- Notable Unreported Decision
- Appeal Determined - Special Leave Refused (HCA)
SUPREME COURT OF QUEENSLAND
Geju Pty Ltd v Central Highlands Regional Council (No 2)  QSC 279
GEJU PTY LTD ACN 010714799
CENTRAL HIGHLANDS REGIONAL COUNCIL
Supreme Court at Mackay
1 December 2016
1, 2 August 2016. Last submissions received 28 November 2016.
TORTS – NEGLIGENCE – ESSENTIALS OF ACTION FOR NEGLIGENCE – GENERALLY – where the defendant council issued a certificate incorrectly describing a property as industrial –– where the plaintiff claims damages for negligent misrepresentation on the basis that it would not have purchased the property if the defendant had not made that representation – where the property had an approval for a material change of use – where the certificate was not issued to the plaintiff – whether the defendant owed the plaintiff a duty of care – whether the defendant breached its’ duty of care – whether the defendant caused the plaintiff’s loss
TORTS – NEGLIGENCE - CONTRIBUTORY NEGLIGENCE – where the defendant submits the plaintiff was contributorily negligent in failing to undertake enquiries as to the zoning of the property, failing to engage a valuer, paying too much for the property and failing to protect itself through contract – whether the plaintiff was contributorily negligent
TORTS – NEGLIGENCE - APPORTIONMENT OF RESPONSIBILITY AND DAMAGES – where the defendant
submits there should be an apportionment of liability between the concurrent wrongdoers namely the defendant and the solicitors who acted for the plaintiff – where the claim against the solicitors has been settled – where the details of the settlement have not been disclosed – whether there should be an apportionment
DAMAGES – MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR TORT – MEASURE OF DAMAGES – where the plaintiff claims the difference in the price paid and the real value of the property at the date of purchase – where the plaintiff claims acquisition, holding, borrowing and disposal costs
Civil Liability Act 2003 (Qld) s 11, 30, 31
Civil Proceedings Act 2011 (Qld) s 58(4)
Integrated Planning Act 1997 (Qld) s 4.3.3, s 5.7.8, s 5.7.9, s 5.7.12
Law Reform Act 1995 (Qld) s 10
Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185, cited
Chandra v Perpetual Trustees Victoria Ltd  NSWSC 694;  Aust Torts Report 81-896, cited
Davidson v Tulloch (1860) 3 Macq 783, cited
Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241, considered
Hungerfords v Walker (1989) 171 CLR 125, cited
HWL Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640, cited
L Schuler AG v Wickman Machine Tool Sales Ltd  AC 235, cited
L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225, followed
March v E & MH Stramere Pty Ltd (1991) 171 CLR 506, cited
Meandarra Aerial Spraying Pty Ltd v GEJ & MA Geldard Pty Ltd  1 Qd R 319, cited
Mid Density Developments Pty Ltd v Rockdale Municipal Council (1993) 116 ALR 460, followed
Owners – Strata Plan No 61288 v Brookfield Australia Investments Ltd (2013) 85 NSWLR 479, cited
Perpetual Trustees Australia Ltd v Heperu Pty Ltd  NSWCA 84, cited
Podrebersek v Australia Iron and Steel Pty Ltd (1985) 59 ALJR 492, cited
Precision Products (NSW) Pty Ltd v Hawkesbury City Council (2008) 74 NSWLR 102, cited
Reinhold v NSW Lotteries Corporation (No 2) (2008) 82 NSWLR 762, cited
San Sebastian Proprietary Ltd v Minister Administering The Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340, cited
Strong v Woolworths (2012) 246 CLR 182, cited
Wallace v Kam (2013) 250 CLR 375, cited
Winks v WH Heck & Sons Pty Ltd  1 Qd R 226, cited
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515, considered
Yates v Mobile Marine Repairs Pty Ltd  NSWSC 1463, cited
C Heyworth-Smith QC for the plaintiff
A Duffy QC for the defendant
Macrossan and Amiet Solicitors for the plaintiff
King & Company Solicitors for the defendant
- McMeekin J: The plaintiff, Geju Pty Ltd (“Geju”), purchased a block of land in Capella in 2008 believing that under the local planning scheme it was zoned as falling within the zone “Town”, precinct “Industrial”. It was not. It was zoned “Rural” but with a conditional approval for a material change in use (“MCU”) which permitted some forms of industrial development. The guiding mind of Geju, Brian Birch, says that Geju would not have purchased the land if the true position had been known. Mr Birch says that he was misled by a “Limited Town Planning Certificate” (“the Certificate”) issued by the defendant, the Central Highlands Regional Council (“the Council”). Geju claims damages against the Council for negligent misrepresentation.
- Proceedings were also brought by Geju against the solicitors who were retained to act for Geju on the purchase, Anne Murray & Co, and that claim has been settled.
- Before discussing the points of contention I note that the Council is statutorily obliged by sections 5.7.8 and 5.7.12 of the Integrated Planning Act 1997 (Qld) (“IPA”) to produce within 5 business days a limited planning and development certificate to an applicant who has paid the relevant fee. Section 5.7.9 provides that a limited planning and development certificate must contain:
- a summary of the provisions of any planning scheme, including any infrastructure charges schedule or regulated infrastructure charges schedule, applying specifically to the premises;
- if any of the State planning regulatory provisions apply to the premises—a description of the provisions that apply;
- a description of any designations applying to the premises. (my emphasis)
- The issues are:
- Did the Council owe a duty of care to Geju in issuing the Certificate?
- If a duty was owed did the Council breach the duty?
- Was Geju contributorily negligent?
- Should there be an apportionment of liability between concurrent wrongdoers – namely the Council and the solicitors who acted for Geju on the purchase - and if so in what proportion?
- If a duty was owed and breached did that breach cause Geju loss? If so, what loss?
The Certificate was defective
- It is not in issue that the Certificate was defective, to use a relatively neutral term. The Certificate showed the relevant “Zone” as “Town” and the “Precinct” as “Industrial” whereas the correct zone was “Rural”. If zoned “Town” then it is the “Precinct” information which is important. The Peak Downs Shire Planning Scheme states that the “Town Zone contains a number of sub-areas known as Precincts which delineate different land capabilities and constraints…The provisions specific to Precincts prevail over those applicable to development in the Zone.”
- However that was not the only defect in the Certificate. By its terms it referred to the wrong block of land. The subject land is accurately described as Lot 70 on SP209731 and was located at Hibernia Road, Capella. The Certificate referred to “Lot 15 on SP191634, Parish Khosh Bulduk”. While the parish applies to both lots the reference in the Certificate is to a residential lot on the far side of Capella to the subject land and one that was not zoned “Industrial” either.
The Getting of the Certificate
- To appreciate the various arguments it is necessary to say more about the request for the Certificate and the response to that request.
- The request for the Certificate came from Anne Murray & Co solicitors who identified themselves in their covering letter as solicitors “for the abovenamed Purchasers” who were a group I will call the Mayfair Group, Geju’s predecessor in title. The cover letter refers to a telephone discussion earlier that day and encloses the required fee for a limited planning certificate. There is no evidence of what was said in this phone call and specifically whether the solicitors gave a reason for wanting the Certificate.
- The Certificate issued on 4 February 2008. At the time the land was zoned “Rural”. In August of 2007 the Council had approved a re-configuration of the land of which Lot 70 formed a part and had also approved a material change of use in respect of Lot 70. Subject to conditions it could be used for industrial purposes of a particular type (“light and service industries”). The relevant legislation provided that such a change of use approval was valid for only four years: IPA s. 3.5.21.
- The cover letter enclosing the certificate contains the heading ‘LIMITED TOWN PLANNING CERTIFICATE LOT 70 ON SP209731, PARISH: KHOSH BULDUK.’ This is the correct lot number and parish. The first line of the letter reads: “Please find enclosed ‘Limited Town Planning Certificate’ for the above mentioned property situated at Hibernia Road, Capella Queensland.” Both the letter and the certificate are signed by Don Lindeman, the Chief Executive Officer.
- The Certificate reads:
“Property Description: LOT 15 on SP191634, PARISH: KHOSH BULDUK’ [an incorrect lot and SP number in fact identifying a residential block on the other side of Capella]; ‘Property Location: Hibernia Road, Capella Queensland’ [the correct address];
then underneath this:
‘Planning Scheme* provisions Applying to subject land: (a) Zone: TOWN Precinct: INDUSTRIAL.’
- The bottom third of the Certificate is a street map. It depicts a street name Hibernia Road, (the correct location) and there is a large block of land in which ‘LOT 70 SP209731’ is written (the correct lot number). Finally the footer contains the words: ‘Limited Town Planning Certificate Lot 70 SP209731, Rubyvale road, Capella’ (the correct lot number and incorrect road, although Rubyvale Road is the road referred to in the request for the Certificate).
- How the certificate came to be issued in this form was not explained.
The Certificate comes in to Mr Birch’s hands
- The Certificate was not requested by Mr Birch or by anyone on his behalf nor was it issued to Mr Birch. The Council argues that the fact that it did not issue the Certificate to Mr Birch or to anyone on his behalf is relevant to whether a duty of care was owed.
- How it came into his hands is in contest as, to an extent, the relevant witnesses were re-constructing events. However the probabilities seem to favour the following sequence. Mr Birch obtained the certificate from the real estate agent handling the sale on behalf of the vendor, Clinton Adams. Mr Adams received the Certificate from Alan Coates, one of the principals of the vendor, the Mayfair Group. The vendor had asked their solicitors, Anne Murray & Co, to request the Certificate. As matters transpired that same firm came to act for Geju on its purchase of the land from the Mayfair Group.
- The Council says that not only is the identity of the person to whom the certificate was issued important but so is the time that elapsed between the date of issue of the Certificate and the settlement of Mr Birch’s contract to purchase the land.
- The chronology is as follows:
28 Mar 2007
Ford Property enters into contract to sell the land to the Mayfair Group for $484,000
9 May 2007
Ford Property applies for re-configuration and material change of use
22 Aug 2007
Council approves Ford Property’s application for re-configuration and material change of use with conditions
13 Dec 2007
Settlement of sale of the land from Ford Property to the Mayfair Group
13 Dec 2007
In a letter of this date the solicitors acting for Mayfair Group request a limited town planning certificate
13 Dec 2007
Solicitors advise the Council of the settlement of the Ford Property/Mayfair group sale – stamped received by the council on 14 December 2007
1 Feb 2008
The letter of 13 December 2007 requesting the Certificate is stamped as being received by the Council
4 Feb 2008
The Certificate issues
Mr Birch is given the Certificate by Mr Adams sometime between February and May 2008
5 June 2008
Geju enters into a contract to purchase the land for $900,000
? June 2008
Geju retains Anne Murray & Co, solicitors
1 August 2008
The contract to purchase the land settles
Where necessary I will refer back to relevant events.
Is a certificate showing “Industrial” in fact misleading?
- The council argues that despite its defects the Certificate was not misleading. It submits that Geju effectively obtained what it bargained for – a block of land on which industrial development could occur. To follow the argument it is necessary to say a little more about the MCU approval.
- On 22 August 2007 an Application for Reconfiguration of Lots & Material Change of Use was approved in respect of Lot 7 on RP613959, 20 Hay Street, Capella. The approval can be found in a decision notice with attached approval conditions. The lots were reconfigured and one of these became the subject property. The decision notice records that the MCU will lapse after 4 years.
The condition 8 point
- One of the arguments is that the approval had lapsed by the time of Geju’s purchase. If that is right then there can be no argument – all Geju obtained was a rural lot. The effect of one of the conditions of the MCU approval, Condition 8, is at the heart of the debate. Condition 8 appears under “Approval Conditions – A: Assessment’s Managers Condition and Notes” and states:
“Within 6 months of this approval coming into effect, or prior to any building or other subsequent development, the applicant/developer shall supply a master plan of proposed Lot 70 to Council, so that an appropriate assessment can be made of applications required and possible compatibility, access and service implications.”
- Geju argues that the effect of the condition was to require the “applicant/developer” to supply to the council the master plan referred to within six months of 24 August 2007 – so by 23 February 2008 - and that absent that step the condition lapsed. It is common ground that no such master plan was supplied. Hence it follows, it was submitted, that the condition lapsed before Geju had entered into the subject contract.
- The Council disagreed. It submitted that the true meaning of the clause was to require the master plan only before doing any further development and that could occur any time within the four year period for which the approval lasted.
- The way in which the six month period in condition 8 and the four year period in the decision notice are intended to interact could be expressed considerably more clearly.
- The difficulty with the Council’s argument, as senior counsel for Geju submitted, is that if correct it follows that the words requiring the provision of the master plan within six months are entirely otiose.
- With some hesitation I have come to the view that the Council’s submission as to the effect of the clause is correct. I have done so for two reasons. The first is what seems to me to be the intended overriding effect of the IPA. The second is that I think that the better view is that the approval conditions are not really conditions at all.
- The 4 year lapsing period is found in both the Decision Notice Approval and the IPA. The decision notice says that development approval takes effect from the time the decision notice is given and “this approval will lapse unless substantially started within the above stated currency periods.” The decision notice approval outlines the relevant currency periods. It states the relevant periods in section 3.5.21 of the IPA apply to each aspect of development in this approval. It goes on to list that for material change of use it is 4 years.
- Thus the decision notice clearly indicates that the MCU will lapse on 24 August 2011.
- The MCU approval conditions, so called, also contain a section titled “Assessment Manager’s Advisory Notes” and the first point made is that “in respect to the statutory compliance with the above conditions, the applicant/developer is to adhere to Section 4.3.3 of the Integrated Planning Act 1997.” This section states relevantly: “A person must not contravene a development approval, including any condition in the approval.” The section provides for a maximum penalty of 1665 penalty units. Under the present regulations that equates to a maximum penalty of $202,963.50. It seems improbable that the legislature intended a penalty to apply at all, let alone such a potentially severe one, to a failure to provide a master plan within six months, given all the exigencies involved in compliance, and given that the preparation of the plan was for the benefit of the developer and a failure to do so immaterial to the Council or the people it represents.
