PLANNING SCHEME - interpretation or consideration of VPP provision

Consideration of the interpretation and application of the Environmental Audit Overlay and its interface with associated permit conditions.

CHANGE TO LEGISLATION OR VPPS - whether change to VPPs or statutory provisions is required or desirable

It is recommended that the drafting and application of the Environmental Audit Overlay should be reviewed

A number of Tribunal cases in recent years have involved landowners in the Fitzroy area challenging certain permit conditions attached to planning permits for the renovation of period dwellings in that area. These cases involve properties affected by the Environmental Audit Overlay (EAO), which has been applied on a precinct wide basis.

The EAO has been applied to areas of Fitzroy, which were previously zoned Light Industrial because the council sees this area as inherently involving a risk of soil or groundwater contamination from past industrial uses. The situation is complicated by the fact that Council's rates records only go back to the 1970s. It is common ground that there are still some industrial businesses operating in that part of Fitzroy covered by the EAO.

The previous Tribunal cases in question have involved permit conditions that essentially seek to replicate/reinforce the statutory environmental audit requirements of the EAO in relation to the works approved by the permit.

The requirements of the EAO apply independently, whether or not any supplementary permit conditions are imposed. Each landowner in these Tribunal decisions has asked the Tribunal to delete the disputed permit conditions. In some cases the proposed residential works were quite modest and the likely cost of environmental audit would be far greater than the project value of the intended works.

Different divisions of the Tribunal have exercised their discretion using more than one approach, but in the majority of cases the landowner has convinced the Tribunal that the permit condition(s) should be removed.

In the present case, rather than the Tribunal seeking to resolve the situation using the criteria set out in the previous decision of Norman & Timey v Yarra CC [2008] VCAT 309, the Tribunal decided the better approach is to simply delete the permit conditions and rely on the operation of the EAO. It is not necessary, given the provisions of the overlay, to duplicate its provisions by way of permit conditions.

There is ambiguity in the provisions of the EAO in terms of whether it applies only in the case of development associated with a new sensitive use or whether it applies to all development, even minor development associated with an existing sensitive use. It is suggested that the provisions of the EAO should be reviewed to resolve this ambiguity. Consideration should be given as to what role, if any, the responsible authority should retain or whether the EPA should be given the discretion as to whether an environmental audit or some other assessment of risk should be required.

Architype Australia Pty Ltd v Yarra CC (includes Summary) (Red Dot) [2010] VCAT 497

1. The decision of the Responsible Authority is varied. The Tribunal directs that Permit No. P208/0922 must contain the conditions set out in the Permit issued by the Responsible Authority on 11 June 2009 with the following modifications:
   • Conditions 5 and 6 are deleted.
2. The Responsible Authority is directed to issue a modified permit in accordance with this order.

The existing permit No. PL08/0922 dated 11 June 2009 permits the development of the land at 1 Henry Street Fitzroy "...for a rear ground and first floor addition, including partial demolition". The owner has lodged an Application for Review of Conditions 5 and 6 of that permit pursuant to Section 80 of the Planning and Environment Act 1987.

The entire site is affected by a Heritage Overlay HO334 and also by an Environmental Audit Overlay. The western part of the site is affected by a Design and Development Overlay DDO2.

State policies - Clauses 11.03, 14.03-1, 15.03-2 and 15.06.

Also see the Potentially Contaminated Land General Practice Note June 2005, the Minister's Direction No. 1 and the State Environment Protection Policy (Prevention and Management of Contamination of Land) dated 4 June 2002.

The subject land is located on the northern side of Henry Street, has a 7.7 metre wide frontage to Henry Street and an area of about 158 square metres. It is improved by a single-storey attached, double fronted period brick dwelling. The front of the dwelling faces south to Henry Street and it has a rear (north) facing private open space area.

Norman & Tinney v Yarra CC [2008] VCAT 309, Yang Kuan Pty Ltd v Boroondara CC [2008] VCAT 2524, Lancaster & Anor v Yarra CC [2009] VCAT 1574.

