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No duty owed to subsequent purchaser of land

Posted by Darius Isaacs on 27 March 2019

Council avoids liability for zoning mistake on planning certificate.

A decision by the Queensland Court of Appeal in a negligent misrepresentation case brought by a disgruntled purchaser against the Central Highlands Regional Council serves as a timely reminder for local governments of the importance of due diligence when releasing information to the public to ensure that the information provided is as accurate as possible.

In 2007 the purchaser company, Geju Pty Ltd, purchased a rural lot of land in Capella from a local business consortium for $900,000.00, believing the lot to be zoned industrial and intending to reconfigure the lot into smaller industrial lots.  The lot was in fact classed as rural land with industrial usage rights subject to a number of unmet development conditions.  The purchaser, at the time of purchase, was unaware of these conditions and upon discovering the true status of the land, initiated a claim against the Council seeking damages for the difference between the actual value of the land and the purchase price.  Central to the purchaser's case was its reliance on an erroneous Limited Planning & Development certificate issued by the Council's predecessor, the Peak Downs Shire Council, which incorrectly described the lot as within the industrial precinct of the Capella town zone.  (The Central Highlands Regional Council had assumed the liabilities of the Peak Downs Shire Council upon amalgamation.)  Properly, the certificate should have stated that the lot was in the rural zone. 

Relevantly, the Council had not issued the certificate to the purchaser, but in fact it had been requested by the former consortium owners following their initial purchase of the lot some months earlier.  The certificate was then provided to a local real estate agent and eventually a copy of the certificate ended up in the possession of the purchaser some 4 months after its initial issue.   Central to the Council's defence was that at the time of issue the issuing Council was unaware that the lot was for sale or that the consortium intended to give out the certificate to potential buyers of the lot including, in this matter, the actual purchaser or that such persons would seek to rely upon the contents of same. 

The purchaser was successful in its claim against the Council at first instance, with the trial judge finding that it was not necessary for the Council to know the purpose for which a planning certificate is sought in order for a duty of care to be imposed.  The Council appealed to the Queensland Court of Appeal. 

The Court of Appeal accepted that in the absence of knowledge by the issuing Council that the certificate was to be relied upon by other potential buyers of the lot, including the purchaser, the Council did not owe the purchaser a duty of care to ensure the accuracy of the information in it.  In its judgment, however, the Court of Appeal examined the corresponding statutory provisions within the planning legislation which confers a right to reasonable compensation for persons who suffer financial loss because of an error or omission in a planning development certificate and noted the absence of any limitations within these provisions upon an affected party's right to recover a position which was somewhat removed from the common law approach. 

An application for special leave to the High Court, seeking to appeal the Court of Appeal's decision, was refused. 

Whilst it is somewhat trite to simply conclude from this decision that local governments must always ensure the accuracy of information provided to the public, this decision highlights the significant financial consequences that can flow from a simple error within a planning certificate.  Had the circumstances of the extent of the Council's knowledge, or reliance and vulnerability by the purchaser been different, the Council would have been at greater risk of exposure to liability.  Further, an affected party need not necessarily have been the initial recipient of the certificate in order to trigger a statutory right to compensation.

For more information on this case, and how it affects your potential exposure, please email the solicitors at King & Company who ran the matter for the Council, Mark Williams and Darius Isaacs, or call them now on (07) 3243 0000.

Darius IsaacsAuthor: Darius Isaacs
About: Darius is a Senior Associate in the firm's Dispute Resolution & Litigation Group.
Tags: Local Government Liability Council Liability Litigation

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