Molonglo Group (Australia) Pty Ltd v Commissioner for Act Revenue (Administrative Review)
[2025] ACAT 63
•22 August 2025
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
MOLONGLO GROUP (AUSTRALIA) PTY LTD v COMMISSIONER FOR ACT REVENUE (Administrative Review) [2025] ACAT 63
AT 69/2024
Catchwords: ADMINISTRATIVE REVIEW – lease variation charge – statutory interpretation – principles – Planning and Development Act 2007 (repealed), s 277, s 277A – proper interpretation of the definition of ‘improvement’ – proper interpretation of ‘must not be taken into account’ – proper interpretation of ‘proposed improvement’ - what may and may not be taken into account - whether hypothetical improvements may be taken into account within the comparables sales and hypothetical development methods of valuation
Legislation cited: Explanatory Statement to the Planning and Development (Lease Variation Charges) Amendment Bill clauses 2, 16, 39,40,42,118-123, 124
Land (Planning and Environment) Act 1991 – ss 184A,184C
Legislation Act 2001 ss 138-142,146(2)
Planning Act 2023 ss 332,333, 641 (3)(b)
Planning and Development Act 2007 (repealed) ss 7, 15, 46, 113, 276C, 276D, 277, 277A, 277C, 278, Division 9.63, Dictionary
Planning and Development (Lease Variation Charges) Amendment Act 2011
Planning and Development (Lease Variation Charges) Amendment Bill 2011 – clauses 2, 277A,278
Rates Act 2006 s 6
Subordinate
Legislation cited: Commencement Notice CN2021-2 – Planning and Development (Plan Variation No 377) Commencement Notice 2021
Commercial Zones Development Code
Estate Development Code
Land (Planning and Environment) Regulations – regs 12,13
Notifiable Instrument NI2021-65 Planning and Development (Plan Variation No 377) Approval 2021
Planning and Development Regulation 2008 (No 2 of 2008) – regs 175(1), (2) and 177
The Multi Unit Housing Development Code
The Fyshwick Precinct Code
Cases citedAlcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41
Certain Lloyd’s Underwriters Subscribing to Contract No IH00AAQS v Cross [2012] HCA 56
CIC Insurance Ltd v Bankstown Football Club 1997] HCA 2
City Hill Pty Limited v ACT Planning and Land Authority and ACT Civil and Administrative Tribunal [2015] ACTSC 40
Croc’s Franchising Pty Ltd v Alamdo Holdings Pty Ltd [2023] NSWCAJohnston v Valuer-General of New South Wales [2024] NSWLEC 90
Lacey v Attorney-General (Qld) [2011] HCA 10
Macedonian Orthodox Church Incorporated v ACT Planning & Land Authority [2015] ACTCA 32
Maurici v Chief Commissioner of State Revenue [2003] HCA 8
Pafburn Pty Limited v The Owners – Strata Plan No 84764 [2024] HCA 49
Patman v Fletcher’s Fotographics Pty Ltd (1984) IR 471
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28
R v A2 [2019] HCA 35
Spencer v Commonwealth [1907] HCA 82
SNS Pty Ltd v Roads and Maritime Services [2018] NSWLEC 7
Tenstat Valuer General; Woolworths Limited v Valuer General [2012] NSWLEC 1361
Trust Company of Australia Ltd v Valuer-General [2007] NSWCA 181
Valuer-General Victoria v WTSI Properties 490 SKR Pty Ltd [2025] HCA 23
Village No 22 Pty Ltd CAN 620 656 260 v ACT Planning and Land Authority & Anor [2021] ACAT 43Woolworths Limited v Valuer General [2012] NSWLEC 1361
List of
Texts/Papers cited: Final Report on the Review of the Change of Use Charges System in the ACT (29 November 2010)
Tribunal:Acting Presidential Member G Curtin SC
Senior Member D Parker
Date of Orders: 22 August 2025
Date of Reasons for Decision: 17 September 2025
Date of Publication: 24 September 2025
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) AT 69/2024BETWEEN:
MOLONGLO GROUP (AUSTRALIA) PTY LTD (ACN 109342547)
First ApplicantLOLITA (ACT) NO 1 PTY LIMITED (ACN 106 428 835)
Second ApplicantLOLITA (ACT) NO 2 PTY LIMITED (ACN 106 428 844)
Third ApplicantAND:
COMMISSIONER FOR ACT REVENUE
RespondentTRIBUNAL:Acting Presidential Member G Curtin SC
Senior Member D Parker
DATE:22 August 2025
ORDER
The Tribunal orders that:
1.The respondent’s confirmation dated 1 July 2024 of the Notice of Assessment, Lease Variation Charge, dated 7 March 2024 is set aside.
2.In lieu thereof, the lease variation charge for Development Application no.2023414149 is determined to be $26,480,938.
3.Liberty to apply in relation to costs.
………………Signed………………..
Acting Presidential Member G Curtin SCREASONS FOR DECISION
Introduction.............................................................................................................. 2
The two sections in dispute...................................................................................... 7
The issues in dispute and the structure of these reasons.......................................... 9
Principles of statutory interpretation...................................................................... 11
Legislative history of the lease variation charge.................................................... 14
Factual, planning and lease variation charge background..................................... 34
The land and the EDP works.................................................................................. 44
The parties’ contentions......................................................................................... 46
. Common ground.................................................................................................. 46
. Molonglo’s interpretation of ss 277 and 277A.................................................... 51
. The Commissioner’s interpretation of ss 277 and 277A..................................... 54
Decision.................................................................................................................. 56
. Overview as to how the provisions work............................................................. 56
. Section 277A modifies section 277..................................................................... 58
. The meaning of “must not be taken into account”............................................... 59
. The definition of “improvements”....................................................................... 60
. “Existing” improvements..................................................................................... 60
. “Proposed improvements”................................................................................... 61
. “And includes any of the following”................................................................... 62
. Section 277A(3)(e)............................................................................................... 65
. Section 277A(3)(f)............................................................................................... 68
. Valuing the after value......................................................................................... 73
The valuation evidence.......................................................................................... 77
. General comments............................................................................................... 77
. Ms Byrne........................................................................................................... 80
. Mr Flannery...................................................................................................... 86
. Mr Dyson.......................................................................................................... 90
The quantity surveyors’ evidence and our findings............................................. 102
The calculation of the LVC.................................................................................. 108
Conclusion............................................................................................................ 109
Orders................................................................................................................... 109
Introduction
1.The main issue in this case is the proper interpretation of ss 277 and 277A of the Planning and Development Act 2007 (the PDA), the substance of which is now replicated in ss 332 and 333 of the present Planning Act 2023.
