New South Wales Court of Appeal CITATION : Tynan & Ors. v. Newcastle City Council [2002] NSWCA 142 FILE NUMBER(S) : CA 40919/01 HEARING DATE(S) : 8 May 2002 JUDGMENT DATE : 22 May 2002 PARTIES : Jason James Tynan, Heath Andrew Tynan and Mike Justin Tynan - appellants Newcastle City Council - respondent JUDGMENT OF : Hodgson JA at 1; Davies AJA at 52; Pearlman AJA at 53 LOWER COURT JURISDICTION : District Court LOWER COURT DC 5822/99 FILE NUMBER(S) : LOWER COURT Walmsley DCJ JUDICIAL OFFICER : COUNSEL : Mr. J. Van Aalst for appellants Mr. G. Lindsay SC with Mr. A. Ridley for respondent SOLICITORS : Woolf Associates, Sydney for appellants Harris Wheeler, Newcastle for respondent CATCHWORDS : LOCAL GOVERNMENT - TORT - Negligence - Duties of Councils - Application for building approval - Inspection of foundations - Whether duty to check whether distance from boundary conformed to plans - DAMAGES - Hypothetical circumstances - How damages assessed - Loss from court proceedings which resulted in order for removal of house - Proceedings taken after extension to house, resulting from Council's negligence - Finding by primary judge that proceedings would have been taken in any event - Whether damages should have been awarded for the loss of a chance that proceedings not taken. LEGISLATION CITED : Local Government (Approvals) Regulation 1993, clause 12(1) CASES CITED: Malec v. J.C. Hutton Pty. Ltd. (1990) 169 CLR 6383 DECISION : 1. Appeal allowed to the extent of increasing the judgment in favour of the appellants by a sum of $29,000.00 plus interest on that amount from 30 September 1998 2. Appeal otherwise dismissed 3. No order as to the costs of the appeal. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40919/01 DC 5822/99 HODGSON JA DAVIES AJA PEARLMAN AJA 22 May 2002 TYNAN & ORS. V. NEWCASTLE CITY COUNCIL Judgment 1 HODGSON JA: On 19 November 2001, in proceedings brought by the appellants against the respondent, Newcastle City Council, alleging negligence on the party of the Council and its officers, Walmsley DCJ rejected the principal allegation of negligence but, on a second allegation, gave judgment in favour of the appellants for $20,000.00 plus interest under s.81A of the District Court Act from November 1995. On that day also, the primary judge ordered the respondent to pay the appellant's costs of the proceedings, although it appears that on 12 November 2001 he substituted an order that the respondent pay 35% of the appellants' costs of the proceedings. 2 The appellants have appealed to this Court from that decision, seeking to have overturned his Honour's rejection of their principal allegation of negligence and seeking also very much increased damages. CIRCUMSTANCES 3 Since December 1992, the appellants have been owners as tenants in common in equal shares of a parcel of land of about 6 hectares at Blackhill near Newcastle. This land is within the local government area of the respondent Council, and is zoned in the Newcastle Local Environment Plan 1978 as Rural 1(a). 4 On 4 August 1993, at a time when there was already one residence on the property, the appellant Jason Tynan (who I will refer to as Jason), with the consent of all appellants, lodged a Development Application with the Council seeking consent for a development described as "dual occupancy/manager's residence", with a proposed floor space of 47.25m.sq. The accompanying plans showed a small rectangular house built on a number of wooden piers, with the site plan showing the house having its western edge approximately parallel to the western boundary of the land and 12.4 metres from that boundary. 5 The Development Application was approved by the Council on 15 October 1993, subject to conditions including a condition that the proposed development be carried out "strictly in accordance with the details set out in the plans". 6 Meanwhile, on 19 August 1993, Jason had lodged a building application in respect of the same development, which described the building as a pre-built one-bedroom kit home. Jason subsequently dug pier holes for the house, and on 20 October 1993 contacted the Council requesting an inspection. The Council records noted this as a request for an inspection in relation to "steel/slab". On 21 October 1993, a Mr. Schasser, an employee of the Council, came to the site; and his notes record that the inspection disclosed pier holes approximately 1.2 metres deep, and that Jason was told "he can erect the poles". The piers were then concreted in, and on 28 October 1993, by means of a crane, the kit home was placed on the piers. The kit home had been acquired at a cost of $9,000.00. 7 On 1 December 1993, the building application was approved subject to conditions, including a condition requiring compliance in full with all conditions of the development consent. 8 On 12 November 1995, Jason lodged a second building application seeking approval for building work being "alterations/additions to an existing building". The plans showed substantial extensions, all at a greater distance from the western boundary than 12.4 metres. The site plan showed the western boundary of the property approximately parallel to the western wall of the original house and 12.4 metres from it. 9 The second building application was approved on 21 August 1995. On 14 September 1995, a Council officer, Mr. Kuba, came to the site to inspect before the concrete slab was poured. On that occasion, he was observed by Jason to have a heated discussion with the appellants' neighbour to the west, Mr. Meharg, following which Mr. Kuba came back and told Jason that the building was in the wrong place, in that the plan showed the house to be 12.4 metres from the boundary whereas in fact it was considerably closer. Mr. Kuba advised Jason to lodge an amended building application. 10 On 24 October 1995, Jason wrote the following letter to the Council: In response to your letter regarding my building application please find attached 4 site plans. The previous plans which were submitted were incorrectly surveyed due to a misunderstanding of the boundry (sic) line. The measurements were taken from a row of surveyor pegs just beyond the fence, which were thought to be the correct boundry (sic) line. Since this matter has been brought to my attention new plans have been drawn up which I hope meet council requirements. I'm sorry for any inconvience (sic) this misunderstanding may have caused. The plan attached to that letter showed that the western boundary of the land was not parallel with the western wall of the "existing res", and showed it to be only 3.4 metres from that wall at the northern end of the wall and only 0.987 metres away from the wall at the southern end of the wall. 11 However, it is plain from plans in Blue Appeal Book pp.151-2 and from a photograph in Exhibit G that these measurements were not in fact from the western wall of the original kit house, but from the posts of a covered area which were about 2.4 metres to the west of the western wall of the original kit home. Accordingly, the boundary was in fact about 5.8 metres from the western wall of the original kit house at the northern end of that wall, and about 3.4 metres from the western wall at the southern end of that wall. 12 On 9 November 1995, Jason lodged amendments to both building applications, showing the house in the correct location. These amendments were approved on 6 February 1996, and construction of the house was completed. 13 Later in 1996, Mr. Meharg sued the appellants and the Council in the Land & Environment Court, seeking orders for removal of the building. On 13 February 1998, Sheahan J declared the two building approvals and the approval to the amendment to be invalid, declared that the building was unlawful, and ordered its removal. He ordered the appellants and the council each to pay one-half of Mr. Meharg's costs of those proceedings. 14 The appellants appealed to the Court of Appeal from that decision. On 30 September 1998, the Court of Appeal gave its decision, overturning Sheahan J's decision in relation to the two building approvals, but confirming it in relation to the approval of the amendments, and otherwise dismissing the appeal. The basis of the Court of Appeal decision was that it was not reasonably open to the Council to conclude that the approval as amended (for a building located close to the boundary) would be substantially the same as the original approval (for a building located 12.4 metres from the boundary), as required by s.106 of the Local Government Act. The Court of Appeal ordered the appellants to pay Mr. Meharg's costs of the appeal. 15 At first, the appellants did not comply with the order to remove the house, and contempt proceedings were brought in the Court of Appeal. The house was removed on 6 March 1999. In August 1999, the appellants commenced these proceedings against the Council. 16 In the proceedings below, the appellants alleged in substance two areas of breach of duty by the Council: firstly, negligence associated with the 1993 inspection by Mr. Schasser, and secondly, negligence associated with the 1995-6 approvals. The appellants claimed the following heads of damage: 1. 1993 expenses incurred for the kit home: $15,160.00 2. 1995 materials and labouring erecting extensions: $29,109.80 3. 1996 materials and builder for extensions: $14,218.40 4. Removal of dwelling 1999: $11,173.00 5. Fees/costs for replacing dwelling: $2,462.00 6. Expert advice: $153,272.00 (This claim was amended before us to a claim for $105,118.50 actually paid to the expert Mr. McNaughton) 7. Legal costs expended in relation to Land & Environment Court proceedings: $175,317.10 8. Rent costs: $8,115.00 9. Purchase of steel beams supporting home: $2,700.00. DECISION OF PRIMARY JUDGE 17 The primary judge found that it was not within Mr. Schasser's functions when he made the inspection on 21 October 1993 to measure the distance of the piers from the boundary, or to ascertain the whereabouts of the boundary. Accordingly, his Honour found that there was no breach by the Council in Mr. Schasser not doing so, or in him not advising Jason to submit a new plan or to stop work. 18 However, the primary judge found that the Council through Mr. Kuba did encourage Jason in late October 1995 to make an amended application, and thereby breached a duty of care causing damage to the appellants. 