Supreme Court New South Wales Medium Neutral Citation: Stolfa & Anor v Owners Strata Plan No. 4366 & Ors [2011] NSWSC 1473 Hearing dates: Friday 25 November 2011 Decision date: 25 November 2011 Jurisdiction: Equity Division Before: Brereton J Decision: Judgment for the third defendant against the plaintiffs for $22,827. Dismiss the defendants' notice of motion to vary the judgment. Second and third defendants to pay two-thirds of plaintiffs' costs of the inquiry into the plaintiffs' damages. Catchwords: CONSEQUENTIAL ORDERS - Inquiry into damages - interlocutory injunctions restrain defendants from engaging in certain building works in strata block - plaintiff provides usual undertaking as to damages - final judgment does not continue interlocutory relief - third defendant contends suffered loss consequent upon interlocutory orders as unable to live in property - onus on party seeking to enforce undertaking to establish damage sustained but for injunction - basis for sustaining injunction after certain date was removed - third defendant entitled to damages from such date. PRACTICE AND PROCEDURE - Application by defendants to vary judgment - orders made that second and third defendants pay strata corporation fixed sum to repair common property - actual costs of repairs less than amount determined on inquiry - judgment for a fixed sum rather than order for indemnification given to minimise risk of vexation and inconvenience attendant upon indemnity - no basis to recall judgment. Legislation Cited: (NSW) Uniform Civil Procedure Rules 2005, r 36.17 Cases Cited: Air Express Limited v Ansett Transport Industries (Operations) Proprietary Limited (1981) 146 CLR 249 Doherty v Liverpool District Hospital [1991] 22 NSWLR 284 Gilchrist v Estate of Late Taylor [2004] NSWCA 476 Newmont Yandal Operations Pty Ltd v J Aron Corporation and the Goldman Sachs Group Inc & Others [2007] 70 NSWLR 411 Stolfa v Owners Strata Plan 4366 & ors [2009] NSWSC 589 Stolfa v Owners Strata Plan 4366 & ors [2010] NSWSC 1507 Category: Consequential orders Parties: Veronica and Raffaele Stolfa (plaintiffs) Owners Strata Plan 4366 (first defendant) John Hempton and Joanna Kalowski (second defendants) Stephen Hempton (third defendant) Representation: Counsel: M Ashurst SC (plaintiffs) P Gray SC with P Koroknay (second and third defendants) Solicitors: W G McNally Jones Staff (plaintiffs) David Le Page (second and third defendants) File Number(s): 2007/256199 Judgment (ex tempore) 1HIS HONOUR: On 27 August 2007 Gzell J, upon the plaintiffs giving the usual undertaking as to damages, made orders as follows: 1. The second and third defendants, whether by themselves, servants or agents, be restrained from carrying out any further renovation and/or construction work on common property of the first defendant, specifically: a. In the cavity area excavated beneath the porch of Unit 1 and the old stairs, where a concrete slab has been poured. b. The proposed brick wall on patio area of Unit 3. 2. Until 4 pm on 18 September 2007, the second and third defendants, whether by themselves, servants or agents, be restrained from any renovation and construction work which incorporates common property of the first defendant into their lots. 3. Until 4 pm 18 September 2007, the second and third defendants, whether by themselves, servants or agents, be restrained from using common property for a purpose not approved by the Owners Corporation, specifically: a. the cavity area excavated beneath the porch of Unit 1 and the old stairs, where a concrete slab floor has been poured. 2Those orders were varied by Palmer J on 18 September 2007, who then made orders as follows: 1. The Second Defendant be restrained from carrying out any renovation and construction work which interferes with, obstructs, damages or encroaches upon common property or in any way incorporates common property into the lot area of Unit 1, including but not limited to: a. Construction works affecting the cavity area excavated beneath the porch and the old stairs of Unit 1. 2. The Third Defendant be restrained from carrying out any renovation and construction work which interferes with, obstructs, damages or encroaches upon common property or in any way incorporates common property into the lots area of Unit 3, including but not limited to: a. Constructing any brick walls which enclose or divide the patio area of Unit 3; b. Demolishing any internal walls in Unit 3. 