Randwick City Council v T & H Fatouros Pty Ltd

CATCHWORDS: TORTS - negligence - duty of care - statutory powers of local authority - construction of stairway - whether appellant owed the respondent a duty to take reasonable care in the discharge of its statutory powers and functions to prevent the respondent from sustaining economic loss, being the respondent's liability in negligence for personal injuries suffered by a third party when he injured himself on an external stairway attached to a building owned by the respondent - respondent claimed from the appellant the damages it had agreed to pay the third party. - LOCAL GOVERNMENT - construction of stairway - approval of council - inspection of stairway by council - issue of fire safety orders and notices to the respondent - whether the appellant took on supervision of the entire building with respect to fire safety based on cl 80C(3) of the Environmental Planning and Assessment Regulation 1994 (NSW) - whether this clause required the appellant to include, in a fire safety schedule (issued under cl 80C(1)) to a fire safety order made under s 121B of the Environmental Planning and Assessment Act 1979 (NSW), fire safety measures relating to stairways - statutory fire safety measures under cl 80A. D

Building Code of Australia, cll D1.8, D2.16 Environmental Planning and Assessment Act 1979 (NSW), ss 121B, 121H, 126 Environmental Planning and Assessment Amendment Regulation 1998 (NSW) LEGISLATION CITED: Environmental Planning and Assessment Regulation 1994 (NSW), cll 80, 80A, 80C(1), 80C(3) Law Reform (Miscellaneous Provisions) Act 1946 (NSW), s 5 Local Government (Orders) Regulation 1993 (NSW), cll 2, 3, 4, 6(1), 6(2) Local Government Act 1993 (NSW), ss 124, 132, 628 Suitors' Fund Act 1951 (NSW)

Amaca Pty Ltd v The State of New South Wales (2004) 132 LGERA 309 Brodie v Singleton Shire Council (2001) 206 CLR 512 Caltex Oil (Australia) Pty Ltd v The Dredge 'Willemstad' (1976) 136 CLR 529 Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 CASES CITED: Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540 Perre v Apand Pty Ltd (1999) 198 CLR 180 Pyrenees Shire Council v Day (1988) 192 CLR 330 Sutherland Shire Council v Heyman (1985) 157 CLR 424 T & H Fatouros Pty Ltd v Randwick City Council (2005) 142 LGERA 271 Woolcock Street Investments v CDG Pty Ltd (2004) 216 CLR 515

PARTIES: Randwick City Council (Appellant) T & H Fatouros Pty Ltd (Respondent)

COUNSEL: P W Taylor SC/J Castaldi (Appellant) D G T Nock SC/M Vesper (Respondent)

SOLICITORS: Moray & Agnew Newcastle (Appellant) Henry Davis York (Respondent)

LOWER COURT JURISDICTION: Supreme Court - Common Law Division

LOWER COURT DATE OF DECISION: 01/09/05, 25/05/06

LOWER COURT MEDIUM NEUTRAL CITATION: [2005] NSWSC 874; [2006] NSWSC 483

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40372/06 SC 20370/02

GILES JA IPP JA TOBIAS JA

Friday 20 July 2007 RANDWICK CITY COUNCIL v T & H FATOUROS PTY LIMITED Judgment 1 GILES JA: I agree with Ipp JA. 2 IPP JA:

The duty of care issue 3 This appeal turns on whether the appellant ("the Council") owed the respondent (T & H Fatouros Pty Limited, referred to as "Fatouros") a duty to take reasonable care "in the discharge of its statutory powers and functions" to prevent Fatouros from sustaining economic loss. 4 The economic loss in question was Fatouros' liability in negligence for the personal injuries suffered by Mr Mark Ward when he fell through railings on an external stairway or fire escape attached to a building in Coogee that Fatouros owned. Mr Ward claimed damages from Fatouros for the injuries he so suffered. Fatouros settled Mr Ward's action (on a basis conceded by the Council to be reasonable) and claimed from the Council the damages it had agreed to pay Mr Ward. 5 The trial judge, Simpson J, upheld Fatouros' claim and granted judgment in its favour: See T & H Fatouros Pty Ltd v Randwick City Council (2005) 142 LGERA 271. The Council appeals against this judgment. 6 Fatouros' claim is not for an indemnity or contribution from the Council on the ground that the latter was a joint tortfeasor in regard to the damages sustained by Mr Ward. Fatouros does not claim under s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).

