Western Districts Developments Pty Ltd v Baulkham Hills Shire Council

[2009] NSWCA 283

Reported Decision: 169 LGERA 6275 NSWLR 706[2010] ALMD 719[2010] ALMD 886[2010] ALMD 633

New South Wales

Court of Appeal

CITATION:	Western Districts Developments Pty Limited and Turnpike Lane Pty Limited v Baulkham Hills Shire Council [2009] NSWCA 283
HEARING DATE(S):	12 June 2009
JUDGMENT DATE:	18 September 2009
JUDGMENT OF:	Giles JA at 1; Campbell JA at 12; Preston CJ of LEC at 15
DECISION:	1. Leave to appeal granted and direct the filing of the notice of appeal within 7 days. 2. Appeal upheld. 3. Set aside the decisions and orders of Brown LCM of 12 February 2008 and Harrison AsJ of 31 July 2008. 4. Remit the matter to the Local Court for quantum of damages to be assessed. 5. The respondent to pay the applicant's costs.
CATCHWORDS:	TORTS - negligence - economic loss - issue of subdivision certificate - liability of local council as principal certifying authority for the subdivision - misexercise of statutory power - non-compliance with a requirement for a certificate of compliance by water supply authority - purchase of lot from subdivider - purchasers suffer economic loss having to comply with requirements of water supply authority - whether duty of care owed by principal certifying authority to purchasers in relation to issue of subdivision certificate - APPEAL - decision of Local Court - jurisdiction of appellate court - appeal against judgment or order "but only as being erroneous in point of law" - decision that no duty of care owed - whether decision erroneous in point of law
LEGISLATION CITED:	Civil Liability Act 2002 Conveyancing Act 1919 Environmental Planning and Assessment Act 1979 Local Court Act 2007 Local Courts Act 1982 Sydney Water Act 1994
CATEGORY:	Principal judgment
CASES CITED:	Albert Shire Council v Bamford (1998) 2 Qd R 125; (1997) 97 LGERA 33 Amaca Pty Limited v State of New South Wales [2003] HCA 44; (2003) 77 ALJR 1509; (2003) 199 ALR 596 Amaca Pty Ltd (under NSW External Administration) v A B & P Constructions Pty Ltd [2007] NSWCA 220; (2007) Aust Torts Reports 81-910 Bryan v Maloney [1995] HCA 17; (1995) 182 CLR 609 Caledonian Collieries Ltd v Spiers (1957) 97 CLR 202 Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258 Donoghue v Stevenson [1932] AC 562 East Suffolk Rivers Catchment Board v Kent [1941] AC 74 Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54; (2002) 211 CLR 540 Hillpalm Pty Limited v Heaven’s Door Pty Limited [2004] HCA 59; (2004) 220 CLR 472 McPherson’s Limited v Eaton [2005] NSWCA 435; (2005) 65 NSWLR 187 Northern Residential Pty Ltd v Newcastle City Council [2009] NSWCA 141; (2009) 166 LGERA 352 Perre v Apand Pty Limited [1999] HCA 36; (1999) 198 CLR 180 Port Stephens Shire Council v Booth [2005] NSWCA 323; (2005) 148 LGERA 351 Precision Products (NSW) Pty Ltd v Hawkesbury City Council [2008] NSWCA 278 Pyrenees Shire Council v Day [1998] HCA 3; (1998) 192 CLR 330 Royal & Sun Alliance Insurance Australia Limited v Betta Industries Pty Limited; Harlander Pty Limited (in liq) v State of New South Wales [2002] NSWCA 323; (2002) 12 ANZ Ins Cas 61-544 Seltsam Pty Limited v Ghaleb [2005] NSWCA 208 State of New South Wales v Bovis Lend Lease Pty Limited (formerly Civil & Civic Pty Limited) [2007] NSWSC 1045; (2007) Aust Torts Reports 81-917 State of New South Wales v Paige [2002] NSWCA 235; (2002) 60 NSWLR 371 State of New South Wales v Tyszyk [2008] NSWCA 107 Sullivan v Moody [2001] HCA 59; (2001) 207 CLR 562 Sutherland Shire Council v Becker [2006] NSWCA 344; (2006) 150 LGERA 184 Sutherland Shire Council v Heyman (1985) 157 CLR 424 Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517 Sydney Water Corporation v Abramovic [2007] NSWCA 248; (2007) Aust Torts Reports 81-913 Woolcock Street Investments Pty Limited v CDG Pty Limited [2004] HCA 16; (2004) 216 CLR 515
PARTIES:	Western Districts Development Pty Limited and Turnpike Lane Pty Limited - Appellants Baulkham Hills Shire Council - Respondent
FILE NUMBER(S):	CA 40365/08
COUNSEL:	APPELLANTS Mr A Fernon RESPONDENT Mr D Grieve QC Mr J Kildea
SOLICITORS:	APPELLANTS Low Doherty & Stratford, Blacktown RESPONDENT Matthew Pearce, Baulkham Hills Shire Council
LOWER COURT JURISDICTION:	Supreme Court - Common Law Division
LOWER COURT FILE NUMBER(S):	SC 11069/08
LOWER COURT JUDICIAL OFFICER:	Harrison AsJ
LOWER COURT DATE OF DECISION:	31 July 2008
LOWER COURT MEDIUM NEUTRAL CITATION:	Western Districts Developments v Baulkham Hills Shire Council [2008] NSWSC 770

CA 40365/08
SC 11069/08

GILES JA
CAMPBELL JA
PRESTON CJ OF LEC

18 SEPTEMBER 2009

WESTERN DISTRICTS DEVELOPMENTS PTY LIMITED AND TURNPIKE LANE PTY LIMITED V BAULKHAM HILLS SHIRE COUNCIL

Judgment

1 GILES JA: The facts and the issues on appeal are described in the reasons of Preston CJ of LEC, which I have had the advantage of reading in draft. Save that I give my own reasons for upholding the competency of the appeal against the Magistrate’s decision, I agree with his Honour’s reasons.

2 Under s 73(1) of the Local Courts Act 1982 as then in force an appeal lay against a Local Court judgment or order “but only as being erroneous in point of law”.

3 It is well established that whether a duty of care is owed is a question of law. But the decision that a duty of care is owed or is not owed may wholly turn on a factual finding or findings: in McPherson’s Ltd v Eaton [2005] NSWCA 435; (2005) 65 NSWLR 187 at [14] Mason P instanced whether a solicitor was engaged to advise as to the commercial or simply the conveyancing aspects of a transaction. See also Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517 at [4] per Gleeson CJ; Amaca Pty Ltd v A B & P Constructions Pty Ltd [2007] NSWCA 220 at [8]; and Sydney Water Corporation v Abramovic [2007] NSWCA 248 at [66]. If the decision turns wholly on a factual finding or findings which are said to be erroneous, it could be said that any error is not in point of law.

