By Anthony Whealy, Partner, Ashleigh Cowper, Senior Associate and Roisin McCann, Paralegal

In the last two years we have seen a number of judgments providing significant consideration on the proper construction of written clause 4.6 variation requests, which have emphasised the importance of well-drafted requests, but  arguably resulted in a higher standard of satisfaction as to justified contraventions of development standards. Commensurately, most observers would agree that proposed variations have been subject to intense scrutiny and highly conservative decisions, for example refusing applications even where all parties considered that the design of a building was appropriate and that it caused no unreasonable adverse impacts whatsoever (see for just one example Baron Corporation Pty Limited v Council of the City of Sydney [2018] NSWLEC 1552.

On 12 March 2020, Acting Commissioner Philip Clay handed down his judgment in SJD DB2 Pty Ltd v Woollahra Municipal Council [2020] NSWLEC 1112 (SJD DB2).

This appeal sought consent for the construction of a six-storey shop top housing development at 28-34 Cross Street Double Bay (the DA). The Court approved the proposed development, having a height of 21.21m where the control was 14.7m – representing a maximum variation of approximately 44% (or 6.51m) – and a floor space ratio (FSR) of 3.54:1 where the control was 2.5:1 – representing a variation of approximately 41%. (View the design  by Bates Smart here).

Background – recent court decisions on clause 4.6 variation requestsThese significant variations were approved by virtue of clause 4.6 of the Woollahra Local Environmental Plan 2014 (WLEP), a standard clause which enables a consent authority to vary the applicable height and FSR controls, subject to satisfaction of certain prerequisites. In this case, the Court accepted that the clause 4.6 variations were well-justified, and ultimately better than a compliant (smaller) scheme on the subject site. An important factor contributing to this finding was the design excellence of the proposed building, which the Court referred to as “an excellent response to its context” and a “high quality architectural design” (at [74], [106].). The upshot was the approval of a building having six storeys rather than the four storeys that a strict application of the LEP controls would have allowed.

To provide some context on the significance of the SJD DB2 decision, it is helpful to briefly set out the Court’s recently endorsed approach to matters on the construction and interpretation of clause 4.6 variation requests. In other words, the correct legal approach to these matters.

In Baron Corporation Pty Limited v Council of the City of Sydney [2019] NSWLEC 61 (Baron), the Court considered an appeal under under s 56A of the Land and Environment Court Act 1979 to a judge of the Land and Environment Court relating to a development application for alterations and additions to an approved 7-storey residential flat building containing 27 apartments at 17-19 Dunning Avenue Rosebery, including to increase the number of units from 27 to 39 and increase the FSR of the development from 2:1 to 2.3:1.

This proposed increase in FSR resulted in the necessity of a request under cl 4.6(2) of the Sydney Local Environmental Plan 2012. At first instance, Commissioner Gray refused to grant development consent to the development application, finding that the Applicant’s clause 4.6 variation request had not adequately addressed the matters required to be demonstrated by clause 4.6(3).

On appeal, the Applicant submitted that the Commissioner had misdirected herself by asking whether she was “directly and reasonably satisfied” with the reasons given in the clause 4.6 request, particularly in light of his Honour Chief Justice Preston’s statement in Initial Action Pty Ltd v Woollahra Municipal Council [2018] NSWLEC 118 (at [25]) that:

 “…the consent authority, or the Court on appeal, does not have to directly form the opinion of satisfaction regarding the matters in cl 4.6(3)(a) and (b), but only indirectly form the opinion of satisfaction that the applicant’s written request has adequately addressed the matters required to be demonstrated by cl 4.6(3)(a) and (b).”

The Court rejected the Applicant’s submissions and held that a clause 4.6 request cannot be found to adequately address the matters required to be demonstrated unless it “in fact” demonstrates those matters.

This decision indicated that the approach taken by the Court in Al Maha Pty Ltd v Huajun Investments Pty Ltd [2018] NSWCA 245 was the settled position in respect of the proper construction of clause 4.6 requests, despite otherwise contrary commentary provided in Initial Action, including as provided by the excerpt above.