19 The primary judge said that, if he had found for the appellants on the 1993 alleged breach, he would have deducted 50% for contributory negligence; but he found no contributory negligence by the appellants in relation to the 1995 breach. 20 The primary judge then went on to consider damages on two alternative bases: first, what he called scenario 1, namely that the Council was liable for the alleged 1993 negligence as well as the 1995 negligence; and second, what he called scenario 2, namely that the Council was liable only for the 1995 negligence. 21 Dealing in turn with the nine heads of damage, his Honour's conclusions were as follows: 1. The appellants' counsel conceded that Jason still proposed to use the kit home, and the primary judge indicated that he would have awarded $6,000.00 on scenario 1, but nothing on scenario 2. 2. The respondent's counsel contended that many materials could be re-used, and the primary judge indicated he would have awarded $15,000.00 on scenario 1, but nothing on scenario 2. 3. The primary judge found that some of the items under this head could be re-used, and assessed damages under this head at $12,000.00 on both scenarios. 4. On scenario 1, the primary judge would have awarded the whole amount claimed for removal of the house, namely $11,173.00; but on scenario 2, he allowed only an incremental amount of $2,000.00. 5. The primary judge found that nothing was payable under this head on either scenario. 6. The primary judge held that it was reasonable for the appellants to have retained the expert Mr. McNaughton, but not reasonable for them not to have placed a limit on this expense, namely a limit of $30,000.00. His Honour would have awarded $30,000 on scenario 1, but awarded $4,000.00 on scenario 2. 7. In relation to costs, the primary judge rejected a res judicata argument advanced by the respondent. However, in so far as the costs claimed were costs of Mr. Meharg ordered to be paid by the appellants, the primary judge held that any award in relation to these costs would be re-visiting the very question determined in the previous proceedings. That finding accounted for about $107,000.00 of the appellants' claim. As regards the appellants' own costs, about $68,000.00, recovery of those costs from the Council had not been considered in the previous proceedings, and the primary judge said he would have awarded $40,000.00 on scenario 1. However, he found that "even without the breach of duty involved in scenario 2, the proceedings would have been brought in the Land & Environment Court and would have gone on appeal". Accordingly, he awarded only $2,000.00 on scenario 2, being the amount by which he considered the costs had been increased by the scenario 2 breach. 8. The primary judge would have allowed rent costs of $8,115.00 on scenario 1, but allowed none on scenario 2. 9. There being no evidence that the beams were worthless, the primary judge would have allowed $1,500.00 under this head on scenario 1. He allowed none on scenario 2. 22 In the result, his Honour awarded damages of $20,000.00 plus interest from 9 November 1995. GROUNDS OF APPEAL 23 The appellants appealed on the following grounds: 1. His Honour was in error in stating (at page 5, paragraph 10) that the Appellant's case was that the Respondent was negligent by failing to measure the distance of the Kit-Home or alterations from the western boundary before giving its approval in 1993 and 1995; 2. His Honour ought to have stated that the case pleaded and contended for by the Appellants was that the duty of care owed by the Respondent in 1993 to the Appellants when Mr Schasser inspected the pier holes was that in the performance of its statutory duties to ensure that the distance between the western boundary and the position where the kit-home was to be erected, was in conformity with the distance disclosed in the plan lodged with the approved development application. 3. His Honour failed to provide reasons as to why clause 12 of the Local Government (Approvals) Regulation 1993 did not provide him with any assistance for determining of the existence of a duty of care at the time when Schasser approved the pier holes and authorised the pouring of cement. 4. His Honour ought to have found:- (a) that when Schasser was at the site in 1993 to inspect the pier holes he was participating in or part of the approval process for the Respondent in respect of the erection of the kit-home to which process clause 12(g) of the above Regulations applied; and (b) that the Respondent owed to the Appellants a duty of care to ensure that before it approved the Building Application (BA93/23118) that the position for the kit-home (as disclosed by the pier holes) in relation to the western boundary was in conformity with the plan which formed part of the approved development application. 