Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Dansar Pty Ltd v Byron Shire Council [2014] NSWCA 364
• Hearing dates: 18 and 19 March 2014
• Decision date: 27 October 2014
• Before: Macfarlan JA at [1]; Meagher JA at [99]; Leeming JA at [184]

Decision

Appeal dismissed with costs.

 

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: TORTS - negligence - duty of care - pure economic loss - respondent Council was consent authority in relation to development application and authority having care and management of sewerage works - appellant sought allocation of sewerage capacity for purpose of obtaining consent to development application - whether Council owed duty of care when implementing earlier decision as to allocation of spare sewerage capacity - whether existence of asserted duty compatible with Council's statutory functions and obligations - whether other features of relationship between parties justified subjecting Council to duty of care - relevance of distinction between policy and operational decisions
• Legislation Cited: Civil Liability Act 2002 (NSW), ss 43, 43A, 44; Environmental Planning and Assessment Act 1979 (NSW), ss 76A, 78A, 79C, 80, 82, 97; Land and Environment Court Act 1979 (NSW), s 39; Local Government Act 1993 (NSW), ss 8, 22, 24, 58, 61, 68, 89, 176, 179; Protection of the Environment Operations Act 1997 (NSW), s 91
• Cases Cited: Armidale City Council v Alec Finlayson Pty Ltd [1999] FCA 330; 104 LGERA 9; Avenhouse v Hornsby Shire Council (1998) 44 NSWLR 1; Barrick Australia Ltd v Williams [2009] NSWCA 275; 74 NSWLR 733; CAL No 14 Pty Ltd v Motor Accidents Insurance Board [2009] HCA 47; 239 CLR 390; Caledonian Collieries Ltd v Speirs [1957] HCA 14; 97 CLR 202; Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" [1976] HCA 65; 136 CLR 529; Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; 75 NSWLR 649; Codlea Pty Ltd v Byron Shire Council [1999] NSWCA 399; 105 LGERA 370; Crimmins v Stevedoring Industry Finance Committee [1999] HCA 59; 200 CLR 1; Eberstaller v Poulos [2014] NSWCA 211; Federated Engine-Drivers' and Firemen's Association of Australasia v Broken Hill Proprietary Co Ltd [1911] HCA 31; 12 CLR 398; Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54; 211 CLR 540; Hazeldell Ltd v Commonwealth [1924] HCA 36; 34 CLR 442; Hill v Van Erp [1997] HCA 9; 188 CLR 159; Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] VSC 27; ATR 81-692; L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) [1981] HCA 59; 150 CLR 225; Makawe Pty Ltd v Randwick City Council [2009] NSWCA 412; 171 LGERA 165; McGovern v Ku-ring-gai Council [2008] NSWCA 209; 72 NSWLR 504; MM Constructions (Aust) Pty Ltd v Port Stephens Council (No 7) [2012] NSWCA 417; 191 LGERA 292; Moorabool Shire Council v Taitapanui [2006] VSCA 30; 14 VR 55; Mutual Life & Citizens' Assurance Co Ltd v Evatt [1968] HCA 74; 122 CLR 556; Newcastle City Council v Shortland Management Services [2003] NSWCA 156; 57 NSWLR 173; Perre v Apand Pty Ltd [1999] HCA 36; 198 CLR 180; Precision Products (NSW) Pty Ltd v Hawkesbury City Council [2008] NSWCA 278; 74 NSWLR 102; Pyrenees Shire Council v Day [1998] HCA 3; 192 CLR 330; R v Connell; ex parte Hetton Bellbird Collieries Ltd [1944] HCA 42; 69 CLR 407; Stuart v Kirkland-Veenstra [2009] HCA 15; 237 CLR 215; Sullivan v Moody [2001] HCA 59; 207 CLR 562; Sutherland Shire Council v Heyman [1985] HCA 41; 157 CLR 424; Tepko Pty Ltd v Water Board [2001] HCA 19; 206 CLR 1; Vairy v Wyong Shire Council [2005] HCA 62; 223 CLR 422; Western Districts Developments Pty Ltd v Baulkham Hills Shire Council [2009] NSWCA 283; 75 NSWLR 706; Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; 216 CLR 515
• Category: Principal judgment
• Parties: Dansar Pty Ltd (Appellant); Byron Shire Council (Respondent)
• Representation: Counsel: AJL Bannon SC/A Bouris (Appellant); PW Taylor SC (Respondent); Solicitors: King & Wood Mallesons (Appellant); Moray & Agnew (Newcastle) (Respondent)
• File Number(s): CA 2013/56482

Decision under appeal

• Jurisdiction: 9111
• Citation: Dansar Pty Ltd v Byron Shire Council [2013] NSWSC 17
• Date of Decision: 30 January 2013
• Before: McCallum J
• File Number(s): SC 2007/265126

HEADNOTE

[This headnote is not to be read as part of the judgment]

The respondent, Byron Shire Council ("the Council"), was both the development consent authority and the water and sewerage authority for the Byron Shire. In mid-2000, it assessed that there was spare capacity within the West Byron Sewage Treatment Plant and resolved to allocate that capacity to new developments.

On 6 February 2001 the appellant, Dansar Pty Ltd, lodged an application for approval of the residential development of a property owned by it. In May 2001 there was a deemed refusal of that application and in August 2001 Dansar appealed from that deemed refusal. That appeal was dismissed by the Land and Environment Court in March 2002. In October 2002 Dansar lodged new development applications for the same development. Those applications were approved in June 2005.

In 2007, Dansar commenced proceedings against the Council alleging that the latter had breached a duty of care owed to Dansar, and claiming damages for economic loss suffered as a result of delay in approving its development application. Dansar claimed that but for that breach of duty it would have been allocated the required sewerage capacity and received development approval at some time between December 2001 and February 2002. By judgment of 30 January 2013, McCallum J in the Common Law Division held that the Council did not owe the posited duty of care and entered judgment for the Council.

Held (Meagher and Leeming JJA, dismissing the appeal; Macfarlan JA dissenting):

(1) The existence and content of any duty of care must be determined prospectively and by reference to the statutory context and the positions occupied by the parties in that context ([108]-[110], [158]-[159]).

Sullivan v Moody [2001] HCA 59; 207 CLR 562, CAL No 14 Pty Ltd v Motor Accidents Insurance Board [2009] HCA 47; 239 CLR 390, Perre v Apand Pty Ltd [1999] HCA 36; 198 CLR 180, Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54; 211 CLR 540, Stuart v Kirkland-Veenstra [2009] HCA 15; 237 CLR 215, Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; 75 NSWLR 649, considered.

(2) Where it is said that a public authority owes a duty of care, it is necessary to identify the function or power, the performance or exercise of which is the subject matter of the alleged duty, and to address whether the existence of that duty would give rise to inconsistent obligations or conflicting claims upon the exercise of the power ([159]).

(3) The asserted duty of care is incompatible with the Council's unconstrained exercise of its statutory functions and obligations. In determining whether to increase the permanent load on the treatment works by the amount of capacity required for the appellant's development, the Council was required to give paramount consideration to the safety and continued operation of the treatment facilities, maintaining public health and protecting the environment. That obligation and the interests to which the Council was to have regard are incompatible with the existence of the asserted private law duty of care ([161]).

(4) That incompatibility is not avoided by seeking to restrict the content of the duty by reference to "mechanical" tasks of allocation ([162]). The Council's decision in January 2002 to adhere to the methodology which it had adopted in mid-2000 was not "mechanical" and required a judgment as to whether that methodology and the assumptions and calculations which informed it should be applied when considering Dansar's development ([162]).

Sullivan v Moody [2001] HCA 59; 207 CLR 562, applied.

(5) There was no reliance or assumption of responsibility, and to that extent no relevant vulnerability ([171]-[177]). At no time was Dansar relying on any express or implied assurance from the Council that it would allocate available capacity in a particular way and exercise reasonable care in doing so ([176]). The appellant had the assistance of expert town planning advice. It also had access to officers and staff of the Council, to the public deliberations and resolutions of the Council and to reports presented at those meetings ([173]).

Tepko Pty Ltd v Water Board [2001] HCA 19; 206 CLR 1, Mutual Life & Citizens' Assurance Co Ltd v Evatt [1968] HCA 74; 122 CLR 556, Perre v Apand Pty Ltd [1999] HCA 36; 198 CLR 180, Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; 216 CLR 515, considered.

(6) The appellant had no right or entitlement to have any further load committed to the sewerage system. Nor did it have any right or interest, the enjoyment of which depended on the exercise of care by the Council or the existence of which depended on the exercise of care by the Council in the performance of a function that it was obliged to undertake ([179]-[180]). In that respect, the position is to be contrasted with Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" [1976] HCA 65; 136 CLR 529, Hill v Van Erp [1997] HCA 9; 188 CLR 159 and Perre v Apand Pty Ltd [1999] HCA 36; 198 CLR 180.

(7) (Per Macfarlan JA, dissenting) The Council was subject to a common law duty of care in the operational task of allocating to developments for which approval was sought the sewerage capacity that it had determined was available and should be allocated to development applicants in order of receipt of application ([73], [83], [85]-[87]). There is no reason why a statutory authority such as the Council may not be subject to specific duties of care related to aspects of its functions that do not involve matters of judgment, opinion or public policy ([69]).

Avenhouse v Hornsby Shire Council (1998) 44 NSWLR 1, Armidale City Council v Alec Finlayson Pty Ltd [1999] FCA 330; 104 LGERA 9 and Western District Developments Pty Ltd v Baulkham Hills Shire Council [2009] NSWCA 283; 75 NSWLR 706, followed.

Dictum of Mason J in Sutherland Shire Council v Heyman [1985] HCA 41; 157 CLR 424 at 469, applied.

Judgment

 

1 MACFARLAN JA: In 1997 the respondent Council, which is both the development consent authority and water and sewerage authority for the Byron Shire, resolved to limit the number of new developments it approved in the area, due to the limited capacity of its two sewerage treatment plants. In September 2000, Mr John Vaughan, the principal of Dansar Pty Ltd (the appellant), gave instructions for the preparation of an application by Dansar to the Council for approval of the residential development of a property owned by it. Mr Vaughan was aware of the Shire's limited sewerage capacity but believed that the Council would allocate Dansar part of the available capacity for its development.

 

2 Dansar's development application was lodged with the Council on 6 February 2001 but was only approved (by then in an amended form) on 20 June 2005.

 

3 Dansar commenced the present proceedings in 2007 claiming damages from the Council for the breach by it of a common law duty of care that it owed to Dansar. Dansar alleged, and continues to allege, that the delay in approval was largely caused by the Council failing to exercise reasonable care in carrying out the mechanical task of allocating the spare capacity which it had determined should be allocated to new developments. Dansar contended that if the Council had not acted negligently, it would have realised that capacity was available to allocate to Dansar, would have made such an allocation and would have approved the development application much earlier than occurred, with Dansar thereby avoiding the financial loss it suffered as a result of the delay.

 

4 The proceedings were heard by McCallum J sitting in the Common Law Division. By judgment of 30 January 2013, her Honour found that the Council did not owe the asserted duty of care to Dansar and directed the entry of judgment for the Council ([2013] NSWSC 17).

 

5 On appeal, Dansar challenged that finding and contended that this Court should find that the Council both owed the alleged duty of care and breached it. The parties agreed that if the Court found for Dansar on liability, questions of causation and quantum of damages should be remitted to the Common Law Division for determination.

 

6 For the reasons that appear below, I consider that the alleged duty was both owed and breached and that the Council did not demonstrate that any of the statutory defences upon which it relied (Civil Liability Act 2002 (NSW) ss 43, 43A and 44) were applicable. As a result, the appeal should be allowed and the proceedings remitted to the Common Law Division.

 

RELEVANT STATUTORY AND OTHER PROVISIONS

 

Environmental Planning and Assessment Act 1979 (NSW)

 

7 Section 76A of the Environmental Planning and Assessment Act ("EPAA") prohibits the development of land without consent where, as in the case of Dansar's proposed development, an environmental planning instrument requires development consent to be obtained. Section 78A permits a person to apply to a consent authority, in this case the Council, for consent to carry out a development. The consent authority is required to consider the matters identified in s 79C in evaluating the application, including the provisions of a relevant environmental planning instrument.

 

Local Government Act 1993 (NSW)

 

8 Section 68 of the Local Government Act ("LGA") prohibits the carrying out of sewerage work and the connection of private drains or sewers to public drains or sewers unless an approval is obtained from the relevant council, here the respondent Council. In determining an application, the council is to consider, inter alia, protection of the environment and of public health, safety and convenience (see s 89). Section 78A(3) of the EPAA permits an application for such approval to be made in a relevant development application lodged with the same council under the EPAA.

 

9 Section 176 of the LGA confers a right of appeal to the Land and Environment Court ("LEC") on an applicant who is dissatisfied with the determination of an application for approval concerning sewerage works. The LEC has a discretion on such an appeal to award compensation to an applicant for approval, for any expense incurred in consequence of a council's refusal to grant, or delay in granting, an approval:

 

"if the Court considers that the council would not have acted in the way it did but for the fact that it was unduly influenced by vexatious or unmeritorious submissions made by members of the public or that the council has acted vexatiously" (see s 179).

 

Byron Local Environmental Plan 1988

 

10 Clause 45(1) of the Byron Local Environmental Plan ("the LEP") provides:

 

"45(1) The Council shall not consent to the carrying out of development on any land to which this plan applies unless it is satisfied that prior adequate arrangements have been made for the provision of sewerage, drainage and water services to the land".

 

Civil Liability Act 2002 (NSW)

 

11 Sections 43 and 43A of the Civil Liability Act ("CLA") are in the following terms:

 

"43 Proceedings against public or other authorities based on breach of statutory duty

 

(1) This section applies to proceedings for civil liability to which this Part applies to the extent that the liability is based on a breach of a statutory duty by a public or other authority in connection with the exercise of or a failure to exercise a function of the authority.

 

(2) For the purposes of any such proceedings, an act or omission of the authority does not constitute a breach of statutory duty unless the act or omission was in the circumstances so unreasonable that no authority having the functions of the authority in question could properly consider the act or omission to be a reasonable exercise of its functions.

 

(3) In the case of a function of a public or other authority to prohibit or regulate an activity, this section applies in addition to section 44.

 

43A Proceedings against public or other authorities for the exercise of special statutory powers

 

(1) This section applies to proceedings for civil liability to which this Part applies to the extent that the liability is based on a public or other authority's exercise of, or failure to exercise, a special statutory power conferred on the authority.

