Important considerations for LMA’s in 2025 - the Full Court ‘weighs in’ on council LMA’s and inconsistent planning consents

As many council officers and other development professionals may recall, the Full Court decision in Zweck v Town of Gawler [2015] SASCFC 172 has been pivotal in the use and application of LMA’s and their relevance to subsequent development applications proposing development contrary to an LMA.  The effect of Zweck is that an LMA is (i) a contract enforceable against the owners of the land which is subject to it and (ii) that an LMA could constrain or preclude the future development of the land in perpetuity despite changes to the relevant Development Plan or to circumstances concerning the land.

 Zweck considered a Gawler Council LMA entered into under the Development Act 1993 and a subsequent development application made thereunder which was assessed by the Council.

The question that has lingered since is whether an LMA entered into by a council can be enforced against an owner where a development authorisation has been granted contrary to the LMA by a relevant authority which is not the council.  It is this question that was answered by the Court of Appeal very late last year in Zhengtang Precinct Loft Pty Ltd v The Corporation of the City of Adelaide [2024] SASCA 148.

The key facts and findings of this 2024 case are, separately, below –

• the judgment arose from an enforcement notice issued by the Council to Zhengtang, asserting a breach of an LMA entered into by the Council and Zhengtang on 7 November 2014 and registered on the subject site;
• the LMA contained a concept plan for the development of the subject land restricting the development of a building on the site to 25 metres with a 20% tolerance at its highest;
• Zhengtang applied for a mixed-use building of 16 storeys in height on 17 September 2020.  The relevant authority for this application was the SCAP and the application was assessed under the Development Plan which provided for a maximum building height of 53 metres.  The LMA, therefore, intentionally set out to restrict building heights to 25 metres;
• the SCAP generally supported the application but refused it on the basis that the Council refused to waive or vary the LMA.  The SCAP refusal was appealed and ultimately resolved in 2021 on the basis of the ERD Court granting Development Plan consent to a building of 16 storeys and 53 metres in height.  The Council was not a party to the appeal; and
• between 2021 and 2022, the Council and Zhengtang corresponded regarding the Development Plan consent. Zhengtang indicated that it would proceed with the development despite the LMA.  The Council issued its enforcement notice to Zhengtang which then commenced the appeal process. The argument on appeal to the ERD Court concerned the effect of the LMA and whether it constrained the development to the 25 metre limit with a 20% tolerance.  The ERD Court rejected Zhengtang’s arguments and upheld the enforcement notice.  This decision was appealed to the Court of Appeal in March 2023.

Key findings and outcomes in the appeal:

• on appeal, Zhengtang argued the terms of the LMA and how they should be interpreted. This portion of the appeal was dismissed on the basis that the height restriction contained within the LMA was clear and not open to interpretation;
• Zhengtang posed two additional questions to the Court:

1. 1.    Does a planning consent granted contrary to an LMA override the LMA?
   2.    If the situation arises where there is an inconsistency between an LMA and planning consent, does the ERD Court have the discretion not to enforce the LMA?

• the answer to the first question above was ‘no’.  Reflecting Zweck and taking into consideration submissions made to the Court by the Attorney-General, the Court determined that a planning consent granted contrary to an LMA does not automatically override the LMA;
• the second question above arose because the ERD Court had upheld the enforcement notice on the basis that the development proposed by Zhengtang was contrary to the LMA.  The ERD Court had not been asked to consider whether it should exercise a discretion to not enforce the LMA in light of the consent granted, the intent and content of the LMA, current planning assessment criteria, site circumstances and other relevant consideration;
• the answer to this second question was ‘yes’.  In making this determination, the Court determined that the effect of a planning consent granted contrary to an LMA is a fact and degree exercise having regard to the nature of the development approved, the scope, wording, intent and content of the LMA and other relevant circumstances; and
• the Court remitted the appeal back to the ERD Court for a hearing on the LMA and whether the Court should exercise its discretion to not enforce it.

Key considerations for Councils:

• This decision confirms that LMA’s are not automatically overridden by an inconsistent planning consent. This is an important finding given the current context of the PDI Act 2016 where Councils enter into LMA’s but are never the relevant authority for a planning consent granted for a development on land subject to an LMA.
• The decision reaffirms the need for LMA’s to be drafted with due care and attention to detail.  LMA’s continue to be interpreted on the basis that they are a contract between parties, meaning that they are interpreted on the basis of their content and with limited recourse to documents not contained within them.  It is, therefore, important that LMA’s be drafted to clearly reflect the intention and objective of the document, what its intent LMA is in the event of inconsistency with the Planning and Design Code and to deal with consents granted that are inconsistent with the LMA.
• In entering into LMA’s, councils must consider its current intent and purpose and its lifespan.  An LMA that clearly articulates, in detail, the intent and objectives of the parties, what may or may not impact it and its weighting in the future, will have considerably better prospects of an enduring LMA compared to a document that is briefer and less articulate in its terms. The key considerations being
  • What is the purpose of the LMA and is it still relevant?
  • Can certain provisions be waived and others remain?
  • What are the ramifications of a waiver?

For any questions related to this Alert or to LMA’s generally please contact Victoria Shute on 8113 7104 or vshute@kelledyjones.com.au