Leichhardt Council v Geitonia Pty Ltd

considerations on sentence

1. The relevant purposes of sentencing set out in s 3A Crimes (Sentencing Procedure) Act 1999 (CSP Act) are: (a) to ensure that the offender is adequately punished for the offence, (b) to prevent crime by deterring the offender and other persons from committing similar offences, … (e) to make the offender accountable for his or her actions, (f) to denounce the conduct of the offender, (g) to recognise the harm done to the victim of the crime and the community.
2. The primary consideration on sentence is the objective seriousness of the offence: see authorities referred to in Gittany Constructions Pty Ltd v Sutherland Shire Council [2006] NSWLEC 242, 145 LGERA 189 (Preston CJ) at [108]-[109]. The objective seriousness of the offence establishes the upper and lower limits of the appropriate penalty irrespective of the mitigating features. However, the sentence must reflect and be proportionate to both the objective circumstances of the offence and the subjective (ie personal) circumstances of the defendant: Veen v The Queen [1979] HCA 7, 143 CLR 458 at 490; Veen v The Queen (No 2) [1988] HCA 14, 164 CLR 465 at 472. The penalty should be determined by an instinctive synthesis of all of the relevant objective and subjective circumstances: Markarian v The Queen [2005] HCA 25, 79 ALJR 1048 at [37], [39], [66] & [73]; Muldrock v R [2011] HCA 39, (2011) 244 CLR 120 at [26].
3. The factors that the Court is required to take into account include the aggravating and mitigating factors referred to in s 21A of the CSP Act that are relevant and known to the Court (most are irrelevant to environmental offences) and any other objective or subjective factors that affect the relative seriousness of the offence: s 21A(1) CSP Act.
4. At the end of the day Mr Gertos stands out as far more culpable than the other defendants because they offended because of what Mr Gertos did.

OBJECTIVE SERIOUSNESS OF THE OFFENCE

1. The objective circumstances of relevance to this case include the maximum penalty, the extent of harm caused (in this case environmental harm and the undermining of the regulatory system of development control), the offender's state of mind and reasons for committing the offence, the foreseeability of risk of harm, the practical measures to avoid harm, and the offender's control over the causes giving rise to the offence.

Maximum penalty

1. The maximum penalty for the commission of the offence is a fine of $1.1 million. The maximum penalty is the public expression of Parliament of the seriousness of the offence. The maximum penalty is used to compare the worst possible case and the case before the Court.

Harm caused

1. The causing of "substantial" injury, loss or damage by commission of an offence is an aggravating factor: s 21A(2)(g) CSP Act. The southern façade was not a heritage listed item under the LEP, its demolition did not affect nearby heritage listed items, and its aesthetic value was not high. Nevertheless, in my opinion, the offence caused substantial environmental harm in that it caused the loss of a façade which had heritage significance arising from its distinctive character, historical value and such aesthetic value as it had and its retention was consistent with the following heritage conservation objectives in cl 15 of the LEP: (a) to protect, conserve and enhance the cultural heritage and the evidence of cultural heritage, including places, buildings, works, relics, townscapes, landscapes, trees, potential archaeological sites and conservation areas, and provide measures for their conservation, (b) to protect, conserve and enhance the character and identity of the suburbs, places and landscapes of Leichhardt, including the natural, scenic and cultural attributes of the Sydney Harbour foreshore and its creeks and waterways, surface rock, remnant bushland, ridgelines and skylines, (c) to prevent undesirable incremental change, including demolition, which reduces the heritage significance of places, conservation areas or heritage items, (d) to allow compatible and viable adaptation and re-use of the fabric of heritage significance. …
2. In the conviction judgment at [19] I said by reference to the LEP: The land was in the vicinity of heritage items. As such, development consent could not be granted for the development carried out in this case unless Council had made an assessment of the effect which the carrying out of that development would have on the heritage significance of the heritage items as well as on any significant views to and from the heritage items: cl 16(7) LEP. The land was also located in a conservation area under the LEP. As such, development consent could not be granted for the development carried out in this case unless Council had made an assessment of the extent to which the carrying out of that development would affect the heritage significance of the conservation area: cl 16(8) LEP.
3. At the sentencing hearing the prosecutor tendered expert evidence of Mr Robert Moore, an architect specialising in conservation and heritage architecture, which largely reiterates evidence that he gave in his expert report and in a joint expert report with Mr Robert Staas (heritage expert for Geitonia) in earlier Class 1 proceedings in the Court. Before me, Mr Moore's evidence was uncontested and I accept it insofar as it is not inconsistent with the judgment in the Class 1 proceedings which, insofar as it is relevant to sentencing, I also accept. The Class 1 proceedings were a merits appeal by Geitonia against the Council's rejection of an application to modify the development consent to permit the previously demolished façade to be reconstructed with new and salvaged material. The Senior Commissioner dismissed the appeal on the basis that the proposed modification was not substantially the same as the development for which consent was originally given: Geitonia Pty Ltd v Leichhardt Council [2012] NSWLEC 1263. The Senior Commissioner observed that the salvaged material stored on site was somewhat dilapidated, had in many respect been disassembled, and was not accompanied by any annotation as to its provenance. This and the proposed partial use of new material informed his decision that the modified development did not satisfy the accepted test that a proposed modified development must remain substantially the same development as that for which consent was originally given. He considered that it would not be substantially the same development qualitatively because, first, it would not sit comfortably with the heritage conservation objectives in the LEP and, secondly, retention of the original façade was a significant and fundamental element of the original development: at [19], [25]-[27], [30], [33]-[35].
4. Mr Moore's evidence at the sentencing hearing, as it was in the Class 1 proceedings, was that the building had "a definable heritage significance arising from [its] distinctive character, historical and aesthetic values", and was also part of an important historic element within the Parramatta Road corridor. In his opinion, demolition of the southern façade "completely extinguished the former buildings' tangible presence in the streetscape and identity of the area". In relation to reconstruction, Mr Moore opined that: 1. The condition of the salvaged materials from the demolished southern facade which were to be reused did not support meaningful reconstruction. This is consistent with the conclusion of the Senior Commissioner, who performed a site inspection, that the salvaged material "stored on the site was somewhat dilapidated, had in many respects been disassembled and was not accompanied in any fashion by any annotation as to provenance": at [13]. 2. Reconstruction of the southern façade in manner that replicates the original construction exactly, and thus in such a way to retain heritage values, would prove to be difficult, if not impossible without exhaustive archaeological style dimension records given (inter alia) that the salvaged materials had not been carefully retained.
5. There should be taken into account that the defendants' conduct in demolishing the façade by hand with a view to reconstruction using the same bricks was not as egregious as demolition by bulldozer where there would have been no possibility of such reconstruction. However, this came to nought for they did not record the provenance and failed to preserve much of the brickwork, which were significant factors in the Court's rejection of Geitonia's later modification application to reconstruct the demolished façade.

