Tepko Pty Limited and Ors v Water Board S36/2000

[2000] HCATrans 697

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S36 of 2000

B e t w e e n -

TEPKO PTY LIMITED, NEAL EARTHMOVING PTY LIMITED and JOHN HENRY NEAL

Appellants

and

WATER BOARD

Respondent

GLEESON CJ
GAUDRON J
McHUGH J
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 22 NOVEMBER 2000, AT 9.36 AM

(Continued from 21/11/00)

Copyright in the High Court of Australia

GLEESON CJ:   Yes, Mr Downes.

MR DOWNES:   Your Honours, overnight, in an effort to reduce the time taken in further submissions, we have produced a document which partly addresses factual references in the transcript to matters that I would have taken your Honours to and partly answers some issues that were raised yesterday by some of your Honours.  I think that is being handed to your Honours now.  We have also turned up the Environmental Planning and Assessment Act in the form it was at the relevant time and we have made a copy of that for your Honours, or the relevant parts of it.

Can I briefly take your Honours to that Act to see the structure relevantly so far as the Environmental Planning and Assessment Act was concerned.  If one goes to section 26 of the Act, on page 24 of the print, one sees that:

an environmental planning instrument may make provision for or with respect to any of the following:–

(b)  controlling…..development –

“Development” is defined in the definitions section at page 5 of the print in section 4 to include the subdivision of land.  The general principles relating to environmental planning instruments appear in Part III which begins on page 23 of the print.

Local environmental plans, LEPs as they are called, are dealt with in Division 4 which begins on page 37 and there is then a series of sections setting out the steps that were necessary back in 1985 and thereabouts relating to the coming into effect of a local environmental plan including requirements for exhibition and so forth.

Your Honour Justice Kirby may remember something of this from a case called The Balmain Association v The Minister in which there was considerable reference to these provisions.

KIRBY J:   Fortunately I do not.

MR DOWNES:   Your Honours, and at page 70, which I think is the critical point for present purposes, after the – section 70, I am sorry, page 47, which is the relevant section, after the preliminary process is gone through under which the Minister ultimately makes a local environmental plan”.

CALLINAN J:   Mr Downes, there is some mention in section 37 of planning policies.  Now, I only refer to that because there is a reference in the letter and the memorandum to non-conflict, as it were, with policies.  Were there any planning policies promulgated relevant to this area pursuant to section 37?

MR DOWNES:   These are the things that in the vernacular are called SEPPs and they are formal policies.  I am not aware of any particular policy that would touch on the issues that arise in this case.

McHUGH J:   Well, there were State environmental planning policies and regional environmental planning policies and they had various numbers ‑ ‑ ‑

MR DOWNES:   Yes, and they are collected in the local government practices and perhaps it would be appropriate for us to examine those to see if there are any that are relevant, but offhand I am not aware of them.

CALLINAN J:   I only ask it because of the reference in the memorandum to government policy, you might remember.

McHUGH J:   Your legislation stops short of dealing with it but there were also designated developments, were there not, after inquiries in respect of various areas.

MR DOWNES:   Yes, that is so.  Now, so far as the Metropolitan Water, Sewerage, and Drainage Act is concerned that we handed up yesterday, I wonder if I could just take only a moment to say what is our position so far as sections 34A and B are concerned, and we have really covered this in writing in the first of the documents in the document that I have just handed to your Honours.  The one particularly, we would respectfully submit, material matter which comes from section 34A and B and which assists the construction that I was contending for, for the meaning of the words “immediate cost to connect” and those associated words in the document, is that given that the memorandum and draft letter can be said to be anticipating the possibility of a future agreement under sections 34A and 34B, one can then use 34A and 34B to understand what the word “cost” means in the memorandum and draft letter and that word appears a number of times in 34A and 34B, particularly, for example, in 34A(3)(a):

the whole of the cost of the construction of the main or mains and ancillary works –

and that phrase “cost of construction” which must be cost to the Board of construction, appears also in section 34B(2)(b) at the top of the second page in which that subsection appears in the print.

GLEESON CJ:   Well I suppose, it is not material to the outcome of this case but, you could have arguments, perhaps large arguments, about appropriate costing.  There could be arguments, for example, as to whether cost would include an element for cost of capital.

MR DOWNES:   Yes.  The overhead that Justice Hayne was referring to as well, is another possible, yes.

GLEESON CJ:   Well, what would otherwise be called a profit, a return on capital.

MR DOWNES:   Yes.  But, at any event, at least its cost to the Board of construction, we would relevantly submit.  The next thing that we would seek to say in consequence of what one reads in section 34A and 34B is something that is a response to some observations your Honour the Chief Justice made yesterday, namely, that this is a situation, or in some way an analogist to a situation, or to be compared with a situation, in which two businessmen are negotiating with one and other in connection with the contract.  This is not, we would respectfully submit, when properly understood, such a situation.  What sections 34A and B provide is that the Board is entitled, in certain circumstances, to be recompensed for the cost of capital works it is carrying out to its own system.

I am sure your Honours understand this, but nothing that we are talking about in this case is to do with the reticulation pipes that would appear on the subdivision.  What the $2.5 million is concerned with is amplification of the Board’s infrastructure in the streets, if you like, and other areas where the infrastructure is carried leading to the point at which it passes the appellants’ property, and at which point, and at his cost, the developer would connect.  So one is talking about not some commercial agreement in some way for the benefit of the appellant, except to the extent to which it is the condition precedent to his being able to draw water from the Board’s system.  One is talking about reimbursing the Board the cost of necessary capital works to the Board’s infrastructure away from the appellants’ land.  That, we would ‑ ‑ ‑

GLEESON CJ:   Is that what 34A is about?

MR DOWNES:   Yes.

GLEESON CJ:   I am just looking at 34A(3)(a).  I am not sure I completely understand it at the moment.  It is talking about ‑ ‑ ‑

MR DOWNES:   These sections are not easy sections to understand, I must say.

GLEESON CJ:   It is talking about “the cost of the construction of the main or mains and ancillary works”.

MR DOWNES:   Well, that, as we would understand it, is ancillary works to the mains, to the Board’s infrastructure.

GUMMOW J:   Well, the Board has an exclusive position under section 37.

MR DOWNES:   If I could go back first to 34A(1), which is the, so to speak, springboard to what appears in 34A(2) and following, and that is:

The board may enter into an agreement under this section with the owner of any land…..or with any person authorised…..providing for the construction of either a water or sewer main, or both, and such ancillary works as may be specified in the agreement, to serve the land ‑ ‑ ‑

GLEESON CJ:   Now, how does that relate to what you have described as the reticulation?

MR DOWNES:   It does not include it.

GLEESON CJ:   I see.

MR DOWNES:   I mean, what this case is all about is about the proposed subdivision being put into a position in which it can tap in to the Board’s main, no more than that.  The cost of actually having pipes going through the land and available to be connected to the various subdivided lots is entirely another cost and entirely a cost for the developer.  There is not even any contemplation, of course, that that would be something done by the Board.  So that is the second proposition we seek to make relating to sections 34A and 34B.

