Mac's Pty Ltd v Minister Administering Local Government Act 1993 and Parramatta City Council - [2008] NSWCA 132 - NSWCA 1996 case summary — Zoe

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Mac's Pty Ltd v Minister Administering Local Government Act 1993 and Parramatta City Council

[2008] NSWCA 132

Court of Appeal (NSW)|1996-03-05|Before: Biscoe J, Pearlman J, Stein J

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Source facts

Court

Court of Appeal (NSW)

Decision date

1996-03-05

Before

Biscoe J, Pearlman J, Stein J

Source

Original judgment source is linked above.

Judgment (342 paragraphs)

[1]

Background to proposed development of Civic Place site 40 The applicants' properties lie within the Civic Place site.

[2]

41 On 7 December 1998 Parramatta City council resolved as follows: (a) council note that a meeting of the council's Civic Place Working Party met on Friday 4 December 1998 to consider matters affecting the site, including the draft REP and proposed Parramatta/Chatswood rail link. (b) council in consultation with other stakeholders, develop a masterplan and management plan for the development of the Civic Place area. (c) Preparation of the master plan and management plan to commence immediately and be completed by the finalisation of the REP. (d) council establish a project working team with representatives from DOT and other government agencies and assisted by consultants. The project working team will report to council's Civic Place Working Party. (e) Concurrently with the preparation of the masterplan and management plan council review its longer term accommodation requirements including an examination of: (1) its organisation space needs (2) locational options (3) functional and customer service requirements (4) civic activity space needs (5) broad concept design parameters (6) cost parameters (f) council review its strategic property holdings and financial capacity with a view to creating asset management funding strategy which will allow council to best utilize its resources for the project. (g) In future, non-member Civic Place Working Party councillors be invited to attend Civic Place Working Party Meetings and advised accordingly. 42 The minute of the Lord Mayor received by the council on 7 December 1998 states: 1. council at its meeting of 11 August 1997 appointed the then Lord Mayor (Cr Haines) and councillor Books, Bolgoff, Garrard, Hyam, Russo and Worthington to a Working Party in respect of the future sale and development of council's Smith Street site as part of the future development of Civic Place. 2. Civic Place and other blocks adjacent to Parramatta Station have been identified in the Draft Parramatta Regional Environmental Plan (REP) as the prime location to deliver the scale and type of development that is critical to lead Parramatta's growth as Sydney's second major centre. 3. Also, State Government has publicly committed itself to the future growth and development of Parramatta, including the recently announced Transport Strategy and Parramatta/Chatswood rail link and public transport interchange. 4. I am also aware of property owners in the area wanting to develop their sites. 5. The draft REP illustrates options for the development of the Civic Place area. It is also recognised that the only way to achieve the quantity and quality of development is by way of an integrated masterplan and management plan. The masterplan is required under the REP and will guide integrated planning and development of the locality. The management plan is council's plan for directing people, actions and resources to the project. 6. Now that the draft REP has been exhibited and recognising the need to proceed with the development of this strategic matter last Friday, 4 December I called a meeting of council's Civic Place Working Group. 7. The Working Group received update reports on the draft REP, the Parramatta/Chatswood rail link and public transport interchange, and government's consideration of its Parramatta properties and accommodation. 8. The Group agreed that council should continue to work in close partnership with the various stakeholders and that it was necessary to establish a master plan and management plan for the area concurrent with the finalisation of the REP. 9. It was agreed that a working team should be established in council to establish the plans and that the team should be assisted by an appropriate specialist consultant. State Government and other stakeholders need to be partners in the project. 10. The group recognised that the project greatly affected council's position regarding its accommodation and its property assets. It was agreed that a strategy should be developed for the longer term accommodation requirements for council and for the effective and efficient management of its property holdings. This work should commence immediately and be done concurrent with the Civic Place project. 11. I believe it is necessary that the work on Civic Place and council's accommodation and asset/funding strategy now get underway and be completed by the time of the finalisation of the REP. 12. Further reports on both matters will be provided to council in the new year. 43 On 20 August 1999 Sydney Regional Environmental Plan 28 (SREP 28) was made by publication in the Gazette. SREP 28 included provisions requiring the preparation of a master plan for "master plan sites" defined in Part 1 of Schedule 2 of SREP 28. The Civic Place site was a master plan site identified in Part 1 of Schedule 2, and describes the Civic Place site as comprising "all land bounded by Macquarie Street, Smith Street, Darcy Street and the Church Street Mall, Parramatta." 44 Clause 10(4) of SREP 28 required that master plans be prepared for master plan sites identified in Part 1 of Schedule 2 of SREP 28 by "the owner or lessee of the land concerned, the council concerned or the Director".. Parramatta City Council is the council responsible for the Civic Place site. 45 Clause 10(8)(a) of SREP 28 required that a draft master plan be advertised and publicly exhibited for not less than 21 days for public comment. 46 On 26 November 2001 council resolved: (a) The Government Architect, Mr Chris Johnson, be appointed to undertake the Masterplan for Civic Place to achieve a whole-of-government approach through the coordination of the various Government agencies and in view of the appointment of the Government Architect to undertake other critical Masterplans within the area of the Civic Place Masterplan. (b) The appointment of the Government Architect be subject to council first consulting with the Independent Commission Against Corruption in respect of the appointment. 47 The Report to council from the General Manager dated 22 November 2001, received at the council meeting of 26 November 2001, stated various reasons for the appointment of the Government Architect. That Report stated: 1. council is aware that in mid 1999 work on a design concept for the area known as Civic Place (bounded by Darcy, Church, Macquarie and Smith Streets - see attachment 1) was commenced and the firm Jackson, Teece, Chesterman, Willis was engaged to undertake the Masterplan. … 5. In May 2001, the NSW Government announced that the Parramatta to Chatswood Rail Link would be constructed in two sections, with the first section from Chatswood to Epping receiving funding approval. The Government also announced the upgrading of the Parramatta Railway Station to allow incorporation of the Transitway and indicated that the Interchange would proceed. At a meeting with the council in August, the Minister for Transport, the Hon Carl Scully, indicated that planning approval for the complete Parramatta to Chatswood Rail Link would be sought and that, as Minister, he was committed to completion of the Epping to Parramatta Rail Link section. 6. The Minister also announced the formation of a Transport Planning Coordination Group to be chaired by the Government Architect, Mr Chris Johnson, and the group to comprise the General Managers of Parramatta Rail Link, the Transitways, Parramatta City council and senior officers from the Department of Transport and Department of Public Works and Services. The Transport Planning Coordination Group is to receive advice as appropriate from other Government departments and agencies such as the Department of Urban Affairs and Planning (DUAP) and the Heritage Office (HO). … 10. Due to the range and number of government projects that are centred in and around the Civic Place area, and the particular timelines in respect of each, there is now an urgency for council to proceed in preparation of a Masterplan for Civic Place. 11. Since the NSW Government made more clear its intentions in relation to these projects, and following the council's Strategic Planning Session in late August in relation to development of the City Centre, action has been taken to secure the appointment of a project manager to be employed on staff. The role of this position will be to facilitate and coordinate the various processes, stakeholders and other project management duties to oversee the development of a masterplan for Civic Place and, following adoption, to project manage the implementation of various works within Civic Place. An appointment in relation to this position is expected to be finalised in the near future. 12. A Civic Place Masterplan Group has been formed comprising the various Government representatives, including DUAP and the Heritage Office with a stakeholder group to include land owners, Property council and Chamber of Commerce. This committee is to consider the development of the Masterplan for report to council's Civic Place Committee, which comprises all councillors, with the exception of the three councillors who have been appointed to the Central Parramatta Planning Committee. 13. It is necessary that council makes an appointment of a firm or agency to undertake the detailed planning work in the development of a Masterplan for Civic Place. 14. In this regard, an offer has been received from DPWS that the Government Architect, Mr Chris Johnson, be appointed by council to undertake the masterplanning process. 15. council's options for undertaking of the Masterplan appear to be as follows: (a) Re-engage Mr David Chesterman of JTCW. (b) Invite a range of suitably qualified firms to lodge expressions of interest for appointment. (c) Appoint the NSW Government Architect, Mr Chris Johnson. … The Report also addressed the master planning process and advice to council at paragraph 24. The Report identified that it would be necessary to establish economically viable development parcels and be affordable and beneficial to council. 48 On 27 May 2002, council resolved to form a subcommittee for Civic Place. In the report of the General Manager received by council on 27 May 2002, the General Manager recommends the establishment of a Civic Place subcommittee and states at par 3: From discussions that have been taking place with the Department of Public Works and Services (DPWS) regarding the Government Office Relocation Program and in particular the proposed relocation of the Head Office of Sydney Water, it is emerging that council may be in a position to replace its existing facilities through a redevelopment process of Civic Place. The redevelopment of Civic Place is potentially a very large and complex process, which clearly council would want to achieve a high class redevelopment with quality buildings and good urban outcomes. If the full value of the site including all of the lands in council, government and private ownership, it is to be realised council will need to consider a range of options including the possibility of a joint venture and agreements with a major development/construction company. 49 In a report to council on 12 June 2002, the Civic Place Project Manager states: 1. SREP 28 - Parramatta, establishes (Schedule 2) the Civic Place Master Plan Site, requires that the council, as the appropriate authority, adopt a master plan for the area and provides that consent to development, other than that of a minor nature, is not granted unless consideration has been given to the master plan (Part 1 Section 10). … 4. The Master Plan and any necessary, concurrent amendments will need to be in place before development can be approved in the area. 5. Parramatta council is concerned to ensure that a comprehensive redevelopment of the area is undertaken to provide a suitable context for the State Government's Parramatta Government Property Strategy, and as the Gateway to Parramatta envisaged in the REP. 50 Under the provisions of Part 2 of Chapter 13 of the LG Act, councils are required to adopt management plans. The council Management Plan for the period 2002/03 - 2005/06 made on 26 June 2002, identified the development of Civic Place as the largest individual development in Parramatta with an investment of more than $500 million expected to create some 7,000 jobs and involving the redevelopment of Civic Place as the gateway to Parramatta CBD. The management plan identified the redevelopment of Civic Place as one of the "big seven" major capital items for the period of the management plan . 51 On 16 September 2002, council resolved, amongst other matters: (a) That the Draft Master Plan be approved for exhibition for a period of 28 days commencing in mid October. 52 The Executive Summary to the report of the Senior Project Officer - Civic Place Project Manager received by council on 16 September 2002, states: 1. The Draft Master Plan prepared by the Government Architect on behalf of Parramatta City council is approaching the time to seek public input through a public exhibition in October 2002. 2. The exhibition of the Draft Master Plan will be conducted concurrently with the exhibition of the Transport Management and Accessibility Plan (TMAP) and the consultation on proposed supporting amendments to the Parramatta Regional Environment Plan (REP). 3. The exhibition of the Draft Master Plan is the first phase in a staged process of delivering the development of Civic Place. The issues raised by the community and stakeholders during the consultation will assist council to further develop a Final Master Plan. 53 On 10 December 2002, council resolved to present the Master Plan to the Central Parramatta Planning Committee (CPPC) recommending its adoption. 54 On 11 December 2002, the CPPC resolved to approve the Master Plan in principle subject to gazettal of certain amendments to SREP 28 with an amendment to the Master Plan, P67 Design Principles, Activating Streets and Public Spaces by the removal of the words "using appropriate legal mechanisms including caveats to residential titles." A report of the Project Manager - Civic Place states: 10. Planning NSW have placed on exhibition, SREP28 Amendment 6…that supports the Master Plan and brings it into conformity with the REP. That amendment anticipates that council will support the Master Plan, amended after exhibition, and the Central Parramatta Planning Committee will give conditional approval to the Master Plan in advance of the REP Amendment being considered and approved by the Minister. 11. The Committee also asked that more detailed information be provided on the design management and procurement methodology for the project generally and for the public spaces in particular. It is proposed that a multi-stage selection process be undertaken for a development partner. Design and construction quality will be achieved by creating a competitive process where two final proponents attempt to secure the project (partly) on the basis of architectural quality. It is envisaged that the design assessment team is independent of the financial assessment team (following the Docklands Model) and will include some members of the CPPC. The Committee will of course, have final design control through the final determination of Development Application for the final work. 55 On 14 March 2003, amendment number 6 was made to SREP 28 by publication in the Gazette. That amendment inserted into SREP 28, relevantly, clause 28(2)(i) which provided a number of matters to which a consent authority must have regard in considering a development application for Civic Place.

