Transport for NSW v Hunt Leather Pty Ltd; Hunt Leather Pty Ltd v Transport for NSW

[2024] NSWCA 227

Court of Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:

Transport for NSW v Hunt Leather Pty Ltd; Hunt Leather Pty Ltd v Transport for NSW [2024] NSWCA 227

Hearing dates:

1, 2, 3 July 2024;
last written submissions 26 August 2024

Decision date:

18 September 2024

Before:

Bell CJ; Leeming JA; Mitchelmore JA

Decision:

1. Appeal allowed.

2. Cross-appeal dismissed.

3. Set aside each of (i) order 1 made in the Common Law Division on 3 August 2023, (ii) the judgment in favour of Hunt Leather Pty Ltd entered on 15 December 2023, (iii) the judgment in favour of Ancio Investments Pty Ltd entered on 8 February 2024, and in lieu thereof, order that (i) the proceedings be dismissed and (ii) the plaintiffs are to pay the defendant’s costs.

4. Order the respondents/cross-appellants to pay the appellant’s/cross-respondent’s costs of the appeal and cross-appeal.

Catchwords:

TORTS – nuisance – private nuisance – plaintiffs claimed their properties were affected by construction of Sydney Light Rail – whether interference with enjoyment of plaintiffs’ property substantial and unreasonable – whether failure by plaintiffs to establish a failure to take reasonable care determinative – whether defendant bore onus of establishing that it took reasonable care – whether defendant failed to take reasonable care – significance to cause of action in nuisance of taking reasonable care – whether use of road for construction purposes exceptional – whether interference with plaintiffs’ enjoyment inevitable – whether delay in construction attributable to discovery of unknown utilities – whether damages should include a “recovery period” – whether s 43A of Civil Liability Act 2002 (NSW) applicable

DAMAGES – pure economic loss – funded litigation – funding agreement included commission to funder – whether commission recoverable as component of damages

Legislation Cited:

Civil Liability Act 2002 (NSW), ss 5B, 5C, 40, 43A

Civil Procedure Act 2005 (NSW), Pt 10

Environmental Planning and Assessment Act 1979 (NSW), s 4.2

Supreme Court Act 1970 (NSW), s 101

Transport Administration Act 1988 (NSW), ss 3C, 104L, 104N, 104O

Uniform Civil Procedure Rules 2005 (NSW), r 36.16

Cases Cited:

Anderson v Bowles (1951) 84 CLR 310; [1951] HCA 61

Anderson v Canaccord Genuity Financial Ltd (No 2) [2024] NSWCA 161

Andreae v Selfridge & Co [1938] 1 Ch 1

Bamford v Turnley (1860) 3 B & S 62; 122 ER 25

Berry v British Transport Commission [1962] 1 QB 306

Broder v Saillard (1876) 2 Ch D 692

Brodie v Singleton Shire Council (2001) 206 CLR 512; [2001] HCA 29

Buckle v Bayswater Road Board (1936) 57 CLR 259; [1936] HCA 65

Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520; [1994] HCA 13

Computer Edge Pty Ltd v Apple Computer Inc [1984] HCA 47; 54 ALR 767

Curtis v Harden Shire Council (2014) 88 NSWLR 10; [2014] NSWCA 314

Della Franca v Lorenzato; Burwood Council v Lorenzato [2021] NSWCA 321

Dennis v Ministry of Defence [2003] EWHC 793; [2003] EGLR 121

Don Brass Foundry Pty Ltd v Stead (1948) 48 SR (NSW) 482

Elston v Dore (1982) 149 CLR 480; [1982] HCA 71

Fearn v Board of Trustees of the Tate Gallery [2024] AC 1; [2023] UKSC 4

Gales Holdings Pty Ltd v Tweed Shire Council (2013) 85 NSWLR 514; [2013] NSWCA 382

Gartner v Kidman (1962) 108 CLR 12; [1962] HCA 27

Gray v Sirtex Medical Ltd (2011) 193 FCR 1; [2011] FCAFC 40

Hargrave v Goldman (1963) 110 CLR 40; [1963] HCA 56

Hazelwood v Webber (1934) 52 CLR 268; [1934] HCA 62

Henderson v Merrett Syndicates Ltd [1995] 2 AC 145

Hole v Barlow (1858) 4 CB NS 334; 140 ER 1113

Housman v Camuglia (2021) 104 NSWLR 615; [2021] NSWCA 106

Hunt Leather Pty Ltd v Transport for NSW [2023] NSWSC 840

Hunt Leather Pty Ltd v Transport for NSW (No 3) [2023] NSWSC 1598

Hunt Leather Pty Ltd v Transport for NSW (No 4) [2024] NSWSC 140

Hunt Leather Pty Ltd v Transport for NSW (No 5) [2024] NSWSC 776

Landoro(Qld) Pty Ltd v Jensen International Pty Ltd [1999] QCA 318

Manchester Corporation v Farnsworth [1930] AC 171

Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560; [2019] HCA 32

Munro v Southern Dairies Ltd [1955] VLR 332

Narellan Franchise Pty Ltd v RBME Pty Ltd [2023] NSWCA 139

Overseas Tankship (UK) Ltd v The Miller Steamship Co Pty Ltd [1967] 1 AC 617

Painter v Reed [1930] SASR 295

Perera v Genworth Financial Mortgage Insurance Pty Ltd (2017) 94 NSWLR 83; [2017] NSWCA 19

PPK Willoughby Pty Ltd v Baird [2021] NSWCA 312

Precision Products (NSW) Pty Ltd v Hawkesbury City Council (2008) 74 NSWLR 102; [2008] NSWCA 278

Pwllbach Colliery Co Ltd v Woodman [1915] AC 634

Queensland Bulk Water Supply Authority t/as Seqwater v Rodriguez & Sons Pty Ltd [2021] NSWCA 206; 393 ALR 162

Rapier v London Tramways Co [1893] 2 Ch 588

Read v J Lyons & Co Ltd [1947] AC 156

Roads & Traffic Authority of NSW v Refrigerated Roadways Pty Ltd (2009) 77 NSWLR 360; [2009] NSWCA 263

Rylands v Fletcher (1868) LR 3 HL 330

SedleighDenfield v O’Callaghan [1940] AC 880

Shinetec(Australia) Pty Ltd v The Gosford Pty Ltd [2024] NSWCA 174

Southern Properties (WA) Pty Ltd v Executive Director of the Department of Conservation and Land Management (2012) 42 WAR 287; [2012] WASCA 79

Southwark London Borough Council v Tanner [2001] 1 AC 1; [1999] UKHL 40

The Manchester Ship Canal Company Ltd v United Utilities Water Ltd (No 2) [2024] UKSC 22

Thomas (as liquidator of Anne Lewis Pty Ltd (in liq)) v Arthur Hughes Pty Ltd [2016] NSWSC 1861

Torette House Pty Ltd v Berkman (1939) 39 SR (NSW) 156

Torette House Pty Ltd v Berkman (1940) 62 CLR 637; [1940] HCA 1

Waterhouse v Contractors Bonding Ltd [2014] 1 NZLR 91; [2013] NZSC 89

Weber v Greater Hume Shire Council (2019) 100 NSWLR 1; [2019] NSWCA 74

Woolworths Ltd v Pallas Newco Pty Ltd (2004) 61 NSWLR 707; [2004] NSWCA 422

Wyong Shire Council v Shirt (1980) 146 CLR 40; [1980] HCA 12

Texts Cited:

D Nolan and A Robertson (eds) Rights and Private Law (Hart Publishing, 2011)

E Garrett, The Law of Nuisances (William Clowes & Sons, 1890).

E Garrett, The Law of Nuisances (William Clowes & Sons, 2nd ed 1897)

E Garrett, The Law of Nuisances (William Clowes & Sons, 3rd ed 1908)

J Murphy, The Law of Nuisance (Oxford University Press, 2010)

J Salmond, Law of Torts (Stevens & Haynes, 3rd ed 1912)

Category:

Principal judgment

Parties:

Transport for NSW (Appellant; Cross-Respondent)
Hunt Leather Pty Ltd (First Respondent; First Cross-Appellant)
Sophie Irene Hunt (Second Respondent)
Ancio Investments Pty Ltd (Third Respondent; Second Cross-Appellant)
Nicholas Zisti (Fourth Respondent)

Representation:

Counsel:
N Owens SC, N Simpson, E Bathurst, L Moretti (Transport for NSW in the appeal)
D McLure SC, N Simpson (Transport for NSW in the cross-appeal)
A Bannon SC, L Shipway, A Hochroth, M Pulsford (Respondents and Cross-Appellants)

Solicitors:
Lander & Rogers (Transport for NSW)
Banton Group (Respondents; Cross-Appellants)

File Number(s):

2023/242788; 2023/465963; 2024/253975

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Common Law

Citation:

[2023] NSWSC 840; [2024] NSWSC 140; [2024] NSWSC 776

Date of Decision:

19 July 2023

Before:

Cavanagh J

File Number(s):

2018/263841

HEADNOTE

[This headnote is not to be read as part of the judgment]

In 2011, the appellant, Transport for NSW (TfNSW), a statutory corporation, commenced planning for the construction of the Sydney Light Rail. TfNSW by a Project Deed engaged a contractor to undertake the construction works. Attached to the Project Deed was an Initial Delivery Program (IDP) which divided construction into stages, or “fee zones”, to be completed by set times to minimise disruption. A timetable substantially similar to the IDP was the subject of a media release. Construction in the various fee zones took much longer than advised. During the course of construction, very numerous utilities were located each of which needed to be addressed, leading to delay. The Project Deed included only limited financial disincentives in the event that construction in each fee zone was delayed.

The respondents brought representative proceedings under Part 10 of the Civil Procedure Act 2005 (NSW) on behalf of proprietors said to be affected by the construction works. They claimed in public and private nuisance, but the claim in public nuisance was dismissed. The respondents alleged that it was unreasonable for TfNSW to contract on terms that did not sufficiently disincentivise delay affecting neighbouring occupiers, and relied on an amended IDP which indicated what they submitted to be reasonable timeframes for construction.

The primary judge accepted that delays which exceeded the times in the amended IDP amounted to an unreasonable interference with the respondents’ enjoyment of their property for which damages were awarded. The primary judge rejected TfNSW’s submission that it had exercised reasonable care in the planning process with the consequence that there had been no unreasonable interference. The primary judge also rejected TfNSW’s defence based on s 43A of the Civil Liability Act 2002 (NSW) because while it was a statutory corporation, TfNSW’s conduct was not “based on” a “special statutory power” for the purposes of that provision. The primary judge also held that there was no statutory immunity for the conduct of the construction works as the nuisance that was created was not an “inevitable” result of the statutory task. Although the primary judge found TfNSW liable, his Honour rejected the respondents’ submission that the 40% commission payable to a litigation funder should be a component of damages.

