By Aaron Gadiel, Partner

The Land and Environment Court has struck down the NSW Government’s decision to list North Sydney’s ‘MLC Building’ on the state heritage registrar.

The Court’s decision was handed down on Friday (15 July 2022).  It dramatically highlights the careful tightrope that statutory decision-makers must walk if they are to make lawful decisions about state heritage listings and other matters.

Background

In July 2020, the Applicant lodged a development application to North Sydney Council for the demolition and redevelopment of the MLC Building.

Soon after this application was lodged (in September 2020), the Heritage Council resolved to give notice of its intention to consider listing the MLC Building on the state’s heritage register.

(Developers are becoming increasingly familiar with the tendency of public authorities to move quickly with new heritage listings after a development application has been lodged for the re-development of a site.  This appears to be yet another example of this highly reactive practice.)

Ultimately (in May 2021), following a review by the Independent Planning Commission, the NSW Government’s Special Minister of State (Don Harwin) directed that the MLC Building be listed on the state’s heritage register.

Unlawful decision

The Court found that the Minister’s decision to list the MLC Building as ‘state heritage’ was unlawful, because the Minister had failed to consider two mandatory relevant considerations required by the Heritage Act 1977:

• whether the listing would render the building incapable of reasonable or economic use; and
• whether the listing would cause undue financial hardship to the owner, mortgagee or lessee of the building or the land on which the building is situated.

The case primarily turned on the reasons for the Minister’s decision.  These reasons were required by the Heritage Act 1977.  They had to be published on the internet within a week of the decision being made.

The statutory reasons did not contain any reference to whether (with the listing):

• the building could be put to reasonable or economic use; or
• there would be undue hardship.

The Court said that (as a general proposition) where reasons are given, it is appropriate that they be regarded as what they purport to be.  That is, a statement of the complete reasons for the decision.  A failure to include reference to a matter in a statement of reasons may justify an inference that the matter was not taken into account.  This creates a serious legal deficiency when the matter is one that is required by law to be considered.

The Court said that the obligation to give reasons is an obligation that required the Minister to expose — through the reasons — the Minister’s decision-making.  This meant that the reasons must include a reference to the mandatory relevant considerations required the Heritage Act 1977.

The statutory reasons did not contain any reference to the mandatory relevant considerations.  On this basis, the reasons were accepted by the Court as evidence that those matters had not been taken into account when the Minister made the listing decision.

The Court also rejected the notion that mandatory relevant considerations could be treated as mere matters of ‘formality’ necessary to finalise a preliminary decision that has already been made.  The Court said that the relevant considerations were not a mere formality — they were instead the essential considerations to determine whether a listing should be made.

The Court has ordered the Heritage Council to remove the North Sydney MLC Building from the state’s heritage registrar.  This will enable a development application, that is presently pending, to be determined free of this heritage listing (subject to any appeal or further statutory steps by the NSW Government).

Significance

The decision has two broad implications for the wider planning system in NSW.

Firstly, it will intensify the focus on decisions made by public authorities to proceed with heritage listings in a reactive way, without consideration of the impacts that the listing will have for the economic use of the building or the hardship that may be caused.

Having said this, in our experience, politically motivated local heritage listings are often ineffective at preventing the viable re-development of sites in need for renewal.

For example, in Hillcrest Rose Bay Pty Ltd v Woollahra Municipal Council [2021] NSWLEC 1662, we acted for a developer who successfully obtained development consent for the significant re-development of the ‘Hillcrest’ site on New South Hard Road Rose Bay.  The site had been listed a local heritage item only following the lodgement of a development application for demolition.

The re-development included the addition of additional wings on each side of the building, as well as an additional floor level within a roof addition, and two new basement levels providing car parking for residents and visitors, accessed by a car-lift.

Secondly, the heritage listing was struck down because the reasons (required to be prepared and published by law) did not identify two essential considerations that had to be dealt with by the decision-maker as part of the decision.

The requirement to publish reasons is not unique to state heritage listings.

For example, since 2018, the Environmental Planning and Assessment Act 1979 requires that decisions by consent authorities (including local councils, panels, the Planning Minister and the Independent Planning Commission) must be supported by reasons (to grant or refuse development consent) and these reasons must be prepared ‘having regard to any statutory requirements applying to the decision’.  The reasons must be publicly notified.

Similarly, local, district and regional planning panels are also obliged to prepare and publish reasons for their decisions more generally.

The latest Court decision highlights how vulnerable some ministerial, planning commission, local council and panel decisions can be to legal challenge in the Land and Environment Court.

In particular, the process of granting development consent requires the mandatory consideration of many matters (and requires that a consent authority reach states of satisfaction be reached on a number of key areas).  If the reasons given by a consent authority do not identify that the required consideration has been given to these mandatory matters, a decision to grant development consent may be set aside by a Court on a third-party legal challenge.