Posted on October 26, 2023 by Sue Puckeridge and Emma Wei 6

Reclassifying community land – is it effective to permit its sale?

Note: Since this article was published, this case is now undergoing appeal. We will keep you informed of any developments.

Introduction

With some exceptions, land owned and controlled by local Councils, can generally be described as public land. Such land must be classified as either community land (being public land that cannot be sold) or operational land (being public land that can be sold).

Section 30 of the Local Government Act 1993 (LG Act) provides for community land to be reclassified as operational land by making an local environmental plan which would discharge any trusts affecting the land or part of the land. Additionally, Schedule 7 of the LG Act provides for certain types of public land held by Councils on 1 July 1993 to be classified as community land and reclassified as operational land.

The LG Act replaced the Local Government Act 1919 (1919 Act). It specifies the types of public land that were to be classified as community land as at 1 July 1993, this includes land that was “subject to a trust for public purposes”. Such land was automatically classified as community land: LG Act cl 6(2) (b) of Schedule 7 of the LG Act. Clause 6(3) of Schedule 7 gave the Council one year from the commencement of the LG Act to pass a resolution to reclassify community land that was not automatically classified under clause 6(2) as operational land.  Land reclassified as operational is automatically discharged of any trusts.

Several cases have considered whether resolutions passed by Councils to reclassify land pursuant to clause 6 of Schedule 7 have been effective. The issue generally arises where a Council seeks to sell or redevelop the land that was once community land. The question is whether the manner in which land is acquired and the public purpose nominated when acquisition took place gives rise to a type of ‘statutory trust’ which prevents the land being reclassified by resolution so as to permit its sale or redevelopment.

What is a statutory trust?

The precise boundaries of a statutory trust have not been clearly defined. The acquisition of land for a public purpose and its ongoing use for that purpose is not sufficient to create such a trust.  Nor is the way in which the land was acquired, by private treaty or resumption, determinative. The statutory regime and provisions under which the land is acquired and the facts surrounding its acquisition all require careful consideration.

In Rookwood General Cemeteries Reserve Land Manager v Attorney-General NSW [2022] NSWSC 1763 (Rookwood), the Supreme Court set out three features which are generally present for a statutory trust to be created. The features, in summary, are:

1. there is a generally a specific statutory provision or oversight by a particular body or person to ensure that the trust property is used for the nominated purpose,
2. the Attorney General generally has a role to ensure that trustees use the trust property in accordance with the specified purposes, and
3. the statute generally provides for assets to be redeployed for other purposes if it is impossible or impracticable to carry out the original purpose.

Leading cases

The Court has considered whether a statutory trust exists in respect of public land owned by a local Council on several occasions.

The leading case is Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566 (PWC). In this case the High Court held that a Council resolution purporting to classify land used as a carpark as operational land was invalid because the land was subject to a trust for a public purpose. The land had been transferred to the Council at nominal consideration to provide 41 car parking spaces in part satisfaction of a condition of development consent.  The transfer was subject to a condition of sale that the “benefit of car spaces shall accrue to any development application lodged by the vendor…or any owner for the time being of the [Development Land] who wishes to develop [the Development Land].  It is agreed that this condition will not merge on completion of this contract”.  As a consequence, the Council was unable to redevelop the land as intended.

The issue was considered again in Save Little Manly Beach Foreshore Inc v Manly Council (No 2) [2013] NSWLEC 156 (Save Little Manly). The Council had acquired two residential parcels of land. One parcel of land (No 36) was acquired after the commencement of the LG Act under the owner-initiated provisions of the Land Acquisition (Just Terms Compensation Act) 1991 (Just Terms Act). A second parcel of land (No 34) had been acquired by private treaty under the 1919 Act. The Council was seeking to sell both parcels. The Court found in respect of both parcels that the decision to classify them as operational land was invalid. In respect of No 34, it was because the decision to reclassify was inconsistent with the terms of a trust for a public purpose applying to the land (the land having been zoned for open space purposes) and inconsistent with the terms of an instrument executed by the transferor of the land which noted that the land was to be acquired for a public purpose.

Recent Consideration

More recently, the issue was explored by the Supreme Court in Piety Developments Pty Ltd v Cumberland City Council.

