Tepko Pty Limited v Water Board [2001] HCA 19

HIGH COURT OF AUSTRALIA

GLEESON CJ,

GAUDRON, McHUGH, GUMMOW, KIRBY, HAYNE AND CALLINAN JJ

TEPKO PTY LIMITED & ORS APPELLANTS

AND

WATER BOARD RESPONDENT

Tepko Pty Limited v Water Board [2001] HCA 19

5 April 2001

S36/2000

ORDER

1. Amend the style of the respondent to "Ministerial Holding Corporation". 2. Suspend order 1 until 3 May 2001 or earlier order and direct that any submissions by either party that order 1 would incorrectly identify the respondent be filed and served within seven days of the date of these orders. 3. Otherwise appeal dismissed with costs.

On appeal from the Supreme Court of New South Wales

Representation:

G K Downes QC with S J Motbey for the appellants (instructed by S A Teen)

P R Garling SC with S T White and K M Guilfoyle for the respondent (instructed by Phillips Fox)

Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Tepko Pty Limited v Water Board

Negligence – Negligent misstatement – Economic loss – Statutory authority – No statutory obligation to answer queries – Estimate sought and "upper limit" figure provided – Whether duty of care owed – Knowledge of serious purpose – Known reliance – Assumption of responsibility – Whether appreciation of consequences of error – Whether reasonable to rely on "ball-park" figure.

Practice and procedure – Separate trial of issues – Need for clear justification – Difficulties of separate trial of issues – Use of books of documents where status and relevance in the trial are uncertain – Identification of documents in evidence.

Metropolitan Water, Sewerage, and Drainage Act 1924 (NSW), ss 6A, 7, 34A.

Water Board Act 1987 (NSW), s 5.

Water Board (Corporatisation) Act 1994 (NSW), s 107.

1. GLEESON CJ, GUMMOW AND HAYNE JJ. The Supreme Court of New South Wales (Allen J) entered judgment for the respondent ("the Board") which was the defendant in the action. By majority (Mason P and Beazley JA; Fitzgerald JA dissenting), the Court of Appeal dismissed an appeal. The question for this Court is whether the Court of Appeal erred in doing so. It is convenient to begin by identifying the parties. 2. The Board was constituted as a corporation under s 5 of the Water Board Act 1987 (NSW) ("the Water Board Act"). The Board was a continuation of and the same legal entity as that constituted under the corporate name of "The Metropolitan Water Sewerage and Drainage Board" by s 6A of the Metropolitan Water, Sewerage, and Drainage Act 1924 (NSW) ("the 1924 Act"). The 1924 Act was repealed by s 4 and Sched 1 of the Water Legislation (Repeal, Amendment and Savings) Act 1987 (NSW) ("the Repeal Act"). The Repeal Act provided[1] for the continuation of the Board as the same legal entity, despite the repeal of the 1924 Act. The events giving rise to this litigation occurred whilst the 1924 Act was in force and before the enactment of the Water Board Act. It will be necessary to refer to various provisions of the 1924 Act. 3. By the time the action was tried in 1996, the Water Board Act had been repealed by s 107 of the Water Board (Corporatisation) Act 1994 (NSW) ("the 1994 Act"). The 1994 Act provided[2] for the dissolution of the Board and its assets, rights and liabilities transferred to the Ministerial Holding Corporation, a body constituted by s 37B of the State Owned Corporations Act 1989 (NSW). It would appear that the effect of the 1994 Act[3] was that the pending proceedings in this litigation were to be taken as proceedings pending against the Ministerial Holding Corporation. No step was taken to amend the identity of the party in question. It remains for the matter to be attended to by appropriate order in this Court. 4. Mr J H Neal, the third appellant, had a range of business interests. For many years he worked as an earthmoving contractor. With his brother, Mr Alan Fox, and Mr Colin Stuart, Mr Neal owned shares in the first appellant, Tepko Pty Limited ("Tepko"). Tepko had owned since 1981, subject to mortgage, about 160 acres (approximately 65 ha) at Wallacia. Since 1980, an adjoining parcel of about 30 acres (approximately 12 ha) had been owned, subject to mortgage, by Mr Neal personally. Upon both parcels, a dairy business was operated under the management of Mr Neal. 5. In 1983, Neal Earthmoving Pty Limited ("Neal Earthmoving"), the second appellant, which was controlled by Mr Neal, accepted an offer of a loan facility made by the Singapore Branch of the European Asian Bank AG ("the Bank"). The Bank then was wholly owned by Deutsche Bank AG and Creditenstadle AG. The Bank changed its name early in 1986 to Deutsche Bank (Asia) AG. The offer was for the equivalent Swiss francs of $A2 million, for a period of three years from the date of drawdown. The repayment was to be in three annual instalments, 12, 24 and 36 months after the drawdown date. 6. The purposes of the loan by the Bank included assistance with the purchase of the freeholds of two hotels, the Wallacia Hotel and the Oaks Hotel at Camden, the acquisition of Mr Stuart's interest in Tepko and the financing of a proposed subdivision of the dairy land at Wallacia. 7. This litigation against the Board arises from the collapse of the funding arrangements for the proposed subdivision caused, it is alleged, by the breach by the Board of a duty of care to state accurately the likely cost of the provision by the Board of water to the subdivision. It is necessary to consider the circumstances of the dealings between Mr Neal and the Board from which the duty of care pleaded by the appellants is said to have arisen. 8. Several points should be made here. First, the relevant question is whether the Board owed that duty; it is not to the point that, if the pleadings had tendered another issue and the evidence had been somewhat different, some duty with a changed content might have been established. Secondly, this is one of the class of cases referred to by Hayne J in Modbury Triangle Shopping Centre Pty Ltd v Anzil[4] where it is not useful "to begin by examining the extent of a defendant's duty of care separately from the facts which give rise to a claim". Thirdly, where the defendant is a public utility such as the Board which exercises statutory functions subject to direction by the responsible Minister, the defendant moves within a legislative regime with which the common law interacts. Hence the necessity to view the particular circumstances with an appreciation of that legislation. Fourthly, whatever be involved in legal distinctions between stating facts, giving information and providing advice, and between present and future matters[5], in the event this appeal may be decided without attention to those refinements. 9. At some time in 1982, it had occurred to Mr Neal that considerable profit might be made by rezoning and then subdividing the land owned by him and by Tepko ("the dairy land") for rural residential allotments. At this stage, the proposal was for a subdivision of 20 lots; by the time of the events immediately giving rise to this litigation, the proposal had become one for 87 lots. Mr Neal took various steps which required approaches to both the Penrith and Liverpool Councils. This was because the dairy land was situated as to part within the local government area of each of these bodies. Part 3 (ss 24‑74) of the Environmental Planning and Assessment Act 1979 (NSW) ("the EPA Act") provided for the making of environmental planning instruments controlling matters such as subdivision of land. Section 70 empowered the Minister administering the EPA Act to make a local environmental plan ("LEP") in accordance with a draft submitted by the local council. It should be noted that the 1924 Act and the EPA Act were administered by different Ministers. 10. By 1983, it had been made apparent to Mr Neal that, whilst both Penrith and Liverpool Councils were willing to support rezoning and subdivision, their support was subject to the Board undertaking the supply of water for the project. The Councils would not proceed further, even to the granting of a conditional approval to the subdivision, unless an arrangement was made with the Board for the connection of the dairy land to the Board's water supply system. 11. The first step in the legal process necessary to bring about the subdivision was rezoning because residential subdivision was forbidden under the existing rural zoning. The rezoning would be achieved by LEPs made under s 70 of the EPA Act in respect of the Liverpool and Penrith Council areas. For the making of an LEP, the local council draft had to be supported by a certificate under s 65 of the EPA Act by the Director of Environment and Planning ("the Director"), an officer appointed under s 13 of the EPA Act. The certificate might be refused if the draft plan was inconsistent with any State environmental planning policy or regional environmental plan. The certificates were refused in October 1983 for reasons including the absence of a guarantee of the supply of water. 12. The dairy land was just outside the Board's system which provided water to Wallacia through mains from the North Warragamba reservoir. This reservoir also serviced the more remote townships of Mulgoa and Luddenham. In the late 1970s and early 1980s, the New South Wales Government had instituted an "Urban Development Program". One of its objectives was the steering of new urban development into areas classified as appropriate, having regard to infrastructure costs associated with the provision of such services as water. The dairy land was not within the Urban Development Program. In the Wallacia area, there were potential demands upon the water system, including expected increased usage from the subdivision of land already zoned for residential development. 13. The funds of the Board were fully committed to meeting the Urban Development Program; the Board was not a planning body and was reluctant to make decisions which might lead to longer term difficulties for the Urban Development Program. However, there was a practice of the Board in the relevant period to provide water supply to rural residential areas provided that the works were funded by the developers so as not to affect the Urban Development Program. The practice was not a statutory obligation imposed upon the Board; it was capable of application or modification by the Board, subject to Ministerial direction under s 7 of the 1924 Act. This section provided that, in the exercise and discharge of its powers, authorities, duties and functions, the Board was subject to the direction and control of the Minister[6]. 14. Nevertheless, the Board was under no statutory obligation to assist developers by providing information or giving costings in respect of proposed subdivisions of land which were not zoned for residential purposes. Further, it was the long‑standing policy of the Board not to provide such information in connection with any rezoning proposal. As early as May 1982, the Board had made it clear to Mr Neal that it was against its policy to supply information concerning the provision of services to subdivisions and developments which were contrary to present zoning. The Board had said: