Tepko Pty Limited & Ors v Water Board

[2000] HCATrans 514

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.

MR DOWNES:   Well, Mr Garling sought to tender it, but ultimately withdrew the tender.

CALLINAN J:   After the cross-examination.

MR DOWNES:   Yes.

CALLINAN J:   You could have required it to be tendered.

MR DOWNES:   Yes.

CALLINAN J:   You did not, or your side did not?

MR DOWNES:   No.

KIRBY J:   But the judge ‑ ‑ ‑

MR DOWNES:   We required them to call Mr Rhodes ‑ ‑ ‑

KIRBY J:   The judge did rely on it, though.

MR DOWNES:   Yes, he used it as the basis ‑ ‑ ‑

KIRBY J:   But can we understand his Honour’s reasons in that respect without having access to the letter?

MR DOWNES:   Well, the letter is in the appeal book.  This is the one that ‑ ‑ ‑

McHUGH J:   Well, more than that, Justice Fitzgerald at 1216 at line 25 said that:

the letter is part of the evidence which is available for this Court’s consideration.

MR DOWNES:   Yes, he also said ‑ ‑ ‑

CALLINAN J:   How could he say that when nobody had required it to be tendered?  I can understand how so much of it as may have emerged as a result of cross-examination might have got into evidence, but the complete letter itself could not have been received, as it were, by Justice Fitzgerald in the Court of Appeal.

MR DOWNES:   I suppose I had better just say this – if one goes to 72, at 72:

Letter from Rhodes –

et cetera –

tendered…..Tender objected to.  Argument.  Ruling deferred.

That is 72.  Then at 81, line 5, his Honour says:

I rule that the letter…..is admissible under section 69 of the Evidence Act 1995.

Exhibit #1 Letter -

so it is, at that stage, an exhibit.  Then at 85, line 45, his Honour says:

Mr Garling, I shall make an order that you call Mr Rhodes unless you undertake to call Mr Clayton.

Mr Clayton is the Board officer ‑ ‑ ‑

KIRBY J:   Who was present at the meeting of 25 November ‑ ‑ ‑

MR DOWNES:   Yes.  Mr Garling wants time to think about that, and he responds at the top of page 94:

I intend to call Mr Clayton –

well, ultimately that intention was not realised –

I am reluctant to give an undertaking with respect to the witness.  In the light of that it is appropriate I withdraw the tender and ask for the document to be marked for identification?

MFI #3 Letter

And the letter is ‑ ‑ ‑

McHUGH J:   Are these directions to call a witness somehow based on the Evidence Act, are they - the questions about fairness?

MR DOWNES:   Well, yes, I have not followed through, but we served the notice requiring them to call Rhodes.  The actual letter ‑ ‑ ‑

CALLINAN J:   This is what happens:  half the trial is on documents and half the trial is on oral evidence, and the whole thing becomes confused.  It would be a lot shorter and lot less expensive if trials were conducted in the orthodox way and all issues were tried at once, in my view.

MR DOWNES:   We will wait with interest for your Honours’ judgment in this case, but as I said to your Honour yesterday, I do not want to say anything ‑ ‑ ‑

CALLINAN J:   Mr Garling was alive to the difficulty because at pages 90 and 91 he raised some question about the difficulty of running a negligence case without some proof of damage, and I do not know what happened to that.  That is why I am interested to know how the case was ultimately pared down, but counsel were alive to the problems and raised them.

MR DOWNES:   Can I just tell your Honours that the Rhodes letter is at 1085 and has very promptly stamped on it “Exhibit” and then next to the word “Exhibit”, “MFI3”.

CALLINAN J:   I do not want to look at it unless it is in evidence.  I just do not want my mind tainted by matters that were not in evidence.  I am content to look at whatever emerged about it in cross‑examination and I will need to know that in view of the fact that a finding was made in relation to it, which I think may be relevant to the duty of care question.

MR DOWNES:   Can I just say this though?  The significance of all of this is, if the letter is not in evidence, then it follows that the finding of the trial judge that he did not accept Mr Geraghty when he gave his evidence about the non‑negotiable ‑ ‑ ‑

CALLINAN J:   But that may have been shorthand by his Honour for a reference to material about it or secondary evidence, as it were, that emerged of it in cross‑examination.

MR DOWNES:   Well, it may, but I am conscious of the fact that I am running out of my own time estimate at the moment.

CALLINAN J:   I am sorry, I just need to know these matters.  To me, they are very important.

MR DOWNES:   No, but we have put the material relating to this, have we not, in this document this morning?

CALLINAN J:   You may not be able to do it now and it does not matter, if I can get a document that deals with it, Mr Downes.

MR DOWNES:   Well, it is slightly cryptically dealt with under the heading “The Board’s Attitude to the 2.5 million Cost Estimate”.

CALLINAN J:   Do not take time with it now.  All I need to know is the references to it and perhaps we can be provided with those at some early time, but not now.

MR DOWNES:   Your Honours, if we can have leave to put in a little note about that, I will not say anything further and, I think, in those circumstances, particularly having regard to the time, I can go immediately to misfeasance in public office, on which I would anticipate my submissions would take five minutes at most.

CALLINAN J:   Your junior has a note of the other matters I raised, in essence?

MR DOWNES:   Yes.  Our submissions address the substance of misfeasance in public office in the submissions in‑chief and the particular issue that seems now to be raised by the respondent in the submissions in reply.  That point is what might be described as a pleading point, in a sense.  The point is the Board is not a public officer, therefore, the claim fails.  To which we say vicarious liability exists if an argument is relevantly maintainable that the Board is not to be treated as akin to a public officer, and it is really not open to argue, given that this case has been argued right through now into a third court without this point being taken, that a vicarious liability claim cannot be relied upon.  We would respectfully submit, in an event, that the pleadings are wide enough to justify it.

GAUDRON J:   I think you should not assume that I will take what was said in the House of Lords as to vicarious liability as correct.  I need to be persuaded as to what actually is involved in vicarious liability, what actually is the notion.  For myself, I think it is about control, ability to control, and here it seems that ability is in the Minister.

I am not too sure about how it works, but I also have difficulty with the notion that where ex hypothesi an individual is acting without statutory authority, I mean that is the hypothesis on which misfeasance in public office depends, that a board can be held liable – I mean, a board might accept liability by way of indemnity or the like, but, absent that sort of thing, I have real difficulty with the notions of vicarious liability for misfeasance in public office.  Maybe you will want to deal with that in written submissions too.

MR DOWNES:   Well, your Honour, can I just very briefly say just some propositions:  One, Rivers, in turn, relies on Racz v Home Office (1994) 2 AC 45, and obviously we would want to rely upon the reasoning in that case, first proposition. In other words, if your Honours are not persuaded, as your Honours will not be, by the mere fact that it is a decision of the House of Lords, we rely on the reasoning in it. The second proposition is, of course, there was no suggestion in Mengel itself whether the defendant was the Government of Northern Territory, that the Government of Northern Territory would not be liable if the claim was made out.  Thirdly, the relevant persons were employees of the Board and in terms of ‑ ‑ ‑

GLEESON CJ:   I was going to ask you who the relevant persons were, vicarious liability for whom?

GAUDRON J:   For the Minister?

MR DOWNES:   Well, for MacLachlan and Clayton, in particular.

GLEESON CJ:   Am I right in thinking that the allegation that is being made against whoever the individuals are, for whom the Board is vicariously responsible, is an allegation of corruption within the meaning of the Independent Commission Against Corruption Act?

MR DOWNES:   I do not have a sufficient knowledge of the ‑ ‑ ‑

GLEESON CJ:   It may be more than a mere pleading point if you are alleging that there are some individuals in public office in New South Wales who engaged in conduct which, if your allegation is true, amounted to corruption within the meaning of the Independent Commission Against Corruption Act, there might be a requirement of some specificity.

MR DOWNES:   But, your Honour, one thing is plain in the way this case has been conducted until now.  That allegation, as an allegation, pleadings aside, has been very squarely made ‑ ‑ ‑

HAYNE J:   Against whom?  Against the Board, I can understand, but against individuals saying X, either knowingly abused his or her power;  have we ever got to that level of specificity, Mr Downes?

MR DOWNES:   That is precisely what is said about the conduct of Messrs
Clayton and MacLachlan in giving and adhering to the cost estimate that they gave and adhered to, notwithstanding the fact that the evidence establishes, in their own handwriting, that $1.4 million of the cost was not required and there was a doubling, without warrant, of the estimate for rising mains. 

Now, the problem that there is not more expansive material to explain exactly what was meant by those words, is the problem that the Board never called these persons to tell the court what was the explanation for the word “not required”.  I know it is a large leap to go from a mere note “not required” to a finding of deliberate conduct, and just in answer to your Honour Justice Gaudron, as we understand Mengel and Sanders v Snell, there are two potential arms to a misfeasance in public office case:  one is acting outside power; the other is, deliberate conduct calculated to harm.  The alternative that we are opting for here, and always have, is the deliberate conduct calculated to cause harm; the harm being, harm in connection with the development proposal of Mr Neal.

GAUDRON J:   Well, it seems to me that that leg makes it harder in the context of vicarious liability, because no one had to consider vicarious liability in the Northern Territory in Mengel, because it did not get so far.

MR DOWNES:   Yes, that is always so in such a case, but so, if I might say so, is the observation that I put, is the observation that advocates always make in such a circumstance on the understanding, no doubt, that someone in this Court would have said at some stage, “Well, why are we worrying about all of this detail when the case simply must fail because there is no vicarious liability?”

HAYNE J:   Now, you said that the case was always put as deliberate conduct intended to cause harm.  How does that sit with issue (4) identified at 1103?  It seems to put, at first blush, a different aspect of the case, where there is reference to “improper abuse of power”.

MR DOWNES:   All I can say is, it says “abuse of power”, not “excess of power”.  The two ‑ ‑ ‑

HAYNE J:   All I can say, Mr Downes, is that large allegations require considerable specificity.  They are not to be bandied about in the courts of this country idly.

MR DOWNES:   I understand that.  Your Honour, can I just say this though, that abuse of power is conduct within power and it is on that basis that I adhere to what I said.  I hear what your Honour says ‑ ‑ ‑

GAUDRON J:   “By the defendant”, not by the employees for whom the defendant is vicariously liable and it does seem to me to raise a distinct issue.

MR DOWNES:   I take on board what your Honours have said.  There are some things I could – it is a matter as to what your Honours want me to do.

McHUGH J:   One thing that you have to bear in mind in terms of vicarious liability is that the accepted doctrine in this Court is that there is no vicarious liability in respect of independent discretions conferred on public officers, whether it be a policeman, as in Baume and Enever v The Commonwealth; whether it is a pilot on a boat, and there are no doubt many other cases.  But the definition of “public officer” for the purpose of this tort is very wide, is it not?  It has been held to cover anybody who is paid by public funds as long as they are discharging some public duty or exercising some power which is an incident of their public duty or functions.

But where did these officers fit in in this particular case?  Are they public officers?  Do they have independent discretions?  Are they really exercising a public office when they give this information out?  They are not exercising any statutory power nor are they discharging any public duty.

MR DOWNES:   We say, yes, they are, your Honour.  Can I just remind your Honour that the Law Reform (Vicarious Liability) Act 1983, which in certain circumstances, at any event, legislates, with respect, to the independent function provisions and provides that vicarious liability still exists. That was in force in 1985.

Your Honours, I can conclude what I wish to say, setting aside for the moment some of the matters that your Honours have raised about misfeasance in public office, by doing one further thing, namely, referring your Honours to page 347 of Mengel’s Case in which the Court recognises “reckless indifference” as a species of deliberate conduct, relevantly.  This, we would submit, is a reckless indifference case if other tests in terms of misfeasance are satisfied.

KIRBY J:   Does the Court make it clear that that goes there for beyond malice, that you can establish misfeasance in public office without establishing actual malice on the part of the public officer?

MR DOWNES:   The passage at 347 is at the bottom of the page in 185 CLR 307:

If misfeasance in public office is viewed as a counterpart to the torts imposing liability on private individuals for the intention infliction of harm, there is much to be said for the view that, just as with the tort of inducing a breach of contract, misfeasance in public office is not confined to actual knowledge but extends to the situation in which a public officer recklessly disregards the means of ascertaining the extent of his or her power.  However, that is not what was put in this case.

Et cetera.  Your Honours, before I sit down, there is just one other matter that I wanted to draw attention to in answer to your Honour Justice Callinan’s question because it is the sort of thing that might slip past.  It is Mr Neal’s evidence, Mr Neal not having been cross‑examined on what happened on 25 November, and it is at page 572 in which he says:

I attended a meeting at the Defendant’s Offices with Mr Rhodes and Mr Wright from the Board.  We referred to the costing of $2.5 million and Mr Wright said that about three kilometres of pipe laying was necessary to amplify the line from the Warragamba Treatment Works and Pumping Plant to my development.  He said that if we increased our first yield to 180 lots –

that is as compared to 87 lots –

then the cost would be $3.5 million.

Those are our submissions.

GLEESON CJ:   Just before you conclude, Mr Downes, is there anything you would want to say on the question of whether or not we should not, at this stage, restrict your special leave to the negligence issue, and that is to say, withdraw your special leave in so far as it relates to misfeasance in public office, partly having regard to the evidentiary and factual circumstances which have been explored in discussion with you?

MR DOWNES:   It is stating the obvious to say that if the appeal is upheld on negligence - we would not wish to press the misfeasance claim, to put it that way, if the negligence claim was upheld, but what we would say is this ‑ ‑ ‑

GAUDRON J:   And you cannot succeed on it if it is rejected, can you?  You cannot succeed in misfeasance in public office if the negligence claim is rejected.

MR DOWNES:   We can, as I said to his Honour yesterday, but maybe that is in a world of perfect logic as opposed to a real world.

GLEESON CJ:   But what is concerning me, I must say, is you seem to be inviting us – what are the names of those men again?  Mr MacLachlan and ‑ ‑ ‑?

MR DOWNES:   Clayton.

GLEESON CJ:   Mr MacLachlan and Clayton.  You seem to be inviting us to visit upon Mr MacLachlan and Mr Clayton a very nasty surprise.  They are not parties to these proceedings and you want us to produce a judgment in which we make – we, for the first time, without these findings having been made in the courts below – extremely serious findings against them and say the Board is vicariously responsible.