2.Those provisions govern the calculation of the charge payable to the Territory when a nominal rent Crown lease is varied.
3.In this case the Commissioner contends that the charge should be a little over $100m. The applicants contend the charge should be zero.
4.For the reasons that follow both contentions should be rejected. In our view the charge should be $26,480,938.
5.The land the subject of this case (the Molonglo land) is approximately 14 ha in area, is the subject of one Crown lease and was purchased by the second and third applicants in 2007.
6.The first applicant is a company associated with the second and third applicants and has, between the three corporations, administrative responsibility for the Molonglo land. For the purposes of these reasons, it is convenient to refer to the three applicants collectively as Molonglo.
7.Molonglo wishes to develop the Molonglo land.
8.The Purpose clause in the Crown lease for the Molonglo land presently provides for limited uses, including, most relevantly, that the gross floor area (GFA) permitted for buildings is limited to 20,170 m2 and that construction of multi-unit dwellings is not permitted.
9.In September 2022, Molonglo lodged a development application (DA 86) for the approval of an Estate Development Plan (EDP) for the Molonglo land.[1]
[1] AB 1621 at [93]
10.That EDP was approved subject to conditions (the approved EDP). That is, the proposal and plans put forward for consideration by Molonglo (albeit after discussions with various authorities in the consultation phase of an EDP application process[2]) were approved, but subject to some conditions.
[2] AB 1616 at [79]-[80]; AB 4155
11.The approval was given on 19 December 2022 and was the subject of several later reconsiderations and subsequent approvals. Unless otherwise necessary, we shall simply refer to the initial and subsequent approvals collectively as the EDP approval.
12.The EDP geographically delineated an “estate”, being the land the subject of the EDP approval, and various of the approved plans show the estate boundary. The estate in this approval included both the Molonglo land and a small amount of adjoining Territory land.
13.The approved EDP provided for the creation of 36 new CZ3 - Services Zone blocks, some demolition, and the construction of various utility services, roads, footpaths, earthworks, tree removal, landscaping, public open spaces, publicly accessible open spaces and other associated works (the EDP works).[3]
[3] One of the valuers, Mr Dyson, could only see 35 blocks on the plan and assumed the 36th block was for the proposed new roads. It makes no difference in the case whether there were 35 or 36 blocks
14.One condition of the EDP approval for DA 86 was that a variation of the Purpose clause in the Crown lease would need to be obtained to permit the development approved in the EDP approval.
15.In 2023, and as required by the EDP approval, Molonglo lodged a development application (DA 19) primarily, although not only, to vary the Crown lease by varying the Purpose clause. That application was approved on 5 June 2023.
16.The lease variation has not yet been effected pending the outcome of this dispute.
17.The approved lease variation substantially expands the Purpose clause of the lease. Further uses would now be permitted. Most relevantly for this case, the approval would allow an increase of GFA from 20,170 m2 to a little under 192,000 m2 (excluding residential uses) and would permit multi-unit housing of up to 700 dwellings. Those latter two uses are the uses which overwhelmingly affect the value of the land, and we will therefore only mention them hereafter.
18.The approval of DA 19 was a “chargeable variation” under the PDA. The approval of DA 19 triggered an obligation under the PDA to pay a lease variation charge (LVC), calculated by ss 277 and 277A in the PDA.
19.All sections referred to below are references to sections of the PDA unless otherwise specified.
20.Section 276D said that the LVC is taken to be worked out on the day the development approval of the chargeable variation is approved. In this case that date is 5 June 2023.
21.Section 277 provided the formula for the calculation of the LVC. Put simply, it said that market valuations were to be made of the value of the lease immediately before and immediately after the lease variation.
22.Section 277 said that the before value was then to be subtracted from the after value, and the result discounted by 25%, to arrive at the LVC.
23.Section 277A modified the valuation exercise provided for in s 277.
24.Section 277A(1) said that in working out the before and after values an improvement (as defined) in relation to the land “must not be taken into account”.
25.Section 277A(3) defined “improvement”.
26.The central dispute in this case is whether some or all the costs of the EDP works are caught by the definition of “improvement” in 277A(3).
27.Some of the EDP works are to be carried out on the Molonglo land. Some are to be carried out on the Territory land which is inside the estate boundary. Those two categories of works were referred to in the case by the experts as the onsite works (being on the site of the estate). Other EDP works were to be carried out on Territory land which is outside the estate boundary (these were referred to by the experts as the offsite works).
28.We shall describe these works in greater detail later in these reasons, but the evidence was that if all the EDP works (the full EDP works) were undertaken, the Molonglo land would then be in a subdividable state. That is, the land would be in a physical state which would allow for a successful subdivision application, although another development application would need to be lodged and approved for a formal subdivision to take place.
29.The applicants retained a quantity surveying firm (Turner & Townsend) to cost the full EDP works. Those costings were provided to one of Molonglo’s two valuers, Ms Narelle Byrne.
30.After receipt of the Turner & Townsend costings, Ms Byrne sought revised costings of the full EDP works from Molonglo. She sought costings of only those parts of the full EDP works which, if undertaken, would make the Molonglo land (in Ms Byrne’s opinion) as comparable as possible to the basket of comparable sales Ms Byrne desired to use for her comparable sales analysis.[4]
[4] AB 287 at [3.1.3]; T 800.1-802.44
31.Revised costings were provided.
32.Those revised costings (undertaken by Mr Sephton Wolmarans of Rider Levett Bucknall) were provided to Ms Byrne and have been the costings put forward by Molonglo for the purposes of this case.[5] Their quantum is disputed by the Commissioner although not in relation to any item of work or the quantities measure by Mr Wolmarans.
