Is the lease void or incapable of registration?
57Section 76A(1) of the Environmental Planning and Assessment Act 1979 ( EPA Act ) provides:
If an environmental planning instrument provides that specified development may not be carried out except with development consent, a person must not carry the development out on land to which the provision applies unless:
(a) such a consent has been obtained and is in force, and
(b) the development is carried out in accordance with the consent and the instrument.
"Development" includes the subdivision of land: EPA Act, s 4. "Subdivision of land" means "the division of land into two or more parts that, after the division, would be obviously adapted for separate occupation, use or disposition": EPA Act s 4B(1). The division may be effected by, among other things, "any agreement, ... rendering different parts of the land available for separate occupation, use or disposition": EPA Act s 4B(1)(b). "Land" includes "a building erected on the land": EPA Act s 4. "Building" is defined in the same section to include part of a building. However, "subdivision of land" does not include "a lease (of any duration) of a building or part of a building": EPA Act, s 4B(3)(a). Nor does it include "a division of land effected by means of a transaction referred to in section 23G of the Conveyancing Act 1919": EPA Act, s 4B(3)(d). One of the transactions referred to in s 23G of the Conveyancing Act is a transaction that comprises "the lease of part of an existing lot for a period that, including the period of any option to renew, does not exceed 5 years": s 23G(d)(i).
58The EPA Act contains extensive provisions in Part 6 for the implementation and enforcement of the Act. Section 121B sets out a broad range of orders that a council or consent authority can give in the circumstances specified in the section, including in circumstances where premises are being used for a purpose for which development consent is required but has not been obtained. Section 121ZK gives a person on whom an order is served a right to appeal to the Land and Environment Court. Section 123(1) of the Act provides:
Any person may bring proceedings in the Court for an order to remedy or restrain a breach of this Act, whether or not any right of that person has been or may be infringed by or as a consequence of that breach.
Section 125 makes it an offence to do anything prohibited by the Act (or not to do anything required to be done under the Act). Section 126 provides for a penalty not exceeding 10,000 penalty units.
59Section 23F(2)(a) of the Conveyancing Act provides that the RegistrarGeneral may refuse to register a lease of part of an existing lot unless "the land to which the transaction relates is shown on a current plan". Exceptions are created by s 23G. As I have already mentioned, one of those is where the lease is for a period that does not exceed 5 years. None of the exceptions is relevant in this case. "Current plan" is defined in s 7A to include a "registered plan". "Registered plan" is defined in s 7 to include, relevantly, a plan of subdivision (para (a)) and "a plan (other than a plan referred to in paragraph (a)-(d)) that is registered or recorded in the office of the Registrar-General for the purpose of showing a parcel in a lawful division of land" (para (e)). In addition, s 37 of the Real Property Act 1900 provides that the RegistrarGeneral may refuse to accept a dealing or instrument for registration if the dealing or instrument purports to give effect to a transaction that contravenes s 23F of the Conveyancing Act .
60The land which is the subject of the lease is governed by the Strathfield Planning Scheme Ordinance . The land is zoned "Residential "B"". Permitted uses include "churches; ... educational establishments; ... places of public worship; professional consulting rooms; ...": see the Table that forms part of cl 22 of the Ordinance. Clauses 41, 41A and 41B place restrictions on the Council's ability to grant consent to development allowed by the table to cl 22. However, none of those restrictions is relevant in this case. Clause 43A of that Ordinance provides:
A person shall not subdivide any land without development consent.
It follows that, although subject to consent, a subdivision of the relevant land for its current uses may be permitted.
61Mr Raphael makes three submissions in this context. First, he says that no plan was attached to the lease. Second, he says that the lease is void for uncertainty because it describes the land to be leased as "part" of the two lots to be leased. Third, he says that the lease was illegal and so unenforceable because it involves a subdivision of land and therefore a development without Council consent. I do not think that there is any merit in Mr Raphael's first two submissions. The description of the leased land must be read together with the other provisions of the lease. The premises are described as "416-420 Liverpool Street, Strathfield South. Including All existing buildings (excluding the Chapel) and the land." As I have said, the reference to "Liverpool Street" is obviously intended to be a reference to Liverpool Road. Clause 24.15 of the lease provides that notwithstanding the provisions of the lease "the Lessor shall be entitled exclusive access and use of the Doctors Surgery within Leigh Hall College comprising Rooms 15,16 and 17 and the toilet facilities". It is clear that the lease describes the leased land as "part" of the two lots because of the exclusion of the chapel and of rooms 15, 16 and 17 and the toilet facilities of Leigh Hall. Those exclusions are capable of precise identification. Consequently, the lease is not void for uncertainty. The fact that no plan was attached does not alter the position.