On appeal, TfNSW challenged the finding that the respondents suffered an interference which was both substantial and unreasonable. In particular, it challenged the findings that the amended IDP was a reasonable estimate, that there was sufficient evidence to show that the delay was caused by the discovery of unknown utilities, and that TfNSW’s construction works constituted an “extraordinary” rather than a “common and ordinary” use of the roads. It maintained that the onus was on the respondents at trial to show that TfNSW had not exercised reasonable care, and argued that the primary judge erred in not holding that any nuisance was an inevitable result of the statutory task under the authorising statute.

By cross-appeal, the cross-appellants submitted that the funding commission was a loss to the cross-appellants for which damages for nuisance should account.

The Court held, allowing the appeal and dismissing the cross-appeal:

In the appeal:

1. There was insufficient evidence to show that there was a form of pre-construction investigation which would have temporarily reduced the interference with the respondents’ enjoyment of their land. This error is sufficient to dispose of the appeal: at [84]-[97].

2. The primary judge did not err in failing to make a negative finding that TfNSW did not fail to exercise reasonable care in circumstances where the converse proposition was disavowed by the respondents and where TfNSW left unexplained why the construction activities took so long: at [98]-[106].

3. There was no error in holding that TfNSW’s defence that the delay was an inevitable result of the statutory task was not made out. There is no proper basis for a conclusion that there was nothing which TfNSW could have done to facilitate the occupation of a fee zone being some months shorter than had occurred: at [127]-[134].

Southern Properties (WA) Pty Ltd v Executive Director of the Department of Conservation and Land Management (2012) 42 WAR 287; [2012] WASCA 79, applied. The Manchester Ship Canal Company Ltd v United Utilities Water Ltd (No 2) [2024] UKSC 22, considered.

4. It is not strictly necessary for a plaintiff in an action for nuisance to prove that the defendant failed to take reasonable care. Although that fact may be relevant, the overarching question is whether the interference with the enjoyment of the plaintiff’s property is substantial and unreasonable. There is no such exception for “construction cases”: at [135]-[153].

5. The primary judge did not err in holding that section 43A of the Civil Liability Act does not apply. Section 43A operates to attenuate the standard of care required to be proved when establishing civil liability in tort, but it is no part of a claim for nuisance to show that the defendant failed to take reasonable care. Further, the claim was not “based on” the exercise of a “special statutory power”: at [174]-[181].

Discussion by the Court of:

6. The relevance of the phrase “common and ordinary” use of land to a finding that an interference is unreasonable: at [115]-[126].

Gartner v Kidman (1962) 108 CLR 12; [1962] HCA 27; Fearn v Board of Trustees of the Tate Gallery [2024] AC 1; [2023] UKSC 4, considered.

In the cross-appeal:

7. The 40% funding commission was not recoverable as damages for nuisance. That fee is not to be regarded as a foreseeable loss caused by the nuisance, but instead as the voluntary act of the particular plaintiff: at [193]-[210].

Gray v Sirtex Medical Ltd (2011) 193 FCR 1; [2011] FCAFC 40; Berry v British Transport Commission [1962] 1 QB 306, considered; Landoro (Qld) Pty Ltd v Jensen International Pty Ltd [1999] QCA 318, explained.

JUDGMENT

1. THE COURT: This appeal and cross-appeal, which were heard concurrently, are brought from decisions determining liability and damages in respect of the four lead plaintiffs in representative proceedings pursuant to Part 10 of the Civil Procedure Act 2005 (NSW) arising out of the construction of the Sydney Light Rail. The appellant, Transport for NSW, a corporation constituted by s 3C of the Transport Administration Act 1988 (NSW), which statute also refers to it as “TfNSW”, was the sole defendant. TfNSW planned the construction of the Sydney Light Rail, but did not itself undertake any work.

2. The Sydney Light Rail is a light rail system between Circular Quay and Moore Park, from which separate branches continue to Randwick and Kingsford. Most of the route is along public roads, including George St in the Sydney CBD and Anzac Parade in Kensington. (A map of the route is found at [20] of the main judgment: Hunt Leather Pty Ltd v Transport for NSW [2023] NSWSC 840.) Hunt Leather Pty Ltd operated two retail stores along George St, one inside the Queen Victoria Building and the other in leased premises facing George St in the Strand Arcade. Ancio Investments Pty Ltd was the trustee of a trading trust which operated various restaurant businesses from leased premises on Anzac Parade in Kensington.

3. The group members were defined by reference to causes of action in private nuisance and public nuisance. The action for public nuisance failed and there is no appeal from that part of the judgment. The second and fourth plaintiffs, Ms Sophie Hunt and Mr Nicholas Zisti, were not occupiers of land and were only plaintiffs for the purposes of pursuing claims for public nuisance, but their companies, Hunt Leather Pty Ltd and Ancio Investments Pty Ltd, obtained judgments in their favour based on private nuisance for very substantial reasons for judgment occupying 1140 paragraphs over 292 pages following a trial lasting almost six weeks in November and December 2022. Hunt Leather’s success was based solely on its Strand Arcade premises, and there is no appeal from the finding by the primary judge at [887] and [911] that there was no substantial interference to its premises in the Queen Victoria Building.

4. By a separate judgment following a further hearing in December 2023, the primary judge dismissed Hunt Leather’s and Ancio’s claim that the damages should include a 40% commission they were liable to pay to a litigation funder: Hunt Leather Pty Ltd v Transport for NSW (No 4) [2024] NSWSC 140. Those companies have cross-appealed from that decision. Their cross-appeal is put on the basis that the commission should have been incorporated into the damages ordered, in effect, a form of grossing up; it was not said that the commission was recoverable pursuant to any costs order (cf Anderson v Canaccord Genuity Financial Ltd (No 2) [2024] NSWCA 161 at [106]-[158]). The result was judgments in their favour against TfNSW in the amounts of $3,693,164 and $317,773 respectively. The cross-appeal was expanded to include a separate challenge to one aspect of a subsequent costs order, made on 24 June 2024, by which TfNSW was ordered to pay 65% of the plaintiffs’ costs in respect of the claims for private nuisance: Hunt Leather Pty Ltd v Transport for NSW (No 5) [2024] NSWSC 776. Because that order was made only a week prior to the hearing of the appeal, it was developed by submissions supplied in accordance with a timetable imposed at the conclusion of the hearing. The last submissions were supplied on 26 August 2024.

5. Although there has been a final determination of the claims by Hunt Leather and Ancio against TfNSW, the claims of other group members have not been determined. TfNSW’s appeal was brought purportedly as of right. At the time the notice of appeal was filed, the appeal was from an order made on 3 August 2023 that there be “Judgment in favour of the first and third plaintiffs for sums to be quantified”. The order, which determined liability but not quantum, was plainly interlocutory for the purposes of s 101(2)(e) of the Supreme Court Act 1970 (NSW): see Computer Edge Pty Ltd v Apple Computer Inc [1984] HCA 47; 54 ALR 767 at 768 and Narellan Franchise Pty Ltd v RBME Pty Ltd [2023] NSWCA 139 at [16]-[17]. However, the judgments have now been quantified and as between Hunt Leather, Ancio and TfNSW all matters in dispute have been determined. Consistently with the analysis in Queensland Bulk Water Supply Authority t/as Seqwater v Rodriguez & Sons Pty Ltd [2021] NSWCA 206; 393 ALR 162 at [14]-[20], the appeal from those judgments is as of right, and thus the notice of appeal correctly anticipated the position which obtained by the time the appeal was heard.

Background

6. The following paragraphs are uncontroversial.

7. TfNSW did not own the roads along which the Sydney Light Rail was built. Nor did it perform any construction work. As will be seen, those matters do not exclude TfNSW from being liable in private nuisance to occupiers affected by the construction.

8. Construction would inevitably occur along the entirety of the route, so as to prepare foundations, lay tracks, install electrical infrastructure and signalling, and so on. The construction occupied much of the land dedicated as a road including the footpath, including by the erection of fencing and hoarding. Footpaths are ordinarily part of the land dedicated as a road; see for example Brodie v Singleton Shire Council (2001) 206 CLR 512; [2001] HCA 29 at [50]-[51], and what matters, as Dixon J observed in Buckle v Bayswater Road Board (1936) 57 CLR 259 at 286; [1936] HCA 65, is that there is a public right of passage. The occupation of the road (including the footpath) was capable of constituting a public nuisance, but it was also capable of constituting a private nuisance, insofar as it interfered with the enjoyment of neighbouring land, notably, by reducing passing traffic.

9. Pursuant to agreements with City of Sydney Council, Centennial Park and Moore Park Trust and Randwick City Council, TfNSW was granted a licence to enter and occupy the land (principally, the road surface and footpaths within the road reserve), which were owned by those bodies, and was empowered to grant licences to anyone else to do so for the purposes of constructing the Sydney Light Rail. Pursuant to cl 12.1 of the Project Deed, TfNSW granted OpCo a “non-exclusive Construction Site Licence” permitting it and its contractors to use and occupy the land.

The “public and private partnership”

10. The main planning of the Sydney Light Rail commenced in 2012, and TfNSW determined that it would be built and operated through a “public and private partnership”. The label is at best uninformative and at worst misleading – as is perhaps most obvious from the fact that the sole defendant was TfNSW, with nothing to suggest any joint liability with or contribution from some private “partner”.

10. What in fact happened in point of law was based on a Project Deed and a Design and Construct Contract. The parties to the Project Deed were TfNSW and a partnership of three ALTRAC companies each of which was a trustee of trusts known, respectively, as the ALTRAC Light Rail Trust 1, 2 and 3. The primary judge explained at [23] that he would refer to the partnership, interchangeably, as “ALTRAC” and “OpCo”, and these reasons will use the same nomenclature. The parties to the Design and Construct Contract were that partnership (ie ALTRAC or OpCo) and each of Alston Transport Australia Pty Ltd and Acciona Infrastructure Australia Pty Ltd, which two companies were defined as the “D&C Contractor”. None of those details greatly matters for the purposes of this litigation. The essence of the bargain was that a Spanish infrastructure company and a French rolling stock manufacturer would construct the light rail system which would then be operated privately for a period of 15 years. The Project Deed provided in cl 1.6 that the “Project Agreements” (which included the Project Deed, and the Design and Construct Contract) did not incorporate any of the principles or guidance published by either the Commonwealth under its National Public Private Partnership Policy and Guidelines or the State under its NSW Public Private Partnerships Guidelines (2012).

Staging of construction and the IDP

12. The D&C Contractor was not to occupy the entirety of the site throughout the construction period. Instead, construction would occur in stages. It is obvious that staging the construction reduced the ability of the D&C Contractor to be flexible in a range of matters (including the timing of each work and the storage of machines and materials along the route) and may well have increased the cost and time taken for construction. It is also obvious that to the extent that disruption to motorists, pedestrians and, most relevantly, the occupiers of neighbouring premises along the route, was caused by the construction activities and the erection of fencing and hoarding preventing ordinary access to the road and footpath, that disruption would be expected to be reduced in any particular area by the construction being staged.

