Camuglia v Housman & Ors

District Court of NSW|2020-06-20

Background

The plaintiff is the registered proprietor of land known as 5 Bay View Street, Lavender Bay ("the Property").
Situated on the Property is a multi-level brick and sandstone masonry apartment building consisting of 6 units. Other improvements relevantly include: a concrete stairway along the south-western boundary with 3 Bay View Street extending to about half the length of the boundary and its associated stringer, a timber fence along the same boundary, and external landscaping structures including concrete paving slabs to the south-east of the building.
The Property falls significantly from the street frontage towards the south-east facing the rear yard by approximately 17 metres. The Property has views of Lavender Bay and the Sydney Harbour Bridge and was fully tenanted until March 2018. Since October 2018, no tenants have resided at the Property, with the exception of Unit 2 which has been occupied from time to time by the plaintiff's son, Marco.
The property to the immediate south of the Property is owned by the first and second defendants. On 15 May 2017, they entered into a contract with the third defendant, Pacific Plus Constructions Pty Ltd ("PPC"), whereby PPC was engaged to carry out the demolition of the existing dwelling on the Defendants' Property, and excavation and construction works required pursuant to the Development Consent obtained from North Sydney Council.
On 23 May 2017, PPC sub-contracted the demolition and bulk excavation works to Viper Civil Pty Ltd ("Viper") who commenced demolition works shortly thereafter.
The excavation works commenced in about September 2017 and involved the use of hammering equipment.
The excavation works continued to at least 10 January 2019.
By no later than October 2018, the following damage had occurred to the Property: 1. the supporting foundations for the stairway on the Property had collapsed and the stairway showed signs of cracking and settlement; 2. the stairway edge finish, being the stair stringer, abutting the Defendants' Property at the location of the collapse had become damaged; 3. the concrete paving slabs to the east of the building on the Property, which serve as a footpath, had moved and settled; 4. the balcony on the north-eastern side of the building cracked away from the building and settled to the east, corresponding to the movement of the concrete slabs.

The Proceedings

The plaintiff commenced these proceedings seeking damages for the damage occasioned to the Property, alleging causes of action in nuisance, negligence and pursuant to s 177(2) of the Conveyancing Act 1919 (NSW).
The interaction between these causes of action, and issues as to whether the tortious duties owed by the defendants were non-delegable, raised interesting questions. It is unnecessary to resolve them however as I was told that a cross-claim brought by the first and second defendants against the third defendant seeking indemnity has been resolved in terms pursuant to which the third defendant accepted its obligations to indemnify. In those circumstances it was agreed that any judgment that might be entered against the defendants should reflect a joint and several liability.

The Issues

Due to concessions made on the first and last days of the hearing, the issues requiring determination have narrowed significantly. The defendants accept their acts and omissions caused the damage referred to in subparagraphs 8(a) to (c). They do not accept that the damage to the balcony, referred to in subparagraph (d), is referable to their conduct ("the balcony").
The quantum of the damage that is referable to rectifying the damage to the plaintiff's premises was agreed by the defendants, subject to two submissions, namely: 1. That in the circumstances an award of damages to reflect the cost of rectification is not appropriate; and 2. That the plaintiff has failed to mitigate her loss.

Consequential Loss Claim

As I have indicated, the plaintiff was leasing the units contained within the building. She says that as a consequence of the damage to the stairway it was no longer feasible to lease the premises, and that as a consequence they have laid vacant since various dates in 2018. The plaintiff claims lost rent by way of consequential loss. Her entitlement to this head of damages is disputed.

The Balcony Issue

The issue in relation to the balcony, briefly stated, is whether the damage evident to the balcony was caused by the defendants' excavation work. The plaintiff's case in relation to this topic is heavily reliant on a dilapidation report which was a requirement under the development application. It was prepared by Crozier Geographical Consultants. The report did not disclose the existence of the cracking. The plaintiff thus invited me to infer that the cracking was not present prior to the excavation works.
The plaintiff's own expert, Mr Robert Herbertson, a highly experienced civil and structural engineer, however was far more circumspect in relation to the issue. His evidence was that the crack was an older crack, that is to say, that it was most likely in existence prior to the works being undertaken on the adjacent block.
I accept Mr Herbertson's evidence, based as it is on his opinion having inspected the balcony. To my mind, this direct evidence is more persuasive than the inference which the plaintiff asks me to draw from the dilapidation report.
I find that the damage to the balcony is not causally linked to the defendants' breaches.