Mr Ward's fall and its cause 7 On 12 December 2000, Mr Ward was sleeping in a room on the top floor of a three-storey section of a building that Fatouros owned. A thunderstorm occurred, he awoke and walked from his room onto the external stairway of the building. The rain had caused the stairway to become wet. Mr Ward went down the stairs to the first landing, intending to walk down the next flight. His foot slipped on the slippery wet surface and he slid through a large gap in the balustrade. He fell to the ground below, fractured his skull and became paraplegic. 8 Simpson J described the external stairway as follows (at 275): "[T]he doorway on the top floor opens directly onto a short flight of steps which descends to a landing. A further set of steps, travelling in the opposite direction, descends to a series of quarter- landings which take the user to a second platform from which a third set of steps descends to the lower level. These quarter- landings appear to have the effect of taking the stairway full circle, so that the third flight of steps is directly under the second, and travelling in the same direction. The surrounding structures of the stairway appear to be very simple. There are, on each side of the stairway, two vertical support pillars to which the stairs and landings are attached. The landings and the stairs themselves are surrounded by a framework, apparently made of steel tubing. On each side are two corner posts, joined by two fairly small-diameter pipes or tubes. These form a simple balustrade, with a handrail at the top, apparently at what would be about waist to shoulder height, and a second horizontal pipe or tube half way between the handrail and the landing or stairs. Otherwise, the landings and the stairs are completely open. There is nothing, such as mesh or other filling, to prevent a person or an object from falling through the open face." 9 Mr Hugh Cowling, a civil engineer, testified that the stairway was "far too steep for comfort and safety". All except one of the "tread goings" on the stairway were too narrow. There was a lack of constancy in the dimensions of the goings and risers. Conditions for users of the stairs were unsafe and unpredictable. There were other serious defects. Each of the riser openings was too large. The surface material was not of an approved type and did not have a non-slip finish. The variable dimensions of the stepped quarter-landings were unsafe. The balustrades were too low and the top rails did not consistently follow the overall gradient of the stairway. The openings in the balustrade through which Mr Ward fell measured 640 millimetres in height and 890 millimetres in width. The Building Code of Australia ("the BCA") required that, in stairways of this kind, there should not be an opening within a balustrade that permitted a 125-millimetre sphere to pass through. The openings in the balustrade of the stairway in question greatly and obviously departed from the BCA. 10 Mr Cowling expressed the unchallenged views that the stairway "did not even come close to complying with essential requirements" and its defects contributed to Mr Ward's fall.

The relevant legislation 11 Prior to Mr Ward's injuries, the Council, acting under discretionary statutory powers, sent Fatouros, in connection with the building, three notices of an intention to issue a fire safety order and three fire safety orders. Fatouros submits that this conduct on the part of the Council materially contributed to the existence of the duty of care that the judge found. It is, therefore, necessary to refer to the legislative provisions under which the Council so acted and other legislative provisions that, according to the parties, are relevant to the duty of care issue. 12 Two such notices and one such order were issued by the Council under the Local Government Act 1993 ("the LGA"). Section 132 of the LGA requires a Council, before giving a fire safety order, to give notice of the intended recipient of its intention to do so. Section 124 provides: "A Council may order a person to do or to refrain from doing a thing specified in Column 1 of the following Table if the circumstances specified opposite it in Column 2 of the Table exist and the person comes within the description opposite it in Column 3 of the Table."

The "Table" is headed: " Orders Orders requiring or prohibiting the doing of things to or on premises."

Order 4 is as follows: To do what? In what circumstances? To whom? 4. To do or refrain from doing such things as are specified in the order so as to ensure or promote adequate fire safety or fire safety awareness. (a) Provisions for fire safety or fire safety awareness are not adequate to prevent fire, suppress fire or prevent the spread of fire or ensure or promote the safety of persons in the event of fire. Owner of premises or, in the case of a place of shared accommodation, the owner or manager. (b) Maintenance or use of the premises constitutes a significant fire hazard.