[5] Being those in Mr Wolmarans’ report dated 12 December 2024 and annexed to Ms Byrne’s report as Annexure E, at AB 195 ff. A physical description of some of the works excluded from the Turner & Townsend costings was given by Ms Byrne at T 824.46-827.1
33.In the dictionary of the case, and in these reasons, these works costed by Mr Wolmarans were referred to as the EDP works. It should not be overlooked that these works were not the full works provided for in the EDP approval. If the EDP works (being less than the full EDP works) were undertaken, the Molonglo land would be in an almost subdividable state. We shall sometimes refer in these reasons to the outcome of the EDP works costed by Mr Wolmarans as the (almost) subdivision.
34.The EDP works were costed by Molonglo at a little under $70m, a sum which included the offsite works costed at approximately $15m. The respondent costed the EDP works at approximately $51m (including the offsite works).
35.Until necessary to quantify those costings more precisely we shall use those approximate figures in these reasons for ease of expression.
36.In his initial decision as to the amount of the LVC the respondent (the Commissioner) assessed the before value of the Molonglo Crown lease at a little over $22m, the after value at just under $72m, the difference at just under $50m and, after applying the statutory discount of 25%, assessed the LVC at $36,993,750.[6]
[6] Notice of Assessment dated 7 March 2024, AB 914
37.The applicants sought a reconsideration of that assessment pursuant to s 277C.[7] After reconsideration the Commissioner confirmed the assessment referred to above.[8]
[7] By application dated 11 June 2024
[8] AB 912
38.The applicants then commenced proceedings in the Tribunal to review the reconsideration determination, it being a reviewable decision.
39.In these Tribunal proceedings the parties agreed that the before value of the Molonglo land should be $21,408,000. There is no reason not to accept that agreement. For that reason, we shall only refer to the after value hereafter although much of what we say in relation to the interpretation of ss 277 and 277A applies to the valuation of the before value.
40.For the purposes of this case an electronic and hard copy Application Book was prepared which contained the evidence and the parties’ written submissions. The Application Book of a little over 11,000 pages was tendered and became Exhibit A.[9] References to the relevant pages of the Application Book are noted in these reasons as AB#.
[9] Most but not all documents in the Application Book were tendered. What was and was not tendered is noted in the transcript
41.In these reasons we have provided references to some of the evidence tendered or submissions made. We have done this for the assistance of the parties to aid their understanding of our reasons, but it should be understood that we had regard to all of the evidence and submissions.
The two sections in dispute
42.As at the date of approval of the lease variation s 277 said:[10]
[10] Although the relevant approval in this case, DA 19, approved the “consolidation” of Blocks 11 and 12 together with a variation of the purpose clause, the application was not for a “consolidation” as defined in the PDA because s 234 defines “consolidation” to mean the surrender of two or more leases, and the grant of a new lease or leases. It follows that the relevant sub-sections of s 277 to apply are those referring to chargeable lease variations which are neither a consolidation nor a subdivision
277 Lease variation charges—s 277 chargeable variations
(1) The commissioner for revenue works out the lease variation charge for a s 277 chargeable variation of a nominal rent lease as follows:
LVC = (V 1 – V 2) x 75%
(2) In this section:
LVC means the lease variation charge payable for the s 277 chargeable variation of the lease.
V1—
(a)for a variation other than a consolidation or subdivision, means the capital sum that the lease might be expected to realise if—
(i)the lease were varied as proposed; and
(ii)the lease 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 lease or, for a variation that involves the surrender of a lease and issue of a new lease, the new lease, were a nominal rent; or
(b)…
V2—
(a)for a variation other than a consolidation or subdivision, means the capital sum that the lease might be expected to realise if—
(i)the lease were not varied during the remainder of its term; and
(ii)the lease were genuinely offered for sale immediately before the variation on the reasonable terms and conditions 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; or
(b) …
(3) If the amount worked out as V1 is equal to or less than the amount worked out as V2, no lease variation charge is payable.
(4) ...
43.There was no issue in relation to the interpretation or application of (a)(i) and (iii) in the definition of the after value (V1). The contest was in relation to (a)(ii), the capital sum the lease might be expected to realise if genuinely offered for sale immediately after the lease variation.
44.Section 277A said:
277A Lease variation charge under s 277—improvements
(1) In working out V1 and V2 under section 277, an improvement in relation to the land comprised in the lease must not be taken into account.
NotePower to make a regulation in relation to a matter includes power to make provision in relation to a clas of a matter (see Legislation Act, s 48 (2)).
…
(2) However, an existing improvement by way of clearing, filling, grading, draining, levelling or excavating the land may be taken into account.
(3) In this section:
improvement, in relation to land, means an existing or proposed improvement and includes any of the following:
(a)a building or structure on or under the land;
(b)an alteration or demolition of an existing building or structure on or under the land;
(c)the remediation of the land;
(d)earthworks, planting or other work that affects the landscape of the land;
(e)anything mentioned in paragraphs (a) to (d) that is required—
(i)as a condition of a development approval; or
(ii)by a statutory approval obtained or required for a development proposal; or
(iii)under an agreement between the Territory or a territory entity and—
(A)the lessee; or
(B)if the lessee is not the applicant for the development approval—the applicant.
(f)anything mentioned in paragraphs (a) to (d) proposed in a development application in relation to a chargeable variation of a nominal rent lease to be carried out on land outside of the land under the lease. remediation—see the Environment Protection Act 1997, dictionary.
The issues in dispute and the structure of these reasons
45.The issues in dispute between the parties included the following:
(a)Did s 277A qualify s 277, or was s 277A inconsistent with s 277 and therefore should be read down.
(b)What were “proposed improvements” in s 277A(3).
(c)Did the definition of “improvement “ in s 277A(3) contain two categories of matters, namely existing and proposed improvements (which also had to fall within s 277A(3)(a)-(f)), or did the definition contain three categories of matters, being existing improvements, proposed improvements, and matters set out in s 277A(3)(a)-(f) (which might not otherwise be existing or proposed improvements).
