Posted on November 6, 2014 by Lindsay Taylor

Court of Appeal Considers Whether Developer Entitled to Spare Capacity in Council’s Sewerage System

In Dansar Pty Limited v Byron Shire Council [2014] NSWCA 364, the NSW Court of Appeal, by majority judgement, rejected a claim by a developer against council for damages for economic loss arising from the Council’s failure to allocate spare capacity in its sewerage system to the developer because of the Council’s delay in determining a development application.


Byron Shire Council was the water and sewerage authority for its local government area, and also the consent authority for development under the applicable planning controls.

In mid 2000, the Council determined that there was spare capacity in its sewerage system that could be allocated to new development. In late 2001, it passed a resolution the effect of which was to not provide sewerage services to new development that would exceed the spare capacity.

The Council’s planning controls precluded it from granting development consent to any development unless the Council was satisfied that prior adequate arrangements had been made for the provision of sewerage services to the land proposed to be developed.

The developer made a development application to the Council for consent to carry out a residential development in early 2001. There was sufficient spare capacity in the sewerage system for the developer’s development at the time it made the application. Nevertheless, it did not obtain development consent for its development until mid 2005.

Developer’s claim

The developer claimed that the Council had been negligent in carrying out the ‘operational and mechanical‘ task of implementing its decision to allocate the spare capacity. The Council was said to owe a duty of care to the developer to ensure that it did not suffer economic loss resulting from the Council’s refusal or delay in implementing its decision.

The developer’s case accepted that the Council as the sewerage authority owed no duty of care to the developer in making the decision whether there was spare capacity in the sewerage system that could be allocated to new development.

Decision of the Court

Meagher JA (with whom Leeming JA agreed) gave the leading judgement. Macfarlan JA dissented.

No private law duty of care

The Court held that there was a disconformity between the Council’s alleged duty of care and the free and proper exercise of its statutory functions that would ordinarily be sufficient reason in and of itself for denying the existence of any duty.

The function in question was characterised as that of deciding whether to increase the permanent load on the Council’s sewerage treatment works by the amount of capacity required for the developer’s development. The exercise of this function had two dimensions, namely, firstly whether as the sewerage authority the Council should allocate spare capacity to the developer’s development, and, secondly, whether such arrangement provided the basis for the granting of development consent.

The Court held that in deciding whether it should allocate spare capacity to the developer’s development, the Council was required to give ‘paramount‘ consideration to the safety and continued operation of its sewerage treatment facilities, maintaining public health, and protecting the environment. The Court held that this obligation and the interests the Council was required to protect were incompatible with the existence of a private law duty to take reasonable care to avoid economic loss to the developer resulting from refusal or delay of in granting it development consent.

The Court also held that the developer’s attempt to restrict the Council’s duty to that of the mechanical task of allocation did not affect the incompatibility analysis.

Reliance / assumption of responsibility

The evidence showed no reliance by the developer, or assumption of responsibility by the Council, that would have given rise to a duty of care.

The evidence showed that the developer had an expectation that there would be spare capacity available for its development when it first made its development application. The evidence also revealed ongoing communications between the Council and the developer regarding the capacity of the Council’s sewerage system. However, the Council had made no statement or representation on which the developer relied as to how it would allocate the spare capacity or whether any of it would be allocated to the developer’s development.

Further, the evidence showed that at no time did the developer  seek or receive any assurance from the Council that it would act carefully or competently in implementing a decision about available capacity, and that the developer had engaged with the Council on the basis that it did not have any entitlement  to receive spare capacity for its development or have it allocated in a particular way.

No right or entitlement

The Court held that, even where spare capacity existed, the developer had no right or entitlement to have any further load committed to the Council’s sewerage system, nor did it have any right or interest the enjoyment of which depended on the exercise of reasonable care by the Council, or the existence of which depended on the Council exercising care in the performance of a statutory function which it was obliged to undertake.


This is an important case in the law of negligence relating to the exercise of statutory functions by local councils in matters such as the provision of public utility services. It deals with an issue that is of fundamental importance to developers and often contentious between the developer and the council. The decision serves to protect the proper exercise of such functions by councils in the public interest and unaffected by any duties owed to private interests.

Having said this, it is clear from the case that it is possible that the particular course of dealings between a council and a private interest, such as a developer, can in appropriate circumstances give rise to a duty of care that is actionable in damages by the private interest if breached by the Council.