Allen Commercial Constructions Pty Ltd v The Council of the Municipality of North Sydney

RECOMMENDATION In view of the benefit to pedestrian movement brought about by the amalgamation of vehicular movement in the subject premises and the adjoining premises to the south, and that further extension of the vehicular movement system to properties to the south has been made possible in the future, thus making available an alternative to vehicular movement in Pitt Street Mall, it is recommended that a floor space bonus of 1.05:1 be granted.

The report concluded with the recommendation for deleting condition B(b) and adding condition 56. 24 On 14 August 1990, solicitors acting for the then owner of Glasshouse wrote to the Council a letter including the following: Our client has indeed completed an agreement relating to vehicular access in favour of the adjoining "Skygarden" development. However, precisely as Council Officers advised, our client has no powers to compel the owners of the Imperial Arcade and Centre Point to enter into reciprocal arrangements, as these owners currently have no proposals to redevelop their sites. The result is, precisely as Council Officers advised, that the developers are unable to comply with the conditions imposed by Council.

Our client is, however, willing to comply with the spirit and intent of the condition, so far as it is legally within their power so to do. Given that no agreement can be reached relating to the proposed easement in gross with the Imperial Arcade and Centre Point, our client is willing voluntarily to enter into a binding legal agreement with Council, which could be registered against their title, so as to bind successors. It is proposed that such agreement would contain provisions whereby at any subsequent date, Council may require the owner for the time being of 135 King Street to grant easements in gross in favour of the Imperial Arcade, or Centre Point, upon redevelopment of these sites. 25 The Council referred this proposal to the City Solicitor. A suggested form of agreement was submitted to the City Solicitor by the owner's solicitors on 8 March 1991. Amendments were suggested by the City Solicitor. The matter remained under review until 8 January 1996, when negotiations appear to have broken down on account of difficulties experienced in obtaining reciprocal agreements with the owners of Centrepoint and Imperial Arcade. 26 The building of Glasshouse commenced in 1988 and finished in 1990. Skygarden opened in 1991. Perpetual became the owner of Glasshouse in 1998. Westfield acquired Centrepoint in 2002, Skygarden in August 2004, and Imperial Arcade in September 2004. 27 On 20 September 2004, Westfield submitted to Perpetual a transfer granting to Imperial Arcade and Centrepoint a right of way "as shown and on the terms contained in DP641047". Perpetual did not execute that transfer.

DECISION OF PRIMARY JUDGE 28 The primary judge held that condition 56, if valid, would bind Perpetual because its continuing use of the Glasshouse was a "development" under the Act, and accordingly Perpetual could continue this use only if relevant conditions were complied with: Hillpalm Pty. Limited v. Heaven's Door Pty. Limited [2004] HCA 59, (2004) 220 CLR 472, 137 LGERA 57, at [49]. 29 The primary judge held that condition 56 was a condition imposed for a planning purpose fairly and reasonably related to the Glasshouse development. However, he continued: 66 The omission by the council to consistently provide for a viable and reasonable mechanism for the implementation of its grand scheme reinforces the conclusion that compliance with condition 56 was not feasible. Critical questions remain unanswered even at the present time. These include important matters such as the amount of consideration to be paid for the grant of the further right of way and the undefined "reciprocal rights." The prospect of the achievement of a consensual outcome is left to speculation. It is not reasonable to require a developer to do that which is impossible without the co-operation of third parties. Particularly where the third parties have no commensurate interest in the subject property. There is a total lack of guidance as to how the object of the condition is to be achieved. There is no discretion vested in the City Solicitor or any other relevant person whereby the developer is able to seek total or partial exemption from compliance. Accordingly there is no opportunity for relaxation of the otherwise strict application of the condition. It is altogether unreasonable, principally as a consequence of its inherent impractability.(sic)

67 The fact that compliance is limited to the provision of documentary evidence does not alleviate the imperative to show that "the right of way…is extended to cover the right of way to the 'Imperial Arcade' and the 'Centrepoint' site." Moreover, although the wording of the condition when read literally suggests there is already a right of way to the other two properties that is not the case.

68 The scheme envisages that each of Skygarden and Imperial Arcade would be required to grant rights over their own land. There is the further demand upon the owner of the Glasshouse. Prior to the consolidation of ownership of all of the other properties, compliance with condition 56 was at all relevant times unachievable by unilateral action of the owner of the Glasshouse.

69 The difficulty is amply demonstrated by the rejection of the proposal by AMP and Stockland in 1988. Achievement of compliance with condition 56 presented as an impossibility at the time the building was erected. The owner and builder of the Glasshouse was placed in the position where it was unable to comply with the condition prior to completion of the building. Even so the owner of the Glasshouse wrote to council on 14 August 1990 (see [26]) seeking to resolve the problem by suggesting a compromise. Despite further correspondence over the next six years the apparently intractable problem was not resolved. This lack of resolution further demonstrates the extent of inherent unreasonableness in condition 56. Another weighing factor is the effect on future development of the Glasshouse property refected by the opinion of Raine and Horne (see [23]).

70 What was being addressed by the s 102 application in November 1988 was the deletion of condition B(b). The underlying justification for the deletion of condition B(b) was the creation of the right of way in favour of Skygarden by registration of the s 88B instrument in April 1988. The developer was released from the requirement to acquire transferable floor space. The extension of the right of way for the benefit of Imperial Arcade and Centrepoint was only incidental to the decision. Reference to the report to council (see [25]) makes it clear the award of the floor space bonus was requested in return for imposition of the right of way in favour of Skygarden and the completion of access arrangements to that site and "progressing, as far as possible," with extension of access to the other two sites.

