Mosman Municipal Council v Waratah Village Partners Pty Ltd

3. Section 76A of the EP&A Act provides that if an environmental planning instrument so provides, development may not be carried out except with development consent. It is in the context of s 76A and s 125(1) that the said offence arises.

4. The Defendant has pleaded not guilty. Both the Prosecutor and Defendant relied on affidavit evidence. Some witnesses also gave oral evidence at the hearing. All written submissions received during and after the hearing from the parties have been considered in the preparation of this judgment.

Facts 5. The facts as set out here are drawn in large part from the statement of agreed facts supplied by the parties. The Defendant is the registered proprietor of 66 Bradleys Head Road, Mosman (the property). The Defendant became the owner of the property on 28 June 2000 and continues to be the owner. The property was the site of the Bradleys Head Private Hospital (the building), a three storey building and a heritage item under the Mosman Local Environmental Plan 1998 (the LEP) on the dates of the offence. At the relevant time the property was zoned residential 2(a1) under the LEP. The LEP required development consent for the demolition of the building.

Development Application No. 8.2000.137.1 was lodged by the Defendant with the Prosecutor on 7 April 2000 for the development of a 10 unit retirement village conversion from the building. The consent for the development was issued by the Prosecutor on 1 September 2000. The conditions of development included demolition of much of the building but required that part of the existing walls and footings of the building be retained as detailed in plans attached to the Notice of Determination of consent.

Darren Mitchelson, through his company Network Property Services Pty Ltd (NPS), was appointed by the Defendant's parent company, Equity & Law (E&L), as the project manager for the development of the retirement village at the property. On 20 December 2000, Paul Gearin, an accredited certifier, issued a construction certificate for partial demolition of the building to the Defendant. The plans attached to the construction certificate marked S2A included a note to the following effect: Note: Where existing footings & walls are to be used, engineer is to inspect and approve structural adequacy of footings & walls before proceeding with level 2.

On 22 January 2001 the consulting engineer for the project, Taylor Thomson Whitting, issued a Site Instruction to Mitchelson. That Site Instruction noted that "the existing footings will be structurally inadequate for the new development". Mitchelson contacted the certifier to discuss the consulting engineer's advice. Mitchelson apparently believed he then obtained the certifier's verbal consent for total demolition of the building. The certifier was not called to give evidence.

Mitchelson instructed Menai Excavations Pty Ltd (Menai) to demolish the whole of the building, including the walls the development consent required to be retained (the walls). On 24 and 25 January 2001, Menai demolished the walls. On 6 February 2001, the consulting engineer confirmed by letter the Site Instruction that both the footings and the walls were structurally inadequate.

Menai has pleaded guilty in this Court to a similar charge in separate proceedings. Mitchelson has also been separately charged with a similar offence and has pleaded guilty in this Court.

The offence charged is a strict liability offence. Proof of intention of causing the offence is therefore not required, but the defence of honest and reasonable mistake of fact may be available to the Defendant. There is no dispute that development, namely demolition of all walls of the building, was carried out without development consent.

Contractual arrangement between Mitchelson and the Defendant 12. However, one of the key issues in these proceedings is what is the nature of the contractual relationship between the Defendant and Mitchelson, and hence the liability, if any, of the Defendant.

