A key legal issue that has been creating uncertainty for developers and local governments is the extent to which the development application can limit the scope of a development approval.
For example, if a development application for a retail complex contains proposed operating hours, but the Council fails to include a condition in the development approval that restricts opening to those hours, does the developer nonetheless have to comply with the restriction stated in its application, or can it operate 24/7?
On 12 February 2016, the Court of Appeal delivered its judgment inFraser Coast Regional Council v Walter Elliott Holdings Pty Ltd QCA 19, which provides clarity as to the circumstances in which the application material will be relevant.
The developer applied to the Council for a development approval for a material change of use for 86 relocatable homes.
The application included design plans showing example layouts of the relocatable homes, each having 2 bedrooms and a third “multi-purpose room”. However, the application emphasised that these plans were “examples” only and requested that they not form part of the approval. This was to maintain flexibility, as the final designs were to be determined through subsequent building approvals for each home. The application also requested that infrastructure charges for the development be calculated on the basis that each relocatable home was a 2 bedroom dwelling, resulting in a charge of $20,000 per dwelling.
The Council approved the application. The approval did not refer to the developer’s design plans, and did not limit the number of bedrooms per dwelling. Given this, the Council did not calculate infrastructure charges on the basis requested by the developer. Instead, the Council imposed a higher charge of $28,000 per relocatable home, on the basis that each was a 3+ bedroom dwelling.
The developer commenced declaratory proceedings challenging the infrastructure charges in the Planning and Environment Court (P&E Court). The P&E Court made the declarations, deciding that, in light of the design plans, the Council should have accepted that the application was for 2 bedroom dwellings. The P&E Court described it as “speculative” for the Council to assume that the “multi-purpose rooms” could be used as bedrooms.
The Council appealed the P&E Court’s decision to the Court of Appeal.
COURT OF APPEAL DECISION
The Court was faced with two competing legal principles.
- First principle: The first principle is that, in approving a development application, a Council only has power to approve the development that was applied for. It cannot approve a different development. The developer argued that this principle meant that the 2 bedrooms proposed in the application “mark[ed] out the boundary of the approval sought”, such that the Council could not approve 3+ bedroom dwellings.
- Second principle: The competing principle is that a development approval should generally be construed on its own, without reference to any other material. The only exception to this is where the material is incorporated into the approval (such as through a cross-reference). The rationale for this principle is that because a development approval attaches to land, binding subsequent landowners and third parties, it should be clear on its face, rather than having to be read in light of other documents (which those other persons may not be aware of).
In reconciling these principles, the majority of the Court emphasised that, at the developer’s request, none of the design plans had been incorporated into the approval. Given this, there was nothing in the approval to justify an assumption that each relocatable home would only have 2 bedrooms.
While the majority accepted that the first principle is legally valid, it considered that the principle cannot be relied upon by a developer to artificially alter the nature of the development. In this regard, President McMurdo stated: “To find otherwise would mean a developer, by referring to apples as oranges in material attached to a successful development application, could force a local authority to treat apples as oranges in subsequently determining infrastructure charges.”
As the final number of bedrooms would not be determined until the building approval stage, it followed that the Council was entitled to treat the development application as being for 3 bedroom dwellings.
The Court of Appeal’s decision provides some guidance as to how the two competing principles should be applied.
It confirms that, despite the first principle, matters stated in application material will not normally be relevant in interpreting an approval.
However, the facts of this case were relatively unusual, as normally a developer would not specifically request that design plans not form part of the approval.
The Court was clearly concerned to avoid an outcome that would allow a developer to inaccurately describe their development in a development application for the purpose of avoiding infrastructure charges. Given this, it is not clear that the same decision would have been reached if, for example, the developer had requested that the designs plans form part of the approval but the Council, for whatever reason, did not include them. Similarly, the decision does not resolve the opening hours example raised at the beginning of this article.
In such scenarios, it remains an open question as to how the two principles would be reconciled. On the current state of the case law, there are at least two potential approaches.
- The first approach, involving a strict application of the second principle, would be that unless the approval is for a fundamentally different development to that which was applied for (eg a materially different use), the application should be ignored. The benefit of this approach is that it would provide the most certainty to future landowners. However, in the opening hours example, it may allow the developer to take advantage of the Council’s failure to limit opening hours, provided that doing so was not involve a materially different development.
- The second approach is that, because the application defines the limits of what can be approved (as per the first principle), any approval must be read down so that it complies with those limits (eg the operating hours restriction).
This second approach is not strictly inconsistent with the Court of Appeal’s decision, because the developer specifically requested that the design plans not form part of the approval, which meant the plans did not amount to a restriction proposed in the application.
The benefit of this approach is that, by balancing the two principles, it better achieves equity between competing community and development interests.
The downside to this approach is that subsequent landowners may need to “audit” development approvals against the underlying application material. This could be a costly and complex exercise, particularly where the application includes numerous technical reports.
The significant difference between the practical outcomes under each approach shows that this issue is one that should be treated seriously by Councils and developers. Further, as the issue has not yet been definitively resolved, it is expected that there will be more litigation on this issue.
Until the uncertainty is resolved, the practical message for both Councils and developers is to ensure that there is clarity regarding any restrictions on development. A development application should be clear as to the use applied for, and any limitations on that use that are proposed by the developer. Similarly, Councils should ensure that any restrictions proposed in an application are captured in the approval, either through a general condition that cross-references the particular part of the application material or, preferably (for the sake of clarity), one that specifically states the relevant restriction