Meriton Apartments Pty Ltd v Ku-Ring-Gai Council

Arkibuilt Pty Ltd v Ku-Ring-Gai Council [2006] NSWLEC 502; CASES CITED: Associated Provisional Picture Houses Ltd v Wednesbury Corporation [1948] AC 223; Rose Consulting Group v Baulkham Hills Shire Council (2003) 58 NSWLR 159; Trehy & Ingold v Gosford City Council (1995) 87 LGERA 262

APPLICANT Mr C McEwen SC SOLICITORS Hunt & Hunt LEGAL REPRESENTATIVES: RESPONDENT Mr J A Ayling SC SOLICITORS Phillips Fox

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

10243 of 2006 Meriton Apartments Pty Limited v Ku-Ring-Gai Council

JUDGMENT 1 Talbot J: A development application for construction of 7 residential flat buildings containing 148 apartments at 1580-1596 Pacific Highway Wahroonga was determined by the respondent council on 9 August 2005. The application was approved subject to conditions. Condition 90 prescribed payment of a contribution for the provision, extension or augmentation of community facilities, recreation facilities, open space and administration that will or are likely to be required as a consequence of development in the area. The amount required is to be in accordance with the council's adopted s 94 Contributions Plan for Residential Development ("the CP") effective from 30 June 2004 calculated for each additional person as follows: 1. Community Facilities $1,117.76 2. Park Acquisition and Embellishment Works - Wahroonga $6,574.28 3. Sportsgrounds Works $1,318.32 4. Aquatic/Leisure Centres $27.82 5. Traffic and Transport $150.28 6. Section 94 Plan Administration $100.04 2 The condition dictates that to obtain the total contribution figure the following table of occupancy rates is to be used according to the different dwelling sizes: OCCUPANCY RATES FOR DIFFERENT DWELLING SIZES Small dwelling (under 75sqm) 1.27 persons Medium dwelling (75-under 110sqm) 1.78 persons Large dwelling (110-under 150sqm) 2.56 persons Very Large dwelling (150sqm or more) 3.48 persons New Lot 3.48 persons SEPP (Seniors Living) Dwelling 1.3 persons 3 The s 94 contribution rates calculated by dwelling size for the suburb of Wahroonga are set out in table 3 of the CP as follows: No. Persons/ Dwelling Wahroonga Per Person $9,288.51 Small dwelling (under 75 sqm) 1.27 $11,796.40 Medium dwelling (75 - under 110 sqm) 1.78 $16,533.54 Large dwelling (110 - under 150 sqm) 2.56 $23,778.57 Very Large dwelling (150 sqm or more) and New Lot Subdivision 3.48 $32,324.00 SEPP (Seniors Living) Housing 1.3 $11,157.66

4 The total contribution claimed for the development of the 140 additional dwellings is currently $2,133,458.10. An original figure of $2,583,504.80 was reduced to the above figure when the consent was modified by the council on 7 November 2005 to take account of the existing dwellings on the site. The applicant has lodged a further application for modification of the consent and contends that the s 94 contribution should be reduced because it is unreasonable in the particular circumstances of the case (s 94B(3) of the Environmental Planning and Assessment Act 1979 ("the EPA Act")). 5 Notwithstanding that the occupancy rates specified in the development consent are based upon the size of the dwellings pursuant to the CP it has been agreed between the parties that it is appropriate, at least in the present case, to use the number of bedrooms to determine the number of additional persons. 6 For the purpose of determining occupancy rates it is agreed that a small dwelling equates to a one-bedroom unit, a medium dwelling equates to a two-bedroom unit and a large dwelling equates to a three-bedroom unit. The existing eight dwellings on the site are to be credited with an occupancy rate of 3.48 persons each as very large dwellings. 7 The CP forecasts that between 2004 and 2009, 3,018 additional dwellings will be erected in Ku-Ring-Gai comprising 520 houses and 2,497 other dwellings and that 4,998 additional persons will take up residence in the local government area. The forecast increase in population in the Wahroonga precinct is 627 persons. The total sum to be collected pursuant to the CP appears to be $47,184,618.54 with an applied rate per person in the Wahroonga precinct of $9,288.51. According to the applicant, by using the respondent's average occupancy rates the forecast population increase is in fact 6,669 persons so that on this basis the council could expect to receive approximately 33% additional funds. 8 Based upon the occupancy rates foreshadowed in the CP (using the criterion of the number of bedrooms), the net increase in population as a consequence of the development will be 246 persons, according to the respondent whereas the applicant claims the net increase will be 180 persons. 9 The applicant takes no issue with the approach that forecasts a population increase in the whole of Ku-Ring-Gai based upon the construction of 3,018 new dwellings. However, it is the applicant's position that the appropriate calculation of increase in population to be attributed to each development for the purposes of the CP can only be reasonably undertaken by calculating the proportion of the 4,998 additional residents that each development represents. It is submitted that the use of such a marginal occupancy rate (MOR) is a means of apportioning the actual population increase (4,998) between new developments so that the s 94 contribution is equally distributed. It is claimed this determines the marginal increase in population generated by each new dwelling to arrive at the forecast population increase of 4,998 persons as opposed to the actual population.

