Elf Farm Supplies Pty Ltd v Hawkesbury City Council & Anor

The applicant contends that its proposed use is properly categorised as a 'rural industry' and is accordingly not a prohibited use. It says that such use is to be distinguished from an 'industry' which would be prohibited in the zone.

In addition to its principal submission the applicant asserts that the production of mushroom substrate does not meet the description of a manufacturing process. The applicant maintains that such process does not constitute a manufacturing process within the meaning of the Factories, Shops and Industries Act 1962 ("the FSI Act") because it does not involve the breaking up or dismantling of any goods or articles for trade sale or gain. It submits that the production of mushroom substrate by lorry load does not comprise 'goods or articles' within the meaning of that term as defined in that Act. It relies on the judgment of the High Court in R v Aird; Ex parte The Australian Workers' Union [1973] 129 CLR 654 wherein the court held that ready-mixed concrete was not an 'article'.

The applicant thirdly submits that to construe the LEP as prohibiting this development in a rural zone under the LEP would result in an absurdity. Such a construction would prohibit a rural industry intended to serve the rural community. If the council's submissions are upheld, a rural industry would be prohibited in a rural zone, yet a rural industry could be conducted in zones 4(b) Industry Light and 4(a) Industry General under the LEP.

Section 6 of the LEP adopts the Environmental Planning and Assessment Model Provisions 1980 ("the Model Provisions") subject to certain inconsequential exceptions. The definition of 'industry' is defined in Pt II s 4(1) of the Model Provisions as:-

(a) any manufacturing process within the Factories, Shops and Industries Act 1962 (b) the breaking up or dismantling of any goods or any article for trade or sale or gain or as ancillary to any business; The FSI Act defines 'manufacturing process' in s 4(1) as:- "Manufacturing process" means any handicraft or process in or incidental to the making, assembling, altering, repairing, renovating, preparing, ornamenting, finishing, cleaning, washing, breaking up, or adapting of any goods or any articles or any part of an article, for trade or sale or gain, or as ancillary to any business, and includes any handicraft or process declared by the Governor, pursuant to this Act, to be a manufacturing process. The term 'rural industry' is defined in Pt II s 4(1) of the Model Provisions as follows:- rural industry means handling, treating, processing or packing of primary products and includes the servicing in a workshop of plant or equipment used for rural purposes in the locality;

State Environmental Planning Policy No 30 - Intensive Agriculture ("SEPP No 30") is a planning instrument which applies to the subject lands. SEPP No 30 provides that the term 'rural industry' where it appears in environmental planning instruments includes composting facilities and works. Clause 8 of SEPP No 30 provides:- 8 A reference in an environmental planning instrument, whether made before or after commencement of this clause, to rural industry is taken to include a reference to composting facilities and works, including facilities and works for the production of mushroom substrate.

In support of its principal argument that 'rural industry' is not 'an industry' the applicant submits that the decision of the New South Wales Court of Appeal in Egan and Ors v Hawkesbury City Council and Anor (1993) 79 LGERA 321 led to an amendment to the definition of 'extractive industry' in the Model Provisions to distinguish 'extractive industry' from 'industry'. The applicant submits that by analogy the distinction between 'industry' and rural industry' is to be recognised, and that since 'rural industry' is not one of the prohibited uses of the LEP, it is permissible with consent.

The environmental impact statement relating to the proposed development establishes that the substrate plant involves a substantial undertaking. The construction of the plant requires the development of approximately 4.1 hectares of the subject land which comprises approximately 25 per cent of its area. Covered storage areas, various sheds, a conveyor system, plant room, work shop, car park, weigh bridge, office, amenities and other infrastructure including the installation of tunnels made of concrete for processing the raw materials are incorporated into the proposal. The plant would operate 24 hours per day and produce 750 tonnes of substrate per week. Heavy items of plant and equipment including a front end loader, tractors, external conveyors, refrigeration plant, blowers and water pumps are involved in the manufacturing process and several employees are required.