It is suggested that I should draw your Honours’ attention to 34B(2)(b)(ii) on page 30 because it may have some relevance to the words in the memorandum and draft letter.  The agreement can be an agreement:

providing for the construction of any additional main or works which is or are capable of serving only such land –

and your Honours will recollect references along those lines in the memorandum and draft letter, or under (iii):

providing for the construction of any additional main or works which is or are capable of serving other lands as well as the land referred to in the application –

The third proposition that we wish to make relating to sections 34A and 34B is that testing the position as it was in November 1985 with a view to determining whether there was or was not a duty of care as we have said, and I said yesterday we put in our written submissions, one factor tending towards the finding of a duty of care is the fact that the appellants were involved in a proposal which contemplated the likelihood, in due course, known to the Board, that an agreement under sections 34A and 34B would be entered into.

We do not accept, and I put submissions yesterday why we say this, that that is any reason or any basis for saying that a duty of care would only arise at the time that the Board was exercising its powers under sections 34A and 34B because it was its acceptance of the appropriateness of, in 1985, giving an estimate ‑- and I do not want to go over the submissions I put to your Honours yesterday – its acceptance in 1985 of the appropriateness of giving an estimate was something which it must have known would have an impact on the conduct of Mr Neal in and about his further progressing the proposal.

It must have known that there were alternatives other than proceeding towards this ultimate agreement.  It must have known that, one, because it was trying to persuade Mr Neal not to go on with the development.  So it must have known that a possibility was that it would sell the land immediately ‑ ‑ ‑

GAUDRON J:   Where is the evidence of that?

MR DOWNES:   Well, there are a number of findings ‑ ‑ ‑

GAUDRON J:   Were there findings that they were positively trying to persuade him not to go along with the development?

MR DOWNES:   With respect, yes, there are.  All of the material points in that direction, we would submit.

GAUDRON J:   Well, I know it may ‑ ‑ ‑

MR DOWNES:   And there is a finding of Mr Justice Fitzgerald, which we said in our written submissions is agreed in by the majority.  My learned friend says was not.  So there is a problem about that but that depends on the meaning of the words of the majority when they said, “We agree in the reasoning of Mr Justice Fitzgerald relating to breach”.  If I could take your Honours to that particular passage.  It is at 1238, I think, starting at about line 5:

Both the surrounding circumstances and the contents of the letter which the Board prepared for Mrs Crosio to send to Mr Carr, including the final paragraph of that letter, indicate that the Board’s evident purpose was to state its position in a convincing way in order to influence both the politicians and the appellants.  As the letter…..as in fact occurred, the Board was prepared to meet with the appellants…..The Board recognised that the supply of water…..was a real possibility.  If water was to be connected –

the Board wanted it in this way –

However, that was not the Board’s preferred option.  It remained opposed to the residential development…..If the Board did not convince the politicians to support it, its best chance of the appellants not proceeding with their development ‑ ‑ ‑

GAUDRON J:   Well, I do not take that from the letter that was read yesterday.  So if there is some other evidence – what I took from the letter was that the Board wanted a combined proposal that took in all the land and did not want to do it piecemeal, which would seem to me to be a reasonable position to have in the circumstances, and I have seen nothing to suggest that they tried to persuade, which is what I understood you to say, the appellant not to proceed with the proposal.

MR DOWNES:   Well, your Honour was asking me if there was any finding and I had just got to ‑ and I will not read it, I am sure your Honours have read on but the next ‑ ‑ ‑

GAUDRON J:   Yes, but the finding, you said, was that they tried to persuade this appellant not to proceed with the development, as I understood it.

MR DOWNES:   Well, I would simply put as a submission what his Honour Mr Justice Fitzgerald was saying.  I will have to come back in a moment to a further matter, but the first proposition is their best way of persuading Mr Neal not to go on was for the cost to be too high; that is proposition one.  Now, as to how you find that that was their purpose, it is not just a matter of looking at the draft letter and the memorandum.  It is a matter of looking at the overall factual position; the fact that Mr Neal had been trying since 1983 to get a response from the Board.  The fact that the Board in its own memorandum referred to “gross political pressure”, referred to ‑ ‑ ‑

GLEESON CJ:   Just a minute.  All this reasoning is referring to the Board.  The Board is a body corporate, is it not?

MR DOWNES:   Yes.

GLEESON CJ:   Is this a reference to the Board or to Mr Wright?  When you are starting to talk about purpose and policy and attributing motives to a body corporate, you may run into the difficulty of identifying the body corporate with, for example, one individual who is writing a letter.  There may have been – I am not suggesting this is the case – individuals in the employment of the Board whose lives would have been more comfortable if no developer ever developed any land.

MR DOWNES:   Yes, that is so, your Honour.

GLEESON CJ:   But how do you attribute motive to the body corporate?

MR DOWNES:   Well, because, particularly in its relevant conduct ultimately leading to the sending of this letter, which included Board officers saying, for example, that they would, in effect, cave in to gross political pressure.  One must, at the end of the day, particularly in the evidentiary state that this case is at the moment, and in the absence of any evidence having been called from the Board - and I am not sure that the proposition your Honour has just put to me, or the problems that have just been put to me, have ever been raised against us in these proceedings, but the culminating document is the document that goes to the Minister.  That must be taken relevantly to be the Board’s position and so must the reasoning which the examination of the material before the court discloses.

GLEESON CJ:   I can understand how you can attribute carelessness to the body corporate when one of its officers makes a certain statement or gives certain information, but I am not nearly so clear as to how you attribute to the body corporate the kind of mental state that seems to be reflected in this passage of the judgment of Justice Fitzgerald.  This may be only one aspect of a wider problem involved in the tort of misfeasance in public office, said to have been committed by a body corporate.

MR DOWNES:   Yes.  Well, I will come to that in a moment, but, I mean, one answer to that is vicarious liability and, if it is convenient to do so, the House of Lords very recently in this years parts of the Weekly Law Reports [2000] 2 WLR in a decision in Three Rivers DC v Bank of England at page 1220, said at 1231 that:

vicarious liability apply as much to misfeasance in public office –

I was addressing what I called the third proposition relating to section 34A and B, and that was that as a factor known to the parties, namely Neal and the Board, was that the proposal that Neal had would in all likelihood, ultimately, if carried forth, lead to an agreement under 34A and 34B.  The contemplation of that agreement gives rise to a duty of care and we say that that very firmly puts an end to a submissions that no duty of care arises until 34A and 34B come into operation.

It is not our case that the duty of care arises out of sections 34A and 34B.  It is our case that the duty arises out of the positions, the relationship between the parties back in 1985, although you can look forward to what might happen in the future as one of a number of matters that might be taken into account to determine whether a duty of care exists, and as I said ‑ ‑ ‑

HAYNE J:   Thus, does your proposition come to this:  that in circumstances where the Board knows or ought to have known that the inquirer, here the appellant, intended to act on the Board’s advice of cost - that term being as understood from section 34A - in ordering its commercial affairs, as, for example, in deciding whether to seek an agreement under 34A and any necessary prerequisite certificate, the Board owes a duty to take reasonable care for the accuracy of the estimate of use?

MR DOWNES:   Absolutely, your Honour, and when it makes this decision, one of its options is to say, “This is too much, the development is unviable.  We will sell now to someone, give someone else the headache and go on with our other development” or whatever might be the position.