 

(2) A special statutory power is a power:

 

(a) that is conferred by or under a statute, and

 

(b) that is of a kind that persons generally are not authorised to exercise without specific statutory authority.

 

(3) For the purposes of any such proceedings, any act or omission involving an exercise of, or failure to exercise, a special statutory power does not give rise to civil liability unless the act or omission was in the circumstances so unreasonable that no authority having the special statutory power in question could properly consider the act or omission to be a reasonable exercise of, or failure to exercise, its power.

 

(4) In the case of a special statutory power of a public or other authority to prohibit or regulate an activity, this section applies in addition to section 44."

 

12 Section 44 of the CLA provides that a public authority such as the Council is not liable for a failure to exercise or to consider exercising any regulatory function if the authority could not have been required to exercise the function in proceedings instituted by the plaintiff.

 

THE FACTUAL CIRCUMSTANCES

 

13 Following the limitation on new developments that the Council imposed in 1997, interim upgrade works were undertaken to improve the Byron Bay area's sewerage capacity.

 

14 In mid-2000, an officer in the Council's Engineering Department, Mr Ian Cook, calculated the sewerage capacity of the West Byron Sewerage Treatment Plant (being that which is relevant to Dansar's land) (the "West Byron STP") available for allocation by the Council. He derived a figure of 371 EPs which was converted by Council staff to 92.4 ETs. An "ET" (meaning "equivalent tenement") is a standard measure used to assess the impact of a property on the sewerage system. An "EP" (meaning "equivalent person") is a standard unit of sewerage usage based on the usage of a typical person in a residential setting. Council staff used a ratio of four EPs to one ET in making the conversion. Subsequent documents and also submissions before this Court usually referred to the not materially different figure of 92.75 ETs which I shall use.

 

15 At its meeting on 19 September 2000, the Council noted that the West Byron STP had an unused capacity of 371 EPs available for allocation to applicants for development approval.

 

16 Dansar lodged its development application with the Council on 6 February 2001, after Mr Vaughan of Dansar had been advised by the Mayor of Byron Bay that there was sewerage capacity available to cover the development.

 

17 In a memorandum of 27 February 2001 to the Council's General Manager and others, its Senior Development Engineer, Mr Bob Hanby, said that 32.14 ETs of the 92.75 ETs previously identified spare capacity of the West Byron STP had been allocated to various approved development applications and that the allocations required to satisfy further applications that had been lodged with Council exceeded the balance of the spare capacity. He said that it was therefore necessary "that a protocol be put in place with regard to allocation of the remaining ETs and further acceptance of Development Applications". It is clear that the allocations made and to be made did not include that required for Dansar's development.

 

18 These figures were repeated by the Council's General Manager, Ms Robyn Read, in a memorandum of 28 February 2001 to all councillors. Ms Read concluded that there was "no remaining spare capacity in the West Byron STP assuming the success of a large percentage of lodged DAs". The Mayor showed Mr Vaughan a copy of this memorandum the following day. What he said indicated that Dansar's development was one of those to which the previously identified spare capacity had been or would be allocated. Further communications with Council representatives in the following months confirmed Mr Vaughan's belief that this was so.

 

19 On 1 March 2001 the Mayor issued a media release stating that the development applications that the Council was then processing would consume the remaining capacity of the West Byron STP and that "any spare capacity that emerges because of the failure of current development applications will be allocated on the basis of date of receipt". The Council passed a resolution to this effect on 24 April 2001. Mr Vaughan read the press release and also a notice to the same effect posted at the Council's offices.

 

20 By memorandum of 14 August 2001, Council staff recommended that the Council defer a decision on Dansar's development application for two months to allow for the submission of a revised proposal addressing various concerns set out in the report. None of those concerns related to sewerage. The Council so resolved on that day.

 

21 On 31 August 2001, Dansar lodged with the LEC an appeal against the "deemed refusal" of its development application which occurred by reason of the Council not having determined the application within the period prescribed by the regulations (see s 82 EPAA). That deemed refusal did not preclude the Council thereafter considering and determining the application (ibid).

 

22 In a memorandum presented to the Council meeting of 28 August 2001, Council staff noted that there were sufficient ETs to allocate to development applications lodged prior to 6 March 2001.

 

23 In October 2001 Dansar lodged with the Council amended plans for its development application.

 

24 On 2 November 2001 the Council filed in Dansar's LEC proceedings a "Draft Statement of Issues". The first two issues were stated to be:

 

"1.1 Whether adequate arrangements can be made for the provision of services to the proposed development in accordance with clause 45 of the Byron Local Environmental Plan 1988.

 

1.2 Whether the proposal can be approved having regard to the inability to make prior adequate arrangements to the satisfaction of Council for the disposal of sewage".

 

25 An internal Council document of 18 December 2001 referred to the Dansar development application as requiring, in its original form, 11.6 ETs and 12.4 ETs in its amended form.

 

26 By a memorandum of 18 December 2001 Council officers recommended the refusal of Dansar's development application for a number of reasons, the first of which was as follows:

 

"The proposed development exceeds the available additional loading on sewerage services, and therefore prior adequate arrangements have not been made in accordance with Clause 45 of the Byron Local Environmental Plan 1988".

 

The memorandum included the following discussion on that topic:

 

"The calculation of the loading on the sewerage system proposed by this development is as follows:

 

11 x 2 bedroom units @ 0.7 ET / unit	= 7.7 ET
6 x 3 bedroom units @ 0.95 ET / unit	= 5.7 ET
Total	= 13.4 ET

 

The additional loading [being additional to the standard 1.0 applicable to the undeveloped site] created by the proposed development is 12.4 ET. There is insufficient capacity available from Council's sewerage infrastructure for the subject development. A separate report is to be presented to the Committee for consideration in this regard. In this regard, the application has not made prior adequate arrangements for the provision of sewerage services to the land as required by Clause 45 of Byron LEP 1988. Additionally the original application was for 11.6 ET. It is not reasonable that the applicant now apply for additional 'spare' ET. Any future allocation, which may become available, should be limited to 11.6 ET".

 

27 At its meeting on 18 December 2001, the Council resolved to defer consideration of Dansar's development application and to invite it to amend the application to address a number of points, not including any concerning sewerage. The resolution also stated that "Council recognises that DA 10.2001.64.1 [Dansar's application of 6 February 2001] was included in the pre-6 March 2001 ET allocation". At an extraordinary meeting on 29 January 2002, the Council however rescinded this aspect of its resolution.

 

28 A report dated 18 December 2001 prepared by Council staff and dealing with "spare capacity - West Byron sewerage treatment plant" recorded that only 5.073 ETs of the available capacity of 92.75 ETs remained unallocated. It was said that those allocations did not include any allocation for Dansar's development application, which required 11.6 ETs. The report said that there was only 0.943 ET available for Dansar. It noted that further ETs might become available if a development application by Aquarius Backpackers was refused.

 

29 The Council's Final Statement of Issues dated 13 February 2002, filed in the LEC proceedings, contained the same first two issues concerning sewerage as included in the draft (as to which, see [24] above).

 

30 On 15 February 2002 Mr Phil Warner, the Council's Acting Director of Water and Waste Services, advised councillors that recent sewage flows for Byron Bay showed significant unanticipated growth and indicated that further technical work was being commissioned "to verify the data and suggest appropriate next steps".

 

31 Appended to the memorandum was a note from the General Manager which included a statement that "under no circumstances should there be a re-allocation of any ETs that are released through failed court cases, etc". This statement was not contained in what appears to be the final version dated 1 March 2002 of the memorandum and its appended note. In any event, it did not suggest that the identified spare capacity of 92.75 ETs should not remain allocated to those developments to which it had been allocated and which continued to require it.

 

32 In his Statement of Evidence for use at the LEC hearing in March 2002, Mr Warner supported the Council's decision to refuse Dansar's development application "as the proposal will place an additional sewage load, in excess of the current and committed loads of 10,395 EP (Equivalent Persons) on the West Byron Sewage Treatment Plant. This plant does not have spare sewage treatment capacity to cater for this additional load". Mr Warner did not say that the spare capacity of 92.75 ETs previously identified as available for allocation should no longer be allocated. Rather, he was saying that Dansar's development could not be accommodated within that total capacity (of 10,395 EPs) because it was already committed. The evidence before the primary judge indicates that this was an erroneous proposition because, contrary to the apparent belief of Council officers, the part of that capacity that had previously been identified as "spare" (92.75 ETs) had not, with due care, been allocated to developments that required it (see [39] - [41] below).

 

33 Similarly, in submissions to the LEC on 11 March 2002, the solicitor for the Council opposed Dansar's appeal on the basis, inter alia, that there was insufficient of the 92.75 ETs spare capacity remaining to satisfy the sewerage need for Dansar's development.

 

34 In his judgment of 15 March 2002, Commissioner Hoffman of the LEC stated that the parties before him were agreed that one of the two principal issues on the appeal before him was that concerning sewerage identified in [24] above. The Commissioner dismissed the appeal against the deemed decision to refuse the development application. He concluded that sewerage capacity was not available, there being insufficient of the spare capacity of "92 ETs" remaining available for Dansar's development.

 

35 A memorandum dated 27 March 2003 from the then General Manager of the Council, Ms Pamela Westing, to councillors and the "Executive Team" stated that allocation of sewerage capacity to development applications would "continue to be made on the basis of a total spare capacity of 92.75 ET, as advised to Council by the then General Manager on 28 February 2001".

 

36 Dansar's prospects of obtaining development approval finally changed when, in a letter of 29 April 2004 to Mr Vaughan of Dansar, Ms Westing stated:

 

" ... A report presenting the issue to Council is scheduled to go to Council's Ordinary Meeting on 11 May 2004. The availability of ETs from the original 92.75 determined in March 2001 is a result of the outcome of various matters before the Land and Environment Court. The report to Council will outline the issues and the options for allocating this capacity. If Council resolves to continue its current process, there will be sufficient ETs available for your development application should you choose to lodge [a] S82A review request, or an appeal to the Land and Environment Court".

 

37 The Council passed a resolution to this effect on 11 May 2004 and, by letter of 20 May 2004, the Acting Director of Water and Waste Services of the Council advised Mr Vaughan that 10.5 ETs of the spare sewerage capacity had been reserved for Dansar's development. This was sufficient to satisfy its development's requirements for sewerage.

 

38 After further dealings between Dansar and the Council, the Council approved Dansar's amended development application on 20 June 2005.

 

The available capacity of the West Byron Sewerage Treatment Plant

 

39 It was common ground on the appeal that, at all material times, sufficient of the 92.75 ETs total spare capacity referred to above remained available to accommodate Dansar's proposed development application. The Council's position in this respect on appeal and at first instance was confirmed by a letter tendered on appeal. The letter, from Dansar's solicitors to the Council's solicitors, included the following:

 

"We confirm that you have advised us that your position is that it has never been the Council's case, and it will not be argued on appeal, that ETs were not available for the Dansar application, if the allocations from the pool of 92.75 ETs had been correctly identified and tallied" (Exhibit A).

 

40 The nature of the Council officers' errors which led to the Council acting, for a considerable period, on the basis that there was insufficient of the total spare capacity of 92.75 ETs available to accommodate Dansar's proposed development were identified in a schedule provided by Dansar to the Court on appeal. It is unnecessary to state more of the detail of these errors than the following, as the fact that they were made and their effect was a matter of agreement between the parties.

 

• 1.8 ETs continued to be allocated in respect of a development application by one Roberts after the application was withdrawn.
• 1.6 ETs continued to be allocated in respect of a development application by P W O'Connor after the application was approved without any ET requirements.
• A standard credit of 1.0 ET per site should have been, but was not, given in respect of a development by C Lonergan and Associates.
• 3.93 ETs were allocated in respect of a development by one Ahern when no allocation was required for that development.
• 0.7 ETs continued to be allocated in respect of a development application by one Ives after the application was withdrawn.
• 11.5 ETs were double counted in respect of a development at Shirley Street, Byron Bay.
• 9.75 ETs were double counted in respect of a development application by Aquarius Backpackers.

 

41 These errors accounted for 30.28 ETs. In addition, Dansar contended that 39.25 further ETs of the total spare capacity of 92.75 ETs were available for allocation but were not recognised by Council officers to be available because Council officers used the wrong conversion rate in converting the figure of 371 EPs to ETs (see [14] above). This contention was not the subject of detailed submissions on appeal because the impact of the errors listed above exceeded by a considerable margin the capacity of between 11.6 and 12.4 ETs required for the Dansar development. I add that there appears to be an error of one ET in the schedule Dansar supplied to this Court, probably making the effect of the alleged conversion rate error 38.25 ETs rather than 39.25 ETs but the difference is of no consequence.

 

THE JUDGMENT AT FIRST INSTANCE

 

42 The primary judge summarised Dansar's case as follows:

 

"2 Amongst the many planning issues raised by the development application was a question as to the extent of Byron Shire's spare sewage treatment capacity. The present claim rests critically on the Council's consideration of that issue. In broad terms the developer, Dansar Pty Ltd, asserts that the Council negligently underestimated the degree of spare sewage treatment capacity in Byron Shire and overestimated the extent to which such capacity was already at least notionally allocated to existing properties or other approved developments, resulting in its denying the existence of spare capacity sufficient to meet the requirements of Dansar's proposal."

 

43 Her Honour made the following further observations concerning Dansar's claim:

 

"12 ... Dansar's claim focuses acutely on that aspect of the process, being based on the assertion that the Council owed a duty of care to developers, in effect, to get those calculations right. Implicitly, the claim assumes the existence of a private right to have any (correctly calculated) spare capacity allocated for new development.

 

...

 

45 ... The essence of the claim is that, having adopted a system for the allocation of the spare capacity identified, the Council failed to implement that system (or made errors in doing so). Implicitly, the premise of the claim is that, regardless of any assumption of responsibility or specific reliance, the adoption of a system informs the existence and content of a duty of care."

 

44 The primary judge's reasons for concluding that the Council did not owe Dansar the duty alleged are indicated by the following extracts from her Honour's judgment:

 

"82 The disconformity between the duty of care asserted by Dansar and the Council's statutory functions is manifest. Many of the functions exercised by the Council within the complex statutory regime considered above focus critically on considerations of public health and environmental impact. The existence of a private right to recover relational interest damages in respect of a failure to allocate sewage treatment capacity to an individual property developer is plainly inimical to the unimpeded exercise of such functions. That consideration alone militates powerfully against imputing a duty of care of the content asserted by Dansar.

