SUTHERLAND SHIRE COUNCIL v HEYMAN

157 CLR 424
60 ALR 1

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(Judgment by: MASON J)

SUTHERLAND SHIRE COUNCIL
v HEYMAN

Court:

Judges: Gibbs C.J.

Mason J.Wilson J.
Brennan J.
Deane J.

Subject References:
Negligence
Local Government (NSW)

Judgment date: 4 July 1985

CANBERRA

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Judgment by:
MASON J

This appeal raises an important question concerning the liability in negligence of a local authority, which has statutory power to make inspections of buildings in the course of erection, for its failure to inspect, or its failure to detect on inspection, defects in the foundations of such buildings. The appeal, brought by the appellant council against a judgment of the New South Wales Court of Appeal, arises out of an action in the District Court of New South Wales brought by the respondents, who are husband and wife, for damages for negligence. The respondents are the registered proprietors for an estate in fee simple of land known as 14 Bridgeview Road, Engadine, near Sydney, which they purchased in January 1975 from the previous owners, Mr R. Sloan and Miss L. Makin, who caused a house to be erected on the land between 1968 and 1970. The respondents saw the house for the first time in December 1974. They did not then discern any defects in the house. It seems that they did not notice that anything was seriously amiss until 20 January 1976 when bad leaks occurred in the house during heavy rain and serious defects began to appear. These defects took the form of cracking in many places and distortion of the beams and other supports under the house. Remedial work was in due course carried out, including remedial work to the footings, which turned out to be quite inadequate and had led to an instability in the structure of the house.

The appellant was the local government authority for the area under the Local Government Act 1919 (NSW) ("the Act") and as such was charged with the responsibility of implementing the provisions of the Act and ordinances made thereunder, a matter to be discussed in more detail later. The respondents' claim in negligence begins with the appellant's approval on 17 September 1968 of certain plans and specifications for the erection of the house submitted on behalf of Mr Sloan and Miss Makin by a building company. The respondents' case was that the appellant was negligent in two respects: (1) in approving plans for the erection of the house, the foundations of which were inadequate and unstable and did not comply with the Act and ordinances; and (2) in failing to ensure that the foundations were inspected properly or at all.

Robson D.C.J., by whom the action was tried, found that the appellant was not negligent in approving the plans and this finding was not challenged on appeal. However, his Honour found on the balance of probabilities that an officer of the appellant had inspected the site after the foundation trenches were open and before the foundations were laid and that the appellant was negligent in the manner in which this inspection was carried out. He held that it was liable in damages for this negligence to the respondents and entered judgment in their favour in the sum of $5,625.75 damages and interest amounting to $2,297.18, making a total of $7,922.93.

His Honour's finding that there had been an inspection after the trenches were open and before the foundations were laid seems to have been based on the conditions contained in the building approval, the practice of the appellant in making inspections and the failure of the appellant to call a witness, Mr Pollard, who, although no longer employed by it, had been employed as a building inspector at the relevant time and would have been able to give relevant evidence. The Court of Appeal concluded that on the evidence a finding that an inspection had been carried out at that time was not justified. Hope and Reynolds JJ.A. found that the only inspection which was made by the appellant was made on 3 December 1969 after the framework of the house was constructed. This finding was based on the existence of a card kept as a record by the appellant, which established that an inspection was carried out by a building inspector on 3 December 1969 at which time the framework of the house had been constructed. Their Honours concluded that on the evidence an inference could be drawn that no other inspection was carried out by the appellant. However, their Honours held that the appellant had been negligent in inspecting or failing to inspect the footings on 3 December 1969. In the result the Court of Appeal affirmed the judgment of the primary judge.

It is convenient at this point to recount some of the material facts, as stated by Hope J.A., so that the conclusion reached by the Court of Appeal may be appreciated. The application to the appellant for building approval was accompanied by plans showing brick pier and pipe supports for a large part of the floor area. At its front the building stood at or near ground level, but the land ran down very sharply to the rear so that the floor level at the back of the house was very high above the ground. The accompanying specifications stated under the heading "EXCAVATOR - TRENCHES":

"Excavate for all footings for walls, piers, etc., to a minimum depth of 9 in. or to a depth necessary to secure solid bottoms and even bearing throughout, bottoms to be level and stepped as necessary."

Later under the heading "BRICKLAYER - FOOTINGS", it was stated:-

"All brick walls and piers are to be on footings as described below. Footings are to be on level foundations and be stepped and lapped as required. Footings are to be two courses of 9 in. work under walls 4! in. thick, up to 5 ft. high; add one course of 14 in. work where height of wall exceeds 5 ft."

The specifications also contained other provisions as to footings which were applicable in special circumstances. The plans showed the existence of piers and pipe supports, but no details were shown as to what was required in respect of their footings.

Much of the land that sloped down to the rear and over which the house was to be built contained floating rocks and was made up of rubble or other filling, although at places there was "parent" rock which would provide a solid basis for the piers or other foundations. The evidence established, as would be quite obvious, that the combination of the need for piers and pipes to support the building where the land dropped away, and the instability or other unsatisfactory nature of much of the ground on which those supports would have to stand, necessitated care being taken with the footings for the supports, and would give any person with building knowledge or skills a warning that the building might be at risk if the footings were not adequately supported.

The building approval was set out in a printed form. So far as it is relevant it provided:

"Approval has been given by the Council of the Shire of Sutherland to the erection of the building(s) described in the attached plans and specifications and numbered as above subject to observance of the provisions of Part XI of the Local Government Act, 1919, as amended, and the ordinances made thereunder, and also subject to the following conditions :-

1.

Forty-eight hours' notice in writing shall be given to the Council prior to the following works being carried out:-

(a)

Commencement of the building.

(b)

When foundation trenches are open and before foundations are laid.

(c)

When steels are in place and before concrete is poured (foundations, lintels beams, floors).

