In brief
The case of Buyozo Pty Limited v Ku-ring-gai Council [2021] NSWLEC 2 concerned a decision of Pepper J, which upheld an appeal to the NSW Land and Environment Court (NSWLEC) brought by Buyozo to modify a condition of consent to reduce the amount of development contributions payable under section 7.11 of the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act) from $987,242.37 to $674,151.05 on the basis that gross floor area had been calculated incorrectly. Our April 2021 article examined that decision in detail.
Ku-ring-gai Council appealed the decision to the Court of Appeal (Court) in the case of Ku-ring-gai Council v Buyozo Pty Ltd [2021] NSWCA 177 (Buyozo). There were six grounds of appeal, falling into the following three categories:
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Whether the primary judge had erred in concluding that a power existed under section 4.55 of the EP&A Act to modify a condition of consent requiring the payment of contributions, where the contributions had already been paid.
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Whether the primary judge had erred by misconstruing the definition of 'gross floor area' in the Ku-ring-gai Local Environmental Plan 2015 (KLEP) by finding that the area comprising the corridors in the building was an area of access to space used for the loading or unloading of goods.
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Whether the primary judge had erred in concluding that there was utility in modifying the subject condition (Condition 30), which required the payment of a monetary contribution.
The Court ultimately upheld the appeal on all three grounds, set aside the judgment of the primary judge, and refused the modification application. The Court also made an order for costs against Buyozo for the appeal proceedings.
We examine the takeaways from the Court's judgment below.
Limits of power to modify development consents under sections 4.55(1A), 4.55(2), and 4.56(1) of the EP&A Act
The Court's judgment contained two important conclusions relating to the power of consent authorities to modify development consents.
Conclusion 1
A condition of consent can never be imposed requiring the doing of something retrospectively. It can only require something to be done prospectively. In this case, as the contributions had already been paid, the condition "had no further work to do" and so after the condition had been satisfied (i.e. after the payment of the contributions), the condition was not capable of being modified (at [46]).
The Court reasoned at [37]-[47] that a modification shares with the grant of a development consent the essential characteristic of only operating prospectively, so as to authorise the doing of something in the future: Willoughby City Council v Dasco Design and Construction Pty Ltd & Anor (2000) 111 LGERA 422; [2000] NSWLEC 275.
The Court, by way of example to highlight this principle, drew an interesting distinction in respect of the erection of a building. The Court observed that a development consent cannot be granted to authorise development that has already been carried out, for example the erection of a building. Rather, a development consent can only operate prospectively, including for example the future use of an already erected building. The Court held at [40] that this essential characteristic of the grant of a development consent flows into the modification of a development consent.
Importantly, this creates a more nuanced and constrained explanation of the modification powers compared to how those powers have in practice been applied following decisions like Windy Dropdown Pty Ltd v Warringah Council (2000) 111 LGERA 299; [2000] NSWLEC 240 (Windy Dropdown).
Windy Dropdown has been cited for the proposition that the power is "facultative" and "the broad construction of s 96 leads to a practical result that enables a consent authority to deal with unexpected contingencies as they arise during the course of construction of development or even subsequently, provided of course that the development to which the consent as modified relates is substantially the same development" (at [32]). However, as the Court of Appeal noted in Buyozo, "the effect of the modification is to authorise what has already occurred, although the authorisation operates prospectively and not retrospectively" (at [35]).
Conclusion 2
The Court held that there were four powers to modify a development consent, being section 4.55(1), section 4.55(1A), section 4.55(2), and section 4.56(1) of the EP&A Act, which each vary. Where a modification to a development consent is applied for under section 4.55(1A), section 4.55(2), or section 4.56(1) of the EP&A Act, the Court's judgment requires that at least one of the results of the modification application must be a change to the proposed development. In that regard, the Court stated:
"[55] The constraints on three of the powers, s 4.55(1A), s 4.55(2) and s 4.56(1), indicate that the modification of the development consent sought needs to effect some change to the development the subject of the development consent, while the constraints on one of the powers, s 4.55(1), indicate to the contrary that no change to the development the subject of the development consent needs to be effected." (emphasis added).
"[63] The upshot of this analysis is that the power in s 4.56(1), as with the powers in s 4.55(1A) and s 4.55(2), can only be exercised to modify a development consent if the modification will effect some change to the development the subject of the development consent. This need not be the only effect of the modification but it must be at least one of the results of the modification of the development consent." (emphasis added).
The Court held that the subject development (with its proposed modification to the conditions of consent) would not involve any modification to the development, and concluded that the power to modify was therefore not engaged.
How can applicants avoid the limitations of sections 4.55(1A), 4.55(2), and 4.56(1) of the EP&A Act?
Where no change to a development is proposed, an applicant cannot rely on section 4.55(1A), section 4.55(2), or section 4.56(1) of the EP&A Act to modify the development. The Court explained the following three options would instead be available in those circumstances (at [66]-[71]):
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An applicant could apply to modify a development consent under section 4.55(1) of the EP&A Act to correct a minor error, misdescription, or miscalculation. There are limited situations in which this will be possible. The Court referred to section 4.55(1) of the EP&A Act as "a form of 'slip rule' commonly available to correct minor errors in court judgments", and confirmed that this would not have been available in Buyozo's circumstances.
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An applicant could appeal the imposition of a condition by commencing Class 1 proceedings under section 8.7 of the EP&A Act. The NSWLEC on appeal could then assess whether a condition imposed under section 7.11 of the EP&A Act was determined in accordance with the relevant contributions plan, or amend the condition if it was unreasonable in the circumstances
This option had not been pursued in Buyozo. In our experience, applicants often seek to modify a consent (and appeal the refusal of the modification), rather than directly appeal the conditions of consent so as not to potentially jeopardise the entire consent and to prevent the consent ceasing to have effect while it is being appealed (see section 8.13(1) of the EP&A Act).
