Makawe Pty Ltd v Randwick City Council - [2009] NSWCA 412

No judgment structure available for this case.

Reported Decision: 171 LGERA 165[2010] ALMD 3110

New South Wales

Court of Appeal

CITATION: Makawe Pty Limited v Randwick City Council [2009] NSWCA 412

HEARING DATE(S): 28 May 2009

JUDGMENT DATE:
15 December 2009

JUDGMENT OF: Hodgson JA at 1; Campbell JA at 58; Simpson J at 75

DECISION: Appeal dismissed with costs.

CATCHWORDS: LOCAL GOVERNMENT – Consent authority – Approval of development application for home unit building – Approval of building application – Subsequent flooding of basement car-park due to fluctuations in water table – Whether consent authority owed duty of care to purchaser of home unit building. - TORTS – Negligence – Duty of care – Pure economic loss – Loss to purchaser of home unit building from flooding of basement car-park due to fluctuations in water table – Whether duty of care in respect of such loss owed to purchaser by consent authority that approved development and building applications.

LEGISLATION CITED: Environmental Planning and Assessment Act 1979 ss 76, 90 and 91
Local Government Act 1993 ss 68, 76, 94 and 96
Local Government (Approvals) Regulation 1993 reg 12

CATEGORY: Principal judgment

CASES CITED: Armidale City Council v Alec Finlayson Pty Limited [1999] FCA 330; (1999) 104 LGERA 9
Bamford v Albert Shire Council [1998] 2 Qd R 125; (1998) 97 LGERA 33
Bryan v Maloney (1995) 182 CLR 609
Caltex Refineries (Queensland) Pty Limited v Stavar [2009] NSWCA 258
De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28
Donoghue v Stevenson [1932] AC 562
Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54; (2002) 211 CLR 540
Hill v Van Erp [1997] HCA 9; (1997) 188 CLR 159
Mid-City Skin Cancer & Laser Centre Pty Ltd v Zahedi-Anarak [2006] NSWSC 844; (2006) 67 NSWLR 569
Moorabool Shire Council v Taitapanui [2006] VSCA 30; (2006) 14 VR 55
Perre v Apand Pty Limited [1999] HCA 36; (1999) 198 CLR 180
Port Stevens Shire Council v Booth [2005] NSWCA 323; (2005) 148 LGERA 351
Pyrenees Shire Council v Day [1998] HCA 3; (1998) 192 CLR 330
Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Limited [2009] NSWCA 263; (2009) 53 MVR 502; [2009] Aust Torts Reports 82-031
Sutherland Shire Council v Becker [2006] NSWCA 344; (2006) 150 LGERA 184
Sutherland Shire Council v Heyman [1985] HCA 41; (1985) 157 CLR 424
Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422
Western Districts Development Pty Limited v Baulkham Hills Shire Council [2009] NSWCA 283; (2009) 169 LGERA 62
Wollongong City Council v Fregnan [1982] 1 NSWLR 244
Woolcock Street Investments Pty Limited v CDG Pty Limited [2004] HCA 16; (2004) 216 CLR 515

PARTIES: MAKAWE PTY LIMITED (appellant)
RANDWICK CITY COUNCIL (respondent)

FILE NUMBER(S): CA 40252/08

COUNSEL: S D ROBB QC/ G P SEGAL (appellant)
L KING SC/ S GLASCOTT (respondent)

SOLICITORS: Charles G Roth (appellant)
DLA Phillips Fox (respondent)

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 3020/03

LOWER COURT JUDICIAL OFFICER: Phegan DCJ

LOWER COURT DATE OF DECISION: 16 May 2008

- 56 -

CA 40252/08
DC 3020/03

HODGSON JA
CAMPBELL JA
SIMPSON J
15 DECEMBER 2009

MAKAWE PTY LIMITED v RANDWICK CITY COUNCIL

Headnote

FACTS

In 1995, Randwick Council (the Council) approved a development application for the building of an apartment block with a basement level car park, 3 metres below ground level.

In 1996, the Council approved a building application for the building. At this time, the Council had in its possession a geo-technical report stating the water table to be at about the same level as the basement floor slab. The Council was also aware from an internal 1992 Private Stormwater Code and participation in the 1996 Botany Aquifer Working Group that the water table was close to the ground surface.

In February 1997, Makawe purchased the building from developers.

From June 1998 onwards, flooding occurred in the car park, causing damage to the pumping systems, leaving stains and requiring rectification works.

In the District Court, Makawe argued that, notwithstanding a lack of direct relationship, the Council owed it a duty of care. It alleged breach of duty; in that having regard to the geo-technical report and its powers under the Environmental Planning and Assessment Act 1979 and the Local Government Act 1993, the Council ought to have taken steps to protect the building.

At first instance Phegan DCJ entered verdict and judgment in favour of the Council finding that the Council did not owe any duty of care, in part, on the basis that the damage claimed consisted of pure economic loss.

Makawe appealed from that decision.

ISSUES

(2) Did the primary judge err in finding no duty of care on the part of the Council towards Makawe.
HELD (dismissing the appeal)
As to (1)

(per Simpson J; Hodgson and Campbell JJA agreeing)
The damage was properly considered by the primary judge as one of pure economic loss.

Woolcock Street Investments Pty Limited v CDG Pty Limited

As to (2)

(per Simpson J; Hodgson and Campbell JA agreeing)
There was no error in the primary judge’s ultimate finding that the Council did not owe a duty of care to the subsequent purchaser Makawe.

(per Hodgson JA; Campbell JA agreeing)
The primary judge erred in treating control, vulnerability and reliance as each being necessary requirements in establishing a duty of care.

Perre v Apand Pty Limited

Sutherland Shire Council v Heyman

Pyrenees Shire Council v Day

Sutherland Shire Council v Heyman

Pyrenees Shire Council v Day

Caltex Refineries (QLD) Pty Limited v Stavar

(per Simpson J)
The primary judge was correct in:

(i) Taking a cumulative approach to the salient features of vulnerability and reliance;

(ii) Not taking into account policy considerations. Proof of the absence of a policy reason that might contra-indicate a duty of care does not establish a positive reason for the imposition of that duty of care;

Hill v Van Erp

Moorabool Shire Council v Taitapanui

CA 40252/08
DC 3020/03

HODGSON JA
CAMPBELL JA
SIMPSON J

15 DECEMBER 2009

MAKAWE PTY LIMITED v RANDWICK CITY COUNCIL

Judgment

: The circumstances giving rise to this appeal, the issues raised and the grounds of appeal are set out in the judgment of Simpson J. I agree with Simpson J that the Council did not owe Makawe a relevant duty of care, and that accordingly the appeal should be dismissed with costs. My reasons are as follows.

Statutory Framework

2 The question what if any duty of care was owed by the Council to Makawe must be considered having regard to the statutory regime pursuant to which the Council granted the relevant approvals.

3 The approval granted in December 1995 to the development of the land by way of construction of the building was granted pursuant to ss 76, 90 and 91 of the Environmental Planning and Assessment Act 1979 (EPA Act) as then in force.

4 Section 76 subsections (1) and (2) of the EPA Act then provided as follows:

76 Restriction on development

(1) Subject to this Act, where an environmental planning instrument provides that development specified therein may be carried out without the necessity for consent under this Act being obtained therefor, a person shall not carry out that development on land to which that provision applies except in accordance with the provisions of that instrument.

(a) that consent has been obtained and is in force under this Act, and

5 Section 90 of the EPA Act then relevantly provided:

90 Matters for consideration

(g) whether the land to which that development application relates is unsuitable for that development by reason of its being, or being likely to be, subject to flooding, tidal inundation, subsidence, slip or bush fire or to any other risk,

6 Section 91 of the EPA Act then relevantly provided:

91 Determination of development application

(a) the granting of consent to that application, either unconditionally or subject to conditions, or

…

(a) relates to any matter referred to in section 90 (1) of relevance to the development the subject of the consent,

…

(f) requires the carrying out of works (whether or not being works on land to which the application relates) relating to any matter referred to in section 90 (1) applicable to the development the subject of the consent,

7 The approvals to building granted progressively during 1996 were granted pursuant to ss 68, 76, 94 and 96 of the Local Government Act 1993 (LG Act) as then in force and the Regulations made thereunder as then in force.

8 Section 68 of the LG Act provided to the effect that a person may carry out certain activities, including the activity of erecting a building, only with the prior approval of the Council, with certain irrelevant exceptions. Section 94(1) of the LG Act provided as follows:

94 Determination of application

(a) by granting approval to the application, either unconditionally or subject to conditions, or

9 Section 96 of the LG Act provided for staged approvals.

10 Regulation 12 of the Local Government (Approvals) Regulation 1993 relevantly provided as follows:

Matters for consideration by council in determining whether to approve building applications

12. (1)

(a) drainage, ventilation, lighting and healthiness of the building;

(b) design, materials, stability, building line and height;

…

(l) whether the site is subject to flooding or tidal inundation;

Council’s Knowledge

11 Also relevant to the question of what if any duty of care was owed by the Council to Makawe is the Council’s knowledge concerning the existence, location and characteristics of the water table in the vicinity of the subject land.

12 One relevant piece of evidence was the Private Stormwater Code published by the Council’s Engineers’ Department in 1992, which (at Blue 421) referred to a requirement that the base of any proposed stormwater infiltration pit be not less than one metre from (that is, above) the water table. This was some indication that the Council was aware that the water table in its area was, in some places, not very far below the surface of the land.

13 The next piece of relevant evidence was a document produced in August 1996 by the Botany Aquifer Working Group, of which the Council was a member, concerning the management of the Botany Sands Aquifer (Blue 377-402). This document refers to the water table in the Council’s area being generally within a few metres of the ground surface, except beneath the few remaining sand dunes (Blue 384), and to water level fluctuation in the aquifer (Blue 385, 388, 391, 392). Some of the relevant approvals in this case were given before August 1996, but it may be inferred that one or more Council officers involved in the Working Group had for some time been aware of these matters.

