F Hannan (Properties) Pty Ltd v Council of the City of Sydney

Factual Background 7The factual background giving rise to this application is not in dispute. Hannan's original summons was filed in Court on 24 August 2010. It claimed the following relief: (a) a declaration that the council was required to comply with s 111 of the EPAA prior to undertaking, or causing, the construction of the Bourke Road, Mandible and Bowden Street cycleway ("the cycleway"); (b) a declaration that the council did not comply with s 111 of the EPAA prior to the construction of the cycleway; and (c) an order that the council demolish the cycleway and restore all previous traffic and parking arrangements. 8Hannan's points of claim were filed in Court on 5 October 2010. Relevantly paragraph 9(c) states that the construction of the cycleway is not exempt development. 9The council's points of defence were filed on 15 October 2010. In answer to paragraph 9(c) of the points of claim, the council alleges that the construction of the cycleway was (with the exception of the work described in paragraph 7 of the points of defence) exempt development within the meaning of cl 97(1)(c) of the State Environmental Planning Policy (Infrastructure) 2007 ( "the SEPP"). 10On 17 December 2010, the State Environmental Planning Policy (Infrastructure) Amendment (Miscellaneous) 2010 commenced ("the SEPP Amendment"). The SEPP Amendment relevantly removed the requirement originally contained in cl 20(2)(d) of the SEPP that development "must involve no more than minimal environmental impact on the environment or the amenity of the surrounding area" for it to be exempt development. Thus, the requirement that there be minimal environmental impact ceased to be a mandatory criterion for qualification as exempt development under the SEPP. 11Hannan became aware of the amendment to the SEPP shortly after it came into effect, on 4 January 2011.

The Proposed Amendments 12The proposed amended summons claims the following additional relief to purportedly address the issues arising from the amendment to the SEPP: 3. A declaration that to the extent State Environmental Planning Policy (Infrastructure) Amendment (Miscellaneous) 2010 purports to amend clause 20 of State Environmental Planning Policy (Infrastructure) 2007 so as to permit development that is not of minimal environmental impact it is contrary to section 76(2) of the EPA Act and thereby invalid and of no effect. 4. A declaration that the carrying out of the Bourke Road, Mandible and Bowden Street cycleway is not development that is of minimal environmental impact within the meaning of section 76(2) of the EPA Act. 5. A declaration that the carrying out of the Bourke Road, Mandible and Bowden Street cycleway is not exempt development pursuant to State Environmental Planning Policy (Infrastructure) 2007. 6. A declaration that the carrying out if the Bourke Road, Mandible and Bowden Street cycleway was in all the circumstances unlawful. 13The proposed amended points of claim purports to plead a cause of action against the Minister in this way: 22.On or about 17 December 2010, the Second Respondent recommended the making of the State Environmental Planning Policy (Infrastructure) Amendment (Miscellaneous) 2010 ( Infrastructure SEPP Amendment ) by Governor under section 37 of EPA Act. 23.Schedule 1, clause 4 of the Infrastructure SEPP Amendment omitted clause 20 of the State Environmental Planning Policy (Infrastructure) 2007 ( Infrastructure SEPP ) and inserted an alternative clause 20 in the Infrastructure SEPP. 24.The omission of the previous clause 20 of the Infrastructure SEPP and the insertion of the alternative clause 20 of the Infrastructure SEPP is ultra vires as it contravenes the requirements of section 76(2) of the EPA Act. PARTICULARS (a) Section 76(2) of the EPA Act provides that an environmental planning instrument may provide that the development of a specified class or description that is of minimal environmental impact is exempt development. (b) The omission of the previous clause 20 of the Infrastructure SEPP and the insertion of the alternative clause 20 of the Infrastructure SEPP has the effect of removing the previous clause 20(2)(d) which provided that exempt development under the Infrastructure SEPP must involve no more that minimal impact on the environment or amenity of the surrounding area. (c) The effect of the amendment is to provide that development of a specified class or description is exempt development without regard to whether it is of minimal environmental impact. 25. Infrastructure SEPP is an environmental planning instrument for the purposes of section 76(2) of the EPA Act 1979. 26. Pursuant to section 76(2) of the EPA Act 1979 Infrastructure SEPP may only provide that development of a specified class or description that is of minimal environmental impact is exempt development. 27. The carrying out of the construction of a cycleway on Bourke Road, Mandible and Bowden Streets is not development that is of a minimal environmental impact within the meaning of section 76(2) of the EPA Act 1979. 28. The carrying out of the construction of a cycleway on Bourke Road, Mandible and Bowden Streets is not exempt development for the purposes of the Infrastructure SEPP. 29. To the extent that the Infrastructure SEPP Amendment purports to amend clause 20 of The Infrastructure SEPP so as to permit development that is not of minimal environmental impact it is contrary to section 76(2) of the EPA Act and thereby invalid and of no effect.

Statutory Framework 14The term "exempt development" is defined in s 4(1) of the EPAA as "development for which provision is made as referred to in section 76(2)". 15Section 76 of the EPPA Act states the following (emphasis added): 76 Development that does not need consent (1) General If an environmental planning instrument provides that specified development may be carried out without the need for development consent, a person may carry the development out, in accordance with the instrument, on land to which the provision applies. Note. Environmental assessment of the development may nevertheless be required under Part 5. (2) Exempt development An environmental planning instrument may provide that development of a specified class or description that is of minimal environmental impact is exempt development. (3) If development is exempt development: (a) the development may be carried out, in accordance with the instrument, on land to which the provision applies without the need for development consent, unless that land: (i) is critical habitat, or (ii) is, or is part of, a wilderness area (within the meaning of the Wilderness Act 1987 ), and (b) Part 5 does not apply to the development. A provision made under subsection (2) has no effect at any time during which the land is land to which paragraph (a) (i) or (ii) applies. 16Section 35 of the EPAA provides: 35 Validity of instruments The validity of an environmental planning instrument shall not be questioned in any legal proceedings except those commenced in the Court by any person within 3 months of the date of its publication on the NSW legislation website. 17Clause 20 of the SEPP relevantly stated as follows: 20 Exempt development Note.Under section 76 of the Act, exempt development may be carried out without the need for development consent under Part 4 of the Act or for assessment under Part 5 of the Act. The section states that exempt development: (a) must be of minimal environmental impact, and (b) cannot be carried out in critical habitat of an endangered species, population or ecological community (identified under the Threatened Species Conservation Act 1995 or the Fisheries Management Act 1994 ), and (c) cannot be carried out in a wilderness area (identified under the Wilderness Act 1987 ). (1) Development for a purpose specified in Schedule 1 is exempt development if: (a) it is carried out by or on behalf of a public authority, and (b) it meets the development standards for the development specified in Schedule 1, and (c) it complies with the requirements of this clause. (2) To be exempt development, the development: ... (d) must involve no more than minimal impact on the environment or amenity of the surrounding area ... 18And cl 97(1)(c)(iv) relevantly provides: 97 Exempt development (1) Development for any of the following purposes is exempt development if it is carried out by or on behalf of a public authority in connection with a road or road infrastructure facilities and complies with clause 20(2) (Exempt development): ... (c) erection, installation, maintenance, reconstruction, repair or replacement of any of the following, and any associated landscaping works: ... (iv) pedestrian and cyclist facilities (such as footpaths, street lighting, kerb adjustments and ramps, pedestrian fences, refuges, holding rails, and bollards)... 19Finally, Sch 1 of the SEPP Amendment states: [4] Clauses 20 and 20A Omit Clause 20. Insert instead: 20 General requirements for exempt development (1) This clause applies to any development that this Policy provides is exempt development. Note. Clause 20A and other provisions of this Policy identify kinds of developments that are exempt development if they meet the requirements of this clause. (2) To be exempt development, the development: (a) must meet the relevant deemed-to-satisfy provisions of the Building Code of Australia, or if there are no such relevant provisions, must be structurally adequate, and (b) must not, if it relates to an existing building: (i) cause the building to contravene the Building Code of Australia, or (ii) compromise the fire safety of the building or affect access to any fire exit, and (c) must be carried out in accordance with all relevant requirements of the Blue Book, and (d) must not be designed development, and Note. Designated development is defined in section 77A of the Act as development that is declared to be designated development by an environmental planning instrument or the regulations. (e) if it is likely to affect a State or local heritage item or a heritage conservation area, must involve no more than minimal impact on the heritage significance of the item or area, and (f) must be installed in accordance with the manufacturer's specifications, if applicable, and (g) must not involve the removal or pruning of a tree or other vegetation that requires a permit or development consent for removal or pruning, unless that removal or pruning is undertaken in accordance with a permit or development consent. Note. A permit for the removal or pruning of a tree or other vegetation may be granted under a local environmental plan. A development consent for the removal of native vegetation may be granted under the Native Vegetation Act 2003.

