District Court New South Wales

• Medium Neutral Citation: Geoffrey and Christine Hanson v Tamworth Regional Council [2012] NSWDC 26
• Hearing dates: 28 November 2011
• Decision date: 07 March 2012
• Before: Judge M Sidis

Decision

1. Verdict for the defendant 2. The plaintiffs are to pay the defendant's costs of the proceedings. This order is suspended for seven days to allow either party to list the matter for further argument on the issue of costs 3. The exhibits will be retained for 28 days

• Catchwords: Duty of care of public authority arising from leaking stormwater pipe - foreseeability - control and relationship - causation - competing expert evidence - adequacy of investigation and factual basis for expert opinion - breach - special statutory power - damage - mitigation of loss - whether claim statute barred
• Legislation Cited: Limitation Act 1969Civil Liability Act 2002 Local Government Act 1993; Roads Act 2003
• Cases Cited: Sutherland Shire Council v Becker [2006] NSWCA 344Graham Barclay Oyster Pty Limited v Ryan (2002) 211 CLR 540Pyrenees Shire Council v Day (1998) 192 CLR 33Makawe Pty Limited v Ranqick City Council [2009] NSWCA 412 Donoghue v Stevenson [1932] AC 562 Sefleigh-Denfield v O'Callaghan & Ors [1940] AC 880 Bankstown City Council v Alamdo Holdings Pty Ltd (2005) 223 CLR Randwick City Council v T & H Fatouros Pty Ltd [2007] NSWCA 177 Crimmins v Stevedoring Industry Finance Committee (1991) 200 CLR 1 Amaca Pty Ltd v The New South Wales (2004) 132 LGERA 309Brodie v Singleton Shire Council (2001) CLR 512 Woolworths Ltd v Strong & Anor [2010] NSWCA 282Flounders v Millar [2007] 238 Bendix Mintex Pty Ltd v Barnes (1997) 42 NSWLR 307 Seltsam Pty Limited v McGuinness (2000) 49 NSWLR 262TC by his tutor Sabatino v State of NSW [2001] NSWCA 380Betts v Whittingslow (1945) 71 CLR 637 Jones v Dunkel (1959) 101 CLR 298 Presland v Hunter Area Health Services [2003] 754 Hunter Area Health Service v Presland [2005] NSWCA 33 Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Ltd [2009] NSWCA 263
• Texts Cited: M Aronson, Government Liability in Negligence [2008] MULR 2
• Category: Principal judgment
• Parties: Geoffrey and Christine Hanson (Plaintiffs)Tamworth Regional Council (Defendants)
• Representation: Harris Wheeler Lawyers (For the Plaintiffs)Moray & Agnew (For the Defendants)
• File Number(s): 2009/00332933

Judgment

1 These proceedings concerned the plaintiffs' property at 38 Yarmouth Parade, Tamworth, formally described as Lot 155 in Deposited Plan 251134. The lot was created when DP 251134 was registered in February 2006.

2 The defendant was constituted in 2004 when it assumed the assets and liabilities of the local government authorities previously responsible for the area in which the property was situated. Those authorities were Cockburn Shire Council and Tamworth City Council.

3 Although the expert engineering witnesses differed concerning the north point to be applied when describing the property and its features, for convenience and for the purpose of these reasons only, I have adopted the boundary with Yarmouth Parade as the eastern boundary of the property.

4 At the time of the subdivision, the property was on a downhill grade with a slope to the west. It was intersected by a natural gully or watercourse. The engineers retained by the parties, Mr Shirley of Shirley Consulting Engineers Pty Limited and Mr Barker of Barker Harle, could not agree on its probable location within the property.

5 The area of the depression formed by the gully was filled as part of the subdivision works. The engineering experts agreed that the probable major source of the fill was materials taken from excavation for road works at the south eastern corner of Yarmouth Parade. They agreed that seepage was able to occur within and below the fill strata.

6 A stormwater drainage pipe was laid in a trench beneath Yarmouth Parade in the course of the subdivision works. The trench traversed an area where the gully upstream of the property was filled. The road, pipe and other drainage works vested in the local authority, then Cockburn Shire Council, on registration of DP 251134.

7 The plaintiffs purchased the property in August 1976. Their house was constructed in 1977 in accordance with a building approval issued by the then local authority, Tamworth City Council. The builders were MC and Y F Benning.

8 In 1979 Mr Hanson observed features that indicated settlement in the foundations supporting the western wall of the house. Investigations were undertaken and a complaint was made to the Builders Licensing Board. It was concluded that the fill in the gully beneath the house had not been adequately compacted at the time of the subdivision resulting in differential settlement affecting almost the whole of the house.

9 The Builders Licensing Board approved rectification work that involved underpinning of the foundations for the western wall of the house with pier and beam footings.

10 This work was undertaken in February 1981. The work also involved the virtual reconstruction of the western wall and repairs to cracks in other external and internal walls of the house.

11 Between 1981 and 1985 the plaintiffs resided in Coonamble and rented the house. On their return in 1985 Mr Hanson noted a crack in the brickwork near the front door, that is, on the eastern wall of the house. He repaired the crack.

12 Mr Hanson set out in detail at paragraph 40 of his affidavit (Exhibit B1) his observations between 1981 and 1998 of settlement and movement inside and at the front of the house. He started monitoring and measuring for movement.

13 The plaintiffs commissioned a report from Mr Cohen, dated 4 May 1999, Annexure GH-13, Exhibit B2). Mr Cohen reported on settlement that occurred since the time of his previous inspection in 1979. None of this settlement occurred in the western wall. All of it affected the front section of the house.

14 Between 2001 and 2006 Mr Hanson communicated at various times with the defendant, calling it to account for the damage he noted in the house. The defendant denied liability.

15 Mr Hanson said that in March 2007 he received information that caused him to suspect that the stormwater pipe was leaking and as a result he constructed a device by means of which he was able to insert a digital camera into the stormwater pipe and take photographs of its interior. He attached some of these photographs to his affidavit as Annexure GH-38.

16 On 25 July 2007 Mr Hanson prepared a list of damage that he believed the property had suffered at that time, internally and externally. The list was set out in paragraph 99 of his affidavit.

17 On 7 November 2007 the plaintiffs' solicitors notified the defendant of their allegations that water was leaking from the stormwater pipe. Enclosed with the letter was a report of Mr Robert Carr, RCA Australia, on his geotechnical investigation of the property and in which he dealt with settlement between 1981 and 1999.

18 On 14 November 2007 the defendant's staff undertook closed circuit television inspection of the stormwater pipe.

19 On 1 May 2008 Mr Barker inspected the pipe at the defendant's request.

20 On 3 December 2008 Mr Hanson observed features that suggested to him that storm water flowed over the property.

21 In March 2009 Mr Hanson took further photographs of the interior of the stormwater pipe, (GH-18).

22 In August 2010 the defendant undertook repairs to the stormwater pipe. .

23 The plaintiffs claimed against the defendant in negligence and nuisance. They conceded that each cause of action involved proof of the same elements.

24 The defendant denied any liability in negligence or nuisance. It raised defences based on s 14 of the Limitations Act 1969, s 43A of the Civil Liability Act 2002 and failure on the part of the plaintiffs to mitigate their loss.

25 The plaintiffs did not press their claims for restraining and mandatory orders concerning the stormwater pipe. The defendant did not press its claims for apportionment and contribution or for consideration of s 42 of the Civil Liability Act 2002.

DUTY OF CARE

26 The plaintiffs pleaded that the defendant owed them a duty to take reasonable care with respect to the stormwater pipe to prevent the escape of water onto the property.

27 They acknowledged that in respect of both the claim in negligence and in nuisance it was necessary that they meet the general principles set out in s 5B of the Civil Liability Act:

(1)A person is not negligent in failing to take precautions against a risk of harm unless:

(a)The risk was foreseeable (that is, it is a risk of which the person knew or ought to have known), and

(b)the risk was not insignificant, and

(c)in the circumstances, a reasonable person in the person's position would have taken those precautions.

(2)In determining whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (amongst other relevant things):

(a)The probability that the harm would occur if care were not taken,

(b)the likely seriousness of the harm,

(c)the burden of taking precautions to avoid the risk of harm,

(d)the social utility of the activity that creates the risk of harm.

28 The defendant put in issue the question of whether, as a public authority, it was under a duty of care to the plaintiffs in the circumstances of this case.

29 The defendant claimed that the facts were virtually identical to those in Sutherland Shire Council v Becker [2006] NSWCA 344, an action that also involved a claim of neglect and nuisance on the part of the Council in failing to maintain and repair a leaking stormwater pipe. There was an important distinction in the facts of that case because the water that escaped from the stormwater pipe did not flow onto the plaintiff property owner's land. It saturated fill on adjoining property, causing it to move and remove support for fill on the plaintiff's land.

30 The many principles of law that were dealt with by Justice Bryson in his reasons, however, were applicable to the current case. In his reasons Justice Bryson undertook a lengthy analysis of decisions involving the duty of care of public authorities in the exercise of statutory powers and, in particular, the extent of any duty to take positive action in the exercise of those powers.