13 By s 628 of the LGA, a failure to comply with an order issued under s 124 renders the person concerned guilty of an offence and liable to a penalty. 14 Two notices of intention to give a fire safety order and one fire safety order were given under the Environmental Planning and Assessment Act 1979 (NSW) ("the EPA Act"). 15 Section 121H of the EPA Act requires notice to be given of an intention to give a fire safety order under that Act. Order six in 121B provides that a council "may" order an owner of premises "to do or refrain from doing such things as are specified in the order so as to ensure or promote adequate fire safety or fire safety awareness". By s 126 of the EPA Act, a failure to comply with an order issued under s 121B renders the person concerned guilty of an offence and liable to a penalty. 16 The Environmental Planning and Assessment Amendment Regulation 1998 (NSW), which amended the Environmental Planning and Assessment Regulation 1994 (NSW) ("the EPA Regulation") by inserting a new Part 7B, came into force on 1 July 1998. Clause 80C(1) of the EPA Regulation requires a council, when giving a fire safety order under the EPA Act in relation to building premises, to issue a schedule (a fire safety schedule) "specifying the fire safety measures (both current and proposed) that should be implemented in the building premises". Clause 80C(3) provides: "A fire safety schedule: (a) must deal with the whole of the building, not merely the part of the building to which the development consent, construction certificate or fire safety order relates, and (b) must include: (i) such of the fire safety measures currently implemented in the building premises, and (ii) such of the fire safety measures proposed or required to be implemented in the building premises, as are statutory fire safety measures, and (c) must distinguish between: (i) the fire safety measures currently implemented in the building premises, and (ii) the fire safety measures proposed or required to be implemented in the building premises, and (d) must specify the minimum standard of performance for each fire safety measure included in the schedule." 17 Clause 80 defines a fire safety measure as "any measure (including any item of equipment, form of construction or fire safety strategy) that is, or is proposed to be, implemented in a building to ensure the safety of persons using the building in the event of fire". A "statutory fire safety measure" is defined by cl 80A which provides: " The fire safety measures listed in the Table to this clause are statutory fire safety measures for the purposes of this Part."

The Table lists several fire safety measures. None refer to the provision of stairways or fire escapes. 18 At trial, various issues were raised as to whether the Council was required, by statute, to apply the BCA or to have regard to the BCA when issuing fire safety orders (presumably either under the LGA or the EPA Act). At trial, this was said to be relevant partly because cl D2.16 of the BCA required that balustrades of the kind constructed by Fatouros should not have openings that would permit a 125-millimetre sphere to pass through. No legislation, however, was identified as supporting this proposition and, on appeal, Fatouros did not contend that there was any legislative provision that required the Council, generally, to apply or have regard to the BCA or, in particular, to ensure that the stairway complied with the BCA.

The facts and circumstances relevant to the existence of a duty of care 19 The building fell within the local government area administered by the Council. Fatouros conducted a "boarding house" or "shared accommodation" business in the building. Many of the tenants were backpackers. 20 The stairway was constructed in about April 1998. Prior to that date, another external timber stairway was attached to the building. On 28 October 1996, the Council, acting under s 132 of the LGA, gave a "Notice of Intention to Give Fire Safety Order" to Fatouros. By this notice, the Council notified Fatouros that it intended to serve an order on Fatouros directing it, under s 124 of the LGA, to do certain work. Part of the work was described as follows: "1. The external stairway serving as a required exit to the first floor is in a dilapidated state. An engineer certificate of structural adequacy is required to be submitted to Council. Alternatively, the external stairway is to comply with Clause D1.8 of the Building Code of Australia." 21 On 15 November 1996, the Council, acting under s 124 of the LGA, issued a fire safety order to Fatouros. The order required Fatouros to carry out the work specified in the 28 October 1996 notice and to submit to the Council an engineer's certificate of structural adequacy or to ensure that the stairway complied with cl D1.8 of the BCA. Clause D1.8 of the BCA is headed: "External stairways or ramps in lieu of fire-isolated stairs".

As Simpson J pointed out (at 274): "The clause appears to be directed toward ensuring that external stairways are protected against a fire in the main building, and to be principally concerned with the materials of which such a stairway may be constructed, and with shielding the stairway from any fire in the building." 22 The fire safety order of 15 November 1996 stated: "It is a requirement of this fire safety order that a certificate be furnished to Council with respect to each essential service installed in the premises to which the order relates, in accordance with the provisions of Clause 6(1), 2, 3, 4 and 6(2) of the Local Government (Orders) Regulation 1993".

