Kalgovas v Iliopoulos

The plaintiffs, Mr and Mrs Kalgovas, are the owners of a residential property known as 18 Ingrid Road, Kareela (folio identifier 835/243651). They acquired the property (“No 18”) in 1986. At that time, the neighbouring property known as 20 Ingrid Road, Kareela (folio identifier 836/243651) was owned by the defendants, Mr and Mrs Iliopoulos. They had acquired that property (“No 20”) in 1982. Mr Iliopoulos transferred his share of No 20 to Mrs Iliopoulos in 2008. She remains the sole registered proprietor of No 20.

The proceedings concern certain excavation and other works carried out in the 1980’s on No 20, in areas close to the boundary with No 18. The works were carried out in connection with the construction of a dwelling house on No 20 which was then vacant land. The works were in fact carried out for the defendants by or under the control and supervision of Mr Iliopoulos, who had considerable experience in the construction industry.

The plaintiffs complain that the excavation and other works, including a dry stone retaining wall constructed on or close the boundary, have had the effect of removing or reducing the support provided by No 20 to No 18. The plaintiffs allege that the loss of support has caused damage to certain structures on No 18 (although not the dwelling house itself), and that such damage did not become apparent until 2014. The proceedings were commenced in 2015.

By their Second Further Amended Statement of Claim the plaintiffs allege various causes of action, including a claim in negligence based upon s 177 of the Conveyancing Act 1919 (NSW), claims for breach of statutory duty under Part 31 of Ordinance No 70 made under the Local Government Act 1919 (NSW), a claim for relief pursuant to s 3 of the Encroachment of Buildings Act 1922 (NSW), and claims in trespass and nuisance. The relief claimed includes damages and compensation, but the relief principally sought is in the nature of mandatory injunctive relief to require the defendants to carry out works on No 20 that would have the effect of restoring adequate support for No 18. The plaintiffs contend that the defendants should be ordered to remove the dry stone retaining wall and erect a replacement retaining wall that sits entirely on No 20. There is evidence that, to a minor degree, the existing wall encroaches upon No 18.

The defendants do not dispute that certain excavation and other works were carried out by Mr Iliopoulos in the 1980’s and that he was responsible for the construction of the dry stone retaining wall. However, they deny that any of the works were carried out negligently or in breach of any statutory duty, and in any event contend that the works have not caused any damage to the plaintiffs. In that regard, the defendants allege that the damage observed by the plaintiffs is the result of the inadequate design and construction of certain structures on No 18, in particular a stairway near the boundary with No 20, and a paved area near the top of the stairway near the garage to No 18. The defendants accept that the dry stone retaining wall encroaches to a small extent upon No 18 but contend that no relief should be granted that would require the removal of the dry stone retaining wall. The defendants deny any liability in trespass or nuisance. Amongst other things, the defendants’ Defence includes a claim that the causes of action alleged by the plaintiffs are time-barred pursuant to the s 14 of the Limitation Act 1969 (NSW).

The trial was conducted over four days from 6 to 9 December 2021. In the plaintiffs’ case, lay evidence was given by each plaintiff (both of whom were cross-examined), as well as Mr Philip White (a former owner of 16 Ingrid Road, Kareela), Mr Ian Williams (who was involved in the works associated with the stairway) and Ms Susan Georgevits (a professional colleague and friend of Mrs Kalgovas). None of those three witnesses were required for cross-examination. Expert evidence was given by Mr David Loomes (surveyor), Mr Ken Demlakian (civil and structural engineer), Mr Nicholas Smith (geotechnical engineer), Mr Scott Barwick (town planner) and Mr Richard Cohen (quantity surveyor). In addition, the plaintiffs relied upon two reports by Mr Dimitrious Mitsopoulos (civil and structural engineer). The Court was informed that Mr Mitsopoulos had died prior to the hearing. Neither Mr Loomes nor Mr Smith was required for cross-examination. Mr Barwick was cross-examined, albeit briefly. Messrs Demlakian and Cohen were each cross-examined in the course of giving evidence concurrently with experts called by the defendants.

In the defendants’ case, lay evidence was given by Mr Iliopoulos. He was cross-examined. Mrs Iliopoulos was not called. Expert evidence was given by Mr Jason Isherwood (surveyor), Mr Nicholas Kokolis (structural engineer) and Mr Nicholas Ferrara (costing consultant), each of whom was cross-examined. Mr Kokolis gave his evidence concurrently with Mr Demlakian. Mr Ferrara gave his evidence concurrently with Mr Cohen.

Mr Demlakian and Mr Kokolis produced a Joint Report (dated 19 October 2021) which set out some points of agreement and disagreement between them.

The properties at No 18 and No 20 are rectangular blocks that run in a generally north-westerly direction from Ingrid Road to the foreshore of Oyster Bay in the Georges River. The photographic and survey evidence shows that there is a considerable slope downward from the Ingrid Road end of the properties towards the bay. The land in that area slopes gently downwards from roughly west to east (i.e. from the property at No 16 towards the property at No 22).

The property boundaries at Ingrid Road can be regarded as the southern boundaries; the property boundaries at Oyster Bay can be regarded as the northern boundaries; and the boundary between No 18 and No 20 can be regarded as either the eastern boundary of No 18 or the western boundary of No 20. That boundary is approximately 36.33m in length. Each of No 18 and No 20 is a little over 15m in width.