Harm: Undermining of the regulatory system of development control

1. The commission of the offence also caused substantial harm by undermining the objectives and integrity of the regulatory system of development control. The development consent that was in force required the majority of the southern façade to be retained. Carrying out development without development consent, or not in accordance with a development consent, tends to undermine the objectives of the EPA Act and its prescribed processes for prior application, assessment and approval of the carrying out of development. Offences which undermine the integrity of the regulatory system are objectively serious. Use of the criminal law ensures the credibility of the regulatory system. Relevantly, s 5 of the EPA Act provides that the objects of the Act are: (a) to encourage: (i) the proper management, development and conservation of natural and artificial resources, including cities, towns and villages for the purpose of promoting the social and economic welfare of the community and a better environment, (ii) the promotion and co-ordination of the orderly and economic use and development of land, … (vi) the protection of the environment… … (c) to provide increased opportunity for public involvement and participation in environmental planning and assessment.
2. When the defendants hatched the plan to demolish the façade at the coffee shop meeting in early October 2011, in defiance of the clear terms of the existing development consent, it should be inferred that they thought development consent to do so was unlikely to be forthcoming having regard (inter alia) to the specific detailed requirements in the existing development consent concerning its retention and restoration, and the two unsuccessful attempts in July and September 2011 by Geitonia per Mr Gertos to obtain Council approval of plans that did not provide for retention of the façade.
3. By their actions they foreclosed the opportunity for prior assessment of the removal of the southern façade and the option Council to refuse consent.

State of mind

1. A factor to be taken into account in determining the objective seriousness of a strict liability offence, such as an offence against s 125(1) of the EPA Act, is the state of mind of the offender. A strict liability offence that is committed intentionally, recklessly or negligently will be objectively more serious than one not so committed. The defendants demolished the southern façade intentionally without first applying for modification of the existing development consent or for a new development consent to enable it to be done lawfully: conviction judgment at [168]. It is to be inferred that the defendants knew the development consent required the majority of the southern façade to be retained. Geitonia was the beneficiary of the consent and per Mr Gertos made two earlier unsuccessful attempts to obtain Council approval of plans that did not provide for retention of the southern façade: conviction judgment at [35]. Mr Gertos/Geitonia's letter of 20 October 2012 also evidence consciousness of the requirement. The communications between Foong of GRC and Mr Ladogna, the construction certificate certifier, on 19 October 2011 concerning the development consent's requirement confirm that GRC knew of it.
2. The offences were premeditated and planned, albeit (as the defendants submit) for weeks rather than months or years before the demolition. In addition, Mr Gertos' letter to Council of 20 October 2011 was deceptive or misleading for reasons referred to at [9] above. Where an environmental offence is committed in deceptive circumstances, such circumstances are an aggravating factor: Environment Protection Authority v Gardner (unreported, NSWLEC Lloyd J, 7 November 1997).

