Macedonian Orthodox Church Incorporated v ACT Planning and Land Authority [2013] ACTSC 19

3. The appellant now seeks leave to appeal from the decision of the ACAT. Leave is required by s 86 (3) of the ACT Civil and Administrative Tribunal Act 2008 (ACT) (the ACAT Act). On 1 June 2012, I ordered that the question of leave be reserved to the hearing of the appeal. The application for leave and the appeal itself were heard by me on 30 November 2012, at which time I reserved my decision.

4. By letter dated 8 November 2002, the firm of McCann Property and Planning wrote to the respondent's predecessor, ACT Planning and Land Management, applying to "deconcessionalise" the lease. The aim of the appellant in deconcessionalising the lease was to allow subdivision of the land and to allow the appellant to:

(a) to establish its Australian headquarters by building a Bishops residence, a community hall and associated car parking facilities on the portion of the land to be retained by the appellant (the Church Block); and

(b) to permit construction of a multi unit residential complex on the remainder of the land (the Residential Block).

5. On 8 August 2003, the then Minister for Planning approved the deconcessionalisation of the lease, conditional upon the appellant paying an amount equal to the lease's present market value. On 15 February 2008, the respondent advised the appellant that the amount required to deconcessionalise the lease was $300,000.

6. In February 2006, Development Application No 200600518 (the DA) was lodged on behalf of the appellant, seeking subdivision of the land and changes to the purpose clauses of the new leases. The DA included proposed works on the Church Block including construction of a bell tower, a baptismal pool, a Bishops residence and a community hall, as well as recladding of the dome of the existing church building (the Church works).

7. On 28 September 2007, the ACT Planning and Land Authority (ACTPLA) published a decision approving the application, subject to the appellant paying the current market value for the land so as to deconcessionalise the Crown lease. It was a further condition of the subdivision of the land that the appellant surrender the existing Crown lease over the land and accept new Crown leases for each of the subdivided blocks, with the form of the new leases to be substantially in accordance with drafts attached to the decision.

8. Attachment 1 to the decision of 28 September 2007 is the draft lease for the Church Block. The draft lease in Clause 3 (c) provides that the land and any building or other improvements on the land are to be used "only for the purpose of Community use LIMITED TO (sic) place of worship and/or religious associated use", and also contained the following covenants (the development covenants):

1. THE LESSEE FURTHER COVENANTS WITH THE COMMONWEALTH as follows:

COMMENCEMENT OF DEVELOPMENT

(a) That the Lessee shall within twelve (12) months from the date of the lease or within such further time as may be approved in writing by the Authority for that purpose commence to erect an approved development in accordance with plans and specifications prepared by the Lessee and previously submitted to and approved in writing by the Authority;

COMPLETION OF DEVELOPMENT

(b) That the Lessee shall within twenty four (24) months from the date of commencement of the lease or within such further time as may be approved in writing by the Authority complete an erection of the said approved development in accordance with the said plans and specifications and in accordance with every Statute Ordinance or Regulation and applicable thereto;

9. Attachment 2 to the decision of 28 September 2007 is the draft lease for the Residential Block, providing that the land is to be used "for the purpose of multi-unit housing of not less than one (1) dwelling and not more than fifty seven (57) dwellings". It also contains development covenants identical to those found in the draft lease for the Church Block.

10. An appeal from the decision of ACTPLA of 28 September 2007, brought by a number of objectors to the development, was upheld by the ACAT on 19 August 2008 (Paxevanos v ACT Planning and Land Authority & Ors [2008] ACTAAT 20). On 16 December 2007, this Court (Macedonian Orthodox Church Inc v Paxevanos [2009] ACTSC 166) per Mansfield J, allowed an appeal by the present appellant from the decision of the ACAT, restoring the decision of ACTPLA of 28 September 2009 to the extent that it:

1. approved the subdivision of the land into two blocks, the Church Block and the Residential Block;
2. provided that the Church Block was to be used for a place of worship and religious and associated use, and that the Residential Block be used for residential purposes, limited to not more than 56 dwellings; and

1. provided for the Church works to be carried out on the Church Block.