 

...

 

84 ... [T]he fact that the public interest is a relevant and potentially determinative consideration in any development application is inconsistent with the imposition of a duty on the Council to take care in the allocation of putative units of sewage treatment capacity, less still to do so in a timely fashion.

 

...

 

87 In my view, that submission [that the Council had a high degree of control in calculating available sewage treatment capacity] entails two misconceptions. First, it looks with telescopic focus to the financial interests of developers as if that were the only interest required to be served by the exercise of the Council's several functions. Secondly, it treats sewage treatment capacity as if it were a fixed, measurable resource which the Council had an obligation to quantify correctly and to allocate exhaustively. That overlooks the complexity of the sewage issue, for the reasons explained by Mr Warner considered above, and the importance of the Council's separate function as the sewage management authority. The present case is quite different from the position of a certifying authority where the matter required to be certified is known to the Council and not known to the person for whose protection the certificate is issued. The control exercised by the Council, and the degree of vulnerability of the person seeking the certificate or approval, in cases of the kind discussed by Hodgson JA in Makawe derives from a more focussed task.

 

...

 

90 The want of reasonable care asserted in the present case is the Council's alleged failure, due to mistakes of calculation or wrong information, to identify enough spare sewage treatment capacity to satisfy itself as to the existence of 'prior adequate arrangements' for the purpose of clause 45 of the Byron Local Environmental Plan. In short, it is a complaint that the Council negligently failed to allow a greater burden on the sewerage system. To say that Dansar was unable to protect itself from the consequences of such negligence in a way that should cast the consequences of the loss on the Council assumes not only that there existed an objective, 'correct' quantity of spare sewage treatment capacity but that all such capacity was required to be allocated for development: see plaintiff's written submissions, paragraphs 29, 53. Each of those premises highlights the disconformity between the duty of care asserted by Dansar and the unimpeded performance of the Council's statutory functions. For the reasons given in the evidence of Mr Warner, the Council's calculation of spare capacity or available ET, whilst helpful for planning purposes, was ultimately no more than theoretical. Further, the Council was under no legal duty to allocate all spare capacity calculated. To adopt such an approach would plainly be in conflict with the proper exercise of its other functions.

 

91 The vulnerability asserted by Dansar is a want of protection of an economic interest which, as the foregoing analysis of the statutory context reveals, stands in competition with many other interests of varied vulnerability and importance. Dansar ought reasonably to have expected and planned its business on that basis. Mr Vaughan emphasised in his evidence that, until he saw the draft statement of issues in the proceedings in the Land and Environment Court, there were 'no concerns...at all about sewerage': T78.49. However, in the absence of any specific reliance by Dansar on any positive representation by the Council, I do not think it can be concluded that Dansar was vulnerable in the sense explained by the High Court in Woolcock. The recognition of a duty of care to protect an individual against such vulnerability would skew the careful balance of competing interests sought to be achieved by the statutory regime of regulation and management."

 

RELEVANT CASE AUTHORITY

 

45 As indicated by Mason J in Sutherland Shire Council v Heyman [1985] HCA 41; 157 CLR 424 at 457-8, there is "no reason why a public authority should not be subject to a common law duty of care in appropriate circumstances in relation to performing, or failing to perform, its functions, except in so far as its policy-making and, perhaps, its discretionary decisions are concerned". Thus, as a general proposition, "when statutory powers are conferred they must be exercised with reasonable care", with the consequence that the repositories of the powers will be liable for damages for negligence if loss results (Stuart v Kirkland-Veenstra [2009] HCA 15; 237 CLR 215 at [117] per Gummow, Hayne and Heydon JJ).

 

46 Likewise, in Caledonian Collieries Ltd v Speirs [1957] HCA 14; 97 CLR 202 at 220, Dixon CJ and McTiernan, Kitto and Taylor JJ referred to the "well-settled principle" that:

 

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

 

47 In Precision Products (NSW) Pty Ltd v Hawkesbury City Council [2008] NSWCA 278; 74 NSWLR 102 at [75], Allsop P (with whom Beazley and McColl JJA agreed) described this passage from Caledonian as "part of the fabric of the common law in the task of the ascertainment of the existence and scope of the duty of care" (see also MM Constructions (Aust) Pty Ltd v Port Stephens Council (No 7) [2012] NSWCA 417; 191 LGERA 292 at [90]). His Honour however emphasised that the passage did not justify the imposition of a duty of care in every case falling within its description. Rather, against the background of the general principle outlined, whether a duty of care existed in a particular case was to be determined by the circumstances of the case, including the statutory background and framework in which the relevant conduct occurred or allegedly should have occurred.

 

48 In Sutherland Shire Council v Heyman, Mason J further observed (at 468) that "a duty of care cannot arise in relation to acts and omissions which reflect the policy-making and discretionary elements involved in the exercise of statutory discretions". His Honour distinguished between policy decisions and operational decisions, indicating in relation to the former that "a public authority is under no duty of care in relation to decisions which involve or are dictated by financial, economic, social or political factors or constraints" (at 469).

 

49 In cases such as the present where the plaintiff's alleged loss is purely economic, the courts have been cautious in concluding that a duty of care existed. Many considerations are relevant but central to the issue are those to which McHugh J referred in Perre v Apand Pty Ltd [1999] HCA 36; 198 CLR 180 at [105] of "reasonable foreseeability of loss, indeterminancy of liability, autonomy of the individual, vulnerability to risk and the defendant's knowledge of the risk and its magnitude". A more extensive list of "salient features" was given by Allsop P in Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; 75 NSWLR 649 at [103]. Of particular relevance in the present context are the following factors to which his Honour referred:

 

"103 ...

 

(o) the existence of conflicting duties arising from other principles of law or statute;

 

(p) consistency with the terms, scope and purpose of any statute relevant to the existence of a duty; and

 

(q) the desirability of, and in some circumstances, need for conformance and coherence in the structure and fabric of the common law."

 

50 The exclusive possession by a statutory authority of information of central importance to the dealings between that statutory authority and another person may well support a conclusion that the statutory authority is under a duty of care to deal carefully with that information (see L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) [1981] HCA 59; 150 CLR 225 at 243 per Stephen J).

 

51 Some authorities dealing with claims against local councils that are of potential relevance to the present case are as follows.

 

52 In Avenhouse v Hornsby Shire Council (1998) 44 NSWLR 1, this Court found that after the defendant council had approved a subdivision, it was under a duty of care to take the formal steps necessary to give effect to that approval and to do so with due diligence and within a reasonable time. Sheller JA (with whom Mason P and Priestley JA agreed) concluded that the council's failure to certify the plan of subdivision after it had earlier been approved was not related to any policy matter or budgetary constraint (at 22-3), with the result that a duty of care was not precluded.

 

53 In Newcastle City Council v Shortland Management Services [2003] NSWCA 156; 57 NSWLR 173, this Court was concerned with the since-repealed s 114 of the Local Government Act 1993 which required a local council to give notice of an application for approval to erect a building to the owners of adjoining lands. It applied if, in the council's opinion, "the enjoyment of the adjoining land may be detrimentally affected by the proposed building after its erection".

 

54 The Court held that the defendant council did not owe a common law duty of care to exercise reasonable care in connection with the formation of an opinion under s 114(1) concerning detrimental affectation. Spigelman CJ (with whom Mason P and Sheller JA agreed) observed that "the scope and subject matter of the matter about which the opinion must be formed is not such as can be judged on a standard of reasonable care, as distinct from Wednesbury unreasonableness" (an administrative law, not common law, concept) and concluded that "the subjective nature of the test and the subject matter about which the relevant opinion is to be formed strongly indicate that no common law duty should be found to exist with respect to the formation of the opinion" (at [80] and [82]).

 

55 In Armidale City Council v Alec Finlayson Pty Ltd [1999] FCA 330; 104 LGERA 9, the Full Federal Court was concerned with a claim for damages for common law negligence against a local council for granting development applications and approving plans of subdivision when its officers were aware of significant contamination of the subject land. The Court found that it was clearly open to the primary judge to conclude that the council owed a relevant duty of care, the Court observing that the council decisions complained of did not involve policy considerations.

 

56 In Precision Products v Hawkesbury City Council, Precision Products claimed damages for the loss it suffered as a result of the allegedly negligent exercise by the respondent council of its power under s 91 of the Protection of the Environment Operations Act 1997 (NSW) to issue notices requiring the clean-up of suspected pollution. The council was alleged to have been negligent in a variety of respects, including issuing two notices on grounds incapable of supporting their issue and denying Precision Products procedural fairness. The Court rejected the posited duty of care because there was an absence of reliance, of assumption of responsibility and of vulnerability, and because the imposition of the alleged duty would have been incompatible with the council's responsibility under the statute in question. Allsop P observed that "[t]o infuse common law duties and the recovery of damages in such a field as the issuing of notices under s 91 where governmental (EPA supervision) and legal (judicial review) controls already exist would introduce an undesirable incompatibility and lack of coherence to the regime of environmental protection" (at [119]). His Honour noted that the position may well be different in a case, such as the present, concerned with a council's approval of a plan or grant of permission for an act to be done or for a person otherwise to engage in activity (at [120]).

 

57 In Makawe Pty Ltd v Randwick City Council [2009] NSWCA 412; 171 LGERA 165, the current owner of a residential apartment building claimed damages from a local council for negligently giving approval to previous owners to construct a building at a time when the council was in possession of a geo-technical report indicating that there was a risk of flooding in the then proposed underground carpark. The claim was treated as one for pure economic loss. Hodgson JA (with whom Campbell JA relevantly agreed) reviewed earlier cases in which local authorities were alleged to owe duties of care to developers and purchasers in relation to the former's approval of development and building applications. His Honour (at [43]) said that he did not disagree with any of those cases and drew the following general propositions from them:

 

"(1) General statements such as that of Gibbs CJ in Heyman, to the effect that when statutory powers are conferred they must be exercised with reasonable care, do not mean that in all cases, where a local authority exercises statutory powers in respect of the approval of subdivisions and/or building work, it owes a duty of care in respect of those approvals to developers and/or subsequent purchasers of the property.

 

(2) However, if the approving authority is subject to a statutory requirement not to give consent unless it is satisfied of something, the courts may well find a duty, owed to developers and to purchasers, to exercise reasonable care in considering whether it is so satisfied: Taitapanui, Western Districts.

 

(3) If the approving authority actually knows something seriously detrimental to the subdivision or the building, and is aware that it is likely that developers and/or purchasers do not know this, the courts may well find a duty owed to developers and purchasers to exercise reasonable care in relation to that detrimental feature: Fregnan, Finlayson, Booth.

 

(4) If the approving authority makes a positive requirement that something be done which otherwise would not be done, the courts may well find a duty owed to developers and purchasers to exercise reasonable care in making that requirement: Fregnan.

 

(5) If the approving authority is required to consider or take into account some particular matter which bears on the structural integrity of buildings to be erected, the courts may well find a duty owed to developers and purchasers to exercise reasonable care to avoid risks of property damage arising from this matter: Fregnan, Bamford."

 

58 In Western Districts (Western Districts Developments Pty Ltd v Baulkham Hills Shire Council [2009] NSWCA 283; 75 NSWLR 706), to which his Honour referred in his second general proposition, a council approved a plan of subdivision even though a required certificate of compliance had not been obtained from the water supply authority. The council was held liable to later owners of a lot in the subdivision for damages resulting from the council's negligent failure to ensure that this certificate had been issued. This Court held that the council owed the plaintiffs a duty of care to satisfy itself that the requirement for a water supply certificate of compliance was met. Preston CJ of LEC (with whom Giles and Campbell JJA relevantly agreed) found that there was no issue of coherence with administrative law as there had been in Precision Products v Hawkesbury City Council.

 

59 Taitapenui (Moorabool Shire Council v Taitapanui [2006] VSCA 30; 14 VR 55), to which Hodgson JA also referred in relation to his second proposition, was a case in which a local council was held liable (on the basis that it was the employer of a building surveyor) for loss suffered by subsequent purchasers of a building for which its surveyor had negligently approved a building permit.

 

60 In Makawe, Hodgson JA considered the case before him to be finely balanced but concluded (as did the other members of the Court) that the council did not owe a relevant duty of care. One of a number of matters that his Honour took into account was that the council had not been shown to have actual knowledge of something seriously or potentially detrimental to the owner of the building of which the council would have been aware that the developer did not know ([45]). Campbell JA similarly emphasised the absence of proof that the council had knowledge that others concerned in the construction of the building did not have ([71]). His Honour also emphasised the absence of any relevant communication between the plaintiff (as a subsequent owner) and the council ([69] and [73]).

 

61 In MM Constructions, developers sued the respondent council for damages for negligence in its handling of a development application and subsequent modification applications. The developers failed because it was held that there had been no relevant reliance, no assumption of responsibility and no vulnerability, and that the posited duty did not conform to the statutory framework. Important to the latter finding was the existence of a statutory framework for challenge to the council's decisions by way of appeal and the necessity in deciding whether to grant approval for the council to consider "the broad range of interests public and private of the kind set out in the EPA Act, ss 5 and 79C" (at [98]).

 

THE ISSUES ON APPEAL

 

62 Dansar submitted on appeal that the primary judge erroneously characterised the duty it alleged as a duty on the part of the Council to correctly allocate the spare sewerage treatment capacity by forming an opinion about a matter of some complexity involving public health, economic and other considerations.

 

63 Dansar submitted that the alleged duty was in fact very different in that it focused only on the mechanical or operational task of implementing the scheme of sewerage allocation which the Council had decided to pursue. The alleged duty was thus said to be to take reasonable care in performing the mechanical or operational tasks of allocating the spare capacity of the West Byron STP which the Council had identified as being available for new developments, and informing itself as to the outcome of that process. Mr Bannon SC, senior counsel for Dansar, submitted that the Council had made "a basic error of maths" and that Dansar was in a highly vulnerable position because there was nothing it could do to investigate the correctness of the Council's calculations (Transcript p 35).

 

64 Dansar submitted that if the relevant Council officers had not made basic errors of a mechanical nature, the Council would undoubtedly have concluded that Clause 45 of the LEP (see [10] above) had been satisfied and would have granted development approval in a timely fashion. Dansar emphasised in this connection that the evidence showed that the Council was at all relevant times willing, and intending, to allocate sewerage capacity to Dansar's development if that capacity was available, which the Council would have realised it was if basic calculations had been made carefully.

