Western Districts Developments v Baulkam Hills Shire Council

Western Districts Developments v Baulkam Hills Shire Council - [2008] NSWSC 770 - NSWSC 2008 case summary — Zoe

[11]

JUDGMENT (Appeal decision of Local Court Magistrate - duty of care - vulnerability) 1 HER HONOUR: The issue raised on appeal is whether the Council owed Western District Developments a duty of care to compensate it for economic loss. The Magistrate decided that it did not, largely because Western District Developments was not vulnerable. By summons filed 11 March 2008, the plaintiffs seeks firstly, an order that the appeal be allowed; secondly, that the decision of his Honour Magistrate Brown made on 12 February 2008 in proceedings No 310/2007 be set aside; and thirdly that there be judgment for the plaintiffs in the sum of $47,511 plus interest. On 12 February 2008, the Magistrate gave judgment in favour of the defendant. 2 The first plaintiff is Western Districts Developments Pty Limited (the first plaintiff in the Local Court). The second plaintiff is Turnpike Lane Pty Limited (the second plaintiff in the Local Court). The plaintiffs relied on the affidavits of Patrick Doherty dated 8 April 2008 and 4 June 2008. The defendant is Baulkham Hills Shire Council (the defendant in the Local Court) ("the Council"). For convenience, I shall refer to the parties by name and so far as the plaintiffs are concerned, where reference is made to Western District Developments it is a reference to both Western District Developments and Turnpike Lane Pty Limited. 3 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 73 of the Local Courts Act 1982 permits a party who is dissatisfied with a judgment as being erroneous on a point of law to appeal to this Court. The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered in Allen v Kerr & Anor [1995] Aust Torts Reports 81-354; Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156; Carr v Neill [1999] NSWSC 1263 and R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082; (2002) 37 MVR 479. The judicial officer cannot act on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588. 4 The Council submitted that the Magistrate made a factual finding that the plaintiffs were not vulnerable and in the absence of an error of law, the Magistrate's finding of fact cannot be overturned in this appeal. As Campbell JA stated in State of NSW v Tyszyk [2008] NSWCA 107 at [151] the vulnerability of a plaintiff can be an important factor in deciding whether a duty of care is owed to him or her. In my view, the conclusion that the plaintiffs were not vulnerable is not a finding of fact. Rather vulnerability is an important factor in deciding whether a duty of care is owed. In my view, the Magistrate's determination of whether the plaintiff was vulnerable can be considered as being "erroneous on a point of law". Even if I am wrong, I would grant leave to appeal on a mixed question of fact and law. 5 Section 75 of the Local Courts Act provides that the Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal.

[25]