[3]

56 On 30 April 2003 council resolved to acquire certain land within Civic Place known as Connection Arcade. The council Report dated 30 April 2003 looked at the proposal to acquire Connection Arcade as representing a positive investment and it would increase council's frontage to Church Street Mall and surrounding streets. The report considered the funding principles proposed to be used for the acquisition of the remainder of the Darcy Street properties. At par 15 and onwards in the Report, council made the following statements: 15. Firstly, the intended and most desirable outcome will be the transfer of the properties to Civic Place development partner as part of the Project. This would involve the buying out of any remaining tenancies or reaching agreement with the tenants for their inclusion in the final development. These arrangements would be put into place through the council's Development Partner. 16. If, for some reason this does not eventuate the properties can be refinanced (possible writing down the debt through the disposal of other properties) and held as a long term investment. 17. Lastly the properties could be sold (perhaps amalgamated with other council properties) to an investor or developer. 57 On 14 May 2003 the CPPC resolved to adopt the Master Plan to come into effect on 1 June 2003 subject to certain minor amendments. The CPPC further resolved that: (b) …the Committee seek a joint meeting between Parramatta City council, the Central Parramatta Planning Committee and Parramatta Rail Link to collaborate on design co-ordination issues. 58 In a council report of 26 May 2003, council referred to the approval it sought on 30 April 2003 for Special Loan Funds for the acquisition of properties in Darcy Street. Council noted that negotiation with the owners of the Hungry Jacks Building (Mac's Pty Ltd) and of 20-26 Darcy Street (R & R Fazzolari) had indicated that they were unwilling to sell. This was also described in the council report of 10 June 2003. 59 In June 2003 the Master Plan was released in final form to the public.

[20]

Under the provisions of the REP, the Master Plan is required to address the following issues: · Phasing of development · Urban design considerations, including principles drawn from site analysis of the site and its context, density, height controls, building envelopes, identified views, privacy and security · Distribution of major land uses, including public access and open space · Environmental considerations, including noise attenuation, flood mitigation, water and soil management, remediation of contaminated land, solar access, energy efficiency, and management of significant flora and fauna habitat · Access considerations, including public transport, pedestrian, cycle and road access and circulation networks, including local traffic and parking · Patterns of subdivision or site amalgamation · Infrastructure provision and funding · Site landscaping · Heritage considerations, including conservation and protection of heritage items, heritage conservation areas, identified historic views and archaeological relics (including the preparation of conservation plans) · Provision of public facilities · Any other matter required by the appropriate authority 66 On page 53 the Master Plan states: Parramatta City council's vision is that Civic Place will be a landmark development with vibrant public places, distinctive buildings and active street life. council's vision and the strategic outcomes that provide the framework for this Master Plan are outlined in the 2002-2006 Management Plan. The vision will contribute to the achievement of several of council's strategic outcome areas which integrate economic, social and environmental issues to meet the needs of the community and secure its long term well being. The outcome areas relevant to the Civic Place site are: · SUSTAINABLE CITY Parramatta City will have an improving way of life now and for future generations · DISTINCTIVE CITY Parramatta is the leading City at the heart of Sydney - a distinctive, vibrant, cosmopolitan and sustainable city · ATTRACTIVE CITY Parramatta will be a place where people choose to live, work, visit and invest · ACCESSIBLE CITY People will move easily to and around Parramatta City using a more sustainable form of transport · ENTERPRISING CITY Parramatta will seize opportunities for smart growth and promote sustainable economic development · NATURAL CITY Parramatta will protect and enhance its environment. Think globally and act locally. 67 On page 54 the Master Plan states: Based on this framework, the Master Plan area must create a place which: · Considers, interprets and celebrates its indigenous and non-indigenous heritage, and integrates such features into the design of new or redeveloped buildings and public spaces · Provides for land uses and activities which recognise Parramatta's role as a primary centre serving the western Sydney and Sydney's wider regions · Provides sufficient opportunity for the location of civic land uses and functions, befitting Parramatta's role as the metropolitan area's second CBD · Provides for employment opportunities commensurate existing and proposed regional public transport services and which contribute to the jobs targets identified in strategic planning documents · Incorporates Ecologically Sustainable Development principles · Comprises high quality urban design, building forms and public spaces which enhance Parramatta's image and identify · Has an urban structure and public domain that allows the safe and convenient movement of pedestrians between the transport interchange and other activities in the Parramatta City Centre · Provides opportunities for residential uses and the development of a 24 hour centre 68 On page 55 the Master Plan states: Based also on the planning framework established in the Parramatta REP, this Master Plan has the following objectives: · Promote the significance of Civic Place in the context of Parramatta and Western Sydney and as the focus of the revitalisation of the Parramatta City Centre · Provide guidance for the future redevelopment and management of the Civic Place site including the scale, form and types of development within a publicly accountable process · Enable development to proceed efficiently by clarifying issues and identifying requirements for coordination and future consideration · Set the implementation strategy and future management structure for the site · Assist the consent authority in considering development applications by setting the planning framework 69 On page 63 the Master Plan states: The Master Plan proposes to re-instate and celebrate the historic links between the St Johns Church and the Lancer Barracks. This east-west link sets the framework for the introduction of a new sequence of public spaces and the way in which the future development is organised on the site. See figure 6.1 Historic Axes.

