Meriton Apartments Pty Limited v Parramatta City Council

The categorisation of land is not required on an annual basis, the levying of rates does occur on an annual basis, hence, presumably, Meriton's claim for 1 July 2002 to 30 June 2003.

Meriton argues that the land the subject of proceedings 30347 of 2003 (the first appeal) has had the dominant use of residential accommodation since 1 July 2002 because of ongoing construction of buildings intended for residential use on the land for the whole of the rating year.

In relation to proceedings 30506 of 2003 (the second appeal) it is argued by Meriton that: (1) Between 1 July 2002 and 31 March 2003 the land was vacant and zoned inter alia for residential purposes. (2) Further, during December 2002 to March 2003 the land was being excavated but was still vacant of buildings or structures, although this may constitute a use for residential accommodation. (3) Between 1 April 2003 and 30 June 2003 its dominant use has been for residential accommodation involving the erection of a building for the purpose of residential accommodation.

The third issue is the same as the sole issue which arises in the first appeal. It is agreed that for the whole of the relevant rating period there will be no physical occupation by residents.

Summary of legal Issues 8. The legal issues raised are: 1. Should the land in both appeals be categorised as residential under s 516(1)(a) of the LG Act during the period of building construction? 2. What is the appropriate date from which the Court's declaration that the land is residential (if made) should take effect under s 526(3) of the LG Act? 3. Should the land in the second appeal be categorised as residential under s 516(1)(b) of the LG Act for the period it was vacant from 1 July 2002 to 31 March 2003?

The facts 9. There is a Statement of Agreed Facts in each appeal. In matter no 30347 of 2003 (the first appeal) the Statement of Agreed Facts is as follows: 1. The subject land is Lot 1 in DP 632003 and is situated at 15 Hassall Street, Parramatta. 2. As at 1 July 2002 the Applicant was the registered proprietor of the subject land.

The Respondent issued rate notice 792/15 on 18 July 2002 applicable to the subject land for the period 1 July 2002 to 30 June 2003 and thereby declared that the rating category for the subject land is "Business/CBD".

On 12 March 2003 the Applicant applied (by letter dated 11 March 2003 transmitted on 12 March 2003) to the Respondent for a change in the categorisation of the land for rating purposes from "Business/CBD" to "Residential" pursuant to Section 525 of the Local Government Act 1993 ("LG Act").

On 26 March 2003 the Respondent notified the Applicant that the rating category should remain as "Business/CBD".

The Applicant has appealed from the decision of the Respondent refusing to re-categorise the land pursuant to Section 526 of the LG Act.

The subject land is zoned "City Edge Zone" pursuant to the provisions of SREP No. 28, which is the environmental planning instrument which applies to the subject land.

Pursuant to clause 19(2)(a) of SREP 28 exempt development and development for the purpose of home activities may be carried out without consent. Clause 19(2)(b) provides that "any other development may be carried out only with development consent". "Any other development" would include residential development.

Development consent 97/00262/DU dated 22 December 1997 (as modified) ("the consent") has been granted in respect of the subject land and is in force. The consent authorises the erection on the subject land of two residential towers above basement parking. Tower 1 consists of 20 floors (148 residential units) and has a Gross Floor Area of 12,328.5m2 (including 85m2 of retail). Tower 2 consists of 16 floors (88 residential units) and has a Gross Floor Area of 7,489.1m2. The parking levels occupy 869.5m2 providing a total GFA of 20,687.1m2.

Prior to July 2001, an open air car park and a small shed were located on the subject land. Excavation approval was granted by Council on 15 August 2001 (CC No. NU/00547/01).

As at 1 July 2002, the subject land was in the course of construction of the basement carpark, approval for which was granted by Council on 1 November 2001.

Excavation of the site was completed in November 2001 and from that date construction of the foundations of the residential flat buildings and associated car park commenced. Since November 2001 to date, construction work for the development the subject of the consent has been carried out on the land and no other activity has been carried out.

All works carried out on the subject land between 1 July 2002 and 30 June 2003 are referrable to the consent and Construction Certificate Numbers NU/00649/01, NF/00894/01 and NJ/00836/01.

On and from 1 July 2002 the land has not been vacant land.

The subject land will remain a construction site for a period beyond 30 June 2003.

