Background
Fengqin Li, a Chinese national, contracted in 2016 to buy vacant residential land at 8 Rogers Close, Berwick, Victoria, for $296,000. A no objection notification issued under the Foreign Acquisitions and Takeovers Act 1975 (Cth) permitted the acquisition on conditions that included completing one or more dwellings within four years. The deadline expired on 4 March 2020, but the land remained vacant and Ms Li neither sought to vary the condition nor took steps toward construction.
The Australian Taxation Office repeatedly contacted Ms Li from 2021 onward. In telephone conversations in early 2023, she said that she lacked funds to build and intended to sell the undeveloped property. She did not remedy the breach or participate in the Commissioner’s later enforcement proceeding, despite service of the relevant documents and multiple opportunities to respond. The Commissioner therefore sought default judgment, a civil penalty, costs, and an extension of an existing freezing order over the property.
The Court’s Holding
Justice O’Bryan entered default judgment after finding that Ms Li was in default under the Federal Court Rules and that the pleaded facts established a contravention of s 96(1) of the Act. The Court declared that Ms Li contravened the provision on 4 March 2020 and on every day thereafter by failing to complete a dwelling within the required period. Under s 93 of the Regulatory Powers (Standard Provisions) Act 2014 (Cth), each day of continuing noncompliance constituted a separate contravention.
The Court imposed a single aggregate pecuniary penalty of $508,000. Although more than 2,300 daily contraventions produced a theoretical maximum in the hundreds of millions of dollars, the Court treated them as a series of contraventions of the same character and selected a penalty equal to the current maximum for one contravention—twice the property’s estimated $254,000 capital gain. The Court also awarded the Commissioner $50,757.70 in costs and extended the freezing order until 28 days after judgment to avoid a gap before the statutory charge securing the penalty could become practically effective.
Key Takeaways
- A condition requiring development of vacant residential land remains enforceable after its deadline, and continuing noncompliance may constitute a separate civil contravention on every day it persists.
- When numerous contraventions arise from the same continuing conduct, the Court may impose one aggregate penalty while assessing whether the total is just and sufficient for specific and general deterrence.
- Failure to engage with regulators, remedy a known breach, or participate in court proceedings can support default judgment and increase the need for a substantial deterrent penalty.
Why It Matters
The decision demonstrates the potentially severe consequences for foreign purchasers who fail to satisfy development conditions attached to approval of residential-land acquisitions. Even a single unremedied failure can generate years of daily contraventions and an exceptionally large theoretical penalty exposure.
It also underscores that these conditions serve Australia’s policy of directing foreign residential investment toward increasing housing supply rather than passive land speculation. The Court treated prolonged noncompliance and lack of cooperation as central to deterrence, while still applying a single penalty proportionate to the conduct as a whole.