Felixstowe Pty Ltd v Council of the City of Gladstone [1994] QCA 478

IN THE COURT OF APPEAL [1994] QCA 478 SUPREME COURT OF QUEENSLAND Appeal No. 104 of 1994 Brisbane Before Fitzgerald P. Pincus J.A. Lee J. [Felixstowe Pty Ltd v. Council of the City of Gladstone] BETWEEN: FELIXSTOWE PTY LTD (Appellant) Respondent AND: COUNCIL OF THE CITY OF GLADSTONE (Respondent) Appellant REASONS FOR JUDGMENT - FITZGERALD P. Judgment delivered 11/11/1994 The respondent, Felixstowe Pty Ltd, is the owner of a substantial parcel of land in the local authority area of the appellant, Council of the City of Gladstone. On 15 June 1991, a new Town Planning Scheme was gazetted for the whole area. In that Scheme, Felixstowe's land was zoned Residential A (Low Density). Previously, it had been zoned Residential A (High Density). The interest of Felixstowe in the land was "injuriously affected" by the rezoning within the meaning of sub-s. 3.5(1)(a) of the Local Government (Planning and Environment) Act 1990, and by that sub-section Felixstowe became "entitled to obtain from the [Council] compensation in respect of the injurious affection ... and [to] claim compensation ...". It is not now in dispute that the amount of the compensation is $402,250.00. -- 1 of 20 -- 2 Felixstowe's claim for compensation was rejected by the Council, and Felixstowe appealed to the Planning and Environment Court, which allowed the appeal. An appeal to this Court was allowed on the basis of a specified error, which Felixstowe conceded. The orders of the Planning and Environment Court were set aside, and the matter was remitted for the Planning and Environment Court to decide three issues which the parties were agreed would be determinative of the outcome. In all, these three issues raised a number of points, all of which but one were decided in the Council's favour. Nonetheless, the point decided in Felixstowe's favour was held to entitle it to succeed, and orders were made by the Planning and Environment Court allowing Felixstowe's appeal to that Court and assessing the compensation at $402,250.00, the amount referred to above. The Council has appealed to this Court, and Felixstowe has opposed that appeal and also sought to support the Planning and Environment Court decision by reference to points which that Court decided against it, including one point which was not among those remitted by this Court for decision by the Planning and Environment Court. The Council's entire case depends on cl. 9 of a deed entered into between the parties dated 12 May 1981, which was varied - in presently immaterial respects - by a further deed dated 15 December 1985. Clause 9 provided that, if the land was -- 2 of 20 -- 3 rezoned on the Council's application in certain circumstances, Felixstowe "shall not be entitled to any compensation in respect of such rezoning whether on account of injurious affection or otherwise howsoever". The Council contends that the rezoning by the new Town Planning Scheme on 15 June 1991 was "such [a] rezoning". Felixstowe expressly conceded - and this judgment is premised on that concession, right or wrong - that the statutory right to compensation, even under legislation not then in force, could have been prospectively abandoned, lawfully and effectively, at the time when the deed was executed. But, it submitted that: (a) cl. 9 of the deed was unlawful as being in contravention of sub-s. 33(16C)(d) of the Local Government Act 1936 as amended; (b) cl. 9 is unenforceable as being a penalty or in the nature of a penalty; and (c) the Council was precluded from relying upon cl. 9 by waiver, estoppel or election, having regard to the conduct of the Council and Felixstowe on and after 5 February 1986 to and including 7 February 1990. The matters previously remitted by this Court to the Planning and Environment Court were substantially those raised in paragraphs (a), (b) and (c). The deed had been entered into by the parties in connection with an earlier rezoning of the land. Under a previous Town -- 3 of 20 -- 4 Planning Scheme, the land was zoned Residential C (Low Density, no flats). Felixstowe, which desired "to develop the land for accommodation units, ... to be developed and registered in accordance with the provisions of the Building Units and Group Titles Act of 1980", applied to the Council for the land to be rezoned. The recitals to the deed continued: "AND WHEREAS the Council is prepared to make application to the Honourable the Minister for Local Government pursuant to the provisions of The Local Government