Dansar Pty Ltd v Byron Shire Council

Supreme Court of NSW|2011-12-20|Before: McCallum J

Judgment 1HER HONOUR: This is a claim in negligence brought against a local council by a property developer. The claim is for pure economic loss, being the developer's disappointed profit expectations in respect of the proposed construction of a residential complex with 18 dwellings at Byron Bay, on a site separated from beach frontage only by a railway line. 2Amongst the many planning issues raised by the development application was a question as to the extent of Byron Shire's spare sewage treatment capacity. The present claim rests critically on the Council's consideration of that issue. In broad terms the developer, Dansar Pty Ltd, asserts that the Council negligently underestimated the degree of spare sewage treatment capacity in Byron Shire and overestimated the extent to which such capacity was already at least notionally allocated to existing properties or other approved developments, resulting in its denying the existence of spare capacity sufficient to meet the requirements of Dansar's proposal. 3The Council denies that it owed Dansar a duty of care, defending the claim with the modest contention that the exercise of public power in the management of such a basic community facility as the treatment of sewage does not give rise to a private right of action to protect the economic interests of private property developers. 4For the reasons that follow, I have concluded that the Council does not owe the duty of care asserted against it and, accordingly, that Dansar's claim must be dismissed.

Order for a separate hearing 5On 6 October 2012 an order was made that the trial of questions on the issue of liability be determined separately and prior to the trial on damages. This judgment determines the issue of liability. It was common ground at the hearing that the Court would not proceed to a further hearing on damages unless the plaintiff established on the balance of probabilities in the present hearing that at least some damage was caused by any negligence found.

Circumstances in which the claim is brought 6Byron Bay, on the east coast of Australia, is stunningly beautiful and enjoys magnificent weather. It is a popular tourist destination and a valuable area for property development. 7The popularity of the region has at times imposed an excessive load on Byron Shire's sewage treatment system. It is necessary to record some detail of the difficulties facing the Shire on that account. During the 1990's the burden of an increasing permanent population together with a steady influx of tourists during holiday periods overwhelmed the system, sometimes placing the Council in breach of the standards imposed by the Environment Protection Authority. In August 1997 concerns as to the public health and legal implications of that circumstance prompted the Council to impose a moratorium on new development pending improvement works to address the problem. 8Byron Shire had two sewage treatment plants. These proceedings are principally concerned with the workings of the West Byron Sewage Treatment Plant. The capacity of a sewage treatment plant to treat raw sewage can be measured in a unit known as EP, described in the proceedings as standing variously for "equivalent population" or "equivalent person". As a unit of measurement, EP is an estimate or assumption that, for each member of the population, the volume of discharge that will flow into the sewerage system each day will be 240 litres (including all household effluent and stormwater drainage). 9As at 1997 West Byron Sewage Treatment Plant had a rated capacity of 4,000 EP. However, the increased load on the system during the peak holiday period was well in excess of that. After imposing the moratorium on new development, the Council engaged engineering consultants Gutteridge Haskings & Davies Pty Ltd to design and implement urgent interim upgrade works on the plant. The engineers recorded that, based on the peak holiday population for January 1997 considered together with upcoming developments approved by the Council, the predicted total requirement for West Byron Sewage Treatment Plant was 10,395 EP against its rated design capacity of 4,000 EP: exhibit A, tab 22, page 278. Urgent interim works were recommended which, in short, were aimed at increasing the functionality of the existing plant until a new plant could be commissioned. 10After completion of the interim works in about April 1999, the Council revisited the need for a moratorium on new development. On 19 September 2000 the Council passed the following resolutions (exhibit A, tab 37, pages 394 and 280 - the pages were out of order in the exhibit as originally compiled): 1. That Council acknowledges the existence of spare capacity at the West Byron Sewage Treatment Plant. 2. That Council in its capacity as the sewerage authority resolved not to enter into any arrangement or agreement for the provision of sewerage services (including reticulation and treatment of sewage) for any proposed development, that is additional to the current and committed load in the catchment of the West Byron STP which would increase the load of the plant beyond its present capacity for non peak loads of 833 EP. Any additional load would seriously jeopardise the plant's ability to meet EPA licence criteria and to comply with Council's statutory obligations for pollution control. This resolution does not prevent Council from agreeing, when satisfied, to a scheme or arrangement that substitutes an existing sewage load on the plant with an identical equivalent sewage load, or lesser load, generated from a new development on the same land. 11The prefatory words of the second resolution ("in its capacity as the sewerage authority") are explained by the fact that Byron Shire Council acts as the water and sewerage authority for its local government area. It will be necessary to return to the significance of that circumstance. 12The resolution acknowledging that spare capacity existed at the West Byron Sewage Treatment Plant brought an end to the moratorium and opened an opportunity for developers to lodge applications for new development. It became necessary in that context for the Council to identify its quantification of the spare capacity and to monitor the extent to which it might be taken up by new development applications as they were lodged. Dansar's claim focuses acutely on that aspect of the process, being based on the assertion that the Council owed a duty of care to developers, in effect, to get those calculations right. Implicitly, the claim assumes the existence of a private right to have any (correctly calculated) spare capacity allocated for new development. So much is comprehended within Dansar's complaint that the Council's consideration of the application "involved the failure to allocate the plaintiff with capacity in accordance with the allocation regime the Council imposed upon itself and which it communicated to the plaintiff": see Dansar's written submissions at [5]. 