San Sebastian Pty Ltd v Minister [1986] HCA 68;

San Sebastian Pty Ltd v Minister [1986] HCA 68; - HCA 1986 case summary — Zoe

[36]

23. The appellants submit that where A engages in conduct which is intended to cause B or a class of persons to act in a particular manner, A comes under a duty of care to B or any member of the class who is induced to act in that manner. Alternatively the appellants submit that A comes under a duty of care where he has an interest in inducing such action. The American authorities invoked by the appellants are not expressly based on a proposition as wide-ranging as that first stated. By way of illustration, cases such as Rusch Factors, Inc. v. Levin (1968) 284 F.Supp. 85 and Rhode Island Hospital Trust National Bank v. Swartz, Bresenoff, Yavner & Jacobs [1972] USCA4 26; (1972) 455 F 2d 847 dealt, and were expressed to deal, with the liability of accountants for careless financial misrepresentations in certified financial statements supplied by the accountants to their clients in the knowledge that they were to be used by the clients in support of their application to the plaintiffs for funds. In Rhode Island Hospital Trust the accountants not only knew but acknowledged that the plaintiff bank sought the financial statements in connexion with loans which it was proposing to make to the corporation to which the financial statements related. The two decisions provide support for the proposition that, where a statement is made for the purpose of inducing the plaintiff, or the members of a limited class including the plaintiff, to commit themselves financially upon the basis that the statement is true, and the plaintiff acts in reliance on the statement, the law will impose a duty of care on the maker of the statement. This proposition is rather different from the appellants' first submission. The deficiency in that submission may be expressed by saying that it is necessary not only that A intends that B or members of a class of persons should act or refrain from acting in a particular way, but also that A makes the statement with the intention of inducing B or members of that class, in reliance on the statement, to act or refrain from acting in the particular way, in circumstances where A should realize that economic loss may be suffered if the statement is not true. In cases where the defendant intends the statement to operate as a direct inducement to action, the reasonableness of the reliance will not be a critical factor, although in other cases the defendant's appreciation of the reasonableness of reliance will be relevant.

[63]

6. The learned trial judge, Ash J., accepted the evidence of experienced and expert planners that, when a plan for a significant urban area is proposed, it is necessary that there be a satisfactory relationship between planning proposals and the transport system that is or will be available. Feasibility in the planning sense therefore encompasses a correspondence between the transport demands to be expected when a plan of development is implemented and the capacity of the transport system which serves or will serve the relevant area. In preparing the Study documents, however, no adequate research into or analysis of the capacity of the transport system was undertaken or commissioned by the Authority. There was evidence, given by a transport engineer, that the rail and road traffic generated by a workforce of even 35,000 would have caused unacceptable congestion at the Town Hall underground station and on the roadways leading to Woolloomooloo. That opinion was a matter of controversy at the trial and there is no finding that the transport system would not have been capable of meeting the demands of a workforce of 35,000. However, his Honour found that there was a significant error in estimating what the size of the workforce would be if the Study were implemented. The calculations on which the estimate of 35,000 was based were not given in evidence. Obviously the size of the workforce depended on a number of factors: on the extent of site amalgamation, for that determined the maximum floor space ratio which might be permitted; on the floor space ratio actually approved for particular sites; on the proportion of space in the new development allocated to particular uses, for office use attracts the highest number of workers per unit of floor space; on the average area that would be occupied by an office worker; and on a decision by the Commonwealth whether it would develop a large site which it owned as an office block. Ash J. found that the Authority's "'envisaged' workforce figure was very wrong and resulted from very inadequate work including the items of research, investigation and calculation in the preparation of the Study". Whether or not the transport capacity was adequate for a workforce of 35,000, it was clearly insufficient to support a redevelopment which would, on his Honour's finding, "involve a workforce well in excess of 35,000". That finding must be taken to mean that if the Council exercised its powers as the Study documents proposed, the resulting redevelopment would have generated the larger workforce. There is a logical difficulty in accepting that finding, because the Study documents did not prescribe the manner in which the Council would exercise its powers in particular cases and, had the Council continued to regard the plan as its guide to the exercise of its powers, it might nevertheless have exercised its powers so as to restrict development in order that the workforce should not exceed 35,000. However, let it be assumed that the plan was not feasible in the planning sense, because redevelopment along the lines proposed would have generated a workforce - whether 35,000 or more - in excess of the capacity of the transport system to cope. For reasons to be stated, that finding does not suffice to establish the plaintiffs' claims.

