Supreme Court New South Wales

• Medium Neutral Citation: Bell v Hunters Hill Council [2012] NSWSC 1522
• Hearing dates: 22 November 2012
• Decision date: 12 December 2012
• Before: Young J

Decision

Stand the matter over for mention before me on 20 February 2013 at 9.30 am.

• Catchwords: CONTRACT - breach of deed - damages - mitigation of damages - whether plaintiff took reasonable measures to prevent further loss - expenditure of professional fees on solicitors to mitigate loss - costs
• Legislation Cited: Civil Liability Act 2002; Surveillance Devices Act 2007
• Cases Cited: British Racing Drivers' Club Ltd v Hextall Erskine & Co [1996] 3 All ER 667; British Motor Trade Association v Salvadori [1949] Ch 556; Conolan v Leyland (1884) 27 Ch D 632; Gomba Holdings (UK) Ltd v Miniories Finance Ltd (No 2) [1993] Ch 171; Queanbeyan leagues Club Ltd v Poldune Pty Ltd [2000] NSWSC 1100; McCorquodale v The Shell Oil Co of Australia Ltd (1932) 33 SR (NSW)151; McDermott v Black [1940] HCA 4; (1940) 63 CLR 161; Sherson & Associates Pty Ltd v Bailey & Ors [2000] NSWCA 275; (2001) Aust Tort Reports 81-591; University of Western Australia v Gray (No 28) [2010] FCA 586; (2010) 185 FCR 335; Wentworth v Bullen (1829) 9 B & C 840; 109 ER 313
• Texts Cited: Harvey McGregor, McGregor on Damages 17th ed (2003) Sweet & Maxwell
• Category: Principal judgment
• Parties: Donna Maree Bell (Plaintiff); Hunters Hill Council (Defendant)
• Representation: Counsel: Mr M Hadley (Plaintiff); Mr S Glascott (Defendant); Solicitors: Shaw Reynolds Lawyers (Plaintiff); DLA Piper (Defendant)
• File Number(s): SC279766 of 2008

Judgment

1 These proceedings, whilst initially a suit for injunction against an alleged nuisance, have now become an action for damages for breach of a deed.

2 This state of affairs came about because the equity suit was settled on the basis that the parties would enter into a deed. They did so, but the plaintiff complaints that the defendant breached the terms of that deed causing her damages.

3 The plaintiff is the registered proprietor of land at Hunters Hill fronting a street I will call X street. The plaintiff's land is at the low point of X street. Whilst X street is drained, there are some good reasons for saying that the drainage is now inadequate and that such inadequate drainage was the cause of flooding to the plaintiff's land and house.

4 The plaintiff sought an injunction to protect her property from further flooding. The case was provisionally settled by the parties entering into a deed on 4 November 2009 ("The Deed").

5 Clause 5. 2 of The Deed provided that within 28 days of the obligations of the Deed being satisfied, the Equity proceedings would be discontinued with no order as to costs.

6 It is necessary to set out clauses 3, 9.1 and 16.1:

3 The Works

3.1 Council agrees to undertake the Works.

3.2 Council agrees that it will use its best endeavours to have the Works designed by 30 November 2009.

3.3 Council will ensure that Bell is provided with a reasonable opportunity to meet and discuss the Works with the Consultant Engineers prior to the design for the carrying out of the Works being finalised.

3.4 Council will provide to the Consulting Engineers with a copy of the report obtained by Bell from LHO Group Pty Limited dated March 2008 (copy of which is Annexure C) for consideration by the Consulting Engineers in preparing the most appropriate design for the Works.

3.5 The design for the Works will:

3.5.A include necessary structures within the road reserve to capture the 1 in 100 year ARI calculated flows with any overflow to be discharged within the drainage easement;

3.5.B include removal of the Existing Pipeline;

3.5.C include installation of a replacement pipeline of capacity of at least a 1 in 20 year ARK

3.5.D be in accordance with the appropriate engineering standards, but generally for the new pipeline to safely convey a 1 in 20 year ARI event within the pipeline, and any additional flow of up to the 1 in 100 year ARI event to be contained within the drainage easement;

3.5.E incorporate the Works Conditions (annexure B).

3 6 Construction of the Works will be in accordance with clause 3.5.

3.7 Council will ensure that the Works are commenced by no later than 30 March 2010.

3.8 Notwithstanding any other provision of this agreement, Council undertakes to complete the Works as expeditiously as possible.

. . .

9 Entire Agreement

9.1 This document contains everything the parties have agreed in relation to the matters it deals with. No party can rely on an earlier document, or anything said or done by another party before this document was executed, except as permitted by law.

. . .

16 Waiver

16.1 The fact that a party fails to do, or delays in doing, something the party is entitled to do under this document, does not amount to a waiver of any obligation of, or breach of obligation by, another party. A waiver by a party is only effective if it is in writing. A written waiver by a party is only effective in relation to the particular obligation or breach in respect of which it is given. It is not to be taken as an implied waiver of any other obligation or breach or as an implied waiver of that obligation or breach in relation to any other occasion.

7 Clause 2.1 contained a definition of "Works" as follows:-

Works means an upgrade to the existing stormwater drainage system in the vicinity of the Property as proposed under this agreement including the replacement of the Existing Pipeline, construction of additional drainage pits and other works deemed necessary including landscaping.

8 The Works Conditions relevantly contained the following:-

Works Conditions

1. . . . .

2. . . . .

3. . . . .

4. Before the start of the Works, Council shall engage an independent vibration monitoring consultant to install vibration monitoring stations along the base of the foundation walls of the adjoining house on the east side for future vibration monitoring. These monitoring stations, which must not be less than 4 in number equally spaced along the lengths of the east boundaries, are to be sufficient in number so that the vibration sensing meter, when placed on the station, is effectively in line between the source of the vibrations and the house being protected.

5. . . . .

6. . . . .

7. . . . .

8. Where excavations extend below the level of the base of the footings of a building on the Property, the person causing the excavation must give the owner of the adjoining property at least seven (7) days written notice of their intention to excavate below the level of the base of the footing and furnish the adjoining property owner with particulars of the proposed work.

9. Suppression of vibrations emitted from the Works is to be undertaken in accordance with industry best practice, to ensure excessive levels of vibration do not occur to minimise adverse effects experienced on any adjoining land.

10. The use of machine operated excavation equipment or other heavy machine operated construction equipment likely to cause ground vibrations is only to be operated when ground vibration monitoring equipment is operating and in place at the east boundary of the Easement site. The equipment is to be placed so that it is always in a direct line (i.e. the shortest distance) between the operating plant and the residence at the Property being protected. The monitoring equipment must be able to provide a continuous (hard copy) record of the vibrations generated and these records made available each day for review by the supervising engineer. The maximum level of vibration at the residence foundations is not to exceed 5 mm per second for 6mm at the property boundary). Any occurrence where the vibration level exceeds 5 mm per second is to result in the machine responsible for the vibration to stop operating and the situation reported to the supervising engineer. The machine can only resume operating after any damage to the adjoining property has been assessed by the engineer and a revised excavation method recommended by the engineer.

11. Any rock breaking or associated work is to be carried out with the use of rock saw. A hydraulic hammer is only to be used to assist in removing rock from the site after it has been sawn.

12. . . .

13. . . . .

9 The plaintiff claims that the defendant breached the terms of The Deed in a number of respects, namely:

A. It did not use its best endeavours to have design completed by 30 November 2009;

B. Delay in providing the final design to the plaintiff for review;

C. Failing to provide a design which met the design criteria of The Deed;

D. Delay in addressing design issues;

E. Issuing tender documents that did not comply with The Deed;

F The defendant's contractors contrary to Work Condition 11 began using rock hammers to break up rock without first cutting the rock with a rock saw.

10 The plaintiff claims damages under four heads:

(1) Costs of repair (including repairing cracking) ($31,600);

(2) Legal costs incurred to mitigate damages ($76,118 to date of Further Amended Statement of Claim);

(3) Costs of mounting a surveillance camera ($9,009);

(4) Cost of retaining a private investigator ($18,545).

11 As to (1), the defendant now agrees that it should pay the plaintiff $31,600, but it says there was never any dispute about its liability to pay a sum under The Deed which it is now prepared to accept is $31,600 and that there is no breach of The Deed involved.

12 With respect, it does not matter whether there was a breach involved with this $31,600 or whether it is due on the true construction of The Deed. The fact is that it was demanded and had not been conceded until after the present part of the proceedings had been commenced. Although the Council's point may be relevant on the question of costs, there is no reason to my mind why the $31,600 should not form part of the plaintiff's verdict.

13 The plaintiff says that I need to find that there were breaches of The Deed and what damages flow from such breaches. I am also asked to deal with the costs of the proceedings after the execution of The Deed (costs before then being dealt with by The Deed itself).

14 It can be seen from above that, realistically, I am concerned with the liability of the defendant for the damages claimed under heads (2), (3) and (4) above.

15 The proceedings were heard by me on 22 November 2012, Mr M Hadley of counsel appearing for the plaintiff and Mr S Glascott of counsel appearing for the defendant.

16 The defendant's case can be summarised as follows:

1. The Council committed no breach of The Deed;

2. If there was any breach, no damages flowed from it.

3. The claims under heads (2), (3) and (4) are all too remote and, in particular, the claim for legal costs is not a proper head of damage;

4. Insofar as the plaintiff's claim is for expenses caused in an attempt to mitigate her damages, it is excessive;

5. The plaintiff did not act reasonably in incurring costs and expenses in alleged mitigation;

6. The plaintiff waived the alleged breaches;

7. Most of the claims made are for money paid by the plaintiff's husband and not moneys for which the plaintiff was liable to pay;

8. The plaintiff's claim is an apportionable claim under the Civil Liability Act 2002.

17 It is necessary to note that, after the execution of The Deed, the parties returned to the Court on at least two occasions to deal with problems that had arisen in carrying out The Deed's provisions, mainly to do with delay. Both on 29 March 2010 and 13 October 2010, these forays resulted in consent orders being made setting new deadlines for steps to occur. The defendant says, but the plaintiff denies that these consent orders varied The Deed's obligations or that the plaintiff is estopped from saying otherwise.

