//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2025] NSWSC 1029
Supreme Court of NSW
2025-09-10
Elkaim AJ
Original judgment source is linked above.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: The Owners - Strata Plan No 16460 v Hunter Water Corporation [2025] NSWSC 1029
Hearing dates: 19 – 28 August 2025
Date of orders: 10 September 2025
Decision date: 10 September 2025
Jurisdiction: Common Law
Before: Elkaim AJ
Decision: 1. Judgment for the plaintiffs in the sum of $1,161,841.92.
2. The defendant is to pay the plaintiffs’ costs of the proceedings.
3. I will hear the parties on interest or any alternative costs order.
4. If the matters in Order 3 above are to be agitated the parties are to inform my Associate within 7 days of this judgment.
5. The constituent parts of the judgment sum are noted and set out in the Schedule of Property Damage.
Catchwords: TORTS — nuisance — private nuisance — plaintiffs’ properties flooded after water main owned and operated by Hunter Water Corporation burst — whether defendant’s interference with enjoyment of plaintiffs’ property was unreasonable — whether unreasonableness is an element of nuisance
DAMAGES — property damage loss — claim for loss to property value due to stigma associated with flooding
Legislation Cited: Civil Liability Act 2002 (NSW), ss 5B, 5D, 5E, 42, 43A
Electricity Industry Act 2000 (Vic)
Hunter Water Act 1991 (NSW), ss 3, 4, 4A, 12, 19, 20, 22
Metropolitan Water, Sewerage and Drainage Act 1924 (NSW), s 32
Water Board Act 1987 (NSW)
Cases Cited: Allianz Australia Insurance Ltd v Roads and Traffic Authority of New South Wales; Kelly v Roads and Traffic Authority of New South Wales [2010] NSWCA 328
Bankstown City Council v Zraika; Roads and Maritime Services v Zraika [2016] NSWCA 51
Curtis v Harden Shire Council; (2014) 88 NSWLR 10; [2014] NSWCA 314
Graham v Board of Water Supply & Drainage (1891) 12 NSWLR 287
Hunt Leather Pty Ltd v Transport for NSW [2023] NSWSC 840
Metropolitan Water, Sewerage and Drainage Board v OK Elliott Ltd (1934) 52 CLR 134; [1934] HCA 57
Owners Strata Plan 16460 v Hunter Water Corporation [2025] NSWSC 947
Prestage v Barrett [2021] TASSC 27
Rushcutters Investments Pty Ltd v Water Board (1989) 68 LGRA 128
Sleeman v SPI Electricity Pty Ltd [2014] VSCA 243
Transport for NSW v Hunt Leather Pty Ltd; Hunt Leather Pty Ltd v Transport for NSW [2024] NSWCA 227
Texts Cited: Richard Buckley, The Law of Negligence and Nuisance (7th ed, 2025, LexisNexis Butterworths)
Category: Principal judgment
Parties: The Owners - Strata Plan No 16460 (Plaintiff)
Hunter Water Corporation (Defendant)
Representation: Counsel:
M J Dawson (Plaintiff)
V Chan (Plaintiff)
M T McCulloch SC (Defendant)
S J Maybury (Defendant)
Solicitors:
Mills Oakley (Plaintiff)
Makinson d'Apice Lawyers (Defendant)
File Number(s): 2020/77341
Publication restriction: No
There are 119 plaintiffs. The first plaintiff is an Owner’s Corporation which is a body corporate representing the owners of a strata scheme bearing Strata Plan No 16460. The Owner’s Corporation also owns the common property within the scheme. The other 118 plaintiffs are owners, some past, of the lots within the scheme, which is a townhouse complex in Elermore Vale, an outer western suburb of the New South Wales city of Newcastle.
There is one defendant, which is the Hunter Water Corporation (the HWC), a corporation created by the Hunter Water Act 1991 (NSW) (the HWA).
On 22 September 2017, a water main running alongside, and above the complex, burst, and then discharged large amounts of water into the complex. The townhouses and the common property were flooded and thereby damaged.
The plaintiffs allege the flooding was a nuisance perpetrated by the defendant and that it was a product of the defendant’s negligence. They seek the damages caused by the defendant’s conduct.
The claim in negligence falls under the Civil Liability Act 2002 (NSW) (the CLA). The defendant admitted that it owed a duty of care to the plaintiffs. Breach of this duty is to be gauged according to the general principles set out in s 5B of the CLA. Causation falls under s 5D. Section 5E says that the onus of proving causation is always on the plaintiff.
The defendant denies that it caused any nuisance, that it was negligent, or is in any way liable to pay damages or compensation to the plaintiffs.
In addition, the defendant relies upon ss 42 and 43A of the CLA as defences to the negligence claim.
Section 42 of the CLA dictates the principles that apply “in determining whether a public or other authority has a duty of care or has breached a duty of care in proceedings for civil liability …”
Section 43A of the CLA applies to “Proceedings against public or other authorities for the exercise of special statutory powers.” If applicable, the section impacts the assessment of negligence so that any breach of “a special statutory power does not give rise to civil liability unless the act or omission was in the circumstances so unreasonable that no authority having the special statutory power in question could properly consider the act or omission to be a reasonable exercise of, or failure to exercise, its power”.
The reliance on ss 42 and 43A of the CLA does not extend to the nuisance claim in line with the NSW Court of Appeal decision in Transport for NSW v Hunt Leather Pty Ltd; Hunt Leather Pty Ltd v Transport for NSW [2024] NSWCA 227. The defendant submitted that the decision in Hunt Leather concerning the applicability of s 43A to a nuisance claim was wrong but accepted that I was bound by the case. An appeal in Hunt Leather has been heard by the High Court but not yet decided.
The plaintiffs emphasised that the defendant had not pleaded any justification of its actions by way of statutory authority. Nevertheless, the plaintiffs submitted that any such defence would have failed.
The defendant accepted that there was no specific pleading of statutory authority but relied instead on para 30 in the amended defence:
“Further, and/or in the alternative, and in answer to the whole of the Statement of Claim, the defendant states that if the plaintiffs suffered loss and damage in the manner alleged, or at all (which is not admitted), it did all that could be reasonably expected of it to avoid the risk of harm and the alleged accident occurred because of some other event, which the defendant could not have reasonably prevented.”
There had been a previous failure of the water main (about 90m south of the subject failure) in March 2010. The plaintiffs described the defendant’s actions following the 2010 failure as a “comedy of errors”.
The plaintiffs allege that on 3 August 2017 there had begun a continuous discharge of water near the complex, and that on the day before the major water main failure, the defendant’s employees had excavated and exposed the water main.
At the core of the plaintiffs’ case is the assertion that the water main should have been turned off, or had its flow diverted or reduced, prior to the catastrophic failure on 22 September 2017.
The defendant’s written submissions state:
“4. In the early hours of 22 September 2017 a Cast Iron Cement Lined (CICL) 500 mm diameter water main (‘the 500mm water main’) owned by the Defendant under Aries Way (laid in 1953 prior to the roadway existing) suffered a major failure. As a result, water left the pipe and the Plaintiffs’ property and contents were damaged.”
It is evident from this submission that the defendant admits that the water main belonged to the defendant, that the pipe had suffered a major failure and that as a result, the plaintiffs’ property was damaged. It is further conceded that there was an interference with the plaintiffs’ use and enjoyment of their properties.
The plaintiffs’ claim for damages is twofold. There is the cost of the physical damage to the properties and there is the diminution in value of the properties arising from their reputation as having been affected by flooding. The latter is referred to as the stigma attaching to the properties and has two elements: firstly a purchaser would be wary of paying market value for a property knowing it had a history of flooding, and secondly, the history of flooding had increased insurance premiums (and therefore strata levies) so that a purchaser would take the higher levies into account in assessing the amount to be paid for the relevant lot.
In respect of the physical damage the quantum was agreed at $1,161,841.92. The stigma claim was not agreed either as to entitlement or quantum. The plaintiffs’ assessment of the reduced value was $20,000 per townhouse, making a total of $2,380,000 for the 119 townhouses, or probably $2,240,000 because there are actually only 112 townhouses.
In addition, consequent upon a late amendment to the statement of claim, the plaintiffs also seek compensation pursuant to s 22 of the HWA.
The HWA dictates the powers and functions of the defendant. The following are some relevant sections.
Section 3 of the HWA includes these definitions:
owner, in relation to land, includes every person who jointly or severally at law or in equity—
(a) is entitled to the land for an estate of freehold in possession, or
(b) is a person to whom the Crown has contracted to sell the land under the Crown Land Management Act 2016 or any other Act relating to alienation of land of the Crown, or
(c) is entitled to receive, or receives, or if the land were let to a tenant would receive, the rents and profits of the land, whether as beneficial owner, trustee, mortgagee in possession or otherwise,
and, in relation to land of the Crown, means the Crown but does not include a person who, or a class of persons that, is specified by a regulation not to be an owner for the purposes of this definition, either generally or in a particular case or class of cases.
