Plaintiff v Defendants

"Before certification the plan of subdivision must be amended to include a 40m wide drainage reserve, with title vested to Melbourne Water Corporation, in accordance with the dimensions shown on the attached plan."

7 A permit containing such a condition was issued on 6 September 2005. On 15 September 2006, an application was lodged by Domus to amend the planning permit. The application for amendment was forwarded to the Corporation and eventually the permit was amended, but it remained subject to the above condition. The final permit was issued by Frankston Council after further amendment on 21 September 2005. The permit was No. 050302. Clause 13 of the final permit dealt with "conditions required by Melbourne Water", and sub-clause 13(f) was in these terms:

"(f) Before certification the Plan of Subdivision must be amended to include a 40m wide drainage easement in favour of Melbourne Water."

Application for Review

8 On 10 October 2005, an application for review was lodged on behalf of Domus in the Planning and Environment List of the Victorian Civil and Administrative Tribunal ("the Tribunal"). The application for review was heard on 27 April 2006. Reasons for the decision, and the orders made, were published by the Tribunal on 9 June 2006.

9 The orders made by the Tribunal were that the application for review was allowed and the decision of the responsible authority was varied. The orders provided that Frankston Council, as the responsible authority, issue a modified permit containing the conditions set out in permit No. 050302 dated 6 September 2005, as amended on 21 September 2005, but further modified by the deletion and amendment of certain conditions. It is only necessary to refer to the deletion of one condition, which is the subject of this application for leave to appeal. The Tribunal ordered the deletion of condition 13(f).

Appeal to Supreme Court

10 Section 148 of the Victorian Civil and Administrative Tribunal Act 1998 ("the VCAT Act") gives the right to a party to a proceeding in VCAT to appeal to this Court "on a question of law, from an order of the Tribunal in the proceeding." (Emphasis added.) However, that right is subject to this Court granting leave to appeal. As stated, Osborn J adjourned the application for leave to appeal to be heard with the appeal, if leave is granted.

11 The plaintiff Corporation prepared a draft notice of appeal which states a number of grounds. The overall effect is that the Tribunal misdirected itself as a matter of law in deciding and determining the validity of condition 13(f). It was submitted in substance that the Tribunal stated the wrong test, did not consider and determine the issue of validity of the condition in accordance with the law, particularly in respect to the Corporation's statutory powers under the Water Act 1989, and confused the question of validity with the merits of the proceeding.

The Issues on the Application for Review

12 Before the Tribunal, Mr G. Peake of counsel on behalf of Domus, submitted that condition 13(f) was invalid because it had no nexus with the permit to subdivide the property into three lots. It was submitted that the subdivision of the land did not create any need for additional drainage. It was further submitted that the Corporation, if it thought appropriate, could take steps to acquire part of the land if it was necessary in the future to achieve an environmental design in accordance with the current policy for the design of new waterways.[3]

13 The land the subject of the application for subdivision is situated on the eastern side of Potts Road, Langwarrin, at number 64. Potts Road runs in a north west-south east direction. The area in question is approximately 8,231 square metres, which is approximately one hectare. The land runs in a generally east-west direction.

14 Domus had earlier applied for a planning permit to develop a portion of the land for the erection of 26 dwellings. The application was referred to the Corporation. It requested that a condition be imposed which set aside the eastern end of the land for a width of 40 metres for the purposes of constructing a waterway. The Domus application was the subject of a review by the Tribunal. It directed the issue of a planning permit to develop the land for the purpose of 20 new dwellings, but did not impose the condition then sought by the Corporation. After the issue of the permit, Domus then made application to subdivide the land into three lots. Lot 1 contained the existing dwelling on the property which was situated on the frontage to Potts Road, Lot A was the area for the 20 dwellings, and Lot B was the area at the rear of the block of approximately 2,243 square metres, which was earmarked for future development. Running through Lot B was an existing eight metre drainage easement. To the rear of the land was a creek surrounded by trees.

15 Evidence revealed that the back section of the land was subject to flooding, although this was a rare event. The Corporation contended that any development of the back of Lot B was inappropriate as it would pose a danger to people and property, increase the impact of flooding on upstream properties by reducing the storage capacity, and restrict the management of the floodway by potentially impeding or limiting the nature of the works that could properly be undertaken by a floodplain manager to mitigate the effects of flooding. As the waterway manager, the Corporation desired to have access to Lot B to properly perform its functions, and hence the request for an easement of 40 metres' width across the back of Lot B. At the hearing, the Corporation sought a reserve instead of an easement. However, the review was conducted and determined on the then existing condition 13(f), which required the creation of an easement.

16 The Tribunal described the land in its reasons as follows:

"11. An existing 8.05m wide drainage easement in favour of lots on LP52070 runs across the site close to the rear (north eastern) boundary and is now contained in Lot B.

12. The subject site is one of several substantial lots on the north eastern side of Potts Road zoned Residential 1 that are yet to be fully developed. Opposite the site is an existing residential development. The site is also subject to Development Plan Overlay Schedule 1.

13. To the north west and south east adjoining the site is a double storey brick dwelling and a single storey concrete dwelling and bungalow. To the rear is land used for extractive industry by Burdett's Quarries. This land is separated from the subject site by dense vegetation. This area of land to the north east is subject to Amendment C35 which has been exhibited. C35 in summary proposes to rezone the land to Residential 1 and Rural Conservation, and would apply a Development Plan Overlay that includes transfer of the remnant bushland to the Crown.

14. The land has a fall of approximately 5m to the north east mainly within the wider, rear portion of the site. Vegetation on the site is sparse except for an area of dense bush adjacent to the rear north eastern boundary contained in Lot B. It is this area of dense bush that Melbourne Water has indicated should be included within a drainage easement to be retained as a 'natural' open waterway. The rear of the subject site is traversed by the Potts Road Drain (waterway). In this section it is a small ephemeral stream. The channel is generally a shallow depression approximately 50 cm deep and 2m wide.

15. Whilst Lot B is said to be flood prone this land is not subject under the Frankston Planning Scheme to either an Urban Floodway zone or Land Subject to Inundation Overlay. Mr Daff (who gave evidence on behalf of the Corporation) indicated that in a one in 100 year storm event the flows are not contained in the Potts Road waterway which traverses the rear of the side hence the low land abutting the waterway which includes Lot B is flooded. The existing 8m wide easement which was created at the time of the creation of the lots in Potts Road is considered satisfactory for low density subdivision but it was never intended to carry the runoff resulting from a one in 100 year flood event on an urbanised catchment. Mr Daff also indicated the waterway was located outside the easement for some of its length."