MR DOWNES:   The fact that that is open to your Honours is simply a product of the fact that they did not enter the witness box.

GAUDRON J:   And you did not join them as parties.

MR DOWNES:   They were present, as has been pointed out.  They prepared statements.

CALLINAN J:   Just wait a moment.  You say they did not enter the witness box.  Were not statements by them in evidence?  For example, Mr MacLachlan ‑ ‑ ‑

MR DOWNES:   Because they were tendered by our side as admissions.  They were statements prepared by the respondent in anticipation, and your Honour saw the passage where Mr Garling said, “I am intending to call Mr Clayton”, but ultimately did not.

CALLINAN J:   Mr Garling did not tender, then, any statements by any witnesses at all.  Is that correct?

MR DOWNES:   That is correct.

CALLINAN J:   He simply relied upon some documents which he tendered.  Is that so?

MR DOWNES:   Three documents apparently.  Most of the documents were tendered by us.

CALLINAN J:   So Mr MacLachlan was really your witness.

MR DOWNES:   No.  We would say no.  We simply tendered parts of his – no, we did not call him ‑ we did not ‑ ‑ ‑

CALLINAN J:   These had been served on you, had they, by ‑ ‑ ‑

MR DOWNES:   Yes.

CALLINAN J:   I see.

MR DOWNES:   We did not – no, no, these statements were prepared by the Water Board for use in the proceedings and we tendered them as admissions.

CALLINAN J:   Well, you tendered them as part of your case.

MR DOWNES:   Yes.

CALLINAN J:   Well, then he was your witness, was he not?

McHUGH J:   But as admissions.

MR DOWNES:   As admissions.

CALLINAN J:   Well, he is your witness then, is he not?

MR DOWNES:   No, because we did not call him to give evidence.  These were not proved, for example, by his getting in the witness box ‑ ‑ ‑

CALLINAN J:   They do not have to be.  They went into evidence.  You relied upon them.  How can you allege misfeasance about somebody who was your witness?  The fact that he was not called is irrelevant.  His statement was tendered.  How can you allege misfeasance against your own witness?

MR DOWNES:   Because it does not make him our witness.

CALLINAN J:   Well, I am sorry, I disagree with that.  Once you tender part of his statements, he becomes ‑ ‑ ‑

MR DOWNES:   There are certainly authorities in New South Wales about this, that the statement that was prepared is just simply another document that is in the hands of the other party.  Just as we were able to tender the notes themselves as an admission by them, so we were able to tender what Mr MacLachlan said in a couple of lines of his statement as to when these were prepared.  Again, this may be something, but I know there are certainly a number of authorities in New South Wales ‑ ‑ ‑

CALLINAN J:   Well, I would like to see them, because ‑ ‑ ‑

MR DOWNES:   The issue arises in New South Wales when people say, “Right, you have tendered a paragraph out of my statement, now I want to cross-examine the proposed witness”.

McHUGH J:   Yes, but how did they get tendered as admissions?  These people are not parties to the proceedings.  Did they get in under some equivalent of the old 14(b) of the Evidence Act in New South Wales?  How did they get into evidence?

MR DOWNES:   Well, they were not objected to.  Well, I do not know whether they were.  They were not objected to.  So there was no ruling on those issues.  But one thing is clear, they were not treated as being the evidence of a witness that was being called by the appellant, at least because in that event it would have been a requirement that Mr MacLachlan and Mr Clayton got into the witness box and said, “This is my statement and its contents are true”.

CALLINAN J:   You will have to refer me to those authorities.  You need not do it now, but I will need to see them.  They may turn upon the practice rules in New South Wales; I do not know.

MR DOWNES:   Those are my submissions.

GLEESON CJ:   Yes, thank you, Mr Downes.  Yes, Mr Garling.

MR GARLING:   Your Honours, we wish to put the submissions essentially in four parts.

GLEESON CJ:   Will you excuse me for a moment?  Before you go any further, Mr Garling, by majority, the Court is of the view that the special leave to appeal that was granted in this matter should be confined to the negligence issue.  That is to say, in effect, that special leave is withdrawn in relation to the misfeasance in public office issue.

MR GARLING:   If the Court please.  In that case, your Honours, we wish to put our submissions in three and a half parts.  The first, your Honours, would be just to very briefly identify the statutory framework of the Water Board for two purposes.  One is to make the submission that the Board’s officers were acting within power.  That is probably irrelevant now.  But, secondly, to make the submission that there is nothing in the Act to mandate a duty of care by the Board to the appellants at the time at which these events occurred.

May I very briefly highlight the sections of the Act that may be relevant.  Your Honours have noted already section 6A which is the incorporation and your Honours have noted section 7(2), that is that:

The board shall, in the exercise and discharge of its powers, authorities, duties and functions, be subject to the direction and control of the Minister.

Would your Honours next note section 23, where the Board is:

For the purposes of and subject to the provisions of this Act, the board shall be capable of –

doing a range of activities and, at the end, of:

doing and suffering all such other acts and things as bodies corporate may by law do and suffer.

Your Honours, sections 25C and 26 provide for the appointment of a general manager and various officers and employees and workmen of the Board to assist in the execution of the Act.

Section 30 is entitled “Functions generally” and it sets out specific functions with which the Board is charged, and subsection (2) provides that “The Board shall exercise the functions” in specific municipal and shire areas.  I can tell your Honours that the Schedule and the Gazette which adds those areas includes both the Penrith and the Liverpool areas.  Hence, there was no question that the Board’s powers extended to this particular area.

Your Honours, section 31 gives to the Board a power to construct various works.  It is probably convenient to refer to those works as the Board’s infrastructure.  Section 32 provides for ancillary powers with respect to the undertaking of works construction.  Your Honours have noted sections 34A and 34B and I would wish to return to those.  Section 37 provides that the Board:

Subject to the provisions of this Act…..be the sole authority for the conduct of water supply and sewerage services…..within its area of operations.

Section 44 may be relevant and is of some assistance to demonstrate the point my learned friend, Mr Downes, referred to earlier.  Section 44 is entitled “Connections”, and that provides that:

(1) Where a water or sewer main has been laid and is available to be connected, public notice…..shall be given.

After a  specific time:

the owners of all lands within the prescribed distance –

of the main are then levied rates, whether or not they are connected.  The section also provides for connections to be made by the individuals to the Board’s mains, and that would be the connection by the subdivider to the Board’s mains and the subdivider would then be responsible for the internal reticulation.

I then need just to notice three other sections, your Honours, section 47:

Purposes for which water may be supplied.

(1) Water available from works provided by or vested in the board shall be primarily used and equitably distributed for domestic purposes, sewerage flushing, and the maintenance of a suitable pressure for fire extinguishing.

GLEESON CJ:   Do you accept the proposition that Mr Downes put about the Act, that sections 34A and 34B cover the subject which was in the memorandum and the letter?

MR GARLING:   Yes, but the time had not yet arrived for those to be put into effect.

GLEESON CJ:   But what the letter was talking about when it referred to cost was the kind of cost referred to in section 34A and 34B.

MR GARLING:   Yes, but I need to take the Court back to that because, in my respectful submission, it is not limited to the main of precisely the size necessary to serve that subdivision and there are some findings about that that I will take the Court to.  Your Honours, can I also just note for completion, section 49, which provides that:

The board shall not be liable to any penalty or damages for not supplying water –

in certain circumstances and adds –

nor shall the board be compellable to supply water to any person whomsoever.

And section 51, which provides that:

The board shall take effective measures to protect the supply –

in the circumstances nominated –

and to maintain an adequate and pure supply.

Now, your Honour the Chief Justice yesterday asked about a global immunity section.  We do not believe that by 1985, when this form of the Act was in place, there was such a section, with the exception of section 49, which provides that the board is not “compellable to supply water”.

McHUGH J:   So the section we dealt with in Puntoriero was not in force.  What was it ‑ ‑ ‑

MR GARLING:   We do not believe so.

McHUGH J:   No.

MR GARLING:   Your Honours, the only other matter I wish to note in terms of statutory framework with respect to the Environmental Planning and Assessment Act, which my learned friend took your Honours to this morning, is one matter in the Act which he did not draw specifically to your Honours’ attention, but it may be important for your Honours to note, and that is section 69. Section 69 provides that:

The Director –

of the Department of Environment and Planning –

shall furnish a report to the Minister as to –

(a)  whether the draft local environmental plan.....is inconsistent with any State environmental planning policy –

and the like; whether the relevant procedural steps have been complied with and:

(e)  such other matters relating to the draft plan as the Director thinks appropriate –

and unless the Minister has that report and considers it, he cannot make the local environmental plan.

McHUGH J:   Mr Garling, my recollection, is there not in the ‑ around section 112, or somewhere in this Act, or used to be, provisions about designating development?  Do they fall in here in any way, or are they relevant?

MR GARLING:   Yes, there are such provisions and, no, they are not relevant, for this reason, that they apply at the time of a development application to a council of a particular kind and that was never reached because the LEP had not been made.

McHUGH J:   Yes.

MR GARLING:   Your Honours ought just note ‑ I will not take your Honours to these pages, but at pages 621 and 622, were the notices in the Gazette of the ultimate making of the LEPs referable to this land, but that was well after the events with which we are concerned.  The first was in June 1986 and the second in June 1987.

Your Honours, before proceeding to the next part of my submissions, can I just take your Honours to a very general description of the nature of the claim that was pleaded and made because, in our respectful submission, that is a relevant background for your Honours to consider both the legal principles and some issues of fact we wish to put.  I ask your Honours to go to volume 1 of the appeal books, to the amended statement of claim, and to pages 2, 3 and 4 of that statement of claim.  Your Honours, paragraph 8 pleads that:

the plaintiffs made representations to the Minister of Planning and Environment and through him to the Minister of Natural Resources in an attempt to gain water supply for the property.

Your Honours, a convenient shorthand may be the planning Minister and the water Minister.  We note, your Honour, it was not suggested that there was a request to the Board.

Paragraph 9 pleads, “The task of advising the Minister”, the water Minister, “as undertaken by the defendant”, and paragraph 10 pleads that, “On 11 November” the Board “represented to the” water Minister:

with a view to inducing the Minister to sign a Ministerial letter to be provided to the plaintiff and its representatives answering the representations –

certain representations.  It said, in paragraph 11 on page 4:

The making of the representations referred to in paragraph –

it should be 10, your Honours, it is a typographical error:

caused or contributed to the act by the Minister of…..signing, and providing to the plaintiff’s representative Mr Watkins, a letter –

So that the feeling was that our conduct induced the water Minister to sign a ministerial letter, that being to the planning Minister, and that it “caused or contributed to the act by the” water Minister of signing the Watkins letter.  The claim in terms of ‑ ‑ ‑

McHUGH J:   The case seems to have departed from that.

MR GARLING:   It does, but I want to come back to it, your Honour, because, in our respectful submission, my learned friend’s submissions gloss over it inappropriately.  Your Honours, your Honour Justice Gaudron yesterday was asking about the nature of the economic loss which the plaintiffs were identifying as the harm for which they were suing.  There are two references ‑ ‑ ‑

GAUDRON J:   Which was foreseeable.

MR GARLING:    Yes.  I wish to come to that, your Honour, but there are two references that may be of assistance.  Again, I do not wish to take your Honours to them and read them.  At page 23, in the first three lines of his opening, my learned friend said, Mr Motbey said:

The case for the plaintiff is that the Deutsche Bank’s act of putting these companies into receivership was the result of a significant misstatement or misrepresentation by the Water Board.

Then, when his Honour the trial judge came to summarise in a general sense, the plaintiff’s claim – that is to be found at 1102 in volume 5 on the first half of the page.  I merely draw your Honours’ attention to that because it seems to us that, with respect, the way in which my learned friend put his case yesterday, namely, in essence, either a diminution in value of the land or, alternatively, the loss of a valuable chance to develop the land, is not really the way in which it was put below.  Also when my learned friend embraced your Honour Justice Hayne’s formulation of the duty this morning, it suffers, we would submit, from the same defect.  Your Honours, I wish then to move, I hope in a ‑ ‑ ‑

GUMMOW J:   The same defect, being what?

MR GARLING:    Being that they did not put their case that way below.  The case below was that the harm caused by this conduct was the putting in of the receiver into the companies which led to the companies not being able to proceed with the project.

McHUGH J:   But harm was never an issue, was it?

MR GARLING:    In the sense of foreseeability, it was, your Honour, and there is a finding of the trial judge, and we would say Justice Mason, that the harm alleged was not foreseeable.

CALLINAN J:   That a receiver might go in was not foreseeable?

MR GARLING:    Yes, your Honour.

KIRBY J:   Even though the memorandum indicated that he was in financial difficulty.

MR GARLING:    Yes, but significantly, the true position was never revealed to the Board.

CALLINAN J:   Is this a kind of an impecuniosity defence, is it, in relation to damages, that you are raising now and seems to have been adopted by Justice Mason and the trial judge; that this was not foreseeable because the appellants were impecunious?  Is that what is being said?

MR GARLING:   No, the case that was put, which was namely that the conduct of the Board led the bank to insert a receiver and that caused economic loss, was not foreseeable to the Board because what it did not know was that the financial position of the appellants was, contrary to what they were generally asserting, as weak as it was.

GLEESON CJ:   But all you have to be able to foresee is harm of the kind that happened.  You do not have to foresee the precise kind of harm that occurred.

MR GARLING:   That is true, your Honour, but allied with the notion of foreseeability, a point to which we will come, is that the reliance made by the recipient of the information was a reasonable reliance, so that we would put the finding of the trial judge and Justice Mason to the Court as either a question of foreseeability of harm or, alternatively, a finding that the reliance that was made by the appellants was not reasonable and therefore could not be.

GUMMOW J:   I do not understand that.

McHUGH J:   In the course of your submissions, will you bear in mind this, that at the moment I do not see that foreseeability has anything to do with this case, having regard to the segregation of issues.

GUMMOW J:   That is right.  How does all this bear on the issue statements at 1102 and 1103?

MR GARLING:   Your Honours, we put it in this way, that this Court has consistently held in cases of economic loss that ‑ ‑ ‑

GUMMOW J:   No, you have to address the text of the question.