The definition of "essential service" in cl 6(2) of the Local Government (Orders) Regulation 1993 (NSW) does not include a stairway, external or otherwise. Therefore, the fire safety order did not require Fatouros to furnish the Council with a certificate in regard to the stairway. There was no evidence as to whether a certificate was in fact furnished to Council "with respect to each essential service installed in the premises", as the fire safety order required. 23 Fatouros did not comply with the 15 November 1996 fire safety order within the time stipulated. On 23 January 1997, a real estate agent acting on behalf of Fatouros wrote to the Council stating that Mr Fatouros (the person in control of Fatouros) was "currently negotiating" with engineers and a construction company and "should have the stairs completed shortly". 24 The Council wrote to Fatouros in January 1997 noting that the 15 November 1996 fire safety order had still not been complied with and directing Fatouros to show cause within 10 days why legal proceedings should not be instituted against it for non-compliance. 25 Fatouros engaged an engineer, Mr Kaparos, to design a new external stairway and he produced plans dated 21 April 1997. Fatouros engaged Paul Jones, trading as Paul Jones Staircases, to build the stairway to Mr Kaparos' design. A further delay ensued. Eventually, Mr Jones informed Mr Fatouros that he could not construct the stairway in accordance with Mr Kaparos' plans. He advised that the area available for the staircase as designed by Mr Kaparos was too small. Mr Jones then provided an amended design of the staircase to Mr Fatouros. Mr Fatouros told Mr Jones to go ahead with the construction in accordance with that amended design. 26 On 23 February 1998 the Council gave Fatouros another notice of intention to give a fire safety order. The material part of the work to be carried out was in identical terms to para 1 of the notice of 28 October 1996. 27 Mr Jones completed the stairway in about April 1998. The stairway that Mr Jones constructed was that from which Mr Ward fell. It is common ground that, notwithstanding its defects, the stairway complied with cl D1.8 of the BCA. 28 The Council undertook yearly fire safety inspections and, in accordance with that routine, inspected the building on 27 March 2000. The inspectors concerned completed a form headed "Place of Shared Accommodation Inspection BCA Assessment". This was an internal form not seen by any person outside the Council. 29 Next to a question in the form "Are the handrails and balustrading satisfactory?", a tick has been placed in a block indicating the answer "Yes". The context of the form suggests that the question related to internal staircases alone. According to the form, the only instructions given to Fatouros by the inspectors concerned the removal of rubbish near the main stairs of the building (not the external stairway) so as to provide access to the fire extinguisher. 30 On 31 March 2000, the Council gave Fatouros notice of intention to issue a fire safety order in accordance with s 121H of the EPA Act, in relation to the removal of rubbish and furniture "adjacent to the main stairway" and the provision of access to the fire extinguisher. 31 Presumably as a result of that inspection, on 4 May 2000 the Council issued a fire safety order to Fatouros "pursuant to the provisions of Order No 6 in the Table to s 121B of the Environmental Planning and Assessment Act 1979". Fatouros was thereby ordered to "[r]emove all rubbish and furniture located to the main stairway and provide access to the portable fire extinguisher located in that area". This order did not apply to the external stairway. 32 At a meeting after the stairway had been completed, Mr Fatouros met with two Council officers, Mr Watson and Mr Robeshaw. They inspected the stairway and, according to Mr Fatouros, they told him "[i]t's fine. It's fine, we're happy with this". 33 Other meetings took place during 2000 between Mr Fatouros and officers of the Council in relation to the building but not in connection with the stairway. 34 On 7 July 2000, the Council, acting under s 121H of the EPA Act, issued to Fatouros a notice of intention to issue a fire safety order relating to fire safety measures and smoke alarms, not the stairway. No fire safety order followed this notice. 35 Thereafter, and prior to Mr Ward's fall, Council officers inspected the building and required work to be done, but said nothing about the stairway.

The trial judge's reasons 36 Simpson J found (at 284) that the Council had, by its conduct, attracted a duty of care "to ensure that the stairway was safe for the purpose for which it was to be used, and not to give it approval until it was safe". 37 The judge based her finding of a duty of care on the following matters:

(a) The Council, according to the judge (at 283), "took on supervision of the building with respect to fire safety".

(b) The Council acknowledged that the stairway was adequate from a fire safety standpoint.

(c) Fatouros relied on the expertise of the Council in approving the construction of the stairway.

