The tribunal varies the responsible authority's decision. The tribunal directs that planning permit MPS 2004/0716 pursuant to the Moreland Planning Scheme must not contain conditions 6, 7 and 8. The tribunal directs the responsible authority to issue a modified permit in accordance with this order.

1 The use and development of land should be sustainable. But there will be more than one mechanism to achieve this outcome. Sometimes the appropriate mechanism will be by imposing conditions on planning permits. Sometimes it will be by relying on other legislation or fiscal policy or market forces. This proceeding requires us to consider planning permit conditions on a dual occupancy development requiring solar hot water systems, rainwater tanks and a 5-star energy rating. All these matters are comprehensively addressed in building regulations. We conclude that it is lawful, but inappropriate, to impose such conditions.

2 The Moreland City Council ("the council") has granted a planning permit which allows two dwellings to be constructed on land in Fawkner. The permit contains the following conditions ("the conditions"):

6 Prior to the occupation of the development, hot water to the new dwellings must be from a gas-boosted solar hot water system or other system with similar or enhanced energy efficiency to the satisfaction of the responsible authority.

7 Prior to the occupation of the development, stormwater from all roof areas must flow through rainwater tanks with only the overflow discharging to the legal point of discharge and the contents of the tank used for toilet flushing purposes to the satisfaction of the responsible authority.

8 The proposed development must achieve a minimum 5-star energy rating when measured against the Sustainable Energy Authority of Victoria 'FirstRate' system of [sic] equivalent.

3 The applicant has applied to the tribunal for the review of the conditions.[1]

4 Because the application for review had the potential to have broad implications throughout Victoria, the President directed that notice of the hearing be given to the Minister for Planning, the Department of Sustainability and Environment, the Sustainable Energy Authority, the Commissioner for Environmental Sustainability and the Building Commission of Victoria. He also made a general direction that any person wishing to make a submission could do so. Although none of the named parties sought to make a submission, in addition to the parties to the proceeding, submissions were received from Melbourne Water, the cities of Port Phillip and Manningham, Mr Mike Hill of WestWyck Pty Ltd and the Housing Industry Association ("the HIA").[2]

5 The applicant submitted that the conditions were ultra vires. He also submitted that the conditions should be deleted as a matter of discretion. Before dealing with these submissions, we will outline relevant building controls and planning provisions.

Building Act and Building Regulations

6 The construction of buildings in Victoria is governed by the Building Act 1993 and the Building (Interim) Regulations 2005 ("the building regulations"). The principal objective of the building regulations is to prescribe standards for the construction of buildings. The regulations adopt the Building Code of Australia ("the BCA").[3] Under the building regulations buildings are classified as set out in the BCA.[4] It is common ground that the proposed dwellings would be Class 1 buildings pursuant to the building regulations and the BCA.

7 The regulations and the BCA contain detailed provisions in relation to energy efficiency in new dwellings. Under the "deemed to satisfy" provisions of the BCA, all new Class 1 buildings are required to achieve a 5-star house energy rating. (There are certain exceptions in relation to Class 1 buildings of timber floor construction or earth wall construction.) New Class 1 buildings also require either a rainwater tank, connected to all sanitary flushing systems, or a solar water heating system. All new Class 2 buildings are required to achieve an average 5-star rating for dwellings in a building, but each sole occupancy unit need only achieve a rating of three stars. Further, there is no requirement to install a rainwater tank or solar water heating system in a Class 2 building. A support system of energy raters, rating software and technical guidelines has been created to assist applicants meet these standards through the building approval process.

8 The building regulations also provide transitional arrangements to allow the industry to cope with change. Section 10(2) of the Building Act provides that if a building surveyor is satisfied and certifies in writing that substantial progress was made on the design of a building prior to a building regulation commencing, then the building regulation does not apply to the carrying out of the relevant work. In the case of individual "one off" designs, the date of the relevant plans is normally taken to be evidence of substantial progress in relation to the design.[5] In the present context this is relevant. The plans are dated 31 December 2004, at which time there were various options for Class 1 dwellings, one of which was to achieve a 5-star house energy rating, without providing either a rainwater tank or a solar water heating system.

