Land and Environment Court New South Wales Medium Neutral Citation: Stannic Securities Pty Ltd v Wyong Shire Council (No 2) [2011] NSWLEC 1353 Hearing dates: 8,9 June, 30 September, 17 October 2011 Decision date: 09 December 2011 Jurisdiction: Class 1 Before: Hussey C Decision: (1)The appeal is upheld. (2)Pursuant to section 96 of the Environmental Planning and Assessment Act 1979 (NSW) approval is granted to the modification of the Development Application DA/74/2010 for the subdivision of 31-43 Mataram Road, Woongarrah, New South Wales to 44 residential lots and 1 residue lot and 1 drainage lot, as set out in annexure "A". (3)The exhibits may be returned except 1, 12, A, M, N and O. Catchwords: Section 94 contributions; reasonableness, occupancy rates, existing lot credits, land values Legislation Cited: Environmental Planning & Assessment Act 1979 Wyong Section 94 Contributions Plan No 7A Wyong Section 94 Contributions Plan No 11 Cases Cited: Rose Consulting Group v Baulkham Hills Shire [2003] 129 LGERA 165 Lake Macquarie City v Hammersmith Management Pty Ltd [2004] 132 LGERA 225. Toadolla Co Pty Ltd v Dumaresq Shire [1992] 78 LGERA 261 Category: Principal judgment Parties: Stannic Securities Pty Limited (Applicant) Wyong Shire Council (Respondent) Representation: Counsel Mr J Ayling SC (Respondent) Ms S Pritchard (Applicant) Solicitors HWL Ebsworth Lawyers (Respondent) Esplins Lawyers (Applicant) File Number(s): 10579 of 2010 Judgment Background 1This appeal was lodged against the provisions of Condition 27 of a development consent requiring s94 contributions in respect of a 44 - lot residential subdivision at Mataram Road, Woongarah. The site is within the Wyong release area, which has been under development for over 15 years. 2The original schedule of contributions was based on 16 individual categories (including open space land/works, water quality land/works, etc) resulting in a total contribution of $2,049,335. The initial submission for the applicant was that this contribution was unreasonable and should be reduced by about $914,110. 3The subdivision is part of the staged development of the land incorporating: * Lots 90B and 90C in DP 22837. * Lot 146 in DP 1149052, known as No 33 - 43 Mataram Road. This lot was created as a residue in a previous subdivision of Lots 72B & 72C in DP 22837 and Lots 5 & 6 in DP 1118025. 4Insofar as condition 27 required contributions towards a number of infrastructure items some of which are agreed, the main issues arising in this appeal concern the reasonableness of those conditions, with particular reference to occupancy rates and land valuation variations. There is an additional issue concerning what credits should be allowed for existing allotments. Section 94 Contribution Plans (CP) 5The following two s94CP's apply: * Section 94 Contributions Plan No7A "Drainage, Water Quality, Open Space, Community Facilities and Roads - Warnervale District" (CP7A). The original CP for this release area became effective in about 1994 and was updated to the current CP7A, which commenced in September 2005. It relevantly covers the 12 specific infrastructure and services categories within the release areas. * Section 94 Contributions Plan No 11 - " Shire Wide Infrastructure, Services and Facilities" (CP11). This commenced in July 2007 and it relates to the incremental upgrading and expansion of public amenities and services required within the overall local government areas as a result of the release area development. It includes an additional 4 categories relevant in the subject application. 6During the operation of these CP's, the Minister for Planning issued a s94E Direction in January 2009, which restricted the maximum s94 contribution to $20000 per dwelling or lot. The council sought exemption from this Direction and on 31 May 2009, the cap on s 94 contributions was lifted to $34,682.11 in respect of CP7 A. Note 2 to the Minister's direction of 31 May 2009 provides: "Council is to adopt a new contributions plan for the Warnervale Land as a matter of priority. A draft plan is to be provided to the Department of Planning for comment prior to public notification. The new contributions plan is to be adopted by the end of 2009 and a progress report is to be provided to the Department within three (3) months from the date of this Direction". 7Insofar as a draft CP dated September 2009 was prepared, it was not adopted. Then on 3 March 2011, the Minister for Planning issued a new section 94E Direction which replaced previous directions, and excluded the subject land from any restriction on section 94 charges. 