Cairns Earthmoving Contractors Pty Ltd v Cairns City Council [2000] QSC 250

IN THE SUPREME COURT OF QUEENSLAND CAIRNS No.154 of 1998 Before the Hon. Justice Jones [Cairns Earthmoving Contractors Pty Ltd -v- Cairns City Council] [2000] QSC 250 Plaintiff: CAIRNS EARTHMOVING CONTRACTORS PTY LTD Defendant: CAIRNS CITY COUNCIL JONES J Judgment delivered 22nd day of June 2000 The defendant’s application is dismissed. The defendant is ordered to pay the plaintiff’s costs of and incidental to this application to be assessed. Catchwords: PRACTICE - DEFENCE - STRIKING OUT - STATEMENT OF CLAIM - The plaintiff applied to the defendant to have rural land rezoned residential - Plaintiff agreed to develop land instead of paying certain charges - Plaintiff claims for breach of contract - Dispute as to value of work - When jurisdiction to strike out pleadings exercised - Action to proceed. Counsel: Mr D. Gore QC for the Respondent / Plaintiff Mr M. Jonsson for the Applicant / Defendant Solicitors: Miller Harris for the Respondent / Plaintiff MacDonnells for the Applicant / Defendant Hearing date: 15th March, 2000. -- 1 of 11 -- 2 IN THE SUPREME COURT OF QUEENSLAND Registry: Cairns Number: Plaintiff: CAIRNS EARTHMOVING CONTRACTORS PTY LTD Defendant: CAIRNS CITY COUNCIL REASONS FOR JUDGMENT BEFORE THE HONOURABLE JUSTICE JONES DELIVERED THE DAY OF JUNE, 200 1. This is an application by the defendant, Cairns City Council, (hereinafter referred to as “the Council” which description includes the defendant in its other personality as the Mulgrave Shire Council). The Council seeks to strike out certain paragraphs of the plaintiff’s statement of claim on the ground that they do not disclose a cause of action or alternatively amount to an abuse of process. 2. The plaintiff’s claim is for damages for breach of contract, for negligence and for restitution. The application is concerned with the latter two aspects. Background facts 3 In 1991 the plaintiff applied to the Council to rezone certain land from the Rural C zone to Residential A zone. The Council approved the change subject to certain conditions which were challenged in proceedings in the Planning and Environment Court. Following a number of proceedings in that Court, which included modification of previously agreed conditions, the approval was confirmed -- 2 of 11 -- 3 subject to conditions embodied in a consent order of that Court pronounced on 12 February, 1996. 4 The Council had, in late 1995, adopted a Catchment and Management Plan for an area around O’Leary’s Creek (“the 1995 plan”). O’Leary’s Creek was to be diverted to flow into Hemming’s Creek as a flood mitigation measure. The works involved also an upgrade of Hemming’s Creek to handle the increased flow resulting from this diversion. 5 The 1995 plan identified the cost of the construction work, the number of residential lots which could be established in the developable area and recommended the headwork’s charges which could be imposed on future land development. The plan also provided for the undertaking of works by developers who could claim their value as a credit against the developer’s obligation to pay headwork’s charges. 6 The plaintiff, intending to develop land in this area, agreed with the Council to carry out construction works in lieu of paying the headwork’s charges. The agreement was expressed in the conditions which formed part of the consent orders. The relevant terms of the agreement, expressed as conditions, are as follows:- “8(d) Where the applicant has elected to carry out works in lieu of monetary contribution and has provided a bank guarantee at the time of sealing the Plan of Subdivision then as the applicant carries out works, the value of those works shall be determined to the satisfaction of the Director Infrastructure and Planning having regard to the estimates contained in the Cairns City Council O’Leary’s Creek Diversion and Catchment Management Plan prepared by Connell Wagner dated October 1995. The amount of any bank guarantee shall be reduced by the value of works carried out. (e) If the value of works carried out exceeds the contribution required by reference to the number of lots created then the Council will reimburse the applicant in accordance with the Cairns City Council O’Leary’s Creek Diversion and Catchment Management Plan prepared by -- 3 of 11 -- 4 Connell Wagner dated October 1995 within 60 days of Council receiving funds.” 7 The plaintiff’s claim for breach of contract, which is not challenged by this application, I mention only for the sake of completeness. It is that the plaintiff performed construction work to the value of $1,216,300.00. The plaintiff developed for his own sake 54.9265 hectares of land which attracted a headwork’s charge of $788,415.00. The plaintiff claims an indebtedness on the part of Council for the differential of $471,885.00. The Council relies on other provisions in the consent orders which require the plaintiff to construct a cut-off drain and to be reimbursed for the work from the headwork’s charges contributed by other developers. By reason of this, the Council claims it is not indebted to the plaintiff in contract. 8 The negligence claim which is sought to be struck out is based on the plaintiff’s assertion that the 1995 plan was negligently conceived resulting in the headwork’s charges being significantly higher than what should have been imposed. The amount claimed in this regard is $1,105,150.00 being the difference between the value of the work done ($1,216,300.00) less the amount of the charges as they ought to have been, namely $155,150.00. 9 There is an alternative claim in negligence based on the assertion that the design of the drainage construction works resulted in unnecessary work being carried out by the plaintiff. It is asserted that an alternative design could have been implemented for a reduced cost, namely $345,160.00. Had the alternative design been implemented the plaintiff would not have carried out the excess work which had a value of $915,940.00. 