14 Finally on this aspect, there were documents that came into existence in connection with the relevant applications. It appears from a report of Jeffery and Katauskos Pty Limited dated 19 February 1996 to a subcontractor on the proposal, namely Jim’s Concrete Works, that the excavation for the basement car park was to be a depth of the order of three metres (Blue 354), that the highest ground water levels measured was at a depth of 2.9 metres, and that this level would be expected to increase with seasonal fluctuations and prolonged periods of wet weather (Blue 357). It was not proved that this report was received by the Council; but a supplementary report dated 13 March 1996 was in the Council’s file (Blue 483-4) and referred to the depth of the ground water table as being at approximately three metres below the existing ground surface.

15 It can be inferred that the Council officers dealing with the applications were aware that the excavation for the basement car park was to be to about three metres. The primary judge found that, by reason of the Council’s participation in the Aquifer Working Group, that Council officers “must have been alerted to the current state and location of the aquifer” (par [38]), and that the report of 13 March 1996 “contained more than sufficient information to alert the [Council] to potential problems that might arise from the intersection of the basement car park and the water table” (par [39]). The primary judge found that the Council had, if not actual knowledge of all these matters, then at least constructive knowledge (par [37]).

16 The primary judge did not find that Council officers dealing with the relevant applications actually took in and understood the information in the report of 13 March 1996 that the water table had been measured at about three metres below the surface, that is at about the same level as the depth of excavation for the underground car park; or that these officers actually knew that the water table was subject to fluctuations such that there could be significant inundation of the underground car park. There is no ground of appeal that the primary judge should have made these findings of fact. In my opinion, the appeal should be determined on the basis that the Council officers dealing with the applications should have been aware of these things, in the sense that had they and other Council officers exercised reasonable skill and care in relation to them, they would have had actual knowledge of them.

Duty of Care – Principles

17 In my opinion, the approach to be taken in determining whether a duty of care exists, in circumstances where there is no authority establishing the existence of a duty of care, and if so its scope or content, is usefully summarised by Allsop P in Caltex Refineries (Queensland) Pty Limited v Stavar [2009] NSWCA 258 at [102]-[105] as follows:

[102] This rejection of any particular formula or methodology or test the application of which will yield an answer to the question whether there exists in any given circumstance a duty of care, and if so, its scope or content, has been accompanied by the identification of an approach to be used to assist in drawing the conclusion whether in novel circumstances the law imputes a duty and, if so, in identifying its scope or content. If the circumstances fall within an accepted category of duty, little or no difficulty arises. If, however, the posited duty is a novel one, the proper approach is to undertake a close analysis of the facts bearing on the relationship between the plaintiff and the putative tortfeasor by references to the “salient features” or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury.

(a) the foreseeability of harm;

(b) the nature of the harm alleged;

(c) the degree and nature of control able to be exercised by the defendant to avoid harm;

(d) the degree of vulnerability of the plaintiff to harm from the defendant’s conduct, including the capacity and reasonable expectation of a plaintiff to take steps to protect itself;

(e) the degree of reliance by the plaintiff upon the defendant;

(f) any assumption of responsibility by the defendant;

(g) the proximity or nearness in a physical, temporal or relational sense of the plaintiff to the defendant;

(h) the existence or otherwise of a category of relationship between the defendant and the plaintiff or a person closely connected with the plaintiff;

(i) the nature of the activity undertaken by the defendant;

(j) the nature or the degree of the hazard or danger liable to be caused by the defendant’s conduct or the activity or substance controlled by the defendant;

(k) knowledge (either actual or constructive) by the defendant that the conduct will cause harm to the plaintiff;

(l) any potential indeterminacy of liability;

(m) the nature and consequences of any action that can be taken to avoid the harm to the plaintiff;

(n) the extent of imposition on the autonomy or freedom of individuals, including the right to pursue one’s own interests;

(o) the existence of conflicting duties arising from other principles of law or statute;

(p) consistency with the terms, scope and purpose of any statute relevant to the existence of a duty; and

[104] There is no suggestion in the cases that it is compulsory in any given case to make findings about all of these features. Nor should the list be seen as exhaustive. Rather, it provides a non-exhaustive universe of considerations of the kind relevant to the evaluative task of imputation of the duty and the identification of its scope and content.

Sullivan v Moody

Pure Economic Loss

18 I agree with Simpson J and with the primary judge that the loss complained of in this case is to be characterised as pure economic loss. In my opinion, this conclusion is required by the decision of the High Court in Woolcock Street Investments Pty Limited v CDG Pty Limited [2004] HCA 16; (2004) 216 CLR 515. There has been very minor property damage to Makawe’s building by way of staining and the like; but the damages claim is not in respect of that staining or its consequences, but rather in respect of the defect in the building as originally constructed.

19 This characterisation of the loss falls within salient feature (b) in Allsop P’s list in Stavar; and I agree with the primary judge that this is a factor that tends against the finding of a duty of care in relation to that kind of loss.

Errors of Primary Judge

20 However, the primary judge (at par [30]) identifies, as requirements for the existence of a duty of care, the elements of control, vulnerability and reliance; and (at par [33]) suggests that the existence of a duty to use reasonable care in the exercise of the power of a local authority to approve a development application and to impose conditions will depend on “whether the relationship between local authority and plaintiff is one which meets all of the criteria by which the existence of a duty is determined”. Later (at par [50]) the primary judge refers to “recent developments of principle in the High Court in which control and reliance appear to be equally important as necessary conditions of a duty of care and not merely alternative requirements”; and he goes on to suggest that control and vulnerability are “independent requirements for the purpose of establishing a duty of care”. He concludes (at par [55]) that Makawe’s case fails “because of the absence of vulnerability and actual reliance”.

21 In my opinion, these passages indicate that the primary judge approached the question on the basis that, in order to establish a duty of care, Makawe had to establish each of the elements of control, vulnerability and reliance; and in my opinion that is not the correct approach. These are three particularly important salient points to be considered in deciding whether there is a duty of care, but they are not all-or-nothing necessary elements to be satisfied if a duty of care is to be established. I accept that, for a duty of care to exist, there must be some element of control in a defendant and there must be some vulnerability in the plaintiff in some sense or another (which is not necessarily the same sense as the word has been used in some of the cases); but in my opinion these are matters of degree to be taken into account in an overall assessment. Reliance may be completely absent: for example, I am unable to identify any relevant reliance in Perre v Apand Pty Limited [1999] HCA 36; (1999) 198 CLR 180.

22 In my opinion the reasoning of the primary judge was erroneous in that he found that Makawe’s case failed because of absence of vulnerability (because there were avenues open to Makawe at the time of the purchase by which it could have protected itself) and because of absence of actual reliance, on the basis that these were each necessary requirements for the existence of a duty of care.

23 In my opinion also, in relation to the question of reliance, the reasoning of the primary judge was erroneous in that it focussed on actual reliance, rather than such reliance by Makawe as the Council would reasonably have foreseen. In my opinion, the question whether the Council owed a duty of care to Makawe was affected not so much by what Makawe actually did as by what the Council would reasonably expect concerning a purchaser of property. I note that in Sutherland Shire Council v Heyman [1985] HCA 41; (1985) 157 CLR 424 at 463, Mason J referred to “foreseeability of the plaintiff’s reasonable reliance” as being important; although I do note that at 470-471 Mason J appeared to place some weight on the absence of actual reliance in finding there was no duty of care in that case. In my opinion, actual reliance (as opposed to the foreseeability or knowledge by the defendant of that reliance) goes more to the question of causation and perhaps to the question of contributory negligence, than to the question of the existence of a duty of care.

24 Mason J’s discussion of reliance in Heyman was criticised in Pyrenees Shire Council v Day [1998] HCA 3; (1998) 192 CLR 330, particularly in that in Heyman Mason J stated (at 463-64) that “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”; and also (at 464) that “there will be cases in which the plaintiff’s reasonable reliance will arise out of a general dependence on an authority’s performance of its function with due care, without the need for contributing conduct on the part of a defendant or action to his detriment on the part of a plaintiff”. The latter assertion was an answer to questions posed by Mason J at 463:

(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.

25 In Pyrenees, Brennan CJ (at 344) asserted that legislative intention was the criterion for a public law duty of a public authority to exercise a power, and he was unable to accept “general reliance” as the basis of such a liability. Gummow J (at 387-88) described the general reliance doctrine as having the nature of a legal fiction, with no sound doctrinal footing. Kirby J (at 411) also said general reliance was a fiction, and said that it could not be a basis for finding a duty of care. Toohey J (at 356) did not accept that general reliance was a fiction, and he went on (at 359-61) to suggest that, while general reliance may not of itself give rise to a duty of care, it could be relevant to the question whether a duty of care exists. McHugh J (at 370-71) considered it was incorrect to say the doctrine of general reliance was a fiction, and said that it could give rise to a duty of care.

26 In my opinion, none of this alters the position that, whether the reliance under consideration is general reliance by persons in the position of the plaintiff, or specific actual reliance by the plaintiff itself, it is foreseeability or knowledge of that reliance by the defendant that is significant for the purposes of a duty of care. And in my opinion, the views of Brennan CJ and Gummow and Kirby JJ in Pyrenees do not altogether banish from consideration, among factors relevant to the question of whether there should be a finding of a duty of care, the question whether it was reasonably foreseeable by the defendant that persons in the position of the plaintiff would rely on the relevant function of the defendant being performed with due care.

Some Authorities

27 However, although I think the reasoning of the primary judge was erroneous in these respects, in my opinion his conclusion that no relevant duty of care was owed was correct.

28 I note first that Heyman establishes that there is no general duty of care owed by a Council to a purchaser of property to protect that purchaser from economic loss by exercise of its power to carry out inspections during the construction of a building so as to ensure that the building is constructed in accordance with approved plans and specifications. In my opinion, one important rationale for this conclusion is that there is no statutory or other obligation on a local authority to carry out inspections, whereas there is a statutory obligation on a developer (and ordinarily a contractual obligation on a builder) to ensure that a building is built in conformity with approved plans, so that the reasonable reliance of a purchaser of property would be on performance of these obligations by the developer and the builder rather than on the local authority doing something it was not obliged to do.

