HANNA v RICHMOND PROPERTIES SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY, CLARKE and MEAGHER JJA 27 September 1991, 15 November 1991 [1991] NSWCA 140 COMMON LAW — REFERENCE UNDER PT72 — CONSTRUCTION LIST ADOPTION OF REPORT — NATURAL JUSTICE — VIEW — INSPECTION Mahoney JA In or about September 1987, a project was commenced for the erection of a new building in Mona Road, Darling Point. That land adjoined an old building which the appellants owned in Darling Point Road, Darling Point. The work was done with the use, inter alia, of heavy machinery. The appellants claim that what was done, and in particular what resulted from the use of that machinery, caused vibrations and, it may be, the compacting of the soil or sand forming the basis of their building. They brought proceedings for the damage which, they claim, has been caused to that building. The appellants' claim was referred to a referee, Mr J I Muirhead. The referee concluded that it had not been shown that damage to the appellants' building had been caused by the relevant building work. The referee's conclusion has been confirmed by Giles J. The appellants have appealed to this Court. The appellants' contention that the building work caused damage to their building was supported by detailed evidence from themselves and from occupants of the premises at the time and by evidence from two persons claiming expertise in building matters, Mr Sicari and Mr Moir. The submission of Mr Hamilton QC, for the appellants, was to the effect that, having regard to what was done in the building work, it would be surprising if damage had not been caused and therefore it should be inferred that the damage in question was caused by what was here complained of. There is, I think, considerable force in what Mr Hamilton has submitted. Those who develop land do not have a free hand. It must be obvious to those who develop land in built up areas that what they do is apt to cause damage to those nearby. Particularly is this so where they excavate or use machinery which affects the soundness of the soil or the stability of the surrounding area. There has been discussion, in the cases and otherwise, as to the extent of the liability of developers and as to when their liability for damage of this kind is absolute or requires the proof of negligence. It has been held or at least suggested that, notwithstanding that a building stands on adjacent land, a developer may excavate to the extent of causing damage to that land and to the building on it and is liable only if what he does is done negligently: see, eg, Fleming. Law of Torts, 7th ed, 393-4 and the cases there referred to. It may be that that is no longer the law. In Stoneman v Lyons (1975) 133 CLR 550 at 567, Stephen J suggested that the older view, derived from Dalton v Anaus (1881) 6 App Cas 740 "is clearly ill adapted to conditions in modern cities". But, however that be, it may be that the distinction between nuisance and negligence and between the different kinds of nuisance will, in built up areas, no longer be 2 UNREPORTED JUDGMENTS crucial. The danger to land and in particular to buildings in the vicinity of work of this kind will ordinarily be so obvious that the developer's duty to take care will be plain. The seriousness of the consequences of a breach of that duty will ordinarily require that such work should not be permitted to be done unless the possibility of damage is eliminated. And, I think, it follows from the considerations to which I have referred that, where the developer does such things and damage appears in surrounding buildings, it will ordinarily not be difficult; to infer that the one has caused the other. It was, I think, upon this kind of reasoning that, in this part of his argument, Mr Hamilton QC relied. If the evidence of the lay witnesses called by the appellants had been accepted and, in particular, had been accepted as describing what happened during the period in February 1988 when the work was done, I would, for myself, have had little difficulty in concluding that what the developer did caused damage to the appellants' premises. But the difficulty in the present case is that there was not a full acceptance of what was said either by the lay witnesses or by the expert witnesses called for the appellants. The problems arising from the evidence were considered by Giles J and have been again considered by Clarke JA. The referee Mr Muirhead did not give to that evidence the effect which Mr Hamilton QC suggested it should have. Giles J and Clarke JA have accepted his conclusion. With some reluctance I have come to the same conclusion. I agree with the judgment of Clarke JA in respect of the submissions to which he has referred. I agree with the orders he proposes. Clarke JA The appellants own a boarding house in Darling Point Road, Darling Point. The building was erected in 1909 and has been classified by The National Trust of Australia and entered on The Trust's Register as a place of historical significance. The appellants have owned the building since about 1961. In 1986 the first, second and fourth respondents entered into a joint venture agreement for the demolition of premises which were then erected, and the construction of new buildings, in Mona Road, Darling Point. Initially the joint venturers demolished two buildings which were known as 29 and 31 Mona Road. Those premises backed onto the land upon which the appellants' boarding house is situated. Late in 1986 the appellants became aware that their building had been damaged. They claimed that the damage had been caused by the demolition works on the Mona Road properties. They made a claim against the first, second, third and fourth respondents and also against another company, and following a number of meetings and site inspections their claim was compromised, the appellants receiving $6,000.00 compensation. In September 1987 the fifth respondent was engaged to carry out the building works on the site and in October that company entered into a contract for the erection of the new premises in Mona Road. The early stages of the construction of the building were uneventful so far as concerns the appellants. However, in early 1988 work began on the excavation for a ventilation system for a car park for the building. That excavation was carried out by a Kato machine which was on the site for a number of days during the first two weeks of February 1988. It was the appellants' contention that the performance of this work created significant vibration in the boarding house and disturbed the sandy soil both in URJ HANNA v RICHMOND PROPERTIES (Clarke JA) 3 the Mona Road and Darling Point sites to such