Calardu Penrith Pty Ltd v Penrith City Council & Anor [2010] NSWCA 189 (6 August 2010)

Last Updated: 16 August 2010

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Calardu Penrith Pty Ltd v Penrith City Council & Anor [2010] NSWCA 189
This decision has been amended. Please see the end of the judgment for a list of the amendments.

FILE NUMBER(S):
2010/107056

HEARING DATE(S):
26 July 2010, 27 July 2010

JUDGMENT DATE:
6 August 2010

PARTIES:
Calardu Penrith Pty Ltd
Penrith City Council
Pipven Pty Limited

JUDGMENT OF:
Hodgson JA Tobias JA McColl JA

LOWER COURT JURISDICTION:
Land & Environment Court

LOWER COURT FILE NUMBER(S):
L&E 40913/09

LOWER COURT JUDICIAL OFFICER:
Biscoe J

LOWER COURT DATE OF DECISION:
1 April 2010

LOWER COURT MEDIUM NEUTRAL CITATION:
Calardu Penrith Pty Ltd v Penrith City Council [2010] NSWLEC 50

COUNSEL:
A: A Galasso SC / M Wright
1R: J Robson SC / A Stafford
2R: J Griffiths SC/M Allars (Ms)

SOLICITORS:
A: Mallesons Stephen Jaques, Sydney
1R: Sparke Helmore, Sydney
2R: Norton Rose Australia, Sydney

CATCHWORDS:
ENVIRONMENT AND PLANNING – development control – consent – whether Council acted ultra vires in purporting to grant development consent – whether development had capital investment value exceeding $10 million – whether tenancy fit-out costs included in determination of capital investment value

LEGISLATION CITED:
Environmental Planning and Assessment Act 1979
Environmental Planning and Assessment Regulation 2000
State Environmental Planning Policy (Major Development) 2005

CATEGORY:
Principal judgment

CASES CITED:
Calardu Penrith Pty Ltd v Pipven Pty Ltd [2009] NSWLEC 119

TEXTS CITED:


DECISION:
Appeal dismissed with costs



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 2010/107056

L&E 40913/2009

HODGSON JA

TOBIAS JA

McCOLL JA

Friday 6 August 2010

CALARDU PENRITH PTY LTD v PENRITH CITY COUNCIL & ANOR

Judgment

1 HODGSON JA: I agree with the orders proposed by Tobias JA and I agree with his reasons. I would add the following.

2 In support of his contentions concerning Question 1 considered by Tobias JA, Mr Galasso SC for Calardu advanced the following argument:

(1) Under the Penrith Local Environmental Plan 1996 (Industrial Land) (the LEP), “shops trading principally in bulky goods” (with certain limitations) was a land use for a purpose for which development may be carried out only with development consent, while (with certain exceptions not here relevant) other “shops” was a land use for a purpose for which development was prohibited: see cl 9 of the LEP (Blue 26-27) and Zone No 4(b) (Blue 28-30).

(2) This development was consented to and thus was permissible only as a development for the purpose of shops trading principally in bulky goods.

(3) Therefore, what was necessary to “establish and operate the development” (within the definition of “capital investment value” in cl 3(2)(a) of the State Environmental Planning Policy (Major Development) 2005 (the SEPP)) was what was necessary to establish and operate it as bulky goods shops.

(4) Therefore, the costs necessary to establish and operate the development for this permissible purpose must include the costs necessary for the bulky goods shops to operate.

3 The development application made it clear that the consent sought was for the erection of a building, and that separate development consent would be sought for bulky goods shops within the building. Thus the relevant land use, for which development consent was sought, can be described with some particularity as “land use for the purpose of erecting and providing a building suitable for bulky goods shops, for the purpose of having bulky goods shops established and operating within it”. In my opinion, the land use so described does fall within the more general description of land use for the purpose of bulky goods shops; but even if it did not, it would fall within the category of any land use other than a prohibited land use (in the second dot point of cl (b)(ii) in Zone No 4(b)).

4 What is necessary to establish and operate a development consisting of the erecting and providing of a building suitable for bulky goods shops, for the purpose of having bulky goods shops established and operating within it, does not extend to the cost of fitting out those shops.

5 In relation to Question 4 considered by Tobias JA, the costs of constructing the partially completed reinforced concrete slab were in my opinion both necessary to establish the development proposed to be erected on it, and also fairly regarded as part of the same project.

6 It may be that if this slab had been constructed at a substantial time earlier, as part of a separate enterprise (perhaps by a different developer), the result could well be different. If that had been the case, the cost of the slab could well have been considered insufficiently connected with the development to be included in the costs necessary for its establishment and operation.

7 TOBIAS JA: The appellant, Calardu Penrith Pty Ltd (Calardu), owns certain land located on Mulgoa Road, Penrith upon which is erected a substantial bulky goods retail development known as the “Penrith Homemakers Centre” or the “Harvey Norman Homemakers Centre” (the Harvey Norman land). The second respondent, Pipven Pty Ltd (Pipven), owns land adjoining the Harvey Norman land upon which is also erected a large bulky goods retail development known as the Penrith SupaCenta (the Pipven land).

8 On 9 November 2009 the first respondent, Penrith City Council (the Council), granted a development consent in favour of Pipven to what was described in its development application as “Alterations and additions to the Existing Bulky Goods retail centre known as the ‘SupaCenta Penrith’ ” (the 2009 Consent). By summons filed on 1 December 2009 in Class 4 of the jurisdiction of the Land and Environment Court, Calardu sought, amongst other relief, a declaration that the 2009 Consent was void and of no effect.

9 In those proceedings Calardu advanced six grounds of invalidity of the 2009 Consent, all of which were rejected by the primary judge, Biscoe J, in his judgment of 1 April 2010 when he ordered that Calardu’s summons be dismissed with costs. Calardu now appeals to this Court against his Honour’s orders but on the basis of only one of the six grounds of alleged invalidity advanced by it at trial.