3. The Second Defendant be restrained from using common property for a purpose not approved by the Owners Corporation, specifically the cavity area identified in 1a. 3Those orders were further varied by Windeyer J on 9 October 2007, who then made orders noting that the undertaking as to damages was continued (which it was in any event by operation of the rules), as follows: 1. The Third Defendant be restrained from carrying out any renovation and construction work which interferes with, obstructs, damages or encroaches upon common property or in any way incorporates common property into the lot area of Unit 3, by: a) Constructing any brick walls which enclose or divide the patio area of Unit 3; b) Demolishing any internal walls in Unit 3. 2. Note the undertaking of the Second Defendants not to use that part of the cavity area under the front patio which is on common property for any private or special purpose, without the consent of the First Defendant. 4The trial commenced before me on 30 April 2008, and continued on 1 May, 31 July, 1 August, and 28 October that year. On 26 June 2009, I gave judgment in Stolfa v Owners Strata Plan 4366 & ors [2009] NSWSC 589, making orders as follows: (1) Declare that the Second Defendants are liable to compensate the Plaintiffs for the reasonable cost of repairing damage occasioned to Unit 2 by the performance of building works in about Unit 1. (2) Declare that the Third Defendant is liable to compensate the Plaintiffs for the reasonable cost of repairing damage occasioned to Unit 2 by the performance of building works in about Unit 3. (3) Order that there be an inquiry as to the damages referred to in orders 1 and 2, and that until further order the inquiry proceed before me. (4) Order that the proceedings be otherwise dismissed. 5One consequence of that judgment was that no injunctive relief of the type that had been granted on an interlocutory basis was continued. 6By notice of motion filed on 8 March 2010, the third defendant Stephen Disco Hempton seeks an inquiry pursuant to the plaintiffs' undertaking as to damages as to the loss and damage suffered by the third defendants as a result of the interlocutory injunction. 7Mr Hempton says that as a result of the interlocutory orders, he was unable to complete the work to Unit 3 or the common property referred to as the Lot 3 veranda area, as a result of which he and his family were compelled to continue to live in a flat at Rose Bay which he owned, which would otherwise have been let for rent. He says that he expected to complete the renovations and move in to Unit 3 by 1 June 2008, but was unable to do so because of delays occasioned by the injunctions until 22 October 2009. 8The evidence establishes, and it is not controversial, that the rental value of the Rose Bay property was $680 per week for the period June 2008 to 30 June 2009, and $690 per week from July 2009 to October 2009. 9In Air Express Limited v Ansett Transport Industries (Operations) Proprietary Limited (1981) 146 CLR 249, Gibbs J, as he then was, said (at 313): In the end however the question becomes one of fact: did the making of the order cause the loss? The onus of proof must, in accordance with general principles, lie on the defendant who asserts that he sustained damage by reason of the order. To order a plaintiff to pay damages where it appears that the party bound by the injunction would have acted as he did even if the injunction had not been granted, would be to give the undertaking an effect obviously not intended. The party seeking to enforce the undertaking must show that the making of the order was a cause without which the damage would not have been suffered. 10Similarly, Mason J, as he then was, said (at 325): It is no part for the purpose of the undertaking to protect the defendant against loss or damage which he would have sustained otherwise as, for example, detriment which flows from the commencement of the litigation itself. That is loss or damage which the defendant must bear himself, as he does when monetary injunction is sought or granted. Consequently, it is for parties seeking to enforce the undertaking to show that the damage which he has sustained would not have been sustained but for the injunction. 11The injunction in this case contained two elements, at least after the variation of 18 September 2007, when it was extended beyond the brick walls enclosing or dividing the patio to include also "demolishing any internal walls in Unit 3". The continuation of the order on 9 October 2007 was to similar effect. 12The issue about the internal walls in Unit 3 was one which arose from concerns as to the structural sufficiency of the proposed replacements. That was addressed by the joint expert, Mr Branch, in his report of 28 February 2008. It was the subject of questioning at the view on 30 April 2008, and cross-examination in the early stages of the trial. 