…
works means water mains, sewer mains, drainage channels and any works ancillary to those works.
Section 4 of the HWA created the defendant as a corporation.
Section 4A sets out the functions of the defendant, in particular as stated in s 12.
Section 12(1)(a) of the HWA says the Governor may grant an operating licence to the corporation to carry out works for supplying water. Section 13 sets out the terms and conditions of a licence granted by the Governor.
Section 19(2) of the HWA states:
The Corporation may, subject to this Act, operate, repair, replace, maintain, remove, extend, expand, connect, disconnect, improve or do any other things that are necessary or appropriate to any of its works to ensure that, in the opinion of the Corporation, the works are used in an efficient manner for the purposes for which they were installed.
(a) to operate, repair, replace, maintain, remove, extend, expand, connect, disconnect, improve or do any other things that the Corporation considers are necessary or appropriate to any of its works or to construct new works and, for these purposes, to carry out any work on, below or above the surface of the land …
“6. In August/September 2017, approximately 20% or 930 kilometres of Hunter Water's watermains were designated as Critical Watermains, including Hunter Water's 500mm Cast Iron Cement Lined (‘CICL’) watermain located adjacent to the plaintiffs' properties in Aries Way, Elermore Vale. I note that the section of the 500 CICL watermain the subject of the plaintiffs' claim was represented in the Prioritisation Model as Wallsend to Glendale.
7. From my review of Hunter Water's business records, I am aware that the relevant section of Hunter Water's 500 CICL received a 3.25 rating of risk out of a possible 6.85, resulting in it being ranked as the 14,559th segment out of 17,072 sections of watermain within Hunter Water's Area of Operations considered in the 2005 Prioritisation Model.
8. Annexed and marked JW-16 is a copy of part of a Hunter Water spreadsheet representing the results of the Prioritisation Model undertaken in 2005. Given the spreadsheet contains entries for a total of 17,072 sections of watermains, only the details relating to IPID 458037 have been reproduced. The risk model identified Hunter Water's Critical Watermains, and in approximately May 2005 the Prioritisation Model was applied to the approximately 930 kilometres of Critical Watermains operated by Hunter Water in order to determine which sections of watermain should first be selected to undergo condition assessment.
9. In approximately October 2008, Hunter Water conducted a review of the progress of its condition assessments to inform the Board of Directors in relation to progress of the Strategic Condition Assessment Program. A copy of the 30 October 2008 submission to the Board of Directors is annexed and marked JW-7.
10. The review identified:
(a) approximately 266 kilometres of Hunter Water's 930-kilometre Critical Watermain network had been assessed at that time;
(b) direct replacement of poor conditioned trunk mains indicated that an investment of $43 million may potentially be required;
(c) however, management strategies other than replacement would significantly reduce the required capital investment.”
The parties were generally agreed as to the necessary ingredients for the establishment of a nuisance. There was however, one major area of disagreement.
It was agreed that the plaintiffs must establish an interference with the use and enjoyment of their properties. Such an interference was conceded by the defendant. The concession extended to the defendant agreeing that the bursting of the pipe caused the interference.
The disagreement related to the assessment of the defendant’s conduct. The defendant submitted that there was no nuisance if the defendant had, in carrying out the action that caused the interference, acted reasonably. The defendant submitted there had to be fault, or at least unreasonable behaviour, on the part of the defendant.
The defendant submitted that in the present case it had acted reasonably in each of: excavating the earth above the pipe; leaving the pipe uncovered overnight; and not turning off the water flow. Therefore, there was no nuisance and no liability on the part of the defendant.
This discussion occurred in Hunt Leather, from [135] – [148]:
“135. Ground 2(a) challenges the rejection by the primary judge of TfNSW’s submission that because construction was a legitimate activity, done for the end of establishing a light rail service, then there could be no nuisance if TFNSW showed that it was using reasonable care. This ground does not strictly arise for two reasons: first, because of TfNSW’s success based on the insufficiency of the amended IDP as a basis for the judgment against it, and secondly because of the rejection of ground 2(b) above.
- Ground 4 is related. It is that the primary judge erred in finding that TfNSW bore the onus of establishing that it took reasonable care in connection with the construction of the Sydney Light Rail. It is convenient to address both grounds together, and to do so concisely since they are non-dispositive.
- The first submission is contrary to authority. When determining whether a claim of private nuisance has been made out, it is necessary to ask whether a particular use is ‘reasonable according to the ordinary uses of mankind living in society, or more correctly in a particular society’: Elston v Dore (1982) 149 CLR 480 at 488; [1982] HCA 71, citing Sedleigh Denfield v O’Callaghan [1940] AC 880 at 903-904. It does not follow from the fact that a defendant has established that a use is being undertaken with reasonable care that there can be no nuisance. As much was rejected by Sir George Jessel MR in Broder v Saillard (1876) 2 Ch D 692 at 701-702:
[A] man is entitled to the comfortable enjoyment of his dwelling-house. If his neighbour makes such a noise as to interfere with the ordinary use and enjoyment of his dwelling-house, so as to cause serious annoyance and disturbance, the occupier of the dwelling-house is entitled to be protected from it. It is no answer to say that the Defendant is only making a reasonable use of his property…. The test, therefore is whether the stables are unluckily so situated as that the noise from the horses, not being uncommon horses in any way, materially disturbs the comfort of the plaintiffs dwelling-house, and prevents the people sleeping at night.
- In Munro v Southern Dairies Ltd [1955] VLR 332 at 336, Sholl J said:
It is no answer to say that the defendant is only making a reasonable use of his property, because there are many trades and many occupations which are not only reasonable, but necessary to be followed, and which still cannot be allowed to be followed in the proximity of dwelling-houses, so as to interfere with the comfort of their inhabitants.
- Sholl J mentioned with approval the point made in the headnote to the report of Painter v Reed [1930] SASR 295, which reads:
In an action for nuisance, where it was shewn that the defendant had taken much trouble to make the carrying on of his business as unobjectionable as possible, and had carried on his business in a fair and reasonable way, and at a site proper for such a business. Held, on the evidence, that noises caused in the early mornings by the movements and stamping of horses, which disturbed the sleep of the plaintiff, constituted an actionable nuisance, and should be restrained by injunction.
- In Rapier v London Tramways Co [1893] 2 Ch 588, the defendant was authorised by statute to lay tracks for a railway. To that end, it established stables in a residential area to house carriage-horses. The plaintiffs complained of the noise and smell from the stables. The defendant was held liable in nuisance although it proved that it took reasonable steps to mitigate the nuisance. It was said at 600:
If I am sued for nuisance, and the nuisance is proved, it is no defence on my part to say, and to prove, that I have taken all reasonable care to prevent it.
- Similarly, in Pwllbach Colliery Co Ltd v Woodman [1915] AC 634 at 638, Earl Loreburn said:
Their duty to their neighbour is not merely to take care so as to avoid causing a nuisance. Their duty is to abstain from causing one at all.
- Similarly, Sir John Salmond wrote in his Law of Torts (1912) at 199:
it is an actionable nuisance at common law to run a locomotive engine which cannot by any skill in construction or care in management be prevented from discharging sparks; and in the absence of statutory authority he who does so is liable for the consequences, however careful he may have been to prevent them.
- Professor Nolan reiterated these points in D Nolan, “‘A Tort Against Land’: Private Nuisance as a Property Tort” in D Nolan and A Robertson (eds) Rights and Private Law (Hart Publishing 2011) 459 at 468:
In common law systems, this substantial interference requirement is often referred to as a requirement that there be an ‘unreasonable user’ of the defendant’s land, but this language is best avoided, for two reasons. The first is that it serves to reinforce the common misconception that only the occupier of the land from which the nuisance emanates can be liable for it. And the other reason is that the use of the word ‘unreasonable’ in this context is apt to be understood as signifying that the conduct of the defendant must be unreasonable, when in fact it is the interference with the claimant’s property which must be unreasonable.
- As Lord Hoffmann indicated in Southwark London Borough Council v Tanner [2001] 1 AC 1 at 20; [1999] UKHL 40, ‘it may in one sense be quite reasonable to burn bricks in the vicinity of convenient deposits of clay but unreasonable to inflict the consequences upon the occupants of nearby houses’. The two are analytically distinct questions, and it is only the latter that is determinative. Lord Hoffmann’s distinction recalled that made some 160 years ago in Bamford v Turnley (1860) 3 B & S 62; 122 ER 25 when, in disapproving the jury direction made in Hole v Barlow (1858) 4 CB NS 334; 140 ER 1113 that there was no nuisance to neighbours if a brick kiln was being conducted in a reasonable and proper manner, Erle CJ, Williams J, Keating J and Wilde B said that the jury should not be asked ‘whether the causing of the nuisance was a reasonable use of the land’.
