1. The plans to be endorsed and which will then form part of the permit are the plans submitted with the application.

2. This permit will expire after two (2) years if the relevant plan of subdivision is not certified by the responsible authority, unless an extension of time is approved by the responsible authority. The written request for extension of time must be received before three (3) months have elapsed after the date of expiry.

3. The subdivision as shown on the endorsed plan must not be altered, save with the written consent of the responsible authority.

4. The owner of the land must enter into agreements with the relevant authorities for the provision of water supply, drainage, sewerage facilities, electricity, gas and telecommunication services to each lot shown on the endorsed plan in accordance with the authority's requirements and relevant legislation at the time.

5. All existing and proposed easements and sites for existing or required utility services and roads on the land must be set aside in the plan of subdivision submitted for certification in favour of the relevant authority for which the easement or site is to be created.

6. The plan of subdivision submitted for certification under the Subdivision Act 1988 must be referred to the Relevant Authority in accordance with Section 8 of that Act.

7. Before the plan of subdivision is certified under the Subdivision Act 1988, the owner must enter into an agreement with the responsible authority made pursuant to section 173 of the Planning and Environment Act 1987, and make application to the Registrar of Titles to have the agreement registered on the title to the land under section 181 of the Act which provides that:

•

The land will not be further subdivided; and

•

No dwelling shall be constructed on lot 2 without the consent of the responsible authority.

The owner must pay the reasonable costs of the preparation, execution and registration of the section 173 agreement.

2 The responsible authority is directed to issue a permit in accordance with this order under the provisions of section 85(1)(b) of the Planning and Environment Act 1987

Mr Tim Power, solicitor, of Freehills. He called as a witness:

•

Mr Marco Negri, town planner, Contour Consultants Australia

1 Factually, this is a very straightforward matter. It is an application to review the refusal by the responsible authority to grant a permit for a two lot subdivision at Swan Marsh. The subject land has a total area of approximately 80.62 hectares. It is located on the Swan Marsh-Stoneyford Road about 200 metres west of the Swan Marsh township. Lot 1 will have an area of approximately 5.19 hectares and will accommodate an existing weatherboard dwelling, associated sheds and paddock. Lot 2 will have an area of approximately 75.43 hectares and will accommodate an existing blue gum eucalyptus plantation.

2 Surrounding land is generally used for agricultural purposes with farm related dwellings. Swan Marsh township presently consists of a primary school, a hall and tennis courts, a general store which is apparently not operating, a football/sporting oval a short distance to the east, and a small cluster of dwellings.

3 The significance of the case relates to the way in which policies in the planning scheme should be applied to excisions of existing dwellings from land otherwise used for timber production. This is representative of the increasing number of applications responsible authorities are dealing with as timber plantations proliferate on agricultural land formerly used for dairying or grazing. The timber companies have no use for or desire to continue to own dwellings located on properties converted to timber production. Unlike traditional grazing and other agricultural land uses, few timber plantations are comprised of owner/occupier agricultural properties. Timber plantation companies, such as Great Southern, are reluctant residential landlords. Unless an existing dwelling can be excised from the balance of the land, there is little or no incentive for timber companies to retain dwellings, with their associated outbuildings and driveways, that necessitate buffers being maintained around them in accordance with the Code of Forest Practices for Timber Production. Instead, the removal of dwellings enables the further expansion of the timber plantation where they cannot otherwise be disposed of.

4 In this case, the responsible authority seeks some general guidance from the Tribunal as to how it should deal consistently with the increasing number of such applications in a way that appropriately balances competing policy objectives found within the planning scheme and in a way that is consistent with its House Lot Excision in the Rural and Environmental Rural Zones Policy at Clause 22.04.

5 Planning policies relevant to this application include:

•

Clause 17.05 Agriculture

•

Clause 17.07 Forestry and Timber Production

•

Clause 19.01 Subdivision

•

Clause 21 Municipal Strategic Statement (MSS)

•

Clause 22.04 House Lot Excision in the Rural and Environmental Rural Zones Policy.

6 The decision guidelines within the Rural Zone and the various strategies and policies within the local planning policy framework (LPPF) establish a set of relatively straightforward planning policy imperatives for the assessment of an application of this nature.

