Mosman Municipal Council v Menai Excavations Pty Ltd

MOSMAN MUNICIPAL COUNCIL Prosecutor v MENAI EXCAVATIONS PTY LIMITED ACN 003 221 270 Defendant REASONS FOR JUDGMENT

1. The defendant has pleaded guilty to an offence against s 125(1) of the Environmental Planning and Assessment Act 1979 ("the EP&A Act") that between 19 January 2001 and 30 January 2001 the defendant did cause to be carried out development, that is, demolition of Bradleys Head Private Hospital ("the building") at No. 66 Bradleys Head Road, Mosman without prior development consent issued by the prosecutor and as required under the Mosman Local Environmental Plan 1998. The present proceedings relate to penalty and costs. The facts
2. The relevant facts are not in dispute. They are derived from an agreed statement of facts and a number of affidavits together with additional documentary material which was tendered.
3. The property known as No. 66 Bradleys Head Road, Mosman was at all relevant times and is subject to the Mosman Local Environmental Plan 1998 ("the LEP") and within residential 2(a1) zone. The demolition of a building under the LEP requires a development consent. Moreover, the property was also listed as a heritage item and was within a heritage conservation area under the LEP. The council's consent was also required for demolishing a heritage item or a building within a heritage conservation area (cl 33(1) of the LEP).
4. On 26 August 1999 the prosecutor granted development consent to LMH Elizabeth Bay Pty Ltd to demolish the existing building on the property and erect two attached dwellings.
5. On 7 April 2000 Waratah Village Partners Pty Ltd lodged with the prosecutor a development application for a "10 unit retirement village conversion from private hospital" on the property. The plans lodged with the development application showed that a portion of the fabric of the existing building was to be retained. A statement of environmental effects lodged with the development application states (inter alia) that the design of the proposal seeks to maximise the use of the existing building envelope, to repair and enhance the existing sandstone boundary fencing and use all the existing sandstone where possible.
6. The maximum permissible height of a new building is eight metres under the LEP. The maximum height of the proposed building was 13.7 metres. The prosecutor resolved to uphold an objection to the height control pursuant to State Environmental Planning Policy No. 1 on the basis that the existing building would be largely retained, the maximum ridge height of the proposed roof would not exceed the existing ridge height, and the proposed building would not result in any increase in the building's footprint.
7. A heritage impact statement lodged with the development application notes not only the proposed restoration of the heritage-listed boundary fence, but also contains the statement: "The subject building of this property is not heritage listed". This statement is an incorrect statement of fact - the building was listed as a heritage item. A second statement of environmental effects was also lodged with the development application. It states (inter alia): It is proposed that the current hospital building in poor repair be renovated and turned into units. The intention for the development is to return it to the period detail typical of buildings of that era… The existing stone and timber boundary fence will be restored to its original condition.
8. On 29 August 2000 the Development Assessment Committee of the prosecutor considered a report of an assessment officer. The report includes the following statement: The site is within the Bradleys Head Road Conservation Area identified in MLEP 1998 [Mosman Local Environmental Plan 1998] . While the building is currently a heritage item under MLEP 1998, it is not a proposed heritage item under draft LEP 1998 - Amendment 1 (Heritage).
9. The report of the assessment officer then sets out the views of the prosecutor's heritage advisor, as follows: The proposal appears to be an excellent way to adaptive reuse of this derelict site with potential to reinforce the gateway approach to the Bradley's Head Conservation Area and make good use of the building fabric. Of particular significance will be the restoration of the use of stone and timber fence to the front garden… The building is only significant as a gateway to the conservation area. It would have some local heritage since for historical and aesthetic values. The fencing is also important as it adjoins a heritage item…
10. On 1 September 2000 the prosecutor granted consent to the development application. Sometime in June 2000, Mr D Mitchelson, who was the project manager for the subject development and was representing Waratah Village Partners Pty Ltd, telephoned Mr J E Dicker, the manager of Menai Excavations Pty Ltd ("the defendant") and asked him to provide a quote for the partial demolition and excavation of the building at No. 66 Bradleys Head Road, Mosman. Shortly thereafter Mr Dicker met Mr Mitchelson at the site. According to the undisputed evidence of Mr Dicker: I walked through the entire building with Mitchelson and he showed me which walls were to stay and which were to be demolished. Mr Mitchelson also provided me with a plan which showed which walls were to remain the same and which were to be demolished.
11. Mr Dicker prepared a quote which he then sent to Mr Mitchelson at Equity and Law Pty Ltd, which I understand is either a holding company by or a related company to Waratah Village Partners Pty Ltd.
