Complying development certificate invalidated: New South Wales Land and Environment Court has declared a complying development certificate invalid because of draft heritage status

In brief

The case of Randwick City Council v Belle Living Pty Ltd (No 2) [2023] NSWLEC 100 concerned Class 4 proceedings in the New South Wales Land and Environment Court (Court) brought by Randwick City Council (Council) against the site owner, Belle Living Pty Ltd (Belle Living), and the private certifier.

The Court considered the interpretation of the words "draft heritage item" and invalidated a complying development certificate (CDC) issued by a private certifier to Belle Living for demolition because the building and site was a draft heritage item. This case also raised questions about the exercise of the Court's discretion, unreasonableness, and the issue of estoppel.

The status of a building as a "draft heritage item" impacts whether certain development can occur under the simpler complying development regime. In this case, although other quite recent Court proceedings in the case of Helm No.18 Pty Ltd v North Sydney Council [2022] NSWLEC 1406 relating to the challenge of an interim heritage order had concluded that the item did not reach the threshold for local heritage listing, the fact the property sat within the legal category of a draft heritage item was what was legally relevant to the validity of the CDC.

Whilst a draft heritage listing does not prevent someone from lodging a development application for demolition and a consent being granted, this case serves as a reminder to undertake careful due diligence before buying a property to understand whether the property is a draft heritage item.

Background

Proceedings

The Council commenced the proceedings in June 2023. The summons commencing the litigation sought a declaration from the Court that the CDC issued for demolition works at 3 Berwick Street, Coogee (site) was invalid, and the partial demolition works already carried out were unauthorised.

Belle Living defended the proceedings while the private certifier, who was listed as the second respondent and who had issued the CDC, filed a submitting appearance.

Council heritage review

In January 2020, the Council invited the Randwick community to nominate sites and places of potential heritage value as part of its planning proposal to amend the Randwick Local Environmental Plan 2012 (RLEP). Following community consultation, 281 properties were identified for consideration. The site, which comprised a single-storey inter-war bungalow constructed in or about 1923, was one of those properties.

In May 2021, the Council resolved to include 57 properties as heritage items in schedule 5 of the RLEP. Although the site was not one of the 57 properties, the Council nevertheless resolved that the site, along with other properties, be identified and set aside by the Council for a future in-depth heritage study.

Development application and the interim heritage order

In August 2022, Belle Living lodged a development application for the subdivision of the site and construction of two dwellings.

Following the receipt of the development application, an urgent motion was carried at the Council meeting on 27 September 2022 for a heritage assessment of the site to be undertaken. Following that assessment, the Council made an interim heritage order for the site under section 25 of the Heritage Act 1977 (NSW) on 14 October 2022, which was valid for 6 months.

In November 2022, Belle Living filed a Class 1 appeal against the Council's making of the interim heritage order (see the case of Belle Living Pty Ltd v Randwick City Council [2023] NSWLEC 1282 (IHO proceedings)). In the same month, the Randwick Local Planning Panel resolved that the site be listed as an item of local heritage in schedule 5 of the RLEP. The Council then prepared a planning proposal to give effect to this resolution, which was forwarded to the Minister for Planning (Minister) in February 2023. Gateway determination was then provided by the Minister's delegate in March 2023.

In May 2023, Belle Living's development application was refused by Council.

On 7 June 2023, the Court delivered its judgment in the IHO proceedings. The Court held as follows (at [56]):

"The research and reports that have been undertaken and provided to the Court in evidence are, in my view, thorough and comprehensive and I am satisfied that any further investigation will not illicit additional information that would change the finding that the item does not reach the threshold for local heritage listing when the Heritage Guidelines are applied. On that basis, it is appropriate to revoke the IHO."

Complying development certificate

On 7 June 2023 and immediately after the judgment in the IHO proceedings was delivered, the private certifier issued a CDC for the demolition of the building at the site under section 4.28(11) of the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act).

Action taken by the Council

Two days later on 9 June 2023, the Council issued a stop demolition work order to Belle Living under section 9.34 of the EP&A Act. By this time, some demolition work at the site had already started.

On the same day, the Council commenced these Class 4 proceedings by way of summons seeking to invalidate the CDC. The summons contended that the CDC issued for the site was invalid on the basis that the site was a "draft heritage item" as defined in clause 1.5 of the State Environmental Planning Policy (Exempt and Complying Development Codes) 2008 (Codes SEPP), and thus not authorised to be issued. The Council also sought interlocutory relief, which was granted by the Court on 13 June 2023, preventing further demolition work from taking place.

Cross-appeal by Belle Living

On 16 June 2023, Belle Living filed a cross-summons on the basis that the site was not a "draft heritage item" within the meaning of clause 1.5 of the Codes SEPP, and the Council had failed to comply with the conditions of the Gateway Determination made by the Minister to facilitate the listing of the property as a local heritage item.

Issues

The main issue for the Court to determine was whether the development pursuant to the CDC was invalid under section 4.31 of the EP&A Act as it related to land involving a draft heritage item. Belle Living's cross-summons separately raised issues of unreasonableness and estoppel against the Council.

Interpretation of "draft heritage item"

The interpretation of the words "draft heritage item" was a significant issue at the hearing.

Clause 1.5 of the Codes SEPP defines "draft heritage item" and "heritage item" as follows: 

• "draft heritage item means a building, work, archaeological site, tree, place or aboriginal object identified as a heritage item in a local environmental plan that has been subject to community consultation, other than an item that was consulted on before 1 March 2006, but has not been included in a plan before 27 February 2009."

• "heritage item means a building, work, archaeological site, tree, place or Aboriginal object identified as a heritage item in an environmental planning instrument."

