Star Property Investments Pty Ltd and Another v Leichhardt Municipal Council

APPLICANTS: Mr P C Tomasetti (Barrister)

SOLICITORS: Carbone Anderson LEGAL REPRESENTATIVES: RESPONDENT: Mr P D McClellan QC with Mr A M Pickles (Barrister)

SOLICITORS: Pike Pike & Fenwick

IN THE LAND AND Matter No. 10283 of 2000 ENVIRONMENT COURT Coram: Talbot J OF NEW SOUTH WALES Decision Date: 2 November, 2000

Star Property Investments Pty Ltd First Applicant Cape Property Group Pty Ltd Second Applicant v Leichhardt Municipal Council Respondent

1. The applicants are the owners as tenants in common of properties known as 81 and 83 Ryan Street Lilyfield. On 7 October 1999 Form Architects (Aust) Pty Ltd lodged development application No D1999/946 with Leichhardt Council seeking consent for demolition of existing structures and construction of five townhouses on land known as 81 to 83 Ryan Street Lilyfield. Development application No D1999/946 was considered by council at its meeting on 11 June 2000 when it resolved to refuse consent.

2. The land is in zone Residential 2(b2) pursuant to Leichhardt Local Environmental Plan No. 2 ("LEP 20"). The proposed development is a residential flat building as defined in LEP 10. Residential flat development is permissible within the 2(b2) zone under LEP 20, with council's consent.

3. The applicants have appealed to this Court against the refusal of the application for development consent.

4. The applicants have raised the question of whether the premises, or either of them, enjoy existing use rights as a preliminary issue of law. Further, the Court is asked to determine whether any existing use rights have been abandoned in respect of either or both premises. Finally, if existing use rights apply, whether the provisions of the LEP containing development standards, applicable DCPs and a draft LEP derogate from the incorporated provisions within the meaning of s 108(2) and (3) of the Environmental Planning and Assessment Act 1979 ("the EP&A Act").

5. Section 106 of the EP&A Act contains a definition of "existing use".

6. Section 108 relevantly provides:- (1) The regulations may make provision for or with respect to existing use and, in particular, for or with respect to: (a) … (b) the change of an existing use to another use, and (c) … (2) The provisions (in this section referred to as the incorporated provisions ) of any regulations in force for the purposes of subsection (1) are taken to be incorporated in every environmental planning instrument.

(3) An environmental planning instrument may, in accordance with this Act, contain provisions extending, expanding or supplementing the incorporated provisions, but any provisions (other than incorporated provisions) in such an instrument that, but for this subsection, would derogate or have the effect of derogating from the incorporated provisions have no force or effect while the incorporated provisions remain in force.

(4) … 7. Regulation 39 provides:- (1) An existing use may, in accordance with this Division, be: (a) … (b) … (c) … (d) changed to another use, including a use that would otherwise be prohibited under the Act.

(2) A use to which an existing use is changed is itself taken to be an existing use for the purposes of the Act and may, subject to this Division, be changed to another use.

Pursuant to reg 43, development consent is required for any change of an existing use to another use.

The applicants seek to rely on the existing use provisions in order to avoid the consequences of being required to comply with relevant development standards or to lodge an objection pursuant to SEPP 1 on the basis that the LEP provisions derogate or have the effect of derogating from the incorporated provisions.

The land was originally zoned within a living area pursuant to a County of Cumberland Planning Scheme Ordinance.

There is no dispute that on 26 January 1955 development consent was granted to use 83 Ryan Street for light industry, woodworking.

Various development consents were subsequently granted to the use of No 83 Ryan Street between 1955 and 1970. The most recent development consent in respect of No 83 Ryan Street was granted on 15 September 1970 in respect of the use of the premises for manufacturing detail joinery.

Council also granted various development consents for the use of No 81 Ryan Street between 1958 and 1964. The most recent development consent for the use of No 81 Ryan Street was granted on 28 July 1964 when council approved the use of the land for general woodworking as an adjunct to a tubular furniture factory.

