HG Alert: Court Finds Development Application Out of Bounds - Mar 2009

Court Finds Development Application Out of Bounds of Trade Practices Act

Property developers take note – challenging a development application on the basis that it is misleading and deceptive under section 52 of the Trade Practices Act will likely be thrown out of court following the recent decision of the NSW Supreme Court in Street v Luna Park Sydney Pty Limited.

Section 52 of the Trade Practices Act prohibits misleading or deceptive conduct – that is, conduct in trade or commerce, which is misleading and deceptive, or is likely to mislead or deceive. Businesses have an obligation not to engage in any conduct in business that is likely to mislead or deceive.

The Trade Practices Act does not define the meaning of the term “in trade or commerce”. The High Court has said that conduct in trade or commerce is "conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character”.

In Street v Luna Park Sydney Pty Limited, the plaintiffs - a developer of a nearby residential apartment block and 7 residents - sought to establish that the development application that had been lodged in relation to the construction of adult thrill rides at Luna Park, was misleading and deceptive. This claim was made on the basis that the development application contained a representation by the developer, Metro Edgley, that noisy adult thrill rides would not be located in the northern section of Luna Park. The adjoining developer and the residents claimed that they bought and developed their properties on the basis of this representation. However, as matters turned out, the developer did locate some noisy rides in the northern section of Luna Park, resulting in the commencement of court action.

Justice Brereton (who heard the case) stated that:

“A development application is an application for permission – or consent – to do something that otherwise would be prohibited by law… The lodging of a development application conveys no commitment on the part of the applicant to proceed with the development if consent is granted.”

The Judge also ruled that a development application could not be considered misleading or deceptive because it does not have a trading or commercial character and therefore does not fall within the ambit of the Trade Practices Act.

The plaintiffs also sought to establish a common law claim that Metro Edgley made negligent misrepresentations which were relied upon by the residents in making their decision to purchase units in the nearby residential apartment block. However, Justice Brereton rejected such contentions on the basis that Metro Edgley did not owe the developer of the residential apartment block and its residents a duty of care as no “special relationship” or “vulnerability” existed between Metro Edgley and the plaintiffs.