Hepburn Shire Council is facing an unprecedented governance crisis, with five of its seven councillors stood down and upcoming council meetings cancelled following private criminal prosecutions brought by local businessman and property developer David Penman.
The most recent prosecutions relate to the adoption of the Council’s 2026/27 budget. With the result that only two councillors remain in place, the Council cannot form the quorum of four required to make decisions, and formal decision-making has come to a halt.
The allegations
Mr Penman claims the budget was adopted unlawfully because proper processes were not followed — He has said the prosecutions concern the adoption of the budget without the documents the Local Government Act required the Council to include. He has also claimed that changes made between the draft budget and the final version worsened the Council’s financial position.
Two offences are potentially relevant to allegations like those made in relation to the Hepburn budget, and each has well-established elements. The common law offence of misconduct in public office requires the prosecution to prove beyond reasonable doubt that a public official, acting in the course of their office, wilfully misconducted themselves — whether by a deliberate act or by deliberate neglect of a duty — without reasonable excuse or justification, and that the misconduct was so serious, measured against the responsibilities of the office, as to warrant criminal punishment. Victorian courts have emphasised that this final element sets the offence apart from mere error or maladministration.
The statutory offence of misuse of position, under section 123 of the Local Government Act 2020, requires proof that a councillor intentionally misused their position to gain an advantage for themselves or another person, or to cause detriment to the Council or someone else.
Both offences are, by design, directed at deliberate wrongdoing: as a general principle of this area of law, honest mistakes, procedural irregularities and decisions made in good faith reliance on official advice are matters for administrative or political accountability rather than the criminal courts.
Mr Penman has stated publicly that his concerns are legitimate and that private prosecutions are a lawful part of the democratic process. All charges are allegations only. No court has determined any of them, and the matters remain before the courts.
The Council’s response
Hepburn Shire Council has strongly defended the budget’s legality, releasing a statement this week saying it “would like to correct commentary suggesting otherwise”.
According to the Council, a compliant draft budget prepared on the official Victorian Government template was placed on public exhibition on 26 May. Following community feedback and updated financial information, refinements were made before the budget was formally adopted on 30 June. The Council says that amending a budget between public exhibition and final adoption is standard practice across Victorian local government.
The Council states that when questions about compliance were raised at the adoption meeting, the Chief Executive Officer advised councillors that the budget met legislative requirements before the vote was taken. It has since obtained independent legal advice which it says confirms the adopted 2026/27 budget meets the requirements of the Local Government Act 2020.
How the law allows this
The councillor stand-downs flow from section 229 of the Local Government Act 2020. Following amendments passed in 2024, a councillor charged with a specified offence — including any offence punishable by two or more years’ imprisonment — is automatically stood down until the charge is withdrawn or the proceedings, including any appeal, are finally determined.
The provision was designed for councillors facing serious charges laid by police. But in Victoria any person may commence a criminal proceeding by filing a charge-sheet, without any police involvement or independent assessment of the evidence — and the automatic stand-down applies regardless of who lays the charge. The combined effect is that a single individual can, through private prosecution, remove a majority of an elected council from office for as long as the proceedings take to resolve, whatever their eventual outcome.
Local Government Calls for Urgent Reform
Rural Councils Victoria has issued a an urgent call for the Victorian Government to step in immediately and close what it believes is a dangerous ‘legislative loophole’. RCV Chair Robert Amos warned that the current law was being “weaponised to disrupt councils and undermine democracy”. He state that is untenable for the Local Government Act to grant a single individual the power to trigger an automatic stand-down before any independent public authority has assessed the merits of the case.
Mr Amos went on to say, “We fear that without urgent action, a tidal wave of vexatious nuisance lawfare proceedings could grind local councils to a standstill…”
Rural Councils Victoria has called on the Attorney-General, Sonya Kilkenny, to request the Director Public Prosecutions to consider taking over all current private prosecutions against Councillors and to determine as quickly as possible whether they should proceed.
RCV also called on the Local Government Minister, Paul Hamer, to fast track planned legislative change so Councillors are no longer automatically required to stand-down for a private prosecution, and that this legislation be made retrospective.
The State steps in
In response to concerns about the situation in Hepburn Shire, the Minister for Local Government, Paul Hamer, has brought the prosecutions to the attention of the Director of Public Prosecutions, who has the power to take over a private prosecution and either continue or discontinue it. A Victorian Government spokesperson said the government was “very concerned about the situation unfolding” and that Hepburn Shire residents deserve a council that serves them.
The government has previously introduced legislation that would allow councillors to continue their work while facing private prosecution, though it has not yet passed.
In the meantime, Council staff continue to run day-to-day operations. Services including waste collection, libraries and road maintenance are continuing as normal.
The matters referred to in this article involving charges against individuals are allegations only and remain before the courts.
