Federal Court of Australia|1992-12-18|Before: Davies J

Re Mid Density Development Pty Limited v Rockdale Municipal Council [1992] FCA 634; (1992) 79 Lgera 30, (1992) 39 FCR 579 (18 December 1992)

Trade Practices - whether damages available for loss caused by reliance upon certificate issued by local council under s. 149 Environmental Planning and Assessment Act (EPA) - whether misstatement as to risk of flooding amounted to negligence or deceit - application of statutory defence of good faith under s.149 EPA and s.582A - whether council was a trading and financial corporation under Trade Practices Act (TPA) - whether provision of s.149 certificate was conduct in trade or commerce under s.52 TPA or s.42 Fair Trading Act.

Roberts v Hopwood (1925) AC 578

State Superannuation Board v Trade Practices Commission [1982] HCA 72; (1982) 150 CLR 282

Counsel for the applicant: R.C. McDougall QC, I.M. Jackman

Counsel for the respondent: A.R. Emmett QC, M.T. McCulloch

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

DAVIES J. The applicant in these proceedings, Mid Density Developments Pty Limited ("Mid Density"), a developer of land, seeks damages from the Municipal Council of the Shire of Rockdale ("Rockdale). The claim is based primarily upon false statements contained in three certificates issued by the Shire Secretary under s.149 of the Environmental Planning and Assessment Act 1979 (NSW) ("the EPA"). The claim relies upon the common law causes of action of negligence and deceit, upon s.42 of the Fair Trading Act 1987 (NSW) and upon s.52 of the Trade Practices Act 1974 (Cth). Rockdale relies, inter alia, upon the statutory defences set out in s.149 (6) of the EPA and s.582A(1) of the Local Government Act 1919 (NSW) ("the LGA").

2. In early 1990, Mid Density became interested in acquiring and developing land fronting Henderson Street, Rockdale. The land, which had a number of factories on it, dropped away from Henderson Street towards Wolli Creek, though it did not actually adjoin that creek. Wolli Creek is a subsidiary of Cooks River, which debouches close to Mascot Airport. Although Wolli Creek and Cooks River are ordinarily placid, their character can change during Sydney's storms.

3. In the course of his negotiations for the property, Mr Lazare Heman, a director of Mid Density, saw a certificate issued by the Shire Clerk of Rockdale to the vendor under s.149 of the EPA. That section provides inter alia:-

"(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).

....

....

(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)."

"(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.

......"

The certificate as issued on 7 March 1990 gave the following specified information inter alia:-

"The Council has not, by resolution, adopted a policy

to restrict the development of the land by reason of

this likelihood of land slip, bushfire, flooding, tidal

inundation, subsidence or any other risk."

"(a) Has the Council information which would indicate

that the land is subject to the risk of flooding or

tidal inundation? - No."

The answer to question (a) was completed by Mr C.S. Mable, the officer of Rockdale primarily responsible for answering the flooding question in s.149 certificates. At the end of the advisory information, the certificate concluded:-

"The above information has been taken from the

Council's records but Council cannot accept any

responsibility for any omission or inaccuracy."

4. It was said by Mr S.J. Pogson, a building and project manager engaged by Mid Density to oversee the proposed development, that, on 15 or 16 October 1990, he went to the Engineer's Department of Rockdale and spoke to Mr Mable, the officer of Rockdale to whom questions with respect to flooding were primarily directed. Mr Pogson showed a sketch plan of the proposed development and asked inter alia:-

"Are there any easments or problems with the land, any

pipes, flooding or whatever?"

"Again you would have to make a formal request for

that information but on the surface I think it is OK."

5. Mr Mable denied this conversation. I accept that it occurred. However, as Mr Mable did not at that time believe that flooding was a problem, this informal conversation would not found and was not relied upon as an independent cause of action.

6. On 19 October 1990, Mid Density entered into a contract to purchase the property. Certificates under s.149 of the EPA were thereafter sought by Mid Density's solicitors. A certificate for a part of the land was issued on 26 October 1990 and another for the remainder on 27 November 1990. Both were in identical terms to the certificate given earlier on 7 March 1990. In each, the question as to flooding was answered by Mr Mable.

7. On 13 December 1990, Mr Pogson and Mr C. Griffiths, an engineer for Mid Density, spoke with Mr P.C. McFarland, Chief Town Planner for Rockdale. They asked inter alia whether there was any problem with respect to flooding. There is a dispute as to whether Mr McFarland replied "No we don't have a problem in that area" or "I am unaware." However, all witnesses are agreed that Mr McFarland went on to add words to the effect; "You had better check with the Engineer's Department." I pause to state that I see no element of negligence or misrepresentation in Mr McFarland's statement and I need not discuss it again. It was not relied upon as an independent cause of action.

