DID TOVIR CAUSE OR PERMIT THE PREMISES TO BE USED FOR THE PURPOSE OF BACKPACKERS ACCOMMODATION?
144The respondents submit that the Council has not discharged its burden of proving beyond reasonable doubt that Tovir caused or permitted a breach of the Court's orders because it has not proved that Tovir had knowledge of the unlawful use and had in some way connived or arranged for it to take place on its behalf. They submit:
(a)mere ownership of the premises is insufficient: Wilkie v Blacktown City Council [2002] NSWCA 284, 121 LGERA 444 at [40] - [44], [59] - [60];
(b)the fact that Tovir received rental income from the premises does not alone prove that Tovir knew of and participated in the specific use of the premises;
(c)mere presence at the scene of an illegal activity is insufficient unless there is a prior arrangement for the illegal activity to take place: Osland v The Queen [1998] HCA 75, 197 CLR 316 at [72];
(d)there is no evidence of direct management by Tovir. It does not suffice that there is a group of family companies including the family trust (of which Tovir is the trustee), nor that there were occasional visits to the premises by Thomas and Vivian Rappaport, nor that the vehicles used by Michael Rappaport were registered to Tovir;
(e)Michael Rappaport's actions cannot be attributed to Tovir because there is no evidence of the relationship between them, there has been no attempt to show that he was an officer or employee of Tovir, and it has not been established that he was involved in decision-making affecting the affairs or business of Tovir or had the capacity to significantly affect Tovir's financial standing: Ford, Austin & Ramsay, Ford's Principles of Corporations Law, 11th ed (2003) at 8.020 summarising Australian Securities & Investments Commission v Adler [2002] NSWSC 171, 41 ACSR 72;
(f)there is no evidence that Tovir caused the promotion or marketing material on the BIH and BSH websites to be created or published. Nor was there any association between Tovir and BIH and BSH, particularly given that Vivian Rappaport was not a director or shareholder of BIH or BSH. The respondents concede that the subject premises were promoted through BIH and BSH by Michael Rappaport. They also concede that it might be an available inference that he was retained by Tovir to do it. However, they submit that another reasonably available inference is that he was doing it without Tovir's acquiescence, knowledge or permission and did it running the social club on behalf of himself, BIH or BSH - one just does not know;
(g)the Court could not be satisfied, based on the limited evidence of Thomas and Vivian Rappaport attending one of the subject premises, that Tovir was invested with a sufficient level of knowledge to understand the nature of the use being carried out on the premises;
(h)it could rationally be inferred that when Michael Rappaport used Tovir's motor vehicles when managing the premises, he was acting on his own or in his capacity as a director or shareholder of BIH or BSH;
(i)the question is whether Michael Rappaport was acting on the authority, express or implied, of Tovir: O'Sullivan v Truth and Sportsman Ltd [1957] HCA 8, 96 CLR 220 at 228. That has not been proved.
145None of the propositions in [144(a) - (c)] above applies here. That is, the evidence against Tovir is not merely of its ownership of the premises, nor is it merely that it received rental income from the premises. Rather, it is both and more. Nor is the evidence merely that Thomas and Vivian Rappaport were present at the premises. It is that and more. As for [144(e)] above, the Council, contends, and I accept, that Michael Rappaport was Tovir's property manager. Whether in that capacity he was Tovir's employee or agent does not matter. I agree that there was no attempt to show that he was an officer of Tovir. The respondents refer to Australian Securities & Investments Commission v Adler but it was concerned with a statutory definition of "officer". In that case it was claimed that Mr Adler had breached his statutory duties as an officer of a corporation and an issue was whether he was an "officer" within the definition of "officer" in s 9(b)(i) and (ii) of the Corporations Act 2001 (Cth), which provides that an "officer" is "a person who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or who has the capacity to affect significantly the corporation's financial standing". That issue does not arise in the present case.
146In my opinion, the Council has discharged its burden of proof in relation to both premises having regard to the following matters in combination.
147First, Tovir is a small family company whose directors and shareholders are Thomas and Vivian Rappaport. Michael Rappaport is their son and appears to have lived with them during the charge period.
148Secondly, Tovir owned the premises.
149Thirdly, Tovir rented out the premises and received the rental income. Where rent was not paid by bank transfer, Michael Rappaport regularly collected the rent. On occasions, so did Thomas and Vivian Rappaport.