13. The Defendant argued that Mitchelson was an independent contractor retained by its parent company E&L and the Defendant was not vicariously liable for his actions (E&L owns fifty percent of the shares in the Defendant. The Defendant was established as a company specifically to develop the property). In order to prove Mitchelson was an independent contractor, the Defendant relied on an affidavit of Ian Dorney, a director of E&L and also a director of the Defendant, sworn on 25 June 2002. Paragraph 10 of Dorney's affidavit states: Equity & Law is also engaged in the development of land. In my capacity as director of that company due to the fact that Equity & Law and Waratah had recently acquired a number of sites it was decided that we should engage the services of a project management company. Shortly after Waratah acquired the land a person known to me, who is a recruitment consultant and major investor in the Waratah Project of the Land referred me to Darren Mitchelson as a person who would be suitable to assist in this area.
14. Annexed to Dorney's affidavit was an Agreement dated 7 April 2000 between E&L, NPS and Mitchelson, whereby NPS, through Mitchelson, agreed to carry out various services. The agreement has no fixed term of duration. Clause 1.2.3 of the agreement states: DM [Darren Mitchelson] will project manage sites as agreed between NPS and E&L. This will include, but is not necessary [sic] limited to the following: · Liason with design team members (Architect, Engineer etc) · Liason with local authorities and regulatory bodies · Tender arrangements for sub contractor works · Appointment of sub contractors · Sourcing of building materials where required · Cash flow forecasts · Cost monitoring · Approval of sub contractor invoices for payment by others One of the sites specified in the agreement for project management by NPS was the property the subject of these proceedings.
15. Under the agreement Mitchelson was to work exclusively for E&L or its associated companies, including the Defendant, in relation to finding potential sites with a retirement village or development potential (cl 1.2.2). E&L would guarantee the payment of the retainer specified in the agreement (cl 2.1). The agreement also stated that NPS and its representative Darren Mitchelson will work exclusively with E&L for the term of the Agreement in relation to the business plan originated by E&L (cl 3.2). The agreement is silent on matters such as how Mitchelson would carry out his duties. The agreement did specify that E&L was to provide appropriate office space for NPS and infrastructure that was necessary to carry out its functions (cl 2.2). The agreement also stated (cl 3.1) that "NPS, and its representative DM [Darren Mitchelson], are independent contractors in their relationship with E&L".

16. The Prosecutor argued that regardless of the private arrangement between the Defendant and Mitchelson, it was necessary to consider the objective evidence to determine what was the precise nature of their relationship. The agreement on its own was not conclusive on that matter. I note that it is a well established principle that the parties to a relationship cannot define the nature of that relationship simply by labelling it in a particular manner.

Prosecutor's submissions on the liability of the Defendant for Mitchelson's actions

1. Direct liability - Was Mitchelson the heart, mind and will of the Defendant
2. The Prosecutor argued that Mitchelson was the heart, mind and will of the company so far as concerned the project carried out for the Defendant on the property. Such liability is of the company itself for what are deemed to be its wrongs, rather than making the company punishable for the wrongs of others (see Fords Principles of Corporations Law, 10th ed, at [16.110]). In support of this proposition the Prosecutor relies on the judgment of Lord Reid in Tesco Supermarkets Ltd v Nattrass [1972] AC 153 at 170 - 1 and its application by the High Court in Hamilton v Whitehead (1988) 166 CLR 121. In Hamilton the Court (Mason CJ, Wilson and Toohey JJ) stated (at 127) that "It is not a case of a company being made liable for an act performed by a servant of the company on its behalf. The liability imposed is direct, not vicarious."

18. The Prosecutor argued it is consistent with the evidence that Mitchelson exercised control of the project on behalf of the Defendant i.e. that the Defendant gave Mitchelson control of the project. Mitchelson managed the site as the alter ego of the company itself and he was liable as the principal offender as if he was speaking as the company. No one else apart from the Defendant, through its Director, Dorney, could have given that control as the Defendant was the owner of the site, was the applicant for and obtained the development consent, was the applicant for the construction certificate, was responsible for and had control over the project and that control was delegated to Mitchelson.