8. The structure of the Shire Engineer's Department was such that it was headed by the Chief Engineer, Mr K.R. Bean. His deputy was Mr W. Christer. Mr Mable answered to Mr Bean with respect to some matters, particularly flooding, and to Mr Christer in others. Below Mr Mable in the hierarchy was Mr A.L. Merrilees.

9. On 20 December 1990, Mid Density completed its acquisition of the land, and on 9 January 1991, an application for development approval was lodged.

10. On 31 January 1991, Rockdale sent a letter to Mr Heman, approving the subdivision of the land into three new allotments as sought by Mid Density in a letter of 28 November 1990. The letter specified certain conditions which need not concern us. The letter was signed by the Chief Engineer, Mr K.R. Bean, and contained Mr Mable's name for reference.

11. The application for development approval encountered more difficulty. The application was allocated to Mr A.L. Merrilees for his attention. Mr Merrilees has not given evidence. Mr Bean and Mr Mable have each given evidence that they respectively drew Mr Merrilees' attention to the Cooks River Flood Study issued by the Public Works Department in 1985, to which I shall later refer in more detail.

12. Whether or not he was prompted by Mr Bean or Mr Mable, Mr Merrilees took the view that a flooding condition should be imposed on the development.

Mr R. Weatherby of Mid Density came to hear of this and at his request

for clarification, on 8 February 1991, Mr Mable sent a fax which read:-

"Flood levels at 23-29 Henderson Street, Turrella.

Please be advised that the Public Works Dept after a

study of the Cooks River has indicated a flood level

adjacent to the above properties of 3.75 (A.H.D.) In

this regard council would require a floor level in

this location of 4.00 (W.R.T. A.H.D.).

Thereafter, there was discussion between officers of Mid Density and those of Rockdale. The officers of Rockdale indicated that it was their view that such a condition was appropriate and that, subject to modification, it would be imposed. They further informed the officers of Mid Density that no clear s.149 certificate would thereafter be issued in respect of the subject land.

13. Mr Bean, Mr Mable and Mr Merrilees considered that certain assumptions adopted for the purposes of the Cooks River Flood Study were too conservative. Rockdale requested one of its former employees, Mr H.T. Wong, to rework the Study. Mr Wong did so, adopting assumptions he had used in 1986 for another study, the Wolli Creek and Bardwell Creek Flood Study. One of the assumptions adopted for the purposes of the Cooks River Flood Study, that of a storm surge in Botany Bay at the same time as high tide and a storm onshore, was omitted. The result was to reduce the flood level calculations in the Cooks River Flood Study by 300mm or thereabouts. With this change, however, the approach established by the Cooks River Flood Study was implemented.

14. On 17 April 1991, Rockdale approved the development application subject to a large number of conditions including:-

"28. The floor level of the proposed factory units to be set

at a minimum level of 3.35 AHD."

The level was set at 3.35 metres above Australian Height Datum ("AHD"). Compliance with the condition would have made the development unprofitable.

15. On 24 April 1991, the Council adopted a flood plain management policy, of which three elements were:-

"A. THAT Council adopt the 2% or 1 in 50 year

Flood Standard for the properties within the

Wolli Creek catchment area downstream of the

Henderson Street weir based on the revised

P.W.D. levels.

B. THAT habitable floor levels to be set a

minimum 250 mm above the standard flood

level.

C. THAT a notation be made on Section 149 Certificates

issued for Henderson Street properties drawing the

applicants attention to the fact that the whole or

part of their land is subject to Council's Flood

Management Policy."

The 3.35 AHD level set for the subject land conformed with that policy.

16. Thereafter, s.149 certificates were issued accordingly. A certificate with respect to the subject land, dated 22 July 1991, stated in the first part:-

"WHETHER COUNCIL HAS, BY RESOLUTION, ADOPTED A POLICY

TO RESTRICT THE DEVELOPMENT OF THE LAND BY REASON OF

THE LIKELIHOOD OF LAND SLIP, BUSHFIRE, FLOODING, TIDAL

INUNDATION, SUBSIDENCE OR ANY OTHER RISK.

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."

In the advisory section of the certificate, the following appeared:-

B. HAS THE COUNCIL INFORMATION WHICH WOULD INDICATE

THAT THE LAND IS SUBJECT TO THE RISK OF FLOODING OR

TIDAL INUNDATION?

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 possesion 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."

All this resulted in loss sustained by Mid Density.