Not long after the decision was handed down in Baron, the Court of Appeal considered matters concerning the proper construction of clause 4.6 requests in RebelMH Neutral Bay Pty Limited v North Sydney Council [2019] NSWCA 130 (RebelMH) This appeal, also brought under s 56A of the Land and Environment Court Act 1979, involved a DA for the construction of a residential flat building at 14-16B Thrupp Street Neutral Bay, which contravened the height development standard provided in the North Sydney Local Environmental Plan 2013 and accordingly required the submission of a clause 4.6 variation request.

The Applicant in this matter submitted that at first instance, Justice Moore had misconstrued clause 4.6 by finding that to ‘adequately address’ the matters required to be demonstrated in clause 4.6(3), the request had to actually demonstrate those matters. The Court reaffirmed the decision in Baron (and Al Maha) in finding that “it is not sufficient for the request merely to seek to demonstrate the matters in subcl (3)… [it] must in fact demonstrate the matters in subcl (3)” (at [51]).

The findings of these two cases resulted in a higher standard to be met in satisfying the relevant tests, (at least compared to that set out in Initial Action,) in requiring that clause 4.6 requests must do more than simply cover the matters provided for under clause 4.6(3) and must instead demonstrate those outcomes have been met ‘in fact’.

In light of these judgments, developers could be forgiven for being wary as to whether significant breaches in height and/or FSR might be achievable – even where clause 4.6 variation requests are carefully drafted and environmental planning grounds seemingly well established. However, this more recent judgment in SJD DB2 provides some refreshing and helpful commentary on this area, and seems to reflect a much-needed return to an approach that embraces reasonableness and flexibility in a consent authority’s exercise of their power to grant consent to a development that contravenes development standards.

Findings on the clause 4.6 variation requests

The main contentions maintained by the Council at the hearing in SJD DB2 were as follows:

• that the objections made pursuant to cl 4.6 of WLEP did not adequately address the non-compliances;
• that the proposal was inconsistent with the desired future character of the area; and
• that the loss of commercial floor space was unacceptable.

The Court drew from the decisions in Initial Action and RebelMH in the SJD DB2 judgment, and noted that although there are a number of ways to demonstrate that compliance with a development standard is unreasonable or unnecessary, it may be sufficient to establish only one way (at [35].) In considering the clause 4.6 variation requests submitted by the Applicant, the Court considered that they could be treated together, as the breaches they related to were fundamentally related, as where there is greater building form with additional height, so too is there greater floor area (at [63].)

The issues between the parties in respect of the clause 4.6 variation requests were refined by the Court as follows (at [65]):

1. what is the desired future character?
2. is the proposal consistent/compatible with that desired future character?
3. has any visual intrusion been minimised?
4. have the controls been abandoned?

The Applicant submitted that the clause 4.6 variation requests were well founded in light of the Council’s recent approvals of two 6-storey developments adjoining the subject site to the east at 20-26 Cross Street and 16-18 Cross Street because they:

• demonstrated the relevant desired future character of the area; and
• established Council’s abandonment of the height and FSR controls as applicable to that particular area of the Double Bay Centre.

In respect of desired future character, the Court agreed with the Applicant in finding that the focus of its assessment should be primarily confined to the more immediate context of the subject site, as opposed to the broader area of the Double Bay Centre, which was considered to be of limited relevance. The portion of Cross Street subject of the proposed development was considered to be a “well-defined component of the Centre” with its own character that “forms part of the overall character of the Centre and is not an anathema to it” (at [68].)

Importantly, the Court considered that a construction of the desired future character “must take into account the form of the buildings to the east which the Council approved under effectively the same controls”, and also substantially exceeded the height and FSR controls, and as a result, “represent the recently expressed attitude of the Respondent to the controls and what is desired in this part of Cross Street” (at [69]). These nearby approved developments were referred to as the ‘driving force’ for development in the immediate locality, and although the broader context was not to be excluded from consideration, it was this more defined context that the Court considered was “determinative of the preferred form of development for the Site” (at [70], [72].)

