The NSW Supreme Court has allowed damages against Transport for NSW for small businesses affected by the Sydney Light Rail construction

In brief 

In the recent decision handed down on 19 July 2023 in Hunt Leather Pty Ltd v Transport for NSW [2023] NSWSC 840, the NSW Supreme Court has upheld a claim for private nuisance brought in relation to the interference caused by the NSW Government's Sydney Light Rail (SLR) project from Circular Quay to Kingsford/Randwick. The proceedings were commenced as a class action against Transport for NSW (TfNSW) on behalf of all persons who suffered loss or damage by reason of the interference with their enjoyment of their interest in the land. The two lead plaintiffs were a luxury handbag store, and a restaurant. The outcome means that TfNSW has been found liable for the financial damage suffered by the two businesses during the construction of the SLR. The decision will have wide implications for infrastructure planning throughout the State.

Background

The proceedings 

The proceedings were commenced against TfNSW on behalf of all persons who held an interest in land in the vicinity of the SLR, and suffered loss or damage by reason of the interference with their enjoyment of that interest. TfNSW conducted the planning of the SLR between 2011 and 2014. The Project Deed was then entered into with ALTRAC in December 2014. 

There were four lead plaintiffs, being a luxury retail leather goods business with stores in the QVB and the Strand Arcade (Hunt Leather), its CEO (Ms Sophie Hunt), a trustee of a unit trust that operated a restaurant business on Anzac Parade in Kensington (Ancio), and its sole director (Mr Nicholas Zisti).

The SLR project 

The SLR project was due to be completed in March 2019, but due to extensive delays, it was not completed until March 2020. It was supposed to be completed in stages according to "fee zones", whereby the occupation periods for each fee zone were established under the Project Deed. The intention of this strategy was to minimise disruption to businesses along the route. However, every time there was an encounter with an unidentified utility (referred to as a 'Utility Works Event'), the contractor could make a claim to extend the relevant occupation period in each zone. Ultimately, the fee zone strategy failed and businesses were subject to extensive construction activities in excess of what was anticipated under the strategy. His Honour commented that "[the staging of the construction activities] could only be described as a complete failure" (at [758]). 

The claim 

Hunt Leather and Ancio pursued a private nuisance claim, whilst Ms Hunt and Mr Zisti pursued a public nuisance claim. 

The private nuisance claim 

There are three types of private nuisances that can be established per Robson v Leischke (2008) 72 NSWLR 98; [2008] NSWLEC 152 at [54]:

• "Causing encroachment on the neighbour's land, short of trespass

• Causing physical damage to the neighbour's land; and

• Unduly interfering with a neighbour in the comfortable and convenient enjoyment of his or her land"

The Hunt Leather case was concerned with the third type of interference. 

The plaintiffs alleged that during the construction of the SLR, members of the class were subject to a nuisance arising from the SLR construction activities, which was an interference with their rights, and the enjoyment and occupation of their properties. The plaintiffs submitted that the nuisance was constituted by: 

• the nature of the SLR construction activities (involving heavy machinery, vibrations, noise and dust); 

• the presence of hoardings and general restriction of pedestrian and vehicular movement; and 

• the length of time that the SLR construction work was being conducted outside of their premises. 

The plaintiffs claimed that TfNSW was responsible for the nuisance because it was the statutory authority that developed, procured, planned, and organised the SLR Project, and that the nuisance arose because of TfNSW's failures in the planning, design and contracting phase. 

The public nuisance claim 

Ms Hunt and Mr Zisti claimed that the public nuisance (the substantial and unreasonable disruption or inconvenience to the public in the exercise of public rights) occurred by the damage and obstruction of roadways and footpaths through road closures and the erection of hoardings, and that they suffered loss and damage, and non-economic loss (see [947] - [949]). 