13The Council's engineering department had calculated that there was "spare capacity" in the order of 92.4 ET (standing for equivalent tenement, a unit of measure estimating sewage effluent per tenement or standard household rather than per equivalent person). Perhaps due to a transcription error, the figure of 92.4 ET first calculated by the Council was always later expressed as 92.7 ET. 14The Council maintained a series of tables referred to as the "ET Allocation Tables". Mr Adrian Warner, an engineer employed by the Council, gave evidence that the primary purpose of those tables was to enable the Council to calculate the contribution to be levied from a developer for the construction of sewerage works in accordance with s 64 of the Local Government Act 1993: T91.47; T98.19. However, the tables were also used by the Council's planning department to track the likely requirements of new development proposals against the so-called spare capacity of 92.7 ET. 15It is important to understand what those calculations denoted. As explained in evidence by Mr Warner, ET and EP measurements provide an assumed volume of discharge, which has a use in identifying the design capacity of a sewage treatment plant and in providing an estimate of the potential sewage that will be contributed to the system by proposed developments. However, those units of measurement do not measure the actual capacity of a sewerage system or ensure against the risk of pollution of waterways and associated breaches of the licence conditions imposed by the Environment Protection Authority. Those risks are best guarded against by the actual measurement of sewage flows, the measurement of process units and the measurement of performance outcomes of the sewerage plant. Mr Warner considered that Dansar's reliance in these proceedings upon the existence of so-called "spare capacity" identified by the Council's engineers confuses a prediction of capacity with the actual measured or assessed capacity of the plant to process greater loads of sewage: see Mr Warner's affidavit affirmed 30 October 2013 at paragraphs 12-15, 55; and cross-examination at T97.20. 16Dansar's original development application was lodged on 6 February 2001 by its planning consultant, GeoLink. It is the Council's treatment of that application which gives rise to Dansar's claims in these proceedings. The application sought consent for the construction of 18 two-bedroom, two-storey dwellings with associated car parking spaces, landscaping and a swimming pool: exhibit A, tab 40, page 728. The proposed development was assessed as requiring 11.6 ET of sewage capacity. 17Dansar's application could not receive consent unless the Council was satisfied in terms of clause 45(1) of the Byron Local Environmental Plan 1988, which provided as follows: Provision of services: 45(1) The Council shall not consent to the carrying out of development on any land to which this plan applies unless it is satisfied that prior adequate arrangements have been made for the provision of sewerage, draining and water services to the land. 18According to the ET Allocation Tables, after the receipt of Dansar's application and depending on the treatment of a number of other applications, it appeared that the spare capacity of 92.7 ET (evidently adopted by the Council as the working assumption for those tables) might be absorbed or almost absorbed by applications lodged up to that point. An announcement to that effect was made by the Mayor in a press release dated 1 March 2001: exhibit A, tab 45, page 1088. The press release warned that anyone lodging a development application after that date did so in the knowledge that there may be no spare capacity at the time the application was determined. Dansar contends that the Mayor's announcement was premised on a mistaken analysis as to the spare sewage treatment capacity available at that time. 19On 24 April 2001 the Council resolved, "for reasons of equity", to allocate any spare capacity that should emerge in either sewage treatment plant after 6 March 2001 to applications received after that date in chronological order, that is, according to the date of receipt of the application. It is common ground that Dansar's application was received before that date, within the moratorium-free window. 20The Council did not determine Dansar's development application before it was deemed to have been refused under s 82(1) of the Environmental Planning and Assessment Act 1979 and clause 113 of the Environmental Planning and Assessment Regulation. Accordingly, from about 28 May 2001, Dansar had a right of appeal to the Land and Environment Court under s 97 of the Act. 21Dansar's application came before the Council on 14 August 2001. A report to the Council of that date prepared by its development engineer discloses that, at that stage, the application was being treated as being within the spare sewage treatment capacity acknowledged by the Council in the 19 September 2000 resolution: exhibit A, tab 66, page 1307. However, the development engineer had a series of other concerns about the application, which were unrelated to sewage treatment. He recommended that the Council defer a decision on the determination of the application for two months to allow for the submission by Dansar of a revised proposal addressing the concerns set out in the report: exhibit A, tab 66, page 281. 22Dansar's statement of claim relied upon an alleged failure by the Council to give "any proper consideration" to the development application at that meeting as one of the particulars of breach of duty of care (paragraph 52(b)(i)). However, that allegation was expressly abandoned at the hearing. 23On about 15 August 2001, following the Council's determination to defer a decision on the development application, Dansar instructed its planning consultant to prepare an appeal to the Land and Environment Court based on the deemed refusal. The appeal was lodged on 31 August 2001. Dansar's principal, Mr John Vaughan, gave evidence that one of the reasons for bringing the appeal was that the Council had a policy of reserving sewerage capacity for applications under appeal or review, although his main concern was to get a decision: T76.19-T76.31. 24Dansar pursued its application to the Council in tandem with the appeal, as contemplated by s 82 of the Environmental Planning and Assessment Act. On 16 October 2001 Dansar lodged amended plans in response to the Council's resolution of 14 August 2001: exhibit A, tab 70, page 1348. Further changes to the design of the proposed development were submitted on 29 October 2001: exhibit A, tab 70, page 1358. The amended plans reduced the number of dwellings and altered the layout of the project. 25On 2 November 2001 the Council filed a draft statement of issues in the proceedings in the Land and Environment Court. The first two issues articulated in that document related to the absence of adequate arrangements for the provision of sewerage services for the development application. The issues were expressed in the following terms (exhibit A, tab 71B, page 1327): 1.1 Whether adequate arrangements can be made for the provision of services to the proposed development in accordance with clause 45 of the Byron Local Environmental Plan 1988. 1.2 Whether the proposal can be approved having regard to the inability to make prior adequate arrangements to the satisfaction of council for the disposal of sewage. 26As already noted, the Council's satisfaction as to the existence of such prior adequate arrangements was critical to the success of Dansar's development application, since clause 45 of the Byron Local Environmental Plan prohibited the granting of consent otherwise. 27Dansar's principal, Mr John Vaughan, believed at that stage that he had an agreement to the effect that prior adequate arrangements had been reached. His understanding was based on a conversation he had with the Mayor on 1 March 2001, the day on which the press release concerning the Shire's sewage treatment capacity was issued. The conversation was in the following terms (affidavit of John Bernard Vaughan sworn 18 November 2011 at paragraph 21): Mr Vaughan: Have the existing development applications been allotted capacity? The Mayor: If you are in, you're in. 28When Mr Vaughan saw the draft statement of issues filed by the Council in the Land and Environment Court, he confronted the Mayor as to why clause 45 had been listed as a reason for refusing his development. According to Mr Vaughan, the Mayor's only response was, "the Council's lawyers put it in". It should be recorded in the context of that evidence, however, that Dansar did not bring a claim based upon reliance on any representation by the Council on the issue of sewage treatment capacity: T78.18; T228.43. 