The trial judge said that the council was not exercising a power when it issued the s 149 certificate. Rather, it was performing a “statutorily imposed obligation”.
Concerning the claim against the vendor, the trial judge said that the vendor’s replies to the requisitions were misleading. The reply to requisition 6 was misleading because the council’s rights over the pipe were tantamount to an easement. The reply to requisition 7 was misleading because the 2002 resolution stated that a easement over the pipe would be acquired and that an easement along the side boundary would be acquired in the future. The reply to requisition 8 was misleading because the 2002 resolution and the 2003 notices were outstanding notifications, claims or requirements of a local authority. The reply to requisition 19 was misleading because the property was affected by restrictions on use and development because of the pipe and the 2002 resolution.
Both the council and the vendor appealed against the trial judge’s decision to the New South Wales Court of Appeal.
Decision
Basten, Macfarlan and Brereton JJA allowed both appeals.
Reasons
The council’s appeal
Basten JA addressed the issue of s 43A of the Civil Liability Act. His Honour said that “[a] power does not cease to be a power because there is a duty to exercise it”. His Honour concluded that the issue of the s 149 certificate was the exercise of a special statutory power within the meaning of s 43A. Furthermore, there was no evidence to support the proposition that the statements in the s 149 certificate were in breach of the standard imposed by s 43A. [14], [21], [28]
Macfarlan J said that the policy referred to in item 7 of the s 149 certificate was not site-specific. Rather, it was about the relationship of particular land to general flood-plain levels. Therefore, the 2002 resolution was not a policy. [83]
Even if the 2002 resolution was a policy, it did not restrict development of the property because of the likelihood of flooding. By indicating that council would, in the future, make development consent conditional on the grant of an easement, it could be said to have restricted development by indirect means. But item 7 was only concerned with policies that restricted development in a direct sense. [84], [85]
Furthermore, even if the 2002 resolution was a policy that restricted development because of flooding, the council had abandoned it by the time it issued the s 149 certificate. The council’s letter of 14 February 2003 said that the council would not be pursuing resolution B. Also, by saying that it would be acting in accordance with the 2003 notices, the council confirmed that the 2003 notices had superseded the 2002 resolution. [87], [88], [90]
For these reasons, there had been no misstatement in the s 149 certificate. [95]
Brereton JA held that the 2002 resolution: (1) was not a policy; (2) did not restrict development of the property; (3) did not restrict development because of the likelihood of flooding; and (4) even if it was such a policy, had been abandoned. [138]
The 2002 resolution was not a policy because it was not a generic statement of guidelines, principles or criteria. Instead, it was a specific decision concerning the property. Also, it did not restrict the development of land or, indeed, development at all. If it did restrict development, it did so because of the proposed acquisition of an easement and not because of the likelihood of flooding. And it had been abandoned, the council’s letter of 14 February 2003 indicating that the 2002 resolution was no longer being pursued. [139]–[143]
Brereton JA also agreed with Basten JA that, in answering item 7, the council had not acted unreasonably within the meaning of s 43A of the Civil Liability Act. Therefore, the council had not incurred any liability in its issue of the s 149 certificate. [147]
The vendor’s appeal
Macfarlan JA held that the vendor had not been required to refer to the council’s rights over the pipe in answering requisition 6. This was because cl 10 of the contract precluded the purchaser from making a requisition about the pipe. The pipe was a “service for the property … passing through the property”. As for requisition 7, the vendor’s reply was not misleading because the 2002 resolution had been abandoned. As for requisition 8, neither the 2002 resolution nor the 2003 notices were outstanding at the time the vendor replied to the requisition. Nor was the vendor affected by any other outstanding claim. As for requisition 19, the vendor’s non-answer could not be regarded as incorrect or misleading. [115], [117], [118]–[121], [123]
Brereton JA said that the answer to requisition 6 was literally correct, because the council’s rights over the pipe did not constitute an easement. Furthermore, cl 10 of the contract precluded a requisition concerning a drainage service passing through the property. The answer to requisition 7 was not false because the 2002 resolution had been abandoned. The requisition did not require disclosure of a notification that was no longer operative. Concerning requisition 8, the 2002 resolution and the 2003 notices were not outstanding and any claim by the council to have the right to enter the property to perform works was not a claim of the kind envisaged by the requisition. Concerning requisition 19, the 2002 resolution did not restrict development of the land. The existence of the pipe was not a restriction on user. [159], [162], [164], [165]
Therefore, the vendor’s answers to the requisitions were not negligent misstatements. [166]
Editorial comment
In this case, a residential property was purchased for $3 million. Before completion, the purchaser obtained information about the property from a council-issued planning certificate attached to the contract of sale and from the vendor’s replies to requisitions. Neither the planning certificate nor the replies to requisitions disclosed the existence of a blocked and broken drainage pipe running under the property. Nor did they disclose that, because of the blocked and broken pipe, stormwater inundated the property during periods of heavy or prolonged rainfall. And, of course, the pipe was not visible to the purchaser. And so the purchaser, oblivious to the problems, completed the sale — to her considerable detriment.
The NSW Supreme Court held that the council and the vendor were liable to the purchaser and awarded the purchaser substantial damages. However, the NSW Court of Appeal reversed the Supreme Court’s decision, with the result that the purchaser had to bear the losses she incurred because of the inundations.
The decision is good news for councils. Following the trial decision, it appeared that councils would have to disclose site-specific information in planning certificates. However, the NSW Court of Appeal has ruled that a “policy” of the kind referred to in a planning certificate is not site-specific. A council does not have to keep, retrieve and disclose information pertaining only to individual properties. It need only disclose broad, regional policies affecting the property.
Furthermore, the Court of Appeal held that the issue of a planning certificate in NSW has the benefit of s 43A of the Civil Liability Act. It is the exercise of a “special statutory power”. This means that an issuing council will not be liable unless it acted unreasonably.
The Court of Appeal also upheld the vendor’s appeal. It ruled that the vendor’s replies to requisitions were not false or misleading. Despite the problems with the pipe, regular flooding of the property over many years and much correspondence and negotiation with the council, none of the requisitions succeeded in extracting information about those matters from the vendor. The vendor was able to answer all the requisitions truthfully and accurately and yet disclose nothing about the pipe or the flooding.
Perhaps purchasers need to include more targeted enquiries in their requisitions — requisitions covering the kind of problems that occurred in this case. And they should also ensure that replies to requisitions are received within a reasonable time. Practitioners acting for vendors and purchasers should read the NSW Court of Appeal’s judgment in Carter v Mehmet (2021) ANZ ConvR ¶21-168; [2021] NSWCA 286 to better understand their obligations when serving or replying to requisitions.
Source: Della Franca v Lorenzato; Burwood Council v Lorenzato (2021) ANZ ConvR ¶21-169; [2021] NSWCA 321, 16 December 2021.
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