145. Lord Simonds said that ‘if a man commits a legal nuisance it is no answer to his injured neighbour that he took the utmost care not to commit it’: Read v J Lyons & Co Ltd [1947] AC 156 (HL) at 183. Lord Millett said that ‘the use of the word “reasonable” in this context is apt to be misunderstood. It is no answer to an action for nuisance to say that the defendant is only making reasonable use of his land’: Southwark at 20. Much the same point was made more recently by Lord Sales in Fearn at [165]: ‘liability turns on the issue of reasonableness as between the two parties located in a particular locality, not on the reasonableness of the defendant’s use in the abstract’.
- TfNSW’s proposition does not accord with principle. The reasonableness of a use is conceptually distinct from the reasonableness of a defendant’s conduct. That is the point made by, among others, Lords Hoffmann, Millett and Sales in the passages cited in the previous paragraphs. Use of the term “reasonable user” as a substitute for unreasonable interference is apt to conflate those two points.
- It may also be seen by examples. A landowner who uses land as an airbase in a residential area, albeit having taken all reasonable steps to minimise noise and disruption according to industry standards, is likely still liable in nuisance because the question is whether the nature of the interference itself is unreasonable in the locality: see J Murphy, The Law of Nuisance (Oxford University Press, 2010) pp 11-12, referring to Dennis v Ministry of Defence [2003] EWHC 793; [2003] EGLR 121, where noise from Harrier jump jets was held to be a nuisance.
- Another way of making this point is to observe that it is plain that a defendant who has undertaken or authorised a use of land which will cause substantial interference with the enjoyment of a neighbour’s land will owe that neighbour a duty of care. TfNSW’s submission posits that the defendant has failed to take reasonable care. In those circumstances, the defendant would be prima facie liable in negligence. Alternatively, if TfNSW’s submission were sound, a defendant who could establish that it performed construction work in a way which was not negligent could not be liable in nuisance. But there is no reason to think that the boundaries of two separate torts, which serve different ends and are prompted by different legal policies, are coterminous in the way acceptance of this ground would entail. After all, ‘the common law is not antipathetic to concurrent liability’: Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 at 193. It would be profoundly anhistoric to confine torts so that they ceased to overlap, a point elaborated in Perera v Genworth Financial Mortgage Insurance Pty Ltd (2017) 94 NSWLR 83; [2017] NSWCA 19 at [44].”
I have emphasised some parts in the above passages from Hunt Leather by underlining.
The plaintiffs also took me to several passages in the primary decision in Hunt Leather Pty Ltd v Transport for NSW [2023] NSWSC 840, which were not ‘corrected’ in the Court of Appeal. They included:
“579. Nuisance is a tort. The law of torts is concerned with the allocation of losses which arise incidental to the activities of people in modern society …” (footnotes omitted)
I have included this straightforward statement because of its confirmation of nuisance as a tort. It is worth observing that the origin of the word tort is in the Latin ‘tortum’ referring to a wrong. That there should be a wrong is an inherent part of nuisance. I make this observation because the defendant emphasised that it could not be liable if it had done nothing wrong.
Returning to the primary decision in Hunt Leather:
“587. There are three types of interference with land which may constitute a nuisance (as observed by Preston CJ in Robson v Leischke (2008) 72 NSWLR 98; [2008] NSWLEC 152 at [54]), as follows:
‘(a) causing encroachment on the neighbour’s land, short of trespass;
(b) causing physical damage to the neighbour’s land or any building, works or vegetation on it; and
(c) unduly interfering with a neighbour in the comfortable and convenient enjoyment of his or her land.’”
The nuisance in the current case was said to fit within type (b) in the just quoted paragraph.
The plaintiffs then took up the questions of fault and reasonableness. In Prestage v Barrett [2021] TASSC 27, Estcourt J said at:
“723. The plaintiffs say that once it is appreciated that the touchstone for liability in nuisance is simple foreseeability then the special place of that tort, within the Australian common law, is easily discerned. In short, they say:
the element of ‘fault’ required for private nuisance translates to the creation of, or failure to abate, or cause of unreasonable interference in others' interests in private land, in circumstances where the unreasonable interference is foreseeable; and
since foreseeability is a step short of negligence, negligence is not a prerequisite to liability in private nuisance.
…
- To the extent it is not already clear from what I have written, I accept the plaintiffs' submission.
- Thus, I accept that the principle established by the first two of those last mentioned cases, and ‘preserved’ in the third, is that the ‘fault’ required for nuisance is the doing of the act of commission or omission in circumstances where it was reasonably foreseeable that it might result in unreasonable interference in the enjoyment, by persons in the class including the plaintiffs, of interests in land. There is no further requirement that the act or omission also involve a failure to take reasonable care.”
“It is often said that for liability to arise, the defendant’s use of his land must be ‘unreasonable’ but this expression is somewhat tautologous: it expresses a conclusion as to the legal status of the defendant’s activity and is not in itself a test for the imposition of liability. The court is not free to conduct some kind of intuitive ad hoc comparison of the parties’ activities against each other. In determining ‘reasonableness,’ the court will not however, examine the defendant’s activity in isolation. On the contrary, in balancing the interests of the two parties, the court will concern itself primarily, although not exclusively, with the impact of the defendant’s activity upon the claimant. If that impact is substantial, it is unlikely to avail the defendant that he is conducting his business according to the best modern methods and taking all the usual precautions. The test for liability is an objective one determined by the law. In determining the question of reasonableness, the court will consider one or more of a number of specific factors which require separate treatment. Among the most important of these are locality, duration, any hypersensitivity on the part of the claimant and any spiteful or malicious motive on the part of the defendant.”
“127. This ground proceeded on the basis that the primary judge had correctly found at [828] that ‘if [TfNSW] can establish that the interference with the plaintiffs’ property (which might otherwise give rise to an action in nuisance) was an inevitable consequence of carrying out the work, then the plaintiffs would not succeed’. We did not understand the respondents to contend to the contrary.
- It was accepted that TfNSW was authorised by statute to construct the Sydney Light Rail, and as McLure P explained in Southern Properties (WA) Pty Ltd v Executive Director of the Department of Conservation and Land Management (2012) 42 WAR 287; [2012] WASCA 79 at [122]-[123]:
‘In considering whether a nuisance is inevitable it is necessary to distinguish between statutory provisions that require a specified activity to be carried out and provisions that permit, but do not require, a specified activity to be carried out. In the former case there is no separate requirement of inevitability; any nuisance resulting from the activity will be authorised unless it is caused by negligence on the part of the person conducting the activity. All that is required is that the specified activity be executed (performed) with reasonable care. See Trindade, Cane and Lunney, The Law of Torts in Australia (4th ed) [4.1.6.3].
Where the statute permits the specified activity to be carried on, it must be shown that what the legislation authorised could not be done without creating a nuisance and that the nuisance was not caused by negligence. The inevitability limb focuses attention, not on the execution of the specified activity, but on the decisions relating to whether, when or how to undertake the authorised activity. Thus, if the creation of a nuisance could have been avoided by the proper exercise of the statutory power (i.e. one that was consistent with its scope and purpose(s)), the defence will fail even in the absence of negligence: Melaleuca Estate Pty Ltd v Port Stephens Council [2006] NSWCA 31 at [48]-[57].’
- That understanding of ‘inevitability’ was recently adopted by the Supreme Court of the United Kingdom in The Manchester Ship Canal Company Ltd v United Utilities Water Ltd (No 2) at [18]-[20] and [94].”
In respect of onus, I was again referred to the primary decision in Hunt Leather, at [814] where Cavanagh J stated that “the defendant bears the onus of proving that it took all reasonable care (as it seeks to rely on that proposition in answer to the plaintiffs’ claim)”.
In the appeal against Cavanagh J’s findings on onus, the Court of Appeal stated at [149]:
“This appears to have been the primary judge’s view at [814]. When the primary judge said that ‘the defendant bears the onus of proving that it took all reasonable care’ his Honour appears to have meant no more than that proof of reasonable care (or lack thereof) is not an essential or necessary part of the plaintiffs’ case but was nonetheless relevant to the inquiry, and if TfNSW wished to raise it as an argument or factor that points against the unreasonableness of the interference, it was for it to do so. We respectfully agree.”
Bringing all the submissions about the authorities together, and without attempting to summarise the law of nuisance, I think the following emerges for the purposes of this case:
The plaintiffs must establish that there was an interference with the use and enjoyment of their land. This was conceded by the defendant.
The interference must have been caused by the water emanating from the defendant’s water main. This also was conceded by the defendant.
Against the above concessions the defendant can only succeed if it did nothing wrong.
Doing nothing wrong requires findings that the burst was inevitable, not foreseeable and was not consequent upon any unreasonable act on the part of the defendant. The latter includes the relevance of the history of the site and the leaving of the excavation site overnight without shutting off, diverting, or reducing the flow (and pressure) of the water.
This question includes consideration of the defendant’s submission that the burst was inevitable. I observe here however, as will be explained below, that even if the burst was inevitable that does not necessarily exclude a finding of nuisance.
