Jojeni Investments Pty Ltd v Mosman Municipal Council

1. [1]

   MACFARLAN JA: I agree with Leeming JA.

2. [2]

   The 1933 approval of which there was evidence was a building approval. Its existence did not suggest that there had been a prior development approval, nor did it define the purpose for which the altered building could be used. Rather, it identified the nature of the alterations that could be made to the existing building. Both the building’s use (as a dwelling) prior to the 1933 alterations and its use after the alterations (as a flat building) were lawful under the law in force at that time because the uses were for residential purposes. Development consent was not required.

3. [3]

   To resolve the present appeal it is necessary to characterise the property’s use from 1933 until the present to determine the nature of the existing use rights to which the appellant is entitled. There is no development consent to affect that characterisation and the building approval for the change in the physical characteristics of the building is not determinative. For the reasons given by Leeming JA, it should be concluded that since 1933 the building has been used as a building containing flats and that the appellant’s existing use rights correspond to that characterisation. The more particular characterisation contended for by the Council, involving a reference to two flats, would not conform with the High Court’s reasoning in Shire of Perth v O’Keefe [1964] HCA 37; 110 CLR 529 and Woollahra Municipal Council v Banool Developments Pty Ltd [1973] HCA 65; 129 CLR 138.

4. [4]

   GLEESON JA: I agree with Leeming JA.

5. [5]

   Stripped of its historical complexities, the “existing use” question in the present case was not concerned with the activities of a particular business or industry, or with land used for activities, processes or transactions of widely differing kinds. Here, the only relevant activity conducted on the land was the use of the building as two flats. Approval to convert the existing building into two flats was given in 1933. At all times after 1933 that use was lawful as an “existing use”, notwithstanding subsequent planning instruments prohibiting residential flat buildings on the land where the subject premises stand.

6. [6]

   As a matter of ordinary language, the appropriate designation of the purpose being served by the use of the premises is for the reasons given by Leeming JA, a building containing “flats”, rather than a building containing two flats. The former description best describes the activities in question. The latter and more particular characterisation is too narrow, because it focuses upon the detailed activities which have taken place, that is, the number of flats. Authority does not support such a narrow approach to characterising the purpose of an “existing use”: see the High Court authorities referred to by Macfarlan JA at [3]. See also Royal Agricultural Society of New South Wales v Sydney City Council (1987) 61 LGRA 305 at 310-311 (McHugh JA; Hope and Samuels JJA agreeing); and North Sydney Municipal Council v Boyts Radio & Electrical Pty Ltd (1989) 16 NSWLR 50 at 50-60 (Kirby P; Samuels and Priestley JJA agreeing).

7. [7]

   LEEMING JA: In the early years of the twentieth century, a two storey house was built on Arbutus Street in the Municipality of Mosman in Sydney. The land drops away steeply from the street, so much so that a basement which is below street level may be entered directly from the backyard. Council approved building alteration works to the house in 1933 to convert it into two flats. That occurred, and for the following 80 years, the building has been used as two separate residences.

8. [8]

   The land is now zoned “R2 Low Density Residential” under the Mosman Local Environmental Plan 2012. In that zone, dwelling-houses are permitted with consent but residential flat buildings are prohibited. In the 2012 LEP, “residential flat building” is defined to mean “a building containing 3 or more dwellings, but does not include an attached dwelling or multi dwelling housing”. The LEP also defines “dual occupancy (attached)” to mean “2 dwellings on one lot of land that are attached to each other, but does not include a secondary dwelling”. There is also a category “dual occupancy (detached)”. Both forms of dual occupancy are prohibited in land zoned R2.

9. [9]

   Nevertheless, it has at all times been common ground that the use of the building as two flats was lawful after 1933. On any view, that use is an “existing use” within the meaning of Div 10 of Pt 4 of the Environmental Planning and Assessment Act 1979 (NSW). Section 106 defines “existing use”:

10. [10]

    The parties’ agreement had and has the potential to obscure the complexity of the legal position. That is because the definition and the substantive provisions in Div 10 of Pt 4 operate more subtly than may at first appear. First, they do not operate retrospectively: Steedman v Baulkham Hills Shire Council [No 2] (1993) 31 NSWLR 562 at 578. Instead, the definition of “environmental planning instrument” picks up not merely the 2012 LEP, but also the “former planning instruments” referred to in Sch 3 of the Miscellaneous Acts (Planning) Repeal and Amendment Act 1979 (NSW), which, as will be seen below, include the Cumberland Planning Scheme Ordinance 1951 and Local Environmental Plans made in 1982 and 1998. As Handley JA explained in Steedman at 578-579, it is sometimes necessary to determine whether, at each of the dates each environmental planning instrument commenced, the existing use continued (see for example Council of the City of Sydney v Wilson Parking Australia Pty Ltd [2015] NSWLEC 42 at [186]-[229]). Happily, that is not an inquiry that is required in the present case, because the Council accepted (in accordance with information in historical electoral rolls) that the use of the building for two flats was continuous throughout the period.

11. [11]

    Secondly, and importantly for this appeal, the definition of “existing use” distinguishes between a use which was for a lawful purpose which became prohibited, and a use for which development consent was obtained which became prohibited. The former category of uses did not require development consent: Steedman at 569 and 580; the latter are uses which were lawful only because consent had been obtained. It may be seen that the definition thereby picks up the “conventional threefold structure”, seen most clearly now in ss 76, 76A and 76B of the Environmental Planning and Assessment Act, to which Spigelman CJ referred in Woolworths Ltd v Pallas Newco Pty Ltd [2004] NSWCA 422; 61 NSWLR 707 at [2].

12. [12]

    A series of deeming provisions caused the 1933 approval by Council under s 314 of the Local Government Act 1919 (NSW) to be taken to be a development consent under the Environmental Planning and Assessment Act. That in turn meant that the second limb of the definition was capable of being engaged, if it could be established that there was a use for which the 1933 approval was granted. This was at the forefront of Council’s submissions.

13. [13]

    However, the definition of existing use might also be engaged through the first limb of the definition, if the correct analysis were that consent were not required for the use of the building as two flats, as opposed to the construction work to effect its conversion from a dwelling-house to two flats. I have concluded that this is central to the approach to be taken to resolve this appeal.

