Sutherland Shire Council v Heyman - [1985] HCA 41 - HCA 1985 case summary — Zoe

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Sutherland Shire Council v Heyman

[1985] HCA 41

High Court of Australia|1985-07-04|Before: Deane JJ

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Court

High Court of Australia

Decision date

1985-07-04

Before

Deane JJ

Source

Original judgment source is linked above.

Judgment (265 paragraphs)

[1]

High Court of Australia Gibbs C.J. Mason, Wilson, Brennan and Deane JJ. Sutherland Shire Council v Heyman [1985] HCA 41

[2]

ORDER Appeal allowed. In accordance with the condition imposed on the grant of special leave, order that the costs of proceedings in this Court be paid by the appellant. Order that the judgment and order of the Court of Appeal (other than the order for costs) be set aside. In lieu thereof, order that the appeal from the District Court be allowed, that the judgment of the District Court be set aside and that there be judgment for the defendant in the action and that the defendant pay the plaintiffs' costs.

[3]

This is an appeal from a decision of the Court of Appeal of the Supreme Court of New South Wales [25] , affirming a decision of Judge Robson given in favour of the respondents, the plaintiffs in an action brought against the appellant, the Council of the Shire of Sutherland ("the Council"). The appeal raises for decision the important questions whether a local authority in New South Wales which gives approval to the erection of a dwelling house owes to persons who subsequently become the owners and occupiers of the house a duty to take reasonable care to ensure that the building is constructed in conformity with the plans and specifications which it has approved, and what duty, if any, it owes to such persons in deciding whether to make inspections, and in carrying out such inspections as are made, during the construction of the building. The special leave to appeal which was granted by this Court was limited to prevent the appellant from raising a further question regarding the limitation period in an action of this kind.

[19]

The learned trial judge rejected a contention that the Council was negligent in giving its approval to the plans and specifications submitted to it. He held that "the plans as approved were adequate protection to ensure compliance with the [Local Government] Act if all the conditions were fulfilled including an inspection being carried out". In argument before us, counsel for the respondents did not challenge this finding, but submitted that the Council was negligent either in carrying out such inspections of the building as were made by its officers while the building was in the course of construction or in failing to make the inspections that ought to have been made. Clause 1(b) of the conditions of the building permit appears to have been designed to give the Council an opportunity to inspect the foundation trenches before the foundations were laid. The learned trial judge inferred that an inspection was made after the trenches had been dug and before the footings were constructed and held that the inspection was carried out negligently. The evidence clearly established that if the trenches had been inspected, it would have been readily apparent that the excavation had not been made "to a depth necessary to secure solid bottoms", as the specifications required, and that the footings proposed to be erected were inadequate. If an inspection was made at that time it was made very carelessly. However, there is no direct evidence whether or not any such inspection was made. The learned trial judge said that it was probable that the builder would have given the notice required by cl. 1(b) of the conditions, and that Mr Pollard, who later checked the framework, appears to have said or done nothing about the failure to supply a survey report or to inspect the trenches, although his recommendation that a check survey should be submitted indicated the importance that he attached to the footings. The learned judge was more ready to draw the inference that Mr Pollard had inspected the trenches because Mr Pollard was not called as a witness; although he had retired from employment with the Council, he was still living in New South Wales. A search of the files of the Council revealed only one document which refers to any inspection of the building; that was a standard form of document used for recording the result of inspections ("the inspection card") and it bore one endorsement: "Frame O.K. 3.12.69, F.W.P." The initials were apparently those of Mr Pollard.

[32]

It is convenient to dispose immediately of one argument submitted on behalf of the Council, namely that s. 317A of the Local Government Act sets the limits of the duties owed by the Council to private citizens when it is acting under Pt XI of that Act. The respondents' action is founded on negligence, and not on breach of statutory duty, and the statutory provisions to which reference has been made are relied on not as the source of the Council's obligations, but as the setting in which its acts and omissions have to be considered. It may be true that if the respondents had sought a certificate under s. 317A their present difficulties would not have arisen, but that section is not decisive of the questions which fall for decision in the present case. The provisions of the section have created difficulties to which attention has been drawn in articles by Professor K.E. Lindgren in the Australian Law Journal, vol. 47, p. 617 et seq. and Professor Peter Butt in the Australian Law Journal, vol. 55, p. 293 et seq. Although sub-s. (1) of s. 317A speaks of a certificate that the building "complies with the Act, the ordinances, and the plans and specifications", sub-s. (4) states that the production of the certificate shall be evidence that "the building complied with the requirements of the Act and ordinances" - no mention is made of the plans and specifications. It has been said that the purpose of s. 317A was to overcome difficulties between vendors and purchasers when an intending purchaser made requisitions concerning the failure of a building to comply with the Act and ordinances: see Australian Law Journal, vol. 47, p. 622 andSeeto Constructions Pty. Ltd. v. Snowy River Shire Council [1] . However, the main effect of the section appears to be to protect a bona fide purchaser for value who has obtained a certificate from action which a local authority might otherwise take in respect of events that occurred prior to the issue of the certificate. For example, a council could not, as against such a purchaser, exercise its power to order demolition under cl. 82 of Ordinance No. 71 if the work which allegedly contravened the Acts and ordinances had been done before the certificate was issued and it could not successfully launch a prosecution under cl. 83(f) of Ordinance No. 71 against the purchaser in respect of the use or occupation of a building which had been completed before the certificate was issued. It has been recognized in the decisions that the section has this effect: see Hayes v. Cable [2] and Crompton v. Lane [3] . It is unnecessary for present purposes to consider those cases further. It is enough to say that s. 317A is not directed to the questions whether the Council owes a duty of care in exercising its statutory functions and if so to whom and in what circumstances such duty is owed.

[36]

The submission made in support of the demurrer is that whatever duties and powers are imposed upon or given to a local council by the planning ordinance are imposed and given for the benefit of the public generally and not for the benefit of individuals or particular classes of individuals, and that for a negligent performance of those duties or a negligent exercise of those powers an action for damages will not lie at the suit of an individual thereby affected. We agree that this is so. With all respect, if this statement was intended to express a general principle it was not then, and is not now, correct. The fact that a statutory provision, which confers powers or duties on a public authority, is enacted for the benefit of the public generally, and confers no private right upon an individual, does not mean that the individual has no right of action at common law if the council is negligent. In East Suffolk Rivers Catchment Board v. Kent [6] , Lord Atkin said: But apart from the existence of a public duty to the public, every person whether discharging a public duty or not is under a common law obligation to some persons in some circumstances to conduct himself with reasonable care so as not to injure those persons likely to be affected by his want of care. This duty exists whether a person is performing a public duty, or merely exercising a power which he possesses either under statutory authority or in pursuance of his ordinary rights as a citizen. Although Lord Atkin dissented in that case, that statement is supported by the authorities which his Lordship cited, and is not contrary to the views expressed by those of their Lordships who were in the majority [7] . In Caledonian Collieries Ltd. v. Speirs [8] , Dixon C.J. and McTiernan, Kitto and Taylor JJ. referred to "the well-settled principle" that "when statutory powers are conferred they must be exercised with reasonable care". The decision of this Court in Birch v. Central West County District Council [9] provides a further example, if one is necessary, of a case in which an action for negligence lay against a statutory authority for damage negligently caused in the course of the exercise of functions conferred on it for the benefit of the public. Long before the decisions in Dorset Yacht Co. v. Home Office [10] and Anns v. Merton London Borough Council [11] the law recognized that persons acting under statutory powers (as well as persons performing statutory duties) might at common law be under a duty of care towards persons likely to suffer damage as a result of their carelessness. What was thought, however, until Anns v. Merton London Borough Council decided the contrary, was that "where a statutory authority is entrusted with a mere power it cannot be made liable for any damage sustained by a member of the public by reason of a failure to exercise that power": per Lord Romer in East Suffolk Rivers Catchment Board v. Kent [12] . The general rule was said to be that the public authority was liable for misfeasance but not for non-feasance. 1. (1960) S.R. (N.S.W.) 398. 2. (1960) 60 S.R. (N.S.W.), at p. 400. 3. [1941] A.C. 74, at pp. 88-89. 4. [1941] A.C., at pp. 85, 95, 99-102. 5. (1957) 97 C.L.R. 202, at p. 220. 6. (1969) 119 C.L.R. 652. 7. [1970] A.C. 1004. 8. [1978] A.C. 728. 9. [1941] A.C., at p. 102.

