Council of the City of Sydney v Waldorf Apartments Hotel Sydney Pty Limited and Anor

KEY ISSUES: Injunctions and Declarations :- whether Court should exercise its discretion to make orders restraining breach of Environmental Planning and Assessment Act 1979 - final orders made allowing unlawful use to continue for defined period

LEGISLATION CITED: Central Sydney Development Control Plan 1996 Environmental Planning and Assessment Act 1979 s 124(1)

Council of the City of Sydney v Waldorf Apartments Hotel Sydney Pty Limited and Anor [2008] NSWLEC 97 Council of the Municipality of North Sydney v Sydney Serviced Apartments Pty Ltd [1992] NSWLEC 43 CASES CITED: F Hannan Pty Ltd v Electricity Commission of New South Wales [No 3] (1985) 66 LGRA 306 North Sydney Municipal Council v Sydney Serviced Apartments Pty Ltd (1990) 21 NSWLR 532 Warringah Shire Council v Sedevcic (1987) 10 NSWLR 335

APPLICANT Mr M Baird SOLICITORS LEGAL REPRESENTATIVES: City Prosecutor's Office, Sydney City Council RESPONDENTS Mr P McEwen SC SOLICITORS Landerer & Company

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

40389 of 2007 Council of the City of Sydney v Waldorf Apartments Hotel Sydney Pty Limited and Anor (No 2)

JUDGMENT 1 Her Honour: In Council of the City of Sydney v Waldorf Apartments Hotel Sydney Pty Limited and Anor [2008] NSWLEC 97 I held that the use of 57-67 Liverpool Street Sydney (the building) for serviced apartments without development consent was unlawful. I also held that the First Respondent was using the building for its business of serviced apartments without development consent. Declarations and orders are only sought against the First Respondent. The use of the building for serviced apartments is longstanding, having commenced in 1987. The Council had knowledge of the use from 1992. The relevant circumstances are set out in my earlier judgment at [10].

2 Declarations concerning the unlawful use for serviced apartments should be made. However, as indicated in my first judgment the consequential orders I make require further consideration as the unusual circumstances of this case raise issues about the appropriate manner in which the Court's discretion to make such orders under s 124(1) of the Environmental Planning and Assessment Act 1979 (the EP&A Act) should be exercised. I raised at [85] the possible option that the current use of 27 of the 100 apartments in the building could be allowed to continue regardless of whether an application for development consent for serviced apartment use was made. As a consequence of the declarations to be made, the other 73 apartments cannot be used for serviced apartments without development consent being granted (albeit with a twelve month period of grace under the Council's proposed orders). Council's submissions 3 The Council proposes the consequential order that the Respondents cease carrying out the use of the building as serviced apartments and that this order be stayed for twelve months. The Court should not hold that the impact of the unlawful use is minimal in the absence of any evidence on that issue. The lack of complaints can be explained by the current occupiers of the apartments assuming the use is lawful. The Council recognises that there are situations where an unlawful use is prohibited and the Court has exercised its discretion to allow that use to occur, see F Hannan Pty Ltd v Electricity Commission of New South Wales [No 3] (1985) 66 LGRA 306 at 311 and Warringah Shire Council v Sedevcic (1987) 10 NSWLR 335 at 339-341, 342. In this case the use is permissible with consent. It is important that the planning laws be enforced to ensure the economic and orderly development of the City of Sydney. The unlawful use can be regularised by the making of a development application and the granting of consent, if forthcoming. The use has not been subject to a merit assessment, which can occur if a development consent is lodged. 4 The making of orders allowing the unlawful use to continue in any form sets a bad precedent which could potentially impact on the way the City of Sydney pursues enforcement action in the future. It may need to consider taking criminal action instead of pursuing civil enforcement. 5 The Respondents have taken steps to mitigate potential detriment with the signing of new transitional management agreements with current apartment owners who allow their apartments to be used in the First Respondent's business for a fee. When these terminate the Respondents will not suffer detriment. Further the Respondents have benefited from lengthy continuous and undisturbed use of the building for an unlawful use. This was commenced without notice to or knowledge of the Council in 1987. Respondents' submissions 6 The Respondents have prepared draft orders which would enable the existing 27 apartments to continue to be used indefinitely for serviced apartments or, alternatively, provide that any 27 apartments in the building could be used for serviced apartments. Provision is made for reporting the apartments being used to the Council annually, which will enable enforcement of the order following inspection.

7 There is no evidence that the serviced apartment use in the building is having undesirable environmental impacts such as negative impacts on residential amenity. The only specific evidence is of three complaints by users of the serviced apartments that the service and accommodation was inadequate.

