Forbes Shire Council v Pace [2002] NSWSC 966 | Case summary

JUDGMENT 1 His Honour: This is an appeal pursuant to the Local Courts (Civil Claims) Act 1970, s 69 and the Justices Act 1902, Part 5, by the Forbes Shire Council ("the Council") from the decision of I Barnett Esq, LCM in the Local Court at Forbes against a judgment in favour of the defendant, Francis Anthony Pace ("the farmer") for $11,900 plus interest and costs for nuisance and negligence arising out of the flooding of the farmer's property by effluent from the Council's sewage treatment works resulting in the loss of part of a crop of oats and damage to a fence. The magistrate's findings of fact may be summarised as follows. 2 The farmer purchased the subject property in about 1990 and on it he grows oats and wheat and has a chaff mill where he mills chaff which he sells to equestrian centres and the thoroughbred and harness racing industries. His property is adjacent to Gum Swamp which takes overflow from the Forbes Sewage Treatment Plant which has been operated by the Council since the 1930s. When the water reaches a certain level in Gum Swamp it can then flow into what is known as North Swamp and then, if permitted by the relevant authorities, it can be discharged from North Swamp into the Lachlan River by a pipe system. There is a levee bank between Gum Swamp and North Swamp breached by a concrete outlet pipe which allows water and/or effluent from Gum Swamp to be transferred to North Swamp, but at times this outlet pipe is blocked with soil. 3 The Council regularly discharged excess waste into the Lachlan River until about 1993 when the Environment Protection Authority placed restrictions on the amount of treated effluent which could be discharged into the river, and since that date no treated effluent has been discharged into the river except on rare occasions, but the Council has continued to discharge effluent from its sewerage treatment works into Gum Swamp. The waters of Gum Swamp are polluted and toxic, a matter known to the Council for some time. 4 The farmer first noticed a significant rise in the water level of Gum Swamp in about 1993 when an area of the swamp overflowed and the water inundated his farm. Since then he has observed that the water level of Gum Swamp rises during the winter when there is no evaporation, but more so in winters when there is significant rain. Between 1993 and 1999 the farmer's property has been inundated from Gum Swamp on a number of occasions, there has been ongoing correspondence and interaction between the farmer and the Council, and the present proceedings are the third that the farmer has taken action against the Council in relation to damage caused by such inundation. Two previous actions related to inundations in 1996 and 1998 were settled between the parties. In a letter from the Council's general manager dated 10 February 2000 (Ex. 41 in the Local Court) there was an admission by the general manager of the foreseeability of flooding during the winters of 1999, 2000, 2001 or until the existing sewage treatment plant is upgraded. 5 Early in 1997 as a result of ongoing concerns then expressed by the farmer, the Council commenced to build a levee bank within the farmer's property in an endeavour to prevent water and effluent coming onto it. Earthworks were started, a borrow pit was dug and construction of a levee bank commenced towards the southern corner of the farmer's property, but following a complaint (otherwise unidentified) the works ceased. Although an application was made to, and approved by, the Water Resources Commission for the levee bank, the farmer became concerned at what he perceived was the Council's delay and in a well founded concern on his part to protect his property he moved earth that had been extracted from the borrow pit earlier by the Council to construct a levee bank. 6 Following the 1998 inundation of the land, the general manager of the Council wrote to the farmer on 13 April 1999 indicating, inter alia, "Council will carry out the necessary repairs to the bank around your property in order to minimise leakage from Gum Swamp onto your land. This bank will be required for at least the next two winters at which time Council anticipates that a subsidy will be forthcoming from the government for the provision of a new sewerage treatment plant and a management plan for Gum Swamp". 7 No plans or specifications were drawn up for such works, but about this time a Council employee using a 22 tonne 95OG loader carried out some work on the levee bank. He collected soil from a mound on the farmer's land and deposited it on top of the old levee bank, and from time to time he used the front-end loader to shape the levee bank and to compact it. This bank was not properly constructed, the wrong materials were used, and it was not sufficiently compacted, so that it remained possible for water to seep from Gum Swamp onto the farmer's land. 8 Then in November 1999, when the farmer had 8 acres of oats growing in the paddock adjoining the levee bank, approximately 5 acres of such crop was inundated with water from the swamp, his tractor became bogged in the wet ground and he was unable to harvest that part of his crop until well after it had passed harvesting stage and there was no point in doing so. His Worship rejected submissions on behalf of the Council that the inundation of the southern portion of the farmer's paddock was due to the run-off or residue of rains which fell in October or that the inundation was caused or contributed to by the levee bank causing ponding and preventing run-off from the farmer's land. 9 He found (p 12) that Gum Swamp was a swamp in name only (by which I take him to mean a natural swamp collecting natural rain and run-off), but it was in fact the overflow from the sewerage treatment plant. He also found that the southern boundary fence on the farmer's property had been damaged by the inundations and because the levee bank (which he found was the Council's solution) was built inside the farmer's land it was necessary for a fresh fence to be erected to prevent his stock from drinking the toxic and polluted waters of Gum Swamp. 10 Apart from disputing a number of factual issues, the Council claimed immunity pursuant to the Local Government Act 1993, s 733 but the magistrate rejected this defence and awarded the farmer $8,500 for the loss of his crop and $3,400 for the loss of the fence, making a total of $11,900. 11 The Council has appealed, submitting that the magistrate erred in his construction of s 733 and also in his assessment of the farmer's damages. 12 Section 733 So far as material the section is as follows: Exemption from liability---flood liable land and land in coastal zone (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. (2) 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 in the coastal zone being affected by a coastline hazard (as described in a manual referred to in subsection (5) (b)) or the nature or extent of any such hazard, 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 so affected. (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 coastline. The notification must specify where and when copies of the manual may be inspected. … 13 The ambit of the section and of its predecessor, s 582A of the Local Government Act 1919 which was in identical terms, was considered a few years ago by the Court of Appeal in two cases, heard and decided closely together, namely Attrill v Richmond River Shire Council (1995) 38 NSWLR 545 on appeal from (1993) 30 NSWLR 122, and Kempsey Shire Council v Lawrence [1996] A Torts R 63141 ¶81-375, on appeal from Lawrence v Kempsey Shire Council (1995) 87 LGERA 49. 14 In Attrill the plaintiffs owned dairy land which lay between the Richmond River and Main Road 149, and the water drained across their land by way of an existing continuous depression towards the road and through three culverts which had been constructed where the road crossed the depression. Prior to the construction of the road and since, the plaintiff's farm had been the subject of regular flooding by rain and flood water, but the flood waters escaped by overtopping the surface of the road and through the culverts under the road. 15 Following flooding of the Richmond River in 1984, the Council carried out works on the road raising its surface, but it did not carry out any works on the culverts to alter their width or capacity. This work was done for the purposes of the road and not in any way relating to considerations of flooding. Subsequently the river again flooded and the plaintiff claimed that the Council's action in raising the surface of the roadway was to increase the area of their land inundated by floodwaters retained by the roadway when those waters rose to a higher level than the former height of the lowest part of the surface of the road, and that after the floodwaters receded the road in effect acted as a weir as the rate of escape of the collected water was limited to the flow through the three culverts. 16 At first instance Hodgson J, on the trial of separate questions, held that the Council could rely on s 582A as a defence to the plaintiff's case for damages caused by its acts or omissions prior to the commencement of the proceedings, but that the section was not a defence to the plaintiff's claim for injunctions against actions or omissions after the commencement of proceedings which would constitute nuisance under the general law. The plaintiffs appealed against the first part of this ruling but the appeal was dismissed and it was held (at 38 NSWLR 546) that the extent of the immunity contained in the section could not be limited by reference to what was said by the Minister to Parliament in his Second Reading Speech, and was not limited to work done by the Council for flood mitigation or related purposes. 17 In Lawrence the plaintiff's grazing land abutting Christmas Creek had over many years been subject to intermittent flooding before a channel was dug as part of flood mitigation works to facilitate the disposal of effluent from the Council's sewerage treatment works into the Creek. The flood waters contained nutrient enriched sewerage effluent which caused weeds to grow in and on the banks of the Creek, impeding water flows which from time to time built up and caused low level flooding of the plaintiff's land and the nutrient enriched deposits degraded the grazing capacity of the land. The plaintiff sued the Council claiming an injunction and damages for nuisance, and the Council relied on s 733. Young J found that the release of effluent into the creek constituted an actionable nuisance, but made no finding in relation to the construction of the channel; and by reference to the Minister's Second Reading Speech and the provisions of subs (5) of the section, his Honour held (at 87 LGERA 72-3) that the immunity only applied to advice given or work done when a Council was carrying out government policy in relation to flood prone lands, and that it did not apply to all works done which might cause land to be flooded. 18 The Council appealed and, contrary to what was said by the magistrate in the present case, Young J's approach was not upheld in the Court of Appeal; but echoing what the Court had said in Attrill, it was expressly overruled. Clarke JA said at 63149 that a defence under s 733 involves two stages. The first is to identify for what conduct the appellant, in the absence of s 733 would be liable and, the second whether such conduct comes within subsections (1) or (2) of s 733. His Honour identified the action of the Council rendering the appellant liable to damages as the release of the effluent into the Creek in such condition that it increased the nutrients in the water and damaged the respondent's land, and said that under s 733 that conduct would be exempt from liability if (a) it was done in good faith and (b) it related to the likelihood of the land being flooded or the nature or extent of any such flooding. 19 His Honour was prepared to assume that the appellant in that case had acted in good faith but went on: " … the appellant has not shown that the second condition was satisfied. In my opinion it is clear beyond argument that the conduct of the appellant in releasing the effluent was not shown to "relate to the likelihood of land being flooded or the nature or extent of any such flooding". The activity of the appellant which led to the adverse finding related solely to the disposal of the effluent. Nothing in the evidence suggests that it was concerned with, or in any way related to, the likelihood of land being flooded and the section has no application." 20 However, his Honour went on to say that if Young J had found that the construction of the channel constituted an actionable nuisance then it may well be that s 733 would have applied to such activity. 21 On behalf of the farmer it was submitted that the reference in the section to "the likelihood of land being flooded …" referred to flooding or inundation brought about by natural phenomena such as storm or tide, not an inundation brought about by activities such as Council filling up an area until it overflows, and reference was made to the heading to the section, "Flood liable land and land in coastal zone" and s 33 of the Interpretation Act 1987. This point was not considered by the Court of Appeal as in both those cases the land was liable to flooding before the acts complained of: see Lawrence at 87 LGERA 49 (headnote) and Attrill at 548. 22 In Bennett v Water Administration Ministerial Corporation (unreported - 6 June 1991), Rolfe J did make passing reference (at p 9) to the heading and the Parliamentary Debate on the Bill, but held that the reference to "the likelihood of the land being flooded" indicated that the provision applied to all land, whether previously liable to flooding or not. In any event, in Attrill the Court of Appeal found that there was no ambiguity in the language of the section, and its construction cannot be limited in the manner sought. See also Bonnici v Ku-ring-gai Municipal Council [2001] NSWSC 1124 at [205]-[206]. 23 In the present case, the nuisance (or negligence) complained of was twofold, the release of the effluent and the inadequate building of the levee bank. But, unlike in Lawrence where the complaint about the effluent was the quality of it (containing nutrients which caused damage to the plaintiff's land), here the complaint (subject to the toxic nature of the water relevant to the need to replace the fence) was the quantity of the effluent which caused the inundation of the plaintiff's land. Although both cases concerned the discharge of effluent from sewerage works, there is in my view a significant distinction based on the nature of the damage occasioned by the discharge. 24 Both the release of effluent into Gum Swamp and the construction of the levee bank related to the likelihood of the land being flooded and the extent of any such flooding, and accordingly, so far as concerns the inundation of the farmer's oat crop is concerned, the first requirement for the immunity provided for by s 733 was satisfied. 25 The other element referred to in the section and discussed in the Court of Appeal is the requirement for the Council to have acted in good faith. This requirement was considered in relation to the former section 572A, although in a totally different factual situation, in Mid-Density Development Pty Ltd v Rockdale Municipal Council (1993) 81 LGERA 104 at 113-14 where it was held that lack of good faith is not limited to dishonesty, but involves more than honest ineptitude. 26 The concept of good faith has also been considered in various other legal contexts e.g. Roberts v Hopwood [1925] AC 578 at 603-4, Central Estates (Belgravia) Ltd v Woolgar [1972] 1 QB 48 at 55, Mogridge v Clapp [1892] 3 Ch 382. It involves acting honestly without any ulterior motive, and in Lamont v Wyong Shire Council (unreported - Palmer AJ - 13 December 1991) his Honour held that though negligence or gross negligence would not be sufficient to avoid the protection afforded by the section, a lack of honest endeavour to undertake the task for which the Council has the responsibility would be sufficient: pp 6-7. 27 In the present case the learned magistrate found that in topping up the levee bank in April 1999 the Council was not making a genuine effort to remedy the situation, but was merely trying to "fob off" the farmer until additional funds were forthcoming which were expected within about two years, and that was why it did not spend the money to use proper materials and compact the levee bank properly, so that it would not leak. Accordingly the magistrate was not satisfied that the Council had acted in good faith in relation to the levee bank. 28 It was submitted on behalf of the Council that this issue of good faith was not raised at the hearing in the sense that it was not the subject of cross-examination or submission, and this seems to be acknowledged by the learned magistrate at page 12, line 45 of his judgment. 29 Prior to delivering judgment, the defendant had the matter brought back before me, and submitted that the issue of good faith was in fact raised before the magistrate in the court below. The defendant's solicitors provided a transcription of the submissions made to the Local Court Magistrate at Forbes on 18-19 December 2001 and it was submitted that the issue of good faith occurred at: · pages 25.16 - 26.1 and 30.1 - 32.12 (18 December 2001), and · pages 28.20 - 41.6 (19 December 2001). 30 At p 25.16 on18 December, Mr Hill did raise the issue of good faith when he submitted that s 733 requires something bona fide to be done, although it was not in the context of the levy bank. He said: "What was actually happening was they were flooding, the Council … was adding water to … Gum Swamp … They were doing it regularly. They knew what they were doing, and they knew that a consequence of that was that Mr Pace's land would be flooded … This is not an act of negligence that the … statute talks about. There's nothing negligent about … that. That's simply an action that's done, with a consequence … they knew that if they put water into Gum Swamp … if they couldn't discharge it into the Lachlan River, it would flood Mr Pace's property…" 31 The other references to good faith by Mr Hill are not relevant to the present issue. 32 However, once the Council amended its Defence on 15 June 2001 (on the fourth day of the hearing) by adding paragraphs 3(f)(iii) & 5(g) and thus raising the defence of immunity under s 733, the Council assumed the onus of establishing each of the elements of such immunity, which included that it had acted in good faith. Indeed, if the Defence had been pleaded properly, instead of the short hand manner in which it was, the defence would have alleged: that the acts or omissions complained of (a) related to the likelihood of any land being flooded or the nature or extent of any such flooding and (b) were not done or omitted in good faith. 33 The issue of good faith was, therefore before the magistrate, who clearly expressed his conclusions on the issue. 34 There was material before him on which he could reach the conclusion that in relation to the levee bank the Council had not acted in good faith, and there is no appeal from the Local Court in its Civil Claims Division other than on questions of law: Local Court (Civil Claims) Act 1970, s 69(2). 35 On the other hand, the farmer's claim for the fence related not only to the quantity of the water (flooding) but also to the toxic nature of the water in that the damage to the fence had the result that his stock were able to gain access to (and drink) the toxic water of Gum Swamp. Section 733 could not in those circumstances provide immunity to the Council in respect of the pollution or contamination of the water by the discharge of the effluent as opposed to the flooding of the land. 36 Accordingly, although the magistrate was in error in following the reasoning of Young J, it was open to him to hold that the Council did not have the immunity conferred by s 733 because 1) the Council was not acting in good faith in relation to the levee bank and 2) as to the claim for damage to the fence, the farmer's complaint was not as to the quantity of the water, but to the quality of such water. 37 For these reasons the Council's appeal fails in so far as it relates to s 733 of the Local Government Act. 38 The two remaining grounds of appeal in relation to damages can be dealt with briefly. It was submitted that the farmer was under a duty to mitigate his damages, but failed to do so. Whilst the duty to mitigate can be readily acknowledged, to suggest that he should have gone out and purchased other oats to chaff and sell was a matter considered by the learned magistrate and in respect of it he found against the Council on the facts. It was also submitted that his calculation of damages was erroneous but as I understand it he had differrent expert opinions before him and he substantially accepted the one which supported the farmer. This was again a question of fact and his finding was open to him. 39 The other matter complained of relates to the fence and it was submitted that as the fence that had been destroyed was old, the farmer was in effect receiving "new for old" to which he was not entitled. However, the practicalities of the matter, which were well appreciated by his Worship, were that what was required was a fence that would prevent the stock from getting to the polluted waters, and the old fence having been rendered ineffective, anything less than a new fence would also have been ineffective. Whilst one can go and buy a second hand motor vehicle or refrigerator to replace one of similar age that has been lost or damaged, one cannot build an old fence, as the major cost is the cost of labour. 40 For these reasons the appeal is dismissed with costs and the judgment of the Local Court affirmed. Exhibit A to be returned.

Forbes Shire Council v Pace

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