(d)

When drain lines are laid and before covering in.

2.

Notice in writing shall be given within 24 hours of completion of the following works:-

(a)

When foundation walls and piers are complete (fibro and weatherboard).

(b)

When in brick buildings walls are up to dampcourse and then up to square .

(c)

When (in fibro and weatherboard) frame work is completed.

(d)

When building is completed, but before occupation.

....

4.

.....

(c)

The Council prohibits occupation without its permission of any building within the Shire until it has been completed in accordance with the approved plans and specifications and the building has been inspected and passed following Notice as required under Clause 2(d) of this Permit.

The above conditions are imposed by the Council to ensure that the whole of the work is in accordance with the approved plans and specifications, the building ordinances and Council's and Water Board requirements."

Further conditions were stamped on the annexed plans. One such condition was expressed as follows:

"This plan is approved subject to a surveyor's certificate being produced when the foundations have been laid and walls commenced."

In a letter from the appellant to Mr Sloan and Miss Makin dated 17 September 1968 which evidently accompanied the plans, it was stated that two additional conditions had been imposed of which the second was:

"2. Submission to Council of check survey when brick footings have commenced."

The card to which reference has already been made was the only record held by the appellant in respect of the construction of the building or of any inspection relating to it. The card referred to the premises, the serial number of the building approval and contained an endorsement:-

"Frame O.K. 3.12.69. F.W.P."

The initials are those of Mr Pollard who was then employed by the appellant. It seems that it was the appellant's practice to give a builder cards of this type so that he could send a card to the appellant when an inspection could be conveniently carried out and that it was only on receipt of such a card that an inspection would be carried out.

There is no direct evidence that the appellant carried out any inspection when the house was completed or before its occupation. The respondents did not apply for or obtain any certificate in respect of it under the provisions of the Act, and there is no record that the previous owners applied for or obtained a certificate under that section .

The Court of Appeal inferred that the inspection on 3 December 1969 was carried out following notice by the builder that the framework had been completed, but rejected the submission that the only purpose of that inspection was to examine the framework. Hope J.A. observed that it was not known whether the officer who made the inspection did anything to check the foundations. In response to the submission that there was no practicable check that could have been made by the officer since the piers and pillars had already been erected, as well as other parts of the building, and the base for the footings of the piers and the pillars would have been covered by soil, his Honour considered that despite the lapse of time and the changes that may have occurred in the surrounding surface between December 1969 and the time when the respondents and their advisers were able to carry out tests, it was apparent from the evidence that it would have been practicable in December 1969 by removing part of the soil or by other means, to see how the footings were supported. He observed that such a test would not have involved any major work. And he then went on to hold that on the assumption that the officer of the appellant assumed the duty of inspecting the footings he must have failed to exercise reasonable care to see that they were properly supported if he failed to discover the inadequacy of that support. He pointed out that if on the other hand the appellant, having been notified that the building was constructed up to the framework stage, knowing that no earlier inspection had been carried out, failed to have any inspection of the footings and their support carried out, it failed to exercise reasonable care to ensure that the footings had been laid or constructed to its satisfaction in accordance with the approved plans and specifications.

His Honour pointed out that the appellant had express power under the Act to impose conditions on any approval and those conditions might relate to the stability of the building. The conditions actually imposed in the instant case made provision for the giving of the notice to the appellant at various stages of construction. The purpose of the conditions was to ensure that the whole of the work was carried out in accordance with the approved plans and specifications. He regarded the conditions as having been validly imposed because the Act requires every building to be erected to the satisfaction of the council in accordance with both the Act and the ordinances and with the approved plans and specifications, the council having a duty to ensure that it is so satisfied.

Having found that the appellant had failed to take reasonable care in one or other of the two respects already mentioned, Hope J.A. considered that the appellant was liable in negligence in accordance with the principles enunciated by Lord Wilberforce in Anns v. Merton London Borough Council (1978) AC 728. Reynolds J.A, who delivered a separate judgment, adopted a similar approach to that taken by Hope J.A. Mahoney J.A. agreed with the orders proposed by the other members of the court but neglected to give any reasons for so doing.

At the trial the respondents' case, so far as it related to inspection, was that the appellant was liable either because it failed to inspect the footings before the trenches were closed or because it negligently inspected them. Negligent inspection of the footings, or negligent omission to inspect the footings, at the stage when the framework of the house had been erected, which was the basis of the Court of Appeal's finding of negligence, was not a matter put forward by the respondents at first instance. However, on appeal, the respondents were entitled to sustain the judgment which they had obtained on another ground, even a ground not argued at the trial, so long as there was no possibility that the ground might have been answered by evidence not actually called. It was not suggested that the appellant is in a position to call additional evidence on the issue found against it by the Court of Appeal. The result is that the issue, once raised before that Court, had to be determined on the evidence. The appellant submits that the determination was erroneous. But, if it be accepted, as I consider it should be, that the practice of the appellant was to inspect only upon submission by the builder of a card and that there was no record in the appellant's files of an inspection before 3 December 1969, the officer who made the inspection of the framework on that day knew or ought to have known that the footings had not been inspected previously.

The principal relevant provision in Pt XI of the Act dealing with "BUILDING REGULATION" is s 305(1) which confers general power on the council of a municipality to "control and regulate the erection of buildings in the municipality". A building may not be erected or used in contravention of provisions made by or under the Act (s 306(1)). Division 4 of Pt XI contains a series of provisions amounting to an entire scheme of regulation which is designed to ensure that buildings will be erected in accordance with the Act, the ordinances and the applications, plans and specifications approved by the council. Section 310 provides:

"Subject to the provisions of this Act and of any ordinance every building hereafter erected in the area shall be erected to the satisfaction of the council-

(a)

in conformity with this Act and the ordinances; and

(b)

in conformity with the application, plans, and specifications in respect of which the council has given its approval for the erection of the building."

