Precision Products (NSW) Pty Ltd v Hawkesbury City Council - [2008] NSWCA 278

Reported Decision: 74 NSWLR 102

New South Wales

Court of Appeal

CITATION: Precision Products (NSW) Pty Limited v Hawkesbury City Council [2008] NSWCA 278
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 24 July 2008, 25 July 2008

JUDGMENT DATE:
31 October 2008

JUDGMENT OF: Allsop P at 1; Beazley JA at 199; McColl JA at 200

DECISION: 1. Set aside orders 3, 4, 5, 6, 7 and 8 made by the District Court on 26 June 2007 and in lieu thereof order that the plaintiff pay the defendant's costs.
2. Otherwise dismiss the appeal.
3. Order that the appellant pay the respondent's costs of the appeal.

CATCHWORDS: STATUTORY POWERS AND DUTIES – exercise of statutory powers and duties – conduct of administrative or public responsibilities – reasonableness – propriety of purpose - NEGLIGENCE – economic loss – proceedings against public authorities in exercise of statutory powers – negligence in performance of statutory powers and duties– whether decision so unreasonable that no public authority could properly consider reasonable exercise of power – Civil Liability Act 2002 s 43A – contributory negligence - DUTY OF CARE – existence of and scope of duty of care – whether duty to exercise care and skill in adhering to text and purpose of statutory scheme – whether breach of statutory duty – whether breach of duty to afford procedural fairness – whether relationship or position of vulnerability - ENVIRONMENTAL PROTECTION – environmental pollution – powers of Council in protection of environment – issuance of notice under Protection of the Environment Operations Act 1997 (NSW) s 91 – precautionary principle – Protection of the Environment Administration Act 1991 (NSW) s 6 - COSTS – indemnity costs – discretion as to indemnity costs – grounds for award of costs on indemnity basis – where inclusive costs offer – conduct of parties – unreasonable conduct – liability for costs of persons not party to proceedings - MEASURE OF DAMAGES (TORT) – assessment of damages for economic loss – mitigation of damages - WORDS & PHRASES – “suspicion”

LEGISLATION CITED: Civil Liability Act 2002 (NSW)
Judiciary Act 1903 (Cth)
Land and Environment Court Act 1979 (NSW)
Mental Health Act 1990 (NSW)
Protection of the Environment Administration Act 1991 (NSW)
Protection of the Environment Operations Act 1997 (NSW)

CASES CITED: Associated Provincial Picture Houses Limited v Wednesbury Corporation [1948] 1 KB 223
Australian National Airlines Commission v Newman [1987] HCA 9; 162 CLR 466
Avon Downs Pty Limited v Federal Commission of Taxation [1949] HCA 26; 78 CLR 353
Bathurst City Council v Saban (1985) 2 NSWLR 704
Beaudesert Shire Council v Smith [1966] HCA 49; 120 CLR 145
Board of Fire Commissioners (NSW) v Ardouin [1961] HCA 71; 109 CLR 105
Brodie v Singleton Shire Council (2001) 206 CLR 512
Bryan v Maloney [1995] HCA 17; 182 CLR 609
Buck v Bavone [1976] HCA 24; 135 CLR 110
Caledonian Collieries Limited v Speirs [1957] HCA 14; 97 CLR 202
Caltex Oil (Australia) Pty Limited v The Dredge “Willemstad” [1976] HCA 65; 136 CLR 529
Coco v R [1994] HCA 15; 179 CLR 427
Cran v State of New South Wales [2004] NSWCA 92; 62 NSWLR 95
Crimmins v Stevedoring Industry Finance Committee [1999] HCA 59; 200 CLR 1
Curran v Northern Ireland Housing Association [1987] AC 718
Darkingjung Pty Limited v Darkingjung Aboriginal Land Council [2006] NSWSC 42
Davis v Radcliff [1990] 1 WLR 821
Deputy Commissioner of Taxation v Richard Walter Pty Limited [1995] HCA 23; 183 CLR 168
Dunlop v Woollahra Municipal Council [1982] AC 158
Esanda Finance Corporation Limited v Peat Marwick Hungerfords [1997] HCA 9; 188 CLR 241
George v Rockett [1990] HCA 26; 170 CLR 104
Graham Barclay Oysters Pty Limited v Ryan [2002] HCA 54; 211 CLR 540
Hill v Van Erp (1997) 188 CLR 159
Hunter Area Health Service v Presland [2005] NSWCA 33; 63 NSWLR 22
Kioa v West [1985] HCA 81; 159 CLR 550
Leatch v National Parks and Wildlife Service (1993) 81 LGERA 270
Liverpool City Council v Cauchi [2005] NSWLEC 675; 145 LGERA 1
Malika Holdings Pty Limited v Stretton [2001] HCA 14; 204 CLR 290
Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; 209 CLR 597
National Parks and Wildlife Service v Stables Perisher Pty Limited (1990) 20 NSWLR 573
Northern Territory v Mengel [1995] HCA 65; 185 CLR 307
NSW v Bujdoso [2007] NSWCA 44; 69 NSWLR 302
Perre v Apand Pty Limited [1999] HCA 36; 198 CLR 180
Peters’ American Delicacy Co Ltd v Heath [1939] HCA 2; 61 CLR 457
Plaintiff S157/2002 v Commonwealth [2003] HCA 2; 211 CLR 476
Port Stephens Shire Council v Booth [2005] NSWCA 323; (2005) 148 LGERA 351
Presland v Hunter Area Health Service [2003] NSWSC 754
Puntoriero v Water Corporation [1999] HCA 45; 199 CLR 575
Pyrenees Shire Council v Day [1998] HCA 3; 192 CLR 330
Queensland Bacon Pty Limited v Rees [1966] HCA 21; 115 CLR 266
R v Connell; ex parte Hetton Bellbird Collieries Limited [1944] HCA 42; 69 CLR 407
R v Hickman; ex parte Fox [1945] HCA 53; 70 CLR 598
Romeo v Conservation Commission of the Northern Territory [1998] HCA 5; 192 CLR 431
Rowling v Takaro Properties Limited [1988] AC 473
Shuttleworth v Cox Brothers and Co (Maidenhead) Limited [1927] 2 KB 9
State of New South Wales v Paige [2002] NSWCA 235; 60 NSWLR 371
Sutherland Shire Council v Heyman [1985] HCA 41; 157 CLR 424
Takaro Properties Limited v Rowling [1986] 1 NZLR 22
Telstra Corporation Limited v Hornsby Shire Council [2006] NSWLEC 133
Twist v Randwick Municipal Council [1976] HCA 58; 136 CLR 106
Vairy v Wyong Shire Council [2005] HCA 62; 223 CLR 422
Wayde v New South Wales Rugby League Limited [1985] HCA 68; 180 CLR 459
Woolcock Street Investments Pty Limited v CDG Pty Limited [2004] HCA 16; 216 CLR 515

PARTIES: Precision Products (NSW) Pty Limited
Hawkesbury City Council

FILE NUMBER(S): CA 40588/2007

COUNSEL: C Harris SC, M Seymour
G M Watson SC, M J Windsor

SOLICITORS: Coode & Corry (Penrith)
McCabe Terrill

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): 5203/2004

LOWER COURT JUDICIAL OFFICER: Gibb DCJ

LOWER COURT DATE OF DECISION: 11 May 2007

CA 40588/2007

ALLSOP P
BEAZLEY JA
McCOLL JA
31 October 2008

PRECISION PRODUCTS (NSW) PTY LIMITED v HAWKESBURY CITY COUNCIL

JUDGMENT

1 ALLSOP P:

Contents

Background [3]

Pleadings [10]

The reasons of the primary judge

· Summary of conclusions [17]

· Jurisdiction [18]

· Duty of care [19]

· Breach of duty and the validity of the action taken [21]

· The Civil Liability Act 2002 (NSW), s 43A [33]

· Contributory negligence and mitigation [34]

· Damages [37]

Jurisdiction [40]

Duty of care

· The appellant’s submissions [48]

· The Council’s submissions [62]

· Reasons on duty of care [74]

Breach of duty [121]

The

Civil Liability Act 2002

, s 43A

Contributory negligence and mitigation [180]

Damages

· Disposal of stock [184]

· Lost customers [186]

Costs [187]

Miscellaneous matters [195]

Orders

2 This is an appeal from orders made by the District Court (Gibb DCJ) dismissing a claim by the appellant (as plaintiff) against the Hawkesbury City Council (“the Council”). The appellant claimed damages, including exemplary and aggravated damages, as a consequence of the alleged negligent exercise of statutory power by the Council under the Protection of the Environment Operations Act1997 (NSW) (the “PEO Act”) which was said to have caused damage to the appellant’s business by requiring it to cease the use of, and to remove stock from, the premises on which it conducted its business.

Background

3 On 2 December 1988, the Council granted development consent for chemical warehousing and blending to be carried out at 97 Fairey Road, South Windsor, being the location of the business in question. At that time, the property was owned and occupied by a Mr Cassidy and/or a company controlled by him. On 1 November 1997, Mr Allan Zeuschner’s company, Precision Products (Aust) Pty Limited, purchased the chemical business that had been carried on by Mr Cassidy’s company from Unit 4 at the above address and took a licence from Mr Cassidy to occupy Unit 4 (except for a small chemical laboratory contained in Unit 4 which Mr Cassidy continued to occupy for use in connection with the business he continued to carry on in Unit 3). The property at 97 Fairey Road was an industrial structure divided into separate units for the carrying on of separate businesses.

4 Precision Products (Aust) Pty Limited traded from the premises at Unit 4 until approximately August 2001, when the appellant (Precision Products (NSW) Pty Limited) took over the business. Mr Zeuschner was the sole director, shareholder and employee of the appellant.

5 On 30 April 2002, the property, including Unit 4, was inspected by Ms Dianne Tierney and other officers of the Council, including a Mr Chris Dan. Ms Tierney asked questions of Mr Zeuschner; photographs were taken and notes were made. Three weeks later, on 22 May 2002, and without any further contact with Mr Zeuschner or the appellant, a notice was sent by the Council purporting to be under the PEO Act, s 91. The notice was, relevantly, in the following terms:

Background

On … Tuesday 30th April 2002 a site inspection was carried out on Lot 36 DP263025 also known at 97, Unit Four, Fairey Road Windsor NSW in the presence of the Manager Precision Products NSW P/L Mr Allan Zeuschner, Mr Chris Dan and Dianne Tierney from Hawkesbury City Council. At the time of the inspection it was observed that Unit Four was being utilised for the processing of hazardous chemicals and in a manner where there is potential to cause danger to the environment and public health. A development application has not been approved by Hawkesbury City Council for this activity. This notice is being issued to prevent the pollution of receiving waters.
Direction to take clean-up action

Hawkesbury City Council directs Mr Allan John Zeuschner as both the Director and Secretary of the company trading as Precision Products NSW P/L as the person carrying out the activity on the premises located at 97, Unit Four, Lot 36 DP 263025, Fairey Road Windsor, to take the following clean-up action.

· Cease the use of the premises for the processing of hazardous chemicals immediately as the premises is [sic] being used in a manner where there is potential to cause danger to the environment and public health.

· Remove all chemicals from the site within fourteen (14) days from the date of this notice.

· Provide to Council in writing where the chemicals were transported or disposed of within twenty one (21) days from the date of this notice.

