Aeropelican Air Services Pty Ltd v Lake Macquarie Council [2006] NSWLEC 18 | Case summary

JUDGMENT 1 Cowdroy J: The applicant is the registered proprietor of land near Marks Point being lots 1576, 1639 and 939 in Deposited Plan 755233 known as Aeropelican Airport at Belmont ("the land"). The land was zoned 6(c) Open Space (Local Reservation) under the City of Lake Macquarie Local Environmental Plan 1984 ("the 1984 LEP"). 2 The applicant seeks a declaration that the respondent ("the Council") is required to acquire the applicant's land, in consequence of the service of notices by the applicant pursuant to the 1984 LEP. Facts 3 Clause 19 of the 1984 LEP relevantly stated as follows: (1) The owner of any land within: (a) Zone No. 5(a), 5(c), 6(c) or 7(b); or (b) Zone No. 7(c), may, by notice in writing, require: (c) the Council; or (d) the Corporation, respectively, to acquire the land. (2) On receipt of a notice referred to in subclause (1), subject to subclause (3), the authority concerned shall acquire the land, unless the land may be required to be provided as a condition of consent to the carrying out of development. (3) Nothing in this plan, other than subclause (4), shall require the Council to acquire any land within Zone No. 6(c) if, in the opinion of the Council, the need for the open space has not yet been created by residential development in the vicinity. (4) On the receipt of a notice referred to in subclause (1), the Council must acquire land within Zone No. 6(c) if the Council is of the opinion that the owner of the land will suffer hardship if the land is not acquired within a reasonable time. (5) A person may, with the consent of Council, carry out development for any purpose on land within Zone No. 5(a), 5(c) or 6(c) until the land is acquired or developed for the purpose for which it is zoned. (6) A person shall not carry out development on land referred to in subclause (5) so as to render the land unfit for the purpose for which it is zoned. … 4 Pursuant to cl 19(1) on 9 December 2003 the applicant provided the Council with a notice requiring it to acquire the land ("the first acquisition notice"). Such notice relevantly states: This Company hereby gives notice pursuant to Clause 19 of the Plan for the Council to acquire that part of the abovementioned land zoned 6(c). The plan referred to is the 1984 LEP. 5 On 17 March 2004 the applicant provided the Council with another notice under cl 19(1) requiring it to acquire the land ("the second acquisition notice"), which specifically alerted the Council to the applicant's claim of hardship under cl 19(4). The rezoning of the land 6 On 19 March 2004 the 1984 LEP was repealed by the adoption of the Lake Macquarie Local Environmental Plan 2004 ("the 2004 LEP"). Pursuant to the 2004 LEP, the zoning of the land was changed from 6(c) Open Space (Local Reservation) to the 5 - Infrastructure zone as well as partly to the 7(2) - Conservation (Secondary) zone. However, the relevant LEP for consideration of the applicant's claim is the 1984 LEP. Events after the service of the first acquisition notice 7 On 16 December 2003 Mr Tony Farrell, Group Manager Strategy for the Council received a telephone call from Mr Royston Ferris, Managing Director of the applicant. According to the file note made by Mr Farrell, Mr Ferris was concerned that pursuant to the draft local environmental plan ("the draft LEP") the proposed new zoning would sterilise the land. The service of a notice to acquire the land under cl 19(1) of the 1984 LEP was referred to and a meeting was arranged for 29 December 2003. 8 On 23 December 2003 Mr Farrell prepared an internal memorandum addressed to all Councillors which states as follows: The operator of Aeropelican Air Services Pty Ltd, IAG Group Australia Pty Ltd, has served notice on Council to acquire their property at Marks Point. The property the subject of the acquisition is currently zoned Proposed Open Space 6(c) under the terms of LMLEP 1984. An acquisition liability applies to this zoning. Under draft LMLEP 2000, the property has a zoning of 5. Infrastructure. No acquisition liability applies to the site under the draft LEP. I have had one telephone conversation with the Managing Director of Aeropelican regarding the acquisition notice. It appears the company is acting on advice that the proposed draft represents a 'backzoning' of the property. I am not certain how Aeropelican's advisers reached this conclusion, or why the acquisition notice is viewed as a solution. The Managing Director further advised there was no intention to discontinue the airline's operations at this time. I have arranged a meeting with Aeropelican representatives next week and hope they will clarify their intentions and concerns at that time. Given the significance of the site and the likelihood for publicity regarding this action, the purpose of the memo is to give you early advice of the matter. 9 On 29 December 2003 a meeting was held between Mr Farrell, Mr Ferris and Mr Todd Hadley, a valuer engaged by the applicant. During the meeting reference was made to the fact that the existing operations of the applicant were uncommercial and that a notice to acquire the land was being served to maximise compensation. The notes of the meeting refer to the desire of the applicant to obtain a rezoning of the land for residential and partly commercial use. 10 By internal memorandum to all councillors dated 30 December 2003, Mr Farrell advised them of his meeting with Mr Ferris and Mr Hadley. The memorandum relevantly states: · The owners would prefer to discuss an alternative zoning for the site, rather than acquisition, as in their view, Aeropelican is not viable in the long term. Their primary aim is for a residential zoning with some commercial. · The owners have commissioned various consultants to prepare a rezoning application for the site. Those studies are well advanced but are not complete. · They have no immediate plans to shut down Aeropelican. … · The owners will, subject to legal advice on the implications, write to Council advising their acquisition notice should be held in abeyance pending finalisation of their rezoning application. 11 By letter dated 9 January 2004 Mr Hadley wrote to Mr Farrell stating relevantly: I further note your advice to the meeting that Council would prefer to rezone the land and not acquire it at this stage. I note that under the provisions of the Draft LEP, Council proposed to rezone the property in a way that would significantly diminish the value of the property as the proposed zoning will not permit the highest and best use of the land which would include residential, tourist and commercial uses. If Council was willing to readdress the proposed zoning of the land under the Draft LEP to permit reasonable development of the land for some or all of the abovementioned uses, my client would be prepared to consider withdrawing the Clause 19 Notice that it has served. 12 On 13 January 2004 the Community Land Planner (Recreation) of the Community Planning Department of the Council, Ms Susan Boyd, prepared an internal memorandum for the attention of the Manager, Environmental Planning. The memorandum considered the need to acquire the land for open space purposes, referring to population growth and existing recreational facilities. It recommended that the subject land be acquired to cater for the future need for recreational facilities. 