THE BACKGROUND FACTS

10 The Harvey Norman land owned by Calardu comprises Lots 1, 2, 4 and 5 in SP 72448 located on Mulgoa Road, Penrith. As I have noted above, erected on that land are buildings known as the Penrith Homemakers Centre or the Harvey Norman Homemakers Centre in which Harvey Norman, Domayne and Bunnings together with other businesses carry on trading as bulky goods retailers. The building has a gross floor area of 34,156m².

11 The Harvey Norman land adjoins the Pipven land which comprises Lots 10 and 11 in DP 1046110 and is known as 13-23 Patty’s Place, Jamisontown. Constructed upon that land is a large bulky goods retail development known as the Penrith SupaCenta (the SupaCenta) that has operated since about 2001 with approximately 27,561m² of gross floor area.

12 Both the Pipven land and the Harvey Norman land are relevantly zoned 4(b) Special Industry under Penrith Local Environmental Plan 1996 (Industrial Land) (the LEP). The effect of that zoning is that shops trading principally in “bulky goods” are permissible with consent but shops generally are otherwise prohibited.

THE HISTORY OF THE PROCEEDINGS IN THE LAND AND ENVIRONMENT COURT

13 On 7 November 2007 Pipven lodged Development Application No.07/1418 (the 2007 application) with the Council for the redevelopment of the Pipven land which, had it been implemented, would have increased the retail floor space of the SupaCenta by approximately 27,000m², i.e. it would have doubled in size (the 2008 development). The Council under delegated authority granted consent to the 2007 application on 16 July 2008 (the 2008 Consent). On or about 1 June 2009 a third party certifier approved an application made on Pipven’s behalf for a construction certificate in respect of the 2008 development.

14 In or about May 2009 Pipven, and its builder Broxtan Pty Ltd (Broxtan), commenced the 2008 development. Part of the work then carried out comprised the placing of fill to provide a foundational base for that part of the proposed development which was located adjoining the eastern end of the existing SupaCenta building. The work also included the pouring of a reinforced concrete slab on the eastern side of the existing building and the installation of drainage and plumbing.

15 That slab, which was to form part of the ground floor of the 2008 development, was only partially constructed when on or about 25 June 2009 Calardu commenced proceedings in the Land and Environment Court challenging the validity of the 2008 Consent and the construction certificate which had been issued pursuant thereto. These proceedings came before the primary judge who on 24 July 2009 vacated the hearing dates and adjourned the proceedings pursuant to s 124(3) of the Environmental Planning and Assessment Act 1979 (the EP&A Act) pending the lodgement and determination of a proposed further development application: Calardu Penrith Pty Ltd v Pipven Pty Ltd [2009] NSWLEC 119. A condition of that adjournment was that Pipven was required to undertake the surrender of the 2008 Consent upon the Council granting consent to the proposed further development application.

16 On 5 August 2009, Pipven lodged with the Council Development Application No.09/0746 (the 2009 application). That application relevantly proposed a single storey extension (the extension) to the existing SupaCenta building of approximately 6,468m² gross floor area, thus increasing the total gross floor area of the SupaCenta to approximately 34,029m². Further, the drawings included with the development application proposed the division of the extension into 10 new tenancies (separated by partitions and divisions) together with the creation of mall space.

17 On 9 November 2009 the Council granted consent to the 2009 application (the 2009 Consent). On or about 7 December 2009, in accordance with its undertaking, Pipven surrendered its 2008 Consent by Instrument of Surrender pursuant to cl 97 of the Environmental Planning and Assessment Regulation 2000 (the Regulation).

THE DESCRIPTION OF THE DEVELOPMENT THE SUBJECT OF THE 2009 CONSENT

18 As I have noted at [8] above, Calardu described the development in the 2009 application form in the following terms:

“Alterations and additions to the Existing Bulky Goods retail centre known as the ‘SupaCenta Penrith’.”

19 In the Introduction to the Statement of Environmental Effects (the SEE) which accompanied the application, the proposed development was described as

“alterations and additions to the existing bulky goods retail centre known as the ‘Supa Centa Penrith’, Pattys Place, Jamisontown.”

Reference was made to the 2008 Consent and to the fact that construction had commenced under that consent

“including site works, and the partial laying of the ground floor slab in the location of the development proposed in the application the subject of [the SEE]”.

20 Of particular significance to the issues in the appeal is the following part of Chapter 3.0 of the SEE which is headed “DESCRIPTION OF THE DEVELOPMENT” and which is relevantly in the following terms:

“Development consent is sought for alterations and additions to the existing bulky goods retail centre on the subject site, generally in accordance with the architectural plans prepared by Quattro architects, reduced copies of which are attached to this report in Appendix 2. The principal features are as described below.

Building works

1. A single storey ground floor extension (comprising 6,468m² GFA) of the existing bulky goods retail centre (bringing the total GFA on the site to 34,029m²) on a partially constructed reinforced concrete slab. Main external materials are painted finished concrete panels and metal deck roofing.

2. Division of the new building into mall space and ten tenancy units.

3. Minor alterations to existing external walls and internal tenancy walls at the eastern end of the existing Centre, adjacent to the above described works.

4. Rooftop plant screened by louvered acoustic screens to match roof sheeting colour.

Note:

● The general use of the proposed extension will be for bulky goods retailing and ancillary purposes. Specific uses will be subject to separate applications if and as required.” (Italics in original)

21 Chapter 3.0 of the SEE concludes with the following “Note”:

“Work already completed pursuant to Consent No 07/1418 [the 2008 Consent], including site works and preliminary ground level construction, does not form part of this application. This application seeks approval only for those works shown on the development and other plans accompanying this application that are new works.” (Italics in original)

22 The 2009 application was reported on by the Council’s Senior Environmental Planner (the Council planner) who described the application in his Executive Summary relevantly as follows:

“Council is in receipt of a Development Application which proposes alterations and additions to an existing bulky good retail development known as the ‘SupaCenta’.

