Ipoh Pty Limited v Sydney City Council

Connery v Manly Council (1999) 105 LGERA 451 ; Ipoh Pty Ltd v Sydney City Council [2005] NSWLEC 498; McDougall v Warringah Shire Council (1993) 30 NSWLR 258, 80 LGERA 151; CASES CITED: North Sydney Municipal Council v P D Mayoh Pty Ltd (1988) 14 NSWLR 740, 66 LGRA 352; Paino v Woollahra Municipal Council (1990) 71 LGRA 62; Pimas Group Pty Limited v Maritime Services Board of NSW (1994) 82 LGERA 205; Shellharbour Municipal Council v Rovili Pty Ltd (1989) 16 NSWLR 104, 68 LGRA 231; Sydney City Council v Claude Neon Ltd (1989) 15 NSWLR 724, 67 LGRA 181

DATES OF HEARING: 14/12/2005, 14/02/2006 (written submissions), 22/02/2006 (final written submissions)

APPLICANT Mr J A Ayling SC with Dr S Berverling (barrister) SOLICITORS Home Wilkinson Lowry LEGAL REPRESENTATIVES: RESPONDENT Mr M Craig QC with Ms J M Jagot (barrister) SOLICITORS Maddocks

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

10323 and 40376 of 2005 Ipoh Pty Limited v Sydney City Council

JUDGMENT 1 Talbot J: The following facts are the subject of a Statement of Agreed Facts:

1. The Respondent is the owner of land known as Folio 8643 Folio 28 being Lot 1 in DP 811077 ("the Land").
2. Erected on the land is a building generally known as the Queen Victoria Building, 429-481 George Street, Sydney (hereinafter referred to as the "Queen Victoria Building").
3. Central Sydney Local Environmental Plan ("the LEP") and Central Sydney Heritage Local Environmental Plan 2000 ("the HELP") apply to the land.
4. The Queen Victoria Building is listed as an item in schedule 1 to the HELP.
5. The Applicant holds a lease over the Queen Victoria Building for a period of 99 years. The term of the lease expires in 2083.
6. On 9 January 2004, the Applicant lodged with the Respondent a development application No. D2004/00015 (the "development application") for the upgrading of certain elements of the Queen Victoria Building in the form of a master plan.
7. The proposed development is permissible with consent.
8. The Respondent proceeded with the assessment of the development application.
9. On 10 September 2004, the Heritage Council advised the Council by letter:

1. "The proposed escalators in the existing voids of the building as shown in drawing "Revised Escalator Scheme A (Plan and Section and North End)" prepared by Ancher Mortlock Wooley dated 3/09/04 are recommended for approval for a period of ten years only;

2. The NSW Heritage Council, in view of the above, recommends the retention of the existing escalators at the George St entrance of the building; and

3. In relation to all internal works the construction period should be kept to a minimum and all works should be the subject of an Implementation Plan."
4. On 13 September 2004,the applicant amended its development application by the submission of a revised escalator scheme (A) to the Respondent.
5. By report dated 8 November 2004 to the Planning Development & Transport Committee, the Respondent's planners made the following recommendation: "That arising from consideration of a report by Planning Workshop Australia to the Planning Development & Transport Committee on 8 November 2004, in relation to development application D/2004/00015 made by Ipoh Pty Limited for the site at 429-481 George Street, Sydney (Queen Victoria Building) for the staged upgrade of the existing building, it be resolved that:

(A) the requirement to carry out a design competition may not be required in this instance, providing the stage 2 development applications exhibit design excellence, and the same project architect is retained (Ancher Mortlock & Wooley) and is commissioned to supervise the full construction phase of the development;

(B) information provided by the Applicant regarding the history of the use of the site warrants recognition that the historic use of the site is of considerable heritage significance;

(C) the Council's heritage database inventory report be updated so as to indicate that the retail/market use of the site is of considerable historic significance; and

(D) consent be granted subject to the following conditions."