The Magistrate's decision 28 The Magistrate's decision turned on the issue of vulnerability. The Magistrate stated: "30. Whilst there [are] a number of aspects of these submissions that are highly contentious, what is clear is that "vulnerability" appears to be a necessary characteristic for a plaintiff who hopes to succeed in a claim against a statutory authority for pure economic loss occasioned by some negligence of that authority. I agree with counsel for the defendants that this is the most vital issue: if this question is decided against the plaintiff, its claim cannot succeed. 31. It is difficult to see how the present plaintiff could be classified as "vulnerable" in the relevant sense. As noted in Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at [23] per Gleeson CJ, Gummow, Hayne and Heydon JJ: "…'vulnerability' is to be understood as a reference to the plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of a loss on the defendant." 32. In general, corporations do not appear able to satisfy this test. Corporations must act through agents, and it is the duty of the corporation's directors to ensure that properly qualified and skilled agents are engaged to act for the corporation in regard to the work that it undertakes. And it is generally through the proper application of those agents' care and skill that the corporation is able "to protect itself from the consequences of a defendant's want of reasonable care". 33. Furthermore, the present plaintiff is a company in the business of property development. Although there is no evidence regarding the experience of the company and its directors and agents in this business, it seems correct to deduce that a company that holds itself out to operate in this field should have some substantial understanding of the nature of the business, and the legal requirements that will apply to its obtaining the full right to complete the development. 34. On the other hand, of course, it was argued for the defendant that it has absolutely no duty to anyone to correctly record information on the linen plan or anywhere else in its records. That argument should be comprehensively rejected. It is not for the council to decide whether it will fulfil its statutory duties, and no doubt administrative action could be taken against a council that persistently disobeyed the law. But such is not the case here. 35. Even if the plaintiff were not a corporation however, the result would be the same, because the views I have expressed regarding the need for a person in the business of property development to know what he, she or it is doing, and to engage suitably qualified and expert advisers to enable it to continue profitably in that business, quite naturally applies to all persons, whether natural or purely legal, who engage in that business. 36. There is considerable force in para 12 of the defendant's submissions quoted above; the plaintiff, if properly advised, could have undertaken several relatively straightforward steps to check the accuracy of the information supplied by the defendant. And, as in all cases where information is vital or important to a project, checking that information is both common sense and good business practice. 37. The plaintiff sought to rely of Port Stephens Council v Booth & Ors [2005] NSWCA 323 at par 81-110. However, I think that decision has little in common with the present case, firstly because the plaintiff was not a corporation, and secondly because the problem (noise from Williamtown RAAF base and its activities) was one the plaintiff could readily have ascertained by simple investigation." 38. It follows that the defendant did not owe a duty of care to this particular plaintiff to ensure that all information it provided to the plaintiff regarding dealings with other statutory authorities in relation to a different development application was accurate. Whilst there is also little doubt that, if the duty existed, it was breached, I do not think it is necessary to address that point, or the issue of quantum. I give judgment for the defendant." 29 It is important to appreciate that the onus was upon Western Districts Developments to established that it was vulnerable. Whether the plaintiff was a corporation or not is not to the point. However, the Magistrate (at [35]) stated that even if the plaintiff was not a corporation the result was the same. The Magistrate's reasoning as to why the plaintiffs were not vulnerable was firstly, because a person in the business of property development needs to known what he or she is doing and engage qualified advisers; and secondly, if the plaintiffs were properly advised they could have taken steps to check the information. 30 The parties referred to Bryan v Maloney (1995) 182 CLR 609; Perre v Apand Pty Ltd [1999] 198 CLR 180; Armidale City Council v Alec Finlayson Pty Ltd (1999) 104 LEGRA 9; Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; Port Stephens Shire Council v Booth [2005] NSWCA 323; Sutherland Shire Council v Becker [2006] NSWCA 344; Chandra v Perpetual Trustees Victoria Ltd [2007] NSWSC 694; and NSW v Bovis Lend Lease Pty Ltd [2007] NSWSC 1045. I would add State of NSW v Tyszyk [2008] NSWCA 107 at [151]. 31 The starting point is Woolcock, where in a joint judgment the High Court referred to claims for pure economic loss and at [21], [23] and [24] had this to say: "[21] Claims for damages for pure economic loss present peculiar difficulty. Competition is the hallmark of most forms of commercial activity in Australia. As Brennan J said in Bryan v Maloney : "If liability were to be imposed for the doing of anything which caused pure economic loss that was foreseeable, the tort of negligence would destroy commercial competition, sterilise many contracts and, in the well-known dictum of Chief Judge Cardozo, expose defendants to potential liability "in an indeterminate amount for an indeterminate time to an indeterminate class." That is why damages for pure economic loss are not recoverable if all that is shown is that the defendant's negligence was a cause of the loss and the loss was reasonably foreseeable.