18 Over 1400 pages of evidence was tendered before me. Unfortunately (for me) a considerable amount was inadmissible, but not the subject of objection. Apart from assistance given by some concessions, I had to consider how much weight to give to this material.

19 Alleged breaches A to E detailed above are of little consequence as, if they were not swept away by variation or by an estoppel, they did not cause any damage. However, they are relevant as setting the background on the issue as to whether the plaintiff was reasonably justified in attempting to mitigate feared damage by taking the steps she did.

20 Thus, it seems logical to focus first on alleged breach F and then, if necessary, deal with the question of damages, particularly questions of mitigation and remoteness.

21 The defendant Council retained a contractor to carry out the work to be done under The Deed. The contractor was Wilkie Group Pty Ltd.

22 The contract made between the Council and Wilkie Group was entered into after a tender process. The plaintiff's advisors had considerable input into the documentation.

23 The contract contained, among many others, the following term:

SP5.4 Any rock breaking or associated work is to be carried out with the use of a rock saw. A hydraulic hammer is only to be used to assist in removing rock from the site after it has been sawn.

24 There is little doubt that Wilkie Group was an independent contractor to the Council to carry out the Work required by The Deed.

25 Where a Council or other person retains an independent contractor and that contractor causes damage to the plaintiff, there can be a number of different scenarios presented. I will deal with these in summary form.

1. If the contractor commits a trespass, the Council is only liable if there is evidence that it authorised the exact trespass committed (McCorquodale v The Shell Oil Co of Australia Ltd (1932) 33 SR (NSW) 151);

2. The Council may be liable for negligence in selecting the contractor;

3. There are certain non delegatible obligations that cannot be evaded by hiring a contractor to do the actual work;

4. Otherwise, in tort, the contractor is liable for damage done as a result of carrying out the work;

5. However, the Council can be liable in contract if it has undertaken that a certain result will be achieved or that it will adequately supervise the contractor and has failed to do so.

26 Accordingly, simply because the work done by the contractor did damage to the plaintiff's house (if that be the case) would not be sufficient of itself to find the Council to be in breach of its obligations under The Deed.

27 I make this point because in the early part of the submissions made by the plaintiff it seemed to me that this point was not being recognised. However, if the fifth scenario is the correct one, the difference in the approaches is more apparent than real.

28 I now turn to the evidence on this issue. The evidence might be described as "lop sided" because, although on the plaintiff's side evidence was given by the plaintiff, her husband and the private investigators working with Lyonswood Investigations & Forensic Group, Messrs O'Brien and Raprager, no evidence on the issue was tendered by the defendant.

29 In saying this I do not disregard the evidence of Mr Maglis and the vibration reports to the effect that the plaintiff suffered no damage by vibration caused by rock excavation. These were not to the point as to whether the contractor used jack hammers to excavate rock contrary to the Work Conditions and the defendant's inactivity to see that the Work Conditions were observed.

30 The plaintiff says that:

30 On Monday 28 March 2011 I was at home whilst the defendant's contractors were carrying out Works in the easement on the adjoining property. During the course of the morning I observed that the contractors were continuously using a large hydraulic jackhammer to carry out the works. At first I did not say anything because I thought the hydraulic jackhammer was being used in accordance with the Works Conditions contained in the Deed. However, during the course of the morning I became increasingly worried about the affects the prolonged use of the hydraulic jackhammer was having on my residence. I could feel the floor, walls and kitchen bench top reverberating. At about 1.30 pm I observed that my television, which was mounted on the western wall was vibrating. I telephoned my husband and told him

what I had observed. He suggested that I ask the contractor how long the hammering was going to last. I then went and spoke with the Contractor, Mr Wilkie. During this discussion I said to Mr Wilkie words to the effect:

"Do you intend to use the hydraulic hammer to excavate rock the entire length of the easement?"

He said: "Yes."

I was taken aback by this response and felt myself shaking. I said words to the effect: "using the hydraulic hammer breaches an express term within our Deed of Agreement with the Council, which is a legally binding Supreme Court document."

Mr Wilkie replied with words to the effect: "I read my contract with the Council this morning and it does not contain any such condition."

I said words to the effect: "I have seen the tender document and it was a condition of the contract. I am going to contact my legal representative to stop the unfettered use of the hydraulic hammer."

Mr Wilkie responded with words to the effect: "Doesn't worry me".

I terminated the conversation and went back to my house. The hammering recommenced before I had time to enter my home.