[68]

11. There are two general approaches which have been espoused in modern times as appropriate to confine the occasions when a legal duty of care is imposed on a defendant whose carelessness in word, deed or omission might cause loss to the plaintiff. The first approach, advanced by Lord Wilberforce in Anns v. Merton London Borough Council [1977] UKHL 4; (1978) AC 728, at pp 751-752, is to deny the existence of a duty of care which general principle would otherwise establish when there are "considerations which ought to negative, or to reduce or limit the scope of the duty or the class of person to whom it is owed". I have stated elsewhere (Sutherland Shire Council, at p.588; pp.43- 44) my reasons for rejecting this approach. The second approach is to require "a relationship of proximity" as explained by Deane J. in Sutherland Shire Council, at p.595; pp.55-56. Both the Anns approach and the proximity approach have been espoused because it was perceived that foreseeability of loss is not the only criterion for imposing a duty of care in some classes of case. Neither the Anns approach nor the proximity approach defines the legal rules which apply in those classes of case where foreseeability of loss alone does not suffice to give rise to a duty of care. Yet legal rules are required to determine whether a duty of care exists in a particular case. By a legal rule I mean a rule that prescribes an issue of fact on which a legal consequence depends. It is necessary to appreciate that neither approach expresses a legal rule; each approach postulates a framework within which the courts can develop legal rules which limit the occasions when the law would otherwise impose a duty of care. Deane J. in Sutherland Shire Council (at p.595; pp.55-56) saw the importance of the general notion of proximity as "the unifying rationale of particular propositions of law which might otherwise appear to be disparate" and listed factors which might be determinative in different categories of case. His Honour described this notion of proximity as "a touchstone and control of the categories of case in which the common law will adjudge that a duty of care is owed". So long as the general notion of proximity is understood in that way, it will not be treated as a particular proposition of law apt to be applied in the resolution of a particular case. The variable content proposed for the notion denies its applicability as a particular proposition of law. True it is that some legal rules import broad community standards, for instance, a rule expressed in terms of what is reasonable. Such a rule nevertheless requires determination of an issue of fact: McHale v. Watson [1964] HCA 64; (1964) 111 CLR 384, at p 397. But proximity is not a community standard by reference to which issues of fact can be determined, nor is it a particular proposition of law excluding a right to relief otherwise open on the facts of a case. If proximity were misunderstood as being a particular proposition of law expressing a touchstone for resolving a particular case, the judge would be required to define its legal content according to some notion of whether it was appropriate to impose a duty of care in that case. A rule without specific content confers a discretion. The discretion might be described as a judicial discretion and the discretion might be reviewed on appeal but such a rule nonetheless confers a discretion. Damages in tort are not granted or refused in the exercise of a judicial discretion.

[83]

20. In the present case, the plaintiffs submit that the defendants intended to induce developers, including the plaintiffs, to acquire and consolidate blocks of land in Woolloomooloo and to develop the consolidated blocks in accordance with the plan contained in the Study documents. The representation on which the plaintiffs found their case is that the plan was feasible in the planning sense. It is submitted that it was foreseeable that if the representation turned out to be untrue the plaintiffs would suffer loss. What can be said of the other conditions on the existence of a duty of care? It is necessary to identify precisely the relevant representation, that is, the representation which caused the loss complained of. The plaintiffs in this case do not suggest that the representation which caused their loss was merely that the plan was feasible considered as a representation made in isolation. That representation was made, if at all, by implication from the statement that the Study documents had been expertly prepared by the Authority, from the fact that the Council had accepted the plan therein contained and from the publishing of the Study documents. It was the official origins and official acceptance of the plan which at once gave it an appearance of feasibility and engendered such an expectation that the plan would be implemented as to encourage developers to purchase land. It would have been quite unreasonable for a developer to purchase property in Woolloomooloo in reliance on a mere representation that a set of documents - devoid of statutory effect - contained a plan which was feasible irrespective of its origins and its acceptance by the Council. No duty of care could be held to exist with respect to the making of so limited a representation. For the Council and the Authority to say simply "this plan is feasible" is not to offer any inducement to a developer to buy property. On the other hand, a representation that the Council had accepted the plan and intended the Study documents "to serve as a guide in the control of development" is a representation of a very different character, for the Council, as the responsible authority, was vested with the requisite powers to control development in Woolloomooloo. However, that representation cannot avail the plaintiffs for it was true. The plaintiffs are constrained to say that that representation carried by implication a representation that the plan was feasible in the planning sense and was, in that sense, false. But even if that implication should be made (and the want of detail in the Study documents leaves me unsatisfied that it should), the circumstances would not give rise to a duty of care in making the representation.

At a glance

Court

Decision date

Before

Source

Judgment (88 paragraphs)

San Sebastian Pty Ltd v Minister [1986] HCA 68; (1986) 162 CLR 340 (25 November 1986)

Parties

Legislation Cited (4)

Cases Cited (12)