13 By letter dated 10 February 2004 Mr Hadley again wrote to the Council referring to the meeting of 29 December 2003 and his letter dated 9 January 2004. Such letter expressed disappointment that the Council had not responded and urgently sought its advice. The letter also stated the acquisition notice could not be withdrawn unless Council provided an assurance that the applicant would not be prejudiced by the delay. 14 By letter dated 13 February 2004 Mr Farrell responded explaining that arising from the last conversation he had believed that the applicant was interviewing consultants and would be engaging "a rezoning team". 15 On 24 February 2004 Ms Boyd prepared a second internal memorandum which referred to her previous memorandum of 13 January 2004 and confirmed her opinion that the acquisition of additional land for the purpose of future recreational activities was required. 16 By letter dated 17 March 2004 the applicant served the second acquisition notice. The notice was accompanied by a letter signed by Mr Ferris explaining that he was the sole shareholder of IAP Group Australia Pty Limited ("IAP"), which holds 100% of the shareholding of the applicant. The letter continued: I am suffering hardship and loss of income with all my personal assets tied up within the business. The main asset with any significant equity is the land for which I require the council to acquire without delay. Upon legal advise (sic) I am giving the council a fresh notice to acquire dated 17/3/2004 with appended a detailed case for hardship. This is to remain confidential. Further information and supportive documentation can be supplied upon request in substantiation of this claim. Attached to the second notice were the unaudited accounts of IAP prepared by Ernst & Young. 17 By internal memorandum dated 24 April 2004 Mr Farrell requested Mr Ross Gilshenan, Manager Finance and Administration of the Council, to undertake an assessment of the claim of financial hardship based on the documents supplied and to identify further documents that might be sought. Mr Farrell also requested that the Council's solicitor, Mr Peter Rees, advise in relation to the test for hardship and any relevant Court precedents to assist in the assessment. 18 By memorandum from Mr Gilshenan to Mr Farrell dated 3 May 2004, Mr Gilshenan suggested that the Council's auditors, Pricewaterhouse Coopers ("PWC"), consider the information provided by the applicant. 19 PWC were duly retained and after having considered the information supplied, sought additional material. On 5 July 2004 Mr Gilshenan wrote to Mr Ferris seeking, inter alia, the most recently audited accounts for the applicant and IAP Group, notes to the audited financial accounts of the applicant, a recent cashflow statement, a detailed structure of the IAP Group of companies and a personal balance sheet of Mr Ferris. 20 By letter dated 27 July 2004 the applicant responded, relevantly forwarding the 2003 audited accounts for the group. The letter stated: Aeropelican do not have separate audited accounts - all ours are on a consolidated basis. The 2002 Audited accounts were provided with an earlier correspondence and here are the 2003. In response to the request for cash flow statements, the applicant responded stating: We do not produce cash flow statements, but should see all you need from these management P&L's that clearly show the performance of Aeropelican over the past 12 months. 21 In the letter Mr Ferris also confirmed that he was the sole shareholder of the IAP Group, which in turn owned all the shares in the applicant. Mr Ferris provided details of his own financial position as set out in a "personal balance sheet". 22 On 22 November 2004 the Council adopted the Lake Macquarie s 94 Contributions Plan No 1 - Citywide ("the 2004 Contributions Plan"), replacing another contributions plan, made in 1998, which prevailed at the date of service of the notices ("the 1998 Contributions Plan"). The 2004 Contributions Plan required contributions from developers towards the acquisition of open space where a nexus existed between the particular development and an area of open space to be acquired. It identified areas of open space for future acquisition. The applicant's land was not included as an area for future acquisition under the 2004 Contributions Plan. 23 A file note of the Council dated 7 February 2005 records a conversation held on 1 February 2005 between Mr Farrell and Mr James Coffey of Belmont Aviation. Mr Coffey stated to Mr Farrell that he had been involved in a proposal to purchase the applicant (and the land) from IAP. IAP had advised Mr Coffey that it had entered into an agreement with the Council and could not proceed with the proposed sale. The memorandum refers to a purchase price of $3m plus the value of two aircraft. Mr Coffey observed that the applicant had the potential to be a consistently profitable operation. 24 By letter dated 15 February 2005, McCloys, property developers, advised the Mayor that the applicant had entered into a commercial arrangement with one of the companies in the McCloy Group. The letter stated that McCloys' interest was secured by first mortgage over the land. The letter referred to the acquisition notice and requested a briefing session with all Councillors together with the applicant and a town planner, namely Mr Don Fox. Events after the commencement of proceedings 25 By application class 4 filed on 15 February 2005 the applicant instituted these proceedings. The application sought an order that the Council make application to the Minister for Local Government pursuant to s 187 of the Local Government Act 1993 for "approval to issue a proposed acquisition notice ("the notice") under the Land Acquisition (Just Terms Compensation) Act 1991 in respect of 939, 1576 and 1639 in DP 755233". The application also sought an order that the Council "shall within forty (40) days of the approval of the Minister issue a notice to the applicant". 26 By internal memorandum dated 17 February 2005 addressed to all Councillors, Mr Farrell drew attention to the first acquisition notice. The memorandum relevantly states: This acquisition notice seeks to take advantage of the previous zoning of the site which was 6(c) Open Space (Local Reservation). The site was rezoned to 5. Infrastructure under LMLEP 2004. As the acquisition notice was lodged prior to gazettal of LMLEP 2004, it remains current and must be dealt with by Council. The owner has consistently advised that he required the acquisition notice to be processed, notwithstanding an earlier indication that his long term goal was to achieve a rezoning. The memorandum advised Councillors of the institution of these proceedings and of the applicant's desire to retain a rezoning of the land for approximately 100 residential lots and a tourism lot. The memorandum also referred to a possible meeting with the McCloy Group. 27 By internal memorandum dated 17 February 2005 the Council's Valuer and Land Economist Lynne Ferrier sought advice of the Council's City Strategist, Mr Ian Andrews concerning alternative zonings and the impact of existing use rights pertaining to the current use of the land as an airport. 