· Ensure the premises is [sic] cleaned to the satisfaction of the Manager of the Environment & Waste Branch including all waste holding vessels, separators and underground tanks. All chemicals/waste are to be disposed of by an authorised waste removal company and all appropriate documentation indicating the amount and receiving company forwarded to council within twenty one (21) days.

This notice is issued under section 91 of the

. It is an offence against that Act not to comply with this notice, unless you have a reasonable excuse for not complying.

6 It is important to note the following features of the notice that assumed some importance in the litigation. First, whilst the notice referred to potential to cause danger to the environment and to the fact that the notice was being issued to prevent the pollution of receiving waters, no so-called “pollution incidents” were separately referred to. Secondly, reference was made to the alleged lack of development consent.

7 Between 22 May and 8 July 2002, the appellant ceased using the premises and removed chemicals from the premises. This, it was asserted, caused it economic loss.

8 On 6 June 2002, the Council issued a second notice under the PEO Act, s 91. Its terms were, relevantly, the same as the earlier notice. It was issued after a request for further time to comply by the appellant.

9 The appellant claimed that the economic loss suffered by it was a consequence of conforming with an invalid notice (or notices) which were negligently issued by the Council. The trial of the action involved a significant body of disputed facts as to what actually happened, findings of credit by the primary judge (by and large consistently against Mr Zeuschner and in favour of Ms Tierney) and a conclusion by the primary judge that the appellant was without legal remedy. It is convenient to delay any more detailed examination of the facts until the discussion of the legitimacy of the conduct of the Council in the section of these reasons on breach of duty, on the hypothesis of the existence of a duty of care as alleged.

Pleadings

10 The heads of relief claimed in paragraph 20 of the Second Further Amended Statement of Claim (“the 2nd FASC”) were:

(i) damages;

(ii) aggravated and exemplary damages;

(iii) interest;

(iv) costs;

11 In relation to the first purported notice under the PEO Act, s 91 issued on 22 May 2002, the appellant alleged (see the 2nd FASC paras 7A and 7B) that the Council did not afford it procedural fairness and that the notice was thereby invalid. Additionally, or alternatively, the appellant asserted (see the 2nd FASC paras 7C and 7D) that the notice issued on 22 May 2002 was invalid (a) because it did not identify any “pollution incident [that] has occurred or is occurring” within the meaning of s 91; (b) because the notice required the appellant to carry out work which was not “clean-up action” within the meaning of s 91; and (c) because the work to be carried out on the site and the terms of the notice amounted, effectively to a notice prohibiting the plaintiff from carrying on its business contemplated by Pt 4.4 of the PEO Act, which the Council had no power to issue.

12 Further, it was alleged (see the 2nd FASC paras 7E and 7F) that the decision of the Council to issue the notice was manifestly unreasonable and therefore invalid.

13 Finally, it was alleged (see the 2nd FASC paras 7G – 7I) that the notice was invalid because of a lack of proper authority in Ms Tierney to sign the notice.

14 In paras 10-10I of the 2nd FASC the appellant alleged that the second notice issued on 6 June 2002 was also invalid for reasons substantially similar to those invalidating the first notice.

15 The appellant further alleged in paras 14-16 of the 2nd FASC that the Council owed a duty of care to the appellant “to see that proper skill and care was exercised in investigating and the issuing of [the first and second notices]”.

16 The appellant alleged that the Council breached the duty of care in that the directions were not “validly, properly or reasonably issued”. The particulars to this allegation of breach of duty were as follows:

(a) Issuing the directions on grounds incapable of supporting their issue as at both 22 May and 6 June 2002. This included the assertion that the defendant did not reasonably suspect that a pollution incident within the meaning of the PEO Act had occurred or was occurring at or from the site or that the plaintiff was causing or had caused a pollution incident. (See para 17A.)

(b) Issuing the directions without affording procedural fairness. (See para 17AA.)

(c) Failing to ensure that the notices were signed by an officer of the Council who was validly authorised to do so. (See para 17AB.)

(d) Issuing notices that were invalid. (See para 17AC.)

(i) the use of premises for the processing of hazardous chemicals in a manner where there was potential to cause danger to the environment and public health was not a valid basis for the issue of a direction to take clean-up action under s 91;

(ii) the lack of approval of a development application for a use being made of premises was not a valid basis for the issue of a notice to take clean-up action under s 91; and

(iii) the lack of development consent for a use being made of premises was not a valid basis for the issue of such a notice under s 91.

(See para 17B.)

(f) Issuing the notices on the basis that the Council had not approved a development application for the use of the site for processing hazardous chemicals when in fact the Council had approved such a development application by granting development consent. (See para 17C.)

(g) Issuing the notices without adequately checking its records in order to determine whether the Council had approved a development application for the use of the site for processing hazardous chemicals. (See para 17D.)

(h) Issuing the notices expressed so as to require action that went beyond what might reasonably have been required to remove existing “pollution” within the meaning of the PEO Act and/or preventing pollution that was likely to occur. (See para 17E.)

(i) Representing to the appellant that it (the appellant) did not have development approval for the activities being carried out by it on the premises. (See para 17F.)

(j) Continuing to insist on the appellant complying with the notices notwithstanding that the Council was aware, at all times, of the building approval and development approval and that the appellant notified the Council on or about 23 May 2002 that the Council had issued a development approval for the activities being carried out. (See para 17G.)

Issue was taken by the Council with all aspects of the claims made.

The reasons of the primary judge

Summary of conclusions

17 The essential conclusions of the primary judge were as follows:

(a) the claim was in essence one for judicial review of the exercise of the Council’s functions, seeking relief that was, by the Land and Environment Court Act 1979 (NSW) (“the L and E Court Act ”), s 71(1), made exclusive to the Land and Environment Court and that the District Court had no jurisdiction to hear it;

(b) that there was no duty of care owed by the Council to the appellant;

(c) that if there were a duty of care there was no breach;

(d) that if there were breach, the Civil Liability Act 2002 (NSW), s 43A applied to protect the Council;

(e) that although rejecting the Council’s assertion of contributory negligence, the appellant had failed to mitigate its position by failing to take various steps and because of this the claim should fail;

(f) that if her Honour were otherwise wrong, damages in the order of $26,000 would have been awarded to the appellant; and

The question of jurisdiction

18 The primary judge concluded that the proceedings were in substance to review a function of the Council and so exclusively within the jurisdiction of the Land and Environment Court by reason of the L and E Court Act, ss 20(1)(e), 20(2), 20(3)(a) and (b) and 71(1).

The question of the duty of care

19 The primary judge’s essential findings included the following:

(a) The appellant was not “vulnerable”, because although it could not prevent the issue of notices, it could have resisted the notices by citing a reasonable excuse not to comply with them because of the notices’ invalidity or by moving for relief in the Land and Environment Court. The appellant was in a position to protect its own economic interests and was not in any relevant sense “vulnerable” or within the control or power of the Council.

(b) Reliance and proximity alone do not constitute a basis for the imposition of a duty.

(c) The knowledge of the Council officers that the appellant would rely on the notices was “problematic”, given that the notice itself stated that it was to be obeyed “unless you have a reasonable excuse for not complying”.

(d) The foreseeability of economic harm flowing from the exercise of the power was insufficient.

(e) The PEO Act , s 91 confers a discretionary power. Further, it is a power which of its nature must impose cost on the person affected.

(f) There was no duty to exercise the power in any way for the benefit of a person in the position of the appellant; rather, the power was to be exercised for the benefit of the public and the protection of the environment.

(g) The PEO Act , s 91(4) expressly contemplated an “innocent” recipient of a notice under s 91.

(h) The Council did not appreciate that the notices were relevantly deficient.

(i) There was no dishonesty or malice on the part of the Council or any officer in issuing the notices or making the decision to do so.

(j) The PEO Act was concerned with the protection of the environment and the public interest and in determining whether a common law duty exists it was necessary to give close consideration to the statutory scheme involved and especially whether a common law duty of care was “inconsistent” or “incompatible” with the statute.

(k) There is no express statutory requirement for procedural fairness in the decision-making process for the issue of notices on s 91.

20 In all the circumstances, after a consideration of the terms of the PEO Act and related legislation and after a discussion of a number of cases to which I will make reference below, the primary judge was of the view that there was no duty of care imposed on the Council of the kind pleaded.

Breach of duty and the validity of the action taken

Reasonable suspicion

21 The primary judge found that the Council officers, in particular, Ms Tierney, held the belief or suspicion that there had been or would likely be pollution from the premises and that those beliefs were reasonable.

22 At page 95 of the primary judge’s reasons the following finding was made:

I find that Ms Tierney in fact held the suspicions of which she gave evidence, and that they were reasonable suspicions in the circumstances. I find that in deciding to issue each of the notices, Ms Tierney acted bona fide upon her reasonable suspicions then formed.

23 The credit of Ms Tierney, was severely called into question in cross-examination. There was an allegation, dealt with early in the primary judge’s reasons, that Ms Tierney had fabricated documents after proceedings had started to justify her position in relation to the issue of the notices. It was also alleged in cross-examination of her that she had fabricated a diary note at a later date. The primary judge rejected these allegations. She found Ms Tierney to be “patently honest”, “frank and honest”, a “witness of complete honesty” and “honest, frank and reliable”.

24 The rejection of these allegations was important because included in the notes said to be a fabrication was contemporaneous support for evidence given by Ms Tierney about what she thought of the premises and the possible danger to the surrounding environment. In particular, the relevant note contained a record of something said by Mr Zeuschner which contained a clear admission that he thought that he would be subject to some action by the authorities because of the way he was conducting his business. This statement was denied by Mr Zeuschner, but found by the primary judge to have been made by him.

25 The findings about the honesty of Ms Tierney were made in the context of contradictory evidence, not only of Mr Zeuschner, but also of others, including the appellant’s solicitor who gave evidence of the extent and contents of documents provided on discovery, which, he said, did not include a document produced by Ms Tierney in her evidence and said to be contemporaneous with events.

26 Ultimately, the appellant challenged only one aspect of the primary judge’s acceptance of Ms Tierney’s evidence – about conversations after the notice had been served concerning the scope of the development consent, and what was said to flow from that in connection with the reason for issuing the notices. I will come to this challenge in due course in dealing with the factual issues in the context of the asserted breach of duty.

27 The primary judge accepted all the evidence of Ms Tierney as to what she saw and thought about the state of the premises and concluded that there was a clear base upon which to issue a notice under s 91.

28 Within this conclusion was the rejection of the assertion that the only reason for issuing the notice was a belief that the activities conducted at the premises by the appellant went beyond the development consent that had been issued by the Council. The primary judge accepted that there were discussions about the development consent and indeed heated meetings. The primary judge stated the following at p 89 of her reasons:

I am conscious that there was much discussion about development consent immediately after the notices were issued, and a rather heated meeting convened to discuss that subject on 5 July 2002. But the fact that a meeting with town planners focussed upon a discussion as to the content of the development consent is hardly surprising. I do not find that the fact of that meeting or the content of the debate at that meeting supports the plaintiff’s contention that the notice was issued because of the Council’s view about the lack of development consent. The lack of development consent was a separate problem which the Council addressed for a while, but which for reasons not explored in these proceedings the Council did not pursue.

Procedural fairness

29 After a discussion of various cases, including Twist v Randwick Municipal Council [1976] HCA 58; 136 CLR 106; Liverpool City Council v Cauchi [2005] NSWLEC 675; 145 LGERA 1; Kioa v West [1985] HCA 81; 159 CLR 550; and Deputy Commissioner of Taxation v Richard Walter Pty Limited [1995] HCA 23; 183 CLR 168 and of the structure of the relevant legislation, the primary judge found no breach of duty to accord procedural fairness. It is not clear whether the primary judge so concluded because of a finding that there was no duty or that in the circumstances here no steps needed to be taken. In any event, the primary judge distinguished Cauchi.