29On 13 December 2001 Mr Vaughan received a draft report from the Council evaluating Dansar's revised application following the amendments made in October 2001. The draft report stated that the amendments created an extra 0.8 ET requirement of sewage treatment capacity. Mr Vaughan stated that, had he or his planners been notified that the revised development application exceeded the ET allocation for the original application, the plans would have been further revised. He requested that a supplementary report be prepared for presentation to the Council reflecting the deletion of one of the houses proposed as part of the complex, with the effect that the ET allocation would be reduced to a figure slightly less than that for the original development application: exhibit A, tab 78 at page 1399. That request does not appear to have been complied with. 30The Council considered Dansar's application at its meeting on 18 December 2001. An evaluation of the application prepared for the purpose of that meeting recommended that the application be refused for a number of reasons. Apart from the first item, the detail is not important except to demonstrate the number and variety of reasons (beyond the sewage issue) put forward by the author of the report for rejecting the application. They were as follows: 1. The proposed development exceeds the available additional loading on sewerage services, and therefore prior adequate arrangements have not been made in accordance with Clause 45 of the Byron Local Environmental Plan 1988. 2. The proposed development is inconsistent with the guiding principles, in particular, clause 2(3)(b) and (c) of the Byron Local Environmental Plan 1988, with regard to intergenerational equity, conserving biodiversity and ecological integrity. 3. The proposed development has not demonstrated that residential density has been maximised without adversely affecting the environmental features of the land, in accordance with clause 43(1)(a) of the North Coast Regional Environmental Plan 1988. 4. The proposed development does not comply with the requirements of Part J. 5. The application fails to provide detailed landscaping plans as required by Part H, Section H1.10, and thereby provides a lack of adequate detail to enable thorough assessment of the impact of the development on the streetscape, visual amenity and privacy of surrounding lands. 6. The application has provided a lack of adequate detail in relation to road construction requirements and the impact of such works on the design of the proposed development. 7. The application provides lack of adequate detail to demonstrate the adequacy of the 'potential pedestrian reserve' to physically cater for the function of the reserve for public pedestrian access, and to preserve the privacy and amenity of the adjacent residential property. 8. The application has provided insufficient detail to determine if the grades of the proposed access driveways are satisfactory. 9. The application has not provided any detail to show what impact the development may have on the existing stormwater regime. 10. The revised proposal is not accompanied by an objection pursuant to State Environmental Planning Policy No. 1 relating to the variation of the maximum height limit set by Clause 40 of the Byron Local Environmental Plan 1988, relevant to proposed House 4. 31The Council did not accede to the recommendation that the application be refused, resolving instead to defer its consideration with an invitation to Dansar to make further amendments addressing points 2, 3 and 5 to 10 inclusive: exhibit A, tab 77. 32In reaching that position, the Council addressed the proposition put forward in the report (that the proposed development exceeded the available additional loading on sewerage services) by passing a resolution in the following terms (point 6 of the Council's resolutions): That Council recognises that [the development application] was included in the pre 6 March 2001 ET allocation. 33Dansar's statement of claim relies upon an alleged failure by the Council to give "any proper consideration" to the development application at the December meeting as a further particular of breach of duty of care (paragraph 52(b)(i)). That allegation was maintained at the hearing. However, the considerations which prompted the abandonment of a like allegation in respect of the August meeting would appear to apply with equal force to the December meeting. On the strength of the evidence before me, it appears that it would have been open to the Council to reject the development application at that meeting, even leaving aside the sewage issue. Its consideration was expressly deferred against a recognition that the application fell within the spare capacity previously recognised, in order to allow Dansar to address other concerns. 34The resolution on 18 December 2001 recognising that Dansar's application was included within the pre-March 2001 ET allocation (recorded at point 6) was the subject of a successful rescission motion at the next meeting of Council on 29 January 2002: exhibit A, tab 84. 35Separately, at the meeting of 18 December 2001, the Council resolved that three councillors be invited to negotiate the determination of the development application and accept a negotiated solution on behalf of Council. However, Dansar alleges that the mediation of the remaining disputed items was not addressed because, from the time of the successful rescission motion on 29 January 2002, the Council negligently and erroneously maintained that the remaining ET available from the spare 92.7 previously quantified was less than the 11.6 ET required for Dansar's proposal. 36On 13 February 2002 the Council filed its final statement of issues in the Land and Environment Court appeal proceedings. In that document, the two issues raised by clause 45 of the Byron Local Environmental Plan continued to be listed as issues contested by the Council: exhibit A, tab 87, page 1519. 37At around the same time, the complications of a fluctuating itinerant population again began to surface. On 15 February 2002, Mr Warner reported to the Council's general manager that a recent assessment of Byron Bay sewage flows for the peak period, January 2002, and the off-peak period, August 2001, showed significant growth. The cause of the increase had not been able to be identified but its implications included a concern that, even following completion of a substantial upgrade to the two sewage treatment plants, ultimate capacity would be reached within a very short time: exhibit A, tab 87A, page 1747. At that stage, Mr Warner considered that, irrespective of any theoretical calculation of spare capacity or available ET, by January 2002 the West Byron Sewage Treatment Plant was in fact overloaded. He noted that the Plant had in fact failed to comply with its licence conditions in the past (the significance of the breaches was questioned in cross-examination: T114-115). Mr Warner regarded the risk of future non-compliance to be even greater, given the spike in January 2002. 38On 15 March 2002 the Land and Environment Court dismissed Dansar's appeal against the Council's deemed refusal of the development application: exhibit A, tab 94, page 1597, cited as Vaughan v Byron Shire Council, unreported, NSW Land and Environment Court, Commissioner Hoffman, 15 March 2002. An appeal against that decision was dismissed: Vaughan v Byron Shire Council (No 2) [2002] NSWLEC 158. It will be necessary to return to the detail of those two decisions. 39In October 2002, following the dismissal of the appeal, Dansar lodged a new development application seeking consent for the construction of 15 units and a separate application for development approval for a house on the western end of the land. Those applications were ultimately approved. In December 2005 Dansar sold the property subject to its compliance with the terms of the development approval. 40Dansar claims to have incurred "significant financial loss and wasted expenditure as a result of holding the property, including lost profits" (plaintiff's written submissions, paragraph 32) due to the Council's allegedly negligent approach to the sewage treatment capacity issue.

