Crone Associates Pty Limited v Sydney City Council

Land and Environment Court (NSW)|1999-05-18|Before: Bignold J

The Applicant's appeal originally was in respect of the following matters -

(ii.) the related condition 5 requiring the infill of the colonnade space; and

(iii.) the quantum of heritage floor space awarded by Condition 2.

In resisting the appeal, the Council's principal argument was that the award of heritage floor space was entirely a matter within the Council's discretion, both as to entitlement and as to quantum. Although no question arose concerning entitlement, the Council submitted that in respect of the question of quantum of heritage floor space to be awarded, it was free, in the exercise of its discretion, to depart from the formula contained in the DCP and to determine the quantum of heritage floor space to be awarded according to its assessment of the merits of the individual case. In the present case, the Council had applied the formula contained in the DCP for calculating the award of heritage floor space but had discounted the result thereby obtained (ie 3,740 m2) by deducting therefrom the amount of floor space contained in 5 levels of additions to the rear of the building approved by the Council in 1981 and erected soon thereafter, that additional floor space totalling 1,270 m2. In deducting the additional floor space in the building created following the grant of the 1981 development consent, the Council had concluded that the 1981 additions did not contribute to the heritage significance of the building (rather that they detracted from that significance).

Thus, the sole issue raised by the appeal concerns the quantum of heritage floor space to be awarded - should it be the amount calculated in accordance with the applicable formula in the DCP ie 3,740 m2, as contended by the Applicant, or should it be the discounted amount of 2,470 m2, as contended by the Council?

In order to resolve this issue, it is first necessary to understand the relevant statutory provisions of the Council's relevant planning instruments which propound the principles of the system for the transfer of heritage floor space within the City of Sydney.

B. THE SYSTEM FOR TRANSFER OF HERITAGE FLOOR SPACE IN THE CITY OF SYDNEY

Before noting the relevant statutory provisions which propound the current system, which is based upon 1996 planning instruments, it should be noted, by way of background comment, that the Council has administered some form of system for transfer of heritage floor space since 1971. The various systems, or more precisely, the various formulae for its calculation of heritage floor space, are detailed in the evidence of Mr John Kass, the Director of City Development, (Exhibit C).

The current system is principally found in the provisions of (i) Central Sydney Local Environmental Plan 1996 (the LEP) and (ii) the DCP. These provisions apply in respect of "heritage buildings" being buildings that are listed in Schedule 1 to Central Sydney Local Environmental Plan 1992 - Conservation of Heritage Items (the Heritage LEP).

A principal function of the Heritage LEP is to identify "heritage items" (and related concepts eg "heritage conservation area", "heritage significance", "heritage streetscape", "statement of heritage impact").

Clause 5 defines all of the foregoing terms. It defines "heritage item" as follows:

`heritage item' means a building, part of a building, work, relic, place, archaeological site, streetscape, tree or landscape or townscape item which is of heritage significance to the City of Sydney and which is described in a Schedule to this plan.

Schedule 1 to the Heritage LEP lists some 450 individual " buildings and works " including " Banking House ".

Schedule 2 to the Heritage LEP lists some 30 individual "elements of buildings" (generally the "facade" of the building).

Schedule 3 to the Heritage LEP lists "a number of `heritage streetscapes'".

Schedule 4 to the Heritage LEP lists a number of "townscapes and landscape items".

The express aims and objectives of the Heritage LEP are stated in cl 2 as follows:

This plan aims to conserve heritage items on the land to which it applies by:

(a) integrating heritage conservation into the planning and development control processes and, where appropriate, requiring the investigation and recording of archaeological potential; and

(b) ensuring that the consideration of matters affecting heritage items is undertaken by the Council in the fullest possible knowledge of the significance of those items; and

(c) ensuring that, in the future, development is undertaken in a manner that is sympathetic to and does not detract from the heritage significance of heritage items, and the distinctive character that they impart to Central Sydney.

Clause 7 of the Heritage LEP stipulates a wide range of development and demolition controls in respect of proposals likely to affect the heritage significance of a heritage item. In particular, subclause (6) , limits the Council's power to grant consent to an application " which would result in the partial demolition " of a heritage item by requiring the Council to be satisfied that the proposal (i) " minimises disturbance to the significant fabric of the original heritage item " and (ii) ensures the maintenance of the architectural integrity of that part of the heritage item that is retained; and subclause (7) limits the Council's power to consent to an application " which would result in the total or substantial demolition " of the heritage item by requiring the Council to be " satisfied that the heritage item cannot be preserved without rendering the site on which it is located incapable of reasonable or economic use ".

Clause 8 of the Heritage LEP confers powers upon the Council to grant "incentives" for the conservation of heritage items, namely (i) granting consent for the use of the item for any purpose (subclause (1)) and (ii) excluding the floor space of the item from the calculation of floor space ratio or the calculation of on-site parking space requirements (subclause (2)).

It is to be noted that the Heritage LEP does not, itself, provide for the transfer of heritage floor space. However at the time the Heritage LEP came into force the Council administered a system for transfer of heritage floor space, but that system was not based upon statutory planning instruments.

The stated objectives of the LEP include the following:

Part 5 of the LEP deals with " Floor Space Ratios ", the Explanatory Note to the Part stating:

Floor space ratio (FSR) control is a standard that is related to the scale, bulk, and intensity of development on a site. It assists in providing certainty for investors and equity for owners of heritage buildings involved in the award and allocation of heritage floor space. Achievement of any FSR is subject to compliance with height and other special controls contained in this Plan and the Central Sydney Development Control Plan 1996 .

Clause 34 of the LEP includes the following " objectives for the control of floor space ratios ":

(a) to ensure a degree of equity in relation to development potential for sites of different sizes and for sites located in different parts of Central Sydney,

(b) to ensure that proposals for new buildings are assessed with due regard to urban design and built form provisions,

Clause 35 which deals with " Maximum floor ratios " provides as follows in subclause (1):

(1) The floor space ratio of a building on land in Central Sydney is not to exceed the maximum floor space ratio shown for the building on the Floor Space Ratio Map. The achievement of any floor space ratio is subject to compliance with the height controls and other provisions of this Plan as well as the provisions of Central Sydney Local Environment Plan 1992 - Conservation of Heritage Items.