17. The first question to which it is convenient to turn is whether Rockdale is a corporation for the purposes of s 4 (1) of the Trade Practices Act. That section provides that "corporation" means a body corporate that, inter alia, "(b) is a trading corporation formed within the limits of Australia or is a financial corporation so formed", words which pick up the terms used in para (xx) of s.51 of the Constitution. If Rockdale is such a corporation, s.52 of the Trade Practices Act further requires that the conduct complained of be conduct "in trade or commerce".

18. The test to determine whether a corporation is a trading or financial corporation is found in decisions of the High Court of Australia in R. v. Judges of Federal Court of Australia; ex parte W.A. National Football League ("Adamson's case")(1979) [1979] HCA 6; 143 CLR 190 and State Superannuation Board v. Trade Practices Commission [1982] HCA 72; (1982) 150 CLR 282. In the latter case, Mason, Murphy and Deane JJ. said at 304-5:-

"Secondly, the judgments of the majority in Adamson

make it clear that, in having regard to the

activities of a corporation for the purpose of

ascertaining its trading character, the Court looks

beyond its 'predominant and characteristic

activity' (cf.p 213 per Gibbs J.). Barwick C.J. at

(1979) 143

CLR, at p 208 spoke of making a judgment 'after

an overview' of all the corporations's current

activities, the conclusion being open that it is a

trading corporation once it is found that 'trading

is a substantial and not a merely peripheral

activity'. Mason J. at (1979) 143 CLR, at p 234

said that it is very much a question of fact and

degree' having earlier stated at (1979) 143 CLR,

at p 233 that the expression is essentially 'a

description or label given to a corporation when

its trading activities form a sufficiently

significant proportion of its overall activities as

to merit its description as a trading corporation.

...

Like the expression 'trading corporation', the

words 'financial corporation' are not a term of

art; nor do they have a special or settled legal

meaning. They do no more than describe a

corporation which engages in financial activities

or perhaps is intended so to do."

As to the meaning of "financial corporation", see also Re Ku-ring-gai Co-operative Building Society (No. 12) Ltd [1978] FCA 50; (1978) 36 FLR 134 at 159.

19. The issue is, therefore, whether Rockdale's trading activities or financial activities formed a sufficiently significant proportion of its overall activities as to justify its description as a trading or financial corporation. The adjectives "significant" and "substantial" were considered in the context of characterisation in Deputy Commissioner of Taxation v. Stewart [1984] HCA 11; (1984) 154 CLR 385 at 390, 397 and 399-400. The activities must be of a sufficiently significant or substantial scale as to confer the character of "trading" or "financial" upon the corporation. The relationship between the activities relied upon and the overall activities of the corporation, and the extent of those activities in comparison to the extent of the corporation's activities overall are relevant.

20. Rockdale is typical of municipal councils in that it concerns itself with matters of local government. There is no evidence that it carries on trading activities under Part XVII of the LGA. Most of its revenue is derived from rates, garbage levies and the rent from properties which it owns. I assume that fees may be charged at Rockdale's lending libraries or at its tip and the like. In the 1990 Annual Report, the following income was disclosed, inter alia:

Rates $14,692,680

Garbage Levy $ 3,357,847

Government Grants and

Subsidies $ 4,202,248

Contributions towards Works $ 1,546,399

Rents $ 374,286

Interest on Investments $ 1,692,472

Fees, Charges and

Sundry Income $ 1,526,917

21. Fees etc. provided only 5% of total income. Some fees would have been charged for trading activities. A report, "The Year in Review," refers inter alia "increasing fees, for carnivals, circuses, planing, large picnics and organised sport." Many of the fees, however, would have been derived from activities other than business or trading activities. For example, fees were charged and received for the grant of s.149 certificates. In addition to the prescribed fee, an urgency fee of $50 was charged if a certificate was sought within 24 hours. It was submitted by Mr R. C. McDougall QC, with whom Mr I.M. Jackman of counsel appeared for the applicant, that, as the imposition of a charge for an expedited certificate was discretionary, the provision of s.149 certificates was a trading activity. In my opinion, it is not a trading activity but the performance of a statutory duty in respect of which the EPA permitted the charging of fees. See Lismore City Council v Stewart (1989) 18 NSWLR 718.

22. Mr McDougall further submitted that Rockdale engaged in trading because it contracted out its garbage collection service. However, it seems to me that this is not a trading activity. It is the nature of the activity so far as Rockdale is concerned that matters. From Rockdale's point of view, the carrying out of a statutory function, the provision of garbage services, is not a trading activity, whether Rockdale uses its own employees, subcontractors or a contractor to perform the whole or part of the works. The carrying out of a function of government in the interests of the community is not a trading activity.

