Downes v Maitland City Council

By statement of claim filed on 25 February 2019 Maureen and Louis Downes (the plaintiffs) claim damages against Maitland City Council (the defendant). They allege that the defendant, by approving the development of a two-storied office and car park next to their property in Bull Street, Maitland (the property), negligently exposed them to the risk of harm caused by disruption to drainage on their property. Further, they allege that the Council created a nuisance which adversely affected the use, enjoyment and value of the property. In its defence, the Council denied negligence and nuisance and alleged that it had a complete defence to the plaintiffs’ claim by reason of s 733 of the Local Government Act 1993 (NSW) (the Act).

By notice of motion filed on 30 March 2020, the defendant seeks an order under Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 13.4(1)(b), that the proceedings be dismissed on the basis that no reasonable cause of action was disclosed.

Mr Guihot, who appeared on behalf of the defendant, submitted that the defendant had adduced sufficient evidence to establish the defence on a prima facie basis and that, as the plaintiffs had adduced no evidence to the contrary, the proceedings ought be dismissed.

Section 733 of the Act relevantly provides:

The parties put on evidence on the motion which was assembled in a joint court book, to which no objection was taken. None of the deponents of affidavits contained in the court book was required for cross-examination. Accordingly none of the evidence has been tested. This is not an uncommon circumstance in an application such as the present, which is usually not an occasion for cross-examination. The summary of the evidence set out below is to be viewed in that context and does not represent final findings of fact, which, for the reasons given below, must await a final hearing.

The plaintiffs’ family has owned two adjoining blocks on Bull Street, Maitland for as long as Ms Downes can remember. There was a gully behind the property which was very pronounced in Ms Downes’ childhood. In the 1955 flood, the house on one of the blocks and the gully were submerged in water. Thereafter the area was declared a flood zone area.

In the mid-1990s, the Council granted development approval (DA 94425) for the construction of a 12m x 12m metal colorbond shed on a lot which fronted onto Anlaby Street, Maitland on the other side of the gully. The shed was to be used for storage and repair of vehicles. This and other developments in the gully began to affect the Downes’ properties because they altered the course of the run-off from higher ground.

In 1996, the owner of the site on which the shed had been constructed applied for the site to be rezoned from 1(a) Prime Rural land to 3(b) Support Business. In purported performance of its statutory obligations under the Hunter Valley Flood Mitigation Act 1956 (NSW) (rep), the Council consulted the Department of Land and Water Conservation about the re-zoning. In its letter of 21 February 1996 the Department said:

In further correspondence dated 14 March 1996, the Department of Public Works wrote to the Council on behalf of the Department of Land and Water Conservation. It reiterated the Department’s opposition to the re-zoning.

By letter dated 23 April 1996, the Department of Land and Water Conservation wrote to the Council, referring to communications in the interim. The Department confirmed that it was not opposed to structures on the “high area” of Lot 2. However, it continued:

The plaintiffs’ property is towards the south and is not elevated.

On 7 May 1996 the Council’s Development and Environmental Services Committee considered the proposed re-zoning application. The meeting papers contained the following passage under the heading “Flooding”:

The recommendation made by the Committee was that the Council prepare and exhibit a draft Local Environment Plan to rezone part of Lot 2 (on which the shed had been constructed) from 1(a) Prime Rural to 3(b) Support Business.

On 18 June 2001, a development application was submitted by Geoff Craig & Associates Pty Ltd, consulting engineers and project managers (Geoff Craig), for the construction of a two-storied building to accommodate the Infringement Processing Bureau, with an associated car park. The owners of the site consented to the application. The estimated cost of development was $2.48m. The plaintiffs, who were concerned about the effect on their property, met with Council representatives, including Belinda Smith, the town planner, to discuss what would happen to run-off from the development. The plaintiffs did not consider the Council’s responses to their concerns to be satisfactory.

On 20 June 2001, the Council wrote to land owners whom it considered might be affected by the proposed development, including the plaintiffs, and invited them to respond.

In accordance with its usual procedures and protocols, by letter dated 21 June 2001, Ms Smith, on behalf of the Council, referred the development application to the Department of Land and Water Conservation as the site for the development was located within the declared flood plain, although the Council contended that it was outside the designated flood way.

