1. The proceeding is dismissed.
2. Costs are reserved. The parties have leave to make any application for costs within 42 calendar days of these orders. If a party makes a costs application, further orders may be made. The parties are referred to the provisions of section 109 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic). If no costs application is made, there will be no order as to costs.

1. The applicants claim damages from the respondents for breach of an agreement to carry out work by the respondents to address alleged flows of water from the respondents' property onto the applicants' property.
2. The respondents deny breaching the agreement.
3. The hearing was conducted in person for 1 day on 11 December 2024.
4. Each of the applicants and the respondents gave evidence, save for the third respondent. The applicants relied on an expert report but did not call the expert to give evidence at hearing. The parties have received legal advice and were legally represented at times in the proceeding. Neither party was legally represented at hearing.
5. At the conclusion of the hearing, I reserved my decision and ordered the parties to provide written closing submissions by 25 February 2025 and any reply submissions by 24 March 2025, addressing the following issues:

1. What was the purpose of the Deed of Settlement & Release dated 26 July 2022 in relation to the proceeding? 2. Do the parties' rights merge on execution of the Deed?

1. Was the Deed breached? If so, which paragraphs of the Deed were breached and in what way? Who breached the Deed?

1. What are the legal consequences of a breach of the Deed by either party? 2. If a breach of the Deed entitles the applicants to pursue their claim against the respondents under section 16 of the Water Act 1989 (Vic) ('Act'), then

(i) were there flows of water onto the applicants' property from the respondents' property and, if so, when? > > (ii) were the flows not reasonable, having regard to the matters set out in section 20 of the Act? > > (iii) did the flows of water cause damage to the applicants' property or cause the applicants to suffer economic loss? > > (iv) how did the respondents cause the flows of water?

6. The applicants filed submissions on 23 February 2025 and the respondents filed submissions on 25 February 2025.
7. Having heard the evidence of the parties and considered their submissions, I will dismiss the proceeding for the following reasons.

1. The applicants are the owners of residential property in Ivanhoe, one of Melbourne's north-eastern suburbs.
2. The respondents are the owners of adjoining residential property.
3. For years, the parties have been involved in a dispute over a common boundary fence and alleged flows of water from the respondents' property onto the applicants' property.
4. In June 2020, respondents commenced a proceeding in the Magistrates' Court of Victoria for orders that the dividing fence be completed in accordance with an agreement between the parties. In June 2021, the Court ordered the fence be completed in accordance with the agreement.
5. In July 2021, the applicants commenced a proceeding in the VCAT against the respondents alleging, since January 2018, there have been unreasonable flows of water from the respondents' land onto the applicants' land which has caused damage to the applicants' land, including the fence dividing the properties. The legal basis for the action was breach of section 16 of the Act and the applicants sought unspecified damages.
6. The respondents defended the proceeding and disputed the applicants' claim under the Act.
7. On 26 July 2022 and through their lawyers, the parties signed a deed of settlement ('Deed'), which resolved the dispute over the boundary fence and alleged flows of water onto the applicants' land. Among other things, the Deed provided the applicants would pay $2,100 for their one-half contribution to complete the boundary fence and the respondents would carry out an agreed scope of work to address the alleged flows of water from their land onto the applicants' land.
8. In January 2023, the applicants requested the proceeding be re-instated on the grounds the respondents had failed to comply with the Deed.
9. By Points of Claim filed in November 2023, the applicants sought an order that the respondents complete the work and/or pay damages of approximately $49,000 for the cost of rectification work to stop flows of water onto their land, and refund amounts paid for the boundary fence, legal costs and interest.
10. By Points of Defence filed in January 2024, the respondents denied liability for the applicants' claim and contended they had complied with their obligations under the Deed.

1. At the beginning of the hearing, I explained to the applicants that they have the burden of proof to satisfy the Tribunal on the balance of probabilities of the facts necessary to establish the respondents breached the Deed and the breach has caused them to suffer loss and damage.
2. I also explained that, if the hearing involved hearing evidence about the alleged flows of water and breach of section 16 of the Act, the applicants had the burden of proving the facts and allegations for this claim. If they are unable to satisfy his evidentiary onus on the balance of probabilities, the Tribunal must dismiss their claim.

