Moorabool Shire Council & Anor v Taitapanui & Ors

[2006] HCATrans 328

[2006] HCATrans 328

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M33 of 2006

B e t w e e n -

MOORABOOL SHIRE COUNCIL AND WALLY MELLIS

Applicants

and

JUSTIN BRYAN TAITAPANUI AND LISA ANN TAITAPANUI

First Respondents

HIA INSURANCE SERVICES PTY LTD T/AS HOME OWNERS WARRANTY

Second Respondent

WATSON CONSTRUCTION PTY LTD (IN LIQUIDATION)

Third Respondent

Application for special leave to appeal

HAYNE J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 16 JUNE 2006, AT 10.52 AM

Copyright in the High Court of Australia

__________________

MR C.L. PANNAM, QC:   If the Court pleases, I appear with my learned friend, MR M.D. WILSON, on behalf of the applicant.  (instructed by Phillips Fox)

MR C.R. NORTHROP:   If the Court pleases, I appear on behalf of the first respondents.  (instructed by Harwood Andrews)

MR D.V. AGHION:   May it please the Court, I appear on behalf of the second respondent.  (instructed by Richmond & Bennison)

HAYNE J:   Yes, Dr Pannam.

MR PANNAM:   Your Honours, the point of general public importance that arises, if leave to appeal is granted in this case, can be fairly shortly stated.  As the Court has seen, the general area is itself of general public importance, namely, the liability of building professionals in respect of their work in domestic building to remote purchasers of the building.  It is a subject that has agitated this Court over a long period of time, perhaps beginning with the Sutherland Shire Council Case and culminating with the Woolcock Street Investments’ Case.  The point that really arises in relation to working out the future of that line of cases is this.  It is the significance that reliance has in determining the existence of a duty of care. 

Can I put it this way.  The Court will recall that in Sutherland Shire Council by a majority the Court held that the absence of reliance in that case resulted in the absence of the existence of a duty of care.  What then happened in Woolcock Street Investments – well, perhaps I will put it another way.  The Court of Appeal of New South Wales in Sved’s Case, by a majority of two to one, again held that the absence of reliance upon a builder in the original construction phase, the absence of any reliance by the remote purchaser on any involvement of a builder was fatal to that claim.  So one has a decision of the High Court and one has a decision of the Court of Appeal of New South Wales which stands for the proposition that the absence of reliance is fatal to the existence of a duty of care in these class of cases.

HAYNE J:   What might be thought to set this case apart from those is – correct me if I am wrong – that the building surveyor was (a) licensed pursuant to statute in effect, and (b) performing functions in satisfaction of particular statutory requirements, was he not?

MR PANNAM:   Yes, but, in our respectful submission, that is nothing unusual.  The Sutherland Shire Council Case had statutory responsibilities, as did, in New South Wales, Woollahra Shire Council, so that the mere fact that the source of the control of the obligation is to be found in statute is nothing, in our respectful submission, that is significant for present purposes.  What is significant is that this, like those cases, is a case where there was evidence given by the plaintiffs of what they relied on.  What they relied on can be simply stated:  the bank in sending out someone to value the property for the purpose of the loan, a reputable solicitor was retained, and a reputable estate agent was retained.  That was the evidence they gave.  There was no evidence at all that they knew of any role that was played by the building surveyor in the process. 

So this is a case that really falls within the Sutherland sort of case and the Sved sort of case where the evidence showed there was absolutely no reliance on anything that the building surveyor did.  Indeed, one could put it higher than that.  There was no evidence that they ever knew of any role that was played in the building process by a building surveyor.  So that, in our respectful submission, the point that is of importance in this case is to determine for general purposes what role reliance plays in the existence of a duty of care in this area.

Now, Bryan v Maloney does not answer the question because there you are concerned with the concept of general reliance.  That subsequently, as your Honours are aware, has been somewhat discredited in other decisions of this Court.  So the question that arises here is, what is the importance to be given in a particular case to the existence or non‑existence of reliance?  Your Honours, that is the main point ‑ ‑ ‑

HAYNE J:   Is that the appropriate starting point or is the appropriate starting point the exercise of statutory functions by a person contemplated by the statute and licensed pursuant to the statute?  That is, are you in the Crimmins’ field of discourse rather than in Bryan v Maloney?