A building may not be erected without the prior approval of the council (s 311) and an application for approval must be made in the prescribed form and be accompanied by the plans and specifications (s 312(1)). The council is required to take into consideration in dealing with an application for approval of the erection of a building the long list of matters specified in s 313 which relate, amongst other things, to the safety of the building and its suitability for human habitation - see especially pars.(a), (b), (d), (l) and (m). The council may approve, approve subject to conditions, or disapprove the application, subject to the proviso that the council shall not approve unless it is satisfied that a building erected in accordance with the application, plans and specifications as approved would be in accordance with the provisions of the Act and the ordinances (s 314(1)). The council is given power to prohibit the use or occupation, without its permission, of any building until it has been completed in accordance with the approved plans and specifications (s 316(1)). And the council is required, on application, to issue a certificate to the effect that in the opinion of the council a building in all respects complies with the Act, the ordinances and the plans and specifications approved by the council or stating that any contravention of the Act or ordinance or any departure from the approved plans and specifications is not such as need to be rectified (s 317A). The production of the certificate is for all purposes deemed conclusive evidence in favour of a bona fide purchaser for value that at the date of the certificate the building complied with the requirements of the Act and ordinances (s 317A(4)).

With the exception of cl.83 of Ordinance No. 71, neither the provisions of the Act nor those of the ordinances explicitly impose an obligation, or confer power, on a council to make inspections of buildings in course of erection. Clause 83 requires the Clerk to instruct "the proper servant" of the council to make an inspection of a building upon receipt of notice in writing by the person by or in consequence of whose order the building has been erected, there being a requirement to give such notice before any person uses or occupies the uncompleted building and forthwith upon completion of any unoccupied building. The servant so instructed must inspect and report to the council whether or not the building has been erected in accordance with the ordinance and without material deviation from the approved plans and specifications. The evidence did not establish that an inspection was made pursuant to cl.83 or that the circumstances were such as to oblige the appellant to make an inspection under the clause.

Independently of cl.83, the effect of the general scheme of regulation contained in Pt XI and the ordinances is to impose on a council a duty to satisfy itself that a building is erected in conformity with the Act and the ordinances (O'Carroll v. Potter (1928) 29 SR(NSW) 393, at p 398), and this necessarily extends to the matters mentioned in par.(b) of s 310. The words "to the satisfaction of the Council" in s 310 indicate that it is for the council in the exercise of its discretion to determine what steps it will take in order to satisfy itself that the relevant requirements have been complied with in relation to the erection of the building. But it is difficult to understand how a council could discharge its responsibility without making inspections. Indeed, the evidence demonstrates that the appellant adopted the practice of making inspections of buildings in course of erection according to a procedure the object of which was to ensure, though it may not have been achieved in this case, that the foundations were checked. We should proceed therefore on the footing that the making of an inspection or inspections of a building in course of erection was a necessary element in the performance by a council of its duty to satisfy itself of the matters already mentioned.

As the evidence does not support a finding that the footings were inspected and merely supports the finding that the appellant was careless either in failing to inspect or in inspecting, the respondents must establish that the appellant was liable in negligence whether it inspected or failed to inspect. The critical question then is whether the appellant is liable on either basis. The answer depends on the general principles of the common law regulating the liability of a public authority in negligence in respect of its act or omission in the course of performing its statutory responsibilities. The application of the law of negligence, itself in course of evolutionary development, to public authorities has presented special problems. These problems are referable mainly to the character of a public authority as a body entrusted by statute with functions to be performed in the public interest or for public purposes. Some adjustment therefore needs to be made to accommodate the application of the principles and concepts of negligence to the acts and omissions of such a body. In what circumstances, if at all, does a public authority come under a common law duty of care in relation to the performance or non-performance of its functions? Can a cause of action for breach of a common law duty of care co-exist with a cause of action for breach of statutory duty? In what circumstances, if at all, is a public authority liable in negligence for loss or damage suffered by another through the fault of a third party, when the authority fails to perform a statutory function which has as its object the prevention or mitigation of loss or damage of that kind? To what extent are these questions affected by the circumstance that a public authority exercises policy-making and discretionary functions? These are the major issues of principle which lie behind the present appeal.

The myriad of decided cases do not furnish clear and unqualified answers to these issues. This is partly because the decided cases on some occasions distinguish unnecessarily between a statutory power and a statutory duty and on other occasions distinguish insufficiently between a common law duty of care and a statutory duty. And it is partly because the unsatisfactory dichotomy between misfeasance and non-feasance has had a significant influence in this branch of the law of negligence. It is not surprising that this has been so - the duties imposed by statute on public authorities are generally positive or affirmative duties. When a duty of care arises in relation to a statutory duty or power having as its object the prevention of danger or the avoidance or minimization of loss or damage to the public, a section of the public or a class of individuals, linking breach of that duty of care to an individual's loss or damage inevitably raises questions of causation.

Except in so far as a statute creates a civil cause of action for breach of duty, the distinction between a statutory power and a statutory duty, generally speaking, has limited relevance to civil liability arising out of performance or non-performance of statutory functions. When a statute sets up a public authority, the statute prescribes its functions so as to arm it with appropriate powers for the attainment of certain objects in the public interest. The authority is thereby given a capacity which it would otherwise lack, rather than a legal immunity in relation to what it does, though a grant of power may have this effect when the infliction of damage on others is the inevitable result of its exercise. In framing such a statute it is inconvenient to describe the intended activities of the authority in terms of a series of positive duties. It is preferable to express those activities as functions or powers so that the authority is free to make policy-making decisions and discretionary judgments with a view to attaining the statutory objects. Decisions and judgments of this kind will be involved as a preliminary to exercising, or declining to exercise, a power and, subsequently, in determining how it is to be exercised. Viewed in this light statutory powers are not in general mere powers which the authority has an option to exercise or not according to its unfettered choice. They are powers conferred for the purpose of attaining the statutory objects, sometimes generating a public expectation having regard to the purpose for which they are granted that they will be exercised. There is, accordingly, no reason why a public authority should not be subject to a common law duty of care in appropriate circumstances in relation to performing, or failing to perform, its functions, except in so far as its policy-making and, perhaps, its discretionary decisions are concerned. And, despite possible indications to the contrary in Anns (at pp 755, 757-758, 760), there is no compelling reason for confining such a duty of care to situations in which a public authority or its officers are acting in excess of power or authority.

