Farriss v Minister Administering the Crown Lands Act 1989

Court of Appeal (NSW)|2011-06-30|Before: Campbell JA, Macfarlan JA, Pain J, MacFarlan JA

Judgment 1CAMPBELL JA : I agree with Macfarlan JA. 2MACFARLAN JA : On 3 May 2000 the respondent Minister granted to the appellant, Ms Shelley Farriss, a domestic waterfront licence under s 34 Crown Lands Act 1989 (the " CL Act ") in respect of Crown land adjoining the appellant's property in Pittwater Road, Bayview. The Crown land over which the licence was granted consists of a grassed reclaimed waterfront area of approximately 520.90m and the area of Pittwater over which a jetty of 1.17m width and 69.6m length extends. 3On 11 August 2009 the Land and Property Management Authority (the "LPMA", formerly the Department of Lands) issued on behalf of the Minister a Notice of Redetermination of the rent payable by the appellant under the licence. Clause 28 of the licence and s 142 CL Act authorised such a redetermination. 4The appellant objected to the redetermination but the Minister rejected the objection and affirmed the rent redetermination. As she was entitled to do under s 142(5)(b) CL Act, the appellant appealed to the Land and Environment Court (the "LEC") against the refusal of her objection. By judgment dated 18 October 2010 Pain J dismissed that appeal ([2010] NSWLEC 206). 5The appellant then appealed to this Court under s 57(1) Land and Environment Court Act 1979. This section permits an appeal on a question of law. 6In support of her appeal the appellant submitted to this Court that Pain J erred in law by misconstruing a document issued by the Independent Pricing and Regulatory Tribunal of New South Wales ("IPART") upon which the Minister relied in making his rental redetermination. That document was a Review into Rentals for Waterfront Tenancies on Crown Land in NSW (the "IPART Review"), which IPART issued in April 2004. 7For reasons that I give below I do not consider that Pain J erred in law. As a result the appeal should be dismissed with costs.

