CITY OF SALISBURY v MWS ENGINEERING PTY LTD & ORS [2011] SAERDC 39 (29 September 2011)

Last Updated: 29 September 2011

ENVIRONMENT, RESOURCES AND DEVELOPMENT COURT OF SOUTH AUSTRALIA

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CITY OF SALISBURY v MWS ENGINEERING PTY LTD & ORS

[2011] SAERDC 39

Judgment of His Honour Judge Costello

29 September 2011

ENVIRONMENT AND PLANNING - BUILDING CONTROL - OTHER MATTERS - OFFENCES AND PENALTIES - UNAUTHORISED WORK

Three defendants each charged with two separate offences of undertaking building work without approval - pleas of guilty to each offence entered - defendants erected two warehouse buildings without approval - conduct of defendants inadvertent not deliberate - convictions entered - corporate defendants each fined $3,000 for each offence - defendant director fined $4,500 for each offence - no occasion to invoke "totality principle".

Development Act 1993; Criminal Law (Sentencing) Act 1988, referred to.

R v Major [1998] SASC 7089; (1998) 70 SASR 488; Nixon 66 A Crim R83; City of Salisbury v Ahrens Group [2010] SASC 254; (2010) 108 SASR 54; Rossi (1988) 142 LSJS 451, 455, discussed.

CITY OF SALISBURY v MWS ENGINEERING PTY LTD & ORS
[2011] SAERDC 39

THE COURT DELIVERED THE FOLLOWING JUDGMENT

The Complaint

1. The defendants are charged upon complaint with breaches of section 44(1) of the Development Act 1993 (“the Act”).
2. The complaint is as follows:

Offence Details

1. Between January 2009 and October 2009 at Pooraka in the said State, the First Defendant undertook development which was not an approved development contrary to section 44(1) of the Development Act 1993 (the Act).

Particulars
1.1 Between the said dates the First Defendant caused, suffered or permitted development, namely building work, comprising the construction of an extension to its existing workshop on the land known as 27-29 Maxwell Road Pooraka In the said State, comprised in Certificate of Title Register Book Volume 5919 Folio 142 (the subject land).
1.2 The said development was not an approved development.
Offence Details

2. In or about October 2009 at Pooraka or elsewhere in the said State the First Defendant undertook development which was not an approved development contrary to section 44(1) of the Act.

Particulars
2.1 On or about the said dates, the First Defendant caused, suffered or permitted development, namely building work, comprising the construction of an extension to the existing Adelaide Precast Workshop, on the subject land.
2.2 The said development was not an approved development.
Offence Details

3. Between January 2009 and October 2009 at Pooraka, in the said State, the Second Defendant undertook development which was not an approved development contrary to section 44(1) of the Act.

Particulars
3.1 Between the said dates the Second Defendant caused, suffered or permitted development, namely building work, comprising the construction of an extension to the First Defendant’s workshop on the subject land.
3.2 The said development was not an approved development.
Offence Details

4. In or about October 2009 at Pooraka or elsewhere in the said State, the Second Defendant undertook development which was not an approved development contrary to Section 44(1) of the Act.

Particulars
4.1 On or about the said dates the Second Defendants caused, suffered or permitted development, namely building work comprising the construction of an extension to the existing Adelaide Precast Workshop, on the subject land.
4.2 The said development was not an approved development.
Offence details

5. Between January 2009 and October 2009 at Pooraka or elsewhere in the said State the Third Defendant undertook development which was not an approved development contrary to section 44(1) of the Act.

Particulars
5.1 Between the said dates the Third Defendant caused, suffered or permitted development, namely building work, comprising the construction of an extension to the First Defendant’s workshop on the subject land.
5.2 The said development was not an approved development.
Offence details

6. In or about October 2009 at Pooraka or elsewhere in the said State, the Third Defendant undertook development which was not an approved development contrary to section 44(1) of the Act.

Particulars
6.1 On or about the said dates, the Third Defendant caused, suffered or permitted development, namely building work, comprising the construction of an extension to the existing Adelaide Precast Workshop, on the subject land.
6.2 The said development was not approved development.
Offence Details

7. Between January 2009 and October 2009 at Pooraka, or elsewhere in the said State, the Third Defendant was a director of a company which undertook development which was not an approved development and thereby contravened section 44(1) of the Act contrary to section 105(3) of the Act.
   