an extent that subsidence occurred beneath the foundations of the boarding house which thereby suffered further damage. Almost one year later the appellants instituted proceedings in this court seeking damages against the first to fifth respondents. Those proceedings were entered in the Construction List of the Common Law Division and on 26 May 1989 Brownie J ordered that the whole of the proceedings be referred to Mr J I Muirhead as referee pursuant to Pt72 of the Supreme Court Rules. The referee carried out the reference and made his report on 14 March 1990 concluding, in essence, that the appellants had failed to establish their case. Thereupon the respondents sought an order under SCR Pt 72 r13 that the report be adopted. The appellants opposed this application substantially upon the basis that the referee had made a number of significant factual mistakes, the effect of which was to vitiate his finding that the appellants had not established that their building had been damaged by the respondents. These proceedings came on for hearing before Giles J who was not persuaded that the referee had made any error, adopted the report and directed the entry of judgment for the respondents. The appellants have appealed on two bases. Before turning to a consideration of the arguments raised in support of the appeal I should point out that Giles J undertook a thorough analysis of the evidence adduced before the referee in reaching his conclusion. The respondents did not submit that he should not have followed this course nor did they contend that in considering an application for the adoption of the report of a referee the role of a judge was more circumscribed. Accordingly, there is no need to consider whether this is an appropriate procedure to follow in determining whether a report should be adopted (see Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd, (1988) 17 NSWLR 60, at 67; Xuereb v Viola, (1988) 18 NSWLR 453, at 462-6; McBeath v Sheldon, 16 May 1990, Giles J, unreported; Hobartville Stud Pty Ltd v Union Insurance Co Ltd, 21 December 1990, Giles J, unreported and Bermria Pty Ltd v Homebush Abattoir Corporation, 8 February 1991, Powell J, unreported). Denial of Natural Justice The short submission was that the referee made a finding, based on his observations during a view of the boarding house, in circumstances which denied natural justice to the appellants. The most convenient way to deal with the submission is to outline what took place during the reference concerning the view, the use made by the referee of his observations, the submissions which were made before Giles J concerning this issue and then to deal with the arguments developed in this Court. On the sixth day of the hearing of the reference counsel for the appellants informed the referee that his evidence was complete and asked the referee to have a view of the premises. The transcript records the application as follows: "(Counsel addressed the Referee on the application for a view of the subject premises. The Referee said that he proposed to have a view and make some observations, which he would have put into the transcript. He would then invite counsel to question him on any observations he made. He said that part 72 of the Act gave him power to obtain evidence in any matter (sic) he saw fit. Mr Biggins had no objection to that course. Mr Hastings also had no objection in principle, although he had some reservations which he said he would express at the appropriate time. Mr Biggins said he had some reservations about an opportunity 4 UNREPORTED JUDGMENTS being given to question the Referee about his observations. The Referee said that he would have a view at a time convenient to all concerned including the occupants of the premises....)" The invitation by the referee to counsel to question him on any observations he made seems to me to have been a sensible one. It provided the referee with an opportunity to outline in the presence of counsel any matters which he had observed and which he regarded as important, and also provided counsel with an opportunity of obtaining clarification of any statement then made by the referee in order that there could be no suggestion that anyone was taken by surprise. Counsel did not seem to view the matter that way for their reservations concerning the invitation seem to have proceeded upon the assumption that the referee was not inviting clarification but cross-examination. This emerged most clearly from an affidavit of Mr Geoffrey Robert Brookes, the solicitor for the first and fifth respondents, which was admitted into evidence before Giles J and in which Mr Brookes provided greater detail of what occurred when the application for a view was made. According to the deponent after the referee had made the statement that he would permit people to question him Mr Biggins said words to the effect: "While I don't object to the view, I for one would have some reservations at the prospect of cross-examining you Mr Referee." Mr Hastings, who appeared for the third and fourth respondents, said: "Yes, I agree with Mr Biggins, that is not the way it is normally done." Mr Wood, who appeared for the appellants, responded: "T on behalf of the plaintiffs would certainly not wish to cross-examine you on your findings. The way it is normally done, Mr Arbitrator, is that the judge attends the premises to be viewed in company with the parties,, but no one says anything, thus leaving the judge or whoever to draw his own conclusions." Following which the referee said: "Well, if that's what the parties want, I am happy to fit in but I still propose to take the shorthand writer along." There was no objection to the admission into evidence of this affidavit nor was Mr Brookes cross-examined upon its contents. Accordingly the argument proceeded both before Giles J and this court upon the basis that what Mr Brookes had said was correct. On 28 February 1990 the view took place. The referee, Mr Wood, Mr Biggins, Mr Hastings, Mr Boyd (the solicitor fox the appellants) and a shorthand writer were present. Mrs Hanna (the second appellant) was also present for the purpose of making access available. The building was inspected by t:he referee in the presence of the other persons already mentioned. The referee, however, also inspected the space between the roof and ceiling in a particular portion of the house but no one accompanied him upon that particular part of the inspection. According to Mr Boyd, whose affidavit was also admitted into evidence, the only statement made by the referee after the inspection was that the roof was in need of repair. However, it would appear that this statement was not