MR PANNAM:   Well, we would say no.  It is certainly the start, but what the critical point is – well, can I come to it in another way?  In the Court of Appeal the majority, conscious of the problem of reliance, approached it in a very odd way indeed.  What they said was this.  You have to get a section 32 certificate in order to have a valid contract in this area in Victoria.  A section 32 certificate involves the production of a building permit, an occupancy permit.

HAYNE J:   Just so.

MR PANNAM:   And their Honours went on to say because a solicitor had been retained in this case, that meant that the solicitor would have satisfied himself or herself about the appropriateness or otherwise of the existence of that certificate, and if the certificate was there and it showed no irregularity, why then you can infer that the solicitor did not draw that to the attention of the client, whereas if there was some problem about it he would have drawn it to the attention of the client.

HAYNE J:   But had the building surveyor acted carefully, the hypothesis is there would have been neither certificate.

MR PANNAM:   That is true.

HAYNE J:   It is not a case of content; its existence is relevant, is it not?

MR PANNAM:   Yes, but the way in which the Court of Appeal dealt with it was the way I put.  They were conscious of reliance and said, “Well, we’ll find some reliance here”, and did in the absence of evidence from the solicitor, in the absence of evidence from the claimants.  The mere existence of the certificate was enough, the reasoning went.  Because there was nothing untoward about the certificates themselves, the solicitor was satisfied; being satisfied, had no occasion to draw that to the attention of the client.  Now, your Honours, that is the first point of importance in the case.

The second point can be stated in the following way.  What was common to both Bryan v Maloney and to Woolcock Street Investments was that the first step in this exercise must concentrate upon the relationship between the building professional whose conduct is in question and the first owner of the house.  In Bryan v Maloney that relationship was found to create a duty of care between the first owner and the building professional involved in that case and in Woolcock Street Investments the plaintiff failed because there was no such duty of care owed on the facts of that case.

This case falls right in the middle because, on any view of the facts of the case, if the original building owner, the Watsons, had sued the building surveyor, Mellis, it is submitted that it would be perfectly clear that the building surveyor would have been found to owe a duty of care, to be sure, but there would have been a very substantial contributory negligence.  Indeed, that is reflected in the final order of the court.  There was a responsibility of, I think, 50 per cent.

Now, the question really arises when there is a truncated liability at the first stage, not the Bryan v Maloney complete liability between the building professional and the original owner, not the Woolcock Street Investments’ Case where there was no liability between them, but what was the impact on the duty of care in this area of the law where you have the relationship between the building professional and the first owner being affected by significant contributory negligence.  Now, that is a question that has not been ventilated in the Court and this would provide a vehicle for examining that aspect of the matter.

HAYNE J:   How do you say it could come into play?  What possible outcomes would there be that would fall for consideration whereas between building surveyor and present plaintiff the relationship that exists is established simply by the existence of the relevant certificates?

MR PANNAM:   What we would say is this, that it would be an extremely unusual result to find that as between the original owner and the building professional in question there was a significant truncated liability, but as between the building surveyor in this case and the ultimate remote purchaser there was to be a complete liability.  It would be a very odd result.  It is the kind of thing that the Court dealt with in part in the contract context in Voli v Inglewood Shire Council where Justice Windeyer in a passage your Honours are familiar with said that you look to the original relationship between the parties in order to determine the extent of a duty owed to a third person.  It is that kind of question.

What this appeal would raise, if leave was granted, was a consideration that has not taken place in the cases that I have referred to in this Court, namely, what is the impact of a truncation of the original liability between the first owner and the building professional, and the ultimate remote purchaser’s entitlement to call up a duty of care?  Your Honours, that is the second point.