MR GARLING:   Yes, your Honour, I am.  May I put it this way?  This Court has held that foreseeability of harm alone is not sufficient to create a duty of care.  We would submit that the obverse of that is that without foreseeability of harm one cannot have a duty of care.

McHUGH J:   Yes, but unless you are going to argue that – well, you want to reject the categorical approach of the negligent representation in information cases, then the traditional view has been that the assumption of responsibility took away any requirement of foreseeability.  It put the case in the category of contract in terms of a duty.  Lord Devlin said it was equivalent to contract and so foreseeability has never been an issue in this category of cases.  At least, that is my recollection of the law.  I may be wrong.  I am talking about these mutual relationship cases, of course.

MR GARLING:   We would submit that, at least in the judgment of Justice Brennan, as his Honour then was in San Sebastian – and I was going to take the Court to that in due course – there is a suggestion that there must be a foreseeability of harm included as an element of a duty in cases of this kind.

McHUGH J:   I can understand that argument in an Esanda type case or a planning type case where it applies to numerous people, but not when your case is a relationship case.

MR GARLING:   I will bear that in mind, which is all your Honour asked me to do.

McHUGH J:   Yes.

MR GARLING:   In answer to your Honour Justice Gummow’s point about why it is relevant at 1102 is because in the issue, all it stated at 1102, namely:

Did the defendant owe to the plaintiffs a duty to take…..care –

I shorten the issue – that would be a part of that consideration, your Honour.

Your Honours, I propose to move, if convenient to the Court, to elucidate a number of the legal principles that appear to impact on cases of this kind.  My learned friend’s reference to a number of the cases earlier this morning, means that I can do so in a somewhat shorter way.  May I put it this way, your Honours:  in Evatt’s Case, the effect of the judgment of the Chief Justice Sir Garfield Barwick at 571, which is what my learned friend took your Honours to this morning, is that there are three propositions – perhaps it is convenient that I do take your Honours to it.  There are really three propositions.  At the top of 571, his Honour says:

First of all, I think the circumstances must be such as to have caused the speaker or be calculated to cause a reasonable person in the position of the speaker to realize that he is being trusted by the recipient of the information or advice to give information which the recipient believes the speaker to possess or to which the recipient believes the speaker to have access or to give advice, about a matter upon or in respect of which the recipient believes the speaker to possess a capacity or opportunity for judgment ‑ ‑ ‑

McHUGH J:   You will not that there is no reference to “foreseeability” and that this question of realisation that you are being trusted is the substitute of foreseeability.  Maybe it is the laws in view of foreseeability if it is relevant.

MR GARLING:   It seems to assumes the existence of foreseeability, your Honour, is the way we would put it.  Your Honours, the second point is in the next paragraph:

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.

Then, thirdly, in the next paragraph, his Honour says:

Further, it seems to me that the circumstance must be such that it is reasonable in all the circumstance for the recipient to seek, or to accept, and to rely upon the utterance of the speaker.

That is where I took an earlier submission to the Court in saying the question of reliance must be reasonable.  We would submit that one of the elements his Honour identifies is what can in a shorthand term be called reasonable reliance.

We were going to draw your Honours’ attention to the passage at 572 and 573 that my learned friend drew your Honours’ attention to this morning, so we will not repeat that.  We remind your Honours that at the bottom of 571 and the top of 572, his Honour says:

I have used throughout the description “recipient” to cover both the case where the incorrect utterance is sought by a question or inquiry and the case where it is volunteered by the speaker.  Though it must be relatively rare that the latter case will give rise to a cause of action, the possibility cannot, in my opinion, be ruled out.

We would submit, your Honours, that those statements of principle in the sense of the elements that contribute to the existence of a duty of care, have been adopted by this Court in both Shaddock and in San Sebastion.

May we then take your Honours to San Sebastion and, in particular, in the first instance to the joint judgment.  San Sebastion, your Honours, is reported in 162 CLR 340, and in the joint judgment at 355, at about the top of the page where the paragraph commences, their Honours say:

The relationship of proximity is an integral constituent of the duty of care concept.

Recognising the development of the law since that time so that proximity as an expression or concept is not any longer regarded as an “integral constituent”, it is nevertheless instructive to note what the constituents of that were, to which their Honours had regard. 

It would appear that the first proposition for which their Honours thought proximity was relevant is at about eight lines down in that paragraph after the various references where their Honours say:

The notion of proximity, because it limits the loss that would otherwise be recoverable if foreseeability were used as an exclusive criterion of the duty of care, is of vital importance when the plaintiff’s claim is for pure economic loss.

Then their Honours say:

When the economic loss results from negligent misstatement, the element of reliance plays a prominent part in the ascertainment of a relationship of proximity between the plaintiff and the defendant, and therefore in the ascertainment of a duty of care.

Their Honours explain that in the next paragraph.  They say:

In cases of negligent misstatement, reliance plays an important role, particularly so when the defendant directs his statement to a class of persons with the intention of inducing members of the class to act or refrain from acting, in reliance on the statement, in circumstances where he should realize that they may thereby suffer economic loss if the statement is not true.

So we take from that, your Honours, and we submit that the Court would take from that that reliance is relevant at both stages, the duty of care to which this extract is relevant and, of course, in the causation sense.  In this case, in the issues that were tried, reliance was relevant to the issue of duty of care.  It was not, of course, relevant to the issue of causation.

Can we take your Honours to the judgment of Justice Brennan at 372 and, in passing, can we invite your Honours to note a remark which we submit is correct and apt in this case because it will refer to what we submit, ultimately, is the error in Justice Fitzgerald’s judgment.  At about point 3, your Honours, in the large paragraph, his Honour says this:

A person who gives information or advice to another to induce the other to a course of action does not necessarily undertake to be careful in the information he gives or the advice he offers.  Helpful information and friendly advice, even on matters of the gravest import, will often be proffered without any thought of the informant or adviser being responsible for its truth or soundness.  To impose a legal duty of care on the unsolicited and voluntary giving of any information and advice on serious or business matters would chill communications which are a valuable source of wisdom and experience for a person contemplating a course of conduct.

We take that statement to be authority for the proposition, contrary to what seems to have influenced Justice Fitzgerald, that the mere fact that a statement is inaccurate does not, of itself, bespeak the necessity to have a duty of care surrounding it.

GUMMOW J:   You really have to read 371 as well, have you not?  You have to go back to 371.

MR GARLING:    Yes, your Honour.  I was about to come to how he adopted Chief Justice Barwick’s points.

GUMMOW J:   No, “The doctrine of Hedley Byrne has not made the tort of deceit otiose”, and so on and so forth.

MR GARLING:    Yes, and that ‑ ‑ ‑

GUMMOW J:   That is the genesis of what then is developed on 372.

MR GARLING:    And the statement before that sentence as well, your Honour, yes.

GUMMOW J:   Yes, that is right.

MR GARLING:    Which has been quoted in a number of subsequent judgments in this Court.

GUMMOW J:   That is right.

MR GARLING:    Can we take your Honours, at 372, to the passage underneath that, to which I was taking your Honours, where Justice Brennan deals with what one might regard as elements that may give rise to a duty of care.  He says:

Where a representor gives information or advice on a serious or business matter, intending thereby to induce the representee to act on it, the representor is under a duty of care in giving that advice or information if three conditions are satisfied.  First (corresponding with the first condition expressed by Barwick C.J.), if the representor realizes or ought to realize that the representee will trust in his especial competence to give that information or advice; second (corresponding with the third condition), if it would be reasonable for the representee to accept and rely on that information or advice; and third –

and, Justice McHugh, this is the part of the judgment that I indicated I would draw your Honour’s attention to –

(applying the underlying principle of the law of negligence), if it is reasonably foreseeable that the representee is likely to suffer loss should the information turn out to be incorrect or the advice turn out to be unsound.

Your Honours, may I take the Court then to the decision ‑ ‑ ‑

McHUGH J:   Well, that is change of language from what was said in Shaddock’s Case.  It may well have the same effect, but it is a change of language.  But it throws up the point that has troubled me for a long time in this Court, and that is what cases are to be read as deciding.  I mean, time and again, we were referred to dissenting judgments, passages in this and that judgment, but they can be no more than illustrative of principle, can they?  What you have to look at is what are the reasons which animated a particular decision.  That is what the ratio of cases is.  Having regard to what is the ratio of Shaddock, should we now alter what seems to have been the ratio of Shaddock by applying the slightly different formulation of Justice Brennan in Shaddock which was said in a different context, a case where you are publishing a zoning plan or ‑ ‑ ‑

MR GARLING:   May I respond to that in this way, your Honour, by submitting that the principle must always be, in our respectful submission, that unless the harm is foreseeable there can be no duty of care.  Now, it might be in the specific category of negligent misstatement that there are some elements which the court looks for in the construct of a duty of care, which necessarily incorporate or have within them as an unspoken element, the foreseeability notion.

Your Honour, that is not dissimilar from the concept that in personal injury law this Court has said on many occasions that cases such as road user and road user, hospital and patient, teacher and pupil and the like, so obviously bespeak a duty of care as not to give rise to any real inquiry in every case in a practical sense as to whether a duty exists.       Now, that is because the foreseeability of harm, et cetera, are all obvious from one road user to another or in those categories of cases.

Your Honours, in certain circumstances in cases of negligent misstatement foreseeability will be obvious.  If one person requests of another ‑ ‑ ‑

McHUGH J:   Plainly, in an Esanda-type case, certainly and in a San Sebastian-type case, certainly, because there is no mutual relationship.  There is no assumption of responsibility.  One is in a different area of discourse.

MR GARLING:   We hope to persuade your Honours that the facts of this case do not quite make the description given to them by my learned friend so that foreseeability does become relevant.  Your Honours, may I take your Honours to Esanda 188 CLR 241 at 252? After the extract from Lord Jauncey’s speech in Carparo – this is the judgment of Sir Gerard Brennan – his Honour the Chief Justice says this ‑ ‑ ‑

McHUGH J:   What page is this?

MR GARLING:   At 252, I am sorry, your Honour, immediately under the extract from Lord Jauncey’s speech.  I was thrown by the marginal note saying that it was Justice Dawson when, in fact, it is the end of the Chief Justice’s judgment:

The uniform course of authority shows that mere foreseeability of the possibility that a statement made or advice given by A to B might be communicated to a class of which C is a member and that C might enter into some transaction as the result thereof and suffer financial loss in that transaction is not sufficient to impose on A a duty of care –

Now, your Honours, may we submit that when we come to the facts we will make good the proposition that this case falls into that category, that all there was in this case was a statement by the Board to the water Minister, which was foreseeable that it may come to the attention of Neal but it was not a statement made to the appellants.

We say the mere foreseeability that might come to the appellants’ attention is not sufficient to impose on us a duty of care to the appellants.  Then his Honour says ‑ ‑ ‑

KIRBY J:   It goes beyond mere foreseeability, because, for two reasons:  first, that the structure of the memorandum seems to contemplate that it will be drawn to the attention of Mr Neal and his company; and secondly, even the most rudimentary knowledge of the way government operates with representations made and memoranda would indicate that that is what happens and what is intended to happen.  A memorandum is prepared and that forms the basis of the response which, with any adaptations, the Minister makes to the constituent.

McHUGH J:   And can I add to that, the opening paragraphs of the memorandum tended to treat Mr Carr as an agent and it made representations on behalf of a principal, and I use those terms loosely, Mr Neal.

MR GARLING:   Yes, your Honours.  May I, when I return to the facts, deal with both of those points, but in short we will put that the parts of the draft letter relied upon do not give rise to that conclusion, firstly; secondly, that Justice Mason was correct when he found the purpose of the letter, as he did in his judgment to which we will take your Honours; and thirdly, that is not inconsistent with the preceding material that your Honours have not yet been taken to, which is how Mr Carr got involved in the first place.

GLEESON CJ:   But if you asked, in relation to the information that the Water Board was reluctantly giving, who wants to know?  The answer would be, Mr Neal, would it not?

MR GARLING:   No, the answer would be more than that, your Honour.  It would be the planning Minister is the person who wants to know, and the letter is addressed to him in response to his request and viewed in the  overall context of it, it is material relevant to that request.

GLEESON CJ:   But if somebody from the Water Board said to somebody else in the Water Board, why are we being badgered to give this information, the answer would have been, because Mr Neal needs it.

MR GARLING:   No, your Honour, with respect not, for the reason that we will put, that when one examines what it was that Mr Neal was asking of Mr Carr, which gave rise to the correspondence and the response, that is not the answer one would get in the facts of this case and I will need, in due course, to take your Honours to that to make good that submission.

Your Honours, may I return to Esanda in Chief Justice Brennan’s judgment.  He says, after the extract I have read to your Honours:

In some situations, a plaintiff who has suffered pure economic loss by entering into a transaction in reliance on a statement made or advice given by a defendant may be entitled to recover without proving that the plaintiff sought the information and advice.

That is, similar to the statement by Chief Justice Barwick about request cases.

But, in every case, it is necessary for the plaintiff to allege and prove -

and then his Honour seems to have three elements:

that the defendant knew or ought reasonably to have known that the information or advice would be communicated to the plaintiff, either individually or as a member of an identified class ‑ ‑ ‑

KIRBY J:   Well, that test would be passed here.

MR GARLING:   That is foreseeability, your Honour, and we do not argue, and we have never argued, that it was not foreseeable that the information may come to the attention of Mr Neal.  Might I say, your Honours, just diverging slightly, the findings are that the Carr letter did not come specifically to the attention of Mr Neal.  Now, there is a finding that the effect of it may have come to Mr Rhodes’ attention, but I will take your Honours to that again.  May I read on, your Honours.  His Honour continues:

that the information or advice would be so communicated for a purpose that would be very likely to lead the plaintiff to enter into a transaction of the kind that the plaintiff does enter into and that it would be very likely that the plaintiff would enter into such a transaction in reliance on the information or advice and thereby risk the incurring of economic loss –

Again, your Honours, we submit that that is a notion akin to the concept of reasonableness of reliance.  Then his Honour says:

If any of these elements be wanting –

and those elements, we would say, were foreseeability, purpose and reasonableness of reliance –

If any of these elements be wanting, the plaintiff fails to establish that the defendant owed the plaintiff a duty to use reasonable care in making the statement or giving the advice.