31 He referred to authority commencing with Sutherland Shire Council v Heyman (1985) 157 CLR 524 through to Graham Barclay Oysters Pty Limited v Ryan 2002) 211 CLR 540 and dealt with elements of reliance, foreseeability, knowledge of risk, relationship and standard of care. All were elements relevant to the case under consideration.

32 He noted that in Heyman the High Court debated the concept of reliance arising out of general dependence on an authority to carry out its functions with due care but that this concept was rejected in Pyrenees Shire Council v Day (1998)192 CLR 33. Justice Bryson was therefore not prepared to conclude that absence of inquiry of or of reliance upon a local authority established that the authority owed no duty of care.

33 In Makawe Pty Limited v Randwick City Council [2009] NSWCA 412, Hodgson JA said (at [26]):

... whether the reliance under consideration is general reliance by persons in the position of the plaintiff, or specific actual reliance by the plaintiff itself, it is foreseeability or knowledge of that reliance by the defendant that is significant for the purposes of a duty of care. And in my opinion, the views of Brennan CJ and Gummow and Kirby JJ in Pyrenees do not altogether banish from consideration, among facts relevant to the question of whether there should be a finding of a duty of care, the question whether it was reasonably foreseeable by the defendant that persons in the position of the plaintiff would rely on the relevant function of the defendant being performed with due care.

34 On the issue of foreseeability, Justice Bryson in Becker said:

Case law and judicial opinion do not provide clear paths for decision on the circumstances in which a duty of care is imposed on a public authority exercising statutory powers, the risks against which a duty of care protects, and the persons to whom a duty of care is owed. [82]

and

A simple-hearted progress from foreseeability of risk of loss to attribution of duty of care is not what the law authorises.

35 He preferred to adopt the approach taken by Gummow and Hayne JJ in Graham Barclay Oysters at 596-597 [145]-[146]:

[145] ... the co-existence of knowledge of a risk of harm and power to avert or to minimise that harm does not, without more, give rise to a duty of care at common law. The totality of the relationship between the parties, not merely the foresight and capacity to act on the part of one of them, is the proper basis upon which a duty of care may be recognised. Were it otherwise, any recipient of statutory powers to licence, supervise or compel conduct in a given field, would, upon gaining foresight of some relevant risk, owe a duty of care to those ultimately threatened by that risk to act to prevent or minimise it. As will appear, the common law should be particularly hesitant to recognise such a duty where the relevant authority is empowered to regulate conduct relating to or impacting on the risk-laden field of endeavour which is populated by self-interested commercial actors who themselves possess some power to avert those risks.[146] The existence or otherwise of a common law duty of care allegedly owed by a statutory authority turns on a close examination of the terms, scope and purpose of the relevant statutory regime. The question is whether that regime erects or facilitates a relationship between the authority and a class of persons that, in all the circumstances, displays sufficient characteristics answering the criteria for intervention by the tort of negligence.

36 Justice Bryson noted the distinction between a power to inspect and a duty to inspect and said that in the absence of a statutory duty to make an inspection, there would be no negligence in omitting to inspect. Referring to authority, he said at [96]:

I regard it as clear that unless there is a statutory obligation to exercise a power (in this instance, a statutory duty to make an inspection) a duty of care does not require its exercise, and there is no breach of duty if it is not exercised.

37 In dealing with the issue of relationship, Justice Bryson referred to the reasons of Gleeson CJ in Graham Barclay Oysters to the effect that there must be something in the statutory provisions to justify a conclusion that the powers were given for the protection of a specific class of persons in which the claimant was included or were given for a class of persons who can be identified and distinguished from the public generally. He quoted Justice McHugh, who after referring to Donoghue v Stevenson [1932] AC 562 said:

To create a duty, the relationship between the public authority and persons affected by the conduct of the authority must be 'so closely and directly affected by [its] act [or omission] that [it] ought reasonably to have them in contemplation as being so affected' when it directs its mind to the relevant conduct in question.

38 Bryson J extracted a passage from the reasons of Gummow and Hayne JJ (at 597-598 [149]-[150]) in which they said that the focus of analysis in determining the nature of the relationship between the local authority and a class of persons was the relevant legislation and the positions occupied by the parties on the facts as found as the trial. They listed a number of features that should be considered:

1The degree and nature of control exercised by the authority over the risk of harm that eventuated;

2the degree of vulnerability of those who depend on the proper exercise by the authority of its powers;

3the consistency or otherwise of the asserted duty of care with the terms, scope and purpose of the relevant statute;

4the factor of control is of fundamental importance in discerning a common law duty of care on the part of a public authority.

(Authorities excluded)

39 In dealing with the claim of nuisance, in isolation from the tort of negligence, Justice Bryson quoted from Lord Wright in Sedleigh-Denfield v O'Callaghan & Ors [1940] AC 880 (at 905):

... if the defendant did not create the nuisance, he must, if he is to be held responsible, have continued it, which I think means simply neglected to remedy it when he became, or should have become, aware of it.

40 Justice Bryson said that fault of some kind was now usually necessary for liability in nuisance. He said that the question of whether the Sutherland Shire Council became liable for nuisance depended on establishing that the Council failed to remedy the nuisance without undue delay when it became aware of the nuisance or with ordinary and reasonable care ought to have become aware of it. As already noted, the parties did not dispute that this principle applied in the current case.

41 In Bankstown City Council v Alamdo Holdings Pty Ltd (20050 223 CLR 660 (at 666 [16]), after referring to English authority, Gleeson CJ, Gummow, Hayne and Callinan JJ said:

This indicates that a body such as the Council is not, without negligence on its part, liable for a nuisance attributable to the exercise of, or failure to exercise, its statutory powers. In this Court, it had been remarked by Gavan Duffy and Starke JJ in Metropolitan Gas Co v Melbourne Corporation (1924) 35 CLR 186 at 197:

And although it was said in argument that the Company's claim was founded upon either trespass or nuisance or negligence, still the liability of the corporation must depend upon whether, in the exercise of its statutory powers, it has acted negligently, so as to do unnecessary damage to the Company.

42 I proceeded therefore on the basis that unless the claim in negligence was made out, the claim in nuisance could not succeed.

43 Having regard to these principles of the law I concluded that the relevant features for consideration in this case in the determination of whether the defendant owed the plaintiffs a duty of care were foresight, control, relationship.

Foresight

44 The plaintiffs claimed that the risk of damage to their property from a leaking stormwater pipe was foreseeable. They claimed that the defendant knew or ought reasonably to have foreseen the risk of harm to their property from water leaking from the stormwater pipe at least from 7 November 2001 when, at a meeting with the defendant's general manager, Mr Hanson delivered a letter (GH -14) and Mr Hogan, a building inspector employed by the defendant, was directed to prepare a report.

45 In order to reach this point it was necessary for the plaintiffs to take Mr Hogan back to 1981 when he attended at the property to inspect the excavations undertaken for the construction of piers for the remedial underpinning of the western wall of the house. Also present at the time of this inspection were Mr Benning, the builder, Mr Bradford, an inspector with the Builders Licensing Board and Mr D T Cohen of D T Cohen & Associates, consulting engineers. It was put to Mr Hogan that at this inspection he was shown the reports prepared for the builder by two separate consulting engineers, Mr Bryan of F R Kelley & Associates Pty Limited (GH-2) and Mr Cohen (GH-4).

46 Mr Bryan's report included the following:

There appeared to be some evidence of moisture under the centre portion of the rear wall which could indicate a leak from one of the house services.

...

It would appear, therefore, that settlement of this wall could have been the result of constructing the footing on an improperly consolidated fill, possibly further aggravated by the presence of water from some unknown source.

The wall referred to in this extract was the western wall of the house.

47 Mr Cohen's report contained the following extracts:

The house has been built in an area that was sub-divided in early 1974. On perusal of the subdivision engineering drawings it is apparent that the house has been constructed on filled ground (to depth of approximately 1200 mm) over a naturally occurring gully. A stormwater pipe was constructed up hill from the abovementioned house.

...

In regard to the repair of the rear wall, I would advise that the external brick skin be removed and the footing beneath it be demolished. A pier and beam footing system should then be constructed and a new brick wall built. Unfortunately, it is not impossible that settlement problems may occur in the front of the house in the future.

48 It was put to Mr Hogan that at the time of this inspection in 1981 he was shown the reports prepared by Mr Bryan and Mr Cohen. He did not remember receiving a copy of Mr Bryan's report but agreed that he might have seen it and he agreed that, if seen, he would have read the extracts set out above. He maintained, however, that he did not remember reading the report.

49 He recalled having seen Mr Cohen's report and the reference in it to a stormwater pipe constructed uphill from the house but said he had no knowledge of the stormwater pipe.

50 He did not remember having discussed the water from an unknown source with Mr Bradford or asking Mr Bradford if a source of the water had been identified. The most that Mr Hogan was prepared to say was that, had he read Mr Bryan's report, he might have asked Mr Bradford about the source of the water.

51 Mr Hogan said he was not concerned at this meeting about the source of the water. His concern was to ensure that rectification work proposed by the consulting engineers as a solution to the movement of fill beneath the western wall of the house was properly carried out.

52 Mr Hogan accepted that his experience at the time of this meeting indicated to him that the presence of moisture in unconsolidated fill might exacerbate the movement of fill and present a potential problem. He said that he did not consider the presence of water to be noteworthy. His view was that it could have come from a number of sources, including natural water run off or leaking utility services such as water connections and sewers.