There is a third point, and it is this.  Bryan v Maloney itself has been called into question in various places, and indeed Justice Callinan has called it in question recently in the Woolcock Street Investments’ Case.  If leave was to be granted in this case, it would be an appropriate vehicle, if the Court was minded to grant leave, to determine whether the Court did take a wrong turning in Bryan v Maloney and, if it did, whether the law in this area should be put back on a correct course.  That is the third point.

There is a fourth point, and it is this.  In Victoria, as in every other Australian State and Territory, there is an elaborate set of statutory control over the building industry, and the reasons for that are clear enough.  The building industry is both socially and economically important and it poses considerable political problems. 

This government in Victoria, as other governments, have attempted to deal with that in the following way.  Since 1973 there have been statutory schemes in place that are designed to protect the purchasers of domestic property.  Now the situation is you have all building professionals are registered.  They are disciplined by an appropriate professional body.  Failure to comply with the standards that are formulated for them to be observed are the subject of sanctions.  They can be struck off; they can be fined.  There is a statutory regime that imposes certain statutory warranties that run in favour of all owners of the land – not only the original owner, but subsequent owners as well, and they run with the land under section 8 of the relevant Act that is in our outline.  Their limitation period for that liability is 10 years after the date of building, which is very different from the common law situation.  There is a statutory scheme of insurance that requires all building professionals to carry insurance up to a maximum, I think, of $200,000 – or, rather, a minimum of $200,000.  And there is a system, as in all other States and Territories, of apportionment of liability. 

Now, if leave was to be granted in this case, we would seek to make the submission that the existence of that statutory framework rather contraindicates the intervention of the Court, creating by decision at common law a whole new regime which goes far outside that statutory regime.  Now, in decisions of this Court, numerous of them, it has been held that it is a relevant consideration in determining the existence of a duty of care to pay regard to whether there is a statutory regime which overlaps or impacts upon the particular area of the law in question. 

Now, here, we would submit, consistently with English authority if it has not found favour as yet in the Court, that this is an area best left to the legislature rather than to be amplified and expanded by decisions of the Court.  Justice Callinan made the very point towards the end of your Honour’s judgment in Woolcock Street Investments. 

Now, your Honour, there is a variety of points that arise in the appeal – four I have identified – and perhaps there is a fifth, and it is this.  Central to the existence of a duty of care, it has been held in this Court, is the concept of the vulnerability of the plaintiff to the actions or inactions of the person whose conduct is in question.  In this case, that area of the law would impact upon the decision in the following way. 

Here the evidence was that there was an availability of pre‑purchase inspections.  That was not contradicted.  There was evidence that was given by the three building professionals, one in particular that was not challenged, that a pre‑purchase inspection would have revealed the disconformity between the foundations and the structure.  The foundations were simply not appropriate to carry the kind of panel that was used for the

external cladding of the house.  Also there was the ability by contract to stipulate for any contractual warranty that was thought to be appropriate. 

Now, in our respectful submission, these were not people who were vulnerable in the relevant sense.  Perhaps that is not a separate point, perhaps that goes back to the first point about the whole notion of reliance and it is wrapped up in that, but it is still yet another aspect of these cases that have come before this Court that could be clarified were leave to be granted in this case.

Your Honours, they are the points upon which we would rely to seek leave to carry this appeal to the Court.  If the Court pleases.

HAYNE J:   Yes, thank you, Dr Pannam.  We need not trouble you, Mr Northrop and Mr Aghion.

In important respects the decision of the Court of Appeal turns on the particular nature of the obligations owed under applicable Victorian statutes by a building surveyor who issued certain permits required by that legislation in connection with the construction and occupation of a new dwelling for the predecessors in title of the plaintiffs, certificates which it was necessary for the plaintiff’s predecessor in title to produce upon sale of the land to the plaintiffs.

No question about the Court’s decision in Bryan v Maloney (1995) 182 CLR 609 would arise if special leave to appeal were granted. An appeal in the present matter would enjoy insufficient prospects of success to warrant a grant of special leave. Special leave is accordingly refused and refused with costs.

AT 11.08 AM THE MATTER WAS CONCLUDED