Karakatsis Holdings Pty Ltd & Anor v The Council of the City of Sydney

The Proposal

1. The site is identified in red in the following aerial photograph from the Council's Statement of Facts and Contentions:
2. The proposed development entails: 1. Alterations and additions to the existing buildings including: 1. the removal of non-structural internal partitioning, 2. erection of new dividing walls to create five separate lots, 3. three additional stairs to provide access to the first floor, with two existing stairs to be retained, 4. conversion of a window on Sherbrooke Street into a door, 5. eight new skylights; and 1. five lot Torrens title subdivision.
3. Lots 1 and 2 are proposed with frontage on Palmer Street; Lots 3 and 4 with frontage to Sherbrooke Street; and Lot 5 with frontage to Burton Street. Lots 1, 2, 3 and 4 have courtyards, and balconies at the first level, at the rear. The applicants have amended the plans during the course of the hearing, and the arrangement of the five lots is shown (for the ground floor) on the following plan (ex A):
4. The applicants provided sketch plans for a typical residential layout and a typical health consulting room layout for Lot 1, and plans for home industry/residential use for the five lots (ex B).

Issues

1. The development application does not propose any use for the five lots proposed to be created, and the Statement of Environmental Effects accompanying the development application states that use will be the subject of separate applications. The Council contends in its Statement of Facts and Contentions (ex 1, tab 3) that the proposal does not represent orderly or economic development of the land, identified in s5(a)(ii) of the Act as an object of the Act, on that basis that he configuration of the lots does not appear to be suitable for any of the nominated permissible uses in the R1 zone; and the lots lack necessary areas of open space, access to light and ventilation, and internal amenity to be occupied by residential uses and insufficient space to accommodate the necessary access arrangements that would apply to a commercial/community use.
2. The Council further contends that lack of a proposed use makes it impossible to make a detailed assessment of the application, and suitability of the site cannot be assessed as no use is proposed as part of the application; and that approval of lots capable of different occupancies which do not appear suitable for any permitted uses on the subject site is not in the public interest.

Evidence

1. The hearing commenced on site with a view, which included Sherbrooke Street and Palmer Street. Submissions were made on site by the owners of 5 Sherbrooke Street, which adjoins the site, and 11 and 13 Sherbrooke Street. Those submissions raised concerns as to existing problems with anti-social behaviour associated with bars in the area, and opposition to any of the lots being used for a bar; parking; and lack of loading access if the use of any of the lots is commercial. Agreed notes of the objector submissions were provided after the hearing.
2. Submissions made to the Council in response to its notification of the application are in evidence (ex 1, tab 5), and include submissions that the two lots facing Sherbrooke Street should be limited to residential use; lack of parking; fire safety; and noise and smoke from commercial uses.

