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A case of undue influence

12 September 2009 1,639 views No Comment

A RECENT decision in the NSW Land and Environment Court means developers and investors in that state (and potentially the nation) now have no idea where they stand.

The decision of judge David Lloyd on August31 exposes land developers in NSW to crippling uncertainty.

Perhaps more worrying is the fact that the state Labor government and the planning minister in particular immediately signalled that they would not challenge the decision. The handling of this crucial planning matter highlights the weakness of the government, which does not appear to have the courage to provide certainty to investors and the community whenever it fears political pain.

The facts of the matter are these. In 2008 a local resident action group began a legal challenge against the NSW planning minister’s decision to approve developments at Catherine Hill Bay and at Gwandalan, both near Newcastle. The basis of their case was that the state Labor government, through the then minister for planning and then minister for the environment, signed a non-binding memoranda of understanding with the land owner, Rose Corporation, which provided that if the land was rezoned and development approved, then various lands would be transferred to the Department of the Environment and Climate Change to be incorporated into the state’s national parks.

The MOU was part of a package of similar in-principle agreements throughout the Lower Hunter, which would have seen a total of up to 12,000ha of land in private ownership transferred into public ownership if various developments were ultimately approved. This was adopted by cabinet late in 2006 under then premier Morris Iemma as part of the Lower Hunter Strategy to provide enough local housing for the next 25 years. Together with public lands, this provided for 22,000ha of new conservation lands and formed part of the Lower Hunter Conservation Strategy.

The resident action group, represented by the Environmental Defender’s Office, did not challenge the rezoning but challenged various development approvals on the sites. Justice Lloyd found the development approvals void because in his view, the then planning minister, Frank Sartor, was biased towards approving the applications in exchange for environmental lands. Yet the development approvals at Catherine Hill Bay and Gwandalan were subject to inquiry by an independent review panel chaired by the extremely capable Gabrielle Kibble, former NSW director-general of planning.

The review panel rejected the original applications and the developer was forced to submit new applications. The new applications were also examined by the review panel and ultimately recommended for approval after a lengthy process. The minister subsequently approved the applications and the land was duly transferred to the Department of the Environment and Climate Change.

Sartor’s action to rezone land for residential purposes was not challenged and still stands, yet the development applications, independently assessed and supported by the panel, were found to be illegal. The result is clearly nonsense.

The judge seemed to rely on the wording in the original MOU (approved by the whole cabinet and drafted by the government’s lawyers), and other miscellaneous bits of correspondence. At no time was Sartor, also a former mayor of Sydney, called as a witness.

The former minister has claimed that some of the judge’s factual inferences are not correct. The decision also raises a significant legal precedent issue. It follows that whenever a government gives in-principle support for a project (such as a railway line) the planning minister may be prejudiced in determining the application. Given this reasoning Kevin Rudd’s recent announcement that the Gorgon Gas Project will go ahead could be argued to have prejudiced the future decision of the federal Minister for the Environment, Peter Garrett, on the application.

The decision of the present Planning Minister, Kristina Keneally, not to appeal the matter has caused consternation among the property and development industry. There is a similar case under way concerning the 7000-dwelling Huntley township proposal near Branxton. It is clear that sooner or later the law will need to be clarified, as the present unsatisfactory situation will create uncertainty.

It is fascinating to record that a government source leaked its own senior counsel’s advice on the day the case began in the Land and Environment Court saying that the government faced a real prospect of losing. This was then featured on the front page of The Sydney Morning Herald. It made the story of the court decision bigger than it otherwise would have been.

Along with the talented John Della Bosca, in the last month or so the energetic Sartor has been widely touted as a replacement for the lacklustre Labor premier Nathan Rees. It is at least also conceivable that the NSW government dissociated itself from the case so as to label it as a Sartor mistake and hence damage his reputation. Keneally immediately described it as a decision of the former minister and decided not to appeal within hours without the normal post-judgment legal analysis.

The government also ruled out a legislative response, even though this issue is causing deep uncertainty in the industry. Indeed other developers of other projects in NSW are reporting calls from banks concerned about its implications in that new developments are now vulnerable to other court challenges on similar grounds.

Sartor’s Lower Hunter Regional Strategy is good public policy. Don’t be surprised if, in a few months, Sartor and Della Bosca bounce back to form a joint ticket and come to lead NSW Labor before the next election.

Ross Fitzgerald THE AUSTRALIAN September 12, 2009