accurate for there is in the appeal book a page of transcript which is headed: "UPON RESUMPTION: Inspection at No 12 Darling Point Road" and which ends with the words: "Further hearing was adjourned until Thursday 1 March 1990 at 9 am." That page contains the referee's comments upon his observations. It is necessary at this stage to refer only to one comment which reads: URJ HANNA v RICHMOND PROPERTIES (Clarke JA) 5 "Tn the roof I was able to identify from the photographs which are in the Moir report the areas which he highlights. I have formed my opinion on those and it shall be in my report." The page of transcript does not reveal any questioning of the referee on his observations but if what is set out in the passage I have recorded was said in the presence of counsel, as I think it must have been, then there clearly was an opportunity for counsel to seek clarification from the referee notwithstanding their earlier observations on the undesirability of parties cross-examining a referee. In due course the opinion which the referee had formed while inspecting the premises was disclosed in para 25 of his report which reads: "A significant inconsistency is apparent to me in the evidence of Mr Moir. I have found from the view that his photographs accurately represent the condition existing within the roof space but are totally at variance with his assertion of recent large movements within ceiling timbers. This is because if such movements had taken place recently this would be paralleled by movements of equal size in either of the joints between ceiling and cornice or between cornice and wall at that location. Such cracks do exist elsewhere but not at the relevant locations. The pulling from vertical of the top of the east-west dividing wall, which Mr Moir correctly connects with the general movements in the building, is clearly not recent. From Mr Moir's photographs I am of the opinion that no movements have taken place in the roof structure in recent years." In the proceedings before Giles J the appellants submitted that "they had been denied natural justice through the referee making use of what he observed in the roof space when the view was held, without informing the parties thereto or giving them the opportunity to address it". In his judgment his Honour noted that additional evidence in the form of the two affidavits to which I have referred was tendered before him and that he had been referred to the page of transcript I have mentioned. His Honour's judgment then proceeds: "Tn para 25 of his report the referee did state his opinion. He said that he found from the view that Mr Moir's photographs accurately represented the condition existing within the roof space. In para 26 he said, with reference generally to the photographic evidence, that his observations on the view enabled him to identify the sites of the photographs and to obtain a feeling for scale. No complaint could be made as to either of these matters, and there is no reason at all to think that the referee made any impermissible use of the view or failed to afford to the parties the opportunity to deal with anything which he saw which was not otherwise the subject of evidence." The identical submission was made before this court but on this occasion it was developed in two different ways. First, it was said that following the inspection the arbitrator gave the appellants no opportunity to deal with the significance of what he had observed in and near the roof area before making a finding adverse to the appellants upon the basis of his observations. Secondly, and on the assumption that the referee had made the comments appearing on the page of transcript to which I have referred in the presence of counsel, it was said that his reference to the formation of an opinion was insufficient to put the appellant properly on notice of the significance of the things he observed, and that, as he had not disclosed the content of that opinion and afforded the appellants an opportunity of examining the facts upon which the opinion had been formed, he denied natural justice. 6 UNREPORTED JUDGMENTS The first submission raises the question whether the page of transcript to which I have referred recorded observations made by the referee in the presence of counsel. Although the matter is not entirely free from doubt I think that the sounder view is that it did. There are a number of reasons which lead me to this view. In the first place there was a transcript of the referee's comments prepared which is, in terms, consistent only with the referee having made his comments on observations concerning the inspection in the presence of the court reporter and counsel. It is clear enough from what appears in the transcript that the comments were made after the inspection. When one finds that the transcript commences with the words "Upon resumption" and ends with a reference to the adjournment of the further hearing until 9 am on the next day the conclusion is almost irresistible that the comments were made in what was thought, at least by the court reporter, to be part of the hearing. Secondly, the transcript was tendered before Giles J and no party sought to suggest that it did not contain an accurate transcription of what occurred on the site nor did any party seek to have it corrected. Thirdly the text of his Honour's judgment indicates that he was expressly referred to it, that no one suggested that it was not accurate or that the events recorded therein had not: taken place and the submissions before his Honour clearly proceeded upon the basis that the transcript was accurate. Before this court senior counsel for the appellants, Mr Hamilton QC, who had not been at the inspection, relied solely on the passage in Mr Boyd's affidavit in which he said that "the arbitrator made no observations apart from the comment that the roof was in need of repair, referred to in para 9 of his report". Mr Boyd did not seek to set out the precise comments which had been made and I am unable to accept that this single statement justifies the conclusion that the words solemnly transcribed were said only in the presence of the court reporter. Furthermore I think there can be little doubt but that the particular submission was not made to Giles J. Mr Hamilton submitted that nonetheless his clients had been denied natural justice (the second submission). He contended that the minimum requirements of natural justice dictate that a party should be made aware of the evidence to be used against it and be given the opportunity to reply to it. In this respect he relied on the well known statement of Mason J (as he then was) in Kioa v West, (1985) 159 CLR 