(d) The Council's activities in regard to the stairway caused Fatouros damage. 38 The judge made the finding in the following passage (at 283) that the Council took on supervision of the building with respect to fire safety: "I am also of the view that s 80C(3) [sic cl 80C(3) of the EPA Regulation] did create in the Council a duty in issuing the 2000 Notices and Order, to deal with the whole of the building, and not merely the questions of rubbish removal and smoke alarms. That is, once it took on supervision of the building with respect to fire safety, the Council was not entitled to limit its supervision to discrete aspects of fire safety. Its obligation was to deal with all fire safety issues. In omitting any reference to issues other than those mentioned, each implied that other fire safety measures were satisfactory. Each carried with it a silent imprimatur of the adequacy of the newly constructed stairway." 39 The judge made the finding in the following passage (at 283) that the Council acknowledged that the stairway was adequate from a fire safety standpoint: "In my view, the consequence of Clause 80C(3) is that, by implication, the Fire Safety Order given in May 2000 acknowledged that, except for the matters specified in the Order, the Council regarded the fire safety measures in place at the Fatouros premises as adequate. It is less easy to read the same implication into the Notice of Intention to Give a Fire Safety Order, given in July 2000 but, nevertheless, since such a Notice is required by s 121H of the EPAA, and is a prerequisite to the issuing of a Fire Safety Order, that notice also should be so construed."

Her Honour said (at 284) that it was the Council's role "to ensure that the construction of the stairway complied with safety standards". 40 As regards reliance, her Honour said (at 284), "Fatouros was entitled to, and did, rely upon the expertise of the Council officers in approving the construction". She said: "In saying this I do not for one moment think that Mr Fatouros articulated any questions in his own mind concerning what was implied by the Council's conduct. The process was more subtle than that. I am satisfied that he acquired a sense of security about the adequacy of the stairway because of the manner in which the Council dealt with him".

At another point in her reasons, the judge said (at 285) that Fatouras "relied upon the Council for … advice that the stairway was adequate to meet the Council's requirements". 41 As regards the vulnerability of Fatouros, her Honour said (at 285): "It could not be said that Fatouros fell into 'an ascertainable class of vulnerable person … unable to protect themselves from harm'; it could, however, reasonably be said that the damage (that is, the economic damage to Fatouros) flowed from activities within the Council's control". 42 The judge made a finding (accepted by both parties), relevant both to the existence of a duty and breach, that it was obvious to any person "who turned his or her mind to the safety of the stairs as constructed" (at 285) that the stairs were "inherently unsafe" and "posed a danger". Her Honour said (at 285 to 286): "Whilst it is true that the risk should have been obvious to Mr Fatouros, that scarcely avails the Council. If the risk should have been obvious to Mr Fatouros, so much more so should it have been obvious to Council officers, whose task it was to assess the safety of structures and their compliance with statutory requirements. Approval of an obviously dangerous structure can only be a breach of duty". 43 In dealing with breach, her Honour said (at 284): "In approving an inherently unsafe structure, the Council failed in its duty to Fatouros". 44 Her Honour did not state expressly what conduct of the Council amounted to "approving an inherently unsafe structure". I infer that the conduct in question was issuing the fire safety order of 4 May 2000 without mentioning the stairway, issuing the notice of intention to give a fire safety order on 7 July 2000 and again not mentioning the stairway, the approval to which Mr Fatouros testified which occurred when the Council officers met him at the building after the stairway had been completed and told him that it was "fine", and the other communications between the Council and Fatouros, after the stairway had been completed and inspected, in which the Council said nothing about the stairway. 45 Mr Nock SC, who, together with Mr Vesper, appeared for Fatouros, supported the judge's reasoning. He also submitted that the content of the common law duty of care owed by the Council to Fatouros was such that, irrespective of its statutory powers, the Council officers should have warned Fatouros that the completed stairway was unsafe.

