Victorian Civil and Administrative Tribunal|2007-10-05

Cameron Manor Pty Ltd v Mornington Peninsula SC (Red Dot) [2007] VCAT 1822 (5 October 2007)

Development contributions - Section 173 agreements for the voluntary payment of development contributions - Sections 62(5) and (6) Planning and Environment Act 1987.

Nick Brash, Melbourne Water Corporation, George and Nancy Awburn, Anthony Smithers, Shiva Meditation Centre, Timothy & Christine Stafford, Marjory & Charles Nicholson, Naomi Indira McCann, Paul Sotiriou, Hannah & Simon Bunyevich, Country Fire Authority

Cameron Manor Pty Ltd v Mornington Peninsula SC (Red Dot) [2007] VCAT 1822

Condition 3 so far as it relates to payments for development contributions and contributions for public open space, is invalid because it contravenes section 62(6) of the Planning and Environment Act 1987;
Condition 3 so far as it relates to provision for contributions to public open space, is not applicable to permit application P06/0057 because the payment of contributions is only required in respect of subdivision.

Mr How Ng, Town Planner, of H & G Town Planning Pty Ltd.

This is a hearing to determine two questions of law posed by the applicant at a review hearing before Member Bennett on 21 May 2007.
The applicant seeks review of a decision of the council to refuse to grant a permit for use and development of the subject land as a 64 bed aged care facility (together with associated car parking, vegetation removal, earth works and landscaping).
There was an earlier, unsuccessful application for a similar proposal in 2005. Since that time, the land has been rezoned as a result of Amendment C42 to the Mornington Peninsula Planning Scheme. Amendment C42 rezoned an area of land at Mt Eliza north of Tower Road from Low Density Residential Zone to Residential 1 Zone and included the land in Design and Development Overlay Schedule 11.
Clause 3 of Schedule 11 to the Design and Development Overlay (DDO11) includes the following requirement:

Any permit for subdivision or additional residential development, other than a single dwelling on a lot existing at the approval date, must include the following condition:

Prior to commencement of development or the issue of a statement of compliance, an Agreement under section 173 of the Planning and Environment Act 1987 must be entered into between the land owner and the responsible authority that requires:
- The full provision of infrastructure, including reticulated sewerage, to service any new lot or development, generally in accordance with the requirements of Clause 55 and 56 of the planning scheme and in accordance with plans and specifications to be submitted and approved to the satisfaction of the responsible authority. All costs of infrastructure provision and upgrading must be met by the landowners with no costs to Mornington Peninsula Shire Council.
- Provision for development contributions, generally in accordance with the Development Contributions Report - Tower Road, Mt Eliza (Option 1) March 2004, prepared by Beveridge Williams & Co Pty Ltd.
- Where proposed development abuts Tower Road or gains access from a road which intersects with Tower Road, the plans must include provision for a roundabout or other traffic control devices to the satisfaction of the responsible authority.
- Provision for contributions to public open space:
  - equal to five percent (5%) of the site area or five percent (5%) of the site value of the land to be subdivided; and
  - a further five percent (5%) of either the site area or as a cash in lieu contribution to be applied towards environmental improvement (including conservation land acquisition) in the Mt Eliza area generally, provided the calculation of this further 5% may be discounted by the area or site value of any lot that contains a dwelling that exists at the approval date;

provided that the total public open space contribution is equivalent to not less than $10,000, indexed in accordance with the CPI, for every new lot created.

In connection with the hearing before Member Bennett, the council circulated without prejudice conditions that included condition 3, which reflects the above requirement included in DDO11.
The applicant has raised two questions of law in relation to condition 3, namely:
1. Is condition 3 ultra vires because it offends section 46N of the Planning and Environment Act 1987, clause 52.01 of the Mornington Peninsula Planning Scheme and section 18(1A) of the Subdivision Act 1998?
2. Is condition 3 required to be included by virtue of DDO11 (for additional residential development as distinct from subdivision) or can be it excluded in full or in part (for example, the public open space requirement)?

When Amendment C42 was exhibited, it proposed to rezone the Mt Eliza land from Low Density Residential Zone to Residential 1 Zone; replace Design and Development Overlay Schedule 6 with Design and Development Overlay Schedule 2, introduce a Development Contributions Plan Overlay and a new Development Plan Overlay Schedule 10 in order to facilitate and control an appropriate future form of development for this area. The land in question has a total area of 26.9 hectares, including the subject land which has an area of 8,094 square metres. A planning panel considered submissions in respect of the amendment and its report is dated June 2004.
Whilst the panel supported the proposed outcome for the Mt Eliza land, it was critical of the complexity and multiplicity of controls that were proposed to achieve an appropriate outcome:

Quite simply, the Panel cannot accept that there is a need for this land to have four separate Overlays when issues such as lot sizes are controlled by two of these, development contributions by two and vegetation control and management bar at least two as well as other provisions in the planning scheme.[1]

Development contributions were dealt with in the exhibited amendment by means of a Development Contributions Plan Overlay, which included in Schedule 1 the Tower Road, Mt Eliza Development Contributions Plan. As well as the Development Contributions Overlay, the proposed Development Plan Overlay (DPO10) required that any permit granted for subdivision or additional residential development be conditional on a section 173 agreement being entered that required:
- The full provision of infrastructure to a new lot/development;
- A public open space contribution equal to 10% of the site value (excluding any lot containing an existing dwelling, with contributions able to be used to finance the funding of footpath construction along Tower Road);
- Development to be in accordance with the approved development plan; and
- One dwelling only per site (except for land for which approval had been given for a retirement village).
The Panel expressed concerns about the proposed approach to development contributions. It said:

The Panel is also troubled by the proposed approach to development contributions. The Amendment proposes a dual approach through the use of both a Development Contributions Plan overlay and the use of a Section 173 Agreement through the proposed Development Plan Overlay.

Mr Cowley hinted during the course of the hearing that Council's use of Section 173 Agreements was an attempt to ensure that decisions on planning matters were as far as possible in the hands of the Council and that decisions by VCAT were avoided. It is a fundamental principle of the Victorian planning system that aggrieved parties can take matters to VCAT and in the Panel's opinion it is not the purpose of controls to attempt to impose 'belt and braces' solutions simply to avoid VCAT hearings.

With a strong policy framework and clear and concise controls, the need for disputes can be minimised. What is proposed in this instance however is a control regime that has the potential to lengthen VCAT hearings rather than remove the need for them.

In the Panel's opinion, there is no need for both an Agreement and the DCPO and in this case it is of the view that, subject to minor changes set out in its recommendations, the exhibited DCPO is the appropriate mechanism to fund the infrastructure that will be required when existing lots in this are subdivided.

Further concerns were expressed about the use of the Design and Development Overlay.
The Panel recommended a number of changes to the suite of proposed controls under Amendment C42. They included preparation of a new site specific Design and Development Overlay and preparation of a revised Development Contributions Plan Overlay, which would include reference to the open space levy of 10%. The Panel recommended deletion of the Development Plan Overlay.
The version of Amendment C42 ultimately adopted by the council and approved by the Minister departed significantly from the Panel's recommendations and the exhibited amendment. It rezoned the land to Residential 1 Zone and applied only one overlay, the Design and Development Overlay. It included in schedule 11 to the Design and Development Overlay a wide range of requirements that had previously been the subject of separate overlays. This includes that part of clause 3 requiring a section 173 agreement to provide for payment of development contributions and contributions to public open space, plus other matters.

Statutory scheme for payment of development contributions

The case of Dennis Family Corporation v Casey CC[2] sets out a history of development contributions in Victoria, the background to the Development Contributions Review and a description of the nature of development contributions as provided for in Part 3B of the Act and the Development Contributions Guidelines. The Development Contributions Review (2000-2003) led to amendments to the Planning and Environment Act 1987 in 2004, which resulted in the present form of the Act as it relates to development contributions and conditions in permits involving the provision of a payment for works, services, or facilities. The Development Contributions Guidelines, which can be found on the website of the Department of Planning and Community Development (DPCD), were also updated to reflect the outcomes of the Review and changes to legislation.
Clause 18.12 of the SPFF in the Mornington Peninsula Planning Scheme provides as follows:

18.12 Developer contributions to infrastructure

To facilitate the timely provision of planned infrastructure to communities through the preparation and implementation of development contributions plans.

Development Contributions Plans, prepared and approved under the Planning and Environment Act 1987, should be used to manage contributions towards infrastructure.

Development contributions may be collected on the basis of an approved Development Contributions Plan.

When preparing Development Contributions Plans planning authorities should have regard to the Development Contributions Guidelines (Department of Sustainability and Environment, June 2003).

Part 3B of the Act authorises the inclusion of development contributions plans in a planning scheme for the purpose of levying contributions for the provision of works, services and facilities. The Development Contributions Plan Overlay provides the mechanism for including an approved development contributions plan in the planning scheme. Sections 62(5) and 62(6) make it clear that development contributions can only be lawfully imposed (as distinct from voluntary provided) by way of approved development contributions plans under Part 3B of the Act. They provide as follows:

(5) In deciding to grant a permit, the responsible authority may -

(a) include a condition required to implement an approved development contributions plan; or

(b) include a condition requiring specified works, services or facilities to be provided or paid for in accordance with an agreement under section 173; or

(c) include a condition that specified works, services or facilities that the responsible authority considers necessary to be provided on or to the land or other land as a result of the grant of the permit be -

(iii) provided or paid for partly by the applicant where the remaining cost is to be met by any Minister, public authority or municipal council providing the works, services or facilities.