It is now well settled that a public authority may be subject to a common law duty of care when it exercises a statutory power or performs a statutory duty. The principle that when statutory powers are conferred they must be exercised with reasonable care, so that if those who exercise them could by reasonable precaution have prevented an injury which has been occasioned, and was likely to be occasioned, by their exercise, damages for negligence may be recovered (Caledonian Collieries Ltd. v. Speirs (1957) 97 CLR 202 , at pp 219-220; Benning v. Wong (1969) 122 CLR 249 , at pp 307-308) has been applied mainly to private Acts. However, it has been frequently applied in Australia to public authorities, notably public utilities, exercising powers under public statutes (Sermon v. The Commissioner of Railways (1907) 5 CLR 239 , at pp 245, 254; Essendon Corporation v. McSweeney (1914) 17 CLR 524 , at p 530; Metropolitan Gas Co. v. Melbourne Corporation (1924) 35 CLR 186 , at pp 193-194, 197; South Australian Railways Commissioner v. Barnes (1927) 40 CLR 179 ; Cox Bros. (Australia) Ltd. v. Commissioner of Waterworks (1933) 50 CLR 108 ; The South Australian Railways Commissioner v. Riggs (1951) 84 CLR 586 , at pp 589-590; Voli v. Inglewood Shire Council (1963) 110 CLR 74 , at pp 88, 89, 100; Birch v. Central West County District Council (1969) 119 CLR 652 ). While some early statements of the principle suggest that the power given by statute is conditioned upon it being exercised without negligence so that negligent exercise amounts to an excess of authority (McSweeney, at p 530; Metropolitan Gas Co., at p 197), the better view has always been that the cause of action in negligence arises under the principle by virtue of a breach of a duty of care existing at common law (Geddis v. Proprietors of Bann Reservoir (1878) 3 App Cas 430, at pp 455-456; London and Brighton Railway Co. v. Truman (1885) 11 App Cas 45, at p 61; Fullarton v. North Melbourne Electric Tramway and Lighting Co . Ltd. (1916) 21 CLR 181 , at pp 199-200; East Suffolk Rivers Catchment Board v. Kent (1941) AC 74, at pp 88-89; Riggs, at pp 589-590). And, at least since the decision in Fisher v. Ruislip-Northwood Urban District Council and Middlesex County Council [1945] KB 584, esp. at pp 592-593, 615, 619-620, it has been generally accepted that, unless the statute manifests a contrary intention, a public authority which enters upon an exercise of statutory power may place itself in a relationship to members of the public which imports a common law duty to take care.

According to received doctrine the breach of a statutory duty may itself give rise to a civil cause of action. In England and Australia the separate and concurrent character of causes of action arising from breach of a statutory duty and common law negligence have been repeatedly emphasised (O'Connor v. S.P. Bray Ltd. (1937) 56 CLR 464 , at p 477; London Passenger Transport Board v. Upson (1949) AC 155, at pp 168-169; Downs v. Williams (1971) 126 CLR 61 , at pp 74-75). The existence of a statutory cause of action, generally based on strict liability, does not exclude liability for breach of a common law duty of care unless the statute provides otherwise (Hirst v. Jessop (1962) 63 SR(NSW) 15, at p 21; Bux v. Slough Metals Ltd. (1973) 1 WLR 1358 , at pp 1364, 1369-1370). On this view, the breach of a statutory duty may both (a) itself give rise to a separate cause of action, and (b) be evidence of negligence at common law (Sibley v. Kais (1967) 118 CLR 424 , at p 427). This is to be contrasted with the prevailing view in the United States where the breach of a statutory duty is treated as evidence of negligence at common law and not as giving rise to a separate cause of action (see Prosser and Keeton on the Law of Torts (5th ed. 1984) pp.220-223, 229-231). The United States view appears now to have been embraced in Canada (Reg. v. Saskatchewan Wheat Pool (1983) 143 DLR(3d) 9). Accordingly, the proposition that a public authority is not liable at the suit of an individual for damages for breach of statutory duty unless the statute on its true construction manifests an intention to confer a civil cause of action has no application to the liability of an authority for breach of a common law duty of care.

Generally speaking a public authority which is under no statutory obligation to exercise a power comes under no common law duty of care to do so (see Revesz v. Commonwealth of Australia (1951) 51 SR(NSW) 63). But an authority may by its conduct place itself in such a position that it attracts a duty of care which calls for exercise of the power. A common illustration is provided by the cases in which an authority in the exercise of its functions has created a danger, thereby subjecting itself to a duty of care for the safety of others which must be discharged by an exercise of its statutory powers or by giving a warning. See, for example, Barnes v. Irwell Valley Water Board [1939] 1 KB 21 ; Knight v. Sheffield Corporation [1942] 2 All ER 411 ; Fisher v. Ruislip-Northwood Urban District Council; Bird v. Pearce; ex parte Somerset County Council (1979) 77 LGR 753. That it is the conduct of the authority in creating the danger that attracts the duty of care is demonstrated by Sheppard v. Glossop Corporation [1921] 3 KB 132 . There the highway authority was under no duty of care with respect to lighting, though the danger was foreseeable, because it did not create the danger. Having statutory power to make provision for the lighting of streets, it placed a lamp at a dangerous point in a street, the danger not being of its making, but extinguished the lamp at 9 p.m. in accordance with a general resolution applying to all streets in the borough. The authority was held not liable on the footing that the statute imposed no obligation to light, that the authority having begun to light was under no obligation to continue to do so, and that having done nothing to make the street dangerous, it was under no obligation to give warning of the danger. Atkin L.J. (at p 151) explained earlier cases in which under the same statute local authorities had been liable for not lighting by stating that the local authorities had created the dangers which were responsible for the plaintiffs' injuries.