1. In their Points of Claim filed in November 2023, the legal basis for the applicants' claim is unclear. However, in their request for re-instatement of the proceeding in January 2023, the applicants allege the respondents have not carried out some of the work set out in the Deed. This seems to be the basis for the applicants' claim in the proceeding, i.e. the respondents breached the Deed.
2. The applicants seek an order that the respondents complete work to their rear yard to permanently stop water seeping and flowing onto their property. They also seek damages totalling $49,023.79, including the cost of rectification work to stop flows of water onto their land and expert witness fees ($23,797.68), a refund for replacement of the boundary fence ($6,260), legal costs ($9,663.56) and interest ($5,252.55).
3. As it was not clear to me at the hearing if the applicants were seeking damages for breach of the Deed or pursuing their claim under section 16 of the Act notwithstanding the Deed, I heard evidence from the parties about the Deed and performance of the parties' obligations, together with evidence about the alleged flows of water from the respondents' land onto the applicants' land.
4. At the end of the hearing, I ordered the parties to provide written closing submissions in relation to both issues - i.e. the Deed and alleged breach, and the applicants' claim under section 16 of the Act.

A. WHAT WAS THE PURPOSE OF THE DEED OF SETTLEMENT?

1. The applicants submit the purpose of the Deed was to establish a clear process for constructing a common fence, subject to council regulations. However, the regulatory requirements differ for each of the applicants' property and the respondents' property. A town planning permit is required for one property but not the other. While a planning permit was issued for one property (Permit no. D21/158073), it was subsequently cancelled and no permit was obtained for the other property.
2. The applicants contend they have complied with their obligations under the Deed. For example, in relation to Item 11(c) of the Deed, the applicants paid one half of the timber sleeper invoice within the required 7-day period. They acknowledge the sleepers had been installed before payment was made.

1. The respondents submit they have denied liability for the applicants' claims throughout the proceeding. Under cover of the denial of liability, they say they agreed to the Deed in good faith to resolve the dispute with the applicants.
2. The respondents allege they have complied with their obligations under the Deed. However, they concede they were unable to meet all their obligations by the completion date under the Deed due to COVID-related delays, adverse weather conditions and a backlog of work from their concreter.

B. DO THE PARTIES' RIGHTS MERGE ON EXECUTION OF THE DEED OF SETTLEMENT?

1. The concept of merger refers to the notion that once a claim has been resolved and a settlement or judgment is reached, any previous or further rights relating to the claim are extinguished and absorbed into the settlement agreement or judgment.
2. The Deed recites there is a dispute between the parties over the 'Fence Works' (which were the subject of the Magistrates' Court proceeding) and the alleged flows of water from the respondents' land onto the applicants' land (which was the subject of the VCAT proceeding). The Deed further recites, 'The Parties wish to resolve the dispute in accordance with this Deed.'
3. The Deed then sets out the parties' agreement in relation to the Fence Works (Clauses 8 & 9) and works on the respondents' property (Clauses 10 to 12 inclusive). The Deed expressly releases and discharges the parties from any current or future claims relating to the subject matter of the proceeding, with some important nuances.
4. Clause 13 provides, inter alia, from the date the parties comply and satisfy their obligations in the Deed, they release and discharge each other from all claims and proceedings for damages arising out of or in any way connected with the subject matter of the Magistrates' Court proceeding or the VCAT proceeding.
5. However, Clause 14 provides the releases in Clause 13 do not apply to any claim relating to a failure by a party to perform any obligation under the Deed. Clause 15 provides the parties with a right of reinstatement of the proceeding if either party fails to perform any obligation under the Deed.

1. Upon the full performance of the terms in the Deed, the parties agreed to discharge their rights to pursue further claims in relation to the completed works, damages, or issues arising from the earlier Magistrates' Court or the Tribunal proceedings. I find there is a merger of the parties' rights in the sense that any claims arising out of the proceedings are now extinguished and replaced by the terms of the Deed.
2. While the Deed merges the parties' rights in relation to the previous claims and releases them from further action regarding those claims, I further find the Deed does not preclude legal action for failure to comply with the terms of the Deed. The rights under the earlier proceeding and the VCAT proceeding are extinguished once the obligations in the Deed are fulfilled, but if there is non-performance or breach of the Deed, the parties retain the right to pursue a claim for non-performance or breach.
3. As I have found the parties' rights have merged by reason of the Deed, I do not have to determine the applicants' claim against the respondents for breach of section 16 of the Act. That is, I do not have to determine Issue E - are the applicants entitled to pursue a claim under section 16 of the Act?

