Tweed Shire Council v Michael Allen trading as M W Allen and Associates - [2009] NSWSC 1195

No judgment structure available for this case.

CITATION: Tweed Shire Council v Michael Allen trading as M W Allen & Associates [2009] NSWSC 1195

HEARING DATE(S): 16/10/09

JUDGMENT DATE :
11 November 2009

JUDGMENT OF: Patten AJ at 1

DECISION: See paragraph 32

LEGISLATION CITED: Local Court Act 2007;

CATEGORY: Separate question

CASES CITED: Woolcock Street Investments Pty Ltd v C D G Pty Ltd 216 CLR 515;
Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529;
Perre v Apard Pty Ltd (1999) 198 CLR 180;
Minister for Immigration and Multicultural Affairs v Wang [2003] 215 CLR 518;
Western District Developments Pty Ltd and Turnpike Lane Pty Limited v Baulkham Hills Shire Council [2009]NSWCA 283;
State of NSW v Bovis Lead Lease Pty Ltd [2001] NSWSC 1045 and Eko Investments Pty Ltd v Austruc Constructions Ltd & Ors [2009] NSWSC 208;
B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue [2008] NSWSC 187

PARTIES: Tweed Shire Council - Plaintiff
Michael Allen - Defendant

FILE NUMBER(S): SC 2009/12913

COUNSEL: Ms S Duggan with Mr M Seymour - Plaintiff
Mr P Macfarlane - Defendant

SOLICITORS: Stacks the Law Firm - Plaintiff
Bolster & Co - Defendant

LOWER COURT JURISDICTION: Local Court

LOWER COURT FILE NUMBER(S): 71/2006

LOWER COURT JUDICIAL OFFICER : Sinclair LCM

LOWER COURT DATE OF DECISION: 6/5/09

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

Patten AJ

11 November 2009

No: 2009 /12913

Tweed Shire Council
v
Michael Allen t/as M W Allen & Associates
JUDGMENT

1 This was the hearing of an appeal instituted by Summons filed on 3 June 2009 against the judgment for the Defendant, Michael William Allen given following a second hearing by A C Sinclair LCM in the Local Court at Murwillumbah on 6 May last. The hearing before me was upon an Amended Summons filed 15 September 2009 and accordingly, as it seems to me, sections s 39 and 41 of the Local Court Act 2007 apply, although, if I be wrong in that view, the previous statute contains provisions which are broadly similar.

2 Before me, Ms S Duggan with Mr M Seymour appeared for Tweed Shire Council (the Council) and Mr P Macfarlane for the Defendant. The appeal on a question of law is brought as of right. The Amended Summons identified the relevant questions of law in these terms:

“1. The Magistrate erred in finding that the Council was not “vulnerable” according to law.

2. The Magistrate erred in finding that the Defendant did not owe a duty of care to the Plaintiff.

3. The Magistrate erred in not finding that the Defendant did breach the duty of care to the Plaintiff.

4. The Magistrate erred in finding no additional evidence was able to be filed.

3 The evidence in the case before me comprised 2 folders of documents, exhibit A, which contained relevant material admitted with the Defendant’s consent. The material revealed that the Council’s local government area includes the village of Condong and that the Defendant, an engineer, was retained by the owner of land in, or in the vicinity of, the village in respect of the proposed subdivision of the land. I take a summary of the facts which led to this litigation from the learned magistrate’s judgment delivered at the first hearing on 16 April 2008 (the first judgment) in which she found for the Council and entered a verdict of $40,392.51 against the Defendant:

“Mr Michael Allen is a registered civil engineer. He has for many years operated a business in the Tweed Heads/Murwillumbah area. In the 1990’s he was involved with the owners of land at Condong who wished to sub-divide their land into twenty residential allotments. Approval of that sub-division was initially refused by the Tweed Shire Council and subsequently approved by the Land and Environment Court. The Court’s approval included conditions that had been formulated by the Council.

