Burwood Council (Council) recently experienced a costly loss in the Supreme Court of New South Wales, after it provided a planning certificate containing negligent misstatements. By way of background, in 2011 Elisa Lorenzato signed a contract for a property at 13 Appian Way, Burwood (property), attached to which was Council’s planning certificate issued under the former section 149 (now section 10.7) of the Environmental Planning and Assessment Act 1979 (EP&A Act). The certificate failed to disclose the existence of a stormwater drainage pipe running under a house and pool situated on the property. It also failed to disclose a resolution that Council had adopted in 2002 for the acquisition of an easement over the pipe and establishment of an easement on the property’s western boundary (easement resolution).

Since purchasing the property, the Lorenzatos experienced flooding on nine occasions due to the pipe becoming blocked and cracking, and water pouring from the road down the property’s driveway.

The purchaser alleged that:

(a) Council had breached sections 149(2)[1] and (4)[2] of the EP&A Act by failing to provide to the purchaser information about the easement resolution and its effects on any future development;

(b) Council had breached section 149(5)[3] of the EP&A Act by failing to provide to the purchaser advice on other such matters affecting the land about which it was aware (namely, the existence of the stormwater pipe); and

(c) had the purchaser been aware of the pipe’s existence and the easement resolution, the purchaser would not have proceeded with the purchase.

Council claimed that the planning certificate prepared by it and attached to the contract for sale was prepared with reasonable care and skill and that the details expressed in the certificate were not inaccurate or misleadingly incomplete. In addition, Council submitted that it should be granted access to the purchaser’s property to repair the damaged pipe.

The purchaser simultaneously brought an action against the property’s vendor (the second defendant) for negligent statement in the answers that were given in response to requisitions about the property prior to completion. That claim alleged that the vendor knew, at the time of the property’s conveyance, information about the stormwater pipe and easement resolution that was not disclosed upon request.

Negligent misstatement by Council

Council did not dispute that it owed to prospective purchasers a common law duty to exercise reasonable care as to the accuracy of any planning certificate attached to contracts for sale. That much was established by L Shaddock and Associates Pty Ltd v Parramatta City Council (No 1),[4] and is a rule designed to protect persons who might, in deciding whether to commit themselves financially,[5] rely on information contained in a planning certificate. However, Council rejected the claim that it had negligently breached its duty to provide the purchaser with information about relevant matters of which Council was aware.

In respect of the plaintiff’s claim concerning breaches to sections 149 (2) and (4) of the EP&A Act, the Supreme Court ultimately held that the easement resolution constituted a “policy” affecting the development of the property for the purposes of clause 7 of the Environmental Planning and Assessment Regulation 2000 (NSW) (EP&A Regulation). As such, the easement resolution ought to have been flagged by Council through details of it being included within the planning certificate provided to the purchaser. By not doing so, Council had breached its duty.

The plaintiff’s argument in relation to its claim that Council had breached section 149(5) of the EP&A Act was unsuccessful. By the wording of that provision, councils “may” provide advice on any other relevant matters, but this does not constitute an obligation, the Court held. As such, the Court held that Council was under no obligation to refer the purchaser to the existence of the stormwater pipe without an explicit request for information.

Statutory defences

The first defence invoked by Council concerned section 43A of the Civil Liability Act 2002 (NSW), which limits the liability of a public authority exercising a “special statutory power”. The Court found that, by providing a planning certificate under section 149(2) of the EP&A Act, Council was performing a ‘statutorily imposed obligation’,[6] not a ‘special statutory power’. This is because, when a request is made under that provision for a planning certificate, councils must respond ‘as soon as possible’[7]. The term ‘special statutory power’ cannot be read so broadly as to include such obligations.

Council’s purported defence under section 733 of the Local Government Act 1993 (NSW) (LG Act) also failed. That defence protects councils who provide advice in good faith to landholders about the likelihood and extent of flooding. This defence was unavailable in the circumstances, as the information (or lack thereof) provided by Council in the planning certificate did not relate to the likelihood or extent of any flooding, but rather related to the existence of a policy affecting development.

As such, Council was ordered to pay damages of over $1.2 million, plus over $700,000 in interest.

Negligent misstatement by the second defendant

The purchaser also brought action against the property’s vendor, Mr Della-Franca, for statements he made via his solicitor in response to requisitions raised by the purchaser. The Court found that the second defendant, despite instructing otherwise in his solicitor’s correspondence with the purchaser, did have knowledge of the existence of the stormwater pipe and the easement resolution.

The second defendant had therefore breached his common law duty to a purchaser to exercise reasonable care to accurately answer requisitions on title,[8] and was ordered to pay damages of over $1.2 million, plus over $600,000 in interest.

Significance of the decision for councils

The case highlights that some council resolutions (particularly those affecting the development of a specific portion of land) may constitute a “policy” for the purposes of clause 7 of the EP&A Regulation. As such, to avoid litigation of the type described above, councils should ensure prospective purchasers are notified of these policies by way of an accurate planning certificate.

The Court’s findings in this case confirm that the defence available to councils under section 733 of the LG Act only protects councils in circumstances where they are giving advice about the likelihood or extent of flooding (or any other matter listed in the provision), but it does not extend to situations where a council is required to advise about the existence of a policy affecting a property.

In closing out his judgment, Fagan J chastised Council’s conduct in settling and litigating the matter. His Honour reminded Council of their status as an elected body representing the constituents of Burwood, who he said had been burdened by the exorbitant costs of litigation in the matter [9]. This statement provides a stark warning to councils engaged in similar disputes, and indicates that steps should be taken earlier and in good faith to resolve them in a way similar to state authorities, who are bound by NSW’s Model Litigant Policy (though Fagan J’s decision stops short of imposing the Model Litigant Policy on local government bodies).

Thank you to Elizabeth Ryan for her contribution to this article.

References

[1] Now known as s 10.7(2).

[2] Now known as s 10.7(4).

[3] Now known as s 10.7(5).

[4] (1981) 150 CLR 225.

[5] Mid Density Developments Pty Ltd v Rockdale Municipal Council [1993] FCA 408, [39] (Gibbs CJ, Mason, Wilson and Dawson JJ).

[6] Lorenzato v Burwood Council [2020] NSWSC 1659, [309] (Fagan J).

[7] Environmental Planning and Assessment Act 1979 (NSW) s 149(2).

[8] Bebonis v Angelos; Christopoulos v Angelos (2002) 56 NSWLR 127; Votraint No 1088 Pty Ltd v Commonwealth [2005] NSWCA 249, [13]-[19] (Mason P, Giles JA and Campbell AJA agreeing).

[9] Lorenzato v Burwood Council [2020] NSWSC 1659, [484] (Fagan J).