Bamford & Bamford v Albert Shire Council [1996] QSC 165

IN THE SUPREME COURT OF QUEENSLAND Brisbane Writ No. 382 of 1995 BETWEEN: NEIL RAYMOND BAMFORD and SANDRA DALE BAMFORD Plaintiffs AND: ALBERT SHIRE COUNCIL Defendant JUDGMENT - DERRINGTON J. Delivered: 22 May 1996 CATCHWORDS: Negligence - Council approved subdivision land - Plaintiffs purchased lot - Substantial land-slip present - Land-slip should have been detected on available evidence - Whether breach of duty owed to Plaintiffs Damages - Serious damage to house by land-slip - Plaintiffs forced to vacate house - Whether Plaintiffs entitled to recover cost of stabilisation of land and reinstatement of house -Whether measure present unaffected value of land together with constructions costs - Whether measure unaffected value house and land together - Economic loss - Interruption of business - Loss of earning capacity - postponement of balance. Counsel: Mr S. Couper QC for the Plaintiffs Mr K. Wilson for the Defendant Solicitors: Barker Gosling for the Plaintiffs King and Company for the Defendant Hearing dates : 22-26 April 1996 -- 1 of 16 -- IN THE SUPREME COURT OF QUEENSLAND Brisbane Writ No. 382 of 1995 BETWEEN: NEIL RAYMOND BAMFORD and SANDRA DALE BAMFORD Plaintiffs AND: ALBERT SHIRE COUNCIL Defendant JUDGMENT - DERRINGTON J Judgment delivered 22 May 1996 In 1976 and 1978 the defendant approved the progressive subdivisions of hilly land in a fairly isolated part of Mudgeeraba in its local government area. The land that is the subject of this action had originally been included in the earlier subdivision but in order to avoid problems with the later one, which affected contiguous land, the developer altered the size and shape of the relevant lot by attaching to it a further area to its north. This enlarged it to its present area of 3.337 hectares but the change is irrelevant here. In August 1986 the plaintiffs purchased it for $39,000 with the intention of building their home on it at a later time. The legal costs and stamp duty incurred in its purchase was $2181.00. Part of it was unsuitable for residential purposes being overlaid by an old land-slip that had filled a gully. This should have been apparent to any expert who examined the site for land- slips, but not to others. While that part was not particularly steep, the slip came from a neighbouring area that was steep; and its descent to this site was unremarkable. Land slips were a fairly common phenomenon in the conditions existing in this location and the reasonable possibility of the presence of the relevant slip should have been anticipated by any competent expert whose duty included its detection. Although it had -- 2 of 16 -- 2 occurred long before 1974, there were other recent slips nearby, both of which were manifest on the information available to the defendant's engineer. Further, evidence of it was readily available at the time of the subdivision in aerial photographs of the area. One taken in 1974 clearly revealed it, but in a similar photograph taken in 1978, the growth of foliage in the interim partly hid it from view. This makes no difference to the result for such a possibility should have been anticipated. When considering these applications for subdivision, the defendants' enquiry should at least have extended to the 1974 photos. Unfortunately that part where the slip came to rest on the subject land was superficially the most attractive for building, for the difficult nature of the balance allowed at best for only a limited range of styles of houses, such as pole houses, and then only with expensive infrastructure. However, the defendant zoned it rural with residential use as of right. Technically the lot met the description of a home-site, but only in a limited way which would not be apparent to an ordinary purchaser, and because of this, such a description was quite misleading. The limitation was so severe as to alter its character and excluded the type of home desired by the plaintiffs. At best it permitted one that they did not want. As it was, the defendant's engineer who recommended approval of the subdivision and who acknowledges his duty to protect potential purchasers from buying unsuitable lots, did not consult the aerial photographs at all, but only made a visual inspection of the lot from the road. This was inadequate because of the overgrowth. He also relied on a report of the developer's consulting geo-technical engineer that referred only to the other slips nearby. It did not refer to the state of the subject land because, according to the consultant, it was not part of the area to which the focus of his report was directed. The defendant's engineer denies this, but in any case he was at fault in placing such unquestioning reliance on a report of the consultant of a developer. It is true that the report could have been misread and some small inattention to detail -- 3 of 16 -- 3 probably led to a misinterpretation that it said more than it did. However, the danger of this shows that the position should have been specifically verified. The folly in relying on such a report in these circumstances is obvious, especially as it did not specifically deal with the state of the relevant lot, so that its safety could only be inferred from the absence of any reference to the contrary. With knowledge of other slips in the immediate area, the engineer was not entitled to rely on that. His duty was only to take reasonable care, but his investigation was too superficial to satisfy that standard. In the result, this substantial slip was present and should have been detected through evidence that was available; and the reasons given for its oversight are inadequate. Further, any excuse relating to the report does not explain the original approval of the subdivision creating the lot in its first form, for the report did not exist at that time. The defendant properly concedes that if it were aware of the landslip problem, it had a duty to warn potential purchasers. This at least must extend to the case where it should have been aware of it. Consequently in the present case it should either have refused to allow this subdivision with a zoning allowing for housing; or, if it allowed for such zoning subject to a better configuration of the lot, it should still have provided a warning to potential purchasers . From the foregoing analysis, it follows that the defendant, through the advice of its engineer, was negligent in approving of the subdivision and zoning the relevant lot for residential use. That is not the end of the matter for to constitute a cause of action its negligence must amount to a breach of duty owed to the plaintiffs. It properly concedes that it owed a duty of care to the plaintiffs in accordance with the principle enunciated in Council of the Shire of Sutherland v. Heyman (1985) 157 CLR 424, even though they were subsequent purchasers: Bryan v. Maloney (1995) 69 ALJR 375. See also Alec Finlayson Pty Ltd v. Armidale City Council (1994) ATR 81-282. However it challenges the practical extent of the duty and denies -- 4 of 16 -- 4 that its negligence amounted to any breach of it. The plaintiffs generally knew of the system of local authority approval of subdivisions and zoning and relied on the defendant's subdivisional approval and zoning of the land as confirming that on proper investigation it was shown to be suitable for reasonable residential use. Their reasonable and foreseeable general reliance on the defendant's protection in this way was sufficient to bring them within the necessary proximity to the defendant for the latter's duty to take care to avoid reasonably foreseeable harm to them to arise: Northern Territory of Australia v. Deutscher Klub (Darwin) Inc (1993) 84 LGERA 87; Alec Finlayson Pty Ltd v. Armidale City Council (supra). It is argued that the defendant was not a guarantor of the quality of the land, which is true but not to the point. Its grant of approval negligently created a hazard for the plaintiffs, and they relied on the grant as assuring safety from such a risk. That is sufficient. They were not persons to whom a statutory duty was owed, for the statute imposing the defendant's duties in such matters was not of that nature; but that duty contributed to the foreseeable reliance by the plaintiffs on the defendant's performance of its duty. An argument was mounted on the premise that the defendant was not responsible for or did not know of the defect. This is irrelevant. The breach of duty lies in wrongly granting the approval that permitted the creation of a lot the defective state of which caused harm to the persons who relied on the defendant's exclusion of such defects. This breach includes the failure to make reasonably adequate enquiry before granting approval. It does not depend on knowledge or creation of the defect. In early 1993 the plaintiffs obtained the defendant's building approval to their proposed residence on what seemed to them to be the most suitable site, and again relying upon that approval as confirming that the site was suitable, they erected their home there. The defendant -- 5 of 16 -- 5 admits breach of its duty to the plaintiffs in respect of this approval and accepts its liability to compensate them for that, but it puts the measure of damages in issue. The total cost of the improvements was $229,237.00. Of that $9408.00 related to preparatory work antecedent to the approval, but that was required by the defendant before it would consider the plans, and so it should be regarded as associated with the wrongful building approval. In any case this loss was a consequence of the defendant's wrongful approval of the subdivision in the first place. Consequently, it too is part of the compensible loss. In the course of levelling the construction site the plaintiffs excavated a small portion of the toe of the slope formed by the slip. This had the physical effect of reducing the resistance afforded by friction within the colluvium and between the colluvium and substratum rock which to that time had held back the downhill force exerted by the colluvium above. This weakening was followed by a period of heavy rain which saturated at least part of the colluvium and also percolated to the colluvium/rock interface, with a lubricating effect. With the reduction of friction