On 7 August 1997 the Council approved the sub-division. In 1998 Councill was provided with a certificate signed by Mr Allen that the civil engineering works associated with the sub-division were in compliance with the development conditions and standards imposed on the Development Consent for the sub-division.

The Council contends that the Consent referred the developer to the Development Control Plan 16 and to Australian Standards AS3798-1990 and AS 1726-1993. The Council further contends that Mr Allen was in breach of these provisions in that he did not conduct himself geo-technical testing or retain an appropriate expert prior to construction. This resulted in the infrastructure, which vested in the Council on registration of the subdivision, being built on soft alluvial soils. These soils were an inappropriate base for such improvements and have led to subsidence. The subsidence has cause damage to Council infrastructure the most significant being the ponding of stormwater within a cul-de-sac within the sub-division. The Council has carried out remedial works.

Mr Allen contends that the conditions of approval did not require geo-technical testing and that he as a civil engineer complied with his professional responsibilities.

He further contends that there was no relationship between himself and the Council, which would created any obligation to the Council on his part, nor any right to damages on the Council’s part.

4 In the first judgment, the Magistrate noted the agreement of the parties that the case was one of “pure economic loss” and that:

In order to succeed in its claim the Council must establish on the balance of probabilities that Mr Allen owed the Council a duty of care, that he breached this duty and that the Council suffered damage.”

5 She cited as “the most recent case” Woolcock Street Investments Pty Ltd v C D G Pty Ltd 216 CLR 515. She also referred to Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529 and Perre v Apard Pty Ltd (1999) 198 CLR 180 and observed “the vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed”.

6 However, she distinguished the facts in Woolcock and held that the Defendant “owed a duty of care to the landowner to avoid economic loss” before proceeding to deal with the various elements which the High Court indicated would be relevant to the determination of that issue. She held that there was no disconformity of duty; that there was foreseeability of loss; that indeterminancy of liability did not in the circumstances of the case create a difficulty; that following what McHugh J said in Woolcock the “autonomy of the individual” was not a relevant factor in considering this type of claim and that the Defendant was, or should have been, aware of the magnitude of the risk likely to result from his negligence.

7 In relation to the issue of “vulnerability” the learned Magistrate said:

“On the issue of vulnerability the majority in the Woolcock case were of the view that the facts in that case did not show that the appellant could not have protected itself against the economic loss it alleges it suffered. For example, a provision or warranty could have been asserted into the contract for sale or inspections could have been undertaken prior to contract.

8 The Magistrate concluded her first judgment on the issue of liability with this paragraph:

“I do not agree that the Council had to specifically request geotechnical testing before it was appropriate for the relevant expert, in this case the civil engineer, to undertake such testing. That is why experts are retained. Mr Allen was persuaded by his knowledge of the area and other developments undertaken nearby to form the view that geotechnical testing was not required. He was aware that the course of a river could alter over time. There is no evidence as to whether or not any testing was undertaken on the neighbouring developments. Mr Allen could not have known the condition of the subsoils whereas this was easily ascertainable by way of geotechnical testing. I am satisfied that in not undertaking the geotechnical testing Mr Allen was in breach of his professional obligations.”

9 The defendant appealed to this Court against the first judgment and that appeal was heard by Malpass AsJ.

10 It is, I think, relevant to have regard to the manner in which the appeal was conducted before his Honour as demonstrated by the following extracts from the transcript:

“Macfarlane (For Mr Allen): Yes, your Honour.

This is in one sense a narrow appeal. There is one appeal ground and that appeal ground is that ---

His Honour: It is whether she applied the right test and I suppose took into account all the relevant circumstances?

Macfarlane: Yes Your Honour. From the outset, the question turns on vulnerability. I will take your Honour to the cases on vulnerability in a moment. Can I say this, that the reasoning of her Honour in applying vulnerability, in my submission, fell into error, firstly because her Honour did not take into account the extent of the council being involved in the rezoning application, the actual rezoning and then the process leading up to subdivision.

In my submission the involvement of the Council in the rezoning process and the subdivision process is of crucial importance to understand whether or not, or to approach the question of whether the council was vulnerable vis-à-vis, the appellant engineer. The reason I make that submission is because the land the case involves was a piece of land, as at 1990, which was zoned agricultural protection.

The owners of the land were Mr and Mrs Visio and Mr and Mrs Visio wished to subdivide that land and engaged the appellant to make submission to the council to seek to persuade council that the land should be rezoned from agricultural protection to urban expansion, and once that rezoning took place, then the subdivision application could follow, which it did.

From the outset, the submission is, in relation to her Honour’s reasoning on vulnerability, that there was inadequate attention given to the involvement of council as to the rezoning. I will take your Honour to the evidence which demonstrated the council’s involvement in the rezoning process in a moment.

………………………………

Macfarlane: Yes. The case in negligence against the appellant was that the appellant should have engaged geotechnical investigations to test whether or not there were soft alluvial clays, which were present under the land that the roads were built on. So what happened – as I understand it the facts in this sense are not controversial – is that the roads were constructed as part of the subdivision in 1997/98, two cul-de-sacs in fact.

There were no geotechnical investigations into the land underneath those roads but there were geotechnical investigations into the compaction of the fill in the roads, but not underneath that compaction, and a case of negligence against my client below was that when he signed those certificates, what he should have done was either test himself or engaged others to test whether the soil underneath the compaction had soft alluvial clays.

As I go through the evidence of the rezoning and the subdivision process, your Honour will see that not only were the council required to turn their own minds to the question of whether geotechnical investigations were required – they did not do that, and they were able to do that. Your Honour should be thinking that it is significant to challenge the finding of negligence but my submission is that that is seeking to demonstrate that the council was able to take steps to protect itself, which is the touchstone of the vulnerability question.

His Honour: Is there common ground as to the question of whether or not this certificate deals with the subject matter of the soft soil?

Macfarlane: From the appellant’s point of view the certificate did not address geotechnical investigations and it was not required to, and my friend’s case below was that the certificate should have, as I understand it.”

11 The judgment of Malpass AsJ was delivered on 12 September 2008. After referring to the facts his Honour quoted the following passage from the judgment of the majority in Woolcock:

Caltex Oil

Perre v Apand Pty Ltd

Perre

Hill v Van Erp

Esanda Finance Corporation Ltd v Peat Marwick Hungerfords

12 The judgment of Malpass AsJ continued:

“Accordingly, (the Council) could only succeed in its claim if it could demonstrate vulnerability on its part. The Local Court found that certain facts made out the requirement for vulnerability.

Generally speaking, the one issue ventilated by the plaintiff is that the Magistrate both applied the wrong test and failed to address all of the relevant circumstances in approaching her task in dealing with the matter of vulnerability. In my view, the contentions of the plaintiff are well founded.”

13 Later in the judgment his Honour quoted from the first judgment the passages which I have set out in paragraph 7 above.

14 In the outcome his Honour concluded that the Magistrate had erred in law:

“It seems to me to be erroneous to approach the test of vulnerability in the manner adopted by the Magistrate. Each case has to be considered having regard to its own particular facts. This case falls into a different category to those involving a first owner or a purchaser of land.

The question to be addressed is that of the relative inability of a plaintiff to protect itself from the economic loss. The cases seem to have regard to matters of ignorance or social, political or economic constraints that render a plaintiff unable to protect itself.

The context of this case was that the plaintiff was an applicant and the defendant was the relevant local government authority. There had been involvement for some years concerning the processes of rezoning and subdivision. The role of the defendant required it to consider, inter alia, matters such as flooding and subsidence affecting the land.

It seems to me that, in addressing the matter of its vulnerability, the Magistrate should have had regard to what the defendant could have done to protect itself against the economic loss claimed by it. Without intending to be exhaustive I will mention certain matters. There may have been inquiries or investigations that could have been made. There may have been steps that could have been taken to bring about testing at the expense of the plaintiff (or the owners).

In my view, the Magistrate has erroneously applied the test of vulnerability and has not taken into account all of the relevant circumstances.”