The background to the litigation

1. [14]

   The appellant owns the land known as 7 Arbutus St. It has applied to demolish the existing building and construct a building containing three flats, with basement parking. The respondent Council refused the application, and there is a pending appeal in Class 1 of the jurisdiction of the Land and Environment Court which was adjourned in light of this proceeding.

2. [15]

   The appellant’s proposed development is prohibited on land zoned R2, and so its application turns upon its existing use rights under Div 10 of Pt 4 Environmental Planning and Assessment Act. There is a dispute about the quality of those rights.

3. [16]

   The Environmental Planning and Assessment Act expressly authorises regulations for or with respect to the change of an existing use to another use and the “enlargement or expansion or intensification of an existing use”: s 108(1)(b) and (c). The regulation-making power has been exercised, and the regulations so made are the “incorporated provisions”, which are taken to be incorporated in every environmental planning instrument (s 108(2)) and which, speaking generally, prevail over any provisions which would derogate from them (s 108(3)). The incorporated provisions are found in Pt 5 of the Environmental Planning and Assessment Regulation 2000. That Part contains regulations permitting the enlargement, expansion or intensification of, and changes to, existing uses. In all such cases, development consent is required. However, the regulations distinguish between an enlargement, expansion or intensification of an existing use on the one hand, and a change of an existing use to another use, on the other. An enlargement, expansion or intensification “must be for the existing use and for no other use”: reg 42(2)(a). A change to another use may occur “only if that other use is a use that may be carried out with or without development consent under the Act”: reg 41(1)(d).

4. [17]

   The appellant sought a declaration, in separate proceedings in Class 4 of the jurisdiction of the Land and Environment Court, that its land “has the benefit of existing use rights as a residential flat building”. However, the primary judge accepted the Council’s proposed alternative formulation, and made a declaration that the land “has the benefit of existing use rights as two flats in a house”: Jojeni Investments Pty Ltd v Mosman Municipal Council [2014] NSWLEC 120. The appellant appeals from that declaration as of right, pursuant to s 58 of the Land and Environment Court Act 1979 (NSW).

5. [18]

   As Basten JA said in Calleja v Botany Bay City Council [2005] NSWCA 337; 142 LGERA 104 at [43], the answer to a dispute about an existing use often depends on the level of particularity or generality with which the use is identified. This litigation provides a further example. But it may be seen that the dispute as to the appropriate terms of the declaration of existing use rights goes directly to the question of power to approve the appellant’s development application. If the development application is merely an “enlargement or expansion or intensification” of the existing use, then so long as it is “for the existing use and for no other use” the Council (and the Land and Environment Court on appeal) is empowered to grant consent to it. Of course, consent may alternatively be refused, or granted subject to conditions, depending on the application’s merits (which are not before this Court). If however the development application involves a change of use, then, because it amounts to a residential flat building which is prohibited in zone R2, the Council lacks power to grant consent (as does the Land and Environment Court on appeal). Because the question is one of power, which may be dispositive of the Class 1 proceedings, it was appropriate that it be determined separately (the same course was taken in Woollahra Municipal Council v Banool Developments Pty Ltd (1973) 129 CLR 138: see at 141).

6. [19]

   The nature of the underlying legal problem is readily exposed by considering two examples analogous to those advanced in oral submissions by the appellant. Suppose in 1923 approval had been granted to erect a block of eight flats. As a matter of first impression, it would seem likely that the provisions of reg 41(1)(a) and (b) for the alteration, extension, enlargement, expansion or intensification of the use would permit an application in 2015 to demolish and rebuild a block of seven flats, or for that matter nine flats. A building constructed so as to accommodate seven flats, or nine flats, would not appear to be a “change of use”, and would appear to be “for the existing use and for no other use” within the meaning of regs 41 and 42 of the current Regulation.

7. [20]

   Conversely, suppose in 1923 approval had been granted to demolish the existing structure and build a new building, to be used as a single residence. Once again, as a matter of first impression, it would seem likely that regs 41 and 42 would not permit an application to demolish and rebuild a block of two or more flats.

8. [21]

   The reason for the different outcomes is that as a matter of the “ordinary use of language” and as a matter of what is “likely to appeal to practical minds as appropriate in the application of town-planning legislation” (both phrases are used by Kitto J in Shire of Perth v O’Keefe (1964) 110 CLR 529 at 535), there is no meaningful distinction in the use of buildings containing seven, eight or nine flats, but there is a clear and material distinction between the use of a building for a single residence and for two or more residences.

9. [22]

   The present case is intermediate. Whether there is a change of use, or merely an enlargement, expansion or intensification of the same use, when a building containing two flats is replaced by a building containing three flats is far from obvious, at least to my mind. That is the first reason for its difficulty.

10. [23]

    Two additional considerations exacerbate the difficulty of this appeal. The first is that the terms of Council’s 1933 approval cannot be located and must be inferred from the documents which survive. The second is that the planning regime in 1933 was quite different from the current regime. In particular, the regime in 1933 drew no distinction between a residential flat building containing two flats, and one containing three flats; the opposite is true today.

The reasons of the primary judge

1. [24]

   The reasons of the primary judge were concise. His Honour noted the concessions that an approval had been lawfully granted, and that the property had operated continuously thereafter as two separate residences, sharing a basement laundry and service area: at [12]. His Honour noted that while the current use was prohibited under the current LEP, it was lawful in view of existing use rights, and that there was a dispute as to the nature of those rights, and in particular as to whether those rights extended to more than “2 flats in a building”: at [17]-[22]. His Honour then briefly recorded the parties’ submissions.

2. [25]

   The dispositive portion of his Honour’s reasons was at [35]-[42]. In accordance with Botany Bay City Council v Workmate Abrasives Pty Ltd (2004) 138 LGERA 120, his Honour regarded the so-called “genus test” for existing uses as inapplicable because the use was dependent upon an historical building consent. His Honour referred to the application of that decision in two first instance decisions where a development consent specified a particular use, to which I return below. His Honour then concluded at [41]-[42] that:

3. [26]

   His Honour accordingly limited the declaration to a use which conformed to the approved plans and the description of the application in the building register. Although his Honour described the surviving contemporaneous documents, he made no finding as to the terms of Council’s 1933 approval. Nor did his Honour refer to the planning regime at the time approval was given.