Expert evidence

1. The applicants relied on expert evidence by Ms Genevieve Slattery (planning) and Mr Steven King (amenity). The Council relied on expert planning evidence from Mr Patrick Quinn. The experts conferenced and provided a joint report (ex 2).
2. Mr Quinn and Ms Slattery agreed (ex 2, p4) that cl 7.22 of the LEP would apply to any application for use of the premises and would limit the range of uses, reducing it to at least the following uses nominated by the LEP: Attached dwellings; Bed and breakfast accommodation; Boarding houses; Child care centres; Community facilities; Dual occupancy; Dwelling houses; Group homes; Health consulting rooms; Home-based child care; Home industries; Home occupation (Sex Services); Horticulture; Hostels; Medical Centre; Multi dwelling housing; Places of public worship; Residential flat buildings; Respite day care centres; Semi-detached dwellings; Seniors housing.
3. They noted that additional uses not listed as prohibited development would also be permissible with consent.
4. Ms Slattery considered that a "neighbourhood shop" would also be permissible, on the basis that cl 2.3(3)(b) provides that a reference to a specific use will not apply to another use referred to separately in the Land Use Table; shops are specifically referred to in the Land Use Table, and neighbourhood shops are separately referred to in the Land Use Table; and applying cl 2.3(3)(b) the reference to "shops" in cl 7.22 would only apply to "shops" as distinct from "neighbourhood shops" (ex 2, pp 5-6). Mr Quinn disagreed, noting that cl 7.22 prohibits "shops" and "neighbourhood shops" are a type of shop; cl 2.3(3) refers to the Land Use Table in Part 2 of the LEP which is a separate part of the LEP to cl 7.22; cl 7.22 does not refer to the Land Use Table for the R1 zone; and cl 2.4 (presumably a reference to cl 2.3(4)) notes that cl 2.3 is subject to the other provisions of the LEP. It is not necessary to decide this issue, which the parties agreed is a peripheral issue. While cl 7.22 applies to land in the R1 zone, on the agreed evidence before the Court cl 7.22(3)(a) would not be met.
5. Mr Quinn and Mr King agreed that an acceptable level of amenity can potentially be achieved if the lots were occupied as residential dwellings, however the level of amenity would be dependent on the proposed fit out of the specific lot (ex 2, p 2). Mr Quinn noted that the amenity of the lots is also dependent on all of the lots being built and maintained in the manner proposed in the application, which cannot be guaranteed once the sites are subdivided and in individual ownership, and without a nominated "base" use the amenity or suitability for any of the permitted uses of the lots within the subdivision cannot be protected if any of the other lots or surrounding sites were to be redeveloped; and a significant loss of amenity may further reduce the range of potential uses within the proposed lots. Mr King was of the opinion that the "warehouse conversion" potential of the lots is an advantage appropriate to the locality, and that potential extends to most of the permitted uses; the normal development application process which would be required for any specific proposed uses would include considerations of future amenity.
6. Ms Slattery considered that given the alterations proposed in the development application, one, several or all of the allotments could be used independently of the other allotments without unnecessarily restricting their future use. The alterations proposed result in a "shell" which can be internally fitted out as required by future tenants without impacting on the amenity of the functionality of any of the other allotments. At the time of assessment of future development applications for occupancy an assessment can be made of the impact of the proposed use on other allotments within the site to ensure amenity levels are maintained. In Ms Slattery's opinion, given the location of the site within a mixed use/character locality with a range of residential, retail, artistic and commercial uses evident and based on the surrounding buildings and developments, appropriate land sues could comprise home industries, dwelling houses, health consulting rooms, respite day care centres, group homes and the like, all uses which are relatively low impact and could be accommodated within the proposed allotments while maintaining consistency with the character of the locality and minimising potential adverse amenity impacts on nearby residents.
7. In oral evidence Mr Quinn commented on the indicative sketch plans for a residential layout and a home occupation/residential use (ex B). While he noted that those sketches demonstrate that some of the permissible uses could be carried out, and generally show that the lots could be occupied for residential purposes, he has a concern that the residential uses rely on the central courtyard area, and retention of the courtyard/lightwell area is crucial to the amenity of the lots; once subdivided with a use approved, it could be difficult to ensure adequate solar access to the courtyard. For example, if the first development application was for a medical consulting room with additional floorspace rather than the courtyard and balcony, that would have an impact on solar access for the other lots. Mr Quinn agreed that assessment of such an application would take into consideration that potential impact on other lots, however he considered the issue would be the weight given. Mr King did not consider that there would be a risk of sterilisation of the affected lots, as there would be other options, for example varying the roof forms, and creation of additional voids to achieve amenity.
8. Mr Quinn and Ms Slattery agreed (ex 2 p 4) that compliance with the BCA can be achieved. The applicant provided a BCA Compliance Statement dated 13 August 2015 (ex 1, p 153), noting that the proposal is to provide base building "shells" that could be used for various uses such as Class 1a, Class 2 (or Class 4), Class 5 or Class 6 subject to a future development application for fit out. That statement addressed requirements and recommendations for structure, fire safety, access and egress, accessibility, services and equipment, health and amenity and energy efficiency. The Council accepts that BCA compliance can be achieved, and the proposed conditions of consent include conditions 19, 20 and 21 which specify construction and certification requirements.
9. Mr Quinn and Ms Slattery agreed (ex 2, p 6) that in principle there is no objection to the pattern of subdivision; Ms Slattery considered that the proposal will result in allotment sizes which are consistent with the prevailing lot sizes in the locality and the creation of voids in the rear of the sites will result in built forms/footprints which are similar to the terrace houses to the south of the site.

