Reported Decision : 105 LGERA 370 New South Wales Court of Appeal CITATION : CODLEA PTY LTD v BYRON SHIRE COUNCIL [1999] NSWCA 399 FILE NUMBER(S) : CA 40005/99 HEARING DATE(S) : 30 September 1999 JUDGMENT DATE : 28 October 1999 PARTIES : Codlea Pty Ltd v Byron Shire Council JUDGMENT OF : Handley JA at 1; Sheller JA at 2; Stein JA at 3 LOWER COURT JURISDICTION : Land & Environment Court LOWER COURT FILE NUMBER(S) : LEC 10021/98 LOWER COURT JUDICIAL OFFICER : Talbot J COUNSEL : P Graham QC/D P Wilson (Appellant) G K Downes QC/P C Tomasetti (Respondent) SOLICITORS : Bolster & Co (Appellant) Wilshire Webb (Respondent) CATCHWORDS : LAND AND ENVIRONMENT COURT - appeal to judge from commissioner (refusing development consent for subdivision of land) - application for leave to appeal and appeal heard concurrently, construction of clause contained in Local Environmental Plan, power of Land and Environment Court to utilise s 39(2) of the Land and Environment Court Act 1979 to give Council's agreement under the Local Environmental Plan Environmental Planning and Assessment Act 1979 ss 90(1)(a),79C(1)(a) Land and Environment Court Act 1979, ss 39(2),36(5),56A,57(3)(b) ACTS CITED : Land and Environment Court Rules, Pt 13 rr 14, 16 Local Government Act 1993, s 64 Water Supply Authorities Act 1987, Div 2 Pt 3, ss 25, 26, 27 Federal Commissioner of Taxation v Newton (1957) 96 CLR 577 Newton v Federal Commissioner of Taxation (1958) 98 CLR 1 Kogarah Municipal Council v Kent (1981) 46 LGRA 334 CASES CITED: McDougal v Warringah Shire Council (1993) 30 NSWLR 258 North Sydney Municipal Council v P D Mayoh Pty Ltd (1998) 14 NSWLR 746 Strathfield Municipal Council v Drew (1985) 1 NSWLR 338 Sydney City Council v Claude Neon Ltd (1989) 15 NSWLR 724 DECISION : Leave to appeal granted on the undertaking of the appellant to pay the filing fee; Appeal dismissed with costs IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40005/99 LEC 10021/98 HANDLEY JA SHELLER JA STEIN JA Thursday, 28 October 1999 CODLEA PTY LIMITED v BYRON SHIRE COUNCIL The appellant lodged a development application with the respondent Council for the subdivision of land at Brunswick Heads, New South Wales, proposing that part of the sewerage generated by the Brunswick Head township be redirected from the Brunswick Head treatment plant to another plant across the Brunswick River by way of a rising main constructed at its expense. The application was refused by the respondent. It was not satisfied that prior adequate arrangements had been made for the provision of sewerage services to the proposed development in accordance with Clause 45 of the Byron Local Environmental Plan 1988 (LEP) and s 90(1)(l) of the Environmental Planning and Assessment Act 1979. Clause 45 provides: That Council shall not consent to the carrying out of development on any land to which this plan provides unless it is satisfied that prior adequate arrangements have been made for the provision of sewerage, drainage and water services to the land. The appellant appealed to a Commissioner of the Land and Environment Court. The matter was heard as a merits appeal and the Commissioner found for the appellant on the merits issue. With respect to cl 45, the Commissioner was of the opinion that prior arrangements for sewerage had been adequate and the intent of the clause had been met. An adequate arrangement did not mean a sealed and signed agreement. However, such a finding did not compel the Council to enter into an agreement with the appellant. Conditional consent was granted to the appellant. On appeal before Talbot J, his Honour noted that cl 45 required, at least, a willingness to co-operate in a consensual way to bring the scheme to fulfilment. 'Arrangements' referred to preparatory measures and could be less than an agreement. It was held that the Commissioner had no power under s 39(2) of the Land and Environment Court Act 1979 ( LEC Act ) to make arrangements on behalf of the Council. The power to reach an agreement or issue a certificate of compliance under the Water Supply Authorities Act 1987 was a separate matter which arose subsequent to the granting of consent. Accordingly, the decision of the Commissioner was reversed and the development application was refused. In the Court of Appeal, the appellant argued that: 1. Leave to appeal should be granted; 2. There was no question of law arising from the decision of the Commissioner capable of being addressed by Talbot J; 3. Alternatively, it was open to the Commissioner, exercising the powers contained in s 39 of the LEC Act , to adjudge the sewerage arrangement proposed by the appellant to be adequate within the meaning of cl 45 