Bankstown City Council v Alamdo Holdings Pty Ltd

Bankstown City Council v Alamdo Holdings Pty Ltd - [2005] HCA 46 - HCA 2005 case summary — Zoe

[16]

In a suit heard in the Equity Division of the New South Wales Supreme Court[1], Gzell J held that there had been a significant increase in the frequency with which the Land was likely to be inundated. In 1960, before the first of the buildings was constructed, flooding had been likely as something between a one in five year event and a one in 10 year event. By 1998, floodwaters would be likely to enter one of the buildings "at flow rates somewhat in excess of a one in two year event". This increased frequency of likely flooding diminished the activity to be planned for the Land and was an unreasonable interference with the use and enjoyment of the Land of the kind against which the action for private nuisance was directed.
Gzell J rejected the submission by the Council that, because Alamdo had purchased the Land with knowledge of its flood‑prone state, in the exercise of his discretion he should withhold injunctive relief. His Honour also rejected the Council's submission that there was such a disproportion between the cost to it of abating the nuisance (estimated as being at least $1.5 million) and the prospective damage suffered by Alamdo that injunctive relief should be refused.
An injunction was granted restraining the Council from causing or permitting stormwater from inundating the Land "so as to cause a nuisance". The Council was ordered, without expense to Alamdo, to "carry out works to abate the nuisance", and to supply Alamdo with a detailed report of the steps it proposed to take to comply with that obligation. There is no issue in this Court respecting the form taken by this mandatory relief.
Section 68 of the Supreme Court Act 1970 (NSW) ("the Supreme Court Act") empowered the Supreme Court to award damages "either in addition to or in substitution for" an injunction "against the commission or continuance of any wrongful act". This provision is the local representative of s 2 of Lord Cairns' Act 1858 (UK)[2]. These provisions extend even to an award of damages in place of an injunction where the plaintiff has moved quia timet and before any wrong has been committed. The damages are awarded "in respect of an injury which is still in the future"[3].
Gzell J made no provision for damages assessed by reference to the flood-prone nature of the Land and the consequent diminution in the value of the reversion; this was because his Honour considered that this injury would be rectified by the mandatory injunctive relief. The evidence suggested that the damages assessed by reference to that diminution of value would have been at least $1.4 million.
At the trial, both parties approached the matter on the basis that the damages, being damages for nuisance, were readily ascertainable. This appears from the following passage in the trial judge's reasons:

[36]

