Bankstown City Council v Alamdo Holdings Pty Ltd

Court of Appeal (NSW)|2004-07-15|Before: Spigelman CJ, Giles JA, Ipp JA, Mr J

Reported Decision : 135 LGERA 312 (2004) Aust Torts Reports 81-770

CITATION : Bankstown City Council v Alamdo Holdings Pty Ltd [2004] NSWCA 325 HEARING DATE(S) : 15 July 2004 JUDGMENT DATE : 15 September 2004

JUDGMENT OF : Spigelman CJ at 1; Giles JA at 127; Ipp JA at 128 DECISION : Appeal dismissed. ; Cross-appeal dismissed.

LOWER COURT Supreme Court JURISDICTION : LOWER COURT 2252 of 1999 FILE NUMBER(S) : LOWER COURT Gzell J JUDICIAL OFFICER :

35 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 41224/03

SPIGELMAN CJ GILES JA IPP JA

15 September 2004 BANKSTOWN CITY COUNCIL v ALAMDO HOLDINGS PTY LTD

An unlined storm water channel, connected to the drainage system operated by the Appellant, runs adjacent to the Respondent's land. Periodically, the channel overflows, causing the Respondent's land to flood. Gzell J held that the Appellant was liable for the flooding in nuisance and that it could not claim immunity under s733 of the Local Government Act because a) it had not acted in good faith and b) s733 does not apply to injunctive relief. His Honour granted a quia timet injunction, ordering the Appellant to undertake remedial work to abate the nuisance. The Appellant appeals from this decision. The Respondent cross-appeals on the basis that it should have been awarded damages in addition to injunctive relief.

A. The council did not lose its immunity under s733 by failing to undertake remedial work. A council only loses the protection of s733 where the act that constitutes the nuisance is not done in good faith. In this case, there was no evidence that the acts found to constitute the nuisance, being the construction and operation of the drainage system and the Council's conduct in permitting the urbanisation process, were not done in good faith. [48], [51], [52], [53], [55], [127], [128]

Kempsey Shire Council v Lawrence (1996) Aust Torts Rep 81-375 applied.

B. The protection of s733 of the Local Government Act does not extend to mandatory or prohibitory injunctive relief: - The use of the past tense in "anything done or omitted to be done" does not extend to something "intended to be done".

Section 733 is an exemption from liability provision and, as such, must be strictly construed.

A good faith standard cannot be applied to conduct that has not yet occurred.

Attrill v Richmond River Shire Council (1993) 30 NSWLR 122; Bonnici v Kur-ring-gai Municipal Council; Chapman, Morsons & Co v Auckland Union (1889) 20 QBD 294; Board of Fire Commissioners v Ardouin (1961) 109 CLR 105; Australian National Airlines Commission v Newman (1987) 162 CLR 466; Punterioro v Water Administration Ministerial Corp (1999) 199 CLR 525; Suatu Holdings Pty Ltd v Australia Postal Corporation (1989) 86 ALR 532 applied; Melaleuca v Port Stephens Shire Council [2004] considered.

The injunction ordered by Gzell J was not a disproportionate remedy. [73], [127], [128]

An injunction requiring the defendant to "be restrained…from causing or permitting stormwater to inundate the plaintiff's land…so as to cause a nuisance" did not infringe the principle that an injunction ought to make clear what the defendant is required to do or not to do. [106]-[108], [127], [128]

Thompson-Schwab v Costaki [1956] 1 WLR 335; Sedleigh-Denfiled v O'Callaghan [1940] AC 880; Maggbury Pty Ltd v Hafele Austrlia Pty Ltd (2001) 210 CLR 181; Bonnici v Kuringai Municipal Council (2001) NSWSC 2190 applied. Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337 referred to.

The council was not liable to compensate the appellant for lost rent or profits. Liability for lost rent or profit is liability for a past act. The Council, having acted in good faith, was protected from liability for all past acts and omissions by s733 of the Local Government Act. [121] -[124], [127], [128]

ORDERS 1 Order 3 in the orders of Gzell J varied by substituting 6 June 2005 for 6 May 2005.

3 Cross appeal dismissed with costs. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 41224/03

SPIGELMAN CJ GILES JA IPP JA

15 September 2004 BANKSTOWN CITY COUNCIL v ALAMDO HOLDINGS PTY LTD Judgment

1 SPIGELMAN CJ: The Respondent, Alamdo Holdings Pty Ltd ("Alamdo"), is the owner of land upon which two industrial buildings are situated within the area of the municipality of which the Appellant ("Bankstown Council") is the local government authority. For about 450 metres beside the Alamdo land an unlined channel carries stormwater, in part within an easement and in part within a drainage reserve. 2 Bankstown Council has constructed, and continues to operate, a drainage system to the south of the plaintiff's land, which collects stormwater. The system culminates in an outlet of two stormwater pipes at a gross pollutant trap near the southeast boundary of the Alamdo land. From this outlet the water is directed to the unlined channel. 3 The Alamdo land, being situated at the low point of the catchment, is subject to flooding, by overflow from the unlined channel. Gzell J found that the flooding constituted a nuisance. There is no appeal from his Honour's finding to that effect. His Honour found that the risk of future flooding was sufficiently significant to justify a quia timet injunction. There is no appeal from his Honour's conclusion that the nuisance is likely to be repeated. 4 The focus of this appeal is on the exemption from liability available to the Council under s733 of the Local Government Act, 1993 ("the Act") and on the appropriateness and form of the injunctive relief that was granted. 5 His Honour made the following order: - "1 That the defendant be restrained by itself, its servants and agents from causing or permitting stormwater to inundate the plaintiff's land being lot 21, Deposited Plan No 702060 at Bennett Street, Chester Hill so as to cause a nuisance. 2 That the defendant, without expense to the plaintiff, carry out works to abate the nuisance. …" 6 His Honour suspended order 1 until 6 May 2005, in order to allow the Appellant time to complete the remedial works. His Honour also ordered the Appellant to report to the Respondent on the proposal for, and the progress of, the works. 7 Section 733 provides: "(1) A council does not incur any liability in respect of: (a) any advice furnished in good faith by the council relating to the likelihood of any land being flooded or the nature or extent of any such flooding, or (b) anything done or omitted to be done in good faith by the council in so far as it relates to the likelihood of land being flooded or the nature or extent of any such flooding. .…

(3) Without limiting subsections (1) and (2), those subsections apply to: (a) the preparation or making of an environmental planning instrument or development control plan, or the granting or refusal of consent to a development application, or the determination of an application for a complying development certificate, under the Environmental Planning and Assessment Act 1979 , and (b) (Repealed) (c) the imposition of any condition in relation to an application referred to in paragraph (a), and (d) advice furnished in a certificate under section 149 of the Environmental Planning and Assessment Act 1979 , and (e) the carrying out of flood mitigation works, and (f) the carrying out of coastal management works, and (g) any other thing done or omitted to be done in the exercise of a council's functions under this or any other Act.

