The recent VCAT decision in SMA Projects Pty Ltd v Yarra CC & Ors [2013] VCAT 436, tested the argument of financial viability i.e. whether the financial viability of a proposal was relevant in justifying a development. The proposal was for the development of a site with 350 dwellings and commercial uses (an increase from a previously approved application) and included the restoration of heritage buildings.
In summary, the permit applicant argued that the cost of restoration to the heritage buildings would render the remainder of the proposal unviable and that the greater yield, from the remainder of the site was required, in order to compensate for the costs (and associate public benefit benefit) of restoring the heritage buildings.
Council argued that financial viability issues have no relevance to the issues which the Tribunal is required to consider, and that the price paid for the site presumably reflects the applicant’s own assessment of the potential for a profitable return on investment.
Although the Tribunal found that the proposal should be approved on its merits and that there was no need to consider the issue of financial feasibility in case, it did provide the following interesting guidance for anyone wishing to run a similar argument on financial feasibility:
•In this case the Tribunal indicated that it had not been presented with evidence to persuade them that it was this particular proposal, and this proposal alone, that could achieve the public benefit sought i.e. the restoration of heritage buildings. There could be any number of development options which could achieve that objective;
•The applicant, in seeking to advance a financial feasibility argument, must demonstrate that any intended public benefit, used as leverage, is dependent on the financial feasibility of the project (and Tribunal was not convinced in this case);
This case is interesting because the Tribunal appears to suggest that the ‘public benefit’ argument of a proposal, in the right circumstances, could be used to increase yield (due to a financial feasibility imperative) of a project. But we wouldn’t suggest applicant’s run this line just yet.