13. Those considerations were reflected in a development agreement between TfNSW and City of Sydney Council dated 18 December 2013, which recited that the parties sought to minimise the impacts of construction on the community, businesses and residences in the local government area, including by TfNSW’s agreement that staging of the works would be developed to demonstrate a balance between efficient construction methods and to minimise impacts on business operations and resident amenities.

14. Attached to the Project Deed as Schedule A10 was an “Initial Delivery Program” or “IDP”. The Schedule was not included in the appeal books. It appears to have been a lengthy print out obtained from an .XER file, which is used in project management software. As will be seen below, on the third day of the hearing the Court was given a print out of the “amended IDP” which is critical to the approach taken by the primary judge. The print out has 56 pages, and each page has over 100 rows of entries. Many of the rows contain headings, but the large majority describe specific activities in a particular place and timeframe along the route of the Sydney Light Rail.

15. The IDP reflected a division of the construction route into stages, which were called “fee zones”. Hunt Leather’s Strand Arcade store was in fee zone 5 and Ancio’s restaurants were in fee zone 29. The IDP identified a wide range of activities which would be undertaken in each fee zone and the order in which they would be undertaken, and stated the time during which the D&C Contractor would occupy each fee zone. There were thousands of activities in the IDP.

16. In May 2015, TfNSW issued a media release to the effect that the Sydney Light Rail construction would begin at Moore Park in September 2015, with construction on George Street beginning in October 2015. The document advised that the light rail route had been divided into 31 individual zones to minimise, as much as possible, the impacts of the construction on discrete areas, and gave a list and map of the 31 fee zones, noting that construction would take place in fee zone 5 from 23 October 2015 until 12 August 2016, and in fee zone 29 from 19 February 2016 to 6 September 2016. The document stated, under a bold heading: “Major construction begins September 2015 – Major construction expected to complete mid 2018”:

The light rail route has been divided into 31 individual zones to minimise, as much as possible, the impacts of construction in any one area. These are listed in the table and maps below. ALTRAC can alter its construction schedule but not the duration within any individual zone, if required. If changes to the construction schedule are required, ALTRAC must provide a notice of 60 business days. The public will be fully advised of any changes well in advance of works taking place…

17. The times published in the media release approximately reflect the programming incorporated within the IDP. There are differences, but they are minor. The material supplied to this Court does not appear to enable an understanding of why, to take one example, the document recorded the commencement of occupation of fee zone 5 to be 23 October 2015 while the corresponding date in the IDP was 15 October 2015.

18. As matters turned out, the times stated in the media release for the completion of the Sydney Light Rail were understated by around a year, but the periods stated for the occupation of each fee zone proved to be extremely optimistic. The statement that ALTRAC could not alter the duration within any individual zone was wrong.

19. The Project Deed made it quite clear that the dates in the IDP were not contractual promises. Clause 17.2 required OpCo to use its best endeavours to achieve completion by 16 March 2019, and to “diligently progress the Delivery Activities”. Clause 17.3 required OpCo periodically to update the Delivery Program, which started with the IDP in Schedule A10 attached to the deed, and which said explicitly in cl 17.3(c) that “Nothing in the Delivery Program will bind TfNSW or otherwise affect the time for the performance of TfNSW’s obligations under this deed”.

20. The reasons for the substantial delay between actual construction compared to the times identified in the IDP and the press release were not fully explained. The primary judge found that a contributing factor was the discovery of utilities along the route.

21. At [111]-[202] the primary judge described the way in which the Sydney Light Rail was planned. Prominent in that process was the so-called “utilities risk”. The primary judge said of this:

104 Generally, the utilities risk was the potential for problems to arise during the SLR construction from the presence of utilities along the SLR route. As I will identify, at the time of entry into the Project Deed, it was known that there were many utilities along the route which would need to be treated in order for construction to proceed. It was also expected that there would be more utilities which were not known to exist at the time of entry into the Project Deed but which would be discovered during the course of the construction.

105 It was also known that the required treatment of each utility would vary, but that this could include covering up, replacing, moving and upgrading utilities. It was known that at the time of entry into the Project Deed, there were no agreements in place with utility providers as to the methods of such treatment.

106 The utilities risk was the risk of delay and additional costs arising from the need to treat utilities and the discovery of previously unknown utilities.

22. His Honour said:

941 As it happens, during the course of the project, the D&C contractor discovered nearly as many unknown utilities as had been discovered prior to entry into the Project Deed. I have accepted that the discovery of unknown utilities in Fee Zone 5 and Fee Zone 29 caused the substantial prolongation of occupation in the fee zones.

942 In this judgment, I am not making any determination about why the completion of the project took place a year after it was supposed to, although it is a fair assumption that the utilities problems had a lot to do with it. The point of this litigation is to contrast that which was supposed to happen with what actually occurred in respect of disruption to business owners along the SLR route.

943 Something went wrong. Specifically, the defendant entered into the Project Deed at a time when it did not know the extent of the utilities risk and on terms which offered little deterrence to the D&C contractor from overstaying in a fee zone. The risk about which it had expressed the most concern, being delays caused by utilities issues, eventuated. Because of the terms on which it had engaged and the incompleteness of its knowledge about the utilities risk, there was significant prolongation of construction activities in the fee zones (specifically, the fee zones which I have considered).

23. At a high level, it was common ground that in order to establish actionable private nuisance sounding in damages, it is necessary but not sufficient for a plaintiff to establish a substantial interference with the enjoyment of land. It was also common ground that there were some substantial interferences with enjoyment which were not actionable. The primary judge’s reasoning attended, appropriately, to these nuances. His Honour accepted that on any view the occupiers had no basis to complain of some measure of disruption caused by the construction of the Sydney Light Rail, but formed a view that there came a time after which TfNSW was liable for damage caused by the ongoing disruption.

The amended IDP

24. The primary judge did not use the IDP itself in determining the extent to which there was actionable nuisance. Instead, his Honour deployed an “amended IDP” which had been propounded by the plaintiffs and determined that insofar as occupation of the fee zones had exceeded the times in the amended IDP, it was unreasonable and therefore actionable. According to the amended IDP, work in fee zone 5 should have started on 15 October 2015 and finished on 1 November 2016. It did not finish until 3 December 2017. In fee zone 29, the work should have started on 12 December 2016 and finished on 3 September 2017. It did not finish until 28 February 2019.

25. The author of the amended IDP was Mr Griffith. The primary judge recorded that Mr Griffith was a “planning and programming” expert, who was not originally called to provide an opinion about the quality of the defendant’s utilities investigations or management, but nonetheless ended up doing so (at [486]). There was a large issue at trial concerning Mr Griffith’s opinions, much of which is incorporated below:

487 Mr Griffith considered that the delay risk associated with unknown utilities should have been known to the defendant. He says that the defendant should have taken further steps to reduce this risk by:

(a) undertaking more utility surveys covering the rail alignment and adjacent properties with statistical analysis of the differences between the utility plans and survey results; and

(b) reaching concluded agreements with utility providers that clearly defined treatment plans and agreed expected procedures.

488 Mr Griffith’s expertise lay in the assessment of whether there were delays in the completion of the SLR Project and the cause of those delays. Notably, the defendant challenged Mr Griffith’s evidence relating to the cause of the delays and the reasoning applied in reaching his conclusions. The defendant also suggested that the assumptions made by Mr Griffith were not available.

26. The primary judge explained the preparation by Mr Griffith of the amended IDP at [495]:

Mr Griffith prepared an amended IDP, reflecting what he says would have been reasonable allowances for the works and, in particular, the utility treatments, should the defendant have undertaken those further steps he suggests. There is obviously hindsight in the calculation but the point is to provide some indication of what might have been a reasonable timeframe for the works to have been completed in each fee zone, assuming more knowledge and agreement in respect of utilities at the outset, (thereby meaning less delay during the works).

27. We shall return to the details underlying Mr Griffith’s calculations and the criticisms of them. For present purposes, it suffices to note that the effect of the amended IDP was to extend the allowance for completion of work in the fee zones by an additional three or four months in fee zones 5 and 29, as reflected in the following table reproduced at [935]:

28. The primary judge’s reasoning based on the amended IDP was explained:

936 In my view, the amended IDP is an appropriate measure for determining the point at which the interference with the land became unreasonable. Mr Griffith undertook an analysis allowing more time for various activities, which were mainly utilities treatments. His amended IDP reflects what was reasonably achievable. It seems to me that there came a point when, despite the importance and complexity of the project, it was no longer reasonable to expect the plaintiffs as adjoining business operators to put up with the construction activity. At that point, the requirements for an actionable nuisance were satisfied.

937 As such, for Hunt Leather, the period of the nuisance commenced on 1 November 2016 and ended on 3 December 2017.

938 For Ancio, the period of the nuisance commenced on 27 January 2017 and ended on 28 February 2019.

The error in the determination of the period Ancio suffered actionable nuisance

29. There was an error in the dates applicable for Ancio’s claim in fee zone 29, which was corrected by his Honour in a subsequent judgment under the slip rule (the application was not opposed by TfNSW): Hunt Leather Pty Ltd v Transport for NSW (No 3) [2023] NSWSC 1598 at [12]. For reasons which will become apparent, it is convenient to reproduce [9]-[12] of that judgment:

9 In paragraph [936] of the judgment, I found that I would adopt Mr Griffith’s amended Initial Delivery Program (“IDP”) as an appropriate measure for determining the point at which the interference with the land became unreasonable. I set out a table in paragraph [935] of the judgment. I identified Mr Griffith’s corrected IDP occupation period as between 12 December 2016 and 3 September 2017. On that basis, I commenced the period of nuisance for Ancio on 3 September 2017.

10 Mr Hochroth points out that, in fact, I had already found that the period of interference commenced for Ancio in May 2016 and, thus, my table (which set out the occupation period as commencing on 12 December 2016) was incorrect.

11 I accept that what I had intended to find in the table at paragraph [935] and the finding at [936] was that there was a specific period during which the works on behalf of the defendant were reasonable but, after a specific period, the work became unreasonable, such that that was the date on which the period of nuisance commenced.

12 In those circumstances, I accept that the commencement of the period of nuisance for Ancio on 3 September 2017 was an accidental slip. The date in the table is incorrect and inconsistent with my earlier findings. The period of nuisance for Ancio should commence on 27 January 2017 and end on 28 February 2019. The date will be amended in the table at [935] of the judgment and also at paragraphs [938] and [1108(1)] and [1108(2)].

