Vicinity Centres Pty Ltd v Mornington Peninsula SC [2017] VCAT 1802

1. In application P1128/2017, the decision of the responsible authority is varied.
2. In planning permit application P16/2201, a permit is granted and directed to be issued for the land at 61 Mornington-Tyabb Road, Mornington, in accordance with the endorsed plans and the conditions set out in the Notice of Decision to Grant a Permit issued on 9 May 2017, subject to:
   • Condition 5 being amended as follows:
     • Part b.iv. is amended to read:

Any subsequent permit allowing the sale of liquor, including packaged liquor, must solely be in association with and accommodated within the supermarket floor area of the '4250sqm area designated for a supermarket'.

• The last two sentences in Condition 5 are amended to read:

The agreement is to remain extant for the life of the approved use and development at this property.

The agreement must be executed prior to the occupation of the development and all costs relating to the preparation of the agreement are to be borne by the Applicant.

1. The permit allows:
   • Use and development of the land for a supermarket;
   • Development of six restricted retail premises and a café;
   • Reduction in car parking requirements;
   • Reduction in loading and unloading requirements;
   • Reduction in bicycle end-of-trip facilities.

For Vicinity Centres Pty Ltd, Mornington Chamber of Commerce Inc

Ms M Foley of counsel instructed by Rigby Cooke lawyers. She called expert evidence from:

Ms S Rigo, town planner, Hansen Partnership Pty Ltd.

Ms S Brennan SC and Ms J Sharp of counsel instructed by Norton Rose Fulbright Australia. They called expert evidence from:

• Mr J Ganly, economist.
• Mr T Dimasi, economist.
• Mr B McNamara, town planner.
• Mr J Walsh, traffic engineer.
• Mr K Twite, town planner.

Re-use the existing building for a supermarket with a total leasable floor area of 4,250m2, six restricted retail premises (ranging in size from 500 to 2,000m2), and a café (100m2). 403 car parking spaces and 54 bicycle spaces are provided. The supermarket would operate from 6am to midnight seven days a week. The restricted retail premises are expected to operate from 9am to 6pm daily other than Thursdays and Fridays when they would open to 9pm. No signage is proposed.

Applications under section 82 of the Planning and Environment Act 1987 - to review the decision to grant a permit.

Commercial 2 Zone [C2Z]. Mornington-Tyabb Road is a Road Zone Catgeory 1.

Clause 34.02- use and develop the land for a shop (supermarket) exceeding 1,800m2 in leasable floor area.

Clause 34.02 - to develop six restricted retail premises and a café.

Clause 52.07 - to reduce loading and unloading requirements.

Clause 52.34 - to reduce bicycle end-of-trip facilities.

Clauses 9, 10, 11, 15, 17, 18, 19, 21, 22.01, 22.02, 22.13, 22.18, 52.06, 52.07 and 65.

The land is 3.503ha and located on the north[1] side of the Mornington-Tyabb Road, east of the Nepean Highway.

1. The closure of a large format Masters hardware store which formerly occupied the subject land leaves vacant a substantial building with expansive parking facilities. This is where the respondent proposes a full-line supermarket, six restricted retail premises and a café.
2. The Mornington Peninsula Shire Council determined to approve the permit application and issued a Notice of Decision to Grant a Permit [Notice] subject to conditions. Two applications before the Tribunal ask for that decision to be reviewed. They are by Vicinity Centres Pty Ltd (owner of Bentons Square and Mornington Central) and the Mornington Chamber of Commerce Inc.

1. The dispute focuses on the proposal for a supermarket of 4,250m² leasable floor area. This floor area exceeds 1,800m² for a supermarket that is an as-of-right use within the C2Z. Proposed restricted retail uses are more than 500m² each (to a total of 6,495m2) and are as-of-right in the same Zone.
2. Relying on expert planning evidence, the applicants submit the application for a full-line supermarket is not strategically justified and there is insufficient support for a full-line supermarket on the subject land. They submit that the scale of the supermarket is radically different to an as-of-right supermarket and in this case will fragment commercial activity, will establish a critical mass of conventional retail facilities and will duplicate facilities in other activity centres leading to, among other things, the creation of a separate retail precinct. The proposal is, the applicants submit, the antithesis of strategic directions urged by local policy in the scheme and has the potential to result in significant and detrimental impacts on established activity centres and, in turn, affected communities.
3. The applicants' grounds are challenged by the Council and respondent, with expert planning, economic and traffic evidence called on behalf of the respondent. The respondent offered several permit conditions during the permit application process that are included in the Notice and does not seek review of any conditions included in that Notice.

1. Before we turn to our findings with respect to the key issues, it is important in a balanced assessment of the proposal to identify matters that are agreed or not in dispute between the parties:[3]

• There are no identified or unacceptable potential off-site amenity impacts including for existing residents, residential areas or other sensitive land uses;
• The adaption of the existing building on the subject land is acceptable, with conditions proposed by the Council to enhance the urban design outcome and establish safe pedestrian access via a signalised crossing of the Mornington-Tyabb Road;
• The majority of the floorspace would be used for restricted retailing, a use of the subject land for which no planning permit is required and a use that is supported by local policy in this location;[4]
• The volume of on-site parking is acceptable, with a reduction of seven spaces from the rates required in clause 52.06 for a supermarket, café and restricted retail premises;
• Arrangements for loading and waste management are acceptable;
• Traffic associated with the use can be accommodated on the road network including through the roundabout adjacent to the subject land on the Mornington-Tyabb Road;
• The proposal would re-use or re-purpose the former Masters hardware store and land with benefits in terms of renewing infrastructure for which there has been a substantial investment. That also has environmental benefits;
• A relevant consideration is the impact on the role, function and viability of activity centres not on competitor businesses.