4 This was the substance of the Council’s argument, namely, that the Magistrate’s decision rested upon his Honour’s finding that the applicants were not vulnerable and that was a question of fact. The Council referred to State of New South Wales v Bovis Lend Lease Pty Ltd [2007] NSWSC 1045, submitting that Einstein J had characterised the degree and nature of vulnerability for the purposes of whether a duty of care was owed as a question of fact.

5 For a number of reasons, the Council’s argument should not be accepted.

6 The argument is not made good by State of New South Wales v Bovis Lend Lease Pty Ltd. His Honour did refer at [25] to the question of a duty of care depending “on the circumstance, and thus a factual finding” that one company was not in a position to acquire contractual or statutory rights against another company in the event that the other company’s design or construction work was defective, and at [31] referred to the observation by McHugh J in Perre v Apand Pty Ltd (1999) 198 CLR 180 at [129] which I next set out and put the words “one of fact” in italics. But a fact/law dichotomy was not of significance. His Honour considered that the first company was in a position adequately to protect its own interests, by contract or statute. That may well have gone beyond fact, but the characterisation did not matter.

7 Any support for the argument goes back to the observation by McHugh J, which was -

“The degree and the nature of vulnerability sufficient to found a duty of care will no doubt vary from category to category and from case to case. Although each category will have to formulate a particular standard, the ultimate question will be one of fact.”

8 This does not support the argument. By the ultimate question being one of fact, his Honour meant that the degree and nature of vulnerability depended on the facts. That is true, but it does not mean that vulnerability is fact for the fact/law dichotomy. The characterisation as vulnerability sufficient to found a duty of care is not a question of fact; it involves a legal standard.

9 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.

10 Further, while vulnerability is an important factor in whether or not a duty of care to guard against economic loss is owed, it is not the sole consideration. On current jurisprudence, the decision that a duty of care is owed or is not owed is arrived at in novel circumstances upon a “multi-factorial” approach, with a close analysis of the facts bearing on the relationship between the plaintiff and the defendant and regard to “salient features”; see most recently Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258 at [101]-[108] per Allsop P. The Magistrate’s decision could not, on the correct approach, be solely by regard to vulnerability. His decision that a duty of care was not owed involved (or should have involved) assessment of all salient features, only one (although a primary one) of which was vulnerability. If the decision was erroneous, it was erroneous in point of law although involving a factual finding that the applicants were corporations and the other factual findings.

11 I agree with the orders proposed by Preston CJ of LEC.

12 CAMPBELL JA: I agree with Preston CJ of LEC, though I also accept the point made by Giles JA that a decision on existence of a duty of care is not always a question of law.

13 In considering the precedent value of the present decision in future, it may be of relevance that no defence was raised under the Civil Liability Act 2002.

14 I agree with the orders proposed by Preston CJ of LEC.

15 PRESTON CJ OF LEC:

Nature of case and conclusion

16 The two applicants seek leave to appeal from the judgment of Harrison AsJ delivered on 31 July 2008 which dismissed the applicants’ appeal against the decision of Brown LCM of the Local Court on 12 February 2008, which in turn dismissed the applicants’ claim against Baulkham Hills Shire Council (“the Council”) in negligence. The application was argued on the basis that the hearing of the application would constitute the hearing of the appeal if leave to appeal were to be granted.

17 The primary issue on the application was whether the Council owed a duty of care to the applicants in issuing a subdivision certificate that authorised the registration of a plan of subdivision creating lots, one of which was purchased by the applicants. The Council, by notice of contention, challenged the competency of the original appeal against the decision of the Local Court as not being “erroneous in point of law”.

18 My conclusions are twofold. First, the appeal was competent, and, secondly, the judgment and order of the Magistrate were erroneous in point of law. Contrary to the decisions below, the Council did owe the applicants a duty of care when issuing the subdivision certificate for the subdivision.

19 Breach of duty, if a duty of care exists, was not in contest on the appeal. Damages, however, need still to be assessed. The applicants claimed a little under $50,000 plus interest, although the amount of damages recoverable was in dispute. The amount claimed is not insignificant, the point of law is of some general importance, and leave to appeal should be granted.

20 I would therefore propose that leave to appeal should be granted, the appeal allowed, the judgments and orders below set aside and the proceedings remitted to the Local Court for determination of the quantum of damages.

The impugned conduct of the Council

21 The applicants are the owners of land known as 6 Aldephi Street, Rouse Hill, being Lot 2 in DP1058390 (“the property”).

22 On 2 July 2003, the applicants entered into a contract to purchase the property from Wati Pty Limited (“Wati”). The property was one of a number of lots to be created by a subdivision of a larger parcel of land owned by Wati. The contract of sale was not in evidence.

23 On 12 August 2003, after the applicants had entered into the contract to purchase the property, the Council granted development consent for subdivision of four existing lots, being part lots 7, 8, 9 and 14 in DP 193021, into two lots. One of the two lots was the property. The development consent, which had a reference number 458/04/ZA, was subject to conditions. Two of the conditions were Conditions E4 and E5. They provided:

“4. Section 73 Certificate
A Section 73 Compliance Certificate under the Sydney Water Act 1994 must be obtained. Application must be made through an authorised Water Servicing Co-ordinator, for details see the Sydney Water website or telephone 13 20 92 .
Following application a ‘Notice of Requirements’ will be forwarded detailing water and sewer extensions to be built and charges to be paid. Please make early contact with the Coordinator , since building of water/sewer extensions can be time consuming and may impact on other services and building, driveway or landscape design.
The Section 73 Certificate must be submitted to the ‘Principal Certifying Authority’ prior to release of the linen plan/occupation of the development.
5. Final Plan of Subdivision
The submission of a subdivision certificate application and final plan of subdivision with an 88B Instrument (where applicable) together with:
…
(c) The completed checklist of conditions.
…
NOTE : Council will not accept the final plan of subdivision unless accompanied by all items detailed above.”

24 Wati appointed, pursuant to s 109E(1) of the Environmental Planning and Assessment Act 1979 (“EPA Act”), the Council as the principal certifying authority in respect of the subdivision.

25 Condition E4 required Wati to obtain a certificate of compliance under s 73 of the Sydney Water Act 1994 (“the Water Act”). Section 72 of the Water Act provides that a developer, who is required by an approval to obtain a compliance certificate, may apply to Sydney Water Corporation (“the Corporation”) for a compliance certificate. If such application is made, the Corporation may, pursuant to s 74(1) of the Water Act, before proceeding further with the application, serve a notice on the developer requiring the developer to do one or more things, including paying an amount to the Corporation to cover the whole or an appropriate portion of relevant costs of constructing works and systems, as assessed by the Corporation (see s 74(1) of the Water Act). The Corporation must grant the developer a compliance certificate when the Corporation is satisfied that the requirements of a notice served on the developer under s 74 have been complied with (see s 73(b) of the Water Act).

26 Notwithstanding the requirements of Conditions E4 and E5 of the development consent for the subdivision, Wati did not apply for a certificate of compliance under s 73 of the Water Act in respect of the subdivision. Nevertheless, Wati applied to the Council, in its capacity as the principal certifying authority for the subdivision, for a subdivision certificate. A subdivision certificate is a certificate that authorises the registration of a plan of subdivision under Division 3 of Part 23 of the Conveyancing Act 1919 (see s 109C(1)(d) of the EPA Act).

27 Wati’s application for a subdivision certificate displayed ticks next to each number of the conditions of consent, including Conditions E4 and E5. Wati also enclosed a compliance certificate under s 73 of the Water Act. The compliance certificate was signed by two officers of the Corporation and dated 27 August 2003. The certificate stated: “Sydney Water Corporation certifies that the above named applicant has complied with the requirements, relating to the plan of Subdivision/Development described above, of Division 9 of the Sydney Water Act, 1994”. The applicant named above was “Wati Pty Ltd”. The development described above was “Service Station & Car Wash Development”. The land was described as Lots 7-9 and 14 in DP193021 and Pt 101 in DP1003626. The development consent for the development described had a reference number of “DA 1357/2001/HC” and an endorsed date of 26 July 2001.

28 On 23 October 2003, the Council in its capacity as the principal certifying authority for the subdivision, issued a subdivision certificate for the subdivision. At that time, s 109J of the EPA Act restricted the issue of a subdivision certificate unless the certifying authority was satisfied that certain requirements had been met (the terms of the section have been amended subsequently). Section 109J(1) provided in part:

“(1) A subdivision certificate must not be issued for a subdivision unless the certifying authority is satisfied of each of the following:
(c) in the case of subdivision for which a development consent has been granted, that the applicant has complied with all conditions of the consent that, by its terms, are required to be complied with before a subdivision certificate may be issued in relation to the plan of subdivision,
(e) in the case of subdivision that relates to land within a water supply authority’s area of operations, that the applicant has obtained a certificate of compliance from the water supply authority with respect to the division [sic] of the land …”

29 A water supply authority was defined to include the Corporation and a certificate of compliance was defined to mean a certificate of compliance issued by the water supply authority under the Act under which the water supply authority was constituted (see s 109J(4)).

30 As a matter of fact, none of these requirements had been met by Wati. Wati had not obtained a certificate of compliance from the Corporation with respect to the subdivision. The certificate of compliance Wati had obtained related to a different development. As a consequence, Wati had not complied with Condition E4 and hence could not properly comply with Condition E5 which required the completed checklist of conditions that had been satisfied, including Condition E4. The restrictions on issuing a subdivision certificate for the subdivision under s 109J(1)(c) and (e) therefore still operated.

31 Nevertheless, on 23 October 2003, the Council issued a subdivision certificate for the subdivision. The subdivision certificate was endorsed on the linen plan of subdivision which was subsequently registered as DP1058390. The subdivision certificate was to the following effect:

“ Subdivision Certificate
I certify that the provisions of s 109J of the Environmental Planning Assessment Act 1979 have been satisfied in relation to the proposed SUBDIVISION set out herein and the subdivision is for lease purposes in accordance with s 23H of the Conveyancing Act 1919.”

32 The subdivision certificate was signed by an authorised person of the Council and dated 23 October 2003. The subdivision certificate was numbered 9941 and the reference for development consent for the subdivision was “458-04”.

33 On 18 December 2003, the linen plan of subdivision was registered by the Registrar-General. The plan of subdivision was authorised by the subdivision certificate that had been issued by the Council (s 109C(1)(d) of the EPA Act and s 195C(1)(e) of the Conveyancing Act 1919).

34 The only explanation for the Council’s conduct in issuing the subdivision certificate for the subdivision was that the authorised person at the Council mistakenly referred to, and relied on, the other s 73 certificate of compliance that the Corporation had issued. However, that certificate expressly stated that it related to a different development (service station and car wash development not subdivision) authorised by a different development consent (the consent with the reference DA 1357/2001/HC granted on 26 July 2001 not the consent for the subdivision with the reference 458/04/ZA granted on 12 August 2003). It did not meet the description of being a certificate of compliance with respect to the subdivision of the land.

35 On 22 January 2004, Wati’s solicitors replied to the applicants’ solicitors’ requisitions on title dated 4 July 2003. One of the requisitions was:

“19. Has the Vendor any notice or knowledge of any of the following matters affecting or relating to the property or any part thereof:
(f) Any sum due to local or public authorities for sewerage connections or other works? If so, same should be paid and receipt produced for my inspection prior to settlement.”

36 The answer given was “Not as far as Vendor is aware”. Strictly speaking, that answer was correct. As Wati had not applied for a s 73 certificate of compliance with respect to the subdivision, the Corporation had not had the opportunity to serve a notice requiring the payment of an amount to cover the cost of works and systems already constructed to serve the subdivision. Hence, there was no sum due at that time.

The applicants suffer loss as a consequence of the Council’s conduct

37 Once the plan of subdivision was registered, the contract of sale, which had previously been conditional on the registration of the proposed plan of subdivision (see s 23F(3) of the Conveyancing Act 1919), became unconditional. The applicants completed the purchase and the property was transferred to them on 27 January 2004.

38 The applicants lodged with the Council a development application to erect a commercial and retail building on the property. On 5 August 2004, the Council granted development consent for this development on conditions. Condition 27 required:

“27 Notice of Requirements
The submission of documentary evidence to the Principal Certifying Authority, including a Notice of Requirements, from Sydney Water Corporation confirming that satisfactory arrangements had been made for the provision of water and sewerage facilities.”

39 To satisfy Condition 27, the applicants applied, on 21 February 2005, for a compliance certificate under s 73 of the Water Act. On 15 March 2005, the Corporation, as it was entitled to do under s 74 of the Water Act, served a notice on the applicants requiring the applicants to pay a total of $47,511.00 in charges to cover costs of works and services that had already been constructed. The applicants paid the amount on 14 and 16 February 2006, thereby satisfying the notice. Subsequently, on 19 December 2006, the Corporation granted the s 73 certificate of compliance relating to the applicants’ commercial and retail building development and the applicants were able to satisfy Condition 27 of the development consent.