GAUDRON J:   Does it matter - is it relevant in that relationship to have regard to the nature of the commercial activity?  I ask that because it seems to me that you may find another statutory body with another person undertaking commercial activities who order their commercial affairs on the basis of information told, for example, a new policy will be implemented - well, to take a case that is fairly close to home, one could envisage radiologists who, if they were told that a policy would be implemented with respect to Medicare refunds for MRIs, who might order their affairs on that basis.  But that seems to me to be a different type of commercial activity from what is essentially a speculative commercial activity.  That is to say, this man and his associated companies had bought land that was not zoned.  They were speculating, as it were, they were punting upon getting various permissions and consents.

MR DOWNES:   Could I just say a couple of things in answer to your Honour.  I do not think anything at all turns on this, but if I have kind of misled the Court into thinking that Mr Neal bought this land for the purpose of some speculative – in fact, he had owned it as his own dairy since 1980 and was approached by local councils who wanted more land to develop, as I understand it.  But I do not think that that has any relevance to the issues, as we would see it, that arise.  Certainly, at the relevant time, for whatever reason, he was interested in speculatively developing the land for profit and that is an important part of one of the things we say.

The second thing to say, in answer to what your Honour said, is this:  that the only relevant knowledge which the Board needed to have was that the information was being sought in connection with a serious business purpose, nothing more than that.  In fact, if I fail to persuade your Honours that that is the only relevant knowledge that the Board needed to have, in fact, it knew a lot more.  It knew, one, that Mr Neal wanted to subdivide the land for resale, and it knew, two, that Mr Neal was in financial difficulties and might be forced to sell the land.

HAYNE J:   But to fasten on the serious business purpose tends to suggest, to my mind at least, that you are positing some duty of care in connection with any commercial negotiation.  That would be a large proposition, and it seems to me that the two further elements to which reference might have to be made are, one, that Mr Neal was not free to look elsewhere for this service, the Board had a monopoly.

MR DOWNES:   Yes, your Honour.

HAYNE J:   Second, the Board was not free to charge whatever it liked.  It had, under 34A, power to charge only cost.  Having said there are two elements, there may, as well, be some other considerations that bear upon it but at least those two may have to be taken into account.

GAUDRON J:   And also that the Board was not obliged to do the work unless directed by the Minister.

MR DOWNES:   Can I just say in answer to your Honour’s two observations, that I do not resile from the simpler proposition but equally, as your Honours will appreciate, if it is necessary to do so for success in the appeal, I embrace the lower proposition that your Honour has put.  I have been promising, I know, for far too long to take your Honours to the cases ‑ ‑ ‑

HAYNE J:   But just before you do, the further element to which reference may have to be made is the Board did not have to answer.  The Board could say, “We won’t give you an estimate.  We can’t give you an estimate.”  If it gives one, then as I understand it, you say it must give a careful one.

MR DOWNES:   Yes, precisely.  I am not going to take your Honours ‑ ‑ ‑

GUMMOW J:   Just before you get to that, this question of so‑called political interference is apt to be misunderstood, I think.  There is a section here that we referred to yesterday.

MR DOWNES:   Section 7, yes.

GUMMOW J:   And the effect of so‑called political interference in these court cases and contract cases – it is discussed in the Hughes Aircraft Case 146 ALR 1 at 71 to 77. Now, is it a relevant factor here that the Board was not obliged to deal with your client at all but could be required to do so by the Minister? Is not that an element in all this correspondence? There is nothing wrong about it, it seems to me.

MR DOWNES:   Yes.  I do not disagree with your Honour.

GUMMOW J:   Now, I do not think any of the cases on negligence will actually deal with this sort of problem here.

MR DOWNES:   The Board would say, if the Board were standing here, “It wasn’t just the Minister who was directing me.  Mr Neal was stirring up local members who were writing direct to members of the Board and so forth.”  So, factually, there may be something slightly more than the ‑ ‑ ‑

GUMMOW J:   That is true.

MR DOWNES:   I do not propose to take your Honours, and your Honours would not let me anyway, to long passages in cases.  I really put the broad propositions that we seek to make good and I just wanted to take your Honours to six or seven passages of seven or eight lines each in a number of the cases to seek to make good the propositions.  Can I begin by going to MLC v Evatt 122 CLR 556? Your Honours will be well familiar with the passages from Sir Garfield Barwick’s judgment.

GUMMOW J:   Can I just say this to you, Mr Downes, before we embark on this long road?

MR DOWNES:   Short, I hope, your Honour.

GUMMOW J:   Is there not force in what Justice Hayne was putting to you?  The motion of duties of care in commercial parties dealing towards some project is a very slippery one, is it not?

MR DOWNES:   Well, can I answer that by just asking your Honours to look at what, for example, Sir Garfield Barwick actually said at page 571, as to what the element was in a relationship cases, in early development, I have to concede, of these cases.  It is the paragraph about two-thirds of the way down the page starting:

Then the speaker must realize or the circumstances be such that he ought to have realized that the recipient intends to act upon the information or advice in respect of his property or of himself in connexion with some matter of business or serious consequence.  Of course, utterances in the course of social intercourse with no thought of legal consequence could not satisfy such a condition.

So, at that point, dealing with a request case, or what I call a relationship case, that was the necessary element.  Then, the more famous passage of the Chief Justice’s is at page 572, at the bottom of the page, the paragraph starting, “It seems to me”, and going over, I think, to about three or four lines down page 573.

Again, without reading that out loud to your Honours, it starts and finishes with what these two people face to face with one another had as the knowledge, the one of what was being sought, and the knowledge of what ‑ ‑ ‑

GUMMOW J:   Yes, but the two parties in this case are not proposed contracting parties.

MR DOWNES:   No.  But that makes the point even stronger, we would submit.

GUMMOW J:   It is the adaptation of this reasoning – it is this adaptation to the situation where there are two contracting parties, they have no particular reason to trust one and other at all.  But it seems curious, where there is not present ‑ ‑ ‑

MR DOWNES:   We have a clearer case because of the potentiality for contract.  So, at any event, that is all I wanted to take your Honours to in MLC.

McHUGH J:   But what the Chief Justice said does indicate how separate this particular category of economic loss is from other areas of economic loss.

MR DOWNES:   Absolutely, yes.

McHUGH J:   Negligent advice or information, as it originated in Hedley Byrne, was based on the notion of voluntariness, as opposed to the imposition of a duty by law.  It was seen as very similar to contract law in that respect.  Now, in the course of the development of the tort, this notion of voluntariness, or assumption of responsibility, has tended to fade out because it is now recognised, to a large extent, that it is the law that says that there is an assumption of responsibility.  But, it still seems to me it is in a very different category from other areas of economic loss, such as that in Perre v Apand and all the other classes of cases.  It is a very special category of cases.

MR DOWNES:   Yes.  We propose to submit, as I foreshadowed, and some of these passages will touch directly on this proposition, that there is even, potentially at any event, a different rule in place when one is dealing with what I have called a relation case and a third party case.  What has happened, we would respectfully submit, is that not surprisingly, the development of the law in connection with negligent misstatement, after Hedley Byrne first, MLC v Evatt and Shaddock, has the boundaries of being further tested.  That is why the cases subsequently, Esanda, San Sebastian and so forth, have been concerned with the question of how far it can be pushed into this area of indeterminate liability.

