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Focus: Environment & Planning – September 2007

Corruption risks in NSW development approval processes

In brief: The NSW Independent Commission Against Corruption has released a report on corruption risks associated with the New South Wales development approval process. Partner Paul Lalich (view CV), Senior Associate Suzanne Westgate and Lawyer Will Potts consider the potential impact of the recommendations.

How does it affect you?

  • The Independent Commission Against Corruption has made a number of broad recommendations to address corruption risks in government. While recommendations regarding political donations and the increased use of IHAPs have clear anti-corruption implications and should be supported, if adopted, some of the Commission's recommendations may add to delay and cost in the development assessment process.

The report

The Independent Commission Against Corruption's (the Commission) report (the Report) follows its 2005 discussion paper entitled Corruption risks in NSW development approval processes. The Report identifies corruption risks and makes several key recommendations to address those risks.

Political donations

The Commission has emphasised that the most significant corruption issue is political donations and their potential to influence public officials in decision-making. While stopping short of recommending a complete ban on political donations, the Commission has proposed:

  • that the Department of Local Government amend the Model Code of Conduct for Local Councils in NSW (2004) to:
    • include clear instructions to councillors on the circumstances in which political donations will give rise to non-pecuniary conflicts of interest and how to manage such conflicts; and
    • instruct councillors to refrain from discussion and voting on matters affecting campaign donors (in the case of donations above a prescribed limit);
  • that the Premier consider requiring disclosure of donations made to candidates before an election. 

In addition, the Commission has recommended that the Premier consider amending the Election Funding Act 1981 (NSW) to require persons submitting development applications or rezoning proposals to the Minister for Planning to declare any political donations they have made to the Minister or to his or her political party.

Independent Hearing and Assessment Panels

The use of Independent Hearing and Assessment Panels (IHAPs) to assess development applications is identified by the Commission as a means of achieving better planning decisions and reducing Land and Environment Court appeals. The Report states that IHAPs assist in depoliticising the approval process and recommends that councils consider referring a wider range of matters to IHAPs, including development proposals involving significant departures from development standards.

The Commission does not go so far as to recommend that IHAPs be given final decision-making powers and instead supports maintaining councillors' discretion to decide whether to accept an IHAP recommendation in determining development applications.

Extending third-party merit appeal rights

Significantly, the Commission believes that wider merit-based appeals by third parties can provide a safeguard against corrupt decision-making by consent authorities. 

The Commission has recommended that the Minister for Planning consider extending third-party merit appeal rights to certain categories of development, including:

  • development relying on significant SEPP 1 objections;
  • major and controversial development; and
  • developments that are the subject of planning agreements.
SEPP 1 objections

The Report also states that many submissions expressed concern with the level of discretion associated with State Environmental Planning Policy No. 1 (SEPP 1), which allows an objection to be made to development standards that a development application does not comply with. Whilst recognising that the Department of Planning is currently undertaking a review of SEPP 1 to determine whether quantified limits need to be included, the Commission has recommended that the Department consider implementing an 'oversight mechanism' for council-approved developments that include SEPP 1 objections. Options proposed include:

  • the approval of the Director-General of Planning be obtained for all developments relying on SEPP 1 objections seeking a variation to a development standard beyond a certain limit; and
  • when an application reliant on a SEPP 1 objection is determined under delegated authority, the determination be subject to a system of peer review.
Planning agreements

A number of submissions to the Commission expressed concern with the lack of transparency in planning agreements under section 93F(4) of the Environmental Planning and Assessment Act 1979 (NSW) (the EPA Act). 

In response, the Commission recommends:

  • councils consider preparing and publicly exhibiting policies to clarify the processes they will follow in relation to planning agreements; and
  • councils ensure that negotiations over planning agreements are not undertaken by the officers responsible for assessing the development to which the planning agreement relates.

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Planning law implications

The Report has been released at a time when the Department of Planning has announced an intention to reform the development approval process under the EPA Act. If adopted, the Commission's recommendations could significantly alter this process.

While the recommendations regarding political donations and the increased use of IHAPs have clear anti-corruption implications and should be supported, other recommendations may add to delay in the assessment process without a reasonable anti-corruption benefit. 

For example, extending third-party merit appeals where a planning agreement is proposed as part of a development could result in increased delay, uncertainty and cost associated with obtaining development consent. Given the public notification requirements and prescriptive nature of the regime within the EPA Act regarding planning agreements, it is not readily apparent that the costs associated with merit appeals for applications involving such agreements are outweighed by any reduction in corruption risk.

SEPP 1 has long provided an important flexibility mechanism in the planning regime where development does not meet all relevant standards. If this flexibility is limited, the rigidity in the application of planning controls will have the potential to increase costs associated with the assessment process. The peer review of SEPP 1 determinations by the Minister will also add delay to the process and may not have the effect of materially removing any perceived corruption risk associated with this aspect of the process.

We will continue to monitor this issue and keep you updated.

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