By Anthony Whealy, Partner and Matt Sonter, Partner

After a year of very conservative judgments and commentary in the planning and development industry regarding the difficulties in exceeding development controls such as height and FSR – even where circumstances would clearly justify a larger development – two recent decisions of the Land and Environment Court have emphatically demonstrated that DAs for larger and/or taller developments can and should be approved where they can be justified on their merits. Nevertheless, the drafting of, and strategy behind a ‘clause 4.6 variation’ request, remain of critical importance.

Before explaining the issues, let’s start with the raw numbers.

In an appeal seeking consent for a residential flat building at Alison Road in Coogee, the Court approved a DA having a height of 14.5m where the height control was 9.5m (about a 55% exceedance), and a floor space ratio of 0.91:1 where the control was 0.75:1 (about a 20% exceedance). The Chief Judge of the Court has now rejected Randwick Council’s appeal against that approval.

In an appeal seeking consent for a residential flat building at Bondi Road in Bondi (in which the writers represented the applicant), the Court approved a DA having a Floor space ratio of 1.5:1 where the control was 0.9:1 (about a 65% exceedance). Interestingly, in this matter no planning agreement (VPA) was offered or required from the developer, despite the Council having a ‘policy’ purporting to limit any FSR non-compliance to a maximum 15% and requiring developers to pay 50% of the profits of that additional FSR to the Council.

Both DAs were approved by using clause 4.6 of the relevant LEP to vary the applicable height and FSR controls, to achieve outcomes that the Court accepted were sensible, well-justified, and ultimately better than a compliant (smaller) scheme on those particular sites.

Some background – why is it such big news?

Firstly, let’s not dwell on the past too much. The point of this article is to emphasise our opinion that a line in the sand has been drawn and that it’s time for a change in the overly conservative thinking that has characterised this area of planning law over the past year.

In short, a previous LEC decision in January 2015 (Four2Five Pty Ltd v Ashfield Council) has been roundly interpreted to mean that development standards such as height and FSR in Council local environmental plans (LEPs) and State Environmental Planning Policies (SEPPs) are almost sacrosanct and can rarely ever be exceeded. That’s a curious and unfortunate position when it’s considered that most LEPs in NSW contain a specific clause – clause 4.6 – which has the express purpose of allowing development standards to be varied by allowing “flexibility” in applying those development standards, so as “to achieve better outcomes for and from development”.

Nevertheless clause 4.6 includes its own set of tests, which, if applied rigidly and legalistically, would ironically make it hard for a consent authority to be flexible when considering a variation to controls such as height and FSR. The decision in Four2Five vs Ashfield Council held that clause 4.6 was different than its predecessor, SEPP 1, imposing different and additional hurdles that must be overcome before development standards such as height and FSR can be exceeded.

By contrast, over the previous decade, the very clear position under SEPP 1 had been that a development standard could be exceeded where the consent authority was satisfied (amongst other matters) that the development achieves the objectives of the development standard: Wehbe v Pittwater Council (2007). The rationale was that if the proposed development provides an alternative means of achieving the objective of the development standard, strict compliance with the standard would be unnecessary (it is achieved anyway) and unreasonable (no purpose would be served).

Four2Five vs Ashfield Council on the other hand, distinguished clause 4.6 by closely analysing each of the requirements set out in that clause and, of critical importance, concluding that it was not enough for the consent authority to be satisfied that the proposed development will be consistent with the objectives of the development standard and the zone objectives. In addition, the consent authority must also be satisfied that there are other “sufficient environmental planning grounds to justify contravening the development standard”. In this matter, the Commissioner was satisfied that the proposal met the relevant objectives of the development standard and the zone, but was not satisfied that there were other, additional environmental planning grounds warranting the exceedance. In particular, the Commissioner held that it was not sufficient to point to generic planning benefits such as the provision of additional housing stock, rather something more specific to that particular site and development was required.

It should be noted that a Judge of the Court, and later the Court of Appeal, upheld the decision but expressly noted that the Commissioner’s decision on that point (that she was not “satisfied” because something more specific to the site was required) was simply a discretionary (subjective) opinion which was a matter for her alone to decide. It does not mean that clause 4.6 variations can only ever be allowed where there is some special or particular feature of the site that justifies the non-compliance. Whether there are “sufficient environmental planning grounds to justify contravening the development standard” is something that can be assessed on a case by case basis and is for the consent authority to determine for itself. This point seems to have been missed by many within the local government industry.