There are other situations in which an authority's occupation of premises (Voli) or its ownership or control of a structure in a highway or of a public place (Buckle v. Bayswater Road Board (1936) 57 CLR 259 , at pp 286-287; Aiken v. Kingborough Corporation (1939) 62 CLR 179 ) attracts to it a duty of care. In these cases the statute facilitates the existence of a common law duty of care. In the words of Lord Denning M.R. in Scott v. Green (1969) 1 WLR 301 , at p 304, "The statute does not by itself give rise to a civil action, but it forms the foundation on which the common law can build a cause of action." As Voli demonstrates, the breach of the common law duty may arise from the failure of the authority's officers to ascertain that the statutory requirements are satisfied. There, the officers who examined the plans and specifications of the shire hall failed to ascertain that the authority's by-laws relating to public buildings had been infringed with the result that a stage collapsed and injured the plaintiff. The authority and its architect were held liable. Liability of this kind extends to liability for damage which is attributable to the positive and wrongful act of another - see Goldman v. Hargrave (1966) 115 CLR 458 , at p 466; [1967] 1 AC 645 , at pp 661-662 where Lord Wilberforce stated that Sedleigh-Denfield v. O'Callaghan (1940) AC 880 provided support for the existence of a general duty upon occupiers in relation to hazards occurring on their land, whether natural or man-made.

And then there are situations in which a public authority, not otherwise under a relevant duty, may place itself in such a position that others rely on it to take care for their safety so that the authority comes under a duty of care calling for positive action. Such a relationship has been held to arise where a person, by practice or past conduct upon which other persons come to rely, creates a self-imposed duty to take positive action to protect the safety or interests of another or at least to warn him that he or his interests are at risk (Mercer v. South Eastern & Chatham Railway Companies' Managing Committee [1922] 2 KB 549 ; Morash v. Lockhart & Ritchie Ltd. (1978) 95 DLR(3d) 647; cf. Pennant Hills Restaurants Pty. Ltd. v. Barrell Insurances Pty. Ltd. (1981) 145 CLR 625 ). The liability of the public authorities in Knight (at p 414) and Bird (at pp 758-759) was put on this basis.

Reliance has always been an important element in establishing the existence of a duty of care. It has been suggested that liability in negligence is largely, if not exclusively, based on the plaintiff's reliance on the defendant's taking care in circumstances where the defendant is aware or ought to be aware of that reliance (Reiter, "Contracts, Torts, Relations and Reliance" in Reiter and Swan (Eds), Studies in Contract Law (1980) p 235, at pp.310-311). Be this as it may, the concept of proximity as explained by Stephen J. in Caltex Oil (Australia) Pty. Ltd. v. The Dredge "Willemstad" (1976) 136 CLR 529 , at pp 574-575 and Deane J. in Jaensch v. Coffey (1984) 58 ALJR 426, at p 442 (but cf. Leigh & Sillivan Ltd. v. The Aliakmon Shipping Co. Ltd. (1985) 2 WLR 289 , at p 327) involves in most cases a degree of reliance (see Junior Books Ltd. v. Veitchi Ltd. [1983] 1 AC 520 , at p 546). And it has certainly been an influential factor in setting limits to the far-ranging effect of the foreseeability doctrine and in confining the class of persons to whom a duty of care may be owed. It is natural, therefore, that the plaintiff's foreseeable and reasonable reliance on the defendant's statement has been a constant feature of the cases in which a defendant has been held liable for economic loss sustained as a result of negligent misstatement (Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. (1964) AC 465, at pp 486, 496, 502-503, 514; Ministry of Housing and Local Government v. Sharp [1970] 2 QB 223 , at p 268; Dutton v. Bognor Regis Urban District Council [1972] 1 QB 373 , at pp 394-395, 405; Scott Group Ltd. v. McFarlane (1978) 1 NZLR 553, at p 576). And in Shaddock & Associates Pty. Ltd. v. Parramatta City Council (No. 1) (1981) 150 CLR 225 , reliance by the plaintiff on the information provided by the defendant local authority which was aware or ought to have been aware of that reliance was an important, if not vital, element in the authority's liability for negligent misstatement (see pp 231, 252-253, 255).

Likewise, in the United States reliance has been a critical element in liability for negligent failure to exercise a power, especially when it is a power of inspection. Where the plaintiff alleged negligent failure by federal inspectors to inspect machinery involving safety hazards, it was held that the plaintiff must so choose to look to federal inspectors for protection that as a result of the government's inducements he or his employer had purposely come to rely specifically and principally on the government for their safety (Blessing v. United States (1978) 447 FSupp. 1160, at pp 1197-1200). But it was acknowledged that reliance might be established if the authority supplanted, rather than supplemented, the employer's inspections (p 1194). Similarly, the liability of coast guards for negligent inspections has been denied on the ground that the plaintiffs had not shown that they knew that the coast guards conducted safety inspections and that they were thereby induced to forego their own safety efforts (Patentas v. United States (1982) 687 F 2d 707, at p 717). On the other hand it has been recognized that where the government has supplanted private responsibility, as in the case of air traffic controllers, general, rather than specific, reliance may be sufficient to generate liability (Clemente v. United States (1977) 567 F 2d 1140, at pp 1147-1148). This approach was adopted in relation to the inspection and certification of civil aircraft (SA Empresa De Viacao Aerea Rio Grandense (Varig Airlines) v. United States (1982) 692 F 2d 1205 and United Scottish Insurance v. United States (1982) 692 F 2d 1209, where the court pointed out that the public generally depends on the government properly to inspect aircraft and that this justifies the imposition of a duty of care (p 1211)). These decisions were overruled by the Supreme Court in United States v. Varig Airlines (1984) 81 L.Ed. 2d 660 but only on the ground that they fell within the discretionary function exception in the Federal Tort Claims Act 1946.