- I say “so-called” conditions because, to a large extent, the “conditions” are watered down considerably by the terms of the notice in which they appear. Under the heading “Approval Conditions” it firstly says the Council “grants a Development Permit…subject to the following conditions:” but then states “The following recommendations are under two headings: (A) Assessment Manager’s Conditions and Notes; and (B) Department of Natural Resources & Water Conditions and Notes” (emphasis added.) As mentioned condition 8 appears under “(A) Assessment Manager’s Conditions and Notes”. So by the very terms of the document in which they appear the “conditions” are described as “recommendations”.
- That these are intended as recommendations rather than conditions is reinforced by the absence of any statement as to the consequences of non-compliance so far as the development is concerned. If the provision of the “master plan” was essential I would expect a clear statement to the effect that the approval would lapse should the “master plan” referred to not be lodged within the six month period specified in condition 8. But not only is that not said but it seems that at worst the developer incurs a monetary penalty.
- It is interesting to note that the Council itself has vacillated on the effect of condition 8. I am conscious of course that what parties actually do is not determinative of the legal effect of a decision of this sort: see, in the contractual setting, Winks v WH Heck & Sons Pty Ltd; L Schuler AG v Wickman Machine Tool Sales Ltd. The relevant point here is the scope for confusion. I shall briefly detail what occurred.
- After the contract settled Mr Birch engaged a surveyor, Mark Murray of Murray & Associates, to submit an application to the Council. Mr Murray did so under cover of a letter dated 23 October 2008. The letter states “I also attach correspondence to support that, contrary to the Peak Downs Shire Planning Scheme which shows this area as Rural, it is in fact zoned Town Industrial.” There appears a hand written ‘File Note’ on the letter which records that the land is zoned Town Industrial and states “(Previously) MCU + ROL Approve creating Lot 70 on SP 20… for Industrial U… Copy provided.” At least one officer at the Council therefore was aware of the MCU, and presumably condition 8, as its existence was noted on the front page of the application.
- Yet in response to the letter from Mr Murray the Council made no reference to condition 8 but rather suggested the need for a “concept sewerage plan” and a “site specific hydraulics report and stormwater management plan”. The significant point is that Council did not say that the application failed because it had not been lodged within 6 months of the decision notice approval.
- So it seems that in practise, at least in this case, Council did not treat condition 8 as having the effect for which Geju contends.
- Despite that and contrary to it a Full Planning and Development Certificate relating to the subject land and dated 30 October 2013 (ie five years later) stated “Condition 8 had not been carried out within the specified time period thus the Material Change of Use component of this approval has lapsed.” At this point of course the four year period within which the change of use had to be implemented had also lapsed.
- Despite my finding that I prefer the Council’s construction the situation is far from crystal clear. And that potential for confusion is relevant to the fundamental point of this debate.
Does the zone matter?
- Geju argues that land that is zoned “industrial” is quite different from land that is zoned “rural” with permission to carry out some forms of industrial development provided the development is commenced within four years of approval, let alone with an approval that has arguably lapsed within six months of issue. I agree that it is. There are three things to note.
- The first is that the confusion generated by the contrasting provisions (ie the condition 8 point) would give any sensible developer pause before expending nearly $1M on land that may or may not have an existing approval to carry out industrial development - assuming that rural land is less valuable than industrial land as the valuation evidence indicates. At the time Mr Birch purchased the land the six month window for lodging the “master plan” had expired. Had he known of the existence of the MCU and its conditions (or assuming a hypothetical purchaser in his positon) I could well understand a decision not to purchase this land for industrial development because of concerns about the true position. There may have been no current approval.
- The second point is that there is a conceptual difference between land zoned industrial and land on which some industrial development is permitted but only so long as the first change in use is implemented within four years. What transpired in this case demonstrates why.
- Mr Birch did not proceed with his plans to develop the land for industrial purposes because he felt the market moved against him and the cost could not be justified. This would not have mattered greatly if the land was zoned industrial. But with a four year window in which to act it was essential that the market move back in his favour within that period or he had wasted his money, again assuming that rural land is less valuable than industrial land.
- The third point that Geju argued was that the development permitted under the MCU was restricted. This is true but only to an extent. The development allowed is not as restricted as Geju contended.
- The argument seemed to proceed on the assumption that if the land was zoned industrial then the reasonable purchaser would assume that he or she could carry out any form of industrial development. Very few planning schemes would allow that and the one relevant in this District did not.
- While not particularly relevant there was no evidence of what Mr Birch thought he was entitled to do if his assumption was correct and the land was within the precinct “Industrial” as the Certificate showed. What he apparently intended to do was build sheds – a form of light industrial use, I would assume, and perhaps within the terms of the approval conditions.
- I say “perhaps” because the effect of the approval conditions is not plain. I will explain why.
- The approval conditions included that “any development of an industrial nature … shall be in accord with the outcomes sought in the Peak Downs Shire Planning Scheme under section 184.108.40.206(d)(ii): ‘Land in Hibernia Road/Butter Factory Street area is predominantly used for light and service industries, which are compatible with nearby Rural residential land and Council’s water storage areas.’” The quote in fact is from s 4.3.2(2).6(d)(ii) of the Peak Downs Shire Planning Scheme. The scheme contains no section 220.127.116.11(d)(ii) nor does it contain any definition of “light and service industries”. There are descriptions of “heavy impact”, “medium impact” and “low impact” industries in the Planning Scheme. Perhaps the intention was to equate “light and service industries” in the approval conditions with “low impact industry” in the planning scheme. The difficulty with that assumption is that in the immediately preceding paragraph there appears a reference to low, medium and high impact industries. The deliberate use of a different phrase – “light and service industries”- in the immediately subsequent paragraph in the normal course would strongly suggest that a different meaning is intended. What might be considered “normal” no doubt depends on the context. A Council that misstates section numbers of its own Planning Scheme in formal certificates, provides planning certificates that do not apply to the land enquired after nor even to the land designated, and treats its conditions as irrelevant at one point in time but regards them as conclusive at other times, perhaps cannot be expected to maintain consistency in its use of language in the conditions that it imposes. The problem remains as to the meaning intended.
- The distinction then between what Geju could do by way of development of the land if zoned “industrial” in contradistinction to what could be done under the terms of the approval remains unclear to me. There may be no relevant distinction. Geju argues that if the accurate classification intended by the approval was “low impact” the uses permitted are not particularly suited to an investor in land having industrial uses associated with a mining area. The definition divides “uses” into “group numbers”. Using those numbers Geju submits:
- the Lot might be used for “Industrial Machinery and Equipment Manufacturing” (use 286) but only “up to a maximum total use area of 100 m2”. Lot 70 is 10.12 ha or 1000 times the size of that maximum total use area. What was the Plaintiff to do with the other 101,100 m² of the Lot, bearing in mind that it could not be reconfigured further?
- other similarly restricted uses were “281 Motor Vehicle and Part Manufacturing” and “285 Electrical Equipment and Appliance Manufacturing”. While these (and use 286) included “the servicing or repair of an item that would be produced manufactured or created from the above list”, this could only be done on 100m² of the site;
- uses for Building Construction, Non-building construction, Site Preparation Services, Building Structure Services, Installation Trade Services, Building Completion Services, Other Construction Services were permitted, but “only where the use of the premises is for the purposes of a yard or depot.” Accordingly, for those services, the use did not even permit the “servicing or repair of an item”.
- While the foregoing may be accepted the real issue is what a reasonable purchaser would have assumed could be done if the land was zoned “Town” and the precinct “Industrial” as the Certificate represented? Any reasonable purchaser would, on receiving the certificate, have checked the planning scheme – assuming that they were unfamiliar with it – and determined the uses that they could expect to achieve given the limitations imposed by the scheme. The problem with Geju’s argument is that even if the land was zoned “Town” and “Industrial”, as the Certificate represented, the permitted uses would remain restricted by s 4.3.2(2).6(d)(ii) of the scheme as the MCU provided, and if the submission that the accurate classification intended by the approval was “low impact” was accepted, then by the uses under that classification outlined above.
- Geju is on stronger ground in its complaint that its ability to reconfigure the lot was considerably restricted by the conditions impose under the MCU. The Assessment Manager’s Advisory Notes list under “Approval Conditions” the following: “The granting of this reconfiguration does in no way allow for further reconfiguration. If a further reconfiguration was to be considered it should be noted that the lots are already at the minimum lot size against land classes under the current Planning Scheme”.
- The minimum lot sizes for newly created lots within the Rural zone depends on the classification of the land – the Scheme refers to P4.1 (500ha) P4.2 (1000ha) and P4.3 (5000ha). The minimum lot size in Town - Industrial Precinct (P6.4) is 800m² with road frontage and frontage to depth ratio provisos. The Property is over 10ha or 100,000m2 in size. So if zoned as the Certificate represented there was at least the potential for considerable reconfiguration, but not under the rural zoning.
- A reasonable hypothetical purchaser would in the normal course be influenced by such a difference. I am conscious of Mr Eales’ evidence on the point that there was other competing land but a zoning that permits reconfiguration is generally speaking a more attractive proposition, particularly in the fullness of time, than one that does not.
- The Council contends that the advisory notes are not binding on an assessment manager and that “an approval to reconfigure the subject property into subdivided lots for industrial purposes could have been lawfully obtained by the Plaintiff upon the lodgement of a properly made application.” That may be so but what “could” be achieved is by no means the same as what might be considered to be likely to be achieved or what a reasonable hypothetical purchaser might think was reasonable to bring into account in assessing value or deciding to purchase a property. Such a person would be entitled to think that the conditions imposed served to indicate Council’s present attitude to any reconfiguration. As Geju submits, a subdivision would have been contrary to the Planning Scheme and there was no evidence that the Council would have, or was likely to have, departed from the advisory note or planning scheme.
- I am not persuaded that there were available any significantly different uses assuming that the Certificate was accurate when compared to those uses that were in fact available under the MCU. In my view that is not fatal to Geju’s claim. The ability to reconfigure into smaller lots was a material factor. So was the limited time within which to act to secure the development. As well the very obscurity of the approval conditions would be relevant to a hypothetical purchaser contemplating investing $1.2M (as was Mr Birch’s intent) in the purchase of the land.
- My conclusion is that the Certificate was relevantly misleading. The effect of these observations and findings on the valuation and mitigation points are discussed below.
A duty of care is owed
When is a duty owed?
- In Esanda Finance Corporation Ltd v Peat Marwick Hungerfords Brennan CJ described when a duty may be owed when information is communicated to a third party. He sets out the threshold test:
The uniform course of authority shows that mere foreseeability of the possibility that a statement made or advice given by A to B might be communicated to a class of which C is a member and that C might enter into some transaction as the result thereof and suffer financial loss in that transaction is not sufficient to impose on A a duty of care owed to C in the making of the statement or the giving of the advice. In some situations, a plaintiff who has suffered pure economic loss by entering into a transaction in reliance on a statement made or advice given by a defendant may be entitled to recover without proving that the plaintiff sought the information and advice. But, in every case, it is necessary for the plaintiff to allege and prove that the defendant knew or ought reasonably to have known that the information or advice would be communicated to the plaintiff, either individually or as a member of an identified class, that the information or advice would be so communicated for a purpose that would be very likely to lead the plaintiff to enter into a transaction of the kind that the plaintiff does enter into and that it would be very likely that the plaintiff would enter into such a transaction in reliance on the information or advice and thereby risk the incurring of economic loss if the statement should be untrue or the advice should be unsound. If any of these elements be wanting, the plaintiff fails to establish that the defendant owed the plaintiff a duty to use reasonable care in making the statement or giving the advice. (my emphasis)
- In the same case Toohey and Gaudron JJ emphasized the importance of notions of reliance and assumption of responsibility:
The decided cases do not identify precisely what it is that results in liability for economic loss suffered in consequence of the voluntary provision of information or advice. However, commonsense requires the conclusion that a special relationship of proximity marked either by reliance or by the assumption of responsibility does not arise unless the person providing the information or advice has some special expertise or knowledge, or some special means of acquiring information which is not available to the recipient. Moreover, ordinary principles require that the relationship does not arise unless it is reasonable for the recipient to act on that information or advice without further inquiry. Similarly, ordinary principles require that it be reasonable for the recipient to act upon it for the purpose for which it is used. That is not to say that a special relationship of proximity exists if these conditions are satisfied. Rather, it is to say that the relationship does not arise unless they are. (my emphasis)
- Since Esanda Finance was decided the concept of proximity as a criterion for the existence of a duty of care owed has been disavowed: see French CJ in Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288. Nonetheless proximity in the sense discussed by Toohey and Gaudron JJ while it may not be determinative remains relevant. So French CJ noted with approval the observation made by Basten J in Owners – Strata Plan No 61288 v Brookfield Australia Investments Ltd that “the factors which were apt to be included” in “the concept of ‘proximity’ as a touchstones of the existence of a duty of care…remain relevant.” (footnotes omitted)
The criteria are satisfied here
- In my view each of the conditions mentioned in Esanda by Brennan CJ on the one hand and Toohey and Gaudron JJ on the other, in the passages quoted above, are satisfied here. This is not to break new ground. In my view the matter is long settled.
- It is now well established that a public body which in the exercise of its public functions follows the practice of supplying information which is available to it more readily than to other persons, whether or not it has a statutory duty to do so, is under a duty to those whom it knows will rely upon it in circumstances in which it is reasonable for those to do so, to exercise reasonable care that the information given is correct: L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1). The crucial issue seems to be whether it “ought reasonably be known” by the Council that in providing the information it “will or may be acted upon for a serious purpose, and loss may be suffered if it proved to be inaccurate.”