62Mr Murr, who appeared for AIAE, makes two submissions in answer to Mr Raphael's third point. First, he submits that the lease did not involve a subdivision of land because the lease does not render different parts of the land available for separate occupation. It simply renders a different building or parts of a building available for separate occupation. Mr Murr accepts that it is still necessary for a plan to be registered to satisfy the requirements of s 23F of the Conveyancing Act . However, the court can make an order requiring that to be done. Secondly, Mr Murr submits that, if development consent is required, the court should imply a term in the lease requiring Dr Taluja to do all things reasonable on her part to be done to obtain that consent and the court can order specific performance of that term.
63I do not accept Mr Murr's first submission. In support of that submission, Mr Murr relies on the decision of Jacobs J in Re Lehrer [1961] SR (NSW) 365. That case concerned four leases. Relevantly, one was for the first floor of a building and another was for a flat in the building. Both leases were for more than 5 years. The question was whether those leases effected a subdivision within the meaning of s 4 of the Local Government Act 1919, the predecessor of the EPA Act. "Subdivision" and its grammatical variants was defined under the earlier Act, relevantly, to mean the division of land into parts rendering different parts thereof immediately available for separate occupation or disposition. "Land" as defined in s 4 of the Act "includes a mine and also includes any river, watercourse, or inland water, tidal or non-tidal". Jacobs J held that space in a building, although real property, was not "land" for the purposes of the Act. Consequently, the lease of space in a building did not involve a division of land into two or more parts.
64The short answer to Mr Murr's first submission, however, is that a building and a part of a building are "land" for the purposes of the EPA Act: see the definition of "land" in s 4 (quoted above). The Chapel is a building erected on the land. Consequently, it is itself land for the purposes of the Act. The effect of the lease is to divide that piece of land from the rest of the land the subject of the lease to make them available for separate occupation and use. The lease therefore effects a subdivision. Similarly, rooms 15, 16 and 17 of Leigh Hall are clearly part of a building and so a building and therefore land for the purposes of the Act. Consequently, the lease also effects a subdivision in respect of those rooms.
65I do, however, accept Mr Murr's second submission. That submission raises two issues. The first is whether the lease is unenforceable because it breaches s 76A(1) of the EPA Act. The second is whether, if not, there should be implied in the lease a term requiring Dr Taluja to do all things reasonable on her part to be done to have the lease registered (including applying for planning approval for the subdivision).
66As to the first issue, the EPA Act does not expressly address the enforceability of agreements that involve a breach of the Act. Whether the Act has that effect depends, then, on its proper construction. As Mason J explained in Yango Pastoral Co Pty Ltd V First Chicago Australia Ltd (1978) 139 CLR 410 at 423:
The principle that a contract the making of which is expressly or impliedly prohibited by statute is illegal and void is one of long standing but it has always been recognized that the principle is necessarily subject to any contrary intention manifested by the statute. It is perhaps more accurate to say that the question whether a contract prohibited by statute is void is, like the associated question whether the statute prohibits the contract, a question of statutory construction and that the principle to which I have referred does no more than enunciate the ordinary rule which will be applied when the statute itself is silent upon the question.
Where the statute is silent, the court will, in determining whether on its proper construction the statute renders the relevant contract void, take into account matters such as the purpose of the legislation, whether the legislation expressly prohibits the conduct in question, whether the legislation provides for the consequences of breach and the consequences for the parties if the legislation does have the effect of rendering the contract void.
67There are several decisions which have considered the validity of agreements apparently entered into in breach of the EPA Act or similar legislation. The one that most closely resembles the current one is Hardy v Wardy [2001] NSWSC 180. In that case, the defendant owned land on which was situated a large two-storey warehouse and office and a separate one-storey building used to operate a smash repair business. Both buildings were on the same title. The defendant leased the warehouse and offices to the plaintiff. The lease contained an option to purchase. The plaintiff purported to exercise that option. Between the time the option was granted and the time it was exercised, the Local Government Act was replaced by the EPA Act. One question in the case was whether the agreement resulting from the exercise of the option was void because it effected a subdivision of land. Bryson J held that it was not:
[48] ... If subdivision is altogether forbidden an agreement to subdivide may be affected by illegality, but if the relevant Environmental Planning Instrument allows the subdivision to be consented to there would in my opinion be no reason why an agreement to carry out the subdivision would be illegal.
[49] Entering into a contract carrying of which [sic] requires a subdivision, or a contract to carry out any other development, cannot itself be seen as development and in my opinion is not affected by any question of illegality. Counsel were unable to refer me to any statutory provision which could be thought to prohibit or make illegal any such agreement, and in my understanding there is none.
68These paragraphs appear to contain two separate reasons. One is that an agreement to carry out a subdivision to which consent can be given is not illegal. The other is that an agreement to carry out a development was not itself a development. Neither of these reasons strikes me as being entirely satisfactory. The prohibition in s 76A(1) is against carrying out the development unless "such a consent has been obtained and is in force". The tense and the requirement that the consent be in force clearly suggest that a development contravenes the section if, at the time the development occurs, consent has not been obtained. In the case of a subdivision, the relevant development is the division of the land. That division may be effected by, among other things, an agreement. Consequently, it is the agreement itself which is the development.
69There are other cases in which courts have held that an agreement to engage in conduct which is prohibited by the EPA Act is not void. For example, in Australian National Car Parks Pty Ltd v State Rail Authority of NSW [2005] NSWSC 120 the lease provided that the leased premises were not to be used otherwise than for car parking purposes. That use was prohibited by the relevant Local Environmental Plan. The lessee argued that, for that reason, the lease was void. That argument was rejected by Malpass M:
[21] ... The relevant provisions of the statute and of the Plan do not expressly prohibit the making of such a tenancy agreement or make it void. They do not expressly address the question of enforceability of contracts. The Plan itself is concerned with development. ... What the Environmental Planning and Assessment Act 1979 and the Environmental Planning and Assessment Regulation 2000 do is inter alia provide remedies, create offences and impose penalties.
See also Perman v Wenholt-Dwyer [2004] NSWSC 48.
70In my opinion, the approach taken by Malpass M should be applied in this case. Although earlier authorities suggest that a lease involving use of premises contrary to planning laws is unenforceable, as Giles J pointed out in Bawofi Pty Ltd v Comrealty Ltd (1992) NSW ConvR 55-646, those decisions were handed down before the decision of the High Court in Yango Pastoral Co ; and that were taken in relation to legislation that has been superseded by the EPA Act.
71The EPA Act treats subdivision as a form of development. It is not generally concerned with agreements. It is concerned with the way in which land is used. It provides a comprehensive structure for regulating that use. As part of that structure it permits local authorities to specify particular uses which may be the subject of consent. If land is used in a way that is inconsistent with the consent that is given or in the absence of consent, the Act gives local authorities and others broad powers to ensure that the objectives of the Act and relevant subordinate legislation are met. In exercising those powers, the local authorities and the Land and Environment Court can consider the nature of the conduct that is engaged in breach of the Act and the objectives sought to be achieved by the relevant prohibition in fashioning an appropriate order. One possibility is that the local authority or the court will decide consent should be given to the relevant activity or development, as happened when consent was sought to Noor Al Houda and Holdings continuing to operate a school at the premises. In those circumstances, I do not think that s 76A(1) of the EPA Act should be read as intending to render void all agreements made in breach of its provisions.
72Once it is accepted that the lease is not void because it involves a breach of s 76A(1) of the EPA Act, in my opinion a term is to be implied that Dr Taluja will do all things reasonable on her part to be done to have the lease registered, including obtaining the Council's consent to the subdivision effected by the lease. That implied obligation arises from the fact that Dr Taluja agreed to grant a lease of the premises the subject of the lease to Noor Al Houda for 25 years. That lease can only take effect if the lease is registered. In order to register the lease, the land to which the transaction relates must be shown on a current plan. Relevantly, the current plan must be a registered plan which is a plan of subdivision. However, a plan of subdivision cannot be registered unless the subdivision has been approved. The agreement to grant the lease carries with it an agreement to do all things reasonable to give effect to that agreement: Butts v O'Dwyer (1952) 87 CLR 267. Consequently, it carries with it an agreement to do all things reasonable on Dr Taluja's part to be done to obtain approval to the subdivision and registration of the plan of subdivision.