The recent Planning & Environment Court decision of Montrose Creek Pty Ltd and Manningtree v BCC serves as a valuable reminder why skimping on due diligence is not worth the risk.
The matter concerned a mixed use development located in Keperra that Brisbane City Council approved for Opal Wing Pty Ltd. The approved use commenced and the site was subsequently purchased by Manningtree and Montrose. The Development Permit included a standard condition requiring the payment of infrastructure contributions prior to the use commencing. In September 2010, Council discovered that an amount of over $400,000 in infrastructure contributions remained outstanding for the site. Council initially pursued Opal Wing but it entered into voluntary liquidation. Council then pursued Manningtree and Montrose for the outstanding infrastructure contributions. A Show Cause Notice was issued, followed by an Enforcement Notice served on the basis that the failure to pay the outstanding infrastructure contributions was a breach of a condition of an approval and therefore a development offence. The Enforcement Notice was appealed.
In their defence, Manningtree and Montrose asserted that:
- the standard planning and development certificate obtained during due diligence did not reveal the outstanding infrastructure contributions;
- they had no knowledge of the outstanding infrastructure contributions until receipt of the Show Cause Notice;
- the development approval conditions required that infrastructure contributions be paid “prior to the commencement of use or prior to endorsement of a Community Management Statement, whichever is sooner“;
- failure to pay the outstanding infrastructure contributions before Council endorsed the Community Management Statement and before the use commenced was a breach committed when the site was owned by Opal Wing and the breach should be actionable only against Opal Wing;
- they would suffer considerable financial hardship if required to pay the outstanding infrastructure contributions.
The Court determined that that timing requirement in the approval conditions (the words ‘prior to’) was the crystallisation of the date from which the offence had been committed, not the date of cessation of a liability. It further determined that an obligation to pay the infrastructure charges attaches to the land and binds the owner and any successors in title. Manningtree and Montrose’s failure to pay the infrastructure charges was a development offence and a continuing offence. To find otherwise would result in an unsustainable situation when the person benefiting from a development approval would not pay its share of the demand on infrastructure created by the development.
The Court was unsympathetic to Manningtree and Montrose’s arguments that they did not know the charges were outstanding. The Court considered that they could have discovered the contributions existed by obtaining a full development certificate but they elected to obtain a standard planning and development certificate instead. The Court found for the Council and ordered that Manningtree and Montrose pay the outstanding charges and be restrained from using the premises for the approved purpose.
The difference between obtaining a full development certificate and a standard development certificate is roughly $3,000 (costs for development certificates vary between Councils and the complexity of the approvals) plus an additional 20 business days. The additional time and costs incurred provides the recipient with a statement from Council about the fulfilment or non-fulfilment of each condition of a development approval in force (including details concerning any infrastructure agreements in place and advice concerning any prosecutions for a development offence in relation to the premises of which the local government is aware of outstanding fees and charges payable). The certificate can be used as evidence of the information it contains in a proceeding.
The additional cost of conducting thorough due diligence is insignificant when compared to the crippling outcome above, which unfortunately in not an isolated event.