Clauses 44 and 45 deal with heritage floor space. The Explanatory Note to the clauses states:

An incentive for the conservation of heritage items is to be provided through the regulated award and allocation of floor space potential from heritage buildings listed in the Central Sydney Local Environmental Plan 1992 - Conservation of Heritage Items to other suitable sites within Central Sydney. The details of the award and allocation mechanism are presented in the Central Sydney Development Control Plan 1996.

Note that the site of a heritage building may be included in the development site area or be the subject of an award of heritage floor space, but not both.

The objectives of this Plan in relation to the award and allocation of heritage floor space are:

(a) to assist and encourage the conservation of heritage buildings within Central Sydney through the award of heritage floor space, and

(b) to complement the aims and objectives of Central Sydney Local Environmental Plan 1992 - Conservation of Heritage Items.

45 Award and allocation of heritage floor space (1) When an application is made for consent to development that the consent authority is satisfied includes the conservation of a heritage building on a site within Central Sydney, the consent authority may award the owner of the heritage building or a person nominated by the owner an amount of heritage floor space.

(2) The consent authority may grant consent for development on a site to which this Plan applies (whether or not it is the site of a heritage building) which will result in a building with a floor space ratio that exceeds the maximum floor space ratio allowed by this Plan without the allocation of heritage floor space to the site but that does not exceed the maximum floor space ratio allowed by this Plan with the allocation of heritage floor space to the site.

(3) Such a consent may be granted only if the consent authority is satisfied that the allocation to the site of an amount of heritage floor space equal to the difference between the maximum floor space area allowed without the allocation of heritage floor space to the site and the floor space area of the building that will result from carrying out the development in accordance with the consent will be required by a condition of the consent.

(4) Heritage floor space may be allocated to a site only with the agreement of the person awarded the heritage floor space or another person whose entitlement to agree has been notified in writing to the Council by the person last entitled to agree.

(5) This clause does not allow heritage floor space to be awarded in relation to a heritage building:

(a) if the area occupied by the heritage building has previously been or is included as part of a site area for the purpose of calculating the floor space ratio of another building or of a proposed building for which a development consent is current, or

(b) if an amount of floor space available for use in a building on another site has already been awarded in relation to the heritage building either under this clause or before the commencement of this Plan pursuant to any other incentive scheme administered by the Central Sydney Planning Committee or the Council to encourage conservation of the heritage building.

(6) Any floor space awarded pursuant to such an incentive scheme is taken to be heritage floor space for the purposes of this plan whether or not it was allocated for use in a building before the commencement of this Plan.

(1) After heritage floor space has been awarded in relation to a heritage building, the part of the site occupied by the building is to be excluded from the site area for the purpose of calculating the floor space ratio of buildings on a site that includes the heritage building.

The DCP was prepared in accordance with s 72 of the EP&A Act . Clause 1.1 states its purpose as follows:

The DCP provides more detailed provisions than in the Central Sydney Local Environmental Plan 1996 (LEP) for development in Central Sydney that will:

_ contribute to the prosperity and character of Central Sydney.

Under Section 90 of the Act, the consent authority is required to take into consideration the relevant provisions of this DCP in determining an application for development in Central Sydney

Clause 1.4 states the relationship between the DCP and the LEP as follows:

The provisions contained in this DCP are in addition to the provisions of the LEP. If there is any inconsistency between this DCP and the LEP, the LEP will prevail.

Compliance with the provisions of this DCP does not necessarily guarantee that consent to a Development Application (DA) will be granted. Each DA will be assessed having regard to the LEP, this DCP, other matters listed in Section 90 of the Act, and any other policies adopted by the consent authority.

Consistent application of the provisions of this DCP will be given high priority by the consent authority.

For convenience, related clauses in the LEP are noted where applicable in this DCP.

Section 7 of the DCP deals with " Heritage Floor Space ".

The stated "strategy" of the Section is as follows:

An incentive for the conservation of heritage buildings is provided by the consent authority through the award and allocation of Heritage Floor Space (HFS).

The stated " objective " of the Section is as follows:

To provide a system to assist the conservation of heritage buildings.

Clause 7.1 of the DCP which deals with " Eligibility of heritage buildings to be awarded HFS ", provides as follows:

7.1.1 To be eligible to be awarded HFS, a heritage building is:

(i) (a) to be listed on Schedule 1 of the Central Sydney LEP 1992 - Conservation of Heritage Items , be located within the City Centre or City Edge zones of the LEP, and have been built prior to the 1957 amendment of the Height of Buildings Act 1912 ;

or (b) to be a heritage building not listed on Schedule 1 of the Central Sydney LEP 1992 - Conservation of Heritage Items but be located within the City Centre or City Edge zones of the LEP and be subject to a Permanent Conservation Order or an Interim Conservation Order made under the Heritage Act 1977, and/or be a building which the consent authority has resolved is of heritage significance and should be added to Schedule 1 of the Heritage LEP.

(ii) to involve conservation of a heritage building in (i) in accordance with a Conservation Plan approved by the consent authority. The Conservation Plan would generally involve:

(a) works to conserve the existing significant fabric of the building (b) removal of elements that detract from the significance of the building; (c) where appropriate, reinstatement of original fabric based on documentary evidence; (d) other works which may be compatible with the significance of the building.

(iii) to involve works which would not increase or result in only a minor increase in the external envelope and FSA of the heritage building. (iv) only such a building, in the case of heritage buildings owned by the Federal, State or Local Government, which are sold or leased by the government for a minimum of 50 years to the private sector after commencement of the Central Sydney Local Environmental Plan 1996 and which meet the eligibility provisions of (i), (ii), and (iii) above.