[33]

79 At paragraph 14 at page 3 of council's report, council foreshadowed that the next significant addition to the value will be through the financial structuring of the project and the nature and timing of the council's land ownership and transfer. 80 On 24 November 2003 council resolved as follows: (a) That council seek approval of the Minister for Local Government and the Governor of NSW to compulsory acquire all of the following properties: (i) 160 Church Street; (ii) 12 Darcy Street (iii) 14 Darcy Street (iv) 18 Darcy Street (v) 20-26 Darcy Street (vi) 28 Darcy Street. (b) Further that, the General Manager be authorised to make application to the Minister for Local Government to compulsory acquire the properties. 81 The report of the Manager, Property Services, received by council on 24 November 2003, states: … 2. As council would be aware, the Connection Arcade (including the Hotel Parramatta) was acquired by council on 11 July 2003 in accordance with Resolution (c) of council meeting on 28th April 2003. 3. The remaining properties to be acquired in accordance with Resolution (d) of council meeting of 28th April 2003 are listed as follows: (i) 160 Church Street (ii) 12 Darcy Street (iii) 14 Darcy Street (iv) 18 Darcy Street (v) 20-26 Darcy Street (vi) 28 Darcy Street 4. A site plan indicating the respective properties is attached as Attachment 1. 5. Council's Valuer F C Carrapetta & Associates together with council's consultant Valuer and Land and Economist Mike Collins & Associates were requested to undertake current market valuation of each property as well as values for the purpose of compulsory acquisition. 6. In addition, values of leasehold interests (lessee's interest) were also assessed by Mr F J Kelly who also acted on behalf of the PRL in acquisition of properties in Argyle Street for the purpose of 'buying out' any tenancies within a 5 year period. Several leases will naturally expire within this period, thus no buy out costs will apply. 7. Mike Collins and Associates were requested in June 2003 to formally submit offers on behalf of council to all owners to purchase their respective properties, subject to council's formal approval. 8. To date little response has been received. Various owners are not interested in selling their properties, some owners are refusing to acknowledge council's offer and some owners have requested to make no further contact with them. 9. A copy summarising the status of council's previous offers by Mike Collins and Associated is attached as Attachment 2. Current Status 10. council proposes to redevelop Civic Place in accordance with the provisions of the Civic Place Master Plan and SREP 28. 11. The development will be for the following purposes: · to assist the Parramatta City Centre to reach its target of employment growth of 60,000 jobs by 2021, through the creation of 4,770 jobs at Civic Place; · to increase the utilisation of public transport; · to provide open space, · to provide revamped council facilities including an administration building, library, senior citizen's centre and toilets; · to provide additional facilities to the public including a new child care centre; and · to provide commercial, retail and residential development and facilities. 12. In order to achieve the employment targets, the Civic Place Master Plan envisages the development of up to 168,000m2 of gross floor area, comprised as follows: Commercial Office 65,000m2 Residential 60,000m2 Entertainment and Leisure 3,000m2 Commercial facilities 5,000m2 Retail 35,000m2 Total Area 168,000m2 13. council is now in the process of preparing appropriate documentation in order to deliver the Civic Place property to the open market for Expressions of Interest for a development partner in March 2004. 14. council was previously advised through reports submitted to council at its meeting of 28 April 2003 and a subsequent workshop held with councillors on 2 September 2003 that use of the compulsory acquisition powers of council may be required if acquisition through mutual negotiations with property owners cannot be achieved. 15. It is vital to the overall Civic Place development that all properties in Darcy Street be acquired to ensure control of all properties which provide vital frontage to Darcy Street and form part of the development site for both commercial, retail and residential development. Proposal to Compulsory Acquire 16. If it is not supported by other property acquisitions council's property at 30 Darcy Street will not provide the appropriate land area and configuration of an acceptable footprint for a commercial office building. This is the only council property to carry the maximum development potential under the REP and the Master Plan and failure to redevelop it would also preclude the extension of the main rail concourse into Civic Place. 17. council will be unable to accommodate the 30,000m2 pre-commit for the Department of Commerce. Without the additional properties neither 30 Darcy Street, 16 Darcy Street nor the Connection Arcade/Hotel can take the required footprint of 12,000 - 15,000m2 for a commercially viable office. This would not only remove that area of development but the potential to construct an equal area of residential development (under the REP controls linking the two). 18. Further, it will deny the possibility of closing Darcy Street with the increase in site area and GFA and the Urban Design improvements that would flow from the inclusion of Darcy Street in the development. 19. It will erode the potential to link and integrate the retail component of the development from the rail concourse through to Church over three levels. This would very significantly reduce the financial and non-financial benefits of the development. 20. Taken together these implications put in question the financial viability of the Civic Place project. 21. council has been frustrated in all of its attempts over the last six months in particular to enter into full and meaningful discussions and negotiations with all the owners of the relevant properties in Darcy Street in order to acquire the relevant properties by mutual negotiations. … 27. In order to proceed to acquire ownership of the relevant properties necessary to deliver the masterplan it is now considered paramount that council formally consider acquisition of the properties through the compulsory acquisition process as detailed in this report. … 31. council's efforts to date in this regard are considered more than reasonable and any further delay in attempting to acquire the relevant properties will have a major impact of the delivery of the Civic Place project and as a consequence achievement of the objectives of SREP 28 and the Masterplan. … 82 On 4 December 2003, council wrote to the Director-General of the Department of Commerce. That letter states, in part: As you are aware, this project is the result of considerable joint effort by the NSW Government and Parramatta City council. The project, with its genesis in the Sydney Regional Environmental Plan 28 Parramatta, was the first REP to cover a complete city centre. Since its gazettal in 2001, the REP partners have monitored the achievement of its objectives.

[75]

(a) the relocation of substantial Government offices into Civic Place will generate employment within the Parramatta CBD area. The additional 4,770 jobs referred to in council's submission would be based on estimates of the proposed tenancy requirements (b) the creation of the pedestrian link to PRL, and the development of appropriate civic areas within Civic Place will facilitate transport usage; (c) the creation of 6,000m2 of open space in a central plaza as required by the approved master plan for the site, as public benefit, will improve the urban amenity of the Civic Place locality; (d) the council Facilities and the Community Facilities noted above will be delivered, a least in part, through the amalgamated lands contributed by council; and (e) the development of commercial, retail and residential facilities is noted in the Master Plan for the Site. 95 On 11 May 2004, the Director General of the Department of Local Government wrote to the council referring to the council's letter dated 22 April 2004 and highlighted council's statement made in that letter that "It is likely that the selected proponent will require that title to certain parts or the whole of the council's land holding in the site be transferred or leased for the purposes of the Project". The Director General referred to section 188 of the LG Act and asked the council to advise "whether the land council seeks to compulsorily acquire will be the subject of sale, transfer or lease." 96 On 17 May 2004, council resolved to approve the appointment of the Civic Place Management Committee under s 355 of the LG Act. The report to "City Leadership & Management" from the Civic Place Project - Development Director, dated 7 May 2004 and received at council's meeting of 17 May 2004, stated various reasons in support of the appointment of the Civic Place Management Committee and set out the roles and functions of the Committee at par 12. 97 Council received a number of responses to the EOI and short listed a number of proponents. 98 On 7 June 2004, in response to the Department of Local Government's letter of 11 May 2004, council wrote to the Director General of the Department of Local Government in respect of the compulsory acquisition of the Darcy Street properties, identifying among other things that negotiations with land owners had continued but that little progress had been made. The letter states: Council has continued negotiations with the owners of properties in Darcy Street the subject of the application for compulsory acquisition, however little progress has been made in this regard. The various owners are generally only prepared to consider prices substantially in excess of council's independent valuations.

[91]