28 By internal memorandum dated 1 March 2005 Mr Farrell sought information from Mr Gilshenan concerning various aspects of the valuation provided by the applicant and of the letter provided to the Council by PWC. 29 In the letter to Mr Gilshenan dated 24 February 2005 PWC observed that as of 28 February 2004 the applicant had reported net assets of $6.7m. The letter referred to the balance sheet of the applicant as recording a total equity to 30 June 2003 of $7,454,092 and $6,702,925 as at 28 February 2004. The letter made observations concerning several aspects of the financial affairs of the company and drew attention to the fact that audited accounts had not been provided. PWC concluded that in the absence of audited accounts it was unable to provide a definitive opinion concerning the financial position of the applicant. 30 By letter dated 8 March 2005 Mr Rees, solicitor for the Council, wrote to Mr Paul Hines, solicitor for the applicant requesting as a matter of urgency production of audited financial statements of IAP Group Australia Pty Limited and the applicant, including profit and loss accounts, balance sheets and cash flow statements for the year ended 30 June 2004, together with copies of contracts for sale relating to Aeropelican aircraft and details of current mortgages. 31 By letter dated 10 March 2005 Mr Hines responded, enclosing copies of the accounts for the financial year ending 30 June 2004 of the IAP Group ("the 2004 accounts"). The letter states: The Group comprises IAP Group Australia Pty Limited and Aeropelican Air Services Pty Limited and the accounts for the latter company can be calculated by deduction between the two columns. I am instructed that these accounts have not been signed off as the audited accounts but that sign off is imminent. There are no separate audited accounts for Aeropelican Air Services Pty Limited. The letter referred to the existence of documents relating to contracts and mortgages and which were said to be commercially confidential. The letter stated that they would be disclosed upon production of an undertaking to maintain confidentiality. 32 Mr Rees also reported that the mortgage granted to the McCloy Group apparently secured $2m but that the applicant was unwilling to produce details of any arrangements except to the Council's legal advisers. On 11 March 2005 the information provided to Mr Rees was forwarded by him to Mr Gilshenan with advice that the information should be immediately forwarded to Council's accountant. 33 Mr Gilshenan thereupon considered the 2004 accounts and balance sheets and found several apparent discrepancies in the 2004 accounts. The information was then sent by Mr Gilshenan to PWC. 34 In correspondence addressed to Mr Rees dated 11 April 2005, Mr Hines stated: It now appears that I have been inaccurate in my letter to you of 10th March 2005, which stated that the Aeropelican accounts could be determined 'by deduction between the two columns' of the consolidated accounts. I am now instructed that this is not the case and that the result for Aeropelican Air Services Pty Limited is shown on page 13 of the audited accounts under 'diminution of investments' showing a negative '$721,173', I apologise for this error. Mr Hines' letter also suggested that the applicant's accountants should meet with the Council's accountants. 35 Between 24 February 2005 and 15 May 2005 Mr Dennis Robertson of Weston Woodley Robertson was appointed by the Council in place of PWC to investigate the applicant's accounts and provide a report to the Council with respect to the applicant's claim of hardship. 36 By letter dated 23 June 2005 Weston Woodley Robertson provided a report to the Council's solicitor concerning the financial position of the applicant. Mr Dennis Robertson, the author of the report, concluded that the financial information provided to him in respect of the applicant was "brief and inconsistent". He reported that the applicant and/or IAP appeared to have suffered financial hardship from the downturn in the aviation industry. The applicant had also made loans in excess of $6m to its holding company, IAP. Mr Robertson noted that the director of the applicant (Mr Ferris) had not expressed any view as to the financial position of the applicant but had expressed the view that IAP could pay its debts "as and when they fall due". Mr Robertson stated: Whilst Aeropelican appears to have provided some information in support of it suffering hardship from its loans to its holding company and from the impact of a downturn in the aviation industry, I have not sighted any documentation to support the claim of Aeropelican that the current zoning of the land is causing hardship to Aeropelican. 37 In his concluding opinion, Mr Robertson said: Based on the inconsistent and incomplete information provided in respect of Aeropelican, it may be that Aeropelican has, or is suffering financial hardship. The loaning of $6.139 million, apparently unsecured, by Aeropelican to its ailing holding company, IAP, appears to be a significant factor if Aeropelican is suffering financially. Aeropelican does not appear to have provided any information, other than alleging it is in a poor financial position, that would enable the council to form an opinion that it will suffer hardship if the land is not acquired within a reasonable time. The financial statements of IAP indicate that the land has a market value. I have had regard to the documents provided to me and, for the reasons set out in this report, it is my opinion that adequate information has not been provided by Aeropelican to enable the council to form the opinion that the owner of the land will suffer hardship if the land is not acquired within a reasonable time. 38 By letter dated 1 June 2005 Peter Rees wrote to Mr Hines stating as follows: In view of the land being now no longer used as it was by your client prior to 30 April 2005, my client proposes to reconsider the aspect of need referred to in Clause 19(3) of the Lake Macquarie Local Environmental Plan 1984, in relation to that land. I am instructed that although my client has, by its a. Lake Macquarie Local Environmental Plan 2004 (19.3.04), and b. Section 94 Citywide Contributions Plan (22.11.04) expressed its view that residential development in the vicinity of the land has not generated a need to acquire the land for open space purposes, my client wishes to afford your client the opportunity to make submissions to it before 14 June 2005, as to whether or not the need for the land as open space has been created by residential development in the vicinity. Immediately following that date, a report will be prepared by a Council officer and submitted to Council for its consideration on 20 June 2005. 39 By letter dated 7 June 2005 Mr Hines replied, stating inter alia: With regard to your letter of 1 June 2005, affording my client the opportunity to make a submission, such a submission would appear to be useless given that the defence states that the Council has made its determination on clause 19(3). The defence referred to is the points of defence filed by the Council in these proceedings. 40 On Friday 24 June 2005 the Council's business papers for its meeting to be held on 27 June 2005 were delivered by courier to each of the Councillors. Such papers included separate appendix ("the final report") relating to a confidential agenda item, namely the applicant's claim. The final report was prepared by Mr Tony Farrell and recommended that Council resolve to move into confidential session for the purpose of considering the report. 