The terms of Council’s 1933 approval

1. [27]

   On appeal, Council maintained the submission which had succeeded at first instance: that Workmate Abrasives was dispositive, and that the character of the existing use was determined by reference to the 1933 approval. It is convenient to deal with what can be inferred as to its terms immediately.

2. [28]

   The precise terms of Council’s 1933 approval were not known. Those terms are to be inferred from three contemporaneous documents, read in the light of the applicable planning regime.

3. [29]

   The first document was an entry in a building register maintained by Council, which recorded various applications (for buildings, alterations, garages and subdivisions) sequentially, in the order they were received. Each application was given a number and a brief description. The register recorded on 18 September 1933 that an application had been made relating to the Arbutus St property. The application was numbered “33/110”, was described as “Alt & Adds into 2 flats”, and was made by “Ackland Mrs H”.

4. [30]

   The second was a single page architectural plan with a Municipality of Mosman stamp upon it, showing that a fee (of half a crown) was paid on 18 September 1933. The plan was annotated “33/110” and dated by hand 25 September 1933. It was described as “plan of conversion of residence into flats Arbutus Street Mosman for Mrs H Ackland”. The ground floor and first floor floor-plans showed self-contained residential accommodation. The plans also showed a basement with a laundry and ironing and box room.

5. [31]

   The third was the Valuer General’s valuation rolls and field books. One thing that has remained constant throughout the period since 1933 is that the rates imposed by local councils have been determined by reference to land values assessed by the Valuer General in accordance with the Valuation of Land Act 1916 (NSW). The valuation list in 1930 described the “nature of improvements” on the land as “RES” (that is, “residence”) while in the 1935 list the improvements were described as “FLATS”. An entry dated 24 October 1933 in the field book recorded that the land was “converted to Flats”. It will be seen below that what matters for present purposes is that the building works and change of use took place before 1937; as much may confidently be inferred from the contemporaneous documents.

6. [32]

   In order to place those documents in context, so as to infer precisely what Council approved in 1933, it is necessary to turn to the legislative regime then applicable.

The planning regime in 1933 as applicable to Arbutus St, Mosman

1. [33]

   The Local Government Act 1919 (NSW) commenced on 1 January 1920. Within Pt XI, s 305(1) empowered the council of a municipality (such as the Municipality of Mosman) to control and regulate the erection of buildings in accordance with Pt XI. “Erection” included “any structural work or any alteration, addition, or rebuilding”: s 304. The regime followed a familiar pattern. It was prohibited to erect or use a building in contravention of the Act: s 306(1), and in particular it was prohibited to occupy or use a building for residential purposes if it was erected for any purpose other than residential purposes without prior consent: s 306(2). Section 311 provided that a building “shall not be erected or altered unless the approval of the Council is obtained therefor beforehand”. Section 312 required applications for the approval of Council to be made in the prescribed manner, to be accompanied by two copies of such plans and specifications as need be prescribed, and to be accompanied by the prescribed fee. Section 314 required the Council to consider each application and the plans and specifications accompanying it and empowered it to approve, or approve subject to conditions, or disapprove the application. Section 315 required substantial commencement within twelve months of the approval, failing which it was void. Section 316 empowered Council to prohibit the use or occupation of a building until permission to do so had been granted.

2. [34]

   Importantly for present purposes, s 309 empowered the Governor to declare portions of a council’s area to be a “residential district”. If such a declaration were made, various prohibitions in s 309(1) could be engaged including a prohibition on the erection or use of a building for specified trades, industries, shops and places of public amusement. Of this provision it was said that:

3. [35]

   On 11 November 1921, Ordinance No 71 was proclaimed under the Local Government Act 1919. It applied in the Municipality of Mosman. Part IV of Ordinance No 71 applied to “residential flat buildings” (which were defined – see below), and made provision for the extent to which such buildings could occupy the allotment of land on which they stood, their maximum height, and various other structural matters.

4. [36]

   On 11 August 1922, cl 52½ was inserted into Ordinance No 71. This clause provided that when it was “proposed to alter a building so that it may be used as a dwelling-house or residential flat building”, Council could require the whole building to comply with the provisions of the Ordinance which apply to a dwelling-house or residential flat building as the case may be.

5. [37]

   On 21 October 1924, parts of Mosman, including Arbutus St, were proclaimed to be a residential district, pursuant to s 309 of the Local Government Act 1919.

6. [38]

   In 1928, the Local Government (Amendment) Act 1928 (NSW) relevantly amended the Local Government Act 1919 as follows. First, a new paragraph, s 309(1)(f), was inserted into s 309 of the Act, adding a new prohibition which could be engaged when a residential district proclamation was made. New paragraph (f) prohibited the “erection or use in the district of any building for the purpose of a residential flat”. A proviso to that paragraph was that:

7. [39]

   Secondly, s 309(1A) was introduced (by s 9 of the 1928 Act), in response to the High Court’s decision in Dyer v Luckett (1928) 41 CLR 44: see M Wilcox at 466-468. The new sub-section authorised a proclamation to apply “generally to all or any trades, industries, manufactures, shops and places of public amusement”, or “particularly to the trades, industries, manufactures, shops and places of public amusement mentioned in the proclamation” or “to all trades, industries, manufactures, shops and places of public amusement other than those mentioned in the proclamation”. However, no provision was made in respect of the use of a building for residential flats, even though the prohibition was introduced by the same amending Act. Residential flat buildings were either authorised or forbidden.

8. [40]

   It is generally wrong to construe an Act by reference to delegated legislation made pursuant to it: Master Education Services Pty Ltd v Ketchell [2008] HCA 38; 236 CLR 101 at [19]. That would be for the tail to wag the dog, as French CJ observed in Plaintiff M47/2012 v Director-General of Security [2012] HCA 46; 251 CLR 1 at [56]. The present case is an exception to the general rule. When in 1928 an amendment was made prohibiting the erection or use of a class of building described as “residential flat building”, the term was undefined in the Act but was defined in the Ordinance made pursuant to the Act, Pt IV of which regulated “residential flat buildings”. In those circumstances, to conclude that the identical term in the new Act bore the meaning it had been given in the pre-existing delegated legislation is to do no more than to read the Act and the delegated legislation together so as to identify the nature of the scheme.