8 The Respondents argue that the orders proposed by the Council would effectively end the serviced apartment business in twelve months as it is highly unlikely the current controls in the Central Sydney Development Control Plan 1996, which require a separate lift and entrance for serviced apartment use, could be carried out economically. These controls are referred to specifically in the affidavit of Mr Moore, planner, relied on in the proceedings by the Council. If the Council's orders are made there would be a substantial impact on the Respondents' business and its use of lot 191. As well as the loss of the business, lot 191 will be substantially reduced in value. Finding 9 I identified in my earlier judgment at [79]-[84] the competing factors concerning the exercise of discretion in this case and therefore do not need to repeat those matters again here. As referred to in submissions and in my earlier judgment at [79] the principles identified by Kirby P in Sedevcic are important to consider when exercising the Court's discretion to make injunctive orders restraining activity. 10 The Council relied on the decision of Bignold J in Council of the Municipality of North Sydney v Sydney Serviced Apartments Pty Ltd [1992] NSWLEC 43 on remitter from the Court of Appeal in North Sydney Municipal Council v Sydney Serviced Apartments Pty Ltd (1990) 21 NSWLR 532 (Blues Point Tower) where his Honour had to determine if an injunction restraining the use of the Blues Point Tower building for serviced apartments ought be granted. In that case the parties had filed evidence concerning the environmental impacts of the serviced apartment use and conflicting evidence concerning whether there was an adverse impact on other residents in the building, inter alia. His Honour did not find that evidence of great assistance in that case and was mindful that serviced apartment use was prohibited under the relevant LEP. He determined that an injunction ought to issue. 11 The facts of this case in relation to the exercise of discretion are distinguishable from Blues Point Tower in several respects. In that case, unlike here, there were no inquiries made of the relevant council about whether the serviced apartment use was lawful (with the response from the Council's staff that it was on more than one occasion), there were no special by-laws passed by the body corporate (in 1992 in this case) to allow use of the common property for the serviced apartment business and there was no equivalent to lot 191 used for the office/administration area of the serviced apartment business on the ground floor. In this case purchasers of apartments or visitors coming to the building since 1987 would have been aware of the building's use for serviced apartments particularly after 1992 when the special by-laws enabling use of the common property for the serviced apartment business were made. Before that time the First Respondent owned and/or managed a majority of the apartments in the building in any event. There was also appropriate signage indicating serviced apartment use on the building from the early 1990s. The use of lot 191 for the administration of the business and the signage on the building clearly indicated the serviced apartment use in the building.

12 The appropriate exercise of discretion in this case is finely balanced in relation to the making of final orders restraining the unlawful use. Generally, the upholding of public laws is an important factor to take into account so that unlawful use of land in breach of the EP&A Act should be restrained. Mr Moore's affidavit refers to the different considerations which generally apply when assessing serviced apartment use compared to apartments used for permanent occupation because of the potential impacts on residential amenity, inter alia. There is virtually no evidence that there is any adverse impact on residential amenity as a result of the serviced apartment use of the building. I agree with the Council that, in the absence of a merit review, I should not conclude that the use has minimal impact (about which I make no finding). What I do have before me is the history which suggests that to date there have been few problems which have manifested themselves as complaints to either the body corporate of the building or the Council. The First Respondent (and the Second Respondent) have invested in and arranged their business of serviced apartment use with the knowledge of the Council since 1992. The loss of the business and the reduction in value of lot 191 should the business cease will cause economic loss. 13 Rather than allowing the business based on 27 apartments to continue for an indefinite period, another option is to allow it to continue for a finite period beyond the one year allowed by the Council's proposed order. Weighing up all the parties' respective arguments I consider that is the appropriate course to take. I consider that the Respondents should be able to continue the serviced apartment business in any 27 apartments in the building for a period of six years before the declaration that the use requires development consent takes effect. Accordingly I intend to make a modified order based on the second alternative order proposed by the Respondents. Should the First Respondent wish to expand the business beyond 27 apartments, development consent will need to be sought.

14 I reject the submissions of the Council that this decision sets a precedent which will apply in other cases. I must determine how the broad judicial discretion should be exercised in the particular circumstances of this case. My decision cannot provide a precedent for another decision-maker because other cases must be determined on their own facts. Allowing an unlawful use to continue for a period is not unique in this Court's exercise of its broad discretion whether to grant injunctive relief. What the Council may choose to do in the future as part of its enforcement policy is a matter for it and is not relevant to my consideration of this matter. 15 I consider I should make the following declarations and orders and:

1. Declare that development consent DA/44/80/0226 issued on 1 September 1980 for use of the building at 57-67 Liverpool Street, Sydney as "flats", does not permit or authorise the use of the building for "serviced apartments".
2. Declare that in breach of s 76A of the Environmental Planning and Assessment Act 1979 the First Respondent is carrying out development, namely the use of 57-67 Liverpool Street, Sydney as "serviced apartments" without development consent having first been obtained.
3. Order that except as provided by order 4 and order 5 the First Respondent, its servants, agents and invitees are restrained from using 57-67 Liverpool Street, Sydney (the building) for the purpose of serviced apartments without prior development consent.

4. Subject to order 5, order 3 does not apply to that part of the building specified in the schedule to these orders for six years.
5. The First Respondent or its successor in title may change the 27 residential flats nominated under order 4 by notice in writing to the consent authority such notice to be given no more frequently than each 12 months commencing from the date of these orders and provided that there shall be no more than 27 residential flats within the building being used for the purpose of serviced apartments at any one time.
6. The First Respondent or its successor in title shall maintain on the building at all times a register of all apartments within the building being used as serviced apartments together with a copy of the latest nomination of the 27 residential apartments to be used as serviced apartments, made under order 5, and make those documents available for inspection by any officer of the consent authority upon request. SCHEDULE (a) Lot 191 in strata plan 20656 which forms part of the building; (b) The common areas of the building including the common property in strata plan 20656 and that part of the common property in strata plan 20656 which is the subject of dealing number E390049; (c) Lots 1, 14, 22, 26, 27, 31, 34, 38, 39, 40, 43, 44, 50, 53, 56, 57, 58, 64, 69, 71, 80, 86, 87, 88, 92, 99 and 100 in strata plan 20656 or any other 27 residential flats within the building nominated in writing annually in accordance with Order 5.
7. Costs are reserved.

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