Land and Environment Court of New South Wales CITATION : Crone Nation Pty Ltd v Sydney City Council [2005] NSWLEC 334 APPLICANT Crone Nation Pty Ltd PARTIES : RESPONDENT Sydney City Council FILE NUMBER(S) : 10104 of 2005 CORAM: Bly C - Hoffman C KEY ISSUES: Development Application :- Demolition of existing buildings - economic adaptive re-use - heritage significance - erection of a nine-storey commercial building - appropriate character Central Sydney Local Environmental Plans 1996 LEGISLATION CITED: City of Sydney Policy for the Management of Laneways in Central Sydney 1993 Sydney Heritage Local Environmental Plan DATES OF HEARING: 02-04/05/2005 DATE OF JUDGMENT: 07/07/2005 APPLICANT Mr J Webster, SC with Ms H Irish, barrister Instructed by: Ms M Peatman, solicitor of Hunt & Hunt LEGAL REPRESENTATIVES: RESPONDENT Mr M Craig, QC, Instructed by: Ms P Whitford of Maddocks JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES Bly C Hoffman C 7 July 2005 10104 of 2005 Crone Nation Pty Ltd v Sydney City Council JUDGMENT 1 This appeal relates to development application No. D/04/00560 which is for the demolition of two integrated six-storey early 20th century commercial buildings ("the existing building") and the construction of a nine storey building with basement at 405 - 411 Sussex Street, Haymarket. The proposed building is to be used for commercial purposes including offices, shops and restaurants. The basement will provide carparking for 23 cars. 2 The irregular shaped site has an area of 1341 sq m. It has a frontage to Sussex Street (36 m), Little Hay Street (54 m) and Dixon Street (8 m). The two existing building is presently utilised for small retail, warehouse and office tenancies. They were originally used for the joint purposes of manufacturing and warehousing for the Anthony Hordens retail empire. 3 The locality in which the site is situated comprises a mixture of multi-storey buildings having heights up to eight storeys but mainly of three storeys. Like the existing building a number of these buildings have been variously converted from warehouses to retail and commercial tenancies. Statutory provisions 4 The site is situated in the City Centre Zone under the Central Sydney Local Environmental Plan 1996 ("the LEP") and in this zone the proposed building is permissible with development consent. Under cl 52 of the LEP demolition also requires consent. Other relevantly applicable planning instruments are: * Central Sydney Heritage Local Environmental Plan 2000 ("the heritage LEP") * Draft Central Sydney Local Environmental Plan 2002 ("the draft LEP") * City of Sydney Policy for the Management of Laneways in Central Sydney 1993 ("the laneways policy") Advertising and council's decision 5 The application was advertised and one submission was received raising objection in relation to likely impacts on an easement for light and air. This objection has now been withdrawn. 6 The application was refused by the council on 16 March 2005 for 9 reasons mainly involving: * The loss of a building of heritage significance and resultant adverse impacts on the special qualities and character of the Haymarket area, * The proposed building would have an excessive street wall height and would thus be inappropriate in the local context, * The proposed building has an excessive floor space ratio, * The proposal would result in the removal of an existing internal courtyard, * The proposal would be unsatisfactory in relation to wind standards; fire safety; and energy rating. The issues 7 A statement of issues identifying seven separate issues was initially provided but at the end of the hearing the council submitted that there were three main issues each of which indicated that the application should be refused. In essence these issues are: 1. Whether the existing building is capable of an economic adaptive reuse. 2. Whether the existing building should be demolished given its heritage significance and its contribution to the character of the Haymarket Special Area. 3. Whether the proposed new building would have an appropriate character in the context of the Haymarket Special Area. 8 Whilst we agree that the existing building does not warrant retention, for reasons relating to the failure of the proposed building to respond to the Haymarket Special Area we have decided that the development application should not be approved. The evidence 9 On behalf of the respondent council, expert evidence was given by: * Mr T Moore - town planner * Mr Anthony Smith - heritage architect * Mr P Bennett - valuer 10 On behalf of the applicant, expert evidence was given by: * Mr N Dickson - town planner and urban designer * Mr R Staas - heritage architect * Mr S Davies - heritage planner * Mr Andrew Smith - town planner * Mr R. Montague - valuer * Dr R Lamb - visual impact consultant * Mr N Sissons – architect. 11 The parties had agreed to Mr C Wall - building services engineer as a Court-appointed expert. Adaptive reuse 12 In considering adaptive reuse, in their joint report Mr Sissons and Mr Anthony Smith agreed that the existing buildings could be reused subject to the following qualifications: o Mr Smith believed there is a proven market for small cellular office spaces in Haymarket, rather than exclusively larger open plan space as in the proposal. Reuse of the buildings with its masonry walls suited cellular spaces. o Mr Sissons noted it was those masonry walls that limited the options for internal layout of refurbished or new leaseable space. He was not convinced a market existed for small floor spaces. 