So the way his Honour would put it is that they are, we would submit, either individually or in combination necessary to be established.  Justice Dawson at 256 does note, your Honours, at the top of 256 that:

a request is not a necessary prerequisite for reasonable reliance.

But at the bottom of the page, he says at 256:

But an intention to induce a person to whom information or advice is given to act in a particular way is merely one of the various means by which it may be shown that the reliance by that person upon the information or advice is reasonable so that, in combination with other relevant circumstances, it may serve to establish a relationship of proximity –

And then if your Honours go to 257, immediately before the extract from San Sebastian, his Honour says:

Circumstances of the kind identified by Barwick CJ in Evatt must otherwise exist, although an intention to induce a particular course of action may point to their existence.

At 264, we wish to draw the Court’s attention to the judgment of Justice Toohey and your Honour Justice Gaudron.  We do not refer to it all, your Honour, not because we wish to avoid confronting any part of it, but because we think these are the relevant parts.  At 264 in this joint judgment, the passage is to be found at about point 6, commencing:

In the context of liability for negligent statements, it seems to us that reliance is better expressed in terms similar to those used by Mason J in Kondis.  Thus, reliance is to be understood, in the context of the provision of information or advice, as an expectation, which is reasonable in the circumstances, that due care will be exercised in relation to that provision.  Similarly, we consider that, in that same context, assumption of responsibility should be understood in the way explained by Barwick CJ in Evatt.  More precisely, it should be understood as the assumption of responsibility for providing information or advice in circumstances where it is known, or ought reasonably be known, that it will or may be acted upon for a serious purpose, and loss may be suffered if it proves to be inaccurate.

Now, we would submit, your Honours, that within the words:

known, or ought reasonably be known, that it will or may be acted upon for a serious purpose –

that encompasses something more than mere foreseeability of the likelihood of economic loss in a very general sense.  It encompasses some knowledge or constructive knowledge of the purpose, a serious one, for which the information will be acted upon.  Your Honours, may we draw your Honours’ attention at 265 to a passage in the judgment at about point 7, commencing in the paragraph:

The decided cases do not identify precisely  ‑ ‑ ‑

McHUGH J:   But the preceding paragraph makes the point that there are various aspects of the category of liability for negligent statements.

MR GARLING:   Yes, your Honour, we accept that.  Although tempted to encourage the Court to depart from its previous authorities and accept the English position, we do not feel able to assay that task.  Therefore, we accept that there must always be some cases outside of where a specific purpose or intention arises where liability is possible.  We simply submit that they will be read, and this is not one of them.  In the passage at 265, their Honours note:

However, commonsense requires the conclusion that a special relationship of proximity marked either by reliance or by the assumption of responsibility does not arise unless the person providing the information or advice has some special expertise or knowledge, or some special means of acquiring information which is not available to the recipient.  Moreover, ordinary principles require that the relationship does not arise unless it is reasonable for the recipient to act on that information or advice without further inquiry.

We would submit that that is the same or equivalent to the earlier authorities relating to reasonable reliance.  Then the judgment says:

Similarly, ordinary principles require that it be reasonable for the recipient to act upon it for the purpose for which it is used.  That is not to say that a special relationship of proximity exists if these conditions are satisfied.  Rather, it is to say that the relationship does not arise unless they are.

We would submit that the findings of the courts below are against that element and, therefore, a duty does not arise. 

Your Honours, we wish to refer the Court to your Honour Justice McHugh’s judgment at 275, in particular at the middle of the page, where your Honour says:

Thus, the position in Australia to date with respect to liability for pure economic loss caused by negligent misstatement is that, absent a statement to a particular person in response to a particular request for information or advice or an assumption of responsibility to the plaintiff for that statement, it will be difficult to establish the requisite duty of care unless there is an intention to induce the recipient of the information or advice, or a class to which the recipient belongs, to act or refrain from acting on it.  Mere knowledge by a defendant that the information or advice will be communicated to the plaintiff is not enough.

GLEESON CJ:   But the argument against you is that this is a case of a statement to a particular person in response to a particular request for information.

MR GARLING:   Yes, your Honour, but we will submit that it is not a statement to the appellants.

GLEESON CJ:   What is the point of distinction between this case and Shaddock?  Is that it?

MR GARLING:   The first point of distinction, your Honour, is that the request in Shaddock was from the plaintiffs’ solicitor.  That is the first point of distinction, for specific information ‑ ‑ ‑

GUMMOW J:   They wanted a 342AS certificate, did they not?

MR GARLING:   Yes, they wanted specific information for a purpose which was obvious, namely, the conveyancing of the land.  Secondly, the information that was provided, was provided in the ordinary and usual course of the council’s operations, it being a repository of that information.  The evidence was that it was the practice in those circumstances to consult with local councils to obtain the information.

GLEESON CJ:   And why is that different from this case?

MR GARLING:   Because the evidence here is, clearly, that it was not the practice of the Water Board to hand out this information.  In fact it, as the point has been made on a number of occasions, declined to hand out the information.

GLEESON CJ:   But there was a practice of the Water Board informing people of the cost of putting water on to subdivisions, was there not?

MR GARLING:   When it got to a section 34A and section 34B stage, yes, your Honour, but not before that.  All of the documentary material and the material available in this case said it was contrary to the Board’s usual practice to be handing out this information at this stage.  We wished also just to refer your Honours to the judgment ‑ ‑ ‑

GAUDRON J:   And that is because, I suppose, is it, that there was no subdivision.  I do not know to what extent one could look at it, but even at the end, people are talking about a subdivision of twice the size or something, or three times the size, and extending the area of land that would be involved in the subdivision.  I suppose if you look at it realistically, one is just talking theoretically until there is actually an approved subdivision.

MR GARLING:   That is so, your Honour, and the point that your Honour makes, with respect, is demonstrated in the facts of this case where – and I will take your Honours to the documents to make this good – the so‑called 1982 request for the approximate cost of subdivision was about a subdivision of 20 two‑hectare lots, not the sort of subdivision which was later contemplated in the course of the 1985 material, nor, indeed, the options that were being discussed after 25 November 1985.

GAUDRON J:   Were they not discussed on 25 November?

MR GARLING:   Yes, and the letter of 25th makes that plain, and they continued to be discussed, your Honour, afterwards.

CALLINAN J:   You did not say that the work that was done for 650,000 was less work?

MR GARLING:   Yes, we did, your Honour.

CALLINAN J:   It was?

MR GARLING:   We put, both in cross‑examination and submission, that that was evidence which was irrelevant because, in the vernacular, one was comparing apples and oranges and that is what his Honour the trial judge found.  He found that the work that was ultimately done was not of the same magnitude or type of that which was encompassed in 1985 and I will give your Honour a reference to that in the trial judge’s judgment.

CALLINAN J:   Thank you.

MR GARLING:   And that did not seem to be dealt with in any specific way in the Court of Appeal’s judgment. 

In your Honour Justice Gummow’s decision in Esanda we wish to draw attention to just a couple of passages.  Your Honour at 298 turned to consider the question of tortious responsibility for non‑deceitful statements and at 309, when your Honour was disposing of the actual appeal, your Honour notes that in 309 about point 7 or 8 in Evatt’s Case, Shaddock and Hedley Byrne itself, your Honour notes:

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.

Your Honour then goes on to note – and I will not read the balance of the paragraph – but your Honour notes that at 309 and across to 310 that:

such a request is by no means essential –

to liability and notes the deficiencies in the case that is brought. 

Your Honours, can I move from that note of the various authorities to the particular facts of this case in order to make good these submissions?  Firstly, that we would submit that there was no foreseeability in this case of the reliance which occurred and that the reliance which was made by the appellants on the statement was not reasonable.

Now, your Honours, firstly, may we just in doing that take your Honours to the decision of the Court of Appeal of Justice Mason at 1202.  At the top of the page his Honour says, in respect of the memorandum and letter:

Nothing in the memorandum or letter indicated that the Board was or ought to have been conscious of the fact that some decision was about to be taken by Mr Neal in reliance upon the information as to costing likely to be conveyed to the appellants through the Crosio‑Carr letter.

Then at 1203, line 29, his Honour says:

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.

Your Honours, there are some references to that in the judgment of the trial judge, which I wish to take your Honours to.  Firstly, at 1139, at about line 22 or so – it is part of a sentence referring to the relevance of the meeting of 25 November ‑ ‑ ‑

McHUGH J:   What pages is that?

MR GARLING:    Page 1139, your Honour.  His Honour says, in the second sentences in that paragraph:

Its importance is that it demonstrates no inconsistency on the part of the Board with what I have held – namely that the Board simply had no reason to expect otherwise than that Mr Neal would be duly advised, if he did not already know, that the figure of “in the order of $2.5 million” was a starting point for the usual train of events which would lead, eventually, if Mr Neal persisted with the proposed subdivision, to a s 34A agreement for a substantially lower figure.

His Honour, at 1146, then deals with “Foreseeability”, as he calls it, in part of his judgment, the heading of which is “Foreseeability of Economic Damage”, and then at line 11 he says this, speaking of the Board:

It had no reason to anticipate as a reasonable possibility anything like what in fact occurred – namely that Mr Neal and his solicitor would promptly, before the figure was refined down in the ordinary way by further investigation, inform Mr Neal’s bank (of which it had no knowledge let alone that it was on the point of putting in a liquidator) that, in effect, the cost to connect the water was firmly the figure stated in the letter and that unless that was paid the water could not be connected to the proposed subdivision.

His Honour repeats a similar finding at the following page, 1147.

GUMMOW J:   Where does this idea of refining down come from?

MR GARLING:    It came, your Honour, from the expert evidence of Mr Smith, the engineer called for the appellants.  He, in summary, your Honour, said that it was well known in engineering and subdivision areas that there were levels of cost ‑ ‑ ‑

GUMMOW J:   This is at page 1137, is it?

MR GARLING:    No, your Honour, that is really referring to the Rhodes’ letter.  There is some other evidence which I will turn up of Mr Smith, the engineer ‑ ‑ ‑

GUMMOW J:   Well, it may be important.

MR GARLING:    Yes, your Honour.  Would your Honour pardon me a moment.

HAYNE J:   It begins at 1133/1134, I think.

CALLINAN J:   Page 1137 and 1138, I think.  The bottom of 1137, is that what you ‑ ‑ ‑

MR GARLING:    Well, it is in that chapter, your Honour.  May I just give your Honours some specific references, but they are the pages where his Honour dealt with it?  He says at 1134, about line 36, and I am grateful to your Honour Justice Hayne:

There were well established general engineering levels of costing.  These levels were not peculiar to the Board.  The first was that in routine engineering practice the lowest level of costing was an order of cost estimate.  The next level, in ascending order, was a preliminary (or “pre-design”) estimate.  The third was a detailed design estimate.  (Generally in engineering practice there was also, where tenders were to be called, a final costing for that purpose ‑ ‑ ‑

HAYNE J:   And the ultimate conclusion comes at 1135, lines 35 to 50, does it not?  The process will lead to a “much less” cost.

MR GARLING:   Yes, this was the starting point of a process which as the detail of the subdivision was refined, so the detail and costing of the provision of water would be refined.

GLEESON CJ:   As exemplified by what appears at page 1148, line 50.

MR GARLING:    Yes, your Honour, that is so.  May I just remind the Court, with respect to that point, that the $1.7 million figure was found to be not negligent, although it was challenged by the trial judge and found not to be negligent by the Court of Appeal.  So that was found to be a reasonable figure which was, in fact, provided on 29 January 1986.

I was about to take the Court to the passage at 1147 in the trial judge’s judgment at about line 25:

A reasonable body in the position of the Board would not have foreseen anything like, or even remotely resembling, what happened.  Had it known of the real position between Mr Neal and his bank then it is at least arguable that a reasonable body in its position should have foreseen the possibility that the letter might have to be shown urgently to Mr Neal’s financier, notwithstanding that the figure stated would be understood by Mr Neal as a ball-park figure likely to come down after detailed examination, and that before such detailed examination could be undertaken the financier would pull the financial rug from under Mr Neal or otherwise act to his economic disadvantage.

But his Honour then makes it clear as to his other findings, that the details of the financial position and the precarious nature of it were not known to the Board.

GLEESON CJ:   Well, I am looking at 1148, lines 13 and 14.  That aspect of the case raises perhaps a consideration relevant to duty, does it not?  It is perhaps a consideration that is often one likely to arise in the area of negligent misstatements or negligent advice.  What kind of reciprocity is there, what kind of obligation is there on the person who is seeking the advice or information to inform the person from whom the advice is sought as to the possible implications of assuming a duty to take care in giving the advice?

MR GARLING:   Yes.  We would submit that the way in which that is appropriately collected in the authorities to date would incorporate this circumstance, namely, if there is a specific request by one to the other as to the provision of information, then, of course, one would expect that the asker would provide all relevant information with respect to that material.  Secondly, it is a matter for the seeker of the information to let the maker of the statement know the intended purpose of the usage of it.  Now that may be inferred from what transpires, but it is important, we would submit, that intended purpose is known.

GLEESON CJ:   But a problem underlying or lurking behind the difficulties that the courts have had with this area of duty, I suppose, is the fact that you may be imposing a duty on someone who has got no idea of the implications of making a mistake.

MR GARLING:   Yes, your Honour, and we would submit that is why the courts are reluctant to impose duties unless, in what has been called “relationship cases”, it is manifest that the reliance is reasonable and was either known or ought to have been known, and there is a clear assumption of responsibility.  But we would submit it is a very important consideration and ought not be overlooked.

The references we have given your Honours are references we say which support the proposition that either there was no foreseeability of what was going to happen, or alternatively, the reliance which occurred was not reasonable.  That, on the authorities to which we have taken your Honours, would rule out a duty of care, in our respectful submission.

Your Honours, may we next move to this proposition – to make good this proposition:  that what occurred in this case was not a specific request for information from the appellants to the Water Board.  May we seek to make good that request in this way?  May we start with the earliest request, which is at page 833?  That is to be found in volume 4, your Honours.  It is submitted by the appellants that this is the request to which there was an ultimate answer in November 1985.  Would your Honours note that the letter comes from Mr Murray, who was a consulting surveyor retained by the appellants.