[37]

In the present case, the Court of Appeal, in deciding that the Council owed a duty of care to the respondents and that there was a breach of that duty, relied heavily on Anns v. Merton London Borough Council, a decision which is indeed of great significance in the development of the law of negligence. In that case the plaintiffs were lessees under long leases granted by the owners (who were also the builders) of a block of flats after the completion of the building. The defendant Borough Council had taken over the liabilities of a local authority which had passed building plans for the block. The case was decided on the pleadings, without a determination of the facts, but on the basis of the plaintiffs' allegations, which were substantially as follows. The builders had constructed the building to a depth of 2 ft 6 ins below ground level only, instead of 3 ft or deeper as required by the plans. Structural movement in the building began to occur because of the inadequacy of the foundations, causing cracks in the walls, sloping of the floors and other damage. The local authority had failed to carry out an inspection of the foundations or, alternatively, an inspection was made by an inspector who failed to use reasonable care and skill and therefore failed to discover the inadequacy of the foundations. It was held by a majority of the House of Lords (Lord Wilberforce, Lord Diplock, Lord Simon of Glaisdale, and Lord Russell of Killowen), (i) "that the defendant council would not be guilty of a breach of duty in not carrying out inspection of the foundations of the block unless it were shown (a) not properly to have exercised its discretion as to the making of inspections, and (b) to have failed to exercise reasonable care in its acts or omissions to secure that the byelaws applicable to the foundations of the block were complied with"; and (ii) "that the defendant council would be liable to the respondents for breach of duty if it were proved that its inspector, having assumed the duty of inspecting the foundations, and acting otherwise than in the bona fide exercise of any discretion under the statute, did not exercise reasonable care to ensure that the byelaws applicable to the foundations were complied with". The court also rejected an argument that the actions were barred by the Limitation Act 1939 U.K. but we are not concerned with that aspect of the matter. Lord Salmon agreed that the Borough Council would be liable if an inspection was made without the exercise of reasonable care and skill, but held that if no inspection was made the plaintiffs' claim should fail.

[51]

I turn then to the second group of propositions for which Anns v. Merton London Borough Council is authority. There was no novelty in holding that the ordinary principles of negligence apply to public authorities exercising statutory functions - powers as well as duties. The distinction between the area of policy and the operational area is a logical and convenient one. There is no doubt that a public authority may be liable for the negligent acts of its servants or agents in carrying out their duties, or exercising their powers, within the operational area, although if the performance of their duties or the exercise of their powers involves the exercise of a discretion, an act will not be negligent if it was done in good faith in the exercise of, and within the limits of, the discretion. In accordance with the principles stated in Anns v. Merton London Borough Council, a local authority has been held liable for damage resulting from negligence in passing building plans submitted for approval (Dennis v. Charnwood Borough Council [31] ) and from the negligent inspection of the foundations of a building while the work of construction was in progress: Mount Albert Borough Council v. Johnson [32] ; see also Dutton v. Bognor Regis Urban District Council [33] , a case decided before Anns v. Merton London Borough Council. Similarly a council has been held liable for negligently granting a planning permission that was defective (Port Underwood Forests Ltd. v. Marlborough County Council [34] ) and the Housing Corporation of New Zealand has been held liable for negligence in approving a house built by a novel method of construction as one in respect of which a loan could be made: Bruce v. Housing Corporation of New Zealand [35] . The decision of this Court in Voli v. Inglewood Shire Council [36] is consistent with, but distinguishable from, this line of decisions, because although it was said [37] , that the council was liable for the failure of its officers, who examined and approved the plans and specifications, to ascertain whether the by-laws had been complied with, the liability of the council was based on the fact that it owned the building whose collapse injured the plaintiffs.

[54]

All the discussion in the cases is in terms of causing harm through action, with the one exception in Lord Atkin's famous statement of the "neighbour principle": "Who, then, in law is my neighbour? The answer seems to be - persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question [39] ." [Emphasis added.] The "acts or omissions which are called in question," however, must be taken to refer to the specific allegations of negligence in the context of the conduct which caused the harm. This would cover omissions such as failing to apply one's brakes while driving, failing to unload a gun which is placed in the vicinity of children or failing adequately to inspect a product that is negligently manufactured and placed on the market. The word "omissions" in the context of the "neighbour principle" refers to omissions as part of an action, and not to merely letting something happen. With all respect, I cannot agree that non-feasance does not come within the rule of Donoghue v. Stevenson. The famous definition of "negligence" given by Alderson B. in Blyth v. Birmingham Water-works Co. [40] (and followed and developed in Overseas Tankship (U.K.) Ltd. v. Morts Dock & Engineering Co. Ltd. (The Wagon Mound [No. 1]) [41] ) includes omissions as well as acts. It was in the following terms: Negligence is the omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do, or doing something which a prudent and reasonable man would not do. The defendants might have been liable for negligence, if, unintentionally, they omitted to do that which a reasonable person would have done, or did that which a person taking reasonable precautions would not have done. 1. [1932] A.C. 562. 2. [1932] A.C., at p. 580. 3. (1856) 11 Ex. 781, at p. 784 [156 E.R. 1047, at p. 1049]. 4. [1961] A.C. 388, at p. 426.

[65]