McHUGH J:   Yes.  That is the point about the strangers case, is the problem there was the extent of liability if a duty ‑ ‑ ‑

MR DOWNES:   Yes, and however you categorise this case, even if you say it is not a request case, one thing is clear about it, there was no possible potentiality for indeterminate liability.  I mean, I suppose if you stretched your mind ‑ ‑ ‑

McHUGH J:   Those cases all stayed apart from this notion of voluntariness.  In no realistic sense can it be said that the order is voluntary assuming responsibility to this indeterminate mass of people out there, at least in most cases.

MR DOWNES:   Yes.  Can I take your Honours to a couple of passages in Shaddock 150 CLR 225 ‑ ‑ ‑

GLEESON CJ:   I do not suppose section 52 of the Trade Practices Act had a run.

MR DOWNES:   In this case?

GLEESON CJ:   In this case.

MR DOWNES:   It was in the pleadings at some stage but abandoned, your Honour.

GUMMOW J:   Did the Trade Practices Act bind the Water Board?

MR DOWNES:   I think that may be the reason.  I mean, it is only the recent amendments ‑ ‑ ‑

McHUGH J:   Was the Fair Trading Act in force at the time, the New South Wales Fair Trading Act, was it in force?

GUMMOW J:   That is 87, I think ‑ ‑ ‑

MR DOWNES:   No, it was – there might have been a time limit problem also under the Trade Practices Act, too.

GLEESON CJ:   It came to mind because the delicate balance struck by all these cases in relation to this area of the law.  It does not seem to matter much now in the light of section 52.  It seems to have been trampled by some hobnail boots.

HAYNE J:   In which it is pleaded in every case short of homicide.  I am waiting for a ‑ ‑ ‑

GUMMOW J:   This would have been a representation as to a future matter, would it not, and it would have to have been reasonably based and you would say it was not reasonably based?

MR DOWNES:   Yes.

GUMMOW J:   That is how it would pan out.  However, I am sorry ‑ ‑ ‑

MR DOWNES:   It would be arguable that it was not a future matter ‑ ‑ ‑

GUMMOW J:   Well, that is what I wonder.  Is this a representation – the statement in the memorandum, is it a representation?  The negligence case is assuming some dichotomy between information and advice, which I really do not understand as exhausting the ‑ ‑ ‑

McHUGH J:   Well, it might be a representation that this is the Board’s presently held opinion as to what it would cost, or it may, on the other hand, be simply the Board’s prediction.

MR DOWNES:   Yes.

GLEESON CJ:   Well now, Shaddock.

MR DOWNES:   Shaddock (1980-1981) 150 CLR 225, the passages are in the then Chief Justice’s judgment, Sir Harry Gibbs, at page 231. What was a central issue in Shaddock’s Case was what was the effect, as your Honour Justice McHugh mentioned yesterday, of the majority decision in MLC v Evatt requiring it to be part of the business of the defendant to give advice, and the way that the High Court seems to have dealt with it is, as I would see it, in effect by saying, well, the High Court had to decide for itself what the position was and that was not a condition, but they then went on to say, in any event, relevantly, the giving of such advice was part of the business or activity or whatever of a local council. But, in any event, so what Mr Justice Gibbs said relevantly at page 231 about a third of the way down the page in the middle of that long paragraph:

It would appear to accord with general principle that a person should be under no duty to take reasonable care that advice or information which he gives to another is correct, unless he knows, or ought to know, that the other relies on him to take such reasonable care and may act in reliance on the advice or information which he is given, and unless it would be reasonable for that other person so to rely and act.

So again this concept of trust arises.  The next passage relevantly in the judgment of the Chief Justice is at page 236, three lines down from the top of the page:

It is true that Mr Carroll did not expressly say what the purchasers intended to do with the land, but the Council ought to have known that the road widening, if carried out, would adversely affect the use of the land for most conceivable purposes.

So there it is plain that no specific knowledge of the purpose was required and, of course, a critical consideration in the reasoning of the majority was that there ought to be, on the part of the council, such specific knowledge to give rise to a cause of action or to give rise to a duty of care.

Mr Justice Stephen at page 239 thought that, short of the MLC problem, the whole case was quite simple.  He says in the paragraph beginning in the middle of page 239:

This, then, clears the way to the question of substance:  is the Council liable in damages for supplying this admittedly erroneous information?  The response to this would be clearly “Yes” if this were a case of advice given by someone in the course of their business or profession, the advice requiring –

et cetera:

However –

he then goes on to say ‑ ‑ ‑

GLEESON CJ:   May I ask you, did any of the judgments in this case refer to what was undoubtedly the fact in this case, that the subject matter of the advice or information was something peculiarly within the knowledge of the council.  In other words it was whether the council had a road-widening proposal?

MR DOWNES:   I do not think it was in the judgment of the majority.

GLEESON CJ:   I just wondered whether that might be a factor to add to the factors mentioned by Justice Hayne a little earlier, that what you are here informing somebody about is a matter that is peculiarly within the knowledge of the Board, that is how much it is going to cost the Board to extend its existing infrastructure, which is a different thing from expressing an opinion about the value of a parcel of land, which, in a sense, is a matter on which anyone could have an opinion.

MR DOWNES:   Your Honour, I meant to mention in my opening observations this morning that that is a factor which is relevant to the observations your Honour was making yesterday about taking along an engineer, because it is not just a question of what is the cost per foot of a rising main of particular diameter.  To know what the cost is going to be requires an intimate knowledge of the current state of the Board’s mains, something which an outside expert would be unlikely to know.

McHUGH J:   There is a passage, I think, at 243 in the judgment of Justice Stephen, is there not, about point 3:

Where, as in the present case, the supplier is the exclusive possessor of essential information –

et cetera.

MR DOWNES:   And this, if I can go back to your Honour’s point in the light of that, what is peculiar about the majority judgment in the Court of Appeal, the majority wrote their judgment before Perre v Apand had been decided.  They actually say so, because there is not a footnote.  It is incorporated in the judgment but the last few paragraphs of the judgment say, “Since we wrote the above, our attention has been drawn”.

One of the things they fasten on in Perre v Apand is the references by members of this Court to the concept of vulnerability, which is really, we would respectfully submit, exactly the relevant category that what your Honour has just been referring to is to be put.

Mr Neal was really entirely at the whim or under the control, relevantly, for the determination of what was required and how much it would cost, of the Board yet, peculiarly, the majority in the Court of Appeal went on to say there is no basis for any perceived vulnerability here.  It is as if what the Court of Appeal was doing was thinking with kind of Amadio eyes about vulnerability being something to do with the nature of the applicant.  Everyone knows that one thing that you do not say about Mr Neal is that he was not persistent and he was not out there looking after his rights.

GUMMOW J:   He is not a weak‑willed person.

MR DOWNES:   But we are not looking at concepts of literacy or something or other of that sort.

McHUGH J:   But is that fair to the Court of Appeal because, particularly the judgment of Justice Kirby in Perre v Apand, and other cases, there is a view that you should reject this category approach in that every question of duty in these economic loss cases should be determined on this basis of foreseeability, proximity and fair, just and reasonable.

MR DOWNES:   Yes.

McHUGH J:   And I read the Court of Appeal judgments as, in effect, looking at the case in that light, rather than in the light of the categories that have developed hitherto.

MR DOWNES:   Your Honours, I do not want to do the Court of Appeal a disservice but the passage I am dealing with is at 1203, so your Honours can see it, but the Court of Appeal were taking vulnerability as a relevant factor.  They were not rejecting it and they said at line 29:

Here the Water Board had no reason to think that the information which it provided to its Minister was about to be the basis of some critical step taken by the appellants.