The subject Development Application proposes a single storey addition to the existing bulky goods retail centre of 6,468m² Gross Floor Area (GFA). The proposed additions involve ten (10) separate tenancy units in a ‘mall’ style format. Separate Development Consent is proposed for the use and fitout of the individual tenants. ...”

23 The Council planner then set out a history of the site and, with respect to the 2009 application, noted against the sub-heading “Project Summary” the following description:

“Alterations and additions to an existing bulky goods retail development”.

Under the subheading “Alterations and Additions”, he described what was proposed as being, relevantly,

“● Erection of a single storey ground floor extension (comprising 6,468m² GFA) of the existing bulky goods retail centre (bringing the total GFA on the site to 34,029m²).

...

● Division of the new building into mall space and ten (10) tenancy units.

● Minor alterations to existing external walls and internal tenancy walls at the eastern end of the existing building, adjacent to the above described works.

...”

24 The Council planner recommended that the application be approved subject to the imposition of conditions. The Notice of Determination that was dated 13 November 2009 described the approved development as “Alterations and Additions to Existing Bulky Goods Retail Centre”. Apart from a condition which required the surrender of the 2008 Consent, Condition 3 was in the following terms:

“Prior to occupation of the building or a tenancy within the building, a separate development approval is to be obtained from Penrith City Council to use the building or each tenancy within the building/complex.” (Bold in original text)

The purpose of this condition, according to the Council planner’s report, was to ensure that the use of the proposed tenancies would be subject to separate assessment and approval for the purpose of consistency with the “bulky goods” definition in the LEP.

THE ISSUE BEFORE THE PRIMARY JUDGE THAT IS THE SUBJECT OF THE APPEAL

25 As I have already observed, Calardu advanced some six grounds of invalidity of the 2009 Consent. Of present relevance is the first of those grounds which was expressed in Calardu’s summons in the following terms:

“In purporting to grant the [2009] Consent, the [Council] acted ultra vires as it did not have jurisdiction to grant development consent to any development application for development having a Capital Investment Value exceeding $10 million. The development the subject of the [2009] Consent has a Capital Investment Value exceeding $10 million.”

26 In order to understand this ground of challenge that by common agreement in the appeal, although not at trial, involved the determination of a jurisdictional fact, it is necessary to refer to the relevant statutory provisions which govern it.

THE RELEVANT STATUTORY PROVISIONS AND THEIR APPLICATION TO THE ISSUE THE SUBJECT OF THE APPEAL

27 Part 2A of the EP&A Act was inserted by Act No. 36 of 2008. It is headed “Other planning bodies”. Division 3 is headed “Joint regional planning panels”. Section 23G is relevantly in the following terms:

“23G Joint regional planning panels

(1) The Minister may, by order published in the Gazette, constitute a joint regional planning panel for a particular part of the State specified in the order.

(2) A regional panel has the following functions:

(a) any of a council’s functions as a consent authority that are conferred on it under an environmental planning instrument,

...

(5A) Subject to the regulations, a regional panel is, in the exercise of functions conferred under subsection (2)(a), taken to be the council whose functions are conferred on a regional panel as referred to in subsection (2)(a).

(5B) A regional panel is to exercise functions conferred as referred to in subsection (2)(a) to the exclusion of the applicable council (subject to any delegation under this Act).

...”

Pursuant to s 23G(1), the regional panel, which covered the Council’s area, was constituted by the Minister as the Sydney West Joint Planning Panel (the Panel).

28 As s 23G(2)(a) provides, the functions of the Panel include any of a council’s functions as a consent authority as are conferred upon it by an environmental planning instrument. The relevant environmental planning instrument in the present case was State Environment Planning Policy (Major Development) 2005 (the SEPP). The following provisions of the SEPP are presently relevant:

“13B General development to which Part applies

(1) This Part applies to the following development:

(a) development that has a capital investment value of more than $10 million,

...

13F Council consent functions to be exercised by regional panels

(1) A regional panel for a part of the State may exercise the following consent authority functions of the council ... for development to which this Part applies:

(a) the determination of development applications ...

(2) However, the following functions of a council as a consent authority are not conferred by this clause on a regional panel:

...

(d) the receipt and assessment of development applications,

...

(Emphasis added)

29 The expression “capital investment value” in cl 13B(1)(a) was defined non-exhaustively in cl 3(2)(a) of the SEPP relevantly in the following terms:

“(2) For the purposes of this Policy:

(a) the ‘capital investment value’ of development includes all costs necessary to establish and operate the development, including the design and construction of buildings, structures, associated infrastructure and fixed or mobile plant and equipment ...”

30 The jurisdictional issue that arose in the present case was whether the “development” the subject of the 2009 Consent had a “capital investment value” of more than $10 million. If it did then the 2009 Consent was invalid as it would have been granted by the Council without power to do so as that power resided in the Panel pursuant to cl 13F(1)(a) of the SEPP to the exclusion of the Council: see s 23G(5B).

31 Calardu submitted that, on the evidence, the primary judge should have held that the capital investment value of the development exceeded $10 million whereas the Council and Pipven submitted to the contrary. As will be seen, the resolution of that issue essentially turned upon whether the “capital investment value” of the “development” the subject of the 2009 Consent included the estimated tenancy fit-out costs of the extension as well as the costs previously incurred in the carrying out of works under the 2008 Consent including, in particular, the cost of the partial construction of the ground floor reinforced concrete slab. Calardu accepted both at trial and on appeal that it was necessary for the cost of both of these items to be included in the determination of “capital investment value” for it to succeed in establishing that the threshold of $10 million had been exceeded.

32 Calardu alternatively submitted that even if the tenancy fit-out costs were to be prima facie excluded from the determination of the capital investment value of the development the subject of the 2009 Consent, nevertheless, they should be included as the 2009 application was a “staged development application” within the meaning of cl 13G of the SEPP which relevantly provided as follows:

“13G Staged development functions

(1) The functions of a council conferred on a regional panel extend to the determination of the separate development applications that form part of a staged development application, if:

(a) the estimated capital investment value of the whole of the development likely to be covered by all the applicable development applications is an amount specified under clause 13B(1)(a)-(d) in relation to that type of development, or

...”