5. His Honour erred in finding (at pages 10 to 11 paragraphs 20 and page 12 paragraph 22(e)) that:- (a) Mr Schasser did not have to locate the western boundary; or (b) to observe the discrepancy between the position of the pier holes and that boundary on his inspection, and the distance thereof recorded in the plan attached or forming part of the approved development application; or (c) that it was not within the bounds of Schassers function that day, to ascertain the position of the western boundary or to advise the Appellants of a discrepancy between the position of the kit home disclosed in the plan and the western boundary; (d) that the western boundary was approximately half a metre closer to the kit home than the boundary; (e) Schasser found the fence `quite some distance from the pier holes'; and (f) by failing to find that the failure of the Respondent to call Schasser to provide evidence of his inspection of the pier holes in 1993 permitted an inference that the Respondent thereby would have exposed facts unfavourable to its case (Jones v Dunkell 1959 101CLR 298 @ 320) and consequentially to draw an inference that his evidence would not have assisted the Respondent's case; and (g) that the Appellant was in a better position than anyone to observe or to deduce the error; and (h) by finding (at page 13 paragraph 22(h)) that "no conduct or failure to act on the Repsondent's (sic) part induced the Appellant (Jason Tynan) not to take steps to protect himself from the error in the plan, or that he (Jason) was relying upon the Respondent to point out errors in the plan"; and (i) that the Respondent did not owe a duty of care. 6. As to His Honour's findings on contributory negligence His Honour was in error In finding: (a) that there was a causal relationship between the failure of the Appellant (Jason Tynan) to observe the measurement of 12.5m on the plan and the omission of Schasser to properly carry out his statutory function; and (b) by making the finding of contributory negligence in paragraph 31 His Honour ought to have (but failed) to find that the Respondent (through Schasser) was negligent. 7. His Honour ought to have found that there was no evidence upon which to find contributory negligence in respect of Scenario 1. 8. As to damages His Honour erred as follows:- (a) by failing to award $6000 for compensation for the loss in respect of the cost of the acquisition and erection of the kit-home; (b) by failing to award the sum of $15,000 as compensation for the loss suffered in respect of the extensions (page 16 paragraph 35); (c) by failing to award the sum of $11,173 (paragraph 36(d); and (d) in the finding in paragraph 37 that most of those expenses would have been incurred in any event; and (e) by failing to award the fees (in paragraph 37(e)) lost for the fees for the development and building applications; and (f) His Honour was in error by imposing the limit of $30,000 in respect of the fees paid to McNaughton and by the award of $4000 as compensation for the cost for retaining him as an expert; and (g) that the claim for the legal costs in respect of the Land & Environment Court was an attempt to re-visit the order made by Justice Sheahan; and (h) His Honour's finding (page 21 paragraph 44 and page 22) that even without the 1995 breach of duty proceedings would have been brought in the Land & Environment Court and that the bulk of those fees and in respect of the appeal to the Court of Appeal would have been incurred in any event; (i) in failing to find that the rent for alternative accommodation was causally related to the Respondents breach of its duty of care; (j) His honour ought to have allowed as damages to cost of the purchase of the steel beams. 9. His Honour ought to have awarded as damages in addition to those claimed in 8 above:- (a) the sum of $173,317.10 for the legal costs in respect of the Land & Environment Court proceedings; (b) the sum of $153,272 for the fees paid to Mr McNaughton. ISSUES 24 The issues argued on appeal essentially came down to the following. Firstly, whether the primary judge was in error in not finding a breach of duty by the Council in 1993. Secondly, an issue which would arise only if there was a decision in favour of the appellants on the first issue, namely what damages should be awarded on the basis of that breach. Thirdly, the question whether or not there was error in assessment of damages for the 1995 breach. That in turn led to two subsidiary issues: firstly, the question of res judicata affecting the claim for costs, and secondly the question whether there was error in the primary judge's finding that the Land & Environment Court proceedings and appeal would have happened even if the 1995 breach had not occurred. 