Mr White gave evidence that when he purchased No 16 in 1979 there was a dwelling house on No 18 and No 20 was vacant. The records of Sutherland Shire Council indicate that a development consent was issued in November 1982 for construction of a residential dwelling on No 20. The consent was issued to the defendants, who had become registered as the proprietors of No 20 on 18 May 1982. The Council records further indicate that the development was undertaken in the period from about December 1982 (by which time some excavation had taken place) to about March 1987 (by which time the dwelling appeared to be complete and occupied). It seems that the excavation and other works including the construction of the dry stone retaining wall, that are the focus of these proceedings, were carried out during that period.

However, there is evidence that Mr Iliopoulos undertook earth works on No 20 as early as March 1982, after the defendants had exchanged contracts to purchase the property but prior to completion of the contract. On 23 March 1982 an occupier of No 22 (G Lyras) complained to the Council about Mr Iliopoulos placing fill on No 20. It seems that Council officers attended the site on the following day and on that occasion took some photographs (see Exhibit C1 pages 269-70). Council records show that a Council officer spoke to Mr Iliopoulos on the telephone on 24 March 1982, and an arrangement was made for Mr Iliopoulos to attend the Council for an interview on 25 March 1982. Mr Iliopoulos denied in cross-examination that he spoke to a Council officer on the telephone, but I think that the Council record is very likely correct. On 25 March 1982 the Council issued a Notice to Comply to Mr Iliopoulos (under the Sutherland Planning Scheme Ordinance) to forthwith “cease filling, excavating or altering the vacant land” at No 20. In cross-examination, Mr Iliopoulos said that he had put some road base onto the land at that time but he denied that he had excavated or cut away the land. The photograph taken by the Council officer of that part of No 20 near the southern boundary clearly shows the deposit of what may be road base. It also shows an area near the western boundary of No 20, to the east of the concrete driveway that was then on No 18. I note that in cross-examination Mr Demlakian suggested (at Transcript 186) that the photograph showed some cut faces in that area, apparently made by a backhoe. However, in his report of 9 September 2020 Mr Demlakian expressed the view (at paragraph 6.30) that there would be no need for a retaining wall on the boundary in that area until there were excavations below the natural ground level at No 20.

It appears that excavations for the purposes of construction of the dwelling had occurred by December 1982. A note on the Council file dated 8 December 1982 records:

Mr Iliopoulos deposed that the excavation “commenced in stages from the front boundary to the rear boundary”. He gave evidence to the effect that the excavation came no closer than 1.5m away from the wall of the house on No 18. (There is evidence that this wall is approximately 1.5m away from the boundary between the two properties.) In cross-examination, Mr Iliopoulos denied that he excavated into No 18.

Mr White gave evidence in relation to the excavation of No 20 as follows:

There is a dispute between the parties as to when the dry stone retaining wall was constructed. Mr Iliopoulos maintains that it was constructed in 1982. The plaintiffs suggest that it was constructed in 1986, at around the time or shortly before they moved into No 18 in July 1986.

The defendants retained a surveyor in relation to the development, namely, John B White and Associates. That firm produced various plans in the course of the development. A plan dated 26 January 1983 refers to nails being placed in formwork at the rear (northern) end of the dwelling to be constructed. Another plan, dated 1 August 1983, shows the outline of a “brick cottage” under construction, with a verandah at the rear and a patio at the front that extends to the boundary with No 18. The plan contains notations across the boundary just north of the patio and at a point approximately level with the rear of the “brick cottage”. These notations are: “bdy wall”.

In my view, the plan dated 1 August 1983 suggests that the dry stone retaining wall is likely to have been constructed by that date. That is not inconsistent with Mr White’s general observation that the retaining wall was constructed around the same time as building works on No 20. Neither is the conclusion inconsistent with the 2 May 1986 survey plan of No 18 which merely notes that the boundary is not fenced.

I note that both Mr Kalgovas and Mrs Kalgovas gave evidence to the effect that they did not see the wall when they inspected No 18 in about April 1986. Further, Ms Georgevits gave evidence that she does not recall seeing the wall when she went to the property in July 1986 shortly before Mr and Mrs Kalgovas moved in. However, the likelihood is that the wall was not noticed because, as stated by Mr Kalgovas, the yards on both sides of No 18 were “badly overgrown”, and there was then no stairway or path on the eastern side of the house on No 18 that would readily enable a close inspection of the boundary in that area. Both Mr and Mrs Kalgovas gave evidence that they first noticed the wall after they moved in, but I think it is unlikely that the wall was constructed in the period from about April 1986 to July 1986, as suggested by the plaintiffs in submissions.

Mr Iliopoulos deposed, in relation to the construction of the wall, as follows:

In cross-examination, Mr Iliopoulos explained that he started the dry stone wall at a place where there was “a big boulder into my land”. He said that he followed the contours of the land down towards the river. Mr Iliopoulos stated that the wall was constructed before he did the excavation “for the balance of the house”. He said that an excavator was used in the construction of the wall. He agreed that an excavator could not have been used if the construction had taken place in 1986. It can be inferred that the construction of the house by that time would not have left sufficient space for an excavator to work in that area. Mr Iliopoulos maintained that the height of the wall was subsequently increased by the placement of backfill in the course of construction works undertaken by the plaintiffs on No 18; although he conceded that he did not see any importing of fill onto the land or backfilling in relation to the stairway built on No 18.

Mr Iliopoulos agreed that he knew from his experience that if he excavated near the boundary he would need to retain the plaintiffs’ land, such that it would not erode, crumble or wash away at the boundary. Mr Iliopoulos said that there was not much hydrostatic pressure behind a wall of 900mm in height, and that he did not need to make any allowance for any hydrostatic pressure behind the dry stone wall. Mr Iliopoulos said that the use of a geofabric was “not required”. He agreed that no geotechnical report was obtained before the wall was built, and that a written design for the wall was “not required”.

