Enforcement by Suitable Means?
125If the conclusion I have expressed in the preceding paragraph is incorrect, s 93F(3)(g) of the EP Act requires the court to determine for itself whether the 2010 Agreement provides for enforcement of the 2010 Agreement by a suitable means in the event of its breach by the developer. Since this question was fully argued, I propose to address it.
126The primary Judge construed " enforcement by suitable means " in s 93F(3)(g) as requiring an additional, independent and enforceable assurance that the developer's promises under the planning agreement will be honoured (at [126]). His Honour held that the provisions in the 2010 Agreement allowing it to be registered pursuant to s 93H of the EP Act did not satisfy the statutory requirement because the effect of registration was merely to substitute one contractual promise for another. His Honour's construction of s 93F(3)(g) appears to have been based on, or at least strongly influenced by, the so-called ejusdem generis principle of construction. His Honour considered that the principle was attracted by the particular examples of " suitable means " specified in s 95F(3)(g).
127The ejusdem generis rule of construction is a principle that allows general words in the statute to be restricted to the same genus as the specific words that precede them: The King v Regos and Morgan [1947] HCA 19; 74 CLR 613, at 623, per Latham CJ. Before the rule can be applied it is necessary to identify some genus which comprehends the specific case for which provision is made in the statute: Regos, at 623; Deputy Commissioner of Taxation v Clark [2003] NSWCA 91; 57 NSWLR 113, at 143 [126], per Spigelman CJ (with whom Handley and Hodgson AJA agreed). But, as Dixon J explained in Cody v J H Nelson Pty Ltd [1947] HCA 17; 74 CLR 629, at 649, the ejusdem generis principle of construction is not to be applied mechanically. It is a guide in the process of interpretation which must take into account the whole instrument and the subject matter: see, too, DCT v Clark, at 143 [127]-[129].
128Doubt has been expressed as to whether the ejusdem generis principle of construction applies where general words in a statute are followed (rather than preceded) by terms suggestive of a narrower genus: Bennion on Statutory Interpretation (5 th ed 2008), at [1242]. Assuming, however, that the principle can apply to a provision such as s 93F(3)(g), (in which general words are followed by specific examples), it is still necessary to identify a genus from those examples.
129It is difficult to discern a genus in the specific examples of suitable means given in s 93F(3)(g), namely the provision of a " bond or guarantee ". A bond may take many different forms, including a deed poll by which an obligor binds himself or herself to pay a specified sum to the obligee: Butterworths Australian Legal Dictionary (1997), at 137. The provision of a bond would also include the obligor depositing a sum of money, whether with the obligee or a third party, in order to secure performance of an obligation. A guarantee is essentially a binding promise by one person to be answerable for the debt or obligation of another, should the latter default: J Phillips and J O'Donovan, The Modern Contract of Guarantee (Looseleaf ed), at [1.300]. A guarantee is not ordinarily self-executing, but must be enforced by the creditor or obligee against the guarantor if the obligor defaults. Unless the guarantor provides security, the guarantee is enforceable only as an unsecured promise.
130The use of the general expression " suitable means " in s 93F(3)(g) of the EPA Act reflects the very wide range of obligations that a planning agreement may impose on a developer and the variety of mechanisms for enforcement of those obligations that may be " suitable ". For example, the 2010 Agreement obliged the Land Owner to transfer " Conservation Offset Lands " to the Minister: Sch 5, Table 2. If the Land Owner failed to transfer the Lands, the Agreement stated that it consented to the Minister compulsorily acquiring the whole or any part of the Conservation Offset Lands for $1.00: Sch 4, par 2.4. It was not suggested that this enforcement mechanism was not a " suitable means " of enforcement, notwithstanding that consent to compulsory acquisition for a nominal sum does not appear to have significant characteristics in common with a bond or guarantee.
131It follows that the question of whether the 2010 Agreement provides for its enforcement " by a suitable means ... in the event of a breach by the developer " is to be determined in accordance with the ordinary meaning of the statutory language, unmodified by the ejusdem generis principle of construction. I am prepared to assume, without deciding, that Sweetwater is correct to submit that the question is to be resolved by considering separately each obligation created by the 2010 Agreement, rather than by taking a more global approach.
132On this basis, it is necessary to identify the particular obligation in issue and the means, if any, provided by the 2010 Agreement for the enforcement of that obligation. " Suitability " is to be assessed by reference to whether the means of enforcement is likely to eliminate or reduce to a commercially acceptable level the risk that the obligation created by the planning agreement will not be performed and that the planning authority or the community will not receive the intended benefits. The assessment should take account of the commercial context in which the planning agreement is to operate, including the capacity of the developer to comply with the relevant obligation. A relevant factor is the likely availability and effectiveness of the specified means of enforcement.
133In the present case, the relevant obligation is the Land Owner's liability to make the Development Contributions by a series of instalments amounting to $1.1 million ([63] above. The appellants relied on the Land Owner's agreement to procure registration of the 2010 Agreement under the RP Act and the subsequent registration of the Agreement (cl 9.2, [66] above) as the suitable means of enforcement of the obligation to pay the Development Contributions. The appellants do not rely on cl 7.1 of the 2010 Agreement, which provides that any party could enforce the Agreement in any court, as a sufficient means of enforcement of itself.
