By Ben Patrick, Partner and Carolyn Tran, Senior Associate

The decision of Casdaus Pty Ltd v Nichols [2026] VCAT 483 has adopted the strictest possible interpretation of the requirement under the Water Act 1989 (Vic) (Act) for upstream owners to prevent unreasonable flows of water onto neighbouring properties, even if the flow was not caused by the current owner.

Under subsection 16(5) of the Act, the current owner of a property is required to take all steps reasonably available to them to prevent an unreasonable flow of water.  If they fail to do this, they may be liable to the downstream owner for any loss and damage caused by the water flow.

A respondent’s financial circumstances can be relevant to the question of what constitutes a ‘reasonable step’, but an owner will only be excused from the obligation to prevent the unreasonable flow in exceptional cases involving extreme financial disadvantage where the respondent is effectively living ‘hand to mouth’.

Factual Background

The applicant (Casdaus) was the owner of an apartment in a high-rise residential complex in Melbourne.  The Respondent was the owner of an apartment located directly above Casdaus’ apartment, which included a balcony from which water had been leaking into Casdaus’ apartment from shortly after construction was completed.

The leak into Casdaus was caused by defective waterproofing works carried out by the builder, Hacer Group (Hacer). It was common ground that the flow of water from the Respondent’s property into Casdaus’ property was unreasonable.

In her defence, the Respondent argued that she simply could not afford the rectification works, which were going to cost approximately $225,000.  She argued that her personal financial circumstances should be considered when determining she had taken any steps ‘reasonably available’ to her under section 16(5).  It was her position that she had taken all reasonable steps available to her to address the issue, including providing assistance to Casdaus and the Owners Corporation with investigations into the source of the water ingress into Casdaus’ property, conducting her own investigations into the source of water ingress, commencing proceedings against Hacer and carrying out some repairs to the balcony.

The Respondent put forward evidence that her limited finances made immediate and complete rectification unreasonable.  She argued that she could not be expected to complete the works until she secured funds from Hacer, who was the true wrongdoer,

The Tribunal’s Decision

His Honour Vice-President Judge Macnamara found that Ms Nichols was liable under subsection 16(5).

First, his Honour determined that the reference in subsection 16(5) to the current occupier being fixed with liability if they failed to take “any steps reasonably available” was intended to mean that the current occupier must take “all steps reasonably available”.  His Honour was not attracted to the submission by the Respondent that the taking of a single reasonable step would satisfy the requirement in 16(5).

Second, his Honour considered the relevance of a respondent’s financial circumstances.  His Honour accepted that the Act contained an inherent ambiguity as to whether financial circumstances may be considered in determining what steps were ‘reasonably available’ to a successor in title to abate the nuisance under section 16(5).  Under the common law that existed prior to the Act, a party’s financial circumstances were a relevant consideration in relation to liability for a nuisance created by a predecessor in title and subsequently adopted by a subsequent owner of the land: see Owners Strata Plan 4085 v Mallone [2006] NSWSC 1381.

His Honour concluded that, aside from extreme cases of utter destitution, any assertion from a respondent that they are unable to afford the rectification work attaches an implicit assumption that the respondent is choosing to spend their money on something they consider more important than meeting their statutory obligations.

Despite his Honour holding that financial circumstances can be considered under section 16(5), he found that the Respondent did not meet the relevant threshold.  His Honour concluded that the Respondent was not someone ‘living hand to mouth’ but instead someone who could have paid for the repairs to stop the leak if under a legal obligation to do so.

His Honour found that there were factors that indicated that the complete rectification work was a step reasonably available to her:

1. the property was tenanted;
2. she was a relatively ‘young woman’;
3. she was the CEO of a charity although she was not richly remunerated; and
4. her husband held a senior position in the construction industry and it would be reasonable to assume that a spouse would assist with liabilities or join in providing guarantees or security for borrowings.

It is worth noting that if the upstream owner becomes liable under s 16(5), then the liability of the wrongdoer who originally caused the flow is extinguished. Instead, liability for the flow of water affixes to the subsequent owner. As a result, a failure by a subsequent owner to undertake the necessary works to prevent an unreasonable flow can be an expensive error.

Key Takeaways

Casdaus Pty Ltd v Nichols confirms that under section 16(5) of the Act, owners must take every objectively reasonable action to prevent an unreasonable flow of water.

His Honour’s interpretation of subsection 16(5) leaves very limited circumstances in which a respondent may be excused from liability under the Act. The circumstances are likely to be even more limited if the owner is not an owner-occupier of the property and deriving an income from the property.

Financial hardship can only be considered in rare cases of extreme disadvantage.  When considering financial circumstances, the VCAT is entitled to consider potential family financial support available to the respondent even if that support is merely speculative.  As a result, most owners will be liable for water flowing from their property, even if that flow began before they took ownership and if they took some (but not all) reasonable steps to prevent the flow.

Please contact our team if you would like assistance with claims under the Water Act 1989 (Vic) or understanding how this decision may affect property owners or insurers.