Mr Iliopoulos denied that the wall (or a section of it) “collapsed” in 1990, and denied that he repaired or rebuilt the wall (or a part of it) at that time. He stated, however, that some rocks fell down from the wall which they (the plaintiffs) built up. He said that some stones falling down was “not a big issue”.

The location of the dry stone wall is depicted on a number of plans in evidence. Very broadly, it extends along the boundary in a southerly direction from a point approximately opposite the verandah at the rear of the house on No 20 to a point towards the front of the house, where the wall turns in so that it meets the wall of the house. It can be inferred that at this point the boulder referred to by Mr Iliopoulos would have prevented construction of the stone wall further south.

That is not to say that south of that point the boundary lacks any retaining wall. Another wall consisting of a concrete block component and an adjacent brick component extends from a point approximately opposite the front of the house on No 20 in a southerly direction to a point in front of the house (and opposite the garden and driveway area in front of the house on No 18). This wall sits on top of a cantilevered concrete slab that extends out from the house on No 20. (Parts of this wall can be seen, for example, in photographs 1, 2, 3, 45 and 53 in the report of Mr Kokolis dated 3 December 2019.)

It should be noted at this point, however, that there is a section of the boundary beneath the cantilevered slab that is not retained by any structure (see, for example, photographs 50 to 52 of Mr Kokolis’ report dated 3 December 2019). There is a brick wall along or close to the boundary in that area, but this wall does not extend any further south than the point where it intersects with a wall that runs in an east to west direction from the boundary into No 18. This brick wall (sometimes referred to as a dwarf brick wall) was constructed in about 1986 as part of the construction of the stairway on the eastern side of No 18. It is convenient to turn now to the various works the plaintiffs have carried out on No 18 in areas close to the boundary with No 20.

In about 1986, after the plaintiffs moved in to No 18, they arranged for the construction of a stairway running down the eastern side of the house. At that time there was no convenient means of access from the Ingrid Road end of the property to the Oyster Bay end other than through the house itself.

The stairway was (at least in part) supported by a dwarf brick wall that was built upon No 18 close to the boundary. Mr Kalgovas said that this wall was at least 25cm away from the boundary. The stairway incorporated pre-cast concrete stair treads that extend from or very close to the side of the house. At the top of the stairway, construction was facilitated by the removal of a portion of the wall that runs east to west from the boundary into No 18. There is a landing about halfway down the stairway. At that point a window on the side of the house was converted into a doorway. It seems from the evidence of Mr Williams that this occurred in early 1987. Later, some additional stairs (the photographical evidence suggests seven in total) were added to the bottom of the stairway. These stairs rest on the ground and are not supported by the dwarf brick wall.

In 1988, the plaintiffs had various landscaping works carried out on No 18. These works included the removal of the concrete driveway slab and its replacement with pavers. It is apparent that the paving works incorporated drainage. It seems that the paving extended some distance towards the boundary with No 20, beyond the point reached by the former concrete slab. The pavers extend to the top of the stairway on the eastern side of the house. Paving was also installed in an area at the rear of the house. Whilst not entirely clear, it seems likely that at that time pavers were also installed in the area bellow the stairway on the eastern side of the house. That is the area, referred to by Mr Kalgovas in his evidence as the bottom landing, upon which two gas cylinders (installed in April 2010) now sit. It also seems likely that the additional stairs were installed at that time.

There is a dispute between the parties in relation to the construction of the dwarf brick wall. The defendants assert, and the plaintiffs deny, that in the course of its construction soil was filled between the dry stone wall and the dwarf brick wall and extra soil and rockery was placed on top of the dry stone wall and the height of that wall was increased. This issue will be returned to later in these reasons.

Both Mr and Mrs Kalgovas gave evidence to the effect that in about mid-1990 Mr Iliopoulos said that the stone wall had collapsed, and that he would fix it up. Mr Kalgovas gave evidence that on the following Saturday he saw Mr Iliopoulos and another man “rebuilding” the wall at a point about halfway down the stairs. He said that Mr Iliopoulos appeared to be pushing grey cement in between rocks in the wall. Mr Kalgovas gave evidence that after the weekend Mr Iliopoulos said that he had rebuilt the wall, “differently to last time”, and gave an assurance that it would not collapse again. Mrs Kalgovas gave evidence that Mr Iliopoulos said that he had fixed the wall and that it would not fall again.

Mr Iliopoulos gave evidence that neither he nor anyone under his instruction rebuilt the stacked stone wall. He denied that conversations occurred as asserted by the plaintiffs. This evidence of Mr Iliopoulos sits awkwardly with what is contained in a letter he sent to the plaintiffs’ solicitors on about 13 July 2015 shortly prior to the commencement of the proceedings. The letter contains the following:

In cross-examination, Mr Iliopoulos denied that he carried out repair works to the rock wall in 1990. He denied that the wall suffered damage. When confronted with what he had written in 2015 he maintained that there was no collapse, but stated in effect that portions of the wall, where its height had been increased by the plaintiffs, fell down. He said that some stones had fallen down and he had put them up. Mr Iliopoulos later accepted that what he had written about paying for a labourer was not true. He seemed to agree that he wrote it to assist his argument or case against the plaintiffs. Mr Iliopoulos then said that he and his son had fixed up the wall in 1990. Mr Iliopoulos’ evidence on this topic was less than satisfactory, and it casts doubt upon the accuracy and reliability of his testimony generally.