Act for the re-zoning of the land ... provided inter alia that the Council is given all reasonable assurances that [Felixstowe] will develop the land in accordance with [its] stated intention of accommodation units pursuant to the provisions of the said Building Units and Group Titles Act of 1980. AND WHEREAS [Felixstowe] has also agreed with the Council that in consideration of the Council making the necessary application for the approval of the re-zoning ... it will, upon the gazettal of such rezoning ... at [Felixstowe's] expense carry out certain works and make certain contributions to the Council for the benefit and development of the subject area." By the deed, "in consideration of the Council making application to the Honourable the Minister for Local Government pursuant to the provisions of the Local Government Act ... for the rezoning of the ... land ...", Felixstowe promised that it would "upon the gazettal of such rezoning ..." do certain things. It is sufficient for present purposes to set out cll. 1, 4, 5 and 9, which respectively provided: "1. Develop the said land in accordance with [Felixstowe's] proposal as contained in the annexed document marked 'A' with such variations as to the parties hereto may agree upon from time to time in the three stages as -- 4 of 20 -- 5 marked on the plan annexed hereto, marked with the letter 'B' (as amended ...). ... 4. Substantially complete the construction of Stage 1 of the proposed development within two (2) years from the date of gazettal of the said re-zoning and to substantially complete the whole development within five (5) years from the said date of gazettal of the re-zoning. 5. The Council is relying on the representation made by [Felixstowe] that [it] will only use the subject land for development in accordance with the proposal contained in the said annexed document marked 'A', and [Felixstowe] in order to assure the Council that the land will only be developed for the type of development provided, hereby covenants with the Council that it will develop the land in accordance with the provisions of the said proposed development plan and in the event of [Felixstowe] selling or transferring the whole or any part of the undeveloped subject land it will obtain from such Purchaser or transferee and deliver to the Council a covenant in regard to the development of the land in accordance with the said proposal similar to that contained herein and with such personal and/or financial guarantees as the Council shall in its discretion decide upon and shall obtain from such purchaser or transferee and deliver to the Council a further covenant that this covenant shall be passed on to any successive purchaser or transferee in title. ... 9. Notwithstanding anything herein contained and without prejudice to the Councils rights hereunder if [Felixstowe] shall fail in its obligations hereunder with respect to the development of any part or parts of the said lands in accordance with the plans attached hereto and such failure to develop shall continue for a period of one year then the Council shall have the right without any further reference to [Felixstowe] to apply for the rezoning of the said part or parts so undeveloped to the original zoning of Residential 'C' as herein set out or such similar zoning as may be applicable under the Council's Town Planning Scheme from time to -- 5 of 20 -- 6 time for Residential Development and in the case of such rezoning being granted [Felixstowe] shall not be entitled to any compensation in respect to such rezoning whether on account of injurious affection or otherwise howsoever." On 16 March 1981, a few days after the deed was executed, the Council wrote to the Minister for Local Government, seeking the rezoning in accordance with the Local Government Act. The Minister was informed that: "... ... the land is suitable for the proposed development ... . ... The proposed development shall have a greater density than that of single residential development however, Council does not consider the greater density excessive in this particular area. ... ... ... Council considers that the subject site is suited to residential development. The site has been unsuccessful as a site suitable for single lot subdivision. ... . A group title development such as the one proposed appears to be the best use of the land." As required by the Act, the Council informed the Minister of objections which had been received, and its "representations on the ... objections" included a statement that: "The density and type