Di Napoli v New Beach Apartments

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

6521/03 MARIA LILIANA DI NAPOLI V NEW BEACH APARTMENTS PTY LTD JUDGMENT 1 HIS HONOUR: This is an application by the defendant for an extension of time for compliance with a mandatory injunction, or alternatively, for a temporary stay of the injunction until further order. The ground relied on is an unforeseen change in circumstances since the order was made and last varied. 2 In 2003 the defendant, whose sole director is Paul Hanna, contracted with Morgan Pacific Constructions Pty Ltd (the "Builder", whose director is Edmond Younis) to construct a residential building on the defendant's land at 44 New Beach Road, Darling Point. The plaintiff is the owner of the adjoining land to the east, known as 8 Annandale Street, Darling Point. The defendant has commenced construction work on its land, and, in order to provide structural support for the works on its land, has inserted 10 rock anchors into the eastern face of its land and through into the under-surface of the plaintiff's land, without the plaintiff's consent. 3 According to Young CJ in Eq's judgment of 9 February 2004 (Di Napoli v New Beach Apartments Pty Ltd [2004] NSWSC 52), the plaintiff made it clear, by 31 October 2003, that she would not consent to the insertion of the rock anchors, and yet they were installed on about 3 or 4 November 2003. The contract between the Builder and the subcontractor which installed the anchors, Stewart Building Pty Ltd, provided for commencement of the work on 3 November 2003. 4 The anchors are "temporary" in the sense that they degrade in 3-5 years. They are inserted into holes drilled in the rock, and then surrounded by a non-shrinking grout which is much stronger than concrete. The evidence before me on the application indicates that the anchors are approximately 9 m long. They have been inserted, on a downward slope of approximately 30 degrees to the horizontal, into a shoring wall on the defendant's land, continuing into the plaintiff's subsoil for about 6.5 m, under the plaintiff's swimming pool. 5 At some time shortly after the installation of the anchors, Mr Hanna instructed the Builder to remove them, but by no later than 17 November 2003, the Builder had recommended to Mr Hanna that the rock anchors remain in place, and it appears that this recommendation was accepted. 6 The plaintiff commenced the present proceeding on 30 December 2003, seeking injunctive orders and damages for trespass. At the same time she made an application by notice of motion for an order for the removal of the rock anchors. 7 Mr Shelton, who works for Northrop Structural & Civil Engineers, the structural engineers for the development project, wrote a memorandum to the defendant's solicitor and the Builder on 8 January 2004, expressing the opinion that any attempt to remove the anchors by pulling them out of the rock would almost certainly crack and damage the shoring wall, with the result that the anchor would break off at a short distance into the rock face and most of it would be left behind. At that stage Mr Shelton was unable to resolve the practicalities of coring the anchors out of the rock. 8 On 9 February 2004 Young CJ in Eq, after delivering the ex tempore reasons to which I have referred, made the following interlocutory orders, subject to the usual undertaking as to damages: "1. That until further order the Defendant on or before 5.00pm on 23 February 2004 demolish and remove so much of the said rock anchors as are erected beyond the boundary of the Defendant's land and into the Plaintiff's land. 2. That until further order the Defendant be restrained from, by itself, its servants or agents (including by builders retained by it) from infringing the underground space of the Plaintiff's property. 3. That until further order the Defendant be restrained from, by itself, its servants or agents (including by builders retained by it) trespassing onto the underground space of the Plaintiff's property." 9 In his reasons for judgment, his Honour noted that it would not be a breach of his orders for the defendant to enter the plaintiff's underground space to remove the rock anchors. That annotation was placed in the orders themselves when the time for complying with the mandatory order (Order 1) was extended on 20 February 2004. The judgment did not explore whether there would be any practical difficulties in removing the anchors. 10 The defendant made some attempts to comply with the Court's mandatory order, but by 20 February 2004 it had not been able to remove the anchors. It appears from some site notes that the Builder had difficulties with a subcontractor called Absolute, which was excavating the building site. Absolute's machinery malfunctioned and had to be replaced. It was apparently necessary to complete the excavation before erecting the scaffolding needed for the purpose of drilling out the cores. 