Carson Simpson Pty Ltd v Casey CC [2006] VCAT 1725

6 Condition 7(d) of 25 are the ones mentioned in the application for review. They are the ones under actual review in this proceeding. However, it needs to be noted that the applicant company does not have any quarrel with what either of these conditions say. It is common ground that both are necessary and appropriate. The controversy is not about the plans for the road or the provision of that portion of road, but in relation to the bearing, and sharing, of the cost of the site. The company contends that the permit is quite unfair in this respect and that it requires amendment. It considers that an amendment to condition 25 is the appropriate way of dealing with this. The intention is not to change what is said in condition 25, but rather to add to it a stipulation in relation to the bearing of the cost in the construction of the road.

7 Mr. Appudurai, who appeared for the responsible authority, purported to set out the issues to be decided in part 7 of his written submissions constituted by his paragraphs 7.1 to 7.7 inclusive. In so doing he has argued that these conditions are valid, appropriate and necessary. In so saying he mistakes the issue to be decided in as much as the company entirely agrees that those conditions, as far as they go, are entirely necessary, valid and appropriate. They are simply not in issue, and there is no issue about their validity or appropriateness that needs to be decided. The real issue to be decided is what provision is to be made, if any, as to the payment or sharing or bearing of the cost of the provision of the road.

8 As things stand, this piece of road is needed for the subdivision to proceed. The responsible authority is quite right to make construction of that piece of road a condition precedent to the subdivision. We have a situation here where, although ultimate construction of the whole of this road to its eventual standard is contemplated for the future, neither the responsible authority nor any other authority has it in mind to construct the whole of it, or the portion required for this subdivision in the immediate future, within the time span within which the company wishes to proceed with this subdivision.

9 In these circumstances, the road will not be constructed, and the subdivision cannot proceed for the time being, unless the company constructs that portion of the road specified in condition 25. As far as the responsible authority is concerned, if the company wants to construct the road so as to be able to proceed with the subdivision, then it should proceed to construct it and bear the cost of such construction.

10 The company might well be content to accept that position if it was not for condition 40 of the permit, and the development contribution plan pursuant to which condition 40 is included in the permit.

11 There are three control provisions in the planning scheme that apply to this land. It is, for the most part, in a Residential 1 zone with a small portion in an Urban Floodway zone. The land is also subject to a Development Plan Overlay, Schedule 1. However, neither the zone provisions nor the Development Plan Overlay and its Schedule concern us in the present case.

12 The control provisions that we are concerned with is the Development Contributions Plan Overlay in cl.45.06 of the planning scheme and Schedule 4 in relation thereto.

13 Clause 45.06-1 provides that land subject to the overlay cannot be subdivided until a Development Contributions Plan has been incorporated in the planning scheme. Development Contributions Plans are provided for in Part 3B of the Planning and Environment Act 1987 (PE Act) constituted by ss.46H to 46QC.

14 There is such a Development Contributions Plan in existence and it has been incorporated in the planning scheme. It is known as "DEVELOPMENT CONTRIBUTIONS PLAN FOR LOCAL STRUCTURE PLAN 3 CRANBOURNE-EAST". The land we are concerned with, together with other substantial areas of land in the vicinity, are covered by this Development Contributions Plan.

15 Clause 45.06-1 also provides that, where a permit for subdivision is granted, it must be consistent with the Development Contributions Plan and must:

26 Clause 3 of the Schedule goes on to say that levies are payable as specified in dollars per lot of all land in the subdivision, that the amounts in the Schedule are in 1993 dollars and that the responsible authority will adjust these amounts quarterly for inflation starting 1 July 1994 based on the General Consumer Price Index for Capital Cities.

27 It can be seen that distributor roads alone constitute almost half of the total cost of works and that element represents almost half of each levy of $2,675. The traffic management works takes the sum of distributor roads and the traffic management works over the half way mark.

28 It is common ground in this case that the distributor roads item, both in the total cost and in the levy breakdown, includes and covers Linsell Avenue up to its ultimate so-called sub-arterial status and over its entire length or a much greater length than is needed for the current subdivision. The condition 25 road works required to enable this subdivision to proceed are a small part of much greater road works for Linsell Avenue covered by the Development Contributions Scheme and the levies that the company is required to pay pursuant to condition 40 in relation thereto.