Delegation

30 There was a certain lack of clarity and contradiction in the primary judge’s reasons in relation to delegation. On at least one occasion, the primary judge appeared to indicate her view that the delegation of authority to Ms Tierney was valid; in other places, it appeared that she concluded the delegation to be invalid. More importantly, however, the primary judge found that there was no negligence in Ms Tierney or any Council officer in assuming or believing that she had authority to issue the notice. In particular the primary judge rejected the proposition that the Council was required to check the delegation before issuing the notice.

The question of what should or could have been done by the Council

31 The primary judge discussed the issue of the unlicensed storage of dangerous goods. Her Honour also noted that the matters which concerned Ms Tierney were also to be seen in the views of the appellant’s expert. In cross-examination, the appellant’s town planning expert, Mr Falson, agreed that the potential for a pollution incident by reason of the method of storage of the chemicals on the site was ever present. This was particularly so given that there was no bunding to protect the surrounding environment from any spill.

32 The primary judge rejected any proposition that no steps were required to be taken. Her Honour concluded that the appellant had failed to discharge the onus of proving that the notice went too far and was not a legitimate clean up notice under the PEO Act or that it could not reasonably be seen as such.

The Civil Liability Act 2002 (NSW), s 43A

33 The primary judge expressed the view that the Civil Liability Act, s 43A protected the Council. This was a finding based substantially on the findings as to the reasonableness of the Council’s approach.

Contributory negligence and mitigation

34 The primary judge rejected the Council’s pleading of contributory negligence. This was not challenged on appeal. Nevertheless, the primary judge concluded that the appellant had failed to mitigate its position and because of that its claim should fail. The primary judge accepted the Council’s submission that the appellant should have undertaken the following conduct to ameliorate its position and thereby mitigate its loss or damage:

(a) The appellant could have done nothing and rested on a reasonable excuse for non-compliance.

(b) The appellant could have exploited the argument that the notice was not addressed to the correct company.

(c) The appellant could have sought professional assistance at an earlier point from environmental consultants, town planners, dangerous goods consultants or lawyers.

(d) The appellant could have applied to the Land & Environment Court for immediate relief against compliance.

35 The primary judge accepted a submission from the Council that the appellant had failed to do any of these things and had otherwise led no evidence supporting a contention that it was mitigating its loss. The submission of the Council that was accepted was also to the effect that the appellant was preoccupied with what business it could operate at 97 Fairey Road rather the way it was carrying out its activities.

36 For these reasons the primary judge said that the appellant’s claim should fail.

Damages

37 The primary judge prefaced her remarks on loss with a comment about the lack of adequate documentation reflecting the business affairs of the appellant and of the unreliability of Mr Zeuschner’s evidence.

38 The primary judge also prefaced her conclusion on the posited heads of loss by noting that the Council could have acted against the appellant even if the notice was too broad and by also noting that if the Council had not acted the likelihood was that the WorkCover Authority would have stepped in to take some unidentified action in relation to the state of the premises. These comments may have formed the foundation for a conclusion that even if the notice in this form should not have been issued, no loss had been proved to have been suffered because there had been no attempt to identify what loss would have occurred from a properly framed notice given the findings as to the state of the premises.

39 In any event, the primary judge considered each of the relevant heads of loss. The primary judge would have awarded:

(a) nothing for the removal of waste;

(b) $4,247.75 for loss of stock consequent upon the notice;

(c) $320 payable under the notice;

(d) $10,365 for loss of sales;

(e) $11,026 for loss of profits;

(f) nothing for lost customers;

(g) nothing for exemplary damages.

Jurisdiction

40 The appellant stressed that the relief it claimed was for damages at common law, not “to review” or “to command” a function conferred or imposed by a planning or environmental law. It was the relief claimed that was determinative, it was submitted, not the findings that may have to be made in considering whether relief is to be given. It was submitted that once one identified claims for relief that were of a common law character the L and E Court Act, ss 20(2) and 71(1) did not operate. Reliance was placed on Bathurst City Council v Saban (1985) 2 NSWLR 704 at 709; Darkingjung Pty Limited v Darkingjung Aboriginal Land Council [2006] NSWSC 42; and National Parks and Wildlife Service v Stables Perisher Pty Limited (1990) 20 NSWLR 573 at 583.

41 The Council made submissions in writing supporting the primary judge’s conclusion. It was submitted in writing that for the purpose of assessing jurisdiction here, it was the findings that may have to be made that were determinative, not the relief that was claimed. The Council conceded that a case of misrepresentation could have been based on the claims of invalidity. Here, it submitted, the claim was for no more than review of the function.

42 In oral argument on the appeal, the Council conceded that what was involved was an action for common law damages which was within the jurisdiction of the District Court.

43 Notwithstanding this concession, it is appropriate to make the following remarks.

44 The passages in Bathurst City Council v Saban, Darkingjung and National Parks and Wildlife Service make clear (as do the terms of the L and E Court Act, ss 20(1)(e), 20(2) and 71(1)) that it is proceedings to do certain things that are made exclusive to the Land and Environment Court. Relevantly, here, “proceedings to review … the exercise of a function conferred or imposed by a planning or environmental law”.

45 Notwithstanding the baldness of some of the assertions in the pleading of invalidity, it is clear that the only claim for relief was one for damages and, by para 19 of the 2nd FASC, that claim was grounded only upon the allegation of breach of a common law duty to exercise proper skill and care in “investigating and issuing the two directions”.

46 The primary judge, of course, found there to be no such duty. In those circumstances the claim simply failed.

47 If the Council was under a duty to exercise due care at common law in the respects identified, a proceeding which propounded a claim for damages for breach of that common law duty would not answer the description of a “proceeding to review … the exercise of the function”. The fact that only damages were sought was not determinative (though it was relevant). If a plaintiff were to seek damages consequent upon an order in the nature of certiorari, that is a claim for damages arising from or in respect of the flawed administrative action, different considerations might apply.

The duty of care

The appellant’s submissions on duty of care

48 The appellant identified three erroneous conclusions in the primary judge’s reasons. First, the primary judge erred in finding that no established category of duty applied. Secondly, the primary judge erred in determining whether a duty applied by concluding that considerations of the vulnerability of the appellant and reliance by the appellant here were not relevant or not of sufficient weight. Thirdly, the primary judge erred in taking into account or giving too much weight to various matters, being the so-called “precautionary principle”, the principle of coherence between any posited duty of care and administrative law concepts of procedural fairness and the statutory scheme under the PEO Act, and the availability of alternative relief in the Land and Environment Court.

49 The first and primary proposition of the appellant was that the passage in the joint judgment of Dixon CJ, McTiernan, Kitto and Taylor JJ in Caledonian Collieries Limited v Speirs [1957] HCA 14; 97 CLR 202 at 220 had not been given proper consideration by the primary judge. In that passage, their Honours said the following:

The well settled principle applies that when statutory powers are conferred they must be exercised with reasonable care, so that if that those who exercise them could by reasonable precaution have prevented an injury which has been occasioned and was likely to be occasioned by their exercise, damages for negligence may be recovered.

50 The appellant noted that Caledonian Collieries had been subsequently referred to in a number of High Court and Court of Appeal decisions, including Sutherland Shire Council v Heyman [1985] HCA 41; 157 CLR 424 at 436, 458 and 484; Pyrenees Shire Council v Day [1998] HCA 3; 192 CLR 330 at 391; and Port Stephens Shire Council v Booth [2005] NSWCA 323; 148 LGERA 351 at 369 [83].

51 Her Honour was incorrect, it was said, to distinguish or put to one side Caledonian Collieries on the basis that this was a discretionary power being exercised here and not a power which there was a duty to exercise.

52 The appellant criticised her Honour’s reliance on cases such as Crimmins v Stevedoring Industry Finance Committee [1999] HCA 59; 200 CLR 1; Graham Barclay Oysters Pty Limited v Ryan [2002] HCA 54; 211 CLR 540 and Romeo v Conservation Commission of the Northern Territory [1998] HCA 5; 192 CLR 431 on the basis that these were cases concerned with the duty to take action, that is, a duty to exercise a power to avoid loss, not (as here) the negligent exercise of a power. The appellant submitted that in circumstances where a power is exercised (here in taking action under the PEO Act) the Council had an obligation to take reasonable care in the exercise of the power to prevent a reasonably foreseeable and avoidable loss that may occur should the power not be exercised with reasonable care.

53 The appellant submitted that her Honour was also in error in dealing with the decision of the High Court in Northern Territory v Mengel [1995] HCA 65; 185 CLR 307 in the way she did. Her Honour had referred to the passages in Mengel which dealt with Beaudesert Shire Council v Smith [1966] HCA 49; 120 CLR 145. The appellant emphasised the passage in the High Court judgment at 348 that “in this country governments and public officers are liable in negligence according to the same general principles that apply to individuals”. The appellant pointed out that in Mengel negligence was not considered in the High Court because the judge at first instance had apparently accepted the existence of a duty of care, but found no breach of it and there had been no intermediate appeal pressed on that issue.

54 The appellant argued that when cases such as Woolcock Street Investments Pty Limited v CDG Pty Limited [2004] HCA 16; 216 CLR 515 and Perre v Apand Pty Limited [1999] HCA 36; 198 CLR 180 are understood properly, there was a proper basis to conclude here that the appellant was vulnerable and that a duty arose. In particular, the appellant relied upon the following:

• First, the appellant was given no warning about the inspection or, in the three week delay before the first notice was issued, that the respondent had concerns about the premises. The appellant had no opportunity to comment or give an explanation for any of the concerns.

• Secondly, the appellant was not told about any of the four “pollution incidents” that Ms Tierney said in her evidence had caused her to issue the notice. The appellant had no opportunity to explain these incidents or to take action voluntarily to address them before the notice was issued.

• Thirdly, the notice did not identify any pollution incident so that the appellant had no way of knowing whether it might have a reasonable excuse for failing to comply with the notice or some other defence to a prosecution.

• Fourthly, the notice indicated that it was being issued because the appellant did not have a development consent for its activities on the site and that this matter was confirmed to Mr Zeuschner by Ms Tierney when he asked about the matter.

• Fifthly, the Council was in a much better position than the appellant to investigate the permitted uses of the land.

55 The appellant submitted that it was unrealistic to think that a person in the position of the appellant had a real opportunity to protect itself in circumstances where such a notice was given with the threat of fines of $250,000 per day in circumstances where no warning or proper notice to the appellant had been given about the issue on the notice.

56 The appellant also attacked the primary judge’s reference to the so-called “precautionary principle” referred to in the Protection of the Environment Administration Act1991 (NSW) (the “PEA Act”), s 6. The primary judge referred to the PEA Act, s 6(1) and (2)(a) in the context of the structure of the State legislation of which the PEO Act formed part, and the statutory purposes of the Environment Protection Authority (the “EPA”) in the PEA Act.

57 The appellant noted that the precautionary principle, in its proper context, is one suited to assist decision-makers who are confronted with the task of undertaking environmental assessment of any proposed activity. The principle required them to approach the task from the common sense point of view that if there was a lack of scientific certainty available for the decision maker to rely upon, the decision should be made cautiously: Leatch v National Parks and Wildlife Service (1993) 81 LGERA 270 and Telstra Corporation Limited v Hornsby Shire Council [2006] NSWLEC 133; 67 NSWLR 256 at [128]. The appellant submitted that the principle had no relevance to the circumstances here and that the discussion of it reflected a misunderstanding of the appropriate task in assessing whether the duty of care existed.