11 Mr Shipp, the contract administrator of the Builder, made an affidavit on 20 February 2004 recording that the Builder had inquired about removing the rock anchors by core drilling, and as an alternative, de-stressing the anchors, removing the waling plates and jacking out the anchors. It was decided to proceed by core drilling. This involves using a special hollow diamond drill to take out a core of material from the drilling area. 12 The Builder engaged a subcontractor called MacDonalds Contractors (Australia) Pty Ltd ("MacDonalds") to undertake the removal work. MacDonalds quoted for the job, in writing, on 16 February 2004. In their quotation, they pointed out that the anchors were not designed to be removed, and that the common practice was simply to de-stress the anchors and remove the anchor heads, leaving the underground tendons to rust away. They said that MacDonalds could not guarantee that the drill core would follow the line of the anchor, and therefore that the anchor could be successfully removed. They also said they had assumed a maximum anchor length of 6 m. The Builder entered into a subcontractor agreement with MacDonalds on 17 February 2004, providing for the work to be done in the period from 20 to 23 February 2004. 13 On 20 February the defendant applied for an extension of time for compliance with the order. The application was opposed. After a contested hearing, Young CJ in Eq extended the time for compliance until 15 March 2004. 14 Although the sub-contract provided for MacDonalds to do the removal work from 20 to 23 February, their work did not in fact commence until about 3 March, after all other preliminary work had been completed, including excavation, scaffolding, structural bracing and engineer checks. Mr Younis has given evidence that he told everyone on site on 3 March that the removal work had to be completed in 10 days, and he told "Lyle" from MacDonalds to find a second drill in order to speed up the process, although no second machine was ever in fact brought to the site. 15 On 4 March 2004 the plaintiff's solicitor wrote to the defendant's solicitors, on the understanding that the defendant's Builder was about to commence the removal of the anchors by drilling them out. The letter expressed concern about vibration and destabilisation of the plaintiff's land, and potential damage to the land and the structures on it, and claimed that, although the drilling work would not be in contempt of court, it would still constitute a trespass for which the plaintiff would hold the defendant liable in damages. The letter said that the plaintiff might be prepared to consent to the drilling work if she received appropriate engineering advice. It asked for full specifications of the works (including reinstatement), an engineer's certification, and a geotechnical opinion, that the works would not jeopardise the stability and integrity of the plaintiff's land and structures. 16 The defendant's solicitor replied on the same day, complaining of inaccuracies in the letter under reply, but not answering the request for appropriate engineering advice. The inaccuracies were said to be a claim by the plaintiff's solicitor that a representative of the Builder, Mr Shipp, had given evidence of alternatives to drilling out of the anchors, and a contention that further excavation below the existing shoring wall raised issues under a restriction as to user created by the deposited plan for the defendant's land. It is not appropriate to comment on the second matter here, as infringement of the restriction on user has not been raised by any application before me. As to whether the Builder had raised the possibility of any alternative to drilling, the truth appears to be somewhere between the contentions of the solicitors. As I have said, Mr Shipp referred to exploring the possibility of jacking out the anchors as an alternative to drilling them out, but that possibility does not appear to have produced any real proposal. 17 The plaintiff's solicitor wrote again on 5 March repeating that his client did not consent to the drilling work that had by then commenced, and requiring the defendant to hold and retain all core materials that were drilled out, for inspection by the plaintiff's experts. 18 On 5 March 2004 MacDonalds wrote to the Builder saying that they were continuing to remove as much of the anchors as possible, but that the original drill holes and anchors were not straight and may have been deflected by changes in material (for example, sand to rock), whereas the core drilling method being used by MacDonalds drilled a very straight hole. The drilling process resulted, in some cases, in the metal strand being cut and only part of the anchor being removed. The letter confirmed that MacDonalds could not guarantee that the total anchor could be successfully removed. It required confirmation of pricing. Mr Younis gave evidence that he saw lengths of metal anchors of about 3 m on-site, although the drilling process had converted much of the material extracted into slurry and metal fibres. 19 On 8 March 2004 Mr Younis had a conversation with Mr Ian MacDonald of MacDonalds, in which Mr MacDonald said "there is no way we can get any more of the anchors out than we already have". In his oral evidence on 16 March Mr Younis explained this as a reference to the financial dispute between the Builder and MacDonalds, but it seems to me plain from the text of the conversation to which Mr Younis deposed in his affidavit that Mr MacDonald was referring to the difficulty that had been explained in MacDonalds' letter of 5 March. Mr MacDonald then expressed his concern to Mr Younis that if he could not extract the whole length of the anchors, there would be a fight in Court and he would not be paid, and so he demanded a bank cheque for the full amount payable to MacDonalds by the following morning, and threatened to walk off the job if it was not received. Mr Younis claimed that the subcontract provided for payment in 30 days. 20 On the following day, 9 March, Mr Younis and Mr MacDonalds had another conversation about payment, evidently in heated terms, and that afternoon MacDonalds ceased work on the site, and they did not attend the site on 10 March. By that time they had completed their extraction work on 8 of the 10 rock anchors. Subsequently there were negotiations, in which it appears that MacDonalds proposed a personal guarantee by Mr Younis. 21 On 10 March 2004 the defendant's solicitor wrote to the plaintiff's solicitor giving notice of an application for a stay of the mandatory order. The letter asserted that MacDonalds had breached its sub-contract with the Builder, in that (inter alia) MacDonalds had indicated that it was unable to extract the entire length of each rock anchor. The letter explained that MacDonalds had abandoned the site pending receipt of payment. On the same day the plaintiff's solicitor wrote to the defendant's solicitor complaining that their earlier letters had not been answered and asking when the plaintiff's expert could inspect the site. 22 On 11 March 2004 the defendant's solicitor wrote to the plaintiff's solicitor, purporting to answer the plaintiff's request for engineering advice made in the letter of 4 March by saying that the plaintiff had subpoenaed and inspected the consulting engineer's file. That was obviously no answer to the request that had been made. The letter also repeated the assertion that the plaintiff's solicitors had misrepresented Mr Shipp's evidence. I have commented on that matter. It said that material removed in the drilling process comes out as fragments of crushed rocks and sand which fall down the rock face and lie in a pool of water at the base of the rock wall. In essence the material removed is substantially a sandy/muddy slurry at the base of the wall. This claim is contrary to some evidence given by Mr Younis in cross-examination, to the effect that he saw some anchor rods about 3 m long on the site. 23 The defendant brought the present application before Bryson J on Friday 12 March 2004. His Honour granted the defendant leave to file the application and the affidavit of Mr Younis. The application was adjourned to 15 March 2004, evidently to give the plaintiff time to consider the evidence of Mr Younis, and it came before me in the Duty List on the latter day. Counsel for the parties estimated a two-hour hearing in which the plaintiff would seek to cross-examine Mr Younis. As there was insufficient time on 15 March for such a hearing, I adjourned the application to 11am on 16 March, extending the time for compliance with the mandatory order for another day. The hearing on 16 March was for over 4 hours, during which time Mr Younis was cross-examined and additional written material was tendered in evidence. I stood the application over, and extended the time for compliance with the order, to 18 March to give myself time to consider the evidence. I accepted an undertaking on behalf of the defendant not to fill the drill holes that had been made in the extraction work in the meantime. 24 On 16 March Mr Younis gave evidence that some form of rapprochement had been reached between the Builder and MacDonalds, and that on that day MacDonalds was completing its extraction work. I assume that by 18 March 2004, MacDonalds have (at least, in their view) completed the work that they were engaged to perform. 25 In his affidavit, Mr Younis said: "It appears to me that out of the 8 rock anchors extracted by MacDonalds so far, the entire length of the anchors have been cored out and extracted." 26 That statement is inconsistent with other evidence before me on the application. In the first place, it is inconsistent with the statements by MacDonalds in their quotation and the letter of 5 March to the effect that in the case of some anchors, complete extraction would be impossible. Secondly, the site notes attached to the affidavit of Mr Younis indicate that on 4 and 5 March 2004, the first and second anchors were extracted, and were in each case approximately 3 m long. The site notes record other extractions but do not record any extraction longer than 3 m. Thirdly, Mr Younis gave oral evidence that he saw some extracted anchors on the site and estimated their length at about 3 m. Fourthly, it is inconsistent with the letter of the defendant's solicitor dated 10 March 2004, referred to above. On the state of the evidence at this stage, there must be some doubt as to whether the drilling has extended to the full length of the anchors, and whether it has in part missed the anchors where they deviate from a straight line. 27 At the present time, there are 9 or 10 holes in the shoring wall along the eastern boundary of the defendant's land, extending for some distance into the plaintiff's under-surface. There is some evidence to indicate that the under-surface is sandstone and unstable material. It is under, and presumably is part of the sub-surface support for, the plaintiff's swimming pool. Mr Younis gave evidence that it would be dangerous not to fill the holes, because rainwater would flow into the holes and build up behind the shoring wall, creating considerable pressure. 