33 The expression “staged development application” is defined in s 83B of the EP&A Act which relevantly provides:

“(1) For the purposes of this Act, a staged development application is a development application that sets out concept proposals for the development of a site, and for which detailed proposals for separate parts of the site are to be the subject of subsequent development applications. The application may set out detailed proposals for the first stage of development.

(2) A development application is not to be treated as a staged development application unless the applicant requests it to be treated as a staged development application.”

It was common ground that the reference in cl 13G(1) of the SEPP to “a staged development application” was to such an application as defined in s 83B.

THE DISPUTED COSTS

34 Each of the parties called a quantity surveyor to estimate the capital investment value of the development the subject of the 2009 Consent. The quantity surveyors called on behalf of the Council and Pipven excluded from their estimate the value of the works carried out pursuant to the 2008 Consent as well as the estimated tenancy fit-out costs, which were to be the subject of future development applications as required by Condition 3 of the 2009 Consent: see [24] above.

35 On the other hand Mr Mee, the quantity surveyor engaged by Calardu, included both items attributing the amount of $1,645,489 to the works carried out pursuant to the 2008 Consent and $1,316,405 to future tenancy fit-out costs. Those figures were not in dispute if otherwise it was appropriate to include them as part of the capital investment value of the development.

36 However, it is of some relevance to understand the basis upon which Mr Mee determined his estimate of tenancy fit-out costs. His estimate of the capital investment value of the development the subject of the 2009 Consent was contained in a report dated 2 October 2009. In that report he noted, relevantly, that with respect to the costs of tenancy fit-out works, he had made a “Nominal allowance only” of $135 per m² of retail floor area which fell within a range from $100 to $250 plus per m² subject to the nature of the type of tenancy. The total amount that he allowed for tenancy fit-out was $800,226 (all figures are exclusive of GST as the definition of “capital investment value” requires). That figure comprised the following elements:

[<img src="/scjudgments/2010nswca.nsf/files/2010NSWCA189.gif/$file/2010NSWCA189.gif" alt="tenancy fit-out costs">]

37 To those items Mr Mee added an item for ceiling finishes to tenancies in an amount of $287,712 as well as a further item referred to in the joint report of the quantity surveyors as “Margins & Adjustments” in an amount of $228,467, giving a total for costs of tenancy and fit-out works of $1,316,405. It should also be noted that Mr Mee included a sum of $574,425 for internal tenancy division walls, but it was not suggested that that amount was not properly included in Mr Mee’s estimate of the capital investment value of the development.

38 In his oral evidence, Mr Mee agreed in cross-examination that he had arrived at his estimate of tenancy fit-out costs first by relying upon his experience and, second, by having a site inspection of the existing tenancies in the SupaCenta to determine the level of fit-out that had been achieved in the existing facility so as to ensure that he had made reasonable assumptions.

39 When requested to provide his understanding of the word “operate” in the definition of “capital investment value”, Mr Mee stated that he had assumed that it related to the facility being fully tenanted and having its doors open on day one, although he excluded any future running and operating costs. He explained his concept of “doors open on day one” to mean doors open on day one for customers to come in and specifically shop at tenancies within the completed extension in which tenancy spaces were let, tenants were ready for business and the doors were open for customers.

40 It was for the foregoing reasons that he included tenancy fit-out costs in his estimate on the basis that they were required to be included by virtue of the reference in the definition of “capital investment value” to “all costs necessary to establish and operate the development” (my emphasis).

THE REASONS OF THE PRIMARY JUDGE

41 The primary judge made the following findings relevant to the present issue.

(a) Under cl 13B(1)(a) of the SEPP the time as at which there should be a determination of whether the relevant development had a capital investment value of more than $10 million is when the development application is lodged. In the present case, the 2009 application was lodged with the Council on 5 August 2009 and Mr Mee’s estimate of the capital investment value of the development was made as at September 2009 whereas the Council determined to grant consent on 9 November 2009.

I interpolate so as to enable the issue to be put to one side that it was not suggested that there was any relevant difference in costs between August 2009 and November 2009. However, in response to Pipven’s submission that even if Calardu succeeded on the appeal, the primary judge’s dismissal of its summons should not, as a matter of discretion, be disturbed, Calardu submitted in Ground 6 of its Amended Notice of Appeal that his Honour’s finding that the capital investment value of the development was to be determined as at the lodgement date of the development application, was in error. In its written submissions in reply Calardu submitted that the correct date was the date of determination when the relevant consent authority (be it the Council or the Panel) purported to exercise jurisdiction to grant the consent.

However, as I am of the view that it is unnecessary to deal with the discretion argument, it follows that it is equally unnecessary, and in any event inappropriate on the facts of the present case, to determine whether his Honour was correct in his finding that the capital investment value was required to be determined for the purpose of cl 13B(1)(a) of the SEPP as at the lodgement date of the relevant development application.

(b) Under the definition of “capital investment value” in cl 3(2)(a) of the SEPP, the word “capital” as well as the inclusive words of the definition required the conclusion that the “costs necessary to establish and operate the development” were to be confined to costs of a capital nature. Calardu also challenges this finding in Ground 5 of its Amended Notice of Appeal.

(c) While the “development” to which the definition refers should be identifiable from the particular development application under consideration, that development is not necessary confined by the four corners of that application given that the definition of “capital investment value” includes the costs of “associated infrastructure” and of “fixed or mobile plant and equipment”, items that may well not be found in a particular development application. This construction is necessary to avoid the device of making components of a particular development the subject of separate development applications in order to avoid the vesting of jurisdiction in a regional panel. This finding is not challenged as such.

