Kira Holdings Pty Ltd v Liverpool City Council [2004] NSWLEC 81 | Case summary

JUDGMENT:

12 - IN THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES 10055 of 2003; 10056 of 2003; 10057 of 2003 Lloyd J 15 March 2004 KIRA HOLDINGS PTY LIMITED ACN 000 585 437 Applicant v LIVERPOOL CITY COUNCIL Respondent JUDGMENT Introduction 1 The applicant appeals pursuant to s 56A of the Land and Environment Court Act 1979 ("the Court Act") against a decision of Commissioner Hoffman, claiming that it was denied procedural fairness. A denial of procedural fairness (or natural justice), when it occurs, may amount to an error of law (Stead v State Government Insurance Commission (1986) 161 CLR 141, Escobar v Spindaleri (1986) 7 NSWLR 51). The commissioner took a view of the applicant's land with representatives of the parties, but failed to disclose to them his observations on the view and then relied upon his observations in his reasons for the decision. He thereby failed to give the applicant the opportunity to call evidence or to make submissions on what the commissioner had observed. 2 The relevant facts may be briefly described. The applicant had appealed against the deemed refusal of Liverpool City Council (hereinafter "the council") for a residential subdivision of land. The adjoining land was occupied by Inghams Enterprises Pty Ltd (hereinafter "Inghams") and upon which stood a large number of chicken sheds, a poultry processing factory, effluent treatment ponds and spray irrigation facilities. Although the chicken sheds were unused, the remaining facilities were operating, being the processing factory, effluent treatment ponds and spray irrigation. The central issue in the hearing before the commissioner was the likely impact of odour from the Inghams' property on a future residential population in the proposed subdivision. In Ingham Enterprises Pty Ltd v Kira Holdings Pty Ltd (1996) 90 LGERA 68 the Court of Appeal had held that this was a relevant consideration. 3 The council's expert witness, Dr P Zib, agreeing with the applicant's expert witness, Mr R J Ormerod, had conceded that the existing situation involving the use of the processing factory, the effluent treatment ponds and the spray irrigation, did not cause any unacceptable odour impact upon the applicant's land. There was some evidence from two nearby residents that they detected odour on some occasions after the use of chicken sheds had ceased. Those residents were unable to identify the source of the odour, although they thought it might have been coming from the ponds. 4 The commissioner took a view, after which the hearing resumed and counsel addressed. The council's junior counsel had conceded that the odour impact arising from the present use of the Inghams' land was not sufficient to warrant refusal of the application. The applicant's junior counsel submitted that since the expert witnesses on each side had agreed that there was not an odour problem, it was not an issue. The commissioner then reserved his decision. 5 In his decision, after reciting the facts and the parties' submissions, the commissioner set out his conclusions in the final two paragraphs, as follows: [129] Overall and it seems to the Court as follows: · the Court of Appeal decision referred to in evidence eschewed the assumption that adverse impact on future residents of any subdivision of Lot 90 could be solved by prosecution of Inghams in operating their rural industry on the adjoining property. · On the view, as the Court was taken up to the north-western boundary adjoining the effluent treatment ponds, there was heavy dank air as one approached from approximately 50 to 75 m away from the boundary. The dank air had a faint smell similar to diarrhoea as Mrs Dixon had said. · Some of the allotments in the proposed Stage 1 and Stage 3 subdivisions would adjoin these effluent ponds. · There was already a 2 m high timber fence along the boundary separating the ponds from Lot 90. So the dank air and faint smell, presumably in normal operation of the ponds, would exist in the backyards and probably within the houses proposed adjoining the boundary. If there was a breakdown, or peak use of the ponds it would presumably be worse. · There was in one position, some missing boards of the fence so that the ponds and the aerator spray heads could be seen. There were baffles on the heads to prevent the spray being directed upwards however it still drifted across the ponds and obviously was absorbed in the nearby air. · The evidence of local residents including the written objections to the proposals, led the Court to the belief that there was borderline incompatibility between the existing rural industry and the existing residential subdivision. · The evidence of the local residents was that it was difficult to tell if the smells came from the effluent ponds or from the poultry processing plant. · The computer modelling carried out by the applicant only analysed the now disused chicken sheds. There was no analysis of the smell generation of the effluent ponds, or the spray irrigation, or the processing plant. · Stage 2 of the proposed subdivision was in the southern corner between the two banks of 6 chicken sheds and the closest to the processing plant. It would seem that stage 2 according to the computer modelling would be the worst affected of any of the three stages. [130] In summary the Court has concluded that since the Court of Appeal decision referred to in evidence, the circumstances have not changed significantly. The rural industry is still operating on Lot 90 and still generating significant smells. The existing chicken sheds were only a part of that operation, and were almost certainly the worst source of smells for any proposed subdivision on Lot 90, and for the existing residential development to the north. The current lack of use of the chicken sheds does not mean that the smells generated by other activities in the rural industry make it compatible with development of Lot 90 for residential use.