The approved masterplan for Civic Place and the financial feasibility, both assume certain additional land is secured by Parramatta City council (PCC) in addition to its current holdings. 16. Macquarie House land was purchased by council on the 1st July, 2004 and will be incorporated into the site. 17. Australia Post have responded positively to PCC interest in securing an option over their property, however written agreement is yet to be obtained. 18. Negotiations are also continuing to purchase those Darcy Street Properties not yet owned by council. We have concurrently made application to the Minister for Local Government to compulsorily acquire these properties, should commercial negotiations be unsuccessful. … 23. The Darcy Street road is intended to be compulsorily acquired from PCC itself in order to close the road and incorporate the site as operational land, and a council resolution has been passed to this end. … 103 At paragraphs 32 and 33 of the Report, council reported on the following: 32. Council will hold the freehold title to the Civic Place land until completion and will lease Connection Arcade and Macquarie House to the Developer so that the Developer can manage and collect income from the relevant tenancies. At completion, the developer will create separate title to council of the council facilities, Community facilities and the public open space. The Developer or its nominee will take title over the remainder of the works. 33. The developer will have responsibility for creating the necessary legal instruments to effect the required ownership structure. 104 In a minute of the Lord Mayor to council dated 29 July 2004 and received at a council meeting on 2 August 2004, the Lord Mayor recommended that council delay issuing the RFP pending the Minister for Local Government giving the necessary approvals to the compulsory acquisition of the Darcy Street properties. 105 A meeting minute of 20 September 2004 contains a recommendation that council issue the RFP. 106 The report to the Confidential Committee of council from the Development Director Civic Place Project, received at a meeting of the Confidential Committee of council on 20 September 2004, recommended that council note the report from the Development Director, Civic Place Project, and authorise the issue of documents to the 4 short listed tenderers. The report provides the following background information: 1. Council resolved at its meeting on 2 August 2004 that it will delay issuing the Request for Proposal documents to the four (4) shortlisted tenderers until the Minister for Local Government gives the necessary approvals to the compulsory acquisition of the Darcy Street properties. 2. The Minister indicated that consideration of council's application for compulsory acquisition for the Darcy Street properties would be delayed due to the legislation that would be introduced in the next session of Parliament. The legislation covers Local Government's involvement in Public / Private Partnerships requiring councils involved in major development to seek approval from State Government. This proposed legislation follows the report by Emeritus Professor Maurice Daly into the Liverpool council Public Inquiry and the recommendations for Public / Private Partnerships in Local Government. 3. Once the legislation is finalised, the Director General of the Department of Local Government will establish a Local Government Project Review Committee. The legislation will be retrospective to 28 June 2004, and as such, Parramatta City council will need to seek approval from this Committee before the acquisition of Darcy Street properties and the appointment of a Development Partner can proceed. Given that this is such a significant project and well advanced, the Minister gave an assurance that our project would be the first reviewed by this group. In addition, the Director General of the Department of Local Government gave an undertaking to provide a preliminary assessment of the proposal once council makes its submission, along the lines set out in the Daly report. 4. The submission was completed and lodged with the Director General of the Department of Local Government on 2 September 2004. It addresses each of the significant matters raised in the Daly report. Council endorsed the lodgement of the submission at its 16 August 2004 meeting. It is anticipated that the Committee will, upon initial review of the submission, ask council representatives to present its report and address any queries that they have. 5. Review and acceptance of the Civic Place submission by the Project Review Committee is likely to be sufficient grounds for the Minister for Local Government to then consider the recommendations of the Department of Local Government in relation to compulsory acquisition of the Darcy Street properties. This is foreshadowed to occur in approximately eight (8) weeks. 6. Included within the submission to the Project Review Committee was the outline of the Financial Model for Civic Place, together with various scenarios which cover the precommitment risks and residual risks to council. The Financial Model is to be treated as Confidential, and was presented to the council Meeting. 7. The Civic Place Management Team has considered in detail the various financial model outcomes, and considers that the return profiles to council would likely be sustainable and should, in any event, be tested by market tendering in the RFP phase of the project. 8. Council representatives have briefed each of the four (4) selected parties from the Expression of Interest process on the reasons for the delay in calling for Request for Proposal (RFP) submissions. Given the lack of tenancy commitment by the NSW Department of Commerce, it is possible that one of the parties (being Lend Lease Development) will withdraw at the commencement of the RFP process. That party has verbally indicated it would prefer to focus on the upcoming Parramatta Legal Precinct tender. 9. The Management Committee has considered various options for progressing the RFP process. Its view is that the outcomes of the market bids for the Development Partner role will be the litmus test for the financial model and the Project Review Committee endorsement. 10. The Management Committee considers that continuing delay in achieving the RFP process, brought about by the review to be held under the Project Review Committee of the Department of Local Government, could further destabilise interest in the project by the shortlisted RFP bidders. Furthermore: (a) there is a positive view that the Project Review Committee will endorse the project under the proposed legislation, and subsequently the compulsory acquisition of the Darcy Street Properties would proceed (for which funds have already been approved); (b) negotiations are continuing positively on the Australia Post site, for securing an option for the Development Partner to purchase that site; (c) going to the marketplace for RFP bids will maintain the momentum of the project, does not constitute a financial commitment by council or a commitment to proceed, and will enable financial offers to be confidentially ratified via the Project Review Committee of the Department of Local Government. 11. As such, the Management Committee considers it would be appropriate to issue the RFP documentation, and to issue a later addendum when the remaining property issues are resolved. This is reflected in the attached outline by council's solicitors of the proposed amended RFP process (See Attachment 1). 107 A document titled "Civic Place Request for Proposals and Request for Tenders" (RFP Document) was issued to the four development proponents in September 2004. The RFP Document sets out the process to be followed by proponents, including the following: 4.1 Invitation to lodge Proposal (a) To assist council in selecting Proponents to participate in the Proposal Negotiation Process, the Proponent is invited to lodge a Proposal in accordance with this RFP. (b) The Proponent must comply with the provisions of this Part 1 at all times during the RFP process and, in lodging a Proposal, makes the acknowledgment set out in the Proposal Form. … 6.2 Evaluation of Proposals

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11.1 Option 1 - Exit Strategy 11.1.1 The Exit Strategy option provides council with two different ways of not proceeding with the Civic Place site. As previously reported, should council exit from the Civic Place project it will be exposed to substantial costs and risks. These costs will vary according to the option taken. The net present values of cash flows, without considering financial implications of annual deficits under each of these options are as follows: 11.1.1.1 Hold Purchased Properties - Repay Current Debt over 20 Years - negative ($[redacted figure]) 11.1.1.2 Sell Purchased Properties - negative ($[redacted figure]) 11.2 Option 2 - Proceed with Civic Place 11.2.1 As council is aware the development market place has been thoroughly canvassed and the best offering (against predetermined selection criteria) has been made by Grocon. 11.2.2 Financial negotiations with Grocon have continued over the six week period which has resulted in a final financial offering on 24 November 2005. 11.2.3 Each version of Grocon's financial offering has been analysed against council's base financial model as previously presented to council. A summary of the changes against this base case will be provided to councillors at the workshop. In essence, following the negotiations, council's net cash flow over the duration of the project has improved by $78.1m, and net assets (assets less debt) by $112.3m). 12. In summary, this gap has been closed through a series of changes primarily by Grocon. These include: 12.1 Provision for [redacted figure] revenue share. 12.2 A reduction and capping of relocation costs and participation payments 12.3 The removal of the purchase of [redacted site] and [redacted site] sites from council's liability. Negotiations on these sites will now be undertaken directly by Grocon creating an additional injection of participation payments of $[redacted figure]. 12.4 Changes in the staging to reduce risks. 12.5 Changes in risk sharing such as archaeological and environmental risks. 12.6 A Sydney Water contribution of $4.25m to the public domain in accordance with conditions contained in the REP. 12.7 An arrangement to provide council with 93 car parking spaces (previously offered at 25). 13. The financial evaluation has been considered from the point of view of: 13.1 Value Change in net assets 13.2 Debt Service Ratio impacts on council's budget 13.3 Net cash flow implications 13.4 Balance Sheet implications 127 In the same report, the General Manager addresses the value change of council's assets at pars 14, 15 and 19, which state: 14. The council's Civic Place assets (including public domain but excluding those assets purchased through loan funds) are valued in best possible use terms at $77m. Once Civic Place is completed the council's assets are valued at $95m. This gives an $18m or 23% increase in asset value. 15. Council should note that to own these assets it will incur a net debt on Civic Place of $10.1m. This will reduce the net increase of council's assets to $84.9m or a 10.3% increase. However, the council will have less exposure to the need of replacement and maintenance costs of its existing degraded assets (currently costing $1.5m pa to maintain). … 19. The following figures are indicative of the major items of council's financial offering from Grocon: Receipts 19.1 Upfront participation payments $[redacted figure] 19.2 Revenue share $[redacted figure] 19.3 council facilities and public domain $[redacted figure] 19.4 Housing cash contribution $[redacted figure] Total $[redacted figure] … 128 In the same report, the General Manager addresses council's long term debt position at pars 21, 22 and 23, which state: 21. On completion of council's facilities in 2012, council was originally required to make a payment of $[redacted figure]m to Grocon. This would have had a significant impact on council's debt position. As part of the negotiations, Grocon has offered to provide an interest only financing arrangement to council whereby Grocon will finance this amount until the council's revenue share payments fully offset the $[redacted figure]m. This will be done by way of a form of lease, with Grocon continuing to own the council facilities and council paying the related interest-only finance costs until the $[redacted figure]m payment is finalised by way of revenue share payments. 22. It should be noted that the council's revenue share is not guaranteed, either by the total amount or the timing of receipt of payments. The modelling carried out by council shows that the council can have a reasonable expectation that the total revenue share will be some $[redacted figure]m, and that this will be delivered in 2012 and 2013. This has formed the basis of council's financial modelling as attached to this report. 23. The actual amount and timing of the revenue share payments to council will be dependent upon the market response to Grocon's development proposals. In order to be financially viable (and as the council's facilities sit above the retail and car parking levels of the project), Grocon is very likely to deliver a substantial portion of its development proposals at the same time as the delivery of council's facilities. If this occurs, it will minimise the financial exposure of the council and accord with council's preferred financial model. This will leave the council with an annual lease payment of some $[redacted figure]m until the balance of the $[redacted figure]m is paid. 129 In the same report, the General Manager refers to the Development Agreement conditions under the heading "Legal and Risk" at pars 37, 38 and 39, which state: 37. As can be seen in Blake Dawson Waldron's (BDW's) Outline of Key Development Agreement Provisions the legal and risk issues are quite complex. 38. Council should note that the Development Agreement will be subject to the following conditions prior to financial closure taking place. 38.1 The compulsory acquisition of the Darcy Street properties must be undertaken by council prior to 31 December 2006. 38.2 Grocon must acquire the [redacted site] site prior to 31 December 2006. 38.3 Grocon's DA consent will be granted on terms which are reasonable to the developer and council by 31 December 2006. 38.4 Grocon have confidence by 31 December 2006 (with a further extension to 30 June 2007) to secure adequate levels of pre-commitments to the project that render the development feasible and capable of being financed which fit within the parameters of the submitted Grocon financial model. 39. Once these conditions have either been waived or satisfied, Grocon's obligation to construct the council Related Facilities in accordance with the requirements of the Development Agreement will be unconditional and no extensions of time will be permitted because of market conditions (including an absence of any Pre-Commitments for the Project). 130 In the same report, the General Manager addresses the timing of contractual arrangements at par 46, which states: It must be remembered that council is unable to enter into any contractual arrangements with Grocon until such time as the Department of Local Government Private Public Partnership Review Panel has considered the proposal and the Minister for Local Government has granted consent to proceed. Should council proceed, it is hoped that details can be submitted to the Department over the next weeks and that Ministerial consent will be granted by the end of February 2006. 131 Attachment C to the council report dated 30 November 2005 is a report prepared by Booz Allen Hamilton. The report is a third party review of the Civic Place Project and concludes, at par 5.2: In the event that council does not proceed with the Civic Place Development, it will incur costs (associated with the base case) of approximately $[redacted figure] and DSR of around approximately 8%.