The Leichhardt Planning Scheme Ordinance was certified by the Minister on 8 March 1979 and publicly exhibited on 9 April 1979. Interim Development Order No. 27 was published in New South Wales Government Gazette No. 52 on 12 April 1979 ("IDO 27").

Clause 1A(1) of IDO 27 provides:- 1A(1) Except as provided by sub clause (2) this order applies to the whole of the land within the municipality of Leichhardt, as shown in the scheme map referred to in the scheme in the course of preparation, with boundaries as indicated on that map.

"Scheme in the course of preparation" means the Leichhardt Planning Scheme certified by the Minister on 8 March 1979 in accordance with s 342F(2) of the Local Government Act 1919 and publicly exhibited on 9 April 1979 by the council in accordance with s 342F(3) of that Act.

The land was zoned residential 2(b3) under the Leichhardt PSO. Industry was a prohibited use within the 2(b3) zone.

The relevant date for establishing an existing use therefore is 12 April 1979.

As indicated above, the current environmental planning instrument is LEP 20 pursuant to which the land is zoned Residential 2(b2) and the proposed use is permissible within the zone.

Annito and Mariana Scaramuzza ("Scaramuzza") occupied No 83 Ryan Street as tenants from 1969 or 1970 for the purpose of a joinery and cabinet making business supplying custom built furniture made to order.

Both properties were owned by Kozaro Pty Ltd on 12 April 1979.

They were purchased by Scaramuzza on 7 February 1980. At that time No 81 Ryan Street was being used for woodworking and cabinet making and production of furniture.

Scaramuzza continued to occupy the premises at No 83 Ryan Street from 1980 until 1990 and used the premises for woodworking purposes.

Pursuant to an unregistered lease dated 1 February 1982 Scaramuzza leased No 81 Ryan Street for a term of two years. The lease stipulated that the premises shall be used only as a woodworking factory and that the tenant would obtain, at his own expense, all necessary consents that may be required from Municipal or Shire or other authorities to carry on the proposed business, being the use for which the premises were leased.

From January 1984 through to 1991 tenants occupied No 81 Ryan Street pursuant to various leases which contained a covenant that the lessee would not use or permit to be used the premises for any purpose other than as shop or commercial premises and for carrying on the business of woodworking and joinery and allied trades.

A further lease for the period October 1991 to the end of September 1993 contained a covenant that the lessee would not use or permit to be used the premises for any purpose other than as a shop or commercial premises and for carrying on the business of furniture restoration and storage.

No 81 Ryan Street was the subject of a further lease for a term of three years commencing 1 February 1994. However, the covenant in that lease prescribed that the premises not be used for any other purpose except for the display and wholesaling of light fittings and associated equipment. The lease contained a clause whereby the lessee confirmed that all the permits, approvals and licenses necessary to conduct the type of business had been obtained. The lessee also acknowledged that the lessor had not made any representations as to the feasibility of carrying on such business on the demised premises and had no objections, responsibilities or liabilities in this respect.

Mr Scaramuzza said that the lessees thereafter used that premises for displaying and wholesaling of light fittings and associated equipment. The lease was renewed on 1 February 1997 for a further term of three years and Mr Scaramuzza said the tenants continued to use the premises for display and sale of light fittings.

During October 1998 Scaramuzza consented to the subleasing of 81 Ryan Street to Sugarbaby Pty Ltd. The conditional consent was furnished in writing on 1 October 1998. The only reference to the nature of the business to be conducted by the sublessee was a prescription that the head lessee accept responsibility for "any additional costs relating to the different nature of the business carried out by Sugarbaby".

A director of Sugarbaby Pty Ltd, Yvonne Dianne Thorpe, gave evidence and told the Court that the company occupied 81 Ryan Street from October 1998 until October 1999. During this period of time Sugarbaby used the whole of the premises for the warehousing of perfumed soap products and office administration associated with the warehouse use.