That is the Court of Appeal’s requirement that the specific purpose must be known.

GLEESON CJ:   I would not have called this vulnerability.  I would have called it dependency.

MR DOWNES:   Yes, your Honour, but we would submit that there is a correlation between the two.

GLEESON CJ:   He needed the information.  There was only one possible source of the information and the information was about a matter peculiarly within the knowledge of that source.

MR DOWNES:   Yes.  I do not mind if it is called dependency, but “vulnerability” is a word which some members of this Court have chosen, and we would submit it readily falls within that.  But then the Court of Appeal, having shown that the first part of the basis for its reasoning is that their specific purpose has to be made known, then said:

Nor was the Board the party in control of a situation in which Mr Neal’s interests stood in a position of perceived vulnerability.

As we said in our written submissions that, we would respectfully submit, is a conclusion draw by the Court of Appeal and it is very difficult to sustain in the circumstances.  Can I go back to my reference to the cases?  The next passage in Justice Stephens judgment I would have taken your Honours to is that passage at 242 that I took your Honours to yesterday, the one in which he says, “The council sets itself up as an information centre”.  I will not read that again.  Then one comes to the judgment of Mr Justice Mason and at page 250 - and these are the important passages because they are, to some extent, at any event, in a judgment of Justice Toohey and your Honour Justice Gaudron in Esanda referred to.  He says at 250:

According to the Chief Justice –

that is in MLC, 250, the second paragraph -

whenever a person gives information or advice to another upon a serious matter –

et cetera.  I will not read the paragraph.  Your Honours can read it and it is familiar anyway.

GUMMOW J:   Taken literally, why would that not apply to two commercial negotiators?  That is my trouble with that passage.

MR DOWNES:   Well, it would.

GLEESON CJ:   What about the qualification “it is reasonable in the circumstance for the other party to act on that information”?

MR DOWNES:   Reasonable to act.

GLEESON CJ:   If you are in a commercial situation, at least one that involves an element of bargaining, it normally would not be reasonable, would it, to act as though the other person was under a duty of frankness to you.

MR DOWNES:   Not if one was simply in a negotiation, no, to act in a contract.  Can I withdraw that?  I mean, if someone is saying, “My best offer is 250,000 ‑ ‑ ‑

GLEESON CJ:   That is usually a straight out lie.

MR DOWNES:   Well, yes ‑ ‑ ‑

GLEESON CJ:   As subsequent events usually rapidly demonstrate.  Barristers do it all the time.

MR DOWNES:   No, they are very careful the way they put it, your Honour.  That is one thing, but if he says - and the cases are brimful of these cases, of people being challenged on this.  Nowadays, as your Honour has pointed out, it is always under section 52 in the alternative, that is, if estoppel cannot be run as well.  If someone says, to pick a case from this Court, “I tell you this speed boat will do 80 kilometres an hour”, then why would that not give rise potentially to a duty of care?  If the fellow is never taken – he bought the speed boat and someone else had told him that it did 80, and, well, maybe that would be good enough ‑ ‑ ‑

McHUGH J:   Is not Esso v Mardon, if I remember rightly, that Court of Appeal decision in England – is not that a negligent representation case in the course of negotiations?  I am pretty sure it is from recollection.

MR DOWNES:   Yes, I mean, I can see there may be circumstances in negotiation in which a duty of care would not arise but usually they will be cases which, in any event, there is really no subject matter for a duty of care.  I mean, one has the mere…..decisions in the law of contract.  Maybe that is what you say about, “This is my final offer”.  You cannot challenge it by saying, “Well, we have now turned up by a subpoena a letter which you wrote to somebody which says that he would go to another 100,000”, or something or other.

The next passage in the judgment of Justice Mason is at 251, the paragraph, “It is for these reasons”, the first one starting on the page:

I consider that this Court should now adopt Barwick CJ’s statement of the conditions –

et cetera.

Finally, on page 253, important to the reasoning in this case, we would submit, the last paragraph:

I would reject the respondent’s argument that no duty of care arose because Mr Carroll did not bring home to it the purpose to which the information would be put.  True it is that he did not state why the information was wanted or what action his clients proposed to take on the strength of it.  But the existence of a duty of care does not depend upon knowledge on the part of the speakers of the precise use to which the information will be put.  It is enough if he knows, or ought to know, that the inquirer is requesting it for a serious purpose, that he proposes to act upon it and that he may suffer loss if it proves to be inaccurate.  These requirements were satisfied in the present case.

He goes on then to deal with the 342AS certificate aspect.  I will not read out to your Honours further from that.

Now, it is that passage which the majority in the Court of Appeal thought was material in that part of their judgment appearing at page 1194 and when they were dealing with Esanda because the joint judgment of Justice Toohey and Justice Gaudron in Esanda approved that statement of Justice Mason in Shaddock, and you can see it set out and the crux of it set out at page 1194 of the appeal book:

the existence of a duty of care does not depend upon knowledge on the part of the speaker of the precise use –

and the reference to “serious purpose”.

Now, what the majority in the Court of Appeal did in this analysis that appears on these pages of the judgment is to ask itself the question, “Is that view of Justices Toohey and Gaudron the view of the Court as a whole?” and they said, “Well, we do not think it is”.  They said, “We do not think it is” at page 1195 at line 36, largely because of what your Honours Justice McHugh and Justice Gummow said in Esanda.  Now, it is always a difficult task in the High Court to draw the attention of existing sitting members of the Court to passages they have written in previous judgments because I think it is fair to say that the judge knows what he meant.  But, nevertheless, those of us who labour in the other side of the courtroom have the task of putting the submission ‑ ‑ ‑

McHUGH J:   I do not think you should always take that view of it.  Sometimes I am surprised at the view that commentators attribute to Judges of the Court.

MR DOWNES:   Can I just take your Honours to a couple of passages in Esanda, the first one on an entirely different purpose in the judgment of the Chief Justice, Sir Gerard Brennan, at page 252, and there he is setting out the elements and I just marked this passage on the issue of whether this is a case in which you can say that there was any communication.  I am not sure that the respondent puts this argument, but there is some suggestion in their written submissions that, in effect, because it was communicated by the Board only to its Minister, that there was no communication, effectively, to the appellant and the relevant bit is in the middle of 252, where the formula that Sir Gerard Brennan adopts is:

knew or ought reasonably to have known that the information or advice would be communicated –

Now, the more important passages are, first of all, at page 261, the passage that is relied upon by the majority in the Court of Appeal in the judgment of Justice Toohey and Justice Gaudron, and I will not read it, but it is the passage on 261, starting, “The statement by Barwick CJ in Evatt”.

