Mosman Municipal Council v Waratah Village Partners Pty Ltd - [2002] NSWLEC 184 - NSWLEC 2002 case summary — Zoe

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Mosman Municipal Council v Waratah Village Partners Pty Ltd

[2002] NSWLEC 184

Land and Environment Court (NSW)|2002-06-25|Before: Pain J, Mr P

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At a glance

Source facts

Court

Land and Environment Court (NSW)

Decision date

2002-06-25

Before

Pain J, Mr P

Source

Original judgment source is linked above.

Judgment (55 paragraphs)

[1]

Introduction

These are Class 5 proceedings commenced by Mosman Municipal Council (the Prosecutor) against Waratah Village Partners Pty Ltd (the Defendant) concerning demolition work carried out at 66 Bradleys Head Road, Mosman in breach of s 125(1) of the Environmental Planning and Assessment Act 1979 (EP&A Act). The amended summons seeks:
An order that the Defendant WARATAH VILLAGE PARTNERS PTY LTD of Level 6, 200 George Street, Sydney 2000 in the State of New South Wales appear before a Judge of the Court to answer the offence against Section 125(1) of the Environmental Planning and Assessment Act, 1979 that between 19 January 2001 and 30 January 2001 at Mosman in the State of New South Wales the Defendant did cause to be carried out development, to wit, demolition of structures known as Bradleys Head Private Hospital erected on land at 66 Bradleys Head Road, Mosman, otherwise than in accordance with a prior development consent obtained and in force and issued by the Mosman Municipal Council pursuant to Mosman Local Environmental Plan 1998.
An order that the Defendant be dealt with according to law for the commission of the above offence.
An order that the Defendant pay the Prosecutor's costs.

[2]

Section 125(1) of the EP&A Act provides: Where any matter or thing is by or under this Act, other than by or under the regulations, directed or forbidden to be done, or where the Minister, the Director-General, a council or any other person is authorised by or under this Act, other than by or under the regulations, to direct any matter or thing to be done, or to forbid any matter or thing to be done, and that matter or thing if so directed to be done remains undone, or if so forbidden to be done is done, a person offending against that direction or prohibition shall be guilty of an offence against this Act.

[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.
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.
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".

[17]

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

[19]

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.
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.

[26]

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?
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.
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 .
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.

Parties

Applicant/Plaintiff:

Mosman Municipal Council

Respondent/Defendant:

Waratah Village Partners Pty Ltd

Cases Cited (18)

CITATION : Mosman Municipal Council v Waratah Village Partners Pty Ltd [2002] NSWLEC 184 PROSECUTOR Mosman Municipal Council PARTIES : DEFENDANT Waratah Village Partners Pty Ltd (ACN 090 814 672) FILE NUMBER(S) : 50067 of 2001 CORAM: Pain J KEY ISSUES: Prosecution :- not guilty plea - unlawful demolition of building - whether Defendant liable for agent's actions - whether agent was mind and will of Defendant - whether vicarious liability - relevance of primary versus secondary offender in relation to vicarious liability - whether honest and reasonable mistake of fact - whether s 80(12) of the Environmental Planning and Assessment Act 1979 is available as a defence Environmental Planning and Assessment Act 1979 s 76A, s 80(12), s 96, s 125(1) LEGISLATION CITED: Environmental Planning and Assessment Regulation 2000 cl 145 Mosman Local Environmental Plan 1998 Burrell v Jacenko (1998) 99 LGERA 173; Canterbury City Council v Saad (2000) 112 LGERA 107; Environmental Protection Authority v Multiplex Constructions Pty Ltd (2000) 112 LGERA 1; Environmental Protection Authority v Snowy Mountains Engineering Corporation Ltd (1994) 83 LGERA 51; Environmental Protection Authority v Taylor Woodrow (Australia) Pty Ltd (1997) 101 LGERA 226; Giorgianni v The Queen (1985) 156 CLR 473; Hamilton v Whitehead (1988) 166 CLR 121; Mosman Municipal Council v Menai Excavations Pty Ltd [2002] NSWLEC 132; CASES CITED: Mosman Municipal Council v Mitchelson [2002] NSWLEC 111; North Sydney City Council v Michael Standley & Associates Pty Ltd (1998) 97 LGERA 433; Owen v Wiltara (1998) 103 LGERA 137; Power v Penthill House Pty Ltd (1993) 80 LGERA 247; R v Australian Films Limited (1921) 29 CLR 195; Rao v Canterbury City Council (2000) 112 LGERA 360; State Rail Authority of NSW v Hunter Water Board (1992) 28 NSWLR 721; Stevens v Brodribb Sawmilling Company Proprietary Limited (1986) 160 CLR 16; Swadling v Sutherland Shire Council (1994) 82 LGERA 431; Tesco Supermarkets Ltd v Nattrass [1972] AC 153 DATES OF HEARING: 24, 25/06/2002, 15/07/2002 (written submissions), 23/09/2002 (written submissions) DATE OF JUDGMENT: 10/21/2002

(1998) 99 LGERA 173

(2000) 112 LGERA 107

(2000) 112 LGERA 1

(1994) 83 LGERA 51

(1997) 101 LGERA 226

(1985) 156 CLR 473

(1988) 166 CLR 121

(1998) 97 LGERA 433

(1998) 103 LGERA 137

(1993) 80 LGERA 247

(1921) 29 CLR 195

(2000) 112 LGERA 360