19. The evidence relied on in support of this submission was as follows: (i) Paragraph 5 of Dorney's affidavit states: "I have the day to day control of Waratah". Paragraph 29 of Dorney's affidavit states that "…Mitchelson was in control of the project…". (ii) Paragraph 3 of Dorney's affidavit states why the Defendant company was established i.e. to undertake the development on the property. The Prosecutor submitted the "organ or agent or arm" that was to carry out the development was Mitchelson. (iii) In par 10 of Dorney's affidavit reference is made to "we", meaning both E&L and the Defendant, decided to engage a project management company, ultimately Mitchelson's company, NPS. (iv) There was evidence in the affidavits of James Perica and John Carmichael, the Prosecutor's Manager, Development Services and Director, Environment and Planning respectively, about conversations between Perica, Carmichael, Dorney and Mitchelson at a meeting held at the Prosecutor's chambers on 31 January 2001, after the demolition took place. In his affidavit of 5 July 2001, Perica states at par 27: I started the meeting by saying "What is the relationship between Equity and Law Pty Limited and Waratah Village Partners Pty Limited?". Ian Dorney said "I am a Director of Equity and Law Pty Limited. Equity and Law Pty Limited is the mother company, which has interests in areas other than development, including financing. Waratah Village Partners Pty Limited is a company dealing specifically with aged housing construction. Darren Mitchelson is the Project Manager for 66 Bradleys Head Road, representing Waratah Village Partners Pty Limited. (v) The Prosecutor submitted that Mitchelson agreed in oral evidence with the proposition that Dorney had advised the meeting at the Prosecutor chambers on 31 January 2001 that Mitchelson was the project manager for the site, representing the Defendant. This could be inferred from Mitchelson's statements in cross examination to the effect that while he did not recall that being said, it was probable something to that effect could have been said and it was the fact that he was representing the Defendant. (vi) The evidence from Dorney personally was that Mitchelson did represent the Defendant company in his activities, namely that Mitchelson obtained a construction certificate and gave instructions to demolish the walls. (vii) It was Mitchelson's evidence that he had told Dorney of his limited experience in project management work of this nature, his experience being in organising office fit outs. Dorney when asked in cross-examination could not recall being told of Mitchelson's limited experience in undertaking work of this nature

2. Vicarious liability - was Mitchelson an agent of the Defendant?
3. Alternatively, the Prosecutor argues that the Defendant is vicariously liable for Mitchelson's actions as he was acting as the Defendant's agent. The Prosecutor relies on Power v Penthill House Pty Ltd (1993) 80 LGERA 247 in support of this proposition and argues that case is essentially a "blue print" for the current case.

21. In addition to the evidence relied on in relation to the submission that Mitchelson was the heart, mind and will of the Defendant, the further evidence relied on by the Prosecutor to prove Mitchelson was an agent was: (i) A letter to the Prosecutor signed by Mitchelson on the Defendant's letterhead asking that development application approved stamped drawings be sent to the correct address for Waratah Village Partners (Exhibit H). The Prosecutor argues this shows Mitchelson was giving directions to the Prosecutor on behalf of the Defendant. (ii) The instructions given to the Defendant's then lawyers, Hones Lawyers, which refer to the work being carried out on the site and correspondence from Hones Lawyers which refers to "our client's project manager, Mr Darren Mitchelson" (Exhibit N). (iii) Dorney signed a modification application under s 96 of the EP&A Act which referred to an application being made as: "Darren Mitchelson c/o Waratah Village Partners" (Exhibit O). (iv) Mitchelson gave directions on site as to what was to occur (i.e. arranging inspections by the engineer and certifier and giving directions for the demolition to occur) and these were consistent with his authority. (v) Mitchelson told Dorney on 23 January 2001 that he had given the instruction to demolish all the walls to Menai the day before demolition took place and Dorney did not object to this. In par 28 of his affidavit Dorney deposed that the following conversation took place on 23 January 2001: [Mitchelson]: "The engineer has issued a site instruction saying the walls should come down and the footings be replaced." [Dorney]: "So what does this mean?" [Mitchelson]: "The certifier has said it is ok to demolish the rest of the walls and replace the footings so I have instructed Menai to proceed on that basis". [Dorney]: "Ok." The Prosecutor relies on the fact that Dorney didn't contest Mitchelson's authority to authorise the demolition. The demolition contractor could proceed on Mitchelson's word. (vi) Mitchelson agreed in cross-examination that he did not specify which company he was acting for as between E&L and the Defendant when he dealt with the Prosecutor's officers in relation to the development at the property.
22. The Prosecutor submits that a corporate principal can be vicariously liable for the wrongs of its agent where the agent has, through the course of his work for the company, done the particular act with intent to do wrong: R v Australian Films Limited (1921) 29 CLR 195 at 217; Environmental Protection Authority v Taylor Woodrow (Australia) Pty Ltd (1997) 101 LGERA 226 at 240. In this case, the offence being one of strict liability, no proof of intent is required: Power v Penthill House.

Defendant's submissions 23. The Defendant maintained that Mitchelson was at all times an independent contractor and that the Defendant was not vicariously liable for his actions. The Defendant argued that vicarious liability would arise in two circumstances: (a) Where the Court finds that Mitchelson was an employee of Waratah and that his acts and omissions that led to the offence were carried out within the scope of his employment; or (b) Where the Court finds that Mitchelson was an independent contractor of Waratah and there was direct authorisation of Mitchelson's acts or omissions by Waratah.

