Port Philip City Council v Domain Hill Properties P/L [1998] VSC 35

5. The Planning Permit allowed the Developer to develop and use the land situate at and known as 16-18 Albert Road, South Melbourne for the purpose of an 86 lot subdivision. This was the final step in a process which commenced in November 1996 when the property was purchased. At that time the building was a nine storey office building which had, some months previously, been vacated by the Department of Defence. On 21 April 1997 the City granted a Planning Permit to convert the office building into 36 apartments and accessory units. These apartments and car parking spaces accounted for the 86 lots for which application to sub-divide was made on 22 March 1997. The permit for subdivision with which this appeal is concerned was issued by the City on 25 August 1997. The City granted the application for subdivision subject to a number of conditions including condition 7, which required the Developer to pay to the City an amount equal to five percent of the site value of the land as a public open space requirement under s. 18(1)(b) of the Subdivision Act 1988.

8. By notice given on 22 October 1997 the Developer appealed against the Condition 7 on the ground that it was "unnecessary, excessive and an open space levy is not required". The appeal was heard before the Planning Division of the Tribunal on 5 February 1998. At this hearing counsel for the Developer took as a preliminary point that no public open space requirement should have been made because the subdivision was exempted by s. 18(8) of the Subdivision Act 1988 and by cl. 7-1.4 of the applicable planning scheme. This point was successful and the appeal was allowed on 15 March 1998. In the appeal before the court, the City raises three grounds, essentially challenging the Tribunal's view of cl. 7-1.4. Grounds 4 and 5 which were concerned with the procedural aspects of the hearing before the Tribunal were not pursued.

11. I should add before turning to the argument that the Developer paid the open space levy on 8 January 1998 and a certified plan of subdivision was issued on the following day. As at 5 February 1998 when the appeal was before the Tribunal, it was said that the building works were due for completion "within the next few weeks".

14. Broadly speaking, s. 18 of the Subdivision Act 1988 confers upon the City a discretion to require a sub-divider to set aside a percentage of the land in the subdivision which was to be used for residential, industrial or commercial purposes or to pay to the City a percentage of the site value of the land or to do a combination of these. In each case the City may determine the percentage up to five percent. This land or money must be used for public open space purposes: s. 20. By s. 18(8) it is provided:

"(8) A public open space requirement is not required if -

(a) the subdivision is of a class of subdivision that is exempted from the public open space requirement by the planning scheme."

21. The planning scheme in the State Section contains the following clause:

The following classes of subdivision are exempt from a public open space requirement, in accordance with Section 18(8) of the Subdivision Act 1988.

The subdivision of a residential building provided each lot contains part of the building. The building must have been constructed before 30 October 1989 or a planning permit must have been issued for the building before that date.

The subdivision of a commercial or industrial building provided each lot contains part of the building."

30. The City's grounds of appeal on this point are the following:

"1. The Tribunal wrongly interpreted and applied clause 7-1.4 of the Port Phillip Planning Scheme by finding that the building the subject matter of the appeal fell within the exemption in that clause. 2. The Tribunal wrongly failed to construe clause 7-1.4 in a way which would promote the purpose or object underlying clause 7-1.4 and Section 18(3) of the Subdivision Act 1988 [the Subdivision Act] namely to exempt from making a public open space requirement only the subdivision of those buildings used for residential purposes which were used for residential purposes or permitted to be constructed for residential purposes as at the date the Subdivision Act came into operation. 3. The Tribunal erred in failing to construe class 1 in clause 7-1.4 as providing an exemption only where a building which had been constructed before 30 October 1989, was so constructed as a building to be used for residential purposes.

34. On behalf of the Developer it was put that each of the three requirements of the description of the class 1 exemption was satisfied. The building the subject of the subdivision was a residential building. This was accepted by the City, but not necessarily for the reasons offered by the Developer. Second, each lot of the subdivision contained part of the building. This was not challenged by the City. Third, it was said that the office building had originally been constructed many years ago, well prior to 30 October 1989 so that it fell within the second sentence of the class 1 description of the exempted subdivision. Alternatively, it was submitted that if the building had not then become a residential building it remained a commercial building and therefore fell within class 2.

37. The argument for the City accepted that the building was a residential building and that the other requirements of the first sentence of the class 1 description were satisfied. Counsel submitted that on its true construction the second sentence required that the building must have assumed its residential character before 30 October 1989 or that a planning permit for this purpose must have issued before that date. He argued that these requirements were not satisfied since the planning permit for conversion to a residential building was not issued until 21 April 1997 and the construction work to give effect to this was not completed until some time thereafter.

40. The Tribunal pursuant to s.47(1)(c)(ii) of the Administrative Appeals Tribunal Act 1985 sought the opinion of a deputy president on this legal point and this opinion is set out in its reasons for determination. I should say at once that the deputy president did not have the benefit of oral argument or debate with the parties or their representatives as I did, nor was he provided with any written legal argument on the point on behalf of the City. This was because the preliminary point apparently came as a surprise to the representative of the City at the Tribunal hearing. The deputy president advised the Tribunal that the expression "residential building" should be given its ordinary meaning as "a building which is used for residential accommodation of whatever specific type". He preferred this definition to that contained in the regional section of the planning scheme: "a building with more than 10 habitable rooms that provides temporary or permanent accommodation for at least two people who are not a family. It does not include a tourist hotel".

