THE REASONING OF THE PRIMARY JUDGE ON THE QUESTION WHETHER THE COUNCIL OWED A DUTY OF CARE TO FINLAYSON
10 In concluding that this duty existed, his Honour said that he bore in mind (51 FCR at 401-2) the following circumstances:
· The Council had detailed knowledge, through its officers, of the potential danger.
· The Council must have appreciated that ordinary persons in the community who might buy the land or some of it with no prior acquaintance with the site, would not have the same knowledge.
· In terms of relevant knowledge, the Council was in a position of dominating advantage compared with Finlayson.
· The Council also had its statutory duty under s 90(1)(g) of the EPA Act to take into consideration whether the land was unsuitable for that development by reason of its being, or being likely to be, subject to any risk of the kind specified or any other risk.
· The requirements of professional practice (see above finding) which lay upon the Council's town planner.
· Mr Finlayson's evidence, accepted by the primary Judge, of his reliance upon the Council's approval as indicating that the land was appropriate to be built upon for residential purposes, was justified by the Council's statutory obligation in relation to the development application. Although Mr Finlayson could not quote the provision of the statute, the basis of his reliance really lay in the practice of the Councils and those who deal with them, itself firmly grounded in legal obligations.
· The Council took an active part in the creation of the situation from which Finlayson's loss came: The Council insisted upon the re-zoning as residential, despite initial opposition from the State Planning Authority; and the Council positively decided to approve Basia's development application and tacitly approved the foreshadowed further development. This made the subdivision possible, and made the land available to purchasers, including Finlayson, for the purpose of residential construction upon it.
11 In concluding that the existence of a relevant duty of care had been established in each development application decision, his Honour referred to the following considerations (51 FCR at 412):
· Finlayson, which was buying part only of the land, had no practical means, of either investigating or remedying, the contamination of the whole area.
· Yet Finlayson would be affected by contaminants both on the land it acquired and on adjacent parcels.
· Finlayson had to rely on the Council to have approved the development with due care.
· Finlayson had no means of knowing or of having reason to suspect what was in the soil, so as to excite a particular need for that care, since the signs of the contamination had been covered over by gravel. The Council's officers knew that this covering was deceptive, but the ordinary purchaser would not. The Council should have taken the position of potential purchasers into account.
· Nor could the Council have thought a purchaser would obtain, at great expense, chemical analyses of land in a residential subdivision. It was a situation where, of necessity, the functions of the Council as the local government authority, in approving development of the subdivision must be seen (as Mason J put it in Sutherland Shire Council v Heyman (1985) 157 CLR 424 (at 462-3)) as supplanting private responsibility.
THE FIRST QUESTION ON THE APPEAL: DID THE PRIMARY JUDGE ERR IN HOLDING THAT A DUTY OF CARE EXISTED?
12 Although, as has been said, the Council did not seek to challenge the findings of fact made by the trial Judge, it did challenge his Honour's conclusion that a relevant duty of care existed.
13 For the Council, particular reliance is placed upon the circumstance that, in support of its development application dated 31 October 1985, Finlayson through its surveyor, made particular statements to the Council concerning the site in the form of a statement of the environmental effects required by the Regulations made under s77(3) of the EPA Act.
14 By way of legislative background, it should be mentioned that one of the other matters specified in s 90(1) is -
"(b) the impact of that development on the environment… and, where harm to the environment is likely to be caused, any means that may be employed to protect the environment or to mitigate that harm;"
15 As has been noted, the Regulations made under s 77(3) relevantly require that a development application must be accompanied by information (a) demonstrating that consideration has been given to the environmental impact of the development; and (b) setting out any steps to be taken to mitigate any likely adverse environmental impact.
16 The statement of environmental effects of the proposed residential subdivision was dated 30 October 1985, and was made by Terence J. Stewart, Consulting Surveyor and Registered Valuer. It described the environment from several aspects as follows:
17 With respect to the topography, it stated that "[t]he soil appears to be clay based and through previous industrial use has nearly a full cover of consolidated gravel. There are no unique features associated with the land and there are no known reserves of minerals".
18 With respect to ecology, it stated that there was no vegetation, trees or timber on the property, which was only covered with natural grasses of little value.
19 As to the human aspect, the statement referred to "prior industrial usage… now a vacant area with no occupancy".
20 In justifying the proposal, it was stated, in addressing usage, that the land "has as its best use residential living in accordance with its zoning. It is unsuitable land for agriculture both pastoral and arable".
21 In dealing with urban design, it was stated that this area of Armidale "is best suited to residential living and encompassed with other open areas adjoining will provide a comfortable living area…"
22 As to engineering aspects, it was stated that the land -
"…is considered physically suitable for residential living. Its low grade allows economics in house construction, and it also allows for low velocity drainage with no serious impact of soil erosion.
Drainage will be out of the subdivision and into the natural watercourse of Martin Gully and there will be no detrimental effect to other properties".
23 On behalf of the Council reliance is also placed upon Mr Stewart's statement of environmental effects dated 27 November 1987, accompanying that development application. It stated:
"The effect of the subdivision will in no way have any impact upon the overall residential subdivision of the area… It is considered that there will be no detrimental effects to the environment by the proposed subdivision and will have no effect upon the normal requirements of residential living within the area as it develops."
24 Although the Council did not, on the appeal, seek to pursue the defence of contributory negligence pleaded at first instance, it is now submitted for the Council that these statements of environmental effects "represented to Council that the land was suitable for residential living and, generally, that investigation of the land and as to the effect of the proposed subdivision had been made". It was then submitted that this negated the existence of any duty of care.