550, at 582-4. He also submitted that where a tribunal has power to gather evidence for itself it must reveal the evidence which it has so gathered and on which it intends to rely to the parties to permit them to address it on that evidence (Bread Manufacturers of NSW v Evans, (1981) 56 ALJR 89). It is, I think, now firmly established that there is a measure of flexibility in the the rules of natural justice the essential requirement of which is that the parties be accorded fairness in all the circumstances. In determining whether there has been compliance with those rules in particular circumstances the nature of the power exercised and the statutory provisions governing its exercise are of primary importance (Kioa, p 563, 583-4, 612). Clearly enough they apply in regard to a reference under SCR Pt72. Yet, as Cole J pointed in Xuereb v Viola (at p 468) the nature of the reference may well dictate what is required in order to ensure that the reference is conducted fairly. If, for example, it was agreed between parties that a referee should determine whether there were defects in a building and the cost of rectification of those defects solely upon an inspection of the building then it would be idle to suggest that if the referee complied with those obligations he or she would be found to have denied natural justice. The URJ HANNA v RICHMOND PROPERTIES (Clarke JA) 7 terms of reference would be quite inconsistent with the notion that there was an obligation to disclose conclusions and allow the parties the right to answer them. This was not, of course, a case of that nature. On the other hand it is not unimportant to identify the purpose intended to be served by a view, or inspection, by a referee in order to determine whether what flowed from that view or inspection involved a denial of procedural fairness or natural justice. In the present case one difficulty with the appellants' submissions is that the status of the view was never defined. Although engineering questions arose in the dispute and the referee was an experienced engineer, there is no evidence that the order referring the issues to Mr Muirhead contained any express term dealing with the manner in which he would proceed or the use to which he could put a view. At stages during the argument I gained the impression that Mr Hamilton was contending that the referee was entitled to use the results of a view for the purpose of understanding the questions raised, to follow the evidence and to apply it but was not entitled to put the result of the view in place of evidence nor to use impressions gained as a result of the view in reaching his conclusion (Scott v The Shire of Numurkah, 91 CLR 300, at 313-4). In the end I do not think he was making that submission but if he was I am unable to accept it. Pursuant to SCR Pt72 r8 the referee is empowered to conduct the proceedings in such manner as he or she thinks fit and is not bound by the rules of evidence. The referee "may inform himself or herself in relation to any matter in such manner as the referee thinks fit". These powers are far wider than those of a judge who is, broadly speaking, bound to try the case in accordance with the rules of evidence unless, and to the extent that, the parties consent to a different procedure being adopted. Furthermore the limited use to which a view can be pull by a judge is well understood by lawyers but I think it would be going too far to suggest that referees of the type represented by Mr Muirhead would know of the relevant rule or, if they knew of it, would understand that it applied to them. The point was not discussed in any depth during the hearing of this appeal and for this reason I feel constrained not to express any concluded opinion upon it. Subject to that reservation my view is that the rule in Scott does not apply to a referee appointed pursuant to SCR Pt72 who is entitled to make such use of a view as he or she considers appropriate provided that procedural fairness is accorded to the parties. Mr Muirhead clearly regarded the inspection which he carried out on the view as a manner of informing himself for that is what he said to the parties who expressed no objection to his following that course. He also appears to have had a keen awareness of the need to accord procedural fairness and for that reason suggested the procedure whereby counsel questioned him. Having regard to the reaction of all counsel to his suggestion and his final statement that he would carry out the view in accordance with their requests and thereby not present himself for questioning he could not, in my view, be said to have denied natural justice. He expressed himself in terms which to my mind leave no room for doubt that he intended to carry out an inspection to see, inter alia, whether the evidence before him was borne out. In these circumstances while it might otherwise be thought that he should not have drawn an adverse conclusion against a witness on a point in issue upon the basis of his inspection without at least affording the witness the opportunity of dealing with the point that criticism is not, in my view, open in this case. 8 UNREPORTED JUDGMENTS Quite apart from these considerations I am not convinced that the appellants were denied the opportunity of dealing with the point raised by Mr Muirhead in para 25 of his report. Mr Moir, whose evidence I deal with in more detail in relation to the second point, was a critical witness called on behalf of the appellants. He was an engineer who gave evidence in support of the contention that the excavation works had caused significant movement in the appellants' premises which was most clearly demonstrated in the roof space. His evidence that the movement in the roof area was recent and more probably than not caused by the excavation work next door in February 1988 was disputed by the respondents whose counsel challenged it in cross-examination. Mr Moir contended that the separation between the timber sections in the roof was relatively recent and that this fact was evident from the absence of dust on the separated ends. He also pointed to nails which were no longer hard driven into the timber and submitted they indicated that the movement was recent. He was confronted with photographs of, inter alia, nails and it was put to him that the grime on the nails was quite inconsistent with his theory. More importantly, it was suggested to him that the absence of movement in the joints between ceiling and cornice or between cornice and wall was quite inconsistent with the theory being advanced. In this respect the following questions were asked and answers given: "Q. You say, do you not, that there has