May we submit in passing, as we note this letter, that it seems that in the area of subdivision, consulting surveyors and town planners are regularly consulted for expert advice as to how to construct the subdivisions and what the elements are and the like.  This is a letter which says:

Proposed re-zoning of Lot 3…..City of Liverpool –

so, it is only part of the overall subdivision that was ultimately dealt with in the Board’s documents.  It does not include any part of the Penrith council area.  Mr Murray says:

I am writing in the form of a pre-development enquiry in connection with a proposed application to the Department of Environment and Planning, through Liverpool City Council, to permit the subdivision of the above-described land into 2ha parcels and the erection of a dwelling house on each parcel.

Enclosed please find copy of plan, being a very approximate preliminary…..which sets out the general proposal.

If your Honours ‑ ‑ ‑

GAUDRON J:   We are talking about a rural subdivision at this stage of two hectares.

MR GARLING:   Yes, two hectares.

GAUDRON J:   We are not talking residential.

MR GARLING:   No.  If your Honours turn to 834, the plan which accompanied the letter makes it plain that it was seeking a 20 lot subdivision.  It is true that Mr Murray sought the general advice of the Board whether the existing mains were able to cope, whether, if they were not, what arrangements and approximate costs of amplification would be necessary, and estimated costs of water reticulation.

Now, that letter was responded to specifically at 842, where the Board addressed a specific response on 10 May.  Although the left margin of the document is cut off, I think the context of it is clear:

The proposed subdivision is contrary to the existing zoning…..It is not the Board’s policy to supply information regarding the provision of services to subdivisions/developments which are contrary to zoning…..

further enquires regarding this development should be made through the Department of Environment and Planning.

Now, your Honours, thereafter, of course, the subdivision went through various changes from time to time but we would submit that one cannot, even though one can point to many years of contact between these parties, delve back in this way to some note three and a half years before the memorandum and draft letter to say that was a specific request of the kind noted by the authorities as giving rise to what flows from a specific request.

Your Honours, may we then move to what might be called the more proximate material, which is when Mr Carr came to be involved and we need to start in the same volume at page 993.  Short background, your Honour, the appellants made a confidential ministerial submission, having secured an appointment with Mr Carr via the Premier’s office.  This was the confidential ministerial submission put to Mr Carr by the appellants and this is what led to the chain of correspondence resulting in the draft letter and memorandum.

Now, your Honours will note on 994 is the “Executive Summary”.  This is set out in the trial judge’s judgment but the last paragraph is, perhaps, convenient for your Honours to note:

The Minister –

this is Mr Carr –

is respectfully requested to intervene as appropriate using his powers under the E.P.A. (1979) Act to assist with the resolution of problems and constraints presently preventing the commencement of the identified development sequence.

So that is, we would submit, your Honours, the starting point of this series of interactions.  Would your Honours note at 996 about line 20 is a largely unreadable paragraph.  May I read what I understand it to be to your Honours onto the transcript?  We understand this paragraph reads as follows:

The primary purpose of this submission is to make the Minister aware of Mr. Neal’s intent and to respectively request the Minister’s assistance to overcome water supply constraints identified for both of Mr. Neal’s rural residential projects at Wallacia by the Metropolitan Water Sewerage and Drainage Board (M.W.S.D.B.)

Your Honours, we understand the appellants agree with that reading of that paragraph.

GAUDRON J:   I am a little confused.  Identified by both the proposals.

MR GARLING:   Yes, “for both of Mr Neal’s rural residential projects”.

GAUDRON J:   Well, now, had Liverpool and Penrith now become separate projects?

MR GARLING:    Yes.  If your Honour goes back to 994, it seems to be a reference to the first two projects identified in those listings at line 30.  Your Honour sees that there are four identified projects:

PENRITH CITY COUNCIL AREA – WALLACIA TOWNSHIP
Rural residential…..

LIVERPOOL CITY COUNCIL AREA – WALLACIA TOWNSHIP
Rural residential…..

PENRITH CITY COUNCIL AREA – WALLACIA TOWNSHIP
Recreational and Commercial facility project.

And then:

CAMDEN MUNICIPAL COUNCIL AREA – CAMLOT CASTLE
Convention Centre, Restaurant and Winery with rural residential estate.

So it seems to pick up the first two of those, your Honour.  Would your Honours go to ‑ and I refrain from reading all of it; I hope just to highlight the particular points – but at 999, line 23 – it is convenient I invite your Honours to note this paragraph because it relates also to the question of vulnerability, to which I wish to return.  It says this:

In view of continuing concern over this issue, Mr. Neal has also commissioned his own expert Consultant studies in the matter of water supply, the results of which are detailed in the file volume attached to this submission (VIZ:  Roger Beeston and Associates – Consulting Surveyors Report).

I do not wish to take your Honours to that but your Honours will find it at 971 and following.  At page 1000, at the bottom of the page and at the top of page 1001, we submit is the purpose of this ministerial submission.  At line 44, the submission asks the Minister this – it says:

The Minister is advised that the point has now been reached in negotiations on the resolution of constraints with the M.W.S.D.B. where despite broad agreement on the acceptability of possible identified solutions, it is not likely that concurrence for the developments will be given by the M.W.S.D.B. – except by Ministerial intervention based on a consideration of the Department of Environment and Planning’s Regional and State planning policy responsibilities and power.  For this reason, a policy directive from the Minister is seen as a realistic solution by all parties concerned, so that Government support “in principal” can be extended to the development projects.  The Minister is therefore respectfully requested to investigate the issuing of such a policy directive and to make it available to his colleague –

the water Minister –

to enable the M.W.S.D.B. to revise their determination in this matter.  It is also strongly argued in this submission that such a directive can best contemplate a possible solution to this issue in terms of the following initiatives:

Now, if one looks at those initiatives, paragraph 1 refers to effluent disposal.  Your Honours need not concern yourselves with that.  Paragraph 2 deals with this issue which is of, we would submit, vital important:

That the MWSDB –

the Water Board –

should evaluate the attached Beeston Consultancy report –

that is the report at 971, your Honours –

in connection with the Wellings, Smith and Burns report –

that is a reference, your Honours, to a report that the Water Board had commissioned itself some time earlier –

to determine which of the suggested alternative sources of water supply to the proposed development is the most viable medium to long term option for the Board, and that any such evaluation should also recognise the obligations of the Developer in ensuring that the present and future financial and manpower resources of the MWSDB are not in any way disadvantaged by the implementation of the preferred supply option.

What that was a suggestion that alternative forms of supply should be permitted, rather than tapping into the Board’s mains, and I will not delay to take your Honours to the detail, but they were things such as the use of rain water and recycled water and the like, or, alternatively, the fitting of smaller fittings, use of off-peak supply and other types of alternative water supply methods.

Your Honours, that submission having reached the planning Minister, at 991 and 992 is the briefing note to the Minister from his Department.  Your Honours will see that it was a meeting to discuss the four projects which were identified at page 994.  Project III, which are these particular projects, are at 992.  What is there said is this at line 25 on 992:

The proposed subdivision in Liverpool was not permissible…..Liverpool Council resolved to permit the subdivision but following advice from the Water Board, and the findings of a study by Wellings Smith and Byrnes that a comprehensive plan for rural residential subdivision was needed prior to any further subdivisions of this nature, the Director refused to issue a Section 65 Certificate and notified –

the Council accordingly.

HAYNE J:   A reference to the “advice from the Water Board”, is that the same advice referred to at 998, line 44:

the official MWSDB –

Water Board –

reply to Penrith City Council’s Local Environmental Study of 1984 was that available funds and resources are presently fully committed to NSW Government’s Urban Development Program, at least in short to medium term.

Or is it some other report?

MR GARLING:   Well, I cannot say it is, your Honour, for this reason, that the briefing notes referring to the Liverpool council development, and that is a Penrith council issue; but may I say this:  without knowing precisely what was in the author’s mind, it is likely to be of advice to that effect.

Your Honours, may I very quickly then just take your Honours to these references:  1017 is a note of the meeting between the appellants and Mr Carr.  At line 35, paragraph 2 of that note, it says, speaking of the planning Minister:

The Minister agreed to write to Mrs Crosio, Minister for Natural Resources, to seek her support to expedite Water Board consideration of alternative methods other than reticulation for the provision of water and disposal of sewerage.  The Water Board are currently considering this matter.

So, that what Mr Neal is told at the meeting with the planning Minister is that the planning Minister will write to the water Minister asking about the alternative supply options.  That is relevant, your Honour ‑ ‑ ‑

GAUDRON J:   What is that, tanks and septics?

MR GARLING:   I am sorry?

GAUDRON J:   That is tanks and septics, is it not?  That is all we have, is it not?  A very elaborate way of saying not connecting the water.

MR GARLING:   No.  Permitting rural residential with tanks or permitting it with limited methods of supply such as off-peak water, or perhaps permitting smaller tanks or reservoirs supplied in an off-peak sense, rather than what I would call instant access to water by turning the tap.

GAUDRON J:   What used to be called town water.

MR GARLING:   Town water, yes, your Honour.

GAUDRON J:   Thank you.

MR GARLING:   The next step, your Honours, is page 1024, which is the letter from Mr Carr to the water Minister.  He says:

I met with a Mr John Neal.....to discuss his proposals for rural residential development at Wallacia in order to financially support the restoration and development of…..“Camelot”.

He says:

While some limited rural residential development on the periphery of Wallacia village might be supported the question of appropriate arrangements for water and sewerage disposal needs to be addressed.

That is hardly less than a ringing endorsement of the entirety of the rural residential subdivision that the appellants were putting.  He says:

I understand that demand on the present reticulation service is at capacity and that the Metropolitan Water, Sewerage and Drainage Board is currently determining an appropriate policy for alternative methods of servicing such development proposals.

In order that I might consider the proposal by Mr Neal further –

and your Honours will recall that was issuing a ministerial directive of the kind under the EPA Act –

I would appreciate your advice as to when this policy is expected to be finalised.

Now, your Honours, the letter is passed, as the trial judge notes, and as Justice Mason notes, from the Minister to the Water Board for a response.  It goes to the policy co‑ordination unit, which was a unit within the Water Board that co‑ordinated such responses.  At page 1199 and through to 1202, in the judgment of Justice Mason – at 1199 he talks about the policy co‑ordination unit and what its job was, and it is clear that what his Honour finds, as is, we would submit, clear from the documents, that this was an inquiry from Mr Carr, which was a special inquiry falling to the policy co‑ordination unit.  One then moves against that background, your Honours, to the memorandum and draft letter.  I note the time, your Honours ‑ ‑ ‑

GLEESON CJ:   Yes, we will adjourn now until 2 pm.  How long do you think you will need for your submissions?

MR GARLING:   I would hope, your Honours, to take no more than 15 to 20 minutes.

GLEESON CJ:   Very well.  We will adjourn now and we will resume at 2 pm.

AT 12.45 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.02 PM:

GLEESON CJ:   Yes, Mr Garling.

MR GARLING:    If the Court pleases.  Your Honours, I had come to the point in time where it was appropriate to take the Court once again to the memorandum and draft letter against the background that I had taken the Court to, but I need to take the Court to just a couple of other documents to elucidate the background.  May I take your Honours to page 1020 in volume 4?  Your Honours will recall that I took the Court to the note made as a record of the meeting between the Minister, Mr Carr, and Mr Neal, and that was at 1017, and your Honours will recall I said to the Court that there was less than enthusiastic embracing of the entire subdivision by the Minister.

The document at 1020 is a letter written about 10 days after the meeting by Mr Rhodes on behalf of Mr Neal to the Department of Environment and Planning.  I only draw your Honours’ attention to it to note that this is what Mr Neal took away from the meeting, or his advisers, and that is to be found in the third paragraph where their subjective expectation of what was going on is noted, namely, having recorded the meeting and who was in attendance, what is noted is:

the Minister indicated that he would write to his colleague the Honourable Janice Crosio in respect of the M.W.S.&D.B.’s current policies on the provision of water to rural residential subdivisions.

That is their subjective, one might almost say, mental note of what was happening at the time.  I took your Honours very briefly to the letter from Mr Carr at 1024.  At 1025 is the memorandum from the Water Board’s officer which provides part of the material which made its way into the draft letter.  Your Honours will see, at 1025, the references are the letter from Mr Carr and then a letter of 14 October from Mrs Crosio.  Your Honours, that was simply what I would call a holding letter to Mr Carr from the water Minister noting the receipt of Mr Carr’s inquiry and informing the Minister that a reply would be provided.

If one looks at the first paragraph, your Honours, the Water Board officer’s note is that the planning Minister has requested information from the water Minister:

as to when policy for servicing rural residential development such as that envisaged in Reference 1 will become available.

He then deals with various matters and then, in the last two paragraphs, says:

The engineering and economic analyses needed for completion of the policy report should be available to your unit by January/February 1986.

Would you please make an assessment of when the Rural Residential Policy will be finished and prepare terms of reply to the request.

Now, your Honours, I did not mean to omit by not reading the second paragraph on that page and I invite your Honours’ attention to it, but in our respectful submission, that paragraph, similarly to the submissions we will put with respect to the draft letter and memo, do nothing more than note what is, in effect, the foreseeability of information coming to Mr Neal’s notice, the appellant’s notice, and secondly, as will become apparent from the context of the letter, noting that there are circumstances in which the appellants can have access to water outside of the policy.

Your Honours, the draft memorandum is at many places in the papers but conveniently, whilst your Honours have this volume open, it is at 1036.  My learned friend has read it, your Honours, and I do not wish to reread the whole of the memorandum to your Honours, but suffice it to say that, when one reads the memorandum it is – and, of course, your Honours, this is a document that never came to the attention of the appellants at all.

What one takes from this document is it is an internal communication in the broader government sense from the general manager to the Minister to provide information to the Minister to enable the Minister to consider, firstly, the appropriateness of the response in the draft letter and secondly, whether the Minister wishes to make some other response in answer to the planning Minister’s request.  So it provides information, we would submit, as fully as possible or appropriate by way of background.

It addresses in the first five paragraphs the issue of policy, it addresses the particular proposal of Mr Neal that says that it ought not be considered in isolation, and I wish to return in a moment to Justice Callinan’s query about government objectives.