40 The applicants submitted that they would not have had to pay the total amount of $47,511.00 required by the Corporation if Wati had applied for and obtained a s 73 certificate of compliance with respect to the subdivision, as it was required to have done by Condition E4 of the development consent and s 109J(1)(c) and (e) of the EPA Act. If Wati had applied for a certificate of compliance with respect to the subdivision, the Corporation would have served a notice of requirements on Wati to pay an amount to cover the costs of works and services already constructed, which amount would have included the amount that the Corporation later required the applicants to pay. The Corporation would not have issued a s 73 certificate of compliance to Wati unless it had complied with the notice by paying the required amount. Without the s 73 certificate of compliance Wati would not have been able to satisfy Conditions E4 and E5 of the development consent. The Council as principal certifying authority would have been restricted by s 109J(1)(c) and (e) of the EPA Act from issuing a subdivision certificate for the subdivision and the linen plan of subdivision would not have been authorised for registration.

41 Hence, the applicants submitted, the issue of the subdivision certificate by the Council as the principal certifying authority without Wati having obtained a s 73 certificate of compliance, as required by Conditions E4 and E5 of the development consent, and s 109J(1)(c) and (e) of the EPA Act, meant that the Corporation did not recover its costs of works and systems constructed from the subdivider of the land, Wati, but rather recovered from the next developer of the subdivided land, namely the applicants. The applicants submitted that the Council’s conduct was, therefore, causative of economic loss to the applicants.

The decision of the Magistrate

42 Brown LCM found that the Council did not owe a duty of care to the applicants (at [38]). This conclusion was based on his finding (at [30] and [31]) that the applicants could not be classified as “vulnerable” in the sense stated in Woolcock Street Investments Pty Limited v CDG Pty Limited [2004] HCA 16; (2004) 216 CLR 515 at [23]. Two reasons were given.

43 First, the applicants were corporations and “corporations do not appear able to satisfy this test”. A corporation acts through its agents and “it is generally through the proper application of those agents’ care and skill that the corporation is able ‘to protect itself from the consequences of a defendant’s want of reasonable care’” (at [32]).

44 Secondly, the applicants were “in the business of property development” and “a company that holds itself out to operate in this field should have some substantial understanding of the nature of the business, and the legal requirements that will apply to its obtaining the full right to complete the development” (at [33]). The applicants, “if properly advised, could have undertaken several relatively straightforward steps to check the accuracy of the information supplied by the defendant” (at [36]). These steps included those submitted by the Council of making inquiries at the Corporation to ascertain what was the situation with regard to the existence of a s 73 certificate of compliance or whether fees and charges were assessable on the land; inquiring of the vendor whether it had obtained a certificate; requiring the vendor to produce the relevant s 73 certificate or other evidence that the vendor had paid all fees and charges (at [36] referring to [12]). The applicants were not vulnerable because they could have protected themselves by taking such steps.

45 On the basis of the finding that the applicants were not vulnerable, Brown LCM held that the Council did not owe a duty of care to the applicants (at [38]). If a duty of care existed, however, Brown LCM held that there was “little doubt” that it was breached but because of the finding of the non-existence of a duty of care, the issues of breach and quantum of damages were not addressed.

The decision of the Associate Judge on appeal

46 The applicants appealed under s 73 of the Local Courts Act 1982 against the decision of Brown LCM as being erroneous on a point of law. The point of law was the decision of the non-existence of a duty of care.

47 The Council submitted that the decision that a duty of care did not exist was based on the finding that the applicants were not vulnerable and that finding was a finding of fact not law. Hence, the Council submitted, the appeal was against a decision that was erroneous in fact, not law, and the appeal was incompetent.

48 Harrison AsJ rejected the Council’s submission that the appeal was incompetent. Her Honour said that the vulnerability of the applicants was an important factor in deciding whether a duty of care was owed, referring to State of NSW v Tyszyk [2008] NSWCA 107 at [151]. The Magistrate’s determination of whether the applicants were vulnerable “can be considered as being ‘erroneous on a point of law’” (at [4]). Alternatively, if that conclusion was wrong, Harrison AsJ held she would grant leave to appeal on a mixed question of fact and law (at [4]).

49 Harrison AsJ agreed with the applicants’ submission that the Magistrate erred, in determining vulnerability, in seeking to draw a distinction between corporate and non-corporate plaintiffs. The ability of a party to protect its own position is not dependent on it being a corporate body or an individual (at [44]). However, Harrison AsJ noted that the Magistrate also considered whether the applicants would be vulnerable had they not been corporate entities. The Magistrate had concluded that the applicants were not vulnerable as they were in the business of property development and could have made inquiries to check the accuracy of the information supplied by the Council. Harrison AsJ agreed with this basis for finding that the applicants were not vulnerable. Harrison AsJ said:

“48 At [19(f)] of the requisitions on title, Western Developments asked Wati if it had any notice or knowledge of any sum due to local or public authorities for sewerage connections. If Wati had such knowledge of any sum due for sewerage connections, Western Developments stipulated that the sum should be paid and receipt produced for inspection prior to settlement. Wati answered the question by saying “Not so far as the vendor is aware.” Wati also provided incorrect information to the Council by annexing a s 73 certificate in relation to different lots.
49 The straightforward step that could have been taken by Western Developments was that it could have contacted the Water Board to enquire whether a s 73 Certificate had been issued in respect of the property prior to settlement of the conditional contract. Western Developments was in the position of being able to protect itself from the consequences of the Council’s mistake by making its own enquiries of the Water Board and checking if the answer to [requisitions] given by Wati was correct.
50 The Magistrate did not need to fully analyse the cases referred to by Western Developments. Rather, the statement of principle in Woolcock Street Investments is sufficient. In my view, it was open to the magistrate to decide that the plaintiff was not vulnerable and that no duty of care arose in the circumstances.”

50 Accordingly, Harrison AsJ dismissed the appeal (at [51]).

Competency of appeal against the Magistrate’s decision

51 The appeal against the Magistrate’s decision to the Supreme Court was under s 73 of the Local Courts Act 1982 which was then in force. (The Local Court Act 2007 did not commence until 6 July 2009. The new provision governing appeals from the Local Court to the Supreme Court of New South Wales is s 39 which is in different terms). Section 73(1) provided:

“A party to proceedings under this Part who is dissatisfied with the judgment or order of a Court sitting in its General Division may appeal to the Supreme Court against the judgment or order, but only as being erroneous in point of law.”