(4) Without limiting any other circumstances in which a council may have acted in good faith, a council is, unless the contrary is proved, taken to have acted in good faith for the purposes of this section if the advice was furnished, or the thing was done or omitted to be done, substantially in accordance with the principles contained in the relevant manual most recently notified under subsection (5) at that time. (5) For the purposes of this section, the Minister for Planning may, from time to time, give notification in the Gazette of the publication of: (a) a manual relating to the management of flood liable land, or (b) a manual relating to the management of the coast line. the notification must specify where and when copies of the manual may be inspected.

(6) A copy of the manual must be available for public inspection, free of charge, at the office of the council during ordinary office hours.

(7) This section applies to and in respect of: (a) the Crown, a statutory body representing the Crown and a public or local authority constituted by or under any Act, and .…" 8 Two issues arise on this appeal pursuant to this section. First, the Appellant challenges his Honour's finding that relevant conduct of the Bankstown Council was not "in good faith", within s733(1)(b). Secondly, the Appellant challenges his Honour's finding that the protection of s733 does not extend to injunctive relief prohibiting the Council causing or permitting a nuisance in the future. 9 The Appellant challenges the basis upon which his Honour decided to grant an injunction. The Appellant also challenges the form of the order. 10 Alamdo filed a cross-appeal asserting that, in addition to the injunction, his Honour ought to have awarded damages to Alamdo to cover the period until the remedial works are completed. 11 Some grounds of appeal and cross-appeal, as originally filed, were abandoned.

Liability in Nuisance 12 Although his Honour's finding of liability in nuisance is not in issue on this appeal, it is pertinent to identify the basis on which that finding was made. 13 The Respondent pleaded its case in nuisance in the following paragraphs of its Amended Statement of Claim: "[6] The defendant has: 6.1 Permitted and approved of development, including residential houses and commercial premises, permitting construction in such a fashion that water will drain into the stormwater system. 6.2 Made and sealed roads in such fashion that the roads will discharge water into the stormwater system. [7] The defendant has constructed and owns two stormwater pipes which surface in the vicinity of the Marks Street boundary of the land which are so designed as to collect water from all of the surrounding streets and premises and to discharge it into the channel. [8] The matters pleaded in paragraphs 6 and 7 above have caused a substantial increase in the volume and velocity of water passing through the channel. [9] Further the defendant has failed adequately or at all to clean, repair and maintain the channel, including that portion of the channel within the easements. [10] The said failure has reduced the capacity of the channel to carry or drain waters. Cause of action in nuisance [11] In consequence of the matters pleaded at paragraphs 6-10 inclusive above waters discharging into the channel have on a number of occasions overflown the channel and flowed onto and passed over parts of the land other than those parts within the easements, causing a nuisance." 14 It does not appear from his Honour's judgment that anything turned on pars [9] and [10], i.e. the assertion that the Bankstown Council had failed to "clean, repair and maintain the channel". The thrust of the case was confined to the existence and operation of the stormwater drainage system. 15 There has been no suggestion that any conduct, other than that pleaded, was relied on as constituting a nuisance. Mr J Ireland QC, who appeared for the Bankstown Council, submitted that at no stage had any different case been propounded. Dr C Birch SC, who appeared for the Respondent, did not contest this proposition. 16 Mr Ireland submitted that the pleadings should be read in a restrictive manner to refer only to construction of the drainage system and approval of development. In my opinion, the continued operation of the existing system by the Council is sufficiently raised on the plaintiff's pleadings by the reference to the fact that stormwater pipes were not only constructed by the Council, but also that the Council "owned" them. This is made clear by the injunctive relief sought in the pleadings. The Respondent sought an order restraining the Council from causing or permitting water to be discharged so as to flow onto the Alamdo land. In the alternative, it sought the construction of works "for effectively carrying such water through the channel." 17 On the pleadings it was, in my opinion, open to the Respondent to propound a case based on the past and future operation of the drainage system owned by the Council. 18 The judgment of Gzell J does not identify in express terms the act or condition performed by the Appellant, or for which it is responsible, which made it liable for the nuisance constituted by flooding. His Honour sets out the matters which led to the consequence of periodic inundation i.e. the stormwater drainage infrastructure constructed and owned by the Appellant. His Honour also refers to the fact that the Appellant accepted that urbanisation of the catchment area had led to an increased flow of water in the channel. There is no express reference, however, to the fact that this urbanisation was in significant measure determined by approval of development by the Appellant. 19 The expert evidence before his Honour concentrated on three time periods. First, the position in 1930, when the land and surrounding region was largely undeveloped. Secondly, the position in 1960, when the major part of the stormwater drainage infrastructure within the relevant catchment had been constructed. Thirdly, the position in 1998, proximate to the trial. 20 The expert evidence was expressed in terms of the flow of water at, and calculated flood heights in relation to, the floors of each of the two buildings on the subject site. These figures were given for each of the three reference years of 1930, 1960 and 1998 for floods of different probabilities including, for example, a one in a 100-year flood, a one in 5 year flood and a one in 2 year flood. 21 In this regard the trial judge made a number of findings of fact which it is unnecessary to set out. It is pertinent to note that his Honour did emphasise the change over the period, for example, in the following passage: "[42] …The action for private nuisance is directed against unreasonable interference with the use and enjoyment of land. In my view, the evidence demonstrates a significant increase in the frequency with which plaintiff's land is likely to be inundated. Significantly, floodwaters would not have reached the floor of Building No 2 at the flow rates for any events up to the one in 100 year event in 1930. And it would have taken something in excess of a one in a five-year event for water to be likely to enter the building at 1960 flow rates. By 1998, however, floodwaters would be likely to enter Building No 2 at flow rates somewhat in excess of a one in two year event. [43] In my view there is a more significant interference with the use and enjoyment of land subject to expected flooding every three years or so than in the case of an expected flood every 100 years. The frequency of the likely flood event diminishes the type of activity that can be planned to take effect on the land." 22 His Honour referred to a number of cases in which local authorities have been held liable for the discharge of water onto neighbouring land, including from a public drain which had become unable to cope with increased flows arising from urbanisation. (Hawthorn Corporation v Kannuluik [1906] AC 105; Rudd v Hornsby Shire Council (1975) 31 LGRA 120; Bonnici v Kur-ring-gai Municipal Council (2001) 121 LGERA 1). His Honour's reliance on these cases indicates the basis on which he found the nuisance to have been committed in the instant case. 23 His Honour set out the effect of Hawthorn Corporation v Kannuluik as follows: "[46] … a municipal authority… took over the care of a watercourse and made it into a public drain which proved, in the course of time, to be increasingly insufficient to hold and pass on a mixture of slime and sewerage poured into it, with the result that the respondent's property was flooded. The appellant was liable notwithstanding that the drain when first formed was sufficient for its purpose." 24 In Kannuluik at 108, the Privy Council treated the judgment of Holyroyd J in the Full Court of the Supreme Court of Victoria as the leading judgment. That judgment relied on the further construction of the drainage system by the Council and the permission it give to others to take steps which maintained the flow of water. Kannuluik v Mayor of Hawthorn (1903) 29 VLR 308 at 317-318. 25 With respect to Rudd v Hornsby Shire Council, Gzell J quoted the following passage from the judgment of Holland J at 134: "If, by reason of the development of the area by approval or permission of the local council and the establishment by that council of a roads and drainage system designed to serve the development by collecting and concentrating the run-off from the area so as to discharge it into the watercourse, the watercourse becomes inadequate to cope with the flow thereby causing physical damage to and interference with the use and enjoyment of the plaintiff's land, the council may be liable to him in nuisance. It will be liable unless the council can justify the nuisance suffered by the plaintiff on the ground that it had statutory authority to create and maintain that nuisance."

