New South Wales District Court CITATION: Wilkinson v McCabe [2009] NSWDC 6 HEARING DATE(S): 24-25 November 2008 JUDGMENT DATE: 3 February 2009 JURISDICTION: Civil JUDGMENT OF: Sidis DCJ 1 The plaintiff is to pay the defendants' costs occasioned by reason of the adjournments of the proceedings granted on 5 November 2007 and 29 April 2008. 2 The defendants are to pay the plaintiff's costs of the proceedings up to and including 30 August 2007 and those incurred after 20 October 2008, with the exception of those costs referred to in paragraphs 44, 45 and 47 and the costs dealt with by order of Naughton DCJ on 8 March 2005. DECISION: 3 The proceedings are otherwise dismissed. 4 The exhibits are returned. 5 Reasons are published. CATCHWORDS: COSTS - appropriate orders when substantive proceedings not pursued - whether defendants acted unreasonably in responding to claim of nuisance causing water penetration Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 CASES CITED: Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; ex parte Lai Quin (1997) 186 CLR 622 Sedleigh-Denfield v O'Callaghan [1940] AC 880 PARTIES: Richard Wilkinson by his tutor James Wilkinson - Plaintiff Damon McCabe and Gabrielle McCabe - Defendants FILE NUMBER(S): Newcastle 142/04 COUNSEL: A Leopold SC - S Chrysanthou (Plaintiff) D Murr SC - P R Cummings (Defendants) SOLICITORS: O'Sullivan Saddington (Plaintiff) Sparke Helmore Lawyers (Defendants) JUDGMENT 1 On 24 March 2004 Mr Richard Wilkinson commenced proceedings against Damon and Gabrielle McCabe claiming nuisance and damage from water penetration to his property at 28 The Terrace, The Hill. He claimed that the water entered his property from the property immediately to the south at 30 The Terrace, owned by the defendants. 2 The claim was defended. The defendants denied liability and damage. 3 The litigation was protracted. It involved a number of interlocutory applications involving disputes between the parties concerning the need to investigate conditions at 30 The Terrace that were potentially the cause of water penetration and damage to the plaintiff's property. Each party engaged experts and served upon the other multiple reports concerning those conditions. There was no clear indication of the way in which water was entering the plaintiff's property. On the defendants' arguments, any water that was entering the plaintiff's property was unrelated to any conditions, natural or man-made, on their property. 4 Extreme weather conditions were experienced in the Newcastle region in June 2007. Heavy rain caused the water to penetrate the kitchen wall of the plaintiff's property at such an accelerated rate that the plaintiff's son removed some of the brickwork from that wall. The gap in the wall revealed behind it a 150 mm PVC storm water pipe situated within the defendants' property from which water was leaking at that time in some volume and spilling into the plaintiff's property. It was discovered that a collar fitted to the pipe was split and opened to a width of about 10 mm. 5 This discovery was reported to the defendants in October 2007 and the pipe was repaired on the instructions of the defendants in November 2007. 6 The plaintiff accepted that repair of the pipe substantially resolved the problem of water penetration to his property. He elected not to pursue the claims for the cost of repairs to the affected parts of his property, apparently because the amount involved was relatively modest. The plaintiff sought an order that the proceedings be otherwise dismissed. 7 The defendants contended that the repair of the pipe had entirely resolved the water penetration problem and that in electing not to pursue his claim the plaintiff had capitulated because he appreciated that he could not succeed in the claim on the basis of the pleadings as they stood immediately prior to the proposed hearing date. The defendants accepted that it was inappropriate to embark upon a full hearing of the merits of the claim. They sought a verdict in their favour. 8 The remaining issue related to costs. Both parties argued for an order for costs in their favour. 9 I was reminded of the principles expressed in Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 and confirmed in Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; ex parte Lai Quin (1997) 186 CLR 622 that, where there had been no trial of the issues, the court should not attempt to determine the merits of the parties' claims when considering what would be the appropriate costs order. 10 Notwithstanding these principles, the defendants argued that the plaintiff would not have succeeded on his claim because the precise cause of the nuisance was not pleaded in the amended statement of claim filed on 26 June 2006. This assertion was made clear in a letter from the defendants' solicitor of 20 October 2008 where it was stated that the plaintiff did not plead the broken pipe as the source of the alleged nuisance, did not particularise it or claim relief in respect of it. Rather, the statement of claim related the nuisance to the removal of a dish drain from the common boundary of the properties, the placement of fill against the wall of the plaintiff's property and the placement of paving on the common boundary. On this basis it was asserted: In short, your client's claim is and always has been utterly without substance. 