53 The plaintiffs' proposition was that the information obtained by Mr Hogan at this site inspection drew the defendant's attention to the vulnerability of the plaintiffs' property, constructed as it was on unconsolidated fill, to damage from moisture in the subsoil conditions. They claimed that when, 20 years later, in 2001, they notified the defendant of further settlement along the eastern wall and garage of the house, Mr Hogan acting reasonably, should have been alerted to the foreseeable risk that water escaping from open joints in the stormwater pipeline might be the cause of the further damage to the house.

54 There were many difficulties facing the plaintiffs in this argument.

55 I was not satisfied from this evidence that in 1981 the defendant was alerted to more than the fact that moisture from an unknown source might have exacerbated the settlement of the fill beneath the western wall of the house.

56 Mr Hogan did not concede that he was shown Mr Bryan's report. At most he agreed that he might have seen it and that, had be seen it, he might have asked questions about the source of the moisture.

57 At most the evidence suggested that at the meeting the likely causes of settlement were discussed and that there might have been reference to the presence of water from an unknown source. As stated by Mr Hogan, he was not an engineer. Two consulting engineers investigated the cause of the damage to the house at that time, neither of whom related it directly to the presence of moisture. Both said the cause was unconsolidated and uncontrolled fill and inadequate foundations. Only Mr Bryan referred to the presence of moisture as a possible aggravating feature. Neither engineer suggested that investigation should be undertaken to locate the source of any moisture and to remove it as an aggravating feature. Mr Cohen specifically referred to a stormwater pipe located uphill from the house but did not mention the presence of moisture.

58 Not even Mr Bryan, whose firm designed the roads and services for the subdivision, including, I inferred, the stormwater drainage services, suggested the stormwater pipe as a source of the moisture he noted beneath the western wall.

59 I was satisfied therefore that it was reasonable for Mr Hogan, a building inspector without engineering training or qualification, to accept that the solution proposed by the Builders Licensing Board, involving as it did the advice of two consulting engineers, would resolve the problems of settlement beneath the western wall of the house.

60 Between 2001 and 2006 the plaintiffs engaged in correspondence and meetings with the defendant in the course of which they claimed neglect on the part of the defendant in approving the subdivision and in approving the building application for their house with inadequate footings.

61 Mr Hogan was directed to investigate and report on these complaints. His report, dated 16 November 2001, dealt with and rejected these claims.

62 At no stage during the course of these communications was the defendant alerted to the likelihood that excessive moisture in the subsoil from any source, including a leaking stormwater pipe, was the cause of the ongoing damage to the house.

63 The plaintiffs' solicitors wrote to the defendant on 7 November 2007 (GH-39) stating that the plaintiffs first became aware that the stormwater pipe was leaking under the road surface in front of their property in early 2007. The solicitors alleged that the reports of Mr Cohen of 4 May 1999, Mr Hanson of 25 July 2007 and of Mr Carr of RCA Australia of October 2007 established that:

1.the stormwater pipe under Yarmouth Parade in the vicinity of Lot 115 leaks;

2.water leaking from the stormwater pipe has caused the uncontrolled fill on Lot 115 to settle at a far greater rate than would have been the case but for the leaking pipe;

3.the greatly increased rate of settlement of the fill on Lot 115 due to the leaking pipe has caused and is continuing to cause significant damage to the dwelling house on Lot 115.

64 I concluded that this was the first time at which the defendant had actual knowledge of the plaintiff's claim that leaks from the stormwater pipe were the cause of damage to their house. Further, I concluded that at no stage prior to November 2007 was information provided to the defendant from which it ought reasonably to have foreseen that there was a risk that water escaping from the stormwater pipe was the cause of damage to the plaintiffs' property.

65 Justice McHugh in Crimmins (at 42 [102]) delivered the following caution:

In my opinion, however, one must be very careful about using constructive knowledge in this area. Pyrenees for example, would have taken on a very different complexion if the shire council did not have actual knowledge of the risk. Speaking generally, I think it is unlikely that a plaintiff could succeed because of the authority's constructive knowledge of an area of risk, unless it can be said that the defendant authority had an obligation to seek out the requisite knowledge in the all the circumstances, including cases where the defendant authority already possesses certain actual knowledge, but fails to look further. It would be a far-reaching step to impose affirmative obligations on a statutory authority merely because it could have or even ought to have known that the plaintiff was, or was a member of a class which was, likely to suffer harm of the relevant kind.

66 I concluded therefore that, in the circumstances of this case, it was only after November 2007 that the defendant possessed sufficient information to render it reasonably foreseeable that water was leaking from its stormwater pipe and creating a risk of harm to the property. It was only at that stage that the defendant owed the plaintiffs a duty of care to take reasonable precautions to avert the risk.

Control and Relationship

67 The next question addressed the extent of control that the defendant had over the stormwater pipe and the nature of its relationship with the plaintiffs. In Randwick City Council v T & H Fatouros Pty Ltd [2007] NSWCA 177, Justice Ipp at [49] said:

For control to be a significant factor, capable of giving rise to a duty on a public authority to take affirmative action, the measure of control must be significant and special. I shall refer to authorities that bear this out.

68 The authorities to which he referred were Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1, Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540, Pyrenees Shire Council v Day (1988) 192 CLR 300, Amaca Pty Ltd v The State of New South Wales (2004) 132 LGERA 309, Brodie v Singleton Shire Council (2001) 206 CLR 512.

69 In asserting that the required measure of control was present in this case, the plaintiffs drew my attention to the provisions s 59A(2) of the Local Government Act 1993 that conferred on the defendant the power to operate, repair, replace, maintain, remove, extend, expand, connect, disconnect, improve or do other things necessary or appropriate for the efficient use of the stormwater pipe. S 634 of the Act made it an offence for the plaintiffs themselves to undertake any work on the stormwater pipe.

70 They contended that the defendant had total control over the risk that they claimed eventuated and caused them property damage and loss.

71 I accepted that the defendant solely had the power to inspect and effect repairs to the stormwater pipe. The next step for the plaintiffs was to establish that the relationship between them and the defendant was such that they were so closely or directly affected by the defendant's failure to undertake inspection and repairs of the pipeline that the defendant ought reasonably to have had the plaintiffs in contemplation as being affected when it directed its mind to the question of the exercise of its powers under s 59A of the Act with respect to the stormwater pipe.

72 The plaintiffs relied on the following evidence of Mr Hogan:

Q.But wasn't it simply obvious to you that unconsolidated fill on a slope and potential aggravation by moisture was likely to cause that fill to settle further and move down the slope?

A.It might, but as I say that's not something that - that's not my role to investigate. It wasn't my role to investigate that.

Q.I understand that. But you accept nonetheless that your experience at the time at least told you that the presence of moisture in unconsolidated fill was a potential problem because that moisture might exacerbate the movement of that fill down slope.

A.I can accept that.

(Transcript 102.34)

73 The plaintiffs pointed to this evidence as support for their proposition that the defendant was aware of their vulnerability because the presence of moisture aggravated the risk of settlement of the unconsolidated fill on their property. In those circumstances, they contended that, since the plaintiffs themselves had no power to take steps to inspect and repair the stormwater pipe, a relationship existed where the measure of control possessed by the defendant was significant and special.

74 I did not accept this contention. At the time Mr Hogan inspected the property in 1981 the source of the moisture referred to by Mr Bryan was unknown. It appeared that it was of not of sufficient concern to the engineers who designed the remedial measures that were implemented at that time to warrant investigation as to its source.

75 In the absence of evidence that established that the defendant knew or ought to have known that leaks from the stormwater pipe were causing or likely to cause damage to the plaintiffs' property, there was no basis for an argument that the plaintiffs were in a position of vulnerability so much greater than that of any other member of the public that the defendant was under a positive obligation to depart from its normal practice and undertake a program of preventative inspection and maintenance of this particular section of the stormwater pipe.

76 I did not accept that the element of control alone, in the absence of circumstances creating a necessarily close or special relationship, was sufficient to establish a duty of care prior to November 2007.

CAUSATION

77 In respect of causation the Civil Liability Act 2002 provides:

5D General principles

(1) A determination that negligence caused particular harm comprises the following elements:

(a) that the negligence was a necessary condition of the occurrence of the harm (factual causation), and

(b) that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused (scope of liability).

(2) In determining in an exceptional case, in accordance with established principles, whether negligence that cannot be established as a necessary condition of the occurrence of harm should be accepted as establishing factual causation, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.

...

(4) For the purpose of determining the scope of liability, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.

5E Onus of proof

In determining liability for negligence, the plaintiff always bears the onus of proving, on the balance of probabilities, any fact relevant to the issue of causation.

78 The principles arising from this provision were dealt with by Campbell JA in Woolworths Ltd v Strong & Anor [2010] NSWCA 282. Although under appeal to the High Court, I considered that the reasons provided by Justice Campbell provided guidance to the way in which these provisions are to be applied.

79 On the basis of these principles, the words used in s 5D(1) as applied to this case required that the plaintiffs establish that the defendant's failure to exercise reasonable care and skill in the maintenance and repair of the stormwater pipe was a necessary condition of the occurrence of the damage to the house.

