By Tara Plumbe, Partner and Julia Dyson, Associate

Mills Oakley successfully brought a claim in nuisance against a statutory authority for damages in excess of $1 million after a water pipe suffered a catastrophic failure inundating a strata complex at Elermore Vale.

The decision clarifies the distinction between a claim in nuisance and a claim in negligence against public authorities in NSW and highlights the different thresholds that apply to such claims.

Ultimately, the Court:

• confirmed the decision of the Court of Appeal in Hunt Leather that the reliance on ss 42 and 43A of the Civil Liability Act 2002 (NSW) (“CLA”) does not extend to a claim in nuisance,
• maintained the status quo that s 43A imposes a higher standard on public authorities in claims for negligence.

Background

In the early hours of 22 September 2017, a water main owned and operated by Hunter Water Corporation (“HWC”) burst in close proximity to a strata scheme located in Elermore Vale, NSW.

In the afternoon prior to the rupture, HWC attended the site, commenced investigations, excavating the area. The pipe was left exposed overnight with the view of returning to site the following day with appropriate equipment for repairs. Overnight, the pipe suffered a catastrophic failure resulting in extensive flooding and significant property damage to the property.

All liability experts agreed that a significant factor causing the pipe failure was its excavation and being left exposed overnight.

Relevantly the same pipe suffered a catastrophic failure in March 2010 approximately 90 metres from this subject incident. It caused 4.5 million litres of water to discharge into the same property.

The Plaintiff contended that the pipe burst was an entirely unpredictable event.

Proceedings were brought against HWC in both negligence and nuisance for physical property damage and loss of value.

The Decision

Nuisance

The Court confirmed the decision of the Court of Appeal in Transport for NSW v Hunt Leather Pty Ltd; Hunt Leather Pty Ltd v Transport for NSW [2024] NSWCA 227 that the reliance on ss 42 and 43A of the CLA does not extend to the nuisance claim.

The Court summarised the necessary conditions of nuisance in the case as follows:

• The plaintiffs must establish that there was an interference with the use and enjoyment of their land. This was conceded by the defendant.
• The interference must have been caused by the water emanating from the defendant’s water main. This also was conceded by the defendant.
• Against the above concessions the defendant can only succeed if it did nothing wrong.
• Doing nothing wrong requires findings that the burst was inevitable, not foreseeable and was not consequent upon any unreasonable act on the part of the respondent.

The Court held that the defendant acted unreasonably in leaving the pipe exposed overnight, without shutting it off, diverting the water flow or reducing the pressure in the pipe. The Court held that the statutory defences were not enlivened because the defendants did not take reasonable care.

Negligence

The Court held that the Plaintiff had established the general principles of negligence, being a reasonably foreseeable risk, the risk was not insignificant, and a failure to take reasonable precautions. The Plaintiff would also have been able to establish causation.

While the Court found that HWC had breached its general duty to take precautions against the risk of harm under section 5B of the CLA, the Court accepted that it was a statutory function of HWC to repair and maintain the water mains. This amounted to the exercise of a special statutory power under s 43A and HWC could rely on the defences available under ss 42 and 43A of the CLA.

The Court reaffirmed the proposition that there may be a range of options as to what might constitute a reasonable act or reasonable failure to act, and the Defendant needs only show that the actions of the defendant fall within the range. Whilst the Court was critical of the defendant’s approach to leaks, the Court held it was impossible to say that the ‘fix it when it breaks’ approach was outside the range of approaches.

As the Court did not find that HWC’s conduct amounted to “gross negligence,” the claim in negligence was unsuccessful. HWC was not negligent because of the higher standard required by s 43A.

Damages

Prior to hearing, the parties had agreed on the damages for physical damage to the premises. This sum was accepted by the Court in the sum of $1,161,841.92.

On the claim for diminution of value, whilst the Court could conceive a scenario for diminution in value, the claim could not succeed on the two bases. This was because there was insufficient evidence to link the increased premiums to the flooding, and the claim for stigma loss had been appropriately conceded by the expert to be discounted to zero due to the effluxion of time.