been movement in these joists of recent origin? A. Yes. I say that the joists have been pulled bodily towards the southern side of the building. Q. I suggest that if that were a valid observation, you would then see a crack in the joint between the top of the ceiling and the supporting brick wall, because the whole ceiling would have moved en masse with the joists? A. Yes. Q. Can you show where in the photograph that sort of separation is apparent? A. No, I don't think it shows up too well in the photographs." In the context in which this evidence was given it is fairly clear that the witness was saying that there were indications of movement in the ceiling, cornice and wall but that those features did not show up in the photographs. When Mr Muirhead viewed the ceiling, which was, of course visible to all persons present at the view, he found that there were no indications of movement in the relevant area. That is that there were no cracks between the ceiling and cornice or between cornice and wall. This then is not a case where, as was suggested by counsel for the appellants, the referee sprung something upon the parties. The whole issue dealt with in para 25 had been the subject of evidence and cross-examination and the point being made by the referee in that paragraph was that the view demonstrated that the photographs were accurate, contrary to Mr Moitr's evidence. Both the photographs and the inspection showed there had been no recent movement of the ceiling and wall and this, in the referee's opinion, effectively destroyed Mr Moir's theory of recent movement in the joists. In my opinion this ground of appeal fails. Finding that damage had not been proved Mr Hamilton QC next submitted that the referee had erred in concluding that there was no evidence of any damage causally related to the excavation works carried out by the respondents and for this reason Giles J ought to have declined to adopt the report. This submission requires some understanding of the factual background, the referee's report and the reasons which led Giles J to his conclusion. URJ HANNA v RICHMOND PROPERTIES (Clarke JA) 9 At the hearing before the referee the appellants sought to rely on evidence, given by themselves and various boarders who lived in the subject premises, concerning the occurrences in early February 1988 and damage to the building which they noticed following those occurrences. They also relied on a number of photographs, which were said to demonstrate cracks and to indicate movements in the building, and the evidence of experts including a Mr Sicari and Mr Moir. The referee concluded, as I understand his report, that there was clear evidence of building movement in the subject premises but that there was no evidentiary material linking any specific damage that was visible with what had occurred in early February 1988. He did, however, recognise that there was acceptable evidence that there had been vibrations in the building in 1988 but concluded that the appellants had failed to discharge the onus of showing that specific damage had resulted from those vibrations and the movement in the subsoil which was said to have occurred at that time. The essential findings which are relevant to the issue under consideration are contained in the following paragraphs of the report which I set out: "9. It is claimed that cracks opened up in the house due to settlement in the foundations caused by vibration emanating from the machinery used in excavation and subsequent construction operations which were, at their closest, 10m from the house. 12. Evidence was given by lay witness (sic) who were tenants in the building which is operated by the plaintiffs as a boarding house. They described, as best they could their observations and experiences. None of these lay witnesses was able to contribute any specific evidence of physical damage caused to the building by the operations in progress in early February. Considerable "interpretation" of their statements is necessary to form a picture of what they observed and accordingly their evidence has very little weight. 13. These tenants gave evidence of the nuisance they suffered from the noise and vibrations but there is no evidence that any of them left the building as a result of the disturbance. There is thus no evidence of any financial loss to the plaintiffs as a result of the noise and vibration nuisance. 14. There is no doubt that the building exhibits damage and structural distress ranging from superficial and minor to severe. 15. There is no doubt that the damage has been caused by settlement of the footings which has not been uniform over the area of the building. 18. Damage to masonry buildings caused by differential settlement of the footings is characterised by cracks which taper in width from hairline at the level of the footings and which are widest at the top. Such cracks are commonly evident at openings in the brickwork for windows and doors which are points of weakness in the wall. The most severe cracking seen at 12 Darling Point Road is in brickwork in the wall to the rear verandah at the upper level. These cracks are estimated to have a total width in excess of 20mm. They are best illustrated by the photographs on Exhibit 35D. 19. Internally the most severe damage exists in the framing of the roof which is seriously distressed and in urgent need of repair. 20. There is no doubt that work was in progress at the relevant time which had the potential to cause damage. The only evidence as to the extent of damage which is attributable to those events of early February 1988 is in the series of photographs taken by the various witnesses. 10 UNREPORTED JUDGMENTS 21. The photographs have not been taken scientifically. They have not been taken from consistent viewpoints, with the same focal length lenses nor has there been any attempt made to provide any reference scales beside the cracks. 22. Nevertheless they satisfy their purpose substantially. They have been taken at known times, they are clear and give sufficient definition with which to identify their objects and to show the extent, if any, of any changes which have taken place in the intervals between the shots. 23. Photographic evidence was provided by a number of witnesses. The most useful for identifying damage during the period of early February 1988, which would be manifested by the widening of cracks are in Exhibit 26 Sheets A, B, C and D. These show cracks at 5th November 1986 ie shortly prior to the signing of the Deed and again at 22nd March 1988 which is after the time when the damage is alleged to have occurred. The photos of the cracks taken on each occasion have been mounted next to each other for ease of comparison. There are also photos taken in May 1989. These are in some cases irrelevant but where photos of the March 1988 date do not exist they serve to illustrate damage or lack of deterioration over the longer period. 