The Defendant submitted there was no evidence suggesting Mitchelson was an employee of the Defendant. Mitchelson performed project management services for E&L pursuant to the Agreement dated 7 April 2000. That agreement provided that Mitchelson through his company NPS would provide project management services to a number of projects, including the project at the property. It is clear from the agreement, namely cl 3.1 and 3.2, that Mitchelson and NPS were independent contractors, not employees. The Defendant relies on Stevens v Brodribb Sawmilling Company Proprietary Limited (1986) 160 CLR 16 in support of this proposition. Furthermore, Mitchelson was carrying out work in relation to the project pursuant to that agreement.

Further, the Defendant argued that even if Mitchelson was an employee, the Defendant is only vicariously responsible for actions carried out within the scope of his employment. Mitchelson was only authorised to act lawfully in putting the development consent into effect. Any unlawful action was outside the scope of his employment.

In relation to vicarious liability of a principal for an independent contractor, the Defendant submitted on the basis of the decision of Lloyd J in Environmental Protection Authority v Multiplex Constructions Pty Ltd (2000) 112 LGERA 1 that there must be sufficient control and direction over the independent contractor's activities by the principal in order to support a finding of vicarious liability.

Dorney's affidavit (par 29) states that Mitchelson was in control of the project and the evidence of both Dorney and Mitchelson was that Mitchelson had control of how the project was to be carried out. The only area where Mitchelson said he did not have authority was in relation to spending money, as he only had authority to spend up to a certain amount.

Dorney disputed in his oral evidence that he stated to Prosecutor officers at the meeting held at the Prosecutor's Chambers on 31 January 2001 that Mitchelson was representing the Defendant in addition to stating he was the project manager for the property.

There is no evidence, the Defendant submitted, to support a conclusion that Mitchelson was anything other than an independent contractor over whom the Defendant did not exercise sufficient direction or control to justify a finding of vicarious liability. There was no evidence of any direction by the Defendant to Mitchelson in relation to the unlawful demolition. This submission was made on the basis that there was no evidence inconsistent with the arrangements between the parties being controlled by the agreement under which Mitchelson's company is described and employed as an independent contractor. Further, the Defendant submitted, I need to be satisfied beyond reasonable doubt that the Defendant directed Mitchelson other than in accordance with the development consent issued by the Prosecutor. Finding Was Mitchelson the heart, mind and will of the company? 30. As the Prosecutor identified, Tesco was applied in Australia in Hamilton. In Tesco it was recognised that where an employee or agent can be said to be acting as the company, such that the agent's "mind which directs his acts is the mind of the company", the company will be liable - the agent's guilt is the guilt of the company. Furthermore, it is a question of law, having regard to the facts of the case, as to whether a person can be regarded as the mind of the company. In Tesco Lord Reid held at 170 - 1: It must be a question of law whether, once the facts have been ascertained, a person in doing particular things is to be regarded as the company or merely as the company's servant or agent… Normally the board of directors, the managing director and perhaps other superior officers of a company carry out the functions of management and speak and act as the company. Their subordinates do not. They carry out orders from above and it can make no difference that they are given some measure of discretion. But the board of directors may delegate some part of their functions of management giving to their delegate full discretion to act independently of instructions from them. I see no difficulty in holding that they have thereby put such a delegate in their place so that within the scope of the delegation he can act as the company. 31. On the evidence relied on by the Prosecutor, I do not think Mitchelson could be described in this way. I note the evidence relied on by the Prosecutor, set out at par 19, as the basis for the Prosecutor's submission that Mitchelson was the heart and mind of the company. It is clearly important to determine the extent to which Mitchelson was able to exercise his discretion independently of instructions from the Defendant in carrying out his work. It was also the evidence in the proceedings that: (i) Mitchelson had an office next to Dorney and kept him regularly informed of matters. Mitchelson estimated that he spent approximately fifty percent of his time in his office. He agreed with the Prosecutor in cross-examination that it was important that he keep the owners fully informed and that it was the owners of the site who controlled access and possession of the site for the purposes of carrying out work. (ii) Mitchelson and Dorney had numerous informal meetings to discuss progress on the project so that Dorney was kept informed of progress regularly by Mitchelson. Mitchelson's affidavit and cross-examination confirmed that Dorney gave directions for some actions to be taken during the course of the project. Examples were instructions to Mitchelson to get builders' quotes and to obtain a construction certificate. (iii) Dorney was told by Mitchelson of the potential problems with the footings and walls on 9 or 10 January 2001 and Dorney asked him what he was going to do about it. (iv) Dorney was also informed on 23 January 2001 before the demolition took place, that Mitchelson had instructed Menai Excavations to demolish all the walls and footings, and Dorney said "OK". (v) While the evidence discloses that Mitchelson did have discretion in how he went about much of his day to day duties and filled out forms such as the application for modification, Dorney signed such documents on behalf of the Defendant. (vi) Mitchelson only had limited authority in relation to spending money, that is, up to a certain defined amount. (vii) Mitchelson agreed in cross-examination that he asked Dorney whether to proceed with getting construction drawings and to engage the services of and get quotes for a builder as referred to in par 13 of Mitchelson's affidavit sworn 28 May 2002. He was asked to forward fee proposals to Dorney and was instructed by Dorney to find a builder for the project . 32. In all the circumstances I do not think the Defendant is directly liable for Mitchelson's actions on the basis that Mitchelson was the heart, mind and will of the company, as he was not invested, in my view, with such complete discretion in how he did attend to matters on behalf of the Defendant to justify such a finding. While it is clear that Mitchelson had authority to make arrangements for Menai to undertake demolition, it is also clear that Dorney had ultimate control over what occurred at the site. There was frequent communication between Dorney and Mitchelson about the work being conducted on the property and, on more than one occasion, Dorney instructed Mitchelson on what action to take. Mitchelson advised Dorney of the difficulties with the footings and walls in early January and advised him on 23 January 2001 (before the demolition took place) that he had organised for the demolition to be undertaken. This evidence suggests that Mitchelson was not the heart, mind and will of the company, as he was not invested with full discretion to act independently of instructions from Dorney.