41 The final report provided comprehensive detail concerning the background of the applicant's claim, and of counsel's advice that the Council formally determine its position concerning the acquisition notice served upon the Council by the applicant. It referred to the issue of financial hardship and to the conclusions of the accountant, Mr Robertson. Under the heading of "Proposal" contained in Mr Farrell's report the following appears: Proposal: The proposal is for Council to determine its position in respect of questions raised by clauses 19(3) and 19(4) of LMLEP 1984. The purpose of making those determinations is to assist the Land and Environment Court in determining an application for orders against Council made by Aeropelican Air Services P/L. Those orders effectively seek to require Council to acquire Belmont Airport. 42 The final report concluded as follows: Conclusion: Council is defending action in the Land and Environment Court initiated by the owner of Belmont Airport, Aeropelican Air Services, intended to require Council to acquire Belmont Airport. Counsel for Council has requested that Council formally determine its position on the questions posed by clauses 19(3) and (4) of LMLEP 1984. That is whether a need for the open space has been created in the vicinity by residential development and whether Council is of the opinion, the owner will suffer financial hardship if Council does not acquire the land within a reasonable time. Council engaged an independent accountant to examine the accounting records provided to Council by the owner and the accountant has provided his report, appendix 3. The City Strategist has also provided a report, appendix 2. The owner's solicitor was also invited to make representations on clause 19(3). The experts' opinions support the recommendation to this report and the owner's solicitor has decided not to make representations on the matters under consideration. Based on the information available, I suggest Council can only determine that the need for open space in the vicinity of Belmont Airport has not been generated by residential development. Further, financial hardship, if Council does not acquire the land within a reasonable time, has not been proven. 43 The Robertson report was attached to the final report to the Council. Also attached was a report prepared by Ian Andrews, City Strategist of the Council, dated 20 June 2005 ("the Andrews Report"). The Andrews Report considered whether residential development in the vicinity of land owned by the applicant had generated a need for the acquisition of the land for open space purposes. The Andrews Report referred to the rezoning of the land to zone 5 under the 2004 LEP and observed that the objectives of the 5 - Infrastructure zone were to: (a) provide land for future infrastructure needs such as roads, drainage and other utilities; and (b) provide land required for the expansion of existing community facilities or the development of new community facilities; and (c) provide for limited development within the zone where it can be demonstrated that the development will not prejudice or have the potential to prejudice the intended future infrastructure development of that land; and (d) ensure that development adjacent to or adjoining land zoned Infrastructure does not prejudice the future infrastructure development within that zone; and (e) provide for sustainable water cycle management. 44 The Andrews Report also noted the uses permissible with the consent of Council in the 5 Infrastructure zone, which were as follows: Agriculture (other than intensive agriculture), airline terminals, airports, bus stations, car parking facilities, cemeteries and crematoriums, child care centres, community facilities, drainage, earthworks, educational establishments, emergency services facilities, energy generation works, entertainment facilities, environmental facilities, helipads, heliports, hospitals, medical centres, motels, places of public worship, rail lines, roads, signs, stormwater management facilities, telecommunications facilities, transport terminals, utility installations, veterinary hospitals. 45 The Andrews Report referred to the Lake Macquarie Open Space Strategy and state, inter alia: In the process of preparing the Lifestyle 2020 Strategy that underpins Lake Macquarie LEP 2004, and the LEP itself, Council appointed URS Australia Pty Ltd to prepare the Lake Macquarie Open Space Strategy 2001. The strategy examined the need for open space throughout the City and related this need to the areas of land zoned for and reserved for open space so that Council could achieve the appropriate distribution of open space and recreation facilities for the projected population of the City as identified in the Lake Macquarie Lifestyle 2020 Strategy. The strategy recommended lands that Council could acquire to provide for the open space needs of the future population of the City to year 2020, and potential disposal of lands considered surplus to open space need. 46 Thereafter the Andrews Report referred to the 2004 Contributions Plan. Pursuant to such plan, contributions towards the acquisition of open space were levied on developments where a nexus existed between the particular development and the areas to be acquired. The Andrews Report concluded: It is my opinion that the need for open space has not yet been generated by residential development in the vicinity of the Site. 47 The final report recommended that the Council form the opinion that the applicant's land was not required for open space and that the applicant would not suffer hardship if the land were not acquired. At the Council meeting held on 27 June 2005 the Council resolved as follows: A That Council resolves to move into confidential session for the purpose of considering the following report, and that in accordance with Clause 8.A (2)(d)(i) and (2)(g) of Council's Code of Meeting Practice the meeting be closed to the public, on the grounds that the report contains: (i) information concerning potential litigation, or advice that would otherwise be privileged from production in legal proceedings on the ground of legal professional privilege; and (ii) commercial information of a confidential nature which, if disclosed, would prejudice the commercial position of the person who supplied it. B Council is of the opinion that the need for open space, being the land known as Belmont Airport, has not yet been created by residential development in the vicinity. C Council is of the opinion that the owner of Belmont Airport will not suffer hardship if the land known as Belmont Airport is not acquired within a reasonable time. Applicant's submissions 48 The applicant submits that where a failure by the Council to acquire the land in breach of the EP&A Act has been established, the Court, as a matter of discretion, cannot refuse to make an order for compulsory acquisition. It relies upon Port Stephens Council v Fidler (1997) 94 LGERA 298. The applicant submits that cl 19 has been inserted in the 1984 LEP to ameliorate injustice to land owners whose land is set aside for a public purpose which limits rights of development: see Carson v Department of Environment Planning (1985) 3 NSWLR 99 at 108-9. 