Museth v Windsor Country Golf Club Ltd

Court of Appeal (NSW)|2016-11-28|Before: Gleeson JA, McDougall J

Solicitors: Herbert Weller Solicitor (Appellant) Colin Biggers & Paisley (Respondent) File Number(s): 2016/4407 Decision under appeal Court or tribunal: District Court of New South Wales Jurisdiction: Civil Date of Decision: 16/12/2015 Before: Kearns DCJ File Number(s): 2013/281866

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Judgment

GLEESON JA: I agree with McDougall J that the appeal should be dismissed with costs for the reasons given by his Honour. As to the question of whether leave to appeal is required because the matter in issue involves an amount or value of less than $100,000 (Supreme Court Act 1970 (NSW), s 101(2)(r)), no point was taken by the respondent that the appeal was incompetent: Uniform Civil Procedure Rules 2005 (NSW) r 51.41, nor was the question of leave addressed by the parties on the appeal. Since no point would be served in putting the parties to further expense in making submissions on the question of leave, I agree with the course proposed by McDougall J that the appeal be determined on the merits.
BARRETT AJA: I agree with McDougall J that the appeal should be dismissed with costs. Because no party addressed the question whether leave to appeal was required or warranted, I prefer to express no opinion on that matter. Subject to that, I agree with the reasons of McDougall J.
McDOUGALL J: The appellant (Mr Museth) sued the respondent (the Club) in nuisance. He claimed that water flowed from the Club's land onto his land and penetrated the sub-surface clay soil. That, Mr Museth claimed, caused damage to the structure to his house.
The primary judge found the nuisance proved (although he found that it had been abated in August 2015, when remedial measures taken by the Club stopped the flow of water from its land to Mr Museth's land). He assessed damages at $25,000. Since the plaintiff had settled his claim against another defendant for $30,000, and since it was common ground that he was required to give credit for that receipt, the primary judge entered judgment for the Club with costs.
Mr Museth, purportedly as of right, appeals from that decision. There is a question as to whether he requires leave. I return to that question at [120] and following below.

The facts

Mr Museth's property is located on the corner of McQuade Avenue and Cox Street, South Windsor. If one regards McQuade Avenue as running east-west, and Cox Street as running north-south, Mr Museth's property is on the south-western corner. His land runs thence to the west. At its western boundary, his land is abutted by land of the Club.
When Mr Museth bought his property in November 2011, there was a dirt dish drain on the Club's land towards its eastern end, running parallel to the boundary with Mr Museth's property. The Club's land was grassed at that point (although there was a paved area further to the west, and there were also buildings further to the west).
At the point where the two properties abut, the land slopes generally from west to east: the Club's land is higher than Mr Museth's land. It may be inferred that the dirt dish drain had been constructed to divert water flowing down the slope of the Club's land away from Mr Museth's property (and away from other properties in Cox Street).
The primary judge found that both surface water and sub-surface water flowed from the Club's land onto (and into) Mr Museth's land. The Club does not challenge that finding. The primary judge found, further, that the effect of those water flows was to charge the sub-surface clay in Mr Museth's land with water, thus causing it to swell. As is common experience with clay soils, the clay beneath Mr Museth's house swells when it is charged with water and shrinks when it dries out. That shrink/swell movement disturbed the footings of Mr Museth's house (which was about 70 years old). That in turn caused cracking in the walls and, the primary judge found, movement in the roof timbers which caused the roof to sag.
In August 2015, the Club constructed a retaining wall near the eastern boundary of its property where it abutted Mr Museth's property (and other properties in Cox Street), and constructed a concrete spoon drain behind that retaining wall. Those measures were effective in stopping the flow of water from the Club's land to Mr Museth's land.