10. In matter no 30506 of 2003 (the second appeal) the Statement of Agreed Facts is as follows:
    1. The subject land at the time of the application to Council to re-categorise the land for rating purposes was Part Lot A DP 419172, Lot 1 DP 128208, Lot 1 DP 607818 and Lot 22 DP 608152 situated at 180-180A George Street and 30-32 Charles Street, Parramatta. On 30 April 2003, the four lots were consolidated into one lot being Lot 100 DP 1052493. The registration of the new DP requires the Valuer General to prepare a new valuation pursuant to the Valuation of Land Act 1916.

Pursuant to section 516(1) of the Local Government Act 1993 (the "LG Act"), the subject land is comprised of four parcels of rateable land valued as four separate assessments.

As at 1 July 2002, the Applicant was the registered proprietor of the subject land.

The Respondent has issued the rate notices 555/30, 555/32, 737/180 and 737/180A on 18 July 2002 applicable to the subject land for the period 1 July 2002 to 30 June 2003 and thereby declared that the category for the subject land is "Business/CBD".

On 12 March 2003 the Applicant applied (by letter dated 11 March 2003 transmitted on 12 March 2003) to the Respondent for a change in the categorisation of the land for rating purposes from "Business/CBD" to "Residential" pursuant to Section 525 of the LG Act.

On 26 March 2003 the Respondent notified the Applicant that the rating category should remain as "Business/CBD".

The Applicant has appealed from the decision of the Respondent refusing to re-categorise the land pursuant to Section 526 of the LG Act.

The subject land is zoned "City Edge Zone" pursuant to the provisions of SREP No. 28, which is the environmental planning instrument which applies to the subject land.

Pursuant to clause 19(2)(a) of SREP 28 exempt development and development for the purpose of home activities may be carried out without consent. Clause 19(2)(b) provides that "any other development may be carried out only with development consent" . "Any other development" would include residential development.

Development consent JF/02124/01 dated 23 August 2002 (deferred commencement reissued 20 September 2002) (the "consent") has been granted in respect of the subject land and is in force. The consent authorises the erection of a retail/residential development comprising 206 apartments and 1,300m2 of retail floor space. The site area of the subject land is 7,978m2 and the maximum permitted floor area is 22,335m2.

Prior to March 2002 three industrial buildings occupied the subject land.

As at 1 July 2002 the subject land was vacant due to the demolition of the former industrial buildings in March - April 2002. Demolition approval was granted by Council on 24 January 2002.

Excavation of the site commenced in December 2002 for the purposes of implementation of the consent. Approval was granted by Council on 6 December 2002 and Council issued Construction Certificate No. ZZ683.

Excavation of the site was completed in April 2003 and from that date construction of the foundations of the retail/residential development commenced.

The subject land will remain a construction site for a period beyond 30 June 2003. Question 1 Should the land in both appeals be categorised as residential under s 516(1)(a) during the period of building construction? Meriton's arguments 11. Section 516 of the LG Act provides: (1) Land is to be categorised as residential if it is a parcel of rateable land valued as one assessment and: (a) its dominant use is for residential accommodation (otherwise than as a hotel, motel, guest-house, backpacker hostel or nursing home or any other form of residential accommodation (not being a boarding house or a lodging house) prescribed by the regulations), or (b) in the case of vacant land, it is zoned or otherwise designated for use under an environmental planning instrument (with or without development consent) for residential purposes, or (c) it is rural residential land. (1A) For the purposes of this section, a boarding house or a lodging house means a building wholly or partly let as lodging in which each letting provides the tariff-paying occupant with a principal place of residence and in which … 12. There is no dispute between the parties that the developments approved under the development consents in both appeals are residential in character. Meriton's primary submission is that the dominant use of the land is for residential accommodation once the erection of the buildings which will ultimately be used for residential accommodation has been commenced. Pearlman J in Mackenzie v Randwick City Council (Pearlman J, NSWLEC, 26 February 1996, unreported) was relied on where her Honour held that: "dominant use" in s 516 must refer to the main or principal purpose for which land is used. …in terms of space occupied, time spent in occupation and layout.