30. The finding that the commencement of the interference to Mr Zisti’s restaurant was 7 May 2016 was at [888]-[909], where his Honour concluded that the interference continued between 7 May 2016 and 28 February 2019.

31. It is apparent from the above how his Honour proceeded. Because the only integer that mattered for the purposes of calculating damages was the point at which the interference became, on the approach taken by his Honour, no longer reasonable, his Honour only corrected the date of 3 September 2017, replacing it with 27 January 2017. However, as the passage at [9]-[10] of the later judgment makes plain, the starting date for the actual occupation (which on the approach taken by his Honour was not tortious) was 7 May 2016, not 12 December 2016, despite that date not being corrected under the slip rule. It is also clear that the important date of 27 January 2017 was determined by using the methodology in the main judgment, which admitted of a period under the corrected IDP of non-tortious occupation of the period from 12 December 2016 until 3 September 2017 (which is 265 days), and shifted that period so that it commenced on 7 May 2016 (7 May 2016 until 27 January 2017 is also 265 days).

The way Mr Griffith calculated the amended IDP

32. How then did Mr Griffith calculate his amended IDP? Attachment 6 to his report was not included in the appeal books, but at the Court’s request was provided on the last day of the hearing of the appeal. In that document he explained, in paragraph 625, that on his calculations the “IDP Occupation” of fee zone 5 of 281 days had, when corrected, increased to 349 days. In the case of fee zone 29, IDP Occupation of 211 days had increased to 251 days. In paragraph 626 he explained why. In both cases, 19 days were attributable to “Increased Earthworks Contingency” and “Inclement Weather Allowance”. In fee zone 5, there were also 36 days for “Early Works Design Links” and 13 days for “Increased Float between Utility Treatments”. In fee zone 29, there were 25 days for “Increased Allowance for Treatment of Unknown Utilities”, 8 days for “Increased Float between Utility Treatments” and a reduction of 12 days for “Start date delay mitigation” (not all of those delays extended the time cumulatively). Each of those categories was explained in paragraphs 628-665 in his report. For example, Mr Griffith was critical of the fact that the IDP did not include any “Float”, which was essentially an allowance for various contingencies (“In my opinion, a contractor should reasonably have included some contingency in the IDP for the higher risk Activities such as Utility Treatments and Civil Works”). Mr Griffith also considered that there should have been a contingency for Unknown Utilities (“A Contractor acting reasonably would have made an allowance for [the delay in completing Unknown Utilities] in the IDP”).

33. Mr Griffith produced a table in section 2.3 of his report headed “Corrected IDP” for the purpose of correcting the IDP so as “to represent a reasonable baseline against which to assess delay to Fee Zone Completion”, based on the links between the design submissions and construction, the lack of general contingency, lack of contingency for Unknown Utilities, lack of float between Utility Treatment Activities in successive fee zones, and lack of inclement weather allowance. The result was that the “IDP occupation” for fee zones 5 and 29 increased from 281 and 211 days, respectively, to 349 and 251 days, respectively.

34. It is worth explaining two aspects of the details of Mr Griffith’s reasoning. The largest contributor to the increased times is an allowance for “utility treatment activities”, and the most straightforward component of the increase was the incorporation of an allowance for inclement weather.

35. Mr Griffith’s treatment of unknown utilities was at paragraphs 633-639 of Attachment 6. In fee zone 5, he stated that there were 67 known utilities, and 55 “unknown utilities”. He said that the unknown utilities “in my opinion would have been allowed for had they been known at the time of Contract”. He used simple linear extrapolation. He noted that 28 workdays were allocated to utility treatment in the IDP, and that 55 was 82% of 67, and so increased 28 by 82% yielding 51 workdays. In fee zone 29, where there were 106 known utilities and 103 unknown utilities and 18 days allocated to utility treatment in the IDP, he noted that 103 was 97% of 106, and increased 18 by 97% yielding 36 workdays.

32. Mr Griffith’s treatment of inclement weather allowance was at paragraphs 655-665 of Attachment 6. He simply allowed 4.5% of the workday duration of each activity in the fee zone rounded to the nearest whole day, noting that 4.5% “reflects the typical impact from weather that I have tended to see on projects carried out in the Sydney area”. The overall workday allowances for fee zones 5 and 29 were 208 and 251 days respectively, to which were added 9 and 11 days.

33. The details underlying Mr Griffith’s reasoning do not for present purposes matter, save to confirm the basis on which they were derived. It is clear, as TfNSW submitted, without contradiction from the respondents, that the amendments reflected deficiencies, in Mr Griffith’s opinion, based on looking at project documents and programs produced at or around the commencement of the project. As it was put orally:

OWENS: … Mr Griffith wasn’t looking to identify, by reference to the true facts and circumstances in George Street and elsewhere, whether this project could have been built quicker or differently or whatever. What he was looking to do is identify errors in the IDP as an estimate or as a plan.

38. That is to say, the amendments were what Mr Griffith regarded as estimates which incorporated appropriate allowances based on what was then known, i.e. prior to commencement of construction. The amended IDP was not intended to be an assessment, based on what in fact occurred each day along the route (including in relation to the discovery and treatment of previously unknown utilities), of the time after which continued work became unreasonable (it was also described, accurately but somewhat cryptically, as an “ex post facto a priori prediction”).

39. As the judge correctly recorded at [58]:

The case is conceptually difficult because the plaintiffs seek to rely on the way in which the construction activities were undertaken during the period of construction work for the purposes of establishing the nuisance, but they only seek to rely on their criticisms of the defendant’s conduct for the period up until the Project Deed was entered into in December 2014 (before the construction actually started). In these circumstances, there has been limited exploration of what actually happened during the course of the construction. Indeed, the defendant did not adduce any evidence of what actually happened during the SLR construction. The plaintiffs adduced evidence from one of their experts (Mr Mark Griffith) as to the cause of the prolonged periods of construction in the individual fee zones. (emphasis added)

40. Two important things emerge from an understanding of the way in which the amended IDP was derived.

41. The first is that it assumed that there was complete or substantially complete identification of all utilities along the route before construction commenced. That was confirmed in the following exchange:

LEEMING JA: Does it mean that on the amended IDP, there’s 100% discovery of all the unknown utilities before you start?

BANNON: [For] all intents and purposes.

LEEMING JA: Okay.

BANNON: He allows for some additional contingency, but [for] all intents and purposes.

42. There was no evidence about how long it would have taken to obtain such knowledge, or how disruptive doing so would have been to the occupiers of neighbouring premises.

43. Indeed, Mr Griffith and Mr McIntyre (an expert called by TfNSW) agreed that “the time it took to deal with the utilities” was always likely to have “had a similar effect on the overall completion of the project as actually occurred”.

44. The second is that, at best, Mr Griffith’s amended IDP reflected an opinion of how long it ought reasonably to take to perform all of the activities in the staged construction of the Sydney Light Rail, assuming full knowledge of utilities (including subterranean utilities) in advance. But it is one thing to say in advance that a particular time period is a reasonable time period within which construction should occur, and another thing to say that a builder’s occupation of the roadway and footpaths for any time longer than a particular time period was in fact unreasonable. Mr Griffith’s amended IDP did not purport to delineate the times after which continued occupation of the roadway and footpaths would be unreasonable, whether as a matter of prediction or with the benefit of the delays that actually occurred, and the additional time taken to treat the additional utilities that were discovered in the course of construction.

45. It boils down to this. The Initial Delivery Program attached to the Project Deed contained a timeline for the construction of the Sydney Light Rail. It did not of itself have any contractual force. To the extent that it could be regarded as a prediction of the time for construction, it was deficient in obvious respects (such as the absence of any contingency for weather), and there were obligations upon the parties to update it from time to time as construction proceeded. It is true that the approximate timing of the occupancy in each fee zone reflected in the IDP was communicated to the public and to the nearby occupiers who would be affected. Mr Griffith prepared an amended IDP which corrected the deficiencies he perceived, with the result that the occupancy of each fee zone was extended, but was still very substantially less than the actual occupancy that occurred.

46. TfNSW was not sued for negligently compiling the IDP. Nor was it sued for misleading and deceptive conduct in issuing the press release which stated the durations for which ALTRAC would occupy each fee zone. Instead, TfNSW was sued for nuisance. The primary judge determined that TfNSW was liable for the time it exceeded the amended IDP in each fee zone. But that timing was based merely on Mr Griffith’s corrections of the methodology in the IDP.

47. TfNSW did not adduce evidence of what occurred to delay the completion of the project and why. Nor did the plaintiffs. As will be seen, a significant aspect of the trial was the failure by both sides to establish why the occupation of each fee zone in fact took as long as it did.

48. The critical issue in this appeal is the determination that TfNSW was liable for damages in private nuisance insofar as the contractors occupying the fee zones exceeded the times in the amended IDP. Before addressing that in detail, it is as well to mention the basis on which TfNSW was found liable.

Liability of TfNSW for nuisance for work directed by it

49. TfNSW was not a landowner. Nor did it do any relevant construction work. Nor was it said to be vicariously liable for the conduct of any contractors. Instead, it was found to be personally liable for creating the state of affairs which led to the nuisance: at [939]-[946]. The essence of the problem was that the disincentives in the Project Deed for delayed occupation of a fee zone were insufficient. Simplifying the position considerably, the total amount of daily fees for occupying fee zones beyond the “Base Fee Zone Occupation Period” was capped at $7.5 million, and even that amount might in certain circumstances be reduced by the $3 million “Base Fee Zone Credit” (the details are given at [224]-[225] of the reasons of the primary judge). (For completeness, it may be noted that the “Base Fee Zone Occupation Period” was calculated by reference to Schedule B9, as opposed to the IDP in Schedule A10.)

50. The primary judge concluded:

944 In the end, I agree with Mr McIntyre, one of the defendant’s experts, to the effect that the defendant was faced with competing interests, and I agree with Mr Hardman that the defendant was required to undertake a commercial negotiation. The problem is that it did so on terms that were to the advantage of OpCo at a time when the risk to business owners along the route remained high. That which was predicted by Ausgrid, and had been described by the defendant as an extreme risk, occurred.

945 Whilst the SLR was completed only a year behind schedule, the defendant’s fee zone strategy failed because business owners were subject to extensive construction activities for periods far in excess of that originally anticipated. The defendant took the risk of that occurring when it entered into the Project Deed on the terms that it did. It was the business owners who bore the consequence of the decision. The defendant created that state of affairs.

946 For these reasons, the defendant is personally responsible for the nuisance and is liable to Hunt Leather and Ancio in respect of the losses which they have sustained.