The primary judge's reasons

The primary judge gave two separate judgments in this matter. In one, which I will call the reopening judgment, he dealt with (and dismissed) an application by Mr Museth to reopen his case and adduce evidence of the cost of underpinning. In the other, which I will call the principal judgment, the primary judge dealt with the substantive issues. Both judgments need to be considered, because his Honour expressly incorporated into the principal judgment aspects of his reasoning in the reopening judgment.
The primary judge commenced the principal judgment by setting out, in a way that is not now contentious, an outline of Mr Museth's claim, the principles relating to the law of nuisance relevant to the flow of water from one property to another, the facts as to the flow of water from the Club's land onto Mr Museth's land, and the facts as to the Club's works in abatement. As I have indicated, his Honour found that up until August 2015, water had flowed both across and below ground from the Club's land to Mr Museth's land, and had caused both exterior and interior cracking to Mr Museth's house. That finding took his Honour to the question of damages.
Each party led expert evidence. To the extent that the expert evidence dealt with water flows, it may be put to one side. The expert evidence as to damages addressed three topics. They were roof sag, the need for underpinning, and whether demolition and reconstruction was the only way of remedying the damage to Mr Museth's house.
As to roof sag, the primary judge concluded that the sagging shown in photographs that were in evidence had been caused by movement in the walls. Movement in the walls had been caused by movement (swell/shrink) in the sub-surface clay material beneath the house.
As to underpinning, the primary judge noted that the claim for damages included a claim for the cost of underpinning. There was no evidence of that cost because (as I have indicated already) the primary judge had rejected Mr Museth's application to reopen and lead evidence of that cost.
The primary judge appeared to accept the evidence of Mr Museth's expert, Mr Koloff, that underpinning could control movement in the foundations of the house. Because there was no evidence of that cost, his Honour was unable to find that underpinning would not be viable in an economic sense.
The primary judge found that the structural integrity of the building was not threatened by the cracks that had been observed. Thus, he concluded, underpinning was not required to rectify or prevent structural damage.
In short, the primary judge found that the defects could not be remedied by underpinning, and that underpinning was not necessary to secure the structural integrity of the house. His Honour did find that underpinning would prevent further movement and consequent damage, but considered that such damage would not affect the structural integrity of the house.
The primary judge noted (at [72]), as to the claim for demolition and rebuilding, that "it was no part of the plaintiff's submission". Mr Gross of Queens Counsel, who appeared with Mr Boyd of Counsel for Mr Museth on the hearing of the appeal, attacked that comment. It was incorrect. The submissions put for Mr Museth to the primary judge had included a claim for the cost of demolition and reconstruction. It is fair to say that the submissions were put in a perfunctory way, and were not addressed with any detail whatsoever.
The primary judge found that the expert evidence on which Mr Museth relied did not support the claim for demolition and rebuilding. Accordingly, he determined not to allow it.
In the reopening judgment, the primary judge had raised (in the context of the cost of underpinning) the question of whether it was reasonable to spend a large amount of money (the amount came from the quotation that Mr Museth wanted to tender if given leave to reopen) on underpinning, having regard to the non-structural nature of the defects. He concluded that it was not. Although his Honour did not expressly refer to that in his principal judgment, it is clear that the same reasoning process would apply.
On the basis that the only damage was cosmetic, the primary judge allowed damages in accordance with the estimate provided by one of the Club's witnesses, and a sum for inconvenience. He rejected a claim for exemplary damages. There is no complaint made as to that. Nor is there any complaint that, on the (contested) basis that the only damage was cosmetic, the sum allowed was inadequate.

Outline of issues and approach to decision

Mr Museth advanced eight grounds of appeal.
Ground 1 attacks what are said to have been inconsistent findings of fact made by the primary judge when his Honour dealt with the expert evidence, as a result of which, it is said, the primary judge incorrectly concluded that the structural integrity of Mr Museth's house was not compromised, and the only repairs needed were "cosmetic".
Ground 2 asserts that the primary judge erred in stating that the experts who had commented on wall movement were not asked about, and did not comment on, structural integrity. The ground asserts that Mr Museth's expert Mr Koloff did do this.
Ground 3 asserts that the primary judge erred in his approach to the assessment of damages by using the concept of "betterment", and thus confining damages to the cost of "cosmetic" repairs (and an allowance for inconvenience). The ground asserts that to the extent that compliance with the current standards of the local council would have resulted in a better building, that was simply a function of reinstatement (by demolition and reconstruction).
Ground 4 attacks the primary judge's asserted reliance "upon the purchase price [paid by Mr Museth in 2011] as a significant factor preventing [Mr Museth] from obtaining any damages for the cost of demolition and rebuilding".
Ground 5 attacks the primary judge's reasoning (referable to evidence given by Mr Koloff) that Mr Museth did not buy a house for a "1 in 100 years storm" and, thus, his Honour's rejection of this aspect of Mr Koloff's evidence.
Ground 6 asserts that the primary judge failed to consider the evidence adequately, and to give proper reasons for decision. That ground is, expressly, parasitic on grounds 1 to 5.
Ground 7 attacks the primary judge's refusal to allow by way of damages the cost of demolition and reconstruction, bearing in mind (it is said) that underpinning was not an option, because it was not cost effective, and that there was structural damage to the house.
Ground 8 (which is parasitic on all the preceding grounds) asserts that the damages assessed were inadequate.
The Club relied on a notice of contention. That notice raised two grounds: 1. on the primary judge's finding that there was no structural damage, and bearing in mind that the nuisance had been abated, it was not reasonable to reinstate (as Mr Museth said should be done) by demolishing and rebuilding at a cost of $550,000; and 2. passages in the oral evidence of Mr Koloff (strangely, given for the first time in re-examination) were inadmissible and, objection having been taken to them, should have been rejected.
It is not really possible to make sense of the grounds of appeal, or the notice of contention, without giving detailed consideration to the expert evidence.
Further, and for reasons that will become apparent, it is my view that the admissible and probative expert evidence does not and could not support the conclusions for which Mr Museth now argues. In substance, I think, the second ground stated in the notice of contention is correct. Since that is sufficient to dispose of the appeal (and since an analysis of that question will in any event deal also with the first, second and fifth grounds of appeal), I shall approach the resolution of the issues on appeal by turning to the notice of contention and those grounds after setting out the expert evidence.