23. On the other hand, Rockdale earned some income from carrying out tasks within its municipal responsibility. The report, "Year in Review," records that "Council undertook kerb and gutter reconstruction ... for the Roads and Traffic Authority ... which earned income for the council." Mr McDougall submitted that Rockdale carried on the business of leasing out property. However, notwithstanding that the Council earned substantial rents, its activity would not be categorised as a business. The letting of premises may be a business, but would not ordinarily be so described.

24. Consequently, I would not describe Rockdale as a trading corporation. Its trading activities as a whole seem to me to be too insignificant in relation to the totality of Rockdale's activities to confer the requisite character.

25. Mr McDougall submitted that Rockdale was a financial corporation. He pointed out that interest from investments amounted to 5% of total income, and that not only did Rockdale invest surplus money at interest but, in times of monetary shortage, borrowed money at interest. Again, it seems to me that these activities are too minor and too much an integral part of local government to confer upon Rockdale the character of a financial corporation.

26. Whatever debate there may be about these matters, it seems to me that, in the issuance of certificates under s.149, and in the discussions between Rockdale's officers and the officers of Mid Density, Rockdale was not acting in trade or commerce. Mr McDougall submitted that s.149 certificates are required at the time of the sale and purchase of real estate. He submitted that this was an activity in trade or commerce. However, that is not necessarily so. So many transactions in real estate are not carried out in the course of trade or commerce. See O'Brien v. Smolonogov (1982) 53 ALR 107; and Argy v. Blunts and Lane Cove Real Estate Pty Ltd (1990) 94 ALR 719.

27. Therefore, the mere act of giving a certificate under the EPA is neutral in this respect. It is the character of the act so far as the person doing the act is concerned which is the test. From Rockdale's point of view, it was merely carrying out its functions as a municipal council in the performance of its statutory duty under s.149 of the Act. That duty has no element of trade or commerce in it. Rockdale was obliged to give a certificate when application was made to it. The purposes and activities of the applicant for the certificate conferred no character upon the conduct of Rockdale in performing its statutory duty, see Concrete Constructions (NSW) Pty Limited v. Nelson [1990] HCA 17; (1990) 169 CLR 594.

28. I am of the view that s.52 of the Trade Practices Act does not provide a ground upon which the applicant may succeed. I should add that, if s.52 did apply, it would in my opinion override the statutory exemptions provided by the EPA and the LGA. They are inconsistent with the operation of s.52, for s.52, allows no such exemption to a corporation which is a trading or financial corporation and which is in breach of s.52.

29. Because s.42 of the Fair Trading Act also requires that the challenged action be action in trade or commerce, I am of the view that that section similarly does not apply. If it did apply, it would not override the statutory exemption under the LGA. See s.4(6) and Schedule 1 of the Fair Trading Act.

30. The evidence before the Court establishes that Cooks River and its subsidiary, Wolli Creek including Bardwell Creek, can give rise to flooding at the time of Sydney's storms. Problems of flooding were the concern of the Shire Engineer and of officers of his department. One such officer was deputed to fulfil the task of completing the relevant question in s.149 certificates. In 1990, that officer was Mr C.S. Mable. He had fulfilled the task for some 2-3 years.

31. Cooks River together with its subsidiaries runs through several municipalities. Wolli Creek near the subject land is on the western edge of Rockdale running between Rockdale and Canterbury. 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 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. The one in 50 year levels were determined for the types of storms that might be expected to occur once in 50 years or twice a century.

32. The Cooks River Flood Study contained maps and diagrams in the form of long sections, set out in exhibits 7.1 and 7.2 to the Study, and in the form of flood surface contours, set out in exhibits 7.3 and 7.4 thereto. A long section, exhibit 7.2, covered Wolli Creek from its confluence with Bardwell Creek to its confluence with Cooks River and specifically identified Henderson Street. A flood surface contour, sheet 2 of exhibit 7.4, covered Wolli Creek over the same length and Cooks River from a point well upstream of the confluence with Wolli Creek to a point close to the river's entry into Botany Bay.

33. From 1985, when the 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 Cooks River Flood Study and thereby to determine whether, in accordance with the 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 and Mr Mable referred to it from time to time, though not in 1990, for the purpose of determining flooding risks.

34. Rockdale received two copies of this Study in 1985, together with a copy of a Compendium of Data. The latter has long since been misplaced, though another copy is now in evidence. Mr Mable referred to the Study in 1989, but the present whereabouts of the two copies is no longer known. However, copies of the relevant diagrams were made and retained, probably in the Shire Engineer's office. Any officer of the Council wishing to check on a risk of flooding in the area would have been able to locate the diagrams.