52 The language of this provision, like many appeal provisions which restrict the scope of an appeal from a lower court, is awkward, an observation also made by Basten JA in Seltsam Pty Limited v Ghaleb [2005] NSWCA 208 at [149] in relation to another appeal provision restricting an appeal to being “in point in law”. The phrase “but only as being erroneous in point of law” evidently restricts the scope of the appeal that may be brought by a party dissatisfied with a judgment or order of the Local Court. But how restrictive is the scope of the appeal?

53 The phrase refers back to the judgment or order – it is the judgment or order that is erroneous in point of law. A judgment or order on a point of law, which is erroneous, would fall within the scope of the appeal. That is to say, an appeal against an erroneous judgment or order on a point of law would answer the description of an appeal against a judgment or order as being erroneous in point of law.

54 However, the phrase is not restricted to judgments or orders on points of law. It also captures other judgments or orders that involve error in point of law. Circumstances where a judgment or order might be erroneous in point of law include where the court:

“(a) misapprehended the relevant legal principles to be applied;
(b) made a finding as to primary facts which was unsupported by any evidence or other material on which reliance might properly be placed;
(c) in the application of correctly stated principles, drawn an inference from the facts which was not reasonably available in the circumstances, or
(d) failed to address an issue which is raised by the agreed or established facts.”

See Amaca Pty Ltd (under NSW External Administration) v A B & P Constructions Pty Ltd [2007] NSWCA 220; (2007) Aust Torts Reports 81-910 at [134], summarising the authorities referred to in Seltsam Pty Ltd v Ghaleb at [149]-[168].

55 The applicants, being the parties who are dissatisfied with the judgment and orders of the Local Court, must identify, relevantly for present purposes, the legal error or errors on the part of the Local Court which affected the judgment and orders: Seltsam Pty Ltd v Ghaleb at [158].

56 The applicants identify two legal errors. First, the Magistrate, and the Associate Judge on the appeal, found the Council did not owe a duty of care to the applicants.

57 The existence or non-existence of a duty of care is a question of law: see, for example, Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54; (2002) 211 CLR 540 at [106]; Amaca Pty Limited v State of New South Wales [2003] HCA 44; (2003) 77 ALJR 1509; (2003) 199 ALR 596 at [26]; McPherson’s Limited v Eaton [2005] NSWCA 435; (2005) 65 NSWLR 187 at [34]; Sutherland Shire Council v Becker [2006] NSWCA 344; (2006) 150 LGERA 184 at [59]; Amaca Pty Limited (under NSW External Administration) v A B & P Constructions Pty Limited at [45] and [135]; State of NSW v Bovis Lend Lease Pty Limited (formerly Civil & Civic Pty Limited) [2007] NSWSC 1045; (2007) Aust Torts Reports 81-917 at [7(iv)].

58 A decision that a duty of care exists, when it does not exist, or does not exist when it does exist, is erroneous in point of law: see Royal & Sun Alliance Insurance Australia Limited v Betta Industries Pty Limited; Harlander (in liq) v State of NSW [2002] NSWCA 323; (2002) 12 ANZ Insurance Cases 61-544 at [47]; McPherson’s Limited v Eaton at [34], [127] and [2] and [27]; Sydney Water Corporation v Abramovic [2007] NSWCA 248; (2007) Aust Torts Reports 81-913 at [64].

59 Hence, the decision of the Magistrate and of the Associate Judge, that the Council did not owe the applicants a duty of care is on a point of law. An appeal against the Magistrate’s decision on the basis that it is erroneous is an appeal against the decision “as being erroneous in point of law”. The fact that the Magistrate’s decision as to the non existence of the duty of care may depend on questions of fact, including as to whether the applicants are vulnerable, does not alter the character of the decision as being one on a point of law.

60 Secondly, the applicants challenge the finding that the applicants were not vulnerable. That finding was fundamental to and affected the judgment and orders of the Magistrate and Associate Judge. The applicants submit that the finding of non-vulnerability was affected by legal error in that there was a misapprehension or misapplication of the relevant legal principles. An appeal against a judgment or order that is affected by such legal error is also one properly characterised as an appeal against a judgment or order “as being erroneous in point of law.”

61 For these reasons, the Council’s notice of contention, that the appeal is not one against a judgment or order as being erroneous in point of law, should be rejected.

Judgment is erroneous in point of law

62 The duty of care in this case is said to arise from the exercise of the statutory power to issue a subdivision certificate for the subdivision. It is settled law that a public authority may be subject to a common law duty of care when it exercises a statutory power or performs a statutory duty: see East Suffolk Rivers Catchment Board v Kent [1941] AC 74 at 88-89; Caledonian Collieries Ltd v Spiers (1957) 97 CLR 202 at 220; Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 436, 458, 484; Pyrenees Shire Council v Day [1998] HCA 3; (1998) 192 CLR 330 at [177]; Port Stephens Shire Council v Booth [2005] NSWCA 323; (2005) 148 LGERA 351 at [82], [83]; Precision Products (NSW) Pty Ltd v Hawkesbury City Council [2008] NSWCA 278 at [75]. Whether a public authority will be subject to a duty of care owed to a particular person or class of persons in a particular case depends, amongst other things, on the legislation containing the statutory duty or power (see, for example, Graham Barclay Oysters Pty Ltd v Ryan at [146], [149]; State of NSW v Paige [2002] NSWCA 235; (2002) 60 NSWLR 371 at [93] and Precision Products (NSW) Pty Limited v Hawkesbury City Council at [78]) and the nature of the harm caused (such as whether injury to person or property or pure economic loss).

63 The statutory power in this case is the power to issue a subdivision certificate under s 109D(1) of the EPA Act. The identity of the repository of the power can vary depending on a number of factors. In the case of a subdivision the subject of development consent, the repository of the power can be the consent authority or the council (see s 109D(1)(d)(i) of the EPA Act). In many instances, the council will be the consent authority so that there will be no choice. This was the case here where the Council was the consent authority that granted development consent for the subdivision. There is, however, a qualification on the identity of the repository of power where the subdivision involves subdivision work. Subsection 109D(3) provides that:

“A subdivision certificate must not be issued for a subdivision involving subdivision work except by the principal certifying authority appointed for the carrying out of the subdivision work.”