9 It is also important to note that the required house energy rating is implemented using the BCA, which is a performance based building code. Compliance with the BCA can be achieved by complying with the prescriptive requirements, such as the 5-star standard, or by developing another solution which demonstrates that the proposal meets the relevant performance requirements. Further the requirements of the BCA can be waived, modified or varied by the Building Appeals Board.[6]

10 The 5-star standard was introduced following a Regulatory Information Bulletin. The requirement that new Class 1 buildings have a rainwater tank or a solar water heating system was introduced on 29 June 2004 by the Plumbing (Water and Energy Savings) Regulations 2004.

11 When the ResCode provisions were introduced into planning schemes in August 2001 there was a specific requirement that, if an application was made on or after 1 March 2002, the development should be designed to achieve a house energy rating of four stars. Importantly this requirement was deleted by Amendment VC25 to all planning schemes on 1 July 2004; it was not amended to require a 5-star house energy rating. The explanatory statement for Amendment VC25 explains that the amendment was made for the following reason:

From 1 July 2004, the Building Regulations will require all Class 1 and 2 buildings will be required [sic] to achieve a house energy rating (HER) of 5 stars except under certain circumstances. The amendment ensures consistency between the VPP and planning schemes and the Building Regulations.

12 The conditions seek to advance some of the objectives of planning in Victoria, as set out in section 4(1) of the Planning and Environment Act 1987 ("the Act"). In particular, the conditions seek to advance the sustainable use and development of land and the maintenance of ecological processes.[7] So much is not in dispute.

13 The applicant relies upon section 62(4) of the Act, which provides:

The responsible authority must not include in a permit a condition which is inconsistent -

(a) with the Building Act 1993; or

(c) a relevant determination of the Building Appeals Board under that Act in respect of the land to which the permit applies.

14 The applicant claims that the conditions are inconsistent with the building regulations.[8] The President[9] does not agree. An inconsistency does not arise simply because conditions cover the same ground as the ground covered in building regulations. A direct inconsistency arises if it is impossible to serve both masters. As the building regulations do not proscribe any of the measures required by the conditions, there is no direct inconsistency. It is possible to comply with the conditions and comply with the building regulations. Nor do the conditions destroy any rights conferred by the building regulations. Further, there is no indirect inconsistency by reference to the principle of "covering the field". The most commonly quoted formulation of that principle is that of Dixon J in Ex Parte McLean[10]:

[Inconsistency] depends upon the intention of the paramount Legislature to express by its enactment, completely, exhaustively, or exclusively, what shall be the law governing the particular conduct or matter to which its intention is directed. When a Federal law discloses such an intention, it is inconsistent with it for the law of a State to govern the same conduct or matter.

Although the President is satisfied that the building regulations are intended to be the principal method of imposing certain types of sustainability measures in dwellings in Victoria, he is not satisfied that these regulations are intended to completely, exhaustively or exclusively express the law in relation to the subject.

15 The applicant also submitted that the conditions were conditions that related to the use of land and could not be imposed upon a permit for the development of land. The President does not agree. Each of the conditions relate to the manner in which the building is to be constructed and what features it is to include. The conditions have a sufficient relationship to the development of the land to be lawful.

16 The Planning and Environment Act has a broad sweep. Although planning schemes made under the Act can regulate the fine details of a use or development of land, the Parliament has also passed other legislation addressed at matters within the sweep of the Planning and Environment Act. Examples can be found in relation to subdivision[11], liquor sales and consumption[12], pollution[13], gambling[14], heritage buildings[15], prostitution[16], and water[17]. Building is another obvious example.

