Calardu Penrith Pty Ltd v Penrith City Council & Anor [2010] NSWCA 189 | Case summary

Calardu Penrith Pty Ltd v Penrith City Council & Anor [2010] NSWCA 189 | Case summary | Zoe

[13]

Friday 6 August 2010 CALARDU PENRITH PTY LTD v PENRITH CITY COUNCIL & ANOR Judgment 1 HODGSON JA: I agree with the orders proposed by Tobias JA and I agree with his reasons. I would add the following. 2 In support of his contentions concerning Question 1 considered by Tobias JA, Mr Galasso SC for Calardu advanced the following argument: (1) Under the Penrith Local Environmental Plan 1996 (Industrial Land) (the LEP), "shops trading principally in bulky goods" (with certain limitations) was a land use for a purpose for which development may be carried out only with development consent, while (with certain exceptions not here relevant) other "shops" was a land use for a purpose for which development was prohibited: see cl 9 of the LEP (Blue 26-27) and Zone No 4(b) (Blue 28-30). (2) This development was consented to and thus was permissible only as a development for the purpose of shops trading principally in bulky goods. (3) Therefore, what was necessary to "establish and operate the development" (within the definition of "capital investment value" in cl 3(2)(a) of the State Environmental Planning Policy (Major Development) 2005 (the SEPP)) was what was necessary to establish and operate it as bulky goods shops. (4) Therefore, the costs necessary to establish and operate the development for this permissible purpose must include the costs necessary for the bulky goods shops to operate. 3 The development application made it clear that the consent sought was for the erection of a building, and that separate development consent would be sought for bulky goods shops within the building. Thus the relevant land use, for which development consent was sought, can be described with some particularity as "land use for the purpose of erecting and providing a building suitable for bulky goods shops, for the purpose of having bulky goods shops established and operating within it". In my opinion, the land use so described does fall within the more general description of land use for the purpose of bulky goods shops; but even if it did not, it would fall within the category of any land use other than a prohibited land use (in the second dot point of cl (b)(ii) in Zone No 4(b)). 4 What is necessary to establish and operate a development consisting of the erecting and providing of a building suitable for bulky goods shops, for the purpose of having bulky goods shops established and operating within it, does not extend to the cost of fitting out those shops. 5 In relation to Question 4 considered by Tobias JA, the costs of constructing the partially completed reinforced concrete slab were in my opinion both necessary to establish the development proposed to be erected on it, and also fairly regarded as part of the same project. 6 It may be that if this slab had been constructed at a substantial time earlier, as part of a separate enterprise (perhaps by a different developer), the result could well be different. If that had been the case, the cost of the slab could well have been considered insufficiently connected with the development to be included in the costs necessary for its establishment and operation. 7 TOBIAS JA: The appellant, Calardu Penrith Pty Ltd (Calardu), owns certain land located on Mulgoa Road, Penrith upon which is erected a substantial bulky goods retail development known as the "Penrith Homemakers Centre" or the "Harvey Norman Homemakers Centre" (the Harvey Norman land). The second respondent, Pipven Pty Ltd (Pipven), owns land adjoining the Harvey Norman land upon which is also erected a large bulky goods retail development known as the Penrith SupaCenta (the Pipven land). 8 On 9 November 2009 the first respondent, Penrith City Council (the Council), granted a development consent in favour of Pipven to what was described in its development application as "Alterations and additions to the Existing Bulky Goods retail centre known as the 'SupaCenta Penrith' " (the 2009 Consent). By summons filed on 1 December 2009 in Class 4 of the jurisdiction of the Land and Environment Court, Calardu sought, amongst other relief, a declaration that the 2009 Consent was void and of no effect. 9 In those proceedings Calardu advanced six grounds of invalidity of the 2009 Consent, all of which were rejected by the primary judge, Biscoe J, in his judgment of 1 April 2010 when he ordered that Calardu's summons be dismissed with costs. Calardu now appeals to this Court against his Honour's orders but on the basis of only one of the six grounds of alleged invalidity advanced by it at trial.