13. The use of land involves no more than the "physical acts by which the land is made to serve some purpose" : Council of the City of Newcastle v Royal Newcastle Hospital (1957) 96 CLR 493 at 508 (Kitto J). In this case the use of land for the purpose of residential accommodation is achieved by the erection of a building or buildings in which residential accommodation can be provided. The physical acts involved in the erection of a building is the means by which the land is made to serve that purpose.

Council's argument 14. The Council submitted that the fundamental flaw in Meriton's interpretation of the phrase "its dominant use is for residential accommodation" in s 516(1)(a) of the LG Act is that reliance is placed on planning terminology and case law in the planning law area (these cases are referred to in my finding below). This case concerns categorisation for rating purposes only. The Council's counsel pointed out that in Mackenzie Pearlman J did not follow the approach taken in Foodbarn Pty Ltd v Solicitor-General (1975) 32 LGRA 157 on the classification of "dominant use" finding that it was not the correct approach in that case. Rather, she applied the alternative meaning of "dominant" meaning "main" or "principal".

15. The Council argued that "residential" and "accommodation" should be given their ordinary dictionary meanings, that is, actual occupation of buildings by residents. The Council argued that the use for residential accommodation has not yet commenced because no building exists to house residential accommodation.

The determination of the words "use is for" requires identification of the use which requires in turn the identification of the user and the owner and/or occupier. This interpretation is supported by the exceptions to residential accommodation specified in s 516(1)(a) which exempt from residential accommodation hotel, motel, guest-house, backpacker hostel or nursing home. Meriton, as the owner and occupier of the site, will never use the land for residential accommodation, it was submitted. The dominant use of the land in this case is property development and the appropriate rating category is therefore business.

The Council relied on a New Zealand case of Hutt City Council v Aged-Care Hospitals Ltd [1998] 2 NZLR 137 where the Court of Appeal looked at the use of a property by the occupier, that is, the person primarily liable for rates, to support this submission. As the obligation to pay rates falls on the owner of the land it is the owner's purpose that is relevant for rating purposes.

Finding on question 1 18. What does "its dominant use is for residential accommodation" mean in s 516(1)(a)? There is no guidance provided in the LG Act as to the interpretation of this phrase. Nor is there any definition of "use" in the LG Act's dictionary. I have not been referred to any cases in the ratings context precisely dealing with the issue before me. Meriton has relied on a number of cases dealing with planning law to draw on legal approaches which can inform the law applicable this case. I do not agree with the Council that such planning cases can have no relevance to the statutory context concerning rating of land before me. Consideration of the use of land in a case such as Council of the City of Parramatta v Brickworks Limited (1972) 128 CLR 1, which considered existing use rights, can assist in the interpretation of statutory terms such as "use". Care must obviously be exercised where a decision is based on a particular statutory framework which does not apply here.

19. A useful starting point, which supports Meriton's case, is Council of the City of Newcastle v Royal Newcastle Hospital which concerned whether or not unimproved, meaning not built upon, grounds of the hospital were "used or occupied by the hospital … for the purposes thereof" under s 132(1)(d) of the Local Government Act 1919. The issue was relevant to whether that land was exempt from rates. At 515 Taylor J stated: The uses to which property of any description may be put are manifold and what will constitute "use" will depend to a great extent upon the purpose for which it has been acquired or created. Land, it may be said, is no exception and s. 132 itself shows plainly enough that the "use" of land will vary with the purpose for which it has been acquired and to which it has been devoted …

His Honour continued: But where an exemption is prescribed by reference to use for a purpose or purposes it is sufficient, in my opinion, if it be shown that the land in question has been wholly devoted to that purpose even though, the fulfilment of the purpose does not require the immediate physical use of every part of the land. These statements were accepted by Gibbs J (Barwick CJ, Menzies and Owen JJ agreeing) in Brickworks at 22.

20. In Brickworks certain land was being used as a brickworks and quarry. Further land adjoining the brickworks and quarry had been purchased. The issue was whether the further land was the subject of existing use rights when it had not all been physically used for quarrying or brickworks. It was held at 21 - 22 that:

It is not enough to bring cl. 32 into operation that land has been acquired with the intention of using it for a particular purpose in the future. On the other hand, it is not necessary, to constitute a present use of land, that there should be a physical use of all of it, or indeed of any of it. … if the whole of the land in question was acquired for and devoted to the purpose of quarrying and brick-making, the whole may be held to have been used for that purpose although only part of it was physically used.

21. In those cases part of the whole site was being used for the relevant physical purpose at the time the Court was considering vacant land within the site to determine its use, unlike here. I nevertheless agree that they support Meriton's contention that it is not necessary to have a final building ready for occupation to conclude that land is used for the purposes of residential accommodation.

22. I accept Meriton's reasoning that use of land must be for a purpose and that the erection of a building is the means in this case by which the land is made to serve that purpose (see par 13). While intention to use vacant land is not sufficient, as was conceded by Meriton, the purpose of the use of land is manifested by the commencement of building construction the use of which building is for the purpose of residential accommodation.

Whose purpose is relevant? 23. I consider that the physical purpose for which the land is used, as set out at par 19 - 22, must be determinative for rating purposes rather than another purpose of the owner/occupier in using the land, in this case, undertaking the business activity of property development. I do not therefore accept the submission of the Council that it is the owner's purpose which defines for rating categorisation the purpose of the use of the land. The New Zealand decision of Hutt relied on by the Council concerns a different statutory context and I do not find it persuasive.

24. I agree with Meriton that the position argued by the Council would lead to anomalous results. As will become clear from my answer to question 3 concerning the second appeal, I consider Meriton's land should be categorised as residential when vacant. If the Council is correct, during the building process, from the commencement of building construction, at which point the land ceases to be vacant land under s 516(1)(b), until the completion of the building and issue of an occupation certificate authorising use and occupation of the building for residential accommodation, the land could not be categorised as residential. As the land falls within neither s 516(1)(b) nor (a) for that period, the land would be categorised as "business" pursuant to s 518 on the Council's case. It would then revert to residential when the occupation certificate issued, or was actually occupied as residential accommodation depending on the basis on which the Council's argument was accepted.

25. If the intention of the owner of premises is the relevant purpose then, for example, any residential property which is rented out may be considered as "business" for rating purposes. If the owner then moved in the property would revert to a residential category. Such a system would be extremely cumbersome for local councils and property owners to administer in my view.

Is the different drafting in s 516(1)(a) and (b) relevant? 26. Is there any useful distinction between "use is for residential accommodation" in s 516(1)(a) and "use … for residential purposes" in s 516(1)(b)?

27. The Council argued it is necessary to look at the actual and present use of the property under s 516(1)(a), not the planning use as Meriton's arguments were characterised. This is contrasted, according to the Council, with s 516(1)(b) which focuses on future use and therefore does use the planning terminology of "for residential purposes". I agree with the Council that s 516(1)(a) is concerned with present use. For reasons I have given above I do not consider I am applying a "planning" approach to the interpretation of s 516(1)(a) so that I do not find the distinction the Council seeks to draw between s 516(1)(a) and (b) to be of assistance.

28. Accordingly, the land in both appeals should be categorised as residential under s 516(1)(a) during the period of building construction. Question 2 What is the appropriate date from which the Court's declaration that the land is residential (if made) should take effect under s 526(3)? 29. Another argument raised by the Council is that if Meriton is successful in both appeals the date of the Court's declaration of a change to a residential rating under s 525(3) should be the date of the application for review made to the Council, in other words, 12 March 2003. If I so find then the treatment of vacant land in the second appeal under s 516(1)(b) between 1 July 2002 and 31 March 2003 arises from 12 to 31 March 2003 only.

Council's argument 30. Under s 523 a council is not required to annually review a declaration that a parcel of land is within a particular category for rating purposes but may review a declaration at any time. Under s 523(2) a council is required to review the declaration if required to do so under s 525 by a person who has rateable land. Section 525(1)(a) provides that a rateable person may apply at any time for a review of a declaration that the person's rateable land is within a particular category under s 514. In this case Meriton has applied for reviews of the categorisation of its land from 1 July 2002. Meriton had made an earlier application under s 525 which was refused but Meriton did not appeal against that decision.

31. The Council argues that to make the declaration from a date earlier than Meriton's application to the Council is to undermine the appeal provisions which provide that an appeal must be made within 30 days after a declaration under s 525. Further, the Council argued that it should not be deprived of additional revenue to which it has hitherto been entitled before the time it was given notice of the circumstances which give rise to the entitlement to the change in category for rating purposes. To do otherwise would be unfair. Meriton's arguments 32. If the Court finds that Meriton's view of the facts is correct and the property should be regarded as in the residential category from 1 July 2002, then the declaration should be made from that date. To do otherwise would mean the Council has had a windfall due to the erroneous categorisation of the land as "business".

33. The facts as found by the Court should be reflected in the declaration made by the Court. There is no limit specified in the legislation on the declaration the Court may make under s 526(3). Not to do what Meriton proposes would result in unjust enrichment within the meaning of David's Securities Pty Limited v Commonwealth Bank of Australia (1992) 175 CLR 353 as the Council would have received money based on a category that is incorrect. I note that the Council argued that the issue of unjust enrichment did not arise at all as there was no mistake, duress or illegality occasioned by the facts in this case which would give rise to any suggestion that there was unjust enrichment.

Finding on question 2 34. Section 526(3) does not fetter the Court's discretion in any way. It states: the Court, on an appeal, may declare the date on which a declaration is to take effect or the category for the land, or both, as the case requires . Section 525 provides that a rateable person can apply to the Council at any time for a review. The fact that an application can be made at any time and that there is a 30 day limit for an appeal to be lodged under s 526(2) should not be interpreted as limiting the period of a declaration made by the Court to the date of the application for review made to the Council. Nothing in the legislation suggests such a limitation should be applied. How the Court's discretion is exercised in making any declaration sought will depend on the circumstances of each case. If the circumstances warrant a change in the rating category I consider it would generally be appropriate to make such a change from the time sought in the absence of any "disentitling" conduct by an applicant. It is not necessary to consider the issue of unjust enrichment raised by Meriton's submissions. In this case there is no reason why the Court's discretion should not be exercised to make a declaration commencing from 1 July 2002.

35. Accordingly, any declaration by the Court that the land in the appeals is residential for rating purposes can date from 1 July 2002. Question 3 Should the land in the second appeal be categorised as residential under Section 516(1)(b) for the period it was vacant from 1 July 2002 to 31 March 2003? 36. Given my finding on question 2 it is appropriate that I now consider question 3. This question is only relevant to the second appeal and is limited to 1 July 2002 to 31 March 2003 when the parcels of land in question were vacant. It is agreed that the land was vacant from 1 July 2002 to 31 March 2003, and that excavation in preparation for building took place from December 2002.

Council's argument 37. Section 516(1)(b) provides vacant land is residential if it is zoned or otherwise designated for use under an environmental planning instrument for residential purposes. Section 516(1)(b) is not available to Meriton, according to the Council, because, under SREP 28, the property is zoned "City Edge zone" whereby any development may be carried out with development consent. This could include residential accommodation. The provisions of this zone do not meet the requirements of s 516(1)(b) because this is not designation for use for residential purposes.

38. Accordingly, the Council argues that s 519 must be considered where vacant land is not able to be categorised under s 516 (or as farmland under s 515 or mining under s 517). Section 519(a) provides that if the land is zoned or otherwise designated for use under an environmental planning instrument the land is to be categorised " … according to any purpose for which the land may be used after taking into account the nature of any improvements on the land and the nature of surrounding development" . It is clear from the plan attached to the SREP that the site is surrounded by a variety of developments including office and parkland. None of the surrounding development is residential in nature. Accordingly, the Council argued s 519(a) does not apply and the vacant land cannot be categorised as residential. It must therefore be categorised as "business" in conformity with s 518.

Meriton's argument 39. Meriton argued that each of the parcels of land is zoned for use under SREP 28 for residential purposes because the instrument permits, with development consent, residential development. It is irrelevant that the land can also be used for other purposes. Accordingly, s 516(1)(b) can be applied as the land is zoned or otherwise designated for use under an environmental planning instrument for residential purposes. Meriton relied on Wuudee Australia Pty Ltd v South Sydney City Council (Waddell AJ, NSWLEC, 31 October 1994, unreported) [ Wuudee No 2 ] a decision of Waddell AJ which Meriton said favoured their interpretation. In Wuudee No 2 the same legislative provisions as apply in this case were considered. Waddell AJ held that: The reference to "dominant use" in [s 516(1)(a)] and consideration of the common form of environmental planning schemes show that if vacant land may be developed for residential purposes, with or without development consent, it must be categorised as "residential". It is not relevant that it might be used, with or without development consent, for other purposes.