134Under cl 9.2 of the 2010 Agreement, the Land Owner agreed to procure registration of the Agreement under the RP Act in the relevant folios of the land subject to the Agreement, in accordance with s 93H of the EPA Act. Once registered under s 93H, the 2010 Agreement is binding on and enforceable against the owner of the land from time to time " as if each owner for the time being had entered into the agreement " (s 93H(3)). As the heading to s 93H suggests, the effect of registration is that the 2010 Agreement runs with the land. The Land Owner's obligations are thus enforceable as personal obligations against the Land Owner's successors in title. The obligations do not bind the land itself, as would be the case with a mortgage or charge.
135The 2010 Agreement addresses the risk that the Land Owner will fail to procure registration of the 2010 Agreement. It does so by deeming the Minister to have an equitable interest in the land sufficient to support the lodging of a caveat under s 74F(1) of the RP Act (cl 9.4(a)). The Minister must withdraw the caveat only when the Land Owner complies with the registration requirement (cl 9.4(c)). While the precise nature of the " deemed " equitable interest may be a matter for debate, these provisions create a mechanism enabling the Minister to hold up the transfer of the land until the Land Owner complies with its registration obligations or until the Minister has an opportunity to seek injunctive relief.
136It is also necessary to take into account Sch 10 to the 2010 Agreement. It prevents the Land Owner transferring more than 10 hectares of the land unless the transferee first enters into a deed agreeing to comply with all the " Required Obligations " as if it were the Land Owner. Further, the Land Owner must satisfy the Minister than the proposed transferee is capable of complying with the Required Obligations (par 1(a)(i)). The form of deed as set out in Annexure A to the 2010 Agreement, as I have noted, effectively substitutes the transferee for the transferor as the party obliged to perform the relevant obligations and releases the transferor from its obligations.
137The effect of this rather elaborate scheme is that the Land Owner's obligations run with the land by virtue of registration of the 2010 Agreement. This comes about because the Agreement specifically provides for registration under s 93H of the EPA Act. The Land Owner is not automatically released from its obligations if it transfers the land (or a portion exceeding 10 hectares) since s 93H makes no such provision. However, the Land Owner will be released from its future obligations if, before it transfers the land (or any portion exceeding 10 hectares), it complies with Sch 1, par 6. This can only happen if the transferee satisfies the Minister that it is capable of financially complying with the " Required Obligations " and the transferee signs the Novation Deed. The release operates in relation to the land that is transferred, but the obligations otherwise remain in place. If the transferee subsequently transfers the land, the subsequent transferee will be bound by the obligations created by the 2010 Agreement (EPA Act. s 93H(3)).
138The mechanisms for enforcing the Land Owner's obligation to make the Development Contributions provided by the 2010 Agreement is essentially that the obligation runs with the land until the obligation is discharged. One important safeguard is that before any transfer takes place the Minister must be satisfied that the proposed transferee has the financial capacity to comply (relevantly) with the obligation to pay the Development Contributions. In making that assessment, the Minister is able to take into account the value of the land to be acquired and the transferee's capacity to service any loans it takes out to finance the purchase.
139The enforcement mechanism provided by the 2010 Agreement does not necessarily eliminate entirely the risk that the Land Owner will default in making the Developer Contributions and the consequential risk that the contributions will never be made. But the 2010 Agreement takes advantage of the registration mechanism specifically provided for by the very legislation that introduced the statutory concept of a planning agreement under the EPA Act. The obvious purpose of that mechanism is to establish a means of enforcing obligations created by planning agreements against successive owners of land which is to be developed. The legislation itself therefore contemplates that registration of a planning agreement so that obligations run with the land may well constitute a suitable means of enforcing those obligations.
140I accept that in assessing the suitability of the means of enforcement provided by the 2010 Agreement, it is material that the Land Owner may be released, in whole or in part, from compliance with its future obligations when it transfers the land. However, the Land Owner cannot be released unless the Minister is satisfied that the transferee has the financial capacity to meet the obligations it must assume as a deemed party to the 2010 Agreement and as a party to the Novation Deed.
141The mechanism provided in the 2010 Agreement seems to me to establish a suitable means of enforcement of the obligation to make Development Contributions in the event of breach by the developer. The mechanism ensures that the owner of the land for the time being will be liable to make the contributions as and when they fall due. Safeguards are in place to minimise, if not eliminate entirely, the risk of insolvency by such an owner. Those safeguards include the effect of registration of the 2010 Agreement on successive owners of the land. For example, a transferee from an insolvent owner (or from that owner's representatives) will be bound by the obligation to make the Development Contributions in accordance with the terms of the 2010 Agreement.
142This conclusion does not depend on, but receives support from, the fact that the land in this case comprises 1702 hectares in the Lower Hunter Valley. No valuation evidence was adduced in the Land and Environment Court. But it could hardly be in dispute that such an extensive area of land approved for residential development would have a value greatly in excess of $1.1 million.
143For these reasons, the 2010 Agreement, objectively considered, provides a suitable means of enforcement of the obligation to make Development Contributions in the event of breach by the developer.