1. As I stated in the opening paragraphs of my interim decision in this proceeding:

The land at 1 Henry Street Fitzroy is a fairly modest sized lot improved by a double fronted period dwelling. Unlike the period dwellings further east along the north side of Henry Street, the dwelling on the appeal site is not dilapidated but has been and I understand is still occupied and in reasonable condition. The site is zoned Residential 1 and the three Overlays mentioned above affect the site (most relevantly an Environmental Audit Overlay).

In the context of the site having most recently changed hands in late 2008, the new owners of the site have obtained a planning permit No. PL08/0922 dated 11 June 2009 which permits the development of the site "...for a rear ground and first floor addition, including partial demolition". The details of the approved development are usefully summarised at paragraph 24 of the Council's written submission.

1. The Permit includes Conditions 5 and 6 which have been challenged by the owner at the Tribunal. The hearing of this conditions appeal came before me on 15 December 2009. Conditions 5 and 6 of the permit provide as follows.

Before the commencement of the development hereby approved either:

1. Certificate of Environmental Audit indicating the land is suitable for residential use must be issued for the land in accordance with Section 53Y of the Environment Protection Act 1987; or
2. An Environmental auditor appointed by the Environment Protection Act 1970 must make a statement in accordance with Section 53ZS of the Act that the environmental conditions of the land are suitable for residential use.

The development works allowed by this permit must comply with the directions and conditions of any statement of environmental audit issued for the land.

1. Because of the uncertainties in the operation of the Environmental Audit Overlay ("EAO") and how it affects these conditions, rather than issuing a final decision, my interim orders dated 9 February 2010 gave the parties the opportunity to provide further written comments on these uncertainties. I have since received these further written submissions and have taken them into account in my findings set out below. Suffice to say that there was no major change in position by either party in this further correspondence, in terms of the orders being sought.
2. I see three key issues which I now need to deal with in finalising this proceeding, being:
   • Identifying the various significant problems I see with the operation of the EAO.
   • Establishing whether or not it is appropriate for the Tribunal to continue to seek to resolve these various difficulties by using the criteria set out in my previous decision of Norman & Tinney v Yarra CC[1].
   • If the answer is 'no', then resolving what approach should the Tribunal take instead.
3. In summary, my finding is that I see an overwhelming range of current problems with the operation of the EAO. Particularly with the benefit of the relevant text from the background documents as set out in the Annexure to this decision, it has become clear to me that it is no longer tenable or appropriate for the Tribunal to continue to try to resolve disputes regarding the type of permit conditions in question here utilising the criteria set out in the Norman & Tinney decision. Rather I see the proper and responsible way forward as being that the contentious Conditions 5 and 6 are deleted altogether. In my view the time is ripe for a review of the EAO at a State level, with a view to amending the EAO to achieve a holistic solution to the current problems.

RANGE OF PROBLEMS WITH CURRENT OPERATION OF THE ENVIRONMENTAL AUDIT OVERLAY

1. I have summarised below what I regard as an overwhelming range of current problems being experienced with the operation of the EAO and the associated permit conditions which have become increasingly contentious and difficult for the Tribunal to deal with.

1. The line of previous Tribunal decisions discussed in my interim orders have all assumed that the scope of the EAO extends to buildings and works associated with not only a new sensitive use, but also an existing sensitive use.
2. I acknowledge that on one view this can be justified on the basis that the owner of an existing residential dwelling on land affected by an EAO may still wish to carry out major works which could lead to substantial exposure of potentially contaminated soil. Some practical examples here might be excavation works for a new pool, or the demolition of a long-standing rear garage which exposes potentially contaminated soil underneath the garage concrete slab.
3. However following the approach that the EAO applies to all works proposed with respect on an existing sensitive use on land affected by the EAO, this potentially leads to some extreme results that the average person would probably regard as disproportionate and absurd. For example, where a multi storey dwelling is located on land affected by an EAO, then on a strict view even upper level works completely removed from the ground level soil would require the preparation of a statutory environmental audit to achieve compliance with the EAO.
4. Apart from the obvious additional cost and inconvenience for the owner involved, it is difficult to see any public policy benefits flowing from the obtaining of a very expensive statutory environmental audit where for instance an owner is simply adding an upper level balcony or deck or some other minor alteration or addition. In the Norman & Tinney case for instance there were ground level works involved but they were very modest and with minimal soil disturbance - replacing a carport, installing a cubby house and erecting a new rear pergola