of the LEP. Held (Stein JA, Handley and Sheller JJA agreeing): 1. A question of law arose in the decision of the Commissioner, with respect to the construction of cl 45 and the power of the Court under s 39(2) to exercise a function of the Council under that clause; 2. Clause 45 is in the nature of a condition precedent to the granting of consent. Section 39(2) directs attention to the subject matter of the appeal. The subject of the appeal before the LEC was the respondent's refusal of the appellant's development application. The issue of the respondent's 'satisfaction' is a function within s 39(2). However, the making of 'prior adequate arrangements' by the Council is not a function which the Court acquires under s 39(2). The making of arrangements is exclusively the province of the Council. ORDERS 1. Leave to appeal granted on the undertaking of the appellant to pay the filing fee. 2. Appeal dismissed with costs. OoO IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40005/99 LEC 10021/98 HANDLEY JA SHELLER JA STEIN JA Thursday, 28 October 1999 CODLEA PTY LIMITED v BYRON SHIRE COUNCIL JUDGMENT 1 HANDLEY JA: I agree with Stein JA. 2 SHELLER JA: I agree with Stein JA. 3 STEIN JA: Introduction: 4 This is an application for leave to appeal from a decision of Talbot J given in the Land and Environment Court (the L and E Court) on 4 December 1998. It requires leave pursuant to s 57(3)(b) of the Land and Environment Court Act 1979 (the LEC Act) since his Honour was hearing an appeal from a decision of a Commissioner under s 56A of that Act. The appeal to the Court of Appeal is confined to a question of law as was the appeal before Talbot J. 5 Commissioner Dr Roseth heard a merits appeal (in class 1 of the L and E Court's jurisdiction) against the refusal of the Byron Shire Council to grant development consent to the subdivision of land at Brunswick Heads into 226 residential lots. The Commissioner upheld the developer's appeal and granted conditional consent. Talbot J reversed this decision and refused consent. 6 During argument before the Court of Appeal on 30 September 1999, we indicated a tentative view that leave to appeal should be granted. To my mind nothing has occurred to change this opinion. Accordingly, leave to appeal should be granted. The development application and its refusal 7 To understand the issue involved in the appeal it is necessary to say a little about the development application. Brunswick Heads is divided by the Brunswick River. Ocean Shores is to the north and Brunswick Heads township is to the south of the river. The proposed subdivision lies to the south of the river. Ocean Shores is serviced by a sewerage treatment plant located on the northern shore of the river. Brunswick Heads has a separate treatment works which is located on a tributary on the southern side of the river. This plant is presently operating to the maximum of its capacity, whereas the Ocean Shores plant is under-utilised. 8 The appellant's development application proposed that some of the sewerage generated by the township of Brunswick Heads be re-directed to the Ocean Shores plant by a rising main constructed across the river at its expense. This would have the effect of reducing the load on the Brunswick Head plant and thus facilitate its use to service the proposed subdivision. 9 The development application was refused by the Council on 14 October 1997 for two reasons. Only the first is now relevant. It is as follows: That Council is not satisfied at this time that prior adequate arrangements have been made for the provision of sewerage services to the proposed development in accordance with Clause 45 of Byron Local Environmental Plan 1988 and the Environmental Planning & Assessment Act Section 90. The appeal to the Commissioner 10 The developer appealed from the Council's refusal of its development application and the matter was assigned to Commissioner Roseth to hear. It is plain from his judgment of 24 June 1998 that the Council's only objection to the proposal was the arrangement proposed for sewerage. 