12. On 8 November 2004, the Respondent's Finance, Properties and Tenders Committee considered a report the purpose of which was to obtain Council's consent as owner of the Queen Victoria Building to the lodgement of a development application for a master plan to guide upgrading works to the Queen Victoria Building ("QVB"). The report recommended that:

(A) "Council grant owners' consent for the lodgement of the development application for a master plan as described in the subject report by the lessee of the Queen Victoria Building, noting that separate development applications will be lodged for the works included in the master plan and that no works are authorised by this consent: and

(B) Council's attorney be authorised to execute all necessary documentation."

13. On 15 November 2004, the Respondent resolved as follows: That arising from consideration of a report by the City's Valuation Consultant to the Finance, Properties and Tenders Committee on 8 November 2004 on 429-481 George Street, Sydney (Queen Victoria Building) - Owners Consent, it be resolved that Council:

(A) acknowledge that the Queen Victoria Building is an iconic tourist and visitor destination, a heritage item of considerable significance, and a prominent and successful retail centre;

(B) recognize the need to continually maintain and upgrade the Queen Victoria Building to ensure its ongoing success and popularity and support the objectives of the works proposed in the Master Plan as described in the subject report, including the need to improve circulation and access through the building and to the upper levels;

(C) note that separate development applications would be required for the works included in the Master Plan and that no works are authorised by consenting to the Master Plan;

(D) defer consideration of the request for owner's consent to the lodgement of a development application for a Master Plan by the lessee of the Queen Victoria Building, pending a review as to whether there is an alternative means of improving circulation to the upper levels of the building while minimising the impact on the internal spaces as well as the heritage fabric of the building;

(E) establish a sub-committee for the purposes of undertaking the review identified in clause (D), the sub-committee to comprise the Lord Mayor or her representative, the Chair of the Finance, Properties and Tenders Committee, other interested Councillors and the General Manager or his representative; and

(F) request that a report be presented at or prior to the final meeting of the Finance, Properties and Tenders Committee, scheduled for 13 December 2004, in order to facilitate a determination regarding the granting of owner's consent. 14. At its meeting of the 9 May 2004 the Respondent resolved that: (A) Council not grant owner's consent for the lodgement of a development application for a Master Plan for the Queen Victoria Building, for the reasons outlined in the Memorandum; and

(B) Council request that the lessee of the Queen Victoria Building investigate alternative means of improving circulation to the upper levels of the building; while reducing the impact on the internal spaces as well as the heritage fabric of the building. 15. The Respondent has failed to give its consent in writing as the owner of the Queen Victoria Building to the making of the development application.

16. The Respondent has failed to determine the development application pursuant to s80(1) of the Environmental Planning and Assessment Act 1979 by granting consent to the application either conditionally or subject to conditions by refusing consent to the application.

17. At its meeting of 5 September 2005 the Council's planning development and transport Committee resolved: "(a) the application be returned to the Applicant as it cannot be determined in the absence of Council's consent as land owner to the lodgement of the development application; (b) the Applicant be advised that, had determination been possible, the development application would have been refused due to the negative impact of the proposed escalators on the quality, character, heritage significance and iconic nature of the interior of the building, and its appreciation by the public; and (c) the proposed changes to the 1997 Conservation Management Plan as proposed by Graham Brooks & Associates Pty Ltd, dated November 2003, not be endorsed. The Conservation Management Plan, as prepared by Graham Brooks & Associates Pty Ltd, dated 1997, shall remain the guiding document for assessing works to the building."

2 Under clause 19.1 of a Lease between the Council as lessor and Ipoh Garden Berhad (Aust) Pty Limited as lessee dated 28 February 1984 ("the Lease"), the consent of the Council, as lessor, is required to the use of any part of the QVB, subject to an obligation that the lessor will not unreasonably withhold its consent to any proposed use "which may reasonably be shown to be commercially viable and will not materially diminish public access to and enjoyment of the Queen Victoria Building as a building of historical and architectural significance and will not affect the use of the Tunnel Arcades for the purpose of pedestrian passage and retail shops as provided for in the Plans and Specifications…"

3 Clause 19.1 contains a further proviso as follows: …AND PROVIDED ALSO THAT the grant of this Lease will not relieve any sub-lessee from its or his obligation to obtain from the Lessor as the responsible authority any consent required under the Environmental Planning and Assessment Act or any other relevant legislations for the time being enforced.

