GRAHAM BENSON STEEL AND STEEL and ASSOCIATES PTY LTD v SEYMOUR AND ANOR SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY, CLARKE and SHELLER JJA 2 March 1992, 20 March 1992 [1992] NSWCA 96 Encroachment of building — breach of duty — causal connection — reliance — inference — question of fact — no question of principle. Mahoney JA I agree with the judgment of Clarke JA. Clarke JA The respondents ("the Seymours") purchased 33 Pine Avenue, East Ballina, by Contract of Sale dated 15 December 1980. The contract was settled on 19 December 1980. They remained the owners of the house until 1985 when they sold it to Mrs Barbara Browning who was also a party in what was, at first instance, a complex piece of litigation. The previous owner of 33 Pine Avenue had constructed a deck and patio on the north-western corner of the land and this structure and the retaining wall on which it rested encroached onto the adjoining lot on which 31 Pine Street was constructed. Indeed the retaining wall abutted directly against the timber walls of the adjoining cottage a fact which led to the eventual rotting of those timbers. Boed Pty Ltd ("Boed") purchased 31 Pine Avenue in about October 1981 and the cottage was used as a home for Mr Funnell who was the principal of Boed. At the time Boed purchased these premises neither Funnell nor the Seymours knew that the patio, deck and retaining wall encroached onto 31. However, in about 1983 water flooded into Boed's house during a tropical cyclone. The morning after this occurrence Funnell made an inspection and observed the concrete patio against his house. Inside his house he pulled down one of the interior walls and found that the exterior timbers had been rotted out, allowing water from outside to go straight through onto the Gyprock wall. He called a surveyor in and the encroachment was discovered. Thereupon Boed claimed compensation from the Seymours and demanded that they remove the encroachment. Its demands were not met and on 14 February 1985 it filed a summons seeking, inter alia, an order that the encroachment be removed and a declaration that Boed was entitled to damages for nuisance. Shortly after the institution of these proceedings the Seymours, who had been endeavouring to sell their house for some years, exchanged contracts with Mrs Browning who was then brought in as an additional defendant in the action. In addition cross-claims were filed, by Mrs Browning against the Seymours and by the latter against the present appellants, Mr G B Steel ("Steel") and his company, Steel and Associates Pty Ltd. It is unnecessary to refer to the detail of the litigation for Boed's claim was settled during the hearing and the appeal concerns only two issues which arose in the cross-claim brought by the Seymours against Steel and his company. The cross-claim arose in this way. When the Seymours were buying Pine Street they retained Messrs Colin Daley Quinn and Co, Solicitors, to act for them on the purchase. Those solicitors advised them to retain a local surveyor to carry 2 UNREPORTED JUDGMENTS out a survey of the property. They followed that advice and retained Steel to carry out the survey for them. By a report dated 8 December 1980 he furnished a report addressed to the Seymours' solicitors and enclosed a survey plan with that report. The report and plan were sent to Messrs Colin Daley Quinn and Co and received by that firm on 11 December 1980 which was four days before exchange of the contracts of sale. The survey plan and report disclosed that "retaining walls and a ramp extended from 33 Pine Avenue towards the street". The encroachment on the north-western corner to which I have already referred was not disclosed. The Seymours claimed that they had retained Steel to furnish them with a survey of the premises and that it was a term of their agreement that Steel would use due care and skill in carrying out the survey. This he had not done and consequently they claimed, in effect, indemnity from Steel in respect of moneys, including legal expenses, they were required to pay Boed. Steel and his company defended the cross-claim, denying that they were negligent or in breach of a contractual obligation, that there was any causal nexus between any negligence of theirs and the damage suffered by the Seymours and denying that the Seymours had suffered damage to the extent claimed. Bryson J found for the Seymours and entered judgment against Steel and his company for damages to be assessed. He also ordered that there be an enquiry as to damages which was to be conducted by himself in private chambers. That enquiry has not yet been conducted but, nonetheless, Steel and his company have appealed against the orders made by his Honour. Two issues arise on the appeal. The first concerns the Seymours' claim that Steel's breach of duty relevantly caused them the loss the subject of the cross-claim. Their contention at the trial had been that they suffered the loss because of Steel's negligent failure to disclose the existence of the encroachment in either the survey report or survey plan. On the appeal Steel and his company, accepting that they had breached their duty to the Seymours, denied that there was a relevant causal nexus between their breach and the damage suffered by the Seymours. His Honour had found for the Seymours on this issue and the question confronting this Court is whether it has been demonstrated that his Honour was in error in so doing. The point is a narrow one. The Seymours did not call their solicitor from Messrs Colin Daley Quinn and Co at the hearing. They submitted that upon the proper construction of the pleadings no question of causation arose or, alternatively, that the proper inference to draw from the facts was that they had relied upon the contents of the survey when deciding to exchange contracts for the purchase of 33 Pine Avenue and causation was therefore proved. It is not, I think, necessary to refer to the pleadings. They do not appear to me to bear the construction which has been urged upon us by Mr S Motbey, counsel for the Seymours. On the contrary they would appear to leave causation open as a live issue. It is not, however, necessary to form a concluded opinion on this question because I agree, with respect, with his Honour's view that