71 Having regard to the whole of the circumstances applying at the time and the surrounding relevant facts and difficulties of enforcement I determine that the decision of the council to impose condition 56 was so unreasonable that no reasonable planning authority, properly advised, could have come to it ( Temwood Holdings and Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223). I reach that conclusion following a consideration of the prevailing facts at the time when the condition was added. The subsequent quirk of history when Westfield became the common owner of all three properties located immediately to the south of the Glasshouse does not rectify or overcome the fundamental unreasonableness of the condition. The context for the assessment of the degree of unreasonableness is the circumstances when the decision was made. At that time, the condition amounted to a relevant abuse of power. It was so devoid of plausible justification that no reasonable person could have imposed it.

72 The degree of perversity can be readily understood by considering whether condition 56 could ever be enforced. It is not an adequate answer to say, as the applicant does, that the condition is anticipatory or ambulatory. Even if the condition is to be construed on the basis that Westfield now holds title to each of the relevant properties it will not lead to a resolution of outstanding issues such as determination of an appropriate consideration to be paid by Westfield or the nature of the so-called "reciprocal rights." The condition is plainly unenforceable without the co-operation and consensus of all relevant parties. They must first reach a mutually satisfactory agreement that takes account of individual legal rights as well as their complex commercial interests. The council would be involved as the consent authority in respect of any development required as a consequence of, or preparatory to, the finalisation of the commercial agreement between the landowners, particularly if there is an intensification of the use of the right of way across the Glasshouse site (see the discussion in North Sydney Council v Ligon 302 Pty Ltd (1996) 185 CLR 470 at 476 and 477). On the basis of its total lack of capacity for practical application, condition 56 is so devoid of utility and purpose that it is relevantly unreasonable in the Wednesbury sense. Alternatively by the same line of reasoning it is void for uncertainty.

73 The effect of condition 56, if enforceable, would be to require the owner of the Glasshouse to obtain the consent of the owner of Skygarden to the use of its land for the purpose of extending the right of way in favour of Imperial Arcade and Centrepoint. That, according to the first respondent, would be unlawful because it would require the owner of the Glasshouse to obtain the consent of third parties before it could act on the consent. Mr Rares SC, who appears for Perpetual, relies on the judgment of the High Court in Ligon at p 478-9 to support that proposition. However as I read the High Court decision it does not raise a relevant matter for determination in the present case. The High Court was considering whether the consent of the owner of other land in the locality over which a right of way already existed was required before an application could be made for development consent to a proposed development on the dominant tenement. The situation here is the reverse. The applicant for approval to modification of the Glasshouse development consent was not seeking to use other land. To the contrary the council was seeking to force the applicant to make its land available for use by other landholders. Whether development consent would be required to enable the other landholders to use the Glasshouse right of way is but one of the complicating factors that reinforce the impracticality of enforcing condition 56.

74 Even if I am wrong about the validity of condition 56 nevertheless the Court would not be in a position to make an order that would require the applicant and first respondent to successfully negotiate a settlement of the terms of their legal relationships (see for example Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 604-5). Assuming against the present fact such a settlement can be reached, there would still be the outstanding matter of a further development consent. 30 Having found condition 56 was invalid, he went on to hold that it was severable.

ISSUES ON APPEAL 31 It is convenient to consider the matters raised on the appeal under three headings: 1. Construction and uncertainty of condition 56. 2. Wednesbury unreasonableness. 3. Severance.

