Waverley Council v Tovir Investments Pty Ltd (No 4)

[2013] NSWLEC 88

Land and Environment Court

New South Wales

Medium Neutral Citation:

Waverley Council v Tovir Investments Pty Ltd & Rappaport (No 4) [2013] NSWLEC 88

Hearing dates:

17 June 2013

Decision date:

18 June 2013

Jurisdiction:

Class 4

Before:

Biscoe J

Decision:

(1) Respondent Tovir Investments Pty Ltd is fined $40,000 apportioned as follows:

(a) $20,000 for its contempt relating to 6 Kent Street, Waverley;

(b) $20,000 for its contempt relating to 34 Imperial Avenue, Bondi.

(2) Respondent Michael Rappaport is fined the sum of $4,000 apportioned as follows:

(a) $2,000 for his contempt relating to 6 Kent street, Waverley;

(b) $2,000 for his contempt relating to 34 Imperial Avenue, Bondi.

(3) Respondents are to pay the applicant's costs.

Catchwords:

CONTEMPT - sentencing for disobeying Court orders not to cause or permit premises to be used for purpose of backpackers accommodation as defined in Waverley Local Environmental Plan 1996 - relevance of mental condition to sentencing.

Legislation Cited:

Crimes (Sentencing Procedure) Act 1999 s 3A
Waverley Local Environmental Plan 1996

Cases Cited:

Beldon v R [2012] NSWCCA 194 at [33] - [34]
Burwood Council v Ruan [2008] NSWLEC 167
Butters v R [2010] NSWCCA 1
Liverpool City Council v Palerma Pty Ltd and Parilo (No 2) [2009] NSWLEC 45
Matthews v Australian Securities and Investments Commission [2009] NSWCA 155
Mosman Municipal Council v Kelly (No 6) [2010] NSWLEC 20
Pittwater Council v Brown Brothers Waste Contractors Pty Ltd (No 2) [2009] NSWLEC 210
Queanbeyan City Council v Sun (No 2) [2013] NSWLEC 64
R v Bugmy [2012] NSWCCA 223
R v Verdins; R v Buckley; R v Vo [2007] VSCA 102,16 VR 269
Ryan v R [2001] HCA 21, 206 CLR 267
Waverley Council v Tovir Investments Pty Ltd & Rappaport (No 3) [2013] NSWLEC 35
Wood v Staunton (No 5) (19960 86 A Crim R 183

Category:

Sentence

Parties:

Waverley Council (Applicant)
Tovir Investments Pty Ltd (First Respondent)
Michael Rappaport (Second Respondent)

Representation:

COUNSEL:
T Howard (Applicant)
A Gruzman (Respondents)
SOLICITORS:
Sparke Helmore (Applicant)
Boskovitz & Associates (Respondents)

File Number(s):

40917/10 and 40918/10

Judgment

1. This is a sentencing for contempt of Court.

1. On 28 January 2011 and 25 February 2011, the Court, on the application of Waverley Council, made orders by consent restraining the respondents Tovir Investments Pty Ltd and Michael Rappaport from using the properties known as 6 Kent Street, Waverley and 34 Imperial Avenue, Bondi, or causing or permitting them to be used, for the purpose of "backpackers accommodation" as defined in the Waverley Local Environmental Plan 1996 (LEP). At all relevant times the use of the properties for that purpose was prohibited under the LEP.

1. On 27 March 2013, for the reasons published in Waverley Council v Tovir Investments Pty Ltd & Rappaport (No 3) [2013] NSWLEC 35, I adjudged each of the respondents guilty of contempt of court as charged for contravening the Court orders and ordered them to pay Council's costs. They had pleaded not guilty. The charge period in the case of the Kent Street property was from about 12 February 2011 to about 14 April 2012 and, in the case of the Imperial Avenue property, was from about 12 February 2012 to about March 2012. I found that during the charge periods Tovir caused and permitted, and Michael Rappaport caused, the properties to be used for the purposes of "backpackers accommodation" as defined in the LEP.

1. The unlawful use of the properties for the purpose of backpackers accommodation was characterised in the case of both premises by (among other things):

(a)   a high turnover of transient occupants, not known to their neighbours;

(b)   the frequent presence in the street of a bus dropping the occupants, and prospective occupants, off and picking them up, including late at night;

(c)   the frequent visible presence of waste, in the form of overflowing bins, rubbish placed on the ground next to full bins and discarded mattresses and other personal and household items; and

(d)   intense and sometimes relentless partying, often late into the night and during the week.

1. The unlawful use of the properties for the purpose of "backpackers accommodation", as defined in the LEP, during the charge periods had a significant, negative impact on the amenity of the neighbourhood of each property. The respondents were aware of the complaints made by the neighbours. The records of the NSW Police demonstrate that on numerous occasions during the charge periods officers of attended the properties in response to noise complaints and that they issued a number of noise abatement directions to a number of different occupants.

1. The contempt of court of each respondent was wilful in the sense that it was not casual, accidental or unintentional. However, it is not alleged that the contempt was contumacious.

1. Not only did Tovir permit the properties to be marketed as backpackers accommodation but it was aware through its directors and Michael Rappaport, its property manager, of the characteristics of occupation which had the legal consequence that each of the properties was being used for the purposes of "backpackers accommodation", as defined in the LEP.

1. Despite having consented to the making of the Court orders and having represented to the Court, at least in relation to the Imperial Avenue property, that the use had ceased, neither of the respondents took steps to cause the use of the properties for the purposes of backpackers accommodation to cease. On the contrary, there was a continuity of use before and after the consent orders were made without any or significant change.

1. During 2011 Council's solicitors wrote letters to Michael Rappaport and/or Tovir warning that the consent orders were being breached. The respondents' solicitors wrote back denying that the premises were being used for the purposes of backpackers accommodation. Notwithstanding these denials, both properties were intensively used for the purposes of backpackers accommodation throughout the summer of 2011/2012.

1. In 2009 Tovir decided to upgrade the properties. Because Thomas Rappaport anticipated that development consent could be obtained within three to six months, Tovir terminated the long term tenancies that were in place and switched to short term tenancies pending receipt of development consents and commencement of upgrading. Although he asserts in evidence that the decision at that time was to lease for three months, no leases have been tendered and, on the evidence reviewed in my earlier judgment, I am satisfied that most occupancies were in fact for substantially less than two months.

1. The Kent Street development application (DA) was lodged in March 2010 and approved by Council in November 2010 on conditions that Tovir did not find acceptable. Tovir appealed successfully to this Court which handed down its decision in June 2011. Work commenced in May 2012 and is now complete, and the premises are being advertised for leasing. They will be let for long term residential purposes when the occupation certificate is received. The Imperial Avenue DA was lodged in September 2011 and refused. A further DA was lodged in April 2012, there was no consent and Tovir appealed successfully to this Court which handed down its decision in September 2012. Works commenced in October 2012 and should be complete in about October 2013 when Tovir intends to lease the premises on a long term basis.

1. Since the commencement of building works there has been compliance with the consent orders and there is no likelihood of a continuing breach.

1. Michael Rappaport's psychological state is a consideration when sentencing him. There is evidence, which I accept, of his treating clinical psychologist, Dr Sam Borenstein, as follows. Michael Rappaport suffers major depression (recurrent type), post traumatic stress disorder with dissociative features, chronic anxiety and panic disorder. He consults a consultant psychiatrist as well as Dr Borenstein regularly. He has struggled with his chronic psychological/psychiatric condition over many years and remains susceptible to stressors of the sort this prolonged court case represents. Throughout the court case, his mental state was fragile and precarious. He expressed genuine guilt and remorse with regard to his actions, in particular contempt, for which he sought to make restitution. He is already financially burdened by the proceedings. Facing a heavy penalty will impact significantly on his desire to move forward in his resolve to recover from his disorder. A heavy penalty will set him back significantly and interfere with his desire to become a productive and "normal" member of society.

1. There is also evidence, which I accept, from Thomas Rappaport that the proceedings have so stressed Michael Rappaport that his engagement to be married has terminated and he has been left in a depressed and fragile state of mind.

1. In R v Verdins; R v Buckley; R v Vo [2007] VSCA 102, (2007) 16 VR 269, the Court said at [32]:

Impaired mental functioning, whether temporary or permanent ("the condition"), is relevant to sentencing in at least the following six ways:

1. The condition may reduce the moral culpability of the offending conduct, as distinct from the offender's legal responsibility. Where that is so, the condition affects the punishment that is just in all the circumstances; and denunciation is less likely to be a relevant sentencing objective.

2. The condition may have a bearing on the kind of sentence that is imposed and the conditions in which it should be served.