of development proposed is not in Council's view, detrimental to the amenity of the area." The rezoning of the land to Residential A (High Density) was gazetted on 23 July 1981. The present proceeding has been conducted on the footing that Felixstowe's obligations under the deed were conditions imposed by the Council on its approval of Felixstowe's -- 6 of 20 -- 7 application for rezoning. Under sub-s. 33(6A)(d)(iii) of the Local Government Act, the Council was empowered to approve the application "subject to reasonable and relevant conditions". However, the Council accepted that there was an overriding limitation under sub-s. 33(16C)(a)(i), which made it "unlawful ... to subject the approval of the application to a condition that is not ... reasonably required by the re-zoning of the land". And, by sub-s. 33(16C)(d), it was unlawful for the Council and Felixstowe "to enter into an agreement ... concerning a matter in respect of which pursuant to paragraph (a) ..., it is unlawful for the Local Authority to impose conditions". Shortly stated, Felixstowe's first answer to the Council's reliance on cl. 9 of the deed was that it is inapplicable because Felixstowe did not "fail in its obligations [under the deed] with respect to the development of any part or parts of the said lands in accordance with the plans attached ...", and, a fortiori, "such failure to develop [did not] continue for a period of one year ...". There had been no "failure", according to Felixstowe, because there had been no obligation; the material obligations in the deed were "unlawful". The Council sought to contest this by arguing that the obligations were not "unlawful", or, alternatively, Felixstowe could not take advantage of that unlawfulness in this proceeding. -- 7 of 20 -- 8 The basis for the latter submission was not clear. The jurisdiction of the Planning and Environment Court (previously the Local Government Court) to entertain the point in an appropriate proceeding was not challenged, and it was not submitted that the only remedy against the imposition of an unlawful condition was an appeal against the decision to impose the condition: cf. Barraclough v. Brown (1897) A.C. 615; The Grazier's Association of New South Wales v. Durkin (1930) 44 C.L.R. 29. On the contrary, it was submitted that "Felixstowe ought to have brought proceedings for declaratory relief", although no explanation was provided beyond the perceived advantage to the Council if declaratory relief had been sought; i.e., "such proceedings would have attracted discretionary grounds for denying Felixstowe any relief". Overall, the submission ignores the way in which the question whether Felixstowe's obligations under the deed comes to be material: under the Local Government (Planning and Environment) Act, Felixstowe is entitled to compensation unless some basis emerges for denying Felixstowe its statutory entitlement; which, in the circumstances, requires, at a minimum, a failure by Felixstowe to perform material obligations under the deed: cf. sub-ss. 3.5(2), (4) and 6 of the Local Government (Planning and Environment) Act. The point was faintly raised that, even if initially unlawful, Felixstowe's obligations had lost that character -- 8 of 20 -- 9 by, it seemed, effluxion of time. The basis for this were two dicta in Mulgrave Shire Council v. Red Hills Pty Ltd (1994) 83 L.G.E.R.A. 323 at pp. 328 and 329. However, the matter was not pressed, and is without substance. That case involved no issue of unlawfulness, but whether "... acts and conduct could ... be regarded as creating binding contractual relations ..." and whether either party "intended its conduct to give rise to binding legal relations": p. 326. It is not difficult to comprehend acceptance of, and action upon, a condition might be relevant to those issues. The question, therefore, is whether Felixstowe's material obligations were "unlawful" or "reasonably required by the rezoning". At its most extreme, the Council's argument was that "to succeed on this point ..., Felixstowe would need to show that cl. 9 was so unreasonable no Council could have required it ...". Reliance was placed upon Newbury District Council v. Secretary of State for the Environment (1981 A.C. 578; Cardwell Shire Council v. King Ranch Australia Pty Ltd [No. 2] (1985) 55 L.G.R.A. 384; and Wootton v. Woongarra Shire Council (1985) 56 L.G.R.A. 301. In Newbury District Council, the statutory provision empowered the local planning authority to grant planning permission ... "subject to such conditions as