Is the cost of rectification the appropriate measure of damage?

The defendants point to the fact that the plaintiff has currently before North Sydney Council a development application which, if granted, would result in the demolition of the property. As such, they say that the probability is that any award of damages in the nature of rectification costs is unlikely to be expended on rectifying the stairway, as the stairway is destined for demolition.
I do not accept this submission. A similar proposition was rejected by the High Court in Bellgrove v Eldridge (1954) 90 CLR 613 at [620]. The subjective intention of the plaintiff is irrelevant (see also Ellis's Town House Pty Ltd v Botan Pty Ltd [2017] NSWCA 20). Although Bellgrove was a matter decided in contract, as Campbell JA observed in Gagner v Canturi Corp [2009] NSWCA 413 at [89], Bellgrove also provides guidance in the assessment of damages in tort.
The correct position in relation to the issue of the appropriate measure of damages is as submitted by the plaintiff. Namely, that in cases where there has been tortious damage to land, the plaintiff has an election to claim either the diminution in value of the land or the reasonable cost of reinstatement, provided that where reinstatement is sought the cost of reinstatement is not disproportionate to the diminution in value of the land (Minter v Eacott (1952) 69 WN (NSW) 93; Evans v Balog [1976] 1 NSWLR 36 at [40] (Samuels JA with whom Moffitt P and Hutley JA agreed); Gagner v Canturi Corp (2009) 262 ALR 691; [2009] NSWCA 413 at 711-712 [98]-[103] (Campbell JA, Macfarlan and Sackville JJA agreeing)).
There was no evidence to establish such disproportionality.
I thus find that the plaintiffs are entitled to damages by way of rectification costs for damage to the stairway, but not to the balcony.

Alleged Failure to Mitigate Loss

The defendants amended their defence during the trial to plead an alleged failure on behalf of the plaintiff to mitigate her loss.
The law in this regard is as stated by the Court of Appeal in Karacominakis v Big Country Developments Pty Ltd & Ors [2000] NSWCA 313 at [85]: A plaintiff who acts unreasonably in failing to minimise his loss from the defendant's breach of contract will have his damages reduced to the extent to which, had he acted reasonably, his loss would have been less. This is often misleadingly referred to as a duty to mitigate, although the plaintiff is not under a positive duty. The plaintiff does not have to show that he has fulfilled his so-called duty, and the onus is on the defence to show that he has not and the extent to which he has not. Since the defendant is a wrongdoer, in determining whether the plaintiff has acted unreasonably a high standard of conduct will not be required, and the plaintiff will not be held to have acted unreasonably simply because the defendant can suggest other and more beneficial conduct if it was reasonable for the plaintiff to do what he did.
The particulars of the alleged failure of the plaintiff to mitigate her loss are as follows: 1. Failing to repair the damage to the side stairs; 2. Unreasonably withholding her consent to allow the defendants to repair the side stairs; 3. Failing to repair the damage to the side stairs before the boundary wall was constructed on the defendants' property; and 4. Unreasonably withholding her consent to allow the defendants to repair the side stairs before the boundary wall was constructed on the defendant's property.
This defence must fail.
As to the two allegations of unreasonable withholding of consent, the contention fails at the factual level, that is to say that there is simply no evidence that the plaintiff unreasonably withheld her consent to the defendants repairing the damage which they had created.
Following the damage to the stairway negotiations as to the detail of the defendants' proposed scheme for rectification were in progress. On 21 December 2018, the plaintiff gave written approval for that rectification scheme, subject to two technical matters. The defendants' engineers on the same day confirmed that the rectification works would be undertaken, taking into account the two technical matters to which I have referred.
Notwithstanding this agreement, the defendants never undertook the rectification works.
It was only after they failed to do so that the plaintiff commenced proceedings to recover the costs of those rectification works. How this can be said to have amounted to a failure to mitigate her loss is difficult to divine.
The contention that the plaintiff failed to repair the damage herself is wrong at law. It rings hollow in the defendant's mouth to say that having damaged the plaintiff's land and the fixtures thereon, the plaintiff must rectify the problem herself, at her cost, in the absence of which she will have been said to have failed to mitigate her loss.