7 Under the Rural Zone in this part of Colac Otway, the minimum subdivision size is 40 hectares. Clause 35.01-4 provides discretion for the subdivision of land into lots below the minimum subdivision size where the subdivision provides a lot for an existing dwelling or where the number of lots is no more than that which could be created under the schedule to the zone. Both provisions apply in this case. Decision guidelines require consideration of the purpose of the zone, the State planning policy framework (SPPF) and LPPF, and a range of other rural related matters.

8 Within the SPPF there is support for timber production (see clause 17.07) and the protection of productive agricultural land (see clause 17.05). Similar strategic objectives are also to be found within the MSS. Various strategies seek to protect productive agricultural land from incompatible uses, including dwellings and hobby farms, and to discourage the creation of smaller lots so as to avoid land use conflict and the loss of agricultural land.

9 The House Lot Excision in the Rural and Environmental Rural Zones policy in clause 22.04 provides a specific policy in relation to applications to create smaller lots. The objectives of the policy are:

To ensure that the excision of dwellings and the creation of lots smaller than that specified in the Schedules to the Rural and Environmental Rural Zones are consistent with the purposes of those zones.

To limit the subdivision of land that will be incompatible with the utilisation of the land for sustainable resource use.

To ensure that the subdivision of land which excises a dwelling is designed in a manner which does not prejudice surrounding rural production activities.

10 The most relevant when exercising discretion in the present case are:

•

The excision of dwellings will take place in a manner that will ensure the dwelling does not have the potential to restrict agricultural production on adjacent land. It should be ensured that adequate distance is maintained within the existing lot around the dwelling to reasonably limit likely impacts (if any) of adjacent agricultural activity. The permit may require the planting of vegetation and construction of fences within the excised lot to reduce any potential impacts.

•

Subdivision that is likely to lead to such a concentration of lots as to change the general use and character of the rural area will be strongly discouraged, unless it can be shown that the clustering of lots will not limit the productive use and development of the larger lots in the subdivision or surrounding land.

11 The other relevant factor to take into account is the decline in rural population and the associated loss of facilities in many small towns. Swan Marsh is typical of these. The conflicting pressures are described in clause 21.01-04 of the MSS in the following terms:

In common with the rest of Victoria, the rural parts of Colac Otway have been losing population and many of these small townships are a shadow of their former sizes. Most have a number of urban sized lots that are now utilised for farming purposes. Outside the settlements, farms have been progressively enlarged with a further loss of rural population, particularly within the Otway Ranges. Pressure has been continuous for development along the coastal strip but the high proportion of public land in the Otway Ranges has a constraining effect on rural residential development there. Further north there has been steady but very limited demand for rural residential development in the low-lying areas between Colac and Elliminyt.

Colac Otway Shire has experienced limited demand for rural residential development and its high quality agricultural land has not suffered undue pressure for small lot subdivision. Although the Shire does not contain thousands of small rural lots as is the case in municipalities to the north such as Golden Plains and Moorabool, the rural areas are somewhat fragmented with unused lots and it is important for the long term agricultural use of the land that these lots not be developed for rural residential housing. Council does not support the development of these small lots and intends to develop a policy for these areas that will be introduced by way of a separate amendment. Some limited rural residential development has occurred in the coastal areas and around Colac and Birregurra near to services.

12 The responsible authority's reasons for refusal to grant a permit were:

1. That it is contrary to the purpose of the zone as the excision does not enhance the sustainable use of the land or protect and create an effective rural infrastructure, nor is it seen to promote economic development compatible with rural activities.

2. That it cannot satisfy the decision guidelines at Clause 35.01-06 as the excision does not relate to rural land use or diversification; nor is the subdivision required for the operation of the rural activity. The excision would reduce farm production of the land, and could impact on the rural economy and may have an adverse impact on surrounding land uses.

3. That to approve such an application would create at [sic] precedence for other landowners to follow.

4. That the proposal is considered contrary to the strategies at Clause 21.04-02, and 21.04-05 and the policy at Clause 22.04 in particular the excision has the potential to create conflict with adjacent agricultural activities, and is unrelated to the maintenance of sustainable agriculture.