3. Whether general deterrence should be moderated or eliminated as a sentencing consideration depends upon the nature and severity of the symptoms exhibited by the offender, and the effect of the condition on the mental capacity of the offender, whether at the time of the offending or at the date of sentence or both.

4. Whether specific deterrence should be moderated or eliminated as a sentencing consideration likewise depends upon the nature and severity of the symptoms of the condition as exhibited by the offender, and the effect of the condition on the mental capacity of the offender, whether at the time of the offending or at the date of the sentence or both.

5. The existence of the condition at the date of sentencing (or its foreseeable recurrence) may mean that a given sentence will weigh more heavily on the offender than it would on a person in normal health.

6. Where there is a serious risk of imprisonment having a significant adverse effect on the offender's mental health, this will be a factor tending to mitigate punishment.

1. In Beldon v R [2012] NSWCCA 194 at [33] - [34] (followed in R v Bugmy [2012] NSWCCA 223 at [44]) it was held (omitting most citations):

33     Where it is said that an offender suffers from a mental condition or disorder, this may bear upon the question of sentence in a number of different ways, depending upon the circumstances of the case. As Gleeson CJ observed in R v Engert (1995) 84 A Crim R 67 at 69, it is erroneous in principle to approach the law of sentencing as though automatic consequences follow from the presence or absence of particular factual circumstances such as a mental disorder.

34     Court decisions in this area have identified a number of ways in which the presence of a mental condition or disorder may bear upon the question of sentence. A helpful summary of these factors appears in the judgment of McClellan CJ at CL in Director of Public Prosecutions (Cth) v De La Rosa [2010] NSWCCA 194; 79 NSWLR 1 at 43 [177]:

Where an offender is suffering from a mental illness, intellectual handicap or other mental problems the courts have developed principles to be applied when sentencing. They can be summarised in the following manner:

Where the state of a person's mental health contributes to the commission of the offence in a material way, the offender's moral culpability may be reduced. Consequently the need to denounce the crime may be reduced with a reduction in the sentence.

It may also have the consequence that an offender is an inappropriate vehicle for general deterrence resulting in a reduction in the sentence which would otherwise have been imposed.

It may mean that a custodial sentence may weigh more heavily on the person. Because the sentence will be more onerous for that person the length of the prison term or the conditions under which it is served may be reduced.

It may reduce or eliminate the significance of specific deterrence.

Conversely, it may be that because of a person's mental illness, they present more of a danger to the community. In those circumstances, considerations of specific deterrence may result in an increased sentence...

SENTENCING PRINCIPLES

1. The underlying purpose of the exercise of the power of the Court to punish for a contempt such as this is to protect the effective administration of justice by demonstrating that the Court's orders will be enforced. The following ten factors relevant to sentencing for contempt identified by the Court of Appeal in Wood v Staunton (No 5) (1996) 86 A Crim R 183 were endorsed by the Court of Appeal in Matthews v Australian Securities and Investments Commission [2009] NSWCA 155 and have been applied in this Court in a number of decisions (eg Burwood Council v Ruan [2008] NSWLEC 167, Liverpool City Council v Palerma Pty Ltd (No 2) [2009] NSWLEC 45 at [7]; Pittwater Council v Brown Brothers Waste Contractors Pty Ltd (No 2) [2009] NSWLEC 210 at [92]; and Mosman Municipal Council v Kelly (No 6) [2010] NSWLEC 20 at [6]):

(1)   the seriousness of the contempt proved;

(2)   whether the contemnor was aware of the consequences to himself of what he did;

(3)   the actual consequences of the contempt on the relevant trial or inquiry;

(4)   whether the contempt was committed in the context of serious crime;

(5)   the reason for the contempt;

(6)   whether the contemnor has received any benefit by indicating an intention to give evidence;

(7)   whether there has been any apology or public expression of contrition;

(8)   the character and antecedents of the contemnor;

(9)   general and personal deterrence; and

(10)   denunciation of the contempt.

1. Wood v Staunton was concerned with a different species of contempt, namely refusing to answer questions at a Royal Commission. That influenced the precise formulation of the ten factors in that case, in particular the references "to himself" in factor (2) and "on the relevant trial or inquiry" in factor (3). Those factors require some adaptation in a case such as the present. Wood v Staunton predated the Crimes (Sentencing Procedure) Act 1999. That Act applies to criminal contempts but, in my view, applies by analogy to civil contempts such as this: Queanbeyan v Sun (No 2) [2013] NSWLEC 64 at [17] per (Biscoe J). The purposes for which a court may impose a sentence on an offender are listed in s 3A of that Act and relevantly include the following:

(a) to ensure that the offender is adequately punished for the offence,

(b) to prevent crime by deterring the offender and other persons from committing similar offences,

...