(d)Whether, to be caught by sub-s 277A(3)(e), the “anything” had to be described in detail in the conditions of the development approval.
(e)Were the EDP works “required” by a “condition of a development approval”, or were they “required” by a statutory approval obtained or required for a development proposal per s 277A(3)(e).
(f)Whether, to be caught by sub-s 277A(3)(e)(iii), an agreement had to have been entered into rather than existing in draft form.
(g)Whether, to be caught by sub-s 277A(3)(f):
i.the “anything” had to be in the development application for the lease variation, as distinct from being in the development application for an EDP; and
ii.did the word “proposed” mean put forward by an applicant as distinct from being required by a planning authority.
(h)The meaning to be given to the words “development approval”, “development proposal” and “development application” used in ss 277 and 277A.
(i)Were the EDP works caught by one or more sub-sections of s 277A.
(j)Assuming some or all of the EDP works were caught by s 277A, could some or all of those works (and the costs associated therewith) nevertheless be used in a reasoning process such as that employed by:
i.Ms Byrne in her comparable sales method;
ii.Mr Michael Dyson in his hypothetical development method.
(k)What is the reasonable cost of the EDP works.
(l)What is the after value of the Molonglo land for the purposes of s 277.
46.We have structured our reasons to answer those and the other questions which arise as follows.
47.We first set out the principles of interpretation we have applied. We then set out the legislative history which preceded the introduction of ss 277 and 277A.
48.We then set out the factual and planning background to this dispute, followed by a brief explanation of the EDP works.
49.We then briefly describe the parties’ competing contentions before turning to our decisions on the issues in dispute.
Principles of statutory interpretation
50.The principles of statutory interpretation both under statute and at law were not in dispute. They were comprehensively set out in the parties’ written submissions by reference to the relevant sections of the Legislation Act 2001 and the common law.
51.The relevant statute is the Legislation Act2001, and the central provisions of that statute are ss 138-142.
52.In short, those provisions provide that “working out the meaning of an Act” means resolving an ambiguous or obscure provision, confirming or displacing the apparent meaning of an Act, finding the meaning of the Act when its apparent meaning leads to a result that is manifestly absurd or is unreasonable or finding the meaning of the Act in any other case.
53.Section 139(1) says that the interpretation that best achieves the purpose of an Act is to be preferred to any other interpretation. Section 139(2) says that s 139(1) applies whether or not the Act’s purpose is expressly stated in the Act. It follows, by necessary implication, that the Legislation Act allows for the purpose of the Act to be ascertained from material external to the Act itself.
54.There was no dispute that provisions of an Act must be read in the context of the Act as a whole and that extrinsic material may be considered.
55.The common law principles were not in dispute. They are set out in the authorities cited by the parties which included, although were not limited to, CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2, Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28, Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41, Lacey v Attorney-General (Qld) [2011] HCA 10, Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross [2012] HCA 56 and Pafburn Pty Limited v The Owners – Strata Plan No 84764 [2024] HCA 49.
56.We have also considered R v A2 [2019] HCA 35in which the High Court neatly explained what “context” was to be considered, and how context and purpose interacted with the literal meaning of words used in an Act.
57.In that case Kiefel CJ and Keane J, with whom Nettle and Gordon JJ agreed, said the following at 520-522:
[32] The method to be applied in construing a statute to ascertain the intended meaning of the words used is well settled. It commences with a consideration of the words of the provision itself, but it does not end there. A literal approach to construction, which requires the courts to obey the ordinary meaning or usage of the words of a provision, even if the result is improbable, has long been eschewed by this Court. It is now accepted that even words having an apparently clear ordinary or grammatical meaning may be ascribed a different legal meaning after the process of construction is complete. This is because consideration of the context for the provision may point to factors that tend against the ordinary usage of the words of the provision.
[33] Consideration of the context for the provision is undertaken at the first stage of the process of construction. Context is to be understood in its widest sense. It includes surrounding statutory provisions, what may be drawn from other aspects of the statute and the statute as a whole. It extends to the mischief which it may be seen that the statute is intended to remedy. “Mischief” is an old expression. It may be understood to refer to a state of affairs which to date the law has not addressed. It is in that sense a defect in the law which is now sought to be remedied. The mischief may point most clearly to what it is that the statute seeks to achieve.
[34] This is not to suggest that a very general purpose of a statute will necessarily provide much context for a particular provision or that the words of the provision should be lost sight of in the process of construction. These considerations were emphasised in the decisions of this Court upon which the Court of Criminal Appeal placed some weight.
[35] The joint judgment in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue rejected an approach which paid no regard to the words of the provision and sought to apply the general purpose of the statute, to raise revenue, to derive a very different meaning from that which could be drawn from the terms of the provision. The general purpose said nothing meaningful about the provision, the text of which clearly enough conveyed its intended operation. Similarly, in Saeed v Minister for Immigration and Citizenship the court below was held to have failed to consider the actual terms of the section. A general purpose of the statute, to address shortcomings identified in an earlier decision of this Court, was not as useful as the intention revealed by the terms of the statute itself. In Baini v The Queen, it was necessary to reiterate that the question of whether there had been a “substantial miscarriage of justice” within the meaning of the relevant provision required consideration of the text of the provision, not resort to paraphrases of the statutory language in extrinsic materials, other cases and different legislation.
[36] These cases serve to remind that the text of a statute is important, for it contains the words being construed, and that a very general purpose may not detract from the meaning of those words. As always with statutory construction, much depends upon the terms of the particular statute and what may be drawn from the context for and purpose of the provision.
[37] None of these cases suggest a return to a literal approach to construction. They do not suggest that the text should not be read in context and by reference to the mischief to which the provision is directed. They do not deny the possibility, adverted to in CIC Insurance Ltd v Bankstown Football Club Ltd, that in a particular case, “if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance”. When a literal meaning of words in a statute does not conform to the evident purpose or policy of the particular provision, it is entirely appropriate for the courts to depart from the literal meaning. A construction which promotes the purpose of a statute is to be preferred.
(Citations omitted, emphasis added.)