80 Concepts of material contribution and increase in risk have no role to play in deciding whether s 5D(1) is satisfied in any particular case. Causation within the meaning of s 5D(1) is only established if the necessary condition test is satisfied. The word harm refers to the particular harm suffered by the plaintiffs.

81 As to s 5E, Justice Campbell said that the words are clear and that they do not change the law as it existed prior to the introduction of the section. The provision acts as a reminder to the courts not to overlook an important part of the law of negligence. He said it was still possible for a plaintiff to satisfy the onus of proving causation if a court can infer that it is more likely than not that the failure to exercise reasonable care and skill was a necessary condition of the particular harm that the plaintiff suffered. The question remains what inferences are open on the established facts.

82 Justice Campbell referred to Flounders v Millar [2007] NSWCA 238 where Ipp JA, after referring extensively to authority, including Bendix Mintex Pty Ltd v Barnes (1997) 42 NSWLR 307, Seltsam Pty Limited v McGuinness (2000) 49 NSWLR 262, TC by his tutor Sabatino v State of New South Wales [2001] NSWCA 380, Betts v Whittingslow (1945) 71 CLR 637 and Jones v Dunkel (1959) 101 CLR 298, said [at 35]:

It remains necessary for a plaintiff, relying on circumstantial evidence, to prove that the circumstances raise the more probable inference in favour of what is alleged. The circumstances must do more than give rise to conflicting inferences of an equal degree of probability or plausibility. The choice between conflicting inferences must be more than a matter of conjecture. If the court is left to speculate about possibilities as to the cause of the injury, the plaintiff must fail. As I have attempted to demonstrate, there are many cases in this Court that follow and adopt these principles.

83 Mr Shirley propounded the following as the process by which the damage to the house was caused:

1The fill placed on the property at the time of the subdivision was inadequately compacted and consolidated;

2The foundations for the house were inadequate for a filled site;

3The rectification work undertaken in 1981 was inappropriate and poorly executed;

4After the rectification work was completed there was further settlement of the fill as a result of seepage of water causing soil creep;

5The soil creep undermined the foundations of the house and caused it to twist and tilt;

6Moisture within the soil was a known cause of soil creep;

7In ordinary circumstances the fill on the property should have settled within 7 to 10 years after it was placed, in this case, at the latest by the mid-1980's;

8Something unusual was required to explain the ongoing settlement within the fill;

9The only additional feature to provide that explanation was the presence of water leaking from the stormwater pipe.

84 The experts agreed in respect of items 1 - 3 and 6 - 8. Mr Shirley concluded that the unusual circumstance that explained the ongoing settlement within the fill was the leaking of stormwater from the stormwater pipe and the trench in which it was laid. He said that this water was additional to that which might be expected from natural surface run off. He said it found its way into the gully and saturated the fill resulting in soil creep.

85 Mr Barker disagreed. His opinion was that there were elements forming the basis for Mr Shirley's conclusion that were speculative and some that were not supported by objective observation. He put forward the following as potential explanations for the damage:

1The following from Mr Shirley's report (Exhibit C2):

56Thus, despite the drainage works installed during the subdivision construction, it is most likely that the natural seepage along the gullies would continue after completion of the subdivision earthworks. In addition, due to the porous nature of the materials used in the subdivision fill operations [viz: gravely silty sands], it is also very likely that a significant proportion of the surface run-off would continue to be absorbed into, and flow through, the fill materials within the gully areas after completion of the subdivision drainage system.

2Continuing settlement beneath the western wall at its northern end because the piers constructed as part of the rectification works were not properly founded.

3Rotation within the house resulting from consolidation settlement of the fill, the weight of the fill embankment and the additional load applied by the remedial footings.

86 Mr Barker's opinion was that the piered footings should not have been constructed without first undertaking investigation to ascertain the foundations and profile of the fill beneath the remainder of the house. Further, it was his opinion that settlement ceased by 1999 and that it was not possible to determine the contribution to the damage, if any, that was the result of any leakage from the stormwater pipe.

87 The features that were the basis for Mr Shirley's opinion that the damage to the house was caused by leakage from the stormwater pipe and that were the subject of debate between the experts were:

1The condition of the stormwater pipe and the trench in which it was laid;

2The mechanism for further settlement;

3The movement of water through the property;

4The nature of the damage to the house.

The condition of the stormwater pipe

88 The experts agreed (Exhibit F, item 27) as follows:

Leakage can occur from the open joints when there are significant water flows. Leaks from open joints may also be possible in the areas of reverse fall. Silt / debris in the pipe does not prevent leakage.

89 The defendant made no concession that it undertook work in August 2010 in order to repair a leak in the pipe, that it provided evidence that there was a leak in the pipe or that any leak caused damage to the property.

90 It was apparent from photographic evidence that the stormwater pipe was damaged, that there were gaps at joints and that there was an accumulation of soil and debris within the pipe.

91 Mr Hanson described in his affidavit a number of occasions when stormwater surcharged from the pipe at times of heavy rainfall with consequent discharge of stormwater onto the property. The experts agreed that these events were not relevant to the issue of causation.

92 Mr Shirley explained that it was standard practice to design and build stormwater drains that did not have capacity to cope with severe storm events. He said they were the only engineering structures that were designed to fail on a regular basis.

93 For this reason I have not considered the surcharge of stormwater in dealing with the issue of causation, except to the extent that, in times when the stormwater pipe was filled to or beyond capacity, hydrostatic pressure might have forced water through gaps in the pipes and into the surrounding fill.

94 Mr Ian Newcombe, a geotechnical engineer formerly employed by the defendant, observed the opening in Yarmouth Parade on 3 August 2010. He said the purpose of the excavation was the exposure and realignment of the stormwater pipe and the installation of a fibreglass sleeve in the pipe. He prepared and attached to his affidavit (Exhibit 5, annexure A) an engineering log of the excavation in which he described the nature of the soils within the trench.

95 Mr Newcombe described his observations, assisted by photographs taken by other employees of the defendant. He said the road opening uncovered a pipe where a joint was vertically displaced by approximately 80 mm. He measured the displacement from the edge of the trench using a tape measure. He did not enter the trench because the walls were unsupported.

96 He did not observe any granular, free draining, pipe bedding material that would accelerate water loss from the pipe. He said the medium plasticity clay fines material surrounding the pipe limited significant dispersion of water from the displaced joint. He did not observe loss of fines in close proximity to the joint as would be expected if there were significant water loss from the joint.

97 The moisture content in the soil surrounding the displaced joint was nearly equivalent to that in the sediment pile well above the pipe. This also indicated that there was no significant leakage from the joint.

98 Although rainfall records indicated that there was significant rainfall in the vicinity of Yarmouth Parade in the days prior to the road opening, Mr Newcombe did not observe saturation of the surrounding soil adjacent to the pipe joint indicative of significant leakage

99 In addition to the absence of observable loss of fines in the soil surrounding the joint, there was no evidence of mineralisation in the soil surrounding the joint, both of which would be expected to result from significant long term leakage at the joint. Mr Newcombe explained that mineralisation depended upon the minerals that were carried in the stormwater. He agreed that the more appropriate description of this process was mineralised oxidation.

100 He said there was no observable localised subsidence above the location of the dislocated joint, a feature that he would expect to result when a pipe leaked significant volumes of water.

101 Mr Newcombe confirmed that he was present at the site of the excavation for about 30 to 45 minutes after 90% of the trench had been excavated. He agreed that, because he had not been able to enter the trench, he did not use a G-pick or other method to remove the marks left on the walls of the trench by the bucket of the excavator. He accepted that this was a standard practice when examining material for the purpose of preparation of a geological profile.

102 Mr Newcombe said that with the exception of the top layer of granitic sands he prepared his profile from his examination of material that had been removed from the trench and stockpiled on the side of the road. He agreed that this involved some guesswork on his part. He said this material was close to uniform for the depth of the trench.

103 Mr Newcombe was not present at the site when the disjointed pipe was raised, rolled over and realigned. He did not sight the underside of the pipe.

104 He agreed that his measurement of the vertical displacement was approximate only and accepted that it could have measured 100 - 120 mm. He observed only one joint.

105 He agreed that the sections of pipe were joined by spigot and socket joints, with the socket being inserted into the spigot a distance of 100 to 150 mm at the time of installation. He agreed that the separation of the joints involved movement of 100 to 150 mm, indicative of settlement beneath the pipe or down hill creep. He said down hill creep would be unusual because it would be reflected in some deflection in the kerb alignment. This was a feature that he did not observe although he acknowledged that at the time of his inspection he was not specifically addressing the matter of kerb deflection. In the absence of this feature, he considered it was more likely to be the result of vertical movement.

106 Mr Newcombe did not describe the moisture content of the material at the very base of the trench in his engineering log. He said this was because he did not know which of the soils that were stockpiled came from this part of the trench. There was no visible difference in the soils and his gut feel (Transcript 124.21) was that there was no difference in the moisture content.

107 At the time of his inspection of the excavation Mr Newcombe was unaware of the plaintiffs' claim that the pipe was leaking at the joint that he measured. He agreed that he was not specifically investigating leakage from the joint but pointed out that in the normal course of his investigation, if a dislocated joint was observed, he would automatically look for evidence of water loss. In this case, his observations were limited to the top of the pipe as exposed in the trench and depicted in the photographs annexed to his affidavit.

