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[2014] NSWSC 1804
Supreme Court of NSW
2014-10-01
Adams J
Original judgment source is linked above.
Introduction 1On 29 May 2014 the Occupational Division of the Civil and Administrative Tribunal of New South Wales, constituted by the Hon W Haylen QC, Deputy President, determined that the plaintiff, a Councillor of the Auburn City Council had breached s 449(1A) of the Local Government Act 1993 (NSW) (to which all legislative references relate unless otherwise indicated) by lodging returns that he knew or ought reasonably to have known were false or misleading in a material particular and suspended him from his office for one month: Office of Local Government v Mehajer [2014] NSWCATOD 64. By summons in this Court the plaintiff seeks to appeal and leave to appeal his suspension under s 29(4)(b) of Schedule 5 of the Civil and Administrative Tribunal Act 2013 (NSW), which provides for an appeal "as of right on any question of law or, with the leave of the court, on any other grounds". It is also relevant to note ss 29(7) & (8) - (7) Non-lawyer appeals The court in a non-lawyer appeal may: (a) decide to deal with the appeal by way of a new hearing if it considers that the grounds for the appeal warrant a new hearing, and (b) permit such fresh evidence, or evidence in addition to or in substitution for the evidence received by the Tribunal at first instance, to be given in the new hearing as it considers appropriate in the circumstances. (8) In determining a non-lawyer appeal, the court may make such orders as it considers appropriate in light of its decision on the appeal, including (but not limited to) orders that provide for any one or more of the following: (a) the decision under appeal to be confirmed, affirmed or varied, (b) the decision under appeal to be quashed or set aside, (c) the decision under appeal to be quashed or set aside and for another decision to be substituted for it, (d) the whole or any part of the case to be reconsidered by the Tribunal at first instance, either with or without further evidence, in accordance with the directions of the court. 2The plaintiff contends that leave to appeal should be granted and the Court proceed by way of a hearing de novo to reconsider the appropriate sentence which, it is submitted, should be that the plaintiff should be counselled or reprimanded pursuant to s 482(1)(a). The defendant submits that leave to appeal should be refused or, if granted, the appeal should be dismissed. Background 3The plaintiff was elected as a councillor to Auburn City Council in September 2012. He was required to make disclosures of pecuniary interests in accordance with s 449(1), which provides - (1) A councillor or designated person must complete and lodge with the general manager, within 3 months after becoming a councillor or designated person, a return in the form prescribed by the regulations. 4The prescribed form provides for the listing of "Real Property", being the "address of each parcel of real property in which I had an interest at the return date or at any time during the return period". In respect of "Sources of Sources of Income", they are described as those "I reasonably expect to receive from an occupation in the period ..." and those "received from any occupation during the period ...". Also required were disclosures of income from trusts, from any other source, gifts, contributions to travel, interests and positions in corporations and positions in trade unions or professional bodies, creditors and dispositions of property. Provision for "discretionary disclosures" was also made. The form (correctly) does not suggest that anything other than complete disclosure of this information is required. Facts 5The following facts were found by the Tribunal and are not sought to be gainsaid in the appeal - "[7] It is convenient at this point to briefly consider the defects in both returns. The October 2012 return identified three sets of properties in the same street in Lidcombe although various street numbers were recorded. The nature of these properties was not identified. The 2013 return nominated possibly fourteen properties mostly by reference to lot numbers only and there were four further lots within this group that were listed. There were also a number of shops listed that were in the same street referred to in the 2012 return but appearing under different street numbers. [8] In 2012 the only occupation listed was that of Auburn councillor. In the 2013 return Clr Mehajer added his employment as a builder, his role as a Strata Manager and a Directorship in "Sydney Project Group/Mehajer Bros. P/L". [9] The 2012 return listed nothing under the heading of Sources of Other Income. In 2013 three rental properties were listed by reference to lot and DP numbers. This return also identified a Mehajer Bros trust as a potential source of income. [10] There were no positions or interests in corporations identified in the 2012 return. In the 2013 return, however, five directorships were identified described as being a development undertaking in four cases and a building undertaking in the other. [11] Under the heading of debts, nothing was listed in 2012. In 2013 mortgages with two Banks were listed together with family loans. In the 2013 return, for the first time, Clr Mehajer listed a number of discretionary disclosures. [12] In late November 2013 Clr Mehajer agreed to be interviewed by investigative officers attached to the Department. The councillor was not obliged to attend this interview. At the outset he spoke of his education and the nature of the work he had undertaken. The Councillor had completed a degree in Construction Management (Housing), an Advanced Diploma in Structural Engineering and a Graduate Diploma in Environmental Systems in which he was completing a Master's Degree. He had undertaken short courses at UTS in Local Government subjects and had done so in order to obtain information. He stated that his experience was mainly in project management, engineering and building. [13] During the course of the interview Clr Mehajer provided a number of explanations for the state of the 2012 disclosure return. He stated that he did not