13 Mr Sissons and Mr Smith reached particular agreement in relation to the following: * Significant adaptive reuse would make it possible to provide smaller retail units that would activate Little Hay Street. In the proposal this area was allocated to a supermarket and carparking but the supermarket could not fit into the existing buildings and carparking may also be reduced from the proposal. * Subject to appropriate construction management, the existing retail units on Sussex Street could remain open during adaptive reuse works, whilst they could not remain during construction of the proposal. * Building A had narrow windows which did not provide sufficient natural light to the floor space inside the building. Buildings B and C, the old factory buildings had tall window proportions that provide good natural light. * the existing toilet facilities require rebuilding at least, if not, new toilets should be provided elsewhere within the buildings. * On-site loading and unloading is possible using the existing service courtyard. * Providing pedestrian and goods access from the street and from the courtyard needs attention. * Buildings A, B and C have different floor levels replacing the existing lifts and lift motors is a necessary, but he other buildings B and C. * Alternatively a new lift core could be provided in the courtyard space with footbridge connections to the Commercial and retail uses are appropriate for any reuse. But residential, hotel or serviced apartment uses would not be appropriate in the existing buildings. 14 Mr Andrew Smith concluded that adaptive reuse had not been fully explored. Mr Sissons said that the extent of works necessary made it impractical and that the ecologically sustainable development ("ESD") compliance matters would probably support this conclusion; however they agreed that financial viability should be dealt with by Mr Bennett and Mr Montague and ESD by Mr Wall. 15 In their joint report, Mr Montague and Mr Bennett explored the financial viability of the project as a refurbishment instead of demolition and rebuilding. They agreed the way to estimate viability is to take the market value after refurbishment minus the cost of the improvements and compare this to the known market value before refurbishment. 16 The various monetary calculations in the witnesses' evidence is quite complex. A summary is that once the calculation is done if the residue of the subtraction is less than the market value before refurbishment then it is not viable. If the residue is equal to or a little above the market value before refurbishment it is marginal viability. And, if the residue is well above the current market value then refurbishment is financially viable. 17 Mr Montague calculated that refurbishment is not viable/marginal. Mr Bennett calculated that it is marginal/viable. The disagreement as to the viability resulted from differences in what the market value of the property might be after refurbishment and disagreement on estimated achievable rents and other matters. For example Mr Montague deducted all revenue during construction and renovation, but they had agreed if the ground floor retail on Sussex Street could continue during refurbishment there was $1m income additional. 18 However, they both agreed, despite the variation in their calculations, that in terms of financial viability the refurbishment of the buildings was marginal. 19 They agreed monetary estimates in the viability assessment of either the refurbishment or the demolition and rebuild options could only be accurate to within $2 million on this site due to: uncertain rental market fluctuations, changing construction costs, changing holding costs if interest rates go up, without detailed drawings of a refurbishment option the leaseable floor space and thus rental income varies, without drawings the cost of the refurbishment can only be a rough estimate, small cellular offices attract different rental income to large floor areas, etc. 20 Mr Bennett said one of the flaws in Mr Montague's argument to prove there should be demolition and a new building, involved the use of rental figures for 12 months previous when the market was more buoyant. Now that the market had slowed down the only choice for viability was refurbishment. 21 Mr Montague responded to this by saying that traditionally in Haymarket, properties were not sold and ownership was retained over long periods. Therefore during a period of low economic return or low rental market it was appropriate to redevelop so that when the economy rose again the development could benefit from the higher rentals achievable. On that scenario he believed the property should be redeveloped with a new building now. 22 In regard to the ESD of the proposal as against the retention of the existing building, Mr Wall analysed the ESD issues in regard to the embodied energy ("EE") of the existing and new buildings. He said it was not referred to in cl 12(j) of the LEP and was only a small part of the ESD analysis that also includes energy efficiency, water conservation, healthy buildings and waste control and disposal. 