Federal Court of Australia|1993-08-27|Before: Drummond JJ

Mid Density Developments Pty Limited v Rockdale Municipal Council [1993] FCA 408; (1993) 116 ALR 460 Check (27 August 1993)

MID DENSITY DEVELOPMENTS PTY LIMITED v. ROCKDALE MUNICIPAL COUNCIL

Negligence - misstatement - municipal council - issue of certificates - reliance - statutory defence - "good faith".

L. Shaddock and Associates Proprietary Limited v The Council of the City of Parramatta (No. 1) [1981] HCA 59; (1981) 150 CLR 225

San Sebastian Proprietary Limited v Minister Administering The Environmental Planning and Assessment Act 1979 [1986] HCA 68; (1986) 162 CLR 340

and Mr I.M. Jackman

instructed by Dobes and Andrews.

Counsel and solicitors

and Mr M. McCulloch

instructed by Phillips Fox.

The parties bring in Short Minutes of Order to give effect to the Reasons for Judgment delivered today.

Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.

GUMMOW, HILL, DRUMMOND JJ The appellant carries on the business of property development.This includes the acquisition and refurbishment of existing buildings,with or without the construction of new buildings, subdivision and sale. On 19 October 1990, the appellant entered into a written agreement ("the Contract") with DHA Management Pty Ltd ("the vendor"). The Contract was for the purchase by the appellant for $2m. of a property known as 31-39 Henderson Street, Turrella, in the State of New South Wales ("the Land"). The Land is situated within the Municipality of Rockdale. The respondent, the Council of that municipality, is,pursuant to s. 22 of the Local Government Act 1919 (N.S.W.) ("the Local Government Act"), a body corporate with all the powers of bodies corporate, for the purposes of and subject to the provisions of that Act.

2. The primary Judge dismissed the appellant's claims. His Honour's judgment is reported: [1992] FCA 634; (1992) 39 FCR 579.

3. One of the issues on the present appeal to this Court is whether the respondent is a trading corporation so as to attract the operation of s. 52 of the Trade Practices Act 1974 ("the T.P. Act"). Another issue concerns the liability of the respondent to the appellant in negligence, for information supplied in circumstances outlined below.

4. We turn first to consider the claim in negligence.

5. At the time of entry into the Contract, there were buildings on the Land but these were generally in a poor state, save for a large building at the front of the parcel. This had good potential for refurbishment. The appellant proposed to subdivide and sell two smaller lots to adjoining owners to provide a cash flow for the consummation of its proposals for development of the balance of the Land. This involved the refurbishment of certain of the buildings and the construction of other buildings for sale or lease.

6. The Contract was settled on 20 December 1990. On 9 January 1991 the appellant submitted to the respondent an application pursuant to the Environmental Planning and Assessment Act 1979 (N.S.W.) ("the E.P.A. Act") for the development of the Land by the erection thereon of 11 additional factory units. On 24 April 1991 the respondent approved the development application, but subject to a large number of conditions. These included a requirement that the floor level of the proposed factory units be set at a minimum level of 3.35 metres above Australian Height Datum ("AHD").

7. This requirement conformed to a policy which was adopted by the Council on 24 April 1991 in respect of properties (including the Land) within the Wolli Creek catchment area downstream of the Henderson Street weir. Three elements of this flood plan management policy were (i) that the Council adopt a 1 in 50 year flood standard, (ii) that habitable floor levels be set at a minimum of 250mm above the standard flood level, and (iii) that a notation be made on certificates issued under s. 149 of the E.P.A. Act in respect of Henderson Street properties, and that the notation draw the attention of applicants "to the fact that the whole or part of their land is subject to the Council's Flood Management Policy". It will be necessary to refer further to s. 149 of the E.P.A. Act.

8. The terms in which the approval was given in April 1991, in particular that concerned with the floor level in compliance with the newly adopted flood management policy of the respondent, were such that compliance therewith would have made the development unprofitable to the appellant.