The parties' submissions 6 Mr T F Robertson SC, appearing with Mr G B Newport for the applicant, relies upon the following submissions which focus on the second, third and fourth dot points in par [129] of the commissioner's decision. (a) The observations made by the commissioner on the view were central to his rejection of the development application. (b) The case had proceeded on the common assumption that the existing situation did not create any unacceptable odour impact upon the applicant's land. (c) The commissioner did not inform the parties that he intended to use his observations on the view as to odour generated by the effluent treatment ponds as a basis for rejecting the development application when no such case was advanced by either party and the only expert evidence on the issue was that the current position was satisfactory. (d) The commissioner had no evidence that the Inghams' operation caused any odours to be received on the applicant's land, other than what the commissioner smelled and observed on the view. (e) The evidence of the two nearby residents regarding the presence of odour was experienced in a different area, not the area proposed for subdivision. (f) The commissioner had a duty to disclose his observations on the view if he intended to rely upon them. The applicant could then have investigated the source of the odour detected by the commissioner and the reason for it. The applicant could have obtained an affidavit from or issued a subpoena to Inghams to determine whether there had been a breakdown of machinery at the processing plant or whether there was some other reason to explain the presence of the odour, which might have been a single isolated incident. (g) The non-disclosure by the commissioner meant that the applicant was disabled from investigating the source of the odour and, if necessary, from calling any expert evidence relating thereto. (h) A decision-maker whose decision may adversely affect a person's interest must, before making the decision, disclose to the person any facts which are unknown to that person and upon which the decision-maker intends to rely. In the present case, the decision was adverse to the applicant based upon secret evidence not disclosed either on the view or during the hearing. (i) Although s 54 of the Evidence Act 1995 provides that whatever is noticed on a view is evidence, that does not override the rules of procedural fairness. (j) The appeal should be allowed and the orders of the commissioner set aside. The matter should be remitted to a commissioner or commissioners, other than Commissioner Hoffman, or to a judge of the Court, for rehearing and redetermination consistent with the Court's reasons for judgment. Reliance was placed on Baulkham Hills Shire Council v Basemount Pty Ltd (2003) 126 LGERA 339. 7 Mr P J McEwen SC, appearing with Mr A M Pickles for the respondent, relies upon the following relevant submissions. (a) The question of whether the failure of the commissioner to disclose his own olfactory experience of the view works an unfairness must be considered in the context of the issue of odour being a live one, having been raised by two local residents, and whose evidence of the same olfactory experience was already before the Court. (b) None of the authorities support a proposition that the commissioner is bound to report on matters on the view which are experienced visually, orally or in the olfactory senses, where that experience is consistent with and supported by evidence tendered at trial. (c) If there has been a breach of the rule that the case should be decided upon evidence which all parties had an opportunity to question, this should not vitiate the decision. There was more than sufficient other material for the commissioner to come to the decision which he did. Regardless of the evidence of the view or the appellant's opportunity to comment upon it, the commissioner would have reached the same conclusion. (Reference was made to GIO v Bailey (1992) 27 NSWLR 34 per Kirby P at 315 and per Clarke JA at 324.) (d) If the Court concludes that the commissioner was in error in failing to disclose his observations on the view, the proceedings may be remitted to Commissioner Hoffman for determination in conformity with the law ( Baulkham Hills Shire Council v Basemount Pty Limited (2003) 126 LGERA 339 per Tobias JA at 346 and 347). Conclusions 8 Although the commissioner was not bound by the rules of evidence (s 38(2) of the Court Act), s 54 of the Evidence Act 1995 nevertheless states: The Court... may take any reasonable inference from what it sees, hears or otherwise notices during a demonstration, experiment or inspection. 