On 25 November 2011, the NSW Court of Appeal handed down its decision in Hoxton Park Residents Action Group Inc v Liverpool City Council (No 2)  NSWCA 363.
In this case, the Court considered an application for leave to appeal and whether there were grounds to challenge the constitutional validity of Commonwealth legislation enabling a grant of funds for the construction and use of a religious school, and whether there were grounds for claims in nuisance and negligence associated with the development.
These proceedings involved an appeal from the decision of Justice Rein in the Supreme Court of NSW in Hoxton Park Residents Action Group Inc v Liverpool City Council (No 2)  NSWSC 1312 (earlier decision). The earlier decision concerned an application to the Court by the Hoxton Park Residents Action Group inc (Hoxton Park) to prevent the construction and operation of an educational facility and place of worship (facility) on land owned by the Australian Federation of Islamic Councils (Federation) and leased by the Malek Fahd Islamic School Ltd (School). in the earlier decision, His Honour had dismissed the proceedings on the basis that Hoxton Park was unable to establish a reasonable cause of action.
Hoxton Park was granted leave to appeal to challenge the constitutional validity of Commonwealth legislation through which the Commonwealth provided a grant to the Federation and School for the construction and operation of the facility. Funding for the facility was obtained from the Commonwealth by a grant made under the Schools Assistance Act 2009 (CTH) (SA Act), and distributed to the Federation and School pursuant to State legislation. Hoxton Park argued that the Commonwealth's grant was invalid on the basis that it contravened section 116 of the Constitution, which prohibits the Commonwealth from legislating in respect of religion.
Additionally, the applicants sought a declaration that Liverpool City Council (Council) had no authority to approve the development application for the facility as section 220 of the Local Government Act 1993 (NSW) (which prescribes the legal status of councils) was invalid. the effect of section 220, amongst other things, is to prevent a council from being characterised as a constitutional corporation.
Hoxton Park also alleged nuisance and negligence on the basis that the Federation and School created a public nuisance due to the construction of the facility and from conduct which would ultimately result from the use of the facility (and land) once constructed. Hoxton Park also argued that the Federation and School engaged in "a hazardous activity" upon which the facility was being constructed, causing "loss and damage" to surrounding residents.
During the appeal, the Court considered a number of issues which had been raised in the earlier decision, including whether:
- it is constitutionally valid for Commonwealth or State legislation to provide for funding for religious purposes,
- it is valid for State legislation to establish the Council, and
- claims in nuisance or negligence can be made for activities undertaken on the land pursuant to the development consent.
The Court considered whether, to the extent that such a grant was permitted by the SA Act, the SA Act was invalid due to contravening the constitutional prohibition on Commonwealth legislation in relation to religion under section 116. the Court further considered whether the State legislation, which gave effect to the grant, was also invalid due to it also contravening Section 116.
The Court held that due to uncertainty in the law as to whether the Commonwealth can validly provide funding for religious purposes, the issue was "a proper matter for challenge" (at 35). The Court stated that in the earlier decision, the Judge had erroneously struck out the challenge to the Commonwealth law which affected the grant to the federation and school (at 37).
In rejecting Hoxton Park's claim, The Court upheld the earlier decision that a State law which establishes a religion or interferes with a religion is not "repugnant" to section 116,on the basis that the legislative power of a State is not limited by section 116. The Court also ruled that even if section 116 was held to govern state legislative power, if the Commonwealth legislation did not contravene section 116, neither did the state legislation (at 40).
Further, The Court held that the Federation and School were unable to challenge the lawful existence of the Council on the grounds that section 220 was invalid as:
- there is no constitutional restraint on the legislature creating a collective group identified as a "body politic" (at 57), and
- the term "body politic" in section 220 of the Local Government Amendment (Legal Status) Act 2008 (NSW) establishes a collective body capable of exercising statutory functions, and the consideration of development applications in respect of land with specific geographical boundaries (at 57).
In relation to the claims in nuisance and negligence, The Court found that while the claims for nuisance and negligence in this case were not well executed, these issues could be pleaded again. The Court held that:
- the Supreme Court of NSW has jurisdiction to deal with claims in nuisance and negligence in relation to an activity approved under a Development Consent (at 62), and
- compliance with a development approval is not necessarily a defence against any claim in nuisance or negligence. whether a grant of development approval provides a defence to a claim in nuisance depends upon the evidence specifically relating to the case (at 68).
There may be further challenges under section 116 of the constitution in relation to the provision of grants to schools or religious institutions under the SA Act. In determining whether a conflict exists, the Court will consider whether the Commonwealth law:
- establishes a religion,
- imposes a religious observance, or
- prohibits the free exercise of any religion (section 116 of the constitution).
State governments are not subject to restrictions under Section 116 of the Constitution, however should be aware of these constraints on the Commonwealth government.
This case also confirms that no constitutional restraint exists on the creation by the legislature of a collective group identified as a "body politic" capable of exercising statutory functions and considering development applications, and that development consents are not necessarily a defence against any claim in nuisance or negligence.
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