9. At the trial it was agreed that, should liability be established, the damages to be awarded to the appellant would be $926,615 plus interest from 26 September 1991.

10. On 7 March 1990, the respondent had issued, on the application of the solicitors for the vendor, a certificate under s. 149 of the E.P.A. Act in respect of the Land. The certificate disclosed that the Land was zoned "Industrial 4 (b)" under the Rockdale Planning Scheme.

11. An annexure to the certificate commenced with the following:

"Further to your application for information under

Section 149 (5) of the Environmental Planning and

Assessment Act, Rockdale Council has resolved to

supply answers to the following questions. It is

regretted that no further information can be

supplied:-"

The 2nd, 3rd, 4th and 5th of these questions were concerned respectively with the susceptibility of the Land to slip or subsidence, and affectation by a Residential District proclamation, a Tree Preservation Order and Heritage listing.

"Has the Council information which would indicate that

the land is subject to the risk of flooding or tidal

inundation?"

This was answered "No". The annexure was signed on behalf of the Town Clerk and immediately above the signature there appeared the sentence:

"The above information has been taken from the

Council's records but Council cannot accept any

responsibility for any omission or inaccuracy."

The significance of this sentence was much debated on the appeal. It would seem that it has been used on certificates issued by other councils in addition to the respondent; see Lismore City Council v Stewart (1989) 18 NSWLR 718 at 727. This case also is authority that despite the payment of the prescribed fee, no contract is formed between the council and the applicant for a s. 149 certificate: supra at 725-6 per Hope JA.

13. On two occasions after exchange of the Contract and before completion, the solicitors for the purchaser, the appellant, themselves applied for and were issued a certificate under s. 149. One was issued on 26 October and the other on 27 November 1990. They related to different portions of the Land. Each contained an annexure which relevantly was in exactly the same terms as the certificate which had been issued to the vendor's solicitors 8 months before.

14. It will be apparent immediately, from what already has been said, that there was a fundamental shift in the position taken by the respondent in dealing with inquiries as to the risk of flooding or tidal inundation, in the period between completion of the contract in December 1990 and the adoption of the flood management policy in April 1991. That policy was implemented, with the result that in response to a further application in June 1991 by the solicitors for the appellant in respect of the Land, the respondent replied to the question whether it had information which would indicate that the Land was subject to the risk of flooding or tidal inundation by stating:

"Council is in possession of the '1986 Wolli Creek and

Bardwell Creek Flood Study' which indicates the land

could be subject to flooding.

Council is in possession of the '1985 Cooks River

Flood Study' published by the NSW Public Works

Department which indicates the land could be subject

to flooding. Council makes no comment as to the

validity of this document.

Refer also to item 11 on the main certificate."

Against item 11 of the main certificate, in answer to the question whether the respondent had by resolution adopted a policy to restrict the development of the subject land by reason of the likelihood of, inter alia, flooding or tidal inundation, the respondent replied:

"The whole or part of this property is affected by

council's Flood Management Policy. Council resolved

on 24 April 1991 to adopt the 2% or 1 in 50 year Flood

Standard for this area. The habitable floor level of

buildings is to be set a minimum of 250mm above the

Standard Flood Level. For further details contact

Council's Engineer's Department."

The 1986 study referred to above was described in the evidence as the "Wong Study" after its author, and the 1985 study was described as the "PWD Study".

15. The Wolli Creek is a subsidiary of the Cooks River, which enters Botany Bay. The Land dropped away from Henderson Street towards Wolli Creek, although it did not actually abut that creek. The primary Judge found that the Cooks River and the Wolli Creek can flood in storms. The Cooks River and its subsidiaries run through several municipalities. The bank of the Wolli Creek adjacent to the Land is in the respondent's municipality. The land on the other bank is in the Canterbury Municipality; this bank is about 1 metre below that on the Rockdale side. On this lower side, there is a "flood plain" which is a reserve. The Canterbury Municipal Council had, on 1 February 1990, adopted a flood management policy incorporating a 1 in 50 year flood standard for the Wolli Creek.