[27]

[24] In other cases of pure economic loss ( Bryan v Maloney is an example) reference has been made to notions of assumption of responsibility and known reliance. The negligent misstatement cases like Mutual Life & Citizens' Assurance Co Ltd v Evatt and Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) can be seen as cases in which a central plank in the plaintiff's allegation that the defendant owed it a duty of care is the contention that the defendant knew that the plaintiff would rely on the accuracy of the information the defendant provided. And it may be, as Professor Stapleton has suggested, that these cases, too, can be explained by reference to notions of vulnerability. …" 32 Damages for economic loss are not recoverable for pure economic loss if all that is shown is that the defendant's negligence was the cause of the loss and that loss was reasonably foreseeable. Something more must be shown. Vulnerability of the plaintiff is an important requirement. 33 In Becker, Ms Becker's claim arose out of a slippage which occurred in fill material on the southern side of her house property in Lilli Pilli on the evening of 17 August 1998. She sought an order that Sutherland Shire Council repair and stabilise the defective drainage system. 34 Both parties placed emphasis upon paragraphs [59] to [60] in Becker where Bryson JA discussed the approach to be adopted in determining whether a duty of care arises. His Honour explained: "59 No authoritative decisions of the High Court of Australia or of this Court of Appeal establish whether or not the appellant had a duty of care to the respondent of the kind upon which the respondent must rely. It is for the Court to decide as a matter of law whether a duty of care existed, deriving such assistance as can be derived from case law which appears to present analogies, while keeping in mind that it is in the nature of analogies to be imperfect. The conclusion on duty of care is to be formed after review and consideration of an array of matters which I do not attempt to define exhaustively, but as an attempt to indicate them, I set them out. Three matters which I have not included in this array, although they receive much attention in recent consideration of duty of care, are control, vulnerability and reliance. As I will later show, I do not think the facts of this case bring them under consideration. All the facts, events and conduct which the evidence makes available for consideration about the application for subdivision approval made to the appellant and how the appellant acted upon it; and particularly the appellant's consideration and approval of the construction of the pipeline and the part in its design and construction taken by others, including the developer and its surveyors, who conducted the development application on its behalf and prepared the plans which were put before the appellant. The range of foreseeable risks, whatever considerations are available bearing on the reasonableness of foreseeability of risks and the events foreseeably likely to occur in the future on the land, including construction of dwellings and other structures, and other activities which might foreseeably expose property to risks of damage; and the ways in which it was foreseeable that damage might happen. The statutory function performed by the appellant, what its statutory or other public duties required or enabled it to do or made it reasonable for it to do; and the presence or absence of any legislative provision or purpose for the protection of property interests of later proprietors. The significance for a decision that there is a duty of care of policy considerations including the avoidance of indefinitely extending liability and policy considerations relating to the burdens or exemptions which relate to exercise of functions of government. The class of persons, classes of property and classes of risks which are to be protected by the duty of care.

[28]