On or about 26 June 2001, the Council sent a “comment sheet” to the members of the Council’s Floodplain Management Committee. The “Description of Matter” section said as follows:

Of the three members of the Floodplain Management Committee, two (Ralph Ward and Wayne Carson) responded that they did not wish to comment and that they did not consider that the matter should be discussed at a full meeting of the Floodplain Management Committee. The third, Michael Belcher, answered both questions in the affirmative. He said:

On 4 July 2001, Leanne Harris, who has been the Council’s Co-ordinator of Development Assessment since July 2013, spoke to Mr Belcher. In her file note of the conversation she wrote:

I understand the gist of this note to be that the main issue was the need to ensure that drainage with respect to the site was appropriate and that this was a separate issue to the flood levels, which were thought not to be likely to recur to 1955 levels.

Following this conversation, Ms Harris wrote to Ms Smith as follows:

I do not consider that the memo to Ms Smith adequately encapsulates the concerns raised by Mr Belcher about drainage, which were separate from his concerns about flood levels.

In about July 2001 the Council received, in response to its letter of 20 June 2001, several letters of objection from residents who lived in Bull Street, including the plaintiffs. A major ground of objection was that the development of the car park would cause stormwater run-off to pass into the properties of the residents.

By letter to the Council dated 25 July 2001, the Department of Land and Water Conservation conveyed its approval of the proposed construction work. However, it reminded the Council of the limits of the Department’s involvement in the following passage from the letter:

By handwritten memorandum dated 31 July 2001, an “engineers’ assessment” of the application was sent to Ms Smith. On the topic of drainage, the document said:

The relevant condition proposed was:

By letter dated 7 August 2001, Geoff Craig wrote to the Council about concerns that the Council had raised about the proposed development. They said, in part, that the surface of the carpark was “90% impervious” which meant that “all runoff from the carpark is directed into the adjacent downstream gully”. They proposed various measures to deal with the stormwater runoff including:

The agenda for the Council’s Approval and Regulatory Committee meeting on 14 August 2001 addressed the relevant considerations under s 79C of the Environmental Planning and Assessment Act 1979 (NSW) (the EPA Act), including, of present relevance, s 79C(1)(b), “the likely impacts of that development, including environmental impacts on both the natural and built environments, and social and economic impacts on the locality”. The effect of the development on the properties, such as the plaintiffs’ on Bull Street, was not referred to under this heading.

Under the heading, “Section 79C(1)(c) the suitability of the site for the development”, the meeting papers contain extracts from letters from concerned residents about the increased run off from the developments. The planner’s comment was:

The conclusion expressed in the meeting papers was that the proposed development complied with the objectives of the 3(b) zone and was considered an appropriate form of development for the site. The proposal included a section on appropriate conditions and the reason for their imposition. Under the heading, “Drainage & Sediment/Erosion Control”, the reason and conditions were set out as follows:

On 14 August 2001, there was a “public access meeting” of the Approvals and Regulatory Committee of the Council. The plaintiffs were notified of the meeting. The evidence does not reveal whether they attended. However there is no record of any representations having been made by them at the meeting.

On 14 August 2001, the Council issued a notice of determination granting approval of the development application. The conditions with respect to drainage and sediment and erosion control were as set out above.

Ms Harris deposed in her affidavit in support of the motion:

Since the construction of the building and the car park, the plaintiffs’ uncontroverted evidence is that the property has been affected by water from the southern side of the gully. Storms produce this effect without a flood. Every time there is a storm, the plaintiffs’ property is affected by water coming from the direction of the Infringement Processing Bureau. The gully itself has also overflowed on several occasions, some of which have been documented by Ms Downes. As a result of this water, the piers of the plaintiffs’ house are sinking, several of the old timber piers are rotting, the doors do not close and the walls are cracking.

The onus of proving a defence under s 733 of the Act lies on the defendant. In order to obtain an order for summary dismissal, it is therefore incumbent on the defendant to show that there is no triable issue as to its good faith in approving the development next to the property.

Before turning to the facts of the present case, it is instructive to address the authorities in the area, including Bankstown City Council v Alamdo Holdings Pty Ltd (2005) 223 CLR 660; [2005] HCA 46 (Alamdo HC).

Alamdo Holdings Pty Ltd (Alamdo), which owned flood-prone land in the Bankstown City Council area, sued the Council, claiming damages and a mandatory injunction directing the Council to undertake remedial works. The Council pleaded s 733 as a defence to the claim. The primary judge found that the Council had not acted in good faith and, accordingly, had not made out the defence. Gzell J granted injunctive relief for the abatement of the nuisance and held that, in any event, s 733 would not protect the Council against the making of an injunction: Alamdo Holdings Pty Ltd v Bankstown City Council [2003] NSWSC 1074; (2003) 134 LGERA 114.

The Council appealed and Alamdo cross-appealed. The Court of Appeal (Spigelman CJ, Giles and Ipp JJA agreeing) upheld the primary judge’s finding that the Council had not established the good faith defence but reversed the finding that injunctive relief was not excluded by s 733 (if good faith had been made out): Bankstown City Council v Alamdo Holdings Pty Ltd [2004] NSWCA 325; (2004) 135 LGERA 312. Accordingly, it dismissed the Council’s appeal and Alamdo’s cross-appeal, with the effect that the injunctions made by Gzell J stood as did his Honour’s finding that Alamdo was not entitled to damages.

Spigelman CJ described s 733 as follows at [32]:

Both the Council and Alamdo sought special leave to appeal to the High Court. The High Court allowed the Council’s appeal against the injunction. The High Court held that, although s 733 conferred protection from exposure to an injunction because the word “liability” was to be construed broadly, there was insufficient evidence to support a finding that the Council had not acted in good faith. The plurality (Gleeson CJ, Gummow, Hayne and Callinan JJ) said at [56]:

On this basis, the High Court refused Alamdo’s application for special leave to appeal against the refusal of the trial judge and the Court of Appeal to award damages.

Alamdo HC was considered by the Court of Appeal in Port Stephens Shire Council v Booth [2005] NSWCA 323; (2005) 148 LGERA 351 (Booth). In Booth, the Council had granted development consent for the construction of holiday cabins in the vicinity of the weapons range used by aircraft from the Williamtown RAAF Base. The developer brought proceedings against the Council in the District Court, which found that the Council was liable in negligence and had not made out the defence of good faith under s 149(6) of the EPA Act, to which s 733 of the Act was regarded as being analogous.

The Court of Appeal (Giles JA, Beazley JA and Hunt AJA agreeing) dismissed the Council’s appeal. The reasons for upholding the primary judge’s finding of lack of good faith appear from the following extract:

The Court addressed the authorities on statutory analogues to s 149(6), which included s 733 of the Act. Giles JA said, at [122]:

One of the cases referred to by Giles JA was Melaleuca Estate Pty Ltd v Port Stephens Shire Council [2004] NSWSC 415, which his Honour noted was then the subject of an appeal.

In Melaleuca Estate Pty Ltd v Port Stephens Shire Council, the plaintiff’s predecessor in title acquired land in about 1950. In the 1970s the Council approved a neighbouring development and carried out road drainage works. The storm water substantially increased the flow of water onto the plaintiff’s land. The plaintiff (Melaleuca) obtained development approval for a development which required it to execute drainage work on the land. Subsequently the plaintiff sought an injunction to restrain the Council from discharging stormwater onto the plaintiff’s land.

The primary judge, Cripps AJ, was satisfied that the water coming onto the property constituted a nuisance but found that the plaintiff had willingly undertaken the responsibility of executing drainage work and that the Council was therefore not liable since it had not adopted the nuisance by failing unreasonably to do anything about it.

The Court of Appeal (Giles JA, McColl JA and Hunt AJA agreeing) allowed the appeal: Melaleuca Estate Pty Ltd v Port Stephens Council [2006] NSWCA 31; (2006) 143 LGERA 319. It found that the plaintiff/appellant had not taken upon itself the obligation to deal with the ingress of water and that the stormwater flow remained a nuisance for which the Council was liable. As the Council had relied on s 733 of the Act, it was necessary for the Court to consider the meaning of “good faith” and whether the Council had established that it came within the exception.

At [75], Giles JA referred to Alamdo HC as follows:

The findings of the Court of Appeal as to the lack of good faith of the Council are as follows:

It was also argued by Melaleuca that s 733 did not apply because the Council’s conduct did not relate to the likelihood of the land being flooded or the nature and extent of flooding. Giles JA rejected this argument at [78] as follows:

It was common ground that the Council bears the onus of establishing good faith. Mr Guihot submitted that the Council had established a prima facie case that it had acted in good faith by adducing evidence that it had followed its usual processes of consultation and consideration when considering whether to approve the car park, and on what conditions. While he accepted that there was a triable issue on the questions of negligence and nuisance, he contended that the plaintiffs had neither rebutted the evidence by adducing their own evidence on the question of good faith, nor had they sought to challenge the Council’s evidence by cross-examining the deponents of affidavits read on behalf of the Council. He submitted that, in those circumstances, there was no justification for the matter going to trial and that the proceedings should be summarily dismissed.

I reject the submission that the plaintiffs have not adduced evidence on the topic of good faith. The narrative set out above concerning the approval of the shed in 1996 and the concerns raised at that time derives from the documents tendered by the plaintiffs from the Council’s files. The plaintiffs have also adduced substantial photographic evidence which shows the change in the topography of the land behind their property over the years. Further, the plaintiffs have adduced uncontroverted evidence that the conditions imposed by the Council on the development have been manifestly inadequate to address the drainage issues. In essence, the plaintiffs submitted that their concerns about the damage which would be caused to their property by the carpark which were foreseen by Mr Belcher, were disregarded by the Council, and have come to pass.

Plainly mere negligence does not amount to lack of good faith. The distinction between the two concepts needs to be maintained in order to preserve the meaning and effect of s 733 of the Act. Nonetheless, more is involved to establish good faith than mere proof of absence of corruption or compliance with procedures and applicable legislation. Further, the authorities referred to above demonstrate that the question whether good faith is established is one about which minds may differ and requires a close examination of the relevant facts, which can only be found at trial. The passage from Giles JA’s judgment in Melaleuca Estate Pty Ltd v Port Stephens Shire Council indicates that a Council which has exhibited “signal disregard of the rights of the owner of the land” (at [85]) may be unable to prove that it acted in good faith. I understand this to be the basis of the plaintiffs’ opposition to summary dismissal.

Rather than accepting the advice given to the Council by its in-house engineer in the handwritten assessment referred to above (which would have required the proposed carpark to be surfaced with pervious paving materials such that the pre-development initial and continuing rainfall loss factors were maintained), the Council approved the application on the basis that there would be an “approved stormwater drainage plan”, which presupposed that the carpark would be covered in an impervious surface.

Further, the evidence adduced by the plaintiffs shows that the Council can be taken to have been aware, at least from 7 May 1996, that the residences on Bull Street (where the plaintiffs’ property is located) would be, over time, acquired by the NSW Government because they were susceptible to flooding. The inference is open on the evidence that the Council may have been less concerned about the run-off to these properties from the developments to which it was granting approval because once the properties were owned by the Government, they were to be left undeveloped, thereby removing the potential for harm from run-off. While the Council was sufficiently aware of the need to address the run-off (as its documents indicate), it is plain from the plaintiffs’ evidence (which would be available to be accepted at trial and was not controverted by the Council for the purposes of this application) that the conditions imposed by the Council have either not been enforced or are manifestly insufficient to protect the plaintiffs’ property from the run-off occasioned by the building and car park development.

In my view, the material adduced by the plaintiffs, including Mr Belcher’s response to the application, the express caveat in the letter from the Department of Land and Water Conservation and the historical material from the 1990s, is sufficient to indicate that there is a triable issue as to whether the Council will be able to prove at a final hearing, on the balance of probabilities, that it acted in good faith. It is not appropriate, in determining an interlocutory application, to say more about the strength or otherwise of the Council’s defence.

It was accepted that the plaintiff has a reasonable cause of action in negligence (in the sense that there are issues to be tried). I am not persuaded that there is no triable issue as to whether the defendant can establish a defence under s 733 of the Act. The meaning of “good faith” has been described (by the Court of Appeal in Bankstown City Council v Alamdo Holdings Pty Ltd) as “protean”. The High Court has warned against putting a gloss on the words “good faith” (in Alamdo HC). In these circumstances, the defendant has not established that the question whether it is entitled to defeat the plaintiffs’ claim on the basis of s 733 ought be dealt with summarily.

Ms Downes confirmed that she and her brother acted on their own behalf and had not incurred expenses by way of legal fees. Accordingly, there will be no order as to costs in their favour, which would otherwise follow the event in accordance with the general rule: UCPR, r 42.1.

For the reasons given above, I make the following orders: