New South Wales Court of Appeal CITATION: Baulkham Hills Shire Council v Group Development Services Pty Ltd [2005] NSWCA 315 HEARING DATE(S): 3 August 2005 JUDGMENT DATE: 27 September 2005 JUDGMENT OF: Handley JA at 1; Ipp JA at 25; Tobias JA at 26 DECISION: Appeal dismissed with costs CATCHWORDS: ENVIRONMENTAL LAW - planning - developer's contribution to council's open space and recreation land - contributions plan - ENVIRONMENTAL LAW - planning - developer's contribution to council's open space and recreation land - contribution not a tax - D Environmental Planning and Assessment Act 1979 LEGISLATION CITED: Environmental Planning and Assessment Regulation 2000 Kellyville/Rouse Hill Contributions Plan No 8A - Open Space and Recreation Matthews v Chicory Marketing Board (Vic) (1938) 60 CLR 263 CASES CITED: Meriton Apartments Pty Ltd v Minister for Urban Affairs and Planning (2000) 107 LGERA 363 Baulkham Hills Shire Council (Claimant) PARTIES: Group Development Services Pty Ltd (Opponent) FILE NUMBER(S): CA 40909 of 2004 B J Preston SC/A Galasso (Claimant) COUNSEL: C McEwen SC/M Seymour (Opponent) Coleman & Greig (Claimant) SOLICITORS: Hunt & Hunt (Opponent) LOWER COURT JURISDICTION: Land & Environment Court LOWER COURT FILE NUMBER(S): LEC 10054 of 2004 LOWER COURT JUDICIAL OFFICER: McClellan CJ IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40909 of 2004 HANDLEY JA IPP JA TOBIAS JA 27 SEPTEMBER 2005 BAULKHAM HILLS SHIRE COUNCIL v GROUP DEVELOPMENT SERVICES PTY LTD CATCHWORDS ENVIRONMENTAL LAW – planning – developer's contribution to council's open space and recreation land – contributions plan ENVIRONMENTAL LAW – planning – developer's contribution to council's open space and recreation land – contribution not a tax FACTS The respondent applied for a reduction in contributions imposed pursuant to the conditions of a subdivision consent granted by the appellant. The application was refused and the respondent appealed to the Land and Environment Court. The appeal came before a commissioner, who referred two questions of law to a judge. These were whether the contribution plan authorised an adjustment to contributions for the cost of land to allow for increases in land values between the date of the plan and the date of the consent, and whether the plan complied with cl 32(3)(b) of the Environmental Planning and Assessment Regulation 2000 which allowed the appellant to change the rates in the contribution plan "to reflect … quarterly or annual variations to readily accessible index figures adopted by the plan". HELD : (1) The plan did not authorise adjustment to contributions to reflect changes in the estimated land acquisition cost between the date of the plan and the date of the consent; (2) Contribution payments were not a tax, and the principles governing the construction of taxation legislation did not apply; (3) The words "readily accessible index figures" in cl 32(3)(b) referred to an index already in existence; (4) Clause 32(3)(b) did not authorise the Council to create a new index, but required it to adopt an existing one. ORDERS Appeal dismissed with costs. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40909 of 2004 HANDLEY JA IPP JA TOBIAS JA 27 SEPTEMBER 2005 BAULKHAM HILLS SHIRE COUNCIL v GROUP DEVELOPMENT SERVICES PTY LTD Judgment 1 HANDLEY JA : The respondent company appealed to the Land and Environment Court from a deemed refusal of its application under s 96 of the Environmental Planning and Assessment Act 1979 (the Act) to reduce the contributions imposed pursuant to s 94 as conditions of a subdivision consent granted by the Council on 21 June 2002. Under s 94(11) a council may only impose such a condition in accordance with a contribution plan approved under s 94B. Under s 94(12) an unreasonable condition can be disallowed or amended by the Court on a class 1 appeal. 2 The relevant plan, the Kellyville/Rouse Hill Contributions Plan No 8A – Open Space and Recreation, was adopted by the Council on 18 July 2000. Appendix A to the plan fixed $84,082,068 as the cost of the land required by the council for open space and recreation consequent on the development of the Kellyville/Rouse Hill area for residential use. Clause 4.4 of the plan contained a formula which enabled the council to recover that land cost from contributions levied on developers as conditions of subdivision or building consents for residential land within that area. 3 The Council imposed contribution conditions on its consent in respect of additional amounts, over and above those fixed by cl 4.4 of the plan, to compensate it for increases in the value of land in the area since the plan was adopted. It also claimed the right to recover further amounts to compensate it for increases in the value of land in the area between the date of its consent and the date the developer paid the contribution amounts. 4 The respondent's class 1 appeal came before a commissioner who referred two questions of law to a judge and the reference came before McClellan CJ. The first was whether the plan, on its true construction, authorised an adjustment of contributions for the cost of land for Open Space and Recreation to allow for increases in land values between the date of the plan and the date of the consent, and the second was whether the plan complied with cl 32(3)(b) of the Environmental Planning and Assessment Regulation 2000 which authorised a council to change the rates in its plan "to reflect … quarterly or annual variations to readily accessible index figures adopted by the plan". 5 The Chief Judge answered both questions adversely to the council which sought leave to appeal. The Court heard the leave application as if it were an appeal and at the end of the hearing we granted leave to appeal and reserved our decision. Adjustment to contributions between date of plan and date of consent 6 The plan contemplated in its recital provisions that the contribution rates it adopted would be adjusted to reflect changing conditions. Plan 8A commenced: "The schedule of contribution rates for various types of residential development forms an integral component of the Kellyville/Rouse Hill Contributions Plan No 8. The schedule is continually updated in accordance with the provisions of this plan and is therefore available to be viewed or purchased separately to the booklet containing the five contribution plans (8A to 8E)." 7 Clause 1.7 relevantly provided: "In order to keep this plan relevant it is envisaged that it will be monitored, reviewed and amended accordingly. Any changes to the plan apart from the quarterly indexation of the capital works component and adjustments to the land acquisition component in accordance with the formulas set out in section 5.5 will be publicly exhibited in accordance with normal statutory procedure." 8 The difficulties for the council are created by the operative provisions of the plan. Clause 4.4 contains a formula for the calculation of the land cost component of "the contribution rate for open space and recreation" based on the cost of land shown in appendix A without any provision for its adjustment. The other components of the formula were fixed at the date of the plan. Clause 4.4 was the operative provision the council had to use to fix the contribution rate per lot which the developer would be required to pay under a condition of consent imposed pursuant to s 94(1) and (11). Clause 4.4 does not authorise or require any adjustment to the land cost component in the formula to reflect changes in land values after the date of the plan. 9 Mr Preston SC relied heavily on cl 5.5 read with the recital provisions to provide a basis for the adjustment of the land cost component of contributions to reflect changes in estimated land values between the date of the plan and the date of the consent. Clause 5.5. relevantly provided: "Contributions will also be adjusted at the time of payment so that they are relative to current day values as follows: … Land The land component of a contribution condition amount will be adjusted in line with the latest average land value estimates published in the Shire Plan (Baulkham Hills Shire Council). The average land value estimates will be reviewed on a quarterly basis and determined by averaging the cost of prime residential land acquisitions (per m2) within the Kellyville/Rouse Hill Release Area over the previous quarter. Formula for Adjusting Contributions - Land Contribution at the Time of Payment = C x L(1) L(2) Where:- C = is the original contribution condition amount as specified in the consent (excluding the capital component) L(1) = is the average estimated land acquisition cost (per m2) at the time of payment L(2) = is the average estimated land acquisition cost (per m2) at the time of consent" 10 Clause 5.5 provides for the adjustment of contributions that have already been fixed under other provisions of the plan. The figure C in the formula is the amount fixed by the consent. This is then adjusted to reflect changes in the estimated acquisition cost between the date of consent (L(2)) and the date of payment (L(1)). Clause 5.5 does not authorise any adjustment for changes in the estimated land acquisition cost between the date of the plan and the date of consent. 11 Mr Preston relied on the opening lines of cl 5.5 which he submitted assumed that the contributions will have been adjusted before they were fixed so as to be relative to current day values at the date of consent, but his submission is not supported by the text. 12 The opening words refer to contributions which will have been fixed under other provisions of the plan. They are to be adjusted "at the date of payment", "as follows". When so adjusted they are to be "relative to current day values". If current day values have increased by 25% since the consent the same percentage increase in the contribution would ensure that "contributions" were relative to current day values at the date of payment. 13 In my judgment cl 5.5 does not authorise the fixing of a contribution amount to reflect changes in the estimated land acquisition cost between the date of the plan and the date of the consent, and does not even contemplate that such an adjustment will have occurred pursuant to other provisions in the plan. 14 Unfortunately for the Council its plan does not contain any provision which enables the land cost component of the contribution amount to be fixed by reference to the estimated land acquisition cost at the date of consent to reflect changes in land value estimates from the date of the plan to the date of consent. The recital provisions do not and can not provide the necessary machinery for achieving such an adjustment. The answer of McClellan CJ to question 1 was therefore correct. 15 During the argument the Court asked Mr Preston whether contribution condition amounts were a tax and referred to the definition of a tax given by Latham CJ in Matthews v Chicory Marketing Board (Vic) (1938) 60 CLR 263, 276: "… a compulsory exaction of money by a public authority for public purposes, enforceable by law, and … not a payment for services rendered." 16 Mr Preston submitted that these amounts were not a tax and referred the Court to a number of decisions, the most relevant being that of Cowdroy J in Meriton Apartments Pty Ltd v Minister for Urban Affairs and Planning (2000) 107 LGERA 363, 377-9 where the authorities are collected. This decision establishes that these amounts are not taxes, and that the principles which govern the construction of taxation legislation do not apply. 17 The fact that such an amount is not a tax does not affect the conclusion reached above because under s 94(11) conditions imposing an obligation to pay such amounts must be "determined in accordance with a contributions plan approved under s 94B" and the plan did not authorise the fixing of a contribution which had been adjusted for changes in land values between the date of the plan and the date of the consent. Adjustments based on average land value estimates in Shire Plan 18 Question two asked whether the formula in cl 5.5 for quarterly adjustments to the land acquisition component was a "quarterly … variation to readily accessible index figures" within cl 32(3)(b) of the Regulation. Clause 5.5 relevantly provides: "The land component of a contribution condition amount will be adjusted in line with the latest average land value estimates published in the Shire Plan (Baulkham Hills Shire Council). The average estimates will be reviewed on a quarterly basis and determined by averaging the cost of prime residential land acquisitions (per m2) within the Kellyville/Rouse Hill release area over the previous quarter." 19 When the plan was adopted on 18 July 2000 Appendix A contained the estimated land acquisition cost of $84,082,068 for land required for open space and recreation within the release area. That cost must have been based on some average land value but this was not stated in or readily apparent from Appendix A. Clause 5.5 provides that "The average land estimates will be reviewed on a quarterly basis" in accordance with land value estimates "published in the Shire Plan". 20 The clause authorises adjustments to the land component of a contribution amount to reflect changes in the average estimated land acquisition cost between the date of consent and the date of payment and is effective for that purpose if it complied with cl 32(3)(b) of the Regulation. This provides: "A council may make the following kinds of amendments to a contributions plan without the need to prepare a new contributions plan: (a) … (b) Changes to rates set out in the plan to reflect quarterly or annual variations to readily accessible index figures adopted by the plan (such as a Consumer Price Index), (c) …" 21 It was not suggested that the base figure per square metre as at 18 July 2000 could be ascertained by examination of the Shire Plan on that day. As at that date there was no index figure in any realistic sense at all. The statement of agreed facts (para 11(2)) shows that the first index figure of $120 per m2 was published by the Council in the Hills Shire Plan for the quarter ended 31 December 2000. Presumably this was published later, after the Council's valuer provided his estimates of land values as at 31 December. 22 Clause 5.5 did not "adopt" "readily accessible index figures" at all. There were no such figures of the kind contemplated by cl 5.5 in existence at the date of the plan. The clause purported to authorise the council to create such figures in the future. As at the date of the plan there was no index, or index figure, in existence, let alone one which was then "readily accessible". 23 In my judgment cl 32(3)(b) did not authorise the council to create a new index, but only authorised the adoption of an index already in existence which would provide figures that were readily accessible. The need for the Council to "adopt" an index required it to adopt an existing one which would ordinarily, if not invariably, be one maintained by an independent third party. The example provided "such as a Consumer Price Index" was such an index, already in existence, maintained by an independent third party, which would indeed provide "readily accessible index figures" from the very start of the plan. The example is consistent with the construction of cl 32(3)(b) outlined above and inconsistent with that assumed in cl 5.5 of the plan. The answer of McClellan CJ to question two was therefore correct. 24 The appeal should be dismissed with costs. 25 IPP JA : I agree with Handley JA. 26 TOBIAS JA : I agree with Handley JA. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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