Principles relevant to expert evidence

Section 76 of the Evidence Act 2005 (NSW) states "the opinion rule". It reads: 76 The opinion rule (1) Evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed. (2) Subsection (1) does not apply to evidence of an opinion contained in a certificate or other document given or made under regulations made under an Act other than this Act to the extent to which the regulations provide that the certificate or other document has evidentiary effect.
There are several exceptions to the opinion rule. Section 79 sets out the exception for "opinions based on specialised knowledge". It reads: 79 Exception: opinions based on specialised knowledge (1) If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge. (2) To avoid doubt, and without limiting subsection (1): (a) a reference in that subsection to specialised knowledge includes a reference to specialised knowledge of child development and child behaviour (including specialised knowledge of the impact of sexual abuse on children and their development and behaviour during and following the abuse), and (b) a reference in that subsection to an opinion of a person includes, if the person has specialised knowledge of the kind referred to in paragraph (a), a reference to an opinion relating to either or both of the following: (i) the development and behaviour of children generally, (ii) the development and behaviour of children who have been victims of sexual offences, or offences similar to sexual offences.
Rule 31.28 of the Uniform Civil Procedure Rules 2005 (NSW) sets out procedural requirements to be satisfied before expert opinion evidence can be adduced. The rule serves a number of purposes, one of which is to provide a measure of procedural fairness to a party against whom such evidence is to be adduced. I set out r 31.28: 31.28 Disclosure of experts' reports and hospital reports (1) Each party must serve experts' reports and hospital reports on each other active party: (a) in accordance with any order of the court, or (b) if no such order is in force, in accordance with any relevant practice note, or (c) if no such order or practice note is in force, not later than 28 days before the date of the hearing at which the report is to be used. (2) An application to the court for an order under subrule (1) (other than an order solely for abridgment or extension of time) may be made without serving notice of motion. (3) Except by leave of the court, or by consent of the parties: (a) an expert's report or hospital report is not admissible unless it has been served in accordance with this rule, and (b) without limiting paragraph (a), an expert's report or hospital report, when tendered under section 63, 64 or 69 of the Evidence Act 1995, is not admissible unless it has been served in accordance with this rule, and (c) the oral expert evidence in chief of any expert is not admissible unless an expert's report or hospital report served in accordance with this rule contains the substance of the matters sought to be adduced in evidence. (4) Leave is not to be given as referred to in subrule (3) unless the court is satisfied: (a) that there are exceptional circumstances that warrant the granting of leave, or (b) that the report concerned merely updates an earlier version of a report that has been served in accordance with subrule (1).
In the present case, expert evidence dealing with water flows, the likely causes of cracking in Mr Museth's residence, the quality or character of that cracking, methods of repair, and the like would in principle be relevant, and thus could be admissible pursuant to s 56 of the Evidence Act. No one suggested otherwise. However, the issues raised by ground 2 of the notice of contention include whether the evidence in question was shown to fall within s 79(1), and thus to be admissible as an exception to the opinion rule.
In Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21, the majority (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ) said at [37] that, in the ordinary case, if expert evidence is to be admissible, it must be apparent from the evidence how the opinion expressed follows from the stated (known or assumed) facts by the application of the specialised knowledge of the witness to those facts. In doing so, their Honours referred with approval to what Heydon JA had said in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305, at [85]: In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of "specialised knowledge"; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be "wholly or substantially based on the witness's expert knowledge"; so far as the opinion is based on facts "observed" by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of "specialised knowledge" in which the witness is expert by reason of "training, study or experience", and on which the opinion is "wholly or substantially based", applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v R (1999) 197 CLR 414, on "a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise" (at [41]).
It followed, the majority said in Dasreef at [42], that if the evidence does not demonstrate that an opinion expressed by a witness is based on the specialised knowledge of that witness, which in turn is based on training, study or experience, then the evidence is not admissible. That is because, for s 79(1) of the Evidence Act to be engaged, it must be shown or conceded that each of the elements stipulated in that subsection is proved.
In the present case, the evidence of Mr Koloff, an expert on whose evidence Mr Museth relied heavily both at trial and on the hearing of the appeal, fell lamentably short of meeting those basic requirements.
In my view, purported expert opinion evidence should not be admitted unless the requirements of s 79(1) are proved or conceded. If evidence is admitted without those requirements being proved or conceded, the opposing party is placed in a most invidious situation. Counsel for that party has two choices: to test the evidence, and risk in effect making good its defects; or not to test it, and take the risk that the trial judge might find it persuasive. In my view, it is grossly unfair to put a party in that situation. If parties and their legal advisers cannot ensure that purported expert opinion evidence meets the basic requirements for admissibility, the consequences should fall on them, not on the other party.
Further, in my view, it is not consistent with r 31.28 to permit expert evidence to be given, particularly on a vital topic, unless the requirements of the rule have been met (or the opposing party consents).