1. It is further unchallenged that the proposal will:
   • Create more jobs than:
     • the former Masters business - a total of some 161 full-time equivalent jobs for all of the proposed uses and 31 more than the former Masters operation.[5] Of these, 94 are for the supermarket;
     • a smaller supermarket of 1,800m2;
   • Not include any small-scale speciality shops and only the café is less than 500m2 in floor area;
   • Deliver choice and competition as well as offer a convenient option for residents and workers;
   • Achieve improved urban design and landscape outcomes consequent upon conditions included in the Notice.

1. The subject land, and an abutting lot to its south-east, stand alone in this pocket of C2Z-zoned land. The subject land was rezoned from INZ3 to Business 4 via Amendment C149 following an Advisory Committee review of Woolworths' "Oxygen" proposals in 2010. It was then rezoned C2Z as part of Amendment VC100 in 2013. The wider area is INZ3. Public land is to the east and south. A residential area is to the south-west. These zones are shown in the property report extract in the 'Information' section above.
2. The subject land abuts a main road, with roundabout, and is in a setting where there are commercial, industrial and business uses to the north and west, parkland to the east, houses to the south-west (west of Dunns Road) and a civic reserve to the south/south-east. The commercial/industrial area continues east beyond the Dallas Brooks Reserve. The businesses extending along the Mornington-Tyabb Road from the Nepean Highway include car showrooms, a 7-Eleven store, bridal wear, toy shop, a vet, and automotive services. They have a retail and/or service flavour. Internal to the industrial precinct are other businesses, some of a light industrial nature. There are service industries and other uses such as a ballet school and gym.
3. Land on the north side of the Mornington-Tyabb Road is part of a commercial/industrial corridor. Our description is consistent with the description by the Advisory Committee reviewing the "Oxygen" proposals in 2010[6] and the Council's 2017 Activity Centres Strategy Review (to which we refer again below) which describes it as a "mixed business area".

1. Activity centres are identified in local policy at clause 21.07-3:

1. Supermarkets in the Mornington region are shown in the extract from the 2016 Economic Impact Statement below:[7]

1. These include:
   • Mornington activity centre - north of the Nepean Highway. Main Street has a distinctive fine-grained character with extensive speciality shopping, cafés, restaurants and other uses. South of this area are parkland, community and business uses including a hospital.

The Mornington activity centre contains three supermarkets that sit at the edge of the retail/commercial area:

• Coles in Mornington Central with a floor area of 3,277m2;
• Woolworths in Mornington Village with a floor area of 2,894m2;
• Aldi at Mornington Village with a floor area of 1,334m2.

The 2017 Activity Centres Strategy Review refers to a low vacancy rate of 1%.

Bentons Square sits centrally within a large residential area. It contains a Woolworths supermarket with a floor area of 4,257m2. There are some 45 specialty and related stores with a Dan Murphys and service station. There are some community uses. The economic evidence refers to one vacancy. Mr Dimasi refers to four vacancies. We saw three vacancies on our visit, with one the subject of a fit-out. This centre has grown since the 2005 Activity Centres Strategy - then the supermarket was 3,500m2 with 18 tenancies.

• The Peninsula home maker centre is north of Bungower Road. An ALDI supermarket is in this centre.

• Overall, there are two Woolworths, two Aldi stores, a Foodworks, and one Coles within this region without including Mt Eliza and Mt Martha. The proposed supermarket is to be occupied by Coles.[8]

1. Current permit applications before the Council include an expansion of Mornington Village comprising an additional 600m2 for Woolworths and 266m2 for Aldi.[9] We were also advised of pre-application discussions for a restricted retail premises on the land adjacent to the subject land within the C2Z and another property at Craigie Road/Nepean Highway with respect to a possible rezoning. No formal applications have been lodged with the responsible authority/planning authority, as far as we are aware.

1. We must take account of, and give effect to, State policies applicable to issues before us to ensure integrated decision-making.[10] We must take account of the Municipal Strategic Statement and local policies.[11]
2. In the case of Mornington Peninsula, Mornington in the largest activity centre in the Shire and a Major Activity Centre in the Municipal Strategic Statement and Plan Melbourne 2017 - 2050. Clause 22.18 identifies the Mornington Major Activity Centre's retail core and professional services areas. The subject land is not within either of these areas. Bentons Square is a Large Township Centre in local policy.[12] The hierarchy of activity centres is relevant to reinforcing the Peninsula's distinct settlement pattern.[13]
3. State planning policy seeks to support the role and function of each centre in the context of its classification.[14] Local policy supports the activity centre hierarchy.[15] Local policy at clause 21.07-3 further includes that "Additional retail and office development should be directed primarily to Major Activity Centres and to a lesser extent to Large Township Activity Centres in a way that is commensurate with population growth in their catchments" [emphasis not in the original]. The policy explains this position, including facilitating a high level of service to the community, multiplier effects and certainty for investment decisions.
4. Local policy describes fragmentation of commercial activity as not in the best interests of the community and 'out-of-centre' retail (and other) developments as detracting from compact urban patterns.[16]