Dilemmas associated with a precinct-wide approach to the application of the EAO

1. It is common ground that many of the relevant decisions involved in the operation of the EAO arise from the Fitzroy area. This in turn reflects the precinct-wide approach that has been taken to the application of the EAO within the Fitzroy area. In other words, in relation to a significant area within Fitzroy which Council believes was previously zoned for light industrial purposes[2], Council's approach has been to apply the EAO across this significant area on a blanket basis.
2. In terms of public health issues, I respect the fact that Council is obviously concerned regarding the potential health impacts of contamination potentially existing on any one site within the area affected by this EAO, either due to the historical use of that particular site or otherwise possibly due to the migration of contamination from a neighbouring site. Nevertheless the obvious dilemma with this approach is that a very large number of residential properties in Fitzroy then face the serious requirement of dealing with the ongoing operation of the EAO, even those where the owner has strong evidence that their property has only ever been used for residential purposes.
3. The situation here is further muddied by the fact that the Yarra CC rates records only go back as far as the 1970s. This means that any one land owner seeking to establish that their property has only been used for residential purposes does not have any assistance from the rate records if we are talking about properties with say 50-100 years of history or more.
4. While I am not suggesting that there are any easy answers to this awkward situation, the Potentially Contaminated Land General Practice Note June 2005 makes it clear that it was intended that the EAO only be applied by planning authorities on a cautious basis. Page 7 of this June 2005 document states that (with my emphasis):

Planning authorities should be careful in applying the Overlay. All buildings and works associated with a sensitive use (irrespective of how minor) will trigger the need to undertake an environmental audit.

Where sensitive uses already exist on a site the planning authority, before applying an EAO, should satisfy itself that these sites are potentially contaminated (through site history records). If there is no evidence of potentially contaminated land it may not be appropriate to apply the EAO to these sites.

1. In a situation where any one municipality such as Yarra CC has taken a precinct approach to applying the EAO, it is an interesting question as to whether it can be said that Yarra has met the intended approach under this June 2005 Practice Note that the Council has '... satisfied itself that the sites are potentially contaminated'. To my knowledge no actual environmental testing was done across the precinct at the time the decision was made to apply the EAO on a precinct basis. Again this process is not made any easier by the fact that the rates record for the Fitzroy area do not go any further back in time than the 1970s.

1. To recap on the wording of the EAO found at Clause 45.03-1 of the Planning Scheme, it states:

Before a sensitive use (residential use, childcare centre, pre-school centre or primary school) commences or before the construction or carrying out of buildings and works in association with a sensitive use commences, either:

• a certificate of environmental audit must be issued for the land in accordance with Part IXD of the Environment Protection Act 1970; or
• an environmental auditor appointed under the Environment Protection Act 1970 must make a statement in accordance with Part IXD of that Act that the environmental conditions of the land are suitable for the sensitive use.

1. In terms of the scope of the operation of the EAO with respect to "uses", focusing on the first four lines of this Clause, there is no doubt that the "use" aspect of the EAO simply deals with a new use that is commencing eg a new dwelling or school.
2. What seems less clear cut is the situation with "buildings and works". That is, in a situation where the "use" aspect of the operation of the EAO is limited to new uses which are commencing, but where the words 'a sensitive use' are then used for a 2nd time at the end of the third line of the EAO, I can see room for:
   • one interpretation (which the Tribunal has followed to date) that the plain and ordinary meaning of the words 'or before the construction or carrying out of buildings and works in association with a sensitive use commences' tells us that the draftsperson of the EAO intended the scope of the EAO to include buildings and works associated with both an existing and a new sensitive use; but
   • also a 2nd line of argument that where the words 'a sensitive use' appear at the end of the third line of the EAO, these words need to be interpreted taking into account the fact that the first two lines of the EAO tell us that the scope of the EAO with respect to "uses" is limited to new uses. This line of thinking picks up the latin maxim of "noscitur a sociis" - "The meaning of a word can be gathered from the context"[3]. Following this second line of thinking, if one is trying to interpret the scope of the "buildings and works" requirements of the EAO when the first four lines of the EAO are considered as a whole, the correct position is that the EAO only applies to 'buildings and works' associated with a new sensitive use. There is also some support for this 2nd line of thinking in the information set out in the Annexure to this decision.
3. For the reasons set out above, my view is that the existing wording of the first four lines of the EAO is clumsy and creates ambiguity as to the scope of the EAO with respect to 'use' compared to 'buildings and works'.

