Public policy: Onus on Parliament to remove uncertainty

26/03/2006 Sunday Times By Dominic J. Puthucheary and Firoz Hussein

AFTER a marathon legal battle lasting 12 years, the former residents of the ill-fated Highland Towers were told on Feb 17 that the Majlis Perbandaran Ampang Jaya (MPAJ) would not be held liable for its part in the events that caused the tragedy, and for its failure to come up with and implement a promised drainage master plan or to stabilise the hill slope, causing the "post-collapse failure".

This failure led to economic loss being suffered by the owners of the remaining blocks in Highland Towers which became uninhabitable.

The issues of law and fact raised in the appeal were complex and the landmark judgment of the Federal Court has become the subject of considerable debate.

In the Highland Towers case, leave to appeal was granted by the Federal Court on five grounds but ultimately only two were decisive.

In relation to the first ground, which was in respect of the collapse, the three judges of the Federal Court were unanimous in holding that the council enjoyed immunity in approving the diversion of a stream and in failing to detect any damage or defect in the building and drainage plans relating to the development submitted.

In his leading judgment, Tan Sri Amar Steve L.K. Shim held that the acts of the council fell "squarely" within the ambit of the immunity conferred by Section 95(2) of the Street, Drainage & Building Act 1974.

Section 95(2) confers wide immunity on local authorities in respect of works that they carry out pursuant to the Act.

Given the interpretation of the Federal Court on the immunity conferred by Section 95(2), the time has now come for Parliament to urgently consider whether in the interest of public health, environmental concerns, and safety, the immunity should be abolished or restricted in some manner.

In most other areas of public services, state authorities and the Government enjoy no special immunity. Government hospitals and doctors treating patients are subject to the same standard of care expected of medical professionals in the private sector.

Government hospitals and doctors enjoy no special immunity from suit. It is therefore anomalous that ratepayers should be placed in a more disadvantageous position vis-a-vis the responsibilities of local authorities in respect of construction and drainage works of the type that resulted in the Highland Towers tragedy.

Local authorities are paid directly by ratepayers to provide planning and drainage services.

The ratepayer expects that, at the very least, local authorities will carry out their duties and provide services at a level sufficient to protect life and property.

The removal of the immunity conferred by Section 95(2) of the Act will send a clear and unequivocal message to local authorities that they will be required by law to achieve higher standards, especially in areas where the lives and safety of the public are potentially at risk.

In relation to the second ground, the issue of post-collapse liability for economic loss, the Federal Court was divided.

After the collapse of Block 1, the MPAJ took steps to stabilise the hill slope to ensure that no further collapse would occur to the remaining blocks.

It then agreed to undertake a master drainage plan which would cater for the East Stream, which had been found to be connected to the cause of the collapse.

Time passed and even until the High Court trial took place, the MPAJ had not provided the promised master drainage plan.

At the High Court trial, the MPAJ offered no explanation why its promise to provide a master drainage plan was not met.

Shim took the view that economic loss was recoverable but that the local authority was protected from liability by the immunity contained in Section 95(2).

However, the immunity conferred by Section 95(2), prima facie, only covers acts performed by the state authority or its officers.

There is nothing in the wording of Section 95(2) which confers immunity on them for omissions or a failure to act.

Furthermore, it is a well established principle of the common law that local authorities are liable for nonfeasance - that is, a failure to carry out their public duty.

The Federal Court did not specifically consider whether the immunity conferred upon the local authority by Section 95(2) extends to a failure to act, which was really the crux of the complaint against the MPAJ.

The decision of the Federal Court also raises the question whether statute should confer a local authority with complete immunity for actions or inaction which resulted in a tragedy involving the loss of numerous lives, damage to property and economic loss.

The majority of the Federal Court went even further.

While recognising that generally damages can be recovered for pure economic loss, they held that as a matter of public policy, damages for economic loss were not recoverable against the local authority in the circumstances of the case.

In giving the judgment of the majority of the Federal Court, Datuk Abdul Hamid Mohamad recognised that the decision of the court may lead to uncertainty as to precisely where the line should be drawn vis-will-vis recoverability of damages for pure economic loss.

Uncertainty in the law is highly undesirable. The public and litigants are entitled to know the extent of their rights and obligations.

Uncertainty means that litigants may be forced to undertake protracted litigation without knowing their prospects of success.

Litigation today is expensive and time-consuming.

This may result in deserving litigants being deterred from enforcing their rights because of the prohibitive cost of fighting an uncertain battle.

The net effect would be that injustices would be perpetrated unless the situation is redressed to bring certainty to the law in this area.

Perhaps the time is appropriate for a complete review of the law and codification of the common law to reduce the element of uncertainty.

The common law of negligence has evolved in a piecemeal fashion and this has, in part, given rise to the many uncertainties and inconsistencies which litigants face.

Additionally, the reasoning of the majority also begs the question whether the courts should determine cases on the grounds of public policy.

It has often been argued that the courts are ill-equipped to determine matters of public policy and Parliament and the executive should determine such policy.

However, the judges of the Federal Court were entitled to consider public policy arguments because they are entrenched in the common law.

Public policy, as determined by the courts is extremely subjective.

It may be argued that given the fact that Section 95(2) already exempted local authorities from certain acts, then if Parliament had also intended such authorities to be exempted for their failure to act or nonfeasance, then Parliament would have expressly enacted such a provision in the Act.

In retrospect, the ruling of the Federal Court on the issue of economic loss regrettably represents a missed opportunity for judicial activism.

It is important for courts to recognise their role as the custodian of the rights of citizens and of the necessity to limit arguments of public policy to the confines of extreme situations involving public morality and where Parliament has not otherwise legislated.

The rights of citizens as a matter of public policy needs to be considered in the light of a citizen's public interest of accountability.

In view of the recognised uncertainties both as regards the extent to which damages for pure economic loss are recoverable and the precise ambit of what constitutes public policy, it is now appropriate for Parliament to consider these matters and introduce legislation to remove uncertainties in the law.

* The writers are lawyers.