2. Is the Defendant vicariously liable for Mitchelson's actions?
3. For the Defendant to be guilty, the Prosecutor has the onus of proving beyond reasonable doubt a relevant relationship between the Defendant and Mitchelson such as would create vicarious liability for his actions; Owen v Wiltara (1998) 103 LGERA 137, Environmental Protection Authority v Snowy Mountains Engineering Corporation Ltd (1994) 83 LGERA 51. This requires consideration of the facts of the case to see what the nature of that relationship was.

The evidence suggests that although the Defendant and Mitchelson might have considered that Mitchelson was engaged on the basis that he was an independent contractor, he was clearly also held out as the Defendant's agent, in my view.

E&L owns fifty per cent of the shares in the Defendant and the two companies share common directors, of whom Dorney is most relevant in this circumstance given his close involvement with the Defendant's day to day activities. It is quite possible for Mitchelson to be an agent of the Defendant at the same time as he is either an employee or independent contractor of E&L or the Defendant. The evidence set out above at par 19 and 21 relied on by the Prosecutor demonstrates that Mitchelson is the Defendant's agent, despite the Defendant's reliance on the agreement in which E&L employed NPS as an independent contractor. There was evidence in Mitchelson' cross-examination to the effect that when he dealt with Dorney, Dorney did not advise him whether he was communicating with him as a director of E&L or the Defendant. Further, although Mitchelson did not make clear to the Prosecutor's officers when he dealt with them which company he was working for, there was no reason for people dealing with Mitchelson to think he was not working for the Defendant rather than another entity, such as E&L, in relation to the property.

Further, in relation to the conversation during the meeting at the Prosecutor's chambers on 31 January 2001, I accept the evidence of the Prosecutor's officers, James Perica and John Carmichael, that Dorney said Mitchelson was the project manager and was representing the Defendant. I note that Dorney agreed with the Prosecutor in cross-examination that although he could not recall the terms of the conversation with the Prosecutor's officers on 31 January 2001 he was likely to have said Mitchelson was the project manager for the project but denied he said Mitchelson was representing the Defendant.