Clause 7.2 of the DCP which deals with the award of HFS provides as follows:

7.2.1 Prior to registration of HFS, the applicant must complete conservation works required in accordance with an approved Conservation Plan and enter into legal agreements and grant covenants on the land which:

(i) limit any future redevelopment of the site to the total FSA and height of the conserved heritage item; (ii) ensure the ongoing conservation of the building by regular maintenance, including the provision of adequate insurance and a maintenance fund.

Clause 7.3 of the DCP which deals with the amount of HFS to be awarded provides as follows:

7.3.1. The amount of HFS (measure in square metres) that may be awarded to a heritage building is to be calculated using either formula (i) or (ii) as appropriate: Formula (i): Government buildings and rateable buildings in private ownership: HFSH = 0.5AS FSRH where: HFSH is the amount of heritage floor space awarded (in square metres) AS is the site area (in square metres) occupied by the heritage building and does not include any curtilage or any later additions which are not of significance. For heritage items which contain more than one building, only the site area of buildings identified as significant in an approved Conservation Plan will be included. FSRH is the FSR for the site of the heritage building as defined at the beginning of this section. Formula (ii): Non-rateable buildings in private ownership: HFSH = 0.5 x FSAH where: FSAH is the floor space area (in square metres) of the heritage building(s).

Clause 7.4 of the DCP which deals with the requirement for allocation of HFS provides as follows:

7.4.1 The allocation of HFS is required if a proposed development:

(i) is within the City Centre zone of Central Sydney Local Environmental Plan 1996 , and (ii) has a proposed FSR that exceeds the FSRD for development in the City Centre zone.

Clause 7.6 of the DCP which deals with the allocation or change of ownership of HFS provides as follows:

7.6.1 HFS can only be allocated or the ownership of it change if it is registered on Council's HFS register 7.6.2 Any HFS which is registered on the Council register may be allocated to a development in the City Centre zone whether part of or separate from a heritage site, providing the development has received consent. 7.6.3 HFS may not be allocated to a site where the erection of a proposed building would involve demolition or destruction of a heritage item. 7.6.4 Council is to be notified of each allocation and/or change of ownership and the HFS Register will be updated accordingly.

Finally, cl 7.8 of the DCP which deals with procedures and administration provides as follows:

7.8.1 An application for the award of HFS is to be made concurrently with a development application for works to conserve a heritage building. In addition to the information required in a development application (see Explanatory Note 1), any application for HFS is to include a Conservation Plan for conservation works and ongoing maintenance of the building. 7.8.2 Council is to keep a Register of all relevant information relating to HFS awarded for the works to conserve a heritage building. The HFS Register is to be available for public inspection. Council is to register each award of HFS only after conservation works included in the development consent have been completed and the relevant legal agreements have been executed. 7.8.3 HFS may be allocated to a development site, as required by a condition of development consent, from any HFS award listed in Council's HFS Register. 7.8.4 Any purchase price of HFS is to be determined between the respective owner of the HFS and the prospective purchaser. 7.8.5 Legal documentation must be provided that the HFS required by the development consent has been allocated from Council's Register prior to the building application for the development requiring the allocation of HFS being approved. 7.8.7 HFS may only be allocated and used once in a development. If a proposed development which has received an allocation of HFS does not proceed, the HFS may be re-entered onto the Register and be available for re-allocation. 7.8.8 The cost of any legal agreements, transactions, and other documentation required in connection with the award and allocation or change of ownership of HFS is to be met by the respective owner of the HFS and the proposed purchaser. 7.8.1 Council is to charge a fee for an award of HFS and for the administration of the Register in accordance with Sections 608 to 610 of the Local Government Act 1993.

The elements of the system for transfer of HFS that may be deduced from the foregoing statutory provisions, may be summarised as follows:

(i.) The stated object or purpose of the HFS system is to provide an incentive for the conservation of Schedule 1 listed heritage buildings to assist their conservation;

(ii.) Eligibility for an award of HFS arises in circumstances where a Conservation Plan proposing the conservation of the heritage building is approved by the Council in its determination of a development application to carry out works to conserve the building;

(iii.) The award of HFS is in the discretion of the Council, which may make the award for an amount of HFS in favour of the owner of the heritage building or of a person nominated by that owner.

(iv.) The amount of HFS that may be awarded is to be calculated by using the appropriate stipulated formula

(v.) The award of HFS is not to be registered in the Council's HFS Register until the applicant completes the conservation works in accordance with the approved Conservation Plan and enters into the required legal agreements and covenants with the Council limiting future re-development of the site of the heritage item and ensuring the ongoing maintenance of the heritage item.

(vi.) HFS is required to be allocated to a site of a proposed development within the City Centre which proposes a floor space ratio exceeding the prescribed maximum ratio.

(vii.) An allocation of HFS may only be made if it is registered in the Council's HFS Register.

(viii.) Ownership of HFS may change provided that the change is registered on the Council's HFS Register.

(ix.) The Council's HFS Register is to be available for public inspection and must contain all relevant information relating to the HFS awarded in respect of a heritage building.

(x.) The purchase price of HFS is a matter to be determined by the owner and the purchaser.

The key elements of the system so far as concerns the sole issue (of quantification of the award of HFS) raised by these proceedings are -

(i.) the discretion vested by cl 45(1) of the LEP in the Council to award to the owner of the heritage building ….. " an amount of heritage floor space "; and

(ii.) the detailed provisions of s 7 of the DCP concerning (i) eligibility for an award of HFS; (ii) calculating the amount of HFS that may be awarded; (iii) requiring allocation of HFS; (iv) registration of HFS in the Council's HSF Register which is to be available for public inspection; (v) allocation of HFS; (vi) change of ownership of HFS.