11 There were a number of difficulties facing the defendants in maintaining this position. 12 It could not be said that the claims made in the statement of claim that related the concentration of the flow of water to the removal or burial of a dish drain and asphalt surface in an area adjoining the plaintiff's property and the placing of fill against the wall of the plaintiff's property were utterly without substance for the following reasons: 1 Investigations and the affidavits of the prior owner of the defendants' property appeared to rule out the proposition that a dish drain was buried. They did not rule out the proposition that a dish drain was removed. 2 Although there remained a dispute concerning the depth to which fill might have been placed in the courtyard area of the defendants' property, Mr Barnett reported on 3 December 2007 observations, in the area where the broken pipe was located, of packing sand and building debris at a depth of 700 mm below the concrete slab on the defendants' property. Mr Barnett's conclusion was that, as pleaded by the plaintiff, this fill facilitated the flow of water towards the wall of the plaintiff's property. 13 In addition to the water flowing from the broken PVC pipe, Mr Barnett reported that ineffective drainage through blockages, methods of installation and inadequacies identified in the report of Namits Pty Limited increased the volumes of water through the subsurface area adjacent to the plaintiff's property. 14 I find therefore that the claim as pleaded, while not precisely identifying the broken pipe as a cause of the water penetration, sufficiently identified the issues and was not utterly without substance. 15 The question then to be determined was whether either party acted unreasonably in the course of the litigation such that an order for costs against that party was warranted or whether in the circumstances of this case it was appropriate to order that the parties pay their own costs. 16 Prior to the commencement of the proceedings the plaintiff wrote to the defendants on four occasions between 2001 and 2003 complaining of problems he was experiencing through water penetration in the areas of his home identified as the kitchen, pantry and sewing room. The letters related the problem to the placement of fill against the wall of these areas and the inadequacy of drainage of that fill. The last of those letters indicated that the defendants had not responded to previous correspondence and that in the absence of appropriate response the plaintiff would commence legal action. The proceedings were commenced on 24 March 2004. 17 The defendants relied on the decision of the House of Lords in Sedleigh-Denfield v O'Callaghan [1940] AC 880 to argue that they acted reasonably in response to the plaintiff's claim. The principles expressed in the opinions forming the judgment indicated that the elements involved in an action for private nuisance were: 1 Identification of the nuisance, in this case water penetration of the southern wall of the plaintiff's property. 2 With the knowledge of the nuisance, the occupier fails to take reasonable steps to abate the nuisance within a reasonable period. 3 An occupier of land was liable if he or she continued the nuisance although he or she did not create it. 18 The argument for the defendants was that they acted reasonably in repairing the broken pipe within a very short period after they were notified in October 2007 that it was the cause of the nuisance. 19 There were a number of reasons why this argument failed. 20 The defence denied both liability and damage. The defendants initially contended that since they acquired their property they had done nothing to affect its physical condition and that they could not be held liable for conditions that pre-existed their ownership of the property. This contention was contrary to legal principle. 21 They further denied liability because no nuisance existed. They pointed to extensive investigations undertaken by their experts that failed to identify any source of the water penetration complained of by the plaintiff and that indicated that the damp conditions existing in the plaintiff's home were related to its age, condition and building techniques adopted at the time of its construction. It was said that these factors made it likely that the plaintiff's property suffered from dampness and water penetration from the time it was originally built. 22 This argument was inconsistent with the material relied also on by the defendants that discounted the watering of the garden bed located on the common boundary of the properties as a cause of the nuisance. The defendants' expert contended that, since the garden bed had been in the same position for many years and the plaintiff's complaints were of recent origin, this was not the source of the water penetrating his wall. 23 The defendants also suggested that rainwater was running off the plaintiff's roof, falling on to their property and running back through the plaintiff's wall. This in itself appeared to be an indication that subsoil drainage was ineffective and that rain water was not draining away in the manner claimed by the defendants. 