4 Under clause 20.1, the lessee is not permitted to make any alteration, modification or addition to the QVB other than, relevantly, for ensuring or improving the economic viability of the QVB for any purpose referred to in clause 19.1. Under clause 20.2, the carrying out of any alterations or additions or the like by the applicant as lessee is not permitted unless and until "fully detailed plans and drawings and a fully detailed specification of the proposed work and class or materials have been submitted to and approved by the lessor in writing which approval will not be unreasonably withheld or delayed". 5 The applicant has appealed against the refusal of the council to determine its application for development consent as a deemed refusal. The following preliminary question is raised by the council in the class 1 proceedings as a Question of Law: Whether the ancillary jurisdiction of this Court, pursuant to s.39(2) of the Land and Environment Court Act 1979 should be construed, in the circumstances of this case, to permit the Court to grant owner's consent to the lodgement of development application no. D/2004/00015. Particulars (a) A development application may be made only by the owner of the land to which the development application relates, or by another person with the consent in writing of the owner, pursuant to cl 49 of the Environmental Planning and Assessment Regulation 2000. (b) The City of Sydney Council ("the City") is the owner of the Queen Victoria Building, ("the QVB") the subject of Development Application No. D2004/00015. (c) The QVB is owned by the Council as operational land pursuant to the Local Government Act 1993. (d) The City has entered into an Agreement for Lease and Lease of the QVB in respect of the rights of the City (as owner) and Ipoh Pty Limited (as the entity currently entitled to be described as lessee). (e) This preliminary question of law arises due to: (i) The decision of the owner not to grant consent for the lodgement of DA No. D2004/00015; (ii) The significance of Council's ownership of the QVB as operational land; (iii) The significance of the existing registered lease which regulates the relationship between the owner and the lessee; (iv) The consequences which flow from any intervention by the Court in the role of the owner under that Lease, including the exposure in respect of loss, damages, and/or termination. 6 The applicant has framed a further question concerning the competency of the class 1 application as follows: Does an appeal lie to the Land and Environment Court against the deemed refusal of a development application, where the owner of the land to which that development application relates has not given its consent to the lodgement of that development application? 7 In separate class 4 proceedings the applicant seeks orders to the following effect: (a) That the respondent council forthwith give its consent in writing as the owner of the land to the making of DA No. D2004/00015. (b) That the council determine that development application and notify the applicant of its determination thereof; and (c) Costs. 8 Justice Pain, at a preliminary hearing in September 2005 rejected the council's application by Notice of Motion seeking orders that the class 4 application be dismissed on the basis that no reasonable cause of action has been disclosed in relation to the two issues. Justice Pain was satisfied in each case that there is a reasonable cause of action disclosed and an arguable case to be tried. Her reasons were published on 9 September 2005 (Ipoh Pty Ltd v Sydney City Council [2005] NSWLEC 498). 9 The further hearing before me commenced on 14 December 2005. Final written submissions were received on 22 February 2006.