49 The applicant claims that a breach of s 122 of the EP&A Act has occurred because of the failure of the Council to acquire as required by cl 19(2) of the 1984 LEP. 50 The applicant submits that because of the rights created by cl 19 of the 1984 LEP, the Council must give specific consideration to the applicant's notices. Otherwise, cl 19(3) is not enlivened and cl 19(2) remains the governing clause. A general re-zoning of the land under the draft LEP does not address the requirement for consideration of the need for open space "in the vicinity" pursuant to cl 19(3). The applicant submits that the Council cannot refuse to form an opinion: see Liverpool City Council v Weir and Ors (1984) 51 LGRA 250 at 253-4. 51 The applicant submits that the Council's adoption of the draft LEP in 2002 is irrelevant since it does not address itself to the applicant's notice. Even if that adoption indicated the Council's policy after December 2004, the Council was still obliged to address the notice specifically. The Council cannot blindly follow policy: see Sagnata Investments Ltd v Norwich Corporation [1971] 2 QB 614 at 639. 52 The applicant relies upon internal memoranda of the Council dated 13 January 2004 and 24 February 2004. The two memoranda refer to need for open space in the Marks Point area. The applicant says these represent the entirety of the Council's consideration under cl 19(3), and accordingly submits that there was never any real consideration of its acquisition notices. 53 The applicant submits that as at February 2005 the Council had not formed the opinion under cl 19(3) or cl 19(4) and that at no time up until commencement of the proceedings did the Council make a resolution in terms of cl 19(3). Accordingly the Council never formed the opinion which was required to be formed after service of the applicant's notice issued pursuant to cl 19(1) of the 1984 LEP. 54 The applicant submits that it has a right to have the Council acquire its land unless the Council forms the opinion under cl 19(3). The applicant relies upon New South Wales Aboriginal Land Council v Minister Administering the Crown Lands (Consolidation) Act and the Western Lands Act (1988) 14 NSWLR 685 at 694; Parramatta City Council v Sandell and Anor [1973] 1 NSWLR 151 at 167-8; Greenfields Mountain Pty Ltd v Byron Shire Council (1998) 100 LGERA 409 at 425-6; Byron Shire Council v Greenfields Mountain Pty Ltd (1999) 105 LGERA 445 at 448-50. 55 The applicant further submits that the Council must form its opinion under cl 19(3) within a reasonable time and that following the expiration of a reasonable period of time the right to have the land acquired crystallises. Upon such event the right of the applicant may be enforced under s 124 of the Act as a failure to comply with the Act and the LEP. 56 Further, the applicant submits that the Council was required to accord procedural fairness to the applicant when it considered whether the exceptions provided by cl 19(3) and cl 19(4) were established, and relies upon Kioa v West (1985) 159 CLR 550 at 582. The applicant says the Council failed to afford it procedural fairness by not informing it of the engagement of Mr Robertson or providing an opportunity for it to furnish additional information to him, by not giving it an opportunity to comment upon the report prepared for the Council meeting of 27 June 2005, nor an opportunity to comment upon the conclusions of Mr Robertson or Mr Andrews. 57 The applicant submits that the Council was required to form its opinion based upon a "proper genuine and realistic consideration on the merits": see Broussard v Minister for Immigration and Ethnic Affairs (1989) 21 FCR 472 at 483; Khan and Ors v Immigration and Ethnic Affairs (unreported, Fed C of A, Gummow J, 11 December 1987); Weal v Bathurst City Council and Anor (2000) 111 LGERA 181. The decision of the Council must be reasonably open on the material before it: see Slack-Smith & Anor v Director-General of Department of Land and Water Conservation (2003) 132 LGERA 1. 58 The applicant also submits that the Council erred in its understanding of the meaning of "hardship" in cl 19(4) of the 1984 LEP by relying upon the statement of Mr Robertson that the land could be sold to alleviate hardship. The applicant submits that Mr Robertson should have taken into consideration the fact that the acquisition of the land pursuant to the provisions of the Land Acquisition (Just Terms Compensation) Act 1991 would have entitled the applicant to compensation based on the market value of residential land. 59 The applicant submits that the Council's resolution of 27 June 2005 was made for the purposes of providing a defence to the applicant's claim in the proceedings and was a "colourable" one. It was made solely for the purpose of defending the proceedings and was based upon counsel's advice. The resolution was not a bona fide exercise by the Council of any discretion and as such it cannot be effective: see Lubrizol Corporation Ltd and Ors v Leichhardt Municipal Council (1960) 6 LGRA 203 at 210; Chippendale Estates Pty Ltd v Sydney City Council (1960) 6 LGRA 194 at 202; Long and Anor v Copmanhurst Shire Council (1969) 19 LGRA 29 at 34; Donovan v City of Sale [1979] VR 461 at 474; The Shire President, Councillors and Ratepayers of the Shire of Swan Hill v Bradbury (1937) 56 CLR 746 at 757-8; Thompson and Ors v The Council of the Municipality of Randwick (1950) 81 CLR 87 at 106; Nettheim on behalf of Actors Equity of Australia v Minister for Planning and Local Government (unreported, Court of Appeal (NSW), No 528 of 1988, 21 October 1988). The Council's submissions 60 Section 27 of the EP&A Act requires acquisition clauses to be included in local environmental plans where land is zoned exclusively for a public purpose: see Carson. The Council submits that the applicant's land was not zoned exclusively for a public purpose and therefore a right to require acquisition arose only where the requirements of cl 19(3) and (4) were met. 61 The Council submits that there was no primary obligation upon the Council to act upon the acquisition notice. It says that cl 19(3) does not require the Council to form an opinion subsequent to the receipt of the notice, but simply to hold an opinion. It says the Council may rely upon previous resolutions of the Council which indicate it holds the relevant opinion. 62 The Council says that its resolution to adopt the draft LEP on 18 November 2002 indicated that it did not consider the applicant's land was required for open space purposes. Accordingly, it held the requisite opinion under cl 19(3) of the LEP at the date the acquisition notices were served. The Council submits that the formation of an opinion under cl 19(3) does not require a specific resolution where the opinion of the Council can be gleaned from other resolutions. An opinion under cl 19(3) may be either general (relating to all land in the 6(c) zone) or specific (relating to an individual parcel of land in the 6(c) zone). 