Easter Investment Group Pty Ltd v E & S Projects Pty Ltd Trading as the Cemento Group

[2023] NSWDC 64

District Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Easter Investment Group Pty Ltd and Anor v E & S Projects Pty Ltd Trading as the Cemento Group & Ors [2023] NSWDC 64

Hearing dates:

28, 29 and 30 November 2022, 8 March 2023

Date of orders:

22 March 2023

Decision date:

22 March 2023

Jurisdiction:

Civil

Before:

Weber SC DCJ

Decision:

(1)   That there be judgment for the plaintiff against the defendants jointly and severally in the sum of $134,611.

(2) Interest thereon at the rates pertaining from time to time pursuant to the provisions of section 100 of the Civil Procedure Act

(3)   Order that the defendant pay the plaintiff's costs.

Catchwords:

Damage to Property – Neighbouring properties - Damage to neighbouring property from excavation of neighbouring building – Where there are questions of causation of damage

Legislation Cited:

Evidence Act 1995 (NSW)

Civil Procedure Act

Cases Cited:

Jones v Dunkel (1959) 101 CLR 298

Category:

Principal judgment

Parties:

First Plaintiff: The Easter Investment Pty Ltd
Second Plaintiff: C.B. Enterprises Int. Pty Ltd
First Defendant: E & S Projects Pty Ltd
Second Defendant: Stephen Fabrizio
Third Defendant: Corus No 1 Pty Ltd
Fourth Defendant: Corus No 2 Pty Ltd
Fifth Defendant: Corus No 3 Pty Ltd
Sixth Defendant: Corus Group Pty Ltd
Seventh Defendant: Cemento Constructions Pty Ltd
Eighth Defendant: Enzo Salsano

Representation:

Counsel:
Plaintiffs: Mr O’Connor
Defendants: Mr Auld

Solicitors:
Plaintiffs: Sarina Ann Jackson
Defendants: William Cotsis

File Number(s):

2020/195671

Publication restriction:

None

JUDGMENT

Introduction

1. The Plaintiffs are the registered proprietors of the property known as 1 John Street, Waterloo.

2. The third to sixth defendants are the registered proprietors of the adjoining property, which is known as 169 Botany Road, Waterloo.

3. The first and seventh defendants are construction companies. The second defendant is a director of the fourth to seventh defendants. The eighth defendant is the director of third defendant.

The Demolition

4. In 2018 the defendants were proposing to completely demolish 169 Botany Road and rebuild. As the property and 1 John Street were 100 years old and adjoining, the plaintiffs were concerned that there would almost inevitably be damage to 1 John Street, occasioned by the demolition. In addition, it was clear that in order to affect the demolition and redevelopment of 169 Botany Road, the builders would require access to 1 John Street.

The Deed

5. In order to provide for this access, and to deal with any damage which might occur to 1 John Street, the parties entered into a deed styled “the Adjoining Owners Deed” (“The Deed”).

6. In addition to the respective owners of the properties, the first and seventh defendants were parties to the Deed, as being construction companies who were undertaking the demolition and the rebuild.

7. All defendants to the proceedings therefore are parties to the Deed. The defendant parties are jointly and severally liable as covenantors under the provisions of the Deed.

8. It is not necessary to further describe the Deed beyond noting that at CB[56] part 5.l(c) the Deed notes that the contractor must;

"carry out the Agreed Activities in a safe, proper and workmanlike manner, exercising due skill care and diligence, and taking all such precautions as are necessary or prudent to;

a) Prevent nuisance and unreasonable noise, disturbance and inconvenience to the occupiers and uses of the Adjoining Owners Land; and

b) Without limiting clause 7, prevent any damage to any part of the Adjoining Owner's Land caused by the Agreed Activities;

9. At CB[S8] part 6.1 the parties agreed that;

"The Covenantors jointly and severally indemnify the Adjoining Owner against any claim damage, expense, loss or liability suffered or incurred by the Adjoining Owner in respect of:

a) Damage to any real or personal property; and (emphasis supplied)

b) Injury to, or death of, any person,

The Contractors jointly and severally further indemnify the Adjoining Owner against any claim, damage, expense, loss or liability suffered or incurred by the Adjoining Owner in respect of any breach of this deed by the Contractor and/or Principle."