Consideration

1. The Council's position is that without knowing what the ultimate use for each lot is intended to be, approval of the subdivision is not consistent with the object in s 5(a)(ii) of the Act to encourage the promotion and co-ordination of the orderly and economic use and development of land. While it is not seeking detailed fitout information, in the circumstances of this site, with its existing buildings, small lots and potential amenity impacts on neighbours, it is relevant that there be a nominated use.
2. The applicants' position is that the consideration of the development application under s 79C of the Act must be limited to the matters relevant to the subdivision and the subdivision works, and assessment of future uses and fitout will be a matter for assessment when application is made for those uses.
3. The parties were in agreement as to the applicable general principles. Subdivision is a form of "development" as defined in s 4(1) of the Act, and is defined in s 4B to mean "the division of land into two or more parts that, after the division, would be obviously adapted for separate occupation, use or disposition". Subdivision itself does not involve any use of land, and consent for subdivision does not of itself import any approval for subsequent use for any purpose: Wehbe v Pittwater Council (2007) 156 LGERA 446 at [28]. The Council's draft conditions include condition 2, requiring a separate development application for the fitout and use of each individual lot; the applicants accept that condition.
4. The applicants rely on the judgment of Sugerman J in Smith v Randwick Municipal Council (1950) 17 LGR(NSW) 246 at 250: The approval of a subdivision into lots of, say, 18 feet or 19 feet frontage is in law the approval of a subdivision simpliciter and not its approval with any condition or for any particular purpose such as shops or dwellings etc. The question what sort of building may be erected upon the respective blocks is one which in strictness arises for decision later when it is sought to build on them and one which will be affected by circumstances as they then exist, by various considerations including the size of the lots, and by other matters which may have occurred in the meantime, such, for instance, as the proclamation of the area as a residential area.
5. The starting point for the Council's submission is the Court of Appeal decision in Seraphina Bell Pty Ltd v Willoughby Municipal Council (No 2) (1967) 14 LGRA 209 at 224, that it would be wrong to require a council to deal with a subdivision application "as if the land were and would always remain vacant land", and that it would be appropriate to have regard to "the present and to the prospective state of the buildings and their uses".
6. The proposition that while in general an application for subdivision is to be assessed on the basis that future uses will be assessed when application is made for those future uses, the nature of prospective uses may be relevant in the circumstances of a particular case, is reflected in the planning principle in Parrott v Kiama [2004] NSWLEC 77: 17 When should a subdivision application include information on the buildings to be built on the resulting allotment(s)? It is normal practice in Australia to subdivide land without constraints on the buildings that can later be built. While this practice is appropriate in most cases, it is not always so. I have adopted the planning principle that a subdivision application should provide constraints on future buildings when the proposed allotments are smaller than usual, or environmentally sensitive or where significant impacts on neighbours is likely and needs careful design to minimise them.
7. The Council accepts that normally prospective future uses would not be taken into consideration, however it submits that in the circumstances of this application, where the proposed lots are small, and significant impacts on neighbours are likely and so careful design is needed to minimise them, and in the context of the tight existing building, it is difficult properly to assess the application without a nominated use.
8. The applicants submit that while the Court may be entitled to have some regard to potential future uses under the rubric of public interest, and the orderly and economic development of land, it is not sufficient where the proposal is otherwise entirely compliant with the relevant development controls for the Council to require more work. The applicants submit that there is no evidence of particular sensitivity or potentially significant impacts on neighbours, and that potential impacts on neighbours would be no different and no less manageable at a future development application stage than for any other small lot in Palmer or Sherbrooke Streets. The applicants submit that there is no evidence before the Court that the subdivision is inappropriate or otherwise should not be approved, on the basis that there is no non-compliance with any control in the LEP or the DCP, no inconsistency with the objectives of the R1 zone, and no applicable minimum lot size; BCA compliance and structural integrity can be achieved through the construction process; the subdivision pattern is acceptable; and the uncontroverted evidence of Ms Slattery is that the proposed allotments are consistent with prevailing lot sizes in the locality, the proposed subdivision will create no discernible adverse impacts on neighbours, the environment or streetscape, and the new allotments will be more in keeping with the fine grained nature of the locality; and the proposed subdivision will have no adverse impacts on the Burton Street Tabernacle or the heritage conservation area.