The elements of control, reliance and vulnerability 46 Courts must be cautious in imposing affirmative common law duties of care on statutory authorities (see, in particular, McHugh J - with whom Gleeson CJ agreed - in Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at 34, [79]). 47 In Sutherland Shire Council v Heyman (1985) 157 CLR 424, Mason J, (as his Honour then was) at 460, observed that while, generally speaking, a public authority which is under no statutory obligation to exercise a power comes under no common law duty of care to do so, it "may by its conduct place itself in such a position that it attracts a duty of care which calls for exercise of the power". His Honour (at 461) pointed out that "a public authority, not otherwise under a relevant duty, may place itself in such a position that others rely on it to take care for their safety so that the authority comes under a duty of care calling for positive action". These propositions are not controversial and, in substance, are supported by Pyrenees Shire Council v Day (1988) 192 CLR 330, Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 and Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540. 48 In Amaca Pty Ltd v The State of New South Wales (2004) 132 LGERA 309, I drew (at 325, [64]) the following propositions from Pyrenees, Crimmins and Graham Barclay Oysters: "(a) The totality of the relationship between the parties is the proper basis for the determination of a duty of care. (b) The category of control that may contribute to the existence of a duty of care to exercise statutory powers includes control, generally, of any situation that contains within it a risk of harm to others. (c) A duty of care does not arise merely because an authority has statutory powers, the exercise of which might prevent harm to others. (d) The existence of statutory powers and the mere prior exercise of those powers from time to time do not, without more, create a duty to exercise those powers in the future. (e) Knowledge that harm may result from a failure to exercise statutory powers is not itself sufficient to create a duty of care." 49 For control to be a significant factor, capable of giving rise to a duty on a public authority to take affirmative action, the measure of control must be significant and special. I shall refer to authorities that bear this out. 50 In Crimmins, Gummow J said (at 61, [166]) that in some cases: "[T]he powers vested by statute in a public authority may give to it such a significant and special measure of control over the safety of the person or property of the plaintiff as to oblige it to exercise its powers to avert danger or to bring the danger to the knowledge of the plaintiff. The powers of the appellant with respect to fire prevention in Pyrenees Shire Council v Day … were in this category." [my emphasis] 51 In Graham Barclay Oysters, Gummow and Hayne JJ said (at 598, [151]): "[I]n Pyrenees Shire Council v Day … the Shire held a significant and special measure of control over the safety from fire of persons and property at the relevant premises. That degree of control was the touchstone of the Shire's duty to safeguard others from the risk of fire in circumstances where the Shire had entered upon the exercise of its statutory powers of fire prevention and it alone among the relevant parties knew of, and was responsible for, the continued existence of the risk of fire." [my emphasis] 52 Thus, the sole and actual knowledge that the Shire in Pyrenees had of the risk coloured to a material degree the quality of the control it exercised. Moreover, the fact that persons at risk of harm from fire had no knowledge of the risk, while the Shire knew of it, made those persons particularly vulnerable. That vulnerability also contributed to the quality of the control exercisable by the Shire. These matters rendered the control "significant and special". 53 Crimmins was a "control" case of a unique kind. As Callinan J observed in Graham Barclay Oysters (at 663, [317]): "What distinguished the powers and functions [of the authority in Crimmins ] was that if they were not in fact exercised, then the industry which was a uniquely organised one, would hardly have been able to function at all, or with any degree of efficiency …" 54 In Amaca Pty Ltd v The State of New South Wales, I remarked at (at 322 to 323, [52]): " Crimmins has always been regarded as a 'very special' case. There can be little doubt that it has to be regarded as a 'control' case of a unique kind. Its uniqueness lies in the degree of control that the Authority had over the actual entering into of contracts of employment, the conditions of work, and the conduct of both workers and employers. The vulnerability of the workers has also to be regarded as 'special'. Their very employment in practical terms was in the hands of the Authority and they were only casual workers with relatively weak bargaining power. 55 The position was summarised by Gaudron, McHugh and Gummow JJ in Brodie v Singleton Shire Council (2001) 206 CLR 512 (at 559, [102]): "[I]t has become more clearly understood that, on occasions, the powers vested by statute in a public authority may give it such a significant and special measure of control over the safety of the person or property of citizens as to impose upon the authority a duty of care. This may oblige the particular authority to exercise those powers to avert a danger to safety or to bring the danger to the knowledge of citizens otherwise at hazard from the danger. In this regard, the factor of control is of fundamental importance …" [my emphasis] 56 The nature of reliance, sufficient to contribute materially to the imposition of a duty of care on the part of a statutory body to exercise its statutory powers, is also a matter of some complexity. In determining the quality of reliance, regard must be had to the seriousness of the risk, the likelihood of its occurrence and the vulnerability of the persons at risk. 57 Knowledge of the risk on the part of the authority, and the absence of knowledge on the part of persons for whose benefit it is said the statutory power should be exercised, would, ordinarily, be critical features in the inquiry. As Gummow and Hayne JJ observed in Graham Barclay Oysters (at 596, [145]): "[T]he co-existence of knowledge of a risk of harm and power to avert or to minimise that harm does not, without more, give rise to a duty of care at common law. The totality of the relationship between the parties, not merely the foresight and capacity to act on the part of one of them, is the proper basis upon which a duty of care may be recognised. Were it otherwise, any recipient of statutory powers to licence, supervise or compel conduct in a given field, would, upon gaining foresight of some relevant risk, owe a duty of care to those ultimately threatened by that risk to act to prevent or minimise it." 58 In the present case, the difficulties faced by Fatouros in establishing a duty of care on the part of the Council are increased as the duty of care contended for is a duty to take reasonable steps to prevent economic loss. As was said in Woolcock Street Investments v CDG Pty Ltd (2004) 216 CLR 515 at 529, [21]: "Claims for damages for pure economic loss present peculiar difficulty."