Before leaving this topic it should be noted that Mrs Kalgovas deposed:

I accept that evidence and also the evidence given by Mr and Mrs Kalgovas to the effect that the construction works for the stairway did not involve any importation or movement of fill or any increase in the height of the dry stone retaining wall. Their evidence is to be preferred to that given by Mr Iliopoulos on these matters. The evidence given by Mr Iliopoulos here was not convincing, including his attempt to depict on photographs the extent to which the height of the wall was allegedly increased by the plaintiffs. In my opinion the cross-examination of Mr Iliopoulos (at Transcript pages 134 to 136) showed the depiction to be inaccurate and unreliable. I find that the wall was wholly constructed by or at least under the supervision of Mr Iliopoulos, who also carried out some repairs to a portion of it in 1990 when at least a few stones became dislodged in the section of the wall near the stairway landing. It is likely that the height of the wall in that area was increased to some extent as a result of the repairs. I do accept that some minor removal and reinstatement of stones may have earlier occurred when the stairway was constructed in 1986, but I consider that any such work would have been of a cosmetic nature only (see the report of Mr Demlakian dated 9 September 2020 at paragraph 6.36).

The plaintiffs moved away from No 18 in about September 1995. They resumed living there in about late-2002.

Mr Kalgovas deposed that in about September 2014 his wife drew his attention to an apparent bowing out of the stacked stone wall towards No 20 in the paved area near the gas cylinders. Mr Kalgovas went to the area and noticed a 3cm to 5cm depression more fully described in his 4 January 2016 affidavit (at paragraph 62; see also the photograph at Exhibit C1 page 257). Mr Kalgovas further deposed that in about November 2014 he became aware of subsidence of the driveway when this was pointed out to him by an officer of the Council. Mr Kalgovas says that the Council officer also showed him that there was no retaining wall under the cantilevered concrete slab and the block and brick wall on No 20 to hold back the soil beside the plaintiffs’ driveway.

Mr Kalgovas’ evidence in respect of the appearance of damage, as referred to above, was not directly challenged. It was put to him that he had been aware since at least 1990 that there was an issue with the retaining wall. Mr Kalgovas denied that, and the matter was not further pursued. There had of course been the incident in 1990 referred to in the preceding section of these reasons. However, both plaintiffs gave evidence to the effect (which I accept) that Mr Iliopoulos had assured them that the wall would not collapse again. It would not be unreasonable to accept that assurance in circumstances where Mr Iliopoulos, who had built the wall, apparently had experience and expertise as a builder.

The evidence of the expert engineers relating to the adequacy of the dry stone retaining wall and the likely causes of the damage upon No 18 was the central focus of the hearing. As already noted, the engineering evidence consisted of the reports and oral evidence of Messrs Demlakian and Kokolis, as well as the reports of Mr Mitsopoulos and Mr Smith (geotechnical engineer). The evidence is voluminous. The plaintiffs relied upon no fewer than six reports of Mr Demlakian (albeit that there was a large overlap between the contents of the first three reports dated 3 July 2019, 17 September 2019 and 9 October 2019), in addition to the two reports of Mr Smith (dated 30 November 2017 and 13 December 2017) and the two reports of Mr Mitsopoulos (dated 16 September 2016 and 17 August 2017). The defendants relied upon the two reports of Mr Kokolis (dated 3 December 2019 and 8 December 2020). Both Mr Demlakian and Mr Kokolis placed some reliance upon aspects of Mr Smith’s reports. As noted earlier, Mr Smith was not required for cross-examination.

Mr Smith’s first report contains the details and results of his geotechnical investigation. The investigation involved six locations (five bore holes using a hand auger and one test pit dug with hand tools) close to the boundary between the properties. The report also records various observations made of parts of the boundary area, including the following:

Mr Smith also made various comments about the sub-surface conditions, including a statement that, where tested, the fill was assessed as being poorly compacted. I note that Mr Kokolis placed some emphasis upon that statement. In relation to the footing of the dwarf brick wall exposed at the test pit, Mr Smith said that the footing was founded within the poorly compacted fill profile at a depth of 0.44m below adjacent surface levels. Mr Smith also stated that sandstone bedrock was encountered at certain locations, and that at other locations the presence of sandstone bedrock is inferred only.

In his second report, Mr Smith expressed a number of opinions, including those in the following paragraphs:

The first report of Mr Mitsopoulos contains, amongst other things, a number of observations he made at an inspection of the properties on 30 June 2016, including the following:

I do not propose to summarise the detail contained throughout the reports of Messrs Demlakian and Kokolis. However, reference should be made to their Joint Report to show the essence of the positions ultimately reached by them. The Joint Report includes the following:

It can thus been seen that whilst these experts agreed that the unretained section of the boundary south of the building line of No 18 is unstable and has given rise to the subsidence of the driveway paving, they remain at odds in relation to the stability and adequacy of the dry stone retaining wall. It should be noted, however, that Mr Kokolis accepts that there has been movement of the wall, and merely suggests that it is possible that the deformed structure has reached equilibrium and is stable in its bulged condition. The remaining differences between the experts, including on the question of what remedial works may be required, became the focus of the questions asked during the session of concurrent evidence.

The opinions of Mr Demlakian are broadly summarised in paragraphs 9.1 to 9.10 of his report dated 3 July 2019 (see also his reports dated 17 September 2019 and 9 October 2019) as follows:

The opinions of Mr Kokolis may not be so readily summarised. However, it is apparent from his report of 3 December 2019 that he attributes the observed damage to the stairway on No 18 (such as the cracking of the brick wall beneath the landing) to an inadequate footing system or settlement of poorly compacted fill below the footing system (see, for example, paragraphs 2.1.48, 2.1.51, 2.1.52 and 3.3.4) rather than to any inadequacy of the dry stone retaining wall (see also paragraph 2.3.5 in relation to the pavers at the base of the stairway). Mr Kokolis agrees that the workmanship of the wall is “not the best” but does not accept, in the absence of design analysis to the contrary, that it is structurally inadequate.