17 The Tribunal noted that the subject land was located within a catchment of the Potts Road main drain, and that the catchment area was 124 hectares at Valley Road and was made up of 63 hectares of residential land, 51 hectares of rural conservation land and 10 hectares of low density residential land. The upper catchment was approximately 65 hectares upstream of the Cranbourne-Frankston Road. Evidence placed before the Tribunal was to the effect that the Corporation was concerned with the future development of the area and its effect upon drainage and any flooding. The land is situated in the catchment of the Potts Road main drain, a declared main drain under the MMBW Act.[4] North of Raneen Drive, it is a waterway. Part X of the MMBW Act deals with Metropolitan Drainage and Waterways. The Corporation has extensive powers, duties and functions under s.261 of the MMBW Act. It is also responsible for the floodplain management functions under Division 4 of Part 10 of the Water Act.

The Tribunal's Reasons

18 The Tribunal members published reasons for the decision. A careful consideration of the reasons tends to the view that the members confused issues of validity of the proposed condition and the merits of the planning issues. Mr Peake of Counsel, who also appeared for Domus at the hearing, submitted that the Tribunal considered all necessary issues, both legal and factual, and in effect held that the condition 13(f) was inappropriate and unnecessary. I have carefully considered the reasons and I do not accept that his characterisation of the decision making process is correct.

19 Domus sought a review of a number of conditions, including 13(f). There was discussion between the parties and in the end there were three conditions in contention. In paragraph 5 of the Tribunal's reasons, it is noted that Domus contended that conditions 13(c) and (d) were inappropriate on a subdivision permit. Having made that observation, the members stated in paragraph 16:

"6. In relation to condition 13(f) the applicant contends this condition is invalid as it has no nexus with what has been permitted. It is submitted the subdivision of the land into three lots does not create any need for additional drainage nor does it prevent Melbourne Water taking steps to acquire part of the land if it considers this is necessary in the future to achieve an environmental design in accordance with its current policy for the design of new waterways."

(Emphasis added).

20 Reference to the written submissions relied upon by Mr Peake at the Tribunal hearing supports the matters stated in paragraph 6 of the reasons. It is important to note that it was a contention of Domus that the condition was invalid.

21 In the written submissions Mr Peake raised the issue as follows:

"3.11 It is submitted that there is no nexus between the proposed condition and the permission sought. It is therefore submitted that the answer should be the same as it was at the previous appeal hearing, being that the condition fails to satisfy the tests for a valid condition and should therefore not be included in the permit. It is always open to Melbourne Water to acquire any easement, and use the funds collected from all the landowners in the area as part of the drainage scheme to pay compensation for the acquisition of the easement."

(Emphasis added).

22 It is noted that it was the contention of Domus on the review that the condition was invalid because there was "no nexus between the proposed condition and the permission sought". It appears that what Counsel was putting on behalf of Domus was that there was no connection between the exercise of the power and the subdivision, in that it was unnecessary to create the easement. The authorities establish that there are a variety of matters which may render the exercise of statutory power invalid. It is important that any attack upon the validity of the exercise of the statutory power is precisely stated and consistent with established grounds of attack. The Corporation exercised a power given to it by Parliament in s.136 of the Water Act 1989. Under that section, the Corporation was empowered to require the creation of an easement for its use, for any of the specified purposes. The purposes relied upon by the Corporation were for waterway management and drainage. To assert that the condition imposed was invalid was to assert either that the Corporation did not have the statutory power, or that if did, it did not exercise the statutory power in accordance with the law.

23 The issue of validity having been raised, the Tribunal was obliged to consider whether the power existed and whether the exercise of the power was in accordance with the law. This required the Tribunal to:-

(i) Identify with some precision the alleged ground of invalidity;

(ii) Determine the appropriate validity test to apply in the circumstances; and

(iii) Consider the head of power and its exercise, and determine whether there was a relevant head of power and whether it was validly exercised in all the circumstances. The validity of the exercise of the power was a question of fact.

24 If the power was validly exercised, the Tribunal then had to consider the merits of the review. The merits question raises a number of issues. The first matter to address was to identify the matters relied upon by the parties. Secondly, to determine whether the matters relied upon were relevant to the merits issue. A matter of some importance was the weight the Tribunal was required to attach to the valid exercise of the power. That is, having concluded the power existed and was validly exercised, what weight should be given to the exercise of the statutory power on the issue of merits? Another matter of some importance is the relevance, if any, of the fact that the Legislature has not provided for compensation to the landowner for loss suffered by the creation of an easement.[5] No doubt there will be other matters relevant to the issue and these will depend upon the circumstances.

25 The jurisdiction of the Tribunal is set out in s.40 of the VCAT Act and s.42 defines what is review jurisdiction. Section 80(1) of the P & E Act deals specifically with a review of a permit condition. Section 84(B) requires certain matters to be taken into account on the review by the Tribunal, and s.85 prescribes what the Tribunal may do on the determination of the review.

26 I have carefully considered the reasons of the Tribunal, and in my opinion it failed to consider and determine the proper issues, failed to determine and apply the proper test on the question of validity, failed to actually determine the question of validity, failed to properly consider the merits issue, and appeared to confuse the validity and merits issues. There is some difficulty in understanding what the Tribunal was doing in reaching its conclusion, and whether in fact the conclusion was based upon validity, or merits. This is especially so when one considers a test stated in paragraph 44 of the reasons, which apparently the Tribunal relied upon and which does not appear to be an appropriate test for either validity or merits. The purported test appears to use the verbiage in s.98(1) of the P & E Act, which relates to a right to compensation. It was not an appropriate test to apply on either the question of validity or the question of merits.

27 In paragraph 23 of the reasons, the Tribunal stated two alternative tests of validity of a condition. Paragraph 25 contained a variation of the test, paragraph 40 repeated a variation of one of the tests set out in paragraph 23, and paragraph 41 stated what appears to be another test. In paragraph 44, the Tribunal applied another test. A consideration of these paragraphs reveals that the Tribunal misdirected itself as a matter of law on the correct test in Australia. It was confused as to the appropriate test and how it should be applied, it appeared to state the wrong test, and appeared to confuse what may have been the merits of the imposition of the condition, with its validity.

28 I must confess I have difficulty in understanding the reasoning of the Tribunal which led to the decision to delete condition 13(f). The members, having addressed the question of what was the appropriate test of validity and set out to summarise what appeared to be the relevant planning policy, then seemed to lose their way. The Tribunal did not specifically deal with the issue of validity, even though it was clearly a matter in issue. The members referred to a test which was not a test of validity in paragraph 44, and which appeared to be influenced by the provisions of s.98 of the P & E Act. That section deals with the question of compensation. In an earlier paragraph, reference was made to compensation. The concluding paragraphs on the issue of condition 13(f) do not appear to go anywhere, and do not adequately explain what led the Tribunal to the decision that it made. There is a lack of structure in the reasoning process. Whether the decision was based upon the view formed that the condition was invalid or upon some basis of merits is impossible to discern.

