Posted on February 11, 2016 by Sue Puckeridge

Pecuniary interest disclosures – NCAT reinforces high probity requirements

The NSW Civil and Administrative Tribunal (‘Tribunal‘) has  recently  upheld an earlier decision of the Local Government Pecuniary Interest Tribunal (‘PIT‘) holding that the Deputy Mayor of Auburn City Council breached the pecuniary interest provisions of the Local Government Act 1993 (‘LGA‘).    Though currently on appeal to the Supreme Court, the decision reiterates that the disclosure requirements of the LGA require careful consideration on each occasion at which a matter is considered where a pecuniary interest exists.  

The Tribunal decided to conduct proceedings to determine whether Councillor Mehajer had breached s451(2) of the LGA.  This followed receipt of a report by the Office of Local Government which concluded that  Mr Mehajer had failed to disclose a pecuniary interest at three separate meetings of the Council between November 2012 and December 2013.

At the time of the meetings in question, Mr Mehajer had an interest in several properties in Auburn’s local government area.  Prior to the meetings, Mr Mehajer made disclosures in respect of certain properties but not a property at 3 Mary Street which was owned by a company of which he was a director and held 90% of the voting rights.  Mr Mehajer had, however, disclosed his interest in 3 Mary Street in a return purportedly lodged with the General Manager in August 2013 pursuant to s449 of the LGA.

At each of the three meetings the Council considered a report recommending increases in the floor space of land in certain zones.  3 Mary Street was located within the zones being considered and the evidence before the Tribunal demonstrated that the increased floor space ratio increased the value of the property by approximately $1 million.

Mr Mehajer remained at the meetings at which these reports were considered and voted on the motions before the Council.  He did not make a special disclosure at the meetings.

Mr Mehajer acknowledged that he had not made the disclosure but submitted that he had mistakenly thought that because he was not proposing to develop 3 Mary Street in a way that would derive benefit to 3 Mary Street, it was not necessary for him to do so.  As his evidence was not challenged, the Tribunal accepted it but noted that it ‘stretche[d] credulity‘ [10].

Importantly, Mr Mehajer submitted that s448(g) of the LGA applied.  Section 448(g) creates an exception to the requirement to make a disclosure.  The section provides that unless a proposal to amend an environmental planning instrument relates to a change to the permissible uses of land in which a person, or a company of which the person is a member, has a proprietary interest, it does not have to be disclosed.  Mr Mehajer argued that the Council was not considering a change to the ‘permissible use’ of land because the term has a technical meaning under the Environmental Planning and Assessment Act 1979 (‘EPA Act‘).  Rather it was considering a change to floor space ratios which is a change to a development standard.

To accept this submission, the Tribunal was required to reject the decision by the PIT in Director General, Department of Local Government v Virgona (PIT3/1998), 23 April 1999.

The Tribunal refused to do so, holding that the decision in Virgona was correct and that the word ‘permissible’ should be given its ordinary meaning of  liberty to do things capable of affecting the value of land.  Its meaning should not be confined to the alteration to the zoning of land or the mere use of land itself as the term is used in the EPA Act.

Consequently, having regard to the heading of Chapter 14 of the LGA –  ‘Honesty and Disclosure of Interests‘ and the context in which the words ‘an instrument that effects a change to the permissible use of (land)‘, Mr Mehajer was not exempt from disclosing an interest in property the value of which was likely to increase by $1 million if the Council approved the proposal before it.

Taking into account the evidence before it, Mr Mehajer was suspended from civic office for a period of 4 months.

This decision preceded the government’s decision to suspend the councillors of Auburn City Council from 10 February 2016 pending the outcome of a public inquiry.  The public inquiry is to examine whether the councillors complied with applicable laws, rules and policies in carrying out their functions together with allegations that decisions made by the council in relation to planning and development matters may have inappropriately benefited a number of councillors.

The Tribunal’s decision reiterates that the law requires a high level of probity of those undertaking civic office.  As  the issue appears to be within the terms of reference for the public inquiry it will be a matter to which the Commissioner will have regard in preparing his report to the Minister.

The Tribunal’s full decision is available from the NSW Caselaw website here.  A future article reporting on the outcome of the appeal will follow once judgment is delivered.

UPDATE: Since publication the decision of the Tribunal has been set aside by the Supreme Court. Our article on the Supreme Court’s decision can be found here.