THE IPART REVIEW 11In the introduction to the IPART Review, IPART described its terms of reference and the approach that it took in conducting the review as follows: " 1.1 Tribunal's terms of reference The terms of reference for the review required the Tribunal to determine a suitable approach for setting rentals for domestic waterfront tenancies over land owned or administered by the Waterways Authority and the Department of Lands. In determining this approach, it was to: align rental returns to reflect and maintain market value ensure that rents cover, at a minimum, administration costs consider tenants' ability to pay, including the situation of pensioners consider appropriate equity arrangements for tenants in special circumstances (such as those who have only water-based access to their properties)". 12Under the heading " 1.2 Overview of main findings and recommendations " the IPART Review stated the following: "The Tribunal found that any approach for setting rentals for domestic waterfront occupancies should recognise that the land affected by these occupancies is a valuable community asset, and the NSW Government, on behalf of the community, is entitled to a reasonable return on this asset. It also found that it is appropriate that such an approach aims to align rentals with the market value of the occupancy. It recommends that this be achieved through the use of the following formula for calculating rentals: General Rent ($) = [Precinct Statutory Land Value ($/m )] x [Occupancy area (m )] x [Rate of return (3.05%)] x [Discount Factor (50%)] In addition, the Tribunal found that the rental, occupancy instrument, occupancy term and other conditions should be considered as an integrated package of rights and obligations. This package should take into account Government policy and principles for the use and management of public land and waterfront areas, as well as the value of the occupancy to the rights holder". 13Under the heading " 3.3 Policies and principles in relation to public waterfront land " the IPART Review stated that since 1997 it had been Government policy to improve public access to waterfront land for which domestic occupancies can be provided. It then stated the following: "In addition, the Crown Lands Act 1989 [s 11] provides for the NSW Government to manage Crown land to maximise the benefits of this resource for the people of NSW. It sets out six principles for doing this, which are that: public use and enjoyment of appropriate Crown land must be encouraged where appropriate, multiple use of Crown land must be encouraged where appropriate, Crown land should be used and managed in such a way that both the land and its resources are sustained in perpetuity environmental protection principles must be observed in relation to the management and administration of Crown land the natural resources of Crown land (including water, soil, flora, fauna and scenic quality) must be conserved wherever possible Crown land must be occupied, used, sold, leased, licensed or otherwise dealt with in the best interests of the State consistent with the above principles." 14Under the heading " 6 GENERAL FORMULA FOR CALCULATING RENTALS ", the IPART Review stated the following: "The Tribunal has developed a general formula for calculating rentals to align rentals with the market value of the occupancy, and maintain this alignment over time. This formula is: General Rent ($) = [Precinct SLV ($/m ) x [Occupancy area (m)] x [Rate of return (3.05%)] x [Discount Factor (50%)] The Tribunal's formula is similar to the one the Department of Lands uses to set rentals for occupancies on the North Coast, and the Waterways Authority uses to set rentals for occupancies involving large reclamations. However, it includes a lower rate of return (3.05 per cent compared to 6 per cent) and adopts different reasons for the use of a discount factor. The Tribunal believes it should be used as the basis for establishing the level of rental for all current and future rights holders. It recognises that, for some rights holders, this will result in increased rentals. For others, rentals may be reduced. The Tribunal's consideration of the ability of rights holders to meet increased rentals is discussed in Chapter 8." 15With reference to the rate of return of 3.05 per cent forming part of that formula, the IPART Review stated the following under the heading " 6.3 Rate of return of 3.05 per cent ": "The agencies have suggested a rate of return of 6 per cent, based upon SVO and land board precedents and advice. This is determined on the basis of a number of factors, including: the value of the public land to the rights holder the income return recognises that public land cannot be sold in order to realise a capital gains (sic) as is possible for private freehold development the only outgoing is the statutory rate charges to Local Council. The Tribunal investigated the appropriate rate of return to the community on waterfront occupancies. As discussed in Chapter 5, it believes that a market for occupancies exists. However, the market price is not easy to observe and so we need to rely on surrogates. The Tribunal has used the long-term net return from residential rentals as a proxy for this return. ... The Tribunal believes a 3.05 per cent ... rate of return is appropriate. However, this rate of return will need to be reviewed regularly." 16To conclude the IPART Review's section headed " 6 GENERAL FORMULA FOR CALCULATING RENTALS " the Tribunal stated the following: " Recommendations The Tribunal recommends that: A general formula be used to set occupancy rentals that reflect the market value of the occupancy. This formula incorporates a 3.05 per cent rate of return and a 50 per cent discount factor. The rate of return will need to be regularly reviewed. Thus: General Rent ($) = [Precinct SLV ($/m )] x [Occupancy area (m )] x [Rate of return (3.05%)] x [Discount Factor (50%] To maintain currency, rentals should be calculated annually using latest SLV available and precincts should be defined as homogeneous water front areas." 17This part of the IPART Review was repeated in Attachment 2 to the IPART Review which was headed " LIST OF RECOMMENDATIONS ".

THE ISSUE 18The issue that divides the parties is whether the IPART recommendation (which s 143(3) obliged the LEC to apply) encompassed not only the formula stated in the recommendation quoted in [16] above but also the statement that preceded it, i.e "[t]he rate of return will need to be regularly reviewed". The appellant contended that it did and that because the rate of return contained in the formula had not been reviewed since its adoption in 2004 and had not therefore (on its argument) been "regularly reviewed", the LEC had been obliged to undertake such a review. The appellant submitted that by not doing this the LEC erred in law because it misunderstood its role. 19The respondent Minister's competing contention was that the IPART recommendation was constituted only by the formula and that the LEC was correct in deciding that the redetermination of the appellant's rental simply required the formula to be applied, without the LEC conducting any review of the rate of return.

