Muirhead v Kingborough Council (No 2)
[2000] TASSC 127
•15 September 2000
[2000] TASSC 127
CITATION: Muirhead v Kingborough Council (No 2) [2000] TASSC 127
PARTIES: MUIRHEAD, Robert John Barker
MUIRHEAD, Angela Kathleen
v
KINGBOROUGH COUNCIL
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: 1424/1996
DELIVERED ON: 15 September 2000
DELIVERED AT: Hobart
HEARING DATE: 27, 28 July 2000
JUDGMENT OF: Cox CJ
CATCHWORDS:
Damages - Measure and remoteness of damages in actions for tort - Measure of damages - Damage to land and buildings - Negligence of council causing landslip - Method of assessment - Notional value of property as at the date of trial to be compared with actual value of property - Nature of damages recoverable for vexation and distress.
Wollongong City Council v Fregnan [1982] 1 NSWLR 244; Rentokil Pty Ltd v Channon (1990) 19 NSWLR 417; Campbelltown City Council v Mackay & Anor (1988) 15 NSWLR 501, referred to.
Aust Dig Damages [29]
REPRESENTATION:
Counsel:
Plaintiffs: S P Estcourt QC
Defendant: G L Sealy, J Walters
Solicitors:
Plaintiffs: Murdoch Clarke
Defendant: Piggott Wood & Baker
Judgment Number: [2000] TASSC 127
Number of paragraphs: 16
Serial No 127/2000
File No 1424/1996
ROBERT JOHN BARKER MUIRHEAD and
ANGELA KATHLEEN MUIRHEAD
v KINGBOROUGH COUNCIL (NO 2)
REASONS FOR JUDGMENT COX CJ
15 September 2000
The issue of liability in this action was determined in November 1997 when I gave judgment for the plaintiffs for damages to be assessed for the loss occasioned to them by the defendant's negligence in causing a concentration of storm water to be deposited onto land adjacent to that of the plaintiffs. In the result, landslips occurred and a large part of the plaintiffs' land, which runs to high water mark on the River Derwent, subsided. The detailed findings are recorded in an unreported judgment 132/1997. My task now is to assess the damages.
The plaintiffs have continued to reside in their home, which is built on a block at 20 Karingal Court, Taroona. It is an attractive and substantial building which they purchased in December 1991 to accommodate their four children, two of whom were then at University and the other two at school, and alterations were effected to the property so as to provide self-contained accommodation for Mrs Muirhead's mother. Two of the children have now left home, but return to reside there for about three months of the year. It commands a fine view of the river and until the subsidence occurred, the site had the added attraction of private access to the beach where the plaintiffs had a boat of which they made extensive use. Access was obtained down a steep and winding path below a fenced-in level lawn area to the east of the house at the top of a 10 metre escarpment which extends behind Nos 20 - 24 Karingal Court.
In about the middle of March 1996 during heavy rainfall, a landslip occurred immediately below a storm water outfall at No 24 Karingal Court. The use of this outfall had been actively encouraged by the defendant and this constituted the negligence which grounds the action. Combined with the heavy rainfall, this concentration of water caused a landslip which destabilised an adjacent area of land partly on the plaintiffs' property below their house and on the night of 19/20 April 1996, again with unprecedented heavy rainfall and the offending storm water outfall still discharging, a second landslip occurred causing the subsidence of a large part of the rear of the plaintiffs' garden and path to the beach. The plaintiffs had no forewarning of the subsidence and woke to find that part of their land, in their words, "devastated". It is an agreed fact that the costs of undertaking stabilising works on the area, the subject of the landslip, would be not less than $440,000. The plaintiffs do not have the funds to effect these works and it is common ground that the expenditure is not warranted, having regard to the value of the property. Despite some expectations by the plaintiffs that the defendant, after liability was established in November 1997, would effect remedial works, it is clear from the defendant's answers to interrogatories that it will not do so. It is also common ground that the plaintiffs should receive as damages (inter alia) a sum equal to the difference between the notional value of the property in an undamaged state (ie, had the subsidence not occurred) as at the date of trial and the value of the property as it now is. This approach is in accordance with that taken in similar circumstances by the New South Wales Court of Appeal in Wollongong City Council v Fregnan [1982] 1 NSWLR 244 and Rentokil Pty Ltd v Channon (1990) 19 NSWLR 417.