9 Although a judge is not obliged to record his or her observations of a view (Gillett v Murphy [2001] NSWCA 199 per Rolfe AJA, Mason P and Grove AJA concurring), he or she must comply with the principles of procedural fairness. In Kioa v West (1985) 159 CLR 550, Mason J said (at 584): The law has now developed to a point where it may be accepted that there is a common law duty to act fairly, in the sense of according procedural fairness, in the making of administrative decisions which affect rights, interests and legitimate expectations, subject only to the clear manifestation of a contrary statutory intention. 10 Mason J described (at 582) the common law doctrine of natural justice as "a fundamental rule" in the following terms: It is a fundamental rule of the common law doctrine of natural justice expressed in traditional terms that, generally speaking, when an order is to be made which will deprive a person of some right or interest or the legitimate expectation of a benefit, he is entitled to know the case sought to be made against him and to be given an opportunity of replying to it:… 11 In the same case Brennan J also outlined the content of the requirement to afford the parties procedural fairness (at 629): Nevertheless in the ordinary case where no problem of confidentiality arises an opportunity should be given to deal with adverse information that is credible, relevant and significant to the decision to be made. It is not sufficient for the repository of the power to endeavour to shut information of that kind out of his mind and to reach a decision without reference to it. Information of that kind creates a real risk of prejudice, albeit subconscious, and it is unfair to deny a person whose interests are likely to be affected by the decision an opportunity to deal with the information. 12 As I stated in Carstens v Pittwater Council (1999) 111 LGERA 1 at 17, the Evidence Act does not displace the common law obligation of decision-makers to act judicially, as explained by Deane J in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 366. 13 In Carstens v Pittwater City Council, I held (at 17) that the duty to act judicially extends to commissioners of this Court undertaking a view. The duty requires commissioners to disclose, and to provide an opportunity for the parties to comment on, any observation that is to be applied in the determination of the issues before the Court and which is not otherwise in evidence. In other words, commissioners are bound to apply the rules of procedural fairness. 14 The duty of decision-makers undertaking a view is discussed in a number of other judgments, to which I now turn. 15 In Hodge v Williams (1947) 47 SR(NSW) 489 at 492-493, Davidson J stated: Sometimes there may be a very fine line between what is proper and improper in the conduct of a view by a jury or by a Judge when exercising the function of deciding issues of fact. Impressions formed in such circumstances may be of potent value. Inspection is a substitution of the eye for the ear in the reception of evidence. Therefore, where practicable, the courts have always allowed a view where it may assist the tribunal in arriving at a decision… Nevertheless, it is not permissible for the Judge or jury, in the absence of the parties, to gather by extraneous evidence or experiments of their own, anything in the nature of additional evidence, and apply it in the determination of the issue, unless the facts so obtained are ventilated and submitted to the comment of parties or their counsel…. 16 Davidson J repeated this principle in Unsted v Unsted (1947) 47 SR(NSW) 495, stating (at 498): It is not permissible, however, for the Judge to gather anything in the nature of extraneous evidence and apply it in the determination of the issues unless the facts are openly ventilated and exposed to the criticism of the parties. 17 In Szwarcbord v Gallop [2002] ACTSC 46, a statutory board failed to disclose observations from a fact-finding visit, which were then taken into account in making adverse findings against the plaintiffs. Crispin J held (at [40]) that the failure to disclose this material deprived the parties of a "real and effective opportunity to be heard in relation to any such material" and amounted to a breach of the requirements of procedural fairness. 18 The rule governing the judicial use of extra-evidentiary observations was carefully considered in GIO of NSW v Bailey (1992) 27 NSWLR 304. Kirby P said (at 311): If material is used to determine a case which is outside the legal evidence, beyond the permissible exceptions and is not disclosed to the parties, an irregularity will have occurred which may amount to a breach of the requirement of procedural fairness and necessitate the setting aside of the judgment challenged. 