35. The letter from the District Engineer of 23 July 1985, which accompanied the Study and the Compendium of Data said, inter alia:

"The study determines flood levels for the 1%, 2% and

5% probability design floods and associated flow

velocity information for sections of Cooks River and

Wolli Creek. Information contained in the study is

consistent with the Government's Draft Floodplain

Development Manual.

It is suggested that, on the basis of information

contained in the study, Council should prepare a

Floodplain Management Plan for areas of floodprone

land as detailed in the Government's Flood Prone Land

Policy and the draft Floodplain Development Manual."

36. The Cooks River Flood Study and the diagrams were used for determining the conditions to place upon some developments. There were several developments in the Rockdale Municipality, towards the mouth of Cooks River, which were thought to be at risk of flooding. Information from the Study was used by Mr Bean and Mr Mable during 1989 and 1990 in their consideration of applications for developments in Gertrude Street, Princes Highway and Levey Street. These developments were close to Cooks River. Mr Merrilees, who instigated the imposition of a flood condition upon the subject land, was aware of or became aware of the Cooks River Study and relied upon it in relation to the subject land. However, not all officers in the Shire Engineer's Department were aware of the Study. The Deputy Engineer, Mr Christer, was not aware of it until 1991.

37. There also existed another study of some relevance. In January 1986, there had been issued by Rockdale a report entitled 'Wolli Creek and Bardwell Creek Flood Study'. The report considered Wolli Creek upstream from the end of Henderson's Road close to the subject land to areas further south. The study was made by a then council officer, Mr H.T. Wong, for the reasons stated in its opening paragraphs, namely:-

"This study has been undertaken for Rockdale Municipal

Council in response to the N.S.W. Government's recent

moves to shift responsibility for floodplain

identification and management from state to local

government bodies.

It investigates two major creeks in Rockdale

municipality - Wolli Creek and Bardwell Creek.

Data on recent flood events in 1969, 1975, 1983 and

1984 have been collected and analysed to provide a

basis for calibration and verification of two

computer-based mathematical models, RORB and HEC2.

These were then used to define design flood profiles

along both creeks for various annual exceedance

probabilities, using design rainfall information from

Marrickville and Mortdale pluviographs.

Lands subject to potential flood hazard are

identified, and further studies are recommended to

determine mitigation options.

38. Mr Wong adopted slightly different criteria from that adopted in the Public Works Study because he considered that the criteria adopted in that Study were unduly cautious. Mr Wong's study stopped short of the subject land, and perhaps nothing in it bears directly upon the issues in the present case, save that it confirms that the means of establishing flooding risks were well understood, even within the Engineer's Department of Rockdale.

39. As to knowledge of actual flooding, it is relevant that Canterbury had in February 1990 formally adopted the one in 50 year flood levels. Canterbury suffered flooding of the area opposite the subject land, for there was at that point on the western side of Wolli Creek, a flood plain which presumably saved the subject land from any build-up of water level that might otherwise have occurred. The historical records of Rockdale were limited. Mr Mable gave this evidence:

"After you took up the position which you have just

described in 1987, did you make it your business to

familiarise yourself with the information held by

council which dealt with the risk of flooding within

the municipality? ---Yes.

And what information was that Mr Mable?---It was based

on some records council had on flooding incidents 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."

40. Mr Mable, who considered it his task to be aware of flood risks, was not aware of any actual flooding of the subject land. There may have been more flooding of the Henderson Street land but Mr Mable was unaware of it. The Compendium of Data records notes of a meeting of persons engaged in the Cooks River Flood Study with officers of the Engineer's Department Rockdale. The notes record inter alia:

"1. Flood Level Information

..........

B. Wolli Creek

...........

Henderson Street industrial area subject to flooding

has been a lot of filling, building up and reclamation

over the years - most of it illegal and without

Council knowledge and approval.

Check with F.C. Stevens (factory in Henderson Street)

regarding flooding and filling."

The information may have come from Mr Bean, who said in evidence that he could remember an occasion when minor flooding affected a factory close to the subject land.

41. The limitations of recorded flood information and of flood reputation are shown by the Cooks River Study which, in its commencing summary states, inter alia:-

"Historical flood level data was gathered during the

study by resident interviews, newspaper research and

examination of the Public Works Department files. The

flood level data gathered was reduced to Australia

Height Datum where possible, for comparison purposes.

The information collected has been published

separately as 'Cooks River Flood Investigation,

Compendium of Data'

The study catchment is well covered by pluviographs

(continuous rainfall versus time recorders) and the

records for the major floods recorded since 1956 have

been collected and analysed where available. No flood

discharge measurements are available.

The recorded flood level data available does not cover

an adequately long period to enable flood level

probabilities to be defined by historical events

alone. Consequently, an approach using mathematic

models was adopted."

42. In any event, in the middle of 1990, if an officer of Rockdale had compared the levels set out in diagrams in the Cooks River Flood 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.

43. We thus come to the crux of the issue in this case. The case brought on behalf of Mid Density is 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. The respondent, Rockdale, takes the view that Mr Mable answered the question honestly and in good faith, for he had not known or heard of any instance in which the subject land had flooded and, because there was a flood plain on the Canterbury side of Wolli Creek, he did not consider there was any risk of flooding.

44. It was, of course, somewhat difficult for Mr Mable to explain in cross-examination why it was that he answered the questions as he had. The plain fact was, as Mr Mable should have known, that Rockdale had information which disclosed that the subject land was at risk of flooding.

45. Mr Mable explained his actions in the following paragraphs of his statement:-

" I read the Study (in 1989). The document dealt with an

area, part of which was outside the Municipality of

Rockdale. I tabbed those parts of the Study that were

relevant to properties in the Municipality of Rockdale that

had a history of flooding. The Study contained plans that

gave predicted flood levels for storms of various

occurrences, being one in twenty years, one in fifty years,

and one in one hundred years. The Properties I tabbed were

properties which had either been affected by flooding of the

Cooks River or flooding of the drainage system caused by

surges of the Cooks River due to high tides. Though the

Study provided predicted flood levels for Wolli Creek, which

is the water way that abuts the property in this claim,the

predicted flood levels for properties butting the Wolli

Creek were not taken into consideration in relation to

Section 149 Certificates for properties along the Wolli

Creek because there had never been flooding of properties

along the Wolli Creek within the Municipality of Rockdale

and because Council had not adopted the Study.

I have never referred to the Study in issuing Section 149

certificates. I did not believe that the study was a

Council record until it was adopted by the Council for use

in association with its development consents. If the plan

had been prepared by Council I would have considered it a

Council record."

"2. My first contact with the PWD Study was in about 1989

as I have indicated in paragraph 15 of my statement. The

circumstances in which I spoke to Mr Bean were in connection

with a development application received in respect of a

proposed development in Gertrude Street, Arncliffe. This

development was a multi-million dollar hotel with a proposed

excavated carpark. I recall discussing with Mr Bean the

floor levels which had been proposed for that area. I

recall being given a copy of the Study. I had indicated in

paragraph 16 of my statement that I read the study. By

that I meant that I looked at the Table of Contents and the

Introduction to see whether the Study made any reference to

the flood levels for the Gertrude Street area. I found the

plan described as Exhibit 7.4 annexed to the Study. Having

found that plan I did not examine any other part of the

Study. I did not concern myself with the methodology in

the Study but was interested only in the flood levels

relating to the Gertrude Street area. I was aware that

Gertrude Street was below low tide and was a higher risk of

flooding. I was also aware that the Cooks River had broken

its bank on occasions and I therefore considered it

important to have an adequate floor level set for the hotel

development. I discussed the Gertrude Street development

with Mr Bean because I was concerned about the possibility

of flooding. I recall that eventually the conditions of

consent required a minimum floor level which accorded with

the 1:100 year flood event level, RL2, contained in the

Study. I recall taking a copy of the plan and placing it

with the Gertrude Street development application file. I

did not look at those parts of the plan which referred to

Wolli Creek or Henderson Street. I gave the Study back to

Mr Bean."

...

"8. I was aware, shortly after it came into existence, of

the January 1986 Wolli Creek and Bardwell Creek Flood Study.

I never looked at that study until after 1990. In 1986 I

understood that study related to Wolli Creek and Bardwell

Creek upstream of the confluence of those two waterways and

did not relate to Wolli Creek below that confluence or to

the Henderson Street area. I was not aware until after

1990 that it made reference to the Cooks River Flood Study."

46. That Mr Mable was negligent in answering the questions in the s.149 certificates as he did is not in doubt. His negligence went beyond his answers to the s.149 certificates. He was the officer who for several years had the particular responsibility of answering questions relating to flooding. How he could undertake this task without familiarising himself with every detail of the Cooks River Flood Study and of the Wolli Creek and Bardwell Creek Flood 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 applicant's loss.

47. It appears that Mr Mable answered the questions as he did because, so far as he was aware, the property had not been flooded. The fax of February 1991 dealt with a different matter so far as Mr Mable was concerned, for it dealt with the imposition of a condition which would protect users from harm should a storm as severe as a one in 50 year storm affect the area.

48. Mr McDougall submitted that the proper inference was that Mr Mable gave the answers set out in the certificates without caring whether they were true or false, and without paying the matter any attention or making any investigation as to whether the Council had information relating to flooding.