Evidence called for Mr Museth

Mr Museth called evidence from a geotechnical engineer, Mr Jworchan; from a civil and structural engineer, Mr Koloff; and from a builder, Mr Parcell. Messrs Koloff and Jworchan gave oral evidence. Mr Parcell did not; he was seriously ill, and his statement of evidence was tendered, but was not tested in cross-examination. Mr Jworchan
Mr Jworchan's evidence dealt, as one would expect, with the geotechnical characteristics of Mr Museth's land. He said that "bedrock shale is unlikely to be encountered up to depth of about 2.0m". Thus, he said, if underpinning works had to be based on shale, "existing residence may not be economically underpinned". Mr Jworchan concluded that the soil had a very low bearing capacity down to about a metre in depth, and a higher but variable bearing capacity at a depth of about one to two metres. He concluded that it "may be feasible" to underpin the house "at depths of 1.0m to 2.0m".
In his oral evidence, Mr Jworchan confirmed that he had no comment on whether underpinning might or might not be appropriate. He said that this was a question for "whoever was designing that, yes". Mr Koloff
Mr Koloff's written evidence was extraordinarily unsatisfactory. In his first report, dated 29 March 2015, he referred to a site inspection that he had conducted two days earlier in the company of Mr Parcell and said, without any further ado: Underpinning of the house required as per [the attached quotation of] Crackerjack Construction for $187,000 and rectify all damaged parts of the house will cost in excess of $400,000.
It appears that objection was taken to that statement. Understandably, Counsel then appearing for Mr Museth did not press it.
Next, Mr Koloff set out his "conclusion": The most cost effective solution is to demolish the house and construct similar new dwellings on levels higher than 1 in 100 years storm as provided by Winsor [sic] Council.
It does not appear that objection was taken to that sentence. Nonetheless, it can have no probative weight, because the report simply does not indicate what is the problem to which demolition and reconstruction is "the most cost effective solution". It does not provide any factual basis for the assertion. Nor (of necessity given the absence of factual reference) does it provide any process of reasoning.
There is another problem with the "conclusion". It is apparent that Mr Koloff thought that a new house should be erected above the 1 in 100 year storm level. The evidence is silent as to whether Mr Museth's land fell above or below that level. If it were below that level then, one might infer, reconstruction would not be effective.
The report then set out Mr Koloff's qualifications.
There was annexed to the report a quotation from Crackerjack Construction. The tender of that quotation was not pressed.
That is all there was to Mr Koloff's first report.
In a second report dated 3 July 2015, Mr Koloff referred to his first inspection and to a subsequent inspection on 7 May 2015. He said: As a result of newly erected extension of the carpark belonging to Windsor Country Gold [sic] Club (building works complete in 2011) all the surface water is discharged to the rear of the properties along Cox Street and in particular the No.37 Cox Street which is at the lowest point of previously constructed spoon drain and pit and subsequently collapsed due to excess water flow and inadequate construction. Over the past 4 years the rear yard of the above property has been heavily saturated and movements of the foundations created external and internal cracks, some sections of the roof have collapsed. The concerned owner of the above property Mr. Mick Musech [sic] has obtained a geotechnical report from Geotechique Pty Ltd stating that the soil end bearing capacity is less or equal to 100 KPa and the substrata of the surrounding area is heavily saturated where the moisture content exceeds 100%. Recommendation: In view of the above I recommend that the building should be demolished and similar dwelling to be erected on foundation such as screw piling suitable for this type of soil condition and in lieu new stormwater drainage system to be erected by the Windsor Country Golf Club thus diverting the water flow to the Council's stormwater drainage system. Underpinning is not an option as per my previous report dated 29.03.2015.
Because the sentence in the previous report, dealing with underpinning, had not been tendered, the last sentence of the "Recommendation" had no point of reference and no probative weight.
In essence (so it seems to me), the absence of any demonstrated reasoning process in Mr Koloff's reports means that they were inadmissible, because they could not be seen to come within s 79(1) of the Evidence Act. Even if the reports were admissible, there were problems.
First, the recommendation for demolition and reconstruction simply does not follow, in any way explained in the second report, from the assumed facts set out in the two preceding paragraphs. It may well follow from observations made by Mr Koloff during one or other of his site inspections, but if it does, the report does not show how. Thus, in my view, the recommendation has no probative weight. It is impossible for anyone reading the report to understand the factual basis leading to the conclusion that demolition and reconstruction is appropriate, or the reasoning deployed in support of that conclusion.
Another problem concerns that part of the recommendation that commences with the words "and in lieu". Do those words mean that the "new stormwater drainage system" is to be erected in lieu of what was then in place on the Club's land (i.e., the dirt dish drain)? Or do they indicate, as was submitted for the Club on appeal, that constructing an effective stormwater drainage system on its land is an alternative to demolition and reconstruction of Mr Museth's house.
Neither of Mr Koloff's reports, to the extent that they were admitted into evidence, said anything about the need for or cost of underpinning. Further, in my view, neither of them said anything of any probative force, to the effect that the only practicable method of reinstatement available to Mr Museth was demolition and reconstruction.
Mr Koloff gave oral evidence, including some substantive evidence in chief. Since there was no objection to his giving further oral evidence in chief (as opposed to specific objections to specific questions), this may be taken to have happened with the Club's consent, for the purposes of UCPR r 31.28(3).
No part of Mr Koloff's oral evidence in chief (nor, for that matter, in his cross-examination) provided any support for the proposition that nothing short of demolition and reconstruction (or, perhaps, as an intermediate measure, underpinning) could provide an appropriate method of rectification for the damage caused by the nuisance to Mr Museth's house.
In the course of cross-examination, Mr Koloff agreed with the following points: 1. when assessing damage due to foundation movements, the relevant Australian Standard, AS 2870, provided the "starting position"; 2. in assessing rectification of cracks in a house built of brick (as was Mr Museth's property), the extent and direction of cracking were important, but the width was "not necessarily" important; 3. in assessing the appropriate rectification for a 70 year old brick house built on clay, it would be very important to measure the width of cracks, their direction and their location; 4. he had not measured the width of the cracks; 5. Mr MacLeod, an expert who had provided a report for the Club, had measured the cracks; Mr Koloff agreed that the report "was very comprehensive", and he "would agree with the contents of" that "very comprehensive… report"; and 6. when shown a copy of the report in question, it was Mr MacLeod's report, he found it to be comprehensive, and that he agreed with the opinions in it.
The primary judge commented, correctly, that it was difficult to understand Mr Koloff's apparent acceptance of the comprehensive nature of, and opinions expressed in, Mr MacLeod's report, given that the opinions expressed by Mr MacLeod differed in some respects from those expressed by Mr Koloff. The primary judge concluded at [67] that Mr Koloff had not meant to say what he said, because Mr MacLeod's report "is completely contradictory to his own report". The primary judge did not venture a view as to what it was that Mr Koloff had intended to say.
It is apparent that English was not Mr Koloff's first language, and this may explain the apparent inconsistency. (It may also explain why Mr Koloff's second report contains the puzzling passage commencing with the words "and in lieu" - see at [55], [59] above.) Whilst the difficulty that a witness has with the English language may give rise to an inference that the witness did not intend to convey the meaning that some of his answers (or other evidence) on their face appear to convey, it does not provide any basis for inferring what it was that the witness had intended to convey.
Leaving those problems aside, the point reached at the conclusion of Mr Koloff's evidence in chief, including his reports, and evidence in cross-examination was that he had given no evidence of the need for underpinning, and no evidence (of any probative force) as to why it was necessary to demolish and rebuild, rather than repair. Quite extraordinarily, those topics were broached in re-examination.
In the course of re-examination, Mr Koloff was shown a number of photographs, said to have been taken on 2 June 2015. He was asked to describe what they showed to him. He said that some of them at least showed a "typical difference of settlement, a vertical crack" that indicated "movements to the foundation and, and that typical vertical crack". He said that vertical cracks were the ones that caused major problems; horizontal cracks, it appears, were nothing to worry about.
Mr Koloff was then asked to assume that the width of some of the cracks was 10mm, or 10 to 15mm. Rather than assume that fact, he appeared to estimate, by looking at the photographs, that this indeed was their width. Neither the assumption nor his visual estimate were consistent with the measurements made by Mr MacLeod. As events happened, Mr MacLeod's measurements were not challenged in cross-examination.
Mr Koloff was then asked to indicate the significance of the cracking depicted in the photographs. There was an objection. The primary judge allowed the question. Mr Koloff said that it showed "the movements in the foundations and the thing is moving and settling". In terms of significance, he said (again over objection) that "it's underpinning" which was "a very complex process" that had to be "done in stage".
Then, and I think it is reasonably clear, still over objection (Counsel then appearing for the Club seems to have taken the appropriate course that his objection applied to the whole line of questioning; Mr Gross did not suggest otherwise), Mr Koloff said that the only way to rectify the damage was "if you demolished and rebuilt again" or, somewhat cryptically, "underpinning".
Mr Koloff was then asked further questions, again over objection, as to the assumed width of cracks shown in photographs (again, the fact that the assumption was inconsistent with Mr MacLeod's statement of evidence does not appear to have troubled anyone) and asked to indicate what those cracks showed. He said "the only way you can rectify once whatever is to underpin and to go to firm stratum, underpin it".
There was more of the same.
Next, Mr Koloff was asked to look at a photograph of the house which showed "the sagging of the roof". This had not been mentioned in either of his reports, nor in any of his oral evidence to date. Mr Koloff said that the sagging in the roof was due to movement in the load-bearing walls. When asked how to repair the damage, he said he did not know, perhaps the trusses could be replaced, "but unless you fix up the, unless you fix up the load bearing walls you're wasting your time because this will happen again".
Again, it appeared to be common ground on the hearing of the appeal that this evidence was given (or should be taken to have been given) over the repeated objections of Counsel for the Club.
The evidence in re-examination to which I have referred is the subject of the second ground in the notice of contention. Although I shall return to this, I should indicate at this point that in my opinion, that material should not have been admitted, for at least four, related, reasons.
First, it had not been flagged in any way in the reports and thus, absent consent (which clearly was not forthcoming) should not have been given: UCPR r 31.28(3). Second, by no stretch of the imagination could the evidence be regarded as having arisen out of the carefully structured cross-examination. Third, the conclusory and unreasoned manner in which the evidence was given, coupled with its divergence (as to the width of the cracks) from other evidence that was expected to be given, made it unreliable. And fourth, arising out of the preceding matters, the evidence was unfairly prejudicial to the Club, thus engaging s 135 of the Evidence Act. Mr Parcell
The third expert on whose evidence Mr Museth sought to rely was Mr Parcell. Mr Parcell prepared two reports, the later of which was dated 27 July 2015. In that report, he referred to inspections he had made in January, March, May and July 2015, and reported on his observations. He said that in his view, movement in the footings, movement and cracking in the brickwork, movement and cracking in the interior walls and the sagging of the roof were caused by water penetration. He then purported to give the following opinions: 1. the foundations required underpinning; 2. the underpinning of the foundations could not be done with the dwelling in situ, and therefore the dwelling should be demolished and removed; and 3. once the underpinning work had been performed, the dwelling could be rebuilt at a cost "in the order of $550,000" which "would include the cost of pile driving to depths of the new footings to the engineers [sic] satisfaction".
Those opinions were attacked, on the basis that they were conclusory and showed no reasoning. That must be so, as to the first. The report gives no reasoning to support the proposition (which I note appears to be one that Mr Koloff did not agree with, if one passage in his re-examination is to be accepted).
As to the second opinion, it was on its face inconsistent with the opinion of Mr Jworchan. However, that is not of itself a reason for regarding it as inadmissible. Nor do I think that the second opinion is so baldly expressed as to be inadmissible. When it is read in the context of the whole report, I think that the reason why Mr Parcell expressed that opinion is clear enough.
The real problem, however, lies with the third opinion. That assumes that underpinning will take place. Yet the underpinning that is in question relates to the footings of the existing dwelling. That would not be necessary if the existing dwelling were demolished. Once the existing building had been demolished, a new building could be constructed on footings to be designed by an engineer. Mr Koloff had indicated that screw pile footings would be appropriate. However one regards the process, there would be no need for underpinning the existing footings.
As I have said, Mr Parcell was ill and could not attend court. Thus, his evidence was not tested in cross-examination.
The primary judge said at [73] that an earlier report by Mr Parcell (dated 19 January 2015) "is of no assistance", and that the later report "is of little further help". His Honour gave reasons, including the apparent inconsistency with Mr Jworchan's opinion.
The primary judge, at [73], rejected Mr Parcell's opinion. The grounds of appeal do not challenge his Honour's rejection. In my view, the reason that his Honour gave was sufficient to justify rejection of the opinion. I add that the other matter I have referred to above - the apparent duplication of underpinning the footings of the existing dwelling which was to be demolished, and the construction of pile driven footings for the new dwelling (both of which appear to have been included in the estimated cost of $550,000) - provide an additional reason for rejecting the opinion.
Once that opinion had been rejected, there was no evidence of the cost of rebuilding. It follows that even if the primary judge had concluded that rebuilding was the only appropriate way to deal with the defects caused to Mr Museth's house by the movement of the underling clay soils, there was no evidence that would have enabled his Honour to fix the cost.
Mr Gross in his submissions in this Court relied on Mr Parcell's evidence. He did not explain how that evidence could assist Mr Museth, having regard to the primary judge's unchallenged rejection of it.