[15]

THE HISTORY OF THE PROCEEDINGS IN THE LAND AND ENVIRONMENT COURT 13 On 7 November 2007 Pipven lodged Development Application No.07/1418 (the 2007 application) with the Council for the redevelopment of the Pipven land which, had it been implemented, would have increased the retail floor space of the SupaCenta by approximately 27,000m², i.e. it would have doubled in size (the 2008 development). The Council under delegated authority granted consent to the 2007 application on 16 July 2008 (the 2008 Consent). On or about 1 June 2009 a third party certifier approved an application made on Pipven's behalf for a construction certificate in respect of the 2008 development. 14 In or about May 2009 Pipven, and its builder Broxtan Pty Ltd (Broxtan), commenced the 2008 development. Part of the work then carried out comprised the placing of fill to provide a foundational base for that part of the proposed development which was located adjoining the eastern end of the existing SupaCenta building. The work also included the pouring of a reinforced concrete slab on the eastern side of the existing building and the installation of drainage and plumbing. 15 That slab, which was to form part of the ground floor of the 2008 development, was only partially constructed when on or about 25 June 2009 Calardu commenced proceedings in the Land and Environment Court challenging the validity of the 2008 Consent and the construction certificate which had been issued pursuant thereto. These proceedings came before the primary judge who on 24 July 2009 vacated the hearing dates and adjourned the proceedings pursuant to s 124(3) of the Environmental Planning and Assessment Act 1979 (the EP&A Act) pending the lodgement and determination of a proposed further development application: Calardu Penrith Pty Ltd v Pipven Pty Ltd [2009] NSWLEC 119. A condition of that adjournment was that Pipven was required to undertake the surrender of the 2008 Consent upon the Council granting consent to the proposed further development application. 16 On 5 August 2009, Pipven lodged with the Council Development Application No.09/0746 (the 2009 application). That application relevantly proposed a single storey extension (the extension) to the existing SupaCenta building of approximately 6,468m² gross floor area, thus increasing the total gross floor area of the SupaCenta to approximately 34,029m². Further, the drawings included with the development application proposed the division of the extension into 10 new tenancies (separated by partitions and divisions) together with the creation of mall space. 17 On 9 November 2009 the Council granted consent to the 2009 application (the 2009 Consent). On or about 7 December 2009, in accordance with its undertaking, Pipven surrendered its 2008 Consent by Instrument of Surrender pursuant to cl 97 of the Environmental Planning and Assessment Regulation 2000 (the Regulation).

[17]

Reference was made to the 2008 Consent and to the fact that construction had commenced under that consent "including site works, and the partial laying of the ground floor slab in the location of the development proposed in the application the subject of [the SEE]". 20 Of particular significance to the issues in the appeal is the following part of Chapter 3.0 of the SEE which is headed "DESCRIPTION OF THE DEVELOPMENT" and which is relevantly in the following terms: "Development consent is sought for alterations and additions to the existing bulky goods retail centre on the subject site, generally in accordance with the architectural plans prepared by Quattro architects, reduced copies of which are attached to this report in Appendix 2. The principal features are as described below. Building works 1. A single storey ground floor extension (comprising 6,468m² GFA) of the existing bulky goods retail centre (bringing the total GFA on the site to 34,029m²) on a partially constructed reinforced concrete slab. Main external materials are painted finished concrete panels and metal deck roofing. 2. Division of the new building into mall space and ten tenancy units. 3. Minor alterations to existing external walls and internal tenancy walls at the eastern end of the existing Centre, adjacent to the above described works. 4. Rooftop plant screened by louvered acoustic screens to match roof sheeting colour. Note : ● The general use of the proposed extension will be for bulky goods retailing and ancillary purposes. Specific uses will be subject to separate applications if and as required ." (Italics in original) 21 Chapter 3.0 of the SEE concludes with the following "Note": " Work already completed pursuant to Consent No 07/1418 [the 2008 Consent] , including site works and preliminary ground level construction, does not form part of this application. This application seeks approval only for those works shown on the development and other plans accompanying this application that are new works ." (Italics in original) 22 The 2009 application was reported on by the Council's Senior Environmental Planner (the Council planner) who described the application in his Executive Summary relevantly as follows: "Council is in receipt of a Development Application which proposes alterations and additions to an existing bulky good retail development known as the 'SupaCenta'. The subject Development Application proposes a single storey addition to the existing bulky goods retail centre of 6,468m² Gross Floor Area (GFA). The proposed additions involve ten (10) separate tenancy units in a 'mall' style format. Separate Development Consent is proposed for the use and fitout of the individual tenants. …" 23 The Council planner then set out a history of the site and, with respect to the 2009 application, noted against the sub-heading "Project Summary" the following description: "Alterations and additions to an existing bulky goods retail development".