There are then two important passages because we would respectfully submit they were not addressed by the majority.  The one in your Honour Justice McHugh’s judgment, your Honour will recollect your Honour reviewed the position in various common law countries, and then your Honour drew some conclusions at 281, the paragraph before, “The law in Australia”:

This survey of authority in England, Canada, New Zealand and the United States shows that, absent some mutual relationship ‑

that is the phrase that we place weight on and the phrase which caused me to change from talking about a request case to a relationship case ‑

giving rise to an assumption of responsibility, the common law courts are reluctant to impose a duty of care on an auditor in favour of a third party unless the auditor –

et cetera.  A passage in the judgment of your Honour Justice Gummow, we would respectfully submit, to similar effect.  At page 309, the last complete paragraph on that page, and the second part of that, just to read the precise bit we rely on:

Secondly, in Mutual Life & Citizens’ Assurance Co Ltd v Evatt, Shaddock & Associates Pty Ltd v Parramatta City Council and Hedley Byrne itself, the misstatement was made in response to a request for information or advice or both.  That made it appropriate to hold that in responding to the request the defendant assumed or undertook responsibility (or disclaimed it, as in Hedley Byrne), and, perhaps, that the defendant intended or at least assumed that the plaintiff would act upon what it had been told.

So we would respectfully submit that those two passages, rather than suggesting that your Honours Justice McHugh and Justice Gummow did not accept the approach that had been taken by Justice Toohey and Justice Gaudron, leads, in fact, to the contrary conclusion.

I do not want to take your Honours to San Sebastian, because the only bit I want to refer to in that is the passage that is set out on page 1192 of the appeal book and if your Honours look there, your Honours will see that there there was a similar qualification, in line two in the joint judgment of the majority, to “absence of a request”:

The maker of a statement may come under a duty to take care…..in the absence of a request ‑

So the existence of a request is in the mind of those Justices, we would say, a most material, indeed, even a distinguishing factor.  Well, that, your Honours, is I think, all – there is just one case that is not on our list and your Honours will not have it; we only picked it up very recently.  Can I just give your Honours a line in a decision of the House of Lords, Smith v Bush (1990) 1 AC 831 and at page 872 Lord Jauncey says:

In both Candler v Crane, Christmas & Co. [1951] 2 KB 164 and Hedley Byrne & Co. Ltd. v Heller & Partners Ltd. [1964] AC 465, the provider of the information was the obvious and the most easily available, if not the only available, source of that information.  It would not be difficult therefore to conclude that the person who sought such information was likely to rely upon it.

So that is another short passage in support of that proposition.  Now, your Honours, those are the authorities that we seek to rely upon in duty of care.  Our submissions and our analysis of the ‑ ‑ ‑

KIRBY J:   Could I just ask you, if one is looking at the issue of policy as the third question, and it is addressed in various ways in the written submissions.

KIRBY J:   It is to add, if your submission is right, to the burdens on the public purse of potentially very considerable amounts if, attached to letters of the kind that have passed here to the Minister with intent to be passed on to you, the burden, not only of political opprobrium, answerability in the Parliament, answerability as between the Minister and the Board, and all the other public-type remedies of the past, now, the economic consequences of damages verdicts.  Now, is that question relevant?  Is it such a bad thing?  Would that be a stimulus to honest and proper and careful answering of questions?

MR DOWNES:   Well, that is precisely – I mean, that is the ‑ ‑ ‑

KIRBY J:   I do not see much discussion of this, but at the bottom line ‑ ‑ ‑

MR DOWNES:   That is the countervailing consideration.

KIRBY J:   That is, it seems to me, the question which the common law has to ask itself.  Do we add to the traditional remedies of the past in public law matters now the economic sanction of “You will pay if you get it negligently wrong”?

MR DOWNES:   Well, can I answer your Honour in a number of ways:  we would respectfully submit that if such a public policy consideration militates against a duty of care, then equally it would have militated against a duty of care in Shaddock’s Case, for example.  We would respectfully submit that that issue has been passed over as one public policy issue.

GLEESON CJ:   If you got into that issue, how would you know, how would we know what the consequences might be?  The consequence might simply be that the Water Board would refuse to provide this information.  Or, the consequence might be that the Water Board would start charging for providing this information.

MR DOWNES:   Those very considerations were addressed in, although I do not think in Shaddock any of the Judges actually sort of put up a label “public policy”, they certainly did address an argument which said, “Ah, councils have stopped giving out these certificates”, and in effect they said, “We do not think councils will stop giving out these certificates”.

GLEESON CJ:   May I inquire, politely, how would they know?

MR DOWNES:   Well, because they were Justices of the High Court of Australia, your Honour.

KIRBY J:   Do you have anything else to say in answer to my question?

MR DOWNES:   The second proposition is the one that your Honour anticipated, namely, that in these competing considerations, the more material consideration is that it will be an inducement to bodies such as the Board to give proper calculations.  It should not, and would not, one would assume, have the effect of opening floodgates of claims, one, because this is a very particular case.  The floodgates are much more likely to be left open by Shaddock’s Case, where what you are dealing with is junior clerks who are filling out ticks and crosses on forms.

GAUDRON J:   But there is another side to this.  The Board did not want to give your client this information, resisted giving it, had no obligation to give it, unless the Act has changed, still has no obligation to give it, and the simple solution, at least if one is looking at policy considerations for a board – simple solution to the problems that the case throws up is for a board to say to anybody in a similar position to Mr Neal, “No, we will not tell you the price, we will do the work and send you the bill”.  And if you do not like that, you can abandon your project.

MR DOWNES:   But that is just one reason why the Board may decline in the future to do so ‑ ‑ ‑

GAUDRON J:   As it did in this case.  It declined in this case, on several occasions.  That seems to me to be a factor of some importance in determining what this relationship was, and to the extent that you rely on “gross political interference”, it was a relationship in which the Board was a reluctant participant.

MR DOWNES:   Well, yes, I take what your Honour says, although if your Honours look at our written submission, we say, albeit reluctantly, but, nevertheless, it did give the – so that is a second matter though that we would rely upon.  That raises though, I think it is perhaps the third matter which your Honour Justice Gaudron has raised, namely, the prospect that boards will not give certificates.

GAUDRON J:   Not that they will not give certificates, but they will not give information in this area.

MR DOWNES:   Yes.  Well, not certificates, information.  To that, I suppose we say, so be it.  As your Honour the Chief Justice points out, it would be very difficult for the Court to determine what bodies like the Board might do in the future, but also it is not for the Board ‑ ‑ ‑

GLEESON CJ:   Would a disclaimer be effective?

MR DOWNES:   Well, there have not been too many disclaimer cases since Hedley Byrne itself but, in principle, I do not see why not.

McHUGH J:   It was effective in Hedley Byrne.

MR DOWNES:   Exactly.  I mean, the actual decision in Hedley Byrne was that the plaintiff failed.  It is not for the Court to be looking at a much wider interest.  Might potential plaintiffs like my client be in a position in which it will not have a cause of action if negligent advice is – well, no, I withdraw that.  That is not the point at all.  The question is, if there is a duty of care and if the consequence is that bodies such as the Board do not give information in circumstances like this, then persons like Mr Neal will be less advantaged because they will not have information that might be useful to them.  Well, I think we have to say to that, so be it.  It involves too many imponderables that the Court really cannot come to grips with.  So I think that is what we would say about that proposition.

HAYNE J:   Your propositions proceed all, it seems to me, from the premise that the Board is to be taken as having, albeit indirectly, given information to Neal.  Do the considerations of reluctance, to which Justice Gaudron has just referred, bear in any way upon the contention that there was a giving of information indirectly to Neal and his interests?

MR DOWNES:   No, your Honour.  I mean, the first proposition is that it could not be the case that somebody who has given information in circumstances that entirely attract a duty of care can say, “But I was reluctant”.

HAYNE J:   That is not the point I am making.  The point I am seeking to explore with you is this:  the history apparently is that Mr Neal was at the Board for a very long time asking them to give him a cost and they did not.

