Posted on February 25, 2016 by

Valuing works-in-kind – a reminder

A recent decision in the Supreme Court of New South Wales highlights the difficulties that can arise when valuing works-in-kind under agreements between a council and developer under s94(5)(b) of the Environmental Planning and Assessment Act 1979 (EPA Act).

Section 94(5)(b) of the EPA Act provides that a consent authority may accept the provision of a material public benefit (usually works) in part or full satisfaction of a condition requiring development contributions imposed under s94(1) or (3).

Rockdale City Council v Calibre Construction Corp Pty Ltd [2015] NSWSC 1980 involved a dispute over the estimated contribution value of an access road constructed by a developer under a works-in-kind agreement (WIKA). The value of the works was to partially satisfy a condition of development consent requiring the payment of development contributions under s94 of the EPA Act.

On the basis of a valuation of the access road works provided to the Council, Council brought proceedings claiming that the developer was liable to pay Council an outstanding amount of $729,680 in respect of development contributions. The developer disputed the liability to pay that amount on the basis that the valuation of the works was too low and had not been validly undertaken in accordance with the WIKA.

Under the WIKA the developer agreed to construct the new access road which was to be built over a concrete stormwater holding tank that was to be constructed as part of the development. The WIKA provided that the contribution value of the access road was to be determined by ‘a quantity surveyor engaged by the Council, in accordance with clauses 4.3 to 4.7’.

A quantity surveyor was engaged. However, the developer argued that the surveyor’s purported determination of the estimated cost of the construction of the road was not carried out in accordance with the WIKA and therefore not binding.

At the heart of the dispute was whether the quantity surveyor erred in excluding work that was associated with the construction of the holding tank. The developer contended that these costs should be included in the calculation of the costs of constructing the access road. The Council argued that they should not be.

The matter ultimately turned on the proper construction of the WIKA.

The Court held that there was no basis to find that the parties intended that the construction of the tank was to be regarded as part of construction the access road. To do so would result in the developer being entitled to a credit in respect of its s94 contributions liability for work that was required to be undertaken pursuant to separate conditions of consent. Further, the building of the tank was not included in the description of works under the Council’s Contributions Plan, and therefore Council could not accept construction of the tank as part of a works-in-kind agreement.

Nonetheless, the Court held that the surveyor’s determination did not fulfil the requirements of the WIKA because it failed to allow for the costs of pavement removal, excavation and removal of spoil, all of which were necessary for the construction of the access road.

Because the surveyor did not properly discharge its functions as required under the WIKA, the determination was not binding on the developer and the Council’s claim for a further payment from the developer failed.

As this case highlights, care needs to be taken when drafting works-in-kind agreement to ensure that the valuation process and proper scope of works are clearly defined. If they are not this could impact on a council’s ability to recover any shortfall in development contributions.