The issue of visual intrusion was determined as being both minor in nature and minimised by the proposed development (at [86]). In reaching this conclusion, the Court clarified that the existence of a ‘visual intrusion’ should be distinguished from a disruption to a ‘view’, and further defined as a necessarily unwelcome form that intrudes into an available outlook (at [78]-[79]). Due to the DA’s proposed “attractive well-designed building with coherent form and scale”, the impact of any visual intrusion was considered to be minimised, particularly because the affected outlooks did not contribute substantially to the amenity of impacted apartments (at [80], [87]).

Finally, although he noted it was not strictly necessary to do so, the Acting Commissioner turned his mind to whether the controls had been abandoned, especially in light of the recent nearby developments. As with construing the applicable ‘desired future character’ of the area, the Court considered that the immediate context of the section on Cross Street to which the DA related could be narrowed in on to illustrate that the concept of abandonment had been satisfied (at [92]-[93].) As a result, the Council’s abandonment of the height and FSR controls was found to be clearly and deliberately established, albeit confined to this discreet section of Cross Street.

The Court’s findings in SJD DB2 reflect a common sense approach to the construction of ‘desired future character’ by reference to relevant contextual and factual circumstances, and carefully curtails the question of ‘abandonment’ of controls in this way to provide clarity as to how objectives of development standards might be adequately met despite numerical non-compliance.

The issue of commercial viability

On the issue regarding the loss of 1,000m² of commercial floor space, the parties engaged economic experts to provide evidence as to how potential employment opportunities and the wider commercial viability of the Double Bay Centre might be impacted, and how significant those impacts were in an assessment of the DA as a whole. The Court agreed with the Applicant’s submissions that the relevant provisions contained in the Woollahra Development Control Plan 2015 only encouraged, and did not require, that commercial use on first floors be retained.

The impact on employment opportunities was further assessed as being “so small as not to have a measureable impact on the viability” of the Centre (at [54].) The Court suggested that if such an objective were required to be achieved by every development in the area, rather than as a general Centre-wide outcome, there would necessarily result adverse planning and urban design outcomes, including discordant built form articulation and/or the provision of unnecessary floor-to-ceiling heights (at [58]-[59].)

Key takeaways

We expect that this decision will obviously be particularly significant for other recent and anticipated nearby development proposals in the Double Bay Centre, but should have a much broader application, reminding all consent authorities of the proper approach to clause 4.6 variations. In particular, that there is no maximum number or percentage by which a development standard may be varied – a common misconception within the industry whereby many councils suggest that if a variation is numerically large, that a planning proposal (LEP amendment) is instead required, rather than reliance on clause 4.6. That is fundamentally wrong. No such numerical limitation on the size of a variation to a development standard such as height or FSR exists under the Standard Instrument cluase 4.6 wording.

While it remains very much the case that clause 4.6 variation requests must be carefully drafted and well reasoned, developers should rest assured that flexibility in applying clause 4.6 to vary development standards can and should  prevail in order to achieve better outcomes for a particular site and context in justifiable circumstances. Indeed, as Acting Commissioner Clay makes clear in his judgment, ‘cl 4.6 is as much a part of [an LEP] as the clauses with development standards. Planning is not other than orderly simply because there is reliance on cl 4.6 for an appropriate planning outcome’ (at [73]).

The approach taken by the Court in the SJD DB2 judgment serves as a breath of fresh air, particularly following the recent trend of judgments that would appear to compound upon and constrain the set of tests applicable to clause 4.6 to such a degree that its underlying purpose of flexibility in varying development standards becomes obscured and even lost. We can hope to see a shift away from this direction within the Double Bay Centre in the near future, and perhaps even more broadly, as a result of the SJD DB2 judgment.