(14 May 1999)
LIABILITY IN PERFORMANCE OF STATUTORY FUNCTIONS
The law recognises that where public bodies carry out statutory functions they must do so in a way which is not negligent. However, the courts have been reluctant to impose liability for failure to exercise statutory functions. This is changing.
Implications for Clients
Legal liability is possible where a public body does not perform a function and harm results to others. It is advisable for clients to consider the administration of their programs to avoid or minimise liability.
Development of the Law
The doctrine of 'general reliance'
In the case of Sutherland Shire Council v Heyman (1985) 157 CLR 424, the High Court recognised that in some circumstances liability could arise for failure to exercise a statutory function. Mason CJ said (at page 464) that there may be a 'general expectation' by the community that a power will be exercised.
...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. ...The control of air traffic, the safety inspection of aircraft and the fighting of a fire...by a fire authority...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...
The Pyrenees case
The 'doctrine of general reliance' was rejected by the High Court in the case of Pyrenees Shire Council v Day; Eskimo Amber Pty Ltd v Pyrenees Shire Council (1998) 192 CLR 330. The majority of the High Court said that the doctrine was a 'fiction'. It was considered that it would lead to great uncertainty if the general expectations of the community were to be the touchstone of liability. There is no doubt that often it would be difficult for a plaintiff to prove that a 'general expectation' existed.
The case concerned a negligence action brought against a council arising out of a fire that destroyed adjoining premises. The fire spread from a defective fireplace. The council was aware of the defective fireplace and had ordered that it be repaired. However, it did not follow up its order.
The High Court justices all gave separate judgments. It is clear however that they all recognise there can sometimes be liability for failure to exercise a statutory function. For example, Brennan CJ found that the council was under a public law duty to enforce the legislation relating to fire prevention and was liable for failure to do so, where such failure was 'irrational'. Kirby J considered liability differently and relied upon concepts such as 'proximity' and 'fairness'.
(An analysis of the different reasons is published in Litigation Notes, No. 2, 27 May 1998. The note points out that because of the case, serious questions arise as to the principle to be applied in determining liability in negligence.)
Contaminated oysters - Ryan's case
This is the most recent case on the issue of liability for non-feasance in relation to statutory functions and it presented an opportunity for a court to set out the relevant principle. The case was decided by Wilcox J in the Federal Court on 5 March 1999 (Ryan v Great Lakes Council  FCA 177).
The case concerned an outbreak of hepatitis A in a group of people who had eaten oysters grown in water contaminated by faeces. The oysters were grown in Wallis Lake, New South Wales in early 1997. A representative action was brought by Mr Ryan in a class action for 185 victims.
Wilcox J found that the State of New South Wales and the Great Lakes Shire Council were negligent for failing to prevent contamination of the lake. He found that the existence of pollution sources such as septic tanks and boats were known to the council and to the state; further that both the council and the state failed to use the powers they had to prevent or minimise water pollution.
The judge considered that his finding of liability was consistent with the judgments of the High Court in Pyrenees. He added that he was attracted to the 'pragmatic approach to the matter of proximity' (Ryan at para 290) taken by Priestley JA in the recent case of Avenhouse v Hornsby Shire Council (1997-1998) 44 NSWLR 1. This approach looks to 'nearness' or 'closeness' between the plaintiff and defendant in resolving duty of care questions.
Priestley JA had also referred to the famous 'good neighbour' speech of Lord Atkin in Donoghue v Stevenson 1932 AC at 580 in which Lord Atkin had said that 'you must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injury your neighbour'.
A pragmatic approach
In conclusion Wilcox J said the court must take a 'pragmatic approach' and that no generalisation can take the place of 'the court's own experience-based judgment' as to whether a duty of care should exist. This is the same approach as in Avenhouse v Hornsby Shire Council where Sheller JA (at page 8) summed up the present state of the law by saying: 'The modern abundance of authority would not however make Lord Atkin much wiser'. It would seem that clients should look to common sense rather than a precisely articulated principle in deciding upon possible exposure to liability in this area.
It was considered important by Wilcox J that the council knew of the risk from water contamination and that it had extensive statutory powers to control pollution. Prior to the outbreak of hepatitis A, the council had in place an environmental testing program and had decided to cease this program.
During the course of the hearing the council asserted that its failure to have a program was based on 'policy judgments and financial constraints'. There was evidence of a general nature before the court which showed that the council's resources were limited, the government had maintained a system of 'rate pegging' since the early 1980s and that the council's existing funding was already committed to specific projects (Ryan paras 220-222). However, Wilcox J found that it had not introduced any specific evidence to support this proposition. The judge did not say what his finding would have been if there had been evidence of financial constraints.
If it can be established that failure to perform a function is due to financial constraints, the standard of care will be less and liability may be avoided.
Liability in operation or execution of functions
The reference to 'policy judgments' appears to be a reference to the distinction drawn in the case law between actions based upon 'policy' as opposed to 'operations'. It has traditionally been said that liability does not attach to policy-making but may be imposed in respect of the operation or execution of a function.
For example, Mason J in Heyman's case (1985) 157 CLR 424 at 469 said 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.
This line of authority was not developed by the council in Ryan's case. However, where the evidence is present it may be the basis of a successful defence.
A finding of liability was also made against the State of New South Wales. Again the state knew of the risk and had statutory powers to control pollution. It was also relevant that the state exercised substantial managerial control over the Wallis Lake oyster industry on a day-to-day basis. In particular, the state could have stopped the production of oysters and did not do so.
Similar issues have been recently considered by the Victorian Court of Appeal. The court stressed the importance of legislative intention.
On 31 July 1998 in Stevedoring Industry Finance Committee v Crimmins the Court of Appeal (Winneke P, Tadgell and Buchanan JJA) found that the Australian Stevedoring Industry Association was not under a duty of care to waterside workers to warn them of the risks arising from exposure to asbestos.
The association was established by legislation to promote waterfront reforms and other related purposes. Although the association did have the power to advise regarding safety issues this was not its principal function. Further it was not the employer of the workers. The Court of Appeal considered there was not a legislative intention that the association be liable for a failure to warn the workers of these dangers.
In State of Victoria v Richards Anor  VSCA 103 the Court of Appeal (Callaway, Batt and Buchanan JJA) on 11 November 1998 held that the State of Victoria was not under a duty of care to abattoir workers to warn of the dangers to them from diseased meat.
The state had legislative power to control abattoirs and to inspect meat. However, the court considered that the legislation was directed to the safety of consumers by preventing the sale of unhygienic meat and that the state did not owe the alleged duty of care towards the abattoir workers. The court contrasted the facts in the Pyrenees case where the council had failed to exercise powers conferred for the very purpose of preventing fire.
The principle of law to be applied in considering whether a public body may be liable for failure to exercise a power is still uncertain. However, it is relevant for clients to ask:
- Under the relevant legislation, what the principal purpose of their operations is. (Liability is more likely to be found if a body fails to perform a function it is expressly established to perform.)
- On a pragmatic view, whether harm to persons or property is likely if there is a failure to perform statutory functions.
- Whether the body has accepted by its conduct a responsibility to undertake a particular activity.
- In developing business and other plans, whether the body will be in a position to properly explain failure to perform a statutory function on the basis of financial constraints and policy considerations, and how any failure can be best communicated to those who may suffer injury or loss.
- In formulating proposals for legislation, whether the body is likely to be able to perform all of the functions to be conferred.
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The material in this briefing is provided for general information only and should not be relied upon for the purpose of a particular matter. Please contact AGS before any action or decision is taken on the basis of any of the material in this briefing.