Ms Thorpe did not obtain any formal approvals from the council for the company's use of No 81 Ryan Street following advice from the real estate agent that it was not necessary.

The property was transferred to the present owners by Scaramuzza on 18 October 1999.

From 7 February 1980 to 1990 Scaramuzza continued to use 83 Ryan Street for woodworking purposes.

Scaramuzza leased No 83 Ryan Street for a term of three years commencing 20 June 1990. The lease contained a covenant that the lessee would not use or permit to be used the demised premises for any purpose other than as shop or commercial premises and for carrying on the business of pattern and mould maker. The lease expired on 19 June 1993.

The premises were further let for a term of three years from 1 January 1994. The lessee covenanted not to use or permit the premises to be used for any other purpose except for woodworking, cabinet making and furniture manufacturing and related items and office and storage facilities to be used in connection with the manufacture of such items. The lease was surrendered by the lessee on 28 April 1995 before the expiration of the term.

On 15 September 1995 Scaramuzza entered into a further lease of No 83 Ryan Street for a period of three years. The permitted use of the premises was described in the lease as woodworking, carpentry and related activities.

Finally, Scaramuzza entered into a lease on 24 November 1998 for a term of one year commencing 1 December 1998. The lease stipulated that the premises shall be used only as cabinet making (wood work). The tenant remained in occupation at the date of sale to the applicants on 18 October 1999.

Mr Scaramuzza says that from time to time he visited 83 Ryan Street and observed the premises were being used for woodworking and cabinet making purposes.

However, Ms Thorpe told the Court that when she first inspected the premises at No 81 Ryan Street she also visited No 83 Ryan Street. In late September 1998 she observed that both premises appeared to be occupied and used for the light fittings business. She did not see any woodworking activity.

(d) The evidence of the subjective intention of the owners

The following statements by Mr Scaramuzza were admitted over the objection of the respondent, subject to relevance, to enable the applicants to make a submission that the owners at all relevant times maintained an intention to retain "existing use rights" in respect of the premises:- Although 81R were going to be used for a different purpose to woodworking it was my understanding that the Lessee was obliged to obtain all necessary permits and approvals to conduct the type of business that he rented the premises for. I understood he had to get those permissions at his own expense and I assumed that he had. I did not enquire of them whether that had got Council approval and they never told me that they had not got Council approval. Had I known that they may have been in breach of Council requirements I would have insisted that they remedy that situation. If they had refused to remedy the situation I would have insisted that they do so and if they did not I would have terminated the Lease and I would have resumed using the premises for woodworking or some other purpose which the Council approved of.

I never intended at any time to surrender my rights to use 81R for a commercial or light industrial type of purpose. I always thought 81R were being legally used and if it had been brought to my attention that there was any problem in this regard I would have rectified the problem. I did not intend at any time to abandon my rights to use 81R in any way at all.

Following the Lessee moving in they paid the rent and there were no complaints from any neighbours of which I was aware nor was there any complaint from the Council. I assumed that they had done everything that they had to do to legally use 81R.

The following statement by Francesco Anthony Colacicco who is a director of the first applicant was admitted on the same basis:- Star and Cape settled the purchase of the properties on 18 October, 2000. I proposed to continue leasing the properties until the leases expired. I wanted to redevelop the properties for residential purposes and proposed to submit a development application to council for that purpose after exchange of contracts. If the development application was refused or became delayed I intended to continue to lease the properties for any lawful purposes including industrial purposes and to then decide whether to hold onto the properties or to sell them.

The applicants' contention is that notwithstanding the proposal to change the use from a non-conforming use to a use permissible with consent, the combined effect of s 108(3) and reg 39(1)(d) is to allow the change of an existing use to "another use", conforming or non-conforming ( Kremer & Associates v North Sydney Municipal Council (1982) 47 LGRA 209 at 217).

Further, relying on Woollahra Municipal Council v Banool Developments Pty Ltd (1973) 129 CLR 138 and Woollahra Municipal Council v TAJJ Investments Pty Ltd (1982) 49 LGRA 123, the applicant argues that because the owner for the time being never at any stage intended to abandon or terminate "the existing use", the existing use has continued throughout the relevant time.