10. At CB[S9] the deed requires the contractor to make good at 7.2;

"without limiting the Contractors obligation to make good under this clause 7, the Contractor must upon completion of the Agreed Activities or the earlier termination of this Deed;

a) Remove any materials, plant and equipment belonging to the Principle; Contractor, Authorised User or Approved Contractor from the Adjoining Owner's Land; and

b) Fully repair and make good any damage caused to the Adjoining Owner's Land in the Course of complying with clause 7.2(a) above."

Mr Babazogli

11. The plaintiffs engaged Mr Alfredo Babazogli to advise them in relation to issues arising out of the demolition and redevelopment of 169 Botany Road. Mr Babazogli is a builder of 42 years’ experience, in both residential and commercial construction. He has held a personal builder’s licence since August 1986. He is the principal of the company AFPA Building Services Pty Ltd (“AFPA”).

12. Pursuant to his retainer, Mr Babazogli conducted a series of site inspections for the purpose of ascertaining the damage caused to 1 John Street by the demolition. He then proposed remedial work to the property in order to both limit the damage, and rectify it.

The Dilapidation Reports

13. Pre-dilapidation and post dilapidation reports were prepared in relation to the 1 John Street demolition. Following these reports, Mr Babazogli undertook remedial works to 1 John Street, pursuant to the Deed, in relation to damage to the property which had become evident following the demolition. In so doing however, Mr Babazogli indicated that the post dilapidation report did not identify all of the structural damage and cracks caused by the demolition. This was so as complete access to the property was not available during both inspections.

14. On 17 April 2019 Mr Babazogli, through AFPA, sent an invoice to the defendants for remedial works which he had completed. This invoice was met by the defendants.

The Unpaid Invoice

15. Subsequent to the initial remedial works, further damage to the 1 John Street was detected by Mr Babazogli. A further agreement was reached on 13 September 2019, pursuant to which the defendants would pay an amount of $9,542.50 to rectify the identified damage "within 7 days of an invoice being provided to Cemento Constructions." at CB[77] at (3).

16. The remedial works were completed by AFPA, however, despite the defendants’ promise to pay, it is common ground that the amount sought in the invoice was never paid. The sum of $9,542.50 remaining unpaid forms part of the plaintiff’s damages claim in the proceedings (“The Unpaid Invoice”).

The Fourth Inspection

17. Subsequently to the damage outlined in the Unpaid Invoice, AFPA undertook a further inspection of 1 John Street. This occurred on 5 December 2019. Following that inspection, AFPA issued a report to the plaintiffs' outlining remedial issues yet to be resolved by the defendants (CB[183]). The defects identified were:

18. Cracking of the slab in the basement carpark and movement of the property due to the lack of underpinning and over excavation,

19. Movement of the pipework to the grease trap,

20. Water leaking into the basement carpark from the pt floor balcony wall in the south east corner,

21. Construction rubbish left in box gutter on the roof above the rear deck,

22. Further construction rubbish left in the backyard,

23. Remove render and paint from decking and sand boards,

24. Remove rubbish from box gutter and install "Z" flashing, remove all paint and render.

The Statement of Claim

25. Plaintiffs sue the defendants on the Deed. They have also brought a case in nuisance. At the end of the day however the plaintiff's case has been confined to a case under the Deed.

26. In addition to the unpaid invoice, the plaintiff sought damages for rectification of the following defects:

1. Items 1 & 2- Rectify grease trap and garage door concrete slab

2. Item 3 - Rectify crack to fa ade, all damage & flaking paint for repainting

3. Item 4- Rectify construction debris and make good were required

4. Item 5- Remove over flashing, debris, make good to roof sheets and wall and install Z flashing

5. Item 6- Rectify cracked balustrade at rear and make good

6. Item 7- Remedy water leak and consequential damage caused by the water entry into the garage

7. Item 8- Remove and adjust boardroom stacker doors

8. Item 9- Rectify gas cage to be free standing

Defendant’s Concessions

27. On the first day of the hearing the defendants conceded all of of the items to which I have just referred other than Items 1 and 2. During the hearing, the parties thankfully agreed on costings for all of the remedial work the subject of the plaintiff's claim, including the costs of the contentious items. This agreement was reached on an “if found” basis, in relation to the contentious items.