MR DOWNES:   Yes.

HAYNE J:   The particular communication and the only communications upon which you fasten are communications flowing between the general manager of the Board and the Minister.

MR DOWNES:   Yes.

HAYNE J:   Does that fact, the fact that there is no direct communication and a history of reluctance to deal with Mr Neal directly?

MR DOWNES:   No, because the whole is not greater than the sum of the parts.  Reluctance is not a factor and once the communication is known to be likely to be and, in fact, is communicated, that is not a defence and the two put together do not add.  Can I say just this though, that relevant here is what is in our note from this morning which particularly is calculated to avoid giving your Honours further chapter and verse from the appeal book and it is:

D.  REFERENCES TO APPEAL BOOKS –

the characterisation of the advice you request.  Now, particularly under the heading “Evidence” we have set out what is the material and I said yesterday we would do this, that goes to the request.  Could I just ‑ ‑ ‑

GUMMOW J:   But does it go to the whole of the relationship, does it?

GAUDRON J:   Yes.  You see, you have set up this dichotomy of relationship and stranger cases.  Maybe this is a case that suggests there is something more complex than that simple dichotomy.  When you take into account the reluctance directed to a third party, no obligation and so forth and so on, that is really the question.

MR DOWNES:   We would submit no, but ultimately we will find ourselves in your Honours’ hands.

GUMMOW J:   You see, it is not a case like in the local government cases where you write in for a certificate and that is the only time the parties meet, as it were.  This all happens against a lot of toing-and-froing and maybe you have to look at all of that.

MR DOWNES:   Maybe you do but that, we would respectfully submit, makes our case stronger, rather than weaker.  Can I just take your Honours to the critical finding of the Court of Appeal, because it is very strong in our favour at 1197, line 10:

The appellants submit that the letter –

this is the draft letter –

was in effect the long‑delayed response to the appellant’s request for a cost estimate that had been pressed since 1982 –

and there is then a reference to AB 830.  This is in our written submissions but AB 830 is, in fact, AB 833 in this Court and it is that original letter to the Board of 12 March 1982, as your Honours will see.  The Court of Appeal go on to say, or the President with the concurrence of Justice Beazley:

I accept this submission, at least as regards the draft letter prepared for Ms Crosio to send to Mr Carr.  I shall assume (without deciding) that this can be applied in the context of liability stemming through the Crosio‑Watkins letter.

But, in any event, the phrase that we seize upon is the finding of the “long‑delayed response to the appellant’s request”.

HAYNE J:   What is the best evidence to which you point of the Board knowing that its communication to its political master would be passed on to Mr Neal?

MR DOWNES:   The last paragraph of the draft letter inviting Mr Neal to communicate directly with a member of the Board.  In addition, the first words of the draft letter which are:

I refer to your representation on behalf of John Neal Earthmoving –

It is at pages 686 and 687.

HAYNE J:   Yes, I have it.

CALLINAN J:   Mr Downes, could I just ask you some questions?  You may not be able to answer them immediately, but would you be able to give me the references in the transcript to where the judge pared down the case, as it were?

MR DOWNES:   Yes.

CALLINAN J:   Would you also be able to tell me whether the version of what occurred at the meeting on 25 November, which appears in Mr Geraghty’s evidence at about page 100, was ever contradicted, either in cross-examination or otherwise?

MR DOWNES:   The answer to that is no, it was not.

CALLINAN J:   Thank you.  Would you also be able to tell me whether Mr Geraghty’s letter, which was apparently written on about 25 November, whether that appears anywhere in the appeal book, because I cannot find it, and finally ‑ ‑ ‑

MR DOWNES:   Page 108 – it comes in because it is an MFI and it is right at the very end of the ‑ ‑ ‑

CALLINAN J:   Did it get into evidence?

MR DOWNES:   No, sorry, no, I am thinking of the wrong letter.

CALLINAN J:   Because Mr Garling cross-examined on it at some ‑ ‑ ‑

MR DOWNES:   No, I am sorry, your Honour, it is 1047 and I withdraw everything I just said.  It is in evidence and it is 1047.

CALLINAN J:   All right, and just one final question I want to ask you, who was Mr Rhodes who attended the meeting with Mr Neal?

MR DOWNES:   He was a surveyor who was advising Mr Neal.

CALLINAN J:   Thank you.

MR DOWNES:   Your Honour, in addition to Geraghty at 100, not only – I hesitate to say this word after hearing the case in the Court yesterday – not only not cross-examined on but unchallenged, was some evidence of Mr Neal himself at 572 and line 44.  At 572 and line 44 Mr Neal gives evidence of what took place at the meeting ‑ ‑ ‑

CALLINAN J:   I was interested at page 100 at line 30 where Mr Geraghty ‑ ‑ ‑

MR DOWNES:   Yes, that is the not negotiable ‑ ‑ ‑

CALLINAN J:   Well, it just could not be avoided, 2.5 was it.  It was the “bare minimum”, at line 21.

MR DOWNES:   The trial judge said as to that, that whilst he accepted that Mr Geraghty was an honest witness, he did not accept that, and he gave as really the only reason for it that it flew in the face of the Rhodes’ letter, which may or may not be in evidence.  Because, in effect, as I said to your Honours yesterday, in the Rhodes’ letter, Mr Rhodes said, “Take heart, we will drive down the Water Board”, and that was ‑ ‑ ‑

CALLINAN J:   That is confirmatory, if that is what it said.

MR DOWNES:   Perhaps I am putting a spin on it but ‑ ‑ ‑

CALLINAN J:   Is the Rhodes’ letter in?  I really need to know that.

MR DOWNES:   That is what you get by looking, and I think this is in the document we have just given your Honours, pages 72, 81, 84 and 94 of the transcript, which conclude, if your Honours only want to look at the ultimate, with Mr Garling saying, “Very well, I withdraw the tender of the letter.  Can it be marked for identification?”.

CALLINAN J:   So it did not get into evidence.

MR DOWNES:   This was because the judge imposed a condition upon Mr Garling ‑ ‑ ‑

CALLINAN J:   Please, I need to know first, did it get into ‑ ‑ ‑

MR DOWNES:   It did not get into evidence, except a suggestion that it was cross-examined upon and bits of it – but I am not sure where you find it in the transcript, if it was.

CALLINAN J:   If it is cross-examined on, but nobody sought to have it tendered when it was cross-examined on.

GAUDRON J:   We are talking about an estimated cost, as distinct from an order of cost.

MR DOWNES:   But one does not expect orders of costs to go down from $2.5 million to $1.7 million in a month or so, as a result of a re‑calculation, so the fact that a new figure is produced that is much lower is only a piece of evidence in aid of a finding, we would respectfully submit, that we do not have to deal with anyway because of the finding in our favour of negligence.

McHUGH J:   But at 1148/1149 the judge points out that “it was all too late”, that the “financial crisis” had erupted.

MR DOWNES:   Yes, too late for any ‑ ‑ ‑

McHUGH J:   It says:

But it was all too late.....because of the financial crisis –

MR DOWNES:   Yes, absolutely, yes, that is right, the damage had been done.  Your Honour referred to 1149.  At 1148 is the finding that my learned friend referred to, that Neal left “the Board in the dark”.  We have dealt with that in our written submissions.  With great respect, that finding of his Honour’s is very difficult to follow, considering that the Board knew he was in financial difficulties, knew he might have to sell.  We know that letters were being written on his behalf by a Mr Watkins to a member of the Board, a Mrs Anderson, saying what a situation he was in. 

