1 What’s happened?

On 27 July 2010 the Department of Planning released the draft State Environmental Planning Policy (Competition) 2010 (Draft SEPP) for public comment.

The stated aim of the Draft SEPP is to promote economic growth and competition and to remove anti-competitive barriers in environmental planning and assessment. It attempts to achieve this aim by:

  • prohibiting consent authorities from considering the commercial viability of proposed development, and
  • overcoming restrictions in planning instruments on the number of a particular type of retail premises and their proximity to other retail premises of that type.

 2 Who needs to know?

Property developers involved in the development of ‘commercial development’, which includes retail premises, business premises or office premises.

3 What is the current situation?

In determining a development application under Part 4 of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act), consent authorities are required by section 79C(1)(b) of the EPA Act (Section 79C(1)(b)) to consider the likely economic impacts of the proposed development in the locality.

Until 2005, the prevailing view in the Land and Environment Court was that, in considering economic impacts under Section 79C(1)(b), a consent authority could not consider:

  1. the economic viability of a particular proposal, or
  2. the effect of a particular proposal on the economic viability of a trade competitor (unless the proposed development would have an overall adverse effect upon the extent and adequacy of facilities available to the local community).

However, in 2005 the New South Wales Court of Appeal in Randall Pty Ltd v Willoughby Council (2005) 144 LGERA 119 cast doubts on this restrictive view and said that it is at least arguable that a broader construction of Section 79C(1)(b) should be adopted. Since Randall, the prevailing view in the Land and Environment Court appears to be that positive and negative economic impacts, whether overall, or specific impacts in a locality, must be considered under Section 79C(1)(b).

4 What will change?

4.1 Matters that a consent authority may not consider

It is far from clear whether the Draft SEPP will achieve its aim of promoting economic growth and competition. In fact, the likely result is to create confusion about the interaction of the Draft SEPP with existing case law on the consideration of economic impacts under Section 79C(1)(b).

The Draft SEPP seems to be an attempt to enshrine the position as it was in NSW before 2005 by providing in clauses 8 and 9 that a consent authority may not consider the matters set out in paragraphs 3(a) and 3(b) above for the purpose of determining a development application under Part 4 of the EPA Act.

However, clauses 8 and 9 of the Draft SEPP cannot override Section 79C(1)(b). It is not possible for subordinate legislation such as the Draft SEPP to override principal legislation: see section 32, Interpretation Act 1987 (NSW). Section 79C(1)(b) is to be given the interpretation which the Court of Appeal and the Land and Environment Court have given to it since 2005.

Also, in our view, clauses 8 and 9 of the Draft SEPP will create a conflict between section 79C(1)(a) of the EPA Act (Section 79C(1)(a)) on the one hand (which requires a consent authority to consider the provisions of a SEPP), and Section 79C(1)(b) on the other hand. This conflict will arise (if the Draft SEPP is made) because Section 79C(1)(a) will, in effect, prohibit the consideration of certain economic impacts on the one hand, and Section 79C(1)(b) will require consideration of those economic impacts on the other hand. In our view, this conflict is contrary to the stated aim of the Draft SEPP.

If the Draft SEPP is enacted in its current form, it is likely to give rise to litigation which revisits the decisions in NSW since 2005. But the outcome of that litigation would be far from clear.

4.2 Restrictions in environmental planning instruments

Clauses 10 and 11 of the Draft SEPP will overcome restrictions in planning instruments and development control plans on:

  1. the number of a particular type of retail premises in any commercial development, or in any particular area, or
  2. the proximity of a particular type of retail premises to other retail premises of that type.

This change results from one of the key recommendations of the New South Wales Government’s report, Promoting Economic Growth and Competition Through the Planning System (April 2010) (Report). The Report referred to regional and sub-regional strategies that effectively restrict the number of supermarkets and other retail outlets in a particular area. It said that removing such restrictions ‘will help ensure that restrictions are not codified into environmental planning instruments which prevent the potential for competition in regions or subregions.’ It also referred to a zone objective in the Liverpool Local Environmental Plan 2008 which aimed to limit retail development in the zone to one small scale supermarket. This objective was said to be ‘anti-competitive and should be removed’.

The Report also referred to a recommendation of the Australian Competition and Consumer Commission (ACCC) in 2008 that governments have regard to the likely impact of applications for additional supermarket space on competition between supermarkets in the area, with particular regard to whether the proposal will facilitate the entry of a supermarket operator not currently trading in the area. The Draft SEPP does not implement this ACCC recommendation.

The public exhibition period for the Draft SEPP closes on 26 August 2010.