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Flood relief for Council and Vendor

Sara Hatcher, Julian Peters, Anna Shilova & Lauren Jones

In light of the recent New South Wales floods, many Australians may be wondering who is responsible for decrepit drainage. If you thought Council, continue reading.

Council and Vendor had a massive victory following the Court of Appeal’s decision in Della Franca v Lorenzato; Burwood Council v Lorenzato [2021] NSWCA 321.

Background

The case concerned a historic stormwater drainage pipe (‘the Pipe’) that ran under land located in Burwood, New South Wales (‘the Property’). The Pipe was built in 1904 and owned by Burwood Council (‘Council’). At some point between 1904 and 2001, the Pipe was forgotten.

In 1911, the house that currently stands on the Property was constructed over part of the Pipe. In 1989, Mr Della Franca purchased the property; unaware of the Pipe.

In light of complaints of stormwater inundation by local residents, in 2001, Council rediscovered the existence of the Pipe, which had significantly deteriorated. After an assessment, Council engineers concluded that a new stormwater pipe needed to be installed and a drainage easement needed to be created on the north and west boundaries of the Property.

Council then passed a resolution on 11 June 2002 (‘the Resolution’), which delineated that Council would attempt to either seek a compulsory acquisition to obtain an easement over the Pipe, or negotiate with the owner of the Property – namely, Mr Della Franca. Council’s subsequent attempts to reach an agreement with Mr Della France were fruitless. By 2003, Council had ceased attempts to negotiate with Mr Della Franca and the plans outlined in the Resolution were abandoned. The possibility of relocating the proposed pipe to a neighboring property was suggested.

Fast forward to 2010, Mr Della Franca (‘the Vendor’) obtains a certificate under section 149 of the Environmental Planning and Assessment Act 1979 (NSW) (‘the Certificate’). Mr Della Franca then enters into a contact for the sale of the Property with Ms Lorenzato (‘the Purchaser’). Council, in response to the Certificate, provides “advice on other matters affecting the subject land of which Council is aware”. Unfortunately, Council’s advice omitted information relating to the Pipe. In the Certificate, Council also answers ‘no’ to the following:

Item 7. the land was affected by a policy adopted by the Council … that restricts the development of the land because of the likelihood of … flooding …

Item 7A . [w]hether development on the land … for the purposes of dwelling houses … is subject to flood related development controls… development on the land … for any other purpose is subject to flood related development controls

The Purchaser also serves requisitions on the Vendor. Notably, the day before completion of the contract, the Vendor answers ‘no’ and ‘Purchaser should make own enquires’ to the following requisitions:

Requisition 6: [was] aware of … any unregistered easements … which affect the property

Requisition 7: [had] received any notification from the … local Council that the land or part of it is to be … resumed

Requisition 8: [was there] any outstanding notification, claim or requirement of … a … local authority

Requisition 9: [was] aware of any restrictions on the use or development of the land.

A few months after settlement, stormwater floods the Property. It may come as no surprise that the cause of the flooding was that old forgotten Pipe. The Purchaser now learns of the existence of the Pipe, which had now collapsed, from Council. Which brings us to the Supreme Court Proceedings.

Supreme Court

In the first instance, the Supreme Court found in favour of the Purchaser. The proceedings were commenced on the basis that the Resolution was a policy, Council’s response to the Certificate was incorrect and the Vendor’s response to the requisitions were inaccurate or misleading.

The Honorable Fagan J, agreeing with the Purchaser, relevantly determined that:

  • The Council had adopted the Resolution as a policy, with the purpose to reduce the risk of flooding. As such, Council’s answer to item 7 was incorrect.
  • The Vendor’s replies to the requisitions were misleading.

Council appealed the decision, on the basis that the 2002 Resolution was not a policy, and won.

The Vendor appealed the decision, on the basis that their responses to the requisitions were accurate, and won.

Why?

Court of Appeal

The Court of Appeal determined the following:

  • The Resolution was not a policy because it was not a generic statement of guidelines, principles or criteria; rather, it was a site-specific decision. Nor did it restrict the development of land.
  • The Vendor answered the requisitions accurately as: the Pipe did not constitute an easement, the requisition did not require disclosure of a notification or claims that were no longer operative (i.e., the Resolution was considered to have been abandoned), and the Resolution did not restrict the development of the land.

So, you want to purchase a property and now you’re asking: what can I do?

We help you ensure that requisitions are issued and answered within a reasonable time so we have options if any of the answers are misleading and generally safeguard you in your conveyancing. If you need help buying or selling a property, please contact Sara Hatcher, Julian PetersAnna Shilova or a member from Russell Kennedy's Property and Development team.

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