I now turn to apply to the present case the principles which I have been discussing. The powers conferred by Div.4 of Pt XI of the Local Government Act and by Ordinance 71 were intended to ensure that buildings are properly constructed in the interests of health and safety and, I should think, also in the interest of achieving or maintaining a standard of building appropriate to the municipality or area of the municipality concerned. In those circumstances, although no relevant statutory duty was imposed on the Council, it owed to the plaintiffs, as owners and occupiers of a house erected subject to its approval and under its control, a duty at common law to give proper consideration to the question whether it should exercise its powers, including its powers of inspection. The Council will therefore be liable to the plaintiffs for the damage which they have suffered if that damage is caused by a failure of the Council to perform that duty. However, the duty was not as extensive as that suggested by Hope J.A. - it was not a duty to take reasonable care that the footings were inspected - and it involved a large element of policy or discretion. The Council had no statutory duty to inspect the building at any time before completion, and there was nothing in the relationship between the Council and the building owners, or in the circumstances, that gave rise to a duty to make an inspection. The Council had a discretion as to how and when it should exercise its powers, and it could not be rendered liable for negligence unless it were shown that it had not properly exercised that discretion. The difficulty which faces the respondents in the present case is that attention was not directed to this question at the trial. The evidence shows that the municipality was a large one, with an area of 184 square miles. In each of the years 1968 and 1969 more than 4,000 building applications were made. In 1968 the Council employed 17 inspectors in its health and building department, of whom ten were employed in the field; in 1969 the number of inspectors in the field was reduced to eight. The evidence does not show, and these figures by themselves do not indicate, whether the number of inspectors was adequate to enable all necessary inspections to be made, and if not whether it was financially practicable to appoint more inspectors. What is more important is that it does not appear that the Council failed to give proper consideration to the question of what inspections should be made, either generally or in this case. The Council did of course have a system whose object was to ensure that buildings were constructed in accordance with (inter alia) the approved plans and specifications. It is true that the evidence discloses a weakness in that system - when a notice was received under cl. 2(c) of the conditions in the form used in the present case, the inspector sent out to inspect the framework would probably be unaware whether any earlier inspection had been made. It may be surmised that this system might have been improved with little expenditure of money or effort, but the evidence does not establish that this was so. In any case, the evidence does not show that the Council failed to give proper consideration to the question what procedures of inspection should be followed when the system was first introduced, or that it subsequently became aware that the system was defective and failed to give consideration to its improvement. The onus of proving that a public authority is negligent in failing to consider the exercise of a statutory power, when the decision whether or not the power should be exercised is discretionary, is not a light one. Unfortunately for the respondents, they have not discharged it in the present case.

[106]

Except in so far as a statute creates a civil cause of action for breach of duty, the distinction between a statutory power and a statutory duty, generally speaking, has limited relevance to civil liability arising out of performance or non-performance of statutory functions. When a statute sets up a public authority, the statute prescribes its functions so as to arm it with appropriate powers for the attainment of certain objects in the public interest. The authority is thereby given a capacity which it would otherwise lack, rather than a legal immunity in relation to what it does, though a grant of power may have this effect when the infliction of damage on others is the inevitable result of its exercise. In framing such a statute it is inconvenient to describe the intended activities of the authority in terms of a series of positive duties. It is preferable to express those activities as functions or powers so that the authority is free to make policy-making decisions and discretionary judgments with a view to attaining the statutory objects. Decisions and judgments of this kind will be involved as a preliminary to exercising, or declining to exercise, a power and, subsequently, in determining how it is to be exercised. Viewed in this light statutory powers are not in general mere powers which the authority has an option to exercise or not according to its unfettered choice. They are powers conferred for the purpose of attaining the statutory objects, sometimes generating a public expectation having regard to the purpose for which they are granted that they will be exercised. There is, accordingly, no reason why a public authority should not be subject to a common law duty of care in appropriate circumstances in relation to performing, or failing to perform, its functions, except in so far as its policy-making and, perhaps, its discretionary decisions are concerned. And, despite possible indications to the contrary in Anns v. Merton London Borough Council [67] , there is no compelling reason for confining such a duty of care to situations in which a public authority or its officers are acting in excess of power or authority.

[107]

It is now well settled that a public authority may be subject to a common law duty of care when it exercises a statutory power or performs a statutory duty. The principle that when statutory powers are conferred they must be exercised with reasonable care, so that if those who exercise them could by reasonable precaution have prevented an injury which has been occasioned, and was likely to be occasioned, by their exercise, damages for negligence may be recovered (Caledonian Collieries Ltd. v. Speirs [68] ; Benning v. Wong [69] ) has been applied mainly to private Acts. However, it has been frequently applied in Australia to public authorities, notably public utilities, exercising powers under public statutes: Sermon v. Commissioner of Railways [70] ; Essendon Corporation v. McSweeney [71] ; Metropolitan Gas Co. v. Melbourne Corporation [72] ; South Australian Railways Commissioner v. Barnes [73] ; Cox Bros. (Australia) Ltd. v. Commissioner of Waterworks [74] ; South Australian Railways Commissioner v. Riggs [1] ; Voli v. Inglewood Shire Council [2] ; Birch v. Central West County District Council [3] . While some early statements of the principle suggest that the power given by statute is conditioned upon it being exercised without negligence so that negligent exercise amounts to an excess of authority (McSweeney [4] ; Metropolitan Gas Co. [5] ), the better view has always been that the cause of action in negligence arises under the principle by virtue of a breach of a duty of care existing at common law: Geddis v. Proprietors of Bann Reservoir [6] ; London and Brighton Railway Co. v. Truman [7] ;Fullarton v. North Melbourne Electric Tramway and Lighting Co. Ltd. [8] ; East Suffolk Rivers Catchment Board v. Kent [9] ; Riggs [10] . And at least since the decision in Fisher v. Ruislip-Northwood Urban District Council and Middlesex County Council [11] , it has been generally accepted that, unless the statute manifests a contrary intention, a public authority which enters upon an exercise of statutory power may place itself in a relationship to members of the public which imports a common law duty to take care.

[121]

The American experience therefore furnishes support for the view that a public authority is liable for negligent failure to perform a function when it foresees or ought to foresee that: (a) the plaintiff reasonably relies on the defendant performing the function and taking care in doing so, and (b) the plaintiff will suffer damage if the defendant does not take care. Several interrelated questions arise in connexion with the concept of reliance as a sufficient basis for the existence of the duty of care in the class of case with which we are concerned: (1) whether it is an essential element in the concept (a) that there should be conduct on the part of the defendant contributing to the plaintiff's reliance, and (b) that the plaintiff should act to his detriment; and (2) whether the concept extends to general reliance or dependence by those in the position of the plaintiff, as distinct from specific reliance by the plaintiff. The last question is largely a reflection of the earlier questions. It is positive conduct on the part of the defendant or the plaintiff's acting to his detriment which gives rise to specific, as distinct from general, reliance or dependence. Contributing conduct on the part of the defendant is an element in the vast majority of cases simply because without it the plaintiff would fail to establish reasonable reliance. Insistence on conduct contributing to the plaintiff's reliance would conform to a general notion that it is positive conduct on the part of an authority which attracts a duty of care calling for exercise of a statutory power. However, there is no a priori reason why the existence of a duty of care should necessarily be conditioned on the defendant's positive conduct. The same comment may be made about detriment. That the plaintiff has acted to his detriment may strengthen the case for imposing a duty of care, especially if the defendant is aware that the plaintiff has so acted, but there is no underlying reason why it should be regarded as a necessary condition. In the case of a public authority, the foreseeability of the plaintiff's reasonable reliance is a sufficient basis for finding a duty of care, subject to such dispensations as may arise from the special character of a public authority exercising statutory functions, a matter to be discussed shortly.