64 The appointment of the principal certifying authority was, and still is, under s 109E of the EPA Act. In the relevant period of time in this case, s 109E(1) and (2) provided that:

“(1) A person who proposes to carry out development involving building work or subdivision work pursuant to a development consent or complying development certificate may appoint the consent authority or an accredited certifier as the principal certifying authority for the development.
(2) Despite subsection (1), an accredited certifier must not be appointed as the principal certifying authority for development involving subdivision work unless the subdivision to which the work relates is of a kind identified by an environmental planning instrument as one in respect of which an accredited certifier may be a certifying authority.”

65 Section 109E of the EPA Act was subsequently amended, but the effect of the new subsections (1) and (2) is similar in these respects to the former subsections (1) and (2).

66 In this case, Wati, the person who proposed to carry out development involving subdivision pursuant to the development consent, appointed the Council, which was the consent authority, as the principal certifying authority. Thus the Council exercised the statutory power not as a council, but as a principal certifying authority. Considerations material to whether a public authority is subject to a common law duty of care do not fully apply.

67 The exercise of the power in s 109D(1)(d) to issue a subdivision certificate is subject to the restrictions in s 109J(1) and (2) of the EPA Act. These provisions fix preconditions that must be satisfied before the power may be exercised to issue a subdivision certificate. The certifying authority must be satisfied that the matters in subsections 109J(1) and (2) have been met. The matters vary in nature but their inclusion would seem to have a common purpose, namely that of ensuring that the product or the commodity that is created by the subdivision meets certain standards, including lawfulness, compliance with conditions of development consent and compliance with requirements of any relevant water supply authority.

68 The effect of exercising the power to issue a subdivision certificate for the subdivision is to authorise the registration of the plan of subdivision under Division 3 of Part 23 of the Conveyancing Act 1919 (see s 109C(1)(d) of the EPA Act). Upon registration of the plan of subdivision, the subdivided allotments became capable of being transferred on sale. After transfer of title to the subdivided lots, enforcing compliance with any unsatisfied conditions of development consent for the subdivision may be difficult, if not impossible, as Hillpalm Pty Limited v Heaven’s Door Pty Limited [2004] HCA 59; (2004) 220 CLR 472 revealed.

69 The effect of issuing the subdivision certificate for the subdivision is similar to that referred to by McPherson JA in Albert Shire Council v Bamford (1998) 2 Qd R 125; (1997) 97 LGERA 33 at 43:

“The effect of exercising its power of approving an application for subdivision is to create a series of new allotments which would otherwise not be available for purchase and use by members of the public for residential purposes … The effect of approving a subdivision puts into circulation something which, in that form, is for the first time capable of being bought and sold, or, in other words, dealt with as a merchantable commodity. Viewed in that way, the Council’s action may be compared to that of the manufacturer in Donoghue v Stevenson [1932] AC 562, who, by fabricating a commodity and making it available for distribution to the public, comes under a duty of care to persons who sustain damage through negligence in the course of manufacturing it.”

70 So too in Port Stephens Shire Council v Booth at [100], Giles JA (with whom Beazley JA and Hunt AJA agreed), dealing with the exercise by a council of the statutory powers to grant development consent and building approval for a holiday cabin resort on land adversely affected by noise from aircraft utilising a nearby air force base, stated that:

“… just as the duty of care owed to LMI [the applicant for development consent and building approval] would protect it from putting onto the market the defective commodities of land with inappropriately constructed cabins, so also the duty of care owed to prospective purchasers protected them by preventing the defective commodities coming onto the market. The land was not like a medication which could be used safely or unsafely, so that a duty of care was satisfied by instructions as to use. The time for reasonable care, in the interests of prospective purchasers as well as LMI, was in the consideration of the development application and the building application, so that the approvals were not given without appropriate noise attenuation conditions.”

71 In this case, the effect of exercising the power to issue a subdivision certificate was to create new allotments which would not otherwise be available for purchase and use by members of the public. Imposing a duty of care on the exercise of the power to issue a subdivision certificate would protect prospective purchasers from putting on to the market allotments that do not meet the standards implicitly required by the matters in s 109J(1) and (2) of the EPA Act, such as lawfulness, compliance with conditions of development consent and compliance with any requirements with a relevant water supply authority. The time for reasonable care in the interests of prospective purchasers is at the time of issue of the subdivision certificate. Afterwards is too late.

72 The existence of a duty of care also depends on the nature of the harm that may be caused by an exercise of the statutory power or performance of the statutory duty. In the case of the statutory power to issue a subdivision certificate for a subdivision, the nature of the harm that may be caused is pure economic loss.

73 In Perre v Apand Pty Limited [1999] HCA 36; (1999) 198 CLR 180 at [105], McHugh J listed five principles that are “relevant in determining whether a duty exists in all cases of liability for pure economic loss”. They are principles concerned with: reasonable foreseeability of loss; indeterminacy of liability; autonomy of the individual; vulnerability to risk; and knowledge of the risk and its magnitude: see also Woolcock Street Investments Pty Limited v CDG Pty Ltd at [74]. I will deal first with the factors of reasonable foreseeability and vulnerability.

74 There needs to be reasonable foreseeability. A defendant must know or ought reasonably to know that its conduct is likely to cause harm, in the form of economic loss, to the plaintiff or a class of persons to which the plaintiff belongs, unless the defendant takes reasonable care to avoid that harm. However, reasonable foreseeability is not sufficient in itself to always give rise to a duty of care, especially in cases of pure economic loss: Bryan v Maloney [1995] HCA 17; (1995) 182 CLR 609 at 632; Sullivan v Moody [2001] HCA 59; (2001) 207 CLR 562 at [42]; Woolcock Street Investments Pty Limited v CDG Pty Ltd at [21] and [76].

75 In this case, the test of reasonable foreseeability is satisfied. The Council knew or ought reasonably to have known that the issue of a subdivision certificate for the subdivision, in circumstances where the matters about which it was required to be satisfied had not been met, was likely to cause harm, in the form of economic loss, to prospective purchasers of the subdivided allotments unless the Council took reasonable care to avoid that harm. It was reasonably foreseeable that issuing a subdivision certificate for the subdivision without being satisfied that each of the matters required by s 109J(1) and (2) had in fact been met may result in putting on the market subdivided allotments that failed to meet the standards implicitly required by the matters in s 109J(1) and (2). Such a failure was likely to cause economic loss to prospective purchasers of the subdivided allotments.

76 The present case is an illustration. The Council issued a subdivision certificate without the condition of development consent requiring a certificate of compliance from the water supply authority with respect to the subdivision, or the independent statutory requirement to do the same, being satisfied. The issuing of a subdivision certificate under these circumstances led to the putting on the market of subdivided allotments, which when developed by prospective purchasers in the future, were likely to be the subject of a notice by the water supply authority to comply with certain requirements involving payment of money.