60 The matters for consideration are not highly defined, and not always easy to distinguish from each other. Reasoning of syllogistic cogency supporting a conclusion is not, I would respectfully say, found in case law, even in decisions of the highest authority and, as I understand matters, is not truly available. Decision whether or not as a matter of law there is a duty of care is a judicial task which is beyond complete exposition: but it must be undertaken none-the-less. There is no generalisation which can express the basis upon which the courts will hold that a duty of care exists: this is a situation which is to be recognised, not rightly understood as a problem with an available solution. Compare Avenhouse v Council of the Shire of Hornsby (1998) 44 NSWLR 1 at 8 (Priestley JA)." 35 I shall refer to Booth in some detail as Western Districts Developments submitted that the Magistrate did not properly consider and apply this case. Both Booth and Finlayson involved a Council's duty of care to the owner of the land and to a known prospective purchaser of the land and to other person who might acquire part of the land or lots which are to be subdivided. In Booth, the Council conceded that it owed a duty of care. In Finlayson, the Council did not concede it owed a duty of care. 36 In Booth, on 17 February 1993 a development application was lodged by Lloyd Moffat Investments Pty Ltd ("LMI") with Port Stephens Shire Council ("the Council") for the development of a budget level holiday cabin resort on the family's land, to be known as Fisherman's Village. The proposed development involved construction of forty one new cabins, to be used with an existing four cabins and the restaurant as an eco-friendly tourist facility, together with infrastructure works. The land was to be subject to a community plan subdivision in accordance with the Community Land Development Act 1989, the effect of which would be that lots in the subdivision would be sold with the purchasers having shared interests in community property. On 21 April 1993 the Council granted development consent. 37 LMI lodged a building application with the Council, which was approved on 22 December 1993, and construction of the cabins and the infrastructure works commenced. From late 1993 onwards a number of purchasers entered into contracts to purchase lots in the community plan from LMI. The community plan was registered on 27 September 1994. The purchasers "off the plan", and other purchasers who entered into contracts to purchase lots, completed their purchases. Many of them purchased for investment, intending that their cabin(s) be rented out to persons holidaying at Fisherman's Village. On the registration of the community plan a neighbourhood association was constituted. It appointed Fisherman's Village Pty Ltd ("FV") as managing agent for the neighbourhood plan. FV also entered into agreements with purchasers to act as agent for renting out their cabins. 38 The Williamtown RAAF Base was situated approximately nine kilometres to the south-west of Swan Bay. Aircraft from Williamtown used the Salt Ash Weapons Range ("the Range") for the purpose indicated by its name. The Range was situated much closer to Swan Bay, approximately two and a half kilometres to its south-west. 39 Until at least late 1995 aircraft noise was not a significant problem to those involved in Fisherman's Village. Mr Moffat and others said that they were aware of aircraft in the vicinity of Fisherman's Village, but that the noise did not affect the amenity of the site to the point of discomfort. From late 1995 the aircraft noise increased in frequency of aircraft movements and intensity of noise, although seldom if ever at weekends or at night. Guests at Fisherman's Village complained. In late 1998 it was decided to operate Fisherman's Village commercially only at weekends. 40 In early 1999 proceedings were brought against the Council by LMI, FV and the principals of LMI and FV, Mr Lloyd Moffat and Mrs Michelle Moffat (collectively, "the developers"). Later in 1999 twenty-five proceedings were brought against the Council by lot owners, including LMI and Mr and Mrs Moffat. All the plaintiffs claimed damages for negligence in the grant of the development consent and the building approval, and the lot owners also claimed damages for negligence in the issue of certificates under s 149 of the EPA Act. 41 The Court of Appeal in Booth (per Giles JA with whom Beazley JA and Hunt AJA agreed) under the heading "(ii) Discharge of the duty: stated: "92 Although a duty of care owed to the purchasers was conceded, it is material to ask why the Council came under a duty of care.

[30]

94 The trial judge, Burchett J, had asked whether the council when it came to consider the initial and subsequent development applications, owed a duty of care to "the owner of the land, to a known prospective purchaser of parts of the land, or to other persons who might acquire parts of the land or lots into which it was to be subdivided pursuant to the Council's approval of the particular development application" (FCR at 401). He had enquired into a relationship of proximity, as was the then approach to finding a duty of care, and had regarded as a "fundamental feature" that by approving the development application the council "created a danger, thereby subjecting itself to a duty of care for the safety of others" (at 409-10). His Honour had also regarded as a "highly relevant factor" the concept of "reliance, by those who may be affected, on the public authority to take reasonable care", and had said (at 412) - "The complexity of modern life continually places citizens in situations where, in a practical sense, they have to rely on the due performance of functions by authorities in circumstances in which lack of care may create or permit hidden hazards. In City of Kamloops v Nielsen (supra, at 674), Wilson J described the citizen's "ever-increasing reliance on public officials" as "a feature of our age". Applying this consideration to the present case, the applicant, buying part only of the land, had no practical means either of investigating or of remedying the contamination of the whole area. Yet the applicant would be affected by contaminants both on the land it acquired and on adjacent parcels. It had to rely on the Council to have approved the development with due care. Indeed, it had no means of knowing or reason to suspect what was in the soil to excite a particular need for that care. According to Mr Hegarty, the signs were actually covered over by the gravel in 1985. The Council's officers knew that covering was deceptive, but the ordinary purchaser would not, and the Council should have taken the position of potential purchasers into account: cf Mid Density Developments Pty Ltd v Rockdale Municipal Council (1993) 44 FCR 290 at 300. Nor could the Council have thought a purchaser would obtain, at great expense, chemical analyses of land in a residential subdivision. It is a situation where, of necessity, the functions of the Council, in approving development of the subdivision, must be seen as supplanting private responsibility, to use Mason J's phrase. In my opinion, the existence of a relevant duty of care has been established in respect of each of the decisions upon the development applications involved in this case."