25 We have difficulty accepting the submission. In our opinion, it was clearly open to his Honour, on the unchallenged findings of fact he made, to conclude that the Council owed Finlayson a relevant duty of care. Moreover, we detect no error of legal principle in the approach taken by his Honour.
26 It is true that courts of high authority have, from time to time, adopted various ways of approach in analysing whether, in the particular circumstances of the case at hand, a duty of care existed. In Avenhouse v Hornsby Shire Council ((1998) 44 NSWLR 1) Priestley JA (at 5-9) recently reviewed the approaches that have been taken. Priestley JA (at 9) observed of the circumstances of Avenhouse, viz. the failure of a Council to process a subdivisional application with due diligence, that even if one were to take into account each of the various approaches that have been taken, none of them ruled out the conclusion in that case that the relationship is so close that a duty arose. The same can be said, we think, of a duty of the kind pleaded in para 25 of the statement of claim. Further, again as Priestley JA (at 9) did in Avenhouse, if one were to disregard all formulations except that of Lord Atkin in Donoghue v Stevenson [1932] AC 562 (at 581) and simply to ask oneself the question whether, in the present case, the relationship between Finlayson and the Council is so close that a duty of care upon the Council arose, the answer, in our judgment, will be in the affirmative. Moreover, the reasoning in Pyrenees Shire Council v Day (1998) 192 CLR 330 and Romeo v Conservation Commission (NT) (1998) 192 CLR 431, the most recent authoritative statements in this area for our purposes, not only do not detract from our conclusion, but support it.
27 As was contended for on behalf of Finlayson, the following considerations point to the existence of a relationship between Finlayson and the Council that was so close, that a duty upon the Council of care arose on these undisputed facts:
· To the Council's knowledge, pockets of contamination were randomly located on the land and were hidden under a deceptive gravel surface.
· So far as the Council knew, the applicants for residential subdivision development approval (first Basia, later Finlayson) were unaware of the contamination risk.
· The Council could not have thought that purchasers of the land would have thought that there was a contamination problem, or would have had the means, or even the idea, of obtaining expensive technical analyses of the land.
· Here there were both physical proximity and, from Finlayson's perspective, latent defects, yet the Council knew that the gravel surface was deceptive (see Hawkins v Clayton (1988) 164 CLR 539 per Deane J (at 577)).
· The Council had before it an application for residential subdivision which could not proceed without its consent.
· It must have been apparent to the Council that, if it approved the subdivisions, the overwhelming probability was that the subdividers, unaware of the contamination problem, would sell the resulting blocks to purchasers, who would also be unaware of the problem, and that the blocks would ultimately be used for residential purposes.
· The Council knew that the use of the land for residential purposes had the potential to cause serious harm to the occupiers of the land.
· The Council had a statutory obligation to consider whether the land was suitable for residential subdivision, regard being had to risks such as contamination.
· Without incurring expense or delay, the Council had only to look to the information in its own records and to the specific knowledge of its officers in order to appreciate that it could not conclude that the land was suitable for residential subdivision.
· The Council's approval of the development applications proceeded, in fact, without the need to resort to any "policy" considerations.
· It must have been obvious to the Council that the subsequent discovery of the contamination had the potential to cause economic loss to the purchasers of the land.
· It must also have been obvious to the Council that the subsequent discovery of the contamination in land sold to local residents by a firm such as Finlayson (known to the Council as a local builder/developer) in consequence of the approval given to its subdivision application, had the potential to damage severely Finlayson's reputation as a competent and responsible builder/developer and the community's willingness to deal with him.
28 Although much relied on in the argument for the Council, in our view the surveyor's statements of environmental impact have no relevance to the present question. Those statements did not, and did not purport to, address the question whether the land was already contaminated. Finlayson had no reason then to believe, and did not believe, that the land was already polluted. On the other hand, the Council was well aware of a serious problem (see Albert Shire Council v Bamford (1998) 97 LGERA 33). The Council's argument seeks to reverse these roles by attempting to fly in the face of the unchallenged facts.
29 On behalf of the Council it is further submitted that, as a matter of statutory construction, the extent of the Council's duty, in these circumstances, was limited to making a determination of applications according to s 90, including having regard to the requisite statement of environmental effects. This, the argument runs, the Council did, and it was obliged to do no more. Moreover, it is said on behalf of the Council that, again as a matter of interpretation of the EPA Act, no private cause of action could accrue in the present circumstances in negligence against the consent authority arising out of its determination of such an application. Rather, the rights and remedies consequential upon a determination are exhaustively provided for in Division I Part IV, s 75-105 of the EPA Act, conferring rights of appeal against a Council's refusal to grant development consent, and similar remedies.
30 We cannot accept any aspect of the Council's argument. It is true that the application for development approval was made under the statute and that certain statutory rights and obligations arose accordingly under the EPA Act, including the statutory rights of appeal mentioned. However, it does not follow from the fact that the Council was purporting to exercise its statutory function, that no cause of action in negligence could arise as a matter of statutory interpretation. Certainly, there is no explicit provision in the EPA Act to that effect. If such an interpretation were to be open, it would have to be grounded in an implication derived from the context, scope or purpose of the legislation. In our opinion, there is nothing in the context, scope or purpose of the EPA Act which could justify the making of the implication contended for on behalf of the Council. There is, in our view, nothing at all inconsistent with the existence of a statutory right of appeal against a refusal of a development application on the one hand, and, on the other, the existence of a private cause of action in negligence against the Council arising out of circumstances, one of which is the making of an application under the EPA Act for development approval. Whether such a cause of action exists under the general law is, of course, another matter. Our present point is that, as a matter of statutory construction, we can see nothing in the Act which precludes the possibility of such a cause of action arising at common law in appropriate circumstances.