49. It appears to me, however, that Mr Mable was an honest witness and that I should accept his evidence that he gave the answer that he considered to be appropriate. Of course, Mr Mable's evidence was somewhat confused. Mr Mable had no sensible answer to some of the questions put to him. But the overall impression which I gained was that he nevertheless filled in the s.149 certificates honestly and, in his view, correctly.

50. Perhaps I come to this view through long experience in administrative law. When administration has been faulty, the reason is very often that the administrator has misunderstood the task, and has posed to himself the wrong question. And that, I think, has occurred in the present instance. For how otherwise could Mr Mable have completed the flooding question in the s.149 certificates, which he did as a regular part of his duties, 20 times per week, unless he had kept on his desk or close to hand a copy of the diagrams in the Cooks River Flood Study. It seems clear that he regarded his task as being that he should keep himself informed about actual flooding. He did that, and he answered the questions from his knowledge of actual flooding. But that was not the question asked on the certificate and the answers he gave in relation to the subject land were wrong.

51. Mr Mable's approach to the question flowed in part from his failure to give attention to the Cook River Flood Study and to the Wolli Creek and Bardwell Creek Flood Study. His failure to examine these two studies with care undermined his ability to carry out his duties as a council engineer. Mr Mable was not alone in this respect. I gather from Rockdale's loss of the copies of the Cooks River Study and Compendium of Data, from the lack of attention that Mr Mable gave to the studies and from the fact that the Deputy Engineer, Mr Christer, was unaware of the existence of the Cooks River Flood Study until 1991, that the development of a flood plain management plan for Wolli Creek had gradually slipped off Rockdale's agenda of matters requiring attention.

52. In my opinion, notwithstanding the reservation expressed at the end of the s.149 certification, the issuance of the certificates, which were formal documents on which reliance would be likely to be placed, cast upon Rockdale the common law duty to exercise reasonable care in their preparation. A breach of this duty would, unless otherwise provided by statute, give rise to a cause of action for negligence by any person within the ambit of the duty of care, such as a purchaser of land. In my opinion, Mid Density was a person to whom a duty of care was owed at the time of the issue of all three s.149 certificates, including the certificate of 3 March 1990. See Council of the Shire of Sutherland v Heyman [1985] HCA 41; (1985) 157 CLR 424; L Shaddock and Associates Pty Ltd v Council of the City of Parramatta (No.1) [1981] HCA 59; (1981) 150 CLR 225; Parramatta City Council v Lutz (1988) 12 NSWLR 293; Kyogle Shire Council v Francis (1988) 13 NSWLR 396; Curran v Greater Taree City Council (1992) Aust Torts Rep 61-157; State of South Australia v Callipari (unreported, Kirby P, Meagher and Handly JJ.A. 3 September 1992).

53. I therefore turn to the statutory defence of "good faith" which appears in s.149(6) of the EPA and s.582 A (1) of LGA. Mr McDougall submitted inter alia that, if a misstatement was so egregious as to constitute deceit, then it was not made in good faith.

54. In my opinion, the concept of "good faith" in the performance of statutory functions includes two criteria; first, that the act be done bona fide and not maliciously or to achieve an ulterior purpose and, second, 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. Lord Sumner spoke of a like circumstance in Roberts v. Hopwood (1925) AC 578 when considering the exercise of a statutory discretion to pay salaries and wages. At 603-4, Lord Sumner said:-

"Firstly, the final words of the section are not

absolute, but are subject to an implied qualification

of good faith - 'as the board may bona fide think

fit.' Is the implication of good faith all? That is

a qualification drawn from the general legal doctrine,

that persons who hold public office have a legal

responsibility towards those whom they represent - not

merely towards those who vote for them - to the

discharge of which they must honestly apply their

minds. Bona fide here cannot simply mean that they

are not making a profit out of their office or acting

in it from private spite, nor is bona fide a short way

of saying that the council has acted within the ambit

of its powers and therefore not contrary to law. It

must mean that they are giving their minds to the

comprehension and their wills to the discharge of

their duty towards that public, whose money and local

business they administer."

In Lamont v Wyong Shire Council (unreported, 13 December 1991), Palmer A.J. expressed a similar view with respect to action taken in relation to flooding. His Honour said, inter alia at 5-6 :-

"Failure to act in good faith in my view clearly does

not mean acting with negligence. I accept that the

protection afforded by the Section will be lost and

good faith will be absent where there is proof that

the council committed the relevant act or omission

with malice or with a collateral purpose or with a

corrupt purpose. This is not in my view, however, the

end of the matter.

