Cumerlong Holdings Pty Ltd v Dalcross Properties Pty Ltd

Conveyancing Act 1919 (NSW) Environmental Planning and Assessment Act 1979 (NSW) LEGISLATION CITED : Interpretation Act 1987 (NSW) Local Government Act 1919 (NSW) Miscellaneous Acts (Planning) Repeal and Amendment Act 1979 (NSW)

CASES CITED : Coshott v Ludwig (13 or 14 February 1997, unreported, CA Meagher JA, Giles and Simos AJJA)

Cumerlong Holding Pty Limited (Plaintiff) PARTIES : Dalcross Properties Pty Limited (First Defendant) Dalcross Holdings Pty Limited (Second Defendant)

COUNSEL : P McEwan SC / N Eastman (Plaintiff) A Galasso SC / G Newport (Defendants)

SOLICITORS : Williamsons Solicitors Pty Ltd (Plaintiffs) Robert Napoli & Co (Defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4269/08 Cumerlong Holdings Pty Ltd v Dalcross Properties Pty Limited and Dalcross Holdings Pty Limited JUDGMENT 1 The plaintiff and the first defendant own neighbouring properties in Killara. The plaintiff owns Lot 1 DP302605 known as 9 Werona Avenue, Killara. The first defendant owns Lots 102 and 103, DP834629 known as 26 Stanhope Road, Killara. Werona Avenue and Stanhope Road intersect. The second defendant operates a private hospital upon Lot 101 and proposes to extend the use onto Lot 103 and Lot B, DP322493. 2 The plaintiff seeks an order that the defendants be restrained from using or permitting to be used the land in Lots 102 and 103 for any (including associated and ancillary) hospital, medical, surgical, therapeutical, nursing, rehabilitation, physiotherapy, dental or convalescent purposes or any associated or ancillary purpose in contravention of the restriction on use created by an instrument pursuant to Section 88B of the Conveyancing Act 1919. 3 The instrument: a) burdens Lots 102 and 103; and b) benefits, amongst other properties, Lot 1, DP302605. 4 On 5 September 2008 Ku-ring-gai Council issued a Notice of Determination of Development Application 0166/08 granting consent to the part demolition and extension to an existing hospital at Lot 101, DP834629, Stanhope Road and demolition of existing dwelling houses and extension of the hospital use on the defendants' lands being Lot 103 and Lot B. 5 The relevant restriction is contained in DP834629 and relevantly reads: "(a) No part of the land shall be used, or permitted or suffered to be used for any hospital, medical, surgical, therapeutical, nursing, rehabilitation, physiotherapy, dental or convalescent purpose or for any other purpose (including but not limited to the ingress or egress of vehicular or pedestrian traffic, the loading or unloading of persons or goods or the parking of motor or other vehicles of any description) associated with or ancillary to any hospital, medical practice, dental practice, physiotherapy practice, occupational therapy practice, rehabilitation establishment or convalescent home.

(b) No building erected on the land or any part thereof shall be used or occupied for any purpose other than a private dwelling house.

The authority to release, vary or modify such restriction is to rest with a minimum of eight of the benefited proprietors."

The defendants accepted that, prima facie , these terms prevent the use of the subject land for hospital/medical uses. 6 The plaintiff contended that the private covenant was a regulatory instrument within s 28 of the Environmental Planning and Assessment Act 1979 ("EP&A Act") and remains in force and prevents the defendants from using the land for the purposes prohibited by the covenant. 7 The defendants submitted that the consent of the Council had the effect of setting aside the restrictions by virtue of the operation of s 28 of the Environmental Planning and Assessment Act 1979 which reads: "(1) In this section, 'regulatory instrument' means any Act (other than this Act), rule, regulation, by-law, ordinance, proclamation, agreement, covenant or instrument by or under whatever authority made.

(2) For the purpose of enabling development to be carried out in accordance with an environmental planning instrument or in accordance with a consent granted under this Act, an environmental planning instrument may provide that, to the extent necessary to serve that purpose, a regulatory instrument specified in that environmental planning instrument shall not apply to any such development or shall apply subject to the modifications specified in that environmental planning instrument.

(3) A provision referred to in subsection (2) shall have effect according to its tenor, but only if the Governor has, before the making of the environmental planning instrument, approved of the provision.

(4) Where a Minister is responsible for the administration of a regulatory instrument referred to in subsection (2), the approval of the Governor for the purposes of subsection (3) shall not be recommended except with the prior concurrence in writing of that Minister.

