In brief - Decision in Central Coast Council v Pastoral Investment Land & Loan Pty Ltd [2020] NSWSC 777 serves as a useful reminder for councils and developers regarding risks where there is a perception that a council's discretions are being fettered 

Justice Darke's decision in Central Coast Council v Pastoral Investment Land & Loan Pty Ltd [2020] NSWSC 777 considers two unique and distinct areas of planning and local government law. 

Firstly, the Court considered whether by entering into a Deed of Agreement the Council had unlawfully fettered its discretion to determine a development application agreed to be made by the other party to the agreement. This decision is unique because the common form of agreements entered into by Councils and developers relating to development since section 7.4 was introduced to the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act) is through voluntary planning agreements. 

Secondly, Darke J's obiter comments about the application of section 8.13 of the EP&A Act. Section 8.13(1) of the EP&A Act provides that a development consent the subject of a Class 1 appeal in the Land and Environment Court of NSW ceases to have effect. There was a dispute between the parties as to whether or not the development consent, which was the subject of a dismissed Class 1 appeal in the Land and Environment Court of NSW, was revived, or whether it remained in the state of suspension given that decision was being appealed. 

Whilst Darke J did not express a concluded view, His Honour's view broadens the application of section 8.13(2) of the EP&A Act which provides that a consent is revived on the discontinuation of the appeal. That subsection does not expressly state what is to occur when an appeal is dismissed. This case contains comments suggesting that a development consent that is the subject of an appeal under the EP&A Act, is not only revived where a matter has been discontinued. There are now arguments for the revival of a consent on the dismissal of a matter. 

This article summarises the facts of the case and then analyses the findings and comments of Darke J.

Facts of Central Coast Council v Pastoral Investment Land & Loan Pty Ltd 

Central Coast Council (Council) commenced proceedings in the Supreme Court of NSW against the registered owner (PILL) of parcels of land totalling more than 24 hectares in Warnervale.

The parties had entered into a Deed of Agreement on or before 8 March 2007 in relation to the land, which provided that the parties would each do certain things, including:

  • Council would use its best endeavours to obtain a certain re-zoning of the land.

  • PILL would lodge a development application to subdivide the land in an agreed manner if the land was rezoned.

  • If the development application was approved and the plan of subdivision registered, PILL would transfer a lot containing land of high environmental conservation value to the Council for $1.00.

The rezoning of the land as intended by the Deed of Agreement was effected in November 2008. 

However, it was not until 2015 that PILL provided a draft plan of subdivision to the Council. 

After discussions with the Council a development application was then lodged in 2017 for "Subdivision (Boundary Adjustment) and Clearing of Vegetation ancillary to subdivision". The Council opposed the component of the application relating to vegetation clearing and issued development consent in August 2018 for "Boundary Realignment (Subdivision) only. Partial consent excludes proposed native vegetation clearing, land use and all other works".

Condition 1.02 made it abundantly clear that no clearing of native vegetation was permitted under the consent. 

Consequently, PILL commenced Class 1 proceedings in the Land and Environment Court of NSW appealing the determination of the development application. In those proceedings, PILL sought that the consent be modified to permit the clearing of the land.

After the Class 1 Land and Environment Court proceedings were commenced by PILL against the Council, the Council commenced Supreme Court proceedings against PILL. The Council argued that because PILL had failed to advance the subdivision, it had breached an implied term of the Deed of Agreement obliging it to cooperate with the Council with respect to the subdivision. The Council sought orders for specific performance.

PILL denied it was in breach of the Deed of Agreement, and by way of cross claim contended that the Deed of Agreement was entered into unlawfully by Council and comprised an unlawful fetter on Council's ability to exercise future statutory powers, amongst other things.

Important to the second matter we discuss in this article, at the time of the Supreme Court hearing, the Class 1 Land and Environment Court matter had progressed to the point whereby a Senior Commissioner of the Court had dismissed PILL's application and PILL had appealed that determination to a Judge of the Court. The appeal had not yet been heard and so there was a question over whether the development consent issued had effect.

We have summarised the questions addressed by the Court below.

Was the Deed of Agreement entered into by the Council ultra vires or unlawful?

Darke J considered the powers of the Council and the history of how the Deed of Agreement was executed. 

The Court found that at the time the Deed of Agreement was entered into, the Council was a body corporate and had the power to do what was necessary for or incidental to the exercise of its functions. The Council had the power to acquire land by agreement for the purpose of exercising any of its functions (section 186(1) and section 187 of the Local Government Act 1993 (NSW)). Further, a resolution passed by the Council on 28 June 2006 authorised Council's entry into the Deed of Agreement.

Does the Deed of Agreement constitute an unlawful fetter upon the future exercise of the Council’s statutory powers?

In these proceedings, PILL relied on the well-known fettering of power doctrine set out in Ansett Transport Industries (Operations) Pty Ltd v The Commonwealth (1977) 139 CLR 54:

"There is a general principle of law that a public authority cannot preclude itself from exercising important discretionary powers or performing public duties by incompatible contractual or other undertakings".

PILL argued in its cross claim that by entering into the Deed of Agreement, the Council had impliedly agreed to grant development consent to PILL. Council would not obtain the benefit of receiving the conservation lands if the development consent was not issued.

In response, the Council argued that the Deed of Agreement preserved the Council's discretionary powers. The Deed of Agreement required the Council to carry out its assessment of any development application "in accordance with applicable legislation, including principally the [EP&A] Act, and may determine such an application in its sole discretion." Another clause stated "Insofar as any provision of this Deed constitutes an unlawful fetter on Council in its capacity as statutory authority required to exercise its statutory discretions, the provision is not binding and is subject to clause 10." Clause 10 related to severability.