Nuisances denied by TfNSW

TfNSW denied there had been any nuisance in both the private and public claims. It argued amongst other things that the interference was not substantial and unreasonable, and it could not be liable in nuisance because the interference was an inevitable consequence of the SLR construction. 

Issues 

Summary 

The issues before the Court were principally: 

• Whether it was necessary for the plaintiffs to establish that the defendant failed to take reasonable care in order to succeed in an action for nuisance.

• Whether the interference to the lead plaintiffs' properties constituted an actionable nuisance that TfNSW should be liable for (i.e. was the interference substantial and unreasonable?). 

• Whether the defendant could rely on the defence of statutory authority.

The above is a simplification. The case involved complex legal and factual issues, evidence from experts in 8 separate disciplines, and 25 days of hearing in November - December 2022. The full written judgment by Justice Cavanagh handed down on 19 July 2023 comprised 1140 paragraphs. 

Was it necessary to prove negligence?  

The lead plaintiffs in Hunt Leather did not plead any negligence claim. TfNSW argued that in order to succeed in the nuisance claim, it was necessary to succeed in establishing negligence against TfNSW. 

The Court confirmed at [646] that the interference may be unreasonable even though the defendant took reasonable care. Whilst the Court observed that there are many cases where the same facts give rise to both an action in nuisance and negligence, the Court found at [674] that there was no need for a plaintiff to establish negligence to succeed in an action in nuisance, even if it may do so.  

The Court affirmed that nuisance is concerned with interference with a person's enjoyment of the land, and noted at [582] that the High Court of Australia has not yet held that a claimant must establish that the tortfeasor (in this case, TfNSW) acted negligently to succeed in nuisance. 

Despite these findings, the Court found that "it was not evident" that TfNSW had properly considered the interests of business owners along the SLR route (at [820]), and his Honour was unable to be satisfied that TfNSW exercised reasonable care to protect the interest of business owners along the SLR route. 

Was the interference substantial and unreasonable?  

The Court confirmed at [646] that the plaintiffs must each establish that there had been an interference with their use of the land which was "substantial and unreasonable", and that what is unreasonable must be considered objectively by the parties having regard to a range of factors. 

Regarding whether the interferences were "substantial", the Court found that the interference to Hunt Leather's Strand Arcade store was substantial and unreasonable between November 2015 and December 2017 (coinciding with when the barricades and hoardings were removed). The Court identified the point at which the nuisance became unreasonable as November 2016, one year after the commencement of the interference (see [937]). For the Hunt Leather QVB store however, the Court was not satisfied that the interference was substantial, finding that dusty windows alone were not sufficient for the interference to be "substantial" [at [887]). 

For the Ancio restaurant, the Court found that there was a substantial interference between May 2016 and February 2019 due to the hoardings and barricades erected outside of the restaurant. The Court identified the point at which the nuisance became unreasonable as September 2017, one year and four months after the commencement of the interference (see [938]).
 
The Court found at [656] that the use of the roads along the SLR route was not a common and ordinary use, and was "exceptional". This finding went towards the Court's consideration of the reasonableness of the interference.  

The Court helpfully provided a list of factors at [915] regarding whether an interference was unreasonable. These factors included: 

• the nature and purpose of the activities;

• the relationship between the parties, including the obligations of the landowner from which the nuisance emanates;

• the period during which the interference was substantial;

• the benefit of the activities to the public;

• whether the landowner took care to avoid unnecessary interference;

• whether there were self-help measures available to the claimants; and

• the extent to which the defendant might have known or anticipated that the interference would impact on the financial interests of the adjoining landowners.

The Court noted the law of nuisance is based on the principle of "give and take" between neighbours. It seeks to strike a balance between the conflicting rights and interests of neighbours, one of whom may be seeking quiet use of their land whilst the other may be developing their land. (at [589]).

Could TfNSW rely on a defence? 

