The Owners - Strata Plan No 16460 v Hunter Water Corporation

There are 119 plaintiffs. The first plaintiff is an Owner’s Corporation which is a body corporate representing the owners of a strata scheme bearing Strata Plan No 16460. The Owner’s Corporation also owns the common property within the scheme. The other 118 plaintiffs are owners, some past, of the lots within the scheme, which is a townhouse complex in Elermore Vale, an outer western suburb of the New South Wales city of Newcastle.

There is one defendant, which is the Hunter Water Corporation (the HWC), a corporation created by the Hunter Water Act 1991 (NSW) (the HWA).

On 22 September 2017, a water main running alongside, and above the complex, burst, and then discharged large amounts of water into the complex. The townhouses and the common property were flooded and thereby damaged.

The plaintiffs allege the flooding was a nuisance perpetrated by the defendant and that it was a product of the defendant’s negligence. They seek the damages caused by the defendant’s conduct.

The claim in negligence falls under the Civil Liability Act 2002 (NSW) (the CLA). The defendant admitted that it owed a duty of care to the plaintiffs. Breach of this duty is to be gauged according to the general principles set out in s 5B of the CLA. Causation falls under s 5D. Section 5E says that the onus of proving causation is always on the plaintiff.

The defendant denies that it caused any nuisance, that it was negligent, or is in any way liable to pay damages or compensation to the plaintiffs.

In addition, the defendant relies upon ss 42 and 43A of the CLA as defences to the negligence claim.

Section 42 of the CLA dictates the principles that apply “in determining whether a public or other authority has a duty of care or has breached a duty of care in proceedings for civil liability …”

Section 43A of the CLA applies to “Proceedings against public or other authorities for the exercise of special statutory powers.” If applicable, the section impacts the assessment of negligence so that any breach of “a special statutory power does not give rise to civil liability unless the act or omission 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”.

The reliance on ss 42 and 43A of the CLA does not extend to the nuisance claim in line with the NSW Court of Appeal decision in Transport for NSW v Hunt Leather Pty Ltd; Hunt Leather Pty Ltd v Transport for NSW [2024] NSWCA 227. The defendant submitted that the decision in Hunt Leather concerning the applicability of s 43A to a nuisance claim was wrong but accepted that I was bound by the case. An appeal in Hunt Leather has been heard by the High Court but not yet decided.

The plaintiffs emphasised that the defendant had not pleaded any justification of its actions by way of statutory authority. Nevertheless, the plaintiffs submitted that any such defence would have failed.

The defendant accepted that there was no specific pleading of statutory authority but relied instead on para 30 in the amended defence:

There had been a previous failure of the water main (about 90m south of the subject failure) in March 2010. The plaintiffs described the defendant’s actions following the 2010 failure as a “comedy of errors”.

The plaintiffs allege that on 3 August 2017 there had begun a continuous discharge of water near the complex, and that on the day before the major water main failure, the defendant’s employees had excavated and exposed the water main.

At the core of the plaintiffs’ case is the assertion that the water main should have been turned off, or had its flow diverted or reduced, prior to the catastrophic failure on 22 September 2017.

The defendant’s written submissions state:

It is evident from this submission that the defendant admits that the water main belonged to the defendant, that the pipe had suffered a major failure and that as a result, the plaintiffs’ property was damaged. It is further conceded that there was an interference with the plaintiffs’ use and enjoyment of their properties.

The plaintiffs’ claim for damages is twofold. There is the cost of the physical damage to the properties and there is the diminution in value of the properties arising from their reputation as having been affected by flooding. The latter is referred to as the stigma attaching to the properties and has two elements: firstly a purchaser would be wary of paying market value for a property knowing it had a history of flooding, and secondly, the history of flooding had increased insurance premiums (and therefore strata levies) so that a purchaser would take the higher levies into account in assessing the amount to be paid for the relevant lot.

In respect of the physical damage the quantum was agreed at $1,161,841.92. The stigma claim was not agreed either as to entitlement or quantum. The plaintiffs’ assessment of the reduced value was $20,000 per townhouse, making a total of $2,380,000 for the 119 townhouses, or probably $2,240,000 because there are actually only 112 townhouses.