(d) The definition is neutral as to who is to incur the relevant costs: it need not be the proponent of the development. Pipven challenges this finding in its Notice of Contention.

(e) The words of the definition are “costs necessary to establish and operate the development”, not “operating costs” or “costs in operating” which suggests the definition contemplates only capital costs which bring the development to the point where it is “(finally) established and operations are to commence”. There is some contention with respect to this finding.

(f) The tenancy fit-out costs included by Mr Mee were of a capital nature. Pipven also challenges this finding in its Notice of Contention.

(g) The tenancy fit-out costs included by Mr Mee were not costs of the subject development and should therefore have been excluded from the determination of the capital investment value of the development. This finding is challenged in Calardu’s first ground of appeal.

(h) The works completed pursuant to the 2008 Consent were essential for the building proposed by the 2009 Consent to be established and to operate. Accordingly, the capital investment value of the development included the costs already incurred pursuant to the 2008 Consent. This was because first, the extension was proposed to be constructed upon, and therefore included, the partially constructed reinforced concrete slab referred to in the 2009 application and, second, the slab was constructed for the purpose of an extension of the existing bulky goods warehouse, albeit pursuant to the 2008 Consent. These facts in effect mandated that those costs were “necessary to establish and operate the development” the subject of the 2009 Consent within the meaning of the definition of “capital investment value” in cl 3(2) of the SEPP. Both the Council and Pipven challenged this finding in their respective Notices of Contention.

(i) The development the subject of the 2009 application was not a “staged development application” within the meaning of cl 13G(1) of the SEPP given that it was conceded that the expression “staged development application” in cl 13G(1) had the same meaning as in s 83B of the EP&A Act. Further, s 83B(2) was fatal to Calardu’s contention as the proponent of the development did not request that the 2009 application be treated as a staged development application. These findings are challenged by Calardu in its second ground of appeal.

42 Accordingly, the appeal raises five questions for determination, namely, whether

(a) Mr Mee’s tenancy fit-out costs were costs of the development and therefore within the definition of “capital investment value”;

(b) the tenancy fit-out costs were of a capital nature;

(c) the capital investment value of the development was confined to costs incurred by the proponent of the development;

(d) the costs incurred pursuant to the 2008 development consent were costs captured by the definition of “capital investment value”; and

(e) the 2009 application was a “staged development application” within the meaning of s 83B of the EP&A Act.

QUESTION 1: Were Mr Mee’s estimated costs of tenancy fit-out costs of the development and, therefore, within the definition of “capital investment value”?

The primary judge’s reasoning

43 Having determined (at [73]) that the tenancy fit-out costs identified by Mr Mee were “of a capital nature”, nevertheless his Honour (at [74]) considered that they were not costs of the subject development and therefore did not fall within the definition of “capital investment value”. His reasoning to this conclusion was as follows:

“... The subject development is for alterations and additions to the existing bulky goods retail centre. That development includes that which was done under the 2008 consent but stops short of any specific tenancy development use in the future. Those tenancy fit-out costs are not ‘costs necessary to establish and operate’ the subject development. The tenancy fit-out costs are those that would be incurred for specific tenancy uses pursuant to future development consents. The 2009 development application stated that: ‘Specific uses will be subject to separate applications if and when required’. Tenancy fit-out costs may vary substantially according to the purpose for which a tenant may wish to put a particular tenancy. This reinforces the conclusion that the developments to which such costs relate are defined by reference to the development described in future development applications relating to particular tenancies and are not part of the subject development.”

The submissions of the parties

44 Calardu’s submissions on this issue may be summarised thus:

(a) The definition in cl 3(2)(a) of the SEPP of “capital investment value” includes “all costs necessary to establish and operate the” relevant development;

(b) The “development” in the present case was for alterations and additions to an existing bulky goods centre: in other words, it was to provide an extension to the existing centre for the purpose of the retailing of bulky goods by tenants;

(c) Accordingly, the development could not be established and operate (within the meaning of the definition) as a bulky goods centre unless and until the new tenancies to be added by the development were at a stage where they were “(finally) established and operations are to commence”, these being the primary judge’s words at [68] of his reasons (referred to at [41(e)] above);

(d) Thus in order for the extension to “operate” as a bulky goods centre, it was necessary, notwithstanding that future tenancies were to be the subject of separate development applications, for the costs of the tenant’s fit-out to be regarded as necessarily part of the cost of establishing and operating the extension for the purpose for which it was to be constructed. In this regard, the fact that the definition includes “all costs” supports this proposition;

(e) As the nature of the development (bulky goods retailing) required not only the construction of the built form but also the introduction of tenants whose activities satisfy the definition in the LEP of “bulky goods”, it followed that the fit-out costs of those putative tenants were required to be incurred in order for the “development” to “operate” for the purpose for which it was designed.

45 In its written submissions Calardu stated (at paragraph 44) that the relevant question was whether the fit-out costs were necessary to establish and operate the development. The application of the definition could be tested by simply asking the following question:

“Can an extension to an existing bulky goods centre operate as a bulky goods centre before the new tenancies are (finally) established and operations are to commence?”

46 It was submitted that the answer to that question must be in the negative because until the tenancies have been fitted out, bulky goods retailing operations could not commence to operate.

47 In its oral submissions on the appeal, Calardu reiterated this point by emphasising first, that the “development” to which the definition of “capital investment value” referred, extended beyond the four corners of the particular development application as the primary judge had held; second, that the application in the present case was, in any event, not one for a nondescript building but for a building designed for a particular purpose; third, that that purpose was bulky goods retailing; fourth, that what was consented to was an extension for that purpose which was proposed to contain 10 bulky goods tenancies; and fifth, the development so described could not commence to operate as an extension to the existing retail centre unless the tenancies were fitted out to an extent sufficient to enable the retailing of bulky goods to commence.

