Woollahra Municipal Council v JPS Development & Construction Pty Limited [2007] NSWLEC 595 | Case summary

EX TEMPORE JUDGMENT 1 HIS HONOUR: The defendant, JPS Development and Construction Pty Limited, has pleaded guilty to an offence against s 125(1) of the Environmental Planning and Assessment Act 1979 ("the EP&A Act") in that between about 1 January 2006 and 31 March 2006 the defendant carried out development on land at No. 52 Glenmore Road, Paddington, being development which required development consent under the Woollahra Local Environmental Plan 1995 otherwise than in accordance with the development consent DA 2001/691 granted by Woollahra Municipal Council, being a thing forbidden to be done by dint of s 76A(1B) of the EP&A Act. The question for determination is the penalty which should now be imposed. 2 The relevant facts have been largely agreed upon and have been reduced to a statement of agreed facts which the parties have tendered this morning. The statement of agreed facts has been supplemented by some additional documentary material, namely by an affidavit of the managing director of the defendant, Mr Jeffrey Paul Sarkis. Mr Sarkis also give some oral evidence. 3 The subject property to which the offence relates is known as Terrace 4 at No. 52 Glenmore Road, Paddington. That property is within the Paddington Heritage Conservation Area under the Paddington Development Control Plan, although the subject property itself is not and was not a heritage item. 4 The defendant company has two shareholders, namely Mr Sarkis and his wife. It is a company whose principal business is a builder. It is conceded that the defendant company is in fact the alter ego of Mr Sarkis. In the present case and in relation to the development at No. 52 Glenmore Road, Paddington, the principal was JCR Bourke Pty Limited. It owned the site and was the beneficiary of the development consent for the re-development of that property. 5 Kincorp (NSW) Pty Limited was engaged by JCR Bourke as the project manager. The defendant was the successful tenderer and entered into a building contract with JCR Bourke. A structural engineer, Mr John Haymes of Nettleton Haymes Pty Limited, was engaged by Kincorp to act as consulting structural engineer. 6 As I have noted, the subject property which was the subject of the development consent was not a heritage item and there is no heritage item in the immediate vicinity of that property although it is apparent that it clearly must have contributed to streetscape of the Heritage Conservation Area. 7 On 25 June 2002, the council issued development consent for the redevelopment of the property. On 16 January 2004, a construction certificate was issued by VCA Logic Pty Limited. The development consent required part of Terrace 4 fronting Glenmore Road to be retained and restored in accordance with the approved plans. Building work commenced on the property in about November 2005. On 14 November 2005, a meeting was held on the site and an officer of the council, Mr Wong, advised those present, including Mr Sarkis, that any changes to the plans could not occur until further approval was obtained from the council. 8 On 16 November 2005, Mr Peter Waddell, a geotechnical engineer and principal of Coffey Geosciences Pty Limited, inspected the property at the request of the project manager. He met Mr Haymes and Mr Terence Daly of Kincorp on the site. Mr Waddell prepared a report of his inspection dated 17 November 2005 and he noted in his report: The brick terrace is supported on a wall of sandstone blocks that bear on a sand foundation. During our site visit excavations adjacent to this wall extended to a depth of 0.5m depth below the base of the footing exposing sand. At either end of the wall loose sand had been packed against the unsupported exposed sand. In the middle of the wall the sand foundation was exposed and dry sand was observed running from beneath the sandstone block footings. We advised the site personnel from JPS Development and Constructions that there was a significant risk of the wall collapsing if the sand beneath the footings was unsupported. 9 Mr Waddell recommended the that following options be considered: first, either demolish the terrace (which he considered to be the preferable course to underpinning) or second, to underpin the sandstone blocks of the terrace. 10 In late November, the defendant commenced carrying out the unpinning of the existing walls at the terrace as directed by the project manager pursuant to the advice of Mr Haymes. On 16 December 2005, Mr Waddell made a further inspection and in a letter on that date addressed to JCR Bourke he states: The east corner of the terrace wall is likely to collapse if further attempts are made to excavate underpinning panels beneath the corner. Extensive propping works could be attempted to support the wall however the condition of the corner is now such that it will need to be rebuilt. The remainder of the wall would be at increased risk of collapse if the corner of the wall were demolished. Therefore we recommend that from a site safety perspective it would be preferable to demolish the north wall of the terrace, construct adequate footings and then reconstruct the walls. 11 According to the statement of agreed facts, on 16 January 2006 Mr Haymes again inspected the property and furnished a report on that day. In that report he notes that underpinning was proceeding but he recommended that no further work be done until "overhead walls demolished". On 19 December 2005, Mr Haymes furnished a letter to Kincorp in which he states: On Friday, 16-12-2005, our Mr John Haymes in the company of your Mr Terrence Daly, Mr Jeff Sarkis (JPS Development and Construction Pty Ltd, Building Contractors) and Mr Peter Waddell (Coffey Geosciences Pty Ltd, Geotechnical Engineers), inspected the underpinning in progress to the existing sandstone wall central to the eastern end of the property. The inspection was made at the request of Mr Sarkis due to the collapse of the loose sand at the eastern end of the wall and cracking due to settlement of the structure. After discussion with the contractor and Mr Waddell it was agreed that further removal of the loose sand could endanger the stability of the wall and the retaining wall to the existing footway at Glenmore Road. Further work could endanger the contractors executing the underpinning.

As the existing internal walls of the property are to be removed and as part of the approved development we recommend that the internal walls, roof and dividing walls be demolished as a matter of urgency and prior to any further underpinning of the sandstone footing and wall. The sandstone that has settled can then be safely underpinned and brought back to a stable condition and the central wall reconstructed with adequate stability. 12 By email dated 20 January 2006, the project manager sent a written instruction to the defendant confirming the direction to demolish Terrace 4 to the level indicated by Mr Haymes' instruction of 16 January 2006. On 15 February 2006, Mr Haymes again attended the property and observed further cracking had occurred to the sandstone block wall and cracking and settlement had occurred to the front wall facing Glenmore Road. Mr Haymes considered that the wall was unstable and unsafe. The defendant was then instructed to demolish the internal cross-walls in the remaining section of the sandstone block wall. 13 What the defendant was directed to do may be contrasted with the development consent drawings which show in relation to Terrace 4 the southern external wall to be retained, the northern external wall to be retained and the front façade walls on the eastern elevation to be retained and were to be cement rendered. The slate roof was to be restored, the front basement wall and footings below street level were shown to be retained, subject to a note on the engineering footing plan and approved with the construction certificate plans that "extent of demolition of footings to be determined on site", and the basement cross-wall and supporting footings are shown to be retained. 14 An application was made on 27 April 2006 under s 96 of the EP&A Act to seek retrospective approval for the demolition of Terrace 4 and the erection of a new dwelling in its place. This application was approved by the council on 21 August 2006. 15 I turn now to the evidence of the defendant which was given by its managing director, Mr Sarkis. In his affidavit he says that his company responded to a tender called by Kincorp on behalf of JCR Bourke and was subsequently awarded a building contract dated 6 October 2005 with JCR Bourke. He says at all times Kincorp was the project manager for the owner under the building contract and the defendant was obliged to comply with the directions of Kincorp in that regard. 16 In addition to Kincorp and its principal, Mr Daly, the owner had retained and was from time to time represented by his architect, Mr Horace Rapisarda of MLR Architects Pty Ltd and by its structural engineer, Mr Haymes. Mr Sarkis says he was at all times aware that the approved plans showed at least the lower sections of Terrace 4 and the external walls and not the rear wall were to be retained. He says that in the first half of November 2005 there was a partial collapse - a portion of the wall located on the right-hand side of the property facing the front door, and he refers to the letter from Coffey Geosciences dated 17 November 2005 to which I have referred. He says that in undertaking the underpinning a sandstone block approximately two metres from Glenmore Road was found to be badly twisted and there was already severe cracking in the wall. 17 Further investigation showed significant cracks within the wall and the internal slab area. Mr Sarkis says the final part of the underpinning method that they employed had failed. He immediately called a meeting of Mr Daly of Kincorp, Mr Haymes and Mr Waddell which took place on 16 December 2005. He recollects that Mr Haymes asserted that the building was structurally unsound, that demolition was required and that the underpinning could not be continued in a safe manner. 