Zammit v EL-Khoury [2010] ACTSC 6

5. It is necessary, in order to resolve that issue, to outline the history of the matter.

6. On 28 November 2005, the plaintiff sent to the defendants an engineer's report suggesting certain works to remedy the situation. The defendants responded by offering to pay half of the cost of a retaining wall which they claimed would remedy the plaintiff's grievance.

7. The plaintiff responded on 7 December 2005 asserting that "the fill against my house needed to be removed". He agreed that a retaining wall was needed but declined to contribute to the cost of it.

8. The issue thus remained unresolved, resulting in a letter to the defendants from solicitors for the plaintiff (S & T Lawyers - Mr C Filgate Giles).

9. The complaint as then formulated was in the following terms:

You have been repeatedly advised by Mr Zammit and Mr Morgan that the work that you have carried out on your property has channelled water through the brickwork of the Zammit's property and has caused the underside of Mr Zammit's property to suffer from accumulating moisture. The underside of Mr Zammit's house is now very wet and boggy and has a very foul and unhealthy smell of dampness.

Additionally, your build up of earth works against the wall of Mr Zammit's house, exceeds that wall's capacity to stand lateral pressures and make [sic] result in deformation of the wall and its possible collapse.

Unless we receive, by 5.00 pm on Wednesday 1 March 2006, your written undertaking to remove all of your above works forthwith, cease your activities that have adversely affected our client's property forthwith and to make good all the damage to our client's property that your works have caused, we will have no alternative but to make an application to the Supreme Court of the ACT for an injunction and orders that will require you to attend to same, without further notice to you.

10. That elicited a response from solicitors for the defendants (J.S O'Connor Harris & Co - Mr John Harris) on 5 March 2006:

Please be advised that this firm acts for Mr and Mrs El Khoury and we are in receipt of your letter dated 27 February 2006 to our clients. We have also read the report prepared by Mr Morgan in this matter.

With respect, one key assumption made by Mr Morgan is [sic] his report would appear to be incorrect. There is a considerable amount of evidence to indicate that both the rear of the garage (at its level) and the rear of the house (at its respective level) have been dug into the hill so that the floor level of both is below natural ground level at the rear.

Mr & Mrs El Khoury have not changed the ground level at all since they purchased the property and so the statement that "in the past few months the ground level has been built up" is completely incorrect. It is entirely possible, however, that previous owners have added to the natural ground level on our client's side of the boundary.

As you would be aware, the proprietor who changes the natural ground level at the boundary of two blocks is generally the person responsible for retaining the change in level. When both parties have contributed to the change in level it is not uncommon for them to share the responsibility and the cost of the retaining work.

Since Mr Morgan prepared his report, our client has exposed your client's garage wall to reveal pre-existing parging and a waterproof layer, which indicates that it was always below ground level. In this respect, the garage wall would always seem to have been retaining a measure of the soil uphill.

We would be pleased to have your comments upon the ambit of the issue, but the problem now seems to be focussed upon the rear of your client's house where there is up to about 800 mm of soil against the wall of the house. Closer towards the front of the house the amount of soil would seem to run down to a minimal level. The parging at the bottom of the garage wall is now exposed along the full length of that wall and so it is retaining very little (although it may require some remedial works)

As our clients have indicated in their earlier letters, they are happy to take a cooperative attitude towards resolving the problem and to share the costs of any solution. We have not seen the drawings prepared by Mr Morgan and so we cannot comment on his proposal.

If you care to send us the proposals for solving the problem then our clients are prepared to agree upon a solution at the shared cost of the two proprietors.

Lastly, on the issue of water damage to Mr Zammit's property, it has been our client's observation that his gutters discharge back into the building during heavy rain. As a result, water cascades down the side of his house from behind the large board and it is entirely possible that a fair proportion finds itself on the inside of the house.

We look forward to receiving your response so that a series of detailed provisions might be drawn up and agreed.

11. Proceedings were then commenced. The plaintiff did not accede at that stage to the defendant's request to negotiate further. The parties apparently conferred at court on 31 March 2006. That led to a proposal from the defendants based on a report from a Mr Kenworthy, a suitably qualified engineer.

4 April 2006

S & T Lawyers

BY FACSIMILE: 6257 6657

ATTENTION: FIL GILES

Dear Sirs,

RE: BOUNDARY PROBLEM

BLOCKS 5 & 8, SECTION 32 NGUNNAWAL

I refer to our brief conference at the Court on Friday 31 March 2006 and also to our draft engineers report. I apologise for the late delivery of the report, which was finalised on Thursday evening because Mr Kenworthy was engaged in work at Wollongong for the past few days.