CONSTRUCTION AND UNCERTAINTY Submissions 32 Mr. Walker SC for Westfield submitted that the primary judge erred in not addressing and reaching a conclusion on the question of construction and on the related question of uncertainty, before addressing the question of reasonableness. However, Mr. Walker submitted that, in addressing the question of construction, the Court can have regard to the requirements for validity. 33 He referred to s.32 of the Interpretation Act 1987, which is as follows: 32 Instruments to be construed so as not to exceed the powers conferred by the Acts under which they are made (1) An instrument shall be construed as operating to the full extent of, but so as not to exceed, the power conferred by the Act under which it is made. (2) If any provision of an instrument, or the application of any such provision to any person, subject-matter or circumstance, would, but for this section, be construed as being in excess of the power conferred by the Act under which it is made: (a) it shall be a valid provision to the extent to which it is not in excess of that power, and (b) the remainder of the instrument, and the application of the provision to other persons, subject-matters or circumstances, shall not be affected. (3) This section applies to an instrument in addition to, and without limiting the effect of, any provision of the instrument or of the Act under which it is made. 34 He submitted that this applied to planning consents, and that where more than one interpretation was open, the interpretation that ensures validity should be adopted: Chu Kheng Lim v. Minister for Immigration, Local Government & Ethnic Affairs (1992) 176 CLR 1 at 14; Warehouse Group (Australia) Pty. Limited v. Woolworths Limited [2003] NSWCA 270, 137 LGERA 115 at [19]. He also submitted that the Court should prefer an interpretation that avoids impossibility of performance: Hinton Demolition Pty. Limited v. Lower (No.2) [1971] 1 SASR 512 at 528. 35 Accordingly, he submitted, in construing condition 56 one can have regard to the requirements for validity of such conditions, which are set out in Western Australia Planning Commission v. Temwood Holdings Pty. Limited [2004] HCA 63, 221 CLR 30, at [57]: 57 The Commission also does not dispute that a condition attached to a consent must reasonably and fairly relate to the development permitted. A condition attached to a grant of planning permission will not be valid therefore unless: 1. The condition is for a planning purpose and not for any ulterior purpose. A planning purpose is one that implements a planning policy whose scope is ascertained by reference to the legislation that confers planning functions on the authority, not by reference to some preconceived general notion of what constitutes planning. 2. The condition reasonably and fairly relates to the development permitted. 3. The condition is not so unreasonable that no reasonable planning authority could have imposed it. 36 Certainty as such was not a requirement for validity, though uncertainty could be an element of unreasonableness: Cann's Pty. Limited v. The Commonwealth (1946) 71 CLR 210 at 227-8; Genkem Pty. Limited v. Environment Protection Authority (1994) 35 NSWLR 33 at 42. In any event, he submitted, as part of upholding the effectiveness of instruments, the Court would try to give them practical effect by avoiding uncertainty. Instruments such as consents and conditions of consent are to be construed, not as documents drafted with legal expertise, but to achieve practical results: Gill v. Donald Humberstone & Co. Limited [1963] 1 WLR 929 at 933-4; Driscoll v. J. Scott Pty. Limited (1976) 50 ALJR 528 at 531; Hecar Investments & Co. Pty. Ltd. v. Lake Macquarie Municipal Council (1984) 53 LGRA 322 at 323. 37 In the present case, he submitted, there was no uncertainty in relation to condition 56 if it is regarded as taking effect if and when there is appropriate co-operation from Imperial Arcade and Centrepoint; if it is understood as not requiring consideration; and if the reference to reciprocal rights and duties is understood as referring to the grant of an appropriate easement by Skygarden to Imperial Arcade and Centrepoint, and by Imperial Arcade to Centrepoint, and as making provision for a principled extension of the terms of the existing easement so as to make them applicable to the extended easement. 38 Mr. Hutley SC for Perpetual submitted that condition 56 could not be interpreted as requiring the grant of an easement in favour of Imperial Arcade and Centrepoint without consideration, because this would be wholly unreasonable, having regard to the resulting costs, burdens and risks that would be imposed on the owner of Glasshouse, and the enormous commercial benefit that would come as a windfall to the owners of Imperial Arcade and Centrepoint. The only reasonable conclusion was that what was contemplated was a commercial negotiation as to appropriate consideration. 39 Further, Mr. Hutley submitted, the terms of the existing easement showed that there was much that needed to be the subject of commercial negotiation in relation to matters other than consideration, such as maintenance, insurance and allocation of risk: the future use of Imperial Arcade and Centrepoint, if there were re-developments of these sites, could not be anticipated, and could result in greatly increased burdens and risks imposed on the owner of Glasshouse. Mr. Hutley submitted that the reference to "reciprocal rights and duties" confirmed that condition 56 could not be considered as requiring any more than future commercial negotiations.

