Court discretion to override Land Management Agreements - Zhengtang Precinct Loft Pty Ltd v The Corporation of the City of Adelaide & Noon [2026] SAERDC 7
In the recent decision of Zhengtang Precinct Loft Pty Ltd v The Corporation of the City of Adelaide & Noon [2026] SAERDC 7, the Environment, Resources and Development Court (ERD Court) considered the principles relevant to determining whether, in the exercise of its discretion, it should decline to enforce a land management agreement (LMA).
Facts
The case concerned a proposed development at the former Balfours Site on Franklin Street (Land), where the applicant, Zhengtang Precinct Loft Pty Ltd (Zhengtang), proposed the construction of a 53 metre building (Development).
The Development had earlier been granted development authorisation pursuant to the Planning, Development and Infrastructure Act 2016 (SA) (PDI Act). However, the Development was inconsistent with a preexisting LMA between Zhengtang and the Corporation of the City of Adelaide (Council), which prohibited development on the Land beyond a height of 25 metres.
LMAs had also been entered into in relation to other parts of the former Balfours Site. Each of those LMAs incorporated the same Concept Plan, which identified the proposed building heights across the broader site. However, the height restrictions shown in that Concept Plan were not ultimately enforced by the Council in relation to the neighbouring West Franklin Apartments, which were constructed to heights exceeding 53 metres with the Council’s support. Similarly, the proposed Development would also exceed the height shown in the Concept Plan annexed to earlier LMAs and to the LMA the subject of these proceedings.
The Council subsequently issued Zhengtang with an enforcement notice under section 213 of the PDI Act on the basis of its proposed breach of the LMA, by way of its intention to proceed with the Development, contrary to the LMA height restriction.
The proceedings involved the resolution of the conflict between the development authorisation, which permitted the Development to 53 metres in height, and the LMA, which prohibited development beyond 25 metres (with a 20% tolerance).
Case History
The primary hearing, Zhengtang Precinct Loft Pty Ltd v The Corporation of the City of Adelaide [2023] SAERDC 3 before the ERD Court, concerned the interpretation of the LMA. The Court found that the LMA permitted construction only up to 25 metres (within a 20% tolerance).
Zhengtang appealed that decision, succeeding only on its amended grounds regarding how a conflict between an LMA and subsequent inconsistent development authorisation could be resolved. The Court of Appeal (CoA) in Zhengtang Precinct Loft Pty Ltd v The Corporation of the City of Adelaide [2024] SASCA 148 held that, where an inconsistency exists between an LMA and a development authorisation, the ERD Court has a discretion to not enforce the LMA. The CoA remitted the matter back to the ERD Court for hearing on that limited issue of the exercise of its discretion.
Zhengtang contended that the ERD Court should decline to exercise its discretion to enforce the LMA, and, accordingly, should quash the enforcement notice. The Council and an interested party contended that the LMA should be enforced and that there was no basis to quash the enforcement notice.
Decision
Ultimately, the ERD Court declined to exercise its discretion not to enforce the LMA, thereby limiting the development of the Land to 25 metres (with a 20% tolerance). The ERD Court reasoned that its discretion not to enforce an LMA is unfettered and that it should identify various factors that will be of relevance, including:
identifying the apparent rationale for the entry into of the LMA and considering its continued relevance;
ensuring that the agreement does not become a permanent clog on development regardless of future circumstances;
identifying the circumstances that had changed since the entry into of the LMA, including identifying what changes, if any, have occurred to the relevant Development Plan since the entry into of the LMA.
In that context, the ERD Court then identified and considered the following factors:
The apparent rationale for entering into the agreement - To be ascertained from the terms of the agreement, including its recitals. In this case, the apparent rationale of the LMA was to ensure that the Council retained a degree of control over any proposed development beyond that afforded by the planning scheme. This factor favoured the enforcement of the LMA.
Whether the applicant entered into the LMA voluntarily to secure advantages it might otherwise have not been entitled – This may include avoiding delay, cost, and risk. Zhengtang had voluntarily entered into the LMA upon purchasing the Land in 2014. This factor favoured enforcement of the LMA.
Whether overriding the LMA would disappoint the legitimate contractual expectations of the parties – In this case, overriding the LMA would have undermined the Council’s contractual expectations. This factor favoured enforcement of the LMA
Passage of time – This may become relevant where the rationale for entering into the LMA ceased to exist, or where it may indicate that the LMA has become a permanent impediment to development. In the present case, there was no evidence of either matter. This was therefore a neutral consideration.
Legislative changes– Since the LMA was entered into, the PDI Act had replaced the repealed Development Act 1993. While the PDI Act continues to recognise the role of LMAs, its objects place greater emphasis on supporting development. This factor favoured declining to enforce the LMA.
Whether there has been changes in the Development Plan or Code since the LMA was entered into - In this case, the relevant Development Plan regarding the maximum permissible height of buildings on the Land had not changed from 53 metres when the LMA was entered into. This factor favoured enforcement of the LMA.
Changes in the locality - Since entry into the LMA, there had been no evidence of . any significant changes to the locality. This therefore was a neutral consideration.
The public availability of the LMA – In this instance, the LMA was noted on title and therefore available for public inspection. The ERD Court reasoned that purchasers of apartments in neighbouring buildings had reasonably relied on the LMA when deciding to purchase. This factor favoured enforcement of the LMA.
The economic viability of undertaking development - Zhengtang produced a feasibility analysis indicating that it would incur a loss if the Development were restricted to the 25 metres provided for in the LMA. The ERD Court found that although there was some economic merit to decline enforcement of the LMA, the evidence of the non-expert report did not go so far as to suggest that no developer could profitably develop the Land in compliance with the LMA.
The recission of other LMAs and subsequent construction - LMAs relating to other developments on the broader Balfours site had been abandoned, and buildings were subsequently constructed to heights exceeding 53 metres. While the ERD Court regarded this as a relevant consideration, it did not permit an inference to be drawn that the Concept Plan attached to those rescinded LMAs no longer continued to apply to the Land. This factor was found to favour declining to enforce the LMA .
The proposed development had received development authorisation - It was implicit in the grant of development authorisation that the proposal had been assessed against relevant planning policy, having regard to the existing LMA. This factor favoured declining to enforce the LMA.
The ERD Court, after considering each of these factors in combination, declined to exercise its discretion not to enforce the LMA as the following factors favouring enforcement were afforded significant weight:
that the apparent rationale for the LMA was still relevant;
the binding nature of the LMA;
the fact that Zhengtang voluntarily entered into the LMA to secure the benefits of purchasing the land comprising the Balfours Site;
the fact that the LMA was on the public record and that it was reasonable for third parties to make decisions based on its existence (although recognising the LMA may be rescinded or varied by the Council or not enforced by the Court);
the heights set out in the Development Plan that applied to the subject Land have not changed since the date of the entry into of the LMA.
Take away
This case reinforces that a development authorisation will not automatically displace the operation of an existing LMA where the two are inconsistent. Conversely, LMA’s are not to be considered as permanent blocks on development as there may well be circumstances where subsequently authorised inconsistent development may be allowed to proceed by way of variation, waiver, or in the exercise of the Court’s discretion.
For more specific information on any of the material contained in this article please contact Gavin Leydon on +61 8 8210 1225 or gleydon@normans.com.au or Stephan Koefer on +61 8 8217 1368 or skoefer@normans.com.au