11. On 6 April 2011, the appellant paid the required sum of $300,000 to deconcessionalise the lease.

12. Shortly thereafter the Australian Valuation Office (AVO) provided valuations of the land before and after the proposed change of as set out in the DA, for the purpose of calculating any CUC. An amended valuation from the AVO dated 29 July 2011 reduced the "after value" by $300,000 in recognition of the cost of deconcessionalising the lease. A further valuation of before and after values was prepared by the AVO on 14 November 2011.

13. It is unnecessary to set out here the various valuations arrived at by the AVO, because subsequently the parties agreed upon the before and after values, subject to one issue. The appellant asserted that the cost of Church works, as set out in the DA, were required to be taken into account in determining the "after value" of the land.

14. By letter dated 18 November 2011 the respondent communicated its decision on the disputed issue:

I can confirm that it is the view of the Planning and Land Authority that the building and development provisions contained within the draft Crown leases at clauses 3 (a) and 3 (b) do not bind the Church to the plans and specifications in any particular development application (DA) including DA 200600518. Accordingly, the cost of the church works has not been taken into consideration in determining the CUC.

15. Based upon that decision, and the AVO's valuations, the respondent determined a CUC of $2,055,000 in relation to the proposed variation of the lease over the land.

16. The appellant sought review of the determination of the CUC in the ACAT. During the course of those proceedings the parties agreed that the "before value" of the Land was $2,795,000 and the "after value" (providing the works on the Church Block as set out in the DA were not taken into account) was $5,540,000, yielding an added value of $2,745,000. By application of the formula set out in s 277 of the Planning and Development Act 2007 (ACT) (the PDA), a CUC of $2,058,750 was derived.

17. In a decision published 27 April 2012, the ACAT rejected the appellant's submission that the cost of the Church works on the Church Block was to be deducted from the "after value" of the land, and confirmed the CUC as $2,058,750. The appellant now seeks leave to appeal that decision.

18. In its Notice of Appeal dated 8 June 2012 the appellant specifies its grounds of appeal as:

(a) That the tribunal erred in concluding that neither Clause 3 (a) or 3 (b) of the draft Crown lease for "the Church block", nor condition 11 of the development approval obliged the appellant to build "the Church works" on "the Church block" ...

(b) That the Tribunal erred in failing to conclude the obligation to build "the church works" must be taken into account in the determining the V1 amount for the after value leases.

(c) The Tribunal erred in its application of the decision in Macedonian Orthodox Church Inc v Paxevanos [2009] ACTSC 166 by concluding that "the approval to subdivide the land is not necessarily tied to the approval to develop the resulting Church block" in the circumstances of the development approval in this case ...

(d) The Tribunal erred in concluding that if "the church works" were to be deducted they would reduce the value of the church lease to zero rather than to the negative value agreed by the appellant's and the respondent's valuers ...

19. The appellant accepts that CUC is calculated in accordance with s 277 of the PDA, and in simple terms is levied at 75% of the increase in value arising from the variation of a Crown lease. The applicable historical version of s 277 relevantly provided:

277 Working out change of use charge

(1) The planning and land authority works out the change of use charge for a variation of a lease as follows:

CUC = (V1 - V2) x 75%

(2) In this section:

CUC means the change of use charge payable for the variation of the lease.

V1 -

(a) (not applicable)

(b) for a variation that is a consolidation or subdivision, means the capital sum that the new lease or leases be granted under the consolidation or subdivision might be expected to realise if-

(i) the consolidation or subdivision were to take place as proposed; and

(ii) the new lease or leases were genuinely offered for sale immediately after the variation on the reasonable terms and conditions that a genuine seller would require; and

(iii) the rent payable throughout the term of the new lease or leases were a nominal rent.

