Court of Appeal drains Pasminco’s pipe dream

A dispute between developers and a council concerning the construction of a stormwater pipe has given the Court of Appeal another opportunity to consider how to resolve inconsistencies between development consents and construction certificates and the principles to apply when interpreting an uncertain condition of development consent.

An uncertain condition of development consent can be a nightmare for developers, councils and prospective purchasers when trying to understand what the condition requires. While the starting point must always be the text of the condition, what do you do when the text is itself unclear? What if someone suggests that a document, not in existence at the time the consent was issued, changes the way the condition should be understood?  What effect do the plans and specifications approved by a construction certificate have on the plans approved by the development consent?

These questions were answered recently by the Court of Appeal in Bunderra Holdings Pty Ltd v Pasminco Cockle Creek Smelter Pty Ltd (subject to Deed of Company Arrangement) [2017] NSWCA 263.

Background facts of the case

The dispute between (our client) Bunderra Holdings Pty Ltd (Bunderra) and Pasminco Cockle Creek Smelter Pty Ltd (subject to a Deed of Company Arrangement) (Pasminco) concerned the ultimate responsibility to construct a stormwater pipe due to an ‘awkwardly drafted condition’ of a development consent issued by Lake Macquarie City Council (the Council).

The land the subject of the development consent, known as the Tripad site, originally formed part of a larger holding of land owned by Pasminco.  Pasminco sold the Tripad site to Bunderra after the Council had granted Pasminco development consent for a residential subdivision on the Tripad land. The Tripad site was below the Pasminco site.

The consent required the subdivision to occur in accordance with stormwater strategies which had been prepared on behalf of Pasminco. These contemplated the construction of a pipe under a road that divided the two sites to carry stormwater from the Pasminco site through the Tripad site. A condition of consent required the applicant to demonstrate that stormwater could safely flow from the Pasminco land through the Tripad site and required plans and calculations for these stormwater controls to be submitted to the Council prior to the issue of a construction certificate for the residential subdivision.

After the consent was issued, Pasminco submitted a further stormwater strategy to the Council.  This was said to be in response to the consent condition referred to above, and expressly required the pipe to be built as part of the Tripad site subdivision works, ie, by Bunderra.

Bunderra obtained construction certificates from the Council for all required civil works and carried out those works.  The Council issued certificates of practical completion for all of those works. The plans approved by the construction certificates did not provide for the construction of the pipe.

A dispute then arose between Pasminco and Bunderra over who was responsible for the construction of the pipe. This culminated in Pasminco bringing class 4 proceedings in the Land and Environment Court to restrain the Council from granting a subdivision certificate for the development until after the pipe had been constructed.

Pasminco succeeded at first instance.  Robson J held that:

  1. Pasminco’s further stormwater strategy, which expressly provided for the construction of the pipe as part of the Tripad subdivision, was impliedly (and retrospectively) incorporated into the consent; and
  2. the issue of the construction certificate, which made no provision for the construction of the pipe, did not alter the applicant’s obligations under the development consent.

Bunderra appealed.

The Court of Appeal’s decision

The Court of Appeal reversed Robson J’s decision and, in doing so, gave some important guidance on the interpretation of development consents.

Development consents are to be construed to achieve practical results

The Court reaffirmed the principle that development consents are to be interpreted to achieve practical results. In doing so, it pointed out that development consents are drafted by planners and not lawyers, and should therefore be given a liberal construction.

The retrospective incorporation of the later stormwater strategy.

The Court found that the stormwater strategy given to the Council after the development consent had been granted could not be retrospectively incorporated into the consent for the purpose of interpreting the consent conditions. In doing so, the Court reinforced the principle that, because a development consent enures for the benefit of subsequent land owners, it is of fundamental importance that people are able to determine with precision what the consent requires by reference to the text of the consent and any documents incorporated into the consent either expressly or “by necessary implication”. A document that does not come into existence until after the consent has been granted cannot be used to determine the meaning of the conditions of consent.

The effect of the construction certificate

The Court confirmed that the plans and specifications approved by a construction certificate prevail over the plans and specifications the subject of development consent to the extent of any inconsistency between them.

In Bunderra’s case, the Court concluded that the construction certificates issued by the Council imposed no requirement to construct the pipe and held that these must prevail over any inconsistent provisions of the development consent plans.

Lessons learned

There are two key lessons to be learned from this case:

  1. A development consent must be interpreted by reference to the text of the consent itself and any documents incorporated “by necessary implication”. A document that is not in existence when a development consent is granted cannot be used to interpret the meaning of the conditions of consent.
  2. In the event of any inconsistency between development consent plans and the plans the subject of a construction certificate, the construction certificate plans will prevail to the extent of any inconsistency.

To learn more about this case, please contact Andrew Brickhill.