 

65 In response, the Council relied upon the primary judge's approach and submitted in particular that there was a lack of coherence between the alleged duty and relevant statutory provisions.

 

66 The Council's opposition to a finding of a breach of duty, in the event of a finding that a relevant duty existed, was of a limited character only. Separately, it relied upon ss 43, 43A and 44 of the Civil Liability Act in defence of Dansar's claim.

 

67 As noted earlier, the parties agreed that if the issue of liability was determined in Dansar's favour, the proceedings should be remitted to the Common Law Division for determination of the issues of causation and quantum of damages.

 

RESOLUTION OF THE APPEAL

 

DUTY OF CARE

 

The nature of Dansar's complaints

 

68 The essence of the primary judge's reasons for concluding that no relevant duty of care was owed was that such a duty of care would be inconsistent with "the unimpeded performance of the Council's statutory functions" (see Judgment [90] quoted in [44] above). Her Honour's view was that the Council's performance of its statutory functions concerning sewerage involved the resolution of issues of some complexity and required the Council to have regard particularly to considerations of public health and environmental impact (Judgment [82] and [87]). Performance of those functions therefore required the exercise of judgment about questions on which more than one view was available and involved issues of public policy.

 

69 The authorities referred to in [45] to [61] above would undoubtedly preclude a finding that the Council owed to private developers such as Dansar a generalised duty to exercise its statutory functions concerning sewerage and developments in a careful fashion. Certainly no duty of care would be owed in respect of the exercise of a judgment of the type referred to in the preceding paragraph. However, there is no reason why a statutory authority such as the Council may not be subject to specific duties of care related to aspects of its functions that do not involve matters of judgment, opinion or public policy (see for example Sutherland Shire Council v Heyman referred to in [45] and [48] above). The decision in Avenhouse (see [52] above) illustrates this proposition. In that case, the Council's decision to approve the subdivision would undoubtedly have involved questions of judgment and policy, with the result that the Council would not have been under a duty of care in the making of it. However the steps following approval of the subdivision were of an "operational" character, to use the word Mason J used in Sutherland Shire Council v Heyman at 469 (see [48] above). There was no reason why the Council should not be subject to a duty of care in taking them, as the Court held it was.

 

70 As Dansar submitted, the steps of which it complained in the present case were of this character. The Council officers determined in mid-2000 that the West Byron STP had a capacity of 371 EPs (converted by Council officers to 92.75 ETs) available for allocation and at its meeting on 19 September 2000, and on a number of occasions thereafter, the Council proceeded upon the basis that this was the case and that that capacity should be allocated to developments as applications for approval were received thereafter (see [14] to [19] above). As a result of the mechanical errors identified in [40] to [41] above, Council officers believed by December 2001 that the 92.75 ETs spare capacity had been duly allocated to development applications other than that of Dansar (see [28] and [32] above).

 

71 It is clear from the evidence that if the Council and its officers had not laboured under this mistaken belief, sufficient of the 92.75 ETs spare capacity would have been allocated to Dansar's development to fulfil its sewerage requirements, with the consequence that the Council, when exercising its development control functions, would inevitably have been satisfied, in terms of Clause 45(1) of the LEP, "that prior adequate arrangements [had] been made for the provision of sewerage, drainage and water services to the land" on which Dansar's development was proposed to be undertaken (see [10] above).

 

72 When, if at all, prior to the actual approval date of 20 June 2005, the Council would have approved Dansar's development application if it had been satisfied in terms of Clause 45(1) of the LEP earlier is not a question for present determination. It is a question of causation to be addressed on remission of the proceedings to the Common Law Division. Unless it is determined favourably to Dansar, Dansar will not obtain a substantial damages award.

 

73 What I have said above does not indicate that once the Council and its officers began to use the figure of 92.75 ETs available capacity the Council remained bound, vis á vis Dansar or otherwise, to adhere to that figure and allocate it to development applications. On the contrary, it was at all times open to the Council to take a different judgmental or policy view about the available capacity and to act upon it, but it did not do so. So long as it adhered to the figure of 92.75 ETs, it was in my view, subject to my consideration of other "salient features" relevant to the imposition of a common law duty of care to which I will turn below, subject to a common law duty of care in the operational task of allocating it to developments for which approval was sought.

 

The relevance of the increased sewage flows

 

74 The Council submitted that the increased sewage flows in the Byron Bay area that Mr Warner identified in his memorandum of 15 February 2002 (see [30] above) indicated that the Council was not, and could not be, obliged to allocate the previously ascertained figure of 92.75 ETs because that figure was based on lesser sewage flows occurring at an earlier time. It would of course have been open to the Council, on the basis of Mr Warner's view, to decide not to allocate any remaining part of the 92.75 ETs because of changed circumstances, but the Council did not do this.

 

75 In December 2001 the Council's approach to the sewerage requirements of Dansar's development turned on the question of whether any of the previously identified 92.75 ETs spare capacity for the West Byron STP remained unallocated (see [26] and [28]). The position remained the same after Mr Warner's memorandum of 15 February 2002, as demonstrated by Mr Warner's evidence for use at the LEC hearing and the submissions made at that hearing, in March 2002, on behalf of the Council (see [32] and [33] above). The Commissioner's decision similarly turned on that question and the Council memorandum of 27 March 2003 showed that the Council was still utilising the figure of 92.75 ETs in 2003 ([34] and [35] above). Furthermore, by notice dated 9 December 2011, the Council admitted that from 20 September 2000 until 2005 it used the calculation of the West Byron STP's spare capacity of about 92 ETs to allocate ETs to each of the 36 development applications lodged with the Council between 20 September 2000 and 1 March 2001 (this being the period during which Dansar's application was lodged). The notice refers to 92.4 ETs but this is not, at least for present purposes, materially different from 92.75 ETs (see [14] above).

 

76 The primary judge said that "[f]or the reasons given in the evidence of Mr Warner, the Council's calculation of spare capacity or available ET, whilst helpful for planning purposes, was ultimately no more than theoretical" and that "the Council was under no legal duty to allocate all spare capacity calculated" (Judgment [90] quoted in [44] above).

 

77 Her Honour's reference to Mr Warner's evidence was apparently to his evidence in these proceedings that Dansar's reliance on 92.75 ETs "spare capacity" identified by the Council's engineers confused "a prediction of capacity with the actual measured or assessed capacity of the plant to process greater loads of sewage" (Judgment [15]). This evidence demonstrated why the Council, consistently with the discharge of its statutory functions, could not have been under any obligation to adhere to an estimate made at one time as conditions and considerations later changed. However, for the reasons already given, this is not a reason to deny the existence of a duty of care in relation to the implementation of an approach that the Council adopted, and continued to apply notwithstanding changed circumstances.

 

78 Certainly, as the Council submitted, its performance of its statutory functions required it to have regard to the actual measured or assessed capacities at the relevant time but there is no basis for concluding in the present case that it did not do so. In particular, the Council was conscious of the increased flows identified by Mr Warner but did not change its decision to make 92.75 ETs of capacity available to developers. For the same reason, the Council's reliance on a concession it alleged that Dansar's expert witness, Mr David Bristow, made in his evidence, that in light of the increased sewage flows it would not have been unreasonable for the Council to have refused Dansar's development application, is misplaced.

 

Clause 45 of the LEP

 

79 The Council relied on appeal upon this Court's decision in Codlea Pty Ltd v Byron Shire Council [1999] NSWCA 399; 105 LGERA 370 in which a development application relating to and subject to the Byron LEP was refused because the Council was not satisfied, in terms of Clause 45(1) of the LEP, that "prior adequate arrangements" had been made for the provision of sewerage services for the proposed development. The Court held that an appeal against the refusal of the development application entitled the Court to substitute its own satisfaction under Clause 45 for the Council's lack of satisfaction, but the Court could not make an arrangement concerning sewerage where none had been made by the Council. The Court accepted that the "arrangements" referred to in Clause 45 extended at least to "willingness on the part of the relevant authorities to co-operate in a consensual way" (at [40]).

 

80 In reliance on Codlea, the Council submitted that the duty of care asserted by Dansar "would be incoherent with the purely factual nature of the Byron LEP Clause 45 pre-condition, and the consequently unexaminable fact of the absence of any such sewerage arrangements" (written submissions [16.8]). However in the present case the requirements of Clause 45(1) would have been satisfied if the Council had taken reasonable care in performance of the operational steps involved in the allocation of the identified spare capacity. The consensual element of Clause 45(1) to which Codlea adverted was satisfied by the Council's undoubted willingness to allocate sewerage capacity to Dansar's development if sufficient of the 92.75 ETs spare capacity identified were available. The element of satisfaction would have been present if the Council had carefully allocated the identified spare capacity because it would have been apparent to it that there was not only, as the Council had given Dansar to understand (see [16] and [18] above), a willingness on its part to provide capacity in response to Dansar's application but also an ability to do so. Contrary to the Council's submission, the alleged duty was thus not inconsistent with the existence of a discretion in the Council to make or not make arrangements of the type referred to in Clause 45(1).

 

Whether inconsistency with the statutory framework

 

81 In argument on the appeal the Council emphasised two issues of coherence between the posited duty of care and the relevant statutory framework. First, it contended that a common law duty of care could not "relevantly attach to a non-statutory decision not to enter into a sewerage arrangement" (Transcript p 41). However Dansar did not contend that the posited duty would do this. That duty was not one "to enter into a sewerage arrangement" but a duty of the Council to take reasonable care in its allocation of identified spare sewerage capacity. On Dansar's case, compliance with this duty would have led to the Council appreciating that Clause 45 of the LEP had been satisfied, because there was both a willingness and an ability of the Council to make an allocation to Dansar of the sewerage capacity required for its development.

 

82 Secondly, the Council asserted that there was a lack of such coherence by reason of s 179 of the LGA (see [9] above). However, this section applies only where a council has been "unduly influenced by vexatious or unmeritorious submissions made by members of the public" or has acted "vexatiously" (s 179(1)). Neither of these circumstances is present here and I do not consider any implication can be drawn from the section, or otherwise, that it was intended to operate exhaustively, with the consequence that a common law duty of care directed at other circumstances would be inconsistent with it.

 

83 In summary, I find that the statutory framework was not inconsistent with the posited duty of care. The conduct to which Dansar's claim was directed did not concern the Council's consideration of environmental, public hygiene or other policy factors (compare Precision Products and MM Constructions referred to in [56] and [61] above). Nor did it involve questions of judgment or opinion (compare Newcastle City Council v Shortland at [53] to [54] above). Rather, the conduct involved mechanical steps more analogous to those with which Avenhouse, Armidale City Council and Western Districts (see [52], [55] and [58] above) were concerned. The general propositions formulated by Hodgson JA in Makawe (see [57] above) also provide some support for my conclusion, particularly the second proposition. Unlike the position in Makawe, there was here direct communication and a relationship between the plaintiff and the Council and the Council was in possession of information concerning the allocation of spare capacity for the West Byron STP of which it knew or should have known Dansar would be unaware (see also Shaddock referred to in [50] above).

 

Other relevant factors

 

84 I turn now to consider other factors of relevance to the existence or non-existence of a duty of care in the present case.

 

85 In my view the element of reliance was present here. In September 2000 the Council concluded that a limited amount of spare capacity of the West Byron STP (371 EPs which it converted to 92.75 ETs) was available for allocation (see [15] above). Dansar was given reason to believe (see [16] above) that its development would receive an appropriate allocation and lodged its application accordingly. It was totally reliant for its allocation on the Council's careful dispensation of the spare capacity. The Council was the sole repository of the information and calculations necessary to determine whether any of the 92.75 ETs were available for Dansar and therefore had a high degree of control over what occurred. Moreover, unlike the position in Precision Products (see [56] above), the conduct occurred in the context of the Council exercising a power (of approval of a development application) for the benefit of Dansar. In embarking on its exercise it assumed (subject to issues arising out of the statutory framework) a responsibility to Dansar. Dansar was vulnerable, at least because it had no effective right of appeal, it not having the knowledge of the Council's steps in allocating the 92.75 ETs spare capacity that would have enabled it to know that it had cause for complaint. Moreover, the decision in Codlea (see [79] above) would have constituted a significant, although perhaps not insurmountable (see [80] above), impediment to an appeal being mounted.

 

86 Other factors favouring the imposition of a relevant duty of care are that Dansar and the Council were, by reason of Dansar's lodgment of its development application and the Council's responsibility to deal with it, in a close "one-to-one" relationship and the likelihood of Dansar suffering harm from the absence of or delay in approval of its development application would have been readily foreseeable to a reasonable council in the position of the respondent.

 

87 My view is that in these circumstances the Council owed Dansar the duty of care Dansar alleged. The statements of general principle referred to in [45] to [50] above support the imposition of that duty, as does a consideration of the particular circumstances of the case. For the reasons I have given, the statutory context in which the Council acted did not require a different conclusion.

 

BREACH OF DUTY

 

88 In argument on the appeal, Mr P W Taylor SC, who appeared for the Council, confined his arguments concerning breach to the statutory defences that I address below and to one that the increased sewage flows identified in early 2002 (see [30] above) constituted changed circumstances rendering it reasonable for the Council to depart from its earlier intention to allocate 92.75 ETs of the spare capacity of the West Byron STP, with the result that there was no breach of duty in not allocating any of that capacity to Dansar. The Council relied particularly on the evidence of Mr Warner and the alleged concession by Mr Bristow (see [78] above) in this respect. However, this change of circumstances does not answer Dansar's case because, as I have pointed out, the Council decided nevertheless to continue to allocate the previously identified spare capacity of 92.75 ETs. On Dansar's case, it was negligent in doing this.

 

89 In light of the rejection of this latter argument of the Council, it follows from the manner in which the Council's case was put that, unless any of the statutory defences assist the Council, the conclusion that it committed a breach of duty must follow (see the appeal transcript at pp 70-71).

 

90 The earliest date upon which Dansar ultimately came to allege that a breach occurred was 29 January 2002, the date when the Council rescinded that part of its earlier resolution which recognised Dansar's entitlement to an allocation. I accept that a breach occurred on this date as, at least by then, the Council and its staff should have realised that a careful allocation of the identified spare capacity of 92.75 ETs would have led to an allocation being available to Dansar to meet its development's requirements.

 

THE STATUTORY DEFENCES

 

91 Dansar submitted that the Council ought not to be permitted to rely on appeal upon its pleaded statutory defences under s 43, 43A and 44 of the Civil Liability Act (see [11] to [12] above). Dansar pointed to the absence of a Notice of Contention and of written submissions lodged prior to the appeal hearing addressing the defences. To this I would add the circumstance that the primary judge did not deal with the defences. Nevertheless, I would permit the Council to rely upon them as any prejudice to Dansar was overcome by Dansar being afforded the opportunity to lodge, after the appeal hearing, a written submission concerning the defences.

 

Section 43 Civil Liability Act

 

92 This section applies only to proceedings "based on a breach of a statutory duty" (s 43(1) - see [11] above). The section is thus inapplicable in the present case because Dansar's claim is not so based but it is based upon a breach of a common law duty of care.

 

Section 43A Civil Liability Act

 

93 On appeal, the Council did in substance do no more in relation to its s 43A defence than adopt its first instance written submissions relating to that issue. Those submissions contended, but only in a limited fashion, that the Council's conduct was not unreasonable in the sense referred to in s 43A(3) (see [11] above). The Council relied in this respect only on the argument addressed above arising out of Codlea (see [80] above) and on its argument, also addressed above, concerning the increased West Byron STP sewage plant flows in early 2002 (see [74] above). For the reasons that I have given above (see [77] and [80]), neither of these arguments answer Dansar's claim. In my view, neither addressed the factual situation in the present case where the Council had a continuing intention to allocate 92.75 ETs from the West Byron STP capacity but failed to take carefully the mechanical steps involved in doing so. Bearing in mind the standard of negligence referred to in s 43A(3) (as to which see Precision Products at [175]-[177]), it would in my view have been necessary for the Council to contend, and establish, that the careless mistakes it made in relation to the allocations (see [40] above) were not capable of being described as ones which no council acting reasonably could have made. As it did not do either, its defence under s 43A fails.

 

94 In light of the limited submissions provided to this Court on the statutory defences, it is not necessary or appropriate to deal with any other hurdles the Council may have faced in relying on this or the other defences.

 

Section 44 Civil Liability Act

 

95 This section is concerned with the failure of an authority such as the Council "to exercise or to consider exercising any function of the authority to prohibit or regulate an activity ..." (s 44(1)). The present is not such a case. It is concerned with an aspect of the Council's functions in approving developments. There is no allegation that the Council failed to prohibit or regulate any activity of Dansar, or of any other person.

 

CAUSATION

 

96 The parties agreed that unless the Court considered that remittal would plainly be futile (and Dansar's claim would therefore fail because the Council's breach of duty caused it no loss), the issue of causation should be remitted to the Common Law Division for determination. On appeal, the issue of causation was not addressed by the parties in detail but there is in my view nothing in the material put before the Court to indicate that Dansar's case on causation is hopeless. As a result, the issue should be remitted.

 

ORDERS

 

97 As Dansar is entitled to succeed on the only issue with which the primary judge dealt, namely duty of care, the appeal should allowed.

 

98 I propose the following orders:

 

(1) Appeal allowed.

 

(2) Set aside the order made by the primary judge on 30 January 2013 and any order made thereafter concerning the costs of the proceedings at first instance.

 

(3) Remit the proceedings to the Common Law Division for it:

 

(a) To determine whether the appellant suffered any loss, and if so how much, as a result of the respondent's breach of duty as found by this Court; and

 

(b) To enter judgment and make consequential orders, including as to the costs of the proceedings at first instance.

 

(4) Order the respondent to pay the appellant's costs of the appeal.

 

99 MEAGHER JA: The respondent Council has responsibility for the care and management of the water, sewerage and drainage works for the Byron Shire and supplies those services to the community living in that area. The issue in this appeal is whether, when considering an application for the allocation of sewerage capacity for its proposed development, the Council owed a duty of care to the appellant property developer. It will be necessary later in these reasons to consider more closely the content of that asserted duty which is said to be concerned only with the carrying out of the 'mechanical' task involved in allocating capacity previously determined to be available. The appellant alleges that but for the Council's breach of that duty its application for the construction of a residential complex would have been approved three years earlier than occurred and that it suffered financial loss as a result. That loss includes profits which the appellant alleges it would have obtained had the development been approved earlier. The appellant does not allege that it relied upon the accuracy of any advice or information provided by the Council.

 

Introduction

 

100 One of the sewage treatment plants which the Council operates and manages is the West Byron sewage treatment plant (West Byron STP). That plant was first commissioned in 1990. In early 2000 works upgrading that plant were completed. Those works increased its average design flow capacity to 2,000kL/day and its peak dry weather flow capacity to 2,500kL/day.

 

101 Those design capacities may also be expressed in EPs or ETs. An EP, an abbreviation for equivalent person, is a standard measure of sewerage load (hydraulic as well as biological) based on the estimated daily contribution to the load of a typical person in a residential setting (which takes account of all zonings in that setting including residential, commercial and industrial). ET or equivalent tenement describes the potential daily hydraulic load generated by a standard household connected to the sewerage system. These measures are used when establishing the design capacity of a sewage treatment plant and estimating the potential sewage contribution of developments within the sewage catchment area. The assumption ordinarily made as to usage by an equivalent person is 240L/day. The assumption as to the ratio of ETs to EPs can vary according to factors such as population density and is contestable in the sense that for a given catchment area there is likely to be a range of values which might be justified as reasonable, at one end conservative and at the other, less so.

 

102 In June 2000 the Council carried out an assessment to determine the existing and committed loads at its sewerage facilities, including the West Byron STP. To do so it measured the hydraulic load based on actual flows into that plant. The current load was 1,588.8kL/day. It then estimated the "committed" load which consisted of undeveloped lots deemed to have an entitlement to sewerage services (because they were in a reticulated area where owners were already paying sewerage rates) and land or properties the subject of development applications which had been approved. It did so adopting the assumptions 1 EP = 240L/day and 1 ET = 4 EPs. It then subtracted the current and committed load from the plant's design capacity. The "spare" capacity was assessed to be 371 EPs, which was then expressed as 92.75 ETs.

 

103 In September 2000 the Council, in its capacity as sewerage authority, resolved not to enter into any arrangement or agreement for the provision of further sewerage services to any proposed development which would increase the load on the West Byron STP beyond its present capacity for non-peak loads of 8,333 EPs or 2,000kL/day. The effect of that resolution, based on its earlier assessment, was that the Council should not enter into any new arrangements for the provision of sewerage services that would result in the estimated spare capacity of 371 EPs being exceeded. The imposition of any additional load was described as seriously jeopardising the plant's ability to meet its "EPA licence criteria and to comply with Council's statutory obligations for pollution control".

 

104 The appellant's case before this Court was that the Council was negligent in carrying out the "operational and mechanical" task of implementing its decision to allocate that spare capacity. By narrowing the content of the asserted duty of care in this way the appellant sought to meet an argument that the suggested duty of care would be incompatible with the Council's statutory and other obligations. It submitted that this narrower duty arose "once the Council's functions had been exercised in resolving to allocate some [capacity] to new development applications". In its written submissions the appellant described the subject matter of the duty of care for which it contended in the following terms:

 

"The duty of care attached after the Council had undertaken the decision of whether to allocate spare sewerage capacity, and applied to the Council's conduct through its staff in implementing its resolution by determining the exact amount to allocate pursuant to the resolution and, in particular, by mechanical errors in calculation of ETs available".

 

105 The risk of harm to which it is said this duty is directed is economic loss resulting from a refusal to allocate sewerage capacity or a delay in the allocation of capacity, in either case resulting from negligence in the mechanical task of allocating previously designated spare capacity. That risk of harm only arose if there was capacity which would have been allocated but for the alleged negligence. At the same time, the appellant's case accepts that whether there was capacity available was a matter to be determined by the Council as sewerage authority and that its task in doing so was not the subject of the duty of care sought to be imposed.

 

106 The appellant's first development application was lodged in February 2001 and amended in late October 2001 and in January 2002. As finally amended, it involved the construction of 16 residential flat units or houses. That amended application was finally dealt with by the order of the Land and Environment Court made on 15 March 2002 dismissing the developer's appeal under s 97 of the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act) from the Council's deemed refusal of its application. In October 2002 the appellant lodged two new development applications. Together they sought approval for the same development as was the subject of the first application as finally amended. The second applications were approved. The appellant then sold the undeveloped property in November 2005. It claims by way of damages the difference between the profit obtained on that sale and the profit it says it would have obtained had it received development consent at some time between December 2001 and February 2002 and proceeded with that development. The appellant says its development would have been completed by April or May 2003 and that upon completion it would have sold "some or all of the units and/or leased some or all of the units, as developed" (see Statement of Claim, paras 58 to 67). The appellant also claims by way of damages the legal costs it incurred, and those of the Council for which it is liable, in relation to its appeal to the Land and Environment Court.

 

107 The primary judge (McCallum J) rejected the appellant's case on the basis that the Council owed no duty of care in the terms alleged: Dansar Pty Ltd v Byron Shire Council [2013] NSWSC 17. That conclusion follows a careful analysis of the relevant statutory context and the significant features of the relationship between the parties: [82]-[94]. Her Honour's principal reasons for so concluding were that there was a disconformity between the asserted duty and the Council's statutory functions and obligations, which were to be exercised in the public interest and involved considerations of public health and environmental impact; that as between the parties there was no relevant reliance or assumption of responsibility; and that the appellant was not 'vulnerable' in the relevant sense: [82], [90], [91], [92], [94]. This appeal is from that decision. In my view her Honour was correct in so concluding.

 

Relevant principles

 

108 Whether the Council owed a duty of care to the appellant in the terms alleged requires consideration of the totality of the relationship between it and the appellant. That consideration involves an examination of the statutory context and the positions occupied by the parties in that context: Perre v Apand Pty Ltd [1999] HCA 36; 198 CLR 180 at [198] (Gummow J); Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54; 211 CLR 540 at [146] (Gummow and Hayne JJ); Stuart v Kirkland-Veenstra [2009] HCA 15; 237 CLR 215 at [112] (Gummow, Hayne and Heydon JJ).

 

109 The focus of that consideration is on the presence or absence of features or factors which in earlier decisions have assisted in determining the existence of a duty of care. In Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; 75 NSWLR 649, Allsop P referred to a number of those features, whilst at the same time making clear that the list was not exhaustive or compulsory. The significance of particular features or factors in a given case will depend on the circumstances of that case, including the content of the duty of care alleged, the nature of the risk of harm to the plaintiff and the particular kind of loss or damage involved. As is revealed by a consideration of earlier cases, those circumstances will give rise to different "problems" in determining the existence and scope of any duty of care.

 

110 In Sullivan v Moody [2001] HCA 59; 207 CLR 562 at [50] the Court (Gleeson CJ, Gaudron, McHugh, Hayne and Callinan JJ) described the principled approach to be taken as follows:

 

"Different classes of case give rise to different problems in determining the existence and nature or scope, of a duty of care. Sometimes the problems may be bound up with the harm suffered by the plaintiff, as, for example, where its direct cause is the criminal conduct of some third party. Sometimes they may arise because the defendant is the repository of a statutory power or discretion. Sometimes they may reflect the difficulty of confining the class of persons to whom a duty may be owed within reasonable limits. Sometimes they may concern the need to preserve the coherence of other legal principles, or of a statutory scheme which governs certain conduct or relationships. The relevant problem will then become the focus of attention in a judicial evaluation of the factors which tend for or against a conclusion, to be arrived at as a matter of principle." [Footnotes omitted]

 

111 The present case involves a claim for pure economic loss made against a statutory authority responsible for the care and management of a public utility and the provision of an essential service to members of the public living in the local government area for which it is responsible. It is not one in which the Council damaged property owned by a third party causing the appellant thereby to suffer economic loss because of the relationship between it and that third party or its property: cf Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" [1976] HCA 65; 136 CLR 529. Nor is it a case in which it is said that the Council had entered upon the exercise of its statutory powers with respect to the preventing or averting of a risk of harm of which it had some knowledge and over which it had a measure of control, but failed to do so with reasonable care: cf Pyrenees Shire Council v Day [1998] HCA 3; 192 CLR 330; or one in which it is said that the Council did not, but should have, exercised its powers to prevent or avert a risk of harm: cf Stuart v Kirkland-Veenstra.

 

112 Nor does the appellant allege that it relied on the accuracy of information or advice that the Council provided: cf Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) [1981] HCA 59; 150 CLR 225; Tepko Pty Ltd v Water Board [2001] HCA 19; 206 CLR 1. Specifically, it does not allege that it relied upon any statement of the Council as to the existence of spare capacity, as to how the Council might assess that any spare capacity was available, as to the likelihood of capacity being available for its development, as to how or when any such capacity would be allocated or that the Council by its officers would act (as distinct from seek to act) competently and diligently when undertaking any such assessment or allocation. In argument before the primary judge, counsel for the appellant made clear that it was not making "a representation and reliance case".

 

113 In this context, the following further general observations may be made. First, as the plurality (Gleeson CJ, Gummow, Hayne and Heydon JJ) said in Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; 216 CLR 515 at [21], damages for pure economic loss are not recoverable if all that is shown is that the defendant's negligence was a cause of the plaintiff's loss and that loss was reasonably foreseeable. Reasonable foreseeability of harm of the kind alleged is a necessary but not sufficient condition for the existence of a duty of care: Sullivan v Moody at [42], [64]; Graham Barclay Oysters Pty Ltd v Ryan at [9]. Indeed, as McHugh J said in Perre v Apand Pty Ltd at [131], knowledge, actual or constructive, of the defendant that its act "will harm the plaintiff is virtually a prerequisite of a duty of care in cases of pure economic loss". In that case, as Gummow J noted at [216], the tortfeasor Apand knew or ought to have known that economic loss would flow directly and inevitably as a result of the Perres being excluded from the Western Australian market. The possibility of the occurrence of that loss was not speculative. This language echoes Stephen J's description in Caltex Oil at 577 of the nature of the economic loss sustained in that case as "direct and inevitably flowing from the severing of the pipeline and not in any sense a matter for speculation only".

 

114 Secondly, in Graham Barclay Oysters Pty Ltd v Ryan at [149], Gummow and Hayne JJ (Gaudron J agreeing) said of a claim against a statutory authority:

 

"An evaluation of whether a relationship between a statutory authority and a class of persons imports a common law duty of care is necessarily a multi-faceted inquiry. Each of the salient features of the relationship must be considered. The focus of analysis is the relevant legislation and the positions occupied by the parties on the facts as found at trial. It ordinarily will be necessary to consider the degree and nature of control exercised by the authority over the risk of harm that eventuated; the degree of vulnerability of those who depend on the proper exercise by the authority of its powers; and the consistency or otherwise of the asserted duty of care with the terms, scope and purpose of the relevant statute. In particular categories of cases, some features will be of increased significance."

 

115 Thirdly, in Woolcock v CDG at [23] the plurality explained what is meant by 'vulnerability' in this context:

 

"Since Caltex Oil, and most notably in Perre v Apand Pty Ltd, 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. '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. So, in Perre, the plaintiffs could do nothing to protect themselves from the economic consequences to them of the defendant's negligence in sowing a crop which caused the quarantining of the plaintiffs' land."

 

116 Fourthly, the consistency or otherwise of the asserted duty of care with the terms, scope and purpose of the relevant statute may arise in a number of ways. In Sullivan v Moody the Court said at [60]:

 

"The circumstance that a defendant owes a duty of care to a third party, or is subject to statutory obligations which constrain the manner in which powers or discretions may be exercised, does not of itself rule out the possibility that a duty of care is owed to a plaintiff. People may be subject to a number of duties, at least provided they are not irreconcilable. ... But if a suggested duty of care would give rise to inconsistent obligations, that would ordinarily be a reason for denying that the duty exists. Similarly, when public authorities, or their officers, are charged with the responsibility of conducting investigations, or exercising powers, in the public interest, or in the interests of a specified class of persons, the law would not ordinarily subject them to a duty to have regard to the interests of another class of persons where that would impose upon them conflicting claims or obligations."

 

117 The statute may indicate that "the legislature has legislated to cover the field and excluded all common law duties of care" or "the imposition of a common law duty may be inconsistent with or undermine the effectiveness of the duties imposed by the statute": per McHugh J in Graham Barclay Oysters Pty Ltd v Ryan at [78].

 

The legislative context and relationship between the parties

 

The Council's regulatory and service functions

118 Subsection 8(2) of the Local Government Act 1993 (NSW) (LG Act) provides that a Council "in the exercise of its functions" must pursue its charter. By s 8(1), that charter includes:

 

"●to provide directly or on behalf of other levels of government, after due consultation, adequate, equitable and appropriate services and facilities for the community and to ensure that those services and facilities are managed efficiently and effectively

...

 

●to properly manage, develop, protect, restore, enhance and conserve the environment of the area for which it is responsible, in a manner that is consistent with and promotes the principles of ecologically sustainable development

...

 

●to ensure that, in the exercise of its regulatory functions, it acts consistently and without bias, particularly where an activity of the council is affected".

 

119 Subsection 8(2) also provides that nothing in that section "gives rise to, or can be taken into account in, any civil cause of action". In the face of that injunction neither party relied upon these provisions as relevant when determining the existence of a common law duty of care.

 

120 The LG Act provides for the conferral on a council of service functions as well as regulatory ones. The former include the provision of services and facilities directed to satisfying essential needs of its local community (s 24). Division 2 of Part 3 in Chapter 6 of the Act enables councils to be given responsibility for the care and management of water, sewerage and drainage works and facilities. Regulatory functions may be conferred by the Act or other legislation (ss 22, 68) and relevantly include the council's role as a "consent authority" under the EP&A Act.

 

121 The appellant's development application was made to the Council under s 78A(1) of the EP&A Act. The Council was required by s 80(1) to determine that application by granting or refusing consent. It was not submitted by the appellant that the Council was subject to any common law duty to act expeditiously when determining its development application. The position in that respect was summarised by Basten JA in MM Constructions (Aust) Pty Ltd v Port Stephens Council [2012] NSWCA 417; 191 LGERA 292 at [207] - [209]:

 

"Private landholders seeking approval are entitled to have their applications considered within a reasonable time. Once the prescribed period (40 days) has expired, the applicant is entitled to treat the failure to make a determination as a deemed refusal, from which it may appeal to the Land and Environment Court: EP&A Act, ss 82 and 97. Alternatively, an applicant aggrieved by unreasonable delay could obtain an order in the nature of mandamus directing the Council to determine the application. The fact that the Council is, in this sense, under an obligation to act within a reasonable time, does not mean that it is liable in negligence for damages for failing to proceed with reasonable expedition.

 

Needless to say, if the applicant proceeded to lodge an appeal with the Land and Environment Court, no claim in tort would lie against the Court for failing to take reasonable care in determining an application although, again, this Court could make orders requiring the Land and Environment Court to carry out its functions according to law.

 

In these circumstances, the concept of a duty in the Council to act expeditiously may be conceded; it is a statutory duty subject to both appellate and judicial review."

 

122 The matters which the Council was required to take into account in determining whether there was any legal impediment to the development of the appellant's land include "the public interest" and the provisions of any relevant environmental planning instrument: EP&A Act, s 79C(1). By s 80(2) it was required to refuse an application for the sub-division of land (which by s 4B includes a strata sub-division) that would if carried out result in the contravention of an environmental planning instrument. The Byron Local Environmental Plan 1988 (the Byron LEP) is such an instrument made under Pt 3 of that Act. Clause 45 relevantly provided:

 

"45(1) The Council shall not consent to the carrying out of development on any land to which this plan applies unless it is satisfied that prior adequate arrangements have been made for the provision of sewerage, drainage and water services to the land."

 

123 Also, the Council was charged under s 58 of the LG Act with the "care and management" of sewerage works in the Byron Shire. In undertaking that responsibility, the Council was, in the language of s 24, providing services and carrying out an activity "appropriate to the current and future needs" of its local community. In doing so it was required to comply with any direction given by the Minister for Public Works as to the taking of a measure designed to ensure the proper safety, maintenance and working of those works: LG Act, s 61. The suspension of the allocation of sewage treatment capacity to new developments could be one such measure.

 

124 Where a council is the relevant sewerage authority the application for development consent may also seek approval for connection to the sewerage facilities under the council's control: EP&A Act, s 78A(3). That application is made under s 68(1) of the LG Act: see Item 6 of Part B to the Table following s 68. Although the appellant's first development application noted that it would seek to connect to the existing system, the Council did not in its later deliberations treat that intimation as constituting an application for an approval under s 68.

 

125 Section 89 of the LG Act states that in determining an application for connection under s 68 the Council must give effect to "the applicant's objectives to the extent to which they are compatible with the public interest" - that interest described as including the protection of the environment and the protection of public health, safety and convenience (s 89(3)). This section expressly recognises that an applicant's interest may conflict with a public interest to which the Council is to have regard and provides in that event that the latter must prevail.

 

126 These provisions identify as specific objectives to which the Council must have regard in its care and management of sewerage works the proper safety, maintenance and working of those works (s 61), public health and safety and the risk of damage to property (s 62) and the protection of the environment and protection of public health, safety and convenience (s 89).

 

127 The premises-based activity of sewage treatment which the Council undertakes is also required to be the subject of an environment protection licence issued under Chapter 3 of the Protection of the Environment Operations Act 1997 (NSW). The licence issued in relation to the West Byron STP premises imposed conditions governing the general operation of that plant and containing specific limits in relation to matters including the pollution of waters, sewage loads and permitted concentration limits, in the treated effluent output of the works of various pollutants, such as phosphorus and ammonia.

 

128 Returning to cl 45 of the Byron LEP, in Codlea Pty Ltd v Byron Shire Council [1999] NSWCA 399; 105 LGERA 370 this Court (Stein JA, Handley and Sheller JJA agreeing) held that the "arrangements" to which it refers are those between the applicant for development consent and the provider of the sewerage services. The effect of the reasoning in that case is that, as the relevant consent authority charged with determining a development application, the Council was required to consider whether there was an arrangement in existence between it and the applicant. Whether such an arrangement should be made was a separate and anterior question to be addressed by the Council as the authority having responsibility for the care and management of the sewerage facilities. If the Council was not satisfied that there was such an arrangement, consent to the carrying out of the development had to be refused.

 

129 The point of relevance of this decision in the present context is that the task of making such an arrangement was an aspect of the Council's function in managing the sewerage facilities. There is no issue as to the fact being that the Council did not make such an arrangement with the appellant until May 2004. Although at one point in the oral argument the appellant suggested that it also relied on a breach by the Council as consent authority of a duty of care owed with respect to its being satisfied within cl 45(1), such a claim was neither pleaded nor arguable on the facts.

 

The relationship between the parties

 

130 Three matters may be noted at the outset. The first is that the Council's calculation of the West Byron STP's spare capacity undertaken as at June 2000 was a function of the current load generated by existing users of that system measured as at August 1999 and an estimate of the future load then committed to that system. At that time, it was also expected that the load generated by existing users would increase due to growth of the resident and tourist population, as well as growth in the likely number of "day trippers". Any such increase could justify a further assessment of any remaining capacity taking into account the estimated committed load. The second is that whether any capacity was made available to new developments was a matter for the judgment of the Council as the authority having responsibility for the care and management of the sewerage works. The third matter is that the Council did not give any assurances to those who lodged development applications between August 2000 and February 2001 that it would not subsequently revisit the question of spare capacity or that any assessed spare capacity would be allocated in a particular way or without regard to the overriding public interest in protecting the treatment plant from being overloaded.

 

131 In September 2000, the Council resolved to acknowledge that the West Byron STP had unused capacity of 371 EPs. At that time it addressed how that capacity might be allocated. The methods of doing so included by order of lodgement of development application, by order of determination of development application or by order of requests for additional load or connection to the West Byron STP. Although it did not make an immediate announcement of the fact, the Council decided to allocate that capacity by order of lodgement of development applications.

 

132 By late February 2001 officers of the Council calculated that taking into account the additional committed load allocated since August 2000 and development applications lodged since that time, there would be no remaining capacity in the West Byron STP. That being the position it determined to put in place "a protocol ... with regard to allocation of the remaining ETs and further acceptance of Development Applications". That protocol, which was announced by a media release dated 1 March 2001, was directed to the allocation of capacity to applications received after that date.

 

133 In its development application lodged on 6 February 2001 the appellant noted that in "relation to sewer, we understand that limited capacity exists at the West Byron plant, and we would seek to connect to the existing system to exploit that capacity". That application earlier recorded an understanding that recent studies (presumably those undertaken on behalf of the Council) had indicated "that the West Byron Sewerage [sic] Treatment Plant has spare capacity sufficient to accommodate the wastewater load from the proposed development". The treatment capacity estimated as required for the proposed development was 11.6 ETs.

 

134 Before that development application was lodged, the appellant's principal director, Mr Vaughan, was advised by the Mayor that there was "spare capacity at the moment" at the West Byron STP. It was not, however, part of the appellant's case that it had received or relied upon any statement or advice as to the existence of such capacity, as to the way in which it would be allocated or that it had received or would receive such an allocation. It did, however, seek some assurances, thereby indicating an appreciation that there was a risk that its development would not receive the capacity it required.

 

135 In May 2001 the appellant's town planner sought confirmation from the Council that an ET allocation for the development was "in place". The Council's response was that the application was noted as having been received prior to 1 March 2001 and that "applications received during 2001 are to be determined in order of lodgement for the purposes of allocation of ETs to ensure appropriate allocation". The town planner replied inquiring whether the Council's response meant that "there is a possibility that there will not be any ETs remaining when this DA is determined". The Council's reply clearly left that possibility open. It was that "as applications are to be dealt with in the order of lodgement, further information is unavailable at this stage".

 

136 On 14 August 2001 the Council resolved to defer a decision on the appellant's application so as to allow it to be amended to take account of several issues described as being incompatible "with current development controls". By its letter dated 21 August 2001 the town planner again sought clarification of the position with respect to the allocation of sewerage capacity:

 

"As I understand it, there is the potential that there may not be sufficient ETs available when the time comes to determine this application. From our recent discussion, it would appear that the chances of this are slim, however, as I am sure you would understand, the possibility greatly concerns my client.

 

We had interpreted the media release issued by the Mayor in March to mean that all applications lodged with Council before that date were 'safe' with regard to the availability of ETs. Apparently, this interpretation is not correct, even though, as was evident from their reaction at the recent meeting, most Councillors shared this interpretation."

 

And concluded:

 

"You might recall that in early June 2000 [sic] I sent you an email asking for an indication that sufficient ETs were available for this application. I did not get a reply to that email. Could you now please clarify the situation with respect to ETs, hopefully by guaranteeing that sufficient ETs are available for this proposal."

 

(The reference to June 2000 is to be understood as being to June 2001 as the appellant's application was not lodged until February 2001.)

 

137 The Council did not respond to the town planner's letter of 21 August 2001. On 13 September 2001 solicitors acting for the appellant also sought the Council's "written confirmation that ET allocations for our client's Application are in place and will not, under any circumstances, be reallocated until such time as our client's Application is determined by the Court or agreement is otherwise reached". That confirmation was not given.

 

138 In mid-August 2001 the appellant appealed to the Land and Environment Court from the deemed refusal of its application. In early November, the Council served a draft statement of the issues in those proceedings. Those issues included the absence of any adequate arrangement for the provision of sewerage services. On 18 December 2001, a report from the Council's officers indicated that there were not sufficient ETs remaining from the originally estimated 92.75 ETs to satisfy the estimated requirement of the appellant's development. In this context, on 19 December 2001, the appellant's solicitors wrote to the Council's lawyers as follows:

 

"We also note that despite our requests dated 13 September, 17 October and 28 November, we have received no written confirmation that ET allocations for our client's application are in place and will not, under any circumstances, be reallocated until such time as our client's application is determined by the Court or agreement is otherwise reached between our respective clients."

 

139 The further report of 18 December 2001 stated that 68.927 of the 92.75 ETs spare capacity had been allocated to approved applications, 18.75 had been reserved pending the outcome of appeals that had been lodged against the Council's determinations and that 5.073 remained unallocated. The report marked that 3.1 ETs be allocated to a development which already had been recommended for approval, leaving 1.793 ETs available for two applications - one of which was that of the appellant. By this time the appellant's development was estimated to require 12.4 ETs.