10 In some contexts the applicant's argument extends to the point where it is claimed that the alleged benefit from the proposed public amenity is unrelated to population in any respect. The new or increased population would therefore have no bearing on the demand for those facilities. 11 The justification for a contribution in respect of each of the multi-purpose community centre, children's services, new resident kits, traffic and public domain studies and public open space is the subject of a challenge on various grounds to support an argument that the levy is not a reasonable contribution. 12 Sections 94(1) and (2) of the EPA Act establish the criteria for the grant of development consent subject to a condition requiring the payment of a monetary contribution as follows: (1) If a consent authority is satisfied that development for which development consent is sought will or is likely to require the provision of or increase the demand for public amenities and public services within the area, the consent authority may grant the development consent subject to a condition requiring: (a) the dedication of land free of cost, or (b) the payment of a monetary contribution, or both. (2) A condition referred to in subsection (1) may be imposed only to require a reasonable dedication or contribution for the provision, extension or augmentation of the public amenities and public services concerned. 13 Section 94B(1) contains a constraint on the power of a council to impose a condition under s 94 namely only if it is a kind allowed by and is determined in accordance with a contributions plan. 14 The Court is not constrained by s 94B(1) on appeal as a consequence of s 94B(3) which is in the following terms: A condition under section 94 that is of a kind allowed by a contributions plan (or a direction of the Minister under this Division) may be disallowed or amended by the Court on appeal because it is unreasonable in the particular circumstances of that case, even if it was determined in accordance with the relevant contributions plan (or direction). This subsection does not authorise the Court to disallow or amend the contributions plan or direction. 15 In Rose Consulting Group v Baulkham Hills Shire Council (2003) 58 NSWLR 159 in construing the effect of the then s 94(12), essentially to the same effect as the present s 94B(3), the Court of Appeal preferred the interpretation that the Court on appeal has a broader discretion than that of a council in amending an unreasonable condition so it is no longer unreasonable even if no longer permitted or mandated by the contributions plan (at [35]). 16 In the course of his judgment (with which Meagher JA and Young CJ in Eq agreed), Santow JA expressed an opinion that the distinction between determining a condition to be "unreasonable" in accordance with s 94(12) and determining a condition not to be "reasonable" (s94(2)) is purely semantic. The simple test he posed is whether a condition is not reasonable in terms of s 94(1) and s94(2) so as to be challengeable on appeal as unreasonable even if the curial result is no longer in conformity with a contributions plan. 17 The earlier reasoning expressed by this Court in Trehy & Ingold v Gosford City Council (1995) 87 LGERA 262 at 275 was expressly approved by the Court of Appeal in Rose Consulting on the basis that the Court on appeal has a wider discretion than the council so that a condition may be disallowed and amended because it is unreasonable even though it was determined in accordance with the plan. The question as to whether the contribution was "unreasonable in the particular circumstances" does not invoke the Wednesbury test (Associated Provisional Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223). Santow J agreed with the submission put by the appellant in Rose Consulting that the application of the Wednesbury principle finds no support in either the context or subject matter of the provision. The discretion vested in the Court "comports with the ordinary meaning conveyed by the text of the provision". 18 Relying upon the abovementioned principles it is the applicant's case that the application of the provisions of the CP will have the effect of charging the developer with a levy that is disproportionate to the demand created by the development for the provision, extension or augmentation of the identified public amenities and public services concerned. Furthermore even if that is not right the necessary nexus between the development and the amenities and services has not been established.