The Contentious Items

28. The concessions of the defendant, to which I have referred, led to the consequence that the sole issue before the Court was as to whether the damage to the garage concrete slab of 1 John Street, and the grease trap contained in it, is causally linked to the demolition. These two issues have been justifiably conflated by the parties in the conduct of the proceedings, as they both involve movement of the slab in the garage.

29. I should also add that it became common ground of the proceedings that there had in fact been movement in the slab (TP 143.25)

Causation

30. Accordingly, the proceedings came down to a determination of an issue of causation. The defendants deny that the defects in the slab are caused by the demolition works. The plaintiffs attributed the defects to these works.

31. It is to that issue therefore that I now turn.

The Plaintiffs Thesis as to the Cause of the Defects

32. The plaintiff’s thesis as to the cause of the cracking to the slab, and consequent damage to the grease trap, is based on the evidence of Mr Babazogli. This thesis is based first on what Mr Babazogli observed, and his expert opinion derived from his observations.

33. The demolition work commenced in January 2018, and was completed by February 2018 (Easter affidavit 22 April 2021 CB 25). The first damage to John Street was discovered in October 2018. Further damage was discovered in August and September 2019 (Easter affidavit paragraph 12)

34. Mr Babazogli first inspected the property post demolition, on 12 February 2018. In his affidavit of 31 August 2021, Mr Babazogli gave evidence that he noticed that over excavation had occurred along the south wall of 1 John Street, and at the south east corner of the property [14]. He provided photographs which are annexed to his report which to my mind, demonstrates this over excavation quite vividly (CB 185- 88).

35. Mr Babazogli in his affidavit of 31 August 2021 gave the following evidence:

“It was clear that the excavation work conducted by the Cemento Group had undermined the foundation of the Property. As a result, the structural integrity of the Property had been jeopardised. I recall that during the First Inspection, I said words to the following effect to Mr Mulligan:

Me:    "You have over excavated and undermined the foundation of the building at 167 Botany Road. You should immediately backfill and build up the level of the sand to the top of the existing footing and leave it until the builder determined what underpinning and piling solution would be used." [17]

Based on my experience, the builder of the Adjacent Property would have needed to use underpinning and sheet piling as part of their new construction process. If done correctly and promptly, this process would have reduced the damage to the Property. [18]

Based on my experience, in a situation like this, underpinning and sheet piling procedures should have been specifically designed and inspected by the builder's consulting engineers. By backfilling correctly and compacting the sand adequately, it would have reduced further settlement of the Properly. [19]

During my inspection on 12 February 2018, I observed that the backfilling conducted was inadequate. The backfilling should have been compacted and extended to the whole width of the site. I refer to the photos taken on 1 February 2018 at pages 14 to 15 of Exhibit "AB-1". The photos show that the backfilling conducted by the builder was loose and not compacted. In addition, the extent of the backfill was too small and failed to cover the southern wall.” [20]

36. The reference to Mr Mulligan is a reference to the developer’s Project Manager.

37. Mr Babazogli goes on to give evidence:

“On 5 December 2019, I attended the Property to conduct a further inspection in relation to the damage and cracks discovered on 22 October 2018 (the "Fourth Inspection"). During the Fourth Inspection, structural damage was discovered, included significant cracks on the concrete slab of the Property's basement carpark. Movement of the pipework of the Property's grease trap was discovered and had damaged the Property's pipework. In addition, I discovered that water was also leaking from the first-floor balcony wall in the southeastern corner into the basement carpark of the Property. Water was leaking into the basement from the cracks in the southern wall and southeastern corner of the Property.” [34]

Based on my knowledge and experience in the building industry, I believe that the above damage and cracks were directly caused by the construction work conducted at the Adjacent Property. In particular, over excavation and insufficient underpinning would have caused the lack of support under the southern wall and southeastern corner of the Property, which in turn would have caused the damage and crack in the Property.” [36]

“I believe that the damage to the Property could have been avoided by not over excavating when the demolition and initial foundation work was undertaken.” [38]

“If the over excavation was noticed or required, the Cemento Group, in my opinion, should have underpinned the Adjacent Property in the correct sequence and procedures as detailed by their structural engineer. In my opinion, they should not have over excavated to the extent they did. It should only be done in small areas. Underpinning should have been done every 3 to 4 metres going down and in each section. Then sheet piling should be done accordingly thereafter.” [39]