[133]

The final problem - whether a failure to exercise a statutory power can be causative of damage which has its origin in an earlier and positive act of negligence by another or in some accidental occurrence - may be disposed of shortly. We are concerned, not with the larger question of causation in its application to omissions that have agitated discussion by philosophers, but with the impact on causation of a breach of a duty of care, arising out of a possible relationship of general reliance or dependence, which has as its object the prevention of personal injury or physical damage through the negligence or default of others. Just as the gardener's failure to water the flowers may properly be regarded as a material cause of their dying for want of water, when it is his duty to water them (see Hart and Honoré, Causation in The Law (1959), at pp. 35-36 ), so may failure to inspect amount to a cause of harm, if that failure is in breach of a duty to prevent the occurrence of that harm. When there is a duty to take a precaution against damage occurring to others through the default of third parties or through accident, breach of the duty may be regarded as materially causing or materially contributing to that damage, should it occur, subject of course to the question whether performance of the duty would have averted the harm. This is the approach which has been taken in the case, already mentioned, involving the liability of the occupier for damage resulting from his failure to guard against a danger caused by the positive and wrongful act of another and in the liability of the architect for injury caused to a worker as a result of the architect's failure to inspect a dangerous structure: Florida Hotels Pty. Ltd. v. Mayo [49] ; Clay v. A. J. Crump & Sons Ltd. [50] . And it is the approach which underlies the liability of the defendant for breach of statutory duty to guard dangerous machinery. So, if it is otherwise legitimate to hold that a public authority is under a common law duty of care in relation to a statutory power to inspect buildings in course of erection, the statute having as its object the prevention of injury from dangers arising from faulty construction, the fact that breach of the duty takes the form of a negligent omission is no reason for denying the existence of the duty or that it is a cause which materially contributes to the injury that ensues.

[165]

Clause 14(d) of the Ordinance provides that "[e]very part of a building shall be erected in a good and workmanlike manner". The Council may order the opening, or cutting into, or pulling down of any work where the Council has reason to believe or suspect that anything has been done in contravention of the Act or of any Ordinance, and in the event of the work being found to have been done in contravention of the Act or of the Ordinances, the person doing the work shall be required to comply with the Act or the Ordinances (cl. 82(a)). The Council is empowered to prohibit the use or occupation, without its permission, of any building until it is completed in accordance with approved plans and specifications (s. 316, cl. 83). An inspection must be made by the Council's inspector when a notice is received from the builder or owner on completion in order to determine whether the building has been erected in accordance with the Ordinance and without material deviation from the approved plans and specifications (cl. 83). The doing of any work in connexion with the erection of a building otherwise than in conformity with an approval is an offence (s. 317). Section 317A of the Act provides for the furnishing of a certificate of the Council's opinion that a building either complies with the Act, the Building Ordinance and the approved plans and specifications, or that any contravention of the Act or Ordinance or any departure from the plans and specifications does not need to be rectified. Any person may apply for a s. 317A certificate. No certificate of compliance under s. 317A has ever been applied for or furnished in respect of the house at 14 Bridgeview Road. There was no evidence of the receipt by the Council of a notice before the footings were laid, a notice before the trenches were filled in or a notice of completion. There was no evidence of an inspection by the Council's inspector of the house after completion but before occupation. Nor is there any evidence of the giving of any permission to occupy.

[201]

If his Lordship meant only that a public authority when it is engaged in the performance of statutory functions that are not inherently dangerous may, on general principles, be under a general duty of care I would respectfully agree. But the "normal" duty of care cannot be a duty to exercise a statutory power to prevent injury to another, or otherwise to act in such a way as to prevent injury to him, unless Parliament has imposed such a duty or unless the authority has itself created or increased the risk of injury of that kind. In the absence of a statutory duty, a "normal" duty to exercise care cannot arise unless the acts actually done in exercise of a statutory power create or increase a risk of foreseeable injury to another, and then the duty is to do those acts with reasonable care and to take "reasonable precautions" to prevent that injury occurring. Thus in Birch v. Central West County District Council [13] the Council, an electricity authority, was held liable to a customer for damage sustained because of its failure to provide electricity at the normal voltage level when there was a known risk of damage created by the supply of electricity at the lower voltage level and that risk was avoidable by the exercise of reasonable skill and care. The duty of care arose from the Council's act in supplying electricity at what was known to be a dangerously low voltage rather than from its statutory obligation to supply: per Walsh J. [14] . The duty depended on general principles, not on the provisions of the statute. Indeed, Barwick C.J. said [15] that the duty of care was "unconnected with its statutory authority, or any duty derived from its constating statute". In Shaddock [16] the performance of public functions by the Council was one of the circumstances which warranted a conclusion that the Council realized or ought to have realized that a person seeking information from the Council about town planning proposals intended to act upon the information given so that a duty of care arose in the giving of the information: see per Gibbs C.J. [17] ; Stephen J. [18] ; Mason J. [19] . Again the duty of care arose not by reason of the statutory powers with which the Council was invested but because the Council had adopted a practice of providing information which it possessed as a planning authority and private persons were accustomed to seek and to act on the information provided.

[223]

It is equally at odds with practicality. If a building is said to suffer fresh damage when, without any external cause, the initial damage reaches a certain stage of severity, successive causes of action will arise and, as the owners of the property may have changed, the causes of action may be vested in different persons. What are the implications? I shall assume that the measure of damages for this kind of damage may be either diminution in value of the property or the cost of making the damage good, dependent upon the circumstances. Then let it be assumed that vendor and purchaser both know of the original damage and its potential consequences. The first owner would be entitled to damages for the diminution in value of the property on sale, a value which might be expected to reflect the potential for further deterioration. A subsequent owner, having bought at a depressed price, acquires a new cause of action when the degree of deterioration reaches the critical stage which is seen to be fresh damage. He would be entitled to the cost of repairs. If Lord Wilberforce's view in Anns [37] were adopted, the measure of damages to which he would be entitled is "the amount of expenditure necessary to restore the dwelling to a condition in which it is no longer a danger to the health or safety of persons occupying and possibly (depending on the circumstances) expenses arising from necessary displacement". So the first purchaser may effect only partial repairs - sufficient to eliminate the risk to health and safety. If the underlying defect is not repaired, a new cause of action would arise with each further deterioration. Next, let it be assumed that the first owner recovers the cost of repairs for damage before it reaches the critical stage, but sells for full value without disclosing that damage or making the repairs, presumably the second owner would be entitled to recover for the total loss of value in the premises once the damage reaches the critical stage. He would recover for damage for which the first owner could have recovered if he had known of the damage.

[234]

The common law imposes no general duty to avoid loss or injury to another merely because it is reasonably foreseeable that one's actions or omissions are likely to cause it. Nor, under the common law, is a person liable in damages for loss or injury to another merely because such loss or injury would not have been sustained if he or she had acted with reasonable care to avoid it. Such a duty arises and such liability exists under the common law only if there be the requisite element of proximity in the relationship between the parties with respect to the relevant act or omission: the injured party must be "so closely and directly affected by my act" that the law adjudges that "I ought reasonably to have [him or her] in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question": per Lord Atkin, Donoghue v. Stevenson [47] . Reasonable foreseeability of loss or injury to another is an indication and, in the more settled areas of the law of negligence involving ordinary physical injury or damage caused by the direct impact of positive act, commonly an adequate indication that the requirement of proximity is satisfied. Lord Atkin's notions of reasonable foreseeability and proximity were however distinct and the requirement of proximity remains as the touchstone and control of the categories of case in which the common law of negligence will admit the existence of a duty of care: see, generally, Jaensch v. Coffey [48] , Governors of the Peabody Donation Fund v. Sir Lindsay Parkinson & Co. Ltd. [49] . It will subsequently be seen that the ultimate question in the present case is whether the relationship between the Council and the respondents possessed the requisite degree of proximity to give rise to a relevant duty of care on the part of the Council to the respondents. At this stage, it is convenient to indicate my understanding of what is involved in the notion of proximity. To some extent, that involves a repetition of views expressed in the course of my judgment in Jaensch v. Coffey [50] .