13 We were referred to other Tribunal decisions which have granted permits for the excision of dwellings on land used for timber production - see Favero v Corangamite SC[1] and Midway Pty Ltd v Colac Otway SC[2].

14 The case of Midway Pty Ltd v Colac Otway SC is of particular relevance because Member Hewet undertook a detailed and careful analysis of the policy framework applicable to cases such as this, which we consider accurately summarises the issues. He said:

[36] Clause 35.01-4 of the Rural zone provides the discretion to grant a permit for the subdivision of land into lots smaller than specified in the schedule to the zone provided that the subdivision is to create a lot for an existing dwelling. In assessing an application for such a subdivision consideration must be given to the State and Local Planning Policy Frameworks and relevant decision guidelines and, as I have detailed above, the policy framework is primarily focussed upon protecting rural land so that it can continue to be used for rural purposes. Threats to the achievement of this objective include the environmental degradation of land, fragmentation of land holdings into lots too small to sustain rural activities, intrusion of incompatible land uses (including residential uses) into rural areas, and the creation of unplanned rural/residential subdivisions.

[37] In response to these threats the local policy at Clause 22.04 provides direction as to how to exercise the discretion available to grant a permit. I think it is significant that while the local policy recognises that house lot excisions can be detrimental to the continued maintenance and efficient operation of farming land and sustainable agriculture, it does not discourage house lot excisions, but rather seeks to ensure that "....that the creation of small lots and excision of dwellings is consistent with the zone objectives and with Council's strategic objectives......." Elements of the policy are quite specific (eg minimum lot area of 2ha) while other elements are expressed in terms which emphasise the achievement of outcomes (eg the excision of dwellings will take place in a manner that will ensure the dwelling does not have the potential to restrict agricultural production on adjacent land).

[38] The policy clearly applies to the consideration of applications for house lot excisions in the Rural Zone, irrespective of the nature of the agricultural use. The policy does not distinguish between house lot excisions for timber plantations and, for example dairy farms. In the absence of a different policy specifically aimed at timber plantations, an application for the excision of a house lot from a timber plantation must be assessed against the existing policy. It is not open to the Council to seek to apply different tests for timber plantations than it does to, say, dairy farms.

[39] In this context I think the Council's reliance on the submission that the grant of a permit would establish an undesirable precedent, has not been substantiated. I accept that the rate of conversion from dairy farms and other rural uses to timber plantations is increasing in this municipality and it was common ground between the parties that applications for house lot excisions invariably follow the establishment of a timber plantation. In my view however, the local policy provides sufficient protection against the undesirable consequences of this trend feared by the Council, provided of course that the Council is prepared to apply the policy correctly and consistently. Each application must be considered against the outcomes sought to be achieved by the policy having regard to the context of the site and the individual circumstances and merits of the application. In the event that the grant of a permit would, for example, contribute to a "concentration of lots as to change the general use and character of the rural area", then the permit ought not be granted. A similar outcome ought to occur in respect of an application which would result in a dwelling having the potential to restrict agricultural production on adjacent land and where inadequate distance is maintained to reasonably limit likely impacts of adjacent agricultural activity.

15 We have reached the conclusion that a permit for subdivision should be granted. It meets the objectives of the House Lot Excision in the Rural and Environmental Rural Zones policy and the specific policies contained within clause 22.04-3. Specifically:

•

Both lots exceed 2 hectares in size.

•

The dwelling is in a habitable condition.

•

Excision of the dwelling will not have the potential to restrict agricultural production on adjacent land. The layout of the subdivision and tree planting on lot 2 maintain the required buffer distance under the Code of Forest Practices for Timber Production. The dwelling is reasonably well set back from the northern boundary and the grazing land that occupies this adjoining property. The dwelling is surrounded by cypress trees which provide a visual barrier between the dwelling and adjoining rural properties.

•

The subdivision will not lead to a concentration of lots such as to change the general use and character of the rural area. No additional dwellings will be created, especially if a section 173 agreement is entered which requires a consent of the responsible authority for a dwelling on lot 2. This issue is discussed further below.