[22]

Pursuant to s 23G(1), the regional panel, which covered the Council's area, was constituted by the Minister as the Sydney West Joint Planning Panel (the Panel). 28 As s 23G(2)(a) provides, the functions of the Panel include any of a council's functions as a consent authority as are conferred upon it by an environmental planning instrument. The relevant environmental planning instrument in the present case was State Environment Planning Policy (Major Development) 2005 (the SEPP). The following provisions of the SEPP are presently relevant: " 13B General development to which Part applies (1) This Part applies to the following development: (a) development that has a capital investment value of more than $10 million , … 13F Council consent functions to be exercised by regional panels (1) A regional panel for a part of the State may exercise the following consent authority functions of the council … for development to which this Part applies: (a) the determination of development applications … (2) However, the following functions of a council as a consent authority are not conferred by this clause on a regional panel: … (d) the receipt and assessment of development applications, ... (Emphasis added) 29 The expression "capital investment value" in cl 13B(1)(a) was defined non-exhaustively in cl 3(2)(a) of the SEPP relevantly in the following terms: "(2) For the purposes of this Policy: (a) the 'capital investment value' of development includes all costs necessary to establish and operate the development, including the design and construction of buildings, structures, associated infrastructure and fixed or mobile plant and equipment …" 30 The jurisdictional issue that arose in the present case was whether the "development" the subject of the 2009 Consent had a "capital investment value" of more than $10 million. If it did then the 2009 Consent was invalid as it would have been granted by the Council without power to do so as that power resided in the Panel pursuant to cl 13F(1)(a) of the SEPP to the exclusion of the Council: see s 23G(5B). 31 Calardu submitted that, on the evidence, the primary judge should have held that the capital investment value of the development exceeded $10 million whereas the Council and Pipven submitted to the contrary. As will be seen, the resolution of that issue essentially turned upon whether the "capital investment value" of the "development" the subject of the 2009 Consent included the estimated tenancy fit-out costs of the extension as well as the costs previously incurred in the carrying out of works under the 2008 Consent including, in particular, the cost of the partial construction of the ground floor reinforced concrete slab. Calardu accepted both at trial and on appeal that it was necessary for the cost of both of these items to be included in the determination of "capital investment value" for it to succeed in establishing that the threshold of $10 million had been exceeded. 32 Calardu alternatively submitted that even if the tenancy fit-out costs were to be prima facie excluded from the determination of the capital investment value of the development the subject of the 2009 Consent, nevertheless, they should be included as the 2009 application was a "staged development application" within the meaning of cl 13G of the SEPP which relevantly provided as follows: " 13G Staged development functions (1) The functions of a council conferred on a regional panel extend to the determination of the separate development applications that form part of a staged development application, if: (a) the estimated capital investment value of the whole of the development likely to be covered by all the applicable development applications is an amount specified under clause 13B(1)(a)-(d) in relation to that type of development, or …" 33 The expression "staged development application" is defined in s 83B of the EP&A Act which relevantly provides: "(1) For the purposes of this Act, a staged development application is a development application that sets out concept proposals for the development of a site, and for which detailed proposals for separate parts of the site are to be the subject of subsequent development applications. The application may set out detailed proposals for the first stage of development. (2) A development application is not to be treated as a staged development application unless the applicant requests it to be treated as a staged development application."