(6) The responsible authority must not include in a permit a condition requiring a person to pay an amount for or provide works, services or facilities except -

(a) in accordance with subsection (5) or section 46N; or

(b) a condition that a planning scheme requires to be included as referred to in subsection (1)(a); or

This understanding is reinforced by reference to the Second Reading Speech in relating to the 2004 amendments to the Planning and Environment Act 1987, where the Minister for Planning said in describing the purpose of the amendments:

The Government has recognised that the current legislative provisions relating to permit conditions requiring payments for or provision of infrastructure are confusing and ambiguous.

Section 62 of the Act is to be amended to clarify that councils and referral authorities have power to recover, by planning permit conditions, the cost of the impact of individual developments where a need for works, services or facilities is necessitated by the development. ...

However, it should be understood that permit conditioning provisions should not undermine the principle that development contributions applying to multiple land owners should be collected via development contributions plans.[3]

It was accepted by Justice Osborn in Casey City Council v Carson Simpson Pty Ltd[4] that:

[134] This statement, together with the background to the amendment, support the view that it was directed in significant part to clearly proscribing "informal" DCPs, following the controversy attaching to the decision in Curry v Shire of Melton. ...

The facts in Curry v Melton SC[5] were that Melton Shire Council had an adopted DCP[6], but it had not been incorporated in the Melton Planning Scheme and thus was not an "approved" DCP under the Act. A condition on a planning permit for the subdivision of certain land into 208 lots required the owner to enter a Section 173 Agreement to pay development contributions in accordance with the adopted DCP.
Justice Balmford held that the condition was invalid. Because the DCP was not an approved plan under the Planning and Environment Act 1987, Section 62(5)(a) did not empower the making of the condition, nor was the condition otherwise authorised by Section 62(5)(b). This meant that the general ability to impose a condition requiring an owner to enter a Section 173 agreement pursuant to section 62(2)(f) of the Act was not open ended. It was limited to matters that are otherwise authorised or valid.
The controversy referred to by Justice Osborn in Casey City Council v Carson Simpson Pty Ltd related to deficiencies in the wording of the (then) provisions of sections 62(5) and 62(6). These deficiencies were intended to be rectified by the 2004 amendments to the Act.

The situation in Curry v Melton SC involved a planning permit condition which attempted to levy the development contributions by requiring the developer to enter a Section 173 agreement. In holding this to be invalid, Justice Balmford said:

[25] As to the general opening words of sub-section 62(2) ["The responsible authority may include any other condition it thinks fit..."], Mr Morris submitted that to adopt the interpretation put forward by Mr Wright would be to negate the careful drafting and nice distinctions appearing in sub-sections 62(5) and (6). I am satisfied, on the authority of the Second Reading Speech, that the purpose of the Development Contributions Act [now Part 3B of the Planning and Environment Act 1987] was to establish a new system for the collection of moneys to fund relevant infrastructure, and that the new system had been prepared after lengthy and elaborate consideration and consultation. That being so, I would find it to be in the highest degree improbable that Parliament would have intended, by retaining those general words, to authorise a condition on a permit providing for the collection of moneys to that end by means other than the machinery carefully and precisely established by those two sub-sections.

The effect of the decision in Curry was to make clear that a collection of money which was not otherwise valid under the Act could not be made valid simply by including it in a section 173 agreement.
The Development Contributions Review found that there may be situations where developers are willing to make payments or provide works, services or facilities which are not part of an approved development contributions plan. In order not to remove that opportunity, the ability for councils and developers to enter a section 173 agreement to provide works, services or facilities or pay for them was retained in the revised version of section 62(5)(b). However, Development Contributions Guidelines make it clear that such arrangements must be consensual and voluntary.
The relevant provisions of the Guidelines state[7]:

Voluntary agreements provide an alternative mechanism to a DCP for obtaining development contributions towards infrastructure provision. The following guidelines provide information about the use of voluntary agreements for this purpose. They explain:

What are voluntary agreement?
When can a voluntary agreement be used?
What can a voluntary agreement provide for?
Where can further information be obtained?

There is an opportunity within the planning system for landowners, the council and other parties to freely negotiate agreements for the provision of infrastructure, at the time a development proposal is considered.

An agreement can be used to place an obligation on the parties to:

Provide infrastructure, and/or
Pay for infrastructure.

Entering into an agreement for development contributions requires all parties to voluntarily agree to commit to their obligations, as set out in the agreement. Therefore, the establishment of a voluntary agreement cannot be a requirement of a planning scheme amendment or planning permit.

