Australia: The cost of an inaccurate planning certificate

The recent decision of the Supreme Court in Geju Pty Ltd v Central Highlands Regional Council (No 2)1 concerns whether a council can be held liable for providing misleading information to an entity and, in particular, to an entity that did not request that information.

The decision distils key issues for local governments and potential purchasers of land:

  1. Does a local government owe a duty of care to a third party (including a potential purchaser) in issuing accurate information, namely, a statutory planning and development certificate2, even though that third party did not request the information from the Council and in fact is unknown to the Council? Such a duty may exist if, among other things, there:
    1. is evidence that the loss was foreseen or foreseeable;
    2. are sufficient salient features, particularly vulnerability, that, when combined, constitute a close relationship between the third party and the Council to give rise to a duty of care;
    3. is reliance by the third party upon the information provided by the Council;
    4. is a rational way to define a class of which the third party is a member.
  1. If a duty is owed, did the Council breach the duty?

BACKGROUND

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. The land was zoned "Rural" but with a conditional approval for a material change in use which permitted some forms of industrial development.

The Court heard evidence that Geju would not have purchased the land if the true position had been known and Geju's guiding mind, Mr Birch, was misled by a 'Limited Town Planning Certificate' (the Certificate) issued by the defendant, the Central Highlands Regional Council (the Council). Further, the Certificate was not requested by Mr Birch or by anyone on his behalf, nor was it issued to Mr Birch or Geju. Rather, it was likely that Mr Birch obtained the certificate from the real estate agent handling the sale on behalf of the vendor.

DECISION

A number of key issues can be distilled from the decision:

  1. A Council which in the exercise of its public functions supplies information which is available to it more readily than to other persons, is under a duty to those whom it knows will reasonably rely upon it, to exercise reasonable care that the information given is correct: L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1).3
  2. Shaddock is not restricted in principle to apply only to the actual requestor of the information. Further, the Mid Density Developments Pty Ltd v Rockdale Municipal Council4 case provides that the duty extends to those dealing with the requestor.

    Accordingly, it did not matter whether the third party had requested the certificate – the Council owed it a duty to ensure the accuracy of the information contained in the Certificate.

  1. The loss was foreseeable - the uses to which land might be put is relevant to its true value. It was foreseeable that the Certificate would be shown to a prospective purchaser.
  2. Whilst the notion of proximity has been rejected by the High Court as being determinative of the existence and content of a duty of care, it remains important:
  3. "... 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."5

  1. A vendor or prospective purchaser could only obtain such a certificate or access the information such a certificate is supposed to contain from the Council. That is all that the plaintiff needed to show to demonstrate relevant vulnerability.
  2. A solicitor acting for the owners sought the certificate. Plainly it was for a serious purpose and its recipient was very likely to rely on it in making financial decisions.
  3. It was reasonable for Geju to rely upon the Certificate (notwithstanding the lot description was wrongly detailed in part of the Certificate). It is not reasonable that Geju assume the contents of the Certificate were incorrect and try to protect itself through other means, namely, contractually. That is not common practice.
  4. Geju was a member of an identified class (potential purchasers) to whom it was likely the Certificate would come and the Certificate would very likely lead Geju to enter into a transaction of the kind they did enter into.
  5. The duty applies to the intended recipient of the notice and potential purchasers (for a limited time. For example, the duty would likely extend to a potential purchaser seeking to purchase the land within four months of the certificate being given but probably not four years after the certificate was given). The duty may also extend to those with an interest in the accuracy of the Certificate such as financial institutions and guarantors.
  6. The Council breached its duty to the third party and caused it economic loss. Geju successfully claimed damages against the Council for negligent misrepresentation.

TAKE AWAY POINTS

Statutory planning and development certificates are important to financial decisions made by potential purchasers and relevant financial institutions. Failure to supply accurate information may mean a local government may be responsible for any economic loss suffered by an entity relying upon the certificate.

Time frames are short in which certificates must be supplied and often files have to be called in from archives meaning the real time an officer has to prepare the certificate may be limited. Giving the preparation of certificates work priority is important. Having reviewers is also an important step in maintaining integrity. It is also important that databases accurately reflect the real situation (particularly when there are subdivisions) and that such databases can be interrogated upon any query.

The duty to provide accurate information may extend to others who have not requested the information. That class is not indeterminate but common sense should prevail in this regard. Furthermore, councils should not suppose that potential purchasers should assume information provided by it will be inaccurate and so take other measures to protect themselves.

Footnotes

1 [2016] QSC 279

2 Sometimes referred to as a town planning certificate. There are three categories of certificate: limited, standard and full.

3 (1981) 150 CLR 225

4 (1993) 116 ALR 460

5 Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241, Toohey and Gaudron JJ at 265.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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