[24]

THE DISPUTED COSTS 34 Each of the parties called a quantity surveyor to estimate the capital investment value of the development the subject of the 2009 Consent. The quantity surveyors called on behalf of the Council and Pipven excluded from their estimate the value of the works carried out pursuant to the 2008 Consent as well as the estimated tenancy fit-out costs, which were to be the subject of future development applications as required by Condition 3 of the 2009 Consent: see [24] above. 35 On the other hand Mr Mee, the quantity surveyor engaged by Calardu, included both items attributing the amount of $1,645,489 to the works carried out pursuant to the 2008 Consent and $1,316,405 to future tenancy fit-out costs. Those figures were not in dispute if otherwise it was appropriate to include them as part of the capital investment value of the development. 36 However, it is of some relevance to understand the basis upon which Mr Mee determined his estimate of tenancy fit-out costs. His estimate of the capital investment value of the development the subject of the 2009 Consent was contained in a report dated 2 October 2009. In that report he noted, relevantly, that with respect to the costs of tenancy fit-out works, he had made a "Nominal allowance only" of $135 per m² of retail floor area which fell within a range from $100 to $250 plus per m² subject to the nature of the type of tenancy. The total amount that he allowed for tenancy fit-out was $800,226 (all figures are exclusive of GST as the definition of "capital investment value" requires). That figure comprised the following elements: 37 To those items Mr Mee added an item for ceiling finishes to tenancies in an amount of $287,712 as well as a further item referred to in the joint report of the quantity surveyors as "Margins & Adjustments" in an amount of $228,467, giving a total for costs of tenancy and fit-out works of $1,316,405. It should also be noted that Mr Mee included a sum of $574,425 for internal tenancy division walls, but it was not suggested that that amount was not properly included in Mr Mee's estimate of the capital investment value of the development. 38 In his oral evidence, Mr Mee agreed in cross-examination that he had arrived at his estimate of tenancy fit-out costs first by relying upon his experience and, second, by having a site inspection of the existing tenancies in the SupaCenta to determine the level of fit-out that had been achieved in the existing facility so as to ensure that he had made reasonable assumptions. 39 When requested to provide his understanding of the word "operate" in the definition of "capital investment value", Mr Mee stated that he had assumed that it related to the facility being fully tenanted and having its doors open on day one, although he excluded any future running and operating costs. He explained his concept of "doors open on day one" to mean doors open on day one for customers to come in and specifically shop at tenancies within the completed extension in which tenancy spaces were let, tenants were ready for business and the doors were open for customers. 40 It was for the foregoing reasons that he included tenancy fit-out costs in his estimate on the basis that they were required to be included by virtue of the reference in the definition of "capital investment value" to "all costs necessary to establish and operate the development" (my emphasis).

[47]

(e) As the nature of the development (bulky goods retailing) required not only the construction of the built form but also the introduction of tenants whose activities satisfy the definition in the LEP of " bulky goods " , it followed that the fit-out costs of those putative tenants were required to be incurred in order for the " development " to " operate " for the purpose for which it was designed. 45 In its written submissions Calardu stated (at paragraph 44) that the relevant question was whether the fit-out costs were necessary to establish and operate the development. The application of the definition could be tested by simply asking the following question: "Can an extension to an existing bulky goods centre operate as a bulky goods centre before the new tenancies are (finally) established and operations are to commence?" 46 It was submitted that the answer to that question must be in the negative because until the tenancies have been fitted out, bulky goods retailing operations could not commence to operate. 47 In its oral submissions on the appeal, Calardu reiterated this point by emphasising first, that the "development" to which the definition of "capital investment value" referred, extended beyond the four corners of the particular development application as the primary judge had held; second, that the application in the present case was, in any event, not one for a nondescript building but for a building designed for a particular purpose; third, that that purpose was bulky goods retailing; fourth, that what was consented to was an extension for that purpose which was proposed to contain 10 bulky goods tenancies; and fifth, the development so described could not commence to operate as an extension to the existing retail centre unless the tenancies were fitted out to an extent sufficient to enable the retailing of bulky goods to commence. 48 It will thus be appreciated that the focus of Calardu's submissions was upon two matters: first, that the relevant development for the purpose of determining its "capital investment value" as defined was as an extension to an existing bulky goods centre for the purpose of operating as part of that centre; and, second, that the development could not "operate" for that purpose unless and until tenancy fit-out costs were incurred to enable the commencement of retailing. In other words, what was being proposed was a series of bulky goods shops that could only operate as such if the fit-out costs of the putative tenants were incurred. 49 The submissions of Pipven may be summarised as follows:

[67]

The tenancy fit-out costs should be excluded 51 In my opinion Calardu's submissions should be rejected and those of Pipven and the Council accepted. It is critical for the exercise required by cl 13B(1)(a) of the SEPP that the "development", the capital investment value of which is to be assessed in accordance with the definition of that expression, should be capable of accurate identification. True it is, as the primary judge found, that that development and, certainly, the cost necessary to establish it, may go beyond the four corners of the development application depending, no doubt, on its detail. 52 The type of detail that would be included in an application for a construction certificate would, more often than not, be missing from a development application. I exemplify in this context such matters as details relating to plumbing, water supply points, mechanical requirements such as for air conditioning, electrical wiring, the provision of wet areas and amenities, the provision for an electricity substation and matters of that nature. 53 In my opinion, all those costs, including those not of a capital nature such as consultants fees, are required to be included for the purpose of determining the "capital investment value" of the development as defined. In this respect, I respectfully disagree with the primary judge that such costs are confined to capital items. 54 Nevertheless, it is the identification of the consent authority to determine the particular development application to which clauses 13B(1)(a) and 13F(1)(a) are directed. In the present case it is clear that the development in respect of which consent was being sought, whichever authority was empowered to grant it, did not include any particular bulky goods retail use of any part of the extension. Certainly, the extension was designed with a particular purpose in mind but, as is apparent from the various descriptions of the development by the proponent as well as by the Council planner to which I have referred at [18]-[24] above, what was being proposed was the erection of a building divided into mall space and 10 tenancy units together with minor alterations to the existing external walls and internal tenancy walls at the eastern end of the existing building to enable the two to be married together. 55 In this context, it needs to be recollected that Mr Mee included in his assessment of the capital investment value of the development, and which was not the subject of challenge, some $574,425 for internal tenancy division walls. The application documents made it plain that although the general use of the proposed extension would be for bulky goods retailing, specific uses would be the subject of separate development applications and the Council imposed a condition upon its consent to give effect to that intention and for good reason: see [24] above. 56 When those separate applications are made, they are to include as part of the cost of the development the subject of those applications (as required by cl 1(h) of Schedule 1 to the Regulation) the estimated cost of the development that, in the present context, would be the applicant's fit-out costs. Although the expenditure of those costs may be necessary to "establish and operate" the particular use the subject of such a development application, it was not a cost necessary to "establish and operate" the development, being the extension per se whose capital investment value was at issue in the present case. 57 In this respect I accept the submissions of Pipven and the Council that the word "operate" where used in the definition of "capital investment value" refers, in the present case, to the building the subject of the application being in such a condition as to be available to be occupied by bulky goods retail tenants. That did not require the inclusion of the fit-out costs of those tenants let alone the inclusion of such costs estimated on a generic basis. It did include the cost of the internal tenancy division walls about which there was no issue. 58 Accordingly, in my opinion, the primary judge was correct in finding at [74] of his reasons that the tenancy fit-out costs estimated by Mr Mee should be excluded from the determination of capital investment value of the subject development. 59 As it was conceded by Calardu that in order for its appeal to succeed, it was necessary for it to overturn the primary judge's finding to which I have referred, it follows that its failure to do so mandates that the appeal be dismissed. However, as the other questions were fully argued, I will deal shortly with them to the extent I consider appropriate.