Particulars
7.1 Between the said dates the Third Defendant was a director of the First and Second Defendants.
7.2 Between the said dates the First Defendant and/or Second Defendants caused, suffered or permitted development, namely building work, comprising the construction of a warehouse extension to the First Defendant’s warehouse on the subject land.
7.3 The said development was not an approved development.
Offence Details

8. In or about October 2009 at Pooraka or elsewhere in the said State, the Third Defendant was a director of a company which undertook development which was not an approved development and thereby contravened section 44(1) of the Act contrary to section 105(3) of the Act.

Particulars
8.1 On or about the said dates the Third Defendant was a director of the First and Second Defendants.
8.2 On or about the said dates the First Defendant and/or the Second Defendants caused, suffered or permitted development, namely building work, comprising the construction of an extension to the Adelaide Precast Workshop on the subject land.
8.3 The said development was not an approved development.
Offence Details

9. In or about October 2009 at Pooraka or elsewhere in the said State, the Fourth Defendant undertook development which was not an approved development contrary to section 44(1) of the Act.

Particulars
9.1 On or about the said dates, the Fourth Defendant caused, suffered or permitted development, namely building work, comprising the construction of an extension to the existing Adelaide Precast Workshop, on the subject land.
9.2 The said development was not an approved development.
Offence Details

10. Between January 2009 and October 2009 at Pooraka, or elsewhere in the said State, the Fourth Defendant was a director of a company which undertook development which was not an approved development and thereby contravened section 44(1) of the Act contrary to section 105(3) of the Act.
    

Particulars
10.1 Between the said dates the Fourth Defendant was a director of the First and Second Defendants.
10.2 Between the said dates the First Defendant and/or Second Defendants caused, suffered or permitted development, namely building work, comprising the construction of a warehouse extension to the First Defendant’s warehouse on the subject land.
10.3 The said development was not an approved development.
Offence Details

11. In or about October 2009 at Pooraka or elsewhere in the said State, the Fourth Defendant was a director of a company which undertook development which was not an approved development and thereby contravened section 44(1) of the Act contrary to section 105(3) of the Act.

Particulars
11.1 On or about the said dates the Fourth Defendant was a director of the First Defendant and the Second Defendant.
11.2 On or about the said dates the First and/or Second Defendants caused, suffered or permitted development namely building work comprising the extension of the Adelaide Precast Workshop on the subject land.
11.3 The said development was not an approved development.

3. The first defendant has pleaded guilty to Counts 1 and 2. The second defendant has pleaded guilty to Counts 3 and 4. The third defendant has pleaded guilty to Counts 5 and 6. The complainant has applied to withdraw Counts 7 and 8 and I dismiss these charges.
4. No plea has been entered by the fourth defendant and further consideration of Counts 9-11 inclusive must await the outcome of negotiations between the parties.

Statement of Agreed Facts

5. On the hearing, the complainant submitted a Statement of Agreed Facts which is as follows:
   1. The First Defendant is a licensed builder authorised to undertake building work that does not exceed one storey in height in addition to structural steel erection in South Australia by virtue of building licence number BLD 36042.
   2. The First Defendant is a steel fabrication company which employed approximately forty (40) people in the said State however now employs twelve (12) people.
   3. The Operation Manager of the First Defendant requested permission from the Third Defendant to construct an extension to an existing workshop (Building B) on the land known as 27-29 Maxwell Road, Pooraka (Land) as the First Defendant required additional workshop area within which to conduct and operate its business on the Land. The Third Defendant gave permission for the said extensions to be constructed. The First Defendant was directed by the Third Defendant to construct an extension to the existing Adelaide Pre-Cast workshop (Building C and D) on the Land as Adelaide Pre-Cast required additional workshop area within which to conduct and operate its business on the Land.

4. The Second Defendant is the registered proprietor of the Land.
5. The Third and Fourth Defendants are directors of the First and Second Defendants.