Duty of care asserted by Dansar 41The circumstances surrounding the Council's assessment in 2000 that the existing spare capacity at the West Byron Sewage Treatment Plant was 92.7 ET and the manner of allocation of that capacity are relied upon by Dansar to support the existence of a duty of care pleaded in the following terms (at paragraph 33 of the statement of claim): (a)to give proper consideration to the development application; (b)to give proper consideration, at the time it came to determine the development application, as to whether sufficient sewerage capacity existed at the West Byron Sewage Treatment Plant to accommodate the development proposals constituted by the application. 42The particulars of that allegation identify (non-exhaustively) proximity, vulnerability, foreseeability and the Council's knowledge or constructive knowledge of the alleged actual spare sewage treatment capacity as relevant features pointing to the existence of a duty of care. 43Separately, Dansar relies on the Council's consideration of the development application to support the existence of a duty of care pleaded in the following terms (at paragraph 51 of the statement of claim): (a) to give proper consideration to the development application after lodgement, and in particular after 14 August 2001; (b) to give proper consideration to the development application on or about 14 August 2001, on or about 18 December 2001, on or about 29 January 2002 and on or about 22 February 2002 when the defendant came to consider whether or not the development application would be approved; (c)in respect of the matters to be considered as part of (a) and (b), to act upon information which was properly and soundly based, accurate and reasonable in its conclusions as to the existing spare capacity of the West Byron Sewage Treatment Plant at the relevant times. 44As already noted, during the hearing Dansar abandoned the allegation that there was any breach of duty of care in respect of the Council's consideration of the development application at its meeting of 14 August 2001. 45As noted in the submissions of Mr Taylor SC, who appeared for the Council, Dansar does not allege that the Council owed it a duty of care to enter into, or even to consider entering into, "arrangements" for the provision of sewerage services to the land (such prior arrangements being the pre-condition to the development consent imposed by clause 45 of the Bryon Local Environmental Plan). The essence of the claim is that, having adopted a system for the allocation of the spare capacity identified, the Council failed to implement that system (or made errors in doing so). Implicitly, the premise of the claim is that, regardless of any assumption of responsibility or specific reliance, the adoption of a system informs the existence and content of a duty of care.

Principles to be applied in determining whether a duty is owed 46The correct approach to determining whether a duty of care is owed was analysed by Allsop P in Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; (2009) 75 NSWLR 649. The President explained that, whilst the High Court has rejected the existence of any general determinant or formulaic equation to answer the question as to whether a duty of care exists in any given circumstance, an approach has been identified which requires the court to make an evaluative judgment based on the consideration of many factors. His Honour said (at [102]-[103]): 102 ...If the circumstances fall within an accepted category of duty, little or no difficulty arises. If, however, the posited duty is a novel one, the proper approach is to undertake a close analysis of the facts bearing on the relationship between the plaintiff and the putative tortfeasor by references (sic) to the "salient features" or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury. 103 These salient features include: (a) the foreseeability of harm; (b) the nature of the harm alleged; (c) the degree and nature of control able to be exercised by the defendant to avoid harm; (d) the degree of vulnerability of the plaintiff to harm from the defendant's conduct, including the capacity and reasonable expectation of a plaintiff to take steps to protect itself; (e) the degree of reliance by the plaintiff upon the defendant; (f) any assumption of responsibility by the defendant; (g) the proximity or nearness in a physical, temporal or relational sense of the plaintiff to the defendant; (h) the existence or otherwise of a category of relationship between the defendant and the plaintiff or a person closely connected with the plaintiff; (i) the nature of the activity undertaken by the defendant; (j) the nature or the degree of the hazard or danger liable to be caused by the defendant's conduct or the activity or substance controlled by the defendant; (k) knowledge (either actual or constructive) by the defendant that the conduct will cause harm to the plaintiff; (l) any potential indeterminacy of liability; (m) the nature and consequences of any action that can be taken to avoid the harm to the plaintiff; (n) the extent of imposition on the autonomy or freedom of individuals, including the right to pursue one's own interests; (o) the existence of conflicting duties arising from other principles of law or statute; (p) consistency with the terms, scope and purpose of any statute relevant to the existence of a duty; and (q) the desirability of, and in some circumstances, need for conformance and coherence in the structure and fabric of the common law. 47The saliency of the relevant features is necessarily informed in the present case by the statutory framework within which the Council was required to consider the development application, importantly including its dual function as both the consent authority and the sewerage management authority. 48Mr Cotman SC, who appeared with Ms Harris for Dansar, submitted that the present case does fall within an accepted category of duty of care, being "the processing of development applications": see plaintiff's legal contentions on duty of care at [4]. That submission invites careful attention. Authority to support it was said to be found in the decision of the Court of Appeal in Makawe Pty Ltd v Randwick City Council [2009] NSWCA 412; (2009) 171 LGERA 165 at [43], where Hodgson JA provided a series of general propositions drawn from "a number of cases suggesting that local authorities may have a duty of care owed to developers and/or purchasers in relation to their approval of development and/or building applications": at [30]. 49Of the five propositions drawn from those cases by Hodgson JA, the one relied upon by the plaintiff (proposition (2) at [43]) is: However, if the approving authority is subject to a statutory requirement not to give consent unless it is satisfied of something, the courts may well find a duty, owed to developers and to purchasers, to exercise reasonable care in considering whether it is so satisfied: Taitapanui, Western Districts. 