29 Further, it was submitted by Mr Garde QC for the Corporation that the Tribunal failed to give effect to s.136 of the Water Act, which expressly authorises the Corporation to require the creation of an easement for, inter alia, waterway management and drainage. The submission raises the question as to which of the tests stated by the Tribunal was the correct test. The tests discussed by the Tribunal were established in cases where the Court was dealing with a general discretionary power given to a responsible planning authority to impose conditions on a planning permit which the authority considered were appropriate. The statutory power did not identify any specific purposes for the exercise. The usual formula was that a responsible authority in a planning matter was authorised to grant a permit "subject to such conditions as it thought fit". That is not the position in the present matter. The responsible authority had no say in the imposition of the condition. The Corporation exercised a statutory power for specified purposes, and the responsible authority was required to impose the condition. The imposition of the condition was not as a result of any decision made by the responsible authority. It was imposed by the Corporation exercising a power for purposes authorised and specified by Parliament.

The Tribunal's Tests of Validity

30 It is necessary to set out the paragraphs in the Tribunal's reasons that deal with the tests of validity.

31 In paragraph 23, the Tribunal said:

"23. To be valid, a condition in a planning permit must fairly and reasonably relate to the permitted development or the condition must be reasonably capable of being regarded as relevant to the implementation of planning policy as ascertained from the P E Act and relevant planning scheme."

32 In support, the Tribunal referred to three authorities, namely, Pyx Granite Co Limited v Ministry of Housing and Local Government;[6] 271 William Street Pty Ltd v City of Melbourne;[7] and Rosemeier v City of Greater Geelong (No. 1).[8] Each of the first two authorities was concerned with a general power given to a planning authority to impose conditions on the grant of a planning permit. As stated, that is not the situation here. The responsible authority did not impose a condition as the result of any decision made by it. It was mandated by statute to impose the condition. The decision maker was the Corporation. The power was exercised for specified purposes. The question of validity in such circumstances may not be governed by the general tests referred to in the above cases. This issue was not raised in this proceeding. I will consider the issue later. For present purposes, I will consider the way in which the Tribunal appeared to deal with the validity question.

33 The first test in paragraph 23 is taken from the English case of Pyx Granite[9] and does not represent the law in this country in respect to the exercise of a power given to a responsible authority to grant a permit subject to conditions which are not specified. The alternative test, purporting to represent the law in this country, has been misstated. The word "relevant" is wrong and the test is, whether a condition was reasonably capable of "being regarded as related to the implementation of planning policy".[10] (Emphasis added.)

34 In paragraph 25 of the reasons, the Tribunal said:

"25. Whether the condition was reasonably capable of being related to the implementation of planning policy in the relevant sense is a question of fact."

Reference was made to the decision of Osborn J in Helen Stogdale v Stonnington City Council and Ors.[11] In that case, Osborn J said it was a question of fact. But the validity test again was misstated by the Tribunal. It purported to state the second test set out in paragraph 23 of the reasons. However, the correct test is whether the conclusion was "reasonably capable of being regarded". (Emphasis added).

35 In paragraph 40, the Tribunal said:

"40. Whilst Melbourne Water as a referral authority can compel the responsible authority to impose conditions at its request any such conditions however like all other conditions imposed on a permit must reasonably relate to the permitted development. Section 136 of the Water Act specifies the types of things for which Melbourne Water may require an easement or reserve in relation to a planning permit for subdivision. There is no evidence of what works are actually to be undertaken. There is already in existence a drainage easement that it acknowledges caters for the existing situation."

The test purports to state the first test set out in paragraph 23, which is based upon the Pyx Granite case.

36 In the following paragraph, the Tribunal wrote:

"41. Whilst Mr Peake referred to the alternative methods by which Melbourne Water can acquire land as a water authority it is not necessary for the Tribunal to weigh up whether such alternative methods should or should not outweigh imposing a condition in the form sought. The Tribunal is required in this matter to consider whether condition 13(f) is valid in the context of the particular permit and if not specifically linked to this permit whether there are any planning policies that would indicate such a condition is appropriate to enable achievement of the policies."

This test is also wrong as a matter of law.

37 The actual reasoning relating to condition 13(f), which appears to decide the issue, is confined to two paragraphs, namely, 44 and 45. The reasoning is difficult to follow. The main ground of the review as contended by Domus was that the condition was invalid. Yet the Tribunal seemed to proceed on the assumption that Melbourne Water was required to show that the 40 metre wide drainage easement was a direct, natural and reasonable consequence of the proposal to subdivide the land. The Tribunal seemed to take the view that the omission to have floodplain and waterway controls under the Frankston Planning Scheme was a matter for Melbourne Water to concern itself with in the future, and that since there was no development proposed on Lot B and it was always subject to flooding, the proposed subdivision would not change the situation. Whether the Tribunal decided the issues on the validity or merits, or both, is impossible to say.

38 Paragraphs 44 and 45 of the reasons state:

"44. We are not able to conclude that the requirements of Melbourne Water for a 40m wide drainage easement are the direct, natural and reasonable consequence of the proposal to subdivide this land. Imposing a condition to prevent inappropriate development from occurring on a lot in circumstances where Melbourne Water does not consider there is an appropriate control is not a matter for Melbourne Water. That the floodplain and waterway are not covered by appropriate controls under the Frankston Planning Scheme is not a reason for the imposition of the condition. The planning scheme recognises that in such circumstances the appropriate controls that should be imposed are the application of either an Urban Floodway Zone or a Land Subject to Inundation Overlay. If Melbourne Water is concerned about the wider implications of development within the floodplain they should seek to have such controls imposed. The protection of future developments from flooding and ensuring that future development does not reduce flood storage or restrict the passage of flood flows is a matter for the whole drainage scheme.

45. Development has already been approved on Lot A which is not contained within the floodplain. No development is proposed on Lot B. Lot B is already subject to flooding the subdivision will not change this situation. There is an existing 8m wide easement in relation to drainage. If, after the modelling is carried out by Melbourne Water, this is not satisfactory then it can seek to enlarge the area by way of its own legislation."

39 It is apparent that the Tribunal stated a test that the Corporation's requirements for the easement had to be "the direct natural and reasonable consequence of the proposal to subdivide this land." The phrase "the direct natural and reasonable consequence" appears in s.98(1) of the P&E Act and that section deals with the right to compensation. The test was applied by the Tribunal in reaching its conclusion and is neither a test of validity nor one of merits. The Tribunal erred in reaching its conclusion based upon that test.

Proper Test of Validity

40 It is necessary to determine what was the proper test of validity of the condition.

41 As noted above, in paragraph 23 of its reasons the Tribunal stated two tests in the alternative. The Tribunal erred as a matter of law in stating the two tests. The first test is the test in England is not the law of Australia. Secondly, the alternative test did not accurately state the test in Australia. Thirdly, the Tribunal seemed to assume that both tests were the same whereas in fact they are different.