8As at the time of lodgement of DA 74/2010 (27 January 2010), council had not yet adopted a new contributions plan for the subject land. The evidence 9Detailed evidence in this matter was presented by: * Mr P Grech; consulting planner for the council. * Mr C King; consulting planner for the applicant. * Mr G Jones; valuer for the council. * Mr S McMonigal; valuer for the applicant. Credits 10This issue concerns what credit should be allowed for the three existing allotments, whose subdivision has resulted in the approved development creating new 44 lots. The initial s 94 contributions were based on the total 44 lots, which Mr King considered unreasonable and should be reduced to 41 lots. 11In this regard, I note that the 12 categories in CP7A relate to services required for the subdivision of land and facilities for the wider community, such as open space and drainage. The actual contributions for these categories are then calculated on the basis of Net Developable Area (NDA) or Dwelling Unit (DU). 12Allowances for existing development are noted in section B15 as follows: Contributions will be levied according to the estimated increase in demand. An amount equivalent to the contribution attributable to any existing (or approved) development on the site of a proposed new development will be allowed for in the calculation of contributions. In assessing the contribution allowance to be given to existing development the factors contained in Table 3 will be used. For example > Dwelling houses and single vacant allotments = 1DU. 13Insofar as Mr Grech initially said that all three existing lots should be levied, during the appeal the council conceded that credit could be allowed for lots 90B and 90C because they were original acreage lots with rural - residential houses on them and accordingly did not create the need for new infrastructure. 14With regard to Lot 146, Mr Grech says that this is a residue lot created in a previous subdivision for which no contributions were required and therefore no credit should be allowed. 15Against this, the applicant's submission is that the historical development of the land involved: * Originally there were three lots comprising Lots 90B, 90C and 72C. * Lot 72C was subdivided into seven residential lots and one residue (Lot 146). Contributions were paid for seven lots with no contribution apparently charged for Lot 146. * The current subdivision creating 44 lots is a subdivision of Lots 90B, 90C and 146. 16Accordingly, the applicant submits that assuming there is a credit entitlement for the original lots (90B, 90C, 72C), then those credits flow through each further subdivision of each lot until there are no residue lots left, i.e. the original Lot 72C credit flows through to Lot 146. This means that the credit is not lost because the lot is a residue, instead it is the same credit that carries through in respect of the lot. 17My understanding of the application of section B15 is that a credit is allowed in respect of existing lots, which may contain a dwelling because they do not increase demand for new infrastructure. However these "existing" lots are usually the original or "parent" lot. Consequently, I accept the council's concession that it is reasonable that credits should be given for the original Lots 90B and 90C and I consider this is consistent with section B15. 18Applying this approach to Lot 72C, it appears to me that one credit would be allowed for this original/parent lot. As Lot 72C was apparently subdivided into the seven residential lots, plus residue Lot 146 (i.e. a total of eight lots) and only contributions paid for seven lots, then one credit has been allowed. 19In the circumstances, I would apply s B15 on the basis that 1 credit is allowed for the original lot and the 7 contributions paid for the 7 new lots, including residue lot 146. Therefore when this Lot 146 is subdivided, further contributions are only required in respect of any additional lots created. 20It seems to me however that some discretion should be exercised as to when residue lots are levied instead of the original credit flowing through possibly several stages of subdivision as submitted by the applicant. It may be that a residue lot could be of a larger area and shape that may result in the lot being developed by way of housing without further subdivision. Therefore it could avoid contributions to designated infrastructure/services in the release area. On the other hand, some residues could be of smaller size or shape that precludes its individual development and in those circumstances I consider it may be unreasonable to levy a contribution. 