Consequential Loss Claim

The plaintiff adduced evidence from Mr Dominic D'Torre, who has been the leasing manager of the property since 2015. Mr D'Torre expressed the view that following his inspection of the damage to the plaintiff's property it was no longer feasible to relet the units on the property owing to the safety issues relating to the damage to the stairway, its stringer, and the concrete paving slabs to the east of the building.
Mr D'Ettorre annexed to his affidavit rental ledgers for the units in the Property, which showed that the rents which were last being received for Units 1, 3, 4, 5 and 6 in 2018 were as set out in the table below: Unit Rent (per week) 1 $725 3 $649 4 $750 5 $765 6 $600 Total $3,489

Mr D'Ettorre's evidence however, was that even if it the stairs had not been damaged, it would have been necessary to discount the asking rent by about a third. This rent reduction would be necessary to reflect the loss of amenity of the units due to their proximity to the building works. This loss, it was accepted, could not be attributable to the defendant. Thus, the plaintiff reduced its consequential loss claim by a third, namely to a figure of $2327.16 per week (3,489 x 0.667 = 2327.16).
A number of matters arise from this calculation of damage for consequential loss. The first is that unit two has at all times been capable of being occupied. Indeed it had for the most part been occupied by the plaintiff's son, Marco. It was capable of being occupied because of its position, being on the top floor of the building. Unit six is adjacent to unit two on the top floor of the building, and as such it would seem to me that the reasons which would permit unit two to be continuously occupied would apply equally to unit six.
In addition the plaintiff's claim for consequential loss carries with it the implied proposition that rent would have been obtained for each unit for every week of the year, since they were vacated. This is not a commercially realistic assumption. I raised this question with Mr Sirtes of senior counsel, who appeared for the plaintiff, and put to him that there needed to be a discount to reflect the vicissitudes of life, as a landlord. Mr Sirtes accepted that proposition.
The other area of necessary uncertainty in relation to the quantification of the consequential loss claim is the fact that this loss will continue until such time as the damage is rectified, which date itself is uncertain.
Taking all of these matters into consideration, it seems to me that the appropriate manner in which to deal with the awarding of damages for consequential loss is to calculate the rent lost, excluding unit six, discounting the rent by a third (as proposed by the plaintiff), thus producing a figure of $1926.96 per week. This figure should in turn be discounted for the vicissitudes, which I assess to be 20%. Rent loss should be calculated for the period from October 2018 until one month after judgment (14 September 2020), which being a period of 102 weeks, results in a figure of $157,240.14, which I have calculated as follows: Consequential Loss per week = $3,489 - $600 - 33.3% - 20% Consequential Loss per week = $1,541.57 Consequential Loss per week x 102 weeks = $157,240.14

Quantum of the Rectification Claim

The parties were agreed that the cost of rectification work for the damage done to the plaintiff's property (excluding damage to the balcony) was in the sum of $55,783.37 (excluding GST). Therefore, the sum inclusive of GST is a sum of $61,361.71.

Conclusion

There should be judgment for the plaintiff in the sum of $218,601.85.
I will hear the parties on costs.

Orders: 1. Judgment for the plaintiff in the sum of $218,601.85; 2. That any party wishing to be heard on the question of costs notify my associate of that desire on or before noon on 18 August 2020 ("Notification"); 3. That in the event of Notification, the notifying party shall file and serve any evidence and submissions on the question of costs on or before 4:00pm on 20 August 2020; 4. That the non-notifying party file and serve any evidence and submissions which it wishes to make on the questions of costs on or before 4:00pm on 24 August 2020; 5. That the filing of the documents referred to in orders (3) and (4) be effected by way of email transmission to my associate; 6. That the resolution of any question as to costs be decided on the papers. 7. That in the absence of Notification, the Court will order that the defendant pay the plaintiff's costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 September 2020

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Judgment (13 paragraphs)

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