26 As in Kannuluik, this passage refers to two areas of council decision-making: approval of development and the creation and operation of the drainage system. 27 In Rudd, Holland J referred to the process of urban development as increasing the run-off, although it was the construction and operation of drainage system which constituted the primary conduct for which the Hornsby Shire Council was held liable in nuisance. I refer in particular to the following passages: · … "the damage suffered by the plaintiff is attributable ultimately to the existence of the Council's drainage system, that system receiving and concentrating, as it was designed to, the run off from the whole of the developed area including its own road systems, and that development and drainage system so altering the flow of water entering the plaintiff's land compared to what it previously was to cause the damage complained of" (132.1) (Note the reference to "that development"). · … " I am satisfied that the changes in the flow of water across the plaintiff's land and physical damage that has been done to it up to the present have been caused by the Council's drainage works." (133.8) · "It may be assumed that the drainage works that are the cause of the nuisance are themselves authorised and that the owners of the land in which the pipes were installed were duly compensated but the question is whether the statutory powers relied upon authorised the Council to discharge the water in such a way as to render the watercourse below the outlet inadequate to carry it without causing damage to the plaintiff's land, in short, to create a nuisance to the lower owners" (135.8) 28 Bonnici, which Gzell J said applied Kannuluik, was explained by his Honour in the following terms: "[53] …Sperling J… took the view that the incursion of stormwater from the street on the plaintiff's land in excess of stormwater arriving naturally, not being negligible, there was actionable private nuisance." 29 The facts in Bonnici were summarised by Sperling J in terms of an increase in the flow of stormwater by reason of the construction of road-works and run-off from additional residential lots in an enlarged catchment area. (Bonnici supra at [7]-[9]). 30 The critical passage in the reasons for judgment of Gzell J is to be found in par [56]: "[56] In my view, I should follow Kannuluik as it was explained by Holland J in Rudd and applied by Sperling J in Bonnici . The interference with the use and enjoyment of the plaintiff's land constitutes actionable private nuisance by the defendant unless it can justify the nuisance on the ground that it had statutory authority to create and maintain it or it establishes some other defence." 31 Although his Honour does not say so expressly, the authorities upon which he relied by way of analogy suggest that his Honour determined that the relevant conduct of the Appellant encompassed both the construction and operation of the drainage system and the Council's role in the urbanisation process which rendered the system less and less adequate. It appears that his Honour accepted the Respondent's case as pleaded in pars [6], [7], [8] and [11] of the Amended Statement of Claim.

The Statutory Exemption 32 A statutory standard of "good faith" is protean and always takes its colour from its context. The most significant feature of s733 in this regard is that the section protects a governmental body from legal liability for losses incurred by others. 33 The basic Australian authority, on the interpretation of an exemption from liability provision, is Board of Fire Commissioners v Ardouin (1961) 109 CLR 105, where the relevant statute protected the Board from liability "for any damage caused in the bona fide exercise of" its statutory powers. Kitto J said at 116: " … the protective nature of the provision is such that a most strict interpretation of its words is plainly demanded. The consequences for the property, the health, the lives, of individuals affected by a negligent executive exercise of powers under the Act may be of the most serious; yet the section takes away all remedy, if only good faith exist …. Section 46 operates, then, to derogate, in a manner potentially most serious, from the rights of individuals; and a presumption therefore arises that the legislature, in enacting it, has chosen its words with complete precision, not intending that such an immunity, granted in the general interest but at the cost of individuals, should be carried further than a jealous interpretation will allow." 34 In Ardouin the Court was not called on to interpret the "bona fide" standard. It read down the exemption so that it applied only to conduct specifically authorised by statute and not to conduct incidental to, or in the course of, the exercise of power. Since Ardouin, exemption from liability provisions have often been strictly, even jealously, construed. (See eg Australian National Airlines Commission v Newman (1987) 162 CLR 466 at 471, 476; Puntoriero v Water Administration Ministerial Corp (1999) 199 CLR 575 at [33]-[37], [59]-[68], [113]). 35 This principle has also been applied in the following way: "Thus, such phrases … as 'in respect of' and 'by reason of' are to be construed narrowly rather than generously, as would otherwise be the case". ( Suatu Holdings Pty Ltd v Australian Postal Corporation (1989) 86 ALR 532 at 541 per Gummow J). 36 The words "in respect of" in s733 of the Act should also be construed in this way. 37 More significant, for present purposes, is the "good faith" standard in s733. The issue often arises whether this formulation imports a subjective or objective standard. (See eg Cannane v J Cannane Pty Ltd (in liq) (1998) 192 CLR 557 at 596). The principle that an exemption provision should be construed strictly leads to the conclusion that a test of good faith in such a provision is not concerned only with the state of mind of the accused. A public authority seeking to take advantage of an exemption provision should, in the absence of a contrary indication, be required to satisfy an objective test of good faith. This is because such a test imports reasonable conduct on its part, including tests of prudence, caution, conscientiousness and, in some cases, of diligence. (See Cannane supra; Bropho v Human Rights and Equal Opportunity Commission (2004) 204 ALR 761 at [96]-[102], [144]. 38 Accordingly, it has been held that the "good faith" standard in s733 does not involve a test of honesty so that just "honest ineptitude" is not enough. (See Mid Density Developments Pty Ltd v Rockdale Municipal Council (1993) 44 FCR 290 at 299-300; Douglas v Water Administration Ministerial Corporation (NSWCA (unreported 12 September 1995).) I prefer to base this conclusion on the principle of statutory interpretation I have mentioned, rather than on the concept advanced in Mid Density Developments at 299, that s733 is concerned to strike a balance between the interests of a public authority and private interests in property or reliance on the conduct of a public authority. 39 It will often be the case that the identification of the precise act of a defendant which causes a nuisance is not controversial and does not require rigorous analysis. Where, however, as in the present case, a council seeks to rely on the exemption from liability in s733 of the Act, it is necessary to give careful attention to the acts said to have been done or omitted, in order to determine whether those acts have been "in good faith". 40 As Clarke JA, with whom Kirby P and Sheller JA agreed, said in Kempsey Shire Council v Lawrence (1996) Aust Torts Rep 81-375: "….it is necessary in considering the statutory defences to consider those in the context of each separate activity said to constitute a nuisance." (at 63,148)

and "The point under consideration involves two stages. The first is to identify for what conduct the appellant, in the absence of s733, would be liable and, the second, whether that conduct falls within subsection (1) and (2) of s733." (at 63,149)