77 The vulnerability of the plaintiff is an important factor in determining the existence of a duty of care to avoid economic loss: Woolcock Street Investments Pty Limited v CDG Pty Ltd at [23], [80]. The concept of vulnerability was explained as follows:

“‘Vulnerability’ in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, ‘vulnerability’ is to be understood as a reference to the plaintiff’s inability to protect itself from the consequences of a defendant’s want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant”: at [23].

See also Perre v Apand Pty Limited at [118], [127].

78 In this case, prospective purchasers of subdivided allotments are vulnerable. In the context of s 109J(1) and (2), prospective purchasers are unable to protect themselves from the consequences of the principal certifying authority’s want of reasonable care in exercising the statutory power under s 109J to issue a subdivision certificate for a subdivision, either entirely or in a way which would cast the consequences of loss on the principal certifying authority. This inability is manifested in a number of ways.

79 First, the inability flows from the effect of the issue of a subdivision certificate. A subdivision certificate authorises the registration of the plan of subdivision. Upon registration, the subdivided allotments become capable of being transferred on sale. The effect is to put into circulation a merchantable commodity. As a consequence, any noncompliance with the matters in s 109J(1) and (2) existing at the time of issue of the subdivision certificate, is crystallised, transmitted to and visited upon prospective purchasers of the subdivided allotments.

80 One example is the situation that arose in Hillpalm Pty Limited v Heaven’s Door. If the principal certifying authority issues a subdivision certificate for a subdivision, notwithstanding noncompliance with a condition of development consent for the subdivision requiring the creation and construction of a right of carriageway, and the plan of subdivision is registered, and the subdivided allotments are transferred, purchasers of the subdivided allotments cannot enforce compliance with the condition of development consent requiring the creation and construction of the right of carriageway.

81 Another example is provided by the facts of the present case. If the principal certifying authority issues a subdivision certificate for a subdivision, notwithstanding noncompliance with the requirement for a certificate of compliance by the relevant water supply authority with respect to the subdivision, and the plan of subdivision is registered, and the subdivided allotments are transferred, purchasers of the subdivided allotments, when they come to develop, will be visited with the consequences of the prior noncompliance, such as the requirement to pay an amount to cover works and systems already constructed to service the subdivision, which amount would have been paid by the subdivider if there had been compliance prior to the issue of the subdivision certificate.

82 Because of this effect of the issue of a subdivision certificate, prospective purchasers are unable to protect themselves, after the principal certifying authority has exercised the statutory power to issue a subdivision certificate, from the consequences of any misexercise of the power.

83 Making inquiries and ascertaining whether the principal certifying authority has or has not misexercised the statutory power to issue the subdivision certificate does not protect prospective purchasers from the consequences of any misexercise of power. Having knowledge of the misexercise of power does not make prospective purchasers able to remedy it or protect themselves from its consequences, either entirely or by casting the consequences of loss on the principal certifying authority.

84 There is also an anterior problem. Prospective purchasers are entitled to assume that if the principal certifying authority exercises the statutory power to issue a subdivision certificate, it has satisfied itself that all of the applicable requirements in s 109J(1) and (2) have in fact been complied with. Prospective purchasers ought not be required to assume that the principal certifying authority has exercised the statutory power improperly or to make inquiries to ascertain whether it has exercised the statutory power properly or improperly.

85 Prospective purchasers who have entered a conditional contract to purchase an allotment to be created by the subdivision, such as the applicants in this case, cannot withhold from purchasing the subdivided allotment once the plan of subdivision has been registered if they discover that the principal certifying authority issued the subdivision certificate without being satisfied that each of the applicable requirements in s 109J(1) and (2) had in fact been met. They are obliged to complete the contract upon registration of the plan of subdivision. They cannot renegotiate the price or the terms of the contract.

86 It is also not reasonable to expect that prospective purchasers should protect themselves, before the principal certifying authority exercises the statutory power to issue a subdivision certificate, against the consequences of any potential misexercise of the power.

87 In theory, prospective purchasers could seek to protect themselves by insisting upon a provision in the contract for sale entitling them to decline to complete the contract or to be compensated by the vendor if the principal certifying authority misexercises the statutory power. But in practice, this would not happen. A prospective purchaser would not anticipate that the principal certifying authority might misexercise the statutory power and, therefore, would not seek inclusion of a contractual provision to protect itself against loss from such unanticipated conduct.

88 Even if a contractual provision entitling non-completion were to be included, such a provision would provide inadequate protection against economic loss for prospective purchasers. If they do not complete the purchase of the property, they will suffer the loss of the property and the benefits that it might have yielded to them. Hence, this step only changes the loss to them, not protect them against any loss.

89 Moreover, including a contractual provision entitling non-completion by the purchaser or compensation by the vendor does not cast the consequences of loss on the principal certifying authority. The burden remains either on the purchaser or the vendor of the lot.

90 For these reasons, the applicants were vulnerable.

91 I now turn to the three remaining factors identified by McHugh J in Perre v Apand as being relevant to determine whether a duty exists to avoid economic loss.

92 The factor of indeterminacy of liability is not a significant issue in cases concerned with economic loss suffered by purchasers of subdivided allotments that come into existence by reason of the issue of a subdivision certificate. The economic loss will be suffered by the first purchaser of a subdivided allotment who is affected by the noncompliance with a requirement in s 109J(1) and (2) which existed when the subdivision certificate was issued. For example, in the case of noncompliance with the requirement for a certificate of compliance for the relevant water supply authority, the loss will be suffered by the first purchaser of the subdivided allotment who proposes to carry out development on the allotment. As part of the process of obtaining development consent to carry out the development, the purchaser would be required to obtain a certificate of compliance from the water supply authority, and in order to do that the purchaser would need to meet any notified requirements of the water supply authority, including payment of an amount to cover the works and systems already constructed. Upon meeting those requirements, a certificate of compliance would be issued and the consequences of the former noncompliance would be spent. Subsequent purchasers of the allotment would no longer suffer economic loss, flowing from the exercise of the statutory power to issue the subdivision certificate in circumstances where there was noncompliance with the requirement to obtain a certificate of compliance from the water supply authority.

93 The factor of autonomy of individuals is not relevant in the context of a claim for damages for pure economic loss arising out of the misexercise of the statutory power to issue a subdivision certificate for a subdivision.

94 The factor of actual knowledge of the risk and its magnitude is not relevant in this case. There is no evidence that the Council actually knew of the risk or its magnitude. However, the Council ought to have known of the risk that the exercise of the statutory power to issue a subdivision certificate when the Council was not satisfied that all of the applicable requirements in s 109J(1) and (2) had been complied with could cause economic loss to prospective purchasers of the subdivided allotments.