42 The authorities upon which the Tribunal relied were dealing with a situation where a general power was given to a responsible planning authority to impose conditions on the grant of a permit, in circumstances where the statutory power authorised the authority to "include any condition that it thinks fit". Where a general authority is given to a planning authority in a statute, and there are no or very few provisions concerning the type of conditions that can be imposed, then the test referred to in the above cases applies. Mr Garde QC drew attention to the fact that the Tribunal, in seeking to apply a test of validity, concentrated on planning policy and overlooked the important statutory powers, obligations and rights given to the Corporation with respect to, inter alia, waterway management and drainage. In the present matter, the responsible authority had no say in the imposition of condition 13(f). The validity of the condition depended upon the statutory power given to the Corporation and its proper performance. Whilst planning policy may have a bearing on the issue, the real question concerns the nature of the statutory power and its exercise by the Corporation. Mr Garde's submission raised the question of whether the Tribunal misdirected itself in relying upon those cases to determine the correct test.

43 The authorities concerning the valid exercise of a statutory power go back well over 100 years. The cases show that there have been a variety of grounds for attacking the exercise of a statutory power. It is important, when an attack is made upon the exercise of a statutory power, that the issue of invalidity is precisely identified and stated. Counsel for Domus, Mr Peake, stated that the condition was invalid because there was "no nexus" between the condition imposed and what had been permitted, namely, a subdivision. Reference to his submissions to the Tribunal suggest that what he means was that the condition must relate to the achievement of the planning policy. He relied upon what was said in Rosemeier v City of Greater Geelong.[12] The point is that there must be a relation between the condition and relevant planning policy. But to confine the issue in the present proceeding to planning policy has the capacity to mislead, and in my opinion, did mislead the Tribunal. It failed to give full effect to other statutory provisions relating to the Corporation, and in particular its rights, powers and obligations with respect to floodplain, waterway and drainage management.

44 It is appropriate to consider the test laid down in the authorities concerning the general power given to a planning authority to impose conditions in the exercise of a discretion. The law relating to the exercise of statutory powers discussed by the Tribunal was the applicable law in circumstances where the responsible authority was authorised to impose a condition which was discretionary. What the Corporation had done was to exercise a statutory power for a purpose specified by s.136 of the Water Act 1989.

45 In Pyx Granite Co Ltd v Ministry of Housing and Local Government,[13] Lord Denning said:

"This brings me to the question whether the conditions imposed in this case are valid or not. ...

The principles to be applied are not, I think, in doubt. Although the planning authorities are given very wide powers to impose 'such conditions as they think fit,' nevertheless the law says that those conditions, to be valid, must fairly and reasonably relate to the permitted development. The planning authority are not at liberty to use their powers for an ulterior object, however desirable that object may seem to them to be in the public interest. If they mistake or misuse their powers, however bona fide, the Court can interfere by declaration and injunction."

(Emphases added)

46 The power given to the authority in that case, which was concerned with a planning permit, authorised it to impose "such conditions as they think fit".

47 What his Lordship stated has been applied in many cases in England. In Fawcett Properties Ltd v Buckingham County Council,[14] the members of the House of Lords Judicial Committee considered the appropriate test. Lord Jenkins[15] summarised the principles and after observing that the power to impose conditions is usually expressed in language conferring an absolute discretion on a planning authority, stated that nevertheless the power "must be construed as limited to the imposition of conditions with respect to matters relevant, or reasonably capable of being regarded as relevant, to the implementation of planning policy." His Lordship then went on to refer to what Lord Denning had said in the Pyx Granite case. His Lordship then observed that although one could not appeal on the question of wisdom or merits of a condition imposed in any given case, nevertheless the principles established in the Associate Provincial Picture Houses Ltd v Wednesbury Corporation[16] case were relevant to the issue of validity. That is, if the decision was so unreasonable that no reasonable authority could ever have come to it, the courts can interfere.

48 The English test was further considered by the House of Lords in Newbury District Council v Environment Secretary.[17] Each of their Lordships stated the test, and I refer to what Lord Fraser of Tullybelton said, as follows:[18]

"In order to be valid, a condition must satisfy three tests. First, it must have a planning purpose. It may have other purposes as well as its planning purpose. But if it is imposed solely for some other purpose or purposes, such as furtherance of the housing policy of the local authority, it will not be valid as a planning condition ... Second, it must relate to the permitted development to which it is annexed. The best known statement of these two tests is that by Lord Denning in the Pyx Granite case ...

Thirdly, the condition must be 'reasonable' in the rather special sense of the Wednesbury case. Thus it will be invalid if it is 'so clearly unreasonable that no reasonable planning authority could have imposed it."

(Emphases added).

49 The English test in respect to planning permits and discretionary conditions is not the Australian test. The High Court in Allen Commercial Constructions Pty Ltd v The Council of the Municipality of North Sydney[19] laid down the test for Australia. Walsh J delivered the leading judgment. Barwick CJ, Menzies and Windeyer JJ agreed. His Honour, in stating the test, relied on what Lord Jenkins said in the Fawcett Properties Pty Ltd case.[20] Walsh J said:[21]

"In accordance with a well-recognised rule, s.40(1) (of the Planning Ordinance) ought to be understood (quite apart from the limitation contained in its opening words) not as giving an unlimited discretion as to the conditions which may be imposed, but as conferring a power to impose conditions which are reasonably capable of being regarded as related to the purpose for which the function of the authority is being exercised, as ascertained from a consideration of the scheme and of the Act under which it is made. This purpose may be conveniently described, in accordance with the expression used by Lord Jenkins in Fawcett Properties Ltd v Buckingham County Council, as being 'the implementation of planning policy', provided that it is borne in mind that it is from the Act and from any relevant provisions of the ordinance, and not from some pre-conceived general notion of what constitutes planning, that the scope of planning policy is to be ascertained."

(Emphases added).

50 The test is - was the condition one which was "reasonably capable of being regarded as related to the purpose for which the function of the authority is being exercised"?

51 The alternative test contained in paragraph 23 of the Tribunal's reasons was not that stated by Walsh J. The Tribunal members substituted for the phrase "as related" the words "as relevant". The words "relevant" and "related" are not interchangeable. There is a difference between the English test, based as it is upon what Lord Denning said, and the Australian test laid down in the Allen Commercial Constructions case.

52 In 271 William Street v City of Melbourne,[22] Harris J noted the difference. His Honour said, after referring to the test laid down by Walsh J, the following:[23]

"This is somewhat different from and perhaps wider than the way the matter was stated by Lord Denning in Pyx Granite Co Ltd v Ministry of Housing and Local Government, supra at p.572."

53 I respectfully agree. There is a difference.

54 Based upon the test stated by Walsh J, assuming it applied, the question for the Tribunal in the present matter was -

Was condition 13(f) of the permit reasonably capable of being regarded as related to the implementation of planning policy as ascertained from a consideration of the planning scheme, the P & E Act and any other Act dealing with the question of water management?

55 It is observed that the condition must be reasonably capable of being regarded as related to that purpose. The use of the word "related" provides a wider application than the use of the word "relevant" to the implementation of the planning policy. The courts have considered phrases such as "in relation to", "relating to", "related to" and "in respect of". As the learned authors said in Pearce and Geddes, Statement Interpretation in Australia:[24]

"It does not seem that the different expressions are interpreted as having a different meaning."

