The case of Lorenzato v Burwood Council  NSWSC 1659 (Lorenzato v Burwood) concerned an action against Burwood Council (Council) for negligent misstatement in a planning certificate issued under section 149 of the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act) (Planning Certificate). This case was heard by Justice Fagan in the New South Wales Supreme Court.
This case arose following numerous occasions of flooding on the plaintiff's property at 13 Appian Way, Burwood (Property) due to a blockage in a Council-owned pipe that had been laid beneath the Property in the 1900s (which was beneath the residence and the pool) (Pipe).
The plaintiff purchased the Property in 2011, and the Planning Certificate was attached to the contract. The Planning Certificate did not disclose the existence the Pipe, or the Council's resolution from 2002 in relation to the flooding.
This article focusses on the claims against the Council (rather than the claims against the vendor, and the vendor's cross-claim against its solicitor). The plaintiff's actions against the Council were for negligent misstatement in the Planning Certificate, and in nuisance for the damage caused by the flooding.
The Court found against the Council in relation to both of those actions, and the Council was unsuccessful (in relation to both actions) in arguing that a statutory immunity applied. The Council was ordered to pay the plaintiff approximately $2 million (including interest) in damages, and the plaintiff's costs in the proceedings against the Council.
The Pipe underneath the plaintiff's home carried stormwater runoff from a 5.2ha catchment.
The Planning Certificate did not disclose that Council had resolved in 2002 to acquire an easement over the pipe and for the later establishment of a drainage easement along the Property's western boundary.
In 2005, Council reconfigured the street drainage in a way that resulted in the stormwater from the catchment area being concentrated in a junction pit out the front of the plaintiff's Property, despite that pit being dependent on the failing Pipe beneath the plaintiff's Property.
After the plaintiff moved into the Property, the Property was flooded by overland flows of stormwater on nine occasions in one year, due to the Pipe becoming blocked, causing stormwater to back up on Appian Way and funnel down the plaintiff's driveway.
Council's duty to provide correct information in a planning certificate
There is a common law duty for councils to provide correct information in a planning certificate, a duty which is owed to potential purchasers of the Property the subject of the certificate.
The plaintiff alleged that the Council had breached its duty of care, as the Planning Certificate contained incorrect and misleading information concerning matters prescribed for the purposes of section 149(4) of EP&A Act. That subsection stated:
"The regulations may provide that information to be furnished in a planning certificate shall be set out in the prescribed form and manner."
Council incorrectly answered Question 7 of the Planning Certificate
At the relevant time, schedule 4 of the Environmental Planning and Assessment Regulation 2000 (NSW) (EP&A Regulations) required that a planning certificate under section 149 contain certain information, including "whether or not the land is affected by a policy adopted by the council…that restricts the development of the land because of the likelihood of …flooding." (Question 7).
Council's 2002 resolution related to negotiating or compulsorily acquiring an easement over the existing Pipe, and also referred to an easement being created in the future on the side boundary of the Property for drainage purposes. Council argued that this was not a "policy" for the purposes of Question 7.
The Court found that the word "policy" in Question 7 was not defined in the EP&A Act, and its meaning could not be elucidated by its statutory context. Its meaning must be given its ordinary English meaning, and in that regard, the Council's 2002 resolution was a "policy":
"…in the sense of a broad plan of action with multiple components, some of them contingent upon others or upon the course of events, drawn up to address a significant and persistent stormwater management problem that affected a number of landowners and users of a public road in one part of a local government area."
The Court also found that the policy did "restrict the development of land" as a drainage easement would preclude building any structure over the area affected by it. The restriction on development would be an inherent effect of the creation of the easements pursuant to the Council resolution.
Although the Council attempted to argue that the easements were not imposed "because of the likelihood of flooding", the Court was quite critical of the Council portraying the inundation as something other than flooding before the Supreme Court, whilst classifying it as flooding before the Land and Environment Court when opposing the plaintiff's development application.
Everyone (including the Council) who had spoken of the uncontrolled stormwater surface flow at Appian Way for the last 50 years had "almost invariably referred to the risk associated with the under capacity pipe as a risk of 'flooding'", including the Council itself in raising contentions in Class 1 proceedings in the Land and Environment Court when opposing the plaintiff's development application.
The Court therefore found that the restriction "had everything to do with flooding".
Breach of the duty to exercise reasonable care in issuing the Planning Certificate
In all of the above circumstances, the Council's answer of "No" to Question 7 was therefore found to be incorrect, and the Court held that it had negligently breached its duty to exercise reasonable care in issuing the Planning Certificate.
The Court found that it was not relevant "whether Council took reasonable steps to maintain accurate records of policies that it had adopted or whether it followed a reasonable procedure for interrogating those records prior to issuing a certificate", because the circumstances involved Council's own acts and/or decisions. In that regard, the Court stated:
"The duty of care could not be discharged by the adoption of any system of keeping or searching records if, notwithstanding such system, Council failed to answer question 7 in a s 149 certificate with reasonable accuracy as to the existence of its own policy resolution that lay within its own repository of corporate knowledge."
The Court held that all of the elements of a cause of action against Council for negligent misstatement in the planning certificate were established, i.e. the plaintiff's reliance upon the Planning Certificate and consequent damage.
No statutory defences available in relation to the negligent misstatement in the Planning Certificate
The Court found that section 43A of the Civil Liability Act 2002 (NSW) was not applicable here, because the planning certificate was not issued in the exercise of a statutory power. Rather, it was issued pursuant to a statutory obligation, being the requirement in section 149(2) of the EP&A Act to issue a planning certificate.
Council also sought (unsuccessfully) to rely upon section 733(1)(a) of the Local Government Act 1993 (NSW) (Local Government Act), which stated:
"A council does not incur any liability in respect of—
(a) any advice furnished in good faith by the council relating to the likelihood of any land being flooded or the nature or extent of any such flooding,"
The Court held that due to the difference in wording between Question 7 and section 733(1)(a) of the Local Government Act, the statutory immunity in section 733(1)(a) did not apply. The answer to Question 7 is advice concerning whether there was any policy of the description given by that question, rather than being advice "relating to the likelihood of [the land] being flooded".
Private nuisance for stormwater flooding caused by a public authority and the limits of the statutory defence of good faith
The plaintiff claimed that the repeated flooding of her Property by overland stormwater constituted private nuisance by a public authority. It was therefore necessary to consider whether, due to being a public authority, liability was excluded.
In relation to the nuisance claim, the Court found that the Council was liable for instances of overland flows of stormwater on to the plaintiff's Property because:
The cause of the flooding was blockage of Council's pipe under the Property.
Council's long delay, until mid-July 2013, in rectifying this blockage was the product of its own indecision and inaction.
The plaintiff did not deny Council access to her land to repair the pipe.
The plaintiff did not bear any responsibility for the flooding.
The Council's construction of drainage works on Appian Way in 2005 (which caused the flooding of the plaintiff's Property) were carried out pursuant to section 71 of the Roads Act 1993 (NSW) and section 59A of the Local Government Act. Those sections do not exclude liability for nuisance.
The statutory defence section 733 of the Local Government Act also did not exclude liability, as the Council failed to prove that it had acted in good faith.
Statutory immunity under section 733 of the Local Government Act not applicable due to a lack of good faith
Council argued that section 733(1)(b) and (3)(e) and (g) of the Local Government Act provided a statutory immunity from liability in the circumstances. The onus is on the Council to prove the application of this statutory immunity.
Those subsections provide immunity from liability incurred in respect of "anything done or omitted to be done in good faith by the council in so far as it relates to the likelihood of land being flooded or the nature or extent of any such flooding" (emphasis added), including "carrying out of flood mitigation works" and "any other thing done or omitted to be done in the exercise of a council's functions under this or any other Act."
Justice Fagan held that Council had not discharged its onus of proving the defence in section 733, and Council was held liable to the plaintiff for the flooding damage. This was due to the requirement for good faith not having been met. For example, the Court found:
"Council adduced no evidence capable of demonstrating good faith in its absurd decision to construct the junction pit in front of No 13 and to feed all stormwater run-off into it, when it knew that the outlet pipe was inadequate in both capacity and condition."
The Court also found that although there was a necessity to address the drainage problem on Appian Way, Council had been told that its planned works in that regard, even if fully implemented, would still leave the system "well below adequate capacity and not even sufficient for 1 year ARI rain events". The Court found in relation to the works that were undertaken that "Good faith cannot be shown in relation to the partial undertaking of a scheme that would achieve no useful object".
The Council was found not only to have breached its common law duty to exercise reasonable care in issuing the Planning Certificate, but it was also found to be liable for the nuisance due to the repeated flooding of the plaintiff's Property. Due to its conduct over an extended period of time, the Court found that the Council could not rely on the statutory immunity in the Local Government Act as it had not acted with good faith.
This had significant financial consequences for the Council, which was ordered to pay over $2 million to the plaintiff, as well as the plaintiff's costs of the proceedings against it.
Councils need to be vigilant to ensure that any resolutions made relating to properties are properly recorded in a readily searchable form, in a system that would be interrogated for the purposes of preparing planning certificates. In this case, although the Council's 2002 resolution was not picked up in searches when the planning certificate was prepared, as it was the Council's own policy, within its corporate knowledge, the Council could not avoid its liability for negligent misstatement by reliance on its searching protocols.