The Finding on Good Faith 41 As indicated above, in the reasoning of Gzell J leading up to his conclusion on nuisance in paragraph [56], as quoted, the relevant conduct constituting the nuisance encompassed both the construction and operation of the drainage system and the Council's conduct in permitting the urbanisation process. 42 There was no evidence to suggest that the original construction of the drainage system and the approvals leading to urbanisation, were in any way affected by conduct which could be said to be other than in "good faith." The only aspect of his Honour's findings on nuisance that, on the evidence, could do so, was the Council's conduct in continuing to operate the drainage system as its inadequacies became increasingly clear, without constructing works that would ameliorate the risk of flooding to the Respondent's land. However, his Honour's judgment does not refer to the failure by the Council to take remedial action in the form of construction works to the unlined channel over any period of time prior to the commencement of proceedings. 43 His Honour referred to correspondence in 1989 in which a representative of the Respondent drew the Council's attention to the problem, indicating that the Respondent was prepared to contribute to the cost of the requisite works. At that stage officers of the Council estimated the costs of a concrete channel at about $1.6 million and of a reinforced concrete box culvert at approximately $2.7 million. The Respondent was informed that this work was not listed in the Council's forward works program. However, his Honour did not rely on this first communication, shortly after the Respondent acquired the land, in his reasoning on good faith. Nor did he rely on the period of about nine years that elapsed thereafter. 44 His Honour's consideration of the issue of good faith commenced with events in 1998. His Honour noted that a site meeting was held on the land in July 1998. Mr Morrison, the Manager of Roads and Infrastructure of Bankstown Council, attended this meeting. Mr Morrison thereafter requested consultants to investigate a number of matters relating to the channel including options for improvement. The consultants prepared a report in September 1998 which, inter-alia, recommended further study of options to reduce inundation. Thereafter the following steps occurred: · In February 1999 the Respondent wrote requiring the defendant to construct a drainage channel, so that its property would not be affected in the future. · Mr Morrison, upon receipt of the above letter, recorded his undertaking to the Respondent that he would arrange an investigation of possible solutions with a view to including the project in the works program, subject to funding. · The Respondent's letter was acknowledged. That acknowledgement included a statement that urgent advice had been sought from the defendant's engineering staff and that when that was given, the Respondent would be informed. · In March 1999 the Respondent complained that he had not received a reply to his letter and gave notice that legal action would be taken. There was no response to this letter. · These proceedings were commenced in May 1999 · The defendant's consultants produced a memorandum in May 1999 which concluded that the property probably would be flooded at quite frequent intervals and recommended further investigation. · In November 1999, the consultants produced a preliminary report which recommended the acquisition of the plaintiff's land with a view to demolishing the buildings, and the rezoning and redevelopment of a portion of site as residential property. The object oof the plan was to produce a cost neutral solution by the sale of the residential portion of the land. Subsequent investigation by the Council's property manager indicated a higher cost of acquisition and this option was abandoned. 45 His Honour found: "[36] No further steps have been taken by the defendant to alleviate the problem. In particular, no proposal has been included in the defendant's forward works program. Mr Morrison said that nothing had been done pending the resolution of these proceedings." 46 Gzell J found against the Appellant on the issue of good faith in the following passage: "[68] In my view, the defendant did not act in good faith in the instant circumstances. Mr Morrison was of the view that there was a potential problem. He initiated a detailed investigation. A solution was the acquisition of the land and its use, partially as a detention basin and partially for on-sale of residential lots. Further investigation led to the rejection of that plan because the cost of acquisition of the land would not make the proposal cost neutral. Notwithstanding recognition of a continuing problem, the defendant did nothing thereafter. It made no prospective plans but relied solely on the argument that these proceedings having been commenced, further investigation should await their outcome. [69] Having recognised the problem, the defendant was, in my view, obliged to take reasonable steps to deal with it. Had the defendant continued its investigations, arrived at an alternative solution and introduced it to its rolling works programme so that its priority might be established as against other works, a different result may have eventuated. Its abandonment of any further investigation pending the outcome of these proceedings put it, in my view, outside the protection of the Local Government Act 1993, s 733." 47 The centrality of the conduct after May 1999 is reiterated in that part of his Honour's reasons dealing with discretion: "[85] Finally, the defendant submitted that in the exercise of my discretion, I should refuse to grant injunctive relief because the plaintiff purchased the land in its flood-prone state with knowledge. [86] While this is a matter to be taken into account in the exercise of my discretion, I am of the view that it is far outweighed by the abandonment of investigation of further proposals for the elimination or amelioration of the flooding problem by the defendant." 48 His Honour's conclusion on the absence of good faith is expressly based only on the Council's conduct, or rather inaction, over the period commencing in about February 1999 to the date of the hearing before his Honour. In my opinion, it was not open to his Honour to find that the Council's conduct over this period was such that the Council could not rely on s 733 of the Act. 49 The first reason for this conclusion is that the issue about the Council's inaction during this period was not properly examined at the trial. The relevant Council officer had been cross-examined by counsel for Alamdo to the effect that nothing had been done after the February 2000 report. In re-examination he was asked why. An objection from counsel for Alamdo, that this question did not arise from the cross-examination, was rejected. The Council officer answered: "Primarily because of these proceedings". 50 There was no exploration of any of the other facts and matters, the relevance of which is suggested by the word "primarily". Nor was there any further consideration of the link between the proceedings and the ordering of Council priorities. The fact that this matter arose in a question in re-examination, which was objected to, indicates that it formed no part of the Respondent's case. Although the Council has the onus of proving good faith, the limited evidence in this respect provided an inadequate basis for a finding that the Council's conduct was not in good faith. 51 Secondly, the terminology of s733 is that a council "does not incur any liability in respect of… anything done or omitted to be done in good faith by the council". Although the words "in respect of" do not require a precise causal relationship, nevertheless, s733 requires the basis of liability of the Council in nuisance to be the focus of attention. As the extract from Suatu quoted above indicates, in an exemption provision words such as "in respect of" do not receive a liberal interpretation. 52 Mr Ireland submitted that there was no connection between the acts found to constitute a nuisance and the abandonment of investigations about remedial work in 1999. This submission should be accepted. 53 Liability did not attach to the Council for its conduct in the nature of non-feasance over the period from early 1999 until the date of the hearing. The pleadings asserted liability on the basis of Council decision-making which led to the progressive urbanisation of the region and its construction and operation of the stormwater drainage system leading to the discharge from the two stormwater pipes into the channel. This is a much broader basis of liability than that to which his Honour referred in his findings on good faith. 54 As will presently appear, I do not believe that a good faith standard can be applied to future conduct at all. In any event, in order for his Honour to find that the Council was not entitled to the protection of s733 on the basis of lack of good faith, he had to decide, at the least, that its continued operation of the stormwater drainage system was not in good faith, in the sense that, absent remedial measures, such operation was unreasonable in some way. This was not the approach his Honour took. 55 The Council did not incur liability in nuisance in respect of its failure to investigate remedial works in the period after February 1999. Its conduct during that time period was barely relevant to the issue of good faith that arose under s733, let alone determinative of it