19 Kirby P referred to the disclosure of evidence of matters material to the decision as a "stringent rule" (at 311) and also noted (at 310): The High Court of Australia has recently warned against the dangers of judicial silence, where such silence may mislead a party or deprive a party, or its representatives, of the opportunity of responding to matters which may influence the decision or of endeavouring to persuade the decision-maker to a different result: see Vakauta v Kelly (1989) 167 CLR 568 at 571… 20 Similarly Clarke JA noted (at 324) "the fundamental rule that the case should be decided upon the evidence which all parties had an opportunity to question". 21 In Re Minister of Immigration and Multicultural Affairs; Ex parte Applicant S154/2002 [2003] HCA 60, Kirby J considered the extent of a decision-maker's duty to disclose evidence which was adverse to the parties. His Honour stated (at [86]): The extent of the duty to indicate a relevant piece of apparently adverse evidence for comment obviously depends upon the importance that may be attached to that evidence and whether the importance was so obvious that it did not need to be underlined. 22 In Weir Family Supermarket v Liquor Licensing Commission [1992] 1 VR 305 a tribunal did not invite further submissions after it took a view at the request of the parties. Although the majority held there was no breach of natural justice in that instance, the case provides guidance in the application of the rules of procedural fairness to decision-makers engaging in inspections or views. Gobbo J stated (at 348): If the inspection is to resolve conflicting evidence, there is no real purpose served in the court reporting back for further argument as to how it was proposing to use the inspection to resolve this conflict. But it would be otherwise if the court made a finding that had not been canvassed and which was not reasonable to be anticipated having regard to the oral and other evidence given and generally the way in which the parties had conducted the case. 23 The question of whether the commissioner was required to disclose his observations and give the parties an opportunity to respond depends on whether his observations amount to additional and extraneous evidence; or conversely, whether his observations were merely consistent with evidence from one side or the other and which was already before the Court. Mr McEwen SC submitted that the commissioner's observations of the view were merely an acknowledgement of the odours already described in the evidence of the two local residents, Mrs D Dixon and Mr C M Williams. Conversely, Mr Robertson SC contended that the commissioner's observations amounted to distinct and additional material, which was contrary both to the expert evidence of both parties and the issues raised by the parties, giving rise to a duty to apply the rules of procedural fairness. 24 The observations made by the commissioner at the time of the view were additional to the evidence given by the two local residents, Mrs Dixon and Mr Williams, at the hearing. The residents' evidence concerned the odour experienced on adjacent land to the subject land and was not traced to any particular location on the Inghams' property. Accordingly, the commissioner's observations amounted to additional evidence to that which had been adduced in the hearing. 25 The expert witnesses for the applicant and for the council, Dr Zib and Mr Ormerod, had both previously agreed that there was no odour problem on the subject land. The commissioner did not afford the appellants an opportunity to either investigate, rebut or explain his olfactory observations at the development site on the day of the view. Accordingly, the commissioner's decision relied upon a finding that had not been canvassed and which was not reasonable to be anticipated by the applicant having regard to the expert evidence of both Dr Zib and Mr Ormerod. 26 Decision-makers who take part in a view are obliged to comply with the rules of procedural fairness. These rules require decision-makers to disclose to the parties, and afford them an opportunity to respond to, any additional evidence or observations made on the view that may be taken into account in the determination. Where the observations made on the view are consistent with the evidence of one side or the other which is before the Court, such a disclosure is not required. However, where the observations are contrary to the evidence otherwise before the Court, the decision-maker must disclose his or her observations to the parties and allow them the opportunity to investigate and comment on the evidence if they so desire and, if necessary, call further evidence by way of explanation. By applying his olfactory observations of the view to the determination of the issues, the commissioner was under a duty to disclose his observations to the parties to afford them an opportunity to respond. This failure to do so before publishing his decision amounts to a breach of the rules of procedural fairness. Does the breach of procedural fairness vitiate the judgment? 