Eskimo Amber Pty Ltd & Ors v Pyrenees Shire Councill- Pryeness Shire v Day

[1996] HCATrans 207

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M15 of 1996

B e t w e e n -

ESKIMO AMBER PTY LTD, GEORGE STAMATOPOULOS & VOULA STAMATOPOULOS

Applicants

and

PYRENEES SHIRE COUNCIL (previously known as THE PRESIDENT, COUNCILLORS & RATEPAYERS OF THE SHIRE OF RIPON)

Respondent

Office of the Registry
  Melbourne  No M16 of 1996

B e t w e e n -

PYRENEES SHIRE COUNCIL (previously known as THE PRESIDENT, COUNCILLORS & RATEPAYERS OF THE SHIRE OF RIPON)

Applicants

and

WILLIAM ROSS DAY & LEANNE CHRISTINE DAY

Respondents

Applications for special leave to appeal

DAWSON J

McHUGH J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON MONDAY, 5 AUGUST 1996, AT 2.41 PM

Copyright in the High Court of Australia

__________________________

MR J.A. RIORDAN,   If the Court pleases, I appear on behalf of Eskimo Amber and Stamatopoulos and the Days.  (instructed by Oakley Thompson & Co)

MS. M.L. WARREN,   May it please the Court, I appear on behalf of Pyrenees Shire Council in both matters.  (instructed by Maddock Lonie & Chisholm)

DAWSON J:    Mr Riordan?  Well, how do we deal with it?

MR RIORDAN:   Well, your Honours, I am not sure that it is the right order.  I am happy to go in this order.  The matter of principle concerned must be the matter where the finding of general reliance is challenged and that is the matter of Day in which I appear on behalf of the respondent.

DAWSON J:   Yes, well you want to deal with Day first, do you?

MR RIORDAN:   I am happy to do it either way, your Honours.

DAWSON J:   What do you say, Ms Warren?

MS WARREN:   I am happy to deal with it either way.

DAWSON J:   Well, you had better decide amongst yourselves which one goes first.

MR RIORDAN:   I am happy to go first, your Honours.  Your Honours, there are two applications for leave to appeal.  It arises out of findings which differ between the occupiers, the nature of the occupation where fire damage is sustained.  The claims relate to the liability of a local municipality in respect of the exercise of its powers or, at least, the inadequate exercise of its powers after it had learned of the danger and when the danger was of such significance that the inspector in question formed the view that it might burn down Beaufort.  Beaufort was the town where the fire occurred and where the Shire offices were.  It was only a small town but ‑ ‑ ‑

DAWSON J:   Well, not the whole of Beaufort but the main street. 

MR RIORDAN:   No, your Honour, the evidence was that he formed the view that if there were a fire it could raze Beaufort.  That was the inspector’s - I do not know that it makes any difference, only the extent of the number of ratepayers threatened by the occurrence.  Your Honours, in short form and the facts are set out in the application books, a fire occurred in 1988 in a chimney ‑ ‑ ‑

DAWSON J:   We are aware of the facts, Mr Riordan.

MR RIORDAN:   As your Honours please.  Then your Honours are aware that some steps, but inadequate steps, were taken.  They did not increase the risk of the damage but they did not prevent the damage and the question that arose at the trial was whether there had been general reliance or such expectation upon the Shire that it was obliged to exercise its powers and is apparent from the judgment the court considered the principles annunciated in Heyman’s Case and Lutz’s Case principally.

The conclusion reached by the Court of Appeal and by the trial judge was that there was a reliance on the part of ratepayers generally and the occupiers generally an expectation which brought about a duty upon the Council for a positive exercise of its powers.

DAWSON J:   You do not challenge that decision?

MR RIORDAN:   I do not challenge that, no, your Honours.  In relation to the actual ‑ ‑ ‑

KIRBY J:   Heyman and Lutz have been around for a while.  They are regularly applied in the courts under this Court.  You do not challenge the principles.

MR RIORDAN:   No, your Honour, I rely on Lutz’s Case.