GAUDRON J:   And can you tell me what evidence there is as to the Board’s knowledge of the then current proposal?

MR GARLING:   Well, the best evidence would seem to be this, your Honour.  If your Honour goes back to the confidential ministerial submission, which commenced at page 993, attached to it at pages 1004 and 1005 are two single pages giving descriptions of the project.  So 1004 has a project description in the Penrith area of 60 1 acre lots.  I understand that, your Honours, to be about half a hectare or a little less; and then, on page 1005 ‑ ‑ ‑

GAUDRON J:   Is not two hectares 5 acres?

CALLINAN J:   Yes it is, it is 4.8 to 5 acres.

MR GARLING:   Sorry, your Honour, I have got the maths the wrong way around.  So that is the Penrith part of the subdivision.  On the next page, 1005, this is the Liverpool area, your Honours:

Rural Residential consisting of 20x2 hectare lots and 7x4000m (l acre) lots –

So that is the best source of material by which I can respond to your Honour’s question.  There was no doubt, as other documents show, and the court found, that this confidential ministerial submission was provided to the Water Board.

GAUDRON J:   They are the 87 lots?

MR GARLING:   Yes, and your Honour will recall in some of the complex mathematical calculations my learned friend took the Court to yesterday, there were 87 lots.

Now, your Honours, what we would say is, reading for a moment this memorandum, the overall purpose of it is readily apparent and that is to provide to the water Minister the information necessary for the water Minister to respond to the planning Minister’s query, either in the form of the draft letter, which she ultimately did, or in some other form if she thought that was appropriate.

We would submit, therefore, when one moves to the findings of the Court of Appeal on this issue, to which I wish to take the Court, that they are correct and unexceptional.  May I take your Honours to the judgment of Justice Mason at 1199, where his Honour commences to analyse the exchange and the memo and draft letter.  At 1199 his Honour notes particular features of the exchange.  Line 10:

The letter –

of Mr Carr –

acknowledged that the Board was “currently determining an appropriate policy for alternative methods of servicing … development proposals” –

And it continued:

I would appreciate your advice as to when this policy is expected to be furnished.

I have taken your Honours to that.  His Honour then gives a description of the Policy Coordination Unit and its functions and talks about the various memoranda.  Then the memoranda that I took your Honours to of Mr Clayton where his Honour Justice Mason says:

His memoranda –

speaking of Clayton –

express a firm preference for addressing Mr Neal’s proposals in a wider geographical context as well as in the broader context of a policy still being developed by the Board as to servicing rural residential development.

Then at 1200, line 19, in the judgment there appears this:

The memorandum (and annexure) –

which is a reference to the draft letter, your Honours –

sued upon have the same broad thrust.  Thus, the communication proposed by the Board is from Mrs Crosio to Mr Carr, with the draft letter stipulating:  “I trust this information will enable you to further consider Mr Neal’s proposal”.

Now, your Honours, I do not wish to be accused of omitting anything to draw to your Honours’ attention anything that may be against me, so that I invite your Honours to read the paragraph where the President finds that it was likely that the specific costing information:

the Board knew that in the likely event that Mrs Crosio sent the letter as drafted that information would be passed on (by Mr Carr) to Mr Neal and his advisers.

But we have not ever sought to challenge that position, that it was foreseeable that the contents may come to his attention.  The President goes on:

However, the letter by its terms and its addressee was clearly directed to stating the Board’s position referable to a decision intended to be made by Mr Carr (or cabinet).  More significantly, the letter stated firmly the Board’s consciousness “that it is not a planning organisation and would not wish to take a decision on this matter in a way which might lead to longer term difficulties for both the Government and the Board”.  The information provided as to the Board’s preparedness to provide water…..were provided “within this framework”.

Then his Honour deals with the “cave in”.  He says:

The “cave-in” was the statement of the Board’s preparedness to take certain action “within this framework” and the provision of relevant costing estimates.  But the letter did not suggest that the battle was won, at least at that stage.

McHUGH J:   Well, I must say that, having regard to the principles in Shaddock, I do not find any of that persuasive.  The strength of your case seems to me to lie in the last limb that, given the apparent knowledge about the provisional nature of these estimates, that it was not reasonable for the appellant to rely on them, rather than on this particular issue.

MR GARLING:   As your Honour pleases.  I will not abandon this issue, however.

McHUGH J:   I know.  I do not expect you to.

MR GARLING:   I am indebted for your Honour’s indication of your Honour’s provisional view.  But, your Honour, may I add to this:  one thing which is not yet clear to the Court, I apprehend, is that not even the draft letter was relied upon by the appellants.  Not the memorandum; it was never seen, and the draft letter was not, in fact, relied upon.  I wish to make that point shortly, which is an additional factor of significance in our respectful submission.

GLEESON CJ:   It is not a question of whether they relied on a document, it is a question of whether they relied on information.

MR GARLING:   Yes, but, your Honours, when we come to the way in which the information that was relied upon was presented, and in response to a request of a particular kind, then a real issue arises as to whether or not that was outside the purpose or intention of the provision of the material originally.  That raises, we would submit, a reason why it is important in cases of this kind to have limits on how the information might be used.  Because once information is in a written document, either because of Freedom of Information Act applications to government authorities and departments, or because, in this case, it resides within another area such as the Minister’s office, it can be used in any way by the holders of that information for any purpose.  Your Honours, at 1202 the finding is that:

Nothing in the memorandum or letter indicated that the Board was or ought to have been conscious of the fact that some decision was about to be taken by Mr Neal –

I took your Honours to that earlier, and then –

It certainly cannot be said that that letter evidenced an intention on the Board’s part to induce a particular response by the appellants, or even that the information would be made available to the appellants in a context – - -

McHUGH J:   Well, with great respect, that seems to me to miss the point.  The point is that after providing this information, information which had been requested, which plainly they intended to be transferred via Mr Carr to the present appellant, the real question in mind is whether or not it was reasonable for them to rely on that information having regard to the material that you took us to before lunch today.

MR GARLING:    Yes, your Honour, I appreciate that.

McHUGH J:   This 1200 through 1202 seems to introduce a rather irrelevant issue really.  I mean, in the context of what this case is about, it is the provision of information.  True it is that this may have all been part of some general scheme but the critical question is that this information was given with the intention of it being passed on in relation to a very serious matter in which there had been requests for a long period of time.

MR GARLING:    May I simply respond by saying there is a difference between, in our respectful submission, foreseeability that the information may end up in someone’s hands and intention that it be given for the purpose of reliance and, we submit, in this case, foreseeability is established, but not the latter.  That is why it is a relevant consideration to look at the intention of the writer of the memorandum and draft letter.

McHUGH J:   Well, if one can look at the subsequent letters – the letter, I think, was in January the following year – they specifically referred to using this information for planning.  So it is not difficult to come to the view that this first stage was also intended for that purpose.

MR GARLING:    Your Honour will keep in mind, of course, with respect to the 29 January letter, that that follows a sequence commencing with the meeting of the 25th ‑ ‑ ‑

McHUGH J:   Yes, I appreciate that.

MR GARLING:    - - - through Mr Geraghty’s alternative options letter and the like, so that it is not necessarily part of the same flow of correspondence although I accept part of the overall dealings between the parties.

McHUGH J:   Yes.

MR GARLING:    Your Honours, there were two points with respect to the letter of Mrs Crosio that we would wish to answer.  It is convenient, since your Honours have volume 5, to go to 1099, where the letter is set out and we would understand, accurately, your Honours.  The first matter we would wish to deal with arises from the provisions of section 34A and 34B and their relation to the term “cost to connect”.  It is a matter, I think I indicated to your Honour the Chief Justice, I would return to.  Your Honours, the proposition is put, as we understand it, that the phrase on page 1100, at line 32, namely:

The immediate cost to connect Mr. Neal’s proposed development would be in the order of $2.5 million.

Then the last sentence:

I must also advise that the $2.5 million scheme would be satisfactory only to serve the development proposed by Mr. Neal.

It would, properly read, be understood against the background of the use of the word “cost” in section 34A and 34B.

May I just, before moving to those sections, invite your Honours to note the paragraph immediately above that where it says:

The minimum viable scheme to serve rural residential development in the Wallacia area would cost in the order of $7 to $10 million.  This would provide for around seven similar developments.

Now, that would immediately suggest, if one was engaged in the exercise of direct apportionment, that the actual cost for Mr Neal is 1.25 million or thereabouts, because one divides the 7 to 10 million figure by the seven developments, so that against that point, one has to view what is being referred to in the 2.5 million.

Can I then take your Honours to section 34A and invite your Honours’ attention to the fact that a contract in section 34A can provide for works necessary for the actual development itself or works undertaken which will benefit both the actual development itself and other developments.  If your Honours go to section 34A(3)(a):

Any agreement under this section may make provision for ‑

(a) the payment to the board by the owner of such land…..of the whole of the cost of the construction of the main or mains and ancillary works or such part thereof as the board considers reasonable to be paid in respect of such land, having regard to the benefit of such main or mains and works to the land of such owner specified in the agreement and to any other lands that will be, in the opinion of the board, capable of being served by such main or mains and works –

Now, that contemplates the nature of augmentation which the evidence disclosed was the usual practice of the Board, namely, that one would not simply augment the system by one extra pipe or combination of pipes just to serve this development but you would undertake work of a significant kind from time to time that may benefit this as well as other developments, so that when one is talking of the “immediate cost to connect”, true it is that one picks up cost of construction under section 34A, but one cannot limit it just to Mr Neal’s development, nor does the letter suggest that one can.

GAUDRON J:   I do not follow that.  What about the last sentence on the fourth paragraph of page 1100?

MR GARLING:   Yes, your Honour:

I must also advise that…..satisfactory only to serve the development –

That sentence, your Honour?

GAUDRON J:   Yes.

MR GARLING:   The answer to that is, I think, to be found in the complexities of the way in which augmentation takes place.  May I give your Honours, I hope, a very short description of how I understand the evidence and the findings of the trial judge was, namely, that the existing pipes did not provide for the maximum zonings which had been approved.  Therefore, to provide for additional zonings outside of those that had been approved, such as this development, augmentation was required.

Now, as we would read that last sentence, what it encompasses is augmentation of the existing system to an extent where the extra over the existing design system would only be adequate for Mr Neal, but it may, nevertheless, serve other land.

HAYNE J:   But how does any of this arise when you do not put on a contention that the finding of carelessness in production of this figure, whatever its content, should be overturned?  Whatever the content of this figure is, you have a finding against you, which you do not dispute, that it was not carefully prepared, have you not?

MR GARLING:   Yes, your Honour.  I was directing that submission in answer the earlier question of the Chief Justice.  The second submission I would wish to make with respect to this letter is in answer to a query that your Honour Justice Callinan raised yesterday about the term of government objectives, which is to be found at the top of page 1100.

May I give your Honour an answer in three parts.  Firstly, this being a memorandum from the General Manager to the Minister, a lot is unspoken, because they no doubt deal with each other regularly, it is not intended that this memorandum come to the attention of a third party, although that phrase is in the letter which went to Mr Carr.  Secondly, your Honour ought not ‑ and I think Mr Downes made this point this morning, but we agree – think that what is referred to as government objectives would have anything to do with a statutory State Environmental Planning Policy.

Thirdly, your Honour, at 1090 in the judgment at the first paragraph on the page, the trial judge does discuss, albeit very generally, what the urban development program was and the objectives of the program and the like, and your Honour may take the view that that provides an answer as to what the government objectives were.

CALLINAN J:   I read that, and I did not know what the basis for it was.

MR GARLING:   The documents that were tendered, contents of various documents, contents of various submissions, and the like.

CALLINAN J:   It is a very big record, but I was not aware of the evidentiary basis for that finding on page 1090.

MR GARLING:   Well, I will turn up the evidentiary basis, but that is, I think, sufficient ‑ ‑ ‑

CALLINAN J:   Perhaps if you just give me page references to them, thank you.

MR GARLING:   I will, your Honour, but that is perhaps sufficient to indicate the objectives.  Your Honours, we wish to move to the next submission, which is that the notions advanced by the appellants, that the appellants were vulnerable or, to pick up the discussion that fell from your Honour the Chief Justice, dependent, is not of significance on the facts in this case.  May we put these submissions quickly and we hope concisely. 

We submit that there is no vulnerability here, because the appellant was a person who had access to, and used frequently, expert advice and was himself experienced in this area.  The trial judge’s findings with respect to the appellants being experienced are found in many places, but I will give your Honours three references without taking your Honours to them:  1135, 1136 and 1140.

The fact that the appellants had access to expert advice that looked at not just drawing lines on maps for a subdivision, but looked at persuading the Board to entertain different policies with respect for the provision of water and the like, are to be found in the Beeston Report, a reference to which I gave your Honours earlier, and in the role that Mr Rhodes played, the evidence is, at page 70, line 5, that he was a “consultant town planner” and both of whom were experts in this area of subdivision retained by the appellants to assist them.

McHUGH J:   Now, the material you referred to us this morning seems to me strongly support your argument about whether or not it was reasonable for the appellant to rely on this estimate, subject to one matter that I want to hear you address on.  Accepting that it would be well known to the appellant’s advisers that there were these four levels of costing, it was also well known that on a first estimate, at least, there was a factor applied to multiply the estimate by 1.35.  Now, you did not use that figure, you used a multiplier of 2, so that even a professional adviser would be misled concerning the extreme or the maximum nature of this estimate.  Now, what do you say about that aspect of it?

MR GARLING:    That there is a simple answer to it, your Honour, which I hope I can persuade your Honour on.  There is a confusion apparently arising from the documents between the 1.35 figure and the figure of 2.  May I explain it in this way:  the 1.35 figure known to the profession generally as the reserve built into Water Board estimates remained and was used constantly throughout.  The multiplier of 2 was accompanied by the word “difficulty”, as your Honours will recall.

McHUGH J:   Yes.

MR GARLING:    The evidence was that in estimating cost of varying pipes, a factor of difficulty was relevant to the estimation.

McHUGH J:   Was there evidence that that was known generally in the profession?

MR GARLING:   Yes, your Honour, yes.  For example, may I explain what the factor of difficulty is about.  There is an ordinary cost.  If the ground under which the pipes are to be placed consists of part rock or quarter rock or half rock or three-quarters rock, one applies a factor of difficulty to the standard unit cost.  Now, can I take your Honours immediately to that.  It arises in this way ‑ ‑ ‑

GLEESON CJ:   Could I just ask what you are seeking to demonstrate by taking us to that?