- The continuing authority of Shaddock was affirmed, at least implicitly, in Woolcock Street Investments Pty Ltd v CDG Pty Ltd where the plurality (Gleeson CJ, Gummow, Hayne and Heydon JJ) in discussing Shaddock and the concept of vulnerability identified as “a central plank in the plaintiff’s allegation that the defendant owed it a duty of care … the contention that the defendant knew that the plaintiff would rely on the accuracy of the information the defendant provided”.
- Despite that long standing authority the Council argued the case as if the plaintiff’s proposition that a duty of care was owed was a novel one requiring an examination of the salient features of the relationship between the parties. This was required, it is said, because it was not the person to whom the certificate was issued that suffered loss but someone who dealt with the recipient.
- The Council submitted that the “telling features militating against a finding that such a duty existed in this case are:
- There was no evidence that the loss was foreseen or foreseeable;
- There was no relationship at all between the Plaintiff and the Defendant, certainly not such as to warrant the imposition of a duty of care in this case;
- There was no assumption of responsibility on the part of the Defendant to the Plaintiff;
- There was no known reliance by the Plaintiff, that is, the Defendant did not know of the Plaintiff or that it would or was likely to rely upon the Defendant to exercise care;
- There was no relevant vulnerability on the part of the Plaintiff; 
- There is no rational way to define a class of which the Plaintiff was a member, except in the broadest terms;
- To impose a duty in a case such as the present would be to impose an indeterminate liability – there would be no rational limit upon the range of persons to whom such a duty would extend;
- This is not one of the categories of case in which such a duty has traditionally been or should now be imposed.”
- I will deal with each of the arguments in turn but essentially the argument is that the Council were not to know that someone such as Geju would rely on the accuracy of the information the defendant provided.
- At the outset I observe that the authorities that speak of a need to show in the maker of a statement the existence of an intention to induce someone to act or refrain from acting in the particular way, in reliance on the statement (eg Esanda Finance Corporation Ltd v Peat Marwick Hungerfords) or the need for a request antecedent to the provision of the information (eg San Sebastian Proprietary Ltd v Minister Administering The Environmental Planning and Assessment Act 1979) are firstly not apposite to a council under a statutory obligation to provide a certificate of the type in issue here and secondly explicitly recognise that there are exceptions. Hence McHugh J in Esanda said:
“Nevertheless the decisions have all emphasised that lack of intention to induce the plaintiff to act or refrain from acting is not necessarily fatal to a plaintiff’s claim because other factors may be present that obviate the need for such an intention.”
And in San Sebastian the majority held that an antecedent request was “by no means essential” to establishing reliance.
(a) There was no evidence that the loss was foreseen or foreseeable.
- The notion underlying that assertion is that the uses to which land might be put is not relevant to its true value. That is not sensible. The further premise is that the Council could not have foreseen that the Certificate would be shown to a prospective purchaser. I cannot see why not. I discuss the point further below.
(b)There was no relationship at all between the Plaintiff and the Defendant, certainly not such as to warrant the imposition of a duty of care in this case
(c) There was no assumption of responsibility on the part of the Defendant to the Plaintiff;
(f) There is no rational way to define a class of which the Plaintiff was a member, except in the broadest terms;
(h) This is not one of the categories of case in which such a duty has traditionally been or should now be imposed
- In my view each proposition is simply wrong. Each of these propositions involves much the same point and relies on the fact that Geju was not the person who requested the Certificate. The statement of principle in Shaddock has never been restricted only to the actual recipient of the information or that it was an essential condition that he or she need ask for it.
- As mentioned it was held in San Sebastian that an antecedent request was “by no means essential” to establishing reliance. The majority (Gibbs CJ, Mason, Wilson and Dawson JJ) said:
“The maker of a statement may come under a duty to take care through a combination of circumstances or in various ways, in the absence of a request by the recipient. The author, though volunteering information or advice, may be known to possess, or profess to possess, skill and competence in the area which is the subject of the communication. He may warrant the correctness of what he says or assume responsibility for its correctness.”
- I have no doubt that a Council in issuing such a certificate falls into that category.
- So in Mid Density Developments Pty Ltd v Rockdale Municipal Council those observations were applied to hold, in a very similar factual situation to that here, that the duty owed is not only not confined to the person who requests the information but extends to a person dealing with the recipient. The case was a decision of the Full Court of the Federal Court (Gummow, Hill and Drummond JJ). The Council there had issued three certificates – the first to the solicitors for the vendor in March 1990 and the next two were requested by and issued to the purchasers in October and November 1990. The contract was entered in earlier in October and settled in December 1990. The three certificates related to different portions of the land. In relation to the first certificate the Court said:
“But, in our view, even as regards the first certificate it is no answer to the submission that a duty of care to the appellant arose on the part of the respondent [ie the council], that the certificate was not issued directly to the appellant. The relevant class of persons to be considered in the present situation included potential purchasers of the property the subject of the certificate. It is sufficient if the misstatement is made to members of a limited class of persons, including the plaintiff, with the intention that those persons should rely thereon in deciding whether to commit themselves financially…”
- The facts here are very similar. The only difference is that Geju did not also ask for certificates. But that was not relevant to the decision in Mid Density.
- I cannot see why the relevant class of persons to be considered should not include potential purchasers of the property the subject of the Certificate. Indeed the Certificate is only relevant to show the use to which the land might be put and that is likely to be relevant only to those contemplating making serious financial decisions involving the land. Two classes of people will be particularly interested – those who own the land and those who might be interested in buying it. And those who own the land might well be interested in informing those in the latter class of the features of the land, such as its zoning and potential use. Why then exclude the latter class as being those not reasonably in contemplation? The Council’s answer seems to be because we did not know that person’s identity. In my view that is irrelevant.
- Before leaving the point I note that the authorities are clear that it is not a necessary pre-requisite for the Council to know for what purpose the information is sought. Mason J made the point expressly in Shaddock:
“True it is that he did not state why the information was wanted or what action his clients proposed to take on the strength of it. But the existence of a duty of care does not depend upon knowledge on the part of the speaker of the precise use to which the information will be put. It is enough if he knows, or ought to know, that the inquirer is requesting it for a serious purpose, that he proposes to act upon it and that he may suffer loss if it proves to be inaccurate.”
- Similarly Gibbs J said:
“The nature of the inquiry – made by a solicitor, for conveyancing purposes, on a form commonly used and prepared by law stationers – made clear the gravity of the inquiry and the importance attached to the answer.”
- Hence I do not think it determinative that Mr Birch did not ask for the Certificate, nor that the Council were not to know the precise purpose for which the Certificate was sought. A solicitor acting for the owners sought the certificate. Plainly enough it was for a serious purpose and its recipient was very likely to rely on it in making financial decisions. Geju was a member of an identified class to whom it was likely the Certificate would come and the Certificate would be very likely to lead Geju to enter into a transaction of the kind they did enter into. That is all that is necessary.
(d)There was no known reliance by the Plaintiff, that is, the Defendant did not know of the Plaintiff or that it would or was likely to rely upon the Defendant to exercise care;
- To a large extent the argument has already been dealt with in the discussion above. There are two aspects – reasonable reliance and actual reliance. Both are in issue but it is the first that is relevant here.
- In a general sense the point was decided in Mid Density where the Court said:
“The circumstance that the relevant information provider is in a better position than anyone else to know of the accuracy of the information provided, may as this evidence indicates, be significant in considering the question of reasonable reliance. In a case such as the present, it also is important in considering the anterior question of the existence of a duty of care.”
- The Council is here, as the councils were held to be in Shaddock and Mid Density, such an information provider.
- But there is an additional argument. The Council argues that it was not reasonable for Geju to rely on the Certificate in the circumstances here. It is said that on its face the certificate related to a different property and it followed the certificate was so defective that no reasonable person would rely on it. When the error in the Certificate is drawn to one’s attention it is indeed obvious. But should it have been so glaringly obvious to Mr Birch?
- The fact is that the wrong property description was not observed by a whole series of people who dealt with it and who one would expect might notice – the relevant Council officer who was presumably charged with the responsibility of issuing accurate certificates, Mr Don Lindeman the CEO of the Council who signed the documents, the real estate agent, Mr Adams, the solicitors who acted for both parties in the transaction, the surveyor Mr Murray, and finally Mr Birch. At least there was no evidence that any of them did notice the error. That tends to suggest that Mr Birch’s failure to notice it was unexceptional.
- That is explicable. Mr Birch of course was not expecting to receive a certificate relating to a different piece of land. So why check the lot number? As well the information on the Certificate was mostly accurate. The correct address is shown and people generally know addresses, not lot numbers. The map at the bottom of the form was accurate. And the covering letter referred to the correct lot number.
- In my opinion Mr Birch’s reliance in all the circumstances was a reasonable one.
(e) There was no relevant vulnerability on the part of the Plaintiff
- Council’s focus on vulnerability is understandable. The notion of proximity that earlier decisions of the High Court had emphasised has given way to broader considerations and significantly the concept of vulnerability. So in Precision Products (NSW) Pty Ltd v Hawkesbury City Council Allsop P (with whom Beazley and McColl JJA agreed at  and  respectively) summarised the duty of care in respect of claims for economic loss as follows: 
“The circumstances in which the common law will impose a duty of care to avoid causing pure economic loss have been the subject of considerable debate and uncertainty in Australia since Caltex Oil (Australia) Pty Limited v The Dredge “Willemstad”. Since then, in a series of cases in the High Court culminating in Woolcock Street Investments v CDG (Bryan v Maloney; Hill v Van Erp; Esanda Finance Corporation Limited v Peat Marwick Hungerfords; Pyrenees Shire Council v Day; and Perre v Apand) the High Court has identified an approach based on the presence, in the particular circumstances, of “salient features” that, when combined, constitute or reflect a sufficiently close relationship to give rise to a duty of care. Such salient features include the inherent likelihood of the production of economic loss (Caltex at 136) and assumption of responsibility and known reliance (Bryan v Maloney and the negligent misrepresentation cases). The most important of these features, however, is vulnerability, in the sense discussed in the joint reasons of Gleeson CJ, Gummow, Hayne and Heydon JJ in Woolcock Street Investments v CDG at 530” (my emphasis and citations omitted).
- It is common ground that there is no body other than the Council from which a vendor or prospective purchaser could obtain such a certificate or access the information such a certificate is supposed to contain. It is common ground that the Council had access to the relevant information required to complete the Certificate. I did not understand the Council to argue that a duty was not owed to prospective purchasers of land to which the Certificate relates if issued to that purchaser. In my view that is all that the plaintiff need show to demonstrate relevant vulnerability.
- The Council however submits that Geju could have protected itself from the Council’s defective certificate in various ways and hence was not relevantly vulnerable. In deference to these arguments I will go on. The Council points out that Mr Birch was an experienced developer, had experience of town planning matters and contracts for the acquisition and sale of properties, and had undertaken a number of subdivisions. The suggestions were that Geju could have protected itself:
- by contract,
- by seeking legal advice before entering into the contract,
- by exploring the MCU,
- by reading the certificate and appreciating the error,
- by having searches carried out to confirm the permitted use,
- by seeking other professional advice such as from surveyors, valuers, town planning professionals or the like; or
- by seeking a standard or full certificate.
- Each of the suggested protective measures assumes that a prospective purchaser ought to proceed on the assumption that a certificate issued by the Council is potentially misleading. I am not at all sure that is right – particularly where there is a statutory obligation to provide accurate information.
- Putting that to one side the Council is significantly hampered in advancing any cogent criticism because it did not lead evidence of why it was that the error occurred. Was it an error by a clerk in entering information manually? Or was it a computer error – so that upon enquiry the computer would respond as was done here? In the former case one would not expect the error to be repeated. In the latter it would always recur. For all the evidence shows the granting of the MCU approval meant that the Council computer would class the Precinct as “Industrial” whatever the enquiry. Only the Council knows its systems and it chose not to reveal them.
- The error is not explained by pointing out that the wrong lot number may have been used (lot 15 on SP191634) in the search which produced the Certificate. That block of land was not zoned industrial either but was a residential lot.
- As it happens there is some evidence on the point. Geju was one of two purchasers. After it entered into the contract with the Mayfair Group another company, Centritek Pty Ltd (“Centritek”), a company owned by Mr Birch’s daughter and son-in-law, Petrina and Jeff Burke, were subsequently added as purchasers. Ms Burke made enquiry of the Council on 29 July 2008 (3 days before the contract to Geju completed) and a Ms Pentland replied: “Confirming the new lots are (Lot 70=Industrial) and (Lot 71=Rural)” and attached survey plans for the lots. Again what method Ms Pentland used to obtain the information is not known but the response strongly suggests that any enquiry made in the time period open to Geju before settlement would have produced the same result as on the Certificate.
- Against that the Council pointed out that when the surveyor, Mr Murray, made a search later in 2008 he discovered that the land was shown as “Rural”. I have detailed what occurred above.
- Why one search turned up rural zoning and another an industrial zoning remains unexplained. However in the absence of evidence either way there is no warrant to draw an inference that because enquiry by an expert showed the land as “Rural” in October 2008, the enquiries reasonably open to Geju in June – July 2008 would have revealed the true situation, even assuming an obligation lay on it to do further searches. And it is noteworthy that Mr Murray assumed the Certificate to be accurate and that the planning scheme inaccurate as it had not been updated.
- Similarly a valuer, Mr Lyons, discovered the land was zoned “rural” in 2012. What method of search he undertook is not known. By then of course the MCU approval had lapsed. This may have resulted in a change back to “rural” on the Council’s database. No necessary inference follows as to what a 2008 search may have revealed.