1993 BREACH 25 The appellants' submissions on this matter relied inter alia on cl.12(1)(g) of the Local Government (Approvals) Regulation 1993. Clause 12(1) of that Regulation is as follows: 12(1) In determining an application for approval to erect a building the council must take the following matters into consideration: (a) drainage, ventilation, lighting and healthiness of the building, (b) design, materials, stability, building line and height, (c) size, height and lighting of rooms, (d) height of floor levels in relation to level of road, (e) size, height and materials of party walls between buildings, (f) the proportion of the site to be covered by the building and the provision of open spaces and light areas, (g) the position of the building or any outbuilding or office in relation to other buildings or to the boundaries of the site, (h) the provision of storage for water for domestic purposes, (i) means of access generally and particularly the means of access for the purposes of the removal of human waste and other waste, whether a public place may be obstructed or rendered inconvenient if the approval is given, (k) height, materials, stability, design and position of fences (if any) to be erected on or on the boundaries of the allotment on which the building is to be erected, (l) whether the site is subject to flooding or tidal inundation, (m) whether the site is or probably will be subject to subsidence or slip, (n) whether the erection of the building adversely affects the drainage of adjoining sites, (o) whether the use of the building is likely to cause offensive noise within the meaning of the Noise Control Act 1975, (p) the likely effect of the building on other land and buildings, (q) if the land is not or will not be connected to a public sewerage system, whether the site is suitable for the satisfactory disposal of effluent from, and an adequate water supply is or can be made available for, a septic tank, or if not, a septic closet or, if not, another means of disposing of human waste. 26 The essential submission of Mr. Van Aalst, Counsel for the appellants, was that, having regard to cl.12(1)(g), there was an obligation on Mr. Schasser, when he came to the site, to observe where the piers were in relation to the boundary and satisfy himself that there appeared to be compliance with the plans. Even a cursory observation of the position of the pier holes relative to the western fence line of the boundary would have made it obvious to him that they were far closer than 12.4 metres to the boundary. Mr. Van Aalst also submitted that the primary judge's reasons were inadequate, because he gave no reasons for saying that cl.1(g) "did not assist" him. 27 In my opinion, although the inspection by Mr. Schasser took place before approval of the building application, it is plain that it was not part of the process of approval of a building application. It is plain that Jason was wishing to proceed urgently with the building in anticipation of approval of the building application, and what he had requested from the Council was an inspection required prior to the installation of the poles on which the kit home was to be placed, an inspection which would normally take place after approval of the building application. I have already referred to the fact that the note of the request indicated that the inspection was to be of "steel/slab". 28 The matters referred to in cl.12(1)(g) are matters for consideration prior to the granting of a building application, and accordingly are matters which the clause contemplates will be considered before any building work commences; so the consideration of the matters in cl.12(1)(g) must be based on the plans and specifications submitted to the Council and the Council's appreciation of the site prior to the commencement of any building work. In my opinion, the primary judge was plainly correct to say that cl.12(1)(g) had no relevance to the inspection carried out by Mr. Schasser, and there was no deficiency of reasons in his judgment on that matter. 29 Since the inspection requested was to approve the preparations for installation of the poles, and since that was the purpose of Mr. Schasser's visit to the site, there was clearly in my opinion no obligation on Mr. Schasser to check the location of the poles in relation to the boundary of the site. Accordingly, in my opinion, there was no breach of duty by Mr. Schasser or by the Council in Mr. Schasser's failure to check the distance of the piers from the boundary and failure to alert Jason to the discrepancy with the plans. 30 If Mr. Schasser had actually known that the piers were not placed in accordance with the plans but said nothing, it is possible that that could have amounted to a breach of duty: but no allegation of actual knowledge by Mr. Schasser was ever made. Furthermore, an inference of actual knowledge could not have been supported unless there was clear evidence as to the precise physical set-up at the time of the inspection, including the exact location and appearance of any boundary fence. Although there is some evidence that a boundary fence was on the boundary, there is also evidence that it was not. The photograph Exhibit C1 shows a fence and a number of posts in the vicinity of the newly erected kit home which were plainly not on the boundary. One of the plans submitted in July 1995 showed a "boundary fence" parallel to the western wall of the original house and at a distance which, according to the scale on the plan, was about 5.5 metres. In fact, it appears that the boundary was about 5.8 metres from one end of the western wall, and about 3.4 metres from the other end. Jason's letter of 24 October 1995 also attests to confusion as to the relationship between the existing boundary fence and the boundary. So plainly, in the absence of any obligation to check, no breach of duty could be made out on the way the case was conducted and on the evidence. 