15 Malpass AsJ made these orders:

16 Magistrate Sinclair thereupon conducted a further oral hearing and received written submissions from the parties. She published her second judgment on 6 May 2009, which commenced :

It has been agreed throughout by the parties that the claim was one of “pure economic loss” and that the authorities on that point applied to this case.

17 Thereafter, in the second judgment, her Honour confined herself to the issue of vulnerability. After summarising the submissions on behalf of both the plaintiff and the defendant, she expressed this conclusion:

“Having reviewed the evidence, the submissions, the decision of Associate Justice Malpass and the decisions in the Woolcock case and Perre v Apand, the Court makes the following findings:

The Council could have protected its position by

As those steps could have been taken well before the Certificates were produced they could not be said to have induced the Council not to protect itself.

The Council was not therefore “vulnerable” in the relevant sense and accordingly the Council has not made out its claim.”

18 Following this conclusion, her Honour entered a verdict for the Defendant.

19 Essentially the submissions made on behalf of the Council were that the Magistrate erred in law by narrowing, in the second judgment, the issue before her to the single question of vulnerability. Instead, it was submitted, her task was to evaluate the whole of the evidence and determine upon that evidence viewed in the light of the judgment of Malpass AsJ whether the Defendant owed a duty of care to the Council.

20 There is authority that absent a specific direction, a court bound by an order for remittal, such as occurred in this case, is bound to consider the entirety of the matter and Minister for Immigration and Multicultural Affairs v Wang [2003] 215 CLR 518 provides an illustration of this principle in a way which is apposite to this case. The Full Court of the Federal Court in remitting a matter for rehearing by the Refugee Review Tribunal ordered that the Tribunal be as previously constituted in order that the applicant might preserve favourable findings of fact. On appeal to the High Court, Gleeson CJ observed:

“It is clear that the reason for the order finally made by the Full Court was a view that the interests of justice required that the respondent should be protected as far as possible from the contingency that, on the hearing of the remitted matter, the Tribunal might take a view of the facts less favourable to the respondent than had been taken by Ms Boland.

The content of the interests of justice, in the events that occurred, is to be determined in the light of the provisions of the Act , pursuant to which the respondent made his application for a protection visa, and pursuant to which the delegate of the Minister, the Tribunal, and the Federal Court were acting. Under the statutory scheme, and in consequence of the other orders made by the Full Court, the Tribunal is now obliged to undertake a further review of the delegate's decision. The Tribunal's decision upon that review is to be made on the basis of the facts as they appear in the course of that review. To what extent the information before the Tribunal will differ from the information that was originally before Ms Boland is not known. The findings made by Ms Boland will have no legal status in that further review. Neither Ms Boland, if she undertakes the further review, nor any other member of the Tribunal, if the Tribunal is differently constituted, will be bound by them. The most that can be said is that, as a practical matter, if Ms Boland undertakes the review, then, unless there is a significant change in the information before the Tribunal, she is unlikely to alter the view of the facts she took previously, whereas a fresh decision-maker might see the matter differently even if the information remains substantially the same. If that be regarded properly as a risk, does justice require that the respondent be protected from it?

It is tempting, but dangerous, to seek analogies in the field of adversarial litigation. An appeal court, pursuant to statutory power, may order a re-trial limited to particular issues. But where the issues on a re-trial are at large, it would come as a surprise to see a court of appeal order a re-trial before a particular judge for the reason that the judge is thought to be more, or less, likely than others to resolve the issues in a particular fashion. The Full Court, having set aside the Tribunal's decision, appears to have contemplated that the further hearing would in some way be limited, but it made no order to that effect; it attempted to achieve the same practical result by indirect means. Whether it could have achieved the intended result by making different orders, or giving different directions, is not a matter that arises for decision.

21 Although Gleeson CJ was referring to an administrative tribunal, in my opinion, much of what he said is applicable to this case. There was no limitation in the order made by Malpass AsJ and it was certainly not implicit in his Honour’s order that any rehearing be necessarily conducted by Magistrate Sinclair. The matter was entirely at large and the case could have been reheard by any Local Court Magistrate. It would, accordingly, in my opinion, have been an error of law for Magistrate Sinclair (or any other Magistrate) to have regarded herself or himself bound by any previous finding.