6. The Fourth Defendant is a licensed builder and is licensed to undertake any building work limited to structural steel erection and domestic building work not exceeding one storey in South Australia by virtue of building licence BLD 40002.

Building B

7. A development application identified as development application number 361/2587/2009/2B was submitted to the Council on or about 15 October 2009 for the construction of Building B.
8. The development application form submitted to the Council or on about 15 October 2009 for Building B indicated that the “development cost” was $120,000.
9. Construction of Building B commenced on the Land on or about August 2009 and was completed on or about 22 October 2009. The building was occupied at that date.
10. Building B is an extension to an existing building on the Land. It is a class 7B building under the Building Code of Australia (BCA). It is predominately used to cure paint on steel.
11. The total floor area of Building B is approximately 844 square metres with a height of 4.5 metres. Together, Building B and the building which it extended have a total floor area of 1688 square metres and a height of 4.5 metres.

12. Development Plan consent was granted to Building B on 5 March 2010.

13. To date, neither Building Rules consent nor Development Approval has been granted by any relevant authority, to Building B.

14. To date, a certificate of Occupancy has not been granted in relation to Building B.

15. On or about 22 October 2009, the Complainant issued a notice pursuant to section 84(2) of the Development Act 1993 (Act) to the First and Second Defendants in relation to the construction of Building B on the Land. The said notice provided that development was being undertaken on the Land without a valid development approval. The said notice directed that the First and Second Defendants “refrain from all construction work and occupation of the building until further notice or a valid development approval has been granted”.
16. It is accepted by the Complainant that when the said notice was issued in relation to Building B the building was essentially completed. For a period of time after the said notice was first issued in relation to Building B, Building B ceased to be occupied. However, at present, Building B is now occupied.

Buildings C & D

17. A development application identified as development application number 361/1885/2009/1B was submitted to the Council on or about 30 July 2009 for the construction of Building C. Subsequently, a further development application identified as development application number 361/2586/2009/2B was submitted to the Council on or about 15 October 2009 for the construction of Building C & D. Effectively, the latter application incorporated the construction of Building C which had been included in the earlier application. The latter application sought to combine the construction of Building C with Building D.
18. The development application form submitted to the Council on or about 30 July 2009 for Building C indicated that the “development cost” was $350,000. The development application form submitted to the Council on or about 15 October 2009 for Building C & D (as a combined development) indicated that the “development cost” was $1.1 million.
19. A number of steel posts forming part of the framework for Building C and one steel post forming part of the framework for Building D were erected on the Land on 28 October 2009. Some trenches had been excavated and concrete pads were poured in preparation for the erection of the steel posts on or before 19 October 2009.
20. Building C & D together are a class 5 and 7B building under the BCA. Building C is presently used by the company Adelaide Precast Pty Ltd who operates its business from a portion of the Land. It is proposed that Building D, once completed, will be similarly used.
21. Building C & D together when completed also will involve an extension of an existing building on the Land and will have a total area of approximately 1300 square metres and a height of 10 metres.
22. Development Plan consent was granted to Building C on 11 August 2009. Neither Building Rules consent nor development approval was granted to development application number 361/1885/2009/1B (for the construction of Building C) because the latter application for Building C & D, as combined structures (361/2586/2009/2B) superseded it.

23. Development Plan consent was granted to Building C & D on 01 December 2009.
24. Building Rules consent was granted to Building C & D on 22 December 2009.
25. Development Approval was granted to Building C & D on 22 December 2009.

