Can this be right?
By Russell Cocks, Solicitor
First published in the Law Institute Journal
Can lawyers rely on certificates provided by authorities?
Property lawyers rely on certificates from authorities, such as local councils, all the time. Acting for a vendor, our clients have an obligation to disclose, prior to contract, certain information to prospective purchasers about the property to be sold and often rely upon certificates to reveal that information. Indeed, s.32J Sale of Land Act envisages that such certificates may be attached to the Vendor Statement. When acting for a purchaser, it is common practice to rely on certificates attached to the Vendor Statement as proof of the information contained therein.
This is particularly relevant to the town planning status of the property, a consideration that can have a huge impact on the value of the property. It is fair to say that the average lawyer would unconditionally accept that if a planning certificate was annexed to a Vendor Statement, the zoning of the property would comply with that certificate and that the purchaser can rely on that information. It is therefore likely to come as somewhat of a shock that the Court of Appeal in Queensland appears to have thrown doubt on this expectation and, if that decision were to be followed in Victoria, lawyers would become liable to their purchaser clients if the information in the certificate proved to be incorrect.
Central Highlands Regional Council v Geju P/L [2018] QCA 38 was an appeal by the Council against the decision in Geju P/L v Central Highlands Regional Council [2016] QSC 279. At first instance McMeekin J held the Council responsible for an incorrect town planning certificate that described land as zoned ‘industrial’ when it was in fact zoned ‘rural’ and found in favour of a purchaser who, relying on the certificate, had paid too much for the land. The purchaser’s claim had been based on the negligence of Council in providing the incorrect certificate to the vendor, who in turn provided it to the purchaser, and the Court was satisfied that the Council owed a duty of care to the purchaser, had breached that duty and the purchaser had suffered loss as a result. Most lawyers would agree with that decision and take comfort in the knowledge that an authority is responsible not only to the party who obtains the certificate, but third parties who might be expected to rely on the certificate.
But that decision was overturned on appeal. The Court of Appeal followed a similar line of analysis to McMeekin J but diverted, dramatically, at the question of duty of care. McMeekin J was satisfied that the Council owed a general duty of care in respect of the provision of certificates and described the purchaser as being a member of a class of people who might reasonably be expected to rely on the certificate – a potential purchaser of the property. However, the Court of Appeal rejected this view and concluded that “there was no rational way to define a class of which (the purchaser) was a member other than in very broad terms” and went on to suggest that tenants, lenders or investors might also be interested in the information contained in the certificate and that the Council’s liability should not extend to such a wide class of people. Thus, the Council owed no duty of care to the prospective purchaser.
Can this be right?
Since Mid Density Developments P/L v Rockdale Municipal Council [1993] FCA 408 there has been a widely held belief that municipal Councils are responsible for the accuracy of certificates provided to applicants for certificates AND third parties who deal with the applicant and might be reasonably expected to rely on such certificates. Prospective purchasers certainly fall within such a class, particularly when the certificate is relied upon by the applicant vendor to satisfy the vendor’s statutory disclosure obligation to prospective purchasers. That other classes of people might also interact with the applicant for the certificate hardly seems a valid reason to exclude that smaller class of people who interact as prospective purchasers.
The law relating to negligence causing pure economic loss is arcane. The High Court has had cause to consider the issue on a number of occasions and Central Highlands might provide the opportunity for it to do so again. In the meantime it is hoped that the previously understood liability imposed on council charged with the responsibility of administering planning schemes to provide correct certificates in respect of those schemes will continue, in Victoria at least.
Tip Box
•authorities provide certificates relating to properties
•the applicant for the certificate can rely on it
•there is now some doubt as to whether a third party can rely