(5) A declaration in the environmental planning instrument as to the approval of the Governor as referred to in subsection (3) or the concurrence of a Minister as referred to in subsection (4) shall be prima facie evidence of the approval or concurrence." 8 There were conflicting contentions as to the construction and operation of s 28. Was the approval of the Governor required in the circumstances of the present case? Was the Minister responsible for the administration of a private covenant? There was no declaration as to the approval of the Governor in LEP 194. Both parties referred at length to the history of the legislation and the planning instruments. 9 Part XIIA of the Local Government Act 1919 provided for the preparation by a council of a scheme with respect to any land in its area. Section 34G(2) provided that a scheme may contain provisions for regulating and controlling the use of land and the purposes for which land may be used. Section 342G(3) provides that a scheme may contain provision for all or any of a large number of listed matters. These include: "(i) the regulation of building and of matters relating thereto; … (l) the zoning of land and the prohibition in any zone of the erection, construction, carrying out or use of any structure or work upon the land or the use in any zone of any land for any specified purpose or for any purpose other than a specified purpose; (m) the extinction or variation of private rights of way and other easements." [This does not refer to covenants.] 10 Section 342G(4) provides: "(4) A scheme may suspend either generally or in any particular case or class of cases the operation of any provision of this or any other Act, or of any rule, regulation, by-law, ordinance, proclamation, agreement, covenant or instrument by or under whatever authority made, to the extent to which that provision is inconsistent with any of the provisions of the scheme." 11 In Government Gazette No 108 of 1 October 1971 the proclamation of the Ku-ring-gai Planning Scheme Ordinance ("KPSO") by the Governor appeared. Column IV of the Table included in clause 23 and that clause, as to land within Residential 2(b) zoning, provided that the purposes for which buildings or works may be erected or carried out or used only with the consent of the responsible authority were any purpose other than those permitted by Column II (dwelling houses) or prohibited by Column V. Hospital and medical uses were not prohibited by Column V. Lots 102 and 103 were within zone 2(b) - Residential B. This continued for many years. 12 Clause 68 of the KPSO provided: "68. (1) The operation of section 309 of the Act and of the proclamations made thereunder declaring residential districts is hereby suspended to the extent to which such section and such proclamations are inconsistent with any of the provisions of this Ordinance or with any consent given thereunder.

(2) In respect of any land which is comprised within any zone, other than within Zone No 2(a), 2(b), 2(c), 2(d), 2(e), 2(f), 2(g) or 2(h) the operation of any covenant agreement or instrument imposing restrictions as to the erection or use of buildings for certain purposes or as to the use of land for certain purposes is hereby suspended to the extent to which any such covenant, agreement or instrument is inconsistent with any provision of this Ordinance or with any consent given thereunder.