In our experience, the decision in Four2Five vs Ashfield Council has resulted in a significant trend over the past year of DAs being refused on the basis that even though they achieve the objectives of the zone and of the development standards and achieve “better outcomes”, clause 4.6 should be applied very conservatively.

As explained below, the correct position is that clause 4.6 variations must be very well drafted and well thought-out. But there should be no artificial conservatism about using clause 4.6, given that its purpose is to allow flexibility and to achieve better outcomes for a site by allowing development to exceed height and/or FSR in justifiable circumstances.

The recent Court decisions

Micaul Holdings Pty Limited v Randwick City Council (2015)

In this appeal a residential flat building in Randwick was approved with a 55% exceedance of the height limit (at its highest point) and a 20% exceedance of the FSR control. The Commissioner was satisfied that the written clause 4.6 variation request by the applicant’s town planner was comprehensive and had addressed all of the prerequisites of clause 4.6. She was also persuaded that the site was “unusual in terms of its location at the low point of the locality, its proximity to larger RFBs that would not comply with the building height development standard and its flood affectation”. Those features, when taken together with other benefits of the proposal such as its design excellence and internal amenity, provided sufficient environmental planning grounds to justify approval via clause 4.6 of the LEP.

The Council appealed against that decision, raising very technical legal arguments about whether each and every item of clause 4.6 of the LEP had been meticulously considered and complied with (both in terms of the applicant’s written document itself, and in the Commissioner’s assessment of it). In February of this year the Chief Judge of the Court dismissed that appeal, finding no fault in the Commissioner’s approval of those large variations to the height and FSR controls.

While the judgment did not directly overturn the Four2Five v Ashfield decision (indeed it did not even mention it!) one very important issue emerged. The Chief Judge noted that one of the consent authority’s obligations is to be satisfied that “the applicant’s written request has adequately addressed….that compliance with the development standard is unreasonable or unnecessary in the circumstances of the case …and that there are sufficient environmental planning grounds to justify contravening the development standard.”  He held that this means:

“the Commissioner did not have to be satisfied directly that compliance with each development standard is unreasonable or unnecessary in the circumstances of the case, but only indirectly by being satisfied that the applicant’s written request has adequately addressed the matter in subclause (3)(a) that compliance with each development standard is unreasonable or unnecessary”.

It will be interesting to see how this impacts on the application of clause 4.6 variation requests going forward because, on its face, the decision means that:

1. The consent authority (whether a council, the JRPP, or the Court) must be satisfied that the applicant’s written 4.6 variation request has adequately addressed everything necessary in clause 4.6(3), rather than the consent authority being “satisfied directly” as to each of those matters; and
2. The consent authority must be personally satisfied that the development will be ‘consistent with’ the objectives of the zone and of the development standard that is being varied. As explained below’ consistent with’ means something less than actually achieving those objectives.

The decision obviously underscores the importance of providing a robust and well-argued clause 4.6 variation request which addresses each requisite element of clause 4.6(3).

Moskovich v Waverley Council [2016]

In this appeal a residential flat building in Bondi was approved with a floor space ratio of 1.5:1 where the control was 0.9:1 (about a 65% exceedance). Our staff represented the applicant (prior to joining Mills Oakley). The Council fought tooth and nail against the proposal, with much of the hearing taken up by argument about whether the applicant’s clause 4.6 variation request was adequate. The Commissioner’s decision analysed the Four2Five vs Ashfield Council decision (and other relevant judgments) at length, devoting some 16 out of 20 pages (!) to an assessment of whether the clause 4.6 variation could lawfully be approved, notwithstanding the large numerical exceedance of the FSR control.

The applicant’s development was located on a large, steep sloping site in Bondi that proposed the amalgamation of two allotments to accommodate a five storey residential flat building with two levels of basement parking. The applicant’s clause 4.6 request argued that a contravention of the FSR standard was necessary to the design to ensure that there was an adequate distribution of floor space and height so as to result in better visual and amenity outcomes. Given the steeply sloping topography, the additional floor space would result in a large amount of the floor area being below the Bondi Road level, which, as the applicant argued, would result in a better streetscape and internal and external amenity outcome than a complying development.

