Hunt Leather Pty Ltd v Transport for NSW

1. [1]

   Attached to this judgment is a summary which was delivered orally on 19 July 2023 for the benefit of the parties and those members of the community who are interested in these proceedings. The summary contains extracts from this judgment. All of the passages in the summary are to be found in the judgment.

2. [2]

   These proceedings are representative proceedings pursuant to Part 10 of the Civil Procedure Act 2005 (NSW) (“CPA”). The proceedings are pursued on behalf of the persons said to be affected by the construction and development of the Sydney Light Rail (“SLR”) between Circular Quay and Randwick/Kingsford in Sydney.

3. [3]

   As set out in paragraph 1 of the third further amended statement of claim filed on 26 October 2022, the proceedings are pursued on behalf of all persons:

4. [4]

   All of the persons who may come within the descriptions set out in paragraphs (a) and (b) are said to be “Group Members”.

5. [5]

   The defendant is a New South Wales Government agency constituted as a statutory corporation pursuant to s 3C of the Transport Administration Act 1988 (NSW) (“TA Act”) and, by operation of s 13A(1)(a) of the Interpretation Act 1987 (NSW) (“Interpretation Act”), is a statutory body representing the Crown pursuable by way of s 50(1)(c) of the Interpretation Act and/or s 5(2) of the Crown Proceedings Act 1988 (NSW).

6. [6]

   The defendant is the NSW Government agency which planned, designed and managed the processes leading towards the construction of the SLR, although it did not actually undertake the construction work.

7. [7]

   The powers and functions of the defendant are governed by the TA Act. As set out in s 3D of the TA Act, an objective of the defendant is “to plan for a transport system that meets the needs and expectations of the public”.

8. [8]

   The general functions of the defendant are set out in s 3E and Schedule 1 of the TA Act. These include:

9. [9]

   Division 2A of Part 9 of the TA Act contains “special provisions relating to light rail”. These provisions include s 104O, pursuant to which the defendant may develop and operate light rail systems or facilitate their development and operation by other persons.

10. [10]

    The defendant says that it was exercising the powers conferred on it by s 104O when it was involved in the planning, development and design of the SLR prior to the commencement of the construction work.

11. [11]

    There are four lead plaintiffs, being:

    1. (1)

       Hunt Leather Pty Ltd (“Hunt Leather”), which operates a retail leather goods business;

    2. (2)

       Ms Sophie Hunt, who has been the Chief Executive Officer of Hunt Leather since approximately 2003;

    3. (3)

       Ancio Investments Pty Ltd (“Ancio”), being the trustee of the unit trust known as the Ancio Unit Trust, which between May 2009 and April 2019 operated a restaurant business on Anzac Parade in Kensington; and

    4. (4)

       Nicholas Zisti, who was the sole director of Ancio and operated and who had responsibility for the restaurant.

12. [12]

    After a short delay and some preliminary arguments, the hearing commenced on 7 November 2022 (an earlier hearing date had been vacated).

13. [13]

    The hearing concluded on 13 December 2022.

14. [14]

    The hearing which took place during that period was to determine:

    1. (1)

       the liability of the defendant to the lead plaintiffs;

    2. (2)

       the amount of damages (if any) which would be payable by the defendant to the lead plaintiffs; and

    3. (3)

       agreed common questions.

15. [15]

    Although the legal representatives for the plaintiffs estimate that there may be thousands of people who fall within the class defined as Group Members, the initial hearing was only in respect of the lead plaintiffs. However, like all class actions, the purpose of the hearing was also to determine common questions which may impact on the entitlement of other Group Members to any damages.

16. [16]

    In this matter, there are particular difficulties with the potential common questions as, unlike some class actions where there may be a single cause of loss sustained by all members of the class, the causes of any loss suffered by Group Members are in dispute and may vary.

17. [17]

    Fundamentally, that is because there may be substantial differences between the impact that the construction of the SLR had on landholders and business owners at certain points along the route compared to others. This was demonstrated in the initial hearing because Hunt Leather occupied stores in what is described as Fee Zones 5 and 6 on George Street in the Sydney Central Business District (“CBD”), whereas Mr Zisti’s restaurant operated in Fee Zone 29 on Anzac Parade in Kensington.

18. [18]

    There may be some commonality in terms of what occurred outside Mr Zisti’s restaurant and the Hunt Leather stores but there are also some significant differences.

The Sydney Light Rail

1. [19]

   The SLR is well-known to Sydneysiders. It constituted a major infrastructure development by the NSW Government. It commences at Circular Quay and runs through the heart of Sydney via one of Sydney’s main streets, George Street. It then proceeds up through dense and busy areas such as Surry Hills and along one of Sydney’s south-eastern thoroughfares, Anzac Parade, before branching off into two lanes, one from Centennial Park to Randwick along Alison Road and the other from Moore Park to Kingsford (via the University of New South Wales) along Anzac Parade.

2. [20]

   A map showing the SLR route is below:

3. [21]

   The main planning of the SLR commenced in 2012. The defendant determined that the SLR would be built and operated through a public and private partnership (“PPP”) with the entity appointed by the defendant being responsible for both the construction and the operation of the SLR for a period of 15 years. Under a PPP, the State enters into a project deed pursuant to which the other party in the partnership agrees to finance, design, construct commission, operate and maintain the asset which is built for a specified term (in this case, 15 years).

4. [22]

   The timetable proposed by the defendant allowed for a period of approximately two years of planning and development, with entry into a project deed in December 2014. In fact, this is what occurred. After significant investigation and planning, the defendant called for proposals. It selected a proponent (being Connecting Sydney, known as “CSY”), negotiated and then entered into a project deed on 17 December 2014 (“Project Deed”). CSY nominated a number of ALTRAC companies as the entities through which it wished to contract.

5. [23]

   The term OpCo is used in the Project Deed to identify the other party to the Project Deed i.e. ALTRAC. I will use OpCo and ALTRAC interchangeably in this judgment. At the same time as it entered into the Project Deed, ALTRAC entered into a design and construct contract (“the D&C contract”) with its nominated contractor, a joint venture between Acciona and Alstom (“the D&C contractor”). The O&M contractor was Transdev. In reality, the parties standing behind CSY were the same parties behind OpCo and the D&C contractor.

6. [24]

   The terms of the D&C contract were similar to the terms of the Project Deed. Obligations and entitlements imposed on OpCo through the Project Deed were thus passed down the line to the D&C contractor. The project was due to be completed by March 2019. It was supposed to be completed in stages or according to “fee zones”, thereby ensuring minimal disruption to businesses along the route. As it turned out, it was not completed until March 2020. On any view, the project was beset with problems and delays. The defendant and the D&C contractor fell into dispute, with the D&C contractor claiming a significant additional sum from the defendant.

7. [25]

   I am not privy to the details of that dispute, as there was only limited evidence about it adduced in these proceedings. I am told that the defendant ultimately paid the D&C contractor an additional $550 million.

8. [26]

   The D&C contractor was originally a party to these proceedings but it is no longer a party. I do not know why it was originally joined to the proceedings and why it is no longer a party, other than that there has been a settlement, which must in some way be referable to that payment.

The lead plaintiffs’ businesses

1. [27]

   Hunt Leather was established in 1975 by John and Elizabeth Hunt. In 2015, it operated ten stores throughout Australia, some of which were branded stores selling only international brands, such as Longchamp and Rimowa.

2. [28]

   Much of the evidence was directed towards the interference with the Hunt Leather Strand Arcade store and the losses sustained by Hunt Leather arising from that interference. Whilst there was also evidence relating to the Hunt Leather store in the Queen Victoria Building (“QVB”) and, of course, the impact on Mr Zisti’s restaurant, the focus of the evidence was very much on how the SLR construction activities impacted the operation of the Hunt Leather Strand Arcade store. This may be because, on one view, the impact on the Hunt Leather Strand Arcade store was both obvious and direct.

3. [29]

   When compared to some of the other fee zones (in particular, Fee Zone 29), the Sydney CBD is densely populated by buildings, both new and old, retail shops, apartments, department stores, restaurants and food stores. Further, perhaps another reason why the focus of some of the evidence was on Fee Zone 5 and the Strand Arcade store was because only at the Hunt Leather Strand Arcade store (and not the QVB store) was the opening of the premises on the footpath adjacent to hoardings that were erected when the construction activity started.

4. [30]

   Hunt Leather had been operating its Strand Arcade store since 12 April 2013. Its flagship store was previously in the MLC Centre in Martin Place, which it had operated since 1975. The Strand Arcade is a prestigious arcade in Sydney running between George Street and Pitt Street Mall. The Strand Arcade is replete with boutique stores, luxury stores, original specialty stores and food stores.

5. [31]

   The Hunt Leather Strand Arcade store occupied the north-western corner of the arcade at ground level, with large doors opening onto George Street and also an internal entrance on the arcade side.

6. [32]

   The Strand Arcade store produced Hunt Leather’s highest turnover of anywhere in Australia. It sold Hunt Leather goods as well as branded goods, such as Longchamp products. It sold a variety of products such as briefcases, compendiums and folios.

7. [33]

   According to Ms Hunt, business had been increasing in the Strand Arcade. At least to a certain extent, this is reflected in the increase in turnover in the Strand Arcade store. The turnover in the 2014-15 financial year was 65% higher than it was for the 2013-14 financial year.

8. [34]

   The Hunt Leather Strand Arcade store remained open throughout the whole period of the SLR construction and remained open until, like all businesses, it was impacted by the COVID-19 pandemic. In 2021, Hunt Leather moved from its George Street-facing store to a space further inside the Strand Arcade, where it now continues to operate.

9. [35]

   Hunt Leather also operated a retail store in the QVB in Fee Zone 6. Fee Zone 6 covered George Street between Market Street and Park Street. The QVB is a large, grand building of important historical significance which runs between Market Street and Sydney Town Hall. Like the Strand Arcade, the QVB houses a range of shops selling luxury goods, food, clothes and accessories (amongst other things).

10. [36]

    The lower ground level of the QVB forms part of the pedestrian walkway which runs from underneath the Myer building on the corner of Market and George Streets to Town Hall train station. Town Hall station is situated underneath Sydney Town Hall, which is across the street from the southern end of the QVB.

11. [37]

    Hunt Leather operated a Longchamp branded store in the QVB. That store closed in around November 2018. According to Ms Hunt, its closure was forced due to the inability of Hunt Leather to continue to support it, both because of the impact of the SLR construction activities in Fee Zone 6 and because Hunt Leather could no longer fund the QVB store using the profits of the Strand Arcade store.

12. [38]

    Longchamp is an international luxury goods brand. It is a French-owned company. Longchamp entered into an agreement with Hunt Leather to enable Hunt Leather to operate three stores in Australia selling only Longchamp goods. The agreement with Longchamp was not an exclusive agreement, in the sense that Longchamp bags and accessories were also sold in other stores in Sydney.

13. [39]

    The QVB store was on the ground level of the QVB. The entrance to the store was inside the QVB but it had a window or shopfront which faced George Street.

14. [40]

    Mr Zisti’s restaurant was situated on the eastern side of Anzac Parade at 1/240-268 Anzac Parade, Kensington (in Fee Zone 29). Mr Zisti operated his business through a corporate structure, as follows:

    1. (1)

       from about May 2009 until April 2019, Mr Zisti was the sole director of Ancio and operated a restaurant business;

    2. (2)

       from about May 2009 to July 2011, Ancio operated the restaurant premises as a Thai restaurant known as “In the Mood for Thai”. At that time, Mr Zisti worked in the business;

    3. (3)

       from about 4 July 2011 until July 2018, another Thai restaurant (“Khing Thai”) operated from the restaurant premises;

    4. (4)

       from about June 2013 to June 2014, Ancio operated a coffee cart outside the restaurant premises known as Giddy Up Expresso Bar (“Giddy Up”); and

    5. (5)

       from about August 2018 to April 2019, an Italian restaurant (“Sugo Pasta Bar”) operated from the restaurant premises. During this time, Mr Zisti had a hands-on role in managing the business and operating the front-of-house.

15. [41]

    As his financial records show, Mr Zisti had been developing his business over the five years prior to the commencement of construction of the SLR. In the year before the construction commenced, his profits had reached better than ever levels at $149,000.

16. [42]

    In 2018, Mr Zisti closed his Thai restaurant due to low sales and opened a pasta bar instead. He says that he did so because of the impact of the SLR construction works. The pasta bar was not a success. He did not renew the lease in 2019; he says this was because he was not making any money from the venture.

17. [43]

    There is no dispute that the SLR construction commenced in Fee Zone 29 on 7 May 2016. Occupation of Anzac Parade in Fee Zone 29 ended on 26 June 2019. Mr Zisti claims that the restaurant was impacted throughout this whole period, such that his entitlement to losses amounts to the diminution of sales or the net profit that he would have generated but for the SLR construction activities.

18. [44]

    There is no claim that the noise and disruption caused by the SLR, once operational, constitutes a nuisance. Rather, the acts constituting the nuisance are said to have occurred during the construction of the SLR.

19. [45]

    Further, the plaintiffs do not complain about the conduct of the defendant during the period when construction was being undertaken (as the defendant did not undertake the construction work). The conduct of the defendant of which the plaintiffs complain is the conduct prior to construction, during the design, planning and contract negotiation phases of the project.

20. [46]

    This judgment will necessarily involve a consideration of complex legal issues and the interpretation of many construction-related documents, including an extensive project deed.

21. [47]

    As noted, the plaintiffs include the four lead plaintiffs. As lead plaintiffs, their names appear on the pleadings.

22. [48]

    The plaintiffs pursue only one cause of action. It is a cause of action in nuisance, both private and public. Private nuisance is a different legal concept from public nuisance but, in some respects, it gives rise to a consideration of the same principles. Nuisance is a tortious remedy. It is different from negligence, albeit there is a dispute between the parties about the extent to which the plaintiffs can establish nuisance without establishing some failure to take care on the part of the defendant.

23. [49]

    The essential proposition advanced by the plaintiffs is that during the construction of the SLR, the members of the class were subject to a nuisance in the sense that their rights, enjoyment and occupation of their properties were subject to an interference arising from the construction activities which was substantial and, if it is necessary to so find, unreasonable. As may be expected, the law does not merely permit any home or business owner to claim damages from a party who in some way created an interference by way of construction activities. To do so would impede the ability and entitlement of both private citizens and the government to undertake ordinary construction work, such as building and roadworks.

24. [50]

    In order to succeed in an action such as this, it will be necessary for the plaintiffs to establish that there was interference with their land (or the land that they occupied) at such a level as to constitute a legally actionable nuisance and, further, that the defendant should be liable for that nuisance.

25. [51]

    In this case, the plaintiffs submit that the nuisance was constituted both by the nature of the activities (which involved heavy construction machinery, vibrations, noise and dust, the presence of hoardings and the general restriction of pedestrian and vehicular movement) and the length of time that the work was being conducted outside their respective premises.

26. [52]

    Issues arise as to whether nuisance must necessarily involve construction activities being performed adjacent to the premises, or whether nuisance can be constituted by (for example):

    1. (1)

       the erection of barricades on a roadway some distance from a shop, which might deter potential customers from walking past the shop;

    2. (2)

       the placement of hoardings and barricades in the middle of the road when the entrance to the shop is not on the road but inside an adjacent building (i.e. inside the QVB); or

    3. (3)

       the blockage by hoardings of the line of sight of a shopfront window from the other side of the road.

27. [53]

    The plaintiffs say that although the defendant did not actually do the physical construction work, it is personally responsible for the nuisance because it was the statutory authority which developed, procured, planned and organised the work. Further, they say that the nuisance arose because of the defendant’s failures in the planning, design and contracting phase (up to December 2014).

28. [54]

    The plaintiffs submit that if the defendant is liable in nuisance, then it is liable to pay damages to the lead plaintiffs.

29. [55]

    Damages are compensatory. If their claim is successful, the plaintiffs are entitled to be put back into the position they would have been in if not for the tortious conduct. That necessarily involves a consideration of whether and how the activities giving rise to the nuisance caused the lead plaintiffs to suffer loss (including loss of amenity).

30. [56]

    Ms Hunt and Mr Zisti also claim personal losses in the nature of damages for inconvenience and hurt arising from the public nuisance.

31. [57]

    The defendant’s response to these claims is to:

    1. (1)

       deny that there has been any nuisance, whether private or public. The defendant submits that the plaintiffs have not established the elements of the tort of nuisance. They say this for a number of reasons, including that, whilst not disputing the essential proposition that noise, dust and construction work would and did have an impact on adjoining businesses:

    2. (2)

       rely on s 43A of the Civil Liability Act 2002 (NSW) (“CLA”). That is, the defendant says that it has statutory protection in respect of this type of action against it; and

    3. (3)

       rely generally on its role as a statutory corporation and, in particular, s 141 of the Roads Act 1993 (NSW) (“Roads Act”) as a defence to the alleged public nuisance.

32. [58]

    The case is conceptually difficult because the plaintiffs seek to rely on the way in which the construction activities were undertaken during the period of construction work for the purposes of establishing the nuisance, but they only seek to rely on their criticisms of the defendant’s conduct for the period up until the Project Deed was entered into in December 2014 (before the construction actually started). In these circumstances, there has been limited exploration of what actually happened during the course of the construction. Indeed, the defendant did not adduce any evidence of what actually happened during the SLR construction. The plaintiffs adduced evidence from one of their experts (Mr Mark Griffith) as to the cause of the prolonged periods of construction in the individual fee zones.

33. [59]

    The amount of loss said to have been caused by the nuisance is also in dispute. This is because, on the defendant’s case, there were other factors impacting the profitability of the Hunt Leather business and Mr Zisti’s restaurant, aside from the SLR construction. An example in respect of Hunt Leather is the increased competition in the luxury goods market. An example in respect of Mr Zisti's restaurant is the change in parking restrictions on the street outside the restaurant.

34. [60]

    The case was prepared and presented in a thorough, competent and efficient manner by the parties. However, the evidence is extensive and the issues are complex. The combined submissions of the parties comprised over 1000 pages. The volume of material relied upon and the detail to which the parties descended in their efforts to refute the opposing case was extraordinary. The expert reports, when combined, amount to more than ten volumes of material. At times, it felt like this case was more a construction dispute than a claim in nuisance.

35. [61]

    At least according to the parties, there could be little doubt as to the correctness of their positions. Alas, the outcome of litigation does not permit a draw.

36. [62]

    It is important to observe that there are really two questions which arise in this hearing, as far as the plaintiffs are concerned:

    1. (1)

       subject to any defences available to the defendant, was the interference to the lead plaintiffs’ properties such as to constitute an actionable nuisance? and

    2. (2)

       should the defendant be liable for such a nuisance?

37. [63]

    I should say that there is some merit in the defendant’s suggestion that this is not a particularly apt vehicle for a class action. Whilst it is possible to answer some common questions, as will be apparent from consideration of the lead plaintiffs’ properties and businesses and the interference said to have been caused by the SLR construction, the nature and extent of interference with properties along the SLR route would vary significantly.

38. [64]

    For example, it does not seem to me that the following circumstances in and of themselves (that is, without some other matters or factors giving rise to interference with the use and enjoyment of the property), would be sufficient to be an actionable nuisance:

    1. (1)

       the permanent closure of a section of George Street to vehicular traffic;

    2. (2)

       the changing of parking restrictions; and

    3. (3)

       the fact, if established, that less vehicles or people might have travelled along the road at any particular point.

39. [65]

    Questions of proof loom large for a number of different reasons.

40. [66]

    At the very beginning of the case, Mr Miller, on behalf of the defendant, submitted that the evidence adduced by the plaintiffs would not satisfy the Court of the fundamental proposition advanced by them, being that the defendant’s failures in planning and procurement caused a substantial delay and prolongation of the construction activities. Even though the occupation of individual fee zones was prolonged for periods of two or three times of what was initially anticipated, he submitted that this case would not provide an answer to members of the community as to why that occurred.

41. [67]

    Mr Miller submitted that it was not up to the defendant to prove why the construction activities took so long, such that the defendant would not be adducing evidence to explain the delay. Indeed, the defendant’s programming expert, Mr McIntyre, did not address the cause of the delay in his evidence, albeit he was critical of the methodology adopted by the plaintiffs’ expert, Mr Griffith.

42. [68]

    At the very end of the case, I again asked Mr Miller what caused the delay, if what was asserted by the plaintiffs did not. He gave essentially the same answer, being that the plaintiffs had not proved what caused the delay and it was not up to the defendant to establish the reason for the delay. As Mr Owens added after Mr Miller, there could be many causes, particularly in relation to the design decisions made by the D&C contractor.

43. [69]

    As I perhaps indicated during exchanges, I found it a little surprising that at the end of a case involving a government agency and thousands of members of the community who were affected by prolonged construction activities, the Court would be left uninformed about the cause of such a delay.

44. [70]

    In assessing the sufficiency of evidence, it is permissible to draw inferences and, of course, have regard to the power of each party to adduce evidence. The principle in Blatch v Archer (1774) 1 Cowp 63; (1774) 98 ER 969 applies. That is, evidence is to be weighed according to the capacity of a party to adduce it. One of the features of this case is that the parties obviously made forensic decisions as to the evidence which would be adduced. The plaintiffs prepared expert evidence on defined issues. The defendant opted to respond to some (but not all) of those opinions and did not seek to explain through additional evidence other issues, such as causation.

45. [71]

    Further, if a failure to take care is relevant, the parties are at odds about who bears the onus of establishing failure to take care. The plaintiffs’ position is that the exercise of reasonable care is not relevant to their primary cases. If it is relevant, the defendant bears the onus of establishing that it took care. The plaintiffs have not pleaded the existence or breach of any duty of care, although they refer to casually significant failures by the defendant.

46. [72]

    There is an issue as to who bears the onus of proof in establishing that the interference with the plaintiffs’ use of their land was inevitable in circumstances in which the defendant maintains that it was a statutory authority acting in accordance with the authority given to it.

47. [73]

    Finally, the plaintiffs maintain that the s 141 Roads Act defence to the claim in public nuisance is not maintainable, unless the defendant establishes that it complied with the conditions of the consent granted by the Roads and Maritime Services (“RMS”) on 2 October 2015. The plaintiffs nominate some conditions with which they say the defendant did not comply but then assert that it is up to the defendant to prove that it did so comply. The defendant asserts that the onus would be on the plaintiffs to prove that it did not comply with the conditions stipulated by the RMS.

48. [74]

    Generally, it would be preferable if cases were not decided on onus of proof issues. However, having regard to the way in which this case was pursued and defended, who proved what may be important.

The pleadings

1. [75]

   During the hearing, there was considerable focus on the pleaded case, particularly by the defendant. The plaintiffs perhaps took a broader approach to the pleadings.

2. [76]

   I granted leave to the plaintiffs to file a third further amended statement of claim on 24 October 2022. The final version of the statement of claim was filed on 26 October 2022. On 24 October 2022, I also granted leave to the plaintiffs to file a further amended reply. The final version of the defence was filed on 7 November 2022. The final version of the reply relied upon by the plaintiffs was filed on 17 November 2022.

3. [77]

   It is not necessary to consider earlier versions of the pleadings. I will thus refer to the third further amended statement of claim as “the Statement of Claim”, the amended defence as “the Defence” and the further amended reply as “the Reply”.

4. [78]

   The pleaded background is not in dispute. The plaintiffs do not plead the existence of a duty of care, the risk of harm or any breach of duty. Indeed, in the Reply, the plaintiffs plead that “these proceedings do not concern whether the Defendant had a duty of care or breached its duty of care.”

5. [79]

   Having set out the background to the commencement of the construction activities, the plaintiffs plead that there were delays in the Civil Works caused by the defendant. It is paragraphs 12(a)-(f) and 13-14(d) of the Statement of Claim which give rise to the central factual dispute in these proceedings.

6. [80]

   I summarise those paragraphs as follows:

   1. (1)

      in March and May 2015, the D&C contractor advised the defendant that it had received guidelines from Ausgrid as to its requirements for the treatment of utilities along the SLR route;

   2. (2)

      the Ausgrid guidelines differed significantly from the approach to utilities, which had been developed and agreed between the defendant and the D&C contractor (as recorded in Schedule F8 to the relevant project documentation);

   3. (3)

      the new Ausgrid guidelines resulted in a substantial change to the scope of the project, leading to an estimated delay of over two years and four months and an estimated additional cost of around $426 million in civil construction works;

   4. (4)

      a substantial cause of the Ausgrid scope changes was the defendant’s failure to finalise agreements with stakeholders, such as utility providers (including Ausgrid) and local councils, regarding the treatment of utility assets prior to entry into the Project Deed;

   5. (5)

      during the course of the civil construction works, the defendant issued the D&C contractor with approximately 60 directions to change the scope of work (“project scope changes”);

   6. (6)

      a substantial cause of the project scope changes was the failure by the defendant to effectively plan and procure the project between 2011 and 2014;

   7. (7)

      during the course of the civil construction works, the D&C contractor encountered many unknown utilities which had the effect of prolonging the occupation of Fee Zones 5, 6 and 29 (“utilities prolongation”);

   8. (8)

      the substantial cause of the utilities prolongation was that the defendant had entered into the Project Deed on terms that allowed the D&C contractor relief under the Project Deed and allocated no risk in respect of unknown utilities to the D&C contractor, in circumstances where unknown utilities were likely to be encountered (“the contracting conduct”);

   9. (9)

      after the commencement of the construction, the defendant made repeated public statements to the effect that the project would be completed by 2019;

   10. (10)

       the delays in the completion of the project and, alternatively, the prolonged occupation of individual fee zones was caused by delays during the civil construction works phase of the project; and

   11. (11)

       each of the Ausgrid scope changes, the project scope changes and the contracting conduct were a substantial cause of the Civil Works delay, which was caused by the defendant’s conduct in:

7. [81]

   Further, the plaintiffs plead that:

   1. (1)

      there was a substantial delay in the completion of the overall project, or a delay in the planned occupation of the individual fee zones during the undertaking of the Civil Works; and

   2. (2)

      that substantial delay was caused by the defendant’s conduct prior to commencement of the Civil Works by:

8. [82]

   The plaintiffs then plead that, through its conduct in authorising or permitting the construction of the project and/or causing the Civil Works delay, the defendant caused a substantial and unreasonable interference with the plaintiffs’ and all Group Members’ enjoyment of their respective interests in land located in the vicinity of the project.

9. [83]

   Further, the plaintiffs then plead that through the conduct to which I have referred, the defendant has caused substantial and unreasonable disruption or inconvenience to the public in the exercise of public rights (namely, by the damage to and obstruction of roadways and footpaths, as well as road closures and the direction of hoardings) (“the public nuisance”).

10. [84]

    Put simply, by their pleadings, the plaintiffs allege that there were failures in the planning and procurement phase of the SLR and that those failures led to excessive delays in the construction works, thereby giving rise to a substantial and unreasonable interference with their properties.

The defence

1. [85]

   The defendant:

   1. (1)

      acknowledges that it received ALTRAC’s letter annexed to its claim on 20 May 2015, suggesting that, if the Ausgrid guidelines amounted to a direction under the D&C contract, then it claimed compensation (being an extension of time by 865 days and the sum of $423,963,512); but

   2. (2)

      says that on 1 June 2015, it wrote to ALTRAC and informed it that the Ausgrid guidelines should not be treated as a formal direction issued under the Project Deed and that no such direction had been given. On 24 July 2015, ALTRAC and the D&C contractor both unconditionally withdrew their claims in respect of the Ausgrid guidelines;

   3. (3)

      says that the plaintiffs’ allegations as to the cause of the Ausgrid scope changes proceed on incorrect premises. It says that the Ausgrid guidelines do not specify Ausgrid’s practice or accepted industry-wide practice for standard utility treatments, nor do they specify the utility treatments required in respect of the project. It further relies on sections of the Project Deed as to the allocation of risk between the defendant and ALTRAC;

   4. (4)

      says that it only issued 52 modifications in respect of the SLR construction and, further, that the plaintiff had elected to establish liability with reference to contractual modifications, limited to only four modifications (being numbers 25, 33B, 40A and 59 in Fee Zones 5, 6 and 29), such that the plaintiffs are estopped from contending further that any other modifications constitute a failure by the defendant to factually plan and procure the project;

   5. (5)

      in respect of paragraph 12(e) of the Statement of Claim, says that the plaintiffs have not identified how utilities were accounted for, nor have they identified how and for what period the civil construction works in each such fee zones were prolonged; and

   6. (6)

      in respect of the contracting conduct, says that it disputes the plaintiffs’ allegations as to the terms, effects and operation of the Project Deed and, in particular, it denies that the Project Deed operated such that ALTRAC and the D&C contractor were allocated no risk in respect of unknown utilities.

2. [86]

   Essentially, the defendant denies the plaintiffs’ allegation that the Civil Works were delayed or that the delay was caused by and for the reasons identified by the plaintiffs.

3. [87]

   The defendant then denies the allegations of nuisance, specifically:

   1. (1)

      it relies on ex gratia deeds signed by the plaintiffs, pursuant to which the defendant made payments of ex gratia financial assistance to the plaintiffs (the defendant does not say that the receipt of the ex gratia payments by the plaintiffs preclude the plaintiffs from pursuing these proceedings, but they seek credit for such payments); and

   2. (2)

      in respect of the public nuisance claim, the defendant says that it has not interfered with the public’s right of passage on public roads and the claim for public nuisance should fail but, in any event, the work was done pursuant to an approval issued by the RMS. The defendant says that in carrying out, authorising or permitting the works subject to the RMS approval, such work is taken not to constitute a public nuisance, having regard to s 141 of the Roads Act.

4. [88]

   Further, the defendant specifically pleads that:

   1. (1)

      any interference with the right to the enjoyment of private land or inconvenience to users of a public road was an inevitable consequence of the exercise of that statutory authority;

   2. (2)

      in undertaking the work and engaging in the conduct which was the subject of the plaintiffs’ claim, it was exercising special statutory powers, as defined in s 43A(2) of the CLA;

   3. (3)

      it was inevitable that the SLR construction would result in disruption to the public’s right of passage along the light rail route and, to the extent that there has been any effect on public passage, it was the inevitable consequence of the defendant’s exercise of statutory power to carry out such development; and

   4. (4)

      the acts or omissions in planning, procuring and contracting for the SLR were not so unreasonable that no authority having the special statutory powers referred to could properly consider the acts or omissions by the defendant to be a reasonable exercise, or a failure to exercise, those powers.

5. [89]

   Finally, the defendant alleges that Hunt Leather failed to mitigate its loss by failing to close its wooden doors (which opened onto George Street) or somehow encase them in glass doors. The defendant did not pursue this aspect of its defence.

The plaintiffs’ case in closing submissions

1. [90]

   In their closing submissions, the plaintiffs put their case in three alternative ways. As they say, the primary case is Case A. They advance alternative cases in the event that they are unsuccessful in their primary case. Case A is as follows:

2. [91]

   The plaintiffs’ primary case does not involve any consideration of whether the defendant’s conduct was reasonable or whether any unreasonable conduct caused the delay in the works or even whether any alternative approach to planning would have resulted in a substantially lesser interference.

3. [92]

   As I understand the plaintiffs’ primary case, even though they suggest that questions of reasonableness are irrelevant, they accept that they must establish that the defendant was responsible for the substantial interference. They use the term “responsible” as meaning something different from failing to take care or an assessment of the reasonableness of the defendant’s conduct.

4. [93]

   Case B is put in the same way as the plaintiffs’ primary case, except that it is assumed that s 43A of the CLA applies, contrary to their primary case. The plaintiffs submit that they would still be entitled to succeed because s 43A(3) is satisfied.

5. [94]

   The plaintiffs submit that the Court would accept that the conduct of the defendant was, in the circumstances, so unreasonable that no authority having the special statutory power in question would properly consider the act or omission to be a reasonable exercise of, or a failure to exercise, its statutory power.

6. [95]

   The plaintiffs describe s 43A as a condition that must be satisfied before their claim in nuisance can succeed.

7. [96]

   They then identify the reasons why no authority having a special statutory power (if they be wrong on their assertion about the special statutory power) could properly consider the conduct to be a reasonable exercise of that power.

8. [97]

   Case B necessarily involves an extensive consideration of the expert evidence and the steps taken by the defendant in the planning and procurement phase of the project, which form the basis of the allegations against it.

9. [98]

   The second alternative case, being Case C, proceeds on the basis that, contrary to the plaintiffs’ primary position, the use of the land during the SLR construction was a common and ordinary one. The plaintiffs submit that if there was a finding that the use of the land for the purposes of the SLR construction was common and ordinary, then the onus lies on the defendant to establish that it took reasonable and proper precautions to prevent disruption to the plaintiffs and other Group Members.

10. [99]

    The plaintiffs submit that the defendant has not discharged its onus in this regard. Further, the plaintiffs submit that if it was up to the plaintiffs to prove that the defendant failed to take reasonable and proper precautions to save disruption (contrary to their submissions regarding onus of proof), then the plaintiffs have adduced such evidence through their programming expert, Mr Griffith.

The defendant’s case in closing submissions

1. [100]

   During closing submissions, the defendant maintained its approach that it was necessary for the plaintiffs to establish that the defendant was negligent in order to succeed in the cause of action in nuisance. Indeed, the defendant’s approach to its submissions was to emphasise this and, further, that even if the plaintiffs establish that the defendant failed to take care, the plaintiffs have not established that such failures caused any substantial interference with their businesses.

2. [101]

   The defendant makes more than one reference to the need for the plaintiffs to establish the counterfactual. The defendant submits that the plaintiffs must establish what would have happened if, for example, a different delivery model had been adopted, further utility investigations had been carried out prior to entry into the Project Deed, or agreements had been entered into with utility providers prior to the entry into the Project Deed.

3. [102]

   The defendant rejects Case A on the basis that the use of the land was common and ordinary and rejects the proposition that the period of the nuisance (if any) should commence on the day that construction works started outside the plaintiffs’ businesses. The defendant says also that s 43A of the CLA applies such that it has no liability and that, in any event, on the evidence, the interference with the businesses was inevitable.

The utilities risk

1. [103]

   In the pleadings, throughout the conduct of the hearing and during submissions, the parties referred to the “utilities risk”. The utilities risk is also referred to in many documents relied upon by the parties. It is appropriate to record what I understand to be the utilities risk, as that term will be used throughout the judgment.

2. [104]

   Generally, the utilities risk was the potential for problems to arise during the SLR construction from the presence of utilities along the SLR route. As I will identify, at the time of entry into the Project Deed, it was known that there were many utilities along the route which would need to be treated in order for construction to proceed. It was also expected that there would be more utilities which were not known to exist at the time of entry into the Project Deed but which would be discovered during the course of the construction.

3. [105]

   It was also known that the required treatment of each utility would vary, but that this could include covering up, replacing, moving and upgrading utilities. It was known that at the time of entry into the Project Deed, there were no agreements in place with utility providers as to the methods of such treatment.

4. [106]

   The utilities risk was the risk of delay and additional costs arising from the need to treat utilities and the discovery of previously unknown utilities.

5. [107]

   The risk arose at two levels, being:

   1. (1)

      the uncertainty arising out of the absence of agreements with utility providers in respect of the already discovered and known utilities (as the defendant had not yet entered into agreements with utility providers, such as Ausgrid, prior to entering into the Project Deed); and

   2. (2)

      the problems which might arise from the discovery of unknown utilities or changes in known utilities along the SLR route.

6. [108]

   The NSW Government had announced and promoted the idea that the SLR would be constructed in stages. Occupation periods were specified in the Project Deed. An Initial Delivery Program (“IDP”) was attached to the Project Deed. This was intended to provide a schedule for the construction works in individual stages (fee zones). Part of the schedule included allowances for the treatment of utilities in each fee zone. The risk was that, if more utilities were discovered in a particular fee zone and/or there were difficulties in reaching agreement with utility providers, then the IDP would be impacted and the occupation period in each fee zone would be extended. This is because:

   1. (1)

      in respect of existing and known utilities, it would be necessary to reach agreement with utility providers as to how the utilities could be treated; and

   2. (2)

      the discovery of any previously unknown utility would require the D&C contractor to:

7. [109]

   All utilities were owned by third party utility providers. Some utilities could only be handled by the owner of the utilities. Others could be treated by the D&C contractor, as needed.

8. [110]

   As I will identify, the utilities risk was a risk which featured prominently in the planning and procurement stage of the SLR project.

The planning and development of the SLR

1. [111]

   In 2012, the State published its “NSW Long Term Transport Master Plan” (“the Master Plan”). The Master Plan included the “Sydney Light Rail Strategic Plan”. Sydney’s light rail future was focused on expanding light rail services in the CBD and inner city. As identified, the NSW Government would focus on the customer as the centre of Sydney’s light rail future. A light rail in the CBD would benefit a range of users.

2. [112]

   After setting out the proposed route, the State identified that the SLR would cost approximately $1.6 billion to complete, which was funded by a transport budget and a PPP arrangement.

3. [113]

   It stated:

4. [114]

   Plainly, the State identified from the outset that construction would take place in stages, with city streets to be closed in sections to minimise disruptions to residents, businesses and commuters.

5. [115]

   On 19 February 2013, the first of many delivery strategy workshops took place. At least at that time, the defendant contemplated that the SLR construction would be divided into “Early Works” and “Civil Works”.

6. [116]

   The scope of the Early Works was identified as including:

   1. (1)

      utilities;

   2. (2)

      bus and pedestrian networks; and

   3. (3)

      enabling works.

7. [117]

   In the first delivery strategy workshop on 19 February 2013, the defendant recognised that utilities would be a primary area of risk and that the presence of utilities created a very uncertain environment (as it was recorded in the workshop minutes).

8. [118]

   Indeed, in that very first delivery strategy workshop, the defendant identified the following risks associated with its planned Early Works program:

9. [119]

   Further, it was proposed that the Civil Works would commence part way through the Early Works to minimise the overall duration of the SLR construction. The risks posed by utilities were said to include issues arising from agreements with authorities to relocate or protect utilities, as well as the performance of utilities works (i.e. the contestable and non-contestable works).

10. [120]

    The second delivery strategy workshop took place on 5 March 2013. Again, there was a focus on the utilities risk, noting that:

11. [121]

    At that stage, it was proposed that utilities works would be undertaken as part of the Early Works contract.

12. [122]

    At a meeting on 15 May 2013, the defendant first raised the possibility of combining the utilities works with the Civil Works contract. There was some discussion about whether it would reduce time on the ground. There was also consideration as to whether the services relocation could start later, therefore reducing the period of high-impact work.

13. [123]

    By 31 May 2013, the philosophy had changed. Utilities relocation would be included in the Civil Works contract, subject to some critical areas remaining in the Early Works package. This is noted in a Significant Issue Paper dated 13 June 2013. As such, the scope of the Early Works package was significantly reduced.

14. [124]

    The risks associated with utilities (both known and unknown) were again highlighted in a Significant Issue Paper dated 20 June 2013. It was proposed that there would be a trenching contract, whereby trenching works would be performed at nominated locations and depths along George Street. This would enable a portion of the unknown utilities to be identified, whilst also verifying the location of known utilities.

15. [125]

    At a meeting between the defendant and Ausgrid on 21 June 2013, Ausgrid identified which of its assets were likely be affected by the SLR construction, including sub-stations, pits, cables, overhead street furniture and kiosks. There were 66 pits on George Street which would require relocation and adjustment.

16. [126]

    In June 2013, the defendant prepared its State Significant Infrastructure application for the purposes of a proposal under Part 5.1 of the Environmental Planning and Assessment Act 1979 (NSW) (“EPA Act”). As part of its application, the defendant identified the impact of the SLR, which included construction impacts. The following impacts were identified:

    1. (1)

       reduction in local amenities due to increased noise and vibration, air quality impacts, traffic and reduced visual amenity; and

    2. (2)

       temporary loss of and disruption to access to private property, community facilities, employment/businesses, education, open space and recreational activity.

17. [127]

    It specifically identified certain activities which had the potential to result in significant noise and vibration impacts, including the construction of the light rail stops, the demolition of existing structures, relocation of services and utilities and the installation of light rail tracks and associated facility infrastructure.

18. [128]

    In the Significant Issue Paper dated 20 June 2013, the defendant again identified a key risk to the project as being managing and appropriately treating conflicts with utilities and services suggesting that the resolution of such conflicts had the potential to be more complex than anticipated and could result in delays. It said that the objective of the trenching contract was to reduce the uncertainty associated with service relocations. It sought approval to let a trenching contract which would “enable a portion of the unknown services within the corridor to be identified whilst also verifying the location of known services”.

19. [129]

    In July 2013, the defendant held a market sounding meeting in relation to the way in which the SLR would be delivered. The feedback suggested that the delivery strategy of an Early Works package, followed by a Civil Works package was the preferred option. However, it was noted that all participants recognised the critical importance of efficient construction management on George Street, suggesting that a single construction package had the best potential to minimise disruption.

20. [130]

    The market was particularly concerned about the risks associated with utility services, suggesting that the majority of organisations believed that risk sharing of service relocations was required. The market was reluctant to accept full risk on service relocations.

21. [131]

    By 12 July 2013, the defendant had established a “Risk Register”. The first risk to be identified was construction fatigue in the CBD and other high impact areas. The potential impact of this construction fatigue was identified as not only stakeholder and community opposition, but also a class action and injunctions on the project. The defendant highlighted the risk that business owners might seek compensation based on loss of trade caused by the construction activity, including noise, vibration, dust and general nuisance.

22. [132]

    By 22 July 2013, the defendant had settled on a delivery strategy, which involved a two-package approach, being discrete Early Works through a managing contractor and a second package: the “design, construct, maintain and operate” contract. That is how the project was ultimately delivered, although the scope of the Early Works contract was later reduced.

23. [133]

    In the document titled “Transport Project CBD and South East Light Rail Delivery Strategy” dated 22 July 2013, the defendant noted that the key drivers in relation to the delivery strategy would be:

24. [134]

    Thus, by July 2013, the defendant had set the date for entry into the Project Deed as December 2014.

25. [135]

    In August 2013, the defendant drafted a “Commercial Principles” document to address its objectives, including risk share between the defendant and OpCo. It identified that, in respect of known utilities, the risk would be OpCo’s, and in respect of unknown utilities, the risk would be shared.

26. [136]

    Another risk identified as early as 17 May 2013 was the risk that the QVB stop location may need to be changed to accommodate underground walkways; specifically, the walkway under the QVB. This was highlighted in a design report dated 16 August 2013. It was noted that the pedestrian walkway was situated below George and Market Streets connecting the QVB to Sydney Central Plaza and the Myer store. The suggested vertical rail alignment was said to conflict with the underground structure and, as such, it needed to be raised to prevent any encroachment.

27. [137]

    In its “Commercial Principles Update” document of September 2013, the defendant identified a major outstanding issue as being OpCo’s obligations with respect to each interface agreement. It confirmed that the utility authority approval risk would be transferred to OpCo.

28. [138]

    In its industry briefing of 13 October 2013, the defendant suggested that the main works contractor would need to absorb all of the risk on scope items, and all utility works would be the responsibility of OpCo. As also observed by the Commercial & Financial Delivery Group, the project team’s preferred position was to transfer all risks associated with utilities to OpCo, but it would be testing the market on this issue. This was again confirmed in its meeting of 10 October 2013.

29. [139]

    An industry briefing for the purposes of the tender took place on 22 October 2013. The defendant identified that one option would be to enter into a flexible contracting model with long lead Early Works, including utilities, roads and footpaths, ahead of the Civil Works.

30. [140]

    In December 2013, Ausgrid provided to the defendant a document entitled “Sydney Light Rail: Ausgrid Asset Assessment, Treatments and Supply Advice – December 2013.” Ausgrid identified that a significant risk to light rail projects in large cities around the world is the management of existing services along the route. Ausgrid proposed a collaborative approach to ongoing Ausgrid developments along the proposed light rail route to minimise the impact and cost of re-work. It recommended that works start on Ausgrid’s asset treatments in early 2014 to accommodate long timeframes for executing some of the work, due to network access constraints. It observed that the work required by the defendant would be substantial and would require a work execution regime on a scale not previously seen in the Sydney CBD, which would continue for a substantial period. Ausgrid recommended an aggressive work program to commence treatment of Ausgrid’s assets well in advance of the Civil Works. Ultimately, this did not happen.

31. [141]

    On 18 December 2013, the defendant entered into a Development Agreement with the City of Sydney Council (“the Council”). In the recitals to the Development Agreement, it is noted that the defendant and the Council sought to minimise the impact of the project’s construction on the community, businesses and residents in the Local Government Area (“LGA”). The Council wished to ensure the effective integration of the project into the public domain.

32. [142]

    In cl 6.1 of the Development Agreement, it was noted that the defendant would be responsible for the project’s design. The defendant would design the works in accordance with its fundamental obligations, technical requirements, city codes and standards and other obligations under the agreement.

33. [143]

    One of the technical requirements set out in Schedule 7 of the Development Agreement related to the light rail stops. Stops were to be designed in compliance with statutory requirements and were to permit maximum pedestrian permeability and accessibility. The defendant agreed to consult with the disability sector as part of the process of determining disability requirements. It agreed to provide a step-free access to one portion of each stop in the pedestrianised areas. It agreed that along the route in the City of Sydney LGA, the defendant would:

    1. (1)

       minimise use of barriers and fences;

    2. (2)

       minimise surrounding level changes;

    3. (3)

       minimise steps; and

    4. (4)

       be integrated where possible at the level of the surrounding environment. This is relevant to the plaintiffs’ complaint about Modification 25.

34. [144]

    Further, the defendant agreed that during the delivery phase of the SLR construction, staging of the works would be developed to demonstrate a balance between efficient construction methods and to minimise impacts on business operations and resident amenities (Schedule 7, cl 2.2.2).

35. [145]

    The analysis and discussion of risks and options for the delivery of the SLR continued throughout 2014.

36. [146]

    By January 2014, the defendant had updated its Commercial and Financial Principles document for the purposes of the Commercial & Financial Delivery Group. It noted that optimal risk transfer to OpCo was being achieved. It stated that the investigation, protection, relocation and modification of utilities, as well as the provision of services for construction operations by OpCo, was being allocated to OpCo. OpCo would be required to accept the risk of any work undertaken by the managing contractor (Early Works) and also to undertake any further work as required.

37. [147]

    Further, all risks associated with utility services works were to be transferred to OpCo. The defendant stated that, by the time of entry into the Project Deed, it would have undertaken comprehensive site investigations into the utilities.

38. [148]

    At a meeting of the defendant’s Light Rail Advisory Board on 9 January 2014, reference was made to the key risk of utilities. The known utility service relocations were proving more complex than anticipated, which would result in severe impacts on the road and footpath network and critical services, delays in completion of the work schedule and additional costs to complete the works.

39. [149]

    Following a meeting with Ausgrid on 14 January 2014, the defendant’s consultant, Ryan Andriessen of the Arup Group, provided a summary of the meeting. He noted that Ausgrid intended to write to the NSW Premier advising that the Ausgrid works required for the SLR project would cost more than $500 million and would take six years to complete. Specifically, Ausgrid suggested that the proposed Early Works program for the nominated intersections (there were going to be six) was not feasible. It thought that the proposed Early Works would take three years. At best, the detailed design for those intersections could be completed by November 2014.

40. [150]

    Ausgrid also identified the likely issues arising in relation to the works to be performed under the Early Works contract.

41. [151]

    On 15 January 2014, Ausgrid wrote to the Utilities Reference Group (which had been established by the defendant) noting that before any budget could be established, there needed to be clear agreement between each utility owner and the defendant on what needed to be moved, where it would be moved to, the resources and time required and the provision of access to the utility. Mr Vince Graham, the CEO of Ausgrid, observed “[m]y significant concern is that the project and timetable already approved by the government for this project includes an allowance for utility relocation that does not reflect the scope and complexity of the work required”.

42. [152]

    Mr Graham noted that Ausgrid’s resource demand to achieve utility relocation could not be confirmed until the scope of relocation was finalised. Access to utilities under the road in George Street would generally be restricted to night-time and potentially weekends, with road lane closures. He supported the approach of taking an order of precedence for asset relocation (meaning that priority should be given to the utilities treatment works over other works).

43. [153]

    Also in January 2014, the SLR Risk Register was updated, specifically with respect to utilities. Reference was made to the inherent complexity of risk of the work being underestimated, the constraints on the existing environment to relocate assets, changes to existing assets, the additional scope of the works and the dependency on third parties to support the works. At a further meeting of the defendant’s Commercial & Financial Delivery Group on 28 January 2014, it was noted by Ausgrid that $600 million would be required for utilities relocation, whereas the defendant believed that approximately $200 million was required. There was further discussion about the utilities component of the project and how it would be priced. In particular, the group noted that there were no detailed agreements with utility providers on how to deal with utilities relocation and that there would be a risk in commencing procurement without those agreements. It was suggested that agreements would likely be in place before planning approval was obtained. As a matter of fact, procurement commenced and ended (with the Project Deed) without the agreements being in place and despite the warnings as to the risk in doing so.

44. [154]

    In the Pre-Tender Assurance Review Report of 29 January 2014, the defendant noted that the project delivery phase carried a number of key risks, including:

    1. (1)

       treatment (including relocation and protection) of utilities;

    2. (2)

       the significant potential for major traffic congestion;

    3. (3)

       noise, vibration and disruption of residents and businesses along the alignment; and

    4. (4)

       the presence of heritage artefacts as well as hazardous and contaminated materials along the route.

45. [155]

    A key risk was the treatment of utilities on George Street, particularly Ausgrid assets and, to a lesser extent, other assets. By that time, detailed solutions for the protection and relocation of utilities on George Street had not been agreed with Ausgrid.

46. [156]

    At the meeting of the Sydney Light Rail Advisory Board of 3 February 2014, the key risks associated with the project were said to be:

47. [157]

    An article in the Sydney Morning Herald on 5 February 2014 referred to a peer review by Evans and Peck (an engineering firm), which concluded that, with the number or utility services likely affected, there would be a significant cost blow-out in relation to the SLR project. One of the key observations contained in the Evans and Peck report was that it was unlikely that the utility work would be carried out in a timely and coordinated manner for the benefit of the project and that there was a high risk of increases to project cost and time.

48. [158]

    On 10 February 2014, Mr Mark de Lacey of Ausgrid again wrote to the defendant noting that the schedule proposed by the defendant was extremely ambitious. It was unlikely that Ausgrid could meet the timetable set by the defendant. By way of example, Mr de Lacey said that Ausgrid would expect to take two to three years to execute a treatment project for a single intersection.

49. [159]

    At a briefing meeting on 12 February 2014 between representatives of the defendant and Ausgrid, Mr de Lacey stated that the time scale for Ausgrid to complete utility work treatments on the identified intersections was approximately three years.

50. [160]

    On 13 February 2014, the defendant obtained legal advice from Ashurst about its proposals in respect of the proposed daily fee scheme and the withholding of monetary amounts under the Project Deed. It sought advice as to whether, in particular, cl 12.3 of the Project Deed could constitute a penalty. Ashurst advised that it would not. It is notable that, in its advice, Ashurst refers to the proposed cl 12.3 and its instructions that:

51. [161]

    It is apparent that the defendant was proposing to include a clause that would incentivise the proponent and that that clause would ultimately become cl 12.3.

52. [162]

    From 25 February 2014, the defendant’s representatives attended a monthly meeting with the Deputy Director General regarding the project. The defendant’s Project Manager, Mr Mark O’Shea, noted that at that point in time, 30% of the services being encountered during the defendant’s utilities trenching investigations along the SLR route were unknown services (that is, not charted). Work was ongoing to determine if the unknown services were live or abandoned.

53. [163]

    At a meeting of the CBD and South East Light Rail Client Control Group (“the Client Control Group”) on 3 March 2014, it was proposed that an occupation fee regime would be implemented in order to minimise the duration of construction activities in the individual sections of the SLR.

54. [164]

    An occupancy fee would be developed to:

    1. (1)

       encourage proponents and OpCo to minimise disruption in the defined fee zones;

    2. (2)

       value the benefits to the proponents as they related to occupation;

    3. (3)

       inform various affected communities in relation to planned occupancy; and

    4. (4)

       provide the defendant with a management tool to deal with unanticipated occupations.

55. [165]

    Occupation of a fee zone in a “fee area” would commence on the day when OpCo’s activities in that fee area required diversion of traffic from traffic lanes. It would be deemed to be continuous until the “Occupation Succession Date”. The proposed fee zone rates would vary between $7,200 per day for public spaces and roadways, and $3,200 per day for areas which would become the light rail corridor. A proposed Occupation Fee Schedule was attached to the meeting minutes.

56. [166]

    Then, on 7 March 2014, the defendant published its “Sydney Light Rail Public Private Partnership – Request for Proposal (Overview)” (“RFP”). As stated in the RFP, the scope of the SLR PPP included:

    1. (1)

       the design, construction and financing of all infrastructure and rolling stock associated with the SLR, including the incorporation of Early Works; and

    2. (2)

       the customer service operations and maintenance of the SLR from 1 July 2015 until the end of the term.

57. [167]

    Section 5.8 of the RFP dealt with utility providers and infrastructure owners. The defendant proposed that all of OpCo’s activities which impacted utility services would be carried out in such a manner that:

    1. (1)

       did not affect the structure and integrity of the utility services;

    2. (2)

       monitored the condition and provided protection of utility services; and

    3. (3)

       minimised any disruption and avoided damage to utility services.

58. [168]

    By 10 March 2014, the defendant had undertaken surveys along the SLR route which comprised of 105,032 electronic files, all to be issued to the proponents for tender on secure hard drives.

59. [169]

    In the defendant’s Client Control Group meeting of 17 March 2014, there was some discussion as to the proposed occupation fee regime. The Client Control Group requested a paper from Ernst & Young accountants addressing:

    1. (1)

       details of the rationale of the proposed occupation fee regime within the overall commercial context of the PPP framework; and

    2. (2)

       sufficient evidence that the proposed occupation fee regime would effectively deter OpCo from extending the occupation of fee zones and, further, that it would encourage OpCo to meet overall project objectives.

60. [170]

    Ernst & Young was also asked to analyse whether the proposed rates and the occupation fee regime would be expected to deter OpCo from occupying traffic lanes during peak traffic periods.

61. [171]

    The only inference from the minutes of the Client Control Group is that the defendant was aware that it needed to provide sufficient incentive and deterrence to OpCo so as to make its staged construction method effective.

62. [172]

    For reasons which are not clear, the Ernst & Young report responding to the above-noted request was not made available to the Court. At the hearing, Mr Bannon indicated that a copy of the report had been requested from the defendant but they had not received a response. Mr Miller then indicated that a Notice to Produce had been issued to Ernst & Young, but neither Ernst & Young nor the defendant were able to locate the report. The absence of such an advice may be important.

63. [173]

    Around 27 May 2014, the defendant published its Treatment Guidelines for Ausgrid assets. As specified in the document, the purpose of the Treatment Guidelines was to provide guidance for the treatment of Ausgrid assets for the SLR project by providing typical (rather than agreed) requirements for treatment operations and a range of assets, especially in George Street. The intent was not to substitute or replicate existing Ausgrid design standards but to supplement those with specific guidance relevant to the SLR project. It specified that the Treatment Guidelines had been developed by the defendant and informed through consultation with Ausgrid, but that they had not been formally endorsed by Ausgrid. They were to provide guidance only.

64. [174]

    There were further meetings between the defendant and Ausgrid, and Ausgrid and CSY, regarding the likely Ausgrid requirements. On 28 May 2014, representatives of the defendant and Ausgrid again met to determine the extent of Ausgrid’s proposed works along the light rail corridor. A draft collaborative treatment plan for Ausgrid assets was compiled in June 2014.

65. [175]

    On 4 June 2014, approval for the State Significant Infrastructure was granted pursuant to s 115ZB of the EPA Act. [1] Schedule B to the approval contained requirements in respect of noise and vibration and, specifically, construction noise mitigation.

66. [176]

    On 5 June 2014, a meeting was held about issues relating to Ausgrid. Ausgrid was not represented at the meeting. It was noted that the defendant was approaching the end of the tender phase and there was still no definitive guidance regarding a signed interface agreement with Ausgrid.

67. [177]

    It was noted that it was not financially possible to have a light rail system that only operated intermittently due to regular Ausgrid disruptions, nor was it feasible to bid based on the relocation of the entire Ausgrid CBD network, as that would take an additional two years to complete (at a minimum). The working proposal was thus to leave the Ausgrid CBD network in place, modify pit access to suit construction requirements and assume that an agreement would be reached between OpCo and Ausgrid with reasonable concessions on both sides. This assumption proved to be somewhat optimistic, as at least according to the D&C contractor, the guidelines published by Ausgrid after entry into the Project Deed were substantially different to those attached to the Project Deed.

68. [178]

    On 12 June 2014, the defendant published its further survey data (as at 4 June 2014) comprising 1,855 electronic files issued to the proponents for tender.

69. [179]

    On 17 June 2014, there was a further meeting of the Commercial & Financial Delivery Group. As noted in the minutes, Ausgrid was changing its “business as usual” practices with respect to pit access and response timeframes during the SLR construction. By this, it was meant that Ausgrid would be setting up a specialist team to deal with the SLR.

70. [180]

    On 24 June 2014, there was a further meeting of the Commercial & Financial Delivery Group. Again, the “utilities risk evaluation” was discussed. A paper was presented outlining the defendant’s position that it would accept no risks associated with the timing of the construction works. However, it was willing to accept certain risks associated with cost increases in situations where utility providers required changes in treatment options.

71. [181]

    On 30 June 2014, the defendant entered into an Early Works contract with Laing O’Rourke Australia Construction Pty Ltd as the managing contractor. The Early Works contract contained two packages. The first package was in respect of non-utility Early Works, such as the demolition of certain structures (for example, the Olivia Gardens and the Parklands Tennis Centre). The second package involved key intersection work. Six intersections were identified, being:

72. [182]

    Although it is not clear why those intersections were specified, it is apparent from the terms of the Early Works contract that they must have been considered important to traffic flow and, in particular, the bus routes in Sydney.

73. [183]

    The intersections of George Street and King Street, and George Street and Market Street (being the intersections enclosing the Strand Arcade’s western entrance and the start of the underground walkway from Myer to Sydney Town Hall) were not included as part of the Early Works contract.

74. [184]

    The key requirements of the Early Works contract included:

75. [185]

    Plainly, the point of the Early Works contract was to ensure that, at the specified intersections, all utilities treatments and other obstructions which might impact upon the SLR construction were dealt with in advance of OpCo commencing work on the intersections. Further, it aimed to ensure that the work was done at night and on weekends, so as to not disrupt the flow of traffic (in particular, buses) through those intersections. Indeed, Stephen Lewcock (a utilities manager who worked on the SLR project and gave evidence at the hearing) states in an email of 13 August 2014 that the aim was to clear the intersections to enable the D&C contractor to construct the track slabs as quickly as possible, with minimal disruption to the public.

76. [186]

    The work was to be done in such a manner that the intersections would be opened for night works and closed again before traffic commenced the following morning. The road would be sealed in a temporary manner, with plates placed across the road and bitumen laid. Again, this would allow traffic to flow.

77. [187]

    The Early Works at the specified intersections were due to be completed by 17 April 2015. The managing contractor’s objectives included ensuring that the identified work items were successfully completed before OpCo was required to occupy the same physical locations for the Civil Works.

78. [188]

    On 18 July 2014, the defendant again published an updated Risk Register. One of the risks identified included compensation and nuisance claims by impacted stakeholders and businesses. Utilities remained a major risk. That risk included the potential that the defendant would be unable to reach a timely agreement with respect to the appropriate treatment of affected utility services. The extent of the works remained unknown and treatment strategies needed to be agreed with third party providers. Reference was made to the fact that the Ausgrid process would take three months. Existing protocols and procedures were deemed too slow and “not reactive enough” to support the SLR works program.

79. [189]

    A major risk was identified as being the unplanned discovery of additional utility services, which would necessitate additional expenditure in order to complete the required works within the program allowances.

80. [190]

    In a Contract Finalisation Summary prepared by the defendant dated 11 August 2014, the defendant noted that it was receiving very strong push-back on the utilities risk from the market.

81. [191]

    At a workshop meeting dated 19 August 2014, utilities were again discussed, with the main issue being “known” versus “unknown” utilities. The question of fee zone occupancy was also considered. There was a reference to the perception of performance on George Street in front of businesses and a change of governments being the biggest risks. The defendant was most concerned about Zone A (that is, George St). Politicians were noted to be “spooked” by the experience of building the light rails in Edinburgh and the Gold Coast; in respect of the latter, it was said that 15% of nearby business owners “went bust”.

82. [192]

    On 1 September 2014, a draft version of a “Deed for Adjustment Works to Network Assets” was prepared between Ausgrid and the defendant.

83. [193]

    In its “Consolidated Clarification: Returnable 8 – Options,” CSY noted that the current scope of the investigation works for Route A (being Circular Quay to Central) was “100% level B and level A survey.” Level B survey involved a full geophysical survey, including the location of cables and ground-penetrating radar. Level A survey involved a full internal survey of pit/manholes and the potholing of assets to determine exact depth.

84. [194]

    At least on the defendant’s case, CSY’s document “Underwritten Clarification: Returnable 5 – Engineering, Architectural and Urban Design” (dated 15 September 2014) is an important document. Therein, CSY put forward its Initial Utility Services Treatment Plan, which provided for the identification of utilities through to the treatment and resolution of utilities issues. It observed that the treatment of existing utilities was a key delivery risk for the project.

85. [195]

    It acknowledged the high quantity and quality of information supplied by the defendant in the RFP Information Documents. It stated that the plan had been prepared utilising the tools provided by the defendant, such as existing utility survey data, class detection database and treatment options papers.

86. [196]

    On 2 October 2014, CSY’s document titled “Contract close out issues” identified one of the key contractual issues as being the definition of “Utility Works Event” and “Compensation Event” in circumstances where the former may, in certain situations, lead to the latter.

87. [197]

    On 21 October 2014, the State approved the selection of CSY as the preferred proponent for the SLR project. The SLR project budget was increased to $2.104 billion, which included $120 million in respect of the Early Works and $1.415 billion in respect of the Civil Works.

88. [198]

    On 22 October 2014, the SLR Contract Finalisation Group prepared an update on key contractual issues. It suggested that the proponents had largely agreed to the overall structure of the defendant’s risk sharing in relation to Utility Works Events.

89. [199]

    On 21 October 2014, there was a final update on key issues identified by the SLR Advisory Board, including the utilities regime. As noted in the minutes, CSY had agreed to the overall structure of the defendant’s proposal as to risk sharing around Utility Works Events. However, there were outstanding issues relating to specific technical exclusions, whether Utility Works Events on George Street should be subject to a different regime in respect of delay costs and the finalisation of caps and thresholds.

90. [200]

    As of 27 November 2014, the proposal was for a cost-sharing regime in respect of events where:

    1. (1)

       it was necessary for OpCo to protect, modify, replace, relocate or otherwise deal with utility services not identified in the utilities information;

    2. (2)

       there was a change in the physical characteristics of a location of utility services identified in the utilities information;

    3. (3)

       in respect of specific Ausgrid assets which required non-standard treatment, if Ausgrid subsequently required a change of that non-standard treatment option; and

    4. (4)

       in any part of George Street (including intersections), any provider of gas, sewerage, electricity or telecommunications in Australia failed to carry out works and provide services for a period exceeding 15 business days.

91. [201]

    On 17 December 2014, the defendant entered into the Project Deed with the entities nominated by CSY, described as the “ALTRAC Light Rail Partnership” (being a partnership between three ALTRAC companies).

92. [202]

    A number of things are clear from the pre-Project Deed documents, including that:

    1. (1)

       the defendant’s original intention was to deliver the project through an extensive Early Works contract, which would include the utilities treatments followed by a separate Civil Works contract. Over the pre-Project Deed period, particularly in 2014, that plan changed such that the defendant decided that the utilities treatment works would form part of the Civil Works contract and the Early Works contract would be limited to six key intersections (and would include utilities treatments);

    2. (2)

       the defendant was aware of the significant risk to business owners along the SLR route arising from the construction activities. It was aware that the construction of the SLR would have a significant impact on businesses. It was aware of the Gold Coast experience in which 15% of businesses along that route had failed during the construction period. It was aware that it needed to minimise interference with local businesses as far as possible and that doing so would be critical to the viability of the businesses;

    3. (3)

       the defendant was well aware of the utilities risk. It was one of the primary risks associated the project, particularly bearing in mind that the project would require excavation of one of Sydney’s busiest streets (being George Street);

    4. (4)

       at the time of entry into the Project Deed, the defendant was aware that it had not yet discovered all utilities along the route and that there would be unknown utilities. It was aware that the discovery of unknown utilities could delay the Civil Works. It was aware that its investigation into utilities was more thorough along Route A (which included George Street) than other areas, such as Anzac Parade. It was aware that the discovery of unknown utilities would delay the progress of the construction works. It was aware that 30% of the utilities being discovered through the trenching contract were unknown utilities;

    5. (5)

       at the time of entry into the Project Deed, the defendant was aware that no agreement was in place with the major provider of utility services, Ausgrid, or indeed, other utility providers (such as Sydney Water) as to how their utilities could be treated. This was identified by the defendant as another risk to the performance of the Civil Works, that is, the risk remained that Ausgrid might require different treatment methods from those identified in the Project Deed. This is what the D&C contractor said occurred and what led to a substantial claim for compensation from the D&C contractor;

    6. (6)

       the defendant had been warned by Ausgrid that the defendant’s own plans, in terms of cost and timing in dealing with the utilities, was likely to be a significant underestimation. Ausgrid had warned in very direct terms that the treatment of utilities would take much longer and cost much more than might have been anticipated. Ausgrid had also cautioned that the timetable for the Early Works contract was unachievable;

    7. (7)

       at no point prior to entry into the Project Deed was there any statement by the defendant, through its various planning groups or Risk Register, that the significant risks that it had been highlighting were somehow reduced. For example, there is no statement that those risks which were highlighted as being major, such as the risk of unknown utilities or delay risks associated with the absence of agreements with utility providers, were reduced by December 2014; and

    8. (8)

       the defendant was aware that it needed to engage the proponent on terms that work would be done by the D&C contractor in stages, with limited concurrency between the stages. Thus, it needed to both impose a fee zone schedule and impose terms which would deter OpCo from not complying with that fee zone schedule. This was critical to minimising harmful interaction with business owners along the SLR route.

The way in which the SLR Project was intended to be delivered

1. [203]

   Having regard to all of the planning, discussions, meetings, reports, negotiations and statements by the defendant, it is clear that by the time of entry into the Project Deed, the defendant intended that the SLR would be delivered in the following way:

   1. (1)

      through two separate contracts, being:

   2. (2)

      under the terms of the Project Deed, the defendant would be required to pay OpCo approximately 50% of the costs associated with the design and construction of the SLR. OpCo would then make its profit through the operation of the SLR for a term of 15 years after completion of the construction of the SLR;

   3. (3)

      having regard to the very substantial utilities risk that the defendant was aware of and had identified, there would be some risk sharing between the defendant and OpCo in respect of that utilities risk;

   4. (4)

      construction of the SLR would commence in 2015 and be completed by March 2019;

   5. (5)

      construction was to take place in stages – that is, in 31 fee zones – so as to minimise the disruption to residents and business owners along the SLR route;

   6. (6)

      the Project Deed would contain an Initial Delivery Program and an Occupation Schedule specifying when the D&C contractor would be in occupation of each fee zone. The Project Deed would include terms which required the D&C contractor to undertake work in each fee zone for a specified period before moving onto another fee zone.

2. [204]

   The terms of the Project Deed would provide both an incentive to undertake work in the staged manner and a deterrent from remaining in occupation of any particular fee zone for excessive periods.

3. [205]

   The Project Deed is an extensive document comprising 317 pages with thousands of pages of annexures. The “Definitions” section is itself 62 pages.

4. [206]

   The Project Deed did not just cover the design and construction of the SLR. The agreement which ALTRAC and the defendant entered into was to the effect that ALTRAC would be paid a certain sum in respect of its design and completion of the SLR and that, thereafter, it would have a right to operate it for a period of 15 years.

5. [207]

   The original date for completion of the SLR was 16 March 2019. The term of the agreement with ALTRAC was intended to expire 15 years after that date (on 16 March 2034). As previously noted, I will refer to ALTRAC as OpCo when discussing the Project Deed (adopting the terminology used in the deed).

6. [208]

   As specified, the objectives for the project included:

   1. (1)

      to deliver world class light rail services;

   2. (2)

      to provide an appropriate customer experience;

   3. (3)

      to develop a long-term collaborative working relationship between the defendant and OpCo and OpCo’s contractors; and

   4. (4)

      to design, deliver, test, commission, operate and maintain a safe light rail system.

7. [209]

   OpCo’s primary obligations were to:

   1. (1)

      arrange for financing;

   2. (2)

      design and construct the SLR works;

   3. (3)

      operate and maintain the SLR during the operations phase;

   4. (4)

      hand the equipment back to the defendant on the end date; and

   5. (5)

      “…engage with the community and implement proactive stakeholder and community liaison strategies to minimise disruption and develop community ‘ownership’ of the SLR.”

8. [210]

   The defendant’s primary obligations (without limiting any other obligations under the Project Deed) were to:

   1. (1)

      grant OpCo the licences under cll 12.1 and 12.4 of the Project Deed; and

   2. (2)

      pay OpCo in accordance with cl 25 of the Project Deed.

9. [211]

   Clause 4.6 specified that, except as expressly stated in the Project Deed, OpCo accepted all risks associated with the project and would not be entitled to make any claim against the defendant arising out of or in connection with such risks.

10. [212]

    OpCo’s general obligations were set out in cl 9. Pursuant to cl 9.1, OpCo agreed that it had allowed for the provision of all work and materials necessary for its activities and that all work and materials were to be undertaken and provided by OpCo at its own cost. They would form part of OpCo’s activities and would not constitute a modification. They would not entitle OpCo to make a claim, except as expressly provided by the Project Deed.

11. [213]

    Clause 9.6 was in the following terms:

12. [214]

    Neither party suggested that cl 9.6 was of any relevance to the claims being pursued against the defendant in these proceedings.

13. [215]

    Clause 9.13 specified that, subject to cl 26 (Compensation Events) and cl 27 (Relief Events), the defendant would not be liable for any claim by OpCo arising out of or in any way in connection with other contractors’ activities.

14. [216]

    Clause 9.17 related to Utility Services. Clause 9.17(a)(ii) is in the following terms:

15. [217]

    Clause 9.17(a)(viii) is in the following terms:

16. [218]

    It can be seen that Relief Events and Compensation Events provided an exception to the imposition of risk arising from utilities. A Compensation Event was defined to include: “[b]efore the date of Completion the occurrence of a Utility Works Event.”

17. [219]

    Utility Works Event (“UWE”) was defined in cl 1.1 to mean:

18. [220]

    A Relief Event was defined to include a Compensation Event. If a UWE occurred and this would cause delay to the Occupation Cessation Date for a fee zone occupied by OpCo on the date of the UWE, then OpCo could apply for an extension of the Base Fee Zone Occupation Period. Further, if the conditions precedent were satisfied, the defendant agreed to grant an extension of the Occupation Cessation Date.

19. [221]

    OpCo was required to investigate, protect, relocate, modify and provide all utility services in accordance with Schedule B4 of the Project Deed (Requirements of Utility Provider Agreements). Further, other than in respect of cll 26.1 and 27, OpCo assumed the risk of the existence, location, condition and availability of the utility services. I will discuss what this means later in this judgment.

20. [222]

    As set out in cl 9.24, OpCo was required to provide the managing contractor and Early Works contractor with such access to the SLR site as may be required by the managing contractor. This proved to be unachievable or, at least, did not happen.

21. [223]

    The issue of licences and occupation was dealt with in cl 12 of the Project Deed. Pursuant to cl 12.1, the defendant granted to OpCo a non-exclusive Construction Site Licence to use and occupy, and to meet OpCo’s contractors’ use and occupation of, each section of the construction site for the purposes of performing OpCo’s activities, in consideration of the receipt by the defendant a licence fee of $10.

22. [224]

    A particular clause of significance is cl 12.3. It governed the “fee areas” and fee zones, as follows:

23. [225]

    The effect of cl 12.3 was to make OpCo liable to the defendant for a specified amount for each day that OpCo occupied each fee zone longer than the agreed period. Daily fees were calculated for each day that the “Actual Fee Zone Occupation Period” exceeded the “Base Fee Zone Occupation Period.” As was evidenced in cl 12.3(a), a sliding scale of amounts applied, but the total amount was capped at the aggregate of $7.5 million for all daily fees for which OpCo may become liable. Further, at financial close, OpCo would be allocated a credit of $3 million (“Base Fee Zone Credit”) subject to conditions.

24. [226]

    Clause 12.3 also specified what would happen if utility works falling under the definition of a UWE or a specific category of Relief Event (defined as a “fire, explosion, flood, storm, lightning” and so on) occurred. If any cause had delayed OpCo’s Occupation Cessation Date in relation to a fee zone, and OpCo wished to claim an extension of the Base Fee Zone Occupation Period, OpCo could make an application following the procedure set out in cl 27 of the Project Deed.

25. [227]

    Further, if a Compensation Event caused OpCo to incur loss, then OpCo may claim compensation in accordance with cl 26. Subject to the procedural requirements, as set out in cl 26.5, the defendant was required to compensate OpCo for the Net Financial Impact of the Compensation Event (relevantly to this case, a UWE).

26. [228]

    Further, as set out in cl 27.1, if a Relief Event occurred and its effects were likely to affect OpCo’s ability to comply with its obligations under the Project Deed, or it delayed an activity on the critical path shown in the Delivery Program, or which was not shown on the critical path but had become critical as a result of the Relief Event, then OpCo was required to provide written notice and comply generally with cl 27.

27. [229]

    Clause 17 of the Project Deed was the time clause. It also specified the Initial Delivery Program. The IDP was set out in Schedule A10. As specified in cl 17.3(b), OpCo was required to update the delivery program periodically in no less than monthly intervals to account for changes in the program.

28. [230]

    Clause 25 contained the payment provisions. It is only necessary to say that the defendant agreed to pay OpCo half of the projected cost of the SLR project. It was intended that OpCo would recover the balance of its cost and profit through being granted the licence to operate the SLR for a period of 15 years.

29. [231]

    Schedule B4 to the Project Deed set out the requirements of Utility Provider Agreements, imposing an obligation on OpCo to comply with, satisfy, carry out and fulfil all the obligations and conditions of each Utility Provider Agreement.

30. [232]

    That is, OpCo was contractually required to comply with any Utility Provider Agreements (even though the agreements were not then in place). This is of some significance, bearing in mind the D&C contractor’s later claim against the defendant.

31. [233]

    Schedule D1 to the Project Deed set out the Service Payment Regime by way of a complicated formula. Schedule D4 specified the net financial impact of certain events. This schedule is said to be particularly important, at least on the defendant’s case, as the defendant says that it is not merely a matter of looking at the additional fees imposed for any extended occupation of fee zones. The defendant submits that it is also necessary to look at the net financial impact, particularly as it says that OpCo would continue to incur additional expenses during delays, which must be taken into account when determining the financial deterrent to OpCo as a result of any delay in the completion of the project.

32. [234]

    Schedule E1 specified the SPR. Appendix 30 related to utility services. As set out in the overview and scope of Appendix 30, OpCo was required to establish the location of all utility services which may be affected by the SLR construction, ensure that no damage was caused to the utility services, assess the risk for all utility services, provide protection and, where needed, relocate utility services in accordance with the utility service owner’s requirements.

33. [235]

    Schedule F contained the initial project plans. Schedule F8 contained the Initial Utility Service Treatment Plan, which also included the Utility Service Identification and Treatment Register and the “Treatment Proposals, Sketches and Drawings”.

34. [236]

    As specified, the Initial Utility Service Treatment Plan covered all works relating to the relocation, protection and adjustment of utility services. The plan outlined the procedures to be established by OpCo for relocating and working near utility services within the project area. It required that all work would be carried out in compliance with the interface agreements between the defendant, utility providers and authorities, along with the Project Deed and the standards of those utility providers and authorities. Of course, at the time of entry into the Project Deed, there was no agreement in place with utility owners.

35. [237]

    At the same time that ALTRAC entered into the Project Deed, it entered into a D&C contract with Alston Transport Australia Pty Ltd and Acciona Infrastructure Australia Pty Ltd. The D&C contract contained similar terms to the Project Deed in respect of compensation, relief events, fee zones, licences and payment.

36. [238]

    Immediately following the entry into the Project Deed, the NSW Minister for Transport, Gladys Berejiklian (as she then was), issued a media release confirming the signing of the contract and identifying its benefits. She noted that major construction would start after Anzac Day in 2015, and works would be staged along the route to reduce the impact on residents and businesses during construction. She said that the State would work closely with the community to fine tune the detailed weekly construction program and that regular consultation would take place.

37. [239]

    The defendant prepared a document which it described as the “Sydney Light Rail Public Private Partnership Final Contract Summary” (“Contract Summary”) dated 25 August 2015. The summary itself is 56 pages long. I will refer to it, not as an aid in interpreting the Project Deed, but as evidence of what the defendant intended and thought could reasonably have been achieved.

38. [240]

    The defendant identified the key benefits of the SLR as being:

39. [241]

    The defendant said it adopted a risk-sharing arrangement in accordance with Infrastructure Australia’s “National PPP Guidelines”. This risk allocation process resulted in various risks either being retained by the State, transferred to the private sector, or shared between the parties.

40. [242]

    Included in the Contract Summary is a section headed “Section Access,” which states:

41. [243]

    Plainly, the defendant was announcing to the public that it had put in place a system that was intended to ensure minimal disruption with businesses along the SLR route and that it had incentivised the D&C contractor to make sure that that would happen. In explaining the means by which it had incentivised OpCo, it only referred to the daily fee payable, should OpCo exceed the agreed base occupation period. No mention was made of what the defendant says in this case was the real incentive, being the D&C contractor’s holding costs.

42. [244]

    Consistently with the announcements made by the government and the representations made to business owners during the government’s promotion of the SLR, the defendant developed what I would describe as a fee zone strategy. As the government was aware that the impact of the SLR construction on businesses along the route would be significant, it set in place a strategy for the project to be delivered in stages. Whilst there would be some overlap, there were 31 separate fee zones. Through the Project Deed, the defendant established occupation periods for each fee zone. Further, the IDP attached to the Project Deed set out OpCo’s delivery program in each fee zone.

43. [245]

    The IDP had been an integral component of the project delivery since the first Request for Proposal was sent to potential proponents in March 2014. Proponents were informed that the IDP must be consistent with their proposals, including the initial project plans and its design, procurement, construction and commissioning strategies. It was required to be supported by a separate schedule which included the date of commencement of occupation of the fee zone and the base fee zone occupation duration.

44. [246]

    The point is that the IDP was intended to be a document prepared by OpCo, in conjunction with the defendant, which was consistent with all of its design, procurement, construction and commissioning strategies. Integral to the construction of the SLR was that it be completed in stages. The IDP must be viewed as a realistic and reasonable estimate by OpCo as to how the work could be done consistently with the defendant’s fee zone requirements, based on the information available at the time of entry into the Project Deed and assuming that the utilities risk was appropriately reduced through the pre-Project Deed investigation and planning.

45. [247]

    The IDP included approximately 4,600 activities, organised within a nine-level hierarchical work breakdown structure. The key dates set out in the IDP were:

    1. (1)

       15 December 2014 – contract close;

    2. (2)

       18 February 2015 – financial close;

    3. (3)

       16 March 2019 – final performance testing; and

    4. (4)

       16 March 2009 – project completion.

46. [248]

    Each program in the IDP stipulated working and non-working days and the number of working hours per working day.

47. [249]

    The detail contained in the IDP was extensive. It has been extensively reviewed by the programming experts, being Mr Griffith and Mr Ian McIntyre. It is beyond the scope of this judgment to comment on the hundreds of pages of annexures to the reports of Mr Griffith and Mr McIntyre, although a review of the annexures does provide some key information in respect of deficiencies in the IDP, problems which emerged immediately with the IDP and the extensive changes which were necessarily made to the IDP (that is, extensive delays) arising, in particular, from utilities issues and modifications in Fee Zones 6 and 29.

48. [250]

    The IDP set out the expected start and finish dates for works within each fee zone. For example, as at the signing of the Project Deed, the date for commencement of work in Fee Zone 5 (which was noted to be utilities relocation) was 15 October 2015. That work was scheduled to finish on 24 November 2015. All of the construction works for Fee Zone 5 were scheduled to finish on 15 February 2016. Thereafter, there would be track work which was scheduled to finish on 12 April 2016. Following that, the construction activities would involve kerb, footpath, lighting and pavement work which was to take place over short periods, such as days or weeks up until the completion of the pavement works on 6 February 2017.

49. [251]

    The IDP is referred to in cl 17.3 of the Project Deed. Under cl 17.3, the D&C contractor was required to:

    1. (1)

       update the delivery program periodically to take account of changes to the program and any corrective action plan submitted by the D&C contractor;

    2. (2)

       ensure that each update contained the details required;

    3. (3)

       explain any changes to the critical path and delivery program;

    4. (4)

       periodically add intervals, no less than monthly;

    5. (5)

       confirm whether the D&C contractor would achieve completion; and

    6. (6)

       ensure that each updated delivery program allowed for project plans and design documentation.

50. [252]

    Clause 17 is the time clause. Two things emerge from cl 17, being:

    1. (1)

       the primary obligation was to achieve completion by the specified date of completion, rather than to complete the works in each fee zone in accordance with the IDP; and

    2. (2)

       nothing in the IDP was binding on the D&C contractor or would otherwise affect the time for performance of OpCo’s obligations under the Deed. In other words, what had contractual force was the time for completion of the overall project. The IDP had no contractual force in the sense that a failure to complete in accordance with the IDP in each fee zone did not give rise to a breach by the D&C contractor.

51. [253]

    However, a fee was payable if the D&C contractor spent longer in each fee zone than agreed, unless one of the defined events occurred which gave rise to an extension. Schedule B9 to the Project Deed sets out the occupation fee schedule, including the daily fees which were payable if OpCo exceeded the Base Fee Zone Occupation Periods. This is a reference back to cl 12.3. The relevant sections of Schedule B are as follows:

52. [254]

    The defendant’s fee zone strategy was intended to ensure that the disruption to business owners along the route was kept to a minimum. Ensuring that the work was done in stages and that the D&C contractor was sufficiently deterred and incentivised was integral to minimising the disruption to businesses.

53. [255]

    However, every time a UWE occurred, and OpCo could demonstrate that a delay to the Occupation Cessation Date for a fee zone was caused, then OpCo could make a claim for an extension to the Base Fee Zone Occupation Period. If the condition precedents for relief had been complied with, the defendant would grant an extension of the relevant Occupation Cessation Date, to the extent and for as long as the relevant event prevented OpCo from performing the works for which a relevant Base Fee Zone Occupation Period was required.

54. [256]

    Further, as set out in cl 26.1 of the Project Deed, if a Compensation Event (which is defined to include a UWE) caused OpCo to incur loss, OpCo could claim compensation in accordance with cl 26 (Compensation Events). To the extent that any claim for compensation included a claim for losses OpCo had incurred and which arose out of or in connection with any delays in delivery activities, OpCo was entitled to compensation for loss in respect of the period of time for which it had been granted an extension of time.

55. [257]

    The fee zone strategy thus required the D&C contractor to complete its work in any particular fee zone in accordance with the Occupation Schedule, or else it would be subject to a financial penalty, except that:

    1. (1)

       the D&C contractor could obtain relief from such penalty and indeed claim compensation for certain events, including (and relevantly to this matter) a UWE; and

    2. (2)

       the maximum penalty for overstay over the life of the project was $7.5 million.

56. [258]

    The plaintiffs say that such a contractual arrangement was so unreasonable that no authority exercising the powers of the defendant would have entered into the Project Deed on those terms.

57. [259]

    The defendant rejects this. It says that looking at those terms in isolation ignores the importance of the very significant impost on the D&C contractor arising out of moving from one fee zone to another and leaving work incomplete, being the D&C contractor’s own costs. Specifically, leaving construction at a standstill in various fee zones would have cost the D&C contractor a significant sum. The defendant says that the amount it would cost the D&C contractor in internal costs gave rise to an incentive to complete in accordance with the IDP.

Announcement of the construction schedule

1. [260]

   In May 2015, the defendant published a media release to the effect that the SLR construction would begin at Moore Park in September 2015, with construction on George Street beginning in October 2015.

2. [261]

   After outlining the need for change and the benefits of the SLR, the defendant informed the public that the light rail route had been divided into 31 individual zones to minimise, as much as possible, the impacts of the construction on discrete areas. It provided a tabled list and a map of the 31 zones, noting that construction would take place between the following dates:

   1. (1)

      Fee Zone 5: 23 October 2015 to 12 August 2016;

   2. (2)

      Fee Zone 6: 3 December 2015 to 16 October 2016; and

   3. (3)

      Fee Zone 29: 19 February 2016 to 6 September 2016.

3. [262]

   The defendant stated, “ALTRAC can alter its construction schedule but not the duration within any individual zone, if required. If changes to the construction schedule are required, ALTRAC must provide a notice of 60 business days. The public will be fully advised of any changes well in advance of works taking place…”.

4. [263]

   Evidently, the defendant was telling the community that although the party doing the work could change its schedule, it could not change the length of time that it was working in each fee zone. To the extent to which the defendant believed, thought or intended this, it proved to be quite wrong.

5. [264]

   The media release was re-published in part by various media companies, including in an article by the Daily Telegraph.

Lay evidence as to interference with businesses

1. [265]

   As is clear from their evidence, there was either actual construction work or the appearance of construction activities outside the lead plaintiffs’ businesses for periods far in excess of what was contemplated.

2. [266]

   Ms Hunt prepared four statements dated 2 December 2020, 21 May 2021, 2 September 2022 and 25 October 2022. Much of her evidence is uncontroversial and provides the basis for my earlier comments on the Hunt Leather stores. Further, much of her evidence is relevant to damages issues, on which I will comment later.

3. [267]

   In her first statement, Ms Hunt provided a detailed chronology as to her observations of the SLR construction activities and the ways in which those construction activities affected Hunt Leather’s business in both stores. She became aware of the plans to construct the SLR through media releases and through direct communications during 2014. She says that she was encouraged by the plans for the works to be staged in order to minimise disruption to individual businesses.

4. [268]

   Ms Hunt says that an important aspect of the Strand Arcade positioning was the increased patronage by international visitors walking up George Street from Circular Quay. From her own observations and those of her staff, the level of patronage by international visitors decreased markedly during the SLR construction.

5. [269]

   In cross-examination, Ms Hunt was challenged about her general observations as to the effect of the SLR construction on the Hunt Leather stores and her observations as to the activities which were undertaken.

6. [270]

   There was no real challenge to Ms Hunt’s evidence in respect of the period up to December 2017. That is because there is no dispute that, at least between the time of commencement of construction and December 2017, Fee Zone 5 was the subject of regular construction activities and remained boarded up during that time. Specifically, there were hoardings on both sides of the road on George Street and, in particular, directly out the front of the Hunt Leather Strand Arcade store.

7. [271]

   Ms Hunt was also shown a daily photographic record taken around midday each day from a point further north on George Street, looking down George Street towards Market Street. The point of this photographic record (or, at least, the defendant’s reason for referring to the photographic record) was to demonstrate that any suggestion by Ms Hunt that construction was being undertaken on a continuous basis after December 2017 could not be correct.

8. [272]

   It is clear from the daily photographic record that George Street between King and Market Streets was re-opened in December 2017 and the hoardings which had been in place up until that time were removed (albeit the hoardings remained in place at both King and Market streets).

9. [273]

   The defendant put to Ms Hunt that during the period December 2017 to late 2019, only discrete and limited construction work was undertaken in Fee Zone 5, such that there would have been minimal impact upon the Strand Arcade store. Ms Hunt did not agree with the latter part of the proposition, although she tended to accept that the construction activities around that time were discrete.

10. [274]

    The daily photographic record speaks for itself. As Ms Hunt suggested, it is difficult to see precisely what activities were carried out on any particular day. However, there were plainly many periods when there were no construction activities, other than the parking of construction vehicles close to the Strand Arcade or activities such as the planting of a tree or digging of a hole further up towards Market Street.

11. [275]

    However, as suggested by Ms Hunt, barricades remained at the corner of George and Market Streets, thereby blocking the road to any traffic (other than pedestrian traffic on each of the western and eastern footpaths). For much of the time, barricades also remained at the south-western and south-eastern corners of the block outside the Apple and Telstra stores.

12. [276]

    Further, it is evident from the photographic record that construction work at the intersection of King and George Streets was still being carried out from time-to-time, presumably on the weekends. Whilst Ms Hunt’s emails of August to September 2019 record her ongoing despair at the reduction in foot traffic coming up George Street and the problems with her business, her complaints at that time were more related to the ongoing work in other fee zones, such as Fee Zone 4. Photographs contained in the D&C contractor’s monthly project reports and similar documents demonstrate that the whole of the road in Fee Zone 4 remained a construction site after construction had finished in Fee Zone 5.

13. [277]

    Ms Hunt emphasised that the problem for her stores was not just that the works were noisy and dusty, but that customers would have found it difficult to walk up George Street and international tourists were deterred from doing so. As she said, the shopping experience was greatly diminished, not only because of the noise and dust, but also the mere presence of the hoardings and barricades along George Street.

14. [278]

    It was put to Ms Hunt that she could have engaged a door attendant so that customers would realise that the shop was not closed. Ms Hunt identified why that would not have been feasible (although she had not previously considered it). The idea that Ms Hunt could have put a person on the George Street doors is one that arises purely with the benefit of hindsight. It would have been an additional expense and there is no evidence that it would have successfully increased patronage during this time. The defendant made no submission that Hunt Leather had failed to mitigate its loss.

15. [279]

    Mr Foulstone was the manager of the Hunt Leather Strand Arcade store. His evidence related mainly to the level of noise experienced at the store, as well as the noise testing that was undertaken for the purposes of this case. He was also asked about the viability of closing the doors which opened onto George Street. His evidence was uncontroversial and supportive of Ms Hunt’s evidence.

16. [280]

    Mr Zisti prepared five statements dated 2 December 2020, 18 January 2021, 14 May 2021, 2 September 2022 and 25 October 2022.

17. [281]

    According to Mr Zisti, he chose Anzac Parade for his restaurant business because it was on a main road and easily accessible to the public. It had large windows out the front which allowed natural light and enabled customers to look into the premises.

18. [282]

    The restaurant generally opened seven days a week, from 5.00pm to 10.00pm. It occasionally opened for lunch between 12.00pm and 3.00pm. Its customers were mainly families from the local area and, in its later years, students from the University of New South Wales.

19. [283]

    According to Mr Zisti, the primary source of revenue up until the commencement of the SLR construction was in-house dining, rather than takeaway. Throughout the operation of the restaurant business, Mr Zisti used food delivery apps to deliver takeaway food, including Menulog, Deliveroo and then later, Uber Eats.

20. [284]

    In June 2013, Mr Zisti opened a coffee cart on the footpath outside the restaurant, which he named Giddy Up. He says that was successful, generating sales of approximately $5,000 to $6,000 per week.

21. [285]

    In the period immediately prior to the commencement of the SLR construction, Mr Zisti had developed his business such that revenue was generated from:

22. [286]

    Mr Zisti did not keep a record of the revenue split between these methods of generating income. However, he estimates that approximately 90% of revenue was from in-house dining.

23. [287]

    Mr Zisti became aware of the proposed SLR construction through the media in or about 2012. In 2013, he visited the Gold Coast and whilst he was there, he visited some shop owners who had operated during the construction of the Gold Coast Light Rail. He says that because of this, he became aware of the potential for disruption to his restaurant business arising out of the SLR construction.

24. [288]

    Mr Zisti says that during the period leading up to the SLR construction, his sales were continuing to increase (I will discuss this later in this judgment).

25. [289]

    In 2015, he was negotiating to sell the restaurant business and intended to sell it for approximately $250,000. A draft contract was drawn up. However, the negotiations fell through and the restaurant business was not sold.

26. [290]

    By February 2015, Mr Zisti had expanded his opening hours for the restaurant to include between 3pm and 5pm (seven days a week), hoping to cater for more university students who would be walking by.

27. [291]

    On 2 May 2016, Mr Zisti was informed that from 7 May 2016, there would be substantial changes to the road outside his restaurant, including that:

28. [292]

    Mr Zisti says that on 7 May 2016, construction of the SLR began on Anzac Parade. He recalls that barricades were established around the median strip and parking was removed on either side of the road. The parking lane was designated for traffic. Mr Zisti became concerned about the removal of the parking spaces on Anzac Parade because the parking available at the Doncaster Hotel was not obvious, as it was not directly outside the restaurant.

29. [293]

    Further, the barricades and hoardings that were constructed blocked the view from one side of Anzac Parade to the other. That is, persons walking along the western side of Anzac Parade (on the opposite side of the road) could no longer see his restaurant.

30. [294]

    According to Mr Zisti, in the first few days of construction, his revenue was reduced by 29%.

31. [295]

    In his first statement, Mr Zisti describes the nature of the construction work which he observed outside his restaurant and the impact on his restaurant on a monthly basis from May 2016 to 2019. He says that the construction continued, involving the use of heavy machinery with barricades and hoardings in place. There are photographs in the D&C contractor’s monthly progress reports taken in 2018 which support Mr Zisti’s recollection as to the level of construction activity being undertaken in Fee Zone 29 during 2018. This significantly impacted the restaurant.

32. [296]

    Mr Zisti refers to photographs showing the barricades, hoardings and dirt from the construction site in the gutters along Anzac Parade. He refers to there being a partial closure of the intersection of Anzac Parade and Todman Avenue from time-to-time. Mr Zisti says that for the first time since it had opened six years prior, the restaurant made a loss for the financial year ending 30 June 2018.

33. [297]

    In July 2018, Mr Zisti decided to save on expenses by closing the restaurant for lunch and only operating during the evenings. He said this caused him to lose the revenue generated by university students, who would generally visit during the daytime.

34. [298]

    Further, around this time, Mr Zisti was having difficulty finding Thai chefs. In July 2018, he closed the restaurant for a few weeks to remodel and fit out the restaurant business to operate as an Italian restaurant, known as Sugo Pasta Bar. That business name was registered on 3 July 2018.

35. [299]

    Mr Zisti operated Sugo Pasta Bar from August 2018 to April 2019 with one chef. He says that around August 2018, SLR construction works on the kerb and footpath continued on Anzac Parade, obstructing access for pedestrians and restaurant customers. The barricades and hoardings remained in place. This continued until January 2019. Mr Zisti says he did not recall works taking place outside the restaurant premises in January 2019.

36. [300]

    Mr Zisti says that at various points during the construction, the restaurant was affected by noise, dust and night-time light spillage from the construction works. The noise was a constant feature of the construction work, although the noisiest activities were generally not undertaken during the evening dining hours.

37. [301]

    Further, the construction workers employed the use of intense, bright floodlights at night, which greatly detracted from the ambiance of the restaurant. Sugo Pasta Bar’s street-facing window was constantly coated with dust. Mr Zisti had to employ a window cleaner to regularly clean it.

38. [302]

    Mr Zisti believes that the SLR construction completely ruined the amenity of the restaurant premises. It went from being easily accessible to impossible to access. Customers were told to stay away from the area and when they came, there was nothing enjoyable about eating in the middle of a construction zone.

39. [303]

    Mr Zisti took various steps to mitigate the loss, including general advertising, placing a sign on the awning outside the restaurant premises and reaching out to Randwick City Council to assist him.

40. [304]

    In 2017, Mr Zisti stopped opening his restaurant on Mondays.

41. [305]

    By February 2018, Mr Zisti was discussing with his chefs the need to reduce their hours. He discussed the possibility of terminating the employment of one of the chefs but was told by the head chef that this would not be acceptable to the group. He was told that the chefs would be willing to stay until he was able to find replacements. He advertised unsuccessfully for replacements for a period of three months. A number of trial chefs came and went. By this time, the restaurant business was not making money.

42. [306]

    Mr Zisti says that he did not plan to start an Italian restaurant but he was concerned about the viability of the Thai restaurant. Mr Zisti did not renew the lease when it expired in April 2019.

43. [307]

    The cross-examination of Mr Zisti was limited. He agreed that the construction works commenced in May 2016 but that the works were fairly minor and did not interfere with his business until August 2016.

44. [308]

    He agreed that although he had specifically referred to each month in his statement, he did not have an independent recollection of precisely what construction work was carried out at any particular time. He maintained that construction work involving heavy machinery took place outside his premises between August 2017 and June 2018. He did not recall what type of heavy machinery it was. He was really unable to say precisely what type of work was being carried out during that period. He agreed that he was aware that from the moment the construction started there would be no parking outside the restaurant.

45. [309]

    Mr Zisti agreed that it was always part of his business strategy to have a delivery component for the restaurant business. He was taken to the events of July 2018. He agreed that the Thai chefs resigned in July 2018. He had been looking for Thai chefs since February 2018, although it seems that he had essentially given up looking for new chefs by July 2018.

46. [310]

    He agreed that when the Thai chefs left, he made an instant decision to convert his restaurant to an Italian restaurant. He did not contact a recruitment agency or Centrelink (for example) in order to recruit more Thai chefs. He agreed that by changing to an Italian restaurant, he would lose the customer base of the Thai restaurant and he would still have the same problems with the light rail construction.

47. [311]

    It was suggested to Mr Zisti that the quality of food offered by Sugo Pasta Bar was not as good as the Thai restaurant. He said it was a different cuisine. He was referred to poor Google reviews for Sugo Pasta Bar.

48. [312]

    Parts of the cross-examination of Mr Zisti were directed at the proposition that he had failed to mitigate his loss by not doing more to keep the restaurant open or that in some way he was the author of his own misfortune by changing to an Italian pasta bar. I reject that aspect of the cross-examination.

49. [313]

    As Mr Zisti said, and as his records disclose, 2018 was the first time that his restaurant suffered a loss. He had originally operated a successful business which decreased in profitability after the commencement of the SLR construction. Mr Zisti tried to reduce his staff but his chefs, as a group, would not accept it. They all left at the same time. Mr Zisti then spent three months trying to replace those employees without success. He was not required to continue to operate his business at a loss. His decision to change the restaurant to a pasta bar may have been made somewhat quickly, but he was left without any Thai chefs and he was not a Thai cook. He knew an Italian chef and he hoped to develop the restaurant. A year later, he was forced to decide whether to renew the lease for a period of a further five years. He decided not to. The Italian restaurant was not successful.

Expert evidence

1. [314]

   The parties relied on a range of expert evidence, some of which may be critical to the outcome of the case and some of which was barely relevant. That expert evidence included:

   1. (1)

      utilities experts – Edward Szmalko on behalf of the plaintiffs and Craig Sampson on behalf of the defendant. The defendant also adduced evidence from Stephen Lewcock, a utilities manager who had been employed on the SLR project;

   2. (2)

      planning and programming experts – Mark Griffith on behalf of the plaintiffs and Ian McIntyre on behalf of the defendant;

   3. (3)

      procurement expert – Jarred Hardman on behalf of the defendant;

   4. (4)

      noise experts – Neil Gross on behalf of the plaintiffs and Renzo Tonin on behalf of the defendant;

   5. (5)

      air quality experts – Gary Graham on behalf of the plaintiffs and Aleksander Todoroski on behalf of the defendant;

   6. (6)

      traffic experts – Oleg Sannikov on behalf of the plaintiffs and Shaun Smedley on behalf of the defendant;

   7. (7)

      retail experts – Chris Abery on behalf of the plaintiffs and Ian Shimmin on behalf of the defendant; and

   8. (8)

      quantum experts – Tony Samuel on behalf of the plaintiffs and Ashley McPhee on behalf of the defendant.

2. [315]

   Other than the utilities experts, the experts in each discipline met in conclave and prepared joint reports. In accordance with the orders I made prior to the commencement of the hearing, Mr Szmalko and Mr Sampson did not meet in conclave or provide a joint report. They gave evidence independently of each other.

3. [316]

   Without intending to limit or exclude anything said by the experts, the point of the expert evidence in each discipline may be summarised as follows:

   1. (1)

      the utilities and procurement experts opined on the risks associated with utilities on the project, the defendant’s knowledge of those risks, the delivery model adopted by the defendant, and the process of engagement with OpCo and negotiations as to the contractual terms;

   2. (2)

      the programming experts also commented on risks associated with the project, the way in which the project was to be delivered, the proposed timeframes, the actual periods in which the D&C contractor was engaged in work in each fee zone and the reasons for the delayed occupation of each fee zone;

   3. (3)

      the dust experts offered projections on the likely level of dust which might have been experienced in these fee zones, the relevant standards and the steps actually taken and the steps which should have been taken to reduce the level of dust;

   4. (4)

      the noise experts commented on the likely level of noise arising from the construction activities, the steps actually taken to reduce the noise and the steps which should have been taken to reduce the noise;

   5. (5)

      the traffic experts commented on the methodology for counting traffic and specifically, whether there was any reduction in traffic in Fee Zone 29 as a result of the construction activities;

   6. (6)

      the retail experts commented on the retail market as it existed around the time of the construction of the SLR and offered projections as to how the lead plaintiffs’ businesses might have fared but for the construction activities being undertaken in the relevant fee zones; and

   7. (7)

      the quantum experts undertook mathematical calculations, having regard to various assumptions as to the profitability of the businesses prior to the commencement of the construction of the SLR, and analysed the reduction in profitability as a result of the SLR, having regard to the assumptions that they had made.

4. [317]

   Edward Szmalko is the manager and director of NEN Consulting Pty Limited, which I understand to be his own consulting firm. He holds a Bachelor of Electrical and Electronic Engineering. He is qualified for and has had practical experience in the application of internationally recognised project management and methodologies.

5. [318]

   Mr Szmalko had no involvement in the SLR project but he was aware of its general nature and scope. He believed from media coverage and other public documentation that the project was delivered around two years later than expected (in fact, the completion date was a year late).

6. [319]

   Whilst there was no specific challenge to Mr Szmalko’s expertise, the defendant emphasised in cross-examination that Mr Szmalko’s experience in large-scale infrastructure projects was not prior to 2015.

7. [320]

   Mr Szmalko offered many opinions in his reports. Not all of his opinions were subject to any challenge or necessarily in dispute. However, many of his important opinions were the subject of cross-examination and were challenged. He was certainly challenged as to the basis for some of his opinions.

8. [321]

   Mr Szmalko prepared a 350-page report dated 10 June 2021.

9. [322]

   In that report, he said that he was provided with letters of instruction and asked to make quite a number of assumptions regarding the duties and obligations of the defendant and its dealings with Ausgrid. Some of his opinions reflect his assumptions rather than analysis of what actually occurred.

10. [323]

    Mr Szmalko was instructed to answer the following questions:

11. [324]

    In his second report, dated 6 September 2022, Mr Szmalko was asked to review and comment on the expert reports relied upon by the defendant, being those of Mr Hardman, Mr Sampson and Mr Lewcock.

12. [325]

    In his third report, dated 18 October 2022, Mr Szmalko was asked to offer an opinion on the reasonableness of the defendant’s conduct and, specifically, whether he regarded the entry into the Project Deed as so unreasonable that no authority in the defendant’s position could properly consider it to be a reasonable exercise of the defendant’s power.

13. [326]

    Mr Szmalko opined that it was unreasonable for the defendant to enter into the Project Deed in the circumstances in which it did and, further, that its conduct in entering into the Project Deed and the circumstances in which it did was so unreasonable that no authority in the defendant’s position could properly consider it to be a reasonable exercise of the defendant’s power.

14. [327]

    In offering this opinion, Mr Szmalko referred to the failures of the defendant identified in his first and second reports.

15. [328]

    The failures identified by Mr Szmalko are set out in paragraphs [150]-[152] of his first report as follows:

16. [329]

    Mr Szmalko said that, in offering his opinion, his investigations were focused on the following issues:

    1. (1)

       the defendant’s approach to identifying risks associated with utility assets;

    2. (2)

       the approach, process and methods adopted by the defendant to identify and treat any known potential impacts relating to utility assets;

    3. (3)

       the defendant’s role in engaging with utility providers to manage and identify any potential utility assets and impacts to the project;

    4. (4)

       the outcomes of the engagement with utility providers; and

    5. (5)

       the impacts associated with utility assets that might reasonably have been anticipated by the defendant at the time of entrance into the Project Deed.

17. [330]

    Mr Szmalko stated that the identification, investigation and physical treatment of utility assets is amongst the first work to occur on major construction projects. Treatment of utility assets is typically a significant part of the scope of the project and such treatment is amongst the most complex and time consuming of activities on a project. As he said, this would be particularly so in relation to a project such as the SLR, which involved the Sydney CBD and high utility asset complexity.

18. [331]

    Mr Szmalko pointed out that, when treating utility assets, it is often a requirement of utility providers that those assets are upgraded to comply with current standards. Relocating a utility asset is typically achieved by building a new utility asset in a different location and decommissioning the impacted utility asset.

19. [332]

    There is really no dispute as to these matters. Mr Szmalko’s comments attest to the significant complexity involved in locating and treating utility assets and the uncertainty of knowing what may be required by the utility provider in terms of treatment.

20. [333]

    What is in dispute is whether, with this in mind, the defendant failed in its approach to utilities.

21. [334]

    Mr Szmalko identified such standards or practices as he says existed with respect to the identification of utilities. He said that the principles set out in Australian Standard AS5488-2013 (“the Standard”) represented good industry practice and were not new. However, one of the challenges to Mr Szmalko’s evidence was that his own experience in the area of utilities commenced well after 2013.

22. [335]

    He identified four “quality levels” for utility asset information (being levels A, B, C and D), which were described as follows:

23. [336]

    He said that in his experience, utility asset information is typically available for 70-90% of assets that are quality level B or higher, meaning that, generally, only 10-30% of utility assets will be unknown when proceeding with a construction project. He also said that it is necessary to have, as a minimum, 90% of utility asset information at quality level D. The defendant disputes that opinion. I am uncertain as to the basis of that opinion as it is not contained in the Standard.

24. [337]

    Mr Szmalko said that, in addition to obtaining the necessary information about utility assets, it is necessary to negotiate agreements with utility providers to allow for the necessary access to and treatment of utility assets impacted by the project. In his view, there should be interface agreements, including treatment guidelines. Further, there should be agreements with utility providers which allow for the finalisation of detailed engineering design with respect to proposed utility assets treatments. Again, the need to enter into agreements with utility providers is obvious but the issue between the parties is when that could or should have happened.

25. [338]

    As previously stated, non-contestable works are those which, according to applicable regulations or the provider’s own requirements, can only be carried out by the utility providers themselves. Contestable works are those which allow for third parties to undertake certain works themselves, subject to assurances given to the utility providers. It would follow that the performance of non-contestable work would be dependent on when the utility provider might perform the work.

26. [339]

    Mr Szmalko said that the risks associated with utility assets normally fall into three classes, being:

    1. (1)

       risk of encountering unknown utilities that are not identified by the utility asset investigations;

    2. (2)

       risk of encountering utility assets with different physical characteristics to those identified by investigations prior to commencement of the construction; and

    3. (3)

       utility provider approval risk; namely, there is a risk that approval of treatment plans under a project would not be forthcoming or provided within anticipated timeframes. This risk is particularly high where non-standard treatments are sought, or where they seek derogations from the usual standards applied by the relevant utility provider.

27. [340]

    These are the risks to which I have already referred in a general way as the utilities risk. These are the risks of which the defendant was well aware at the time of entry into the Project Deed. It is notable that, as I have already identified, each of these risks or events fell within the definition of a UWE, for which the D&C contractor was entitled to relief.

28. [341]

    Mr Szmalko said that the management of utilities risk involves conducting sufficient utility investigations in accordance with the appropriate processes and developing treatment plans that are suitable to utility providers. Mr Szmalko said that the need to manage the utilities risk was acknowledged by the defendant or brought to its attention through many of the documents which he, Mr Szmalko, reviewed.

29. [342]

    Again, that is so. I have already provided a summary of those documents.

30. [343]

    Mr Szmalko set out what he considered to be an appropriate utilities risk management approach, in accordance with good industry practice, which he summarised as follows:

31. [344]

    Mr Szmalko was critical of the defendant for not undertaking the Utilities Mitigation Steps. However, the defendant says that Mr Szmalko failed to identify or specify the basis of that opinion and that, in fact, the defendant did undertake the Utilities Mitigation Steps (even though there was no standard or regulation compelling them to do so).

32. [345]

    Mr Szmalko then said that, in a project such as the SLR, there are three main ways that utilities are typically managed in order to minimise the risk posed to a project, being:

    1. (1)

       Option 1 (Early risk transfer) – this involves transferring the risk to the tenderers and transferring the control over the management of that risk at an early stage. The transfer would occur early enough in the planning process to allow for the tenderers to conduct the Utilities Mitigation Steps;

    2. (2)

       Option 2 (Late risk transfer) – this approach involves a State entity retaining control over the management of the utilities risk throughout the planning of the project. The risk is still ultimately transferred to the D&C contractor for construction activity at around Step 6 of the Utilities Mitigation Steps. This is to manage the likelihood of the utilities risk materialising; and

    3. (3)

       Option 3 (Risk sharing) – the third alternative is one where the utilities risk and responsibility for undertaking any Utilities Mitigation Steps is shared. In Mr Szmalko’s experience, on major projects, this involves a two-staged contracting process. The first stage is the project development phase, which is followed by the project delivery phase.

33. [346]

    Mr Szmalko said that, having made the decision to execute a risk transfer under the Project Deed, the reasonable course to mitigate the consequence of utilities risk was to:

    1. (1)

       not issue the RFP until the defendant had completed the Utilities Mitigation Steps; that is, steps 1 to 6 to which I have already referred;

    2. (2)

       advance its utility investigations to a level that would have allowed OpCo to scope and estimate utilities with sufficient certainty, such that it would agree to a risk transfer proposed by the defendant. This involved obtaining better information of higher quality levels;

    3. (3)

       if sufficient utilities assets information was unable to be provided, then the defendant could have:

34. [347]

    Mr Szmalko said that, contrary to what should have happened, on 7 March 2014, the RFP was issued at a time when the defendant:

    1. (1)

       had not finalised the agreements for treatment and guidelines;

    2. (2)

       had not completed sufficient utilities investigations;

    3. (3)

       had not reached agreement with Ausgrid or Sydney Water; and

    4. (4)

       had not yet finalised the Early Works scope.

35. [348]

    There is some merit in Mr Szmalko’s observations, but there is also a difficulty with his opinion, as he opined on the basis that the defendant was seeking to achieve a complete risk transfer in respect of utilities. In fact, the defendant realised early in the planning stage that a complete risk transfer to OpCo would not be achievable and opted for what it described as a risk sharing approach with respect to utilities.

36. [349]

    Mr Szmalko said that, having issued the RFP, the defendant ought to have appreciated that without having properly investigated and assessed the risk associated with utility assets, including not having reached agreements with utility providers, there could have been delays to the main construction works. Again, I have already observed that the defendant did appreciate that there could be delays. That is mentioned many times in the pre-Project Deed documents.

37. [350]

    Mr Szmalko also opined that the scope of the amended Early Works contract was not consistent with good industry practice. He said that the defendant should have maximised the scope of utility works completed during the Early Works phase in order to minimise the scope and time risk for the primary contractor. Instead, the approach which was ultimately adopted maximised OpCo’s scope and increased the risk of associated time and cost effects during its execution of the project.

38. [351]

    Mr Szmalko believed that the scope of the Early Works contract was inadequate in the context of the project as a whole. It showed that the defendant was not prepared at the time of entering into the Early Works contract to comprehensively identify and treat high-risk utility assets. That must be correct, as the scope of utilities treatment in the Early Works contract was limited to six intersections. However, even on that limited basis, Ausgrid had warned the defendant that its timetable for the Early Works contract was unachievable.

39. [352]

    Having reviewed the Project Deed, Mr Szmalko opined that the relief provided in the Project Deed in respect of utilities events was not consistent with his experience as to the very limited relief for the treatment of utilities on other projects. He said that the level of relief under this Project Deed would only have been granted to OpCo if the defendant had considered that delays and additional costs were likely to result from the preliminary nature of the utility asset information and the unfinalised nature of the agreements with Ausgrid and Sydney Water.

40. [353]

    Mr Szmalko described the Project Deed as the final step in the defendant’s failed attempt to execute a complete transfer of utilities risk to OpCo. Again, his assumption or belief was contrary to the fact. He said that the terms which were ultimately included in the Project Deed represent a failure by the defendant to adequately procure the project which, together with other failures in planning the project, almost guaranteed delay in the execution of the project. Again, that may be right, but his opinion is flawed because it is based on the incorrect assumption that the defendant was seeking to transfer the whole of the risk to OpCo.

41. [354]

    Further, Mr Szmalko opined that OpCo would have believed that the treatments in Schedule F8 to the Project Deed (which were different from the Ausgrid standards) had or would be agreed by Ausgrid or that, in some way, the defendant would alleviate the requirement for Ausgrid’s agreement. According to Mr Szmalko, there was a substantial inconsistency between the treatments proposed in Schedule F8 and the actual requirements of Ausgrid. The defendant should have appreciated that this would likely lead to delay in the execution of the project. Again, that may be so, but Schedule F8 does not specify that the treatments suggested had been agreed to by Ausgrid and his assumption that OpCo would have so believed is not otherwise established.

42. [355]

    Mr Szmalko said that Schedule F8 adopted various assumed derogations from Ausgrid’s standards which had not been agreed to by Ausgrid, with respect to a number of specific pit and cable assets. Mr Szmalko considered that the Ausgrid guidelines represented an approach to the treatment of Ausgrid utility asset works that departed from and was materially different to the requirements set out in Schedule F8 to the Project Deed. He considered that the treatment set out in Schedule F8 was very unlikely to be accepted by Ausgrid. It was not good industry practice and was not compliant with Ausgrid’s standards or advice.

43. [356]

    Mr Szmalko was challenged during cross-examination on a number of aspects of his reports. I have already referred to that aspect of his evidence which may be based on incorrect assumptions.

44. [357]

    In my view, as emerged during cross-examination, there are a number of problems with parts of Mr Szmalko’s evidence (both in written and oral form):

    1. (1)

       as Mr Szmalko himself acknowledged, he was asked to assume a number of things and then opine on the planning and design phase of the project, the defendant’s approach to the risks associated with the project and the terms of the Project Deed. He acknowledged that he was not provided with documents which related to the actual work performed by the D&C contractor after it entered into the Project Deed;

    2. (2)

       some of the assumptions made by Mr Szmalko ultimately turned into his own opinions. In fact, when endeavouring to explain certain matters, he said so. He was unable to offer any opinion as to whether, in undertaking the work relating to the utilities, there had been actual compliance with the six steps that he had identified as the Utilities Mitigation Steps. Although he identified the six steps as being necessary, his evidence as to whether the six steps were actually complied with, when they were complied with and by whom, was somewhat vague;

    3. (3)

       Mr Szmalko used certain words about the defendant’s provision of information, such as “misrepresent” and “mislead,” but was unable to say whether this actually had an effect on the staging of the work after entering into the Project Deed;

    4. (4)

       Mr Szmalko’s opinions about how work was done in the industry prior to 2014 were based on what he was told by others, as he appears not to have had any relevant experience in utilities management prior to 2014;

    5. (5)

       Mr Szmalko was critical of the reduction in the scope of the Early Works contract, although he did not acknowledge why the scope was reduced. Further, the original Early Works contract was limited to six intersections and included utilities treatment. As I have said, the Early Works contract required Laing O’Rourke to undertake the work on weekends and at night. However, the scope of the Early Works contract was significantly reduced, such that the work was only performed in respect of two intersections;

    6. (6)

       Mr Szmalko stated that it was the defendant’s intention to transfer all of the utilities risk to OpCo but when pressed, he said that he meant something less than a transfer of the whole risk. However, as expressed in his reports, he had proceeded on the basis that the defendant intended to transfer all of the utilities risk to OpCo and subsequently opined that it had failed to do so;

    7. (7)

       Mr Szmalko referred to the Ausgrid guidelines as having contractual force and requiring more than the relevant standard. Considerable time was taken in the cross-examination trying to identify the standard to which he was referring and where it might be found in his reports; and

    8. (8)

       it was put to Mr Szmalko that the defendant actually undertook the utilities work in accordance with the six steps. Mr Szmalko declined to offer any opinion as he said he did not know how the work was done.

45. [358]

    That was surprising. His criticisms of the defendant were essentially based on his view that good practice required following these six steps. Yet he was unable to specify how the defendant had not followed them.

46. [359]

    It is difficult to understand Mr Szmalko’s emphasis on what he described as the six necessary steps in mitigating utilities risk, unless he was intending to suggest that the defendant did not carry out these steps.

47. [360]

    These problems with Mr Szmalko’s evidence do not mean that I would reject all of his evidence. Some of his opinions were plainly based on his experience (such as the terms of the Project Deed which dealt with the occupation zones and utilities risk, the general risks associated with the project and the potential for delays arising from unknown utilities). However, to the extent that Mr Szmalko offered general opinions about what the defendant should have done, I found his evidence less than compelling.

48. [361]

    The defendant relied on the affidavit of Mr Lewcock dated 11 November 2021. Mr Lewcock is a Utilities Manager employed by Australian Utilities Solutions Pty Ltd. He is currently advising the defendant on the Parramatta Light Rail and other projects. He has been in that role since 2016.

49. [362]

    Between September 2013 and December 2015, he was employed by Turner and Townsend Pty Ltd as a Director of Infrastructure, specialising in utilities management. Turner and Townsend was contracted by the defendant to assist in the tender phase of the SLR.

50. [363]

    During 2013 to 2016, Mr Lewcock was also the Senior Project Manager (Utilities) for the SLR.

51. [364]

    Mr Lewcock has 16 years of experience in the construction industry, which includes 11 years specialising in utilities in the context of infrastructure projects. He previously worked on the Dublin Tram project and on the Edinburgh Tram project. He was the enabling works Construction Manager responsible principally for utility relocations on the Edinburgh Tram project. The Edinburgh Tram project consisted of approximately 2,500 utility relocations. At the same time that he was working on the SLR, he was also the Utilities Lead Manager advising on other light rail projects such as the Canberra Light Rail, Newcastle Light Rail, Parramatta Light Rail, Sydney Metro and Auckland Light Rail.

52. [365]

    Mr Lewcock was asked to provide an affidavit in response to the affidavits of Mr Szmalko. He identified and responded to three criticisms of the defendant that were raised by Mr Szmalko, being:

    1. (1)

       the defendant did not undertake sufficient investigations as to the existence, condition and location of utilities likely to be affected by the SLR prior to issuing the RFP and entering into the Project Deed;

    2. (2)

       the defendant failed to properly consult with and obtain approval from utility providers (in particular, Ausgrid) in relation to the proposed treatment of assets belonging to those utilities prior to issuing the RFP and entering into the Project Deed;

    3. (3)

       the defendant failed to conduct sufficient early works prior to entering into the Project Deed, to minimise the potential for disruption and delay to OpCo after entry into the Project Deed (that is, the scope of the Early Works contract).

53. [366]

    Mr Lewcock disagreed with each of these criticisms.

54. [367]

    Mr Lewcock said that after commencing work in September 2013, he quickly became aware that, from a utilities perspective, the SLR project was likely to be far more complicated than any other Australian infrastructure project about which he had knowledge. In particular, he identified:

    1. (1)

       the location of utility assets in a congested CBD;

    2. (2)

       the amount of traffic congestion on George Street;

    3. (3)

       the quantity and complexity of assets in George Street (particularly the Ausgrid assets);

    4. (4)

       the complexity of the Ausgrid 11KV triplex system;

    5. (5)

       the criticality of the utility assets in the CBD;

    6. (6)

       the age of the assets;

    7. (7)

       the location of the roads inhibiting access; and

    8. (8)

       the imprecise nature of the information as to the existence and condition of the utilities.

55. [368]

    There is really no dispute that these matters rendered the utilities investigation and treatment complex. Indeed, Mr Lewcock’s reference to these matters again serves to highlight the potential for problems and delays to arise during construction due to the need to discover, agree on and treat all relevant utilities.

56. [369]

    Mr Lewcock said that, in 2014, there were known principles regarding the classification of information, including quality levels and information for subset utilities ranging from quality level D (being the most basic and least reliable) to quality level A (being the most reliable). He said that obtaining quality level A information in respect of utilities in a busy CBD street is time consuming and costly.

57. [370]

    Mr Lewcock said that, prior to entry into the Project Deed, the defendant obtained:

    1. (1)

       quality level D information for the entire route of the SLR;

    2. (2)

       quality level C information for the entire route of the SLR;

    3. (3)

       quality level B information for 100% of Route A (that is, George Street);

    4. (4)

       quality level A information for approximately 90% of every known pit and manhole, including in Fee Zones 5 and 6, and 100% of known electrical communications, Council, RMS and Sydney Water utilities; and

    5. (5)

       for Fee Zone 29, the defendant obtained quality level A information for manholes and all service features.

58. [371]

    Mr Lewcock noted that the defendant did not have the expertise to carry out utilities investigations, relocations, nor the design and construction of the SLR. It engaged contractors to undertake these tasks. In particular, it engaged contractors to gather utilities information during the planning and procurement phase for the purposes of:

    1. (1)

       informing the scale of the tasks that utilities would play in the SLR;

    2. (2)

       informing the selection of an appropriate delivery model;

    3. (3)

       facilitating a competitive tender process for an Early Works contract; and

    4. (4)

       facilitating a competitive tender process for a “design and construct” contractor.

59. [372]

    Mr Lewcock opined that the defendant achieved these purposes during the process of design, planning and procurement of the SLR. Indeed, it asked the proponents to identify what additional investigations they might require.

60. [373]

    Further, he referred to the “Sydney Light Rail Utility Conflicts Database” (“the database”) as well as the GAS model, which were made available to OpCo. The GAS model was a software programme which could be utilised to search for underlying data.

61. [374]

    He considered that the conflicts database was a more reliable source of information than Mr Szmalko’s recreated GAS model. Ultimately, having reviewed the conflicts database, Mr Lewcock considered that the quality information supplied by the defendant in respect of Fee Zones 5, 6 and 29 was significantly greater than Mr Szmalko suggested.

62. [375]

    Mr Lewcock rejected the suggestion that the defendant in some way failed by not obtaining treatment approvals from Ausgrid prior to entry into the Project Deed. He said that this suggestion ignores the reality of Ausgrid’s approach, the complexity of the Ausgrid network and the need to undertake disciplinary design checks before seeking approval for a treatment. He rejected the idea that it would have been possible for the defendant to have reached agreement with a utility provider, such as Ausgrid, in respect of the treatment of Ausgrid assets even before appointment of the proponent.

63. [376]

    Mr Lewcock also rejected Mr Szmalko’s criticism of the defendant in not undertaking further Early Works (additional utilities investigations). He considered that the defendant did undertake sufficient investigations to enable proponents to make bids and answer the RFP. Proponents were able to and did request additional investigations or information. Of course, this must be so, but this only addresses the issue from the perspective of there being sufficient information to engage the other party.

64. [377]

    He also rejected Mr Szmalko’s idea that the defendant should have and could have obtained Ausgrid’s approval as to the treatment of particular assets prior to entry into the Project Deed. He considered that Ausgrid required a detailed proposal from the successful tenderer prior to approving any proposal.

65. [378]

    This was certainly one of the major themes of the expert evidence. That being whether it would have been possible to enter into agreements with utility providers prior to the SLR design being finalised. On the defendant’s case, this could never have occurred.

66. [379]

    Mr Lewcock then reviewed the actual work undertaken by him as the Senior Project Manager of Early Works and utilities for the SLR. He recalled that when he started that work, he received, examined and considered the state of the utilities work undertaken up until that point and sought to identify any gaps or associated risks. He also considered what work needed to be completed to enable the project to be packaged for tender. He said that relevant personnel from the defendant and Ausgrid met regularly. There were a number of different streams for which groups were formed, meetings occurred and minutes were taken. I have commented on this in my examination of the planning process.

67. [380]

    Mr Lewcock said that when he commenced, he read the prior project records of extensive engagements with Ausgrid. In particular, he referred to the early Issues Papers and the Ausgrid preliminary asset assessment treatments supplied by 30 September 2013. He said that Ausgrid made it plain from the outset that its preference was that the assets would be left in place untreated, if possible. This approach featured in the defendant’s ongoing dialogue with Ausgrid. In light of this, any treatment which needed to be relocated required a detailed design evidencing why it could not be left in situ. As Mr Lewcock said, the design of the SLR was to be prepared by the tenderer which meant that the defendant was not in a position to provide a detailed design in respect of each utility potentially requiring relocation.

68. [381]

    However, the defendant did engage Arup Group engineers to prepare a reference design. The reference design was issued in August 2013.

69. [382]

    Mr Lewcock said that even prior to his arrival on the project, the defendant had already undertaken extensive work to understand and prepare for the engagement of a contractor, including by way of significant trenching works to improve the quality of utility information.

70. [383]

    He referred to an Issues Paper dated 20 June 2013, which noted that a key risk to the project would include managing and appropriately treating conflicts with utilities and services encountered along the alignment, and that the resolution of such conflicts had the potential to be more complex than anticipated and could result in:

    1. (1)

       delays in reaching agreements with utility providers and stakeholders;

    2. (2)

       severe impacts on the existing road networks and services;

    3. (3)

       scheduled delays and additional costs associated with the scope of the works;

    4. (4)

       damage to existing assets; and

    5. (5)

       safety incidences associated with any services.

71. [384]

    The object of the proposed trenching contract was to reduce these risks.

72. [385]

    The defendant entered into a trenching contract in September 2013 which required the trenching contractor to do, amongst other things:

    1. (1)

       carry out a desktop study of the “Dial Before You Dig” documentation;

    2. (2)

       coordinate with others to determine the exact location and depth of trenches required;

    3. (3)

       conduct field verification of existing infrastructure and services (known and unknown) and propose trench locations;

    4. (4)

       facilitate interface agreements with technical advisers and utility providers to optimise access to utilities; and

    5. (5)

       obtain all of the necessary approvals, including from responsible authorities, and comply with their conditions.

73. [386]

    Mr Lewcock then pointed to what he said was the trenching contractor’s extensive engagement with Ausgrid and the City of Sydney Council on the trenching to be undertaken. Mr Lewcock referred to ongoing discussions and negotiations with Ausgrid, particularly through the defendant’s consultant, the Arup Group.

74. [387]

    He noted that by the time the Request for Proposal was issued on 7 March 2014, the results of the trenching investigations had been compiled with by the Arup Group and consolidated into a user-friendly document which was made available to proponents in the Data Room. After 7 March 2014, proponents were issued with the survey information. In particular, a meeting was held between the defendant and CSY about the site investigation data. At this meeting, the defendant sought to demonstrate the amount of quality utilities information that was available, how that information was gathered, where to find it and how to use it.

75. [388]

    Reference was made to the development of an Underground Utilities Survey (“UUS”) model created by the Arup Group, which contained all of the relevant information known by the defendant.

76. [389]

    On or about 16 April 2014, the Arup Group uploaded to the Data Room a Utilities Clash Detection Guide dated 27 March 2014. The purpose of this guide was to assist the defendant in understanding the number of utility clashes on the SLR project and this could be used to inform further investigations and design developments. The guide contained a classification reflecting the different quality levels of utilities information, that is, quality levels A to D.

77. [390]

    Mr Lewcock highlighted that information had been regularly updated to the Data Room, including information relating to utilities investigations.

78. [391]

    On 15 May 2014, an interactive meeting about utilities was held between the defendant, CSY and Ausgrid. Ausgrid advised that all asset relocation was non-contestable work. An issue arose as to whether Ausgrid would undertake the work itself or use a contestable approach, meaning that OpCo would complete some of the utilities relocations or upgrades.

79. [392]

    Mr Lewcock referred to the difficulties with finalising the scope of the Early Works, especially because works were required on Ausgrid assets at each intersection forming part of the Early Works contract. In particular, Mr Lewcock noted that Ausgrid would not approve any relocation proposal for a particular Ausgrid asset without a completed design (integrated with adjoining Ausgrid assets) and the final SLR design.

80. [393]

    As Mr Lewcock noted, on 20 June 2014, the defendant issued proponents with a notice attaching Schedule E1 to the Project Deed, being the scope and performance requirements for utility service treatment plans.

81. [394]

    On 12 July 2014, CSY submitted its response to the Request for Proposal, which included the draft Initial Utility Service Treatment Plan. The purpose of this document was to outline the procedures that would be established by CSY for relocating and working on the utility assets during the design and construction of the SLR. The Utility Service Treatment Plan covered all aspects of the scope of the work relating to the relocation, protection and adjustment of utility assets, including:

    1. (1)

       the set-up and maintenance of interface agreements with utility authorities;

    2. (2)

       detailed designs for the relocation and protection of utilities which were contestable works; and

    3. (3)

       the management of utility authorities during the preparation of non-contestable utility designs.

82. [395]

    At a meeting on 31 July 2014, Ausgrid tabled a document which set out a proposed approval process. Ausgrid indicated that it proposed to analyse the treatment of its assets on a “lot” basis, rather than asset-by-asset. Ausgrid would develop a high-level design solution and the designs would be completed by the proponent. The design would be submitted to Ausgrid for issuance of the Ausgrid-approved treatment plan which would reference Ausgrid’s standards and requirements. The timeframe would be two to four weeks per lot, meaning that Ausgrid was foreshadowing that the treatment approval process could take up to four weeks for each lot.

83. [396]

    According to Mr Lewcock, only the D&C contractor could submit such design plans because the Project Deed stipulated that the D&C contractor was to prepare the final design for the SLR.

84. [397]

    Mr Lewcock then detailed the continued exchange of information leading up to the execution of the Project Deed on 17 December 2014.

85. [398]

    According to Mr Lewcock, Ausgrid made it clear that, in the absence of a detailed design integrated with the SLR design, Ausgrid would not and could not approve any treatment of utilities in advance. He said that Ausgrid refused to agree to any options in advance of the detailed design, which was only going to be undertaken after completion of the Project Deed. He rejected Mr Szmalko’s suggestion that it would have been possible to develop an agreed treatment method with Ausgrid prior to the RFP or the Project Deed.

86. [399]

    Specifically, in respect of Fee Zone 5, Mr Lewcock annexed the information contained in the database to his affidavit. He said it showed that 53% of the data obtained by the defendant was quality level A and that there was 100% quality level A information relating to the Ausgrid pits, although, as he clarified in his oral evidence, this does not mean 100% quality A for the whole of Fee Zone 5. Similarly, in respect of Fee Zone 6, Mr Lewcock said that the information obtained was 47% quality level A and 100% quality level A in respect of the Ausgrid pits. In Fee Zone 29, the information was 25% quality level A. There were no Ausgrid pits in Fee Zone 29.

87. [400]

    The plaintiffs’ cross-examination of Mr Lewcock was focussed on the processes adopted and decisions made by the defendant as to the investigation and treatment of utilities, along with the consideration given to differing delivery models for the SLR.

88. [401]

    Mr Lewcock was cross-examined about his experience on the Edinburgh, Dublin and Parramatta light rail systems. This was presumably in an attempt to establish that things had been done differently in other places. Namely, agreements had been entered into prior to the relevant civil works and there had been proper and complete identification of utilities prior to the commencement of those works.

89. [402]

    On the Edinburgh Tram project, Mr Lewcock was responsible for removing all conflicts in the Edinburgh city centre which could prevent the infrastructure from being constructed. Ninety percent of those conflicts were utility conflicts. It was put to him that in respect of the Edinburgh Tram project, there had been a Multi Utilities Diversion Framework Agreement in place which was similar to an early works contract. Mr Lewcock did not recall this and it was not otherwise established by the plaintiffs.

90. [403]

    Mr Lewcock disagreed that the removal of the utilities conflicts took place in advance of the construction of the Edinburgh Tram. He said that the construction had started but it subsequently ceased because there was a dispute as to whether the light rail corridor had been properly cleared.

91. [404]

    He disagreed that the Edinburgh Tram construction followed the removal of utilities conflicts by another contractor; Mr Lewcock said there had been an early works package but it had not been completed in advance of the civil works contractor starting. He agreed that his experience was that there were significant delays in the performance of the early works contract because of the number of utilities which needed to be dealt with. He was not sure precisely why there had been delays but he agreed that there were complexities in removing the utilities along the light rail corridor. He accepted that it had been necessary to enter into agreements with utility providers, which took some time. He accepted that there were delays but maintained that the actual project was delivered in advance of time.

92. [405]

    In respect of the Dublin Tram, Mr Lewcock said that the model was very different. That is because the government actually constructed their own infrastructure. The main contractor did all of the works, including the utilities works. The early work on utilities was very limited and mainly involved changing corners on kerbs to enable traffic diversions to advance the main works.

93. [406]

    Mr Lewcock also agreed that in respect of Stages 1 and 2 of the Parramatta Light Rail, there was a stepped process whereby the contractor went through zones. However, in that project there was no discrete early works package; once they moved into a new section, they completed all of the utilities works and laid the track.

94. [407]

    It was put to Mr Lewcock that in respect of the Parramatta Light Rail, the defendant conducted its own site investigations and consulted with the major utility providers from the early stages to plan, design and construct activities using augmented reality and digital 3D technology to map more than 300 inground services. He answered “Yes, the same as SLR, the Sydney Light Rail”.

95. [408]

    Mr Lewcock was taken through the Early Works contract in some detail. He agreed that its purpose was to minimise disruption to critical bus routes and to reduce the likelihood of delays to the project. He said that, as he only arrived on the project after the planning stage, he was not aware of any discussions about the way in which the SLR should be delivered. It was not within the scope of his role to determine whether there should be an early works contract or not.

96. [409]

    He agreed that if the aims of the Early Works contract had been achievable, it would have reduced the likelihood of delays during the construction of the SLR, although he did not believe that it would have necessarily prevented the delay to the end date of the contract. He thought it would speed up the D&C contractor’s work because it would limit the scope of its work and reduce the length of any delay arising.

97. [410]

    Mr Lewcock seemed disinclined to accept Mr Bannon’s propositions (on behalf of the plaintiffs), but I understood Mr Lewcock to be generally accepting that if the Early Works contract had been achievable (that is, if it had been performed as it was intended), then it would have limited the potential for delays during the performance of the Civil Works.

98. [411]

    Further, Mr Lewcock agreed that if the Early Works contract had been performed as initially intended, then agreements could have been reached with utility providers at an earlier point.

99. [412]

    He agreed that the work carried out under the Early Works contract was performed in the manner stipulated by the contract: at night and on weekends. If a problem was discovered with a utility which could not be solved immediately, then the road was reinstated whilst the problem was being resolved, thereby causing no disruption to traffic along the road.

100. [413]

     It seems clear that the benefit of the Early Works contract, had it been wholly achievable, would have been that the utilities treatment work could have been investigated and undertaken outside of normal business hours.

101. [414]

     If all of the utilities treatment work was undertaken in this manner, then the noise and dust (factors to which Ms Hunt referred) would have been significantly reduced. That is because the utilities treatment work which took place on George Street would have been undertaken at night whilst shops were closed. Whether that was actually achievable may be another issue.

102. [415]

     However, it was never part of the plaintiffs’ case that all of the utilities work should have occurred outside of normal hours or that this would have been an achievable means of lessening the impact on businesses.

103. [416]

     Mr Lewcock was cross-examined on his knowledge of the risks associated with utilities. Again, Mr Lewcock and the cross-examiner disagreed slightly on the meaning of “risk” and “significant risk”. I can only accept that when the term “risk” was used in various documents prior to entry into the Project Deed, the relevant persons were using the word in the ordinary sense, meaning the potential for something to happen in the future.

104. [417]

     The utilities risk was described as a “significant risk”. Again, bearing in mind the number and complexity of the utilities, that must be so. Indeed, it was described in the planning documents as an extreme risk.

105. [418]

     A person does not need to be an expert engineer to understand that the number and range of utilities under George Street would be vast and complex. This was all identified in the defendant’s correspondence in 2013 and 2014. The point of Mr Bannon’s cross-examination on this topic was to identify that the defendant must have been well aware of the risks associated with the treatment of the utilities.

106. [419]

     Whether or not Mr Lewcock necessarily agreed with the sentiments expressed in the correspondence is not of great significance because the documents tend to speak for themselves.

107. [420]

     It is apparent from a review of the documents that from the moment Ausgrid was informed of the defendant’s intentions in respect of the SLR, it expressed a real concern about the cost and time necessary to undertake appropriate utilities investigations and treatments, specifically in relation to its own assets. I have identified examples in my summary of the pre-Project Deed planning.

108. [421]

     Yet, according to Mr Lewcock, Ausgrid’s approach changed in August 2014. He said that until August 2014, Ausgrid had been adopting a business as usual approach, meaning that it would deal with requests from the D&C contractor about its utilities in the usual way.

109. [422]

     However, he said that Ausgrid then decided to adopt a collaborative approach. It developed its own team to deal with the SLR project. Its team would be devoted to dealing with the SLR which, according to Mr Lewcock, changed the parameters of the argument and the risks associated with the treatment of utilities.

110. [423]

     That may be somewhat of an overstatement. I accept that there was a change in Ausgrid’s attitude and approach in the three months leading up to entry into the Project Deed but it does not necessarily follow that all of its earlier warnings and cautions regarding the cost, delay and difficulties in treating and relocating assets suddenly became redundant. Indeed, Ausgrid never suggested that its earlier warnings were no longer relevant. Ausgrid's suggestion that all of the work on its utilities would be non-contestable (meaning that Ausgrid would be doing the work itself) must have rung alarm bells for the defendant when it came to planning.

111. [424]

     Ultimately, the Early Works contract was reduced in scope. The Early Works contractor did provide some early relocations in Pitt, Eddy and Rawson Streets. It moved a gas main and some telecommunications cables, but it seems that the objectives of the Early Works contract were not achieved.

112. [425]

     I found Mr Lewcock to be an impressive witness. Of course, it is unsurprising that he remained supportive of the defendant’s approach in terms of its utilities investigations and delivery model. He was directly involved in the process, although he did not establish the defendant’s delivery model.

113. [426]

     Mr Bannon’s point that Mr Lewcock was not a decision-maker and the defendant did not call anyone higher up the chain of command was well-made, however, that does not diminish Mr Lewcock’s evidence or the relevance of his explanations about what actually occurred.

114. [427]

     Further, having regard to Mr Lewcock’s evidence and references to pre-Project Deed documents, it is apparent that Mr Szmalko’s criticisms and opinions were very general in nature. Not only did Mr Szmalko not consider what actually happened but it appears that he did not consider some of the important source documents.

115. [428]

     Mr Sampson prepared reports dated 23 December 2021 and 15 November 2022.

116. [429]

     Mr Sampson was asked by the defendant to respond to Mr Szmalko’s criticisms. Mr Sampson is a civil engineer who provides consulting services to major infrastructure projects in Australia. He has worked on a number of light rail projects, commencing with the Gold Coast Light Rail in 2010 progressing through to Stages 2 and 3 of that project, as well as the Canberra Metro and the Parramatta Light Rail. He said that he was very familiar with the importance of design and integration of utility treatment works, the necessity of accurate utility asset locations and the need to undertake extensive subsurface utility investigations. He said he was familiar with the difficulty in obtaining utility authority approvals for integrated utility treatments and the need for sufficient design information in this process.

117. [430]

     Mr Sampson reviewed the different quality levels of information in respect of the SLR utilities (being quality levels A to D) with reference to the Standard (AS5488-2013). He pointed out that Mr Szmalko had made multiple references to the 2019 version of the Standard in preference to the 2013 version, despite the fact that Mr Szmalko commented on what the defendant should have done in 2013 and 2014.

118. [431]

     Mr Sampson said that, in his experience, in 2013 and 2014:

     1. (1)

        it was only possible to have utility assets at 100% quality level A if the entire length of the asset had been sighted and surveyed. With respect to the SLR, that did not happen;

     2. (2)

        in 2013, much less focus was placed on the importance of engagement with utility providers to confirm utility treatment options. Rather, there was a focus on passing all the risks to the relevant contractor, leaving it to them to resolve issues with the utility providers. By way of example, Mr Sampson referred to Stage 1 of the Gold Coast Light Rail, whereby the risk was left to the contractor to deal with utility providers. That may be right and the defendant in this case originally intended to transfer the risk to OpCo;

     3. (3)

        Mr Sampson disagreed with Mr Szmalko’s criticisms of the level of utility investigations, noting that by the time of its Returnable 8 options from CSY, the survey coverage for route A (which included Fee Zones 5 and 6) was 100% level B and level A survey. In his opinion, these figures exceeded Mr Szmalko’s generalised quality level estimates;

     4. (4)

        Mr Sampson suggested that all utility quality levels should only be used as a guide. In some circumstances, even quality level B data could be far too inaccurate for determining an appropriate utility treatment in congested areas; and

     5. (5)

        further, it would always be necessary for the contractor to undertake additional quality level A investigations for its design and construction needs. He stated:

119. [432]

     He also suggested that undertaking sufficient quality level A subsurface investigations to satisfy the project needs by the Request for Proposal stage would have been an extremely invasive process, with considerable time required and a large stakeholder impact. The full investigation process would have required significant amounts of CBD roads and verges to be closed.

120. [433]

     Mr Sampson considered that the defendant completed the subsurface utility investigation works in accordance with good industry practice. Further, he noted that Mr Szmalko did not provide specific locations where he believed that more utility quality level A investigations should have been carried out and failed to identify why they were needed. Without such detail, it was difficult to respond to Mr Szmalko’s criticisms.

121. [434]

     Mr Sampson suggested that it would have been quite impracticable to consider an option that involved fully excavating ground materials to expose the utilities for the entire SLR route prior to commencement of the D&C contract (or at any time).

122. [435]

     Ultimately, it was Mr Sampson’s view that it was almost impossible to accurately confirm the location of all potentially impacted utility assets along the SLR corridor ahead of a detailed design and the commencement of the construction. He emphasised that many impacts would not have been known until the advancement of the detailed design, such that the detailed utility investigation works would have caused considerable further disruption to stakeholders along the route.

123. [436]

     In relation to Mr Szmalko’s suggestion that the defendant should have entered into agreements with utility providers to provide certainty about the treatment of utilities, Mr Sampson agreed that despite Schedule F8 to the Project Deed, there was no certainty that the treatment guidelines would be accepted by the relevant utility providers.

124. [437]

     I am not sure what Mr Sampson meant by that but perhaps more significantly, he also considered that it was extremely unlikely that Ausgrid would have agreed on derogations prior to the Project Deed being executed. He pointed out that during Stages 1 and 3 of the Gold Coast Light Rail, the electrical authorities all requested extensive detailed design and integration to verify the impacts to their networks before agreeing on any treatment guidelines.

125. [438]

     He opined that, without the Project Deed being executed and the D&C contractor having substantially completed the detailed design process, the utility authorities would not have provided the approvals which Mr Szmalko said the defendant should have obtained. The only way that the defendant could have obtained approvals or agreements from utility authorities prior to the Project Deed execution would have been to develop an alternate project delivery strategy. That is, a strategy which allowed for detailed design to occur ahead of the engagement of a construct-only contractor to build the SLR infrastructure.

126. [439]

     Mr Sampson did not consider that such an alternative delivery strategy was possible, having regard to his experience working on major civil infrastructure projects for the following reasons:

     1. (1)

        firstly, in the absence of a detailed design which accurately sets out the location and details of the proposed infrastructure, there is uncertainty as to which existing utilities require treatment and the scope of any required treatments;

     2. (2)

        secondly, an integral part of finalising utility treatments requires consideration of the construction staging to ensure the proposed utility treatments are efficiently and effectively undertaken; and

     3. (3)

        thirdly, there is generally considerable delay in undertaking utility treatments. In Mr Sampson’s experience, some utility treatments take several years to complete, depending on their complexity. The SLR project could not wait for all utilities to be relocated before commencing other project infrastructure.

127. [440]

     In his second report, Mr Sampson was asked to specifically opine on whether the defendant acted (or omitted to act) in circumstances which were so unreasonable that no authority having the suggested special statutory power could properly consider it to be a reasonable exercise of its powers by not finalising agreements with utility providers regarding the treatment of utility assets (prior to the execution of the Project Deed).

128. [441]

     In his opinion, the defendant did not act or omit to act in a way that was in the circumstances so unreasonable that no authority having those special powers could properly consider it to be a reasonable exercise of the powers.

129. [442]

     The key reasons for this opinion were stated as:

     1. (1)

        the utilities scope of work for the project was not fully quantifiable at the time of the RFP due to the need to undertake the detailed design process to confirm utility impacts;

     2. (2)

        similarly, agreement on utility treatments by the utility providers was not possible at the time of the RFP due to the need to first undertake the detail design process;

     3. (3)

        irrespective of whether there was a finalised agreement with Ausgrid at the time of the Project Deed execution, the fact remains that any such agreement would only have been a guideline for seeking utility treatment approval. There would not have been an agreed treatment solution for each impacted utility; and

     4. (4)

        a full transfer of the utilities risk to the successful proponent/D&C contractor was not possible given the market’s appetite for accepting the utilities risk, especially given that it was not possible to finalise a fixed utility treatment scope of work during the RFP process.

130. [443]

     Mr Sampson opined that the SLR was a very difficult and complex project and that the defendant acted reasonably in all matters that he considered in his reports.

131. [444]

     Mr Sampson referred to his experience on the Gold Coast Light Rail project as an indicator of what could go wrong, particularly in relation to the utilities risk. In his view, the Gold Coast Light Rail contractor underestimated the utilities risk and, having accepted it, was significantly impacted due to unforeseen utility related impacts, utilities scope growth and consequential program delays. This resulted in significant costs and time blowouts on the Gold Coast project.

132. [445]

     Further, even though the Gold Coast Light Rail contractor carried out subsurface utility investigations ahead of the design and construction phase, many unknown utilities were found during the construction activities. As such, the contractor had to obtain treatment design and approvals from utility authorities as it completed the construction works. This all caused a considerable delay to most aspects of the Gold Coast project.

133. [446]

     Having said that, Mr Sampson believed that the difficulties with utilities in Stage 1 of the Gold Coast Light Rail was a key moment for the civil contracting industry (although the basis of this belief is somewhat unclear). The industry became aware of the risks of entering into a PPP contract model for large light rail infrastructure projects, in which the contractor is required to accept all of the utilities risk.

134. [447]

     Mr Sampson’s observations about the Gold Coast experience and the experience of the industry experience in general seem to me to be particularly significant. He pointed to the industry’s awareness of the potential for significant delays arising from the discovery of unknown utilities and the need to reach agreement with utility providers. Further, he observed that the Sydney CBD, when compared to the Gold Coast, was significantly more complex from a utilities treatment perspective. He said this would have influenced any proponent for the SLR PPP.

135. [448]

     In giving this evidence, Mr Sampson was really suggesting that the risk of delay caused by utilities was so high that potential proponents would not be willing to accept it. That is demonstrated by what occurred on the SLR. However, this evidence was really a double-edged sword for the defendant as it tended to highlight that the defendant knew that the risk of substantial delay arising from the utilities was high. Mr Sampson’s point was that the risk associated with utilities was so high that a proponent would not accept it. This provides an answer to Mr Szmalko’s criticism about risk sharing and rather reinforces the problem for the defendant (as it ultimately took the risk).

136. [449]

     Mr Sampson disagreed with Mr Szmalko’s opinion that the defendant had determined to arrange a complete transfer of all utilities risk to OpCo. He considered that while the defendant continued to prefer a full transfer and sought to test the market in this regard, the ultimate risk transfer outcome was subject to gaining agreement from a market that had little appetite to accept the utilities risk.

137. [450]

     Mr Sampson considered that there were problems with undertaking all of the utilities investigations and completing the detailed design prior to execution of the Project Deed. Mr Sampson also considered that the scope of utility investigations is very much dependent on the detailed design process and planning during the construction stage, which often leads to many additional constraints not envisaged at the RFP stage. He did not consider that the completion of utility site investigations prior to a detailed design process and without daily input from the construction contractor would generate all of the information required to negate the utilities risk. In other words, the utilities risk would remain.

138. [451]

     Further, he considered that the completion of a detailed design ahead of inputs from a successful proponent would result in a significant design interphase risk, meaning that the designs would not fit together and there would likely be redesign required, resulting in changes to utilities treatments.

139. [452]

     Mr Sampson rejected Mr Szmalko’s criticisms of the defendant’s conduct in relation to the Ausgrid utility assets. He accepted that there was no certainty that the guide to utility treatments would be accepted by Ausgrid, but he maintained that obtaining Ausgrid agreements on derogations prior to the Project Deed was extremely unlikely due to the need for extensive detailed design information which was not available during the RFP process.

140. [453]

     Mr Sampson also rejected Mr Szmalko’s criticisms of the failure to include further utilities investigations in the Early Works program. Again, he pointed out that Mr Szmalko had failed to provide specific details on which utility assets could have been treated as part of the Early Works contract. He said that utility treatments can only be undertaken through an early works contract if there is a sufficiently detailed design available at the time of the early works contract. There was not on this project because the detailed design was to be undertaken by OpCo.

141. [454]

     Mr Sampson opined that in 2014, there was less focus on the importance of utility providers’ engagement and more focus on passing all of the risk onto the contractor. He referred to the Gold Coast Light Rail by way of example. He also opined that the defendant did implement many of the items set out in the 2019 Australian Standard (AS5488.2:2019) even though they were not specifically detailed in the 2013 Standard.

142. [455]

     He acknowledged that, due to the inability to fully quantify the scope of the utilities work during the RFP, there was a significant utilities risk at the time of the Project Deed execution. As the proponents were not prepared to accept all of that risk, the defendant had to negotiate a risk sharing process to obtain a proponent which was prepared to sign the Project Deed. In these circumstances, Mr Sampson did not consider that the defendant acted unreasonably.

143. [456]

     Counsel for the plaintiffs, Mr Bannon, challenged a number of aspects of Mr Sampson’s reports. In particular, he took Mr Sampson to the agreement between the defendant and Sydney City Council, questioning whether Mr Sampson had regard to the defendant’s obligation to various stakeholders, including persons likely to be affected by the SLR construction.

144. [457]

     Mr Sampson did not expressly state in his reports that he had particular regard to any obligation to business owners and those affected by the construction of the light rail. However, he responded to Mr Bannon’s questions by suggesting that those stakeholders were in the back of his mind and he would have considered them when forming his opinion.

145. [458]

     Mr Sampson was cross-examined in relation to the alternative delivery model put forward by the plaintiffs. During the course of the evidence, the alternative delivery model seemed to shift from separate early works and D&C contracts to a single D&C contract with separate stages or “hole points”. During his evidence as to why he did not consider that separate early works and D&C contracts were an appropriate delivery model, Mr Sampson said:

146. [459]

     I took Mr Sampson to be expressing the view that the best model would be one which saw the treatment of the utilities prior to any construction works associated with the light rail, such as the laying of the slab and the light rail line. He was taken up on this comment by Mr Bannon. Although Mr Sampson accepted that he had suggested this, he moved away from the suggestion in subsequent questioning. It was suggested by Mr Bannon that Mr Sampson was acting as an advocate but, other than the fact that his answers were not always what the plaintiffs might have wanted, the basis for such a suggestion was unclear.

147. [460]

     The thrust of the cross-examination was that Mr Sampson had failed to factor into his opinion any consideration of stakeholders, such as business owners and residents along the SLR route, and that his opinion as to the reasonableness of the defendant’s conduct – that is, his direct opinion that the defendant’s conduct was not so unreasonable that no authority would have acted that way – was affected by what may be described as a one-dimensional approach.

148. [461]

     Mr Sampson was cross-examined extensively on his experience with the Gold Coast Light Rail. He specifically said that he only had regard to his experience on Stage 1 of the project (which was completed by 2014), noting that he was subsequently involved in Stage 2 of the project. As he alluded to, the Gold Coast Light Rail proved to be somewhat disastrous for the relevant contractor. According to Mr Sampson, the cost of the project was around $750 million, but the contractor only received a payment of approximately $400 million. Of course, there is much more to the analysis than merely looking at those numbers but at least on the evidence before me, it seems that the Gold Coast project was completed at a loss to the contractor.

149. [462]

     One of the reasons for that was apparently that the contractor decided to incur the substantial cost in ensuring that the project was completed on time, rather than expose itself to significant penalties by way of liquidated damages. Mr Sampson claimed that the penalties for non-completion on time were severe (up to $1 million a day).

150. [463]

     According to Mr Sampson, even though the D&C contractor on the Gold Coast project exposed itself to extra costs in carrying out work at night-time as well as during the daytime, it determined that it would incur all of those costs to complete the project on time, rather than being exposed to significant liquidated damages. Of course, these penalties might be contrasted with the amounts payable by the D&C contractor for overstaying a fee zone.

151. [464]

     Perhaps importantly, Mr Sampson also agreed in cross-examination that suggestions of 100% quality level A information had the potential to be misleading. He said that the reference to 100% level A only applied to the specific point of the investigation, for example, a pothole. Anything between those points cannot be level A, unless it has been sighted.

152. [465]

     Further, he pointed out that the real problem with utilities is the unknowns. He would have expected the D&C contractor to have undertaken utilities investigations after the Project Deed and before the commencement of the Civil Works, however, the problem arises when unknowns are discovered or “just pop up” during the course of the works. He distinguished between unknown utilities discovered before commencement of the works and those which are discovered during the works. It is the discovery of the latter which, according to Mr Sampson, make a “huge difference” to the outcome.

153. [466]

     Overall, much of what Mr Lewcock and Mr Sampson said makes sense. It is consistent with much of the pre-Project Deed documentation and discussions. Their views were more based on their experience and knowledge of what was happening on the project, rather than being generalised or unsupported criticisms lacking regard to what occurred on the project and elsewhere. Much of the expert evidence was directed at the s 43A CLA question and the unreasonableness of the defendant’s conduct. I prefer the evidence of Mr Lewcock and Mr Sampson on that issue.

154. [467]

     As I have identified in my review of the evidence of the utilities experts, there are a number of problems with Mr Szmalko’s evidence. Specifically, some of the assumptions he made are not borne out by the evidence and some of his conclusions are directly contrary to the evidence. The basis of some of his opinions is not clear. To the extent that he offered opinions on any alternative delivery model or on the basis that the defendant intended to completely transfer the risk to OpCo through the Project Deed, those opinions cannot be accepted.

155. [468]

     Further, I accept the evidence of Mr Lewcock and Mr Sampson on the difficulties that would have arisen if Mr Szmalko’s proposed alternate delivery models had been adopted.

156. [469]

     Having said that, there is some consistency between the utilities experts on a number of issues. The deterrence clause (cl 12.3) in the Project Deed was described as unique. Investigating utilities prior to commencing the Civil Works was important and necessary. The general effect of Mr Szmalko’s Utilities Mitigations Steps was not really in dispute. The fact that the trenching contract was unlikely to have discovered all utilities was not in dispute, as it was merely a survey. The suggestion of 100% quality level A in Fee Zone 5 was apt to mislead.

157. [470]

     It is also clear from the evidence of Mr Lewcock and Mr Sampson that, as I have already accepted with reference to the pre-Project Deed documents, the presence of unknown utilities was a big risk on this project and that the requirements of utility providers were not finalised and remained a risk at the time of entry into the Project Deed.

158. [471]

     Mr Sampson said that the discovery of previously unknown utilities would make a huge difference to the outcome. As I will explain, he was correct.

159. [472]

     To a certain extent, the defendant’s expert evidence on utilities tended to highlight the significance, risk and complexity of the utilities problem. The defendant’s evidence assisted its case in resisting the s 43A unreasonableness point but also highlighted the fact that the defendant was well-aware of the risk of substantial delay in completing the Civil Works at the time it entered into the Project Deed.

160. [473]

     Mr Hardman prepared a report on behalf of the defendant in relation to procurement and risk management. He has worked on some of Australia’s largest infrastructure procurements.

161. [474]

     In carrying out his investigations, Mr Hardman focussed on the structure adopted by the defendant in planning and procuring the SLR project, whilst also considering key industry guidelines and practices. He did not consider that the defendant’s conduct in managing the utilities risk fell short of the ordinary industry standard. In particular, he criticised Mr Szmalko for ignoring the basic principles of commercial negotiation in his comments about risk management and document negotiation. He said that Mr Szmalko did not consider that the market was never willing to accept the full risk transfer. As I have already observed, that is so.

162. [475]

     He believed that, if Mr Szmalko’s views about the way in which the defendant should have proceeded were followed, then the defendant would have had to:

     1. (1)

        ignore the PPP guidelines;

     2. (2)

        adopt an approach to risk management which did not comply with the ISO 31000 standard;

     3. (3)

        ignore market feedback;

     4. (4)

        require the detailed design to be completed prior to RFP release to allow Ausgrid to develop treatments for utilities; and

     5. (5)

        require tenderers to price full risk transfer.

163. [476]

     Mr Hardman said that the outcome of this approach would have been unacceptable. By this, he meant commercially unacceptable at the pricing level.

164. [477]

     Much of Mr Hardman’s report was devoted to what I will describe as “general risk management approaches”. Further, according to Mr Hardman, having regard to the defendant’s Risk Register of July 2014, the stages which Mr Szmalko described as the Utilities Mitigation Steps were actually reflected in the controls and risk treatments identified by the defendant.

165. [478]

     Mr Hardman was cross-examined somewhat robustly. There was certainly a challenge to his expertise and his general approach. Whilst Mr Hardman only offered opinions on matters which he was asked to opine by the defendant, I do not consider that his particular expertise and opinions add a great deal to the determination of the outcome. Whilst he made criticisms of Mr Szmalko’s opinions (which were similarly made by other experts) which I accept, his approach to risk management was generic.

166. [479]

     He did identify inconsistencies in Mr Szmalko’s evidence but I am not certain that all of his comments would fall within the well-understood meaning of an expert opinion.

167. [480]

     In reality, Mr Hardman’s main expertise is in the area of commercial drafting and risk transfer. Having said that, the focus of his report appears to have been more on the consequences of delay to the project completion date and the risk of liquidated damages, rather than the consequences of overstaying fee zones.

168. [481]

     Further, his views on risk sharing were again very much based on the end result and the consequences of overall delay, rather than on the fee zone structure, which is significant in this case. His opinion on the costs arising out of delays payable by the D&C contractor did not have regard to what actually happened in the fee zones. As the increased periods of concurrency in the fee zones demonstrate, the D&C contractor could reduce its costs exposure caused by the need to cease work in a particular fee zone whilst a utility problem was being dealt with by simply moving into another fee zone.

169. [482]

     Perhaps the real significance of Mr Hardman’s evidence is that it highlights that, having chosen the PPP model and having adopted a timeline, the defendant was required to enter into a commercial negotiation to achieve what it wanted to achieve, being the appointment of a partner to construct and operate the SLR. This certainly informs the s 43A CLA question relating to the unreasonableness of the defendant’s conduct. However, the significance of the evidence in assessing whether the interference with the plaintiffs’ properties was substantial and unreasonable is less clear.

170. [483]

     The plaintiffs retained Mr Griffith as their programming expert. The defendant retained Mr McIntyre as its programming expert. Both experts sought to demonstrate and explain the time that the D&C contractor occupied individual fee zones, although they approached that task differently. At times during their evidence, it did seem like this was a construction case between a principal and a contractor, rather than a claim for damages in nuisance.

171. [484]

     Mr Griffith is a director of Latitude Consulting Engineers. He has over 30 years of engineering experience. He has provided management advice to owners, contractors and governments in relation to programming, contracting, administration and cost analysis, quality control and occupational health and safety. He has provided expert opinions in relation to the assessment of delays and extensions of time, cost analysis defects and project management practice.

172. [485]

     Mr Griffith prepared an expert report dated 9 June 2021, a reply report dated 6 September 2022 and a supplementary report dated 16 October 2022.

173. [486]

     Whilst Mr Griffith was not retained initially to offer an opinion about the quality of the defendant’s utilities investigations or management, he ended up doing so. Rather, he was asked to assume that the defendant had failed to properly manage the utilities risk. Based on his own project management experience, he ultimately concluded that this assumption about the management of the utilities risk was consistent with the opinions he had formed about the defendant’s conduct.

174. [487]

     Mr Griffith considered that the delay risk associated with unknown utilities should have been known to the defendant. He says that the defendant should have taken further steps to reduce this risk by:

175. [488]

     Mr Griffith’s expertise lay in the assessment of whether there were delays in the completion of the SLR Project and the cause of those delays. Notably, the defendant challenged Mr Griffith’s evidence relating to the cause of the delays and the reasoning applied in reaching his conclusions. The defendant also suggested that the assumptions made by Mr Griffith were not available.

176. [489]

     However, in his assessments, Mr Griffith had regard to the events which actually occurred. He considered the “as-built” documents (the documents which recorded what was happening on the project during the period of construction). He also undertook a Windows (computer) analysis, which verified his conclusions.

177. [490]

     Mr Griffith opined that the SLR project took longer than it should have, stating that the planned occupation of Fee Zones 5, 6 and 29 was extended due to the defendant’s conduct.

178. [491]

     In his initial view, the increase in occupation was as follows:

     1. (1)

        for Fee Zone 5, from 281 to 1105 days (a 393% increase);

     2. (2)

        for Fee Zone 6, from 318 to 1116 days (a 351% increase); and

     3. (3)

        for Fee Zone 29, from 191 to 1146 days (a 600% increase).

179. [492]

     In paragraph 30 of his report, Mr Griffith set out a table comparing the planned occupation dates with the as-built occupation program, as follows:

180. [493]

     He included a further table indicating the periods of further work after occupation ceased, as follows:

181. [494]

     In my view, the periods of fee zone occupation were not quite as extensive as he suggests but, on any view, they were much longer than planned and exceeded two years.

182. [495]

     Mr Griffith prepared an amended IDP, reflecting what he says would have been reasonable allowances for the works and, in particular, the utility treatments, should the defendant have undertaken those further steps he suggests. There is obviously hindsight in the calculation but the point is to provide some indication of what might have been a reasonable timeframe for the works to have been completed in each fee zone, assuming more knowledge and agreement in respect of utilities at the outset, (thereby meaning less delay during the works).

183. [496]

     Mr Griffith identified the cause of the delays in the occupation of Fee Zones 5, 6 and 29 as being:

     1. (1)

        the number of modifications issued by the defendant during the course of the construction work;

     2. (2)

        the discovery of many previously unknown utilities, leading to delays in the treatment these utilities; and

     3. (3)

        delays in reaching agreement with utility providers in respect of the treatment of the utilities.

184. [497]

     Mr McIntyre prepared two reports dated 11 February 2022 and 17 November 2022. He was initially asked two questions, being:

     1. (1)

        what works occurred in Fee Zones 5, 6 and 29 relevant to the complaints made in paragraphs 16(a) and 16(a)(i) of the Statement of Claim within the proximity of the premises referred to in those paragraphs? and

     2. (2)

        did he agree or disagree with Mr Griffith’s opinion as to whether the utilities conduct and any failures identified resulted in any of the Fee Zones 5, 6 or 29 being occupied for longer than otherwise expected?

185. [498]

     As he said in his report, the main objective of his investigation and analysis was to identify what construction and related work was performed in Fee Zones 5, 6 and 29. He adopted a classification system for the construction and related works. Construction activities which he identified as Category 2 were mostly relevant to his analysis. He defined Category 2 activities as moderate or heavy construction or related works. He analysed when Category 2 works were being performed in Fee Zones 5, 6 and 29.

186. [499]

     He also examined and analysed the information relating to the workdays required to complete Category 2 works that occurred within 100 metres (50 metres either side) of the business premises. In undertaking a daily analysis of Category 2 works through the as-built documents, Mr McIntyre was able to conclude that Category 2 work only occurred in the fee zones for a proportion of the extended occupation period claimed.

187. [500]

     Mr McIntyre’s analysis may be somewhat illusory, particularly if the D&C contractor was constantly starting and stopping work or was absent for long periods arranging utility treatments. If this were a different type of claim, that analysis may be critical but I am not sure how the intermittent use of heavy machinery would have helped Mr Zisti when the construction site was directly outside his premises. It is not as if potential patrons had advance notice of when their enjoyment of the restaurant premises might have been disturbed.

188. [501]

     Mr McIntyre’s analysis was modified somewhat as a result of the expert conclave. I will refer to his amended analysis further when considering the joint report.

189. [502]

     The second question Mr McIntyre was asked to answer was whether the utilities conduct or any failures identified resulted in the occupation of the fee zones for longer than initially planned. Mr McIntyre did not consider that it was possible to answer this question. He did not agree with Mr Griffith’s methodology of comparing what actually happened with what was shown on the program adopted by the D&C contractor at an earlier point in time. He said that to do so would involve an assumption that the activities on the project would have occurred at the time shown on the IDP. He considered that such an assumption was unwarranted. He rejected Mr Griffith’s opinion as being unsound because it was based upon flawed assumptions and methodologies.

190. [503]

     Further, Mr McIntyre suggested that Mr Griffith’s approach was flawed because he appears to have assumed that it was possible for the defendant to avoid the circumstances which arose during the project by adopting a different strategy or approach. I am not sure what he meant by that, other than, in his view, it would be incorrect to assume that there was anything that the defendant could have done to prevent that which ultimately occurred, that is, significant delay. I assume that approach is consistent with the defendant’s assertion that the interference with the plaintiffs’ properties was inevitable. It is somewhat surprising that the defendant is approaching the issues in the case on the basis that there was nothing it could have done to prevent the substantial delays in each fee zone.

191. [504]

     In any event, Mr McIntyre said that, given the difficulties of reaching agreement with utility providers and other parties about designs affecting their assets (without knowledge of the design and configuration of the permanent works), avoiding the failures alleged by Mr Griffith would have required a complete design, rather than merely a reference design (and including a design of the permanent works), to be issued following agreement with the utility providers and other third parties. Mr McIntyre did not agree that this could have occurred.

192. [505]

     I agree that the delivery model did not permit or require a complete design at the early stage of the project, but I do not accept that the so-called failures could only have been avoided by a complete design. This ignores the central problem of the ongoing discovery of unknown utilities and the issues arising from Ausgrid’s treatment guidelines.

193. [506]

     Mr McIntyre rejected the alternative delivery strategy put forward. He said that the alternative delivery strategy would have required the defendant to enter into a contract, prepare a design, treat utilities and manage third-party assets. This would necessarily have involved a complete design, including that of the permanent works. This complete design could not have been undertaken until all of the utilities and other items interacting with the SLR had been found. According to Mr McIntyre, this needed to occur before tenders were called.

194. [507]

     According to Mr McIntyre, if all of this had occurred, then the Project Deed’s IDP would be irrelevant because the project would have been delivered through a different model. I took this to mean that he did not consider that anything could be drawn from the IDP if, on the plaintiffs’ case, the project should have been delivered using a different model.

195. [508]

     Although Mr Griffith’s and Mr McIntyre’s reports (when combined) were 1500 pages, the joint report focussed on an analysis of the number of days that each expert identified the D&C contractor as having occupied Fee Zones 5, 6 and 29.

196. [509]

     Mr McIntyre maintained his form of classification (Category 2) as being the number of days when the D&C contractor was performing construction work in each particular fee zone. Mr Griffith used broader criteria for identifying the periods of occupation; he included periods when there were no barricades up and when minor construction work was being undertaken in the fee zones.

197. [510]

     Mr McIntyre distinguished between work which he identified as occurring in the “full zone,” which was anywhere within the fee zone and the “proximate zone” (in Fee Zone 5, this was very close to the Strand Arcade). For example, Mr McIntyre said that in Fee Zone 5, work occurred in the Full Zone for 514 days during the execution period (1,553 days) but in the proximate zone, work occurred on 410 days during the execution period.

198. [511]

     Mr Griffith agreed with this analysis, except he thought that, with respect to Fee Zone 5, there were an additional 31 days during which work was carried out in the full zone and an additional 19 days during which work was carried out in the proximate zone.

199. [512]

     It follows that in Fee Zone 5, actual construction work took place for around 514-545 days between 2015 and 2019. The days were not consecutive and the hoardings remained in place up to December 2017, regardless of whether actual construction activity occurred on a particular day.

200. [513]

     In respect of Fee Zone 6, the experts disagreed as to whether any analysis was necessary. Mr McIntyre said that, as the plaintiff did not complain of noise and dust, no analysis was necessary, whereas Mr Griffith undertook the analysis, concluding that Category 2 works were carried out over 424 days in Fee Zone 6.

201. [514]

     In respect of Fee Zone 29, the experts differed. Mr Griffith concluded that Category 2 works were carried out in Fee Zone 29 for 759 days in the Full Zone and 133 days in the Proximate Zone. Mr McIntyre concluded that works occurred in the Full Zone for 367 days and for 75 days in the Proximate Zone. Again, it is not suggested that this work was always carried out on consecutive days or that the hoardings were removed between the periods of work.

202. [515]

     Mr Griffith’s analysis shows the extent to which there was a prolongation of construction activity, when compared to the IDP:

203. [516]

     Mr Griffith said that the D&C contractor occupied Fee Zone 5 up until March 2018. The defendant said that the occupation of Fee Zone 5 ended in December 2017, when all of the barricades and hoardings were removed and when the area between King and Market Streets was opened up for Christmas.

204. [517]

     When Mr Griffith was shown photographs of Fee Zone 5 taken in February 2018, he agreed that the defendant was not occupying the fee zone at that time. There is thus some uncertainty as to the basis upon which Mr Griffith concluded that the defendant was in occupation of Fee Zone 5 after December 2017. On my analysis, whilst some occasional work continued to be performed in Fee Zone 5 in 2018-2019, the hoardings came down before Christmas 2017.

205. [518]

     The dates on which the defendant’s occupation of the three specified fee zones commenced and ended is important because it is part of the plaintiffs’ claim that nuisance is not established by a daily analysis of the construction, but through consideration of the total period in which hoardings and barricades were present and when construction work was undertaken.

206. [519]

     The barricades were present because construction work was being undertaken, it was expected that further construction work would be undertaken, or it was being carried out elsewhere along the SLR route.

207. [520]

     Mr Griffith undertook his analysis by considering the IDP and then adjusting or correcting it, having regard to any modifications that were made. He described this as a “corrected IDP”.

208. [521]

     The defendant generally accepts that the D&C contractor was in occupation of Fee Zones 5 and 29 for much longer than the IDP (whether corrected or not). For example, in Fee Zone 5, the defendant accepts that the D&C contractor was in occupation until December 2017, which is only three months earlier than Mr Griffith’s suggested date. It follows that, even on the defendant’s analysis, the D&C contractor was in occupation of Fee Zone 5 for close to 500 days more than the time projected in the IDP.

209. [522]

     Mr Griffith opined that, even though the Ausgrid treatment plans in respect of known utilities were finalised in February 2016, the discovery of a large number of unknown utilities (not just those belonging to Ausgrid) during the actual construction work delayed the construction activities, meaning that the D&C contractor remained in occupation for the extended period.

210. [523]

     Whilst Mr Griffith did not specifically analyse what occurred every time an unknown utility was discovered (and thus was unable to identify any precise period of extra work or delay in Fee Zone 5, with reference to the discovery of any particular unknown utility), he considered that the substantial delay must have been caused by the discovery of these unknown utilities. On his examination of the as-built documents, he could find no other cause of the delay.

211. [524]

     He ascertained that there were some minor modifications approved in respect of Fee Zone 5, but said that these minor modifications could not explain the considerable variance between the days projected in the IDP and the occupation days according to the as-built documents.

212. [525]

     In any event, the difference between the experts’ opinions as to the precise period in which each of the fee zones was occupied by the D&C contractor is somewhat inconsequential, particularly in respect of Fee Zone 5, as I do not accept (and will discuss later) that the Hunt Leather store was subject to substantial interference after December 2017.

213. [526]

     Mr Griffith considered the terms of the Project Deed relevant to the fee zone strategy. He observed:

214. [527]

     Mr Griffith identified two key deficiencies in the IDP relevant to this case, being:

     1. (1)

        there is nothing in the IDP indicating how the D&C contractor intended to address the problem of unknown utilities without delays; and

     2. (2)

        the IDP for each individual fee zone does not anticipate the problem of discovering utilities, which would cause a delay in the commencement or continuation of work in another fee zone.

215. [528]

     I accept this. Indeed, the IDP for Fee Zone 5 projects the utilities treatments being completed in the first two months of activity in the fee zone. There is no allowance for that which the defendant knew was likely to occur, being the discovery of unknown utilities.

216. [529]

     Both Mr Griffith and Mr McIntyre were asked about particular terms in the Project Deed, and the following exchange ensued:

217. [530]

     Thus, their evidence on this topic (that is, the uniqueness of the combination of terms) is consistent with the evidence of the other experts.

218. [531]

     Mr Griffith and Mr McIntyre were then asked a series of questions as to the risks associated with the project and, on their analysis, the defendant’s knowledge of those risks:

219. [532]

     Compelling as they seemed at the time of cross-examination, these exchanges were really nothing more than confirmation from the experts of that which emerges from the source documents. The experts were saying nothing more than is readily apparent from the defendant’s own pre-Project Deed documents. That is:

     1. (1)

        the likelihood of interference with businesses along the route was known to the defendant;

     2. (2)

        the defendant anticipated that unknown utilities would be discovered during the construction activities;

     3. (3)

        the risk of prolongation of occupation in fee zones arising from the discovery of unknown utilities was known to the defendant;

     4. (4)

        it was reasonable to expect that the defendant would contract on terms which would minimise the risk of delay in the construction of the works in the fee zones; and

     5. (5)

        the defendant was faced with competing interests when planning and contracting. The fact that it faced (and was required to consider) competing interests is a relevant factor in assessing the reasonableness of its conduct and the decisions made during the planning stages.

220. [533]

     Mr McIntyre was further asked whether he had looked at the terms of the Project Deed and whether he was familiar with a monetary cap payable on excess occupation. Again, Mr McIntyre said that he had not looked at this. Despite the importance of both matters (and the fact that Mr Griffith referred to them in his reports), Mr McIntyre did not look into the issue raised about the terms of the Project Deed. He did not feel that he was able to comment on causation, other than to disagree with Mr Griffith’s approach.

221. [534]

     The following exchange took place:

222. [535]

     Mr Griffith was challenged on his ability to offer an opinion about the IDP because he had no knowledge of the resources available to the D&C contractor. Mr Griffith accepted that he had assumed that the D&C contractor had resourced the project adequately to comply with the staging of the works in the fee zones. He did not consider that it was necessary for him to know what the resources were.

223. [536]

     Mr Miller described the lack of information about the D&C contractor’s resourcing levels as an information gap, which fundamentally rendered Mr Griffith’s opinion as to the reasonableness of the IDP invalid.

224. [537]

     There is a difficulty with Mr Miller’s proposition. The D&C contractor entered into a contract which required it to complete the work in stages and in the time allowed for each stage, based on the IDP. The proposition that no opinion could be offered on the reasonableness of the IDP without a thorough understanding of the resources available to the D&C contractor seems rather odd in circumstances in which the D&C contractor entered into the D&C contract and agreed to complete the work in the manner specified and, at least according to the defendant, would be subjected to significant costs and loss of profit if it did not do so.

225. [538]

     It seems to be a fair assumption that, in entering into such a contract, the D&C contractor had the capacity and, indeed, allocated sufficient resources to complete the work in accordance with the IDP. Otherwise, it must have been entering into a contract without understanding whether it could comply with the IDP, thereby exposing itself to significant costs if it could not comply (according to the defendant).

226. [539]

     Of course, the alternative proposition is that the D&C contractor did not have to worry too much about whether it remained for extended periods in each fee zone because the penalties for doing so were negligible (as Mr Griffith described them).

227. [540]

     In the end, Mr Griffith’s approach to his programming analysis was to:

     1. (1)

        look at the IDP;

     2. (2)

        assume that the D&C contractor had sufficient resources to undertake the work in a staged fashion, as contemplated by the contract;

     3. (3)

        consider whether, having regard to the nature of the activities required to be performed, the IDP was reasonable;

     4. (4)

        alter or extend the periods somewhat, having regard to his own views as to the reasonable extension periods that should have been allowed;

     5. (5)

        prepare a table incorporating the amendments (that is, the amended IDP);

     6. (6)

        compare when the D&C contractor was actually in occupation of each fee zone against the amended IDP;

     7. (7)

        identify the period during which the D&C contractor occupied each fee zone for longer than the IDP or amended IDP; and

     8. (8)

        offer an opinion for the cause of these extended periods during which the D&C contractor remained in each fee zone.

228. [541]

     He agreed that, in amending the IDP, he would add a contingency for unknown utilities because, on his view, many of the unknown utilities would have been known if sufficient utility investigations had been undertaken. That really relates to the counterfactual referred to by the defendant. Mr Griffith’s amended IDP assumes that if additional utilities investigations had been carried out, the defendant would have located more utilities and the delays which eventuated would not have happened.

229. [542]

     Mr Griffith opined, based on his review of the documentation, that there were ultimately as many unknown utilities as there were known utilities. On that basis, he concluded that there were insufficient utilities investigations carried out. It is important to note that Mr McIntyre did not comment on these matters in his report.

230. [543]

     Mr Griffith suggested that the way to determine whether sufficient investigations had been carried out would be to look firstly at the plans provided by the utility owners. As such, if the defendant discovered more utilities than shown in the plans, then it would be necessary to trace the additional previously unknown utilities. This would result in the discovery of pits where the unknown utilities were located. Mr Griffith said it was simply a matter of continuing the trenching until the defendant could be satisfied that it was not finding anything it was unaware of. It is plain that the trenching contract let by the defendant did not require the trenching contractor to do this, even in Fee Zone 5.

231. [544]

     On his analysis of the documents, despite what might be viewed as extensive investigations, the defendant was still finding a lot more utilities than was expected.

232. [545]

     Finally, Counsel cross-examined Mr Griffith in respect of his comment that OpCo was incentivised to deliver the entire project by 16 March 2019, but disincentivised to complete the work in accordance with the fee zone schedule. Mr Miller took Mr Griffith to Schedule D4 to the Project Deed, suggesting that if the D&C contractor was in fee zones for longer than anticipated, it would never recover all of its costs. Mr Griffith accepted that that would be a relevant factor to consider. He also said that it would be relevant to consider whether the D&C contractor was making any profit on its fixed expenses and also that consequent delay in completion of the project would result in the recovery of its debts to be delayed. Mr Griffith said he was unaware about how all of those arrangements worked together and whether they were based on fee zones or the overall project completion.

233. [546]

     As Mr Griffith said, rather than having the workforce sitting around in a particular fee zone waiting to recommence work, the D&C contractor simply moved into another fee zone. This meant that the D&C contractor was working in multiple fee zones at the same time and for extended periods. This is the only explanation offered in this case as to why the D&C contractor did not stick to the Occupation Schedule. Further, it explains why the periods of concurrency in fee zones was so much greater than intended.

234. [547]

     Mr McIntyre was cross-examined on his belief about the Ausgrid requirements. On his analysis of the documents, Ausgrid determined that it would not approve any utilities treatments until the complete SLR design was prepared. Mr McIntyre considered that Ausgrid needed a complete design of the whole infrastructure works (that is, an integrated design) before it would approve treatments. As it turned out, Ausgrid did agree to some treatments without the complete design but Mr McIntyre maintained that it was essential for Ausgrid to know where the light rail track and slab would be and where other permanent works were going so that it could determine whether any action was required in relation to an affected utility.

235. [548]

     Mr Bannon challenged Mr McIntyre on his reference to Ausgrid’s requirement for a complete design (and whether “complete” was the right word) but, in my view, Ausgrid made it plain that it needed a sufficient design of the track and slab to understand the extent to which the construction activities would interfere with its utilities. Mr McIntyre said that when Ausgrid was informed of the location of the track slabs and the proposed works in respect of its utilities, Ausgrid was prepared to approve treatments. I accept this as an accurate reflection of what Ausgrid required before approving any utility treatments.

236. [549]

     In my view, there was ultimately agreement between the experts about how to calculate the period of occupation in the fee zones. Specifically, they agreed on the number of actual Category 2 workdays in the full zone and the actual Category 2 workdays in the proximate zone. Mr Griffith explained that the minor point of disagreement was that he did not look at the actual hours when the businesses were open; he only looked at the days.

237. [550]

     Ultimately, in respect of Fee Zone 5, the experts concluded that during the period of October 2015 to December 2019, there was actual construction work involving noise, dust and vibration for 614 days. This included the 410 days when actual construction work was being carried out within 50 metres of the Hunt Leather Strand Arcade Store. It follows there were 204 days when work was not being carried out within 50 metres of the Strand Arcade store.

238. [551]

     In his assessment of the amended IDP, Mr Griffith made some allowance for the impact of modifications. He thought 10% was sufficient. He increased the fee zone occupation durations across the entire period by 10% based on his experience and the fact that the modifications were dealt with during the design phase. He felt that 20% would have been excessive. Mr McIntyre thought this was an arbitrary approach.

239. [552]

     It was put to Mr Griffith that he did not analyse whether the discovery of the unknown utilities (whether a bit of pipe, conduit or something more substantial) actually impacted upon any work that was being carried out. Mr Griffith disagreed. He said that his as-built analysis looked at all of the unknown utility events which had been recorded as delays. Annexed to his report are the source documents upon which he relied.

240. [553]

     It was put to Mr Griffith that his whole analysis involved an assumption that the discovery of unknown utilities impacted on critical path work or that the discovery delayed work. Mr Griffith disagreed. He said:

241. [554]

     He maintained that the D&C contractor’s contemporaneous records showed the way in which the discovery of an unknown utility impacted upon its work. Again, on my review of those documents, that is correct.

242. [555]

     Mr Griffith undertook the same analysis for Fee Zones 6 and 29.

243. [556]

     I am persuaded by Mr Griffith’s analysis of what happened on this project. I do not accept, as the defendant submits, that no conclusion on the cause of the substantial prolongation of the D&C contractor’s occupation in the fee zones could be made without tracing the impact of every utility across the life of the project. I do not accept the defendant’s submission that no conclusion can be drawn without evidence of the D&C contractor’s resources and how the delays in each fee zone might have been caused by under-resourcing on the part of the D&C contractor.

244. [557]

     In the end, there was little between Mr Griffith and Mr McIntyre in terms of their assessments of the occupation periods. There was also little between them in terms of the number of days that the D&C contractor actually performed work in the fee zones. Mr McIntyre developed a categorisation system which was helpful in determining when work was performed in each fee zone and the D&C contractor’s occupation of each fee zone. This is relevant to assessing the period of any nuisance, although it is not determinative.

245. [558]

     The real difference between Mr Griffith and Mr McIntyre related to whether Mr Griffith could offer an opinion on the cause of the delays based on his methodology and analysis, or whether, as suggested by Mr McIntyre, that methodology did not provide a proper basis for expressing an opinion as to cause.

246. [559]

     Of course, Mr McIntyre did not offer any opinion as to the cause of the prolonged periods of occupation, merely suggesting that Mr Griffith’s approach was flawed. Further, Mr McIntyre did not offer any opinion as to what a reasonable allowance for the performance of the work in the fee zones might have been, assuming that sufficient utility investigations were undertaken and agreements with providers were in place prior to the commencement of work. Rather, he suggested that, because the so-called counterfactual would involve an entirely different delivery model, there could be no reference to the IDP as a base from which to work.

247. [560]

     Whilst the defendant submits that the plaintiffs have not proved the counterfactual, I understand the plaintiffs to be submitting that the counterfactual is the amended IDP. Of course, it would have always been difficult for the defendant to put forward some alternative counterfactual (not that it was required to do so) because it says that the nuisance was inevitable. I do not accept this. Nor do I accept that in a nuisance claim, the plaintiffs must necessarily expose a counterfactual.

248. [561]

     The difference between the parties on these issues is, again, a reflection of their differing approaches to what the plaintiffs must prove to succeed.

Project scope changes

1. [562]

   As set out in paragraphs 12(c) and 12(d) of the Statement of Claim, the plaintiffs allege that during the course of the project, the defendant issued the D&C contractor with approximately 60 directions to change the scope of those works. The plaintiffs allege that a substantial cause of the project scope changes was the failure by the defendant to effectively plan and procure the project between 2011 and 2014. The particular project scope changes or modifications upon which the plaintiffs rely are:

   1. (1)

      Modification 25, regarding the relocation of the QVB stop;

   2. (2)

      Modification 33B, regarding roadworks in Fee Zone 29;

   3. (3)

      Modification 48, regarding smart poles and underground cables; and

   4. (4)

      Modification 59, regarding the timber poles on Anzac Parade.

2. [563]

   These modifications relate to the particular fee zones that are the subject of the current proceedings. In my view, the only complaint of substance is in respect of Modification 25.

3. [564]

   Modification 25 was issued on 26 February 2016. The construction activity relating to Modification 25 commenced on 14 November 2016 and finished on 18 August 2017. It required the D&C contractor to position the QVB stop approximately 30 metres south of the location shown on the reference design drawings. Further, the D&C contractor was required to maximise the reduction in platform height relative to the surrounding footpath without risking the integrity of the pedestrian tunnel beneath Market Street and without impacting the driveway of the Hilton Hotel.

4. [565]

   The D&C contractor said that the net financial impact of the modification would be $14,897,687 and that there would be the following delays in occupation cessation of the fee zones:

   1. (1)

      Fee Zone 6: 442 calendar days;

   2. (2)

      Fee Zone 2: 4 calendar days;

   3. (3)

      Fee Zone 4: 43 calendar days; and

   4. (4)

      Fee Zone 5: 49 calendar days.

5. [566]

   The D&C contractor said that prior to the issue of Modification 25, it had been proceeding with the design of the QVB stop at the location shown in the reference design. It had increased road levels to reduce conflicts with utilities and to avoid impacts on the wearing slab above the QVB pedestrian tunnel. However, all of that work ceased on receipt of Modification 25.

6. [567]

   The D&C contractor maintained that there had been a significant increase in the scope of works associated with the modification, in particular, due to issues associated with relocating the high-pressure Jemena service at the George and Market Street intersection. The D&C contractor said that its pre-modification design was based on adopting a road and track alignment through the George and Market Street intersection that went over the top of the slab to avoid any impact to the wearing slab and the QVB pedestrian tunnel structure.

7. [568]

   It must be borne in mind that there was a significant dispute between the D&C contractor and the defendant in respect of the D&C contractor’s claim arising out of Modification 25. This issue was the subject of earlier litigation and it is not my function to resolve such a dispute.

8. [569]

   The defendant says that this design issue was part of the D&C contractor’s scope and was not resolved prior to the execution of the Project Deed because:

   1. (1)

      the defendant was not the SLR designer;

   2. (2)

      the reference design alerted the D&C contractor to the potential for a clash between the rail slab and the roof of the tunnel below;

   3. (3)

      accordingly, the D&C contractor was charged with resolving that clash as part of its design scope;

   4. (4)

      clause 13.1(b) of the Project Deed required the D&C contractor to design the SLR works in accordance with third party agreements; and

   5. (5)

      the Development Agreement mandated only that there be disability compliant access to the platforms of these stops (I have referred to this in my review of the planning documents).

9. [570]

   The defendant disputes the contention that Modification 25 caused the delays alleged by the plaintiffs.

10. [571]

    Mr Griffith was asked questions about his analysis of any delay caused by the modification relating to the change in the rail stop in Fee Zone 6. Mr Griffith agreed that before the D&C contractor was given the direction to move the light rail stop 30 metres to the south, it was building a compliant design that was not going to clash with any utilities.

11. [572]

    There was a difference of opinion between the experts as to the reason for Modification 25. Mr Griffith considered that it became necessary to move the QVB stop south as part of the arrangement to reduce the levels over the tunnel. Mr McIntyre considered that the design would not have produced delay. The issue was accessibility of the light rail stop.

12. [573]

    However, the experts agreed that one of the Modification 25 requirements was that the level of the platform (which was eventually located 30 metres south) needed to be level with the surrounds. I understand the defendant’s position on Modification 25 to be that it could not be blamed for the delay arising from Modification 25, rather than that there was no delay at all. Modification 25 caused a significant delay in the completion of the Civil Works in Fee Zone 6 and also impacted on the delay in Fee Zone 5.

13. [574]

    In terms of blame, all I can really say is that the need for the QVB stop to be level with the surrounds was something that was referred to in Schedule 7 of the Development Agreement. The presence of the QVB tunnel must have been known at all relevant times. As set out in cl 6.1 of the Development Agreement, the defendant agreed to be responsible for ensuring a compliant design. It does seem like this issue could have been identified well in advance of the construction commencing so as to avoid any delay. Having regard to the terms of Schedule 7 to the Development Agreement, that which gave rise to Modification 25 was something that should have been apparent to the defendant well prior to commencement of the Civil Works. In this regard, the need for Modification 25 could be viewed as arising out of a planning failure on the part of the defendant.

14. [575]

    Modification 33B related to Fee Zone 29. Modification 33B involved a revised kerb design. The revised design was directed in May 2016 and the road design was completed in September 2017.

15. [576]

    The defendant disputes that this modification could have caused any delay to the construction works in the area surrounding Mr Zisti’s restaurant. The defendant says that Mr Griffith did not undertake any project-wide critical path analysis which might establish that the Modification 33B works caused a delay. It submits that Mr Griffith did not explain how completion in September 2017 could have caused the sort of delay which occurred in Fee Zone 29. I agree with the defendant’s analysis. In my view, the cause of the substantial prolongation of construction works in Fee Zone 29 was the problem with utilities (as I will discuss later in this judgment).

16. [577]

    Modifications 40 and 59 received little attention during the proceedings.

17. [578]

    The parties differ markedly in their approach to the law which applies to this case and their differences have some impact on the outcome.

The tort of nuisance

1. [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. [2] Perhaps the most well-known and common tort is negligence.

2. [580]

   There are many cases where precisely the same facts would establish liability both in nuisance and in negligence. [3] It may be that this case could have been framed in both negligence and nuisance, but it is not. It is only brought in nuisance. It is important not to confuse the concepts. Further, it is important to observe that the plaintiffs do not particularise any failure to exercise reasonable care as part of their pleadings. They refer to failures by the defendant but they do not plead the existence of a duty of care, risk of ham or negligence. They refer to the defendant’s failures in the context of delays in the construction activity.

3. [581]

   One of the central areas of dispute in these proceedings is whether, in order to succeed in their cause of action in nuisance, the plaintiffs must establish that the defendant failed to take reasonable care or acted negligently. The defendant says that the plaintiffs must establish that the defendant failed to take reasonable care in order to succeed. The defendant’s position on nuisance is best summarised in its closing submissions, as follows:

4. [582]

   On one view of the case law, there may be some difference of opinion about those propositions. Having said that, the High Court of Australia has not yet held that, in order to succeed in nuisance in a case such as this, a claimant must establish that the tortfeasor acted without reasonable care or “negligently”.

5. [583]

   It might be argued that the Court’s treatment of old common law principles, such as the rule in Rylands v Fletcher (1868) LR 3 HL 330, points in that direction but there are also other cases which tend to suggest that negligence is not an essential element of the tort of nuisance. Further, it does not seem to me that anything said in cases such as Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520; [1994] HCA 13 (“Burnie Port Authority”) tends to suggest that negligence is now a necessary element of the tort of nuisance.

6. [584]

   In Hargrave v Goldman (1963) 110 CLR 40; [1963] HCA 56, a case involving the escape of fire from a property onto the neighbouring land which was pursued in both nuisance and negligence, Windeyer J described the difference between nuisance and negligence as follows (at 62):

7. [585]

   Nuisance is a tort which has constantly evolved to suit the changing times. It is a tort where there is no prescribed or defined limit on the circumstances which might give rise to a cause of action. In a nuisance action, the focus of the inquiry is on the effect of the defendant’s use of the land on the adjoining landowners (or in this case, occupiers of the land), rather than the conduct of the tortfeasor leading to the interference. This makes sense, as nuisance is primarily concerned with interference with the use and enjoyment of land. In our society, the circumstances in which an occupier or a person in control of land may interfere with another person’s use or enjoyment of land are many and varied, as is apparent from any examination of the case law.

8. [586]

   A matter which is not in dispute in these proceedings is the lead plaintiffs’ right to sue. As the tort of nuisance is a tort to land, the claimant might normally be the landowner but a person who has possession of the land may also claim (Hunter v Canary Wharf Ltd & London Docklands Development Corporation [1997] AC 655 at 688). That is because it is a person’s enjoyment of the land which is the subject of the interference.

9. [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:

10. [588]

    In this case, the Court is concerned with the third kind of interference noted above, although the plaintiffs’ case is put more broadly than that. On their case, the nuisance is said to involve a combination of factors, including the emanation of things from the defendant’s land onto the plaintiffs’ land (such as noise and dust), the erection of hoardings close to the plaintiffs’ premises and the closing of surrounding areas and roads (which reduced the volume of foot and vehicular traffic near the businesses). Cases in which an actionable nuisance arises as a result of an interference with the plaintiff’s enjoyment of land, without something emanating from the defendant’s land, are rare.

11. [589]

    The law of nuisance seeks to strike a balance between the conflicting rights and interests of neighbours, one of whom may be seeking to preserve a quiet use and enjoyment of their land and another who may be developing and using its land for purposes that are accepted as necessary in modern society. Nuisance is based on the principle of “give and take” between neighbours.

12. [590]

    Cases in nuisance can be traced back hundreds of years. In particular, with the development of London in the 1800s, many nuisance cases were decided which remain relevant today.

13. [591]

    In Sturgess v Bridgman (1879) 11 Ch D 852 at 865, Thesiger LJ observed that if something is a nuisance, it is to be determined not merely by the abstract consideration of the thing itself but with reference to its circumstances and locality. Referring to different areas in London, his Honour said, “What would be a nuisance in Belgrave Square would not necessarily be so in Bermondsey”.

14. [592]

    That statement remains apt in an action such as this, in which the level and type of interference varied depending on the position of the “neighbour” and the use to which the land was put.

15. [593]

    Not every interference with the use or enjoyment of land gives rise to an actionable claim in nuisance. A balance must be struck between the right of the land user to use its land as it sees fit and the interest of the adjoining landowner to be protected from interference with their rights as a landowner.

16. [594]

    In Bamford v Turnley (1862) 3 B & S 66 at 83-84; [1862] 1 WLUK 22, Bramwell B set out a test (that is, some limiting feature on when a nuisance might be actionable) which has been referred to by both parties in this litigation, as follows:

17. [595]

    In Hargrave v Goldman, Windeyer J observed (at 59) that nuisance has been described as an “unlawful interference with a person’s use or enjoyment of land or of some right over or in connexion with it.” [4] As his Honour said, generally speaking, the term “nuisance” denotes a state of affairs that is either continuous or recurrent.

18. [596]

    More recently, nuisance was described by the New South Wales Court of Appeal in Gales Holdings Pty Ltd v Tweed Shire Council (2013) 85 NSWLR 514; [2013] NSWCA 382 (“Gales Holdings”) (per Emmett JA at [131]) as follows:

19. [597]

    One way in which that balance is struck is to preclude actions arising out of a mere inconvenience, annoyance or temporary disturbance. This is done by limiting actions to interferences which are substantial. What may be considered temporary, minor or inconsequential, as opposed to substantial, must depend on the particular circumstances of each case, particularly when it comes to that which is common in modern society, such as construction work. Temporary is a relative term.

20. [598]

    Further, an objective test is applied: it is the standards of an ordinary person which must be assessed rather than the claimant’s personal feelings about the interference. Whether an interference with land is substantial is necessarily an evaluative task, having regard to a range of factors. In this case, there is no dispute between the parties that it is necessary for the plaintiffs to establish that the interference was substantial; the plaintiffs admit that it must be established.

21. [599]

    The need for the interference to be substantial may be particularly significant in this class action because the level of interference with Group Members along the SLR route varied greatly. Indeed, the level of interference varied even between the three businesses run by the lead plaintiffs. A finding of substantial interference with one business at a particular point along the route may not translate to a similar finding in respect of another business at a different point along the route.

22. [600]

    Another way in which the balance between competing interests is achieved is through the concept of reasonableness. Consistently with some cases, the defendant describes this as the “reasonable user” principle. That is, to give rise to a legally actionable nuisance, the interference must be substantial and unreasonable (at least in respect of common and ordinary uses of land). As described in Gales Holdings (per Emmett JA at [131), no action will lie if “it” is reasonably and conveniently done.

23. [601]

    The defendant highlights the reasonable user principle as the touchstone of liability in a nuisance action, suggesting that it requires the plaintiffs to establish that the defendant has “acted with negligence.”

24. [602]

    In Cambridge Water Co v Eastern Counties Leather plc [1994] 2 AC 264 at 299 (“Cambridge Water”), Lord Goff said:

25. [603]

    As such, the circumstances in which a claimant may recover in nuisance is controlled by the reasonable user principle.

26. [604]

    The clash of competing interests which is central to a claim in nuisance is particularly apparent in this matter because the plaintiffs, said to constitute a class of thousands of members, complain about the interference with their rights and the use and enjoyment of their land by reason of the construction of a public transport system on roads adjacent to their businesses, which is said by the State to be necessary and of considerable benefit to Australia’s largest city. This new public transport system has been installed on some of the busiest and most crowded streets in Sydney. The plaintiffs do not say that the operation of the SLR, once completed, caused or causes a substantial interference with the use of their land; they complain about the interference during the period of construction of the SLR.

27. [605]

    The plaintiffs submit in rather simple terms that, in circumstances whereby the use of the adjoining land (that is, the roads constituting the SLR route) was for the development and construction of a light rail, then the use of the land by the defendant could not be described as common or ordinary. The plaintiffs submit that they therefore only need to establish that the interference with their land was substantial, and no more.

28. [606]

    On the other hand, the defendant submits that this rather simple analysis must fail, in part because the construction of the SLR would fall within the meaning of ordinary or common use of the land (the land being public roads and the construction being roadworks) and also because that approach ignores the complex balancing of the parties’ interests which must take place, said to be based on the reasonable user principle.

29. [607]

    The defendant’s approach to the cause of action pursued by the plaintiffs is founded on the concepts of reasonable care and conduct, except it also says that the standard of care is, in fact, elevated because it is entitled to rely on s 43A of the CLA.

30. [608]

    Resolution of these issues between the parties will necessarily involve the determination of some of the factual issues and the application of correct legal principles to those facts.

31. [609]

    However, it is necessary to say something more about the law of nuisance to try and resolve the conflict between the parties on the proper application of legal principles. In particular, it is necessary to further consider the question of whether, as the defendant submits, a legally actionable nuisance must require the establishment of some failure to take care on the part of the defendant. It must be said that much of the evidence and hearing time was devoted to the task of establishing a failure to take care and, indeed, a failure on the part of the defendant at the higher standard as referred to in s 43A of the CLA.

32. [610]

    In Elston v Dore (1982) 149 CLR 480 at 488; [1982] HCA 71, the Court (per Gibbs CJ, Wilson and Brennan JJ) observed that, whilst “negligence in the narrow sense is not essential, fault of some kind is almost always necessary.” In Gales Holdings, the Court similarly observed that in nuisance, liability is not strict. [5] Fault of some kind is essential. Negligence would suffice, although it is not necessary.

33. [611]

    In Sedleigh-Denfield v O’Callaghan [1940] AC 880 at 897, Lord Atkin observed that a deliberate act or negligence is not an essential ingredient of the tort of nuisance but there must be a degree of personal responsibility, which his Honour said was connoted in the definition of the word “use”.

34. [612]

    In Hargrave v Goldman, Windeyer J noted that negligence is not a necessary element in nuisance. His Honour said (at 62):

35. [613]

    In my view, it is important to have regard to the context in which the concept of “reasonableness” is used. The defendant’s emphasis on the reasonable user principle shifts the focus to the conduct of the defendant and away from the nature of the harm suffered by the plaintiffs and their interests.

36. [614]

    Professor Fleming suggests:

37. [615]

    Whether there has been such substantial and unreasonable interference does not depend entirely upon what the occupier of the land intended. The question is whether, in all of the circumstances of the case, including the relationship between the plaintiffs as landowners and the defendant as the owner of property (or, in this case, the relevant statutory authority which is said to have created the nuisance and the plaintiffs as business owners), the interference with the use and enjoyment of the plaintiffs’ land was unreasonable.

38. [616]

    The wrong itself is the interference with the use of the claimants’ land by the defendant.

39. [617]

    In Barr v Biffa Waste Services Ltd [2012] 3 All ER 380; [2013] QB 455 at [72], Lord Carnwath referred to the qualification on the reasonableness test, as follows:

40. [618]

    The phrase “what objectively a normal person would find it reasonable to have to put up with” suggests that, in assessing the role of reasonableness in the law of nuisance, the Court is not determining whether the defendant acted negligently or failed to take reasonable care. Rather, the question of reasonableness is being considered from a different perspective.

41. [619]

    Specifically, reasonableness is being assessed objectively as between the parties, having regard to their particular circumstances and the nature of the activities being carried out by both parties.

42. [620]

    In Woodhouse v Fitzgerald (2021) 104 NSWLR 475; [2021] NSWCA 54 (“Woodhouse”), the plaintiff and defendants owned neighbouring properties. The Rural Fire Service conducted controlled burning on the defendants’ property and, two weeks later, a tree on the property reignited and fire spread to the neighbour’s land. The plaintiff brought proceedings, claiming that the defendants owed a non-delegable duty of care and also that the escape of the fire gave rise to a claim in nuisance.

43. [621]

    As Basten JA observed in Woodhouse at [31], the scope, elements and defences to a tort of private nuisance have long been seen as uncertain and remain so.

44. [622]

    In considering the plaintiff’s submission that the owners were liable in nuisance for the escape of the fire without fault on their part, his Honour stated (at [47]):

45. [623]

    I take his Honour’s statements as a rejection of the claim that liability for the escape of fire was necessarily strict. I do not take his Honour’s observations to in some way set a standard which must be applied. I do not take his Honour’s reference to “unreasonable” as meaning negligent or without the exercise of reasonable care.

46. [624]

    The very recent United Kingdom Supreme Court decision of Fearn and others v Board of Trustees of the Tate Gallery [2023] UKSC 4 (“Fearn”) contains a comprehensive review of the law of nuisance as it applies in the UK.

47. [625]

    In Fearn, the owners of units in a residential apartment block adjacent to the Tate Modern art museum in Bankside, London successfully sued in nuisance in respect of a viewing gallery which had been erected on the top floor of the museum. The viewing gallery allowed visitors to the museum to peer directly into the neighbouring apartments. The UK Supreme Court accepted (by a three-two majority) that in providing a viewing platform on the top floor of its building, the Tate Modern had committed a nuisance because it had allowed hundreds of thousands of persons to peer directly into units in the adjoining apartment block. As such, a remedy was provided to the unitholders.

48. [626]

    The Court was concerned with the same issue which, at least in part, separates the parties in the present matter. The issue was described by Lord Sales at [158] (with whom Lord Kitchin agreed) as:

49. [627]

    Referring to the question of whether an interference must be substantial and unreasonable, Lord Leggatt (with whom Lord Reed and Lord Lloyd-Jones agreed) said (at [18]-[19]):

50. [628]

    If reasonableness, when considered in the context of private nuisance, is not a legal standard or test which must be applied to the defendant’s conduct but is merely a way of stating a conclusion as to “what is right” between the parties, it could not be essential for a claimant seeking damages in nuisance to establish that the defendant was negligent (specifically, that it failed to act in accordance with a particular standard of care).

51. [629]

    Further, according to Lord Leggatt in Fearn, the reasonable user principle referred to by Lord Goff in Cambridge Water is nothing more than an expression of that which was said by Bramwell B in Bamford. His Lordship stated at [29], (referring to Cambridge Water at 299):

52. [630]

    At least according to his Lordship, it is not a defence to an action in nuisance that the defendant’s use of the land is reasonable.

53. [631]

    His Lordship went on to say at [31]:

54. [632]

    Lord Sales (with whom Lord Kitchin agreed in dissent) also examined the reasonable user principle, emphasising the importance of reasonableness between neighbours (at [160]).

55. [633]

    His Lordship suggested that the question of reasonableness needed to be determined having regard to the responsibilities of both parties and the particular locale where the buildings were situated. That may be relevant when looking at what occurred in the main streets of the CBD in the present case.

56. [634]

    Further, his Lordship did not accept that defining the use of land as common and ordinary was the “be all and end all of the test for nuisance” (at [227]), without further consideration of other matters. In his view, the Court was required to consider all of the circumstances of the case.

57. [635]

    His Lordship said at [167]:

58. [636]

    In the even more recent UK case of Jalla and another v Shell International Trading and Shipping Co Ltd and another [2023] UKSC 16 at [2], the Court (per Lord Burrows, with whom Lord Reed, Lord Briggs, Lord Kitchin and Lord Sales agreed) described private nuisance as follows:

59. [637]

    The two most recent cases in the UK (which are both 2023 cases) thus focus on substantial and unreasonable interference, while neither case suggests that unreasonableness is to be equated with the negligence of the defendant.

60. [638]

    Returning to Australian case law, in Southern Properties (WA) Pty Ltd v Executive Director of the Department of Conservation and Land Management (2012) 42 WAR 287; [2012] WASCA 79 (“Southern Properties”), McLure P (from [117]-[119]) addressed the question of whether the tort of nuisance has been subsumed in the law of negligence or, put another way, whether establishing negligence is essential for success in a nuisance claim, as follows:

61. [639]

    I take her Honour’s comment that liability is not “discharged by the exercise of reasonable care” to once again confirm that establishing a failure to take care is not a condition of the tort of nuisance (consistently with those earlier cases to which I have referred) and, further, a lack of negligence on the part of the defendant may not amount to a defence. It is merely a factor to be considered in assessing any unreasonableness between the parties.

62. [640]

    Her Honour’s observations about unreasonableness and the exercise of reasonable care are consistent with the analysis I have already undertaken. It is the interference itself which must be unreasonable. That must be assessed having regard to a range of factors.

63. [641]

    Further, in Southern Properties, Pullin JA stated at [329]:

64. [642]

    A similar approach was taken in Prestage v Barrett, Thorne v Barrett, Howells v Barrett [2021] TASSC 27 (“Prestage”), being another case involving the escape of fire. In Prestage, the Court was also required to consider whether, in order to succeed in nuisance, it was necessary to establish negligence.

65. [643]

    Estcourt J undertook an extensive analysis of the issue. At [718]-[733], his Honour resolved the issue put before him in favour of the approach identified in Southern Properties and also in two other Victorian Supreme Court cases of Riverman Orchards Pty Ltd v Hayden [2017] VSC 379 and Butler Market Gardens Pty Ltd v GG & PM Burrell Pty Ltd [2018] VSC 768. Ultimately, his Honour held that it was not a requirement of nuisance that there be a failure to take care.

66. [644]

    The defendant may wish to prove that it did not fail to take care but, in considering whether a failure to take care is an essential element of the tort of nuisance and whether the plaintiffs’ claim must necessarily arise out of a failure to take care, I reject that proposition.

67. [645]

    That is not to say that nuisance is a tort of strict liability, such as in the old case of Rylands v Fletcher, which is no longer applicable. Whilst McLure P in Southern Properties described liability as strict (at [119]), her Honour did so in the context of stating that the duty not to expose neighbours to a nuisance is not necessarily discharged by the exercise of reasonable care. As her Honour had already said (at [118]), establishing that reasonable precautions have been taken is a factor in assessing unreasonableness.

68. [646]

    In my view, the plaintiffs must establish that there has been an interference with their use of the land which was substantial and unreasonable. What is unreasonable must be considered objectively between the parties having regard to a range of factors. The interference may be unreasonable even though the defendant took reasonable care. The fact that the defendant did take reasonable care (if it be so) may be a relevant factor but that in itself does not provide a defence or mean that the plaintiffs cannot succeed in a case such as this.

69. [647]

    The next issue is whether a description of the defendant’s use of the land as not being common and ordinary changes or reduces the requirements for an actionable nuisance.

70. [648]

    The plaintiffs’ Case A is based on the proposition that the use of the roads constituting the light rail route was not common and ordinary and, as such, it is only necessary to establish that the interference with the plaintiffs’ land was substantial in order to succeed. According to the plaintiffs, questions of reasonableness do not arise.

71. [649]

    In Fearn, Lord Leggatt (at [24]) accepted that the law of private nuisance prioritises the general and ordinary use of land over more particular and uncommon uses, again emphasising the reciprocal nature of the “give and take” principle.

72. [650]

    On the other hand, Lord Sales did not consider that the question of whether the defendant acted in accordance with the common and ordinary use of land and locality was the “be all and end all” of the test for nuisance. His Lordship thought that this would “seriously distort the tort” (at [227]). He said so for the following reasons:

    1. (1)

       firstly, such an exclusive focus places excessive weight on one side of what is inextricably a two-sided relationship (at [227]);

    2. (2)

       secondly, a claimant landowner and a defendant landowner may each wish to use their property in ways which are not common and ordinary according to the standards of the locale, and the test governing any conflict between those uses must be capable of accommodating such situations in a just manner (at [229]);

    3. (3)

       thirdly, to make a claim in nuisance turn on whether the defendant’s use of its land is common and ordinary would cause the law of nuisance to have a disproportionate impact on the general right of landowners to use their land as they wish. It would stultify the development of land. As his Lordship said, “[i]f land can be developed for new uses in ways which reasonable accommodation on both sides would allow, the law of nuisance should not prevent it” (at [230]); and

    4. (4)

       fourthly, whilst his Lordship accepted that questions of common and ordinary use might be central to the tort of nuisance, he did not think that the concept was capable of providing a solution in all cases. It is still necessary to have recourse to the more general principle of objective reasonableness (at [232]).

73. [651]

    It seems to me that the observations of Lord Sales with respect to common and ordinary use are more consistent with the law as it has developed in Australia. An assessment of what is reasonable between the parties, allowing for “give and take” and a whole range of factors, is fundamental to the law of nuisance. Further, I agree with the defendant’s submissions regarding the plaintiffs’ focus on the words “common and ordinary.” It is difficult to accept that in finding that the use of the roads was not common or ordinary, the tort essentially becomes one of strict liability. This would hardly allow for technological advancements, fluctuations in construction activity and developments in land use.

74. [652]

    I do not take any statement in any recent Australian case as advocating a type of two-tier tort, such that a substantial interference arising from activity on land which is not common or ordinary gives rise to a form of strict liability, whereas if the use is common or ordinary, the concept of reasonableness places a check on what is actionable.

75. [653]

    George Street – or at least George Street north, near The Rocks – was the first road built in Australia by European settlers. Over a period of more than 200 years, it has been modified and developed to become one of the busiest (if not, the busiest) street in Australia. Trams stopped running along George Street in 1958. The tram tracks were removed at that time. Between 1958 and 2019, George Street was open for exclusive use by vehicular and pedestrian traffic, including buses.

76. [654]

    Whether the use of land is common and ordinary is essentially a matter of impression and evaluation. Each case is different and there is no guiding principle or test through which the Court can consider whether a particular use is common and ordinary.

77. [655]

    The defendant’s position is that carrying out construction activity on a road is a common and ordinary use of the land, as roads are regularly altered and maintained. That would be correct if the defendant had merely been carrying out roadworks. However, that description of the work being undertaken during construction of the SLR route is perhaps too simple and rather ignores the context in which the work was being done. I say this for the following reasons:

    1. (1)

       firstly, the defendant was not a roads authority. It was a statutory agency with the powers and functions set out in the TA Act, which included the development and administration of public transport systems; and

    2. (2)

       secondly, roadworks do not normally involve the laying of rail tracks on a road, the excavation of the road surface and the erection of platforms or stations along some of Sydney’s busiest streets.

78. [656]

    In the end, I do not consider that the use of the roads – that is, George Street and the other roads comprising the SLR route for the purposes of constructing the light rail – was a common and ordinary use of those roads. It was exceptional.

79. [657]

    Having said that, as I have already discussed, such a finding does not have the significance that the plaintiffs suggest. In my view, it is merely a factor to be assessed in considering the reasonableness of the interference. It does not lead to the imposition of a form of strict liability.

80. [658]

    Having accepted that establishing negligence is not a necessary element of nuisance, it is necessary to consider what is meant by the term “fault” in the law of nuisance.

81. [659]

    The question arises as to how the defendant could be at fault if it was not negligent. It seems to me that, consistently with the approach in both Southern Properties and Prestage (and the statement of principle in Gales Holdings), the fault requirement may be established through the mechanism of foreseeability and the creation of the state of affairs which led to the nuisance. In that way, a defendant can be seen to have some personal responsibility for that which befalls the claimant. After all, the essence of the tort of nuisance is the harm suffered, not the conduct. Fault may be established if the defendant, with knowledge of the risk of substantial harm to its neighbour’s property, creates a state of affairs which results in a substantial and unreasonable interference.

82. [660]

    In Clerk & Lindsell on Torts, the authors identify three situations whereby a defendant has created a nuisance, the first being:

83. [661]

    The statement in the first sentence above is reflective of the plaintiffs’ case. The plaintiffs submit that there has been a deliberate use of the land in circumstances in which the defendant knew there would be interference with the plaintiffs’ land and, further, the plaintiffs submit that I should find that the harm was an unreasonable infringement on the use of their land, such that the defendant was an unreasonable user of its land.

84. [662]

    Foreseeability is an essential element of the tort of nuisance, otherwise the liability would be strict. That is, liability would be imposed whether or not the defendant had foreseen the risks associated with the use of its land.

85. [663]

    Fault is established if the defendant, through its conduct, created the circumstances or state of affairs which led to the substantial and unreasonable interference, in circumstances in which that interference was foreseeable. Fault may be established through a failure to take care but negligence is not essential.

The application of the Civil Liability Act

1. [664]

   The CLA commenced on 20 March 2002. The CLA has been amended on a number of occasions, most relevantly for the purposes of this case, by the Civil Liability Amendment (Personal Responsibility) Act 2002 (NSW), which amended the CLA with the introduction of s 43A.

2. [665]

   There is no dispute that the provisions of the CLA could apply to these proceedings, although the extent to which they do may be limited because the cause of action which the plaintiffs pursue is not in negligence but in nuisance.

3. [666]

   The parties take differing positions as to whether Part 1A of the CLA applies. Part 1A applies to any claim for damages for harm resulting from negligence, regardless of whether the claim is brought in tort, in contract, under statute or otherwise (s 5A(1)).

4. [667]

   Negligence is defined in s 5 to mean a “failure to exercise reasonable care and skill”.

5. [668]

   The application of Part 1A is not dependent on how the cause of action is framed (Motorcycling Events Group Australia Pty Ltd v Kelly (2013) 303 ALR 583; [2013] NSWCA 361 at [86], per Gleeson JA). Having regard to the definition of negligence, Part 1A applies to any claim for damages resulting from a failure to take care (Paul v Cooke (2013) 85 NSWLR 167; [2013] NSWCA 311 at [41], per Leeming JA).

6. [669]

   The defendant submits that nuisance is a fault-based tort and that the plaintiffs cannot succeed against the defendant without establishing negligence on its part.

7. [670]

   Further, on the defendant’s approach, if s 43A of the CLA applies, then the standard even for a nuisance claim is that set out in s 43A(3), being that the act or omission of the defendant 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.”

8. [671]

   The plaintiffs submit that Part 1A of the CLA is not applicable. They submit that the tort of nuisance is not based on a failure to take care or whether the defendant acted in breach of any duty of care. Questions of unreasonableness arise in a different context.

9. [672]

   On the defendant’s case, Part 1A does apply. It would follow that s 5B applies and the analysis mandated by s 5B must be undertaken.

10. [673]

    In Paul v Cooke, Leeming JA identified (at [40]) that the term “negligence” is used in differing ways in different parts of the CLA. It may be a reference to the tort of negligence or merely a convenient way of describing a failure to take care. This is evident from the definition of negligence in s 5.

11. [674]

    As is evident from my analysis of the relevant legal principles, I do not accept that to succeed in an action in nuisance, a plaintiff must establish that the defendant was negligent (or failed to take care), although it may do so. In the present case, the fact that the defendant may establish that it did not fail to take care as part of its defence does not mean that the claim is for damages resulting from a failure to take care.

12. [675]

    It is important to have regard to all of the words in s 5A(1) of the CLA. Part 1A applies to “a claim for damages resulting from…”. This requires an assessment of whether the claim (not the damage itself) results from a failure to take care. If established, the present claim results from the interference with the plaintiffs’ land, which was both substantial and unreasonable. It is the nature of the interference that is being assessed, having regard to a range of factors. “Unreasonable” is not being used in this context as a shorthand way of saying that the defendant failed to take care. The plaintiffs’ claims for damages do not result from a failure to take care.

13. [676]

    This approach is consistent with the judgment in Gales Holdings at first instance (Gales Holdings Pty Ltd v Tweed Shire Council [2011] NSWSC 1128). At [346], Bergin CJ in Eq rejected the defendant’s submission that Part 1A of the CLA applied to the plaintiff’s claim in nuisance.

14. [677]

    Further, in Southern Properties at [126], McLure P expressed the tentative view that the equivalent part in the Civil Liability Act 2002 (WA) did not apply to a claim in nuisance. Pullin JA was more certain that it did not (at [329]).

15. [678]

    As such, Part 1A of the CLA does not apply to these proceedings.

16. [679]

    The parties agree that Part 5 of the CLA (“Liability of public and other authorities”) may apply. Part 5 applies to a civil liability in tort. It extends to any such liability, even if the damages are sought in an action for breach of contract or any other cause of action.

17. [680]

    The only cause of action pursued by the plaintiffs is nuisance. That cause of action gives rise to a civil liability in tort. As such, the provisions of Part 5 apply to these proceedings.

18. [681]

    Further, there is no dispute that the defendant is a “public or other authority” within the meaning of that term, as defined in s 41 of the CLA.

19. [682]

    The opening words of s 42 of the CLA are:

20. [683]

    Section 42 thus specifies the principles which must be applied when determining whether the public authority has a duty of care or has breached a duty of care in proceedings for civil liability. That is not this case.

21. [684]

    Section 43 expressly applies to a claim for breach of statutory duty.

22. [685]

    In Patsalis v New South Wales (2012) 81 NSWLR 742; [2012] NSWCA 307 at [87], Basten JA expressed doubt as to whether s 43 would apply to a claim in negligence for a breach of the duty to take reasonable steps to protect the safety of a prisoner, as distinct from a claim for a breach of statutory duty, suggesting that the former would be a claim in respect of a duty arising under the general law, rather than a statutory duty.

23. [686]

    In McKenna v Hunter & New England Local Health District [2013] NSWCA 476 at [167], Macfarlan JA observed that s 43 of the CLA would not apply to a liability based on a common law duty of care. [8]

24. [687]

    There is no claim against the defendant based on a breach of statutory duty and, thus, s 43 of the CLA does not apply.

25. [688]

    The only section within Part 5 of the CLA that could apply is s 43A.

26. [689]

    Section 43A of the CLA may apply because, as set out in s 43A(1), the section applies to proceedings for civil liability to which Part 5 applies. Part 5 applies to civil liability in tort. If the defendant has a liability, it will have a liability in tort and as such, s 43A may apply.

27. [690]

    However, in my view, s 43A does not apply to the plaintiffs’ claims.

28. [691]

    Section 43A is in the following terms:

29. [692]

    Section 43A does not operate as a defence. That has been made clear by the Court of Appeal in a number of cases (e.g. Queensland Bulk Water Supply Authority (t/as Seqwater) v Rodriguez & Sons Pty Ltd (2021) 393 ALR 162; [2021] NSWCA 206 (“Rodriguez”) and Della Franca v Lorenzato; Burwood Council v Lorenzetti [2021] NSWCA 321 (“Della Franca”)). I am thus not determining primary liability and assessing whether the defendant has a defence based on s 43A.

30. [693]

    If it did, the approach may be different. If I were to find the defendant liable in nuisance, I would then go on to apply s 43A on its terms, as it applies to any cause of action in tort.

31. [694]

    In Della Franca, Basten JA held at [8] (with reference to the characterisation of s 43A as a defence) that:

32. [695]

    Similarly, Leeming JA said in Bankstown City Council v Zraika; Roads and Maritime Services v Zraika (2016) 94 NSWLR 159; [2016] NSWCA 51 (at [109]) that “Section 43A assumes the existence of a duty of care and identifies the standard to be applied...”.

33. [696]

    Of course, that must be so in an action based on negligence, but it is not easy to see how that works in an action which is not based on the existence of a duty of care or any allegation of breach.

34. [697]

    If s 43A merely sets the standard of care which applies when determining the liability of a defendant in an action founded upon the existence of a duty of care and an allegation of breach, then it would not apply to an action which is not based on the existence of a duty of care and in which the plaintiff is not required to establish whether there has been a breach of that duty.

35. [698]

    In the NSW Court of Appeal decision of Gales Holdings, Emmett JA (at [195]-[197]), rejected the local council’s reliance on s 43A in the context of a cause of action in nuisance. His Honour found that the plaintiff’s claims were not based on any allegation that the local council had failed to exercise a particular statutory duty or that it had exercised a particular power negligently or unreasonably. His Honour noted that the plaintiff had sued in nuisance and not for breach of statutory duty; therefore, it was a misconception to suggest that its claim was based on the local council’s exercise of any particular power.

36. [699]

    I am uncertain whether his Honour was rejecting a submission that the local council’s liability was based on the exercise of a special statutory power – that is, that s 43A(1) was not satisfied – or whether his Honour was suggesting that s 43A could never apply to a claim in nuisance.

37. [700]

    During closing submissions in the present case, the defendant initially accepted that s 43A could not apply to the plaintiffs’ Case A but later retracted that proposition, suggesting that it could apply to the attribution of responsibility in a case against the defendant.

38. [701]

    Of course, the application of s 43A is not dependent upon the precise cause of action pursued, in the sense that a claimant can hardly avoid it by placing a particular label on the cause of action. However, whatever the tortious cause of action, the determination of liability must require the assessment of the standard of care to be imposed on the defendant, assuming the existence of a duty of care.

39. [702]

    Yet, if there is no consideration of whether a defendant (which is a statutory authority) owed a duty of care to the plaintiff and s 43A does not operate as a defence, the premise on which it operates is not satisfied. If s 43A sets the standard of care as a legal threshold which must be overcome by a claimant, it could not apply to a cause of action in which it is not necessary to establish, as a minimum, the failure to exercise reasonable care.

40. [703]

    In Roads & Traffic Authority of NSW v Refrigerated Roadways Pty Ltd (2009) 77 NSWLR 360; [2009] NSWCA 263 at [352], Campbell JA (with whom McColl JA and Sackville AJA agreed), considered the construction of s 43A. In particular, his Honour observed:

41. [704]

    Having reviewed the legislative history and, in particular, comments in the Law of Negligence Review Panel, Review of the Law of Negligence: Final Report, (Canberra, AGPS, 2002) (“the Ipp Report”) and part of the relevant Second Reading Speech, his Honour concluded at [359]-[360]:

42. [705]

    In Rickard v Allianz Australia Insurance Ltd (2009) 54 MVR 214; [2009] NSWSC 1115, Hoeben J considered the judgment of the New South Wales Court of Appeal in Precision Products (NSW) Pty Ltd v Hawkesbury City Council (2008) 74 NSWLR 102; [2008] NSWCA 278 and stated:

43. [706]

    As questions regarding the existence, scope and breach of the duty of care (having regard to s 5B of the CLA) do not arise, and s 43A does not operate as a defence, then there is no role for s 43A to play in these proceedings. There is no scope for applying the two-step process. I am not considering s 5B or the “Shirt calculus” (see Wyong Shire Council v Shirt (1980) 146 CLR 40) and then applying the higher standard as required by s 43A.

44. [707]

    If, contrary to my view, s 43A could apply to the claim, the defendant must establish the threshold requirements set out in s 43A(1).

45. [708]

    The application of s 43A is expressly limited to the extent that the liability of the defendant is based on the defendant’s exercise (or failure to exercise) a “special statutory power.” Therefore, it is necessary to find a sufficient connection between the liability imposed and the exercise or failure to exercise a special statutory power, such that the liability is based on the exercise of that power.

46. [709]

    There is a distinction between a liability based on the exercise of (or failure to exercise) a special statutory power and an act or omission involving an exercise of (or failure to exercise) such a power.

47. [710]

    “Based on” is a term of ordinary English usage and should be given its ordinary meaning. It connotes a causal connection between the liability of the defendant and the exercise of the relevant power.

48. [711]

    In Curtis v Harden Shire Council (2014) 88 NSWLR 10; [2014] NSWCA 314, Basten JA observed at [244]:

49. [712]

    Section 43A directs attention to the acts or omissions of the defendant which lead to its liability. Whether or not a plaintiff pleads that the defendant was, in so acting or omitting to do something, exercising or failing to exercise a special statutory power is not determinative.

50. [713]

    In this case, the defendant would not be liable for undertaking the construction activities such as digging up the roadway, examining and treating utilities or laying the light rail line. On the plaintiffs’ case, the defendant’s liability is said to arise from the state of affairs which existed for an extended period in Fee Zones 5, 6 and 29. In those circumstances, it must bear some personal responsibility for the nuisance.

51. [714]

    It is thus necessary to examine what the plaintiffs say the defendant did or did not do up until entry into the Project Deed to determine whether the liability of the defendant is based on the exercise (or failure to exercise) a special statutory power.

52. [715]

    In circumstances in which the liability of the defendant arises only in nuisance and not negligence, and the claims against the defendant are based on steps taken during the planning and procurement phase of the project, it is perhaps difficult to accept that the liability of the defendant could be based on the exercise of a special statutory power, rather than merely involving the exercise of a special statutory power.

53. [716]

    Further, as I have outlined earlier in this judgment, the focus of the tort of nuisance is on the interference with the plaintiffs’ property. That is the wrong. The wrong is not, for example, the failure of the defendant to undertake the six utilities mitigation steps identified by Mr Szmalko. It is not the failure of the defendant to include terms in the Project Deed which would sufficiently ensure compliance with its fee zone strategy.

54. [717]

    I do not consider that any liability the defendant might have is based on the exercise of a special statutory power. The basis of any liability would be the creation of the state of affairs that resulted in the substantial and unreasonable interference with the plaintiffs’ property. The defendant’s liability is not based on the exercise of any statutory power. To find otherwise would be to misapply or misunderstand the tort of nuisance. The basis of liability is the harm experienced by the plaintiffs, not the nature of the defendant’s conduct.

55. [718]

    If I am wrong on that, the threshold question must be: what was the special statutory power that the defendant was exercising or failing to exercise when it did or did not do the things asserted by the plaintiffs in their pleadings?

56. [719]

    The meaning of “a special statutory power” is described in s 43A(2) as follows:

57. [720]

    Subsections 43A(2)(a) and (b) are conjunctive. A special statutory power is one that is both conferred by or under statute and of a kind that persons generally are not authorised to exercise without specific statutory authority.

Parties’ submissions on special statutory power

1. [721]

   The defendant identifies the relevant special statutory power as being that conferred by s 104O of the TA Act. Alternatively, the defendant relies on the powers conferred under Schedule 1 of the TA Act, which sets out the functions of Transport for NSW. It specifically relies on cl 9, which confers a power on the defendant to contract in connection with the exercise of the functions specified in Schedule 1.

2. [722]

   Section 104O of the TA Act is in the following terms:

3. [723]

   The defendant submits that, at all relevant times, it was developing or facilitating a light rail system. As that power is conferred under a statute and is of a kind that persons are generally not authorised to exercise without specific statutory authority, then the exercise of the power under s 104O is the exercise of a special statutory power (according to the defendant).

4. [724]

   The defendant submits that the power conferred by s 104O is a power to develop, or facilitate the development of, light rail systems. It is thus a forward-looking or prospective power. It is a power to engage in actions that will bring a light rail system into existence.

5. [725]

   One of the things that needs to be achieved to bring about a completed light rail system is the declaration of a route under s 104N(2) of the TA Act. The defendant says that it would make no sense to suggest that the power to develop a light rail system cannot be activated until the route is formally declared. As such, the defendant submits that its entry into the Early Works contract and the Project Deed were within the exercise of the power under s 104O.

6. [726]

   The defendant submits that the term “transport infrastructure” would include the SLR. In s 3 of the TA Act, “transport infrastructure” is defined as follows:

7. [727]

   Alternatively, the defendant submits that the basis of its liability must include the work done by the D&C contractor, which directly caused the interference with the plaintiffs’ properties. This was work done pursuant to s 104O, as the D&C contractor was constructing the SLR along the declared route.

8. [728]

   The plaintiffs submit that the defendant was not exercising any power conferred by s 104O because there had been no declaration of the route for the light rail system (being the SLR) until 11 September 2015.

9. [729]

   Section 104N(1) of the TA Act provides:

10. [730]

    Section 104N(2) provides:

11. [731]

    The relevant regulation made under s 104N(2) was not made until 11 September 2015 [9] (the “TA Regulation”). It introduced cl 82A to Schedule 1, Part 7A of the TA Regulation in the following terms:

12. [732]

    Put simply, the plaintiffs submit that the special statutory power on which the defendant relies did not come into existence until 11 September 2015, such that it could not have been exercising that special statutory power in 2014.

13. [733]

    Further, the plaintiffs submit that the power in s 3E of the TA Act (which specifies that the defendant has the functions set out in Schedule 1) could only be a reference to cl 9 of Schedule 1 of the TA Act, which is in the following terms:

14. [734]

    Schedule 1 sets out the functions of the defendant, which are general in nature. Clause 9 is an ancillary function of the defendant (per Schedule 1, Part 3), being the power to contract. This power existed in 2014. However, the plaintiffs submit that the defendant’s reliance on cl 3(1) of Schedule 1, being a general power to develop, establish, hold, manage and maintain transport infrastructure, is misplaced.

15. [735]

    The plaintiffs submit that the word “rail” in the s 3 definition of “transport infrastructure” does not include light rail, specifically as Part 9, Division 2A of the TA Act contains special provisions relating to light rails. It provides for the development (and facilitation of the development) of light rail systems. The plaintiffs thus submit that the defendant’s reliance on the general functions set out in Schedule 1 of the TA Act is misplaced.

16. [736]

    Further, to the extent that the defendant seeks to rely on the “power to contract” in Schedule 1, cl 9, that is not a special statutory power because it is not of a kind that persons are generally unauthorised to exercise without specific statutory authority.

Consideration of special statutory power

1. [737]

   Pursuant to s 104O of the TA Act, the defendant has the power to develop and operate light rail systems. Section 104O was part of the TA Act in 2014. Plainly, not everyone is entitled to develop or operate a light rail system. The power to do so is a power conferred by the TA Act.

2. [738]

   However, the TA Act must be read as a whole. As the power in s 104O is to develop and operate light rail systems, regard must be had to other sections of the TA Act to determine what a light rail system is. Section 104N(1) of the TA Act commences with the words “for the purposes of this Act”. As a matter of proper statutory construction, “light rail systems” when referred to in the TA Act must be given the meaning set out in s 104N(1).

3. [739]

   Pursuant to s 104N(1), a light rail system is a system for the provision of light rail services along the route declared under s 104N(2). The power existing under s 104O is not a power to develop or operate a light rail system anywhere. It is only a power to develop or operate a light rail system along a declared route. As the SLR route was not declared until 11 September 2015, then the SLR did not become a “light rail system” as that term is understood in the TA Act until 11 September 2015.

4. [740]

   Prior to 11 September 2015, the SLR was not a light rail system for the purposes of s 104O. In undertaking its planning and procurement of the SLR, the defendant could not have been exercising the power under s 104O.

5. [741]

   It could only have been exercising the more general powers conferred under Schedule 1, cl 9.

6. [742]

   Section 3E(1) of the TA Act specifies that the defendant has the functions set out in Schedule 1. The functions set out in Schedule 1 include “general functions” (Part 1) and “transport functions” (Part 2). The general functions set out in Part 1 include “transport planning and policy” and the transport functions set out in Part 2 include “transport infrastructure development.”

7. [743]

   Plainly, the defendant must have been exercising a statutory power in 2014 when it adopted the processes relating to the SLR, but the question remains: what was the “special” statutory power? It does not seem to me that the answer can be found by merely pointing to the general functions afforded to the defendant under the legislation which establishes it. To do so would conflate any statutory powers with special statutory powers.

8. [744]

   In Sydney Water Corporation v Turano (2009) 239 CLR 51; [2009] HCA 42, the Court (per French CJ, Gummow, Hayne, Crennan and Bell JJ at [25]) referred to the well-known article by Professor Mark Aronson titled “Government Liability in Negligence,” [10] wherein Professor Aronson said:

9. [745]

   I do not think that reliance on the general functions set out in the TA Act assists the defendant. There remains a distinction between exercising a statutory power and exercising a special statutory power. The general functions set out in s 3E and Schedule 1 of the TA Act merely describe the powers that any authority such as Transport for NSW would have. It does not seem to me that they fall within the meaning of “special” for the purposes of s 43A of the CLA.

10. [746]

    As such, the defendant has not established that it was exercising a special statutory power in 2013-2014.

Was the defendant’s conduct in planning and procuring the SLR unreasonable in the sense used in s 43A of the CLA?

1. [747]

   Although it is not strictly necessary that I make findings on this issue, for completeness (and as substantial expert evidence was directed to this issue), I will record my views.

2. [748]

   In Rodriguez, the Court (per Basten JA, Meagher JA and Leeming JA) observed at [655] that a plaintiff seeking to establish that the defendant’s acts or omissions were so unreasonable should do so through expert evidence. In this case, both parties sought to adduce expert evidence on that question, albeit the expert evidence was only finalised following some pretrial discussions in respect of the need for such evidence.

3. [749]

   There is a difference between the standard of reasonable care and the standard imposed by s 43A of the CLA. That is the point of s 43A.

4. [750]

   For the reasons already identified, I do not accept Mr Szmalko’s opinion on this issue. His ultimate conclusion was affected by incorrect assumptions and a failure to articulate the basis of some of his opinions or consider what actually occurred. I also accept that the some of the experts’ comments about competing interests (such as those made by Mr McIntyre and Mr Hardman) had merit.

5. [751]

   It may be possible to work backwards with only the interests of business owners in mind but at the time of entry into the Project Deed, the defendant was faced with competing interests relating to the risks associated with the project and its own need to engage on terms which would deliver a light rail for the public benefit.

6. [752]

   The evidence of Mr Sampson and Mr Lewcock on the s 43A issue made sense. It was consistent with my review of the planning documents. That is not to say that all of their evidence helped the defendant, as it did tend to highlight the significance of the utilities risk.

7. [753]

   I prefer their opinions on whether the defendant’s acts or omissions were so unreasonable that no authority would have considered it a reasonable exercise of its special statutory power (if it was special).

8. [754]

   Although I found Mr Hardman’s evidence to be somewhat generic, he made the following observation when opining that the defendant’s conduct was not so unreasonable:

9. [755]

   Mr Hardman observed that one single risk should not, by itself, hold up procurement. He pointed to the objectives of the SLR project. As the plaintiffs submit, those objectives did not include minimising the interruption with businesses along the light rail route. It might be said that the defendant achieved its objectives and, therefore, its conduct was not so unreasonable according to the s 43A standard.

10. [756]

    Had s 43A of the CLA applied, I would not have accepted that the acts or omissions of the defendant were “so unreasonable” according to the standard which must be applied in s 43A.

What actually occurred?

1. [757]

   Firstly, the entire SLR construction was not completed on time; completion was achieved in March 2020.

2. [758]

   Further, and importantly for the purposes of this case, the proposed staging of the construction activities (to minimise disruption to businesses and residents) could only be described as a complete failure. At least in respect of Fee Zones 5, 6 and 29, the D&C contractor remained in occupation of each of those fee zones for prolonged periods far in excess of that which was planned and promised.

3. [759]

   I set out a table which shows the planned occupation periods and the estimates of the programming experts as to what actually occurred:

4. [760]

   The plan for the D&C contractor to complete the work in one fee zone before moving onto another also failed. I set out a table which shows the planned periods of concurrency between the fee zones and the actual periods of concurrency:

5. [761]

   Finally, I set out a table prepared by Mr Griffith contrasting the dates shown in the IDP for utility treatment works with the actual period during which utilities were discovered and treated:

6. [762]

   Further, the proposal to undertake work at six key intersections through the Early Works contract proved to be unsuccessful. Difficulties emerged between the Early Works contractor (Laing O’Rourke) and the D&C contractor. The Early Works contract was abandoned after work had only been attempted at two intersections. The D&C contractor then took on the work at those intersections as part of its main D&C contract.

7. [763]

   Finally, the process which the defendant adopted to locate all the utilities along the route did not work. This is evident from the large number of unknown utilities discovered during the construction works.

8. [764]

   It is necessary that I deal with some issues pursued by the parties relevant to their cases.

What caused the prolonged occupation in the fee zones?

1. [765]

   The plaintiffs plead a causal relationship between the alleged failures in planning and the delay in the fee zones.

2. [766]

   Central to the defendant’s defence is the proposition that the plaintiffs could not (and did not) establish the cause of the prolonged periods during which the D&C contractor continued to undertake construction activities in each fee zone. The defendant said as much during its opening and closing submissions.

3. [767]

   The defendant’s programming expert, Mr McIntyre, did not consider that the approach of Mr Griffith was an available approach.

4. [768]

   According to the defendant, causation could only be established by identifying each new utility which was discovered during the course of the construction and tracing the steps taken by the D&C contractor to obtain approval from the relevant utility provider. That would have involved:

   1. (1)

      identifying when each new utility was discovered;

   2. (2)

      assessing whether the utility was contestable or non-contestable;

   3. (3)

      examining when its existence was reported to the utility provider (for example, Ausgrid);

   4. (4)

      identifying the utility provider’s response;

   5. (5)

      understanding what treatment of the utility was required; and

   6. (6)

      determining when it had been done.

5. [769]

   This would have been impossible to do. According to the D&C contractor’s Project Phase Delivery Report of January 2019, by that point in time, the D&C contractor had discovered 1759 unknown utilities along the route. This is in addition to more than 2000 known utilities which were recorded in a database provided to the D&C contractor prior to commencement of the work. Further, utilities continued to be discovered months and years after the work was supposed to be finished in the fee zones.

6. [770]

   These records informed Mr Griffith’s opinion that the defendant undertook insufficient utilities investigations prior to entering into the Project Deed and that the cause of the substantial delay in the fee zones was the ongoing discovery of unknown utilities.

7. [771]

   Through his examination of the source documents, Mr Griffith identified the discovery of unknown utilities as follows:

   1. (1)

      in Fee Zone 5, there were 55 unknown utilities between 12 January 2015 and 19 July 2018;

   2. (2)

      in Fee Zone 6, there were 46 unknown utilities between 12 November 2015 and 30 May 2018; and

   3. (3)

      in Fee Zone 29, there were 103 unknown utilities between 17 December 2015 and 7 June 2018.

8. [772]

   It may be no coincidence that the surveying of Fee Zone 29 for utilities was less thorough than in the CBD. Each time an unknown utility was discovered, it would have been necessary for the D&C contractor to identify it and then seek a response from the provider as to how the utility could and should be treated. If the utility was non-contestable, it would be necessary for the utility provider to move or replace the utility itself. This process must have caused delay. In 2014, Ausgrid said that it would be treating all of its utilities as non-contestable.

9. [773]

   No other explanation was offered as to why there was such a variance between the Occupation Schedule and the actual period of occupation by the D&C contractor, at least in Fee Zones 5 and 29. Modification 25 provides an explanation for at least some of the delay in Fee Zone 6.

10. [774]

    The defendant offers no explanation for the substantial delay in the completion of construction activities in each of the individual fee zones. It says that there is no onus on it to do so. Whilst that is so, the evidence must be assessed having regard to the power of a party to adduce evidence on a relevant issue. No evidence was adduced from Ausgrid or the D&C contractor.

11. [775]

    However, it is not the position that there is no evidence as to what caused the prolonged occupation in the various fee zones.

12. [776]

    The evidence includes:

    1. (1)

       the evidence of Mr Griffith, being the only witness who examined the as-built drawings and undertook a Windows analysis to determine what actually happened during the construction period;

    2. (2)

       the annexures to Mr Griffith’s report, including the table of utility claims from the date of commencement of the construction;

    3. (3)

       the evidence of Mr Sampson that the discovery of unknown utilities during the course of the works would have made a huge difference to the outcome in terms of the construction being undertaken in accordance with the plan; and

    4. (4)

       the D&C contractor’s “Delivery Phase Progress Reports” and other documents from the period 2015 to 2019. Indeed, on my analysis, there are approximately 120 documents from this period which refer to utilities in the context of problems and delays.

13. [777]

    By way of example, on 5 August 2016, the D&C contractor released its Delivery Phase Progress Report for the month of July 2016. In its report, the D&C contractor noted that productivity across the project was “extremely low” as a result of multiple factors, including the resolution of utility scope, installation delays (due to varied design requirements and the slow resolution of modifications) and a “significant increase in unforeseen obstacles in the ground” despite prior efforts to locate them. As a result, the D&C contractor indicated that there would be fee zone slippage, especially in the CBD. It flagged that significant parts of the project would be open for construction concurrently. It said that it would struggle to mitigate scope changes whilst maintaining the completion date set by the Project Deed.

14. [778]

    Further documents containing evidence of delays as communicated to the defendant throughout the project are tabled below (although it is noted that this is merely a selection; there are many other documents to this effect):

15. [779]

    In all these circumstances, I accept that the construction activities in Fee Zones 5 and 29 took substantially longer than planned because of the discovery and identification of so many previously unknown utilities and the time taken to reach agreement with utility providers and treat the utilities. I also accept that in respect of Fee Zone 6, and to a much lesser extent Fee Zone 5, a substantial delay arose from the issues surrounding Modification 25.

A different delivery model?

1. [780]

   Part of the plaintiffs’ case involved attempting to develop an alternative delivery model in respect of the SLR. Through their experts, the plaintiffs endeavoured to establish that there was a better way of developing and constructing the SLR which would not have exposed businesses and residents to the lengthy and extensive disruption. The plaintiffs say that the delivery model pursued by the defendant was unreasonable (within the meaning of that concept in s 43A of the CLA).

2. [781]

   The alternative delivery model which was initially developed by the plaintiffs involved the separation of the utilities investigation and treatment from the scope of the D&C contract through an early works contract. In fact, that was the model originally proposed by the defendant in 2013.

3. [782]

   As the hearing progressed, the plaintiffs moved away from the use of an early works contract as an alternative delivery model. Instead, they contended that all of the work, including the utilities management and treatment, should have been undertaken under one contract with a requirement that the works be performed in stages or, as Mr Griffith said, “hole points”. This was a model favoured by Mr Griffith and, as it emerged, also by Mr Sampson. At one point in his evidence, Mr Sampson described that form of contract as the best approach, albeit he moved away from that suggestion under subsequent questioning, pointing out some limitations to the approach.

4. [783]

   In my view, the viability of such an alternative delivery model would have depended upon the stage at which the design process was finalised. There was a disagreement between the experts about the extent to which it would have been necessary to finalise the SLR design prior to reaching agreement with utility providers in respect of the treatment of their utilities. The defendant’s experts, Mr McIntyre and Mr Sampson, suggested that asset owners would not have committed to any treatments until a completed design was available.

5. [784]

   On the other hand, Mr Szmalko and Mr Griffith suggested that the alternative delivery model would have worked because the utility providers would have been willing to enter into agreements at the concept level design stage, that is, with much less detail in the design than the defendant’s experts indicated.

6. [785]

   My analysis of the documentation supports the defendant’s position. I accept that utility providers, such as Ausgrid, would not have committed to individual utility treatments (that is, replacements, upgrades or coverings) until a detailed design was available.

7. [786]

   At one stage during the hearing, the plaintiffs suggested that all of the work could have been done at night-time. This suggestion had never been pleaded and was not raised in evidence. The plaintiffs pointed to one comment in Mr Szmalko’s report about the benefit of the Early Works contract in the designated intersections “and other areas” but it was difficult to interpret that comment as supporting the proposition that all of the SLR construction should have been undertaken at night.

8. [787]

   It became apparent that any suggestion that all of the work should have been done at night-time would have represented a fundamental shift in the plaintiffs’ case. The plaintiffs did not press that contention.

9. [788]

   In my view, the generalised criticisms of the defendant in respect of the delivery model that it ultimately pursued are misplaced. There is an air of unreality and hindsight in the plaintiffs’ arguments, including those adopted by their experts, which attempt to rewrite all that occurred. The suggestion that the SLR should have been delivered in an entirely different way rather ignores everything that occurred between Ausgrid, the defendant and the proponent/OpCo.

10. [789]

    Throughout 2013-2014, the defendant was engaged in the process of selecting the best delivery model for the SLR, having regard to its aims and the feedback which it had received from potential proponents. The NSW Government had been carrying out infrastructure through the PPP model for some time. The plaintiffs did not suggest that the State should not have developed the SLR through a PPP.

11. [790]

    In my view, the delivery model was not the problem. As identified by Mr Griffith (and as the documents demonstrate), the problem was that there were too many previously unknown utilities which continued to be discovered in the individual fee zones. The terms on which the defendant engaged the D&C contractor provided relief to the D&C contractor in the case of such events and offered no disincentive for overstaying in each fee zone. At least according to the D&C contractor, the absence of an interface agreement with Ausgrid and the differences between the initial guidelines (attached to the Project Deed) and Ausgrid’s guidelines led to the D&C contractor overstaying its occupation of the fee zones. Having regard to the terms of the Project Deed, the D&C contractor was entitled to relief for these differences.

Allocation of risk

1. [791]

   The defendant disputes the plaintiffs’ assertion that it failed in its contracting conduct because it allocated little of the utilities risk to OpCo.

2. [792]

   The defendant was aware of the utilities risk from the time it commenced planning the project. It was a major risk of the construction process, both in relation to time and cost. At one point, it was described as an extreme risk. The likely proponents were also aware of the utilities risk. Mr Sampson said that the Gold Coast Light Rail experience was a turning point in the construction industry and the utilities risk was even more complex in the Sydney CBD.

3. [793]

   As all of the experts attested to, the SLR project was likely to be one of the most complex infrastructure projects conducted, particularly as it required the excavation of the road, the building of a slab and the laying of a light rail line in some of the most crowded streets in Sydney, where there was likely to be a vast number of utilities.

4. [794]

   The defendant’s original plan was to ensure that the proponent took the utilities risk. However, the market would not accept that and, by 2014, the defendant had moved away from that plan. It moved to what it described as a risk sharing approach.

5. [795]

   The defendant says that the effect of the Project Deed is that OpCo took on most of the utilities risk. OpCo was provided with draft utility agreements with Ausgrid and Sydney Water and data files representing the utility survey conducted by the defendant. The defendant says that when CSY was ready to tender, it effectively told the defendant that it was satisfied with the utilities information provided and did not need any more. Further, the defendant relies on Mr Hardman’s evidence to the effect that, on his analysis, most of the utilities management risk was transferred to the D&C contractor. He said that the availability of Relief Events did not mean that the risk was not properly managed or that the risk was not transferred to the D&C contractor.

6. [796]

   The defendant says that cl 12.3 of the Project Deed cannot be looked at in isolation. It says that there was no financial benefit to the D&C contractor in overstaying a fee zone and that there was a direct financial disadvantage in doing so. The defendant points to terms of the Project Deed which would result in the D&C contractor bearing part of the direct costs and not being reimbursed for fixed overheads or delay costs. Nor would it recover lost profits upon the occurrence of a UWE.

7. [797]

   I will not repeat the extensive analysis of the terms of the Project Deed undertaken by the defendant to establish that the D&C contractor would have continued to bear its own costs. For the purposes of this issue, I accept that. The plaintiffs did not suggest otherwise. Having said that, as with some other issues, the defendant’s approach is somewhat contrary to the information contained in the contemporaneous documents.

8. [798]

   As I highlighted in my review of the planning of the SLR, on 17 March 2014, there was discussion during a Client Control Group meeting about the proposed occupation fee regime. The Client Control Group requested advice from Ernst & Young as to whether the proposed occupation fee regime would effectively deter OpCo from extending the occupation of fee zones and whether it would encourage OpCo to meet the overall project objectives.

9. [799]

   The Client Control Group was not referring to the possibility of OpCo bearing its own costs. Yet, according to the defendant, the real deterrent was the fact that OpCo/the D&C contractor would have to bear their own costs. No mention of that deterrent is made anywhere in any document I have seen. All of the experts who commented on this issue were critical of the terms of the Project Deed for offering no disincentive to overstaying in the fee zones. The defendant did not ask its own experts to comment on cl 12.3. Yet, the defendant calls to its aid other clauses of the Project Deed which it says encapsulate the real deterrent.

10. [800]

    I am unable to accept that approach. It appears to be an attempt to shift the focus from what the defendant identified as being the deterrent prior to entry into the Project Deed to other provisions never mentioned by the defendant in that context.

11. [801]

    Clause 12.3 formed an integral part of the defendant’s fee zone strategy, just as the IDP was more than something simply made up by OpCo. That must have been the view of the Client Control Group on 17 March 2014. An integral part of ensuring that the D&C contractor did not overstay in the fee zones was the occupation fee regime.

12. [802]

    However, in my view, the terms of the Project Deed left very little of the utilities risk to OpCo and the “penalties” which applied for overstaying in the fee zones were negligible. The defendant’s attempt to impose a fee zone regime (with strict compliance by the D&C contractor) failed because the agreed terms were such that most of the utilities risk was borne by the defendant and the express terms agreed to by the defendant provided no deterrent against non-compliance with the occupation periods. Relief was offered to OpCo in respect of UWEs, which were defined in a broad way to include not only the discovery of unknown utilities, but any material change in respect of known utilities.

13. [803]

    Having regard to the payment regime under the Project Deed, the D&C contractor almost benefited from the discovery of an unknown utility, as it became possible for it to obtain relief in the form of both time and compensation.

14. [804]

    The very real risk that continued to exist was the risk of delayed completion of the works in each fee zone caused by the discovery of unknown utilities and changes to known utilities. Whatever the defendant’s intentions in respect of risk sharing were, it did not ultimately engage on terms which involved much sharing of those risks. It started planning with the intention of having the proponent assume the time and cost-related risk arising out of utilities issues. It ended up with an arrangement which imposed little of that risk on the D&C contractor.

15. [805]

    In the end, the result of that process was that the business owners were exposed to that risk and the risk came home.

Matters raised by the defendant as part of its defence

1. [806]

   The defendant submits that the construction of the SLR was for the public benefit. In support of this submission, it relies on a number of documents, including:

   1. (1)

      the “NSW Long Term Transport Masterplan”;

   2. (2)

      the NSW Government’s document titled “Sydney’s Light Rail Future: Expanding public transport, revitalising our city”;

   3. (3)

      the relevant State Significant Infrastructure (“SSI”) application;

   4. (4)

      supporting documentation in respect of the SSI application;

   5. (5)

      the Secretary’s environmental assessment report pursuant to s 115ZA of the EPA Act; and

   6. (6)

      the infrastructure approval and the environmental impact statement pursuant to s 115ZB of the EPA Act.

2. [807]

   As might be expected, much of the material relied upon by the defendant is material which the defendant published many years ago to explain and justify the need for the SLR. As the documents suggest, the defendant had in mind:

   1. (1)

      significantly boosting the capacity and reliability of the public transport system;

   2. (2)

      providing the right transport model for the right task;

   3. (3)

      putting the customer first, in the sense that commuters could make short trips within the CBD and travel from the south-eastern suburbs of Sydney to the CBD in a simpler and faster way;

   4. (4)

      increasing capacity, thereby reducing crowding and congestion;

   5. (5)

      providing urban renewal opportunities; and

   6. (6)

      providing improved amenities.

3. [808]

   The volume of material relied upon by the defendant for the purposes of establishing a public benefit contains documents explaining the NSW Government’s rationale for its light rail policy and the development of the SLR. It is not necessary for me to say anything more about the public benefit of any such policy. Despite the plaintiffs’ unwillingness to concede any public benefit, no evidence was adduced from the plaintiffs in response.

4. [809]

   I am satisfied that in developing the SLR and entering into the PPP for the purpose of constructing and operating the SLR, there was a public benefit. It is not necessary for me to make findings about the State’s predictions as to the type and level of benefit ultimately achieved.

5. [810]

   Claims such as those pursued by the plaintiffs do not merely involve an exercise in weighing up detriment to members of the community against the asserted public benefit. In my view, the fact that the construction of the SLR served a public benefit is an important factor to consider in assessing the issue of reasonableness but the fact that there was a public benefit to the project does not operate as a defence.

6. [811]

   If it did, the mere fact that something is of public benefit would allow the State to override the rights and interests of ordinary members of the community, such as business owners, affected by that which is proposed.

7. [812]

   I have found this question a difficult one to answer because:

   1. (1)

      the plaintiffs do not plead the existence of a duty of care or any breach thereof;

   2. (2)

      the plaintiffs say in their Reply that proving that the defendant failed to take care is not part of their case;

   3. (3)

      the plaintiffs do not say that proving negligence is any part of Cases A, B or C as identified in their closing submissions; and

   4. (4)

      the defendant says that it is not obliged to prove that it did take care but says that, in any event, the plaintiffs have not proved that it failed to take care.

8. [813]

   In my view, establishing that the defendant failed to take care is not essential, but whether the defendant failed to take care may have relevance in two ways:

   1. (1)

      firstly, should the defendant establish that the nuisance was the inevitable consequence of an exercise of its authority, it would then be necessary to consider whether the defendant acted with reasonable care; and

   2. (2)

      secondly, as identified in Southern Properties, whether the defendant failed to take care may be a relevant factor in assessing whether the substantial interference was unreasonable, assessed objectively between the parties.

9. [814]

   As this is an issue pressed by the defendant, I will consider it. In my view, 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).

10. [815]

    I have also found the question a difficult one to answer because the failures identified by the plaintiffs in the Statement of Claim are particularised in the context of the delay, rather than a breach of any duty of care. Normally, when an allegation of a breach of duty of care by a statutory authority is made, there would be quite specific particulars in the Statement of Claim. I can only look at the evidence and make a determination based on the expert evidence as well as the planning documents.

11. [816]

    I have already commented on the plaintiffs’ proposed alternative delivery model. The suggestion that the defendant should have adopted an alternative delivery model rather ignores the reasons that it moved away from that alternative model in the first place. Further, an alternative delivery model dependent upon utility providers agreeing to utility treatments in advance of detailed design plans would not have worked because it is unlikely that the utility owners would have so agreed.

12. [817]

    It is also difficult to accept that the defendant should have adopted a more extensive Early Works program followed by a less extensive Civil Works contract, when even the limited Early Works contract was unsuccessful (for reasons which were barely touched upon in this case).

13. [818]

    Having said that, it is clear that the defendant knew of the risks posed by unknown utilities and the lack of agreements with utility providers. It knew that the construction works would cause interference with business owners. It also knew that an important factor in ensuring compliance with its fee zone strategy would be deterring OpCo from overstaying in the fee zones. Yet the relief provided to the D&C contractor was so broad, the likelihood of UWEs was so high and the penalties in respect of overstaying in fee zones so limited that I can only conclude that what ultimately occurred (being the prolonged occupation of fee zones) was not only foreseeable but predictable.

14. [819]

    I accept Mr Griffith’s opinion that the defendant could have done more to discover unknown utilities and that if it had, the delays in individual fee zones would have been lessened (as the D&C contractor could have reached agreement on treatments in advance of starting the Civil Works sometime in 2015).

15. [820]

    I am unable to be satisfied that the defendant exercised reasonable care to protect the interests of the business owners along the light rail route. It engaged on terms that offered little by way of deterrence and imposed little by way of the utilities risk on OpCo. It did so due to market demands and a desire to comply with its own schedule, that is, entering into a project deed in December 2014. While it may have been faced with competing interests and the terms of the Project Deed secured its objectives, it is not evident that the defendant properly considered the interests of business owners along the SLR route.

16. [821]

    The defendant has not established that it obtained advice that the deterrence clause (cl 12.3) would be effective, as it did not tender any such advice. The defendant knew that its investigations would not have discovered all of the unknown utilities. Even its own expert suggested that use of the term “100% Quality A level” was apt to mislead, and discovery of unknown utilities during the works would have had a huge impact on the construction schedule.

17. [822]

    The defendant knew that it had not reached agreement with Ausgrid. It was warned by Ausgrid of the potential for substantial delays in the approval and treatment of Ausgrid’s assets. Yet, it contracted on terms which provided relief to the D&C contractor in respect of the very matters most likely to occur. The defendant may have found a partner willing to accept its timetable but it was the business owners along the route who would be most likely to suffer if what the defendant knew might happen actually occurred. In this sense, the defendant failed to take care for the interests of business owners. The defendant achieved its stated objectives (having a light rail constructed and operated through a PPP) but it did so at considerable cost to business owners along the route. It ultimately engaged on terms which the market demanded (which were quite different to the terms it originally proposed and intended). In doing so, it exposed business owners to the very real risk that, contrary to the assurances made to them, there would be a prolonged period of construction activity outside their premises.

18. [823]

    The defendant raises that it was a statutory authority exercising its statutory functions when it undertook the acts complained of by the plaintiffs. This is different from the issue which arises under s 43A of the CLA. The defendant says that the interference with the plaintiffs’ land was the inevitable consequence of the exercise of its functions and, in circumstances in which it was authorised to undertake those functions, it cannot be liable in nuisance.

19. [824]

    In Southern Properties at [121]-[123], McLure P explained the principles to be applied as follows:

20. [825]

    This case falls into the category referred to in paragraph [123] of Southern Properties.

21. [826]

    In order to succeed in this defence, the defendant must establish that what the TA Act authorised, being the development and construction of the SLR, could not be done without creating a nuisance and that the nuisance was not caused by negligence. This is different from merely establishing that there was a public benefit to the development of the SLR or that the defendant undertook its work in accordance with appropriate planning approval and authority.

22. [827]

    Neither of the latter two matters provide any defence to a claim in nuisance. They may be factors which should be considered in assessing reasonableness but they do not provide any defence in themselves.

23. [828]

    I accept, however, that if the defendant 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.

24. [829]

    A practical approach must be taken in determining whether the nuisance was inevitable. In Manchester Corporation v Farnworth [1930] AC 171 at 183, Viscount Dunedin said:

25. [830]

    The defendant says that this is not a theoretical exercise. It submits that it has easily discharged the burden of establishing that none of the proposed alternative models would have produced a better outcome.

26. [831]

    However, this rather limits the focus of the inquiry and shifts the onus of proof. It also assumes that which must be proved. The defendant says that, as the plaintiffs have not established that an alternative delivery model would have produced a better outcome, the actual outcome must be viewed as inevitable. That is, despite everything that happened in the planning stage and the defendant’s pronouncements about the construction being staged to avoid disruption to businesses, it was inevitable that the work would continue in the fee zones for very lengthy periods. On that approach, it would seem that all of the defendant’s planning and negotiating was always doomed to fail. The insertion of an incentive clause (or any such clause) was never going to achieve anything. The IDP must have embodied nothing more than hope. The Occupation Schedule was unlikely to ever be satisfied.

27. [832]

    I do not accept this. The idea that such an extended period of substantial interference with the businesses along the SLR route was inevitable seems contrary to everything said by the defendant during the planning stage and ALTRAC/OpCo’s agreement to the Occupation Schedule. No evidence was adduced from the D&C contractor, Ausgrid, or ALTRAC/OpCo on this issue, but the defendant maintains that the nuisance was inevitable because the plaintiffs have not proved that the project could have been done through an alternative delivery model.

28. [833]

    The onus is not on the plaintiffs to prove that the nuisance was not inevitable. I reject the defendant’s submission that I should accept that the nuisance was inevitable based on what the plaintiffs have not proved. In my view, the defendant has not established its defence. The very existence of the fee zone strategy and the Occupation Schedule detracts from that which the defendant asserts.

29. [834]

    I do not accept that the nuisance was the inevitable consequence of the exercise of the statutory authority by the defendant.

Was the interference with the plaintiffs’ businesses substantial?

1. [835]

   One of the limitations on an actionable nuisance is that the interference must be substantial.

2. [836]

   The test of whether the interference is substantial is objective, rather than subjective. The fact that a claimant might find the interference significant or substantial does not mandate a finding that it was so.

3. [837]

   What may be substantial is not capable of precise definition. It is only necessary to say that it is used in the context of the interference being significant, as opposed to minor.

4. [838]

   In this action, there will be differing levels of interference with individual businesses, depending on a range of factors. That is the case even amongst the lead plaintiffs and when considering each of their businesses.

5. [839]

   The defendant accepts that the interference with the Hunt Leather Strand Arcade store was substantial, although it takes issue with the length of time for which it was substantial. However, it says that the plaintiffs’ case lacks precision in terms of identification of the sort of activity leading to the interference and when it occurred.

6. [840]

   Notwithstanding that submission, there was really no challenge to Ms Hunt’s evidence as to the types and level of construction activity being undertaken in front of the Strand Arcade store at various times up to December 2017. Further, I do not accept that, for the purposes of considering whether there was an actionable nuisance, I must adopt Mr McIntyre’s Category 2 classification and somehow quantity the interference in days or weeks, with reference to whether there was heavy machinery being used within 50 metres of the store. Certainly, some days would have been worse than others (on many days, there would have been no actual work) but the hoardings remained in place throughout the period, giving the appearance of construction work. The interference arises in the context of the noise and dust emanating from the site but also the proximity of the hoardings to the store meant it would be difficult for potential customers to know whether construction work was being carried out on a particular day or not. I do not think it was incumbent on Hunt Leather to prove on which days over the whole period heavy construction work was being undertaken within 50 metres of its Strand Arcade store. Whilst the defendant may establish through its Category 2 workday schedule that there were a number of days when no heavy machinery was being used, I do not accept that there would be no nuisance on those particular days.

7. [841]

   In my view, the evidence of Ms Hunt and Mr Foulstone, coupled with documentary, photographic and expert evidence (including the evidence of the programming experts, Mr Griffith and Mr McIntyre) provides ample support for the proposition that the interference with the amenity and use of the Hunt Leather Strand Arcade store was substantial from the time when the construction activity started outside the store up to December 2017.

8. [842]

   Ms Hunt said that some construction works commenced in November 2015. Intensive construction work commenced in Fee Zone 5 outside the Strand Arcade store around February 2016 with the arrival of machines, jackhammers, generators and dirt removal trucks.

9. [843]

   She said that the operation of this heavy machinery created an incredible amount of loud and constant noise. The noise was so loud that staff members working in the store had to raise their voices when speaking to customers and each other. The works created dust and dirt.

10. [844]

    Ms Hunt made similar observations about the construction in the first half of 2016. In around June 2016, new works commenced on the footpath on the side of George Street which was opposite to the Strand Arcade store. This limited the ability of pedestrians to cross the street.

11. [845]

    The most significant aspect of the work in Fee Zone 5 was that, for differing periods (although not all of the time) the construction zone was set up across the whole road, right up to the footpath, although not on the footpath.

12. [846]

    I attach a photo of Fee Zone 5 taken on 7 October 2016. Based on the IDP, the construction activity should have been finished by this date.

13. [847]

    The month-to-month evidence about activities outside the Strand Arcade store in 2016 is similar. Ms Hunt recalled that most work stopped outside the store in January 2017 during the holiday season and resumed by February 2017, with the work generating just as much noise and dust as before.

14. [848]

    In March 2017, the construction progressed to more extensive excavation work with even higher levels of loud, continuous noise and a large amount of dust being spread in and around the store.

15. [849]

    On 20 March 2017, Ms Hunt sent an email to Ms Bell of the CBD Business and Community Forum stating her concern that the store was still suffering terribly from the construction. She complained that prospective customers of the luxury international market were simply not walking past. By this stage, Hunt Leather had fallen into rental arrears.

16. [850]

    In May 2017, Ms Hunt started taking photographs and videos of the construction work outside her stores. She annexed a photograph of heavy machinery operating right outside the Strand Arcade store behind hoardings and barricades on 6 May 2017.

17. [851]

    In June 2017, she observed that the construction (including paving works) was continuing.

18. [852]

    In July 2017, she noticed intersection closures near the Strand Arcade store, which impacted upon pedestrian and vehicular traffic.

19. [853]

    In August 2017, Ms Hunt photographed the construction zone. As a result of the noise, vibration, dust and dirt, she said that Hunt Leather staff were forced to close the solid wooden heritage doors at the entrance to the Strand Arcade store. She believed that this further deterred passers-by because the doors blocked their view of the products. Even with the doors closed, on several occasions, she observed dust and dirt blowing under the door and settling on the glass shelves.

20. [854]

    On 18 August 2017, Ms Hunt sent an email stating that the dirt outside the Strand Arcade was dangerous and it was seeping in day and night, even with the doors closed.

21. [855]

    On 25 August 2017, she videotaped heavy machinery being operated right outside the Strand Arcade store. Staff continued to keep the doors closed due to the persistent noise, as well as the daily onslaught of dust and dirt.

22. [856]

    On 12 September 2017, Ms Hunt photographed barricades on George Street outside the store. She also photographed noise blankets, which she said were not securely attached to the barricades.

23. [857]

    On 20 September 2017, she recorded the general construction noise near the Strand Arcade store and filmed the construction work taking place.

24. [858]

    On 25 September 2017, she filmed drilling work outside the store.

25. [859]

    On 1 September 2017, Ms Hunt wrote to the Minister for Transport at the time. As the plaintiffs submit, this letter constitutes a contemporaneous record of the extent of the impacts on the Strand Arcade store:

26. [860]

    On 29 October 2017, Ms Hunt uploaded a video on YouTube which showed the impact the light rail construction was having on the Strand Arcade store. The video shows:

27. [861]

    In December 2017, hoardings and barricades were removed from Fee Zone 5 outside the Strand Arcade store and Christmas lights were installed. Barricades were moved from Fee Zone 6 near the Hunt Leather QVB store around the same time. George Street in Fee Zone 5 was fully open to pedestrian traffic and the regular disturbances arising from construction work on George Street between King and Market Streets ceased. A photo shows the scene as at Christmas 2017:

28. [862]

    The parties relied on acoustic experts, Neil Gross and Renzo Tonin, for the purposes of responding to the suggestions of excessive noise in Fee Zone 5. They also relied on air quality experts, Gary Graham and Aleksander Todoroski.

29. [863]

    There was substantial agreement between the acoustic and air quality experts. I must say that I did not find the expert evidence on these subjects particularly compelling, not because the experts were not competent and experienced but rather that, particularly in respect of the Strand Arcade store, the evidence of Ms Hunt and Mr Foulstone (which was not the subject of any challenge on dust and noise) was more compelling.

30. [864]

    The Court hardly needs an expert on noise to understand that the regular use of jackhammers, grinders, diggers and heavy vehicles would create a level of noise and dust that would substantially interfere with the amenity of a shop adjacent to such works.

31. [865]

    Further, Ms Hunt said that Hunt Leather staff were required to continually clean dust off their shelves. The Court does not need an expert in dust to explain how dust is generated and what its impact might be.

32. [866]

    There was evidence about the sufficiency of the noise blankets and whether all of the blankets were properly attached. There was also a suggestion that higher hoardings could have been used. The idea that taller hoardings should have been installed right outside the Strand Arcade (thereby increasing the feeling of being closed in) seems somewhat counter-intuitive.

33. [867]

    The Hunt Leather Strand Arcade store was positioned at the end of the Strand Arcade. It opened directly onto the George Street footpath. Its main door faced west onto George Street, meaning it was only metres away from the hoardings and barricades and the construction activity.

34. [868]

    There may be businesses along the light rail route which, because of the particular use of their own premises, could not complain about the interference with their premises as being substantial. However, I am satisfied that the presence of hoardings and barricades, the regular use of machinery and the construction activity in Fee Zone 5 (and particularly, directly outside the Strand Arcade) resulted in a substantial interference with the Hunt Leather Strand Arcade store.

35. [869]

    It is not necessary for Hunt Leather to establish that there was an excavator working within metres of its store every day. I accept that the interference was substantial between November 2015 (when the construction work started) and December 2017 (when construction was generally finalised and the barricades and hoardings were removed). Mr Griffith and Mr McIntyre agreed that the D&C contractor was in occupation of Fee Zone 5 at least between November 2015 and December 2017.

36. [870]

    Hunt Leather maintains that there was a continuing substantial interference over the subsequent 18 months because construction activity took place from time to time. Ms Hunt was taken through the defendant’s exhibit, being the daily photographic record of George Street, particularly in between King and Market Streets. She pointed out various days on which activity was being carried out. That often involved the erection of bins or the digging of a particular hole, or similar individual events. A more extensive analysis was undertaken by the programming experts. I have already commented on their evidence.

37. [871]

    Ms Hunt pointed to the fact that, on occasion, work was carried out at the intersection of George and Market Streets or it seemed that work was being carried out in Fee Zone 4 on George Street, further south of King Street. She complained that this would have deterred customers from walking up George Street. She believed that staff from the international hotels and cruise ships were warning people not to use George Street throughout the whole period of construction. Perhaps, they were being directed down to Barangaroo instead.

38. [872]

    It is possible that the number of pedestrians walking along George Street was reduced and continued to be reduced, although there is really no evidence about that other than Ms Hunt’s anecdotal evidence. I am prepared to accept that the type of customers Ms Hunt wanted to attract were deterred from walking past the Strand Arcade store by the general SLR construction activities.

39. [873]

    However, I do not accept that the following matters which Ms Hunt points to as happening after December 2017 were such as to lead to a substantial interference with her business:

    1. (1)

       the fact that work was still being undertaken on George Street, further north of King Street, causing no disturbance to the Strand Arcade store but merely the potential for customers to not walk up George Street; and

    2. (2)

       the fact that there were occasional days during the post-2017 period when workers might have conducted activities in Fee Zone 5, such as digging a hole, erecting a pole or carrying out specific work on a utility. Any interference caused by that type of work would only have been temporary and minor.

40. [874]

    It follows that I am not satisfied that the substantial interference with the use of the Strand Arcade store continued after December 2017.

41. [875]

    I am satisfied that there was a substantial interference during the period November 2015 to December 2017. This is particularly so because of the nature of the business conducted by Hunt Leather. There must also be something in Ms Hunt’s statement that shopping for luxury goods is an experience which those willing to part with their money like to enjoy and that they would be deterred from entering a luxury goods store which was subject to construction noise and dust. It is unsurprising that they would be deterred by the presence of construction activity within metres of the store.

42. [876]

    In my view, the Hunt Leather QVB store was in a different position, obviously geographically, but more importantly, in the context of the interference with the use and enjoyment of the store.

43. [877]

    The QVB store opened inwards, onto the walkway inside the QVB. There was no door onto George Street. There was only a shopfront window.

44. [878]

    There is no evidence that the operation of the QVB store was impacted by either dust or noise. Ms Hunt did not say so.

45. [879]

    The interference is said to be constituted by the closure of Fee Zone 6 to vehicular traffic and the erection of hoardings and barricades in Fee Zone 6 (similar to Fee Zone 5).

46. [880]

    However, the footpaths on both the eastern and western sides of George Street in Fee Zone 6 remained open, although it is possible that they might have been closed occasionally, perhaps for weekend work at the intersections at both ends of the fee zone. There was no physical impediment to pedestrians walking south from Town Hall (particularly, Town Hall station or the George Street cinema complex) along either the eastern or western sides of George Street. This includes the footpath outside the QVB.

47. [881]

    In my view, in the circumstances of this case, an actionable nuisance could not arise merely from the closure of a road to vehicular traffic.

48. [882]

    The complaint is that pedestrians would have been deterred from walking along the footpath in Fee Zone 6 because of the construction activity and, further, that those pedestrians walking on the eastern side of George Street in Fee Zone 6 would not have been able to see the Hunt Leather QVB store shopfront window. Also, Ms Hunt said that the window became dusty as a result of the construction activity and required constant cleaning.

49. [883]

    None of that would have impeded customers from walking through the QVB, particularly if they were in the mood for shopping, thereby passing by the entrance to the Hunt Leather store inside the building rather than walking directly past the construction activity on the George Street footpaths. Ms Hunt points to the presence of hoardings on the roadway (not the footpath) as being likely to have deterred pedestrians from walking along George Street but there is no evidence of any substantial drop in pedestrian numbers walking along George Street.

50. [884]

    The claim of substantial interference in respect of the Hunt Leather QVB store is not based on noise, vibration, dust or dirt but, rather, the claim is that the visibility of the store was affected and that vehicle and pedestrian access were impacted.

51. [885]

    Presumably, the plaintiffs rely on a combination of those factors to establish substantial impairment. Ms Hunt said:

52. [886]

    The barricades on the roadway outside the Hunt Leather QVB store window did not impede visibility of the store from the western side footpath but they impeded visibility from the eastern side footpath. Absent any noise, vibration, dust and dirt, I am left with a complaint that less people would have noticed the store from one side of George Street and that Hunt Leather needed to clean its shopfront window to remove the dust.

53. [887]

    I am not satisfied that the factors relied upon by Hunt Leather were such that the interference was substantial. The fact that the shopfront window became dirty is the type of thing that demands give and take between neighbours and necessitates some form of self-help. The fact that Hunt Leather would have been required to keep its windows clean during dusty times does not mean that the interference could be described as substantial.

54. [888]

    According to Mr Zisti, hoardings and barricades were erected outside his restaurant, or somewhere proximate to the restaurant, in May 2016.

55. [889]

    Construction involving heavy machinery did not commence outside the restaurant until August 2016, although the construction site had been established before that time. Again, according to Mr Zisti, during the second half of 2016, the construction activities outside his restaurant included the use of heavy machinery and concrete pouring. In December 2016, a pedestrian crossing adjacent to the restaurant was closed.

56. [890]

    This type of construction work continued throughout 2017 and, indeed, right up to 2019. In July 2018, there was construction activity on the footpath right outside the restaurant. This sort of construction activity continued until at least the end of 2018. According to Mr Zisti, some construction also continued in the first half of 2019, at which time he was attempting to establish his pasta bar.

57. [891]

    Mr Zisti complains that during the construction period – specifically, during the period of heavy vehicle use – the amenity of his restaurant was affected by noise and dust. His shopfront window was often coated in dust. Plainly, Mr Zisti’s Thai restaurant (and the pasta bar, for the short time it operated) were affected by noise, dust and interference with sight lines caused by the hoardings. There was construction activity being undertaken right outside his restaurant. It is the combined effect of all of these matters which is important.

58. [892]

    The plaintiffs rely on expert traffic evidence on the question of whether there was a substantial reduction in traffic in Fee Zone 29 during the construction activities.

59. [893]

    The plaintiffs obtained reports from Oleg Sannikov dated 21 May 2021 and 2 May 2022. The defendant obtained a report from Shaun Smedley dated 11 November 2021. They also prepared a joint report.

60. [894]

    Their evidence related to the flow of traffic in Fee Zone 29 during the construction works. As George Street was permanently closed to traffic once the SLR construction commenced, their evidence was not relevant to Fee Zones 5 and 6.

61. [895]

    The construction of the SLR in the centre of Anzac Parade resulted in the traffic lanes on Anzac Parade being changed. There had previously been three lanes travelling east which were directly outside Mr Zisti’s restaurant. The construction of the light rail resulted a reduction to two lanes, with one being a bus lane. Most significantly, all parking became prohibited outside Mr Zisti’s restaurant, as it had been transformed into a bus lane. There was thus only one other lane of vehicular traffic, other than the bus lane.

62. [896]

    To inform his opinion about the reduction in traffic flow along Anzac Parade, Mr Sannikov had regard to “Sydney Coordinated Adaptive Traffic System” (“SCATS”) information. This is the system that manages the timing of phases at traffic lights. It uses sensors at each traffic signal to detect a vehicle’s presence.

63. [897]

    Mr Sannikov analysed the traffic flow at three traffic control spots relevant to Fee Zone 29.

64. [898]

    It is not necessary to go into any further detail about the methodology adopted by Mr Sannikov. It is only necessary to say that on Mr Sannikov’s analysis, there was a decline in traffic in Fee Zone 29 during the periods of analysis.

65. [899]

    Mr Smedley was retained by the defendant to respond to Mr Sannikov’s initial report. He offered a number of criticisms of Mr Sannikov’s methodology but it seems that the matters about which Mr Sannikov and Mr Smedley disagreed were resolved. Nevertheless, Mr Smedley raised criticisms of the SCATS data, both in the joint report and his oral evidence. There was an issue as to whether the single loop detectors undercount traffic. Further, at least according to the defendant, the single loop detectors may not count traffic properly during periods of construction.

66. [900]

    The defendant asserts that there are so many variables affecting the total vehicle count that it cannot be relied upon for the purposes of this case. Reference was made to the Austroads “Guide to Traffic Management” (“the Guide”), which refers to the various methods of determining traffic flow. One such method is the use of the single loop detector. As set out in the Guide, this is the most accepted and commonly used method for determining traffic flow.

67. [901]

    The single loop detectors used in Fee Zone 29 were permanent, in the sense that they were under the pavement. It was put to Mr Sannikov that the variables rendered the method unreliable and, further, that there was likely to have been an undercounting of the total number of vehicles. Mr Sannikov said that there could have been undercounting and overcounting, although he accepted that, based on the material provided to him, there would have been a mean undercount of 3.57%.

68. [902]

    Mr Smedley did not accept that the numbers could be used for the purposes suggested by the plaintiff. However, as Mr Smedley accepted, at least by the time of the joint report, the criticisms raised appeared to have been dealt with by Mr Sannikov.

69. [903]

    There may be other more reliable methods for determining traffic flow. It may be, as suggested during cross-examination, that there is a margin of error or tolerance (suggested by Mr Sannikov to be 5%). The total could be affected by the condition of the road; therefore, roadworks might interfere with the detection system. These are all matters which tend to suggest that the total numbers detected using the single loop detector methodology must be subject to some variance and are not 100% accurate.

70. [904]

    However, it does not seem to me that the possibility of a margin of error renders the whole analysis invalid. As set out in the Guide, the single loop detection system is the most widely accepted and used method in Australia.

71. [905]

    In the end, I am satisfied that there was some potential for undercounting or overcounting in the SCATS data but the tolerance or variance level might only have been 5%.

72. [906]

    Whilst there may be some validity in Mr Smedley’s concerns, I accept Mr Sannikov’s analysis and his ultimate conclusion about the reduction in traffic flow in Fee Zone 29.

73. [907]

    The Court does not need expert evidence about how the combination of these factors might have impacted upon Mr Zisti’s restaurant, although there is some. Whilst the construction activity was not undertaken at night or during dinner times, Mr Zisti’s restaurant was adjacent to a construction site.

74. [908]

    The defendant accepts that this sort of activity would have had a substantial impact on the restaurant.

75. [909]

    I accept that this interference continued between 7 May 2016 and 28 February 2019. I am satisfied that the interference was substantial.

Was the interference with the plaintiffs’ businesses substantial and unreasonable?

1. [910]

   Another check or limitation on a claim in nuisance is that the interference or harm must be unreasonable.

2. [911]

   As the interference with the Hunt Leather QVB store was not substantial, I need not consider it further.

3. [912]

   Whether the interference with the plaintiffs’ use of their properties was unreasonable must be assessed objectively, having regard to the position of both landowners (or occupiers) and the uses to which the land was being put.

4. [913]

   This necessarily involves an evaluative assessment of the principle of give and take. It is not an assessment based on some legal standard. It is necessary to consider what would be reasonable for a person in the position of the plaintiffs to put up with, having regard to the principle of give and take.

5. [914]

   In the context of the operation of particular businesses, the period of the interference must be an important factor in assessing reasonableness. In this case, the period of the interference was lengthy and much longer than the defendant had assured business owners would occur.

6. [915]

   Other relevant factors in assessing whether the interference was unreasonable would include:

7. [916]

   I have already commented on all of these factors in this judgment. The fact that the works were for the public benefit is important. The fact that the defendant was a statutory authority exercising its powers for the long-term benefit of the community is important. These factors tend to suggest that the period during which construction activity should be permitted without giving rise to an actionable nuisance should be extensive. However, the period is not never-ending. Nothing about the defendant’s power or authority permitted it to infringe the rights of the landowners and users along the route for an excessive period.

8. [917]

   In my view, assessed objectively, the lead plaintiffs (Hunt Leather and Ancio) suffered an interference with the use of their properties which was both substantial and unreasonable.

9. [918]

   Both the Hunt Leather Strand Arcade store and Mr Zisti’s restaurant were exposed to the effects of the construction works for a period of three years. This must be contrasted with the much shorter periods set out in the IDP (and even Mr Griffith’s amended IDP). The defendant may be correct in suggesting that the IDP was merely an estimate but it was an estimate which the parties must have considered to be reasonable and reflective of the way they thought the work could and should be done, assuming that there would be proper planning.

10. [919]

    I do not accept the defendant’s submission that if it was reasonable to undertake the works, it did not become unreasonable during the course of the works. Indeed, that is the very point of this litigation. That is, despite the public benefit in the development of the SLR and despite the fact that use of the land might have been reasonable for a period (leaving aside the plaintiffs’ “common and ordinary” argument), there came a point in time when it became unreasonable.

11. [920]

    Establishing that the use of the road for the light rail was for the public benefit and represented a reasonable use of the land for some period does not preclude an action in nuisance for any period that the interference became unreasonable. If the opposite was true, a landowner who has obtained permission to undertake construction works could be said to have extinguished the rights of the neighbouring landowner. That cannot be so.

12. [921]

    The defendant knew that the construction of the SLR would expose businesses to a form of interference which had the potential to, and was likely to, severely impact the businesses being operated. The risk, of which the defendant was aware during the planning and procurement stage and when it entered into the Project Deed, came home. The impact of the construction activities amounted to a substantial and unreasonable interference for a period.

13. [922]

    Plainly, something went wrong during the construction phase of this project. Recognising the very substantial risk to business owners along the route as a result of the construction work, the project had been developed, planned and procured on the basis that construction activity would only take place outside individual businesses (that is, those businesses within particular fee zones) for limited periods.

14. [923]

    Whilst I am not assessing “substantial and unreasonable” from the perspective of loss of profit (as if it were a mathematical exercise), it is plain that both Hunt Leather and Ancio suffered significant losses during the extended period when construction was being undertaken outside their premises. The interference was substantial and unreasonable and the plaintiffs would be entitled to succeed, subject to establishing that the defendant should bear some personal responsibility for such interference.

Was the level of interference foreseeable on the part of the defendant?

1. [924]

   There can be no doubt that the defendant was well aware of the utilities risk. Although the defendant had carried out extensive investigations into the existence of utilities prior to entry into the Project Deed (and it provided a database of over 2,000 entries to OpCo prior to same) the defendant knew that there was a substantial risk (in the words of the defendant’s own expert, Mr Sampson) that there could be unknown utilities, that is, utilities not yet discovered. According to Mr Sampson, the discovery of unknown utilities would have had a “huge impact on the outcome”.

2. [925]

   Further, the defendant knew that it had not yet entered into any agreements with utility providers as to the treatment of the utilities. That meant that there was a very substantial risk that whatever previously unknown utilities were found, there would be a delay in obtaining approval from the utility providers for dealing with the unknown utilities.

3. [926]

   Further, in respect of the very large number of utilities which had been located, because there were no agreements in place, there was a risk of delay in reaching agreement. As I have already indicated, utilities were categorised as either contestable or non-contestable. Therefore, in respect of each non-contestable utility, it would be necessary to arrange for the utility provider to undertake the treatment works (which might involve relocating or upgrading the relevant utility). The defendant knew that Ausgrid had predicted that all of the works on its utilities would be non-contestable, meaning Ausgrid would be carrying out the work. Coupled with Ausgrid’s warnings as to how long this all might take, this explains why the utilities risk was described as extreme.

4. [927]

   These were all matters of which the defendant was well aware prior to entry into the Project Deed. Ausgrid had given the defendant very direct warnings and made quite specific statements that the process of locating and treating its utilities could take years.

5. [928]

   Certainly, Ausgrid’s warnings were issued prior to mid-2014. It is possible that when Ausgrid switched from its business as usual approach to setting up a dedicated team to handle the SLR utilities, the risk of the delay originally suggested (being multiple years) was reduced.

6. [929]

   However, on the defendant’s own evidence (per Mr Sampson and Mr Lewcock), the utilities risk remained high. Mr Lewcock, Mr Hardman and Mr Sampson opined that although the defendant had intended to transfer the utilities risk through the Project Deed, it became increasingly apparent that the proponent would not accept all of the risk. As Mr Sampson said, the problems with the Gold Coast Light Rail development marked an important moment in the civil contracting industry, when the risks associated with utilities became clear.

7. [930]

   Further, the other very real risk of which the defendant was aware prior to entry into the Project Deed was the risk of interference with businesses along the SLR route during the construction. This featured prominently in its Risk Register. It acknowledged the Gold Coast experience, whereby 15% of businesses failed during the construction period. As such, not only was the defendant aware of the risk of interference with businesses along the SLR route, it anticipated an interference so extensive that businesses may fail.

8. [931]

   It seems to me that, given the defendant’s knowledge and existence of both risks, what eventuated was plainly foreseeable on the part of the defendant. It knew that there could be prolongation of construction activity in the fee zones well in excess of that contemplated by the fee zone schedule and the IDP.

What is the period of the nuisance?

1. [932]

   The question which then arises is how to determine the period of the nuisance.

2. [933]

   Of course, the defendant must have been entitled to arrange for the construction of the SLR along the specified route. Not all interferences or impacts will give rise to an actionable nuisance. The principle of give and take permits landowners to use their land reasonably in the sense that I have identified. I have already rejected the plaintiffs’ principal proposition that, if the use of the roads was out of the ordinary or uncommon, then the period of the actionable nuisance starts when the substantial interference commenced (meaning, on the plaintiffs’ case, that damages would be payable from the time the works began).

3. [934]

   Whilst I could use the dates in the IDP as a starting point, the plaintiffs put forward an amended IDP as representing a reasonable timeframe for the construction activities. The effect of that amended IDP is to extend the allowance for completion of work in the fee zones by between 3 and 5 months.

4. [935]

   I set out a table:

5. [936]

   In my view, the amended IDP is an appropriate measure for determining the point at which the interference with the land became unreasonable. Mr Griffith undertook an analysis allowing more time for various activities, which were mainly utilities treatments. His amended IDP reflects what was reasonably achievable. It seems to me that there came a point when, despite the importance and complexity of the project, it was no longer reasonable to expect the plaintiffs as adjoining business operators to put up with the construction activity. At that point, the requirements for an actionable nuisance were satisfied.

6. [937]

   As such, for Hunt Leather, the period of the nuisance commenced on 1 November 2016 and ended on 3 December 2017.

7. [938]

   For Ancio, the period of the nuisance commenced on 27 January 2017 and ended on 28 February 2019.

8. [939]

   The defendant is not alleged to be vicariously liable for the conduct of the D&C contractor. Instead, the defendant is said to be liable for the nuisance because it was personally responsible for the creation of the state of affairs which led to the nuisance.

9. [940]

   I am satisfied that the defendant should be found liable in nuisance for the following reasons:

   1. (1)

      that which occurred, being a prolongation of construction activities outside businesses along the SLR route, was plainly foreseeable by the defendant. Indeed, the defendant became aware of the very real risk of what occurred at least one year prior to entry into the Project Deed. Its own documentation establishes its knowledge of the risk that construction would be prolonged outside businesses due to the utilities risk. Ausgrid gave a number of warnings that the treatment of its utilities could not be undertaken in the timeframes proposed by the defendant;

   2. (2)

      the risk was so high that the other party to the PPP arrangement was not prepared to accept the utilities risk, other than to a limited extent. The defendant entered into the Project Deed in December 2014 (being the time when it had planned to enter into such a deed) when it must have known that there would likely be undiscovered utilities along the route. It did so on terms that it accepted all of the risk arising from the discovery of unknown utilities and also any risks in delay or costs arising out of any difference in the utilities already documented. It thus took on most of the utilities risk. It did so at a time when it had not concluded agreements with utility providers, being another matter which it identified in its pre-Project Deed documents as leading to a significant risk of delay;

   3. (3)

      despite assurances to business owners that, in order to minimise disruption to them, the work would be performed in stages and that it had taken steps to ensure that the D&C contractor complied with that requirement, the defendant contracted on terms that provided relief in respect of the utilities issues and provided no real deterrence for any departure from the Occupation Schedule. In other words, the defendant contracted on terms which meant that, if the risks (which it knew were high) eventuated, the interference with businesses along the route would be prolonged and potentially substantially so; and

   4. (4)

      further, it took the risk in respect of the requirements of the utility providers. According to the D&C contractor, the Ausgrid guidelines were quite different from the guidelines contained in the Project Deed. The defendant accepted the risk of this occurring.

10. [941]

    As it happens, during the course of the project, the D&C contractor discovered nearly as many unknown utilities as had been discovered prior to entry into the Project Deed. I have accepted that the discovery of unknown utilities in Fee Zone 5 and Fee Zone 29 caused the substantial prolongation of occupation in the fee zones.

11. [942]

    In this judgment, I am not making any determination about why the completion of the project took place a year after it was supposed to, although it is a fair assumption that the utilities problems had a lot to do with it. The point of this litigation is to contrast that which was supposed to happen with what actually occurred in respect of disruption to business owners along the SLR route.

12. [943]

    Something went wrong. Specifically, the defendant entered into the Project Deed at a time when it did not know the extent of the utilities risk and on terms which offered little deterrence to the D&C contractor from overstaying in a fee zone. The risk about which it had expressed the most concern, being delays caused by utilities issues, eventuated. Because of the terms on which it had engaged and the incompleteness of its knowledge about the utilities risk, there was significant prolongation of construction activities in the fee zones (specifically, the fee zones which I have considered).

13. [944]

    In the end, I agree with Mr McIntyre, one of the defendant’s experts, to the effect that the defendant was faced with competing interests, and I agree with Mr Hardman that the defendant was required to undertake a commercial negotiation. The problem is that it did so on terms that were to the advantage of OpCo at a time when the risk to business owners along the route remained high. That which was predicted by Ausgrid, and had been described by the defendant as an extreme risk, occurred.

14. [945]

    Whilst the SLR was completed only a year behind schedule, the defendant’s fee zone strategy failed because business owners were subject to extensive construction activities for periods far in excess of that originally anticipated. The defendant took the risk of that occurring when it entered into the Project Deed on the terms that it did. It was the business owners who bore the consequence of the decision. The defendant created that state of affairs.

15. [946]

    For these reasons, the defendant is personally responsible for the nuisance and is liable to Hunt Leather and Ancio in respect of the losses which they have sustained.

16. [947]

    The plaintiffs plead that:

17. [948]

    The plaintiffs then plead that, by reason of the public nuisance, the plaintiffs and the Group Members have suffered, and continue to suffer, loss and damage. They particularise that loss and damage in the same way as they particularise the loss and damage in relation to private nuisance.

18. [949]

    The plaintiffs add that they have suffered non-economic loss by way of mental anguish, as well as loss of profit, both of which they have suffered due to the interference with their businesses.

19. [950]

    The elements of the tort of public nuisance are less controversial. They are that:

    1. (1)

       there is a common injury to members of the public generally;

    2. (2)

       the defendant knew or ought to have known of the nuisance to the public generally;

    3. (3)

       the defendant had the means to abate the nuisance; and

    4. (4)

       the defendant failed to take steps to abate the nuisance. [11]

20. [951]

    In Attorney-General v PYA Quarries Ltd (1957) 2 QB 169, Denning LJ observed (at 190) that the difference between private and public nuisance is that “a public nuisance affects her Majesty’s subjects generally, whereas a private nuisance only affects particular individuals.”

21. [952]

    In considering how many people it might take to make a public nuisance, his Lordship went on to say (at 190-191):

22. [953]

    A private action for public nuisance is only sustainable by an individual where the claimant can demonstrate that he or she has suffered substantial damage over and above that suffered in common with other members of the public so affected by the nuisance. Ms Hunt and Mr Zisti, who seek damages personally in public nuisance, point to the mental anguish which they have suffered as a result of the interference with their businesses and, further, the economic loss they have suffered as a result of such interference (which they say they have suffered over and above any injury suffered by other members of the public).

23. [954]

    In my view, this case is not an appropriate vehicle for a claim in public nuisance for a number of reasons.

24. [955]

    Integral to the tort of public nuisance is establishing some harm or injury to the members of the public and then establishing that the plaintiffs suing in public nuisance suffered harm over and above that suffered in common by the members of the public. The plaintiffs must establish, as a starting point, some harm or injury to members of the public generally.

25. [956]

    In their submissions, the plaintiffs focus on the defences raised by the defendant but, in my view, there is a more fundamental problem with plaintiffs’ public nuisance claim.

26. [957]

    The plaintiffs plead that the public nuisance is constituted by the damage arising from the obstruction of roadways and footpaths due to road closures and the erection of hoardings. However, other than the possible exception of specific intersection work or work done out of hours, there is no evidence that the footpaths on George Street (or anywhere along the SLR route) were ever closed to the public. The hoardings in Fee Zone 5 were on the boundary of the road and footpath (acknowledging that the footpath may form part of the road, in any event, as a matter of law), as were the hoardings in Fee Zone 6. The hoardings in Fee Zone 29 were in the middle of the road and not on the footpath.

27. [958]

    There was normally a pedestrian accessway which enabled persons to cross the road from east to west in Fee Zone 5. George Street was permanently closed to vehicular traffic between Circular Quay and Town Hall once the construction activity started. Although it may be that a reduced number of international visitors or other pedestrians walked along George Street, thereby impacting upon Hunt Leather’s sales, there is no evidence of any substantial diminution in foot traffic along George Street or anywhere along the SLR route during the construction period.

28. [959]

    Further, as I observed when considering the traffic expert evidence in respect of Fee Zone 29, the extent of any diminution in vehicular traffic in Fee Zone 29 was limited.

29. [960]

    Having said that, customers were plainly not shopping in the store or eating in the restaurant as they had been prior to the SLR construction.

30. [961]

    Whilst some businesses may have been impacted by the SLR, the permanent closure of a section of George Street to vehicular traffic does not, of itself, give rise to a public nuisance. Similarly, the presence of hoardings and the undertaking of construction work on the closed roadways in Fee Zones 5 and 6 could not have caused harm to members of the public generally. Whilst the pleasure in walking along George Street may have been diminished, the public were not actually prevented from walking along the footpaths.

31. [962]

    Further, the footpaths were not blocked in Fee Zone 29 and the road remained open to vehicular traffic, although there were changes to the lanes. It is not clear what harm was suffered by members of the public generally as a result of the works in Fee Zone 29, as distinct to local businesses (such as Mr Zisti’s restaurant).

32. [963]

    Further, the harm alleged by the plaintiffs occurred when the construction work was being undertaken. The focus of the plaintiffs’ case has been on the conduct of the defendant prior to entry into the Project Deed. No evidence has been adduced as to what the defendant might have done during the SLR construction to abate any public nuisance.

33. [964]

    The defendant also relies on s 141 of the Roads Act, which is its statutory defence to the claim in public nuisance. Section 141 is in the following terms:

34. [965]

    The plaintiffs say that s 141 does not assist the defendant for two reasons, being:

    1. (1)

       the effect of s 144C of the Roads Act is that the RMS consent or approval was not required for any work on or in a public road in connection with the development of the SLR (being a light rail system) once it was declared on 11 September 2015, and the core construction work took place after that time; and

    2. (2)

       even if the RMS approval was relevant, it was subject to the conditions set out in Schedule 3 and Schedule 4 of the approval. The plaintiffs submit that the defendant did not comply with those conditions.

35. [966]

    The RMS approval is dated 2 October 2015 and is relevantly in the following terms:

36. [967]

    The works are identified in Schedule 1 of the approval as being works relating to the design, construction, testing and commission of the SLR. Consent was required under Part 9, Division 3 of the Roads Act, having regard to s 138(1), which is in the following terms:

37. [968]

    Obviously, with respect to the SLR, the defendant intended to erect structures or carry out work on, or dig up or disturb the surface of, a public road.

38. [969]

    However, as noted, the plaintiffs say that s 144C applies so that the RMS consent or approval was not required. The consent or approval was a matter entirely and exclusively for the defendant. As such, according to the plaintiffs, there was no need for RMS’ approval and the defendant’s reliance on the RMS approval of 2 October 2015 is misplaced.

39. [970]

    The immediate problem with that submission is that, as identified by the defendant during closing submissions, the plaintiffs have relied upon an incorrect version of s 144C. At the relevant time, s 144C was in the following terms:

40. [971]

    Section 144C applies to the carrying out of works or taking of other action in connection with the development or operation of a light rail system that cannot be carried out without the prior consent or approval of the roads authority. Specifically, s 144C(2) applies where the consent or approval of the relevant roads authority (not being RMS) is not required but the consent or approval of RMS must be obtained before the work is carried out. In other words, based on s 144C as it was prior to the Statute Law (Miscellaneous Provisions) Act 2020 (NSW), the consent of RMS was required.

41. [972]

    The defendant obtained the RMS approval on 2 October 2015.

42. [973]

    Further, I do not accept the second basis upon which the plaintiffs submit that s 141 does not operate as a defence. The plaintiffs submit that the RMS approval was subject to the conditions set out in Schedules 3 and 4. Those conditions include ensuring the welfare of all people who may be affected by the works, carrying out the activities with skill and care consistent with best industry practice, completing the construction as soon as reasonably practicable and minimising obstruction and any inconvenience to the public.

43. [974]

    The plaintiffs submit that it is necessary for the defendant to establish compliance with each and every one of those conditions. The plaintiffs submit that it has not done so and thus the defendant cannot rely on s 141.

44. [975]

    The plaintiffs have nominated the conditions with which they assert the defendant has failed to comply. However, if the plaintiffs’ submissions are correct and the onus of proof is on the defendant to prove that it has complied with each of the conditions contained in the RMS approval, then it would be necessary for the defendant to adduce evidence to satisfy the Court of compliance with all of the conditions.

45. [976]

    I say “all of the conditions” because it cannot be that the defendant must only establish satisfaction with the conditions nominated by the plaintiffs. Otherwise, the mere allegation of a failure to comply with certain of the conditions by the plaintiffs would shift the onus of proof to the defendant. This arises in circumstances whereby the plaintiffs submit that the defendant cannot rely on the statutory defence under s 141 of the Roads Act because it has not complied with the conditions of the RMS approval. That cannot be correct.

46. [977]

    In my view, the onus of proof should rest with the asserting party, in accordance with the principle of “he who asserts must prove”. If the plaintiffs assert non-compliance, they must prove it.

47. [978]

    As s 141 of the Roads Act applies to the taking of action in accordance with the RMS approval, in order to overcome that provision, it would be necessary for the plaintiffs to establish that any action taken by the defendant was not in accordance with the approval.

48. [979]

    On the plaintiffs’ pleaded case, the public nuisance was constituted by the damage to and obstruction of roadways and footpaths through road closures and the erection of hoardings. This action took place after entry into the Project Deed. It formed part of the works which were the subject of the RMS approval dated 2 October 2015. There has been no attempt by the plaintiffs to establish that the taking of such action in 2015 (and subsequently) was not in accordance with the conditions of the RMS approval. As such, the plaintiffs have not proved that the defendant failed to comply with the conditions of that approval.

49. [980]

    In my view, s 141 of the Roads Act applies.

50. [981]

    The plaintiffs have not established all of the elements of the tort of public nuisance and, in any event, the defendant has a defence under s 141.

51. [982]

    The evidence as to damages issues comes from a number of sources, including:

    1. (1)

       the evidence of Ms Hunt and Mr Zisti;

    2. (2)

       the financial documents;

    3. (3)

       the evidence of the retail experts, Mr Abery and Mr Shimmin; and

    4. (4)

       the evidence of the accounting experts, Mr Samuel and Mr McPhee.

52. [983]

    The lead plaintiffs maintain that, as a result of the nuisance, they have suffered significant financial losses. It is important to observe that those financial losses were sustained by the relevant corporate entities, not the individuals. The individuals (Ms Hunt and Mr Zisti) are only plaintiffs for the purposes of pursuing public nuisance claims.

53. [984]

    Hunt Leather continued to trade through the period of the SLR construction and then during the COVID-19 pandemic (as much as it could). It still operates a store in the Strand Arcade, although it is now located in a different position.

54. [985]

    However, Ancio ceased operating Mr Zisti’s restaurant in April 2019. It did not renew its lease. It says that it is entitled to damages “in perpetuity” as if it is simply a matter of assessing damages forever because it has not operated the restaurant business since 2019. For the reasons I will identify, this cannot be so.

55. [986]

    In assessing damages, the plaintiffs are entitled to be put back into the position that they would have been if not for the defendant’s tortious conduct. It follows that the plaintiffs must establish the losses they have suffered as a result of the tortious conduct of the defendant. This presents some challenges for various reasons.

56. [987]

    Whilst the plaintiffs are being compensated for loss of amenity, the nuisance is not established by loss of profit. In this case, their loss of amenity resulted in a loss of profit and damages will be assessed with reference to that loss of profit.

57. [988]

    They are not entitled to damages merely because, at some point in time, their businesses were interfered with. Any assessment of loss commences on the date on which the action in nuisance arises, rather than the date on which the construction work commenced. To do otherwise would penalise the defendant for an earlier interference which was lawful and reasonable. Therefore, the period for which loss is assessed is the period of the nuisance and any subsequent period during which the profit of the business continued to be affected by the prior interference (the parties termed this the “recovery period”).

58. [989]

    Damages must be assessed with reference to the businesses’ profits prior to the commencement of the construction works, the period of the nuisance and the recovery period. This is because but for the prolonged period of construction activity and subject to some adjustments, it is likely that the businesses would have bounced back to pre-construction profitability at some point. Loss is not assessed with reference to the profits made as at the end of the IDP period – they may have been negligible because of the substantial period of interference. That approach would not put the plaintiffs back into the position they would have been in but for the nuisance.

59. [990]

    Assessing damages in a case such as this involves impression and estimate. Compensation must be fair to both parties. Financial experts tend to analyse in minute detail, as has occurred in this case. However, even one incorrect assumption might render an expert’s opinion invalid.

Hunt Leather

1. [991]

   As at 2015, Hunt Leather owned and operated a number of stores in Australia, being the stores at the Strand Arcade and the QVB, in addition to:

   1. (1)

      a Rimowa store in Martin Place, selling exclusively Rimowa products;

   2. (2)

      a store in Balmain;

   3. (3)

      a store in Melbourne;

   4. (4)

      a Longchamp store located in Melbourne, for which it relinquished the franchising agreement in November 2018;

   5. (5)

      a store in Brisbane, which was divided into a Hunt Leather store and a Longchamp branded store;

   6. (6)

      a Hunt Leather store in Perth; and

   7. (7)

      a Longchamp branded store in the MLC Centre.

2. [992]

   On 1 February 2013, Hunt Leather entered into a lease with Ipoh Pty Limited in respect of the Strand Arcade. The term of the lease was five years commencing on 12 April 2013. There was a base rent with a percentage rent on top. As Hunt Leather never met the gross sales threshold relevant to the percentage rent, it never paid the amount of any percentage rent under the lease. Hunt Leather renewed the lease in 2018.

3. [993]

   According to Ms Hunt, as at September 2014, the Strand Arcade store was generating sales of approximately $225,000 per month. Sales remained steady until September 2015.

4. [994]

   In May 2015, Hunt Leather spent $700,000 fitting out the Strand Arcade store. The lessor agreed to contribute $376,250 towards that fit-out.

5. [995]

   Ms Hunt said that since the Strand Arcade store opened, there was always a high amount of pedestrian traffic in and around the store. Staff reported that their new location in the Strand Arcade was attracting many international tourists. This included many Chinese and American tourists who would disembark from cruise ships at Circular Quay and walk up George Street. They were willing to spend a large amount of money purchasing Australian leather goods. Ms Hunt said that she decided to capitalise on this international market by ensuring that there was always a Mandarin speaker working at the Strand Arcade store and increasing the number of staff, as well as other measures.

6. [996]

   For the financial year ending 30 June 2015, the Strand Arcade store recorded sales of $3,613,961. Between 2015 and 2019, spending by international tourists in Australia went from $6 billion to $10 billion. Unfortunately for Hunt Leather, this coincided with the period of the SLR construction works in George Street.

7. [997]

   In November 2015, the Strand Arcade store recorded sales of $241,895. Ms Hunt said that the sales in November 2015 were 21% lower than in November 2014. The sales figures thus provided an early warning to her about the impact of the SLR construction, which had commenced in October 2015.

8. [998]

   In her statements (and with reference to source documents), Ms Hunt carried out a month-to-month analysis of the financial impact of the SLR construction on both the Hunt Leather Strand Arcade and QVB stores. It is not necessary that I review the impact on a month-to-month basis. The retail and accounting experts have undertaken that task.

9. [999]

   Suffice to say, Ms Hunt noted that sales in both stores decreased almost immediately following the commencement of the SLR construction. Hunt Leather was required to take out loans. It took protective financial measures such as reducing stock levels, reducing staff and reducing the cost of merchandising.

10. [1000]

    Ms Hunt said that at the end of every financial year, Hunt Leather’s accountants prepared reports detailing the company’s revenue, expenditure and profit and loss for the year. She said that the results for each financial year from 2014 to 2019 demonstrate that Hunt Leather turned from a profitable business to a loss-making venture.

11. [1001]

    In fact, Ms Hunt said that the SLR construction decimated the value of Hunt Leather.

12. [1002]

    As at the time of her first affidavit dated 2 December 2020, Ms Hunt was coming to terms with the fact that she may never realise her plan to expand Hunt Leather and develop her own Australian-made collections, and that Hunt Leather may never recover from the damage to its brand.

13. [1003]

    The plaintiffs served reports from Mr Christopher Abery, both in respect of Hunt Leather and Mr Zisti’s restaurant. The defendant similarly served two reports from Mr Ian Shimmin.

14. [1004]

    Both retail experts then met in conclave and prepared joint reports dated 7 November 2022. They gave evidence concurrently.

15. [1005]

    Whilst there was some limited challenge to their expertise on certain issues, I am satisfied that both experts had sufficient expertise to opine on the matters about which they were questioned. Indeed, I was impressed by both experts. They did not strike me as advocating for any particular party and both demonstrated a thorough knowledge of the retail industry, as well as a thorough understanding of their own reports and the other expert’s reports.

16. [1006]

    Whilst at one stage, Mr Bannon’s questioning had the effect of suggesting that Mr Shimmin’s evidence could not be serious, I rejected that assertion. I was satisfied that both experts were doing their best to comply with the expert witness code of conduct and were giving evidence to the best of their ability, based on opinions they held.

17. [1007]

    For the purposes of the joint report, both experts agreed on a number of matters relevant to the assessment of damages, as follows:

18. [1008]

    Despite those areas of agreement, there remained substantial areas of disagreement, including as to the modelling exercise undertaken by Mr Shimmin and the likely recovery period.

19. [1009]

    There was substantial disagreement about the likely performance of the Hunt Leather group (with reference to the Strand Arcade and QVB stores) if not for the impact of the SLR construction.

20. [1010]

    The reason for this disagreement is that, on Mr Shimmin’s modelling and analysis, there would have been a significant reduction in the turnover at the Strand Arcade store because of external factors (other than the light rail) such that, at least on one view of his analysis, the Strand Arcade store would have made no profit by 2019, even without the impact of the SLR.

21. [1011]

    There are a number of factors which informed that assessment. Firstly, the Strand Arcade store’s sales increased by 75% for the period ending 30 June 2015, when compared to the previous financial year. Both experts agreed that this was an extraordinary growth which was difficult to explain based on market trends or other known factors.

22. [1012]

    This level of increase in sales was not sustainable. Indeed, it was said to be out of the ordinary. As such, the experts approached the projection of the Strand Arcade store’s future revenue on a different basis, not on the same significant upward trend as was demonstrated for the 2014-15 financial year.

23. [1013]

    Having said that, Mr Abery considered that past performance was a useful guide and that there was no reason to expect anything other than that the Strand Arcade would have continued to perform well, with turnover increasing along industry lines, allowing for some store specific contingencies.

24. [1014]

    On the other hand, Mr Shimmin undertook a modelling exercise based on his consideration of a number of different factors. The table produced by Mr Shimmin for the purposes of the joint report is set out below:

25. [1015]

    Mr Abery said that Mr Shimmin’s model was not a valid approach and did not consider that all of the negative factors should have been applied to Hunt Leather in undertaking projections but for the construction of the SLR.

26. [1016]

    Specifically, Mr Abery disagreed with Mr Shimmin’s modelling insofar as it related to:

    1. (1)

       structural changes in the luxury goods sector;

    2. (2)

       impacts from new and refurbished luxury goods stores;

    3. (3)

       online impacts;

    4. (4)

       Barangaroo time diversion; and

    5. (5)

       group performance issues.

27. [1017]

    It is fair to say that the plaintiffs’ approach to the modelling undertaken by Mr Shimmin was to reject it entirely as being completely arbitrary, not based on any proper analysis and quite contrary to the performance of any reasonable comparator.

28. [1018]

    As can be seen from the table, Mr Shimmin allowed one positive factor and then a number of negative factors. The positive factor was based on a weighted average of the increase in spending on luxury goods in Australia and the performance of the personal accessories section (which does not only include luxury goods).

29. [1019]

    It is apparent that there was a yearly increase in the luxury goods market between 2015 and 2019. However, the personal accessories market remained relatively flat.

30. [1020]

    Mr Abery did not dispute that there should have been reference to both the luxury goods market and the personal accessories market for the purposes of assessing any likely upward trends in the market, although he emphasised that the analysis should have been more store specific. As I am only assessing the loss to the Hunt Leather Strand Arcade store caused by the SLR construction activities, I agree with that approach.

31. [1021]

    There was greater dispute in respect of the negative factors set out in the table.

32. [1022]

    One of the criticisms of the modelling was that the percentage impact on Hunt Leather for each negative factor was not based on any particular statistic but was merely an estimate by Mr Shimmin. That is not to say that he did not have regard to extensive background information and his experience generally but even he tended to accept that the percentages could be variable and were merely estimates.

33. [1023]

    Mr Shimmin did have regard to material produced under subpoena by other retailers (all of which are subject to confidentiality requirements).

34. [1024]

    I do not propose to recite his analysis in this judgment but, by way of example, Mr Shimmin pointed to:

    1. (1)

       the increase in luxury goods stores in Westfield Sydney, including that five luxury goods stores commenced operating in Westfield alone between March 2016 and October 2017;

    2. (2)

       the impact of the Louis Vuitton store refurbishment on the corner of George and King streets, including the extent to which the increase in sales in that store would have impacted upon the sales at the Hunt Leather Strand Arcade store less than 100 metres away; and

    3. (3)

       the impact of the refurbishment of the T Galleria store and the impact of the relocation of the Bally store from Pitt Street to George Street.

35. [1025]

    Further, Mr Shimmin looked at the turnover data for the Hunt Leather Strand Arcade store from July 2020 to June 2022, which showed a further decline in monthly turnover during the COVID-19 affected period, compared to its reduced turnover in 2017 to 2019. There was an improvement in sales during 2022 but they only returned to 2017-2019 levels.

36. [1026]

    I do not consider that any data from the COVID-19 period can be used to predict what the sales of Hunt Leather might have been in the years prior to the COVID-19 pandemic but for the nuisance. Further, it is to be expected that businesses such as Hunt Leather would take some time to recover to pre-COVID-19 levels, even after the COVID-19 restrictions ended.

37. [1027]

    Hunt Leather moved away from its prime position at the western end of the Strand Arcade into a smaller store further into the Strand Arcade. No doubt, the double whammy of the construction activities, quickly followed by the COVID-19 restrictions, impacted the profitability and viability of the business.

38. [1028]

    On a perhaps simplistic analysis of the difference between the retail experts, it is apparent that Mr Shimmin considered that there was a relatively fixed pie in respect of luxury goods and that Hunt Leather would face increasing competition in the market because of a range of factors. Its share of the pie was thus likely to diminish, irrespective of the SLR construction.

39. [1029]

    Mr Abery did not accept that general proposition. He considered that the market would continue to increase and that the introduction of new players in the market and upgrades to existing competitors would not have negatively impacted upon Hunt Leather’s performance. In part, that is because he did not consider that the comparators used by Mr Shimmin were true comparators.

40. [1030]

    It is my task to determine which approach I should accept for the purposes of assessing damages or, more specifically, whether I should adopt Mr Shimmin’s modelling as reflective of the likely turnover of Hunt Leather, if not for the construction of the SLR.

41. [1031]

    One critical question identified in the joint report was what impact, if any, the construction had on revenue generated by Hunt Leather. According to Mr Abery, the Strand Arcade store incurred an immediate and significant loss of turnover that coincided with the commencement of the project works in Fee Zone 5, which was sustained at consistent levels throughout the duration of the project.

42. [1032]

    The nominal turnover in the first 12 months was 55% less than the pre-works turnover. It further diminished to 67% less in the next 12 months and remained at 65% less after that.

43. [1033]

    Mr Abery said there was no evidence that any or all of the Shimmin revenue adjustments (as set out in his model) affected Hunt Leather’s turnover prior to the project, as the store was trading at or above industry growth rates for luxury retailing. He pointed out that the turnover loss at the Hunt Leather Strand Arcade store quickly reached its low range of 60% to 70% just six months after the SLR works commenced; it maintained this approximate level for the duration of the works. This indicated to him that the longer-term industry adjustment factors in the Shimmin Revenue Growth Model had no effect on Hunt Leather, whilst other specific store openings and refurbishments mostly occurred after the low turnover position was reached in May 2016.

44. [1034]

    On the other hand, Mr Shimmin maintained that his modelling was consistent with industry practice. Further, he recalibrated his revenue growth model to account for actual data during the period July 2015 to October 2015 and the calculation of the hypothetical revenue for the 2015-16 financial year.

45. [1035]

    He included in the joint report a chart which compared the Hunt Leather monthly turnover and the Shimmin Revenue Growth Model:

46. [1036]

    Mr Shimmin thus predicted that the variation between actual turnover and revised expected turnover, even without the impact of the SLR, would be as follows:

47. [1037]

    Mr Shimmin opined that even without the SLR construction, the Hunt Leather group could have expected its turnover to drop by $4,406,249. The reason for this is what Mr Shimmin described as “quantifiable revenue impacts” based on his modelling.

48. [1038]

    It is difficult to accept that a business with such a track record as Hunt Leather would have suffered such a diminution in profitability over the period 2016 to 2020, even without the construction activities. However, I accept that there was increased competition during that period.

49. [1039]

    As Mr Shimmin pointed out, there was an increase in luxury goods stores in the Westfield Sydney Shopping Centre and the Louis Vuitton and T Galleria stores were refurbished. The large Louis Vuitton store was only 100 metres from the Hunt Leather Strand Arcade store, albeit the Louis Vuitton store business was housed in a large building set well back from the corner of King and George Streets. Louis Vuitton also had the benefit of being a globally recognised brand.

50. [1040]

    I do not need expert evidence to understand that shoppers seek out such globally recognised brands.

51. [1041]

    In the end, while Mr Shimmin’s analysis and reference to factors which would have impacted upon Hunt Leather’s sales is important, I do not accept that I should apply his percentage discounts based on each of the factors. It is fair to have regard to some of the impacts (such as new stores, refurbished stores, and Barangaroo time diversions) but I do not accept that there should be such significant discounts for small player erosions and the performance of the Hunt Leather group. Hunt Leather has always been a small player, at least relative to Louis Vuitton.

52. [1042]

    Further, I am comparing the actual performance of the Strand Arcade store with what it would have been but for the tortious conduct of the defendant. The performance of all of the Hunt Leather stores in the 2015-2020 period was not as good as it had been in earlier years but that decline was multifactorial. I do not accept that the Strand Arcade store would have suffered from the same problems as stores in other positions selling different goods with profitability issues already present. A significant factor was the difficulties in the Longchamp branded stores.

53. [1043]

    I am sure that the performance of the Hunt Leather QVB store was not helped by the SLR construction along George Street but there were other factors which impacted upon the financial performance of the QVB store.

54. [1044]

    Because I have not accepted that the QVB store was subject to a nuisance, I am only assessing the losses sustained by the Hunt Leather Strand Arcade store. The Strand Arcade store was Hunt Leather’s flagship store. It was the most profitable. It was not a branded store. The competition that the QVB store faced from other branded stores in Sydney was not as severe in the Strand Arcade store.

55. [1045]

    Further, I am uncertain as to why there should be a discount because Hunt Leather is a small player in the market. It is a small player but, as is evident from its pre-SLR sales, it had a long-established place in the market as a successful purveyor of luxury goods. I accept Ms Hunt’s evidence about the sort of customer she had been cultivating. Sales from international tourists increased in Australia over the relevant period by 66%.

56. [1046]

    If the effects of the Hunt Leather group performance and small player erosion are removed from Mr Shimmin’s modelling, then the impact of the other factors is marginal. For example, in 2016, the impact of Mr Shimmin’s negative factors would have been a deduction of 9.8% as against the status quo market growth rate of 14.1%.

57. [1047]

    The plaintiffs served four reports from Tony Samuel dated 19 May 2021, 16 June 2021, 12 August 2021 and 12 August 2022.

58. [1048]

    The defendant served four reports from Ashley McPhee, including two dated 25 March 2021 (one report on Ancio and the other on Hunt Leather) and two reports dated 29 June 2022 (one report on Ancio and the other on Hunt Leather).

59. [1049]

    The expert accountants met in conclave and produced a joint report dated 14 October 2022. They gave evidence concurrently.

60. [1050]

    There was substantial agreement between the experts on most matters. To the extent that there was any disagreement between them in respect of Hunt Leather, it related primarily to the assumptions which they were instructed to make by the respective parties and some variations of discretionary assessments made. In the end, it was the assumptions underpinning their assessments which differed.

61. [1051]

    For example, in offering their opinions as to the losses said to have been sustained by Hunt Leather for the financial year ending 30 June 2016, both experts had regard to the actual sales of Hunt Leather for the period July 2015 to October 2016, then came to a different view as to the percentage increase which should be allowed for the remainder of the financial year.

62. [1052]

    Mr Samuel allowed a 10% increase in sales for the period October 2015 to June 2016. Mr McPhee allowed a 5% increase for that same period.

63. [1053]

    Both experts assumed that the Hunt Leather stores would not recover to pre-SLR levels until a point in time after the construction had ended. Neither expert considered that the moment the construction works ended would be the point at which sales were no longer impacted by the construction works. Mr Samuel assumed an 18-month period of recovery, whereas Mr McPhee assumed a 12-month period of recovery.

64. [1054]

    Both experts assumed for the purposes of their calculations that, having regard to the performance of some of the other stores in the Hunt Leather group (Mr McPhee did not include the Longchamp stores), the performance of the Strand Arcade store would likely have gone down after 2016. The extent to which the experts considered that the performance of the Strand Arcade store would have decreased differed slightly.

65. [1055]

    Mr McPhee undertook two assessments. His first assessment was undertaken in a manner similar to that of Mr Samuel. He looked at past performance and the performance of the Hunt Leather group as a whole and then estimated the revenue of the Strand Arcade store, having regard to that past performance and actual performance. He then looked at the actual sales figures for the relevant period and used the difference as a basis for calculating loss. This was essentially the same process as that undertaken by Mr Samuel, although some of their variables differed.

66. [1056]

    Mr McPhee was then instructed to undertake a further assessment based on the analysis of Mr Shimmin. As I do not consider that damages should be assessed strictly in accordance with the Shimmin Revenue Growth Model, the latter assessment by Mr McPhee becomes irrelevant.

67. [1057]

    In the end, despite the efforts of the expert accountants in preparing their analyses and calculations, the extent to which the accounting reports are of any value in determining damages must depend upon whether the assumptions they made match my findings.

68. [1058]

    Both parties agreed that, unless I make findings entirely consistent with the plaintiffs’ best case – that is, awarding damages for the whole period right up to 2020 and on the basis of the more favourable assessment of Mr Samuel – I would not be able to finalise any assessment of damages based on the accountants’ reports.

69. [1059]

    Both parties agreed that if my findings take a different form, such as allowing losses for different periods, not allowing the assumed recovery period or not accepting the proposed methodology, then I would not be able to undertake any final assessment without further assistance from them.

70. [1060]

    Whilst the experts did their best to distil their findings into understandable concepts, there remained hundreds of pages of analysis with many different scenarios based on various assumptions. Topics such as the over-allocation of expenses and saved expenses, as well as steps taken to mitigate losses, were the subject of comment. No doubt hundreds of hours have gone into the estimate of loss, both for Hunt Leather and for Ancio.

71. [1061]

    It is beyond the scope of this judgment to analyse the opinions of the accounting experts any further but I must make findings about how the loss should be calculated.

72. [1062]

    Firstly, I do not accept that Hunt Leather is entitled to any damages by way of losses incurred in the operation of the QVB store. This is for two reasons:

    1. (1)

       Hunt Leather has not established any actionable nuisance in respect of the QVB store; and

    2. (2)

       I do not accept that Hunt Leather can recover losses arising out of the operation of the QVB store because the profitability of the Strand Arcade store was diminished (that is, Hunt Leather did not have additional funds to prop up the QVB store).

73. [1063]

    As is evident from the operation of other branded stores, Hunt Leather was experiencing difficulties with these stores independently of the SLR construction. Hunt Leather has not established that any diminution in sales experienced in the QVB store during the period of the SLR construction was caused by the diminution in sales in the Strand Arcade store during that same period.

74. [1064]

    There is an issue between the parties as to what recovery period should be allowed (between 12 and 18 months). In my view, the idea of a recovery period is somewhat arbitrary. It is also somewhat illusory because, as a matter of fact, the situation in George Street was never going to return to its pre-SLR state. However, in my judgment, the actionable nuisance ended by Christmas 2017.

75. [1065]

    Ms Hunt might say that the damage had been done by then. However, it is not clear to me why 18 months would achieve what 12 months could not, such that the plaintiff has not established its entitlement to the longer period. I accept the defendant’s position on this issue and allow a recovery period of 12 months.

76. [1066]

    It is necessary to make findings about what the financial performance of Hunt Leather would have been if not for the tortious conduct of the defendant. This task is complicated by virtue of the fact that:

    1. (1)

       I do not accept that the QVB store was subject to a nuisance;

    2. (2)

       the performance of the Hunt Leather group throughout Australia was not as good as the performance of the Strand Arcade store;

    3. (3)

       there were problems with Hunt Leather’s branded stores, such as the Longchamp store in Melbourne and the QVB store;

    4. (4)

       Hunt Leather was facing increasing competition in the luxury goods market because of the factors identified by Mr Shimmin. The factors which Mr Shimmin identified as causing increased competition arose after 2015, so Mr McPhee’s comment that the performance of the Hunt Leather group was not affected by those factors before 2015 is somewhat irrelevant; and

    5. (5)

       the sales growth at the Strand Arcade store in the year before the SLR construction commenced was extraordinary, difficult to explain and unsustainable.

77. [1067]

    For the reasons I have identified, I consider that there is some merit in Mr Shimmin’s observations but I do not accept that there should be a discount for the performance of the Hunt Leather group as a whole or the small player factor.

78. [1068]

    Doing the best I can, with respect to the Hunt Leather Strand Arcade Store, I would allow a 5% growth each year on the sales figure as at the end of 30 June 2015. This accounts for both the negative and positive factors referred to by the experts. It reflects the positive industry trends (14%) and some of the negative factors (9%) which would have impacted the sales at the Strand Arcade store.

79. [1069]

    In assessing the losses caused by the tortious conduct of the defendant as it impacted the Hunt Leather Strand Arcade store, the following approach should be adopted:

    1. (1)

       calculate what would have been the profit before tax, assuming that there was no interference arising from the construction work;

    2. (2)

       following that:

    3. (3)

       calculate the difference between (1) and the total of (2)(a) and (2)(b);

    4. (4)

       add interest calculated at the Supreme Court rates. I will leave the parties to work out how to calculate interest but the sensible way may be to calculate the loss as at 31 December and 30 June each year, apply the appropriate interest rate and then add it together, up to 30 June 2023; and

    5. (5)

       deduct any amount already received by way of the ex gratia payments.

80. [1070]

    To put it as simply as I can, the Hunt Leather Strand Arcade store was doing well prior to the SLR construction. In my view, it would have continued to do well (rather than go backwards in a substantial way) but I do not accept that sales would have continued to grow at the rate submitted by Hunt Leather. Hence, my rather simple methodology represents an appropriate and fair way of assessing damages. It enables Hunt Leather to be placed back into the position that it would have been in if not for the tortious conduct of the defendant. The assessment of damages is often difficult but it must always be fair. It is important to recognise that it is sometimes necessary to estimate based on all of the evidence available.

Mr Zisti’s restaurant

1. [1071]

   Mr Zisti said that the SLR construction adversely impacted his restaurant from the time that the hoardings were erected until they were dismantled. The business ceased trading in April 2019. Thus, the period during which it may have been impacted was May 2016 to April 2019.

2. [1072]

   According to Mr Zisti, for the year ending 30 June 2016, the restaurant generated sales of $981,699 with a net income before tax of $149,000. This was an increase in net income before tax of 50% compared to the previous year. Both lead plaintiffs had thus recorded substantial sales increases in the year before they were hit by the SLR construction.

3. [1073]

   I set out below a table from Mr Abery’s report, which shows the increase in revenue:

4. [1074]

   Sales for the December 2016 quarter were $269,835, of which $24,000 was generated by food delivery apps. In other words, at least until the end of 2016, sales remained consistent. However, sales started to drop over the next six months. For the year ending 30 June 2017, the total sales were $902,160 with a net income before tax of $21,640. This means that there was an $80,000 drop in gross sales and a $128,000 drop in profit (before tax).

5. [1075]

   According to Mr Zisti, the restaurant was surviving through the use of food delivery apps but there were additional expenses associated with those apps. Although there was only a 10% drop in gross sales, there was an 85% drop in profit. He said this is all accounted for by the significant drop in dine-in and direct takeaway sales, with the business relying on food delivery apps to survive.

6. [1076]

   For the year ending 30 June 2018, the restaurant generated sales of $732,870, which was a drop of over $250,000 in gross sales from two years earlier. The business recorded a net loss of $16,111. Mr Zisti said that this was the first time the business had made a loss in the six years since he opened the restaurant.

7. [1077]

   In July 2018, he decided to save on expenses by closing the restaurant for lunch and only operating during the evenings. He thus lost revenue which was usually generated by university students who visited during the day.

8. [1078]

   At the same time, he was unable to find replacement Thai cooks and he decided to change to an Italian restaurant. After closing the business for a few weeks to remodel and refit the restaurant premises, Sugo Pasta Bar opened. He operated Sugo Pasta Bar from August 2018 to April 2019.

9. [1079]

   In October 2018, Mr Zisti sub-leased the restaurant to a café operator during the day. The sub-lessee operated the café during the day and Mr Zisti operated the pasta bar at night.

10. [1080]

    The restaurant’s Business Activity Statements (“BAS”) for the quarter ending December 2018 showed sales of $32,037. On my analysis, this was about 15% of what was being achieved by Mr Zisti’s Thai restaurant in 2016. A similar result was recorded for the March 2019 BAS quarter.

11. [1081]

    Mr Zisti said that he not only lost the profit from the business but the business was also rendered valueless. When the business closed, Ancio was left with a tax debt of over $107,000 because it was not able to meet PAYG instalments or pay superannuation entitlements. Mr Zisti said that had the restaurant business continued to be profitable, he would have taken up the five-year renewal option on the restaurant lease.

12. [1082]

    His long-term plan was to negotiate a new lease to follow the five-year renewal option and to continue to operate the restaurant.

13. [1083]

    The retail experts agreed on matters relevant to the restaurant business:

14. [1084]

    The experts disagreed on the impact of:

    1. (1)

       underlying market growth; and

    2. (2)

       the closure of the restaurant on Mondays.

15. [1085]

    The question arising is to what extent the losses and ultimate closure were caused by the nuisance which impacted upon the business.

16. [1086]

    The prior upward trend in the restaurant’s profit was reversed immediately after the construction activities commenced. No other explanation has been suggested for the immediate downward trend. Prior to the commencement of the works, Mr Zisti had spent five years establishing a successful restaurant business, which was operating at a profit of $140,000 in the year prior to the SLR construction.

17. [1087]

    Plainly, the restaurant business was affected by the construction activities. The photographs and Mr Zisti’s evidence demonstrate that. The construction activities would also have impacted sales. The amenity of the restaurant must have been reduced as a result of the construction activities, including the permanent presence of hoardings.

18. [1088]

    A factor in the ongoing profitability of the business must also have been the change in parking restrictions outside the business. The implementation of parking restrictions is not of itself a nuisance (see Deepcliffe Pty Ltd & Anor v The Council of the City of Gold Coast & Anor (2000) 111 LGERA 140; [2000] QSC 411 per Chesterman J at [79]-[81]). The decision of the defendant to preclude people from parking outside the restaurant would have impacted upon the business. However, the extent to which that might have altered the course of Mr Zisti’s previously successful business is not known. The change in parking restrictions coincided with the commencement of the construction activities.

19. [1089]

    The task in assessing the losses sustained by Mr Zisti’s restaurant is to:

    1. (1)

       consider what the profit was prior to the commencement of the SLR construction;

    2. (2)

       consider what the profit would have been but for the nuisance, allowing for the fact that Mr Zisti was also facing parking restrictions; and

    3. (3)

       assess loss up to the time that the restaurant ultimately closed.

20. [1090]

    I do not accept that the lead plaintiff (Ancio) is entitled to losses in perpetuity as if the restaurant had not closed. Ancio ceased its business activity when the restaurant closed.

21. [1091]

    I am assessing the loss of this lead plaintiff. The plaintiff is a corporate entity, albeit it is the vehicle through which Mr Zisti earned his income. The loss of the restaurant may have been devastating to Mr Zisti, but the amount that he made was not such that the restaurant could not have been replaced by some other venture. Of course, I am not assessing Mr Zisti’s personal loss but the point remains that Ancio could have pursued other endeavours. It makes no sense to say that when a business (operated through a corporate entity) closes its doors because of unprofitable trading conditions caused by the fault of another person, that person should be liable to pay damages to the business in perpetuity.

22. [1092]

    The answer is to assess loss in the same way as for Hunt Leather. That is, assume a reasonable recovery period, at which time the causal connection between the tortious conduct and the loss of profit ends, subject to some further allowance for the fact that, unlike Hunt Leather, Mr Zisti’s business declined so much that it ceased operating. There must be some allowance in damages for this.

23. [1093]

    Had Ancio not closed the restaurant, any losses arising from the SLR construction would have ceased by 28 February 2020. It may have been forced to close but the conduct of the defendant did not prevent Mr Zisti from attempting something else in the future.

24. [1094]

    Mr Shimmin undertook a similar modelling exercise to predict the performance of the restaurant if not for the SLR construction. He concluded that there would have been the following impacts:

25. [1095]

    In other words, despite the upwards trend in the two years prior to the construction, the restaurant would have experienced a downwards trend regardless of the SLR.

26. [1096]

    Mr Shimmin suggested decreases in revenue as follows:

27. [1097]

    Mr Shimmin pointed to the pre-closure of the coffee cart, which operated in 2014 and contributed 11% in sales. He pointed to Mr Zisti’s decision to cease trading on Mondays.

28. [1098]

    Mr Abery did not agree. He highlighted past performance and the significant upwards trend in the two years prior to the SLR.

29. [1099]

    Mr Samuel and Mr McPhee agreed on the actual revenue of the restaurant business as follows:

30. [1100]

    They also agreed the rate of gross profit as follows:

31. [1101]

    There was also agreement on the appropriate methodology for estimating Ancio’s loss:

32. [1102]

    There was agreement on discounting and interest.

33. [1103]

    However, there was disagreement about whether the restaurant’s delivery and takeaway revenue should have been included in the loss calculation for the 2017-18 and 2018-19 financial years. Mr McPhee appears to have been instructed on the assumption that takeaway revenue would not have been impacted by the project. Mr Samuel disagreed with this, suggesting that the takeaway and delivery revenues declined in line with (and at the same time as) dine-in revenues.

34. [1104]

    For my part, I accept that:

    1. (1)

       over the five years prior to 2016, Mr Zisti had established a successful restaurant business which demonstrated a significant upwards trend in the two years prior to 2016;

    2. (2)

       like the Hunter Leather Strand Arcade store, such a significant upwards trend was probably unsustainable but that does not mean that there would have been a downwards trend;

    3. (3)

       there was a slight decline in the restaurant industry generally over the period of the construction activity (Australia-wide) but it is difficult to apply that decline to Mr Zisti’s restaurant;

    4. (4)

       both the sales (positively) and profit (negatively) would have been impacted by the growth of food delivery apps, irrespective of the SLR construction. That is what occurred. More of Mr Zisti’s revenue came from food delivery apps but his profit decreased due to the smaller margins; and

    5. (5)

       the upwards trend in the two years prior to 2016 was, to a certain extent, impacted by the operation of the coffee cart, which Mr Zisti ceased operating prior to 2016. Revenue must also have been affected by the decision not to trade on Mondays, although it is not clear how that would have impacted upon profit.

35. [1105]

    I accept that Mr Zisti’s decision to move to food delivery apps was in part influenced by the decline in other sales but, bearing in mind the increasing availability of food delivery apps, it may be likely that he would have sought to increase revenue through food delivery apps irrespective of the construction.

36. [1106]

    The profitability of Mr Zisti’s restaurant would have been affected by the change in parking restrictions outside his restaurant even if the restaurant had continued to operate after the construction works were finished. The presence of parking restrictions may have necessitated more reliance on food delivery apps and less reliance on pick-up takeaway orders.

37. [1107]

    Having said that, I accept that Mr Zisti decided to change from his Thai restaurant to Sugo Pasta Bar because of the significantly diminished profitability caused by the SLR construction and, ultimately, he was forced to close his restaurant in April 2019 because of the impact of the SLR construction. I accept that but for the nuisance, Ancio would have entered into a new five-year lease in April 2019.

38. [1108]

    In my view, Ancio’s loss should be calculated as follows:

    1. (1)

       calculate the actual profit of the restaurant business from when the nuisance commenced on 27 January 2017 to the time when the restaurant closed in April 2019;

    2. (2)

       calculate Ancio’s expected profit for the period 27 January 2017 to April 2019 (but for the interference) on the basis that:

39. [1109]

    That leaves consideration of the post-2019 period, in circumstances whereby the restaurant closed in 2019.

40. [1110]

    One approach to assessing loss may be to accept that, but for the SLR construction works, Mr Zisti would have renewed the lease, such that the business would have continued to operate until 2024. What would have happened thereafter is unknown.

41. [1111]

    However, three factors must be taken into account in assessing loss for the period 2019 to 2024, being:

    1. (1)

       the likely impact of parking restrictions;

    2. (2)

       the fact that Ancio was not operating a business at all and no explanation has been offered as to what it was doing; and

    3. (3)

       COVID-19 would have impacted the business, commencing in 2020.

42. [1112]

    It seems to me that the only basis on which I can assess loss for the post-2019 period is to accept that the lease would have been renewed but to approach the question of loss for that five-year period on a “loss of a chance” basis. That is, there is a chance that the business would have continued to operate profitably but its sales would have been impacted by the parking restrictions and the COVID-19 pandemic. The COVID-19 restrictions would have impacted the restaurant significantly.

43. [1113]

    Ancio will not be compensated for doing nothing. It will be compensated because of the causal relationship between the tortious conduct and the reduction in profit. Applying the loss of chance principles, I would apply a discount of 70% to that five-year period, so Ancio is entitled to loss of profit for a further five years discounted by 70%. Thereafter, any period of loss would be too remote and simply speculative.

Ex gratia payments

1. [1114]

   Each of the lead plaintiffs has already received a compensation payment pursuant to the Small Business Assistance Program (“the program”) provided by the NSW Government.

2. [1115]

   As identified in the briefing document for approval by the Minister for Transport and Infrastructure (“the Minister”), the purpose of the program was to provide small businesses with financial assistance due to the SLR project taking longer than planned (referred to as “overstay”).

3. [1116]

   Hunt Leather initially made an application pursuant to the program but it did not fall within the guidelines because its full-time employees exceeded the maximum number of 20. However, the Minister approved a change to the program so that businesses employing up to 50 full-time employees became eligible. Financial assistance was capped.

4. [1117]

   The accounting firm, Ernst & Young, assessed the impact of the overstay on the Hunt Leather business. Ernst & Young recommended that Hunt Leather receive a payment of $99,343, equivalent to two months rent. As identified by Ernst & Young, the shopfront to the Hunt Leather store was on the SLR alignment and proximate to the construction activity. It had been affected by sight line access, ambience and dust.

5. [1118]

   Ancio made a similar application. It received a payment of $13,600 (up to two months rent) again on the basis that construction was taking longer than expected. Ernst & Young accepted that the impact on the business continued (as evidenced by the reduced turnover) and that the restaurant’s sales would continue to be affected until completion of the SLR project.

6. [1119]

   It is not suggested by the plaintiffs that the decision of the defendant to pay compensation under the program in any way affects the outcome of this matter, other than demonstrating that the defendant accepted that the business owners had been affected by the construction and that overstay contributed to a downturn in turnover.

7. [1120]

   The plaintiffs accept that the defendant is entitled to a credit for the amount of any ex gratia payments.

8. [1121]

   I set out below the common questions agreed on by the parties.

   1. (1)

      Is any liability that the defendant has in nuisance based on the defendant’s exercise of or failure to exercise a special statutory power conferred on the defendant?

   2. (2)

      If so, was any act or omissions involving the exercise of or failure to exercise that special statutory power an act or omission that was in the circumstances so unreasonable that no authority having that special statutory power could properly consider that act or omission to be a reasonable exercise of or failure to exercise its power?

   3. (3)

      Does s 42 of the CLA apply to the allegations of nuisance advanced in these proceedings?

   4. (4)

      Was the construction of the SLR along the SLR route an ordinary or normal use of the land:

   5. (5)

      In doing any of the acts alleged in paragraphs 7, 9, 10A, 15 and 18 of the Statement of Claim, was the defendant exercising a statutory authority, being the s 104O power or the s 3E power?

   6. (6)

      If yes to 5, was any interference with the right to enjoyment of private land or obstruction or inconvenience to the public the inevitable consequence of the exercise of that statutory authority?

   7. (7)

      Does s 141 of the Roads Act have the effect that no public nuisance was caused by the defendant as alleged in these proceedings?

   8. (8)

      In circumstances in which the defendant did not undertake the construction activities, should the defendant be liable for any nuisance and, if so, on what basis?

   9. (9)

      Were the construction works of such a nature as to be capable of causing:

   10. (10)

       Are such Group Members as have suffered loss or damage as a result of private or public nuisance for which the defendant is responsible and who have entered into a litigation funding agreement in connection with these proceedings entitled to claim as a head of damages their reasonable litigation funding costs incurred under any such agreement without needing to show:

   11. (11)

       If yes to 10, what is a reasonable rate of litigation funding costs recoverable by such Group Members?

9. [1122]

   The only question which was not agreed is question 9. The defendant submits that question 9 is too vague to provide any meaningful common answer. Further, the parties did not make submissions on questions 10 and 11, which raise what might be described as the “novel issue” of whether the said-to-be reasonable litigation funding costs incurred under a litigation funding agreement are recoverable by the plaintiffs as a separate head of damages.

10. [1123]

    Further, no evidence was adduced which would enable me to answer question 11; that is, “What is a reasonable rate of litigation funding costs recoverable by such Group Members?” No doubt, minds may differ on that topic. I require some evidence as to why 40% (which is the funding rate in this matter) should be considered reasonable.

11. [1124]

    I will now answer the common questions:

    1. (1)

       Is any liability that the defendant has in nuisance based on the defendant’s exercise of or failure to exercise a special statutory power conferred on the defendant?

    2. (2)

       If so, was any act or omission involving the exercise of or failure to exercise that special statutory power an act or omission that was in the circumstances so unreasonable that no authority having that special statutory power could properly consider that act or omission to be a reasonable exercise of or failure to exercise its power?

    3. (3)

       Does s 42 of the CLA apply to the allegations of nuisance advanced in these proceedings?

    4. (4)

       Was the construction of the SLR along the SLR route an ordinary or normal use of the land:

    5. (5)

       In doing any of the acts alleged in paragraphs 7, 9, 10A, 15 and 18 of the Statement of Claim, was the defendant exercising a statutory authority, being the s 104O power or the s 3E power?

    6. (6)

       If yes to 5, was any interference with the right to enjoyment of private land or obstruction or inconvenience to the public the inevitable consequence of the exercise of that statutory authority?

    7. (7)

       Does s 141 of the Roads Act have the effect that no public nuisance was caused by the defendant as alleged in these proceedings?

    8. (8)

       In circumstances in which the defendant did not undertake the construction activities, should the defendant be liable for any nuisance and, if so, on what basis?

    9. (9)

       Were the construction works of such a nature as to be capable of causing:

    10. (10)

        Are such Group Members as have suffered loss or damage as a result of private or public nuisance for which the defendant is responsible and who have entered into a litigation funding agreement in connection with these proceedings entitled to claim as a head of damages their reasonable litigation funding costs incurred under any such agreement without needing to show:

    11. (11)

        If yes to 10, what is a reasonable rate of litigation funding costs recoverable by such Group Members?

12. [1125]

    The first and third plaintiffs have succeeded, although Hunt Leather has only succeeded in respect of the Strand Arcade store. In my view, the interference with the Strand Arcade store and Mr Zisti’s restaurant was substantial and unreasonable for a period. The defendant is responsible for such interference because it created the state of affairs which led to the extended period of interference in circumstances in which the harm was foreseeable and, indeed, predictable.

13. [1126]

    The defendant sought to minimise the interference with the businesses along the SLR route through its fee zone strategy but its fee zone strategy failed for the reasons I have identified.

14. [1127]

    The defendant may have been exposed to additional costs but the persons who ended up bearing the costs of the prolonged construction activity in the fee zones were some of the business owners along the light rail route. They had been promised minimal disruption and a staged process of construction, which would have seen them exposed to the construction activities for months, rather than years.

15. [1128]

    On any view, the original projections by the defendant were optimistic and not soundly based. I have thus allowed a longer period than that originally projected as being reasonable. There was obviously a degree of imprecision in trying to work out the point at which the interference with the businesses (which commenced when the construction work commenced) became unreasonable. I have relied on the opinion of the only expert who really attempted to undertake the analysis, Mr Griffith, in this regard. I have also accepted Mr Griffith’s opinion as to the cause of the prolonged period of construction in Fee Zones 5, 6 and 29.

16. [1129]

    There is no alternative opinion or alternative evidence. There are merely assertions that Mr Griffith’s analysis is flawed.

17. [1130]

    I have rejected the defendant’s statutory authority defence of inevitability.

18. [1131]

    Further, I have found that s 43A of the CLA does not apply in the circumstances of this case.

19. [1132]

    I have also rejected the plaintiffs’ claims in public nuisance.

20. [1133]

    Those findings may assist going forward, bearing in mind that my determination only relates to two members of the class and three (out of 31) fee zones. However, it seems to me that there remains a significant problem in applying my findings about substantial and unreasonable interference to all members of the class. To the extent that this judgment, through the common questions and my findings in respect of the lead plaintiffs, is intended to provide a basis for the assessment of entitlements of other members of the class, I emphasise these matters:

    1. (1)

       the reason that Hunt Leather and Ancio have succeeded is, in part, that they operated small businesses which were highly susceptible to the effects of construction activities without any means of reducing the impact. It is not difficult to understand how a small boutique luxury goods store which opened directly onto the construction works would suffer because of those works. It is not difficult to understand how a small specialist restaurant which relied on the amenity of its premises would suffer as a result of construction activities happening right outside its front door;

    2. (2)

       however, the position may be different with other businesses. Mere proximity to the construction works does not establish substantial interference, no matter what the period of interference, as I have found in respect of the Hunt Leather QVB store. Many businesses may have been affected by the construction of the SLR in ways which would not constitute a nuisance, despite some diminution in profitability flowing from the construction of the SLR; and

    3. (3)

       it must be remembered that the defendant was a statutory authority and was trusted with the responsibility of improving public transport in Sydney. Infrastructure development will always result in some impact on businesses in the relevant area and changes to an area caused by infrastructure development may have a detrimental effect on businesses. I do not consider that persons would have an actionable nuisance merely based upon factors such as:

21. [1134]

    Nuisance has been established in this matter by a combination of factors, particularly having regard to the way in which the construction activity impacted upon the business activities of the lead plaintiffs.

22. [1135]

    It follows that the fact that persons were operating businesses adjacent to the SLR route during the period of construction does not, of itself, give rise to any cause of action on their part. More is required.

23. [1136]

    The fact that these are representative proceedings does not alter the legal principles which apply. As I said at the outset, this is not a particularly apt vehicle for a class action, albeit as I have identified, some of the issues might be common and have been determined by this judgment. Going forward, there will need to be a process or mechanism developed for the determination of both entitlement and loss.

24. [1137]

    My preliminary view is that referees (who are subject to the Court’s oversight) should be appointed to determine outcomes based on guidelines and parameters. Suffice to say, any system which involves each Group Member being required to spend vast sums on quantum experts and have extensive reports prepared for the purposes of assessing their loss (as the lead plaintiffs have done through the funder) must be unworkable.

25. [1138]

    The lead plaintiffs, Hunt Leather and Ancio, are entitled to succeed. The other lead plaintiffs, Ms Hunt and Mr Zisti, are not.

26. [1139]

    There will need to be another short hearing in order to:

    1. (1)

       finalise damages for the lead plaintiffs;

    2. (2)

       determine a process going forward; and

    3. (3)

       consider whether there might be any other common questions which could be answered.

27. [1140]

    I will list the matter for further directions.

28. [1]

    These proceedings are representative proceedings pursuant to Part 10 of the Civil Procedure Act 2005 (NSW) (“CPA”). The proceedings are pursued on behalf of the persons said to be affected by the construction and development of the Sydney Light Rail (“SLR”) between Circular Quay and Randwick/Kingsford in Sydney.

29. [2]

    The defendant is the NSW Government agency which planned, designed and managed the processes leading towards the construction of the SLR, although it did not actually undertake the construction work.

30. [3]

    There are four lead plaintiffs, being:

    1. (1)

       Hunt Leather Pty Ltd (“Hunt Leather”), which operates a retail leather goods business;

    2. (2)

       Ms Sophie Hunt, who has been the Chief Executive Officer of Hunt Leather since approximately 2003;

    3. (3)

       Ancio Investments Pty Ltd (“Ancio”), being the trustee of the unit trust known as the Ancio Unit Trust, which between May 2009 and April 2019 operated a restaurant business on Anzac Parade in Kensington; and

    4. (4)

       Nicholas Zisti, who was the sole director of Ancio and operated and who had responsibility for the restaurant.

31. [4]

    The hearing which took place during in November to December 2022 was to determine:

    1. (1)

       the liability of the defendant to the lead plaintiffs;

    2. (2)

       the amount of damages (if any) which would be payable by the defendant to the lead plaintiffs; and

    3. (3)

       agreed common questions.

32. [5]

    Although the legal representatives for the plaintiffs estimate that there may be thousands of people who fall within the class defined as Group Members, the initial hearing was only in respect of the lead plaintiffs. However, like all class actions, the purpose of the hearing was also to determine common questions which may impact on the entitlement of other Group Members to any damages.

33. [6]

    In this matter, there are particular difficulties with the potential common questions as, unlike some class actions where there may be a single cause of loss sustained by all members of the class, the causes of any loss suffered by Group Members are in dispute and may vary.

34. [7]

    Fundamentally, that is because there may be substantial differences between the impact that the construction of the SLR had on landholders and business owners at certain points along the route compared to others. This was demonstrated in the initial hearing because Hunt Leather occupied stores in what is described as Fee Zones 5 and 6 on George Street in the Sydney Central Business District (“CBD”), whereas Mr Zisti’s restaurant operated in Fee Zone 29 on Anzac Parade in Kensington.

35. [8]

    The main planning of the SLR commenced in 2012. The defendant determined that the SLR would be built and operated through a public and private partnership (“PPP”) with the entity appointed by the defendant being responsible for both the construction and the operation of the SLR for a period of 15 years.

36. [9]

    The timetable proposed by the defendant allowed for a period of approximately two years of planning and development, with entry into a project deed in December 2014. In fact, this is what occurred. After significant investigation and planning, the defendant called for proposals. It selected a proponent (being Connecting Sydney, known as “CSY”), negotiated and then entered into a project deed on 17 December 2014 (“Project Deed”). CSY nominated a number of ALTRAC companies as the entities through which it wished to contract.

37. [10]

    At the same time as it entered into the Project Deed, ALTRAC entered into a design and construct contract (“the D&C contract”) with its nominated contractor, a joint venture between Acciona and Alstom (“the D&C contractor”). In reality, the parties standing behind CSY were the same parties behind ALTRAC and the D&C contractor.

38. [11]

    The terms of the D&C contract were similar to the terms of the Project Deed. Obligations and entitlements imposed on ALTRAC through the Project Deed were thus passed down the line to the D&C contractor. The project was due to be completed by March 2019. It was supposed to be completed in stages or according to fee zones, thereby ensuring minimal disruption to businesses along the route. As it turned out, it was not completed until March 2020.

39. [12]

    The D&C contractor was originally a party to these proceedings but it is no longer a party. I do not know why it was originally joined to the proceedings and why it is no longer a party, other than that there has been a settlement.

40. [13]

    The Hunt Leather Strand Arcade store remained open throughout the whole period of the SLR construction and remained open until, like all businesses, it was impacted by the COVID-19 pandemic.

41. [14]

    Hunt Leather also operated a retail store in the QVB in Fee Zone 6. Fee Zone 6 covered George Street between Market Street and Park Street.

42. [15]

    Hunt Leather operated a Longchamp branded store in the QVB. That store closed in around November 2018. According to Ms Hunt, its closure was forced due to the inability of Hunt Leather to continue to support it, both because of the impact of the SLR construction activities in Fee Zone 6 and because Hunt Leather could no longer fund the QVB store using the profits of the Strand Arcade store.

43. [16]

    Mr Zisti’s restaurant was situated on the eastern side of Anzac Parade in Kensington (in Fee Zone 29).

44. [17]

    In 2018, Mr Zisti closed his Thai restaurant due to low sales and opened a pasta bar instead. He says that he did so because of the impact of the SLR construction works. The pasta bar was not a success. He did not renew the lease in 2019; he says this was because he was not making any money from the venture.

45. [18]

    There is no claim that the noise and disruption caused by the SLR, once operational, constitutes a nuisance. Rather, the acts constituting the nuisance are said to have occurred during the construction of the SLR.

46. [19]

    Further, the plaintiffs do not complain about the conduct of the defendant during the period when construction was being undertaken (as the defendant did not undertake the construction work). The conduct of the defendant of which the plaintiffs complain is the conduct prior to construction, during the design, planning and contract negotiation phases of the project.

47. [20]

    The plaintiffs pursue only one cause of action. It is a cause of action in nuisance, both private and public.

48. [21]

    The essential proposition advanced by the plaintiffs is that during the construction of the SLR, the members of the class were subject to a nuisance in the sense that their rights, enjoyment and occupation of their properties were subject to an interference arising from the construction activities which was substantial and, if it is necessary to so find, unreasonable. As may be expected, the law does not merely permit any home or business owner to claim damages from a party who in some way created an interference by way of construction activities. To do so would impede the ability and entitlement of both private citizens and the government to undertake ordinary construction work, such as building works and roadworks.

49. [22]

    In this case, the plaintiffs submit that the nuisance was constituted both by the nature of the activities (which involved heavy construction machinery, vibrations, noise and dust, the presence of hoardings and the general restriction of pedestrian and vehicular movement) and the length of time that the work was being conducted outside their respective premises.

50. [23]

    The plaintiffs say that although the defendant did not actually do the physical construction work, it is personally responsible for the nuisance because it was the statutory authority which developed, procured, planned and organised the work. Further, they say that the nuisance arose because of the defendant’s failures in the planning, design and contracting phase (up to December 2014).

51. [24]

    The defendant’s response to these claims is to:

    1. (1)

       deny that there has been any nuisance, whether private or public. They say this for a number of reasons, including that, whilst not disputing the essential proposition that noise, dust and construction work would and did have an impact on adjoining businesses:

    2. (2)

       rely on s 43A of the Civil Liability Act 2002 (NSW) (“CLA”). That is, the defendant says that it has statutory protection in respect of this type of action against it; and

    3. (3)

       rely generally on its role as a statutory corporation and, in particular, s 141 of the Roads Act 1993 (NSW) (“Roads Act”) as a defence to the alleged public nuisance.

52. [25]

    The case was prepared and presented in a thorough, competent and efficient manner by the parties. However, the evidence is extensive and the issues are complex.

53. [26]

    At least according to the parties, there could be little doubt as to the correctness of their positions. Alas, the outcome of litigation does not permit a draw.

54. [27]

    It is important to observe that there are really two questions which arise in this hearing, as far as the plaintiffs are concerned:

    1. (1)

       subject to any defences available to the defendant, was the interference to the lead plaintiffs’ properties such as to constitute an actionable nuisance? and

    2. (2)

       should the defendant be liable for such a nuisance?

55. [28]

    In their closing submissions, the plaintiffs put their case in three alternative ways. As they say, the primary case is Case A, which they say requires them only to establish that the interference with their premises was substantial, giving rise to an entitlement to damages from the time when the construction work commenced. They advance alternative cases in the event that they are unsuccessful in their primary case.

56. [29]

    In the pleadings, throughout the conduct of the hearing and during submissions, the parties referred to the “utilities risk”. The utilities risk is also referred to in many documents relied upon by the parties.

57. [30]

    Generally, the utilities risk was the potential for problems to arise during the SLR construction from the presence of utilities along the SLR route. As I will identify, at the time of entry into the Project Deed, it was known that there were many utilities along the route which would need to be treated in order for construction to proceed. It was also expected that there would be more utilities which were not known to exist at the time of entry into the Project Deed but which would be discovered during the course of the construction.

58. [31]

    The utilities risk was the risk of delay and additional costs arising from the need to treat utilities and the discovery of previously unknown utilities.

59. [32]

    The judgment contains an extensive analysis of the pre-Project Deed documents. Only my conclusions from those documents are contained in this summary.

60. [33]

    A number of things are clear from the pre-Project Deed documents, including that:

    1. (1)

       the defendant’s original intention was to deliver the project through an extensive Early Works contract, which would include the utilities treatments followed by a separate Civil Works contract. Over the pre-Project Deed period, particularly in 2014, that plan changed such that the defendant decided that the utilities treatment works would form part of the Civil Works contract and the Early Works contract would be limited to six key intersections (and would include utilities treatments);

    2. (2)

       the defendant was aware of the significant risk to business owners along the SLR route arising from the construction activities. It was aware that the construction of the SLR would have a significant impact on businesses. It was aware of the Gold Coast experience in which 15% of businesses along that route had failed during the construction period. It was aware that it needed to minimise interference with local businesses as far as possible and that doing so would be critical to the viability of the businesses;

    3. (3)

       the defendant was well aware of the utilities risk. It was one of the primary risks associated the project, particularly bearing in mind that the project would require excavation of one of Sydney’s busiest streets (being George Street);

    4. (4)

       at the time of entry into the Project Deed, the defendant was aware that it had not yet discovered all utilities along the route and that there would be unknown utilities. It was aware that the discovery of unknown utilities could delay the Civil Works. It was aware that its investigation into utilities was more thorough along Route A (which included George Street) than other areas, such as Anzac Parade. It was aware that the discovery of unknown utilities would delay the progress of the construction works. It was aware that 30% of the utilities being discovered through the trenching contract were unknown utilities;

    5. (5)

       at the time of entry into the Project Deed, the defendant was aware that no agreement was in place with the major provider of utility services, Ausgrid, or indeed, other utility providers (such as Sydney Water) as to how their utilities could be treated. This was identified by the defendant as another risk to the performance of the Civil Works, that is, the risk remained that Ausgrid might require different treatment methods from those identified in the Project Deed. This is what the D&C contractor said occurred and what led to a substantial claim for compensation from the D&C contractor;

    6. (6)

       the defendant had been warned by Ausgrid that the defendant’s own plans, in terms of cost and timing in dealing with the utilities, was likely to be a significant underestimation. Ausgrid had warned in very direct terms that the treatment of utilities would take much longer and cost much more than might have been anticipated. Ausgrid had also cautioned that the timetable for the Early Works contract was unachievable;

    7. (7)

       at no point prior to entry into the Project Deed was there any statement by the defendant, through its various planning groups or Risk Register, that the significant risks that it had been highlighting were somehow reduced. For example, there is no statement that those risks which were highlighted as being major, such as the risk of unknown utilities or delay risks associated with the absence of agreements with utility providers, were reduced by December 2014; and

    8. (8)

       the defendant was aware that it needed to engage the proponent on terms that work would be done by the D&C contractor in stages, with limited concurrency between the stages. Thus, it needed to both impose a fee zone schedule and impose terms which would deter OpCo from not complying with that fee zone schedule. This was critical to minimising extensive harmful interaction with business owners along the SLR route.

61. [34]

    The Project Deed is an extensive document comprising 317 pages with thousands of pages of annexures. The “Definitions” section is itself 62 pages.

62. [35]

    The Project Deed did not just cover the design and construction of the SLR. The agreement which ALTRAC and the defendant entered into was to the effect that ALTRAC would be paid a certain sum in respect of its design and completion of the SLR and that, thereafter, it would have a right to operate it for a period of 15 years.

63. [36]

    Consistently with the announcements made by the government and the representations made to business owners during the government’s promotion of the SLR, the defendant developed what I would describe as a fee zone strategy. Whilst there would be some overlap, there were 31 separate fee zones. Through the Project Deed, the defendant established occupation periods for each fee zone. Further, the IDP attached to the Project Deed set out OpCo’s delivery program in each fee zone.

64. [37]

    Integral to the construction of the SLR was that it be completed in stages. The IDP must be viewed as a realistic and reasonable estimate by OpCo as to how the work could be done consistently with the defendant’s fee zone requirements, based on the information available at the time of entry into the Project Deed and assuming that the utilities risk was appropriately reduced through the pre-Project Deed investigation and planning.

65. [38]

    The IDP set out the expected start and finish dates for works within each fee zone.

66. [39]

    The defendant’s fee zone strategy was intended to ensure that the disruption to business owners along the route was kept to a minimum. Ensuring that the work was done in stages and that the D&C contractor was sufficiently deterred and incentivised was integral to minimising the disruption to businesses.

67. [40]

    However, every time a Utility Works Event (UWE) occurred, and OpCo could demonstrate that a delay to the Occupation Cessation Date for a fee zone was caused, then OpCo could make a claim for an extension to the Base Fee Zone Occupation Period.

68. [41]

    Further, as set out in cl 26.1 of the Project Deed, if a Compensation Event (which is defined to include a UWE) caused OpCo to incur loss, OpCo could claim compensation in accordance with cl 26 (Compensation Events).

69. [42]

    The fee zone strategy thus required the D&C contractor to complete its work in any particular fee zone in accordance with the Occupation Schedule or else it would be subject to a financial penalty, except that:

    1. (1)

       the D&C contractor could obtain relief from such penalty and indeed claim compensation for certain events, including (and relevantly to this matter) a UWE; and

    2. (2)

       the maximum penalty for overstay over the life of the project was $7.5 million.

70. [43]

    The plaintiffs say that such a contractual arrangement was so unreasonable that no authority exercising the powers of the defendant would have entered into the Project Deed on those terms.

71. [44]

    The defendant rejects this. It says that looking at those terms in isolation ignores the importance of the very significant impost on the D&C contractor arising out of moving from one fee zone to another and leaving work incomplete, being the D&C contractor’s own costs.

72. [45]

    As is clear from the lay evidence, there was either actual construction work or the appearance of construction activities outside the lead plaintiffs’ businesses for periods far in excess of what was contemplated.

73. [46]

    Ms Hunt provided a detailed chronology as to her observations of the SLR construction activities and the ways in which those construction activities affected Hunt Leather’s business in both stores.

74. [47]

    There was no real challenge to Ms Hunt’s evidence in respect of the period up to December 2017. That is because there is no dispute that, at least between the time of commencement of construction and December 2017, Fee Zone 5 was the subject of regular construction activities and remained boarded up during that time. Specifically, there were hoardings on both sides of the road on George Street and, in particular, directly out the front of the Hunt Leather Strand Arcade store.

75. [48]

    It is clear from the daily photographic record that George Street between King and Market Streets was re-opened in December 2017 and the hoardings which had been in place up until that time were removed (albeit the hoardings remained in place at both King and Market streets).

76. [49]

    Ms Hunt emphasised that the problem for her stores was not just that the works were noisy and dusty, but that customers would have found it difficult to walk up George Street and international tourists were deterred from doing so. As she said, the shopping experience was greatly diminished, not only because of the noise and dust, but also the mere presence of the hoardings and barricades along George Street.

77. [50]

    According to Mr Zisti, he chose Anzac Parade for his restaurant business because it was on a main road and easily accessible to the public. It had large windows out the front which allowed natural light and enabled customers to look into the premises.

78. [51]

    According to Mr Zisti, the primary source of revenue up until the commencement of the SLR construction was in-house dining, rather than takeaway.

79. [52]

    Mr Zisti says that during the period leading up to the SLR construction, his sales were continuing to increase (I will discuss this later in this judgment).

80. [53]

    Mr Zisti says that on 7 May 2016, construction of the SLR began on Anzac Parade. He recalls that barricades were established around the median strip and parking was removed on either side of the road. The parking lane was designated for traffic.

81. [54]

    According to Mr Zisti, in the first few days of construction, his revenue was reduced by 29%.

82. [55]

    Mr Zisti describes the nature of the construction work which he observed outside his restaurant and the impact on his restaurant on a monthly basis from May 2016 to 2019.

83. [56]

    In July 2018, Mr Zisti decided to save on expenses by closing the restaurant for lunch and only operating during the evenings. He said this caused him to lose the revenue generated by university students, who would generally visit during the daytime.

84. [57]

    In July 2018, he closed the restaurant for a few weeks to remodel and fit out the restaurant business to operate as an Italian restaurant, known as Sugo Pasta Bar. That business name was registered on 3 July 2018.

85. [58]

    Mr Zisti operated Sugo Pasta Bar from August 2018 to April 2019.

86. [59]

    Mr Zisti did not renew the lease when it expired in April 2019.

87. [60]

    As Mr Zisti said, and as his records disclose, 2018 was the first time that his restaurant suffered a loss. He had originally operated a successful business which decreased in profitability after the commencement of the SLR construction. He was not required to continue to operate his business at a loss. A year later, he was forced to decide whether to renew the lease for a period of a further five years. He decided not to. The Italian restaurant was not successful.

88. [61]

    The parties relied on a range of expert evidence, some of which may be critical to the outcome of the case and some of which was barely relevant. That expert evidence included:

    1. (1)

       utilities experts – Edward Szmalko on behalf of the plaintiffs and Craig Sampson on behalf of the defendant. The defendant also adduced evidence from Stephen Lewcock, a utilities manager who had been employed on the SLR project;

    2. (2)

       planning and programming experts – Mark Griffith on behalf of the plaintiffs and Ian McIntyre on behalf of the defendant;

    3. (3)

       procurement expert – Jarred Hardman on behalf of the defendant;

    4. (4)

       noise experts – Neil Gross on behalf of the plaintiffs and Renzo Tonin on behalf of the defendant;

    5. (5)

       air quality experts – Gary Graham on behalf of the plaintiffs and Aleksander Todoroski on behalf of the defendant;

    6. (6)

       traffic experts – Oleg Sannikov on behalf of the plaintiffs and Shaun Smedley on behalf of the defendant;

    7. (7)

       retail experts – Chris Abery on behalf of the plaintiffs and Ian Shimmin on behalf of the defendant; and

    8. (8)

       quantum experts – Tony Samuel on behalf of the plaintiffs and Ashley McPhee on behalf of the defendant.

89. [62]

    There is an extensive review of the expert evidence in the judgment. I will refer only to my conclusions in this summary.

90. [63]

    As I have identified in my review of the evidence of the utilities experts, there are a number of problems with Mr Szmalko’s evidence. Specifically, some of the assumptions he made are not borne out by the evidence and some of his conclusions are directly contrary to the evidence. The basis of some of his opinions is not clear. To the extent that he offered opinions on any alternative delivery model or on the basis that the defendant intended to completely transfer the risk to OpCo through the Project Deed, those opinions cannot be accepted.

91. [64]

    Further, I accept the evidence of Mr Lewcock and Mr Sampson on the difficulties that would have arisen if Mr Szmalko’s proposed alternate delivery models had been adopted.

92. [65]

    Having said that, there is some consistency between the utilities experts on a number of issues. The deterrence clause (cl 12.3) in the Project Deed was described as unique. Investigating utilities prior to commencing the Civil Works was important and necessary. The general effect of Mr Szmalko’s Utilities Mitigations Steps was not really in dispute. The fact that the trenching contract was unlikely to have discovered all utilities was not in dispute, as it was merely a survey. The suggestion of 100% quality level A in Fee Zone 5 was apt to mislead.

93. [66]

    It is also clear from the evidence of Mr Lewcock and Mr Sampson that, as I have already accepted with reference to the pre-Project Deed documents, the presence of unknown utilities was a big risk on this project and that the requirements of utility providers were not finalised and remained a risk at the time of entry into the Project Deed.

94. [67]

    Mr Sampson said that the discovery of previously unknown utilities would make a huge difference to the outcome. As I will explain, he was correct.

95. [68]

    To a certain extent, the defendant’s expert evidence on utilities tended to highlight the significance, risk and complexity of the utilities problem. The defendant’s evidence assisted its case in resisting the s 43A unreasonableness point but also highlighted the fact that the defendant was well-aware of the risk of substantial delay in completing the Civil Works at the time it entered into the Project Deed.

96. [69]

    The plaintiffs retained Mr Griffith as their programming expert. The defendant retained Mr McIntyre as its programming expert. At times during their evidence, it did seem like this was a construction case between a principal and a contractor, rather than a claim for damages in nuisance.

97. [70]

    Mr Griffith considered that the delay risk associated with unknown utilities should have been known to the defendant. He says that the defendant should have taken further steps to reduce this risk by:

98. [71]

    Mr Griffith opined that the SLR project took longer than it should have, stating that the planned occupation of Fee Zones 5, 6 and 29 was extended due to the defendant’s conduct.

99. [72]

    In his initial view, the increase in occupation was as follows:

    1. (1)

       for Fee Zone 5, from 281 to 1105 days (a 393% increase);

    2. (2)

       for Fee Zone 6, from 318 to 1116 days (a 351% increase); and

    3. (3)

       for Fee Zone 29, from 191 to 1146 days (a 600% increase).

100. [73]

     In my view, the periods of fee zone occupation were not quite as extensive as he suggests but, on any view, they were much longer than planned and exceeded two years.

101. [74]

     Mr Griffith identified the cause of the delays in the occupation of Fee Zones 5, 6 and 29 as being:

     1. (1)

        the number of modifications issued by the defendant during the course of the construction work;

     2. (2)

        the discovery of many previously unknown utilities, leading to delays in the treatment these utilities; and

     3. (3)

        delays in reaching agreement with utility providers in respect of the treatment of the utilities.

102. [75]

     Mr McIntyre prepared two reports dated 11 February 2022 and 17 November 2022. He was initially asked two questions, being:

     1. (1)

        what works occurred in Fee Zones 5, 6 and 29 relevant to the complaints made in the Statement of Claim within the proximity of the premises? and

     2. (2)

        did he agree or disagree with Mr Griffith’s opinion as to whether the utilities conduct and any failures identified resulted in any of the Fee Zones 5, 6 or 29 being occupied for longer than otherwise expected?

103. [76]

     He adopted a classification system for the construction and related works. He defined Category 2 activities as moderate or heavy construction or related works. He analysed when Category 2 works were being performed in Fee Zones 5, 6 and 29.

104. [77]

     The second question Mr McIntyre was asked to answer was whether the utilities conduct or any failures identified resulted in the occupation of the fee zones for longer than initially planned. Mr McIntyre did not consider that it was possible to answer this question. He did not agree with Mr Griffith’s methodology of comparing what actually happened with what was shown on the program adopted by the D&C contractor at an earlier point in time.

105. [78]

     I am persuaded by Mr Griffith’s analysis of what happened on this project. I do not accept, as the defendant submits, that no conclusion on the cause of the substantial prolongation of the D&C contractor’s occupation in the fee zones could be made without tracing the impact of every utility across the life of the project. I do not accept the defendant’s submission that no conclusion can be drawn without evidence of the D&C contractor’s resources and how the delays in each fee zone might have been caused by under-resourcing on the part of the D&C contractor.

106. [79]

     In the end, there was little between Mr Griffith and Mr McIntyre in terms of their assessments of the occupation periods. There was also little between them in terms of the number of days that the D&C contractor actually performed work in the fee zones.

107. [80]

     The real difference between Mr Griffith and Mr McIntyre related to whether Mr Griffith could offer an opinion on the cause of the delays based on his methodology and analysis, or whether, as suggested by Mr McIntyre, that methodology did not provide a proper basis for expressing an opinion as to cause.

108. [81]

     Of course, Mr McIntyre did not offer any opinion as to the cause of the prolonged periods of occupation, merely suggesting that Mr Griffith’s approach was flawed. Further, Mr McIntyre did not offer any opinion as to what a reasonable allowance for the performance of the work in the fee zones might have been, assuming that sufficient utility investigations were undertaken and agreements with providers were in place prior to the commencement of work. Rather, he suggested that, because the so-called counterfactual would involve an entirely different delivery model, there could be no reference to the IDP as a base from which to work.

109. [82]

     Whilst the defendant submits that the plaintiffs have not proved the counterfactual, I understand the plaintiffs to be submitting that the counterfactual is the amended IDP. Of course, it would have always been difficult for the defendant to put forward some alternative counterfactual (not that it was required to do so) because it says that the nuisance was inevitable. I do not accept this. Nor do I accept that in a nuisance claim, the plaintiffs must necessarily expose a counterfactual.

110. [83]

     The difference between the parties on these issues is, again, a reflection of their differing approaches to what the plaintiffs must prove to succeed.

111. [84]

     As set out in paragraphs 12(c) and 12(d) of the Statement of Claim, the plaintiffs allege that during the course of the project, the defendant issued the D&C contractor with approximately 60 directions to change the scope of those works. The plaintiffs allege that a substantial cause of the project scope changes was the failure by the defendant to effectively plan and procure the project between 2011 and 2014.

112. [85]

     In my view, the only complaint of substance is in respect of Modification 25.

113. [86]

     The parties differ markedly in their approach to the law which applies to this case and their differences have some impact on the outcome.

114. [87]

     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. [12]

115. [88]

     There are many cases where precisely the same facts would establish liability both in nuisance and in negligence. [13] It may be that this case could have been framed in both negligence and nuisance, but it is not. It is only brought in nuisance. It is important not to confuse the concepts. Further, it is important to observe that the plaintiffs do not particularise any failure to exercise reasonable care as part of their pleadings. They refer to failures by the defendant but they do not plead the existence of a duty of care, risk of ham or negligence. They refer to the defendant’s failures in the context of delays in the construction activity.

116. [89]

     One of the central areas of dispute in these proceedings is whether, in order to succeed in their cause of action in nuisance, the plaintiffs must establish that the defendant failed to take reasonable care or acted negligently. The defendant says that the plaintiffs must establish that the defendant failed to take reasonable care in order to succeed. The defendant’s position on nuisance is best summarised in its closing submissions, as follows:

117. [90]

     On one view of the case law, there may be some difference of opinion about those propositions. Having said that, the High Court of Australia has not yet held that, in order to succeed in nuisance in a case such as this, a claimant must establish that the tortfeasor acted without reasonable care or “negligently”.

118. [91]

     There are three types of interference with land which may constitute a nuisance:

119. [92]

     In this case, the Court is concerned with the third kind of interference noted above, although the plaintiffs’ case is put more broadly than that. On their case, the nuisance is said to involve a combination of factors, including the emanation of things from the defendant’s land onto the plaintiffs’ land (such as noise and dust), the erection of hoardings close to the plaintiffs’ premises and the closing of surrounding areas and roads (which reduced the volume of foot and vehicular traffic near the businesses).

120. [93]

     Not every interference with the use or enjoyment of land gives rise to an actionable claim in nuisance. A balance must be struck between the right of the landowner to use its land as it sees fit and the interest of the adjoining landowner to be protected from interference with their rights as a landowner.

121. [94]

     One way in which that balance is struck is to preclude actions arising out of a mere inconvenience, annoyance or temporary disturbance. This is done by limiting actions to interferences which are substantial.

122. [95]

     The need for the interference to be substantial may be particularly significant in this class action because the level of interference with Group Members along the SLR route varied greatly. Indeed, the level of interference varied even between the three businesses run by the lead plaintiffs.

123. [96]

     Another way in which the balance between competing interests is achieved is through the concept of reasonableness. Consistently with some cases, the defendant describes this as the “reasonable user” principle.

124. [97]

     The defendant highlights the reasonable user principle as the touchstone of liability in a nuisance action, suggesting that it requires the plaintiffs to establish that the defendant has “acted with negligence.”

125. [98]

     The plaintiffs submit in rather simple terms that, in circumstances whereby the use of the adjoining land (that is, the roads constituting the SLR route) was for the development and construction of a light rail, then the use of the land by the defendant could not be described as common or ordinary. The plaintiffs submit that they therefore only need to establish that the interference with their land was substantial, and no more.

126. [99]

     On the other hand, the defendant submits that this rather simple analysis must fail, in part because the construction of the SLR would fall within the meaning of ordinary or common use of the land (the land being public roads and the construction being roadworks) and also because that approach ignores the complex balancing of the parties’ interests which must take place, said to be based on the reasonable user principle.

127. [100]

     In my view, it is important to have regard to the context in which the concept of “reasonableness” is used. The defendant’s emphasis on the reasonable user principle shifts the focus to the conduct of the defendant and away from the nature of the harm suffered by the plaintiffs and their interests.

128. [101]

     The wrong itself is the interference with the use of the claimants’ land by the defendant.

129. [102]

     The very recent United Kingdom Supreme Court decision of Fearn and others v Board of Trustees of the Tate Gallery [2023] UKSC 4 (“Fearn”) contains a comprehensive review of the law of nuisance as it applies in the UK.

130. [103]

     In the even more recent UK case of Jalla and another v Shell International Trading and Shipping Co Ltd and another [2023] UKSC 16 at [2], the Court (per Lord Burrows, with whom Lord Reed, Lord Briggs, Lord Kitchin and Lord Sales agreed) described private nuisance as follows:

131. [104]

     The two most recent cases in the UK (which are both 2023 cases) thus focus on substantial and unreasonable interference, while neither case suggests that unreasonableness is to be equated with the negligence of the defendant.

132. [105]

     Returning to Australian case law, in Southern Properties (WA) Pty Ltd v Executive Director of the Department of Conservation and Land Management (2012) 42 WAR 287; [2012] WASCA 79 (“Southern Properties”), McLure P (from [117]-[119]) addressed the question of whether the tort of nuisance has been subsumed in the law of negligence or, put another way, whether establishing negligence is essential for success in a nuisance claim, as follows:

133. [106]

     The defendant may wish to prove that it did not fail to take care but, in considering whether a failure to take care is an essential element of the tort of nuisance and whether the plaintiffs’ claim must necessarily arise out of a failure to take care, I reject that proposition.

134. [107]

     In my view, the plaintiffs must establish that there has been an interference with their use of the land which was substantial and unreasonable. What is unreasonable must be considered objectively between the parties having regard to a range of factors. The interference may be unreasonable even though the defendant took reasonable care. The fact that the defendant did take reasonable care (if it be so) may be a relevant factor but that in itself does not provide a defence or mean that the plaintiffs cannot succeed in a case such as this.

135. [108]

     The next issue is whether a description of the defendant’s use of the land as not being common and ordinary changes or reduces the requirements for an actionable nuisance.

136. [109]

     An assessment of what is reasonable between the parties, allowing for “give and take” and a whole range of factors, is fundamental to the law of nuisance. I agree with the defendant’s submissions regarding the plaintiffs’ focus on the words “common and ordinary.” It is difficult to accept that in finding that the use of the roads was not common or ordinary, the tort essentially becomes one of strict liability. This would hardly allow for technological advancements, fluctuations in construction activity and developments in land use.

137. [110]

     I do not take any statement in any recent Australian case as advocating a type of two-tier tort, such that a substantial interference arising from activity on land which is not common or ordinary gives rise to a form of strict liability, whereas if the use is common or ordinary, the concept of reasonableness places a check on what is actionable.

138. [111]

     Whether the use of land is common and ordinary is essentially a matter of impression and evaluation. Each case is different and there is no guiding principle or test through which the Court can consider whether a particular use is common and ordinary.

139. [112]

     The defendant’s position is that carrying out construction activity on a road is a common and ordinary use of the land, as roads are regularly altered and maintained. That would be correct if the defendant had merely been carrying out roadworks. However, that description of the work being undertaken during construction of the SLR route is perhaps too simple and rather ignores the context in which the work was being done.

140. [113]

     In the end, I do not consider that the use of the roads – that is, George Street and the other roads comprising the SLR route for the purposes of constructing the light rail – was a common and ordinary use of those roads. It was exceptional.

141. [114]

     Having said that, as I have already discussed, such a finding does not have the significance that the plaintiffs suggest. In my view, it is merely a factor to be assessed in considering the reasonableness of the interference. It does not lead to the imposition of a form of strict liability.

142. [115]

     Having accepted that establishing negligence is not a necessary element of nuisance, it is necessary to consider what is meant by the term “fault” in the law of nuisance.

143. [116]

     The question arises as to how the defendant could be at fault if it was not negligent. It seems to me that the fault requirement may be established through the mechanism of foreseeability and the creation of the state of affairs which led to the nuisance. In that way, a defendant can be seen to have some personal responsibility for that which befalls the claimant.

144. [117]

     Fault is established if the defendant, through its conduct, created the circumstances or state of affairs which led to the substantial and unreasonable interference, in circumstances in which that interference was foreseeable. Fault may be established through a failure to take care but negligence is not essential.

145. [118]

     There is no dispute that the provisions of the CLA could apply to these proceedings, although the extent to which they do may be limited because the cause of action which the plaintiffs pursue is not in negligence but in nuisance.

146. [119]

     The parties take differing positions as to whether Part 1A of the CLA applies.

147. [120]

     The plaintiffs submit that Part 1A of the CLA is not applicable.

148. [121]

     On the defendant’s case, Part 1A does apply. It would follow that s 5B applies and the analysis mandated by s 5B must be undertaken.

149. [122]

     As is evident from my analysis of the relevant legal principles, I do not accept that to succeed in an action in nuisance, a plaintiff must establish that the defendant was negligent (or failed to take care), although it may do so. In the present case, the fact that the defendant may establish that it did not fail to take care as part of its defence does not mean that the claim is for damages resulting from a failure to take care.

150. [123]

     It is the nature of the interference that is being assessed, having regard to a range of factors. “Unreasonable” is not being used in this context as a shorthand way of saying that the defendant failed to take care. The plaintiffs’ claims for damages do not result from a failure to take care.

151. [124]

     As such, Part 1A of the CLA does not apply to these proceedings.

152. [125]

     The parties agree that Part 5 of the CLA (“Liability of public and other authorities”) may apply. Part 5 applies to a civil liability in tort. It extends to any such liability, even if the damages are sought in an action for breach of contract or any other cause of action.

153. [126]

     The only cause of action pursued by the plaintiffs is nuisance. That cause of action gives rise to a civil liability in tort. As such, the provisions of Part 5 apply to these proceedings.

154. [127]

     The only section within Part 5 of the CLA that could apply is s 43A.

155. [128]

     However, in my view, s 43A does not apply to the plaintiffs’ claims.

156. [129]

     Section 43A does not operate as a defence. That has been made clear by the Court of Appeal in a number of cases.

157. [130]

     If it did, the approach may be different. If I were to find the defendant liable in nuisance, I would then go on to apply s 43A on its terms, as it applies to any cause of action in tort.

158. [131]

     If s 43A merely sets the standard of care which applies when determining the liability of a defendant in an action founded upon the existence of a duty of care and an allegation of breach, then it would not apply to an action which is not based on the existence of a duty of care and in which the plaintiff is not required to establish whether there has been a breach of that duty.

159. [132]

     Whatever the tortious cause of action, the determination of liability must require the assessment of the standard of care to be imposed on the defendant, assuming the existence of a duty of care.

160. [133]

     Yet, if there is no consideration of whether a defendant (which is a statutory authority) owed a duty of care to the plaintiff and s 43A does not operate as a defence, the premise on which it operates is not satisfied. If s 43A sets the standard of care as a legal threshold which must be overcome by a claimant, it could not apply to a cause of action in which it is not necessary to establish, as a minimum, the failure to exercise reasonable care.

161. [134]

     As questions regarding the existence, scope and breach of the duty of care (having regard to s 5B of the CLA) do not arise, and s 43A does not operate as a defence, then there is no role for s 43A to play in these proceedings. There is no scope for applying the two-step process. I am not considering s 5B or the “Shirt calculus” (see Wyong Shire Council v Shirt (1980) 146 CLR 40) and then applying the higher standard as required by s 43A.

162. [135]

     If, contrary to my view, s 43A could apply to the claim, the defendant must establish the threshold requirements set out in s 43A(1).

163. [136]

     There is a distinction between a liability based on the exercise of (or failure to exercise) a special statutory power and an act or omission involving an exercise of (or failure to exercise) such a power.

164. [137]

     I do not consider that any liability the defendant might have is based on the exercise of a special statutory power.

165. [138]

     The defendant identifies the relevant special statutory power as being that conferred by s 104O of the TA Act. Alternatively, the defendant relies on the powers conferred under Schedule 1 of the TA Act, which sets out the functions of Transport for NSW.

166. [139]

     Prior to 11 September 2015, the SLR was not a light rail system for the purposes of s 104O. In undertaking its planning and procurement of the SLR, the defendant could not have been exercising the power under s 104O.

167. [140]

     It could only have been exercising the more general powers conferred under Schedule 1, cl 9.

168. [141]

     I do not think that reliance on the general functions set out in the TA Act assists the defendant. There remains a distinction between exercising a statutory power and exercising a special statutory power. The general functions set out in s 3E and Schedule 1 of the TA Act merely describe the powers that any authority such as Transport for NSW would have. It does not seem to me that they fall within the meaning of “special” for the purposes of s 43A of the CLA.

169. [142]

     As such, the defendant has not established that it was exercising a special statutory power in 2013-2014.

170. [143]

     Although it is not strictly necessary that I make findings on this issue, for completeness (and as substantial expert evidence was directed to this issue), I will record my views.

171. [144]

     There is a difference between the standard of reasonable care and the standard imposed by s 43A of the CLA. That is the point of s 43A.

172. [145]

     For the reasons already identified, I do not accept Mr Szmalko’s opinion on this issue. His ultimate conclusion was affected by incorrect assumptions and a failure to articulate the basis of some of his opinions or consider what actually occurred. I also accept that the some of the experts’ comments about competing interests (such as those made by Mr McIntyre and Mr Hardman) had merit.

173. [146]

     The evidence of Mr Sampson and Mr Lewcock on the s 43A issue made sense. It was consistent with my review of the planning documents. That is not to say that all of their evidence helped the defendant, as it did tend to highlight the significance of the utilities risk.

174. [147]

     I prefer their opinions on whether the defendant’s acts or omissions were so unreasonable that no authority would have considered it a reasonable exercise of its special statutory power (if it was special).

175. [148]

     Had s 43A of the CLA applied, I would not have accepted that the acts or omissions of the defendant were “so unreasonable” according to the standard which must be applied in s 43A.

176. [149]

     Firstly, the entire SLR construction was not completed on time; completion was achieved in March 2020.

177. [150]

     Further, and importantly for the purposes of this case, the proposed staging of the construction activities (to minimise disruption to businesses and residents) could only be described as a complete failure. At least in respect of Fee Zones 5, 6 and 29, the D&C contractor remained in occupation of each of those fee zones for prolonged periods far in excess of that which was planned and promised.

178. [151]

     Further, the proposal to undertake work at six key intersections through the Early Works contract proved to be unsuccessful.

179. [152]

     Finally, the process which the defendant adopted to locate all the utilities along the route did not work. This is evident from the large number of unknown utilities discovered during the construction works.

180. [153]

     It is necessary that I deal with some issues pursued by the parties relevant to their cases.

181. [154]

     The plaintiffs plead a causal relationship between the alleged failures in planning and the delay in the fee zones.

182. [155]

     The defendant offers no explanation for the substantial delay in the completion of construction activities in each of the individual fee zones. It says that there is no onus on it to do so. Whilst that is so, the evidence must be assessed having regard to the power of a party to adduce evidence on a relevant issue. No evidence was adduced from Ausgrid or the D&C contractor.

183. [156]

     However, it is not the position that there is no evidence as to what caused the prolonged occupation in the various fee zones.

184. [157]

     The evidence includes:

     1. (1)

        the evidence of Mr Griffith, being the only witness who examined the as-built drawings and undertook a Windows analysis to determine what actually happened during the construction period;

     2. (2)

        the annexures to Mr Griffith’s report, including the table of utility claims from the date of commencement of the construction;

     3. (3)

        the evidence of Mr Sampson that the discovery of unknown utilities during the course of the works would have made a huge difference to the outcome in terms of the construction being undertaken in accordance with the plan; and

     4. (4)

        the D&C contractor’s “Delivery Phase Progress Reports” and other documents from the period 2015 to 2019. Indeed, on my analysis, there are approximately 120 documents from this period which refer to utilities in the context of problems and delays.

185. [158]

     In all these circumstances, I accept that the construction activities in Fee Zones 5 and 29 took substantially longer than planned because of the discovery and identification of so many previously unknown utilities and the time taken to reach agreement with utility providers and treat the utilities. I also accept that in respect of Fee Zone 6, and to a much lesser extent Fee Zone 5, a substantial delay arose from the issues surrounding Modification 25.

186. [159]

     Part of the plaintiffs’ case involved attempting to develop an alternative delivery model in respect of the SLR.

187. [160]

     As the hearing progressed, the plaintiffs moved away from the use of an early works contract as an alternative delivery model. Instead, they contended that all of the work, including the utilities management and treatment, should have been undertaken under one contract with a requirement that the works be performed in stages or, as Mr Griffith said, “hole points”.

188. [161]

     In my view, the viability of such an alternative delivery model would have depended upon the stage at which the design process was finalised.

189. [162]

     My analysis of the documentation supports the defendant’s position. I accept that utility providers, such as Ausgrid, would not have committed to individual utility treatments (that is, replacements, upgrades or coverings) until a detailed design was available.

190. [163]

     In my view, the generalised criticisms of the defendant in respect of the delivery model that it ultimately pursued are misplaced. There is an air of unreality and hindsight in the plaintiffs’ arguments, including those adopted by their experts, which attempt to rewrite all that occurred.

191. [164]

     In my view, the delivery model was not the problem. As identified by Mr Griffith (and as the documents demonstrate), the problem was that there were too many previously unknown utilities which continued to be discovered in the individual fee zones. The terms on which the defendant engaged the D&C contractor provided relief to the D&C contractor in the case of such events and offered no disincentive for overstaying in each fee zone.

192. [165]

     The defendant disputes the plaintiffs’ assertion that it failed in its contracting conduct because it allocated little of the utilities risk to OpCo.

193. [166]

     The defendant’s original plan was to ensure that the proponent took the utilities risk. However, the market would not accept that and, by 2014, the defendant had moved away from that plan. It moved to what it described as a risk sharing approach.

194. [167]

     The defendant says that the effect of the Project Deed is that OpCo took on most of the utilities risk.

195. [168]

     However, in my view, the terms of the Project Deed left very little of the utilities risk to OpCo and the “penalties” which applied for overstaying in the fee zones were negligible. The defendant’s attempt to impose a fee zone regime (with strict compliance by the D&C contractor) failed because the agreed terms were such that most of the utilities risk was borne by the defendant and the express terms agreed to by the defendant provided no deterrent against non-compliance with the occupation periods. Relief was offered to OpCo in respect of UWEs, which were defined in a broad way to include not only the discovery of unknown utilities, but any material change in respect of known utilities.

196. [169]

     The very real risk that continued to exist was the risk of delayed completion of the works in each fee zone caused by the discovery of unknown utilities and changes to known utilities. Whatever the defendant’s intentions in respect of risk sharing were, it did not ultimately engage on terms which involved much sharing of those risks. It started planning with the intention of having the proponent assume the time and cost-related risk arising out of utilities issues. It ended up with an arrangement which imposed little of that risk on the D&C contractor.

197. [170]

     In the end, the result of that process was that the business owners were exposed to that risk and the risk came home.

198. [171]

     The defendant submits that the construction of the SLR was for the public benefit.

199. [172]

     I am satisfied that in developing the SLR and entering into the PPP for the purpose of constructing and operating the SLR, there was a public benefit. It is not necessary for me to make findings about the State’s predictions as to the type and level of benefit ultimately achieved.

200. [173]

     Claims such as those pursued by the plaintiffs do not merely involve an exercise in weighing up detriment to members of the community against the asserted public benefit. In my view, the fact that the construction of the SLR served a public benefit is an important factor to consider in assessing the issue of reasonableness but the fact that there was a public benefit to the project does not operate as a defence.

201. [174]

     If it did, the mere fact that something is of public benefit would allow the State to override the rights and interests of ordinary members of the community, such as business owners, affected by that which is proposed.

202. [175]

     I have found this question a difficult one to answer because:

     1. (1)

        the plaintiffs do not plead the existence of a duty of care or any breach thereof;

     2. (2)

        the plaintiffs say in their Reply that proving that the defendant failed to take care is not part of their case;

     3. (3)

        the plaintiffs do not say that proving negligence is any part of Cases A, B or C as identified in their closing submissions; and

     4. (4)

        the defendant says that it is not obliged to prove that it did take care but says that, in any event, the plaintiffs have not proved that it failed to take care.

203. [176]

     In my view, establishing that the defendant failed to take care is not essential, but whether the defendant failed to take care may have relevance.

204. [177]

     I have already commented on the plaintiffs’ proposed alternative delivery model. The suggestion that the defendant should have adopted an alternative delivery model rather ignores the reasons that it moved away from that alternative model in the first place.

205. [178]

     It is also difficult to accept that the defendant should have adopted a more extensive Early Works program.

206. [179]

     Having said that, it is clear that the defendant knew of the risks posed by unknown utilities and the lack of agreements with utility providers. It knew that the construction works would cause interference with business owners. It also knew that an important factor in ensuring compliance with its fee zone strategy would be deterring OpCo from overstaying in the fee zones. Yet the relief provided to the D&C contractor was so broad, the likelihood of UWEs was so high and the penalties in respect of overstaying in fee zones so limited that I can only conclude that what ultimately occurred (being the prolonged occupation of fee zones) was not only foreseeable but predictable.

207. [180]

     I am unable to be satisfied that the defendant exercised reasonable care to protect the interests of the business owners along the light rail route. It engaged on terms that offered little by way of deterrence and imposed little by way of the utilities risk on OpCo. It did so due to market demands and a desire to comply with its own schedule, that is, entering into a project deed in December 2014. While it may have been faced with competing interests and the terms of the Project Deed secured its objectives, it is not evident that the defendant properly considered the interests of business owners along the SLR route.

208. [181]

     The defendant raises that it was a statutory authority exercising its statutory functions when it undertook the acts complained of by the plaintiffs. This is different from the issue which arises under s 43A of the CLA. The defendant says that the interference with the plaintiffs’ land was the inevitable consequence of the exercise of its functions and, in circumstances in which it was authorised to undertake those functions, it cannot be liable in nuisance.

209. [182]

     In order to succeed in this defence, the defendant must establish that what the TA Act authorised, being the development and construction of the SLR, could not be done without creating a nuisance and that the nuisance was not caused by negligence.

210. [183]

     The idea that such an extended period of substantial interference with the businesses along the SLR route was inevitable seems contrary to everything said by the defendant during the planning stage and ALTRAC/OpCo’s agreement to the Occupation Schedule. No evidence was adduced from the D&C contractor, Ausgrid, or ALTRAC/OpCo on this issue, but the defendant maintains that the nuisance was inevitable because the plaintiffs have not proved that the project could have been done through an alternative delivery model.

211. [184]

     The onus is not on the plaintiffs to prove that the nuisance was not inevitable. I reject the defendant’s submission that I should accept that the nuisance was inevitable based on what the plaintiffs have not proved. In my view, the defendant has not established its defence. The very existence of the fee zone strategy and the Occupation Schedule detracts from that which the defendant asserts.

212. [185]

     One of the limitations on an actionable nuisance is that the interference must be substantial.

213. [186]

     In this action, there will be differing levels of interference with individual businesses, depending on a range of factors. That is the case even amongst the lead plaintiffs and when considering each of their businesses.

214. [187]

     There may be businesses along the light rail route which, because of the particular use of their own premises, could not complain about the interference with their premises as being substantial. However, I am satisfied that the presence of hoardings and barricades, the regular use of machinery and the construction activity in Fee Zone 5 (and particularly, directly outside the Strand Arcade) resulted in a substantial interference with the Hunt Leather Strand Arcade store.

215. [188]

     I accept that the interference was substantial between November 2015 (when the construction work started) and December 2017 (when construction was generally finalised and the barricades and hoardings were removed).

216. [189]

     Hunt Leather maintains that there was a continuing substantial interference over the subsequent 18 months because construction activity took place from time to time.

217. [190]

     I am not satisfied that the substantial interference with the use of the Strand Arcade store continued after December 2017.

218. [191]

     In my view, the Hunt Leather QVB store was in a different position, obviously geographically, but more importantly, in the context of the interference with the use and enjoyment of the store.

219. [192]

     The claim of substantial interference in respect of the Hunt Leather QVB store is not based on noise, vibration, dust or dirt but, rather, the claim is that the visibility of the store was affected and that vehicle and pedestrian access were impacted.

220. [193]

     I am not satisfied that the factors relied upon by Hunt Leather were such that the interference was substantial. The fact that the shopfront window became dirty is the type of thing that demands give and take between neighbours and necessitates some form of self-help. The fact that Hunt Leather would have been required to keep its windows clean during dusty times does not mean that the interference could be described as substantial.

221. [194]

     According to Mr Zisti, hoardings and barricades were erected outside his restaurant, or somewhere proximate to the restaurant, in May 2016.

222. [195]

     This type of construction work continued throughout 2017 and, indeed, right up to 2019.

223. [196]

     I accept that this interference continued between 7 May 2016 and 28 February 2019. I am satisfied that the interference was substantial.

224. [197]

     In the context of the operation of particular businesses, the period of the interference must be an important factor in assessing reasonableness. In this case, the period of the interference was lengthy and much longer than the defendant had assured business owners would occur.

225. [198]

     Other relevant factors in assessing whether the interference was unreasonable would include:

226. [199]

     I have already commented on all of these factors in this judgment.

227. [200]

     In my view, assessed objectively, the lead plaintiffs (Hunt Leather and Ancio) suffered an interference with the use of their properties which was both substantial and unreasonable.

228. [201]

     I do not accept the defendant’s submission that if it was reasonable to undertake the works, it did not become unreasonable during the course of the works. Indeed, that is the very point of this litigation. That is, despite the public benefit in the development of the SLR and despite the fact that use of the land might have been reasonable for a period (leaving aside the plaintiffs’ “common and ordinary” argument), there came a point in time when it became unreasonable.

229. [202]

     Establishing that the use of the road for the light rail was for the public benefit and represented a reasonable use of the land for some period does not preclude an action in nuisance for any period that the interference became unreasonable. If the opposite was true, a landowner who has obtained permission to undertake construction works could be said to have extinguished the rights of the neighbouring landowner. That cannot be so.

230. [203]

     There can be no doubt that the defendant was well aware of the utilities risk.

231. [204]

     It seems to me that, given the defendant’s knowledge and existence of both risks, what eventuated was plainly foreseeable on the part of the defendant. It knew that there could be prolongation of construction activity in the fee zones well in excess of that contemplated by the fee zone schedule and the IDP.

232. [205]

     The question which then arises is how to determine the period of the nuisance.

233. [206]

     Of course, the defendant must have been entitled to arrange for the construction of the SLR along the specified route. Not all interferences or impacts will give rise to an actionable nuisance. The principle of give and take permits landowners to use their land reasonably in the sense that I have identified. I have already rejected the plaintiffs’ principal proposition that, if the use of the roads was out of the ordinary or uncommon, then the period of the actionable nuisance starts when the substantial interference commenced (meaning, on the plaintiffs’ case, that damages would be payable from the time the works began).

234. [207]

     Whilst I could use the dates in the IDP as a starting point, the plaintiffs put forward an amended IDP as representing a reasonable timeframe for the construction activities. The effect of that amended IDP is to extend the allowance for completion of work in the fee zones by between 3 and 5 months.

235. [208]

     In my view, the amended IDP is an appropriate measure for determining the point at which the interference with the land became unreasonable.

236. [209]

     As such, for Hunt Leather, the period of the nuisance commenced on 1 November 2016 and ended on 3 December 2017.

237. [210]

     For Ancio, the period of the nuisance commenced on 3 September 2017 and ended on 28 February 2019.

238. [211]

     The defendant is not alleged to be vicariously liable for the conduct of the D&C contractor. Instead, the defendant is said to be liable for the nuisance because it was personally responsible for the creation of the state of affairs which led to the nuisance.

239. [212]

     I am satisfied that the defendant should be found liable in nuisance for the following reasons:

     1. (1)

        that which occurred, being a prolongation of construction activities outside businesses along the SLR route, was plainly foreseeable by the defendant.

     2. (2)

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

     3. (3)

        despite assurances to business owners that, in order to minimise disruption to them, the work would be performed in stages and that it had taken steps to ensure that the D&C contractor complied with that requirement, the defendant contracted on terms that provided relief in respect of the utilities issues and provided no real deterrence for any departure from the Occupation Schedule.

     4. (4)

        further, it took the risk in respect of the requirements of the utility providers.

240. [213]

     In this judgment, I am not making any determination about why the completion of the project took place a year after it was supposed to, although it is a fair assumption that the utilities problems had a lot to do with it. The point of this litigation is to contrast that which was supposed to happen with what actually occurred in respect of disruption to business owners along the SLR route.

241. [214]

     Something went wrong. Specifically, the defendant entered into the Project Deed at a time when it did not know the extent of the utilities risk and on terms which offered little deterrence to the D&C contractor from overstaying in a fee zone. The risk about which it had expressed the most concern, being delays caused by utilities issues, eventuated. Because of the terms on which it had engaged and the incompleteness of its knowledge about the utilities risk, there was significant prolongation of construction activities in the fee zones (specifically, the fee zones which I have considered).

242. [215]

     In the end, I agree with Mr McIntyre, one of the defendant’s experts, to the effect that the defendant was faced with competing interests, and I agree with Mr Hardman that the defendant was required to undertake a commercial negotiation. The problem is that it did so on terms that were to the advantage of OpCo at a time when the risk to business owners along the route remained high. That which was predicted by Ausgrid, and had been described by the defendant as an extreme risk, occurred.

243. [216]

     Whilst the SLR was completed only a year behind schedule, the defendant’s fee zone strategy failed because business owners were subject to extensive construction activities for periods far in excess of that originally anticipated. The defendant took the risk of that occurring when it entered into the Project Deed on the terms that it did. It was the business owners who bore the consequence of the decision. The defendant created that state of affairs.

244. [217]

     For these reasons, the defendant is personally responsible for the nuisance and is liable to Hunt Leather and Ancio in respect of the losses which they have sustained.

245. [218]

     The plaintiffs plead that:

246. [219]

     The elements of the tort of public nuisance are less controversial. They are that:

     1. (1)

        there is a common injury to members of the public generally;

     2. (2)

        the defendant knew or ought to have known of the nuisance to the public generally;

     3. (3)

        the defendant had the means to abate the nuisance; and

     4. (4)

        the defendant failed to take steps to abate the nuisance. [14]

247. [220]

     A private action for public nuisance is only sustainable by an individual where the claimant can demonstrate that he or she has suffered substantial damage over and above that suffered in common with other members of the public so affected by the nuisance.

248. [221]

     In my view, this case is not an appropriate vehicle for a claim in public nuisance for a number of reasons.

249. [222]

     The defendant also relies on s 141 of the Roads Act, which is its statutory defence to the claim in public nuisance.

250. [223]

     The plaintiffs say that s 141 does not assist the defendant for two reasons, being:

     1. (1)

        the effect of s 144C of the Roads Act is that the RMS consent or approval was not required for any work on or in a public road in connection with the development of the SLR (being a light rail system) once it was declared on 11 September 2015, and the core construction work took place after that time; and

     2. (2)

        even if the RMS approval was relevant, it was subject to the conditions set out in Schedule 3 and Schedule 4 of the approval. The plaintiffs submit that the defendant did not comply with those conditions.

251. [224]

     The immediate problem with that submission is that, as identified by the defendant during closing submissions, the plaintiffs have relied upon an incorrect version of s 144C.

252. [225]

     Further, I do not accept the second basis upon which the plaintiffs submit that s 141 does not operate as a defence. The plaintiffs submit that the RMS approval was subject to the conditions set out in Schedules 3 and 4.

253. [226]

     The plaintiffs have nominated the conditions with which they assert the defendant has failed to comply. However, if the plaintiffs’ submissions are correct and the onus of proof is on the defendant to prove that it has complied with each of the conditions contained in the RMS approval, then it would be necessary for the defendant to adduce evidence to satisfy the Court of compliance with all of the conditions.

254. [227]

     I say “all of the conditions” because it cannot be that the defendant must only establish satisfaction with the conditions nominated by the plaintiffs. Otherwise, the mere allegation of a failure to comply with certain of the conditions by the plaintiffs would shift the onus of proof to the defendant. This arises in circumstances whereby the plaintiffs submit that the defendant cannot rely on the statutory defence under s 141 of the Roads Act because it has not complied with the conditions of the RMS approval. That cannot be correct.

255. [228]

     In my view, the onus of proof should rest with the asserting party, in accordance with the principle of “he who asserts must prove”. If the plaintiffs assert non-compliance, they must prove it.

256. [229]

     The plaintiffs have not proved that the defendant failed to comply with the conditions of that approval.

257. [230]

     In my view, s 141 of the Roads Act applies.

258. [231]

     The plaintiffs have not established all of the elements of the tort of public nuisance and, in any event, the defendant has a defence under s 141.

259. [232]

     The lead plaintiffs maintain that, as a result of the nuisance, they have suffered significant financial losses. It is important to observe that those financial losses were sustained by the relevant corporate entities, not the individuals.

260. [233]

     Assessing damages in a case such as this involves impression and estimate. Compensation must be fair to both parties. Financial experts tend to analyse in minute detail, as has occurred in this case. However, even one incorrect assumption might render an expert’s opinion invalid.

261. [234]

     The plaintiffs served reports from Mr Christopher Abery, both in respect of Hunt Leather and Mr Zisti’s restaurant. The defendant similarly served two reports from Mr Ian Shimmin.

262. [235]

     There was substantial disagreement about the likely performance of the Hunt Leather group (with reference to the Strand Arcade and QVB stores) if not for the impact of the SLR construction.

263. [236]

     The reason for this disagreement is that, on Mr Shimmin’s modelling and analysis, there would have been a significant reduction in the turnover at the Strand Arcade store because of external factors (other than the light rail) such that, at least on one view of his analysis, the Strand Arcade store would have made no profit by 2019, even without the impact of the SLR.

264. [237]

     Mr Abery considered that past performance was a useful guide and that there was no reason to expect anything other than that the Strand Arcade would have continued to perform well, with turnover increasing along industry lines, allowing for some store specific contingencies.

265. [238]

     It is my task to determine which approach I should accept for the purposes of assessing damages or, more specifically, whether I should adopt Mr Shimmin’s modelling as reflective of the likely turnover of Hunt Leather, if not for the construction of the SLR.

266. [239]

     It is difficult to accept that a business with such a track record as Hunt Leather would have suffered such a diminution in profitability over the period 2016 to 2020, even without the construction activities. However, I accept that there was increased competition during that period.

267. [240]

     In the end, while Mr Shimmin’s analysis and reference to factors which would have impacted upon Hunt Leather’s sales is important, I do not accept that I should apply his percentage discounts based on each of the factors.

268. [241]

     If the effects of the Hunt Leather group performance and small player erosion are removed from Mr Shimmin’s modelling, then the impact of the other factors is marginal. For example, in 2016, the impact of Mr Shimmin’s negative factors would have been a deduction of 9.8% as against the status quo market growth rate of 14.1%.

269. [242]

     Both parties agreed that, unless I make findings entirely consistent with the plaintiffs’ best case – that is, awarding damages for the whole period right up to 2020 and on the basis of the more favourable assessment of Mr Samuel – I would not be able to finalise any assessment of damages based on the accountants’ reports.

270. [243]

     Both parties agreed that if my findings take a different form, such as allowing losses for different periods, not allowing the assumed recovery period or not accepting the proposed methodology, then I would not be able to undertake any final assessment without further assistance from them.

271. [244]

     I will now answer the common questions:

     1. (1)

        Is any liability that the defendant has in nuisance based on the defendant’s exercise of or failure to exercise a special statutory power conferred on the defendant?

     2. (2)

        If so, was any act or omission involving the exercise of or failure to exercise that special statutory power an act or omission that was in the circumstances so unreasonable that no authority having that special statutory power could properly consider that act or omission to be a reasonable exercise of or failure to exercise its power?

     3. (3)

        Does s 42 of the CLA apply to the allegations of nuisance advanced in these proceedings?

     4. (4)

        Was the construction of the SLR along the SLR route an ordinary or normal use of the land:

     5. (5)

        In doing any of the acts alleged in paragraphs 7, 9, 10A, 15 and 18 of the Statement of Claim, was the defendant exercising a statutory authority, being the s 104O power or the s 3E power?

     6. (6)

        If yes to 5, was any interference with the right to enjoyment of private land or obstruction or inconvenience to the public the inevitable consequence of the exercise of that statutory authority?

     7. (7)

        Does s 141 of the Roads Act have the effect that no public nuisance was caused by the defendant as alleged in these proceedings?

     8. (8)

        In circumstances in which the defendant did not undertake the construction activities, should the defendant be liable for any nuisance and, if so, on what basis?

272. [245]

     The first and third plaintiffs have succeeded, although Hunt Leather has only succeeded in respect of the Strand Arcade store. The defendant is responsible for such interference because it created the state of affairs which led to the extended period of interference in circumstances in which the harm was foreseeable and, indeed, predictable.

273. [246]

     The defendant sought to minimise the interference with the businesses along the SLR route through its fee zone strategy but its fee zone strategy failed for the reasons I have identified.

274. [247]

     The defendant may have been exposed to additional costs but the persons who ended up bearing the costs of the prolonged construction activity in the fee zones were some of the business owners along the light rail route. They had been promised minimal disruption and a staged process of construction, which would have seen them exposed to the construction activities for months, rather than years.

275. [248]

     On any view, the original projections by the defendant were optimistic and not soundly based. I have thus allowed a longer period than that originally projected as being reasonable. There was obviously a degree of imprecision in trying to work out the point at which the interference with the businesses (which commenced when the construction work commenced) became unreasonable. I have relied on the opinion of the only expert who really attempted to undertake the analysis, Mr Griffith, in this regard. I have also accepted Mr Griffith’s opinion as to the cause of the prolonged period of construction in Fee Zones 5, 6 and 29.

276. [249]

     There is no alternative opinion or alternative evidence. There are merely assertions that Mr Griffith’s analysis is flawed.

277. [250]

     I have rejected the defendant’s statutory authority defence of inevitability.

278. [251]

     Further, I have found that s 43A of the CLA does not apply in the circumstances of this case.

279. [252]

     I have also rejected the plaintiffs’ claims in public nuisance.

280. [253]

     Those findings may assist going forward, bearing in mind that my determination only relates to two members of the class and three (out of 31) fee zones. However, it seems to me that there remains a significant problem in applying my findings about substantial and unreasonable interference to all members of the class. To the extent that this judgment, through the common questions and my findings in respect of the lead plaintiffs, is intended to provide a basis for the assessment of entitlements of other members of the class, I emphasise these matters:

     1. (1)

        the reason that Hunt Leather and Ancio have succeeded is, in part, that they operated small businesses which were highly susceptible to the effects of construction activities without any means of reducing the impact. It is not difficult to understand how a small boutique luxury goods store which opened directly onto the construction works would suffer because of those works. It is not difficult to understand how a small specialist restaurant which relied on the amenity of its premises would suffer as a result of construction activities happening right outside its front door;

     2. (2)

        however, the position may be different with other businesses. Mere proximity to the construction works does not establish substantial interference, no matter what the period of interference, as I have found in respect of the Hunt Leather QVB store. Many businesses may have been affected by the construction of the SLR in ways which would not constitute a nuisance, despite some diminution in profitability flowing from the construction of the SLR; and

     3. (3)

        it must be remembered that the defendant was a statutory authority and was trusted with the responsibility of improving public transport in Sydney. Infrastructure development will always result in some impact on businesses in the relevant area and changes to an area caused by infrastructure development may have a detrimental effect on businesses. I do not consider that persons would have an actionable nuisance merely based upon factors such as:

281. [254]

     Nuisance has been established in this matter by a combination of factors, particularly having regard to the way in which the construction activity impacted upon the business activities of the lead plaintiffs.

282. [255]

     It follows that the fact that persons were operating businesses adjacent to the SLR route during the period of construction does not, of itself, give rise to any cause of action on their part. More is required.

283. [256]

     The fact that these are representative proceedings does not alter the legal principles which apply. As I said at the outset, this is not a particularly apt vehicle for a class action, albeit as I have identified, some of the issues might be common and have been determined by this judgment. Going forward, there will need to be a process or mechanism developed for the determination of both entitlement and loss.

284. [257]

     My preliminary view is that referees (who are subject to the Court’s oversight) should be appointed to determine outcomes based on guidelines and parameters. Suffice to say, any system which involves each Group Member being required to spend vast sums on quantum experts and have extensive reports prepared for the purposes of assessing their loss (as the lead plaintiffs have done through the funder) must be unworkable.

285. [258]

     The lead plaintiffs, Hunt Leather and Ancio, are entitled to succeed. The other lead plaintiffs, Ms Hunt and Mr Zisti, are not.

286. [259]

     There will need to be another short hearing in order to:

     1. (1)

        finalise damages for the lead plaintiffs;

     2. (2)

        determine a process going forward; and

     3. (3)

        consider whether there might be any other common questions which could be answered.

287. [260]

     I will list the matter for further directions.