24. Photos contained in the Sicari Smith Reports have been of little value to me to determine if any damage has occurred post Deed. The photos in the Moir Report are of good quality but little value in accessing (sic) the damage within the roof with the period in which the dispute is concerned. 25. A significant inconsistency is apparent to me in the evidence of Mr Moir. I have found from the view that his photographs accurately represent the condition existing within the roof space but are totally at variance with his assertion of recent large movements within ceiling timbers. This is because if such movements had taken place recently this would be paralleled by movements of equal size in either of the joints between ceiling and cornice or between cornice and wall at that location. Such cracks do exist elsewhere but not at the relevant locations. The pulling from vertical of the top of the east-west dividing wall, which Mr Moir correctly connects with the general movements in the building, is clearly not recent. From Mr Moir's photographs I am of the opinion that no movements have taken place in the roof structure in recent years. 26. From my examination of the photos in evidence, supported as it is by the oral evidence of the witnesses who took those photos, I have been able to draw conclusions. From my own observations from the view I was able to identify the sites of the photos and to obtain a feeling for scale. 27. I am left in no doubt that between the time of the Deed of Sth December 1986 and the end of February 1988 no significant damage was sustained by the building 12 Darling Point Road............... 41. The evidence of the lay witness (sic) who are tenants is evidence of nuisance but not of negligence such as boisterous activity by the contractor. The only evidence of that would be damage to the building because the lay witnesses gave no evidence of specific damage. 42. I was given no evidence of such damage." Giles J, in rejecting a similar submission, noted that he had been referred to the evidence of Mr Sicari, the boarders, the two plaintiffs and Mr Moir. In relation to para 12 of the Referee's point, which was the focal point of the challenge in this Court, Giles J said: "Tt is evident that the Referee was alive to the need to relate the evidence of these witnesses to the activity on the Mona Road property of which the plaintiffs complained, and that he did not think there was such a relationship as would URJ HANNA v RICHMOND PROPERTIES (Clarke JA) 11 warrant giving much weight thereto. Having read the evidence, I can only agree with the Referee. The remaining statement of Mrs Hanna, whose evidence was not otherwise specifically mentioned by the referee, is in the same position. In my view, when the referee said that the 'only evidence' as to the extent of damage attributable to the events of early February 1988 was the photographic evidence, he was doing no more than say that the only evidence which he considered had sufficient weight to guide him to his conclusion was the photographic evidence, and I do not think that he was in error in that respect." Mr Hamilton submitted that it was simply wrong to say, as the referee had done in para 12, that none of the lay witnesses was able to contribute any specific evidence of physical damage to the building following the operations in Mona Road in early February. In support of this submission he referred the court to the evidence of the various boarders and the appellants. It is, I think, unnecessary to refer to all of that evidence and I will take, as an example of the evidence of the boarders, the statement and evidence of Ms Christian, on whom Mr Hamilton chiefly relied, and the evidence of the appellants. In her statement Ms Christian said that she had been a resident of the building since about mid-1987. She referred to the incident when heavy machines came onto the adjoining property and said: "When work commenced on the adjoining property I felt vibrations in my room and in the building. My bed was shaking. My TV and other items in my room was shaking. This occurred over a period of about a month I think. The vibrations would start early in the morning and continue throughout the day. The noise was loud all day long. The noise and the vibrations started as early as 7 am when I was still in bed. Following the vibrations I noticed:- i. cracks in my room; ii. cracks in other parts of the building; iii. cracks in the concrete out the back; iv. part of the ceiling in the kitchen had fallen out." How could the referee conclude that none of the lay witnesses could contribute any specific evidence of physical damage caused to the building by the operations in early February in the light of this evidence, Mr Hamilton asked. The material in her statement was supplemented by evidence adduced from her in cross-examination which, in view of the reliance placed on it, I set out hereunder: "Q. And you say there was no damage before 1988 you could see in your room, but in other parts of the building there was no damage either? A. I noticed in the kitchen the ceiling had fallen. That wasn't like that before. Q. You noticed that in 1988? A. I noticed that later, but not in 1986, that part of the ceiling had fallen out, and it wasn't like that in 1986. Q. When did you notice that? A. It was 1988. I don't know what month, but I do know when these guys started with their heavy machines. Q. this was after February 1988? A. Yes. Q. Until you saw this in the kitchen you had seen no damage to the rest of the building? A. I just noticed it last year, these cracks. Q. But until then you hadn't seen any other damage to the building? A. No, just large cracks. That's all. Q. But those cracks you saw in 1988? A. Yes." For her part the second appellant in her statement said that in early 1988 she saw the heavy machines come on to the adjoining land, she felt the vibrations and, following the commencement of the work and the severe vibrations, she noticed: 12 UNREPORTED JUDGMENTS 1. the cracks which I had noticed in 1986 opened up again and became wider; ii. many new cracks appeared throughout the building; iii. cracks appeared in the cement in the back yard; iv. some of the glass in the windows cracked; Vv doors became difficult to open and close; Vi. water began to leak in some of the rooms; Vii. cracking in the foundation wall of the building at different points on the side of the building