The American experience therefore furnishes support for the view that a public authority is liable for negligent failure to perform a function when it foresees or ought to foresee that: (a) the plaintiff reasonably relies on the defendant performing the function and taking care in doing so; and (b) the plaintiff will suffer damage if the defendant does not take care. Several inter-related questions arise in connexion with the concept of reliance as a sufficient basis for the existence of the duty of care in the class of case with which we are concerned: (1) whether it is an essential element in the concept (a) that there should be conduct on the part of the defendant contributing to the plaintiff's reliance, and (b) that the plaintiff should act to his detriment; and (2) whether the concept extends to general reliance or dependence by those in the position of the plaintiff, as distinct from specific reliance by the plaintiff. The last question is largely a reflection of the earlier questions. It is positive conduct on the part of the defendant or the plaintiff's acting to his detriment which gives rise to specific, as distinct from general, reliance or dependence. Contributing conduct on the part of the defendant is an element in the vast majority of cases simply because without it the plaintiff would fail to establish reasonable reliance. Insistence on conduct contributing to the plaintiff's reliance would conform to a general notion that it is positive conduct on the part of an authority which attracts a duty of care calling for exercise of a statutory power. However, there is no a priori reason why the existence of a duty of care should necessarily be conditioned on the defendant's positive conduct. The same comment may be made about detriment. That the plaintiff has acted to his detriment may strengthen the case for imposing a duty of care, especially if the defendant is aware that the plaintiff has so acted, but there is no underlying reason why it should be regarded as a necessary condition. In the case of a public authority, the foreseeability of the plaintiff's reasonable reliance is a sufficient basis for finding a duty of care, subject to such dispensations as may arise from the special character of a public authority exercising statutory functions, a matter to be discussed shortly.

If this be accepted, as in my opinion it should be, there will be cases in which the plaintiff's reasonable reliance will arise out of a general dependence on an authority's performance of its function with due care, without the need for contributing conduct on the part of a defendant or action to his detriment on the part of a plaintiff. Reliance or dependence in this sense is in general the product of the grant (and exercise) of powers designed to prevent or minimize a risk of personal injury or disability, recognized by the legislature as being of such magnitude or complexity that individuals cannot, or may not, take adequate steps for their own protection. This situation generates on one side (the individual) a general expectation that the power will be exercised and on the other side (the authority) a realization that there is a general reliance or dependence on its exercise of power (see Shapo, The Duty to Act (1977) pp.95-96). The control of air traffic, the safety inspection of aircraft and the fighting of a fire in a building by a fire authority (but cf. Bennett & Wood Ltd. v. Orange City Council (1967) 67 SR(NSW) 426) may well be examples of this type of function. Whether the inspection of motor vehicles for registration purposes could generate such a general reliance is a more complex question (cf. Rutherford v. Attorney-General (1976) 1 NZLR 403, at pp 408-414). Whether the Council in the present case owed a duty of care to the respondents on this footing is a matter which I leave for later consideration.

Another suggested basis for subjecting an authority to a duty of care in the present circumstances is the failure to give proper consideration to the question whether the power of inspection should be exercised or not. In several respects the preliminary issues which arose for decision in Anns resembled the questions which arise in the present case. The House of Lords concluded that (1) the respondent authority was under a duty to give proper consideration to the question whether there should be an inspection or not and that immunity from attack in the event of non-inspection was not absolute; and (2) that in the event of inspection there might be room outside the area of legitimate discretion and policy for the duty of care at common law.

Although Anns has since been applied in the House of Lords in Governors of the Peabody Donation Fund v. Sir Lindsay Parkinson & Co. Ltd. (1984) 3 WLR 953 , by the New Zealand Court of Appeal in Mt. Albert Borough Council v. Johnson (1979) 2 NZLR 234 and by the Supreme Court of Canada in City of Kamloops v. Neilsen (1984) 10 DLR(4th) 641, it is evident from what I have written that I am unable to accept all that Lord Wilberforce said in his speech. Moreover, although a public authority may be under a public duty, enforceable by mandamus, to give proper consideration to the question whether it should exercise a power, this duty cannot be equated with, or regarded as a foundation for imposing, a duty of care on the public authority in relation to the exercise of the power. Mandamus will compel proper consideration by the authority of its discretion, but that is all.

The appellant, relying on Miller & Croak Pty. Ltd. v. Auburn Municipal Council (1960) 60 SR(NSW) 398, submits that the common law will not impose a duty of care on a public authority in relation to a failure to exercise its powers when those powers are exercisable for the benefit of the public rather than for the benefit of individuals or a class of individuals. There are several answers to this submission. First, in Miller & Croak the Court dealt with the case on the footing that the plaintiff pleaded breach of statutory duty, rather than common law negligence. Secondly, in the context of a common law duty of care the distinction between powers exercisable for the benefit of the public generally and those exercisable for individuals or a class of individuals is of dubious value as the American decisions demonstrate. See Coffey v. City of Milwaukee (1976) 247 NW 2d 132; Cracraft v. City of St. Louis Park (1979) 279 NW 2d 801; Adams v. State of Alaska (1976) 555 P 2d 235; Brennen v. City of Eugene (1979) 591 P 2d 719; Gannon Personnel Agency Inc. v. City of New York (1979) 425 NYS 2d 446; and see the discussion in (1980) 3 Hamline Law Review 231. Finally the submission does not provide an adequate answer to a reliance based duty of care.