12. On or about 18 October 2000 Mr Mitchelson telephoned Mr Dicker to request the defendant to provide him with a quote to demolish the whole of the building and carry out extra excavation work. According to Mr Dicker, Mr Mitchelson said to him: "We have decided to demolish the whole of the building. Could you supply a quote for that?"
13. Mr Dicker then prepared a handwritten quote which he faxed to Mr Mitchelson. On or about 16 November 2000 Mr Dicker received a facsimile letter from Mr Mitchelson requesting a typed copy of the quotation. This quote was subsequently accepted by Mr Mitchelson in a telephone conversation between Mr Dicker and Mr Mitchelson.
14. On 20 December 2000 a construction certificate was issued to Waratah Village Partners Pty Ltd by an accredited certifier, Mr P Gearin. The detailed engineering plans to which the construction certificate relates contains the following notation: Note: where existing footings and walls are to be used, engineer is to inspect and approve structural adequacy of footings and walls before proceeding with level 2.
15. On 9 January 2001 the defendant commenced with preliminary clearing work at the site. On 16 January 2001 the defendant brought its machines to the site to commence demolition work. A conversation took place on that day between Mr Dicker and Mr Mitchelson in which Mr Mitchelson said: "Can you demolish everything but leave the sandstone base if possible". On or about 22 or 23 January 2001, whilst the demolition work was proceeding, Mr Mitchelson said to Mr Dicker: "The engineer told me to pull the sandstone base down. Just stack all the sandstone on the site".
16. On 29 January 2001 a neighbour notified the prosecutor that the existing building at No. 66 Bradleys Head Road had been completely demolished. Mr J Perica, the prosecutor's manager of Development Services, then went to the property site and told the defendant's employee, Mr B Rowley, that the demolition work was unauthorised, and then also spoke to Mr Dicker by mobile telephone and told him the same thing. Mr Perica suggested to Mr Dicker that he instruct his workers accordingly. The defendant then stopped the works and has not returned to the site.
17. Later on the same day Mr Perica received a telephone call from Mr Mitchelson, who said that he was the project manager for the job at No. 66 Bradleys head Road, Mosman. The following conversation then occurred between Mr Perica and Mr Mitchelson: Mr Mitchelson said: " The development was privately certified by Paul Gearin. On 22 January a structural engineer inspected the site and advised that the remaining walls and footings were insufficient to accommodate the building loads. I received a Certificate to this effect, and forwarded it to Mr Gearin. Mr Gearin advised that it was okay to proceed with the demolition." Mr Perica then said: " Demolition requires development consent and no such approval has been sought. Did you check with council prior to proceeding?" Mr Mitchelson replied: "No." Mr Perica said: " Had the original development application sought demolition, consideration of the proposal may well have been different in that retention of large parts of the existing building was an important aspect of the approved development. Put simply, council may not have approved the development in the form put forward if total demolition was a component of the proposal, which it was not."
18. Later on that day Mr Perica received a telephone call from a person who identified himself as Paul Gearin, and who then said that he was the principal certifying authority for the job at No. 66 Bradleys Head Road. The following conversation occurred: Mr Perica said: " It has been alleged that you authorised total demolition to proceed, following receipt of structural engineering certification that remaining walls needed to be demolished on 22 January 2001." Mr Gearin said: "I had a discussion with Darren Mitchelson at or around that time, but I understood that the walls to be demolished were internal walls only, and was therefore not concerned."
19. On 31 January 2001 a meeting was held at prosecutor's office and which was attended by Mr Perica, Mr Mitchelson, Mr I N Dorney (who said that he was a director of Equity and Law Pty Ltd) and Mr J Carmichael, the prosecutor's director of Environment and Planning. During the course of that meeting Mr Mitchelson said: It was intended to retain walls required to be retained and as shown on the approved development consent plans. A Construction Certificate was issued by Paul Gearin in December last year. I had some concerns about whether retained walls and portions of the building could be structurally retained. A structural engineer was engaged and he advised that the walls could not be retained. I verbally advised Paul Gearin and he advised that demolition could proceed.
20. On 23 February 2002, Mosman Local Environmental Plan 1998 (Amendment No. 1 - Heritage Conservation) was published in the New South Wales Government Gazette. The effect of the amendment was to remove the listing of No. 66 Bradleys Head Road as a heritage item. This amendment had been foreshadowed to the applicant for consent when the prosecutor granted it development consent on 1 September 2000. The property remains, however, within a heritage conservation area under the LEP. The defendant
21. The defendant was incorporated on 8 January 1987. Since its incorporation the defendant has been continuously involved in the business of excavation and demolition. It carries out an average of twenty demolitions every year. According to Mr Dicker: Menai has not in the past made any independent inquiries about the validity of the permits that the Project Managers have for the demolition to be carried out where the Customer is a builder or a property developer as we assume they are aware of Council's requirements and will act in accordance with them. When Menai carries out work for private individuals of a domestic nature, we do require the Customer to provide evidence of Council approval.