31 I had a good look around the property and the surrounding area and did not see a circular saw (rock saw) anywhere. I telephoned my husband who was in his office at Chatswood and informed him of my conversation with Mr Wilkie and the fact that I had not observed any rock saw at the work site. I also telephoned my solicitor, Mr Chris Shaw and informed him of what had happened that day. Mr Shaw recommended that I take photographs of the use of the hammer. I took some photos after my conversation with Mr Shaw. Mr Wilkie continued to continuously use the large hydraulic hammer until my husband arrived home at about 2.15 pm. I observed Mr Wilkie operating the hydraulic hammer at least 3 meters away from the lower stormwater pit. I observed my husband filming the works and it appeared to me that as soon as Mr Wilkie became aware that he was being filmed he moved the excavator on which the hydraulic hammer was fitted down towards the stormwater pit and away from where he had been hydraulic hammering the rock.

My husband then had a conversation with Mr Wilkie and Mr Drubha, an engineer from the council who had arrived at about the same time as my husband. In the presence of Mr Wilkie, his two workers, Mr Drubha and my husband I repeated what Mr Wilkie had said to me earlier that day, namely that Mr Wilkie would be using the hydraulic hammer for the entire rock excavation within the stormwater easement. Mr Wilkie did not deny this assertion, in my presence my husband handed to Mr Wilkie a copy of an urgent fax/email that he had sent to Council and which I had hand delivered to Council's premises with a copy of the Deed of Agreement dated 4 November 2009. I observed my husband point out to Mr Wilkie clause 11 of the Works Conditions stressing its paramount importance

In my presence Mr Wilkie said words to the effect: "I have to use the hydraulic hammer to gain access to the stormwater pit as I can't get access with a saw. If I use a saw your land would fall into the easement."

Annexed and marked "AL" is a copy of an urgent letter that I hand delivered to the Council on 28 March 2011. Annexed and marked "AM" is a copy of a letter from SRBG to DLA dated 28 March 2011.

32 At about 7.30 am on Tuesday 29 March 2011 I saw Mr Wilkie's truck arrive with a rock saw. Mr Wilkie used the rock saw that morning until about 10 am. At about 9.55 am my husband left for work. I observed that within a very short time of my husband leaving Mr Wilkie began to use the hammer again. He continued to use the hammer I until about 4.30 pm. During the course of the day I went outside adjacent to the stormwater easement and observed the works. I observed that the hammer was being used to break new ground.

31 Although the Council's solicitors wrote denying any breach and alleging that the Council was fully complying with the conditions of The Deed, no evidence was ever presented to support this contention. Perhaps this is at least partly explained by the fact that the solicitors say that they were instructed that there were three vibration monitors in place and operating which was clearly untrue, though doubtless the solicitors merely passed on what they thought they had been told by their client.

32 The plaintiff was briefly cross-examined on paragraph 32 of her affidavit.

33 There was some confusion as to what the plaintiff had meant when she used the word "again". However, the plaintiff remained adamant that rock hammering continued for most of the day. The cross-examination proceeded:

Q. When you say in paragraph 32 of your affidavit that "I observed that the hammer was being used to break new ground," did you mean that you saw the hammer breaking rock?

A. I saw the hammer breaking the top surface of the dirt and the rock is only very shallow underneath that dirt so that he was using the hammer through the dirt, the top, small section of dirt, of the soil, so he was jack-hammering the rock without it being sawn.

Q. When you say without it being sawn, you saw Mr Wilkie using it that morning?

A. Yes.

Q. You must concede it would be very difficult to determine whether rock had been sawn and whether it had not been sawn?

A. Not from this vantage point, I could see exactly what had been sawn and what hadn't.

34 There was no cross-examination directed to paragraph 30 of the affidavit. Nor was there any cross-examination as to paragraphs 36-38 (though part of paragraph 38 was rejected). This was particularly significant in view of the terms of paragraphs 37 and the first sub-paragraph of 38 which are as follows:

37 I was extremely concerned because the Council continued to deny the extensive use of a hydraulic hammer. I was also concerned because notwithstanding council's undertaking to supervise the works, I did not see Council officers on the site to supervise the works. Based upon my observations, it appeared to me that contractors were using the hydraulic hammer whenever my husband was not at home to supervise the works. I did not trust the contractors to carry out the works in accordance with the Deed. I also became aware the contractor's employees had been entering my property without my consent.

38 My husband and I had suggested that an independent person be engaged to supervise the works and that we were prepared to pay half these costs. The Defendant had rejected this offer. My husband and I therefore decided to install temporary surveillance cameras to monitor the works. Annexed are copies of the following communications:

"AY" letter from my husband to the Council dated 12 April 2011.

"AZ" chain of emails comprising: (a) email from the General Manager of the Council to my husband; (b) email from the Council's solicitors to my solicitors; and (c) email from my solicitor to the Council's solicitors all of which were sent on 12 April 2011.