50None of the cases reviewed by Hodgson JA at [30]-[43] was a claim for economic loss of the kind claimed here, being loss of the profits expected of a development project. In each case, the nature of the harm alleged was the emergence of some physical feature of the relevant site or construction which ought to have been detected or prevented by the Council and which, at a later time, gave rise to damage to property or economic loss: a house which began to collapse due to slippage after being built where required by the Council on land known by the Council to be prone to slippage (Wollongong City Council v Fregnan [1982] 1 NSWLR 244); a house built in accordance with Council approval where the approval entailed consideration as to whether the land was fit to be used for residential purposes and the house later became uninhabitable due to movement of earth and rock (Bamford v Albert Shire Council [1998] 2 Qd R 125); a house built on land which the Council well knew was contaminated (Armidale City Council v Alec Finlayson Pty Limited [1999] FCA 330; (1999) 104 LGERA 9); a holiday cabin built within a predicted aircraft noise contour higher than was considered acceptable for houses and home units where the Council had received the relevant noise exposure forecast before giving development consent (Port Stephens Shire Council v Booth [2005] NSWCA 323; (2005) 148 LGERA 351); a house for which a building permit was granted negligently by a building surveyor employed by the Council which was later found to be structurally deficient (Moorabool Shire Council v Taitapunui [2006] VSCA 30; (2006) 14 VR 55); and a subdivision in which the purchaser of a lot incurred a substantial levy under the Sydney Water Act 1994 after the Council, as the principal certifying authority, issued a subdivision certificate without being satisfied that the subdivider had obtained a compliance certificate under the Act, which was a condition of the development consent (Western Districts Developments Pty Ltd v Baulkham Hills Shire Council [2009] NSWCA 283; (2009) 75 NSWLR 706). 51More particularly, a consideration of the two decisions from which his Honour drew the particular proposition at 43 set out above reveals that it provides slender support for the plaintiff's claim as to the existence of a duty of care in the present case, let alone determining that the claim falls within an existing class of duty of care (unless that phrase is understood in the broadest sense). Each was a case involving damage to property where the consenting authority had to be satisfied of matters pertaining to the protection of the person seeking consent. That is not the way in which the case is put here. Further, as noted above, in Western Districts the Council was acting as the certifying authority rather than as the development consent authority. 52In Taitapanui, the relevant constraint was that the building surveyor was not to issue a building permit unless he was satisfied that the construction would comply with legislated standards. The claim against the Council was not in respect of the exercise of its statutory functions at all, but based on its vicarious liability for the very different statutory functions of the building surveyor as the Council's employee. 53In Western Districts, the relevant constraint was that the Council was not to issue a subdivision certificate unless satisfied that the applicant had obtained a certificate of compliance from the water supply authority. 54The differences from the circumstances of the present case are manifest. Dansar relied upon the fact that, under clause 45 of the Byron Local Environmental Plan, the Council must not consent to a development unless satisfied that prior adequate arrangements have been made for the provision of sewerage, drainage and water services to the land. That was said to bring the case within the class of case referred to by Hodgson JA in Makawe at [43] in proposition no (2). However, as already explained, those were cases in which the precondition for the issue of the relevant certificate was for the protection of the applicant. The functions exercised by the Council in respect of Dansar's development application and more broadly regarding the management of sewage treatment in Byron Shire are scarcely captured in the proposition that the Council was subject to a statutory requirement not to give consent unless it was satisfied of something. 55What that illustrates is the indeterminate content of the question whether a case falls into "an existing category of duty of care", an issue which was approached differently even within the several judgments in Makawe: Hodgson at [48] thought that the case did not, after a careful analysis of some of the matters that have earned the label "salient features"; Campbell JA was silent as to existing versus novel, considering the relevant features without the label and without reference to the President's judgment in Stavar (at [59]-[73]); Simpson J noted the elusive distinction between "pure economic loss" and that which is not "pure economic loss" and considered (at [95]) that even a case falling within the description of pure economic loss should be approached in the manner identified by Allsop P in Stavar. In so holding, her Honour noted that the authorities do not prescribe the relative importance of any of the salient features, that being "precisely the point of the 'salient features' test" (at [137]). 56Interestingly in that context, since the hearing of this case the Court of Appeal has determined an appeal in a claim similar to Dansar's (in that it was a claim for pure economic loss brought by a developer against a Council arising from the processing and assessment of a development application). The appeal was determined without explicit reference to Stavar, evidently on the premise that pure economic loss is an existing category of duty of care: see MM Constructions (Aust) Pty Ltd v Port Stephens Council [2012] NSWCA 417. 57The President wrote the main judgment in that case, holding that the duty asserted by the plaintiff did not arise. After rejecting the broad proposition said to follow from earlier authorities that any foreseeable loss of any kind from the exercise of any [statutory] power exercised without reasonable care is recoverable (at [88]-[90]), his Honour considered the salient features identified by the High Court as being relevant to the determination of the existence of a duty of care in a claim for relational interest loss in Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 216 CLR 515. His Honour's assessment of those considerations was closely informed by a careful analysis of the statutory powers exercised by the Council and the broader statutory context in which the claim was brought. 58One thing that is clear from the authorities is that, even where a case can be described as being of the kind in which the existence of a duty of care is already recognised, that is not necessarily determinative. Save in the kind of case where the existence and content of a duty of care is beyond dispute, such as in the relationship between lawyers and their clients or employers and employees, an existing class of duty does not obviate the need to determine whether a duty is to be imputed in any particular case. The task for the court is to form an evaluative judgment as to the appropriateness of imposing a duty of care of the kind asserted having regard to all of the salient features of the case which inform that question. The list of such features provided by Allsop P in Stavar was described by his Honour as "a non-exhaustive universe" (echoing the widely-accepted scientific theory that the physical universe is expanding in a way that is unknown and unpredictable). It stands as a helpful guide to the evaluative judgment that must be undertaken in any case in which the asserted duty of care is in contest, whether or not it is a duty of a kind that falls within a recognised class. 59The considerations listed by the President call attention to the need for conformance of the content of the duty of care alleged with the statutory responsibilities of the Council, a proposition forcefully reiterated in MM Constructions. That is an important consideration in the present case and necessarily informs the assessment of many of the salient features relevant to the question whether a duty of care is to be imputed. It is appropriate for that reason to begin with an analysis of the relevant statutory regime.