29 The position is somewhat different in relation to the approval of development applications and building plans. The local authority in this case did have a statutory obligation to consider whether to give consents, and to consider what if any conditions to impose; and in particular it had a statutory obligation to take into consideration the matters set out in s 90(1) of the EPA Act and the matters set out in Regulation 12(1) of the Local Government (Approvals) Regulation 1993.

30 There are a number of cases suggesting that local authorities may have a duty of care owed to developers and/or purchasers in relation to their approval of development and/or building applications. I will briefly review some of these cases.

31 In Wollongong City Council v Fregnan [1982] 1 NSWLR 244, the plaintiffs had applied to the Council for approval to erect a house on land they were purchasing, and the Council approved that application. The land was on a slippage register maintained by the Council, and not open to inspection by the public. The plaintiffs had intended to build at a point close to the road (an area reasonably safe from slippage), but Council officers required them to build a further 75 feet to the north (where there was a real risk of slippage). The plaintiffs’ building application was endorsed with a note concerning the danger of slippage, but the plaintiffs were not informed of this or warned of the risks of slippage. About three years later, the house erected by the plaintiffs began to collapse by reason of slippage.

32 The New South Wales Court of Appeal (Hutley, Glass and Mahoney JJA) found that the Council had breached a duty of care to the plaintiffs, in particular because the Council knew of the risks of slippage (and did not inform the plaintiffs), and the Council required the house to be placed in a position on the land where there was a real risk of slippage. Hutley JA (at 248) said the Council had a duty of care to the plaintiffs in exercising its powers to approve the building of their home; while Glass JA (at 252) held that, because careless conduct by the Council did expose the plaintiffs to a foreseeable risk of damage to their property (and not merely economic loss), the Council had a duty of care of the kind identified in Donoghue v Stevenson [1932] AC 562. Mahoney JA agreed with both the other judges on the question of liability.

33 In Bamford v Albert Shire Council [1998] 2 Qd R 125; (1998) 97 LGERA 33, the Council approved a subdivision application by a developer, who sold one of the lots to the plaintiffs. The plaintiffs obtained Council’s approval to build a house on this lot and proceeded to do so. The house later became uninhabitable because of movement of earth and rock. The plaintiffs sued the Council on the basis that the Council was negligent in the grant of subdivision approval and in the grant of approval to carry out building work, and were successful on both allegations at first instance. The Council appealed against the finding that it had been negligent in relation to the grant of subdivision approval, arguing that it did not breach a duty of care to a subsequent purchaser.

34 The Queensland Court of Appeal (McPherson JA, Pincus JA and Thomas J) dismissed this challenge. In the majority judgment, Pincus JA and Thomas J referred to s 34(12) of the Local Government Act 1936 (Queensland), which requires the local authority, in respect of any application for approval of subdivision of land, to take into account (among other things) “(g) whether the land or any part thereof … is not fit to be used for residential purposes.” They relied on a reference by Gibbs CJ in Heyman (at 445) to the “well-settled principle” that “when statutory powers are conferred they must be exercised with reasonable care”, and also to statements in the same case by Mason J at 457-8 and Brennan J at 479. They considered these observations supported the view, which the Council did not contest, that the Council had a duty of care to the plaintiffs, as subsequent purchasers of the property, in exercising its function of considering an application for subdivision. The Court of Appeal upheld the decision of the primary judge that this duty of care had been breached.

35 In Armidale City Council v Alec Finlayson Pty Limited [1999] FCA 330; (1999) 104 LGERA 9, the Council had re-zoned a substantial parcel of land at Armidale, formerly in an industrial zone, as residential. In 1984 a predecessor in title to the plaintiff applied to subdivide this parcel so as to create nine residential lots, a public reserve, and a residual lot, this application said to be part of an overall proposal to subdivide the property. In 1985 the plaintiff (Finlayson) purchased the residual lot, and applied to the Council for approval to subdivide this lot. Approval was granted and Finlayson proceeded to carry out subdivision works, to construct houses, and to sell houses and residential lots. In 1990 Finlayson became aware that some of the land was contaminated, and the fact was that some of the land was contaminated from creosote and arsenic at levels that required remediation. It was established that, at the time of the rezoning and the subdivision application by Finlayson’s predecessor in title, the Council’s officers were well aware that the land was contaminated and that the site was covered with gravel that concealed the contamination.

36 The full Federal Court (Beaumont, Moore and Merkel JJ) held that the Council owed Finlayson a duty of care, relying particularly on the Council’s knowledge of the contamination and of the deceptiveness of the gravel cover, the fact that so far as the Council knew the applicants for residential subdivision development were unaware of the contamination risk, the fact that if it approved the subdivision the probability was the land would be sold to purchasers also unaware of the problem and be used for residential purposes with potential to cause serious harm, and the Council’s statutory obligation to consider whether the land was suitable for residential use by reason of any risk, which would include contamination. The Court also held that the duty of care had been breached, in that the duty of care could only have been discharged by refusing the application, or at least by refusal except on acceptance and performance by the applicant of appropriate remediation.

37 In Port Stevens Shire Council v Booth [2005] NSWCA 323; (2005) 148 LGERA 351, the purchasers of lots in a holiday cabin resort claimed damages from the Council in the following circumstances. In 1992, the Department of Defence sent the Council an Airport Noise Exposure Forecast (ANEF) showing contours for noise exposure from Airforce operations from a nearby airport to the year 2002. Most of the resort area was within the 25 ANEF contour. The relevant Australian Standard provided to the effect that houses, home units and flats were acceptable for less than 20 ANEF, conditional for 20-25 ANEF and unacceptable for greater than 20 ANEF; while hotels, motels and hostels were acceptable for less than 25 ANEF, conditional for 25-30 ANEF and unacceptable for greater than 30 ANEF. Development consent to the development of the resort, and subsequently building consent, were granted by the Council in 1993, with no conditions or advice addressing aircraft noise.

38 The New South Wales Court of Appeal held that the Council owed a duty to purchasers to exercise reasonable care in determination of the applications, rejecting a submission that there was no breach of any duty by the Council unless the Council’s decision was Wednesbury unreasonable; and it upheld the primary judge’s decision that this duty of care had been breached.

39 The case of Moorabool Shire Council v Taitapanui [2006] VSCA 30; (2006) 14 VR 55 was different from the other cases in that, although a claim was upheld against the Council, it was not in respect of the exercise by the Council of its statutory functions. Rather, it was in respect of the exercise of the statutory functions of a building surveyor, for which the Council was held to be vicariously liable in that, although the building surveyor was acting as a private building surveyor, he was nevertheless a Council employee acting in the course of his employment by the Council. The relevant statutory scheme pursuant to which the surveyor was acting was introduced in Victoria in 1993, with the stated object, among other things, of establishing, maintaining and improving standards for the construction of buildings, and it provided that building work must not be carried out unless a building permit had been issued, that a building surveyor must not issue such a permit unless satisfied that the building work and permit would comply with the Act and Regulations (which incorporated with slight modification the Building Code of Australia), and that the Council must keep a register of permits available for inspection by the public. The building surveyor was also required to make mandatory inspections during construction. Surveyors were required to have substantial qualifications, and insurance.

40 A house was built pursuant to a building permit granted in 1996, and it was sold in 1997. It was sold again to the plaintiffs in 1999. It then became apparent that there were substantial structural deficiencies. The Victorian Court of Appeal held that the surveyor (and thus the Council his employer) owed these subsequent purchasers a duty to exercise reasonable care in giving the building permit, and that this duty had been breached.

41 Finally, Western Districts Development Pty Limited v Baulkham Hills Shire Council [2009] NSWCA 283; (2009) 169 LGERA 62 concerned purchasers of a lot in a subdivision who later had to pay a substantial sum of money in order to comply with requirements of a water supply authority. It was a requirement of s 109J(1) of the EPA Act that a subdivision certificate must not be issued for a subdivision unless the certifying authority was satisfied, in the case of a subdivision that related to land within a water supply authority’s area of operations, that the applicant had obtained a certificate of compliance from the water supply authority with respect to the subdivision of the land. In this case, the Council was the relevant certifying authority, and it issued a subdivision certificate even though no certificate of compliance had been obtained from the water supply authority. The New South Wales Court of Appeal held that the Council owed the purchasers a duty of care in relation to compliance with that requirement for the issue of a subdivision certificate, and thus held that the Council was liable for damages in respect of the amounts that the purchasers had to pay to the water supply authority.

42 On the other hand, the existence of a relevant duty of care was denied in Sutherland Shire Council v Becker [2006] NSWCA 344; (2006) 150 LGERA 184. In that case, the Council had approved a subdivision of land, of which the plaintiff’s land was part. The conditions of approval included that any fill to the land be satisfactorily consolidated, and that there be a drainage easement in favour of the plaintiff’s land with a pipeline carrying drainage through that easement. The plans for the pipeline were approved by the Council, and drawings for the works were sighted and signed off by the Council, although the works themselves were carried by the developer. Subsequently, water escaped from the pipe on land adjoining the plaintiff’s land causing slippage of the fill on that land down the hillside; and this removed support for the fill on the plaintiff’s land, which itself slipped down the hillside. The Court of Appeal (Mason P, Giles and Bryson JJA) held that the Council did not owe the plaintiff a relevant duty of care.

43 I see no reason to disagree with any of these cases, and I would draw the following general propositions from them:

Heyman

(2) However, if the approving authority is subject to a statutory requirement not to give consent unless it is satisfied of something, the courts may well find a duty, owed to developers and to purchasers, to exercise reasonable care in considering whether it is so satisfied: Taitapanui, Western Districts.

(3) If the approving authority actually knows something seriously detrimental to the subdivision or the building, and is aware that it is likely that developers and/or purchasers do not know this, the courts may well find a duty owed to developers and purchasers to exercise reasonable care in relation to that detrimental feature: Fregnan, Finlayson, Booth.

(4) If the approving authority makes a positive requirement that something be done which otherwise would not be done, the courts may well find a duty owed to developers and purchasers to exercise reasonable care in making that requirement: Fregnan.