9. [41]

   In around September 1933, the Council granted approval in respect of proposed building works at 7 Arbutus St. The terms of that approval could not be located by the parties. It seems plausible that the building works, which were quite minor, were completed by around 24 October 1933, in accordance with a note in the field book (“converted to Flats 24/10/33”). The field notes from the Valuer General are difficult to interpret, but there appears to be a notation in an entry dated 24 October 1933 against the field “Cost of Improvements” which reads “Convert Flats £300”. But it is quite clear that the conversion had been effected by 1935, because the land and improvements were revalued as at 27 June 1935 at a higher rate and were described in the valuation list as “FLATS”, in contrast with earlier entries where the same entry was “RES”.

10. [42]

    By proclamation dated 15 September 1937, the 1924 proclamation declaring parts of Mosman, including Arbutus St, to be a residential district was revoked, and a new series of 14 residential districts was established. Arbutus St fell within District 11, within which “the erection or use of any building for the purposes of a residential flat” was forbidden (see New South Wales, Government Gazette, No 142, 24 September 1937, 3870). That engaged the prohibition in s 309(1)(f), which had not been engaged by the 1928 proclamation.

11. [43]

    Thus, in 1933, when the building approval was granted, Pt XI of the Local Government Act 1919 made provision for the erection and use of buildings in the Municipality of Mosman. Special provision was made for the use of buildings for residential purposes. The Act identified two categories of buildings capable of being used for residential purposes: dwelling-houses and residential flat buildings. That distinction was made applicable to the land at Arbutus St only through Ordinance No 71. That ordinance dealt expressly with residential flat buildings in Pt IV, and with alterations involving a change of use to either a dwelling-house or residential flat building in cl 52½. Unlike every other building or use which could be forbidden by a proclamation, the Act made no provision for a more precise articulation of classes of residential flat buildings which could be prohibited or permitted. (This changed when the Local Government (Regulation of Flats) Act 1940 (NSW) introduced into the 1919 Act four classes of residential flat buildings, known as classes A, B, C and D, which were defined by reference to their footprint and height, as well as a definition of “residential flat building” in identical terms to that in Ordinance No 71.)

12. [44]

    Finally, in 1933, it was lawful for the Council to grant permission to alter the existing house at Arbutus St so that it comprised two flats, being something which answered the description of a “residential flat building” in Ordinance No 71. That was because although the land was in a proclaimed residential district, the proclamation had been made before 1928, and so had not engaged the prohibition in s 309(1)(f) which had been added by the 1928 amending Act.

Inferring the terms of Council’s 1933 approval

1. [45]

   What then were the terms of Council’s approval? It is necessary to start with the secondary evidence referred to above. This is not a case of another document constituting Council’s consent, nor one of inferring consent from conduct: cf Baiada v Waste Recycling and Processing Service of NSW [1999] NSWCA 139; 130 LGERA 52 at [38] and [98]. Instead, it is a case where secondary evidence is used to identify the terms of a written approval which is not presently able to be found, an approach which accords with that taken in North Sydney Municipal Council v Boyts Radio & Electrical Pty Ltd (1989) 16 NSWLR 50 at 52-53.

2. [46]

   The plan bearing Council’s stamp refers to a “conversion of residence into flats”. Council’s building register refers to “alt[erations] and add[itions] into 2 flats”. The Valuer General’s field notes refer to “converted to flats”. But none of these descriptions is determinative of the use, if any, which the approval authorised.

3. [47]

   There is no reason to conclude that approval was sought or granted for any particular use in terms. No question arose under s 306: the building had been used for residential purposes before 1933, and it was proposed that it continue to be used for residential purposes. What was sought and obtained from Council was an approval under s 314 of the Local Government Act 1919, so as to avoid the prohibition upon erecting or altering a building imposed by s 311. The prohibition in s 311 said nothing as to the use of the building.

4. [48]

   In the task of inferring what was approved by Council, it is necessary to put to one side preconceptions deriving from more recent legislation. Section 4(2) of the Environmental Planning and Assessment Act today provides that a reference to the “carrying out of development includes a reference to the use of land or a building”. That has been the position for many years. It may be seen in s 342T of the Local Government Act 1919 and was traced by Sugerman J, whose judgments in this area warrant high regard, in Ex parte Arnold Homes Pty Ltd; Re Blacktown Municipal Council (1962) 9 LGRA 268 at 271:

5. [49]

   But s 342T was inserted in 1945. It had no counterpart in the Local Government Act 1919 in 1933.

6. [50]

   To put the matter squarely, in 1933 it was possible for the owner of the Arbutus St property, which had been used as a single residence, to use it as two residences without any approval from Council at all. (The position changed in 1937.) Council’s approval was only required in 1933 because of the structural alterations which were sought to be made.

7. [51]

   That said, it is clear that the alteration works proposed would change the nature of the building from a dwelling-house to a residential flat building. It is possible that Council insisted upon compliance with the provisions of Pt IV of Ordinance No 71, as it was entitled to do under cl 52½ of that Ordinance, and imposed conditions upon its approval to ensure that that occurred. The materials do not permit any inference confidently to be drawn one way or the other on that point, so far as I can see. I see no reason to resolve the parties’ competing submissions on the failure by Council to insist that there was an external fire-stair, which turned in part on the definition of “storey” but may merely have reflected a relaxed view of what in practice was required on the sloping site; whatever the position be, this sheds little light on the terms of Council’s approval.