The relationship between the provisions of the DCP and the discretion conferred by the LEP needs to be noted. While the discretion is conferred by the LEP and the operation of the DCP provisions depends upon the exercise of that discretion to award HFS (such decision being part and parcel of the planning discretion vested in the Council by the LEP) nonetheless the DCP provisions significantly influence the content of that discretion, and the manner of its exercise to similar effect that the statutory power and the principles for its exercise were held to operate in Preci v Minister for Health (1992) 112 ALR 432 at 441. Moreover, the DCP does, in cl 7.8.1 expressly provide for the making of an application for an award of HFS by stipulating that such an application is " to be made concurrently with a development application for works to conserve a heritage building ".

I deal with this matter by way of passing comment, not because the matter was in issue in the proceedings, but because it gives some additional and necessary perspective to the nature of HFS which is to be understood not merely as the result of the exercise of statutory planning discretion, but also as creating a valuable proprietary interest.

In Uniting Church in Australia Property Trust (NSW) v. Immer (No. 145) Pty Ltd (1991) 74 LGRA 255, the Court of Appeal considered the nature and incidents of "air spaces" as set out in two Council documents "Transferable Air Space: Summary of Council's Present (Interim) Policy" and "Development Control and Floorspace Ratio Code of 1971" (these documents propounding an earlier version of the Council's system for awarding HFS). In giving the judgment (agreed in by the other members of the Court) Meagher JA at 256 said:

transfer' of air space ' amounts to that which would have astonished a Roman lawyer, the assignment in gross of a ius altius tollendi. McLelland J in Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) NSW Conv R 58,902 has held that an air space ' is not a legal or equitable estate or interest ' in land within the meaning of s 74 F of the Real Property Act 1900 (NSW). No doubt this is so. However, in the same decision his Honour held that they do not constitute proprietary ' rights. This seems to me debatable. They are transferable, and I assume transmissible; they are of large commercial value; and I see no reason why they are not proprietary ' rights in the same way as goodwill, patents or shares in the capital of a company are ` proprietary ' rights.

In Halwood Corporation Ltd v. Chief Commissioner of Stamp Duties (1992) 33 NSWLR 395, Loveday J had to decide whether a deed transferring some 5,574 m 2 of transferable floor space was an " agreement for the sale or conveyance of property " within the meaning of the Stamp Duties Act 1920, such transferable floor space being the creation of the Council's Development Control and Floor Space Ratio Code (1971).

His Honour, at pp 397/398 describes the Council's then existing system for creating transferable floor space as follows:

The particular development potential for the sale of which permission is given is floor space. The council has regard to the cost of restoration of the historic building and to the difference between: (a) the floor space permissible under its code for the site of the historic building calculated in accordance with the basic floor space ratio; and (b) the actual floor area of the historic building, and determines a figure for transferable floor space '. The grant of the award of transferable floor space by the council to the owner of the historic site is subject to the applicant owner entering into a deed which ensures that money gained by sale of the space will be used in the restoration of the historic building. The policy thus provides money for the restoration of historic buildings on sites that could not be developed because of the presence of the historic buildings. The council keeps a register of these awards called the Transferable Floor Space Register ' and the transferable floor space noted in the register as having been awarded in respect of the preservation of the historic buildings noted therein is available to be transferred to a recipient site as a bonus ' deemed to offset the otherwise detrimental effects on the city ' of the additional density of development caused by the increase in the floor space permissible in relation to the recipient site beyond the basic floor space ratio of that site.

In that case, Loveday J rejected the appellant's argument that the relevant " transferable floor space " was not to be regarded as a " proprietary right " because it had " no permanence or stability…..but (it) is uncertain, it is little more than a hope, at the most an expectation that the Sydney City Council will act in a particular way ": 402.

In so concluding, Loveday J referred to the Court of Appeal's judgment in Uniting Church in Australia Property Trust as "at least expressing the tentative opinion that rights to transferable floor space are proprietary rights": 403.

In concluding that the deed was relevantly "an agreement for the sale or conveyance of property", Loveday J held:

Registration in the council's register confers an exclusive entitlement to the floor space. The transferee of the transferable floor space has a right recognised by the council to have a development application considered by the council taking into account the existence of the transferable floor space. This is a valuable right not possessed by an applicant for development approval without transferable floor space. The reality is that commerce regards transferable floor space as a proprietary right. The courts should do likewise.

An editorial note to the law report (395) indicates that an appeal against Loveday J's judgment was dismissed by the Court of Appeal.

Both these New South Wales decisions were considered and followed by Moynihan J in the Supreme Court of Queensland in Application by FAI Leaning Pty Ltd; City of Brisbane Town Planning Act 1964 (1993) 81 LGERA 210 in holding that the transferable site area right created by the Brisbane Town Plan was relevantly a proprietary interest but was not relevantly part of the fee simple in respect of mortgaged land upon which was erected the heritage building, to the owner of which the Brisbane City Council had granted the relevant transferable site area right under the Brisbane Town Plan: 217.

More recently, the Full Court of the Federal Court In Naval, Military and Airforce Club of South Australia (Inc) -v- Commissioner of Taxation (1994) 83 LGERA 332 has considered all three of the cited decisions in holding that transferable floor area rights created by the City of Adelaide Development Control Act 1976 were "proprietary rights" and hence an "asset" for the purposes of Part IIIA of the Income Tax Assessment Act 1936. In his judgment at 355 and following, French J discusses the "(I)ntrinsic character of transferable floor area". That discussion includes the following:

The Act goes beyond mere approval of the Principles and by s 24(6) requires that the council have regard to them. But even that directive, which plainly imposes a legal duty on the council, does not confer upon the Principles statutory force or a legally binding operation. It is not unusual in contemporary legislation to find rule-making powers authorising the creation of administrative or executive guidelines which are not intended to be a species of delegated legislation but give content to some statutory direction to apply or have regard to them. For example, s 23 DN (2) of the Health Insurance Act 1973 (Cth) authorises the minister to determine principles to be applied by the Minister in the exercise of the Minister's powers ' under s 23 DN (1). The word principle ' in that context has been held to carry the ordinary English meaning of ` a general rule or a guide to action ' . Nevertheless by virtue of the statute the Principles so determined effectively regulate the exercise of the Minister's powers: Preci Services Pty Ltd v Minister for Health, Housing and Community Services (1992) 36 FCR 395 at 404.

The statutory direction to the council in the present case, requires it to have regard to the Principles in considering whether to approve a development. That does not require the council to apply them. It leaves each case to be considered on its own merits. The Principles must be taken into account, considered and given due weight but in the end the council reains its own discretion: Ishak v Thowfeek [1968] 1 WLR 1718 at 1725; Re Hunt; Ex parte Sean Investments Pty Ltd (1979) 53 ALJR 552 at 554; R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 at 333 per Gibbs CJ.

The reason for my digression to consider the nature of the right created by the Council's system of HFS is to demonstrate that such a right is now clearly recognised in the law as a transmissible proprietary interest.

Moreover, as Mr Kass' evidence indicates, such interests are also of considerable "value" according to the marketplace evidence where prices paid, have ranged from $50 to $2,000 per square metre.

These undisputed facts do not directly bear upon how the issue in dispute in these proceedings is to be resolved. However, they do give content and colour to the subject matter of the Council's system for awarding and allocating HFS inasmuch as it is reasonable to expect that dealing with such valuable rights the HFS system will be publicly ascertainable in its content and accountable in its operation. The statutory provisions that I have earlier recited continue, in my opinion, to provide an orderly and well-regulated system for the creation of HFS rights and for their disposition.

In the light of such a system, is it to be supposed as the Council's primary argument would have it, that the Council enjoys an unfettered planning discretion both in respect of (i) the award of HFS and (ii) the quantum of the award?

As I have earlier mentioned, it is not in dispute that the Council's determination of the Applicant's development application in the present case recognised an eligibility to an award of HFS and exercised the planning discretion to make such an award. This appeal has been conducted on the basis that the fact of the award (including the exercise of the Council's discretion to make such an award) is unchallenged.

What is in dispute is whether, in so exercising that discretion, the Council was entitled to award an amount of HFS less than the amount that would otherwise have been yielded by the application of the appropriate formula propounded in cl 7.3.1 of the DCP.

This question initially raises a legal question. However, there is another dimension to the question in issue, namely, assuming that the Council was entitled to depart from the applicable formula propounded in the DCP, whether its decision, so to do, should be confirmed by this Court in the exercise of its statutory appellate function in terms of s 39 of the Land and Environment Court Act 1979. This dimension to the question, of course, is but to state conventionally the Court's appellate function in relation to a development appeal. However, the present appeal is not an ordinary development appeal where the Court determines whether to grant or to refuse development consent to the development application because here, what is at issue is not whether development consent should or should not be granted, but whether the amount of HFS awarded by the Council should be confirmed or varied. But for the fact that the award of HFS was expressed as a condition of development consent, it is not readily apparent how the issue would ordinarily fall within the Court's statutory jurisdiction. Perhaps the answer lies in the fact that the Council's decision to award (or not to award) HFS is part and parcel of its determination of a development application proposing conservation works to the heritage building and that as such, namely as an incident of its determination of the development application, it falls within the Court's statutory jurisdiction to hear and determine a development appeal. In so doing, the Court is vested by s 39(2) of the Land and Environment Court Act 1979 with "all the functions and discretions which the person or body whose decision is the subject of the appeal had in respect of the matter the subject of the appeal".

However, it is not necessary to further explore this matter in the present case because the award of HFS manifests itself in the imposition of a condition of the development consent granted by the Council and the Applicant's appeal against the imposition of that condition (or more precisely against the amount of HFS awarded, as reflected in that condition) is clearly within the Court's statutory jurisdiction.

There is no factual dispute as to the manner in which the Council determined to award an amount of HFS less than that which would have been awarded if the applicable formula contained in cl 7.3.1 of the DCP had been applied. However, there is a factual dispute (in the sense of which there exists conflicting expert opinion) as to the effect on the heritage significance of "Banking House" of the building additions carried out pursuant to the 1981 development consent (those additions being the only reason for the Council's decision not to apply the DCP formula for calculating the HFS).

The manner in which the Council determined the amount of HFS to be awarded is set forth in the following extracts from the Report dated 25 August 1998 of Lisa Esposito, Specialist Planner employed by the Council, which was submitted to the Council and gave rise to the Council's decision, the subject of the present appeal:-

The proposal does include conservation work, and is therefore consistent with the HFS provisions within LEP 1996.

The scope of conservation work in the application has been revised to include the removal of the intrusive colonnade and the reinstatement of an appropriately detailed shopfront/active uses edge to Pitt Street. The application is considered sufficient therefore to warrant the award of an amount of HFS provided for under the provisions of the 1996 DCP.

Award of HFS Recommended: The extent of conservation work (proposed and conditioned) to the subject building is considered sufficient to grant an award of Heritage Floor Space.

Calculation of HFS: The total amount of (measured in square metres) of Heritage Floor Space that may be awarded to a privately owned heritage building is calculated using the following formulae:-

Where HFSH is the amount of heritage floor space awarded, AS is the site area occupied by the heritage building (does not include any curtilage or any later additions which are not of significance) and FSRH is the amount of FSR for the site (ie. maximum commercial FSR, being 10:1 in this case).

The calculation of HFS, if a full amount was awarded, would be calculated as follows;-

From the 3740m2 possible award of HFS, the floor space comprised within the 1981 five storey addition (above the reconstructed banking chamber) representing 1270 m2 should be deducted:

It is recommended that 2470 m2 of the Heritage Floor Space be awarded for the scope of works proposed as part of this application and the additional conservation work. (as conditioned).

The Report noted in paragraph 23 that the rationale for recommending a discounted award of HFS had been included in an earlier Report prepared by Ms Esposito in respect of the original development application (which did not propose the in filling of the colonnade space).