The Scope of the Immunity 56 In Attrill v Richmond River Shire Council (1993) 30 NSWLR 122, Hodgson J held that s582A of the Local Government Act 1919, which is in identical terms to s733 of the 1993 Act, did not protect a council from prohibitory or mandatory injunctions based on the probability of future events. His Honour's judgment was the subject of an unsuccessful appeal, but not with respect to this aspect of his reasons (see Attrill v Richmond River Shire Council (1995) 38 NSWLR 545 at 547B, 549C). 57 In Bonnici v Kuringai Municipal Council supra at 30, Sperling J followed Hodgson J's reasoning in Attrill. Gzell J said that he could see no reason to depart from these decisions. More recently Cripps AJ has followed Hodgson J, perhaps reluctantly. (Melaleuca Estate Pty Ltd v Port Stephens Shire Council [2004] NSWSC 415). This question falls to be determined in this Court for the first time. 58 The relevant portion of the reasoning of Hodgson J in Attrill is at 127-128: "I accept that the section should be approached having regard to a prima facie view that the legislature does not intend to take away rights for redress for injury under the general law without reasonably clear words. I also accept that the Second Reading Speech supports the view that the section was directed to dealing with a perceived mischief arising from an inhibition on councils in dealing with developments in flood-prone land, caused by the possibility of liability for damages in connection with such developments. Turning to the first matter that was argued, it seems to me that the primary meaning of "liability" does relate to an obligation to make a payment, or to being subject to some pecuniary obligation; but I do accept that the word can also be appropriate to extend to the state of being liable under any kind of legal obligation. Accordingly, just concentrating on the single word "liability", it does seem to me possible that it could be limited to pecuniary liabilities, that is liabilities for debt or damages, but that it could also extend to a liability to be ordered to do something However, the liability which s 582A deals with is relevantly a liability in respect of "anything done or omitted to be done". That is, it is a liability in respect of past events. The question arises whether an injunction, whether prohibitory or mandatory, is correctly regarded, for the purposes of this section, as a liability in respect of past events. Injunctions are generally directed towards requiring or preventing future events, which would themselves be wrongful (in a broad sense). Those future events must, by evidence in the case, be shown to be reasonably probable; and the usual way of doing this is to lead evidence of actions performed in the past by the defendant. But it seems to me that that is essentially an evidentiary matter: however the probability of some future wrong is established, it is to this future state of affairs that the order is directed. It seems to me that that sort of order, directed towards future states of affairs, does not fall within the words 'any liability in respect of anything done or omitted to be done' within s 582A. Where a mandatory order is made solely because of something done in the past, and not on the basis of some probable future wrongdoing, this position may be less clear. However, I do not think I need to come to any decision on that matter in this case. If there is a nuisance constituted by the raised level of the road in this case then, irrespective of how that nuisance was created, it seems to me that, if the Council were to adopt the nuisance by failing unreasonably to do anything to abate it, then that would be a matter giving rise to a liability which was not a liability in respect of past events; and that would be a matter, it seems to me, which could justify a mandatory injunction of the kind sought by the plaintiffs. So, my view is that the protection in s 582A certainly extends to protecting the council from liability for damages in respect of past events. In my view, it does not extend to protecting the council from prohibitory or mandatory injunctions based solely on the probability of future events. While I do not think I need to decide this for the purpose of determining the particular question before me in these proceedings, I think it probably does not prevent the award of damages in lieu of such injunctions, provided those damages are limited to compensation for events occurring after the commencement of proceedings: that seems to be substantially the view taken in the Chapman Morson's case. As I have indicated, I do not think I need to decide whether the protection does or does not extend to a case which might occur where an injunction is sought simply to reverse a past action or omission, where there is no question of that involving some continuing or future wrong-doing." 59 In Melaleuca (supra) Cripps AJ said at [70]: "Uninstructed I would have thought there was an argument to the effect that if the act or omission is in good faith and it relates to the likelihood of land being flooded, a grant of injunctive relief (either by a mandatory or prohibitory order) disobedience to which could have serious consequence is relevantly to incur a Council in a liability in respect of a thing done or omitted to be done. However I note that at least two other judges of the court have followed the reasoning of Hodgson J (Sperling J in Bonnicci v Kuringai Municipal Council (2001) 121 LGERA 1 and Gzell J in Alamdo Holdings Pty Ltd v Bankstown City Council Aust Torts Reports (2004) 81-721). It would seem to me therefore, as a matter of comity, I ought to do the same and leave it to the Court of Appeal to determine whether there is any substance in a view contrary to that adopted by Hodgson J and other members of the Court." 60 Mr Ireland QC submitted that the words "any liability in respect of…" are wide enough to cover 'liability' to be required to act or to be restrained by injunction. He submitted that if a Council is found to be responsible for conduct, but can plead the exemption with respect to a claim for damages, it is inconsistent for the Council to remain responsible for the conduct, as injunctive relief implies.

61 Dr Birch SC submitted that the words "anything done" refer to past acts and "anything omitted to be done" refer to past omissions. The words do not apply to future conduct. 62 Dr Birch relied on a line of authority referred to by Hodgson J in Attrill at 127, in which terminology similar to that used in s733 - "anything done or omitted to be done" - was held not to apply to prospective injunctive relief. (Attorney-General v Hackney Local Board (1875) LR 20 Eq 626; Flower v Local Board of Low Leyton (1877) 5 Ch D 347; Chapman, Morsons & Co v Guardians of Auckland Union [1889] 20 QBD 294; Council of the City of Brisbane v Attorney-General (Queensland) (1906) 4 CLR 241; Thompson v Council of the Municipality of Randwick (1944) 44 SR (NSW) 455.) 63 In these cases, the words "anything done or omitted to be done" had to be construed in a context where the relevant statutory restriction concerned a requirement to give a public authority notice before initiating legal proceedings. In such a context the purpose of the provision is readily understood as giving the authority an opportunity to make amends. This purpose would not be served by extending the provision to a situation in which urgent injunctive relief was appropriate. (See Hackney Local Board supra at 629, Local Board of Low Leyton supra at 352). 64 In Chapman, Morsons supra at 303, Bowen LJ relied on the natural meaning of the past tense in the formulation "anything done or omitted to be done" to conclude that the words did not extend to something "intended to be done". This is the interpretation adopted by Hodgson J. I have come to the same conclusion. 65 In addition to the reasons of Hodgson J quoted above, with which I agree, I would emphasise two considerations. First, the principle of statutory interpretation requiring strict construction of an exemption provision. Secondly, the difficulty of applying a good faith standard before conduct has occurred. 66 The line of authority based on Ardouin supra, most recently applied by the High Court in Puntoriero, requires a strict construction of s733. On such an approach the words "in respect of anything done or omitted to be done" should be confined to the past tense actually employed. 67 The statutory immunity applies to a wide range of conduct including development approvals, replies to statutory inquiries and other "advice". What reasonable conduct may require of a Council will vary with circumstances which cannot be predicted or stated in advance. For example, the financial capacity of a Council may be transformed by unforeseen events. 68 What good faith may demand, beyond honesty, as s733 requires, cannot be determined before the Council is called upon to act. Even in a case such as that which arose in Mid Density supra, it would be rare for a Court to order a Council to deal with all future applications for advice about flood affectation by referring to documents in its possession, which the full Federal Court held in that case should have been considered for inclusion in the reply in that particular case. What is required in performance of an obligation to act in good faith can only be determined, in the usual case, in hindsight. 69 On this basis the appeal should be dismissed.

