Vernon Rive . 6/09/2010 11:08:38 a.m.
A very recent decision of Ellis J in the High Court (Oteha Investments Ltd v North Shore City Council HC, Auckland, 30 August 2010 CIV-2008-404-6556) clarifies the nature of the duty of care owed by councils towards prospective applicants for resource consents when involved in pre-lodgement meetings where advice is given (and charged for) on local authority planning requirements for proposed developments.
Oteha had bought land intending to construct a 24 unit housing development which would be leased to Housing New Zealand Ltd. Before lodging its application with the North Shore City Council, it had a meeting with council officers to discuss resource consent requirements. A few months later it lodged its application taking into account the advice received.
Three months after the application has been lodged, a consultant planner for the Council identified 2 potentially significant requirements under the district plan which had not been previously identified: an esplanade reserve requirement, and a proposed road extension. The second issue was resolved. But the first "remained both live and problematic and ultimately led to Oteha withdrawing its original application and instructing new consultants to lodge a fresh application ...". Oteha alleged that the delays occasioned by the need for a new application caused Housing New Zealand to terminate negotiations. The company sued the council in negligence.
The council applied to strike out the negligence claim, citing earlier decisions which had held that councils would not be liable for giving interpretive advice concerning the district plans. An initial decision by Associate-Judge Sargisson struck out the negligence claim, holding that the situation was indistinguishable from the authorities in Morrison v Upper Hutt City Council  2 NZLR 331 (CA) and Bella Vista Resort Ltd v WBPDC  3 NZLR 429.
On an application for review of the Associate-Judge’s strikeout decision, Ellis J held that the Oteha facts were distinguishable from the authorities noted above. Contrary to the submissions of the council, he held that it could not be ruled out that a duty of care arises where councils offer a fee-paying service of providing pre-lodgement advice. So, we have a bit of a strange situation in that paid-for Council advice given in pre-lodgement meetings is potentially subject to a tortious duty of care, but the moment an application is lodged, the duty of care no longer applies.
As acknowledged in the decision, the holding may have "a chilling effect on the concept of pre-lodgement meetings and advice". If so, that would be a shame. Many people (particularly those not in the position to engage experts at the outset) find it very helpful speaking with council officers about proposed applications before they are formally lodged. If the result of the decision is to cause councils to "shut up shop" completely, a valuable service would be lost. On the other hand, as also surmised by Ellis J, "it may simply mean that more care is taken when giving such advice".
It seems quite likely this matter will go further. In the meantime I'd expect a change in practice at councils. Options might include (as noted above) the withdrawal of the pre-lodgment advice service completely. Or perhaps less radically, an explicit limitation of liability when giving advice, and an increase in fees to cover the increased insurance premiums which reflect the wider council liability in these situations.
By Vernon Rive on 6/09/2010 11:08:38 a.m. | Comments (1) | Print |