Mr Kenworthy seems to believe that the problem breaks into three parts:

1. The Northern End of the House Wall

He recommends a limited extent of concrete block-work retaining wall in accordance with the dimensions noted by him in his report.

2. The Middle Section of House Wall

It would seem that nothing needs to happen to this section of the wall, but for abundant caution, your clients might care to waterproof this section and backfill it.

3. The Garage Area

The recommendation is that the existing parging and membrane be extended and renewed. It would seem that the garage was constructed with a significant part of the wall below ground level and this method was adopted by the original builder.

It would also seem that the blocked and misaligned gutter contributes to the moisture problem in the house on Block 8. Of course, your client is welcome to access his house from Block 5 to clear the gutter and downpipe as well as making any repairs to the gutter which are appropriate.

We do not believe that it is productive to attempt to allocate blame for the present problem. It is possible that there has been a build up of soil at the northern end of the wall but our client denies that it has occurred in recent times since he took ownership. It is also likely that the garage area has been underground since construction of the house and it is our clients contention that he has actually stripped about 100 mm of existing topsoil away from this area before laying his concrete driveway.

We draw your attention to our clients offer to pay for one half of any necessary work which is contained in his letter of 4 December 2005 to Mr Zammit. This offer was repeated in our letter of 5 March 2006 to your firm.

Our client still believes that agreeing upon the extent of necessary remediation and sharing the cost of the work equally is an appropriate solution to this problem. We make this offer as an open offer in an attempt to bring an otherwise expensive legal procedure over a relatively minor amount of work to a prompt close.

We note that a detailed agreement setting out the precise scope of the work and the tradesmen who might do it must still be reached if the matter is to proceed on these lines. After consulting with your engineer you might care to address this issue.

We look forward to your response.

Yours sincerely

J.S O'Connor Harris & Co

...

12. The engineers' engaged by the several parties then conferred and there emerged some prospect of agreement. Further correspondence then ensued culminating in a letter of 1 November 2006 from the defendant's solicitors:

ATTENTION: MR FILGATE GILES

Without prejudice save as to costs

Dear Sirs

El Khoury ats Zammit

We refer to the offer made this morning by our clients in an effort to settle this matter.

You will recall that our clients offered to complete certain work at their own expense. This work involved the following:

• The construction, entirely on Block 5, of a suitable retaining wall approximately 2.5 metres in length, the base being below damp course level of the plaintiff's house. This wall to be constructed in such a manner as to leave the adjacent wall, from below damp course level, unobstructed.

Our client also offered your client unfettered access to block 5 for the purpose of any remedial work which they may care to perform on the western wall of the house.

Our clients proposed a settlement of the matter on the basis that, these terms being noted, the current action be dismissed with the plaintiff paying the sum of $6,000.00 towards the defendants' costs.

Although this offer was rejected, we have instructions that this offer is to remain open for a period expiring at 5 pm on 2 November next.

The letter is in the nature of a "Calderbank Offer" and our clients reserve the right to produce it in relation to any dispute about costs, in support of an application for indemnity costs.

Yours sincerely

J.S O'Connor Harris & Co

...

13. A counter offer was made by the plaintiff's solicitors:

FAX ONLY 6247 0984

WITHOUT PREJUDICE SAVE AS TO COSTS

Dear John

RE ZAMMIT v EL KHOURY

We refer to your letter of 1 November 2006 and confirm that we are instructed to rejects [sic] your clients' offer.

We are further instructed to convey our client's willingness to settle his claim in these proceedings on the following basis -

1. The Defendants are to carry out, or cause to be carried out, the work described in the attached Schedule of Works ("the Work") in a proper and workmanlike manner at their own expense.
2. The Work is to be commenced within 7 days after acceptance of this offer and completed within 28 days after commencement.
3. The Work is to be supervised and completed to the joint satisfaction and approval of John Morgan (Morgan Engineers) and John Kenworthy (the defendants' engineer).
4. The Plaintiff will bear the cost of any rectification work required to be carried out inside or under his residence.
5. Upon the satisfactory completion of the Work, the parties (or their legal representatives) will execute and file a form of consent orders that -

(a) these proceedings (No. SC 188 of 2006) be dismissed, and

(b) the Defendants pay the Plaintiff's costs agreed in the sum of $20,000.

1. The Defendants are to pay the Plaintiff's costs of $20,000 within 28 days after filing of the consent order referred to in paragraph 5.

In proposing these terms, we are instructed to point out the following -

(a) These proceedings, and the associated costs, could easily have been avoided if the Defendants had acted promptly in response to the Plaintiff's reasonable requests nearly 12 months ago to carry out simple preventative measures.