In her earlier report dated 15 July 1998, Ms Esposito deals with the HFS issue at paragraphs 28 to 42 (inclusive). It is sufficient for present purposes if I quote the following extract -

The application is not considered sufficient therefore to warrant the award of an amount of HFS provided for under the provisions of the 1996 DCP. However, a discounted award that allowed for the extent of demolition and replacement resulting from the 1981 development would be appropriate. It may also be acceptable to allow for this discounted award to be staged so the removal of the intrusive 1981 colonnade and associated work could be deferred, and an appropriate percentage (say 50%) of the HFS award allowable under the DCP formula held over until this work has been completed.

The objective of the HFS award is to provide for the conservation of heritage items. The proposal is not considered to satisfy the HFS objectives of LEP 1996 or relevant HFS provisions in DCP 1996.

The application in its current form should therefore not be approved unless appropriate consent conditions were applied. These conditions should require amendments to the conservation plan and an increased scope of conservation work that is adequate to address those current aspects of the building that are intrusive and diminish its heritage significance.

It is also arguable that the calculation of the award of HFS should take into account the extent of the 1981 rear addition, occupying as it does approximately half of the site of the Schedule 1 heritage item. The definition for the site area of the heritage item for the purpose of calculating HFS (As) excludes any later additions that are not of significance (Cl 7.3.1).

It is accepted that the (partially) reconstructed banking chamber is of significance, although the degree of this significance is difficult to determine. However, the scale of the 1981 redevelopment and the extent to which significant original fabric (including the original banking chamber) was demolished to allow this development to occur, suggests that an award of HFS calculated over the total site would be contrary to the abovementioned policy provision. It would be appropriate therefore to discount the amount of HFS to take into account the nett amount of commercial space contained within the 1981 development over the reconstructed banking chamber.

It appears that the opinions expressed in the foregoing extracts reflect the opinions of the Council's Senior Heritage Architect who was consulted (vide paragraphs 47 and 48 ).

The principal opinion expressed by the Senior Heritage Architect was that the 1981 approved alterations to "Banking House" involved the compromise of the original building by virtue of the demolition of original fabric and its replacement with a contemporary concrete framed commercial building (vide paragraph 34).

This opinion was expounded in the evidence given by Mr Peter Romney, the Council's Area Manager - Heritage, in the following extracts taken from his written report (Exhibit H)..

The 1981 phase of work resulted in the most dramatic impact upon the fabric and configuration of Banking House. In particular, the demolition of the eastern single storey section including the main banking chamber removed what had obviously been the focal point of the building, although the basement area was retained. The generous spatial character, decorative approach (especially the motifs used in the glass ceiling dome) in the and (sic) quality of materials lavished on the banking chamber all testify to the importance of this space within the building, notwithstanding its remoteness from the Pitt Street entry

In summary, the concept for the 1981 alterations can be considered as similar to that of the original 1912 design concept for Banking House ie as two distinct (eastern and western) sections. However, whereas the 1912 John Reid design emphasised the importance of the eastern section with its banking chamber as the qualitative and functional focus of the complex, the 1981 alterations resulted in a substantial diminution of its aesthetic and historical significance. The configuration of the post-1981 banking chamber is primarily a consequence of the structural and functional requirements of the new 7-storey reinforced concrete frame commercial building constructed on this section of the site, rather than a contemporary acknowledgment of the importance of the banking chamber itself.

19 Although it must be recognised that the works carried out to the western (Pitt Street) section of Banking House were substantial and are intrusive, these alterations are largely reversible, or capable of revision so as to produce an acceptable adaptive reuse outcome that can enhance the heritage significance of the complex. The potential for a similar outcome in the eastern section is extremely limited, although the reinstatement of the glass ceiling dome in a non-authentic orientation has some merit. In general however the 1981 structure could be categorised as being of low significance, although it is my opinion that `intrusive' would be a more appropriate assessment of its contribution to the significance of the Banking House complex.

These opinions were countered by the opposing opinions of Mr Graham Brooks who had prepared the Conservation Plan that had accompanied the Applicant's development application that ultimately (in its amended form) was granted deferred commencement consent by the Council and awarded the aforesaid amount of HFS.

In his Report (Exhibit 3) Mr Brooks described the 1981 alteration in the following terms (p 7):

Major alterations and additions were made to the building to completely upgrade the premises and consolidate its role as a Banking centre. The work was designed by the prominent Sydney Architects, Philip Cox and Howard Tanner, the latter of whom is particularly well known for his work on historic buildings.

The alterations included the demolition of the Banking Chamber and rear toilet extension on each of the upper floors. A new Banking Chamber was constructed to replace that demolished and the decorative glass dome over this space, which had survived the earlier alterations, was reconstructed.

Each of the upper floors was extended by the construction of a concrete framed addition which was connected to the rear of the original building. With the exception of the demolition of the small rear toilet blocks, the full extent of the original upper floors was retained. Access between the new and the older portions of each upper floor was achieved by braking through the original window openings in the rear elevation, which were cut down into doorways. The original lifts and stairs were replaced and new toilet facilities added.

In accordance with the Council planning policies of the time, the shop fronts were removed and an arcade cut through at street level, behind the facade, linking with the adjacent properties to form an extended area of covered public pedestrian space.

Mr Brooks' opinion was that the 1981 alterations had not compromised " Banking House " and this was the conclusion in the assessment of the building contained in his Conservation Plan that had been approved by the Council.

While conceding that the style of the 1981 upper floor additions "are not consistent with the architectural style of the original, they are located at the rear of the building and are effectively invisible in terms of architectural presentation of the building to the public domain". (p 18)

Mr Brooks noted the inherent contrariety between Mr Romney's opinion on the effect of the 1981 alterations and the fact that it was after those alterations had been carried out that "Banking House" as an entire building had been given heritage recognition by being successively (i) included in the Council's 1983 Conservation Register, (ii) listed in Schedule 1 to the Conservation LEP, (1992); (iii) favourably assessed in the Council's Heritage Review Project (1995); and (iv) listed in Schedule 1 to the Council's draft Central Sydney Heritage LEP 1998. The Council's Heritage Review contains the following "Statement of Significance":

"Banking House", a six storey steel framed banking and commercial building constructed in the Federation Academic Classical style, is part of the varied Pitt Street streetscape. The building has historic significance for its reflection of the financial power of the racing industry. It is significant as the Bank of New South Wales' first venture into the development office space and an important example of the professional work of noted architect John Reid. The building has a high aesthetic significance as a fine and largely intact example of the style (externally and at ground floor), and includes many of the identifying elements such as the triumphal arch, classical columns, ground floor mosaic tiles and pressed ceilings.