(e) to make the offender accountable for his or her actions,

...

1. There is a significant overlap between the sentencing factors identified in Wood and the sentencing factors set out in that Act. The relevant factors are considered below.

SERIOUSNESS

1. The proven contempts are serious. However, they do not fall into the most serious category of cases of contempt, including because the contempts are not alleged to have been contumacious and the contempts are purged by Tovir's actions in obtaining consent and redeveloping the properties for use other than backpackers accommodation.

1. The respondents submit that had Tovir's expectation that it would take three to six months to obtain development consent to upgrade the properties been correct, there would have been little, if any, non-compliance with the consent orders. I accept that if that expectation had been correct there would have been relatively little non-compliance with the consent orders. However, I do not accept that it was reasonable for the respondents to provide backpackers accommodation even for that period of time, nor to continue doing so after the consent orders were made. I think that Tovir continued to do so because that was in its commercial interest.

1. The respondents submit that although they knew of the Court's consent orders and disobeyed them, the seriousness of their contempt is mitigated because of their ignorance of the meaning of "backpacker's accommodation" in the LEP. I accept that after the consent orders were made Thomas Rappaport made inquiries as to the meaning of the term and was advised by solicitors that the meaning was uncertain and that he should liaise with Council to ensure compliance with the consent orders. I accept that the seriousness of the contempts is reduced by the respondents' communicated desire to the Council to be complaint with the consent orders combined with the fact that the meaning of "backpacker's accommodation" in the LEP was not certain; and the fact that in September 2011 Council's compliance officers inspected the properties and told Mr Thomas Rappaport that they did not find any non-compliance issues. On the other hand, the respondents made a deliberate decision in 2010 to switch from six to 12 month leases to short term occupancies which, to say the least, raised a serious risk that it constituted backpacker's accommodation. Further, after the consent orders were made Council's solicitors repeatedly contended in correspondence with the respondents or their solicitors that the respondents were in breach of the consent orders. And when the respondents' solicitors reviewed Council's evidence in April 2012 they advised the respondents that, unless Council's evidence was rejected, the respondents would be found guilty of contempt.

1. My conclusion is that the contempts are of moderate seriousness.

AWARENESS OF CONSEQUENCES

1. The respondents were aware of the consequences of the conduct constituting the contempt, namely that the amenity of the neighbourhood would be greatly harmed and that Tovir would continue to derive rental revenue from the use of the properties for the purposes of backpackers accommodation.

ACTUAL CONSEQUENCES

1. The consequences were those of which I have found the respondents to be aware. Although the respondents were not aware of it, in the case of one neighbour of the Kent Street property, Mr Kauter, the harm to the amenity of the neighbourhood influenced his decision earlier this year to sell up and move elsewhere. I do not accept the respondents' submission that he exaggerated his evidence in this regard although I accept that he was more sensitive than other neighbours.

REASONS FOR CONTEMPT

1. The respondents submit that their breach of the Court orders is the result of misunderstanding their effect despite making enquiries and researching what constitutes "backpackers accommodation". I do not accept the submission. I accept that the respondents made inquiries and thought that the meaning of "backpacker's accommodation" as defined in the LEP was uncertain. However, when they consented to the orders they accepted that the accommodation being provided at that time was backpackers accommodation and thereafter the nature of the accommodation provided did not change. As stated earlier, in April 2012 their solicitors advised them that, unless the Court rejected Council's evidence, it was sufficient to convict them of contempt.

1. I think, as Council submits, that a reason for Tovir causing and permitting the use of the properties for the purpose of backpackers accommodation was that it was desirable to Tovir from a commercial perspective.

1. The position with respect to Michael Rappaport is more problematic. In the absence of any evidence from him and given the psychologist's evidence, I am not prepared to make a finding as to his reasons for engaging in the conduct constituting the contempt.

