No duty of care owed by public authority to prevent economic loss when determining water licence application
- Whether a public authority owed a duty of care to determine an application for a water licence within a reasonable time frame.
In May 2005 Gunns Limited (Gunns) applied for both a permit to construct a dam and for a licence to take water from it to irrigate a vineyard. The dam permit was issued in October 2005. Gunns spent $750,000 building the dam. In 2011 the water licence was issued but due to the assessment process being changed in 2011, the license was for 16.6 mega litres not the 295 megalitres Gunns had applied for. Gunns alleged it had suffered loss as a result of the water licence being delayed, as the amount of water it could use was insufficient for the vineyard. It commenced proceedings against the State of Tasmania (the State) claiming damages for negligence.
The Decision at Trial
After considering factors such as foreseeability, control, vulnerability, reliance and indeterminacy of claims, the trial judge found that the circumstances did not justify the imposition of a duty of care on the State.
The Issues on Appeal
The questions for the Court of Appeal were firstly whether there was a duty of care; secondly whether there was a failure to make findings about the enquiries made by Gunns prior to commencing the works; and thirdly whether the assessment of contributory negligence in the amount of 40% against Gunns was too high.
The Decision on Appeal
The Court of Appeal dismissed the appeal and held that the trial judge correctly determined that in the circumstances no duty of care should be imposed on the State. While loss was foreseeable, Gunns was not vulnerable because it was as a large corporation with extensive experience dealing with government departments. Further, Gunns failed to establish that its reliance on the State to grant a licence with an adequate water allocation was reasonable in the circumstances. In any event the relevant legislation did not compel a decision be made in any specified time period and this also weighed against the imposition of a duty of care on the State.
The trial judge’s failure to make certain findings was not regarded as consequential and the assessment of contributory negligence was regarded as appropriate although this was ultimately of no consequence as no duty of care was found.
Implications For You
The Court of Appeal, in regard to this novel claim, was not prepared to impose a duty, based in negligence, on the State where the State took an extended time to make a decision to issue a licence, which in part led to loss by the party applying for that license. This is consistent with the leading cases and the High Court’s reluctance to impose duties to protect parties from pure economic loss, particularly commercial entities.