(5) If the approving authority is required to consider or take into account some particular matter which bears on the structural integrity of buildings to be erected, the courts may well find a duty owed to developers and purchasers to exercise reasonable care to avoid risks of property damage arising from this matter: Fregnan, Bamford.
Application to this Case

44 In the present case, there was no relevant requirement on the Council not to give consent unless it was satisfied of something.

45 In my opinion, this was not shown to be a case where the Council actually knew something seriously detrimental or potentially detrimental and was aware that the developer would not know of this. I have already expressed my view that the primary judge did not find actual knowledge in the relevant Council officers of a problem of intersection of the water table with the excavation for the underground car park. Further, the Council had every reason to think that the developer was aware of any problem that there might be in this regard, because the developer’s engineers had measured the water table to be at the level proposed for the excavation of the underground car park and the Council had a document signifying that fact. The developer provided the Council with details of a plan for dealing with drainage, including drainage of the underground car park and including the provision of pumping; and in my opinion it cannot be inferred, as was submitted for Makawe, that this had nothing to do with the level of the water table.

46 This was not a case where the Council made some relevant positive requirement of something to be done.

47 The Council was subject to a statutory requirement in dealing with the development application to take into consideration “whether the land was unsuitable for that development by reason of being … subject to flooding … or to any other reason”; and in relation to the building application, it was required to take into consideration in giving building approval the matters referred to in pars (a) and (b) of Regulation 12(1), and also “whether the site is subject to flooding”. To the extent that any of these matters could pose a threat to the integrity of the building, I may well have been prepared to hold that the Council owed a duty of care to purchasers in relation to physical damage to the property that might result through deficiencies in respect of these matters. However, as indicated earlier, it is clear in my opinion that the claim in this case is in respect of pure economic loss. There is evidence of some threat to the physical condition of the building, in particular there being the possibility that the floor slabs in the basement would become “uneven, cracked and permanently wet” (Blue 12). However, beyond that, there is no evidence of a significant threat to the physical integrity of the building.

48 Accordingly, in my opinion, the case is one where it cannot be said that there is an established duty of care; and it is necessary to consider the matter having regard to the cumulative effect of salient features of the kind set out in Stavar. The first seven of those features are of some relevance in this case.

49 As regards foreseeability of harm, in a general sense it was foreseeable by the Council that, if it did not exercise reasonable care in approving and determining conditions for the development application and the building applications, a subsequent purchaser could be harmed. However, for harm to ensue, there must also generally be a lack of reasonable skill and care by the developer and/or the builder and/or their engineering consultants, and also failure by a purchaser to detect the relevant problem by inspection before purchase. The risk would be most substantial where the failure to exercise reasonable care concerns a matter that could give rise to a hidden defect, for example in hidden foundations. This consideration applies with some force to the existence of a water table near the level of excavation for an underground car park; although as mentioned above, there is no suggestion that this seriously threatens the integrity of the building or substantial physical damage to the building. It can also be said that a reasonable person in the position of the Council should in this case have been aware of the problem; and that the problem was one that would not be obvious to a purchaser. Against this consideration, the problem was apparently known to the developer and/or its engineer, and provision was made for drainage of the underground car park, including provision for the pumping of water.

50 As regards the nature of the harm, I have already agreed with the primary judge that the harm was pure economic loss; and for that reason, in my opinion, a stronger case is required to establish a duty of care.

51 As regards control, the Council did not have control in the sense that it did not produce plans for the building or for engineering solutions to any problems that the building might involve; but on the other hand, it did have power to deny approval or impose conditions.

52 As regards vulnerability, in my opinion problems concerning the relationship between the water table and the underground car park were not problems likely to be picked up on an ordinary inspection prior to purchase, or indeed such as were likely to be dealt with in a contract of purchase. I do not think it is of major significance that the purchaser was an investor: I think it unlikely that there would be a duty of care owed to a class of purchasers who were not investors, but not owed to the class of purchasers who were investors. Although investors may be considered as having more business and financial sophistication than other purchasers, it does not seem to me that the difference is such as to impact substantially on whether or not a duty of care exists.

53 As regards reliance, in my opinion what could be important in relation to this element is the reasonable reliance of a class of persons, including Makawe, that was reasonably foreseeable by the Council. In my opinion, it was reasonably foreseeable that purchasers would place some reliance on the Council having exercised reasonable care in relation to such matters as the stability of the site, so far as this is relevant to the integrity of the building. It is less clear that they would place reliance on the Council in respect of the adequacy of an engineering solution to water table issues, which are not such as to seriously threaten the integrity of the building or indeed such as to give rise to anything other than pure economic loss.

54 As regards assumption of responsibility, the Council was required by the statutory provisions to which I have referred to consider certain matters, and it had a responsibility to do so. Although there is reference in both the EPA Act and the relevant Regulation under the LG Act to flooding, in my opinion this is directed to general flooding of the site rather than to the possibility of the water table impacting on excavations to the site. In my opinion, none of the statutory requirements are specifically directed to the problems that arose in this case.

55 Finally, as regards proximity or nearness in a physical, temporal or relational sense, that is not a powerful factor in favour of imposing a duty of care in this case. Makawe itself had no dealings with the Council.

56 I think the matter is quite finely balanced; but taking into account the totality of these salient elements, in my opinion a duty of care owed by the Council to Makawe in respect of the economic loss that occurred in this case was not established.

57 Having regard to these views, it is unnecessary to specifically address either the notice of contention in this case, the possible defences under the Civil Liability Act 2002, or damages.

58 CAMPBELL JA: The relevant facts are set out in the judgment of Simpson J. I agree with the orders proposed by Simpson J and, subject to the following, with the reasons of Hodgson JA.

59 Any question about the existence of a duty of care must bear in mind the type of damage that it is being suggested the defendant had a duty to take reasonable care to avoid the plaintiff suffering. In the present case, the relevant damage arises from a defect in the design of the structure. That defect is that it was constructed at a depth in the ground such that it was foreseeable that the water table in the surrounding land would sometimes rise above the floor level of the car park, but without there being an adequate means of either preventing water penetration into the car park or dealing with water penetration once it had occurred. That defect in the design is not one that the Council had produced, or concerning which it had any special knowledge.

60 There are some factors that tend in favour of the existence of a duty of care.

61 First, the type of damage suffered was reasonably foreseeable by the Council, given that the Council had knowledge (or at least the means of obtaining the knowledge by searching its own records) of the level of the water table.

62 Second, the Council had a statutory duty (ie, more than a statutory power) to consider whether the land in question was unsuitable for the structure that was proposed to be built on it. Probably the type of water seepage that here occurred would not be “flooding” or “tidal inundation” within the meaning of section 90(1)(g) EPA Act. However, fairly clearly it would be “any other risk” within the meaning of that provision, and the aftermath of any such seepage would be “drainage” within the meaning of Reg 12 Local Government (Approvals) Regulation 1993.

63 Third, it was foreseeable to someone in the position of the Council that a subsequent purchaser would be vulnerable, in the special sense that is relevant to existence of a duty of care, namely that it is unable “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 loss on the defendant”: Woolcock Street Investments Pty Ltd v CDG Pty Ltd at 530 [23]. In deciding whether someone is “unable” to do this, it is courses of conduct that have a realistic prospect of being ones that the subsequent purchaser might follow that matter. If that were not so, a duty of care would risk losing its connection with what one person taking reasonable care to avoid harm to another should do. It is, in theory, open to a purchaser of a building to obtain a warranty from the vendor that the building work has been done in a good and workmanlike manner, and that the building is suitable for the purpose for which it is intended, but in reality it is not very likely that a purchaser would do so. It is also in theory open to the person who purchases a building from the developer to obtain from the developer an assignment of the benefit of any warranty that the developer has obtained from a builder or engineer involved in the construction. However, that latter course is also in reality not a very likely one for a purchaser to follow, particularly when there is no reason to suspect, at the time of purchase, that the building is defective. As well, it is not altogether clear how effective a protection such an assignment would be, given that the quantum of damages recoverable by the assignee of the benefit of contract is the same as the quantum of damages that the assignor could have recovered (Mid-City Skin Cancer & Laser Centre Pty Ltd v Zahedi-Anarak [2006] NSWSC 844; (2006) 67 NSWLR 569 at 608-9 [190]–[193], 622 [245]), and the quantum of damages recoverable for breach of a warranty about the quality of building work is not altogether clear in circumstances where the person with the benefit of that warranty has sold the building for a price that is not reduced by reason of the existence of the defects (cf De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28). In the present case there is no basis for knowing whether or not the Appellant would have a good cause of action in negligence against the designer of the building, but, even if there was such a cause of action, it could not be right that having a good cause of action against another tortfeasor stops one from being vulnerable in the sense that is relevant for existence of a duty of care – otherwise the scope for contribution between tortfeasors would disappear.

64 The nature of the structure seems to me to be a neutral matter. A factor that was relevant to the existence of the builder’s duty of care to a subsequent purchaser in Bryan v Maloney (1995) 182 CLR 609 was that the structure in question was a house, and the kind of structure inherently likely to be the most important, or one of the most important, investments made by a subsequent purchaser in his or her lifetime. However, in Woolcock Street Investments at 528 [17] doubt was cast on the practicality of making a proposition of law, about whether a duty of care existed, depend on whether or not a building was classified as a dwelling. Quite apart from that, here, while the Appellant was in fact an investor, the building was one concerning which the Council had approved a strata plan, which was annexed to the contract by which the Appellant purchased. There was nothing about the structure, as the Council approved its plans, that made it unsuited for occupation as individually owned apartments, and of course at that time the Council did not know whether the subsequent purchaser would be an individual home-owner or an investor.

65 There are other factors particularly relevant to there being no duty of care in the present case.

66 First, the damage suffered was pure economic loss.

67 Second, while the council had a statutory duty to give consideration to matters relating to the seepage that actually occurred, this was as part of a long list of matters that it was required to give consideration to, and no particular consequence was required to follow from giving consideration to these matters. It is not as though there was a statutory obligation on the Council not to consent unless it was satisfied of some particular matter that was relevant to the seepage problem that eventually manifested itself.

68 Third, the statutory duty of the council is not one that related to its own control and management of land (cf Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Limited [2009] NSWCA 263; (2009) 53 MVR 502; [2009] Aust Torts Reports ¶82-031 at [117]-[118]).

