Australia: Court finds Council negligent for incorrectly describing the zoning of land in a limited town planning certificate

IN BRIEF

The case of Geju Pty Ltd v Central Highlands Regional Council (No 2) [2016] QSC 279 concerned a claim in the Supreme Court of Queensland commenced by Geju Pty Ltd against the Central Highlands Regional Council for damages for negligent misrepresentation of the current zoning of the land.

Geju purchased a block of land in Capella on the belief that it was in the "Town" zone, "Industrial" precinct under the planning scheme. The land was in fact zoned "Rural" with a conditional approval for a material change of use which permitted some forms of industrial development. At the time of purchase, Geju relied upon a Limited Town Planning Certificate issued by the Council which incorrectly described the zoning of the land.

Geju claimed damages on the basis that the Council negligently misrepresented the present zoning of the land and that it would not have purchased the property if the Council had not made the misrepresentation.

The Court found that the Council owed a duty of care to Geju as a person interested in buying the land and that it breached that duty of care by inaccurately describing the zone and precinct. The Court ultimately awarded damages in the amount of $1,127,205.50 which included amounts for the difference in the price paid and the real value of the land, acquisition costs, holding costs, borrowing costs and interest.

LIMITED PLANNING AND DEVELOPMENT CERTIFICATE WAS DEFECTIVE

The planning and development certificate was requested and issued before the commencement of the Sustainable Planning Act 2009, and as such the provisions of the Integrated Planning Act 1997 applied.

The Council was obliged under sections 5.7.8 and 5.7.12 of the Integrated Planning Act 1997 to produce a limited planning and development certificate within five business days of a request by an applicant who had paid the relevant fee.

Prior to the purchase of the land by Geju, the Council had issued a limited planning and development certificate to the previous owner of the land, the Mayfair Group, following a request from its solicitors. The planning and development certificate incorrectly stated the zone as "Town" and the precinct as being "Industrial" when in fact the land was zoned "Rural". The planning and development certificate also stated the incorrect lot and plan number but stated the correct address.

COURT FOUND THAT THE COUNCIL OWED A DUTY OF CARE TO GEJU TO TAKE REASONABLE CARE IN THE ISSUING OF A PLANNING AND DEVELOPMENT CERTIFICATE

The Council submitted that it did not owe a duty of care to Geju because it had issued the planning and development certificate to its predecessor in title and did not issue the planning and development certificate directly to Geju. In fact, Geju's representative Mr Birch obtained the planning and development certificate from the real estate agent for the Mayfair Group. The Council further submitted that there would be no way to define a class of which Geju was a member and as such the duty would be imposing an indeterminate liability.

The Court rejected the Council's argument and reinforced (at [58]) the principle from L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) [1981] HCA 59 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 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".

Without limiting the classes of people that might be interested in the planning and development certificate, the Court suggested that there would be two classes of people that would be particularly interested; those who own the land and those who might be interested in buying it. The Court further suggested that those who own the land might be interested in informing those interested in buying it as to the features of the land, including its zoning and potential use.

The Court found that Geju, as an interested purchaser, was a member of a class likely to receive the planning and development certificate and that the certificate would be very likely to lead it into entering a transaction to purchase the land.

COURT FOUND THAT IT WAS REASONABLE FOR MR BIRCH TO RELY ON THE PLANNING AND DEVELOPMENT CERTIFICATE

The Council also contended that it was not reasonable for Geju to rely on the planning and development certificate since, on its face, it related to a different property. The Council suggested that the planning and development certificate was generally so defective that no reasonable person would rely on it.

The Court found that whilst the error was obvious when drawn to one's attention, it was not obvious to a prospective purchaser who was not expecting to receive a planning and development certificate relating to a different piece of land.

The Court noted that the incorrect property description was not observed by a series of people who dealt with it, including the Council officer who was responsible for issuing the planning and development certificate, the chief executive officer of the Council who signed the relevant documents, the real estate agent, the solicitors who acted for both parties in the transaction and the surveyor, and concluded that it was unexceptional that Mr Birch did not notice it.

COURT FOUND THE COUNCIL BREACHED ITS DUTY OF CARE TO TAKE REASONABLE CARE IN THE ISSUING OF THE CERTIFICATE BY INACCURATELY DESCRIBING THE ZONE AND PRECINCT

The Court therefore found that the Council owed a duty of care to Geju and that the Council breached that duty because the planning and development certificate incorrectly stated the zone and precinct.

COURT FOUND THE COUNCIL'S NEGLIGENCE WAS A NECESSARY CONDITION OF THE OCCURRENCE OF HARM

Under the Civil Liability Act 2003, it was necessary to show that the Council's breach of its duty of care was a necessary condition of the harm. Stated another way, it was necessary for Geju to show that "but for" the error in the planning and development certificate Geju would not have purchased the property and therefore would not have suffered harm. The Council submitted that Geju could not satisfy the "but for" test because there was no evidence that it would have acted differently had Geju not seen the planning and development certificate.

The Court rejected the Council's submission and was satisfied that Geju would not have purchased the land if it had known that the true zoning of the land was "Rural" given the marked difference between the price paid and the value of the land as rural land and its intention to develop the land for industrial purposes.

COURT FOUND THAT GEJU WAS NOT CONTRIBUTORILY NEGLIGENT

The Council also contended that Geju was contributorily negligent for failing to undertake enquiries and investigations as to the zoning, failing to engage a consultant to independently value the property and paying too much for the property.

The Court found, however, that Geju did in fact undertake enquiries as to the zoning of the land in that it held the planning and development certificate.

With respect to the price paid for the property, the Court found that the price was not necessarily unreasonable in circumstances where "prevailing market conditions were improving", an independent purchaser was willing to buy the property four years later for an amount yielding a 75% per annum return on the investment and where Mr Birch, who had experience in land development, was prepared to go substantially into debt for its purchase.

The Court also noted that the importance of Geju failing to obtain a valuation and failing to undertake enquiries and investigations as to the zoning would be impossible to assess in the context of attributing a "just and equitable" reduction of damages.

The Court found that the Council had failed to demonstrate that Geju was contributorily negligent.

COURT FOUND THAT GEJU'S SOLICITORS WERE A CONCURRENT WRONGDOER BUT DID NOT APPORTION ANY LIABILITY AGAINST THEM

The Council contended that Geju's solicitors were a concurrent wrongdoer and should be proportionately liable for the damage for failing to notice the error.

In support of the Council's contentions, the Court made findings from admissions in the parties' pleadings that a competent solicitor would have noticed the incorrect lot number and at least made enquiries to the Council about the true status of the land.

However, the Court found that even if the error was noticed, there was no evidence to show that any search, reasonably open to Geju and its solicitors, would have revealed the true status of the land. Therefore, despite finding that Geju's solicitors were a concurrent wrongdoer, the Court ultimately refused to make a finding of apportionment against them.

COURT AWARDED DAMAGES FOR THE DIFFERENCE IN THE PRICE PAID AND THE REAL VALUE OF THE LAND, ACQUISITION COSTS, HOLDING COSTS, BORROWING COSTS AND INTEREST

The Court reinforced that the measure of recoverable damages was the amount of money necessary to restore the plaintiff to the position it was in before the negligent misstatement.

The Court ultimately awarded damages in the amount of $1,127,205.50 which included amounts for the difference in the price paid and the real value of the land, acquisition costs, holding costs, borrowing costs and interest.

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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