By Aaron Gadiel, Partner, and Anthony Whealy, Partner

The NSW Court of Appeal has struck down a development consent for the Walsh Bay Arts Precinct, raising major issues about how ‘staged development applications’ are handled.  This will have state-wide implications, but there will be particularly significant impacts within the City of Sydney.

In Bay Simmer Investments v NSW  [2017] NSWCA 135 a development consent was granted by the Minister for Planning for the development of an ‘integrated arts precinct’ at Walsh Bay, on the south-western side of the Harbour Bridge.

The development consent was challenged by the operator of a restaurant business on the southern side of the development site.  One of the grounds of the challenge was that the Minister had not assessed the effects of the construction of the precinct on local businesses, when granting the development consent.   This challenge was upheld.  The construction impacts of the development were a mandatory relevant consideration, and the failure to consider those impacts was enough to make the development consent invalid.

However, more significantly, the Court also decided that the development consent was invalid for a second reason.

The development application was lodged as a ‘staged development application’.  This means that it was supposed to be a development application that sets out concept proposals for the development of a site — with detailed proposals for ‘separate parts of the site’ to be the subject of subsequent development applications.

Staged development applications of this kind are particularly commonplace in the City of Sydney.  Typically the first development application, which approves the ‘concept proposals’ is called a ‘stage 1’ application, and the subsequent ‘detailed’ development application (which seeks approval for the actual buildings/works) is called a ‘stage 2’ application.

The Sydney Local Environmental Plan 2012 (the Sydney LEP) forces development applicants down this path, because (in clause 7.20) it prevents the grant of any development consent for new buildings or increases in gross floor area, for some categories of development, unless a ‘development control plan’ is prepared.

Under the Environmental Planning and Assessment Act 1979 (the EP&A Act) when a ‘staged development application’ is made, and consent granted, the requirement for a site-specific development control plan is waived.  As neither the City of Sydney — nor individual applicants —normally want to spend time and money writing site-specific development control plans, the City instead steers people into making a ‘staged development application’.

For example, in Central Sydney, the two-stage development application process applies to sites that have an area of more than 1,500 square metres or development that will result in buildings that are more than 55 metres in height.

On 15 June, the Court of Appeal issued a new interpretation of section 83B of the EP&A Act (this a key provision governing ‘staged development applications’, commonly called ‘stage 1’ applications in the City of Sydney).

The Court said that a staged development application — which does not itself include a detailed proposal for a separate part of the site — must be followed by at least two such detailed proposals, for separate parts of the site.  If the initial staged development application only relates to concept proposals, the initial application must anticipate that at least two detailed development applications will follow.

This is inconsistent with the common practice in the City of Sydney and many other infill sites, where the ‘stage 1’ application does not authorise any works, and it is followed by a single subsequent development application which authorises all of the works necessary to erect a building.

However the practice of lodging a concept proposal for a building envelope with an expectation of a single subsequent detailed DA to erect a building within that envelope, will no longer be possible. As a consequence, many staged DAs that are presently on foot throughout NSW may need to be promptly amended to clearly identify the separate stages that will follow via separate DAs.

Outside of the City of Sydney, an initial ‘staged development application’ may still often include detailed proposals (and seek actual authorisation to carry out) the first phase of the overall development.  For example, this may be demolition works, excavation or an initial stage of a subdivision.  Staged development applications of this kind may not be affected by the Court of Appeal’s decision (depending on the precise terms of the application).

However, this approach is often not available in the City of Sydney.  This is because clause 7.19 of the Sydney LEP prevents the grant of development consents for demolition unless a site will be will be comprehensively redeveloped under that development consent, or a pre-existing development consent.

Where clause 7.19 applies, each staged development application (ie ‘stage 1 application’) in the City of Sydney can only seek approval for the ‘concept’ and not any demolition.

As a result of the 15 June decision, such a staged development application must signal an intention to later submit detailed proposals for at least two separate parts of the site (ie anticipate two or more further development applications, rather than a single development application).

This will expand the City of Sydney’s unwieldly two-DA approval process into an even more complex and costly three-DA process.   It may also require some careful consideration as to which ‘separate parts’ of the site would be subject to different detailed development applications.

For some sites, the division of the site would not be difficult.  For sites that have full-site coverage and a single basement and foundations, there may be a need to define the separate parts of the site by stratum (ie separate levels of the building).  There is nothing in the Court’s judgment that would preclude this course of action.

This latest decision of the Court of Appeal introduces an additional complexity to the NSW planning system. It is unlikely to be welcomed by either local councils or development proponents.  It opens up a new risk for legal challenges against some development consents that have already been granted (although the courts would have a broad discretion to decline to make adverse declarations, in the interests of fairness).  It complicates the approval process for many new and existing staged development applications that have not yet been determined.

If the NSW Government is on the ball, it would (right now) be seriously considering rushing through remedial legislation to fix the issue when parliament resumes on 20-23 June.  Legislation of this kind could also validate any existing development consents (protecting them from legal challenge).  If the Government misses this opportunity, the issue would not be able to be addressed by state parliament until August at the earliest.