The Council's Position in the Class 1 Proceedings 10 The council's submissions take account of the distinction between the specified criteria for consent of the council as lessor in clauses 19 and 20 of the lease on the one hand and the relevant considerations to be taken into account under s 79C of the Environmental Planning and Assessment Act 1979 ("the EPA Act") in respect of a development application made to the council as consent authority on the other hand. 11 The Queen Victoria Building is operational land under the Local Government Act 1993 ('the LG Act"). The terms of the lease demonstrate that the parties entered into it as a commercial transaction between private individuals. Accordingly the council says the commencement of the class 1 proceedings is an attempt to bypass or circumvent the lease covenants in reliance upon the powers of the Court under s 39(2) of the Land and Environment Court Act 1979 ("the LEC Act"). On any view it is a justiciable dispute between the lessor and lessee over which the Supreme Court has jurisdiction. 12 Furthermore the decisions of this Court and the Court of Appeal, where it has been determined that s 39(2) was available as a source of power for the Court to give the consent of the council to the making of a development application as owner of the relevant land, relate only to situations when the land in question is vested in council as a public road (see Sydney City Council v Claude Neon Ltd (1989) 15 NSWLR 724, 67 LGRA 181; North Sydney Municipal Council v P D Mayoh Pty Ltd (1988) 14 NSWLR 740, 66 LGRA 352; Shellharbour Municipal Council v Rovili Pty Ltd (1989) 16 NSWLR 104, 68 LGRA 231; and Paino v Woollahra Municipal Council (1990) 71 LGRA 62). 13 Therefore the class 1 and class 4 proceedings ought to be stayed to enable the applicant, as lessee to determine what action it proposes to take, if any, under clauses 19 and 20 of the lease. Otherwise the proceedings should be dismissed as there is no prospect of consent to the development application. The Applicant's Position in the Class 1 Proceedings 14 Mr Ayling SC rejects the submissions made on behalf of council by Mr Craig QC in regard to the status of the land under the LG Act. He claims that the council's functions, powers, rights and duties with respect to public land (including operational land) are in the same category as its functions, powers, rights and duties with respect to public roads and equally different from those of a private individual with respect to land which the latter owns (see the constraints imposed on dealings with land by a council in ss 8, 22 and 23 of the LG Act). 15 Mr Ayling agrees with Mr Craig that the operation of s 39(2) discloses two general categories. Firstly where a council has some statutory function which impinges upon the subject matter of a development application but is not the owner of the land. Conversely the category where the council is the owner of the land the subject of the development application. It is his contention therefore that as the present case is in the second category (in respect of which the cases have been recognised the power of the Court to give owner's consent under s 39(2)) the distinction the council seeks to make by reason of the existence of the lease and its regulation of the legal relationship between the parties is illusory. 16 Mr Ayling also draws attention to clause 34.3 of the lease which provides relevantly: 34.3 Nothing in this Lease contained shall be deemed to prohibit or inhibit the Lessee from exercising any right conferred on it by law to appeal to a court or other appellant tribunal against any decision of the Lessor (in its capacity as the Local Council or the authority charged with the control of development in the City of Sydney)… with respect to the Lessee's use or occupation of the Demised Premises… PROVIDED ALWAYS that neither the Lessee nor the Lessor shall have any right of appeal from any decision or determination of any person made pursuant to a provision of this Lease whereby any such decision or determination is expressed to be final and binding upon both parties. 17 By reason of clause 34.4 and a proper construction of clauses 19 and 20 Mr Ayling says that it is clear that clauses 19 and 20 do not entirely regulate the legal relations between the parties with respect to development. The applicant is not deprived by the lease of its rights accrued under, relevantly, the EPA Act and the LEC Act. It follows therefore that the applicant's entitlement to rely on s 39(2) of the LEC Act for the Court to give, on the council's behalf, the consent to the lodging of the development application remains unaffected by the lease. Discussion 18 In Claude Neon the Court decided that a council can give its consent to the lodging of an application for development consent by giving development approval and further that s 39(2) places the Land and Environment Court, upon an appeal, in the same position as the council where the application relates to a road owned by the council. Hope JA who delivered the judgment of the Court expressly had regard to the statutory scheme in respect of consents to see whether consent to the application could be given where the consent authority is the owner of the land and that land is a public road (at 728). Later that year Clarke JA in Rovili referred to the observations of Hope JA in Claude Neon noting that the council does not have the power of a private landholder arbitrarily to withhold consent as the council is placed in a special situation when an application is made to it for development approval for the erection of a structure partly on its road (at 112). Furthermore if the council simply does nothing Clarke JA noted that the applicant can appeal to the Court which has all the powers of the council including the power to consent to the lodgement of the application. 