The learned authors referred to a number of cases. In Trustees Executors and Agency Co Ltd v Riley,[25] Mann CJ in respect to the said phrases, said:

"The widest possible meaning of any expression intended to convey some connection or relation between the two subject matters to which the words refer."

(Emphases added).

56 Members of the High Court in a number of cases have quoted what his Honour said with approval.

57 More recently, however, the High Court in Workers' Compensation Board of Queensland v Technical Products Pty Ltd[26] said that what his Honour said may have gone too far. Deane, Dawson and Toohey JJ said:

"The phrase gathers meaning from the context in which it appears and it is that context which will determine the matters to which it extends."

58 However, in O'Grady v North Queensland Co Ltd,[27] Toohey and Gaudron JJ said of the expression it "is of broad import".[28] McHugh J in the same case[29] said the phrase "requires no more than a relationship, whether direct or indirect, between two subject matters." In my respectful opinion, the use of the word "related" widens the connection.

59 It is clear that the members of the Tribunal misstated the law which they sought to apply. They also did so in their summary at paragraph 25 of their reasons.

60 It is noted that the test laid down by Walsh J did not address the question raised in the Fawcett case as to the application of the Wednesbury principle, that is, that the condition was reasonable in the sense that a reasonable local authority properly advised might impose such condition. The point has been taken up by McHugh J in a later High Court case.

61 In Bathurst CC v PWC Properties Pty Ltd[30], the High Court[31] noted that certain conditions granted under a planning scheme ordinance were not at large and that the exercise of the power "was attended by the characteristics identified by Walsh J" in the Allen Commercial case. The five member Court then quoted the test laid down by his Honour. More recently, the test was again considered by the High Court in Western Australian Planning Commission v Temwood Holdings Pty Ltd[32]. In that case, one of the issues was whether or not a condition which had been imposed on a permit allowing subdivision of land was a valid one. Section 20(1)(a) of the Town Planning and Development Act (WA) provided that the responsible authority could permit a subdivision and give its approval subject to certain conditions being met before the approval became effective. A developer purchased private land that included coastal foreshore previously reserved under a town planning scheme. The responsible authority approved the application for three subdivisions, subject to a condition that the developer cede a portion of the foreshore reserve to the Crown free of cost and without any payment of compensation by the Crown. The developer appealed unsuccessfully first to the Town Planning Appeal Tribunal, and then to the Supreme Court of Western Australia. On further appeal, the Full Court reversed the primary judge's decision on the ground that s.11 of the said Act conferred on the developer a right to compensation which was not negated by the Commission's powers to impose conditions. It further held that the condition imposed on the developer had not been imposed by the Commission for a planning purpose. The High Court, by a three-two majority, held that the developer had no subsisting or vested right to compensation, and further that the condition imposed on each subdivision was one that the Tribunal had power to impose.

62 The members of the Court considered the applicable test as to the validity of the condition. It is noted that in that case, the question arose as to the responsible authority imposing the condition and whether it was imposed for a legitimate planning purpose. The present matter is different.

63 Although the Court was divided, the three members of the majority did discuss the appropriate test. Callinan J, who was in dissent, also discussed the test. There was some disagreement between the judges as to the appropriate test. However, the four judges noted that the High Court had in the Bathurst City Council v PWC Properties Pty Ltd case endorsed the test laid down by Walsh J. McHugh J adopted the test stated in the English case of Newbury District Council case.[33] Gummow and Hayne JJ noted that the Court had adopted what was said by Walsh J in the earlier decision, but did not adopt the English test. They did not discuss it. Callinan J discussed the test and noted the English test, and doubted whether the third limb of the test was necessary.[34] However, it is clear that his Honour was of the view that the Walsh J test was the applicable one in Australia.

64 In order to determine the validity of a condition imposed in a planning matter where the power to impose a condition is expressed in general terms, the Tribunal is required to undertake the following step by step process:

(i) Identify and state the terms of the proposed condition;

(ii) Consider and determine the relevant planning policy by considering all relevant legislation dealing with the topic, which would not necessarily be confined to planning legislation and schemes;

(iii) Consider and determine whether the condition was reasonably capable of being related to the implementation of that planning policy.

65 The Walsh J test requires the determination of the scope of the planning policy. The present matter concerns an application for a permit to subdivide land. The Corporation exercised statutory powers given to it as a body charged with obligations concerning, inter alia, waterway management and drainage. The issue of the validity of the condition imposed cannot be confined to what is described as planning policy. It depended upon the exercise of the statutory power by the Corporation for one or more of the specified purposes.

66 The starting point is the obligation of the responsible authority on receipt of an application to subdivide the land. By reason of s.55 of the P&E Act, Frankston Council was obliged to give a copy of the application to the Corporation because it is a referral body under the Frankston Planning Scheme. Section 56 requires the referral authority to consider the application. The Corporation was then obliged to inform the responsible authority in writing of its attitude towards the application. Under s.56(1)(b), it may decide not to object to the grant of the permit if the grant is subject to conditions specified by it. Frankston Council referred the application for the subdivision to the Corporation. The Corporation responded. It did not object to the grant provided that certain conditions would be imposed. One of the conditions was 13(f).

67 The Corporation is an Authority for the purposes of the P & E Act. Section 136 of the Water Act 1989 gives it certain powers. It is necessary to set out s.136, which provides:

(1) If a proposal for subdivision of land is referred to an Authority under the Planning and Environment Act 1987, the Authority may require the creation of easements or reserves, or both, for the use of the Authority for any of the following purposes -

(2) The creation of an easement or a reserve for a purpose specified in sub-section (1) gives the Authority for whose use it is created the rights prescribed in relation to an easement or reserve created for that purpose."

68 It is clear that the Corporation had a statutory right to require condition 13(f) on the basis that it was for one or more of the specified purposes. The purposes relied upon were waterway management and drainage.

69 Whether a public authority such as the Corporation, when exercising the statutory power under s.136 is acting lawfully or not, and the nature and extent of the power, are matters to be determined by consideration of the intention of Parliament. The primary source of the intention is the words of the section, taking into account the Act as a whole and when read in context. However, in considering the powers in s.136, it is necessary to take into account also, in so far as they may be relevant, any powers in any other enactment. For example, it is clear that the power found in s.56 of the P & E Act is relevant to the exercise of the power under s.136 of the Water Act. Parliament entrusted the Corporation with the decision to require the creation of an easement for waterway management and drainage. Absent bad faith or fraud, the statutory power is validly exercised if the decision made resulting in the request was for one of the permitted purposes set out in the Act. The exercise of the statutory power for some other purpose would be ultra vires. In other words, when the decision was made that the Corporation required an easement, it must have been done so for a purpose stated in s.136(1). It is clear that the Corporation has obligations concerning waterway management and also drainage, and hence prima facie in seeking the easement across Lot B it was a valid exercise of its statutory power. This is not a case where the discretionary power is given in unqualified terms without reference to any particular purposes. Rather, it involves a legislative provision which does in fact prescribe the purposes. Accordingly, it is unnecessary to determine what the purposes were because they have been prescribed.[35] Of course, it is not a valid exercise of the power if the power is exercised for a different purpose. The validity of the exercise of the power is question of fact. See Municipal Council of Sydney v Campbell.[36] For example, there would not be a proper exercise of the power if in fact it was employed in furtherance of some ulterior object. That is a factual question.