23 The concept of EE involves a consideration of the energy embodied in the demolition of the existing building, and creation and transport of the materials and construction of the new building. If there is no real need for demolition and rebuilding there will be a resultant saving by keeping the existing buildings. EE can be used to calculate how long it takes to achieve a net benefit in energy consumption as a result of building replacement. The shorter the time for a new more efficient building to overtake the energy saving by comparison with keeping an old building, the more desirable is a new building. This is because after the "break even" date, the new building consumes less energy and resources than the old one, with the consequential benefits of less greenhouse emissions etc. 24 Clause 13(a) of the LEP refers to intergenerational responsibility to maintain/improve environmental quality and minimise resource usage. Mr Wall observed once again that embodied energy is only one of a number of factors involved. Two of the recognised manuals on energy efficiency of buildings, The Building Energy-Manual NSW Public Works 1993 and Environment Design Guide RAIA also do not deal with embodied energy. Instead they deal with energy efficiency, particularly the consideration of operational energy required to run a building after construction. Mr Wall was of the opinion that EE alone should not have a determinative role. His calculations showed that the time for the new building to amortise the energy needed to construct it versus keeping the existing building would be about 15 years. After that time the proposed new building would be much more efficient than the existing refurbished building. 25 The alternative of demolishing the existing building and keeping the facades and erecting a new structure behind them would reduce time to the "break even" period but this would only be of limited benefit. Also the existing masonry facades would not be as thermally efficient as the proposed new exterior. This alternative would consume more energy than the proposal. 26 Despite this, the respondent suggested that the technique known, as "night time purging" would make the existing buildings or the alternative of keeping the existing masonry facades superior to the proposal. Night purging is a summer process involving the shutting down air-conditioners and heat generating lights when buildings are unused and blowing cool night air through the structure to cool it. On the following day, the cooler structure assists the air conditioners thereby reducing the consumption of electricity. 27 Mr Wall explained that night purging was heavily dependent on floor structures being cooled by night air, because they had the greatest surface area, whereas walls, windows and roof typically represent about 20% of thermal load. However, in a new or a refurbished office building the necessary carpeted floors and suspended ceilings insulate the structure from the cooling air. Buildings have to be specially designed to benefit from night purging by utilizing natural air movement otherwise the necessary fans can use more energy than would be saved. 28 More generally he explained that night purging works best in colder climates. His research revealed in Melbourne a properly designed building could reduce air-conditioning energy consumption by 20%; in Sydney because of the milder nights it was about 10% saving. 29 Mr Wall said the existing buildings would be much more difficult for adapt to night purging than a new building. He estimated that the new building would reduce energy consumption by comparison with the existing building by about 38%. After the initial 15 years of the new buildings likely 50 year life expectancy, the proposal would in terms of ESD, be superior to the existing building. 30 Overall we have concluded that adaptive reuse of the existing buildings would be of marginal benefit and prospective energy savings short lived. The financial viability of adaptive reuse was shown to have no advantage over a new building. These issues could not be determinative. Heritage significance and character 31 It is plain that at least for architectural and historical reasons the existing building demonstrates some degree of heritage significance, being the amalgamation of several late Victorian structures. The council has decided that it should be listed as a heritage item under the Heritage LEP and sought an Interim Heritage Order from the NSW Heritage Office. The Heritage office has declined to make such an order but agreed that the building is likely to be of at least local heritage significance for its historical associations with the former Anthony Hordern & Sons retail and commercial empire ("the Hordern's enterprise"). On this basis it was recommended that the conservation and feasibility of retaining the building and adaptively reusing it should be fully explored. There was no suggestion that a draft LEP to list the building was either certain or imminent. 