The Challenge to Injunctive Relief 70 The Appellant challenges the grant of injunctive relief on a limited range of grounds. Its primary submission was that an injunction was a disproportionate remedy in the circumstances of the case. It drew attention to a number of factors: · The cost of remedial measures was substantial, at least $1.5 million for an open concrete channel. · The priority that the relief gave one ratepayer over other property owners both in the Appellants' council area and in adjoining local government areas. · The exacerbation of flooding downstream with adverse impact on third parties. The water, as Mr Ireland QC put it, has to go somewhere. There was evidence before the Court about the effects downstream which would require additional works by the Appellant and in the adjoining municipality. · The short duration of historic flooding. No above floor flooding occurred in 1961 or since in one of the two buildings. The maximum duration of a one in 100 year event above the floor in the building that was susceptible has increased from 1961 by only four minutes and the maximum it reached for shorter duration storms was 47 minutes. · On-site remedies were available at limited cost, namely a proposal to waterproof the one building subject to significant flooding. · The evidence that flooding levels over the property were unlikely to increase in the future and that a program of mitigation works was in train. 71 These factors were, possibly with one exception, considered by Gzell J. His Honour's decision to grant injunctive relied was discretionary. There are well known limits on this Court interfering with the exercise of such a discretion. Nothing in the matters raised suggests that his Honour erred in the exercise of his discretion. 72 Dr Birch SC accepted that, in order to obtain a mandatory injunction, the Respondent had to establish that there was a reasonable course of action available to the Council which would abate the nuisance. He accepted that if the cost of the remedial works - about $1.5 million - was utterly disproportionate to the Respondent's loss, that would be a reason for not granting relief. He emphasised in this regard, the impact on the reversion which even the valuer called by the Council calculated at more than $1.4 million. 73 It appears that the cost to the Council is of the same order as the benefit to Alamdo. Additional works may be required downstream, although some are already included in Council's works program. Although the Respondent will receive a significant advantage, there is no disproportion of the kind which would justify this Court intervening. 74 With respect to the option of protecting the buildings at a less expensive cost than by works in the channel itself, Gzell J rejected this approach in the following passage: "[80] It was submitted that Building No 2 could be protected from the incursion of floodwaters by the provision of ramps or flood flaps at relatively inexpensive cost. But that approach does not overcome the diminution in value of the reversion as a result of the land being flood prone." 75 The Council adduced evidence that flood proofing one building affected by above floor flooding for the 100 year event by constructing the concrete ramps at each entry and building around external exit doors would only be $200,000. 76 The Respondent's expert criticised the solution on the basis that it does not flood proof the external paved areas, including areas used for storage; water could still penetrate the building; the concrete ramps would interfere with the manoeuvrability of large vehicles and flooding would impede access to the buildings and make a docking unit unusable. 77 Dr Birch SC submitted that this option would not be sufficient because inundation would still restrict the use of the property by lessees. 78 It was open for his Honour to reject this option. 79 His Honour was also entitled to emphasise, as he did, the frequency with which flooding can be expected to occur. Issues of frequency and duration of flooding were matters of fact and degree to which his Honour was entitled to give such weight as he chose to give. There is no reason for inferring that the weight given was disproportionate. 80 With respect to the consequential requirement for further works to deal with the increased flow of water downstream, notably in the adjoining municipality of Fairfield, Dr Birch submitted that this was not an issue raised before Gzell J. It was not, accordingly, a basis for calling in question his Honour's exercise of the discretion to grant injunctive relief. 81 In any event, the perspective from the point of the Respondent is reflected in the evidence of its expert who said that the Alamdo land is being used as a default detention basin to mitigate flooding downstream (Blue AB 4, p66K). Indeed, in one remedial option proposed by the Appellant's consultants, part of the land was to be put to long term use as a formal detention basin. There is no reason for this Court to give priority to the interests of downstream property owners. 82 The Appellant submitted that the Respondent had purchased the land in 1988 with full knowledge of its flood prone state. It also drew attention to his Honour's failure to evaluate the difference between the extent of the change in risk of floods between 1988, when the property was acquired, and 1999 when the proceedings were instituted. The bulk of the detriment, it was submitted, was extant at the date of purchase. 83 His Honour was aware of these matters. Such weight, if any, as they were entitled to receive was a matter for him. 84 I should note, as did Gzell J, that the Appellant made no attempt to put on any evidence concerning the effect upon it and its ratepayers of the Court determining that expenditure of the order required to abate the nuisance should be incurred. Unlike other cases, no evidence about how the Council determined the priority for public works was adduced to indicate why the works related to the Alamdo lands was not a priority. The Council did not tender its Annual Report which by s428(2)(d) of the Local Government Act 1993 must include a report on the cost of the public works necessary to bring all facilities to a satisfactory standard. 85 The submissions before Gzell J, and in this Court focussed on proportionality, not priority. No case was put forward to suggest that, as a matter of statutory interpretation or otherwise, the Court should refrain from, in effect, redetermining the Council's public works priorities. 86 If such a case had been pursued it would have been necessary to consider a line of authority that suggests that a failure to construct new works does not constitute a nuisance by a drainage authority. (See Glossop v Heston & Islesworth Local Board (1879) 12 Ch D 102; Attorney-General v Guardians of Poor of Union of Dorking (1882) 20 Ch D 595; Robinson v Mayor and Corporation of Borough of Workington [1897] 1 QB 619; Hesketh v Birmingham Corporation [1924] 1 KB 260; Marcic v Thames Water Utilities Ltd [2004] 2 AC 42 at [29]-[34]; [54]-[64]. 87 It may be that the High Court's consideration of issues of non-feasance in Brodie v Singleton Shire Council (2001) 206 CLR 512 at [84]-[90] would lead to the conclusion that the English Court of Appeal's reasons in Marcic v Thames Water Utilities Ltd [2002] 2 WLR 932 at [48]-[103], overruled by the House of Lords, better reflect Australian common law. This does not need to be considered. 88 The Appellant did not rely on this line of authority in these proceedings. These cases may not be consistent with the line of authority stemming from Kannuluik, but that also need not be determined. (See Hesketh supra at 269, 272, c/f Pride of Derby and Derbyshire Angling Association Ltd v British Celanese Ltd [1953] 1 Ch 149 at 190). Issues such as these required careful review of the statutory scheme, including considerations of coherence, which the Appellant did not attempt.