Decision 40 In my opinion, the question of interpretation should be approached on the principles referred to by Mr. Walker. Just as a contract should be construed, if possible, so that its validity is preserved and uncertainty avoided (see for example Meehan v. Jones (1982) 149 CLR 571 at 589, and Upper Hunter County District Council v. Australian Chilling & Freezing Co. Limited (1968) 118 CLR 429 at 436-7), so also should instruments of this kind. Plainly, the Council intended to achieve something substantive by condition 56, and it should be construed if possible so as to give effect to that intention. 41 Another principle to be kept in mind in construing the condition is that a development consent is a document in rem, so that communications between the parties do not form part of the matrix relevant to construction: House of Peace Pty. Limited v. Bankstown City Council [2000] NSWCA 44, 48 NSWLR 498 at [23] and [27]. However, the Court can have regard to objective circumstances, including the physical circumstances, the plans accompanying the development application, and matters relating to title. In this case, in my opinion, the Court can have regard to the following, as they were at 13 December 1988: 1. The existence of the Pitt Street Mall as a pedestrian area, and the Council policy of keeping traffic in that area to a minimum. 2. That the consent and plans for the Glasshouse development provided for access through a basement level to Skygarden of a kind and capacity sufficient for provision of access through to Imperial Arcade and Centrepoint, assuming no extraordinary change in the nature of the activity on those sites. 3. The grant of the easement to Skygarden and the terms of that easement. 4. Consent to plans for Skygarden providing for access through its basement level to Imperial Arcade, albeit without a condition of that consent requiring Skygarden to grant an easement to Imperial Arcade or Centrepoint. 5. The circumstance that the imposition of condition 56 was associated with the deletion of a condition requiring the transfer of transferable floor space to the site. 42 In my opinion, it is clear that the obligation sought to be imposed by condition 56 to extend the easement could not be fully performed without the co-operation of Skygarden, Imperial Arcade and Centrepoint. The need for such co-operation is confirmed by the reference to reciprocal rights and duties. Accordingly, if the condition is to be effectual, it must be considered as imposing an obligation that requires action only if and when there is appropriate co-operation from Skygarden, Imperial Arcade and Centrepoint (or at least, Skygarden and Imperial Arcade). 43 Again, the condition could not be effectual if it left the question of consideration entirely at large. One possibility is that what is required is an extension of the easement without consideration to the owner of Glasshouse. The only other possible alternative which could leave the condition as being possibly effectual and enforceable is to interpret it as requiring Glasshouse to negotiate bona fide as to consideration and/or not unreasonably to refuse a proper offer. However, there is no suggestion in the language that supports this alternative. The language makes no mention of consideration, and that suggests it may be reasonable to interpret it as requiring the extension to be given without consideration. In circumstances where the condition must be interpreted without knowledge of underlying commercial dealings between the Council and the developer, I do not think it can be concluded that such a requirement would impose an unreasonable burden on the developer or on later owners of the Glasshouse. The condition may give rise to a windfall to Imperial Arcade and Centrepoint, but this may be the inevitable consequence of giving effect to the reasonable planning purpose of keeping traffic off the Pitt Street Mall. 44 In my opinion, the reference to reciprocal rights and duties does at least refer to the need for Skygarden to give an easement to Imperial Arcade and Centrepoint, and the need for Imperial Arcade to give an easement to Centrepoint, if the easement is to be effectively extended to Imperial Arcade and Centrepoint. I think it also refers to the question of what the terms of the extended easement are to be. The terms of the existing easement suggest the need for terms in an extended easement relating to such things as the cost of maintenance and repair and insurance, and possibly also as to such things as signage and allocation of risk. 45 Having regard to the above considerations, and the principles of construction I have referred to, in my opinion condition 56 should be interpreted as imposing an obligation on the owner of Glasshouse to take the action required, if and when there is appropriate co-operation from the owners of Skygarden, Imperial Arcade and Centrepoint; to do so without further consideration; with one aspect of the necessary co-operation being the making of appropriate provision for access across Skygarden to Imperial Arcade and across Imperial Arcade to Centrepoint. As regards the terms of the extended easement, in my opinion this raises questions of the kind referred to in Upper Hunter. In my opinion there are alternative reasonable ways of extending the terms of the existing easement to the extended easement. The existence of reasonable alternatives does not mean that there is invalidating uncertainty: the Court can resolve which of these alternatives is the correct one. 46 Mr. Hutley did contend that the possibility of greatly altered use of Imperial Arcade and Centrepoint shows that there is no reasonable way of working out the terms of an extended easement except by commercial negotiations undertaken at the relevant time. There is some force in this submission, but the force is limited because of the principle of easement law that an easement will not authorise use that is excessive by reason of greatly altered use of the dominant tenement as compared with its use at the time of grant (or agreement for grant in a case where what is sought is in effect enforcement of such an agreement): see Gallagher v. Rainbow (1994) 179 CLR 624 at 640-42. 47 That case also provides an illustration of approaches that may be taken when circumstances give rise to questions as to how costs relating to the maintenance and repair of a right of way are to be apportioned, when owners of additional lots come to be entitled to use it. 48 In that case, as set out in the headnote, the owners of four lots on a plan of subdivision gained access to a public street via a private roadway formed from strips of land belonging to each of the four lots. Reciprocal easements over each portion of the roadway were given and taken by the owners of the lots. The right of way was expressed to be for the benefit of the dominant tenement "or any part thereof". The term "grantee" included transferees and assigns as well as the occupier or occupiers for the time being of the dominant tenement. The owners of two of the four lots subsequently subdivided each of these lots into three lots. It was held by a majority of the High Court that the benefit of the easements attached to the dominant tenements in their subdivided form, so that each owner of any of the six new lots had the benefit of the easement. 49 Gaudron and McHugh JJ dissented in this case, on the basis that the owners of the four original lots constituting the dominant tenement each covenanted as grantee with each other as grantor that maintenance and repair costs should be borne equally between them; and the minority judges considered that this covenant could not work according to its terms if the right of way was construed as enuring for the benefit of each of the subdivided lots. The majority held that the contribution from each of the original lots remained the same, and that it was not necessary to determine how questions of contribution as between owners of the newly subdivided lots should be worked out. 50 The view of the minority in Gallagher v. Rainbow was based not on uncertainty as such but on an inference as to the intention manifested by the grant of the easement: Gaudron and McHugh JJ concluded that the considerations they relied on meant that the intention manifested by the grant was that the benefit of the easement should not enure to owners of subdivided lots. If the only question had been, given that the easement was to enure for the benefit of subdivided lots, how the costs were to be apportioned, in my opinion the considerations relied on by the minority would not have precluded application of the Upper Hunter approach. In the present case, there is no question that the Council's intention was that the easement be extended, so that there is no reason not to apply the Upper Hunter approach. 51 Applying the Upper Hunter approach, in my opinion what condition 56 contemplates is that where cls.3 and 4 of the existing easement (set out in par.[14] above) provide for equal division of costs between one grantor and one grantee, such costs should be divided four ways between the grantor and three grantees. In my opinion, no change would be required to cls.1, 2, 5 and 6. As regards cls.7 to 11, what would be required would be a similar obligation on each grantee. 52 What was offered by the transfer submitted by Westfield either did not, or at least did not clearly, have this effect; so in my opinion, Perpetual is not yet in breach of condition 56.

UNREASONABLENESS Submissions 53 Mr. Walker submitted that invalidating unreasonableness would not be made out unless the Council's decision to include condition 56 was "so plainly incorrect as to satisfy the stringent requirements of the Wednesbury unreasonableness test": Woolworths Limited v. Pallas Newco Pty. Limited [2004] NSWCA 422, 61 NSWLR 707, 136 LGERA 288 at [91]. That test was not satisfied. 54 It was clear, he submitted, that the Council had a plan to get traffic off Pitt Street Mall, a plan that could not be achieved at one stroke, and that required the co-operation of future owners in the case of future developments of Imperial Arcade and Centrepoint. The absence of an appropriate condition in the Skygarden approval, requiring Skygarden to grant an easement over its property, neither negatived the existence of this plan, nor the reasonableness of other measures to put it into effect. 55 Mr. Hutley did not contend that requirement (1) of the three requirements stated by McHugh J in Temwood was not satisfied; or that the condition did not relate to the development. However, he contended that the condition did not relate to the development in a reasonable and fair way, and that it was otherwise unreasonable. He made submissions similar to those made in relation to uncertainty, concerning the unreasonableness of the condition unless it left it open to the owner of Glasshouse to engage in commercial negotiations concerning the extension of the easement; but at this stage of the enquiry, that matter may be considered having regard to the actual dealing and communications between the developer and the Council. Mr. Hutley also submitted that the correspondence and the Planning Committee Report showed that the developer had done everything required of it to obtain the removal of condition B(b), and what the Council did was unreasonably to add this extra burden.