There are three pipes running parallel at the site where the subject pipe burst. The three pipes are DN 500 (the subject pipe), DN 600 and DN 1200. In the relevant area the three pipes seem to be about 1 – 1.5 metres apart.
I think a chronology is an appropriate starting point:
The water main was laid in 1953. An assessment report in August 2008 found that DN 600 and DN 1200 were in excellent condition. DN 500, in the relevant section of pipe, was found to have a predicted failure in 2012, but replacement was not recommended.
A Condition Assessment of Trunkmains Between Wallsend WPS and Valentine Reservoir released in October 2009 confirms the analysis referred to in the previous paragraph.
On 3 March 2010, DN 500 burst at a location about 90m from the site of the 2017 failure. As a result of the 2010 failure 4.5 million litres of water were discharged onto, generally speaking, the same properties as affected by the 2017 failure.
The 2010 failure was caused by excessive corrosion in the relevant portion of the pipe.
An HWC Trunkmain Failure Report dated 23 March 2010 states:
“This pipe was analysed as part of the 2008/9 program. The Wallsend to Valentine condition assessment detailes (sic) the findings on this DN 500 pipeline. Essentially this pipe was predicted to fail in 2012 and currently has a predicted failure risk of about 10%. Of the pipe segments on this DN 500, 10% were in category 5, 80 – 100% corrosion loss.”
“There was no apparent cause from pumps or valves closing. The failure comes down to a heavily corroded main under pressure.”
At p 3 of the analysis there is a photograph upon which the extent of flooding is depicted. The photograph below makes clear the vulnerability of the townhouse complex to a pipe running above the complex. The 2010 incident would no doubt have emphasised to the defendant the vulnerability of the complex to a pipe failure above the complex.
Another important aspect arising from the 2010 investigations following the failure is that it became known to the defendant that the pipeline was well underground, perhaps to the extent of 7m. This seems to have been overlooked by the defendant’s staff when they attended the 2017 leak with an excavator capable of digging nowhere near the relevant depth.
On 3 August 2017, the defendant was informed by a private plumber that there was a leak at the corner of Aries Way and Apollo Close which could possibly cause damage to the unit block. Mr Richard Baker, an employee of the defendant, came to the site but could not identify where the leak was coming from.
On 8 August 2017 Mr Kevin Deal, Mr Heath Poole, and Mr Richard Baker (employees of the defendant) attended the site and performed a correlation. The purpose of a correlation is to attempt to identify the location of a leak. Correlation involves the use of microphones to measure soundwaves generated by water leaking from a pipe.
The next day (9 August) Mr Deal and Mr Baker returned to the site to try and work out the precise locations of the three pipes, DN 500, DN 600 and DN 1200. They then made a request to Active Leak Detection Services to correlate the water mains.
On 23 August 2017 Active Leak Detection performed a correlation and placed red paint marks above the leak that they detected. They advised:
"Leak located on 600 mm MSCL possible lead joint at 2.9 TTM leak will be on lower 1/2 of main. Main at 5.5 mtrs from BOK opposite no: 161 Aries Way."
The leak was therefore suggested to emanate from DN 600.
On 28 August 2017 Mr Mitchell Knight and Mr Les Thornton, both employees of the defendant, attended the site with a small excavator (1.8 tons) but their excavation, because of the limitations of the machine, could not reach the top of the water main. The excavation was backfilled.
On 19 September 2017 Mr Shane Hayter and Mr Michael Berry, both employees of the defendant, came to the site with a bigger (5 ton) excavator and began excavating the site beneath the mark that had been made by Active Leak Detection on 23 August 2017. Again, they could not reach the water main but made the site safe so they could return the following day. The soil that had been excavated was not backfilled but was removed from the site.
On 20 September 2017 Mr Berry and Mr Sean Manning came back to the site later in the day but they only managed limited progress. They requested a shoring box because the excavation was now deep and required stabilisation. The excavated soil was again removed from the site.
On 21 September 2017 Mr Berry and Mr Hayter came back to the site in the morning and continued excavation. They discovered that the leak was coming from DN 500 and not from DN 600. They observed a small leak on the lead collar of DN 500. This leak was considered to be a weep, which is not uncommon. DN 500 was estimated to be about 4 to 5 metres underground. They again requested a shoring box for delivery the following day. A team was then commissioned to amend the identified small leak.
At about 3:27am on 22 September 2017 DN 500 burst, leading to the flooding of the townhouse complex.
At 5.05am on the same day DN 500 was shut off. On 2 September 2017, the main was repaired and the area was backfilled and re-turfed. However, it seems the pipe was still shut off in April 2018 and was consigned to be a redundancy option for DN 600 and DN 1200.
There was evidence from four experts; three of them gave concurrent oral evidence.
Dr David Nicholas did not give oral evidence. He is a corrosion expert. He was engaged by the defendant to examine the pipe and analyse whether it had corroded to an extent that it burst. The existence of corrosion was significant because the 2010 incident had been caused by corrosion in the pipe. Dr Nicholas stated:
“A visual examination of both the as-received DN 500 CICL pipe samples from the failure site and the subsequently abrasive blast cleaned components failed to show that corrosion was a major factor in the pipe’s catastrophic failure. This is in contrast to the previous pipe failure on this section of pipeline in 2010 where through-wall fitting and significant metal loss unequivocally showed that corrosion was the prime cause of failure.”
Dr Nicholas went on to make the point that the fact that the failed portion of pipe (in the 2017 failure) was in the same section as in the pipe that failed in 2010 was not necessarily significant because “pipe lengths separated by relatively short distances can show quite different corrosion behaviour”.
Dr Nicholas gave this history of the pipe:
“The DN 500 CICL pipe that failed near the intersection of Aries Way and Apollo Close, Elermore Vale on 22 September 2017 was installed in 1953 and therefore is identified as a 3.7 metre length (12’) pipe manufactured at Australian Iron and Steel (AIS) using the super DeLavaud process patented in the USA in the 1930’s and used for spun pipe manufacture in Australia from 1941 – 1976. In 1953 the pipe installation process would have used native backfill with no imported sand support or sand surround.”
Dr Nicholas measured the thickness of the pipe. He found the thickness to be “of the order of 18 to 19mm”. The measurement is important because one of the other experts (Prof Robert Melchers) placed the varying thickness of the pipe as a central factor in its failure.
Prof Melchers was retained by the defendant. He is a structural engineer “with specialised expertise and experience in structural corrosion and in risk assessment”. He is now retired but remains an Emeritus Professor at the University of Newcastle.
Using photograph (a) on p 7 of his report dated 23 July 2018, the spigot and socket end of the pipe is on the left. The curved crack pattern (called a sinusoidal crack) was found to be significant by Prof Melchers and “to provide the key to the reason for failure”. Prof Melchers concluded that “the most plausible mode of failure is through high tensile stresses … as a direct result of localized bending and localized attempted bulging of the pipe at the region of less than nominal wall thickness”.
The reference to wall thickness arose from the pipe generally having a thickness of 18mm, as noted by Dr Nicholas, but that the thickness of the pipe “in the cracked zone towards, but not at, the socket end of the pipe” was 15mm.
The 3mm difference was not the cause of the burst but contributed to the ultimate failure of the pipe. According to Prof Melchers:
“In summary, it is considered that the contributing aspects to the event on the morning of 22 September 2017 of the overall size of the excavation, not unreasonably governed largely by uncertainty in the origin and location of the leak, and the unforeseeable occurrence of low local thickness of the pipe wall coincidently in the region of excavation.”
I understand Prof Melchers’ opinion in this way; the pipe generally had a thickness of 18mm. However, by sheer coincidence, the thickness of the pipe in the area of excavation was 15mm. The large excavation above the pipe allowed the stresses caused by pressure within the pipe to push through the thinner (15mm) section of the pipe because this section, due to the excavation, was no longer restrained, or reinforced by the 5m of earth that had rested on top of the pipe.
Dr Richard Clegg, also retained by the defendant, disagreed. Dr Clegg is a metallurgical engineer. Dr Clegg thought the sinusoidal form of the crack was “indicative of a fracture driven by internal pressure”. He thought the crack had initiated “at the collar end of the Pipe”. This is the opposite end to where Prof Melchers thought the crack had initiated.
Unlike Prof Melcher, Dr Clegg did not place any significance on the 3mm difference in the thickness of the pipe. In his view:
“The crack-like defect had probably developed over time as a result of gradual degradation mechanisms such as fatigue or corrosion or a combination of both. Corrosion can accelerate the formation fatigue cracks by forming small pits and it can also accelerate the rate at which fatigue cracks grown. In this case, however, the crack appeared to have initiated from under the bell in an area that was not directly exposed to the soil …. Over the 60-year life of the Pipe, it is my opinion that the crack at the end of the Pipe gradually grew to the state that it caused a small leak in the Pipe from under the collar of the bell of the adjacent section.”
“In my opinion and based on the limited documents made available by Hunter Water, the cause of the 2017 Failure of DN500 was most likely a combination of a pre-existing weakening of the pipe, probably caused by corrosion and a change in the conditions on the outside of the pipe caused by the excavation of the pipe. The combination of the two then exceeded the ability of the pipe to withstand the pressure within the pipe.”