1. The applicants allege that the respondents failed to properly complete aspects of the agreed works, as required under the Deed. They claim that some works were only partially completed, certain required elements were not completed and some completed works were not done correctly or in accordance with the Deed.
2. They claim that the respondents' failure to complete the works constitutes a breach of their obligations under the Deed. The applicants submit that, under Clause 13, the release and discharge of the respondents from all claims was conditional on full compliance with the Deed. As the respondents have not met their obligations, the Deed remains enforceable and the applicants are entitled to reinstate the proceeding to seek a proper resolution.
3. The applicants further claim that, given the respondents' breaches of the Deed, they are entitled to seek orders for:

(a) the respondents to complete the required works correctly;

(b) monetary compensation for defective or incomplete work; and

(c) their own workers to enter the respondents' property to complete the necessary works.

1. The respondents submit they have fulfilled their obligations under the Deed and the applicants' claims of non-compliance are unfounded.

1. The applicants claim that the fence was not constructed in accordance with the agreed specifications or planning permit P675/2021. They allege the respondents did not ensure compliance with the planning requirements, which has resulted in the fence being constructed at an incorrect height and location.
2. In response to the allegations of breach, the respondents say the fence was built in accordance with the Deed and the planning permit. The applicants' concerns about council approval and fence height are regulatory issues, not contractual obligations under the Deed.

1. I accept the respondents' submissions that the height of the dividing fence and non-compliance with the planning permit are regulatory issues and not the subject of contractual obligations under the Deed.
2. Accordingly, the applicants have not proved the alleged breach of the respondents' obligations under the Deed.

1. The applicants were required to pay for part of the fence installation, but they dispute the payment was made to a third party rather than the respondents. They submit this raises concerns about whether the correct works were completed and whether the respondents fulfilled their responsibility to oversee the project, as agreed.

1. I find the applicants' submission to be misguided and non-sensical. There is no evidence to support the submission. The allegation of breach is unsuccessful.

1. The Deed provides the respondents must construct a 150mm high concrete upstand along the footpath on the respondents' property to prevent water from flowing onto the applicants' property, within 30 days of receiving payment from the applicants, in accordance with Clause 9(e).
2. In breach of the Deed, the applicants allege the work was completed months after the agreed date.
3. In reply, the respondents concede the concrete upstand was completed three months later than agreed. The respondents say the delay in completing the work was due to external factors, including COVID-related delays, adverse weather and delays with arranging their concreter to complete the work.
4. The respondents say the formwork for the concrete upstand on their property was completed before the date of the Deed, which effectively re-directed water away from the dividing fence line.
5. The respondents submit the delay in completing the concrete upstand did not cause any material damage to the applicants' property and once completed, the upstand functioned as intended. The respondents further submit there is no evidence that any water damage to the applicant's property was caused by the delay.

1. Having considered the evidence and the parties' submissions, I find the respondents breached their obligations under the Deed by failing to have the concrete upstand completed within the required time.

1. The Deed provides the respondents are required to install a 100mm wide strip drain across the concrete apron on their property.
2. The applicants claim the respondents failed to install the strip drain correctly. They rely on an expert report by David White, building consultant, dated 28 July 2023 ('White report'). In his report, Mr White considers the strip drain has not been connected to the respondents' stormwater system.[1] Mr White also considers there are other failings by the respondents in carrying out the work, including no sub-soil drainage to the rear garden and lawn area of the respondents' property and the rear planter box soil levels are higher than the bottom of the dividing fence.
3. In response to the applicants' allegation, the respondents say they installed the strip drain correctly.