1. Bulky goods are "best provided in clusters developed for that purpose" rather than in dispersed locations on industrial land along main roads or in other 'out-of-centre' locations.[17] Such clusters are directed to the edge of the three townships with major activity centres - one being Mornington.
2. Key issues in the scheme are identified as including the impact of locating retail and office development, and service stations, outside activity centres (whether along main roads or in other 'out-of-centre' locations) on the efficiency of the overall hierarchy of centres and on the role, function and viability of existing individual centres.
3. Post-dating local policy in the scheme, the C2Z allows supermarkets (that are typically regarded as a core retail use) to be located in a wider range of locations. The purpose of the C2Z includes:

To implement the State Planning Policy Framework and the Local Planning Policy Framework, including the Municipal Strategic Statement and local planning policies.

To encourage commercial areas for offices, appropriate manufacturing and industries, bulky goods retailing, other retail uses, and associated business and commercial services.

To ensure that uses do not affect the safety and amenity of adjacent, more sensitive uses. [emphasis not in the original]

1. Tribunal decisions to which we have been referred comment on the State-wide changes as a consequence of Amendment VC100 for commercial and industrial zones.[18] We do not need to add to these remarks. There has been a strategic policy decision to provide greater flexibility and growth opportunities for Victoria's commercial and business centres, responding to changing retail, commercial and housing markets by allowing for a wider range of uses to support mixed use employment.[19]
2. We accept an important principle in State and local policy is to give clear direction in relation to preferred locations for investment. Strategies in clause 17.01 do not depart from that. They include:

Locate commercial facilities in existing or planned activity centres.

Provide new convenience shopping facilities to provide for the needs of the local population in new residential areas and within, or immediately adjacent to, existing commercial centres.

Provide small scale shopping opportunities that need to needs of local residents and workers in convenient locations.

1. The principle of different roles and functions in a network of activity centres is evident in policy and the Council's current strategic thinking.[20]

1. We do not consider the local policy relating to activity centres in the case before us should have limited weight as contended by the respondent. Notwithstanding that the Council states that there is a disconnect between local strategies that do not support an 'out-of-centre' location and the broadened range of land uses permitted in the C2Z, a network of activity centres with a range of sizes, roles and functions is part of State policy.[21] Local policy identifies a hierarchy and State policy refers to such a network as comprising a range of centres that differ in their size and function.[22]
2. However, the scheme contemplates retail formats in other locations; Amendment VC100 is founded on creating opportunities in other places. It allows the use of land, as-of-right, for a supermarket to 1,800m2. It allows permit applications to be made and assessed for larger supermarkets in the C2Z.
3. The applicants' evidence refers to the importance of reinforcing the hierarchy of activity centres. Those who have invested in such centres should expect planning decisions to support that hierarchy. Mr Milner states that the policy framework encourages creating greater certainty for investment by providing for the orderly planning and development of land. He says the proposal fails in this regard and would not reinforce public policy. Creating ad hoc centres will likely draw spending and patronage from the established centres. His evidence concludes that any supermarket to re-use the Masters site should be limited to 1,800m2.
4. A location that is within the activity centre or even on the edge of the centre can fairly be regarded as having greater policy support than an 'out-of-centre position', in simple terms.[23] But each site and its context must be individually assessed to appreciate the specific circumstances that apply. Whether or not the proposal is regarded as 'out-of-centre', we must consider whether the proposal will affect the role, function and viability of any activity centre and the network of activity centres, and consider net community benefit, as set out in State and local policy.
5. We do not find that there are grounds to conclude any supermarket re-using the Masters facility on the subject land should be limited to the as-of-right provision of 1,800m2. As becomes apparent from our findings below, the locational and other specific characteristics of the subject land and its environs, and the relationships with and impacts on existing activity centres, lead us to conclude that a larger supermarket is acceptable and will not undermine existing activity centres in terms of their identified role, function and economic performance.

1. The subject land is significantly detached from the discrete land area that comprises Bentons Square.

1. The focus of the dispute about the 'out-of-centre' location of the subject land is whether it is 'out-of-centre' relative to the Mornington Major Activity Centre. This is relevant when applying State and local policy with respect to the siting of large retail facilities in locations that are intended to support designated activity centres and not undermine the role and function of such centres.
2. The relationship is not agreed between the parties and material before us. Differences can be summarised as follows:
   • The Council regards the subject land and proposal as being outside of the retail core and town centre and describes the locale as a "mixed industrial precinct";[24]
   • Mr Milner describes the subject land and proposal as 'out-of-centre' but also agrees with a description of the land and environs as an "existing commercial centre";
   • Mr McNamara regards the subject land as part of the broader activity centre network in Mornington;
   • Mr Ganly describes the subject land as "just beyond the edge of the Mornington Activity Centre";[25]
   • The explanatory statement for Amendment C149 refers to the land as being on the edge of the existing Mornington Activity Centre.
3. It is common ground that the land is not within the Mornington Activity Centre policy area at clause 22.18. As noted earlier, that policy identifies two areas - the retail core and professional services areas - all north of the Nepean Highway.
4. The 2005 Mornington Peninsula Activity Centres Strategy, which is a reference document, did not include the subject land as part of the activity centre but did include land around the Nepean Highway/Main Street intersection. That highway area, including the northern end of the Mornington-Tyabb Road, is not part of the Mornington Activity Centre policy area at clause 22.18.
5. The Mornington Activity Centre Structure Plan 2007, also a reference document, similarly identifies the "highway precinct" and refers to a review of the longer-term boundaries of this area.[26] The highway precinct does not extend to the area of the subject land.