21My assessment of the current circumstances is that a credit should be allowed for the original Lot 72C, which means that Lot 146 is part of the 7 new lots that were levied. Therefore as Lot 146 has effectively paid a contribution, only the additional new lots should now be levied. Accordingly, the total number of new lots to be levied is 41, taking into account the credits for Lots 90B and 90C. Occupation rate 22The calculation of the various s94 contributions depends on a number of variables. Section 5 of CP7A states: Contributions are based on the concept of Net Development Area (NDA) and a Dwelling Unit (DU). NDA is expressed in hectares and is the actual area on which a building (primarily a dwelling) could be sited and excludes land for trunk drainage, roads, open space, community facilities, noise buffers, un-developable lands and certain major nonresidential land uses. A Dwelling Unit (DU) is defined as a dwelling with an occupancy rate of 3.2 persons . Where other than three bedroom dwellings are proposed, an equivalent number of dwelling units should be calculated and used as the basis for determining contributions for the embellishment of open space and the construction of community facilities. NDA is used as the basis for determining contributions for the remainder of items in this Plan. 23However Mr King was unable to establish the origin of the 3.2 occupancy rate and contends that it is excessive and therefore unreasonable. Instead, he reviewed the current demographics for the area and initially stated that the NSW average of 2.5ppd is more appropriate because: * The council has acknowledged that the 3.2 is excessive in its application for exemption from the Ministers s94E Direction, wherein it adopted an occupancy rate of 2.92 persons/dwelling. * The more recent CP11, adopted in 2007 also refers to an occupancy rate of 2.92, stating: "The current occupancy rate of 2.92 persons per dwelling unit (DU) will be applied to determine the contribution rate for a residential development." * According to the council's ' Wyong Residential Development Strategy (2002) ' it states: "Average Household size is declining. In 1996 this was 2.54 persons per household. Consistent with broader ABS predictions, it has been estimated by that this will decrease to 2.47 persons by 2021, despite a current average household size in the new release areas of 3.0 persons per dwelling." * The NSW Department of Planning's Population NSW Bulletin No 12, April 2010, addresses the issue of dwelling/family occupancy and states: "According to the 2006 Census, the average household size in NSW was 2.5 persons per dwelling for all households, and 3.0 persons per dwelling for one family households. This indicates that NSW households are gradually becoming smaller over time". 24In addition to this, Mr King reviewed the ABS Census Wyong Snapshot whereby calculating the number of people in the Wyong local government area and dividing it by the number of occupied dwellings resulted in an occupancy rate of 2.67 persons per dwelling. When about 10000 unoccupied dwellings were included, the occupancy rate was 2.24 persons per dwelling. However I accept the respondent's submission that this lower figure is unrepresentative. Nevertheless, Mr King ultimately considered the 2.67ppd a reasonable figure to apply 25Against this, Mr Grech supports the 3.2ppd occupancy rate. This is partly on the basis that the nature of the area is principally for first homebuyers where families with young children figure prominently. Also, most houses have lots sizes of about 500 sq m and a minimum of three bedrooms, which is unlikely to result in fewer than three occupants. 26Mr Grech does not think it appropriate to apply an occupancy rate that relates to the NSW average. Furthermore, he considers that due care is required when comparing the overall occupancies within Wyong LGA because of the higher densities (RFBs) along the coastal areas, which is different to the subject residential release areas. 27Accordingly, he extracted a number of Collector Districts (CD) from the 2006 Census, which are in the vicinity of the subject land and found that the occupancy rate varied from 2.37 to 3.42ppd, which resulted in an average dwelling occupancy rate of 2.95ppd. When the CDs considered representative of the subject development were assessed, a dwelling occupancy rate of 3.22ppd is observed, together with an average household size of 3.1ppd. 28Therefore, in considering the approach by Mr Grech in his exhibit 7, it is possible and necessary to make some adjustments due to the location and type of development and also the rate that development has occurred within the various CDs. 29Likewise Mr King's approach relied on a number of adjustments and interpretations of the various demographic data. Consequently, when I refer to these CDs it is possible to assess the occupancy rates of those more closely surrounding the subject site and which are predominantly 100% detached housing. This indicates an average occupancy in the order of 2.85ppd, depending on the CDs included. Furthermore CD 1210302, which appears to be closest to the site has a dwelling occupancy rate of 2.93ppd. 30Apart from this, the planners referred to the following Table 2 in exhibit 7, which was prepared by Mr T Wilson from the Queensland Centre for Population Research at the University of Queensland. This is based on the 2006 Census information and looks at various household types over the period from 2006 - 2016. Table 2 Household type 2006 2011 2016 One family households: Couple family