All of the materials required for production of substrate would be transported to the site. Those materials comprise fresh veiled straw, poultry manure, cotton seed hulls, cotton seed meal and gypsum. The production process involves three stages, namely a stage of rapid decomposition and conversion of all organic materials into compost which is regularly turned and moistened over a period of ten days to maintain conditions for rapid composting. Thereafter stage two being a period know as 'peak heat' is reached. The mix is pasteurised, conditioned and converted into usable substrate. Stage three, known as the 'spawn run' involves mushroom spawn on rye grain being seeded to colonise the substrate over a period of two weeks. When complete the mushrooms have germinated and appear on the surface of the mix. On completion of the process the spent product is used for garden mulch or a constituent of potting mix.

The applicant's proposed use involves the delivery of raw materials to the site and the undertaking of a process resulting in production of substrate for commercial gain. In Egan (at 327) , Mahoney JA observed the definition, 'Manufacturing process' contained in the FSI Act should be given a wide interpretation. His Honour determined that crushing of sandstone fell within that portion of the definition, thereby accepting that bulk sandstone comprised 'goods'.

Having considered the various sub-categories of industry, His Honour said at 328:- Each of these is, by its definition, an "industry" albeit of a particular kind. Therefore, if "industry" is to be given its ordinary meaning, it would not be necessary to specify such kinds of industries in the prohibition as the specification of "industry" would include these particular kinds of industries. His Honour considered a submission that the 'industry' was a separate use to 'extractive industry'. The sandstone crushing activity satisfied the definition of 'industry' which was prohibited and simultaneously 'extractive industry' which was permissible. His Honour acknowledged that there may be difficulty where some activities fall within one or more of the definitions. His Honour rejecting the submission that such circumstance rendered the use permissible, said at 328:- I do not think that that is how the local environmental plan was intended to operate. It intended to remove from use with council approval the kinds of activities falling within the definition as proscribed. The fact that a proscribed activity might fall within another definition was not intended to have the effect that it could be carried on, or carried on with consent.

The definition of 'rural industry' in the Model Provisions connotes an industry of a particular kind. The issue is whether the proposed use in the instant case satisfies the definition of 'industry' as contained in the Model Provisions. This requires categorisation of the specific activity proposed.

Adopting the reasoning in Egan, the raw materials used in the proposed process comprise 'goods'. In The Noordam (No 2) and Other Ships [1920] AC 904, Lord Sumner delivering the judgment of the Privy Council said at 909:- The content of the word "goods" differs greatly according to the context in which it is found and the instrument in which it occurs... Goods are not limited to things which are of considerable bulk or weight... The raw materials are subjected to a process resulting in mushroom substrate which is used for trade, sale or gain and which comprise 'goods'.

The High Court of Australia has observed that a useful test for determining if something constitutes 'goods' is to consider whether they are saleable (see Federal Commissioner of Taxation v Totalisator Administration Board 170 CLR 508 at 511). The final product comprises 'goods' since it has a commercial value.

Accordingly the proposed use satisfies the definition of 'Manufacturing process' as defined in the FSI Act. As such, it constitutes an 'industry' as defined in the Model Provisions, and thus the LEP. The proposed use is that of an 'industry' as well as a 'rural industry' applying the approach of Mahoney JA in Egan (at 328). It follows the proposed use is one which is prohibited by the LEP.

The third submission of the applicant, namely that an absurdity arises from such an interpretation of the instrument cannot be sustained in the light of Egans case and the rules of statutory interpretation. In Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129 at 161 Higgins J said:- The question is, what does the language mean; and when we find what the language means in its ordinary and natural sense, it is our duty to obey that meaning, even if we think the result to be inconvenient, impolitic or improbable.

(See also Re Mooi and Comcare Australia (1995) 37 ALD 559 at 563). The interpretation of 'rural industry' may indeed operate to prohibit in rural zones various activities but this is a consequence of the correct interpretation of the provisions of the LEP.

The point of law is to be answered in the affirmative.

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