58 The appellant submitted that one of the reasons for the primary judge coming to the view that there was no duty of care was her view that such duty would be incompatible with the Council’s duty under the statutory scheme in the PEO Act which was the source of its power and that such a duty would therefore be inimical to “coherence” in the law. As required by State of New South Wales v Paige [2002] NSWCA 235; 60 NSWLR 371, the appellant submitted that it was necessary to analyse the relevant statutory scheme closely in order to answer this question. It was submitted that the primary judge failed to do this adequately. In the appellant’s submission, there was nothing incompatible in the Council being required to exercise care in adhering to the text and purpose of the statutory scheme.

59 The appellant submitted that its use of the phrase of “procedural fairness” in its pleading may have misled her Honour into error. The appellant submitted that the phrase in the pleading was shorthand for the Council failing to warn the appellant that it was considering issuing a notice, failing to seek consultation with the appellant as to why the notice should not issue, failing to allow the appellant to comment on the terms in which the notice would issue and, in particular, the nature and extent of the action to be required and failing to give the appellant an opportunity voluntarily to take such steps as might be required to address the Council’s concerns. These were said to be not directed to the public law context of the Council’s actions, but to compliance with the common law duty to exercise the power without negligence. The appellant submitted that the invalidity of the notice was claimed only as a particular of negligence: that the Council was negligent in that it breached its duty of care by issuing an invalid notice, by failing to give the appellant any acceptable warning that it was considering issuing the notice and in failing to give it a chance to comment upon it or address the Council’s concerns.

60 Though not pleaded precisely in this way, the appellant propounded before the primary judge and on appeal two duties, both of which were said to arise at common law: first, the “duty in Caledonian Collieries”; and secondly, the duty (the decision having been taken to exercise the power) to exercise the power properly in accordance with statutory requirements. During oral argument the duty to conduct an investigation with reasonable care (part of the pleaded duty in para 16 of the 2nd FASC) was abandoned.

61 Both these duties were said to have been breached in five ways:

(a) the failure to accord the appellant procedural fairness, being a warning or an opportunity to make submissions or address the Council’s concerns;

(b) the failure to identify the pollution incidents in the notices;

(c) the issue of the notices without a proper basis of a reasonable suspicion of pollution incidents;

(d) the drawing of a notice which was either misleading as to the pollution incidents on which it was based or misrepresented that there was no development approval; and

(e) the requiring of action that was not clean-up action within the meaning of the PEO Act .

The Council’s submissions on duty of care

62 The Council submitted that there was no general duty on a public authority to exercise reasonable care in the exercise of powers. The law, it was submitted, does not recognise a duty having such an ambit. The Court must have regard to the terms of relevant legislation in order to determine whether or not a common law duty of care exists and also to determine the scope of that duty. Reference was made to Crimmins v Stevedoring Industry Finance Committee at 34-35, 59 and 99; Romeo v Conservation Commission of the Northern Territory at [123]; Sullivan v Moody [2001] HCA 59; 207 CLR 562 at [60] and [61]; Sutherland Shire Council v Heyman at 459 and 483; Pyrenees Shire Council v Day at 346; and Graham Barclay Oysters Pty Limited v Ryan at [78], [79] and [185].

63 It was submitted that the duty cannot be defined by reference to proximity: Graham Barclay Oysters Pty Limited v Ryan at [99] and [236], or by reference to reliance on the part of the appellant on the Council exercising a statutory function for its particular benefit: Pyrenees Shire Council v Day at 344 [20], 347-348 [45] and 411 [231].

64 Further, it was submitted that it was wrong to regard the duty as requiring the Council to take reasonable care to guard against any foreseeable risk: Romeo v Conservation Commission of the Northern Territory at [126]-[129].

65 It was submitted that vulnerability, properly understood, was important to the imposition of a duty of care. However, vulnerability did not simply mean that the appellant was exposed to risk, but that the appellant was unable to do anything to protect itself from the economic consequences resulting from the Council’s conduct. It was submitted that the onus was upon the appellant to show that it could not have protected itself against economic loss allegedly suffered: Woolcock Street Investments Pty Limited v CDG Pty Limited at [23], [31], [32], [80], [96], [213] and [231].

66 The Council submitted that a duty of care should not be imposed upon a public authority if the observance of such a duty would be inconsistent with, or have a tendency to discourage the due performance of, a public authority’s statutory duties: Sullivan v Moody and X (Minors) v Bedfordshire County Council [1995] AC 663 at 639. This, it was submitted, was the position here.

67 It was also submitted by the Council that there was no duty imposed on the Council if the purpose of the statutory scheme was (as here) to protect the public: Curran v Northern Ireland Housing Association [1987] AC 718 and Davis v Radcliff [1990] 1 WLR 821.

68 The Council submitted that care was required in the imposition of a duty of care upon public authorities in how they exercise their public powers. The availability of public law remedies in the courts to review unlawful decisions and relieve individuals of the consequences of them indicated, it was submitted, that no additional overlay of remedy based on the tort of negligence would apply, unless misfeasance in public office could be established.

69 Here, the statutory framework for the protection of the environment in the State and therefore the protection of a wider public interest by the PEO Act, together with the control of the Council by the terms of the PEO Act and the direction of the Environmental Protection Authority militated against a duty of care in favour of those against whom the protective powers are directed. The recognition of a common law duty would have a tendency to discourage the performance by the Council of its obligations and would conflict in that sense with the broader social and ecological responsibilities imposed by the PEO Act.

70 The Council also submitted that the requirement of coherence between administrative law and the law of torts militated against the imposition of a duty to take reasonable care to avoid engaging in invalid administrative acts. Particular reliance was placed on State of New South Wales v Paige at 387-405 [76]-[258].

71 The Council submitted that the appellant was in no way vulnerable or under the Council’s control. It could rely on having a reasonable excuse (if it had one), or seek declaratory or prerogative relief, urgently if necessary, if the notice were bad, to be relieved of its apparent threat.

72 The Council submitted that the issuing of a notice under s 91 required it to engage in an investigative process. The public interest required unimpeded investigation and not a duty of care directed to the subject of the possible exercise of power which might cramp or chill the process of investigation and associated decision-making: see Cran v State of New South Wales [2004] NSWCA 92; 62 NSWLR 95 at 113.

73 The Council submitted that the primary judge did not use the so-called precautionary principle in any determinative way. Rather, it was submitted that the primary judge referred to the principle as a reflection of the wider statutory purpose of which the PEO Act, s 91 formed part.

Consideration: duty of care

74 I agree with the conclusions of the primary judge that the duty or duties of care propounded by the appellant and said to be owed by the Council to the appellant does or do not arise. Subject to the following expression of my views, I agree with the substance of the Council’s submissions.

75 The passage from the judgment of Dixon CJ, McTiernan, Kitto and Taylor JJ in Caledonian Collieries forms part of the fabric of the common law in the task of the ascertainment of the existence and scope of the duty of care. Its relevance can be seen in cases of the highest authority: Sutherland Shire Council v Heyman at 436-437, 458-459 and 484; Pyrenees Shire Council v Day at 391-392 [177]; Crimmins v Stevedoring Industry Finance Committee at 29-30 [62]; Romeo v Conservation Commission at 18 [25]; and Brodie v Singleton Shire Council (2001) 206 CLR 512 at 575 [144]. See also in this Court, Port Stephens Shire Council v Booth at 354 [1], 369 [82]-[83] and 397 [199].

76 The “well settled principle” is not, however, a stand-alone unitary test for the identification of a duty of care or the ascertainment of its scope. It is not a basis for concluding that whenever an authority, here a Council, decides to exercise any statutory power, it owes a duty of care to any person who might foreseeably be detrimentally affected in any way by the exercise of the power. The existence and the scope of any duty must be analysed by reference to the principles governing such tasks. The principle is, however, a reflection of one of the competing themes in this area – the importance of the notion of equality of citizen and state in the working through of rights and obligations in society: see Graham Barclay Oysters Pty Limited v Ryan at 553-554 [6]; and Northern Territory v Mengel at 348; and compare the Judiciary Act1903 (Cth), s 64 in the exercise of federal jurisdiction.

77 Here, the ascertainment of whether a duty of care was owed to the appellant, and if it was, its scope, must be analysed by reference to at least two bodies of principle: that governing the duty of care to avoid causing economic loss (the relevant loss to the appellant being, it asserted, its loss of business) and that governing the duty of public authorities in relation to the conduct of administrative or public responsibilities. Both are areas of some complexity: cf Pyrenees Shire Council v Day at 397 [189] and Vairy v Wyong Shire Council [2005] HCA 62; 223 CLR 422 at 445 [67].

78 The necessary starting point for any analysis is the legislation in question. From this one finds not only the express powers, duties and functions of the Council, but also the statutory background and framework in which any relevant common law principle must be placed in an harmonious, compatible and coherent way. See generally, Sullivan v Moody and Paige at 387-405 [76]-[258].

79 The statutory provisions referred to below were those in force during the currency of the events in question. Section 91 of the PEO Act takes its place in Chapter 4 dealing with “Environment protection notices”. Four types of notice are provided for:

· clean-up notices under Part 4.2

· prevention notices under Part 4.3

· prohibition notices under Part 4.4

· compliance cost notices under Part 4.5

80 Chapter 4, in turn, takes its place in the PEO Act as containing one group of instruments or mechanisms to help achieve the objects of the PEO Act which are set out in s 3, and which include the following:

(a) to protect, restore and enhance the quality of the environment in New South Wales, having regard to the need to maintain ecologically sustainable development,
…

(d) to reduce risks to human health and prevent the degradation of the environment by the use of mechanisms that promote the following:

(i) pollution prevention and cleaner production,

(ii) the reduction to harmless levels of the discharge of substances likely to cause harm to the environment,

(iia) the elimination of harmful wastes,

(iii) the reduction in the use of materials and the re-use or recycling of materials,

(iv) the making of progressive environmental improvements, including the reduction of pollution at source,

(v) the monitoring and reporting of environmental quality on a regular basis

…

81 These are objectives which reflect the important public policy of the protection of the environment and the health and well-being of the people of New South Wales.

82 Section 6 identifies the authorities who have these public responsibilities: the EPA, local councils (such as the Council, here) and other public authorities (see s 6(2) and the definition of the phrase “local authority” in the Dictionary to the PEO Act) and other public authorities declared by regulation (see s 6(3)).

83 The EPA can be seen to have an over-arching role in supervising public authorities such as the Council in the exercise of their functions concerning the environment: see for example, the PEA Act, ss 11 and 12 dealing with performance targets for, and directions to, public authorities (such as the Council, here).

84 The objects of the PEA Act insofar as they affect the operations of the EPA are not irrelevant in understanding the place and functions of public authorities (such as the Council, here). The PEA Act, s 6(1)(a) and (2)(a) are in the following terms:

(1) The objectives of the Authority are:

(a) to protect, restore and enhance the quality of the environment in New South Wales, having regard to the need to maintain ecologically sustainable development

…

(2) For the purposes of subsection (1) (a), ecologically sustainable development requires the effective integration of economic and environmental considerations in decision-making processes. Ecologically sustainable development can be achieved through the implementation of the following principles and programs:

(a) the precautionary principle—namely, that if there are threats of serious or irreversible environmental damage, lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation.

In the application of the precautionary principle, public and private decisions should be guided by:

(i) careful evaluation to avoid, wherever practicable, serious or irreversible damage to the environment, and

(ii) an assessment of the risk-weighted consequences of various options

…

85 The PEO Act, chapter 2 deals with protection of the environment policies; chapter 3 deals with environment protection licences; chapter 5 deals with environment protection offences; chapter 6 deals with environmental audits; chapter 7 deals with investigation; chapter 8 deals with criminal and other proceedings; and chapter 9 deals with miscellaneous matters.

86 Section 91 must be read together with the relevant definitions in the Dictionary, as follows:

· “pollution” means:

(a) water pollution, or

(b) air pollution, or

(c) noise pollution, or

(d) land pollution.

· “pollution incident” means:

… an incident or set of circumstances during or as a consequence of which there is, has been or is likely to be a leak, spill or other escape of a substance, as a result of which pollution has occurred, is occurring or is likely to occur. It includes an incident or set of circumstances in which waste has been placed or disposed of on premises unlawfully, but it does not include an incident or set of circumstances involving only the emission of any noise or odour.

· “clean-up action” in relation to a pollution incident includes:

(a) action to prevent, minimise, remove, disperse, destroy or mitigate any pollution resulting or likely to result from the incident, and

(b) ascertaining the nature and extent of the pollution incident and of the actual or likely resulting pollution, and

(c) preparing and carrying out a remedial plan of action.

It also includes (without limitation) action to remove or store waste that has been disposed of on land unlawfully.

87 Section 91 provides as follows:

(1)

Notices

The appropriate regulatory authority may, by notice in writing, do either or both of the following:

(a) direct an occupier of premises at or from which the authority reasonably suspects that a pollution incident has occurred or is occurring,

(b) direct a person who is reasonably suspected by the authority of causing or having caused a pollution incident,

to take such clean-up action as is specified in the notice and within such period as is specified in the notice.

(2)

Notices by EPA in emergency

The EPA may, if it considers that it is necessary to do so because of an emergency, give the clean-up notice even if it is not the appropriate regulatory authority with respect to the pollution incident.

(3)

Reports

The clean-up notice may require the person to whom the notice is given to furnish reports to the appropriate regulatory authority regarding progress on the carrying out of the clean-up action.

(4)

Recovery by person given notice

If the person given a clean-up notice complies with the notice but was not the person who caused the pollution incident, the cost of complying with the notice may be recovered by the person who complied with the notice as a debt in a court of competent jurisdiction from the person who caused the pollution incident.

(5)

Offence

A person who, without reasonable excuse, does not comply with a clean-up notice given to the person is guilty of an offence.

Maximum penalty:

(a) in the case of a corporation—$250,000 and, in the case of a continuing offence, a further penalty of $120,000 for each day the offence continues, or

(b) in the case of an individual—$120,000 and, in the case of a continuing offence, a further penalty of $60,000 for each day the offence continues.

88 Section 92(1) empowers the EPA to direct a public authority to take clean-up action. Section 92(2) authorises a public authority to take clean-up action if it considers it necessary.

89 Clean-up directions can be given orally: s 93(1) and (2); but the direction must be reduced to writing: s 93(3).

90 Prevention notices are dealt with in Part 4.3. Prevention notices can be given by a regulatory authority such as the Council in circumstances set out in s 96(1) and (2):

(1)

Application of section

This section applies when the appropriate regulatory authority reasonably suspects that an activity has been or is being carried on in an environmentally unsatisfactory manner at any premises or by any person (otherwise than at premises).

(2)

Prevention notices

The appropriate regulatory authority may, by notice in writing, do either or both of the following:

(a) direct the occupier of the premises,

(b) direct the person carrying on the activity (whether or not at premises),

to take such action, as is specified in the notice and within such period (if any) as is specified in the notice, to ensure that the activity is carried on in future in an environmentally satisfactory manner.

91 The meaning of the phrase “environmentally unsatisfactory manner” is contained in s 95:

For the purposes of this Part an activity is carried on in an environmentally unsatisfactory manner if:

(a) it is carried on in contravention of, or in a manner that is likely to lead to a contravention of, this Act, the regulations or a condition attached to an environment protection licence, or

(b) it causes, or is likely to cause, a pollution incident, or

(c) it is not carried on by such practicable means as may be necessary to prevent, control or minimise pollution, the emission of any noise or the generation of waste, or

(d) it is not carried on in accordance with good environmental practice.

92 Examples of the type of action that can be required by a prevention notice are set out in s 96(3), as follows:

The action to be taken may (without limitation) include any of the following:

(a) installing, repairing, altering, replacing, maintaining or operating control equipment or other plant,

(b) modifying, or carrying out any work on, plant,

(c) ceasing to use plant or altering the way plant is used,

(d) ceasing to carry on or not commencing to carry on an activity,

(e) carrying on an activity in a particular manner,

(f) carrying on an activity only during particular times,

(g) monitoring, sampling or analysing any pollution or otherwise ascertaining the nature and extent of pollution or the risk of pollution,

(h) action with respect to the transportation, collection, reception, treatment, re-use, reprocessing, storage and disposal of any waste,

(i) preparing and carrying out a plan of action to control, prevent or minimise pollution or waste,

93 The obligations of the recipient of a prevention notice are set out in s 96(4) and (5), as follows:

(4)

Occupier’s duty

If the occupier who is given a notice is not the person carrying on the activity, the notice is taken to require the occupier to take all available steps to cause the action to be taken.

(5)

Reports

A prevention notice may require the person to whom the notice is given to furnish reports to the appropriate regulatory authority regarding progress on carrying out the action required to be taken by the notice.

94 Section 97 contains an offence in the following terms:

A person who does not comply with a prevention notice given to the person is guilty of an offence.

Maximum penalty:

(a) in the case of a corporation—$250,000 and, in the case of a continuing offence, a further penalty of $120,000 for each day the offence continues, or

(b) in the case of an individual—$120,000 and, in the case of a continuing offence, a further penalty of $60,000 for each day the offence continues.

95 Part 4.4 deals with prohibition notices. These can only be given by the Minister upon the recommendation of the EPA. Sections 101 and 102 are in the following terms:

101

Prohibition on activities

(1)

Application of section

This section applies where the EPA recommends to the Minister that a notice be given under this section because it is of the opinion that the emission or discharge of pollutants from (or within) any premises in which any activity is carried on:

(a) is causing or is likely to cause such harm to the environment, or

(b) is or is likely to be so injurious to public health, or

(c) is causing or is likely to cause such discomfort or inconvenience to any persons not associated with the management or operation of the activity,

that the giving of the notice is warranted.

(2)

Notice

The Minister may, by notice in writing, do either or both of the following:

(a) direct the occupier of the premises,

(b) direct the person carrying on the activity,

to cease carrying on the activity, or any specified aspect of it, for such period as is specified in the notice.

(3)

Occupier’s duty

If the occupier who is given a notice is not the person carrying on the activity, the notice is taken to require the occupier to take all available steps to cause the activity to cease.

(4) Further notice
The Minister may give further notices on the expiry of the period of the earlier notice if the EPA recommends in accordance with this section that the further notices be given.

102

Offence

A person who, without reasonable excuse, does not comply with a prohibition notice given to the person is guilty of an offence.

Maximum penalty:

(a) in the case of a corporation—$250,000 and, in the case of a continuing offence, a further penalty of $120,000 for each day the offence continues, or

(b) in the case of an individual—$120,000 and, in the case of a continuing offence, a further penalty of $60,000 for each day the offence continues.

96 Part 4.5 deals with compliance costs, including the costs of clean-up notices, clean-up by an authority, prevention notices and prohibition notices. Section 104 deals with compliance cost notices:

(1) Clean-up notice—monitoring or compliance costs
The appropriate regulatory authority that gives a clean-up notice under section 91 to a person may, by notice in writing, require the person to pay all or any reasonable costs and expenses incurred by the authority in connection with:

(a) monitoring action under the notice, and
(b) ensuring that the notice is complied with, and

(c) any other associated matters.

(2) Clean-up by public authority

A public authority that takes clean-up action under section 92 may, by notice in writing, require:

(a) the occupier of the premises at or from which the authority reasonably suspects that the pollution incident occurred, or
(b) the person who is reasonably suspected by the authority of having caused the pollution incident,

or both, to pay all or any reasonable costs and expenses incurred by it in connection with the clean-up action.

(3) Prevention notice—monitoring or compliance costs

The appropriate regulatory authority (other than the EPA) that gives a prevention notice to a person may, by notice in writing, require the person to pay all or any reasonable costs and expenses incurred by the authority in connection with:
(a) monitoring action under the notice, and
(b) ensuring that the notice is complied with, and
(c) any other associated matters.

(4) Prevention notice or prohibition notice—non-compliance

A regulatory authority that takes action under section 98 because a prevention notice is not complied with or takes action under section 103 because a prohibition notice is not complied with may, by notice in writing, require the person to whom the notice was given to pay all or any reasonable costs and expenses incurred by it in taking the action.

97 Section 105 deals with recovery of costs:

(1)

Recovery of unpaid amounts

A regulatory authority or public authority may recover any unpaid amounts specified in a compliance cost notice as a debt in a court of competent jurisdiction.

(2)

Recovery by person given notice

If the person given a compliance cost notice complies with the notice but was not the person who caused the pollution or pollution incident, the cost of complying with the notice may be recovered by the person who complied with the notice as a debt in a court of competent jurisdiction from the person who caused the pollution or pollution incident.

98 Sections 106 and 107 deal with the registration of charges on land in respect of compliance costs.

99 A notice under chapter 4 can be revoked or varied: s110.

100 In Chapter 7, dealing with investigations, power is given to authorised officers to enter premises: Part 7.4. Sections 201 and 202 in that Part expressly call for care, and refer to compensation, as follows:

201

Care to be taken

In the exercise of a power of entering or searching premises under this Part, the authorised officer must do as little damage as possible.

202

Compensation

The EPA or other regulatory authority that appoints an authorised officer must compensate all interested parties for any damage caused by the authorised officer in exercising a power of entering premises (but not any damage caused by the exercise of any other power), unless the occupier obstructed or hindered the authorised officer in the exercise of the power of entry.

101 From the above provisions the following can be stated. First, the exercise of the power in s 91 is one of judgment for the regulatory authority (or the EPA: s 91(2)). The notice “may” be given. Secondly, the power in s 91 is not exercised for the benefit of either the occupier or the person to whom it is given; rather, the exercise of the power is only for the benefit of the public by dealing with, or preventing, the escape of polluting substances. Thirdly, the nature of the possible action contemplated by the phrase “clean-up action” in s 91 is likely, in the ordinary course, to place a financial burden on the person obliged by the notice to act. Fourthly, the notice in s 91 must be complied with, unless a person has a reasonable excuse. Fifthly, the circumstances that may give rise to a clean-up notice under s 91, or a preventative notice under s 96, or a prohibition notice under s 101 are not clearly segregated. There is, to a degree, a hierarchy of importance or seriousness, but there is potential for overlap of the sections. This multiplicity of bases for action should not be used to limit the scope of any particular step provided for. All are concerned with the public good, by protecting the environment. Sixthly, the relevant suspicion or belief or opinion is as to the occurrence of a pollution incident (s 91), or the carrying on of an activity in an environmentally unsatisfactory manner, including the occurrence of a pollution incident (s 96) or the serious matters of environmental damage (s 101). The relevant state of apprehension or belief is not one required (at least in terms of the provisions) to be judged having regard to the interests of the person or persons to whom the notice is directed. Seventhly, the financial consequences of the notices are, to a degree, dealt with. Parliament has not, however, sought to create a statutory avenue for compensation should the views of the relevant authority turn out to be wrong. Eighthly, the power in s 91 (and ss 96 and 101) is compulsory and enforced by the criminal law. To that extent, an obligation to consider the interests of the person to whom the notice is directed may be seen as inherently in conflict with the direction and focus of compulsory state power.