the proper inference to draw in all the circumstances of the case was that the Seymours did rely on the contents of the survey in deciding to go ahead with the acquisition of 33 Pine Avenue. It would be as well to reiterate at this stage the basic facts. The Seymours decided to buy 33 Pine Avenue; they retained Messrs Colin Daley Quinn and Co to advise them and to act for them on the purchase of the property; their solicitor advised them to retain a local surveyor to carry out a survey of the property; this conversation took place prior to the exchange of contracts; the Seymours \GRAHAM BENSON STEEL AND STEEL and ASSOCIATES PTY LTD v SEYMOUR ANB ANOR (Clarke JA) (Clarke JA) accepted this advice and retained Steel and his company and they prepared a plan and report dated 8 December 1980; those documents were received by Messrs Colin Daley Quinn and Co on 11 December 1980 and on 15 December the solicitors exchanged contracts for the purchase. I should add to that catalogue of events reference to evidence given by Mr Seymour to the effect that he had one further discussion with his solicitor after the initial discussion and that at that time he was told that everything was in order and that "all forms and searches had been completed and we could go ahead with the purchase". Upon those facts Bryson J drew the inference that the Seymours' solicitor had relied on the terms of the survey and that his reliance was relevantly the reliance of the Seymours. It is not disputed that the solicitor's reliance should be treated as the Seymours' reliance. The issue is whether his Honour wrongly inferred that the solicitor had relied upon the survey report and plan. Whether an inference is capable of being drawn from proved facts is to be determined by "the ordinary laws of reasoning" such as suffice for that purpose in ordinary human affairs: see Wigmore on Evidence, 3rd Ed, Vol 1, para27, 406. In Morgan v Babcock and Wilcox Ltd, 43 CLR 163, Knox CJ and Dixon J said, at 173: "The question involved largely depends upon the degree to which coincidence of events and circumstances warrants a belief in their causal connections. An examination of hypotheses logically consistent with proved facts is the received method of testing their sufficiency to establish the conclusion. In the end, however, the reasonableness or the probability of the occurrence of such hypotheses determines their admissibility, and when coincidence of fact and concurrence of time are relied upon, the sufficiency of the circumstances must inevitably be judged by considering whether the general human experience would be contradicted, if the proved facts were unaccompanied by the facts sought to be proved." Of course, as was pointed out by Evatt J in Martin v Osborne, 55 CLR 367, at 381, it is necessary to have regard to every hypothesis which can compete with the hypothesis suggested by experience and knowledge of human affairs. (There is also a valuable analysis of this question by Mahoney JA in Jones v Sutherland Shire Council, (1979) 2 NSWLR 206, at 222 et seq.) Were the only facts available for consideration those I have recited above I would have no hesitation in agreeing with his Honour that it could and should be inferred that the solicitor had relied upon the survey. After all he had advised the procurement of a survey, had duly received it and advised his client that all searches and forms had been completed and that they could proceed with the purchase and only then did he proceed with the exchange of contracts. The only competing inferences are that he had not seen the survey report and plan or, having seen them, he read them so superficially as not to digest their contents. Given that he had advised the purchasers to seek a survey, that he had received the report and plan, that he had advised the purchaser that all was in order and had delayed exchange of contracts until after the receipt of the report and plan it is not difficult to accept the hypothesis that the solicitor examined the report and plan and, having done so, felt that it was in order for the Seymours to proceed with the purchase. Counsel for Steel and his company however point to other facts and submit that when they are considered together with those I have already recited it would be quite unsafe to draw the inference which his Honour drew. He submitted that 4 UNREPORTED JUDGMENTS the totality of facts pointed strongly towards one of the competing inferences. If that is right then, according to the submission, the Seymours failed to prove the reliance upon which causation was based. The additional facts to which our attention was drawn were that the survey plan prepared by Steel demonstrated that an access ramp extending between Pine Avenue and the cottage on 33, and an adjoining area which sat on retaining walls and which was enclosed by a paling fence, encroached in a substantial manner onto land vested in the local council situated between the front of the allotment and the street. It was suggested that this was an important matter for the Seymours to consider in determining whether to go ahead with their purchase and yet the evidence was to the effect that their solicitor had never mentioned these encroachments to them. The question was then posed - "How could the solicitor have failed to advise the Seymours of the encroachments onto Council property if he had read and understood the survey report and plan?" The answer furnished by counsel for Steel was that no solicitor who had understood the report and plan could have failed to advise his clients of the existence of the encroachments shown on them and in these circumstances the only inference which should be drawn is that the solicitor had neither read nor relied upon the contents of the report and plan. Alternatively it was said that there was no basis upon which the inference which his Honour drew could be properly drawn given the existence of an alternative hypothesis of equal probability. My difficulty with this submission is that no attention was paid to the significance of these encroachments during the hearing except insofar as the Seymours were cross-examined as to the manner in which they would have acted if the existence of those encroachments had been pointed out to them. All that the evidence revealed