17 The existence of a power does not provide a justification to use it. Thought must always be given, not just to whether an outcome is desirable, but what is the best method to achieve that outcome. The journey can be as important as the destination. When more than one method is available to achieve an outcome, it will be necessary to consider which is the best or better method, having regard to questions of efficiency, equity, certainty and freedom, as well as the extent to which the substantive objective will be achieved.

18 The decision of the tribunal to approve a pipeline to the Douglas mine in Western Victoria[18] illustrates our point. Objectors claimed there was insufficient water to serve the mine and that the approval of the pipeline would be at the expense of environmental flows. But the tribunal rejected this, stating that:

current planning scheme controls are totally inadequate, and inappropriate, to regulate the use of water so as to ensure appropriate environmental flows. Most water is used by existing users of water. Typically these users will not require a planning permit for either use or development, as the use will be entrenched and the works necessary to deliver the water will be in place. Hence if current planning scheme provisions are to be the tool to regulate the use of water and ensure adequate environmental flows it will only be new users, or existing users which require new development to deliver the water, which will be affected. Such a system of regulation would be unfair and biased. It would wrongly assume that the right of existing users of water is superior to the right of proposed users of water. In truth, many proposed users will be far more efficient in their use of water and will generate far greater community benefits per litre of water used than is the case with existing users. Although a system of control which focuses upon new entrants is sometimes appropriate, it will usually be quite inappropriate in managing the use of a natural resource. It will usually be more appropriate to use a market mechanism or some form of global regulation.[19]

19 A starting point in this case is that building regulations concerning energy efficient building design, solar hot water services and rainwater tanks are comprehensive. If this were not so, a different outcome might result.

20 One of the advantages of relying on the building regulations to effect energy and water efficient dwellings is that all dwellings require a building permit. By contrast, it is not usual for a single dwelling to require a planning permit. If environmentally sustainable design is to be incorporated into dwellings, it ought be incorporated into all dwellings.[20] As a matter of logic, this does not mean that the planning system will always be an inappropriate mechanism to impose sustainability conditions. But if the planning system is to be used to impose the same requirements as those imposed by the building control system, one may ask: what is the point? And if the requirements are different, one may ask: is it fair to discriminate between different forms of housing?

21 We think in applying sustainability conditions it is unfair to discriminate between dwellings that require a planning permit and dwellings that do not. If more stringent sustainability conditions are imposed on multi-unit developments (which require a permit) than detached houses (which usually do not require a permit) this adds to the comparative cost burden of the former type of dwelling. This discourages urban consolidation, contrary to policy. It also overlooks the fact that the nature and location of multi-unit dwellings often makes them more energy efficient than detached houses. Further, multi-unit development is often directed at lower income households. Why should these households have to pay a higher burden than other households?

22 We also think it is less efficient to impose the conditions at the planning permit stage when such matters can be left to the building regulations. This is especially so in relation to conditions which require applicants to demonstrate that buildings will achieve a certain energy rating. The reason for this was explained by the tribunal in Golden Ridge Pty Ltd v City of Whitehorse:[21]

... environmentally sustainable design often turns on matters of detail, such as the thickness of insulation, the use of drapes and the type of glass used in windows. This detail is often unavailable when a building is submitted for planning approval; and it would be unreasonable to require it to be available.

Efficiency is about comparative compliance costs. If different methods are available, the method that imposes the lower compliance costs should generally be preferred.

23 When the planning system is used to impose conditions in relation to matters dealt with by building regulations, an additional problem arises. What was previously certain and predictable becomes uncertain and unpredictable. Developers and builders get to know the building regulations; this is less likely to be the case with every municipal council and every planning scheme. In September 2003 the Department of Sustainability and Environment published a discussion paper which made the same point:

For the sake of consistency and clarity the planning system should generally not prescribe operational or detailed sustainability requirements that are being, or will be addressed, by other regulatory systems.[22]

24 It is true that the structure of Victoria's planning system provides an opportunity for councils to innovate and try new techniques. In the present case, the conditions are hardly innovative as they mirror requirements of the building regulations, without the subtleties and options incorporated in those regulations. In any event, any benefit to be ascribed to innovation in this case is outweighed by the other matters we have outlined.