with children household 3.8966 3.9018 3.905 Couple family without children household 2.0133 2.0162 2.0168 Lone parent family household 2.6876 2.6703 2.6421 Other family household 2.0864 2.0869 2.0868 Total one family households 2.9444 2.932 2.9075 Multiple family household 5.4595 5.4228 5.3648 Total family households 2.9835 2.9713 2.9468 Group household 2.1184 2.1143 2.1142 Lone person household 1 1 1 Total private dwellings 2.4561 2.4304 2.3911 31Of some relevance, this table shows that the average occupancy for one family households is in the order of 2.92 and is projected to slowly decrease. It seems to me that this study is a recent one and from a reliable authority that should be given significant weight, notwithstanding it is based on the 2006 census. But that is the best data available at this stage and it is the same census data used in Mr Grech and Mr King's propositions. From my consideration of this evidence, I am satisfied that it would be reasonable to reduce the occupancy rate from 3.2ppd. Land values 32As noted the s 94 contributions include various land categories such as open space and drainage land. It is obvious from the joint valuers report (exhibit 10) that the land values in this release area have fallen considerably (in the order of 40% - 50%) since the introduction of CP7A in 2005. Therefore I am satisfied from the evidence that it would be reasonable to reduce the associated contribution categories. 33I note that in the further joint planning report (exhibit 8) the planners referred to the s 94 spreadsheet prepared by Mr D Kitson (Council's Senior Contributions Officer), which shows the alternative contribution rates according to the Jones and McGonigal valuations. This spreadsheet is based on the updated draft 2009 CP, which apparently incorporates actual purchase prices of land acquired and interestingly, confirms the claim that the original contributions were unreasonable. 34Insofar as there are some differences between the two valuers, I note that the applicant submitted that a sensitivity allowance of 5% would be appropriate and I am therefore satisfied that it would be reasonable to apply a 45% reduction in the relevant land acquisition categories. By reference to the CP7A and CP11 Table in exhibit 8, this reduction mainly relates to the Warnervale/Wadalba open space land and a minor reduction for the Warnervale/Wadalba roads. Findings 35Having carefully considered the evidence and submissions, I am satisfied the applicant has made a compelling case for a reduction in the levied s94 contributions for this 44 lot subdivision at Woongarah. 36Firstly, I consider it reasonable to allow credit for each of the original lots as stated in CP7A. This obviously applies to Lot 90B and 90C. With regard to Lot 146, whilst it is designated as a residue lot, nevertheless I rely on the applicant's submissions that only I credit was allowed in the original 8 lot subdivision. Therefore, assigning the credit to Lot 72B then means the remaining 7 lots have contributed, including 1 credit lot within Lot 146. Consequently only the additional lots created from this residue lot should be levied. I am satisfied that it would be reasonable to levy 41 lots in this subdivision for s94 contributions. 37The next issue concerns the appropriate occupation rates on which to calculate the s94 charges. Unfortunately this involved some uncertainty because the CPs have not been progressively updated on a regular basis. Also, the 2011 census results are not yet available to accurately assess population trends. Consequently, the planners presented a significant range for the occupancy rate between the 3.2ppd figure preferred by Mr Grech to the 2.67ppd figure preferred by Mr King. 38Having considered the alternative approaches adopted to achieve these figures, I am satisfied that the origin of the 3.2ppd figure in CP7A was not established and the evidence indicates to me that it is now likely to be too high. 39Reference then to the subsequent studies and s94 reviews indicates that a more realistic figure would be in the order of 2.9ppd - 3ppd. I note that the complimentary CP11 for the overall Wyong area prescribes 2.92ppd. This figure was confirmed in the draft CP in 2009, which was intended to update CP7A. 40Considering then the various adjustments by the planners, I am satisfied to give considerable weight to the Wilson report in 2010, which found that based on the 2006 census, the average household sizes over the projected period to 2016 was in the order of 2.92ppd. Furthermore, there would likely be a small decrease in size. 41This trend is consistent with the Department of Planning's 2010 population findings that the 2006 census indicated 3 persons per dwelling for one family households, together with a trend of gradually becoming smaller over time. 42For the purposes of calculating s94 for this subdivision, I am satisfied that there is a reasonable degree of consistency of evidence to support and adopt an occupancy rate of 2.9ppd. However the evidence indicates this finding should be reviewed as soon as the 2011 census figures are available. 