Functions exercised by the Council 60As recognised in the Local Government Act, all functions of a council come from statute, either from that Act or other Acts: see the note to chapter 5 of the Act. The functions of a council include service or non-regulatory functions as well as regulatory functions. The service or non-regulatory functions of a council are set out in chapter 6 of the Act, while the major regulatory functions are set out in chapter 7 of the Act. 61An important aspect of the context in which the present claim is brought is that Byron Shire Council has the regulatory functions of being both the development consent authority and the water and sewerage authority for its local government area: see affidavit of Mr Warner affirmed 30 October 2009 at paragraph 4. Byron Shire's position in that respect is to be contrasted with the position of Sydney metropolitan local councils or councils in the Hunter region, where water supply and sewerage are regulated by other authorities: see s 68(2) of the Local Government Act. 62The general functions of the Council and its dual functions relating to the regulation of development and sewerage are governed by a complex statutory regime. A helpful and comprehensive analysis of the relevant provisions was provided in the written submissions of the Council. The following discussions draws heavily from that document. 63The service or non-regulatory functions of a council contained in chapter 6 of the Local Government Act include, in part 1 of chapter 6, the general function of a local council of providing services to meet the needs of the community. That general function is conferred by s 24 of the Act, as follows: A council may provide goods, services and facilities, and carry out activities, appropriate to the current and future needs within its local community and of the wider public, subject to this Act, the regulations and any other law. 64The performance of that general function is circumscribed by the provisions of part 3 of chapter 6. Division 2 of part 3 includes a series of specific provisions regulating the Council's provision of services in the construction of sewerage works and the management of sewage treatment. Pursuant to those provisions, the Council has conditional power to construct sewerage works and in respect of the treatment of sewage, subject to Ministerial control and possible direction: see ss 56-66 of the Act. 65Section 64 in division 2 confers on the Council the function of a water authority under the Water Management Act 2000 of certifying compliance for development works carried out within its area. The conferral of that function enables the Council to require the construction of sewerage works and to levy contributions towards the cost of such works. 66Chapter 7 of the Act confers on the Council a regulatory function in respect of sewerage works. Section 68 in that chapter prohibits the carrying out of sewerage work, including the connection of a private sewer with the public sewer, without the prior approval of the Council. Section 89 in chapter 7 sets out matters to be considered by the Council in determining whether to grant such approval, which include the principles of ecologically sustainable development. As noted by the Council in its written submissions, the section imposes an obligation on the Council "to subordinate the interests of individual applicants to the public interest (specifically in relation to protecting the environment and public health)". That said, the section also requires the Council to seek to give effect to the applicant's objectives to the extent of their compatibility with the public interest. The section provides: (1) In determining an application, the council: (a) must not approve the application if the activity or the carrying out of the activity for which approval is sought would not comply with the requirements of any relevant regulation, and (b) must take into consideration any criteria in a local policy adopted under Part 3 by the council which are relevant to the subject-matter of the application, and (c) must take into consideration the principles of ecologically sustainable development. (2) If no requirements are prescribed for the purposes of subsection (1) (a), and no criteria are adopted for the purposes of subsection (1) (b), the council in determining an application: (a) is to take into consideration, in addition to the principles of ecologically sustainable development, all matters relevant to the application, and (b) is to seek to give effect to the applicant's objectives to the extent to which they are compatible with the public interest. (3) Without limiting subsection (2), in considering the public interest the matters the council is to consider include: (a) protection of the environment, and (b) protection of public health, safety and convenience, and (c) any items of cultural and heritage significance which might be affected. 67As noted by Mr Taylor, although the Council has a service function of providing sewerage services and sewage treatment facilities, it has no specific obligation to provide them to any particular person. Manifestly, that is the position in respect of the Council's regulatory function under chapter 7. Connection to the public sewer required specific, additional approval which, under s 89, could only be granted to the extent to which it was compatible with the public interest. 68Section 176 of the Act allows an appeal to the Land and Environment Court by a person dissatisfied with the determination of an approval application. Section 179 confers a limited discretion on that Court to award compensation for any expense incurred as a consequence of a council's refusal to grant, or delay in granting, the approval sought. 69The regulatory function is also addressed in the Local Government (Approvals) Regulation 1999, clause 15 of which imposes a mandatory obligation on the Council, in determining any approval application, to have regard to the protection and promotion of public health, the protection of the environment, the safeguarding of its assets and any other relevant matter. 70In its separate capacity as the development consent authority, there fell to the Council the function of considering Dansar's development application under the Environmental Planning and Assessment Act. 71In exercising that function, the Council was required to consider many matters. Section 79C of the Act provides a list of considerations that are mandatory (where relevant) including any local environmental planning instrument, the likely impacts of the development including environmental, social and economic impacts and the public interest. 72The relevant planning instrument in the case of Byron Shire was the Byron Local Environmental Plan 1988, which is considered further below. 73Section 80(2) of the Environmental Planning and Assessment Act mandates the rejection of an application for the subdivision of land that would, if carried out, not comply with an applicable environmental planning instrument. Section 96A of the Act confers power to revoke or modify any consent in force if, "having regard to" the provisions of any draft local environmental plan it appears to the Council that the development should not be carried out or completed. Section 111 of the Act requires the Council to "examine and take into account to the fullest extent possible all matters affecting or likely to affect the environment" in the carrying out of the works. 74As already noted, Dansar had a right of appeal to the Land and Environment Court against the Council's deemed refusal of the application, and exercised that right. It was still open to the Council to determine the application after the appeal was lodged but any such determination would not have obviated the continuation or determination of the appeal, and a grant of consent would not have disposed of the proceedings without Dansar's consent: see s 82(3) and 82(4) of the Act. 75Dansar also had a right of internal review under s 82A of the Act.