26. Subsequent to the grant of the Development Approval the part of the extension identified as Building C has been completed. To date, that portion of the extension identified as “D” has not been completed.
27. To date a Certificate of Occupancy has not been granted in relation to Building C or the portion of Building D that has been constructed.
28. On or about 3 November 2009, the Complainant issued a notice pursuant to section 84(2) of the Development Act 1993 (Act) to the Second Defendant in relation to the construction of Building C and portion of Building D on the Land. The said notice provided that development was being undertaken on the Land without a valid development approval. The said notice directed the Second Defendant to “refrain from all construction work and occupation of the building until further notice or a valid development approval has been granted”.
29. It is accepted by the Complainant that when the said notice was issued in relation to the construction of Building C and portion of Building D, building work ceased immediately.
30. The First Defendant was directed to construct Building B, C & portion of Building D by its director the Third Defendant.
31. Building C and portion of Building D was constructed under the supervision of the Fourth Defendant at the request of the Third Defendant.
32. The First Defendant commenced and completed the construction of Building B, and commenced the construction of C & D without sighting a Development Approval or any plans stamped with such approval.
33. The Defendants did not satisfy themselves that Building Rules consent or Development Approval had been obtained, nor did it make themselves aware of the terms of any such consent or any conditions attaching to it in relation to Building B, C or D.
34. At all material times, all Defendants were aware of the need to obtain development approval from a relevant authority before undertaking development.
6. In his submissions, Mr Roder SC for the complainant referred me to the decisions of the Supreme Court[1] dealing with the “totality principle”. He also stressed the need for the Court to bear in mind the public interest in imposing a penalty which will operate as a general deterrence to others who may be tempted to carry out substantial building works without obtaining the necessary approvals. Mr Roder SC however properly accepted and conceded that these offences were “sins of omission and not commission” in the sense to which I will later refer.

The Defendants

7. Ms Powell QC, who appeared for all defendants, informed the Court that in 1972 the fourth defendant (“Clemente”) commenced to operate a steel construction business under the name of Magill Welding. This later became the first defendant (“MWS”). He was subsequently joined by the third defendant (“Paolo”), his son.
8. Paolo was born in Australia in 1971. He is married with two children, who are 5 and 3 years old. He graduated with an associate diploma from the University of South Australia in 1994 and thereafter, as I have said, joined his father in the business.
9. The business grew and from around 2000 it began tendering for and winning larger commercial construction projects. Since that time it has expanded to over a dozen companies which companies are collectively known as the MWS Group (“the Group”).
10. In 2002 the second defendant was incorporated with its principal purpose being as a property holding company. It is the owner of the land on which the offences occurred (“the subject land”).
11. By 2009 the Group had approximately 200 employees, 70 being employed by MWS and 80 by Adelaide Precast Pty Ltd (“Adelaide Precast”). The Group had become a leading supplier, fabricator and erector of quality fabricated structural steel to the industrial and commercial building industry as well as the mining industry all around Australia.
12. The Group has successfully contracted for and constructed projects such as the Wakefield Street car park, the CMI Toyota headquarters at West Terrace, the Northland Shopping Centre in Victoria and the Crown Apartment complex in Hindmarsh Square.
13. In addition to these projects, the Group has been involved in the construction of numerous warehouse projects in and around the Salisbury Council area.
14. In 2002-2003, the Group relocated its businesses to the subject land and in the process, constructed a new head office, access roads and associated earthworks and landscaping.
15. In 2005 Adelaide Precast was incorporated. Its business involved the manufacture, supply and erection of pre-cast concrete panels.
16. In summary, it is clear from the above (and I accept) that the Group has been very successful over a number of years in the areas of the manufacture, supply and erection of structural steel and pre-cast concrete panels.