[236]

The potential ambiguity of the term "proximity" when used in the context of the law of negligence has long been recognized: see, e.g., Grant v. Australian Knitting Mills Ltd. [51] . Its use has, however, been so widespread in that context in leading judgments that it would seem impracticable to avoid it altogether. The most that one can do is to stress the distinction between Lord Atkin's notion of proximity in Donoghue v. Stevenson and his related but distinct test of reasonable foreseeability. Lord Atkin's "proximity" or "neighbourhood" requirement ("this necessary qualification" [52] ) was a substantive and independent one which was deliberately and expressly introduced to limit or control the bare test of reasonable foreseeability. As he formulated it (see the statement, at p. 580 quoted previously and see also, at p. 582 ("the contemplated relationship" [being] " so close that the duty arises") and, at p. 599 (" so close as to create a duty"), emphasis added), it differed in nature from the test of reasonable foreseeability in that it involved both an evaluation of the closeness of the relationship and a judgment of the legal consequences of that evaluation. While this distinction between the notions of "proximity" and "reasonable foreseeability" has been obscured in judgments in many subsequent cases, particularly in cases where the existence of a duty of care went without saying, it remains a fundamental one. Conceptually, it underlay Lord Devlin's exposition of the principles of the law of negligence in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [53] and the speeches of the Law Lords in Dorset Yacht Co. v. Home Office [54] . It has been recognized and applied in this Court in developing areas of the law of negligence: see, e.g., per Stephen and Mason JJ., Caltex Oil (Australia) Pty. Ltd. v. The Dredge "Willemstad" [55] , and per Gibbs C.J., Jaensch v. Coffey [56] . In the House of Lords, it has been again asserted in clear terms by Lord Keith of Kinkel (in a speech with which the four other members of the House agreed) in the recent case of Peabody Fund v. Parkinson [57] .

[238]

In the recent case of Leigh and Sillivan Ltd. v. Aliakmon Shipping Co. Ltd. [58] , Robert Goff L.J. expressed vigorous disagreement with the views expressed by members of this Court in The Dredge "Willemstad" . For present purposes, it suffices to refer more particularly to his Lordship's comments about Stephen J.'s acceptance [59] of the general notion of "proximity" or "neighbourhood" as a control of the circumstances in which the law will adjudge the existence of a duty of care to avoid reasonably foreseeable injury. Robert Goff L.J. [60] commented that "the trouble" with this "approach" is that "it begs the question" for the reason that once "proximity is no longer treated as expressing a relationship founded simply on foreseeability of damage, it ceases to have an ascertainable meaning; and it cannot therefore provide a criterion for liability". There is an incontestable element of truth in that statement in that the notion of proximity is obviously inadequate to provide an automatic or rigid formula for determining liability. With due respect however, I do not think that that consideration escaped either Lord Atkin or others who have propounded or accepted the notion of proximity as performing the function which Stephen J. ascribed to it. Nor do I think that either the validity or the utility of common law concepts or principles is properly to be measured by reference to whether they can be accommodated in the straitjacket of some formularized criterion of liability. To the contrary, it has been the flexibility of fundamental concepts and principles which has enabled the common law to reflect the influence of contemporary standards and demands and which has in no small part underlain its genius to provide a living element of the social compact of civilization for different peoples through different ages and in different parts of the world. As Lord Devlin pointed out in Hedley Byrne [61] , Lord Atkin himself in Donoghue v. Stevenson [62] expressly warned against the danger of unduly restricting "the inherent adaptability of English law" and expressly recognized [63] that what he was stating was a "general conception of relations giving rise to a duty of care". To dismiss that general conception on the ground that it does not provide a "criterion for liability" or on the ground that it lacks "ascertainable meaning" is, in my respectful view, to ignore its importance as the unifying rationale of particular propositions of law which might otherwise appear to be disparate. More important, it is to disregard its substance and true function.

[240]

The requirement of proximity is directed to the relationship between the parties in so far as it is relevant to the allegedly negligent act or omission of the defendant and the loss or injury sustained by the plaintiff. It involves the notion of nearness or closeness and embraces physical proximity (in the sense of space and time) between the person or property of the plaintiff and the person or property of the defendant, circumstantial proximity such as an overriding relationship of employer and employee or of a professional man and his client and what may (perhaps loosely) be referred to as causal proximity in the sense of the closeness or directness of the causal connexion or relationship between the particular act or course of conduct and the loss or injury sustained. It may reflect an assumption by one party of a responsibility to take care to avoid or prevent injury, loss or damage to the person or property of another or reliance by one party upon such care being taken by the other in circumstances where the other party knew or ought to have known of that reliance. Both the identity and the relative importance of the factors which are determinative of an issue of proximity are likely to vary in different categories of case. That does not mean that there is scope for decision by reference to idiosyncratic notions of justice or morality or that it is a proper approach to treat the requirement of proximity as a question of fact to be resolved merely by reference to the relationship between the plaintiff and the defendant in the particular circumstances. The requirement of a relationship of proximity serves as a touchstone and control of the categories of case in which the common law will adjudge that a duty of care is owed. Given the general circumstances of a case in a new or developing area of the law of negligence, the question what (if any) combination or combinations of factors will satisfy the requirement of proximity is a question of law to be resolved by the processes of legal reasoning, induction and deduction. On the other hand, the identification of the content of that requirement in such an area should not be either ostensibly or actually divorced from notions of what is "fair and reasonable" (cf. per Lord Morris of Borth-y-Gest, Dorset Yacht Co. v. Home Office [64] and per Lord Keith of Kinkel, Peabody Fund v. Parkinson [65] ), or from the considerations of public policy which underlie and enlighten the existence and content of the requirement.

[242]

In the present case, the Council's active connexion with the erection of the house was limited to the exercise of some of its statutory powers and functions with respect to buildings within its local government area. Those statutory powers and functions and their partial exercise provide the context and the essential content of the only relevant relationship between the Council and the respondents with respect to the house. They are to be found in the provisions of the Local Government Act 1919 N.S.W. ("the Act") and of the Ordinances made thereunder which were in force at the time when the plans of the house were approved (subject to conditions) by the Council and when the building was erected. They forbade the erection or alteration of a building without the prior approval of the local council (Act, s. 311). They provided that applications to a local council for approval must be in the prescribed form (s. 312). They specified the matters which a local council should take into consideration in dealing with such applications (s. 313). They required that a local council consider each application and the plans and specifications accompanying it and, subject to the provisions of the Act, approve, approve subject to conditions or disapprove the application (s. 314). Among the matters which were required to be taken into consideration were the stability of the proposed building and whether subsidence of the site was likely (s. 313(1)(b) and (m)). The doing of any work in connexion with the erection of a building otherwise than in conformity with the approval was made an offence (s. 317) as was a failure to comply with the provisions of Ordinance 71 which was the then Building Ordinance (see Ordinance No. 71, cll. 83(f) and 84). Section 310 of the Act provided that, subject to the provisions of the Act and Ordinances, every building "hereafter erected in the area" shall, to the satisfaction of the Council, be erected in conformity with the Act, the Ordinances and with the application, plans and specifications in respect of which the Council gave its approval for the erection of the building. Clause 83 of Ordinance No. 71 required that "the person by or in consequence of whose order the building is being erected" give notice in writing to the local council "forthwith upon completion" and that "forthwith" upon the receipt of such notice there be an inspection by "the proper servant" of the Council who "shall inspect and report to the Council whether or not the building has been erected in accordance with this Ordinance and without material deviation from the approved plans and specifications". In some cases, such as where it appears that reliance was in fact placed by a plaintiff upon the content of such a report, the provisions of cl. 83 may assume particular importance. They are of but background relevance in the present case however since the evidence indicates that no such report was made for the reason that neither the then owners nor the builder gave the requisite notice of completion to the Council and there is no suggestion in the evidence that the respondents adverted to, let alone relied upon, any assumption that such a report would have been made to the Council.