Decision 56 I do not read the Planning Committee Report as suggested by Mr. Hutley. In my opinion, this report recognises that the developer had made physical provision for access that could be extended to Imperial Arcade and Centrepoint, and had done what it could in relation to making legal provision; and expressed the view that, provided the developer remained obliged to perfect this legal provision, it should have the benefit of removal of condition B(b). In my opinion, that this was the thrust of the report is shown by the recommendations, which were given effect to by the Council resolution. 57 In my view, having regard to the value of the transferable floor space which was thereby made available to the developer for use elsewhere, and the fact that the additional legal burden thereby imposed was not shown to have a disproportionate effect on the value of the property, a case of Wednesbury unreasonableness is not made out. The Raine & Horne letter suggested that the existence of the easement reduced the value of the property by up to $3,000,000.00. However, this letter did not indicate to what extent the value of the property would be affected by an extension of the easement to Imperial Arcade and Centrepoint; and indeed it did not make it clear whether or not the prospect of such an extension was taken into account in the assessment that was made.

SEVERANCE 58 Having regard to my decision on the other issues, the question of severance does not arise. However, my view would be that, if condition 56 was invalid, it would be severable. The physical provision for future access across Glasshouse to Imperial Arcade and Centrepoint is there; and the Council has the means by imposition of conditions of approval on future developments of Imperial Arcade and/or Centrepoint, and by resumption (as a last resort if necessary), to put its policy into effect, even if condition 56 is ineffectual.