It seems to me that Mitchelson was acting as the agent for the Defendant and it is therefore vicariously liable for his actions. Mitchelson clearly committed the offence in the course of his work for the Defendant. The situation is similar to that in Power v Penthill House, where the first Defendant was held vicariously liable for the actions of the second and third Defendants as its agent.

The fact that the action was unlawful does not take it outside the scope of Mitchelson's work conducted for the Defendant for which the Defendant is liable. It cannot be suggested, on the evidence, that Mitchelson was acting outside the scope of his work when he caused the unlawful demolition to take place. Although the argument was put by the Defendant on the supposition, which the Defendant denied, that he was an employee, this finding also applies to Mitchelson as an agent.

The submission of the Defendant that I need to be satisfied beyond reasonable doubt that the Defendant directed Mitchelson other than in accordance with the consent, if he was an independent contractor, appears to go beyond the level of control and direction necessary to found vicarious liability, based on Multiplex amongst other authorities, and I do not accept that submission. In any event, it does not arise as I have not founded the Defendant's liability on the basis of vicarious liability for an independent contractor, but rather on the basis of Mitchelson being the Defendant's agent. Primary and secondary offender The parties' submissions 40. The Defendant argued that even if it was vicariously liable for the actions of Mitchelson it is not a principal offender; it could only be guilty as a secondary offender. This was because Mitchelson could only be guilty as a secondary offender - he pleaded guilty to the offence of causing to carry out. As the offence is framed as that of a secondary offender, being "causing to carry out development" the Prosecutor must prove that the Defendant had actual knowledge of the essential elements of the offence. In support of this proposition the Defendant relied on Giorgianni v The Queen (1985) 156 CLR 473 in which Gibbs CJ stated at 488 that the prosecution must show that the defendant: intentionally aided, abetted, counselled or procured the acts of the principal offender. Wilful blindness…is treated as equivalent to knowledge but neither negligence nor recklessness is sufficient.

41. The Defendant argued the distinction between primary and secondary offender was still relevant as different requirements of proof existed depending on how the charge was framed.

42. The Defendant also argued, on the basis of Rao v Canterbury City Council (2000) 112 LGERA 360, that the Prosecutor had to establish the Defendant's express authorisation of the act beyond reasonable doubt. Canterbury City Council v Saad (2000) 112 LGERA 107 was also relied on.

43. In response to the Defendant's argument that it could only be liable as a secondary offender, the Prosecutor argued there was no longer any distinction between principal and secondary offender so that the Defendant could be liable as the principal offender. The Prosecutor argued there was no longer any need on the basis of Giorgianni and Burrell v Jacenko (1998) 99 LGERA 173, to distinguish between principal offenders and secondary offenders.

Finding on Primary v Secondary Offenders 44. The issue as I see it is in slightly different terms to that put by the parties. It seems to me that, as the Defendant company is vicariously liable for Mitchelson's actions as its agent, whether it is liable as principal or secondary offender is irrelevant. The Defendant's guilt arises because of its relationship with Mitchelson. There is no need to consider separately from Mitchelson's actions whether the company itself had the requisite "knowledge" of the relevant circumstances to render it guilty in its own right as a secondary offender, as the Defendant argued.

45. Accordingly, I consider the Defendant is vicariously liable for Mitchelson's actions.

Defences raised 46. The Defendant raised two defences. (i) Honest and reasonable mistake of fact 47. The Defendant relied on the defence of honest and reasonable mistake of fact, namely, did the Defendant have an honest and reasonable belief in a set of facts which if true would exculpate him? The Defendant argued it honestly and reasonably believed that the walls to be retained would not be demolished until approval had been obtained, and this belief was reasonable (see Rao at par 54). The Defendant argued that on the basis of the evidence of Dorney and Mitchelson the Court would find:

(i) The Defendant was aware of the development consent. (ii) The Defendant was aware that development consent required some of the walls to be retained. (iii) The Defendant believed the walls to be retained could be demolished if approval was given. (iv) The Defendant believed the walls to be retained would not be demolished until necessary approval had been obtained. (v) These matters were honestly believed by the Defendant and that belief was reasonable. There is nothing unreasonable in the belief on the Defendant's part that Mitchelson, an independent contractor, would only act lawfully. (vi) Neither Dorney nor the Defendant gave any instructions in relation to the demolition of the walls that were required to be retained under the development consent. Further there was no other form of approval or wilful blindness by the Defendant. 48. The defence of honest and reasonable mistake is only available in relation to questions of fact, not law. The Defendant submits this is a mistake of fact. Once the defence has been raised by the Defendant to show that sufficient evidence indicates the defence might apply, the Prosecution then bears the onus of disproving the defence beyond reasonable doubt: State Rail Authority of NSW v Hunter Water Board (1992) 28 NSWLR 721.

49. The Prosecutor argued the defence had not been made out, arguing the Defendant had to establish a state of mind in which there was a belief, honestly and reasonably held, which, if true, would mean that no offence was committed. The following circumstances show that there was no such belief:

(i) Both Mr Mitchelson and Mr Dorney knew that the company did not have development consent for complete demolition of the building; (ii) Both men also knew that development consent for demolition was required; (iii) Mr Mitchelson knew of the proposed demolition before it occurred; (iv) The principal certifier, Mr Gearin was not called to give evidence as to the advice he gave Mr Mitchelson; (v) In any event, according to Mr Perica, the principal certifier indicated to him that he had not advised the whole structure could be demolished, only the internal walls [see par 25 of Mr Perica's affidavit]; (vi) The principal certifier was not a Prosecutor agent or servant. His function was always quite separate and distinct from that of the consent authority; (vii) Mr Mitchelson and Mr Dorney both chose not to confirm with the Prosecutor that the principal certifier's advice was correct; (viii) Mr Dorney was made aware of the proposed demolition before it occurred or was complete; (ix) Mr Dorney admitted that a phone call to the Prosecutor was all that was required to clarify the situation and that he did not act prudently to make that check before demolition occurred; (x) The development was a significant project involving additions and alterations to a heritage item.

50. Given these facts, it cannot be argued that the Defendant's belief that demolition was permitted was a belief that was reasonably and honestly held.

Finding on defence of honest and reasonable mistake 51. The Prosecutor bears the onus of proof beyond reasonable doubt that the Defendant did not hold the relevant honest and reasonable belief. I do not agree with the Prosecutor's submission as to the level of proof which falls on the Defendant. It is for the Prosecutor to prove beyond reasonable doubt that the Defendant did not hold the relevant honest and reasonable belief once the defence is raised.

52. Nevertheless, I do not think this defence has been made out. Despite the submissions by the Defendant's counsel that the mistake was one of fact, submitting that the Defendant's director Mr Dorney's belief that all the walls would not be demolished until approval had been obtained, rather than whether approval could be given, it seems to me the issue about which the Defendant claims to be mistaken is one of law. That is, that all the necessary approvals had been obtained, which is concerned with Mr Dorney believing the certifier's approval was sufficient to allow the demolition to be lawful, when legally it was not.

53. If I am wrong on my finding the mistake was one of law, the evidence relied on by the Prosecutor demonstrates that if the mistake was one of fact it was not a belief that could reasonably be held in the circumstances. On the oral evidence it is apparent that the Defendant's director Dorney was aware of the need to obtain further development consent from the Prosecutor for the complete demolition of the building, and this was known to him when he spoke to Mitchelson the day before demolition took place at which time he could have stopped the demolition. Accordingly, I do not consider this defence has been made out by the Defendant.

(ii) Section 80(12) of the EP&A Act 54. The Defendant lastly argued that there was a defence based on s 80(12) of the EP&A Act. This section provides that: Effect of Issuing Construction Certificate If a consent authority or an accredited certifier issues a construction certificate, the construction certificate and any approved plans and specifications issued with respect to that construction certificate are taken to form part of the relevant development consent (other than for the purposes of section 96). 55. The Defendant argued the section is necessary because of cl 145 of the Environmental Planning and Assessment Regulation 2000 (the EP&A Regulation) which anticipates that there may be a difference between a development consent and a construction certificate. Clause 145(1) provides: A certifying authority must not issue a construction certificate for building work unless it is satisfied of the following matters: (a) that the design and construction of the building (as depicted in the plans and specifications and as described in any other information furnished to the certifying authority under clause 140) are not inconsistent with the development consent,… 56. The Defendant argued that the use of the words "not inconsistent" in cl 145(1)(a) is deliberate and envisages differences that are still "consistent". A person is entitled to act pursuant to a construction certificate and assume that the construction certificate is valid unless or until it is declared otherwise. Swadling v Sutherland Shire Council (1994) 82 LGERA 431 at 436 was relied on in support of that submission, that judgment concerned the validity of a development consent which, the Defendant argues, is an appropriate analogy for a construction certificate. As the construction certificate has not been challenged or set aside it is therefore valid. The construction certificate permitted the walls to be demolished. There was therefore no breach of the development consent.

57. Further, the construction certificate issued on 20 December 2000 expressly incorporated the Engineering Detail plans and therefore the words "note: where existing footings & walls are to be used, engineer is to inspect and approve structural adequacy of footings & walls before proceeding with level 2". The consulting engineers, Taylor Thompson Witting, issued a site instruction on 22 January 2001 which recommended the removal of the existing footings, including the walls, as these were not structurally adequate (confirmed in a letter dated 6 February 2001). The Defendant submitted that the construction certificate permitted the demolition of the walls to be retained under the development consent if these were not structurally adequate and consequently permitted demolition of those walls. Because of the provisions of s 80(12) of the EP&A Act, namely that the construction certificate forms part of the development consent, there was no breach of the development consent in these circumstances.

58. The Prosecutor argued that the construction certificate cannot amend a development consent, as is clear from the words "other than for the purposes of s 96" in s 80(12) of the EP&A Act. A development consent can only be modified by an application made and consent given under s 96 of the EP&A Act. (The Defendant argued s 102 (now s 96) had been amended to avoid the problem of "creeping" modification allowed in North Sydney City Council v Michael Standley & Associates Pty Ltd (1998) 97 LGERA 433. Before that amendment, each modification was to be assessed according to a development consent as already modified. Section 96 now requires comparison to the consent as originally granted. If s 80(12) did not exclude its operation for the purposes of s 96 then development as modified by the construction certificate would be open, allowing back in the "creeping" modification s 102 (now s 96) had been amended to avoid.)

59. The Prosecutor further argued cl 145 of the EP&A Regulation requires that the construction certificate must be consistent with the development consent. The construction certificate issued on 20 December 2000 did not permit the entire building to be demolished, the note on the certificate relied on by the Defendant did not state total demolition was permitted. The Prosecutor argued that in this situation, where the footings were unsound and structurally inadequate according to a structural engineer, the Defendant did not have the ability to implement the development consent and therefore required further consent from the Prosecutor.

60. Further, the construction certificate was issued on 20 December 2000 before the footings to the walls shown to be retained on the approved development consent plans were found to be unstable. This could not be an amendment to the development consent justifying the demolition in any event as a question of fact.

Finding on s 80(12) 61. While cl 145 of the EP&A Regulation does not allow the issue of a construction certificate which is inconsistent with development consent, the EP&A Act appears to be silent on the legal issue raised here, namely the extent to which a construction certificate can be incorporated into a development consent under s 80(12) if inconsistent with the development consent and the construction certificate has not been declared invalid by a Court. Section 80(12) on its face simply states that any construction certificate issued forms part of the development consent. It seems to me this is a live legal issue given the way the EP&A Act and EP&A Regulation have been drafted. As it is not necessary that I decide the issue finally here because of my view of the facts, I will simply note that the Defendant's interpretation of the reason for the reference to s 96 in s 80(12) is the preferred interpretation on my reading of s 80(12) in the context of the EP&A Act. However, I express no opinion as to whether a defence is available under s 80(12) of the EP&A Act.

62. As a matter of fact in this case the construction certificate issued did not authorise total demolition, as the Defendant alleges. It was issued on 20 December 2000 and noted the need for the inspection of the footings and walls to be retained. That is all that it did. It did not authorise the demolition of footings and walls which were to be retained under the development consent. Accordingly, I consider the Defendant has not made out this defence.

63. I find that the Prosecutor has established beyond reasonable doubt that the Defendant is guilty of the offence alleged in the summons. Orders The Court orders that:
64. The offence is proved.
65. The Defendant is found guilty of the offence with which it is charged.
66. The proceedings are stood over to a date to be fixed for the determination of penalty and costs.
67. The parties are granted leave to approach the Registrar to obtain a hearing date for penalty and costs.

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