[75]

(e) Given that the costs in question were sunk costs, their inclusion for the purpose of determining the issue raised by cl 13B(1)(a) of the SEPP was not consistent with the use of the word " investment " which contemplated prospective rather than retrospective costs necessary to establish the development in respect of which its capital investment value was required to be determined. 66 Calardu submitted that as the works under consideration were necessary to establish and operate the extension of the existing bulky goods retail centre, there was a factual overlap between the prior works and the contemplated works, both of which were necessary to enable the extension to be constructed. 67 Although expressly not made part of the 2009 application, nevertheless as the SEE made clear, the proposed building was to be erected upon the partially constructed reinforced concrete slab so that the latter was intimately connected with the former and, therefore, had no independent function except as part of what was proposed. 68 In my opinion his Honour was correct to include the costs with respect to the partially completed slab as part of the capital investment value of the subject development. He was justified in so doing because, as Calardu submitted, there was an intimate connection between the development proposed and the works that had been completed. One could not exist without the other. 69 This is not to say that there may not be cases where a development is dependent upon an existing building but the costs of erecting that building are too remote to be included as a cost of establishing the development under consideration. Thus, for instance, one might have a development application to renovate, at substantial cost, the shell of a very old heritage building. Those renovations could not take place but for the existence of that shell. However, it may be nigh impossible to determine the original cost of constructing that shell and, even if that cost were ascertainable, its expenditure would be too remote in time. Therefore, the incurring of that cost could properly be regarded as too remote from the proposed renovation as to justify its inclusion in the capital investment value of that renovation. 70 In other words, it is a question of fact and degree as to whether what the Council referred to as the "sunk costs" are to be included as part of the total costs necessary to establish and operate the development whose capital investment value is required to be determined. In the present case the partial construction of the slab and the making of the 2009 application occurred within months of each other. The assumption underlying the plans of the building the subject of that application was to utilise that slab as part of its foundations. Its costs were readily ascertainable and it was thus an intimate and necessary component of the development the subject of that application. No question of remoteness therefore arose. 71 In the foregoing circumstances, in my opinion the primary judge was correct to include those costs in his determination of the capital investment value of the subject development. Pipven and the Council's contention to the contrary should, therefore, be rejected.

[80]

(d) the nature of the development (bulky goods retailing) required the construction of the built form and the introduction of tenants whose activities satisfied the definition of " bulky goods ". Accordingly, the 2009 application truly formed the first stage (the built form stage) of the overall development whereas the second stage was the applications by individual tenants to use a unit in the building for their particular bulky goods retailing operations. 74 In my respectful opinion the development the subject of the 2009 application was, certainly, for the construction of the built form but it did not include the introduction of tenants whose activities satisfied the definition of "bulky goods", although this was contemplated. The development was, as I have found, no more than an application to erect a particular building. It did not include the use of that building for any particular bulky goods retail purpose although its general use for bulky goods retailing was clearly proposed. 75 However, the difficulty faced by Calardu is that s 83B(1) provides that a staged development application is one that "sets out concept proposals for the development of a site". Although such an application may set out detailed proposals for the first stage of that concept development, nonetheless it must still be one that sets out concept proposals. In my opinion the 2009 application was the very antithesis of a concept proposal. It was a concrete proposal. For that reason alone the application was not a staged development application. 76 In any event, I agree with the primary judge that Calardu's submissions to the effect that s 83B(2) was complied with is simply untenable. To suggest, as Calardu did, that the note in the SEE to the effect that specific uses would be the subject of separate development applications if and as required and the condition imposed by the Council requiring such applications constituted a request, even an implied request, that the 2009 application be treated as a staged development application, is without merit. 77 It follows that the primary judge was correct in rejecting the submission that the 2009 application was a staged development application.

Calardu Penrith Pty Ltd v Penrith City Council & Anor

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