43The final matter concerns the land values included in the s94 contributions. I am satisfied that the current values as imposed on the subject development are unreasonable. It is obvious from the evidence that the land values in this release are have fallen significantly, in the order of 40% - 50% since the peak in 2004 - 2005. As previously explained, I think a 45% reduction in Mr McGonigal's values would be appropriate so as to result in reasonable s94 contributions. 44Insofar as Mr King expressed concerns about alternate application of NDA instead of the DU approach for some categories, I am satisfied that the methodology stated in the CPs should remain but the amount be adjusted on the aforementioned basis. Presumably any debate on merits of this methodology would be addressed in the CP review. Reference cases 45I note that in final submissions Ms Pritchard referred to a number of previous cases dealing with s94 contributions. They include: * Rose Consulting Group v Baulkham Hills Shire [2003] 129 LGERA 165. * Lake Macquarie City v Hammersmith Management Pty Ltd [2004] 132 LGERA 225. * Toadolla Co Pty Ltd v Dumaresq Shire [1992] 78 LGERA 261. 46However they mainly deal with the principles of imposing reasonable contributions. But in the subject case, there is no challenge to paying contributions towards the 16 categories, instead the challenge is to the aforementioned variables, which I have assessed on the merits of the evidence. Therefore I do not consider there is any authorities arising that should be applied in the current matter. 47The parties are then directed to update the s94 schedule in accordance with these findings to enable final orders to be made. 48Following the publication of the findings, the parties requested a further mention on 8 December 2011 to discuss the application of the findings to the 16 categories for contributions. 49From the further submissions I have determined that 3 credits should be allowed for the existing lots as previously discussed. This credit should be applied to all categories that involve contributions towards increased services/facility in the release area. 50In regard to the next matter, I have determined that an occupancy rate of 2.9ppd should apply to all categories that are dependent on increased services/facilities. Therefore all such categories should be proportionally reduced. 51The remaining issue concerns the alteration to the land value components in the s 94CP. With regard to the open space land, the previous finding of a 45% reduction (effectively 49.4%) for the open space land should be applied. 52From the submissions I accept that there is a different situation with the drainage land component because council has apparently acquired a substantial portion of this land. Presumably some of this has been acquired within the downward market from 2005. However the valuers did specifically consider the remaining land to be acquired and agreed that there would be a marginal increase in costs. In the circumstances I consider it reasonable to rely on the agreed valuations, so there is no material change to this category. 53The remaining contested categories concern land values for community facilities and water quality works. An accurate adjustment of these categories is difficult due to the absence of specific valuation evidence. However usual valuation practice often involves comparative uses to establish land values. 54Following this approach it appears that the community facilities land is generally located within or adjacent to residential land. In the circumstances, I think it reasonable to adjust this land category by the 49.4% reduction determined for the residential land. With regard to the water quality land, I understand this could include land for drainage control (detention) and water quality control, which is closely associated with drainage land. Accordingly, based on the aforementioned valuers agreement of no reduction for the remaining drainage land, I think it reasonable that there be no reduction in this land category. 55As the parties have now finalised the s 94 contributions, I am satisfied the overall s94 contribution should be reduced and now make the following orders. Court orders 56The Court orders that: (1)The appeal is upheld. (2)Pursuant to section 96 of the Environmental Planning and Assessment Act 1979 (NSW) approval is granted to the modification of the Development Application DA/74/2010 for the subdivision of 31-43 Mataram Road, Woongarrah, New South Wales to 44 residential lots and 1 residue lot and 1 drainage lot, as set out in annexure "A". (3)The exhibits may be returned except 1, 12, A, M, N and O. R Hussey 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. Decision last updated: 09 December 2011