31 Accordingly, no error is shown in relation to the finding that there was no breach of duty in 1993, and there is no need to further look at damages on scenario 1. SCENARIO 2 DAMAGES 32 Apart from the particular questions concerning res judicata and findings concerning whether court proceedings would have occurred but for the scenario 2 breach, the attack on the damages findings were essentially on the basis that the primary judge was not justified in the reductions he made to the appellants' claims for expenses on the building, and that the primary judge was not justified in putting a limit of $30,000.00 on the amount claimed for the appellants' expert, and of $40,000.00 on the amount claimed for costs. 33 In my opinion, these submissions have no substance. Although the appellants put into evidence invoices supporting payments of the amounts which they claimed, they did not give any evidence which established precisely when different items were delivered and used in the building or what items were still of value to the appellants. In the absence of such evidence from the appellants, the primary judge could only do his best on inadequate material, and there is no basis for saying that he has not reasonably done that. 34 As regards the limit of $30,000.00 placed on the expert's fees, it should be noticed first of all that most of these fees were incurred after the Court of Appeal decision, at a time when the appellants were under an unconditional obligation to remove the building. The Council cannot be liable for expenses unreasonably incurred by the appellants, and in my opinion the primary judge was certainly entitled to conclude that anything more than $30,000.00 spent on this expert would be unreasonable, having regard to the matters at issue and the stage that the resolution of the problem had reached. 35 As regards the figure of $40,000.00 for costs, the reduction from $68,000.00 paid for the appellants' own costs was justified, because that $68,000.00 included costs incurred in relation to the contempt proceedings, for which the Council could not be liable; and the primary judge was not given any material to assist him in determining how much of those costs was attributable to the contempt proceedings or was otherwise unreasonable. RES JUDICATA 36 On this matter, the Council originally filed a Notice of Contention, relying on the following grounds: The Respondent gives notice (pursuant to the Supreme Court Rules 1970 Part 51 rule 21) that it contends that the decision of the Court below (relating to the grounds of appeal referred to in paragraphs 8(g) and 8(h) of the Notice of Appeal filed by the Appellants on15 November 2001) should be affirmed on the following grounds: 1. The Trial Judge erred in not determining (in paragraphs 42-44 of his Reasons for Judgment published on 19 October 2001) that the Appellants were estopped from asserting claims for legal costs for the proceedings in and on appeal from the Land and Environment Court of NSW. 2. The Appellants' claims for legal costs for the proceedings in and on appeal from the Land and Environment Court are the subject of an estoppel operative against the Appellants or (in accordance with the principles enunciated in Reichel v Magrath (1889) 14 App Cas 665 at 668 and Haines v ABC (1995) 43 NSWLR 404 at 410B and 414A-D should be dismissed as an abuse of process. 37 At the hearing of the appeal, the Council sought leave to put on a cross-appeal, seeking reduction or elimination of damages in respect of costs, relying on the same grounds. The Court gave leave for such a cross-appeal to be filed. 38 It was submitted by Mr. Van Aalst for the appellants that the primary judge was in error in deciding that the question of liability, as between the appellants and the Council, for the costs of Mr. Meharg had been determined in the previous proceedings. On the other hand, Mr. Lindsay SC for the Council submitted that the determination in relation to costs made in the previous proceedings was inconsistent with a finding being made now that the Council should be liable for any of the appellants' costs of the previous proceedings. 39 In my opinion, the primary judge was correct on both matters. 40 In the previous proceedings, the question was explicitly addressed as to what proportions of Mr. Meharg's costs should be borne by the appellants and by the Council. It would have been open for the appellants or the Council to have submitted that that question not be determined in those proceedings, but that each be left liable for Mr. Meharg's costs, with their responsibility inter se to be determined elsewhere. However, that course was not taken. The order that each pay one-half of the costs was in no way provisional or made so as to leave open some subsequent adjustment. The very question at issue having been finally determined in court proceedings, it is not now open for the appellants to seek a different result. 