The starting point is to determine the notional value of the land as at the date of trial, assuming no landslip had occurred. Two experienced valuers gave evidence. For the plaintiffs, Mr McNamara said he assessed that value in December 1998 at $350,000. Mr Saunders, for the defendant, assessed it in April 1996 at $345,000. Both valuations were based on comparable sales analyses. Mr McNamara, however, updated his valuation to one of $370,000 as at the date of trial, having undertaken a further comparable sales analysis based on more recent sales. Mr Saunders had not been asked to undertake a similar re-valuation and when asked in the witness box to comment on Mr McNamara's opinion, said:
"I haven't specifically addressed the question of valuation as at today's date, but relative to my 1996 valuation I would have thought the market hasn't really done much. It's been pretty stable. In fact it went backwards there for a while. Its picked up in the last twelve to eighteen months. Perhaps, today, three hundred and fifty thousand dollars, I would have thought."
Having regard to the similarity of the methodology used by both valuers, I accept both their earlier estimates, that is, Mr Saunders of $345,000 as at April 1996 and Mr McNamara's estimate of $350,000 as at December 1998. As to the up-to-date valuations, I place more reliance on Mr McNamara than on Mr Saunders because the former had regard to up-to-date comparable sales, whereas the latter was put in the position of giving an off-the-cuff response without adequate data. Nevertheless, Mr McNamara's figure of $370,000 can fairly be tempered by Mr Saunders' experienced view that the market has been fairly stable, although "picking up" in the last 18 months. I would be surprised if the nominal value of the plaintiffs' home had risen by $20,000 in the period from December 1998 to July 2000. I am prepared to accept that it has risen by something in the order of $15,000. I accordingly find that the notional value of the property as at the date of trial was $365,000.
What is its value now, having regard to its observable condition? The plaintiffs' valuer says it is unsaleable and worth nothing. He says no one would buy it because the house has the stigma of being on the brink of a precipice and is at risk of tumbling over the edge. It is an agreed fact that the cost of demolishing the house would be equal to its salvage value. If the house were, or had to be, demolished, it would have no value as a vacant block, according to Mr McNamara, because the council would probably not allow a building to be erected on land with the stigma of instability. He placed considerable emphasis on the fact that two engineers, with varying degrees of conviction as to the probability of its occurrence, acknowledged that there might be further subsidence which would directly affect the house. He conceded that the house, which is presently capable of occupation (as is self-evident from the fact that the plaintiffs and their family have continued to reside there), could command a rental, if let to tenants, of some $300 - $350 per week. Capitalised, this would give a value of $150,000 - $180,000 assuming, of course, that it continued to be habitable and unaffected by subsidence.
Mr Saunders acknowledged that the stigma of the landslip would deter many potential purchasers, but contended that there is a market for such properties at a discounted price. The property at No 24 Karingal Court had changed hands in May 1999 at what he considered a figure of about 15 per cent less than its market value if the landslips below it and below the plaintiffs' property had not occurred (the landslip below 24 Karingal Court had destabilised that below Nos 22 and 20, but with far less effect and at a good deal greater distance from any building ¾ 20 metres in the case of No 24, compared with 8 metres in the case of No 20). Another property on a cliff edge at Penna, which had a subsidence problem between house and high water mark on council land, was, in his view, likewise sold at a discount of about 15 per cent. He also studied sale prices of properties at Rosetta which were close to the core of the landslip in that area and concluded that the discount factor ranged between 15 per cent and 35 per cent. He applied what he described as a generous discount of 40 per cent to the notional value of the plaintiffs' property set by him at $345,000 and asserted that its present value was $207,000. If his approach is correct, the present value of the land, assuming the notional value is $365,000 as I have found, would be $219,000.
