The recent decision of the Supreme Court of Queensland in Trevorrow v Council of the City of the Gold Coast [2017] QSC 12 highlights practical ramifications for landowners who give their consent to another party making a development application in respect of their land, specifically, the liability to pay infrastructure charges.

Key points

  • A land owner can be held liable to pay any outstanding infrastructure charges related to a development approval, even in circumstances where the owner was not the applicant for the development approval which gave rise to the charges.
  • There are practical measures landowners can take to reduce their exposure and liability to pay infrastructure charges where their only involvement with a development approval is to provide owner’s consent to the making of the development application.

Facts

The plaintiff in this matter sought declaratory relief as to whether a registered owner of freehold land is liable to pay infrastructure charges arising out of a development approval granted by a local government for a material change of use, when the development application that resulted in the approval was made by a third party (albeit with the owner’s consent).

The subject land was situated at Burleigh Heads. In late 2006, Pro Skips Pty Ltd (an entity who leased part of the subject land) applied to the council for a development permit for a material change of use of the land for a waste transfer station.

At the time the development application was made, the Integrated Planning Act 1997 (IPA) was in force. Both the IPA at that time, and currently the Sustainable Planning Act 2009 (SPA), provide that where a party seeks to make a development application for material change of use in respect of land they do not own, written consent from the owner of the land is required for the making of that application.

The plaintiff gave consent to the making of the development application.

The Gold Coast City Council (Council) approved the development application in November 2008 and issued an infrastructure charges notice (ICN) under the council’s Priority Infrastructure Plan. Following an appeal, the council issued a negotiated decision notice and a second ICN, in substitution of the first ICN. The total charge payable pursuant to the second ICN was $356,718.84 and the due date for payment was prior to the use commencing.

The use the subject of the development approval had commenced before the development application was made.

The second ICN was not paid. In May 2013, the Council issued a rates notice to the owner of the land in the amount of $400,574.94 being the amount of the unpaid infrastructure charge.

The plaintiff commenced proceedings against the Council submitting that it did not have power to raise an infrastructure charge against the owner of land. This argument was confined to a consideration of whether section 639(1) of the SPA (as originally enacted and amended in 2012), properly construed, extended to an owner of land who was not the applicant for the development permit in question.

Decision

After establishing that the ICN (which, as mentioned, was given under the repealed IPA) transitioned to become an ICN under the SPA and that its effect is to be ascertained in accordance with the SPA, the Court turned its attention to former section 639 of the SPA.

It is important to note that relevant provisions in the SPA relating to infrastructure charges (including section 639) were substantially revised in 2014 by section 18 of the Sustainable Planning (Infrastructure Charges) and Other Legislation Amendment Act 2014. The unamended SPA regulated this case because the rates notice in question was issued in 2013. Section 639 as it was then, now appears in essentially the same terms in current section 664 of the SPA. Because of the similarities, the observations of the Court in this case remain pertinent.

Section 639(1) of the SPA (as originally enacted) provides that an infrastructure charge levied by a local government is, for the purposes of recovery, taken to be rates within the meaning of the Local Government Act.

As noted by the Court, whilst section 639(1) does not expressly say who and whether it is the owner of the land liable to pay such a charge, the mention that the charge is “taken to be rates” leads the exercise of interpretation to that point.

Ultimately the Court held that the plaintiff as the registered owner of land was liable to pay the ICN. In reaching this conclusion, the Court considered that relevant sections of the Local Government Act 1993 and Local Government Regulation 2012 were consistent with a conclusion that if an ICN is taken to be “rates”, a registered owner of land would be liable for the charge. The Court could find no textual or contextual justification to support the plaintiff’s contention that such a construction of section 639 should not be accepted where the owner is not the applicant for the relevant development permit.

In reaching this conclusion, His Honour Judge Jackson made the following observations:

  • The plaintiff’s suggested operation of section 639(1) of the SPA (as originally enacted) would encourage the use of qualifying words which was not present in the provision. His Honour noted that the drafter of the SPA had in other provisions distinguished between the applicant of a development permit as opposed to the owner, showing that this distinction has been made where relevant.
  • Section 639 is directed at the recovery of an infrastructure charge by the local government. As discoverable from the text, the purpose of the section is to make infrastructure charges recoverable as if it is rates, which are generally paid by the owner of the land.
  • When the development approval was given, it attached to the land under section 245 of the SPA and thereby bound the owner and the owner’s successors in title. The owner of the land was benefitted and burdened in that way.
  • Because an application for a development permit cannot be properly made without the owner’s consent, whether an infrastructure charge was levied is within the control of an owner of land, at least to some extent. Unless it was bargained away, the owner controlled the use of the land and an ICN for a material change of use was not payable until the change of use began.

What does this mean for landowners?

  • The decision in Trevorrow highlights that landowners who consent to development applications made in respect of their land can be held liable to pay unpaid infrastructure charges associated with a resulting development approval even if they are not the applicant for the development approval which resulted in the issuing of the ICN.
  • This case is the latest in a line of decisions which confirm that a seemingly innocent party can be liable to pay unpaid infrastructure charges. The basic principle being that those who take the benefit of an approval should pay their share of demand on infrastructure created by the development. [1]
  • There are increased risks for landowners who give consent to development applications to regularise uses already conducted on the land as the owner is no longer in a position to control the commencement of the use of the land and often commencement of the use triggers the timing for payment of infrastructure charges.
  • To avoid exposure, land owners should give serious consideration at the time of giving owner’s consent to entering into an agreement with the applicant to indemnify the land owner and confirm that the applicant is liable to pay any amounts payable pursuant to any resulting development approval, including, but not limited to infrastructure charges. Such arrangements ought to provide for contractual remedies in the event of a breach. While this will not necessarily avoid the need for an owner to pay any outstanding ICN, it will provide a landowner with remedies to pursue reimbursement or damages from the applicant.
  • A landowner might also consider, at the time of giving consent to a development application or prior to allowing a use to commence on the land, requesting some form of financial security or guarantee that could be called upon in the event of non-payment of infrastructure charges. This should be given serious consideration in circumstances where the infrastructure charges associated with the proposed development are significant, or could potentially be significant.
  • After owner’s consent is granted, there is reduced leverage regarding liabilities arising out of a development approval, other than the land owner’s ability to control whether or not the approved use commences. For example, if the development under the development approval has not started (and there is no written arrangement between the owner and another person proposing to buy the land) then the landowner can ask for the approval to be cancelled.
  • The sale of land triggers the need to carefully consider whether any indemnities or contractual arrangements need to be assigned.
  • Potential purchasers of land should make thorough inquiries with the owner of land to ascertain whether the owner has consented to the making of any development applications and if so, consideration ought to be given to the inclusion of a special condition about the liability for payment of any charges arising out of a resulting development approval. Particular care should also be taken to ascertain whether uses have commenced on the land for which there are outstanding infrastructure charges or for which a development approval may be required that could result in associated infrastructure charges being levied.