Financial Gain

1. Another aggravating factor increasing the objective seriousness of an offence is if the reason for the commission of the offence is financial gain: s 21A(2)(o) of the CSP Act. There was financial gain, in the sense of saving of costs to the defendants in demolishing the façade rather than retaining it: conviction judgment at [168]. The defendants point to Mr Gertos' assertion to Council investigators on 7 November 2011 (after demolition), by reference to the plans enclosed with his letter to Council of 20 October 2011 that "it costs triple the money to rebuild". However, he did not give evidence. In any case that out of court assertion, if it is entitled to any weight, appears to be drawing a cost comparison between hand demolition and demolition using machinery, both of which were unlawful.

Foreseeability of risk of harm

1. The defendants could reasonably have foreseen that their action in demolishing the southern façade that constituted the commission of the offence would be likely to cause the harm to which I have referred.

Practical measures to avoid environmental harm

1. There were practical measures that the defendants could have taken to have avoided that harm: retaining the façade by appropriate engineering measures or, if that proved to be not possible, obtaining a new development consent or a modification of the existing development consent to permit faithful hand demolition and reconstruction using the same material.

Control over causes of offence

1. The defendants had control over the causes that gave rise to the offence.

Public safety

1. It is an aggravating factor that an offence is committed "without regard for public safety": s 21A(2)(i) CSP Act. The prosecutor submits that that was the case here because the demolishers were required to demolish the façade by hand thus putting them in close proximity to the façade, which was dangerous work given the then condition for the façade. I am not satisfied that this rises as high as "without regard" for "public" safety.

Conclusion on objective seriousness

1. Considering all the objective circumstances, I conclude that the objective seriousness of the offence is in the medium range for this type of offence.

SUBJECTIVE CIRCUMSTANCES OF THE OFFENDER

1. Within the limit set by the objective seriousness of the offence, the Court may take into account factors personal to the defendants.

No prior convictions

1. It is a mitigating fact that, so far as the Court is aware, the defendants do not have any prior convictions for any offences: s 21A(3)(e) of the CSP Act. This is so notwithstanding that Mr Gertos has been involved personally and through companies in many renovating and building projects including some involving heritage buildings.

Good character

1. Whilst limited, the matters referred to in the preceding paragraph suggest that Mr Gertos, who is an accountant, is generally a person of good character. However, there is a blemish. In Bateman Long and Maloney Pty Ltd v Long Beach Land Company Pty Ltd [2011] NSWSC 1495 he conducted litigation through a company of which he was the sole shareholder and officer. Bryson AJ held that the company was a person of straw and no more than a persona or mask for him to embark on and carry on litigation without responsibility, and that his conduct was "grossly irresponsible"; and consequently a costs order was made against him: at [21], [43]-[48].

No remorse

1. Genuine remorse of an offender is a mitigating factor if it meets the requirements of s 21A(3) (i) of the CSP Act and is also relevant to the prospects of rehabilitation of the offender and to the weight to be given to individual deterrence. The defendants have not expressed any remorse for committing the offence.

Degree of pre-trial disclosure

1. The degree of pre-trial disclosure is a mitigating factor: s 21A(3)(l) CSP Act. Mr Gertos and Geitonia disclosed their defence of necessity several weeks before the trial. As I understand the prosecutor to have ultimately conceded, they were under no obligation to do so. The disclosure avoided the likely disruption and delay to the trial that would have occurred if it had not been disclosed until the trial, in order to give the prosecutor the opportunity to meet that defence.

Likelihood of re-offending

1. A mitigating factor to be taken into account in determining the appropriate sentence is if the offender is unlikely to re-offend: s 21A(3)(g) CSP Act. Notwithstanding absence of evidence of remorse, having regard to the large number of developments in which Mr Gertos has been involved without any prior convictions, the likely deterrent effect of the convictions and penalties that I propose to impose, his age (54) and the fact that he is no longer an officeholder in Geitonia, I am persuaded that the risk of those defendants reoffending is low. As GRC is in liquidation, it will not reoffend.

Prospects of rehabilitation

1. It is a mitigating factor if the offender has good prospects of rehabilitation whether by reason of the offender's age or otherwise: s 21A(3)(h) CSP Act. For the reasons given in the preceding paragraph, I consider that Mr Gertos and Geitonia have good prospects of rehabilitation. As GRC is in liquidation, this factor is irrelevant in its case.

GRC - ability to pay a fine

1. As GRC is in liquidation, it may be assumed that it is impecunious and almost certainly does not have the funds to pay a significant fine. This should be taken into account: s 6 Fines Act 1996. Where the circumstances of the offence are serious, a lack of capacity to pay a fine is not the most important factor. A small or nominal fine would not satisfy the sentencing objects of deterrence, denunciation and punishment: EPA v Barnes at [64]; Environment Protection Authority v Capdate Pty Ltd (1993) 78 LGERA 349 at 354 (Stein J); Environment Protection Authority v Douglass (No 2) [2002] NSWLEC 94 at [15]-[17] (Lloyd J); Environment Protection Authority v Emerald Peat Pty Ltd (in liq) [1999] NSWLEC 147 at [77] (Talbot J). In the present case GRC's offence is sufficiently serious that general deterrence looms large in the determination of the appropriate sentence. I do not think that its assumed impecuniosity should be a ground for reducing an otherwise appropriate fine.