Legal Principles Applicable in Determining Whether a Pleading Discloses No Reasonable Grounds 20Section 64 of the Civil Procedure Act 2005 ("the CPA") for present purposes provides: 64 Amendment of documents generally (1) At any stage of proceedings, the court may order: (a) that any document in the proceedings be amended, or (b) that leave be granted to a party to amend any document in the proceedings. (2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings. (3) An order under this section may be made even if the amendment would have the effect of adding or substituting a cause of action that has arisen after the commencement of the proceedings but, in that case, the date of commencement of the proceedings, in relation to that cause of action, is, subject to section 65, taken to be the date on which the amendment is made... 21Section 58(1)(a)(i) of that Act makes it plain that in exercising its discretion to grant an amendment to a pleading, the Court must have regard to the dictates of justice. This is intended to emphasise the overriding purpose of facilitating the "just, quick and cheap resolution of the real issues in the proceedings" (s 56 and ss 57-60 of the CPA). 22Both ss 64 and 58 of the CPA are silent, however, as to the applicable legal principles to be applied in determining how the wide discretion contained in s 64 of the CPA should be exercised, particularly when an issue arises either as to the substance or form of the proposed amendment. The Land and Environment Court Rules 2007 ("the LEC Rules") and the UCPR are similarly mute. 23The parties agreed, and the Court accepts, that by analogy to r 14.28 of the UCPR, central to the question of whether the amendments ought to be permitted in this application is whether or not the proposed amendments are liable to be struck out as disclosing no reasonable cause of action. 24At common law the power to strike out pleadings because they disclose no reasonable cause of action should be exercised only in plain and obvious cases. Various formulations of the test have been enunciated by the courts. A review of the cases reveals the following pertinent principles in relation to the striking out of pleadings for failing to disclose a reasonable cause of action: (a)he power to strike out pleadings should only be exercised in plain and obvious cases. That is where the case proposed is "so obviously untenable that it cannot possibly succeed" or is "manifestly groundless" ( General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129); (b)the mere fact that an applicant's prospects of success might be characterised as slim would not be enough to strike out a pleading ( Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (Reg) [1997] HCA 8; (1997) 188 CLR 241 at 271); (c)great caution is required where factual questions are involved because it may be difficult to predict in advance of a final hearing the precise manner in which the evidence will unfold. By contrast, where the application turns on questions of law, while caution ought nevertheless be the touchstone of the exercise of the Court's discretion, unless there is no reasonable prospect that the deficiencies in what is pleaded are able to be cured by amendment, opportunities for strike out claims will arise more frequently ( Leerdam v Noori [2009] NSWCA 90; (2009) 255 ALR 553 at [75]); and (d)the Court is not precluded from hearing argument "even of an extensive kind" in determining whether or not the plaintiff's case is untenable ( General Steel Industries at 130).

The Proposed Amendments Disclose No Reasonable Cause of Action 25Put shortly, Hannan submitted that the SEPP Amendment is ultra vires in relation to s 76(2) of the EPAA because as amended the SEPP purports to authorise development of a specified class or description that is not, contrary to the express words of s 76(2) of the EPAA, of minimal environmental impact, and, moreover, the cycleway in question is not of minimal environmental impact. 26The Minister submitted that the amendments purportedly pleaded a claim against him that did not, as proposed, disclose a reasonable cause of action and were "doomed to fail". This was because s 76(2) of the EPAA was only directed to what an environmental planning instrument may provide, namely, that a specified class or description is exempt development. That is to say, the concept of "minimal environmental impact" is directed to the character of the classes or descriptions of development that may be specified to be exempt development and is not directed to operate on a case-by-case basis. 27The Minister relied on the decision by Jagot J in Port Stephens Council v SS & LM Johnston Pty Ltd; Port Stephens Council v Port Stephens Veterans and Citizens Aged Care Ltd [2007] NSWLEC 30; (2007) 152 LGERA 193 (at [71]-[73]) which he submitted was directly on point and which was indistinguishable in respect of the contentions made by Hannan concerning the operation of s 76(2) of the EPAA. Absent any attempt by Hannan to distinguish Port Stephens or argue that it was plainly wrong (neither of which Hannan sought to do, which was confirmed in correspondence passing between the solicitor for Hannan and the Crown Solicitor tendered by the Minister), the reasoning of her Honour provided a complete answer to the claim raised against the Minister as it was currently framed. 28In Port Stephens the defendants were charged with having committed an offence against s 125 of the EPAA by carrying out development absent development consent contrary to s 76A(1)(a) of that Act. The defendants pleaded not guilty on a number of bases, most relevantly for present purposes, on the basis that the development was exempt development being within two categories of development identified as such by the council's development control plan (development for the purpose of a boundary fence and/or development for the purpose of bushfire hazard reduction), and in the alternative, because the council had not established beyond reasonable doubt that the carrying out of the clearing was not exempt development within the meaning of s 76(2) of the EPAA. 29Clause 49 of the Port Stephens Local Environmental Plan 2000 ("the LEP") concerned exempt development and it relevantly provided that (quoted at [20] of the judgment): 49 What is exempt and complying development? (1) Development of minimal environmental impact listed as exempt development in Development Control Plan PS8 - Guidelines for Exempt and Complying Development as adopted by the Council on 24 February 2003 is exempt development, despite any other provisions of this plan except for clause 51A (Acid sulfate soils). (2) ... (3) Development is exempt or complying development only if it complies with the development standards and other requirements applied to the development by Development Control Plan PS8 - Guidelines for Exempt and Complying Development as adopted by the Council on 24 February 2003... 30The council submitted that s 76(2) of the EPAA and cl 49 of the LEP required exempt development to be of minimal environmental impact and because the clearing in question was not of minimal environmental impact, it could not be exempt development. The defendants argued that s 76(2) was a provision empowering the council to decide what development it thought was of minimal environmental impact and to include that within the LEP. Once it had done so, the words "minimal environmental impact" in s 76(2) had no further work to do. 31In accepting the defendants' submissions, Jagot J stated (at [72]-[73]): 72 Exempt development is development for which provision is made as referred to in s 76(2) (s 4(1)). Section 76(2) enables an environmental planning instrument to provide that development of a specified class or description that is of minimal environmental impact is exempt development. Accordingly, the development for which provision is made as referred to in s 76(2) is the result of an exercise of power under that section (that is, the provision in the instrument). If there has been an exercise of power and the validity of that exercise of power is not challenged, there will be exempt development for the purposes of the Act. The reference to "minimal environmental impact" in s 76(2) thus operates at the time that the power is exercised and limits the scope of the power available. The words have no work to do after the exercise of the power. The Council's concern about potential environmental impacts is readily answered. Membership of the specified class or description of development is left to the environmental planning instrument. It is a matter for the instrument (or those who prepare and make it) to decide the terms of the class or description. Development outside that specified class or description is not exempt development. 73 The defendants' construction of the EPA Act thus accords with the ordinary meaning of the provisions construed in context and the purpose of those provisions (evident from the statutory scheme overall and the second reading speech - Hansard , NSW Legislative Assembly, 15 October 1997 pp 822 - 832). The purpose of the provisions is to empower councils to decide what development should be exempt from any requirement for development consent and assessment under Pt 5. The power is available for development that is of minimal environmental impact. The assessment of environmental impact is to be carried out by the council at the time it exercises the power to identify the specified class or description of development. Requiring members of the public who wish to carry out development within the specified class or description to themselves assess the environmental impacts of their development and (presumably) make an objectively correct determination that, in the particular case, the development will in fact be of minimal environmental impact, would defeat the purpose of the statutory scheme. It would make necessary in each and every case the very environmental assessment that the exempt development provisions of the EPA Act were intended to avoid. 32Accordingly, while it was possible for an environmental planning instrument such as the SEPP to be expressed in a way that imposed a requirement that there be minimal environmental impact on a case-by-case basis for each type of development, this was not mandated by the legislation and there was nothing precluding the passing of a new SEPP, through the vehicle of the SEPP Amendment, that did not contain this requirement. 33Moreover, even assuming that the cycleway was not of minimal environmental impact, this fact alone could not establish that the exercise of power in amending the SEPP was invalid. The general issue of the validity of the exercise of power should not, as the present amendments do, be conflated with the ultimate factual finding sought to be demonstrated, namely, that the environmental impact of the cycleway is not minimal. 34Hannan seized upon the words of her Honour ( Port Stephens at [72]) "and the validity of that exercise of power is not challenged", and asserted that by its proposed amendments this was precisely what it was seeking to do, namely, challenge the validity of the exercise of the Minister's power in promulgating the SEPP Amendment. But when properly analysed this is not the actual effect of the proposed amendments. 35Turning first to the amended summons, no declaration is sought in relation to cl 97(c)(iv) of the SEPP. That clause, which is unaffected by the SEPP Amendment and is thus retained in the SEPP, relevantly states that the erection and installation of a cyclist facility, which would presumably encompass most, if not all, of the disputed cycleway, is exempt development. Absent any relief sought in respect of cl 97, the relief sought in relation to the removal of cl 20(2)(d) is, therefore, futile. So much so was recognised by Hannan when it suggested, during the course of argument, a further amendment to remedy the omission. 36Second, paragraph 24 of the proposed amended points of claim, which is at the heart of the claim against the Minister, does no more than state in somewhat circular terms that the removal of cl 20 from the SEPP was an invalid exercise of the Minister's power because it removed the need to have regard to whether or not the development is of minimal environmental development in order for it to be classified as exempt development. Critically, what it does not do is state how the invalidity arises. There is no suggestion, for example, that in exercising his power in amending the SEPP the Minister failed to have regard to a mandatory relevant consideration, viz , whether the construction of the cycleway was of minimum environmental impact, or that the power of the Minister to amend the SEPP contained in s 76(2) was preconditioned on his satisfaction of a jurisdictional fact, namely, that the development to be classified as exempt development was of minimal environmental impact. 37The Minister is, moreover, entitled to know, given that this is an application for both amendment and joinder, the precise way in which he is said to have exercised his power invalidly in amending the SEPP. The present draft cause of action does not, in truth, disclose this. 38In rejecting the amendments seeking to raise a claim against the Minister this is not to say that no cause of action exists, rather that as drafted none is reasonably disclosed. 39However, by reason of the operation of s 35 of the EPAA, it is likely that Hannan is now precluded from challenging the validity of the SEPP Amendment if, in effect, leave to replead the putative cause of action is not granted. I would, in all the circumstances of this case, be unwilling to shut out Hannan from pursuing a properly pleaded cause of action against the Minister. 40It follows that while I reject the amendments in their current form, I would nevertheless permit Hannan the opportunity of repleading them. To do so is consistent with the overriding purpose and the dictates of justice contained in ss 56-60 of the CPA and the principles contained in s 64 of that Act.

The Council 41The proposed amended points of claim also include amendments to paragraphs 7, 15 and 16 of the points of claim and seek to insert paragraphs 16A-16C. Given that the council did not oppose the application to amend, and there is no other reason not to allow them, leave is granted to Hannan to amend the points of claim as against the council.

Costs 42The Minister claims his costs on the basis that he has been successful in defending the application, notwithstanding the ability of Hannan to replead the amendments, and that costs follow the event in proceedings in Class 4 of the Court's jurisdiction (r 42.1 of the UCPR). 43Hannan submits that there should be no order as to costs. It did not suggest that the litigation was being brought in the public interest pursuant to r 4.2 of the LEC Rules, which has the effect of displacing the usual rule in relation to costs. 44The council sought an order that the insofar as it was concerned, the costs of the application should be costs in the cause. 45But for s 35 of the EPAA, I would have been inclined to dismiss the application with costs. This is particularly so in light of the correspondence passing between the Minister and Hannan, in which the Minister notified Hannan of its reliance on Port Stephens and raised the very argument upon which he has succeeded. The reprieve that has been afforded to Hannan in the exercise of the Court's discretion should not, in my view, alter the result insofar as costs are concerned. Having not persuaded the Court that the amendments as proposed ought to be permitted, it must compensate the Minister for the costs he has expended in successfully resisting the application. 46In respect of the council, however, the appropriate order is that there be no order as to costs. The council neither opposed nor actively participated in the application and given that no points of defence or evidence have been filed by the council, none of its costs can be said to have been thrown away by the amendments made. Mr Stephen Free, representing the council, properly described his presence as no more than "a watching brief". While this approach by the council is understandable, it ought not sound in an order for costs. Orders 47In conformity with the reasons above, the orders of the Court are that: (1)the application for leave to amend and leave to join the Minister as the second respondent is dismissed but with leave granted to applicant to replead the cause of action against the Minister; (2)the applicant is to pay the Minister's costs of the application; and (3)within 24 hours the parties are to bring in short minutes of order for the further timetabling of the proceedings, such short minutes to allow for the leave to replead referred to in order 1 above.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 April 2011