In that case, Gleeson CJ, Gummow, Hayne and Heydon JJ said (at 530, [23]): "Since Caltex Oil [ (Australia) Pty Ltd v The Dredge 'Willemstad' (1976) 136 CLR 529], and most notably in Perre v Apand Pty Ltd [(1999) 198 CLR 180], the vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed. '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."

Did the Council take on the supervision of the entire building? 59 Her Honour's finding that the Council took on the supervision of the entire building with respect to fire safety is based, to an extent, on cl 80C of the EPA Regulation. Her Honour said that cl 80C(3) imposed a duty on the Council when issuing fire safety orders under the EPA Act, to deal with the whole of the building, and not merely the questions of rubbish removal and smoke alarms. 60 For the sake of convenience, I shall reiterate the relevant legislative provisions concerning cl 80C. 61 Section s 121B(1) of the EPA Act provides that a council "may" give an order to a person to do or refrain from doing such things as are specified in the order so as to ensure or promote adequate fire safety. Clause 80C(1) of the EPA Regulation provides that, when a council gives a fire safety order, it "must" issue a fire safety schedule specifying the fire safety measures (both current and proposed) that should be implemented in the building concerned. Clause 80 defines a fire safety measure as "any measure (including any item of equipment, form of construction or fire safety strategy) that is, or is proposed to be, implemented in a building to ensure the safety of persons using the building in the event of fire". Clause 80C(3)(a) provides that a fire safety schedule "must deal with the whole of the building, not merely the part of the building to which the development consent, construction certificate which fire safety order relates". Clause 80C(3)(b) provides that a fire safety schedule must include the fire safety measures currently implemented and required to be implemented as "statutory fire safety measures". Clause 80A provides that statutory fire safety measures are the fire safety measures listed in the Table to the clause. Stairways are not among the fire safety measures listed. 62 Thus, cl 80C(3) (which requires a fire safety schedule to deal with the whole of the building and not merely the part to which the fire safety order relates) has limited reach. It does not require a council to include, in a fire safety schedule, fire safety measures relating to stairways (as these are not statutory fire safety measures). Further, cl 80C(3) does not oblige a council, when giving a fire safety order in relation to a building, to list in the fire safety schedule each and every fire safety measure that is needed to remove all fire risks in the building. It only requires statutory fire safety measures to be listed. 63 Thus, by issuing a notice of intention to give a fire safety order, or a fire safety order, a council does not take on supervision of the whole building with respect to fire safety. In my view, there is nothing in the legislation that requires a council to take on supervision of any part of a building with respect to fire safety. If the contrary were to be the case, an extraordinarily heavy and difficult burden would be placed upon councils. It would work as a serious disincentive against councils exercising their discretion to issue fire orders under s 121B of the EPA Act. I do not think that that is the effect of cl 80C(3). 64 Simpson J held that the Council had a duty, under cl 80C(3), in issuing the 2000 notices and fire safety order, to deal with the whole of the building. For the reasons I have expressed, I disagree, with respect, with that view. The duty to deal with the whole of the building was the foundation of her Honour's view that, in issuing notices of an intention to give a fire safety order and fire safety orders, the Council took upon itself the supervision of the building with respect to fire safety. Once it is accepted that there was no such duty, the foundation for her Honour's conclusion falls away. 65 It follows that I disagree with the conclusion (at 283) that the Council had an "obligation … to deal with all fire safety issues". The Council had discretionary powers to deal with fire safety issues but it did not have an obligation in those terms.