102 It is against this background that the existence of the duty is to be assessed.

103 The asserted duty or duties can be taken to have as its or their essence that the Council will take reasonable care in issuing the notices so as to avoid causing the appellant foreseeable economic detriment by the issue of a notice that would not be issued or would be issued in different terms had due care been taken in the circumstances of its issue.

104 Such a duty should not be imputed to or imposed upon the Council in respect of the issue of notices under s 91 for a number of reasons.

105 The duty is to prevent or avoid economic loss, beyond that which it is reasonably necessary to cause in the proper administration of the PEO Act. The circumstances in which the common law will impose a duty of care to avoid causing pure economic loss have been the subject of considerable debate and uncertainty in Australia since Caltex Oil (Australia) Pty Limited v The Dredge “Willemstad” [1976] HCA 65; 136 CLR 529. Since then, in a series of cases in the High Court culminating in Woolcock Street Investments v CDG (Bryan v Maloney [1995] HCA 17; 182 CLR 609; Hill v Van Erp [1997] HCA 9; 188 CLR 159; Esanda Finance Corporation Limited v Peat Marwick Hungerfords [1997] HCA 9; 188 CLR 241; Pyrenees Shire Council v Day; and Perre v Apand) the High Court has identified an approach based on the presence, in the particular circumstances, of “salient features” that, when combined, constitute or reflect a sufficiently close relationship to give rise to a duty of care. Such salient features include the inherent likelihood of the production of economic loss (Caltex at 576) and assumption of responsibility and known reliance (Bryan v Maloney and the negligent misrepresentation cases). The most important of these features, however, is vulnerability, in the sense discussed in the joint reasons of Gleeson CJ, Gummow, Hayne and Heydon JJ in Woolcock Street Investments v CDG at 530 [23]:

"Vulnerability", in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, "vulnerability" is to be understood as a reference to the plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant.

(Citations omitted)

106 Here, though it was foreseeable that the exercise of the power would or may cause economic detriment to the appellant, there were absent the crucial elements of reliance, assumption of responsibility and, most importantly, vulnerability.

107 The appellant did not rely on the Council for any protection or assistance or skill as it may have done in a context of a building inspection or other beneficial regulatory step. The power was not directed to the benefit or protection of the interests of the appellant. The appellant did not rely upon the Council to state matters to better inform it. Rather, it was told to do certain things upon the assertion of lawful authority, and, under the sanction of the criminal law.

108 It was submitted that there was reliance upon the Council in the circumstances because the Council was the repository of knowledge about the terms of the development consent. I reject this submission. An occupier of land carrying on a business can be reasonably expected to understand the terms of any relevant consent that concerns it. In the circumstances here, although the Council made certain statements about the activities on the land and the development consent, this concerned the kind of matter one would anticipate a land user, such as the appellant, would be aware of.

109 The Council did not, by exercising a power to issue a notice under s 91, assume any responsibility to act in the interests, or for the benefit, of the appellant. The exercise of the power was directed towards protecting the environment; and to the extent that a cost was involved it was a power directed against the interest of the appellant.

110 The appellant was able to protect itself from the consequences of the notice to the extent that they arose from a lack of reasonable care in the issue of the notice in a number of ways. First, it was able to take legal advice immediately. To the extent (as it was argued here) that the notice was apparently bad or invalid on its face, or in the circumstances, that could be assessed and the notice challenged or ignored. It was said that procedural fairness was not afforded. For the reasons expressed later, I agree with that submission. That assertion could have grounded an application to the Land and Environment Court, or the notice could have been ignored as an invalid administrative act. To the extent that the notice was too widely drawn and not supported by s 91 and the associated definitions, that could also have been immediately put forward in an attack on the notice or as the basis for a reasonable excuse not to comply with it.

111 The factual considerations relied upon by the appellant do not establish a relationship or position of vulnerability in the sense described in Woolcock Street Investments v CDG.

112 This lack of vulnerability was reinforced when one looks at the purpose of the PEO Act. The powers are to be used to protect the environment and the public. The PEO Act does not require the interests of those who are suspected, or believed, to be responsible for, or be able to remedy, the pollution to be taken into account for the purposes of a common law duty of care. Indeed, to do so would, to a degree, be incompatible with the responsibilities under the PEO Act. Judgments about the existence and potential risk in connection with pollution need to be made. To cast on the EPA, or an authority such as the Council, the responsibility of taking into account the interests of the person who is, or may be, responsible for the pollution and requiring the authority to exercise care (enforceable by damages at common law) in going no further than is reasonable or necessary or proportionate to protect the environment is to infuse into the statutory process considerations that may have a tendency to discourage the due performance of the principal statutory duty. It might well lead to a defensive or overly cautious approach, or a hesitancy in ensuring that all steps are taken to protect the environment: cf X (Minors) v Bedfordshire County Council at 739 and 750 and Sullivan v Moody at 574.

113 In circumstances where there is an available court (which in fact specialises in matters of this kind), the risk of administrative over-reach can be seen to be protected against by the availability to the citizen of the courts (especially here, the Land and Environment Court) in the exercise of judicial power of review of administrative action.

114 The imposition of a duty of care to have regard to the economic interests of a person in the position of the appellant in the way proposed would be to subject the Council, whose responsibility is to exercise the power in the public interest, to a duty to have regard to the conflicting interests and claims of the party whose conduct (on this hypothesis) may have endangered the environment and the public interest. The setting up of this tension between the statute and the common law should not be permitted: Sullivan v Moody at 582.

115 Given the nature of the power as one the enforcement of which is committed to the criminal law, torts, such as malicious prosecution or misfeasance in public office, whose elements are concerned with failure to adhere to the honest and bona fide exercise of the power can be readily accepted as compatible and coherent with the statutory regime and administrative law. The difficulty with negligence in relation to such a power is that it sets up a conflict or tension in the decision-maker between the ends or purposes of the statutory provision and the object of the exercise of the power (such as the appellant), in circumstances of the honest and bona fide exercise of the power.

116 Not only is the duty proposed not compatible with the PEO Act for the reasons expressed above, it also poses issues of a lack of coherence with administrative law for the reasons expressed by the Chief Justice in Paige at 400-404 [156]-[177].

117 The appellant’s complaints here can be seen as rooted in administrative law: the negligent production of an invalid act. That explains the terms of the 2nd FASC and the complaints as propounded: (a) a failure (to exercise reasonable care) to accord procedural fairness; (b) a failure (to exercise reasonable care) to draft the notice to identify the pollution incident and not to be misleading about the development consent; (c) a failure (to exercise reasonable care) to issue a notice within the meaning of the PEO Act; and (d) a failure (to exercise reasonable care) to ensure that there was proper delegated authority to issue the notice.

(2) Without limiting what constitutes a function to regulate an activity for the purposes of this section, a function to issue a licence, permit or other authority in respect of an activity, or to register or otherwise authorise a person in connection with an activity, constitutes a function to regulate the activity.

Special non-feasance protection for roads authorities

(1) A roads authority is not liable in proceedings for civil liability to which this Part applies for harm arising from a failure of the authority to carry out road work, or to consider carrying out road work, unless at the time of the alleged failure the authority had actual knowledge of the particular risk the materialisation of which resulted in the harm.

(2) This section does not operate:

(a) to create a duty of care in respect of a risk merely because a roads authority has actual knowledge of the risk, or

(b) to affect any standard of care that would otherwise be applicable in respect of a risk.

(3) In this section:

carry out road work means carry out any activity in connection with the construction, erection, installation, maintenance, inspection, repair, removal or replacement of a road work within the meaning of the

roads authority has the same meaning as in the Roads Act 1993.

Exercise of function or decision to exercise does not create duty

In proceedings to which this Part applies, the fact that a public or other authority exercises or decides to exercise a function does not of itself indicate that the authority is under a duty to exercise the function or that the function should be exercised in particular circumstances or in a particular way.

170 Only s 43A was relied upon in this case. A number of matters arise from the terms of s 43A, not all of which were dealt with in argument on appeal. Given the views that I have expressed in relation to the matter and thus the degree of remoteness of this provision from the disposition of the appeal, given the extent of argument that took place as to the section and given the importance of the section, I do not think it appropriate to express concluded views about the meaning and effect of s 43A.

171 A number of important issues about its operation should, however, be noted. First, it is not clear whether, as the Legislative Review Committee thought, the section affects the existence or scope of the duty of care or whether it is a statutory immunity which is engaged at the point of consideration of whether there is a liability for what would otherwise be a breach of a duty of care, the scope of which being ascertained without consideration of the terms of s 43A. There was no argument in this appeal that s 43A affected the scope of any posited duty. In this respect, it is to be noted that s 43A(3) refers to giving rise to civil liability, whereas s 43(2) refers to constituting a breach of statutory duty.

172 Secondly, it was argued that the provision should be limited to the valid exercise of power or a decision not to exercise the relevant power and should not extend to protecting an authority where a power has been sought to be exercised (as here), but because of the jurisdictional error involved in the purported exercise of the power, no true exercise of the power has taken place: Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; 209 CLR 597 and Plaintiff S157/2002 v Commonwealth [2003] HCA 2; 211 CLR 476. An interpretation which limited the effect of s 43A in this way might be seen to be in accordance with principles requiring statutory immunities cutting down common law rights to be read strictly or even jealously: Australian National Airlines Commission v Newman [1987] HCA 9; 162 CLR 466 at 471; Board of Fire Commissioners (NSW) v Ardouin [1961] HCA 71; 109 CLR 105 at 116; Puntoriero v Water Corporation [1999] HCA 45; 199 CLR 575 at 588 [34]; and Coco v R [1994] HCA 15; 179 CLR 427 at 436. Important questions of statutory interpretation would arise at this point including the second reading speech of the relevant minister, the surrounding material, and the overall intent and purpose of the Civil Liability Act (cf NSW v Bujdoso [2007] NSWCA 44; 69 NSWLR 302 at 315 [56]; and see also Malika Holdings Pty Limited v Stretton [2001] HCA 14; 204 CLR 290 at [28]-[29]). The question as to whether s 43A affected the existence or scope of a duty of care would be relevant to this question.

173 Involved in the above question of statutory interpretation would be a close examination of the text of the provision. Important in the above debate would be an assessment as to whether the phrase “involving an exercise of” used in sub-s 43A(3) widened the notion in sub-s 43(1) of “based on … [an] exercise of” a special statutory power.

174 If the provision is sufficiently wide to encompass the purported exercise of a special statutory power, it may be necessary to place a limit upon the operation of the section based on the kinds of conception discussed by Dixon J in R v Hickman; ex parte Fox [1945] HCA 53; 70 CLR 598 at 615: “… provided always that its decision is a bona fide attempt to exercise its power, that it relates to the subject matter of the legislation, and that it is reasonably capable of reference to the power given to the body.” Though this formulation was in the context of privative clauses and its content and context is now to be approached as the High Court has indicated in Plaintiff S157, such a formulation may provide a limiting connecting factor permitting purported exercises of power to be encompassed by s 43A; cf the discussion of a related concept in Paige at 402-403 [167]-[170].