70 The Corporation having required the creation of the easement, Frankston Council as the responsible authority was bound to impose the condition.[37] The permit was granted containing condition 13(f). Despite the fact that the Corporation exercised a statutory power and that the responsible authority was bound to impose the condition, it is accepted by Mr Garde that the Tribunal on the review had jurisdiction to consider and determine whether the particular condition should be imposed on the merits. He referred to Roads Corporation v McCarthy[38] and VicRoads v AGC Advances.[39]

71 The test laid down by the High Court which applies to the general power of a planning authority to impose a condition is concerned with the relationship between the condition and the planning policy. There is an emphasis on determining the scope of the planning policy. This approach is appropriate for the simple reason that although the wording of the particular enactment gives a wide and, it may be said, unlimited discretion as to conditions, there must be some governing principle to ensure that the power is properly exercised. But in the present matter, that is not the position. Parliament has given power to the Corporation to require the creation of an easement for any one or more of the purposes set out in s.136(1) of the Water Act. It is the validity of that exercise of power which is to be determined. The test laid down by the High Court is confined to the relationship to planning policy.

72 That the planning test may not be appropriate in other circumstances was noted in Protean (Holdings) Ltd v Environment Protection Authority.[40] In that case, the Court was concerned with the power given to the Environment Protection Authority to grant a licence to discharge or deposit waste into the environment and to impose conditions, limitations or restrictions on such permitted use. In that case, the question arose as to what was the appropriate test. Gillard J[41] noted the test laid down by Walsh J and discussed by Harris J in the 271 William Street Pty Ltd v City of Melbourne case.[42] His Honour then went on to state that he thought the more general test laid down by Lord Denning was more appropriate in the circumstances of that case. In other words, the test was not restricted to the implementation of planning policy in determining the validity of the exercise of the statutory power.

73 There have been many authorities discussing the principles concerning the validity of the exercise of a statutory power. Reference to two textbooks provides a general summary of the principles. In Principles of Australian Administrative Law by Professor Hotop, 6th ed, the learned author said:[43]

"The courts, as we have already noted, apply the general principle that a public authority in which a discretionary power is vested must exercise that power according to law. More specifically, the authority may not exercise its power for an improper purpose; nor may it be guided by irrelevant considerations or fail to be guided by irrelevant considerations; nor may its decision be manifestly unreasonable, or excessively uncertain, or be made without any supporting evidence."

74 Professor de Smith in the 3rd ed of his work Judicial Review of Administrative Action, summarised the principles as follows:[44]

"The authority in which a discretion is vested can be compelled to exercise that discretion, but not to exercise it in any particular manner. In general, a discretion must be exercised only by the authority to which it is committed. That authority must genuinely address itself to the matter before it: it must not act under the dictation of another body or disable itself from exercising a discretion in each individual case. In a purported exercise of its discretion it must not do what it has been forbidden to do, nor must it do what it has not been authorised to do. It must act in good faith, must have regard to all relevant considerations and must not be swayed by irrelevant considerations, must not seek to promote purposes alien to the letter or to the spirit of the legislation that gives it power to act, and must not act arbitrarily or capriciously."

75 The law was discussed in detail by Menhennitt J in Paddle v State Electricity Commission of Victoria and ors.[45] In my respectful opinion, his Honour there stated the principles of law which apply in the present proceeding. In that case, the State Electricity Commission was authorised by the State Electricity Commission Act 1958 to carry out certain works, which included the acquisition of easements. The Commission, in exercise of its powers, acquired easements over the lands of the plaintiffs for the purpose of erecting thereon a series of steel towers, which were to support cables for carrying electricity. The plaintiffs brought proceedings seeking to restrain the Commission on the basis that it was acting in excess of the powers given to it by the Parliament. In a comprehensive judgment, Menhennitt J discussed the principles of law concerning the exercise of a statutory power. His Honour said:[46]

"But fundamentally, however it is put, the issue is, it seems to me, whether or not there has been a true or real exercise of the Commission's powers. If powers are exercised for some collateral or extraneous purpose or not bona fide, then there is not a true or real exercise of the power. ... An issue as to reasonableness has been raised, but it appears to me that the only way an issue as to unreasonableness can arise is once again as an aspect of the question whether or not there has been a true or real exercise of the powers granted. If no reasonable authority vested with the powers of the Commission and acting reasonably could decide to erect a power line along Route 2, then the decision to erect such power line along Route 2 would not be a true or real exercise of the powers granted to the Commission. But if a reasonable authority vested with the powers of the Commission and acting reasonably could within the discretion grant it to it decide to erect a power line along Route 2 then there would be a real and true exercise of the power and the decision and erection of the power line would be within power."

76 His Honour went on to observe that it was not the function of the Court to consider and decide for itself questions of policy, or the manner in which the power vested in the body was to be exercised. This is a matter of substantial importance, not only in relation to the question of a valid exercise of power, but also in relation to whether a court or tribunal should interfere with a decision entrusted by Parliament to a body to make that decision. This has been often noted. In Mixnam's Properties Ltd v Cherpsey Urban District Council,[47] Viscount Radcliffe said:[48]

"I agree, therefore, with the view expressed by Diplock LJ in the Court of Appeal when he says that such supposed grounds of invalidity in subordinate legislation as unreasonableness, repugnancy, arbitrariness or injustice must be regard as particular applications of 'the general rule that subordinate legislation, to be valid must be shown to be within the powers conferred by the statute.' If they cannot be brought within the contemplation of that general rule they are not, in my opinion, valid grounds for invalidity at all, for it is the local authority, not the law court, that is entrusted with responsibility for making the conditions that it thinks the circumstances require."

(Emphasis added).

77 Lord Guest made much the same point when he said:[49]

"There should, however, in my view, be a benevolent interpretation given to the discretion exercised by a public representative body such as the appellants in carrying out the functions entrusted to them by Parliament. Courts should not be astute to find that they have acted outside the scope of their powers. They should be supported if possible. Subject to this, I think the test of ultra vires must be whether the provisions attached can be said to be fairly and reasonably related to the scope and object of the act."

(Emphasis added).

78 Menhennitt J considered the various statutory enactments which bore upon the question of the power and its exercise. His Honour then went on to consider[50] the various cases upon which he relied as supporting the principles stated by him.