13The concerns expressed by Mr Branch had pertained to the beams SB1, SB2, SB3, and SB4. 14At the trial, the plaintiffs did not press for relief in respect of the internal walls in Unit 3, as observed in the principal judgment (at [102]). This was apparently in response to having been informed by Mr Branch that those issues had now been resolved to his satisfaction. 15The plaintiff has now tendered (as PX1001) a letter from Mr Stephen Hempton to Mr Branch of 22 May 2008, apparently received on 3 June 2008, which encloses some revised engineering plans and relevantly states: Due to an oversight of the particular professional who is very sorry, we have revised the plans to include two Columns, and include the extra 180PFC welded and bolted between SB1 and SB2... ... The plans are attached to this letter as well as a certificate from a third engineer who measured the deflection taking into consideration that SB1 is the lowest weight. 16Bearing in mind the onus that the defendants bear on an application such as the present, I am not satisfied that prior to about 22 May 2008 the third defendant would have been entitled lawfully to proceed with the further construction of Unit 3. However, it seems to me that by not long after 22 May 2008, any proper basis for sustaining an injunction on that ground had been removed. It is beside the point, that no application was made in that regard at that time. A plaintiff who obtains an interlocutory injunction and gives an undertaking as to damages assumes the risk so long as that injunction remains in place. 17There is another reason for taking a view similar to that to which those considerations incline me, namely, that loss for the period up to about June should not be recoverable, but thereafter should be. That second basis, which has been addressed in the written submissions, though not orally, is that notwithstanding the interlocutory injunctions, up until the commencement of the hearing at the end of April, the evidence disclosed that Mr Hempton did continue to undertake at least some work in respect of the construction of Lot 3. While that would not necessarily on its own have led to the conclusion which I have otherwise reached, it supports the view that he should recover under the undertaking as to damages only from a period after the first nine months of its operation. In other words, it seems to me that he should not recover in respect of the first nine months for which he was kept out of the property, but should recover for the period thereafter. 18The consequence of that is that he should recover in respect of the period 1 March 2009 until 22 October 2009, from 1 March 2009 to 30 June at $680 per week, and from 1 July to 22 October at $690 per week. The second of those sums comes to $11,040, and the first to $11,786. 19On the inquiry as to damages, there will therefore be judgment for the third defendant against the plaintiffs for $22,827. Application to vary judgment 20Consequent upon the order made in paragraph 112 of the original judgment, to which I have already referred above, there was an inquiry under paragraph 3 of those orders as to the plaintiff's damages. That inquiry was heard on 15 December 2010, and I gave judgment on 23 December 2010 in Stolfa v Owners Strata Plan 4366 & ors [2010] NSWSC 1507. 21Consequent on that inquiry, I made the following orders: (1) Give judgment that the second defendants and the third defendant pay the plaintiff the sum of $77,270 (which sum is inclusive of interest from 28 April 2010). (2) Give judgment that the second and third defendants pay the first defendant the sum of $64,000 (which sum is inclusive of interest from 28 April 2010). (3) Order that by 31 March 2010 the first defendant properly maintain and keep in a state of good and serviceable repair the common property in strata plan 4366 by rectifying the defects to the common property identified in the scope of works of Mr Branch and described in Part 1 and Part 3 of the Schedule referred to in the letter from David Le Page solicitors to Mr Makin of 2 November 2010 to the reasonable satisfaction of Mr Branch, and thereby and for that purpose engage a builder other than the third defendant. 