[2004] VCAT 2027

The decision of the Responsible Authority is affirmed and it is directed that no permit issue.

Mr Jeremy Gobbo QC, instructed by Ms Sally McIndoe of Deacons Lawyers. He called the following persons to give evidence:

* Mr Brendan Rogers, Planning Consultant with Urbis JHD Pty Ltd.

* Mr Stuart McGurn Planning Consultant with Fulcrum Town Planners.

* Mr David Shimmin, Economic Advisor with Urbis JHD Pty Ltd.

Mr John Cicero, Solicitor with Best Hooper Lawyers. He called the following persons to give evidence:

* Mr Rob McGauran, Architect and Urban Designer with McGauran Giannini and Soon.

* Mr Rob Milner, Planning Consultant with Coomes Consulting Group Pty Ltd

Ms Michelle Quigley QC with Ms Sue Brennan of Counsel, instructed by Cornwall Stodart Lawyers. They called evidence from:

* Mr Andrew Clarke, Planning Consultant with Matrix Planning Australia Pty Ltd.

1 This is an application under Section 77 of the Planning and Environment Act 1987 to review Port Phillip City Council's decision to refuse to grant a permit for the use and development of a motel, office and supermarket on the Jupp Motors's site and adjacent land at the north-west corner of City Road and Cecil Street in Southbank, South Melbourne.

2 The proposal as amended by the Tribunal and without objection from the parties comprises:

* A 3,368 sq m supermarket at ground floor level facing City Road.

* A motel comprising lobby and ancillary café at ground floor (Cecil Street), and 104 rooms over three levels above.

* A 1,010 sq m office on the second level, City Road side.

* Car parking for a total of 239 vehicles at ground, third and fourth levels.

* Retention and conversion of the building on the corner of Cecil Street and City Road.

* Retention of the existing building facades along Cecil Street.

* Redevelopment of the remainder of the buildings on the site - which also includes a frontage to Whiteman Street.

3 The land lies within Melbourne's newly developing Southbank Precinct which, as demonstrated by the before and after photographs produced in the course of Mr Rogers evidence has changed almost beyond recognition in the last 10 to 15 years. Southbank, together with South Melbourne and Albert Park comprise the primary trade area for the South Melbourne Activity Centre, a major activity centre under the State Government's Metropolitan Strategy - Melbourne 2030. It was Mr Shimmin's evidence that this primary trade area currently comprises 16,500 residents and in 1991 there were 6,000 residents. Its growth is attributable primarily to the redevelopment of Southbank.

4 It was Mr Shimmin's evidence also that by 2011 the primary trade area can be expected to grow by 45% to 23,900 people. Income levels in the trade area, including the secondary trade areas of Port Melbourne, Middle Park and St Kilda/Queens Road are well above the metropolitan average - 66% above in Southbank, 77% above in Middle Park and 59% above in Port Melbourne.

5 The permit applicant in this case seeks to take advantage of this burgeoning pool of consumers by developing the subject land with, among other things, a 3,368 sq m full line supermarket. However, City Road separates the site from the remainder of the South Melbourne Activity Centre. This east-west thoroughfare is an important Southbank to Port Melbourne collector road. It has a wide carriageway, carrying upwards of 25,000 vehicles per day and is bordered, in the vicinity of the subject land, by mostly industrial and commercial uses.

6 The subject site, while clearly being within the sphere of influence of the South Melbourne Activity Centre is not as intimately associated with the core retail area - centred on Clarendon and Coventry Streets and the South Melbourne Market - as is Ms Quigley's client's site, the Red Bear's site, on the north-east corner of Cecil and York Streets diagonally opposite from the market.

7 The principal issue in this proceeding was whether the clear and growing opportunity for a third supermarket to serve the South Melbourne primary trade area warrants a location on the far side of City Road rather than one more intimately connected with the centre's core retail area.

8 The subject land is located within a Mixed Use Zone under the South Melbourne Planning Scheme. It is also affected by an Environmental Audit Overlay and a Heritage Overlay, which were not in contention here. The stated purpose of the Mixed Use Zone, in addition to being a means to implement the State and Local Planning Policy Framework, is:

To provide for a range of residential, commercial, industrial and other uses which complement the mixed use function of the locality.

To encourage residential development that respects the neighbourhood character.

9 We note also that in the manual for the Victoria Planning Provisions (VPPs) the Mixed Use Zone is included in the suite of residential zones [1]however, unlike most other residential zones where shops and offices are for the most part prohibited, within the Mixed Use Zone shops and offices are uses for which a permit may be granted.

10 Taken as a whole the proposal before us generates the need to obtain planning permission as follows:

* The demolition of parts of the existing buildings - in a heritage overlay area (Clause 43.01-1).

* For buildings and works - in a heritage overlay area (Clause 43.01-1) and for Section 2 uses in a Mixed Use Zone (Clause 32.04-07).

