McFadyen Architects Pty Limited v Kogarah Council

Burwood Area Community Housing Ltd v Sutherland Shire Council (2006) 146 LGERA 91; Currey v Sutherland Shire Council (2003) 129 LGERA 223; CASES CITED: Currey v Sutherland Shire Council [2002] NSWLEC 195; Hubertus Schuetzenverein Liverpool Rifle Club Limited v Commonwealth of Australia (1994) 51 FCR 213; Snook v London and West Riding Investments Ltd (1967) 2 QB 786

APPLICANT Mr J Ayling SC SOLICITORS Susan Hill & Associates Lawyers Pty Ltd LEGAL REPRESENTATIVES: RESPONDENT Mr S Berveling SOLICITORS Pike Pike & Fenwick

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

McFADYEN ARCHITECTS PTY LIMITED Applicant

JUDGMENT Jagot J: Introduction 1 McFadyen Architects Pty Limited lodged a development application with Kogarah Council on or about 28 October 2005, as agent for Macedonian Aged Care and Accommodation Limited ("MACAL"). MACAL proposes to develop land in the Kogarah local government area for the purpose of a residential aged care facility of 64 rooms. MACAL's appeal with respect to the development application is to be heard by the Court on 18-19 December 2006.

2 MACAL contends that its development application should be assessed and determined pursuant to the provisions of State Environmental Planning Policy (Seniors Living) 2004, because it is a "local government or community housing provider" and the Seniors Living SEPP allows such providers (but not other persons) to carry out development for the purpose of seniors housing in Kogarah. The Council contends that MACAL's development application must be assessed and determined under the provisions of the Kogarah Local Environmental Plan 1998 because MACAL was not when it made the application (and is not now) a "local government or community housing provider" as defined in the Seniors Living SEPP.

3 MACAL's proposed development is permissible with consent under the Kogarah LEP. Accordingly, determining the application of the Seniors Living SEPP is not capable of resolving the appeal. Nevertheless, Pt 7 of the Seniors Living SEPP identifies development standards that cannot be used as grounds to refuse development consent to a development application made pursuant to Chapter 3 of the SEPP. Given the inconsistency provisions in cll 5(3) and 17 of the Seniors Living SEPP, the parties agree that answering the question whether the SEPP applies to MACAL's proposed development will or is likely to affect the assessment and determination of the development application.

4 To this end, both parties now seek the separate determination of the following question: Is development application 485/05, lodged with the Respondent on or about 28 October 2005 to carry out development pursuant to SEPP (Seniors Living) 2004 on land within Kogarah Local Government Area, an application made only by or on behalf of a local government or community housing provider?

5 The Council accepts that McFadyen Architects lodged the development application by or on behalf of MACAL only (cf Burwood Area Community Housing Ltd v Sutherland Shire Council (2006) 146 LGERA 91), and that the application proposed development in accordance with the Seniors Living SEPP. The statement of environmental effects accompanying the development application recorded that MACAL was a "company that has been approved as a community housing provider", apparently in reliance on part of the definition of "local government or community housing provider" in cl 3(1) of the Seniors Living SEPP.

6 "Local government or community housing provider" is defined to mean: (a) a local government organisation, or a not for profit organisation, that is a direct provider of housing to tenants receiving government housing subsidies, or (b) an organisation approved by the Minister.

7 Chapter 3 of the Seniors Living SEPP allows development for the purpose of seniors housing despite the provisions of any other environmental planning instrument. Clause 22 of Chapter 3 provides that the provisions of Sch 3 have effect despite any other provisions of the Seniors Living SEPP. Schedule 3 contains special provisions relating to certain land, including item 1 as follows: 1 Development in Kogarah

An application to carry out development allowed by Chapter 3, if the development is to be carried out on land within the Kogarah local government area, may be made only by or on behalf of: (a) the Director-General of the Department of Housing, or (b) a local government or community housing provider.

