Buyer loses out on incorrect planning and development certificate
In the recent decision of Central Highlands Regional Council v Geju Pty Ltd  QCA 38, the Queensland Court of Appeal considered whether a regional council could be liable in negligence to a buyer relying on an incorrect town planning certificate issued by the council but supplied to the buyer by a third party, namely, the seller’s real estate agent.
The case involved an appeal by Central Highlands Regional Council (“Council”) against a judgment requiring Council to pay the respondent, Geju Pty Ltd (“Geju”), the sum of $852,205.50 for loss sustained by Geju when it purchased vacant land in Capella in Central Queensland (“Lot 70”) in reliance upon a negligent misrepresentation in Council’s limited planning and development certificate (“Certificate”).
Facts of the case
In March 2007, the then owners of a lot of land, Ford Property, contracted to sell that lot to Mayfair Group. The lot was in the rural zone but Ford Property had applied to subdivide the lot and for a material change of use from rural to industrial which was approved in August 2007 with conditions. Lot 70 was created upon registration of the survey plan and the material change of use would lapse if the change of use did not occur within 4 years of the approval taking effect.
Ford Property sold Lot 70 to Mayfair Group in December 2007. On the same day, Mayfair Group’s solicitors wrote to Council stating that they acted for the buyer and requested for a limited planning and development certificate. The Certificate was issued to Mayfair Group’s solicitors which incorrectly stated that Lot 70 was in the industrial zone when it should have stated that it was in the rural zone. The Certificate also contained an incorrect lot description.
If the Certificate was accurate and Lot 70 was zoned industrial, there would be greater scope to reconfigure the land into smaller lots and the ability to use the land for industrial purposes would not be limited to the 4 year timeframe under the material change of use approval.
Mayfair Group sold Lot 70 to Geju in June 2008. During the sale process before the contract was entered into, the real estate agent provided the Certificate obtained by Mayfair Group to Geju. Finance was approved based on the incorrect zoning, the lot was worth significantly less than the purchase price on application of the correct zoning.
The main issue for the court to determine was whether Council owed a duty of care to Geju, the court noted that while it was foreseeable that the Certificate would be passed to a broader class of people, there was no evidence that Council knew that the Certificate would be passed on or that a person would buy Lot 70 relying on the information in the Certificate.
Under the statutory framework any person who suffers financial loss because of an error or omission in the certificate may claim reasonable compensation from Council. However, the claim the subject of the proceedings was not made under the statutory provisions but under the common law. The Court of Appeal also noted that Geju was not the requestor of the Certificate.
Geju was not the requestor of the Certificate, nor was it a member of a limited class of people that the Council should have known would likely receive, and rely on, the Certificate. There was insufficient evidence to conclude that the Council owed Geju a duty of care and the Court of Appeal set aside the judgement against Council.
In the course of a property transaction, this case demonstrates the importance for the buyer to obtain a planning and development certificate itself or by its advisors before the contract is entered into. In this case, Geju should not have relied on the Certificate provided by the seller and should have conducted its own due diligence. Further, if a buyer was going to rely on information given to it by the seller, then the relevant warranty about its accuracy should be included.
Please do not hesitate to contact us if you would like us to assist you with your legal due diligence in a property transaction or if you would like us to review the contract before it is entered into.