Evidence called for the Club

The Club called three expert witnesses. They were Dr Cordery (a hydrologist), Mr MacLeod and Mr Mitrevski (each of whom described himself as a civil and structural engineer). Dr Cordery
Dr Cordery's evidence dealt with water flows from the Club's land to Mr Museth's land, and with ways in which those flows could be prevented. Nothing turns on it for present purposes. Mr MacLeod
Mr MacLeod inspected Mr Museth's property and the adjoining land of the Club. He prepared two reports. In one (apart from commenting on other experts' reports), Mr MacLeod set out his detailed observations of the cracking that he had observed during his inspection. In the second report, Mr MacLeod set out his views on the Club's proposed abatement works.
Mr MacLeod observed cracking in the exterior walls at locations that he identified. He measured the width of the cracks "using a hand held crack gauge with an accuracy of ± 0.1mm". He illustrated his observations by reference to photographs. None of the exterior cracks observed and measured by Mr MacLeod was wider than 4mm, and most of them were considerably narrower.
Mr MacLeod also observed (and identified by reference to photographs) internal cracking. To some extent, his observations of the width of those cracks were estimates, presumably because he could not reach them to measure them. Nonetheless, the widest estimated internal crack was about 2mm, and again most of them were narrower.
Mr MacLeod expressed the opinion that "the cracking that exists is cosmetic, of no structural significance and those over 1.0mm in width can be repaired".
Mr MacLeod gave oral evidence in chief, as to a gap between the damp-proof course and the mortar perpend at one point. He had thought it was a construction joint, or construction issue, but said that if it were a crack caused by movement, it could be repaired. He added that the width of the suggested crack "is not representative of all the cracks that I saw on the perimeter of the building", and summarised what he had seen.
Mr MacLeod was cross-examined at some length. Much of the cross-examination dealt with water flows from the Club's land to Mr Museth's land, and the consequences. However, it is important to note that there was no challenge to Mr MacLeod's evidence of his observations of the existence, location and width of the cracking that he observed on his visit. Nor was there any direct challenge to his evidence that the cracking that he observed "is cosmetic, of no structural significance and … can be repaired". Mr Mitrevski
Mr Mitrevski provided a report in which, among other things, he gave evidence of the external and internal cracking that he observed. He supported that evidence by reference to photographs. He said that he observed a number of exterior cracks of 2 to 3mm (or in some cases 1 to 2mm) width, and a number of internal cracks of similar widths. His conclusions included that: The observed cracking, at the time of inspection, varies from "very slight" to slight (< 5mm wide) and are [sic] considered to have little to no influence on the overall structural integrity of the dwelling. The distress observed is generally considered only an "aesthetic" problem.
Mr Mitrevski said that the cracking that he had observed "is not uncommon and generally expected to occur during the design life of a building". It could be repaired. He said that "the apparent reactive nature of the clay foundation material" was likely to lead to "further cracking defects … in the future as a result of general foundation movement from seasonal changes in the foundation moisture condition".
Mr Mitrevski gave oral evidence, and was cross-examined. There was no challenge to his evidence of the width of the cracks that he had observed. Nor was there any challenge to his opinion that the cracking had "little to no influence on the overall structural integrity of the dwelling".

