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Macquarie International Health Clinic Pty Limited v The University of Sydney and Anor Matter No Ca 40126/98 [1998] NSWSC 309 (24 July 1998)

Last Updated: 2 September 1998

MACQUARIE INTERNATIONAL HEALTH CLINIC PTY LIMITED v

THE UNIVERSITY OF SYDNEY & ANOR

CA 40126/98

24 July 1998

Mason P, Meagher JA, Stein JA

The Supreme Court of New South Wales Court of Appeal

NATURE OF JURISDICTION: LAND AND ENVIRONMENT COURT - SHEAHAN J

FILE NO/S: CA 40126/98; LEC 10625/97; LEC 40257/97; LEC 40271/97

DELIVERED: 24 July 1998

HEARING DATE/S: 3 July 1998

PARTIES: MACQUARIE INTERNATIONAL HEALTH CLINIC PTY LIMITED v THE UNIVERSITY OF SYDNEY & ANOR

JUDGMENT OF: MASON P, MEAGHER JA, STEIN JA

COUNSEL:

Appellant: P Larkin/L Byrne

Respondent 1: M Tobias QC/B Preston

Respondent 2:Submitting

SOLICITORS:

Appellant: Teece Hodgson & Ward

Respondent 1: Eakin McCaffery Cox

Respondent 2:Pike Pike & Fenwick

CATCHWORDS:

Whether development permissible - more than one use, education and hospital - characterisation of purposes of use- whether purposes are mutually exclusive - meaning of `ancillary use'.

EXTEMPORE/ RESERVED: RESERVED

ALLOWED/DISMISSED: DISMISSED

NO OF PAGES: 16

Macquarie International Health Clinic Pty Limited (the appellant) challenges a decision of Sheahan J in the Land and Environment Court that a development application lodged by the University of Sydney to establish a private teaching hospital within the medical precinct of its Camperdown campus was permissible with consent. The proposed hospital is to be built partly (75%) on land owned by the University and partly (25%) on adjacent land owned by the Central Area Health Service. The land owned by the University is zoned 5(a) Special Uses -Education and the land on the hospital side is zoned 5 (a) Special Uses - Hospital. The relevant environmental planning instrument is the City of Sydney Local Environmental Plan No 66 (the LEP).

Zoning objectives, identified by the LEP, provide that a permissible development purpose is `indicated by black lettering on the map or a use ancillary or incidental to that use'. The appellant submits that, since 75% of the proposed hospital is in the education zone, the use is plainly not an education one and nor can it be described as ancillary to the education use.

Sheahan J rejected the appellant's submission that the zonings were mutually exclusive and characterised the proposed development as a teaching hospital. He found the development was permissible with consent.

The appellant submits that his Honour erred in:

1. holding that the proposed use of a hospital is simultaneously permissible, pursuant to the LEP, on land zoned for education use and land zoned for hospital use;

2. holding that the use of a hospital is permissible in the education zone;

3. holding that the use of a hospital for education purposes is permitted in the hospital zone;

4. not finding the proposed hospital is a prohibited development.

Held:

1. The characterisation of the proposed development as a teaching hospital was a finding of fact not challenged on appeal.

2. The hospital use and education use are not mutually exclusive purposes.

3. The use involved two purposes which were inextricably bound up so as to be properly characterised as a teaching hospital and not as two independent uses or as a dominant or subservient use.

4. The proposed teaching hospital is permissible in both zones.

Royal Agricultural Society v Sydney City Council (1987) 61 LGRA 305 followed

5. An ancillary use does not necessarily have to be a subservient or subordinate use. It may be more than a minor use and may be an independent use.

Baulkham Hills Shire Council v O'Donnell (1990) 69 LGRA 404

Londish v Knox Grammar School (unreported, Court of Appeal, 22

December 1997) followed.

Appeal dismissed with costs.

MASON P: I agree with Stein JA.

In doing so, I would stress the importance to me of the unchallenged finding that the proposal can be characterised as a "teaching hospital". This finding turns upon detailed factual bases, including the contiguity of the site to the University campus, the University's involvement in establishing the hospital, and aspects of the design of the hospital such as the location of the medical faculty library. I lay emphasis upon these facts. The mere addition of educational activities to an enterprise will not enlarge its character. Thus, an office that takes in students for work experience or a factory whose work force includes apprentices would be unlikely to be characterised as devoted to educational purposes in the normal course.

MEAGHER JA: I agree with Stein JA.

STEIN JA:

INTRODUCTION:

The appellant (Macquarie International Health Clinic Pty Limited) challenges a decision of Sheahan J in the Land and Environment Court. His Honour declared that the development described in a certain development application lodged by the first respondent (The University of Sydney) with the South Sydney City Council (the second respondent) was permissible with consent. The council has filed a submitting appearance. The appellant argues that his Honour was wrong and the development is prohibited.