150Fourthly, Michael Rappaport managed the premises intensively on a daily basis using vehicles owned by Tovir including collecting the rent, transporting people and their luggage as well as mattresses to and from the premises, and showing potential occupants through the premises. He was present with his parents or one or other of them, at the premises on occasions.
151Fifthly, Thomas and Vivian Rappaport visited the Imperial Avenue premises sometimes accompanied by Michael Rappaport. Mrs Perry deposed:
(a)Thomas and Vivian Rappaport visited the Imperial Avenue premises on a number of occasions since about the second half of 2010, escorting people inside the premises and collecting money from them;
(b)over the few months preceding 19 March 2012 Thomas Rappaport was occasionally at the premises doing maintenance work and internal repairs;
(c)on another occasion, which was photographed, Michael and Vivian Rappaport walked into the premises with an occupant;
(d)on an occasion in March 2011 Vivian Rappaport spoke with young people at the premises one at a time, some of them handed something to Vivian Rappaport and she thereupon wrote something in a small book. I infer that she was collecting money from occupants;
(e)on an occasion in October 2011, Tovir's white bus arrived at the premises four or five times, at one stage unloading seven people and Vivian Rappaport was in the driveway meeting them, as they arrived;
(f)on 1 March 2012 the (Tovir) van Thomas Rappaport had driven in the past was parked outside the premises and he was talking to a group of people who had come out of a campervan parked outside Mrs Perry's apartment. Minutes later he, Vivian and Michael Rappaport walked into the premises.
(g)later that day two Council inspectors arrived at the premises and talked to Thomas and Michael Rappaport. Photos of them were taken.
152In addition, Thomas Rappaport and Michael Rappaport were present when Mr Banfield, a council Senior Building Surveyor, inspected the Imperial Avenue premises on 5 September 2011 in connection with a building application. Mr Banfield observed that the building had one unit upstairs and two units downstairs, none of which had Council approval. Thomas Rappaport said that he had approval from the Local Government Appeals Tribunal for three units. Mr Banfield said Council had no record of any consent to construct three units and asked Thomas Rappaport to give a copy of the Tribunal's consent to Council. Thomas Rappaport said that when he found it he would do that. No copy of any such consent was received by Mr Banfield.
153Sixthly, Thomas and Vivian Rappaport were seen by neighbours at the Kent Street premises and on one occasion Thomas Rappaport was accompanied by Michael Rappaport. One or other of Mr Kauter, Mrs Zwartz and Mr Zwartz deposed:
(a)on an occasion in June 2011 there was a vehicle that was regularly driven by Vivian and Michael Rappaport (and owned by Tovir), parked in front of Mr Kauter's property with two mattresses strapped to its roof;
(b)on 10 March 2011 Vivian Rappaport was at the premises. A photo was taken of her apparently putting something in a garbage bin at the premises. She was also seen at the premises from time to time quite late in the evening and also in a Tovir vehicle and with Michael Rappaport;
(c)on 1 August 2011 Thomas Rappaport was working at the premises;
(d)on 7 January 2012 Thomas and Michael Rappaport were at the premises;
(e)at about 1 am on a weeknight in 2011, a (Tovir) vehicle was parked outside the premises and Vivian Rappaport was cleaning rubbish bins outside the premises. There was a loud party going on inside the premises. Mr Zwartz spoke to her, after which she knocked on the door of the downstairs flat at the premises, and shortly afterwards loud party noise stopped. The inference, as the respondents accept, is that the noise stopped because she spoke to the occupants;
(f)Thomas Rappaport has been seen the Tovir van that Michael Rappaport has often driven to and from the premises.
154Seventhly, the subject properties and three other properties were promoted for accommodation on the BIH and BSH websites. In my view, the following matters indicate that BIH and BSH were associated with the respondents and that the websites promoted the premises with the respondents' permission:
(a)Of the five properties marketed on the BIH and BSH websites, three, including the subject properties, were owned by Tovir and two by Tovir's directors and shareholders, Thomas and Vivian Rappaport.
(b)At all material times the sole shareholder of BIH Pty Ltd was Thomas Rappaport. Its sole director was Michael Rappaport from 22 August 2007 to 17 March 2009. Thomas Rappaport was a director from 26 October 2011 to 25 October 2012. Michael Rappaport was a director from 17 May 2012 onwards. Thus, there was no director between 17 March 2009 and 25 October 2011. I infer that BIH Pty Ltd was controlled in that period by its sole shareholder, Thomas Rappaport.