25 The council relied upon the precautionary principle in support of the conditions. In our opinion, this principle ought not be used to impose requirements which are unnecessary or inappropriate. In the present context we think a more important principle is that there be an objective and open process of evaluation of benefits and costs before imposing a requirement.

26 We would not like to leave this case without making some brief comments about the substance of the conditions.

27 All the conditions seek to achieve an outcome by using a regulatory tool. Although this will often be appropriate, the benefits of pricing methods should not be overlooked. For example, if energy prices reflected the full social, economic and environmental cost of supply, most consumers would choose to occupy energy efficient homes.[23] Unlike a regulatory solution directed at new dwellings, the occupiers of all dwellings would have a direct interest in reducing energy consumption. Moreover the consumer would retain choice. Surely this is important in a free society.

28 According to the draft report of the Victorian Competition and Efficiency Commission ("VCEC") on housing regulation in Victoria[24], the introduction of the 5-star building regulation had shortcomings. In view of our decision, it is unnecessary for the tribunal to reach any concluded view on the appropriateness of a 5-star requirement. But we observe that if regulatory methods are used to achieve outcomes, it is essential that the benefits and costs of the regulation be fully understood and that the regulation has a positive benefit to cost ratio. Another point is that regulations must be sufficiently flexible to accommodate unusual circumstances and legitimate consumer preferences. No doubt these matters will be considered when the building regulations are reviewed in light of the final report of the VCEC.

29 According to the VCEC, the process leading to the requirement to install either a solar water heater or a rainwater tank in new dwellings also had shortcomings.[25] We share the concern of the VCEC that the building regulations make solar water heating an alternative to a rainwater tank. The connection is tenuous and incongruous. It is almost as if the decision maker was half hearted about each requirement. For our part, we also think that there should only be a requirement to install such capital items if the benefits clearly outweigh the cost. What this means is that regulators must focus on costs (and who pays) and not just benefits.

30 The benefits of installing a solar hot water system would seem to be reduced energy costs to the consumer and a probable reduction in greenhouse gases. (Of course, if the consumer pays a premium to source electricity from a renewable source, such as wind power, there is no reduction in greenhouse gases.) The main additional cost is the higher purchase price, although there will sometimes be an aesthetic cost. On the information available to us, we doubt that regulation is the appropriate mechanism to promote the use of solar energy in water heating; fiscal policies and education would be more appropriate.

31 Rainwater tanks attract a modest subsidy; and regulatory constraints upon their installation have been largely lifted.[26] But tanks are unlikely to be installed in new dwellings without a regulatory requirement. This is because for most new dwellings the direct benefits are unlikely to exceed the cost of supplying, installing and maintaining the tank. A potential benefit to the consumer is the reduced cost of buying water. But this benefit is very modest compared with the capital cost of the tank: there is no payback within a foreseeable period.

32 It may be that there are indirect, social benefits if new dwellings are required to be fitted with rainwater tanks. It has not been our task to investigate this. But we suspect that, on proper analysis, there are more cost effective ways to achieve such benefits. Further, if the objective is to reduce the need for new water storages, we doubt that this benefit should be the burden of the purchasers of new homes. Indeed, when it comes to water, price is both a convenient and an effective tool to reduce water consumption.

33 Rainwater tanks can also contribute to reducing stormwater flows and improving stormwater quality. Although the provision of rainwater tanks produce these environmental benefits, the extent of the benefits requires further evaluation. More importantly, we believe water sensitive urban design should approached with a broader canvass, in which rainwater tanks are just a part. A number of recent publications are seeking to develop a more integrated approach to water management including the management of urban stormwater.[27] The public consultation process in relation to these proposals above will allow many of these issues to be identified and tested.