Events surrounding the Offences

17. In around 2009 the Group successfully tendered for the supply and installation of the structural steel work and pre-cast concrete panels for the South Australian Water Desalination Project. The original sub-contract sum for the two areas of work was in excess of $10 million. As a result of additional works, the original sum was increased by $4 million making the overall sum in excess of $14 million.
18. This was particularly significant for the Group as a hedge against the downturn caused by the Global Financial Crisis.
19. In 2009 the Group needed additional storage space. In the case of Building “B” it was required to house the structural steel while multiple layers of paint were applied to it as part of the Desalination Project.
20. Buildings “C and D”, which Ms Powell QC submits were always intended to be one, single building, were required, as to one half, to house and operate a concrete polishing machine and, as to the other, to store the completed concrete panels.
21. In August 2009, Clemente and Paolo purchased the polishing machine in Italy. Whilst they were in Italy finalising its purchase they were contacted by Mr Mark Crook, seeking permission to proceed with constructing building “B”. Paolo gave Mr Crook the “go ahead”.
22. The total construction time to build it was some 2-3 weeks, it being a portable frame construction with sheet walls and roof cladding. The drawings for the building were on site and the materials at hand. Indeed, I am told that there is no concrete slab but simply a quarry rubble base.
23. I accept the submission by Ms Powell QC that although the building is substantial, in terms of its size, it is not a complicated building in terms of infrastructure. I understand Buildings “C and D” to fall into much the same category.
24. In giving Mr Crook the “go ahead”, Paolo wrongly (but I accept not unreasonably) assumed that Mr Crook (as the person responsible for the design and construction of the building) had attended to the necessary paper work involved in gaining approvals. There were numerous precedents around the office available to him. Moreover, he had been with the Group as an Operations Manager for 2 years and had previously worked extensively with the Samari’s Group, a well-known steel fabricator and erector.
25. Mr Crook’s explanation was that he believed the priority was to get the job done quickly and chose speed over operating lawfully. I am told that upon learning of this explanation Mr Crook was subsequently dismissed by Paolo.
26. When Paolo learned that an approval had not been obtained he instructed Mr Pound a project designer to lodge the appropriate application. A development application was submitted on 15 October 2009. Soon after the application was lodged a section 84 Notice was issued by the Council in relation to Building “B”. Although no Development Approval has been granted for “B” it is currently being occupied. Ms Powell QC tells me (and I accept) that Building B is not being “utilised” in an operational sense as the business is, for practical purposes, not operating.
27. In relation to Buildings C and D, although a building application for Building “C” was lodged on 30 July 2009, this was superseded by a new application for both buildings, again on 15 October 2009. Construction work involving concrete pads and the erection of some framework posts commenced in October 2009. Following receipt of a s 84 Notice on 3 November 2009, work on the buildings ceased. A development approval for the buildings was granted on 22 December 2009.

Defendants Individual Circumstances

28. In the course of the construction of the Desalination Plant, in 2010 there was an accident in which one of the employees of the Group was killed. As a consequence, the site was shut down for many weeks.
29. The head contractor withheld all future payments to the Group. At that time there were unpaid progress claims in the order of $4.5 million.
30. As a result of being prevented from entering the site, monies due by the Group to other building contractors were withheld. Performance guarantees provided by the Group on other projects were cashed or withheld and the Group lost several projects it had expected to win as a result of the accident and its ramifications.
31. As a consequence of these matters, both the first defendant and Adelaide Precast appointed a voluntary administrator and in May 2011 both entered into Deeds of Company Arrangement.
32. A term of the first defendant’s Deed requires its directors to pay into the Deed Fund the sum of $1 million within 12 months of executing the Deed. In the case of Adelaide Precast, the requirement is $½ million.
33. The payment under these Deeds is proposed to come from the sale of the subject land. I am told that while there was an initial offer of some $12 million for the subject land, on learning of these prosecutions, that offer has been reduced to some $10 million.
34. Since February 2011, the Group has lost all its work, now has only a skeleton work force and struggles, as a result, to effectively compete for new work. In essence, as Ms Powell QC submitted, the Group no longer conducts a viable business.
35. I am told, and it is not disputed, that it is likely that after the property is sold there will not be funds left over for the members of the companies.
36. In relation to Paolo, I am informed that he is being sued by creditors of both the first defendant and Adelaide Precast under personal guarantees from both himself and his wife. The total amount claimed is in excess of $1 million and this amount may increase.
37. One of the creditors has caveated the family home, which is in his wife’s name, and he really has very little left. He has not drawn any salary since 2011 and is in a parlous state, in terms of indebtedness to his various creditors.