EVEN-HANDEDNESS

1. The principle of even-handedness or parity requires the treatment of like cases alike and different cases differently: Green v The Queen [2011] HCA 49, 244 CLR 462 at [28]. With environmental offences there is usually difficulty in applying this principle because of the wide divergence of facts and circumstances in the cases.
2. In Council of the City of Sydney v Trico Constructions Pty Ltd [2015] NSWLEC 56 the defendant demolished a pressed metal ceiling in the mezzanine level of a heritage listed building (unlike the present case) in the Sydney Central Business District without obtaining prior development consent. It was not in good repair and had many holes and tears. A director of the defendant, based on his experience as builder, considered that it was so damaged that it was irreparable and needed to be removed. Subsequently, the Council granted development consent to "reinstate" new pressed metal ceilings to replace the one that was removed; and they were later installed. Preston CJ of LEC held that the fact that the ceiling was damaged did not mean that it did not have heritage significance or that its removal was justified, and that although the director was of the view that it was so damaged that it was irreparable, no studies were undertaken in accordance with proper conservation practices to ascertain whether the holes and tears could be repaired, rather than demolishing and discarding the ceiling at [60]-[61]. The Court found that commission of the offence caused actual harm of medium seriousness, which was a substantial aggravating factor at [64]. Demolishing the ceiling without first applying for and obtaining development consent undermined the regulatory system of development control at [65]-[68]. The defendant foreclosed the opportunity for prior assessment of the removal of the ceiling and the option of the Council refusing consent because of any unacceptable impacts on the heritage significance of the building. The objective seriousness of the offence was assessed at the low end of the range: at [78]. As for subjective circumstances, the Court took into account the lack of prior convictions, the plea of guilty (resulting in a discount of 15%), remorse shown by the defendant, the unlikelihood of re-offending, and the prosecutor's costs that the defendant was ordered to pay after a certain date. The defendant was fined $46,750.
3. In Carlino v Leichhardt Municipal Council [2005] NSWLEC 198, 144 LGERA 235 this Court granted development consent for a garage on residential premises in a conservation area. The garage was proposed to be excavated into the stone retaining wall which formed the road frontage. A condition of the consent, agreed between the parties' heritage consultants, required the retention of the stone retaining wall except for a garage opening. In contravention of the condition, the stone wall was entirely demolished and replaced by a garage and concrete block wall. A subsequent modification consent ameliorated some of the harm caused by allowing use of the removed stone blocks in front of the concrete block wall. A magistrate imposed a fine of $30,250. On appeal to this Court, Lloyd J held that the modification consent neither minimised nor diminished the breach and the permanent harm, which still remained at [28]. His Honour considered that the fine imposed by the magistrate, after allowing a 25% discount for a guilty plea and other mitigating factors, was appropriate.
4. In Cowra Shire Council v Fuller [2015] NSWLEC 13, the landowner defendant was convicted of carrying out development without consent, namely demolition of a homestead constructed in approximately 1900. He knew that he required development consent and did not have it and that, although the building was not heritage listed, the Council was investigating its heritage significance. It was in poor repair although structurally sound. Although he did not demolish the building himself and claimed to have no knowledge of it, there was evidence that he had told the caretaker that an excavator would be arriving in the week the homestead was demolished and the hot water service and electric stove had been removed prior to demolition at his direction. Pain J assessed the objective seriousness of the offence as moderate to high: at [18]. Her Honour took account of the lack of prior convictions, the absence of acceptable evidence of remorse, the utilitarian value of the early guilty plea albeit diminished by lack of cooperation with the prosecutor, and general and specific deterrence at [30]-[35]. Her Honour concluded that a fine of $250,000 was appropriate, which was reduced by 30% to $175,000 for the mitigating factors.
5. In Willoughby City Council v BCPD Pty Ltd [2010] NSWLEC 163, the defendant, a demolition company, demolished a bungalow located within a heritage area, contrary to the terms of a development consent. The development consent provided for the retention of the front façade, external side walls, roof frame and various internal walls and floors of the bungalow, and the demolition of the rear portion. Plans in the contract between the owners and the defendants showed, contrary to the development consent plans, that the whole building except for the front façade was to be demolished. Once the bungalow was demolished in accordance with the contract plans, ie, completely except for the front façade, the front façade became structurally unsound with bowing and cracks appearing. As such, the front façade was also demolished, leaving only the foundations, front steps and part of the front landing of the bungalow. The defendant asserted that it placed some reliance on the designer who stated that he intended to apply for approval of the front façade after the works stated. The designer subsequently lodged a development application and obtained approval to replace the bungalow which previously stood with a new dwelling with a front portion that was almost exactly the same as the former dwelling. I held that "the demolition of virtually the entire house, in the absence of an assessment of the heritage impact, also tended to undermine one of the express aims and objectives of the WLEP to retain the character of the urban conservation areas (cl 2(n)) because it eroded the significance of the Willoughby Conservation Area, albeit it was only one of the houses in that area": at [31]. I took into account heritage acceptability of the new building to be constructed at [23] and [34], the fact that the particular bungalow made a moderate contribution to the overall significance of the conservation area at [38], the defendant's early guilty plea and expressed contrition at [39] and [46], and the fact that those who have been granted licenses to carry out development have a particular responsibility to ensure that the work is carried out in accordance with the law at [40]. The defendant was fined $30,000 which included a 25% discount for an early guilty plea.
6. Willoughby City Council v Finlay (No 2) [2010] NSWLEC 233 concerned the same facts as above. The defendant in this matter, who was tried separately, was the building and interior designer and also acted as the "project manager" in relation to at least some crucial aspects of the development. Sheahan J noted that "total demolition may well have been appropriate but Council was entitled, indeed obliged by law, to be involved in any such decision" at [5]. The defendant acknowledged that she knew a s 96 modification application was necessary in order to obtain approval for the full demolition that was carried out, but took no action to obtain approval. The defendant was fined the same amount, $30,000, as the demolisher.
7. In Mosman Municipal Council v Menai Excavations Pty Ltd [2002] NSWLEC 132, 122 LGERA 89 the defendant demolition company, pursuant to an instruction from the developer, demolished a building within a heritage conservation area contrary to the terms of a development consent which required that a portion of the existing building was to be retained. The defendant believed that the developer had obtained development consent for the demolition. At the time of the offence, the building was also heritage listed, however it was removed from the list approximately two years after the demolition had occurred. Similarly to the present case, the developer, had decided to demolish the whole building well before the structural engineer inspected the site and advised that the remaining walls and footings were insufficient to accommodate the building loads: at [30]. Lloyd J fined the defendant $30,000, which included a 25% discount for an early guilty plea.
8. In Woollahra Municipal Council v JPS Development & Construction Pty Limited [2007] NSWLEC 595, the defendant, a builder, demolished a terrace wall contrary to the terms of the applicable development consent which required part of the terrace to be retained and restored in accordance with approved plans. The terrace was not a heritage item, and there was no heritage item in the immediate vicinity of the property. However, Lloyd J held that it clearly must have contributed to the streetscape of the heritage conservation area within which it was located: at [6]. Prior to demolition, a geotechnical engineer advised that the east corner of the terrace was likely to collapse and again recommended demolition of the terrace wall. In accordance with this advice, the defendant proceeded to demolish the wall, contrary to the development consent drawings. Subsequent to the demolition, a modification application was made and granted for retrospective approval of the demolition. Lloyd J considered that the fact that the defendant was motivated by a safety concern and that the defendant believed that it was under an obligation to do what it was told by the project manager and placed the offence at the lower end of the objective seriousness scale: at [31]. The defendant was fined $5,000 which included a 35% discount which took into account its concern for the safety of those working in and around the building and the early guilty plea at [36].

DETERRENCE

1. The sentence needs to operate as a powerful factor in preventing the commission of similar crimes by persons who might be tempted to do so by the prospect that, if caught, only light punishment will be imposed. There is a need for such general deterrence in cases of offences comprising breaches of planning controls. The planning system would be ineffective if developments were allowed to continue without or in contravention of development consents. General deterrence is particularly important in the case of offenders who are in development businesses: Pittwater Council v Scahill [2009] NSWLEC 12, 165 LGERA 289 at [47].
2. Individual deterrence is aimed at deterring an offender from committing similar offences in future. As I have earlier decided that the risk of Mr Gertos and Geitonia reoffending is low, I conclude that there is little need for individual deterrence in their cases. There is no need for individual deterrence in the case of GRC because it is in liquidation.

AVOIDING DOUBLE PUNISHMENT

1. At the time of the offence, Mr Gertos was the sole shareholder and director of Geitonia and was its alter ego. Where an individual offender and the company that he owns are each being sentenced for the same offence, the fines to be imposed should be such as to avoid double punishment of the individual arising from the diminution in the individual's valuable interest in the company to the extent of the fine imposed on the company.
2. Before I turn to the authorities for this principle, I will deal with the prosecutor's contention that the principle is inapplicable because on 26 November 2013 (after the offence) Mr Gertos sold his shares in Geitonia. Notwithstanding that the defendants' submissions did not engage with it, on the evidence before the Court the factual contention that Mr Gertos has sold his shares in Geitonia is wrong and I reject it. In support of the contention, the prosecutor's written submissions referred only to an ASIC document of 26 November 2013 (at annexure F to the affidavit of Roslyn McCulloch sworn on 12 February 2014). That ASIC document evidences that on 26 November 2013 Mr Gertos ceased to be an office holder of Geitonia. It says nothing about him ceasing to be a shareholder. Subsequent ASIC documents of 9 December 2013 (at page 45 of the affidavit of Adam Virzi sworn on 12 February 2014) and 29 April 2015 (annexure A to the affidavit of Con Savell of 30 April 2015) record that on those dates Mr Gertos was still the shareholder of Geitonia. Accordingly, the principle is applicable in this case.
3. I turn to the authorities for the principle. In Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (No 2) [2002] FCA 559, 190 ALR 169 at [45], Finkelstein J considered what penalty should be imposed on a corporation and its principal shareholder, who had caused the corporation to contravene the Trade Practices Act 1974 (Cth). The maximum penalty for a corporation was $10 million and for an individual $500,000 - a 20:1 ratio. His Honour said at [45]: "I will not ignore the fact that Mr Wilson is the principal shareholder in WTC, and the diminution of its assets that will result from the imposition of a pecuniary penalty is a loss that will ultimately be borne by Mr Wilson. If I do not make allowance for this when assessing Mr Wilson's penalty he will, in effect, be punished twice over." His Honour fined the corporation twenty times the amount he fined its principal shareholder: at [49].
4. In Minister for the Environment and Heritage v Greentree (No 3) [2004] FCA 1317, 136 LGERA 89, the Minister sought pecuniary penalties under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) against a corporation and its sole director/shareholder. The maximum penalty was $5.5 million for a corporation and $550,000 for an individual - a 10:1 ratio: at [6]. Sackville J fined the corporation double the amount he fined the individual: at [88]. His Honour said: 77 …it is appropriate to take into account both the fact that Auen is, in effect, a "one-man" company and the relationship between Auen and Mr Greentree. The evidence indicates that Mr Greentree is the sole director and, in effect, the sole shareholder of Auen. (Prime Grain Pty Ltd is a shareholder of Auen, but Mr Greentree holds all shares in Prime Grain Pty Ltd) While Auen has the capacity to pay a substantial penalty, its position is not the same as, for example, a very large publicly listed corporation to which a pecuniary penalty of some hundreds of thousands of dollars might be of relatively small financial moment. 