The NSW Court of Appeal has overturned the decision of the Supreme Court in Hunt Leather Pty Ltd v Transport for NSW [2023] NSWSC 840, which we discussed in our August 2023 article that highlighted the significant implications the decision had for infrastructure projects.

The Supreme Court at first instance found Transport for NSW (TfNSW) liable for private nuisance to business owners along the Sydney light rail corridor (SLR) from Circular Quay to Kingsford/ Randwick. 

The Court of Appeal overturned that decision based on the first ground of appeal, which centred on whether there was a private nuisance due to contractors occupying so called 'fee zones' along the SLR route beyond the times set out in a delivery program. It held there was no private nuisance as the delivery program was not a reasonable estimate of the relevant timeframes, and there was insufficient evidence to show that there was a form of pre-construction investigation that would have temporarily reduced the interference with the use of land. 

The Supreme Court proceedings were commenced as a class action against TfNSW on behalf of all persons who suffered loss or damage by reason of the interference with their enjoyment of their interest in the land. The two lead plaintiffs were a luxury handbag store, and a restaurant. 

The primary judge considered that a person could not complain about some measure of disruption caused by the construction of the SLR. Indeed the initial judgment found there were some substantial interferences with enjoyment which were not actionable. However, the Court at first instance stated that there comes a point in time after which TfNSW would be liable for damage caused by the ongoing disruption. In this regard, the primary judge accepted that private nuisance would arise from delays which exceeded the timeframes in a document known as an amended Initial Delivery Program. This amended document was prepared by the Plaintiff's planning and programming expert, based off TfNSW's Initial Delivery Program (IDP), a document which was attached to the Project Deed and the timeframes of which were also reflected in a media release. As a result of the exceedance, the Court at first instance held the disruptions to the plaintiffs amounted to a substantial and unreasonable interference with the plaintiffs' enjoyment of their property. 

The outcome at trial for the private nuisance claim meant that TfNSW had been found liable for the financial damage suffered by the two businesses during the construction of the SLR, with the possibility of further liability to other class action members. The public nuisance claims brought by two other plaintiffs were dismissed.

The initial decision had obvious implications for infrastructure planning and delivery throughout the State, as it showed how similar private nuisance claims might be brought by disrupted businesses trading in proximity to an infrastructure project.

TfNSW appealed the decision on 11 grounds. 

The ground of central importance was the challenge to the finding that the plaintiffs had suffered an interference that was both substantial and unreasonable for which TfNSW was responsible, on the basis that it was not open to the trial judge to have had regard to the amended IDP prepared by the plaintiffs as a reasonable estimate of the timeframe for the completion of the relevant stages of the SLR. This ground challenged the underlying factual premise of the primary Judge's reasoning. The Court of Appeal unanimously upheld this first ground, which was sufficient to resolve the appeal in favour of TfNSW. An order for costs in favour of TfNSW followed. 

In its reasoning, the Court of Appeal (Bell CJ, Leeming JA, and Michelmore JA) found that the IDP could not on its face be regarded as anything like a reasonable estimate of construction time in a particular zone, given it made no allowance for inclement weather, and no allowance for the discovery of unknown utilities and various other contingencies ([85]). 

Whilst the amended IDP prepared by the plaintiffs' expert witness addressed some of these deficiencies, for example, inclement weather, it proceeded on the basis that no construction would commence until there was complete knowledge of the numerous subsurface utilities along the route ([86]). It did not explain how that could practically occur. If that were to be the basis of liability, the Court of Appeal held (at [92]) that 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".

The Court of Appeal considered it "conspicuous" (at [94]) the lack of evidence as to how in some rational way complete knowledge of the utilities could be obtained in advance of construction without also causing further substantial interference with occupiers’ enjoyment of their property noting the thousands of subsurface utilities underneath to road reserve.

In other words, the plaintiffs had not produced evidence that there was a form of pre-construction investigation which would have reduced the interference with the plaintiffs' enjoyment of their land ([94]-[95)]. 