Relying on the obligations placed on the tenant from time to time by the terms of the covenants in the respective leases, it is claimed by the applicants that the owner manifested an intention to maintain existing use rights by requiring the tenant to obtain any necessary consents. Moreover, the owners believed at all times that they had existing use rights for woodworking purposes or for other non-conforming purposes to which the use was changed in accordance with the provisions of a particular lease.

Mr Tomasetti, who appears for the applicants, placed considerable weight on the acceptance by the High Court in Banool that the subjective intention of the owner was relevant in determining the question of whether an existing use had been abandoned.

The applicants seek to draw an analogy from the findings of Rath J in Daniel v Manly Municipal Council & Anor (1975) 34 LGRA 14 at 20 to the effect that the actions of a tenant will not necessarily bring existing use rights to an end.

The applicants' arguments raise the question of to what extent a breach of covenant by a lessee can disentitle an owner who has no knowledge that the tenant had acted inconsistently with existing use rights.

Further reliance was placed upon the observations made by Mahoney JA in Hudak v Waverley Municipal Council (1990) 70 LGRA 130 (particularly at 134) where His Honour recognised that to keep a building vacant for a period so that repair work may be done, tenants obtained, or, perhaps, some advantage obtained which is incident to its use or the claimed existing use may be the use of it as such. Thus, keeping it in a condition or using it for an unrelated objective is for a purpose distinct from the existing use. His Honour also observed that abandonment where used in s 107(3) "will ordinarily involve that the owner intends that the use of the land for the existing purpose use, or the right to use it, be given up or that he have the intention to do something which is inconsistent with its continuance" . The fact that actual use has not taken place does not necessarily mean that use for the existing use purpose has been abandoned. Finally, His Honour said that the general effect of s 107(3) is "to place on the owner the onus of showing that it was an intention upon the basis of which the existing use was to continue" .

Mr Tomasetti also relies upon the following passage from the judgment of Hope A-JA at 137 - 138:- As it seems to me, it is necessary to have regard to the whole of the circumstances, including the subjective intention of the relevant person, and to determine whether in the light of all those matters the cessation of actual use proved by the facts is outweighed by an asserted subjective intention to continue the use. Where there continues to be activity designed to continue a non-conforming use as was the case in Woollahra Municipal Council v Banool and Woollahra Municipal Council v TAJJ Investments Pty Ltd , and the length of cessation of actual use is not very long, it may be easy enough to conclude that there has been no abandonment. If however years go by without actual use and particularly where the factor said to be delaying a resumption of the existing use is something of an indefinite character, such as winning the lottery, there would be little difficulty in concluding that the cessation of use for a similar period of time involved an abandonment.

Mr Tomasetti recognises that this is not a case where the facts show that the use of the premises for the non-conforming use was delayed, but rather that here the owners believed they had existing use rights for woodworking purposes or the purposes to which the use was changed in accordance with the various leases.

Mr McClellan QC reminded the Court that the primary question which arises is whether there is an existing use in contrast to existing use rights. Relying on authorities such as Banool, TAJJ and Daniel, he submits that the Court has grafted on the subjective intention of the owner where there is an existing use and a temporary interruption of that use.

Thus, Mr McClellan says that the applicants have to deal with a rebuttal of the presumption raised by s 107(3) which deals with the concept of the cessation of the actual use.

He relies on the evidence that shows the use of No 81 was uncontradictably inconsistent with the existing use at the relevant date for a period of approximately six years. Furthermore, the terms of the lease make it quite clear that possession of the premises was given over for the purpose of the display and wholesaling of light fittings and associated equipment. The covenant which placed the obligation on the tenant to obtain any necessary consents addresses the desire to preserve existing use rights but, according to Mr McClellan, does nothing to preserve the existing use for woodworking purposes.