78 I infer that Mr Greentree will bear the burden of any diminution of Auen's assets that will result from the imposition of a pecuniary penalty on the company. It is appropriate to take that fact into account in order to prevent Mr Greentree being punished, in effect, twice over: Australian Competition & Consumer Commission v ABB Transmission & Distribution Ltd (No 2) (2002) 190 ALR 169 at 182 [45], per Finkelstein J; Re HIH Insurance Ltd (2002) 42 ACSR 80 at [131]-[132], per Santow J. On the other hand, Auen has been involved in a deliberate contravention of s 16(1) of the EPBC Act. The contravening conduct was undertaken in Auen's commercial interests. It is also necessary to bear in mind that the maximum penalties that can be imposed on a corporation are ten times larger than the penalties that can be imposed on individuals who contravene the EPBC Act. The overall pecuniary penalty should obviously be no less than if Auen, a corporation, had been the sole contravenor. On the contrary, the overall penalty should reflect the fact that Mr Greentree, as well as Auen, has contravened s 16(1) of the EPBC Act. … 82 Having regard to the maximum penalty applicable to a contravention by an individual, I think that a pecuniary penalty of $150,000 should be imposed on Mr Greentree. Had Auen been the only contravenor, taking into account its status as a private company and the higher maximum penalty applicable to a contravention by a corporation, I would have imposed a penalty in the order of $400,000. Having regard to the desirability of avoiding penalising Mr Greentree twice over, I think that Auen should pay a penalty of $300,000. In my view, the total penalty of $450,000 is appropriate in the circumstances of the case.
5. In Keir v Sutherland Shire Council [2004] NSWLEC 754, an individual and a company of which he was the sole director and effective mind, were sentenced for committing the same offence of carrying out development other than in accordance with development consent. McClellan CJ of LEC considered that it was appropriate to impose a penalty upon both defendants which was sufficient in the circumstances, but which took account of the fact that it will, in reality, come from the individual's pocket: at [17]. His Honour fined the individual $25,000 and the company $10,000: at [22].
6. In The Hills Shire Council v Kinnarney Civil & Earthworks Pty Ltd (No 2) [2012] NSWLEC 95, I reviewed the authorities and said: [39] Because the defendant Mr Kinnarney is the sole shareholder of the defendant company, the sentences to be imposed should avoid punishing, in effect, Mr Kinnarney, twice over: … [42] Had the corporate defendant been the only contravenor, taking into account its status as a private company and the maximum penalty under s 143(1) of the POEO Act for a contravention by a corporation, as well as the liability for the prosecutor's costs in the sum of perhaps roughly $200,000, I would have fined it in the order of $80,000. Had Mr Kinnarney been the only contravenor, taking into account the maximum penalty applicable to a contravention by an individual and the liability for the prosecutor's costs, I would have fined him in the order of $40,000. Having regard to the desirability of avoiding penalising Mr Kinnarney twice over, these amounts should be adjusted by fining the corporate defendant $50,000 and Mr Kinnarney $30,000. In my view, the overall penalty of $80,000 is appropriate in the circumstances of this case.
7. In Mouawad v The Hills Shire Council [2013] NSWLEC 165, 199 LGERA 28 a magistrate had convicted a company, FCA, and its sole director Mr Mouawad of the same offence and fined each the same amount; and had convicted another company, FCE, and its sole director Mrs Mouawad, of the same offence and had fined each the same amount. Dismissing the appeals by Mr and Mrs Mouawad, Pepper J said, at [200]: Although neither FCE nor FCA were parties to this appeal, I am nevertheless cognisant of the fact that at the time of the commission of the offences Mr Mouawad was the sole shareholder of FCE and Mrs Mouawad was the sole shareholder of FCG which owned all of the shares in FCA Any sentence imposed should therefore avoid punishing the appellants twice in light of the fact that both FCE and FCA were fined in the court below (Kinnarney (No 2) at [39]-[41] and the authorities referred to thereat).
8. In Palfrey v Spiteri; Palfrey v South Penrith Sand & Soil Pty Ltd; Palfrey v Roberts [2014] NSWSC 842 the maximum statutory penalty for a company was five times that for an individual. Garling J imposed fines on a company that were three times the amount of the fines imposed on an individual who was its alter ego. Citing Greentree and Kinnarney, his Honour took the principle of avoiding double punishment into account: [40] The legal principles to which attention is drawn are those which exist to avoid punishing the owners of a company twice over. Where a company is in substance the business alter ego of an individual, that is, a "one person company", and both the company and its owner face monetary penalties for the same conduct which underlies separate offences, then there is a risk that the individual will be doubly punished because the imposition of a monetary penalty on the company, which affects its financial position, will diminish the individual's valuable interest in the company. As well, the individual will be subject to a monetary fine in their individual capacity. [41] Accordingly, it is relevant to take the relationship which here exists between the Company and Mr Spiteri into account to avoid double punishment. … [44] The prosecution accepted that with respect to the offences to which the Company pleaded guilty, and to which Mr Spiteri pleaded guilty, where the offences were in substance the same, that the court should apply the principle so as to avoid double punishment.
9. The United States Sentencing Commission, Guidelines Manual (2014) provides: s8C3.4 Fines Paid by Owners of Closely Held Organizations The court may offset the fine imposed upon a closely held organization when one or more individuals, each of whom owns at least a 5 percent interest in the organization, has been fined in a federal criminal proceeding for the same offense conduct for which the organization is being sentenced. The amount of such offset shall not exceed the amount resulting from multiplying the total fines imposed on those individuals by those individuals' total percentage interest in the organization. Commentary Application Notes: 1. For purposes of this section, an organization is closely held, regardless of its size, when relatively few individuals own it. In order for an organization to be closely held, ownership and management need not completely overlap. 2. This section does not apply to a fine imposed upon an individual that arises out of offense conduct different from that for which the organization is being sentenced. Background: For practical purposes, most closely held organizations are the alter egos of their owner-managers. In the case of criminal conduct by a closely held corporation, the organization and the culpable individual(s) both may be convicted. As a general rule in such cases, appropriate punishment may be achieved by offsetting the fine imposed upon the organization by an amount that reflects the percentage ownership interest of the sentenced individuals and the magnitude of the fines imposed upon those individuals. For example, an organization is owned by five individuals, each of whom has a twenty percent interest; three of the individuals are convicted; and the combined fines imposed on those three equals $100,000. In this example, the fine imposed upon the organization may be offset by up to 60 percent of their combined fine amounts, i.e., by $60,000.
10. Under this provision, a court "may" offset (ie reduce) the fine imposed on a closely held operation when one or more individuals, each an owner of at least a 5% interest, has been fined for the same offence conduct for which the organisation is being sentenced: United States of America v Aqua-Leisure Industries Inc 150 F.3d 95 (1st Cir. 1998). The application of this approach in the present case, where Mr Gertos was the sole shareholder and guiding mind of Geitonia, assuming that he should be fined no less than Geitonia, would result in Geitonia being fined only a nominal amount (or nothing). As it happens, the submission of Mr Gertos and Geitonia is precisely that, although not by reference to the United States Guidelines principle. The NSW Law Reform Commission has supported the United States Guidelines Manual provision and considered that it is open to the NSW courts to adopt it: NSW Law Reform Commission, Sentencing: Corporate Offenders Report 102 (2003) at [15]. Since no Australian court has adopted the United States approach and the parties in this case did not address it, it is preferable that its potential adoption should await another case and another day.
11. In all the Australian avoidance of double penalty decisions to which I have referred, both the one man company and its man were fined substantial amounts. It was acknowledged in Greentree and Kinnarney that the "total" fines imposed on them should be appropriate in the circumstances of the case - a principle analogous to the totality principle. In ABB, Greentree, Kinnarney and Palfrey (but not Mouawad) heavier fines were imposed on the corporation compared with the individual, taking into account that there were heavier maximum statutory penalties for corporations compared with individuals. In ABB, the ratio between the two (20:1) was reflected precisely in the fines imposed. In Greentree the ratio of the maximum statutory penalties for corporations and for individuals was 10:1 but the ratio of the fines imposed was 2:1, which appears to have been the product of instinctive synthesis. In Mouawad the same fine was imposed on the corporation and the individual. Where there was no difference in the maximum statutory penalties, the individual was fined substantially more than the corporation: Keir. In the present case, there is no difference in the statutory maximum penalty for a corporation and an individual.
12. On one view, a logical way to avoid double penalty in a case such as the present, where the individual is the sole shareholder and alter ego of his company (at least where the maximum statutory penalty for each is the same), is to impose a fine on the individual and only a nominal (or no) fine on his company. That would accord with the result under the United States Guidelines Manual. But none of the Australian authorities to which I have referred have taken (nor have they explicitly considered) that view. The explanation may lie in the proposition that avoidance of a double penalty is to be taken into account with other considerations, and that other considerations such as the sentencing objectives of deterrence, denunciation and punishment still require more than a nominal fine to also be imposed on the one man company. This suggests that although Mr Gertos, as the guiding mind behind the offences committed by Geitonia and indeed GRC, should bear the heaviest fine, Geitonia should also bear a fine that is not nominal.

