Legal Insights

Corkman demolishers found guilty of contempt

By John Rantino, Kierra Parker & Louis Wardle

• 23 December 2020 • 12 min read

The developers responsible for the unlawful demolition of the Corkman Hotel were found guilty of contempt of the Tribunal last month in Melbourne CC v 160 Leicester Pty Ltd [2020] VCAT 1255.

The respondent company, 160 Leicester Pty Ltd (Company), as well as its two directors, were held to be in contempt after failing to comply with the terms of an enforcement order (Order) made by the Tribunal in relation to the former Corkman Hotel site.

Justice Quigley, President of the Victorian Civil and Administrative Tribunal (Tribunal), found that:

  • the Tribunal had jurisdiction to make the Order under s 119 of the Planning and Environment Act 1987 (PE Act);
  • in rejecting the respondents’ argument to the contrary, the Order was clear and unambiguous, particularly given the context of the Order and the nature of negotiations leading up to its creation;
  • the trouble and expense required to comply with the terms of the Order did not render the Order incapable of being complied with;
  • the respondents’ inaction and non-compliance with the terms of the Order was wilful and deliberate and therefore contemptuous; and
  • the two directors of the Company had the requisite knowledge of the terms of the Order and control over the steps taken in respect of the Site to be personally liable for contempt.

Having found the respondents guilty of contempt by way of their wilful and deliberately defiant non-compliance with the terms of the Order, together with their lack of contrition, the Tribunal exercised its discretion to penalise the respondents for contempt pursuant to s 137(5) of the Victorian Civil and Administrative Tribunal Act 1998 (VCAT Act).

In a separate decision, the Tribunal imposed a fine of $150,000 on the Company and a term of imprisonment of not less than one month for the two director respondents.

Background

On 15 October 2016, the Company demolished the 159-year-old pub, the Corkman Hotel (Site), without a planning permit, contrary to the provisions of the Melbourne Planning Scheme.

On 28 May 2019, following an application by Melbourne City Council and the Minister for Planning, the Tribunal issued an enforcement order. The Order was made by consent and at the request of the parties, including the Company.

Under the preliminary terms of the Order, by 30 November 2019, the Company was required to (inter alia):

  • clear the Site of remaining demolition material and building fabric; and
  • provide Melbourne City Council with evidence that the environmental condition of the Site was suitable for ‘informal outdoor recreation’.

The Company did not comply with these terms of the Order.

These steps were then to be followed with a plan being submitted to Melbourne City Council for its approval.

The plan was to show the design of an interim park (for informal outdoor recreational use) which the Company was to construct for use by the public while decisions were made as to the future development of the Site. Without the evidence of the suitability of the Site for such use, it was not possible for the Council to properly assess plans for the interim park.

Maddocks acted for both Melbourne City Council and the Minister for Planning, as joint applicants, in bringing the contempt proceedings under s 137 of the VCAT Act. The contempt proceedings were issued against the Company and its two directors. While the Order was only made against the Company, it was contended by the Council and the Minister that the two directors were the controlling minds of the Company and that, as such, they should equally be held in contempt.

Jurisdiction

In opposing the contempt charges, the respondents argued that no contempt could be made out as the Tribunal had lacked the jurisdiction to make the Order in the first place. The respondents contended that as the relevant terms did not seek to ‘restore’ the Site to its former state, the Tribunal’s power to make the Order was not properly enlivened by s 119(b)(iv)(A) of the PE Act.

The Tribunal rejected the argument. Justice Quigley held that the terms of the Order must be interpreted in the context of the whole Order, rather than taken in isolation. The Tribunal observed that the Order ultimately sought the restoration of the Hotel if an approved redevelopment did not occur on the Site by 2022. Such an order fell wholly within s 119. The terms breached by the Company were part of the necessary steps to ensure the amenity of the area was maintained in the interim, which the Tribunal said also fell within s 119.

Clear and unambiguous

The Tribunal found that the Order was sufficiently clear and unambiguous. Justice Quigley found there to be no other possible meaning on the face of the words of the relevant terms, particularly given the circumstances in which the Order was conceived and the extensive negotiations that led to it.

Additional claims by the respondents that costly and complex removal works were not contemplated by the parties when agreeing to the terms of the Order were rejected by the Tribunal. Similarly, Justice Quigley rejected that the reference to 'evidence' and 'environmental condition' were vague or uncertain. Justice Quigley said that it would have been plainly obvious to a properly instructed consultant what the Order required.

Capacity to comply

The respondents were also unsuccessful in arguing that the Order was not capable of compliance.

The respondents contended that when the Company consented to the Order, it was not aware of certain underground building fabric being on the Site. This fabric added to the complexity and cost of complying with the Order. The respondents argued that the trouble and expense required to comply with the terms of the Order rendered it incapable of being complied with.

While the Tribunal accepted that the required works were complicated and costly, it said that the works were not technically impossible or even unusual.

The Tribunal observed that any future redevelopment of the Site would require the clearance of building fabric in any event. As complex as the works may have been, the expense would have to be incurred at some point. The inconvenience to the respondents of doing the works in advance of a redevelopment cannot be a reason for non-compliance.

Contemptuous conduct

Justice Quigley found that the respondents’ inaction and non-compliance with the Order, which had been negotiated and consented to by all parties, was wilful and deliberate. Justice Quigley concluded that the respondents chose only to take steps that they wished to take and no more.