[32]

The Council could not have thought that purchasers of the land would have thought that there was a contamination problem, or would have had the means, or even the idea, of obtaining expensive technical analyses of the land. Here there were both physical proximity and, from Finlayson's perspective, latent defects, yet the Council knew that the gravel surface was deceptive (see Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539 per Deane J (at 577)). The Council had before it an application for residential subdivision which could not proceed without its consent. It must have been apparent to the Council that, if it approved the subdivisions, the overwhelming probability was that the subdividers, unaware of the contamination problem, would sell the resulting blocks to purchasers, who would also be unaware of the problem, and that the blocks would ultimately be used for residential purposes. The Council knew that the use of the land for residential purposes had the potential to cause serious harm to the occupiers of the land. The Council had a statutory obligation to consider whether the land was suitable for residential subdivision, regard being had to risks such as contamination. Without incurring expense or delay, the Council had only to look to the information in its own records and to the specific knowledge of its officers in order to appreciate that it could not conclude that the land was suitable for residential subdivision. The Council's approval of the development applications proceeded, in fact, without the need to resort to any "policy" considerations. It must have been obvious to the Council that the subsequent discovery of the contamination had the potential to cause economic loss to the purchasers of the land. It must also have been obvious to the Council that the subsequent discovery of the contamination in land sold to local residents by a firm such as Finlayson (known to the Council as a local builder/developer) in consequence of the approval given to its subdivision application, had the potential to damage severely Finlayson's reputation as a competent and responsible builder/developer and the community's willingness to deal with him."

[37]