- The only reason that I can see why Geju ought to have thought it necessary to engage experts to carry out further searches or do so itself is if Mr Birch had seen and recognised the significance of the wrong lot number on the Certificate. I have explained why I think it reasonable that he did not.
- As to the retaining of experts I note that Geju did retain solicitors albeit after the contract was entered into – so far as the evidence shows Anne Murray & Co still missed the incorrect reference to the lot in the Certificate.
- But the crucial point is whether a purchaser fails to act reasonably by not retaining solicitors before they enter into contracts of this type? It is I think notorious that people don’t. It is certainly a wise precaution but it seems to me to take the point too far to say that a purchaser is not relevantly vulnerable if the purchaser does not take steps that are not taken as a matter of course (at least so far as the evidence shows and common experience suggests) even assuming that a competent solicitor would have realised the error and assuming that they would have managed to get an accurate answer out of the Council.
- There is no evidence that it is usual practice to require a standard or full certificate where a limited one has been provided. And again no evidence showing that a standard or full certificate would necessarily have been accurate. A standard certificate includes the same information about the applicable planning schemes, although it does include extra details such as a copy of every decision notice for a development approval that has not lapsed.
- There remains the issue of Geju protecting itself by inserting in the contract of purchase a clause protecting itself if it transpired that the land was not zoned industrial.
- There is authority for the proposition that a plaintiff is not relevantly vulnerable where it could have protected itself against the economic loss that it alleged it had suffered by the adoption of appropriate contractual terms: Woolcock Street Investments Pty Ltd v CDG Pty Ltd.
- Woolcock Street Investments was a defective building case. A subsequent purchaser sought to make the engineers who had been involved in the design of the footings liable for the economic loss they suffered years later when the defect was discovered. It was held that no duty was owed principally because under the terms of its contract the engineers owed no such duty to the original owners. That argument is not available here. The duty that Geju says was owed to it was plainly one owed to the person who requested the certificate, ie the vendor. So much was established in Shaddock and I think is not in dispute here.
- However the plurality went on to hold in Woolcock Investments that there was nothing in the agreed facts to show that the plaintiff there was relevantly vulnerable. Their Honours said:
“Those facts do not show that the appellant could not have protected itself against the economic loss it alleges it has suffered. It is agreed that no warranty of freedom from defect was included in the contract by which the appellant bought the land, and that there was no assignment to the appellant of any rights which the vendor may have had against third parties in respect of any claim for defects in the building. Those facts describe what did happen. They say nothing about what could have been done to cast on the respondents the burden of the economic consequences of any negligence by the respondents. The appellant's pleading and the facts set out in the Case Stated are silent about whether the appellant could have sought and obtained the benefit of terms of that kind in the contract.”
- Likewise here the evidence is silent about whether Geju could have sought and obtained from the Mayfair Group the benefit of a warranty that the land was in fact zoned “Industrial”.
- There is however a clear point of distinction between a building defects case and a land purchase case where there is an existing certificate relating to the current use. McHugh J pointed out in Woolcock Street Investments Pty Ltd v CDG Pty Ltd that:
“…the first owners and subsequent purchasers of commercial premises are usually sophisticated and often wealthy investors who are advised by competent solicitors, accountants, architects, engineers and valuers. In the absence of evidence, this Court must assume that the first owner of commercial premises is able to bargain for contractual remedies against the builder. It must also assume that a subsequent purchaser is able to bargain for contractual warranties from the vendor of such premises.” (my emphasis)
- That necessary assumption is not evident here. There is no evidence that it is commonplace where a council has advised that the land is zoned in a certain way to insist upon a warranty as to that information or request a standard or full certificate. It is one thing to bargain for protection in a contract in respect of work that the other party to the contract is to perform. It is quite another to require a contracting party to warrant the accuracy of information emanating from a third party where each of the parties are in precisely the same position – the only body from which the relevant information can come is the Council and the Council had issued their Certificate.
- The Council argues that support for their position comes from the terms of a later contract that Geju itself entered into in respect of the subject land. On 25 February 2012 Geju entered into a contract for the sale of the land for $3 million (“the 2012 contract”). Following entry into the contract and before settlement the purchaser sought advice on the value of the land from a registered valuer. The valuer discovered that the land was zoned rural and the purchaser rescinded the contract. The purchaser there had the right to rescind the contract because the description in Item H of that contract – “Present Use (If any)” was shown as “Industrial” and clause 21.1 of the contract provided that “If it is established that at the date of this Contract: (a) the use of the Property as described in Item H was not lawful under any town planning scheme...and any such facts are not disclosed in this Contract the Purchaser may by notice in writing to the Vendor given on or before the Date for Completion terminate this Contract.” The Council argues that the reasonableness of Geju including such a clause in its contract is manifest.
- Both Geju’s contract to purchase the land and the 2012 contract were standard REIQ Commercial Land and Buildings Contracts. Both had the identical terms, however in Geju’s purchase the “Present Use” was shown as “vacant”. Mr Adams, the real estate agent had inserted that description. His relevant evidence was:
“Did you have any discussion with Mr Birch, or otherwise, about including, in that contract, a provision to enable Geju Proprietary Limited and [Centritek], if it was in it, to get out of the contract if it wasn’t industrial?
‑‑‑None whatsoever, because I’d just been involved in the creation of the allot (sic) – of the previous sale – expecting it to be industrial.”
All right. Can we observe that, in item H, the present use is not identified as industrial?
‑‑‑It’s not identified, but it was vacant, too, so – present use vacant.”
- So Geju ended up without a protective clause through the choice of a real estate agent as to the interpretation of the information required in Item H of the contract. Mr Birch did not turn his mind to the issue.
- There are I think three relevant points to note. The first is that it would not have been reasonable in 2012 to assume that the certificate issued in 2008, four years before, was current. What motivated the employment of the valuer by the purchaser under the 2012 contract is not known but the need to protect oneself four years after a certificate issues is far more compelling than four months later.
- The second is that it is far from clear that had the subject contract contained the same clause as the 2012 contract Geju would have gained any right to rescind – assuming the need for such a clause was recognised and assuming the accurate information would have come to light in time. In 2008 the MCU was in place, at least potentially – see the discussion above on the condition 8 point. There is no doubt that the approval had expired by 2012. In 2008 the use of the land as “Industrial” may have been lawful under the town planning scheme within the meaning of the contract. The defendants own case is that the effect of the MCU is that the plaintiff got what it bargained for. The submission is that “the existence of the Material Change of Use approval is likely to have meant that there was in fact no relevant restriction.” An attempt to rescind on this ground may have resulted in Geju having a strongly defended suit on its hands.
- The third is that the premise underlying the argument is not made out – that Geju ought to have realised the need for a protective clause.
- As it happens in 2008 Geju could have extricated itself from the contract under the subject to finance clause. When the solicitors were retained the contract was still conditional and if the land was significantly less valuable because it was not zoned “Industrial” then no doubt finance would not have been approved – Geju borrowed the entire purchase price and more. So it was not the lack of a protective clause that was the problem. It was that no one recognised that the land was not in fact zoned “Industrial”. And that was because of the misleading Certificate issued by the Council.
- Before leaving the point I observe that the rationale for the approach in Woolcock Street Investments Pty Ltd v CDG Pty Ltdon which the Council relies is the notion that if the plaintiff there was permitted to succeed it would have had the effect of allowing tortious duties to supplant those agreed to by contract. The point was made explicit in the joint judgement of Crennan, Bell and Keane JJ in Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (again a building defect case) where, after citing from Woolcock Street Investments, said:
“These passages accord with the primacy of the law of contract in protection afforded by the common law against unintended harm to economic interests where the particular harm consists of disappointed expectations under a contract. The common law has not developed with a view to altering the allocation of economic risks between parties to a contract by supplementing or supplanting the terms of the contract by duties imposed by the law of tort.”
- That issue is not relevant here.
(g) To impose a duty in a case such as the present would be to impose an indeterminate liability – there would be no rational limit upon the range of persons to whom such a duty would extend
- It may be that the duty extends beyond the owner for the time being and a prospective purchaser – others may have some interest in the accuracy of a certificate and rely on it in the making of serious financial decisions eg financiers and guarantors. It is not necessary to decide that point now. But even if valid that hardly means that there is no rational limit on those who might be owed a duty of care. Nor is such a certificate likely to be seen as having effect years after it was issued. The famous aphorism of Cardozo J of imposing on a council in this position liability “in an indeterminate amount for an indeterminate time to an indeterminate class” (see Perre v Apand Pty Ltd) simply does not arise.
- And it cannot be said that the fact that a council may be exposed to liability unreasonably interferes with its commercial freedom. As Mason J stated in Shaddock: “It is inconceivable that the practice of giving information as to proposals affecting property will be discontinued merely because the provision of inaccurate information may expose an authority to liability.”
- A duty of care was owed.
- The Limited Town Planning certificate was demonstrably defective and the defendant concedes as much. The Council breached its duty to take reasonable care in the issuing of certificates by describing the zone and precinct inaccurately.
- The council argues that causation is not shown. It submits:
- Mr Birch did not rely on the Certificate but was told by a third party – Mr Adams, the real estate agent, or Mr Coates, the vendor - that the property was an industrial property and did not carefully read the certificate itself;
- Mr Birch said that he saw the map on the Certificate, saw that it was in the industrial zone, and that was good enough for him but the map doesn’t say that the land was in the industrial zone at all;
- When Mr Birch became aware that the land was not zoned industrial nothing was done. It was submitted that he became aware both from Mr Murray the surveyor and from subsequent rates notices that clearly showed the land as zoned “Rural”. The implication is that his failure to act shows that the information on the certificate was not relevant to his decision making, assuming he saw and relied on it.
- The principles governing causation are set out in s 11 of the Civil Liability Act 2003 (Qld) (“CLA”) which provides:
- A decision that a breach of duty caused particular harm comprises the following elements—
- the breach of duty was a necessary condition of the occurrence of the harm (factual causation);
- it is appropriate for the scope of the liability of the person in breach to extend to the harm so caused (scope of liability).
- In deciding in an exceptional case, in accordance with established principles, whether a breach of duty—being a breach of duty that is established but which can not be established as satisfying subsection (1)(a)—should be accepted as satisfying subsection (1)(a), the court is to consider (among other relevant things) whether or not and why responsibility for the harm should be imposed on the party in breach.
- If it is relevant to deciding factual causation to decide what the person who suffered harm would have done if the person who was in breach of the duty had not been so in breach—
- the matter is to be decided subjectively in the light of all relevant circumstances, subject to paragraph (b); and
- any statement made by the person after suffering the harm about what he or she would have done is inadmissible except to the extent (if any) that the statement is against his or her interest.
- For the purpose of deciding the scope of liability, the court is to consider (among other relevant things) whether or not and why responsibility for the harm should be imposed on the party who was in breach of the duty.
- The submission is effectively that Mr Birch cannot satisfy the “but for” test – that absent the Council’s negligence the harm would not have been suffered. The decision under s 11(1)(a) concerning factual causation involves precisely that test: Wallace v Kam citing Strong v Woolworths. In Wallace the Court said of the NSW analogue of s 11 “that negligence was a necessary condition of the occurrence of harm is nothing more or less than a determination on the balance of probabilities that the harm that in fact occurred would not have occurred absent the negligence.”
- It is necessary to look more closely at what transpired.
- Mr Birch went to Mr Adam’s office for a social visit sometime between February and May 2008. At this visit Mr Birch was told about the property (that it was an industrial block in Capella) and given sales documents which included the Certificate. Mr Birch stated that he read the Certificate. When questioned whether he had read it in its entirety Mr Birch said “probably not because I’m… not very good with paperwork.” He said he “looked at the map and saw it was in the industrial zone” and thought “that will do me.”
- Because of the map Mr Birch did not take any notice of the lot number. Mr Birch was not interested in nor did he have any use for a rural zoned lot. His evidence was that he would not have bought the lot if it was zoned rural.
- The Council submits that “the evidence that is before the Court would not enable your Honour to comfortably draw the conclusion that the Plaintiff would have acted any differently if it had not seen the certificate.” That is not quite the right question – rather the issue is what Geju would have done if the Council had not been negligent ie if the Certificate had been accurate.
- Section 11(3)(b) CLA prohibits the asking of the question of what Mr Birch (or more accurately Geju) would have done if Mr Birch had known of the true situation. The relevant circumstances (see s 11(3)(a) above) include the price Geju paid, the marked difference between that price and the value of the land as rural land, Mr Birch’s stated disinterest in purchasing rural land, his apparent lack of use of the land for rural purposes in the years since, the relatively limited time in which he had to act to secure the land as industrial, his subservience to market conditions within that limited time, and his attempt to develop the land as industrial land later.
- These factors all suggest that Geju would not have purchased the land had Mr Birch known of the conditional MCU approval and thought that the block was zoned rural. In particular I am satisfied that Mr Birch would not have purchased the land:
- if he thought that it was uncertain whether the Council would treat the MCU as having lapsed due to condition 8;
- if he appreciated that he could not, or may not be able to, reconfigure the lots under the MCU. It is quite obvious that Mr Birch’s intentions were to subdivide the land – he engaged Mr Murray within a month or so of the purchase. The account description in the loan statement from the ANZ Bank of 1 August is “Capella Subdivisio (sic)”.
- It is more problematic as to whether he would have been concerned about the four year window in which he had to act. The views he held in 2008 as to the strength of the market were not explored. A reasonable purchaser may well have thought the land less valuable because of that restriction.