32 According to Mr Anthony Smith the building is the most intact surviving building within central Sydney directly related to the operations of the Hordern's enterprise. Its external elevations have good scale and proportion and retain much of their original timber joinery. Interiors retain much of their original fabric and the timber roof trusses and much of the original structure remains intact. Messrs D T Morrow and Albert Bond, prominent architects of the time were variously involved in the design of the building. There is no suggestion that the building is structurally unsound. 33 In these circumstances Mr Anthony Smith concluded that the building is worthy of heritage listing for essentially the following reasons: * Historic: it is the best surviving building of Anthony Hordern & Sons. * Special associations: it is associated with two prominent architects. * Aesthetic/technical: a precursor to the development of Modernist Architecture in Australia. * Rarity: distinctively minimal decoration and one of few remnants of the Hordern enterprise in Central Sydney * Representative: demonstrates typical features of a Federation warehouse 34 Mr Anthony Smith also refers to the existing courtyard behind the building, which has access off little Hay Street as a significant element, enabling access for better appreciation of the rear of the building itself as well as how the building was accessed for goods handling. 35 Mr Moore acknowledged that the courtyard is not listed in the inventory to the laneways policy but pointed to the requirement in the policy that where a proposed development affects a lane not included in the inventory it should be evaluated in the same manner as if it were included. The policy requires that development adjacent to laneways should reinforce the role of the lane as public open space by maintaining and enhancing public access and maintaining an appropriate scale of development. He argues that the courtyard retains characteristic features such as vehicular connection to a street, commercial loading space and being open to the sky. 36 Mr Davies disagreed, being of the opinion that, having carried out an earlier formal heritage assessment of the building, it does not satisfy the criteria for listing as a heritage item. It is not aesthetically, historically, socially or technically significant for its time, other than being a poorly resolved and functional makeover of an earlier building and a simple rendered extension. More particularly he argued: * Historic: retention of the building is not necessary to maintain the now well documented history of the Special associations: any association with the Hordern enterprise is not represented in the building today. * Aesthetic/technical: the building is not a precursor to modernism. The regularity of the fenestration is typical of late 19th and early 20th century buildings. This is a simple rendered and undecorated building and should not be described as being restrained or of fine proportion, such proportions being simply due to the height to width ratio of glazing patterns common to the majority of warehouse buildings of the period. It lacks aesthetic significance. There are better examples of the work of Morrow and De Putron for the Hordern enterprise elsewhere, which have been listed. The building displays no technical significance for its time. The physical internal relationship between the two buildings is awkward and a poor design resolution. * Rarity: rare does not mean a building should be conserved. The minimal decoration of the building for the period of construction appears more related to cost saving rather than a new aesthetic of the 1900's. * Representative: there are better extant Representative examples of warehouse buildings that are currently protected. It is not necessary to conserve all examples of warehouses of this type. 37 Mr Staas essentially agreed with the conclusions reached in Mr Davies' earlier heritage assessment. Taking into account the number of earlier surveys including those for the preparation of current heritage schedules and the 1997 warehouse and wool stores survey there is no reason why this building should suddenly become prominent and significant. It cannot be suggested that the building has been overlooked. He also agreed with Mr Davies' assessment criteria for the listing of the building. More particularly he said that the building is plain and economical rather than deliberately modern in its expression. It is certainly not rare. He also concluded that because there were no remaining easements or rights of carriageway through the courtyard to access other buildings and it is not a public laneway it cannot be considered to be a laneway under the laneways policy. 38 All things considered we have been persuaded by the carefully reasoned assessment of significance which was carried out by Mr Davies in accordance with the NSW Heritage Manual guidelines concluding that the building does not warrant protection. We particularly accept the evidence that: * There exist better examples of buildings associated with the Hordern's enterprise and the work of its architects. * Whilst it has a dominant character in this location it is nevertheless a traditional conservative building. * The building does not demonstrate the use of new materials or new building techniques. * There have been extensive changes to the original building. The integration of the two original buildings has been poorly executed. 