8. [52]

   It is also clear that Council’s approval in 1933 was for those structural alterations to be made in accordance with the approved plans; if that did not occur, then an occupation certificate under s 316 might be withheld. However, once again it does not follow that those plans circumscribed the use which might be made of the altered building. It is basic that use must be for a purpose, and that the purpose is not concerned with the nature of the buildings that will be used to serve that purpose. That was the reason for the criticism of substantially the same submission which was advanced by the council in Ashfield Municipal Council v Armstrong [2002] NSWCA 269; 122 LGERA 105, where the question was whether a use of a building comprising four flats had commenced prior to a prohibition coming into force (at [11]):

9. [53]

   The same principle was more recently restated in Abret Pty Ltd v Wingecarribee Shire Council [2011] NSWCA 107; 180 LGERA 343 at [51]-[52] (Beazley JA, Campbell JA and Handley AJA agreeing):

10. [54]

    The primary judge’s reasoning appears to have reached a conclusion as to use from the plans alone, divorced from the planning regime applicable in 1933. It will be seen from the foregoing that I would, respectfully, take a different approach.

11. [55]

    I would conclude that it is more likely than not that Council’s approval did not explicitly specify the use of the land, or the purpose of such a use, as opposed to specifying the building work authorised to be undertaken. There was no reason for that to occur. Of course, it was clear that the altered structure was in fact to be used as two self-contained flats. But that does not of itself answer the question as to the characterisation of the use.

12. [56]

    It may readily be inferred, as Council submitted, that “the missing consent is for alterations and additions to a dwelling-house for conversion into two flats in accordance with the approved plan” (written submissions, paragraph 11). However, Council’s submissions added that “It did not authorise a residential flat building, nor did it authorise any number of flats on the land”. There are two difficulties with the latter proposition. The dwelling-house, as altered, undoubtedly was a residential flat building as the term was then understood (as noted above, it was broader than it is under the 2012 LEP, for in 1933, two flats, rather than three, were sufficient). Moreover, the fact that it did not authorise “any number of flats” is not to the point in order to answer the question of use.

13. [57]

    Taking the position at its highest so far as Council was concerned, it might be said that the 1933 approval of the physical work modifying the building impliedly authorised the building to be used for two flats. However, that would elide the basal distinction between development which is lawful without consent, and development which is lawful only with consent. What is more, the legislation in 1933 did not define “development” to include “use”.

14. [58]

    The position may be contrasted with the two decisions on which the primary judge relied. In Botany Bay City Council v Parangool Pty Ltd [2009] NSWLEC 198, the development consent expressly authorised a use: “Use of existing warehouse building for the warehousing/storage and distribution of alcoholic goods”. Those “express and limiting terms” of the development consent delineated the existing use on which the respondent had relied, with the result that that use could not be characterised as “a use for warehousing generally”.

15. [59]

    Secondly, in MM & SW Enterprises Pty Ltd v Strathfield Council [2010] NSWLEC 8; 172 LGERA 125, the consent said to support the existing use (as a brothel) was once again expressed in terms of use: it permitted the “use of the property described above for commercial offices”, subject to it not being “used for the purpose of a Doctors’ nor Dentists’ surgery” or “used for residential habitation at any time”. It was sufficient for the Court to conclude as a matter of construction that the use of the premises (as a brothel) fell outside that which was permitted by the consent.

16. [60]

    The point of distinction is that the consents in Parangool and MM & SW Enterprises contained limiting words constraining the uses which were permitted, without which the use would have been prohibited. Such words would not have appeared in the 1933 approval, because it is to be inferred that no approval for any use, beyond the existing use for residential purposes, was sought, nor was any such approval required.

The 1937 prohibition and subsequent amendments to the planning regime

1. [61]

   As noted above, in 1937 it became unlawful for Council to approve residential flat buildings in a residential district such as Arbutus St.

2. [62]

   It follows that the application approved by Council in 1933 would have been refused had it been made after September 1937. As Bavin J said in Wright v Concord Municipal Council (1937) 13 LGR 183 at 186, following the making of a valid proclamation, council “has no alternative but to refuse”.

3. [63]

   However, because of the proviso to s 309(1)(f), the 1937 proclamation did not render the use of the building for the purpose of a residential flat unlawful. What is more, s 309(2) of the Local Government Act 1919 applied:

4. [64]

   It will be seen below that s 309(2), as construed by the High Court, is relevant to the proper approach to characterisation of the existing use. It suffices for now to observe that s 309(2) had two presently relevant features. First, it ensured that the making of a proclamation did not preclude (a) the continuance of an existing use for a purpose, or (b) the use for any other purpose which a council thought reasonable. Although there was not the same restriction on Council’s power as may now be found in reg 41(1)(d), the notions of use for the same purpose and use for another purpose posed essentially the same questions of generality or particularity as appear in the current legislation.

5. [65]

   Secondly, s 309(2) preserved not merely the lawfulness of an existing use for a purpose, but also the “alteration, enlargement, rebuilding or extension of any building used for” that existing use. It ensured that a residential district proclamation did not preclude the alteration, enlargement, rebuilding or extension of all classes of buildings affected by the proclamation, including a residential flat building, so long as the building was still used for the purpose it had been used for immediately before the proclamation was made.

6. [66]

   Substantially the same position obtained thereafter until the present. The land was zoned “living area” under the County of Cumberland Planning Scheme Ordinance between 1951 and 1982, and “zone 2(a1) Residential” under Mosman Local Environmental Plan No 1 between 1982 and 1998 and under Mosman Local Environmental Plan 1998 between 1998 and 2012. The use as a residential flat building was at all times prohibited under each of those instruments.

7. [67]

   However, a continuation of the existing use was at all times authorised (including by cl 32 of the County of Cumberland Planning Scheme Ordinance 1951, and by Div 10 of Pt 4 of the Environmental Planning and Assessment Act).

8. [68]

   Moreover, in the succeeding decades there continued to be counterparts to s 309(2). Clause 35 of the County of Cumberland Planning Scheme Ordinance provided that an existing building could be “altered, enlarged, or extended, or added to by the erection of new buildings”. Section 108 of the Environmental Planning and Assessment Act as originally enacted followed the current form of empowering regulations for the carrying out of alterations or extensions to or the rebuilding of a building or work being used for an existing use, and the change of an existing use to another use.

9. [69]

   It may assist to repeat the essential conclusions reached thus far. The 1933 approval approved the modification of an existing structure. There was no occasion for it to approve any particular use in terms. If one were to ask what was the source of the entitlement for the building to be used for the lawful purpose of two flats after 1933, as opposed to the entitlement to modify the existing building, then the answer was the fact that it had been lawfully used for residential purposes for many years prior (indeed, prior to the enactment of the Local Government Act 1919).