48 It will thus be appreciated that the focus of Calardu’s submissions was upon two matters: first, that the relevant development for the purpose of determining its “capital investment value” as defined was as an extension to an existing bulky goods centre for the purpose of operating as part of that centre; and, second, that the development could not “operate” for that purpose unless and until tenancy fit-out costs were incurred to enable the commencement of retailing. In other words, what was being proposed was a series of bulky goods shops that could only operate as such if the fit-out costs of the putative tenants were incurred.

49 The submissions of Pipven may be summarised as follows:

(a) The tenancy fit-out costs identified by Mr Mee were generic costs relating to wall finishes, floor finishes, ceiling features, fittings, signage and feature lighting. However, they were costs which were non-tenancy specific and, therefore, could not relate to any specific tenancy use;

(b) The use of generic costs in this manner was inconsistent with Calardu’s submission that the capital investment value of a development included the costs of fitting out new tenancies because those tenancies must be fitted out and made ready for occupation by tenants before the extension as a bulky goods centre could be said to have been established and be able to operate as such;

(c) It followed that these generic costs, being non-tenancy specific, could not have included customised floors, walls and suspended ceilings as these would depend upon the standard of finish required by a particular tenant, which was then both uncertain and unknown;

(d) Clause 13B of the SEPP relevantly applied to the “development” that has a capital investment value of more than $10 million. By cl 13F(1) where that threshold was satisfied, the Panel was required to exercise the function of determining the development application in respect of that development which had that capital investment value;

(e) Accordingly, the words “development”, “development applications” and “development consents” were employed in the relevant provisions of the SEPP to refer to particular developments being those types of development to which Part 3 of the SEPP applied with the consequence that the “development” whose capital investment value was to be determined, was to be generally defined by the development application in respect of which consent was sought;

(f) Furthermore, in cl 3(2)(a) of the SEPP, the word “necessary” related to the particular development whose capital investment value was to be determined and included only those costs which were “necessary” to establish and operate that particular development. On the facts of the present case, the relevant development for the purpose of determining its capital investment value was an extension to an existing bulky goods retail centre known as the SupaCenta. It was, in essence, no more than an extension or addition to an existing building;

(g) The fact that a particular use was proposed with respect to that extension or addition and which required the proposed users or tenants to make separate development applications in respect of their proposed uses, did not require that the costs necessary for the establishment and operation by those tenants of those uses be included as part of the costs necessary to establish and operate the development in respect of which consent was sought and granted;

(h) Accordingly, the tenancy fit-out costs of each applicant for development consent to use part of the extension for bulky goods retailing would be a cost necessary to establish and operate the development the subject of that application. It was not a cost necessary to establish and operate the extension or addition itself;

(i) The word “operate” in the definition of “capital investment value” must have a meaning which is referrable to the development whose capital investment value is to be determined. In the present case, that development was the extension which was no more than a building although the costs necessary to establish and operate it as a building would include more than the costs of concrete, bricks and steel but also electrical, mechanical, engineering and architectural costs required to establish it as a completed whole ready to be leased to its end users;

(j) It followed that, in the context of the particular development the subject of the 2009 application, the development to which that application refers would be established when it was fully constructed and would “operate” within the meaning of the definition when it was available to tenants for the purpose of being fitted out to their particular requirements;

(k) Accordingly, the primary judge was correct in rejecting the generic tenancy fit-out costs estimated by Mr Mee as constituting costs necessary to establish and operate the relevant development for the purpose of determining its capital investment value.

50 The Council adopted Pipven’s submissions. In addition, it submitted that:

(a) The term “development” was defined in s 4(1) of the EP&A Act to include, amongst other things, the use of land on the one hand and the erection of a building on the other. The present development only sought consent to the erection of a building – that was the “development” in respect of which its capital investment value needed to be determined;

(b) Although “development” in cl 13B is not defined in the SEPP, subject to any contrary intention, which was not asserted to exist, the word was taken to have the same meaning that it had in the EP&A Act;

(c) The development was described in the development application as one for “[alterations] and additions to the Existing Bulky Goods retail centre ...”. The proper characterisation of this development was one for the purpose of establishing a retail centre, the floor space of which could be leased for bulky goods retailing;

(d) The proponent “establishes and operates” such a development by constructing the retail centre and taking it to the point where it can be leased to bulky goods retail tenants;

(e) If “capital investment value” were construed to include the fit-out costs of individual tenancies, then cl 13B(1)(a) would be unworkable due to the uncertainties involved in determining tenancy fit-out costs for tenants whose identity and particular use were unknown. In this respect it was insufficient to assess the tenancy fit-out costs on a generic basis as Mr Mee had attempted to do;

(f) Given that the determination of the capital investment value of a particular development was a jurisdictional fact the determination of which had the consequence of identifying the lawful consent authority to determine the development application in question, it followed that the costs necessary to establish and operate the development should, for the purpose of the definition of “capital investment value” be at least capable of determination with reasonable certainty and, further, should relate to the particular building identified in the development application which was to be the subject of determination by the appropriate consent authority;

(g) There was nothing “generic” with respect to the determination of the costs necessary to establish and operate the particular building proposed in the 2009 application. Such costs could be determined with reasonable certainty. However, the same could not be said about the proposed tenancy fit-out costs which Mr Mee had assessed on a generic basis without reference, which would have been impossible, to the particular bulky goods use of the ultimate tenants of the proposed retail spaces in the development;

(h) Accordingly, the relevant costs in the present case were those necessary to “establish and operate” the actual building which was the subject of the 2009 application rather than the costs necessary to establish and operate the bulky goods retail uses of unknown individual tenants which were required to be the subject of separate development applications.

The tenancy fit-out costs should be excluded

51 In my opinion Calardu’s submissions should be rejected and those of Pipven and the Council accepted. It is critical for the exercise required by cl 13B(1)(a) of the SEPP that the “development”, the capital investment value of which is to be assessed in accordance with the definition of that expression, should be capable of accurate identification. True it is, as the primary judge found, that that development and, certainly, the cost necessary to establish it, may go beyond the four corners of the development application depending, no doubt, on its detail.