69 Fourth, when the council approved the design of the building it was in no contractual relationship or any other kind of relationship with the Appellant, and indeed did not know of the Appellant in any way other than by description, as a member of the class of subsequent purchasers of the building.

70 Fifth, insofar as the Council embarked on any task, it was a task of giving its approval to a design that had already been drawn up by professionals who were qualified in the field of engineering and design.

71 Sixth, it is not as though the Council had relevant knowledge that others involved in construction of the building did not have (or that the Council should have realised others involved in the construction of the building did not have). The developer and its engineers knew about the level of the water table in the vicinity.

72 Seventh, as a consequence of the previous two matters mentioned, it is not as though the Council was in a unique position to (or should have realised that it was in a unique position) to stop a subsequent purchaser from suffering the type of loss that the Appellant suffered. The engineer, developer and builder were all in a position to stop it.

73 Eighth, there was no contact or communication of any kind between the plaintiff and the council after the design had been approved on the topic of the adequacy of the design of the building.

74 In these circumstances, in my view no duty of care exists.

75 SIMPSON J: By statement of claim filed in the District Court, the present appellant (Makawe Pty Ltd, to which I will refer as “Makawe”) claimed, against the defendant (the present respondent, Randwick City Council, to which I will refer as “the Council”) an award of damages. Makawe pleaded a cause of action in negligence. The claim was yet another – there have been many – in which a plaintiff contended that a defendant, with whom the plaintiff had no direct relationship, either in contract or otherwise, owed it a duty of care and failed to discharge that duty of care, as a result of which the plaintiff suffered damage.

76 On 16 May 2008 Phegan DCJ entered verdict and judgment in favour of the Council. He did this because he held that the Council did not owe Makawe any (relevant) duty of care. He reached this conclusion, at least in part, via an anterior conclusion that the damage claimed by Makawe consisted of pure economic loss.

77 Makawe appeals against the decision. By its first ground of appeal it challenges the preliminary finding that the damage claimed was properly categorised as pure economic loss; by the second ground of appeal it challenges the consequential (or, at least, subsequent) finding that the Council owed Makawe no duty of care. By the remaining grounds of appeal (the grounds number 10 in all) Makawe asserts various errors in the approach taken by the trial judge in reaching those conclusions.

78 (I interpolate here that whether or not the Council owed Makawe a duty of care is a question of law: Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422 at [62], per Gummow J. If the conclusion is correct, it is of no moment (for appellate purposes) that it was (if it be the case) arrived at by a flawed process of reasoning. There is no room for the conclusion that, had error not infected the reasoning process, the judge might have come to a different result.)

79 By notice of contention the Council contends that, even if error can be demonstrated, the verdict and judgment in its favour can be supported on an alternative basis. That, it seems to me, is merely another way of saying that the conclusion that, as a matter of law, the Council owed Makawe no duty of care is correct, but for reasons other than those identified in a flawed reasoning process (assuming flaws in the reasons have been shown).

Background

80 Pursuant to its powers under the Environmental Planning and Assessment Act 1979 (“the EP&A Act”), in December 1995 the Council granted to Firmbuild Pty Ltd (“Firmbuild”) approval for the construction of a three-storey residential apartment building in Roma Avenue, Kensington. The proposed building consisted of 18 studio apartments and a basement level car park, three metres below ground level. It was within the Council’s power to impose conditions upon the approval. The approval given was, in fact, subject to 42 specified conditions.

81 In January 1996 Firmbuild lodged a building application, which the Council approved, again subject to conditions, in May 1996. At the time of this approval, but not at the time of the approval of the development application, the Council had in its possession a geo-technical report by Messrs Jeffery & Katauskas Pty Ltd (“Jeffery & Katauskas”) that showed that the floor slab on which it was proposed to site the car park was to be constructed at approximately the same level as the water table of the area, and that it was likely that the levels of the water table would rise from time to time, posing a risk of flooding in the car park. The engineers also advised that any such seepage would be controllable by sump and pump de-watering techniques and systems.

82 Construction commenced. From time to time the Council issued “local approvals”, each of which was subject to numerous and detailed conditions. Notwithstanding the information that it had from the Jeffery & Katauskas report, at no time did the Council impose any condition of consent concerning the level of the car park slab. There was no evidence to suggest that it gave any consideration to the imposition of such a condition.

83 Construction was completed at the end of 1996.

84 In February 1997 Makawe contracted to purchase the building from Firmbuild. The purchase was finalised on 4 July 1997. The apartments were let to tenants.

85 In June 1998 flooding occurred in the car park. Makawe arranged for rectification work to be undertaken, but it was some time, and only after several further instances of flooding and the installation of pumps, that a satisfactory solution was achieved.

86 The flooding also involved the deposit of muddy sediment on the car park floor. The sediment was drawn into the pumps and caused damage, and, ultimately, seizure of the pump. This necessitated regular clean outs as part of the maintenance program. The flooding also left brown stains on the floor and walls of the car park.

87 In the District Court, Makawe pleaded that, notwithstanding the absence of any direct relationship between itself and the Council, in all of the circumstances the Council owed “the owner [of the premises] from time to time” a duty to take reasonable care in and about imposing conditions of consent to construction; that, in the applicable circumstances, the discharge of that duty of care required the Council to take measures (such as imposing conditions of consent) that would ensure that penetration from the water table would not cause damage; that, in failing to take such measures, the Council was in breach of its duty of care to the “owner from time to time” (including Mawake); and that, as a consequence, Makawe suffered loss or damage.

88 The allegation of breach of duty was variously formulated in the Further Amended Statement of Claim, on which pleading the matter went to trial; put globally, it was that, having regard to its knowledge of the content of the Jeffery & Katauskas report, and having regard to its powers under the EP&A Act, the Council ought to have taken, and did not take, steps to protect the building (and, in reality, the owners of the building) from the anticipated effects of flooding.

89 Bearing in mind the issues raised on the appeal, it is convenient here to set out the manner in which Makawe’s alleged loss and damage were pleaded:

Particulars

(a) Flooding from time to time of the basement of the Building.

(b) The need to take remedial steps to ameliorate the flooding.

(c) The need to tank the basement against water penetration.

(d) Undermining of the physical integrity of the basement.

(e) Penetration into the basement of sand and oxide sludge.

90 The appeal essentially turns upon whether, in all of the circumstances, the Council owed Makawe a relevant duty of care. However, other, and subsidiary issues, also arise; one of these concerns the nature of the loss alleged by Makawe.

Duty of care

91 As the trial judge correctly recognised, the path to defining the circumstances in which a duty of care is owed by one party to another has been a long and tortured one, and has, as yet, no end.

92 The current state of the law was most recently encapsulated by Allsop P in Caltex Refineries (QLD) Pty Ltd v Stavar [2009] NSWCA 258. That was a case, like the present, in which the plaintiff had no direct contractual or other relationship with the defendant but nevertheless asserted that the defendant owed her a duty of care; unlike the present, the damage there alleged was personal injury, uncomplicated by issues that arise where the damage asserted is found or said to be pure economic loss. (In Stavar, the plaintiff was the wife of a man who had worked on the premises of the defendant, where he had been exposed to asbestos; the plaintiff suffered from an asbestos-caused cancer, which, she claimed, she contracted by coming into contact with asbestos fibres transported on her husband’s clothing, which she laundered.)

93 Allsop P undertook an examination of the authorities relating to the question of the existence of a duty of care, and concluded that there is no particular formula or methodology that will yield (in all cases) an answer to the question whether, in any such case, one party owes to another a duty of care [103]. He gave, however, an inventory of “salient features”, by reference to which the existence or otherwise of a duty of care may be determined. He identified 17 such salient features, of which the following might here be noted:

“(a) the foreseeability of harm;

(b) the nature of the harm alleged;

(c) the degree and nature of control able to be exercised by the defendant to avoid harm;

(d) the degree of vulnerability of the plaintiff to harm from the defendant’s conduct, including the capacity and reasonable expectation of a plaintiff to take steps to protect itself;

(e) the degree of reliance by the plaintiff upon the defendant;

(f) any assumption of responsibility by the defendant;

(g) the proximity or nearness in a physical, temporal or relational sense of the plaintiff to the defendant;

(h) the existence or otherwise of a category of relationship between the defendant and the plaintiff or a person closely connected with the plaintiff;

(i) the nature of the activity undertaken by the defendant;

(j) the nature or the degree of the hazard or danger liable to be caused by the defendant’s conduct or the activity or substance controlled by the defendant;

(k) knowledge (either actual or constructive) by the defendant that the conduct will cause harm to the plaintiff;

(l) any potential indeterminacy of liability;

(m) the nature and consequences of any action that can be taken to avoid the harm to the plaintiff;

(n) …

(o) …

(p) …

94 Given the approach spelled out in Stavar, it seems to me that to begin with a categorisation of loss as “pure economic” or not “pure economic” is to risk over-compartmentalisation. Firstly, the definition of what is, and what is not, pure economic loss has proved elusive. No clear definition has emerged. Secondly, the rationale for so categorising losses (for the purpose of determining whether a duty of care is owed) seems to have been considerably undermined. It was once, but is no longer, thought that no duty of care was owed to a person to avoid damage categorised as pure economic loss. That may be seen to have been so whittled away as to be, in my view, no longer a valid generalisation. Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180 dealt the death blow to that as an absolute proposition (although the circumstances in which liability for the infliction of pure economic loss has continued to bedevil the courts, and occupy the time of the High Court: see, for example, Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 216 CLR 515).

95 And, while there are suggestions that where the loss claimed is of the pure economic variety, the test to be applied to determine the existence or otherwise of a duty of care is a different one, that, in my opinion, does not sit easily with the “salient features” approach which has emerged as the current favourite. As Allsop P has shown, the salient features approach is appropriate to the consideration of the existence or otherwise of a duty of care in any “novel” situation or circumstance, outside accepted or established categories. There appears to be no reason to treat cases of pure economic loss differently; and I perceive good reason, of principle, to endorse an approach that is not differentiated solely by reference to the nature of the loss claimed (although, as Allsop P has held, that may well be one of the salient features).