175 A further important consideration is the content of sub-s 43A(3) and the meaning of the phrase “so unreasonable that no authority having the functions of the authority in question could properly consider the act or omission to be a reasonable exercise of its function.” Such wording can be seen to have its source in what is often referred to as “Wednesbury unreasonableness” from Associated Provincial Picture Houses Limited v Wednesbury Corporation [1948] 1 KB 223 at 229-230. Regard could equally be had to the formulation of cognate concepts in Avon Downs Pty Limited v Federal Commission of Taxation [1949] HCA 26; 78 CLR 353 at 360; R v Connell; ex parte Hetton Bellbird Collieries Limited [1944] HCA 42; 69 CLR 407 at 430; and Buck v Bavone [1976] HCA 24; 135 CLR 110 at 118-119. Cognate ideas are also found in the law attending the responsibility of company directors. The Court there focuses on whether decisions made by boards are made honestly in the interest of the company or are of a kind which no reasonable person could have reached: see Shuttleworth v Cox Brothers and Co (Maidenhead)Limited [1927] 2 KB 9 at 23-24; Peters’ American Delicacy Co Ltd v Heath [1939] HCA 2; 61 CLR 457 at 481; and Wayde v New South Wales Rugby League Limited [1985] HCA 68; 180 CLR 459 at 469-470.

176 While these are different areas of human endeavour, formulations of the kind used in these cases, whether it be in public law, the law of business or the law of torts are attempts to formulate more attenuated tests for legitimate activity than by reference to a fixed standard of reasonable care.

177 Whether it is appropriate to describe s 43A as encapsulating the blunt expression of “gross negligence” is a matter for debate. However, it is plain that the drafter of s 43A was attempting to ameliorate the rigours of the law of negligence.

178 To the extent that s 43A has a protective role to play here, I would conclude that the only possible aspect of Ms Tierney’s conduct that could be said to fall outside the terms of s 43A(3) was the extent of the demands of the notice. The evidence of the expert witness, Mr Falson, is not ultimately persuasive in this regard. He had never issued a notice under s 91; his experience was questionable; and he had not fully familiarised himself with the property. Mr Wilson, who had town planning and consulting experience, also lacked a relevant background to be of great assistance.

179 Not without hesitation, I am not prepared to conclude that the decision to issue the s 91 notices in the form they were was an act so unreasonable that no public authority could properly consider it to be a reasonable exercise of the power. The primary judge accepted Ms Tierney as to her honest belief as to the extent of the pollution. Though in cross-examination she categorised her views into four incidents, she was clearly of the view that how the activity was being run on the premises was a danger to the environment. Those findings and that belief may have led another to come to the view that the extent of the notice, though drastic was appropriate to prevent any future incident. Ms Tierney, as I find, was also motivated by her view of the effect of non-compliance with the development consent. That is not something that can be considered relevant to the hypothetical Council in the application of s 43A. Nevertheless, taking all that she perceived and the potential breadth of a notice under s 91, I am not prepared to conclude that the act was so unreasonable as to fall within the proviso within s 43A(3).

Contributory negligence and mitigation

180 The primary judge’s conclusion that there had been no contributory negligence on the part of Mr Zeuschner and the appellant was not the subject of complaint. The acceptance of the appellant’s submission by the primary judge that contributory negligence had no place on the facts here was, if I may respectfully say so, one founded in common sense. If there was a duty and if there was breach, it is difficult to see why Mr Zeuschner and the appellant should be criticised for acceding to the assertion of lawful authority by the Council. Likewise, I do not think that the matters put forward by the Council to the primary judge and accepted by the primary judge logically or on any common sense basis make out a failure to mitigate. Mr Zeuschner and the appellant were given an instruction under cover of lawful authority by the Council. I do not think it can be said that he failed to mitigate his loss consequent upon that by failing to retain lawyers to challenge the notice, or to take any of the other steps referred to by the primary judge.

181 If, contrary to the views I have otherwise expressed, Mr Zeuschner ought to be found entitled to damages, it has not been made out that he has failed to mitigate in any relevant legal sense.

Damages

182 There were two issues raised in relation to damages. First, there was a complaint that her Honour should have found a greater sum than she did in relation to disposal of stock. Secondly, her Honour should have concluded that there were legitimate damages for lost customers.

183 There was a ground of appeal in submissions put in relation to exemplary damages but, for the reasons that are apparent above, exemplary damages do not arise given my view as to the conduct of the Council.

Disposal of Stock

184 The primary judge allowed only $4,247.75 for lost stock. The plaintiff had claimed loss of stock of $59,965. The primary judge awarded the lower figure based on comparing the appellant’s change in stock from the end of May to June ($56,995.45 to $52,747.70) in a document called a stocktake dated June 2002, which was exhibit M. This was said to be a finding which disregarded the contemporaneous note of Ms Tierney that two thirds of the stock had been disposed of by 5 June 2002. The answer to this apparent inconsistency was the assertion at the trial that there had been a significant amount of stock purchased between 5 June 2002 and 30 June 2002: see p 115 of the primary judge’s reasons. The primary judge did not accept that the $59,965 worth of stock was given away by the company. Reliance was placed upon the company’s records in the stocktake.

185 On appeal, the Court was taken to various documents. One document was an expert report of Mr Bridger prepared on the instructions of the solicitors for the Council. This report had consolidated trading figures of the appellant and Prescision Products (Aust) Pty Limited and revealed a closing stock in June 2002 of $2,324. This had been taken from the Tax Return which was also in evidence. Exhibit M used by the primary judge was said to be a list of chemicals which on its face was a stocktake of “June 02”. Mr Zeuschner denied that this was in fact a stocktake document or that it showed stock on hand at the end of June. Nevertheless, exhibit M was a document which Mr Zeuschner produced for his accountant. It was also accepted that Mr Zeuschner prepared the document and provided it to his accountant. In the circumstances of there being such a lack of clarity in the appellant’s own records as to the stocktake, the judge’s conclusion that the document prepared by Mr Zeuschner, calling itself a stocktake as at June 2002, provided by him to his accountant, could be taken as the basis of stock on hand cannot be criticised. The primary judge appears to have chosen this document rather than the tax return as the basis of the stock on hand and stock lost. No satisfactory explanation appears to have been provided to her Honour as to the inconsistency between the two. Mr Zeuschner was cross-examined about his stock on hand and about purchasing and this finding of fact results in part from that. In all these circumstances, I am not prepared to draw any conclusion that the finding by the trial judge as to lost stock was in error. This is especially so when the appellant was manifestly unable to bring forward to the primary judge and put into evidence coherent business records which clearly identified what the position was.

Lost customers

186 It was submitted that Mr Zeuschner’s evidence of customers who did not return after his business closed should have been accepted as a basis for permanent loss of customer connection and good will. The appellant’s accounting expert assessed the value of those customers for a three year period as $49,066. The Council’s accounting expert, Mr Bridger, made no calculation of the value of lost customers. It was submitted that her Honour should have accepted the appellant’s accounting expert. I am not prepared to conclude that there was any error in her Honour not accepting Mr Bridger’s evidence on this. It was not for an expert accountant to explain why people did not return to the appellant’s business. Some rational foundation in the evidence would need to be identified to permit the inference that customers who did not return after a brief shutdown did not do so because of the shut down. At p 120 of her Honour’s reasons, the primary judge said that the plaintiff had failed to discharge its onus of proof. Her Honour accepted the submissions of the Council that there was no relevant evidence from customers as to why they failed to come back. The Council described the claim as speculative. Her Honour’s agreement with that submission in the absence of any evidence from customers was perfectly reasonable. A so-called expert accountant giving evidence in proceedings based on assumptions was not relevant evidence to supplant real evidence of a connection between the refusal of customers to come back and a 43 day shutdown of the appellant’s business. There was no error in this regard made by the primary judge.

Costs

187 One of the orders made by the primary judge as to costs in a separate judgment (order 4 made on 26 June 2007) was that the appellant pay the Council’s costs on an indemnity basis from 31 October 2006, being the date from which the appellant’s claim was amended to make manifest that the claim was one for administrative relief. Given the concession made by the Council on appeal that her Honour was wrong on jurisdiction it follows that that order should not stand. This order was made on 26 June 2007 and is order 4.

188 The primary judge also made an order that the appellant pay on an indemnity basis the Council’s costs from 14 February 2007 because of the appellant’s unreasonable refusal to accept an offer made by the Council shortly prior to that date. The context of the offer was that the solicitor for the appellant had written to the Council stating that the appellant was prepared to settle the matter on the basis that the Council pay the appellant the sum of $105,000 plus costs as agreed or taxed. The offer was to be open until 15 February. The solicitors for the Council wrote in response a letter dated 14 February 2007 in the following terms:

Our client rejects the plaintiff’s offer and by way of counter offer/s to settle in the sum of $60,000 inclusive of costs including any reserve costs and including any past special costs orders. We consider that the plaintiff’s offer is an invalid offer for the purposes of a special costs order of the kind contemplated by your letter of 12 February 2007.

The offer is made a few days before a very lengthy trial is due to commence [and] is only for a very short period.
The plaintiff’s late amendment and cascading service of witness statements when coupled with the very short offer period does not render it unreasonable that our client declines to accept the offer even if the plaintiff does better on hearing.

189 The primary judge accepted that the Council’s counter offer was not such as to entitle it to the benefit of any presumption or order under the Uniform Civil Procedure Rules 2005. Her Honour said that the question was whether it should be treated as an offer at all and if so whether it should have any costs consequences. Her Honour found that it was an offer capable of immediate acceptance, was without ambiguity, that it involved a real element of compromise, and that it was plainly unreasonable not to accept the offer notwithstanding its unorthodox form.

190 Two criticisms were made. First that the offer was inclusive of costs. Secondly, that the full evidentiary foundation of the Council’s case had not yet been filed and therefore it could not have been unreasonable of the appellant not to accept the offer.

191 I am of the view that her Honour failed to appropriately approach the question of unreasonableness. It is unnecessary to engage in any detailed discussion as to the characterisation of the offer, whether as a so-called Calderbank offer or not. The argument on appeal accepted that her Honour was able to make the award of indemnity costs in circumstances where the conduct of the appellant was unreasonable. The inclusive nature of the offer made the assessment of the offer difficult, though not impossible. One aspect not addressed in detail by the primary judge in her reasons was the state of the Council’s evidence. It is not clear how the appellant should have viewed its prospects of success on the basis of the unamended affidavit evidence of Ms Tierney before the supplemented second affidavit. This was not discussed by the primary judge. Also, reading the costs judgment as a whole, I am left with the view that her Honour’s view as to the hopelessness of the matter on jurisdiction (conceded as wrong on appeal) affected her approach to this aspect of the question of indemnity costs.

192 In re-exercising the discretion, I am not prepared to award indemnity costs because of this counter offer. Whilst the appellant lost the case (and, in my view, correctly so), that view is based principally on the non-existence of the duty. I have, however, come to the view that the Council was negligent in some respects (assuming a duty). I have also come to the view that the appellant was not accorded procedural fairness. An inclusive costs offer is capable of grounding an exercise of the Court’s discretion to award indemnity costs. Here, however, in circumstances where the appellant was not accorded procedural fairness and complied with an otherwise invalid notice to shut its business, I am not prepared to conclude that it acted so unreasonably as to refuse this offer in circumstances where it was made late, where there was a real lack of clarity as to the case of the Council and where the Council’s evidence was served late. In these circumstances I would also set aside order 5 made on 26 June 2007.

