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April 2012 – Voluntary Planning Agreements

The NSW Court of Appeal in Huntlee Pty Ltd v Sweetwater Action Group Inc; Minister for Planning and Infrastructure v Sweetwater Action Group Inc [2011] NSWCA 378 has provided valuable guidance in relation to the security to be provided under Voluntary Planning Agreements (“VPA”) under the EPA Act.

Section 93F(3)(g) of the EPA Act requires that a VPA provide for “the enforcement of the agreement by a suitable means, such as the provision of a bond or guarantee, in the event of a breach of the agreement by the developer” (our emphasis). The VPA entered into between Huntlee Pty Ltd (“Huntlee”) and the Minister for Planning (“Minister”) had been registered on the title to the land under s93H of the EPA Act which created an enforceable obligation against the landowner and its successors. The Court of Appeal found this to be a “suitable means” of enforcement.

Facts: Sweetwater Action Group Inc challenged the validity of the State Environmental Planning Policy (Major Development) Amendment (Huntlee New Town Site) 2010 (“MD SEPP Amendment”), which if valid amended the State Environmental Planning Policy (Major Development) 2005 (“MD SEPP”). This amendment effectively rezoned a large area of land in the Lower Hunter Region, largely owned by Huntlee, as a “state significant site”, thereby conferring power on the Minister to grant approval to the development. The rezoning permitted residential development on land previously zoned as rural land under the relevant local environmental plans.

Huntlee and the Minister entered into a VPA contemplating development contributions including the dedication of 5,612 ha of land for conservation purposes and an environmental contribution of $1million towards the development of a conservation area.

Reasoning: The primary judge held that:

  • the decision of the Minister to recommend that the Governor amend the MD SEPP with the making of the MD SEPP Amendment (“Recommendation Decision”) was invalid because the Minister failed to comply with the requirements of State Environmental Planning Policy No. 55 – Remediation of Land (“SEPP55”); and
  • the Minister had taken into account an irrelevant consideration, namely that the Huntlee VPA was made in conformity with s93F of the EPA Act.

The Court of Appeal held that, whatever the effect of a failure to comply with SEPP55 on the Recommendation Decision, the consequence was not that the MD SEPP Amendment was invalid. The Court’s reasoning included that the making of a valid Recommendation Decision was not a necessary precondition to the making of a SEPP, the Minister was not a ‘planning authority’ for the purposes of cl 6 of SEPP55 and a Ministerial recommendation to make a SEPP is an exercise of executive power which is not subject to judicial review.

In relation to the Huntlee VPA, the Court of Appeal considered that the requirement of “suitability” under section 93F(3)(g) of the EPA Act is to be assessed by reference to whether the means of enforcement is likely to eliminate or reduce to a commercially acceptable level the risk that the obligation created by the VPA will not be performed and that the planning authority or the community will not receive the intended benefits. The Court of Appeal found that it is up to the decision-maker (in this case the Minister) to make a judgement as to whether the criterion specified in s 93F(3)(g) of the EPA Act has been satisfied (it is not a condition on the exercise of power; in legal terms, it is not a ‘jurisdictional fact’). Furthermore, the Minister was entitled to decide that a planning agreement provides for enforcement of the agreement by a suitable means and noted the following:

  • The Huntlee VPA provided for a caveat until the agreement was registered, thus creating a mechanism enabling the Minister to hold up the transfer of the land until the registration obligations are complied with or until the Minister has an opportunity to seek injunctive relief;
  • An important safeguard in the Huntlee VPA is a requirement that, before any transfer of the land takes place, the transferee must enter into a deed agreeing to comply with the obligations in the agreement as if it were the land owner and the Minister must be satisfied that the proposed transferee has the financial capacity to comply with the obligation to pay the Development Contributions;
  • The Huntlee VPA provided that if Huntlee failed to transfer ‘conservation offset lands’ to the Minister as required, it consented to the Minister compulsorily acquiring the conservation offset lands for $1.

Discussion: The Court of Appeal’s judgment provides guidance on what local councils and other planning authorities could consider to be suitable means of enforcing the development contribution obligations provided for in a VPA. In addition to a bond, bank guarantee or personal guarantee, the registration of the agreement on the title of the land may, in some but not all circumstances, be considered sufficient security in the event of a breach of the agreement by the developer.

Note:  This information is not be relied on as legal advice

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