If the EAO operates independently, should Councils be issuing permits with equivalent permit conditions?

1. The line of previous cases set out in my interim orders have all taken the view that the requirements of the EAO operate in their own right, regardless of whether or not there exist any relevant planning permit conditions for any one site affected by the EAO. My own view remains that this is the correct position.
2. Accordingly, it needs to be understood that the starting point for any one site affected by the EAO is that the owner must comply with the full requirements of the EAO, or otherwise leave him or herself vulnerable to Council taking planning enforcement action to achieve compliance with the EAO. This remains the case whether or not there are any relevant permit conditions in dispute and whether or not those conditions are potentially removed or relaxed at the direction of the Tribunal.
3. From this point of view, its terms of what constitutes 'good and orderly planning', it seems a moot point whether there is any real additional planning benefit gained by Councils seeking to impose planning permit conditions which essentially mirror requirements which already exist under the independent operation of the EAO.
4. I acknowledge that it had previously been put to the Tribunal[4] that mirroring the requirements of the EAO in a planning permit condition has the practical/operational benefits for Councils of flagging the relevant clean up requirements to land owners/developers who might otherwise be blissfully ignorant of the requirements of the EAO. However it needs to be said that Councils already have the ability to take enforcement action under the independent operation of the EAO, with or without any equivalent permit conditions being included on any relevant planning permit.

Potential problems associated with planning permit conditions imposing less rigorous audit requirements compared to the EAO

1. As discussed above, it is clear to me that Councils independently have the ability to potentially take enforcement action against land owners if that Council believes that the independent requirements of the EAO have been breached by contentious works for example carried out on a residential property affected by the EAO.
2. Given this basic position, I query how workable/appropriate it would be for the Tribunal to potentially allow a less rigorous planning permit condition in terms of the environmental auditing requirements that apply[5]. In particular, where a more relaxed permit condition is imposed on land affected by an EAO, it surely becomes an incongruous situation where:
   • the residential owner then carries out a lower standard of environmental audit (eg a more modest audit by a private consultant) prior to carrying out the relevant works, thereby satisfying the requirements of the more relaxed permit condition; but
   • the strict requirements of the EAO continue to independently apply, including the requirement for a full statutory environmental audit.

This could create a situation where the residential land owner has on a bona fide basis satisfied the more relaxed permit condition, but is still vulnerable to further planning enforcement action for breaching the more rigorous independent requirements of the EAO.

1. Given this tension between the operation of a potentially less rigorous permit condition compared to the full requirements of the EAO, the Tribunal obviously would not want to be seen to be condoning any breach of the full requirements of the EAO.
2. A further aspect to these difficulties is that most if not all relevant Tribunal decisions on these type of contentious permit conditions involve Applicants who:
   • typically are represented by an architect or planner rather than a lawyer; and
   • in most if not all relevant Tribunal hearings choose not to call any expert evidence from any environmental consultant regarding the real condition of the soil/groundwater on the appeal site. Hence the Tribunal's ability to grapple with the type of contentious permit condition in debate here is constrained by a lack of expert evidence that might otherwise shine some additional light on the condition of the site.

ARE THE NORMAN & TINNEY CRITERIA STILL APPROPRIATE TO RESOLVE THIS TYPE OF CONDITIONS DISPUTE?

1. To recap, in my previous Norman & Tinney[6] decision I set out various criteria which I considered to be a useful benchmark, as follows.