The proposition that in general damages are not recoverable for economic loss unless it is consequential upon injury to the plaintiff's personal property is by no means absolute or inflexible; it is a reflection of the law's concern about endless indeterminate liability. In the absence of any such concern in a particular class of case there is no necessity to give effect to the proposition. The dissenting judgment of Laskin J. in Rivtow Marine Ltd. v. Washington Iron Works (1973) 40 DLR(3d) 530, cited with approval by Lord Wilberforce in Anns (at p 760) and by Lord Roskill in Junior Books (at p 544), acknowledged that there can be liability in negligence for economic loss resulting directly from avoidance of threatened physical harm to property of the plaintiff (Rivtow, at p 550). Referring to a manufacturer who supplies a crane of defective design, Laskin J. said (at p 552):

"It is foreseeable injury to person or to property which supports recovery for economic loss suffered by a consumer or user who is fortunate enough to avert such injury. If recovery for economic loss is allowed when such injury is suffered, I see no reason to deny it when the threatened injury is forestalled."

This approach is to be compared with that adopted by Lord Denning M.R. in Dutton when he said (at p 396):

"The damage done here was not solely economic loss. It was physical damage to the house. If Mr. Tapp's submission were right, it would mean that if the inspector negligently passes the house as properly built and it collapses and injures a person, the council are liable: but if the owner discovers the defect in time to repair it - and he does repair it - the council are not liable. That is an impossible distinction."

In this case it matters not whether the damage sustained by the respondents is characterized as being economic loss or physical damage. It is how the affair stands, viewed from the appellant's perspective, that is important in relation to a duty of care. The foreseeable consequences of a failure to inspect were physical damage to a particular building resulting from faulty foundations and the incurring of expenditure by a subsequent owner in rectifying the defects. To deny the existence of a duty of care solely by reason of the legal characterization of the respondents' loss as economic - because the structure was flawed before they acquired property in it - is to ignore the significance of other circumstances in which the loss was sustained, circumstances which the appellant could readily foresee. One of the circumstances is that the respondents' loss reflects expenditure which averts personal injury to those who occupy the building.

In saying this I am not suggesting that a duty of care arises here simply because the authority could foresee the possibility of economic loss ensuing as a result of its failure to inspect. If there is a firm foundation for a duty of care in this case, it is to be found in reliance or dependence rather than mere foreseeability of physical damage or economic loss. Inspection generally results in the issue of a certificate in which event the principles regulating liability for negligent misstatement apply. Laskin J. in Rivtow (at p 551) pointed out that the position of the inspector and the authority in Dutton qua the claim for costs of repairs and diminution in value of the house differed from that of the manufacturer of a defective product and represented a Hedley Byrne type of liability. The principles regulating liability for negligent misstatement deny that foreseeability of economic loss is itself a sufficient basis for a duty of care and, as we have seen, look to the plaintiff's reasonable reliance on the defendant's statement. Because liability in respect of a certificate depends not only on foreseeability but also on reliance it is a fortiori that liability in negligence for inspection or failure to inspect, not resulting in the issue of a certificate, depends on foreseeable and reasonable reliance or dependence. I have difficulty with the notion that liability for negligent inspection can be grounded on foreseeability alone unless negligent inspection causes damage to the plaintiff in the sense of increasing the damage he would otherwise have sustained. If the authority is under no liability for negligent failure to inspect, how can it expose itself to liability by embarking on a negligent exercise of its power to inspect, without causing damage in the sense already mentioned?

The final problem - whether a failure to exercise a statutory power can be causative of damage which has its origin in an earlier and positive act of negligence by another or in some accidental occurrence - may be disposed of shortly. We are concerned, not with the larger question of causation in its application to omissions that have agitated discussion by philosophers, but with the impact on causation of a breach of a duty of care, arising out of a possible relationship of general reliance or dependence, which has as its object the prevention of personal injury or physical damage through the negligence or default of others. Just as the gardener's failure to water the flowers may properly be regarded as a material cause of their dying for want of water, when it is his duty to water them (see Hart & Honore, Causation in The Law (1959) pp.35-36), so may failure to inspect amount to a cause of harm, if that failure is in breach of a duty to prevent the occurrence of that harm. When there is a duty to take a precaution against damage occurring to others through the default of third parties or through accident, breach of the duty may be regarded as materially causing or materially contributing to that damage, should it occur, subject of course to the question whether performance of the duty would have averted the harm. This is the approach which has been taken in the case, already mentioned, involving the liability of the occupier for damage resulting from his failure to guard against a danger caused by the positive and wrongful act of another and in the liability of the architect for injury caused to a worker as a result of the architect's failure to inspect a dangerous structure (Florida Hotels Pty. Ltd. v. Mayo (1965) 113 CLR 588 ; Clay v. A.J. Crump & Sons Ltd. [1964] 1 QB 533 ). And it is the approach which underlies the liability of the defendant for breach of statutory duty to guard dangerous machinery. So , if it is otherwise legitimate to hold that a public authority is under a common law duty of care in relation to a statutory power to inspect buildings in course of erection, the statute having as its object the prevention of injury from dangers arising from faulty construction, the fact that breach of the duty takes the form of a negligent omission is no reason for denying the existence of the duty or that it is a cause which materially contributes to the injury that ensues.