[243]

At relevant times, the Council has exercised and discharged the above statutory powers and functions generally in relation to buildings in its area. As has been said, it exercised and discharged some of them in relation to the house involved in the present case: the plans and specifications of the particular house were approved by the Council and there was subsequently an inspection, by a Council building inspector, of the house in course of erection when the building inspector failed to observe either that the foundations of the building being erected were inadequate and unsafe or that there was considerable discrepancy between the foundations of what was being built and the foundations indicated in the approved plans. There is not to be discerned in the statutory provisions conferring and defining the Council's powers and functions any legislative intention that the Council should enjoy immunity from liability under the ordinary principles of the common law of negligence. Nor is it suggested that those provisions imposed upon the Council any special statutory duty or liability to the respondents, enforceable by action for damages, independently of those ordinary principles. If the distinction between rights under public law and rights under private law, which is well recognized in civil law systems, be relevant (cf. Harlow, Public and Private Law: Definition Without Distinction, Modern Law Review, vol. 43 (1980), p. 241; Samuel, Public and Private Law: A Private Lawyer's Response, Modern Law Review, vol. 46 (1983), p. 558), the respondents' claim is propounded as an ordinary action in negligence for the alleged breach of their private law rights. The existence of liability on the part of a public governmental body to private individuals under those principles will commonly, as a matter of assumed legislative intent, be precluded in cases where what is involved are actions taken in the exercise of policy-making powers and functions of a quasi-legislative character: see, generally, Welbridge Holdings Ltd. v. Metropolitan Corporation of Greater Winnipeg [66] ; Anns v. Merton London Borough Council [67] ; Takaro Properties Ltd. v. Rowling [68] . No such legislative intent can be assumed however in a case, such as the present, where the relevant powers and functions are of a routine administrative or "operational" nature. In such a case, the mere fact that a public body or instrumentality is exercising statutory powers and functions does not mean that it enjoys immunity from liability to private individuals under the ordinary law beyond the extent that there can be actually discerned in the relevant legislation an express or implied intent that the private rights of individuals be displaced or subordinated. Nor does it mean that the existence of the statutory powers and functions, the assumption of responsibility which may be involved in their exercise, or any reliance which may be placed upon a presumption that they have been or are being properly exercised is to be ignored or discounted in determining whether there existed in the relationship between public body or instrumentality and private citizen a degree of proximity which was adequate to give rise to a duty of care under the principles of common law negligence.

[246]

There is much to be said for the view that Lord Atkin's inclusion of "omissions" in his formulation of the requirement of proximity in Donoghue v. Stevenson [69] was intended to be read as referring not to mere failure to act to prevent injury to another but to an omission in the course of positive conduct, such as a failure to apply the brakes of a motor vehicle while driving it on a public road or a failure adequately to inspect a product in the course of manufacturing it for sale on the open market, which results in the overall course of conduct being the cause of injury or damage: see Professor J.C. Smith and Professor Peter Burns, Donoghue v. Stevenson - The Not so Golden Anniversary, Modern Law Review, vol. 46 (1983) at pp. 155-156 . Be that as it may however, the clear trend of authority has been to accept the principles of common law negligence enunciated in cases such as Donoghue v. Stevenson as being of general application (see, generally, the more recent cases cited by Professor Smillie in Principle, Policy and Negligence, New Zealand Universities Law Review, vol. 11 (1984), p. 111 and, in this Court, Jaensch v. Coffey [70] ; Hackshaw v. Shaw [71] ; Papatonakis v. Australian Telecommunications Commission [72] ). In my view, that trend should continue to be accepted in this Court and those principles should be recognized as governing liability in negligence for omissions as well as for acts of commission. That does not mean that the distinction between mere omission and positive act can be ignored in identifying the considerations by reference to which the existence of a relationship of proximity must be determined in a particular category of case. To the contrary, the distinction between a failure to act and positive action remains a fundamental one. The common law imposes no prima facie general duty to rescue, safeguard or warn another from or of reasonably foreseeable loss or injury or to take reasonable care to ensure that another does not sustain such loss or injury: cf. per Windeyer J., Hargrave v. Goldman [73] . That being so, reasonable foreseeability of a likelihood that such loss or injury will be sustained in the absence of any positive action to avoid it does not of itself suffice to establish such proximity of relationship as will give rise to a prima facie duty on one party to take reasonable care to secure avoidance of a reasonably foreseeable but independently created risk of injury to the other. The categories of case in which such proximity of relationship will be found to exist are properly to be seen as special or "exceptional": cf. per Dixon J., Smith v. Leurs [74] and Dorset Yacht Co. v. Home Office [1] . Apart from those cases where the circumstances disclose an assumption of a particular obligation to take such action or of a particular relationship in which such an obligation is implicit, they are largely confined to cases involving reliance by one party upon care being taken by the other in the discharge or performance of statutory powers, duties or functions or of powers, duties or functions arising from or involved in the holding of an office or the possession or occupation of property.

[250]

In the present case, the respondents do not now argue that the operative cause of their loss or damage was some positive act on the part of the Council. The positive actions involved in the erection of the house with inadequate foundations were those of the builder. The Council gave its approval to the plans and specifications of the house but those plans and specifications (in the context of the conditions of approval) disclosed no deficiency in the foundations and it has not been argued in this Court that the Council was in breach of any duty in that regard. The Council had received no notice of completion of the house and had not given its permission to the commencement of its use or occupation. No certificate that the building complied with the requirements of the Act, the Ordinances, and any approved plans and specifications was sought by the then owners or, subsequently, by the respondents or was furnished by the Council. It is true that the respondents complain both that the Council's inspector negligently conducted the inspection which was carried out and that the Council's system of inspecting buildings in the course of erection was negligently inadequate. Upon analysis however, the respondents' claim against the Council is essentially about what it failed or omitted to do in that the act or omission of the Council which they must identify as an operative cause of their loss is the failure or omission, by reason of careless inspection or inadequate system, to secure that the house was not erected with unsafe foundations. The fact that a third party is careless in not observing negligent conduct by another may mean that a failure or omission to protect, warn or rescue the person put at risk by that negligent conduct is itself careless. It does not alter the fact that the relevant operative act or omission is the failure or omission to protect, warn or rescue and not the mere failure to observe which will be relevantly operative only to the extent that it is reflected in the failure or omission to protect, warn or rescue.