near the excavation site; Viii. a part of the ceiling in the kitchen collapsed; Xi. part of the ceiling on the veranda collapsed; X. some of the bricks became loose and moved; Xi. the shed located at the back of the building collapsed. Equally significant was her husband's statement that as a consequence of speaking to the second appellant on the telephone in early 1988 he immediately went to the property. Upon arriving there he saw a Kato heavy machine excavating next door, he felt the vibrations in the appellants' building when the earth moving machinery was working and noticed, at some unidentified time, cracks widening and other damage in. the building. The appellants also said, and there can be no question. about this, that in early February 1988 they engaged Mr Sicari, an engineer who had inspected their building on the occasion of the earlier damage, to inspect it again. An inspection was carried out and on 11 February 1988 Mr Sicari, or more accurately his firm, furnished a report in the matter. (Unfortunately it was not Mr Sicari who carried out the inspection in February 1988 but an employee who was no longer available to give evidence. Consequently, the report of 11 February was not admitted as evidence that there was damage visible in the building in February 1988.) Mr Hamilton submits that here was clear evidence of specific damage which was caused by the vibrations resulting from the work next door. He summed it up in this way - "The respondents moved heavy machinery onto the adjoining site and carried out excavation work for the exhaust system. When this work was being carried out in early February 1988 vibration was felt through out the appellants' building. Indeed the vibration was so worrying that the second appellant arranged for her husband to come to the site and they both then arranged for Mr Sicari, or his employee, to come and carry out an inspection. Following these events damage was seen to have occurred. The overwhelming probability, in these circumstances, was that that damage had been caused by the events of early February 1988. The referee was wrong to suggest otherwise and the trial judge should have declined to adopt his report for this reason." In considering whether the referee misunderstood the nature of the evidence given by the various witnesses, as the submission suggests, it is important to understand the context of the claim. The building was an old one which sat on sandy material which had the propensity to consolidate when subjected to vibration and inundation. Whatever movement had occurred prior to 1986 was exacerbated by the events at that time. The evidence supported the view that cracks opened up in the house at this time due to settlement in the foundations URJ HANNA v RICHMOND PROPERTIES (Clarke JA) 13 and the existence of this damage was apparently accepted by some of the respondents who compromised a claim then being pressed by the appellants. The repair work carried out in relation to those cracks, and the problems which underlay them, appears to have been minimal. All that occurred was that the first appellant spackled up some of the cracks. The result was that cracks in the building remained visible, albeit that some of them were spackled and nothing was done to remedy underlying faults, such as separation of roof members, which had been caused by the 1986 works. Indeed it would seem that the roof area which was regarded as a critical one in 1988, was not inspected in 1986. What the referee was concerned to examine was whether the events of early February 1988 had caused further damage to an old building which had many cracks in its brickwork which, in turn, had resulted from subsidence and movement in the building. In this context for the appellants to make good their case they had to show that specific and identifiable damage occurred as a result of the excavation in February 1988. To do this it was necessary to eliminate the possibility that the cracks that were visible in a number of inspections, the first of which occurred in September 1988, and the view were not simply the results of the 1986 incidents or the wear and tear of an old building. In order to discharge this onus the appellants relied not only on the evidence of lay witnesses but, to a great degree, also on the evidence of Mr Moir. Although he spoke, in his report, of various areas of damage his main focus was upon the damage in the roof to which I have earlier referred. It was his opinion that this damage had occurred relatively recently and that it resulted from subsidence in the building. As I apprehend the issue it was accepted that subsidence had caused the separation of the sections in the roof but the contention that this had occurred following the excavation of the adjoining property in February 1988 was very much in dispute. In substantial respects the case for the appellants was dependant on Mr Moir's theory. I say this because the movement which had occurred in the building and which caused the separation of the sections in the roof was capable of explaining much, if not all, of the damage seen in the building. If Moir's theory had been sustained it would have followed that the substantial rectification work which he thought necessary was required in order to rectify damage flowing from the conduct of the respondents which was the subject of complaint. If, on the other hand, the Moir theory was not sustained the appellants faced the considerable difficulty of pointing to specific areas of damage which had not been caused by the subsidence which led to the serious situation in the roof but by the subsidence resulting from the excavation carried out on the adjoining premises in early 1988. In order to do this it was necessary, in my view, for the appellants to adduce cogent evidence linking such damage as was seen later in 1988 with the excavation works. This the appellants sought to do by tendering the lay evidence. But the referee was right, in my view, to conclude that this was not of sufficient specificity either as to damage or as to the time when it was first noticed. To say, as some witnesses did, that after the February 1988 incidents they noticed cracks in the building, or even noticed that cracks had appeared in the building, was of limited value given that no attempt was made to say when those cracks appeared, to identify their location or to link specific cracks in some way with what occurred in early 1988. 