96 Nevertheless, it will be appropriate, in due course, to deal with the correctness or otherwise, and the consequences, of the finding that the damage here claimed is properly classified as “pure economic”.

The judgment of the District Court

97 There appears to have been little, if any, area of factual dispute. The trial judge recited the facts, and set out the issues as identified in the pleadings. Under the heading “Duty of care” he observed that:

“The parameters of the relevant duty of care vary substantially depending on whether the loss complained of by the plaintiff is properly classified as economic loss”

“Damage of the kind complained of in this case is now clearly classified as economic loss.”

98 He based this conclusion on a passage in the joint judgment of Gleeson CJ, Gummow, Hayne and Heydon JJ in Woolcock Street at [19]-[20], and repeated that:

“… the only possible classification of the damage in this case is pure economic loss and the duty of care must be defined in terms applicable to such loss.”

99 He considered that, where the only loss sustained is pure economic loss, the duty of care owed is “narrower” than in cases of damage to property or personal injury.

100 He noted that determination of whether a duty of care exists requires consideration of the elements of control, vulnerability, and reliance, the last of which, he said, assumes particular importance in cases of pure economic loss. He considered each of the specified elements in turn.

101 He recognised that, where the defendant is (as is the Council) a local authority, determination of the existence and extent of its duty of care will, in part, depend on the applicable statutory provisions – here, particularly, s 91 of the EP&A Act.

102 He concluded that the Council had had relevant control. Put shortly, this was because of its knowledge of the level of the water table, its knowledge of the Jeffery & Katauskas report, and its power, under the EP&A Act, over building approvals, which included power to impose conditions of approval. He recognised that that was, of itself, insufficient to establish that the Council owed Makawe a duty of care, and that it was necessary also to look to the issues of vulnerability and reliance.

103 He held that Makawe had failed to demonstrate vulnerability in the sense necessary to warrant a conclusion that, because of its vulnerability, the Council owed it a relevant duty of care. He quoted again from the joint judgment in Woolcock Street at [23], where vulnerability for this purpose was defined as:

“… 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 loss on the defendant.”

104 His Honour noted that Makawe had purchased the building, shortly after its completion, for a price in excess of $3,500,000, at a time when the apartments were already tenanted, and that the purpose of the purchase was to use it as a source of income. He thought that that alone made it “very difficult” for Makawe to establish vulnerability in the relevant sense.

105 Still in the context of vulnerability, he dealt also with avenues available to Makawe to protect itself against loss; these included the capacity to require, in the contract of sale, a provision assigning any rights Firmbuild had against its builder, architect or engineer; and Makawe’s capacity, through inspection of the Council’s records, to obtain the Jeffery & Katauskas report and the engineer’s designs. He mentioned that these avenues were, “for a company with [Makawe’s] resources”, relatively inexpensive.

106 He quoted a passage from Bryan v Maloney [1995] HCA 17; (1995) 182 CLR 609, giving emphasis to the observation that the building in that case (a residential house) was:

a permanent structure to be used indefinitely and, in this country, is likely to represent one of the most significant, and possibly

the

most significant, investment which the subsequent owner will make during his or her lifetime

107 He held that the evidence did not establish actual reliance in the relevant sense. He referred to evidence given by a director and principal of Makawe that it was not his practice personally to make direct enquiries of the Council with regard to building matters, but had, rather, left this to his builders and/or architects; and that he expected that the Council would have reviewed engineering matters and imposed appropriate conditions, although he did not give the matter any particular thought.

108 Having concluded that Makawe had established neither vulnerability nor actual reliance, his Honour reached the further conclusion that it had also failed to establish that the Council owed it a duty of care. That, as he recognised, was sufficient to dispose of the proceedings.

109 However, he did go on to deal with the other issues that had been debated during the course of the trial. These included breach of duty, the application of the Civil Liability Act 2002, the application of s 733(1) of the Local Government Act 1993, contributory negligence, and damages.

Breach of duty

110 Phegan DCJ concluded that, on the assumption that the Council owed a duty of care to Makawe, the Council’s failure to include a condition of development approval requiring a drainage system designed to address the risks of a rise in the water table in order to avoid flooding in the basement, represented a failure on the part of the Council to exercise reasonable care and was thus a breach of its duty.

111 He based this conclusion on an analysis of the competing expert evidence.

112 Since the correctness of this conclusion was not challenged by the Council, it is unnecessary to say more about it.

Other defences

113 The Council also raised defences under s 43A of the Civil Liability Act, and s 733(1) of the Local Government Act, and the partial defence of contributory negligence. His Honour rejected each. Since no challenge to any of these conclusions is made in the notice of contention, it is unnecessary to take further time on these issues.

Damages

114 It was common ground that, if Makawe were entitled to recover, its damages would include costs of investigation of the cause of the flooding, including costs of reports from engineers, the costs of replacement pumps and the works undertaken between 1998 and the end of 2003, and the cost of work undertaken in late 2003 and early 2004.

115 Only one head of damages claimed appears to have been contested. This was the claim for the costs of “tanking” to seal off the area below the basement floor, to prevent seepage of ground water to the sub-floor area.

116 This was work that had not been done, but which Makawe claimed was necessary or reasonable in order to cure the problem.

117 His Honour referred to “additional damages” claimed by Makawe, but precisely what was meant by this is not clear from the judgment. He said that the costs of these works were estimated as between $50,000 and $60,000, but rejected the claim, observing that the estimate was made by a geo-technical engineer, with no apparent expertise in costing.

118 He then referred to the claim for “tanking”, which was costed at $398,320. Of this, he held that, before damages “of these proportions” could be recovered, Makawe would “have to make a very clear case that tanking was the only solution to the flooding problem”, a position that, he said, was not supported on the evidence.

The grounds of appeal and the notice of contention

119 As I have mentioned above, the first ground raised by Makawe’s amended notice of appeal was a direct challenge to the finding that the damage claimed by Makawe was pure economic loss. The second ground is a direct challenge to the crucial conclusion that the Council did not owe Makawe a duty of care.

120 The remaining grounds (other than the last, which concerns the notional assessment of damages if a duty of care did exist) attack the manner in which his Honour dealt with the various issues and arrived at the conclusion that no duty of care was owed: to paraphrase, they assert that, rather than determining the salient factors of the particular case, and assessing their relevance and importance in that circumstance, the trial judge took a serial approach to the separate considerations (ground 3); that his Honour failed to give any or any sufficient weight to the statutory role of the Council in considering and approving (including the imposition of conditions) the development and building applications (ground 4); that, in considering whether the Council owed Makawe a duty of care, his Honour failed to give any or any sufficient weight to whether, and if so, to what extent, the Council had departed from proper practice (ground 5); that, in various respects, he erred in his approach to the question of vulnerability (grounds 6, 8 and 9); that his Honour erred in concluding that Makawe had not established that, to the extent necessary, it had relied upon the Council (ground 7); and, finally, that he erred in concluding that, if Makawe were entitled to recover, it was not entitled to recover the projected cost of “tanking”.

121 By its notice of contention the Council asserts that, even if error is shown, the verdict and judgment can be supported on the alternative ground that:

the duty of care alleged by Makawe to be owed to it by the Council depended upon proof that the Council would have owed a duty to Firmbuild;

the Council would not have owed such a duty to Firmbuild.

Ground 1: the nature of the loss alleged

122 Extensive written submissions were directed by both parties to this ground. But, in oral argument, senior counsel for Makawe (who did not prepare the written submissions) somewhat retreated from the challenge, accepting that the line between property damage and pure economic loss is not always (and may not in this case be) “absolutely clear”.

123 However, senior counsel did not abandon the ground, and in recognition of the arguments advanced in the written submissions, it is best that I deal with it, although briefly.

124 The trial judge’s conclusion that the damage claimed was pure economic loss was based virtually wholly on the extracted passage from Woolcock Street. That passage is:

“19. The damage for which the appellant seeks a remedy in this case is the economic loss it alleges it has suffered as a result of buying a building which is defective. Circumstances can be imagined in which, had the defects not been discovered, some damage to person or property might have resulted from those defects . But that is not what has happened. The defects have been identified. Steps can be taken to prevent damage to person or property.

physical

Sutherland Shire Council v Heyman

Bryan v Maloney

Murphy v Brentwood District Council

125 The reference in [19] to potential damage to person or property, and to the identification of the defect and the prospect of rectification before such damage occurred, taken alone, might be seen to leave open the possibility that, once damage to property had actually occurred (as distinct from the potentiality of damage), then the damage claimed can be transformed from pure economic loss to actual property damage. Any such notion is put to rest by what follows in [20] and also by the judgment in Bryan v Maloney.

126 In Bryan v Maloney, a house had been built with inadequate footings. The damage that ensued included cracks in the walls – that is, real physical damage. Nevertheless, it was held to be “mere economic loss” (p 617) because it was distinct from, and not consequent upon, ordinary physical injury to person or property.

127 An attempt was made, in the written submissions, to distinguish the present case from Bryan v Maloney. It was said that the damage in Bryan v Maloney was due to a defect in the structure of the house; but that, in the present case, the structure itself was not inherently defective. It was argued that Bryan v Maloney does not deal with every case of physical damage to a building where the damage does not arise from structural defects inherent in the building.

128 I would reject this attempt. I see no relevant distinction in the defect here shown (the effect of inundation by water including the deposit of stain – causing sediment), and the subsequent property damage, and the defect (inadequate footings) and the actual damage (cracking) in Bryan v Maloney.

129 Reliance was also placed upon a decision of this Court (Sutherland Shire Council v Becker [2006] NSWCA 344; (2006) 150 LGERA 184) as one distinguishing Bryan v Maloney, and treating the claim there made as one for property damage as distinct from pure economic loss. Attention needs to be paid to only one paragraph of the judgment of Bryson JA to reject that submission. His Honour said:

Woolcock Street …

130 In no possible way can Becker be seen as providing an analogy to the damage claimed in the present case.

131 In the light of the passage from Woolcock Street which I have extracted above, I see no error in the conclusion that the damage here claimed was pure economic loss.

132 To the extent that it is necessary or relevant to do so, I would reject this ground of appeal.

Ground 2: duty of care?