10. [70]

    A focus on the distinction between the approval under s 314 to alter the existing building, and the lawfulness of the use of that building for residential purposes, enables an observation which is critical to the determination of this appeal to be made. The former but not the latter, is sourced in the 1933 consent. The use of the building as modified for residential purposes therefore answers the description of an existing use under s 106(a), not (b) of the Environmental Planning and Assessment Act.

The characterisation of the existing use

1. [71]

   The preferable way of analysing the ultimate question as to the nature of the existing use rights is that it does not turn on the ordinary construction of the terms of a development consent. This is not a case like Parangool or MM & SW Enterprises where the development consent prescriptively identifies the permitted use. It is instead a case like Ashfield Municipal Council v Armstrong or Woollahra Municipal Council v Banool Developments Pty Ltd where the lawful use is not derived from any consent or approval. The principles articulated by Kitto J in Shire of Perth v O’Keefe apply.

2. [72]

   Further, if I were wrong about that, such that it is correct for the purposes of s 106 to rely on the second limb of the definition of “existing use” by reason of the fact that the 1933 approval impliedly authorises the use of the building for the purpose of flats, even so I would not consider what was said in Botany Bay City Council v Workmate Abrasives Pty Ltd (2004) 138 LGERA 120 to extend to the present case. The proposition in Workmate Abrasives at [14] that the reasoning in Shire of Perth v O’Keefe is “irrelevant” where an existing use is claimed to flow from an existing development consent is, in my opinion, too broad, if it is said to apply to a case where a development consent is silent as to use and purpose. In such a case, it is not foreign to the task required by the legislation to apply the principles of characterisation directed to identifying the appropriate level of particularity or generality.

3. [73]

   I have other reservations about the authority of Workmate Abrasives. That was a decision given ex tempore and without the benefit of argument from the respondent, in circumstances where the consent specified a use, namely, the manufacturing and reconditioning of industrial machinery. It is to my mind difficult to reconcile with the reasoning in North Sydney Municipal Council v Boyts Radio & Electrical Pty Ltd (1989) 16 NSWLR 50. The use in Boyts was originally as a bakery, but was changed by an approval in 1954 to a warehouse at the same time that the council approved additions and alterations to the building: see at 52-53 (in the interests of concision, I am simplifying the facts slightly). That was a different case from the present, because there was evidence that the approval had been granted in terms of permitting the new use, at a time when, following the introduction of the County of Cumberland Planning Scheme Ordinance 1951, permission was required for the use as a “warehouse” or “bulk store”. But even so, Kirby P, with whom Samuels and Priestley JJA agreed, applied the so-called “genus” test associated with Shire of Perth v O’Keefe and Royal Agricultural Society of New South Wales v Sydney City Council (1987) 61 LGRA 305. Perhaps because the respondent did not appear, the Court in Workmate Abrasives appears not to have been taken to Boyts. That said, none of the foregoing is intended to cast doubt upon the result in Workmate Abrasives, for the Court proceeded to apply the genus test in the alternative to confirm its conclusion: at [15]-[16].

4. [74]

   I return to the question of characterisation, which is not free from difficulty. As Professors Twining and Miers have said in a different context, “There are no categorical rules to direct judges about the selection of appropriate levels of generality”: W Twining and D Miers, How to Do Things with Rules, (5th ed, 2010, Cambridge University Press) at 309. The same is true here.

5. [75]

   However, there are well-established principles to guide the exercise of judgment. The question is the appropriate characterisation of the purpose of the use: O’Keefe at 535. That question is not answered through a meticulous examination of the details of the activities undertaken on the land: O’Keefe at 535. It is necessary to have regard to the purpose served by those activities: Abret Pty Ltd v Wingecarribee Shire Council at [51]. That use is characterised liberally, having regard to the principle that provisions designed to protect and preserve existing use rights should be as liberally construed as the statutory language in its context allows: Dorrestijn v South Australian Planning Commission (1984) 59 ALJR 105 at 108.

6. [76]

   In Royal Agricultural Society (NSW) v Sydney City Council at 310, McHugh JA (with whom Hope and Samuels JJA agreed) stated that the level of generality was “not so general that the characterisation can embrace activities, transactions or processes which differ in kind from the use which the activities etc as a class have made of the land”. In determining the appropriate genus, “attention should be focused on the [town-planning] purpose for which the determination is being made ... because the regulation of the use within the neighbourhood is the general purpose for which planning law is provided”: Boyts at 59; Grace v Thomas Street Café Pty Ltd [2007] NSWCA 359; 159 LGERA 57 at [69].

7. [77]

   Informed by those principles, I conclude that the appropriate level of generality to describe the existing use is as a building containing “flats”, as opposed to the Council’s submission of a building containing two flats. I reach that conclusion for the following reasons.

8. [78]

   First, I am not attracted to the proposition that the existing use is appropriately described by reference to a particular number of flats within a building. It cannot be the case that a residential flat building containing eight flats is in a different category from one containing seven or nine flats. Applying what McHugh JA said in Royal Agricultural Society, I do not consider that the use of a building for the purpose of three flats is “different in kind” from its use as a building for the purpose of two flats. I appreciate that there is what Tobias JA referred to as a well-known class of buildings commonly referred to as a “duplex”: Calleja v Botany Bay City Council [2005] NSWCA 337; 142 LGERA 104 at [25]; see also Shellcove Gardens Pty Ltd v North Sydney Municipal Council (1960) 6 LGRA 93 at 99. Council relied on that distinction. As much is recognised by the dual occupancy definitions in the current LEP. But that was not a class of use separately recognised in the regime in 1933. The appellant submitted that in 1933, insofar as the planning regime identified residential buildings, it only specified “dwelling-houses” and “residential flat buildings”. The appellant submitted orally that “the nature of the use or the only nature of the use that could have been the subject of the approval in 1933, was residential flats, it not being a dwelling-house. That was the only other identifiable candidate from the Act.” I agree. What was approved in 1933 was the conversion of a building such that it might be used no longer as a “dwelling-house” but instead as a “residential flat building”. (It will be recalled that in 1933, but not in 2012, a “residential flat building” was a building containing 2 or more flats.)