The development application sought approval to establish a teaching hospital `within the medical precinct on its [Sydney University] campus' (Blue Book AB 123). The hospital will be a private one with 211 beds and delivering a full range of medical services in a teaching environment. A staff of 250 doctors, nurses, administrative and support staff is proposed, although staff numbers could be as high as 370 at peak times. Designed to be the University's teaching hospital, it will receive around 30 students at a time from the adjacent medical faculty.

THE APPLICABLE PLANNING INSTRUMENT

The proposed hospital is to be erected partly on land owned by the University at its Camperdown Campus and partly on immediately adjacent land owned by the Central Area Health Service. The ratio is approximately 75% on the former and 25% on the latter site. The hospital not only straddles the property boundary but also the zoning boundary, which more or less follows the ownership boundary.

Land on the University side is zoned 5(a) Special Uses - Education and the land on the hospital side is zoned 5(a) Special Uses - Hospital. The relevant environmental planning instrument is the City of Sydney Local Environmental Plan No 66 gazetted on 30 January 1987 (the LEP).

Clause 10 of the LEP is in standard form and provides:

(1) The objectives of a zone are set out in the Table to this clause under the

heading `Objectives of zone'.

(2) Except as otherwise provided by this plan, in relation to land within a

zone specified in the Table to this clause, the purposes (if any) for

which -

(a) development may be carried out without development consent;

(b) development may be carried out only with development consent; and

(c) development is prohibited

are specified under the headings `Without development consent', `Only

with development consent' and `Prohibited', respectively, appearing in

the matter relating to the zone.

(3) Except as otherwise provided by this plan, the Council shall not grant

consent to the carrying out of development on land to which this plan

applies unless the Council is of the opinion that the carrying out of the

development is consistent with the objectives of the zone within which

the development is proposed to be carried out.

The land-use Table for the 5(a) Special Uses zone provide zone objectives. These are `to identify areas which are now owned or used for particular public or community purposes and to identify areas which will be acquired by a public authority for a particular public or community use'. Item 3 of the Table provides that `the particular purpose indicated by black lettering on the map or a use ancillary or incidental to that use' is permissible with consent. Any other purpose is prohibited under item 4 of the Table. The map lettering on the University land is `Education' while the map lettering on the balance of the land is `Hospital'.

THE RESPECTIVE CONTENTIONS

The basic contentions of the parties are as follows:

* The appellant submits that while an education use is permitted in the education zone, a hospital use is not permitted unless it is ancillary or incidental to the education use. In the hospital zone, a hospital is permitted and since the definition of hospital in the Model Provisions, adopted in the LEP, includes educational purposes, the proposal is permissible in the hospital zone. However, since 75% of the proposed hospital is in the education zone, the use is plainly not an education one. Accordingly, the proposed hospital is prohibited in an education zone. Alternatively, it cannot be said that the hospital use is ancillary to the education use.

* The University submits that the proper characterisation of the use is as a teaching hospital. The University rejects the appellant's argument on the mutual exclusivity of the respective zonings. This submission had been rejected by Sheahan J when he found, as a fact, that the proposed teaching hospital could serve both functions - it would be a hospital for an education purpose. The LEP (cl 10 and the zoning table) does not require that the development of a teaching hospital must only be for the purpose of a hospital or education but not both. The University further submits that this is not a case of dual uses but only one use, that of a teaching hospital, as found by the trial judge. In the alternative, it is submitted that the development of a teaching hospital is also a use for the purpose of a hospital which is ancillary or incidental to the education use within the University and, in particular, its medical precinct.

THE JUDGMENT AT FIRST INSTANCE

An important starting point for consideration is the proper characterisation of the use. His Honour the trial judge characterised the proposal of the University as `a teaching hospital' (AB 62 K). This finding of fact is unchallenged. The use was clearly permissible in the hospital zone. Turning to the education zone, Sheahan J said that the proposal `in its entirety cannot simply fit into simplistic definitions of "hospital use" and/or "education use" '. He added:

Here the twin/dual functions of delivering clinical education to medical students and delivering health care services to patients, public or private, are not relevantly severable, in the way that extraction works are severable from agriculture, orcharding, riding schools, etc. [AB 62 S-V]

It is apparent that his Honour meant dual `purposes' rather than `functions'. Sheahan J found that the hospital use was `inextricably part of the education function performed by the University in the relevant medical faculty precinct within the education zone'. The hospital use could not be severed or be seen as an independent use so as to be impermissible in the education zone. The court concluded that the proposed teaching hospital was permissible in the education zone. Accordingly, the trial judge did not proceed to consider the alternative argument that the teaching hospital was ancillary to the education use and permissible on that basis.