In addition, consequent upon a late amendment to the statement of claim, the plaintiffs also seek compensation pursuant to s 22 of the HWA.

The HWA dictates the powers and functions of the defendant. The following are some relevant sections.

Section 3 of the HWA includes these definitions:

Section 4 of the HWA created the defendant as a corporation.

Section 4A sets out the functions of the defendant, in particular as stated in s 12.

Section 12(1)(a) of the HWA says the Governor may grant an operating licence to the corporation to carry out works for supplying water. Section 13 sets out the terms and conditions of a licence granted by the Governor.

Section 19(2) of the HWA states:

Section 20 of the HWA allows entry onto land:

Section 22 of the HWA is the compensation provision which was the subject of a late amendment to the statement of claim, and to which I will return in detail below.

Mr Jarrod Wynn, the defendant’s civil engineering manager, gave this description of the nature and history of the pipe:

The parties were generally agreed as to the necessary ingredients for the establishment of a nuisance. There was however, one major area of disagreement.

It was agreed that the plaintiffs must establish an interference with the use and enjoyment of their properties. Such an interference was conceded by the defendant. The concession extended to the defendant agreeing that the bursting of the pipe caused the interference.

The disagreement related to the assessment of the defendant’s conduct. The defendant submitted that there was no nuisance if the defendant had, in carrying out the action that caused the interference, acted reasonably. The defendant submitted there had to be fault, or at least unreasonable behaviour, on the part of the defendant.

The defendant submitted that in the present case it had acted reasonably in each of: excavating the earth above the pipe; leaving the pipe uncovered overnight; and not turning off the water flow. Therefore, there was no nuisance and no liability on the part of the defendant.

This discussion occurred in Hunt Leather, from [135] – [148]:

I have emphasised some parts in the above passages from Hunt Leather by underlining.

The plaintiffs also took me to several passages in the primary decision in Hunt Leather Pty Ltd v Transport for NSW [2023] NSWSC 840, which were not ‘corrected’ in the Court of Appeal. They included:

I have included this straightforward statement because of its confirmation of nuisance as a tort. It is worth observing that the origin of the word tort is in the Latin ‘tortum’ referring to a wrong. That there should be a wrong is an inherent part of nuisance. I make this observation because the defendant emphasised that it could not be liable if it had done nothing wrong.

Returning to the primary decision in Hunt Leather:

The nuisance in the current case was said to fit within type (b) in the just quoted paragraph.

The plaintiffs then took up the questions of fault and reasonableness. In Prestage v Barrett [2021] TASSC 27, Estcourt J said at:

I was referred to this passage from Richard Buckley, The Law of Negligence and Nuisance (7th ed, 2025) at 299:

Because of its position that the bursting of the pipe was an entirely unpredictable event, and not in any way related to the reason for the excavation, the defendant relied upon this passage from Hunt Leather in the Court of Appeal on the question of inevitability:

In respect of onus, I was again referred to the primary decision in Hunt Leather, at [814] where Cavanagh J stated that “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)”.

In the appeal against Cavanagh J’s findings on onus, the Court of Appeal stated at [149]:

Bringing all the submissions about the authorities together, and without attempting to summarise the law of nuisance, I think the following emerges for the purposes of this case:

This question includes consideration of the defendant’s submission that the burst was inevitable. I observe here however, as will be explained below, that even if the burst was inevitable that does not necessarily exclude a finding of nuisance.

There are three pipes running parallel at the site where the subject pipe burst. The three pipes are DN 500 (the subject pipe), DN 600 and DN 1200. In the relevant area the three pipes seem to be about 1 – 1.5 metres apart.

I think a chronology is an appropriate starting point:

The water main was laid in 1953. An assessment report in August 2008 found that DN 600 and DN 1200 were in excellent condition. DN 500, in the relevant section of pipe, was found to have a predicted failure in 2012, but replacement was not recommended.

A Condition Assessment of Trunkmains Between Wallsend WPS and Valentine Reservoir released in October 2009 confirms the analysis referred to in the previous paragraph.

On 3 March 2010, DN 500 burst at a location about 90m from the site of the 2017 failure. As a result of the 2010 failure 4.5 million litres of water were discharged onto, generally speaking, the same properties as affected by the 2017 failure.