1. Decision guidelines in clause 34.02-7 do not specifically address a supermarket. They have broad reference to considering State and local policy as appropriate.

1. State policy with respect to "Business" contains the following objectives and strategies:[27]

To encourage development which meet the communities' needs for retail, entertainment, office and other commercial services and provides net community benefit in relation to accessibility, efficient infrastructure use and the aggregation and sustainability of commercial facilities. [sic]

Locate commercial facilities in existing or planned activity centres.

Provide new convenience shopping facilities to provide for the needs of the local population in new residential areas and within, or immediately adjacent to, existing commercial centres.

1. The phrase 'out-of-centre' is in clause 17.01-2 where the objective and relevant strategies in this proceeding are:

Ensure that proposals or expansion of single use retail, commercial and recreational facilities outside activity centres are discouraged by giving preference to locations in or on the border of an activity centre.

Ensure that out-of-centre proposals are only considered where the proposed use or development is of net benefit to the community in the region served by the proposal or provides small scale shopping opportunities that meet the needs of local residents and workers in convenient locations.

1. This clause was amended under Amendment VC100.[28]
2. Overall, these strategies are linked with State policy relating to the activity centre network where the objective is to (among other things) encourage major retail developments into activity centres which provide a variety of land uses and are highly accessible to the community. Clause 17.01-1 refers to both "existing and planned activity centres" and "existing commercial centres" with respect to new convenience shopping facilities to provide for the needs of the local population.

1. In considering clause 17.01-1, and particularly having regard to the land use and built form character of the subject land and its environs as we have described earlier, it can be said that the proposal provides new convenience shopping facilities to provide for the needs of the local population "within, or immediately adjacent to, an existing commercial centre". However, it is in dispute as to whether the land is within, at the edge of, or outside of the Major Activity Centre as is relevant to the first strategy in clause 17.01-1.

Location with respect to the existing Mornington activity centre

1. In considering clause 17.01-2 as it relates to "single use retail, commercial and recreational facilities outside activity centres" [emphasis not in the original], it is relevant that the proposal comprises two land uses, only one of which requires planning permission in this case - restricted retail and supermarket. Taken simply on this fact, it could be said that the proposal is not a single use retail or commercial facility. Having said that, both land uses are nested in the definition of "shop" and "retail premises" and, with the integrated design, it is arguable that the proposal is a single retail use. Either way, it is important that 'out-of-centre proposals' are assessed in terms of net community benefit.

1. We do not consider this proposal can be said to be "small scale shopping" as referred to in clause 17.01-2 even though it would be a convenient location for local workers and residents.

1. The scheme at clause 21.07-3 states that zones are applied as follows:

1. As the subject land is zoned C2Z, based on the above it is arguable that the subject land is part of the activity centre, although, in reality it is isolated from other land within C1Z and C2Z. We consider the subject land is on the edge of this part of the large commercial centre and outside the more narrowly defined Mornington Major Activity Centre in local policy.
2. Having said that, it is important to recognise the functional relationship between the retail core/peripheral office areas in the defined activity centre and the mixed business/industrial/commercial area that work together to support this township. Amendment C149 did so. Such a relationship is also recognised in the 2017 Activity Centres Strategy Review when describing the broader precinct as an "enterprise area" as well as by the Advisory Committee reviewing Woolworths' "Oxygen" proposals, cited above.

1. Local policy in the scheme seeks to:
   • Prevent out-of-centre commercial developments in the industrial zones that undermine the activity centres policy at clause 22.02, particularly along main roads;
   • Prevent commercial strip development along (among others) main roads and avoid out-of-centre developments along these roads that undermine the activity centres policy;[29]
   • Prevent out-of-centre developments in non-urban areas that undermine the activity centres policy; [30]
   • Prevent out-of-centre developments in residential areas that undermine the activity centres policy.[31]
2. It is self-evident that the subject land is not part of a non-urban area or residential area. Its context is industrial although it is not zoned INZ3 like the area to its north and west. It is on a main road.
3. The local policy remains largely unchanged since its introduction into the scheme, that occurred well before Amendments VC100 and C149. Nonetheless, it is consistent with the directions of State policy to assess the impact of the proposed supermarket on the activity centre network. That is the case whether or not one regards the proposal as a single use or several uses, and whether or not it is said to be on the edge of, or out of, centre.
4. The 2017 Activity Centres Strategy Review is not a seriously entertained planning proposal but a draft that the Council has resolved to exhibit together with the Industrial Areas Review.[32] It does not carry influential weight but has helpful data. We note that it recognises the flexibility provided by zoning changes. With that in mind, it still emphasises the importance of the activity centre hierarchy and proposes criteria to accommodate 'out-of-centre' development of an appropriate scale and nature that achieves net community benefit and does not undermine the activity centres hierarchy.[33] Five considerations are outlined - location, accessibility, urban design, economic and net community benefit.