they think fit ...". It was held that, to be valid, a condition must satisfy three tests; (i) it must have a planning purpose; -- 9 of 20 -- 10 (ii) it must relate to the development permitted; and (iii) it must not be so clearly unreasonable that no reasonable planning authority could have imposed it: Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation (1948) 1 K.B. 223, 229. These limitations were imported, by a process of statutory construction, into a power to impose conditions which, literally, was unlimited. Nonetheless, in the Full Court decision in Cardwell Shire Council [No. 2], Andrews C.J., with whom Kelly J. concurred, said at p. 356: "It is a question of law whether the council had power to impose such conditions at all; that is to say, the conditions imposed or 'any watered-down version thereof'. Section 34(1) provides inter alia as follows: 'Applications under this section shall be submitted to the local authority. The local authority may approve of any such application, or approve subject to conditions, or disapprove ... .' The discretion vested in the council in the circumstances here is restricted only by the requirement that the conditions imposed must be fairly and reasonably related to the subdivision and if so the conditions imposed are matters for the local authority provided that they are not so unreasonable that no reasonable planning authority could have imposed them: see Sabdoran Pty Ltd v Hervey Bay Town Council [1983] 2 Qd R 172 at 178- 179; 48 LGRA 400 per Connolly J; Allen Commercial Constructions Pty Ltd v North Sydney Municipal Council (1970) 123 CLR 490 at 499-500; 20 LGRA 208 per Walsh J; Newbury District Council v Secretary of State for the Environment [1981] AC 578 at 599- 600 per Viscount Dilhorne." That passage refers only to sub-s. 34(10) of the Local Government Act, which is surprising. Earlier in his -- 10 of 20 -- 11 judgment, (p. 351), Andrews C.J. had quoted a passage from the judgment of Gibbs C.J. in the earlier High Court decision in the same proceeding ((1984) 58 A.L.J.R. 386; 54 L.G.R.A. 110); and, in that passage, Gibbs C.J., with whom Mason, Wilson, Brennan and Dawson JJ. agreed, expressly acknowledged that a further "restriction is imposed on the nature of the conditions that may be imposed by s. 33(16C) of the Local Government Act ...". In Wootton, which came before the Full Court later in 1985, attention was again focussed on sub-s. 33(16C) of the Local Government Act, and reference was made at pp. 302-303 to the decision of the High Court in Cardwell Shire Council but not the decision of the Full Court in Cardwell Shire Council [No. 2]. After quoting from the judgment of Gibbs C.J. in the High Court, Ryan J., with whom Kelly S.P.J. and Derrington J. agreed, said at p. 303: "The question must be whether there is a relevant nexus between the use of the land and the conditions sought to be imposed, that nexus being that the proposed use creates such a change in existing affairs that the condition is a reasonable response to it." On one possible view, that approach appears to question whether a condition is reasonable, or whether it is reasonable for the local authority to require the condition; the statutory test, materially for present purposes, is whether a condition is "reasonably required by the rezoning of the land". This means "reasonably required" by the "fact of" rezoning or "the changes that [it] is likely to -- 11 of 20 -- 12 produce": Cardwell 54 L.G.R.A. 113 per Gibbs C.J.; Proctor v. Brisbane City Council (1993) 81 L.G.E.R.A. 398, 401-402. Broadly speaking, zoning provisions are at least primarily directed to controlling the uses to which land may be put, not in obliging its use for a specific project within a specified period. But, even if that be incorrect or put to one side, what was there to require that the land, when rezoned, be used for the specific purpose proposed by Felixstowe at the time of its rezoning application and developed for that specific purpose within specified time limits (which, as it later transpired, were extended)? The Council was unable to offer any plausible answer, and its inability to do so was emphasised by the curious consequence for which cl. 9 provided; namely, the rezoning of the land back from the zone considered most suitable at the time of the deed: "A group title development such as the one proposed appears to be the best use of the land". There is nothing to indicate any basis for a conclusion either that the particular Felixstowe proposal was "reasonably required