Byron Local Environmental Plan 1988 76As noted above, the relevant local environmental planning instrument required to be taken into account by the Council was the Byron Local Environmental Plan 1988. The aim of the Plan stated in clause 2(1) is to promote sustainable development in Byron by furthering the objects of the Environmental Planning and Assessment Act, particularly in regard to matters listed in that clause. The objectives of the Plan stated in clause 2(2) include enhancing individual and community well-being by following a path of economic development that safeguards the welfare of future generations; inter-generational equity; and the protection of biodiversity. 77It is not necessary for present purposes to go to other parts of the Plan in any detail except in respect of sewage treatment. As already noted, clause 45 of the Plan mandated the refusal of development consent unless the Council was satisfied that prior adequate arrangements had been made for the provision of sewerage services to the land. 78The nature of the function, power or duty to be exercised by the Council under clause 45 was considered by the Court of Appeal in Codlea Pty Ltd v Byron Shire Council [1999] NSWCA 399. Central to the Court's analysis was the recognition that clause 45 has two elements - the objective existence of prior adequate arrangements, which is in the nature of a condition precedent to the granting of consent, and the Council's (subjective) satisfaction of that fact. 79The Court held that the function of being satisfied (or not satisfied) as to the existence of prior adequate arrangements could be seen as a function basic to the Council's function to grant (or refuse) development approval and, for that reason one able to be exercised, on appeal, by the Land and Environment Court in accordance with s 39(2) of the Land and Environment Court Act 1979: at [26] to [28] per Stein JA; Handley and Sheller JJA agreeing at [1] and [2] respectively. Thus if a council refused to be satisfied although prior adequate arrangements had in fact been reached, it would be open to the Court to reach that state of satisfaction. 80However, the Court held at [42] that the underlying objective requirement that there be prior adequate arrangements derives from a function that cannot be exercised by the Land and Environment Court. In reaching that conclusion, Stein JA considered the separate functions exercised by the Council as a water, sewerage and drainage authority with the powers recruited by force of s 64 of the Local Government Act to levy contributions from developers so as to allow for the development of land without cost to the Council. His Honour concluded from the operation of those provisions (which have since been amended but not so as to derogate from the force of the analysis) that the function of reaching prior arrangements, although not strictly a function of the Council in its capacity as the sewerage authority, brings forward consideration of some of the issues arising in the performance of that function: at [32] to [33]. 81The Court of Appeal's conclusion that the function of entering into prior adequate arrangements is exclusively the province of the Council and not one arrogated to the Land and Environment Court under s 39(2) of the Land and Environment Court Act proved fatal to Dansar's appeals. Commissioner Hoffman felt bound to dismiss the appeal, applying Codlea in the absence of there being arrangements already reached between Dansar and the Council at the time the appeal was determined: Vaughan v Byron Shire Council at [82] to [83]. Lloyd J held in Vaughan v Byron Shire Council (No 2) at [17] to [18] that the Commissioner was bound to reach that conclusion.

Salient features 82The disconformity between the duty of care asserted by Dansar and the Council's statutory functions is manifest. Many of the functions exercised by the Council within the complex statutory regime considered above focus critically on considerations of public health and environmental impact. The existence of a private right to recover relational interest damages in respect of a failure to allocate sewage treatment capacity to an individual property developer is plainly inimical to the unimpeded exercise of such functions. That consideration alone militates powerfully against imputing a duty of care of the content asserted by Dansar. 83A consideration of the salient features of the relationship between the Council and Dansar produces the same conclusion. I have already noted my view that the relevant features are necessarily informed by the statutory context. 84It may readily be accepted (and was accepted by the Council at the hearing) that harm of the kind claimed by Dansar was foreseeable. However, as submitted by Mr Taylor on behalf of the Council, harm of that nature is inherent in the process of due consideration which the Council must undertake when assessing proposals for new development in Byron Shire, keeping one eye on the interests of regional development and the other on the important public power exercised in the management of water and sewage. As noted by Mr Taylor in that context, the fact that the public interest is a relevant and potentially determinative consideration in any development application is inconsistent with the imposition of a duty on the Council to take care in the allocation of putative units of sewage treatment capacity, less still to do so in a timely fashion. 85The nature of the harm alleged is the delayed receipt of development profits and the expenses and holding costs incurred during the alleged delay. It is appropriate in that context to consider the salient features required to establish a relationship of sufficient proximity discussed by the High Court in Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 216 CLR 515. A helpful analysis of those considerations is to be found in the decision of the Court of Appeal in MM Constructions, to which I have already referred. Here, as was the case there, there is no relevant reliance, no assumption of responsibility and no vulnerability in the relevant sense (see especially at [93]-[98]). 86Dansar submitted that the Council had a high degree of control (able to be exercised to avoid harm to Dansar) in considering whether there was spare sewage treatment capacity within the 92.7 ET calculated by the Council's engineering department. In particular, it was submitted that the Council had total and exclusive control over the calculation of spare capacity, the information sustaining the calculation and the application of that information to the allocation of ET to development applications. Comprehended within that submission was the proposition that the Council had to apply its allocation system "correctly" and to form "a correct view" as to the possibility of reaching adequate arrangements within the meaning of clause 45 of the Byron Local Environmental Plan: see plaintiff's written submissions, paragraph 49. 87In my view, that submission entails two misconceptions. First, it looks with telescopic focus to the financial interests of developers as if that were the only interest required to be served by the exercise of the Council's several functions. Secondly, it treats sewage treatment capacity as if it were a fixed, measurable resource which the Council had an obligation to quantify correctly and to allocate exhaustively. That overlooks the complexity of the sewage issue, for the reasons explained by Mr Warner considered above, and the importance of the Council's separate function as the sewage management authority. The present case is quite different from the position of a certifying authority where the matter required to be certified is known to the Council and not known to the person for whose protection the certificate is issued. The control exercised by the Council, and the degree of vulnerability of the person seeking the certificate or approval, in cases of the kind discussed by Hodgson JA in Makawe derives from a more focussed task. 88I accept that the Council had a degree of control in respect of the ET allocation process, in the sense that the Council's employees formulated and applied that process, and that Dansar was vulnerable to the outcome of that process, in the sense that it could not control it. However, the control able to be exercised by the Council at any time was not unconstrained. It was circumscribed by the many competing considerations required to be weighed in the exercise of a number of different statutory functions. 