11 The Commissioner treated this as a merit issue since the parties adduced evidence and took opposing stances on the appellant's proposal to divert sewerage from one treatment works to another. Dr Roseth found for the developer on the merits issue. However, as the Commissioner made plain, the issue was relevant to a clause in the Byron Local Environmental Plan 1988 (the LEP) which controlled development in the council area. Clause 45 provides: The Council shall not consent to the carrying out of development on any land to which this plan applies unless it is satisfied that prior adequate arrangements have been made for the provision of sewerage, drainage and water services to the land. 12 Having addressed the merit issues of the proposal the Commissioner turned his attention to cl 45. He said that it was his opinion that the prior arrangements for sewerage were adequate and the intent of the clause had been met. An adequate arrangement did not mean a sealed and signed agreement. The agreement proposed by the appellant was adequate and met the needs of cl 45. This did not mean that the finding of the Court compelled the Council to enter into an agreement with the appellant. Conditional consent was granted, the conditions making extensive provision to accommodate the appellant's proposal regarding the provision of sewerage services, eg. conditions B1, B4, C18, C33 and C34. The appeal to Talbot J 13 On appeal Talbot J noted that there were really two issues before the Commissioner. The merits issue and the satisfaction of cl 45. In the latter respect, the Council was contending that the clause could not be satisfied without an agreement with the Council and that the Court did not have jurisdiction to enter into that agreement on behalf of the Council. 14 Concerning cl 45, Talbot J said that what must be shown was, at least, a willingness to co-operate in a consensual way to bring the scheme to fulfilment. 'Arrangements' was a reference to preparatory measures or plans to carry the provision of sewerage into effect. It could be something less than an agreement. Even a firm undertaking or an acceptance in principle might suffice. His Honour said that the power to reach an agreement or issue a certificate of compliance under the Water Supply Authorities Act, 1987 was a separate and distinct matter and generally arose subsequent to the granting of consent. His Honour said that what was involved in the case before the Commissioner was the satisfaction of cl 45. It was obvious that the Council itself was not satisfied. It had refused consent and contested the appeal on that basis. 15 The question which therefore arose was whether the L and E Court could utilise s 39(2) of the LEC Act to give the Council's agreement under cl 45 of the LEP. 16 His Honour said that, for the reasons given by the Court of Appeal in Strathfield Municipal Council v Drew (1985) 1 NSWLR 338, the making of a decision with respect to a matter of general policy or a planning issue pursuant to a distinct statutory regime, such as the Water Supply Authorities Act, was not within s 39(2). Accordingly, the Commissioner had no power under that section to make the arrangements under cl 45 on behalf of the Council. Issues on appeal 17 The appellant's argument on appeal is twofold. First, it is submitted that there was no question of law (under s 56A of the LEC Act) arising from the decision of the Commissioner capable of being addressed by his Honour. Alternatively, it is submitted that it was open to the Commissioner, exercising the powers contained in s 39 of the LEC Act, to adjudge the arrangement proposed for the provision of sewerage services to the subject land to be adequate within the meaning in cl 45 of the LEP. 18 It is convenient to set forth s 39(2) of the LEC Act: In addition to any other functions and discretions that the Court has apart from this subsection, the Court shall, for the purposes of hearing and disposing of an appeal, have all the functions and discretions which the person or body whose decision is the subject of the appeal had in respect of the matter the subject of the appeal. Was there a question of law? 19 The appellant relies on the way in which the issues were specified before the Commissioner. A note of the issue specified at a conference prior to the hearing was as follows: In circumstances where there is adequate capacity in Ocean Shores sewage treatment plant to take effluent generated by the development whether as a matter of fact the development should be permitted to reticulate sewage to that plant. 20 On behalf of the appellant, Mr Graham QC relies upon this notation as indicating that an issue of fact only was before the Commissioner. This was determined by the Commissioner and, accordingly, no question of law could arise under s 56A of the LEC Act. Mr Graham points to the L and E Court Rules (Part 13 Rules 14, 16) which seek to confine issues to those raised at call-over and to similarly limit questions of law except by leave of the Court. 