8 MACAL is a company limited by guarantee. On 21 December 2004, its constitution was amended to include powers to provide benevolent relief of sickness, suffering and distress caused by old age, retirement and nursing homes, and accommodation for the sick, aged and infirm who do not have capacity to pay fees for such services. It is a not for profit organisation, that is endorsed to receive charity tax concessions and as a public benevolent institution for taxation purposes. It is authorised to fundraise for charitable purposes. It has not been approved by the Minister as a community housing provider, however.

9 About 10 months after it lodged the development application, MACAL entered into a tenancy agreement as tenant of a residential unit in Bexley for a term commencing on 30 August 2006 and ending on 15 May 2007. Clause 21 of the agreement provides that a tenant may with the landlord's prior permission assign the whole or part of the tenant's interest under the agreement or sub-let the residential premises. On 7 September 2006, MACAL entered into a residential tenancy agreement with two people for a term of 28 weeks. Those people both receive rent assistance from the Commonwealth as part of the Newstart Allowance entitlement and partner allowance entitlement under the provisions of the Social Security Act 1991 (Cth). This rent assistance commenced on 20 September 2005 and 15 September 2000 respectively. Prior to this arrangement, MACAL was not providing housing to any person.

10 MACAL submits that these arrangements, in addition to its (agreed) not for profit status, satisfy the definition of "local government or community housing provider", and enable its development application to be assessed and determined pursuant to the Seniors Living SEPP.

11 The Council submits that: (1) The definition of "local government or community housing provider" requires the development application to be made by or on behalf of an organisation that, at the time the application is made, is a not for profit organisation that is a direct provider of housing to tenants receiving government housing subsidies. I should observe that the Council's focus on the time of making the development application arose for the first time during submissions responding to questions that I posed about the definition.

(2) MACAL was a not for profit organisation at that time, but was not a direct provider of housing to tenants receiving government housing subsidies at that time.

(3) MACAL's status had not subsequently altered because: (a) MACAL was not a direct provider of housing to tenants as the only arrangement into which it had entered was a sub-lease, when to be a "direct provider" MACAL must own a building and lease units within that building to tenants;

(b) alternatively, if the lease and sub-lease arrangement meant that MACAL was a direct provider of housing to tenants, I should not be satisfied that the sub-lease was lawful, and the unlawful sub-leasing of premises cannot fall within the definition; (c) I could not be satisfied on the evidence that the sub-tenants would continue to receive rent assistance, because the basis of their entitlement to rent assistance was the Newstart allowance which was inherently fragile, in circumstances where the definition emphasised a requirement for continuity;

(d) the method by which MACAL sought to bring itself within the definition, by entry into one lease and sub-lease was artificial and a sham; and

(e) the development application does not propose that the tenants of the development receive government housing subsidies.

12 The provisions of the Seniors Living SEPP must be understood in the context set by the Environmental Planning and Assessment Act 1979 (the EPA Act). Section 76A of that Act is the central provision giving effect to environmental planning instruments. Under that section, if an environmental planning instrument provides that specified development may not be carried out except with development consent, a person must not carry the development out on land to which the provision applies unless such a consent has been obtained and is in force and the development is carried out in accordance with the consent and the instrument. Under s 76A(2), development consent for the purposes of s 76A(1) may be obtained by the making of a determination by a consent authority to grant development consent. Division 2 of Pt 4 of the Act sets out the procedures for development that needs development consent, including applying for development consent as provided for in s 78A. Any person may, subject to the regulations, apply to a consent authority for consent to carry out development. Division 1 of Pt 6 of the Environmental Planning and Assessment Regulation 2000 contains the procedures for making and amending development applications, and related matters.

13 People apply for consent to carry out development (s 78A) because environmental planning instruments provide that many classes of development may be carried out only with development consent (s 76A). Applications then must be determined in accordance with s 79C, including the obligation to consider such of the provisions of the environmental planning instrument as are of relevance to the development the subject of the development application. In other words, people apply under the EPA Act to carry out development in accordance with environmental planning instruments. They do not apply to do so under environmental planning instruments.

