Dansar Pty Ltd v Byron Shire Council

[2015] HCATrans 93

[2015] HCATrans 093

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney   No S290 of 2014

B e t w e e n -

DANSAR PTY LTD

Applicant

and

BYRON SHIRE COUNCIL ABN 14472131473

Respondent

Application for special leave to appeal

HAYNE J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 17 APRIL 2015, AT 10.38 AM

Copyright in the High Court of Australia

MR A.J.L. BANNON, SC:   I appear with my learned friend, MR A. BOURIS, for the applicant.  (instructed by King & Wood Mallesons)

MR P.W. TAYLOR, SC:   If your Honours please, I appear for the respondent.  (instructed by Moray & Agnew)

HAYNE J:   Yes, Mr Bannon.

MR BANNON:   Your Honours, clause 45(1) of the Byron Local Environmental Plan precluded the Council the capacity to consent authority from approving Dansar’s application unless it was satisfied that that there was a prior adequate arrangement in relation to the sewerage service.

A decision of the New South Wales Court of Appeal, Codlea, confirmed that on an appeal to the Land and Environment Court the court could not make such an arrangement.  There was either one in existence or there was not.  Further that case found that arrangement could comprehend a willingness on the part of the sewerage authority to co‑operate in a consensual way.  Development applications were treated as a matter of fact by the Council as requests for such an allocation.  Justice Leeming specifically confirmed that that is what it was.  It is implicit in the other two judgments that the applications were so treated. 

It follows that the Council in its capacity as a sewerage authority was, therefore, in a position that it had to address numerous requests for sewerage allocation in the form of development applications.  These were requests which it must have appreciated were requests from developers and appreciated that without such an arrangement the development could not proceed or would be delayed until such an arrangement was afforded. 

It was no doubt in recognition of that responsibility that the Council as sewerage authority in September 2000 determined two things:  one, that the relevant sewerage plant, West Byron Sewage Plant, had spare capacity and an amount identified in the cases, 92.75 ETs or equivalent tenements, which were available to be allocated; and, secondly, determined that they would allocate that spare capacity by order of lodgement of DAs.  That is referred to in the majority – Justice Meagher’s decision at AB 105 to 106, paragraph 131.  There is no apparent dispute about that on the factual matters raised in the summary of argument.

That allocation determination, namely, to allocate that spare capacity by order of development application, was not altered at any time from the date of lodgement of the Dansar application, which was 6 February 2001, to its final approval in 2005.  Throughout the whole of that period it was accepted, at trial and on the Court of Appeal, that there was sufficient capacity within the 92.75 to accommodate our request. 

In addition, throughout the whole of that period - and this is referred to at application book 84 at the bottom of the page, the sewerage authority as a matter of fact during that whole period was implementing that determination to allocate spare capacity to development applications as and when they were received. 

My client’s application was received by Council in its capacity as sewerage authority.  It was assessed by reference to their allocation system which they had established, but by reason of mathematical errors and miscalculations as to the available capacity within the 92.75 it failed to obtain its sewerage arrangement which it needed to progress its development until some date in about 2004.  No one disputes that the implementation of the system required only simple maths and that the Council did not seek to defend those errors. 

So, the question arises as how one assesses this by reference to the power being exercised. Justice Meagher, with whom Justice Leeming agreed, identified that the relevant statutory obligation by which the Council was charged with the responsibility of managing the sewerage facility was to be found in section 58 of the Local Government Act.  This is at AB 103, paragraph 123.  His Honour sets out the relevant words that:

the Council was charged under s 58 of the LG Act with the “care and management” of sewerage works –

The management of that facility comprehended a responsibility which required it to deal with multiple development application requests, i.e., requests for allocation of sewerage.  His Honour so found at AB 104 at the bottom of the page, paragraph 128 over to 129.  So there was no specific power to address sewerage allocation requests or, indeed, to allocate, but there was a general management power. 