Form of the Injunction 89 The Appellant attacked the form of the injunction. Mr Ireland submitted that his Honour's orders required the Bankstown Council to eliminate all flooding. He submitted that even if the appropriate works were constructed, the land may still be subject to flooding. 90 The orders would have gone too far if they required Bankstown Council to prevent any inundation of the land, even if inundation would have occurred without the construction and operation of the drainage system by the council.

91 Dr C Birch SC submitted that there was a restraint. The order was confined to conduct "so as to cause a nuisance". These words, he submitted, restrict the remedial works required. Although attention was not explicitly directed to his Honour's second order, set out in par [5] above, the mandatory order to "carry out works to abate the nuisance", impose a similar restriction on the remedial works required. 92 Dr Birch suggested (at T40) that unlawful nuisance would approach but not exceed a one in 100 year event, being the natural flow in 1930, before the construction of the drainage system. Dr Birch did suggest that what was required to comply with the injunction was to re-establish the position as it existed in 1930, prior to the process of urbanisation and the construction of a stormwater drainage system. This would go too far. 93 The qualification "so as to cause a nuisance", imports a standard of reasonableness. As the House of Lords said in Sedleigh-Denfield v O'Callaghan [1940] AC 880 at 903: "A balance has to be maintained between the right of the occupier to do what he likes with his own, and the right of his neighbour not to be interfered with. It is impossible to give any precise, or universal formula, but it may broadly be said that a useful test is perhaps what is reasonable according to the ordinary usage of mankind living in society." 94 I do not regard it as reasonable to require the restoration of the situation in 1930, when the party seeking to do so has, as a landowner, taken advantage of the very process of urbanisation of which, in a sense, it complains, by taking the opportunity to develop its own land. 95 The Council is entitled to use its property - relevantly the drainage easement, drainage reserve and stormwater infrastructure - in a reasonable way. That standard does not require the Council to restore the Alamdo land to the position in which it was in 1930 with respect to susceptibility to flooding. 96 The form of the injunction does not identify an objective standard as to what constitutes a nuisance. No doubt such could be determined by the Court or by agreement between the parties, for example, in terms of what flow or height of water in a one in 50 or one in 100 year event was reasonable. However, his Honour refused to specify what works should be constructed in an order. That refusal has not been challenged. 97 Dr Birch informed the Court that it was the Appellant that had proposed an order in the form eventually made, rather than a more detailed proposal advanced by the Respondent (T41). However, the fact that objection was not taken before Gzell J is not necessarily fatal. (See Animal Liberation (Vic) Inc v Gasser [1991] 1 VR 51 at 57). 98 Dr Birch directed the Court's attention to what Lord Evershed MR described as the "usual practice" of adding to the form of injunctive relief the words "in the manner complained of by the plaintiffs in this action or otherwise so as to cause a nuisance to the plaintiffs." (Thompson-Schwab v Costaki [1956] 1 WLR 335 and 340. 99 Dr Birch also referred to the reliance on this authority by the learned authors of the fourth edition of Meagher, Gummow and Lehane's Equity Doctrines and Remedies Butterworths, Sydney 2002 at 21-505, in the course of their consideration of the requirement of certainty:- "…commonsense and practice alike demonstrate that it is impossible to specify in the language of an injunction every detail of the obligations which it imposes on the person to whom it is addressed. In some cases, the practicalities of the facts may make it impossible to frame an injunction in anything but the most general terms; and, in any event, the danger of an order couched in overtly particular terms is that it may leave the defendant at liberty to indulge in reprehensible conduct which is almost but not quite enjoined, without committing any contempt. Thus, the standard form of injunction in a nuisance case consists of an order forbidding the defendant from doing the acts complained of "in such manner as to constitute a nuisance to the plaintiff: Thompson-Schwab v Costaki [1956] 1 WLR 335 of 340." 100 Part of this passage was quoted with approval by Callinan J in Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at 220, where his Honour added: "Excessively narrow formalism in framing the injunction may wreak its own injustice". 101 The authors of Meagher Gummow and Lehane went on to refer with approval to the discussion by Sperling J in Bonnici v Kur-ring-gai Municipal Council [2001] NSWSC 1190 (following the earlier judgment in Bonnici supra) as to why further precision was not possible in that case. Sperling J made the order in the terms "so as to create a nuisance", which he described, with reference to authority, as "the conventional formula" (at [9]-[10]). 102 It is pertinent to note that Thompson-Schwab v Costaki involved an interlocutory injunction. The need for precision is considerably less in the context of interlocutory relief, where the order is of limited duration and is always subject to amendment upon application. 103 I.C.F Spry in his Principles of Equitable Remedies (6th ed), Sydney Law Book Co 2001 refers to Thompson-Schwab v Costaki as authority for an more limited proposition. The learned author said at 375: "Nonetheless if no particular matter of difficulty arises it is often found sufficient that the defendant should be enjoined from, e.g. doing acts of a sufficiently specified class "so as to cause a nuisance to the plaintiff". 104 Thompson-Schwab was itself a case where, to use Spry's formulation, "no particular matter of difficulty arose". There the nuisance consisted of the use of land for purposes of prostitution. Questions of fact and degree did not arise. Nor was there any possibility of the relevant adverse affect on the plaintiff's land being caused by some means other than deliberate conduct by the defendant by its use of its own land. Neither condition is true in this case. 105 The qualification of an injunction by the words "so as to constitute a nuisance" (or in this case "cause") can cut both ways. It may induce uncertainty in the defendant as to what is required by way of compliance and thereby infringe the principle of certainty. On the other hand it may make any attempt to determine whether there has been compliance more difficult to establish in subsequent contempt proceedings. There is, however, nothing to prevent the parties obtaining certainty by specifying what constitutes compliance and then agreeing to a discharge of the injunction upon implementation of a detailed scheme. (See eg York Bros (Trading) Pty Ltd v Commissioner for Main Roads [1983] 1 NSWLR 391 at 412.) 106 An injunction in the form ordered in this case does not, in my opinion, infringe the principle that an injunction ought to make clear what the defendant is required to do or not to do. As this Court said in a judgment of Meagher, Handley and Cripps JJA in Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337 at 349: "The principle relied on is a counsel of perfection rather than a mandatory standard and there are limits to its application". 107 Under contemporary conditions many traditional restrictions on the scope and content of injunctions operate with diminished force. 108 In the present case the Appellant did not raise any issue of difficulty of compliance, either before Gzell J or in this Court. The submission about the form of the injunction was directed to the suggestion that the injunction went too far by restraining any inundation. Such a submission was rejected by Sperling J in the second Bonnici judgment when he added the words "so as to constitute a nuisance". As I have indicated above, the same conclusion is appropriate in this case. The words "so as to cause a nuisance" and "abate the nuisance" in orders 1 and 2, contain an appropriate restriction. 109 This ground of appeal also fails.