10 In the further alternative the plaintiff makes a restitution claim in respect of work which was performed on the Council’s behalf in the sum of $1,105,150.00. -- 4 of 11 -- 5 The issues 11 The Council denies that the work performed by the plaintiff was of the value claimed; that, in any event, the Council has complied with its contractual arrangements by paying to the plaintiff the monies reimbursed by other developers; and that other works were undertaken as part of the plaintiff’s responsibilities pursuant to the terms of the consent orders and not as performance of works which were undertaken on behalf of the Council. 12 The Council further asserts that the consulting engineer who prepared the 1995 plan was an independent contractor for whose design work and advice the Council was not responsible. The Council contends that it owed no duty of care to the plaintiff in the circumstances. 13 The Council attacks the plaintiff’s pleading under four headings, the latter two of which can be conveniently dealt with together. (a) The formulation of the plan was a policy decision. The primary basis for this assertion is that the 1995 plan was a policy formulation in accordance with the policy-making function as a local government. The Council argues that it’s decision making called for considerations of all manner of discretionary matters which had to take into account the interests of the community as a whole rather than the interests of any single member. The Council argues it was entitled to formulate policies which had as much regard to political and financial criteria as to technical considerations and concerns. As a consequence the Council cannot be liable in private law for doing what Parliament has authorised it to do. -- 5 of 11 -- 6 14 Against this the plaintiff contends that the approval agreed in the consent order was an operational decision. The conditions attached to that operational decision were themselves operational in character and cannot be severed from it. 15 As was noted in Sutherland Shire Council v Heyman 1 the distinction between policy and operational practice is not easy to formulate. That case was concerned with an action by house purchasers seeking damages for defects in a building causing them loss which they said was attributable to negligent Council inspection of the building in the course of its construction. At p.468-9 Mason J (as he then was) said:- “[Anns v Merton London Borough Council] decided that a duty of care cannot arise in relation to acts and omissions which reflect the policy making and discretionary elements involved in the exercise of statutory discretion. It has been said that it is for the authorities to strike that balance between claims of efficiency and thrift to which du Parcq L.J. referred to Kent v East Suffolk River Catchment Board and that it is not for the court to substitute its decision for the authority’s decisions on those matters which were committed by the legislature to the authority for decision... Although these injunctions have compelling force in their application to policy making decisions, their cogency is less obvious when applied to other discretionary matters. The standard of negligence applied by the courts in determining whether a duty of care has been breached cannot be applied to a policy decision, but it can be to operational decisions. Accordingly, it is possible that a duty of care may exist in relation to discretionary considerations which stand outside the policy category in the division between policy factors on the one hand and operational factors on the other. .... The distinction between policy and operational factors is not easy to formulate, if the dividing line between them would be observed if we recognise that a public authority is under no duty of care in relation to decisions which involve or are dictated by financial, economic, social or political practice or constraints. Thus budgetary allocations and the constraints which they entail in terms of allocation of resources cannot be made the subject of a duty of care, but it may be otherwise then the courts are called upon to apply a standard of care to action or inaction that is merely the product of administrative direction, expert or 1 (1984-5) 157 CLR 424 -- 6 of 11 -- 7 professional opinion, technical standards or general standards of reasonableness.” 16 The Council’s action in giving approval to the plaintiff’s development application, was clearly of an operational character 2. 17 The use of the terms of the 1995 plan to frame the scope and nature of the conditions attaching to the approval was part of that operational activity. Even if the old dichotomy of policy/operational function were still to hold sway, it would not in my view prevent examination of the Council’s processes in this case. 18 Even if the actual formulation of the 1995 plan was purely a policy decision this is not a matter which can be determined simply by examining the document. Nor does the fact of a plan being characterised as a policy decision, of itself, necessarily mean there is no duty of care owed by the Council in its conception, formulation and implementation of the plan. In a series of recent decisions of the High Court 3 and a decision of the House of Lords 4 there is a distinct lack of consistency in the articulation of a test for the determination of the existence of a duty of care for torts occasioning economic loss. This is well illustrated in the decision of Perre v Apand where the members of the High Court pronounced differing tests for determining whether the circumstances gave rise to the existence of a duty of care. For the purpose of this application it is unnecessary to engage in any analysis of these tests. Suffice it to say that whether there exists a duty of care on the part of the Council to the plaintiff in the circumstances of this case is unlikely to be determined accordingly to some standard classification of the 2 See Alec Finlayson v Armadale City Council per Burchett J 123 ALR 155 at 186 3 Hill v Van Erp (1997) 188 CLR 159; Esanda Finance v Peat Marwick Hungerfords (1997) 188 CLR 241; Pyrenes Shire Council v Day (1998) 92 CLR 330; and Perre v Apand Ltd (1999) 73 ALJR 1190. 