- One of Council’s arguments is that Mr Birch in fact knew of the true situation and did nothing. The Council pointed to a communication in March 2012 where Mr Birch wrote to Council in the following terms:
“I’ve done considerable work on this block. This should lock in the industrial status of this land, if that needed to happen”
“the process has gone through once and approved. So why not admit mistake.”
as evidence that he knew the land was zoned “rural” with an MCU when he purchased the land. The letter does not show that. It has no bearing on his knowledge in June 2008. It was a response to an email informing him of the approval lapse.
- Similarly, the letter of Mr Murray dated 23 October 2008 attaching the application that I have discussed earlier, does not, as the Council submits, show that Mr Murray knew that the property was zoned “Rural”. Mr Murray’s letter speaks of him holding the opposite belief and he attached the Certificate as proof. The Council argued that I should draw the opposite inference – that Mr Murray well knew the true situation, told Mr Birch of that and wrote his letter on instructions from Mr Birch. The point the Council seeks to make is that an inference should be drawn that knowing of the true situation Mr Birch was unconcerned by it, that the status of the land was not of crucial importance as he now contends as he did nothing to meet the conditions.
- The improbability of such an approach seems to me to be manifest. The parties are agreed that Mr Birch grossly overpaid for the land if it was in fact zoned “Rural”. It was entirely in his interests to at least trigger the approval to ensure he took advantage of the MCU approval. It will be recalled that a first change in use had to occur within the four year period. When Council was asked to consider the sub division proposal the conditions imposed by Council involved the provision of plans – a concept sewerage plan and a hydraulics and stormwater management report. Mr Birch considered this was too expensive, so Geju did not proceed with the then plan. Mr Birch’s actions, or lack of action, speaks volumes.
- I have mentioned that the file note made on the letter from Mr Murray with the application dated 23 October 2008, notes the MCU approval. There is no evidence that Mr Murray saw this file note or that the contents of it were drawn to his attention. The response to the application is a letter from Council dated 23 February 2009 and that made no reference to the MCU. The letter requested more information “in order for the Council to make a proper assessment of the development proposal.” There is no reference in this letter to the MCU approval. Oddly there was no reference back to the conditions concerning minimum lot size mentioned in the MCU. All the file note establishes is that either someone realised Mr Murray was under a misapprehension it was zoned industrial, noted the MCU but then failed to mention this in the response, or they thought that Mr Murray, in saying “it is in fact zoned Town Industrial”, was referring to the MCU and saw no need to mention it in the response. In any case it does not establish that Mr Murray, and thereby Mr Birch, was disabused of the belief caused by the Certificate that the land was zoned industrial.
- The Council urges that I draw an inference on this issue from the fact Mr Murray was not called by the plaintiff. I do not think that is appropriate. Mr Murray is a professional man. There is no evidence that Mr Murray is hostile either to the Council – with whom he must work, one assumes, as he is a surveyor practising in Central Queensland and based in Emerald - or to the truth. There is no property in a witness. The Council has a theory of what occurred. It was equally open to the Council to call Mr Murray if he supported their theory. The Council did not. I am disinclined to draw any inference from his non-appearance in the witness box.
- The Council also urged that Mr Birch knew from the rates notices that issued to Geju that the land was zoned “rural”. That is what the rates notices showed. But unless Mr Birch attended to the rates notices personally and examined the zoning, or instructed his staff to be on the look-out for the zoning, I cannot see why the mere receipt of the rates notices would result in Mr Birch acquiring the requisite knowledge. His evidence was that he did not attend to the payment of the rates notices personally. There was no reason for him to alert his staff to watch out for the zoning.
- Mr Birch did not have excellent recall, which is to be expected after 8 years, and it is evident he did not look at the Certificate carefully. However he believed that he received the Certificate from Mr Adams and that he looked at it. I accept that he was an honest witness. I am satisfied to the requisite standard that when given the material from Mr Adams he looked at the Certificate, saw the precinct described as industrial and that the map depicted his lot. He drew the obvious inference. If the Certificate had been accurate and indicated a “Rural” zoning I am satisfied that Mr Birch would have made enquiries and on learning of the true situation not purchased the property.
- It is not necessary then to consider Council’s submission that Mr Birch did not rely on the certificate, but instead based his belief that the property was zoned “industrial” on what Mr Adams told him.
- In case the matter goes further I make the following observations on the evidence and on Mr Adams.
- Mr Adams acted as the real estate agent for the Property when it was sold in December 2007 and again in June 2008. Mr Adams believes he was given the Certificate by an owner of the Mayfair Group, Mr Coates. That seems very likely. There is no evidence that Mr Adams had any dealings with any other person who was likely to have had possession of the Certificate. Mr Coates wanted Mr Adams to take the property to an expression of interest. Mr Adams wanted as many details as possible for the memorandum and the Certificate was part “of the accumulation of the memorandum.” His evidence was that he had known Mr Birch for 25 years, and during a social visit he gave Mr Birch the information memorandum and believes he would have given him the Certificate as that was his normal practice.
- Under cross-examination Mr Adams agreed that in 2008 when the property came to be sold to Geju the state of his knowledge was that it had been zoned rural, but that there was an approval in place from the Council for a MCU, so that it could be used as industrial land. Mr Adams stated “at the time, I wasn’t aware of what they were doing to create that lot and I relied on this document to say it was industrial. I truly believed that it was an industrial lot.” Mr Adams said he believed that Mr Ford (of Ford Property) and his surveyor must have complied with all of the conditions required to achieve the industrial zoning adding – “If I advertised this property in the Courier Mail, it would be – it would be incorrect of me to do it, and misleading, and – if I did not believe that that was an industrial zoning.”
- When cross-examined about not noticing the incorrect property description Mr Adams said “the first page at lot 70 is correct and signed by Don Lindeman who was the chief executive officer. The second page denotes the block outlined there, and it’s got – was it zone town industrial. I relied on that.”
- I thought Mr Adams to be honest, however his memory was not always reliable but again that is understandable with the passage of 8 years. While he does not remember giving the Certificate to Mr Birch I accept that he would have. If it was in his possession it would be surprising if he did not. I think his belief that the land was zoned industrial was true – his statement about it otherwise being misleading to advertise it as so rang true, and there is no reason to think he would mislead Mr Birch after knowing him for some 25 years.
- It appears Mr Adam’s belief that the land was industrial came about because of a misunderstanding of what Mr Ford had done. He did not appreciate that the MCU was effective for only four years. He held this belief before the Certificate was issued in February 2008 and at the time of the sale from Mr Ford to Mayfair in December 2007. If the Certificate had said that the Property was zoned rural, this would have alerted him to a problem, he would have checked it with the Council and then not have made the representations to Mr Birch that it was industrial.
Purchase from Centritek
- I have mentioned the involvement of Mr Birch’s son in law and daughter and their company Centritek. The Council says that the purchase of the half share of the property by Geju off Centritek in 2012 is relevant to causation. On this point they submit:
“There is no evidence whatever of any reliance by Centritek Pty Ltd. It was the purchaser of a half interest. There is no evidence of what it acted upon in entering into the contract. The Plaintiff acquired [Centritek’s] interest in the property later in 2012. The Plaintiff does not say that it was induced to by reliance upon the certificate, or indeed by anything other than a desire to avoid the consequences of possible insolvency of either Centritek Pty Ltd or possibly his son in law and daughter.
If any loss was suffered upon the entry into of the contract on 5 June 2008, Centritek Pty Ltd suffered half that loss. There is no claim and no evidence that the Plaintiff acquired any chose in action that Centritek Pty Ltd had.
The Plaintiff does not claim, and there is no evidence, that it relied upon the certificate in acquiring the interest of Centritek Pty Ltd or in assuming, if it did, the liabilities of Centritek Pty Ltd in relation to the bank loan. The Plaintiff must fail in discharging the onus of proving that at least that part of its loss was caused by any breach of duty on the part of the Defendant.”
- In my view the necessary inference from the evidence is that the misleading nature of the Certificate was responsible for Centritek’s joinder in the original purchase of the subject land. It led Mr Birch to propose a scheme to his son-in-law and daughter under which they became liable for one-half of the borrowed monies. The original plan was for sheds to be erected on the subject land by Mr Birch’s son-in-law, who was said to be an engineer, from left over steel. Mr Birch said that his son-in-law was “keen to go ahead.” His expertise it seems was an essential part of the plan, initially at least.
- I am satisfied too that Geju purchased Centritek’s half interest at a time when Mr Birch still believed the land to be zoned “industrial”, a belief engendered by the Certificate. I will briefly review the evidence.
- The transfer of the half interest was effective from 24 January 2012. Mr Birch became aware it was zoned “rural” after a valuation was done in February 2012. It was only then that an employee of the valuers, Taylor Byrne, forwarded him an email by a town planner employed by the Council which stated that the property was in the rural zone and that an approval had lapsed. Mr Birch then wrote to the Department of Local Government and Planning on 16 March 2012 and Central Highlands Regional Council on 20 March 2012 believing an error had been made. These actions are all consistent with Mr Birch’s continuing misunderstanding of the true situation until March 2012.
- I am satisfied that the purchase from Centritek does not affect my findings on causation.
Anne Murray & Co
- As stated earlier, proceedings were brought against Geju’s solicitors, Anne Murray & Co, and that claim has been settled. From the viewpoint of principle the existence of competing potential causes is not fatal to the plaintiff’s case: March v E & MH Stramere Pty Ltd. That Geju’s loss may also have been caused by Anne Murray & Co does not affect the causal connection between Geju and the Council. Any relevant apportionment to Anne Murray & Co is dealt with below.
- The Council’s negligence in inaccurately issuing the Certificate was a necessary condition of the occurrence of harm. Had the Certificate stated the true position (that it was zoned “rural”) Geju would not have purchased the land.
- It is trite law that the onus lies on the defendant to establish contributory negligence. The concept of contributory negligence involves the reduction of the damages recoverable “to such extent as the court thinks just and equitable having regard to the claimant's share in the responsibility for the damage”: s 10(1)(b) of the Law Reform Act 1995 (Qld).
- In determining what may be “just and equitable” the principles explained in Podrebersek v Australia Iron and Steel Pty Ltd are relevant:
“The making of an apportionment as between a plaintiff and a defendant of their respective shares in the responsibility for the damage involves a comparison both of culpability, i.e. of the degree of departure from the standard of care of the reasonable man (Pennington v Norris) and of the relative importance of the acts of the parties in causing the damage: Stapley v Gypsum Mines Ltd; Smith v McIntyre and Broadhurst v Millman, and cases there cited. It is the whole conduct of each negligent party in relation to the circumstances of the accident which must be subjected to comparative examination. The significance of the various elements involved in such an examination will vary from case to case; for example, the circumstances of some cases may be such that a comparison of the relative importance of the acts of the parties in causing the damage will be of little, if any, importance.” (my emphasis and citations omitted)
- The Council contends that Geju was contributorily negligent in:
- failing to undertake enquiries and investigations as to the zoning;
- failing to engage a consultant to independently value the Property;
- paying too much for the property ($900,000 when it was worth only $525,000 as the “true value”);
- failing to seek to negotiate terms for terminating the contract if it was not zoned industrial and Geju could not use it as intended.
- Geju submits:
- that it did undertake enquiries as to zoning – it held the limited town planning certificate;
- that the Council failed to adduce evidence that an independent consultant (presumably a valuer) would at the time have picked up that the property was zoned rural;
- that there is no evidence to suggest that $900,000 was more than market value for an industrial zoned lot, pointing out that 4 years later a purchaser was willing to pay three times that amount (ie under the 2012 contract mentioned earlier); and
- that in circumstances where it was apparently zoned industrial by the Council, no such warranty was necessary, and that there is no evidence of what would have happened if such a term was sought to be negotiated.
- I have effectively dealt with points (a), (b) and (d) already in other contexts. I agree with Geju’s submissions.
- The essential difficulty in making a finding of contributory negligence on these points is that even if it be assumed that Geju had departed from the standard of care of the reasonable person the causative effect of that departure is unknown - the relative importance of the acts of Geju in causing the damage is unknowable. As already discussed the Council led no evidence about how certificates were produced, what was the cause of the error, and what the effect would have been had Geju, or someone acting on behalf of Geju, noticed the incorrect property description and asked for a certificate with the correct description. The relative importance of Geju failing to make further enquiries about the zoning and failing to obtain a valuation is impossible to assess.
- In relation to (c) the Council’s argument here is that even under Mr Birch’s mistaken belief $900,000 was too much for Geju to pay. A reasonable person, so the Council contends, would not have paid so much. No authority was cited to support the notion that such an overpayment can constitute contributory negligence but I cannot see any reason in principle to reject the argument that a person contributes to their own loss by a foolish decision to pay too much for an asset. It is contribution to the damage suffered that is in issue, the damage claimed here is economic loss, and foolishness of that sort can certainly cause economic loss.
- I am conscious that Geju paid almost double the amount that the Mayfair group paid only a year or so before for the same block of land. Whether Mr Birch knew that is not known. That difference of itself proves nothing. In any case there is a distinction between the qualities of the land as at March 2007 and as at June 2008 – the Council had approved the MCU. So what was a potentiality had become a reality. But can it be said that Mr Birch acted unreasonably and not in Geju’s best interests in agreeing to the purchase price?
- The Council here rely on a valuation prepared by Mr Eales. His opinion was that as at 5 June 2008 the market value of the subject land was $525,000. That is the extent of the evidence that Mr Birch was unreasonable in his decision making.