From my observations it became apparent to me that the Council was not supervising and monitoring the works. My husband and I therefore decided to engage a private investigator to supervise and monitor the works.

35 The plaintiff's perceived problems were met only with assertive letters making various threats to the plaintiff that the Council was acting completely in accordance with The Deed and she was costing the ratepayers money. This culminated on 5 April 2011 with a solicitor's letter that:

Our client remains of the position that the works being undertaken on Monday were in accordance with the Deed and is prepared to call evidence on the issue. However, such a course is only further delaying the works and further wasting ratepayer funds.

36 However, the reality is that if a solicitor wishes to be assertive and threatening or a party instructs its solicitor to be so she must actually follow through with her threat. In the instant case, the Council never presented any evidence (except some relatively minor reports on vibrations and an expert report which disclosed cracking to the plaintiff's house) that it was proceeding in accordance with the Deed and the solicitor's continued bluster (which I assume was on instructions) has merely cost her client's ratepayers a lot of money and got nowhere.

37 Mr Grotte gave confirmatory evidence and was not cross-examined.

38 Mr Raprager reported that on Friday 15 April 2011 he observed Mr Wilkie approach the surveillance camera and place a two metre high board to block its line of site of the excavation. Jack hammering continued most of the day. Mr Raprager moved the camera to get it to focus again on the excavation.

39 Mr Raprager was not cross examined. His evidence shows that the contractor had something to hide with respect to his activities and that had the Council been supervising, this would probably have been apparent to it. If in fact it was apparent, it did not stop the bluster.

40 Indeed the defendant's solicitors also tried to stop the surveillance camera, asserting that it was illegal under the Surveillance Devices Act 2007. The plaintiff's solicitors replied that the Act did not apply where no sound was being recorded and the defendant's solicitors did not pursue the matter.

41 The defendant did not call Mr Wilkie nor any of his workmen. No Council officer gave evidence. Apart from reports, the only evidence on the council's side was from its solicitor, a Ms Kelly.

42 On this evidence, there is little doubt in my mind that the contract between the Council and the Wilkie Group required Wilkie not to use rock hammers, yet it did so. Wilkie Group on a number of occasions deliberately waited until the plaintiff's husband had left for work and only a woman was in residence before it used the rock hammers in earnest. The defendant tried unsuccessfully to bluff the plaintiff from pursuing the matter and clearly made it clear that the plaintiff was just a nuisance who was causing its ratepayers expense and that as it was not in breach, it would not assist her. The plaintiff reasonably feared that unless she took some action, the use of the rock hammers would continue and would cause severe damage to her house.

43 I now come back to the question as to whether the Council was in breach of the Deed in respect to the use of the rock hammer.

44 The fifth scenario listed by me earlier is the one which fits this case. The Deed provided in clause 3 that the Council would undertake the Works and that the design of the works would include the Works Conditions, including condition 11. Whilst the Council was at liberty to enter into a contract with a third party to do the physical work, it remained contractually bound by the Deed to the plaintiff to have the work done in accordance with the contract.

45 The evidence which I have reviewed earlier shows that rock hammers were used contrary to clause 11. There was thus a breach.

46 I should now digress to consider briefly the other alleged breaches of The Deed. I need only do so briefly as no damage flows from them. As far as I can see, their only significance is that the costs associated with these alleged breaches may properly form part of the plaintiff's costs of the proceedings. However, that is a matter for the cost assessor rather than for me.

47 There seems little doubt that the works did not proceed with the speed envisaged by the plaintiff when the Deed was entered into on 4 November 2009.

48 The defendant's principal answers to the allegation that it was in breach because of this are (1) the plaintiff was over protective of her position when asked for input on design and (2) the original deed was varied by the consent orders made in 2010 (or alternatively there is an estoppel to the same effect).

49 The plaintiff certainly was more involved in discussions as to the proper design of the works than the Council expected, but this was understandable as she was fearful of further flooding of her house, whilst the general attitude of the Council appeared to be that it had many more urgent works calling on its budget than the works to be done under the Deed.

50 Further, some of the delay was a result of Mr Innes of the Council's staff being absent from work as a result of a family bereavement. I am not able to find, on the evidence, that the delay in commencing the work was attributable to the plaintiff.

51 Under the pure common law, a deed could only be varied by another deed. However, equity took a different view and the equitable rule now prevails (see McDermott v Black [1940] HCA 4; (1940) 63 CLR 161 (at 187)).

52 The Consent orders made in March and October 2010 were not only orders of the court, but were contracts between the parties. A contract embodied in a consent order is nonetheless a contract (Wentworth v Bullen (1829) 9 B & C 840 (at 850); (1929) 109 ER 313 (at 316); Conolan v Leyland (1884) 27 Ch D 632 (at 638)).

53 The consent orders could not stand together with the time stipulations in The Deed and must be taken to have varied The Deed.

54 I do not find any of the other complaints are breaches of The Deed. In any event, even if there were breaches, no damages flowed.