Cross-Appeal 110 The issue raised on the cross appeal is whether his Honour should have awarded damages in addition to injunctive relief. Dr C Birch SC drew the court's attention to the valuation evidence, which was based on the reduced rental achievable from the two buildings on the land by reason of the risk of inundation. He submitted that the Cross-Appellant/Respondent was entitled to receive damages on the basis of the lower rent that it had received by reason of the nuisance from, at least, the time of the commencement of the proceedings until the completion of work. 111 In the alternative, the Cross-Appellant/Respondent submitted that the same result, in practical terms, could be achieved if it were to receive interest on the diminished value of the reversion. The valuers calculated diminution in the value of the reversion on the basis of the reduced rental for the properties. It was submitted that the court should take a broad approach to the award of interest in accordance with the requirements of justice in the particular case, relying on Hungerfords v Walker (1989) 171 CLR 125 and 148. 112 Mr Ireland QC submitted that his Honour was correct not to award damages as the damage to the reversion was hypothetical. He referred to Simpson v Savage (1856) 140 ER 143 and Thompson v Sydney Municipal Council (1938) 14 LGR 32 for the proposition that injury to a reversion must be permanent before the owner of the reversion can sue. The works to be completed pursuant to the injunction will mean there has been no such damage. 113 His Honour's reasons on damages were: "[87] In my view, the plaintiff has made out a case in nuisance and is entitled to injunctive relief for the abatement of that nuisance. Since I am of the view that the Local Government Act 1993, s 733 is not available to the defendant, the plaintiff is also entitled to damages. [88] However, since those damages are limited to the diminution in the value of the reversion, which should be rectified by the abatement of the nuisance, I do not propose to order an inquiry as to damages." 114 His Honour rejected the Appellant's reliance on s733 on the basis of an absence of good faith. His Honour, accordingly, did not have to consider the applicability of s733 to the claim for damages if the only basis disentitling reliance was the interpretation point based on Attrill. Dr Birch challenged his Honour's statement that damages would be limited to diminution in value of the reversion, but that need not be determined. 115 Dr Birch submitted that s733 of the Act did not protect the Council from liability for damages for events occurring after the commencement of proceedings. To repeat the passage from Attrill supra, on which Dr Birch relied in this respect, Hodgson J said, obiter, at 128B: "… I think it probably does not prevent the award of damages in lieu of such injunctions, provided those damages are limited to compensation for events occurring after the commencement of proceedings: that seems to be substantially the view taken in the Chapman, Morsons case." 116 Chapman Morsons was, as noted above, a case involving a statutory requirement for notice before the institution of proceedings. The part of the reasons in that case (at 299, 300, 304) relied on by Hodgson J in Attrill turned on the proper characterisation of the original proceedings. If, as held, they were instituted for the substantive purpose of obtaining an injunction, then the object of the statutory notice provision was not served, and it did not apply. As I have indicated above, the proper interpretation of an exemption provision requires a different approach to that appropriate in the case of a notice provision. 117 In Attrill, Hodgson J referred only to the award of damages in lieu of an injunction. The damages now sought by the Cross-Appellant/Respondent are in addition to the injunction it received. 118 Its submissions restricted the claim for damages in the form of diminution of rent for the period after the commencement of the proceedings. The lease of one building commenced on 15 May 1999, for seven years, expiring on 14 April 2006. The other commenced on 1 March 1999 for five years, expiring on 29 February 2004. These proceedings commenced on 6 May 1999. One of two leases was entered into before the commencement of the proceedings and the claim for damages, as formulated in this Court, would not apply to that lease in any event. 119 There is authority which would deny a reversioner the right to claim damages in the form of loss of rent. (See Rust v Victoria Graving Dock Company (1887) 36 Ch D 113.) The reasoning in this case is based on the line of authority commencing with Simpson v Savage supra to the effect that a reversioner can only recover for permanent damage to the reversion. (See Rust supra at 135.) The reasoning also emphasises that damages can only be awarded for injuries that "are the direct result of the act of omission or commission complained of". This reasoning suggests that the test applied was that reflected in Re Polemis [1921] 3 KB 560, subsequently overruled by The Wagon Mound (No 1) [1961] AC 388. The approach to recovery for consequential losses is quite different today. 120 It is unnecessary to determine the issues arising on the cross-claim on this basis, in view of the special statutory regime in s733 of the Act. 121 Any liability for damages for loss of rent in the present case has to be based on conduct by the Council that occurred at the latest, before the conclusion of the proceedings, albeit as argued, before their commencement. The difference does not matter for present purposes. It was not suggested that there was any conduct between the two periods which was relevant to the claim for damages. (The abandonment of investigations, relied on by Gzell J on the good faith issue, was not relevant to this issue.) 122 Neither on the pleadings, nor on the evidence, did the Cross-Appellant put forward a case of nuisance based on a failure to remedy a condition causing a nuisance. The case was directed to the nuisance constituted by actual inundation in the past and, for quia timet relief, by future inundation. In such a case loss of rent or profits involves, in my opinion, a "liability" for past acts. On this basis s733 applies. 123 Dr Birch sought to characterise the loss of rent until the construction of the works as a form of damages in lieu of an injunction. I do not believe such characterisation is appropriate. An injunction would not be granted to take effect from the time of the institution of proceedings. Loss of rent would be in addition to, not in lieu of, an injunction. 124 Even after applying the strict construction appropriate for an exemption provision, in my opinion s733 does extend to protect the Council from liability for the loss of rent claimed. The word liability is protean. (See the authorities, summarised by McHugh J in Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at [137]-[140].) However, in my opinion, it extends to an award of damages of the character raised on the cross-claim. 125 The orders of Gzell J were designed to give the Appellant enough time to undertake remedial measures. During the course of the appeal the Court was informed that the delays associated with the appellate process impose some difficulties with the calling of tenders. The Court indicated to the parties that if it were not able to give an early judgment it would extend the time for compliance with the orders of Gzell J. Dr C Birch informed the Court that on behalf of his client he did not wish to make a contrary submission to the course proposed

1 Vary order 3 in the orders of Gzell J by substituting 6 June 2005 for 6 May 2005.

3 Cross-appeal dismissed with costs. 127 GILES JA: I agree with Spigelman CJ. 128 IPP JA: I agree with Spigelman CJ. **********

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