V2 -

(a) (not applicable)

(b) for a variation that is a consolidation or subdivision, means the capital sum that the lease or leases to be surrendered under the consolidation or subdivision might be expected to realise if-

(i) no consolidation or subdivision were to take place during the remainder of the term of the surrender lease or leases; and

(ii) the lease or leases were genuinely offered for sale immediately before the consolidation or subdivision on the reasonable terms and conditions that a genuine seller would require; and

(iii) the rent payable throughout the term of the lease or leases to be surrendered were a nominal rent.

(3) If the capital value assessed as V1 is equal to or less than the capital value assessed as V2, no change of use charge is payable.

20. The appellant contends that condition 11 of the DA requires the appellant to undertake the building works on the Church Block. That condition provides:

that the approved development shall be completed within 24 months from the date of this approval or within such further time as may be approved in writing by the Planning and Land Authority.

21. The appellant's ultimate contention is that the development covenants in the proposed new leases of the Church Block when read with condition 11 of the DA require the lessee of the Church Block to undertake the Church works as set out in the DA. The appellant contends that the development covenants require an approved development to go ahead, and that, of necessity, they must fix upon some approved development.

22. In the present case, the appellant says, there are approved plans for the Church works and as such condition 11 operates. To the extent that the development covenants may be ambiguous, the appellant submits that the objective background facts as known to the parties may be used by this Court to construe the covenants.

23. It is common ground between the appellant and the respondent that if the provisions of the proposed lease for the Church Block oblige the appellant to undertake the Church works referred to in the DA, the cost of that work must be taken into account in determining the CUC. It is agreed that if that be the case, no CUC would be payable by the appellant.

24. As its starting point, the respondent submits that the development covenants are unambiguous and do not require the completion of the Church works. As the development covenants are unambiguous, there is no justification for resorting to extrinsic material to construe them.

25. Additionally, the respondent says that the lease is an instrument of a type that the use of extrinsic materials in its interpretation is not permitted. The respondent submits the ACAT was correct to determine that the Church works were not to be taken into account in determining the after value (V1) in s 277.

26. The applicant referred me to Royal Sydney Golf Club v Federal Commissioner of Taxation [1955] HCA 13; (1954-1955) 91 CLR 610 as authority for the proposition that statutory planning restrictions are to be taken into account for the purposes of valuing land. Accepting that to be the case (and much may depend on the purpose for which the valuation is obtained), that decision does not advance the appellants argument. In the present case the Crown Lease, when properly construed, either requires the appellant to undertake the Church works or it does not. It is not suggested that the Crown Lease is subject to some overarching statutory planning restriction.

27. By way of contrast, the appellant referred me to the decision of the Federal Court of Australia (Jenkinson, Neaves and Wilcox JJ) in Hamilton v Demgold Pty Ltd (1990) 97 ALR 481 as authority for the proposition that private contracts relating to the development or use of land are not to be considered in a valuation for rating purposes. In determining that a collateral agreement to lease to the Commonwealth a building to be constructed on the land was not to be taken into account in valuing the land, Wilcox J said at 495:

...it is important to note that the obligation of the Commonwealth to take a sub-lease was not embodied in the lease itself.

28. In my opinion, resolution of these proceedings turns upon the answer to the question: what obligations do the development covenants in the proposed Crown lease for the Church Block impose on the appellant? The valuation process contemplated by s 277 in a valuation of the lease, and it is to the lease, and any obligations on the lessee imposed by the lease, that the valuer must have regard. If the development covenants impose on the appellant an obligation to carry out the Church works, that is relevant for the purpose of determining the capital sum that the new Crown leases might be expected to realise if the subdivision occurs: See the definition of V1 in s 277 (2). If the development covenants do not impose on the appellant an obligation to undertake the Church works, then the fact that those works have been approved in a separate development process would not affect the capital sum the leases may be expected to realise. As such, the appellant's contention requires a proper understanding of the construction of the development covenants.

29. The Planning and Development Act provides for the grant of a lease including provisions requiring the lessee to develop the land comprised in the lease in a stated way: s 238 (3)(a). Ordinarily one would expect such a lease to make clear reference to the obligation to develop the land in a particular way, but it is not difficult to conceive circumstances where convenience may require the detail of the obligation to be found in a separate document. Where that is the case, one would expect that the content of that separate document would be incorporated into the terms of the Crown lease by clear identification of the separate document, for example by reference to a particular Development Application. It is a circumstance speaking against the appellant's position that such a course was clearly not adopted with respect to the lease of the Church Block.