18 Mr Sarkis was verbally instructed by Mr Daly to commence demolition of the walls in accordance with the assessment of the structural engineer. As project manager Mr Daly was the main point of contact with the council as far as he was aware. Mr Daly told him that under the development consent the extent of demolition was to be determined on site. 19 In early January 2006, Mr Sarkis commenced arrangements for the demolition work. He says that on 16 January 2006 the structural engineer, Mr Haymes, attended the site. He was verbally instructed by Mr Daly in the presence of Mr Haymes to demolish the brickwork to the top of the sandstone wall level with the ground at the Glenmore Road frontage. Mr Daly again pointed out that the extent of demolition work was to be determined on site in accordance with the approved plans. 20 Mr Sarkis says that he was told on 1 February 2006 by his site supervisor, Mr Danny Shalala, that Mr Haymes had again attended the site and advised that the cracking and instability had become worse and the brickwork and the sandstone required removal. 21 On 22 March 2006, Mr Sarkis caused a letter to be sent from the defendant to the council enclosing the structural engineer's report dated 20 March 2006. He says that in his experience in construction, occupational health and safety issues are supposed to be paramount. Having received instructions from the project manager to demolish the walls of Terrace 4 based on specific advice from a structural engineer, he was extremely concerned about his company's liability and his liability if he did not follow that instruction. He believed the company was also contractually bound to comply with the direction given to it by the project manager. 22 In a letter to Kincorp by Mr Haymes dated 27 March 2006, Mr Haymes recites the history of a project. The letter states, inter alia, that on 14 November 2005, Mr Haymes visited the site to inspect the demolition and excavation for the strip footings and piling. Mr Haymes had expressed concern regarding the nature of the loose sand foundation material on the site and the relative levels of the adjacent footings which were being exposed by the excavation, and it was agreed at that time that professional advice from a geotechnical engineer would be obtained. 23 Mr Haymes further notes the meeting on the 16 November 2006 with Mr Daly, Mr Sarkis, Mr Bourke of JCR Bourke, the current owners and developers, and Mr Waddell of Coffey Geosciences, to discuss the foundation conditions and prepare an action plan for the proposed underpinning and footing construction. . 24 Mr Haymes notes a further meeting on 16 December 2005 at the request of the defendant due to the collapse of the loose sand and cracking of the walls. Some settlement had occurred due to the dry and loose nature of the foundation material and, Mr Haymes, considered that any further work may cause instability of the walls. An instruction was issued, I assume by Mr Haymes, not to proceed with the underpinning until the overhead walls had been demolished. 25 The letter also records that on 16 January 2006, Mr Haymes again visited the site and an instruction was given to demolish the brickwork to the top of the sandstone wall level with Glenmore Road. Subsequently the defendant proceeded with the demolition of the unsafe sections of the internal walls. 26 Mr Haymes notes that on 1 February 2006 he inspected the demolition in progress. Cracking and settlement had occurred to the front wall facing Glenmore Road and Mr Haymes considered that that wall was now unstable and unsafe due to the lack of any lateral support. The defendant was instructed to demolish the internal cross-walls prior to any further construction and the remaining section of the sandstone block wall to achieve an effective and safe working environment. The demolition of the eastern and northern walls of the existing building can be thus seen as a result of (i) lack of information regarding the sandstone block retaining wall supporting the footway to Glenmore Road; (ii) the poor construction of the original terrace structure and footings; (iii) the extended time taken to commence work on site; and (iv) the unstable foundation and sands. 27 As I have noted above, Mr Sarkis has given oral evidence. He states that he and his wife are the sole shareholders of the defendant company which was incorporated in January 2000. He himself has been working as a builder since 1995 since leaving high school. He is married, has a one and a half year old daughter. He is deeply remorseful for what has occurred, he does not want it to happen again. He has taken steps to ensure that it will not happen again by appointing a project manager and an architect builder as design manager. 28 He acknowledges meeting Mr Wong from the council on 14 July 2005 when it was said that any changes to the approved plan would have to go back to the council. 29 There is also in evidence a number of testimonials attesting to the good character of the defendant company. In particular, it gives a regular donation to charities, mainly the Millennium Foundation which funds research at Westmead Hospital as I understand it, and to Boys Town, a project which is identified by one of the referees, Mr Peter Collins, as being a project to which the defendant company is a corporate sponsor. The defendant company has no prior convictions and according to other testimonials has a sound record in the building industry. 30 I turn now to the relevant considerations on penalty. The primary consideration, of course, in any sentencing is the objective gravity or seriousness of the offence together with the actual or likely consequences of a breach, which may also be taken into account. In the present case, the whole system of planning control would, as I previously observed in the course of submissions, be rendered ineffective if developments were allowed to be carried out not in accordance with or in contravention of development consents. The maximum penalty for the offence in this case is $1.1 million, but an offence against s 125 of the EP&A Act can cover a whole range of offences ranging from extremely minor to extremely serious. 31 In the present case, however, I accept the submission made by Mr T Howard, appearing for the defendant, that what the defendant did here was motivated by a safety concern. If the defendant had disregarded the instruction of the structural engineer to demolish, and the unsafe walls had collapsed, it could well have been faced with a prosecution under the occupational health and safety legislation. The defendant also believed that it was under an obligation to do what it was told by the project manager; that is, the structural engineer had asserted that the building was structurally unsound, that demolition was required and that underpinning could not be carried out safety. In my opinion, that is a factor which makes the particular objective seriousness or gravity of the offence in this case at the lower end of the scale. 32 The first consideration is general deterrence. All prosecutions must, of course, carry an element of general deterrence. As I have observed in other cases, however, care must taken to ensure that the penalty imposed does not cause the offender to shoulder an unfair burden of community education: see Walden v Hensler (1987) 163 CLR 561 at 570. 33 In the present case, I do not feel that any element of specific deterrence is required. The defendant, as I have said, has given evidence by its principal that it is deeply remorseful, has taken steps to ensure that the offence will not happen again and it seems that its primary concern was one of safety and, no doubt, safety as regards those people who are working in and around these unsafe structures. I accept the risk of the defendant re-offending is low. 34 A further consideration of any penalty is the principle of even-handedness which requires the court to consider any pattern of sentencing for the particular offence in order to pursue a consistent approach in the imposition of penalties. In the present case the parties have handed up a schedule of penalties that have been imposed by the court for offences against s 125(1) of the EP&A Act. The actual circumstances in which the offence is committed and the mitigating factors, however, in each case are vastly different and in my opinion little guidance can be obtained from those cases. 35 The other factors that have to be taken into consideration are the subjective factors of the defendant which I have briefly noted above. The defendant is a corporation that has a good reputation in the community, it contributes to worthy charities, it has no prior record and it is otherwise a good citizen. There is also to be taken into consideration the fact of the plea of guilty which entitles the defendant to a discount. That discount is in the range of ten to 25 per cent depending upon the timing of the plea. In the present case the timing of the plea was delayed until all the prosecutor's evidence was on and an opportunity was given to the defendant to take advice. I am prepared to regard the timing of the plea as relatively early in the process. 36 All things considered, some penalty is unfortunately called for. The penalty which I propose to impose will take into account all relevant matters, including the express concern for the safety of those working in and around the building and an appropriate discount based on utilitarian value of the plea of guilty, in the range of 35 per cent, which is within the range identified by the Court of Appeal in R v Thomson; R v Houlton (2000) 49 NSWLR 383 at 419. 37 In considering the amount of penalty I also take into consideration the fact that the defendant has agreed to pay the prosecutor's costs. Although the costs have not been finally quantified, I understand that they are in the range of some $30,000 to $35,000. That is, the defendant has already been hit or has agreed to be hit in the hip pocket to that extent. 38 The penalty that I impose is $8,000 which will be reduced by 35 per cent to $5,000. The formal orders of the court are therefore:

Woollahra Municipal Council v JPS Development & Construction Pty Limited

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Judgment (16 paragraphs)

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