It is convenient to set to one side a number of submissions made on behalf of the appellant which, I think, ought to be rejected. It was submitted that, to the extent that his Honour applied the University's subjective motivations for the proposal, he erred since this is irrelevant to the characterisation of the proposal for planning purposes. It is true that the test is an objective one, see Woollahra Municipal Council v Minister for the Environment (1991) 23 NSWLR 710 per Gleeson CJ at 714, 716 and Kirby P at 728. However, a fair reading of Sheahan J's judgment does not lead to the conclusion that his Honour relied on the subjective motivations of the University. His Honour's reference to what `the University wants' must be seen in the context of his extensive examination of the evidence. In my opinion, it cannot be said that his Honour's ultimate conclusion rested upon his acceptance of the subjective motivations of the University.

Another subsidiary argument of the appellant is that Sheahan J erred in construing the planning instrument `broadly' and `liberally' in favour of the University (Red Book AB 61 T). It is axiomatic that the cases that his Honour there noted (Shire of Perth v O'Keefe [1964] HCA 37; (1964) 110 CLR 529 and North Sydney Municipal Council v Boyts Radio & Electrical Pty Limited (1989) 67 LGRA 344) concern existing uses and the liberal construction adopted should not be automatically transposed to cases which do not involve existing uses. However, it does not appear that in determining the issue of statutory construction, Sheahan J approached the task liberally in favour of the University. The cases were referred to in the context of the characterisation of the use. His Honour found that it was teaching hospital and this finding is, as I mentioned, not challenged.

It was further argued that his Honour erred in seeking to compare factual situations in earlier decided cases with the present matter. His Honour extensively reviewed the authorities but it was clearly a review for the purposes of extracting the relevant principles, not to compare factual situations. A reading of the judgment makes it plain that the court below relied on the facts found in the case before it and not the facts from previous authorities.

MUTUAL EXCLUSIVITY AND DUAL USES

The Land and Environment Court categorised the University's development application as one seeking consent to a teaching hospital. Having regard to its character, extent and other features, it was a development for one use only (that of a teaching hospital). This use could not be severed into two independent uses or seen as a dominant and subservient use.

The appellant submits that the LEP provides that X is permitted in one zone and Y is prohibited. In the adjacent zone, Y is permitted and X is prohibited. Unless X = Y, a single development cannot straddle both zones, so it is submitted. Accepting his Honour's unchallenged categorisation of the use as a teaching hospital, it follows that it must be for the purpose of either a `hospital' or `education' but cannot be for both purposes. That is, that the two purposes are mutually exclusive.

This submission was rejected by Sheahan J in a finding of fact that the proposed teaching hospital could and would serve both functions, that it could and would be a hospital for an education purpose. His Honour found that a teaching hospital, by its very nature, involves the imparting of knowledge and skills by teachers and its acquisition by students through systematic instruction and training in a clinical setting.

I reject the mutual exclusivity submission. It does not follow automatically from the appellant's argument. The purpose of the use in question is a teaching hospital. That one purpose may be education does not mean that it must be the only purpose. There can be other purposes, such as here. The nature of imparting practical medical education means that real patients are needed in a hospital setting. As Sheahan J found, the use involved two purposes which were inextricably bound up so as to be properly categorised as a teaching hospital, and not as two independent uses - a hospital and education. While one could, and often does, have a hospital without education, one cannot have medical education without the hospital in a teaching setting. A teaching hospital is necessarily a mixed purpose which cannot be severed. The two purposes are inextricably linked and cannot be severed. Although this finding of his Honour is challenged, it was clearly one open on the evidence. In my opinion, there is but one use as a teaching hospital, with two purposes as its end. These, by their very nature, cannot be severed into two independent uses.

In Royal Agricultural Society v Sydney County Council (1987) 61 LGRA 305 at 310-311 McHugh JA (as he then was) discussed the test of categorisation. After referring to Bonus Pty Ltd v Leichhardt Municipal Council (1954) 19 LGR (NSW) 375, O'Keefe (Kitto J at 535) and Woollahra Municipal Council v Banool Developments Pty Limited [1973] HCA 65; (1973) 129 CLR 138, his Honour noted that they dealt with activities of a common kind. He considered, however, that the principle was also applicable where land was used for activities of widely differing kinds. McHugh JA said:

If the activities, processes or transactions are capable of being treated as all or the majority of the species of a genus, then that genus may properly be regarded as describing the purpose of the use of the land. It they are not, then it may be that the only conclusion is that the land has been used for more than one purpose.