The Court of Appeal went on to state that even with a complete knowledge of the utilities, given the complexity of the SLR project, it "cannot be the case that construction authorised by statute becomes actionable nuisance if it takes a month or two months or three months longer than scheduled" [96]. 

The remaining 10 grounds of appeal raised by TfNSW were rejected by the Court of Appeal. 

Whilst ground 1 was successful, as the ground rested on a challenge to a factual premise (see [84]), much of the trial judge's detailed analysis on the law of private nuisance has not been disturbed by the Court of Appeal's unanimous judgment.

In particular, the Court of Appeal confirmed that it was not strictly necessary for a plaintiff in an action for nuisance to prove that the defendant failed to take reasonable care, and there was no such exception for "construction cases" (paragraphs [135] - [153]). 

In dismissing three of TfNSW's other grounds, the Court of Appeal also confirmed that there was no error by the trial judge in holding that the attenuated standard of care for public authorities in section 43A of the Civil Liability Act 2002 did not apply to a claim for private nuisance (paragraphs [161] to [181]). 

The plaintiffs (the cross-appellants) also brought a cross-appeal against TfNSW (the cross-respondent) regarding the decision that dismissed their claim that damages should include a 40% commission they were liable to pay to a litigation funder in Hunt Leather Pty Ltd v Transport for NSW (No 4) [2024] NSWSC 140 (primary decision). Litigation funders are companies that pay the cost of the litigation and accept the risk of paying the other party's cost. 

The trial judge found that the litigation funding costs were not recoverable as a head of damages for the following reasons:

• the claimed loss was too remote (see paragraphs [100-102] of the primary decision); and

• the cross-appellants, freely and willingly entered into the litigation funding agreement (see paragraphs [103 - 111] of the primary decision). 

The cross-appellants submitted that the funding was necessary to bring the proceeding, and that TfNSW was liable, as the damage, including the cost of litigation, was reasonably foreseeable. Further, the "real benefit" of the proceedings was not avoidance of the cost of litigation but rather the prosecution of the proceedings (paragraph [188]). 

TfNSW argued that they could not have reasonably been expected to foresee the events that followed, in particular the litigation and the type of funding the cross-appellants would select (paragraphs [191 - 192]).  

The Court of Appeal agreed with the primary judge's decision and ultimately dismissed the cross-appeal. It found that the "real benefit" was not the prosecution of the proceedings, but an indemnity of incurring legal costs and ensuring that costs could be paid in the event TfNSW prevailed (in other words, the cross-appellants could provide security for costs if required) (at [197]). The Court of Appeal ultimately viewed this as a voluntary act of the cross-appellants opposed to a foreseeable loss. It was observed by the Court of Appeal that if the 40% commission was viewed as a "head of damages", then there would be "no downside for any group member" (paragraph [199]) who enters into a litigation funding agreement. 

The Court of Appeal's decision will provide some comfort to infrastructure providers during the project planning and delivery phases, as it considers that delays in the order of weeks to months for complex projects are not sufficient to create a nuisance. 

It is important to note that the decision does not close the door on future nuisance claims being brought against public authorities developing infrastructure that is disruptive to adjoining occupiers of land, whether they own or lease land. If part of the liability is to be anchored to project timeframes, it is important that those timelines be reasonable and accurate and the assumptions underlying them be appropriate in the context of the relevant infrastructure project. The critical question for future potential claims over similar infrastructure projects will be whether the relevant interference is "substantial and unreasonable. 

The Court of Appeal's judgment also made an incisive comparison between what the proceedings were and were not,  noting at [46] that "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." Other legal avenues might therefore be considered by those disaffected by prolonged infrastructure works. 

In relation to litigation funding, the result on the cross-appeal reinforces the position that litigation funding commissions must be paid by successful plaintiffs, and the payment of such a commission is not claimable against the defendant.