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The key features of the proposed transaction are as follows : (a) upon satisfaction of the conditions precedent referred to in Section 7.0 above, the Development Agreement will become unconditional and will bind both council and Grocon; (b) at that point, Grocon will pay an initial payment to council, and council will constitute a trust over all of the project land with the exception of the land required to construct the future council facilities. This arrangement effectively transfers the land to Grocon at the start of the project; (c) Grocon will assume an obligation to design and construct the new council facilities by 30 June 2012, subject to certain agreed extensions of time; (d) ... (e) ... (f) ... (g) it is proposed that Council provide a long term lease/licence over the Public Domain Areas of the project. The arrangement will include the requirement for Grocon to maintain the Public Domain Areas and will also include the rights of Grocon over those areas. The areas will remain available for use by the public throughout the term. The term would be for an initial period of up to 30 years, with options for an overall period of 99 years... 133 Attachment A to attachment E above is a document called "Outline of Key Development Agreement Provisions" prepared by Blake Dawson Waldron. On page 3 of the document, an outline of the Trust Structure is provided. Under cl 3.2, the effect of the Trust structure is described as follows: (a) council will, upon receipt of the initial payment referred to above, transfer the equitable title in the Development Component to the Developer (that is an effective transfer of title to the Developer); (b) council will however, remain registered as the owner of the Development Component on the land titles register maintained by the NSW land and Property Information; (c) when the Development Component is completed and subdivided into each of the individual parcels containing the different staged office, retail, residential and car park elements of the Development Component, council will execute a transfer of the legal title in those parcels progressively to the Developer or its nominee; (d) the Developer will indemnify council for all costs arising from the Land Trust, including any stamp duty, land tax, council or other rates, insurance costs or other costs; (e) in order for the Developer to obtain bank finance for the Project, the Developer will need to mortgage the Development Component. This will require council to execute a mortgage in favour of the financier. The mortgage will be non-recourse to council and will include the Developer as a party. 134 On 2 January 2006, Parramatta City council wrote to the Department of Local Government, to provide an update on the Civic Place Project status, among other things. The letter states: Council has now completed an exhaustive Request for Proposals (RFP), Request for Tenders (RFT) and negotiation process leading to a council decision to resolve to enter into a Project Development Agreement (Development Agreement) (and associated documents) with Grocon Pty Limited (Grocon) for the development of the Civic Place site.

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Original Master Plan Objectives Current Proposal Position Parramatta as the centre for investment, recreation, education and employment in Western Sydney Meets Master Plan objectives by providing the appropriate mix of residential, commercial, retail and community uses in order to activate the space. Create a Gateway identity development in accordance with the Civic Place Master Plan Meets Master Plan objectives by creating appropriate links through the site to create connectivity to major public transport links including the transport interchange and Parramatta river, and provides a Gateway built form. Create high quality civic spaces and innovative living and work environments through exceptional design solutions, providing convenient public transport/pedestrian access Exceeds the objectives with a total of 15,595m2 of public space provided (a minimum of 6,500 was required). Much consideration has been given to the urban design of public spaces to ensure spaces that are comfortable and inviting on a human scale. There are strong linkages for pedestrian and vehicular transport access. All buildings, with the exception of the Atria will be subject to a design competition process. Comply with (or exceed) the aims of the regional and local planning provisions for the City Centre. Meets the objectives of local and regional planning instruments in principle Create an economically feasible mix of land uses which responds to the site's location and consumer and investor expectations Meets objectives of the Master Plan. The use mix has been established to position Civic Place as a commercial CBD while ensuring activation of spaces through appropriate positioning of retail and residential spaces. Provide a catalyst for better urban design in the Parramatta area Meets objectives with a well resolved urban design solution, high quality finishes, and sustainable design elements. The central position of this site should have a catalyst effect on the development of adjacent properties in the future. Maintain an ongoing role in the Project Meets Master Plan Objective. Council will retain an ongoing role not only in the design process of their own facilities but also in the overall design of Civic Place having two representatives on the design competition review panel. An element of involvement has also been established through the financial 'blue sky' elements such as revenue share, profit share and tenant sourcing incentives. Council retains ownership of its new facilities. Maximise council's return at the lowest possible risk Meets objectives. Refer to Appendix 4. Deliver new council and community facilities, strengthening the civic focus of the site Meets objectives with delivery of a total of 12,200 sqm of council and Community space in addition to 15,595 sqm of open public space. The positioning of the council building serves to clearly demonstrate the civic focus of the site. Conserve and celebrate Parramatta's environmental, social and cultural heritage Meets objectives. The urban design is sensitive to the existing heritage elements on the site not only in the conservation of these sites but also in the design of surrounding elements. Social and cultural heritage will be conserved and celebrated within a $5m arts and cultural package delivered as part of the Project. Creation of approximately 6,000 jobs Exceeds objective. An Employment Generation Analysis report prepared by SGS Economics & Planning estimated that jobs associated with the Civic Place redevelopment peak at 8,800 in 2023. Refer to Appendix 12. The objectives of the Master Plan have been met using sustainable design elements appropriate to the site, including:

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(a) The Project delivers economic returns to the public through the creation of short and long-term jobs; (b) The Project results in promoting Parramatta as a viable urban investment alternative to the City of Sydney; (c) There is a significant and positive urban planning outcome for the people of Parramatta; (d) The Project enhances community facilities; (e) The Project enhances public spaces; and (f) The Project renews and enhances council's assets and reduces costs of maintenance of these assets. An early public survey on Civic Place indicated a very high level of support for the Civic Place Proposal. 150 At pages 42 to 44 of the Submission, council describes the "Profit Share and Tenant Introduction Fee's". 151 Following the submission to the Local Government Project Review Committee, there was correspondence between the council and the Department of Local Government (9 March 2006 and 22 March 2006) confirming details of the Darcy Street properties for which compulsory acquisition applications had been made and details of representations from affected landowners along Darcy Street. 152 On 9 March 2006, the Department of Local Government wrote to the council in reply to the council's letter dated 2 January 2006 in relation to council's 2003 and 2004 applications to acquire lands by compulsory process. In this letter, the Department requested council to confirm the properties intended to be acquired, provide details of negotiations with the Transport Infrastructure Development Corporation, the lessee of part of Darcy Street and provide a copy of a plan of Darcy Street that has been deposited with the New South Wales Land and Property Information. 153 On 22 March 2006, the council wrote to the Director-General of the Department of Local Government in response to the Departments' letter dated 9 March 2006. In this letter, the council confirmed that it intended to acquire the Fazzolari properties and the Mac's Property among others. The letter enclosed council's letter dated 22 April 2004 in which council had indicated that: No decision has been made by council as to whether any part of the Land or the Civic Place site generally will be divested to the preferred proponent before or after the Project is completed… 154 On 24 March 2006, the council wrote to the Department of Local Government responding to items raised by the Local Government Project Review Committee. The letter states in paragraph (e) on page 2: ...

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(e) Grocon PL initially proposed that the land comprising the site be transferred to GPH on the date of payment of the initial payment of $[tens of millions of dollars]. This transfer would have occurred shortly after the date on which the last of the conditions precedent referred to in the PDA is satisfied or waived. Grocon has requested that the transfer occur by way of constitution of a bare trust arrangement (Trust) as follows: I. on the date which is 10 business days after satisfaction or waiver of the conditions precedent, a deed of trust will be executed by council and GPH; II. council will be the trustee of the Trust; III. the beneficiary of the Trust will be GPH, however it should be noted that GPH may itself be the trustee of various sub-trusts which will conform to the future development components to be constructed as part of the Project; IV. the property of the Trust will comprise the site, excluding the parcel of land which will accommodate the future council facilities to be constructed as part of the Project (council Stratum). The council Stratum will remain in council ownership at all times; (f) as each stage of the Project is completed, GPH will subdivide the relevant stage and call for the transfer of legal title. Council will obtain appropriate advice from its lawyers to ensure that council's involvement in the above structure is within the powers of council under the Local Government Act 1993. 155 On 8 June 2006, the Department of Local Government wrote to Parramatta City council advising that the Local Government Project Review Committee was satisfied that the requirements of the PPP guidelines had been complied with in relation to the Civic Place project. The letter states: As you are aware, the committee has met on three occasions to review this submission, most recently on Thursday, May 18 2006. At this meeting the committee reviewed the original submission and all additional information that was supplied by council in order to clarify aspects of the original submission.