Penalty

38. On this issue generally I first bear in mind the remarks of Bleby J[2], as to the compelling public interest in favour of recording a conviction for this type of offence by way of general deterrence to others who may be tempted to carry out substantial development without gaining Development Approval, or in commencing substantial development work without making any reasonable enquiry as to whether Development Approval has been obtained.
39. His Honour’s observations are peculiarly apposite in the context of the facts of this case and there are accordingly insufficient grounds to exercise a discretion to impose a penalty on any of the defendants without recording a conviction.
40. In relation to the two corporate defendants I take into account the provisions of section 105(1) of the Development Act 1993 which impute to each of them the state of mind of Paolo as one of their directors. Having said that, I should also say that I regard the conduct of the corporate defendants in causing suffering or permitting the building work to be less serious than the conduct of Paolo who was really the “controlling mind” in this matter.
41. I propose to deal with each defendant in turn. I note that the maximum penalty for a breach of s 44(1) is $120,000.
42. In relation to the first defendant I take into account the following:-

1. The company has no prior convictions;
2. It made admissions through its agent at the first available opportunity;

3. The financial consequences of the death of the employee have led to possible financial ruin for a successful company and played a part in deflecting its attention from ensuring that requisite approvals were put in place in a more timely fashion
4. Although the buildings were significant, the infrastructure involved meant that it was a relatively simple construction exercise;
5. The contrition of the company as evidenced by its director, Paolo is both real and obvious;
6. Upon realising that offences had been committed it put in place measures to ensure that this would not happen again;
7. Although two separate offences have been committed, it would appear that the second offence was committed in similar circumstances, namely without knowledge or connivance by the defendant..
   
43. I propose to impose a penalty of $4,000 on each Count but reduce each by 25% for the plea of guilty making a total fine of $6,000.
44. In relation to the second defendant I make the same comments and I propose to impose the same total penalty of $6,000.
45. In relation to the third defendant, I take into account the following:

1. He has no prior convictions;

2. He co-operated with the Council and indicated a plea of guilty at the earliest practical opportunity;

3. He has demonstrated real contrition;

4. The offences are offences of omission. They came about because of inadvertence rather than a deliberate or contumelious disregard for his obligations;
5. He has very properly acknowledged that although the conduct giving rise to the offences was not his, he is nevertheless responsible for it;
6. He has taken steps (by putting in place new procedures) to ensure that there is unlikely to be a repetition of the offences;
7. As a result of the death of one of his employees, he is now in a somewhat parlous financial state making the imposition of any financial penalty much more onerous than would have been the case in 2009.
   
46. Finally I take into account the character references submitted on his behalf by Ms Powell QC which depict him to be a hard working member of the community with commendable honesty and integrity.
47. I propose to impose a fine on each Count of $6,000 but reduce each by 25% for his plea of guilty, making an amount of $4,500 each or a total of $9,000.
48. In their submissions both counsel referred me to the Court’s power to impose one penalty upon each defendant pursuant to the provisions of section 18A of the Criminal Law (Sentencing) Act 1988, particularly in the context of the “totality principle”.
49. In my view, the circumstances here do not call for the application of section 18A. As King CJ said[3]:

There is a principle of sentencing known as the principle of totality, which enables a court to mitigate what strict justice would otherwise indicate, where the total effect of the sentences merited by the individual crimes becomes so crushing as to call for the merciful intervention of the court by way of reducing the total effect.

50. Although His Honour’s observations were made in the context of sentencing for terms of imprisonment, the principles to which he adverted are nevertheless relevant and constructive. I do not regard the total effect of the individual penalties which I intend to impose in relation to each offence (even in the straitened financial circumstances of these defendants) as being “so crushing”.
51. There is, accordingly, no occasion to depart from the penalties referred to above.

The Order of the Court

The First Defendant

52. On Count 1, the first defendant is convicted and fined $3,000.
53. On Count 2, the first defendant is convicted and fined $3,000.
54. In addition I impose a Victims of Crime Levy in the amount of $160.

The Second Defendant

55. On Count 3, the second defendant is convicted and fined $3,000.
56. On Count 4, the second defendant is convicted and fined $3,000.
57. In addition I impose a Victims of Crime Levy in the amount of $160.

The Third Defendant

58. On Count 5, the third defendant is convicted and fined $4,500.
59. On Count 6, the third defendant is convicted and fined $4,500.
60. In addition I impose a Victims of Crime Levy in the sum of $160.

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[1] R v Major (1998) [1998] SASC 7089; 70 SASR 488; Nixon 66 A Crim R83

[2] City of Salisbury v Ahrens Group [2010] SASC 254; (2010) 108 SASR 54

[3] Rossi (1988) 142 LSJS 451, 455