29 Condition 40 affectively requires the company to pay a levy of $2,675 per lot adjusted to current values in accordance with the consumer price index and this contribution will cover the liability and responsibility of the company to contribute the construction of Linsell Avenue, including the condition 25 portion thereof.

30 It follows that the permit in its present form, containing both conditions 25 and 40, requires the company to pay twice in relation to the condition 25 portion of Linsell Avenue. It must pay the levy and it must pay again to construct the condition 25 portion of the road. The permit and its conditions provide no escape for the company, and no adjustment for the "double dipping" by the responsible authority. The only way a company can avoid paying twice is not to proceed with the subdivision. That is in spite of the circumstance that the subdivision is otherwise recognised as being in accordance with sound and orderly planning by the fact that the permit has been granted.

31 This is clearly a most unfair situation. In our opinion the permit can and should make suitable provision in relation to it. The permit, at present, does not do this.

32 Mr. Appidurai has argued that the permit is sufficient, valid, fair and appropriate as it stands, and that there is no occasion for such an adjusting provision. In fact, he argues that such provision cannot lawfully be made. He wants to insist that his client has control over the Development Contributions Plan, its administration and the timing and financing of its various components. That may be true, except for the state transport infrastructure contribution part previously mentioned. It hardly justifies an oppressive and unfair double payment by the company.

33 He has argued that the responsible authority is not yet ready to construct Linsell Avenue, or even the condition 25 portion of it. It may be years before it is ready to do so, notwithstanding that the grant of this permit indicates that development of this subdivision accords with sound and orderly planning. The responsible authority, he argues, is entitled to proceed as and when it thinks appropriate, and to receive and hold all levies in the meantime, subject to its obligation to the State Government in respect of the state transport infrastructure contributions. It is content to leave it to the company, if it wants to proceed with its subdivision (as it certainly does) to construct the road at its own expense and contribute the levy representing it share of the road on top of that.

34 If the company wants to dictate the timing of the road to enable its subdivision then, according to Mr. Appidurai, there is a price for such convenience and that price is, apparently, to pay twice for the road.

35 We are not impressed with this argument. There should only be a price for the early construction of part of Linsell Boulevard if the early construction in fact costs something. It has not been demonstrated that there would be any increased cost to the council or anybody else occasioned by the early construction. On the contrary, it is almost certainly a saving to have it constructed at an earlier, rather than a later stage, having regard to the escalation of costs in relation to road construction and similar works.

36 Furthermore, it has not been made apparent to us that construction in the near future is inconvenient, inappropriate or out of order. It is not as though it is proposed to advance in time works that could and should otherwise be significantly delayed. In general terms at least, it is true to say that road construction infrastructure is one of the first and foremost form of works needed in relation to the development of an area. Other things might wait until they are needed. They are not likely to be needed unless and until roads enable subdivision and development in the form of houses and people living in houses.

37 The Development Contributions Plan does contain some other provisions that perhaps have some relevance. For example, in part 10 it is noted that s.46J of the PE Act requires the imposition of a levy and that levies must be calculated on various bases specified there. There is a provision there that the responsible authority may accept works or land in lieu of fulfilling the contribution requirement. Presumably this means that someone who would otherwise have to contribute a levy might be forgiven the levy, or part of the levy, if it instead provides works or land. It seems appropriate enough in the circumstances of this case for the company to receive a credit against the levy that would otherwise have to pay in relation to road works in Linsell Boulevard and which the responsible authority would otherwise have to finance out of the levy.

38 The administration provisions in part 11 of the Scheme deal with how the responsible authority is to deal with levy money that it receives. Except for the railway contribution and the State road infrastructure contribution, the council is to pay such funds in a special reserve account and it is only to pay out money from the account for infrastructure within the area specified in the Development Contributions Plan.

39 Mr. Appidurai argued that all this means that, in effect, monies paid into that account are really to be regarded as a series of accounts with each levy distributed amongst them in accordance with the items then financed in the Scheme, and only the bits in those sub accounts can be used for those purposes. The Scheme does not really say that. It only says that amounts must be paid for infrastructure specified in the Scheme. It may be that early levies might need to be paid disproportionately for early requirements, with later requirements being made up for disproportionately out of later levy payments. Roads enabling development would appear to be in the early category.

40 Funds collected for the railway contribution and the State road infrastructure contribution are to be dealt with differently. They are to be held in special reserve accounts for these purposes and periodically transferred to the State Government. The periods for the periodic payments are not specified, but it is clear that these segments are, in effect, held on trust for the State Government or its instrumentalities for the particular purposes of railways and State road infrastructure. In these circumstances, the council may be able to determine the periods between the periodic transfers, but it cannot really use those particular funds itself, even for works specified in the Development Contributions Plan.

41 The responsible authority does recognise, to a certain limited extent, the injustice of the double dipping arrangement provided for in the current permit. It is prepared to allow an offset in favour of the company against the levy contributions, although that is not provided for in the permit. It apparently considers that it would be doing this by way of an act of grace. It is not clear to us that it recognises a legal basis for compelling it to make this concession.

42 However, it indicates that it would allow an offset to the extent of $190,000 valued as at December 1995. Six months have expired since then, so this set-off might be for a little more than $190,000, allowing for the two quarters of cost of living adjustment that have occurred since December 1995. Nevertheless, the total set-off would not be significantly more than $190,000, even when so adjusted. Certainly, it would not be anything like the $450,000 or $460,000 estimated as the current cost of carrying out the condition 25 road works.

43 There is a significant problem in relation to the set-off that the council is prepared to allow. It is inadequate, and does not bear a fair relationship to the actual costs of carrying out the works. This arises because it is based on the estimates in the Scheme that in turn give rise to the total cost and the levy per lot thereunder. The Scheme contemplates a life of 20 years. The Scheme is seriously under-funded because two quite serious mistakes have been made in relation to its preparation. It is common ground between the parties that these two problems exist and that they have given rise to significant under-funding.

44 The first problem is that there has been a miscalculation or misestimation in relation to the yield of residential lots per hectare over the whole area of the Development Contributions Scheme. That whole area is, of course, much larger than the area now proposed to be subdivided. We have been told that it is now recognised on both sides that the yield per hectare is markedly less than the original estimate. The result is that the number of lots to be levied to provide the fund for the Development Contributions Plan is in fact less than the number upon which the original calculations are based. The total cost of the Scheme is divided by the estimated number of lots in the area to derive the amount being levied. If the true yield is significantly less than the number used in that division, then the levy per lot and consequently the total fund will be significantly too small. If the right assessment of yield had been made, then the division would be by a smaller number resulting in a greater yield per lot. Although we do not have the exact figures as to the original number and the currently recognised realistic number, it appears that it may be that a factor of 15 lots per hectare was used where it should have been 13 per hectare. No doubt this creates a significant deficit where the Scheme is to provide certain works etc but where the fund will be insufficient for the purpose. This is a problem that bears on the council, rather than others. After all, the error is the council's error in that it is part of the Scheme that the council has prepared or adopted. The Scheme provides that any land can be levied only once.

45 The second problem is that the Scheme has adopted an entirely inappropriate inflation index in making provision for inflation. The General Consumer Price Index for Capital Cities is, as its name suggests, an index in relation to the value of consumer prices and variations in those prices. It is calculated on the basis of a so-called "basket" of consumer items of a sort households are obliged to purchase. It is a so-called cost of living index. It is not a cost of civil engineering index or a cost of land index.

46 As previously noted the things to be covered in this plan are basically civil engineering (principally road works and drainage) and the acquisition of land for road widening and for other community facilities. It was always unlikely that costs of road construction and land acquisition would move or inflate in accordance with the Consumer Price Index over 20 years. It was, of course, possible that the Consumer Price Index would move much more quickly and to a much greater extent and the cost of civil engineering and land. In that case, the adoption of the Consumer Price Index could be demonstrated to be inappropriate and unfair. Although that was possible, experience shows that it was unlikely, especially in the boom conditions that have been experienced in recent years. It might reasonably have been predicted but the costs of civil engineering and the acquisition of land, under these conditions, would inflate much more quickly than the Consumer Price Index. That has proved to be the case. The result is further serious under funding of the plan.