Whatever their views on causation, the three experts who gave concurrent evidence were agreed that a major factor in the bursting of the pipe was the excavation of the ground above it and it being left uncovered by the defendant’s employees.
Mr Fennell said:
“HIS HONOUR: Mr Fennell, do you have any view about the excavation or any comment on what's just been said?
WITNESS FENNELL: Yeah. Pipes that are laid without soil on top of them of this type must be restrained down so they're not able to actually just fall apart. Pipes are laid like this, socket and spigot jointed pipes, cannot withstand the axial force of the pressure within the pipe and where the pipe is laid along the ground in a straight line that's fine, provided the pipes are not allowed at all to start to move slightly because the pressure in them will cause the pipes to come apart.
So if you were to excavate a pipe that had been under the ground and then pressurise it, it would fall apart because the soil provides not just pressure onto the pipe, but it actually holds the pipe in place. So just thought I'd say that in relation to the comparison of pipes laid on the ground. Yes, it's true that the pipe is capable of withstanding the pressure, but the joints between them cannot withstand the axial force along the pipe.”
“DAWSON: If the excavation did not take place, would the pipe have failed?
WITNESS FENNELL: On that case, no, no. The, the excavation led to the failure.”
“HIS HONOUR: Would there have been the failure, if there had been no excavation, on that assumption of the two separate water sources?
WITNESS CLEGG: I can’t say for certain, but my - I could see the situation where the failure wouldn’t have occurred, even if there was a small crack in the spigot end of the pipe, because if the pipe was well supported and was not, and the soil was not moving, it’s quite possible that the pipe wouldn’t have burst, at least at not that time.”
“HIS HONOUR: I'm just really interested at the moment on the effect of the excavation.
WITNESS MELCHERS: Sorry. Clearly that - the removal of the soil will have changed the pressure. Now also in my first report I can't remember the numbers off the top of my head, but it's not a vast amount of stress on - in the cast iron and, remember, these cast iron pipes have got a fairly large factor of safety. They're supposed to be able to support themselves without any soil whatsoever and that's possible I indicate in my second report, where I mention all those 40 pipes that Hunter Water had excavated over a period of time just to investigate them. So the pipes themselves - the pipe itself should be able to sustain all of that without the soil pressure.
HIS HONOUR: We've seen actually a photograph of a pipe going over a river. So it's got nothing on top of it and it's the same pipe. So that's what you're saying really, the pipe doesn't need a whole lot of earth on it to not break?
WITNESS MELCHERS: Correct. The difference is that when you remove part of the soil you set up a differential effect and I'm saying in my first report I point that out that that would have had some effect locally in that area, but it's not a clear cut scenario because the soil was on an angle. So it's not as though it's a clear cut here's soil and here's no soil.”
A corresponding question to whether the burst would have occurred but for the excavation is whether the defect in the pipe (ie the defect that led to the burst) was responsible for the water identified at ground level (by the plumber) or the seepage identified upon excavation.
In the joint report of Prof Melchers and Mr Fennell dated 23 July 2025, this question was asked “What more likely than not was the cause of the failure of DN 500 CICL….?” Prof Melchers answered:
“As noted in my first report, the pipe failed by bursting under the high pressure normally associated with early morning conditions as a result of a thinner than specified pipe wall thickness over a considerable localized area of pipe. The thinner part of the pipe wall did not show any signs of external pipe wall corrosion. It was attributed in the report to manufacture deficiency. Since this area was away from the ends of the pipe it would not have been obvious at the time of installation. Once the pipe was buried there would have been no visible or other evidence. The claim that the water leakage at the joint that was uncovered by the excavation was somehow involved in the failure by bursting is rejected. There was no evidence in my inspection (as noted in my first report) that the two were connected.”
“The pipe failed because of a combination of factors. These were:
- The removal of tonnes of material from the top and around the pipe, therefore changing the external conditions which were assisting the pipe in resisting the pressure within the pipe,
- The fact the pipe wall was thinner than specified, which is consistent with the findings of the 2009 condition assessment,
- l also believe a crack was probably present prior to the pipe being excavated.
I do agree with Prof. Melcher that the time of failure was linked to the fact that the pipe operates under maximum operating conditions during the night when pumping is taking place. The pipe was only partially hand excavated the afternoon before rupture. There may have been a leak from the lead caulking as well as from a crack in the pipe that had not yet developed into a full fracture.
I agree that a leaking lead joint of itself cannot cause a pipe failure.”
“In 2010, a failure of the DN500 CICL 1953 Section 2 pipeline occurred within 50 m of the 2017 failure. This led to significant loss (~$0.5 million in 2010) in the same development. As the properties were downhill from the pipeline, water flooded through the properties. It was foreseeable that this could occur again if the pipe failed adjacent to the development. As well as flooding, it is possible that structural damage could occur. As a result, HWC should have been aware that a rupture of the DN500 CICL 1953 Section 2 could lead to significant loss in the Strata Plan 16460 development.”
I have mentioned common sense because of the characteristics of the site. These are plainly seen in the photograph attached to the statement of Mr Luke Bianchi reproduced below.
DN 500 is running along the hillside, above the townhouses and has about 5m of earth above it. Any catastrophic failure of the pipe near the excavation site (marked in red) is bound to send water pouring down into the residences. Based on the expert evidence, the removal of earth above a pipe obviously has the capacity to affect the integrity of the pipe.
Prof Melchers had a very different view on foreseeability:
“Given the response at (a) above, the failure by bursting could not have been foreseen at any time prior to the time of failure.” (The response at (a) was Prof Melchers’ opinion that the water leakage was not connected to the burst.)
“Yes, the risk of failure was reasonably foreseeable. The condition assessment report delivered in 2009 clearly identified that the pipeline was in poor condition and had a roughly 15% chance of failure per annum in 2017 somewhere along its length. Given that approximately one third of the pipeline was in areas where the consequences of failure would be large the overall chance of the break causing similar levels of damage was approximately 5% per annum for this pipeline in 2017. Note that these figures do not include the increased risk because of excavating the pipe.”
Dr Clegg’s view specifically takes into account the location of the townhouses, which must accord with the common sense I have referred to above.
The defendant made much of the 470 failures referred to by Mr Wynn between 2012 and 2017, presumably to illustrate the regularity of failures and the absence of a need to turn off the water. Mr Wynn refers to the failures in para 43 of his second statement and then states that an Annexure is attached which is a spreadsheet “setting out the number and type of failures experienced on each section of watermain in each year”. The Annexure (JW 3) is far from helpful. It gives a short description of the type of failure but little else. In particular there is no identification of any failure in a site similar to that in the current case nor of any history of previous failures in the identified failures.
To some extent, the evidence concerning the effect of excavation changes the primary enquiry, for liability purposes, from the identification of a weakness or defect in the pipe to the nature and consequences of the excavation, including its size and it being left unfilled overnight. This question also involves whether or not the pipe should have been shut down (or diverted).
The pressure in the pipe was greater during the early morning hours. Dr Nicholas reported, after examining the defendant’s water pressure record:
“It shows a gradual increase in static water pressure in the hours before failure occurred at around 3 am. It is acknowledged that this is standard experience for water supply systems, with service reservoirs being slowly topped up ahead of the early morning demand for water.”
The increase in pressure was obviously known to the defendant. Combined with the reasonable foreseeability of a defect in the pipe being exposed by the removal of the earth above it, the inescapable conclusion is that the defendant acted unreasonably in leaving the pipe exposed overnight. This is not to say that it should necessarily have refilled the excavated hole, but that there were options available including the shutting off of the water.
Shutting off, reducing the pressure or diversion of the water were available options and, bearing in mind the redundancy available through the other two pipes, would have had no effect upon any user. Mr Fennell said restricting the flow of water was relatively inexpensive. He added:
“Given the pipeline was still operating at full flow at the time the leak was first reported, the reasonable response upon receiving such a report should have been to immediately move to restrict flow in case the leak is coming from the DN500 CICL line. A leak may represent an early warning that the pipeline is about to rupture.
If the pipeline was still in full operation at the time the decision was taken to excavate the pipeline flow restrictions should have been introduced to protect the workers on-site who ultimately worked in the excavation using hand tools on top of the pipe that ruptured just hours later. If the pipeline was still in full operation after being excavated it should have had flow restrictions put in place before the excavated pipeline was then subject to the higher pressures that occur during the late night/early morning when reservoirs are filled.”
“The main is only required for redundancy to the DN1200 MSCL that parallels the main.”
Conversely, DN 1200 and DN 600 could have taken up the water passing along DN 500 without any adverse effect.