CONTRITION

1. There is an expression of contrition by Tovir, which I accept, in the evidence of Thomas Rappaport. There is also evidence of contrition by Michael Rappaport, which I accept, in the evidence of Dr Sam Borenstein, clinical psychologist. Evidence of remorse in the report of a psychologist may, and in this case does, suffice: Butters v R [2010] NSWCCA 1 at [16] - [17]. Council submits that Dr Borenstein's evidence should not be accorded weight because he recorded Michael Rappaport as also saying that he had sought to make restitution whereas in fact he had not done so. Given Michael Rappaport's fragile psychological state, I do not propose to hold those words against him. There is also evidence that the respondents regret the problems suffered by neighbours. Although the respondents have not directly apologised to neighbours who gave evidence, that should not be held against them given that Michael Rappaport was subject to a Court order not to contact witnesses and Thomas Rappaport therefore thought that it was taboo for him to do so either.

ANTECEDENTS AND CHARACTER

1. The respondents are of good character. There is no evidence of any relevant antecedents for either respondent.

DETERRENCE

1. Council submits that there is a need for personal deterrence in relation to each of the respondents because the contempt was on-going for a considerable period and there has been no explanation for the conduct or demonstration of any insight into the conduct until the provision of the affidavit of Thomas Rappaport of 11 June 2013. In my opinion, there is no need for personal deterrence because there is no likelihood of re-offending; the contempts have been purged; regardless of any fine imposed, the proceedings will have served as a specific deterrent because of the respondents' liability to pay the enormous legal costs of Council and themselves, estimated to exceed $1 million; and by reason of knowledge of the proceedings in the local community.

1. General deterrence is a significant consideration in the imposition of a penalty for contempt. There is a particular need for general deterrence in relation to the unlawful use of residential properties for the purposes of backpackers accommodation because this type of unlawful use of residential land occasions particular community concern and the unlawful use can be difficult to prove.

DENUNCIATION

1. Denunciation of unlawful conduct involves, substantially, the denunciation inherent in the punishment itself: Ryan v R [2001] HCA 21, 206 CLR 267 at [120].

PARITY OF SENTENCING

1. In Burwood Council v Ruan [2008] NSWLEC 167 at [26] - [28] observed that the range of penalties imposed in this Court in cases of wilful contempt had generally been in the range of $7,500-$50,000, with the higher penalties (generally over $20,000) being imposed in cases involving environmental harm or the risk of environmental harm. In Queanbeyan City Council v Sun (No 2) [2013] NSWLEC 64 at [38] - [41] I referred to the caution to be exercised in comparing sentences passed in different factual contexts. The parties did not refer me to any comparable case.

CAPACITY TO PAY

1. The respondents submit that Tovir has a limited capacity to pay a substantial fine. According to Thomas Rappaport, currently Tovir's gross assets are about $6.1 million, its liabilities are about $5.1 million, its net assets are just under $1 million, but after taking into account its further liabilities for its own and Council's legal costs of the proceedings its net assets are about $267,000. For the 2012 tax year, the Rappaport Family Trust, of which Tovir is trustee, derived very substantial rental income from its various properties including about $101,000 from Kent Street and about $121,000 from Imperial Avenue plus further rental income from renting garages at those properties. Its properties are mortgaged. There is no evidence as to the personal financial position of Tovir's shareholders and directors, Thomas and Vivian Rappaport, or of Michael Rappaport. I am not satisfied that Tovir and Michael Rappaport do not have the financial capacity to pay the fines that I propose to impose on them.

SENTENCE

1. In my opinion, the appropriate sentence is a fine for each respondent. Taking all matters into account, I propose to fine Tovir a total of $40,000 apportioned equally between its contempt in relation to the Kent Street premises and its contempt in relation to the Imperial Avenue premises. I propose to fine Michael Rappaport $4,000 to be apportioned equally in the same way. I have heavily reduced the fine that I otherwise would have imposed on him because of the psychologist's evidence that due to his fragile and precarious mental state a heavy fine would impact negatively on his rehabilitation and his goal to become a productive and "normal" member of society.

ORDERS

1. The orders of the Court are as follows:

(1)   The respondent Tovir Investments Pty Ltd is fined $40,000 apportioned as follows:

(a)   $20,000 for its contempt relating to 6 Kent Street, Waverley;

(b)   $20,000 for its contempt relating to 34 Imperial Avenue, Bondi.

(2)   The respondent Michael Rappaport is fined the sum of $4,000 apportioned as follows:

(a)   $2,000 for his contempt relating to 6 Kent street, Waverley;

(b)   $2,000 for his contempt relating to 34 Imperial Avenue, Bondi.

(3)   The respondents are to pay the applicant's costs.

(4)   The exhibits may be returned.

Decision last updated: 19 June 2013