One submission raised by TfNSW was that the construction was for the public benefit, and therefore this should operate as a defence. The Court found at [809] - [811] that even though there was a public benefit associated with the construction of the SLR, the fact that there was a public benefit does not operate as a defence. Rather, it is an important factor to consider in assessing the issue of reasonableness. Otherwise "it would allow the State to override the rights and interests of ordinary members of the community" [at [811]).

Another defence raised by TfNSW was that it was exercising its statutory functions at the time of which the plaintiff's complained about the actions taken during the construction of the SLR and this interference with the plaintiffs' land was inevitable (see section 43A of the Civil Liability Act 2002) (see [823]). The Court rejected this submission and found that TfNSW had not established its defence. The Court found that the existence of the fee zone strategy detracted from this defence (see [834]). 

Outcome 

Lead Plaintiffs 

The Court ultimately held that Hunt Leather and Ancio were successful in their claim for private nuisance. The Court found at [940] that TfNSW was responsible for the nuisance for 4 reasons: 

1. The prolongation of construction activities outside businesses along the SLR route was plainly foreseeable by TfNSW. 

2. The risk was so high that the other party to the PPP arrangement was not prepared to accept it, other than to a limited extent. 

3. Despite assurance to business owners along the SLR route that the work would be performed in stages, TfNSW contracted on terms that provided no real deterrence for any departure from the staging plan. 

4. TfNSW took the risk in respect of the requirements of the utility providers. 

As a result, the Court found that TfNSW was liable to Hunt Leather and Ancio in respect of the losses that they sustained. 

The public nuisance claim brought by Ms Hunt and Mr Zisti was unsuccessful. The Court observed at [953] that a private action for public nuisance is only available when a claimant can demonstrate they have suffered damage beyond the common injury to the members of the public affected by the nuisance. At [954] - [963], the Court provided a number of reasons why the public nuisance claim was not made out. The Court also found at [980] that section 141 of the Roads Act 1993 provided a defence. That section sets out that where an approval or consent existed, action in accordance with that is taken not to be a public nuisance. 

Class action members 

It remains to be seen how the litigation will affect the class action members, however many of the threshold questions are dealt with by the written judgment. The Court has listed the matter for further directions to determine a process going forward. 

The Court noted that the proceedings were not a "particularly apt vehicle for a class action" (see [1136]), as the loss suffered by each business was proportionally different depending on the degree of interference. The Court at [1133] has warned that mere proximity to the construction works does not establish substantial interference, despite some diminution in profitability flowing from the construction of the SLR. 

Significance

Class action members 

The judgment should encourage class members to pursue their respective claims against TfNSW, provided they can establish they were impacted by the SLR in a way similar to the Hunt Leather Strand Arcade store, as opposed to the QVB store. Broadly speaking, the outlook is more optimistic for customer facing small businesses within the class. 

Broader impacts 

The Hunt Leather decision is a significant case for its broader implications for individuals and businesses affected by large infrastructure projects. Often businesses in the position of the Plaintiffs are unable to claim compensation under the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Just Terms Act), as no interest in land is acquired from them.

Even if an interest in land is acquired, compensation for the impacts of these types of projects is constrained by the heads of compensation in the Just Terms Act, in particular by disturbance and injurious affection. There have been a number of cases in recent years that have constrained the scope of disturbance such that it can no longer be called a "catch all" provision. At the same time, the special value head of compensation has also not been litigated in the manner alluded to by Basten JA at [36] in Roads and Maritime Services v Allandale Blue Metal Pty Ltd [2016] NSWCA 7. 

The Court's decision in Hunt Leather highlights to those whose land has been partially acquired or those whose land has not been acquired in proximity to an intrusive infrastructure project that the tort of nuisance may apply.  If an infrastructure project will diminish profitability because of a substantial and unreasonable interference with a business, then the tort of nuisance should be considered. Infrastructure  authorities will need to focus firmly on the project planning phase and engage with stakeholders to minimise disruption and mitigate risk, particularly where the disruptions might be substantial and unreasonable.