“The Cemento Group's engineer should have set out the amount to be excavated and the areas to be underpinned. The reason for this failure may be that the Cemento Group did not consult an engineer, did not follow the engineer's directions or failed to supervise their excavating contractors. I believe that sheet piling of the Adjacent Property should have been carried out whilst the ground level was above the foundation of the Property. This would have minimised or eliminated any cracks.” [40]

38. In summary, therefore, Mr Babazogli gave evidence that in his view, the damage to the then slab and grease trap were attributable to the over excavation and the lack of underpinning, which caused a loss of support to the southern wall of 1 John Street and the south-east corner of the property.

39. The defendant's called no evidence from anybody on the ground at the time of the demolition, to dispute Mr Babazogli’s evidence either as to the extent of over excavation, or as to his view as to how the over excavation should have been remedied. The defendants also failed to call anyone to give evidence as to what steps, if any, that the defendants in fact took to deal with the over excavation.

40. This evidence was clearly capable of being obtained from Mr John Mulligan, who, as I have indicated was Cemento Constructions’ Pty Ltd (the 7^th Defendant) Property Manager, Mr Enzo Salsano Cemento’s Site Manager, and holder of a building license, together with Cemento’s engineer. None were called. The plaintiff submitted that in the circumstances I should draw an inference that their evidence would not have been helpful to the defendant's case (Jones v Dunkel (1959) 101 CLR 298).

41. As there was no explanation for the failure to adduce such evidence, I believe that it is appropriate to draw such an inference, and I do draw it.

The Defendant’s Attacks on Mr Babazogli’s Expert Evidence

42. The defendants attacked Mr Babazogli’s expert opinions as not being based on sufficient demonstrated expertise. This submission in turn, was based on the fact that, unlike the defendant's expert, Mr Thanopolous, Mr Babazogli was not a structural engineer.

43. I do not consider this criticism of Mr Babazogli’s expert evidence to be a valid one. I do not consider that it is necessary to have a qualification in structural engineering in order to assess the over excavation which Mr Babazogli observed, and to provide guidance as to how to remedy the effects of that over excavation.

44. Mr Babazogli is a builder of impressive practical building experience, he is in my view, well qualified to express the opinions which he has, which opinions were reliant upon his first-hand experience of the over excavation around the footings of 1 John Street.

45. The defendants next attacked Mr Babazogli’s evidence on the basis of his independence. That submission was based on the fact that as Mr Babazogli readily admitted, he had an ongoing business relationship with Mr Easter, the controlling mind of the plaintiffs, having provided his services in respect of other properties owned by him (or by entities which he controlled).

46. In my view, this so called lack of independence could only go to the weight to be attributed to Mr Babazogli’s evidence.

47. I do not find that the commercial relationship between Mr Easter and Mr Babazogli in any way detracts from either Mr Babazogli’s evidence as to matters of fact, or in the expression of his expert opinion.

48. The defendants made other criticism of the plaintiff’s case which I do not believe that I need to deal with in these reasons. The submissions at one stage went so far as to submit that the plaintiff had failed to prove the existence of damage to the garage slab and grease trap. I reject that submission.

The Defendant’s Thesis as to the Cause of the Defects

49. The defendant's thesis as to the cause of the cracking in the garage floor slab was, in summary, that the cracking was quite unrelated to the demolition works, and that it was simply a coincidence that the cracking became evident relativeky shortly after that excavation.

50. In advancing this thesis, the defendants relied heavily on the expert evidence of Mr Con Thanopolous, a structural engineer.

51. Mr Thanopolous in fact advanced two separate theories to explain the cracking in the ground floor slab.

52. His first theory was based on a partial blockage of the mouth of a stormwater pipe, which feeds onto the street outside 1 John Street. This blockage is caused by part of the outlet being obstructed by the bitumen road surface. Mr Thanopolous’ thesis is that this partial blockage of storm water egress caused water to backup into the stormwater pipe to such an extent that it overflowed, flooding the garage. The theory proceeds that flooding in turn caused subsidence, which went on to cause the slab cracking (“The Stormwater Thesis”).