108 Mr Shirley pointed to appearance of watermarks on the inside of the stormwater pipe as shown in the photographs that comprised Exhibit A. He contended that the third of these photographs showed watermarks at three levels: a dark brown mark indicating water had been present within the prior 20 minutes, a lighter brown mark relating to water that was present within the prior 2 hours and a very light brown mark relating to water that was present a month before. He also pointed to a fine white line between the light and very light brown marks that he believed to be a deposit of calcium carbonate resulting from water lying in the pipe for an extended period. He said this was commonly seen in circumstances where water ponded.

109 Mr Shirley said that, in circumstances where there was an open joint, ponded water would seep or flow depending on the porosity of the silt and debris in the pipe and the backfill surrounding the pipe and over time seep into the ground and into the natural drainage path. The rate of flow would depend upon the quantity of water and the speed at which it was flowing through the pipe. During significant stormwater events flow would be increased.

110 Mr Barker pointed to several potential sources for the water that caused the mark including water from normal rainfall events that infiltrated through the fill, water that travelled down the trench, the original filled watercourse and water seeping from the pipe at damaged or dislocated points. He said he could not discern which of those sources of water might have cause the watermark from water lying beneath the pipe.

111 Mr Barker agreed that the substantial rainfall recorded in the days immediately preceding the excavation in 2010 was one of the alternative sources of water to which he referred but he could not state that this or any other source resulted in the collection of water beneath the pipe before it was rotated. He noted that in the three days of 29 - 31 July 2010 rainfall of 66 mm in the vicinity of the stormwater drain was recorded and that flood warnings were issued. He said this should have provided conditions that resulted in obvious seepage in the bedding material if the pipe was leaking. Seepage should also have been present in the bedding material and below the pipe.

112 He said the reverse grade in the section of the pipeline near dislocated joint 9 provided a low point where stormwater could pond and there should therefore have been a saturated area in the bedding material below or adjacent to the dislocated joint. He noted that no evidence of saturation was visible in the photographs or recorded in Mr Newcombe's engineering log. Mr Newcombe did record in the engineering log that the moisture profile was drier at increasing depths of the excavation. Mr Barker said the soil in the area at the base of the excavation should have been significantly wetter if the pipe was leaking.

113 These features indicated to Mr Barker that there was negligible, if any, stormwater discharging or seeping from the pipe or trench.

114 As to the path the water would take if there was leakage from the pipe, Mr Barker said that because the leak was in the area where trench passed over the filled zone of the gully, the water would follow the path of the gully. Elsewhere within the trench the water would probably stay within the trench because it was the more porous of the available channels.

The mechanism for further settlement

115 Mr Shirley said that, in contrast to the differential vertical movement that caused damage to the western wall that was rectified in 1981, the subsequent damage was the result of lateral movement of the fill in a westerly direction or soil creep. Mr Shirley described soil creep as:

Soil creep is a slow downhill movement of fill or natural soil materials which is common on hillsides. It is normally slow, it may be almost imperceptible, it may be as low as .5 of a millimetre per year in flatter slopes. In steeper slopes such as Thredbo or around the northern beaches of Sydney, it approaches 3-5 millimetres per year. (Transcript.174.26)

116 He explained that soils normally remained static but were subject to movement of this nature when they became moist or saturated. He said the rate of creep was normally greater in areas of deeper fill and in the area of a natural gully where more seepage might be expected to occur.

117 The engineers agreed that the likely composition and nature of fill materials was Gravelly Sandy & Silty fill intermixed with cobbles & boulders. The soils are of variable porosity and density. Seepage is able to occur within & below the fill strata. (Exhibit F, item 4)

118 In explaining the reference to seepage occurring within and below fill strata, Mr Shirley said that water normally flowed at the interface between the fill and the natural soils, so that it usually flowed in the lower part of the fill and the upper part of the natural soils. He identified three potential sources for the seepage:

1the natural seepage through the strata in the hills above the gully;

2the stormwater trench that created a source of water seepage whether or not the pipe leaked;

3leaks from the stormwater pipe.

119 Mr Barker was anxious to point out that Mr Shirley's drawing BN055R11 of the inferred subsurface conditions was diagrammatic only. He said there was a lack of information that defined the topsoil zone. This, in his view, made it difficult for those undertaking the piering in 1981 to determine whether they actually excavated through the fill and reached the bedrock. This caused him to conclude that the two piers, 7 and 8, that required hand excavation were not adequately founded and were therefore vulnerable to any moisture regime flowing underneath them.

120 The experts agreed (Exhibit F, item 25):

Both CCTV surveys confirm that the pipeline between Pits A & B had moved / settled since its construction and has been affected by a number of joint separations. There was also an extensive reverse fall in the pipeline in the vicinity of the probable former natural gully. Extensive silt, gravel and other materials were deposited in the pipeline in the area of the reverse fall.

121 The engineers agreed that in 2010 it was apparent that the joint separations in the stormwater pipe were wider on the western than on the eastern side. They also agreed that prior to August 2010 there was settlement in Yarmouth Parade over an area of 4 metres by 8 metres in the vicinity of the pipeline and that it was possible that the road pavement was re-sealed in that area at some time over the past 30 years.

122 Mr Shirley concluded that Yarmouth Parade moved since its original construction and that the wider joints on the western side of the stormwater pipe provided evidence of movement and creep in the fill. He pointed to the following features in support of this conclusion:

1He said photographs P20, P21, and P22 in his report depicted deformation of the kerb in Yarmouth Parade, in the nature of a bulge or lateral shift of the kerb in a westerly direction. When looking at the kerb he considered whether the bulge was the result of spray over the seal from the bitumen roadway but he concluded that the concrete had moved.

Mr Barker disagreed that there was evidence of creep movement in the kerb line. He said that a movement pattern could not be discerned from the current condition of the kerb because there were multiple defects in the kerb itself. He noted the overspray onto the edge of the kerb that he said made it difficult visually to determine the edge of the bitumen and the kerb. He did not see deformation in the kerb. Further, he noted that the fill formation of which the road was constructed was placed in accordance with an engineered standard in contrast to the uncontrolled and unengineered fill placed on the property and that it was therefore less susceptible to movement.

I have already noted that Mr Newcombe, in the course of his limited attendance at the site of the excavation, observed no deflection in the kerb alignment.

2Mr Shirley concluded from his observation of photographs P28 and P29 and the CCTV record from that there was a lateral shift at the joint in the stormwater pipe. Mr Shirley said the pipe instead of lying straight appeared to be skewed to the west and the opening in joint depicted in photograph P29 was wider on the western side. Mr Barker agreed that photograph P29 indicated a small lateral movement in the direction of the opening.

3Inspection of the pipeline between pit B and pit C that indicated to Mr Shirley that the fill and materials in which the pipeline had been laid were moving towards the west. He said that 20 to 30 mm of lateral movement would be sufficient to create the opening. Mr Barker accepted that there was evidence of lateral movement in the pipeline.

The movement of water

The gully

123 The experts agreed that prior to the subdivision a natural gully carried water across the property. They disagreed on the precise location of the gully.

124 Mr Shirley located the gully on the north eastern corner of the land as shown on his drawing BN055R3 (part Exhibit E2). Mr Barker thought the gully entered the property at two points to the north and south of its eastern boundary, joining in approximately the centre of the land and continuing to the west roughly through the centre. His conclusion concerning its location was shown on drawing 80/47 (part Exhibit 7B).

125 Mr Shirley's conclusion was based on:

1His review of parish maps and aerial photographs taken in 1965 and 1974. He also had regard to the subdivision plan on which areas of fill were indicated. The plan also indicated the location of drainage works that he considered indicated the interception of drainage paths and their location.

2His review of pier depths recorded at the time of underpinning works beneath the western wall of the house in 1981. He considered they were a good indicator of the possible depth of the fill, although be believed that the depths recorded at the north western end of the wall were incorrect and that they were not in fact founded on rock. His conclusion was that the gully passed under the north western corner of the house.

3Tilting movement in the house that indicated to Mr Shirley that there was lateral displacement of the footings at the north western corner and tilting of the house at the north eastern corner. Mr Barker disagreed that there was discernable movement at the north eastern corner of the house. Mr Shirley persisted with his opinion that there was tilting movement at the north eastern corner of the house over the height of the wall from the front patio. He also noted that the patio fell towards rather than away from the house, contrary to normal building practice.

126 Mr Barker's opinion was based on:

1The parish map that indicated a confluence of two sections of a watercourse towards the centre of the property. He relied on this map to confirm his conclusion that there were two watercourses running through the eastern part of the property.

2The location of a stormwater pit at the north western corner of the property as shown in document D to Mr Shirley's report and within the construction fill. Mr Shirley pointed out that the stormwater pit was not in fact constructed at the position shown on the subdivision plan but to the north on the adjoining property and more in line with his conclusion concerning the position of the gully.