I should clarify here that I might have looked more favourably at a permit condition requiring environmental investigation work where:

• the site has a current residential use but was used for commercial/industrial purposes at an earlier stage;
• there has been a history of commercial/industrial use of a neighbouring site, that might create a risk of contamination migrating onto or underneath the appeal site;
• the works on the appeal site affected by an EAO involve major disturbance work to or exposure of soil over a significant area of the site (eg. Demolishing all or a substantial part of a period dwelling, or clearing a substantial sealed courtyard or concrete area that has existed over a long period); or
• some credible environmental investigations have been carried which indicate that despite the long term residential use of the property, there is nevertheless a real degree of risk that the site might be contaminated.[7]

1. Particularly with the benefit of the relevant background documents which I have considered for the first time in this proceeding (see the Annexure to this decision), my finding is that the extent of problems associated with the operation of the EAO are now so overwhelming that it is inappropriate/imprudent for the Tribunal to seek to utilise these four criteria to resolve this type of conditions dispute involving so many complicated issues arising from the EAO.
2. Whilst I remain of the view that the four criteria are a useful tool per se, clearly they do not provide the full answer. The situation here seems akin to using the four criteria to plug one hole in the EAO dyke when multiple other holes are spurting out water in other locations.

IF THE TRIBUNAL DOES NOT USE THE NORMAN & TINNEY CRITERIA, WHAT IS THE WAY FORWARD?

1. In conclusion, I have found that:
   • There are overwhelming existing problems with the operation of the EAO.
   • These problems are so acute that it would be inappropriate/imprudent for the Tribunal to try to resolve them using the four criteria set out in my previous Norman & Tinney decision.
2. Rather, I see the best way forward as deleting Conditions 5 and 6, in anticipation of there being a review of the EAO at a State level.
3. Clearly the EAO is ripe for review and the Tribunal hopes that a review can "wipe the slate clean" in terms of how the EAO operates, thereby in future avoiding the type of conditions dispute in question here. In the Tribunal's view anything short of an overall review of the wording of the EAO is dabbling around the edges of the problem.
4. I suggest that some key aspects of any revisions to the EAO could include:
   • Removing the current ambiguity regarding the scope of its operation in relation to "uses" compared to "buildings and works".
   • Having a sensible level of flexibility with the scope of the operation of the EAO, to avoid the current strange situation where for example buildings and works for a pure upper level extension can be caught by the EAO.
   • If a greater level of discretion is provided for and the responsibility for giving advice on this discretion needs to be assigned to a statutory body, in the Tribunal's opinion (with one proviso) the appropriate body to provide this advice is the Victorian Environment Protection Authority ("EPA"). The EPA (unlike Councils or VCAT) deal with these type of contamination and risk assessment issues on a daily basis and have the dedicated technical expertise to apply to the role. The proviso is that it seems essential that appropriate systems and resourcing are put in place if the EPA takes up this role, to make it very clear "who is responsible for what" and to avoid excessive delays in the processing of relevant permit applications.
   • Consideration of whether an updated or new Practice Note should concurrently be prepared and issued. It could for instance clarify in what circumstances the revised EAO should be imposed in the first place on properties (eg is a precinct approach acceptable?) and how the revised EAO should then operate in practice vis-à-vis the development of any one property affected by the EAO.
5. In the meantime, the contentious Conditions 5 and 6 in my view are unworkable and should be removed. Whilst any equivalent future conditions appeal would need to be considered on it own merits, common sense tells us that such overwhelming current problems are likely to linger until real change for the better is achieved.

ANNEXURE: COPY OF PARAGRAPHS 23 TO 31 OF INTERIM DECISION IN THIS PROCEEDING

Does the EAO in fact only require a statutory environmental audit for buildings and works associated with new sensitive use areas?

1. The facts being thrown up in this 1 Henry Street proceeding are challenging and complicated, in that the facts are neither:
   • as benevolent for the owner as existed in the Norman & Tinney appeal; nor
   • raising "contamination alarm bells" as loudly as was the case in the Lancaster decision.

Rather, the facts in question here seem to lie in the uncomfortable middle ground.

1. This "uncomfortable middle ground" has given me pause to reflect on some important points, as follows.
2. It is common ground that much of Council's justification for Conditions 5 and 6 flows simply from the fact that the appeal site is affected by an EAO.
3. The key provision from the EAO is Clause 45.03-1, as follows (with my emphasis).