58.In substance, Bell and Gageler JJ made the same observations. At 545 [124], their Honours said:
The principles of interpretation were not in issue on the hearing of the appeals. In assigning legal meaning to the words of a provision, the court starts with consideration of the ordinary and grammatical meaning of the words taking into account both context and legislative purpose. Consideration of context in its widest sense and the purpose of the statute informs the interpretative task throughout. That consideration, and the consequences of giving a provision its literal, grammatical meaning, may lead the court to adopt a construction that departs from the ordinary meaning of the words. …
(Citations omitted.)
59.It is important to note two things. First, that if there be any conflict between the common law principles and the Legislation Act, the latter prevails.
60.Second, the most relevant context to consider (in addition to the wording of the Act and the provisions) is the context existing at and before the insertion of s 277A into the PDA in 2011.[11]
[11] Inserted by the Planning and Development (Lease Variation Charges) Amendment Act 2011
61.Context may include the legislative history. That history may illuminate the mischief which was sought to be addressed. In this case that mischief is of importance.
Legislative history of the lease variation charge
62.The Australian Capital Territory (the Territory) is the only Australian jurisdiction with a leasehold land tenure system.
63.From about 1971 a “change of use charge” (CUC) was applied where a lease was varied and the variation had the effect of increasing the value of the lease (most often by increasing the purposes permitted by the terms of the lease).
64.The authors of the Final Report on the Review of the Change of Use Charges System in the ACT dated 29 November 2010 (the Final Report), a report to which we will shortly come, said the following about the purpose of the CUC:
A fundamental principle of the leasehold system is the unearned increment in the bundle of rights belongs to the community and thus remains with the community. The Change of Use Charge (CUC) introduced in 1971 ensures that a proportion of any windfall gain accruing to a lessee from a variation to their lease is returned to the community as originally intended.
65.Various methods of calculating the CUC were put in place over the years (more fully described in the Final Report at pp 5 ff).
66.The details of all earlier methodologies used to calculate the CUC is not necessary to traverse, but a useful start may be made at 1991.
67.From 1991 until 1996, the CUC was determined on the assumption that the land to be valued was unimproved. This was done pursuant to the then s 184 of the Land (Planning and Environment) Act 1991 and regs 12 and 13 of the Land (Planning and Environment) Regulations.
68.Section 184 simply said that the Executive would not execute a variation of a lease unless all rent had been paid and, where a variation of the lease would increase the market value of the lease, the lessee had paid the Executive an amount determined by the Executive in respect of the increase in the value of the lease that would result from the variation.
69.Regulation 12 provided that the “added value” was the amount by which the value of the lease immediately after the variation would exceed the value of the lease immediately before the variation, it being assumed that there were no improvements on the land.
70.Regulation 13 said that the amount payable was the amount equal to the added value, remissions could be granted (per reg 15 and at certain rates set out in Schedule 3 under particular circumstances) and in determining the added value of a lease, no reduction would be allowed for where the variation of the lease was conditional upon the applicant financing or undertaking works on the land comprised in the lease or on any unleased Territory Land.
71.That position changed in 1997.
72.Effective from 24 June 1997, s184A was inserted into the Land (Planning and Environment) Act 1991 and the abovementioned regulations were omitted and replaced.
73.In written submissions the Commissioner submitted that the CUC calculated under s 184A was calculated on the basis that the land to be valued was improved. We note that the Final Report said at part 7 that that was the way the statute operated at the time (and until 2011) and we read the provisions the same way.
74.Section 184A said:
Variation of nominal rent lease—change of use charge
(1)The Executive shall not execute a variation of a nominal rent lease unless the lessee has paid the Territory any change of use charge determined by the Minister under subsection (2), subject to any remission or increase under section 184C.
(2) The Minister shall determine the change of use charge for a variation of a nominal rent lease in accordance with the formula—
CUC = (V1 – V2) x 75%
where:
CUC is the change of use charge payable for the variation of the lease;
V1 is the capital sum that the lease might be expected to realise if—
(a)the lease were to be varied as proposed;
(b)the lease were offered for sale in good faith immediately after the variation on such reasonable terms and conditions as a genuine seller would require; and
(c)the rent payable throughout the term of the lease were a nominal rent;
V2 is the capital sum that the lease might be expected to realise if—
(a)the lease were not to be varied during the remainder of its term;
(b)the lease were offered for sale in good faith immediately before the variation on such reasonable terms and conditions as a genuine seller would require; and
(c)the rent payable throughout the term of the lease were a nominal rent.
(3)Where the capital value assessed as “V1” under subsection (2) is equal to or less than the capital value assessed as “V2” under that subsection, no change of use charge is payable under subsection (1).
(4)Insofar as this section applies, by virtue of section 184, to the surrender of a lease and the grant of a new lease—
(a)the reference in paragraph (c) of the definition of “V1” in subsection (2) to the term of the lease is to be read as a reference to the term of the new lease; and
(b)the reference in paragraph (c) of the definition of “V2” in subsection (2) to the term of the lease is to be read as a reference to the term of the lease to be surrendered.
(5)A variation of a lease has no effect if the change of use charge payable under subsection (1) for the variation is not paid.
75.Section 184A is substantially in the same form as the subsequent s 277 of the PDA, although in the Land (Planning and Environment) Act 1991 there was no equivalent to the PDA’s s 277A.
76.Section 184C of the Land (Planning and Environment) Act 1991 said that the Minister could, on application by a lessee, remit a change of use charge under s 184A for the variation of a nominal rent lease in circumstances prescribed by the regulations, and that the Minister could make regulations for that purpose.
77.A regulation was made, being the Land (Planning and Environment) Regulation 1992. It provided for remissions in reg 20 which said:
Prescribed circumstances—Act, s 184C (1)
(1) For the Act, section 184C (1), prescribed circumstances are that it is necessary or desirable to—
(a)promote development of an area; or
(b)change the purposes for which land or buildings, or parts of land or buildings, in an area may be used; or
(c)promote the construction of housing meeting good design or construction criteria; or
(d)promote the construction of attached houses, apartments or 2 or more detached houses on a single lot; or
(e)promote the construction of housing accessible to, or adaptable for, frail or disabled people; or
(f)provide land for the exclusive use of community organisations; or
(g)assist occupiers of premises affected, or likely to be affected, by the operation of the Smoking (Prohibition in Enclosed Public Places) Act 2003, part 2 (Smoking prohibited in enclosed public places) to provide additional facilities at the premises.