understand how the return worked or how to fill it out: indeed he did not know that he had to fill out a form as he was required to declare any interest at meetings of Council. The disclosure forms had been handed out and he had seen Councillors fill them out. He "assumed" it would be the same for himself but he was rushed and thought he had to submit it right away. [14] He had only listed properties or developments in the return that were within the Auburn Council area because he thought that would be where any conflict could arise. Normally he would read the form but this time he had just made an error. He accepted that he lacked knowledge in these matters. [15] Regarding the 2013 return, Clr Mehajer said that he was told that there were breaches of the Act arising from the manner in which he had completed the 2012 return. He therefore undertook "more research" as to what was needed to properly complete the return. He read "a bit of the handbooks" and had gone to the Division of Local Government. He also spoke to the General Manager of the Council who told him to declare everything he knew: they went through the form briefly. This had occurred just before he had completed the 2013 return. [16] Clr Mehajer said that he would have spoken to his accountant in 2012 about his expected sources of income. At the time of his original return he was working as a builder. He agreed that he should have disclosed in this return the rental income he had received. At that time his website described him as being a Project Engineer, a Construction Manager, and a Builder/Developer working closely in a "vast number of projects". [17] The August 2013 return had listed his interest in a number of corporations as being "pecuniary": that was meant to indicate that mostly he had shares in the companies. In the companies he had listed he could have been a shareholder, the secretary or a director, or all three. He was the company secretary in three companies but did not identify those positions. He had received directors fees from Mehajer Bros. but this had not been listed in the correct part of the form - he had missed that detail and that was an error. He agreed that he had not supplied the address for some companies and had not specified the registered address but had inserted the business operating address in the form. Some of the properties he listed he owned but others were owned by a company or other people." The submissions in the Tribunal 6The plaintiff did not give evidence before the Tribunal. His submissions were summarised in its reasons (about which no complaint is made) - "[18] ... [At] the hearing before the Tribunal Clr Mehajer accepted the essence of each complaint and that the returns lodged were false and misleading in material particulars and therefore were in breach of the requirements of s.449(1A) of the Act. In written submissions it was accepted that the Councillor should have taken more care to understand what was required of him in lodging the 2012 return but the errors appearing in the 2013 return should be treated as relatively minor breaches. The councillor regretted and apologised for his lack of care in completing the 2012 return and for the "relatively minor deficiencies" appearing in the 2013 return. [19] It was further submitted on behalf of Clr Mehajer that his various explanations for filing these returns were not relied upon by way of excuse, for he accepted and appreciated that he had failed to take proper care in understanding his obligations when filing out the form. He blamed no one else for these deficiencies but pointed out that he was only recently elected and had not been provided with any information, support, training or specific assistance from the Council regarding his obligations when completing the return. While he felt under pressure to complete the return he accepted that no one had placed him under such pressure. In any event s.449(1) required a return to be within three months of becoming a councillor. [20] While accepting that the 2012 return was false and misleading it was submitted on behalf of the Councillor that a simple and single misunderstanding had caused these errors and therefore little turned on the number of deficiencies relating to properties, sources of income and positions in corporations. These were said to be innocent errors arising from a misunderstanding and were not to be regarded as selective or designed to hide the real position." 7On 12 June 2013 Mr Murphy, a Senior Investigator with the Division of Local Government, who had been in communication with the plaintiff about his returns, sent him an email which contained a link to the Division's website "which has resources to assist Councillors completing their return" and attached a guide to completing the return. The Tribunal (accurately) summarised the guide as follows - "[23] The self-help guide for councillors set out the statutory framework regarding disclosure returns. In relation to each section of the return a "plain English" explanation was provided and common mistakes were discussed. In dealing with Real Property the guide stated that a councillor must declare any directly owned or leased property "anywhere in Australia": the word "anywhere" appeared in bold type. In dealing with sources of income the guide stated that occupation included any form of payment as an employee or through employment/consulting or through directorships or holding an office in a corporation. In relation to interests and positions in corporations the guide stated that it was necessary to include the full company and full details of the business address or registered office of the corporation. There was also information concerning the nature and level of debts that were required to be disclosed." 8The Tribunal accepted the submission by the Chief Executive as to the defects - "[24] ... [The 2012 return was] deficient in a number of significant areas. The particulars omitted were matters that Clr Mehajer was aware of: he had numerous real estate interests that were not disclosed; he knew he had income from rental properties that were not disclosed; he knew he was likely to receive income from his employment that was not disclosed; he knew he was likely to receive consultancy fees that were not disclosed; he knew he was a potential beneficiary of a family trust but this was not disclosed; he knew that he was likely to receive income by way of dividends but this was not disclosed; he knew he held shares in corporations but this was not disclosed; and he knew that he held positions in corporations but they were not disclosed. [25] The complaints about the 2013 return were more limited: there was a failure to disclose a Castle Hill property, positions in a number of corporations, the correct address for corporations in which the councillor held a position, and the failure to provide an address for one of the corporations." The Tribunal's conclusion