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Class 4 judicial review proceedings could be commenced to challenge the validity of a condition, and seek orders to sever it from the development consent (see Maitland City Council v Anambah Homes Pty Ltd (2005) 64 NSWLR 695; [2005] NSWCA 455). (see Rose Consulting Group v Baulkham Hills Shire Council (2003) 58 NSWLR 159; [2003] NSWCA 266; Lake Macquarie City Council v Hammersmith Management Pty Ltd (2003) 132 LGERA 225; [2003] NSWCA 313).
We note that option 3 may be a risky approach given that Class 4 proceedings are not cost-neutral like Class 1 merit proceedings.
We are also already seeing the emergence of a fourth option, which involves an applicant ensuring that a change to a development is proposed when lodging a modification application, as well as a condition. We consider that this would satisfy the requirement arising from the Court's judgment that at least one of the results of the modification of the consent must be that the modification "will effect some change to the development the subject of the development consent".
Primary judge errs in finding that the corridors were excluded from the definition of ''gross floor area'' in the KLEP because the area to be excluded from the definition needs to be ascertained from the use of the building as a whole
The Court held that self-storage areas and the corridors outside them should have been included within the calculation of 'gross floor area'.
The Court found that the exclusion of corridors from gross floor area was akin to excluding the approved use of the building (at [74]).The Court highlighted that the mere fact that some people have a preference to unload goods in corridors before moving them into a self-storage unit does not mean that "the corridors, properly characterised and considering their function within the building as a whole, are to be characterised as spaces for the loading and unloading of goods." (at [75)]. Rather, the correct inquiry is to identify the areas within a building that have been approved by the development consent to be used for the loading or unloading of goods (at [80]).
No public utility in reducing the quantum of contributions paid under Condition 30 of the development consent
The Court held at [95] that Condition 30 of the development consent revealed nothing on its face about how the required amount of contributions had been calculated. Although the development consent would be a publicly available document, its terms did not specify which areas were included or excluded as part of the gross floor area used to calculate the contributions payable.
The Court concluded that the proposed modification of the consent would not be any more informative about the calculation process for the substituted amount, and the public utility in the modification of Condition 30 was "non-existent".
No requirement to take into account overpayments in contributions generally
Contrary to the primary judge's finding, the Court stated at [99] that "the Council would not be required to take the 'overpayment into account' prior to the imposition of any condition in respect of any future development application." This was because a modification to Condition 30 would not cause the difference between the original and proposed amount to cease being a benefit provided as a condition of consent, within the exception identified in section 7.11(6)(a) of the EP&A Act (at [101]).
No right to a refund of contributions paid under a condition of consent, even if a restitution claim was possible, it did not give utility to modifying Condition 30
The Court reaffirmed its decision in Frevcourt Pty Ltd & Anor v Wingecarribee Shire Council (2005) 139 LGERA 140; [2005] NSWCA 107, where it concluded that there was no right to a refund of development contributions in circumstances where there had been an overpayment.
The Court cited David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 378; [1992] HCA 48 and stated at [105] that although it was not clear which type of restitution claim the primary judge had in mind, Buyozo could not have brought an action for money paid under a mistake of law, as it had voluntarily paid the contributions in order to carry out the development, rather than pay under the mistaken belief that it "was under a legal obligation" to do so.
Implications
The judgment of Preston CJ in Buyozo was the third significant judgment on the power to modify a development consent in the last few years, the others being the following:
Since our June 2021 article on AQC Dartbrook, the Environmental Planning and Assessment Regulation 2000 (NSW) has been amended to insert clause 121B, which now allows for modification applications to be amended before determination.
Conclusion
To summarise, the three high-level takeaways from this case are the following:
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Modification applications are forward-looking, and unless the modification is to correct a minor error or misdescription, at least one of the effects of the modification application needs to be a change to the proposed development.
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The more expansive application of the 'gross floor area' definition in the KLEP taken by the primary judge has been overturned. As mentioned in our April 2021 article, developers should ensure that the correct definition is being applied at all stages of the development process.
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There remains little recourse to developers who overpay contributions. If a contribution is suspected to have been calculated incorrectly, steps should be taken to address this before payment occurs. Unfortunately, this often delays the carrying out of the development.
Editor's Note by Ian Wright and Krystal Cunningham-Foran
Relevancy to Queensland law
As stated in our April 2021 article, in Queensland, the term "gross floor area" is defined in Schedule 24 of the Planning Regulation 2017 (Qld) (Planning Regulation).
A local government is required under section 8 and schedule 4 of the Planning Regulation to adopt the definition of gross floor area as it is stated in Schedule 24 of the Planning Regulation.
Schedule 24 of the Planning Regulation relevantly excludes areas of a building used for access between levels and the parking, loading, or manoeuvring vehicles from falling within the definition of gross floor area.
The issue of whether the mere use of an area for loading or unloading goods is enough to satisfy exclusion (e) of the definition of gross floor area has not been considered by Queensland Courts. However, should the issue arise, we consider the Court's approach in Buyozo to be relevant in that the mere or preferred use of an area for loading or unloading goods would not be enough, on its own, to satisfy the exclusion. What would reasonably be required is a characterisation of the use and function of the area as a whole, in the context of the development approval to which the building is subject.
We note for completeness that "gross floor area" in the context of determining whether a planning change is an "adverse planning change" is separately defined under section 30 of the Planning Act 2016.
We are also of the view that under Queensland law, similar to the Court's approach in Buyozo, a condition of a development approval, once complied with, has been completed and cannot be retrospectively altered.