In evaluating the competing opinions of Mr Romney and of Mr Brooks, I should note that the parties' respective Senior Counsel agreed not to cross-examine the experts. Accordingly, my evaluation must be solely based upon the expert's written reports. Ultimately, I have concluded that Mr Brooks' opinions are to be preferred to Mr Romney's competing opinions concerning the effect on Banking House of the 1981 approved alterations. Mr Brooks' opinions are supported by the Conservation Plan which he prepared in support of the development application that was approved by the Council (after it had been amended to include the infilling of the streetfront colonnade, as required by the Council as part of the conservation works proposed for the building). They are also supported by the successive heritage recognitions accorded to " Banking House " post the 1981 alterations, that I have earlier recited.

It remains for me to consider the evidence of Mr John Kass, the Council's Director of City Development. As with the other experts, Mr Kass was not cross-examined and I must evaluate his written evidence (Exhibit G).

I have earlier mentioned that Mr Kass traces the successive HFS systems that have been adopted and applied by the Council since 1971. There were three earlier systems prior to the current system coming into being in 1996 by virtue of the combined operation of the LEP and DCP.

Mr Kass expressed the opinion that the current system (like the systems adopted in 1987 and 1993 respectively) comprised two components "the first partially compensating the building owner for restoration costs and the second for loss of development potential" (para 26).

Whereas it is apparent on the face of the 1987 and 1993 formulae that the floor space (expressed as a floor space ratio) of the heritage building is factored into each formula, this is not the case with the current formula. Mr Kass, who is a highly qualified Engineer and who devised the current formula, says that the current "apparently simple" formula "is a mathematical reduction of one which was slightly more complicated in its expanded form" (para 24) and in paragraph 25 he sets forth the expanded formula by factoring into it the floor space ratio of the heritage building. However, it is so factored in, in such a manner, as to be entirely cancelled out.

Whereas I readily accept Mr Kass's evidence that the current formula is a "mathematical reduction" of a more complex formula, I do not think recourse to the expanded mathematical formula is required, in seeking to understand and apply the current formula contained in cl 7.3.1 of the DCP. According to that formula, there are only two relevant factors - (i) the site area of the heritage building; and (ii) the maximum floor space ratio applicable to the land upon which that building is erected.

It is obvious that neither of these factors involves any consideration of the floor space of the heritage building and that the formula operates independently of that consideration.

Accordingly, I am not persuaded by Mr Kass's opinion that the current formula propounded in cl 7.3.1 of the DCP comprises the two components he has identified in paragraph 26 of his Report.

Rather, I take the meaning of the current formula at face value, which quantifies the amount of HFS at 50% of the maximum floor space ratio for the "site area" of the heritage building. Moreover, in terms of seeking to understand the objective of the HFS system, again I take at face value what the DCP declares to be the objective, namely:

to provide a system to assist the conservation of heritage buildings

It is clear, in my opinion, that both the object and effect of the HFS system is to assist the conservation of heritage buildings. It is not a system for compensating building owners for the loss of development potential.

Mr Kass's Report next traverses the history since 1971 of the award of HFS in respect of the conservation of heritage buildings, some 35 buildings in total having been conserved as a result of the HFS system administered by the Council (paras 27 and 28).

Mr Kass notes that 25 buildings were awarded HFS between 1971 and 1996 (paragraph 29) and that his review of those cases had revealed that in each case, the HFS awarded was for "the full entitlement" under the then applicable formula (para 30).

Next, Mr Kass reviews the cases in which HFS has been awarded since 1996 when he became the Council's Director - City Development "with responsibility to oversee the assessment of development applications seeking an award of HFS under cl 7 of the DCP" (para 32). Of these cases, Mr Kass states the Council has consistently assessed such applications, bearing in mind the existence of the discretion vested in the Council to award HFS.

Of the 23 cases reviewed which received an award of HFS, Mr Kass identifies four cases where "full awards of HFS under the cl 7.3 DCP formula were not made" (para 41). The four cases fell within one or more of the following circumstances (which Mr Kass, and the Council acting upon his advice, considered to justify a "partial award" of HFS):

(i.) the heritage building " incorporated relatively recent additions increasing the floor space of the building… ";

(ii.) the heritage building exhibited intrusive alterations that strictly in terms of cl 7.1 of the DCP warranted demolition or alteration; and

(iii.) elements of heritage significance were proposed to be removed in order to facilitate the adaptive reuse of the heritage building.

In paragraph 44 Mr Kass expresses the opinion that " if Council had considered there was no discretion under the DCP as to the quantum of HFS that could be awarded ", he would have recommended that applications exhibiting any of the three adverse features I have just recited, should be either refused or amended to eliminate those adverse effects or that the application be deferred until a new conservation plan that was satisfactory to the Council had been submitted by the applicant.

It was Mr Kass's opinion that "the discretionary approach to awarding HFS under the 1996 LEP and DCP" had enabled the conservation of heritage buildings in circumstances "where rigid application of the DCP would likely have made such works uneconomic for the owners, or otherwise may have resulted in some buildings not being conserved" (para 44).

Finally, Mr Kass's Report addresses the present application in respect of "Banking House" in the following terms -

The proposal was considered to give rise to eligibility to an award of HFS under cl 7.1.1 of the DCP. However, the Council could have insisted upon the removal of the 1981 alterations, however such a course was not pursued "in order to encourage the building owner to conserve the heritage item": para 45.

In accordance with cl 7.3 of the DCP, the relevant calculation of the amount of HFS to be awarded was 3,740 m2: (paras 46 to 48).

However, since the purpose of a HFS award is to compensate the building owner, in part, for the loss of development potential, the amount of floor space yielded by the 1981 alterations (1,270 m2) should be deducted from the 3,740 m2 because the "loss of development potential was diminished by 1,270 m2": (paras 49 to 52).

Mr Kass considered that the amount of HFS awarded by the Council had been " liberal ", because an alternative calculation based upon a rigid application of the definition of " site area " in the formula for HFS propounded by cl 7.3.1 of the DCP (resulting in the exclusion of that part of the site area of the building upon which is erected the 1981 alterations) would have yielded an amount of HFS of only 1,771 m 2 .

Mr Kass states that the alternative calculation had not been adopted because Mr Romney had recommended the inclusion within the "site area" calculation of the footprint of the 1981 alterations because "the partially reconstructed banking chamber was of some significance albeit the degree of significance was minimal": para 57.

In conclusion, had I considered that Council was unable to reduce the HFS award by an amount equivalent to the additional floorspace constructed in 1981, I would have recommended to Council either that:

(a) The quantum of HFS award be based on the site area of the heritage building only (yielding a total HFS award of 1771 m2; or

(b) The Application be refused pending receipt of a revised Application that involved demolition of the 1981 works, reinstatement of the previous "heritage" elements, and provision of an acceptable Conservation plan for the building.

Mr Brooks' Report (Exhibit 3) expresses opposing opinions to those of Mr Kass. In particular, he disputed Mr Kass's opinion that " site area " might have been calculated to exclude the 1981 alterations, noting ( para 42 ):

The surviving original basement area extends to virtually the full extent of the site. In the 1981 works, new columns penetrated through the basement to support the extended upper floors and new Banking Chamber but did not destroy the great majority of the earlier building fabric at this level.

The Banking Chamber and its amended spaces extends at ground floor level to the rear of the site, beyond the footprint of the surviving 1912 building at ground and upper floors.

The Banking Chamber is an important component of the significance of the overall place, given its continuation of that functional activity which was an integral aspect of the original building.

I would reject Mr Kass's opinion that an alternative calculation of HFS based upon a different " site area " was open to be adopted by the Council. Mr Kass's opinion is not ultimately supported by Mr Romney's evidence and is contrary to Mr Brooks' opinion. Senior Counsel for the Council did not advance any argument in support of Mr Kass's opinion for the alternative calculation of HFS based upon a reduced " site area " calculation. I accept Mr Kass's evidence ( para 68 ) that if the Council lacked the discretion to award HFS in an amount less than that yielded by the applicable formula propounded in cl 7.3.1 of the DCP, he would have made the recommendations he has hypothesised. On the assumption that those same recommendations were to come before me, in the course of determining the present appeal, I would not accept them.

I have already given my reasons for rejecting his recommendation based upon recalculating "site area" for the purpose of the HFS formula. My reasons for rejecting his recommendation requiring removal of the 1981 alterations are based upon my acceptance of Mr Brooks' opinions in Section 2.4 of his Report concerning the assessment of the conservation significance of the 1981 alterations (being opinions that reflect the content of the Conservation Plan prepared by Mr Brooks in respect of "Banking House"). Those opinions include the following:

Of particular relevance to the current Appeal, the Conservation Plan graded the entire volume of the 1981 upper floors extension to the building, including fenestration and open roof deck space as being of Low Significance. Such a grading indicates that while this particular building fabric makes a contribution to the overall significance of the building, it is to a lesser extent, for example, than the richly decorated main facade to Pitt Street.

While the fabric of the 1981 additions makes only a limited contribution to the aesthetic significance of the building, the work undertaken in 1981 in fact assured the survival of the building as a whole, its presence within the Pitt Street streetscape and its continuing role within the cultural and environmental heritage of the City. Without this work it is possible that the building may not have survived the pressures for redevelopment that have since swept away so many fine historic buildings within central Sydney, such as the State Bank in Martin Place and the Regent Theatre. They enabled the building to continue as a commercially viable entity.

To that extent the 1981 alterations and additions have played and continue to play a vital role in the overall significance of the building.

(I have earlier given my reasons for preferring Mr Brooks' opinions to Mr Romney's competing opinions concerning the effect of the 1981 alterations to the conservation significance of " Banking House ").

Senior Counsel for the Council made the following submissions:

(i.) The HFS system propounded in the LEP and DCP comprises two components -

(a) partially compensating the building owner for the expense of the approved conservation works; and (b) partially compensating the building owner for restricting the development potential of the site containing the heritage building.

(ii) Strict application of the HFS formula referable to the footprint of the heritage building, rather than to the floor space of the heritage areas of the building, would lead to an unreasonable or inequitable result in the present case inasmuch as the 1981 alterations yielded 1,270 m 2 floor space, thereby realising some of the site's development potential. To compensate the building owner by an award of HFS without any account of that realised potential would involve a windfall for the owner.

(i) In these circumstances, the merits of the case required the Council to exercise its discretion to depart from the HFS formula propounded by the DCP, and the result of that exercise in the present case was still more favourable to the building owner than it might have been.

(ii) The discretion to depart from the HFS formula contained in the DCP derives from the essential "guideline" nature of the DCP.

(iii) On the merits of the case, the Applicant's claim to the full award of HFS is founded not upon any merits, but upon the assumption that the whole of the building is of "heritage significance" and that the Council had no discretion under the DCP to take into account recent additions to the building (which lack intrinsic heritage value) for the purpose of determining the amount of HFS to be awarded.

The Applicant's competing arguments may be summarised as follows:

(i.) Clause 45 of the LEP vests in the Council the planning discretion to award HFS.

At a glance

Court

Decision date

Before

Source

Judgment (233 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (8)

Cited By (1)