78.In 2007 the Land (Planning and Environment) Act 1991 was repealed and replaced by the PDA. Most provisions, of the PDA, including the ones mentioned hereunder, commenced on 31 March 2008. Sections 277 and 277A of the PDA, which are the subject of the case before us, were not in the original PDA. The original s 277 was in substantially the same form as it is in the case before us, but there was no equivalent to s 277A.
79.The original form of s 277 in the PDA, located in Division 9.6.3, was relevantly as follows:
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:
CUCmeans the change of use charge payable for the variation of the lease.
V1 —
(a)for a variation other than a consolidation or subdivision, means the capital sum that the lease might be expected to realise if—
(i)the lease were varied as proposed; and
(ii)the lease 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 lease or, for a variation that involves the surrender of a lease and issue of a new lease, the new lease, were a nominal rent; or
(b)for a variation that is a consolidation or subdivision, …
V2 —
(a)for a variation other than a consolidation or subdivision, means the capital sum that the lease might be expected to realise if—
(i)the lease were not varied during the remainder of its term; and
(ii)the lease were genuinely offered for sale immediately before the variation on the reasonable terms and conditions 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; or
(b)for a variation that is a consolidation or subdivision, …
(3) If the capital value assessed as V1is equal to or less than the capital value assessed as V2, no change of use charge is payable.
80.Section 278 provided for remissions and is different to s 278 as it applied in June 2003. Section 278(1) said that the planning and land authority must remit all or part of a change of use charge for a variation of a lease under section 276 as prescribed by regulation. Sub-section (2) said that regulations may prescribe the amount to be remitted under sub-section (1).
81.Regulations 175(1) and (2) of the Planning and Development Regulation (2008) gave effect to s 278. (Note that this Regulation internally refers to its “sections” when it intends to refer to “regulations”. We shall use the term “regulation” to avoid possible confusion with terms of the statute.)
82.Regulation 175 said:
Remission of change of use charges generally—Act, s 278 (1) and (2)
(1) The planning and land authority must remit all or part of a CUC for a variation of a lease:
(a)if the variation of the lease is necessary and desirable to—
(i)promote development in an area; or
(ii)change the purposes for which land or buildings, or parts of land or buildings, in an area may be used; or
(iii) promote the construction of well designed or constructed housing; or
(iv)promote the construction of attached houses, apartments or 2 or more detached houses on a single lease; or
(v)promote the construction of housing that is suitable for frail or disabled people; or
(vi)provide land for the exclusive use of a community organisation; or
(vii) assist occupiers of premises affected by the Smoking (Prohibition in Enclosed Public Places) Act 2003, part 2 (Smoking prohibited in enclosed public places) to provide additional facilities at the premises;
(b)in a circumstance, or for a period, stated in a policy direction.
(2) The amount of the change of use charge to be remitted is—
(a)if a policy direction applies to the variation—the amount worked out in accordance with the policy direction; or
(b)in any other case—the amount (if any) that the planning and land authority decides is appropriate in the circumstances.
83.The “policy direction” referred to in regulation 175(2) was a policy direction made under reg 177 which said that the Minister could make a policy direction for reg 175 (1) (b) or (2) (a) and that such policy direction was a disallowable instrument.
84.This was the mechanism referred to in the Final Report at paragraph 2.5.4 under which developers were able to offset (a proportion or percentage of) the increase in land value arising from a successful lease variation application against onsite and offsite user costs. We shall return to paragraph the Final Report shortly.
85.Before leaving s 277 as it then was (before the introduction of s 277A) it is worth noting that s 277 was the subject of some judicial consideration in Macedonian Orthodox Church Incorporated v ACT Planning & Land Authority [2015] ACTCA 32 (Macedonian).
86.In that case the Church was the Crown lessee of land in Narrabundah. The lease was a concessional lease. The Church desired to “deconcessionalise” the lease (which was approved) and subdivide the land to create two new leases. On one lease the Church desired to erect Church related improvements, and on the other it sought approval for the erection of multi-unit dwellings. Those approvals were granted.
87.The Commissioner assessed the CUC, and the Church contended that the cost of undertaking the development should be deducted from the after value on the basis that the varied lease mandated that the development be done. This argument was rejected. The case is not directly on point in relation to the issue before us, but the Court of Appeal did make some remarks on the then s 277 which are of some assistance in the case before us.
88.And at [107] the Court said:
We are satisfied that the “after value” assessed for CUC purposes is the value of the new lease or leases to the extent that it reflects the effect of the lease variation on the scope for using the leased land. The after value should in general not account for the lessee’s particular plans for the new lease as distinct from the general possibilities open to any holder of the lease by reason of the change that has been made by varying the original lease or replacing it with a new lease or new leases. Of course, the after value would need to account for the lessee’s particular plans if those plans had been incorporated in the new lease or leases.
89.That passage supports an interpretation of ss 277 and 277A (that are before us) to the effect that a varied lease is to be varied on the basis of the lease’s highest and best use and not on the applicant’s particular plans (unless incorporated within the lease).
90.In relation to matters to be taken into account in the valuation process the Court said at [24]:
It is agreed that certain matters external to the leases are properly taken into account in valuing each lease; these include “public laws which affect the value of the land, ... including restrictions imposed by planning laws and instruments made thereunder” (Valuer-General v New South Wales Golf Club (2012) 192 LGERA 105 at 114; [36], applying Royal Sydney Golf Club v Federal Commissioner of Taxation (1995) 91 CLR 610 at 624). In the ACT this would include the Territory Plan as well as zoning rules and requirements and certain other instruments made under or for the purposes of the Plan, and possibly other restrictions such as tree preservation orders or heritage listings.
91.That passage supports an interpretation of ss 277 and 277A (that are before us) that the value of a lease is to take into account restrictions imposed by “public laws” including any applicable planning instruments.
