Australia: Why purchasers need to be wary of reliance on planning and development certificates

In a decision that could potentially have wide-reaching implications for purchasers of land, the Queensland Court of Appeal (QCA) has delivered judgment in the case of Central Highlands Regional Council v Geju Pty Ltd [2018] QCA 38 (Central Highlands v Geju).

The case concerned the right of a purchaser to recover damages from the Council, where the purchaser, Geju Pty Ltd (Geju), relied on an incorrect statement that the land was zoned industrial in a limited planning and development certificate issued by Peak Downs Shire Council (Council) to the seller.

While the decision by the QCA was largely a result of the specific facts of the case, it does highlight the necessity for purchasers to utilise their abilities to make their own inquiries to protect themselves from loss as a consequence of another's lack of care.

THE FACTS OF THE CASE

The subject lot (Lot 70) was created as a result of an application by the then owner, Ford Property, to reconfigure an existing lot into two lots and for a material change of use from Rural Zone to Industrial Use. The material change of use was approved in August 2007 with the usual 4 year currency period (i.e. lapsing August 2011).

Ford Property sold Lot 70 to Mayfair Group in December 2007. On settlement, the solicitors for Mayfair Group requested a limited planning and development certificate from Council. The letter from the Council attaching the certificate:

  • correctly referred to Lot 70;
  • showed the correct street address; and
  • attached a map correctly identifying Lot 70.

However, the certificate wrongly identified the lot as lot 15 on SP 191634 and wrongly identified the lot as 'Zone: TOWN Precinct: INDUSTRIAL'.

At the time, section 5.4.5 of the Integrated Planning Act 1997 (now reflected in section 265 of the Planning Act 2016 (Qld) (Planning Act)) provided that 'if a person suffers financial loss because of an error or omission in a planning and development certificate, the person is entitled to be paid reasonable compensation by the local government'.

Mayfair group sold Lot 70 to Geju in June 2008. A principal of the Mayfair Group gave the certificate to the real estate agent who acted on behalf of the Mayfair Group in the sale, who in turn gave the certificate to Mr Birch, the controller of Geju. Finance was approved on the basis of the incorrect zoning. The lot was worth significantly less than the purchase price on application of the correct zoning.

The trial judge found in favour of Geju, finding that the Council owed Geju a duty to take reasonable care in the preparation of the certificate, and that the Council breached that duty by incorrectly describing the zoning of Lot 70.

THE APPEAL

On appeal, the Council put forward three issues for consideration:

  1. Whether the Council owed Geju a duty of care.
  2. Whether it was reasonable for Geju to rely on the certificate.
  3. Whether, if the above are satisfied, there should be an apportionment of liability against the solicitors for Geju.

Duty of Care and Reliance

The trial judge concluded that Geju was a member of an identified class who was likely to receive the certificate and was very likely to rely on it to enter into a transaction such as the purchase of Lot 70.

The QCA disagreed, finding that whilst it was foreseeable that Mayfair Developments would give the certificate to someone else who might rely upon the information contained therein, there was no basis for a conclusion that the Council ought to have known that this would occur, or that the persons to whom the certificate may have been given would rely on it in deciding to purchase Lot 70.

Geju argued that the statutory obligation on the Council to provide the correct information implied an intention by the Council that potential purchasers should rely on the certificate. The QCA held that the statutory obligation did not amount to evidence that the Council knew or intended that a limited class of persons, including Geju, would rely on the certificate in purchasing Lot 70. The QCA found that a duty of care cannot be inferred on the basis of the statutory provisions where there is no known reliance.

The trial judge held that a duty of care could be inferred from Geju's vulnerability, as the Council was the only source of the information contained in the certificate. The QCA referred to Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 wherein 'vulnerability' was found to refer to a person's inability to protect themselves from loss. While the QCA accepted that it was not unreasonable for Geju to fail to seek a standard or full development certificate, the QCA did not accept that Geju had acted prudently in not appointing solicitors until the contract had been entered into, or that Geju could not have sought a warranty from the sellers that the land was zoned industrial.

The QCA allowed the appeal, finding that the Council did not owe Geju a duty of care.

Geju was not the requestor of the certificate, nor was it a member of a limited class of people that the Council should have known would likely receive, and rely on, the certificate. The statutory obligations on the Council were found not to amount to known reliance. Further, Geju was found not to have acted within its abilities to protect itself against the loss suffered.

Apportionment and liability

As no duty of care was found to be owed by the Council, the issue of apportionment of the liability was not open to a decision. However, the QCA determined that if a duty of care was found to be owed, the claim by Geju was apportionable, and the solicitors for Geju were concurrent wrongdoers pursuant to s30(1) of the Civil Liability Act for:

  • their failure to exercise reasonable care, skill and diligence in failing to identify that the certificate referred to an incorrect lot
  • failing to take the steps necessary to obtain an accurate planning and development certificate; and
  • failing to advise Geju to obtain an independent valuation of the lot.

CENTRAL HIGHLANDS V GEJU: THE IMPLICATIONS

The decision by the QCA in Central Highlands v Geju is important as it dispels any optimistic dependence on section 5.7.8 of the IPA (now section 265 of the Planning Act) by persons acting in reliance on the contents of planning and development certificates.

The QCA's decision makes it clear that, where reliance may lead the requestor of a certificate to enter into a transaction at the risk of loss, a council owes the requestor a duty to take reasonable care to ensure the accuracy of the contents of a certificate.

Further, it is clear that the duty is also owed to a person within an identified class of people who was likely to receive the certificate, and very likely to enter into a transaction in reliance on the certificate.

However, the decision also confirms that no duty is owed to a person who is not the requestor of a certificate, and where they do not fall within an identified class.

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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