Posted on March 3, 2016 by Sue Puckeridge

Supreme Court narrows pecuniary interest disclosure requirements under the Local Government Act 1993.

A Councillor will no longer be prevented from taking part in and voting at a meeting held to consider an amendment to a local environmental plan (LEP) where the change to the LEP is a change to a development standard,  despite the significant increase in the value of the land as a result of the change.

The decision of the Supreme Court in Mehajer v Director-General of the Department of Local Government [2016] NSWSC 143  has set aside the decision by the NSW Civil Administrative Tribunal (NCAT) in Office of Local Government v Mehajer [2016] NSWCATOD 10  (NCAT Decision).  In doing so it has widened the operation of the pecuniary interest disclosure exception contained in s448(g) of the Local Government Act 1993 (LGA)  and reduced the level of transparency required by those in civic office.

The facts of this matter are set out in our previous article on the NCAT Decision.

The principal issue on the appeal was whether NCAT had made an error of law in finding that Councillor Mehajer was obliged to disclose, at a meeting at which an amendment to development standards contained in Auburn Local Environmental Plan 2010 (Auburn LEP) was considered, his interest in a property in Mary Street, Auburn. The proposed amendments to the Auburn LEP would increase the property value by approximately $1 million.

In summary, a Councillor who has a pecuniary interest in a matter which is being considered at a council meeting must disclose a pecuniary interest under s451 of the LGA unless an exception applies.

Section 448 identifies interests which do not have to be disclosed. Relevantly, s 448(g)  does not require disclosure of:

an interest in a proposal relating to the making, amending, altering or repeal of an environmental planning instrument other than an instrument that effects a change of the permissible uses of:

(i)    land in which the person …..has a proprietary interest,…..

if the person ….would by reason of the proprietary interest have a pecuniary interest in the proposal,

The Court found that in order to decide whether or not s448(g) applied, consideration needed to be given to the terms of the Auburn LEP and the proposed amendment and whether the particular amendments proposed ‘effects a change of the permissible uses of land’ [at 73]. That is, specific consideration had to be given the proposed amendment to the Auburn LEP.  The question could not be considered on a general basis.

In adopting the earlier decision of the Pecuniary Interest Tribunal, NCAT had not examined ‘whether the wording and terms of the Auburn LEP, and the proposed amendments, fell within the exemption in s 448(g) of the LGA.’ (at [76])

In the circumstances of the Auburn LEP, the permissible uses are contained in Part 2. The proposed amendments affected floor space ratios and height limits which are development standards contained in Part 4.  Development standards can be varied by Council with the concurrence of the Secretary of the Department of Planning and Environment but there is no power to vary the permissible use of land under Part 2.

The Court held that the phrase ‘change of permissible uses of land’ in s448(g) of the LGA, does not include any clause falling within Part 4 of the Auburn LEP.  In the absence of a change to a permissible use set out in Part 2, no breach of s 451 of the LGA occurred and Councillor Mehajer was not required to disclose his interest when the Council considered the amendment.

In effect, the result of this decision is that the phrase, ‘permissible uses’, needs to be interpreted by reference to the concept of permissible uses as developed in the Environmental Planning and Assessment Act 1979 as opposed to the ordinary meaning of the phrase.  This is a narrower interpretation than adopted by NCAT.

Although the Court stressed the need to have regard to the particular LEP amendments, given that LEPs are now based upon the Standard Instrument, unless a proposed amendment is a change to Part 2 of an LEP, it is unlikely to fall outside the  s448 (g) exception.

As such, even though a change to a development standard contained within a planning instrument may result in a significant uplift in value to a property, this does not need to be declared and a Councillor can still vote in favour of the amendment at the Council meeting.