authorised by reference to s94F(3) of the Act.
The Council submits that it is relevant to the exercise of discretion that in 2006 Meriton applied to modify the condition imposed in relation to the ACI site, and that application was refused on the ground that the use as serviced apartments remained a use for "residential purposes". There was no appeal then, and Meriton waited until 2012 to apply again to modify condition 29.
Considering first the ACI site, I am satisfied that cl 27P(3)(b) would preclude a claim for a refund of the difference between the affordable housing contribution calculated at the rate of 3% and 1% of total floor area, and that s94F(4) would not apply to require consideration of the amount paid in any future applications for development consent. Meriton did not identify any other basis on which payment of a contribution in excess of what might now be required could properly be taken into account in decision-making. The money has been spent by City West Housing Pty Ltd. In those circumstances, there is no apparent practical utility in modifying condition 29. A further relevant factor in the exercise of discretion is the history of the matter. As was the case in Progress and Securities Pty Ltd v North Sydney Municipal Council (1988) 66 LGRA 236, Meriton paid the contribution without protest and carried out the approved development. It did not exercise its right of appeal against the decision of the Council in 2006 to refuse to modify condition 29. While subsequent decisions, including that of the Court of Appeal in Fairfield City Council v N & S Olivieri Pty Ltd [2003] NSWCA 41, have cast doubt on that aspect of the judgment of Bignold J in Progress & Securities which framed a related discretionary consideration in terms of the applicant accepting the benefit of a consent but seeking to be relieved of the burden, the more general discretionary consideration is relevant. Having regard to all the circumstances, I am of the view that the proper course would be to refuse the application to modify condition 29, and to dismiss the appeal in relation to the ACI site.
In relation to the VSQ site, the considerations are different. I have concluded that cl 27P(3)(b) does not apply. Meriton must comply with condition 40 before it obtains an Occupation Certificate. In contrast to the ACI site, the modification application was made to the Council within a relatively short period after the granting of the development consents to authorise the change of use. There is no requirement to point to any change in circumstances in order to modify a development consent: Arkibuilt Pty Ltd v Ku-ring-gai Council [2006] NSWLEC 502. Based on those circumstances, I can see no reason why the discretion should not be exercised in favour of Meriton to modify condition 40 to reflect the change in use approved in 2011 and 2012.
Conclusion
At the conclusion of the hearing the parties requested that I provide my findings on the question of whether affordable housing contributions can be repaid; the parties maintained their disagreement as to whether I should provide findings on whether the use as serviced apartments is for "residential purposes". My findings on those issues are set out at [84], and [94]-[95] above. The parties requested that they have an opportunity to confer on the appropriate wording of any modified condition, in part because of the calculation of total floor area. I will make directions in consultation with the parties for the provision of an agreed modified condition, and as to the form of final orders, which will be made in chambers.
Linda Pearson
Commissioner of the Court
Decision last updated: 05 November 2012
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