This is not to say that the nature of the defect in the pipe becomes irrelevant. If the pipe had been heavily corroded the 2010 failure may have assumed a greater significance. But, at the same time, when the excavation was occurring, and when the area was being left overnight, any defect in the pipe was unknown and the possibility of a heavily corroded pipe was present. That the precise defect was unknown does not matter compared to the reasonable action to be taken in case there was a defect capable of leading to a catastrophic failure when the pipe, situated above a large townhouse complex, was left exposed overnight during periods of high water pressure.
There was a leak. Something must have been ‘wrong.’ The excavation was more extensive than it would have been but for the mistaken identification of DN 600. Mr Berry gave this evidence:
“Q. Did that, the confusion between DN500 and DN600, cause a much larger in area excavation to occur than what would normally be the case?
A. The, the understanding was we were trying to work out which main was leaking, so we had a wider excavation to, trying to determine which main was leaking.”
Neither Mr Hayter or Mr Berry turned their minds to any possible consequences. They were both at pains to move any responsibility elsewhere.
For example, Mr Hayter was asked about shutting off the water. He said:
“Q. You didn't make a call to anyone else at Hunter Water about whether to shut down the water main prior to excavation, did you?
A. No, it's not part of my job. My‑‑
Q. You didn't make a call to anyone at Hunter Water whether the water main should be isolated excavation.
A. Again, not my‑‑
Q. That's true?
A. It wasn't my call to do that. It's not in my job description to do that.”
“Q. Did you give consideration to isolating that section of DN500?
A. No, not at all, no.
Q. The system controller didn’t say anything about isolating DN500?
A. We just felt it didn’t need to be shut down.
Q. So it was discussed and you felt it didn’t need to be shut down, is that your evidence?
A. That's true, yeah.”
“Q. There was sufficient redundancy in the other pipes to allow for that isolation/shutdown of the affected section of DN500. That's true, isn't it?
A. There is. Yes, there is sufficient redundancy for works to be done on that main for a set time.”
“In paragraph 450 of section 4 of his report Dr. Clegg suggests that it might not be possible to isolate the DN500 CICL line and doing so might result in water being cut-off to customers and so on. This supposition is not correct as explained by Hunter Water themselves in the file note from Kirby Morrison as I have outlined above.”
The defendant, in final submissions, criticised Mr Fennell suggesting that he had not divorced himself from the events and taken “a step back, let’s say to the beginning of August, and look forward from that point”. I reject the criticism. I think Mr Fennell was giving his opinion based on the whole of the history of the pipe including his observations about it having been shut down both before and after 22 September 2017. It is not retrospective reasoning to say that because something had been done at another time, including after the event, it could not have been done before the event.
As the plaintiffs pointed out there is no specific pleading by the defendant of a statutory defence. However, as I have pointed out, there is a pleading in [30] of the amended defence, which I have set out above, and the defendant made this submission in opening written submissions:
“Moreover, the Defendant had a statutory obligation to supply water to the residents in its supply area. It’s use of the land therefore was common and ordinary. As a statutory authority performing an authorised task under statute in those circumstances, the defendant will only be liable in nuisance if damage was caused by a failure to take reasonable care on its part ...”
The defendant quoted some authorities for this proposition, and I do not doubt their correctness. However, on my findings the defendant did not take reasonable care so that the defence is not enlivened.
Returning to the questions I posed above as to the establishment of nuisance, I am satisfied that there was an interference with the plaintiffs’ use and enjoyment of their land, that the consequent damage was caused by the water discharged when the pipe burst and that the defendant had acted unreasonably in leaving the pipe exposed overnight without shutting off, diverting the water flow or reducing the pressure in the pipe.
Accordingly, I find the plaintiffs have established their nuisance claim against the defendant.
Having found in favour of the plaintiffs on the nuisance claim it is not necessary to consider negligence or the s 22 compensation claim. However, I will do so in case I am wrong about nuisance.
The claim in negligence presents a more difficult task for the plaintiffs, in particular because of the defences provided to the defendant by the CLA.
Starting with s 5B of the CLA, the findings I have made in respect of nuisance I think cover the requirements of the section. I add here the agreed opinion of both Mr Fennell and Dr Clegg in answer to the question: “Was the risk of the 2017 Failure reasonably foreseeable to a person in the position of Hunter Water prior to the time of the 2017 failure? If so, when and what was the probability of that risk occurring?”
“Yes. The modelling in 2009 (Condition Report) indicated that there was a risk of failure of the DN500 pipeline and the probability of that failure grew over time. By 2017, the Condition Report predicted 2 failures in the 1500 m of DN500 CICL 1953 Section 2 pipeline in Elermore Vale. The report indicated that the probability of failure was approximately 15% per annum.”
The next question was whether the risk was not insignificant. The risk of a pipe bursting above the townhouse complex was significant. It had already been proved as such by the 2010 incident. That the earlier incident had a different cause is beside the point. The earlier incident showed that a burst pipe, for whatever reason, could cause significant damage through the flooding of the townhouses.
Next is whether a reasonable person in the defendant’s position would have taken appropriate precautions. This question brings into play s 5B(2) of the CLA. The massive amount of water that would emanate from a burst pipe under full pressure indicates that harm would occur if precautions were not taken. The volume of water rushing through the townhouses would be likely to cause serious harm. As stated by Mr Fennell, the burden of taking precautions to avoid the risk was minimal. It could have been achieved by simply turning off the water, diverting the water or reducing the pressure.
The social utility of the pipeline is obviously a point in favour of the defendant if the role of the pipeline is to provide users with access to water. The point is neutralised however, by the availability of the other two pipes to take up the work of DN 500. This was referred to as the redundancy in the system.
Thus far I would have concluded that there had been negligence under the general principles set out in s 5B. It is now necessary to consider ss 42 and 43A of the CLA. These sections state:
42 Principles concerning resources, responsibilities etc of public or other authorities
The following principles apply in determining whether a public or other authority has a duty of care or has breached a duty of care in proceedings for civil liability to which this Part applies—
(a) the functions required to be exercised by the authority are limited by the financial and other resources that are reasonably available to the authority for the purpose of exercising those functions,
(b) the general allocation of those resources by the authority is not open to challenge,
(c) the functions required to be exercised by the authority are to be determined by reference to the broad range of its activities (and not merely by reference to the matter to which the proceedings relate),
(d) the authority may rely on evidence of its compliance with the general procedures and applicable standards for the exercise of its functions as evidence of the proper exercise of its functions in the matter to which the proceedings relate.
43A Proceedings against public or other authorities for the exercise of special statutory powers
(1) This section applies to proceedings for civil liability to which this Part applies to the extent that the liability is based on a public or other authority’s exercise of, or failure to exercise, a special statutory power conferred on the authority.
(2) A special statutory power is a power—
(a) that is conferred by or under a statute, and
(b) that is of a kind that persons generally are not authorised to exercise without specific statutory authority.
(3) For the purposes of any such proceedings, any act or omission involving an exercise of, or failure to exercise, a special statutory power does not give rise to civil liability unless the act or omission was in the circumstances so unreasonable that no authority having the special statutory power in question could properly consider the act or omission to be a reasonable exercise of, or failure to exercise, its power.
(4) In the case of a special statutory power of a public or other authority to prohibit or regulate an activity, this section applies in addition to section 44.
In respect of s 42 of the CLA the defendant primarily relied upon the statement of Mr Robert Main dated 4 November 2024. Mr Main’s evidence was not challenged, and he was not cross-examined. Mr Main is the Acting Group Manager, Planning and Engineering. Mr Main describes the defendant’s functions in respect of “collection, storage, treatment, transportation and delivery of drinking water” and also in respect of sewerage and run-off surface water.
Mr Main states that the area in which the above functions occur cover about 5,366 km² wherein there is a population of about 600,000 people. Within the area there are 19 wastewater treatment works, 78 service reservoirs, 85 water pumping stations, 441 wastewater pumping stations, 5,115 km of sewer mains and 5,080 km of water mains. In carrying out its functions concerning drinking water, the defendant is subject to a number of quality controls.
Mr Main says that the defendant has to apply a number of “policies, plans and procedures” as well as strategies. He describes the “Critical Watermain Risk Management Framework” as well as of the “Strategic Condition Assessment Program and Watermain Prioritisation Model”. Under the Prioritisation Model the defendant takes into account a number of factors including the water main’s failure history and the operating pressure of the water main. There are other factors listed by Mr Main, but I have mentioned these two because they are the first two in his list and they refer to factors which I think had an impact on my findings on nuisance.
Of equal significance is that Mr Main states “the Prioritisation Model did not consider the potential failure of watermains in the vicinity of residential units as a weighted factor”. This somewhat surprising policy seems to suggest that water mains in residential areas will be allowed to fail before any remedial work takes place.
Mr Main also describes the defendant’s “Budgetary Framework.” He says that under the framework, funds are allocated for watermain maintenance or replacement according to the presentation of a business case for new large capital works and reactions to unforeseen needs for maintenance. If funds are required for maintenance or replacement of a water main, it is necessary for there to be a Project Development Plan which requires approval by a manager and then the entry into a tendering and procurement process.