1. Thus, this current strategic work does not depart from what we consider are the central questions for us to determine - will the proposal have an adverse impact on the network of activity centres and does it achieve a net community benefit? We go to these matters next.

1. The applicants contend that there is insufficient demand for a supermarket of the size proposed and the proposal cannot be justified on the basis of need. These propositions are not supported by the expert evidence before us in this proceeding. This evidence includes:
   • An economic impact assessment by Mr Ganly in 2016 that informed the Council's decision;
   • A further review by Mr Ganly based on updated information including the latest Census data; and
   • A peer review and assessment in Mr Dimasi's expert evidence.
2. In addition, the Council's economic development and strategic planning internal referrals give weight to the economic impact assessment, observing the demand for bulky goods and restricted retailing as well as population growth.
3. Among the key findings in relation to the economic impact assessments and evidence with respect to need and demand are:
   • In 2016, local supermarket floorspace supply was almost 3,000m2 less than required. The most recent assessment shows the need has increased with a revised estimated undersupply of 4,012m2 even with the recent loss of a 'Not Quite Right' premises from Mornington. The change is explained by the latest Census data which shows the population to have grown at a much faster rate than estimated by the Australian Bureau of Statistics previously and specifically in the wider region of the subject land presented in forecasts for the Council.
   • Estimates and forecasts of retail spending market in the catchment also show this is greater than estimated in 2016. Food and drink spending is smaller, for reasons explained by Mr Ganly, but the size is expected to increase from 2020 onwards.
   • Evidence of the undersupply is that trading at existing supermarkets is at levels well above national averages[34], that is, supermarkets in the region are trading strongly. It is unchallenged that Bentons Square is one of the best trading in Victoria and the best in Vicinity's portfolio.
   • The Council's internal referral describes Bentons Square as one of the most profitable and busiest supermarkets in Victoria while Mr Ganly's evidence is Bentons Square and Coles Mornington Central trade at levels "generally well in advance of national averages".

1. We do not set out all of the detailed findings of the reports and evidence. We have had regard to them and extensive cross-examination of the economic experts by Ms Foley wherein she challenges assumptions and the analyses such as the definition of catchment areas, sales and accessibility.
2. We agree with an observation made by the Council's internal referral - that there can be various ways to estimate trade catchments and future population growth. We appreciate variations in assessment assumptions and methodology could result in different forecasts. Ultimately, the experts' conclusions remain intact and robust following cross-examination; that there is an undersupply of floorspace indicating demand and need.
3. Three further matters require comment and underscore our conclusion with respect to demand and need and that any short-term oversupply, should it exist, would be balanced out or surpassed:
   • First, our conclusion that there is a demand for additional supermarket floor space to service this community does not rely on population growth, even though population growth is expected to continue. Our finding relates to the existing circumstances, based on the expert evidence.
   • Second, the proposal before the Council with respect to Mornington Village is not said to significantly vary these findings insofar as Mr Ganly estimates that, with an approval of the expansion, the minor oversupply will be eclipsed by 2020 due to population growth. If that permit application is approved, there is no basis for us to depart from the above conclusions on the expert evidence.
   • Third, the analysis presented in expert evidence does not take into account additional sales associated with seasonal, holiday, visitation which Mr Ganly states would boost annual sales by a minimum of 5% and potentially up to 20% compared with locations where a supermarket was not in such a location. The 2017 Activity Centres Strategy Review refers to 14% of total retail sales in the Shire being non-permanent residents, tourists and other visitors.[35] In the current case, Mr Ganly relies on a conservative figure of 5% that, when added to the other estimates, reinforces his conclusion that additional supermarket floorspace is needed and that there is a demand for the proposed supermarket at a size of 4,250m2.