41 On the other hand, there was no question of recovery of the appellants' own costs from the Council considered in the previous proceedings. The determination of the proportions in which these parties should bear Mr. Meharg's costs did involve some general assessment of the responsibility of the appellants and the Council for what had happened, but there was never any formulation of the issues dealt with in the present proceedings, namely the questions of existence and breach of duties of care and damages consequent thereon. Those issues never having been formulated and determined, I do not consider that the determination in relation to the other question of costs could give rise to res judicata or issue estoppel in relation to recovery from the Council of the appellants' own costs. Nor in my opinion could a claim for those costs be considered an abuse of process: that claim was more appropriately dealt with in the present proceedings than in the previous proceedings. WHETHER PROCEEDINGS WOULD HAVE OCCURRED IN THE ABSENCE OF THE 1995 BREACH 42 Mr. Van Aalst submitted for the appellants that the primary judge's finding was plainly wrong, because the evidence was strongly to the effect that Mr. Meharg was upset primarily by the 1995 extensions, and took proceedings only because of those extensions. Mr. Lindsay submitted that there was ample material for the primary judge to make the finding that he did, namely that there would have been Land & Environment Court proceedings and an appeal even if the 1995 breach had not occurred. 43 One very significant piece of evidence concerning this matter is a letter written by Mr. Meharg to the Council on 24 November 1995, in the following terms: I thank you for your letter of 22nd November 1995. I must express my concern at the fact that the Council saw fit to forward me the notice of 22nd November 1995 in respect of the construction of a verandah on the dwelling referred to in Building Application number 95/1371 but did not see fit to notify me of the construction of the original dwelling nor of the extension to that dwelling. Perhaps council could initially advise me as to why notice of the first construction and subsequent extension where not advised to me. I hereby give notice that I object to the proposed alteration and additions referred to in the Building Application. It has come to my attention that the original application for construction of a dwelling required that a relocatable kit home be constructed on the site and that the dwelling be some 12.4 metres from the common boundary. I note that neither of those two conditions have been complied with. Indeed a recent survey carried out by a qualified Surveyor shows that the guttering for the proposed verandah will be only .64 metres from the actual common boundary. between the registered proprietor of the property in respect of which the building application has been lodged and my property. It is also apparent that the actual original dwelling is not the required 12.4 metres from the common boundary. These matters appear to have been overlooked by the council in respect of the dwelling. The construction of the dwelling impedes my access to a view which was a prime consideration in my decision to select a site on my property for the construction of my own dwelling. I propose that my own dwelling shall be constructed approximately opposite the dwelling which has been constructed and which is the subject of the building application. Accordingly further extension of that property will impede upon the privacy of my property and will severely restrict the view available from my property. It is quite apparent that the original approval of a development application in respect of the construction of the dwelling which is now sought to be extended has not been complied with in that the purposes for which the dwelling was to be constructed in accordance with the development application also the residence was to be a "managers residence". I object most strongly against the construction of the further improvements as sought in the building application and deserve (sic) my rights to pursue this matter further should Council approve the further extensions. 44 Mr. Van Aalst pointed particularly to the last paragraph of that letter as indicating that it was the further improvements to which Mr. Meharg objected, and to the indication that he would pursue the matter further should the Council approve the further extensions, thus implying that otherwise he would not. On the other hand, Mr. Lindsay pointed to the circumstance that the lack of previous objection to the original building is explained by the circumstance referred to in the fourth paragraph of the letter that it was only shortly before the letter that Mr. Meharg became aware that the original building was not in accordance with the approved plan; and Mr. Lindsay pointed to the indication in the next paragraph that even the construction of the original dwelling impeded a view which was a prime consideration of Mr. Meharg's decision as to the site for construction of his own dwelling. 