CONCLUSION 59 For those reasons, in my opinion condition 56 is valid, effectual and enforceable. No breach has yet arisen, because the request made by Westfield did not offer, or at least did not offer with sufficient clarity, appropriate terms as to maintenance of the right of way and insurance. 60 As I understand it, this decision on Westfield's appeal from Land & Environment Court proceedings 41349 of 2004 makes it necessary for there to now be a determination of the application brought by Perpetual (Land & Environment Court proceedings 10114 of 2005) against the deemed refusal of its application under s.96 of the EPA Act to modify development consent No. 44/85/0257. That application was not heard by the Court below and it will now need to be heard. The primary judge also did not resolve the issues raised by Westfield's application (Land & Environment Court proceedings 40227 of 2005) seeking a declaration that the Council cannot be satisfied that the development to which the consent to development application No. 44/85/0257 relates, if modified, will be substantially the same development for which development consent was originally granted by the Council, as modified. It may be that some of the costs of the first instance hearing in this matter will be relevant to those applications. There is also a question as to the costs of this matter below, in circumstances where breach of condition 56 was alleged and, on the view I have taken, not proved. In my view, the costs at first instance should be left in the discretion of the judge who deals with these applications. 61 For those reasons, in my opinion the following orders should be made: 1. Appeal allowed, orders below set aside. 2. Perpetual to pay Westfield's costs of the appeal. 3. No order as to the Council's costs of the appeal. 4. Declaration that condition 56 is valid and enforceable. 5. Cross-claim dismissed. 6. Matter remitted to the Land & Environment Court for decision as to the costs of the first instance hearing. 62 TOBIAS JA: In this matter I have had the benefit of reading in draft the judgments of Hodgson JA and Basten JA. I agree with the orders proposed by Hodgson JA for the reasons given by him and for the additional reasons articulated by Basten JA. However, like Basten JA, I find it unnecessary to express a view on the question of severance. 63 As Basten JA points out in [75] of his judgment, the central issue in the appeal was the validity of condition 56. It was common ground, and acknowledged by the primary judge, that the condition would not be valid unless it met the three-fold test articulated by McHugh J in Temwood Holdings which Hodgson JA has set out in [35] above. 64 The primary judge found that the first and second of those facts were satisfied in that condition 56 was imposed for a planning purpose and reasonably and fairly related to the Glasshouse development. Its planning purpose was the ultimate deletion of vehicular traffic movements from the Pitt Street Mall. I accept that, as Basten JA observes in [85] of his judgment, such a planning purpose would only be legitimate if it derives from the statutory source of the power being exercised. In my opinion, the powers vested in the Council by the Environmental Planning and Assessment Act 1979 were more than adequate to encompass not only the provision of the Pitt Street Mall as a pedestrian thoroughfare, but also the adoption of controls to remove from it all vehicular traffic. 65 Condition 56 also met the second requirement insofar as it related to the Glasshouse development which was in a critical location on King Street to provide vehicular access to the properties to its south as far as Market Street. I would further endorse the finding of the primary judge that is recorded in [87] of Basten JA's judgment as a further basis upon which the second test referred to by McHugh J in Temwood Holdings was satisfied. 66 The validity of condition 56 foundered before the primary judge upon the third test referred to in Temwood Holdings. His Honour's conclusion (at [71]) was that it was devoid of plausible justification such that no reasonable council could have imposed it. Although his Honour coupled that find with the further finding that the condition amounted to a relevant abuse of power, I do not understand him to be backtracking, as it were, upon his earlier finding that the condition fairly and reasonably related to the Glasshouse development. Rather, as [66]-[74] of his judgment illustrated, his Honour dissected the condition in a manner which emphasised his perception of its negative and uncertain qualities which led him to the conclusion that, in all the circumstances, no reasonable council, properly advised, could have it imposed it. 67 However, as Hodgson and Basten JJA make clear, it is difficult if not impossible to characterise the imposition of the condition as manifestly unreasonable in the Wednesbury sense unless one has first construed it to determine precisely the obligation or burden it in fact imposes upon the owner from time to time of the Glasshouse development. Like Basten JA, I agree with the construction of the condition adopted by Hodgson JA. 68 Properly construed, the condition does not impose any obligation upon the owner of the Glasshouse development unless and until there is agreement between at least the owners of Skygarden and Imperial Arcade (and, preferably Centrepoint), to accept an extension of the easement the terms of which are recorded in [14] of the judgment of Hodgson JA. It would also be necessary for Skygarden to grant an easement over its property in favour of Imperial Arcade and/or Centrepoint. Until both these events occur, condition 56 would not operate to impose any obligation upon the owner of Glasshouse to agree to the extension of the easement to benefit the Imperial Arcade and Centrepoint sites. 69 The point is well made by Hodgson JA in [45] of his judgment with which I respectfully agree. There is no doubt that condition 56 is only to operate upon the basis of the existing easement in favour of Skygarden being extended to the Imperial Arcade and Centrepoint properties with appropriate amendments to give effect to the equal division of costs in the terms referred to by Hodgson JA in [51] of his judgment. 70 Perpetual would only become obligated to grant an extension of the easement, and to comply with the condition, when an appropriate instrument complying with the requirements to which I have referred, has been tendered to it for execution. But the fact that that obligation does not presently exist and has not existed since the condition was imposed, does not render the condition uncertain in its operation to the extent that that factor might otherwise be relevant to a determination of whether the condition is Wednesbury unreasonable. 71 It must always be remembered that the test for Wednesbury unreasonableness is stringent: Weal v Bathurst City Council (2000) 111 LGERA 181 at 188 [27] per Mason P. To qualify, the imposition of condition 56 by the Council must have been "so devoid of plausible justification that no reasonable person could have taken that course". In Murrumbidgee Groundwater Preservation Association Inc v Minister for Natural Resources (2005) 138 LGERA 11 at 41 [129] Spigelman CJ, with whom Beazley JA and myself agreed, considered that the most appropriate formulation was whether the decision "is illogical, irrational or lacking a basis in findings or inferences of fact supported on logical grounds," 72 Once condition 56 is construed in the manner to which I have referred, it must follow that the condition is not unreasonable in the Wednesbury sense as I have described it. When regard is had to the history of the matter, the correspondence to and from the Council and the contents of the Planning Committee's report pursuant to which the imposition of condition 56 was recommended, it becomes apparent that its imposition was the quid pro quo for the removal of condition B(b). This resulted in the then developer of Glasshouse being granted bonus floor space without having to surrender the transferable floor space which it had acquired pursuant to condition B(b) and which it could now retain and make available for use elsewhere. 73 In these circumstances, given the true nature and extent of the obligation imposed by condition 56 upon the owner of Glasshouse from time to time, no basis exists for declaring the condition invalid as being illogical, irrational or lacking a basis in findings or inferences of fact. 74 For the foregoing reasons, which generally reflect those of Hodgson JA and Basten JA, I agree with the orders proposed. 75 BASTEN JA: The central issue in this appeal was the validity of condition 56 in a development consent granted by the City of Sydney Council for the construction of a building known as "The Glasshouse" at 131-139 King Street, Sydney. The condition is set out by Hodgson JA at [4] above. 76 With one qualification, I agree with the orders proposed by Hodgson JA, for the reasons given by him and for the additional reasons set out below. The qualification is that, because the question of severance does not arise (the condition in question not being invalid) I would express no views about it. The relevant principles were but lightly touched on in submissions. The condition in question, being condition 56, was in effect imposed in exchange for a favourable variation of the floor space ratio. The practical consequences of any finding of invalidity are so fraught with difficulty that they should not be addressed unless and until necessary: cf Lloyd v Robinson (1962) 107 CLR 142 at 152. 77 In the judgment of the Land and Environment Court in this matter, Westfield Management Ltd v Perpetual Trustee Company Ltd [2005] NSWLEC 510 at [5], the primary judge stated: "The fundamental issue in each case is the proper construction of conditions 19 and 56 of the modified consent … ."