So understood it follows that everything that the Council did as sewerage authority was within the general rubric of its management power.  It is inevitable that within that wider rubric they would be performing functions and making decisions which, on the one hand, would be characterised as policy decisions or decisions influenced by what may be described and have been described in various authorities in this Court as quasi‑legislative functions, but, equally, countless decisions and functions which would be operational. 

A simple example is, for example, let it be supposed that the Council as sewerage authority determined taking into account community needs, budget allocations and the like, determined that it should extend the main to a particular area in anticipation that there will be development in that area and that would be a good thing to do.  That may well fall into the category of the decision which the Court would say does not attract a duty of care.  The implementation of that decision is to lay the pipe and lay it across streets and dig tunnels, et cetera.  There is nothing offensive in suggesting implementing that decision that a duty of care would be attracted to do that job carefully and not cause damage.

HAYNE J:   A duty to whom?

MR BANNON:   To private citizens so that if ‑ ‑ ‑

HAYNE J:   All private citizens?

MR BANNON:   People who might be captured within the scope of what might be affected, for example, by a faulty connection in the main they were laying which might cause damage to adjacent properties by way of example. 

HAYNE J:   Is there not a difficulty in beginning from a proposition expressed with a generality that the Council owes a duty in exercising its power to manage sewerage allocations that it do so carefully?

MR BANNON:   Yes, I accept that.

HAYNE J:   You have to become much more precise and it becomes – what, that Council owes a duty to an individual applicant for a DA, is it?

MR BANNON:   Yes.

HAYNE J:   What?

MR BANNON:   Perhaps just taking up your Honour’s earlier comment.  We accept because it is such a broad power one cannot apply it across the board, a duty to do everything.  But to the extent one goes to Heyman - and one appreciates that there has been refinement of that in relation to the characterisation of policy versus quasi‑legislative, that case and other cases say you look at the function or power being exercised.  So we accept you do have to – because it is a general power of management - you have to analyse the particular function being performed and we accept too that there will be functions and powers which will not attract a duty, so you have to look at the particular matter. 

What we say the particular matter here is in the context of a duty or a power, I should say, to deal with applications by developers, what the Council did was two things.  It exercised that statutory power by setting in place a system.  The system it set in place was we shall allocate the spare capacity which we have by DA, order a lodgement.

We do not attack that decision.  We do not say there is a duty of care attaching to it mainly because we like the decision, it assists us.  There is no occasion for us in a forensic sense to attack that decision.  What we do say - the second thing that they did was when they received our application they exercised a power within ‑ as part or a function within the general management power to see whether it satisfied that system.  They exercised the power of implementation of that system, which they had established, and in the exercise of that power we say they owed a duty of care to the individual developers to exercise reasonable care in applying their own system.

BELL J:   This is in circumstances in which you do not cavil with the proposition that the question of whether any spare capacity should, in fact, be allocated to developers was a question of judgment for the Council?

MR BANNON:   That is so because there is no need for us to do so because what they have set in place – the effect that ‑ ‑ ‑

BELL J:   They had set in place, as the result of a resolution, an approach to the allocation of capacity that depended on a predictive calculation.  At any time it was open to Council to determine, notwithstanding that theoretical capacity, it would be prudent not to allocate. 

MR BANNON:   Yes.  So, in other words we accept – we accepted below that one could, in the exercise of the type of power which does not attract a duty of care, change the system.  But having established the system, the effect of the system was to say, in effect, there is no legislative wider policy discretionary decision which is a plausible or justifiable reason not to allocate the spare capacity to development applications.  That is the effect of determination. 

HAYNE J:   Can I just see if I can capture it this way, Mr Bannon?  You accept, I think, that your client had no right to an allocation.

MR BANNON:   Yes.

HAYNE J:   You say, accepting that Dansar had no right to an allocation, had the system which the Council had put in place been operated carefully Dansar would have got an allocation.

MR BANNON:   Yes, inevitably. 