47 This is not so much a matter of bad luck, but rather the choice of a quite inappropriate index for making allowance for inflation. Other formulae or indices that might have been adopted. It is clear that the Consumer Price Index is not the appropriate one. It measures price movement, but not for the appropriate goods, services and land. This mistake further exacerbates the problem of the under funding of the Scheme.

48 It is a matter for the council to consider how it will deal with its under funding problem. However, it cannot expect to shove it off onto some, but not others, of those liable to pay the levy. It cannot load earlier subdividers to overcome, or partly overcome, the problems that council itself has created.

49 That is what it has attempted to do with its suggested off-set of $190,000. That figure, when it is analysed, is based on the current Scheme with its deficiency and the set-off contemplated is discounted accordingly. Thus, even with the contemplated set-off, the council intends that the company should bear the full current cost of constructing the condition 25 portion of the road to the benefit of the council and the Scheme although its liability under the Scheme is limited to the specified levy and the set-off is discounted because its calculation is based on the deficient fund and the deficient levy. The levy may be deficient, but it is all that this company is required to contribute under the Development Contribution Plan.

50 The permit, with its conditions as to provision of this road (condition 25) when read in conjunction with the levy requirement (condition 40) is clearly unfair. It should not be unfair. It should contain provisions that are fair and equitable. The proposed act of grace set-off, which is not part of the permit or its conditions, is a gesture towards redressing the deficiency of the permit, but is insufficient in the circumstances.

51 We do not accept the submission of Mr. Appidurai to the effect that there is no power to deal with this matter. It is not unusual, where the responsible authority or some other authority is proposing to provide some facility or works that will benefit a subdivision and that are necessary for the subdivision to require the subdivider to make a contribution to the cost of such works. Where the benefit is shared by more than one land holder, the contribution can be adjusted accordingly. It might be half from this subdivider and half, in due course, from the subdivider of the land across the road. Alternatively, a particular road might be partly a collector road for a subdivision and partly a through road serving the wider community. In those circumstances, there might be an apportionment between those considerations and the requirement of a contribution adjusted accordingly.

52 In this case, the responsible authority is not proposing, at this stage, to construct this part of Linsell Boulevard, and neither is any other authority. The company must construct it, if it wants to proceed with its subdivision. It may or may not have had to bear the full cost of the road, if there was no Development Contribution Plan. As it is there is a Development Contribution Plan that is to provide this portion of road, indeed much more of the ultimate Linsell Boulevard, but at a cost of the company to the extent of its levy of $2,675 in 1993 money values. In these circumstances, we think it is open to impose a requirement for a set-off against the levy requirement. We would impose it in the conditions rather than as a supposed act of grace and we would set it on a fair and equitable basis.

53 However, this does not apply to the $500 per lot in 1993 dollars in relation to railways or the $400 per lot, in 1993 dollars, in relation to the State Road Infrastructure Contribution. That $900 per lot, adjusted to current value in accordance with the Consumer Price Index has, in our opinion, to be made available to the State Government in accordance with the Development Contribution Scheme.

54 Mr. Townsend, who appeared for the company, suggested an addendum to condition 25 specifying the set-off. We propose to adopt that idea, although it might be said that the qualification should attach to condition 40. However, in doing so, we think it is necessary to make it clear that the set-off against the levy is not in relation to the $900, but only in relation to the balance of $1,775 (in, of course, 1993 money value).

55 We note that, at the beginning of the hearing, Mr. Appidurai claimed to be unaware of the true nature of the contest in this matter, including the idea of an addition to condition 25. Mr. Townsend claimed to have explained that point to him on the day or days prior to the hearing. This explanation was repeated at the beginning of the hearing. No adjournment was sought on that account.

_________________ ___________________

RUSSELL BYARD GERARD SHARKEY

SENIOR MEMBER SENIOR MEMBER

At a glance

Court

Decision date

Source

Judgment (27 paragraphs)

Carson Simpson Pty Ltd v Casey CC [2006] VCAT 1725 (23 August 2006)

Parties

Legislation Cited (1)