9The Tribunal noted a number of matters in mitigation - "[28] There are a number of factors that should be taken into account in favour of the Councillor. He was newly elected and apparently unfamiliar with the statutory scheme of disclosure. He consented to being interviewed by Divisional Investigators when not compelled to attend and otherwise co-operated with the investigation. The Chief Executive accepted that he had taken responsibility for his actions by acknowledging the breaches of s449(1A). In addition, a number of character references were presented to the Tribunal: they spoke of considerable work within his community and for charitable causes and the high esteem in which he was held within the community generally." 10The Tribunal decided - "[29] Giving full weight to these favourable factors the Tribunal is, nevertheless, unable to conclude that a mere reprimand is an appropriate outcome. Notwithstanding his newness to the office of councillor, his duty was to familiarise himself with his various obligations. None could be more fundamental than his obligation to make a full and accurate disclosure of his pecuniary interests. There were numerous avenues available to him in completing this task besides the text of the Act and the Regulations. He had the use of the councillor's Handbook, the on line self help guide and access to the General Manager as well as other councillors. This level of assistance was ignored and he was content to undertake this important task on the basis of an assumption about the width of the interests to be disclosed. His carelessness in this regards borders on the reckless. He was a builder and a developer on a significant scale and had to understand that there was a real possibility that he could be placed in a conflict of interest when dealing with council business. He was a man educated to tertiary level and still undergoing higher level education. Thus he was aware of many research tools available to him, not only in his education but also in his business and civic roles. He was also the director of a number of companies and the company secretary in some of them: he was therefore well aware of regulatory regimes and the requirement to make himself aware of the extent of his obligations. In his interview with the Investigators he agreed that he could have asked his accountant about possible sources of income for the purpose of completing the disclosure form. Undoubtedly, having regard to the of his business interests, he could have sought legal advice regarding the requirements of the disclosure return. [30] In concluding that a suspension is the appropriate outcome in this case, the Tribunal accepts the submission that the 2012 breach is more serious that the 2013 breach for many of the reasons put forward. It is still surprising that Clr Mehajer did not pay much closer attention to this return, having faced the Investigators and having accepted that the first return was totally inadequate. Again, a continuing lack of care and attention to the required detail does not reflect well on him and his acceptance of his obligations under the Act. In all the circumstances, it is appropriate that Clr Mehajer be suspended from civic off office for a period of one month." Consideration 11The plaintiff's attack on the judgment of the Tribunal commenced with a submission pointing to the terms of s 482(1) providing for a cascade of punishments for failing to disclose a pecuniary interest - 482 Decision of NCAT-pecuniary interest matters (1) The Civil and Administrative Tribunal may, if it finds a complaint against a councillor is proved: (a) counsel the councillor, or (b) reprimand the councillor, or (c) suspend the councillor from civic office for a period not exceeding 6 months, or (d) disqualify the councillor from holding civic office for a period not exceeding 5 years, or (e) suspend the councillor's right to be paid any fee or other remuneration, to which the councillor would otherwise be entitled as the holder of the civic office, in respect of a period not exceeding 6 months (without suspending the councillor from civic office for that period). It is submitted that it is important to bear in mind the distinction between those penalties that do not involve preventing a councillor from carrying out his or her civic duties on the one hand and those that do. This is an important distinction: amongst other considerations, the imposition of the latter involves, of necessity, depriving the councillor's constituents of the input into the deliberations of the Council, for which he or she was elected. 12It should also be noted that the sanctions also apply to contraventions of s 451(1), where a councillor fails to disclose that he or she has a pecuniary interest in a matter in which the Council or a Council committee is concerned and is present at a meeting at which the matter is being considered. Given the direct connexion between the interest and the matter, on the face of it, this seems to be a more serious transgression than an omission to make a full pecuniary interest disclosure. 13Broadly speaking, the availability of a range of punishment options implies the necessity to consider whether those short of depriving the constituents of their representative can adequately punish the councillor's failure to comply with the statutory obligations and vindicate the public interest in maintaining the honesty of municipal administration. Although the Tribunal's language suggests that the only alternatives were reprimand or suspension, it is obvious that it was also open to the Tribunal to suspend his remuneration as a Councillor for up to six months, a substantial financial imposition. 