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What happened

The Trustees of the Poor Sisters of Nazareth owned a 5.77 hectare site known as Nazareth House in Camberwell. The site was proposed to be subdivided into two lots: Lot 1 (3.215 ha) containing existing institutional buildings including a 100‑bed aged persons facility, chapel and convent, and Lot 2 (2.555 ha) an open grassed area (Reasons [1]–[2]). A permit (PP07/00859) contained Condition 3 requiring the owner to enter into a section 173 agreement that provided if either lot was further subdivided a public open space (POS) contribution of 5% (of value or land area) would be provided at that future time. Condition 4 required reticulated services to be available to each lot.

The permit holder applied under s80 of the Planning and Environment Act 1987 to delete Condition 3 and to limit Condition 4 so it applied only to Lot 2 (Information; Reasons introduction). The responsible authority contended Condition 3 was a concession to the permit holder because payment would only be required if a lot was later subdivided and then only at that later time; it remained appropriate to have the section 173 arrangement in place (Reasons, Responsible Authority submissions).

VCAT (Member Jeanette G Rickards) heard submissions and reached three principal conclusions:

• A council cannot lawfully defer the decision to impose a public open space requirement for the current subdivision by using a section 173 agreement to catch a later subdivision; the s18 decision must be made in relation to the particular subdivision before the council and payment (if imposed) is due prior to issue of a Statement of Compliance (Public Open Space requirement [12]; Section 173 Agreement [1]–[2]).
• The two‑lot exemption in s18(8)(c) applies only if the council considers it unlikely that each of the two lots will be further subdivided; if either lot could be further subdivided the exemption does not apply (Public Open Space requirement [8], [10], [14]).
• Where a s18 requirement applies, the percentage is calculated in relation to 'the whole of the land the subject of the subdivision'; the statutory scheme does not contemplate splitting the calculation so that only one of the two lots bears the levy (Application of public open space requirement to lot 2 only [2]–[3]).

Applying these principles to the facts, VCAT found it was not reasonable to conclude both lots were unlikely to be further subdivided; consequently the s18(8) exemption did not apply. The Tribunal considered the site to have significant potential for residential development given its size and zoning, and that the council's policy justified a 5% levy. The Tribunal therefore varied the permit: Condition 3 was amended to require payment to Council of a public open space contribution of 5% of the value of the land prior to issue of a Statement of Compliance (valuation under s19 of the Subdivision Act), and Condition 4 was amended to require services only to Lot 2 (Order; Conclusion).

Why the court decided this way

The Tribunal grounded its decision in the statutory text and structure of the Subdivision Act 1988, particularly s18 and its subsections.

1. Statutory scheme requires a decision at the time of the subdivision application

   • Section 18(1) empowers a council to require POS where planning scheme does not specify an amount; s18(1A) restricts when a council may make the requirement to cases where the council considers, having regard to the listed matters, that the subdivision will create need for more open space. Section 18(1B) contemplates that, once the council decides to impose a requirement, it may receive payment prior to issue of a Statement of Compliance (Public Open Space requirement [4]–[6], [13]).
   • The Tribunal reasoned these provisions show the decision whether to impose POS is by design tied to the particular subdivision application before the council. That decision cannot be delegated to or deferred by a condition that purports to leave the substantive assessment to some later proceeding (Public Open Space requirement [9]–[13]; Section 173 Agreement [1]–[2]).

2. Two‑lot exemption requires specific finding

   • Section 18(8)(c) exempts a subdivision into two lots from a POS requirement if the council considers it unlikely that each lot will be further subdivided. The Tribunal interpreted this as requiring a finding about both lots, not just one (Public Open Space requirement [8], [10], [14]).

3. Calculation applies to the whole land

   • The Tribunal read s18 as referring to 'the land the subject of the subdivision' and concluded that the percentage is applied to the whole parcel being subdivided, not carved off to apply only to a selected resulting lot (Application of public open space requirement to lot 2 only [2]–[3]).

Because the council had not made a conclusive finding that both lots were unlikely to be further subdivided, the Tribunal held the exemption did not apply. The Tribunal also rejected the council's approach of embedding a deferred obligation in a s173 agreement because that approach improperly postponed the statutory decision-making and payment obligations which the Act contemplates occur at the time of that subdivision.

The Tribunal additionally assessed the matters in s18(1A) and local policy: the site is in a residential zone, has prior approvals and potential for residential development, and local policy (clause 22.09) prescribes a 5% levy as standard which may be reduced only in certain circumstances. The Tribunal was not persuaded to reduce the 5% on the information provided and considered the 5% contribution appropriate given the land's scale and potential (Application of section 18(1A) [1]–[6]).

Before and after state of the law

Before this decision:

• There was some VCAT authority (for example Timespan) that had permitted or not objected to arrangements which deferred payment or otherwise linked POS obligation to future events. Clause 52.01 and local schedules also provide a separate regime where a percentage specified in a planning scheme schedule eases enforcement and clarity.

After this decision (VCAT, Member Rickards):

• This Tribunal decision emphasises that under s18 a council must decide whether to impose a POS requirement in relation to the specific subdivision application before it and cannot lawfully defer that statutory decision by means of a section 173 agreement that only triggers on some future subdivision. The reasoning makes clear the s18(8)(c) two‑lot exemption is strictly about whether both lots are unlikely to further subdivide; the onus is on the responsible authority to form that view at the time.

Note: VCAT decisions are persuasive; this decision represents the Member's interpretation of s18. The reasons explicitly state disagreement with Timespan Pty Ltd v Knox CC [2003] VCAT 357 (Section 173 Agreement [3]).

Key passages with plain-English translation

1. "There is nothing in the Act which suggests that a Council can defer consideration of the imposition of a public open space requirement ... until a later time such as a further subdivision of the whole or part of the land." (Public Open Space requirement [12])

   • Plain English: The law requires councils to decide on POS for the subdivision they're looking at now; they cannot push that decision into the future by making a condition that only bites if someone applies later.

2. "If the Council reaches the conclusion that each of the two lots that is being subdivided is unlikely to be further subdivided then that is an end to the matter and the subdivision of the land into two lots is exempt from the requirement to provide public open space." (Public Open Space requirement [14])

   • Plain English: The special rule for two-lot subdivisions only applies if the council genuinely thinks both new lots will stay as they are and not be cut up later. If only one is safe from later subdivision, the special rule does not operate.

3. "The imposition of a condition that requires a section 173 agreement ... is considered to be invalid and a dereliction of the Council's duty under the provisions of the Act." (Section 173 Agreement [1])

   • Plain English: Using a s173 agreement to postpone the POS decision is not a lawful way for the council to do its job.

4. "There is nothing within the provision of section 18 which indicates that a 'splitting' can occur ... it should apply to the whole of the land." (Application of POS to lot 2 only [2]–[3])

   • Plain English: If POS applies, you compute it against the whole area being subdivided, not pick one of the new lots and say 'only that one pays'.

What fact patterns trigger this precedent

• Any two-lot subdivision where a responsible authority attempts to avoid making a s18 determination now by inserting a condition that defers the POS obligation to a future event (for example, a s173 agreement that requires contribution only if a lot is later subdivided).
• Subdivisions where the responsible authority asserts the two‑lot s18(8)(c) exemption but has not clearly decided both lots are unlikely to be further subdivided.
• Proposals where a developer seeks to confine a POS calculation to one of the new lots rather than the whole parcel being subdivided.

In short, whenever a council or permit condition seeks to defer or parcel out a s18 POS obligation from the present subdivision application to a hypothetical future one, this decision provides clear reasoning grounds for challenging that approach.

How later courts have treated it

This deep dive only analyses the judgment at hand. The decision itself cites and contrasts other VCAT authorities (Timespan, Georgiou, Tucker, Estorffe, Maroondah CC v Scott) and expressly states it does not follow Timespan on the relevant point (Section 173 Agreement [3]; footnotes). To determine how higher courts or later tribunals treated this decision, one must search subsequent decisions citing The Trustees of the Poor Sisters of Nazareth v Boroondara CC [2009] VCAT 69 and examine whether they adopted, distinguished or rejected its reasoning. This decision is a Tribunal-level reasoning piece and will be persuasive in comparable cases but not binding on other panels or superior courts.

Still-open questions

• Hierarchy and persuasiveness: As a VCAT decision, the Member's interpretation is persuasive but not binding on other VCAT members or superior courts. Would a County or Supreme Court adopt the same strict approach to s173 agreements deferring s18 obligations? The Tribunal expressly declined to follow Timespan; differing panels could reach different results.
• Edge cases where a conditional s173 arrangement is framed differently: The Tribunal condemned a condition that effectively postpones the s18 decision. But could a differently drafted s173 (for example, one that records prior reasoning or sets fixed formulas for future valuation) survive scrutiny? The decision suggests not if the substantive decision-making regarding need for open space is genuinely deferred, but there may be room to explore nuanced drafting that preserves the council's immediate obligation.
• Interaction with clause 52.01 scheduling: The Tribunal noted that incorporation of a fixed percentage into the planning scheme schedule to clause 52.01 would have avoided the debate (Public Open Space requirement [6]). The practical question remains: how should councils sequence policy, scheme amendment and permit decisions to avoid ad hoc litigation risk?
• Precise evidentiary threshold for s18(8)(c): The Tribunal required a conclusion that both lots are unlikely to be subdivided. What level of evidence or factual matrix suffices to support that view? The decision gives examples and factual analysis (Application of s18(8)(c) [2]–[6]) but does not produce a bright-line test.

Disclaimer: This is general legal information extracted from the VCAT judgment The Trustees of the Poor Sisters of Nazareth v Boroondara CC [2009] VCAT 69. I may make mistakes. This is not legal advice. Before you act on or rely on this material, get a qualified Australian lawyer to check it.