KIRBY J:   All you want to bring up here is a rather complicated factual situation and have us rummaging around in the ashes of this fire.

MR RIORDAN:   Well, no, your Honour.  In my submission, if I take the matter in which I am dealing on behalf of the applicant and that is the matter of Eskimo Amber.  This is, as your Honours are well aware, a new and developing area of the law.  The Court of Appeal has chosen to pick out, to pluck out, a category of occupant which is left without any protection by the Council in these circumstances, simply on the basis of the category, not on the basis of the particular circumstances of that occupant.  What the Court of Appeal said was, “If you are an occupant, a tenant, of the defective premises, then there is no duty of care”.  At page 104 the court attempted to justify that distinction.

DAWSON J:   Now, would you say that there was a duty of care to the owner of the premises?

MR RIORDAN:   In certain circumstances, your Honour, yes.  If the Shire examined the fireplace and the inspector appreciated, he got up there, he was the only person who had been up there, he appreciated there was a defect, he came down and he walked out then, in my submission, yes.  The mere fact of being an owner would not deprive that person of protection but the Court has on many occasions said one must take into account all the circumstances of the relationship.

DAWSON J:   But is the owner not under a duty to keep his premises in good order and condition, at least to keep them from being defective so as to be a danger to adjoining premises?

MR RIORDAN:   Yes, your Honour, he is but if that i ‑ ‑ ‑

DAWSON J:   Well then, how can you say that the Council was under a duty to him.

MR RIORDAN:   Well, your Honour, that is a duty to exercise reasonable care.  If it is a hidden danger that could not be detected by normal inspection and that is this particular problem, this defect, then he would be exercising reasonable care if he did not advert to that problem.  The inspector who represents his Shire learns of that defect and does not disabuse you of the notion that he has a safe fireplace but, your Honour, I am not here arguing for the owner.

DAWSON J:   Well, it is difficult to draw a distinction between the owner and occupier, is it not?  That is the point that Justice Brooking makes.

MR RIORDAN:   No, your Honour.  Let us take the position of a tenant who takes up tenancy in a shop.  The owner might know, the previous tenant might know of the defect but not the incoming tenant and that is the situation in this case.  He is totally oblivious to it.  The people who know are the previous tenant who has mislead him, the owner - well, we are not sure about the owner but let us say the owner - and the Shire, his Shire and one of the things the inspector said in his evidence was that he appreciated that if he did not take steps a new tenant might come in and unwittingly light a fire and create a fire that could burn Beaufort. 

Now, that was his specific evidence.  He addressed his mind to that prospect and said, “I appreciated that a further tenant, a later tenant, would be unsuspecting”.  Now, in my submission, the Court of Appeal ought to have addressed that question logically, taking into account the circumstances of this particular tenant who did not know and who was reliant upon the Council who did know.  If the Council had not known, there would be no question but they knew.  It is almost like a rescue case with a relationship.

They knew of that defect but not the tenant but, your Honour, if I could take your Honours quickly to page 104 where the justification for the distinction is drawn and, in my submission, not one of the proposals relied upon is a proper one.  The first, he says, “What of the tenant?” and then he canvasses for about 10 lines the prospect he might be under an obligation to carry out structural changes.  We know that he was not, from the evidence of the inspector, but then he goes on and says in the middle of the page:

It was entitled to possession.....it had the ability to inspect the chimney.

And that is totally illusionary to say that someone loses the benefit of a duty of care because if he was silly enough to climb up his chimney, he would have found a defect that no one else found except by reason of a fire.  Then it goes on:

The defective chimney constituted an actual fire hazard only when in use and it was the use by the company of the defective chimney which led to the outbreak of the fire.

Well, that is simply not a matter that could be relied upon.  Of course he used it.  He was mislead into using it but he would have known if the Shire had alerted him to the danger or the Shire had prevented it.  Then he says:

If it had become aware of the defect -

We know that reasonably he would not:

If it had become aware of the defect in the chimney it could have prevented the outbreak of fire by discontinuing the use -

That is fanciful.  It is nothing more.  He had no idea.  He was a reasonable tenant using the premises ‑ ‑ ‑

DAWSON J:   But why would he place reliance on the Council or the Shire.  I mean, the tenant comes into the building, he does not know whether it has been inspected or not.  Does he say, “Well, I am safe because if anything were wrong the Shire would have done something about it”.