IMPACT ON THE MORNINTGON MAJOR ACTIVITY CENTRE AND BENTONS SQUARE

1. It is common ground that the catchments of the proposed supermarket and the existing supermarkets overlap.
2. It is also common ground that there will be a loss experienced by existing business if the proposed supermarket is approved, particularly with respect to food and groceries.
3. The respondent submits that the proposal will not have unacceptable economic impacts on other supermarkets or the activity centres based on Mr Ganly's and Mr Dimasi's expert evidence. The two assessments of impacts on existing activity centres do not reach identical findings but the conclusions align - that there will be an impact on sales for the Mornington and Bentons Square activity centres but this will not threaten the viability of the existing supermarkets, activity centres or the hierarchy as a whole, nor change the role or function of any activity centre.
4. Mr Ganly's assessment updates the Economic Impact Assessment he prepared in 2016 taking into account changes such as the delay in opening the proposed premises, changes in floorspace in the activity centres, recently reported sales for Bentons Square and Mornington Central, and revised sales forecasts for the proposed supermarket and restricted retail premises. Other conclusions in Mr Ganly's and Mr Dimasi's expert evidence include:
   • The impact on the Mornington Town Centre would be -6.6% for food and -0.8% for non-food and service retailers. The impact on Bentons Square would be -9.7% for food and -1.0% for non-food and service retailers.
   • Bentons Square is a very successful centre with high trading levels without a strong tourist/visitor focus. Mornington Village is performing well and expected to continue to do so. The street-based shopping environment of Main Street, Mornington, is very different to the proposed facility.
   • Given the strength of these trading positions, the projected impacts will not threaten the ongoing viability of any centre or supermarket and the activity centres will continue to thrive.
   • The consequences of any impact would be mitigated by factors including the following - an undersupply in supermarket floorspace, strong population growth, low vacancy rates in the key activity centres together with strong supermarket performance, and that the supermarket will be accompanied by restricted retail tenants only and therefore limit impacts on specialty traders in the activity centres.
5. It is important to our conclusions that:
   • There is no contrary expert evidence.
   • There is no indication on any material or evidence before us that the supermarkets with which the proposed supermarket would compete are vulnerable or at risk.
   • The assumptions and parameters upon which the expert evidence is founded have been tested through cross-examination and, because of the strong trading position of the existing supermarkets and activity centres, the projected impacts do not give rise to concerns that the network or role and function of activity centres will alter.
   • Mr Dimasi's sensitivity analysis demonstrates that even if there are variations in the order of +/-10% there would still not be a significant impact on Bentons Square, particularly given its outstanding level of performance today. Indeed, Mr Ganly's evidence was that a loss of some 50% would need to occur to threaten Bentons Square. Nor would supermarkets in other centres, and more broadly the Mornington Town Centre, be adversely impacted.
   • The Council's economic development referral states that the Mornington Main Street is a traditional town centre and offers a seaside feel that shoppers will continue to be highly attracted to with its village experience. The referral concludes that the proposal will not compromise the assets that Main Street has to attract shoppers. The strategic planning referral's main concern relates to the potential for speciality shops to be attracted to the subject land and thereby create a node of activity. It proposes restrictions to prevent this outcome by limiting the number of premises, as we refer to again below with respect to the section 173 agreement under the Planning and Environment Act 1987. The referrals agree with the conclusions of the respondent's economic analyses.
6. For these reasons, we do not accept the applicants' submission that a supermarket of the scale proposed on the subject land will undermine any existing activity centre, or the network or hierarchy of centres.

1. The applicants submit bulky goods retailers have difficulty finding land of a sufficient size to accommodate their format so the use of a considerable proportion of the subject land for a supermarket is a lost opportunity.
2. There is no suggestion that there is such a shortage of other land for restricted retail use in this area to place weight on the applicants' argument and evidence on the question of lost opportunity. The 2017 Activity Centres Strategy Review refers to an adequate supply of industrially-zoned land for the next 10 years, although it also says that it would be timely to start to look for additional areas and indicate areas where retail development in industrial areas will be opposed.

1. The applicants submit approval of the proposed supermarket would create a new retail node, is effectively a shopping centre based around a full-line supermarket, and will duplicate facilities in the established activity centres. That is, it will create a new retail precinct as a foundation for a new activity centre that has not been the subject of strategic review in the context of the broader activity centre hierarchy and network.
2. This concern to the Council was among the reasons why a section 173 agreement is included in the Notice, with the aim of restricting the expansion of retail uses on the subject land. We refer to it below.
3. We agree that the subject land would operate as a convenience centre, assisted by the high level of accessibility along main roads. We further agree with the applicants that the proposed supermarket will create a node of retail and commercial activity. That will occur on land that is currently, and has historically been, used for commercial land use (including the former use of the subject land as an antique centre and then the Masters store).
4. However, we are not persuaded to the view that a new activity centre is being established. The subject land would largely be used for convenience supermarket shopping trips but without associated facilities found in the activity centres such as speciality retailing and entertainment.
5. Moreover, there are several features of this location that do not suggest that approval of the current application will create or foster a larger complex or separate activity centre having regard to the physical conditions and the existing zoning regime:
   • The C2Z area is confined wherein the vacant lot to the south-east of the subject land is the only additional C2Z land in the vicinity;
   • That land, and the subject land, abut the large Dallas Brooks Reserve, thereby restricting new development and use immediately to the east. Another large commercial area zoned INZ3 is further to the east but well detached from the subject land;
   • Land to the south, across a main road, is in public use for parkland, recreation facilities and a gallery with land to the south-west developed with dwellings in a General Residential Zone;
   • The subject land is elevated relative to land to its west that is part of the commercial/industrial precinct zoned INZ3 and, without some significant physical works, does not offer a convenient link to properties to the west;
   • There are many lots and businesses to the west of the subject land with extensive consolidation not an imminent likely prospect;
   • Land to the north is separated by a road and the supermarket's back of house facilities such as the loading dock and is also zoned INZ3.
6. The INZ3 zone limits the nature of retail uses that can occur in this large industrial, commercial and business precinct as-of-right. The area performs a significant economic role, as evident in the strategic reviews of industrial areas and activity centres that have been prepared for the Council and are to be the subject of public comment. Any proposal to rezone land in the vicinity of the subject land would be subject to a strategic assessment. We cannot speculate as to whether an outcome of the 2017 Activity Centres Strategy Review and 2017 Industrial Areas Strategy will result in such actions.
7. The Woolworths "Oxygen" Advisory Committee referred to the potential for the subject land to be a catalyst for future development and strategic planning initiatives along the business corridor. The 2017 Activity Centres Strategy Review raises questions about the future role of this area as well. It is clear, however, that the role of this area is distinctly different to Main Street, but supportive of, the role of Mornington as the largest settlement and service centre for the broad region.
8. These findings suggest future strategic work by the Council to guide the future of the industrial area. The proposal will not pre-empt future strategic planning for that wider industrial area and arterial road corridor having regard to the previous use of the land and the constraints associated with expansion. The Council is expected to take the lead on this consistent with Plan Melbourne 2017-2050 that includes the following at Direction 1.2 with respect to supporting the network of activity centres:[36]

All activity centres have the capacity to continue to grow and diversify the range of activities they offer. Opportunities to partner with the private sector to enable future diversification, investment and employment growth should be explored and, where appropriate, facilitated through planning provisions.

