Development permitted by Land and Environment Court orders is not necessarily "approved" development in New South Wales

In brief

The recent Court of Appeal case of Verde Terra Pty Ltd & Ors v Central Coast Council & Anor [2023] NSWCA 121 arose in the context of a dispute about how one measures the environmental impacts of the total development against the development "approved" as this has a bearing on whether the development constitutes "designated development", which involves more onerous development assessment requirements.

The assessment of a development application altering an earlier "approved" development requires an understanding of what the earlier "approved" development is. The Court of Appeal in this case considered whether the earlier "approved" development is the original development consent granted by a consent authority, or whether it comprises development under rectification orders made by the Land and Environment Court in earlier enforcement proceedings.

The appeal

The proceedings concerned an appeal to the Court of Appeal against the Land and Environment Court's decision to dismiss an application by Verde Terra Pty Ltd (Verde Terra) for a declaration sought in the following terms [our emphasis]:

"A declaration that the Mangrove Mountain Landfill & Golf Course constitutes ‘development (whether existing or approved)’ within the meaning of clause 35 of Schedule 3 of the EPA Regulation."

Clause 35 is now section 48 of schedule 3 of the Environmental Planning and Assessment Regulation 2021 (NSW) and switches off a development from otherwise being designated development in certain circumstances. Section 48(1) states as follows [our emphasis]:

"48 Alterations or additions to existing or approved development

(1) Development involving alterations or additions to development, whether existing or approved, is not designated development if, in the consent authority’s opinion, the alterations or additions do not significantly increase the environmental impacts of the existing or approved development."

Switching off the "designated development" categorisation would mean that a development application also avoids the more onerous development assessment requirements for designated development, for example:

• designated development applications must be accompanied by an environmental impact statement (see section 4.12(8) of the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act));

• designated development applications must have a minimum public exhibition period, which for an application for development consent for designated development is 28 days (see clause 8 of schedule 1, part 1, division 2 of the EP&A Act); and

• third party objectors dissatisfied with the determination of the consent authority can appeal to the Land and Environment Court against the determination (see section 8.8(2) of the EP&A Act).

In this context, the development application needs to be assessed or compared with whatever the "approved" development is.

In this case, the question was whether the "approved" development was the original 1998 development consent (1998 development consent), or the development required by the Land and Environment Court's 2014 orders (made with the parties' consent) in the enforcement proceedings. Verde Terra submitted it was the latter. To explain why requires further background being provided.

In 2012, the Central Coast Council (Council) brought proceedings against Verde Terra and others alleging breaches of terms of the existing development consent regulating the extractive industry and waste facility on the subject land.

The parties settled those proceedings by consent orders in 2014, which required works to be undertaken in accordance with conditions. Those works differed from the works approved by the 1998 development consent.

Verde Terra contended that those orders were "approved" development because either:

1. Those works were both permitted and required by the Land and Environment Court's orders (at [33]); or

2. the development the subject of the 2014 consent orders was within the scope of the 1998 development consent, which had been approved by a consent authority. The development the subject of the 2014 consent orders merged with the 1998 development consent, and further development consent was not required for the works (at [34]).

The Court of Appeal determined that the consent orders did not constitute the "approved" development, based on the finding that the orders were not binding "in rem". That is, the Court of Appeal held that the orders only bind the parties, and not the whole world based on the following reasons (at [38]) [our emphasis]:

"Certain orders of the Land and Environment Court under the former s 124 and current s 9.46 of the Environmental Planning and Assessment Act will operate in rem, as well as in personam. That is, they will bind the parties and the whole world (PE Bakers Pty Ltd v Yehuda (1988) 15 NSWLR 437 at 445-446). Had the 2014 orders been made by the Court after a contested hearing, rather than by consent, they would have operated in rem. But, contrary to the submissions of Verde Terra, orders made by consent will not give rise to a judgment in rem (K R Handley, Spencer Bower and Handley: Res Judicata (5th ed, 2019, LexisNexis) at [2.19]; PE Bakers Pty Ltd v Yehuda at 446)."

As is clear from the Court of Appeal's findings, if the 2014 orders had not been consent orders, they would have been binding in rem, and it would not have mattered that the Court was not acting in its exercise of power as a consent authority in making orders in its enforcement capacity. Had that been the situation, those orders would still have resulted in "approved" development for the purposes of the comparison exercise. In that regard, White JA relevantly stated as follows (see [40] to [41]) [our emphasis]:

"I do not accept that 'approved' necessarily means approved by a consent authority. I would accept that if the 2014 orders had been made by the judge after a contested hearing so that they operated in rem, the development 'approved' by the orders would fall within cl 35. That is not because the Council’s cause of action merged in the judgment so that the development is to be taken to be within the 1998 development consent, but because the development approved by the orders would be binding on the world.

A prior approval of designated development by a consent authority is binding on the world (unless overturned on appeal). An approval by the Land and Environment Court of designated development after a contested hearing is binding on the world (again, subject to appeal). Either would fall within the words 'approved development' in cl 35. But as cl 35 affects third parties’ rights, the 'approved development' against which the environmental impact of the total development is to be assessed, is a development whose approval is binding on third parties."

Conclusion

Although the circumstances of this case are based on quite specific facts, the judgment contains three timely reminders about the nature of certain types of orders the Land and Environment Court makes and the planning system in New South Wales (NSW) more broadly:

1. The effect of orders made by the Land and Environment Court can only be properly understood with reference to the power that the Court is exercising in making those orders. The Land and Environment Court's power in Class 1 merits review is quite different to its power in Class 4 enforcement proceedings. Consent orders in those two different types of proceedings have quite different effects. Furthermore, consent orders in Class 4 proceedings will have a different quality to orders made after a contested hearing.

2. Whilst the consent orders in the 2014 Class 4 enforcement proceedings led to circumstances for the regularisation of the breach of the earlier consent, the orders did not become part of, or merge, with the 1998 development consent. The exercise of the powers of approval by a consent authority is different to the exercise of powers by the Land and Environment Court in the context of enforcement proceedings. Once development deviates from the approval system in NSW, for example undertaking development in accordance with the EP&A Act, that not only brings with it difficulties in regularising the breach given the forward-looking nature of the EP&A Act, but it may also create limitations on the use of future approval pathways. This can have ongoing implications even for future landowners.

3. If you are dealing with a site that has been the subject of past unauthorised works and enforcement activity where Court orders have been made, the nature and effect of those orders needs to be properly considered rather than assumed to form part of some sort of an approval. The effect of the orders also may not be binding on third parties.