22 It was contended on behalf of the Council, in effect, that the case before the Magistrate at the second hearing was not concluded by her finding that the Council was not vulnerable. In my view, that proposition is correct, consistently with Woolcock and cases which have followed it, including Western District Developments Pty Ltd and Turnpike Lane Pty Limited v Baulkham Hills Shire Council [2009]NSWCA 283 where Giles JA said:

“10 Absence of vulnerability as found by the Magistrate was not a fact, but a conclusion by way of characterisation drawn from facts such as the fact that the applicants were corporations and the fact that the applicants were experienced property developers and could have made enquiries. The appeal was not in relation to the findings as to those facts, but in relation to the conclusion that the applicants were not vulnerable, and for the reasons given by Preston CJ of LEC the Magistrate erred in law in coming to the conclusion.

Caltex Refineries (Qld) Pty Ltd v Stavar

23 The decisions in both Western Districts and Caltex Refineries (Qld) Ltd v Stavar were, I hasten to add, both given after the decision of Malpass AsJ. Moreover, Caltex was not a case of pure economic loss but rather one of personal injury in a “novel category”

24 It was also submitted on behalf of the Council that the Magistrate’s finding that the Council could protect itself against economic loss was unreasonable and could not be sustained. To the contrary, it was submitted that the Council was vulnerable, in that it was reliant on the skills and expertise of the Defendant to properly supervise the construction of what were only to become public roads on their vesting in the council. “Vulnerability” is, as pointed out by Giles JA in the above quoted passage from Western Districts, a characteristic to be drawn from facts.

25 In “preliminary” written submissions, the Defendant contended that the challenge by the Council to the Magistrate’s finding regarding vulnerability involved a mixed question of fact and law for which leave was required but not sought. I disagree with this submission, being of the opinion that it is no more than a question of fact, but, as it seems to me, whether or not the Magistrate was correct in her finding as to vulnerability is not, and cannot be, the issue before me.

26 Second, it was submitted that the Council now seeks to depart from the way it conducted its case at trial. I do not think that occurred in this case, although it is true that for the most part submissions at the hearing on 8 April 2009 were very much focused on the question of vulnerability. But that, in my opinion, did not avoid the obligation of the Magistrate to make manifest in her judgment that she was deciding whether or not there was a duty of care and that she considered “vulnerability”, important as it may be, as one only of the elements to be considered in a “multi factorial” approach. Indeed, the opening paragraphs of her Honour’s judgment suggest that she did not approach the matter in this way.

27 The third “preliminary” submission was that this appeal constitutes a collateral attack on the judgment of Malpass AsJ. I do not think this is so. His decision bound the Magistrate in relation to the approach to be taken in addressing the vulnerability question and that is not in question in this appeal. However, so far as his Honour suggested that “the council could only succeed in its claim if it could establish vulnerability on its part”, that statement should be regarded as obiter. It is contrary, in my view, to what was said in Woolcock and subsequent cases as made manifest by the passage quoted above from the judgment of Giles JA in Western Districts.

28 In other submissions, counsel for the Defendant contended that it was implicit in the Magistrate’s second judgment that she did, indeed, find that the Defendant did not owe the Council a duty of care, even though her only formal finding was that the Council was not vulnerable. It was submitted that the finding of non vulnerability was open to the Magistrate on the evidence and there was reference to cases such as State of NSW v Bovis Lead Lease Pty Ltd [2001] NSWSC 1045 and Eko Investments Pty Ltd v Austruc Constructions Ltd & Ors [2009] NSWSC 208.