However, Mr Kokolis went on to state (at paragraph 3.3.7):

Mr Kokolis went on to say that if the wall was found to be structurally inadequate it could be strengthened by the construction of a wall in front of the existing dry stone wall (see paragraph 3.10.4). The strengthening works suggested by Mr Kokolis are detailed in the drawings at Appendix F to his second report dated 8 December 2020.

Having read and considered the reports of Messrs Demlakian and Kokolis, and further considered the evidence given in the concurrent session, I have concluded that the opinions expressed by Mr Demlakian in relation to the adequacy of the dry stone retaining wall and the likely causes of the damage upon No 18 should generally be accepted. I formed a favourable impression of Mr Demlakian as a witness. The conclusions he reached, and the reasoning he outlined in support of those conclusions, seemed to me to be soundly based in the evidence, coherent and logical. Mr Demlakian was firmly challenged on aspects of his reasoning and ultimate conclusions, but in my view he satisfactorily answered those challenges, including in respect of the vexed issue of whether the treads on the stairway on No 18 lent towards No 18 or towards No 20. In addition, important aspects of Mr Demlakian’s reasoning and conclusions are supported by the evidence contained in the reports of both Mr Smith and Mr Mitsopoulos as referred to earlier.

Mr Demlakian was confronted with the levels of the stair treads as ascertained by Mr Isherwood, surveyor, which were to the effect that all of the treads were lower towards No 18. Mr Demlakian accepted that he had personally measured only about eight or ten of the stairs (using a spirit level) but firmly maintained that his measurements, which showed that some of the treads were lower towards No 20, were correct (see Mr Demlakian’s report of 9 September 2020 at paragraphs 6.7 to 6.10). I am prepared to accept that Mr Demlakian’s measurements are indeed correct. In this regard it is relevant to note that Mr Kokolis later conceded that one of the photographs of his own spirit level measurement of a stair tread showed that the step sloped down towards No 20 (see Transcript at page 205). It is not possible to definitively reconcile these results with those obtained by Mr Isherwood (using a Leica measuring instrument, from which results are electronically recorded). In any event, Mr Demlakian explained that in either scenario there is a loss of support underneath the stairway which he attributes to “the movement of the wall and loss of lateral restraint” (see Transcript at page 165). Mr Kokolis did not accept that view, but I think that his opposing position, which relies on Mr Isherwood’s results, is weakened by his concession about one of his own measurements. I would add that insofar as Mr Kokolis’ views in relation to damage beneath the landing depend on the view that the stairwell is plum, those views are weakened to some extent by his erroneous measurements of the stair wall (see Transcript at page 172). The wall was in fact 3.2 degrees off the vertical, not 0.2 degrees as stated by Mr Kokolis in his first report.

Mr Kokolis attributes the stairway damage to an inadequate footing system or settlement of poorly compacted fill beneath the footing system. I did not find that evidence to be convincing. I do not think there is good reason to assume poor practice on the part of the stair constructor. Of course, it is not possible to now measure what the compaction of the fill was at the time of construction, but even if the fill at that time is assumed to be in the condition as later assessed by the geotechnical engineer, it would allow a bearing pressure of 50 kPa. Mr Demlakian explained, based on calculations he performed, that the maximum pressure under the footing would be no more than 19 or 20 kPa (see Mr Demlakian’s report of 9 September 2020 at paragraphs 6.19 to 6.23).

I also think that Mr Kokolis’ opinion is weakened by the fact that no damage to the stairway was observed until many years after its construction. If the stairway had been built on poorly compacted fill not able to withstand the loads put upon it, cracking is likely to have occurred much sooner. Mr Demlakian’s evidence to that effect is accepted.

The primary claim advanced by the plaintiffs is the claim in negligence pursuant to s 177 of the Conveyancing Act. Section 177 provides:

The section was introduced in 2000. However, s 177(9) makes it clear that an action in negligence in relation to the removal of support of land that is commenced after the commencement of the section may be based upon conduct that occurred prior to the commencement. Any such action remains subject to any period of limitation under the Limitation Act 1969.

The effect upon the existing law of the introduction of s 177 was discussed by Macready AsJ in Piling Contractors (Qld) Pty Ltd v Prynew Pty Ltd [2008] NSWSC 118 at [40]-[48]. In essence, the common law action in nuisance that arose from the right of a landowner to have the land in its natural state supported by the land of an adjoining owner was abolished, but a common law action in negligence in relation to the right of support for land was recognised. It is not necessary to determine whether such an action in negligence was already available at common law or whether the action was brought into existence by the enactment of s 177. As noted by Young AJA in Llavero v Shearer [2014] NSWSC 1336 at [36], whilst the section abolished the action in nuisance, it did not abolish the common law right of support.

In these circumstances, s 177(2) operates so that the defendants as the then owners of No 20 had a duty of care not to do anything on or in relation to No 20 that removes the support provided by No 20 to No 18 (including the natural surface of, and the subsoil of, No 18). Removal of support in this context includes any reduction of support (see s 177(12)).