1. The respondents did not call Mr White to give expert evidence at hearing. Mr White's opinions were not the subject of any questioning or interrogation. Accordingly, I will give little weight to the expert's opinions.
2. Further, Mr White's opinions regarding the sub-soil drainage and the rear planter box soil levels are not relevant to the respondents' work obligations under the Deed.
3. I find the applicants have not proved the allegation that the respondents breached their obligations in relation to Clause 10(b).

1. The Deed provides the respondents are required to install treated pine sleepers below the lower crossbar of the dividing fence from the rear of the properties to the concrete apron.
2. The applicants allege the work was not done properly. They again rely on the White report in which Mr White opines the timber sleepers have not been installed under the bottom of the dividing fence and are the wrong type and not fit for purpose. He further opines the top of the sleepers are the same level as the soil in the raised garden bed, which is not preventing flows of water onto the applicants' property. He also considers the sleepers inside the raised garden bed have not been installed deep enough to retain all the soil in the garden bed.[2]
3. The respondents contend they have installed the timber sleepers in accordance with their obligations under the Deed.

1. As stated above, the respondents did not call Mr White to give expert evidence at hearing. Mr White's opinions were not the subject of any questioning or interrogation. Again, I will give little weight to the expert's opinions.
2. I find the applicants have not proved the allegation that the respondents breached their obligations in relation to Clause 10(c).

1. The applicants allege the respondents did not use agreed materials in carrying out certain parts of the works. They claim that using different materials than those specified in the Deed is a failure by the respondents to meet their contractual obligations.
2. The respondents deny the allegation.
3. The Deed is generally silent about the materials to be used by the respondents in carrying out their work obligations in Clause 10, save for the use of treated pine sleepers in Clause 10(c).

1. The applicants have not detailed which materials were specified by the Deed and what alternative materials have been used by the respondents in carrying out the work in Clause 10. If they are referring to Mr White's opinion in relation to the materials used in Clause 10(c), I do not accept that opinion.
2. I find the applicants have not proved the allegation that the respondents breached their obligations under the Deed.

1. The applicants allege the respondents constructed some of the works in Clause 10 outside of the agreed boundary, encroaching onto their property. They allege the placement of concrete and other materials extends beyond the respondents' property line.
2. They claim that this unauthorised encroachment violates the terms of the Deed, which required all works to be contained within the respondents' property.
3. The respondents deny that any part of the works extends beyond their property. They argue that the applicants have not provided any clear evidence of encroachment.

1. The applicants have not provided any survey evidence of the location of the boundary between the applicants' property and the respondents' property.
2. Accordingly, the applicants are unable to establish if any of the respondents' work under Clause 10 has encroached onto the applicant's property.
3. I find the applicants have not proved the allegation that the respondents breached their obligations under the Deed.

1. The applicants allege the work completed by the respondents under Clause 10 was substandard and not in line with what was agreed. They have provided photographic evidence of gaps in the fence, which they say make the fence structurally unsound; issues with the respondents' drainage system, which they claim continue to cause water to flow onto their land; and inconsistencies in the construction, which they claim has reduced the effectiveness and durability of the agreed works.
2. They claim that the respondents' failure to carry out the works in a proper and workmanlike manner means that they have not met their obligations under the Deed.
3. The respondents deny the allegations and contend the Deed does not contain any obligation that the work in Clause 10 must be carried out in a proper and workmanlike manner.

1. The Deed provides that the purpose of the works in Clause 10 is to 'prevent water flowing onto the applicants' property'.[3]
2. I find that the respondents will be in breach of their work obligations in Clause 10 if the work is carried out or completed but does not achieve the purpose of the work.
3. The applicants' allegations of failing to carry out the work in a proper and workmanlike manner are vague and imprecise, and unsupported by expert opinion. As stated above, I do not accept Mr White's opinions in this regard. Some of the allegations do not relate to the work in Clause 10.
4. As the applicants have not adduced satisfactory evidence to establish the work carried out by the respondents did not meet the purpose of the work, I find the applicants have not proved the allegation that the respondents breached their obligations under the Deed.