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(b) Discussion of council's financial position in the following terms: 11 Council should refer to the detailed financial comparisons as outlined in the attached report. In keeping with councils previous approach, Civic Place is self funding through a debt capitalisation approach. This minimise any impact on council's operating budget. 12. In November 2005, council had projected a net debt position of $10.08m at project completion to be serviced by the increases from the estimate rates uplift as generated by the Civic Place development. At this time, council had not allowed any CPI growth on revenue share. It was considered prudent at the time not to include this amount until negotiations had been finalised with Grocon. Now that all major risk issues have been negotiated it is an appropriate time to factor in projected growth in revenue share. 13. As a result of this, the most likely scenario now leaves council with a net debt at project completion of $6.26m. This likely debt position is arrived at after all known risk adjustments have been made to the financial model, and all revenue enhancement opportunities are achieved. 14 council should also be aware of the changes to the value of its current net asset values compared to its future net asset values. The most likely balance sheet outcome for council at project completion is that its net asset position will increase from the current value of $71.49m to $88.69m (an increase of 24%). 15 To ensure that council is given the best guidance possible the Civic Place Management Committee has undertaken a sensitivity analysis and is of the opinion that council's best case scenario could generate a debt as low as $0.37m. Conversely the worst case scenario could generate a net debt of $7.67m which includes sacrificing council contingency of $7m. 16 However the Civic Place Management Committee has fully analysed all risks and considers that the most likely net debt position of the Civic Place Project is $6.26m. This is considered to be a prudent estimation considering all of the facts currently known to the Committee at this time. The committee has tried to cap council's risk position in several areas to remove uncertainty; however a project with the complexity of Civic Place cannot be managed without council taking a risk position in some areas. The Civic Place Management Committee has capped exposure to Environmental restoration to a maximum of $4m and has capped its exposure on the cost of vacant possession of Darcy Street properties to $2m. 17. Whilst best endeavours have been undertaken to ensure that councils likely financial position is delivered this estimated net debt position has been achieved by investing $7m that council has acquired from property sales from both Valentine Square and the Hunter Street Car-park forecourt. By investing this $7m council generals interest which offsets councils debt position and provides a contingency fund for unforseen e3xpenses which equates to approximately 10% of councils facility costs. It should be noted that the Department of Local Government supports this approach. Should these funds not be drawn down for contingencies then (on completion of councils facilities), council will have a further $7m to invest in other projects at that time. 18 As before, the servicing of council's net debt position of $6.26m will be financed through the life of the project from the additional uplift that Civic Place generates in rates income. This position will maintain councils commitment [sic] to the community that Civic Place will remain a self funded project. 19 Council is also aware that Grocon has the ability to withdraw from proceeding with Civic Place between June 2007 (financial close) and June 2008 in the unlikely event that they cannot secure finance to proceed with Civic Place. This is considered to be a most unlikely scenario given that by this stage Grocon will have outlaid up to [redacted figure]m in completing their designs, gaining development consent and marketing Civic Place. In this unlikely event however, the Civic Place Management Committee estimate that the cost to council would be [redacted figure]m. However the council has the right to be reimbursed for reasonable costs and would have a consolidated site and an approved DA with which to go back to the market place. 20 At this time should council wish to unravel the civic Place deal altogether then the estimated costs to council would be approximately [redacted figure]m. This is more clearly explained in the attached Civic Place Management Committee Report. 159 The General Manager's report of 29 June 2006 concludes at par 21: The Negotiating Committee has now concluded its major commercial negotiations with Grocon. Over the next weeks the Lawyers representing both parties will finalise legal drafting of the details of the Development Agreement and Annexure to ensure that the facility risk and financial outcomes as outlined in this report , are delivered. 160 Further at par 25: As requested by the Department of Local Government, once council has resolved its position on Civic Place, councils Solicitors will advise the council of its final risk allocation and commercial position. It should be noted that the Department is satisfied that given all the information given to it, that our project complies with their guidelines and as such council may enter into the Development Agreement. As a matter of course however the Department will be notified of the final position as reported to council. 161 The Management Committee report of June 2006 includes an executive summary in which the management committee sets out its recommendations to the council as follows: (a) That the most likely financial outcome arising from the development of Civic Place is a net debt position to council at project completion of $6.26 mill. (b) That the most likely balance sheet outcome for council at Project completion is a nett (sic) asset position of $88.69 mill (being an increase from the current net asset position of $71.45 mill) (c) That council enters into a Development Agreement with Grocon consistent with the Development Agreement summary and Risk Matrix appended at Attachment B; (d) Prior to execution of the Development Agreement that council obtain from its legal advisors a letter form recommended by the Department of Local Government Review Committee; and (e) council expeditiously proceed with all necessary application to the Department of Local Government and, if those applications are approved, proceed with Compulsory Acquisitions of the relevant part of Church Street and any necessary leasehold interests in the Darcy Street properties. 162 The Management Committee report of June 2006 includes a discussion of council's financial position in Part 3. 163 The Management Committee report of June 2006 also discusses design outcomes and includes two tables describing the council Facilities and Community Facilities to be delivered under the Development Agreement. These are as follows: Council Facilities Net Lettable Area(sqm) Entry zone 220 council Workspace 6500 Civic Facilities 650 Basement Storage, IT, Arts 100 Loading Dock 40 Sub-Total 7,510

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167 Also attached to the council attachment (or report) is Annexure B "Development Agreement Summary and Commercial Risk Report". At par 9 of the annexure, the key features of the project and outstanding issues are addressed. These include: 9.0(e) the trust noted above will cover all of the project land (excluding Town Hall and its surrounds), including the land required to construct the future council facilities. This arrangement effectively transfers the land to Grocon at the start of the project. 168 A "Development Agreement Summary" is annexed as "A" to the above Annexure B and is dated 27 June 2006. It is in the same terms as the document referred to above prepared by Blake Dawson Waldron and confirms, at par 3.2 what the effect of the Land Trust is. 169 On 29 June 2006, council resolved to enter into the Development Agreement with Grocon. The resolution included in par (d): (d) That council enter into a Development Agreement with Grocon (Civic Place) Pty Ltd (Grocon) Grocon Constructors Pty Limited and Grocon Pty Limited in relation to the Civic Place Development (and each document necessary to give effect to it including the document referred to in paragraph (e) below) which Development Agreement is substantially in accordance with the Development Agreement and Commercial Risk Report dated June 2006 (see Annexure B to the attached Civic Place Management Committee Report) and may include provision for: 1 The acquisition, purchase, sale, exchange or surrender of any land or other property forming part of the Civic Place Site or located within or adjacent to the Civic Place Site in accordance with the Development Agreement; 2 The construction, completion and delivery of the Civic Place Development; 3 council granting a lease, licence or other entitlement in respect of the public domain areas within the Civic Place Development; 4 The establishment of a trust over the Civic Place Site of which council will be trustee and the beneficial ownership of the land comprising the Civic Place site will be vested in Grocon; 5 The grant of a mortgage to Grocon's financiers over the Civic Place site including over the council's interest.

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201 The Development Agreement concerns the Project which is defined in cl 1.2 to mean the development of the Site. Elements of the Project are further defined to include the design, construction and commissioning of the Works. Works are broadly made up of facilities and other structures to be supplied ultimately to the council as identified in Exhibit V to the contract. In Exhibit V the facilities to be supplied under the contract include council workspace, civic facility, community meeting and activity rooms, seniors leisure and learning centre, library and heritage centre, gallery and technology centre, childcare centre, storage facilities, loading dock and 92 car spaces. Works also include those building structures and other improvements to be developed on the site under the contract other than the Council Project Works. Those Works are generally described in the Developers Design Proposal which is Exhibit X to the Contract. 202 The Site is defined to include the land identified at p 23 of the Development Agreement. The bulk of the land is that identified in Exhibit F to the Development Agreement which is the land bordered by Darcy Street, Smith Street and Macquarie Street together with the westerly border of the substratum of Church Street. 203 Two other properties currently form part of the site. One is referred to as the Integral Energy Substation site which is the site of an existing substation which under the terms of the contract is proposed to be transferred to the council for $1 upon Grocon, in the course of the project design, constructing and commissioning an alternative substation to replace it. The second further piece of property is referred to as the Grocon Land at [redacted site] then owned by [owner of redacted site] which under cl 5.1 Grocon is to use reasonable endeavours to acquire. Acquisition of that property is a condition precedent under cl 2.1(b) of the Development Agreement. "Site" is defined to include such other land as agreed between the parties to form part of the applicable portion of the site for the purpose of the contract. 204 Recital F sets out the substance of the Development Agreement in these terms: The council, GCP and GCPL [Grocon] have agreed upon the development of the project upon the terms and conditions set out in this Contract. (p 9) 205 The Site includes the properties owned by the applicants. These properties form part of the group of properties defined as Darcy and Church Street Properties. For the purposes of this summary the applicants' properties will be referred to as the Darcy Street Properties. 206 Clause 2 of the Development Agreement identifies Conditions Precedent and Conditions Subsequent. The former are identified in cl 2.1 and include: (a) the acquisition by council of the freehold of the Darcy Street and Church Street Properties; (b) acquisition in the name of Grocon of the freehold of the [redacted site] site; (c) planning approval for Stage 1 of the agreement and execution of a Planning Agreement; and (d) execution of the "Pre-Commitment" by Grocon concerned with what is likely to be necessary for Grocon to obtain finance approval. The Conditions Subsequent consists of finance approval and a voluntary agreement as referred to in s 93F of the Environmental Planning and Assessment Act 1979.

