What a nuisance: Court finds NSW Agency caused nuisance to businesses

The Supreme Court of New South Wales has found a NSW Agency liable for nuisance in a class action brought on behalf of businesses claiming to be affected by the construction and development of the Sydney Light Rail.

Snapshot

• The Supreme Court of NSW has handed down judgment in favour of two lead plaintiffs in class action proceedings concerning the impact of the construction and development of a government project on businesses.
• The Court stated that for an interference with the comfortable and convenient enjoyment of land to amount to nuisance, the interference must be substantial and unreasonable.
• The Court’s findings in favour of the lead plaintiffs will not be easily applicable to the wider class. Whether nuisance is found will depend on a combination of factors, including the proximity of construction, the size of any impacted business and the period of interference.
• The decision has significant implications for infrastructure projects and how authorities plan for uncertainties that may arise during construction.

Background

In December 2014, Transport for NSW (TfNSW) entered into a contract with a consortium, ALTRAC, for the design and construction of the Sydney Light Rail (SLR) project in stages to be completed by March 2019.

At the time, Ms Hunt operated a retail leather goods business in the Strand Arcade and Queen Victoria Building, and Mr Zisti operated a restaurant in Kensington. Ms Hunt and Mr Zisti, together with their two companies, were the lead plaintiffs in class action proceedings brought against TfNSW.

Facts

The SLR project was to be completed in stages designed to ensure disruption to business owners along the SLR route was minimised.

However, these stages were at risk of delay and additional costs due to the need to treat known and unknown utilities along the SLR route.

In May 2015, TfNSW announced the following ‘occupation periods’ for the zones in which the lead plaintiffs’ businesses were located:

• Ms Hunt’s Strand Arcade store: 294 days.
• Ms Hunt’s QVB store: 318 days.
• Mr Zisti’s Kensington restaurant: 200 days.

The SLR project was not completed until March 2020, a year behind schedule.

The lead plaintiffs alleged that both a public and private nuisance had occurred. They claimed that the nuisance was constituted by the nature of the activities (e.g. vibrations, noise and dust from construction and the presence of hoarding), as well as the length of time those activities were undertaken.

The plaintiffs claimed that although TfNSW did not undertake the construction of the SLR itself, it was personally liable for nuisance due to it being the statutory authority which procured the SLR project to be undertaken and its conduct during the design, planning and contract negotiation phases of the SLR project.

TfNSW claimed that the impacts of the SLR project were not substantial or unreasonable, and that it could not be liable as the interference was an inevitable consequence of it carrying out its statutory functions in facilitating the SLR project.

It sought to rely on section 141 of the Roads Act 1993 (NSW) (Roads Act), which in summary provides that while a section 138 consent under the Roads Act is in force, any action taken in accordance with consent does not constitute a public nuisance.

TfNSW also sought to rely on section 43A of the Civil Liability Act 2002 (NSW), which provides that any act or omission involving the exercise of, or failure to exercise, a special statutory power, does not give rise to civil liability unless the act or omission was so unreasonable that no authority could have considered the act or omission to be a reasonable exercise, or failure to exercise, the power.

Decision

Interference was substantial and unreasonable

The Court found that the interference to both Ms Hunt’s Strand Arcade store and Mr Zisti’s restaurant was substantial and unreasonable. The interference, therefore, constituted an actionable nuisance. The interference to Ms Hunt’s QVB store was not substantial.

Key to the findings of nuisance was the fact that each business was a small business highly susceptible to the effects of construction activities and without any means to reduce the impact, and the fact that the inference continued for much longer than TfNSW had indicated it would.

However, whether nuisance is found will depend on a combination of factors, including the proximity of construction, the size of any impacted business and the period of interference. A person will not have an actionable nuisance just because of road closures, changed traffic conditions, changed parking restrictions, reduced pedestrian traffic, dust that could be relieved through self-help measures, and line of sight restrictions.

TfNSW liable for private nuisance

The Court found that TfNSW was liable for the nuisance because:

• it was aware of the risks, including the utilities risk and the risk to business owners along the SLR route arising from the construction activities, and took those risks;
• the risks were so high that ALTRAC was only prepared to accept the utilities risk to a limited extent on terms that provided ALTRAC relief in respect of the utilities risks and which did not deter departure from the occupation schedule, contrary to assurances to business owners as to the staged development of the SLR project;
• the nature and extent of the interference arising from the construction activities was not an inevitable consequence of the exercise of TfNSW’s statutory powers; and
• business owners bore the consequence of TfNSW’s decision to take those risks.

In respect of TfNSW’s reliance on s 43A of the CLA, the Court ultimately found that section 43A did not operate as a defence to liability and did not apply in this case because:

• section 43A relates to the standard of care to be exercised in circumstances where there is an alleged breach of a duty of care by a public authority exercising a function (with such an issue not arising in this case);
• the tort of nuisance is focused on interference with property, rather than TfNSW’s exercise (or failure to exercise) any special statutory power; and
• even ifs 43A could apply to a claim in nuisance, the threshold requirement within s 43A(1), that liability be based on the defendant’s exercise of a “special statutory power”, was not satisfied where TfNSW was only exercising its ordinary statutory powers, rather than some “special” statutory power or function.

In relation to the action for public nuisance, the Court found that a private action for public nuisance (as in this case) would only be sustained were a plaintiff could show that they suffered ““substantial damage over and above that suffered in common with other members of the public”. The Court found that TfNSW could rely on section 141 of the Roads Act in defence of the alleged public nuisance in this case.

The Court will hold a short hearing in October 2023 to finalise the damages for the lead plaintiffs and determine the process going forward.

Key takeaways

This case is important for public authorities, construction and development companies, businesses and landowners. The Court’s decision makes clear that:

• for an interference with the comfortable and convenient enjoyment of land to amount to nuisance, the interference must be substantial and unreasonable;
• in the case of construction, whether nuisance is found will depend on a combination of factors, including the proximity of construction, the size of any impacted business and the period of interference;
• entities delivering major construction projects must contract on terms that are consistent with the assurances they give to impacted parties as to their delivery; and
• statutory authorities and contractors must carefully consider how they intend to deal with known and unknown sources of delay.

If you would like to understand what this case means for you, please do not hesitate to get in touch.

Peter Briggs, Partner, Mark Smyth, Partner, Thomas McClintock, Senior Associate, Brigitte Rheinberger, Senior Associate and Andrew Mahler, Graduate