Consideration

The primary judge reviewed the expert evidence by reference to the three topics I have identified: roof sag; underpinning; and demolition and rebuilding.
As to roof sag, the primary judge noted, correctly, that there was photographic evidence that the roof had sagged. He noted, again correctly, that no expert had gone into the roof space "to inspect what the problem was", although that was something "available to be done by experts retained by both parties" (at [44]).
The primary judge then dealt with the competing expert views as to the cause of the roof sag. On balance, he concluded that the roof sag was caused by movement in the walls (which supported the roof trusses) and that the walls moved because of swelling and shrinking in the sub-surface clay.
As to underpinning, the primary judge considered that there were two issues. One was whether underpinning was practically or economically viable. The other was whether it was necessary.
As to the first issue, the primary judge noted Mr Jworchan's evidence that underpinning might be possible, but could be difficult. He then noted Mr Koloff's opinion that underpinning was not an option. Unfortunately, in doing so, the primary judge took into account the sentence to that effect in Mr Koloff's report which was objected to and not pressed. This opinion had been repeated in the second report, by reference back to the first report. It does not appear to have been dealt with specifically in the objections to and rulings on the second report.
If it were open to the primary judge to take that opinion into account (because it had been repeated, apparently without objection, in the second report), there is another problem.
Mr Koloff's view, according to his second report, was that "underpinning is not an option". However, the primary judge (at [68]) accepted the oral evidence of Mr Koloff, to the effect that underpinning was required. In short, the primary judge had before him two conflicting views from Mr Koloff, as to underpinning, and accepted one of those, in preference to the other and the evidence of the other experts. Nothing in Mr Koloff's evidence in re-examination explains this dramatic shift in his opinion. The primary judge does not appear to have considered that inconsistency.
Having concluded that underpinning was required (apparently to prevent further movement in the walls), the primary judge moved to consider whether it was necessary to ensure the structural integrity of the building. He referred to Mr Mitrevski's opinion that the building's structural integrity had not been compromised. It is apparent from the reopening judgment that the primary judge accepted Mr Mitrevski's opinion. In my view, it was open to his Honour to do so. First, that opinion was not challenged in cross-examination. Second, it was supported by Mr MacLeod's opinion. Third, Mr MacLeod's opinion to the same effect on the issue of structural integrity was not challenged in cross-examination.
Mr Gross submitted (and this is in essence the subject of the first ground of appeal) that the primary judge could not, consistently, prefer Mr Koloff's evidence as to the need for underpinning and, at the same time, accept Mr Mitrevski's evidence that the structural integrity of the house was not threatened or impaired. I do not think that there is any such contradiction. The only contradiction that I perceive in this part of the evidence is found in Mr Koloff's conflicting opinions on underpinning.
Accepting, for the moment, that it was open to the trial judge to accept Mr Koloff's oral evidence on the need for underpinning (as opposed to his written evidence and as opposed to the evidence of Messrs MacLeod and Mitrevski), all that follows is that underpinning was necessary to control movement in the walls due to swell/shrink in the underlying clays. The evidence of Messrs MacLeod and Mitrevski confirmed what is (for many people in the Sydney Metropolitan Region) common knowledge: namely, that older houses built on clay soils will experience movement in the walls due to the swelling and shrinkage of the clay. It does not follow, simply because the walls move and crack, that the structural integrity of the building is compromised.
Mr Koloff did not say in terms that the structural integrity of Mr Museth's dwelling was compromised. His evidence (to the extent that it can be understood) was, rather, that the walls would continue to move, as the sub-surface clay expanded and contracted, and would continue to crack as a result. The suggested inconsistency in the findings of the primary judge depends on the assumption that such movement and cracking represents a threat to structural integrity. But as I have indicated, that assumption was not supported by any of the expert testimony, and is inconsistent with the testimony of Messrs MacLeod and Mitrevski.
Thus, even if it were open to the primary judge to rely on the oral evidence of Mr Koloff, given over objection in re-examination, as to the necessity for underpinning, it does not follow that the primary judge erred in accepting the evidence of Mr Mitrevski (supported, I repeat, Mr MacLeod) that the cracking he observed had no structural significance. There was no evidence that any further cracking that might have occurred after each of those gentlemen made his inspection was so radically different to what each had observed as to require some different conclusion. It was not suggested to either Mr MacLeod or Mr Mitrevski that the cracking had worsened, to the extent that his opinion as to structural integrity was no longer valid.
Further, to the extent that Mr Koloff's opinion on the necessity for underpinning depends on his estimates (in the witness box, based on photographs) of the width of the cracks, there is a real area of doubt about the validity of his opinion. His estimate of the width of the cracks was very much at variance with the observations (in one case, supported by precise measurements) made by Messrs MacLeod and Mitrevski. It does not appear from Mr Koloff's reports that he made any measurements, or even estimates, of the width of the cracks that he observed on his site visits.
In the absence of any challenge to the evidence of Messrs MacLeod and Mitrevski as to the width of the cracks, and in the absence of any reliable contradictory evidence from Mr Koloff, the weight that could be given to his opinions expressed in re-examination is in my view minimal. That is because the opinion that he reached, based on the descriptions of the cracks as they appeared (in his view) from the photographs, appears to have little correlation with the unchallenged evidence on that topic.