(c)From the date of BSH Pty Ltd's incorporation on 30 March 2011, its sole director was Thomas Rappaport and its sole shareholder was Michael Rappaport.
(d)The BIH and BSH websites referred to a contact as "Michael" and gave his phone number. Other evidence establishes that that is a phone number of Michael Rappaport.
(e)The BIH websites stated: "Our parent companies own all the properties - so we manage all repairs swiftly". The expression "parent companies" may be understood as a loose reference to Tovir because it owns three of the properties promoted on the website, and to Thomas and Vivian Rappaport because they own the remaining two properties. It does not matter if the term "parent companies" is legally incorrect. There is other evidence of Thomas Rappaport collecting money from occupants and Thomas and Vivian Rappaport carrying out repairs and work (above at [151(a), (b) and (d)] and [153(c)]).
(f)The BIH website referred to the property owner and to Tovir in its terms of use: "For the security of the property owner and the head tenant the sub tenant agrees to pay the rent directly into the property owner [sic] bank account. I agree to these terms and assure Tovir Investments P/L that I have sufficient funds in my credit card to meet these payments".
(g)The post office box address for BIH on the BIH website was the same as Tovir's address on Roads and Maritime Services registration records for Tovir's motor vehicles used by Michael Rappaport when managing the premises and on bank statements for Thomas and Vivian Rappaport's "Tovir Investments Account".
(h)The postal address for BIH Pty Ltd on the BIH website is 1a Kambala Road, Bellevue Hill, which is owned by Thomas and Vivian Rappaport, Tovir's directors and shareholders.
(i)The BIH website provided for payment of rent to BIH and gave its bank account details. Rental payments were made to BIH's bank account, and monies were transferred from that account to Thomas and Vivian Rappaport's Tovir bank account.
(j)The BIH website said that: "The landlord generally limits shared rooms" etc. The "landlord" may be understood as a reference to the owners of the five premises promoted, that is, Tovir and Thomas and Vivian Rappaport.
(k)The BIH website Kent Street link included a tenant testimonial that "Michael and Vivian were great". This appears to be a reference to Michael Rappaport and his mother.
(l)Given all the above, the above, I do not think that the association is negated merely because Vivian Rappaport was not a director or shareholder of BIH Pty Ltd and BSH Pty Ltd.
155Eighthly, Tovir through its directors knew that the Court had enjoined the unlawful use of the premises for the purpose of backpackers accommodation in early 2011. In May and November 2011 Tovir had received correspondence from the Council's lawyers raising the issue of the ongoing use of the premises for that unlawful purpose. Tovir must have turned its mind to that issue because it instructed its lawyers to reply to the Council on 15 November 2011 denying the allegation.
156It may not always be conclusive but "in any ordinary case the question whether one person authorised another to do an act or series of acts on his behalf is best answered by considering for whose benefit or in whose interest it was intended it should be done": Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52, 219 CLR 165 at [70] quoting Press v Mathers [1927] VLR 326 at 332 per Dixon AJ. Michael Rappaport intensively managed the premises, including its use for the purpose of backpackers accommodation, for the benefit of Tovir.
157In my opinion, the evidence shows that the relationship between Tovir and Michael Rappaport was one of owner/lessor and property manager and that it was within the scope of his authority to place occupants in the premises.
158I do not accept the respondents' submission that it is a rational inference that Michael Rappaport might have been only acting on his own or on behalf of BIH or BSH. Tovir owned the premises and he used Tovir vehicles to manage them. One of the vehicles was a 12 seater bus or van. It is fairly obvious that Tovir bought it to manage the premises. Insofar as the respondents suggest he might only have been running the BIH or BSH social club advertised on the websites, that is quite inconsistent with the extent of his actions and, in any case, the social clubs appear to be linked to occupants of the promoted premises.
159The remedy of an injunction is worth no more than its main sanction, contempt: Witham v Holloway [1995] HCA 3, 183 CLR 525 at 547-548. The contempt sanction protects the administration of justice by holding persons, including corporations, accountable for breaching injunctions.