39 Despite the fact that early undecorated buildings such as this have a degree of rarity, the existence of the service courtyard, the architects involved and its relationship with the Hordern's enterprise we agree that the building may be demolished. Appropriate character 40 Under the LEP the site is included in the Haymarket Special Area. Whilst the impact of the proposed new building on the character of the Haymarket area was not clearly identified as an issue in the statement of issues, it has nevertheless been raised and dealt with in the reports and in the oral evidence of the experts. 41 The character statement for Haymarket in the draft LEP is: The number of remaining warehouses and service laneways in Haymarket is, along with the name of the area itself, evidence of its historic role as markets and its proximity to port of Darling Harbour. The area offers evidence of its development following the establishment of Central Station in 1906 and the subsequent decline and resurgence of the area since the markets moved from the city centre. Despite these changes, the area retains a "market" atmosphere, characterised by a diversity of uses, vibrant street life and a diverse social and ethnic mix. As an area somewhat removed from the city centre, it retains fine-grained subdivision patterns, narrow frontages, informal public spaces and generally low building heights. The consistent low street wall and the absence of the tower form, creates a pleasant microclimate at street level, which is well sunlit and protected from winds. 42 One of the objectives of the LEP in cl 12 is to protect the special areas of central Sydney. The characteristics of special areas include: * A character unmatched elsewhere in Central Sydney * A highly distinctive element in the public domain * A focus of public life with high cultural significance * A widely acknowledged public identity. 43 The general objectives of the special area controls are: (a) To protect special areas from development incompatible with the particular character and significance of each special area, and (b) To reinforce the specific attributes and qualities of the built form of the special areas. 44 Being included in the Haymarket Special Area the relevant particular objectives are: (i) To conserve and reinforce the heritage significance of this special area, (ii) To recognise the unique character, uses and scale of the Haymarket locality, (iii) To maintain a high level of daylight access to the street by restricting building height and building bulk, (iv) To retain and enhance the urban character and scale of a market locality by requiring new buildings to be built to that street alignment, to have street frontage heights consistent with the prevailing form of heritage buildings in the special area and to have building setbacks above those street frontage heights. 45 The general and particular objectives are to be reinforced by the exhibited draft LEP. 46 According to Mr Moore warehouse/market/commercial buildings in the locality traditionally have vertical proportions and are defined by windows punctuating strong masonry facades. The parapets of such buildings typically form a dominant line against the sky. Unlike the proposal the existing building is consistent with this character. 47 The proposed building's facades predominantly utilise full height and width of glazing within a concrete frame. There are no defined window bays and the ratio of solid to voids is very low. The top of the building is weakened by the use of small setbacks resulting in the top edge being recessive rather than dominant. 48 Mr Moore further criticises the proposed building because it rises above the height of surrounding contributory buildings when it should be stepping down with the topography. He argued that the design is a commercial office type of building rather than a contemporary expression of a warehouse/market typology. Also the choice of materials and finishes does not draw on the established warehouse/market building character of the area. 49 According to Dr Lamb, as a result of the age, style and construction methods of the early building stock, there tends to be a higher proportion of wall to window in the characteristic load bearing masonry than in later buildings which depend more on frame structures with infill or glazed curtain walls. Some floor retail levels have typically been reworked many times over and now have extensive glass shopfronts and wide openings. 50 Following a lengthy analysis Dr Lamb concludes that the proposed building would have no unacceptable visual impacts. Recognising that the existing building will be replaced with a contemporary building its visual presence will be essentially the same, as far as elements of scale and relationship to the street are concerned. The modulation of the building recalls the strict vertical order of the existing building to an extent and the horizontal element breaks-up the surfaces of the building into a series of glazed openings producing an abstract relationship to the former building. 