22. Mr Dicker states that at the time when he sent the quotations for the job at No. 66 Bradleys Head Road to Mr Mitchelson, he believed that Equity and Law Pty Ltd had obtained all necessary permits to carry out the work. He was told by Mr Mitchelson during their first meeting at the subject site that the front fence was heritage-listed and in no circumstances any part of that fence is to be demolished. Mr Dicker further states that if he had known that Equity and Law Pty Ltd did not have consent to demolish the entire building, then the defendant would not have entered into a contract with it to provide this service. Mr Dicker states that the defendant did not intend to carry out any unauthorised work or do anything contrary to the law.
23. The defendant has now put into place procedures to ensure that authorisation is sighted before carrying out any demolition or excavation, irrespective of the nature or size of the project; and the construction certificate is also sighted.
24. The defendant employs eight full-time workers. It carries out some fifty jobs or projects each year, of which some twenty are demolitions. Part-time workers are also employed by the defendant depending upon the demands of each project. The defendant's financial statements as at 30 June 2001 were produced in evidence. They show that the defendant traded at a loss in that financial year. At present the defendant is breaking even, although it will report a substantial loss for the current financial year ending 30 June 2002. By reference to the balance sheet the defendant has no significant cash reserves and no ability to meet any substantial fine.
25. Mr Dicker states that the defendant is very sorry for unintentionally breaching the heritage regulations and apologises to the Court and to the prosecutor for its actions. The prosecutor's submissions
26. Mr P J McEwen SC, appearing for the prosecutor, makes the following submissions: (a) the offence included the demolition of a heritage item in a heritage conservation area; (b) although its listing as a heritage item was removed on 23 February 2002, the building was and remained in a heritage conservation area; (c) the developer had sought to benefit from the fact that the building was a heritage item by obtaining the benefit of State Environmental Policy No. 5 - Housing for Older People or People with a Disability in that it sought to obtain consent for a development having the same "footprint" as the heritage building; (d) a significant portion of the heritage item was to be left in place (e) the defendant's work was not a minor project but involved an operation of a substantial nature; (f) the defendant was an experienced demolition contractor, having been in business since 1987; (g) the person or body carrying out the work should ensure that there is a proper basis for doing so; and (h) although the need for a specific deterrent may not be great in this case, there is a need for a penalty to reflect a general deterrent. The defendant's submissions
27. Mr B J Preston SC, appearing (with Ms S Pritchard) for the defendant, makes the following submissions: (a) the council had previously granted consent (on 26 August 1999) for the total demolition of the building and then took steps to delete the property as a listed heritage item; (b) the heritage assessment of the building which accompanied the development application for its conversion to a retirement village identified only the stone and timber building fence as having heritage value and which has not been disturbed at all; (c) in assessing the development application the council's assessment officer was of the view that none of the fabric of the building was of heritage value; (d) the defendant was instructed to carry out the demolition by Mr Mitchelson on behalf of the developer; (e) Mr Dicker held the belief that the developer had obtained all necessary consents; (f) upon being informed on 29 January 2001 that the work was illegal, the defendant stopped work immediately and has not returned to the site; (g) the listing of the building as a heritage item was formally removed from the LEP in less than four weeks after the demolition; (h) in granting development consent the council approved retention of only 12.5 per cent of the external wall of the building; (i) the defendant has incurred a loss as a result of carrying out the demolition, having received only $27,000 for a job for which it quoted $67,000; (j) the offence is not likely to be repeated since the defendant has now put in place new procedures to prevent a recurrence of this type of offence; (k) the defendant has co-operated with the prosecutor, entered early plea of guilty and its manager has expressed remorse; (l) the defendant has no prior convictions; (m) the level of any fine should take into account the defendant's financial position and the costs it has incurred; and (n) in all the circumstances the defendant should have the benefit of s 10 of the Crimes (Sentencing Procedure) Act 1999. Conclusions
28. In determining the question of penalty I take into account all of the above-mentioned submissions. I also take into account the following.
29. In paragraph [14] above I refer to the construction certificate that was issued on 20 December 2000. That certificate suggests to me that the certifier believed, as at that date, 20 December 2000, that certain existing footings and walls were to be retained. Yet it was at an earlier date, on 18 October 2000, that Mr Mitchelson requested Mr Dicker to provide a quote to demolish the whole building and said: "We have decided to demolish the whole of the building."