the downhill force of part of the colluvium overcame its resistance and over some months in 1993 and 1994 it gradually moved . This did not become serious until after the construction of the house was completed in July 1993, and by October 1994 the consequential damage to it was so dangerous that the plaintiffs were forced to vacate it, despite remedial attempts. These cost $20,631.00, which the plaintiff admits they are entitled to recover. They were then obliged to rent alternative accommodation. Their expenditure on the land and house and on business equipment, together with the impediment to their borrowing caused by the loss of value of their asset, prevented them from taking any further remedial steps, if that were reasonably possible, or from purchasing alternative premises. The parties agree that damages of $10,306.00 should be awarded for distress and -- 6 of 16 -- 6 inconvenience. The defendant also admits that the value of the land at the date of purchase was nil, and it has made an irrevocable open offer to purchase it as is for its present agreed value of $15,000. This is reasonable and would prevent the possibility of further loss to the plaintiffs. The first controversial issue in damages concerns the measure to be applied in respect of the plaintiffs' loss relating to the house and land. The defendant submits that the measure should be the sums outlaid on the purchase of the land and construction of the house, that is, $39,000.00 and $229,237.00, augmented by $15,000 and $18,304 respectively to bring them into line with present-day costs, and amounting in all to $301,541.00, but reduced by $15,000 for the value of the asset retained by the plaintiff. This produces a result of $286,541.00 which, it says, is sufficient to restore the plaintiffs financially to their former position. It argues that by being effectively reimbursed for the present value of their outlays and for accommodation costs since vacating the house, they will be fully restored to the position they would have occupied but for their loss. It also argues that the plaintiffs have not shown that, in the event that, properly warned, they refrained from purchasing the subject land, they would have purchased other land that would have produced any capital gain, and so no loss is established: Gates v. City Mutual Life Assce Society Ltd (1986) 160 CLR 1; Kyogle Shire Council v. Francis (1988) 13 NSWLR 396, 412. This argument fails because there was ample similar land available in the area that met the wishes of the plaintiffs and they had both the desire and the funds to buy it. It is only if they could not have found a suitable block that they would have postponed their investment, but that contingency was high unlikely. The plaintiffs reject this and advance alternative measures. The first is for the stabilisation of the land and the reinstatement of the damaged house on it. About half of the house would need to be demolished and rebuilt after the removal and replacement of compacted soil. Even -- 7 of 16 -- 7 then, it would be unreasonable to entertain such a project without the protection of a retaining wall intended to prevent further movement of the colluvium or damage from it. The cost of these repairs to the house with incidental work would be $106,919.00 and the cost of the retaining wall would be a further $349,006.00, being the price estimated by the plaintiffs' witness, Mr Nolan, with the addition of the cost of a further thirty rock anchors. The total cost of the project would then be $455,925.00. This would exceed the present unaffected value of the house and land by more than $170,000.00. This leads to the major issue, which is whether the damages should run to this very expensive exercise as compared with the measure that the defendant concedes, or even with the alternative basis advanced by the plaintiffs themselves. The foundation of their argument is their claim that they cannot now buy other comparable land in the district on which to build their house, whereas other suitable land was available in 1986 if proper action by the defendant had precluded their purchase of the relevant lot. They deposed to their passionate emotional attachment to this particular site with its amenities which are so important to them. In effect, they claim that in order to be restored to the position they would have occupied but for the defendant's negligence, they should be provided with enough funds to rebuild in the same place in safety, despite the magnitude of the cost, which they describe as reasonable. This proposition has a number of defects not the least of which is that they were unconvincing as to the importance to them of this particular site and as to the likelihood that, if awarded damages on the scale they seek, they would in fact rebuild there. The second is that the total cost is unreasonable in all the circumstances, particularly as the value of that result would be reduced because of the residual threat of a further slip from uphill. The additional cost is far beyond any real benefit to the plaintiffs, whose desire for the restoration is, at best, certainly not such as to justify that expenditure, and it would be unfair to the defendant to award it: cf. Evans -- 8 of 16 -- 8 v. Balog [1976] 1 NSWLR 36, Public Trustee v. Hermann (1968) 88 WN (Pt 1) (NSW) 442, Hansen v. Gloucester Developments Pty Ltd [1992] 1 Qd R 14. The third defect in the argument is that if the defendant had not been negligent, the plaintiffs would never have purchased this site or tried to erect a house on it. Although the availability of comparable sites with a suitable building area may now be diminished, and those that are available have increased in price, partly because of some scarcity value, that is not enough to justify the claim. It has not been shown that the plaintiffs cannot within a reasonable time obtain suitable vacant land in this or a comparable district and rebuild. Alternatively, it will be open to them to purchase an existing house on suitable land, for there must now be a larger range of choice in this direction than existed when they bought their land. On the valuation of the present unaffected value of this property by Mr Love, any present scarcity value of vacant land in the area is not reflected in the price of house and land together. There was nothing about the subject house that was so special as to exclude this course of action from consideration as to their likely use of their damages. Together these features seriously diminish the persuasive force of the factors that support the plaintiffs' argument on the issue of fairness. The authorities cited by the plaintiffs in support of their claim, Evans v. Balog (1976) 1 NSWLR 36 and Sved v. Council of the Municipality of Woolahra (1995) Aust Torts Rep 81- 328, have no application here even if they support their general submission in principle, for the criteria which they lay down are not met in this case. The favourable factors do not have the weight to prevail. The plaintiffs' claim for this measure should therefore be rejected and it is necessary to turn to their alternative claim. They seek to recover the present value of the subject land, assessed on the basis that it is without the relevant defect produced by the presence of the slip, an uncontradicted amount of $130,000.00, plus the agreed present equivalent of the construction costs of the house they built, -- 9 of 16 -- 9 which is $247,451.00. From this total they acknowledge the need for a deduction of $15,000, being the present value of the land in its defective condition. This leaves a final figure of $362,541. They rely on a number of authorities of which Rentokil Pty Ltd v. Channon (1990) 19 NSWLR 417, applying Wollongong City Council v. Fregnan (1982) 1 NSWLR 244, is the most recent example. These are decisions of the New South Wales Court of Appeal and the reasoning is followed in Sved v. Council of the Municipality of Woolahra (supra) which applies conversely. Although these authorities are not binding, the eminence of their source demands that they should be accorded full respect and, with respect, they would seem to be right in what they say; but that is not necessarily in accord with the plaintiffs' application of them to this case. They are authority for the proposition that in circumstances such as the present, it may be necessary to depart from standard form of assessment in order to achieve the restoration of injured parties to their former position. To do that in circumstances such as this will require the award of a sum beyond the value of the loss at the date of the injury plus interest, for where there is some increase in the cost of houses beyond the rate of interest allowed, it may be insufficient to permit them to purchase a comparable home. Where, as here, they have pursued their remedy promptly, anything less than the present value of the asset, unaffected by the defect causing the relevant harm, would be imperfect. An alternative approach is to allow a rate of interest that would reflect the nature of this loss, in which case the result should be the same. The principal difficulty in this case is that in their application of this principle the plaintiffs have introduced an arbitrary division between the house and the land, taking the present value of the land on the one hand, and, on the other, adding to it the cost of building a similar house upon it. That is not what the authorities say. In circumstances closely similar to the present, the factor -- 10 of 16 -- 10 applied was the present unaffected value of the house and land together. In the present case, the plaintiffs' own valuer fixes this at $285,000, which, when reduced to $270,000 to allow for the value of the asset retained, is well below the figure $362,541 claimed by the plaintiffs under this head. There is no justification for departing from the method adopted by the authorities in this way. Presumably the plaintiffs would argue that their variation should be adopted because of some desire to build a new house to meet their own design on vacant land to be purchased for that purpose. However, according to the reasoning of the authorities, the point of the exercise is to compensate them in money sufficient to restore to them the value of the assets which they would have had but for the defendants' negligence. If they had bought indefective but otherwise identical land and had erected an identical home on it, they would now have an asset worth the amount assessed by the valuer. Moreover, even if the specific purpose behind the assessment were as the plaintiffs would suggest, there is no evidence whatever that they cannot be restored substantially to their former position by the purchase of another house already built. There is no suggestion of the unavailability of such suitable premises in the locality. If the present unaffected value of the house and land were adopted as the measure for this head of damage, no interest would be allowable, as the plaintiffs concede. This would mean that the assessment by this method would yield a result that is less than the figure of $286,541 assessed according to the measure proposed by the defendant. Because the latter is more reliable, it should be adopted. The parties agree that the cost of disturbance, such as moving, and of alternative accommodation since October 1994 to the date of trial was $18,967, and that there will be additional similar costs until the plaintiffs move into a home of their own. If these further items were included, with interest where applicable, the total figure would be about $25,000. The -- 11 of 16 -- 11 defendant concedes that the plaintiffs are entitled to recover this sum, but the plaintiffs seek a higher award based on the total loss of use of their assets. They concede that they cannot have both. Under an alternative measure, the figure for interest as representing compensation to the plaintiffs for the loss of use of their assets is more substantial. If the unaffected value of the house and land were taken to be $280,000 for the relevant period, and a reduction of $50,000.00 is made for an amount received by them from the builders' association but refundable from the damages, then interest at ten percent on the balance for their total loss of the effective use of their asset would produce a figure of about $36,000, which should be adopted. This fairly indicates that the mere reimbursement of rental is not sufficient to compensate them for their loss, and the answer, no doubt, is that their need, caused by their financial difficulties resulting from this loss, forced them to rent premises that were inferior to their own house. They should be properly compensated for what they lost, and the higher figure of $36,000.00 should be adopted. It might be remarked that in Wollongong City Council v. Fregnan (supra) there was a set- off from the award for the value to the plaintiffs of their occupation of the relevant premises. It is difficult to see how this is justified as the effect of the major component of the award is merely to restore to them the present value of their asset. More specifically, there is no award of interest or any other form of damages relating to the period of their occupation that would have justified such a set-off. If the plaintiffs had not been harmed by the defendants' negligence, they would have had property to the value of the amount assessed and as well they would have had the benefit of the occupation of their home for the entire period. If the award compensates them only for the period of lost occupation, then as they will not have been compensated there is no reason to set-off the value of the period of actual operation. Accordingly, there will be no -- 12 of 16 -- 12 deduction from the damages for this factor. The claim for economic loss to the plaintiffs from interruption to their business has been limited to the loss of profits from the second plaintiff's proposed conduct of classes on the premises. There is another side of their business, a pyramid-selling type of operation relating to cosmetics, where they sold the product themselves for profit and also recruited other sellers whose sales would provide them with commission. This was not affected by the harm to their house and was mostly independent of the classes. They were intended to be given to groups of three or four persons at a time, and it was hoped that the attendance would average about ten per week. The targeted group of customers was mainly to be the unemployed, particularly the long-term unemployed. Each pupil was to pay $50.00 for a single lesson that would instruct her as to her most suitable colours in clothing and cosmetics, and as to personal grooming and other matters that would enhance her self- confidence. A salad lunch would have been served and the first plaintiff would have provided transport for each group from a prearranged place at the Gold Coast, selected ad hoc for their convenience, to the plaintiffs' house and return. The cost of the lunch and some photocopying expenses was estimated to be about $11.00, leaving, it was said, a net return of $39.00 per head. This did not allow for incidental expenses, including car depreciation, or the cost of the transport. The latter is difficult to assess, because the pick-up and return sites would have been all over the Gold Coast. When the costs of transport and suitability of the house as a venue were being discussed, it was claimed that each trip would have taken only ten to fifteen minutes each way, but when the location of customers sufficient in number to justify the forecast earnings was the relevant point, the entire Gold Coast was nominated. This inconsistency was characteristic of the looseness of planning and unduly optimistic evidence that was advanced in support of a -- 13 of 16 -- 13 large claim for this component. It was said that an additional net profit of $26 per head was expected from the sale of cosmetics worth $60.00 to each pupil, that a further profit would be derived from future sales to some of them, and that about one in ten would be recruited as sellers of the cosmetics. In another context in the explanation of her own small direct profits, and even losses, from the sale of cosmetics, the second plaintiff said that she usually made gifts of cosmetics to potential recruits, or sold them at cost. No allowance for this was made in the evidence of projected profits from the classes, which further indicates the plaintiffs' unclear assessment of the matter and yet it was that assessment that provided the only evidentiary support for their claim. There was no serious market survey, nor, despite that they have now been conducting these classes for several months, were any figures from them provided to the Court to justify their claims. Even after allowance for their difficulties of proof, in all their evidence on this subject was quite unreliable. This activity was intended to run for only three or four years and then cease as the second plaintiff concentrated on the organisation of cosmetics sales; but having regard to the poor past results of that side of the business, they will probably renew their plans for grooming classes in their new home which will be purchased with the damages from this action. As it has been observed, in the last year they have already commenced those classes by using the home of some pupil in the class at the time. Not only does this confirm that earnings from this source were still available to them, it also shows that this course could have been taken earlier. There should be some sympathy and allowance for their claim that their distress inhibited this, but their evidence of their unsuccessful investigation of alternative venues was far from persuasive that they could not pursue this activity earlier. While the present arrangements may not be ideal, it is plainly better to have some classes in modest surroundings than to have no -- 14 of 16 -- 14 classes at all. If they would in fact have limited this activity to three or four years and if they can still conduct them for the lost period in the future, then the damages would be limited to a postponement of the lost earnings; but in fairness to the plaintiffs it should be found that, because of the very limited success of the cosmetics sales enterprise, they would probably have been forced by financial necessity to continue with the grooming classes indefinitely. The loss should accordingly be measured in part by earnings irrevocably lost and otherwise by some postponement of the balance. This should be subject to some reduction for failure to mitigate it, modest because it would have taken time, trouble and expense to have found or organise other suitable premises. Learned counsel for the plaintiffs wisely tried to minimise the excesses of their claims by presenting a more modest exercise. However, it too relies in some respects on inflated projections and should be discounted because of the strong likelihood that adverse rather than favourable factors would have prevailed. While a market was available, the estimates of its size growth and return appeared to be excessively optimistic and were uncorroborated by satisfactory evidence. For example, the rate of enrolling pupils consistently is probably seriously overstated, as is the allowance for the recurrence of commissions from sales by recruited salespersons. Some of these would probably have dropped out. There has still been insufficient allowance for loss on cosmetics given or sold cheaply to those persons, and for the depreciation on the car used to transport the pupils to classes. And some of the loss attributed to an inability to recruit salespersons will have been avoided in fact, for the second plaintiff did recruit such people during this intervening period and it should be expected that some of them would have come from the same basic source. Only a global assessment of a broad nature that encompasses all of the complex -- 15 of 16 -- 15 considerations is possible. On that basis, an award of $20,000 net, including interest, for this component is appropriate. Summary of Damages Present cost of house and land $301,541 Less residual value 15,000 $286,541 Legal costs and stamp duty 2,181 Distress and inconvenience 10,306 Remedial works 20,631 Loss of use of assets since October 1994 36,000 Loss of earning capacity and interest 20,000 $375,659 There is judgment for the plaintiffs in the sum of Three Hundred and Seventy-Five Thousand, Six Hundred and Fifty-Nine Dollars ($375,659) together with costs, including reserved costs, if any, to be taxed. -- 16 of 16 --