What then is the content of the phrase in the opening words of s 733(1) "not incur any liability"? As interpreted in the Court of Appeal, the relevant conduct of the Council was in the construction and operation of the drainage system, together with its role in the process of urbanisation. That related to the likelihood of the Land being flooded, or to the nature and extent of such flooding of the Land. Accordingly, that past conduct of the Council related to a state of affairs apt to develop in the future, namely, in the words of par (b) of s 733(1), "the likelihood of [the Land] being flooded" or to its "nature or extent".
But, in respect of the conduct identified in this way, did the Council, but for s 733(1), "incur any liability"? What was said of the term "incurred" in a forerunner of s 51(1) of the Income Tax Assessment Act 1936 (Cth)[10] by Dixon J in New Zealand Flax Investments Ltd v Federal Commissioner of Taxation[11] is in point here. It would be unsafe to attempt an exhaustive definition of a conception such as "incur any liability" which is susceptible of various applications, given the normative complexity of the legal system, with the interaction between the rules of law, principles of equity, requirements of statute, and between legal, equitable and statutory remedies. Much must depend upon the subject, scope and purpose of s 733.
This is not a case of construing a statutory provision which authorises government action such as that considered in Coco v The Queen[12]. There, a power to authorise entry onto premises to install and maintain a listening device was held not to extend to authorise an entry which otherwise would be a trespass. Nor is this a case of the protection of the interests of a statutory authority given privileges in the nature of a monopoly for provision of a public service, such as the postal service[13]. Nor is the present a case of the kind identified by McHugh J in Puntoriero v Water Administration Ministerial Corporation[14] where general words of immunity are read down "so that they do not apply to functions of an ordinary character performed by the respondent and which are done pursuant to agreements with the consent of private citizens".
Further, the objective of s 733 was not solely the protection of the funds of local government bodies. The Minister had pointed to the general inconvenience of unnecessary refusal of development applications, and imposition of the unnecessary and costly conditions upon approvals, by over-cautious councils. General statements, upon which Alamdo relied, calling for a narrow reading in immunity provisions of phrases such as "in respect of" do not provide a substitute for consideration of the subject, scope and purpose of the whole of the statutory text.
Alamdo fixed upon further passages in the Minister's Second Reading Speech to which reference has been made above. These mentioned the need for protection against "claims for damages". That phrase, Alamdo submitted, indicates a legislative purpose to provide protection only against accrued causes of action carrying the right to the recovery of an award for damages. However, given the context in which the Minister spoke, it must be highly unlikely that any such technical use of words was intended.
The circumstances of the present litigation illustrate the point. Is the perceived need of the Council for protection any the lesser where it is faced with an injunctive order requiring substantial expenditure for compliance than it would be if, in its discretion under s 68 of the Supreme Court Act, the Supreme Court had, in lieu of injunctive relief, awarded damages in a similarly significant sum? The answer must be in the negative. The legislation is concerned in s 733 with matters of substance and not merely with matters of legal or procedural form.
Given the past conduct of the Council, to which reference has been made in the discussion of par (b) of s 733(1), there was incurred liability "in respect of" that conduct. The Council was liable to the exercise of the equity jurisdiction of the Supreme Court, together with its statutory jurisdiction conferred by s 68 of the Supreme Court Act. Events had occurred which would authorise the Supreme Court to exercise its jurisdiction, albeit with discretion as to the grant and form of relief. Whether or not Alamdo may have been then entitled to recover damages on a cause of action for past invasion of its common law rights, it had an equity in the sense described by Gleeson CJ in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd[15].
The susceptibility of the Council to the adjudication of that equity was a liability which it had encountered, run into, or fallen upon and so one which, but for s 733(1), it had incurred[16]. To the equity suit commenced against it by Alamdo, the Council pleaded an immunity conferred by that provision. Subject to resolving in its favour any question of good faith, that was a good plea.
In Crimmins v Stevedoring Industry Finance Committee[17], Kirby J said of the word "liable":

[48]

Although the Court of Appeal accepted Attrill, it did favour the case put by the Council respecting good faith, a holding which Alamdo attacks.
There thus remains the matter of the acts or omissions of the Council being "in good faith". The expression appears twice in s 733(1), once in par (a), where the text is "any advice furnished in good faith", and once in par (b), where the text is "anything done or omitted to be done in good faith". Section 733(4) provides that, in the limited circumstances explained earlier in these reasons, which can apply only to the furnishing of advice, the Council is to be taken to have acted in good faith, unless the contrary is proved. Otherwise, the pleading by the Council of an immunity pursuant to s 733, as occurred in this litigation, entails a burden upon the Council of making out its case for the operation of that section in its favour.
It is accepted by the Council that this includes the element of good faith, but Alamdo submits that there has been a failure in this respect which necessitates the dismissal of the appeal by the Council to this Court.
Something first must be said respecting the sense in which the phrase "in good faith" is used in s 733(1)(b). Mid Density Developments Pty Ltd v Rockdale Municipal Council[36] concerned the absence of any adequate system for the council to respond, when issuing certificates under s 149 of the EPA Act, to questions by the vendor and later the purchaser respecting the flooding of the particular land under contract. In that setting, it was held that, whilst not dishonest, the council had not acted in good faith. There had been no attempt to supply information by recourse to the council's records and there was no system in operation for doing so. Indeed, the council officer whose responsibility it was to deal with the requests for information had consciously ignored the very records which would have supplied it[37].
Reference was made in Mid Density to various examples in the law where "good faith" is used as a criterion requiring some state of mind or knowledge other than the personal honesty and absence of malice of the relevant actor[38]. Moreover, given the range of advice, acts and omissions to which s 733(1) may apply, what is required for something to be done or omitted in good faith may vary from one case to the next. This makes it unwise, if not impossible, to place a definitive gloss upon the words of the statute.
In Mid Density, the standard of conduct against which the Council's conduct in issuing the s 149 certificates was to be assessed was apparent from the importance of the information sought for the routine processes of conveyancing. The present case stands quite differently in several respects. First, the nature of the nuisance complained of was clarified only in the Court of Appeal, and then recognised as encompassing the involvement of the Council over many years in the construction and operation of the drainage system and its role in the process of urbanisation. Given the vagueness of the complaints against the Council, the weight of its evidentiary burden to establish good faith was correspondingly lightened. Secondly, that was all the more so given that, without negligence on its part in the exercise or failure to exercise its statutory powers, the Council was not liable in nuisance. True enough that point was not taken as an answer to liability, but it cannot properly be shut out of consideration of the content of the requirement of good faith in this case. Here, something more than negligence is necessary because, unless negligence were present, there would be no liability for protection against which s 733(1) was required by the Council.
The Council led evidence at trial from Mr Morrison, the Manager of Roads and Infrastructure with the Council and he was cross-examined. The evidence in chief included voluminous records of the Council. Given the nature of the nuisance alleged against the Council, the material would, unless challenged, suggest both no failure on its part which was to be stigmatised as a want of good faith, and the presence of good faith as a positive attribute of the conduct of the Council over a long period.
However, the primary judge held that the Council had not acted in good faith in the circumstances. His Honour referred to steps taken by the Council to respond to concerns expressed to Mr Morrison by Mr Maurici at a meeting on site in or about July 1998. Gzell J emphasised the importance attached by Mr Morrison to the pending litigation as a reason for deferring the taking of immediate action by the Council. The litigation commenced in May 1999. His Honour concluded:

[55]

As the joint judgment shows, the "past conduct of the Council"[39] "in the construction and operation of the drainage system, together with its role in the process of urbanisation"[40] made the Council "liable to the exercise of the equity jurisdiction of the Supreme Court, together with its statutory jurisdiction conferred by s 68 of the Supreme Court Act"[41] because "[e]vents had occurred which would authorise the Supreme Court to exercise its jurisdiction, albeit with discretion as to the grant and form of relief"[42] and because the plaintiff "had an equity in the sense described by Gleeson CJ in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd"[43]. The result was that "[t]he susceptibility of the Council to the adjudication of that equity was a liability which it had encountered".[44]
Alamdo Holdings Pty Limited ("Alamdo Holdings") contended that injunctive relief was not a "liability" for the purpose of s 733 of the Act because, unlike a common law award of damages, "[n]o 'right' to such a discretionary remedy is enlivened by the act or omission of a defendant; whereas a right to damages is enlivened by a relevant act or omission of the defendant." But as the joint judgment shows, there were two senses in which "[t]he susceptibility of the Council to the adjudication of that equity was a liability which it had encountered"[45]. And those two senses accord with the first and third senses of the term "liability" described by Windeyer J in Ogden Industries Pty Ltd v Lucas[46] that Alamdo Holdings cited in submissions to this Court. Moreover, a Hohfeldian rights analysis, upon which Alamdo Holdings also relied, denies Alamdo Holdings' argument that the equitable relief that it sought and obtained was not a "liability" within the meaning of s 733. That analysis demonstrates that the Council had a "liability" as a corollary of the following two "Hohfeldian rights":
the corollary of the Supreme Court's power to exercise its equitable jurisdiction to grant the injunctive relief is that the defendant had a liability to have its legal position changed by the grant of the injunction. Thus, the existence of the power entailed the third sense of "liability", which was "a situation in which a duty or obligation can arise as the result of the occurrence of some act or event"[47], namely, the granting of the relief; and
the corollary of Alamdo Holdings having an equitable right that the Council not do acts or omit to do acts relating to the likelihood of land being flooded is that the Council had a duty to do acts or not to do those acts. Thus, the existence of the equitable right entailed the first sense of "liability", which was "a legal obligation or duty"[48].
Accordingly, the injunctive relief that Alamdo Holdings sought against the Council was a "liability" within the meaning of s 733(1)(b) of the Act.
For the reasons given by Gleeson CJ, Gummow, Hayne and Callinan JJ, the Council also acted in good faith within the meaning of s 733(1)(b). Consequently, the conduct of the Council, relevant to the action brought by Alamdo Holdings, was conduct "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." The Council was therefore entitled to the immunity provided by s 733.
The appeal should be allowed. Allowing the appeal for the above reasons also has the effect that Alamdo Holdings' special leave application must be rejected.

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