51. That approach accords with authority. It is sufficient if the defendant “created, adopted or continued” the nuisance: Hargrave v Goldman (1963) 110 CLR 40 at 62; [1963] HCA 56. Torette House Pty Ltd v Berkman (1939) 39 SR (NSW) 156 arose from a directed verdict for the defendant in an action for negligence and nuisance. A contracted plumber had gone onto the premises and mistakenly turned on a stopcock which caused water to flow into the plaintiff’s neighbouring land. It was admitted that the defendant did not create it, and was not shown to have known of its existence or allowed it to continue: at 160. However, Jordan CJ was at pains to emphasise that “[a] person who procures the doing of an act is liable for its actual consequences and for anything necessarily involved in its being done whomsoever he may have procured to do it. He is liable for the acts of any agent of his acting within the scope of his employment” at 170; see also at 165. The High Court dismissed an appeal: (1940) 62 CLR 637; [1940] HCA 1, with each of Latham CJ, Starke and Dixon JJ confirming there could be no liability for nuisance from the unanticipated and faultless act of the owner: at 646, 651, 659. This is different from the present facts, and indeed Latham CJ noted at 646 that “the defendant did not employ the plumber to do any act of which the nuisance was the necessary or a natural consequence”.

52. As the Supreme Court of the United Kingdom recently explained, this form of liability is sometimes described as “continuing a nuisance”, and is to be distinguished from a continuing nuisance; the latter term denoting a continuing state of affairs: The Manchester Ship Canal Company Ltd v United Utilities Water Ltd (No 2) [2024] UKSC 22 at [6]-[13]. In order to avoid the verbal similarity between those quite different notions, it is clearer to refer to a person who created, adopted or continued a nuisance.

53. There was no challenge to the reasoning that TfNSW created or procured the conduct which constituted the alleged nuisance.

Utilities risk

54. Reference has already been made to the “utilities risk”: the risk of delay and additional work arising from the need to treat utilities lying beneath the route of the proposed light rail as well as the risk of discovery of previously unknown utilities under the route which would need to be dealt with. The primary judge referred to there being two levels at which the utilities risk arose: in part because of the absence of agreements with utility providers such as Ausgrid, and in part because of the problems which might arise from the discovery of unknown utilities along the route.

55. His Honour said:

108 The NSW Government had announced and promoted the idea that the SLR would be constructed in stages. Occupation periods were specified in the Project Deed. An Initial Delivery Program (“IDP”) was attached to the Project Deed. This was intended to provide a schedule for the construction works in individual stages (fee zones). Part of the schedule included allowances for the treatment of utilities in each fee zone. The risk was that, if more utilities were discovered in a particular fee zone and/or there were difficulties in reaching agreement with utility providers, then the IDP would be impacted and the occupation period in each fee zone would be extended. This is because:

(a) in respect of existing and known utilities, it would be necessary to reach agreement with utility providers as to how the utilities could be treated; and

(b) the discovery of any previously unknown utility would require the D&C contractor to: (i) identify it; (ii) investigate it; (iii) figure out how the construction works would impact upon the utility; (iv) determine whether the utility needed to be relocated or merely protected; (v) determine whether that work could be performed by the D&C contractor (“contestable work”) or whether it would have to be done by the utility provider itself (“non-contestable work”); (vi) plan for the work; and (vi) undertake the utility work.

109 All utilities were owned by third party utility providers. Some utilities could only be handled by the owner of the utilities. Others could be treated by the D&C contractor, as needed.

56. The Project Deed addressed the utilities risk in the Design and Construct contract, as summarised by the primary judge at [216]-[228], including, importantly, cl 12.3. The clause is long and reproduced in its entirety by the primary judge at [224]. His Honour summarised its effect at [225]:

The effect of cl 12.3 was to make OpCo liable to the defendant for a specified amount for each day that OpCo occupied each fee zone longer than the agreed period. Daily fees were calculated for each day that the “Actual Fee Zone Occupation Period” exceeded the “Base Fee Zone Occupation Period.” As was evidenced in cl 12.3(a), a sliding scale of amounts applied, but the total amount was capped at the aggregate of $7.5 million for all daily fees for which OpCo may become liable. Further, at financial close, OpCo would be allocated a credit of $3 million (“Base Fee Zone Credit”) subject to conditions.

Steps to identify unknown utilities

57. How could TfNSW have obtained better knowledge of unknown utilities? TfNSW’s basic submission was simple: “to achieve greater certainty about what utilities were under George Street, for example, in effect cannot be done other than by digging up George Street and having a look”.

58. The primary judge recorded at [168] that, by 10 March 2014, TfNSW had undertaken surveys along the Sydney Light Rail route comprising 105,032 electronic files, all to be issued to the proponents for tender on secure hard drives, and at [178] that on 12 June 2014, TfNSW published further survey data comprising 1,855 electronic files issued to the proponents for tender. This work was done, at least substantially, by a trenching contractor, pursuant to a contract in September 2013 which required the contractor to: (a) carry out a desktop study of the “Dial Before You Dig” documentation; (b) coordinate with others to determine the exact location and depth of trenches required; (c) conduct field verification of existing infrastructure and services (known and unknown) and propose trench locations; (d) facilitate interface agreements with technical advisers and utility providers to optimise access to utilities; and (e) obtain all of the necessary approvals, including from responsible authorities, and comply with their conditions.

59. Mr Griffith assumed full knowledge of utilities in his amended IDP. He confirmed in cross-examination that he did not say what additional surveying should have been undertaken:

MR MILLER: You don’t say anywhere in your report what more utility surveys needed to be undertaken than were. Do you agree?

MR GRIFFITH: No.

MR MILLER: You don’t say anywhere in your report what more part or parts of the alignment needed to be the subject of more survey; do you?

MR GRIFFITH: No.

60. Further, his view that insufficient surveying had been undertaken was a product merely of the fact that so many unknown utilities were encountered during construction:

MR MILLER: Mr Griffith, what you do in your report is say because there were a number of unknown utilities found in the fee zones that you have looked at that are recorded in a utilities register, it must therefore follow that there was insufficient utilities investigation carried out by the date of the project deed; don’t you agree?

MR GRIFFITH: What I say is because there were as many unknown utilities as there were known utilities, that insufficient utility investigations were carried out.

MR MILLER: So the answer to my question is yes, isn’t it?

MR GRIFFITH: If that’s the question that you have asked.

61. The principal debate between experts at trial on the extent to which investigations of unknown utilities could or should have been conducted before construction commenced was between two engineers, Messrs Sampson and Szmalko. The primary judge summarised Mr Sampson’s evidence at length, at [428]-[472], with general approval. His Honour said that much of what he said “makes sense” and that on whether TfNSW’s conduct was unreasonable for the purposes of s 43A of the Civil Liability Act, which was addressed in detail in his second report, he preferred the evidence of Mr Sampson: at [466]. It is unnecessary to summarise Mr Sampson’s evidence on s 43A unreasonableness, but the following matters emerge from his first report.

62. At [431] the primary judge noted that Mr Sampson had said that in 2013 and 2014, it was only possible to have utility assets at 100% quality level A if the entire length of the asset had been sighted and surveyed, which did not happen in the case of the Sydney Light Rail. He said that Stage 1 of the Gold Coast Light Rail had seen the risk of unknown utilities being left to the contractor, which might also have been the original intention in planning the Sydney Light Rail.

63. The primary judge summarised at [193] a “Consolidated Clarification: Returnable 8 – Options” paper dated 1 September 2014 as follows:

the current scope of the investigation works for Route A (being Circular Quay to Central) was “100% level B and level A survey.” Level B survey involved a full geophysical survey, including the location of cables and ground-penetrating radar. Level A survey involved a full internal survey of pit/manholes and the potholing of assets to determine exact depth.

64. The references to “level B” and “level A” were to the following states of information (reproduced by the primary judge at [335] from Mr Szmalko’s report):

… Quality Level B, where the Utility Asset information obtained is more accurate indicating the existence and location of subsurface utilities in three dimensions. In my opinion, even Quality Level B information is not sufficient to proceed with excavation of the Utility Asset without the risk of it being damaged during excavation. However, information relating to the depth of the asset at this quality level improves the ability to plan for its treatment.

Quality Level A, where the Utility Asset information is obtained through non-destructive excavation to directly measure and inspect parts of the Utility Asset. In my opinion, this is the minimum level of accuracy required prior to excavation.

65. Mr Sampson said that the level of investigation which had been undertaken exceeded Mr Szmalko’s generalised quality level estimates. However, he said that it would always be necessary for the contractor to undertake additional quality level A investigations for its design and construction needs:

For the Sydney light rail project, due to the age of the existing utilities and the extremely congested subsurface environment, with the potential for a considerable number of unknown utilities, I would expect the D&C contractor to undertake many long slot trenches (longitudinal and transverse) as part of their subsurface investigations.

66. Mr Sampson said that undertaking sufficient quality level A subsurface investigations to satisfy the project needs by the Request for Proposal stage would have been an extremely invasive process, with considerable time required and a large stakeholder impact. The full investigation process would have required significant amounts of CBD roads and verges to be closed. He also said that it would have been quite impracticable to consider an option that involved fully excavating ground materials to expose the utilities for the entire SLR route prior to commencement of the D&C contract (or at any time).

66. The primary judge summarised Mr Sampson’s conclusion about pre-construction investigations at [435]:

Ultimately, it was Mr Sampson’s view that it was almost impossible to accurately confirm the location of all potentially impacted utility assets along the SLR corridor ahead of a detailed design and the commencement of the construction. He emphasised that many impacts would not have been known until the advancement of the detailed design, such that the detailed utility investigation works would have caused considerable further disruption to stakeholders along the route.

68. The primary judge also gave the following summary of Mr Sampson’s evidence:

446 Mr Sampson believed that the difficulties with utilities in Stage 1 of the Gold Coast Light Rail was a key moment for the civil contracting industry (although the basis of this belief is somewhat unclear). The industry became aware of the risks of entering into a PPP contract model for large light rail infrastructure projects, in which the contractor is required to accept all of the utilities risk.

447 Mr Sampson’s observations about the Gold Coast experience and the experience of the industry experience in general seem to me to be particularly significant. He pointed to the industry’s awareness of the potential for significant delays arising from the discovery of unknown utilities and the need to reach agreement with utility providers. Further, he observed that the Sydney CBD, when compared to the Gold Coast, was significantly more complex from a utilities treatment perspective. He said this would have influenced any proponent for the SLR PPP.

448 In giving this evidence, Mr Sampson was really suggesting that the risk of delay caused by utilities was so high that potential proponents would not be willing to accept it. That is demonstrated by what occurred on the SLR. However, this evidence was really a double-edged sword for the defendant as it tended to highlight that the defendant knew that the risk of substantial delay arising from the utilities was high. Mr Sampson’s point was that the risk associated with utilities was so high that a proponent would not accept it. This provides an answer to Mr Szmalko’s criticism about risk sharing and rather reinforces the problem for the defendant (as it ultimately took the risk).