51 Mr Dickson emphasised the character of the Haymarket Special Area especially its history as a warehouse centre with strong connections to the Chinese community. He noted the urban design character of the area that has been influenced by the predominance of highly articulated masonry facades and punched window forms together with active public spaces with ground level retail and shopfronts. He acknowledged that these historical urban characteristics have changed in recent years with the area becoming increasingly gentrified. This change has been marked by the introduction of a number of modern commercial buildings with streetscape facades dominated by glass, for example the Sussex Centre to the north of the site. These newer buildings have contributed to the present diversity and vibrancy of the area. 52 Mr Dickson was of the opinion that the proposal would reinforce the heritage significance of the area by providing a new building that is complimentary to the existing and surrounding buildings. It would meet the objectives of the draft LEP, which focuses on market rather than warehouse character. 53 Mr Andrew Smith was of the opinion that the proposed development would enhance the desired future character of the special area by recognising and reinforcing its heritage significance. It would do this by providing a new building that is similar in terms of street frontage heights and facade treatment. 54 Recognising that the proposed building has approximately the same bulk as the existing building and accepting that what is proposed is otherwise a quality building we agree that it nevertheless fails to be responsive to the special qualities of the Haymarket area. Whilst the provision of an open style facade associated with retailing and restaurant use at ground level is appropriate the proposed building fails to respond to the character of the area that exhibits a strong sense of articulated masonry facades with punched window forms. Whilst there have been a number of more modern buildings constructed nearby with facades that are dominated by glass, we see these as being largely inappropriate for the Haymarket Special Area and therefore, should not be used to support the proposal. 55 The experts have agreed that the street wall height of the proposed building exceeds the relevant standards. Mr Moore accepted that the non-compliances might be justified although he continued to express concern about the appearance of the top of the building when viewed from nearby streets. We are inclined to agree with him and accept that the height of the building is not problematical. Whilst we recognise his concerns about the design of the top of the building and accept that improvements could be made we nevertheless recognise the manner in which the parapet design responds to the height of the adjoining Sussex Centre building. 56 We accept Mr Dickson's comment that the draft LEP refers to a market locality rather than a warehouse locality and there can be little doubt that in the Haymarket, markets comprise a significant land use that in turn contributes to its character. However in terms of built form it is clear from the evidence of all of the experts that warehouse style buildings make an important contribution. The objectives of the LEP need to be interpreted with this in mind. We have thus decided that the proposed building would be incompatible with the particular character of the Haymarket because it fails to reinforce the area's particular qualities, especially the strong masonry facades as exemplified by the existing building. Such facades are of importance to the unique character and heritage significance of the Haymarket and any replacement building for this conspicuous site must be especially responsive to this. Conclusions 57 Whilst we otherwise find no fundamental flaws with the proposed building, it is on the basis of its failure to respond to the particular requirements of the Haymarket Special Area that the application should be refused. 58 Because the adaptive reuse of the building would be of marginal benefit and prospective energy savings relatively short lived, these matters also do not support the retention of the building. 59 Whilst the existing building makes a contribution to the architectural character and streetscape of the Haymarket Special Area, this is not a sufficient reason to deny its demolition. This is because we accept that a new building would be capable of being designed to make an equivalent contribution. However, the now proposed building does not meet this test and until such a building has been designed we do not agree to the demolition as sought. The appeal is thus dismissed. Orders 60 It is therefore the decision of the Court that: 1. The appeal is dismissed. 2. Development application No. D/04/00560 for the demolition of two commercial buildings and the construction of a nine-storey commercial building with basement at 405 - 411 Sussex Street, Haymarket, is determined by the refusal of development consent. 3. Exhibit D is retained. 4. There is no order as to costs. __________________ T A Bly Commissioner of the Court rjs _____________ K G Hoffman Commissioner of the Court DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.