Quite clearly the defendant’s responsibilities fall within the ambit of s 42 of the CLA. It does seem unusual that funds are allocated retrospective to a failure rather than prospectively to a possible failure. Nevertheless, the defendant, like other public authorities, no doubt has to manage a specific budget which is not necessarily overly generous.
Turning to s 43A of the CLA, the defendant submitted that the higher standard required by the section amounted to, in effect, “gross negligence”. I was referred to the decision of Giles JA in Allianz Australia Insurance Ltd v Roads and Traffic Authority of New South Wales; Kelly v Roads and Traffic Authority of New South Wales [2010] NSWCA 328, at [87]:
“Aronson sums it up in ‘Government Liability in Negligence’ [2008] 32 MULR 44 at 80 that ‘[o]nly the grossest unreasonableness will invalidate the exercise of a statutory discretion’. The learned author suggests that instead of transplanting Wednesbury unreasonableness ‘[i]t might have been more straightforward to draft the new standard simply as ‘gross negligence’. I say nothing of that; in seeking to give content to the language of s 43A, however, a constant is that Wednesbury unreasonableness must be at a high level. The force of s 43A, in its use of language modelled on that of Wednesbury unreasonableness, lies in ‘could properly consider’, with the restraint of ‘could’ moderated by ‘properly’. Necessarily, questions of degree and judgment arise in both reasonableness and properness.”
“Section 43A assumes the existence of a duty of care and identifies the standard to be applied in determining whether that duty has been breached: Curtis v Harden Shire Council [2014] NSWCA 314; 88 NSWLR 10 at [234] and [272]. Another way of describing the operation of the section is that s 43A confers a qualified immunity upon a defendant where that section is applicable: Roads and Maritime Services v Grant at [57].”
“… In cases where s 43A applies, the court must look at the matter having regard to what the authority in question could properly consider a reasonable exercise of the power: Curtis at [6]. As Bathurst CJ there said, ‘[i]f the authority could properly consider what was done was a reasonable exercise of the power then there will be no liability’. To the same point are the observations of Basten JA, with which Beazley P agreed, in Curtis at [278]: the court is required to consider whether no authority properly considering the matter could consider it to be reasonable. His Honour stated that the approach resembled the test for apprehended bias, in that rather than assessing reasonableness for itself, the court was required to ‘view the matter through the eyes of a responsible public authority’.”
“277 The final clause sets a standard. The standard is an act or omission that is ‘so unreasonable’ that no authority could ‘properly consider the act or omission to be reasonable’. This is a curious form of expression: it is not that the act be so unreasonable that no reasonable authority could do the act, but it may perhaps be assumed that the reference to ‘no authority’ is a reference to ‘no authority acting reasonably’. That conclusion is supported by the reference to an authority which ‘could properly consider’ the act to be reasonable. That reading should be accepted.
278 The other awkwardness of expression is that the court is required to consider not whether it considers the act (to paraphrase) grossly unreasonable, but rather whether no authority properly considering the matter could consider it to be reasonable. This test has two aspects. First, the identification of the body to be satisfied as to the proper characterisation of the act or omission is not the court but another public authority. That is, it is like the test of apprehended bias in administrative law, which asks not whether the court might think that the decision-maker might not bring a fair and unbiased mind to the task, but whether a fair-minded lay observer might think that the decision-maker might not bring such a mind to the task. With apprehended bias, the identification of the holder of the opinion is understandable; with liability in tort, it is less clear. It means that the court must view the matter through the eyes of a responsible public authority, having particular expertise and functions. (See also the distinction noted in Jamal v Secretary, Department of Health (1988) 14 NSWLR 252 at 262D-F (Kirby P).)
279 The second aspect of the statutory language is that the state of mind of the authority is not identified as one which it would or should hold, but rather one which no authority could hold. In other words, it envisages a range of opinions as to what might constitute a reasonable act or reasonable failure to act, but asks if no public authority properly considering the issue could place it within that range.”
It was a function of the defendant pursuant to the licence granted under the HWA to repair and maintain the water mains within its jurisdiction. I think this amounts to the exercise of a special statutory power as defined in s 43A(2) of the CLA.
The test described by Basten JA in Curtis does not require an investigation of whether or not there was gross negligence as seems to be suggested by the defendant. Prof Melchers described the approach taken to maintenance by Sydney Water which ranged from a system of fixing the leaks “when they occurred” to a program “with lots of different people involved, to try and detect water as best they can, and as soon as they can, because that’s a warning sign that, in time, and it may be 10 or 15 years later, the pipe might be in the position where it would burst”.
Prof Melchers then described the system in Queensland where sniffer dogs are used “to try and identify where chloride or fluoride was coming up with the water that was leaking out of the pipe…” This is again a proactive system.
Basten JA emphasised that there might be “a range of opinions as to what might constitute a reasonable act or reasonable failure to act” and it is necessary to see whether the actions of the defendant fall within the range. Clearly the approach taken by Sydney Water is at one end of the range, perhaps followed by the system in Queensland. However, it is impossible for me to say that the system adopted by the defendant, namely the ‘fix it when it breaks’ policy is outside the range. It might be at the other end of the range but that does not make it outside the range.
It follows that I could not make a finding that the defendant was not entitled to the protection provided by s 43A. In other words, while I think the defendant was in breach of the principles set out in s 5B of the CLA it nevertheless was not negligent because of the higher standard required by s 43A.
Accordingly, I would have found against the plaintiffs on negligence.
In respect of causation, had I found negligence on the part of the defendant, I would also have found in favour of the plaintiffs on causation. The onus is of course always on the plaintiffs, but I think that onus was discharged.
Based on my finding that the defendant should have turned off, diverted or reduced the pressure in the pipe and that the effect of the pressure in the uncovered pipe was to cause the burst, then I think it follows that the defendant’s failure caused the damage. Put another way, but for the defendant failing to take precautions when leaving the pipe exposed and the water pressure unaltered, the pipe would not have burst and the damage to the complex would not have occurred.
There are two parts to the damages claim: physical damage caused by the descending water and the diminution of the value of each lot within the strata plan.
As noted above, the first part was agreed in the sum of $1,161,841.92. The second part was entirely disputed.
The plaintiffs’ diminution claim, of $20,000 per lot, was styled as the loss derived from the stigma (of flooding) attached to the properties. The stigma had two elements. Firstly, prospective purchasers would pay less for the lots because of its flooding history, and secondly, they would pay less because the quarterly levies were higher as a result of the flooding history. The levies were higher because of the increased insurance costs arising from the flooding history.
The plaintiffs’ case was based on the two reports of Mr Michel Hermiz, a professional property valuer. Mr Hermiz was cross-examined. He was a particularly impressive witness. He made appropriate concessions, and he successfully rebuffed attacks on his reports through his close knowledge of their detail and his area of expertise.
His major concession under cross-examination was already contained in his second report. He stated:
“In my observation, the influence of stigma tends to diminish over time. Specifically, the impact stemming from stigma gradually wanes, particularly in the absence of recent news coverage, articles, or new incidents, especially those resembling previous occurrences.
In the initial 4-5 years following the 2017 incident, there was notable media attention, notably regarding the 2017 incident, with numerous articles easily accessible through basic searches. The amalgamation of the 2010 and 2017 incidents creates a perceived pattern, whether justified or not, indicating a high-risk environment susceptible to future water pipe bursts.
However, as of April 2025, locating articles pertaining to these incidents has become considerably more challenging, requiring prior awareness or extensive research. This suggests a reduction in the stigma impact on both the subject property and its individual units. In my opinion, stigma of this nature typically has a lifespan of 5 to 7 years, assuming no new incidents or articles emerge. Given that approximately 7 years have elapsed since the last incident, it is reasonable to expect that without prior knowledge or thorough investigation, individuals / potential buyers would be unaware of the property's history. Consequently, I anticipate that any stigma-related impact on the property's value has likely become irrelevant.
However, it is crucial to acknowledge that the occurrence of a similar incident would establish a recurring pattern, with three incidents spaced approximately 7 years apart. Consequently, it would not be unexpected for some prospective buyers to view such incidents as an enduring issue, potentially leading them to either refrain from purchasing within the complex or negotiate a substantial discount.”
Mr Hermiz accepted that recent sales might have exceeded his valuations, but he pointed out that the recent drop in interest rates might have spurred prices. There is also of course no way of knowing if the recent purchasers had taken the flooding history or higher strata levies into account. Perhaps they would have paid even more!
Mr Hermiz thought the premiums were about 60% or 70% higher than they should have been. He described his methodology in this way:
“I’ve worked out the, what the strata levies should be within the complex relative to other comparable complexes, and then I’ve noted what their current levies are. That difference then I’ve applied it on a ten year period, which is the usual and most common period where a transfer of property will occur, and then discounted it back to what the present value is, using the bond rate.”
Using Unit 67 as a base for his calculations, Mr Hermiz said this unit was paying levies of $5,315 per annum. He subtracted the levies from comparable units (outside the complex) to arrive at a difference of about $2,000 per annum. He inspected a balance sheet (for May to December 2023) which showed insurance premiums were about $1,966 per annum which is roughly equal to the difference between the strata levies.
