Reported Decision : 147 LGERA 319 New South Wales Supreme Court CITATION : T & H Fatouros Pty Ltd v Randwick City Council [2006] NSWSC 483 HEARING DATE(S) : 9 December 2005 JUDGMENT DATE : 25 May 2006 JUDGMENT OF : Simpson J DECISION : leave granted to reopen; otherwise make no orders CATCHWORDS : notice of motion - reopen judgment 1 September 2005 - claim against Council in breach of duty of care - application of Civil Liability Act 2002 - date of commencement of proceedings - whether date of commencement of original proceedings or date of filing cross-claim - dross-defendant party to original proceedings - proceedings against cross-defendant commenced on date of filing cross-claim - whether conduct in question so unreasonable that no council could consider it reasonable exercise of function - approval of stairway not reasonable exercise of council function Civil Liability Act 2002 s2, s5F, s5G, s5H, s43, s43A Civil Liability Amendment Act 2003 (Number 94), cl 15 Part 4 Schedule 3, Part 5 LEGISLATION CITED : Civil Liability Amendment (Personal Responsibility) Act 2002 (Number 92), Part 1A, cl6(1) Part 3 Schedule 2, Part 5 Environmental Planning and Assessment Act 1979 Supreme Court Act 1970, s78 Supreme Court Rules Pt 8 r11(3) T & H Fatouros Pty Ltd v Randwick City Council [2005] NSWSC 874 CASES CITED : Francis v Lewis [2003] NSWCA 152 George v Lifese Steel Erections Pty Ltd [2003] NSWSC 1146, unreported, 8 December 2003 PARTIES : T & H Fatouros Pty Ltd - Cross-Claimant Randwick City Council - Cross-Defendent FILE NUMBER(S) : SC 20370/02 COUNSEL : DGT Nock SC - Cross-Claimant PW Taylor SC - Cross-Defendant SOLICITORS : Henry Davis York - Cross-Claimant Moray & Agnew - Cross-Defendant IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION SIMPSON J Thursday 25 May 2006 20370/02 T & H Fatouros Pty Ltd v Randwick City Council JUDGMENT 1 HER HONOUR: Two questions emerge in these proceedings. The first is whether certain provisions of the Civil Liability Act 2002 apply in respect of conduct of the Randwick City Council ("the Council"). The second, which calls for determination only if those provisions are held to apply, is whether the conduct in question was so unreasonable that no council could properly consider the conduct to be a reasonable exercise of its function. 2 It is necessary to state some historical matters. 3 On 12 December 2002 Mark Ward suffered serious personal injury when he slipped and fell under the railing on external stairs to a building in Coogee. The building was owned by T and H Fatouros Pty Ltd ("Fatouros") and is in the local government area administered by the Council. Mr Ward brought proceedings against Fatouros and others. Ultimately, he successfully resolved his claim against Fatouros. He did not himself bring proceedings against the Council. By cross-claim filed on 5 February 2004 Fatouros joined the Council as a cross-defendant, claiming that the Council owed Fatouros a duty of care, and that, by its conduct, it had defaulted in that duty of care. On 1 September 2005 I upheld Fatouros' claim against the Council (T & H Fatouros Pty Ltd v Randwick City Council [2005] NSWSC 874) and delivered a verdict for Fatouros on its cross-claim against the Council. It will be necessary below to deal in more detail with the factual basis for that determination. These reasons should be read in conjunction with that judgment. 4 During the course of argument in those proceedings, in written submissions, the Council invoked ss5F, 5G, 5H, 43 and 43A of the Civil Liability Act. In subsequently filed written submissions, the Council expressly abandoned reliance on ss5F, 5G and 5H. It did not expressly abandon reliance upon ss43 or 43A. However, as was later acknowledged, the reasoning that was advanced to explain the abandonment equally applied to ss43 and 43A. In any event, whether by misunderstanding on my part or otherwise, I took the abandonment to apply to the Civil Liability Act as a whole, and so stated in [33]. 5 That brings me to the present proceedings. By notice of motion filed on 6 September 2005 the Council claimed the following orders: "2 An order setting aside the Reasons for Judgment handed down on 1 September 2005 – for the purpose of considering the submission of the [Council] that sections 43, 43A and 44 of the Civil Liability Act 2002 apply to the second cross-claim in the proceedings. 3 An order granting leave to the [Council] for leave to reopen for the limited purpose of submitting: 3.1 That sections 5F to 5H of the Civil Liability Act 2002 apply to the second cross-claim. 3.2 Further and in the alternative, that the commencement of the Civil Liability (Personal Responsibility) Act 2002 on 6 December 2002 applied sections 43 and 44 of the Civil Liability Act 2002 to the second cross-claim. 3.3 Further and in the alternative, that the commencement of the Civil Liability Amendment Act 2003 Number 94 applied section 43, 43A and 44 of the Civil Liability Act 2002 to the second cross-claim." 6 But in written submissions dated 8 December 2005 filed in support of that notice of motion the Council again expressly abandoned reliance upon ss5F, 5G and 5H. It maintains its position in relation to ss43 and 43A. 7 After hearing argument, and on the basis that, the earlier abandonment having post-dated all evidence and argument (both written and oral), and that Fatouros could demonstrate no prejudice, I granted leave to the Council to reopen for the stated purposes. Thus, the two questions I have earlier identified are before the court. does the Civil Liability Act apply? 8 The answer to this question depends in part upon certain matters of legislative and procedural chronology, and in part upon what is encompassed in the notion of "proceedings", specifically, whether the filing of a cross-claim amounts to the commencement of a separate proceeding, or whether the claim put forward in the cross-claim becomes part of the proceedings represented by the initiating process filed on behalf of the plaintiff (in this case, Mr Ward). S78 of the Supreme Court Act 1970, which, although now repealed, applied and continues to apply to the proceedings, is of relevance. 9 As to chronology, I draw some of the dates which follow from the written submissions filed on behalf of the Council, there having been no contest raised as to their accuracy. (In some respects these dates are at considerable variance from those contained in written submissions earlier filed (27 October 2004, para 44).) 10 The Civil Liability Act came into effect on 20 March 2002. The initial proceedings were commenced by Mr Ward on 2 September 2002 when he filed the statement of claim naming Fatouros as a defendant. The cross-claim was filed on behalf of Fatouros on 5 February 2004. The Civil Liability Act was, relevantly, twice amended, once with effect from 6 December 2002, and the second with effect from 19 December 2003. the legislative history of the Civil Liability Act (i) By s2, the Civil Liability Act is taken to have commenced on 20 March 2002. It then contained none of the sections here under consideration; (ii) The Civil Liability Act was amended by the Civil Liability Amendment (Personal Responsibility) Act 2002 (Number 92) ("the Personal Responsibility Act "). This Act introduced a new Part 1A, under the heading "Negligence". This included ss5F, 5G and 5H. (Since reliance upon these sections has, for a second time, been abandoned, I will not take the time to set out those provisions.) This Act also introduced a new Part 5, under the heading "Liability of Public and Other Authorities". This part included ss43 and 44, which were in the following terms: " 43 Proceedings against public or other authorities based on breach of statutory duty (1) This section applies to proceedings to which this Part applies that are based on an alleged breach of a statutory duty by a public or other authority in connection with the exercise of or a failure to exercise a function of the authority. (2) For the purposes of any such proceeding, an act or omission of the authority does not constitute a breach of statutory duty unless the act or omission was in the circumstances so unreasonable that no authority having the functions of the authority in question could properly consider the act or omission to be a reasonable exercise of its function. (3) In the case of a function of a public or other authority to prohibit or regulate an activity, this section applies in addition to section 44. 44 When public or other authority not liable for failure to exercise regulatory functions (1) A public or other authority is not liable in proceedings to which this Part applies to the extent that the claim is based on the failure of the authority to exercise or to consider exercising any function of the authority to prohibit or regulate an activity if the authority could not have been required to exercise the function in proceedings instituted by the claimant. (2) Without limiting what constitutes a function to regulate an activity for the purposes of this section, a function to issue a licence, permit or other authority in respect of an activity, or to register or otherwise authorise a person in connection with an activity, constitutes a function to regulate the activity." The Personal Responsibility Act relevantly commenced on 6 December 2002. "Public or other authority" is specifically defined to include a local council. The Personal Responsibility Act contained transitional provisions. These had the effect of making the amendments thereby introduced retrospective in the sense that they applied to civil liability arising before the commencement of the amendments, but the retrospectivity did not extend to proceedings initiated in a court before their commencement; (iii) the Civil Liability Act was further amended by the Civil Liability Amendment Act 2003 (Number 94) ("the 2003 Amendment Act "). The 2003 Amendment Act introduced into Part 5 a new section, numbered s43A. That section is in the following terms: " 43A Proceedings against public or other authorities for the exercise of special statutory powers (1) This section applies to proceedings for civil liability to which this Part applies to the extent that the liability is based on a public or other authority's exercise of, or failure to exercise, a special statutory power conferred on the authority. (2) A "special statutory power" is a power: (a) that is conferred by or under a statute, and (b) that is of a kind that persons generally are not authorised to exercise without specific statutory authority. (3) For the purposes of any such proceedings, any act or omission involving an exercise of, or failure to exercise, a special statutory power does not give rise to civil liability unless the act or omission was in the circumstances so unreasonable that no authority having the special statutory power in question could properly consider the act or omission to be a reasonable exercise of, or failure to exercise, its power. (4) In the case of a special statutory power of a public or other authority to prohibit or regulate an activity, this section applies in addition to section 44." The 2003 Amendment Act relevantly commenced on 19 December 2003. The 2003 Amendment Act contained transitional provisions, the effect of which is that the amendments operate retrospectively. They apply to civil liability whenever that liability arose. The retrospectivity is limited in that the provisions do not apply where proceedings were commenced prior to 6 December 2002 (the date on which the provisions, inter alia , of Part 1A and Part 5 as originally enacted by the Personal Responsibility Act came into effect). Nor do they apply in respect to any decision of a court made before 19 December 2003 (the date of commencement of the 2003 Amendment Act ). "Civil liability" is nowhere defined in any of the legislation. 11 Given the nature of the argument, it is worth setting out the relevant portions of the transitional provisions. By cl.6(1) of Part 3 of Schedule 2 of the Personal Responsibility Act: "(1) The amendments to [the Civil Liability ] Act made by the [ Personal Responsibility ] Act extend to civil liability arising before the commencement of the amendments, but do not apply to or in respect of proceedings commenced in a court before that commencement." By cl.15 of Part 4 of Schedule 3 of the 2003 Amendment Act : (1) Part 5 ... (as amended by the 2003 Amendment Act ) apply in relation to civil liability whether arising before or after 13 November 2003. (2) Part 5 ... (as so amended) also extends to proceedings commenced before 13 November 2003. (3) However, sub-clause (2) does not operate: (a) to apply Part 5 ... (as so amended) in respect of any decision of a court made before the commencement of this clause, or (b) to apply Part 5 ... in relation to any proceedings to which the Part did not apply immediately before the commencement of this clause." (13 November was the date on which the 2003 Amendment Act was introduced in the Legislative Assembly.) 12 The critical question for the purpose of determining whether or not Part 5 of the Civil Liability Act applies is the identification of the date of "the commencement of the proceedings". That question, in turn, will be answered by the identification of "the proceedings". Are "the proceedings", within the meaning of the Civil Liability Act, the proceedings commenced by Mr Ward; or are they the proceedings which came into existence by reason of the filing of the cross-claim by Fatouros against the Council? 13 S78 of the Supreme Court Act is concerned with cross-claims. It relevantly provides as follows: " Claim by defendant 78(1) Subject to subsection (3), the Court may grant to the defendant in any proceedings (in this section called the first proceedings) all such relief against any person as the Court might grant against that person if the person were a defendant in separate proceedings commenced by the defendant for that purpose. (2) ... (3) ... (4) Subject to the rules, a person against whom relief is claimed under this section - (a) shall, if not a party to the first proceedings, become a party to the first proceedings; and (b) shall have the same rights in respect of a person's defence against the claim as if the person were a defendant in separate proceedings commenced by the defendant for the purpose of that claim." 14 Senior counsel who appeared for the Council relied upon the decision of Studdert J in George v Lifese Steel Erections Pty Ltd [2003] NSWSC 1146, unreported, 8 December 2003. However, that case does not in any way bear upon the present case in support of the proposition that, for the purposes of the Civil Liability Act, "the proceedings" were the proceedings commenced by Mr Ward to which, by reason of s78(4)(a), the Council became a party on the filing of the cross-claim against it. What was before Studdert J was a proceeding in which a statement of claim had been filed, within time, against one defendant, and joinder, by leave, out of time, of a second defendant. The statement of claim against the first defendant was filed at a time when the Civil Liability Act was inapplicable. The joinder of the second defendant post-dated the commencement of the Civil Liability Act. Studdert J held that the Civil Liability Act applied to the cross-claim. However, he did so specifically by reference to SCR Pt 8 r.11(3) which provided: "11(3) Where in any proceedings a party is added otherwise than [in presently irrelevant circumstances] the date of commencement of the proceedings so far as concerns him shall be: (a) where he is added as a defendant – the date on which the amendment adding him as a defendant is made or the date of entry of his appearance or the date of filing his defence, whichever is earliest, (b) otherwise – the date on which the amendment adding him as a party is made." Since, in that case, the second defendant was added as a defendant, it was sub-r(3)(a) that applied, determining the date of commencement as the date of the amendment to the statement of claim by which he was added. That sub-paragraph is inapplicable where a party is added to the proceedings as a cross-defendant. That sub-paragraph says nothing of the position where, by cross-claim, an additional party is added to the proceedings other than as a defendant. Subrule 11(3) is applicable to the present proceedings only if the case comes within sub-paragraph (b): i.e. if the Council has been added to "the proceedings" (that is, Mr Ward's proceedings) otherwise than as a defendant (which, of course, as s78(4) makes clear, is has). 15 S78(4) makes it plain that a cross-defendant, once drawn into the proceedings by the cross-claim, becomes a party to what is in the section called "the first proceedings". SCR Pt 8 r11(3)(b) is directed to that circumstance. There is a curiosity in the use in that sub-paragraph of the words "the amendment" which is not entirely apt to describe what happens when, by cross-claim, an additional party is joined to proceedings. But, when r11(3) is read together with s78(4)(b), the most sensible construction is that, on the date on which the cross-claim is filed, the cross-defendant becomes a party to the (plaintiff's or the principal, or, to use the language of the section, the first) proceedings. 16 By reason of r11(3)(b), the commencement of the proceedings, so far as concerns a cross-defendant, is the date on which he (or it) is joined to the original (first, or plaintiff's) proceedings. In this case that date was 5 February 2004. Accordingly, the Civil Liability Act, as amended by the Personal Responsibility Act and the 2003 Amendment Act, applies to the cross-claim. 17 That means that the second question I have identified must be decided. In its original submissions the Council contended that the liability Fatouros claimed the Council had to it could not survive the application of s44. That, it was said, was because neither Mr Ward nor Fatouros would have had standing to bring proceedings to compel the Council to exercise any function or powers. This argument was entirely misconceived. As is plain from my original judgment, the claim against the Council by Fatouros was not based upon the failure of the Council to exercise or consider exercising any of its functions to prohibit or regulate any activity. It was, as I said in the original judgment and as will be seen below, based upon the negligent exercise by the Council of its functions. In any event, s44 was not relied upon by the Council in the present application. 18 The present application is confined to the question whether, pursuant either to s43 or s43A, the Council can avoid the liability that I otherwise found it had by reason of the provisions of those sections. Having regard to the view I have reached, to which I will come, it is unnecessary to pause to consider whether the liability I found is based upon the breach of a statutory duty (s43) or the Council's exercise of, or failure to exercise, a special statutory power conferred upon it (s43A). In either case the question is whether the Council's conduct was so unreasonable that, in the circumstances, no council could properly consider its conduct to be a reasonable exercise of its functions, or a reasonable exercise of, or failure to exercise, its powers. That takes me back to the findings I made in the original judgment. They can be recapitulated briefly. 19 Over a period commencing on 28 October 1996 the Council required Fatouros to replace the then existing external stairway at the premises. There followed a lengthy period in which Council officers communicated with Mr Fatouros (the principal of Fatouros) concerning the reconstruction of the stairway. Work was completed early in 1998. Mr Fatouros advised the Council: Council officers inspected and approved the construction. Eventually, on 31 March 2000, Council officers noted, on Council files, that the work was completed. Thereafter, annual inspections, with reference, inter alia, to fire-safety matters, were made. 20 Examination of the construction of the stairway revealed, to my satisfaction, that it was entirely inadequate for its purpose. Its principal deficiency was that the sides were completely open; only a handrail and a few uprights stood between the steps and the open space beyond. There was nothing to prevent a person from slipping under the handrail and falling to the ground below. Its purpose was, essentially, as a fire escape. It was plainly dangerous. It left, as a real possibility, and even probability, the danger that persons fleeing the building would slip and fall through its open sides. That is precisely what happened to Mr Ward. Accordingly, I held that, in approving the work, and by implying that the stairway was adequate to meet building standards, the Council breached its duty to Fatouros, by leaving it open to the risk that in fact eventuated, the risk of being sued by a person injured as a direct result of the unsafe construction. 21 The question which now arises, under either ss43 or 43A, is whether the approval given by the Council was, in the circumstances, so unreasonable that no council could properly consider the approval to be a reasonable exercise of its functions under the Environmental Planning and Assessment Act 1979. 22 On behalf of the Council it was argued that six considerations relevant to the determination of this question existed. These were: (i) policy issues inherent in the discharge of the Council's functions; (ii) a general policy not to insist upon periodically updated compliance with current standards; (iii) the discretionary judgment involved in the exercise of the Council's functions; (iv) a statutory discretion, conferred upon the Land and Environment Court, to award compensation where a council's requirements are deemed to be unreasonable; (v) the absence of any indication that the Council had ever identified the reconstructed stairway as a particular danger; (vi) the absence of any indication that the Council had ever formed the view that the reconstructed stairway required modification. 23 The last two of these are, in my opinion, "bootstraps" arguments. As is evident from my original judgment, it was (and remains) my opinion that Council officers ought to have identified the reconstructed stairway as a danger, and that it required modification. 24 It is true that policy issues and discretionary judgements are involved in the determination by Council officers of what to require in respect of building standards. In my view, under no circumstances could it be said that approval of an external stairway, intended to be used as a fire escape, could be other than deficient unless it incorporated adequate protection against slipping and falling. This could easily (and relatively cheaply) be achieved by the construction of barriers or railings on the open sides. Although there was no evidence to this effect, I am satisfied that the cost implications could not possibly outweigh the safety demands. 25 On behalf of the Council the following (to my mind, rather extraordinary) submission was made: "57. These considerations require the view that the Council's failure to issue an order in relation to the balustrade design could not be characterised as 'unreasonable' in the sense in which the expression is used in sections 43 and 43A of Civil Liability Act. The Court of Appeal decision in Francis v Lewis [2003] NSWCA 152, which implies that such a design would have been generally acceptable, supports that view. " (emphasis added) 26 This quite seriously misrepresents the decision in Francis v Lewis. Recourse to the judgment shows how misplaced reliance upon it is. The final sentence in the submission completely misstates the effect of the decision. 27 The circumstances in Francis bore considerable similarities to those of the present case. The stairway in question was an external (fire escape) stairway to a two-storey building. It had been in place since at least 1989, when the owners purchased the building. The stairway was made of steel, consisting of nineteen steps without a landing. It was steep and had no weather protection. It had a single handrail, with periodic vertical supports. The plaintiff in that case was familiar with the stairway, having used it frequently. She was injured on an occasion when, as she ascended the stairs, she slipped, fell backwards and down, and passed under the handrail, falling to the concrete below. 28 Because the age of the stairway was not known other than that it had been in existence since at least 1989, it was not possible to determine which, if any, building standards controls governed its construction. 29 The trial judge held the owners to have been negligent in failing to render the stairs safe by ensuring that there was a mid-rail between the existing handrail and the base of the stairs. 30 This finding gave rise to an appeal. The appeal was unsuccessful. Mason P (with whom Hodgson and Tobias JJA agreed) identified the "significant issue" in the appeal as the trial judge's "somewhat implicit conclusion" that it was unreasonable for the appellant to have left the stairway in that condition. He held that, by reason of the number of steps, the absence of a landing, the steepness of the steps and their exposure to the elements, they were inherently dangerous, more so than many stairways ordinarily encountered. He held that it was reasonably foreseeable that a person might slip and fall when ascending or descending the stairs; and, that if that eventuated, then that person might slide off the edge and fall to the concrete below. Because of the gaps between the balustrade, and the height of the stairs, that risk was "real". Precautionary measures were available and relatively cheap. 31 His Honour then concluded: "59 In the circumstances of this case it was in my view unreasonable for the appellants to have allowed the stairway to remain in the state that it was, at least once they knew or ought to have known that the stairway was in fairly regular use. The appellants arranged for anti-slip devices to be put on the stairs. Unfortunately, they did not arrange for something to be done to close the dangerous gap between the handrail and the stairs." The Court dismissed the appeal. 32 I am at a loss to understand how it could be submitted that the Court of Appeal in that decision implied that a design of the kind here in question would have been generally acceptable. I reject the proposition. 33 In some respects, the present is a stronger case. Here, it is known that the stairway was constructed some time in or before March or April 1998. Fatouros was responsible for its construction. It was not, like Francis, a case of the owner neglecting to take ameliorating action in respect of an already existing structure, one which might have been assumed to have been the recipient of Council approval. Here Fatouros – with the active endorsement of the Council – actually constructed the dangerous stairway. The stairway was, like the stairway in Francis, as I have already held, inherently dangerous. It was reasonably foreseeable that persons would slip and fall, and slip through the open sides to the ground below. It was unreasonable to allow it to be constructed or to remain in that condition. 34 As I have held, Council officers were well placed to identify the dangers inherent in an external stairway so constructed. If they did not, of whom could that be expected? I am satisfied that no council could properly or reasonably have considered approval of the stairway to be a reasonable exercise of the Council's function. 35 I therefore reject the proposition that, by reason of s43 or s43A of Civil Liability Act, the Council's conduct does not constitute a breach of statutory duty (s43), or that it otherwise does not attract liability (s43A). 36 That leaves open the question of what orders ought to be made. Orders have already been made granting leave to the Council to re-open for the limited purposes specified in the notice of motion. I decline to set aside the reasons for judgment of 1 September 2005. I otherwise make no order on the notice of motion, subject to any application for costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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