- The difficulty with the Council’s submission is the notion that a valuer’s opinion (assuming for the moment that it is accurate), given with the advantage of the clarity of hindsight, necessarily determines the reasonableness of the view that a purchaser has prospectively looking at the potentialities of the purchase. Mr Eales’ observes in his analysis of the principal sale that he relies on – as it happens the sale of the subject land from Ford Property to the Mayfair group – that “prevailing market conditions were improving” over the period between that sale (March 2007) and Geju’s contract. Obviously Mr Birch had a more optimistic view of the extent to which those conditions would continue to improve than Mr Eales’ thought justified looking back, albeit when trying to place himself in the shoes of a purchaser in June 2008. Was Mr Birch’s view necessarily unreasonable? The most cogent answer to the argument is that an independent purchaser was willing to buy the subject property for $3 million four years later. A 75% per annum return on your investment would be considered by most as far from a foolish investment. In light of that circumstance Mr Birch’s decision seems quite astute.
- In my view, even in the absence of the 2012 contract, the argument is not made out. There was no cross examination of Mr Birch to explore his thinking. As the Council urges in another part of its submissions Mr Birch had some experience in land development. The very fact that a man with some experience in these matters, not unused to development in this geographical area, was prepared to go very substantially into debt on the purchase says a great deal about what a reasonable person would do. This was a deliberate considered decision. His purpose was to profit. There is no suggestion that there was any other motive. It was his own fortunes that he put at risk. That one man disagrees, and that person a valuer with hindsight, tells me very little about the unreasonableness of the decision.
- In my view the Council have failed to discharge the onus of demonstrating that Geju was contributorily negligent.
Apportionment between wrongdoers
- The Council argues that if they are liable then Anne Murray & Co are also liable and so a concurrent wrongdoer within the meaning of Chapter 2 Part 2 of the CLA and their lability is accordingly limited. Chapter 2 part 2 of the CLA contains the relevant provisions pertaining to proportionate liability. Sections 30 and 31 of the CLA provide:
30 Who is a concurrent wrongdoer
- A concurrent wrongdoer, in relation to a claim, is a person who is 1 of 2 or more persons whose acts or omissions caused, independently of each other, the loss or damage that is the subject of the claim.
- For this part, it does not matter that a concurrent wrongdoer is insolvent, is being wound up, has ceased to exist or has died.
31 Proportionate liability for apportionable claims
- In any proceeding involving an apportionable claim—
- the liability of a defendant who is a concurrent wrongdoer in relation to the claim is limited to an amount reflecting that proportion of the loss or damage claimed that the court considers just and equitable having regard to the extent of the defendant’s responsibility for the loss or damage; and
- judgment must not be given against the defendant for more than that amount in relation to the claim.
(3)In apportioning responsibility between defendants in a proceeding the court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceeding.
- This section applies to a proceeding in relation to an apportionable claim whether or not all concurrent wrongdoers are parties to the proceeding.
- The Council called no evidence on the apportionment issue but submitted that the relevant facts are admitted on the pleadingsand it is by reference to those pleaded and admitted facts that the assessment is to be done. The Council points to the plaintiff’s admission in the Amended Reply at paragraph 27 of the allegations of fact in paragraphs 15, 16, 17, 18 and 19 of the Further Amended Defence.
- Paragraph 15 of the Further Amended Defence essentially states that the claim is for economic loss, the plaintiff is not a consumer as defined in section 29 of the CLA and that the claim is an “apportionable claim” within the meaning of section 28 of the CLA. Paragraph 16 then pleads that Anne Murray & Co owed the plaintiff a duty of care and what this entailed. Admission of those facts while necessary are obviously not sufficient.
- Paragraphs 17-19 of the Further Amended Defence then provide:
17. If the content of the Certificate as it pertained to the Property was inaccurate as alleged by the Plaintiff (which is denied), then such solicitors failed to exercise reasonable care, skill and diligence in the discharge of the duty of care it owed to the Plaintiff by failing to identify that the Certificate did not pertain to the Property and in failing to take steps, or recommend that the Plaintiff take steps to obtain an accurate planning and development certificate which correctly identified the Property or in failing to advise the Plaintiff to obtain an independent valuation of the Property.
18. Such solicitors are, in relation to the claims for negligence or breach of duty, a person who is one of two or more persons whose acts or omissions caused independently of each other the loss and damages that is the subject of the Claim and is thereby a “concurrent wrongdoer” pursuant to section 30(1) of the CLA.
19. Any liability of the Defendant in relation to each of the claims for negligence or breach of duty is limited to an amount reflecting that proportion of the loss and damages claimed that the court considers just and equitable having regard to the extent of the Defendant’s responsibility for the loss and damage and judgment must not be given for more than that amount in relation to the claim, pursuant to section 31 of the CLA.
- Admitting the facts in para 19 does not conclude the apportionable claim but simply reflects the law. In admitting para 17 the Plaintiff does not admit that the failures of the solicitors caused the loss. But the breach of duty and the nature of the breach are established. The crucial paragraph then is the admission of para 18. There Geju admits that the solicitors are a “concurrent wrongdoer” pursuant to section 30(1) of the CLA. A “concurrent wrongdoer” is, as the legislation provides, one who independently causes the loss the subject of the claim. Causation of the loss is thus conceded.
- Geju argues that this is insufficient to show that an apportionment of liability should be made against Anne Murray & Co. Senior counsel for Geju argued that the point was not conceded as the Reply put causation in issue at para 28. While true that simply means the pleading is confusing. The clear admission of para 18 involves a concession that the solicitor caused the loss. Geju is on stronger ground with the more fundamental point made. Before discussing the point I note the principles.
- First, as Geju argues, the onus of proof is on the Council. In Meandarra Aerial Spraying Pty Ltd v GEJ & MA Geldard Pty Ltd Fraser JA said:
“It follows that proof that an act or omission of a person other than a defendant was an independent cause of the claimed loss or damage is necessary before any occasion arises to consider whether or how a defendant’s liability should be limited under s 31. A plaintiff’s cause of action is complete without any evidence that there is a concurrent wrongdoer; the plaintiff is entitled to recover its proved loss in full from a defendant who is proved to be legally liable for that loss. If a defendant wishes to achieve a different result, the onus is on the defendant to prove the necessary facts….”
- And I do not think it is in issue that the principles relevant to tortfeasor contribution are akin to, if not identical to, those pertaining to claims for contributory negligence. Barrett J thought so in Reinhold v NSW Lotteries Corporation (No 2), where his Honour held that Podrebersek set out the authoritative statement of the law in Australia on both issues. Barrett J noted that “blameworthiness and causative potency are recognised in Australia as determinants of responsibility.”
- Given the admission in the pleadings I am prepared to proceed on the assumption that a competent solicitor would have noticed the incorrect lot number and so at least made enquiry of the Council of the true status of the land. But what then? No evidence was led from Council officers to the effect that a full certificate was normally requested in those circumstances. Presumably that certificate would have revealed the Decision Notice and so the conditional approval. The problem with the Council’s argument is, as I have already determined, that the Council has failed to show that any search reasonably open to Geju – and the solicitors – would have revealed the true status of the land. My difficulty then is that I have no evidence to guide me as to the relative importance of the acts of the parties in causing the damage. How then do I arrive at a just apportionment?
- I am conscious that in the statement of principle in Podrebersek the Court said “the circumstances of some cases may be such that a comparison of the relative importance of the acts of the parties in causing the damage will be of little, if any, importance”, but I cannot see that the circumstances here justify that approach.
- I decline to make a finding of apportionment against Anne Murray & Co.
- In case I am wrong in that I will discuss the apportionment I think appropriate on the hypothetical basis that a search would have revealed the crucial information. If there had been cogent evidence that a further request for a limited certificate would have revealed the conditional approval, or evidence that a full certificate was normally requested in those circumstances, then I would accept that some substantial apportionment was called for – in the order of 45%. I would have thought that the Council should bear a greater responsibility given that it created the problem, it should have been able to prevent the issue arising reasonably easily, and given its statutory duty to produce an accurate certificate. The cases suggest that factors of this type are relevant: Yates v Mobile Marine Repairs Pty Ltd; Chandra v Perpetual Trustees Victoria Ltd.
- I should deal with an alternative argument. The Council submitted that a competent solicitor would have advised Geju to obtain a valuation of the subject land once the incorrect lot number was observed. There was no evidence that supported that approach as a practice of competent solicitors. That seems to me to place too high an onus on the solicitors. Even if that was a reasonable course to follow there remains the evidential gap. What would the valuer have discovered in June 2008?
- Finally, I am of course aware that an action was brought against the solicitors by Geju and those proceedings were compromised, but on terms Geju has declined to disclose. I have directed that the terms are to be disclosed once these reasons are delivered. I assume that the solicitors agreed to pay some amount and that Geju would prefer that I not know what that amount is. That inference seems open because if the proceedings were compromised on terms that gave Geju no benefit it would be in Geju’s interests to tell me so. However that knowledge, and accepting that inference, does not assist in making the crucial determination here.
- Geju claims:
- The difference between the price paid for the land and the “real value of the land;”
- Acquisition costs;
- Holding costs;
- Borrowing costs; and
- Disposal costs.
- The measure of recoverable damages is the amount of money necessary to restore the plaintiff to the position it was in before the negligent misstatement, subject to the loss being foreseeable: Shaddock per Mason J. Once it is held that the plaintiff would not have bought the land but for the misstatement then damages to compensate for the expenditure that would not have been incurred but for that purchase are recoverable: Shaddock per Gibbs CJ at 237; Mason J at 255 (Stephen, Aickin JJ agreeing).
- It is useful to deal firstly with three preliminary arguments advanced by the Council. These are:
- That each of the categories of damages should be halved because of Centritek’s half share in the property;
- That certain costs should be reduced only to an amount that would reflect the difference between what was paid and what ought to have been paid when taking into account the “true value” of the Property; and
- That Geju failed to mitigate its loss.
An adjustment for Centritek’s half share and contributions
- I have found that the purchase of Centritek’s half share in January 2012 did not alter the fact that the Council caused the whole of Geju’s loss and Geju is entitled to recover the full amount of damages suffered. It is however necessary to deal with Centritek’s contributions that reduced Geju’s loss.
- Mr Birch’s evidence was that the purchase price was financed by a bank loan (which included a mortgage over the Property and another property owned by Mr Birch). The loan was for $1,200,000 as it included the $900,000 purchase price as well as $300,000 to do development work. Aside from paying for conveyancing, Mr Murray’s fees and general costs the additional $300,000 was used to pay off the interest on the loan over the years. When the loan amount was used in full both Geju and Centritek “put some money in” and then Centritek ran out of finances. Mr Birch did not know how much money Centritek contributed. He said “it wasn’t a great lot.” When questioned whether it wasn’t a great lot as in less than $10,000 or less than $100,000 Mr Birch said “it would have been a lot less $100,000.”
- Geju contends that the appropriate way of dealing with Centritek’s contribution is to reduce the total damages – submitting that $70,000 would be an appropriate reduction.
- The Council submits that Mr Birch appeared to be merely guessing, that the evidence in this respect was unsatisfactory and that there is an available inference against Geju due to there being no evidence from Centritek, nor from whoever it was within Geju that attended to payment of expenses. To a degree the criticism is well founded. Why a proper accounting was not undertaken is puzzling. It means that I am entitled to draw inferences against Geju if reasonably open. However, while it is self-evident that Mr Birch’s evidence was far from precise the evidence suggests that, if he was guessing, his guess was not far off the mark. As I said earlier I am confident that Mr Birch was honest.
- The $70,000 figure has some support from the evidence. It was Mr Birch’s evidence that Centritek and Geju started contributing when the loan amount of $1,200,000 had been completely drawn down. According to the bank records this occurred in April 2010. From April 2010 to January 2012 the amount of interest paid on the loan was approximately $140,000. If Geju and Centritek contributed equal amounts they would have each paid $70,000. There is a possibility that Geju paid more than half during this period considering Centritek was in financial trouble. But that is by no means certain and could easily have been proved. An inference is available that it was not in Geju’s interest to prove it.
- However in my view none of this is relevant. Fundamentally the relevant point is that the companies were in an equal partnership. Each had an obligation to contribute the whole of the amount to the bank but as between themselves each had an obligation to contribute one half. If one contributed more than the other that was properly a matter between themselves. I propose to deduct $70,000 from the award of damages to reflect Centritek’s contribution to borrowing costs.
An adjustment to those costs dependent on the purchase price of $900,000
- As I follow the argument the Council submits that the costs claimed which depend on the amount of the purchase price (and stamp duty is mentioned) should be reduced because Geju paid too much for the land, assuming that it was zoned as Mr Birch assumed. This is another way of putting the argument dismissed under the contributory negligence heading.
- Senior counsel for Geju analysed the Council’s submissions as involving an attempt by the defendant to advance a case different from that raised on the pleadings. Prior to trial I ruled that the defendant could not plead an alternative transaction case ie that if the plaintiff had not purchased this block Geju would have purchased some other block and suffered similar losses as the market fell generally. Senior counsel submitted that this was a variation on that theme – a “different transaction case” with the assumption being that Geju, had it known of the true status, would have purchased this block anyway but paid only $525,000 for it.
- I did not understand that to be the basis of the argument now put but I agree that if this is the basis of the argument it is not pleaded, nor was it put to Mr Birch. In any case the argument is not made out. There is no evidence that Mr Birch would have purchased this or another property zoned rural. His evidence was that he had no use for a rural lot.
- In my view the argument is misconceived. The fundamental principle is to return Geju to the position it would have been in had the negligent misstatement not been made. Absent a finding of contributory negligence the proper starting point is the purchase price actually paid of $900,000.
There is no failure to mitigate
- There is a pleading of a failure to mitigate but no submissions were advanced by the Council. Geju did deal with the point. In case it is relevant I will deal with the argument as it was understood by Geju. The Council pleads that Geju failed to mitigate its loss in failing to dispose of the subject property in a more timely manner. Geju denies that it failed to mitigate its loss. The issue here is whether Geju has held the property for longer than can be considered to be a reasonable time.