3Photographs of the property taken at the time of its purchase by the plaintiffs. Mr Barker said the trees shown in the photographs were a good indicator of the location of shallow or no fill. Mr Shirley did not accept that the trees assisted in locating the site of the gully. He said they appeared to be young and in poor condition and of the type that often grew in subdivision fill. In response Mr Barker pointed to photographs taken one year after the subdivision that he said showed trees within the property that were older than one year and that were therefore indicative of the site of the gully.

4Mr Barker prepared a drawing, SR05, from material that indicated the depth of the piers under the western wall of the house on inspection in 1981. He noted that at the time of this inspection, except for piers 7 and 8, the excavation for all piers was completed and the pouring of concrete was approved. Piers 7 and 8 required further hand excavation that Mr Barker considered to be minor. From this data, he formed an opinion of the soil and founding rock levels before fill was placed. He said the profile indicated that the greatest depth of fill was towards the centre of the property.

5The position of the gully suggested by the trees and pier depths was reasonably close to the area of a depression in the road.

127 Mr Barker said that there could be no certainty concerning the location of the gully that was obviously somewhere under the house unless the site was excavated to determine the depth of the fill and the profile of the property beneath the fill.

128 Mr Bryan's 1979 report included the following:

An examination of these plans indicated that a gully did exist across the block, running from front to rear approximately down the centre of the block.

The road design provided for the diversion of water away from the gully and its subsequent "filling up".

129 The plans to which Mr Bryan referred were plans for the design of roads and services for the subdivision prepared by Mr Bryan's firm.

Soil Pipes

130 The experts agreed (Exhibit F, item 12)

There is evidence of possible small soil pipes within the fill materials exposed in the Council's excavation in 2010. Soil pipes can carry / redirect the flow of water through a soil mass.

131 They agreed that soil pipes could vary in size from millimetres to a metre. They agreed that soil pipes at the site were likely to be typically less than 10 mm in diameter.

132 Mr Shirley was more convinced that the excavation indicated the presence of soil pipes than Mr Barker.

133 Mr Shirley's description, with which Mr Barker agreed, of soil pipes was:

... at this site we have a gravely sandy fill, which we normally talk about as being a duplex soil which has got some fine clay material. These materials commonly have small pathways within them that are formed by water moving through the soil that erodes the fine clay materials until such time as the water moves to a point it does not have to efflux, it may travel a distance along a small porous pathway and then the little vein in a tiny tube, you might think of it, collapses and the water runs another way. It is a process of internal erosion. This internal erosion can be very large, create very large pipes. I've seen them up to nearly a metre in diameter, but typically they are normally small, between five and 10 millimetres, sometimes as low as two or three millimetres in diameter.

...

At this site the piping phenomenon, as we would call it, or the formation of soil pipes, will be greatest towards the base of the fill, because that's where seepage would normally occur. In the upper layers of fill that are not exposed to seepage, it would normally be unusual to see soil pipes form unless the soil has been fully saturated. (Transcript 187.22)

134 Mr Shirley explained that soil pipes increased the speed at which water travelled through fill material, giving rise to pressure beneath the fill and instability.

135 He said that under certain conditions he would expect the soil pipes to form in fill comprising the materials described by Mr Newcombe. The conditions required that water be present in the fill for a sufficient time for pipes to develop. He agreed that theoretically it was not possible to state the composition of the fill because there had been no geotechnical examination of the subsoil but said that his investigations while on site provided him with good indications of the nature of the materials. He noted that Mr Newcombe and Mr Barker had provided no information that contradicted his views. He agreed that his diagram R11 was illustrative only as an inferred estimate of the likely subsurface conditions.

136 Mr Barker's position was that there was no evidence from which he could conclude one way or the other that there were soil pipes in fill exposed by the excavation in 2010. He concluded therefore that, as recorded in the Exhibit F, the photograph marked as Exhibit K provided evidence only of possible small soil pipes.

The nature of damage to the house

137 Mr Shirley and Mr Barker agreed that the house was affected by differential settlement so that it was twisted and warped, that it was out of shape and demonstrated irregular movement. They agreed that the centre of the house was relatively stable and that there was settlement at the north western and south eastern corners of the house.

138 Their recorded agreement was (Exhibit F, item 31):

a)The fill settlement / movement subsequent to circa 1985 is principally related to the movement of subsurface water & seepage through & under the fill.

b)The movement mechanism has affected a wider area than the house footprint alone.

c)The mechanism of the house damage is a combination of vertical and limited lateral movement of the foundation materials, associated with internal erosion and uneven (and possibly localised) settlement of the fill beneath the house.

d)Leakage from the Council pipeline in Yarmouth Parade may also have contributed to the fill settlement / localised lateral movement.

139 Mr Shirley was not comfortable with the use of the word may in paragraph (d) of the recorded agreement. He said that Mr Barker agreed that the water was the initiator of whatever movement occurred. He said that there had to be something more than the natural seepage of water through the gully to cause the movement to continue beyond the normal 7 to 10 year period of settlement. He said the most logical cause was leakage from the stormwater pipe because there was no other non-natural source of water affecting the property.

140 He said this was the reason he was convinced that the stormwater pipe played a major role in the movement of the fill.

141 The major area of dispute between the experts in respect of the movement of the house centred on the explanation for movement at the south eastern corner of the house. Although they agreed that the location of the gully was not critical to the issue of movement, they continued to rely upon its location to support or negative the reasons put forward to explain the changes to the structure of the house.

142 The best that Mr Barker could agree with Mr Shirley was that water leaking from the pipeline might have contributed to movement and settlement but he said that the settlement had stopped. He said water leaking from the pipeline was not the cause because it failed to answer the mechanism of movement under the house.

143 This was because water would follow the gully. It did not explain the damage at the southern end of the house that was remote from the gully and from subsurface seepage. It was in this part of the property where most of the consolidation or settlement and consequent rotation of the building occurred.

144 In dealing with the north western corner, Mr Barker said that none of the mechanisms discussed provided an answer for the claimed ongoing movement and degree of settlement. Further, he could discern no further or appreciable movement that was outside the range movement that would normally be expected in a dwelling where there was a mixed foundation system, contrary to good practice, and which the experts agreed was the subject of a poor method of repair.

145 Mr Barker agreed that the north western corner was tilted towards the structure. He noted that the replacement footing in that area was one of those incomplete at the time of inspection by Mr Hogan. He said that it should not have moved but accepted that there may have been some lateral drifting that caused the base of the wall to move out slightly. He said that was no vertical cracking in the side of the northern wall that would indicate stretching. He put forward a number of potential causes for this tilting:

1this was how the wall was originally built;

2the movement was the result of the subsidence of the original footings that was not corrected when the piers were installed and the rear wall rebuilt;

3lateral movement in the replacement pier at that point, a proposition that was not unreasonable. He agreed that leaking from the stormwater pipe was the only reason he could put forward for the settlement of the piered reconstructed footing which was something that should not have happened but he maintained that this was a possible cause only.

146 Mr Barker did not consider the extent of the misalignment at the north western corner to be significant. He said it was within acceptable tolerances.

147 Mr Shirley and Mr Barker agreed that there were areas on the house where the wall tilted to a degree greater than construction tolerances. This was particularly the case at the south eastern corner of the house, in the region of the garage. In relation to the north western corner, Mr Barker was prepared only to concede that creep movement was a possible cause of movement that was within the construction tolerance.

148 Mr Shirley accepted Mr Barker's contention concerning building tolerances and that the tilt that he measured of 17 mm might partially be explained by reasonable brickwork practice within this tolerance. He said therefore that the tilt did not provide absolute proof of his theory concerning soil creep but it was one in a series of items. Mr Barker said that a tilt of 17 mm was wholly within the accepted tolerance of 25 mm for construction of brickwork in this situation and he therefore placed little weight on the tilt at the north western corner. He said there was insufficient vertical cracking and other strain indicators to indicate movement at the northern end of the building.

149 The cause of the damage at the south eastern corner of the house where the garage was situated was not identified. Mr Barker said the area under the garage was one of maximum movement and while he had no theoretical objection to the possibility of creep associated with the location of the gully under the building, neither expert considered that the gully was under the garage. This indicated to him that the gully might be a factor but not more than that.

150 Mr Shirley's response was that much of the water would take the path of the original gully but said that some would travel sideways where the fill might be more porous. He noted that Mr Barker found many boulders near the south east corner of the house as well as gravely fill. He said that created a more porous line of least resistance.

151 Mr Shirley said the mechanism of movement in the south eastern corner was different to that in the north western corner because that part of the building was based on a different footing system.

152 Mr Barker disagreed. He said the difference in this area was not in the footings but in the floor of the garage that was concrete and not timber as in the house itself.

Damage Surveys

153 Various surveys undertaken between 1999 and 2010 in an attempt to measure movement or settlement in the house.

154 Mr Shirley was concerned about the extent to which the surveys of movement could be relied upon. He said the method of measurement adopted was not precise and allowed discrepancies of plus or minus 2 mm. Further, he was concerned that the measurements were taken internally rather than from an external stable datum point. His concern with the internal points of measurement was they could have moved and affected the results.

155 Mr Barker did not agree. He said it was not a question of whether the house was moving relative to some external fixed point. He was satisfied that Hawkins Hook & Co, the registered surveyors he retained to continue to record differential movement, after reference to the historical data provided by the earlier surveys, produced results that were adequate to allow him to establish whether the structure was moving within itself.