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236 The purpose of a compulsory acquisition under the Local Government Act 1919 (LG Act 1919), the predecessor to the LG Act 1993, was considered in Collins v Willoughby Municipal Council (1967) 14 LGRA 256. There the plaintiff owned land in the Chatswood shopping centre which adjoined land owned by the council. On each parcel of land was an old semi-detached cottage. The council made application to the Governor for his approval of the resumption of the plaintiff's land "for the purpose of undertaking the improvement and embellishment of the area". The council intended to invite tenders for a building lease of the whole site, that is, both the plaintiff's and the council's land, for a term of 99 years. The proposed lease would require the lessee to erect a multi-storey commercial building containing certain free public car-parking accommodation. Section 321(1)(a)(iv) of the LG Act 1919 permitted the council to acquire in any mode authorised under the Act, any land for the purpose, among others, of "undertaking the improvement and embellishment of the area". The proposed resumption was approved by the Governor and notification published in the Gazette. The plaintiff sought a declaration that the purported resumption was void. One of the grounds of the plaintiff's attack was that the real purpose was not to improve or embellish the area but to turn the lands owned by the council to profitable account by their sale or leasing. The suit was dismissed. Else-Mitchell J held at 258 - 259: It is not in doubt that a council constituted under the Local Government Act cannot resume land except by statutory authority and that it must exercise the power conferred by the Act in that behalf bona fide for the purpose for which it was conferred. So much is established by a long line of cases including Lynch v Ku-ring-gai Municipal Council [ (1947) 16 LGR (NSW) 144]; Thompson v Randwick Municipal Council [(1950) 81 CLR 87]; Howarth v McMahon [(1951) 82 CLR 442; Minister for Public Works v Duggan [(1951) 83 CLR 424]; Baida v Baulkham Hills Shire Council [(1951) 83 CLR 344]. But the basis on which the resumptions in some of these cases were invalidated has been removed by amendments to the Local Government Act made in 1951 (by Act No 46 of 1951) which inserted new provisions widening the statutory purposes for which land might be resumed so that as Roper CJ in Eq observed in Baiada v Baulkham Hills Shire Council [Unreported, 17th December, 1952; cf 91 CLR at p 655] a council has under these provisions power to acquire land by resumption to some extent independently of purpose. It may for instance acquire some land which it proposes to acquire for the purpose of undertaking the improvement and embellishment of the area, and also it may acquire, independently of any purpose of the Act, any lands of which that land forms part or which are adjoining or in the vicinity of that land. Under the law as it stood before the amending Act came into operation, it is clear from the decisions referred to that land could not be acquired by a council, at all events by resumption, except for a purpose of the Act.

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In view of the fact that the amendments made to the Local Government Act in 1951 include the sale or leasing of land as purposes for which land may be resumed I think that a council can properly acquire land for the mixed purpose of improvement or embellishment and sale or leasing at a profit and it would therefore not seem to be material that some part only of the land acquired, and even an undefined part, is to be improved or embellished. 237 Significantly, his Honour indicated that even since the 1951 amendments to which he referred, land could not be resumed simply for some purpose of selling or vesting it in a person who does not propose to apply it for any local government purpose (at 260): …No doubt prior to the 1951 amendments to the Local Government Act , land could not be resumed simply for the purpose of selling it to or vesting it in a third person and even since those amendments a resumption which is effected with the sole object of giving it or selling it to some person who does not propose to apply it for any local government purpose may also be invalid… 238 The purpose of a compulsory acquisition under the LG Act 1919 was also considered in Da Rous v Burwood Municipal Council, (Pearlman J, NSWLEC, 5 March 1996, unreported). There the applicant unsuccessfully sought a declaration that a notification of compulsory resumption of land was invalid. For many years the council had been acquiring parcels of land around a stormwater canal that ran through a block of land. The land was generally vacant and the council intended that it would be subdivided and developed for residential purposes. Pearlman J held: The scheme which the council embarked upon in 1964 was a comprehensive scheme to convert an unsightly and unpleasant wasteland into a pleasant residential subdivision. The site was traversed by an open stormwater channel, adjacent to the council's garbage vehicle depot and was run-down and unattractive. Although over the years the council's precise plans for the development of the site changed several times, it was always intended that the ultimate use of the site would be for medium density residential housing and the site would be sold off by the council for that purpose.

[284]

240 A case which is of some relevance is Samrein Pty Ltd v Metropolitan Water Sewerage and Drainage Board (1982) 41 ALR 467, although allowance must be made for the fact that it was decided under different legislation. There the High Court rejected an attempt to restrain the Board from acquiring the appellant's land while holding that, in principle, an acquisition could only occur for a permissible statutory purpose. Gibbs CJ, Mason, Murphy, Wilson and Brennan JJ jointly stated that principle at 468: "The critical question in the present case is whether the purposes for which the Board proposes to acquire the land are purposes of the Act…". The Board had proposed to acquire the land for the purposes of carrying into effect a joint venture with the Government Insurance Office where each party would share the cost of constructing a large office building and each would benefit from the office space they created. Their Honours held at 468 - 469: Section 115 does not expressly provide that the power to acquire land by resumption is to be used for the purposes of the Act. In this respect, it stands in contrast to s 114(1). However, it may be accepted that the statutory power is to be used only for the purposes of the Act…The critical question in the present case is whether the purposes for which the Board proposes to acquire the land are purposes of the Act…Clearly, if the purpose of the acquisition of the land in the present case was to provide office accommodation for the Board's employees now and in the future, the acquisition will have been for one of the purposes of the Act. The questions of whether the land was acquired for another unauthorized purpose, and if so whether that unauthorized purpose was a substantial purpose of the acquisition, are questions of fact. The land in question is situated in a city block…the Board already occupies 60 percent of that block…The remainder of the block…has been purchased by the Board…The Board now proposes to erect a new building on the whole of the western half of the block as a joint venture with the Government Insurance Office - which we shall call the GIO - and for this purpose seeks to acquire the land which it does not already own. The new building proposed is a tower block of approximately 42 stories[sic]. It is intended that upon completion of the building the Board shall register a strata plan and shall transfer the GIO title to about half of the office space and retain title to the remaining area of the office space. At ground level there will be a retail area which will be owned by the Board and GIO as tenants in common in equal shares… It is not contested that the area of office space which the Board will retain is needed by the Board for its own purposes, whether for present use or for use as a result of future foreseeable expansion. However, the argument is that the Board needed only a building of about 21 stories[sic] for its own purposes…

[300]

535 Where the council proposes to acquire land for any purpose it may also acquire other land adjoining or in the vicinity. 254 The joint reasons in Thompson explained that the scheme was bad for two reasons. The first reason was that s 535 was not an independent source of power to acquire land but was merely "incidental" to the s 532 power. The explanation for that decision is that "any purpose" in s 535 was "any purpose" referred to in s 532. The Court held that no land could be acquired unless it was to carry into effect some purpose of the council allowed by the Act. Accordingly, taking the land needed for the construction of the road was permissible, as was taking any additional land adjoining or in the vicinity, but only if it could be shown that this additional land was necessary or incidental to that main purpose. It was proved that the additional land would not be worked upon at all, but rather merely subdivided and re-sold by the council. The court held at 103 - 104: Section 535 authorizes a council, where it proposes to acquire land for any purpose, also to acquire other land adjoining or in the vicinity. The language of s. 535 is in terms very wide. But the section can only operate where the council proposes to acquire land for any purpose. It is therefore not an independent but an incidental power and this indicates that some limits must be placed on its meaning. It does no more, we think, than confer a power to acquire land adjoining or in the vicinity of land authorized to be acquired by s. 532 whenever the acquisition of such adjoining or proximate land is reasonably incidental to the carrying out of the purpose for which the land is authorized to be acquired under that section. In the present case it is clear that the lands proposed to be resumed exceed what is required to construct the new road, and there is no evidence that it is reasonably incidental to any purpose under s. 235 of the Act that this excess should be acquired under s. 535. 255 The second reason for striking down the proposed scheme was that in taking more land than was necessary to construct the road, the council was acting in bad faith. The joint reasons explained at 105 - 106: …in attempting to resume more land than is required to construct the road, is not acting in good faith. By that we do not mean that the Council is acting dishonestly. All that we mean is that the Council is not exercising its powers for the purposes for which they were granted but for what is in law an ulterior purpose. It is not necessary that this ulterior purpose should be the sole purpose. The Council, no doubt, believes that the new road will have advantages…from the point of view of access and upkeep. But the evidence establishes that one purpose at least of the Council in attempting to acquire the land not required to construct the new road is to appropriate the betterments arising from its construction. In Municipal Council of Sydney v. Campbell [(1925) A.C. 338] , this was the sole purpose. But in our opinion it is still an abuse of the Council's powers if such a purpose is a substantial purpose in the sense that no attempt would have been made to resume this land if it had not been desired to reduce the cost of the new road by the profit arising from its re-sale. 256 In Duggan (above), the High Court found no reason to depart from this construction of the same legislation. There the council applied to the Minister for the resumption of some 118 acres of land "for the purpose of the improvement and embellishment of the area" of the land proposed to be resumed. Eighty four acres were to be used for a park, 17 acres for new roads, and the balance of 17 acres was to be acquired simply in order that it might be subdivided and sold for building lots and the proceeds applied towards the costs of the scheme. Dixon, Williams and Kitto JJ in a joint judgment held that the council was not empowered by the Act to acquire the last-mentioned land in excess of the actual requirements for a park and new roads in order that upon re-subdividing that land, the council might re-sell it and apply the proceeds towards the costs of the scheme. Their Honours held at 445 - 446: Before us no serious attempt was made to distinguish the present case on the facts from the recent decision of this Court in Thompson v. Randwick Municipal Council . It was not disputed that it was a substantial purpose of the resumption of the residual lands to make a profit out of their re-sale, and that no attempt would have been made to resume these lands if it had not been the desire of the defendant Council to reduce the cost of the construction of the new road in this way.