21 As Talbot J remarked, the Council's case before Dr Roseth really had two aspects. The first was a true issue of fact regarding the developer's proposal to divert effluent from the Brunswick Heads plant to Ocean Shores. This issue was determined by the Commissioner favourably to the appellant. But there was a second issue which was fairly and squarely raised before the Court, as acknowledged by the Commissioner in his judgment. That was whether or not cl 45 of the LEP had been satisfied. This, of course, raised the question of the jurisdiction of the Court under s 39(2) of the LEC Act. 22 Notwithstanding the inelegant and probably inappropriate note of the issues to be determined, the question of satisfaction with cl 45 was plainly before the Commissioner, see pp 12 - 13 of his judgment. What is also clear is that the Commissioner could not have concluded that the arrangements proposed by the developer under cl 45 were adequate unless he purported to exercise the Council's functions pursuant to s 39(2) of the LEC Act. 23 It is unfortunate that the issues were so badly drafted because they may have had the capacity to mislead the Commissioner. It also deprived him of the opportunity to refer a question of law to a judge under s 36(5) of the LEC Act. 24 Notwithstanding the submission of Mr Graham, it is apparent that a question of law did arise in the decision of the Commissioner. That is one of construction of cl 45 of the LEP and the power of the Court under s 39(2) of the LEC to exercise a function of the Council under cl 45. Clause 45 of the LEP and the applicability of s 39(2) 25 The applicability of s 39(2) of the LEC Act has on occasions proved a difficult issue for the L and E Court and the Court of Appeal as shown by the series of decisions since Kogarah Municipal Council v Kent (1981) 46 LGRA 334. Cripps JA helpfully traced the cases in detail in McDougal v Warringah Shire Council (1993) 30 NSWLR 258 at 271 - 277. In McDougal Kirby P drew attention to the tension between the broad approach to s 39(2) adopted in Kent and the narrower approach of the Court in Drew. The President noted that leave had never been given to re-argue Kent. 26 To determine whether the Court can exercise the Council's function under cl 45 of the LEP, it is necessary to carefully evaluate what function, power or duty the Council is exercising under the clause. This involves closely examining the clause itself. 27 Clause 45, which we were informed has been contained in the LEP since it was made in 1988, mandates that the Council must not grant development consent unless it is satisfied that prior adequate arrangements have been made for the provision of sewerage services to the land. [emphasis added] It is in the nature of condition precedent to the granting of consent. It speaks in the past tense: 'prior adequate arrangements have been made'. 28 Section 39(2) directs attention to the matter the subject of the appeal. Here the matter the subject of the appeal is the Council's refusal of the development application. The first question, therefore, is whether the Council's function of 'satisfaction' that prior adequate arrangements have been made for the provision of sewerage services to the land is a function in respect of the matter the subject of the development application. In my opinion, the issue of the Council's 'satisfaction' under cl 45 can be seen as a function basic to its function to grant development approval (Kirby P in McDougal at 265 and Hope JA in Sydney City Council v Claude Neon Ltd (1989) 15 NSWLR 724 at 732) or as a function sufficiently analogous to the function to be performed regarding the development application so that it is in respect of the subject matter of the appeal (Mahoney JA in McDougal at 272). Again, the function of 'satisfaction' may be said to be 'at the heart of' the matter the subject of the appeal, North Sydney Municipal Council v P D Mayoh Pty Ltd (1988) 14 NSWLR 740 at 746 or 'essential for' the decision on the development application. 29 However, my conclusion that the issue of 'satisfaction' is a function within s 39(2) does not dispose of the question of whether the making of the prior adequate arrangements by the Council is a function which the Court acquires under s 39(2). This may be a very different question to that of the 'satisfaction' with the prior arrangements. 30 Section 64 of the Local Government Act 1993 states that Division 2 of Part 3 of the Water Supply Authorities Act 1987 (the WSA Act) applies to a Council exercising functions under that Act. The Council becomes an 'Authority' under that Act. The Part provides for a scheme whereby water, sewerage and drainage works required for the development of land can be provided without cost to a Council. A developer is required to obtain a certificate of compliance from the Council (ss 26 and 27) before a plan of subdivision can be registered. In deciding whether to grant the certificate, a Council can require the developer to contribute to the value of existing works which benefit the land or can require the developer to pay for the whole or part of the cost of constructing works. The legislation has since been amended but applied at the time relevant to the hearing in the Land and Environment Court. 