Section 173 of the Planning and Environment Act 1987 provides a mechanism for formalising a voluntary agreement between the responsible authority, a landowner, and other parties. The authority that administers, the planning scheme is called the responsible authority. It is usually the council.

The agreement is made under seal and its terms, conditions and obligations are binding on the owner and subsequent owners of the land that the agreement affects. The agreement is usually registered on the title to the land that it affects to ensure that the owner of the land at the time will meet any obligations contained within the agreement.

Section 173 agreements are enforceable through Victorian Civil and Administrative Tribunal (VCAT ). If a party fails to meet its obligations under the agreement, VCAT may issue an Enforcement Order in response to a request from one of the parties.

In addition to obtaining development contributions for infrastructure provision, the Act allows for section 173 Agreements to be used for a range of matters including:

Regulating the use or development of the land.
Identifying conditions that the use or development of land must meet, and
Advancing the objectives of planning in Victoria, planning schemes and planning scheme amendments.

A voluntary agreement in relation to infrastructure provision can be initiated when:

The council considers a planning scheme amendment request, and
The council considers a planning permit application.

A voluntary agreement for the provision of infrastructure is appropriate when the parties agree to a mutually acceptable outcome. An acceptable agreement is more likely to be achieved when the circumstances involve a large individual development or a small number of landowners.

The costs and standard of infrastructure provision.
The timing of the provision of infrastructure.
The parties' obligation to provide for infrastructure.
Timing of payments towards infrastructure.
The refund of cash contributions if infrastructure is not provided.
The upfront provision of infrastructure by one landowner and the reimbursement of the cost by other landowners as they develop; or
Works-in-kind in lieu of a cash contribution.

The emphasis on "voluntary" agreements in the Development Contributions Guidelines clearly indicates it is not intended that section 173 agreements which are not voluntary can be forced onto a developer by way of a condition in a permit that is not agreed to or used as a means to circumvent the provisions of Part 3B of the Act.

Clause 3.0 of Schedule 11 to the Design and Development Overlay requires a condition in a permit for subdivision or additional residential development for a section 173 agreement to pay development contributions according to a document which is not an approved development contributions plan under Part 3B of the Act or part of the planning scheme. Such a provision offends against the principles of the Act relating to development contributions, clause 18.12 of the SPPF, the Development Contributions Guidelines and the Government's stated purpose for the most recent amendments (2004) to the Planning and Environment Act 1987 relating to development contributions.
Adoption and approval of Amendment C42 to the Mornington Peninsula Planning Scheme postdates the Development Contributions Review, the amendments to the Planning and Environment Act 1987, and the Development Contributions Guidelines. It is difficult to understand how the council could have conceived this schedule, or how relevant department officers could have endorsed it and allowed the Minister to approve it. It is clearly contrary to Government intent.

Notwithstanding my finding that the relevant provision of clause 3.0 of DDO11 contravene Government intent, the question of law I am asked to rule upon concerns the validity of condition 3, not the validity of the provisions of DDO11.
The Tribunal has no power under the Planning and Environment Act 1987 to amend or alter a planning scheme or to make declarations about the validity of planning schemes. The proper place to challenge the validity of a planning scheme is in the Supreme Court.[8] The Tribunal must accept that Schedule 11 to the Design and Development Overlay is a valid part of the Mornington Peninsula Planning Scheme and I must therefore interpret and apply the provisions of the schedule as I find them.

When construing the provisions of Schedule 11, I am construing the provisions of a subordinate instrument. I must therefore be guided by section 22 of the Interpretation of Legislation Act 1984, which provides as follows:
1. Subordinate instruments to be construed subject to legislative power of the State and to empowering Act

(1) Every subordinate instrument shall be construed as operating to the full extent of, but so as not to exceed -

(a) the legislative power of the State of Victoria; or

(b) the power to make the subordinate instrument conferred by the Act under or pursuant to which it is made -

to the intent that where a provision of a subordinate instrument, or the application of any such provision to any person, subject-matter or circumstance, would, but for this section, have been construed as being in excess of that power, it shall nevertheless be a valid provision to the extent to which it is not in excess of that power and the remainder of the subordinate instrument and the application of that provision to other persons, subject-matters or circumstances shall not be affected.

(2) The provisions of this section are in addition to, and not in derogation of, any provision of a subordinate instrument or of the Act under or pursuant to which a subordinate instrument is made relating to the construction, or extent of the operation, of that subordinate instrument.