16. The question of flooding has been a concern of the municipalities in the area. In that regard, the primary Judge found as follows:

"In 1983, a number of municipalities, including

Rockdale, met to consider the question of

flooding in Cooks River and its subsidiaries. A

task force was established which has not yet

come up with firm recommendations relating to

the whole of the area. In 1985, however, the

Public Works Department published a study of

flood levels for Cooks River and its

subsidiaries. That study (the PWD Study) laid

down heights above AHD at which, throughout

Cooks River and its subsidiaries, flooding might

be expected. The flood levels were set out for

one in 10 year floods, one in 50 year floods and

one in 100 year floods. Of these, the storms

expected once in 10 years are of least severity

and those expected once in 100 years are the

most severe. . . .

From 1985, when the (PWD) Study was issued, it

was always possible for an officer of Rockdale

to compare the heights of land set out in maps

and records held by Rockdale with the flood

levels set out in the (PWD) Study and thereby to

determine whether, in accordance with the (PWD)

Study, there would be a risk of flooding. A

contour plan with heights of the area in and

around Henderson Street was available throughout

1990 . . ."

His Honour found that during 1989 and 1990 the PWD Study was used for determining the conditions to place upon several developments in the area of the Rockdale Municipality, towards the mouth of the Cooks River, which were thought to be at risk of flooding. His Honour also dealt with the Wong Study. This considered the Wolli Creek upstream from the end of Henderson Street, close to the subject land, to areas further south, but stopped short of the subject land. The primary Judge held that the Wong Study confirmed that "the means of establishing flooding risks were well understood, even within the Engineer's Department of Rockdale". The further finding was made:

"In any event, in the middle of 1990, if an

officer of Rockdale had compared the levels set

out in diagrams in the (PWD) Study with the

contour maps or other documents which disclosed

heights in relation to the subject land which

were in Rockdale's possession, the officer would

have observed that the land was subject to a

risk of flooding. However, no officer of

Rockdale did so."

17. It is necessary now to turn to the New South Wales legislative framework, which had a vital impact on the outcome of the trial. We begin with s. 149 of the E.P.A. Act. This states:

"149 (1) A person may, on payment of the prescribed fee,

apply to a council for a certificate under this

section with respect to any land within the area

of the council.

(2) On application made to it under subsection (1),

the council shall, as soon as practicable, issue

a certificate specifying such matters relating

to the land to which the certificate relates as

may be prescribed (whether arising under or

connected with this or any other Act or

otherwise).

(3) . . .

(4) The regulations may provide that information to

be furnished in a certificate under subsection

(2) shall be set out in the prescribed form and

manner.

(5) A council may, in a certificate under subsection

(2), include advice on such other relevant

matters affecting the land of which it may be

aware.

(6) A council shall not incur any liability in

respect of any advice provided in good faith

pursuant to subsection (5).

(7) For the purpose of any proceedings for an

offence against this Act or the regulations

which may be taken against a person who has

obtained a certificate under this section or who

might reasonably be expected to rely on that

certificate, that certificate shall, in favour

of that person, be conclusively presumed to be

true and correct."

(Emphasis supplied)

Section 149 was enacted in the interval between the decision of the New South Wales Court of Appeal (favourable to the council) and the successful appeal, in L. Shaddock and Associates Proprietary Limited v The Council of the City of Parramatta (No. 1) [1981] HCA 59; (1981) 150 CLR 225; see Lismore City Council v Stewart supra at 723.

