By Anthony Whealy, Partner and James Oldknow, Associate

The NSW Court of Appeal has this week issued an important judgment which overturns decades of law on modification applications, and reverses a recent judgment on calculating gross floor area (GFA), particularly relevant to self-storage facilities. Once again, planning legislation probably needs to be quickly amended to sensibly deal with the implications of this latest decision.

In our July article ‘Update: Calculating Gross Floor Area (for FSR purposes) in NSW (July 20-21)’ we had reported on a Land and Environment Court decision in Buyozo Pty Limited v Ku-ring-gai Council [2021] NSWLEC 2, where the Court had held (in an appeal relating to a modification application seeking to modify a condition of development consent to reduce the amount of development contributions already paid) that the corridors leading from a carpark to the entrance of individual storage units within a self-storage facility were excluded from the calculation of GFA (at [32]) on the basis that those areas fell within the ‘loading or unloading of goods’ exclusion at (h) of the Standard Instrument definition of GFA.

The practical result of that exclusion of GFA was that the applicant had overpaid approx. $300,000 in development contributions required by s.7.11(1) of the Environment Planning and Assessment Act 1979 (EPA Act) because the relevant Contributions Plan provided an applicable rate per square metre of GFA.

However, that outcome was short-lived as the earlier reported findings have very recently been overturned by the NSW Court of Appeal in Ku-ring-gai Council v Buyozo Pty Ltd [2021] NSWCA 177, a Judgment handed down on 13 August 2021.

There are 2 important observations arising out of the Court of Appeal Judgment, which relate to:

1. the exclusion in subparagraph (h) of the definition of GFA pursuant to the Standard Instrument definition relating to “any space used for the loading or unloading of goods (including access to it)”; and
2. the power to modify a development consent pursuant to s.4.55(1A), (2) or s.4.56(1) of the EPA Act to amend a condition of development consent, in this case requiring the payment of a monetary contribution.

In relation to the first point, the Court of Appeal held that the primary Judge had erred in interpreting the definition of GFA because:

• the relevant inquiry was not whether someone in the approved building “might” use those areas for the relevant exclusion (loading or unloading of goods) but rather to identify if the relevant spaces or areas have been approved “to be used” for that specifically excluded purpose (at [83]);
• ultimately the answer hinged on the fact that the approved plans had already expressly identified and designated spaces “to be used [by trucks] for loading or unloading of goods” for the whole storage facility, which were clearly different to the areas of the corridors that people might use in some more practical sense, that serviced individual storage units. It was only the designated areas on the plans that had been approved for the purpose of loading and unloading of goods, which could be properly excluded pursuant to subparagraph (h) of the definition of GFA (at [84]).

In relation to the second point, relating to the power to modify a development consent generally, the Court of Appeal held (somewhat breathtakingly) that there is no power to modify a development consent to amend a condition of consent requiring a monetary contribution, at least in isolation, because:

• the power to modify a development under those provisions only ever arises where there is some change proposed to the development the subject of a development consent (i.e. a change to the approved building and/or its use) (at [10]-[11], [52]-[65]);
• substituting a lesser amount of monetary contributions required to be paid by a condition of consent does not effect any change to the development the subject of a development consent (at 64]).

This is a highly surprising decision which does not sit comfortably with decades of case law (in both the specialised Land and Environment Court, and the Court of Appeal itself) and goes directly against industry practice, by which developer contributions are frequently sought to be altered by way of modification application. The Court of Appeal decision holds that there is simply no power to modify developer contribution conditions, at least without the development itself being modified.

Importantly though, not all avenues to amend conditions of development consent requiring the payment of monetary contributions are lost because Preston CJ reminded the industry of the 3 (current) solutions to this issue (at [66]-[70]), including:

1. considering whether your modification application can proceed via s 4.55(1) of the EPA Act, that is, if the proposed modification is only to correct a “minor error, misdescription or miscalculation”. Of course, this will not apply in most circumstances, but it will in some;
2. lodging a Land and Environment Court appeal against the decision of a Council to grant development consent subject to a condition of consent pursuant to s.8.7 of the EPA Act;
3. bringing judicial review proceedings (Land and Environment Court Class 4 proceedings) to declare the invalidity of the condition and its severance from the development consent, if the condition was not authorised to be imposed.

Unfortunately, the practical outcome of this part of the Court of Appeal’s decision is that developers in NSW will now be pushed towards the 2^nd solution above (direct appeals to the Land and Environment Court) to contest unsatisfactory conditions of consent that do not effect a change to the approved building and/or its use, such as those which relate to the payment of monetary contributions. That is, in these circumstances lodging a s4.55 modification application with the Council (or a s.4.56 modification direct to the Court) is simply no longer an option at all.

With the above in mind, it is important to remind our readers that:

• there are timing constraints when lodging these types of Court appeal. For instance, s.8.10(1) of the EPA Act confirms that between 25 March 2020 and 25 March 2022, developers will have 12 months to lodge a Court appeal after the date Council’s determination is notified or registered on the NSW planning portal – and after that 2 year period passes, only 6 months;
• any such Court appeal will suspend the operation of the development consent pursuant to s.8.13(1) of the EPA Act, which delays construction for the entire period that the appeal against the relevant condition(s) is within the Court system (sometimes taking a year or more), and therefore is plainly a disappointing outcome for the NSW economy, at a time when construction activity and dwelling construction targets are so very important;
• any such Court appeal technically opens the whole consent up for redetermination, meaning there is a risk that an approved DA could be refused outright, notwithstanding a developer’s intention only to contest the relevant condition(s) of consent (although in practice and our experience, this is rare). This risk would need to be weighed up carefully before appealing conditions on a DA that had been contentious, since the entire consent could literally be refused by the Court.

Ultimately, it seems to us that if a developer were to seek changes to an approved building and/or its use in addition to seeking to amend a condition of consent requiring the payment of a monetary contribution, and there was some nexus between those changes, this could be sought via a modification application. This is of course an untested point given it has only been 1 week since the Court of Appeals decision. However, we expect this question will be tested in the very near future because  it seems that this would overcome the Court of Appeal’s very technical observation that a mere challenge to conditions does not “engage” the modification power. A change to the building(s) (i.e. the approved DA drawings) would certainly then ‘engage’ the modification power.

As always, if you need further assistance or advice dealing with these issues, we are ready and able to assist.