Some of the factors which persuaded the Commissioner to uphold the clause 4.6 variation request were the lack of environmental impact of the proposal, the environmental benefits that arise from replacing two existing flat buildings with poor amenity, the characteristics of the site such as its steeply sloping topography, size, two street frontages, and its context which included existing adjacent buildings of greater height and bulk than the proposal. The Court concluded that

“although there is a significant exceedance in the numerical FSR control a large amount of this floor area would not add to bulk or result in impacts greater than that from a complying development. The floor area is contained within a bulk and form of development which complies with the height control and is appropriate to its context with acceptable impacts”.

In this matter, some important principles that arise from the decision are:

• The requirement that the consent authority be personally satisfied the proposed development will be in the public interest because it is “consistent with” the objectives of the development standard and zone is not a requirement to “achieve” those objectives. It is a requirement that the development be ‘compatible’ with them or ‘capable of existing together in harmony’. It means “something less onerous than ‘achievement’”.

• Establishing that ‘compliance with the standard is unreasonable or unnecessary in the circumstances of the case’ does not always require the applicant to show that the relevant objectives of the standard are achieved by the proposal (Wehbe “test” 1). Other methods are available, for example that the relevant objectives of the standard would not be achieved or would be thwarted by a complying development (Wehbe “test” 3).

• It is always best, when pursuing a clause 4.6 variation request, to demonstrate how the proposal achieves a better outcome than a complying scheme. In this case an indicative complying building envelope was provided as part of the DA to demonstrate that it resulted in an inferior outcome for the site.

The related VPA issue

As many in the planning world would know, Waverley Council’s 2014 Planning Agreement Policy requires developers to enter into a VPA for a development application that proposes to vary the floor space ratio standard which requires a clause 4.6 request under the Waverley Local Environmental Plan 2012 (WLEP). Under the Planning Agreement Policy, a breach of the FSR requires the developer to make an ongoing contribution to Council of 50% of any profits obtained for the floor space / height achieved as a result of the breach. In return, the developer may receive up to a bonus 15% floor space.

In these circumstances, VPAs are becoming less and less ‘voluntary’. In Moskovich v Waverley Council (discussed above), the applicant opted from the outset not to offer to enter into a VPA, despite the Council’s Policy that it was necessary due to the proposed breach of the FSR standard and compliance with the Policy.

As discussed above, the Court nevertheless upheld the clause 4.6 variation and in doing so, expressly gave “little weight to the VPA Policy”.

Not only does this judgment reaffirm the processes involved in adequately addressing the tests of a variation to a development standard under clause 4.6, it also demonstrates that despite the Council’s attempts to mandate the applicant to enter into a VPA, any offer to do so must be ‘voluntary’.

Is there a maximum percentage or size allowed for a variation under clause 4.6?

Some consent authorities erroneously take the view that a numerically-significant non-compliance (for example, anything greater than 10%) with a development standard such as FSR, height, or minimum allotment size requires an amendment to the LEP, rather than a clause 4.6 variation, even where they are otherwise supportive of the proposal. The usual reasoning is that the extent of non-compliance is too great (numerically) to be approved via clause 4.6 (or via the previous SEPP 1).

That erroneous view (that any variation greater than about 10% cannot be approved without an LEP amendment) probably stems from a misunderstanding of the Department’s Planning Circular PS 08- 14 (November 2008), which advised councils that all development applications relying on SEPP 1 objections with variations greater than 10% must be determined by full council, rather than the General Manager or staff members. That Circular was issued in response to the findings of the ICAC investigation into corruption allegations affecting Wollongong City Council. However, it only applied to the method of approving non-compliant DAs (i.e. via a Council meeting), not the legal ability to approve those DAs. Moreover, it also self-evidently does allow variations greater than 10%, by establishing who those variations may be approved by. In any case, it applied to SEPP 1, but no such Circular has been issued in relation to clause 4.6 of the Standard Instrument LEP.

Final thoughts

These decisions are good news for applicants and for the broader community given that they re-establish that larger developments can be approved in appropriate circumstances – where they amount to “a better planning outcome”.

Nevertheless the drafting of clause 4.6 variations, and the formulation of the arguments that can be used in support of them, is a very critical task.  We are often engaged to assist in the preparation of clause 4.6 requests. Please contact us if you would like our assistance with a project.