MR RIORDAN:   Your honour, that is the standard argument where a positive act is called for and a positive exercise of statutory powers.  In this case the Shire knows of a hidden danger which threatens not only the people in that building but the entire town.  It ruptures.  If there is any relationship between a Shire, and there is, particularly in a country town, but if there is any relationship it totally ruptures that relationship.  You might say after you have ‑ ‑ ‑

DAWSON J:   Did the tenant here know of the inspection?

MR RIORDAN:   No, your Honour.

DAWSON J:   No, well, why does it rupture the relationship?

MR RIORDAN:   Well, it would have, your Honour, and perhaps it did and that is the nature of general expectation.  It is the nature of Bryan v Maloney.

DAWSON J:   What do you say the tenant’s expectation was?

MR RIORDAN:   The tenant’s expectation was that if his Shire knew of some danger that threatened his life and limb that the Shire would at least convey that to him and exercise its statutory powers but at least tell him that - not take action because they did not want to hurt the feelings of someone of the same ethnic background.  That is the only excuse the Shire gave, apart from not being aware of the extent of its powers.  Now, in my submission, any ratepayer is entitled to say, “If, in the exercise of its powers - and that is how they came by the knowledge - a Shire learns of a threat to the property or life of their ratepayers, then that relationship is one of proximity that demands something be taken to prevent that danger giving rise to the risk that it entails.

Now, in my submission, that is taking it no further than Lutz’s Case.  I know that in Lutz’s Case there was some difference of opinion as to whether or not there was an actual reliance or a general reliance but, in my submission, if there is to be anything in general reliance, then in this case the Shire owed a duty but the only question in this matter, in the matter of Eskimo Amber, is not whether or not there should be general reliance, that was accorded to the other occupiers, it is whether an unsuspecting tenant should suffer as a result and be singled out to suffer as a result, just by reason of the fact that he is a tenant.  In my submission, that conclusion does not follow. 

On page 104 his Honour went on to talk about age and dilapidation simply by virtue of the fact it was 104 years old.  There was no evidence of it being dilapidated at all and then at the end of that page he raised the question of the Shire simply being called upon to satisfy the duty owned by an occupier to his neighbours and what was said was that:

It is reasonable to expect the owner and occupiers of a building to assume responsibility for taking reasonable steps to safeguard neighbouring buildings against dangers from a defect of this kind -

What his Honour was saying there was it is reasonable to impose a duty to exercise reasonable care to prevent the unforeseeable because that is the evidence and that is the conclusion in this case.  It would be impossible for the defendant to prevent danger of that kind which was unforeseeable and his Honour went on to say that in those circumstances any reliance could not be said to be reasonable.  In my submission, there was no evidence at all and none pointed to by his Honour where the tenant had acted in any way other than as a reasonable tenant.

The only reason for this kind of restriction is the sort of comment passed by the trial judge who said, “Well, the rule has never really looked

after purchasers or tenants”.  Now, in my submission, that is no longer the case.  This Court is breaking away from a formularised approach to these problems and the tenant’s matter should have been addressed by paying attention to his particular circumstances.  I have in the outline of the summary of argument at pages 6 and 7 in paragraph 9 pulled together some of the comments - I think it was Justice Deane’s comments - regarding a “strait‑jacket of formularised liability”.  Justice Kirby, “each instance depending upon its particular combination of factors”.

Now, in my submission, there is no reason to simply exclude all occupiers by reason of their occupation.  That is an approach that now, in my submission, ought to be eschewed by this Court and the creation of a category is arbitrary, it is illogical and it interrupts the proper development of the law in a sensitive area relating to the liability of public authorities.  Now, in relation to the Day matter ‑ ‑ ‑

KIRBY J:   Well, we would have to hear Ms Warren first on that.

