Liverpool City Council v Palerma Pty Ltd and Parilo

KEY ISSUES: Contempt :- contempt by company which disobeys court orders made in civil proceedings - contempt by sole director and shareholder who caused the company to disobey the orders.

Land and Environment Court Act 1979, s 67(1)(d) LEGISLATION CITED: Land and Environment Court Rules 2007, rr 3.9, 4.5, 5.2 Supreme Court Rules 1970, Pt 55

Attorney-General v Times Newspaper Ltd [1992] 1 AC 191 Attorney General v Punch Ltd [2003] 1 AC 1046 Blue Mountains City Council v Fowler [2007] NSWLEC 476 Burwood Council v Ruan [2008] NSWLEC 167 Environment Protection Authority v Pannowitz [2006] NSWLEC 219 Grant-Taylor v Jamieson [2002] NSWSC 634 Greater Hume Shire Council v J & L Cauchi Civil Contracting Pty Ltd [2006] NSWLEC 738 Hawkesbury City Council v Foster and Mushroom Composters Pty Ltd [1997] NSWCA 141, (1997) 97 LGERA 12 Lade & Co. Pty Limited v Black [2006] QCA 294, [2006] 2 Qd R 531 CASES CITED: Liverpool City Council v Palerma Pty Ltd [2008] NSWLEC 88 Pelechowski v Registrar, Court of Appeal (NSW) [1999] HCA 19, (1999) 198 CLR 435 Re Intex Consultants Pty Ltd [1986] 2 Qd R 99 Re M; M v Home Office [1994] 1 AC 377 Reid v Howard (1993) 31 NSWLR 298 Reid v Howard [1995] HCA 40, (1995) 184 CLR 1 Stewart v Gymboree Pty Ltd [2001] QCA 307 Street v Hearne [2007] NSWCA 113 Windsurfing International Inc v Sailboards Australia Pty Ltd [1986] FCA 384, (1986) 19 FCR 110 Witham v Holloway [1995] HCA 3, (1995) 183 CLR 525 Z Ltd v A-Z [1982] QB 558

PROSECUTOR: Mr M Wright SOLICITORS: Marsdens Law Group LEGAL REPRESENTATIVES: DEFENDANTS: Mr E Parilo (litigant in person) SOLICITORS: N/A

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

EX TEMPORE JUDGMENT 1 HIS HONOUR: The defendants, Palerma Pty Ltd and its sole shareholder and director/secretary Edmond Michael Parilo, have pleaded not guilty to two charges of contempt of court. The prosecutor, Liverpool City Council, alleges that Palerma Pty Ltd is in contempt because it has failed to comply with orders 3 and 4A which I made on 26 February 2008 in Liverpool City Council v Palerma Pty Ltd [2008] NSWLEC 88, and that Mr Parilo is in contempt in that he, as the human agent of Palerma Pty Ltd, aided and abetted that company in the breaches. The orders 2 The orders made on 26 February 2008 against Palerma Pty Ltd were as follows: "1. Declaration that the respondent by itself or its agents is using the land known as Lot 11 in DP 881728 (63) Orange Grove Road, Liverpool ("the land") for the purpose of the display of advertising on three (3) advertising structures one (1) approximately 8 metres by 5.49 metres in size ("sign A"), one (1) approximately 6 metres by 4.7 metres in size ("sign B") and one (1) approximately 8 metres by 5.49 metres ("sign C") (together "the advertising structures") and the display of flags attached to sixteen (16) flag poles ("the flag poles") contrary to State Environmental Planning Policy No 64 - Advertising & Signage ("SEPP 64") Liverpool Local Environmental Plan 1997 ("LLEP") and the Environmental Planning and Assessment Act ("EPA Act"). 2. Declaration that the advertising structures and flag poles erected upon the land are structures or works requiring development consent pursuant to the LLEP and that no development consent has been sought or obtained, contrary to the EPA Act. 3. Order that the respondent remove or cause to be removed from the land the advertising structures and flag poles within sixty (60) days of the date of the order unless in the meantime the respondent obtains development consent from the applicant for the continued use of the advertising structures and flagpoles. 4A. Order restraining the respondent its servants and agents from using the land for the purpose of the display of advertising unless or until a development consent authorising that use is granted and operative. Order 4A is suspended for sixty (60) days. 4B. Order restraining the respondent, its servants and agents from erecting or causing to be erected on the land any advertising structures unless or until a development consent authorising the erection of any such structures is granted and operative. 5. Order that the respondent pays the applicant's costs of the proceedings. 6. Liberty to both parties to apply on 72 hours' notice."

