Posted on September 12, 2017 by Katie Mortimer and Megan Hawley
‘Undue financial hardship’ & heritage value – the Court gets Sirius
A significant decision for the interpretation of the Heritage Act 1977 (‘Act‘) was recently made by the Land and Environment Court (‘Court‘) in Millers Point Community Assoc. Incorporated v Property NSW  NSWLEC 92.
The Court considered the decision of the Minister for Heritage (‘Minister‘) to not direct that the Sirius Apartment Building (‘Sirius‘) be listed on the State Heritage Register (‘Register‘). The Court found that the Minister made an error of law in deciding that listing Sirius on the Register ‘would cause undue financial hardship to the owner‘, and that he had not discharged the duty required of him by the Act.
On 14 March 2016 the Heritage Council of New South Wales (‘Heritage Council‘) made a recommendation to the Minister that Sirius be listed on the Register. The Heritage Council was satisfied that the building’s aesthetic value and rarity warranted its listing.
Sirius was built in the 1980s and is a recognised example of Brutalist architecture. Property NSW own the land and building, with the New South Wales Land and Housing Corporation the lessee and manager. Until recently Sirius has been used for social housing. On 19 March 2014 the NSW Government announced its intention to sell Sirius and reinvest the sale proceeds into social housing.
The Minister’s decision
On 30 July 2016 the Minister determined not to direct that Sirius be listed on the Register. One reason for the Minister’s decision was that:
‘whatever the heritage significance of the Building, even at its highest (including even if it reached a threshold for State heritage significance), this is outweighed by the undue financial hardship its listing would cause to its owners, by diminishing what would otherwise be its sale value (possibly by in the order of $70 million), which would potentially represent foregone funds for additional social housing.‘
Appeal to the Court
Millers Point Community Association Incorporated’s (‘Applicant‘) primary challenge to the Minister’s decision was that he had misconstrued section 32(1)(d) of the Act, thus he ‘constructively failed to exercise jurisdiction‘ .
The Act states at Section 32(1):
‘(1) The Minister may direct the listing on the State Heritage Register of a place, building, work, relic, moveable object or precinct that the Minister considers is of State heritage significance, but only if the Heritage Council has recommended that the item be listed and the Minister has considered the following:
(a) the recommendation of the Heritage Council that the item should be listed
(b) whether the long-term conservation of the item is necessary,
(c) whether the listing would render the item incapable of reasonable or economic use,
(d) whether the listing would cause undue financial hardship to the owner, mortgagee or lessee of the item or the land on which the item is situated.’
The Applicant submitted that the Minister was required to consider the factors in s32(1), and had misconstrued the section in three ways :
- he omitted to consider the particular financial circumstances of the owner of Sirius in considering ‘undue financial hardship’,
- he fell under the misapprehension that it was not necessary to consider the heritage significance of Sirius, and
- his interpretation of undue financial hardship to mean “mere reduction in value or potential profit from the sale of the Sirius Building and possible loss of monies for social housing to the New South Wales Government” was incorrect.
The Court’s finding
The Court found that the Minister was not required to consider s32(1) of the Act.
However, as the Minister had chosen to make a decision pursuant to this section, and had relied upon the basis of ‘undue financial hardship’ as it appears in s32(1)(d) in making the determination, he elevated his obligation and did fall into error. The process of the Minister’s decision enlivened the Court’s power to consider if s32 had been misconstrued.
In determining whether the Minister had misconstrued the words ‘would cause undue financial hardship to the owner‘ the Court decided there were two ‘yardsticks’ that required a comparative exercise [at 113]:
Yardstick One: whether the listing would cause the owner to experience or suffer financial hardship
The Minister submitted that for yardstick one to be satisfied, financial loss was in and of itself a ‘financial hardship’. It was submitted it would be inequitable to interpret the words so that wealthy individuals would be excluded from being considered to be capable of suffering ‘financial hardship’.
The Court rejected this, and found the word hardship was intended by the legislature, rather then loss or detriment. This meant that the loss must have a nexus to the status of the owner. The Court found that the concept of financial hardship ‘must involve consideration of the financial status of the affected owner, mortgagee or lessee’.
Therefore the Minister had ‘erroneously equated financial hardship with a diminution in the sale value of Sirius’ and misdirected himself in not considering if the identified financial loss would cause financial hardship on Property NSW or the New South Wales Land and Housing Corporation.
Yardstick Two: the context within which that financial hardship is to be considered – whether that financial hardship would be “undue” when assessed against the contextual heritage values of the building recommended for listing
The Court determined that the word ‘undue’ requires ‘financial hardship’ to be considered within a heritage values context.
The Court gave the example of Sydney Harbour Bridge, finding that whatever enormous, unceasing financial hardship that may be caused by maintaining it would not be contemplated to be ‘undue’ due to the iconic heritage value Sydney Harbour Bridge has to the State [at 139].
Consequently, having found financial hardship, the Minister should have then assessed whether this hardship was ‘undue’. In doing so he would have needed to consider the heritage significance of Sirius. The Court found the Minister had ‘side-stepped’ this requirement, as an assessment of whether the financial hardship was undue could not have occurred without a crystallised understanding of the building’s heritage significance.
The Court ultimately declared the Minister’s decision invalid and of no legal effect, and ordered the Minister to re-make a decision according to law.
Read the Court’s full judgment here: Millers Point Community Assoc. Incorporated v Property NSW  NSWLEC 92
Should you wish to discuss the case, please contact Megan Hawley, Partner on 8235 9704 or by email, at firstname.lastname@example.org