Posted on August 31, 2011 by Lindsay Taylor
More on ‘Sweetwater’…
There is more to be said about the decision of Biscoe J in the Land and Environment Court in Sweetwater Action Group Inc v Minister For Planning  NSWLEC 106 (7 July 2011) that was discussed in the In Focus post on this site on 22 July 2011.
The case involved a challenge to the validity of State Environmental Planning Policy (Major Development) Amendment (Huntlee New Town Site) 2010 made by the Governor on the recommendation of the Minister for Planning, which was gazetted on 31 December 2010 (SEPP Amendment).
The SEPP Amendment established the planning controls for a large-scale residential development comprising approximately 7,200 dwellings near Branxton in the lower Hunter Valley, New South Wales.
The proceedings involved a challenge to the validity of the SEPP Amendment, amongst other things, on the grounds that the Minister took into account an irrelevant consideration in deciding to recommend to the Governor that the SEPP Amendment be made.
The applicant in the proceedings contended that the irrelevant consideration was an agreement entered into between the Minister for Planning, the Minister for the Environment and the developer in relation to the SEPP Amendment that purported to be a planning agreement under s93F of the Environmental Planning and Assessment Act 1979 (EPA Act) but did not comply with s93F(3)(g) of that Act because it did not provide for the enforcement of the agreement by a suitable means.
In Gwandalan Summerland Point Action Group Inc v Minister for Planning  75 NSWLR 269, the Court held that the statutory scheme of the EPA Act precludes the Minister from taking into consideration an agreement that is not a planning agreement under s93F when making a decision to make or amend an environmental planning instrument.
The validity of the SEPP Amendment was also challenged on the ground that it was a jurisdictional error for the Minister to consider that the planning agreement was made in accordance with the EPA Act and this error infected the Minister’s recommendation that the SEPP Amendment be made.
The planning agreement in the Sweetwater case provided for the transfer of up to approximately 5,612 ha of environmentally significant land for environmental conservation to be dedicated under the National Parks and Wildlife Act 1974, a contribution of $100,000 towards the conservation of a threatened plant species and a contribution of $1,000,000 towards the management of the conservation offset lands.
The monetary contributions obligations were to be performed by the developer after the SEPP Amendment had occurred.
Clause 7 of the planning agreement provided that it ‘may be enforced by any Party in any Court’. Schedule 1 of the agreement asserted that the requirements of s93F(3)(g) of the EPA Act were satisfied by clause 7.
There was also a compulsory acquisition provision in the planning agreement that secured the landowner’s obligation to transfer the conservation lands to the Minister in the event of a breach.
The Court upheld the grounds of challenge to the SEPP Amendment based on the non-compliance of the planning agreement with s93F(3)(g) and struck down the SEPP Amendment.
The Court held that the planning agreement was a material consideration in the Minister’s decision to recommend to the Governor that the SEPP Amendment be made.
The Court also held that the question of whether the means of enforcement in a planning agreement is ‘suitable‘ is an objective matter that can be determined by the Court irrespective of any agreement reached between the parties.
At the heart of the Court’s decision is the finding that s93F(3)(g) required the planning agreement to provide for an additional, independent and enforceable assurance that the developer’s promises under the agreement would be honoured.
The Court held that such assurances are not restricted to bonds and bank guarantees but must nevertheless be ejustem generis, that is, of a similar nature.
Whilst the Court did not adjudicate on the matter, it appears that the compulsory acquisition provision was suitable for the purposes of s93F(3)(g).
Section 93F(1) and (3) clearly contemplate that a planning agreement may relate to either an instrument change or a development application and specified development.
Care needs to be taken not to overstate the reach of the Sweetwater case. What is required by s93F(3)(g) must surely depend on the circumstances of each case. The Court’s decision in Sweetwater, whilst laying down important principles regarding s93F(3)(g), is nevertheless a product of its own particular facts.
Importantly, Sweetwater dealt with a planning agreement linked to an instrument change rather than the carrying out of development. The contributions were payable in connection with the rezoning of the subject land by the SEPP Amendment and was not expressed to be linked to demand for public facilities arising from the future development of the land.
On the facts of the case, there was no practical means of undoing the SEPP Amendment once it had been made and no other separate means of ensuring the developer paid the monetary contribution if the developer were to breach the obligations in the planning agreement to make the monetary development contributions.
Hence, the absence of any additional, independent and enforceable assurance as security for the performance of such obligations in the planning agreement in Sweetwater was a breach of s93F(3)(g).
But it must be reasonable that no bond or bank guarantee should be required under s93F(3)(g) where development contributions obligations under a planning agreement relate to future development and must be performed before any development occurs that creates any demand for the provision of public facilities to which the contributions relate.
Thus, it must be reasonable that no bond or bank guarantee should be required where a planning agreement requires monetary development contributions to be made immediately before the issuing of a particular kind of Part 4A certificate or other milestone in the development that precedes any development occurring that creates a demand for the public facilities to which the development contributions relate.
Arguably, s93F(3)(g) does not require the provision of a bond or bank guarantee in these circumstances until the time the relevant obligations are required to be made as no development creating any demand for the provision of public facilities to which the contributions relate would have occurred until that time.
It cannot be said with any certainty that the Court would agree that this approach complies with s93F(3)(g). Nevertheless, some sense needs to be made of the Court’s decision so that it does not devastate the ability of parties to planning agreements to make reasonable commercial arrangements relating to the provision of public benefits by developers in planning matters.
The risk to parties in not complying with s93F(3)(g) is that any planning decision, such as the granting of development consent, to which the VPA is linked and is a material consideration, would most likely be struck down upon a challenge as happened in the Sweetwater case.
Where development contributions obligations under a planning agreement are linked to development that creates a demand for public facilities that are funded or provided under the planning agreement, and the demand is likely to arise before the obligations are required to be carried out or completed, the obligations should be secured by a bond, bank guarantee or other similar additional, independent and enforceable assurance in order to comply with s93F(3)(g).
30 August 2011