The $2,000 increased premium over the ten-year period used by Mr Hermiz produced the claimed loss of $20,000 per lot.
There is a fundamental problem with the claim based on increased insurance premiums.
Mr Hermiz said he had not seen any document stating the higher insurance premiums were related to the flooding, but he said:
“I’ve spoken with a broker as well who’s confirmed that would be the largest issue, the repeat offences and the likelihood of a future event occurring.”
“Therefore, a unit in the subject complex (Unit 67) is approximately 73% ($2,247 per year) and 62% ($2,035 per year) respectively more expensive on a strata levy calculation relative to other similar units in the area. This would be highly suspect and unusual, and a buyer would investigate the reason for the higher Strata levies. They would then conclude the impact is related to the high Insurance premiums. Insurers assess risk based on claims history, and multiple past flood claims will cause a high-risk classification, leading to increased premiums. The impact of the previous incidents, stigma and risk associated with future claims, as well as a history of insurance claims (e.g., water damage, liability claims etc.) are likely to have led to higher premiums.”
“HIS HONOUR: --you could have done more. Not you personally, I mean the plaintiffs could have shown us minutes of a meeting where it says, ‘We've got to increase the premiums.’
DAWSON: The levies, yes.
HIS HONOUR: ‘The insurance company says we have to pay more because of this flooding.’
DAWSON: Yes.
HIS HONOUR: All I've got is increased premiums, I accept that, but no reason.
DAWSON: Yes.
HIS HONOUR: It would be a pretty strong inference to draw that there were no other reasons why the insurance premiums might have gone up.
DAWSON: Besides Mr Hermiz's evidence, there is no evidence. There was some evidence in affidavits not read about actual premiums, but it doesn't fill the lacuna that has been identified by the defendant.”
Mr Hermiz says insurers assess risk based on claims history. I have no doubt that is correct, but it is not the evidence here. There is simply no evidence linking the insurance premiums for these properties to the flooding. I do not think I can draw an inference to that effect. It is not the only rational inference available. There could be many other reasons for a higher premium which may or may not include the flood events. The claim based on increased insurance premiums must fail. The claim based on the general stigma had already been effectively discounted to zero by Mr Hermiz.
There is accordingly nothing left in the stigma claim to found any damages.
(1) The Corporation, in exercising its functions under this Division, is to do as little damage as practicable and is, subject to this Division, to compensate all persons who suffer damage by the exercise of the functions.
(2) Compensation may be made by reinstatement, repair, construction of works or payment.
(3) If the Corporation installs a sewer on land in exercise of powers under this Division, the Corporation is required to pay compensation only if the sewer damages, or interferes with, a building or other structure on the land or if a manhole or main ventilator is constructed on the land.
In my decision on the plaintiffs’ application to amend the statement of claim (Owners Strata Plan 16460 v Hunter Water Corporation [2025] NSWSC 947) I set out why I thought the compensation claim under s 22 faced difficulties. However, I was persuaded to permit the amendment because it did not involve any further evidence and revolved around the construction of s 22. Counsel for the plaintiffs told me that he would endeavour to persuade me to accept a different construction to that which I had contemplated.
Central to my view, and it accords with the approach taken by the defendant, is that the right to compensation only arises when the corporation has entered into another person’s land and caused damage.
The basis for the alternative construction arises from s 19(2) of the HWA, which states:
The Corporation may, subject to this Act, operate, repair, replace, maintain, remove, extend, expand, connect, disconnect, improve or do any other things that are necessary or appropriate to any of its works to ensure that, in the opinion of the Corporation, the works are used in an efficient manner for the purposes for which they were installed.
The plaintiffs submitted that the work contemplated by s 19(2) was not restricted to entry on another person’s land and therefore, because s 19(2) falls within the same Division as s 22, compensation is payable if the damage has occurred when the Corporation is performing one of the acts referred to in s19(2). For present purposes this would include “repair” and “maintain”.
The plaintiffs then went on to distinguish the authorities seemingly against the plaintiffs on the basis that the legislation relevant to each of the cases had important differences with the HWA.
For example, in Rushcutters Investments Pty Ltd v Water Board (1989) 68 LGRA 128 the relevant legislation was the Water Board Act 1987 (NSW) and the relevant section is specifically headed “Entry on land to carry out works.”
In Sleeman v SPI Electricity Pty Ltd [2014] VSCA 243 the applicable legislation was the Electricity Industry Act 2000 (Vic) which similarly specifically referred to entry onto land.
It followed, submitted the plaintiffs, that because s 22 of the HWA did not have an ‘entry onto land’ qualification it would apply whenever damage arose from one of the activities described in s 19.
The defendant submitted that s 22 was confined to situations where there had been an entry onto land to perform works. The defendant said the history of the section was important and referred to the provisions of the Metropolitan Water, Sewerage and Drainage Act 1924 (NSW) which had an equivalent provision in s 32. This provision had been considered by the High Court in Metropolitan Water, Sewerage and Drainage Board v OK Elliott Ltd (1934) 52 CLR 134; [1934] HCA 57. Starke J said at 143:
“It has long been settled that if public authorities or persons do acts which they are authorized by statute to do, and do them in a proper manner, then, though the acts so done work special injury to a particular individual, the individual injured cannot maintain an action at law. He is without remedy unless compensation is provided by the Act, and his only remedy is that given by the statute, namely, compensation. The compensation is for losses sustained in consequence of what the authorities or persons may lawfully do under the powers conferred upon them. But it is equally well settled that if the injury or loss is caused by an act which, notwithstanding the statute containing or incorporating a compensation clause, is not made lawful, the remedy by action is not taken away and is open to the person injured. Statutory powers must be exercised ‘with reasonable regard to the rights of other people,’ and if an act is done in excess of the statutory, power, or carelessly or negligently, then the person injured can put in force the ordinary legal remedy by action in the Courts of law.
The declaration in the case now before us is framed on the basis that the acts and omissions of the Board are not made lawful by its Act, but were in excess or in abuse of its powers, or were carelessly and negligently done or omitted. Consequently, the remedy is by action at law for damages, and not for compensation under the Act …” (footnotes omitted)
“The Water Board Act has amongst its progenitors the Metropolitan Water and Sewerage Act 1880 (NSW) and the Metropolitan Water Sewerage and Drainage Act 1924 (NSW). Arguments similar to those raised by the defendant in the present case were considered by the Full Court in Graham v Board of Water Supply & Sewerage (1891) 12 NSWLR 287 and by the High Court in the Metropolitan Water Sewerage & Drainage Board v O K Elliott Pty Ltd (1934) 52 CLR 134; 12 LGR 50 and in each of those cases were rejected. In Graham v Board of Water Supply & Drainage, Darley CJ (at 289-290) distinguished cases where a statute makes no provision for the payment of compensation, in which event someone injured by the negligent performance of the authorised works might sue in tort, and cases where the statute makes provision for the payment of compensation, in which case statutory compensation is payable if the work is done without negligence, whereas if the work is done negligently the injured persons' remedy comes from the common law and not from the statute ...”
There will be a verdict for the plaintiffs in the agreed sum of $1,161,841.92. The plaintiffs are not equally entitled to the same share of this amount. The parties agreed that I approach the matter on the basis of a judgment for the plaintiffs, noting the plaintiffs which suffered property damage. A schedule identifying the property damage according to the individual plaintiffs is attached.
I make the following orders:
Judgment for the plaintiffs in the sum of $1,161,841.92.
The defendant is to pay the plaintiffs’ costs of the proceedings.
I will hear the parties on interest or any alternative costs order.
If the matters in Order 3 above are to be agitated the parties are to inform my Associate within 7 days of this judgment.
The constituent parts of the judgment sum are noted and set out in the Schedule of Property Damage below.
| Plaintiff | Property Damage | | 1st Plaintiff | $914,653.86 | | 42nd Plaintiff | $30,806.03 | | 44th Plaintiff | $53,703.91 | | 55th Plaintiff | $13,438.31 | | 74th Plaintiff | $2,959.00 | | 89th Plaintiff | $25,188.35 | | 90th Plaintiff | $4,321.85 | | 91st Plaintiff | $218.00 | | 93rd Plaintiff | $17,718.46 | | 95th Plaintiff | $12,016.88 | | 96th Plaintiff | $55,116.23 | | 98th Plaintiff | $23,888.29 | | 99th Plaintiff | $7,201.75 | | 100th Plaintiff | $611.00 | | | $1,161,841.92 |
**********
The Owners - Strata Plan No 16460
Hunter Water Corporation [2025] NSWSC 1029
(2014) 88 NSWLR 10
(1891) 12 NSWLR 287
(1934) 52 CLR 134
(1982) 149 CLR 480
(2017) 94 NSWLR 83
(2008) 72 NSWLR 98
(2012) 42 WAR 287
(1988) 14 NSWLR 252