Quashing the ‘compensation’ bogey

There has been a lot of scaremongering about the state government or local authorities having to pay compensation if its decisions are overturned in certain circumstances. Gurdial’s excellent piece below should go a long way in dispelling such talk.

This is from theSun:

Law Speak – Local authorities cannot be sued for invalid planning approvals
Posted on 9 March 2016 – 07:34pm
Last updated on 9 March 2016 – 08:17pm
Gurdial Singh Nijar

I wrote in my last column of the decision by the Penang Appeal Board to set aside the planning permission given to a developer to build some 603 housing units on sensitive hill land – land that is 250 feet above sea level and/or with a gradient of 25°.

The fear persists among local authorities and state governments that they may, nonetheless, be sued for millions by a developer for costs incurred and damage allegedly suffered for the grant of the planning permission in the first place.

It is my respectful view that this fear is unfounded in law.

First, the Appeal Board – acting under powers given to it under the Town and Country Planning Act 1976 – sets aside any planning permission on the basis that the permission was flawed; it violates the applicable legal architecture. In short, the law prohibits any grant.

This implies that the developer did not have any right to the grant of the permission in the first place. It is an elementary principle of law that a court cannot countenance an illegality – which it will be doing if it awards damages in respect of a right that the law, as declared, does not recognise. This applies even if the planning authority misinterpreted the law wrongly.

This was made clear in a recent 2015 case decision of the High Court in England. In summarily dismissing the suit brought by a corporation for damages for loss suffered as a result of the planning authority’s negligence in granting the planning permission in the first place (later refused), the Judge said: “It would be an extreme and unwarranted extension of a local authority’s liability at common law to require it to pay damages to compensate for loss suffered by a member of the public, whether corporate or individual, because of a mistake made by it in granting planning permission to that person, in circumstances where the planning permission, in fact, subsequently had to be set aside or quashed.”

Secondly, what if the developer argues that its loss was because of the representation made by the local authority that such permission would be, and was in fact, granted? This is referred to in law as an estoppel – if a person makes a representation that is acted upon, it is binding on the parties. Else it would be unfair and inequitable.

But the law confines this principle to private law. It does not apply to public authorities exercising public functions. The highest court in England – the House of Lords – made this abundantly clear in a 2002 case (Ex parte Reprotech): “These concepts of private law should not be extended into the public law of planning control, which binds everyone.” Because remedies against public authorities must also take into account the interests of the general public, which the authority exists to promote.

“The general principle”, said the House of Lords, (is) “… that a public authority cannot be estopped from exercising a statutory discretion or performing a public duty.”

This case was approved by the Malaysian Court of Appeal in Majlis Daerah Dungun v TNB (2006); which in turn was cited with approval by the Penang Appeals Board in Goh Kheng Huat v Majlis Perbandaran Seberang Perai (2010).

Thirdly, in any event the Town and Country Planning Act explicitly protects public authorities, including local authorities and its officers, for any act they perform to carry out their functions. This means they cannot be sued for damages “in respect of any act, neglect, or default done or committed” (section 54).

Finally, it is noted that while the Act provides for some situations where damages may be claimed, it says nothing of that kind when it deals with the power of the Appeal Board to set aside a decision of the planning authority. This further reinforces the legal position that there is no basis under the statute to sue the local authority.

On these several grounds it is safe to conclude that no claim for damages can succeed against a local authority for its initial grant of planning permission that is set aside as being invalid in law.

Gurdial is professor at the Law Faculty, University of Malaya.