31 At the hearing before Commissioner Roseth the Council was required, by the L and E Court Rules, to provide a draft of any conditions it would seek to be imposed if the Court was minded to grant consent. It did this and consent was granted in accordance with the Council's draft conditions. Condition C33 requires that a certificate of compliance under s 27 of the WSA Act is to be lodged prior to release of the Linen Plan and that the certificate will be issued on payment of the contribution for water and sewer specified in the notes to the conditions. Condition C34 refers to the contributions. The contributions cover levies under the WSA Act and the Environmental Planning and Assessment Act 1979 (the EPA Act). The levies under the former Act total $1,253,925. 32 Part 3 of Division 2 of the WSA Act contains a number of difficulties of drafting. For example, s 25 empowers a Council to enter into an agreement with the owner of any land providing for the construction of works. The agreement may provide for the payment to the Council by the owner of the whole of the cost of construction works referred to in the agreement or such part of the cost which the Council sees as reasonable. The works constructed are to be the property of the Council. The provision applies to the owner of land as distinct from the developer of land, which is defined as a person to whom an approval, to which the Division applies, has been received under the Local Government Act or development consent under Part 4 of the EPA Act. Unless the developer is also the owner, it appears that s 25 of the Act has no application. A certificate of compliance issued under s 27 of the Act can however require a developer to pay to the Council the cost of construction of works or to enter into an additional works agreement providing for the construction of such works as may be specified. What is also clear from the WSA Act is that an agreement, whether under s 25 or s 27 may follow, indeed is likely to follow, upon the granting of development consent rather than precede it. 33 This situation, and the content of the provisions of the WSA Act, appears to suggest that the function being exercised under cl 45 of the LEP is not strictly a function under the WSA Act. It is more likely to be a function under planning or local government legislation, or of council planning its programmes as a sewerage authority. In one sense, however, the clause may be seen as bringing forward consideration of some of the issues which arise under the WSA Act. 34 The LEP was made by the Minister under Part 3 of the EPA Act at the behest of the Council. The provisions of the LEP (including cl 45) are a mandatory consideration for the Council when considering any development application, see s 90(1)(a) of the EPA Act [now s 79C(1)(a)]. Clause 45 mandates refusal of consent by the Council unless it is satisfied that prior adequate arrangements have been made for the provision of sewerage services to the land. The Council was never satisfied that prior adequate arrangements had been made. This is because no prior adequate arrangements were made by it with the developer. Only if the L and E Court could substitute, not only its satisfaction, but also the 'making' of adequate arrangements, could it grant approval. Therefore, both the 'satisfaction' and the making of the arrangements had to be justified under s 39(2) of the LEC Act. 35 The question remains whether the function of making the prior adequate arrangements referred to in cl 45 is sufficiently analogous to the function to be performed in relation to the development application to warrant the conclusion that the function is one which is in respect of the subject matter of the appeal? Or is that function basic to the function of granting development approval? Putting it another way, is the function of making the prior adequate arrangements at the heart of the matter the subject of the appeal? 36 In my opinion, the nature of the clause as a condition precedent to the granting of consent and its emphasis on 'prior' arrangements having 'been made' are persuasive of the function not being one picked up by s 39(2). While cl 45 is tautological because it refers both to the Council being 'satisfied' and 'prior adequate arrangements' nonetheless, it is clear that the requisite satisfaction by Council can be determined at any time prior to the grant of consent. Notwithstanding, the stress placed in cl 45 on arrangements already having been made with the Council emphasises an exercise of a function and power being a condition precedent to approval. 