45 In my opinion, as raised with counsel at the hearing of the matter, there is a more fundamental problem with the approach of the primary judge. The question of whether proceedings would have been brought in any event, even if the 1995 breach had not occurred, is a hypothetical question, and in my opinion the principles laid down in Malec v. J.C. Hutton Pty. Limited (1990) 169 CLR 638 at 642-3 indicate that it was not a matter for definite decision one way or another as to whether this event would have occurred. The relevant passage from Malec is as follows: When liability has been established and a common law court has to assess damages, its approach to events that allegedly would have occurred, but cannot now occur, or that allegedly might occur, is different from its approach to events which allegedly have occurred. A common law court determines on the balance of probabilities whether an event has occurred. If the probability of the event having occurred is greater than it not having occurred, the occurrence of the event is treated as certain; if the probability of it having occurred is less than it not having occurred, it is treated as not having occurred. Hence, in respect of events which have or have not occurred, damages are assessed on an all or nothing approach. But in the case of an event which it is alleged would or would not have occurred, or might or might not yet occur, the approach of the court is different. The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high - 99.9 per cent - or very low - 0.1 per cent. But unless the chance is so low as to be regarded as speculative - say less than 1 per cent - or so high as to be practically certain - say over 99 per cent - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability. 46 Mr. Van Aalst frankly conceded that this proposition was not put to the primary judge, and Mr. Lindsay submitted that accordingly this Court could not give effect to it. 47 However, in my opinion it was an error for the primary judge to find as a matter of fact that, even without the 1995 breach of duty, the Land & Environment Court proceedings and appeal would definitely have occurred, and to assess damages on that basis. That error is challenged in ground 8(h) of the Grounds of Appeal. In my opinion, this Court should give effect to that ground of appeal and correct the error, apply the correct principle, and avoid so far as possible any injustice to the Council arising from the circumstance that this submission was not put below. 48 In my opinion, having regard to the competing contentions to which I have referred, based on Mr. Meharg's letter of 24 November 1995, and having support also from other parts of the evidence, there is an appreciable chance that, if the Council had not committed its 1995 breach, the Land & Environment Court proceedings would have been avoided. There is a chance that Mr. Meharg would not have felt sufficiently strongly about the initial small construction to take proceedings. There is a chance that, if all that had been erected was the original small house, the appellants would have acceded to a demand to remove it. There is a chance that, if given correct advice, the appellants may have been able to obtain a development approval and building approval such as would have at least given the appellants a satisfactory alternative to the complete removal of the structure. There is even a very small chance that, assuming proceedings were taken, the discretion of the court may have been exercised differently if it was only the original structure which was in place. In my opinion, consistently with Malec, the appellants should in substance have been compensated for being deprived of these chances. 49 In my opinion, when one takes into account all the contingencies, and also has regard to the disadvantage that may flow to the Council through this matter not being properly ventilated below, the appropriate course is to substitute, for the figures adopted by the primary judge, a figure of one-half of the $30,000.00 of the expert's fees and one-half of the $40,000.00 legal costs, totalling $35,000.00. The primary judge adopted $4,000.00 and $2,000.00 respectively, and accordingly there will be an increase in the verdict of $29,000.00. In my opinion, it would be fair to award interest on that increase from the date of the Court of Appeal decision, that is 30 September 1998. In arriving at this figure, I have taken into account the possible impact of the contingencies in relation to other heads of damage, as well as the one immediately under consideration. CONCLUSION 50 Accordingly, the orders which I propose are as follows: 1. Appeal allowed to the extent of increasing the judgment in favour of the appellants by a sum of $29,000.00 plus interest on that amount from 30 September 1998. 2. Appeal otherwise dismissed. 3. No order as to the costs of the appeal. 51 In my opinion, the last order is appropriate, having regard to the limited success of the appeal, and the circumstance that it has succeeded on the basis of a principle not put below and not put to this Court until raised by this Court. The same considerations also mean that the costs order below should not be altered. 52 DAVIES AJA: I agree with Hodgson JA. 53 PEARLMAN AJA: I agree with Hodgson JA. ********** 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.