55 Thus, I come to deal with the question as to whether the damages claimed under heads (2), (3) & (4) are properly claimed by the plaintiff.

56 As McGregor on Damages, 17th ed (2003) makes clear, the law as to mitigation of damages really covers three rules. The primary rule is that a plaintiff must seek to avoid the loss flowing from the defendant's breach by taking reasonable steps to mitigate the loss.

57 The second is a corollary of the first. As McGregor puts it at [7-005]:

...where the claimant does take reasonable steps to mitigate the loss consequent upon the defendant's wrong, he can recover for loss in so doing: this is so even though the resulting damage is in the event greater than it would have been had the mitigating steps not been taken. Put shortly, the claimant can recover for loss incurred in reasonable steps to avoid loss.

58 The present is a most unusual case for the possible application of this second rule. The ordinary case is where there has been an act committed by the defendant which is over and finished and unless the plaintiff hires or acquires a substitute for what has been lost the probabilities will be that he or she will suffer major damage as a result of the wrongful act.

59 It must be noted that mitigation of damages only comes into play when there has been an actual breach of contract or commission of a tort (see McGregor 7-020). A person who fears that he or she will be damaged by a future breach of contract has no cause of action at law, but may perhaps obtain a quia timet injunction in equity.

60 In the instant case, there was a breach of The Deed which appears to have caused damage prior to the erection of the surveillance camera and the retaining of the private investigators. However, what the plaintiff was seeking to avoid or minimise was not only damage caused by the breach of The Deed, but to avoid or minimise further breaches of The Deed of the same type and which, if they occurred would exacerbate the damage already suffered.

61 In his written submissions, Mr Hadley for the plaintiff put that the camera and the private investigator were proper expenses for which the plaintiff should be compensated because they were incurred:

(a) to gather evidence;

(b) to encourage compliance with The Deed and so mitigate damage;

(c) to discourage trespass on the plaintiff's land.

62 So far as (a) referred to in the previous paragraph are concerned, such expense may form part of the disbursements within a proper order for costs, but is not otherwise a proper claim for damages.

63 As far as (c) is concerned this is not a proper cause of action sounding in damages.

64 Claim (b) is the troublesome one. As I noted earlier, one cannot claim for expenses paid out to make one's neighbour not commit a tort or breach of contract which might cause one great loss.

65 However, once there is a tort of breach of contract causing damage, one has a duty to mitigate the damage that will flow from the breach and, if it is later was shown to be the case that the measures reasonably taken to avoid some further loss prove to be more than the amount of loss avoided, the defendant is still liable for them.

66 If there is a continuing breach, whatever is reasonably done to avoid future damages is able to be claimed.

67 What, however, is the situation where there is a breach and damages flow from that breach and then the plaintiff reasonably fears a repeated breach and more damage?

68 This aspect of the case was not addressed in submissions. Indeed the defendant's submissions do not even mention the word "mitigate" and the plaintiff only uses the word once.

69 I have found no authority directly on point. However in one case to which I was referred in argument, Sherson & Associates Pty Ltd v Bailey [2000] NSWCA 275; (2001) Aust Tort Reports 81-591, a decision of the Court of Appeal constituted by Priestley, Fitzgerald and Heydon JJA, an almost analogous situation arose.

70 The basal facts were that Z designed an industrial building under contract with Bailey. The building was erected in 1989. Bailey sued the builder and in the course of collecting evidence for that action was advised in 1992 that the building was likely to be blown down by a heavy wind. Bailey did nothing and the building was destroyed by a heavy wind in 1994.

71 In partial answer to Bailey's claim, Z pleaded that Bailey should have mitigated his damage by heeding the 1992 advice.

72 The Court, affirming Santow J, disagreed with that contention for a number of reasons. Presumably because of the way the case was argued, the present problem was not mentioned by the judges in Sherson. However, the judges did not find any difficulty in considering that Rule 1 of the mitigation rules applied where the alleged time for mitigation occurred eo instanter with the cause of action arising.

73 If that is so, why does it matter that whilst there has been a tort or breach of contract causing damage and in fact, subsequently, there was a repeat of the tort or breach of contract and damage that at the actual moment of the plaintiff doing an act to mitigate his or her potential damage, there was no new cause of action extant.

74 Indeed, the fact that at common law at that actual moment the plaintiff could obtain both damages for the past and a common law injunction for the future reinforces the view that it does not matter.

75 Thus, my view is that if a plaintiff has suffered damage as a result of breach of contract or tort and reasonably anticipates a repeat performance, he or she is obliged to mitigate potential damage and may claim the cost of such measures if in fact there is a repeat performance.

76 In the present case, it may not matter whether the principle I have just enunciated is good law or not, because there are two other avenues which lead to the same result in the present case.