53. I do not accept the Stormwater Thesis, indeed I find it to be completely lacking in foundation. I have formed this view for a number of reasons. First, the evidence shows that the partial blockage of the stormwater pipe predates 2014, yet the cracking did not occur until 2019, a date coincidentally close in time to the excavation works, but distant in time from the first partial blockage of the stormwater pipe (whenever that occurred). Secondly, there was no evidence that the garage in fact ever flooded. Indeed, it was never put to Mr Easter, who was present at 1 John Street on a regular basis, that such flooding occurred.

54. In my view, the fundamental problem with Mr Thanopolous’ Stormwater Thesis is that there is no identifiable evidentiary basis for the thesis. In fact, the cross examination of Mr Thanopoulos demonstrated that he knew very little as to 1 John Street’s storm water drainage (see TP.144.6 and onwards).

49. For example, Mr Thanopolous gave the following evidence at hearing;

1. He did not insert a camera into the pipes to see what they were connected to, at TP.144.10.

2. He had no idea if the storm water pipes were connected to anything, at TP.144.20.

3. He had no schematic of the storm water drainage system from council or the owners of the property, at TP.144.14 and TP.145.19.

4. Had no idea if there were alternative storm water outlets at, TP.145.9.

5. Had no idea how much any hypothetical storm water flow would be impeded, at TP.146.4.

6. Had done no invasive testing to substantiate the saturated substratum allegedly caused by storm water at, TP.146.34.

7. Had done no testing at all to substantiate his theory at, TP146.50.

8. Had never seen any water coming out of the pipes at, TP145.47.

9. Notwithstanding the pipes had been partially blocked from 2014 (per the picture at CB[26]), it was purely coincidental that damage to the property manifested itself contemporaneously to the demolition of the adjoining structure at, TP148.37.

10. Accepted that he did not know if the slab was reinforced which would intern have a bearing on the viability of his saw-cut theory at, TP.l52.31.

11. Had not considered Mr Babazogli's affidavit evidence only his earlier report at, TP155.1

56. In addition to these matters, Mr Thanopoulos accepted that he did not know how much water the pipes could hold before they hypothetically backed up:

Q. Isn't it, therefore, ergo, you don't know how much rain would have to fall before the pipe backed up so much that it would start to flood the garage?

A. I agree with that. (TP.156.12)

57. I find the Stormwater Thesis to be without any foundation, and I reject it.

58. The second thesis advanced by Mr Thanopolous involved the proposition that saw cuts to the garage slab, undertaken by the plaintiff, were the cause of the slab cracking (“the Slab Cut Thesis”). This thesis, in my view, suffered from deficiencies of a similar nature to the Stormwater Thesis, as in summary, Mr Thanopolous had conducted no tests on the structure of the slab, and thus knew little about it. For example, he did not know whether the slab was steel reinforced. As a consequence, the Slab Cut Thesis, in my opinion also lacked an evidentiary foundation.

59. Mr Brincat, a civil engineer who gave evidence for the plaintiff, rejected the Stormwater Thesis and the Slab Cut Thesis, as explaining the slab damage. He noted that there were certain cuts in the slab which did cause some subsidence in the floor slab, however, as he pointed out this subsidence was localised, and was to be found only at the garage roller door entry. This was not the cracking that was the subject of the proceedings.

60. Another problem with Slab Cut Thesis to my mind, is that like the Stormwater Thesis, in order to explain the slab cracking, it required flooding of the garage, an event about which there is no evidence. Mr Brincat also points out that sand loss (the underlying soil in the area), which should be the product of the saw cut thesis is not evident on the footpath, or between the cracks in the slab.

61. Mr Thanopolous also relies on the fact that the control joints in the slab were not sealed. This was conceded by Mr Brincat who opined however, that this was standard practice in the construction of a garage slab which was inside a building, and thus not exposed to the outside elements.

62. Finally, in rejecting the Slab Cut Thesis, Mr Brincat points out that the slab is in fact steel reinforced. He denied that cutting of the reinforcement would cause the slab to fail. His evidence was that rusting of the reinforcement and concrete cancer, following cutting of the reinforcement, would take some 30 to 40 years to eventuate (TP129.20 -129.30). This is in marked contrast to the length of time between the alleged cutting of the slab by the plaintiff, and the emergence of the slab cracking. Mr Brincat said that the cutting of the reinforcement would not result in the slab cracking within a time frame of one to two years (TP129.36-129.45).

63. I do not find the Slab Cut Thesis to be at all persuasive. To my mind it singularly fails to demonstrate a causal link between the cutting and the cracking of the slab. Like the Stormwater Thesis, the Slab Cut Thesis to my mind is merely speculative.

64. As will be apparent from the foregoing, I accept Mr Babazogli’s and Mr Brincat's evidence and opinions on the ultimate question of causation. I do so primarily for the reasons which I have outlined above. I am reinforced in my view however, by what I consider to be the objective facts.

65. The two buildings have existed in close proximity to each other for over 100 years. They have thus provided support to each other for over 100 years. One building was completely demolished and considerable excavation was made below the level of the other building’s footings, and considerable damage to the remaining property (1 John Street) was occasioned. This is now accepted by the defendants.

66. In the circumstances it seems to me to be objectively likely that this is also the explanation for the existence of the slab cracking.

Summary of Conclusion on Causation

67. I am comfortably of the view that Mr Babazogli’s theory of causation of the slab cracking, is more reliable than that of Mr Thanopolous’. Mr Babazogli saw the excavation shortly after it occurred. Having observed what he understandably considered to be over excavation, he told the defendants what they should do in an attempt to remedy that over excavation. In that regard it is important to recall that no one, who was on the ground at the time of the excavation for the defendants, was called to either contradict Mr Babazogli as to his assertion of over excavation, nor his advice as to rectification which should be undertaken. In addition, no witnesses on behalf of the defendant came forward to outline what if any remedial steps were undertaken as a result of Mr Babazogli’s complaint of over excavation.

68. Mr Thanopolous’ two theses in my view, are, with great respect, exercises in educated guesswork as to the cause of the slab cracking. Neither thesis advanced by Mr Thanopolous has any objective foundation, and there was no testing or experimentation undertaken by him which demonstrates the cause of the cracking.

69. Moreover, for reasons which I have previously explained, Mr Babazogli’s thesis as to causation in my view is heavily favoured by the inherent probabilities, given the temporal proximity to the over excavation, and the damage to the slab.

The Grease Trap

70. As to the issue of the grease trap, on my findings the issue becomes otiose. By this I mean to convey that it seemed to be accepted by the parties, that if the slab needed to be replaced, as I find that it does, that the remedial works would in inevitably required the replacement of the grease trap.

71. I should add however, that in any event, I accept that the plaintiffs have established the existence of damage to the grease trap caused by movement in the sand beneath the slab, which in turn was caused by the over excavation. Mr Babazogli gave evidence as to this (see TP.107.1 and following). The plaintiff also relied on a quotation from Mr Toterdill, a plumber who inspected the damage. Mr Toterdill’s quote (which was accepted by the defendants costing expert) narrates as follows:

“Grease Trap Rectification

Found that the outlet to form the grease trap is holding 40mm of water in the discharge line that runs to the sewer. The pipe holds water for 3 metres.

Conduct measurement of pipe work and grease trap, found that the pipe work can’t be altered to retrieve the Required fall fall as per AS 3500 and keep the grease trap in operation. The only way to correctly rectify is to remove the tank and install a new one.”

72. The defendants submit that as Mr Toterdill was not called, I should draw an adverse Jones v Dunkel inference. I do not accept that this is correct. Mr Toterdill’s invoice was admitted into evidence without objection, and as such it is in evidence for all purposes (s 60 of Evidence Act 1995 (NSW)). There is thus no basis for inference that the plaintiff feared calling Mr Toterdill (See Jones v Dunkel at P320-321 per Windeyer J), as such no occasion for a Jones and Dunkel inference arises.

Conclusion

73. The plaintiffs were agreed that if I came to the conclusion that the defendants are liable to the plaintiff for loss occasioned by dint of the cracking to the concrete slab and damage to the grease trap, that it would be appropriate that I enter judgment for the plaintiff in the sum of $134,611.

Costs

74. Costs should follow the event.

Orders

1. That there be judgment for the plaintiff against the defendants jointly and severally in the sum of $134,611.

2. Interest thereon at the rates pertaining from time to time pursuant to the provisions of section 100 of the Civil Procedure Act

3. Order that the defendant pay the plaintiff's costs.

**********

Amendments

22 March 2023 - Typographical error

Decision last updated: 22 March 2023