52 The type of detail that would be included in an application for a construction certificate would, more often than not, be missing from a development application. I exemplify in this context such matters as details relating to plumbing, water supply points, mechanical requirements such as for air conditioning, electrical wiring, the provision of wet areas and amenities, the provision for an electricity substation and matters of that nature.

53 In my opinion, all those costs, including those not of a capital nature such as consultants fees, are required to be included for the purpose of determining the “capital investment value” of the development as defined. In this respect, I respectfully disagree with the primary judge that such costs are confined to capital items.

54 Nevertheless, it is the identification of the consent authority to determine the particular development application to which clauses 13B(1)(a) and 13F(1)(a) are directed. In the present case it is clear that the development in respect of which consent was being sought, whichever authority was empowered to grant it, did not include any particular bulky goods retail use of any part of the extension. Certainly, the extension was designed with a particular purpose in mind but, as is apparent from the various descriptions of the development by the proponent as well as by the Council planner to which I have referred at [18]-[24] above, what was being proposed was the erection of a building divided into mall space and 10 tenancy units together with minor alterations to the existing external walls and internal tenancy walls at the eastern end of the existing building to enable the two to be married together.

55 In this context, it needs to be recollected that Mr Mee included in his assessment of the capital investment value of the development, and which was not the subject of challenge, some $574,425 for internal tenancy division walls. The application documents made it plain that although the general use of the proposed extension would be for bulky goods retailing, specific uses would be the subject of separate development applications and the Council imposed a condition upon its consent to give effect to that intention and for good reason: see [24] above.

56 When those separate applications are made, they are to include as part of the cost of the development the subject of those applications (as required by cl 1(h) of Schedule 1 to the Regulation) the estimated cost of the development that, in the present context, would be the applicant’s fit-out costs. Although the expenditure of those costs may be necessary to “establish and operate” the particular use the subject of such a development application, it was not a cost necessary to “establish and operate” the development, being the extension per se whose capital investment value was at issue in the present case.

57 In this respect I accept the submissions of Pipven and the Council that the word “operate” where used in the definition of “capital investment value” refers, in the present case, to the building the subject of the application being in such a condition as to be available to be occupied by bulky goods retail tenants. That did not require the inclusion of the fit-out costs of those tenants let alone the inclusion of such costs estimated on a generic basis. It did include the cost of the internal tenancy division walls about which there was no issue.

58 Accordingly, in my opinion, the primary judge was correct in finding at [74] of his reasons that the tenancy fit-out costs estimated by Mr Mee should be excluded from the determination of capital investment value of the subject development.

59 As it was conceded by Calardu that in order for its appeal to succeed, it was necessary for it to overturn the primary judge’s finding to which I have referred, it follows that its failure to do so mandates that the appeal be dismissed. However, as the other questions were fully argued, I will deal shortly with them to the extent I consider appropriate.

QUESTION 2: Were the tenancy fit-out costs identified by Mr Mee of a capital nature?

60 The primary judge held (at [73]) that tenancy fit-out costs were of a capital nature. This was challenged by Pipven in its Notice of Contention. The issue that seems to have arisen is whether the particular tenancy fit-out costs identified by Mr Mee were of a capital nature, it being submitted by Pipven that they were not. At paragraph 4.9 of its written submissions Pipven contended as follows:

“Generally the advantage sought to be achieved by a tenancy customised fit-out (as opposed to a basic fit-out offered by the developer) is to display goods of the kind sold by the particular shop to their best advantage, or to enable provision of particular kinds of services. A tenancy fit-out is of a temporary nature, periodically renewed to meet the practical changing retail business needs of the lessee. A tenancy fit-out does not secure a lasting asset. It is not a cost of a capital nature.”

61 It was therefore submitted that in the present case the tenancy fit-out costs were not of a capital nature and, therefore, did not fall within the definition of “capital investment value” for that reason.

62 In my opinion it is neither necessary nor appropriate to determine whether the tenancy fit-out costs in question were of a capital nature as I am of the opinion that, contrary to the finding of the primary judge at [71] that a reference to “costs” in the definition of “capital investment value” is a reference to costs of a capital nature, the costs referred to in that definition are not so confined. They would, for instance, include design fees as well as the fees of other consultants. Apart from expressing that view, it is unnecessary to take this issue further.

QUESTION 3: Was the capital investment value of the development confined to costs incurred by the proponent of the development?

63 The primary judge found at [68(f)] of his reasons that the definition included costs incurred by other than the proponent of the development. This finding was challenged by Pipven in its Notice of Contention. In my opinion the primary judge was correct insofar as he held that the relevant costs to be included in the determination of capital investment value were not necessarily confined to those incurred by the proponent of the development, by which I assume he was referring to the developer. No doubt it would be a rare case where those costs were not incurred by the developer, but the definition is directed to determining all the costs necessary to establish and operate the development and, as his Honour noted, was neutral as to who was to incur them. In my view, he was correct to so find.

QUESTION 4: Were the costs incurred pursuant to the 2008 Consent to be included in the determination of the capital investment value of the development the subject of the 2009 Consent?

64 The primary judge at [64] and [70] of his reasons, answered this question in the affirmative upon the basis that first, the works in question, and in particular the partially completed reinforced concrete slab, were essential to enable the building proposed by the 2009 Consent to be established and to operate; and, second, those works were for the purpose of the 2009 development as the building works identified in Chapter 3 of the SEE specifically described the development as a single storey ground floor extension “on a partially constructed reinforced concrete slab”. Both the Council and Pipven challenged this finding in their Notices of Contention.