4 Caparo Industries v Dickman (1990) 2 AC 605 -- 7 of 11 -- 8 relationship. Nor will a generalised decision on the policy/operational dichotomy necessarily be determinate of the duty. 19 On this latter point it seems to me clear that the Council’s action in giving approval to the plaintiff’s application was of an operational character. 20 (b) Cause of Action excluded by statute. The Council next argued the statutory scheme embodied in the Local Government (Planning and Environment) Act was intended to be a “code by which a local authority may undertake planning of an area to facilitate orderly development and the protection of the environment.” It is argued that the Council was required to exercise a statutorily conferred discretion, having regard to many considerations such as applicable state planning policies, strategic plans and development control plans. By reason of the Council’s having these characteristics it is argued that the common law duty of care is implicitly ousted. 21 The consideration of this point requires a resolution of whether the formulation of the 1995 plan indeed has the characteristics which the Council suggests. The provisions of the Act do not provide any form of statutory immunity. Appellate Courts have decided that in appropriate circumstances a cause of action will lie against a local authority for failing to act in accordance with its powers. It is not necessary to undertake any particular analysis of the cases to which my attention was drawn by Counsel for each party. It is sufficient to rely upon what is beyond contest: that the Council has a duty of care to the respondents in exercising its function of considering the application for the plaintiff. As was observed in Banford v Albert Shire Council 5 discussing the scope of the duty of a local authority:- 5 (1998) 2 QdR 125 by Pincus JA and Thomas J at p.31 -- 8 of 11 -- 9 “one is not confined to looking for a positive indication in the governing statute that particular actions must be taken, or avoided, in certain circumstances; the Council may be properly held negligent in exercising a statutory function, although it has breached no positive requirement of the statute. In the present case one looks to the terms of s.34 (of the Local Government Act) and of any other relevant statutory provision to ascertain the Council’s powers and functions in considering a subdivision application and one looks to the evidence to determine whether they have been exercised or performed negligently or otherwise. One can readily postulate circumstances in which a council which has fully complied with all that the statute positively requires but nevertheless be properly held guilty of negligence in so doing.” 22 It follows from this that one would not, on an application to strike out a pleading, find a basis for doing so simply on the basis that there has been an implicit ouster of the common law duty of care imposed on the local authority. 23 (c) Estoppel and (d) Collateral Challenge The Council next argues that because the approval is embodied on an order of the Planning and Environment Court; and in the absence of any allegation that the order should be set aside there arises an issue estoppel. The Council contends that in the implementation of the decision it was bound to the position that the conditions were relevant and reasonably required in respect of the plaintiff’s application and that the plaintiff therefore is likewise bound. 24 To similar effect is the Council’s argument that these proceedings amount to a collateral challenge to the Court’s order. 25 The plaintiff argues that the consent order of the Planning and Environment Court does not have this effect. Rather it is argued the Court stands in the shoes of the local authority and that its decision is of an administrative character rather than one involving a determination of legal rights. Moreover the plaintiff argues that it is not seeking to challenge or set aside the consent order but asserts that the order is one step in the chain of causation. -- 9 of 11 -- 10 26 As I understand the essence of the case, the point at which the breach of duty is alleged is in the conception of the drainage works, the instructions to the consulting engineers and the determination of the headwork’s charges. In other words, the relevant allegations relate to matters where the duty to exercise care arose in advance of, and independently to, the issues litigated in the Planning and Environment Court. Whether this is so or whether the plaintiff’s case or the defence to it will ultimately be made out, are not matters upon which a concluded view can be taken at this time. The point to be made is simply that these are matters which cannot be determined in a summary way on a strike out application. Decision 27 The jurisdiction to strike out the pleadings is one which is cautiously exercised. In Dey v Victorian Railways Commissioners 6 Dixon J (as he then was) said:- “A case must be very clear indeed to justify the summary intervention of the Court to prevent a plaintiff submitting his case for determination in the appointed manner by the Court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.” 28 This passage has been cited in many cases prompting Barwick CJ to state in General Steel Industries Inc. v Commissioner for Railways (NSW) 7 at p.129:- “It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with the actions of the kind he brings, unless his lack of a cause of action – if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal – is clearly demonstrated. The test to be applied has been variously expressed; “so obviously untenable that it cannot possibly succeed”; 6 (1949) 78 CLR 62 7 (1964) 112 CLR 126 -- 10 of 11 -- 11 “manifestly groundless”; so manifestly faulty that it does not admit of argument”; discloses the case which the Court is satisfied cannot succeed”; “under no possibility can there be a good cause of action”; “be manifest that to allow them” (the pleadings) “to stand would involve useless expense”. 29 My view of the plaintiff’s claim in this case does not meet the descriptors referred to in the above cited passages. In my view the action must be allowed to proceed. 30 I therefore dismiss the defendant’s application. I order the defendant to pay the plaintiff’s costs of and incidental to the application to be assessed. -- 11 of 11 --