95 Other policy factors do not speak against imposing a duty of care on the council when exercising the statutory power to issue a subdivision certificate for a subdivision. In particular, there is not an issue of coherence with administrative law, such as there was in State of NSW v Paige at [156]-[177], [102] and Precision Products (NSW) Pty Limited v Hawkesbury City Council at [116]-[120].

96 I note that in Northern Residential Pty Ltd v Newcastle City Council [2009] NSWCA 141; (2009) 166 LGERA 352, Hodgson JA (at [56]), with whom Tobias JA (at [73]) and Simpson J (at [74]) agreed, considered that a civil action for damages would lie against the principal certifying authority for exercise of the statutory power to issue a subdivision certificate for a subdivision without compliance with the precondition to the exercise of the power in s 109E(3)(d) of the EPA Act. There is no relevant difference between the restrictions in s 109E(3) on the statutory power to issue a subdivision certificate and those in s 109J(1) and (2).

97 In conclusion, the Council did owe a duty of care to the applicants in the exercise of the statutory power to issue the subdivision certificate for the subdivision. The decision of the Magistrate and the Associate Judge to the contrary were erroneous in point of law. This conclusion is sufficient to uphold the appeal. However, the applicants also challenge the decisions as involving error in point of law in finding that the applicants were not vulnerable. I will address this challenge.

98 Both the Magistrate and the Associate Judge concluded that a duty of care was not owed to the applicants because they were not vulnerable. Their reasons differed.

99 The Magistrate’s first reason for concluding that the applicants were not vulnerable was that they were corporations. The vulnerability of a plaintiff is not dependent on being a corporate body or a natural person, as the Associate Judge correctly held. This reason of the Magistrate involved error in misapprehending the legal principles to be applied.

100 The Magistrate’s second reason was that the applicants “could have undertaken several relatively straightforward steps to check the accuracy of the information supplied by the defendant”. This again misapprehends the legal principles to be applied.

101 First, vulnerability is an inability of the plaintiff to protect itself from the consequences of the defendant’s want of reasonable care. In the present context, it is an inability of the applicants to protect themselves from the consequences of the Council’s want of reasonable care in exercising the statutory power to issue a subdivision certificate authorising the registration of the plan of subdivision. Vulnerability is not an inability to check the accuracy of information supplied by the Council or, conversely, non-vulnerability is not an ability to check the accuracy of the information supplied by the Council. That is not a correct formulation of the legal principle.

102 Secondly, the want of reasonable care is not in the supply by the Council of information to the applicants, rather it is in the exercise of the statutory power to issue the subdivision certificate. The consequences of the Council’s want of reasonable care are, therefore, different. Identification of the relevant consequences is necessary to answer the question of the vulnerability of the applicants. Hence, it is the inability of the applicants to protect themselves against the consequences of the Council’s want of reasonable care in the exercise of the statutory power to issue the subdivision certificate, not the consequences of the Council’s want of reasonable care in the supply of information to the applicants.

103 Thirdly, the suggested protective mechanism of undertaking steps to check the accuracy of information supplied by the Council would be ineffective to protect the applicants from the consequences of the Council’s exercise of statutory power to issue the subdivision certificate. Making inquiries and ascertaining, after the fact, that the Council misexercised the power to issue the subdivision certificate could not reverse the process that issue of the subdivision certificate initiated, of authorisation and registration of the plan of subdivision and putting on to the market the subdivided allotments, or cure the noncompliance with the requirements in s 109J(1) and (2) that crystallised on the issue by the Council of the subdivision certificate and that was transmitted to, and would be visited upon, prospective purchasers of the subdivided allotments. Even if the applicants acquired the knowledge of the Council’s misexercise of the statutory power, they had no ability, after the fact, to protect themselves from the consequences of the misexercise of power, either entirely or in a way which would cast the consequences of loss on the Council.

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.

105 The Associate Judge’s reason for concluding that the applicants were not vulnerable was similarly that the applicants could have made inquiries of the Corporation whether a s 73 certificate of compliance had been issued with respect to the property prior to settlement of the conditional contract and could have checked if the answer to the requisition given by Wati was correct. This reason also misapprehends the relevant legal principle.

106 The comments given above in relation to the Magistrate’s second reason are also applicable to this reason of the Associate Judge. In particular, ascertaining, after the fact, that a s 73 certificate of compliance had not been sought or obtained by Wati with respect to the subdivision could not reverse the process that had been initiated by the issue of the subdivision certificate or cure the noncompliance. For these applicants, who had already entered into a conditional contract for the purchase of a subdivided allotment, knowledge of the noncompliance would not have provided justification for not completing the contract once registration of the plan of subdivision occurred. Noncompliance with a condition of development consent and a statutory requirement in s 109J(1) did not go to the title or nature of the land. The applicants were obliged to complete the contract upon registration of the plan of subdivision. Hence, the step of making inquiries of the Corporation would not have protected the applicants from the consequences of the Council’s want of reasonable care in issuing the subdivision certificate for the subdivision.

107 I also note that the answer to the requisition was not incorrect, as the Associate Judge seems to have assumed. As Wati had not applied for a certificate of compliance with respect to the subdivision (true it is in breach of its requirement to do so), the Corporation had not served a notice on Wati requiring the payment of an amount for works and systems already constructed to service the subdivision. Hence, there was no sum due for sewerage connections or other works and the answer “Not so far as Vendor is aware” was correct. Hence, even if an inquiry had been made, any information supplied would not have revealed the answers to the requisitions to be incorrect.

108 Accordingly, both the Magistrate’s decision and the Associate Judge’s decision were erroneous in point of law.

109 Leave to appeal should be granted and the appeal upheld. On the facts, the Council did owe a duty of care to the applicants in the exercise of the statutory power to issue the subdivision certificate to the subdivision. The Magistrate found that if a duty of care existed, it had been breached. The Council did not contest this finding. The Council did not raise any defence under the Civil Liability Act 2002. The Magistrate did not, however, assess the quantum of damages for any economic loss suffered by the applicants as a result of the breach of duty. The matter therefore needs to be remitted to the Local Court for damages to be assessed.

110 I would propose the following orders:

1. Leave to appeal granted and direct the filing of the notice of appeal within 7 days.

2. Appeal upheld.

3. Set aside the decisions and orders of Brown LCM of 12 February 2008 and Harrison AsJ of 31 July 2008.

4. Remit the matter to the Local Court for quantum of damages to be assessed.

5. The respondent to pay the applicants’ costs.

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