The Court was unable to detect an obligation or even an implied obligation on the Council to grant development consent from the provisions in the Deed of Agreement. The Council did not bind itself such that it was required to grant development consent. 

In making these findings, the Court distinguished the case from numerous other cases where the fettering of power doctrine had been applied (at [49]).

Should orders be made for specific performance of the Deed of Agreement?

Having found that the Deed of Agreement was valid and enforceable, the Court considered whether orders for specific performance should be made.

The Council contended that PILL was in breach of the Deed of Agreement because it failed to lodge an application for a subdivision certificate as contemplated by the development consent. It was asserted that PILL was in breach of an implied term of the Deed of Agreement obliging it to cooperate with the Council. Orders of specific performance were sought to compel PILL to progress the subdivision.

In response, PILL asserted that it was entitled to challenge the conditions of development consent issued by the Council (which had the effect of delaying the subdivision contemplated by the Deed of Agreement). Implying such a term sought by the Council would be inconsistent with the exercise of that right.

Whilst the Court found that there was an implied term within the Deed of Agreement that each party was to do "all that was reasonably necessary to be done on its part to facilitate the release by the Council of the signed plan of subdivision", the Court also accepted that PILL was not prevented from challenging the development consent issued by the Council (at [59-60]). It was only after the appeal rights were exhausted that the Court said the process culminating in the release of a subdivision certificate and the requirement for the parties to comply with the implied term was to take place.

Obiter comments on section 8.13 of the EP&A Act

Having found the above, it was not necessary for the Court to deal with other issues in the case. However, Darke J took the opportunity to provide some commentary about the issue between the parties as to whether the development consent had effect (i.e. had been revived) given that the Class 1 challenge had been dismissed in the Land and Environment Court (notwithstanding the appeal to the Judge under section 56A of the Land and Environment Court Act 1979 (NSW)).

Section 8.13 of the EP&A Act provides:

"(1) If the granting of a development consent for development (other than State significant development) is the subject of an appeal made under this Division, the development consent ceases to have effect.

(2) If an appeal under this Division is discontinued, the consent is revived on the discontinuation of the appeal." (emphasis added)

The Council's position was that the development consent did have effect, whereas PILL asserted the dismissal of the Class 1 application did not revive the consent which would have occurred if the appeal was discontinued.

In providing its comments about the application of section 8.13 of the EP&A Act, the Court at [69] referred to the well-known authority for statutory construction in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [84] that:

"…the duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspondence [sic] with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the cannons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning."

The competing interpretations identified by the Court at [78] were whether the reference in section 8.13(2) of the EP&A Act to the revival of a consent on the "discontinuation" of an appeal should be taken to:

  • be the only circumstance in which a development consent is revived such that the consent becomes effective again; or

  • reflect an aspect of the existing state of the law, as opposed to the only circumstance.

The Court did not provide a ruling on the meaning of section 8.13(2) of the EP&A Act noting the matter was "finely balanced". However, the Court expressed a preference (in obiter dicta) that section 8.13(2) of the EP&A Act not be interpreted as providing the only circumstance in which a development consent that ceased to have effect under section 8.13(1), may be revived. 

The brief reasoning behind the preferred (albeit non-binding) view was that if the discontinuation of an appeal was the only circumstance that would revive a development consent, a gap would be created. That is, appeals that are dismissed by the Court, for example for failure to prosecute the appeal with due despatch or failure to provide security for costs, could and would not be revived and would not be effective again. The Court opined that would seem to be an "anomalous outcome" (at [79]).

Lessons for developers and councils

The case serves as a useful reminder of the fettering of power doctrine and provides an example of its application in an unusual set of circumstances. 

As we stated at the outset, voluntary planning agreements are the most common form of agreement entered into between councils and developers. Whilst planning agreement provisions were introduced in the EP&A Act in 2005, the Council and PILL chose to avoid that mechanism and entered into the Deed of Agreement in 2007. The reasons for this decision are not given in the judgment, but the parties went to the extent of clarifying in the Deed of Agreement "This Deed is not a Planning Agreement as defined under the Act." 

Even though the parties chose not to create a planning agreement and subject themselves to the statutory provisions governing them, and instead entered into a Deed of Agreement, that agreement still contained a "no fetter" clause. In addition to the "no fetter" clause, the Deed of Agreement made it clear that it was possible development consent might not be granted because the agreement stated:

"If development consent for subdivision to excise the conservation residue (Lot 1) and the proposed industrial area (Lot 2) is granted by Council…"

Later in the Deed of Agreement, further clarification is provided that:

"Council is required to carry out its assessment of any development application lodged by or on behalf of the Landowner in accordance with applicable legislation, including principally the Act, and may determine such an application in its sole discretion."

The Deed of Agreement did not fetter the Council's ability to determine any development application as asserted by PILL. Contrary to PILL's case, the Court found that the Council had not impliedly agreed to grant the subdivision development consent by entering into the Deed of Agreement.

The matter serves as a useful reminder for councils and developers regarding risks where it might be perceived the Council's discretions are being fettered. To avoid costly arguments, it is important the drafting of the entire agreement complies with the fettering of power doctrine.

The Court's obiter comments also provide support to applying a broader interpretation of section 8.13(2) of the EP&A Act relating to when development consents are revived, which could prove to be helpful for both councils and holders of development consents alike, depending on the circumstances. 

However, the Court's obiter comments were somewhat confined because it did not comment on whether the appeal under section 56A of the Land and Environment Court Act that had been filed following the dismissal of the Class 1 application would have otherwise kept the development consent in a state of suspension preventing it from being revived.

With no judicial finding with respect to the interpretation of section 8.13 of the EP&A Act, councils and holders of development consents involved with dismissed Class 1 appeals need to be aware of the competing interpretations of the section, which has implications for whether the consent can be lawfully relied upon.

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2020.

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