The infamous 2016 destruction of the Corkman Hotel in Carlton has ended in jail for the directors of the developer. 

The directors were sentenced to jail for contempt arising due to their deliberate refusal to comply with orders of the Victorian Civil and Administrative Tribunal (VCAT).

The demolition

On the morning of Saturday 15 October 2016 Stefce Kutlesovski and Raman Shaqiri of 160 Leicester Pty Ltd (the directors) commenced demolition of the Corkman Hotel.  The demolition continued into the night, interrupted only briefly by visits from Melbourne City Council representatives, before a Stop Work Notice was finally served in the early hours of Sunday 16 October 2016.  At that stage the damage was done and the historic pub was almost completely demolished.

The demolition was carried out without a permit.  By separate proceedings in the County Court the directors and the company were penalised for the demolition of Corkman Hotel.

The present proceedings

In May 2019 the directors agreed to orders by VCAT requiring them to, amongst other things, clear the site and provide a plan to turn the site into a park.

The directors failed to take those actions in the time required.

In finding the directors guilty of contempt VCAT held that the failure to comply was deliberate. [Melbourne CC v 160 Leicester Pty Ltd (No 2) [2020] VCAT 1435]

In determining the penalty VCAT considered various factors including the nature and circumstances of the contempt, the directors’ culpability and reasons for their conduct and whether the directors exhibited contrition.  VCAT looked at the directors’ behaviour in light of these factors and concluded that a term of imprisonment (plus a substantial fine) was appropriate.

The directors appealed to the Supreme Court, but the appeal was rejected.  The Court held that monetary penalties would have been regarded as a ‘mere cost of doing business’ – thus countenancing the notion that well-resourced parties were free to disregard, or even flout, orders of VCAT.

When will VCAT send parties guilty of contempt to jail?

If VCAT finds a natural person guilty of contempt it has a discretion to sentence that person to jail.

In this case VCAT exercised that discretion because of the combination of wilful and deliberate non-compliance and an attitude that the directors believed they were free to ignore an order if it was not in their commercial interest.  In the end, VCAT had no confidence that the directors would fulfil their obligations to VCAT, the industry or the community other than by the imposition of what it recognised was a very significant and unusual penalty.

Lessons learned

Parties should be aware that a deliberate and wilful failure to comply with VCAT’s orders will be a contempt which may result in imprisonment.

By Tom Kearney, Senior Associate, MinterEllison and Kate Gorman, Lawyer, MinterEllison

Tom Kearney, Senior Associate

Tom acts for principals, developers, contractors and government on both contentious and non-contentious work. His expertise ranges from contract negotiation and formation, contract review through to advice and administration, with a particular focus on litigation and other forms of dispute resolution including experience with the relevant security of payment legislation in all Australian jurisdictions.

Kate Gorman, Lawyer

Kate has over 15 years of experience in the construction industry working as a project manager across commercial, residential and civil sectors both on the contractor and client side. Kate’s legal experience includes assisting on major infrastructure and private development projects, and she has been involved in preparing commercial and construction transaction documents including for public private partnerships.