Occupancy Rates 19 One of the bases for the applicant's argument is that the CP treats every potential resident of the new development as new Ku-Ring-Gai residents whereas it must be expected there will be a proportion of the current population that will relocate from existing dwellings to the new dwellings. Another major issue is whether the demand for the facilities identified by the CP will be solely generated by residents of the new dwellings or whether the amenities and services will be provided for the existing population to make up a current deficiency. 20 It is contended that the Australian Bureau of Statistics ("ABS") census data upon which the council relies forecasts a decline in the occupancy rate of dwellings. The applicant also criticises the use of census data in respect of dwelling occupancy rates as it ignores vacancy and therefore does not consider the total number of dwellings in the stock to be created during the planning period. 21 The applicant says that the only explanation for the difference of 1,671 persons in forecast population is that there will be a proportion of the existing population that will re-locate from existing dwellings to new dwellings. That forms a basis for its contention that it is reasonable to use by an MOR to determine the marginal increase in population. This contention however takes no account of the prospective change in the occupancy rates of units. It appears to assume that existing vacated dwellings will be occupied at a lower rate than the historical statistics show. It also excludes that the new occupants of existing dwellings who will come from outside the local government area.

22 I agree with the respondent that the point in time to assess the likely demand for public amenities and public services within the area that the development will require is at the time the development consent is granted. The council's approach through the CP is that as the development application is for a certain number of dwellings the demand for public amenities and services will be generated by the occupants of those dwellings. Accordingly council looks at the number of residents who will or are likely to reside in the dwellings approved under the consent. There is no disagreement that in this case the contribution will be more reasonable if determined by reference to the number of bedrooms in a dwelling rather than by reference to dwelling size used in the contributions plan.

23 The council rejects the suggested use of an MOR as it would not indicate the number of people who will of are likely to reside in dwellings to be constructed as part of any particular development. As I said above this assessment is made at one point in time namely when the development application is determined. It is appropriate in my view to look at the number of residents who will or are likely to reside in the dwellings approved under the consent by applying an appropriate occupancy rate to each dwelling.

24 The MOR of 1.66 persons adopted by the applicant represents the growth of 4,999 persons in the planning period of 2004-2009 divided by the forecast number of 3,017 new dwellings.

25 Although the application of an MOR may foreshadow or marginalise the effect of changing trends in occupancy of dwellings it is nevertheless not unreasonable, in the context of s 94, firstly to recognise that the proposed development will be expected to accommodate a net increase in population after taking account of the existing occupancy of the site and then secondly to accept that the increase will be part of the mix of the anticipated new population likely to accrue over the 5 year period of the plan. The adoption of a MOR would not account for the whole of the physical increase in the population generated by the development although prima facie it has the superficial attraction of spreading the levy, at least mathematically on its own terms, across a consistent number of people.

26 Both cases are arguable but nevertheless in the circumstances I can see no reason to find that the determination of a s 94 contribution in accordance with the CP based upon the ABS census data using an average occupancy rate that takes account of the characteristics of the development is not reasonable. Applying the reasoning of the Court of Appeal it follows there is no justification for finding that the determination of the contribution rate on a per person basis is unreasonable. 27 Notwithstanding the reasons for the applicant's support of an MOR, I accept the argument put by the council's consultant, Mr Brindle, that the average occupancy rate is the best indication of the number of persons likely to create the demand as a result of the development. If any of those persons move to the development from within the local government area it is reasonable to expect that the dwelling that is vacated by them will be occupied. 28 During cross-examination Mr Price made an unconvincing attempt to equate the methodology used in other CP's with an MOR. He was unable to identify any CP that used MOR to determine contributions. Although it is not conclusive the general use of average occupancy rate is nevertheless indicative that its adoption is widely accepted as a matter of practice. Jagot J accepted its use in Ku-Ring-Gai in Arkibuilt Pty Ltd v Ku-Ring Gai Council [2006] NSWLEC 502.