43. As I have mentioned, counsel for both parties accepted that the building was a residential building but for significantly different reasons. For the Developer reliance was placed first upon the finding of the Tribunal and also upon the fact that two permits had been granted by the City for development and use as residential and later for subdivision as such. In his written submission to the Tribunal, counsel for the Developer, naturally enough, did not rely upon the first matter; rather he submitted "the building is residential because it has been converted from an office block to an apartment building for residential purposes". Counsel for the City accepted that the plain every day meaning of "residential building" applied and said that the building in question satisfied that definition because it was to be used for this purpose.

46. In the Macquarie Dictionary, the meaning of "residential" is given as "adapted or used for a residence". In common usage the word in conjunction with "building" refers to the physical characteristics and intended use of the building rather than its actual use. Accordingly, it covers an unoccupied house. On the other hand, it would not be usual to refer to a factory or a barn as a residential building merely because one or more people happened to be living there. I accept, therefore, the definition of "residential building" proffered by counsel for the Developer in his written submission to the Tribunal and that adopted by counsel for the City before me. A building which is constructed by the erection of a new building or by the modification of an existing building is properly called a residential building where the purpose of its construction is to provide residential accommodation. In the present context I would include also such a building whose construction is not complete because it is of the nature of an application for permission to subdivide that it will often be made at this time. The last part of the second sentence in the class 1 description shows this to be the case.

49. This definition of residential building has the added advantage that it makes the second sentence in the class 1 description meaningful. This sentence requires that:

"The building must have been constructed before 30 October 1989 or a planning permit must have been issued for the building before that date."

53. The Subdivision Act 1988 came into operation on 30 October 1989. Why, then, should a residential building be exempt only if it is constructed before this date? Such an additional requirement is not demanded of commercial buildings in order to exempt them from the levy. If "constructed" is given the meaning accorded to it by the Tribunal, namely, first constructed, the second sentence would exclude in this way the vast majority of those projects where an existing commercial or industrial building is converted to apartments. That may have been the intention of those responsible for the planning scheme but, if so, it is surprising that it was expressed in such an oblique way. It appears that this aspect of the matter troubled also the deputy chairman. Finally, what planning permit is contemplated by the second part of the second sentence? This part operates where the construction is not completed before 30 October 1989 but a "planning permit for the building" has issued before that date.

56. As a matter of ordinary interpretation of the document, the word "building" in the opening words of the second sentence must refer to the building in the first sentence, that is a building which has been or is being constructed as a residential building. In order to satisfy the requirements of this sentence, it is this construction work which must be completed before the commencement date or a planning permit for this construction must have issued before that date. That the word "construction" covers work by way of major alteration to existing buildings is apparent from the definition of "construct" in the Planning and Environment Act 1987 s. 3 which is imported into this part of the planning scheme by cl 2-1.1.

59. Further, the interpretation which I favour is consistent with what I perceive to be the purpose of the second sentence. A legislative provision repealed by s. 4 of the Subdivision Act 1988 is section 569H of the Local Government Act 1958. This provision, which dates back to 1970, empowered a council to impose an open space levy of up to five percent where "a person proposes to construct any building or buildings on any land" and the council is of opinion that the building or buildings are part of them were or were likely to be used for certain essentially residential purposes. This levy was imposed by empowering the council to refuse to allow the construction to take place until the levy was paid or security given for its payment. It would seem, therefore, that if the building had been constructed or where permission to construct had been given before s. 569H was repealed, the person constructing would have been liable or potentially liable to pay the levy at that time. Under the Subdivision Act 1988 the levy is imposed on a developer, not at the time it seeks a construction permit, but at the time it seeks a permit to subdivide. The second sentence, therefore, appears to have been included to avoid the possibility that the Developer who performed the construction work or successfully sought a construction permit under the s.569H regime might be exposed to the risk of a second open space requirement under s. 18 at the time of subdivision. Since a developer of a commercial building was not at risk under s. 569H it was not necessary to insert a similar provision in the description of the class 2 exemption under cl 7-1.4 of the planning scheme.

62. I conclude, therefore, that the building, the subject of the present subdivision, was at the relevant time and is a residential building, but that it was not constructed as such before 30 October 1989. The subject matter of the subdivision planning permit in which cl 7 is found is not a class 1 subdivision. Nor is it a class 2 subdivision because it was not and is not a commercial building. The first and third grounds of appeal have therefore been made out.

1. The appeal of the appellant brought by notice filed on 9 April 1998 be allowed.

2. The determination of the Tribunal made on 15 March 1998 be set aside.

3. The matter be referred to the Tribunal to be determined according to law.

71. I understand that the parties wish to make submissions as to costs. I will hear them as to this matter and as to the terms of the orders I have proposed.