Before a sensitive use (residential use, child care centre, pre-school centre or primary school) commences or before the construction or carrying out of buildings and works in association with a sensitive use commences, either:

* A certificate of environmental audit must be issued for the land in accordance with Part IXD of the Environment Protection Act 1970; or

* An environmental auditor appointed under the Environment Protection Act 1970 must make a statement in accordance with Part IXD of that Act that the environmental conditions of the land are suitable for the sensitive use.

1. With the previous Tribunal decisions discussed above, the discussion of the requirements of the EAO at the relevant hearings has proceeded on the basis that these requirements apply to:
   • not only a new sensitive use in the area affected by the EAO (eg a warehouse residential conversion); but
   • also to new buildings and works in relation to an existing sensitive use in an area affected by the EAO (eg works to a dwelling which is already being occupied for that purpose).
2. Contrast this with the relevant guidance provided in the "Manual for the Victoria Planning Provisions". The "Practice Notes" section dealing with "Environmental Audit Overlay - Where should the Environmental Audit Overlay be used"[8] (with my highlighting) states as follows.

Minister's Direction No. 1 requires that "In preparing an amendment that would have the effect of allowing (whether or not subject to the grant of a permit) potentially contaminated land to be used for a sensitive use, agriculture or public open space, a planning authority must satisfy itself that the environmental conditions of the land are or will be suitable for that use.

The preparation of a new format scheme is an amendment for the purpose of the Direction and should be complied with. The Direction defines "sensitive use" and "potentially contaminated land" and requires that a planning authority either:

* Satisfy itself that the land is suitable for the proposed use.

* Impose specified requirements in the amendment that require environmental examination of the land before a sensitive use is commenced.

The Environmental Audit Overlay is intended only as a tool that enables the second requirement above to be met; that is, to identify land where the requirements of Direction No. 1 are being deferred until the use is to commence rather than being met at the time of amendment.

For all new format planning schemes, the Direction may be considered to apply only to situations where the scheme allows for the first time potentially contaminated land to be used for a sensitive use, agriculture or public open space. The phrase "known to have been used" can be taken to mean past land use within the actual knowledge of the planning authority, either from a reasonable examination of the available records or because of advice provided by a land owner or other person. A planning authority should seek its own legal advice if there is doubt about how a particular situation should be addressed.

1. This emphasis on the EAO applying where a new sensitive use is proposed is echoed in the statement at page 2 of the June 2005 Practice Note (my emphasis) that:

The Environmental Audit Overlay (EAO) is a mechanism provided in the Victoria Planning Provisions and planning schemes to ensure the requirement for an environmental audit under Direction No. 1 is met before the commencement of the sensitive use or any buildings and works associated with that use.

1. In relation to the text appearing under the heading "When is an environmental audit necessary for a planning permit application" at page 5 of the June 2005 Practice Note, the first paragraph under this heading similarly has an emphasis on "use" rather than "buildings and works" in stating that:

For land that has been identified as potentially contaminated land and where a planning permit application may allow potentially contaminated land to be used for a sensitive use, the SEPP requires that the responsible authority seek a Certificate of Environmental Audit or a Statement of Environmental Audit indicating that the site is suitable for the proposed use.

1. Also see the following text from the fourth paragraph under that heading:

If an environmental audit is required because an EAO is applied over the land, a Certificate or Statement of Environmental Audit must be issued before the sensitive use or buildings and works associated with the sensitive use can commence.

[1] [2008] VCAT 309

[2] This explanation seems plausible given the land use history of this area, but even this historical zoning issue was disputed as part of this proceeding. That is, the Applicant here disputed whether the historical information available supports the proposition that the subject land was historically zoned light industrial.

[3] See Osborn's concise Law Dictionary, 7th Edition by Roger Bird.

[4] See the discussion of this point in my previous Lancaster decision.

[5] At paragraph 43 of my Lancaster decision I made the same point, in stating that "While it is more a secondary factor, it is very unclear to me what status this type of more informal soil testing arrangement would have if, at a later stage, the owner of the property is forced to comply with the strict requirements of the Environmental Audit Overlay. To my knowledge none of the cases I have cited above have addressed this difficult issue".

[6] [2008] VCAT 309