I do not think there is any doubt that the excavation works undertaken on No 20 in connection with the construction of the dwelling on that property had the effect of reducing the support provided by No 20 to No 18. That is, the excavation works that were carried out in various places in close proximity to the boundary with No 18, including in the area where the dry stone wall was erected, reduced the support that had previously been provided to No 18 (see, for example, Mr Demlakian’s report of 10 September 2020 at paragraphs 6.56 to 6.60 and 6.73 to 6.79). It was appreciated by Mr Iliopoulos that there was thus a need for the installation of structures to properly retain the soil on No 18.

It therefore becomes necessary to consider whether the conduct of the defendants, in undertaking the excavation works and taking steps to restore the support to No 18 that had thereby been reduced, amounted to a discharge of their duty of care or, as alleged by the plaintiffs, involved a breach of the duty of care. For the reasons which follow I have concluded that the defendants’ conduct in that regard was negligent and in breach of their duty of care.

The risk of destabilisation at No 18 by the excavation works was in my view plainly foreseeable; it was a risk which was not insignificant; and in the circumstances reasonable persons in the position of the defendants would have taken further precautions against that risk (see Civil Liability Act 2002 (NSW), s 5B).

The further precautions the defendants ought reasonably have taken, but failed to take, include at least the following:

As to (a), the defendants simply failed to provide any retaining wall for a section beneath the cantilevered concrete slab that extends out from the house on No 20. Messrs Demlakian and Kokolis agree that the unretained boundary at that point is unstable and that a retaining wall is necessary to arrest the lack of support.

As to (b), the evidence shows that no engineering design was obtained for a retaining wall in that location, and Mr Iliopoulos did not make any particular allowance for hydrostatic pressure (or drainage), and did not incorporate any geofabric or other means of dealing with soil migration, when constructing the dry stone retaining wall. Moreover, I accept the evidence that the wall as constructed displayed poor and inadequate interlock between the individual boulders (according to Mr Demlakian), and that the workmanship was not the best (according to Mr Kokolis – although I note that in cross-examination he said that he was mainly referring to the aesthetics of the wall). The wall was neither adequately designed nor constructed, and in my opinion was not adequate for the purpose of maintaining the support for No 18 that was reduced by the excavation works on No 20. I note that in his report dated 8 December 2020, Mr Kokolis expressed the opinion (at paragraph 3.3.1) that the dry stone retaining wall was initially constructed to act simply as a garden wall and not to provide support to a substantial structure.

It seems that the dry stone wall may not have been intended to serve as a retaining wall on a permanent basis. Mr Kalgovas and Mrs Kalgovas gave evidence of statements made by Mr Iliopoulos to the effect that the wall was a temporary measure until the area beside the house on No 20 was backfilled. That there was an intention to backfill using excavated material that had been moved to the rear of the property is supported by the note in the Council record dated 8 December 1982 that has already been referred to (see [13] above). Reference should also be made to the letter from the Council to the defendants dated 17 October 1984 which noted that one of the items still to be completed was:

It further seems that Mr Iliopoulos had an intention to build stairs down into the area between the house and the boundary with No 18, commencing from the cantilevered concrete slab. Mr and Mrs Kalgovas gave evidence that Mr Iliopoulos spoke about the building of stairs in that area. The existence of such an intention is supported by the fact that the slab area was constructed in such a way as to leave a gap suitable as a commencing point for stairs. Mr Iliopoulos’ explanation that the gap was merely to provide access, perhaps by means of a step ladder, was unconvincing. Again, the evidence of Mr and Mrs Kalgovas in relation to these matters is to be preferred to that of Mr Iliopoulos. I do not accept his denials that he made the statements as recalled by Mr and Mrs Kalgovas.

Whatever Mr Iliopoulos’ intentions at the time he constructed the dry stone wall, the fact remains that due to negligence in its design and construction the wall was not adequate for the purpose of maintaining the support for No 18 that had been reduced. The defendants’ failures in that regard, and the failure to install an appropriate retaining wall south of the house on No 18, amount to breaches of the duty referred to in s 177 of the Conveyancing Act. Insofar as the retaining works carried out by the defendants can be regarded as a “system”, it was, as concluded by Mr Demlakian, inadequate and defective (see his report of 3 July 2019 at paragraph 9.1). Further, I am satisfied that those failures of the defendants have caused damage to the plaintiffs’ land. The failures to take reasonable precautions in the respects I have found mean that the support hitherto provided by No 20 to No 18 has not been maintained. I am satisfied that this on-going state of affairs has brought about the damage to No 18 that was first noticed by the plaintiffs in 2014.

In particular, I am satisfied on the evidence:

I am not satisfied of the existence of other possible causes of the damage to No 18, as postulated by Mr Kokolis. Accordingly, I have concluded that the damage to No 18 would not have occurred had the defendants not breached their duty of care as described above (see Civil Liability Act 2002, s 5D).

I do not accept the defendants’ submission that the plaintiffs’ cause of action in negligence is statute barred because relevant damage first occurred in 1990 when portion of the dry stone retaining wall “collapsed”. The defendants noted in their submissions that the evidence in relation to that event was limited. The only direct evidence of what occurred came from Mr Iliopoulos who said that some stones had fallen down, and they had been put back up. Mr Iliopoulos assured the plaintiffs that the wall had been fixed and would not fall again. I do not think it has been established that whatever damage occurred to the wall constituted damage to the plaintiffs’ land. In any case, the evidence in relation to this event does not enable the Court to be satisfied that any damage suffered in 1990 is damage of the same type as that which became manifest in 2014 when subsidence on the plaintiffs’ land was noticed. In my opinion, that is when non-negligible damage was first suffered by the plaintiffs as a result of the defendants’ breaches of their duty of care. The cause of action in negligence arose at that time, and these proceedings were commenced within the period prescribed by s 14 of the Limitation Act.