was that the ramp which formed part of the encroachment and which, presumably, connected No 33 with the road had been in position in 1963. That would suggest that the council were aware of its existence but had raised no complaint about it. But the question whether that was the position was not investigated. Nor was there evidence showing when the other encroachment was constructed. Furthermore there was no evidence showing whether there were similar encroachments in front of each of the other houses in Pine Avenue although a survey of No 31 did reveal a similar type of encroachment onto Council property there. All that is known is that both 31 and 33 Pine Avenue had encroachments which extended onto Council land, one of which had existed since 1963, without any indication of Council objection. These encroachments do not seem to have been regarded as important at the trial. More importantly the court does not know what precise searches had been carried out by the Seymours' solicitor and what information he had in his possession when he told his clients that all was in order. The court is, of course, unable to speculate but it is quite possible that the Seymours' solicitor had had discussion with Council officers concerning these questions or had received certificates which indicated to him that the encroachments raised no problem of significance for the Seymours. The point is that the circumstances surrounding these encroachments were not subjected to any examination during the hearing and the court does not know what information was held by the solicitor regarding them and what significance they would have borne to a purchaser. The state of knowledge held about them is thus so sparse that they provide a totally insecure foundation upon which to draw inferences. In these circumstances I see no reason to qualify the view which I earlier expressed that, upon the facts I have recited and which were beyond \GRAHAM BENSON STEEL AND STEEL and ASSOCIATES PTY LTD v SEYMOUR ANB ANOR (Clarke JA) (Clarke JA) dispute, the inference found by his Honour was open and should have been drawn. This ground of appeal therefore fails. The second point concerned the mitigation of damages. It was submitted that it had become quite apparent to all interested parties by 1984 that the encroachment which led to the litigation did exist. Therefore, according to the submission, the Seymours should, in order to mitigate their damages, have removed the encroachment and limited the litigation to a claim against the surveyor. In proceeding, as they did, to defend the action and to press cross-claims they built up their damages contrary to their duty to mitigate. Although this point was raised before the trial judge and was the subject of some observations by him he made no relevant order upon which an appeal can be based. As I earlier stated the damages have not been assessed. There is therefore no order upon which this ground of appeal can operate. Notwithstanding the point was debated and it may be helpful if I indicate shortly my views on the matter. Contrary to the thrust of the appellants' contention the claim which was initially brought by Boed was not an uncomplicated one. It is true that it sought an order for the removal of the encroachment but it did not limit its claims for relief to that one subject matter. It also sought damages for nuisance and in that respect particularised a claim of about $11,000 in such a way as to show that it was claiming for the destruction of a deal of personal property belonging to the Funnell family. In these circumstances the mere removal of the encroachment would not have prevented the continuance of the litigation and once the Seymours were drawn into it I do not think it can be said that they acted unreasonably in cross-claiming against the negligent surveyor. In the event the claims made by Boed were compromised for a sum far less than $11,000 and there was undoubtedly justification for defending the claim. Furthermore, the particular dispute involved a number of complexities and I would myself find it difficult to say that a party acted unreasonably in failing to take that action which in hindsight would have been most effective. That, as I see it, is the thrust of the complaint made by the appellants. The picture becomes even more complicated when one has regard to another submission. That was that the Seymours should never have sold their property to Mrs Browning in 1985 but should have removed the encroachment before selling it to anyone. Superficially that proposition sounds reasonable but the position is that the Seymours had been endeavouring to sell this property for years and had eventually found a purchaser who was prepared to enter into a Contract of Sale with indemnities to protect her in respect of any liability in damages to Boed. They were therefore able to free the funds which had been tied up in the property for years. Although his Honour found that Mrs Browning had acted quite unreasonably at a later time and thereby, perhaps, led to an inflation of the costs of the litigation I can see no basis on which to suggest that the Seymours had been unreasonable and therefore should, in the end, receive by way of a verdict only part of their damages. I therefore agree with his Honour's conclusions. For these reasons the appeal should be dismissed with costs. I should make one final observation. Damages have yet to be assessed and it may be that the trial before Bryson J was a separate trial. There was no argument on this point and I do not determine it but if, in fact, it was a separate trial, then the appeal which we have entertained could proceed only with leave. However 6 UNREPORTED JUDGMENTS no point arises on this question for it was agreed by both parties that if leave were necessary then it should be given and the court proceeded to determine the appeal upon the basis that it was competent. The appeal should be dismissed with costs. Sheller JA I have had the benefit of reading the judgment of Clarke JA and agree with it and the orders therein proposed. The appeal is dismissed with costs. 10 — Counsel for the appellant: SR DONALDSON Solicitors for the appellant: MINTER ELLISON Counsel for the respondent: SJ MOTBEY Solicitors for the respondent: ATTWOOD MARSHALL