(b) The proceedings have been inordinately protracted by reason of the failure of Mr Kenworthy to cooperate with Mr Morgan in the determination of what is relatively straightforward and inexpensive rectification work.

(c) The Defendants' offer (contained in your letter of 1 November 2006) to carry out work comes at the eleventh hour and is not adequate to prevent the recurrence of the problems which prompted the commencement of these proceedings.

(d) In commencing and prosecuting these proceedings, the Plaintiff has incurred legal costs and disbursements in the order of $50,000. The Plaintiff's acceptance of the sum of $20,000 represents a very considerable compromise of the amount he might reasonably expect to recover from the Defendants on a party/party assessment on taxation.

This offer is made on the basis of the principles espoused in Calderbank and we reserve the right to produce a copy of this letter in support of an application for an order that the Defendants pay the Plaintiff's costs on a full indemnity basis from the date of expiry of this offer.

This offer will remain open for acceptance until 5.00 pm on Monday, 6 November 2006.

Yours faithfully,

S & T LAWYERS

...

14. Following agreement on the rectification works as embodied in the consent orders of 14 November 2006, the defendant's solicitors proposed, on 17 November 2006, that each party bear their own costs.

15. That proved unacceptable to the plaintiff. His solicitors suggested that their costs were $105,056.14 (noting the sum of $1,610.00 the plaintiff agreed to pay towards the agreed works).

16. The defendants' solicitors, unsurprisingly, rejected this offer by letter dated 3 July 2007:

...

S & T Lawyers

...

Attention: Mr Fil Giles

Facsimile: (02) 6257 6657

Dear Sirs

RE: EL KHOURY ats ZAMMIT

Thank you for your letter of 28 June 2007.

I am instructed to reject your proposal relating to costs and reiterate our earlier view that each party ought to pay its own costs.

To put this matter into perspective, we remind you of the following:

1. As early as 4 December 2005 Mr El Khoury offered to pay half of the costs of retaining the soil against your client's home.
2. This firm again offered to share the costs of a solution on 5 March 2006.
3. The evidence ultimately established that the problem was caused by a combination of both digging your client's house too deeply into the hill and subsequent mounding of earth on our client's side of the boundary.
4. While there was some dispute about the scope of works to fix the problem, it ultimately transpired to be quite minor work costing only $6,440.00.

It is our view that costs should ultimately bear a relationship to the size of the legal problem being addressed. We are happy to advise you that our clients legal costs were as follows:

1. solicitor's costs $ 4,400
2. Mr Purnell SC $ 6,930

In the above circumstances, the costs claimed by you in this matter, if you pursue them, will be subject to a full hearing on the issue.

Yours faithfully,

J.S. O'Connor Harris & Co

Per:

John Harris

17. That letter did not persuade the plaintiff's solicitors to any further compromise. It is striking that the plaintiff's solicitor's estimate of his costs is wildly disproportionate to that of the defendants, though the dispute seemed to involve similar effort and representation on each side.

18. The issue arose from the building up of earth on the defendants' side of the boundary, though that may have preceded their occupation of the property. Nevertheless, Mr Erskine submitted, legal action was necessary to force a result favourable to the plaintiff. That the result was a compromise is, as Mr Erskine correctly submitted, a proper result. Proceeding to trial is always a last resort.

19. Mr Purnell SC contended that the matter was really a small claim, not warranting Supreme Court action. Certainly, the result as agreed was within the range of a small claim. Further, he contended, the plaintiff's engineer had proposed a solution costing very much in excess of the agreed solution so expanding the scope of the dispute. There had been some factual issues between the engineers but the resolution agreed seemed more in line with the proposal by the defendants' engineer than that of the plaintiff's engineer, albeit that the plaintiff's engineer did not concede that the other engineer was correct.

20. Nevertheless, it does seem to me that there had been a valid argument on each side which warranted being addressed. There was, perhaps more on the part of the plaintiff than the defendants, a concentration on issues that proved to be unimportant which had complicated and prolonged the dispute.

21. It is an important consideration, in my view, that parties are to be encouraged to resolve their differences, particularly in disputes of this kind, by negotiation and compromise rather than litigation. Although I accept that the plaintiff did not act unreasonably in commencing proceedings, much of the escalation thereafter seems to me to have been the result of over-caution on the part of the plaintiff's representatives. I include in that expression not merely the lawyers but also the engineer.

22. It seems to me, on balance that the parties having moved to a sensible compromise, the appropriate order is that each party bear his and their own costs.

I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Chief Justice Higgins.

Counsel for the first and second defendants: Mr J Purnell SC

Solicitor for the first and second defendants: J S O'Connor Harris & Co