1. Clause 12 of the Deed provides the respondents are required to provide the applicants with a notice of completion of the works under Clause 10, together with photographs of the completed works.
2. The applicants claim the respondents failed to provide proper notice of completion and photographs. They submit this failure to provide proof of completion is a serious breach of the Deed, as it prevented them from verifying whether the works were carried out, as agreed.
3. Under the Deed, the respondents agreed to carry out the work under Clause 10 within 30 days of the applicants complying with their obligations under Clause 9(e). This meant the work was to be completed in or about September or October 2022. The applicants refer to correspondence from the respondents' solicitors dated 23 November 2022 and 23 December 2022, which confirm the works were not completed by these dates. They allege the respondents falsely claimed that evidence of completion had been provided to their solicitors and VCAT, yet neither the applicants nor VCAT received such evidence. Further, they say Banyule Council confirmed the stormwater connections were completed on 13 December 2024, making prior claims of completion impossible.
4. The applicants also claim the respondents confirmed the works were not fully completed as at November 2022, contradicting their claim that a completion notice had been sent.
5. In response, the respondents claim they sent the applicants a completion notice and photographs via their lawyers in November 2022. Their lawyers' email outlined the completed and outstanding work, along with explanations for the delay.
6. The respondents contend that receipt of the documents should not constitute a breach of Clause 12, as the requirement was to send the notice and photographs, not to ensure receipt.

1. Clause 12 is a procedural term of the Deed which requires the respondents to notify the applicants and provide photographic evidence that the work under Clause 10 has been completed.
2. I find any breach of Clause 12 does not sound in damages. In other words, if the respondents breached Clause 12, the applicants are not entitled to compensation because of the breach. I do not accept the applicants' submission that a failure to comply with Clause 12 means they cannot verify the works have been carried out in accordance with the Deed. In this proceeding, they claim the works have not been carried out or completed in accordance with Clause 10, despite the respondents' failure to notify them and provide evidence of completion.
3. The Deed does not provide when the respondents must give notice, other than after completion of the works under Clause 10. On the evidence before me, I am unable to determine if or when the respondents complied with Clause 12. In any event, if the respondents breached their obligations under Clause 12, I have found the applicants would not be entitled to compensation for the breach.

D. WHAT ARE THE LEGAL CONSEQUENCES OF A BREACH OF THE DEED BY EITHER PARTY?

1. In assessing whether the applicants have suffered any loss any damage by reason of the respondents' breach of their obligations under the Deed, I must apply the law of contract. The law provides that a party can only successfully claim for losses which naturally arise from a breach of the contract or are reasonably contemplated by the contracting parties at the time the contract was formed.[4]
2. In this case, the applicants claim damages in the nature of the costs of rectification of defective or incomplete work and a refund of amounts paid under the Deed.
3. The loss and damage claimed does not arise directly or indirectly from the breach by the respondents in completing the concrete upstand work within the time required by the Deed.
4. The applicants may be entitled to damages arising from the delay in completing the work under Clause 10(a). However, the applicants lead no evidence of any loss or damage having been suffered directly or indirectly by reason of the breach.
5. Accordingly, I find the respondents have not proved they have suffered any loss or damage because of the respondents' breach of their obligations under the Deed.

1. For the above reasons, I find the applicants have failed to prove on the balance of probabilities the respondents beached their obligations under the Deed, save for the delay in completing the concrete upstand work in Clause 10(a) of the Deed.
2. However, I find the breach of the Deed (i.e. the delay) has not resulted in the applicants suffering any direct or indirect loss or damage.
3. The applicants' claim is largely focussed on perceived inadequacies and regulatory concerns which the Deed does not address. The applicants' allegation that the dividing fence has not been constructed in compliance with the planning permit is not a contractual obligation under the Deed. It is a regulatory matter which can be raised with the responsible authority which issued the permit.
4. It is clear to me that the applicants are dissatisfied with the respondents' performance of their obligations under the Deed. However, and for the above reasons, the applicants' dissatisfaction with the quality of the work and the materials used does not amount to a breach of the respondents' obligations under the Deed.
5. Given that the applicants have been unsuccessful in pursuing their claims against the respondents, my preliminary view is that each party should bear their own costs of this proceeding in accordance with section 109(1) of the VCAT Act.
6. However, in my orders, I will allow the parties time to apply for an order for costs in their favour, including an explanation why the usual presumption that each party should bear their own costs (per section 109(1)) should not apply here.

[4] Hadley v Baxendale (1854) 9 Exch 341.