Public Open Space 29 The existing provision of open space in Wahroonga is 5.86 m2 per person and the plan seeks to supplement this by a levy to facilitate the provisions of open space at the rate equivalent to 4.37m2 for each new resident. 30 The CP states that council will attempt to purchase open space in identified locations. The only action to date is that an Open Space Acquisition Planning Study has been commissioned. Mr Brindle has explained to the Court that this might involve the expansion of existing parks, provision of new parks or improved access to parks. In his view it will enable acquisitions to be aligned with need in the most effective manner. 31 The applicant's complaint is that there is no certainty that space will be provided during the life of the plan or within reasonable proximity to the development. The foreshadowed expenditures are described as generic, non-specific and excessive. 32 The evidence from Mr Price, the applicant's expert, is general and sweeping by raising doubts about some of the primary conclusions in the council's Open Space Study, in particular the allegedly questionable basis of ignoring extensive areas of district open space. An opinion is expressed that the regional existing area of open space could meet the reasonable needs of both the present and future population. 33 Moreover it is alleged there is no reasonable certainty that the occupants will be provided with local open space through the application of the CP in its present form. There is no acquisition schedule of actual land to support cost estimates of purchase. Accordingly, whilst recognising the reasonable assessment of the per capita area demand which meets causal nexus requirements, Mr Price says that neither temporal nor spatial nexus has been satisfied. 34 Paragraphs 16-8, 16-9 and 16-10 of the CP recognise the alternative contingences of providing facilities in advance of the payment of contributions or a lag between the end of the plan and the time at which a facility is provided. The average purchase price for land has been estimated on a per square metre basis using mean sale prices of non-strata dwellings by Local Government Area. Mr Price questions whether there are realistic opportunities for the policies of the CP in this respect to be implemented. He does not dispute however that there is a demonstrable need for open space. 35 The problem for the applicant is that it cannot demonstrate by overt evidence that the council's current intentions lack integrity or substance. It was suggested during cross-examination of Mr Brindle that since the early 1990's the council has collected over $8,000,000 on this account and spent nothing. Mr McEwen SC argues that although council may attempt to purchase land within the precinct that the contributions are collected there is no promise to do so. Equally there is no indication that the council does not intend to implement the policies expressed in the CP. I am not satisfied in the circumstances that the levy in respect of the provision of open space is relevantly unreasonable.

Multipurpose Community Centre 36 Mr Price does not question, in principle, the desirability of providing a multi-purpose community facility but argues that the barrier to the use of existing facilities by a future population more relevantly relates to existing deficiencies. He raises the following issues: · While the facilities meet demands to 2026, no allowance for the identified backlog demand has been included and ought to have been. · The proposed meeting facilities are substantially superior to most currently available. These should be apportioned on a wider catchment of existing and new users. · The conference centre, auditorium and exhibition centre are new types of facilities not available elsewhere in the LGA. How these are apportioned is unreasonable. These should be apportioned over the whole population to 2026.

37 Mr Brindle identifies provisions of the CP that he says make it apparent new development will not be contributing towards meeting an existing backlog. 38 Although the proposed facility will fulfil an existing need it will nevertheless add to the range of facilities. Mr Brindle asserts that the provisions of the CP assume the future population will create a need for community space at the same rate as is available to the existing population. That is why the levy represents only 42-43% of the cost for stages 1 and 2. The need for stages 3 and 5 however is generated entirely by the new population according to Mr Brindle as the existing facilities in that respect satisfy current standards. In principle the arguments put forward by Mr Brindle are sustainable whereas Mr Price has been unable to show that the council either incorrectly or unfairly assessed the adequacy of existing facilities or that it inappropriately identified the extent of the demand created by the foreshadowed future residents.