14 In Currey v Sutherland Shire Council (2003) 129 LGERA 223 at 231, Spigelman CJ identified the scheme for making development applications as "permissive and procedural". He observed that he could see little, if any, scope for the concept of a "valid" application as: Citizens are entitled to apply to authorities for whatever they like. The relevant prohibition in the legislative scheme is found in s 76A, which prohibits development without consent, where an environmental planning instrument provides that development may not be carried out except with consent. There is no relevant prohibition, express or implied, which impinges upon the application making process. 15 This observation reflects the operation of Divs 1 and 2 of Pt 4 of the EPA Act. Item 1 of Sch 3 to the Seniors Living SEPP should be construed in that legislative context and as part of the scheme established by the instrument to meet the needs of seniors in accordance with its aims in cl 2.

16 Chapter 3 of the Seniors Living SEPP permits the development of seniors housing, but only with development consent unless another environmental planning instrument allows that development without development consent (cl 18). In so doing, it also allows development to be carried out in accordance with the Seniors Living SEPP despite the provisions of any other environmental planning instrument (cl 17). By these provisions, the SEPP has three effects with respect to land where it applies, all directed to facilitating the provision of seniors housing consistent with the aims of the SEPP. First, the SEPP preserves the operation of other instruments that enable development for the purpose of seniors housing to be carried out without consent. Secondly, the SEPP prevails over instruments that prohibit development for that purpose. Thirdly, the SEPP prevails over instruments that also permit development for that purpose, but only with development consent. The parties raised no issue about the fact that Seniors Living SEPP applies to the land the subject of the development application (see cl 4).

17 Although many provisions of the Seniors Living SEPP refer to "a development application made pursuant to this Chapter", the SEPP assumes the existence of the EPA Act and Regulations with respect to applications. In this context, the notion of a "development application made pursuant to this Chapter" is a contraction. It can only be understood as meaning "an application under the EPA Act to carry out development allowed by this Chapter". This construction is consistent with the provisions of the EPA Act, in particular ss 76A and 78A. It also casts light on the proper construction of item 1 of Sch 3.

18 The relevant application contemplated by item 1 of Sch 3 to the Seniors Living SEPP is one to "carry out development allowed by Chapter 3". I can see no reason, as a matter of language or logic, that would preclude a development application from satisfying the requirements of item 1 of Sch 3 merely because the organisation obtained the relevant status (of local government or community housing provider) after it applied to the consent authority for consent to carry out seniors housing development and before determination of its development application. Before the organisation obtained that status, its development application would not (and could not) be one to carry out development allowed by Chapter 3 of the Seniors Living SEPP (because of cl 22 and item 1 of Sch 3). If the organisation obtains that status before its development application is determined, then the application becomes an application to carry out development allowed by Chapter 3 made only by or on behalf of one of a local government or community housing provider.

19 Accordingly, cl 2 and item 1 of Sch 3 to the Seniors Living SEPP do not qualify the capacity of any person to apply to carry out development in the Kogarah local government area. That function is left to s 78A of the EPA Act and the Regulations. Rather, they limit the application of Chapter 3 of the Seniors Living SEPP to applications that may, at the time of determination, be characterised as applications made only by or on behalf of one of a local government or community housing provider. If the application cannot be so characterised at that time, then the application cannot be one to carry out development allowed by Chapter 3 of the SEPP.

20 This conclusion is consistent with the scheme of the EPA Act and with Court of Appeal's approval of the decision of Lloyd J in Currey that any defect or irregularity in the development application in that case could be cured by "regarding the development application as having been made nunc pro tunc" (2003) 129 LGERA 223 and 230 - 231 (Currey v Sutherland Shire Council [2002] NSWLEC 195 at [42]).

21 For these reasons, the status of MACAL is to be determined having regard to the information currently available.

22 The parties agree that MACAL is a not for profit organisation. Accordingly, the issue is whether MACAL is a not for profit organisation, that is a direct provider of housing to tenants receiving government housing subsidies.