77 The first of these stem from the fact that the parties have treated the damages globally. It is now agreed that the loss to the plaintiff for damage to her house payable under The Deed is $31,600 including cracking damage of $23,000. As the parties have treated the damage as one whole and there has been no submissions made on the more complicated analysis referred to in the preceding paragraphs, the court is justified as treating the case as one where damage occurred and the plaintiff was under a duty to mitigate her damages if reasonable to do so and to charge the defendant with the cost.

78 The other method of achieving the same result is to note that on the balance of probabilities hammering after the first damage was suffered would not only cause fresh damage, but would also increase the extent of the first damage. Indeed, the plaintiff gives details of this in the particulars of damages she furnished on14 February 2012 (Court Book at 157). Thus, the plaintiff was bound to mitigate the first damage and to do so she was entitled to take reasonable measures to stop further jack hammering.

79 I should note that the defendant made submissions as to remoteness of damage. In my view remoteness does not enter into the equation when dealing with mitigation of damages. The only question is whether what the plaintiff did was reasonable in the circumstances as an attempt to attenuate the loss.

80 The plaintiff's evidence is that she was greatly frustrated by her perception that she had negotiated a term of The Deed that no rock hammers were to be used except to a small extent, yet Wilkie Group appeared to be using the hammer, particularly using it when the man of the house had left for work. It was her evidence that the Council refused to recognise its obligations under The Deed, it kept asserting that it was in the right and gave no supervision as to what was happening on site.

81 The plaintiff had suffered some damage by having cracks appear in her house and in my view reasonably apprehended that if there was further use of rock hammers, those cracks would get worse and other cracking would appear.

82 The only reasonable action which the plaintiff could take was to have her lawyers pursue the Council and to have a person keeping watch over the contractor in the expectation, which was realised to a great extent, that a person does not offend if he or she sees a police person watching.

83 The case is analogous to British Motor Trade Association v Salvadori [1949] Ch 556. In that case, the plaintiff had to conduct extensive enquiries before it could move against the defendant. Roxburgh J allowed the expenses of conducting those enquires other than those which would naturally form part of the plaintiff's costs (see p 569).

84 It follows that the plaintiff is entitled to something under heads (3) and (4).

85 The defendant says that (a) the expenses were paid by the plaintiff's husband and (b) they are excessive.

86 As to (a), during the oral hearing the plaintiff undertook to indemnify her husband for the moneys he paid which she acknowledges were paid on her behalf. Mr Glascott appeared to accept that such an undertaking removed this point from his armoury.

87 As to excessiveness, I have very little hard facts to guide me. It would be criminal to send the matter to an Associate Judge to compute the damages as the costs would far outstrip the result. Doing the best I can, I would allow the $9,009 for the surveillance cameras and reduce the claim for the private investigator by 20% to deal with the fact that the evidence shows that the private investigator was employed not only in an attempt to dissuade Mr Wilkie from rock hammering but also to watch for other possible problems such as non compliance with OH & S requirements and over servicing.

88 To summarise to this point, the plaintiff is entitled to a verdict for $9,009 plus $14,736 in addition to the $31,600 referred to earlier under head (1), a total of $55,345. To that must be added any applicable interest and any amount awarded under head (2) which I am about to consider.

89 There are four matters remaining to consider:

A. Whether the extra legal costs of $76,119 which the plaintiff says were incurred in her endeavour to keep the Council to its contract are a proper head of damage and, if so, whether the amount claimed is reasonable or excessive;

B. Is the claim an apportionable one?

C. What order should be made for the costs of the proceedings after The Deed was delivered;

D. In the events that have happened can I dispose of the original proceedings?

90 A. Mr Hadley says that this head of damage is in the same plight as the damages claimed under heads (3) & (4). The Council made it clear that it would not do anything about the plaintiff's complaints that The Deed was being breached and maintained that it had done nothing wrong. The only way that the plaintiff could protect the integrity of her house was continually to press the Council and its solicitors through her lawyers.

91 On the other hand, Mr Glascott says that well established principles of law lead to the result that whilst some of this claim may legitimately form part of an order for costs in favour of the plaintiff, no part can be received as damages.

92 I must deal first with Mr Glascott's submission.

93 Mr Glascott relies on the decision of Hamilton J in Queanbeyan Leagues Club Ltd v Poldune Pty Ltd [2000] NSWSC 1100. At [45] his Honour summed up the law as to whether a litigant could claim the whole or part of his or her costs as damages. The paragraph omitting reference to authority reads as follows:

I derive the following propositions from the foregoing authorities:

(1) A plaintiff may not recover against a defendant as damages in an action any part of the plaintiff's costs of that action.

(2) Where there is more than one defendant to the action that rule applies to preclude the recovery by the plaintiff as damages against an unsuccessful defendant of any costs of the action that relate to a claim against a successful defendant.

(3) The same rule applies to a cross claim in proceedings, so that a defendant cannot as cross claimant recover as damages against a cross defendant any part of any costs of the proceedings.