I accept the submission of Mr Tobias of senior counsel on behalf of the University that cases such as Baulkham Hills Shire Council v O'Donnell (1990) 69 LGRA 404 at 409-410 are inapplicable to the present case. These cases involved two distinct uses whereas this appeal involves a development for one use only, ie. a teaching hospital. Since the purposes of the use are inextricably bound up, they cannot be severed.

Applying McHugh JA in the Showgrounds case, it is my opinion that the proposal for a teaching hospital contained in the development application is permissible in both zones. It is not made impermissible in the education zone by reason of the fact that a teaching hospital includes another purpose, that of a hospital, in addition to education. The use of a building for the purpose of providing systematic training and instruction for students in the clinical environment of a hospital is, I believe, an educational purpose. It follows that Sheahan J was correct and the appeal should be dismissed. Nonetheless, I turn to the alternative argument of the University that the development of a teaching hospital is also a use for the purpose of a hospital which is ancillary or incidental to the education use within the University and its medical precinct.

ANCILLARY USE?

The alternative submission arises from the express words in item 3 of the land-use Table in the LEP. Put simply, Mr Larkin submits, on behalf of the appellant, that the hospital use cannot be seen as ancillary to the education use in the education zone. That there are twin or dual purposes of delivering clinical education to students and delivering health care to patients (as his Honour held) runs contrary to the hospital use being ancillary to the education use. An examination of the proposal and the plans is said to make it apparent that the major use of the building is as a hospital. Such a use, when compared to the relatively minor education one, cannot be found to be ancillary or incidental to the latter use. It is submitted that, in the context of the Table, `ancillary' means `subservient'.

However, an ancillary use does not necessarily need to be a subordinate or subservient one. It may be more than a minor use. It seems to me that an ancillary or incidental use is not capable of being reduced to a mathematical formula. It may also be noted that among the relevant dictionary meanings of ancillary are `auxiliary' and `accessory'.

In assessing whether the hospital use is ancillary to the education use, two matters should be noted. First, the education zone extends far beyond the subject land right through the University campus. In particular, the proposed site is part of the medical precinct. Closely connected and integrated into the proposed teaching hospital is the Blackburn Building, which houses the faculty of medicine. The new teaching hospital will become part of the medical precinct of the University and physically joined to the Blackburn Building. It will house the faculty of medicine library. Secondly, the appellant concedes, correctly in my view, that in considering the issue it is permissible to examine the education use in the adjacent medical faculty.

If there is a separate hospital use, it appears to be open on the evidence to conclude that it is one which is ancillary or auxiliary to the education use, not only in the proposed building, but ancillary to the education functions in the contiguous medical precinct. In particular, it supports the medical education functions being carried on in the adjoining Blackburn Building in the education zone.

This conclusion accords with the findings of fact in the court below, findings I should add, which were well open on the evidence.

It matters not if the hospital use is an independent use to the education use since the proviso to item 3 of the land-use Table makes clear that an independent use that is ancillary is permissible. In O'Donnell, Meagher JA observed that a use which is ancillary to another use is not precluded from being an independent use. He gives the example of a book publisher opening a sales room at its publishing house (at 410). The sale of books is an independent use although ancillary to the use of publishing. The distinction in this case is that the independent ancillary use is permissible under the land-use Table whereas in O'Donnell, it was prohibited.

Although every case of categorisation must be decided on its own facts, a recent decision in the court may provide some illumination. One of the issues in Londish v Knox Grammar School (unreported, Court of Appeal, 22 December 1997) was whether a proposed student residence was ancillary to a school, an educational establishment. The residence was locationally separate from the main school campus and no formal teaching took place in the residence. On the particular facts before the court, I concluded that the school residential boarding facility was ancillary to the educational establishment.

EVENTS SINCE THE LEC DECISION

Events which have occurred since the case was determined in the Land and Environment Court become relevant if my conclusion on the above issues is in error. On 23 June 1998 the Council granted development consent to the University to construct the teaching hospital. The consent was based on the judgment of Sheahan J holding that the development was permissible and not prohibited. Further, LEP 66 has been amended by gazettal on 24 April 1998 which allows for development consent to be given to development which may be carried out on adjoining or adjacent land in the same or different zone. This would mean that even if the development consent was set aside, which is not sought in the proceedings, an identical fresh development application would be for a permissible use. In these circumstances, the only appropriate order for the court to make in the event of the appellant succeeding in the appeal is to set aside the declaration No 1 made by Sheahan J to the effect that the development was permissible under LEP 66. It seems to me that it would, in the supervening circumstances, be a futility to further declare the development to be prohibited under the LEP.

I would order that the appeal be dismissed and the appellant be ordered to pay the costs of the first respondent.