Directors’ liability

The directors’ liability for contempt was made out, with Justice Quigley finding there to be no doubt the two directors had requisite knowledge of the Order and its terms and had full control over the steps taken, and not taken, by the Company in regard to the Site. The Tribunal held that any decisions made not to undertake the steps required by the Order were decision of a human agent of the company.

Justice Quigley noted the decision in Moira Shire Council v Sidebottom Group Pty Ltd (No 3) [2018] VSC 556, in which Justice Incerti of the Supreme Court stated that there is nothing controversial or difficult about the proposition that in a proceeding for contempt for breach of a court order, the conduct of the company will fall at the feet of its controlling officers.

In Moira, her Honour said that:

A director who has notice of a court order will therefore be under a duty to take reasonable steps to ensure that it is obeyed. And if they wilfully fail to do so, and the order is breached, they may be held directly liable for contempt.

In regard to the requisite knowledge of the directors about the terms of the Order, Justice Quigley relied on clear evidence that no person other than the two respondent directors directed the business of the Company. Therefore, it could only have been upon the instructions of the two directors that the Company consented to the Orders made by the Tribunal in May 2019.

Justice Quigley also followed the judgment in Christian Youth Camps v Cobaw Community Health Services Ltd, in which the court stated that a company’s state of mind is a legal fiction. Justice Quigley held that:[1]

The requisite element of intention, which is implicit in the very idea of contumaciousness will therefore be imputed from the actions or statements of the controlling officers of a company in all the circumstances.

Sentencing

In devising an appropriate penalty, Justice Quigley again cited Moira, in which her Honour stated that the imposition of a penalty should serve three purposes:

  1. specific deterrence (noting the gravity of the respondent’s breach of both the order and undertaking, and subsequent lack of remorse);
  2. general deterrence (to reinforce that compliance with a court order is not optional); and
  3. compelling obedience to court orders.

Additionally, where no other lesser penalty will suffice, imprisonment for contempt should be considered, albeit reserved for exceptional circumstances.[2]

However, unlike the Supreme Court, where there is an unlimited jurisdiction to punish for contempt, the power of tribunals to punish is limited by the words of the statute.[3]

Section 137 of the VCAT Act stipulates that where the Tribunal finds a party guilty of contempt of the Tribunal, the Tribunal is empowered to impose a penalty by way of a fine or imprisonment under s 137(5). The imposition of a term for imprisonment may be considered in reference to the provisions of Part 2 of the Sentencing Act 1991, as stated at s 137(5A), which act as a legislative codification of common law sentencing principles.

The respondents argued that having made a finding pursuant to s 137 of the VCAT Act, there was a necessary step before a penalty could be imposed. That step was a determination as to conviction.

Justice Quigley rejected this proposition, instead finding that a plain reading of s 137 does not require an interim step of a finding of conviction. Section 137(5) simply provides that if the Tribunal finds the person guilty of contempt it may commit a natural person to prison or impose a fine (maximum 1000 penalty units), or do both. In the case of a corporation it may impose a fine (maximum 5000 penalty units). In considering whether and the term for which to commit a person to prison for contempt, the Tribunal may have regard to the provisions of Part 2 of the Sentencing Act.

The company respondent

In sentencing the Company, the Tribunal cited deterrence and denunciation, the nature and gravity of the breach, the effect on the administration of justice and the consequences of the contempt as key considerations. Justice Quigley underlined the importance of restoring the community’s confidence in the planning system in order to safeguard the administration of justice and the rule of law. The Company’s wilful contraventions of the generous terms of the Order resulted in an unsafe and ugly site that has come at a significant cost to the community. As such, a fine of $150,000 was imposed against the Company.

The directors

The Tribunal again noted that a corporate entity can only act through human agency. The directors facilitated the unlawful demolition and intended to redevelop the site but then took no meaningful action in the intervening period to ameliorate the negative impacts of the illegal demolition on the community.

The Tribunal considered the directors to have repeatedly demonstrated arrogance and disregard of both the Orders and the contempt proceedings. The respondents, according to Justice Quigley, had to be dragged to compliance at every step and showed no more than a muted expression of regret in the late stages of the proceedings.

Accordingly, Justice Quigley was not satisfied that a penalty other than a period of imprisonment was appropriate.

Costs

In addition to the above penalties, the respondents were ordered to pay the costs of the applicants in the amount of $250,000.

Key lessons

  1. The jurisdiction of the Tribunal in making an enforcement order must be referenced to the order in its entirety, rather than its terms taken in isolation. This is particularly relevant to the ‘restorative’ element of s 119(b)(iv)(A);
  2. The complexity and expense of required works under an enforcement order will not generally act as a ground for non-compliance;
  3. Provided that the controlling officers of a company have the requisite knowledge of a tribunal order, and have sufficient control over the enterprise, they may be directly liable for the company’s failure to comply with the order;
  4. A key objective of punishing contempt is to secure obedience to orders of the Tribunal. A term of imprisonment may be appropriate in face of the most extreme disregard of the Tribunal’s status and integrity, particularly when disobedience results in significant cost to the community;
  5. A plain reading of ss 137(5) and 137(5A) was adopted by the Tribunal, whereby a determination of a conviction is not a necessary interim step prior to imposing a penalty pursuant to those provisions.

[1] Melbourne CC v 160 Leicester Pty Ltd [2020] VCAT 1255 at [125].
[2] Consumer Affairs Victoria v Talia (Review and Regulation) [2017] VCAT 146 at [124].
[3] Ibid.

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By John Rantino, Kierra Parker & Louis Wardle

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