133 Ground 2 encapsulates the essence of the appeal. As I read them, the remaining grounds (other than the last) point to asserted error in the reasoning process that led to the trial judge’s conclusion that no duty of care was owed.

134 A principal complaint made about the manner in which the trial judge proceeded to his assessment was that he took a “cumulative” approach to the “salient features” examination. That is a theme which permeates the written submissions. That he did this was said to be demonstrated by a single sentence that appears in the judgment after the conclusion that the Council had the relevant control. That sentence is:

“However, whether such a duty was owed to the plaintiff still depends upon whether the further requirements of vulnerability and reliance are met in this case.” (Red, 61T)

135 Reference was made in the submissions to Becker, at [20]-[21], per Giles JA, and Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54; (2002) 211 CLR 540 (at [149]). Resort to the passages cited does not support the proposition that the approach taken by the trial judge was contrary to that required by either of those (or any other) cases. In Graham Barclay Oysters, at [149], Gummow and Hayne JJ said:

“An evaluation of whether a relationship between a statutory authority and a class of persons imports a common law duty of care is necessarily a multi-faceted inquiry. Each of the salient features of the relationship must be considered.”

136 There is nothing in paras [20] or [21] of Becker that suggests that the manner in which the trial judge dealt with the issue was incorrect.

137 It is true that the authorities do not prescribe the relative importance of any of the salient features. That is precisely the point of the “salient features” test. That an order of importance is not prescribed does not mean that each does not have to be considered separately. Indeed, I can see no way that the test can be applied other than to consider each of the elements separately, with an eye to its relative importance for the circumstances of the case in question. To borrow a concept from the criminal law, once all the salient features have been identified, and considered, the exercise involves a synthesis of those considerations and their relative importance.

138 A further submission made was put as follows:

Pyrenees Shire Council v Day

139 It may be correct, as is suggested, that one salient feature may be of such overwhelming importance that others are unable to dislodge its impact. But that does not mean that it is not still necessary to consider all other salient features – it can not be known whether that feature is of such overwhelming importance as to have that effect unless and until it is analysed in context with all others. In any event, even if the proposition were correct, that is not this case. His Honour was correct in his assessment of the features of vulnerability and reliance. The only feature which favoured Makawe was control, and that, alone, given the absence of vulnerability and reliance, could not establish a duty of care.

140 The next complaint was that his Honour failed to take into account “policy considerations” of the kind referred to by Gummow J in Hill v Van Erp [1997] HCA 9; (1997) 188 CLR 159 at 235-6. Had he done so, it was argued, the outcome would have favoured Makawe. Three “policy considerations” were identified: indeterminacy; the reluctance to impose a duty that would interfere with legitimate competitive conduct; and the need to resist the imposition of a duty of care that would intrude into another area of law (Moorabool Shire Council v Taitapanui [2006] 14 VR 55; (special leave refused) [2006] HCA Trans 328).

141 Examination of these policy considerations, if made, would have favoured Makawe: given that the class of persons to whom the duty of care is said to have been owed is limited to purchasers of the property, there is no question of indeterminacy; given that the Council is not engaged in competitive conduct, it is unnecessary to factor in the protection of competition into the determination; and there are no issues of competing legal obligations.

142 I accept that none of the policy considerations identified would speak against the imposition of the duty of care here alleged. The question then is whether such policy considerations were relevant, and ought to have been taken into account with the result that the judge ought to have found that the Council owed Makawe a duty of care.

143 Proof of the absence of a policy reason that might contra-indicate a duty of care does not establish a positive reason for the imposition of that duty of care. That policy considerations that might argue against a duty of care are absent is no more than neutral. No policy consideration favouring the imposition of a duty of care was identified.

144 The next complaint was that his Honour failed to give any or any sufficient weight to the statutory role of the Council in considering and approving development and building applications. This is the ground numbered 4. The submission made was that, because of the particular way his Honour reasoned, (that is, what was said to be the cumulative approach) he:

“… precluded from his final consideration … the possibility that the Council’s statutory powers of control over building approval and its knowledge of the potential risk to the subject property could themselves found a duty.”

145 This is merely another way of saying that control of itself, and his Honour’s finding in that respect, established a duty of care, or at least was capable of doing so. I would reject that proposition. The answer is as set out in [65] above.

146 In any event, the ground is founded upon a false premise. In paras 31 and 32 of the judgment, the trial judge said:

“Where the defendant is a local authority, such as the defendant Council in this case, the existence and extent of the duty of care depends in part on the statutory regime under which the local authority is acting.”

EP&A Act

Local Government Act

“The Council’s powers over building approval in the relevant legislation ([31]-[32]), together with its knowledge of the potential intersection of the watertable and basement slab, combined to create a basis for a duty to exercise reasonable care in the imposition of conditions for the purpose of building approval with regard to below ground drainage.”

147 Although it was recognised that his Honour had made these references, nevertheless the submission was made that, in this passage, his Honour:

“… expressly den[ied] the ultimate relevance of the statutory duties of the Council and the objects of the statute under which it operates.”

148 Earlier, in para 34 (Red, 58D-F) he said:

“But the existence of a duty to use reasonable care in the exercise of the power will depend upon whether the relationship between local authority and plaintiff is one which meets all of the criteria by which the existence of a duty is determined.”

149 It was submitted that his Honour’s failure to make (further) mention of these matters:

“at the point of assessing the existence or otherwise of a duty to … Makawe, on such an important manner, demonstrates that his Honour did not take those matters into consideration in determining that duty.”

150 It is sufficient to say that I would reject that submission. It does not withstand examination when regard is had to the passages from the judgment I have extracted above.

151 It was next argued that the “cumulative” approach that he was asserted to have taken limited the trial judge to a conclusion

“… in conflict with several cases in this Court where these particular statutory powers have been held to be part of the statutory context founding a duty of care owed by a council”.

152 On examination, however, this submission must also be rejected. One of the decisions upon which reliance was placed was Port Stephens Shire Council v Booth [2005] NSWCA 323 at [81] and [82]. Those paragraphs appear under a sub-heading “(i) Discretion”. In the immediately preceding paragraph ([80]) Giles JA said:

“The Council did not dispute on appeal that it owed the purchasers a duty to take reasonable care in the determination of the application. Its submissions focussed on the grant of development approval.”

153 In [82] he said:

“The present question is not the existence of a duty of care, acknowledged as one owed to the purchasers, but its nature.”

154 Those passages demonstrate that, in that case, the existence of a duty of care was not in issue and was not judicially determined.

155 Another decision cited as an illustration of a case in conflict with the present decision was Becker, at [75].

156 I see nothing in that paragraph to support the proposition. In [75] Bryson JA, in the course of considering whether, in the circumstances that there pertained (vastly different from the present) case law about government powers to regulate conditions of building applied to cases about the existence of a duty of care in the exercise of statutory powers, such as the construction of roads, drains and subdivisions. He concluded that they had no such application. It is of some interest that he held that, in that case, the council owed no duty of care.

157 In my opinion, Phegan DCJ properly took into account the circumstance that the Council exercised statutory powers. That circumstance was one of the considerations that went, in favour of Makawe, into the synthesis. It was not, however, enough, of itself, to create a duty of care.

158 The next argument put on behalf of Makawe arose under the ground numbered 7, in which the finding of absence of reliance was challenged. His Honour concluded that Makawe had failed to establish actual reliance, as distinct from “general reliance”. The ground of appeal as pleaded asserts error in that finding. But the written submissions took a different tack; they did not challenge the finding, but rather asserted error in the emphasis given by his Honour to the absence of reliance.

159 It was put that his Honour:

“… incorrectly reasoned that establishing reliance is required for Makawe to establish that the council owed it a duty of care.”

“50. Second, is [sic] Honour’s reasoning … in relation to reliance appears to misapply relevant authority to reach the conclusion that establishing reliance is essential for Makawe to show a duty of care.”

160 Such a proposition can only be found from a misreading of what his Honour said at para 45. That was:

“What has become increasingly clear in more recent statements in the High Court is that the element of reliance, particularly in cases of economic loss, requires actual and not merely general reliance.”

161 Read properly, his Honour was not saying that reliance is, in every case, a requisite for establishing a duty of care; what he was saying was that, where reliance is established, it is insufficient that it be reliance of a general character (as his Honour found reliance in this case to be) but must be specific, or actual.

162 In any event, it is not apparent that the proposition is incorrect. In Becker, Bryson JA said:

Smith v Eurobodalla Shire Council

163 The written submissions filed for Makawe suggested that this was incorrect. They pointed to a passage in the judgment in Smith in which McClellan AJA said:

may prove

164 The argument put was that this passage shows that the absence of relevant inquiry is not decisive.

165 Again, Booth was cited, this time in support of the proposition that a duty of care may be found to exist in the absence of reliance. As I have indicated, Booth cannot be cited for such a proposition, because it made no such determination.

166 Nor is Smith authority for such a proposition; in Smith, after finding various errors in the conduct of the trial and in the reasoning process, this Court ordered a new trial. That is what McClellan AJA referred to in the opening words of the passage cited:

“In the ultimate resolution of this matter …”

167 In my opinion, no error in this respect has been demonstrated.

168 The next attack was made with respect to the determination of the question of vulnerability (grounds 6, 8 and 9). The challenges identified in the amended Notice of Appeal to the findings of vulnerability were:

that his Honour concluded that, to the extent that Makawe needed to demonstrate vulnerability, such vulnerability was not demonstrated unless there was nothing he could have done to prevent the loss; that so to conclude was an error; and that the correct test is whether Makawe’s inability to protect itself was such as to cast an obligation on the Council;

(a) not having an engineer inspect the property;

(b) not obtaining an assignment of Firmbuild’s rights against the engineer;

169 What his Honour (relevantly) said was:

“42. In Woolcock the High Court pointed to the failure of the plaintiff in that case to show that it was, in any relevant sense, vulnerable to the economic consequences of any negligence on the part of the defendants. The same observation can be made of [Makawe]. The property was bought at a price in excess of $3,500,000 and consisted of 18 studio apartments. Although the property was purchased shortly after completion, the apartments were already tenanted and there is no doubt that the plaintiff’s purpose in purchasing the property was to use it as a source of income through the continued letting of the apartments. It would be very difficult for [Makawe] in such circumstances, even if [Makawe] had sought to do so, to establish vulnerability in the sense explained by the High Court.

