New South Wales Supreme Court CITATION : Australian National Car Parks Pty Limited v State Rail Authority of NSW [2005] NSWSC 120 HEARING DATE(S) : 28 February 2005 JUDGMENT DATE : 3 March 2005 JURISDICTION : Common Law Division JUDGMENT OF : Master Malpass at 1 DECISION : The summons is dismissed; the plaintiff is to pay the costs of the summons; the exhibits may be returned. CATCHWORDS : Defence of illegality - tenancy agreement for car parking purposes - such purpose not permitted by development provisions - erroneous belief that there were existing user rights - not a contract to do an illegal act - what is the subject of the proscription. Central Sydney Local Environment Plan 1996 LEGISLATION CITED : Environmental Planning & Assessment Act 1979 Environmental Planning & Assessment Regulation 2000 Bawofi Pty Ltd v Comrealty Ltd & Anor (1992) NSW ConvR 55-646 Best v Glenville [1960] 3 All ER 478 CASES CITED : Perman v Wentholt-Dwyer [2004] NSWSC 48 Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 Australian National Car Parks Pty Limited (Plaintiff) PARTIES : State Rail Authority of New South Wales (Defendant) FILE NUMBER(S) : SC 12978/04 Ms V Culkoff (Plaintiff) COUNSEL : Mr I E Davidson (Defendant) Steven Klinger (Plaintiff) SOLICITORS : Emil Ford & Co (Defendant) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 8570/02 LOWER COURT JUDICIAL OFFICER : Lulham LCM - 6 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Master Malpass 3 March 2005 12978 of 2004 Australian National Car Parks Pty Limited v State Rail Authority of New South Wales JUDGMENT 1 Master: This matter has developed an expansive history. It was first dealt with by the Magistrate (Lulham LCM) in a judgment delivered on 23 July 2003 (the first judgment). The matter came before me by way of appeal. I delivered my first judgment on 26 February 2004. I set aside that part of the Magistrate's decision which rejected the defence of illegality. The matter was remitted back to the Local Court and the defence of illegality was once again considered by the Magistrate. He dealt with it in a judgment delivered on 31 August 2004 (the second judgment). 2 The second judgment is a lengthy one. The Magistrate gave detailed consideration to the many submissions made to him. Again, he reached the result of rejecting the defence founded on illegality. 3 The matter has once more returned to me by way of appeal. 4 The summons was filed on 9 September 2004. The plaintiff now proceeds on an amended summons filed in court on 30 November 2004. The hearing of the appeal took place on 28 February 2005. 5 Both parties have relied on lengthy and detailed written submissions. Counsel have addressed orally to those submissions. Because of the narrow ambit of the determinative issues, this appeal can be dealt with without grappling with the detail of the considerable argument that has been put to the Court. 6 Also, it is unnecessary to embark on a recitation of the factual background. Most of the relevant material may be found in my first judgment. For present purposes, it suffices to address certain aspects of the material. 7 The plaintiff was the defendant in the Local Court. It was sued pursuant to a tenancy agreement made between the parties for, inter alia, unpaid rent. It has unsuccessfully relied on a defence of illegality. It was contended that the defendant entered into the tenancy agreement in full knowledge of its illegality. 8 The alleged illegality is said to arise by reason of provisions contained in clause 23 of the Central Sydney Local Environment Plan 1996 (the Plan). Under the Plan, the demised premises fall within the residential zone. In such a case, development for certain specified purposes may be carried out, but only with development consent (any other development was prohibited). The purposes which may be carried out with development consent do not include car parking purposes. The tenancy agreement provided that the demised premises were not to be used otherwise than for car parking purposes (and not as it is sometimes said for public car parking purposes). The plaintiff intended to operate a public car park and the defendant knew of this intention. The plaintiff says that when the provisions are properly construed they render the tenancy agreement and/or its performance unlawful. 9 Before proceeding further, I should clarify one matter. There seems to be some confusion in both the first and the second judgments of the magistrate. This may have arisen by reason of conduct of the parties and/or the terms of the tenancy agreement. It concerns a misconception that development consent was required to enable the plaintiff to rely on existing user rights and it affects the accuracy of aspects of the judgments. Whilst the existing user rights might have to be established in court, any such rights could be exercised independently of development consent. Indeed, the Council was unable under the Plan to give development consent for such a user. 10 As earlier indicated, I mention this matter by way of clarification only. It has no further significance in the determination of this appeal. 11 The Magistrate rejected the allegation that the defendant had entered into the tenancy agreement in the full knowledge of its illegality. He found that the defendant had a reasonable belief that the demised premises had existing user rights which would enable them to be used as a public car park. 12 As it turned out, the belief had by the defendant was erroneous. The existing user rights related to private car parking purposes only. In effect, the rights were restricted to tenants of the building in which the car park was located and their employees. 13 The plaintiff had made its own enquiries and had sought its own advice. The Magistrate found in effect that it believed it had a reasonable prospect of establishing that the user rights would enable it to use the demised premises for public car parking. 14 The plaintiff moved into occupation and relied upon what were thought to be the existing user rights. It made a profit from its occupation. It continued to use the premises for public car parking purposes until steps taken by the Council brought that usage to an end. The tenancy was terminated by consent. For completeness, I should add that an application for development consent was made shortly prior thereto. 15 The amended summons identifies 10 grounds of appeal. There is no need to deal with the various grounds individually. 16 Generally speaking, counsel for the plaintiff outlined three principal areas of challenge. The first area concerned the alleged prohibition on the user of the demised premises for the purposes expressed in the tenancy. The second area concerned alleged inconsistencies between findings made in the first and second judgments. These inconsistencies were said to throw up questions of estoppel and bias. The third area concerned what was said to be a failure to apply a line of authority (including, inter alia, Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410). 17 As earlier said, because of the narrow ambit of the determinative issues, this appeal can be briefly disposed of. 18 This is not a case where the parties entered into the tenancy agreement with the intention of flouting the Plan. The defendant had a belief that existing user rights would enable the subject premises to be used for public car parking purposes. The plaintiff was willing to take a commercial risk that there were such rights. The prohibition was not absolute. It seems to be common ground that if there had been such rights, the demised premises could have been legally used for such a purpose. In such a case, the tenancy agreement could have been legally performed. In the circumstances, I do not see the tenancy agreement as a contract which was entered into with the object of committing an illegal act. This is a view which finds support in well established authority (including Yango and Bawofi Pty Ltd v Comrealty Ltd & Anor (1992) NSW ConvR 55-646). 19 I should add that the Magistrate referred to Best v Glenville [1960] 3 All ER 478. The case was considered in Bawofi. It was there treated as one of a number of cases illustrating the intention that must be found. The defence of illegality failed in Best because there was not the intention that the subject premises would be used as a bridge club without consent. 20 Whilst what has been said may be thought to have disposed of this appeal, for completeness I should make some further observations. 21 It may be also relevant to determine precisely what is the subject of the proscription. This is a task that requires the Court to look at the legislative intention. The relevant provisions of the statute and of the Plan do not expressly prohibit the making of such a tenancy agreement or make it void. They do not expressly address the question of enforceability of contracts. The Plan itself is concerned with development. I do not consider that clause 23 was intended to render the tenancy agreement and/or its performance unlawful. What the Environmental Planning and Assessment Act 1979 and the Environmental Planning and Assessment Regulation 2000 do is inter alia provide remedies, create offences and impose penalties. There is authority which supports the view that the intention of such provisions was to penalise breach (see Perman v Wentholt-Dwyer [2004] NSWSC 48). For present purposes, it is unnecessary to take this matter further. 22 In the second judgment, the Magistrate did, inter alia, refine the expression of the representation found to have been made in the first judgment. It was a finding made in respect of the plaintiff's cross-claim. The plaintiff contends that there are other inconsistencies. In my view, there is no need to dwell on these matters. I consider that they are of no significance in the determination of this appeal. 23 Further, it seems to me that the submissions made as to estoppel and bias are misconceived. I do not consider that they help the plaintiff in this appeal. 24 In my view, the Magistrate made a considered analysis of the relevant authorities. He came to the view that the tenancy agreement fell within category 4 (the contract, although lawful according to its own terms, may be performed in a manner which the statute prohibits) of the four main ways in which the enforceability of a contract may be affected by statutory provisions which render it unlawful (see Yango at p 413). This led him to find that the defence of illegality failed. It seems to me that he reached a result that should not be disturbed. I consider that the defence of illegality could not be successfully raised in the circumstances of this case. 25 The plaintiff bears the onus of satisfying the court that the decision of the Magistrate should be disturbed. In my view, that onus has not been discharged. 26 The summons is dismissed. The plaintiff is to pay the costs of the summons. The exhibits may be returned. ********** 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.