The Council's acknowledgement that the stairway was adequate, and the questions of control, reliance and vulnerability 66 In considering whether the Council acknowledged that the stairway was adequate from a fire safety point of view, due regard must be had to her Honour's unchallenged finding that the risk constituted by the construction of the stairway was obvious to Fatouros and to the Council officers. 67 On that basis, it is arguable that, the Council, by its conduct after the stairway was completed, acknowledged (and represented) that it had no concerns about the stairway from a fire safety point of view. 68 On the other hand, it is also arguable that the Council was merely exercising its discretionary powers in respect of discrete aspects of the building and made no acknowledgement or representation. 69 It is not necessary to decide this issue and I shall assume, for the purposes of these reasons, that the Council, in sending the notices and the fire safety order of 4 May 2000 and informing Mr Fatouros that the stairway was "fine", acknowledged and represented that it considered the stairway to be adequate as regards fire safety. 70 An acknowledgement and representation in these terms, without more, does not create any duty of care on the part of the Council as contended for by Fatouros. The fundamental elements of control, reliance and vulnerability on the part of Fatouros must be considered. 71 Before addressing these elements, I should deal with a statement by the judge that, because the 4 May 2000 fire safety order omitted reference to "any clause of the BCA other than cl D1.8" (at 284), it suggested that "the BCA contains no other relevant provisions". The 4 May 2000 fire safety order, however, made no reference to cl D1.8. The only fire safety measure to which it referred was the removal of rubbish and furniture so as to provide access to the portable fire extinguisher located in the area of the main stairway. In any event, the Council was not obliged, when issuing that fire safety order, to make any reference to the BCA. I do not consider that the Council, in any of its relevant conduct, made any representation as to the application or non-application of the BCA, save for cl D1.8 (to which I have previously referred). 72 Coming to the issue of control, the important factor is that the danger constituted by the stairway was obvious and, in particular, was obvious to Fatouros. To this significant extent, the situation was materially different to that in Pyrenees Shire Council v Day. There was nothing to prevent Fatouros from taking cognisance of the danger and remedying the situation. 73 Fatouros had wide-ranging control over the building and the offending staircase. The control that the Council possessed in this regard was limited to the exercise of its discretionary statutory powers, and was neither significant nor special. 74 As regards reliance, her Honour found that Fatouros relied upon the expertise of the Council officers in approving the construction. The judge explained (at 284) that this reliance was limited to the extent of Mr Fatouros acquiring "a sense of security about the adequacy of the stairway because of the manner in which the Council dealt with him". 75 There was, however, no evidence to support any finding of reliance of any kind. Mr Fatouros did not testify that he was influenced in any way by what the Council had done or had not done and there was no evidence that his company had changed its position by reason of the Council's conduct. In any event, the degree of reliance as found is so limited as to be incapable of supporting a duty of care on the part of the Council to prevent Fatouros from sustaining economic loss. 76 As her Honour correctly found, Fatouros was not a vulnerable person and was able to protect itself from harm. As I have already mentioned, the risk was obvious, and Fatouros was well able to take steps to avoid that risk. As the judge found, Fatouros was negligent in not doing so. 77 I would add that Mr Fatouros knew full well that the stairway did not comply with the plans drawn by the engineer Mr Kaparos. Mr Fatouros was content for the stairway to be constructed in accordance with Mr Jones' design. 78 Thus, Fatouros did not establish that it was unable to protect itself from the consequences of any want of reasonable care on the part of the Council. It was not vulnerable in the sense explained in Woolcock Street Investments v CDG Pty Ltd at 530, [23]. The failure to prove vulnerability in this sense, in my view, is fatal to the contention that the Council owed a duty of care to prevent Fatouros from sustaining economic loss. The fact that the Council's conduct may have contributed to Fatouros' loss is no substitute for this element. 79 In my view, the Council did not owe a duty of care to prevent Fatouros from sustaining economic loss.

Conclusion 80 I propose the following orders:

(b) The judgment entered by the trial judge and the orders her Honour made are set aside and in lieu thereof there should be judgment for the Council.

(c) Fatouros is to pay the Council's costs of the appeal and of the trial.

(d) Fatouros is to have a certificate under the Suitors' Fund Act 1951 (NSW) in respect of the appeal, if otherwise qualified. 81 TOBIAS JA: I agree with Ipp JA. **********

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