Tepko Pty Ltd v Water Board

Citation: (2001) 206 CLR 1

The third appellant, Mr Neal, owned shares in the first appellant and controlled the second appellant. Mr Neal and the third appellant owned some land. In 1983 the second appellant accepted an offer of a loan facility from a bank in the sum of about $2m. One purpose of the loan was to finance a proposed rezoning and subdivision of the land. At the time of the loan Mr Neal was aware that the local council would not approve the rezoning and subdivision unless an arrangement was made with the Water Board for the connection of the land to the board's water-supply system. By October 1984 Mr Neal was also aware of the board's position that amplification works would need to be undertaken to connect the land to the board's water-supply system and Mr Neal would be required to pay for the amplification works. Mr Neal was also aware of the board's policy not to provide costing estimates for developments which were contrary to present zoning.

In October 1985 the bank informed Mr Neal that unless he obtained a costing for the amplification works the bank would put his companies into receivership. In November 1985, in response to representations on behalf of Mr Neal, the Minister for Natural Resources wrote a letter in which it was stated that “the immediate cost to connect Mr Neal's proposed development would be in the order of $2.5 million”. Mr Neal obtained a copy of this letter and provided it to the bank. The bank was concerned by the high cost of the development works and decided to appoint a receiver to Mr Neal's companies. In January 1996, after the commencement of the receivership, the board provided a revised estimated cost of $1.7m. In November 1987 the board specified a total cost of $803,000 for the supply of water to the proposed subdivision.

In 1991 the appellants instituted an action in the Supreme Court of New South Wales against the board. The appellants contended that the board was negligent in providing an overstated estimate of the cost of the amplification works and that as a result the bank appointed a receiver to Mr Neal's companies and the appellants suffered economic loss. The trial judge held that the board did not owe the appellants a duty of care in providing an estimate of the cost of the amplification works. The trial judge did not make findings on breach of duty on the alternative assumption that a duty of care was owed. The appellants appealed to the Court of Appeal. The Court of Appeal held that the statement that the immediate cost to connect the proposed development would be in the order of $2.5m was carelessly made, but that the board did not owe Mr Neal a duty of care in respect of the statement. The appellants were granted special leave to appeal to the High Court. The High Court considered whether the board owed Mr Neal a duty of care.

Held per Gleeson CJ, Gaudron, Gummow and Hayne JJ (McHugh, Kirby and Callinan JJ dissenting), dismissing the appeal:

(i) Per Gleeson CJ, Gaudron, Gummow and Hayne JJ (McHugh, Kirby and Callinan JJ dissenting): The circumstances of the case made it unreasonable to posit a duty upon the board in respect of the use Mr Neal made of the estimate provided in the letter of November 1985 in his dealings with the bank. The majority of the Court of Appeal was correct in concluding that the trial judge had not fallen into error in deciding that the appellants had not made out their case with respect to the existence of a duty of care (at [49], [51], [88]).

(ii) Per Gaudron, Kirby and Callinan JJ: There is an undesirability of limiting the issues to be tried in tort claims. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have had the necessity of making full preparation and the factual matters relevant to one issue are relevant to others, and they all overlap (at [52], [168]).