Which case won?

The case for the buyer
  • The existence of the stormwater pipe on the property significantly decreases its market value.
  • If I had been aware of the pipe’s existence I would not have proceeded with the purchase.
  • Either the seller or council should have disclosed their knowledge of the pipe to me.
  • I asked the seller if they were aware of these encumbrances, but they said “no”.
  • It’s despicable that the council and the seller would deceive anyone like this. They are both liable.
  • The law should require the council to provide correct information in a planning certificate.
  • The council breached its duty of care by providing incorrect and misleading information.
  • The council should have disclosed the need for an easement consistent with its resolution.
  • The council owns the stormwater pipe, so it is liable for the significant damage to my property.
The case for the council and the seller
  • Property buyers have a responsibility to make their own enquiries in relation to any property.
  • The seller is not obliged to provide specific answers to general questions about the land.
  • The council should not be liable for flooding on land which does not reach flood-prone levels. A planning certificate is a statutory requirement, general in nature, and not land-specific.
  • The resolution was revoked when the council advised the owner it would not be pursued.
  • An action against council can only be sustained for negligence and we were not negligent.
  • The council prepared the planning certificate with reasonable care and skill and the details expressed on the certificate were not inaccurate or misleadingly completed.
  • As we acted in good faith, we rely on section 733 of the Local Government Act that provides statutory immunity from liability for councils in such circumstances.

So, which case won?

Cast your judgment below to find out
Case A Case B

Case B won. You were right!

How people voted
case a76%
case b24%

Expert commentary on the court's decision

“The mere fact that the… [planning] certificate may have been misleading by non-disclosure is insufficient to found liability. Liability depends upon breach of a duty of care.”
Buyer of property with stormwater pipe wins in Supreme Court

Initially, the purchaser, Elisa Lorenzato, was successful in the Supreme Court against the seller, Michael Della Franca, and Burwood Council. (See Lorenzato v Burwood Council [2020] NSWSC 1659.)

The Supreme Court found that the council breached its common law duty to exercise reasonable care when issuing the planning certificate. Justice Fagan also held the council liable for the damage caused by the flooding and said it could not rely on the statutory immunity provided by the Local Government Act 1993. 

The court also found against Mr Della Franca for negligent misstatement to the requisitions raised by Ms Lorenzato. 

Burwood Council was ordered to pay a little over $2 million in damages to Ms Lorenzato. Mr Della Franca was ordered to pay her over $1.9 million in damages.  

Both Mr Della Franca and Burwood Council were required to pay Ms Lorenzato’s legal costs of proceedings. 

However, this decision was later overturned by the Court of Appeal in the matter Della Franca v Lorenzato; Burwood Council v Lorenzato [2021] NSWCA 321. 

Council and property seller appeal Supreme Court decision

Burwood Council’s appeal was threefold: first, that the resolution did not constitute a policy; secondly, that the land was not technically subject to flood-related development controls; and thirdly, that the council was not required to disclose its awareness of the stormwater pipe on the property.

Mr Della Franca’s appeal was primarily based on whether the responses to the requisitions raised were misleading. The court found that Mr Della Franca was not required to disclose the council’s ownership of the pipe, or that the council resolution had been abandoned, but only whether there were any outstanding matters with Burwood Council, which there were not.

The court also considered that the non-answer to a requisition such as “the purchaser should make their own enquiries” cannot be regarded as incorrect or misleading.

Resolution “not a policy” and abandoned by council

The Court of Appeal found that the council’s resolution was not a policy, because it was not a generic statement of guidelines, principles or criteria. Instead, it was regarded as an operative decision in relation to a specific subject.

The court said that even if the resolution constituted a policy, it would not restrict the development of the land because of flooding. In any event, the court held that the resolution was considered abandoned by the time the planning certificate was issued by the council.

Drainage easements are not flood-related development controls

The Court of Appeal agreed with the primary judge that flood-related development controls are restrictions based on a property’s proximity to flood-prone land.

The creation and preservation of drainage easements are not to be considered flood-related development controls. For this reason there was no misstatement in the planning certificate issued by the council.

Council’s non-disclosure of stormwater pipe not considered negligent

The Court of Appeal held that council did not have a duty of care to openly divulge information about the pipe in the planning certificate. It was said that liability would only arise if the information it was required to or chose to provide was incorrect or misleading.

Therefore, the non-disclosure of the pipe was not considered negligent. Consequently, the council was exempt from liability under section 733 of the Local Government Act.

Property buyer loses appeal and saddled with significant legal costs

The Court of Appeal set aside the orders made by the Supreme Court. Ms Lorenzato was able to keep the $83,846.44 against Burwood Council associated with the nuisance claim, as it was not challenged on appeal.

However, she was ordered to pay Burwood Council half of the council’s costs at first instance, plus the costs on appeal, plus pay Mr Della Franca’s costs at first instance and on appeal.

Justice vs law

To the lay person, it may seem outrageously unjust that a buyer can find themselves in possession of a seriously defective property, while the council can be held to have zero responsibility to divulge the existence of such defects, even when it owns the source of the problem.

The case is a huge win for councils in NSW. It sets a precedent that councils will not be required to disclose site-specific information in a planning certificate attached to a contract.

A planning certificate may only serve as a guide toward further investigation of a specific matter in relation to property. Even then, encumbrances may go undetected, and this case reinforces the difficulty in pursuing council.

Certainly, the award of legal costs against the hapless buyer in this case may act as a deterrent to others who are considering suing a local council in future, no matter how blatantly unfair its behaviour may appear to be.

Due diligence and title insurance may be your best bet

There are inherent risks with every transaction. The dictum caveat emptor, or buyer beware, is never more relevant than when you are considering buying property.

The more comprehensive your due diligence, the better. That said, even the most comprehensive of due diligence enquiries may not be able to show all of the matters that affect a property.

Perhaps a plumbing or underground scanning inspection could have been done to reveal the existence of the stormwater pipe in this case, but would a buyer be able to get that done in the five business day cooling-off period, or other reasonable time set for a “subject to pest and building report” clause?

In any case, the speed of contemporary property transactions can make comprehensive due diligence difficult. If one buyer is unwilling to take the risk, there is always another who is ready and willing.

For those property buyers who are risk averse, one option is to take out title insurance, which may cover an unregistered easement over a property.

However, even this is not a cast-iron guarantee, as any claim would ultimately be assessed on a case-by-case basis by the insurer’s claims department.

NOTICE: This article is accurate as at the time of publication and does not constitute legal advice. Please see our legal notices page for more information. Information related to coronavirus can be outdated very quickly.

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