One of the worst situations in which a private certifier can find himself or herself is being sued in the Land and Environment Court by a local council. These proceedings are typically brought by councils to have certificates that have been issued by certifiers declared invalid. In situations where the council is successful in establishing that a certificate has been wrongfully issued, the certifier may be required to pay the council's legal costs. These costs can often amount to thousands, or even tens of thousands of dollars. Consequently, a mistake in issuing a certificate may result in a financial loss that may take many months of hard work to recover, and can even threaten a certifier's livelihood and ability to remain in business.
An example of a case where this "nightmare scenario" materialised, resulting in a costs order against a certifier, is Kogarah City Council v Armstrong Alliance Pty Ltd (No 2) 2013 NSWLEC 2013. Here's a link to the decision:
http://www.caselaw.nsw.gov.au/action/pjudg?jgmtid=163618
In the Armstrong Alliance case, the Council went to court to restrain the carrying out of building works which were greatly different from the works that had been authorised by the development approval the council had granted. Inspections that were carried out by the council's building coordinator revealed that although the consent approved only a 5 unit apartment building, in fact a sixth unit had been built. Other differences between the development approval and the works that were actually built included the construction of an additional storey and outdoor terrace that were not shown on the council-approved plans; an unapproved elevator shaft to access the unapproved additional storey; an increase in the size and an alteration of the layout of the basement car park; and changes to the internal layout of several of the apartments.
In the judgement which Justice Pepper handed down in the case, she described the conduct of the certifier in scathing terms. Justice Pepper stated that the certifier had "flagrantly transgressed" his legal obligation under clause 145(1)(a) of the Environmental Planning and Assessment Regulation 2000 not to issue any construction certificate unless the design and construction of the building as shown on the proposed construction certificate drawings were consistent with the approved development consent. In these circumstances, Justice Pepper found it appropriate to make a declaration that the construction certificate was invalid.
Even worse for the certifier than being on the receiving end of severe criticism from a judge of the Land and Environment Court was that Justice Pepper saw fit to make a costs order against him. In doing so she endorsed principles that had previously been stated by both Chief Justice Preston and Justice Biscoe, namely that when a consent authority makes an error in issuing an approval which necessitates legal proceedings to have that approval declared invalid, that consent authority (very often a private certifier) will be required to pay the legal costs. The rationale for this approach by the Court is that in these circumstances, it is the consent authority's (the certifiers) mistake that has brought about the litigation.
To make matters worse, the cost principles endorsed by the Court provide that a certifier cannot avoid a costs order simply by entering a "submitting appearance:" in the proceedings (in other words, formally entering an "appearance" but indicating that it does not wish to actively participate in the proceedings or contest any orders that may be made by the court). Furthermore, in circumstances where the beneficiary of the wrongfully issued approval chooses not to defend the proceedings, the certifier will be required to pay all of the council's costs. Additionally, there is the potential that when a certifier incorrectly grants an approval, the beneficiary of that approval may itself take legal action against the certifier which may result in a financial award against the certifier for damages and costs.
Therefore, the result in the Armstrong Alliance case provides a clear and unmistakable message to all those who work as private certifiers, specifically that it is essential always to take great care to ensure that plans that are approved in connection with a construction certificate are consistent with the underlying development approval. The consequences of failing to take this message on board can prove to be exceedingly painful, not only financially but to the certifier's professional reputation as well.
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