The 2010 failure was caused by excessive corrosion in the relevant portion of the pipe.

An HWC Trunkmain Failure Report dated 23 March 2010 states:

A Failure Modes and Effects Analysis Report refers to the above Failure Report and says:

At p 3 of the analysis there is a photograph upon which the extent of flooding is depicted. The photograph below makes clear the vulnerability of the townhouse complex to a pipe running above the complex. The 2010 incident would no doubt have emphasised to the defendant the vulnerability of the complex to a pipe failure above the complex.

Another important aspect arising from the 2010 investigations following the failure is that it became known to the defendant that the pipeline was well underground, perhaps to the extent of 7m. This seems to have been overlooked by the defendant’s staff when they attended the 2017 leak with an excavator capable of digging nowhere near the relevant depth.

On 3 August 2017, the defendant was informed by a private plumber that there was a leak at the corner of Aries Way and Apollo Close which could possibly cause damage to the unit block. Mr Richard Baker, an employee of the defendant, came to the site but could not identify where the leak was coming from.

On 8 August 2017 Mr Kevin Deal, Mr Heath Poole, and Mr Richard Baker (employees of the defendant) attended the site and performed a correlation. The purpose of a correlation is to attempt to identify the location of a leak. Correlation involves the use of microphones to measure soundwaves generated by water leaking from a pipe.

The next day (9 August) Mr Deal and Mr Baker returned to the site to try and work out the precise locations of the three pipes, DN 500, DN 600 and DN 1200. They then made a request to Active Leak Detection Services to correlate the water mains.

On 23 August 2017 Active Leak Detection performed a correlation and placed red paint marks above the leak that they detected. They advised:

The leak was therefore suggested to emanate from DN 600.

On 28 August 2017 Mr Mitchell Knight and Mr Les Thornton, both employees of the defendant, attended the site with a small excavator (1.8 tons) but their excavation, because of the limitations of the machine, could not reach the top of the water main. The excavation was backfilled.

On 19 September 2017 Mr Shane Hayter and Mr Michael Berry, both employees of the defendant, came to the site with a bigger (5 ton) excavator and began excavating the site beneath the mark that had been made by Active Leak Detection on 23 August 2017. Again, they could not reach the water main but made the site safe so they could return the following day. The soil that had been excavated was not backfilled but was removed from the site.

On 20 September 2017 Mr Berry and Mr Sean Manning came back to the site later in the day but they only managed limited progress. They requested a shoring box because the excavation was now deep and required stabilisation. The excavated soil was again removed from the site.

On 21 September 2017 Mr Berry and Mr Hayter came back to the site in the morning and continued excavation. They discovered that the leak was coming from DN 500 and not from DN 600. They observed a small leak on the lead collar of DN 500. This leak was considered to be a weep, which is not uncommon. DN 500 was estimated to be about 4 to 5 metres underground. They again requested a shoring box for delivery the following day. A team was then commissioned to amend the identified small leak.

At about 3:27am on 22 September 2017 DN 500 burst, leading to the flooding of the townhouse complex.

At 5.05am on the same day DN 500 was shut off. On 2 September 2017, the main was repaired and the area was backfilled and re-turfed. However, it seems the pipe was still shut off in April 2018 and was consigned to be a redundancy option for DN 600 and DN 1200.

There was evidence from four experts; three of them gave concurrent oral evidence.

Dr David Nicholas did not give oral evidence. He is a corrosion expert. He was engaged by the defendant to examine the pipe and analyse whether it had corroded to an extent that it burst. The existence of corrosion was significant because the 2010 incident had been caused by corrosion in the pipe. Dr Nicholas stated:

Dr Nicholas went on to make the point that the fact that the failed portion of pipe (in the 2017 failure) was in the same section as in the pipe that failed in 2010 was not necessarily significant because “pipe lengths separated by relatively short distances can show quite different corrosion behaviour”.

Dr Nicholas gave this history of the pipe:

Dr Nicholas measured the thickness of the pipe. He found the thickness to be “of the order of 18 to 19mm”. The measurement is important because one of the other experts (Prof Robert Melchers) placed the varying thickness of the pipe as a central factor in its failure.

Prof Melchers was retained by the defendant. He is a structural engineer “with specialised expertise and experience in structural corrosion and in risk assessment”. He is now retired but remains an Emeritus Professor at the University of Newcastle.

Using photograph (a) on p 7 of his report dated 23 July 2018, the spigot and socket end of the pipe is on the left. The curved crack pattern (called a sinusoidal crack) was found to be significant by Prof Melchers and “to provide the key to the reason for failure”. Prof Melchers concluded that “the most plausible mode of failure is through high tensile stresses … as a direct result of localized bending and localized attempted bulging of the pipe at the region of less than nominal wall thickness”.

The reference to wall thickness arose from the pipe generally having a thickness of 18mm, as noted by Dr Nicholas, but that the thickness of the pipe “in the cracked zone towards, but not at, the socket end of the pipe” was 15mm.

The 3mm difference was not the cause of the burst but contributed to the ultimate failure of the pipe. According to Prof Melchers:

I understand Prof Melchers’ opinion in this way; the pipe generally had a thickness of 18mm. However, by sheer coincidence, the thickness of the pipe in the area of excavation was 15mm. The large excavation above the pipe allowed the stresses caused by pressure within the pipe to push through the thinner (15mm) section of the pipe because this section, due to the excavation, was no longer restrained, or reinforced by the 5m of earth that had rested on top of the pipe.

Dr Richard Clegg, also retained by the defendant, disagreed. Dr Clegg is a metallurgical engineer. Dr Clegg thought the sinusoidal form of the crack was “indicative of a fracture driven by internal pressure”. He thought the crack had initiated “at the collar end of the Pipe”. This is the opposite end to where Prof Melchers thought the crack had initiated.

Unlike Prof Melcher, Dr Clegg did not place any significance on the 3mm difference in the thickness of the pipe. In his view:

Mr Luke Fennell was retained by the plaintiffs. He is a mechanical engineer. He has significant experience in operating pipelines. His report focuses more on the conduct of the defendant’s employees than on the cause of the failure of the pipe. However, he does, in his first report, give a cause which could be consistent with both Dr Clegg and Prof Melchers. He stated:

Whatever their views on causation, the three experts who gave concurrent evidence were agreed that a major factor in the bursting of the pipe was the excavation of the ground above it and it being left uncovered by the defendant’s employees.

Mr Fennell said:

And then a little later:

Dr Clegg said:

Prof Melcher said:

A corresponding question to whether the burst would have occurred but for the excavation is whether the defect in the pipe (ie the defect that led to the burst) was responsible for the water identified at ground level (by the plumber) or the seepage identified upon excavation.

In the joint report of Prof Melchers and Mr Fennell dated 23 July 2025, this question was asked “What more likely than not was the cause of the failure of DN 500 CICL….?” Prof Melchers answered:

I specifically note his emphatic (also a characteristic of his oral evidence) statement about the link between the leak and the burst. Mr Fennell was more circumspect and allowed for more than one possibility:

Turning to foreseeability, I think the most persuasive answer, in part because it conforms with common sense, was given by Dr Clegg:

I have mentioned common sense because of the characteristics of the site. These are plainly seen in the photograph attached to the statement of Mr Luke Bianchi reproduced below.

DN 500 is running along the hillside, above the townhouses and has about 5m of earth above it. Any catastrophic failure of the pipe near the excavation site (marked in red) is bound to send water pouring down into the residences. Based on the expert evidence, the removal of earth above a pipe obviously has the capacity to affect the integrity of the pipe.

Prof Melchers had a very different view on foreseeability:

Mr Fennell was much closer to Dr Clegg:

Dr Clegg’s view specifically takes into account the location of the townhouses, which must accord with the common sense I have referred to above.

The defendant made much of the 470 failures referred to by Mr Wynn between 2012 and 2017, presumably to illustrate the regularity of failures and the absence of a need to turn off the water. Mr Wynn refers to the failures in para 43 of his second statement and then states that an Annexure is attached which is a spreadsheet “setting out the number and type of failures experienced on each section of watermain in each year”. The Annexure (JW 3) is far from helpful. It gives a short description of the type of failure but little else. In particular there is no identification of any failure in a site similar to that in the current case nor of any history of previous failures in the identified failures.