It scarcely needs to be mentioned that the reasons which lie behind the common law's general reluctance to require an individual to take positive action for the benefit of others have no application to a public authority with power to take positive action for the protection of others by avoiding a risk of injury to them. Even so, we need to recall that in other jurisdictions the failure of an employer (Harris v. Pennsylvania Raiload Co. (1931) 50 F 2d 866), an occupier (Ayres & Co. v. Hicks (1942) 40 NE 2d 334) and a boat operator (Horsley v. MacLaren (1971) 22 DLR(3d) 545) to go to the rescue of an employee, a guest and a passenger constitutes negligence though the peril was not the fault of the defendant. See the discussion in Robert, Prichard and Brudner, "Tort Liability for Breach of Statute: A Natural Rights Perspective" in Bayles and Chapman, Justice, Rights, and Tort Law (1983) p 149, at p 164, where it is suggested that these are all instances of a reliance based liability.

Anns decided that a duty of care cannot arise in relation to acts and omissions which reflect the policy-making and discretionary elements involved in the exercise of statutory discretions. It has been said that it is for the authority to strike that balance between the claims of efficiency and thrift to which du Parcq L.J. referred in Kent v. East Suffolk Rivers Catchment Board [1940] 1 KB 319 , at p 338 and that it is not for the court to substitute its decision for the authority's decision on those matters when they were committed by the legislature to the authority for decision (Dorset Yacht Co. v. Home Office (1970) AC 1004, at pp 1031, 1067-1068; Anns, at p 754; Barratt v. District of North Vancouver (1980) 114 DLR(3d) 577). Although these injunctions have compelling force in their application to policy-making decisions, their cogency is less obvious when applied to other discretionary matters. The standard of negligence applied by the courts in determining whether a duty of care has been breached cannot be applied to a policy decision, but it can be applied to operational decisions. Accordingly, it is possible that a duty of care may exist in relation to discretionary considerations which stand outside the policy category in the division between policy factors on the one hand and operational factors on the other. This classification has evolved in the judicial interpretation of the "discretionary function" exception in the United States Federal Tort Claims Act - see Dalehite v. United States (1953) 346 US 15; Indian Towing Co. v. United States (1955) 350 US 61; United States v. Varig Airlines. The object of the Federal Tort Claims Act in displacing government immunity and subjecting the United States Government to liability in tort in the same manner and to the same extent as a private individual under like circumstances, subject to the "discretionary function" exception, is similar to that of Judiciary Act 1903 (Cth).

The distinction between policy and operational factors is not easy to formulate, but the dividing line between them will be observed if we recognize that a public authority is under no duty of care in relation to decisions which involve or are dictated by financial, economic, social or political factors or constraints. Thus budgetary allocations and the constraints which they entail in terms of allocation of resources cannot be made the subject of a duty of care. But it may be otherwise when the courts are called upon to apply a standard of care to action or inaction that is merely the product of administrative direction, expert or professional opinion, technical standards or general standards of reasonableness.

I should make some reference now to East Suffolk. It was applied by two members of this Court in Administration of Papua and New Guinea v. Leahy (1961) 105 CLR 6 and distinguished in Birch v. Central West County District Council. It is by no means consistent with all that I have said, though the statutory power there in question was one which, if exercised with due care, would have minimized rather than prevented or avoided the damage sustained by the respondents. They sustained damage when their dairy farm was flooded in consequence of a very high tide breaching a sea wall. The Board in the exercise of its statutory powers undertook the repair of the wall but was so inefficient that the flooding continued for 178 days, instead of the fourteen days in which it could have been cleared. It was held by majority that the Board was under no liability to the respondents because it was under no duty to repair the wall. Unlike Lord Atkin who in his dissenting judgment correctly drew a distinction between a statutory duty or power and a common law duty of care and treated the respondents' claim as based on the existence of a common law duty, the majority (except Lord Thankerton) based their conclusion on the difference between a statutory power and a statutory duty. Having concluded that the statute conferred a power to repair the wall but that it did not impose a duty to repair, their Lordships held that the Board's failure to repair the wall with reasonable despatch was not the cause of the damage suffered by the respondents. An act of nature was the real cause of that damage. The decision is not an authority on causation, though the speeches of Viscount Simon L.C. and Lord Thankerton seem to reflect a view that an omission cannot cause damage, a view which must be rejected.

In Anns, the House of Lords correctly took the view that the reasoning of the majority (except Lord Thankerton) in East Suffolk failed to take into account the existence of a duty of care at common law, preferring in that respect the approach of Lord Atkin (p 757). Consequently the reasoning of the majority in East Suffolk should not be accepted and the judgments in Leahy do not provide authoritative assistance in the resolution of the present case. Dixon C.J. disposed of the issue of negligence in Leahy, without invoking East Suffolk, on grounds that have no application here. And the views of McTiernan and Kitto JJ., to the extent to which they reflect the reasoning of the majority in East Suffolk, should no longer be accepted.

I return therefore to the question whether the judgment in favour of the respondents can be sustained. It follows from what I have said that, if the judgment is to be sustained, it is on the footing that the appellant was in breach of a duty of care based on a general reliance or dependence on the appellant having investigated the building and having satisfied itself that the building complied with the Act and ordinances. It is clear enough that this was not a case in which the respondents specifically relied on the appellant's exercise of its power. The respondents neither sought a certificate under s 317A nor made any inquiry of the appellant relating to the condition of the building or its compliance with the Act and the ordinances. For that matter the respondents did not give evidence that they relied on the appellant having satisfied itself of these matters or the stability of the foundations.

Moreover, the respondents did not by evidence or argument at any stage of the proceedings advance a case of general reliance or dependence stemming from the existence of the legislative regime of control contained in Pt XI of the Act. No doubt this approach reflected a recognition of the obstacles which such a case would encounter. An intending purchaser of a building can apply for a certificate under s 317A and make inquiries of a council for information concerning the erection of a building and the inspections of it which the council has made. He can, if he wishes, retain an expert to inspect the building and check its foundations - a task which I assume to be within the competence of an appropriate expert. These considerations would complicate the presentation by a person in the position of the respondents of a case based on general reliance or dependence.

I conclude therefore that the respondents have failed to establish that the appellant owed them a duty of care and I would allow the appeal.