(3) Nothing in subclause (2) of this clause shall affect the rights or interests of any statutory authority under any registered instrument." 13 The EP&A Act repealed Part XIIA of the Local Government Act. However, under the Miscellaneous Acts (Planning) Repeal and Amendment Act 1979 a former planning instrument as in force immediately before the appointed day (the day appointed and notified under section 2(2) of the EP&A Act) shall, subject to this Act, have full force and effect according to its tenor and shall be deemed to be a deemed environmental planning instrument. Under clause 1, schedule 3 of the Miscellaneous Acts (Planning) Repeal and Amendment Act a former planning instrument means a prescribed scheme and this means a scheme prescribed within the meaning of Part XIIA of the Local Government Act. 14 Under s 4 of the EP&A Act, a "deemed environmental planning instrument" means a former planning instrument and "environmental planning instrument" includes "a deemed environmental planning instrument" and a "local environmental plan". 15 On 9 March 1990 clause 68 of the KPSO was amended by Ku-ring-gai Local Environmental Plan No 74 (vide Government Gazette No 35 of 9 March 1990). This extends the exempt zones by adding zone 2(h). This is not of consequence for these proceedings. 16 Over the years (vide Government Gazette 35 of 5 March 1982 and Government Gazette 168 of 22 December 2000) amendments were made to clause 23 and the development control table. Column III was deleted in 1982. The Table in clause 23 was deleted and a new Table substituted in 2000. The effect of the various amendments was, inter alia, to reduce the number of columns from five to four. It is unnecessary to rehearse the details of the changes. 17 Ku-ring-gai LEP 194 (vide Government Gazette 92 of 28 May 2004) amended the then existing development control table in clause 23 of the KPSO by creating, inter alia, a new zone, being the 2(d3) zone. From 28 May 2004 the defendants' land was zoned 2(d3) and ceased to zoned as 2(b). Zone 2(d3) was not included in the exempt zones in clause 68(2). 18 Under Column 3 of the Table substituted in 2004 the provisions as to land in Residential 2(d3) were that amongst the development that may be carried out only with development consent were: "Demolition of a building or work … Development … for the purpose of … hospitals … professional consulting rooms …" 19 From 1971 until the present Lot 103 could be used under the KPSO for the purpose of hospitals and professional consulting rooms with the consent of Ku-ring-gai Council. This does not take into account the terms of the restrictive covenant. 20 It is necessary to return to the language of s 28 of the EP&A Act. In Coshott v Ludwig (13 or 14 February 1997, unreported, CA Meagher JA, Giles and Simos AJJA - 1979 NSW Conv R 56, 366) Meagher JA, with whom the other judges agreed, rejected the argument that the word "covenant" where it appears in s 28(1) of the Act or in clause 32(1) of Woollahra LEP27 does not refer to "private" covenants but only to covenants by public authorities. 21 At p 5 of his reasons, Meagher JA said: "the self-evident purpose of s 28 of the Act and clause 32 of LEP27 is to nullify and remove all obstacles to the planning principles decided on by the Council or the Minister. In this context s 28 of the Act is stating, in effect, 'an environmental planning instrument may state what documents should be disregarded', and clause 32 of LEP27 is stating that one type of document to be disregarded is a document creating a restrictive covenant. As to the argument about the words [in s 28(1)] 'by or under whatever authority made', I am of the view that, although chosen without conspicuous felicity, they mean no more than 'howsoever created'." 22 I am bound by this decision. The private covenant is a regulatory instrument within s 28(1) of the EP&A Act. 23 For the purposes of s 28(2) of the EP&A Act KPSO is an environmental planning instrument. Clause 68(2) provides that the operation of any covenant imposing restrictions as to the erection or use of buildings for certain purposes or as to the use of land for certain purposes was suspended to the extent to which any such covenant is inconsistent with any consent given under the KPSO. The consent issued by Ku-ring-gai Council was issued under KPSO. 24 Under Part XIIA of the Local Government Act, the KPSO was proclaimed by the Governor. One of the major changes effected by the EP&A Act was that henceforth environmental planning instruments which include local environmental plans were made under Part 3 of the EP&A Act and made by the Minister. The preparation of Local Environmental Plans is dealt with in Division 4 of the EP&A Act. Under s 70 the Minister may make a Local Environmental Plan. This is done after following the procedure detailed in and meeting the requirements of Division 4 of Part 3. 25 Division 5 of the EP&A Act is headed "Review and Amendments of Environmental Planning Instruments". Section 73A inserted by Act 43 of 2005 enables clerical and minor errors to be corrected by means of an emending environmental planning instrument without compliance with many of the provisions of Part 3. Section 73A does not apply in the present case. 26 Section 74 provides that an environmental planning instrument may be amended in whole or in part by a subsequent environmental planning instrument. Section 74(3) provides that "amended" includes altered, varied or repealed. Section 74(2) provides that a subsequent environmental planning instrument shall be made in accordance with Part 3 except that: "… (b) where the subsequent instrument is a local environmental plan - the provisions of sections 57 and 61 shall not apply, unless the Director-General [of the Department of Planning] directs to the contrary." [Section 57 requires the preparation of an environmental study of the land to which the draft local environmental plan is intended to apply. Section 61 requires the Council to prepare a draft local environmental plan having regard to the environmental study prepared by the Council under s 57.] 27 The defendants contended that s 28 in Division 1 of Part 3 of the EP&A Act only applied to local environmental plans made by the Minister under s 70 after the procedures and steps specified in Division 3 of Part 3 of the EP&A Act had been followed and taken. 28 The defendants submitted that there was a critical distinction between a local environmental plan made pursuant to Division 4 of Part 3 of the Act and one made pursuant to the amending power in s 74 in Division 5 of Part 3 of the Act. 29 Section 74(1) of the EP&A Act envisages and authorises amendment of an environmental planning instrument by a subsequent environmental planning instrument. Section 74(2) provides that this latter (or subsequent) instrument should be made in accordance with the provisions of Part 3. The reference to sections 57 and 61 envisages that, except to this extent, the provisions of Division 4 of Part 3 will apply. The power of the Minister to make a local environmental plan is found in s 70 in Division 4. 30 Section 8 of the Interpretation Act 1987 (NSW) provides that in any Act or instrument a reference to a word or expression in the singular form includes a reference to the word or expression in the plural form. This is subject to a contrary intention (s 5). In the present case I would take the two environmental planning instruments together, that is, KPSO and LEP 194. KPSO clause 68(2) when taken with the re-zoning of the land to residential 2(d3) facilitated the granting of consent and the suspension of the restrictive covenant. Until the rezoning of the land from 2(b) to 2(d3) the provisions of 68(2) did not enable the operation of the restrictive covenant to be suspended. 31 In clause 2 of LEP 194 it is stated that the plan aims to rezone land to facilitate the development of multi-unit housing. In clause 3 it is stated that the plan applies to the land in the vicinity of the Railway/Pacific Highway corridor. The land the subject of the consent is close to the Railway and within the corridor. 32 The defendants relied upon s 68(1) of the Interpretation Act which provides that in any Act or instrument, a reference to some other Act or instrument extends to the other Act or instrument, as in force for the time being. 33 In the present case the KPSO is an applicable environmental planning instrument and continues to apply but it must be read with LEP 194. LEP 194 does not contain a provision referring to the private covenant as a regulatory instrument but by virtue of s 28(1) of the EP&A Act a private covenant is a regulatory instrument. 34 The defendants sought to approach the matter on the basis that the KPSO and LEP 194 should be taken separately, that KPSO was under s 28(2) the relevant environmental planning instrument, that it spoke as of the date the Council granted consent, and that clause 68(2) of KPSO provided that the regulatory instrument should not apply to the development proposed. Clause 68(2) suspended the operation of the covenant not LEP 194. The defendants contended that s 28(3) required the approval of the Governor if LEP 194 provided that the private covenant shall not apply to the development carried out in accordance with KPSO and a consent granted pursuant to it. It was submitted that this was not the present case. 35 I think that the defendants' approach is incorrect and does not sufficiently allow for the combined effect of KPSO and LEP 194. They should be taken together as both are necessary before there can be a consent which results in the private restrictive covenant not applying to the proposed development. 36 LEP 194 indicates substantial public policy reasons for a change in zoning. Nevertheless, the suspension, if not the effective extinguishment, of a private restrictive covenant is a matter of consequence as it is tantamount to destroying established private rights of some value. 37 In my opinion the words of the statute do not lead to the conclusion that KPSO and LEP 194 should be taken separately and that their combined operation and effect should not be considered. The "separate" approach strikes me as artificial. In view of their compounding effect and the change of zoning permitting the provision in KPSO clause 68(2) as to suspending the operation of the covenant coming into effect, I am of the opinion that the approval of the Governor is required under s 28(3) to LEP 194. 38 There is nothing in the structure of Part 3 of the EP&A Act which would lead to a different result. Division 1, which includes s 28, contains a series of general provisions dealing with environmental planning instruments. Division 2 deals with State Environmental Policies, Division 3 with Regional Environmental Plans, Division 4 with Local Environmental Plans, Division 4A with Applications for the Preparation of Local Environmental Plans, Division 4B with Instrument Amendments and Development Applications and Division 5 with Review and Amendment of Environmental Planning Instruments (both minor and substantive). The reference to Divisons 4A and 4B are included for completeness. They do not bear upon the solution of the present construction issues. No sufficient reason appears to exclude amending LEPs, having a compounding effect upon the operation of the environmental planning instruments being amended, from the operation of s 28. 39 There is one evidentiary matter outstanding. There was no evidence whether the Governor had approved of LEP 194 either alone or when compounded with KPSO as to the change of zoning when that change brings clause 68(2) of KPSO into operation when consent is given by the Council to the development proposed. 40 The solicitors for the plaintiff had written to the Governor's Official Secretary seeking such information but had received no useful response, either from the Governor's office or any Department of State. I could understand the contention that the Governor's approval was not necessary and a different view being taken from the one I have expressed, but it ought to be possible without undue difficulty to ascertain the correct factual situation. Perhaps the Department of Planning or its successor could help. I was reluctant to decide the major issue on an evidence basis when it should be possible without difficulty to resolve it authoritatively. I propose to stand the matter over for 21 days to allow this point to be resolved. 41 At one point another question arose under s 28(4), namely, whether a Minister was responsible for the administration of a regulatory instrument. The plaintiff issued a subpoena to the Minister of Lands as the responsible Minister charged with the administration of the Conveyancing Act. 42 In the case of a private restrictive covenant I do not think it can be said a Minister is responsible for the administration of such a covenant. The administration of such a covenant lies in the hands of the owners of the dominant and servient tenements. The registration of the covenant on the titles at LPI does not make a Minister responsible for the administration of such a covenant. 43 I stand the matter over for 21 days for evidence of the Governor's approval or non-approval. **********

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