14 UNREPORTED JUDGMENTS An example of the difficulty encountered in seeking to establish that the specific damage was caused to the premises by the respondents' activities in early 1988 is to be found in the evidence of Mr Durham. He was a boarder who had first arrived at the premises in February 1988. In his statement he said that when he arrived there there was a hole in the ground on the block next door and that shortly after he arrived some heavy earth moving machines came onto the property next door. At times (which were unidentified) he noticed vibrations in the building and after the vibrations he noticed that a crack appeared in his room, cracks appeared in other parts of the building and his door was difficult to open and close. When Mr Durham was called to give evidence he identified a hole on land fronting Darling Point Road and on which there had previously been two houses known as 8 and 10 Darling Point Road. For obvious reasons he was not cross-examined. What was clear enough was that there had been some construction activity on these other blocks in 1988 and that Mr Durham was not talking of the excavations being carried out by the respondents. For this reason his evidence was valueless to the appellants. While it could not be said that the evidence of the other lay witnesses suffered equally significant defects that evidence nevertheless suffered from the problem that it was neither specific as to the identification of the cracks or as to the time at which these cracks were first noticed. For instance, although Ms Christian said that following the vibrations she noticed that part of the ceiling in the kitchen had fallen out she didn't attempt to identify when this occurred. Furthermore, her evidence was to the effect that there was no damage to building before she felt the vibrations in 1988 yet on any view there were many cracks, albeit that some had been spackled. In this context I would understand the referee to have been saying in paral2 of his report that although the lay witnesses gave evidence that at some stage after February 1988 they had seen cracks and other damage that evidence was of relatively small value in determining whether any specific damage had been caused by the operations in progress in February. Understood in this way I do not think his comment:s are exceptionable. Although I may be doing him an injustice I would understand the referee's process of reasoning to have been as follows: The lay witnesses gave evidence of noise and vibration but no specific evidence of damage capable of demonstrating that in the works carried out in February 1988 the building suffered further damage. Mr Moir did, however, advance an opinion that damage which was visible upon the premises had been caused at about this time and he pinpointed, as a prime example, the damage in the ceiling. The building was an old one and sat on sandy soil which had a propensity to consolidate when subjected to vibration. Prior to 1988 it had many cracks. Some had opened up in 1986, others had probably developed previously. Those cracks evidenced movement in the building and indicated underlying structural problems. Although there had undoubtedly been vibration in 1988 which could have led to further damage to the structural integrity of the building it did not necessarily follow that. cracks which appeared some time later in 1988, or 1989, had been caused by the February 1988 vibration. Those cracks may simply have resulted from the earlier damage to the structural integrity of the building. URJ HANNA v RICHMOND PROPERTIES (Meagher JA) 15 In these circumstances the evidence of the lay witnesses was of limited value. While it demonstrated that damage became visible at some time after February 1988 its lack of specificity as to time and precise location of damage provided little assistance in determining whether the building had moved and suffered further structural damage in February 1988. Moir's evidence, if acceptable, would have been significant but, unfortunately for the appellants, his theories did not stand up. Quite apart from the expert evidence there were the photographs which had been taken in November 1986, March 1988 and May 1989. They were of primary importance because they demonstrated the changes to various locations on the building since 1986. Once they were explained by the persons who took them and placed in context by the inspection which took place these photographs established, beyond doubt, that the building had not suffered significant damage between December 1986 and March 1988. Although the referee did not express his conclusions in precisely the terms which I have used I would understand him to have been conveying those notions. For instance, in para 23 he adverted to the opportunity to compare photographs taken at three dates, in para 26 he said he was able to draw conclusions from those photographs supported by oral evidence and in para 27 he concluded that he had been left in no doubt that no significant damage had been sustained between December 1986 and the end of February 1988. Implicit in that conclusion was the view that there had been no widening of cracks between November 1986 and March 1988. I should also mention one other area of evidence, the geotechnical evidence, which was not unimportant. In this respect the referee evinced a preference for the evidence led by the respondents and expressed two important conclusions. They were: (1) The excavation limits on the Mona Road property did not intrude within the zone of influence of the house foundations; (2) The transmission of vibration energy by the bucket of the excavator working in rock could be eliminated as a cause of damage. Although the referee did not explain the precise significance of these findings they would seem to be consistent with his ultimate conclusion. In these circumstances I agree with the conclusion of Giles J that the referee regarded the photographs as the most helpful evidence available to him on which to evaluate the claim and that this is what he was conveying in his statements in para 20. Furthermore, I would not read him to be saying that there was no evidence given by lay witnesses of damage but on the contrary that the evidence which was given by the lay witnesses was neither specific nor particularly helpful. In all the circumstances I would conclude that this challenge to the judgment of Giles J fails. It follows that the appeal should be dismissed with costs. Meagher JA I agree with Clarke JA. Appeal is dismissed with costs. COUNSEL FOR THE Appellant: J P HAMILTON QC and K EASSIE COUNSEL FOR THE Ist and Sth Respondents: P BIGGINS COUNSEL FOR THE 2nd, 3rd and 4th Respondents: P HASTINGS SOLICITORS FOR THE Appellant: CAMERON GILLINGHAM BOYD 16 UNREPORTED JUDGMENTS SOLICITORS FOR THE Ist and 5th Respondents: WALSH JAMES SOLICITORS FOR THE 2nd, 3rd and 4th Respondents: DOKES and ANDREWS