18. Section 582A was inserted in the Local Government Act by the Local Government (Flood Liable Land) Amendment Act 1985 ("the 1985 Act"). It deals with the question of liability in a fashion which, it was not suggested in argument, was different in any relevant respect to that in the E.P.A. Act. The section states:

"582A (1) A council shall 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) Without limiting the generality of

subsection (1), that subsection applies 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, under the

Environmental Planning and

Assessment Act, 1979;

(b) the granting or refusal of an

application for the erection of a

building under Part XI or for the

subdivision of land under Part XII;

(c) the imposition of any condition in

relation to an application referred

to in paragraph (a) or (b);

(d) advice furnished in a certificate

under section 149 of the

Environmental Planning and

Assessment Act, 1979;

(e) the carrying out of flood mitigation

works; and

(f) any other thing done or omitted to

be done in the exercise of a

council's powers, authorities,

duties or functions under this or

any other Act.

(3) Without limiting any other circumstances

in which a council may have acted in good

faith, a council shall, unless the

contrary is proved, be deemed to have

acted in good faith for the purposes of

subsection (1) 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 published under

subsection (4) at that time.

(4) For the purposes of this section, the

Minister for Planning and Environment may,

from time to time, publish in the Gazette

a manual relating to the development of

flood liable land.

(5) This section applies to and in respect of-

(a) the Crown, a statutory body

representing the Crown and a public

or local authority constituted by or

under any Act;

(b) a member or servant of a council or

of any such body or authority;

(c) a public servant; and

(d) a person acting under the direction

of a council or of the Crown or any

such body or authority;

in the same way as it applies to and in

respect of a council.

(6) This section applies to and in respect of

any advice furnished or thing done or

omitted to be done before the commencement

of this section, as well as to and in

respect of any advice furnished or thing

done or omitted to be done after the

commencement of this section."

(Emphasis supplied)

No reliance was sought to be placed by the respondent upon the exculpatory provision of sub-s. 582A (3). It was not suggested that the advice was furnished substantially in accordance with any principles contained in any manual published under sub-s. 582A (4).

19. In the second reading speech in the Legislative Assembly on a parcel of 5 bills, one of which became the 1985 Act, the Minister for Planning and Environment said that one of the principal purposes of the bills was to indemnify councils and other public authorities and their staff "from liability from decisions taken in respect of flood liable land, provided that such decisions are made in accordance with government policy at the time". The Minister continued (Hansard, 16 April 1985, p 6025):

"In bringing forward the indemnification

provisions, the Government has accepted very

strong representations by the local government

and shires associations and a number of

individual councils which claim that the

existing law is inadequate to protect them from

claims for damages arising from planning and

development decisions and the issue of advice

relating to flood liable land, even though they

may have acted in accordance with the relevant

government policy and in good faith. Because of

these concerns and in the interests of

protecting their ratepayers against possible

costly litigation and damage payments, a number

of councils adopt an unnecessarily conservative

approach that sometimes leads to unnecessary

refusal of development applications or the

application of unnecessary and costly

development and building conditions. This, of

course, is unacceptable to the Government, which

is committed to stimulating and encouraging

economic development in the interests of job

creation and the improvement of living standards.

Nevertheless, the Government is aware of the

need to protect the rights of individuals in

such circumstances and, in addressing the

indemnification issue, understands the

importance of striking an appropriate balance

between the rights of the individual on the one

hand, and the problems being confronted by

councils and other public authorities on the

other. Accordingly, the proposed amendment to

the Local Government Act has been drafted in a

way that requires those protected to act in good

faith, and a measure of this good faith will be

that they have acted substantially in accordance

with the Government's policy at the time, that

is the measure of protection provided is limited

by compliance with State requirements or, in

other words, responsible actions will be

protected and irresponsible actions will not be protected. . . ."