14There was no suggested dishonesty or concealment (for example, his company involvements were recorded with ASIC in the conventional way), nor was there any prospect - as distinct from hypothetical potential - suggested of any actual conflict of interest likely to arise in respect of his undisclosed interests (even though the two Lidcombe properties that he initially failed to disclose were within the Auburn Municipality). In truth, if I may respectfully say so, the Tribunal accurately described his actions as "carelessness ... [bordering] on the reckless". 15It is submitted for the plaintiff, as I apprehend it, that the Tribunal did not refer to, and failed to engage with, the critical difference between those punishments which did not prevent him from exercising his functions as a Councillor and those that did. It is contended, in substance, that suspension should be reserved for cases involving intentional concealment of material information or repeat offences or other similar serious cases. Here, the plaintiff was, in substance, a first offender of good character who had just been elected, with no other fault than, in substance, an act of gross carelessness for reasons which, though entirely wrong, were not inexcusable and involved no dishonesty. Accordingly, suspension was too extreme a step and lesser punishments were available and appropriate. In the end, it is submitted that a disproportionate penalty was imposed because the Tribunal failed to take account of the fundamental distinction between penalties that enabled the plaintiff to continue to exercise his duties as a Councillor and those that did not, as though they were merely punishments of an increasing order of severity. 16The defendant's response was, essentially, to submit that the penalty imposed on the plaintiff was not so severe as to suggest latent error in the exercise of the Tribunal's discretion. In substance, it is contended that, even granted the validity of the distinction sought to be relied on (which was not conceded), the penalty was appropriate given the egregious indifference exhibited by the plaintiff in his purported compliance with the disclosure obligations imposed on him by virtue of his office. Conclusion 17It seems to me that the difference between the punishments involving suspension of a councillor's service and those which do not is of considerable significance, for the reasons already mentioned. It should also be borne in mind that suspension from civic office involves far more than not being able to attend meetings or be otherwise able to contribute to the work of the Council but also the inability to assist constituents as a Councillor. I am uncertain whether the distinction now sought to be made was brought to the attention of the Tribunal, since I have only the written submissions. However, I do not think that this is decisive. 18Although I have wavered on the point, I have after close consideration of the reasons for sentence (set put above) of the Tribunal concluded (with respect) that it did not take this important difference into account when suspending the plaintiff. Accordingly its discretion miscarried and the order for suspension cannot stand. Resentence 19At the hearing, the question was raised whether, if error were found, the matter should be remitted to the Tribunal for redetermination or this Court should resentence the plaintiff. Both parties agreed that, in such an event, this Court should finalise the matter and directions were given for further evidence, if any, to be filed. Both parties have filed affidavits, that of the plaintiff sworn 21 September 2014 and that of Lynette Brown (Manager, Investigations) for the defendant. 20Ms Brown, in substance, deposes to the fact that the plaintiff is one of five councillors elected for one of the two wards making up the Municipality and that it is the duty of each Councillor to represent the whole Municipality. Constituents have therefore a range of other Councillors to approach with their concerns. Furthermore, he is but one of all the Councillors who sit on the various Council Committees. 21It appears from the plaintiff's affidavit that he is one (of two) independent Councillors, his Ward containing 90,000 (sic) persons; he meets daily with constituents and on average takes 50 or so telephone calls a week from constituents to discuss various problems, advising or assisting them with a wide range of matters within the Council's responsibilities which impact on them. Many come to him because he is not affiliated with a political party. Council meetings are held monthly. He represents the Council on various Committees with one other Councillor (which meet only several times a year). 22Fees payable to Councillors are determined by the Local Government Remuneration Tribunal. For the years ended 30 June 2013, the monthly payment was $1422. In its Report for 2014, the Tribunal increased the amounts payable from 1 July 2014 by 2.5 per cent. Assuming this was passed on, the monthly payment at present is $1458. 23It seems to me that, as egregious as the plaintiff's conduct was, it did not warrant suspension from office. This would not only punish him but his constituents, for all that they could consult other Councillors. Had there been some element of deliberate concealment or deceit involved, suspension might well have been necessary but that is not the case. Accordingly, I make the following orders - (1)the decision of the Civil and Administrative Tribunal of 29 May 2014 is set aside; (2)in lieu thereof, Councillor Mehajer is reprimanded and his right to be paid any fee or other remuneration to which he would otherwise be entitled as the holder of civic office is suspended for the period of three months dating from, and including, the date of the next payment due (without suspending him from civic office for that period). (3)The parties to make written submissions as to costs.
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: 19 December 2014
Mehajer
Chief Executive of the Office of Local Government