29 The question before me is whether the Magistrate erred in law. Regretfully, I think she did, by apparently restricting her second judgment solely to the issue of vulnerability rather than to a consideration of whether, on all the evidence in the case, the Council established a duty of care owed by the Defendant and a breach of that duty. I observe, incidentally, that whilst the Magistrate found that the Council “could” have protected its position in certain ways, she was entitled, in my opinion, to consider whether it would have been reasonable for it to do so, having regard to all the circumstances, including the Magistrate’s own findings under the heading “Vulnerability” in the first judgment.

30 Preston CJ of LEC with whom Giles JA and Campbell JA agreed addressed the concept of reasonableness and reliance in Western Districts at paragraph 104:

“Fourthly, it is not reasonable to require the applicants as prospective purchasers to take steps to check whether the Council had properly or improperly exercised the statutory power to issue the subdivision certificate. The applicants were entitled to assume that if the Council as principal certifying authority exercises the statutory power to issue the subdivision certificate, it has satisfied itself that all of the applicable requirements in s 109J(1) and (2) have in fact been complied with.

31 It was submitted on behalf of the Council that if the appeal were upheld, it would be open to this Court to substitute a verdict for the Plaintiff for the verdict for the Defendant entered by the Magistrate. However, I do not think that course is open to me (see for instance B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue [2008] NSWSC 187). Unfortunately, the matter will need to be returned to the Local Court for rehearing as this court is not entitled to embark upon the further fact finding which the case requires. I say, unfortunately, being mindful of the fact that costs already incurred are probably disproportionate to the amount at stake. It will be a matter for the administration of the court as to whether the rehearing takes place before the same or a different Magistrate. Hopefully, the parties will reach agreement for the conduct of the new trial at minimum expense.

32 I make these orders;

1. The appeal is upheld.

2. I quash the verdict entered in the Local Court on 6 May 2009.

3. I remit the matter for rehearing in the Local Court on the issues only of whether the Defendant owed a duty of care to the council and, if so, whether there was a breach of that duty.

4. I order the Defendant to pay the Council’s costs.

5. The Defendant is granted a certificate under the Suitors Fund Act.

6. Exhibit may be returned.

7. The costs of the earlier hearings should abide the result of the further hearing and should be dealt with by the Magistrate presiding at that hearing.

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Citations

Tweed Shire Council v Michael Allen trading as M W Allen and Associates [2009] NSWSC 1195

Cases Citing This Decision

0

Cases Cited

6

Statutory Material Cited

1

Rizeq v Western Australia [2017] HCA 23

Vairy v Wyong Shire Council [2005] HCA 62

CITATION:	Tweed Shire Council v Michael Allen trading as M W Allen & Associates [2009] NSWSC 1195
HEARING DATE(S):	16/10/09
JUDGMENT DATE :	11 November 2009
JUDGMENT OF:	Patten AJ at 1
DECISION:	See paragraph 32
LEGISLATION CITED:	Local Court Act 2007;
CATEGORY:	Separate question
CASES CITED:	Woolcock Street Investments Pty Ltd v C D G Pty Ltd 216 CLR 515; Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529; Perre v Apard Pty Ltd (1999) 198 CLR 180; Minister for Immigration and Multicultural Affairs v Wang [2003] 215 CLR 518; Western District Developments Pty Ltd and Turnpike Lane Pty Limited v Baulkham Hills Shire Council [2009]NSWCA 283; State of NSW v Bovis Lead Lease Pty Ltd [2001] NSWSC 1045 and Eko Investments Pty Ltd v Austruc Constructions Ltd & Ors [2009] NSWSC 208; B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue [2008] NSWSC 187
PARTIES:	Tweed Shire Council - Plaintiff Michael Allen - Defendant
FILE NUMBER(S):	SC 2009/12913
COUNSEL:	Ms S Duggan with Mr M Seymour - Plaintiff Mr P Macfarlane - Defendant
SOLICITORS:	Stacks the Law Firm - Plaintiff Bolster & Co - Defendant
LOWER COURT JURISDICTION:	Local Court
LOWER COURT FILE NUMBER(S):	71/2006
LOWER COURT JUDICIAL OFFICER :	Sinclair LCM
LOWER COURT DATE OF DECISION:	6/5/09