20. In 1990 the officer of the respondent who had the particular responsibility of completing s. 149 certificates in relation to flooding was Mr C.S. Mable. He had been employed by the respondent in various positions since about 1977. Mr Mable held the degree of Bachelor of Engineering (Civil). In 1987 he took up the particular duties to which we have referred. In his evidence Mr Mable said that he then made it his business to familiarise himself with information held by the Council which dealt with the risk of flooding within the Municipality. When asked what that information was, he replied:

"It was based on some records Council had on

flooding incidence that had occurred which

mainly centred around the Sans Souci area, we

had very little information apart from that

area, that I was aware of."

21. From his own knowledge, Mr Mable was aware of flooding of Wolli Creek in 1978, 1983 and 1984. The flooding had been on the lower, or Canterbury, side of the creek. There had not been flooding on the Rockdale side. Mr Mable said that when he completed the answers to the certificates in question in this litigation, he referred to no files or other compendia of data. He relied upon his general knowledge. This led him to the firm conclusion that no property in Henderson Street was subject to flooding.

"How he could undertake this task without

familiarising himself with every detail of the

(PWD) Study and of the (Wong) Study is very

difficult to comprehend. One would have

expected a qualified professional to have read

each of these studies with care. Mr Mable has

the qualification of Bachelor of Engineering

(Civil) and is also qualified as a Local

Government Engineer. For such a person not to

read and give close attention to the two flood

studies, was, in my opinion, negligent, and the

negligence ultimately led to the (appellant's) loss."

Earlier, his Honour had formulated the case of the appellant as one that "Mr Mable answered question (a) in the 1990 s. 149 certificates negligently and without due care as to whether they were true or false".

23. However, the appellant sued not the negligent servant but his employer, the appellant. Counsel for the appellant submitted that when dealing with the negligence issue his Honour focussed attention upon the inadequacies of Mr Mable in the performance by him of the tasks given him by the appellant, and that the primary Judge thereby was encouraged into error in his treatment of the statutory issue concerned with "good faith". It was on this point that the primary Judge decided the case adversely to the appellant.

24. His Honour found that the statutory concept of "good faith" in the performance of the functions in question, included two criteria. The first was that the act be done bona fide and not maliciously or to achieve an ulterior purpose. The second was that there be "a genuine attempt to perform the function correctly, that is to say that the function should not be performed without caring whether or not it be properly performed". After considering a passage in the speech of Lord Sumner in Roberts v Hopwood (1925) AC 578 at 603-4, where his Lordship was considering what he described as "an implied qualification of good faith" in s. 62 of the Metropolis Management Act 1855 (U.K.) his Honour concluded:

"In my opinion, Mr Mable completed the s. 149

certificates as he thought appropriate. He

turned his conscious mind to the task and

answered the questions as he thought proper. He

was, however, negligent, in that he failed to

give any proper attention to the (PWD) Study and

the (Wong) Study. In these circumstances, it

seems to me that the s. 149 certificates were

given in good faith."

(Emphasis supplied)

25. Counsel for the appellant emphasised that, on their face, the certificates were issued by the respondent under the hand of the Town Clerk, and that in response to the question whether the Council had information which would indicate that the Land was subject to the risk of flooding or tidal inundation, the Council, stating that the information had been taken from its records, replied "No". It was true that the statement also said that the respondent "cannot accept any responsibility for any omission or inaccuracy". Nevertheless, the issue of negligence and the applicability of the statutory exculpation were to be determined by looking at what the respondent had done or failed to do. The question of "good faith" was not to be determined simply by an evaluation of the conduct of Mr Mable.

26. The appellant's submission was that the Council cannot have been acting in good faith in issuing a certificate under the signature of the Town Clerk said to be based on the records of the Council if the very records which would supply the relevant information had been consciously ignored. This did not involve a challenge to the primary Judge's finding that Mr Mable honestly believed that what he was doing was, for whatever reason, the right thing. Rather, the submission was that, as a matter of objective fact, if one put together several matters (viz. the knowledge of the Council that the records existed, the lack of any proper system of dealing with requests for information of the type in question, and, as a conscious decision, the execution of the certificates without reference to those records) the result was irresponsible conduct by the respondent and an absence of good faith in the statutory sense.