30. In my opinion, I am not permitted or required to use extrinsic material, and in particular evidence of the genesis and purpose of the DA, in construing the development covenants. The basis for admission of extrinsic evidence in construing a contractual document is ambiguity. As Mason J said in Codelfa Constructions Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 352:

The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning.

31. The development covenants, and in particular covenant 3 (a), provide an obligation for the appellant to erect "an approved development" on the Church block. As noted by the ACAT, the use of the indefinite article in the phrase "an approved development" allows the appellant's obligation imposed by covenant 3 (a) to be satisfied by the construction of any approved development, and not only by the development the appellant currently plans to undertake. The phrase is unambiguous, and construing it according to its plain meaning leads to no absurd or illogical result.

32. Additionally, there are good reasons why the use of extrinsic materials should not be permitted in construing the terms of a Crown Lease. In Bowler v Hilda Pty Ltd [2001] FCA 342; (2001) 112 FCR 59, the Federal Court of Australia (Drummond, Dowsett and Gyles JJ) considered an appeal from this Court in which extrinsic material had been received to interpret a clause in a registered units plan. Referring to the decision of the primary judge on this issue, Drummond J said at 62:

There are, however, difficulties in accepting his Honour's approach in identifying ambiguity in the covenants in the units plan and in then resolving that ambiguity by reference to materials extrinsic to the registered plan. In the ACT, a lease from the Crown operates as the grant of an interest in land. But, by reason of s 175 of the Land (Planning and Environment) Act, which makes unlawful the use of land in the Territory other than for the purposes set forth in the lease, the lease also serves to establish the planning restrictions applicable to uses of the land the subject of the lease. Gyles J, in his reasons, points out that upon registration of a unit plan and performance by the Registrar-General of his consequential duty to issue certificates of title for each unit lease, an indefeasible title to each unit is created. The notion that material extrinsic to the Register can be used to resolve ambiguities in the registered title is therefore difficult to accept as correct. Further, as Gyles J also points out, the line of authorities dealing with the construction of development consents referred to by the learned primary judge... provides additional reason for not accepting that material extrinsic to the registered unit plan can be used as an aid to the construction of the statement of planning purpose in a lease issued under the ACT leasehold system.

The special position of Crown leases in the ACT is of importance. Effectively, for relevant purposes, a Crown lease, rather than fee simple, is the root of all title. Transactions take place in relation to those leases, which are different in function from ordinary inter partes leases. It is also necessary to appreciate the significance of purposes clauses in Crown leases. They have traditionally been a principal means of administering planning controls in the ACT (for example Morpath Pty Ltd v ACT Youth Accommodation Group Inc (1987) 16 FCR 325). Section 175 of the Land (Planning and Environment) Act 1991 (ACT) makes unlawful the use of land other than for the purposes authorised by the lease. That Act also seeks to ensure harmony between purposes authorised by the Crown lease and the Territory Plan (ss 8 and 65(4)(a)). In the present case, all of the possible uses covered by the purposes clause are within the Territory Plan as it applied to the land in question.

In this setting, it seems to me that the cross-appellants are correct in submitting that the line of cases referred to in [38] of the judgment below (Bowler v Hilda Pty Ltd [2000]) FCA 899), which limit the extrinsic material which can be taken into account in construing statutory planning approvals, provide a useful guide to resolution of the present case and the same reasoning should have been applied here. These cases (and others including Sydney Serviced Apartments Pty Ltd v North Sydney Municipal Council (No 2) (1993) 78 LGERA 404 at 407, 408) were recently considered and applied by the New South Wales Court of Appeal in Winn v Director-General of National Parks and Wildlife [2001] NSWCA 17 (particularly at [2]-[5] and [198]-[202]). The rationale of these cases appears from the following passage from the judgment of Hope J in Leichhardt Municipal Council v Terminals Pty Ltd (1970) 21 LGRA 44 at 50-51:

"Whilst it is true that generally speaking regard cannot be had to extrinsic evidence, other than evidence to identify a thing or place referred to, in order to interpret a public document such as a planning approval, reference may be had to documents, the terms of which are incorporated into the public document: Slough Estates Ltd v Slough Borough Council (No 2) [[1971] AC 958]; Ryde Municipal Council v The Royal Ryde Homes (1970) 19 LGRA 321. I say generally, for the basis of this view is that a planning approval operates for the benefit of successors in title to the owner who obtained the approval, and it would be quite inapt to alter the apparent meaning of the approval, for example, of negotiations or correspondence between the original applicant and the council."

In Winn, Spigelman CJ noted that development consent (at [4]):

"...is also a document intended to be relied upon by many persons dealing with the original grantee or assignees of the grantee, in such contexts as the provision of security. In some respects it is equivalent to a document of title. It must be construed in accordance with its enduring functions".

34. This approach was approved in the later case of Springrange Pty Ltd v Australian Capital Territory [2010] ACTCA 17.

35. To give an example of why extrinsic material cannot be used to construe a Crown lease, one may ask: What would happen if the appellant were to sell the Church block before the works set out in the DA were completed? The purchaser would be incapable, by reference to the Register, to ascertain the obligation to undertake the works.

36. As Gyles J points out, extrinsic evidence as to a registered lease may be considered in some circumstances, for example in identifying the land: see also Spence v Minister for Urban Services [2000] ACTAAT 37. However, when used in this way, it is not used for the purpose of construction.

37. Even if the extrinsic material relied upon by the appellant was able to be taken into consideration in construing the lease for the Church block, it would not, in my opinion, lead to a conclusion that the development covenants are to be construed so as to oblige the appellant to undertake the Church works. The fallacy in the appellant's argument is the proposition that in order to have meaning, the development covenants must refer to an existing approved development.

38. One may well ask: why would the respondent require the appellant to undertake the particular works that constitute the Church works? The lease of the Church block is a lease of private land to a private entity, albeit a religious organisation. There is no obvious public purpose to be achieved, or public benefit to be bestowed, in requiring the appellant to undertake the Church works. It is inherently improbable that the respondent would require the specific Church works to be completed as a term of the lease, as opposed to a term of a separate development application, where there is no obvious planning reason to do so, or public benefit to be conferred.

39. The DA led to the grant of the lease for the Church block, but is functionally separate from the lease. The lease stands alone and is to be construed as such. Effectively, this means that the Territory requires the appellant to undertake an approved development on the appellant's land rather than the development that has presently been approved.

40. The ACAT was correct to decide that the development covenants did not require the appellant to undertake the Church works on the Church Block. As such, it was correct to conclude that the Church works were not to be taken into account in assessing any CUC. The appellant cannot succeed on proposed grounds of appeal (a) and (b).

41. Proposed ground of appeal (c) raises the ACAT's interpretation of the decision of Mansfield J in Macedonian Orthodox Church Inc v Paxevanos. There is no merit in this proposed ground of appeal for two reasons. First, when properly understood, the ACAT said nothing more than that the decision allowed for the possibility that different elements of the one development application may be considered separately. That is not a misinterpretation of Mansfield J's decision.

42. Secondly, the fact that the lease of the Church block is to be construed according to its own terms, and not by reference to the terms of the DA, makes the ACAT's interpretation of Macedonian Orthodox Church v Paxevanos irrelevant.

43. The fourth proposed ground of appeal, ground (d), is also unsustainable. Whatever the ACAT may have concluded as to the effect of taking into account the cost of the Church works on the value of the Church lease is irrelevant bearing in mind its correct conclusion that the cost of those could not be taken into account.

44. I refuse leave to appeal. The applicant is to pay the respondents costs of the appeal.

I certify that the preceding forty four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Burns.

Solicitor for the Appellant: J S O'Connor Harris & Co

Solicitor for the Respondent: ACT Government Solicitor