COSTS

1. It is common ground that payment by the defendants of the prosecutor's costs is an aspect of punishment and should be taken into account when considering the penalty to be imposed: EPA v Barnes [2006] NSWCCA 246 at [78]. In the present case there was a three week trial, with the prosecutor represented by senior and junior counsel. The prosecutor estimates that its costs are in the vicinity of $500,000.
2. The defendants will be ordered to pay the prosecutor's costs under s 257B of the Criminal Procedure Act 1986. There is a contest as to how the prosecutor's costs should be apportioned among the defendants.
3. The prosecutor proposes that: (a) the three defendants should each pay one third of its costs up until commencement of the trial on 23 February 2015 except for its notice of motion of 10 June 2014 for the trial of GRC to be conducted ex parte, which GRC should be ordered to pay; and (b) Geitonia and Mr Gertos should each be ordered to pay one half of the prosecutor's costs from commencement of the trial. Geitonia and Mr Gertos contest that proposal in two respects. First, they submit that GRC should pay one third of the prosecutor's costs from the commencement of the trial. Secondly, they submit that as between Mr Gertos and Geitonia the apportionment of costs from commencement of the trial should be substantially the same as the "apportionment" of the overall fine between them (in order to avoid double punishment of Mr Gertos).
4. In my opinion, the defendant's first submission should not be accepted because it does not allow for the fact that GRC took no part in the trial or sentencing hearing and, on my estimate, an ex parte trial and sentencing hearing against GRC alone would not have taken more than a total of two days. In my opinion, the defendant's second submission is logical and should be accepted. These conclusions are reflected in the costs orders set out below (where the percentages are rounded).

CONCLUSION AS TO PENALTY

1. Synthesising all factors, I conclude that the appropriate fines are: Mr Gertos $150,000, Geitonia $50,000 and GRC $50,000. In my view, having regard to the fact that Geitonia was a "one man company", the total penalty of $200,000 imposed on Mr Gertos and Geitonia is appropriate in the circumstances of this case.

ORDERs

1. The Court makes the following orders: Proceeding 50795 of 2013 against Geitonia Pty Limited: 1. The defendant is fined $50,000. 2. In relation to the prosecutor's total costs of proceedings 50795, 50796 and 50798 of 2013 (which were heard together), the defendant is to pay one third of the prosecutor's costs prior to 23 February 2015 except for the costs of the prosecutor's notice of motion filed on 10 June 2014, and is to pay 25% of the prosecutor's costs from 23 February 2015. 3. The exhibits may be returned. Proceeding 50796 of 2013 against GRC Projects Pty Ltd (in liq): 1. The defendant is fined $50,000. 2. In relation to the prosecutor's total costs of proceedings 50795, 50796 and 50798 of 2013 (which were heard together), the defendant is to pay the prosecutor's costs of the prosecutor's notice of motion filed on 10 June 2014, one third of the prosecutor's other costs prior to 23 February 2015, and 10% of the prosecutor's costs from 23 February 2015. 3. The exhibits may be returned. Proceeding 50798 of 2013 against Bill Gertos: 1. The defendant is fined $150,000. 2. In relation to the prosecutor's total costs of proceedings 50795, 50796 and 50798 of 2013 (which were heard together), the defendant is to pay one third of the prosecutor's costs prior to 23 February 2015 except for the costs of the prosecutor's notice of motion filed on 10 June 2014, and 65% of the prosecutor's costs from 23 February 2015. 3. The exhibits may be returned.

Amendments 18 May 2015 - typographical error [38] "trail" to "trial' DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 May 2015