* To use land in the Mixed Use Zone for a Section 2 use namely a shop (supermarket), office and motel (Clause 31.01-2).

* To reduce the Scheme's car parking requirements (Clause 52.06-1).

11 By the time of the hearing, and following our amendment of the plans accompanying the permit application, there were no real arguments against the proposal on heritage grounds nor were there any substantial concerns in relation to parking ratios for the hotel/motel and office uses - other than in relation to details about layout which could mostly be addressed via conditions on a permit. Accordingly, and in view of our ultimate conclusions on the principal issues referred to above, it is not necessary to dwell on these other issues, other than in passing.

12 Clause 65 of the Scheme sets out decision guidelines that must be considered, as appropriate, before deciding about a permit application under the Port Phillip Planning Scheme. Relevantly for the consideration of the issues in this proceeding, the decision guidelines include:

- The matters set out at Section 60 of the Act; and

13 Among other things Section 60 of the Act provides that if the circumstances appear to so require consideration may be given by the decision-maker to:

* Any significant social or economic effect of a use or development. In this regard the net community benefit of a third supermarket and its economic benefits and disbenefits within and outside of the trade area have relevance

* Any strategic plan which has been adopted by a Minister, Government Department or municipal council. In this regard the Metropolitan Strategy is a strategic plan adopted by a Minister[2].

* Any other relevant matter. In this regard the South Melbourne Central (Consultation Draft) Structure Plan was referred to by all parties and we accept that it is a relevant document. Of relevance also in this proceeding was the placing on exhibition in the week prior to the hearing of a combined permit and Planning Scheme amendment application (Amendment C41) to enable the Red Bear's site to be developed with, among other things, a 3,725 sq m supermarket, 8,150 sq m of office, a child care centre, a medical centre, a commercial gym and car parking for 775 cars.

14 The most relevant provisions of the State Planning Policy Framework are the policies at Clause 17.01 referring to activity centres and Clause 17.02 referring to business under the sectorial issue of economic development. The stated objective at Clause 17.01-1 for activity centres is:

To encourage the concentration of major retail, commercial, administrative, entertainment and cultural developments into activity centres (including strip shopping centres) which provide a variety of land uses and are highly accessible to the community.

15 Under the heading of General Implementation it is policy for activity centres to be planned to, among other things:

* Provide a range of shopping facilities in locations which are readily accessible to the community.

* Provide good accessibility by all available modes of transport (particularly public transport) and safe pedestrian and cycling routes and to encourage multi-purpose trip making to such centres.

* Facilitate ease of pedestrian movement between components of centres, public transport interchanges and passing areas.

* Maximise opportunities for the co-location multi-use and sharing of facilities.

* Provide attractive environments for community activities.

16 The subject land was included in a Mixed Use Zone after the gazettal of the new format Planning Scheme. It was previously zoned Industrial, as is much of the area to the north of City Road and westward to Port Melbourne. It would be fair to say therefore that the local provisions dealing with industrial land use have little relevance. Similar observations can be made with respect to the local provisions in relation to mixed use areas, because the site is not included in any of the mixed use areas identified within the relevant framework plan. What is of relevance however is the fact that the application of Mixed Use Zones as a means of implementing the strategic outcomes sought under the Municipal Strategic Statement, is clearly not as a mechanism for achieving the municipalities retail outcomes. Whilst the use shop is not prohibited in the Mixed Use Zone - which is not the case in an Industrial Zone - we think it open to find that the reference at Clause 21.05-12, for mixed use areas to provide for a range of residential, commercial, industrial and other uses that complement the mixed use function of the locality, is not directed towards implementing Port Phillip's policies for retail planning.

17 A local policy at Clause 22.02 refers specifically to retail centres. While in a strict sense this is only applicable to land in Business Zones, it is relevant in that it sets out the municipality's objectives for retailing. At a general level these objectives include discouraging the expansion of centres into adjacent residential areas and encouraging active street frontages, weather protected pedestrian areas for promenading and outdoor dining and innovative public space treatments. For the South Melbourne Shopping Centre it is policy to:

* Support and enhance the important strategic role of Clarendon Street as a sub-regional centre that provides higher order comparison shopping for the wider community.

* Encourage new land use to support pedestrian activity links along Clarendon Street to Albert Park Lake, the South Melbourne Market and the Southbank Entertainment Precinct.

* Encourage better integration of the Clarendon Street Shopping Centre with the South Melbourne Market ...

18 The South Melbourne Central (Consultation Draft) Structure Plan Consultation Draft of March-May 2004 builds upon and responds to changes that have occurred following the gazettal of the Scheme's Local Planning Policy Framework. Whilst referred to as a consultation draft we accept that it is founded on a well researched base that has itself been the subject of considerable public consultation - including a six day workshop in July 2003 and subsequent community feedback - pending preparation of the current document. We accept that it is not a plan that should be taken lightly. Among other things the draft recommends rezoning the remainder of the triangle within which the subject land is located - north-west of City Road and bounded by Whiteman Street and the Westgate Freeway overpass - to Mixed Use. It also suggests that this precinct is one that can accommodate significant change, with encouragement given for a built form outcome of between eight and 15 storeys reducing to two to four storeys along the northern side of City Road. At page 122 the strategies for this City Road Mixed Use Wedge include promoting mixed use development in the form of medium density residential or office located above commercial or restricted retail premises at street level.

19 At page 110 of the draft Structure Plan the strategies for the Clarendon Street core retail strip are for Clarendon Street to continue as the heart of the South Melbourne Activity Centre's with expansion to occur along Market and York Streets to link with the market site. The Red Bear's site is identified as a specific opportunity within what the structure plan refers to as the Emerging Activity Precinct (another area identified for significant change), with the ability to develop synergies with the market and the rest of the activity centre, including consolidation of retail uses in the activity centre and the existing activity node around the market. This emerging activity precinct is shown as separated from the City Road Mixed Use Wedge by an area identified as the Western Business Precinct. Much of this area is currently zoned Industrial 1. Taken as a whole, this area separates the subject land from the market and retail core and is earmarked for re-zoning to Business 3, an office/industrial type zone where a shop, other than restricted retail premises such as furniture, furnishings, party lighting and office supplies, is prohibited.

20 The hearing of this application for review extended over four days. In the course of the hearing and again on a number of occasions subsequent to the hearing we inspected the subject land and surrounding areas as well as the South Melbourne Market, the Clarendon Street retail strip with its Coles Supermarket and the Port Melbourne Shopping Centre at Bay Street.

21 In the course of the hearing the parties' representatives and the witnesses called to give evidence tabled and spoke to written submissions or witness statements. These together with the plans, photographs and other documents tabled during the hearing have been attached to the Tribunal's file.

22 Following the hearing and at the direction of the Tribunal the Respondent parties were provided with an opportunity to make written submissions in relation to some amended plans tabled by Mr Gobbo on the third day during Mr Rogers' evidence. The plans were directed towards addressing some of the more detailed layout criticisms raised by Mr McGauran who gave evidence for the Responsible Authority. One submission in respect of these plans was received from Best Hooper Lawyers on behalf of the Responsible Authority and a submission in reply was filed and served by the proponent. As it turns out we have not had to turn our minds to these submissions and there is no need to refer to them further.

23 As noted above the principal issue in this proceeding was the suitability in strategic or orderly planning terms of the site's location for a full line supermarket. A further although allied issue was whether, despite the location, the development represented an overall net community benefit that might otherwise justify the grant of a permit.

24 In essence the case put by the permit applicant, and relying heavily on the evidence of Mr Shimmin, was that an opportunity exists within South Melbourne Shopping Centre's main trade area for not only one more, as suggested in the draft structure plan, but two more full line supermarkets and that there is room for both to trade profitably, as well as the existing Coles in Clarendon Street, even if Coles was upgraded.

25 It was Mr Shimmin's evidence also that the residential and working community within the South Melbourne trade area is poorly served at present with only the Coles in Clarendon Street - which all parties acknowledged is less than optimal - the South Melbourne Market, Coles in Bay Street and some other quite small IGA type outlets. As a consequence, it was his evidence that there must be a significant level of escape expenditure outside of the trade area, to the economic disbenefit of other traders. This, in addition, causes inconvenience to the local community due to the need to travel further than might otherwise be the case and with less opportunity for a one stop shopping experience, as encouraged by State and Local, Activity Centre Policy.

26 Relying on the opinions of Messrs McGurn and Rogers the case for the applicant was that the site's proximity to the South Melbourne Market via Cecil Street - a distance of between one and two blocks - made it an appropriate location for a further supermarket. In their opinion any disbenefit due to the site being separated from the core retail area by City Road and the proposed Business 3 Zoned Western Precinct would be outweighed by the community benefit of greater choice in the local food and grocery offer, greater convenience due to not having to go outside of the trade area and the fact also that the site is easily accessible from City Road plus a light rail stop at the Whiteman Street/City Road intersection. In Mr Gobbo's submission, there was no downside, to his client's proposal - the community got more choice, existing traders got a store that would entice back escape expenditure and the other supermarkets, both existing and proposed, could all get a fair and economically sustainable share of the pie.

27 It has to be said, taken at face value, that Mr Gobbo's is a persuasive case. While there was some disagreement by the respondent parties as to the level of market expansion and additional spending power within the trade area - especially in the short term - it was not suggested that this is not a rapidly growing market or that the trade area is not underprovided in terms of food and grocery outlets compared to national averages.

28 The case put against the proposal by the respondent parties focused instead on the site's location and could be said to be based on the following three propositions - put forward by Ms Quigley as fundamental propositions that ought to inform the exercise of the Tribunal's discretion:

* Core retailing belongs in the heart of an activity centre, not on its periphery or beyond;

* Core retailing belongs where it can create valuable synergies with other associated uses, where it can be integrated physically, visually and functionally with the rest of the centre and where it can promote pedestrian accessibility and connection.

29 In Ms Quigley's submission none of these basic principles could be satisfied by the proposal. We accept Ms Quigley's submission. In doing so we acknowledge that none of the expert witnesses suggested other than that a supermarket is a core retail activity.

30 Despite Mr McGauran's and Mr Rogers' suggestions that in time Cecil Street could provide a pedestrian friendly connection with the rest of the retail core - especially with Red Bears bringing the retail core further to the north - we have not been persuaded that the outcome is an appropriate one. As noted at page 40 of the Melbourne 2030 draft Implementation Plan for Activity Centres; large stores such as supermarkets are essential to the vitality of many activity centres and poor integration of large stores can also adversely affect an activity centre's economic and social performance. Things to avoid in relation to such large stores include large stores that are physically separated from the rest of the activity centre, and that fail to integrate with the layout and structure of the centre.

31 Even acknowledging that substantial change has occurred within the Southbank area and that indeed the subject land is earmarked under the draft Structure Plan as an area for substantial change, we are not persuaded that it is a sensible planning outcome to separate one of the core retail functions of an activity centre from the remainder of that centre by a road such as City Road. The town planning witnesses called by the proponent in this case sought to downplay the barrier effect of City Road. However, under cross-examination by the Presiding Member, Mr McGurn acknowledged the barrier effect of City Road. When asked whether there is any prospect of it having a reduced role in the future, he referred to what he understood to be initiatives by the City of Melbourne to try to make Southbank no longer the two halves that it has been in the past because of the barrier that City Road has created. He went on to suggest that it is going to take some time, they're working through that and they are working closer with VicRoads to say `we want to reduce the amount of traffic on City Road to make it function a different way'.

32 We are not persuaded that it is appropriate - certainly at this point in time and in the absence of any clear framework for downgrading City Road - to permit an important element of any core retailing activity to be so isolated. If anything the proposal seeks to take advantage of the site's isolation and separation by servicing the passing trade of City Road rather than by providing a well located attraction that will service the activity centre as a whole and provide the sort of synergies that give vitality to activity centres.

33 The final question is whether, notwithstanding the locational disadvantages of the site, the proposal can nevertheless be said to represent a net community benefit that overrides such disadvantages. We have already acknowledged the existing and likely to increase opportunity for a third supermarket within this trade area. However, taken as a whole we are not persuaded that this opportunity outweighs the disbenefits of undermining the orderly planning of the activity centre. In addition, having regard to the relative ease with which the Red Bear's site was consolidated in the short period of January to April 2004, we are not persuaded, despite Mr Rogers' evidence to the contrary, that there is unlikely to be another more appropriately located site within this activity centre.

34 The activity centre is clearly undergoing change and developments such as the Red Bear's development may well have consequences for other sites within the precinct which, as a result, could free these up for a more appropriately located third supermarket, should one be warranted. Finally, on this last point, while we would accept that a second supermarket will offer considerable social benefit the evidence was not such that at this point in time at least, a third is so necessary as to warrant compromising the structure planning process currently in train for the South Melbourne central area.

35 To conclude we accept that a full line supermarket is a core retail activity that belongs where it can create synergies with other associated uses and thereby contribute to the functionality and vitality of an activity centre. Furthermore, consistent with the outcomes sought under the Metropolitan Strategy - Melbourne 2030, we accept that in the case of such a key, core retail facility, a location that fails to integrate with the layout and structure of an activity centre is to be avoided.

36 While we would not go so far as to suggest that the mixed use wedge within which the subject land is located should not be considered as a part of the South Melbourne Major Activity Centre, we are not persuaded that in a structure planning sense the mixed use wedge is an appropriate location for core retail expansion.

37 Even without the draft Structure Plan, we think commonsense suggests that a core retail activity separated from the remainder of an activity centre by a road such as City Road is not best practice core retail planning. With the best will in the world such a location always presents a constraint to integration.

38 Accordingly, while a supermarket at this location would no doubt be patronised - given the evidence in relation to the existing and growing market - its use would not facilitate the multiple trips and other synergies encouraged under the relevant activity centre policies. In this respect therefore it would not be unreasonable to describe the operation as more of a standalone facility, an outcome very much discouraged by the Planning Policy Framework and one which we do not consider would contribute a net community benefit.

[1] Manual for Victoria Planning Provisions p.26

[2] O'Connell Street Developments Pty Ltd v Yarra City Council [2003] VCAT 448 (30 April 2003)