(4) In separate proceedings against a third party a plaintiff may in some circumstances recover costs of the earlier proceedings as damages if recoverable according to the ordinary principles of the law of damages. The circumstances include the situation where the plaintiff was the unsuccessful defendant in the earlier proceedings, so no question of his recovering costs in those proceedings arose.

(5) If the plaintiff was a successful party in the earlier proceedings, then in the later proceedings it is precluded from recovering more than it recovered as costs in those proceedings, unless there was no provision for recovery of costs in those proceedings (though it remains precluded if there is a statutory prohibition against the recovery of those costs.) The costs may also be able to be recovered in the later proceedings where a party ordered to pay the earlier costs has proved unable to do so.

94 However, the starting point is that in principle a plaintiff reasonably considering that retaining a lawyer to mitigate damages is entitled to claim those damages in the same way as if she hired a carpenter. Thus in British Racing Drivers' Club Ltd v Hextall Erskine & Co [1996] 3 All ER 667 (at 691) Carnwath J (as His Lordship then was) said:

The expenditure on the professional fees of solicitors and accountants was, as I have held, expenditure incurred by the plaintiffs in reasonably mitigating their loss. Prima facie therefore, it is claimable under the ordinary rules relating to mitigation. However, litigation costs have traditionally been subject to special rules for policy reasons.

95 The costs claimed must fall into two sections though it may be difficult to place particular items into one section rather than the other. The first section is those costs which are properly described as costs claimable in the litigation. The second section is costs incurred in order to secure a benefit flowing from past litigation (other than the costs of levying execution).

96 The Rules collected by Hamilton J in the Queanbeyan Leagues Club Case all relate to the first section of cost claims. There is a good reason for adopting those rules with respect to the first section. However, that rationale has no application to costs in the second section.

97 I referred earlier to British Motor Trade Association v Salvadori [1949] Ch 556. At 569, Roxburgh J said that he could see no reason why a plaintiff who had had to conduct considerable investigation before taking action could not recover that part of the expenses incurred which were not part of the costs of the action.

98 This approach is in accordance with the decision of Barker J in the Federal Court in University of Western Australia v Gray (No 28) [2010] FCA 586; (2010) 185 FCR 335 especially at 345 [33] and 351 [51] where His Honour recognised the general principle referred to by Hamilton J, but showed, with reference to authority that it was subject to exception.

99 Thus, on principle, some part of the money spent by the plaintiff on extra legal costs should be recoverable by her as reasonably paid in an attempt to mitigate damage in the same way as the costs under heads (3) & (4).

100 A complication is that the decision in Gomba Holdings (UK) Ltd v Miniories Finance Ltd (No 2) [1993] Ch 171 shows, there are situations where the costs to be allowed to a party include costs not directly attributable to presenting the case to the court. An additional factor is that as Carnwath J said in British Racing Drivers' Club Ltd v Hextall Erskine & Co at 692 there is no established practice as to how far this rule goes.

101 The evidence does not permit me to apportion the costs claimed by the plaintiff. In my view subject to a reduction to cover costs that were not incurred to mitigate damage, the plaintiff would be entitled to recover costs that would not form part of the costs of these proceedings.

102 Should the plaintiff wish to pursue the matter (as the cost of complying with the directions I am about to give may outweigh any benefit) she must prepare and serve on the defendant's solicitors by 31 January 2013 a detailed dissection of the costs claimed under three heads (a) Costs said to be proper costs of the proceedings; (b) Costs incurred to mitigate damages not within class (a); and (c) Other costs. The defendant, within 21 days of service of the dissection is to notify the plaintiff's solicitors of what items, if any, it disputes. If there is no dispute, the plaintiff should be allowed the costs within head (b). If there is a dispute which cannot be speedily determined by the Court, there will be a reference out to decide the issues arising.

103 B. I do not consider that the claim is an apportionable one. The plaintiff's sole claim is against the defendant Council for breach of The Deed . The Council may well have an action against Wilkie Group for breach of contract, but that is not sufficient to bring into play the statutory provisions for apportionable claims.

104 C. The plaintiff has been successful on the points that were argued before me on this part of the proceedings. Prima facie she is entitled to her costs. However, some care may need to be taken as to the exact form of the order. I think it is better merely to give this prima facie indication and stand the question over to 2013 when it can be considered with other outstanding issues.

105 D. This matter of whether the whole proceedings may now be treated as finalised was not debated before me. Even though it may be argued that clause 5.2 of The Deed may not have been satisfied, the remedial works have now been completed and there appears to be no good purpose for keeping the proceedings on foot after the final loose ends noted above have been finalised.

106 Accordingly, all I do at this stage is to publish these reasons and stand the matter over for mention before me on 20 February 2013 at 9.30 am. I would expect that either agreed short minutes plus a note of what is still not agreed would be handed up on that day. However, provided my staff are informed no later than 2 pm on 18 February 2013, the mention date may be altered to suit counsel's convenience.

**********

Decision last updated: 12 December 2012