Conclusions

From that review of the expert evidence, the following conclusions may be stated as to ground 2 of the notice of contention and grounds 1 and 2 of the amended notice of appeal: 1. the primary judge erred in permitting to be given, and (to the extent that he did) relying on, the evidence of Mr Koloff, given over objection in re-examination, as to the apparent extent of exterior cracking and the inferred need, based on those cracks, for underpinning. 2. Even if it were open to the primary judge to receive and rely upon that evidence, it was not, properly understood, inconsistent with the evidence of Mr Mitrevski (and, I add yet again, Mr MacLeod) that the observed cracking posed no risk to the structural integrity of the plaintiff's residence. 3. Properly understood, Mr Koloff did not address, directly or by implication, the question of structural integrity.
Once it is accepted that it was open to the primary judge to conclude, on the whole of the evidence, that the structural integrity of Mr Museth's residence was not compromised, the remaining grounds of appeal (and ground 1 of the notice of contention) can be disposed of quickly.
One way or another, grounds 3, 4, 7 and 8 of the amended notice of appeal raise the question of whether, in all the circumstances, the appropriate measure of damages for the nuisance is the cost of demolition and reconstruction of Mr Museth's residence. That measure of damages could only be appropriate if: 1. the cracking caused by the Club's nuisance had caused the building to become structurally unsound; and 2. the building could not be effectively or economically repaired; so that 3. in consequence, the only way to make good the (hypothetical) damage was to demolish the building and reconstruct it.
However, if the building is not structurally defective, then the issue of repair versus demolition and reconstruction does not arise. Since I have concluded that the primary judge was correct to find that the structural integrity of the building was not compromised, these grounds go nowhere. Even if the reasoning of the primary judge were inadequate or deficient in the ways alleged (and I am not to be taken as saying that I accept any of the criticisms made of his Honour's reasons), there could be no different outcome.
The same may be said as to ground 1 of the notice of contention, which says in effect that the decision of the primary judge should be upheld because, on his Honour's findings and taking into account the abatement of the nuisance, demolition and reconstruction is not an appropriate measure of such loss as Mr Museth has sustained.
I add that, on his Honour's findings (which in essence I think are correct), the obvious measure of damages was, as his Honour pointed out, diminution in value. For whatever reason, no evidence of diminution of value was led. And even if, contrary to my view, damages should have been assessed by reference to the cost of demolition and reconstruction, there was no evidence of that cost before the primary judge.
Mr Gross did not submit that if the primary judge had been correct in his conclusion that the structural integrity of Mr Museth's residence was not compromised, nonetheless, his Honour had erred in assessing damages.
Ground 5 of the amended notice of appeal goes nowhere. Even if the primary judge reasoned as the ground asserts, and erred in doing so, his Honour's ultimate conclusion remains the correct one.
Ground 6 of the amended notice of appeal complains of inadequacy of reasoning in some respects, and ground 8 complains that the damages awarded were inadequate. Ground 6 stands or falls with the matters that I have canvassed at length - specifically, the suggested inconsistency in the findings of the primary judge, and his Honour's conclusion that the cost of demolition and construction did not provide the appropriate measure of damages. It falls with the earlier grounds on which it is based. Likewise, ground 8, which complains of the inadequacy of the damages notionally assessed, falls with those earlier grounds.

The question of leave

Neither party addressed the question, whether leave to appeal was required. On one view, it may be. The primary judge assessed damages at $25,000. There was no evidence before his Honour of any alternative basis of assessment, because: 1. his Honour rejected Mr Museth's application for leave to reopen and tender evidence of the cost of underpinning; and 2. in the principal judgment, his Honour rejected the evidence of Mr Parcell as to the cost of demolition and reconstruction.
The amended notice of appeal does not challenge either of those decisions; nor has leave been sought (if it be necessary) to appeal from the first.
There was no affidavit before this Court giving evidence as to what the cost of demolition or reconstruction might be. It is therefore at least open to question whether there is any "foundation for the allegation" that Mr Museth's claim does exceed $100,000 in value (the quotation comes from Cole v The Commonwealth of Australia (1961) 106 CLR 653; [1961] HCA 87, at CLR 656).
In my view, rather than put the parties to the trouble and expense of making submissions on the question of leave, the better course is to do as I have done, and deal with the merits of the appeal on the assumption that leave is not necessary.
I should say that if the question of leave had been argued, and I had been persuaded that leave was required, I would not have been prepared to grant it. As the notice of appeal discloses, Mr Museth seeks a new trial limited to damages. However, if that new trial were limited to the evidence tendered before and found acceptable by the primary judge, the outcome must be the same. Thus, there would be no miscarriage of justice.
Bearing in mind the matters set out at [120], [121] above, the only purpose to be served by ordering a new trial could be to permit Mr Museth to adduce admissible evidence of (for example) the cost of underpinning or the cost of demolition and reconstruction. I do not think that the interests of justice would be served by permitting this. The right to be heard does not, in the ordinary way, include the right to be heard twice; a trial and an appeal are not to be treated as preludes to a fresh trial where admissible and probative evidence is adduced with the benefit of the reasons given in the first trial and on appeal.

Proposed order

I propose that the appeal be dismissed with 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: 28 November 2016

Evidence Act 2005(NSW)

(Supreme Court Act 1970(NSW)

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