16 Whether timber production is a use regarded favourably by the responsible authority and local community or not, it is nevertheless a use that is encouraged in the Rural Zone and by the State and local planning policy frameworks. For example, clause 21.02 includes:

•

Encouragement for the development of a sustainable timber industry which features greater value adding and processing within Colac Otway Shire.

17 The planning policy framework discourages the creation of small, rural residential lots that may fragment productive agricultural land and create potential conflict between residential and agricultural uses. On the other hand, the municipality is experiencing a decline in its rural population. So far as Swan Marsh is concerned, population is reaching a critical situation such that the future of the Swan Marsh Primary School is threatened by declining enrolments. School closures are symptomatic of dwindling facilities faced by small towns as their rural population base shrinks. Allowing this subdivision and guaranteeing continued use of lot 1 for the purpose of a dwelling maintains the status quo in terms of numbers of dwellings. The size of the lot, the nature of the house and its proximity to the Swan Marsh township, make it an attractive and affordable option for persons wishing to purchase a rural residential property near the town.

18 Whether the dwelling is subdivided and sold or remains part of the larger land holding and is leased, the only option for the parcel of land represented by lot 1 is use for rural residential purposes over the next 10-15 years at least. Timber production has a 10-15 year cycle and with the commitment of the balance of the land to timber production, rural residential is the only option available for the dwelling. We consider this would be the best option. The worst case scenario is that the dwelling is demolished and this piece of rural infrastructure is lost. Such an outcome would only compound the loss of rural population.

19 The opportunity has gone for this dwelling to be an integral part of an operating farm or agricultural enterprise, at least for the foreseeable future. The responsible authority is concerned that a proliferation of subdivisions of dwellings on land committing to timber production will lead to a pattern of houses on small lots throughout the rural area rather than houses on large lots. However, we consider that this is an inescapable fact of life associated with increasing use of land for timber production.

20 If the responsible authority can establish that there are cumulative adverse impacts associated with a proliferation of house lot excisions from agricultural properties converted to timber production, then it may be appropriate to develop a new policy to guide applications for subdivision in such circumstances. But it would be necessary to be able to distinguish between impacts attributable to the timber industry compared to other agricultural industries, such as dairying, in order to establish a sound foundation for such a policy. The council would also need to balance the impacts of such policy on SPPF and LPPF objectives which encourage timber production. Until then, we agree with Member Hewet's comments in Midway Pty Ltd v Colac Otway SC that the existing House Lot Excisions in the Rural and Environmental Rural Zones Policy provides appropriate and adequate direction on how to consider applications for house lot excisions in the Rural Zone, irrespective of the nature of the agricultural use.

21 The council is concerned that this application will be just one of many that can be expected to come before responsible authorities as timber plantations develop across the State. It seeks guidance as to the weight that should be placed upon the lack of desire by timber companies to retain and utilise the dwelling and the possibility that denying a permit may result in either removal of a dwelling, or it becoming vacant and deteriorating. The council poses the question: Does such a scenario justify the creation of small rural residential lots scattered across rural zones as timber plantations, and, to be fair, amalgamations of farms into larger holdings, proceed across the rural landscape?

22 We acknowledge that the trend illustrated by the present application represents a challenge to municipalities such as Colac Otway as they seek to balance apparently conflicting objectives of discouraging the proliferation of small lots in rural areas and maintaining the viability of small rural communities and rural population by dwelling retention.

23 In our view, the key question will be whether the land use will be likely to change as a result of the subdivision. In the present case, the land uses are not likely to change: those changes have already occurred. Proposed lot 2 is already committed to timber production and proposed lot 1 is only likely to be used for rural residential purposes in the foreseeable future, irrespective of whether the dwelling is tenanted, or sold and owner occupied. Such an outcome is likely to be a common feature of land that is acquired for timber production.

24 The fragmentation of ownership which results as a consequence of subdivision will often lead to consequent pressure for additional dwellings. In the case of traditional agricultural land, if a house is excised and sold, there will invariably be pressure for the balance of land to be used for a new dwelling. This has been the experience of the past and has led to policies which seek to limit the proliferation of dwellings on small lots in rural areas. The reason for this is that the owners of these small lots often complain about activities and practices associated with farming, and this creates conflict between agricultural and residential uses.