It is necessary to say something of the engineers' views as to the possibility of further subsidence, although at the end of the day any finding by me preferring one to the other would be of little relevance to the market's reaction to knowledge of the controversy. Both engineers are highly qualified and have conducted comprehensive studies of the site. Mr Thornton, in a report, said this:
"The existing house is within 8m of the headscarp of the landslide. There is a risk to the house as a result of gradual deformation and creep in the soil and rock adjacent to the landslide. There is also risk of damage to the eastern end of the house, in particular via the following mechanisms or hazard scenarios:
i) Possible further failure via defects in the rock and in particular along the extension of the east dipping joint face that forms the headscarp of the landslide at 22 Karingal Court.
ii) Progressive fretting of the currently unsupported soil and extremely weathered sandstone and siltstone in the headscarp.
Mechanism (i) above is the more likely to result in sudden failure that could occur with little or no warning and extend significantly further into the property at 20 Karingal Court and endanger the house. Mechanism (ii) is likely to be more gradual and provide some warning before extending to the house. However, it is of concern with regard to persons using the rear of the property.
The risk to the house has been assessed in a qualitative manner by considering the likelihood of the hazard scenarios identified occurring and the consequences of these scenarios. The Likelihood of Hazard Occurrence, ie the likelihood of further failure is considered to be moderate to high via the mechanisms identified. The consequence of the event ie damage to the house is considered to be high. Therefore, the overall risk is judged to be high."
At the trial, he said:
"Since the inspection, my initial inspection, the head scarp at the back of the landslide has regressed by two metres, several metres, there's active further cracking and fissuring in the slope, the fence at the back of the house, the gate now doesn't open where it did previously and also at the toe of the slope there has been significant erosion of the toe of the slope and yesterday the water in that area was highly discoloured as a result of wave action."
He also said that a stable slope at which no further subsidence could be expected would be in the order of 30 degrees and would extend well under the building.
In cross-examination, he conceded that the first mechanism mentioned in his report was a matter of speculation and that it was not possible to place any degree of probability on its occurring and, if so, when. The second process is the progressive fretting of the unsupported soil in the headscarp eventually working its way down the bank as a result principally of being eroded at the toe by wave action. This would be a gradual process unlike the original failure. Achieving a slope angle of 30 degrees by natural erosion could take up to 100 years.
Mr Thom, called by the defendant, accepted that the loose material in the landslip was likely to erode relatively quickly, exposing a cliff face similar to the cliff faces on either side of it and along the entire foreshore, but he did not believe that there was any evidence to support Mr Thornton's first mechanism of failure via defects in the rock. He did not regard the cliff face, when ultimately exposed by erosion of the loose material, as more likely to fail than any other part of the cliff and pointed out that the original failure of bedrock leading to the landslides had been caused by a combination of unusually high rainfall and the concentration of rainfall on the roofs of Nos 22 and 24 Karingal Court through the storm water outfall on to that particular area. While heavy rainfall may reoccur, the exacerbation of its effect by the channelling of water through the outfall could be avoided.
I am inclined to the view that Mr Thom's opinion is to be preferred because of the unlikelihood of a repetition of the events which caused the original failure and I conclude that although there is likely to be further erosion of loose soil up to the level of the gate at the extremity of the lawn, the house itself is not in danger of collapse in the foreseeable future. I regard Mr Thornton's first mechanism as unlikely to eventuate. Nevertheless, the fact remains that there is controversy between two reputable engineers skilled in this particular area of expertise and a prudent potential purchaser, if aware of the existence of either view, would accept that his purchase of the land involved the acceptance of risk which would require a significant discount in terms of price. The defendant adduced evidence of the Government valuation, a capital value of $260,000 on the property as at September 1996. It was objected to, but admitted on the basis that a prudent purchaser making enquiry would discover that the Valuer-General had attributed that value to it. It was not admitted as evidence of the actual value of the land as at that time.
I do not accept the contention that the property has no value and that it is unsaleable. Mr Thornton conceded that if a 20 metre building set back from the landslide headscarp were adopted, it should result in a low probability of damage to the house for the foreseeable future, say 30 - 50 years. This would leave a minimum of about 20 metres on the front of the block on which a house could be built. Mr Saunders contended that even if the existing house became uninhabitable due to the subsidence, there still remained ample land upon which to build an equally substantial house, notwithstanding the covenants on title which restrict the height to one storey. He considered the unimproved value to be $150,000, but reduced it by $30,000 in recognition of the likelihood that council engineers might insist upon more than usually extensive and expensive foundations being utilised on any new house. I do not accept that there is any degree of probability that the council would veto the erection of a suitable house on the site. There is no direct evidence to that effect and it remains little more than a suggestion which might be an inhibiting consideration to a prudent purchaser.
I am satisfied that the property retains a substantial value notwithstanding the damage done to the seaward side of it and the risk of further damage being sustained. It houses a substantial family home in a most attractive position with fine views. It has a rental potential to return for the foreseeable future an income of $15,000 - $18,000 per annum. Even were the house to become uninhabitable, the land itself has a value of not less than $120,000. While there are many differences between this property and that at Penna and those in the area of the Rosetta landslip, I accept that there is a market for this property, although the price for such a property, unaffected by the landslip problem, is likely to be significantly discounted and that finance will be less readily available. I conclude that a discount in the order of 40 per cent is a useful guide to its present value without being decisive. I consider that it is worth more than the unimproved value of $120,000 attributed to it by Mr Saunders should it become uninhabitable because it is habitable and capable of enjoyment as a family home for the foreseeable future or, in the alternative, capable of being let for $300 - $350 per week. Even applying a discount factor of 50 per cent to the notional valuation of $365,000 which I have found, it would still be worth $182,500. In my opinion, the plaintiffs have been left with a property which is now worth about half its notional value and they should be awarded $182,500 under this head.
In addition, the plaintiffs claim damages for vexation, distress and worry over the predicament the defendant's negligence has caused them. They purchased the home with the intention of making it their permanent and final home during retirement and undertook improvements to it. One of its most attractive features was its private access to the beach below and to the boat which they stationed there. It was, in many ways, a "dream home" and their dream, they claim, has been shattered. Since April 1996 they have both continued to worry about damage to their house and to others who may venture, with or without permission, onto the land on the seaward side of the house. The back yard has continued to fall away notwithstanding a relatively dry period. They have lost the ability to access the beach and the eastern part of their property is now a hazard, incapable of being used for gardening or landscaping. They worry that they may suffer a further landslip without warning, just as they experienced in April 1996. When there is heavy rainfall, their apprehension is increased. Mr Muirhead is an engineer and works away from home on the Mainland of Australia for periods of about 14 days at a time. He is constantly ringing his wife while away to confirm that there has been no mishap, particularly if there has been heavy rain. Mrs Muirhead and her husband, when he is home, twice daily check to see what advance, if any, the erosion has made. Their sleep pattern is affected by worry and they have suffered the frustration of seeing their hopes of remedial action being taken by the defendant not eventuate. They have not had the funds to take such action themselves, nor to purchase another property until the question of their damages has been determined. Their relationship has been placed under strain by their anxiety and frustration.
Damages for such vexation have been awarded in a number of cases. In Perry v Sidney Phillips & Son [1982] 1 WLR 1297, a case where a plaintiff successfully sued surveyors for negligently reporting on the condition of a house which he bought but which had serious defects, he recovered not only the cost of remedying the defects, but damages for the vexation and inconvenience suffered by him as the result of the defendant's negligence. At 1302 - 1303, Lord Denning MR said:
"It seems to me that Mr Perry is entitled to damages for all the vexation, distress and worry which he has been caused by reason of the negligence of the surveyor. If a man buys a house ¾ for his own occupation ¾ on the surveyor's advice that it is sound ¾ and then finds out that it is in a deplorable condition, it is reasonably foreseeable that he will be most upset. He may, as here, not have the money to repair it and this will upset him all the more. That too is reasonably foreseeable. All this anxiety, worry and distress may nowadays be the subject of compensation. Not excessive, but modest compensation."
It is not clear from the report either on appeal or at first instance ([1982] 1 All ER 1005) what sum was awarded under this head, but in Campbelltown City Council v Mackay & Anor (1988) 15 NSWLR 501, Kirby P rejected Lord Denning's injunction that damages for vexation should be "Not excessive, but modest compensation" saying that "Given the purposes of the provision of damages in tort, I can find no justification for his Lordship's opinion" (at 504). In that case, the defendant's negligence had led to the loss of the plaintiff's "dream home", the wife had suffered a still birth as the result of the anxiety and depression at her predicament, the plaintiffs' marriage had broken down and the result had led to psychiatric illness. Although a claim for damages for nervous shock failed, the damages awarded under that head were upheld on appeal as appropriate compensation for vexation, along with a sum of $800 specifically allocated to that head. Again, the report does not reveal the figure. Damages for vexation of $6,000 were upheld in Rentokil Pty Ltd v Channon (supra) in addition to consequential loss equal to the cost of renting alternative premises while the plaintiff's property was put in order. In New Zealand, damages for vexation or stress damages were upheld in the sum of $25,000 in Mouat v Clark Boyce [1992] 2 NZLR 559, Cooke P remarking at 569:
"It is important that stress damages be kept within moderate limits. The award of $25,000 here is on the high side, and should not be seen as a precedent, but the Judge was entitled to find that, confronted with the threat of losing her home, the plaintiff here suffered, as he put it 'great stress and her enjoyment of life has been most seriously impaired'."
In Young v Tomlinson [1979] 2 NZLR 441, Quilliam J awarded $1,000 for annoyance, frustration, discomfort and inconvenience as the result of negligent advice which led to the failure of house foundations. In Hamlin v Bruce Stirling Ltd [1993] 1 NZLR 374, Williamson J awarded $2,500 for stress and inconvenience in a similar claim. In Broken Hill City Council v Tiziani & Anor, an unreported decision of the New South Wales Court of Appeal delivered on 7 February 1997, the court upheld an award of $5,000 for mental or emotional stress. So, too, an award of $5,000 was upheld by the High Court in Baltic Shipping Co v Dillon (1992 - 1993) 176 CLR 344 for disappointment and distress at the loss of entertainment and facilities for enjoyment which had been promised on a cruise when the vessel foundered.
Each of the plaintiffs is entitled to not insubstantial damages for their stress, disappointment and anxiety as the result of the defendant's negligence. The damages must not be excessive, but should not be artificially restricted to a "modest" level. Perhaps "moderate", the term used by Cooke P in Mouat v Clark Boyce (supra), would have been a more felicitous expression than that used by Lord Denning, although Samuels JA did not consider "that any special moderation ought to be applied to assessing damages for inconvenience" (Campbelltown City Council v Mackay & Anor (supra) at p505). They should be commensurate with the detriment. While neither plaintiff has, on the evidence, suffered any psychiatric illness nor has required medical attention, I accept their evidence that their lives have been disrupted and their enjoyment of their home significantly reduced. This has occurred over a four year period. In addition, the condition of their land and its potential as a hazard to passers by on the beach or children from the nearby school, has been a source of anxiety and distress in addition to the other matters I have mentioned. They say they will move and try to start again. This, too will have its traumas. In my opinion a sum of $10,000 for each of them should be added to the judgment sum under this head.
The final claim is for the cost of relocating, for, as I have said, each of them asserts that once this litigation is resolved, they will move house. They claim a sum of $18,153.10 consisting of removal expenses, legal fees, stamp duty on the new purchase, estate agent's commission, survey and building reports and the like. The defendant contends that such expenses should not be allowed, as the plaintiffs will have been compensated for the diminished value of their property and for their vexation and distress the circumstances in which it was diminished and their consequences have caused. The payment of expenses of this sort should the plaintiffs choose to relocate themselves would, so the defendant contends, amount to double compensation. The plaintiffs are entitled to consequential damages. Had they been required to vacate the premises because they were physically destroyed and to acquire new ones, I think they would have been entitled to payment of such expenses. So, too, had they been forced to rent premises while their own were rectified, they could have recovered the cost of such rental (Rentokil Pty Ltd v Channon (supra)). In the present case, however, the premises are habitable and are not hazardous. They are not likely to collapse, notwithstanding the plaintiffs' apprehensions for which they have been compensated. There is no necessity for them to vacate them. If they do so, that will be as a result of their own choice. I uphold the defendant's contention that the relocation expenses are not, in the circumstances of this case, a valid head of damages. In the result, I award the plaintiffs damages of $202,500. There will be judgment accordingly.
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