34 We agree with the VCEC that

The water saving regulation in the 5-star scheme should be more clearly related to the government's water efficiency objectives and should allow a flexible approach as practicable to achieve improved outcomes.

35 Clearly when the final VCEC report is received there will be a need to revisit the issue of solar water heating and rainwater tanks.

36 As this case was in the nature of a test case, we would expect responsible authorities to cease imposing like conditions on planning permits. It would be undesirable if a future applicant was forced to incur costs to overturn such conditions. Of course, in such circumstance, the tribunal may need to make an order that the responsible authority pay such costs.

[1] The application for review lodged on 21 April 2005 only sought to review conditions 6 and 7. However, at the hearing of the application for review, the applicant also sought to contest condition 8. The tribunal gave leave for the application for review to be amended to challenge this condition.

[2] The HIA applied to be joined as a party. The tribunal did not make this order, but heard from the HIA in informing itself as it thought fit.

[3] See Regulation 109. The BCA is not freely available, in the same way that Acts and regulations are freely available. This is indefensible.

[5] This is in accordance with the Minister's guideline MG/13, issued June 2005.

[6] For further detail, see Building Commission Practice Note 2005-55, "Residential Sustainability Measures", issued May 2005.

[7] Compare Australian Conservation Foundation v Minister for Planning [2004] VCAT 2029.

[8] The applicant did not rely upon any inconsistency with either the Building Act or a relevant determination of the Building Appeals Board.

[9] Questions of law must be decided by a judicial member or legal member.

[10] [1930] HCA 12; (1930) 43 CLR 472, at 483.

[11] Subdivision Act 1988.

[12] Liquor Control Reform Act 1998.

[13] Environment Protection Act 1970.

[15] Heritage Act 1995.

[16] Prostitution Regulation Act 1994.

[17] Water Act 1989.

[18] Victorian National Parks Association Inc v Southern Grampians Shire Council [2004] VCAT 20.

[19] Victorian National Parks Association Inc v Southern Grampians Shire Council [2004] VCAT 20, at [55].

[20] TARAS Nominees Pty Ltd v Yarra City Council [2003] VCAT 1952; Metaxas Architects (for Carlos Constructions Pty Ltd) v Moreland City Council [2004] VCAT 1752 at [102].

[21] [2004] VCAT 1706, at [100]. This point is further explained by the case studies on the website of the Sustainable Energy Authority, which make it clear that significant energy savings can be obtained by improving insulation and sealing windows.

[22] Sustainability and the Built Environment, Discussion Paper, Department of Sustainability and Environment, September 2003, page 39.

[23] The same applies to water: see Justice Stuart Morris, Melbourne 2030 and Pricing Policies, a paper delivered to the Planning Institute of Australia 2005 National Congress held at Melbourne on 19 April 2005.

[24] Victorian Competition and Efficiency Commission, Housing Regulation in Victoria: Building Better Outcomes, Draft Report, July 2005, page 95.

[25] Victorian Competition and Efficiency Commission, Housing Regulation in Victoria: Building Better Outcomes, Draft Report, July 2005, page 102. The water tank issue was subject to a detailed study by the Allen Consulting Group, which recommended against the rainwater tank requirement. Amendment VC13, which was approved in September 2001, amended all planning schemes in the State to provide that the installation of a rainwater tank up to 4500 litres capacity does not require a planning permit, except in a Heritage Overlay.

[26] Amendment VC13, which was approved in September 2001, amended all planning schemes in the State to provide that the installation of a rainwater tank up to 4500 litres capacity does not require a planning permit, except in a Heritage Overlay.

[27] See, for example, Water Sensitive Urban Design - Engineering Procedures Stormwater (Melbourne Water 2005), Amendment C44 to the Bayside Planning Scheme and Sustainable Neighbourhoods - a consultation draft DSE 2005.