25 However, there is unlikely to be any pressure for additional dwellings associated with use of land for timber production because of the nature of the use and the way timber companies operate.

26 The fact that Timber Production does not require a permit in the Rural Zone[3] and Dwelling may also be an as of right use on lots of at least 40 hectares[4], means that a council's ability to control either use of land for timber production or for a dwelling is limited. We consider that one means of addressing the potential proliferation of additional dwellings as a consequence of allowing the excision of existing dwellings on land used for timber production is to require a section 173 agreement that would require the consent of the responsible authority for any dwelling on the balance of land used for timber production. We do not consider it would be appropriate to preclude the possibility of a further dwelling in the future at all. Circumstances may change over time and the possibility should be retained for the responsible authority to grant a secondary consent for what might otherwise be an as of right use.

27 Timber production is different to more traditional agricultural pursuits because the land is committed to that use for a much longer period of time until the crop is harvested, which is a minimum of 10-15 years. The condition of the land after harvest means that it is not readily converted back to other cropping or grazing activities due to the presence of stumps. It is not yet clear how this aspect of land used for timber production will be managed and what approach timber companies will take to the future use of land following the timber harvest. It is also unknown what influence trading in carbon credit or native vegetation offsets may have. All that can be said at present is that for the foreseeable future, it is unlikely the balance of land used for timber production will give rise to a demand for an additional dwelling. Therefore, the pressures arising as a result of different amenity expectations due to increase in residential use in rural areas will be minimised.

28 In exercising discretion whether to grant a permit for a house lot excision in a rural zone and in applying its policy, the responsible authority should be considering the question of whether the subdivision is likely to change the land use and whether it will adversely affect surrounding rural production activities, rather than simply taking the view that small lots with dwellings are ipso facto undesirable. It is not the small lots in themselves that are the problem but what they lead to. If the consequences of creating a small lot will not adversely impact on the objectives of the policy, then there is no point in applying the policy in a proscriptive way. Policies should always be applied with an eye to their objectives and the mischief they seek to address.

29 The council's existing policy appears to be quite adequate in framing its objectives and the policies to be applied when exercising the discretion. The issues raised by a rigorous application of the policy require critical analysis and may lead to different outcomes when applied to different sets of facts. That is not a fault of the policy rather it is a product of correctly using a policy to guide decision making. Policies are not rules and do not automatically deliver answers. They are intended to guide the genuine exercise of a discretion in the interests of achieving the policy objective.

30 In the present case we are satisfied that the policy objective, which is to ensure continued utilisation of land for sustainable resource use, will not be prejudiced by granting a permit for this subdivision.

31 At the conclusion of the hearing, draft conditions were discussed. The following represents our conclusion based on the list of draft conditions submitted by the responsible authority.

32 There is no need to include condition 2, which requires a land management plan to be prepared. The appropriate land management regime for lot 2 is the Code of Forest Practices for Timber Production. There is nothing so special about lot 1 that would demand preparation of a land management plan. We consider that the requirements are manifestly excessive for a parcel of land that will be used simply for rural residential purposes. We acknowledge the council's desire to control pest plants, but consider that this is a problem common throughout the municipality and requires a comprehensive, rather than selective, approach to management. We do not consider that this particular lot should be singled out for differential treatment and require a land management plan to be prepared.

33 Conditions 8-11 relate to access. Both lots have adequate existing access and we do not consider there needs to be additional conditions relating to alternative or additional access.

34 Condition 12 should be amended. Condition 12 presently requires a section 173 agreement to be entered into which provides that the land will not be further subdivided; and no dwelling shall be permitted on lot 2. We consider that a dwelling should be permitted on lot 2, if this is allowed under the planning scheme, but only with consent of the responsible authority. This means that the responsible authority must give its consent even if Dwelling is an otherwise as of right use.

[1] [2005] VCAT 1113

[2] [2006] VCAT 15

[3] Subject to meeting the conditions opposite the use in section 1 of the zone

[4] Unless otherwise specified in the schedule to the Rural Zone