Legal Briefing No. 45

Number 45

(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 [1999] 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.

Legislative Intention

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 [1998] 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.

Conclusions

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.

ISSN 1448-4803 (Print)
ISSN 2204-6283 (Online)

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.

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