3 As regards the liberty granted to the parties to apply on seventy-two hours notice, I said at [26] of the judgment: "Mr Parilo, the respondent's director who has appeared on its behalf this morning, has indicated that he proposes to lodge a development application with the council within the next month or so to authorise the signage and advertising structures. Such a course seems to have been contemplated by the respondent as long ago as 2006 but Mr Parilo informed me that the respondent decided not to proceed at that time. The council was agreeable to relief being moulded to give the respondent 60 days to obtain development consent before it is obliged to remove the offending items and to grant liberty to apply. That will enable the respondent to apply to the court to extend the time in the event that the council has not made a decision by then or if the respondent wishes to appeal to the Court from an adverse decision. The council has amended its Application accordingly this morning."

Evidence 4 Orders 3 and 4A have been breached. The defendants do not dispute this, nor any of the evidence tendered by the prosecutor. There is no development consent authorising the continued use of the advertising structures and flag poles; nor has any development application even been lodged with the council seeking such development consent.

5 Palerma Pty Ltd is the owner of the said land in Orange Grove Road, Liverpool on which the advertising structures and flag poles referred to in orders 3A and 4 were, and still are, erected. The orders were obtained on the application of the council who proved that they had been erected unlawfully. Mr Parilo is, and at all material times was, the sole director/secretary and shareholder of Palerma Pty Ltd. Mr Parilo was present in court on 26 February 2008 when the orders were made. He was served with sealed copies of the orders, as was Palerma Pty Ltd. He acknowledged in evidence that whatever Palerma Pty Ltd does is done through him. Mr Parilo represented Palerma Pty Ltd in these contempt proceedings, as he did on 26 February 2008 when the orders were made. 6 The defence to the charges is based upon an alleged telephone conversation which Mr Parilo, in evidence, said that he had in March 2008 with a Mr Coburn, whom he described as the council's director of planning. According to Mr Parilo, Mr Coburn told him that Mr Tolhurst, the council's general manager, had instructed Mr Coburn not to accept any development application from Palerma Pty Ltd. Consequently, Mr Parilo said, he did not lodge a development application as contemplated by orders 3 and 4A because he thought it would be futile to do so. He said that he still wishes to lodge a development application and let council determine it. He gave evidence that he had prepared the plans to lodge with the council. He also gave evidence of what appears to amount to a long standing sense of grievance and affront concerning alleged mistreatment by certain officers of the council.

7 There are a number of other matters which should be put in the scales. First, while giving evidence, Mr Parilo posed the question whether he was technically guilty of contempt and answered it by saying that he was. Secondly, he acknowledged that in the period since the orders were made he has had the benefit of legal advice concerning the orders, and understood the seriousness of the orders. Thirdly, he did not exercise the liberty to apply to have the time for compliance with orders 3A and 4 extended in light of the difficulty which he says he experienced in his mind as a result of the alleged conversation with Mr Coburn. Fourthly, Mr Parilo is an experienced industrial property developer who is fully conversant with the processes of lodging a development application and rights of appeal. Fifthly, until he gave oral evidence today, no explanation had been communicated as to why the orders were not complied with. Sixthly, it is questionable whether the alleged telephone conversation did or should have deterred someone with Mr Parilo's experience from lodging a development application with the council and thereby protecting his position. Finally, the only information concerning the content of the plans which he said he was ready to lodge, is that which he gave in oral evidence.

Contempt power 8 The status of the Land and Environment Court as a superior court of record carries with it broad powers to enforce its orders and to suppress any abuse of its processes, as well as other powers which inhere in superior courts: Hawkesbury City Council v Foster and Mushroom Composters Pty Ltd [1997] NSWCA 141, (1997) 97 LGERA 12 at 17. In any event, the Court's power to punish for contempt, including for disobedience to its own orders, is stated in s 67(1)(d) of the Land and Environment Court Act 1979. Part 55 (Contempt) of the Supreme Court Rules 1970 applies, so far as applicable, to all proceedings in the Land and Environment Court: Land and Environment Court Rules 2007 rr 3.9, 4.5, 5.2. Under Part 55 of the Supreme Court Rules, where the contemnor is not a corporation, the court may punish contempt by committal to a correctional centre or fine or both; and where the contemnor is a corporation, the Court may punish contempt by sequestration or fine or both.