HAYNE J:   But, therefore, not only may those two observations be made, the Council owed a duty of care to Dansar to carry out its system carefully, a duty of care to carry out its system carefully where the Council was not obliged to give the allocation in question.

MR BANNON:   That is right.

HAYNE J:   Is there not an internal inconsistency or tension there, or am I starting at shadows?

MR BANNON:   With respect, the starting point is that Caledonian Collieries accepted in a number of cases - which stands for the proposition that a statutory – the general rule is that if 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 or was likely to be occasioned by their exercise, damages for negligence may be recovered.  We are in the field – we are in the discourse of exercise of statutory power which was the exercise of the power to implement their own system, not a failure to exercise.

HAYNE J:   The injury sustained is you do not get something which is not something you are entitled as a right to.

MR BANNON:   Quite so, but in the context where the Council is charged, the sewerage authority, with a system which is designed for the community, designed for us, it is not designed to be managed for the sake of building up spare capacity.  So that in circumstances where – once it is accepted there is spare capacity and there is no legislative or other policy reason not to hand it out ‑ ‑ ‑

BELL J:   But that does not follow, does it?  It would have been perfectly open to Council, relying on Mr Warner’s opinion to depart from an approach to the allocation of capacity based on the algorithm and to simply say, “Look at the increased flows in January - we are not going to allocate any further capacity”.

MR BANNON:   So much may be accepted.  But as found by – accepted by the Court of Appeal, both majority and minority, they did not change the system in reliance on Mr Warner.

BELL J:   But as a matter of judgment they could have at any time.

MR BANNON:   They could have.

BELL J:   So the duty arises, not in connection with the reasonable exercise of the statutory power, but at a later point and is confined to the implementation of a system whilst ever Council is proceeding with the implementation in accordance with the resolutions. 

MR BANNON:   Quite so but that implementation of that system, we say, is necessarily the exercise of a statutory power being an aspect of the overall management power.  It has to be divisible because they have to do a lot of things - the things in this case but many, many things more.

BELL J:   There is just something about it that has the flavour of looking at what happened and inferring the duty from that.

MR BANNON:   The Council, during the course of this very period, as Justice Macfarlan notes, was using the system and handing it out to other people at the same time.  That is why I say in circumstances where they themselves had determined, notwithstanding Mr Warner, that there was spare capacity, there was no policy reason not to hand it out, they implemented a system as exercising a statutory power which we do not attack – sorry, they establish the system and an exercise of power we do not attack, they had to implement that system in an exercise of a statutory power, there is nothing offensive or inconsistent with saying we, like other developers, ought to have been the beneficiary of the proper implementation of that system.  That is the issue. 

We say the way in which the majority dealt with it was, in a sense, not to address that issue but to concentrate on what we say is the anterior exercise of power, namely, the establishment of a system.  Because the majority said they could have changed the system and the system they established involved judgment, therefore, it must follow that the implementation system which, I think, implicitly they say did not require judgment and was operational, whatever word one wants to use meant that the ordinary rule of duty of care, subject to economic loss issues, did not apply. 

We say that is an issue which is of significance and it will apply to a considerable number of cases if in every case one can identify an anterior exercise of power which involves judgment as a defence to say, well, the implementation, albeit mechanical, does not apply – or the duty of care does not arise.

Cases proceed by analogy one accepts.  Avenhouse, we have referred to, is not a great analogy but it is a partial analogy.  Avenhouse was a case dealt with by the Court of Appeal where the Council approved the subdivision development.  The Court of Appeal held that obviously involved judgmental issues but there was a statutory obligation, a specific obligation, I accept, to give effect to that by signing the plan within a reasonable period of time. 

Here, we would say, analogously, they established a system using their quasi‑legislative powers, whatever.  We ask, it is only fair in those circumstances – it is not inconsistent or inappropriate for the Court to impose a private law duty of care in relation to the implementation of that system for so long as the system is there and because it does not involve any quasi‑legislative issue.

HAYNE J:   Dansar, if it had become aware of the error sooner, could not have obtained any public law remedy against the Council, could it?

MR BANNON:   No.  The issue of vulnerability which is raised – the issue is put against us by the Court of Appeal.  The Court of Appeal’s reasoning proceeds in effect - the determinative reason is this is not a power or function to which a duty can attach.  It then goes on to consider factors.  Really, the two key factors they refer to as perhaps amplifying the decision are one, we were not vulnerable.  They say we could have saved some expenses.  Justice Macfarlan’s reasoning on that, we respectfully submit, is far more cogent.  There is nothing we could do - à la Codlea.  There was either an arrangement or there was not.

In relation to the foreseeability of loss, another factor mentioned by the Court of Appeal, we say this type of loss was plainly foreseeable.  I mean, we are a developer.  They knew the – the terms of the application was obviously designed to get profit.  They must have known we would be delayed.  So we say they are not factors which would detract from the utility of the vehicle and which we seek to have this Court consider and the significance of it.

I know my learned friend wishes to refer to section 68 of the Local Government Act by which you can apply to be connected.  That is not referred to by their Honour’s judgments as a reason why we were not vulnerable.  It is referred to as part of the general background and not relied on by the Court of Appeal.  We say no doubt implicitly, although they did not say it, there is a difference between an application to connect when you have got development approval and something where you do not have development approval so you have got no reason to connect.  It is the difference between the notion of connect and the necessary prior arrangement you need for development approval.  If it please the Court.

HAYNE J:   Thank you, Mr Bannon.  Yes, Mr Taylor.

MR TAYLOR:   Your Honours, we have five propositions and one aside, as it were.  The first proposition is that there is no answer to your Honour Justice Hayne’s question that comes from the applicant, the question – duty to do what?  One can add to it “a duty to do what and when?”  My learned friend endeavoured to answer the question by saying duty to do the calculation, but it is necessary to go to the practicalities of implementing the decision. 

This was an application for development approval.  The Council never decided the application.  There was a deemed refusal and the matter became seized by the Land and Environment Court by the time of the breach that Justice Macfarlan says occurred on 29 January when there was a rescission.  Their answer to the question duty to do what has to be answered by reference to the power that the Council was exercising.  It is, with respect, not an answer to say a duty to add up and subtract correctly because it has to be put in the context of the exercise of the statutory power which was, relevantly, in the case of the development approval, to grant or refuse.

That leads me to the second proposition and, again, it is a question that your Honour Justice Hayne asked.  Is there not some tension in this proposition that there can be a duty to calculate – add up and subtract – that lives underneath the umbrella of a statutory function that concededly has no duty of care that attaches to it.

The answer to your Honour’s question is clearly there is a tension.  The way in which the applicant has consistently tried to answer that question is to posit that there is a clear, conceptual distinction between the assessment of sewerage capacity and the allocation.  Justice Meagher in the judgment put that clearly at application book 113 in paragraph 152 where he identified in the second sentence:

A distinction is sought to be made between, on the one hand, the exercise of deciding –

and then the more narrowly formulated duty of implementation.  His Honour then later went on to reject that that was a distinction that could be sustained and it is consistent with the way in which Justice McCallum addressed the matter as well.  Where his Honour Justice Macfarlan deals with the matter is on page 117 in paragraph 162.  I will leave your Honours to read because it is often distracting to read over the top.  Our point is that his Honour is saying in the last two sentences that it is just a misconception to say that what the Council was doing after 29 January 2002 was just simply adhering to some proposition that it would allocate by adding and subtracting.

Everybody knew that there was an issue about double counting in relation to at least one of the developments and everybody knew that that double counting had occurred if it was just a mathematical exercise.  But the Council rescission motion in January 2002 decided to go back and not do the mathematical adding and subtracting, fully aware that all the Council officers had advised it that there was a possible double counting or an actual double counting in relation to one of the developments.