170 His Honour then referred to Bryan v Maloney, extracted a paragraph from p 625, and emphasised the last sentence which reads:

the

171 In this segment of the judgment, Phegan DCJ was following closely what was said in the joint judgment in Woolcock Street. The facts of that case bore significant parallels with the facts of the present case. The plaintiff was an investment company, purchasing property for investment purposes. After purchase the building was found to have defects. The case proceeded in the High Court by way of appeal from a Case Stated. In the joint judgment the following appeared:

“31 Neither the facts alleged in the statement of claim nor those set out in the Case Stated show that the appellant was, in any relevant sense, vulnerable to the economic consequences of any negligence of the respondents in their design of the foundations for the building. Those facts do not show that the appellant could not have protected itself against the economic loss it alleges it has suffered. It is agreed that no warranty of freedom from defect was included in the contract [of sale], and that there was no assignment to the appellant of any rights which the vendor may have had against third parties in respect of any claim for defects in the building. Those facts describe what did happen. They say nothing about what could have been done to cast on the respondents the burden of the economic consequences of any negligence by the respondents …

It is not alleged or agreed … that the defects of which complaint now is made could not have been discovered …

Bryan v Maloney

Bryan

172 The appellant had obtained from the relevant local authority a certificate of compliance with some relevant legislation. This certificate did not throw up the defects later discovered. The High Court said that that:

“… says nothing about what other investigations might have been undertaken or might have revealed.”

173 I accept, as was put in the written submissions, that:

“The degree and nature of vulnerability sufficient to found a duty of care will vary from category to category and from case to case.”

174 That proposition is drawn directly from the judgment of McHugh J in Perre v Apand.

175 It was argued that, in this case, “particular circumstances” require “a realistic view” of Makawe’s vulnerability to the role of the Council. The “particular circumstances” were not clearly spelled out. Those asserted appear to be:

the Council’s knowledge about the water table and its proximity to the development;

that that information was not in Makawe’s possession;

that it was unlikely that any purchaser, including Makawe, would think to consider whether inspection of the Council file might yield information relevant to the purchase;

Civil Liability Act

176 It was submitted, with respect to the suggestion that Makawe could have informed (and protected) itself by inspecting the Council file, that the evidence did not support a conclusion that any such file would have been made available, that the relevant personnel of Makawe would have recognised the significance of the document at the time, or that they were aware of any matter that would provide a reason to make such an inquiry or to inspect the Council file.

177 It is in this respect, and this respect only, that I have some difficulty with his Honour’s judgment. Underlying the suggestion that Makawe might have inspected the Council records is the suggestion that Makawe was aware of some reason to do so. No such reason is apparent from the evidence. There is no reason to think (on the evidence) that Makawe was aware of the existence of the Jeffery & Katauskas report, such as to prompt it to make such an inspection. I do not accept the process of reasoning by which his Honour arrived at the conclusion that Makawe had failed to establish vulnerability.

178 That, however, does not establish that Makawe was relevantly vulnerable. The absence of any explicit, express or actual reliance by Makawe on the Council, it seems to me, significantly undermines the proposition that it was.

179 And even if it were relevantly vulnerable, that circumstance, in combination with the finding that the Council had control, does not dictate a conclusion that the Council owes it a duty of care. It is still necessary to consider the other matters (to the extent that these are material to the particular circumstances of the case) in the catalogue provided by Allsop P in Stavar (judgment in which had not been delivered at the time of argument in the present case nor indeed at the time of argument in this appeal).

180 Of those features, pointing in favour of a duty are those lettered (c) (the degree and nature of the control exercised by the Council); (f) (the assumption of responsibility (by granting building approval) by the Council); (j) (the nature and degree of hazard); (k) (knowledge by the Council of potential harm to a subsequent purchaser of the building).

181 Pointing in the other direction are those lettered (b) (the nature of the harm – pure economic loss); (d) (degree of vulnerability); (e) (degree of reliance); (g) (proximity); (h) (relationship between Makawe and the Council).

182 When all the features are balanced, I am satisfied that error has not been shown in the conclusion of the trial judge. That makes it unnecessary to consider the question raised by the Notice of Contention.

183 It also makes it unnecessary finally to deal with a further issue raised at the instance of the Court after judgment had been reserved.

184 That issue concerns the applicability (or otherwise) of s 44 of the Civil Liability Act.

185 Since counsel were invited to, and did, make submissions with respect to that section, it is appropriate to note the arguments.

186 Section 44 provides:

“44 When public or other authority not liable for failure to exercise regulatory functions

(1) A public or other authority is not liable in proceedings for civil liability to which this Part applies to the extent that the liability is based on the failure of the authority to exercise or to consider exercising any function of the authority to prohibit or regulate an activity if the authority could not have been required to exercise the function in proceedings instituted by the plaintiff.

187 Section 41 defines (for the purposes of Pt 5 of the Civil Liability Act, in which Part s 44 appears) “function” as including:

“… a power, authority or duty.”

188 The matter was raised in the District Court, and was dealt with briefly by the trial judge. At [77] his Honour said:

“Section 44 refers to a failure to exercise ‘any function’. This is not a case in which the plaintiff’s claim is based on any such allegation. The ‘function’ exercised by the defendant Council in this case is the function of approving a development/building application. That function was clearly exercised and the case against the defendant is based on the manner of its exercise, not a failure to exercise it at all. Section 44 therefore has no application in this case …”

189 As can be seen, his Honour identified “function” for the purposes of s 44(1) as the broadly stated function to deal with applications for building approval. If that is a correct identification of “function” in the sub-section, then the conclusion is clearly correct.

190 However, on behalf of the Council an attempt was made to define or identify “function” more narrowly, and to include the power (see s 41) to impose conditions on the grant of development or building approvals. If that is correct, then it may well be that s 44 affords a complete defence to Makawe’s claims.

191 However, since I have reached the conclusion that the judgment was correct without recourse to s 44, it is unnecessary finally to resolve that matter.

192 This conclusion also means that it is unnecessary to deal with the final ground of appeal concerning the assessment of damages.

193 I would dismiss the appeal with costs.

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Citations

Makawe Pty Ltd v Randwick City Council [2009] NSWCA 412

Most Recent Citation

Mortimer v District Council of Streaky Bay [2014] SADC 75

Cases Citing This Decision

14

Bankstown City Council v Zraika [2016] NSWCA 51

Dansar Pty Ltd v Byron Shire Council [2014] NSWCA 364

Pollard v Wilson [2010] NSWCA 68

Cases Cited

21

Statutory Material Cited

3

Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258

Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16

CITATION:	Makawe Pty Limited v Randwick City Council [2009] NSWCA 412
HEARING DATE(S):	28 May 2009
JUDGMENT DATE:	15 December 2009
JUDGMENT OF:	Hodgson JA at 1; Campbell JA at 58; Simpson J at 75
DECISION:	Appeal dismissed with costs.
CATCHWORDS:	LOCAL GOVERNMENT – Consent authority – Approval of development application for home unit building – Approval of building application – Subsequent flooding of basement car-park due to fluctuations in water table – Whether consent authority owed duty of care to purchaser of home unit building. - TORTS – Negligence – Duty of care – Pure economic loss – Loss to purchaser of home unit building from flooding of basement car-park due to fluctuations in water table – Whether duty of care in respect of such loss owed to purchaser by consent authority that approved development and building applications.
LEGISLATION CITED:	Environmental Planning and Assessment Act 1979 ss 76, 90 and 91 Local Government Act 1993 ss 68, 76, 94 and 96 Local Government (Approvals) Regulation 1993 reg 12
CATEGORY:	Principal judgment
CASES CITED:	Armidale City Council v Alec Finlayson Pty Limited [1999] FCA 330; (1999) 104 LGERA 9 Bamford v Albert Shire Council [1998] 2 Qd R 125; (1998) 97 LGERA 33 Bryan v Maloney (1995) 182 CLR 609 Caltex Refineries (Queensland) Pty Limited v Stavar [2009] NSWCA 258 De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28 Donoghue v Stevenson [1932] AC 562 Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54; (2002) 211 CLR 540 Hill v Van Erp [1997] HCA 9; (1997) 188 CLR 159 Mid-City Skin Cancer & Laser Centre Pty Ltd v Zahedi-Anarak [2006] NSWSC 844; (2006) 67 NSWLR 569 Moorabool Shire Council v Taitapanui [2006] VSCA 30; (2006) 14 VR 55 Perre v Apand Pty Limited [1999] HCA 36; (1999) 198 CLR 180 Port Stevens Shire Council v Booth [2005] NSWCA 323; (2005) 148 LGERA 351 Pyrenees Shire Council v Day [1998] HCA 3; (1998) 192 CLR 330 Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Limited [2009] NSWCA 263; (2009) 53 MVR 502; [2009] Aust Torts Reports 82-031 Sutherland Shire Council v Becker [2006] NSWCA 344; (2006) 150 LGERA 184 Sutherland Shire Council v Heyman [1985] HCA 41; (1985) 157 CLR 424 Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422 Western Districts Development Pty Limited v Baulkham Hills Shire Council [2009] NSWCA 283; (2009) 169 LGERA 62 Wollongong City Council v Fregnan [1982] 1 NSWLR 244 Woolcock Street Investments Pty Limited v CDG Pty Limited [2004] HCA 16; (2004) 216 CLR 515
PARTIES:	MAKAWE PTY LIMITED (appellant) RANDWICK CITY COUNCIL (respondent)
FILE NUMBER(S):	CA 40252/08
COUNSEL:	S D ROBB QC/ G P SEGAL (appellant) L KING SC/ S GLASCOTT (respondent)
SOLICITORS:	Charles G Roth (appellant) DLA Phillips Fox (respondent)
LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	DC 3020/03
LOWER COURT JUDICIAL OFFICER:	Phegan DCJ
LOWER COURT DATE OF DECISION:	16 May 2008