69. The primary judge concluded with the following summary of the experts’ evidence on this issue:

469 Having said that, there is some consistency between the utilities experts on a number of issues. The deterrence clause (cl 12.3) in the Project Deed was described as unique. Investigating utilities prior to commencing the Civil Works was important and necessary. The general effect of Mr Szmalko’s Utilities Mitigations Steps was not really in dispute. The fact that the trenching contract was unlikely to have discovered all utilities was not in dispute, as it was merely a survey. The suggestion of 100% quality level A in Fee Zone 5 was apt to mislead.

470 It is also clear from the evidence of Mr Lewcock and Mr Sampson that, as I have already accepted with reference to the pre-Project Deed documents, the presence of unknown utilities was a big risk on this project and that the requirements of utility providers were not finalised and remained a risk at the time of entry into the Project Deed.

471 Mr Sampson said that the discovery of previously unknown utilities would make a huge difference to the outcome. As I will explain, he was correct.

472 To a certain extent, the defendant’s expert evidence on utilities tended to highlight the significance, risk and complexity of the utilities problem. The defendant’s evidence assisted its case in resisting the s 43A unreasonableness point but also highlighted the fact that the defendant was well-aware of the risk of substantial delay in completing the Civil Works at the time it entered into the Project Deed.

Different delivery model?

70. The trial judge rejected the respondents’ case that there should have been a different delivery model: at [780]-[790]. In large measure this turned on the finding that utility owners such as Ausgrid would not have committed to any treatments in advance of a completed detailed design (as opposed to a concept level design). There was no challenge to that rejection. His Honour continued at [790]:

In my view, the delivery model was not the problem. As identified by Mr Griffith (and as the documents demonstrate), the problem was that there were too many previously unknown utilities which continued to be discovered in the individual fee zones. The terms on which the defendant engaged the D&C contractor provided relief to the D&C contractor in the case of such events and offered no disincentive for overstaying in each fee zone. At least according to the D&C contractor, the absence of an interface agreement with Ausgrid and the differences between the initial guidelines (attached to the Project Deed) and Ausgrid’s guidelines led to the D&C contractor overstaying its occupation of the fee zones. Having regard to the terms of the Project Deed, the D&C contractor was entitled to relief for these differences.

71. The primary judge rejected TfNSW’s submission that the utilities risk was allocated to OpCo, holding that cl 12.3 provided no disincentive for overstaying in the fee zones. There was no challenge to that finding. The primary judge concluded at [804]-[805] that the risk of delayed completion of the works in each fee zone caused by the discovery of unknown utilities and changes to known utilities continued, and despite TfNSW’s initial plans that OpCo assume that risk, the result was “an arrangement which imposed little of that risk on the D&C contractor”, and in turn “the business owners were exposed to that risk and the risk came home”.

The dispositive reasoning of the primary judge

72. Under the heading “Was the interference with the plaintiffs’ businesses substantial and unreasonable?”, the primary judge concluded that it was at [910]-[923].

73. His Honour said:

912 Whether the interference with the plaintiffs’ use of their properties was unreasonable must be assessed objectively, having regard to the position of both landowners (or occupiers) and the uses to which the land was being put.

913 This necessarily involves an evaluative assessment of the principle of give and take. It is not an assessment based on some legal standard. It is necessary to consider what would be reasonable for a person in the position of the plaintiffs to put up with, having regard to the principle of give and take.

74. The primary judge said at [914] that the period of the interference must be an important factor in assessing reasonableness, and noted that it was lengthy and much longer than TfNSW had assured businesses would occur. His Honour said that other relevant factors included the nature and purpose of the activities, the relationship between the parties, including the obligations of the landowner from which the nuisance emanates, the period during which the interference was substantial, the benefit of the activities to the public, whether the landowner took care to avoid unnecessary interference, whether there were self-help measures available to the claimants, and the extent to which the defendant might have known or anticipated that the interference would impact on the financial interests of the adjoining landowners. Many of those factors pointed in favour of a longer period of time for construction. The essence of the evaluative decision made by his Honour was as follows:

916 … However, the period is not never-ending. Nothing about the defendant’s power or authority permitted it to infringe the rights of the landowners and users along the route for an excessive period.

917 In my view, assessed objectively, the lead plaintiffs (Hunt Leather and Ancio) suffered an interference with the use of their properties which was both substantial and unreasonable.

918 Both the Hunt Leather Strand Arcade store and Mr Zisti’s restaurant were exposed to the effects of the construction works for a period of three years. This must be contrasted with the much shorter periods set out in the IDP (and even Mr Griffith’s amended IDP). The defendant may be correct in suggesting that the IDP was merely an estimate but it was an estimate which the parties must have considered to be reasonable and reflective of the way they thought the work could and should be done, assuming that there would be proper planning.

75. That conclusion is, necessarily and explicitly, based on a finding that the IDP or the amended IDP represented a reasonable estimate of the time within which the work could be done.

76. The primary judge also rejected TfNSW’s submission, reiterated in this Court in support of ground 2 of its appeal, that “if it was reasonable to undertake the works, it did not become unreasonable during the course of the works”. His Honour said:

919 … despite the public benefit in the development of the SLR and despite the fact that use of the land might have been reasonable for a period (leaving aside the plaintiffs’ “common and ordinary” argument), there came a point in time when it became unreasonable.

920 Establishing that the use of the road for the light rail was for the public benefit and represented a reasonable use of the land for some period does not preclude an action in nuisance for any period that the interference became unreasonable. If the opposite was true, a landowner who has obtained permission to undertake construction works could be said to have extinguished the rights of the neighbouring landowner. That cannot be so.

921 The defendant knew that the construction of the SLR would expose businesses to a form of interference which had the potential to, and was likely to, severely impact the businesses being operated. The risk, of which the defendant was aware during the planning and procurement stage and when it entered into the Project Deed, came home. The impact of the construction activities amounted to a substantial and unreasonable interference for a period.

The notice of appeal

77. The notice of appeal contained 11 grounds. Parts or all of grounds 1, 2(b), 3, 5, 6, 7 and 8 turn on questions of fact. Grounds 2(a) and 4 turn on questions of law, as do the grounds concerning s 43A.

78. Ground 1 challenged the finding that Hunt Leather and Ancio suffered an interference which was both substantial and unreasonable for which TfNSW was responsible, primarily because it was not open to his Honour to have regard to the IDP (or the amended IDP) as a reasonable estimate. Ground 2(b) was that the primary judge erred in finding that TfNSW did not use reasonable care “to protect the interests of the business owners” along the Sydney Light Rail route. Ground 3 was that the primary judge failed to give adequate reasons for finding that construction activities took substantially longer than planned. Ground 5 maintained that the primary judge erred in concluding that the use of the roads along the route for the purpose of constructing the Sydney Light Rail was an “exceptional” rather than a “common and ordinary” use of the roads. Ground 6 was that the primary judge erred in finding that TfNSW failed to show that any nuisance caused by the construction of the SLR for which TfNSW would otherwise be liable was inevitable. Ground 8 was that the primary judge erred in finding that the construction activities took substantially longer than planned because of the discovery of previously unknown utilities and the time taken to reach agreement with utility providers, as well as “the issues surrounding Modification 25”, and also erred in finding that there was a sufficient evidentiary basis to conclude that the nuisance commenced on 1 November 2016 and 3 September 2017 in respect of Hunt Leather and Ancio respectively, based on the amended IDP.

79. Ground 2(a) was that the primary judge failed to treat as determinative whether TfNSW had taken reasonable care in connection with the construction activity. This ground amounted to the proposition that because the construction of the SLR was a means to an end, and was a legitimate endeavour, it could not constitute an actionable nuisance, at least so long as TfNSW was exercising reasonable care. Ground 4 complained of error in finding that TfNSW bore the onus of proving that it took all reasonable care in connection with the construction along the route of the SLR project.

80. Ground 7 concerned the calculation of damages, and challenged the allowance in the calculation of damages given for a 12 month “recovery period” after the cessation of the occupation of the fee zones.

81. Grounds 9, 10 and 11 concerned the defence under s 43A of the Civil Liability Act.

82. The law of nuisance, perhaps more than most areas of law, gives rise to difficult questions of principle. In part this reflects the fact that there are relatively few decisions of the High Court, and some of those (including Hazelwood v Webber (1934) 52 CLR 268; [1934] HCA 62 and Torette House Pty Ltd v Berkman (1940) 62 CLR 637; [1940] HCA 1) largely concern the rule in Rylands v Fletcher, and arguably require revisiting in light of the High Court’s decision in Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 at 555-556; [1994] HCA 13 to the effect that the rule should mostly be seen as “absorbed by the principles of ordinary negligence”, subject to the qualification that “there may remain cases in which it is preferable to see a defendant’s liability in a Rylands v Fletcher situation as lying in nuisance (or even trespass) and not in negligence”. In part it is a consequence of the divided decision of the High Court in Hargrave v Goldman (1963) 110 CLR 40; [1963] HCA 56, where the point of division was whether liability could extend to nuisance (as Taylor and Owen JJ considered) or whether the defendant could only be liable in negligence, the view advanced by Windeyer J. In part it is a consequence of the fact, noted by the primary judge, that some aspects of the Australian law of nuisance have diverged from that in England and Wales. In part it reflects the division seen in the judgments in Fearn v Board of Trustees of the Tate Gallery [2024] AC 1; [2023] UKSC 4, a decision pressed upon this Court by the respondents, to which we shall return. In part it is a consequence of statute, because many of the nineteenth and early twentieth century decisions decided as actions for private nuisance would today be determined using statutes, notably, planning and environmental legislation. In part it may reflect the proposition, urged upon this Court by TfNSW, that there is not a single law of nuisance, but instead there are separate categories of conduct capable of resulting in a substantial and unreasonable interference to the enjoyment of land, one of which is construction works, to which it was contended special rules apply.

83. This Court had the advantage of receiving submissions from both sides of a very high quality, which extended to many points of principle. That said, this Court’s function is to resolve the appeal, rather than attempting to “discern and apply some other all-embracing criterion of liability in the common law”; cf Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560; [2019] HCA 32 at [76]. In accordance with the approach there stated by Gageler J, we shall apply “the standard common law judicial technique of deciding no more than what needs to be decided”. In large measure, that turns on the resolution of issues of fact, as is clear from the foregoing summary of the grounds of appeal.

The main issue of fact

84. The primary judge found that insofar as construction took longer than the timeframes identified in the amended IDP, it was actionable nuisance. Ground 1 challenged the factual premise of that reasoning. For the reasons which have been anticipated in the foregoing, this ground is made out.

85. The IDP could not on its face be regarded as anything like a reasonable estimate of construction time in any particular fee zone. It made no allowance for inclement weather. It made no allowance for the discovery of unknown utilities and their treatment. It made no allowance for various other contingencies. It may well have been the basis for the media release, but if so it was not a reasonable basis for any estimate of construction time in any particular fee zone.