9. [79]

   Secondly, I apply the same reasoning employed by Mason J in Woollahra Municipal Council v Banool Developments Pty Ltd at 145. Mason J (with the agreement of the other members of the Court) there described s 309(2) of the Local Government Act 1919 in some detail in its application in a substantially similar context (following the making of a residential district proclamation). His Honour said that the fact that it was a provision which makes lawful a continuation of a use which would otherwise be in breach of the proclamation “supplies an indication that the purpose which is there referred to is specific rather than general”. Mason J also referred to the consideration that s 309(1)(c) authorised a “proclamation to descend to the particularity of a shop described by reference to the trade carried on by the shop-keeper or the goods or services which he supplies”. His Honour then said:

10. [80]

    His Honour then stated that the following observations made by Kitto J in Shire of Perth v O’Keefe applied with equal force to s 309(2):

11. [81]

    The High Court in Banool allowed the appeal, restoring the declarations made by Hope J at first instance, who had rejected the land owner’s submission that describing the purpose as “neighbourhood shops” or “neighbourhood retail shops” was appropriately particular.

12. [82]

    It will be seen that Mason J relied on the level of particularity authorised by the Act to be contained in a residential district proclamation, as well as the principles in Shire of Perth v O’Keefe, in order to evaluate the appropriate level of generality or particularity.

13. [83]

    To return to the facts of this appeal, the 1924 proclamation prohibited a long list of factories, shops, and other uses. It included “picture theatres, halls for public amusement, abattoirs, livery stables, bottle yards, dairies and milk depots, billiard-rooms, cattle sale-yards, produce stores, depots for the storage or sale of any material, public garages and public laundries” (they are merely the last five lines of 23 lines of prohibited uses in the proclamation as gazetted). However, in marked contrast, there was no power for any more nuanced articulation of residential flat buildings, whether by reference to number of flats, or height, or area of land occupied. The approach taken in Banool is consistent with a description at the level of generality sought by the appellant.

14. [84]

    Thirdly, attention should be focussed on the town-planning purpose for which the determination is being made. Unsurprisingly, distinct town-planning purposes are associated with the butcher’s shop mentioned by Kitto J, as opposed to, say, a shoe shop. That is far from clear in the case of buildings containing different numbers of flats. The detail of the 1924 proclamation informs the approach to be taken. The existing use was for more than one occupancy in what was otherwise a single dwelling-house. That use was, in 1933, given the description of “residential flat building”. That same distinction appeared in the 1928 amendments, in the 1938 proclamation, and in legislation over the next few decades permitting conversion of buildings into flats. There was no differentiation in 1933 based on the intensity of the use as a residential flat building. As the appellant put in writing:

15. [85]

    The fact that subsequent local environmental plans distinguish between dual occupancies and residential flat buildings is no sound basis to characterise the existing use more narrowly. Kirby P said in Boyts at 61-62 in precisely the same context, in relation to a changed definition of “warehouse”, that “It is impermissible, retrospectively, to impose the particular meaning of ‘warehouse’ later adopted in [a later planning ordinance]”. The same applies with equal force to the later, narrower meaning given to “residential flat building”.

16. [86]

    Fourthly, weight should be given in this contestable and somewhat impressionistic area to considerations of consistency. This Court in Ashfield Municipal Council v Armstrong made a declaration that the appropriate level of particularity was for the purpose of a residential flat building, rather than as a building containing four flats. Having rejected Council’s submission that Armstrong should be distinguished, it is appropriate to apply the same level of particularity to the present case. (It will be seen that a slightly different wording is required, because of the altered definition of “residential flat building” in the Mosman 2012 LEP, but that does not detract from the force of this consideration.)

17. [87]

    In those circumstances, the appropriate characterisation of use is a building used for flats. Council submitted that that could not be so, because then “the land could be used for any number of flats”. But that submission fails to address the fact that there is no authorisation to do anything beyond the existing use in the existing structure until a proposal is approved on its merits.

18. [88]

    Nonetheless, the precise form of declaration proposed by the appellant is undesirable, although it is identical to that issued by this Court in Ashfield Municipal Council v Armstrong, because of the ambiguity of the term “residential flat building”. A declaration in the terms sought would immediately prompt the question: does the declaration of existing use refer to “residential flat building” as defined in Ordinance No 71 in 1933, or in the Local Government Act 1919 in 1940, or in the Mosman LEP in 2012, or something else? Moreover, it is plain that the building is currently not used as a “residential flat building”, as that term is defined in the current LEP, for it is a dual occupancy. Declarations should be clear on their face.

19. [89]

    This appeal should, in accordance with s 56(1) and (2) of the Civil Procedure Act 2005 (NSW), be decided so as to resolve the real issue dividing the parties. The real issue is the question of power to which I earlier referred. The declaration should make it clear, if it is possible to do so, whether a residential flat building with three flats and basement parking would be “an enlargement or expansion or intensification of an existing use” which is “for the existing use and for no other use” or else would involve a “change of use” within the meaning of those terms in s 108(1)(b) and (c) and regs 41 and 42.

20. [90]

    A declaration that the land has the benefit of existing use rights as a building containing flats will resolve the question of power, and avoid the ambiguity of “residential flat building”. Subject to the Council’s notice of contention, declaratory relief in those terms should issue.

Council’s notice of contention

1. [91]

   The Council sought to defend the substance of the result reached by the primary judge by a notice of contention that the effect of s 109B of the Environmental Planning and Assessment Act was to deprive the appellant of all existing use rights. Section 109B is in the following terms:

2. [92]

   Council’s submission on its notice of contention was commendably concise. It was put thus orally:

3. [93]

   After referring to the fact that the definition of development includes use, and the strength of s 109B(2) (“has effect despite anything to the contrary in section 107 or 109”), the submission concluded:

4. [94]

   The point was squarely flagged in Council’s defence, which alleged that “by reason of s 109B(1) of the Act, the land did not have the benefit of an existing use because LEP 2012 did not prohibit use of the Land for that purpose”. Contrary to the appellant’s submissions, it is not a new point which cannot be raised on appeal: see Cassegrain v Gerard Cassegrain & Co Pty Ltd [2015] HCA 2; 89 ALJR 312 at [64] and Attorney General of New South Wales v Homeland Community Ltd [2015] NSWCA 15 at [59].