- The obvious need to sell to mitigate loss only arose in March 2012 when Mr Birch discovered the error in the Certificate after the 2012 contract involving the sale for $3M fell through. Mr Birch said that there have not been any subsequent offers to purchase the land despite his efforts to sell. No specific evidence of those efforts was led however the valuation evidence indicated that there was very little demand over the years since.
- Thus in the report of Mr Kerry Harold of Herron Todd White commissioned by Geju Mr Harold reports: “…values in Capella have dropped significantly over the past 3 years with demand now very weak, sales turnover thinly traded and longer selling periods expected.”
- Mr Harold assessed the property as a rural property, the rezoning to “low impact industrial” having not yet occurred, but said that “it is our opinion that if the property was changed to industrial zoning the value is not likely to increase as this would be a very large industrial site. Current demand for industrial land is near non-existent and any redevelopment in the current market would be completely unviable.”
- Mr Eales, who prepared his valuation on instructions from the Council, agreed the market fell away in 2013, 2014. He found that there had only been 4 industrial sales in Capella since January 2012, one of which was industrial vacant land. He noted “the pronounced downturn is largely attributable to the decline in the local mining industry which presently shows no signs of abating.” In his report he looked at Emerald, the major centre within the Central Highlands region, for industrial land sales from 2005 to 2016. There were 7 sales in 2012 but only one sale in 2013, one in 2014 and none in 2015 or 2016. Mr Eales stated that “like the wider region, the above statistics indicate there was a pronounced decline in activity in the Emerald locality from the market peak in 2011/2012. Market conditions in the wider Central Highlands region remain weak at present.”
- Thus the inability to sell perhaps other than at fire sale price is not Geju’s fault. It had no market to sell to.
- So far as the mitigation argument concerns the claim for consequential costs Mr Birch said that he paid down most of the loan to around $100,000 towards the end of 2012 to avoid paying so much interest and Geju does not claim any borrowing costs after that point in time. Exhibit 11 shows the loan was paid down in June 2012.
- It is clear that a claim can be made for expenses incurred over a time after the acquisition of land and that the plaintiff is to be allowed a reasonable time. Thus Mason J in Shaddock said:
“the measure of recoverable damages for negligent mis-statement is the amount of money necessary to restore the plaintiff to the position he was in before the statement, subject to the loss being foreseeable.”
“the [trial] judge found that, but for the negligent mis-statement, the appellants would not have bought the land, the land being useless for the purpose for which it was acquired. Consequently, the appellants’ loss includes, not merely the diminution in value of the land, but also the expenses of acquisition and retention for a reasonable time, expenses which would not have been incurred had the respondent not been negligent.” (my emphasis)
- Gibbs CJ came to the same conclusion and noted:
“…[o]f course the appellants were bound to mitigate their loss, but the learned trial judge was entitled to find that it was reasonable for the plaintiffs to continue to hold the land until the end of 1974, while they were exploring what could be done with the land and endeavouring to salvage what they could from the disastrous purchase.” (again my emphasis)
- The purchasers in Shaddock were held to be entitled to consequential damage which included council rates, water and sewerage rates, land tax, insurance, additional stamp duty and additional solicitors’ costs. A reasonable time there was held to be about 18 months, that being the time taken to dispose of the land and “salvage what they could from the disastrous purchase”.
- I make findings on each of the heads of consequential damage below. But the Council has not satisfied me that there has been a failure to mitigate the loss.
What is the “real value” of the land as at 5 June 2008
- The principal debate centred on the determination of the real value of the land. The parties are agreed that the appropriate measure of damages is the difference between the price paid for the land and the real value of the land as at the date of purchase (5 June 2008) assessed in light of subsequent events: HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd. The task is to determine what the “real value” of the land was.
- Geju says that the “real value” was $250,000. The Council contends that the value is $525,000.
- Geju relies on the valuation by Mr Harold. He valued the land at $250,000 as at 5 June 2008 on the basis it was zoned “rural” at the relevant time. He made no allowance for the fact that the MCU was in place.
- The Council relies on the opinions of Mr Eales. He values the land at $525,000 but assumes that the highest and best use was as industrial land. He assumes that the existence of the MCU approval merits that approach.
- I am not constrained simply to choosing between those opinions. Senior Counsel for Geju referred to the statement by the Court in Astonland that: “Just as the estimation of market value must be an inexact process, so must the assessment of damages based on an estimate of true value.”
- Both valuers I think were considering market value. The High Court in Astonland discussed the difference between “market value” and “real value” and quoted various epithets that have been used to describe the latter concept. For present purposes perhaps the phrase that best describes “real value” is that it represents “what would have been a fair price to be paid…. in the circumstances….. at the time of the purchase.” The Court said that “[market value] may be disregarded if they are ‘delusive or fictitious’ because they are the result of ‘a fraudulent prospectus, manipulation of the market or some other improper practice on the part of the defendant’… There are other reasons why the law does not limit recovery by reference to market value. One is that, subject to mitigation issues, the plaintiff is ‘not bound to sell them’.. Another is that there may not be a market.. Another is that the market is mistaken on some basis other than manipulation.”
- It is clear that in determining “real value” subsequent events may be brought into account. Geju submits that the subsequent events bearing on the “real value” here include that:
- on an application by Geju for approval to develop the land by subdividing it and building a shed it was told by the Council that it was necessary to sewer the property, making it an unviable prospect;
- the MCU in fact permitted only very limited uses; and
- the MCU (and any industrial use it may have permitted) would expire on 24 August 2011.
- Geju submits that these matters rendered the subject land effectively no different for the purposes of assessing true value to a rural lot without an MCU and that accordingly Mr Harrold’s valuation should be preferred.
- I am not persuaded that the factors in (b) and (c) above are in truth relevant subsequent events. The MCU was conditional and that is relevant but only in the sense of ensuring that if comparable sales were used these conditions were adequately brought into account. As to (a) while the subdivision of the land did not go ahead it was far from clear that the reason for that was the Council’s attitude to sewering the property. Mr Birch claimed that a “full sewerage” system was required by the Council as opposed to individual treatment plants. That does not reflect the contents of the Council’s letter to Murray & Associates of 23 February 2009 which requires a “concept sewage plan”. Mr Birch was unable to produce any document (or other evidence) in which the Council had imposed the condition he described. He thought that Mr Murray may have told him that was so. Given the state of his memory I am not prepared to act on his testimony. Geju did not call Mr Murray and if this was relevant to its case clearly he should have been called. What is certain is that the Council responded to Murray & Associate’s application by letter and that makes no reference to a need to fully sewer the lots.
- I conclude that the subsequent events relied on are not relevant and do not need to be brought into account to determine the real value of the land.
The competing opinions
- In Mr Harrold’s valuation the subject land is described as being most similar to a vacant, large scale rural residential allotment on the outskirts of Comet (67 kilometres south of Capella but only 15 kilometres from Emerald) which sold for $250,000 on 5 August 2008. The land area is almost three times the size of the subject property but unlike the subject property is subject to flooding and is in a “slightly inferior location.” The next most similar property was a vacant rural residential allotment in Emerald with twice the land area of the Property. It sold for $300,000 on 4 December 2007. It is described as superior location and superior land area. Emerald is a much larger population centre than Capella.
- As mentioned earlier Mr Eales says that the most comparable sale is that of the subject land itself in the previous year from Ford Property to the Mayfair group. The land then sold for $484,000. Of the comparable sales mentioned by the valuers this seems to me to be clearly the closest comparison. The circumstances of that sale bear examination.
- The subject lot only came into existence after a subdivision of a pre-existing lot (Lot 7 on RP 613159). It is common ground that the re-configuration of the pre-existing lot was approved on 22 August 2007. On that date the Council required that a “properly scaled and notated Proposal Plan prepared by a licensed cadastral surveyor” be lodged identifying Lots 70 and 71, those being the re-configuration of Lot 7. The transfer documents relating to the sale from Ford Property to the Mayfair group show that the contract was entered into on 28 March 2007 and that the transfer was of Lot 70 on SP 09731 (once approved the correct description was Lot 70 on SP 209731). At the time of the contract that lot did not exist. That is not the only peculiarity of that transfer. The contract is shown as having been entered into on 28 March 2007 but settlement did not occur until 13 December 2007. A near nine month delay in settlement of a transfer of a vacant block of land is hardly commonplace. The documents tendered show that the application for the MCU was lodged on 9 May 2007 ie after the contract was entered into. It seems to be a reasonable inference to draw that both the vendors and the purchasers at the time, the Mayfair group, intended not only that the re-configuration take place but that the approval for the MCU be first obtained before settlement was effected. The inference I draw is that the parties set the purchase price anticipating that the use to which the land would be put would not be merely rural.
- To return to Mr Eales’ opinion. He makes two errors but neither diminishes the force of his opinions. The first is that he describes the consideration for the comparable sale (from parties I have described as the Ford property to the Mayfair group) as being $440,000. The transfer documents show the consideration as being $484,000. I do not know if the difference is explained by a GST component but the transfer documents tendered show the higher price as the one paid. The second error is that he assumes that the approval of the re-configuration and the MCU had already occurred when the contract was entered into in March 2007. He notes the MCU approval as having been obtained on 24 August 2006. While that confusion is understandable given that is the date on the approval documents it is agreed that the correct date is a year later.
- As a result of that second error, in his discussion of the two sales Mr Eales observed that the “use rights” were “generally similar” at the date of the two contracts, assuming the land was zoned rural with the MCU approval in place. Given my findings above I think his assumption is, in a general sense, right. While the approval of the MCU was still in the future as at the date of contract in March 2007 it seems probable that the parties proceeded on the assumption that the settlement of the contract would occur only when that approval was in place, as in fact occurred.
- The earlier sale of the subject land was not the only sale Mr Eales took into account but it was the principal one. The other blocks he thought comparable were each zoned “Town-Industrial” and were considerably smaller than the subject land. He attributed to them very significantly higher average per square metre values. While their size and zoning may have made them more valuable than the subject land that is reflected in the very pronounced difference in the values adopted - $29/m² and $20/m² cf $5/m² for the subject land.
- Mr Eales was criticised for simply assuming that the subject land with an MCU approval was equivalent to the sales of “Town-Industrial” land that he thought were comparable. Whatever the merits of that criticism it cannot apply to the earlier sale of the subject land. One of the weaknesses in Mr Harrold’s valuation is that he ignores this earlier sale.
- There are only two possibilities concerning that earlier sale. One is that the parties to that earlier contract agreed on a price assuming that the land was zoned rural and with no MCU approval under consideration or likely. The alternative is as I have assumed – that the price agreed reflected the assumption that the MCU approval would be obtained. In either case for Mr Harrold to be right one needs to make a very unrealistic assumption that in my view is not borne out by the evidence. It requires an assumption that the market fell dramatically in the space of 15 months – either for rural land, despite the land acquiring the additional characteristic of being capable of being exploited as industrial land under the MCU; or for rural land already with the advantage of an MCU approval albeit conditional. Mr Eales observed, and he was not challenged, that prevailing market conditions were improving over the period from March 2007 to June 2008. I have referred to this earlier. Plainly Mr Birch, an experienced land developer in this area, had a similar but more optimistic view.
- Given that there is no evidence to bear out the assumptions necessarily underlying Mr Harrold’s approach and given its improbability I am not persuaded to adopt Mr Harrold’s approach as appropriate. As well I observe that his comparable sales relate to land of very different size and in very different locations to the subject land making comparison very difficult.
- That finding does not mean that I must necessarily adopt Mr Eales’ views of course. However they seem to me better accord with the comparable sales that the valuers advance.
- As to the criticism levelled at Mr Eales concerning the comparability of land zoned “Town-Industrial” and land zoned “rural” but with an MCU approval as here, I am not at all persuaded that the latter approval was so different in its effect as is contended for. As mentioned earlier no attempt was made to have Mr Birch explain what significant differences there were, from his perspective, in the possible developments he contemplated between the zoning he assumed and the approval he obtained. Those potential differences were not explored in the evidence to any degree. The potentially significant issue was the ability to subdivide which did not seem to concern the Council when the subdivisional plans were proffered by Murray & Associates.
- In any case there are three things to note. The first is that Mr Eales allowed for a very much greater value/m² for the sales of “Town-Industrial”. He did not simply assume a straight adoption of values. That was not shown to be unrealistic.
- Secondly, there remains the fact that Mr Eales started from a base of $440,000 not $484,000. To arrive at $525,000 he effectively assumed a near 20% increase over 15 months to allow for improving market conditions. If one assumes the correct base and the same percentage increase the value would approach $580,000.
- These two features more than meet any criticism.
- Thirdly, it will be recalled that I have determined that the preferable view is that the approval did not lapse within six months (the condition 8 point) but that the confusion generated by the conflicting conditions could well cause a reasonable purchaser to consider, as at June 2008, that it was by no means certain that the MCU was operative. That feature would require some modification of the value of the land, as would the need to commence development within the four year window, and the reconfiguration potential or lack of it. Some moderation of the notional $580,000 is required.
- I adopt $525,000 as the real value of the land as at 5 June 2008.
- Before leaving the matter I note one further argument advanced by the Council. Geju purchased land thinking it was zoned “industrial”. In recent times the land has been zoned “low impact industrial”. The Council argues that as a result Geju can now do what it always wanted to do with the land hence there is no loss.
- Whether the premise is right was not explored in any detail. The plans that Mr Birch had for the land involved building sheds. He can do that under the present zoning albeit with some restrictions on the uses to which those sheds could be put. It is not clear on the evidence that those restrictions were of any concern in 2008. More significantly it is common ground that the level of demand for land with industrial uses is now greatly less than in 2008.
- However I think that the argument proceeds from a false premise. The loss is to be measured as at the date of purchase, at least in the ordinary course. Subsequent events can be brought into account but only if they are intrinsic to the land. Hence existing anticipated competition can be brought into account when the reality of the extent of it becomes clear but not competition that was unexpected and unanticipated. While the distinction might not always be clear, possible future changes in Council’s views on the use to which land might be put falls into the extrinsic class in my judgment and so is to be ignored.
- Accordingly the difference between the price paid and the true value is $375,000. The interest on these damages is $262,848.46.
- Geju contends that the acquisition costs were $41,436.05. This includes $4,411.05 for legal expenses and $37,025 for stamp duty. The Council’s arguments relating to Centritek’s half share and that costs would have been incurred regardless have been dealt with above. Geju’s submission should be preferred. They are costs that would not have been incurred had the Council not breached its duty of care. The interest on these damages is $29,043.70.
- Geju asserts that it is entitled to $50,892.18. This includes $20,235.21 for rates and $30,656.97 for land tax. The Council says that Geju is not entitled to recover any of the holding costs as the evidence at trial was unclear as to whether Geju was in fact the same entity upon which the land tax notices were issued. The notices were issued to the Birch Family Trust.
- Further it was submitted that “the basis of the claim for these expenses is itself misconceived …. The Plaintiff still owns the property. It is in fact presently zoned low impact industrial. There is no evidence that this would not allow the Plaintiff to do whatever it was it wanted to do with it. It is said that market conditions militate against doing anything.”
- The Council’s submission ignores the basis of compensatory damages – to restore the plaintiff to the position he was in before the statement was made. Effectively the Council argues that Geju might still recover its position if the market turns. While true that suffers from the problem that there is no evidence that such a change in fortune is likely to occur in the foreseeable future. The Council has not proven that Geju failed to mitigate its loss by not selling the property earlier. Geju are entitled to these costs. Regardless of the rates being addressed to the Birch Family Trust I am satisfied that the amount was paid either by Geju or out of the joint account with Centritek (ie the additional $300,000 loan amount). Geju is entitled to be compensated the full amount of $50,892.18 as it was responsible for paying the loan back. The interest on these damages is $17,835.90.
- Geju asserts that it is entitled to $321,490.47 for borrowing costs. The Council asserts it is only entitled to $63,576.99. The significant difference is on the basis of the two arguments dismissed above – Centritek’s half share and that Geju should only recover the difference between the price paid by Geju and the “true value (ie the contributory negligence point)”
- The Council also disputed the figures originally put forward by the plaintiff as it contained drawdowns which could not be explained. The Council complained that there were no records to support the interest amounts purportedly incurred between 1 August 2010 and 1 July 2011. They further noted that the bank statements suggest that final payment occurred on 1 June 2012 at which point the loan was closed.
- That records are missing is obviously not ideal. Nonetheless the Council was still able to calculate that the interest paid on the loan facility, based on a loan amount of $979,806.40 was $300,697.85 from 1 August 2008 to 30 June 2012. Geju agreed with this figure to 30 June 2012 but submitted the figure of $319,566.47 was correct to 1 December 2012. Geju did not explain why there were additional borrowing costs after the loan was apparently closed. In the absence of such an explanation I am not prepared to allow the higher amount. It was agreed between the parties that the loan administration charges were $1,934.10. In these circumstances I accept the Council’s calculation that the appropriate figure for the borrowing costs of Geju is $302,631.95.
- The Council disputes that Geju is entitled to interest on the borrowing costs as this would be receiving “interest on interest” and so run counter to the prohibition in s 58(4) of the Civil Proceedings Act 2011 (Qld). Geju submits that it is “interest on special damages” and it is entitled to the same as it would be to interest on any other head of special damages.
- The point was settled in Hungerfords v Walker where Mason CJ and Wilson J said:
“Incurred expense and opportunity cost arising from paying money away or the withholding of moneys due to the defendant's wrong are something more than the late payment of damages. They are pecuniary losses suffered by the plaintiff as a result of the defendant's wrong and therefore constitute an integral element of the loss for which he is entitled to be compensated by an award of damages. Fitzgerald J made this very point in Sanrod Pty Ltd v Dainford Ltd (1984) 54 ALR 179 when he said (at 191):
Whatever may be the position otherwise in respect of damages under the [Trade Practices] Act, I can myself perceive no difficulty in accepting that, when money is paid in consequence of misleading conduct, the loss suffered by that conduct includes not only the money paid but also the cost of borrowing that money or the loss from its investment, as the case may be: cf Frith v Gold Coast Mineral Springs Pty Ltd (1983) ATPR 40-339 affirmed (1983) ATPR 40-394; 47 ALR 547. Interest awarded as a component of damages in such circumstances is not for loss of the use of the money awarded as damages, but for loss of the use of the money paid over in consequence of the misleading conduct and is directly related to the misleading conduct.”
- Geju’s submissions are correct. The outlays to the bank while termed “interest” in the hands of the bank are not “interest” in the hands of Geju within the meaning of s 58(4). That is, Geju is not receiving an amount in compensation for being kept out of its money when it pays interest to the bank on its loans. It is not “the giving of interest on interest” that s 58(4) does not authorise. These amounts are, as Geju contends, simply another outlay incurred. Geju is entitled to interest on the borrowing costs.
- Geju further submits that the interest should be calculated on these damages in two distinct time periods. For the period from 1 August 2008 to 1 December 2012 the interest should be calculated at the default rate but then halved to take into account that the loss was being incurred incrementally in a regular, periodic manner over the entire period of loss. Then from 1 December 2012 to the date of judgment interest should be calculated as a lump sum figure at the default rate as the damages were no longer increasing but had crystallised and Geju was still deprived of the use of the money. Aside from a difference in the figures due to the conclusion above that the appropriate figure is $302,631.95 to 30 June 2012 I agree with these submissions. The figure becomes $232,631.95 after deducting $70,000 for Geju’s contribution to the borrowing costs. The interest on these damages is $117,517.35 which includes $45,541.21 for the first period and $71,976.14 for the second period.
- Geju claims $20,202.15 as disposal costs, asserting that they will incur these costs (as an estimate) as and when it sells a property that it would never have purchased in the first place but for the Council’s negligence. I received no submissions from the Council on this point. While disposal costs may be considered consequential damages there is no evidence supporting the adoption of this figure. Counsel for Geju submitted that it was the aggregate of Mr Adam’s standard percentage for the sale of a property, plus some legal fees.
- If, when and how much Geju sells this property for is uncertain. Any estimation is purely speculative. Indeed, as the Council submits, in the fullness of time, and if Geju hangs on long enough, it may sell for a profit. I do not think it reasonable to visit these costs on the Council.
- In summary I assess the damages as follows:
|The difference in the price paid and the real value||$375,000.00|
|Borrowing costs less Centritek’s contribution||$232,631.95|
- I will hear from counsel as to the appropriate orders in light of these reasons.
 The relevant council was Peak Downs Shire Council at the time but it amalgamated into the Central Highlands Regional Council.
 Despite that provision I will refer to the subject land as “zoned” rural etc both for ease of expression and to match the nomenclature adopted in relevant correspondence and through the trial.
 While not particularly relevant there is an explanation for the apparent delay – the letter probably was not sent until late January or early February 2008.
 The notice is incorrectly dated 24 August 2006. So much is evident from subsequent references including the first paragraph of the letter with its reference to Council’s General Meeting on 22nd August 2007.
 Exhibit 10.
 My emphasis.
  1 Qd R 226 at 238.
  AC 235.
 Exhibit 13.
 Exhibit 12.
 Exhibit 10 - Condition 7 of the Approval Conditions.
 The copy of the Scheme tendered incorporates amendments made in 2011 but the parties were content to argue the case on that version, there being no relevant differences to the version current as at June 2008 apparently.
 See para 73 of Geju’s submissions Exhibit 24.
 Exhibit 10.
 I have had regard to provisions of the Scheme not tendered. I drew the parties’ attention to these provisions and have received relevant supplementary submissions.
 T2-5/25-33; p 25 of Exhibit 19.
 (1997) 188 CLR 241.
 Ibid at 252.
 Ibid at 265.
 (2014) 254 CLR 185 at 200 [21-22].
 (2013) 85 NSWLR 479 at 486 .
 (1981) 150 CLR 225 at 235 per Gibbs CJ; 252 per Mason J.
 Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 at 264.
 (2004) 216 CLR 515.
 Ibid 531 .
 Cf. Precision Products (NSW) Pty Ltd v Hawkesbury City Council (2008) 74 NSWLR 102 at 126  per Allsop P.
 Cf. Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at 533 .
 (1997) 188 CLR 241 at 275.
 (1986) 162 CLR 340 at 356-357 per Gibbs CJ, Mason, Wilson, Dawson JJ.
 Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 at 275.
 San Sebastian Proprietary Ltd v Minister Administering The Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340 at 357 per Gibbs CJ, Mason, Wilson, Dawson JJ.
 (1993) 116 ALR 460.
 Ibid at 470.
 L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225 at 253 per Mason J.
 Ibid at 236.
 Mid Density Developments Pty Ltd v Rockdale Municipal Council (1993) 116 ALR 460 at 471.
 (2008) 74 NSWLR 102 at 126 .
 See also Perpetual Trustees Australia Ltd v Heperu Pty Ltd  NSWCA 84 at .
 Exhibit 18.
 See .
 Exhibit 6.
 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515.
 L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225.
 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at 533 .
 (2004) 216 CLR 515 at 553 .
 At -.
 (2004) 216 CLR 515.
 (2014) 254 CLR 18 at 229 .
 (1999) 198 CLR 180 at 199 .
 L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225 at 252.
 (2013) 250 CLR 375 at 383 .
 (2012) 246 CLR 182 at 190-191 .
 (2013) 250 CLR 375 at 383 .
 See T1-22/9-13.
 See T1-22/21.
 Exhibit 23.
 Exhibit 11 at p 62.
 Exhibit 9.
 Exhibit 13.
 Exhibit 12.
 Exhibit 13.
 Exhibit 12.
 Exhibit 23.
 Exhibit 3.
 Exhibit 6.
 Exhibit 8.
 Exhibit 7.
 Exhibit 9.
 (1991) 171 CLR 506 at 514.
 (1985) 59 ALJR 492 at 494.
 Paragraph 14 of the Further Amended Defence.
 Further Amended Defence, paras 15 to 19; Amended Reply, para 27.
  1 Qd R 319 at 347 .
 (2008) 82 NSWLR 762 at 776 .
 Podrebersek v Australian Iron and Steel Pty Ltd (1985) ALJR 492.
 Reinhold v NSW Lotteries Corporation (No 2) (2008) 82 NSWLR 762 at 775 .
 See - above.
 Podrebersek v Australia Iron and Steel Pty Ltd (1985) 59 ALJR 492 at 494.
  NSWSC 1463.
  NSWSC 694 at ;  Aust Torts Report 81-896.
 L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225 at 255.
 See  – .
 The monthly average interest (total interest adopted by the parties of $300,697.85 divided by 47 months (August 2008 to June 2012)) then multiplied by 22 months (April 2010 to January 2011 inclusive) results in interest for this period of $140,752.18. If adding the interest payments from Exhibit 22 the interest totals $141,917.01 assuming one does not include the payment made on the day the execution was transferred (24 January 2012). The total is $149,604.22 on the contrary assumption.
 See - above.
 Exhibit 22.
 L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225 at 255.
 Ibid at 237.
 (2004) 217 CLR 640 at 656  et seq.
 Ibid at 663 .
 Ibid 657  citing Davidson v Tulloch (1860) 3 Macq 783 at 790 per Lord Campbell LC.
 Ibid 657 .
 Exhibit 12.
 Exhibit 10.
 Exhibit 20.
 At least his report does – in his oral evidence he appears to be well aware of the true date of approval.
 See  above.
 See Ex 12 and para  above
 See  – .
 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at 659-660 [40-42].
 Calculated from 1 August 2008 to 1 December 2016 as the day of publishing these reasons using the Courts Calculator at: http://www.courts.qld.gov.au/courts-calculator/calculator.
 Calculated from 1 August 2008 to 1 December 2016 as the day of publishing these reasons using the Courts Calculator at: http://www.courts.qld.gov.au/courts-calculator/calculator.
 Calculated from 1 August 2008 to 1 December 2016 as the day of publishing these reasons and then halved as being incurred incrementally using the Courts Calculator at: http://www.courts.qld.gov.au/courts-calculator/calculator.
 (1989) 171 CLR 125 at 144.
 Calculated from 1 August 2008 to 30 June 2012 and then halved as being incurred incrementally using the Courts Calculator at: http://www.courts.qld.gov.au/courts-calculator/calculator.
 Calculated from 1 July 2012 to 1 December 2016 as the day of publishing these reasons using the Courts Calculator at: http://www.courts.qld.gov.au/courts-calculator/calculator.
- Published Case Name:
Geju Pty Ltd v Central Highlands Regional Council (No 2)
- Shortened Case Name:
Geju Pty Ltd v Central Highlands Regional Council (No 2)
 QSC 279
01 Dec 2016
- White Star Case:
|Event||Citation or File||Date||Notes|
|Primary Judgment|| QSC 279||01 Dec 2016||Substantive Judgment (McMeekin J).|
|Primary Judgment|| QSC 290||13 Dec 2016||Costs Judgment (McMeekin J).|
|Notice of Appeal Filed||File Number: 13451/16||22 Dec 2016||Appeal from  QSC 279.|
|Appeal Determined (QCA)|| QCA 38  3 Qd R 550||16 Mar 2018||Appeal allowed: Fraser JA, McMurdo JA, Brown J.|
|Appeal Determined (QCA)|| QCA 54||27 Mar 2018||Appeal Costs Judgment: Fraser JA, McMurdo JA, Brown J.|
|Special Leave Refused|| HCASL 239||15 Aug 2018||Special leave refused: Gageler and Keane JJ.|