30. In paragraph [19] above I refer and set out the explanation for the demolition given by Mr Mitchelson on 31 January 2001. This evidence is inconsistent with the requests of 18 October 2000 and 16 November 2000 for a quote to demolish the whole building, with the statement made by Mr Mitchelson to Mr Dicker on 18 October 2000 that "We have decided to demolish the whole of the building", and with the instruction given by Mr Mitchelson to Mr Dicker on the site on 16 January 2001: "Can you demolish everything but leave the sandstone base if possible". This suggests that the developer, through its project manager, had decided to demolish the whole building even well before the structural engineer inspected the site on 22 January 2001 and before receiving the advice that the remaining walls and footings were insufficient to accommodate the building loads.
31. I accept Mr Preston's submission that the defendant was not the developer and was simply doing what it was instructed to do by the developer. Nevertheless, the defendant is an experienced demolition contractor as it has been in business since 1987. The defendant would have been well aware of the need to obtain a development consent before carrying out any demolition work, although I accept Mr Dicker's statement that he believed that the developer had obtained all necessary consents.
32. It must be borne in mind that an offence against s 125(1) of the EP&A Act is one of strict liability. There is thus an onus on those who carry out development, including demolition work, to ensure that any necessary development consent has been obtained. The particular circumstances in this case, in which reliance was placed on others to obtain the necessary consent, does not, in the case of a strict liability offence, operate to exculpate the defendant (McDonagh on behalf of Great Lakes Council v Birdon Dredging Pty Ltd (1998) 99 LGERA 198 at 205).
33. In Caralis & Ors v Smyth (1988) 65 LGRA 303, a building was demolished contrary to s 135 of the Heritage Act 1977. The defendants had previously obtained a certificate from the Heritage Council stating that the building was not subject to an order under the Heritage Act. The defendants were unaware that a special issue of the New South Wales Government Gazette had subsequently contained an order proscribing the demolition of the building. They thus believed that their actions in demolition the building were not unlawful. In the Court of Criminal Appeal, Street CJ (Finlay and Newman JJ agreeing) said (at 309): The purport of these provisions [namely s 135 of the Heritage Act] is to prevent demolition as an objective consequence. There is much to be said for placing persons who undertake demolition in the position of doing so as their own risk so as to ensure that they take proper steps to ascertain the lawfulness of their proposed conduct.
34. In that case the Court of Criminal Appeal confirmed the imposition of the penalties at first instance by Cripps J of $4,000 upon each defendant, which was 40 per cent of the then maximum penalty of $10,000.
35. It is not usual, in the case of strict liability offence, for a defendant to receive the benefit of s 10 of the Crimes (Sentencing Procedure) Act 1999. The reason for this, I think, are explained in McDonagh on behalf of Great Lakes Council v Birdon Dredging Pty Ltd and in Caralis v Smyth, to which I have referred. One of the matters to be taken into consideration under s 10 is "(b) the trivial nature of the offence". I do not regard the subject offence as trivial. The system of planning control would become somewhat ineffective if persons were to carry out development, including demolition work, without ensuring that necessary development consent has been obtained. Whilst I accept the defendant's submission that it is unlikely to re-offend, there is in my opinion a need to impose a penalty which reflects a general deterrence and to reinforce this obligation on the defendant.
36. In determining the amount of penalty I take into account the fact that the maximum penalty prescribed for this offence is $1.1 million. This is an indication of the seriousness with which the legislature regards the offences against s 125 (1) of the EP&A Act. I also take into account the defendant's means to pay, as required by s 6 of the Fines Act 1996. As a consequence the penalty which I impose is less than otherwise would be the case. I also allow a further discount of 25 per cent to reflect the defendant's early plea of guilty, the express statement of remorse given by the defendant's manager and director and the defendant's willingness to facilitate the course of justice which is acknowledged by the plea (Cameron v The Queen (2002) 76 ALJR 382).
37. In all these circumstances I am of the opinion that a penalty in the sum of $40,000 is appropriate, which is discounted by 25 per cent to $30,000. I note that the defendant consents to an order to pay the prosecutor's costs in the agreed sum of $13,237.40.
38. The orders of the Court are: 1. The defendant is convicted of the offence as charged. 2. The defendant must pay a penalty of $30,000.
39. The defendant must pay the prosecutor's costs of $13,237.40.
40. The exhibits may be returned. I hereby certify that the preceding 38 paragraphs are a true copy of the reasons for judgment herein of the Honourable Mr Justice Lloyd.

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