37 Clause 45 has a second limb. Sub-clause (2) provides: For the purposes of this clause, satisfactory arrangements for water services includes the making of satisfactory arrangements with Rous County Council and the council for the augmentation and reticulation of water services to that land. 38 This sub-clause relates only to water services so is not relevant to sewerage services to the land. It is submitted by Mr Downes QC, on behalf of the Council, that this clause assists its case because the 'satisfactory arrangements' includes the making of satisfactory arrangements with the Rous County Council. The Court, under s 39(2), could not acquire the function of the Rous County Council to make such arrangements. Sub-clause (1) of cl 45 only speaks of prior adequate arrangements having been made. It is silent as between whom. By implication the arrangements here would have to be between the owner or developer of the land and the Council, as the consent authority under the EPA Act, and also an 'Authority' under the WSA Act. However, it is possible that a third party could be involved. This would militate against s 39(2) applying to the function. 39 The 'arrangements' referred to in cl 45 are arrangements in the sense explained in Federal Commissioner of Taxation v Newton (1957) 96 CLR 577, in particular Williams J at 630 - 631 and Newton v Federal Commissioner of Taxation (1958) 98 CLR 1 at 7 wherein the Privy Council said: Their Lordships are of opinion that the word "arrangement" is apt to describe something less than a binding contract or agreement, something in the nature of an understanding between two or more persons a plan arranged between them which may not be enforceable at law. 40 The parties seem agreed, and I think that it is the case, that the 'arrangements' referred to in cl 45 are Newton type arrangements. Talbot J described them as 'at least, a willingness on the part of the relevant authorities to co-operate in a consensual way that may bring the scheme to fulfilment'. I think that this is a reasonable way of putting it. Its essence is of course consensual and that is where the appellant faces a difficulty. It is true that the arrangements under cl 45 need not have been implemented. But they still have to exist and must pre-exist the 'satisfaction' of Council with them. They are prior arrangements which have been made. And they must exist to Council's satisfaction prior to consent. 41 Returning to the central question. Are these prior arrangements exclusively for the Council and not the Court on appeal or can the Court acquire the function of the Council to make the arrangements with the developer? 42 Applying the tests suggested in Drew, indeed in the other authorities cited therein, it is my opinion that the making of the arrangements is exclusively the province of the Council. The wording of the clause, utilising the past tense, and the nature of the arrangement itself is persuasive of this conclusion. The arrangements must pre-date and pre-exist the 'satisfaction'. It is not for the Court to make the arrangements on behalf of the Council although, as I have already indicated, the Court on appeal acquires the function of the Council as to 'satisfaction' with the 'prior adequate arrangements' made under the clause. 43 To summarise, there are two elements to cl 45. One is the making of the 'prior adequate arrangements' by the Council and the second is the 'satisfaction' with them prior to granting approval. The former is not 'in respect of the matter the subject of the appeal' and the latter is. Under s 39(2) the Court can substitute its satisfaction with cl 45 for that of the Council. However, the nature and wording of the 'prior adequate arrangements' and their creation is indicative that the Court does not acquire that function under s 39(2). The making of the arrangements is not a function 'in respect of the matter the subject of the appeal', nor is it sufficiently analogous to the function to be performed regarding the development application to be in respect of the subject matter of the appeal. In this case there simply was no arrangement made by the Council with the developer. 44 While leave to appeal should be granted, the appeal should be dismissed with costs. Orders 1. Leave to appeal granted on the undertaking of the appellant to pay the filing fee. 2. Appeal dismissed with costs. OoO 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.