22The second order arose in circumstances described in the judgment as follows: [10] According to the orders made on 26 June 2009, this inquiry, strictly, is as to the costs of repairing damage occasioned to Unit 2 (not to the common property). To so limit it, however, would leave unaddressed what now appears a significant component of the problem, namely damage to the common property proximate to but not within Unit 2. The defendants did not oppose the court seeking to achieve a practical resolution of the issues by addressing this matter. The Hemptons and Stephen Hempton did not dispute that they were liable to indemnify the Owners Corporation in respect of its obligation to rectify damage to the common property caused by their works. ... [12] In principle, therefore, the position is: The Hemptons and Stephen Hempton are liable to compensate the Stolfas in respect of damage to Unit 2; The Owners Corporation is obliged to maintain the common property and thus to remediate any damage to the common property, albeit that it was caused by the Hemptons and/or Stephen Hempton; If the Owners Corporation struck a levy to fund such repairs, the plaintiffs would be liable for 30% of it and, because such liability has been incurred as a result of the defendants' breach of s 117(1)(a) and/or nuisance, should be indemnified by the defendants in that respect; However because the damage to the common property which the Owners Corporation is liable to remediate was caused by the defendants, they are liable to indemnify the Owners Corporation in that respect. ... [27] What then of the impact of the damage to the common property? As has been pointed out, the Stolfas have an absolutely right and the Owners Corporation an absolute liability to remediate that damage. Ordinarily, that might necessitate taking into account that the Stolfas could be liable for 30% of the cost of doing so, being their proportionate unit entitlement. But as it is uncontroversial that the defendants are liable to indemnify the body corporate in that respect, the only provision that need be made in favour of the Stolfas is allowance for the risk, vexation, inconvenience and uncertainty attendant upon the defendants giving that indemnity. As I propose to give judgment against the defendants in favour of the Owners Corporation, that minimises the risk. Nonetheless, I propose to allow 10% of the value of the body corporate works, being $6,000 (plus interest from 28 April 2010, which increases the sum to $6,400), in favour of the plaintiffs in this respect. ... [38] The Owners Corporation is obliged to maintain the common property and thus to remediate any damage to the common property, albeit that it was caused by the Hemptons and/or Stephen Hempton. However, the defendants are liable to indemnify the Owners Corporation in that respect. Accordingly, there will be judgment against the defendants in favour of the Owners Corporation for the costs of remediation of the damage to the common property. 23By notice of motion filed in court today, the defendants seek an order varying that judgment to a sum of $30,923.42, and an order that the owners corporation repay the difference of $33,076 to them. 24Evidence adduced on the motion establishes that the actual cost of the work carried out to repair the common property and consequential costs totalled $30,923.42. The consequence is that the Owners Corporation now has a surplus of $33,076 which is not needed for the purpose for which it was intended, and which can be distributed to lot owners only in accordance with their unanimous resolution and pro rata, such that the plaintiffs would obtain 30 per cent (roughly $10,000). Alternatively, if it remains in the administrative fund and is used for the general expenses of the Owners Corporation, the plaintiffs would receive a "windfall" benefit to that extent. 25The defendants have submitted that, in the absence of fraud or consent, the court can nonetheless vary the order previously made where it has had an unforeseen or unintended legal consequence, or pursuant to the slip rule [ Newmont Yandal Operations Pty Ltd v J Aron Corporation and the Goldman Sachs Group Inc & Others [2007] 70 NSWLR 411]. The court can, I accept, vary its orders in the circumstances described in Newmont Yandal . The courts can also vary orders under the slip rule where it applies [(NSW) Uniform Civil Procedure Rules 2005, r 36.17]. 26But it seems to me that in this case I deliberately gave a judgment for a fixed sum, rather than making an order for indemnification, for the reasons specified in [27] of the previous judgment: namely, to minimise the risk of vexation, inconvenience, and uncertainty attendant upon the defendant's indemnity. One consequence of that was to reduce the damages allowed on account of that risk, vexation, et cetera, in favour of the plaintiffs, in any event. 27Courts are often required to assess damages in respect of losses that have not yet materialised, or at least been quantified. This often happens in personal injuries cases where future economic loss is concerned. In such cases, even if a plaintiff dies unexpectedly shortly after the judgment, the courts treat that as one of the contingencies taken into account in the judgment, rather than authorising the matter to be reopened to reduce the damages just because they turn out to have been less [see Gilchrist v Estate of Late Taylor [2004] NSWCA 476, Doherty v Liverpool District Hospital [1991] 22 NSWLR 284]. 28The point can well be tested here by asking what would have been the case had the costs turned out to be greater, rather than less, than the sum of the award. It must have equally been open to vary it to increase it as it would be to decrease it. In those circumstances, I simply do not think it is open to the court to recall or vary its previous order in that respect. It follows that the motion to vary the judgment ought be dismissed with costs. Costs 29Generally speaking, where a plaintiff fails on several issues but ultimately succeeds in obtaining a judgment in its favour, the court does not dissect costs according to issues, nor reduce the costs award in favour of the plaintiff, unless there has been a relevant offer, to which I shall come. But, the court may depart from that position where there are substantial discrete issues that have contributed in a significant way to the overall costs. 30In this case, the fundamental position is that the plaintiffs succeeded in obtaining an award for the benefit either of the plaintiffs or the third defendant of $141,270. Of the issues argued however, most, though not all, were resolved in favour of the defendants. 31Notably, a substantial part of the hearing on the inquiry as to damages was occupied by a disputed attempt to adduce further evidence on which the plaintiffs failed. It is likely that, had the issues on which the plaintiff failed, including the attempt to adduce further evidence, not been argued, then not only that inquiry, but also the inquiry on the undertaking as to damages, would have been finalised in December last year, and the necessity for the further hearing today averted. For that reason, some significance attends the measure of success that the defendants had on the issues argued on the inquiry. 32So far as the offer is concerned, the fundamental question is whether it is a relevant offer. Ultimately, it offered the plaintiffs alone, rather than the plaintiffs and the first defendant, a sum of $140,000. Both in the fact that the offer was to the plaintiffs alone, and in the fact that the sum was $140,000 on 29 July 2010, some five months before judgment, the offer was more favourable to the plaintiffs than the judgment. So far as the $140,000 is concerned, that conclusion is reached once one allows for the interest component of the judgment that accrued after 29 July 2010. 33But the offer was expressed to include a term that each party pay its own costs of the inquiry as to damages. First, that makes the offer very difficult to compare with the result. Secondly, it is for that very reason that the rules in respect of formal filed offers of compromise provide they cannot contain such a provision. Thirdly, once one takes into account that term, I think it can be concluded that the offer was not more favourable for the plaintiffs than the amount ultimately obtained. Therefore, I do not think it cannot be regarded as a relevant offer for those purposes. 34The result, it seems to me, is that the plaintiffs should have some, but not all, of their costs. 35Bearing in mind the impact of the issues on which the plaintiff failed and potentially requiring a further day of hearing, and the fact that much of the evidence adduced however would have been required in any event, the appropriate order is that the second and third defendants pay two-thirds of the plaintiffs' costs of the inquiry as to damages. 36My orders are as follows: (1) Give judgment for the third defendant against the plaintiffs for $22,827. (2) Order that the plaintiffs to pay the third defendant's costs of the motion for the inquiry in respect of the third defendant's damages under the plaintiffs' undertaking as to damages. (3) Dismiss the defendants' notice of motion filed in court on 25 November 2011 to vary the judgment, with costs. (4) Order that the second and third defendants pay two-thirds of the plaintiffs' costs of the inquiry into the plaintiffs' damages. ********** 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. Decision last updated: 17 January 2012