[306]

The approach to council powers and functions under the 1993 Act is very different from that under the former legislation. In many ways the 1919 Act was more limited and prescriptive in its grants of power to councils to carry out functions. The 1993 Act approaches council powers and functions in a broader fashion: see for example s24 quoted above. Indeed, it has been suggested that the wide grant of power in s21-s24 of the Act was an attempt to overcome deficiencies of power under the 1919 Act and the application of the doctrine of ultra vires. 262 In 2004, Part 6 (ss 400B - 400N) of Chapter 12 was inserted into the LG Act by the Local Government Amendment (Public-Private Partnerships) Act 2004, Schedule 1[5]. The Second Reading Speech (LA, 19 November 2004) explains: The bill will amend the Local Government Act 1993 and provide a regulatory framework within which local government can benefit from public-private partnerships. The Local Government Act 1993 is the core Act for the regulation of local council and county council functions. Public-private partnerships [PPPs] are emerging as a potentially attractive and flexible means for local government to create infrastructure and deliver services. For the purposes of this bill, a PPP is defined as any contracted relationship between a council and the private sector in which a council has an equity interest, shareholding or ongoing obligation or liability. Normal transactions such as sale of community land classified as operational and councils acting as trustees for donations or bequests and tendering will not be affected by these new provisions. A number of councils already have experience in negotiating public private partnerships. Unfortunately, not all those experiences have been positive. As members will be aware, Liverpool City Council, between 1996 and 2003, entered into various commercial arrangements with the private sector to develop infrastructure on land owned by the council. The Liverpool City Council public inquiry found that the cost to council of the failed redevelopment proposals - ultimately to be borne by ratepayers - is at least $22 million. The commissioner of the public inquiry, Professor Maurice Daly, found that councils lacked the in-house expertise required to successfully negotiate PPP arrangements. 263 Clause 408(1)(e) of the Local Government (General) Regulation 2005, which commenced at the same time, excluded from the operation of Part 6 of Chapter 12 "the sale by a council to private person of any property (including operational land"). The 2004 Act brought into effect the recommendations of Professor Daly, referred to in the above extract from the Second Reading Speech. His report of June 2004 relevantly included the following (vol 2 p 21): Private sector initiatives, however, are not the only source of PPP proposals. Councils often have a strong interest in providing new infrastructure in the form of civic centres, youth or old aged facilities, libraries, sporting venues and the like. In concert with the private sector such infrastructure may be put in place in the context of a broader commercial or residential development so that the council may receive both the infrastructure and some revenue, whilst the private sector parties profit from the construction and sale of new buildings, or the longer-term revenue from managing the rentals of the buildings. Councils also often have ambitions to develop land to accommodate population growth, or to cater for segments of the population (such as the aged), but lack either the capital or the know-how to perform the task. Partnerships with the private sector clearly represent a solution. Councils in recent years have ventured into new functions that they traditionally have not had to manage. The provision of local medical services and an extending role in law and order maintenance are examples. Again, there is potential for private sector involvement in such areas. In rural areas councils often run the water and sewerage systems, and councils have begun to play a bigger role in energy production through wind-farms and energy-sharing programmes. Council roles in recycling and, especially in rural areas, with broader waste management issues are further areas where collaboration with the private sector is possible. This summary represents just a sample of the ways in which councils and private sector may form linkages. As successful PPP in Local Government are achieved, the lessons learnt will trigger new initiatives, and new ways of linking Local Government with the private sector. 264 One of the examples of a PPP referred to in this passage bears some comparison with the proposed Civic Place Development. However, the passage is silent about compulsory acquisition. 265 As appears from s 400B(1), as substituted by the Local Government Amendment Act 2005 No.59, "public-private partnership" ("PPP") is a reference to an arrangement between a council and a private person for the purposes of: (a) providing public infrastructure or facilities (being infrastructure or facilities in respect of which the council has an interest, liability or responsibility under the arrangement), or (b) delivering services in accordance with the arrangement, or both, but does not include a reference to any such arrangement if it is of a class that has been excluded from the operation of this Part by the regulations. 266 There is no requirement that the infrastructure or facilities be in the council's ownership. 267 As first enacted, s 400B(1)(a) read: (a) providing public infrastructure or facilities (being infrastructure or facilities in respect of which the council retains a beneficial interest under the arrangement), 268 The Second Reading Speech (LC, 22 June 2005) explains the amendment: To ensure that all public private partnerships involving councils are required to follow the appropriate process, this bill makes a minor amendment to the definition of public private partnerships. The new definition includes all arrangements between a council and private person to provide public infrastructure or facilities where the council retains an interest, liability or other responsibility, or to deliver services in accordance with the arrangement.

[315]

276 The basis of the decision of Mason P in Gaffney is consistent with C.C. Auto Port Pty Ltd v Minister for Works (1965) 113 CLR 365 although that case was decided under different legislation. There the appellant was the owner of land forming part of a city block in Fremantle in Western Australia. The city council published a statutory notice of intention to resume the appellant's land which stated the purpose as "Street Widening…and other purposes". The resumption related to more land than was necessary for the proposed street widening because it was the intention of the council to resell so much of it as was not required for street widening or for its own use in order to meet, as far as possible, the cost of the work of street widening. The relevant legislation authorised the council in resuming land for road widening, to also resume adjoining land. The appellant's challenge to the validity of the resumption failed. Kitto, Taylor and Menzies JJ in a joint judgment said at 377 - 378: "There can be no doubt that the effect of s. 2 is to extend the powers of acquisition of the council when resuming land for the purpose of street widening. It seems clear that apart from that section the authority of the council would be confined to the taking of such land as is actually required for that purpose. But legislation authorizing the compulsory taking of land for particular purposes has frequently authorized the taking of additional land not strictly required for any such purpose". Significantly, their Honours indicated that the resumption of the extra land had to be for, or in association with, the purpose of widening the streets. In other words, it was insufficient merely that the land was adjoining land that was to be resumed for road widening. They said at 381: …But once it had been decided to widen the streets in question and for, or in association with, that purpose to acquire the whole block it was essential to decide upon the most suitable method to be employed in disposing of the land surplus to the work of road widening. …We have given consideration both to the documents in the case and to the oral evidence and we are satisfied that the development of the residue of the land resumed as a modern retail shopping centre was not an end in itself; it was, perhaps it may be said, part of a means to an end. But that end was the widening of the three streets and this was, in our view, both the initiating and the abiding purpose of the resumption.

[326]

287 In my view, the meaning of "re-sale" in s 188 should be determined in light of the legislative history, scope, purposes of the Act and the mischief which s 188 was intended to cure. In Network Ten Pty Ltd v TCN Channel Nine Pty Ltd (2004) 218 CLR 273 at 280-281 [11] McHugh, Gummow and Hayne JJ said: In Newcastle City Council v GIO General Ltd [ (1997) 191 CLR 85 at 112. See also the observations of Windeyer J in Attorney-General (NSW) v Stocks and Holdings (Constructors) Pty Ltd (1970) 124 CLR 262 at 283.] , McHugh J observed: [A] court is permitted to have regard to the words used by the legislature in their legal and historical context and, in appropriate cases, to give them a meaning that will give effect to any purpose of the legislation that can be deduced from that context. His Honour went on to refer to what had been said in the joint judgment in CIC Insurance Ltd v Bankstown Football Club Ltd [(1997) 187 CLR 384]. There, Brennan CJ, Dawson, Toohey and Gummow JJ said 10 : It is well settled that at common law, apart from any reliance upon s 15AB of the Acts Interpretation Act 1901 (Cth), the court may have regard to reports of law reform bodies to ascertain the mischief which a statute is intended to cure . Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses `context' in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy . Instances of general words in a statute being so constrained by their context are numerous. In particular, as McHugh JA pointed out in Isherwood v Butler Pollnow Pty Ltd [(1986) 6 NSWLR 363 at 388, if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent [ Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 320-321] .

Mac's Pty Ltd v Minister Administering Local Government Act 1993 and Parramatta City Council

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