Finding on question 3 40. Do the words in s 516(1)(b) mean that if an environmental planning instrument allows development of any kind, including residential, subject to obtaining development consent the section is satisfied? I agree with Meriton's submissions and the reasoning in Wuudee No 2 that they do. Wuudee No 2 concerned land zoned Residential 2(f) under an LEP whereby development could be carried out without development consent for the purpose of "dwelling-houses except in conservation areas". Development was also permissible with consent for a variety of other purposes including boarding houses, residential flat buildings, car repair stations, group homes, hotels, clubs, and commercial premises.

If it is necessary to go beyond the actual words in the section as the Council urged me to do, in the City Edge zone in this case development consent is required for dwelling houses, as for all other development except home activities. The objectives of the zone include: (b) to encourage an increase in the permanent residential population through new residential development or the conversion of existing buildings and to ensure the maintenance of a range of housing choice Given the general wording in s 516(1)(b) referring to zoning for residential purposes in an environmental planning instrument, it would appear this is satisfied by the City Edge zone.

The Council urged on the Court the approach of Bignold J in Wuudee Australia Pty Ltd v South Sydney City Council (1993) 80 LGERA 1 [ Wuudee No 1 ]. I note that that case was based on the previous rating provisions under the Local Government Act 1919 as amended by the Local Government (Rating) Amendment Act 1977. That case was distinguished by Meriton for that reason, because the statutory provisions were materially different to those before me. While the statutory provisions addressed were different, I consider the general approach of Bignold J supports Meriton's case if it is necessary to go beyond the words of s 516(1)(b). In his reasoning Bignold J noted that "there is no standardised content to conventional zones and zoning provisions may vary considerably" . Bignold J held that the definition in question was principally concerned to identify the permissible uses to which the relevant land may be put. Furthermore, " the real inquiry is directed to the uses to which the subject land may be put as it is not only permissible, but necessary, to examine all of the provisions of the South Sydney Local Environmental Plan No 101 to ascertain what those relevant uses are" . His Honour went on to consider the objectives of the zone. He ultimately concluded that the land fell within "a business, commercial or industrial zone" under the LEP because of its potential to accommodate significant business, commercial or industrial uses although it also had potential to accommodate significant residential uses.

In this case I must consider the application of the words " zoned or otherwise designated for use under an environmental planning instrument … for residential purposes" . The terms of the LEP, particularly the objectives, suggests that this provision is satisfied by the facts of this case. As Bignold J held, there is no application of standard drafting in environmental planning instruments and the range of zones which permit residential purposes is potentially very wide, including the City Edge zone in this case.

I consider s 516(1)(b) applies so that the vacant land is residential. It is not therefore necessary that I consider s 519 as s 516 applies.

Accordingly the vacant land in the second appeal is categorised as residential under s 516(1)(b) from 1 July 2002 to 31 March 2003. In its primary submission Meriton proceeded on the basis that the land was vacant from 1 July 2002 to 31 March 2003 including the period of excavation from December 2000 to 31 March 2003. It is clearly arguable, as Meriton put in the alternative, that the construction of the building commences with excavation, that is, from December 2002. The Council also argued that excavation meant that there was a change from vacant land as this was the commencement of building. Given my finding in question 1, the excavated land would be categorised as residential from December 2002 on the same basis as I found in question 1 in any event.

Summary of findings of law 46. Question 1: Should the land in both appeals be categorised as residential under s 516(1)(a) of the LG Act during the period of building construction? Answer: Yes.

Question 2: What is the appropriate date from which the Court's declaration that the land is residential (if made) should take effect under s 526(3) of the LG Act? Answer: 1 July 2002.

Question 3: Should the land in the second appeal be categorised as residential under s 516(1)(b) of the LG Act for the period it was vacant from 1 July 2002 to 31 March 2003? Answer: Yes.

47. Meriton has been successful in these Class 3 proceedings. I require the parties to file short minutes of order giving effect to these findings in relation to the two appeals within seven (7) days. I will reserve the question of costs.

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