86. The “amended IDP” increased the time each fee zone would be occupied by construction for a few months, to address deficiencies apparent to Mr Griffith on the face of the original IDP, such as lack of allowance for bad weather and certain contingencies. However, the amended IDP proceeded on the basis that no construction would commence until there was complete knowledge of the thousands of sub-surface utilities along the route.

87. It was not established that it was possible, and if so how long it would take and whether that too would amount to a substantial interference with the enjoyment of the plaintiffs’ land, to obtain complete knowledge of the unknown utilities. These points are developed below.

88. Fee zone 5 was a single block – George St between King and Market Streets. So too were many other of the fee zones in the Sydney CBD (fee zone 6 was George St between Market and Park Streets; fee zone 7 was George St between Park and Bathurst Streets, fee zone 8 was George St between Bathurst and Liverpool Streets, and so on). It is in the order of 230-250m long. Before construction work commenced, 67 utilities were identified, and a further 55 utilities were identified during construction. That is an average of a utility every couple of metres.

89. The utilities identified in advance of construction along the Sydney Light Rail route were extremely numerous. Mr Griffith’s report stated in Attachment 6:

I have identified that the Fee Zones and intersections are potentially impacted by 2,942 individual known Utility Services. Of these, based on Schedule F8, the Contract requires work on 2,456 Services.

90. In addition to the thousands of utilities identified prior to construction commencing, a very large number of hitherto unknown utilities were uncovered during construction. Paragraph 633 in Attachment 6 of Mr Griffith’s report identified that there were 55 unknown utilities in fee zone 5 (compared to 67 known before construction), 46 in fee zone 6 (compared to 37), 48 in fee zone 28 (compared to 135) and 103 in fee zone 29 (compared to 106). That is to say, in fee zones 5 and 29, there were approximately as many utilities discovered during construction as had been located in advance of construction, and in fee zone 6 (the block of George St between Market and Park Streets), another 46 – more than the 37 which had been detected prior to construction – were discovered during construction.

91. It is perfectly plain that the utilities were densely located, at least in the inner CBD fee zones such as in fee zone 5 and nearby. There was a utility which required treatment every few metres, with dozens on each city block.

92. In those circumstances, the idea that a series of investigative trenches could be dug so as to identify all of these utilities (for example, a series of night works, with the road and footpath being temporarily restored in time for morning traffic) seems implausible. Yet the premise of the reasoning advanced by the plaintiffs and adopted by the primary judge was that the occupation of the fee zones became tortious after the expiry of the times in the amended IDP, with those times being based upon complete knowledge of the utilities prior to construction commencing. If that were to be the basis of liability, then the plaintiffs needed to establish:

1. first, that it was possible in some rational way to obtain complete knowledge of the utilities prior to construction, and

2. secondly, assuming it were possible to do so, how much interference would that investigation cause.

93. It would in theory be possible to obtain complete knowledge of the utilities by digging up the entirety of George St in each fee zone, uncovering and identifying the utilities. That could not sensibly be done, however, without blocking the street for some extended period of time; at least, there was no evidence that this could be done in any feasible timeframe, and it seems inherently problematic. It also seems most unlikely that that could be done by a series of night works, with temporary resurfacing in time for the road to be reopened the following day. And it would be absurd to dig up the entire road and footpath in order to discover all the utilities, then to resurface it, only to proceed later to undertake the construction works, in the hope that the construction would conform to the timeframes in the amended IDP.

178. Those reasons are sufficient to conclude that these grounds are not made out. In an appeal where the application of s 43A does not alter the result, it is neither necessary nor desirable to address the operation of s 43A comprehensively.

The cross-appeal – should damages include the funder’s 40% fee?

182. For the reasons already given, the appeal must be allowed. Turning to the cross-appeal, whether or not the partial costs order made by the primary judge and noted at [4] above discloses reviewable error is entirely arid, because the order will in any event be set aside. Likewise, the question whether damages should include a litigation funder’s fee does not arise. However, unlike the exercise of the discretion as to the costs of this particular trial, the question concerning the recoverability of the funder’s fee was the subject of full submissions, is a question of principle, and one which will recur in other cases. It is addressed below.

The cross-appellants’ submissions

183. At trial and on appeal, the cross-appellants submitted that the award of damages should include compensation for the litigation funder’s commission. The litigation funding agreement with International Litigation Partners No 16 Pte Ltd provided, relevantly, that the funder would pay all legal costs and disbursements, meet any adverse costs orders, provide any security for costs, provide “litigation management services”, and upon receipt of a “Resolution Sum” would be entitled to reimbursement of the costs it had paid, plus a “Funder’s Commission”. The amount of the commission principally depended on when the resolution was reached, and ranged between 25% and 40%. In the circumstances which led to the judgments being obtained in favour of Hunt Leather and Ancio, the fee was 40%.

184. Common question 10 asked whether the cross-appellants were entitled to claim as a head of damages their reasonable litigation funding costs without needing to show that it was TfNSW’s nuisance which rendered them impecunious, that they would have pursued the claim without litigation funding had they the means, or that they negotiated over the terms of the litigation funding agreement. Common question 11 asked, assuming common question 10 was answered in the affirmative, what a reasonable rate of recoverable litigation funding costs would be.

185. The primary judge found against the cross-appellants on this point, holding that litigation funding costs were not recoverable as a head of damages: Hunt Leather Pty Ltd v Transport for NSW (No 4) [2024] NSWSC 140. His Honour found that reasonable foreseeability was not a sufficient criterion to extend legal responsibility for loss, and considered that the claimed loss was too remote: at [100]-[102]. His Honour considered that the loss was not caused by the cross-respondent’s nuisance but rather by the cross-appellants’ decision, made freely and willingly, to enter into a litigation funding agreement: at [103]-[111]. Further, the primary judge did not consider it appropriate to extend legal responsibility for the loss to the cross-respondent: at [112]-[122]. Common question 11 did not arise.

186. On appeal, the cross-appellants submitted that the loss and damage suffered by the group members included the cost of obtaining the funding necessary to bring the present proceeding, and that the trial judge erred in concluding otherwise. Necessarily, in light of his Honour’s reasons, they contended that the primary judge had erred in holding that the loss was too remote, that there was a break in the chain of causation, and that it was not appropriate for the cross-respondent to be responsible for the obligation to pay the litigation funder.

187. The cross-appellants submitted that the trial judge’s approach to remoteness was contrary to the principle that the defendant is liable for reasonably foreseeable damage. They relied on Landoro (Qld) Pty Ltd v Jensen International Pty Ltd [1999] QCA 318, where the Queensland Court of Appeal allowed amendments to a statement of claim by which the appellant sought to recover the cost of litigation finance it had incurred as a result of the respondents’ alleged breach of contract. They also cited Thomas (as liquidator of Anne Lewis Pty Ltd (in liq)) v Arthur Hughes Pty Ltd [2016] NSWSC 1861 at [19], which refers to Landoro.

188. The cross-appellants contended that the trial judge erred in finding that entry into the litigation funding agreement was not a loan to finance litigation, and could not be characterised as litigation finance or funding. They contended that finance can take on many forms, and that the funder’s obligation to pay legal costs and disbursements is in effect a loan to be paid from the final sum, together with a commission in the form of a contingency fee, especially in the case of funded group members, who have assigned part of the “value” of their claim to the litigation funder. They submitted that the real benefit of the funding arrangement was the prosecution of these proceedings, rather than, as the trial judge concluded, the avoidance of fees and exposure to adverse costs orders. They alleged that this error infected the trial judge’s assessment of whether the loss was caused by the cross-respondent’s conduct or was too remote.

189. Further, the cross-appellants submitted that the litigation funding loss was a reasonably foreseeable consequence of the cross-respondent’s nuisance, and contended that the test for remoteness is whether harm of the kind suffered was reasonably foreseeable. In particular, they submitted that it was reasonably foreseeable that the nuisance would impact a wide class of persons, that it would be uneconomic for these individuals to bring separate claims and that they would be unwilling to take on the adverse costs risk, and thus that it was likely a funded class action would be brought. As they put it, but for the nuisance, the funding agreement would not have been entered into, and the case itself could not have been brought without funding.

190. Finally, the cross-appellants submitted that the trial judge erred in concluding it was not appropriate that the cross-respondent be held responsible for the litigation funding losses. They noted again that the agreement would not have been entered into but for the cross-respondent’s conduct, that a funded class action was reasonably foreseeable, and that in the absence of a damages order accommodating this type of loss, the applicants and group members would not be put in the same position had the tort not been committed. They submitted that the question was not about scope of risk. Instead, they submitted, the purpose and policy of the law of nuisance made it appropriate for liability to extend to these losses.

TfNSW’s submissions

191. In response, TfNSW observed that the primary judge’s view that the litigation funding was not litigation finance was not of decisive significance in his Honour’s reasoning, and that in any event, the funding was more than simply passive litigation finance, as it rewarded the funder for the risk it assumed and provided remuneration for management services.

192. TfNSW also submitted that reasonable foreseeability is not the sole restriction upon the recoverability of damages, and that remoteness principles and normative considerations also apply. Further, they submitted that they could not have reasonably been expected to foresee the events which transpired – specifically, the litigation and this type of funding. They noted that the scope of their obligation in issue was to avoid substantial and unreasonable interference with the use of the land, and that litigation funding was not within the scope of risk created by the nuisance. They submitted that the cross-appellants entered into the funding agreement independently of TfNSW’s conduct, breaking the chain of causation, and that it cannot be the case that litigants can deliberately choose to increase their loss. They also submitted that allowing this cost to be recoverable would advantage funded plaintiffs over others, and that it was not appropriate for the scope of a defendant’s liability to extend to payments made for the purposes of enabling litigation against that defendant.

Consideration

193. The primary judge was correct to dismiss this aspect of the plaintiffs’ claim, for the following reasons, which substantially overlap with those given by his Honour.

194. First, there can be no doubt that the entry into the funding agreements was a voluntary act by some group members. Moreover, the premise of common question 10 was that no assumption was to be made that the group member was impecunious or that any impecuniosity was brought about by the tortious conduct of the defendant, thereby serving to emphasise the voluntariness of the group member’s decision. Their decisions to do so, or to choose not to do so, might be attended by very different considerations. A supermarket which is a franchisee and a supermarket which is a branch of a major listed Australian company might both be affected in similar ways by the construction of the Sydney Light Rail, but each might have quite different approaches as to how they would approach the decision to enter into the funding agreement.

195. Those and similar considerations suggest that there are difficulties in treating the cost of the funding agreement as a component of the damages for which TfNSW would be liable. It seems decidedly odd that TfNSW would be liable for 40% more to a franchisee who entered into a funding agreement, than to a public company which operated a similarly sized and similarly affected supermarket next door.