THE JUDGMENT AT FIRST INSTANCE 20The primary judge observed the following in relation to the reference in the IPART Review to the need for the rate of return to be "reviewed regularly": "45 ... There is no indication anywhere in the report as to the regularity of 'review', nor what the review might entail. The language of the comment does not include the word 'recommend' or recommendation. Nor is there any indication when in future the rate of return will need to be regularly reviewed . 46 The recommendation for use of the general formula as a means of maintaining the alignment of rentals over time including the rate of return of 3.05 per cent is a discrete complete recommendation in itself capable of being applied. The reference to the future need for review of the rate of return is by comparison with the highly prescriptive elements of the general formula, in the nature of comment. The comment contains no information as to the means by which the rate of return could be reviewed . ... 50 One indication that the rate of return was not to be reviewed by this Court is the use of the word 'regularly'. The Court decides appeals only when they are commenced by applicants. A decision as to when a review should take place cannot be 'applied'. It is a condition precedent to instigating the carrying out of a review. If the formula is altered by review by the Court rather than by a further report of IPART, then the Court's decision would affect every licence of the same class. ... 65 I agree with the Minister's submissions that the phrase is general and essentially advisory. It cannot provide a basis for a statutory power residing in the Minister, and hence this Court, to apply the recommendation by undertaking a review of the rate of return in the rent formula. As submitted by the Minister's counsel (par 49-50 above), for the Court to apply something, it must be capable of being applied through the use of an existing principle, law or rule. Section 143(3) refers to a function or discretion which depends on an existing test. 'Regularly' is imprecise and does not enable the Court to apply a review of the rate of return in this appeal, as the Minister submitted . ... 68 Under s 143(1) the Minister can adopt a wider approach to the redetermination of market rent of a licence than under s 143(2). That approach allows a case by case analysis of each redetermination of rent. On appeal the Court's powers would also be broader in applying the principles in s 143(1). The application of an IPART recommendation under s 143(2) provides a means for the Minister, and therefore the Court under s 143(3), to adopt a defined, and confined, approach to the redetermination of rent. In this case the application of the IPART recommended rent formula by the Minister results in a similar approach to all rent redeterminations for domestic waterfront licences. If on appeal the rate of return can be varied in every case by the Court, the certainty in applying the formula to any redetermination would be largely lost as the Court would be determining the rate of review anew on a case by case basis. 69 The role of IPART should also be considered as relevant context for considering the recommendation to which s 143(3) applies. As submitted by the Minister the role of IPART identified in the IPART Act is to undertake a broad analysis of a given topic, possibly employing public consultation and including consideration of matters identified in s 15. The 2004 review considered a wide range of public submissions and discusses a range of matters. These matters informed IPART's recommendation for the rent formula. These are considerations and measures beyond those which this Court can undertake in this appeal, which is essentially conducted as a valuation exercise. The Court's role in this appeal is limited to exercising those functions which the Minister exercised. Where the Minister chooses to apply the IPART recommendation, variation of that recommendation in this statutory context lies with IPART not this Court . " 21As the IPART recommendation did not, on her Honour's analysis, include a recommendation that the person or body applying the formula should review the rate of return (on a regular basis or otherwise), her Honour concluded that she did not have the power under s 143(3) CL Act to review that rate of return and that the appellant's appeal to the LEC should be dismissed.