63 The Council also relies upon its Open Space Acquisition Strategy contained in the 1998 Contributions Plan which prevailed when the acquisition notices were served. The Council submits that such plan establishes that there is more than adequate open space within the city and that the Council had adopted a strategy of augmenting existing open space rather than acquiring new open space. The subject land is not identified as land proposed for acquisition in the 1998 Contributions Plan. 64 The Council submits in the alternative that if cannot rely upon a prior opinion, the adoption of the 2004 Contributions Plan confirmed its opinion after the receipt of the notices. The Council gave consideration to the need for open space when it considered the 2004 Contributions Plan and decided not to acquire further open space in the Belmont area. The 2004 Contributions Plan acknowledged that adequate reserves of land existed to meet both the existing and future population demands for open space. Similarly, the subsequent rezoning of the land by the 2004 LEP to the 5 Infrastructure zone indicated that the land was not necessary for open space. 65 The Council further submits that, by its resolution on 27 June 2005, it formed an opinion under cl 19(3) specifically in relation to the notices. 66 For these reasons, the Council submits that it was only required to acquire the land if it formed the opinion that the owner of the land would suffer hardship if the land were not acquired within a reasonable time. The Council says it considered this matter and by its resolution of 27 June 2005, formed the opinion that the applicant would not suffer hardship if the land were not acquired. 67 The Council submits that there are no grounds on which the Court could find the applicant would suffer hardship, as the land clearly had a market value. The uses permissible in the 6(c) zone included tourist facilities and refreshment rooms and a number of other purposes, subject only to the restriction contained in cl 19(6) that the land could not be used so as to render it unfit for the purpose for which it was zoned. In any event, it is for the Council, not the Court, to form the opinion under cl 19(4). Since the Council has done so, there is no ground on which the merits of the Council's opinion can be reviewed. 68 The Council submits that there is no basis to suggest the Council's resolutions were not made for a proper purpose. It says that the applicant's submission that the Council was prevented from considering the matter after litigation was commenced is contrary to authority: see Warringah Shire Council and Ors v Pittwater Provisional Council (1993) 26 NSWLR 491 at 511. 69 The Council submits that the circumstances in Lubrizol, Chippendale and Copmanhurst were entirely different to the present proceedings. In each of those cases, the Council had undertaken some action which was specifically designed to defeat the rights or proposal of another party. 70 The Council submits that the applicant's contention that it was entitled to procedural fairness is misconceived. The extent of any procedural fairness obligation is limited by the scope of the LEP and the EP&A Act: see Vanmeld Pty Ltd v Fairfield City Council and Anor (1999) 46 NSWLR 78. No right crystallises until an appropriate opinion is formed under cl 19(3) or (4), and accordingly the Council's process did not affect any right of the applicant. In these circumstances, considerations of procedural fairness do not apply. 71 Nonetheless, the Council submits that insofar as any obligation to provide procedural fairness existed, it was fully discharged by the letter of 1 June 2005 from the Council's solicitor which invited the applicant to provide further information. The Council submits that the applicant was thereby given an opportunity to make submissions to the Council. If the applicant failed to take advantage of an opportunity to provide information offered to it by the Council, it cannot then claim that the Council has treated it unfairly: see Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam (2003) 214 CLR 1 at [37]-[38] and Al-Mehdawi v Secretary of State for the Home Department [1990] 1 AC 876 at 901. 72 As to the applicant's submission that the Council is required to acquire the land within a reasonable time of the service of the acquisition notice, the Council submits that any temporal requirement will be informed by the fact that cl 19(2) is not engaged until an opinion is formed under cl 19(3). Further, the applicant initially informed the Council it did not wish to pursue acquisition, did not provide some of the requested information until 10 March 2005, and refused access by the Council to some information. When expressly invited to provide further information, it rejected the opportunity. There can be no suggestion of the breach of any reasonable time requirement where the formation of the opinion has been delayed by the party serving the notice: see Mahoney v Lindsay and Ors (1980) 33 ALR 601 at 603 per Gibbs J. Findings Construction of Clause 19 73 Clause 19(2) of the 1984 LEP operates to require the Council to acquire land which is the subject of a notice under cl 19(1) of such LEP. However, cl 19(2) is expressly subject to subcl (3), which provides that the Council need not acquire 6(c) land if, in the opinion of the Council, there is not yet a need for open space in the area. Subclause (3) operates to release the Council from any requirement to acquire land, except where subcl (4) has application. 74 The applicant has argued that subcl (2) operates to place an obligation on the Council to acquire land, unless, in consideration of a specific application, it forms the requisite opinion under subcl (3). However, as a matter of statutory construction, since subcl (2) is subject to subcl (3), subcl (3) must be answered before subcl (2) has application. 75 The Council must form an opinion under cl 19(3) in relation to the notices of acquisition. It is not sufficient for the Council to have no opinion (see Liverpool City Council v Weir at 253-4), or to rely upon a general policy. The service of the notice activated a duty upon the Council to give genuine consideration to its opinion cl 19(3). 76 Clause 19(4) provides an exception to the operation of subcl (3). Where the Council is of the opinion that there is no need for open space in the vicinity, it must still acquire the land if the owner of the land will suffer hardship if the land is not acquired within a reasonable time. However, the Court is of the opinion that is incumbent upon an applicant for acquisition to provide evidence of hardship. In the absence of such evidence, the Council is entitled to presume that the owner will not suffer hardship. If, however, an applicant provides evidence of hardship, the Council is required to consider that evidence and determine its opinion within a reasonable time. Did the Council form the cl 19(3) opinion? 77 Initially upon receipt of the notice of acquisition, it is apparent that some Council officers considered whether there was a need for open space in the vicinity of the applicant's land. An internal memorandum written by Mr Farrell dated 29 December 2003 requested that a report be prepared to facilitate the Council forming an opinion concerning the need for open space. Ms Boyd prepared memoranda in January and February 2004 in relation to this opinion. A second memorandum of Mr Farrell dated 17 February 2005 was sent to all councillors and acquainted them with the notices of acquisition served by the applicant. 