by the rezoning" or that, if the Felixstowe proposal did not proceed, the best use of the land at the material future time would no longer be a group title project "such as" the Felixstowe project. Nor do the changes caused by the rezoning provide any basis for a conclusion that the specific Felixstowe proposal within a specified time was "reasonably required by the -- 12 of 20 -- 13 rezoning". The structure of the Town Planning Scheme at the time of the deed was to prescribe, for each zone, purposes for which land might be used without the consent of the Council, purposes which required Council consent and purposes for which land might not be used. It is sufficient to refer to the first category, "as-of-right" uses. The Residential C (Low Density, no flats) zone permitted Agriculture, Dwelling-house and Recreation area. So did the Residential A (High Density), along with Accommodation units, Educational establishment and Place of worship. There was no suggestion that the exclusion of all or any of these additional uses was reasonably required. In my opinion, the material obligations of Felixstowe under the deed were unlawful, and Felixstowe did not "fail in its obligations". Accordingly, cl. 9 of the deed did not disentitle it to compensation in accordance with the Local Government (Planning and Environment) Act. The appeal should be dismissed, with costs to be taxed. -- 13 of 20 -- IN THE COURT OF APPEAL SUPREME COURT OF QUEENSLAND Appeal No. 104 of 1994 Brisbane [Felixstowe Pty Ltd v. Council of the City of Gladstone] BETWEEN: FELIXSTOWE PTY LTD (Appellant) Respondent AND; COUNCIL OF THE CITY OF GLADSTONE (Respondent) Appellant FITZGERALD P. PINCUS J.A. LEE J. Judgment delivered 11/11/1994 REASONS FOR JUDGMENT OF FITZGERALD P, PINCUS JA AND LEE J, ALL CONCURRING AS TO THE ORDER MADE. Appeal dismissed with costs to be taxed. CATCHWORDS: TOWN PLANNING - Rezoning - compensation for "injuriously affected" respondent - deed between parties relating to earlier rezoning contained clause limiting liability for compensation in specified circumstances - respondent contended there was no failure of its material obligations under the deed to trigger limitation clause - whether the respondent's material obligations were "unlawful" or "reasonably required by the rezoning" - whether the respondent failed in its material obligations under the deed Counsel: D.R. Gore Q.C. with him D.K. Smith for the Appellant S. Couper Q.C. for the Respondent Solicitors: Sly Weigall Cannan & Peterson as t/a for Tony Goodwin & Co. for the Appellant Crouch & Lyndon for the Respondent Date/s of Hearing: 1 November 1994 -- 14 of 20 -- 2 IN THE COURT OF APPEAL SUPREME COURT OF QUEENSLAND Appeal No. 104 of 1994. Brisbane [Council of the City of Gladstone v. Felixstowe] Before Fitzgerald P. Pincus J.A. Lee J. BETWEEN: COUNCIL OF THE CITY OF GLADSTONE Appellant AND: FELIXSTOWE PTY LTD Respondent REASONS FOR JUDGMENT - PINCUS J.A. Judgment delivered 11/11/1994 I have read the reasons of the President and agree with his Honour's conclusion that the appeal must be dismissed. The only issue I find it necessary to discuss is whether cl. 9 of the Deed, whose relevant provisions are set out in the President's reasons, is unlawful by reason of the provisions of s. 33(16C) of the Local Government Act 1936. That was inserted in the Local Government Act by Act No. 19 of 1980, at a time when local authorities already had power to impose "reasonable and relevant conditions" on an application for rezoning of land: see Local Government Amendment Act 1975 No. 16: 1975 Annual Volume p. 291. The purpose of insertion of the limitation in 1980 must have been to cut down the scope of the power to impose conditions. Mr Gore Q.C. for the appellant did not dispute that, for the -- 15 of 20 -- 3 condition here in question to be good, it had to pass the test imposed by the later provision i.e. the test of being "reasonably required by the rezoning". It might have been possible to construe s. 33(16C)(a) broadly, so that it would be enough to show that the condition in question was reasonably required, not by the rezoning itself, but by the local authority in relation to the rezoning, were it not for the decision of the High Court in Cardwell Shire Council v. King Ranch Australia Pty Ltd (1984) 58 A.L.J.R. 386. There the court had to consider the application of s. 33(16C) to a subdivision case. The construction adopted was that the condition must be reasonably required taking "into account the fact of the subdivision and the changes that