79 The application of the general powers given to planning authorities to impose conditions has the tendency to restrict the question to the implementation of planning policy. As Mr Garde correctly submitted to the Court, the Tribunal in the present matter did so restrict itself.

80 In my opinion, in considering the relevant purpose in order to determine whether the condition was imposed for a permitted purpose and not for some ulterior purpose, the ascertainment of the policy is not confined to planning legislation, including planning schemes, but is to take into account any enactments that bear on the topic. This was made clear by what Gummow and Hayne JJ said in the WAPC v Temwood Holdings Pty Ltd case,[51] where their Honours at page 72 said:

"The classification of the condition as a manifestation of a 'planning purpose' turns upon the considerations referred to by Walsh J in Allan Commercial Constructions and other authorities, as discussed earlier in these reasons. Looking to the subject matter, scope and purpose of the Town Planning Act, when read with the Metropolitan Region Act, was the imposition of the condition capable of being regarded as related to the purpose under s.20(1)(a) of the former statute for which the functions of the Commission were being exercised?

The discretion of the Commission under s.20(1)(a) was 'not fettered' by the provisions of the Town Planning Scheme 'except to the extent necessary for compliance with an environmental condition relevant to the land under consideration'."

(Emphasis added).

81 As stated earlier, Mr Garde submitted that the Tribunal, in seeking to determine the relevant policy, restricted itself to considering relevant planning provisions and accordingly failed to consider a number of statutory provisions which were relevant to the exercise and which formed part of a legislative scheme.

82 As stated earlier, once an attack is made upon the validity of the exercise of statutory power, certain matters must be identified, considered and determined. Paramount is the identification of the attack upon the validity of the exercise. This may involve a question of fact. The authorities show that there are a number of grounds attacking the validity of a statutory power. Chapter 11 of the ninth edition of Administrative Law by Wade and Forsyth discusses the various grounds for attacking the validity. A useful summary is found at page 349, where the learned authors stated:

"For more than three centuries it has been accepted that discretionary power conferred upon public authorities is not absolute, even within its apparent boundaries, but is subject to general legal limitations. These limitations are expressed in a variety of different ways, as by saying that discretion must be exercised reasonably and in good faith, that relevant considerations only must be taken into account, that there must be no malversation of any kind, or that the decision must not be arbitrary or capricious. They can all be comprised by saying that discretion must be exercised in the manner intended by the empowering Act."

It was necessary in the present matter to properly identify the alleged ground of invalidity and then consider that question by applying an appropriate test. In my opinion, the application of the tests referred to by the Tribunal led the Tribunal incorrectly to confine the question to implementation of planning policy. The Tribunal failed to determine whether the condition was valid.

Tribunal Erred

83 Although the test laid down by the High Court in the Allen Commercial Constructions case was not, in my opinion, the appropriate test, and had a potential to mislead in its application to the situation where a referral authority required the creation of an easement, the application for leave to appeal was argued on the basis of the tests stated by the Tribunal. Accordingly, it is appropriate at the outset to consider whether the Tribunal erred in its approach, namely, whether it applied the test as laid down by Walsh J and determined the question of validity.

84 The Tribunal never stated correctly the test that was to apply. Reference to the reasons expressed in paragraphs 23, 25, 40 and 41 reveals that the Tribunal never stated the proper test and indeed appeared to apply a number of tests which were incorrect and, to an extent, inconsistent. It follows that the Tribunal failed to discharge its jurisdiction in accordance with the law on the review.

85 It is apparent that the Tribunal, in accordance with the various tests stated by it, set out to determine the planning policy. However, in so doing, it restricted itself and overlooked other relevant statutory considerations. It was the contention of the Corporation that the Tribunal misunderstood the powers of Melbourne Water under the Water Act 1989.

86 It was submitted by Mr Garde that there was a legislative scheme which had to be considered and that s.136 of the Water Act formed part of it. I agree. In my opinion, s.136 formed part of a legislative scheme for the regulation of subdivision and operated in conjunction with the provisions of the P & E Act and the Subdivision Act 1988. In particular, the P & E Act contains a number of important provisions dealing with the role and function of referral authorities. Section 6(2)(h) makes provision for a planning scheme to require specified things to be done "to the satisfaction of ... a referral authority." I have already set out the various provisions relating to the forwarding of an application to a referral authority, and the effect of the authority's decision on a responsible authority. I agree with what Morris J said in Hand v Warrnambool City Council,[52] as follows:

"What complicates this case is the interrelationship between the Planning and Environment Act and the Subdivision Act 1988. These two Acts must be read together. Not only do the Acts form part of cognate legislation enacted by the Parliament at the same time, but also each Act depends for its operation upon the other."

87 In my opinion, s.136 does form part of the same legislative scheme relating to the subdivision of land. Other relevant provisions are s.259 of the MMBW Act, which defines river improvement works, and the important wide powers, obligations and duties given to and imposed on Melbourne Water by other provisions of that Act, including ss.60, 261, 263, 265, 267, 273, 278 and 284. Section 202 of the Water Act gives the Corporation extensive floodplain management functions.

88 The provisions of the Water Act are relevant to the question of validity. Section 1 of the Act sets out a number of purposes, including promotion of an orderly, equitable and efficient use of water resources, and the protection of catchment conditions. Section 189 sets out the functions of waterway management authorities, and an authority such as the Corporation is obliged in its waterway management district to have regard to the need to maintain the environmental water reserve in accordance with the environmental water reserve objective.[53] Section 202 deals with the floodplain management functions of the Corporation and these include declaring flood levels in flood fringe areas and importantly -

"(d) To control developments that have occurred or that may be proposed for land adjoining waterways."

89 Reference was made to a Second Reading Speech concerning s.136 of the Water Act. The Minister said:

"A key provision protects drainage systems. It requires any authority empowered to authorise development to insist upon protection of drainage, waterways and aquifers, through conditions on the development approval ... ".[54]

90 Reference was also made by counsel for the Corporation to ss.258BA and 258BB of the MMBW Act, which were enacted by s.38 of the Water Drainage Act 1981 and which are similar in intent to s.136.

91 Returning to the Tribunal's reasons, the alternative test stated in paragraph 23 appears to have led the Tribunal into concentrating on planning policy and overlooking other important statutes, including s.136 of the Water Act and the Subdivision Act 1988. If the tests stated in paragraph 23 of the reasons applied, the fact is that any question of planning policy could not overlook the relevant provisions of the Water Act and the Subdivision Act 1988.

92 In my opinion, it is clear that the Tribunal failed to apply the correct test, failed to fully determine the planning policy, which would include all other statutory enactments relevant to the question, did not decide the issue of validity, and appeared to lose its way in relation to the question of merits.