23 I do not accept the Council's submission that being a "direct provider of housing to tenants" requires MACAL to own the building in which the tenants are housed. Nothing in the definition imposes that constraint. I consider that the definition uses the word "direct" to convey a requirement that the organisation itself make housing available. Absent the requirement that the organisation be a "direct provider", the definition might be satisfied by, for example, organisations that provide assistance (by way of funding or otherwise) to some other person or body who makes housing available. The qualification "direct" is intended to limit the application of the Seniors Living SEPP in the Kogarah local government area to organisations that in fact provide housing. Whether the organisation owns the building in which the housing is provided is not to the point. An organisation can be a direct provider of housing to tenants without having title to land. It can, as here, obtain rights over housing and, by so doing, be a direct provider of housing to tenants by vesting in the tenants rights of occupation. The relationship between MACAL and the tenants directly provides housing to the tenants.

24 As MACAL submitted, the Council's concerns that MACAL's rights of occupancy depend on the head residential tenancy agreement continuing are immaterial. Assuming the Council to be correct, if MACAL owned the building and no other, MACAL's ongoing status as a community housing provider would depend on it continuing to own the building and continuing the residential tenancy agreement with the tenants. Further, there is no suggestion (other than the rights of termination contemplated by the agreement and by statute) that the residential tenancy arrangements will or are likely to be terminated before the development application is determined. The Council's concerns about MACAL's ongoing status with respect to the development are a separate matter, that I deal with below.

25 The Council's argument based on the lawfulness or otherwise of the sub-lease, pressed faintly at the hearing, is not sustainable. First, MACAL tendered a letter from the landlord's agent confirming that the sub-lease was granted in accordance with the requirements of cl 21 of the lease. In the face of that evidence, there is no basis for the Council's submission that any aspect of the sub-lease constituted a breach of the head lease. Secondly, and as MACAL submitted, the residential tenancy agreement between MACAL and the tenants is regular on its face creating enforceable rights and obligations between MACAL and the tenants.

26 The Council's submission that the rent assistance received by MACAL's tenants, based on the Newstart allowance, was "fragile" and did not exhibit the necessary degree of continuity contemplated by the phrase "receiving government housing subsidies", cannot stand in the face of the evidence. The evidence established that both tenants were receiving rent assistance up to 10 November 2006, and leads to the inference that such assistance will continue absent some change of circumstances. The date of grant of rent assistance to one tenant was 15 September 2000, and to the other, 20 September 2005. There was no evidence to suggest that the position of the tenants with respect to rent assistance will alter at any time during the currency of the residential tenancy agreement. The Council accepts that the rent assistance constitutes a "government housing subsidy".

27 I move now to the Council's final two arguments, which I infer are the substantial reasons motivating the concerns of the Council - namely, that MACAL presently provides housing to two tenants receiving government housing subsidies only and that there is an insufficient basis to be satisfied that the tenants of the development proposed in the development application will themselves receive government housing subsidies. The Council perceived the first of these circumstances as a sham and the second as circumventing the provisions of the Seniors Living SEPP and enabling it to be used as a "money making exercise" when the relevant intention of the SEPP was to facilitate housing to accommodate tenants receiving government housing subsidies. In other words, development proposed to be carried out by a community housing provider (continuously) was intended to receive the perceived advantages of the Seniors Living SEPP, whereas others (motivated by profit) should develop seniors housing in accordance with the Kogarah LEP.

28 With respect to the argument that the arrangements are a sham, as MACAL submitted, "sham" may be a "popular and pejorative word", but it means doing acts or executing documents which are intended "to give to third parties or to the Court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create" (Snook v London and West Riding Investments Ltd (1967) 2 QB 786 at 802). The arrangements between MACAL and its tenants create precisely the legal rights and obligations apparent on the face of the residential tenancy agreement. MACAL is a not for profit organisation, the specific powers of which (since December 2004) include providing benevolent relief of sickness, suffering and distress caused by old age, retirement and nursing homes, and accommodation for the sick, aged and infirm who do not have capacity to pay fees for such services. Because this aspect of its activities is new, it is not surprising that MACAL cannot yet point to more than one arrangement where it has directly provided housing to tenants who receive government housing subsidies. Presumably, the very purpose of this development application is to enable MACAL to fulfil its objects by providing it with 64 rooms that it can directly provide to tenants who receive government housing subsidies. Be that as it may, its current arrangement is sufficient to bring MACAL within the definition, and there is no basis in the evidence to characterise that arrangement as a sham or its consequence as contrived or artificial.

