Even when a decision maker has been given broad discretion, certain errors can vitiate his or her decision. When a statute gives a person, be it a council officer, a delegate, or a Minster, power to make a decision, that decision must be made in accordance with the statute. As the Court found in Millers Point Community Assoc. Incorporated v Property NSW [2017] NSWLEC 92, a misunderstanding of a key term or phrases in the statute may mean a decision is affected by an error of law and has no legal effect.
Background
The building “Sirius” is located at 36-50 Cumberland Street, The Rocks. It is a prominent building, well known for its unique off-form concrete materials and stacked-box appearance. Until recently, it has been used for social housing. However, on 19 March 2014, the New South Wales Government announced a decision to sell Sirius and reinvest the proceeds in social housing.
On 15 July 2015, following receipt of a nomination from the National Trust of Australia, the Heritage Council of NSW (the Heritage Council) announced it was considering whether to recommend that the Minister for Heritage (the Minister) should direct the listing of Sirius on the State Heritage Register (the Register). The Council made this recommendation pursuant to s 33 of the Heritage Act 1997 (the Act) on 2 December 2015.
In accordance with s 34 of the Act, the Minister decided not to direct the listing of Sirius on the register for a number of reasons, inter alia that:
“whatever the heritage significance of the building, even at its highest… 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.”
The applicant, a community group, challenged this decision on the basis that, inter alia, the Minister used the wrong understanding of the words “undue financial hardship” in making his decision.
Outcome
The building “Sirius” is located at 36-50 Cumberland Street, The Rocks. It is a prominent building, well known for its unique off-form concrete materials and stacked-box appearance. Until recently, it has been used for social housing. However, on 19 March 2014, the New South Wales Government announced a decision to sell Sirius and reinvest the proceeds in social housing.
On 15 July 2015, following receipt of a nomination from the National Trust of Australia, the Heritage Council of NSW (the Heritage Council) announced it was considering whether to recommend that the Minister for Heritage (the Minister) should direct the listing of Sirius on the State Heritage Register (the Register). The Council made this recommendation pursuant to s 33 of the Heritage Act 1997 (the Act) on 2 December 2015.
In accordance with s 34 of the Act, the Minister decided not to direct the listing of Sirius on the register for a number of reasons, inter alia that:
“whatever the heritage significance of the building, even at its highest… 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.”
The applicant, a community group, challenged this decision on the basis that, inter alia, the Minister used the wrong understanding of the words “undue financial hardship” in making his decision.
Outcome
The Court upheld the appeal and found the Minister’s decision not to direct the listing of Sirius involved an error of law and had no legal effect. This was because he had to consider the issue of “undue financial hardship” but, in doing so, he misinterpreted that phrase.
The Minister’s consideration of “undue financial hardship” was mandatory as it formed part of the matters considered by the Heritage Council and embodied in its recommendation. The formulation of the Heritage Council recommendation in accordance with s 33 of the Act and its receipt by the Minister was are preconditions to the Minister making a decision whether Sirius should be listed. In accordance with s 33 of the Act, the Heritage Council had to consider “undue financial hardship” as submissions had been received on the issue. Therefore, the Court found it necessary that the Minister (who considered the Heritage Council’s recommendation) had to take this issue into account.
Second, the Minister’s reasons indicated an incorrect understanding of the term “undue financial hardship”. The Court stressed that statutory interpretation must start with careful consideration of the text itself. In this case, “hardship” was the term used, not “loss” or “detriment” or “diminution in value”. Showing financial loss, therefore, would not be the same as showing financial hardship. The Court advised that in this text, hardship would mean the listing would cause owner or lessee financial difficulties, or result in an adverse financial situation for the lessee. Therefore, when the Court interpreted the Minister’s reasons as merely equating the loss of sale value to hardship, this was found to be a legal error. In addition, the complaint that the listing would result in “forgone funds for additional social housing”, reinforced the error as it did not demonstrate the owner and lessee would suffer hardship, particularly when the use and allocation of funds was a discretionary matter for the State Government.
Observations
It is difficult to draw rules of general application from a case so fixed on the specific words and context of this Act. However, the way the text was considered by the Court raises some matters State and Council decision-makers should keep in mind.
First, when there is a decision to be made in response to a recommendation, it is important to know the matters were mandatory considerations when forming that recommendation. Although the Minister’s decision was not constrained by express mandatory considerations in s 34, the Heritage Council’s process of formulating a recommendation was. As a decision maker, it would be prudent to address matters which were mandatory considerations for any preparatory recommendation.
Second, decision makers must take care in giving reasons. In this case, the Court acknowledged that the diminution in Sirius’ sale value could be evidence used to demonstrate hardship, but it was not hardship per se. The reasons were expressed did not adequately evidence this nuance, and so the Court found the wrong definition of “hardship” had been used and the decision was open to review.
Remember, the application of the above principles depends upon the statute upon which a decision is based. To avoid having decisions rendered null and void, contact the team at HWL Ebsworth to ensure you have certainty about the boundaries of your decision making.
This article was written by Jane Hewitt, Partner and Simon Hill, Solicitor.