78 None of these documents suggested that the Council already held an opinion concerning the need for open space in the vicinity. No mention of such an opinion was made in correspondence between the Council's solicitor, Mr Rees, and the solicitor for the applicant, until the letter from Mr Rees to the applicant's solicitor dated 1 June 2005. In that letter Mr Rees informed the applicant's solicitor that the Council had through the 2004 LEP and the 2004 Contributions Plan expressed the view that the residential development in the vicinity of the land had not generated a need to apply the land for open space purposes. 79 The Council had, prior to the receipt of the notice of acquisition, comprehensively considered the land use requirements of the Lake Macquarie area, including the applicant's land, as part of its preparation of the 2004 LEP. The draft LEP had been adopted by resolution of the Council on 18 November 2002. At the time the applicant served its notices of acquisition, the Council was still pursuing the making of the draft LEP, and it was gazetted two days after service of the second notice of acquisition and became the 2004 LEP. 80 After February 2004 there appears to be a prolonged period in which there was no further internal consideration of the need for public space in the vicinity of the applicant's land. However, on 19 March 2004 the 2004 LEP was made and in November 2004 the 2004 Contributions Plan. Those instruments considered land use in the area and determined that there was no need for public space in the Belmont area. 81 However, the Court does not consider that any of the above actions satisfy the obligation of the Council to form an opinion under cl 19(3). As a result of the service of the acquisition notices, the Council was required to give specific consideration to the need for the applicant's land. The Council was not merely entitled to apply a policy without giving consideration to the acquisition notices: see Sagnata Investments v Norwich Corporation per Phillimore LJ at 638. It was required to give proper genuine and realistic consideration to the acquisition notices: see Broussard. 82 The Council did, however, give specific consideration to the need for the applicant's land for open space purposes in 2005, when a report was prepared by Mr Andrews ("the Andrews report") in anticipation of the Council's formal consideration of the matter. The Andrews report was prepared expressly for the purpose of determining whether residential development in the vicinity of the applicant's land had generated the need for the acquisition of the land for open space purposes. It referred to the Council's policies concerning open space and concluded that the land was not required because the need for open space had not been generated by residential development in the vicinity. Subsequently, on 27 June 2005, the Council formally adopted the opinion that there was not yet a need for open space in the vicinity of the applicant's land. Consideration of hardship 83 The Court now turns to the Council's consideration of the applicant's claim of hardship under cl 19(4). The applicant bears the onus of proving to the Council that it will suffer hardship if the land is not acquired. Further, any opinion with respect to hardship must be in respect of the owner of the land. The financial situation of related companies or its ultimate shareholder or director are not relevant to the Council's decision. 84 The Court notes that cl 19(4) is not an objective test, but a subjective one. The Court is not required to determine for itself whether the applicant will suffer hardship if the land is not acquired. Rather, the Court is required to determine whether the Council formed that opinion. 85 It is clear that the Council formed the opinion that the applicant would not suffer hardship if the land were not acquired within a reasonable time by its resolution of 27 June 2005. On that date, the Council considered of Mr Robertson in relation to the applicant's financial position in reaching its conclusion that hardship had not been established. Procedural fairness 86 The applicant claims that the Council's opinion that the applicant would not suffer hardship if the land were not acquired was made without affording procedural fairness to the applicant. The applicant submits it was required to be informed of the findings of the Council's accountants before the Council made its decision. 87 The Court cannot accept this submission. The only material before Mr Robertson had been provided by the applicant. There can be no suggestion of any adverse material which the applicant did not have the opportunity to answer. There was no obligation for the Council to provide the applicant with the Robertson report itself, since it contained merely advisory opinions with respect to material provided by the applicant. 88 Furthermore, the applicant was invited to provide submissions to the Council before the Council formally determined the matter on 27 June 2005. Since the applicant declined that invitation, it cannot complain that procedural fairness was thereby denied to it: see Al-Mehdawi v Secretary of State for the Home Department [1990] 1 AC 876 at 901. To the extent that any obligation of procedural fairness arose, the Court considers that this invitation by the Council would have satisfied the obligation. The applicant did not have a right to a "full-blown adversarial trial" at the "examination and report stage of the process": see Minister for Local Government and Anor v South Sydney City Council (2002) 55 NSWLR 381 at [251] per Mason P. Test for hardship 89 The applicant also submits that the Council's accountant misunderstood the requirements of cl 19(4) in evaluating the applicant's accounts. Mr Robertson's report referred to the fact that the applicant could have sold the land if it were experiencing hardship. The applicant says that such statement misunderstands that by having to sell the land at a lesser value because of its present zoning, the applicant would be suffering hardship. 90 The Court does not accept this submission. The applicant has asserted that, if an acquisition had proceeded, the land would have been valued based upon an underlying residential zoning. However, there is no evidence before the Court that this would have been the case. Nor is there evidence that the residential value would have substantially exceeded the market value of the land in its current zoning. 91 Even if such evidence had been provided, the Court considers that the hardship provisions are intended to require acquisition where an owner is in genuine financial distress because of the zoning of the land, not simply where some level of financial loss may be incurred if the owner has to sell the land based on the value in its current zoning. The Court considers an owner may be in genuine financial distress where land is unsaleable because of its zoning. However, the Court is not satisfied that these circumstances exist in the present case. A file note of the Council suggests that at least one buyer was interested in purchasing the land from the applicant during the period in which it was attempting to negotiate the acquisition by the Council. There is also some evidence suggesting that the applicant mortgaged its land in late 2004 or early 2005, although no specific details of the mortgage were provided. However, the Court does not consider these facts prove that the zoning of the land was causing hardship to the applicant. 