Constructing a case for nuisance: lessons from Sydney Light Rail

The delays in the construction of Sydney Light Rail saw a representative action for nuisance brought by affected business owners against Transport for New South Wales (TfNSW).  In advancing their claim for interferences and economic loss, the class also sought to recover a commission payable to a litigation funder to advance the proceedings. At first instance, the NSW Supreme Court upheld the claim for private nuisance but rejected that any claim for damages could extend to litigation funding fees.^[1]

Most recently, TfNSW’s appeal against the nuisance finding was allowed.^[2] Importantly for the class action landscape, the Court of Appeal also confirmed that plaintiffs in a representative action for nuisance will not be able to seek to recover litigation funding fees as part of any damages which may be awarded.

Key Takeaways:

The decision clarifies the risk of nuisance claims faced by major project proponents, confirming that a construction project:

• won’t be a nuisance just because it is significantly delayed; but
• may be a nuisance if it was possible for the delays to have been avoided by pre-construction investigations or if the time taken to deliver the project is unreasonable in the context of that particular project. 

The decision also provides useful guidance on what may be done to mitigate these risks, including:

• ensuring that downstream contracts contain appropriate mechanisms for incentivising timely performance of construction activities; and
• carrying out pre-construction investigations to identify and mitigate potential causes of construction delays (but only where doing so will actually reduce the interference caused to neighbouring landowners or business owners).

Background facts

In 2011, TfNSW commenced planning for the construction of the Sydney Light Rail between Circular Quay and Moore Park in Sydney.

TfNSW engaged a contractor to undertake the construction works based on an Initial Delivery Program (IDP) which divided the construction into stages, or “fee zones”, which were to be completed by set dates in order to minimise disruption. A timetable substantially similar to the IDP was the subject of a media release, giving detail to the public of the planned disruption in specific areas. The construction works in the various fee zones took far longer than advised due to the discovery of numerous utilities underground.

A representative action was commenced against TfNSW on behalf of business and property owners affected by the delayed construction works. The class sought damages for nuisance, alleging that it had been unreasonable for TfNSW to contract on terms that did not sufficiently disincentivise its contractor to avoid delays which would impact neighbouring occupiers. The class also sought an order that a commission payable to a litigation funder be included in any damages awarded.

The trial judge found that TfNSW was liable for creating the state of affairs which led to the nuisance and awarded damages accordingly. The basis of the trial judge’s finding in terms of the extent of the nuisance was tied to the time frames for each fee zone in an amended form of the IDP prepared by an expert instructed by the plaintiffs (amended IDP).  Importantly, the plaintiffs submitted that the amended IDP continued time frames based on TfNSW having obtained “complete knowledge” of the utilities prior to the commencement of construction. The trial judge used the dates in the amended IDP as the benchmark of where the interference with land became unreasonable (ie once the periods in the amended IDP were exceeded, the ongoing construction became a nuisance).

Despite finding in favour of the class on the question of nuisance, the trial judge rejected the plaintiffs’ submission that the 40% commission payable under a litigation funding agreement was foreseeable as a result of the nuisance such TfNSW should be liable in damages for such amounts.

Issues on Appeal & Cross Appeal

TfNSW appealed the nuisance finding, and the plaintiffs’ cross appealed in respect of the finding in respect of the funder’s commission. 

There were 11 grounds which the Court of Appeal had to consider in the TfNSW appeal. The Court of Appeal’s decision ultimately turned on whether the primary judge erred in finding that the class suffered an interference which was both substantial and unreasonable, having regard to the amended IDP. The Court further addressed the litigation funding issue (in relation to the cross appeal) as a matter of principle.  We discuss these two key issues below.

Decision

Key Appeal Issue: Was it actionable nuisance that construction took longer than the timeframes anticipated in the amended IDP?

The primary judge found that the occupation of the fee zones became tortious once the times outlined in the amended IDP expired, with those times being based on “complete knowledge” of the utilities prior to the commencement of construction. This was rejected by the Court of Appeal, which found that the plaintiffs had not established that construction had become so protracted that it was unreasonable in the context of the totality of the project.  Specifically, because of the way the plaintiffs had advanced their case, they needed to establish that:

• it was possible for TfNSW to obtain complete knowledge of the utilities prior to construction; and
• (assuming this was possible), how much interference that investigation itself would cause.

The plaintiffs failed to establish these matters, and could not provide a cogent explanation as to how TfNSW could have obtained such complete knowledge prior to construction without causing further interference with the enjoyment of the group members’ land (for example by digging an investigatory trench along the entire alignment prior to construction, which itself would have caused a nuisance). The appeal was allowed on the basis that the plaintiffs failed to prove an integral aspect of their case.

Key Cross Appeal Issue: Should damages include the funder’s 40% fee?

At trial and on appeal, the class submitted that the loss and damage suffered included the cost of obtaining the necessary funding to bring the proceedings against TfNSW. The primary judge had found against the cross-appellants on this point, holding that the loss was too remote and therefore not recoverable as a head of damages.

While this question was redundant in the context of TfNSW’s successful appeal, the Court of Appeal addressed it as a “question of principle, and one which will recur in other cases”.^[3]

The Court of Appeal held that the trial judge was correct to dismiss this aspect of the plaintiffs’ claim because:

• the funder’s fee was not a foreseeable loss caused by the nuisance. Instead, the entry into the funding agreement was the voluntary act of the particular plaintiffs who decided to pursue the litigation and have a third party take on resulting risks; and
• if the funder’s commission was to be held recoverable, this would create an incentive for every group member to enter into similar agreements without any disadvantages. The Court raised concerns about the consequences this would have on the legal system and noted that not every measure that would improve access to justice was for that reason within the policy of the law. The Court relevantly noted that “the fact that litigation may be funded of itself provides no good reason to alter the rules of compensable loss for tort”.^[4]