9. It was common ground that the planning controls in the LEP and the DCP do not in terms require nomination of a prospective use in an application for consent to subdivision. I accept the agreed expert evidence that the proposed pattern of subdivision is appropriate, and agree, based on the view, that the proposed allotments are consistent with the prevailing lot sizes in the locality. I am satisfied that the proposed development is consistent with the objectives of the R1 zone, the locality statement in section 2.4.9 of the DCP, and with objective (a) in section 3.8 of the DCP. It was common ground that there is no adverse impact either on the heritage conservation area, or on the nearby heritage item; and that BCA compliance and structural integrity can be achieved for a range of potential uses.
10. I accept the agreed evidence that a range of potential uses would be permissible on the allotments created by the subdivision, including home occupation (which would be permissible without consent), and a variety of residential and other uses that would require consent, including such uses as health consulting rooms, as identified by the expert planners and noted at paragraph [22] above. While there remained a disagreement between the planners as to whether cl 7.22 of the LEP would preclude future use for a neighbourhood shop, on the evidence before the Court that provision would preclude certain uses including potential use as a bar, which was the subject of concern expressed by the objectors.
11. Based on the indicative sketches provided in exhibit B, I am satisfied that residential use, and use for a home industry combined with residential use, are feasible. I accept the agreed expert evidence that an acceptable level of amenity can be achieved if the lots are occupied as residential dwellings. While Mr Quinn accepted that the uses shown on exhibit B are feasible, his concern remained as to how a future development application for one lot might result in development that would constrain development on other lots.
12. In accordance with the proposed conditions, any future use of an allotment would require a further development application, which would require assessment under s 79C of the Act. Mr Quinn accepted that potential constraints in the form he identified would be a relevant consideration, however he remained concerned as to the weight that might be given to such a consideration. In the context where the proposal is, as described by Ms Slattery, to provide for each allotment a "shell" which can be internally fitted out without impacting on the amenity and functionality of any of the other allotments; where assessment of any future development application for a particular use would include consideration of potential impacts, including amenity impacts, on neighbouring properties; and where, as Mr King stated, there would be design alternatives to overcome potential amenity issues, I am not persuaded that Mr Quinn's concerns could not be overcome as part of the consideration of potential conflict in uses that would be part of the routine development assessment process.
13. I am satisfied that the circumstances of this application do not require that there be a nominated prospective use for the proposed allotments. I agree with the applicants that this application does not raise the issues found in the authorities relied upon by the Council to warrant consideration of potential future uses in the determination of the subdivision application: in the case of Seraphina, a control that could not be met; potential amenity impacts of an adjoining air base (Shoalhaven City Council v Lovell [1996] NSWSC 599); potential for development without consent that would not require further assessment, in particular of heritage impacts (Thompson & Ors v Leichhardt Municipal Council [2000] NSWLEC 230); or environmentally sensitive land (Parrott v Kiama). On the evidence before the Court there are a range of potential future uses for the allotments that are feasible. While the proposed lots are small and the configuration in the context of the existing buildings potentially raises issues for amenity and functionality, that is consistent with the pattern of the existing development in the locality. The feasible prospective uses would not necessarily impact on the amenity or functionality of the other allotments, and potential impacts on neighbouring properties would be addressed in the course of assessment.

Conclusion

1. I am satisfied, for the reasons above, that it is appropriate to grant consent to the proposed development, subject to the conditions agreed between the parties. As noted above, those conditions require a further development application for the fitout and use of each individual lot and conditions relating to compliance with the BCA; and conditions relating to hours of work and noise during construction and regulating construction activity.
2. The orders of the Court are: 1. The appeal is upheld. 2. Development Application No. D/2015/248 for alterations and additions to an existing building and Torrens title subdivision into five allotments for Lot 1 DP 18376, 278 Palmer Street and 45 Burton Street Darlinghurst, is approved subject to the conditions in Annexure A. 3. The exhibits are returned except for exhibits A and 3. Linda Pearson Commissioner of the Court 10376 of 2015_Annexure A (29.6 KB, pdf)

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: 28 October 2015