27. "Good faith" in some contexts identifies an actual state of mind, irrespective of the quality or character of its inducing causes; something will be done or omitted in good faith if the party was honest, albeit careless. See, for example, Smith v Morrison (1974) 1 WLR 659. (Abstinence from inquiry which amounts to a wilful shutting of the eyes may be a circumstance from which dishonesty may be inferred: Jones v Gordon (1877) 2 App Cas 616 at 625, The English and Scottish Mercantile Investment Company, Limited v Brunton (1892) 2 QB 700 at 707-8, The Zamora No. 2 (1921) 1 AC 801 at 803, 812.) On the other hand, "good faith" may require that exercise of caution and diligence to be expected of an honest person of ordinary prudence. This, counsel urged, was what was required by the present statutory context. The appellant then submitted that there was a plain absence of good faith in this sense on the part of the respondent.

28. In Siano v Helvering 13 F Supp 776 at 780 (1936), Clark J said that the words "good faith" or their Latin equivalent appear frequently in the law and are capable of, and have received, what he described as "two divergent meanings". The first was the broad or subjective view which defines them as describing an actual state of mind, irrespective of its producing causes. The other construed the words objectively by the introduction of such concepts as an absence of reasonable caution and diligence. In the instant case, the Court had under consideration a regulation promulgated by the Commissioner of Internal Revenue which used the expression "failure in good faith to observe and comply with the requirements of all Internal Revenue and other laws relating to any operations under his permit". The appellant asserted that he had never heard of a particular tax which he had failed to pay. The Court said (at 781):

"The government could and perhaps for the

completeness of the record should have

introduced evidence of the fame (or notoriety,

as we said before) of the tax. Even in the

absence of such evidence, we think the permitee

was under a duty to make inquiry. We place that

upon two factors: The nature of taxes, and the

lapse of time. Three years and a tax universal

to his trade call, in our opinion, for some

curiosity. No attempt to satisfy that curiosity

smacks to us too much of the ostrich and

proportionately too little of good faith."

See also Lucas v Dicker (1880) 6 QBD 84 at 88, In re Dalton (A Bankrupt) (1963) Ch 336 at 354-5, and Rumsey v R. (1984) 5 WWR 585 at 592-3. These cases illustrate that, in a particular statutory context, a criterion of "good faith" may go beyond personal honesty and the absence of malice, and may require some other quality of the state of mind or knowledge of the relevant actor. An example in this Court is Wilde v Spratt (1986) 13 FCR 284 at 292, where para. 135 (4) (b) of the Bankruptcy Act 1966 was in issue; cf Official Trustee in Bankruptcy v Mitchell [1992] FCA 521; (1992) 38 FCR 364 at 371.

29. The concept of "good faith" as understood in various fields of the general law provides further examples. For example, an administrative decision may involve an improper exercise of power on the footing that it is unreasonable in the Wednesbury sense, without there being mala fides. Likewise, the whole doctrine of constructive notice which was developed in equity as appendant to the bona fide purchaser principle, operates by reference to what would have come to the knowledge of the purchaser if he had conducted his activities in the ordinary way; see Consul Development Pty Limited v DPC Estates Pty Limited [1975] HCA 8; (1975) 132 CLR 373 at 412-3.

30. In the present case, it will be wrong to assume that when used in the relevant legislation the phrase "anything done or omitted to be done in good faith" (in sub-s. 582A (1) of the Local Government Act) and "in respect of any advice provided in good faith" (in sub-s. 149 (6) of the E.P.A. Act) operate to leave the respondent liable only in respect of dishonesty.

31. These provisions, on their face, are designed to strike a balance between (i) the interests of the authority which is funded by public not private funds and which, pursuant to statute, provides the information, and (ii) the interests of the recipient of the information and others reasonably acting upon it where, in the ordinary course, those persons may be expected to incur substantial liability on the faith of what is disclosed by the authority. Is the individual interest to yield to what might be called the wider public interest unless the conduct of the authority may be stigmatised as dishonest? In our view, the statutes do not bring about that result.