As noted earlier, whilst the relief claimed by the plaintiffs includes a claim for damages, the principal relief sought is mandatory injunctive relief to require the defendants to carry out works on No 20 that would have the effect of restoring adequate support for No 18. In my opinion, relief of that character is appropriate in the circumstances of this case where the evidence establishes that unless remedial works are undertaken on No 20 there is likely to be on-going damage occasioned to No 18. I note that the defendants did not submit that such relief was not available as a matter of principle in the event the Court found a breach of the duty of care under s 177. The thrust of the defendants’ case in this respect was upon the scope of any injunctive relief.

Having regard to the agreement reached between Messrs Demlakian and Kokolis concerning the nature of works required in respect of the unretained boundary south of the house on No 18, the defendants accepted that if liability was relevantly established, an order requiring works of that character would be appropriate. However, there was a live issue concerning relief in respect of any liability arising from the dry stone retaining wall. The defendants took the position that it would not be appropriate to order them to carry out the works recommended by Mr Demlakian which would involve the entire removal of the wall (and the stairway on No 18) and the construction of a new retaining wall. The defendants contend that it would be appropriate to only require the existing wall to be strengthened by the construction of a new wall in front of it on No 20, as recommended by Mr Kokolis.

The divergence between the experts on this issue is dealt with in the Joint Report, especially at paragraphs 3.5 and 4.1 to 4.3. The issue was the subject of numerous questions in the course of the concurrent evidence session.

The approach favoured by Mr Kokolis is referred to in his 3 December 2019 report at paragraph 3.10, and further developed in his 8 December 2020 report at paragraphs 2.1.72 to 2.1.79 and Appendix F (drawings SK9, SK10 and SK11). Mr Demlakian’s concerns and objections to this approach are essentially set out in his 9 September 2020 report at paragraphs 6.70 to 6.72, his 10 September 2020 report at paragraphs 6.17 to 6.22 and 6.44 to 6.46, and his 12 April 2021 report at paragraphs 6.85 and 6.94 to 6.105.

Having considered that evidence, and the further evidence adduced in the concurrent session, I have concluded that whilst Mr Demlakian’s concerns are genuine and cannot be lightly dismissed, Mr Kokolis’ proposal for the stone retaining wall to be strengthened by the construction of a new wall in front of it appears to be a feasible and appropriate response to the problems caused by the deficiencies in the existing wall. There are of course risks and uncertainties involved in the implementation of the proposal, but the same can be said of Mr Demlakian’s proposal. In reaching the above conclusion I have taken into account the evidence of the likely costs of the proposals. That evidence suggests that the cost of Mr Demlakian’s proposal would be very much greater than the cost of Mr Kokolis’ proposal. It was Mr Cohen’s opinion that Mr Demlakian’s proposal would cost in the order of $490,000 (including nearly $225,000 for approvals and other fees). Mr Cohen considered that Mr Kokolis’ proposal would cost in the order of $52,000.

It should be noted that in his report of 10 September 2020 (at paragraphs 6.17 and 6.46), Mr Demlakian accepted that the new retaining wall concept proposed by Mr Kokolis could be designed in such a way as to replace the natural support previously provided by No 20 to No 18, provided certain features were incorporated into the design (e.g. the wall would have to be designed for the pressure “at rest” of the soil behind it to prevent further loss of consolidation of the fill behind the wall). Further, one of the reasons for Mr Demlakian’s opposition to Mr Kokolis’ proposal is that it would not overcome the encroachment of the existing wall onto No 18, but in my view the issue of encroachment itself is not significant in the context of framing a remedy to address a breach of the duty referred to in s 177 of the Conveyancing Act.

In all the circumstances I consider that an order should be made requiring the defendants to carry out works essentially as recommended by Mr Kokolis to strengthen the dry stone retaining wall. That order is in addition to an order requiring the defendants to undertake the works in respect of the unretained section of the boundary, essentially as agreed between Mr Demlakian and Mr Kokolis.

I consider that all questions of assessment of damages should be deferred until the requisite works have been carried out. At that stage, the extent to which the plaintiffs have suffered loss (including because structures on No 18 need to be repaired or replaced) will be better known.

In my opinion, the breaches of the duty under s 177 of the Conveyancing Act, as found above, also amount to breaches of Part 31.3 of Ordinance No 70 made under the Local Government Act 1919. Part 31.3, which was in force at the time the defendants carried out the excavation and other works, provided:

I am satisfied on the evidence of the engineers that the soil conditions required retaining walls (or other approved methods of preventing movement of soil) on the boundary between No 18 and No 20 due to the excavation works carried out on No 20 in the vicinity of that boundary. It is clear that those works reduced the level of support for No 18 that had hitherto been provided by No 20. However, the defendants failed to install an appropriate retaining wall on the boundary south of the front façade of the dwelling on No 18, and the dry stone retaining wall that was erected further to the north was designed without any allowance for hydrostatic pressure or drainage.

These breaches of Part 31.3 would give rise to a private action for damages at the suit of the plaintiffs (see Kebewar Pty Ltd v Harkin (1987) 9 NSWLR 738 at 744).

The plaintiffs also relied in their pleading upon Part 31.4(1) of Ordinance No 70 as giving rise to a right of action against the defendants (see Pantalone v Alaouie (1989) 18 NSWLR 119 at 130-132). Part 31.4(1) provided:

Similar observations can be made about the plaintiffs’ claims based upon alleged breaches of various conditions of the defendants’ development consent. In addition, I agree with the submissions made by the defendants to the effect that the plaintiffs have failed to explain how such breaches, which can give rise to liability for a penalty under s 317 of the Local Government Act 1919, would give rise to a private right to claim damages against the defendants. The existence of such a right does not seem to me to be supported by the decision in Pantalone v Alaouie (supra) that was cited by the plaintiffs in submissions.

The plaintiffs complain that the dry stone retaining wall encroaches upon No 18. In that regard they primarily rely on the evidence of the surveyor, Mr Loomes, and his survey of the boundary (see Annexure D to Mr Loomes’ affidavit of 4 October 2016). This evidence, which was not challenged, shows that at least the top section of the wall encroaches to a minor (and unspecified) extent upon No 18 in two areas, including an area near the stairway. The evidence is unclear as to whether, and if so the extent to which, the wall encroaches upon No 18 at lower levels including at levels below the surface. Mr Demlakian gave some evidence to the effect that if the width of the wall at its base was 1m there would be encroachment onto No 18 along the entire length of the wall, in extreme cases of up to 700mm.

The plaintiffs allege that the encroachment prevents their land from being properly supported, and that they are unable to remove the encroachment without going onto No 20. The plaintiffs seek an order under s 3 of the Encroachment of Buildings Act for the defendants to remove the encroachment. The plaintiffs further say that it would be just for the defendants to support the plaintiffs’ land upon the removal of the wall. The plaintiffs alternatively make a claim for compensation under s 3 of the Act.

Section 3 of the Encroachment of Buildings Act provides:

I am not persuaded that in the circumstances of this case it would be appropriate to make an order to remove the encroachment by removal of the dry stone retaining wall. The evidence, so far as it goes, does not establish more than the existence of a minor encroachment. There is no evidence that the existence of the encroachment per se gives rise to any particular or substantial impediment or restriction upon the plaintiffs’ use of No 18. That is so even if it is assumed that there might be an encroachment beneath the surface of as much as 700mm in some places. It is true that the encroachment is effected by a wall which, as I have found, is inadequate to maintain the support for No 18 that had been reduced by the defendants’ works. Nevertheless, as submitted by the defendants, the problems caused by the inadequacies in the wall are not brought about by its encroaching nature. I have concluded that those problems ought to be able to be satisfactorily remedied by the undertaking of works that do not involve the removal of the wall. To require the wall to be removed, and thus necessitate the construction of a new retaining wall, would likely impose a very significant financial burden upon the defendants (perhaps as much as about $490,000) compared to the likely cost of the wall strengthening works (perhaps in the order of about $52,000). That additional burden seems to me to be well out of proportion to the benefit that would arise from the elimination of the encroachment itself.

The assessment of any compensation under the Act will be deferred, together with all other questions of assessment of damages.

The plaintiffs further alleged that the construction of those parts of the dry stone retaining wall which are located on or in the plaintiffs’ land amount to a trespass to the plaintiffs’ land that is a continuing trespass. The allegation that there is a continuing trespass is evidently intended to overcome the limitation period difficulty that would exist in relation to a cause of action in trespass that arose in about 1983 when the wall was constructed.

It is doubtful whether the existence of the encroaching elements of the dry stone retaining wall, which are fixtures in and thus part of the plaintiffs’ land, amount to a continuing trespass (see, for example, Lord v McMahon [2015] NSWSC 1619 at [160]-[161] per Slattery J; McIntosh v Morris [2021] NSWCA 225 at [74] per White JA and [102] and [104]-[107] per Brereton JA). I tend to think that there is no continuing trespass, and that any cause of action to sue for any trespass that occurred in about 1983 is statute barred.

However, even making the assumption, favourable to the plaintiffs, that the trespass claim is maintainable, any relief would not exceed that available under the Encroachment of Buildings Act. For reasons similar to those set out in the preceding section, I do not think it would be appropriate to order the defendants to remove the encroachment by removal of the dry stone retaining wall. Further, I do not think that any damages would exceed the amount of any compensation that would be ordered under the Act.

The plaintiffs make a further claim that the construction of the parts of the dry stone retaining wall which are located on or in the plaintiffs’ land amount to a nuisance that is a continuing nuisance. The damage alleged to have been suffered as a result of the nuisance is said to arise because the wall is unstable such that it requires removal and/or repair. As submitted by the defendants, it is not suggested that any encroachment has, of itself, occasioned any loss to the plaintiffs.

In these circumstances it is difficult to see how this claim adds anything to the primary claim advanced pursuant to s 177 of the Conveyancing Act. If available, the cause of action would not give rise to relief any more extensive than that to be granted for the primary claim.

I will add that it is in any event questionable whether this claim in nuisance, which is framed by reference to damage due to the inadequacy of the dry stone retaining wall, is maintainable in the face of s 177(8) of the Conveyancing Act. That provision abolishes any right to bring an action in nuisance “in respect of the removal of the support provided by supporting land to supported land”. In the circumstances, it is not necessary to determine that question, which was not the subject of any submissions.

The plaintiffs have succeeded on their primary claim pursuant to s 177 of the Conveyancing Act. It is considered appropriate for mandatory injunctive relief to be given in the first instance, as described above, with the assessment of any damages (or compensation pursuant to the Encroachment of Buildings Act) to be deferred until the requisite works have been carried out.

After considering these reasons, the parties will need to confer in respect of the form of relief. In addition to the formulation of a sufficiently precise identification of the works to be performed, the parties will need to consider matters such as the obtaining of any necessary approvals and the terms of a certification of the works following completion. The parties will be given a fair time to deal with these matters as it is highly desirable that the orders clearly and precisely embody a practical and workable regime that has been fully considered by the affected parties.

The matter will be listed for mention in the near future at a time to be arranged with my Associate.