Diversification will give communities access to a wide range of goods and services, provide local employment and support local economies and the development of 20-minute neighbourhoods. In many activity centres, this growth will include housing, particularly at higher densities.

To capture and to accommodate future growth opportunities activity centres will need greater flexibility in planning controls than surrounding residential areas. Local plans undertaken in consultation with the community will identify the scope and nature of future growth within each activity centre

1. Further, although the subject land is proximate to recreation and some cultural facilities, it is not in a location where it is likely that the wide range of other uses encouraged to locate in an activity centre would occur in the current planning regime so as to create a new activity centre. Examples of the broad range of desired uses in activity centres cited in clause 22.02-2 include retail and commercial services (noting the restrictions in the adjacent INZ3 area), residential development and hospitality/entertainment services and community facilities.

SECTION 173 AGREEMENT

1. We have referred to an important component of the Council's decision as a section 173 agreement in Condition 5. Among its terms are that the use of the land is limited to the supermarket and food related tenancies within the maximum floorspace of 4,250m2 and all restricted retail tenancies must have a minimum leasable floor area of 500m2.
2. The respondent accepts the terms of the agreement as set out in the Notice of Decision[37], referring to it as a "safe-guard to prevent duplication of the offer at Bentons Square".[38]
3. Mr Ganly expresses some reservation about a 500m² limit as the minimum floor area for restricted retail premises, given some retailers now operate smaller premises (such as Godfreys at 200 to 300m²) in the form of a showroom with online sales in addition to on-premises sales. Conversely, there is an acceptance in other expert evidence, such as by Mr Dimasi, that the agreement will give comfort by limiting the prospect of smaller specialty businesses relocating, for example, from the town centre.
4. We are persuaded to accept the appropriateness of including the proposed section 173 agreement as a condition of permit. We agree that it provides a safeguard and degree of comfort that are reasonable in the specific circumstances of this case. Shop-front retailing, such as experienced along Main Street, is valued and important. The proposal offers something different to this. The section 173 agreement is a mechanism to endeavour to maintain a distinction and prevent the proposed development "morphing" into a retail node that could undermine existing activity centres.

OVERALL IMPACT ON ACTIVITY CENTRE NETWORK AND INDIVIDUAL CENTRES

1. From the above, we conclude the proposal:
   • Will not adversely impact to any significant degree on existing activity centres;
   • Will not create an unplanned and/or rival activity centre that would threaten the role, viability or function of the designated activity centres; and
   • Will complement the available offerings.
2. The volume of restricted retail floorspace in the current proposal is larger than the supermarket component and would complement the role and function of this location in terms of restricted retail floorspace.
3. Clause 22.02-3 includes a policy to oppose retail developments that would cause a change to the classification of any identified activity centre. The proposal will not do so. It will not create an excessive surplus of floorspace.

1. Mr Milner's evidence refers to the potential for approval of the current application to create a precedent for other 'out-of-centre' full-line supermarkets. An example he gives is another empty Masters store at the intersection of Lower Dandenong Road and Springvale Road.

1. There were over 60 Masters stores nationwide with 18 in Victoria. There are no others in the Mornington Peninsula Shire. We have been referred to several proposals to re-use Masters' sites for a full line supermarket:
   • Braybrook - a planning permit has been issued for a 4,275m2 supermarket, six restricted retail premises (6,842 m2) and a café (100m2).
   • Altona North - proposed Amendment C109 is a combined amendment and planning permit application for Part Precinct 9: Land fronting Millers Road, Altona North, which seeks to rezone the land to facilitate its use as a supermarket and bulky goods retailing.
   • A proposal for a supermarket at the Tooronga site on Toorak Road.
2. We are unaware of a proposal for the property to which Mr Milner refers.
3. Ms Brennan and the economic experts refer to other re-use proposals in Victoria and inter-state involving Bunnings, other forms of restricted retail and trade supplies and formats being proposed by Home Investment Consortium Company.
4. There is limited land zoned C2Z associated with the Mornington Major Activity Centre and other activity centres. Permit applications that propose retail uses in the C2Z will be determined on their own facts and circumstances. For example, the Braybrook proposal was found to (among a number of positive outcomes) respond to a demonstrated demand, have minimal impacts on existing activity centres at Highpoint and Sunshine, enjoy good exposure, complement other retail and commercial uses, offer a large range of restricted retailing, create jobs, have no off-site amenity impacts, re-purpose a building, and not impact on the safety and operation of the road network.[39] Many of these are the same conclusions as we reach in this case.