MR GARLING:   To answer Justice McHugh’s question as to whether or not a professional receiving our estimate would have been misled because we used a factor of 2 in lieu of a factor of 1.35, and my submission is that they are entirely different matters applied in different ways for different purposes and there could be no confusion.

HAYNE J:   But you have still the finding of carelessness against you.  While that finding remains intact and unchallenged, how can you set about demonstrating to us what seems to be your assertion that the calculation can be supported?  It is found against you.  You do not challenge it.

MR GARLING:   Well, I am sorry if your Honour has taken my submissions to be that I am seeking to make it good.  I was not trying to do that with these submissions, but ‑ ‑ ‑

McHUGH J:   Yes, in fact, what Justice Hayne has said just brought to my mind that my question may well be irrelevant because we are really only dealing with duty here, and whether or not it was 1.35 or 2, I am not sure that that affects the question of duty.  As a matter of fact, I am rethinking, I do not think it does, I think it really goes to breach rather than duty.

HAYNE J:   The question of the uncertainty of this estimate may, perhaps – I do say does – have relevance in relation to whether, because it is an order of cost estimate, right or wrong, it is reasonable to rely, and that that may be the real killing ground for the submission that you are now making, not whether factors of 2 or 1.35 were applied.

MR GARLING:   Your Honour, we certainly do submit, as we did before lunch, that that is relevant to the reasonableness of reliance.  I can give your Honour very quickly two references.  Perhaps I will not take your Honour to them, but if your Honour were to look at Mr Smith’s, the expert engineer, evidence at 260 between line 45 to 261, line 6, one sees an example of how a difficulty factor is applied to a calculation.

There is then, in the evidence of Mr Gibbons, who was the contractor who did some later work who came along to tell the Court what that cost.  He annexed to his quotation five pages of detailed quotations between 443 and 447.  Your Honours will see in respect of each of those pages that there is a standard column headed “Diff Factor”, which we ‑ ‑ ‑

McHUGH J:   What page is that, again?

MR GARLING:   Page 443 to 447.  There are various diff factors, or we would say, difficulty factors, ranging between one and two, for various items of work for which he quoted a specific sum.  So that that is the difference, your Honour Justice McHugh, between the two figures.

McHUGH J:   Yes, I notice that 260, 261, the witness said in cross‑examination it was one and a half and then you put to him that it would be higher than that for half rock, and he said, “I would expect so, yes”, but he was not any more specific than that.

MR GARLING:   No, that is right.  Now, the area that Justice Fitzgerald found, and which the other judges agreed, was that the factor of difficulty of two was unsupported by any evidence.  That is the only criticism he made and we do not seek to challenge that.

Your Honours, I was about to move to the question of control or vulnerability.  I had put that there were experts available who were retained to advise the appellants, and were advising them.  To deal with it appropriately, it is clear that they were assisting in the making of submissions to various people.

That leads me to deal with this question of the so-called Rhodes letter, as it has become known.  That is a document which is conveniently – I do not wish to take the Court to it just yet – to be found at 1051 and 1052.  May I put these submissions with respect to it.  The trial judge relied upon it.  One of the grounds of appeal to the Court of Appeal was that it was not open to him to do so.  There was a notice of contention filed by us in the Court of Appeal contending that it was open and appropriate for him to do so.  Debate took place upon that.  Justice Fitzgerald resolved it at 1138 on the basis that it was part of the evidence, and there is no appeal against that to this Court.  There is no ground of appeal against that finding.

CALLINAN J:   No ground of appeal against part of a decision of a dissenting judge.  How could ‑ ‑ ‑

MR GARLING:   No, no, I beg your Honour’s pardon.  I was going to say ‑ ‑ ‑

CALLINAN J:   How could you put on a contention, or why would you need to put on a contention, about a finding in a dissenting judgment?

MR GARLING:    Because it was used, as we would see it, as part of the reasoning leading to breach, and that was joined in by the majority.  So if that fact was to be challenged, there has to be some ground of appeal challenging that fact in this case.

CALLINAN J:   Why is that not embraced within the general ground that the Court of Appeal erred in finding that there is no duty of care?

MR GARLING:    Because we would submit the question of admissibility of evidence or appropriateness of receipt of evidence has to be a specific ground rather than ‑ ‑ ‑

CALLINAN J:   I must say that, at this stage, I am totally unconvinced, when you are urging reliance upon a document, the tender of which you expressly withdrew.

MR GARLING:    But your Honour has half the story.  The debate in the Court of Appeal, as I recall it, was whether, in a bundle of documents, that document found its way into evidence, having been withdrawn separately.  Now, I cannot recall all of the debate before the Court of Appeal, but that was the tenor of it.

CALLINAN J:   Well, you will need to satisfy me because at the moment I have been shown your express withdrawal of the tender of that document.  That appears on the transcript without any qualification at all, does it not?

MR GARLING:    No question, your Honour.

CALLINAN J:   Well, to me, that is the end of the matter unless you can demonstrate to the contrary.

MR GARLING:    Well, your Honour, may I say this, that ‑ ‑ ‑

CALLINAN J:   It also highlights the unsatisfactory way of proving cases by tendering bundles of documents, I might say.  But, anyway ‑ ‑ ‑

MR GARLING:    Yes, your Honour.  But may I say, with respect to it, it was a live issue in the Court of Appeal, and the Court of Appeal heard argument about it and disposed of it.  Now, your Honours, without having to rehash those arguments, it is, with respect, really inappropriate that we should be met in this Court with an assertion about admissibility of evidence where it is not specifically raised in a notice of appeal and nor should this Court be considering such questions, they having been resolved below.

CALLINAN J:   I am sorry, if it has been resolved unsatisfactorily below, as I think it has at the moment, and unless you can persuade me that it cannot be embraced within the general ground of appeal, then I will not act upon it at all, speaking for myself.

MR GARLING:    The reason I submit it is not part of the general ground of appeal is this.  It is, on all hands ‑ and your Honour does not need to read it to know this ‑ a document said to have come into existence after the meeting of 25 November.  That comes from the cross-examination.  What we are sued upon, in terms of duty, is duty as at 11 November, namely, at the time we wrote the memorandum and the draft letter.  So that, we would submit, for that reason alone, it could not come within the overall grounds challenging the finding of no duty.

We can make good our submissions without reference to it, and the point that we wish to make is that the course of conduct, demonstrated by the evidence from 25 November through to 29 January 1986, when an estimate of $1.674 million was produced, does not support any finding that Mr Neal was vulnerable in the way in which the authorities addressed that concept, and one does not need that letter to support that.

CALLINAN J:   Well, in a sense, it is really irrelevant, the letter.

MR GARLING:   We can make good our submission without it, your Honour.

CALLINAN J:   His Honour relied upon it at first instance, did he not?

MR GARLING:   Yes, but only for that purpose, and also relied upon it for a purpose ‑ ‑ ‑

CALLINAN J:   Relied upon it to reject Mr Geraghty’s version of the conversation.

MR GARLING:    But that was not the only reason he relied upon it, your Honour.

CALLINAN J:   It is certainly one quite important reason though, was it not?

MR GARLING:   Yes, but he also found that Mr Geraghty’s evidence - said he was not an impressive witness; that is a finding of demeanour.

CALLINAN J:   Yes, I know, but when a judge does something in relation to credit on an unsound basis, it really does tend to taint his general conclusion, with respect to credit, I think, but I understand your submissions.

MR GARLING:   I feel we are being taken to an area which is unproductive and lengthy ‑ ‑ ‑

CALLINAN J:   Yes, quite, you are right.

MR GARLING:   - - -and if your Honour understands the way I put it, perhaps I could move on.

CALLINAN J:   Yes, I do.

MR GARLING:   I wish to just give your Honours a reference, without taking your Honours to the case, to the reason why we say vulnerability or dependence was not of a kind sufficient to give rise to a duty of care.  Your Honours will be well familiar with the passage in Justice Mason’s judgment in Sutherland Shire Council v Heyman 157 CLR 464. I will not read it to your Honours.

McHUGH J:   The general or the particular reliance passage?

MR GARLING:   The general reliance, your Honour.

McHUGH J:   Well that has been shot down in flames in this Court.

MR GARLING:   Yes, your Honour.

McHUGH J:   No survivors I do not think, including me.

MR GARLING:   But the notion of vulnerability does draw from parts of that passage, and what Justice Mason was talking about there was vulnerability of a very different kind to the sort of position the appellants were in, in this case.

GLEESON CJ:   Just give us the page reference?

MR GARLING:   Page 464, your Honour.

GLEESON CJ:   Thank you.

MR GARLING:   Your Honours will recall the three examples he gave were control of air traffic, safety inspection of aircraft and fighting of a fire in a building by a fire authority.

GLEESON CJ:   Thank you.

MR GARLING:   But the submission we put is that that is really vulnerability of an entirely different kind or dependence of an entirely different kind of that which is demonstrated here.

KIRBY J:   So general reliance, in your submission, lives to fight another day, under the label of vulnerability?  It all goes to show how unconceptual this area of the law has become.

MR GARLING:   No, your Honour.  That would be contrary to the authority of this Court, but the notion of vulnerability and dependence does bear some of its origins from that concept in Justice Mason’s judgment.

Your Honours, may I just move to one last matter, which goes to the issues of request and reasonableness of reliance, and then I just want to put a couple of matters in response to various matters that have fallen.

McHUGH J:   Do you rely on the findings of fact at 1141, 1142, which I think, at the moment, is the strongest part of your case?

MR GARLING:   Yes, your Honour, certainly.

McHUGH J:   And the judge found a reasonable person would have taken that letter.

MR GARLING:   Yes, absolutely, your Honours, and may I say, in the events which occurred, that is a wholly correct finding.  May I take your Honours to what I have said is important, which is that there was a difference between Mr Carr’s letter to Mrs Crosio, which was the letter generating the memo and draft letter, and then Mr Watkins’ request to Mrs Crosio and the response of Mrs Crosio to Mr Watkins, which, your Honours, was the letter which was ultimately taken and used by the appellants in this case.

At 690 and 691 of volume 3, your Honours will have a letter written by Mr Watkins to the water Minister.  Now, that letter, your Honours, generated a letter in response from the water Minister, which letter was taken to the bank and acted upon by the bank.  The findings are that this letter from Mr Watkins to the water Minister did not come to the attention of the Water Board and that the Minister’s response was not done by the Water Board, nor did the Water Board know of it.

There are a number of significant differences and this, your Honours, goes to three points really.  One is that the information relied upon was not in response to any request.  Secondly, the reliance was not reasonable and, thirdly, that it was not foreseeable.

Your Honours, at 690 Mr Watkins at line 23 says he wishes:

to make personal representations to you to urgently review current advice –

in relation to Mr Neal’s land.  There is a description of the “subject property”.  At line 41:

I would therefore appreciate it if you could give urgent consideration to Mr Neal’s proposal and to exercise your discretion in this matter to urgently expedite a solution to his present problems by seeking M.W.S. & D.B. review of the situation.  Without such intervention by the end of this coming week financial pressures will almost certainly force Mr Neal to relinquish the ownership of his Wallacia properties and other commercial assets used as security loans covering this property.  This could result in the loss of some 25 employment positions and have a significant adverse impact on the economy of the Wallacia district.

Then, across the page:

Given the details as presented to me, I am convinced of the merit of Mr Neal’s project and again respectfully request your favourable determination in this matter.

The letter in response is to be found at the following two pages, 692 and 693.  Now, interestingly, your Honours, what is deleted from this letter are two of the parts relied upon by the appellants here giving rise to a duty.  What is omitted at the first part of the letter is the first two paragraphs of the Carr letter, if I may refer to it as that, dealing with policy.  So that perhaps if your Honours were to ‑ ‑ ‑

GUMMOW J:   We should have them side by side.

MR GARLING:   Yes, I was about to invite your Honours to do that.  This is 692, and the Carr letter can be found at ‑ ‑ ‑

McHUGH J:   Page 1099…..as well.

MR GARLING:   Page 1040 to 1041 is another reference to it.  If your Honours would put 1040 and 692.  Now, what is omitted from the letter at 1040 is – well, let me firstly say, the introduction is different, but marginally.  The second sentence of the first paragraph on 1040 is omitted, “You requested advice about”, and then the next paragraph is omitted, “The Board has advised me that its revised policy”, et cetera, is omitted.  Then the letter picks up the following paragraphs through to the final two paragraphs on 1041 and 693.  So, at 1041, the paragraphs that are not included are:

I trust this information will enable you to further consider Mr Neal’s proposal.  In the event that Mr Neal wishes to…..contact –

et cetera, is deleted by the water Minister from the draft letter.  It is then that ‑ ‑ ‑

KIRBY J:   What is the significance of that?  That is appropriate that that should be deleted because that is a response by the Minister for water to the planning Minister.

MR GARLING:   Yes, but your Honours will recall submissions by my learned friend that that was of particular significance because one could take from that paragraph a knowledge or intention or expectation, or we would say foreseeability, on the part of the Board that this material would come to the attention of the appellants and, we would say, in the context of them being invited to discuss it with the Board.

But the operative letter which gets taken to the bank, a letter the Board does not know anything about, does not know it has been written, does not know it is being sought, presents, we would submit, a different picture.  In other words, the information which the Board has provided has been used by the person who received it, the water Minister, for a purpose different from that which it was provided to the water Minister.

McHUGH J:   It may be, but this seems to me a debating point.  I mean, the trial judge found at 1140 that the Board knew:

that the contents of the letter, and certainly the figure of “in the order of $2.5 million”, would be passed on to Mr Neal.

Now, does it make any difference that it went through Mr Carr or Mr Watkins?  After all, it was given to Ms Crosio for the purpose of passing it on to Mr Neal.  Does it make any real difference?

MR GARLING:   Well, we would submit that, yes, it does, and this is an example of why, with negligent misstatements in terms of information contained in documents, one has to be careful to limit the way in which it might be used and the only way one can do that is to look, as we have earlier submitted, intention, purpose and reasonableness of reliance.  So that, in short, your Honours, is the way we put that. 