27 Counsel for the respondent council contended that a breach of the rule does not vitiate the judgment if disclosure of the observation would not possibly have altered the outcome. In Stead v State Government Insurance Commission (1986) 161 CLR 141, a case concerning a denial of natural justice relating to the admissibility of evidence, the High Court noted a qualification to the ordering of a new trial. In joint judgement, Mason, Wilson, Brennan, Deane and Dawson JJ said (at 145): The qualification is that an appellate court will not order a new trial if it would inevitably result in the making of the same order as that made by the primary judge at the first trial. An order for a new trial in such a case would be a futility. For this reason not every departure from the rules of natural justice at a trial will entitle the aggrieved party to a new trial. 28 In considering this case in GIO v Bailey, Kirby P said (at 315): The exception allowed by the "important qualification" which the High Court acknowledged in Stead (at 145) was whether the information would "possibly have made any difference". An appellate court will not order a new trial if it would "inevitably result in the making of the same order as that made by the primary judge at the first trial. 29 By failing to disclose his observations to the parties, and affording them an opportunity to respond, the commissioner prevented the applicant and its expert witnesses from investigating the cause of the odour and making further submissions concerning the odour on the subject land. It is possible the result of any such investigation and such submissions may have made a difference to the conclusions of the commissioner. I do not make any comment about the likely success of such further evidence or submissions, merely that another conclusion was a possibility. The failure of the commissioner to act judicially constituted an error of law (Carstens v Pittwater Council at 17). Accordingly, the decision of the commissioner is vitiated and the matter must be remitted for re-determination in conformity with the law. Should the matter be remitted to Commissioner Hoffman? 30 Mr Robertson SC relies upon Baulkham Hills Shire Council v Basemount Pty Limited (2003) 126 LGERA 339 in support of his submission that the matter be referred to a commissioner other than Commissioner Hoffman. In his submission, the commissioner's decision constituted a pre-judgment of such a high order as to necessitate the remittal of the matter to a different commissioner. Mr McEwen SC submitted, however, that the decision in Basemount should be distinguished on its facts. Consequently, the same commissioner could hear the matter again. 31 Mr McEwen SC further submitted that the denial of procedural fairness by the commissioner was not evidence of pre-judgment of such a high order as to preclude the commissioner from reaching a different view following any further expert evidence and further submissions. 32 Mr McEwen SC contended that Basemount is not authority for the proposition that an error of law by a commissioner precludes re-determination of the appeal by the same commissioner. He relies upon the following statement in the judgment of Tobias JA (at 346 and 347): Before concluding, I should make it clear that the present case is being decided on its own facts. It should not be assumed that merely because a Commissioner's decision is set aside on a s 56A appeal on the ground of error of law that it necessarily follows that any re-hearing and re-determination of the appeal should be by a Commissioner other than the Commissioner from whose decision the appeal was brought. There are many errors of law which would not require an exclusionary order under s 56A(2)(b). Thus if a Commissioner has mistaken the law and asked himself or herself the wrong question, there may be no reason why the appeal should not be remitted to that Commissioner to be determined by him or her in accordance with law. … The foregoing reasons are not intended to lay down any principle of general application to s 56A appeals. The appropriateness of an exclusionary order on a remitter will always depend on the facts and circumstances of the particular case. 33 Under s 36 of the Court Act, the listing arrangements are entirely a matter for the Chief Judge. When the Court of Appeal has previously remitted successful appeals to this Court it has generally (although not always) declined to interfere in the internal listing arrangements in the Court (eg. Steedman v Baulkham Hills Shire Council (No. 2) (1993) 31 NSWLR 562 at 576, 80 LGERA 23 at 32). I have noted the competing contentions of the parties and leave the constitution of the court on the re-hearing of the remitted proceedings to the Chief Judge. I hereby certify that the preceding 33 paragraphs are a true copy of the reasons for judgment herein of the Honourable Mr Justice Lloyd.

Kira Holdings Pty Ltd v Liverpool City Council

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