 

140 At its meeting on 19 December 2001, the Council deferred consideration of the appellant's development application. At the same time, the appellant was invited to submit a revised proposal. It did that in January 2002, reducing the size of the development to 16 residential units or houses. On 29 January 2002 the Council rescinded an earlier resolution (passed at a meeting of its Approvals Committee on 18 December 2001) by which it had "recognised" that the appellant's development was included in the "pre 6 March 2001 ET allocation". The effect of that rescission was to leave the Council able to address the question of allocation to the appellant's development to be undertaken in accordance with the methodology which it had adopted to that time. This was confirmed as being the Council's position in a meeting with the appellant on 1 February 2002.

 

141 It is necessary at this point to refer to proposals which then existed for the augmentation of the Council's sewage treatment facilities at the West Byron STP and South Byron STP. In October 2000 and March 2001 the Council's consulting engineers, Gutteridge Haskins & Davey Pty Ltd (GHD), had prepared reports and concept designs for an increase in the capacity of those facilities. In February 2002 Mr Warner, the Acting Director of Water and Waste Services, reported to the Council that sewage flows in August 2001 and January 2002 had showed significant unanticipated growth and that further work had been commissioned to assess whether it was necessary to revisit the assumptions used by GHD as the basis for preparing its concept designs.

 

142 Mr Warner also gave evidence about those increased flow rates in the proceedings in the Land and Environment Court. His evidence was that the most recently available measurements of current load and estimates of committed load indicated that there was no longer any spare capacity at the West Byron STP.

 

143 His statement tendered in evidence in that hearing (which commenced on 11 March 2002) included the following:

 

"Based on the latest compiled information, the loading on WBSTP is:

 

(Holiday) peak loadings = 3217 kl/day (13404(1) EP)

 

Nonpeak loadings = 1817 kl/day (7571(2) EP)

 

(1) Based on January 2002 data

(2) Based on August 2001 data

 

In addition to the above figures there remains a further potential load from approved development applications and vacant blocks already zoned and eligible for single dwelling developments. This is referred to as committed load.

 

Based on these figures, WBSTP receives sewage loadings in excess of the design capacity. As such, no further loading beyond the committed load should be permitted. Any increase in sewage load beyond the current and committed load will further compromise the performance of the treatment plant and put at risk compliance with EPA licence conditions."

 

144 These measurements of actual loads indicated that in January 2002 the current peak loading (3,217kL/day) exceeded the plant peak dry weather capacity of 2,500kL/day. It also showed that in August 2001 the non-peak loading (1,817kL/day) was not far short of the design flow capacity of 2,000kL/day before taking account of any committed load that had not come on line. Mr Warner's conclusion was that taking existing committed load into account any of the previously identified spare capacity of 92.75 ETs which had not yet been committed should not be allocated.

 

145 Any doubt as to this being the effect of Mr Warner's evidence was removed by his oral evidence. In re-examination he was asked to assume that there were sufficient of the 92.75 ETs available for allocation to the appellant because of a calculation error which overstated the committed load for the Aquarius Backpacker development. He was then asked whether the distribution of those ETs would be "in accordance with the Council's stated policy". He responded:

 

"From a sewerage treatment operation perspective it is not appropriate, because the recent relevant data shows that the plant is now over capacity consistently, so therefore to do that would be to place the plant at risk and to not to be in the spirit of our operating licence with the EPA. It is not appropriate to approve a development that will provide an increased permanent load to the treatment works as opposed to a temporary load that comes from a festival. Further, that increased permanent load for one development it could be argued why do you not do it for more developments, and the clear answer there is that if that were to occur, then the plant would be further and progressively compromised, so therefore my answer is that it should not occur on this occasion. It should not be the first of many that could follow."

 

146 In its judgment delivered on 15 March 2002, the Court did not address the question whether there was or was not capacity available for allocation to the appellant's development. The Court accepted the Council's submission that no capacity had been allocated to the development. It followed, applying the decision in Codlea v Byron Shire Council, that there was no arrangement which the Council as consent authority or the Court (having all the functions and discretions of the Council by reason of s 39(2) of the Land and Environment Court Act 1979 (NSW)) could be satisfied complied with cl 45(1).

 

147 The memorandum from the Council's general manager of 27 March 2003, which outlines "the implications of Council's recent consideration of the capacity at West Byron STP", is not inconsistent with the position then being that the Council's officers proposed to proceed to apply the methodology adopted in 2001 although it was by this time considered that the West Byron STP had no spare capacity.

 

148 Earlier, on 25 February 2003, the Council had received a further report from the Director of Waste and Water Services. That report concluded:

 

"In the case of West Byron STP, the flows now coming into the plant exceed its design hydraulic capacity. The plant is now failing some of its EPA licence limits and short circuiting is occurring in the aeration tank following any substantial wet weather event.

 

In real terms the West Byron STP does not have any spare capacity.

 

If Council resolved that the plant did have spare capacity, and allowed development to occur that was additional to the committed load, the effects on the plant would be increased flows and a high risk of increasing licence breaches."

 

149 The Director then went on to consider what should be done with the "remaining unallocated portion of the 92.75 ET in light of the fact that the West Byron STP is overloaded". He expressed a view as to whether the Council was obliged either legally or "as a matter of equity" to allocate capacity to development applications received prior to 6 March 2001. As the memorandum of 27 March 2003 records that subject and his report were considered at a meeting of the Council on 11 March 2003. At that time it was necessary to decide whether the Council would adhere to the earlier position which it had taken in relation to the allocation of spare capacity or act on the basis of the most recent report of its officers that the plant no longer had spare capacity. No resolution was passed at that meeting. The result was that its earlier resolutions as to the allocation of capacity continued to apply.

 

Was there a duty of care?

 

150 The starting point is the duty of care for which the appellant contends. In Crimmins v Stevedoring Industry Finance Committee [1999] HCA 59; 200 CLR 1 at [5] Gleeson CJ observed that difficulties in formulating the practical content of a duty for the purpose of measuring the performance of a statutory authority against that duty may be a reason for denying its existence. See also Graham Barclay Oysters v Ryan at [8] (Gleeson CJ) and Vairy v Wyong Shire Council [2005] HCA 62; 223 CLR 422 at [59] (Gummow J).

 

151 In its Statement of Claim the appellant pleads the content of the alleged duty of care in two ways. First, it alleges that the Council owed a duty of care "to give proper consideration" when the time came to determine its development application "to whether sufficient sewerage capacity existed at the [West Byron plant]". Secondly, it alleges that when giving consideration to its application the Council had a duty of care "to act upon information which was properly and soundly based [and] accurate and reasonable in its conclusions as to the existing spare capacity" of that plant at that time.

 

152 In its written submissions to this Court, the appellant formulated the duty more narrowly. A distinction is sought to be made between, on the one hand, the exercise of deciding whether there was available capacity and, if so, how that capacity was to be allocated, and on the other, the subsequent task of implementing that decision. The more narrowly formulated duty is said only to apply to the task of implementation, to have arisen once the decision as to capacity was made and to have applied for so long as that decision was adhered to.

 

153 In oral argument the appellant confirmed that this narrower duty did not extend to the making of any decision about capacity and how it might be distributed. It was also accepted that the duty did not require that at any relevant time the Council adhere to any earlier decision as to the availability of capacity or as to how that capacity should be allocated. In pressing this argument the appellant must be taken to have abandoned the broader formulations of the scope of the duty pleaded in its Statement of Claim.

 

154 The appellant describes the activities of the Council to which this narrower duty of care attached as "operational" in the sense referred to by Mason J in Council of the Shire of Sutherland v Heyman [1985] HCA 41; 157 CLR 424 at 469; being activities that involved "action ... that is merely the product of administrative direction". That description was adopted in an attempt to distinguish between the 'policy' decisions of a public body that involved or were dictated by financial, economic, social or political factors or constraints, and the 'operational' decisions that were not. It was said that decisions of the former kind were not ordinarily the subject of any duty of care. In more recent judgments this distinction has been said to be of dubious utility because it will not always be the case that decisions at an operational level do not involve, at least in part, policy or public interest considerations: Pyrenees Shire Council v Day at [181] - [182] (Gummow J); Crimmins v Stevedoring Industry Finance Committee at [292] (Hayne J); and Vairy v Wyong Shire Council [86] (Gummow J).

 

155 In relying on this distinction, the appellant's argument accepts, as it must, that when making decisions about the management and operation of the treatment plant the Council must have regard to considerations that are incompatible with the interests of a particular property owner in seeing that its development is not delayed or refused by a lack of sewerage capacity. The consequences of overloading those facilities include immediate risks to their safety and continued working as well as risks to public health and of pollution of the environment. There is also the possibility of breaches of the plant's operating licence. Where an assessment has to be made as to whether there should be any further loading of the system, these considerations are likely best served by a decision not to do so whereas the interest of the land owner seeking access to the system is not.

 

156 The appellant's argument seeks to avoid this incompatibility by framing the content of the duty narrowly and by reference to the task of allocation which it says the Council staff performed carelessly. That argument proceeds as follows. In September 2000 the Council resolved to acknowledge the existence of spare capacity at the West Byron STP and to allocate that capacity to new developments. Thereafter Council staff were engaged in the administrative task of undertaking that allocation. The Council did not at any relevant time resile from its earlier decision acknowledging the existence of that spare capacity or that it could be allocated. In the period between December 2001 and February 2002 the Council considered whether to approve the appellant's development application. It was not prevented from doing so because there had been a deemed refusal under s 82(1) or an appeal lodged under s 97(1) of the EP&A Act, and indeed s 82(2) authorised the Council to determine the application notwithstanding that appeal. By this time, the public interest and policy matters to which the Council was otherwise required to have regard were no longer relevant because they had been considered by the Council at an earlier point in the process, namely, when the resolution of September 2000 was passed. They were not reconsidered by the Council in February or March 2002, before or during the hearing of the Land and Environment Court proceedings.

 

157 In the way the appellant's case is formulated, whether the Council owed it a duty of care and whether it suffered any economic loss depend on the Council's having adhered to its earlier acknowledgement of available capacity and decision, albeit uncommunicated at the time, as to how that capacity might be allocated. If in January 2002 the Council had reassessed the question of capacity by reference to the more recent data relied upon by Mr Warner, it could have concluded that there was no available uncommitted capacity. Alternatively, it may have decided to reserve any capacity which was otherwise available for a particular use or development such as a hospital or nursing home. In either event, the appellant's application for an allocation of capacity would have been refused in circumstances to which the suggested duty of care would not have applied. That this is so exposes a fundamental difficulty for the appellant's case. The primary judge points to that difficulty in her reasons at [45] where it is observed that the earlier adoption by the Council of a methodology for the allocation of capacity "informs the existence and content" of the duty of care.

 

158 In Vairy v Wyong Shire Council at [60] Gummow J warned against the danger of focussing on the alleged breach when addressing the existence and content of any duty of care. That is because that is a question of law to be determined prospectively. One risk of doing so is that the duty will, as in this case, be framed retrospectively by too specific reference to what happened: per Hayne J in CAL No 14 Pty Ltd v Motor Accidents Insurance Board [2009] HCA 47; 239 CLR 390 at [68]. A related risk is that the question as to the existence of the duty will not be addressed prospectively.

 

159 Where it is said that a public authority owes a duty of care, it is necessary to identify the function or power, the performance or exercise of which is the subject matter of the alleged duty. Having done so, as the joint judgment in Sullivan v Moody makes clear at [60], it is then necessary to address whether the existence of that duty would give rise to inconsistent obligations in the performance of that function or conflicting claims upon the exercise of the power. These questions are part of the prospective inquiry as to the existence and content of the duty. They are not answered, as the appellant's argument would have it, by looking to the way in which the public authority acted on the particular occasion in question and asking whether its doing so in fact required it to give consideration to conflicting claims, or engaged statutory obligations inconsistent with that duty.

 

160 The function in relation to which it is said the Council owed a duty of care was that of deciding whether to increase the permanent load on the treatment works by the amount of capacity required for the appellant's development. That question arose in the context of its determining whether to approve that development. The Council undertook that function between December 2001 and February 2002. There were two particular matters to which it had to give attention. The first was whether, as sewerage authority, it should allocate capacity and consent in principle to the development being connected to the public sewer. The second was whether, as consent authority, it was satisfied that there was an arrangement within cl 45(1) of the Byron LEP.

 

161 Those questions had to be addressed consecutively and the answer to the second was dictated by the answer to the first. In addressing the first the Council was required to give paramount consideration to the safety and continued operation of the treatment facilities, maintaining public health and protecting the environment. That obligation and the interests to which the Council was to have regard are incompatible with the existence of a private law duty to take reasonable care to avoid economic loss to a developer resulting from refusal of or delay in its development approval.

 

162 Furthermore, that incompatibility is not avoided by restricting the duty to what is described as the "mechanical" task of allocation. When the Council was considering the appellant's application in the period from December 2001, it remained subject to these statutory obligations. In deciding, by its rescission resolution of 29 January 2002, to adhere in relation to the appellant's development to the methodology it had previously adopted, the matters to which the Council was able to have regard included any recent data as to loadings on the treatment plant as well as the assumptions and calculations underlying the earlier report of its officers of 18 December 2001. The decision to adhere to the earlier methodology was not a "mechanical" one. It involved a judgment as to whether the previous methodology and the assumptions and calculations which informed it should be applied to that development.

 

163 For these reasons the primary judge was correct to conclude that there was a disconformity between the alleged duty of care and the Council's statutory functions and obligations and that the existence of such a duty would be "inimical to the unimpeded exercise" of those functions. That incompatibility would ordinarily be a sufficient reason for denying the existence of the duty: Sullivan v Moody at [60].

 

164 There are other features of the relationship between the parties that must be considered. They are the foreseeability of harm, indeterminacy, reliance and assumption of responsibility, and the vulnerability of the appellant. The primary judge concluded that there was "no relevant reliance, no assumption of responsibility and no vulnerability in the relevant sense": [85], [91], [92]. I agree with each of those conclusions.

 

165 Foreseeability of harm. As Allsop P observed in MM Constructions (Aust) Pty Ltd v Port Stephens Council at [93], delay in or rejection of a development approval can readily be seen to have economic consequences for a developer. To that extent, in the present case it was foreseeable that a developer might incur some financial disadvantage if its development application was delayed or refused.

 

166 However, the risk of harm to which the suggested duty is directed is not all or any delay in the approval of the development application, or all or any such delay due to a refusal to allocate or delay in allocating sewage treatment capacity. It is only the risk of economic harm resulting from delay or refusal of a development application due to negligence in the mechanical or operational task of allocating capacity.