100 Although the appeals were not concerned with the duty of care owed to LMI, it can not be overlooked in considering the duty of care owed to the purchasers; cf Woolcock Street Investments Pty Ltd v CDG Pty Ltd at [14], explaining Bryan v Maloney [1995] HCA 17; (1995) 182 CLR 609 as dependent on the builder owing a duty of care to the first owner of the house. Proper attention to the 2002 ANEF and AS2021 was required in the exercise of reasonable care in considering the development application, in the discharge of the duty of care owed to LMI prior to and apart from the duty of care owed to prospective purchasers from LMI. LMI would not be warned by a s 149 certificate. The Council's own practice, according to the discussion paper, was to advise with the development consent that the proposed development was within the 25 contour, later the 20 contour, although this was not done in the case of LMI's development consent. So far as prospective purchasers were concerned, although according to conveyancing practice most would obtain a s 149 certificate, there was no certainty that all would do so, and just as the duty of care owed to LMI would protect it from putting onto the market the defective commodities of land with inappropriately constructed cabins, so also the duty of care owed to prospective purchasers protected them by preventing the defective commodities coming onto the market. The land was not like a medication which could be used safely or unsafely, so that a duty of care was satisfied by instructions as to use. The time for reasonable care, in the interests of prospective purchasers as well as LMI, was in the consideration of the development application and the building application, so that the approvals were not given without appropriate noise attenuation conditions. … 132 At least on appeal, the purchasers put it differently. They submitted that, had the Council declined development consent or building approval because of the forecast noise exposure, or had it imposed conditions for construction of the cabins appropriate to the forecast noise exposure, the Fisherman's Village development would not have gone ahead. If so, they would not have purchased their lots, and they would not have suffered loss. There was no question of reliance…" 42 The Court of Appeal agreed with the trial judge that the duty of care had been breached. 43 So far as vulnerability is concerned, in Finlayson, the Council was aware of the contamination and the vulnerability lay in the approvals making the contaminated land available to be sold to a subsequent purchaser who was unlikely to become aware of the contamination from its own investigations. In Booth, in relation to LMI, it would not have been warned of the noise attenuation conditions by obtaining a s 149 certificate. So far as the prospective purchasers were concerned, there was no certainty that a prospective purchaser would obtain a s 149 certificate but just as the Council owed a duty of care to LMI to protect it from putting onto the market the defective commodities of land with inappropriately constructed cabins, it also owed a duty of care to prospective purchasers to protect the defective commodities coming onto the market. 44 Returning to the current proceedings on appeal, Western Districts Development submitted that the Magistrate erred in seeking to draw a distinction between corporate and non-corporate plaintiffs in circumstances where a distinction was not sought to be drawn by the Council nor argued before the Magistrate. I agree with Western Districts Developments proposition that the ability of a party to protect its own position is not dependent on being a corporate body or an individual. But the Magistrate also considered whether Western Districts Developments would be vulnerable had it not been a corporate entity. At [35] the Magistrate said that even if the plaintiff was not a corporation the result would be the same. 45 Western Districts Developments also submitted firstly, that the Magistrate did not consider the effect of Booth on the facts of this case; secondly, that the Magistrate erred in finding no duty of care was owed to it as it could have undertaken its own investigations to determine whether the Council's certification was correct; and finally, the Magistrate did not endeavour to consider vulnerability beyond citing from Woolcock Street Investments. 46 Both Finlayson and Booth are authority for the proposition that the Council may owe a duty of care to a prospective purchaser when it decides to grant a consent to a subdivision. It is trite law but worth repeating here. Each case depends upon its own facts and circumstances. One important factor in determining whether the Council owed Western Developments a duty of care is that under a statutory provision namely s 109J(1) of the EPA the Council should not have issued a subdivision certificate because all of the conditions of the consent were not complied with. 47 The vulnerability of the plaintiff can also be an important factor in determining whether a duty of care is owed. In this case there were essentially two reasons why the Magistrate decided that the plaintiff was not vulnerable. They were firstly, the need for a person in the business of property development to know what he, she or it is doing and to engage suitably qualified advisers to enable it to continue profitably in that business; and secondly, that the plaintiff, if properly advised, could have undertaken several relatively straightforward steps to check the accuracy of the information supplied by the defendant. 48 At [19(f)] of the requisitions on title, Western Developments asked Wati if it had any notice or knowledge of any sum due to local or public authorities for sewerage connections. If Wati had such knowledge of any sum due for sewerage connections, Western Developments stipulated that that sum should be paid and receipt produced for inspection prior to settlement. Wati answered the question by saying "Not so far as the vendor is aware." Wati also provided incorrect information to the Council by annexing a s 73 certificate in relation to different lots. 49 The straightforward step that could have been taken by Western Developments was that it could have contacted the Water Board to enquire whether a s 73 Certificate had been issued in respect of the property prior to settlement of the conditional contract. Western Developments was in the position of being able to protect itself from the consequences of the Council's mistake by making its own enquiries of the Water Board and checking if the answer to requestions given by Wati was correct. 50 The Magistrate did not need to fully analyse the cases referred to by Western Developments. Rather, the statement of principle in Woolcock Street Investments is sufficient. In my view, it was open to the magistrate to decide that the plaintiff was not vulnerable and that no duty of care arose in the circumstances. 51 The appeal is dismissed. The decision of his Honour Magistrate Brown dated 12 February 2008 is affirmed. The summons filed 11 March 2008 is dismissed. 52 Costs are discretionary. Costs normally follow the event. The plaintiffs are to pay the defendant's costs as agreed or assessed.

At a glance

Court

Decision date

Catchwords

Source

Catchwords

Judgment (40 paragraphs)

Parties

Cases Cited (23)

Cited By (1)