196. The group members who entered into funding agreements have chosen to bargain away the risk of being exposed to an adverse costs order and a liability to pay security for costs, as explained by the primary judge:

109 What the plaintiffs have really done is enter into a bargain with a third party, by which they agreed to give the third party an amount of money in return for the third party taking the risk on the litigation. The loss arises from the plaintiffs’ own conduct or decision to pursue the litigation on a risk free basis. Without reference to the defendant, the plaintiffs have increased “their loss” by 40% so as to ensure that they did not bear any costs associated with the litigation. They have not otherwise reduced their loss of profits flowing from the defendant’s conduct. They have agreed to “take a loss” on the amount they actually recover from the defendant by way of actual losses caused by the defendant, so as to enable them to not only pursue the litigation but to do so on a risk free basis.

110 The funder’s commission is different from litigation finance provide by a third party to a plaintiff to enable the plaintiff to pay its legal costs. The funder’s commission represents the funder’s return on its investment. The funder did not lend money to the plaintiffs. It agreed to pay the plaintiffs’ expenses in return for a slice of the damages.

111 In those circumstances, the causal chain between the defendant’s conduct and the loss has been broken. The plaintiffs’ conduct in entering into such an agreement was an intervening act which broke the causal chain between the tortious conduct and the so called loss. I do not accept that the defendant caused the claimed loss, being the funder’s commission.

197. We respectfully agree, although rather than describing the plaintiffs’ decision as being to increase “their loss” by 40%, we would say that they have promised to pay 40% of the damages to which they would otherwise have been entitled in return for an indemnity as to the costs of the litigation (including the potential liability for adverse costs orders and orders for security for costs). But we cannot accept the cross-appellants’ submission that the “real benefit” of the funding agreement was the prosecution of the proceedings. The “real benefit” was an indemnity for the certainty of the incurring of legal costs, and the practical certainty of a liability to provide security for costs, and the potential liability for an adverse costs order, all of which were incidents of the lead plaintiffs’ decision to prosecute the proceedings, and which were the quid pro quo for the funder’s “commission”.

198. In those circumstances, the litigation funder’s fee is not to be regarded as a foreseeable loss caused by the defendant’s nuisance, but instead as the voluntary act of the particular plaintiff.

199. Secondly, if the funder’s commission of 40% is recoverable as damages, then there would be every incentive for every group member, large or small, to enter into such an agreement. There would be no downside for any group member. Nor would there be any incentive to bargain for a smaller fee. We fail to see how that would serve any of the ends to which the legal system is directed. Some of the submissions advanced on behalf of the cross-appellants had the tenor that any measure which improved the ability of plaintiffs to bring proceedings against a defendant enhanced access to justice and was, for that reason alone, within the policy of the law. But in truth the position is more nuanced, as was observed by Glazebrook J writing for the New Zealand Supreme Court in Waterhouse v Contractors Bonding Ltd [2014] 1 NZLR 91; [2013] NZSC 89 at [41]-[42]:

Much was made by Mr Mills of the importance of access to justice for plaintiffs who could not otherwise afford to bring a meritorious suit. We agree that access to justice is an important value in our society. However, this justification for litigation funding can be exaggerated. …

Litigation is a burden to all parties and this burden is not merely financial. Litigation can be time-consuming and emotionally burdensome. It can even be oppressive. The availability of litigation funding could exacerbate the risk of defendants being faced with unmeritorious claims and forced into unjustifiable settlements.

200. It is to be borne steadily in mind that litigation funders are not altruistic organisations dedicated to enhancing access to justice; they are self-interested investors, seeking to profit by involving themselves in litigation. The fact that litigation may be funded of itself provides no good reason to alter the rules of compensable loss for tort.

201. Nor can we accept the cross-appellants’ submission that there is something about the policy of the law of nuisance which renders fees paid to a litigation funder recoverable. There is nothing special about the law of nuisance in this respect, nor is there any relevant difference between the funding of this representative proceeding and any other form of representative proceeding that seeks pecuniary remedies.

202. Thirdly, at least in large measure, the benefit of the funding agreement was in meeting the group members’ costs and any liability for an adverse costs order or an order for security for costs. This suggests that if the quid pro quo provided by the group member – namely, the commission – were recoverable at all, it would be recoverable as a cost or expense of litigation, rather than as a component of damages. But if that is the correct characterisation, it presents an obstacle to the claim for the same amount as damages, in accordance with the principle in Anderson v Bowles (1951) 84 CLR 310 at 323; [1951] HCA 61:

The legislature having determined that costs shall not be recoverable in proceedings of the character now in question, it would be contrary to the principles which these cases exemplify if they were included in the damages and thus were made recoverable by a side wind.

203. A Full Court of the Federal Court said in Gray v Sirtex Medical Ltd (2011) 193 FCR 1; [2011] FCAFC 40 at [15]:

A distinction has long been drawn between damages and legal costs, such that a successful plaintiff cannot recover its costs of the proceedings from the defendant as damages, even though the defendant’s wrongful act caused the plaintiff to incur those costs: Cockburn v Edwards (1881) 18 Ch D 449 per Jessel MR at 459, per Brett LJ at 462 and per Cotton LJ at 463; Ross v Caunters [1980] 1 Ch 297 at 324E-G: Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 at 365F-366B; Seavision Investments S.A. v Evennett & Clarkson Puckle Ltd (The “Tiburon”) [1992] 2 Lloyd’s Rep 26 at 34; Queanbeyan Leagues Club Ltd v Poldune Pty Ltd [2000] NSWSC 1100 at [45] and [46]; McGregor on Damages, 18th ed (Sweet & Maxwell, London, 2009) at [17-003]. A plaintiff’s ability to recover its costs of the proceedings from a defendant depends instead upon the exercise of a judicial discretion; and the amount (if any) that the plaintiff recovers is not assessed in the same way as damages, but “taxed” according to the applicable rules of Court. As Jessel MR put it in Cockburn at 459.8:

... it is not according to law to give to a party by way of damages the costs as between solicitor and client of the litigation in which the damages are recovered. The law gives a successful litigant his costs as between party and party, and he cannot be said to sustain damage by not getting them as between solicitor and client.

204. To substantially the same effect is the rule stated by Devlin LJ in Berry v British Transport Commission [1962] 1 QB 306 at 328 that expenditure on litigation is not recoverable loss.

205. Fourthly, the entitlement of the litigation funder to its commission only accrued upon the entry of a judgment (or alternatively settlement). That not only tends to confirm the force of the previous point but also presents a conceptual difficulty, if not a paradox, identified by the primary judge at [67]:

At the time of the assessment of damages and entry of judgment, the plaintiffs had not paid any amount to the litigation funder. Indeed, they did not become liable to pay any amount to the litigation funder at the time that the nuisance occurred. Whilst liability to pay might be viewed as a loss capable of being subject to an award of damages, it is a feature of this aspect of the claim that the liability to pay (which is said to be the loss) did not crystalise until after a judgment was otherwise entered in favour of the plaintiffs (whether by Court determination or agreement) for a sum of money. The plaintiffs only become liable to pay the funder’s commission after they become entitled to receive a sum from the defendant by way of a judgment (either determined or by consent).

206. The plaintiffs are thus seeking to recover “a loss” which does not crystalise until after the defendant has been ordered, or has agreed, to compensate the plaintiffs in respect of their economic loss. It is a loss which the plaintiffs are not even obliged to tell the defendant about until a time of their choosing.

207. We also cannot accept the cross-appellants’ submission that it is sufficient that the loss be reasonably foreseeable. For the reasons in the previous paragraph, it may be doubted that it is reasonably foreseeable, but the more fundamental consideration is that reasonable foreseeability is a necessary but not a sufficient touchstone for damages in this area. Some losses are taken as being caused by the plaintiff’s own voluntary act, and some are outside the scope of liability.

208. Finally, the foregoing is consistent with the absence of any authority supportive of the cross-appellants’ submissions. Landoro does not assist them. A decision which permitted an amendment to go to trial is not authority for the proposition that the claim is sound, and indeed, Davies JA explicitly said in Landoro at [12] that “[t]o allow these claims to proceed is not, by any means, to assert their correctness”. The principles governing the circumstances in which novel claims may be pleaded are summarised in Perera v Genworth Financial Mortgage Insurance Pty Ltd (2017) 94 NSWLR 83; [2017] NSWCA 19 at [32]-[38]. The reference in Thomas v Arthur Hughes Pty Ltd takes the matter no further.

209. For those reasons, the funder’s commission is to be regarded as the incurring of a liability by the group members’ separate voluntary decisions, rather than a consequence of any actionable nuisance. If that be wrong, then at least in the premises of common question 10, which is that it is unnecessary to establish that the nuisance rendered a group member impecunious, we would not regard the scope of the defendant’s liability to extend to the funder’s commission.

206. The cross-appeal must be dismissed.

Conclusion and orders

211. For those reasons, the appeal should be allowed, the orders made by the Court at first instance in favour of Hunt Leather and Ancio should be set aside, and in lieu thereof, judgments should be entered in favour of TfNSW. TfNSW did not suggest that any of the answers to the common questions given by the primary judge needed to be set aside. The cross-appeal should be dismissed. There is no reason of which the Court is presently aware for costs not to follow the event, both at first instance and in this Court, but that will not prevent any party from making an application within the time stated in UCPR r 36.16.

212. The Court makes the following orders:

1. Appeal allowed.

2. Cross-appeal dismissed.

3. Set aside each of (i) order 1 made in the Common Law Division on 3 August 2023, (ii) the judgment in favour of Hunt Leather Pty Ltd entered on 15 December 2023, (iii) the judgment in favour of Ancio Investments Pty Ltd entered on 8 February 2024, and in lieu thereof, order that (i) the proceedings be dismissed and (ii) the plaintiffs are to pay the defendant’s costs.

4. Order the respondents/cross-appellants to pay the appellant’s/cross-respondent’s costs of the appeal and cross-appeal.

**********

Amendments

20 September 2024 - changed order of counsel in coversheet

17 March 2025 - deleted comma after "zone" in [15] and inserted "and" thereafter.

17 March 2025 – replaced "time" with "times" in [18].

17 March 2025 – inserted "were" between "amendments" and "what Mr Griffith" in [38].

17 March 2025 – replaced "[771]" with "[768]" in [111].

17 March 2025 – replaced "from" with "for" immediately after "alternative model" in [131].

17 March 2025 – replaced "shown" with "shewn" in quote in [139].

17 March 2025 – replaced "560" with "600" immediately before quote in [140].

17 March 2025 – deleted "Bramwell B" and replaced "it is no answer that the act" with "the jury should not be asked "whether the causing of the nuisance"" in [144].

17 March 2025 – replaced "Viscount" with "Lord" and replaced "reasonableness" with "reasonable" in [145].

17 March 2025 – inserted "to" after "contrary" in [163].

Decision last updated: 17 March 2025