193 The primary judge also concluded that the appellant should pay the costs, on an indemnity basis, of the separate representation of Ms Tierney for parts of the trial because of what were said to be the baseless allegations of fabrication of documents and dishonest evidence. This is a difficult aspect of the primary judge’s reasons. In her primary judgment and her costs judgment the primary judge drew conclusions that the appellant had baselessly made serious allegations of, in effect, fraud in circumstances where there was no basis whatsoever for making them. She laid this at the feet primarily of the appellant, but if made out, these matters reflected gravely on counsel in the case. The appellant spent some time in the written submissions tracing the change in the respondent’s case up to and at the trial and the surrounding circumstances which gave rise to the legitimate challenge to Ms Tierney in relation to the creation of documents and the giving of evidence, primarily in the second affidavit. I have already indicated my view that in part that challenge does vitiate some of the findings of credit of the primary judge.

194 The late production of the second affidavit of Ms Tierney, the apparent movement of the Council’s case, the available evidence of the apparent role of the development consent and the clear instructions of Mr Zeuschner concerning the conversation at the inspection of the premises at 30 April permitted counsel to cross-examine Ms Tierney in the manner he did. The attack on Ms Tierney’s credit should not, in all the circumstances, be seen as such an unjustified body of conduct as to justify the payment of the costs of representing Ms Tierney. Whilst the appellant abandoned on appeal the wholesale attack on Ms Tierney’s credit and limited itself to the aspects of her evidence to which I have referred, that does not in any way disentitle the appellant from pointing, as it does, in its written submissions to the factors which led to the strong attack on Ms Tierney’s evidence. In all the circumstances, I do not agree with the primary judge’s characterisation of the cross-examination of Mr Tierney. On that basis, in my view, orders 6 and 7 made on 26 June 2007 should also be set aside.

Miscellaneous matters

195 One ground of the appeal was a complaint about the credibility findings against witnesses called by the appellant. The complaints about the credit findings against Mr Zeuschner have some force. In particular, the primary judge’s finding that Mr Zeuschner’s statement that he did not use coolant was false, was made in the context of the matter not having been put to him. Also, the conclusions which the primary judge drew about the dangerous goods licence and Mr Zeuschner’s evidence after Mr Cassidy’s evidence have some difficulties. It is, however, unnecessary to resolve these in any detail. It was not submitted on appeal that the note regarding the conversation upon Ms Tierney attending the premises was false. There was therefore a clear basis for the finding that this conversation took place. I have already expressed my views as to why the primary judge’s findings in relation to the discussions about development consent should not be taken as reliable. But these matters do not lead to a conclusion that the primary judge was not entitled to be otherwise suspicious about the reliability of Mr Zeuschner’s evidence for reasons of his demeanour and taking into account all the matters before her in the working out of the trial. In particular, the unreliability of Mr Zeuschner in relation to explaining the accounting records and purchasing of stock is not, in my view, thrown into question.

196 I have dealt earlier with Mr Falson’s evidence. It may be doubted that his evidence “bordered on the absurd” as found by her Honour. His views that there were a range of actions that the Council could have taken can be assumed to be open. That does not, however, assist, to any material respect, given the difficulties with his background and experience and the reasonable suspicion of Ms Tierney of pollution incidents and of a threat to the environment in relation to premises that were far from well maintained.

197 I have already dealt with the evidence of Mr Cassidy and Mr Wilson. I accept that their evidence together with the objective documentary material makes it probable that there were conversations about the extent of the development consent, contrary to the findings of the primary judge.

Orders

198 No separate argument was made about order 8 made on 26 June, but the consequence of my views as to orders 4, 5, 6 and 7 is that order 8 should also be set aside. Also, given that I would set aside orders 4, 5, 6, 7 and 8 made on 26 June I would also make consequential orders to order 3 such that the plaintiff pay the defendant’s costs on the usual basis. For the above reasons I would make the following orders:

(1) Set aside orders 3, 4, 5, 6, 7 and 8 made by the District Court on 26 June 2007 and in lieu thereof order that the plaintiff pay the defendant’s costs.

(2) Otherwise dismiss the appeal.

199 BEAZLEY JA: I agree with Allsop P.

200 McCOLL JA: I agree with Allsop P.

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10/11/2009 - typographical error - Paragraph(s) [105]

CITATION:	Precision Products (NSW) Pty Limited v Hawkesbury City Council [2008] NSWCA 278 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	24 July 2008, 25 July 2008
JUDGMENT DATE:	31 October 2008
JUDGMENT OF:	Allsop P at 1; Beazley JA at 199; McColl JA at 200
DECISION:	1. Set aside orders 3, 4, 5, 6, 7 and 8 made by the District Court on 26 June 2007 and in lieu thereof order that the plaintiff pay the defendant's costs. 2. Otherwise dismiss the appeal. 3. Order that the appellant pay the respondent's costs of the appeal.
CATCHWORDS:	STATUTORY POWERS AND DUTIES – exercise of statutory powers and duties – conduct of administrative or public responsibilities – reasonableness – propriety of purpose - NEGLIGENCE – economic loss – proceedings against public authorities in exercise of statutory powers – negligence in performance of statutory powers and duties– whether decision so unreasonable that no public authority could properly consider reasonable exercise of power – Civil Liability Act 2002 s 43A – contributory negligence - DUTY OF CARE – existence of and scope of duty of care – whether duty to exercise care and skill in adhering to text and purpose of statutory scheme – whether breach of statutory duty – whether breach of duty to afford procedural fairness – whether relationship or position of vulnerability - ENVIRONMENTAL PROTECTION – environmental pollution – powers of Council in protection of environment – issuance of notice under Protection of the Environment Operations Act 1997 (NSW) s 91 – precautionary principle – Protection of the Environment Administration Act 1991 (NSW) s 6 - COSTS – indemnity costs – discretion as to indemnity costs – grounds for award of costs on indemnity basis – where inclusive costs offer – conduct of parties – unreasonable conduct – liability for costs of persons not party to proceedings - MEASURE OF DAMAGES (TORT) – assessment of damages for economic loss – mitigation of damages - WORDS & PHRASES – “suspicion”
LEGISLATION CITED:	Civil Liability Act 2002 (NSW) Judiciary Act 1903 (Cth) Land and Environment Court Act 1979 (NSW) Mental Health Act 1990 (NSW) Protection of the Environment Administration Act 1991 (NSW) Protection of the Environment Operations Act 1997 (NSW)
CASES CITED:	Associated Provincial Picture Houses Limited v Wednesbury Corporation [1948] 1 KB 223 Australian National Airlines Commission v Newman [1987] HCA 9; 162 CLR 466 Avon Downs Pty Limited v Federal Commission of Taxation [1949] HCA 26; 78 CLR 353 Bathurst City Council v Saban (1985) 2 NSWLR 704 Beaudesert Shire Council v Smith [1966] HCA 49; 120 CLR 145 Board of Fire Commissioners (NSW) v Ardouin [1961] HCA 71; 109 CLR 105 Brodie v Singleton Shire Council (2001) 206 CLR 512 Bryan v Maloney [1995] HCA 17; 182 CLR 609 Buck v Bavone [1976] HCA 24; 135 CLR 110 Caledonian Collieries Limited v Speirs [1957] HCA 14; 97 CLR 202 Caltex Oil (Australia) Pty Limited v The Dredge “Willemstad” [1976] HCA 65; 136 CLR 529 Coco v R [1994] HCA 15; 179 CLR 427 Cran v State of New South Wales [2004] NSWCA 92; 62 NSWLR 95 Crimmins v Stevedoring Industry Finance Committee [1999] HCA 59; 200 CLR 1 Curran v Northern Ireland Housing Association [1987] AC 718 Darkingjung Pty Limited v Darkingjung Aboriginal Land Council [2006] NSWSC 42 Davis v Radcliff [1990] 1 WLR 821 Deputy Commissioner of Taxation v Richard Walter Pty Limited [1995] HCA 23; 183 CLR 168 Dunlop v Woollahra Municipal Council [1982] AC 158 Esanda Finance Corporation Limited v Peat Marwick Hungerfords [1997] HCA 9; 188 CLR 241 George v Rockett [1990] HCA 26; 170 CLR 104 Graham Barclay Oysters Pty Limited v Ryan [2002] HCA 54; 211 CLR 540 Hill v Van Erp (1997) 188 CLR 159 Hunter Area Health Service v Presland [2005] NSWCA 33; 63 NSWLR 22 Kioa v West [1985] HCA 81; 159 CLR 550 Leatch v National Parks and Wildlife Service (1993) 81 LGERA 270 Liverpool City Council v Cauchi [2005] NSWLEC 675; 145 LGERA 1 Malika Holdings Pty Limited v Stretton [2001] HCA 14; 204 CLR 290 Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; 209 CLR 597 National Parks and Wildlife Service v Stables Perisher Pty Limited (1990) 20 NSWLR 573 Northern Territory v Mengel [1995] HCA 65; 185 CLR 307 NSW v Bujdoso [2007] NSWCA 44; 69 NSWLR 302 Perre v Apand Pty Limited [1999] HCA 36; 198 CLR 180 Peters’ American Delicacy Co Ltd v Heath [1939] HCA 2; 61 CLR 457 Plaintiff S157/2002 v Commonwealth [2003] HCA 2; 211 CLR 476 Port Stephens Shire Council v Booth [2005] NSWCA 323; (2005) 148 LGERA 351 Presland v Hunter Area Health Service [2003] NSWSC 754 Puntoriero v Water Corporation [1999] HCA 45; 199 CLR 575 Pyrenees Shire Council v Day [1998] HCA 3; 192 CLR 330 Queensland Bacon Pty Limited v Rees [1966] HCA 21; 115 CLR 266 R v Connell; ex parte Hetton Bellbird Collieries Limited [1944] HCA 42; 69 CLR 407 R v Hickman; ex parte Fox [1945] HCA 53; 70 CLR 598 Romeo v Conservation Commission of the Northern Territory [1998] HCA 5; 192 CLR 431 Rowling v Takaro Properties Limited [1988] AC 473 Shuttleworth v Cox Brothers and Co (Maidenhead) Limited [1927] 2 KB 9 State of New South Wales v Paige [2002] NSWCA 235; 60 NSWLR 371 Sutherland Shire Council v Heyman [1985] HCA 41; 157 CLR 424 Takaro Properties Limited v Rowling [1986] 1 NZLR 22 Telstra Corporation Limited v Hornsby Shire Council [2006] NSWLEC 133 Twist v Randwick Municipal Council [1976] HCA 58; 136 CLR 106 Vairy v Wyong Shire Council [2005] HCA 62; 223 CLR 422 Wayde v New South Wales Rugby League Limited [1985] HCA 68; 180 CLR 459 Woolcock Street Investments Pty Limited v CDG Pty Limited [2004] HCA 16; 216 CLR 515
PARTIES:	Precision Products (NSW) Pty Limited Hawkesbury City Council
FILE NUMBER(S):	CA 40588/2007
COUNSEL:	C Harris SC, M Seymour G M Watson SC, M J Windsor
SOLICITORS:	Coode & Corry (Penrith) McCabe Terrill
LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	5203/2004
LOWER COURT JUDICIAL OFFICER:	Gibb DCJ
LOWER COURT DATE OF DECISION:	11 May 2007