In this case Cumberland City Council (CCC) had tendered for the sale of land and resolved to sell the land to the plaintiff, Piety Developments Pty Ltd (PD). Shortly after passing the resolution, a motion to rescind the resolution approving the sale was lodged. Consideration of the motion was adjourned pending the upcoming local government elections. PD subsequently initiated proceedings seeking specific performance of an alleged contract. The Council argued, amongst other things, that it was prohibited from selling the land because it was community land under the LG Act.

The land, a deceased estate, had been acquired in 1965 by the previous Auburn Municipal Council by way of compulsory acquisition. The council had approached the executors asking if they wanted to sell the land at market price but the executors did not have the power to sell the land. Consequently, the Council resumed the land relying on its powers under sections 532 and s 249(cc) of the 1919 Act. Section 532 of the 1919 Act gave the Council a general power to acquire land for any purpose under the 1919 Act, including by resumption. Section 249(cc) gave power to the Council “in respect of any public road” to “provide, control and manage sites for the accommodation of vehicles in or near public roads and public reserves”.

Under the 1919 Act, the Council was required to notify the owners of land to be resumed of the purpose of the resumption. The stated purpose on the notice for acquisition served on the executors was to “provid[e] a parking site for the accommodation of vehicles“. The land operated as a car park continuously from 1965.

The primary issue before the Court was whether the land was “subject to a trust for public purposes” at as 1 July 1993 so as to fall within the savings and transitional provisions of the LG Act cl 6(2) (b) of Schedule 7 of the LG Act.  To determine this question the Court needed to consider if the land, when resumed under the 1919 Act, was held under a ‘statutory trust’ for public purposes.  If it was, then the resolution passed shortly before the expiry of the 12 month period provided for under cl 6(3) of the Schedule 7 of the LG Act, purporting to classify the land as operational land was not effective and the land could not be sold.

The Court held that the acquisition of the car park under the 1919 Act did not result in a ‘statutory trust’. As a result, the land was not subject to a ‘trust for public purposes’ for the purposes of cl6(2)(b) of Schedule 7 of the LG Act.  In arriving at this conclusion, the Court distinguished the facts from the previous decisions of PWC and Save Little Manly.

In respect of PWC, the Court held that acquisition of the land under s532 was different to the power relied upon in PWC. In PWC, the Council had accepted the relevant land under s526 of the 1919 Act which refers to the acceptance of land ‘on trust’. Section 532 does not use the word ‘trust’ and while it may have permitted the acceptance of any land subject to it being ‘on trust’, ‘imposition of trust obligations‘ was not inherent in the term:(at [115]).

Save Little Manly was distinguished on the basis that the resumption provisions in the 1919 Act are not the same as the provisions in the LG Act, there was no equivalent to the owner-initiated provisions under the Just Terms Act, which depend on acquisition ‘for a public purpose‘: s23(1). More importantly, there was no equivalent provision to s36 of the Just Terms Act under the 1919 Act. Section 36 permits an acquiring authority to apply to the Land and Environment Court to restrain the use of land in a manner inconsistent with the public purpose for which it was acquired.

Further, the resumption of land under s 532 of the 1919 Act did not exhibit any of the three features specified as necessary in Rookwood. The notion of ‘statutory trust‘ would impose positive obligations on Council to use or ensure the use of the land for the notified purpose. Council would have been obliged from 1965 to make the land available as a carpark indefinitely even if its policies, expenses and realities change. The Court found that this would create unreasonable burdens on Council. In doing so it agreed with the principle articulated in Broadcast Australia Pty Ltd v Noonan [2011] NSWSC 1524, that the statutory power allowing acquisition for a particular purpose does not mandate that the property must exclusively serve that purpose thereafter.

Key Takeaways

The case demonstrates that when dealing with community land that has been reclassified as operational land by resolution, it remains very important to determine if the re-classification was valid and that the land is not subject to a statutory trust.  A careful analysis of the facts and the legislative provisions pursuant to which the land was acquired must be undertaken. A failure to properly consider this issue may result in costly disputes and delays to projects or even prevent projects proceeding.

If you wish to discuss anything in this article, please leave a comment below or contact Sue Puckeridge on 02 8235 9702 or Emma Wei on 02 8235 9725.