The respondent relies on the evidence of Ms Thorpe to show that No 83 was used by the tenant of No 81 at some time for the purpose of the lighting business and that accordingly, the subjective intention of the owner in that regard needs to be enlivened even if the period of occupation was for a few weeks.

Mr McClellan urges the Court to reject the subjective intention claimed on the part of the new owners because the intention formed in that regard was only a general one to revert to pursuing existing use rights if the development application for residential development was refused. There is no evidence of a formal appreciation or understanding of what the existing uses were except the reference by Mr Colacicco to "any lawful purpose including industrial purposes" . Accordingly, in the absence of a keen understanding of the nature of the existing use, it was not possible for the present owners to form the requisite subjective intention. The intention of the new owners has always been to develop the property for residential purposes. Mr McClellan points out that until Mr Colacicco swore an affidavit in these proceedings there was no mention of an intention to revert to an existing use in any of the formal documents produced in evidence, including those lodged in support of a development application. The question of existing use rights was not raised until after these appeal proceedings were commenced.

Mr McClellan argues that because the subject matter of s 108, which is within Div 10 of Pt 4, is a regulation making power for or with respect to existing use then it should not be regarded as making any provision in respect of permissible uses which fall within the regime of Pt 4 Div 1. In written submissions the respondent questions the issue of the validity of reg 39(2) on the basis that it extends the definition of existing use in s 106 and could have the consequence of bestowing existing use rights in perpetuity. Furthermore, a change to a permissible use could have the effect of eliminating the prospect of abandonment as once having changed to a permissible use in accordance with reg 39(1)(d), the owner could subsequently revert to the original prohibited use.

Mr McClellan contends that Kremer was wrongly decided and that reg 39(1)(d) should be confined to uses which are non-conforming and therefore fall within the concept of an existing use.

According to the respondent therefore, in order to bring the proposed change of an existing use to another use within the ambit of Div 10 within Pt 4 of the EP&A Act the reference to "another use" in s 108 and reg 39 must be taken as a reference to another non-conforming use.

Whether the combined effect of s 108 and reg 39 permits change to a permissible use

The ordinary meaning of the words in s 108(1)(b) and reg 39(1)(d) is clear and precise. There is no ambiguity. An existing use is defined in s 106. The words "another use" simply mean a different use distinct from the existing use.

The first requirement in construing or constructing the words of a statute is to determine the ordinary meaning of the words in accordance with common usage in the context of the object and purpose of the legislation. If there is an ambiguity it is permissible to look to the whole of the instrument and the context to find a meaning that would promote the underlying purpose or object of the provision ( Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (1981) 147 CLR 297).

That is not necessary here. Even if it is, then there is no discernible argument to justify a finding that the underlying purpose of protecting existing uses would not be promoted by allowing a change of use to a conforming or permissible use. In my view, it is just as consistent with the purpose of the existing use provisions to allow a change of use to another non-conforming use as it is to allow a change to a conforming use. Furthermore, a change to a conforming use that satisfies the requirements of the incorporated provisions, but does not comply with stricter development standards contained in a modern planning instrument that in effect derogate from the incorporated provisions, could positively facilitate a move towards bringing the use of property into closer conformity with current planning aims and objectives.

For the above reasons, the Court is not prepared to distinguish or overrule the decision in Kremer . The Court therefore finds that the applicant is entitled to rely on the existing use provisions in Div 10 of Pt 4 of the EP&A Act to make an application for change from an existing non-conforming use to another use, even if the latter use is a conforming use.

Although in the course of argument the respondent raised the arguable prospect of an anomalous consequence from the application of cl 39(2) of the EP&A Regulation, the applicant does not rely on cl 39(2). In the circumstances it is not necessary in these proceedings to make any finding as to the validity of that provision except to the extent of accepting that if it is ultimately found to be invalid then it appears to be severable from cl 39(1).

The primary question to be determined in deciding whether or not an owner of a property is entitled to existing use rights is whether or not there is an existing use and not whether or not the owner maintained a subjective intention to maintain existing use rights. The so called rights run with the property, not the individual.