92 Apart from these considerations, it is for the Council, not the Court, to form an opinion on this matter. The Council's opinion was reasonably open to it on the evidence before it, and accordingly the Court would not override that opinion. Improper purpose 93 The applicant submits that the Council's resolution was not a bona fide exercise of its powers but was made for an improper purpose, namely to provide a defence to these proceedings. The applicant relies principally on the fact that the business papers for the Council meeting of 27 June 2005 drew attention to the fact of the litigation and stated that the Council was defending the proceedings. 94 The applicant has referred to Lubrizol, Chippendale Estates and Donovan v City of Sale. In Lubrizol the Court found the Council's resolution to be colourable and made only for the purpose for providing an unappealable ground for rejecting the applicant's development application. In that case the Council had sought to adopt a foreshore building line specifically to thwart an application for development. 95 In Chippendale the Court found that the Council's prohibition on the installation of petrol pumps had been adopted in order to prevent the applicant's proposed development of a service station. In Donovan v City of Sale the Council's attempt to deregister a piggery based upon alleged breaches of the Health Act was found to be an improper purpose for which to exercise its discretion. 96 These cases indicate circumstances where the Court may declare a resolution of the Council to be invalid. However, the question of whether a resolution was made for an improper purpose is primarily a question of fact. The onus of proving that the exercise of discretion was not bona fide, or was for an improper purpose, rests upon the applicant. The only evidence which the applicant has pointed to is the fact that these proceedings were commenced before the resolution was made, and the fact that the business papers of the Council referred to the fact that it was defending the proceedings. The Court does not consider this is to be sufficient to satisfy it that the resolution of 27 June 2005 was not a genuine or proper exercise of the Council's power. 97 The mere fact that a decision contrary to the applicant's interests was made after these proceedings were commenced does not of itself indicate that the decision was colourable. Nor does the Court consider that the brief reference in the Council papers to the fact that the proceedings were being defended is sufficient to indicate that the Council did not give proper consideration to the question before it. The Council members had before them a comprehensive report (the Andrews Report) which considered the need for open space in the vicinity. They also had the report from Mr Robertson, the Council's accountant, which concluded that the applicant was not suffering hardship. The Councillors adopted the recommendations of those reports. Their decision was consistent with the policies of the Council with respect to the land as contained in the 2004 LEP and the 2004 Contributions Plan. It was a decision which open to the Council on the information before it and on the information before the Court in the present proceedings. The Court is not satisfied that the onus of proof has been discharged. Accordingly, the challenge to the Council's resolution of 27 June 2005 fails. Reasonable time 98 Clause 19(3) does not include any specific time limit within which the Council must form its opinion. However, cl 19(4) refers to the fact that an applicant may be suffering hardship if the land is not acquired within a reasonable time. There is therefore a clear implication that the opinion of the Council under cl 19(3) and cl 19(4) is to be formed within a reasonable time: see also Koon Wing Lau v Calwell and Anor (1949) 80 CLR 533 at 573-4. 99 The length of time which is reasonable will depend upon the circumstances of each case: see Wallis & Moore v Sutherland Shire Council [2005] NSWLEC 397 at [70]-[73] and Chief Commissioner Business Franchise Licences v Anek Pty Ltd (unreported, Court of Appeal (NSW), 28 February 1996). The Council is entitled to make appropriate enquiries and to give "a proper genuine and realistic consideration on the merits" to the issue prior to forming any opinion: see Broussard. 100 In the present case, the resolutions of the Council were made 18 months after the service of the first acquisition notice. The applicant provided information to the Council in relation to its claim for hardship on 27 July 2004. After this date, there appears to have been no correspondence from the Council in respect of the acquisition notices until the proceedings were commenced on 15 February 2005. It appears from internal memoranda of the Council that the original accountant retained to advise it in relation to hardship was the source of the delay. However, the Court does not consider this justifies the prolonged decision-making period. On the evidence, the Council did not prepare its final report (the Farrell report), or seek any further information from the applicant, until after proceedings had commenced. The delay on the part of the Council after July 2004 was unreasonable. Effect of the Council's inordinate delay 101 The applicant has submitted that after a reasonable period has elapsed, the obligation upon the Council to acquire the land crystallises. Its relied upon Port Stephens Council v Fidler, Parramatta City Council v Sandell and New South Wales Aboriginal Land Council. In the former two cases, there was an unqualified obligation to acquire the relevant lands upon service of a notice. In New South Wales Aboriginal Land Council the applicant had a right to have lands transferred provided certain objective facts were established. 102 These cases differ from the present case, where the Council retains a discretion to acquire the applicant's land. Clause 19(3) and cl 19(4) pose a subjective test on which the obligation to acquire is based. The Court is not satisfied that, in the circumstances, delay could justify the orders which the applicant seeks, namely an order that the Council acquire the land. The applicant might be entitled to mandamus to require the Council to form opinions under cl 19(3) and 19(4). However, where, as in the present case, the obligation to acquire the land is entirely dependent upon the opinion of the Council, a failure in this respect does not justify an order that the land be acquired. 103 Since the Council has, since the institution of these proceedings, formed opinions under cl 19(3) and 19(4), there is no utility in the Court being asked to make any declaration in the nature of mandamus. However, it reflects upon the reasonableness of the applicant in commencing the proceedings after a prolonged delay by the Council in considering the acquisition notices. Orders 104 For the above reasons, the Court makes the following orders:

The application is dismissed.
Costs reserved.
The exhibits be returned.

Aeropelican Air Services Pty Ltd v Lake Macquarie Council

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Judgment (11 paragraphs)

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Cases Cited (18)

Cited By (1)