24 Except for obtaining from Namits Pty Limited an investigation of the stormwater pipes within their property jointly commissioned with the plaintiff, the defendants disregarded the reports provided by the plaintiff's experts. Those reports recommended that investigation be undertaken of the subsoil conditions in the area of the courtyard where the spa was located. This was an area immediately adjacent to the kitchen, pantry and sewing room of the plaintiff's home. It was the area that the plaintiff pointed to in his pre-litigation correspondence as that affected by water penetration. 25 As early as January 2005 Mr Barnett, building consultant, following an inspection of the features of both properties recommended that a full investigation be undertaken of the way in which stormwater was discharged from the defendants' property. His conclusions in his report of 27 January 2005 included: It can be determined from the available access to the Wilkinson property and documentation that the brick boundary wall is subject to water ingress and that the levels of the rear yard areas of 30 The Terrace have been raised and is a probable cause of water ingress, and degradation of the brickwall. 26 Mr Barnett also criticised the report provided by Mr Clode, architect, following excavation of an area of the defendants' property near to the garden bed. Mr Barnett's concerns were that Mr Clode assessed an isolated area of the boundary, did not address concerns relating to water ingress, did not state that water ingress was not possible or that it was not occurring, and did not recommend water testing of the wall or the drainage system, waterproofing or sub-surface drainage. 27 In March and April 2005 Namits undertook CCTV investigation of the stormwater system on the defendants' property. The full investigation was completed only after three attempts and after blockages and debris within the stormwater piping system were removed. The report provided by Mr Brown concluded that the stormwater system was in good condition but identified a part of the system that was still partially blocked with cement mortar that could cause water to back up in heavy rain. He suggested that the stormwater system would be enhanced if the mortar were to be removed and the pipe laid in a tradesman like manner. 28 There was substantial criticism of the Namits report by Mr Fitzgerald, consulting engineer, in June 2005, Mr Barnett in November 2005 and by Mr Murphy, plumbing consultant, in January 2006. 29 Mr Fitzgerald questioned the methods used in calculating the volumes of water to be discharged through the system and the slope at which the pipes were laid. He was not satisfied that the calculations were adequate to support the assertion that the system was adequate. He identified a major issue, being an opening in downpipe 1 which was, he said, acting as a water release in heavy storms and discharging water into a lower confined area east of the site of the spa. He recommended that further investigation work be undertaken by Namits. There was no evidence that this was done. 30 Mr Barnett noted that the CCTV investigation identified blockages, cracks and holes in pipes that caused backing up of water within the system. He recommended further investigation of the area of fill and the subsurface drainage system adjacent to the common boundary. 31 Mr Murphy's opinion was that the CCTV investigation identified major defects in the stormwater drainage system. He recommended a review of the system by an hydraulic consultant. He pointed to defects in the PVC pipeline adjacent to the common boundary that he described as joint displacements and broken conduits that were not referred to in the Namits report. 32 Mr Brown responded to these criticisms and took issue with these comments, disputing that the survey gave any indication that any part of the pipeline was cracked or that silt was built up within the pipes to the levels described by them. 33 Mr Lee, hydraulic services consultant (not a consulting engineer as stated in his affidavit), in May 2007 responded in particular to Mr McCallum and confirmed the view that the source of the water entering the plaintiff's property was run off from his roof. This opinion was expressed notwithstanding statements in his report that he did not view the damage from the plaintiff's property and it was difficult to conclude that there was no sub-soil drainage on the boundary between the properties or that there was no waterproofing membrane because there had been no sub-soil excavation in the relevant area. Further, on the basis of his assumption that a layer of asphalt remained in place beneath the pavers in the courtyard, he stated that water would not permeate through this layer but would drain away to a grated pit within the courtyard. The only way to predict the way in which water would flow underground if the asphalt surface was not in place, he said, would be to carry out geotechnical investigation of the permeability of the soil. In the final paragraph of his report Mr Lee stated: Accepting that there is water damage evident inside No. 28, in the vicinity of the spa/slab and ground adjacent to it on No. 30, having viewed the video taken on 25 April 2006 by Mr Damon McCabe, my view is that the cause for the water damage to No. 28 is the run off from No. 28 own roof discharging over the McCabe's boundary saturating the ground and the recess beside the down pipe located at the rear north-east corner of No. 30 and thus coming into contact with the wall of No. 28. 