 

167 In that event, the applicant would only suffer financial loss as a result of any delay or refusal if there were spare capacity that would have been allocated earlier, but for the relevant negligence. Whether there was capacity available for allocation was a matter for the judgment of the Council as sewerage authority and not something in respect of which there could be only one "correct" answer. As the primary judge observed at [87] treatment capacity was not a "fixed, measureable resource which the Council had an obligation to quantify correctly and to allocate exhaustively".

 

168 Assuming that but for the relevant negligence the Council would have concluded that there was capacity available, whether the appellant would suffer financial loss as the result of any delay or refusal of its application would then depend on a range of factors, some of which would not in the ordinary course be known to the Council. Those factors include the developer's intentions with respect to the development; any alternative opportunities available to the developer with respect to the use or sale of the undeveloped property; the costs of proceeding with the development, including financing and construction costs; and the revenues received or anticipated before, during and on completion of the development.

 

169 Although in a general sense it was foreseeable that the appellant might suffer detriment if its development was delayed or refused due to carelessness in allocating capacity, it was not foreseeable that the appellant would inevitably do so: cf Caltex Oil at 577, and Perre v Apand at [131], [216].

 

170 Indeterminacy. The present case is not one in which the liability of the Council is indeterminate in any relevant sense: see Caltex Oil at 568 (Stephen J); Perre v Apand at [106] - [108] (McHugh J) and Woolcock v CDG at [21] (Gleeson CJ, Gummow, Hayne and Heydon JJ). The class of potential claimants is those who lodged development applications in the period between August 2000 and February 2001. The general nature of their claims and the measure of the damages that might be claimed can realistically be determined.

 

171 Reliance and assumption of responsibility. Liability claims for negligent misstatement or advice ordinarily depend upon the presence of known reliance and an assumption of responsibility. The speaker must realise, or the circumstances must be such that it ought to have realised, that the recipient intends to rely upon the information or advice in connection with some matter of business or serious consequence and the circumstances must be such that it is reasonable for the recipient to seek or accept, and to rely upon, the information or advice: Tepko Pty Ltd v Water Board at [47] (Gleeson CJ, Gummow and Hayne JJ), citing Mutual Life & Citizens' Assurance Co Ltd v Evatt [1968] HCA 74; 122 CLR 556 at 571 (Barwick CJ).

 

172 The presence of reliance is also an indication of 'vulnerability' as that notion is understood: Perre v Apand at [10] (Gleeson CJ); Woolcock v CDG at [24] (Gleeson CJ, Gummow, Hayne and Heydon JJ). The vulnerability arises because of the recipient's known reliance on the defendant as the source of advice or information.

 

173 In preparing and lodging its development application the appellant had the assistance of expert town planning advice. It also had access to officers and staff of the Council, of whom it could make inquiries, and to the public deliberations and resolutions of the Council and reports presented at its public meetings. The fact that the appellant and its advisors exercised that access is apparent from the terms of its original development application, the evidence of Mr Vaughan as to his dealings with the Council and the correspondence between the Council and the appellant's town planners.

 

174 At the time it lodged its development application the appellant had an expectation that there would be capacity available for its development. However, it did not have any assurance from the Council to that effect or any assurance as to the way in which any available capacity would be allocated. The appellant at the same time must be taken to have appreciated that in determining that there was or was not available capacity, the Council was bound to consider whether increasing the permanent load on the plant, by granting capacity, would compromise its operation.

 

175 At no time did the appellant seek any assurance from the Council that it would act carefully or competently in implementing, or making, a decision about available capacity. Instead, assurances were sought that capacity was or would be available to its development. The terms of those requests show that the appellant was not proceeding on the basis that it had any entitlement to receive capacity or to have capacity allocated in a particular way. In that context, the more specific subject of whether the Council staff might make calculation errors in implementing any decision about how capacity was to be allocated was not a matter to which the appellant expressly addressed attention.

 

176 The appellant may have had an expectation that the Council would undertake the exercise of allocation equitably and competently but, as Allsop P also observed in MM Constructions v Port Stephens Council at [94], that was "no more than a reasonable expectation of members of the public". That expectation would include an appreciation that from time to time errors are made in the conduct of the activities of a public or private service provider which affect the supply of its services. As Gillard J noted in Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] VSC 27; Aust Torts Reports 81-692 at [1017], whilst it may be taken for granted that service providers will be efficient and timely, experience shows that nothing is guaranteed. At no time was the appellant relying on any express or implied assurance from the Council that it would allocate available capacity in a particular way and exercise reasonable care in doing so.

 

177 Vulnerability. The notion of vulnerability includes circumstances in which a plaintiff is unable to protect itself from the consequences of a defendant's want of reasonable care. That may be because it has exercised that ability by placing reliance on the defendant for information or advice. As the above analysis shows, that is not so in this case. It may also be because the plaintiff's enjoyment of a right, interest or expectation is controlled in some relevant sense by the defendant: Pyrenees Shire Council v Day at [168] (Gummow J); Perre v Apand at [38] (Gaudron J), [129] (McHugh J).

 

178 The economic loss claimed by the appellant is the amount necessary to put it in the position it would have been in had it received a timely allocation of capacity and development approval. That loss includes expenses that it says would not have been incurred if development approval had not been delayed and benefits in the form of profits that it says would have been realised. In Hill v Van Erp [1997] HCA 9; 188 CLR 159 the economic loss suffered by the intended beneficiary was the value of an expected testamentary benefit the receipt of which depended totally on the exercise of care in relation to work (specifically the preparation of a will and the securing of its proper execution) which the solicitor had agreed to perform.

 

179 The appellant had no right or entitlement to have any further load committed to the sewerage system. Nor did it have an expectation to that effect, the enjoyment of which necessarily depended on the exercise of care by the Council in relation to a task that it was obliged to perform. The Council was able at any time in the discharge of its responsibility as sewerage authority to determine that there should be no further increase in the permanent load to the treatment works or decide that any such increase should be allocated to specific developments or in a particular way. In these respects the appellant's position is to be contrasted with that of the plaintiffs in Hill v Van Erp, Caltex Oil and Perre v Apand. In Caltex Oil the detriment suffered was the loss of the enjoyment of Caltex's right to use property (the pipeline) which was vital to the ongoing conduct of its business: at 576-577 (Stephen J). In Hill v Van Erp the intended beneficiaries' interests were "totally and unavoidably dependent upon the proper performance of a function within the sole province of the solicitor": at 186 (Dawson J). In Perre v Apand, the plaintiffs were denied access to the "principal and lucrative market" in which they were selling and entitled to sell their potatoes: at [195] (Gummow J). Here, by way of contrast, the appellant's continued enjoyment of any right or interest or expectation was not controlled by the Council. There was no such right or interest, the enjoyment of which depended on the exercise of care by the Council or the existence of which depended on the exercise of care by the Council in the performance of a function that it was obliged to undertake.

 

180 The appellant appreciated at the outset that there was a risk that its development may be delayed or not proceed or proceed in a different form. There were several reasons why that might have occurred. An aspect only of one of those reasons is sought to be made the subject of a duty of care. The appellant was well positioned with the assistance of its expert advisors, and after making inquiries of the Council, to assess before it lodged its application the risk that there would be insufficient sewerage capacity available. It was also in a position to defer the incurring of significant expenses in relation to the development until such time as it had made an arrangement with the Council for the allocation of capacity. In the absence of any such arrangement the appellant may have proceeded in part on an expectation that the Council and its officers would act competently and responsibly in relation to the care and management of the sewerage facilities. At the same time it was foreseeable as a possibility that its development might be refused or delayed in circumstances where reasonable care was not taken. However, that fact and the fact that it might suffer detriment as a result were not sufficient to make it vulnerable in the relevant sense: Woolcock at [23].

 

Conclusion

 

181 Consideration of these features of the relationship between the appellant and the Council, and the statutory context which informs it, points clearly to the conclusion that the Council was not subject to the suggested duty of care. The appellant's claim is for economic loss in circumstances where there was no reliance or assumption of responsibility or relevant vulnerability so as to justify the imposition of that duty. Furthermore to do so would involve subjecting the Council to conflicting claims and obligations in relation to its care and management of the sewerage works.

 

182 This conclusion makes it unnecessary to consider any question of breach; and, in any event, it is not useful to do so in circumstances where the Council does not seriously contest that if it owed the narrow duty of care contended for that duty may have been breached.

 

183 The appeal should be dismissed and the appellant ordered to pay the respondent's costs.

 

184 LEEMING JA: I agree with the reasons and conclusions of Meagher JA. This Court being divided, I should explain why I respectfully disagree with the judgment of Macfarlan JA, which I have also had the advantage of reading in draft. As I see the position, much of the difficulty in this appeal is linguistic, and may be avoided by carefully distinguishing the various duties owed, and the different functions performed, by the Council.

 

185 This is not a case where Dansar alleged that it relied on any representation by the Council. That was expressly disavowed. The duty for which Dansar contended arose upon the submission, in February 2001, of its development application, and continued so long as the Council chose to consider that application. Dansar's development application, consistently with cl 45 of the Byron Local Environmental Plan 1998 and the temporary availability of "Equivalent Tenements" or "ETs", stated that:

 

"Recent studies have indicated that the West Byron [Sewage] Treatment Plant has spare capacity sufficient to accommodate the wastewater load from the proposed development. Based on Council's normal requirements, each two-bedroom development will generate a sewer load of 0.7 ET. The whole development therefore will generate 11.6 ET (18 x 0.7 minus 1 ET 'credit'). [Sewage] from the site will be directed into Council's existing sewerage system, taking advantage of the existing capacity available."

 

186 The application referred in terms to cl 45 and said:

 

"The site can be adequately served with water, telephone and electrical services. In relation to sewer, we understand that limited capacity exists at the West Byron plant, and we would seek to connect to the existing system to exploit that capacity."

 

187 No party disputed that the Council's power was confined by cl 45(1) of the Byron LEP 1998. The Council had no power to grant consent "unless it is satisfied that prior adequate arrangements have been made for the provision of sewerage ... ". That is to say, the Council's state of satisfaction was a condition precedent to the exercise of power under s 80 of the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act). In that sense it may be said to be jurisdictional: Barrick Australia Ltd v Williams [2009] NSWCA 275; 74 NSWLR 733 at [26]. The state of satisfaction must be regularly formed, and could be challenged on judicial review, in accordance with what Latham CJ said in R v Connell; ex parte Hetton Bellbird Collieries Ltd [1944] HCA 42; 69 CLR 407 at 432. Indeed, "any person" (for example, the neighbours some of whom objected to the Dansar's development application) could bring Class 4 proceedings to challenge the consent: see McGovern v Ku-ring-gai Council [2008] NSWCA 209; 72 NSWLR 504. It is trite that any body exercising public power must first satisfy itself that the preconditions have been satisfied. In the case of courts, it has been said to be "the very first duty of any Court" and "the first duty of every judicial officer": Hazeldell Ltd v Commonwealth [1924] HCA 36; 34 CLR 442 at 446; Federated Engine-Drivers' and Firemen's Association of Australasia v Broken Hill Proprietary Co Ltd [1911] HCA 31; 12 CLR 398; see also Eberstaller v Poulos [2014] NSWCA 211 at [1] and [14].

 

188 But although it is conventional and appropriate to describe Council's obligation to satisfy itself of the preconditions to any exercise of power as a "duty", such duty is distinct from the private law duty urged by Dansar in this appeal. For one thing, Council never exercised the power to grant or refuse consent under the EP&A Act (ultimately, the Land and Environment Court dismissed an appeal from Council's deemed refusal) and so there was no occasion for it to reach the state of satisfaction required by cl 45(1). For another, the private law duty for which Dansar contends is one whose breach sounds in damages, rather than vitiating an exercise of public power. For a third, as narrowly formulated, it was a duty to take reasonable care in allocating spare sewerage capacity previously determined to be available. That duty was, correctly, regarded by Dansar as distinct from the determination of available sewerage capacity, which Dansar accepted was not subject to the alleged duty of care.

 

189 Dansar alleged that the Council was required to give "proper consideration" to its development application, including proper consideration as to whether "prior adequate arrangements had been made". That submission conflates the obligation upon the Council to satisfy itself of a precondition to the exercise of its power to grant consent, in its capacity as consent authority, with the Council's functions as sewerage authority. It is the latter which matters for present purposes.

 

190 In determining whether the duty for which Dansar contends exists, it is necessary to ask a question which may seem to be quite artificial. Was the Council exercising its functions under the EP&A Act (responding to a particular application for consent by a landowner), or was the Council exercising its functions as a sewerage authority, implementing spare sewerage capacity in accordance with a resolution reflecting an evaluation of competing and diverse interests (such as the existing demand, the environmental impacts and compliance with the Council's licence)? The artificiality arises because in the present case, the same Council performed both functions, but that will not always be so. The force of Codlea Pty Ltd v Byron Shire Council [1999] NSWCA 399; 105 LGERA 370 is that the function of entering into an "adequate arrangement" is outside the functions exercised in a Class 1 appeal by the Land and Environment Court pursuant to s 39(2) and therefore distinct from the Council's functions under the EP&A Act.

 

191 I accept that Dansar's application for development consent necessarily amounted to its seeking an arrangement for the provision of sewerage for 11.6 ETs (for without the Council being satisfied of the existence of such an arrangement, it had no power to grant consent). However, where (as Dansar accepted) the Council had no duty in formulating, from time to time, the policies it would put in place for allocating the limited sewerage capacity, which necessarily were approximate, contestable and liable to change at any time and without notice, it is difficult to see how there could be a duty to take reasonable care in the implementation of those policies so as to avoid pure economic loss.

 

192 The foregoing is wholly consistent with the reasons of Meagher JA. The analysis required to determine the existence of a duty to take reasonable care is, necessarily, more wide-ranging than the matters to which I have referred, and I gratefully agree with the whole of his Honour's reasons. I would add that I regard this appeal as an unusual case; ordinarily, it might be expected that such cases would involve reliance by the plaintiff upon a representation made by Council about how its policies were being implemented.

 

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Amendments

22 October 2015 - [101] - "240kL/day" changed to "240L/day"
[145] - "Aquarius Backpack development" changed to "Aquarius Backpackers development"
[176] - "ATR 81-692" changed to "Aust Torts Reports 81-692"

Decision last updated: 22 October 2015