Posted on July 22, 2011 by Lindsay Taylor

Enforcement of Planning Agreements under s93F(3)(g) EPA Act

The Land and Environment Court (Biscoe J) recently handed down its decision in Sweetwater Action Group Inc v Minister for Planning [2011] NSWLEC 106 (Sweetwater), a case that dealt with the question whether security provided under a planning agreement satisfied s93F(3)(g) the Environmental Planning and Assessment Act 1979 (EPA Act).

Section 93F(3)(g) of the EPA Act provides that a planning agreement must 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.

Until this point, there has been no substantive judicial consideration of this section of the EPA Act.

The planning agreement the Court considered was reasonably straightforward. It provided for contributions comprising the dedication of land and the making of monetary contributions.

There was no bond or bank guarantee provided in respect of any of the contributions required. In respect of the dedication of land, there was a provision in the agreement to the effect that if the land was not dedicated, the relevant planning authority (in this case the Minister for Planning) could compulsorily acquire the land for $1 under the Land Acquisition (Just Terms Compensation) Act 1991.

The monetary contributions were required to be made on specified dates. They were not required to be made as a precondition to the issue of any certificates under Part 4A of the EPA Act, such as a subdivision certificate (Part 4A certificate) and were not otherwise tied to milestones in the carrying out of the subject development or the creation of demand for the provision of public infrastructure.

The primary finding of Biscoe J was that s93F(3)(g) requires a planning agreement to provide for an additional, independent and enforceable assurance for the developer’s promises.

His Honour held that:

• s93F(3)(g) is not satisfied by relying on a provision to the effect that the planning agreement can be enforced through the Courts,
• registration of a planning agreement pursuant to s93H of the EPA Act, including in conjunction with a provision that a caveat may be placed on the title pending registration, does not satisfy s93F(3)(g),
• the fact that the agreement in question might provide sufficient security in respect of land dedication did not mean that s93F(3)(g) was satisfied, as there was no additional means to enforce the separate obligation to make monetary contributions,
• the requirement that the means of enforcement can be a bond or bank guarantee, is not exhaustive, but the means of enforcement must be similar in nature,
• the question of whether the provisions in the planning agreement provide a suitable means of enforcement is an objective matter, which can be determined by the Court, and
• if a planning agreement does not contain provisions which satisfy s93F(3)(g), the consequence is that the planning agreement is not valid, and cannot be taken into account by the planning authority when making planning decisions. This can clearly have consequences for the validity of any environmental planning instrument made or development consent granted to which the planning agreement relates.

The decision will provide planning authorities, including councils, with a strong argument to require developers to provide security in the form of bank guarantees or bonds in respect of works and monetary contributions.

Planning authorities will also need to ensure that security can be called up in the event of breaches of obligations to dedicate land, or that alternative enforcement provisions are included in respect of land dedication obligations, such as a compulsory acquisition clause such as that described in paragraph 5 above. Biscoe J appeared to accept that a compulsory acquisition clause satisfied s93F(3)(g) in respect of an obligation to dedicate land.

Given the nature of the planning agreement considered by Biscoe J, his Honour did not expressly consider the suitability of means of enforcement such as the provision of a bank guarantee in an amount to cover enforcement costs, in the event of a default, rather than for the full value of the contributions.

However, based on his judgment, it would seem that a bank guarantee for an amount referable to a planning authority’s enforcement costs alone, would not be considered suitable. This is because in such a scenario, in the event of default, the planning authority would need to enforce the agreement through the Courts, which Biscoe J specifically said was not a suitable means of enforcement for the purposes of s93F(3)(g).

His Honour also did not consider whether the ability to withhhold Part 4A certificates was a suitable means of enforcement of a planning agreement.

It is arguable, however, that if a contribution is required before a Part 4A certificate is issued, then no further security is required, as the certificate cannot be issued if the contributions have not been provided, and therefore a default cannot arise.

In light of the apparently strict approach taken by Biscoe J, and the discrete circumstances of the case, it is necessary to consider each planning agreement individually to make an assessment of the suitability of the enforcement provisions contained in the agreement, against the general propositions put forward by Biscoe J.

What is clear is that there must be some form of security. Relying on enforcement through the Courts, and registration of the planning agreement, even in the simplest of agreements, will not be sufficient.

What also needs to be borne in mind is that the Court can determine whether the enforcement provisions are ‘suitable’. So when reviewing the agreements, the test is not whether the particular planning authority considers the enforcement provisions to be suitable, but whether, objectively, they are suitable.

The decision is certainly not the high point of the Court’s 31 years of adjudicating on planning matters. The great benefit of planning agreements in an overly rigid regulatory planning system is their flexibility. Yet, the decision introduces a great deal of unnecessary uncertainty and potential rigidity into the planning agreements system.

If applied strictly, it will preclude the parties to planning agreements from customising security arrangements to fit the particular circumstances of each case.

The case takes no account of any possibility of the assessment of the risk of default in particular cases, even though the requirement in s93F(3)(g) for enforcement by a ‘suitable’ means could reasonably be interpreted to enable this to be done.

The decision has not been well received by many councils and, not unexpectedly, by the development industry.

In any event, while the decision remains the law, planning authorities and developers should ensure that any planning agreements they have entered into, or are proposing to enter into, are reviewed to determine whether the security provisions are suitable.

Any planning agreement that does not comply with the Court’s decision should be amended, albeit that this can only occur by agreement between the parties.  The risk of not amending a non-compliant agreement is that any planning decision made by a planning authority in reliance on the planning agreement could be found to be invalid.

Future planning agreements should be drafted to comply with the Court’s decision but at the same time enable the parties to customise security arrangements suitable to them for the particular agreement.

http://www.caselaw.nsw.gov.au/action/PJUDG?jgmtid=152872