To suggest that Mr Neal was leaving the Board in the dark, just because apparently he did not actually produce a balance sheet showing insolvency, is, we would respectfully submit, a finding that is really not sustainable but, in any event, the difference between whether Mr Neal said to the Board, here is my balance sheet, or he said, I am in financial difficulties and may need to sell, which means, plainly enough, sell prior to finalisation of subdivision or, in any event, means sell quickly and please speed up the subdivision, the nuance of difference between those two we would respectfully take issue with as potentially having any relevance to the question of duty of care.  Yet the trial judge seems to have held that although the Board knew about the financial difficulties, because it did not know the extent of the financial difficulties, no duty of care arose.

CALLINAN J:   Mr Downes, can I just ask one practical question?  If you were to succeed, what would happen?  The issues of causation and damages would have to go back to another trial judge, is that right?

MR DOWNES:   Yes.

KIRBY J:   They cannot go back to Justice Allen.

MR DOWNES:   They cannot go back to Justice Allen, no.

CALLINAN J:   Would that mean that any of his findings would stand?  They would not, would they, because ‑ ‑ ‑

MR DOWNES:   This is the next step if your Honours uphold the appeal.  I mean, there will, I guess, be some problems to be solved there, problems associated with what is the status of the case at this point?

KIRBY J:   They are problems for the Supreme Court and for the future.  They are not before us on our record.

MR DOWNES:   Exactly.

KIRBY J:   And we ought not to enlarge this already complex case.

MR DOWNES:   Yes, with respect, they would not impact on the result in this ‑ ‑ ‑

GLEESON CJ:   Well, as far as people being in the dark are concerned, I imagine you rely on what appears on page 571, line 50, which seems to provide a fairly strong flavour, a lot of which went on later.

MR DOWNES:   Well, I am sure I do, your Honour, I am just having – yes.

GLEESON CJ:   Mr Anderson, I think, there referred to is the son of the Mrs Anderson elsewhere referred to.

MR DOWNES:   Yes, who was a member of the Board.  Your Honours, just another point, discrete point:  we would respectfully submit that part of what my learned friend sought to do before lunch was, in effect, to challenge the Court of Appeal’s finding that the draft letter and memorandum were the long delayed response to Neal’s requests, to use more or less their precise words.  The document at 833:  my learned friend sought to, I think, by taking your Honours to 833, which is the original Murray letter, and then going, I think, to the next page, to a subdivision, as long as your Honours appreciate that this had not gone from a 20 lot to an 87 lot subdivision, this was the 20 lot component of the 87 - there may have been some minor changes but it is not a wholesale change and it always required rezoning even although it was a kind of hybrid, if you like, not rural, not residential, but rural residential.

GLEESON CJ:   How long do you expect to be?

MR DOWNES:   Only about five minutes at the most, your Honour.  To the extent to which my learned friend was putting a submission to your Honours, which we would submit is not really open in the light of no challenge from the findings below, that in some way what was before the Board in October/November 1985 was a kind of alternative Beeston approach.  The answer to that is:  one, the findings we have below; this is really a question, we would respectfully submit, as I have said, not open.  The second answer is that, as we have said in written submissions, Mr Neal was perhaps approaching on a number of fronts at this point of time.

What he was asking the Board was this:  one, “Can I connect to the Board’s mains at no cost whatsoever?  You pay the costs of the infrastructure”.  Two, “Alternatively, can I connect in a limited fashion and will you join in a kind of alternative approach that involves tanks and so forth?”.  And, three, the last position, “Assuming it is conventional and I have to pay, what is the cost?”.  What the Board did expressly in its draft letter was to say, “We will not do it for nothing”.  By implication it said, “And we are not contemplating any alternative proposal involving tank water”.  And, three, “The conventional cost, which we accept is a distinct possibility, although it is not our preferred one, will be 2.5 million”.

Now, once one looks at it that way, these other references to  Beeston reports and so forth are, one, irrelevant and, perhaps more importantly, positively show that what Mr Neal was getting was the final preliminary, if I have to say that, or provisional view – well, the final view of the Board as to what it would do, its provisional figure, order of cost estimate as to the cost.

KIRBY J:   But your client is a developer.  Your client is in this business.  Your client knows, so it is said, that there are ballpark figures.  Your client, in receiving the letters would presumably know all that as the context in which this is happening, and if, in fact, it is just a ballpark, or was just a ballpark figure, then your client could have brought that to the notice of the bank and said, “Look, don’t you worry about that”, to use a famous phrase.

MR DOWNES:   But that certainly, we would respectfully submit, is going to causation and damages.  But the answer to the substance of what your Honour is putting to me ‑ ‑ ‑

KIRBY J:   I wonder if it does, if it is argued ‑ ‑ ‑

MR DOWNES:   We would submit yes.  My learned friend says that you use that to determine reliance, but that just, in our submission, is a wrong understanding of what reliance is here.  But the answer to that is that the finding we have in our favour, not challenged, is that the figure given was negligently out of the ballpark and the duty of care we contend for is a

ballpark figure, a duty to produce a carefully prepared ballpark figure.  The finding is that there was a negligently prepared ballpark figure. 

Again, I go back to what I was saying about the formulation of Justice Hayne.  That formulation proceeds, we would respectfully submit, on the basis that this preliminary figure was not prepared just to be put away in a file and forgotten about until at some stage in the future a proper figure was prepared; it was prepared so that people could think about where they stood at that time.  Let us not go to the cost and expense of preparing the final figure until a decision has been made on the preliminary figure, taken at its face value as a preliminary figure, as to whether it is appropriate to go ahead with the development or not.

We have put some other matters.  I will not cover that because they are covered in our written submissions, even although in‑chief but not in reply.  I think I sought to answer in advance something my learned friend put yesterday but this was the sort of, again, the Beeston.  He had expert advice.  That falls to the ground for two reasons.  One, the Beeston material was the expert advice being put before the Board.  The Board had Mr Neal’s experts’ advice on one aspect and the Board said, having been urged to do so, presumably, “We have taken into account the expert advice and, notwithstanding that, the cost of estimate figure is 2.5 million”.  So that is one answer to it.

The other answer is the answer that once you understand that this is the Board’s infrastructure, no expert could know what was already there in the ground, nor could an expert know precisely what was proposed to be done with that which would enable the expert to test what he thought was a more correct figure and to give advice accordingly.

We do have to put in, within a day or so, a document which confines itself to the matters that Justice Callinan raised before lunch.  Save for that, your Honours, those are our submissions in reply.

GLEESON CJ:   Thank you, Mr Downes.

MR GARLING:   Your Honour, I just wish to provide some transcript references in answer to Justice Callinan’s question about the evidentiary material underlying 1090.  As presently appear to us, they are in many places but would include at least these, 668-670, 671-672 and 678-9.

GLEESON CJ:   Thank you.

MR GARLING:   In respect of the meeting your Honour just referred to at 517, there was no Board employee present, transcript reference 318 line 20.

GLEESON CJ:   We will reserve our decision in this matter.

AT 3.34 PM THE MATTER WAS ADJOURNED