Contempt principles 9 Disobedience of a court order is a contempt of court and, like all proceedings for contempt of court, must be proved beyond reasonable doubt: Witham v Holloway [1995] HCA 3, (1995) 183 CLR 525; Pelechowski v Registrar, Court of Appeal (NSW) [1999] HCA 19, (1999) 198 CLR 435. The classes of contempt and the authorities were reviewed in Burwood Council v Ruan [2008] NSWLEC 167 at [7] - [16] where I held at [7]: "There are three classes of contempt: technical, wilful and contumacious. Technical contempt is where disobedience of a court order (or undertaking to the court) is casual, accidental or unintentional. Wilful contempt is where the disobedience is more than that, but is not contumacious. Contumacious contempt is where there is a specific intention to disobey a court order or undertaking to the court, which evidences a conscious defiance of the court's authority. Although a contempt may be established, in the circumstances of the case the court may decide not to make any order. The element of intention is relevant to whether any order should be made and, if so, to punishment. These principles emerge, in my view, from the following authorities."

10 This classification applies to Palerma Pty Ltd because the orders were made against it. The position of Mr Parilo is different because the orders were not made against him. Mr Parilo is a third party to the orders, even though that may seem artificial given that he is the alter ego of the company. A third party to an order cannot be guilty of contempt in the same sense as a respondent to an order because the order is not directed to the third party and is not the source of any obligation on the third party: Grant-Taylor v Jamieson [2002] NSWSC 634 at [9] per Barrett J. A third party is subject to a different species of contempt, namely, knowingly impeding the administration of justice. A third party impedes the administration of justice if, knowing of the order, the third party wilfully assists the person to whom it is directed to disobey the order, or independently does an act that frustrates or obstructs the purpose of the order: Re M; M v Home Office [1994] 1 AC 377 at 426-427, quoting Lord Oliver in Attorney-General v Times Newspapers Ltd [1992] 1 AC 191 at 217-218. Similarly, see Reid v Howard (1993) 31 NSWLR 298 at 308-309, not disturbed on appeal Reid v Howard [1995] HCA 40, (1995) 184 CLR 1 at 16; Street v Hearne [2007] NSWCA 113 at [147] - [149].

11 In Attorney-General v Times Newspapers Ltd at 214, Lord Ackner quoted the following dictum of Eveleigh LJ in Z Ltd v A-Z [1982] QB 558 at 578: "I think that that the following propositions may be stated as to the consequences which ensue when there are acts or omissions which are contrary to the terms of an injunction. (1) The person against whom the order is made will be liable for contempt of court if he acts in breach of the order after having notice of it. (2) A third party will also be liable if he knowingly assists in the breach, that is to say if knowing the terms of the injunction he wilfully assists the person to whom it was directed to disobey it. This will be so whether or not the person enjoined has had notice of the injunction...

It was argued that the liability of the third party arose because he was treated as aiding and abetting the defendant (i.e. he was an accessory) and as the defendant could himself not be in breach unless he had notice it followed that there was no offence to which the third party could be an accessory. In my opinion this argument misunderstands the true nature of the liability of the third party. He is liable for contempt of court committed by himself. It is true that his conduct may very often been seen as possessing a dual character of contempt of court by himself and aiding and abetting the contempt of another, but the conduct will always amount to contempt of court by himself. It will be conduct which knowingly interferes with the administration of justice by causing the order of the court to be thwarted." In Z Ltd v A-Z Eveleigh LJ also held at 580: "In my opinion a third party with notice of the terms of an injunction should only be liable when he knows that what he is doing is a breach of the terms of that injunction. In the great majority of cases the fact that a person does an act which is contrary to the injunction after having notice of its terms would also inevitably mean that he is knowingly acting contrary to those terms." 12 In Attorney-General v Times Newspapers Ltd at 231, Lord Jauncey held: "I am quite satisfied that … a person who knowingly acts in a way which will frustrate the operation of an injunction may be guilty of contempt even although he is neither named in the order nor has he assisted the person who is named to breach it. Indeed it would be extraordinary if orders of the court could be set at nought with impunity by third parties seeking to achieve that end".