I can conceive of circumstances in which a council may

lose the protection of the section even where it is

demonstrated that the elements to which I have

referred are absent. In my view if council were to

commit an act or omit to do an act which forseeably

could result in damage in circumstances where no

effort or endeavour at all had been made by the

council to take care to avoid the causing of such

damage, then it could well be said that the council

had not demonstrated that in respect of that act or

omission it had been acting in good faith.

...

From what I have said it will appear that negligence,

or even gross negligence, is not sufficient to destroy

the protection afforded by the phrase "in good faith"

appearing in s 582A. What is necessary to destroy

the protection apart from the other factors that I

have mentioned is a lack of an honest endeavour to

undertake the task in which the council has the

responsibility."

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 Cooks River Flood Study and the Wolli Creek and Bardwell Creek Flood Study. In these circumstances, it seems to me that the s.149 certificates were given in good faith.

55. As will be apparent from the above, I am of the view that the elements which are necessary to constitute deceit are not established. Mr Mable mistook his task, but he was not indifferent to the necessity to answer the questions correctly. In any event, as good faith has been established, the statutory defences override any common law cause of action.

56. Had the statutory defences not applied, I would have found that Mid Density suffered loss as a result of the negligence of Rockdale. The certificates were given in the context that they would be relied upon and that harm might be suffered if they were wrong.

57. An issue relating to damages is whether, in the event that liability was established, there was any causal connection between Mid Density's loss and the conduct relied on. It was submitted that Mid Density had entered into the contract to acquire the subject property before obtaining a certificate of its own. The question arises as to whether, at the time of receiving the s.149 certificates in October and November 1990, Mid Density would have been able to avoid the contract. Mr Heman gave evidence that, had the certificates disclosed a risk of flooding, he would have taken all possible steps to avoid the contract. I accept that evidence, as flooding was obviously a matter of importance to Mid Density and a matter which Mid Density had discussed with officers of Rockdale.

58. The case is put by Mr McDougall that Mid Density would have been able to rescind the contract, for it had not been disclosed to Mid Density that there was a proposal to construct a freeway along Wolli Creek which would have affected part of the subject land. As events occurred, Mid Density claimed compensation in relation to this non-disclosure and received an allowance of $25,000 off the purchase price. The argument is that, had Mid Density been informed by the October and November 1990 certificates that there was a risk of flooding, then Mid Density would not have claimed compensation but would have sought to rescind. I accept Mr McDougall's argument in this respect.

59. It is not in dispute that the proposal of the Road Traffic Authority was a proposal within the terms of the warranty set out in para 5(1)(a) of the Conveyancing (Vendor Disclosure and Warranty) Regulation, 1986 (NSW) which provided:-

"5. (1) For the purposes of section 52A (2) (b) of

the Act, the prescribed warranty is as follows:

The vendor warrants that, except as specifically

disclosed in the contract, the land contained in the

contract for sale is not affected at the date of

making of the contract by any of the following

matters:

...

(c) Any proposal for re-alignment, widening or

siting, or alteration of the level, of a road or

railway by the Department of Main Roads or the State

Rail Authority;"

60. Therefore, under reg. 7 (2), there was a right to rescind. This right, having been conferred by regulation, was not limited by clause 8 of the conditions of sale which precluded rescision where a claim for compensation would not exceed 5% of the price. Such a condition does not override reg. 7 (2). See s.52A (5) and (6) of the Conveyancing Act 1919 (NSW).

61. In any event, the certificate of March 1990 had been issued and relied upon before the purchase of the land. Absent good faith, that would have been sufficient to found an award of damages.

62. It is agreed that, should liability be established, the damages to be awarded would be $926,615 plus interest from 26 September 1991. Mr McDougall claimed interest at what he alleged were commercial rates of interest and did so on the footing that, had Mid Density not entered upon the subject transaction, it would have undertaken another profitable development, and he relied upon Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125. However, no evidence was given on this point. In my opinion, in the absence of a specific claim for a different rate of interest and in the absence of proof of facts justifying the allowance of that rate, the ordinary rates of interest adopted by the Court should apply. In New South Wales, those are the usual rates adopted by the Supreme Court of New South Wales. I would calculate interest on that basis.

63. In the circumstances as I see them, however, the application will be dismissed with costs.

Planning and Assessment Act 1979

Local Government Act 1919(NSW)

Re Mid Density Development Pty Limited v Rockdale Municipal Council [1992] FCA 634;

At a glance

Court

Decision date

Before

Source

Judgment (110 paragraphs)

Re Mid Density Development Pty Limited v Rockdale Municipal Council [1992] FCA 634; (1992) 79 Lgera 30, (1992) 39 FCR 579 (18 December 1992)

Parties

Legislation Cited (4)

Cases Cited (14)