19 In Paino Hemmings J recognised the "well-settled" principle that an application lodged without the consent of the owners is not "void" and the necessary consent may be provided any time up to the determination by the consent authority. Hemmings J formed the opinion that, in the circumstances of the case where the application related to development proposed on a public road, the function of the consent to the making of the application could be exercised by the Court pursuant to s 39(2) on behalf of the council. Hemmings J resisted a submission that Claude Neon and Rovili were wrongly decided, as well he might. The circumstances considered by Stein J in Pimas Group Pty Limited v Maritime Services Board of NSW (1994) 82 LGERA 205 were slightly different in that the application for development consent considered in that matter related to the construction of a swimming pool on land owned by the Maritime Services Board. Stein J was not prepared to confine the decision in Claude Neon to its own facts recognising the giving of consent to the application as a planning power for the purposes of the EPA Act and "not a property power". He further found that the granting of the owner's consent to the making of the development application confers no right in property and has no effect on the lease under which the applicant for consent occupied the subject land. 20 Other decisions including McDougall v Warringah Shire Council (1993) 30 NSWLR 258, 80 LGERA 151; Mayoh; and Connery v Manly Council (1999) 105 LGERA 451 show that the underlying consideration for the exercise of power within the meaning of s 39(2) of the LEC Act was whether it was a function the council "had in respect of the matter the subject of the appeal". Although the majority of the cases that I have referred to involve the giving of the consent of the council as the owner of a public road nevertheless I do not consider that the facts of those cases confine the principle to the circumstances where the subject land is a road. As Hope JA observed in Claude Neon at 729 that if the development is one that ought to be approved then the council ought to give its consent. Its failure to do so simply because it wished to frustrate the right of the adjoining owner to obtain approval to a projected structure would be use of its power for an improper purpose, that is, it would be a mala fide abuse of power. If a council considers that it should give consent to a development application it must also consider that it should give consent to the making of the application. The giving of the consent to the making of the development application is a function the exercise of which is basic to the function of the council to grant development approval. To deny the giving of consent to the development application where in all other respects the development application would be approved would amount to a dereliction of the duty and obligation of the council to determine an application for development consent in accordance with the EPA Act. 21 There is, in my opinion, a clear distinction between the exercise of the discretion to give consent to an application for development consent and the approvals referred to in the terms of the lease. It does not follow if development consent is granted that the council is obliged in any way to give its approval as lessor. Although I do not stop to identify the different considerations that would apply, there clearly are different criteria that apply to the consent of a landlord under the terms of its lease and the consent of a consent authority in response to a development application following consideration of the matter required to be considered pursuant to the planning legislation. It is for the same reason that I reject the argument raised by Mr Craig during submissions that the clauses of the lease raise an estoppel against the applicant relying on s 39(2) to circumvent the terms of the lease.

22 Having regard to all of the above reasons I answer the preliminary question raised by the council in the class 1 proceedings in the affirmative. The same answer is given to the further question concerning the competency of the class 1 application on the basis that any consent given by the Court in respect of the development application itself will carry with it the consent of the council to the making of the development application as owner of the land although obviously the Court can make a separate decision in that regard without leaving it to inference. 23 So far as the class 4 proceedings are concerned the parties may be content to allow the development application to be determined in the class 1 proceedings in which case there is no utility in making the orders which the applicant seeks in the class 4 proceedings. It is nevertheless still open for the council to determine the development application thereby obviating the necessity for any further litigation or to enter into consent orders if an accommodation with the applicant can be reached. 24 Having regard to the apparent lack of utility in the circumstances it is in my opinion appropriate that the class 4 proceedings be dismissed. There is a competent appeal and it is not necessary for the respondent council to either give its consent or to determine the development application in order for the matter to proceed. The question of costs will be reserved. 25 The parties are directed to bring in a form of orders that reflect my determination within 14 days. In default of an agreement on the form the orders should take either party has liberty to apply on 2 days' notice.

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