28 I note briefly some other matters canvassed in evidence which, in the end, are distractions. It appears that the Builder has had a substantial stay in the design of the defendant's litigation strategy, and has dealt directly with the defendant's solicitor. Nevertheless, the evidence is that the solicitor acts for the defendant in the litigation, and has accepted instructions to act for the Builder only in respect of the Builder's dispute with MacDonalds. It was therefore appropriate for the plaintiff's solicitor, when writing to the defendant's solicitor to seek information on 15 March, to copy the letter directly to Mr Younis, and misguided for the defendant's solicitor to object to this communication with "our clients". Additionally, the plaintiff relied on some evidence to the effect that in November 2003 and January 2004 the Builder was allowing work to be conducted on the site with no regard to expert advice given by the structural and geotechnical engineers. I do not regard that evidence as sufficient to establish some general propensity of the defendant and the Builder to disregard expert advice. 29 These are the circumstances in which the application for extension of the time to comply with the mandatory orders came before me on 16 March. The defendant submits that the Court should extend the time for compliance with the order, or alternatively to stay the operation of the order, for sufficient time to determine whether compliance is still possible and can reasonably occur, and if not how the defendant may properly proceed with an application to be relieved of further compliance with the order. In oral submissions, the defendant's counsel proposed an extension for 10 days. 30 In Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170, 178, Gibbs CJ, Aitkin, Wilson and Brennan JJ said: "A Court must remain in control of its interlocutory orders. A further order will be appropriate whenever, inter alia, new facts come into existence or are discovered which render its enforcement unjust." 31 The defendant says that the new fact in the present circumstances is the contractual dispute. There is also some evidence that three days have been lost due to rain. The defendant says that injustice would arise from the risk that it would, despite its best endeavours, be in contempt of court if relief is not granted. 32 There are, it seems to me, some additional new matters arising out of the plaintiff's evidence and the cross-examination of Mr Younis. They include the evidence, noted above, which suggests that literal compliance with the mandatory order may be impossible, and that there is a risk to the plaintiff's land while the holes remain unfilled. These additional matters suggest that the Court should not simply accede to or deny the application for an extension or stay in respect of the mandatory order. 33 The plaintiff's primary position is that the Court should deny the extension and leave it to the plaintiff to make such application as she may wish to make arising out of non-compliance with the order. Senior counsel for the plaintiff referred to the rule of practice, where an application is made to vary or set aside a substantive interlocutory order, that the application must be founded on a material change of circumstances since the original application was heard, or discovery of new material which could not reasonably have been put before the Court on the hearing of the original application: Brimaud v Honeysett Instant Print Pty Ltd (Supreme Court of New South Wales, McLelland J, unreported, 19 September 1988). 34 Senior counsel for the plaintiff also referred to Stancomb v Trowbridge Urban District Council [1910] 2 Ch 191. In that case the defendant was restrained by injunction from sending sewage into a stream, and undertook to cleanse the stream. It breached the injunction and failed to cleanse the stream in accordance with its undertaking. The Court directed a writ of sequestration to issue against the defendant, but to lie in the office for six months, and not to issue at all if within that period the defendant performed its undertaking to the satisfaction of a person agreed by the parties. The case suggests a mechanism to deal with compliance with an order or undertaking that imposes a positive undertaking on the defendant, once a breach has occurred justifying the issue of a writ of sequestration. In the present case it has not been established that the defendant has breached the mandatory order, which has been extended until 18 March 2004. 35 The evidence before me is necessarily incomplete, in the interlocutory circumstances, and in particular, the defendant has not had the opportunity to reply to some of the written material tendered on behalf of the plaintiff. There is enough, however, to show that there are serious practical problems confronting the parties that must be addressed in the short term, if possible without compromising the rights of the parties in the litigation. A practical approach to the matters in evidence before me might involve, with some urgency: (a) an appropriately qualified expert or experts determining whether something more should be done, and can reasonably be done, to reverse the effect on the plaintiff of the defendant's trespass, and how best to render the plaintiff's land safe; (b) the defendant then carrying out the works so identified, with appropriate authority from the plaintiff or the Court (a step which may well involve an application by the defendant to dissolve the mandatory order in consideration of carrying out those works). 36 It seems to me that there are four alternative procedures that might be used to pursue the resolution of the practical problems. 