MR RIORDAN:   Yes, I would have thought so, your Honour, if your Honours please.

DAWSON J:   Thank you, Mr Riordan.  Ms Warren?

MS WARREN:   When the Court of Appeal found that there was not general reliance with respect to my learned friend’s clients, the occupiers of the premises, it was not making an arbitrary decision.  It did so on the basis that the occupants were not helpless and it is that lack of helplessness that is critical and fatal to my learned friend’s submission.  The general line of authorities of this Court has been to the effect that general reliance is called upon to protect the helpless individual who cannot otherwise help him or herself.  In this case, the trial judge made a specific finding of fact that the occupants were not, in fact, helpless, that they were, in fact, able prior to entering into the lease for the premises to conduct a search or inquiry of the Council offices which would have disclosed the letter which put the occupiers and owners on notice that there was a defective fireplace and that the Council required rectification.

That was a finding of fact made by the trial judge with respect to my learned friend’s solicitors at the time the lease was entered into and those findings are contained at page 39 of the application book.  So, on that first basis it is my submission to the Court that the Eskimo Amber application is not a suitable case for this Court to consider general reliance. 

The second submission I make to the Court is that in any event there are critical elements necessary in a general reliance case which are missing in the Eskimo Amber set of circumstances.  In this respect, some of the submissions I will make now may overlap with those I will make to the Court shortly with respect to the Day matter, however ‑ ‑ ‑

DAWSON J:   You will deal with both matters together?

MS WARREN:   Would that be convenient for the Court to deal with that?

DAWSON J:   Yes, I think so.

MS WARREN:   Thank you, your Honour, for the indication. 

DAWSON J:   Then Mr Riordan can have a reply on the Day matter.

MS WARREN:   It would be my submission that whilst the courts have held that it is not necessary for there to be evidence of general reliance, whereas it is necessary to have evidence of specific reliance, it is necessary nonetheless for there to be certain ingredients present before general reliance can be found and an analysis of the cases, particularly since the observations of his Honour Justice McHugh in the Lutz Case discloses that in all of the building and like cases where a duty of care has been alleged against a Shire there has been some nexus between the plaintiff and the Shire; for example, a certificate has been issued or an approval of sub‑division has been issued.

The only cases where there has not been a nexus with a particular Shire or authority has been in personal injury cases and I advert there particularly to the gas explosion cases, Nagle v Rottnest Island and also the Deutscher Case in the Northern Territory.  Now, it is the personal injury cases, in my submission, which are the only ones which the courts do not appear to have required the particular nexus and those cases fall within the very special category that his Honour Justice Mason in Heyman adverted to as being the special cases that warrant special protection by the courts, such as the Coastguard Case, the Lighthouse Case, the Air Traffic Control Case. 

In this case, there was no personal injury claim by my learned friend’s client and, therefore, in my submission, it was necessary for the Eskimo Amber party and, indeed, the Day party to have before the Court, as an ingredient, reliance upon the Council, reliance in the nature of dependency and expectation.  In the circumstances of both cases there was no evidence and not even a suggestion before the Court that the Council had conducted itself in such a way as to induce an expectation on the part of any of the parties that the Council would protect parties in the class of the Days, being the adjoining occupiers, or parties in the class of my learned friend’s client, being the occupiers.

In so far as I submit to the Court that certain ingredients need be present in order to establish general reliance, there were a number of assumptions made by the Court of Appeal below.  In so far as the Day matter was concerned, the court made the assumption that the Days were ratepayers.  In fact, there was no evidence at all at the trial on behalf of the Days.  There was no evidence, certainly, that they were ratepayers.  There was also no evidence of any sort before the court in any of the cases that there was a community expectation that the Shire would intervene to protect anyone at all. 

There was also evidence, by way of contrast, that the situation that the Shire officers faced when the first fire occurred and the Shire wished to serve notice on the occupier and the owner was that the particular Shire officers had never encountered that experience and, indeed, Mr Humphries, the senior Shire Engineer, a man of 26 years experience in local government, had never encountered such a situation. 