5. [95]

   However, if the submission be accepted, the appellant would not be entitled to the more limited existing use rights declared by the primary judge, accepting the Council’s submission. The point should have been raised by cross-appeal, rather than notice of contention. But no useful purpose would be served by granting leave to serve a cross-appeal (or treating the notice of contention as a cross-appeal) unless there were merit in the Council’s submission. I turn accordingly to the substance of the point. It may readily be seen that the submission should be rejected.

6. [96]

   The provisions which s 109B displaced, on the Council’s argument, are ss 107 and 109. They are as follows:

7. [97]

   Section 108, which is referred to above under the heading “The background to the litigation”, empowered the making of regulations which may provide a mechanism to authorise what is prohibited by ss 107(2) and 109(2).

8. [98]

   Section 107 applies where there is an absolute prohibition; s 109 where a prohibition may be relaxed if consent is granted: Steedman at 579. Both provisions reflect a compromise between a general prohibition made in the public interest, and the unfairness upon an owner or occupier who has used land for the prohibited purpose prior to the date the prohibition comes into effect. The regulation making power in s 108 also reflects a policy determination that sometimes not merely a continuation of use may be appropriate, but also, in some cases, the owner should be able to alter or extend or rebuild. As this appeal and many others illustrate, those rights can be very valuable. Not lightly in those circumstances is it to be inferred that that legislative balance, and the valuable rights conferred by ss 107, 108 and 109, were substantially taken away by s 109B when the latter was enacted in 1992.

9. [99]

   Secondly, the Minister introducing the bill said nothing of any such altering of the balance or taking away of rights previously enjoyed. To the contrary, he said in the Second Reading speech that:

10. [100]

    It will be seen that the purpose stated by the Minister was in the teeth of the construction for which the Council now contends. That said, there are limitations to the extent to which s 34 of the Interpretation Act 1987 (NSW) entitles this Court to use the Second Reading speech to displace the ordinary effect of the statutory language: see Harrison v Melhem [2008] NSWCA 67; 72 NSWLR 380 at [12]-[13] and [159]-[162].

11. [101]

    For those reasons, it is the third consideration which has greatest weight. The strong language of “has effect despite anything to the contrary in section 107 or 109” in (2)(c) and, especially, the retrospective force given to the section by (3) is typical of a later amendment which is designed wholly to enhance the rights given to a section of the public, and not in any way to detract from those rights.

12. [102]

    It is thus easily seen that Council’s submission carries with it a fatal flaw. If s 109B substantially detracted from the rights previously enjoyed by owners and occupiers of land, why ever should it be given retrospective force? What possible policy objective would be achieved in the case of a landowner having valuable existing use rights before 1992 when s 109B was introduced, on which action may have been taken, if those rights were taken away retrospectively with effect from 1992? This Court is required by s 33 of the Interpretation Act to prefer a construction which would promote the purpose of the Act; Council’s submission collides with that obligation.

13. [103]

    Thus, although the emphatic statutory language in s 109B(2)(c) and (3) was relied on by Council, in fact these provisions are the key to resolving the question of construction arising on the notice of contention. The effect of s 109B is not to alter the class of uses which are defined to be “existing uses” by s 106. After all, s 109B is not expressed to prevail over s 106, in contrast with its relationship with ss 107 and 109, as stated in s 109B(2)(c).

14. [104]

    A recurring element of statutory construction is identifying which of two provisions is the leading provision, and which is the subordinate, to use Lord Herschell’s language in Institute of Patent Agents v Lockwood [1894] AC 347 at 360, cited by the High Court in Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 at [70]. As between the definition of “existing use” in s 106 and the newly inserted s 109B, the former is the leading provision and the latter does not subtract from the class of uses which are existing uses. Section 109B far from achieving that result instead provides clarity as to the absence of effect of all environmental planning instruments upon all such existing uses. It does so by providing an additional immunity for carrying out development.

15. [105]

    Council submitted that its construction reflected the literal meaning of the provisions, read together. That may be so, but it is trite that the ordinary grammatical or literal meaning of any legal text is not necessarily its legal meaning: Project Blue Sky v Australian Broadcasting Authority at [78]; Taylor v The Owners – Strata Plan No 11564 [2014] HCA 9; 88 ALJR 473 at [65]. An example is Plaintiff M47/2012 v Director-General of Security [2012] HCA 46; 251 CLR 1 where Hayne J said at [173] that, because an Act must be read as a whole, “the grammatical meaning of s 31(3) is not its legal meaning”. This appeal provides another example; the evident absurdity of Council’s construction displaces mere literalism. In Day v Harness Racing New South Wales [2014] NSWCA 423 at [55] I said:

16. [106]

    That result accords with the weight of authority when this point or one similar to it has been taken, including the fully reasoned decision of Biscoe J in Currency Corporation Pty Ltd v Wyong Shire Council [2006] NSWLEC 692; 155 LGERA 230 at [47]-[61], although it is contrary to some passages in Caltex Australia Petroleum Pty Ltd v Manly Council [2007] NSWLEC 105; 155 LGERA 255 at [101]-[105] (I note the latter decision was reserved prior to Currency Corporation being delivered). The Court was not taken to any subsequent case endorsing Council’s construction, whilst there are many later cases in which Council’s construction has been rejected, so much so that it could be said in Cracknell & Lonergan Architects Pty Ltd v Leichhardt Municipal Council [2012] NSWLEC 194; 193 LGERA 151 at [53] that “[t]here is ample authority for the proposition earlier stated that a use pursuant to a development consent protected by s 109B may also be an existing use within the meaning of s 106”.

17. [107]

    Accordingly, I would dismiss the notice of contention.

Conclusion and orders

1. [108]

   For those reasons, I would allow the appeal, set aside the orders made by the primary judge, and declare that the property known as 7 Arbutus St, Mosman has the benefit of existing use rights as a building containing flats. In that event, the parties sought to be heard further as to costs.

2. [109]

   The formal orders I propose are: