New South Wales Supreme Court CITATION : Cumerlong Holdings Pty Limited v Dalcross Properties Pty Limited & Dalcross Holdings Pty Limited (No 2) [2009] NSWSC 1157 HEARING DATE(S) : 14 October 2009 JUDGMENT DATE : 30 October 2009 JUDGMENT OF : Smart AJ Leave granted to Minister for Planning to make submissions as amicus curiae on terms as to costs. Judgment of 29 July 2009 vacated. DECISION : Summons dismissed. Orders as to costs. See paragraphs 17 and 33. CATCHWORDS : Leave to Minister to make submissions as amicus curiae despite delay on terms as to costs - whether restrictive covenant enforceable - correct construction of s 28(2) and (3) of Environmental Planning & Assessment Act 1997 and cl 68(2) of Ku-ring-gai Planning Scheme Ordinance (KPSO) - Operation of LEP 194 - Governor's approval to LEP 194 not required LEGISLATION CITED : Environmental Planning and Assessment Act 1979 Miscellaneous Act (Planning) Repeal and Amendment Act 1979 CATEGORY : Principal judgment CASES CITED : Coshott v Ludwig, 13 or 14 February 1997, unreported CA, Meagher JA, Giles and Simos AJJA - 1997 NSW Conv R 56,366 Cumerlong Holdings Pty Limited (Plaintiff) PARTIES : Dalcross Properties Pty Limited (First Defendant) Dalcross Holding Pty Limited (Second Defendant) FILE NUMBER(S) : SC 4269/2008 PJ McEwen SC and N Eastman (Plaintiff) COUNSEL : A Galasso SC and G Newport (Defendants) J Griffiths SC and C Spruce (Minister for Planning) Williamsons Solicitors Pty Ltd (Plaintiff) SOLICITORS : Robert Napoli & Co (Defendants) C Hanson (Minister for Planning) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION Smart AJ Friday 30 October 2009 4269/2008 Cumerlong Holdings Pty Limited v Dalcross Properties Pty Limited and Dalcross Holdings Pty Limited (No 2) JUDGMENT 1 Following the delivery of the judgment on 29 July 2009, the Minister for Planning, by her motion of 13 August 2009, sought leave to appear as amicus curiae in these proceedings. She wished to advance submissions as to the correct construction of s 28 of the Environmental Planning and Assessment Act 1979 ("EP&A Act") and clause 68(2) of the Ku-ring-gai Council Planning Scheme Ordinance (KPSO) and the interaction of those provisions. 2 The Minister wishes to contend that, under s 28 of the EP&A Act and KPSO, the approval of the Governor was not required for LEP 194. 3 The background, the circumstances and the relevant provisions are set out in the judgment of 29 July 2009. Counsel for the Minister stated that a further legislative provision should be noted. On 1 July 2009 the Environmental Planning and Assessment Amendment Act 2008 commenced. That Act repealed the Miscellaneous Acts (Planning) Repeal and Amendment Act 1979 (cf paragraph 13 of earlier judgment). It also amended s 4 of the EP&A Act so as to remove the definition of "deemed environmental planning instrument" and substituted a new definition of environmental planning instruments (cf paragraph 14 of earlier judgment). Neither the Court nor counsel at the hearing on 3 July 2009 were aware that the 2008 amending Act came into operation on 1 July 2009. It was not suggested that this affected the outcome of the proceedings, but it was desirable that the legislative picture be complete. 4 A restrictive covenant prevents Lot 103 DP834629 in Stanhope Road Killara from being used for medical/ hospital and related purposes. The plaintiff owns a nearby property which has the benefit of the covenant. On 5 September 2008 Ku-ring-gai Council issued a Notice of Determination of Development Application granting the extension of the hospital use to Lot 103, owned by the first defendant. Previously, Dalcross Private Hospital had been conducted on neighbouring lands. 5 Under KPSO, Lot 103 was, from about 1 October 1971 to about 28 May 2004, included within zone 2(b) – Residential B. By LEP 194 (gazetted about 28 May 2004) Lot 103 was included in a new zone 2(d3) and ceased to be zoned as 2(b). Under cl 68(2) of KPSO, land in zone 2(b) was exempt from the provision which allowed the operation of a restrictive covenant as to the erection or use of buildings or the use of land to be suspended to the extent to which any such covenant was inconsistent with any provision of KPSO, or with any consent given thereunder. Land covered by the new zoning 2(d3) was not exempt from the provision which permitted suspension, that is, any consent given under KPSO by the Council prevailed over the terms of a restrictive covenant to the contrary. 6 It has been held that a private restrictive covenant is a regulatory instrument for the purposes of s 28 of the EP&A Act (Coshott v Ludwig, 13 or 14 February 1997, unreported CA, Meagher JA, Giles and Simos AJJA – 1997 NSW Conv R 56, 366). 7 Sections 28(2) and (3) of the EP&A Act provide: "(2) For the purpose of enabling development to be carried out in accordance with an environmental planning instrument or in accordance with a consent granted under this Act, an environmental planning instrument may provide that, to the extent necessary to serve that purpose, a regulatory instrument specified in that environmental planning instrument shall not apply to any such development or shall apply subject to the modifications specified in that environmental planning instrument. (3) A provision referred to in subsection (2) shall have effect according to its tenor, but only if the Governor has, before the making of the environmental planning instrument, approved of the provision." 8 In the present case the Minister contended that the KPSO was an environmental planning instrument and that it provided, to the extent necessary, to serve the purpose of enabling the permitted development to be carried out, that a regulatory instrument (the restrictive covenant) specified in the environmental planning instrument shall not apply to any such development. The Minister contended that LEP 194, although an environmental planning instrument, was not the environmental planning instrument secondly referred to in s 28 of the EP&A Act. 9 I will return to the construction of s 28(2) and (3) and the application of those provisions in the circumstances of the present case. 10 The Minister submitted that she should be granted leave to make submissions for the following reasons: a) "Suspension of covenant" clauses are found in almost all other Environment Planning Instruments ("EPIs"). Although the form of such clauses can differ from one EPI to another, in general "suspension of covenant" clauses appear to fall into four broad categories: (i) Suspension clauses that, like the clause in issue in these proceedings, are zone based. For example, the clause does or does not apply to land in a certain zone. (ii) Suspension clauses that are development based. For example, the clause is triggered upon dual occupancy. (iii) Suspension clauses that are site based. For example, the clause does or does not apply to a certain lot and DP. (iv) Suspension clauses that are blanket clauses over a whole local government area." Examples of each category were given. b) The earlier judgment raises some issues of public importance relating to the proper construction of section 28 of the EP&A Act together with cl 68(2) of the KPSO, including: (i) Can "suspension of covenant" clauses made in accordance with s 28 of the EP&A Act ever have an ambulatory effect or are such clauses fixed in time as at the date that Gubernatorial approval is given pursuant to s 28 of the EP&A Act ? (ii) Did Parliament intend that any Environmental Planning Instrument ("EPI") made under the EP&A Act which has the incidental or indirect effect of changing the field of operation of a validly made "suspension of covenant" clause requires separate Gubernatorial approval pursuant to s 28(3), notwithstanding that the EPI does not contain a provision of the kind referred to in that section (or that the suspension of covenant clause, purports, on its terms, to operate prospectively)? 11 It was further submitted by the Minister that she had a clear interest as the Minister responsible for administering the EP&A Act in the proper construction of that Act and of planning instruments made under that Act. 12 Without assenting to all of the reasons advanced on behalf of the Minister she has, in my opinion, made out a case to be heard as amicus curiae. 13 The EP&A Act is important legislation that governs development in New South Wales, including the use of land, the use and erection of buildings and the implementation of planning policies at various levels. Section 28, as these proceedings reveal, is an important provision of that Act as it bears upon the circumstances in which a regulatory instrument specified in the EPI shall not apply. As private restrictive covenants fall within the definition of "regulatory instruments", private property rights of value are capable of being affected. The correct construction and administration of the Act are matters of public importance. 14 I have been troubled by the delay which has occurred. By a detailed letter of 24 March 2009, the solicitors for the defendants wrote to the Principal Legal Officer, Department of Planning explaining the nature of the proceedings, including that the application before the Court "seeks to restrain our clients from implementing the consent [of the Council], asserting a failure by the Governor to approve a provision in LEP 194 said to be required by s 28 [EP&A Act]". The letter stated: "The matter is listed for hearing on 3 July 2009." The letter stated that the position was not clear whether the Governor's approval was required. 15 It was not disputed that no written response to the letter was received from the Department and that an officer of the Department had telephoned the solicitor for the defendants and stated that the Department had no interest in the matter. That was described as most unfortunate and not according with the Minister's view by Senior Counsel appearing for her. 16 If the Minister had appeared at the hearing on 3 July 2009 she would have been heard as amicus curiae and the proceedings would still have concluded on that day. The hearing on 14 October 2009 would not have been necessary, nor would the brief hearing envisaged on 19 August 2009 for a report to be received whether the Governor's approval had been given. 17 Despite the delay and the course of events, in view of the public importance of the issues raised, I grant leave to the Minister to be heard as amicus curiae but the Minster should pay the costs of both the plaintiff and the defendants of the Minister's application of 13 August 2009 and the hearing on 14 October 2009 irrespective of the outcome of the proceedings. 18 The parties and the Minister were notified in advance that they should put on the Minster's application for leave their submissions on that issue and their submissions on the substantive issues so as to limit any further hearing to one day. All parties did so and I received both written and oral submissions. 19 I turn to the substantive issues. Ku-ring-gai Local Environment Plan No 194 has the stated aim "to rezone land to facilitate the development of multi-unit housing and to increase housing choice" (clause 2) and "applies to the land in the vicinity of the Railway/ Pacific Highway corridor and St Ives Centre" (clause 3). 20 Clause 4 provides that LEP 194 amends KPSO. It inserts the zones Residential C1 and Residential C2 after zone No 2(c) in the Table to clause 23, Development Control Table. Further, in clause 23, there is inserted after the matter relating to zone No 2(d) Residential D3. As appears from the earlier judgment, Residential 2(d3) is not an exempt zone under KPSO clause 68(2). As well as changing the zoning of tracts of land close to portions of the North Shore rail line within the Ku-ring-gai Local Government area by making alterations to Clause 23 Development Control Table, a new Part IIIA is inserted into KPSO by LEP 194. That contains detailed provisions as to developments within the rail corridor and St Ives Centre as well as residential developments generally. 21 Broadly, the amendments changing the Development Control Table in clause 23 KPSO have the effect of enlarging the developments that may be carried out with development consent by increasing residential density. Development previously prohibited in a residential 2(b) zone, for example residential flat buildings, may under zoning 2(d3) be carried out with consent. Division 5 of Part IIIA of KPSO introduced by LEP 194, for example, deals with site requirements and development standards for multi-unit housing. 22 The amendments made by LEP 194 to KPSO are significant. The defendants and the Minister contended that the change of zoning of Lot 103 (also Lot 101) was incidental to the creation of the rail corridor. 23 It was emphasised by the defendants that it now lay with the Minister to make a LEP. The defendants and the Minister contended that LEP 194 could readily be read with KPSO and the two considered together. The "suspension of covenants" provision was contained in clause 68(2) of KPSO and not LEP 194. LEP 194 was directed to other permissible matters. See Division 4, Part 3 of EP&A Act 1979. I return to s28(2) and (3) of the EP&A Act. Both parties and the Minister proceeded upon the basis that close attention must be paid to the language of those subsections. I agree. The difference which arose was as to the result which followed. 24 The defendants and the Minister contended that the Governor's approval was not required because LEP 194 did not meet the terms of s 28(2) of the EP&A Act. Section 28(2) applies where, for the purpose of enabling development to be carried out in accordance with a consent granted under the EP&A Act, an EPI may provide that a regulatory instrument (restrictive covenant) specified in the EPI shall not apply to any such development. 25 LEP 194 does not directly so provide. However, it has the effect, by changing the zoning and applying different development controls in the new zoning, of rendering an exempting provision as to suspension of covenants inapplicable so that a development previously unable to be carried out because of the covenant is enabled to be carried out. 26 The effect of the terms of s 28(2) and (3) and their operation in the circumstances of the present case are difficult to determine. My mind has wavered as to the correct construction and operation of those provisions. 27 Each of KPSO and LEP 194 was at all relevant times an environmental planning instrument. 28 LEP 194 does not contain a provision specifying that a regulatory instrument (restrictive covenant) shall not apply to any permitted development to be carried out (or words to that effect). LEP 194, with the changes it has wrought, has a major impact on the proprietary rights of the plaintiff. 29 It is clause 68(2) of the KPSO which provides that the operation of any covenant or instrument imposing restrictions as to the erection or use of buildings or use of land for certain purposes is suspended to the extent it is inconsistent with any consent given thereunder. The phrase "an environmental planning instrument" where secondly appearing in s 28(2) refers to KPSO. Where the phrase "environmental planning instrument" thirdly appears it is preceded by the word "that". It is a reference back to the phrase "environmental planning instrument" where secondly appearing, that is KPSO. 30 I was attracted to the view that when LEP 194 and KPSO are read together the Governor's approval to LEP 194 is required because of the effect LEP 194 has, the amendments it makes to KPSO and the consequences for the plaintiff's land. 31 However, s 28(2) and (3) appear to proceed on the premise that, before the Governor's approval is required to an environmental planning instrument, it should contain a provision that a regulatory instrument specified in that environmental planning instrument should not apply to the permitted development. LEP 194 does not do so by its terms. It does so indirectly by removing Lot 103 from zone 2(b), the land within which is, by clause 68(2), exempted from the "suspension of covenant" provisions of that clause. 32 I have taken the view that the resolution of the issues in these proceedings depends upon the construction of s 28(2) and (3), the Court of Appeal having earlier determined that a private restrictive covenant is a regulatory instrument. The approach taken and opinion expressed in my earlier judgment are incorrect. That earlier judgment did not pay enough attention to the language of s 28(2) and (3) of the EP&A Act. 33 I make the following orders: 1. Judgment of 29 July 2009 vacated. 2. Summons dismissed. 3. Plaintiff pay the defendants' costs of these proceedings other than the costs of the application of the Minister of 13 August 2009 and the hearing on 14 October 2009. 4. The Minister pay the costs of the plaintiff and the defendants of her application of 13 August 2009 and of the hearing on 14 October 2009 on a refresher basis. ********** 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.