So our second point really is this, your Honour, that the tension exists.  It is a real insuperable obstacle to the applicant’s case.  It is only answered by this notion of saying there is a clear distinction between mathematics and the task of assessing capacity and that very concept is one which Justice Meagher rejected.  Justice Leeming agreed with him and it is entirely consistent with the way in which Justice McCallum dealt with it in paragraph 90 of her judgment.

Your Honour, our third proposition is this.  The absence of a council decision against the conceded freedom to walk away from – let us assume there was a mathematical policy – has a particular significance in negating the existence of a duty of care in this case because of what your Honour Justice Bell has alluded to.  It is supplemented – not just by Mr Warner’s evidence in the Land and Environment Court where he – quite contrary to the way in which Justice Macfarlan dealt with it – Mr Warner clearly said his view was, forget about adding and subtracting, there is just no capacity. 

Added to that is what we say is the exquisitely unambiguous concession made by the applicant’s own expert witness.  We refer to this in paragraph 4.13 of the summary of argument.  Perhaps the useful way to deal with this is to take your Honours to – do your Honours have the supplementary book – summary of blue and black book references?

HAYNE J:   The short answer is, I think, no.  But what is the proposition that you want to make?

MR TAYLOR:   The short point is this.  Your Honours will recall the Land and Environment Court decision was in March, the middle of March 2002.  The evidence was that the peak had been caused by, perhaps, some leaks but the reality was nobody knew what the real cause was and what the circumstances were until around about that time.  The applicant’s expert evidence effectively, bluntly, conceded that it would have been reasonable for the Council to refuse to deal with the application until 31 March 2002 at the latest.

So the notion that you can construct, in these circumstances, a duty to add and subtract accurately in the context of a decision which the Council was no longer obliged to make, and against the background of really uncontested expert evidence that it would have been entirely reasonable for the Council to not even deal with the application before 31 March 2002, bearing in mind that, as a consequence of the Land and Environment Court decision, the application had simply ceased to exist because it had been dismissed on 15 March 2002.  Your Honours, our next point is that ‑ ‑ ‑

HAYNE J:   I think, Mr Taylor, we need not trouble you further.  Mr Bannon, is there anything you wish to say in reply?

MR BANNON:   Yes.  Firstly, the characterisation of the duty – I thought I had answered it – was to take reasonable care in the implementation of its own system.  Secondly, the fact that there was no development application approved is irrelevant because the duty was attached, we say, to the function of the Council acting as sewerage authority.  That is recognised most clearly in Justice Leeming’s judgment.  Thirdly, paragraph 162 at AB 117 confirms our proposition.  The conclusion there was - in the third sentence:

In deciding, by its rescission resolution of 29 January 2002, to adhere in relation to the appellant’s development to the methodology it had previously adopted, the matters to which the Council was able to have regard included any recent data. . . The decision to adhere . . . was not a “mechanical” one.  It involved a judgment –

We do not need to cavil with that.  But what that is simply a recognition of was the system had never changed to the extent in January 2002 they confirmed that system – which was the one I have described which simply involved mathematical calculations.  All that paragraph says is rather than change the system they confirmed it.  What that paragraph does not address, but implicitly acknowledges, the implementation of that system in the way it was in not giving us an allocation could not be justified.  Paragraph 162 does not advance the Council’s case, it simply confirms what we had said.

So the fact that, as Justice Macfarlan records, Mr Warner may have been making different noises, the fact that any expert may have said there are other ways in which one could approach the matter is irrelevant to what Council did.  Council had all that information available to it and confirmed its methodology and the methodology was for something which - it involved an exercise of statutory power which is not attacked. 

The implementation of that methodology was an exercise of statutory power which we do attack because it involved no policy issue and there was nothing inconsistent in the legislation, nothing offensive to an application of the general principle that an exercise of statutory power, being the implementation of that system, attracts a duty of care.

HAYNE J:   Thank you, Mr Bannon.

An appeal to this Court would enjoy insufficient prospects of success to warrant a grant of special leave to appeal.  Special leave is refused.  It must be refused with costs.

AT 11.08 AM THE MATTER WAS CONCLUDED