There are two parts of condition 3 (as required by DDO11) which are being challenged - the provision of development contributions and provision of contributions to public open space. In this decision, I will confine my remarks to these aspects. However, this does not necessarily mean that the other aspects of the condition are free from doubt: it simply means they have not been the subject of this proceeding or argument before me.
Two aspects of DDO11 involve the principles of interpretation of subordinate instruments. First, DDO11 is part of the Mornington Peninsula Planning Scheme. The planning scheme is a subordinate instrument under the Planning and Environment Act 1987. Thus section 22 of the Interpretation of Legislation Act 1984 requires that it be construed in a way that does not exceed the power under the Planning and Environment Act 1987 to make a planning scheme. Second, Schedule 11 is a subordinate instrument under the planning scheme. Schedules to overlays under the planning scheme can only make provision for those matters allowed by the overlay. Thus a schedule cannot exceed the power conferred by the overlay. It cannot introduce new planning controls or requirements not authorised by the primary provisions of the overlay.

On behalf of the applicant, Mr Ng submitted that the power to collect development contributions is provided by section 46N of the Planning and Environment Act 1987 on the basis of an approved development contributions plan. A development contributions plan is authorised by section 46I, the contents of which are specified in section 46K. Other than public open space contributions for the subdivision of land as provided by clause 52.01 of the planning scheme and section 18 of the Subdivision Act 1988, section 46I of the Planning and Environment Act 1987 and the other provisions of Part 3B of the Act provide the exclusive code for the levying of development contributions. He submitted that the council has not followed the procedure laid down in the Act. Therefore, the imposition of development contributions in DDO11 and condition 3 proposed by the council, which flows from it, will be ultra vires. DDO11 is subordinate legislation under the Planning and Environment Act 1987 and cannot usurp the enabling authority of the parent Act.
On behalf of the council, Mr Jackson submitted that there is nothing in the Planning and Environment Act 1987 that makes Part 3B an exclusive code for the introduction of development contributions. Schedule 11 to the Design and Development Overlay is part of the planning scheme. It requires a condition to be included in any permit for subdivision or additional residential development. This is therefore a condition to which section 62(1) of the Act applies. This section provides that in deciding to grant a permit, the responsible authority must include any condition which the planning scheme requires to be included. It is therefore not something that the Tribunal has any discretion about.
The council also made detailed submissions about public open space contributions. As a result of my findings and conclusions about the status of clause 3 of DDO11, it is not necessary for me to analyse all the cases and propositions put before me on this issue. The interpretation issues raised by the council in its submission about public open space contributions are important, but they do not need to be dealt with in the context of this particular case.

37 The council has contended that condition 3 must be included in the permit because this is what clause 3.0 of Schedule 11 of the Design and Development Overlay requires. Therefore the condition must be included by reason of section 62(1)(a) of the Act.[9] I disagree with this contention. I find that this is not a condition which the planning scheme requires to be included for the following reasons.

The requirement to include this condition is included in a schedule to the Design and Development Overlay not the overlay itself. If this was a condition in a schedule to the Development Plan Overlay there would be no doubt that it must be included in a permit because clause 43.04-1 of the Development Plan Overlay provides that a permit granted must:
- Include any conditions or requirements specified in a schedule to this overlay.
Clause 43.04-1 draws a distinction between "conditions" and "requirements". A similar distinction is drawn in the Incorporated Plan Overlay (clause 43.03-1) and the Development Contributions Plan Overlay (Clause 45.06-1).
However, the Design and Development Overlay simply refers to "requirements". Clause 43.02-2 relates to buildings and works and provides that buildings and works "must be constructed in accordance with any requirements in a schedule to this overlay". A schedule may include "requirements" relating to building setbacks; building height; plot ratio; landscaping; or any other requirements relating to the design or built form of new development. Clause 43.02-2 does not authorise any requirements to pay development contributions or contributions for public open space.
Clause 43.02-3 deals with subdivision and provides that:

Subdivision must occur in accordance with any lot size or other requirement specified in a schedule to this overlay.

A permit may be granted both for buildings and works and to subdivide land which is not in accordance with any lot size or other requirement in a schedule to the overlay, unless the schedule specifies otherwise. Clause 3.0 of the schedule provides that the "requirements" set out in the clause cannot be varied with a permit except in certain circumstances, which are not relevant in this case.
There is no reference in the part of the schedule dealing with buildings and works (clause 2.0) to a permit condition such as condition 3. Rather, the condition is required by clause 3.0 which relates to subdivision. This is notwithstanding that there is no subdivision associated with the current permit application.
Nevertheless, the requirement in clause 3.0 purports to require this condition both in respect of permits for subdivision or for "additional residential development". It is arguable that this refers to use of land rather than buildings and works, in which case it would have no validity because no permit is required under the Design and Development Overlay for use. However, I will assume for present purposes that the relevant aspect of clause 3.0 of the schedule relates both to subdivision and to buildings and works notwithstanding confusion about the headings.
The question that arises is whether a "requirement" in a schedule must be treated as though it were a condition for the purposes of section 62(1)(a) of the Act. In my view it does not so equate for the following reasons.
The planning scheme draws a clear distinction between conditions and requirements specified in schedules to overlays. A schedule to an overlay is subordinate to the overlay and may only provide for what is authorised by the overlay itself. The schedule cannot impose controls or require things that go beyond what are provided for in the overlay. It cannot exceed the power of the overlay.
Under the Development Plan Overlay, the Incorporated Plan Overlay and the Development Contributions Overlay, each specifically requires that a permit that is granted must include "conditions" set out in the schedule. It is the overlay that contains the power to identify conditions which must be included in a permit. Such conditions would clearly be conditions which the planning scheme requires to be included in a permit within the meaning of section 62(1)(a).
However, the Design and Development Overlay does not include a similar power. It does not provide that a permit must contain conditions in a schedule to the overlay. Rather, it provides that buildings and works "must be constructed" in accordance with any "requirements" in a schedule to the overlay. With respect to subdivision, it provides that subdivision "must occur" in accordance with any "requirement" specified in a schedule to the overlay.
Thus the requirements of clause 43.02-3 relate to the physical construction of buildings and works or the physical subdivision of land. This is understandable given that the purpose of the Design and Development Overlay is to identify requirements relating to "the design and built form of new development". The purpose is not to identify "the form and conditions of future use and development" (as is the purpose of the Development Plan Overlay and the Incorporated Plan Overlay).
Requirements relating to the physical design and built form of new development may be achieved by a schedule stating that a permit must not be granted to allow subdivision or development of a certain type or that does not comply with certain physical requirements. But the design and built form of new development does not include payments of money for development contributions or public open space. A permit condition for such payments cannot be said to be a requirement for the construction of buildings and works, or the layout or physical implementation of a subdivision.
I do not consider that the distinction between "conditions" and "requirements" found in overlays in the planning scheme is inadvertent. In my view, it was intended that under some overlays a schedule could specify that certain conditions must be included in permits granted under the overlay. These are conditions that section 62(1)(a) of the Act applies to. They must be included in a permit.
In respect of other overlays, including the Design and Development Overlay, there is no power to require that certain specified conditions must be included in a permit. There may be a power to require that subdivision occur in a certain way or that buildings and works be constructed in a certain way. Those requirements may be achieved by way of permit. Sometimes a permit condition may be specified in a schedule to the overlay as a means of achieving a particular requirement. Such conditions should not be confused with conditions that are specifically required to be included in a permit under the provisions of the overlay itself.

My conclusion is that the Design and Development Overlay does not include a power to specify that a permit must include any conditions in a schedule to the overlay.
The Design and Development Overlay enables a schedule to set out requirements for construction of buildings and works or for subdivision to occur. Any such requirements must only be for matters authorised by the overlay. In the case of the Design and Development Overlay they must relate to the design and built form of new development. I find that requirements for the payment of development contributions or public open space do not relate to the design and built form of new development. Thus a requirement in a schedule requiring a permit condition to this effect is not authorised by the provisions of the overlay and is therefore ultra vires. In construing any such condition in a permit the condition would have to be construed as being beyond the power of the instrument under which it is made (i.e. clause 43.02 of the planning scheme). Such a condition would therefore be invalid. An invalid condition that is not a condition which the planning scheme requires to be included (within the meaning of section 62(1) of the Act) is therefore not a condition that must be included in the permit.

Is condition 3 a condition that may be included in the permit?

Section 62(1) of the Act deals with what conditions a responsible authority must or must not include in a permit. Section 62(2) deals with conditions that a responsible authority may include in a permit.
However, any condition included under section 62(2) would be subject to the usual tests of validity. In particular, conditions could not be included that are contrary to section 62(5) and (6) of the Act. These sections provide as follows:

(5) In deciding to grant a permit, the responsible authority may -

(a) include a condition required to implement an approved development contributions plan; or

(b) include a condition requiring specified works, services or facilities to be provided or paid for in accordance with an agreement under section 173; or

(iii) provided or paid for partly by the applicant where the remaining cost is to be met by any Minister, public authority or municipal council providing the works, services or facilities.

(6) The responsible authority must not include in a permit a condition requiring a person to pay an amount for or provide works, services or facilities except -

(a) in accordance with subsection (5) or section 46N; or

(b) a condition that a planning scheme requires to be included as referred to in subsection (1)(a); or

It is relevant consider section 62(6) first in relation to the validity of condition 3 and those aspects requiring payment of development contributions and public open space contributions. I interpret each of these aspects as a condition requiring a person to pay an amount for facilities. Such a condition cannot be included in a permit except in accordance with paragraphs (a), (b) or (c) of section 62(6). Paragraph (c) can be discounted because this is not a condition required by a referral authority. Paragraph (b) can also be discounted because of my previous finding that condition 3 is not a condition that a planning scheme requires to be included as referred to in section 62(1)(a). This leaves paragraph (a).
In deciding whether condition 3 is precluded pursuant to section 62(6)(a), the issue is whether those aspects of condition 3 relating to the payment of development contributions and public open space contributions are accordance with section 62(5) or section 46N.
I will deal first with section 46N. It provides as follows:

46N Collection of development infrastructure levy

(a) an approved development contributions plan provides that a development infrastructure levy is payable in respect of the development of any land; and

(b) an application is made under this Act for a permit to carry out that development on that land -

the responsible authority must include a condition in the permit that the applicant -

(c) pay the amount of the levy to the relevant collecting agency within a specified time or within a time specified by the collecting agency; or

(d) enter into an agreement with the relevant collecting agency to pay the amount of the levy within a time specified in the agreement.

I find that section 46N is not applicable because there is no approved development contributions plan. The Development Contributions Report - Tower Road, Mt Eliza (option 1) March 2004 prepared by Beveridge Williams and Co Pty Ltd referred to in the condition is not an approved development contributions plan as defined in Section 46H of the Act because it does not form part of an approved planning scheme.
When amendment C42 was exhibited, the proposed Development Contributions Plan Overlay included a development contributions plan, which if approved would have met the requirements of part 3B of the Act. Hence development infrastructure levies under the development contributions plan could have been required by permit under section 46N of the Act. However, the council chose not to go down this path. The benefit of section 46N is therefore not available to it.
It therefore needs to be determined whether the condition to pay development contributions and contributions for public open space is in accordance with section 62(5).

The meanings of sections 62(5) and (6) of the Planning and Environment Act 1987 were the subject of detailed consideration by Justice Osborn of the Supreme Court case of Casey City Council v Carson Simpson Pty Ltd.[10] With respect to section 62(5)(a), he held this provision should be construed as referring to conditions other than conditions prescribed by section 46(N)(1).[11] However, as there is no approved development contributions plan, I find that section 62(5)(a) is not relevant in this case.
Leaving aside section 62(5)(b) for the moment and looking at section 62(5)(c), I find that this is not relevant because the payment of development contributions contemplated by the condition does not provide that specified works, services or facilities will be paid for wholly by the applicant, or partly by the applicant with the remaining cost to be met by the council or other public authority. Rather, it is a situation where the council intends to collect development contributions from more than one developer towards works, services and facilities, and contributions for open space from more than one developer. This is the type of "informal" development contributions plan that Justice Balmford in Curry v Melton Shire Council[12] found was proscribed by sections 62(5) and (6).
I turn now to section 62(5)(b), which provides that a responsible authority may include a condition requiring specified works, services or facilities to be provided or paid for in accordance with a section 173 agreement.
In Naprelac v Baw Baw SC[13] and Springhaven Property Group Pty Ltd v Whittlesea CC[14], the Tribunal held that section 62(5)(b) did not enable the council to achieve by way of a condition requiring a section 173 agreement something that was otherwise precluded by sections 62(5) and (6) in the absence of mutual consent. I agree with the principle established by these cases.
Section 173 of the Act enables agreements to be entered to achieve things not otherwise possible, but in the absence of voluntary agreement, the contents of a condition requiring such a condition are subject to review and must meet the same tests of validity, relevance and reasonableness as any other permit condition. This is the case whatever the subject matter of the section 173 agreement may be. Section 62(2)(f) enables conditions to be placed on planning permits requiring section 173 agreements and such conditions may be tested on review regarding their validity, relevance or reasonableness.
Section 62(6) provides that certain conditions relating to the provision or payment for works, services and facilities must not be included in a permit, but via the operation of section 62(5)(b) such conditions appear to be exempt if they are the subject of a section 173 agreement. However, the Development Contributions Guidelines (which clause 18.12 of the SPPF refers to) make it quite explicit that section 173 agreements, if they are to be used as an alternative mechanism to obtain development contributions, must be voluntary. The parties must agree to a mutually acceptable outcome. In the absence of voluntary agreement, a responsible authority cannot rely on section 62(5)(b) to impose a condition requiring a section 173 agreement that would otherwise contravene the provisions of the Act. Section 62(5)(b) only exempts a condition that would otherwise offend section 62(6) if it is entirely voluntary.
In the present case, there is no mutual consensus between the applicant and the council on the subject of the proposed section 173 agreement. There is no voluntary agreement. Therefore, I find that the council cannot rely upon section 62(5)(b) to support condition 3.

I conclude that condition 3 is not in accordance with section 62(5). Thus, it does not fall within the ambit of section 62(6)(a).
As condition 3 fails to meet any of the exceptions provided by paragraphs (a), (b) and (c) of section 62(6) it is therefore invalid because it is contrary to section 62(6) of the Act as it is a condition requiring a person to pay an amount for works, services or facilities.
My conclusion is that condition 3 is invalid because it contravenes section 62(6) of the Planning and Environment Act 1987. Therefore it is not a condition that may be included in the permit.