Community Facilities - Children Services 39 The principal argument in regard to this issue ultimately devolves to a question of whether council can be regarded as providing a community benefit by providing child care services in circumstances where they operate on a user pay basis. Accepting that council currently either operates centres on the basis of giving it over to a private operator or by levying changes that are commensurate with fees paid in privately operated centres there is little, if any, justification for a contribution to meet the capital cost of the centre. Arguably the fees charged to the customers take account of that capital cost. 40 Justice Jagot considered the reasonableness of the contribution for child care services in Arkibuilt Pty Ltd. She derived a contribution of 14% of the estimated cost of the proposed centre by recognising the relationship between centres run by the council and private centres in its area. It does not appear to have been drawn to Jagot J's attention that one of the centres is privately operated on council premises thereby reduced the apportionment to 7%. The respondent accepts the 14% calculation and concedes that a reasonable contribution therefore would be $96.23 per person. The applicant now contends for half that figure namely $48.11 per person as an alternative to disallowing the contribution on this account altogether. That the council is charging fees for childcare commensurate with charges by private operations indicates that there is only a nominal communal benefit from the council service. The figures are elusive but using the determination in Arkibuilt Pty Ltd as a staring point, making an adjustment for the council owned premises utilised by a quasi private mother's group and accepting that council operated premises may make some beneficial arrangements for its users on a socially responsible basis I am prepared to vary the contribution to $25 per person by making an assessment that will be a reasonable estimate of the contribution to the public benefit by the provision of child care services by the council.

Arts Centre 41 In the absence of any proposal or information to support a contribution on this account the council has justifiably conceded that it will not pursue it.

Traffic Studies and Public Domain Studies 42 Apparently the cost of works contemplated by the traffic study are apportioned between the existing population and new residents whereas the cost of the study itself is claimed only against the new residents. On the assumption that the works in appendix 1 of the Plan are the subject of the study then it is appropriate and reasonable that the cost of the traffic study be apportioned in the same way. 43 There is no evidence to relate the public domain study solely to the new residents. It is therefore appropriate and reasonable to adopt a conservative approach and apportion this cost to ensure the cost is borne in a fair and reasonable way. 44 Mr Price calculates the contribution payable on the above basis to be a total of $63.51 per capita. I determine that that is reasonable in the circumstances of the case.

Public Art 45 The Public Art Policy of the council relates to art located in a public place. It is difficult to understand the rationale that seeks to establish the nexus between the demand created by new development and the provision of the type of so called facilities described in the CP such as: (a) A pavement mosaic project (b) A mural relief wall (c) A water sculpture (d) Indigenous street seating. 46 It is my view that such facilities are inherently and generally designed for appreciation by the whole community irrespective of population increase. I agree with Mr Price that the funding of public art works "sits uncomfortably" within the intention and context of s 94. I find that the contribution claim is unreasonable in that context and should be disallowed.

New Resident Kits and New Residential Survey 47 The applicant's argument is sourced from the expectation that new residents moving into existing housing may have access to the kit and therefore an appropriate apportionment should be made to refect that fact. Even if it be true that 25% of the new residents in the development will come from the existing areas within Ku-Ring-Gai, as the applicant suggests, nevertheless the trickle down effect means that the provision of new accommodation in the approved development facilitates vacancies elsewhere. The total cost of the survey and kits is reflected in a contribution of $13.00 per person. Apart from the minor nature of the levy, I accept that there is an appropriate nexus between the provision of residential accommodation in the development and the number of new residents in Ku-Ring-Gai generally. The development will therefore generate a proportion of the new population over the period of the plan. The contribution is held to be reasonable in the particular circumstances of the case.

Orders 1. The parties are directed to bring in an agreed form of orders to refect the above findings within 14 days. 2. Alternatively either party has liberty to restore on 2 days' notice for the purpose of settling the form of the orders to be made.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.