89Further, as to the degree of vulnerability, it is important to understand what is comprehended within that term in the present context. The kind of vulnerability that will point to the existence of a duty of care was explained in the joint reasons of Gleeson CJ, Gummow, Hayne and Heydon JJ in Woolcock at 530 [23]: "Vulnerability", in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, "vulnerability" is to be understood as a reference to the plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant. 90The want of reasonable care asserted in the present case is the Council's alleged failure, due to mistakes of calculation or wrong information, to identify enough spare sewage treatment capacity to satisfy itself as to the existence of "prior adequate arrangements" for the purpose of clause 45 of the Byron Local Environmental Plan. In short, it is a complaint that the Council negligently failed to allow a greater burden on the sewerage system. To say that Dansar was unable to protect itself from the consequences of such negligence in a way that should cast the consequences of the loss on the Council assumes not only that there existed an objective, "correct" quantity of spare sewage treatment capacity but that all such capacity was required to be allocated for development: see plaintiff's written submissions, paragraphs 29, 53. Each of those premises highlights the disconformity between the duty of care asserted by Dansar and the unimpeded performance of the Council's statutory functions. For the reasons given in the evidence of Mr Warner, the Council's calculation of spare capacity or available ET, whilst helpful for planning purposes, was ultimately no more than theoretical. Further, the Council was under no legal duty to allocate all spare capacity calculated. To adopt such an approach would plainly be in conflict with the proper exercise of its other functions. 91The vulnerability asserted by Dansar is a want of protection of an economic interest which, as the foregoing analysis of the statutory context reveals, stands in competition with many other interests of varied vulnerability and importance. Dansar ought reasonably to have expected and planned its business on that basis. Mr Vaughan emphasised in his evidence that, until he saw the draft statement of issues in the proceedings in the Land and Environment Court, there were "no concerns...at all about sewerage": T78.49. However, in the absence of any specific reliance by Dansar on any positive representation by the Council, I do not think it can be concluded that Dansar was vulnerable in the sense explained by the High Court in Woolcock. The recognition of a duty of care to protect an individual against such vulnerability would skew the careful balance of competing interests sought to be achieved by the statutory regime of regulation and management. 92As to reliance and assumption of responsibility, Dansar asserts only that it was reasonably foreseeable that it (or a person in its position) would rely on the Council to process the development application with reasonable care and "apply its ET allocation regimen with due care": plaintiff's written submissions, paragraph 65. Beyond that general proposition, Dansar does not assert any actual assumption of responsibility on the part of the Council or that it relied on the Council in any specific way. I do not think that a consideration of any substantial weight in the present context. 93The consideration of proximity requires more careful attention. As submitted on behalf of Dansar, it was a member of a fixed class of applicants who lodged applications within the moratorium-free period, expressly referred to in the Mayor's announcement of 1 March 2002 as "a window of opportunity" for the lodgement of development applications. Dansar relied upon that consideration both as demonstrating a degree of proximity and as rebutting any suggestion that the recognition of a duty of care would result in an indeterminate liability. The deliberations of the Council at various meetings, particularly including the December meeting at which it was resolved to recognise that Dansar's development application was included in the pre 6 March 2001 ET allocation and the subsequent rescission of that motion, reveal that those developers who had lodged applications within the moratorium-free period were regarded as a discrete group for the purpose of considering the availability of adequate sewage arrangements. That is a factor weighing in favour of the recognition of a duty of care, but I do not think it is of sufficient strength to outweigh the other salient features of the case. 94The strongest consideration, in my view, is the tension between the private right asserted in these proceedings and the public powers and functions exercised by the Council. An important consideration in that context is the undesirability of producing an incoherent body of law. I would perceive a measure of incoherence between the Court of Appeal's conclusion in Codlea (that the function of reaching arrangements for the provision of sewerage services to the land is exclusively the province of the Council) and the imposition on the Council of a duty of care of the content asserted by Dansar, which would open the exercise of that function to the scrutiny of this Court.

Conclusion 95For those reasons, I have concluded that the Council did not owe the duty of care asserted by Dansar. 96In light of that conclusion, and after careful deliberation, I have concluded (in some fear of appellate censure) that it is neither necessary nor appropriate to determine the questions of breach of duty and causation. I am mindful of admonitions by superior courts of the importance that, where possible, all issues of fact be determined at first instance, lest the failure to determine any particular issue be premised on legal error. For example, the Court of Appeal has expressed the view that, in personal injury cases, where the issue of damages has been fully litigated and there is a reasonable possibility that the judge's conclusion on liability may be wrong, it is "both just and convenient" that the judge should proceed to assess damages even where not satisfied as to liability: see Nevin v B & R Enclosures Pty Ltd [2004] NSWCA 339 at [75] per Tobias JA, Sheller and Beazley JJA agreeing. Those remarks were strongly reiterated in Wolfenden v International Theme Park Pty Ltd [2008] NSWCA 78 per Giles JA at [3]-[6]; Hodgson JA agreeing with additional remarks at [53]; Windeyer J agreeing at [55]. 97It may also be observed that a complaint as to a similar circumstance was made by the appellant in MM Constructions (where it was alleged that the trial judge did not deal satisfactorily with breach of duty on the hypothesis that his Honour was wrong as to the existence of a duty of care), but that complaint was not ultimately required to be considered by the Court of Appeal (at [6]). 98In my respectful opinion, it is not inconsistent with those authorities to recognise that, in some instances, the determination of issues of fact rendered hypothetical by the judge's conclusion as to another issue will prove to be a barren undertaking, the pursuit of which will be inimical to the overriding purpose of the Civil Procedure Act 2005. In Kelman v Mutton; Howard Haulage Pty Ltd v Mutton [2007] NSWSC 13 at [66], Sully J saw "no sense" in a trial judge's proceeding to quantify the apportionment of liability between cross-claimant and cross-defendant after rejecting the premise of the cross-claim. To do so would require the judge to nominate hypothetical circumstances that justified the apportionment reached, contrary to the earlier finding. 99In the present context, the existence of the asserted duty of care is the legal construct within which the question of breach falls to be determined. The question of breach is complicated in the present case by the indeterminate content of the duty asserted (to give "proper" consideration to the development application and to the sufficiency of existing sewerage capacity). That duty is said to arise not only in respect of the four individual occasions identified in paragraph 52 of the statement of claim but also in respect of the underlying assessment of the so-called spare capacity. To determine whether the plaintiff has established breach would require me to import hypothetical content into a duty the existence of which I reject on the grounds of disconformity with the content of the Council's statutory functions. I do not think it is just or convenient to embark on such an exercise. It would be artificial to proceed to determine the issue of causation in that circumstance. 100The order is that there be a verdict for the defendant.

Amendments 09 May 2013 - typographical error Amended paragraphs: [58] DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 May 2013

(2009) 171 LGERA 165

(2005) 148 LGERA 351

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