34 The geotechnical investigation referred to by Mr Lee was not undertaken. Mr Fitzgerald, reporting in January 2008, stated that no definitive assessment of the upper courtyard was possible due to Mr McCabe's reluctance to allow intrusive investigations in this area. 35 It is not necessary for the purpose of determining the issue of costs that I determine which of these experts was correct. The question to be decided was whether in the face of their apparently conflicting views, it was reasonable of the defendants to continue to decline to investigate in the area immediately adjacent to those parts of the plaintiff's home identified as having been affected by water penetration and to continue to argue: 1 that water penetration was not occurring; and 2 if it was occurring, it was unrelated to conditions existing on their property. 36 It became apparent from this short review of the expert evidence that, whatever the source of the water, be it from the roof of the plaintiff's property, stormwater or water from the spa, the system for disposal of ground water from the defendants' property was in some way defective and that the area most likely to be that which was causing the problem was that in which the spa was located. 37 Mr Clode's investigations did not extend to this area of the defendants' property. Mr Lee's opinions were inconclusive because of the absence of appropriate investigation. Further those opinions proceeded on the basis that it was not the defendants' responsibility to dispose of water originating from the plaintiff's property, even if that water, because of the siting of the buildings, necessarily fell onto the defendants' property. The Namits report was seriously undermined by the criticisms of the plaintiff's experts. 38 I have therefore concluded that it was not reasonable conduct on the part of the defendants to continue to decline to allow investigation of subsoil conditions in this area until faced with the inevitable in October 2007. 39 In my view, it is appropriate that the defendants be ordered to pay a proportion of the plaintiff's costs of the proceedings. 40 The plaintiff sought costs for the period up to and including 3 December 2007, being the first date upon which rain to a sufficient degree fell to allow for testing of the work undertaken on the defendants' property. He sought costs for the period from 20 October 2008 when the defendants put into contention the issue of costs. 41 There were a number of situations that arose during the course of the proceedings that require consideration before the appropriate costs order could be formulated. 42 The statement of claim filed in March 2004 was amended in June 2006. Had the amendments been substantial, that might have disqualified the plaintiff from receiving costs for the period up to the including the date of filing of the amendment. The amendments, in my view, were minor and no adjustment to the costs order was warranted on this basis. 43 An application to transfer the proceedings to the Supreme Court was rejected by His Honour Judge Naughton on 8 March 2005. He ordered each party to pay their own costs of the motion. There was no reason to interfere with this order. 44 The proceedings were fixed for hearing on 5 November 2007. They did not proceed because of the deterioration in the mental capacity of the elderly plaintiff. This was a situation beyond the control of the defendants and they should not be required to bear the additional costs incurred by the plaintiff by reason of the adjournment. Further, I considered it appropriate that the plaintiff pay the defendants' costs occasioned by this adjournment. 45 The proceedings were fixed for hearing on 5 May 2008. They did not proceed because of the illness of senior counsel for the plaintiff. This was a situation beyond the control of the defendants and they should not be required to bear the additional costs incurred by the plaintiff by reason of the adjournment. Further, I considered it appropriate that the plaintiff pay the defendants' costs occasioned by this adjournment. 46 The plaintiff discovered the leaking stormwater pipe in early June 2007. The defendants were not notified until October 2007. The plaintiff provided no explanation for the delay in informing the defendants of the defective pipe. Taking account of the prompt action of the defendants in abating the nuisance once informed of the condition of the pipe, I have concluded that earlier notification might well have brought about earlier abatement. In those circumstances, I consider it appropriate that costs be awarded to the plaintiff up to and including 30 August 2007 and from 20 October 2008. ORDERS 47 The plaintiff is to pay the defendants' costs occasioned by reason of the adjournments of the proceedings granted on 5 November 2007 and 29 April 2008. 48 The defendants are to pay the plaintiff's costs of the proceedings up to and including 30 August 2007 and those incurred after 20 October 2008, with the exception of those costs referred to in paragraphs 44, 45 and 47 and the costs dealt with by order of Naughton DCJ on 8 March 2005. 49 The proceedings are otherwise dismissed. 50 The exhibits are returned. 51 My reasons are published. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.