Fine is manifestly inadequate: District Court of Queensland allows appeal after finding penalty imposed on respondent company for demolition of historical cottage was manifestly inadequate

In brief

The case of Brisbane City Council v Natural Lifestyle Homes Pty Ltd [2023] QDC 234 concerned an appeal under section 222 of the Justices Act 1886 (Qld) to the District Court of Queensland (Court) against what the appellant local government argued to be the manifest inadequacy of the penalty which had been imposed on the respondent in respect of development offences arising from the respondent's demolition of an historical cottage.

Background

Natural Lifestyle Homes Pty Ltd (Respondent) applied to the Brisbane City Council (Council) to redevelop a residential property at 41 Wilden Street, Paddington (Property) owned by one of the Respondent's shareholders, Mr Keane and his wife (Keanes). The Respondent proposed to demolish a heritage cottage on the site (Cottage) and create a replica of it as part of a new residential build which the Keanes were intending to be their new family home.

The Council refused the application for demolition of the Cottage on the basis of its age and historical significance, having been built in 1888, as well as the clear protections afforded to the Cottage under the Brisbane City Plan 2014.

The Council granted a development approval in respect of the Property with stringent conditions requiring the Cottage to be structurally protected and preserved, with any additional works to be completed behind and around the Cottage (Redevelopment).

In order to undertake the Redevelopment, the Respondent intended to move the Cottage to the back of the Property and complete the required works before reinstating the Cottage at which stage it would be integrated with the rest of the Redevelopment. However, upon being moved to the back of the Property, the Cottage's bracing was removed and no structural assessments were undertaken.

The Respondent formed the view that the relocation of the Cottage was no longer feasible and instead demolished the Cottage and built a replica, with the only retained artefacts being the original door and two windows (at [7]). As a result, the Respondent achieved the very development which the Council had refused.

The Respondent pleaded guilty to one count of carrying out assessable development without a permit in breach of section 163(1) of the Planning Act 2016 (Qld) (Planning Act) and one count of contravening a development approval under section 164 of the Planning Act in the Magistrates Court on 9 June 2023 (Offences).

The Respondent was fined $20,000 in respect of the Offences, along with its two shareholders, Mr Keane and Mr Carroll (Shareholders) who were each fined $19,000 and $15,000 respectively.

Appeal

The overarching issue for the Court on appeal was whether, as the Council alleged, the penalty was manifestly inadequate.

In determining the issue, the Court had regard to a number of factors relevant to the exercise of the sentencing discretion, including:

1. the seriousness of the conduct;

2. the maximum penalty for corporations being five times that for natural persons (see section 181B(3) of the Penalties and Sentences Act 1992 (Qld));

3. the cost of doing business;

4. the relationship between the theoretical maximum penalty and the penalty imposed;

5. the Respondent's capacity to pay; and

6. the nature of the offending.

The Court found that the penalty imposed on the Respondent was manifestly inadequate (at [34]).

Court finds the penalty imposed on the Respondent was manifestly inadequate

Seriousness of the conduct

The Court relevantly noted the lack of compliance with the development approval, the decision to demolish the Cottage having been reached over a period of weeks, and a failure to inform the Council of the decision (at [12]). The Court found that the important protections afforded to the Cottage by the approval scheme were undermined and disregarded. The Court concluded that general deterrence was a significant consideration in this context (at [12]).

Penalty five times that for natural persons 

The Court agreed with the Council's argument that attention must be paid to the higher maximum penalty, even where company directors are also being sentenced or where there is a double punishment scenario (at [13]).

Cost of doing business

The Court relevantly noted that imposing significant penalties for offences of this kind are important to prevent developers from viewing penalties as a mere "cost of doing business" (at [14]). Whilst the Court acknowledged that the development was not a "for profit" exercise, being a residential build, the Court found the principle to be relevant nonetheless.

Relationship to maximum penalty

The Court relevantly noted that the maximum penalty, being a fine of $3,002,625 is a "yardstick" to which attention should be paid by judges. The Council contended that the minimal nature of the penalty was "…so untethered to the maximum penalty available that the error in the exercise of the sentencing discretion is apparent, without separate identified discrete legal error in reasoning" (at [17]). The Court had regard to the significant total cost of the Redevelopment, the insignificance of the fine by comparison, and the avoidance of costs associated with moving and reinstated the Cottage.

Capacity to pay

The Court considered both indemnity of the Respondent by its insurer and the Respondent's capacity to pay generally.

The Respondent argued that its indemnity by its insurer of both legal costs and the fine received was neither relevant to the issues on appeal nor the error alleged by the Council. The Court concluded that "[w]here the insurance policy means that a personal burden is not being imposed on the respondent by way of the fine, there is no reason to adjust it upwards, however nor is there a reason to adjust it downwards" (at [21]). The Court concluded that the question of indemnity is therefore neutral as to the issues on appeal.

The sentencing Chief Magistrate emphasised that the fine was informed by the totality of the punishment which the Shareholders would also bear given their connection to the company. The Court disagreed with this, having established that the penalty should be no less than if the company had been the sole contravener (at [22]).

The Respondent also pointed to evidence indicative of its inability to pay a significant fine without the consequence of insolvency which would in turn impact existing building projects, along with the careers and livelihoods of the Shareholders. The Court had regard to a number of considerations of the financial circumstances of the Respondent and its Shareholders (see [24] to [30]) and deemed them "...relevant but not determinative as to the precise quantum of the appropriate penalty..." concluding that "[f]ines are intended to penalise offenders..." (at [31]).

Nature of the offending

The Court noted that the conduct of the Respondent was accepted as not a deliberate defiance of the approval and noted there was no commercial benefit to the Respondent arising from the offending (at [32]). Nonetheless, the Court found that the Respondent's behaviour was reckless having regard to the Shareholders' considerable experience in the area and that the Respondent could have and ought to have consulted with its structural engineer involved in the project regarding the proper preservation of the Cottage.

Conclusion

The Court concluded that the penalty imposed on the Respondent was manifestly inadequate and should be set aside.

The appeal was allowed and the fine of $20,000 imposed on the Respondent was replaced with a fine of $100,000 in respect of the Offences.