32. A council is reasonably to be expected to respond to an application for information of a character of the obvious significance of that sought here by recourse to its records. If the council represents that it has done so ("The above information has been taken from the Council's Records . . .") then it still may have been acting in "good faith" if a real attempt has been made, even though an error was made in the inspection or the results of the inspection were inaccurately represented in the certificate which is issued. It is unnecessary to decide that question on the present appeal.

33. However, in our view, in the circumstances of the present case, a party in the position of the respondent cannot be said to be acting in good faith within the meaning of the E.P.A. Act and the 1985 Act, if it issues s. 149 certificates where no real attempt has been made to have recourse to the vital documentary information available to the council, and the council has no proper system to deal with requests for information of the type in question. Indeed, in the present case, as counsel for the appellant emphasised, the council officer whose responsibility it was to deal with the request for information consciously ignored the very records which would have supplied it.

34. The statutory concept of "good faith" with which the legislation in this case is concerned calls for more than honest ineptitude. There must be a real attempt by the authority to answer the request for information at least by recourse to the materials available to the authority. In this case there was a failure to meet that standard.

35. Accordingly, we would reach a different conclusion on this branch of the case to that of the primary Judge.

36. In addition to resisting the submissions for the appellant, counsel for the respondent, by notice of contention, submitted that the decision of the primary Judge should be affirmed on the footing that (i) there was no duty of care, or, alternatively, (ii) no reasonable reliance. In particular, he contended that, on the evidence, the sentence at the foot of the s. 149 certificates was understood by the appellant as an attempt by the respondent to disclaim liability for any inaccuracy or omission in the information furnished. Counsel submitted that from the words "but Council cannot accept any responsibility for any omission or inaccuracy" it was clear that the respondent was endeavouring to absolve itself of responsibility in relation to the information furnished in the certificate and was, accordingly, not assuming responsibility, within the meaning of the authorities.

37. Mr Mable approached his tasks in relation to the issue of s.149 certificates on the footing that they were all required for property transactions. In particular, he knew that purchasers would be likely to rely upon the answers given to the various questions in the certificates. His evidence was that he sought accordingly to make the answers accurate, with the intention that purchasers should rely on them as being accurate.

38. The relevant s. 149 certificate issued before entry by the appellant into the Contract on 19 October 1990, that is to say the certificate issued on 7 March 1990, had been obtained from the respondent on application by the solicitors for the vendor. The two certificates issued between exchange and completion were sought by the solicitors for the purchaser.

39. But, in our view, even as regards the first certificate it is no answer to the submission that a duty of care to the appellant arose on the part of the respondent, that the certificate was not issued directly to the appellant. The relevant class of persons to be considered in the present situation included potential purchasers of the property the subject of the certificate. It is sufficient if the misstatement is made to members of a limited class of persons, including the plaintiff, with the intention that those persons should rely thereon in deciding whether to commit themselves financially; see San Sebastian Proprietary Limited v Minister Administering The Environmental Planning and Assessment Act 1979 [1986] HCA 68; (1986) 162 CLR 340 at 357, per Gibbs CJ, Mason, Wilson, Dawson JJ.