There is a further reason as to why condition 3 is not a valid condition as it relates to development contributions and this is section 7(4) of the Planning and Environment Act 1987. This section provides as follows (so far as relevant):

7(4) If there appears to be an inconsistency between different provisions of a planning scheme -

(a) the scheme must, so far as practicable, be read so as to resolve the inconsistency; and

(i) the State standard provisions prevail over the local provisions; ...

I find that the relevant aspect of clause 3.0 in DDO11 is inconsistent with the State standard provisions of the planning scheme relating to development contributions (clause 18.11 and clause 45.06).
I have not discussed this issue in detail because it simply reinforces my other conclusions. However it is clear from this provision in the Act that local provisions cannot be used to override the intent and structure of the planning scheme as established through the State standard provisions.

As a separate issue to the validity of condition 3, I find the aspect of the condition relating to public open space contributions would not be applicable in the present case because payment is only required in respect of subdivisions. The current application is not for a permit for subdivision but for buildings and works. The relevant part of clause 3.0 of DDO11 purports to require the condition in any permit for subdivision or additional residential development. However, the section dealing with contributions to public open space is applicable only to subdivisions. The provision for calculating contributions refers specifically to the site value "of the land to be subdivided" and provides for a minimum payment of not less than $10,000.00 (indexed) "for every new lot created".
I see no justification for reading into this provision the additional words "or developed" after reference to "the land to be subdivided" and "for every new lot created". There is no "mischief" that the schedule to the Design and Development Overlay is intended to rectify that would justify reading in such words. There is no suggestion that these words have been inadvertently omitted and there is no requirement to read these words into the schedule to achieve a purpose or objective of the planning scheme.
I therefore find that a condition requiring payment of contributions for public open space would not be required under DDO11 because (even if the requirement was valid), contributions are only payable in respect of subdivision, not for additional residential development (when all that the permit allows is buildings and works).

The questions of law involved in this case are complex. I am mindful of the limits on the Tribunal's powers to question the validity of planning schemes. At the same time, when called upon to interpret the meaning of a particular provision of a schedule to the planning scheme or the validity of a condition proposed as a consequence of the planning scheme provision, I must construe them in such a way as not to exceed the power under which the schedule is made or the Act allows.
It is fair to say that the issues raised are more complex than the parties argued before me. Mr Ng's submission, in particular, relied more on the "vibe" of the matter than on rigorous legal analysis. However, his sense of the "vibe" was correct and I have ultimately determined to make declarations along the lines he seeks.
A concern highlighted by the case however, is how this aspect of DDO11 could ever have been approved by the council, let alone endorsed by the department and ultimately approved by the Minister. The departmental scrutiny of Amendment C42 appears to have ignored the various contraventions of the Act's provisions regarding development contributions and the Government's policy and intent that "permit conditioning provisions should not undermine the principle that development contributions applying to multiple land owners should be collected via development contributions plans".[15]
So far as the particular questions of law are concerned, which I have been asked to rule on, I make the following declarations:
1. Condition 3 so far as it relates to payments for development contributions and contributions for public open space, is invalid because it contravenes section 62(6) of the Planning and Environment Act 1987;
2. Condition 3 so far as it relates to provision for contributions to public open space, is not applicable to permit application P06/0057 because the payment of contributions is only required in respect of subdivision.

[1] Amendment C42 Mornington Peninsula Planning Scheme Panel Report (June 2004) page 39

[2] [2006] VCAT 2372 at [32]- [52]. See also Casey CC v Carson Simpson Pty Ltd [2007] VSC 25 at [20]- [27] where this history is quoted with approval.

[3] In Victoria, Parliamentary Debates, Legislative Assembly, 4 November 2004 (Ms Delahunty, Minister for Planning) 1323

[7] DPCD website: Development Contributions Guidelines, Understanding Development Contributions (June 2003) pp 5-6

[8] See the Boyse Estate v Hume CC [2007] VCAT 237 at [23]

[9] Section 62(1)(a) provides as follows:

(1) In deciding to grant a permit, the responsible authority must -

(a) include any condition which the planning scheme or a relevant referral authority requires to be included.

[15] Second Reading Speech, Planning and Environment Amendment Bill 2004

Environment Act 1987

Cameron Manor Pty Ltd v Mornington Peninsula SC

At a glance

Court

Decision date

Source

Judgment (121 paragraphs)

Cameron Manor Pty Ltd v Mornington Peninsula SC (Red Dot) [2007] VCAT 1822 (5 October 2007)

Parties

Legislation Cited (1)