Your Honours, can I deal with two other matters in our conclusion.  Your Honour Justice Callinan asked about the separation of the issues.

CALLINAN J:   Just the page references will do, Mr Garling.

MR GARLING:   Yes.

CALLINAN J:   I think 90 and 91 was discussed at one stage.

MR GARLING:   There is a judgment of the trial judge, your Honours, where he goes into the question.  It is at 276 and following, which is the judgment leading to the orders that the issues be separated and then there was some debate as to the precise formulation of the questions, but that is where his Honour decided that he would separate the issues, although, as your Honour noted, there was some earlier debate.

CALLINAN J:   Yes, you had raised the difficulty that the Court of Appeal adverted to, the difficulty of excluding causation and damage.

MR GARLING:   Yes.  In part, that came because there was originally a Trade Practices count which was abandoned, so that that is what led to that.  But that is where the trial judge gave his judgment, your Honours, which we would understand would be what your Honour was asking.

CALLINAN J:   Thank you.

MR GARLING:   Your Honours, may we simply say this.  Your Honours received a document this morning from my learned friend in which in part D they referred to references to appeal books for some topics covered

and they sought to give certain references to various evidentiary references relevant to various requests.

Without taking your Honours to each of those, we would simply put this, that if one reads the particular requests and the responses, one sees there has been a particular request and a particular response to that request.  One cannot take from these pieces of correspondence that at the time the Board drafted its memo and draft letter, that it was responding to any precise or specific request from the appellants.  Your Honours, a reading of those documents will demonstrate that fact.  For those reasons, your Honours, we submit the appeal ought be dismissed.

GLEESON CJ:   Thank you, Mr Garling.  Yes, Mr Downes.

MR DOWNES:   Your Honours, two threads underlay my learned friend’s submissions relating to the law.  They were the significance of reliance and the significance of knowledge of the precise purpose for which the information would be used.  As to the first, we would respectfully submit that my learned friend fell into what we have submitted is an error relating to what is the relevant reliance, namely, that there are three types of relevant reliance.  One is causation reliance; one is the kind of reliance that will be used to test whether a duty of care exists in a third party case; and one is reliance in a relationship case which can be explained as well by reference to the word “trust”.

If your Honours think back over the submissions that my learned friend put relating to reliance, they were associated with causation reliance, for example, going to the bank, or associated with the kind of third party reliance.  All of this is intimately tied up with the issue of whether, in a case such as the present, it is necessary for the person giving the advice to have precise knowledge of the purpose for which the information will be used.  I have already put my submissions as to why precision is not necessary and whatever level of precision is required, was satisfied by the facts of this case, and so I will not add anything further on that matter.

McHUGH J:   Well, for my part, I would like to hear what answer you have to what are the trial judge’s findings of fact at 1141 and 1142.

MR DOWNES:   Your Honour, we would respectfully submit there is quite a simple answer to that.  Can I take your Honours, first of all, to page 1081 just so that your Honours can see an “Order of Cost Estimate”.  It is not the relevant one, but this is one of the Board’s order of cost estimates.  That is the sort of calculation we are dealing with.  There is another one at 1080, but that is the sort of calculation that the Board is making when it makes an order of cost estimate.  I would seek to use the factual basis for the trial judge’s finding to lead to precisely the opposite result.

GAUDRON J:   Excuse me, can I just ask you – I am sorry to delay you – when this is an order of cost estimate, was it in precisely the same circumstances as we were here concerned with or was it a cost estimate where the subdivision was actually going?

MR DOWNES:   This is the sort of first step cost estimate.

GAUDRON J:   Yes, but you could do a first step in different factual situations.

MR DOWNES:   But whenever they do a first step calculation, this is called, according to the evidence, an order of cost estimate and this is one of those and this relates to Neal’s land, but it was an earlier order of cost estimate.

McHUGH J:   Yes, I know that, but the case against you is that, having received an order of cost estimate, that your client, reasonably advised, should have understood it as, to use the judge’s phrase, the ballpark figure.  It is a preliminary ballpark figure and that you are going to work down from there.

MR DOWNES:   Well, why work down?  Work to more particularity, perhaps, but if ‑ ‑ ‑

HAYNE J:   Work down, because that is the judge’s finding, Mr Downes.  You have to grapple with the findings.

MR DOWNES:   Well, your Honour, I would prefer to grapple with the Court of Appeal’s finding, and the Court of Appeal’s finding is the finding in the judgment of Justice Fitzgerald, which is agreed to by the majority, and which is at 1239.30:

The findings by the trial judge…..underpinned his Honour’s conclusion that the Board did not expect the appellant to rely on its “figure” of $2.5 million.  The essential reason for that conclusion was that it was “an order of costs estimate”, which was likely to be significantly reduced.  However, such a proposition is inconclusive.  While the appellants could not reasonably rely on the Board’s “order of costs estimate” as an accurate indication of the actual final cost which would be involved if their development proceeded, conversely the Board could not reasonably expect the appellants not to rely upon the amount which it estimates for what it was; i.e., an “order of costs” estimate.

The finding of breach is that, given all of the range that you might expect in an order of costs estimate, this was way outside it.

McHUGH J:   What is that page in the Court of Appeal?

MR GARLING:   Page 1239, your Honour.

HAYNE J:   Against which has to be read line 46.

MR GARLING:  

The trial judge’s findings established that it was ordinary practice…..to the next level of investigation of the likely cost.  An “order of costs” estimate provided an upper limit as a starting point for the appellants’ decision whether or not to proceed with their proposed development, and was obviously considered significant enough for the Board to include the amount in its advice –

But one has to judge that against the other finding, not challenged here, which explains what his Honour Justice Fitzgerald is there saying.  It is at page 1231.  This is his ultimate finding at the bottom of the page:

No evidence was given in explanation or justification of that course, which departed significantly from the factor of 1.35 which the Board ordinarily adopted.

That is the essential finding of negligence which is not challenged.  So there are two answers to the propositions that I am seeking to answer from your Honour Justice McHugh.  The first answer is that whatever be the range that is appropriate for an order of costs estimate, this order of costs estimate was negligently outside it.  We add that, in any event, that is a matter of breach and may be a matter of damages and not a matter of duty of care.

The second proposition is this:  this is the sort of idea that we sought to, so to speak if I may say, cut off, in our original written submissions, the sort of idea that because this is just a starting point and there are going to be further estimates along the path, that in a sense, any error at the starting point can be fixed up along the path.  But that cannot be the way one tests a duty of care as at day one.  In the way your Honour Justice Hayne formulated this morning, in a way which, from our point of view, was most helpful if I might say so, the sort of basis upon which a duty of care can arise in these circumstances, it is because at all relevant times the players are making decisions.

HAYNE J:   And the point where your submissions are sought, and I join with Justice McHugh in seeking your direct answer to it, is whether this is a case where the Board knew or ought to have known that the inquirer was intended to act on the Board’s advice in ordering its commercial affairs.  The finding of the trial judge appears to be, at first blush, you do not order your commercial affairs on the basis of this number.

MR DOWNES:   Well, we would respectfully submit that that finding was successfully overturned in the Court of Appeal and must be so, we would submit.  The logic of it all is entirely, we would respectfully submit, faulty.  The logic is, because we are going to all the trouble of preparing a written first estimate, that that is not something that anyone would reasonably rely upon, because there will be a second and a third and a fourth and a final one.  But we would ask rhetorically, if we may, why bother having the first one, if people are not going to do something with it?

GAUDRON J:   Well I think that is what the Board was trying to tell you in the first place, that there was no point in such an estimate.

MR DOWNES:   But there was such an estimate.  Point or not, there was such an estimate and it is from that fact that the duty of care arises.  We are going over a matter that has been debated in the last ‑ ‑ ‑

McHUGH J:   I know, and the trial judge did say at the bottom of 1141 and 1142, that:

The figure stated would be simply an order of cost estimate…..as to whether it was worth pursuing the matter.

And that was it.

MR DOWNES:   Absolutely.

McHUGH J:   Perhaps it just shows another aspect of the difficulty of segregating the issues in this case, because I am not sure that you can separate it from any actual damage.

MR DOWNES:   I take your Honour’s point.

McHUGH J:   One would have expected that in any discussion with the bank, properly advised, the person should have said, well, that is only the top of the range; it may be a lot less.

MR DOWNES:   My learned friend said at the beginning of his submissions that I changed the way we put the duty of care because I did not refer about appointments of receivers, but referred to concepts such as sale, but if your Honours recollect, I deliberately introduced that by saying that the particular decision that was subsequently made was irrelevant to questions of duty of care and you might have had a very wealthy developer whose option was entirely unaffected by financial concerns.  That fits in with what your Honour just put to me just now.

One of the decisions which – and this falls within it, if I could respectfully suggest so, Justice Hayne’s formulation – was constantly available for a developer such as my client was not to go ahead.  That is what the Board - your Honours asked me well, I will not say more but your Honours will recollect yesterday I said one of the objects of the Board was to try and dissuade this development.

So we would respectfully submit that to say this was a preliminary ballpark issue, that is fine and that would mean that the duty of care was to give a preliminary ballpark figure but the finding of breach is a finding that the figure that was given was negligently outside a preliminary ballpark figure.

Certainly as we have said in our written submissions that this issue will be relevant to the content of the duty of care but will not be relevant to the question of whether there is a duty of care at all or not.  So that, in substance, is the answer that we seek to make to the proposition that your Honour Justice McHugh has raised and which Justice Hayne has embraced, as I understand it.

The preliminary ballpark figure was prepared for use and provided its use was within what it was prepared for, as it was here, then that militates in favour, we would submit, a duty of care not against duty of care.

Can I also give your Honours a reference in addition to 1239 at line 30 that I gave your Honours a reference to, to 1236 also and I think that may be the page I took your Honours to, I am just not sure, also in the judgment of Justice Fitzgerald.

Now, while I am on this point, my learned friend sought again to raise, as he had below, a different construction of the draft letter and the memorandum and we would respectfully submit, in the light of the finding, not challenged at page 1231, line 10 of the appeal book, that it is not open to him to do so.  I would say that if my learned friend had challenged the findings of negligence and we had had notice of that prior to half an hour or an hour ago, that may very well have caused some activity on our part in terms of the way that we put the case before the Court. 

We would respectfully submit that the argument is not available and, in any event, is not sustainable, and we would particularly refer to section 34B(2)(iii), which contemplates contracts relating to the connection of one piece of land, as well as the next subparagraph contemplating the connection of other land.

Can I take your Honours just very quickly, because it is significant on this issue raised by my learned friends, back to pages 1173 and 1176, the colour documents.  Your Honours appreciate that the sum of money increased by reference to difficulty to 1.4 million is for the totality of the amplification and that is what the Board was going to charge Mr Neal.  The cost attributable to Neal’s development of the 1.4 million was 174,000, but, nevertheless, what he was told was 1.4 million as a component of 2.5 million.

We would respectfully submit that, if one looks at the findings on breach, they are sustainable even if my learned friend’s construction that we say is not open to him, even if that construction were to be adopted by the Court.

Now, your Honours, to go back to just another couple of other things.  First of all, the Watkins’ letter.  We would respectfully submit that the Watkins’ letter is, really, if I can be forgiven for using the word, is a furphy.  One thing your Honours have not yet been told is that the trial judge actually did find that the Carr letter came to Mr Neal’s attention almost immediately.  That is at 1136.  Can I tell your Honours that this reference is given in our submissions in reply, but in error it says 1036.  It is 1136, line 40.  There the trial judge found:

It is clear that Mr Rhodes became aware, very quickly, of the contents, of at least the substance –

it says “of”, but I assume it is “or”:

of the letter written on 21 November 1985 by the Minister for Natural Resources to the Minister for Environment and Planning.

That is the Carr letter.  So there is a finding that Mr Rhodes, Mr Neal’s agent, and it is obvious in any event, because it has been pointed out to your Honours by my learned friend that the invitation to talk to Mr Wright is not in the Watkins’ letter.

So, given that the invitation to talk to Mr Wright was taken up almost immediately, the inference that the Carr letter came to the attention or knowledge of Mr Neal is irresistible, we would respectfully submit.  Can I also ask your Honours to look at – I took your Honours previously to page 709.  Page 709, in answer to your Honour Justice Hayne’s request ‑ ‑ ‑

HAYNE J:   Yes, I have seen the transcription of that, thank you.

MR DOWNES:   - - - has been transcribed and that, as transcribed, we would respectfully submit, is most material to one of the matters that my learned friend very recently addressed.  The proposition goes this way:  the figure in the draft memorandum and letter is 2.5 million.  It does not say anything about precisely what the 2.5 million is dealing with.  We know, of course, that it is dealing with the 87 lot subdivision, and we know that the 87 lot subdivision is a creature that got before the Board as an application simply because the application was made by Mr Neal. 

GAUDRON J:   I am sorry, I thought it might have got there because of the submission to the Premier, or to Mr Carr.

MR DOWNES:   But the proposal for an 87 lot subdivision was a proposal of Mr Neal’s, not a proposal of any intervening Minister.  We know that when the 2.5 million was calculated, it was calculated for this 87 lot proposal and it was treated within the Board, because of the Board memorandum at 709, as a current inquiry in October 1985.

So, the sequence of events is unmistakable.  Mr Neal asks for an 87 lot approval.  The 87 lot approval is the subject of a calculation.  The calculation of the amount ultimately finds its way in the draft letter and memorandum of advice.  Now, we say this is a request case, as I said to your Honours earlier, but if it is not a request case it is certainly a relationship case.  If it is not a relationship case, it is certainly a case in which there is no potential indeterminate liability and, at the end of the day, that is the thing, we would respectfully submit, that matters most.

GAUDRON J:   Can I just raise something with you?  The parties are in negotiation after the letter of the 21st.  Within two months one has an estimated cost of 1.7 million.  I am just looking at page 711.

MR DOWNES:   That particular page is not in evidence but the document is, apparently, somewhere else in evidence.

GAUDRON J:   Why is it in the appeal book?

MR DOWNES:   I cannot answer that.  Your Honours, that is entirely consistent with our case.  I mean, the reason it has gone down to $1.7 million is because the Board has decided that $1.4 million of the amount that it said was part of the cost earlier ‑ ‑ ‑

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