92.Meanwhile (that is, leading up until 2009) there had been concerns raised with the Government about the CUC, and its various iterations.
93.The result was that in its 2009-10 Budget, the Territory Government committed to re-examine and codify the CUC.
94.Professor Des Nicholls from the School of Management, Marketing and International Business at the College of Business and Economics at the Australian National University and Dr Stephen Anthony, Director of Budget and Forecasting at Macroeconomics (self-described as an investment advisory and portfolio allocation strategy business offering high end advisory, modelling and forecasting services) were engaged by the government to review the CUC system. The project was overseen by a Steering Committee comprising senior officials from Treasury, ACT Planning and Land Authority (ACTPLA) and the Department of Land and Property Services.
95.They consulted with a number of stakeholders and produced a number of papers in 2009 and 2010.
96.On 29 November 2010, Messrs Nicholls and Anthony issued their Final Report.
97.In the case before us the Commissioner placed significant reliance on the contents of the Final Report, it being part of the extrinsic materials which could be considered.[12] Most particularly, the Commissioner drew our attention to general statements in the Final Report about the purpose of what became ss 277 and 277A.
[12] There was no dispute that the Final Report could be considered
98.The Final Report said that the CUC had originally been known as “betterment”. The authors described the concept of betterment as follows:[13]
Betterment is defined as a benefit conferred by the public on some identifiable beneficiaries. If it is not recovered, the benefit becomes an ‘unearned’ windfall conferred by the public to private beneficiaries. A windfall is unearned in the sense that in the current context it is a creation of the ACT Government’s ability to assign value (in the form of rights and privileges) through lease conditions, to parcels of land across the Territory. Leaseholders may receive a benefit without having to make any improvement to their property. Because this value is ‘gifted’ to the leaseholder, rather than earned, it is socially efficient and equitable that government retains a significant proportion of that windfall and uses it for the benefit of the community.
[13] At p 4
99.The authors also noted that if the Government chose to retain the entire windfall, it may contribute to reducing incentive for property development. The task, the authors said, was to find the right balance between the two, competing objectives.
100.Section 2.5.4 of the Final Report addressed the then offsetting of onsite and offsite capital costs against the CUC. It said:
The current CUC system in the ACT incorporates the following parts:
- a betterment levy, which relates to an increase in a property value as a result of a lease variation;
- onsite capital costs required to prepare the land for redevelopment; and
- offsite costs required for the redevelopment to proceed. There are two kinds:
o capital works/infrastructure that would be required irrespective of the type of development; and
o development specific infrastructure required as a direct result of the particular development proposal.
101.The third dot point quoted about referred to two kinds of offsite works which were explained in a footnote which said:
The distinction between different kinds of offsite works is important because the first is infrastructure which the Government may choose to pay for or subsidise; the other is purely development driven and consideration needs to be given to the attribution of benefits and costs. Offsite works in the first category will usually represent an opportunity to improve public infrastructure in circumstances where the new development represents only an incremental increase in infrastructure usage. Were the Government to wish to extract a proportion of costs for new offsite infrastructure, this raises questions about contributions from other private property owners already established in the same area and using the public infrastructure.
(Emphasis added.)
102.The Final Report continued:
Under the current system all these user costs, as well as improvements, are taken into consideration in the determination of the CUC. Developers are able to offset (a proportion of) the increase in land value from a successful lease variation application against onsite and offsite user costs. However, the original concept of the payment of a betterment was to charge for additional developmental rights; it was not intended to compensate developers for expenditure, both onsite and offsite, required to undertake the redevelopment. Over time, however, these offsets have become a component of the current CUC system.
(Emphasis added.)
103.The first sentence of the quote immediately above was also footnoted. That footnote said:
Infrastructure costs may be reflected in the ‘before’ value (e.g. demolition costs), or deducted from the ‘after’ value (e.g. construction of the footpath and landscaping in front of the block), or deducted directly from the CUC payable (e.g. the cost of a school fence requested by the Department of Education). In all cases the CUC payable has been impacted by these costs.
104.The Final Report continued:
It is important to recognise that a CUC is not an infrastructure or development charge, but a payment for a lease variation which results in increased rights to be associated with the lease.
The CUC and user charge are fundamentally different and as such should be separated in their determination and charging. Under the current system, as a result of developers being able to offset both onsite and offsite costs against CUC, the actual revenue from the betterment component is significantly reduced.
A considerable amount of the discussion with industry during the course of this study has revolved around the treatment of user charges relating to onsite and offsite costs relating to Brownfield development/redevelopment sites. In considering these issues it was noted that the ACT Government has the right to remit all or part of a CUC for the variation of a lease under certain circumstances which are broadly based. Indeed sections 175-177 of the Regulation relate to the remission of CUC (see Attachment 1).
In the case of onsite costs, including demolition costs, it was argued by a number of stakeholders that such costs should be included in the determination of the CUC where this was necessary to make a redevelopment economically viable. It is difficult to justify this approach in general, as such costs should be reflected in the price paid for the property for redevelopment, or alternatively, would be passed on to the end user of the redeveloped property, or shared between the two parties.
…
With respect to offsite costs, our understanding is that the majority of these are mandatory costs imposed by the Government as part of the DA process. Such costs include intersections and road upgrades, for example. The requirement from the developer to undertake these offsite works as part of a development/redevelopment appears to have worked well. This approach satisfies the requirement of timeliness and efficiency from the point of view of project delivery.
As in the case of onsite costs however, these mandatory offsite costs should not be included as part of the CUC. Infrastructure costs should be considered separately from the determination of the CUC and each reported separately.
(Emphasis added.)
105.The circumstances being addressed in those passages included ones in which developers were required to construct what we shall call public infrastructure (roads, footpaths etc) or infrastructure which was “development driven”, and who would pay for such infrastructure. At that time, developers sought and were able to offset at least some of those costs from CUCs.
106.The Final Report suggested that the CUC and “user charges” (being mandatory onsite and offsite works) were fundamentally different, and, accordingly, should be separated in their determination and charging. Separation of the two different charges would, in the opinion of the authors, go some way to ensuring that the CUC would not be (at least in part) an infrastructure or development charge.