29 With respect to the development itself, I think the Council is correct with respect to the policy underlying cl 22 and Sch 3 of the Seniors Living SEPP, but incorrect about the consequences of that policy.

30 The definition of "local government or community housing provider" focuses on the status of the organisation that applies to carry out the development, not the continuing status of the development. That fact does not mean that the provisions of Sch 3 of the Seniors Living SEPP can be circumvented and used as a "money making exercise".

31 First, the requirements of the definition are cumulative. If not a local government organisation or an organisation approved by the Minister, the organisation must be a not for profit organisation involved in the relevant activity (direct provider of housing to tenants receiving government housing subsidies) for the Seniors Living SEPP to apply.

32 Secondly, cl 22 and item 1 of Sch 3 are concerned with the application of the Seniors Living SEPP to proposals to carry out development. If such an application is determined by the grant of consent, the development must be carried out in accordance with that consent (s 76A(1)(b)). Clause 20 of the Seniors Living SEPP addresses one aspect of the use of developments permissible with consent by reason of the SEPP - the requirement for occupation of the development by seniors. Clause 20(3) recognises that there may well be other aspects of the use of development appropriate to be conditioned. If a development application obtains some benefit through the application of the Seniors Living SEPP, then one such aspect may well be a requirement that a local government or community housing provider continue to control occupation of the development and make rooms within it available to tenants receiving government housing subsidies. The (apparent) fact that funding under the Aged Care Act 1997 (Cth) depends upon an allocation of places and associated grant of subsidies after the construction of the development means that such a condition should be carefully worded to be capable of practical implementation, but I can see no reason for there not to be such a condition where an application obtains some material benefit from assessment under the Seniors Living SEPP solely by reason of the identity of the applicant on whose behalf the application is made.

33 In other words, the Council's legitimate concern about development in fact fulfilling the policy apparent in the provisions of the Seniors Living SEPP is a matter for resolution in the process of assessing and determining the development application and, in particular, by imposing appropriate conditions of development consent if the development warrants the grant of consent. Those legitimate concerns are not resolved by characterising MACAL as having sought to work a sham on the Council and the Court by doing nothing more than entering into arrangements that fulfil a number of express powers within MACAL's constitution. This conclusion is also consistent with the scheme of the EPA Act. If development is granted consent, then the ongoing use of the development (in this case, for aged care) is regulated by consent conditions, not the status of the person who made the application or, generally speaking, the terms of the application itself (s 76A(1)(b) of the EPA Act and, for example, the authorities collated in Hubertus Schuetzenverein Liverpool Rifle Club Limited v Commonwealth of Australia (1994) 51 FCR 213).

34 For these reasons, I am satisfied that MACAL, by reason of its status as a not for profit organisation, that is directly providing housing to two tenants receiving government housing subsidies, is a community housing provider as defined in cl 3(1) of the Seniors Living SEPP.

35 Given this conclusion, it is it is not strictly necessary for me to make any observation about another aspect of the definition of local government or community housing provider emphasised by the Council - namely, the present tenses apparent in the words "is" and "receiving". However, I have some difficulty with the notion that the definition excludes a not for profit organisation that will directly provide housing to tenants who will be receiving government housing subsidies through implementing the development the subject of the development application (if granted consent). It is not clear to me why the definition would be read as distinguishing between a not for profit organisation that will satisfy the definition through the development itself and not for profit organisations that satisfy the definition before the development is carried out. The only consequence of that would be to disadvantage not for profit organisations wishing to provide this service when they had not done so previously. The Council's answer that the organisation would have to rely on the Kogarah LEP for the first part of its development and could then rely on the SEPP (once it had built stage one and was directly providing housing to tenants receiving government housing subsidies) was not persuasive. Given that all development applications are prospective and in light of the aims of the Seniors Living SEPP, I would tend to favour a construction of the definition that embraced a not for profit organisation that, through the development, is to be a direct provider of housing to tenants receiving government housing subsidies.

36 The separate question posed for determination by the parties should be answered "yes".

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