160A corporation is an abstraction, it can only act through living persons. The conduct of a person may be attributed to a corporation because the person is the corporation's relevant directing mind and will or because he is an agent or servant for whom the company is vicariously liable: Director-General, Department of Environment and Climate Change v Jack & Bill Issa Pty Ltd (No 5) [2009] NSWLEC 232, 172 LGERA 225 at [78] - [99] per Biscoe J and the cases there reviewed. In doing particular things, depending on the circumstances of the case, a manager may represent the directing mind and will of a corporation, or may be regarded as the corporation's servant or agent for whose conduct the corporation is vicariously liable.
161A rule of attribution counts as a corporation's actions, the actions of its agents or servants, of whatever level, whose work involves compliance with court orders on the corporation's behalf. A corporation disobeys a court order and is in contempt by the deliberate act of its agents or servants whilst acting in the course of their employment, regardless of whether the act was authorised or even expressly forbidden by the corporation, or was done through carelessness, neglect or dereliction of duty, or even was done reasonably on legal advice: Stancomb v Trowbridge Urban District Council [1910] 2 Ch 190, at 194; Heatons Transport (St Helens) Ltd v Transport and General Workers' Union [1973] AC 15 (HL) at 99-100, 108-110; Director General of Fair Trading v Pioneer Concrete (UK) Ltd [1995] 1 AC 456 (HL) at 476-481; Z Ltd v A-Z [1982] 1 QB 558 (CA) at 581; Z Bank v D1 [1994] 1 Lloyd's Rep 656 at 661; Australasian Meat Industry Employees' Union v Mudginberri Station Pty Ltd [1986] HCA 46, 161 CLR 98 at 112 per Gibbs CJ, Mason, Wilson and Deane JJ; Forestview Nominees Pty Ltd v Perron Investments Pty Ltd [1999] 93 FCA 405, 162 ALR 482 at [47] - [49] per Cooper J and [94] per R D Nicholson J (who placed solicitors acting without authority in a separate category); Cram (ed), Borrie & Lowe: The Law of Contempt, 4th ed (2010) at [6-11]. If an order against a corporation can be complied with only if a servant or agent is prevented from exercising his authority, it is the duty of the corporation to at once withdraw that authority, and if it fails to take all possible steps to do so and such person acts contrary to the terms of the order, it will be in contempt: Z Bank v D1 at 661, 666. By imposing responsibility for those whom a corporation can reasonably be expected to influence or control, the entity is induced to keep itself up to the mark and the administration of justice is protected: Reynolds v G H Austin & Sons Ltd [1951] 2 KB 135 at 149.
162Michael Rappaport, whilst acting as Tovir's property manager, deliberately acted in a way that caused the premises to be used for the purpose of backpackers accommodation as defined in the LEP and thereby breached the Court's orders. Therefore, in my opinion, his conduct is to be attributed to Tovir such that Tovir is also in contempt for causing the premises to be used for that unlawful purpose.
163In my opinion, the conduct of Tovir's directors, Thomas and Vivian Rappaport, is also to be attributed to Tovir. So far as the evidence discloses, Tovir's directors were its directing mind and will. Clearly, they knew that Tovir's premises were being rented out for Tovir's benefit and that their son Michael was managing the premises using Tovir's motor vehicles. They attended the premises from time to time, spoke to and escorted occupants inside, collected money from occupants and Thomas Rappaport carried out work at the premises. As regards promotion of the premises on the BIH and BSH websites, Thomas Rappaport was a director or shareholder of BIH Pty Ltd and BSH Pty Ltd. It is a reasonable inference, in my view, that they knew, or at least had reason to anticipate, that the buildings on the premises were providing or were likely to provide accommodation for tourists and travellers, had shared facilities, and generally provided shared accommodation and temporary accommodation. They had the power to prevent it, defaulted in their duty of control, and thereby failed to prevent it: above at [14]. Even if they were unaware of the unlawful purpose of the use, by putting Michael Rappaport in charge of the premises as property manager it should be inferred from the circumstances that he had a discretion or liberty to use the premises for the purpose for which they were used; they at least left it to chance whether the premises would be used for the unlawful purpose; and they thereby permitted him to use the premises for the unlawful purpose. Even without attribution of Michael Rappaport's conduct to Tovir, attribution of their conduct to Tovir leads to the conclusion that Tovir at least permitted the premises to be used for the purpose of backpackers accommodation as defined in the LEP, and therefore is in contempt. In my opinion, when Michael Rappaport's conduct is also attributed to Tovir, the combination of attributed conduct leads to the conclusion beyond reasonable doubt that Tovir caused and permitted the premises to be used for that unlawful purpose.