1. The Tribunal must decide whether the proposal will produce an acceptable outcome having regard to the relevant policies and provisions in the scheme. Net community benefit is central to reaching a conclusion. Clause 10.04 of the scheme requires the decision-maker to integrate the range of policies relevant to the issues to be determined and balance conflicting objectives in favour of net community benefit and sustainable development.
2. There are multiple benefits to the community arising from this proposal and we agree with the respondent's summary of them as including:
   • It will meet a need for additional supermarket floorspace in the region;
   • It will provide choice and competition in a highly accessible location;
   • It will provide a different retail offer to that in the retail core of the Mornington Major Activity Centre and at Bentons Square;

• It will provide additional employment relative to the former use of the land as a Masters home improvement store and will re-use, and enhance, the infrastructure associated with that store;
• It will provide a new signalised pedestrian crossing;
• It will not have an unacceptable impact on the trading figures of surrounding supermarkets;
• It will have no amenity impacts;
• It will not undermine the network of activity centres, will not create a new activity centre, and will not affect the role, function or hierarchy of activity centres.

1. There will be some negative impacts as we have set out in these reasons. We have formed the view that such impacts are not unacceptable and will, in time, be adequately mitigated.

1. This proposal is an early example of a permit application that seeks to rely on the flexibility introduced through Amendment VC100 to allow a significant retail use in a location that is not designated as part of an activity centre. These types of facilities are typically directed to activity centres for sound reasons. However, this proposal also shows that there may be locations where such uses can establish. In this case, the proposal re-uses a former large business premises that is adaptable for a supermarket and restricted retail premises. It is not a case of a new commercial site or a greenfields location. The location is a discrete commercial precinct that is associated with the Mornington Major Activity Centre and, based on the evidence before us, can offer benefits to the community without altering, undermining or placing at risk the role and function of the network of activity centres nominated in the scheme. There is a net community benefit in approving the proposal before us.
2. We have not been persuaded to accept the applicants' grounds that the proposal does not deliver a net community benefit, undermines the hierarchy of centres, will create new activity centre, or that there is insufficient demand and unreasonable impacts arising from a supermarket of the scale proposed in the C2Z as applies to the subject land.
3. For the reasons above, we agree with the decision made by the responsible authority to grant a permit but will make some minor variations to the conditions contained in the Notice for consistency and clarity. We will also delete Condition 21 as this relates to permission under the Food Act 1984. The Council can add this as a note should it wish.

[1] The subject land is off-set from north. We have simplified directional references for ease.

[2] The submissions and evidence of the parties, supporting exhibits given at the hearing and the statements of grounds filed have all been considered in the determination of the proceeding. In accordance with the practice of the Tribunal, not all of this material will be cited or referred to in these reasons.

[3] Noting some third party exemptions also apply in clauses 34.02-6 and 52.34.

[4] For example, clause 22.02 seeks to facilitate the provision of additional restricted retail floor space in bulky goods clusters on the edge of townships that have major activity centres.

[5] Economic Impact Assessment by Mr Ganly, 14 November 2016, at page 17. Additional indirect employment will be created by the proposal (100 full-time equivalent) and would also be expected with a smaller supermarket although the latter is not quantified.

[6] Report of the Woolworths Advisory Committee Reference No. 3, 25 June 2010, at page 11.

[7] Mornington Masters Redevelopment Economic impact Assessment, 14 November 2016 at page 8.

[8] Letter from Coles National Transactions Manager to Blueprint Group Australian Trust dated 18 October 2017 tendered by Ms Brennan SC. The letter refers to Coles Mornington as "performing well" and "is expected to continue to perform well as an anchor to the Main Street shopping centre".

[9] Based on figures included in Mr Ganly's statement is evidence at paragraph 38.

[15] Hierarchy is not mentioned Plan Melbourne 2017-2050 but different categories of centres are nominated.

[16] The Mornington Peninsula Localised Planning Statement makes similar points.

[18] Wittner Pty Ltd v Kingston CC [2014] VCAT 789, [6] - [15]; Langmore v LaTrobe CC [2015] VCAT 690, [17] - [21].

[19] Explanatory statement for Amendment VC100.

[20] 2017 Activity Centres Strategy Review and the officer's report addressing that review and the Industrial Areas Review 2017 September 2017.

[23] Clause 17.01 deals with the concept of 'out-of-centre' development. We refer to it below.

[24] Ms Rigo's submission at paragraph 10.

[25] Mr Ganly's statement of evidence at paragraph 92.

[26] Mornington Activity Centre Structure Plan 2007, at page 61.

[28] Parts of the clause have remained the same for some years. In January 2010, part of clause 12.01-2 is set out below. It in turn was part of a clause relating to the network of activity centres and identifying the role of specific categories of centres:

Ensuring that proposals or expansion of single use retail, commercial and recreational facilities outside activity centres are discouraged by giving preference to locations in or on the border of an activity centre.

Ensuring that out-of-centre proposals are only considered where the proposed use or development is of net benefit to the community in the region served by the proposal.

[32] Council meeting 18 September 2017.

[33] 2017 Activity Centres Strategy Review, Essential Economic, at page 70.

[35] 2017 Activity Centres Strategy Review, at page 56.

[36] Plan Melbourne 2017-2050 at page 37.

[37] At the hearing, variations to Condition 5 were discussed to link the agreement to occupation of the land and to clarify some other aspects of the wording. We have adopted these as agreed between the parties in the event a permit was issued.

[38] Paragraph 14 of the respondent's written submission.

[39] Delegate report, Maribyrnong City Council, dated 15 February 2017 tendered by Ms Brennan.