[251]

Nor is the respondents' claim in the present case for ordinary physical damage to themselves or their property. Their claim, as now crystallized, is not in respect of damage to the fabric of the house or to other property caused by collapse or subsidence of the house as a result of the inadequate foundations. It is for the loss or damage represented by the actual inadequacy of the foundations, that is to say, it is for the cost of remedying a structural defect in their property which already existed at the time when they acquired it. In Anns v. Merton London Borough Council [3] , it was held by the House of Lords that a local government authority owed a relevant duty of care, in respect of inspection of the foundations of a building, to persons who subsequently became long term lessees (either as original lessees or as assignees) of parts of the building. Lord Wilberforce [4] , in a speech with which three of the other four members of the House of Lords agreed, expressed the conclusion that the appropriate classification of damage sustained by the lessees by reason of the inadequacy of the foundations of the completed building was "material, physical damage, and what is recoverable is the amount of expenditure necessary to restore the dwelling to a condition in which it is no longer a danger to the health or safety of persons occupying and possibly (depending on the circumstances) expenses arising from necessary displacement". While, in a case where a subsequent purchaser or long term tenant reasonably elects to retain the premises and to reinforce the foundations, one possible measure of the damages involved in the actual inadequacy would (if such damages were recoverable) be that suggested by his Lordship, I respectfully disagree with the classification of the loss sustained in such circumstances as "material, physical damage". Whatever may be the position with respect to consequential damage to the fabric of the building or to other property caused by subsequent collapse or subsidence, the loss or injury involved in the actual inadequacy of the foundations cannot, in the case of a person who purchased or leased the property after the inadequacy existed but before it was known or manifest, properly be seen as ordinary physical or material damage. The only property which could be said to have been damaged in such a case is the building. The building itself could not be said to have been subjected to "material, physical damage" by reason merely of the inadequacy of its foundations since the building never existed otherwise than with its foundations in that state. Moreover, even if the inadequacy of the foundations could be seen as material, physical damage to the building, it would be damage to property in which a future purchaser or tenant had no interest at all at the time when it occurred. Loss or injury could only be sustained by such a purchaser or tenant on or after the acquisition of the freehold or leasehold estate without knowledge of the faulty foundations. It is arguable that any such loss or injury should be seen as being sustained at the time of acquisition when, because of ignorance of the inadequacy of the foundations, a higher price is paid (or a higher rent is agreed to be paid) than is warranted by the intrinsic worth of the freehold or leasehold estate that is being acquired. Militating against that approach is the consideration that, for so long as the inadequacy of the foundations is neither known nor manifest, no identifiable loss has come home: if the purchaser or tenant sells the freehold or leasehold estate within that time, he or she will sustain no loss by reason of the inadequacy of the foundations. The alternative, and in my view preferable, approach is that any loss or injury involved in the actual inadequacy of the foundations is sustained only at the time when that inadequacy is first known or manifest. It is only then that the actual diminution in the market value of the premises occurs. On either approach, however, any loss involved in the actual inadequacy of the foundations by a person who acquires an interest in the premises after the building has been completed is merely economic in its nature.

[253]

In the courts below, the learned trial judge and the members of the Court of Appeal understandably relied upon Anns as a basis of their conclusion that the Council was liable to the respondents under the ordinary principles of common law negligence. Indeed, in the subsequent case of Minister Administering the Environmental Planning and Assessment Act 1979 v. San Sebastian Pty. Ltd. [5] , Mahoney J.A., having indicated his awareness of difficulties posed by Lord Wilberforce's judgment, expressed the view that the Court of Appeal's decision in the present case was "based on the fact that the legislation in question was not distinguishable in principle from that in Anns " which it was the Court of Appeal's "duty to follow". In this Court however, it is necessary that the reasoning in Anns be more closely and critically scrutinized. For my part, the result of such scrutiny is that I derive little assistance from that case in the resolution of the present appeal. The main reason is that it appears to me that Lord Wilberforce used the terms "proximity" and "neighbourhood" in Anns with a different connotation from that which is, in my respectful view, appropriate to their use as a touchstone of the existence of a prima facie duty of care in a case in which the alleged negligence lies in an omission or failure to act or in which the alleged damage is mere economic loss. The point would probably be unimportant if all that was involved was a bare question of abstract principle since the wider notion of proximity that had and has, in my view correctly, been recognized and applied in previous and subsequent cases (see, e.g., Hedley Byrne [6] ; Peabody Fund v. Parkinson [7] could be accepted as overlaying Lord Wilberforce's exposition of principle. The point cannot be so readily disposed of in the present case however since it appears to me that it was only by reference to his narrower (in the sense explained below) notion of proximity in Anns that Lord Wilberforce could properly discern the existence of a relevant prima facie duty of care.

[256]

Lord Wilberforce's use of the terms "proximity" and "neighbourhood" must be distinguished from the notion of proximity of relationship which was developed in Donoghue v. Stevenson [9] . Notwithstanding an element of uncertainty introduced by the use of the words "reasonable contemplation", it would seem, from an overall reading of his judgment and from the description and the examples given of the second stage, that the first stage test of "a sufficient relationship of proximity or neighbourhood" is to be understood as effectively connoting no more than the circumstance that there is reasonable foreseeability of injury to another. That view of the first stage is supported by his Lordship's subsequent reference, in McLoughlin v. O'Brian [10] , to the examples which he gives in his judgment in Anns [11] in explaining the second stage as "examples" of circumstances where "foreseeability does not of itself, and automatically, lead to a duty of care". In other words, the thesis of the first stage is that there is a prima facie duty of care whenever, in the reasonable contemplation of a person in the sense of what can be reasonably viewed or foreseen, carelessness on his or her part may be likely to cause damage to another: "he would test the sufficiency of proximity simply by the reasonable contemplation of likely harm": per Woodhouse J., Scott Group Ltd. v. McFarlane [12] and see the cases cited by Professor Smillie, loc. cit., p. 132, n. 2. In contrast, Lord Atkin's notion of a relationship of neighbourhood or proximity was formulated as a separate and general limitation upon the test of reasonable foreseeability: see, generally, Jaensch [13] . It designated a broad and flexible requirement of nearness or closeness in the relationship between plaintiff and defendant which must be satisfied before a relevant duty of care to avoid reasonably foreseeable damage to the plaintiff will have arisen. It should be mentioned that, in McLoughlin v. O'Brian [14] , Lord Wilberforce himself moved away from what appears to me to have been his position in Anns by referring, with apparent approval, to Lord Atkin's judgment in Donoghue v. Stevenson as saying "that foreseeability must be accompanied and limited by the law's judgment as to persons who ought, according to its standards of value or justice, to have been in contemplation".

[258]

The approach in Anns [15] may be a convenient one in cases involving ordinary physical injury to a plaintiff or his or her property as a consequence of the direct impact of a positive act of the defendant. It may be that Lord Wilberforce saw Anns as such a case though his references to the "primary fault" of the builder [16] and to the Council's duty being "a duty to take reasonable care to secure compliance with the bye-laws" [17] (emphasis added) must raise doubt that that was so. In such cases, it is likely to be settled that, if the risk of injury was reasonably foreseeable, any proximity requirement is satisfied: see Jaensch [18] . That approach is, however, inappropriate in cases in the less developed areas of the law of negligence such as where what is alleged is a negligent omission or failure to act or where the damage sustained has been merely economic in its nature. In such cases, as has been said, the mere fact that it is reasonably foreseeable that carelessness on the part of a person may be likely to cause damage to another person is not in itself sufficient to give rise to a prima facie duty of care: a relevant duty of care will only arise if the requisite element of "proximity", in the broad sense in which Lord Atkin used the term in Donoghue v. Stevenson, is satisfied. In any general formulation of the ingredients of a cause of action in negligence which is intended to encompass cases involving mere omission or mere economic loss, "proximity" of relationship in this broader sense should be seen as a distinct general requirement which must be satisfied before any duty of care to avoid reasonably foreseeable injury will arise: cf. Jaensch [19] ; Peabody Fund v. Parkinson [20] . In such cases, as Mason J. demonstrates in his judgment in this appeal, it is likely that the existence of the requisite element of proximity will reflect, among other things, reliance by the plaintiff upon care being taken by the defendant to avoid or prevent injury, loss or damage to the plaintiff or his property in circumstances where the defendant had induced or encouraged such reliance or (depending upon the particular combination of factors) was or should have been aware of it.