40. Mr Heman is Managing Director of the appellant. He said in his affidavit that in completing the purchase of the Land his company relied on all three s. 149 certificates, examined by its solicitor. The appellant did so in forming the view that the Land could be developed according to its plans and without any risk of the respondent imposing any onerous building conditions because of a risk of flooding. Mr Heman said that the appellant would not have completed the purchase had he and his fellow directors believed that the Land was prone to any risk of flooding. He was cross-examined. Counsel for the respondent put to him the concluding sentence which appeared immediately above the signature to the relevant annexure to the s. 149 certificates. Mr Heman said that he understood the meaning of the sentence, but that he did not think it "had effect". In the course of previous dealings which he had had with other councils Mr Heman had asked the appellant's solicitor whether such statements had any practical meaning. He had been told that generally "lots of bodies, statutory or otherwise, append that statement but that didn't exonerate them from any responsibility". He was later asked:

"And if that were effective in law you would

understand, would you not, when you read this

document, that no reliance could be placed upon

it by you? - If there was another source of

obtaining the information I may not have relied

on it but the only source of obtaining

information is council, so one is forced to rely on it."

Mr Heman was asked further questions as to his reliance upon the advice of his solicitor, Mr Andrews. There was the following exchange:

"What I am putting to you is this; that if Mr

Andrews had not advised you that the disclaimer

at the bottom of the page was of no effect it

would have been your understanding that you

could not rely on what the council was saying in

the certificate, that is correct, is it not? -

Well, if I may be allowed to sort of enlarge;

there is - in my long history of doing

developments I have had to rely on what

council - councils pass on as information and in general

I have found them reliable. If we deny the

information given to us by council we find

ourselves in the dark most of the time and

therefore we do have to rely on them seeing

they're mainly the one and only source of

information we can rely on."

41. The circumstance that the relevant information provider is in a better position than anyone else to know of the accuracy of the information provided may, as this evidence indicates, be significant in considering the question of reasonable reliance. In a case such as the present, it also is important in considering the anterior question of the existence of a duty of care; see Shaddock supra at 235-6, 242, 252-3, 256.

42. In our view, the appellant made out its case as to the existence of a duty of care and as to reasonable reliance.

43. Further, we would not accept the submission for the respondent that the sentence at the foot of the annexure operated as a disclaimer of liability or rendered the appellant's reliance on the certificates unreasonable. The statement "The above information has been taken from the Council's records but Council cannot accept any responsibility for any omission or inaccuracy", first identifies the system or procedure which has been followed in preparing the certificate. There is an assurance that the information set out has been taken from the records of the Council. The second half of the sentence states a caution or reservation which is to be understood by reference to the first half of the sentence. The "omission or inaccuracy", in respect of which the respondent cannot accept any responsibility, is an omission or inaccuracy in the process involved in taking the above information from its records.

44. The complaint in the present case is that there was a complete failure to have regard to the most significant portion of the Council's records which bore upon the subject matter of the inquiry. The information supplied, simply, was not taken from the records of the Council. It was taken essentially from Mr Mable's folk memory of events at Wolli Creek. The misstatement in the certificates thus arose because the officer of the respondent charged by it with the task of answering the question asked by the applicants for the certificates, failed to follow the procedure, stated on the certificates, of taking the information from the records of the respondent. It follows, in our view, that the concluding portion of the sentence in question had no relevant operation adverse to the case put by the appellant.

45. For these reasons, the appellant should have succeeded below, and the appeal should be allowed. The respondent should pay the costs of the appeal and of the trial. Judgment should be entered for a sum which represents $926,615 plus interest from 26 September 1991. The appeal should be stood over for a short time for the bringing in of short minutes to give effect to this result.

46. It will be apparent from the foregoing that it has been unnecessary to consider the alternative ground advanced by the appellant, seeking to found liability of the respondent in ss. 52 and 82 of the T.P. Act.

Planning and Assessment Act 1979

Local Government Act 1919

Local Government (Flood Liable Land) Amendment Act 1985

Metropolis Management Act 1855

Mid Density Developments Pty Limited v Rockdale Municipal Council [1993] FCA 408;

At a glance

Court

Decision date

Before

Source

Judgment (82 paragraphs)

Mid Density Developments Pty Limited v Rockdale Municipal Council [1993] FCA 408; (1993) 116 ALR 460 Check (27 August 1993)

Parties

Legislation Cited (5)

Cases Cited (8)