A recent decision by the majority of the NSW Supreme Court of
Appeal has rejected a claim of negligence brought by the applicant
developer against the respondent council for a breach of its duty
on a purely economic basis.
In Dansar Pty Limited v Byron Shire Council 
NSWCA 364, the applicant's claim arose from the council's
failure to properly manage the council's development
application process due to the council's sewerage system
nearing capacity which resulted in the development application
initially being rejected.
In this Alert, Special Counsel Karen Browne and Law Graduate
Andrew Clements give a brief snapshot of the case and the
implications arising from the case.
The Byron Shire Council (Council) was both
development consent authority and water and sewerage authority for
the Byron Shire. In 1997 the Council resolved to limit the number
of new developments approved in the area due to the limited
capacity of its two sewerage treatment plants.
The Council's planning controls prevented it from approving
development applications unless the Council was satisfied that
prior adequate arrangements had been made for the provision of
sewerage services to the land proposed to be developed.
In 2001, Dansar Pty Ltd (Developer) applied to
the Council for development approval to carry out a residential
development. At the time of application, there was sufficient
capacity in the sewerage system for the development. However, the
Council failed to correctly calculate the capacity of the sewerage
system, which, resulted in the Developer's application
initially being rejected.
The Developer re-submitted its application, which was approved
by the Council in 2005. The Developer claimed that but for the
Council's error, development approval would have been granted
in a timely manner.
The Developer commenced proceedings in 2007 claiming damages
from the Council for a breach of a common law duty of care
allegedly owed to them. The Developer claimed that the delay in
approval was largely caused by the Council failing to exercise
reasonable care in carrying out the task of allocating the spare
capacity which it had determined should be allocated to new
The Developer alleged that the Council owed a duty of care to
the Developer to ensure that it did not suffer economic loss
resulting from the Council's refusal or delay in implementing
On appeal, the first instance decision was upheld by the
majority of the bench on a 2:1 basis.
The decision is good news for councils around the country
because it confirms that when councils are exercising statutory
functions such powers are unaffected by a duty owed to private
interests, including those of developers.
Dansar held that there was an inconsistency between a
council's duty of care and the free and proper exercise of its
statutory functions and this is ordinarily sufficient reason in and
of itself for denying the existence of any duty when deciding on
As the decision of the Appeal Court was not unanimous, it does
raise the possibility that at some point in the future a court may
decide that a council does have a wholly economic duty of care to a
developer when exercising its statutory functions.
Because of the high costs, royal commissions should only be convened to address issues of substantial public importance.
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