93 I have set out paragraphs 44 and 45 of the reasons above. There appears to be a degree of confusion in the minds of the Tribunal members. Having stated what the Tribunal thought was the appropriate test, although there were a number of versions, the Tribunal went on to seek to determine the planning policy. The attempted exercise can be seen in the reasons from paragraph 26. However, at paragraph 37 reference was made to s.136 of the Water Act, and from that point on the Tribunal seemed to be diverted from what it was seeking to do. Close consideration of the following paragraphs reveals that the Tribunal did not apply the proper test to determine validity. It did not decide the issue of validity. It appeared to be diverted from its task and thereafter appeared to enter into a form of consideration on the merits. However, I must confess I have some difficulty in determining whether the Tribunal was dealing with an attack based on invalidity or a merits review of condition 13(f).

94 Turning to paragraph 44 of the reasons, the first sentence appears to state a different test and suggests that the Tribunal misunderstood the issue. In my view, it is not relevant whether or not the requirements of the Corporation are "the direct natural and reasonable consequence of the proposal to subdivide this land". The authority for this test is not stated, but these words are found in s.98 of the P & E Act. They are concerned with a statutory criterion which must be satisfied if a claim is made for compensation for financial loss. They had nothing to do with the question of the validity of a condition.

95 It is difficult to know what the second sentence of paragraph 44 is dealing with. Apparently the Tribunal is saying that the imposition of a condition is not a matter for Melbourne Water where "Melbourne Water does not consider there is an appropriate control". It is then noted that the floodplain and waterway were not covered by controls under the planning scheme. It is difficult to know the relevance of those observations to the issues in the review. The Corporation was empowered under s.136 to require the creation of an easement for any of the purposes listed in the section. It is not to the point whether there are any controls under the Frankston Planning Scheme. The issue was whether the Corporation had acted properly in exercising its statutory power under s.136, and in particular whether the statutory power was exercised for one of the purposes stated in that section, taking into account the other relevant legislation. The next sentence refers to the planning scheme and what it recognises, but in my view that is a wrong consideration. If the appropriate test as to the issues in the review was that laid down by the High Court, then the restriction of the consideration of the planning policy to the planning scheme failed to give full effect to the test.

96 Paragraph 45 appears to indicate that the Tribunal was under some misunderstanding concerning what the Corporation was seeking to do and the statutory power it was exercising. The fact was that the Corporation was exercising its power under the Water Act, which it was entitled to do.

97 The Tribunal did not state the proper test, which is that stated by Walsh J in the High Court case. The Tribunal failed to properly consider and determine the validity of condition 13(f) in accordance with that test. It restricted its consideration of planning policy and failed to take into account other relevant legislative provisions, which all form part of a legislative scheme. The Tribunal appears to have confused the questions of validity and merits, and in reaching the final decision applied a test which had no bearing on the question at all.

98 The orders made must be set aside. I propose to grant leave to appeal, set aside the orders made and order that the review proceeding be re-heard by a differently constituted tribunal. On the rehearing, the Tribunal must apply the proper test to determine the validity of the condition. That is not the test stated by Walsh J in the High Court. The principles to apply are those which have been established concerning the test of validity of the exercise of a statutory power. The only other observation I make is that Parliament entrusted an experienced body, namely, the Corporation, to determine whether an easement should be created for the purposes of, inter alia, waterway management or drainage. The decision was not entrusted to a court or the Tribunal. Weight must be attached to a proper exercise of power by the Corporation in respect to the creation of an easement when it comes to a question of merits. I refer to s.84B(1), which requires the Tribunal to take into account any matter which the responsible authority was required to take into account in making its decision and to have regard to any matter which the authority was required to have regard to in making that decision.

Conclusion

99 In my opinion, the Tribunal erred in law in carrying out the review and making the orders it did. The members misdirected themselves on the law, failed to properly consider and determine whether or not the condition 13(f) was valid, and in reaching the decision, confused the questions of validity and the merits. The members failed to address the proper issues. Accordingly, in my opinion leave must be granted to appeal to this Court against the orders made by the Tribunal pursuant to s.148(1) of the VCAT Act. The Tribunal erred in law and the appeal must be allowed.

100 Subject to any submissions by counsel, I propose to make the following orders:

(i) That the plaintiff Melbourne Water Corporation have leave to appeal from the orders made by the Tribunal on 9 June 2006;

(ii) That the appeal by Melbourne Water Corporation be allowed;

(iii) That the orders made on 9 June 2006 by the Tribunal be set aside;

(iv) That the proceeding be remitted to the Tribunal to be heard and decided again by a differently constituted Tribunal and that the parties be at liberty to adduce further evidence.

101 I will hear the parties on the question of costs.

[1] See Part II of the Melbourne and Metropolitan Board of Works Act 1958 ("MMBW Act").

[2] See s.56(1)(b).

[3] See paragraph 6 of the Tribunal's reasons.

[4] See Government Gazette - 20 January 1994 at p.164.

[5] See Lloyd v Robinson [1962] HCA 36; (1962) 107 CLR 142 esp at p.154; Bathurst City Council v PWC Properties Pty Ltd (1998); Western Australian Planning Commission v Temwood Holdings Pty Ltd [2004] HCA 63; (2004) 221 CLR 30.

[6] [1958] 1 QB 554.

[7] [1975] VicRp 15; [1975] VR 156.

[8] (1997) AATR 86.

[9] Supra.

[10] Allen Commercial Constructions Pty Ltd v The Council of the Municipality of North Sydney [1970] HCA 42; (1970) 123 CLR 490 at 499.

[11] (2004) 18 VPR 217.

[12] (1997) 20 AATR 86 at para 67.

[13] supra at 572.

[14] [1961] AC 636.

[15] At 684-5.

[16] [1947] EWCA Civ 1; [1948] 1 KB 223.

[17] [1981] AC 578.

[18] At 607.

[19] [1970] HCA 42; (1970) 123 CLR 490.

[20] Supra.

[21] At 499.

[22] [1975] VicRp 15; [1975] VR 156.

[23] At 162.

[24] 5th ed at p.298.

[25] [1941] VicLawRp 22; [1941] VLR 110 at 111.

[26] (1988) 81 ALR 260 at 267.

[27] [1990] HCA 16; (1990) 92 ALR 213.

[28] At 226.

[29] At 228.

[30] [1998] HCA 59; (1998) 195 CLR 566.

[31] at p.577.

[32] [2004] HCA 63; (2004) 221 CLR 30.

[33] See page 55.

[34] See page 87.

[35] See Municipal Council of Sydney v Campbell [1925] AC 338 at 343.

[36] (1925) AC 338 at 343.

[37] See s.62(1)(a) of the P & E Act.

[38] [2004] VSC 369.

[39] (1993) 10 AATR 278.

[40] [1977] VicRp 5; [1977] VR 51.

[41] At 59.

[42] Supra.

[43] At 222.

[44] At 252.

[45] [1968] VicRp 55; [1968] VR 425.

[46] At 430.

[47] [1965] AC 735.

[48] At 753.

[49] At 760.

[50] At 431 et seq.

[51] Supra.

[52] [2004] VCAT 19 at para 13.

[53] See s.189(2).

[54] See Hansard p.2228 of 26 May 1989.