37 First, experts retained by each of the parties could inspect the site and confer, and produce a joint report for the Court. The defendant already has the services of a structural engineer, Northrop Structural & Civil Engineers, and a geotechnical engineer, Jeffrey and Katauskas. I was informed from the bar table that the plaintiff has engaged an engineering expert. 38 It seems to me, however, that there may be an obstacle to this procedure. The plaintiff's expert could be called upon to express opinions that might affect the plaintiff's case in damages. The plaintiff's instructions might inhibit the expert from doing so (I do not suggest that in giving such instructions, the plaintiff would necessarily be acting unreasonably). A similar problem might arise with respect to the defendant's expert, though perhaps less acutely. Having observed the intensely combative way the parties conducted the interlocutory application before me, I doubt whether the joint conference procedure would contribute to a satisfactory practical outcome. 39 Secondly, I could refer the questions in paragraph (a) above to a referee appointed under Part 72 of the Supreme Court Rules. The principal disadvantage of this procedure is that it would unavoidably consume time, presumably to the serious detriment of the defendant. This is because a Part 72 referee proceeds, at least usually, by taking evidence and hearing submissions, and then reporting back to the Court, at which stage there is likely to be a contested hearing for the adoption or rejection of the report. 40 Thirdly, it would be open to the Court to obtain the assistance of an expert under Part 39 rule 7 of the Supreme Court Rules. An expert appointed under this rule does not call witnesses but merely furnishes material for the information of the Court: see Ritchie's Supreme Court Procedure NSW (looseleaf), [39.7.3]. Once the report has been submitted, the Court may hear evidence in opposition to it. Nevertheless the procedure seems to be more expeditious, and more likely to be of real assistance to the Court, than the first two alternatives. 41 If I were to proceed under Part 39 rule 7, I would formulate questions for the expert in terms of paragraph (a) above, and make orders requiring the defendant to bear the costs of the report, since the report is to be obtained in the context of an application by the defendant for indulgence, namely extension of the time for compliance with the mandatory order. I would hope that the parties could agree on the identity of the expert, who would have to be independent from both of them, and on the information to be provided (which would necessarily include these reasons for judgment). I would want to set a short timetable for the report to be prepared, and bring the proceedings back to the Equity Duty Judge thereafter. 42 Even with such a timetable, the Court could not be sure when it would be in a position to hear any further application upon completion of the report, and therefore it would be impractical to simply extend the time for compliance with the mandatory order, and preferable to make an order staying the mandatory order until further order. In order to facilitate inspection of the site by the expert, it would be necessary to make an order or receive an undertaking from the defendant not to fill the excavation holes with grout, although it may be possible for some temporary plugging to be made so as to minimise the deleterious effect of rainwater. 43 Fourthly, the evidence of Mr Younis on 16 March was that the work by MacDonalds on the last rock anchor would be completed on that day. As I understand the defendant's case, it is that the work by MacDonalds constitutes compliance with the mandatory order. The drill holes have not been filled with grout, but that is not a step required by the mandatory order. If it is true that MacDonalds have finished their work since the application for an extension or stay was brought before Bryson J last week, then that may be no point in granting a further extension of the mandatory order. The practical problems could be crystallised by the plaintiff making an appropriate application to contend that what has been done on behalf of the defendant does not constitute compliance with the mandatory order, and that the kind of procedure adopted by Warrington J in Stancomb should be followed in this case. The advantage of this procedure would lie in minimising curial intervention, beyond what has already occurred. 44 The parties had not had an adequate opportunity to consider and make submissions on these four alternatives. I shall now give them a brief opportunity to do so, before making orders. 45 As to the costs of the application, at one stage I was inclined to make no order as to costs, with a view to each party bearing their own costs, essentially because of the unhelpfully aggressive attitude taken by the parties through their solicitors in correspondence. But after carefully reviewing the evidence, I have reached a different conclusion. This is a case where the defendant has come to the Court seeking an indulgence. If the indulgence is granted, it should be on the basis that the defendant pays the plaintiff's costs of the application. Although the letters written by both solicitors show a very aggressive approach which seems to me inimical to resolution of the practical problems that I have identified, overall I do not believe that the circumstances justify any different costs order. Of course, if the fourth alternative is preferred so that the application is dismissed, then costs would follow the event.

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