107.The authors recommended that a formal process should be developed and overseen by appropriate government agencies to identify, verify “and where appropriate fund mandatory offsite infrastructure requirements”.[14] The authors emphasised that:[15]
… mandatory infrastructure costs should be dealt with separately from the LVC.
[14] At p 18
[15] At p 19
108.The authors of the Final Report recommended that the LVC be codified for most land in the Territory.[16] They dealt with “Improvements, onsite and offsite costs revisited” at section 4.2.5. In that section the authors said:
A noteworthy reform associated with the introduction of codification is the treatment of onsite and offsite works which will be treated separately from the calculation of LVC.
The proposed codification system will be based on variations to permitted uses that would result in changes in land values (by means of an index value determined from the market value of land averaged over three years), excluding improvements and those onsite and offsite user costs which are allowable under the current CUC system. This is in line with the principles for the codified framework stated in Section 4.1 above. By taking this approach some of these costs, such as demolition costs, would be reflected in either the offset or premium paid for the land to be redeveloped or would be passed on to the end users/owners of the land through increased purchase prices/rents payable. This is in contrast to the current system where, by allowing these costs to be accounted for in the determination of V 1 and V2, the community is effectively paying for much of the user charges/costs. This approach also has the potential to distort development decisions in supporting demolition of improvements.
As with the current CUC system and as stated earlier, the ACT Government would still retain the right to fully or partially waive the determined CUC in certain cases (in accord with Sections 175-177 of the Regulation or Disallowable Instrument). This right, as at present, would be in the form of a regulation.
While mandatory offsite works will need to be calculated separately from the LVC charge, in response to the feedback received from industry since the release of the Discussion Paper, we are recommending to Government that consideration be given to an efficient process to manage the incidence of benefits and costs of offsite infrastructure. Whilst there should be no justification for the Government to pay for offsite infrastructure upgrades that arise as a result of the operational needs of a particular development, we agree that developers should be compensated for the mandated offsite works, especially if the benefits are realised by the wider community. In such circumstances, the proposed approach allows the developers to be paid the full value of mandated works, whereas under the current system, they are only allowed to deduct a percentage of these costs.
(Emphasis added.)
[16] Beginning at section 4
109.In that passage the authors drew a distinction between offsite infrastructure upgrades that arose because of the operational needs of a particular development (which they considered the Government should not pay for) and mandated offsite work which the Government should pay for (especially if the benefits are realised by the wider community).
110.The Final Report continued at p 30:
Separating out the value of mandatory offsite works under the new arrangements is consistent with the principles of codification identified previously (in particular, timeliness, growth, transparency and simplicity). The consultant recognises that if a development is to be undertaken in a timely fashion, both the scope and funding for mandatory offsite costs will need to be established upfront in a transparent fashion.
For the future administration of offsite costs, we suggest that an appropriate structure and process be established to give due consideration to the reasonableness and scope of these works, who will pay the mandated costs and how they will be funded.
517.From that total Ms Byrne deducted $54,316,009 being the costs of the onsite EDP works as costed by Mr Wolmarans. The result was a figure of $30,988,891 for what she called the:
… calculated deduction to the market derived rate for each component on a ‘shovel ready’ component basis, the market value of the subject property on an ‘After Value’ basis, having regard for its condition …
518.It was this figure which was Ms Byrne’s after value for the Molonglo land per s 277. The difference between that figure and her assessed before value ($23,875,000) was $7,113,891. This latter figure was what she described in her cross-examination as the “uplift of $7 million in the after value compared to the before value”[149] as a result of the increased rights proposed to be granted under the lease variation approved in DA 19.
[149] T 836.15; 841.33
519.Ms Byrne then deducted the costs of the offsite works.
520.The proper figure for Ms Byrne to deduct for the EDP works on the Molonglo land was $28,588,982. That results in a figure of $56,715,918 as the after value.
521.Less the agreed before value of $21,408,000, the result (of V1 – V2) is $35,307,918.
522.Seventy five percent of that last figure, and the amount of the LVC, is $26,480,938.
523.For completeness, had we accepted the totality of Mr Wolmarans’ evidence on costings for works on the Molonglo land ($38,530,494[150]), Ms Byrne’s after value would have been $46,774,406.[151] Less the agreed before value figure of $21,408,000, the difference would have been $25,366,406. Accordingly, the LVC would have been $19,024,804.
[150] AB 499: the total of the costs on that page, less the offsite works and Stages 2B1 and 2B2
[151] $85,304,900 less $45,157,510
524.Had we accepted the totality of Mr Tucker’s evidence on costings for works on the Molonglo land ($23,175,643) Ms Byrne’s after value would have been $62,129,257. Less the agreed before value figure of $21,408,000, the difference would have been $40,721,257. Accordingly, the LVC would have been $30,540, 943.
Conclusion
525.We accept Ms Byrne’s assessment of the after value before adjustments to bring the Molonglo land up to a similar level as the serviced land sales set out in the first table at AB 156, namely $85,304,900.
526.We accept the reasonable costs which would be incurred to bring the Molonglo land up to a standard so that it was as comparable as possible with Ms Byrne’s basket of comparable sales was $28,588,982.
527.We find that the after value was $56,715,918.
528.We accept the parties’ agreement that the before value was $21,408,000.
529.We find that the LVC should be $26,480,938.
Orders
530. On 22 August 2025 we made the following Orders:
(a) The respondent’s confirmation dated 1 July 2024 of the Notice of Assessment, Lease Variation Charge, dated 7 March 2024 is set aside.
(b) In lieu thereof, the lease variation charge for Development Application no. 202341419 is determined to be $26,480,938.
(c) Liberty to apply in relation to costs.
………………………………..
Acting Presidential Member G Curtin SC
Date(s) of hearing: 12-16 May, 16-20, 23-24 June, 2-4 July, 21 August 2025 Counsel for the Applicant: Mr P Walker SC with Mr J Bird Solicitors for the Applicant: Clayton Utz Counsel for the Respondent: Mr A Berger KC with Mr N Oram and Ms J Cunliffe Solicitors for the Respondent: ACT Government Solicitor
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