That was undoubtedly true: nevertheless, no clear conclusion was reached in the judgment regarding the construction, particularly of condition 56, before considering the validity of the conditions. 78 Perpetual, which was the respondent and cross-claimant in the Land and Environment Court, filed pleadings which alleged, in part, the invalidity of condition 56, but did not particularise any basis of such invalidity. Nevertheless the points of defence and the cross-claim, somewhat tendentiously, asserted that the condition was "meaningless" and "inherently uncertain". The primary judge was thus provided with little assistance in the pleadings in determining the basis upon which invalidity was asserted: see also [2005] NSWLEC 510 at [30]. Nevertheless, after dealing with other matters not of present consequence, at [59] his Honour considered whether the condition was imposed "for a legitimate planning purpose" and whether it was reasonably related "to the subject matters of the development consent to which" it was attached. His Honour then set out the "test" adopted by McHugh J in Western Australian Planning Commission v Temwood Holdings Pty Ltd (2004) 221 CLR 30 at [57], set out at [35] above. He sought to apply that test. However, as noted below, care must be taken not to treat a succinct statement of principles as a formulaic test. 79 The first requirement set out in the passage in Temwood Holdings is that the condition be imposed for a "planning purpose" and not for any "ulterior purpose". It is then said, as a second requirement, that the condition "reasonably and fairly relates to the development permitted". This may form part of the language of ulterior purpose, because, at [56], McHugh J had stated the requirement that a condition be "reasonably capable of being regarded as related to a legitimate planning purpose". In paragraph [58] his Honour returned to the concept of invalidity because of an "ulterior purpose". 80 In addition, a third requirement was postulated, namely that imposition of the condition not reveal manifest unreasonableness. Such a requirement is usually treated as involving different considerations from those identified in the purpose requirement. Unreasonableness (of a sufficiently serious degree) is usually tested by looking at the effect of the condition on the proponent of the development, rather than by reference to the purpose sought to be pursued by the consent authority. 81 Further, as noted by Heydon J at [181], the phrase "improper purpose" can have a range of meanings. The range of meanings was helpfully explained by Aickin J in The Queen v Toohey; Ex parte Northern Land Council (1981) 151 CLR 170 at 232-233, in a passage which bears repeating. The 'first question', which his Honour was addressing, was whether "the reasons, motives or purposes for which the Crown or its representative exercises a statutory power are examinable by a court". His Honour continued: "The terminology used in relation to the first of those questions is unfortunately neither uniform nor precise and it is sometimes impossible to be certain of the meaning intended to be conveyed by such expressions as, for example, good faith and bad faith. There are three distinct bases upon which an exercise of administrative power or authority and delegated legislative power or authority may be attacked; they are first the existence of a corrupt purpose, second the existence of an improper purpose and third ultra vires in the narrow sense of the act done being beyond the power of the body concerned, irrespective of the motive or intention of the person or body exercising the power. It is true that in one sense the term ultra vires is capable of embracing all three conceptions. It is however generally unhelpful, if not misleading, to use the term in that wide sense … . I use the adjective 'corrupt' to mean an act done for personal gain, including a gain for the person doing the act or his family or friends. Where some act is authorized to be done for a purpose, the doing of that act 'falsely avowing a legitimate purpose to cover the actual pursuit of an object outside the scope of the power' is better classified as 'improper' rather than 'corrupt' in the absence of an endeavour to obtain personal gain, though the ultimate result of invalidity would follow on either view.

I use the term 'improper purpose' to mean one for which the relevant power or authority was not conferred. It makes no difference whether or not that purpose was known to, or believed or suspected to be necessary by, the person exercising the power. Generally speaking executive or administrative powers are conferred for a purpose ascertainable, with greater or lesser difficulty, from the terms of the instrument conferring the power. In the case of legislative powers it is not always possible to discern a purpose, as distinct from subject matter or content. A belief that the act done is being done for an authorized purpose will be irrelevant if the purpose for which the power is in fact exercised is not such a purpose, whether the belief is as to a matter of fact or law.

Delegated legislative power may be conferred in respect of a subject matter rather than a purpose, though the two ideas overlap, as some cases concerning municipal by-laws demonstrate. However for present purposes there is no distinction between legislative and administrative acts; each may be attacked in the courts." 82 In seeking to apply the requirements stated in Temwood Holdings, the primary judge noted the evidence given by the town planning consultant for Westfield, at [60]: "He describes the planning principle behind the provision of access to the Imperial Arcade and Centrepoint through the existing right of way across the Glasshouse as one to provide the opportunity for goods and service vehicles to be removed from Pitt Street Mall. He says it is a matter of significant planning importance and an appropriate planning objective which will improve the pedestrian movement within the Pitt Street Mall." 83 At [62] his Honour identified the opinions of the experts as "based on notions of general planning policy". He stated: "Consequently there is nothing that meets the first specification laid down by McHugh J in Temwood , namely that there is a planning purpose implementing a planning policy whose scope is ascertained by reference to the EPA Act." 84 Whether this conclusion was determinative or not is unclear: however it would be a mistaken approach to identify the source of the policy by reference to such evidence. Whether the "planning purpose" implements a policy that is within the lawful limits of the authority conferred on a council, depends upon a legal analysis of the statutory source of authority, and not on evidence. 85 Further, the statement of principle contained in the first requirement noted by McHugh J in Temwood Holdings should not be taken out of context. It reflects a passage in the judgement of Walsh J in Allen Commercial Constructions Pty Ltd v The Council of the Municipality of North Sydney (1970) 123 CLR 490 at 499-500, which his Honour had set out in the preceding paragraph in Temwood Holdings. The point sought to be made was that the scope of a legitimate planning policy, and hence a lawful purpose of the consent authority, must be derived from the statutory source of the power being exercised. Preconceived general notions of what constitutes planning will only give rise to extraneous purposes, to the extent that they fall outside the scope of the statute. Once the focus is on the second category of "improper purpose", identified by Aickin J, the exercise of statutory construction is analogous to that required in relation to relevant and irrelevant considerations: the inquiry is directed to the boundaries of lawful authority imposed on the repository of the power. As explained by Mason J in Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 40: "In the context of judicial review on the ground of taking into account irrelevant considerations, this Court has held that, where a statute confers a discretion which in its terms is unconfined, the factors that may be taken into account in the exercise of the discretion are similarly unconfined, except in so far as there may be found in the subject matter, scope and purpose of the statute some implied limitation on the factors to which the decision-maker may legitimately have regard … ." 86 That is not to say that the exercise will in each case be the same: purposes are likely to be more readily identified than the range of relevant and irrelevant considerations. Many considerations may fall within the category of those permitted, rather than those which are mandatory or proscribed, whereas a purpose is more likely to be identifiable with a degree of certainty. Nevertheless, as the differences of opinion reflected in Temwood Holdings demonstrate, identifying the nature and scope of a purpose may itself involve matters of evaluative judgment. The approach will also depend upon the circumstances of the case. Thus, where the power is one of resumption of private land, for identified purposes, it is likely to be construed strictly in accordance with its terms: see Thompson v Randwick Corporation (1950) 81 CLR 87 at 106-107. 87 In any event, and somewhat inconsistently with the remarks set out at [83] above, at [64], his Honour concluded: "One of the stated objects of the EPA Act is and was at all relevant dates the protection, provision and co-ordination of the orderly and economic use and development of land. … If it is accepted that a system that allowed the transfer of floor space and provided for the award of a floor space bonus in certain circumstances is properly a matter of council policy, then condition 56 is to be regarded as a condition imposed for a planning purpose that fairly and reasonably related to the Glasshouse development."