However, in this instance where the existing use has not been continuous, there is an onus on the applicants to demonstrate to the Court that at all times they manifested the requisite intention to maintain the existing use and thus that there was no abandonment of the existing use.

The history of the relevant properties demonstrates that the tenants covenanted with owners of the premises as to the actual use of the premises and further, on most occasions required the tenants to obtain any necessary consents.

The owners leased these premises to various lessees over many years for woodworking, joinery and allied trades as well as a lease that contained a covenant that the lessee would not use or permit to be used the premises for any purpose other than as a shop or commercial premises and for carrying on the business of furniture restoration and storage. It was up until the expiration of this lease that the subjective intention of the owners to preserve the existing use is evident to the Court. The owners of the premises entered into leases which expressly mandated the maintenance of an existing use in connection with the woodworking purpose.

The lease which commenced on 1 February 1994 contained a covenant that the premises be used for the display and wholesaling of light fittings and associated equipment and a clause whereby the lessee confirmed all consents were in place for this use of the premises. This lease was originally for three years and was ultimately renewed and then subleased to another use for the warehousing of perfumed soap products. No formal approvals were obtained for this latter use.

Despite the applicants' submission that the history of these premises demonstrates that the owners believed they had existing use rights for woodworking purposes or the purposes to which the use was changed in accordance with the various leases, the Court is not satisfied that this is sufficient to establish that existing use rights survived the six year period during which the premises were used for display and wholesaling of light fittings and associated equipment as well as a soap warehouse, all with the knowledge and consent of the owners.

Although Mr Tomasetti submits that existing use rights were preserved in the six year period of the use for the display and wholesaling of light fittings and associated equipment, the Court finds that even if the subjective intention of the owner in this instance was to preserve existing use rights, that intention contrasts with the actual maintenance of the existing use of woodworking. It is manifestly inconsistent with an intention to maintain the continuance of the existing use ( Hudak ).

The Court is not satisfied that an existing use continues in respect of the premises at No 81 Ryan Street as the change in use to the light fittings purpose was not accompanied by a subjective intention to preserve the existing use. The interruption cannot be regarded as temporary in the sense that it was in Banool, TAJJ and Daniel.

The historical use of the premises at 83 Ryan Street since the relevant date demonstrates to the Court that the premises have been used for woodworking, cabinet making and furniture manufacturing. The applicants' evidence, in the form of affidavits and oral evidence accounts for the period 7 February 1980 to 15 September 1995. On 15 September 1995 a lease was entered into for a period of three years where the permitted use of the premises was described in the lease as woodworking, carpentry and related activity.

There is no direct evidence before the Court as to the actual use of the premises during this three year period and further, there is no evidence as to whether or not these tenants completed their tenancy.

The only evidence before the Court as to the actual use of the premises during the term of the lease is that of Ms Thorpe who attended the premises in late September 1998 when it was being used for the light fittings business. The applicants did not attempt to offer any evidence to rebut that of Ms Thorpe and thus it is left for the Court to determine whether or not the use was abandoned during this period.

It is difficult for the Court to disregard the evidence of Ms Thorpe. Further, if the premises were being used for the light fittings business then the owner needs to establish that the requisite subjective intention existed. There was no attempt on behalf of the applicants to dispute that No 83 was being used for this purpose or how its use for this purpose was consistent with a subjective intention to maintain the existing use of the premises for woodworking. Moreover, the inconsistent use of No 81 Ryan Street over the six year period does nothing to enhance the applicants' argument in respect of No 83.

The Court cannot be satisfied therefore that the existing use of No 83 Ryan Street for woodworking purposes was maintained throughout the relevant period.

The applicants have not established the fact that the properties have been used continuously for an existing use upon which they can rely for the purpose of the development application.

The respondent council has successfully demonstrated that the existing use has been sufficiently interrupted to justify a finding that the use for woodworking purposes has been relevantly abandoned, even though it may have been subsequently recommenced in part.

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.