the subdivision is likely to produce...and to impose such conditions as appear to be reasonably required in those circumstances". In the Cardwell case, it was found that road traffic on a road and wear and tear on a bridge would be increased by the subdivision and so a condition requiring money to be spent on the road and the bridge could come within the limitation. It is difficult to see any sense in which it could be said that cl. 9 was required, reasonably or otherwise, by the rezoning of the land. Clause 9 entitled the Council to apply to have the land returned to its original zoning, compensation-free, if the development did not proceed. The underlying idea was that the rezoning was for the use of the -- 16 of 20 -- 4 land for a specified development, to be completed within a stipulated time and for that purpose only. It is easy to agree that the condition was reasonably required for the achievement of that purpose, or one might say, reasonably required to ensure that advantage was not taken of the rezoning to use the land for a development other than that contemplated; but I have found it impossible to link these matters back to the rezoning itself, so that one can say that it or its consequences required the condition. It may well be that conditions of this sort have been imposed in the past, after the 1980 amendment; but if so, that could only have been because insufficient attention was paid to the precise terms of that amendment and its effect as elucidated in the Cardwell Shire Council case. I can see no reason why the point should not be available to the respondent now. It is a legal point, in the sense that its resolution depends not on any finding of fact, but on the proper effect to be given to the statute. Where s. 33(16C)(d) applies, it becomes unlawful for the Council to enter into the relevant agreement and the ordinary result of such unlawfulness is that the agreement may not be enforced: Bassin v. Standen (1945) 46 S.R.(N.S.W.) 16 at 18, 19. It is true that some statutes prohibiting contracts may escape the general rule: Bradshaw v. Gilbert's (Australasian) Agency (Vic) Pty Ltd (1952) 86 C.L.R. 209 at 219; but the context here is against such a -- 17 of 20 -- 5 construction. It is unlikely to have been intended that a condition which the statute makes unlawful, inserted in an agreement which the statute makes it unlawful for the parties to enter into, should be able to be relied on as giving rights enforceable at law; nor does any reason appear why the passage of time should be held to have eradicated the illegality. It remains to add that the corresponding provision in the current statute uses language which is significantly different: see Proctor v. Brisbane City Council (1993) 81 L.G.E.R.A. 398. I agree that the appeal should be dismissed with costs. -- 18 of 20 -- 6 IN THE COURT OF APPEAL SUPREME COURT OF QUEENSLAND Appeal No. 104 of 1994 Brisbane [Felixstowe Pl v. Council of the City of Gladstone] Before The President Pincus JA Lee J BETWEEN: FELIXSTOWE PTY LTD (Appellant) Respondent AND: COUNCIL OF THE CITY OF GLADSTONE (Respondent) Appellant JUDGMENT - W C LEE J Judgment delivered 11/11/1994 I have read the judgments of the other members of the Court and agree that the appeal should be dismissed. However, I am content to base my decision on the conclusion that cl. 9 of the Deed is rendered unenforceable by s.33(16C) of the Local Government Act 1936. In particular, I prefer to leave for another day the question of whether the High Court in Cardwell Shire Council v. King Ranch Australia Pty Ltd (1984) 58 A.L.J.R. 386, 388 was purporting to define exhaustively what is meant by the phrase "reasonably required by the rezoning" or whether its comments were only intended to go as far as was necessary -- 19 of 20 -- 7 for the decision in that case. Be that as it may, I consider that the present case falls clearly outside relevant limits. The effect of cl. 9 of the Deed was to require the respondent to forfeit its statutory right to compensation in relation to some future application which would have the effect of reversing the original rezoning. It was a provision designed to enforce the respondent's obligations under the deed and provide a remedy to the Council, should it renege on them. To say that it was a condition "reasonably required" by the rezoning when its operation depended upon a contingency only likely to occur well after that rezoning was complete is to deprive those words of any useful meaning. I agree with the order proposed. -- 20 of 20 --