Reverting back specifically now to the Eskimo Amber matter, it is my submission that there were ingredients necessary for Eskimo Amber to establish general reliance and they were missing from its case.

The third submission I make with respect to the Eskimo Amber application is that as a matter of policy, general reliance has been used by the courts to protect the helpless and, in this case, it would be contrary to the underlying policy of general reliance if the general reliance principle was extended to assist a party, being an occupier such as Eskimo Amber, that could have helped itself.  On those submissions, I submit to the Court that there is no special leave question before the Court in the Eskimo Amber application and that the application should be refused. 

If it is convenient to the Court I will now turn to the Day matter.  There is a general umbrella special leave question, I submit to the Court, in the Day matter and it is that the findings of the Victorian Court of Appeal have enormous ramifications for local authorities and, in essence, it is my submission firstly that the Court of Appeal went too far in determining when proximity should be based on general reliance and the special leave point that arises from the court’s determination is what are the boundaries when general reliance is to be applied?

In the Day matter, the surrounding facts were so broad that, in my submission, it is potentially uncertain as to what precisely are the prerequisites to establish general reliance other than those spelled out by his Honour Justice McHugh in the Lutz Case.  In the Day Case, as I have already adverted to, there was no evidence that they were ratepayers and the Court of Appeal went so far as to actually say that a duty of care could be owed by an unidentified authority.  Now, that very finding of itself has enormous ramifications for local government authorities and similar agencies and is a matter, in my submission, that warrants clarification and determination by this Court.

DAWSON J:   Where do they say that, Ms Warren?

MS WARREN:   Page 100, if the Court pleases.

DAWSON J:   I see it.

MS WARREN:   Two-thirds of the way down the page just after line 15 the court has been dealing with general reliance and country fire authorities and the like and at line 16 says:

General reliance may be on an unidentified public authority.

In my submission, that statement by the court, along with the other matters I am submitting to the Court, pushes the parameters of general reliance to an extent that was not contemplated in the Lutz Case and subsequent authorities and, in my submission, was not contemplated by Justice Mason in Heyman and it is a matter that warrants clarification and determination by this Court.

KIRBY J:   I can understand the concern about the phrase which seems to be rather wide but the Court would not normally provide special leave to correct some too-wide dicta in the decision of an appellant court.  I mean, we are here to correct orders.

MS WARREN:   Yes, your Honour.  If there was only the obiter I have just taken to the Court in the judgment then I would have to concede I would have difficulties but in the overall context of the facts of this case and the overall lack of evidence and the preparedness of the Court of Appeal below to nonetheless find ‑ ‑ ‑

KIRBY J:   Yes, but this is where you run into the same problem as Mr Riordan.  You accept the principles as stated, particularly in Lutz.  There is nothing entirely new.  It is simply a matter of applying the principles to the facts of this case.

MS WARREN:   Your Honour, in the Lutz Case, and the other authorities which I have adverted to in a general way, there was what I would describe as overtones of specific reliance in the sense that your Honour may recall in the Lutz Case, Mrs Lutz had had extensive dealings with the Council, a number of promises had been made and they were never fulfilled.

KIRBY J:   I think I found specific reliance.

MS WARREN:   Yes, your Honour, with respect, you did.

KIRBY J:   But I think the case is the principle for the approach that Justice McHugh took and it is regularly applied in New South Wales, at least; I think, throughout Australia.

MS WARREN:   Yes, your Honour, but comparing the facts of the Lutz Case with the facts of the Day matter, it is my submission that the Court of Appeal went far, far further because the Days had never had anything to do with the Council at all.  There was no evidence at trial on behalf of the Days and, certainly in the other proceedings that were heard at the same time, there was no evidence as to any dealings between the Council officers and any other adjoining occupiers and it is on that basis, your Honour, in the overall context of the Day application, I submit that the parameters have been pushed too far.