That would appear to be an express finding, in the terms adopted by McHugh J in Temwood Holdings , that condition 56 is valid, if the premise concerning transfer of floor space were accepted. His Honour did not reject the premise and must be taken to have accepted it. It was not suggested in this Court that the premise was rejected, or that it should now be rejected. 88 At [65] his Honour turned his attention to condition 19, and suggested that it was at least arguable that there had been practical compliance with condition 19. That suggestion was not revisited in terms until the conclusion at [80] where his Honour held that "condition 19 has effectively been complied with" and that "no further steps are required by [Perpetual] to comply with condition 19". 89 Despite the apparent conclusion at [64] that condition 56 was valid, his Honour stated at [66] (set out at [29] above) that the conduct of the Council "reinforces the conclusion that compliance with condition 56 was not feasible". His Honour further stated that it was "not reasonable" to require the developer "to do that which is impossible without the co-operation of third parties". The language at [68], [69] and [72] is to similar effect. However, the conclusions stated in such terms invite attention to the proper construction of the condition and the precise obligation imposed on the developer. It will be necessary to return to that matter shortly. 90 The conclusion that the condition was not feasible was given legal clothes of varying colours. At [71] it was characterised as involving manifest unreasonableness in the Wednesbury sense, a characterisation also said to constitute a "relevant abuse of power" and, at [72] as rendering the condition "void for uncertainty". 91 It is true that the various grounds of judicial review can overlap and that, in particular circumstances, a head of invalidity can be characterised in more than one way. However, there are curious features about the characterisation adopted in this case. For example, if the condition were manifestly unreasonable, one might have expected the developer to object to it at or soon after it was imposed, which was in December 1988. Of course, the developer may have assumed a different construction of the obligation, a matter which takes one back to the construction exercise not adequately undertaken in the Court below. 92 Secondly, it is unclear in what sense the imposition of the condition was an "abuse of process", given the specific finding that it was imposed for a legitimate purpose, noted at [87] above. Thirdly, to describe the condition as void for uncertainty not only invites attention to its proper construction but also to the range of factors which may be encompassed by such a complaint: see, eg, Aronson, Dyer and Groves, Judicial Review of Administrative Action (3rd ed, 2004) at pp 331-334. In particular, it would require consideration of the lack of any general requirement of "certainty" as a condition of validity, as explained by Dixon J in King Gee Clothing Co Pty Ltd v The Commonwealth (1945) 71 CLR 184 at 194-196. 93 One is inexorably drawn, therefore, to the proper construction of the condition. In substance, Perpetual said three elements were critical, although each contained specific points, as noted at [38] and [39] above. The first was that the condition could not be understood as imposing a requirement on the developer that he or she provide rights of way in favour of the owners of the Imperial Arcade and Centrepoint sites, in circumstances where each of those owners would require a right of way over the Skygarden site and, in relation to Centrepoint, over the Imperial Arcade site as well. Westfield's response to this contention was to confess and avoid. An obligation limited in those terms was sufficient for its purposes because it owned each of the affected properties other than the ultimate subservient tenement, namely The Glasshouse, which was owned by Perpetual. 94 The second argument put forward by Perpetual was that the condition had to be capable of compliance by the owner of The Glasshouse at the time of the development. Whether this was put in terms of statutory power, certainty or reasonableness, or indeed on some other basis, was not entirely clear. Construing the obligation as Hodgson JA does at [42] it imposes a continuing obligation subject to a condition precedent, namely the voluntary co-operation of the owners of the various buildings. 95 The second construction point presented by Perpetual seems to have been integrally related to the third, was that the owner of The Glasshouse must always be permitted to negotiate appropriate commercial terms on which to extend the easement over its premises in favour of additional dominant tenements. I agree with Hodgson JA that it should be inferred that the obligation of the owner of The Glasshouse was to take the steps required, when the occasion arose, without requiring consideration from the beneficiaries of the easements over its land: see [43] and [45] above. 96 In substance, the arguments presented by Perpetual, and addressed by Hodgson JA at [42] and [51] demonstrate variations to the condition which might have been thought desirable, in the interests of The Glasshouse developers, when the condition was imposed, but which do not demonstrate manifest unreasonableness of a kind which would render the condition invalid. 97 Accordingly, Westfield is entitled to orders in the form proposed by Hodgson JA. **********

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