65 Their submissions on this issue may be summarised as follows:

(a) The capital investment value of the development to be assessed did not include the cost of partially completing the concrete slab pursuant to the 2008 Consent which had been incurred prior to the lodgement of the 2009 application;

(b) The SEE specifically noted that the work already completed pursuant to the 2008 Consent, including site works and preliminary ground level construction, did not form part of the 2009 application: see [21] above;

(c) In any event, the costs of those works were properly described as sunk costs which had already been incurred, whereas the costs referred to in the definition of “capital investment value” contemplated prospective costs of a development which was yet to be constructed or even consented to;

(d) As the partially completed slab was lawfully constructed pursuant to the 2008 Consent, the costs of that work were, in effect, spent and could not form part of the costs of the development which was at issue in the present proceedings;

(e) Given that the costs in question were sunk costs, their inclusion for the purpose of determining the issue raised by cl 13B(1)(a) of the SEPP was not consistent with the use of the word “investment” which contemplated prospective rather than retrospective costs necessary to establish the development in respect of which its capital investment value was required to be determined.

66 Calardu submitted that as the works under consideration were necessary to establish and operate the extension of the existing bulky goods retail centre, there was a factual overlap between the prior works and the contemplated works, both of which were necessary to enable the extension to be constructed.

67 Although expressly not made part of the 2009 application, nevertheless as the SEE made clear, the proposed building was to be erected upon the partially constructed reinforced concrete slab so that the latter was intimately connected with the former and, therefore, had no independent function except as part of what was proposed.

68 In my opinion his Honour was correct to include the costs with respect to the partially completed slab as part of the capital investment value of the subject development. He was justified in so doing because, as Calardu submitted, there was an intimate connection between the development proposed and the works that had been completed. One could not exist without the other.

69 This is not to say that there may not be cases where a development is dependent upon an existing building but the costs of erecting that building are too remote to be included as a cost of establishing the development under consideration. Thus, for instance, one might have a development application to renovate, at substantial cost, the shell of a very old heritage building. Those renovations could not take place but for the existence of that shell. However, it may be nigh impossible to determine the original cost of constructing that shell and, even if that cost were ascertainable, its expenditure would be too remote in time. Therefore, the incurring of that cost could properly be regarded as too remote from the proposed renovation as to justify its inclusion in the capital investment value of that renovation.

70 In other words, it is a question of fact and degree as to whether what the Council referred to as the “sunk costs” are to be included as part of the total costs necessary to establish and operate the development whose capital investment value is required to be determined. In the present case the partial construction of the slab and the making of the 2009 application occurred within months of each other. The assumption underlying the plans of the building the subject of that application was to utilise that slab as part of its foundations. Its costs were readily ascertainable and it was thus an intimate and necessary component of the development the subject of that application. No question of remoteness therefore arose.

71 In the foregoing circumstances, in my opinion the primary judge was correct to include those costs in his determination of the capital investment value of the subject development. Pipven and the Council’s contention to the contrary should, therefore, be rejected.

QUESTION 5: Was the development a “staged development application”?

72 The primary judge at [78] of his reasons considered that Calardu’s submission that the 2009 application was a “staged development application” as defined in s 83B of the EP&A Act was “untenable”. Calardu challenged this finding, it being its second ground of appeal.

73 In support of that challenge, Calardu submitted that:

(a) the SEE stated that the tenancy fit-out would be the subject of individual, separate future development applications and that the Council imposed a condition on the 2009 Consent requiring that this be the case;

(b) the statement in the SEE constituted a request that the development application be treated as a staged development application within the meaning of s 83B(2) of the EP&A Act. In this regard there was no statutory requirement as to what should constitute such a request and there was nothing to suggest such a request could not be the subject of implication from the manner in which a proponent puts forward its development application and describes its development in its SEE;

(c) for the purpose of s 83B(1) Pipven specifically requested that the concept of a bulky goods retail extension be determined as part of the 2009 application and that subsequent stages of tenancy (so as to fit within the definition of “bulky goods”) be the subject of subsequent applications. Both ss 83B(1) and (2) were therefore complied with;

(d) the nature of the development (bulky goods retailing) required the construction of the built form and the introduction of tenants whose activities satisfied the definition of “bulky goods”. Accordingly, the 2009 application truly formed the first stage (the built form stage) of the overall development whereas the second stage was the applications by individual tenants to use a unit in the building for their particular bulky goods retailing operations.

74 In my respectful opinion the development the subject of the 2009 application was, certainly, for the construction of the built form but it did not include the introduction of tenants whose activities satisfied the definition of “bulky goods”, although this was contemplated. The development was, as I have found, no more than an application to erect a particular building. It did not include the use of that building for any particular bulky goods retail purpose although its general use for bulky goods retailing was clearly proposed.

75 However, the difficulty faced by Calardu is that s 83B(1) provides that a staged development application is one that “sets out concept proposals for the development of a site”. Although such an application may set out detailed proposals for the first stage of that concept development, nonetheless it must still be one that sets out concept proposals. In my opinion the 2009 application was the very antithesis of a concept proposal. It was a concrete proposal. For that reason alone the application was not a staged development application.

76 In any event, I agree with the primary judge that Calardu’s submissions to the effect that s 83B(2) was complied with is simply untenable. To suggest, as Calardu did, that the note in the SEE to the effect that specific uses would be the subject of separate development applications if and as required and the condition imposed by the Council requiring such applications constituted a request, even an implied request, that the 2009 application be treated as a staged development application, is without merit.

77 It follows that the primary judge was correct in rejecting the submission that the 2009 application was a staged development application.

CONCLUSION

78 It follows from the foregoing that each of Calardu’s grounds of appeal should be rejected as a consequence whereof the primary judge was correct to exclude Mr Mee’s estimate of tenancy fit-out costs from his determination of the capital investment value of the subject development. As it was conceded that in order to succeed on the appeal Calardu need to reverse his Honour’s finding with respect to the tenancy fit-out costs, it follows that the appeals fails.

79 Accordingly, I would propose that the appeal should be dismissed with costs.

80 McCOLL JA: I agree with Tobias JA and the orders he proposes. I also agree with Hodgson JA’s additional remarks.

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13/08/2010 - Correction to coversheet - Paragraph(s) NA


LAST UPDATED:
13 August 2010