156 Mr Shirley maintained that, while the surveys provided information concerning differential movement, they did not indicate whether there had been vertical movement of the building because the reference point itself might have moved. He maintained that survey methods for measuring cracks that themselves might be only two three millimetres were inappropriate.

157 Mr Barker and Mr Shirley were in agreement that that tilt measurements and measurements of settlement coincided only in relation to the southern end of the house.

158 Mr Barker was taken to Table 2 appearing on page 16 of Exhibit 7A in which he charted the measurements obtained by Mr Hanson, G C Civil & Structural Engineers and his firm by different methods and at different dates. He noted that they resulted in measurements that were in close agreement. He concluded from those results that there had been no discernable settlement of the building in the 10 years from 1998 to 2008.

159 Mr Shirley did not accept that any of the survey methods adopted were sufficiently accurate in circumstances where they needed to be accurate to less and 0.2 mm. He said that the measurements he recorded of the correctional brickwork established that substantial movement occurred between 2007 and 2011.

160 He said a survey of the accuracy he considered appropriate would have been expensive and would not have provided information that could be compared to the measurements recorded by the earlier, in his opinion, inaccurate surveys. As a result he said:

And I believe that my crack measurements in association with Mr Hanson's version of 2007 and Mr Cohen's measurements of the brickwork cracking are the primary source of accurate measurement of building movement. (Transcript - 198.1)

Causation - Summary

161 Justice Campbell in Strong confirmed that conclusions concerning causation might still be reached on the basis of inferences drawn from the evidence.

162 Acceptance of Mr Shirley's opinion concerning the cause of the damage to the house depended upon there being a sufficient evidentiary basis to allow me with safety to draw the inferences required to conclude that leakage from the stormwater pipe was the cause of the damage to the house.

163 There were shortcomings in the evidence in respect of the condition of the pipe line, the mechanism for further settlement, the movement of water and damage surveys to the point where I was not satisfied that any water that leaked from the stormwater pipe was the cause of the damage to the house. I summarise some of those shortcomings below.

164 The condition of the stormwater pipe: It was clear from photographic evidence that there were gaps at the joints in the stormwater pipe. The extent to which those gaps leaked both as to regularity and quantity was not established. Although there were water marks shown in photographs of the pipe and the experts agreed that the reverse fall allowed for water to pond, Mr Newcombe provided evidence of his direct observation of the trench in which the pipe was lying that indicated that the trench was not saturated after a period of heavy rainfall.

165 The mechanism for further settlement - soil creep: Mr Shirley said that soil creep was common on hillsides, at a greater rate in areas of deeper fill and in a natural gully. Moisture or saturation was required for soil creep to occur. In this case there were a number of potential sources of moisture: natural stormwater run off from the hillside to the east of the property; water travelling through the trench in which the pipe was situated and leaks from gaps in the stormwater pipe. Each of these sources would potentially follow the path of the gully. The evidence did not exclude the sources other than leaks from gaps in the stormwater pipe to the point where I was satisfied that only leakage from the pipe was responsible for soil creep.

Mr Barker accepted that there was evidence of some soil creep within the trench in which the stormwater pipe was laid. Other evidence indicative of soil creep generally was absent. Mr Shirley's contention that the kerb of Yarmouth Parade was deflected in a westward direction consistent with soil creep was not supported by Mr Barker or Mr Newcombe. Further investigation of the kerb in the area of the overspray was required to support Mr Shirley's opinion.

166 The movement of water:

The gully: In was apparent that further site investigation was required to determine with reasonable confidence the path taken by the gully and that, in the absence of that further information I was not able to make that determination.

I concluded, however, that I should prefer Mr Barker's hypothesis because it was consistent with the photographic evidence of established trees in proximity to the position of the gully as he proposed, with the pattern created by the recorded depths of the piers and with the reference in Mr Bryan's report to the position of the gully in the approximate centre of the property.

Soil pipes: the presence of soil pipes remained a possibility only and, in the absence of further investigation, it was not possible to conclude that they were present in the fill on the property or, if they were present, their extent, their contribution to the rate of seepage and extent of seepage and the likelihood that they developed purely as a result of leakage from the stormwater pipe rather than in response to water from other sources within the stormwater drainage trench.

House damage: Mr Shirley accepted that the damage that he reported at the north western corner of the property did not provide absolute proof for his theory. The damage at the south eastern corner could not be explained by reference to soil creep, particularly if I accepted Mr Shirley's opinion that the gully was positioned beneath the north western corner of the house.

This difficulty highlighted the inadequacy of site investigation to provide reliable evidence concerning the location of the gully. I was left to speculate concerning the position of the gully and the cause of the movement at the south eastern corner of the house.

167 Damage surveys: Mr Shirley was critical of the surveys of damage that were undertaken between 1999 and 2010. He indicated that an appropriate survey could have been undertaken at significant expense. He preferred to rely on the comparison of measurements taken by Mr Hanson and Mr Cohen with his own measurements of cracking. Unfortunately I did not have details of the manner in which Mr Hanson and Mr Cohen took their measurements to assess the reliability of this comparison.

The result was that I either accepted Mr Barker's assessment that there was no discernable settlement of the building between 1998 and 2008 or I was left with the conclusion that there was insufficient evidence to establish whether settlement had taken place.

BREACH

168 The defendant relied s 43A of the Civil Liability Act that provides as follows:

43A Proceedings against public or other authorities for the exercise of special statutory powers

(1) This section applies to proceedings for civil liability to which this Part applies to the extent that the liability is based on a public or other authority's exercise of, or failure to exercise, a special statutory power conferred on the authority.

(2) A special statutory power is a power:

(a) that is conferred by or under a statute, and

(b) that is of a kind that persons generally are not authorised to exercise without specific statutory authority.

(3) For the purposes of any such proceedings, any act or omission involving an exercise of, or failure to exercise, a special statutory power does not give rise to civil liability unless the act or omission was in the circumstances so unreasonable that no authority having the special statutory power in question could properly consider the act or omission to be a reasonable exercise of, or failure to exercise, its power.

(4) In the case of a special statutory power of a public or other authority to prohibit or regulate an activity, this section applies in addition to section 44.

169 It relied on the following provisions of the Local Government Act 2003

59A Ownership of water supply, sewerage and stormwater drainage works

(1) Subject to this Division, a council is the owner of all works of water supply, sewerage and stormwater drainage installed in or on land by the council (whether or not the land is owned by the council).

(2) A council may operate, repair, replace, maintain, remove, extend, expand, connect, disconnect, improve or do any other things that are necessary or appropriate to any of its works to ensure that, in the opinion of the council, the works are used in an efficient manner for the purposes for which the works were installed.

(3) The provisions of this section have effect despite anything contained in section 42 of the Real Property Act 1900

634 Water, sewerage and stormwater drainage offences

(1) A person must not do any water supply work, sewerage work or stormwater drainage work unless the person:

(a) is the holder of an endorsed licence or supervisor certificate in force under the Home Building Act 1989 authorising the holder to do (and to supervise) work of the kind concerned, or

(b) is the holder of a tradesperson certificate in force under the Home Building Act 1989authorising the holder to do that kind of work under supervision and does that work under the general supervision of the holder of a licence or certificate referred to in paragraph (a), or

(c) does the work under the immediate supervision of a person referred to in paragraph (a).

and the following provisions of the Roads Act 2003:

71 Powers of roads authority with respect to road work

A roads authority may carry out road work on any public road for which it is the roads authority and on any other land under its control.

138 Works and structures

(1) A person must not:

(a) erect a structure or carry out a work in, on or over a public road, or

(b) dig up or disturb the surface of a public road, or

(c) remove or interfere with a structure, work or tree on a public road, or

(d) pump water into a public road from any land adjoining the road, or

(e) connect a road (whether public or private) to a classified road,

otherwise than with the consent of the appropriate roads authority.

170 Judicial and academic debate concerning the ambit of the term special statutory power in 43A is inconclusive. I was referred to two sources that persuaded me that the provisions relied on by the defendant were not special statutory powers.

171 In his paper Government Liability in Negligence [2008] MULR 2, Mr Mark Aronson noted that the background to the provision was the first instance decision in Presland v Hunter Area Health Service [2003] 754, a decision that was overturned in Hunter Area Health Service v Presland [2005] NSWCA 33.

172 Mr Aronson suggested that the term special statutory power was directed at powers that permit coercive acts or non-consensual right-depriving acts.

173 The second source was decision of the Court of Appeal in Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Ltd [2009] NSWCA 263. Refrigerated Roadways claimed neglect on the part of the RTA in failing to erect screens on a bridge over the F3 Freeway with the result that a concrete block thrown from the bridge struck its truck and caused the death of the driver, its employee. The decision in that case provided support for Mr Aronson's hypothesis.

174 Campbell JA decided that the erection of screens on bridges over freeways did not involve the exercise of a special statutory power. He did not accept that the statutory provision relied on by the RTA was the source of its power to erect screens because ownership of the bridge in question was sufficient to permit the RTA to do so. He said a member of the public might not be legally free to fix screens without permission from the RTA but [369]: It is not because the exercise of a statutory power, which the RTA has but ordinary citizens lack, is needed to achieve the fencing of the bridge.