Clause 1.17A of the Codes SEPP sets out the requirements for complying development, and contains provisions that in broad terms restrict complying development being carried out on land affected by heritage. Clause 1.18 sets out additional restrictions for complying development, including in clause 1.18(1)(c3) that it "not be carried out on land that comprises, or on which there is, a draft heritage item…".

The Council argued that in the context of clause 1.17A of the Codes SEPP (which makes reference to "heritage item") "…'a draft heritage item must be something other than a heritage item identified in an environmental planning instrument'. Otherwise, 'there would be no need to include the additional specification in cl 1.18 of the Codes SEPP' in relation to 'draft heritage item'" (at [78]).

Belle Living submitted in response to the Council's interpretation that "…the Court would need to read the definition of 'draft heritage item' in clause 1.5 of the Codes SEPP as including reference to the words 'planning proposal', which do not otherwise appear anywhere in the Codes SEPP" (at [96]).

The Court made six findings on the issue (at [101]). This relevantly included the following:

• That to give the two expressions "heritage item" and "draft heritage item" the same meaning would be to make redundant the separate definition of "draft heritage item" in the same clause of the Codes SEPP. A draft heritage item must be something other than a heritage item identified in an environmental planning instrument.

• That "draft" in the definition of "draft heritage item" plainly means anything that is preliminary in nature and not yet finalised.

• The context and legislative history of the Codes SEPP suggests that the definition of "draft heritage item" is to be construed "purposively" with the reference to a "local environmental plan" also including a planning proposal that has been subject to community consultation.

Ultimately, the Court determined that the site was the subject of a planning proposal and was a "draft heritage item" within the meaning of clause 1.5 of the Codes SEPP.

Court's discretion to invalidate the CDC

The Court's discretion to invalidate a CDC is contained in section 4.31 of the EP&A Act, which relevantly provides that:

"Without limiting the powers of the Court under section 9.46(1), the Court may by order under that section declare that a complying development certificate is invalid…"

Having determined that the site was the subject of a planning proposal and was a "draft heritage item", the Court exercised its discretion in section 4.31 of the EP&A Act and declared that the CDC was invalid (at [107]).

Cross-summons 

Unreasonableness of the Council's conduct

In the cross-summons, Belle Living submitted that the Council had acted unreasonably based on the following timeframe of events:

• The Council had previously considered in 2020 and 2021 the site for local heritage listing but it had been recommended that the site did not meet the threshold for local listing.

• On 6 April 2021, the Randwick Local Planning Panel adopted the recommendations from the Council's external heritage consultant that the site did not meet the threshold for local listing.

• The site was not part of the 57 properties recommended to be listed at the Council meeting on 25 May 2021.

• Following the 25 May 2021 Council meeting, there was a 16 month period of inaction until the heritage assessment was commissioned.

Belle Living argued at [117] that it purchased the property in May 2022 on the "reasonable assumption" that the property was not of heritage significance as it has already been assessed by the Council and found to not meet the threshold for local heritage listing. Belle Living then promptly lodged a development application, which was refused on heritage grounds.

Belle Living also argued at [118] that in the IHO proceedings, the site had been found by the Court not to be of any local heritage significance, and on that basis, the Council's subsequent conduct was unreasonable.

The Court did not accept the unreasonableness argument.

The Court found at [125] that the grounds for unreasonableness related to the decision itself and not the process in which a decision is reached. The Court held that further investigations into the significance of the site provide an "evident and intelligible justification" for the steps taken by Council (at [135]).

Issue estoppel

Belle Living further submitted that it was unreasonable for the Council to list the site as local heritage given the Court's judgment in the IHO proceedings. Belle Living argued that an issue estoppel operated to stop in any subsequent proceedings the determination of issue or fact that had been resolved in the IHO judgment.

The Court found that the appeal in the IHO proceedings related to whether the site upon investigation or further inquiry would be found to be of a local heritage (at [144]). However, in these proceedings the central issue was whether the public exhibition of a planning proposal for a listing of a dwelling as a heritage item was considered a "draft heritage item" under the Codes SEPP. The Court considered that the heritage qualities of the site were irrelevant in the current proceedings.

Belle Living's issues estoppel ground therefore failed.

The Court found that as at the date the CDC was issued, the Council had substantially satisfied the conditions of the Gateway Determination (at [150]).

Outcome

The Court ultimately held that the Council was successful on its summons, and Belle Living was unsuccessful on its cross-summons. The Court made the following orders (at [168]):

• A declaration that the CDC was invalid.

• A declaration that Belle Living had failed to comply with the development control order issued by the Council on 9 June 2023.

• A declaration that Belle Living had caried out unauthorised work, being the partial demolition of the dwelling on the site.

• An order restraining Belle Living from carrying out any demolition works to the buildings on the site.

• An order that Belle Living pay the Council's costs in the proceedings.

No orders were made against the private certifier.

Conclusion 

This decision serves as a reminder to those developing land under CDCs, and to certifiers, that CDCs can be challenged for their validity. In some situations, Councils are willing to bring such proceedings as seen in the other recent case of Wollondilly Shire Council v Kennedy [2023] NSWLEC 53, which is the second decision in 2023 where the Court has declared a CDC to be invalid upon the commencement of a summons by the relevant Council.

The decision clarifies the interpretation of the phrase "draft heritage item" in the context of clause 1.18 of the Codes SEPP. Private certifiers need to be alert to when there is a planning proposal to facilitate additional properties being added to the schedule of local heritage items in the RLEP. 

More broadly, this decision serves as a reminder that private certifiers should meticulously consider the provisions of the Codes SEPP on a case by case basis to ensure that each requirement has been met.