CONSIDERATION OF THE APPEAL 22The task at hand is to determine whether Pain J was correct in deciding that IPART's recommendation did not include its statement that the rate of return would need to be regularly reviewed. 23In favour of the appellant's submission that it was included is the fact that the statement appeared under the heading "Recommendations" and that the statement followed the words "The Tribunal recommends that ... ". 24However the first part of the material under that heading, including the statement that "the rate of return will need to be regularly reviewed", appears to me to constitute comments in relation to the formula that the Tribunal recommended be used. Thus the statement that the formula "incorporates a 3.05 per cent rate of return" simply described a part of that formula. It did not add anything to the formula as the point is apparent from an examination of the formula itself. Likewise was the reference to "a 50 per cent discount factor". 25The reference to the need for the rate of return to be regularly reviewed was in my view also a comment of the Tribunal about the formula that it recommended be used. It was not part of the recommendation itself but rather a flagging of the fact that the Tribunal would in time need to review the rate of return. 26The language used in the relevant statement concerning regular review stands in contrast to that used in the second bullet point (see [16] above). The second bullet point is more directive in character, using the words "should be". If the Tribunal had intended to recommend that those applying the specified formula conduct a regular review of the rate of return one would have expected it to use words such as "should be", rather than the words "will need to be". As the primary judge put it, the language of the sentence that refers to regular reviews of the rate of return contrasts with the "highly prescriptive" language of the rent determination formula itself (Judgment [46]). 27Moreover, as her Honour said, "[t]here is no indication anywhere in the report as to the regularity of 'review', nor what the review might entail", or when a review will need to be undertaken (Judgment [45]). These matters point against the statement being a recommendation to a user of the formula to regularly review the rate of return. 28The view for which the respondent Minister contends is further supported by the fact that the statement does not appear in the earlier "Overview of main findings and recommendations" (see [12] above) where reference is made only to the formula. It similarly does not appear in the reference to the formula at the commencement of the IPART Review's section entitled "GENERAL FORMULA FOR CALCULATING RENTALS" (see [14] above). 29That the Minister's view is the correct view of the ambit of IPART's recommendation is confirmed by a consideration of what would be involved in reviewing the rate of return and the circumstances in which that would have to occur if those applying the recommendation were required to conduct it. 30A review of the rate of return would logically include consideration of the matters that IPART took into account in arriving at the rate of return in the first place. As the Review indicates, IPART's recommendations, of which the recommendation concerning the rate of return forms part, were arrived at after wide-ranging deliberations, including consideration of many submissions from members of the public. The LEC could not replicate this process in reviewing the rate of return. Any attempt to do so would be antithetical to its judicial function. 31Furthermore, a principal aim of the preparation and issue of the IPART Review was plainly to identify a general formula for the setting of rentals for domestic waterfront tenancies that would obviate the need for Ministers to undertake extensive deliberations whenever the occasion arose to determine, or redetermine, the rental of such a tenancy. The potential for savings of public resources is obvious. Acceptance of the appellant's submissions would seriously contradict the policy inherent in this approach. If the appellant's submission were accepted, it would be open to any domestic waterfront tenant whose rent had been redetermined by reference to the IPART Review to contend that the rate of return specified in IPART's formula had not been "regularly reviewed" and that the Minister, and if not the Minister then the LEC, should conduct such a review. 32On one view such a review would have to relate to the appropriateness of the existing rate of return as a rate applicable to all domestic waterfront tenancies in New South Wales. As the IPART Review which adopted the rate took account of a variety of general policy considerations (see [11] - [13] above), a review of that rate would also need to do so. It cannot be supposed that the legislature intended the LEC to perform this quasi-legislative function. 33The alternative view is that the LEC would have to consider the appropriateness of the rate of return only insofar as it applied to the particular licence in question. However that would involve reviewing the rate upon a quite different basis to that upon which it had originally been formulated. In the absence of clear language in IPART's Review indicating that that was what IPART intended to occur, I do not consider that the IPART Review should be interpreted as conveying such an incongruous recommendation. 34It follows that considerations of policy and purpose militate against the appellant's contention in the same way that the language of the IPART Review does. As a result, the appellant's contention should be rejected,

CONCLUSION AND ORDERS 35For the reasons that I have given I do not consider that the appellant has established that the primary judge made an error of law. Accordingly the appeal should be dismissed with costs. 36I add in conclusion that these proceedings have come about because, although IPART recommended in 2004 that the rate of return be "regularly reviewed", no review has yet occurred. As over seven years have passed, this arguably means that the rate has not been "reviewed regularly". It would have been open to the Minister when redetermining the appellant's rent to take the view that because the rate of return had not been reviewed since 2004 he should not use the IPART recommendation but should redetermine the rent under s 143(1) by applying the principles there specified to the particular circumstances of the appellant's licence. The Minister apparently decided not to take this course. Such a decision might in certain circumstances be amenable to judicial review but there is no application of that nature before the Court and no basis for this Court knowing whether there would be any foundation for it in the present case. 37SACKVILLE AJA : I agree with Macfarlan JA.

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: 07 September 2011

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