175 I concluded that s 59(2) of the Local Government Act and s 71 of the Roads Act similarly conferred a discretionary, but not a special, statutory power to carry out works on the stormwater pipe that was the defendant's property. S 634 of the Local Government Act and s 138 of the Roads Act merely imposed a requirement for a license or for permission on persons who might undertake work on that property on behalf of the defendant as owner.

176 I determined therefore that s 43A did not displace the general principles of negligence provided for in the Civil Liability Act.

177 On the issue of standard of care, Justice Bryson in Becker referred to the need for the standard to be considered in the light of the power conferred on the public authority and, if a discretionary power, to consider the standard appropriate to a reasonable authority exercising that power.

178 This element addresses the precautions that a reasonable person in the position of the defendant might reasonably take against the foreseeable risk of harm to the plaintiffs' property resulting from leaks in its stormwater pipe.

179 The defendant did not suggest that the one off cost of inspection and repair was beyond its budgetary limits. Mr Russell, the defendant's manager of operational services, estimated that the cost of the repairs undertaken in August 2010 was $5,000. The evidence indicated that the cost of CCTV inspections was between $800 and $1,500.

180 Its position was that it was not reasonable to demand that it undertake a preventative regular program of inspection of its extensive drainage systems. Mr Russell described the defendant's general practice in the maintenance of the drainage systems within its area. He said:

Historically, the budget levels have been insufficient to fund any systematic or comprehensive inspection program of these assets. All maintenance has been on the basis of either responses to public notifications or reports by Council workers who have observed problems. While the budget has been larger in the last 2 years that essentially remains the position, with the exception of active maintenance of the levee system. (Exhibit 4, [6])

181 Mr Russell was taken to the financial accounts of the defendant for the financial years 2008 - 2011. They indicated that in each of those years the defendant operated at a surplus and that amounts budgeted for planning, development and civil infrastructure, from which funds for maintenance of drainage systems would be drawn, were not fully expended.

182 The plaintiffs called no evidence of the suggested alternatives that might be available to the defendant to implement a regime of preventative inspection that would have avoided the damage to their property or of their cost. I did not accept that the information concerning the defendant's operating surplus was sufficient to establish that the defendant had the financial capacity to implement a practice of regular preventative inspection of its drainage systems or that a reasonable person in the defendant's position would, in response to the risk that water might leak from any pipe within its drainage system, implement a practice of regular inspection of its drainage systems.

183 My findings concerning foreseeability, control and relationship made it apparent that there was no warrant for action on the part of the defendant prior to receiving the letter from the plaintiffs' solicitor in November 2007.

184 The letter informing the defendant of the allegation that the stormwater pipe was leaking was dated 7 November 2007. On 14 November 2007 the defendant arranged for inspection of the pipe with CCTV. It was not until May 2008 that Mr Barker was engaged to provide an opinion. His first report, Exhibit 7A, was dated 29 January 2010. He said he was asked to defer preparation of the report.

185 Repairs to the pipe were undertaken in August 2010.

186 I was satisfied that the information provided in the letter of 7 November 2007 and by the CCTV inspection on 14 November 2007 was sufficient to alert the defendant to the presence of openings in the joints of the stormwater pipe, that there was an accumulation of soil and debris within the pipe and that the pipe had suffered other damage and deterioration. It was also aware that the pipe had been placed in an upstream section of the gully that, in its natural state, flowed across the property so that water escaping from the pipe was likely to follow the path of the gully.

187 In those circumstances I considered the defendant was or should have been aware that water leaking from the stormwater pipe presented a foreseeable and not insignificant risk of harm to the plaintiffs' property. The obvious and reasonable response to this risk was to undertake repairs to the pipe.

188 The defendant did not explain the delay of nearly three years in undertaking repairs to the pipe.

189 I considered that, had it been established that a leak from the stormwater pipe was causative of the damage to the house, the delay in attending to the repair of the pipe was excessive to the point that it would have demonstrated a breach of the defendant's duty of care to the plaintiffs.

DAMAGE

190 The experts agreed that the damage to the house was such that the most cost effective remedy was its demolition and reconstruction. They agreed that a reasonable cost for this exercise was $202,500.

191 I accepted this sum as the appropriate amount by which to compensate the plaintiff had it been established that the defendant owed them a duty of care from 2001, that it was in breach of that duty from 2001 and that the breach was causative of the damage to the house.

192 It follows from my findings that any compensation to which the plaintiffs might be entitled must be limited to the cost of rectifying damage that occurred from a reasonable period after November 2007 and before August 2010.

193 This item raised the issue of whether there was evidence of movement or settlement since 2007 that caused damage to the house. The experts agreed that the various surveys undertaken between May 1999 and December 2010 indicated no vertical settlement or movement of the house. Mr Barker said that, based on currently available data, there was no evidence of movement or settlement in the designated period.

194 Mr Shirley maintained that, notwithstanding the results of these surveys, he located evidence of new cracks in the brickwork near the north west corner of the house. Mr Shirley said that careful inspection of the cracks was useful not only in determining whether they had changed in dimension but also to determine their age by reference to dust or debris within them.

195 In reaching his conclusion Mr Shirley had regard to measurements of cracking recorded by Mr Cohen in 1999, Mr Hanson in July 2007 and his own measurements taken in 2010. He said the comparison of these measurements demonstrated that some cracks became smaller, the crack on the eastern wall, above the garage had increased in size and there was additional cracking in the north western corner.

196 Mr Barker disagreed. He said the comparison of individual crack widths was potentially misleading. He did not know how Mr Hanson and Mr Cohen measured cracks, whether they used a crack gauge and the point along the crack at which they took measurements. He said he compared photographs that he took of the cracks with photographs taken by Mr Hanson. In his view, it was important to place the size of the cracks into context.

197 By reference to Australian Standard 2870 he noted that the cracks were generally less than 1 mm and all less than 5 mm, defined by the Standard as cracks that were noticeable but easily filled and causing minor damage. He said this was damage that was normally seen or able to be seen on correctly designed footings. He said it was not a relevant indicator of distress in the house to be concerned with cracks at a level of minor elements of masonry damage in the face of major amounts of vertical movement.

198 This evidence created two difficulties. The first was that it was insufficient to establish whether additional damage to the house in fact occurred between 2007 and 2010 having regard to the disparate nature of the methods used for measurement of cracks. The second was that it was very apparent by 2007 the damage to the house had already reached the stage where its demolition and reconstruction was necessary and that additional minor cracking, if any, did not increase the loss and damage suffered by the plaintiffs.

199 I therefore concluded that it would not have been appropriate, even if all other elements of the claim were established, to award compensation for damage that occurred between 2007 and 2010.

MITIGATION

200 The defendant contended that the plaintiffs failed to mitigate their loss because:

1They were aware in 1981 of the presence of moisture and they failed to investigate its source.

2Mr Cohen advised the plaintiffs in 1979 that the remedial works undertaken through the Builders Licensing Board were potentially not a complete remedy. Evidence of Mr Hanson's understanding of the potential for further damage was contained in his hand written addendum of the document (GH-9) he signed at the request of the Builders Licensing Board on 16 July 1981 when he added the words without prejudice to a possible further claim if failure of other parts of the foundation occurs (ie anywhere but in the main rear wall).

3They were aware of ongoing damage to the house but failed to investigate its cause or to implement measures to rectify it and prevent further damage.

201 There was no doubt that the plaintiffs were aware of the gradual deterioration in the condition of the house. It was also apparent that, rather than initiating the expensive options of investigation and rectification, they looked to the defendant, at least from 2001, for assistance in that regard. The defendant consistently denied liability for the plaintiffs' loss and damage.

202 I could not conclude that, having regard to their strongly held belief in the defendant's responsibility for their situation, the plaintiffs were at fault in not acting independently.

203 I would therefore reject the claim that they failed to mitigate their loss.

LIMITATION

204 On the defendant's argument the plaintiffs' cause of action arose in the early 1980's when they became aware that the house was constructed on unconsolidated fill and with inappropriate fittings so that it was damaged by settlement aggravated by moisture from an unknown source. Any such cause of action was clearly statute barred.

205 The plaintiffs' argued that the tort was a continuing one and they accepted on that basis that they could recover for damage suffered only from 6 October 2003, that is for the period of six years prior to the issue of their statement of claim.

206 The experts made it clear that moisture from any source was the cause of settlement in poorly consolidated fill. They agreed that the solution of providing partially piered and concrete footings in 1981 was inadequate and poorly executed. In ordinary circumstances, the gaps in stormwater pipes, even if they leaked would not have affected the house, had it been provided with adequate foundations at the time of its original construction or at the time of remedial works in 1981.

207 Taking this into account and having reviewed all of the evidence, I became convinced that the true cause of the damage and loss suffered by the plaintiffs was the use of inappropriate footings for the unconsolidated fill upon which the house was constructed. Any cause of action that the plaintiffs might have had arose from these circumstances and accordingly their right to claim in respect of that cause of action was statute barred.

ORDERS

208 Verdict for the defendant.

209 The plaintiffs are to pay the defendant's costs of the proceedings. This order is suspended for seven days to allow either party to list the matter for further argument on the issue of costs.

210 The exhibits will be retained for 28 days.

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Decision last updated: 27 March 2012