"LOCAL AUTHORITIES ARE ATTRACTIVE DEFENDANTS"

Created: Wednesday, 19 August 2015 21:21

"LOCAL AUTHORITIES ARE ATTRACTIVE DEFENDANTS"

In Monticello Holdings Ltd v Selwyn District Council the High Court took a good look at negligence in the local authority context, and found in favour of the Council. 

Gendall J has produced one of those wonderfully useful judgements that sum up the law on all of the matters in dispute, including in this case local authority liability in negligence, the production of LIMs and PIMs, and the production of information generally.

The case

Monticellois a land development company, which found part of the land it had purchased for residential development was contaminated by hazardous substances arising from a disused town dump that had been operated by one of the predecessors of the current Council.   Historical information about the disused dump was available in Council archives, but unknown to officers who processed the application for resource consent, or those responsible for the issue of PIMs and LIMs.

Since resource consent to subdivide the land was subject to a condition that should contaminants be found the land had to be rehabilitated, this discovery during earthworks meant that the company incurred considerable additional development costs.  Consequently it brought proceedings alleging the Council owed it a duty of care to keep and maintain accurate and reliable records about the existence of contaminated sites, to disclose that information to it, and that under the circumstances it ought to have refused to grant resource consent to develop the land.

Issues

As in all negligence cases, the issues to be determined were:

• Whether Council owed Monticello a duty of care?
• If so, whether Council breached that duty?
• If a breach was established, whether there was a causal connection between that breach and Monticello's loss?
• If causation was made out, whether the damage was nonetheless too remote?

The case failed at the first hurdle, Gendall J finding that in granting the resource consent the Council owed no duty of care to furnish Monticello with any information.  Nor could Council be liable in relation to the issue of a LIM because no LIM was sought for the affected parcel of land, or in relation to the PIM issued because it was obtained by a neighbour and not Monticello and was limited to sewerage works rather than the broader subdivision.

However in reaching those conclusions some interesting points are made.  The issue of duty of care is extensively examined with a statement of the general principles, a discussion on proximity and public policy in determining whether such a duty exists including the application of those principles in New Zealand case law, and a review of the duty of care in relation to local authorities. It begins with the Judge noting a fact only too well known to those in local government:

"Local authorities are attractive defendants.  It is often said that they have "deep pockets".  Also, they do not, generally speaking, cease to exist in the way that intended defendant companies can."

Duty of care

Resource consent

Having handily set out the case law on the subject with an extensive line of case references both overseas and local, Gendall J considers the issue of proximity, necessary to establish a duty of care, in relation to the resource consent, LIM, and PIM.  He concludes:

"The SDC [Council] owed no duty of care, in issuing the resource consent, to consider the economic interests of Monticello, nor the viability of the project (to the extent that project information was before SDC).  When considering resource consents, local authorities are obliged to give effect to the purpose of the Resource Management Act.  Their role is quasi-judicial and, in this respect, their allegiance lies with no one.  Their obligation is simply to comply with the statutory requirements.

…

Further, and perhaps more importantly, it cannot be suggested, with any degree of conviction, that a party applying for a resource consent can expect the issuing authority to apprise it of deleterious aspects of the land upon which a development is planned to proceed."

The mere fact that Council knew or ought to have known that the land was contaminated was not sufficient reason to support the suggestion that it owed a duty of care not to grant resource consent.  Even if such a duty of care did exist, there was an argument that it was discharged by the inclusion of the consent condition requiring any hazardous wastes found on the site to be reported, and the site rehabilitated at the expense of the consent holder.

LIM

In relation to the preparation of LIMs, there could be no proximity because Monticello did not request a LIM.  But in any case Gendall J refuted the suggestion that a local authority owes a duty to the world at large to maintain complete records to ensure that any potential LIMs ever issued are correct "in the sense that they contain all the Council's detailed information about features of a site in question".  He states:

"I therefore reject the notion that, absent a specific paid request to obtain a LIM, there is a general duty of care (seemingly owed to everyone within a relevant district or region) to record contamination in all LIMs and designations."

However, consistent with recent case law on reliance on LIMs, he did observe that if a LIM had been obtained, he would:

"… likely have found that there was a duty of care founded on a sufficiently proximate relationship, with policy factors tending in favour of the imposition of a duty of care."

PIM

The judge then turns his attention to proximity in relation to the issue of a PIM to the party that sold the contaminated land to Monticello, and concludes there was a duty of care (sufficient proximity) between that party and Council.  Although concluding there was insufficient proximity between Monticello and Council in all the circumstances, Gendall J "inclined" to the view that the duty, in so far as it exists, would require Council to disclose information in its records, including historical records.  In other words, once a PIM or a LIM has been ordered and paid for, there is a proximate relationship between Council and the purchaser such that there is a duty of care to disclose all relevant information held by the Council, even if that information needs to be retrieved from the historic records of the local authority if there is reason to suppose such information might exist.