Lord Oliver at 219 gave the example of A who, at the suit of B, has given an undertaking to the Court to demolish a wall and then a third party, C, out of spite against B, obstructs a right of way which A is entitled to use and needs to use to demolish the wall: "…C has impeded the administration of justice by deliberately thwarting an undertaking given to the court and designed to secure the removal of the wall. In circumstances such as these, it would seem to me unarguable that C is not in contempt of court in exactly the same way as if he had obstructed an officer of the court and I cannot imagine any court accepting as a defence to a motion for committal the proposition that no contempt is committed because C was not a party to the action or the undertaking." 13 Attorney General v Punch Ltd [2003] 1 AC 1046 was a case where a third party was found guilty of contempt. The Attorney General had obtained an interlocutory injunction to restrain a former MI5 officer and a newspaper publisher from disclosing material he had learned in the course of his employment in the Security Service. A third party, the editor of Punch Magazine, set about publishing material derived from the officer concerning the Security Service. The House of Lords held that he was guilty of contempt. The ratio of the decision is captured in the headnote: "…contempt of court consisted of interference with the administration of justice and would arise if there was intentional impedance or prejudice of the purpose of a court order; that, in the context of contempt of court proceedings, the purpose of the court in issuing an interlocutory injunction was the preservation of the rights of the parties pending a final determination of the issues between them rather than the litigant's purpose in seeking to obtain the order; that it followed that, in relation to an injunction restraining publication of information pending a decision as to whether it was entitled to protection on the ground of confidentiality, the actus reus of contempt lay in the destruction of the confidentiality of the material which it was the purpose of the injunction to preserve; and that, accordingly, the editor having wilfully published material which he knew the court had intended by its order to remain confidential, the actus reus and mens rea of contempt of court had been established…"

14 Directors of companies who caused their company to disobey a Court order made against the company have been found guilty of contempt: for example, Environment Protection Authority v Pannowitz [2006] NSWLEC 219; Windsurfing International Inc v Sailboards Australia Pty Ltd [1986] FCA 384, (1986) 19 FCR 110; Re Intex Consultants Pty Ltd [1986] 2 Qd R 99; Stewart v Gymboree Pty Ltd [2001] QCA 307.

15 There must be actual disobedience and there can be no disobedience if breach of an order occurs by reason of circumstances outside the control of the alleged contemnor: Lade & Co. Pty Limited v Black [2006] QCA 294, [2006] 2 Qd R 531 at [63]; applied Greater Hume Shire Council v J & L Cauchi Civil Contracting Pty Ltd [2006] NSWLEC 738 at [27] - [32]; followed Blue Mountains City Council v Fowler [2007] NSWLEC 476 at [15]. In Lade at [63] Keane JA held: "There must, of course, be actual disobedience. There cannot be disobedience if the alleged contemnor does not know of the order which he or she is alleged to have breached. Nor could there be disobedience where the breach of the order occurs by reason of circumstances outside the control of the alleged contemnor." Conclusion 16 Contrary to orders 3A and 4, Palerma Pty Ltd has failed to remove or cause to be removed the advertising structures and flag poles and continues to use the land for the purpose of the display of advertising. No development consent as referred to in the orders has been obtained. The defendants did not even lodge a development application. Assuming that the alleged telephone conversation with Mr Coburn occurred, that does not, in my view, warrant the conclusion that the breach of orders 3A and 4 occurred by reason of circumstances outside the control of the defendants. They did not exercise liberty to apply to extend time for compliance with the orders if there was difficulty or delay in obtaining development consent. They communicated no explanation for the breach of the orders until the hearing of the contempt proceedings which, at least in part, were brought in order to enforce the orders. In my opinion, Palerma Pty Ltd wilfully disobeyed the orders and Mr Parilo, with knowledge of the orders, wilfully caused it to do so. The purpose of orders 3A and 4 was to terminate the unlawful erection of the advertising structures and flag poles and the unlawful use of the land for advertising. Having wilfully caused Palerma Pty Ltd to disobey the orders that he knew the Court intended should terminate the unlawful erection and use, the actus reus and mens rea of contempt have been established against Mr Parilo. 17 I find the defendants guilty of contempt as charged. I will proceed to hear the parties on sentence.

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