[260]

As I read Lord Wilberforce's judgment in Anns, there were two essential steps or "stages" involved in his conclusion that the local council was under a duty of care to the plaintiff in that case. The first step or stage was the conclusion that there was, between local council and owners and occupiers of the premises, "a sufficient relationship of proximity or neighbourhood" in the sense "that, in the reasonable contemplation of the [council], carelessness on [its] part may be likely to cause damage" to such an owner or occupier. The second step or stage was his Lordship's conclusion [21] that the "essential factor that the local authority is a public body, discharging functions under statute" did not, in light of the particular statutory powers and functions, preclude the implication of a relevant duty of care in relation to acts or omissions not falling within the proper ambit of its discretion. In other words, his Lordship, in conformity with his general statement of principle, treated reasonable foreseeability ("contemplation") of the likelihood of injury as sufficing to give rise to a prima facie duty of care and concluded that that prima facie duty of care was not negatived by the nature of the local council's powers and functions and was only reduced or limited in scope by the exclusion of acts or omissions which, under the relevant statutory provisions, came within the ambit of the local council's discretion. It follows from what has been said that I respectfully disagree with this process of legal reasoning at least in cases, such as the present, involving omissions or mere economic loss. That being so, I am unable to accept either the decision in Anns or the general statements in Lord Wilberforce's judgment as offering acceptable guidance in relation to the outcome of the present case. In circumstances in which there was no contact between the respondents themselves and the Council prior to the respondents' purchase of the house, the existence of any relevant prima facie duty of care on the part of the Council in the present case depends, as a matter of ordinary principle, primarily upon whether there existed in any relationship between the Council and the class of persons comprising future owners of the house of which the respondents were members the requisite element of proximity in the broader sense of that term explained above.

[261]

One can discern in the relevant provisions of the Act and Ordinances a number of purposes for which a local council's powers and functions with regard to the erection of buildings within its area were conferred. Those purposes included the advancement and maintenance of the general amenity of the neighbourhood, protection of health and the prevention of injury to the person or property of those within the area. The last-mentioned purpose, namely the safety of the person and property of those within the area, was obviously of particular relevance where the foundations of a building were involved. The conferral upon a local government council of those powers and functions represented a restraint upon the freedom of action of owners of land and their builders. It was a restraint which was enforceable by penal sanction and which had been imposed for, among other reasons, the protection of the general public within the area from actions of the owners of land and their builders which might have a detrimental effect upon the advancement of the purposes for which the powers and functions in relation to the erection of buildings were conferred. A local government council may well, in certain circumstances, be under a duty of care to an owner or prospective owner of land within its area in relation to information provided or positive acts done in the exercise and performance of those powers and functions: cf. L. Shaddock & Associates Pty. Ltd. v. Parramatta City Council [No. 1] [22] . It may, in some circumstances, be under a duty to take reasonable care in that exercise and performance to avoid placing unnecessary restrictions or requirements upon such an owner's or prospective owner's freedom to use and develop his land. It is however, in my view, impossible to discern in the relevant provisions of the Act and Ordinances anything which would warrant the conclusion that there had been included among the purposes for which those powers and functions were conferred a general purpose of protecting owners of premises from sustaining economic loss by reason of defects in buildings which they or their builders might erect or which they might purchase after erection.

[263]

There was no contact at all between the Council and the respondents prior to the respondents' purchase of the house. Nor is there anything in the circumstances which could warrant the conclusion that there was some special element in the relationship between the Council and the previous owners, their builder or the respondents or that the Council had assumed any special duty or obligation to any one or more of those persons. The approach of the previous owners, their builder and the respondents was, plainly enough, to ignore rather than to rely upon the Council with respect to the erection or the condition of the house: only one of the notices indicating that a particular inspection stage had been reached was returned to the Council by the previous owners or their builder; no notice of completion of the building was given to the Council as required by Ordinance No. 71, cl. 83; at the time of their purchase, the respondents made no inquiry about what the Council's records disclosed in relation to the house; the respondents neither applied for nor obtained a certificate of compliance under s. 317A of the Act. There is nothing in the evidence to suggest that the Council made any particular representation to the respondents or anyone else about the exercise of its statutory powers and functions in relation to the house. Nor is there anything in the evidence to suggest that the respondents or anyone else placed any reliance upon the actual or assumed exercise by the Council of those statutory powers or functions. In so far as what I have referred to earlier as causal proximity is concerned, the causal relationship between any carelessness on the part of the Council and the damage sustained was indirect in the sense that any such carelessness on the part of the Council would have been inconsequential were it not for the builder's negligent construction of the house which was the cause of the inadequacy of its foundations. As has been seen, protection of the owner of land from the mere economic loss which might be sustained by reason of a defect in a building erected upon his or her land is no part of the purpose for which the relevant legislative powers and functions were conferred upon the Council. The provisions of the Act and Ordinances have traditionally never been seen as intended to place upon a local government council the duty or burden of protecting an owner of premises from mere economic loss sustained by reason of the negligent erection, by someone other than the council, of a building upon his or her land. Nor is there any readily discernible reason in principle, policy or justice why the general body of ratepayers within an area should bear the economic loss sustained by such an owner of land.

[265]

There are three further matters to which brief reference should be made. The first is that the evidence indicated that consequential damage was sustained by the fabric of the respondents' house by reason of movement resulting from the inadequate foundations. While the damages awarded and upheld in the courts below were confined to the cost of remedying the inadequacy of the foundations and to interest thereon, it would seem appropriate that I indicate that I do not consider that the outcome of the present appeal turns upon any distinction between the inadequacy of the actual foundations and consequential damage to the fabric of the building. It seems to me, as at present advised, that any such consequential damage to the building itself resulting from inherent defect in the foundations is properly to be seen as falling within the same category as the damage involved in the inadequacy of the actual foundations, that is to say, as economic loss sustained by reason of the erection or purchase of the unsound building. The second matter is that it should be apparent that my conclusion that no relevant duty of care was owed by the Council to the respondents in the present case is based to no small extent on the particular combination of factors involved in the case including the nature of the damage sustained by the respondents. That conclusion could not be directly applied to a case where the building owner established that the damage sustained was caused by his reliance upon some particular course of conduct being or having been pursued by the Council in (e.g.) circumstances where the Council had encouraged such reliance. Nor is that conclusion directly applicable to a case where ordinary physical injury to person or property (other than the inadequately constructed building) has been sustained as a consequence of a collapse or partial collapse of a building caused by its inadequate foundations. The third matter is that, since the other members of the Court are divided in relation to it, it would seem desirable that I indicate that I have formed a firm view about the finding in the courts below of carelessness on the part of the Council. Like Mason J. and Brennan J., I consider that, on the evidence, there was some carelessness in the inspection of the house while it was under construction. If, contrary to my conclusion, the Council had been under a relevant duty to the respondents to take reasonable care, in the exercise of its powers of inspection, to prevent economic loss being sustained by the respondents by reason of the house being erected with inadequate foundations, I would have been of the view that the finding of negligence by the learned trial judge, which was confirmed by the Court of Appeal, was correct and could not properly be disturbed.