The third special leave question I submit to the Court is whether general reliance should be confined to special categories of cases such as personal injury cases or the more unusual cases that have occurred such as Lutz and other authorities.  Briefly, the line of cases since the Lutz Case has been, as I have already indicated to the Court, that there has been a nexus.  Day, so far as I can ascertain, is the first case out on a limb where there has been no nexus, relationship or dealing on any basis between the particular authority and the plaintiff and the general approach taken by the Court since Lutz, but not considered by this Court, is that only in special cases such as personal injury cases can general reliance be found.

DAWSON J:   Well, you have made that point.

MS WARREN:   Yes, your Honour.  On the basis of those grounds, if it pleases the Court, I submit that there are special leave questions and that special leave should be granted.

McHUGH J:   And refused in the other case?

MS WARREN:   Yes, your Honour, for the reason that I stated at the outset of my submission, with respect to that matter, that it lacks particularly that ingredient of helplessness.

DAWSON J:   Mr Riordan, you have a reply on the Day matter.

MR RIORDAN:   Your Honours, what my friend has said is that there was no evidence of a community expectation.  If I could take your Honours, this was a matter addressed specifically by Mr Justice Brooking at page 98.  He took some care to trace the history of the relevant section and to conclude at about 10 lines down that:

These functions and powers have extended to fire prevention and control since an early stage.  It has long been the position that those who own or occupy premises in a municipality look to the council and to municipal officers to rid them of dangers or inconveniences or other detriments arising from the use or condition of neighbouring buildings -

and so on and he said:

The existence of the powers and their exercise have, as is natural, led to a general expectation that the powers will be exercised.

He said that that could be “judicially noticed” and then he went on to say in any event, there was evidence that the:

notices were served by municipalities in respect of buildings that were dangerous by reason of the risk of fire.

So, his Honour was careful to find that there was a reason for finding a general reliance in these particular circumstances.  My friend says that the boundaries are being extended.  In my submission, the result in the Day Case was on all fours with Lutz’s Case, certainly with Justice McHugh’s decision in that case.

KIRBY J:   Except that there were, as has been pointed out by Ms Warren, more factual indicia of reliance in Lutz.

MR RIORDAN:   Well, your Honour, that is one factor.  If you take a squeaking wheel into account, if that adds to your rights, that is so, even though it was futile but what about if Mrs Lutz’s neighbour had been burnt out?  In my submission, it would have been most unlikely that the Court would have refused her relief just because she was not one of the ones who was complaining bitterly and taking her cause to the council ineffectually and Justice McHugh found that she would not have taken any alternative action in any event so there was no action to her detriment.

What has happened in this case and what marks out this case and I do not know that that has come over, is the nature of the damage.  Here you have a situation where you find that someone with whom you have a relationship, knows of something that is likely to burn you out or kill you.  Now, in those circumstances, if you are asked after the event did you expect to be told beforehand, you would say, “Well, I did not know anything” but after the event, you can imagine what a meeting of ratepayers would have said if Beaufort had been burnt to the ground and the inspector had got up and said, “Look, I knew this tenant” or “He was from the same ethnic background so I decided to do nothing”.  They probably would have lynched him.

Now, that is a fair indication of what the expectation of people can be and, in my submission, the various expressions of expectation through the authorities means that the court is addressing not only a specific reliance but a reliance that would only become apparent if you said to someone, “Do you rely upon your Shire to take these steps if they know that there is a bomb about to explode, if they know this or they know that”.  If a policeman knows there is a bomb over there and he lets me walk into the toilet where the bomb is, will I expect him to have some duty to alert me? 

In my submission, that additional ingredient in the relationship is a very, very real one and the duty to advise of that danger is far greater than simply to advise about burning off blocks or tending to this or that.  The Shire knew and it took no action and, in my submission, the Day judgment was a correct one and, in my submission, the Eskimo Amber judgment discriminated against a tenant without any logical grounds for doing so.

DAWSON J:   Thank you, Mr Riordan.  The Court will take a short adjournment to determine what course it will follow in this case.

AT 3.20 PM SHORT ADJOURNMENT

UPON RESUMING AT 3.23 PM:

DAWSON J:   There will be a grant of special leave in both of these matters.

AT 3.24 PM THE MATTER WAS CONCLUDED