To some extent, the evidence concerning the effect of excavation changes the primary enquiry, for liability purposes, from the identification of a weakness or defect in the pipe to the nature and consequences of the excavation, including its size and it being left unfilled overnight. This question also involves whether or not the pipe should have been shut down (or diverted).

The pressure in the pipe was greater during the early morning hours. Dr Nicholas reported, after examining the defendant’s water pressure record:

The increase in pressure was obviously known to the defendant. Combined with the reasonable foreseeability of a defect in the pipe being exposed by the removal of the earth above it, the inescapable conclusion is that the defendant acted unreasonably in leaving the pipe exposed overnight. This is not to say that it should necessarily have refilled the excavated hole, but that there were options available including the shutting off of the water.

Shutting off, reducing the pressure or diversion of the water were available options and, bearing in mind the redundancy available through the other two pipes, would have had no effect upon any user. Mr Fennell said restricting the flow of water was relatively inexpensive. He added:

In respect of redundancy the Incident Investigation Report dated April 2018 noted that DN 500 was isolated and not in use and then continued:

Conversely, DN 1200 and DN 600 could have taken up the water passing along DN 500 without any adverse effect.

This is not to say that the nature of the defect in the pipe becomes irrelevant. If the pipe had been heavily corroded the 2010 failure may have assumed a greater significance. But, at the same time, when the excavation was occurring, and when the area was being left overnight, any defect in the pipe was unknown and the possibility of a heavily corroded pipe was present. That the precise defect was unknown does not matter compared to the reasonable action to be taken in case there was a defect capable of leading to a catastrophic failure when the pipe, situated above a large townhouse complex, was left exposed overnight during periods of high water pressure.

There was a leak. Something must have been ‘wrong.’ The excavation was more extensive than it would have been but for the mistaken identification of DN 600. Mr Berry gave this evidence:

Neither Mr Hayter or Mr Berry turned their minds to any possible consequences. They were both at pains to move any responsibility elsewhere.

For example, Mr Hayter was asked about shutting off the water. He said:

Mr Berry said:

It was not in issue that DN 1200 and DN 600 provided a level of redundancy in case DN 500 could not be used. After a good deal of unnecessary obfuscation Mr Wynn gave this answer:

Clearly it was an option available to the defendant to shut off DN 500 while repairs were carried out. Notably it had done so earlier when repairing the 2010 failure and later in responding to the 2017 failure. Mr Fennell stated:

The defendant, in final submissions, criticised Mr Fennell suggesting that he had not divorced himself from the events and taken “a step back, let’s say to the beginning of August, and look forward from that point”. I reject the criticism. I think Mr Fennell was giving his opinion based on the whole of the history of the pipe including his observations about it having been shut down both before and after 22 September 2017. It is not retrospective reasoning to say that because something had been done at another time, including after the event, it could not have been done before the event.

As the plaintiffs pointed out there is no specific pleading by the defendant of a statutory defence. However, as I have pointed out, there is a pleading in [30] of the amended defence, which I have set out above, and the defendant made this submission in opening written submissions:

The defendant quoted some authorities for this proposition, and I do not doubt their correctness. However, on my findings the defendant did not take reasonable care so that the defence is not enlivened.

Returning to the questions I posed above as to the establishment of nuisance, I am satisfied that there was an interference with the plaintiffs’ use and enjoyment of their land, that the consequent damage was caused by the water discharged when the pipe burst and that the defendant had acted unreasonably in leaving the pipe exposed overnight without shutting off, diverting the water flow or reducing the pressure in the pipe.

Accordingly, I find the plaintiffs have established their nuisance claim against the defendant.

Having found in favour of the plaintiffs on the nuisance claim it is not necessary to consider negligence or the s 22 compensation claim. However, I will do so in case I am wrong about nuisance.

The claim in negligence presents a more difficult task for the plaintiffs, in particular because of the defences provided to the defendant by the CLA.

Starting with s 5B of the CLA, the findings I have made in respect of nuisance I think cover the requirements of the section. I add here the agreed opinion of both Mr Fennell and Dr Clegg in answer to the question: “Was the risk of the 2017 Failure reasonably foreseeable to a person in the position of Hunter Water prior to the time of the 2017 failure? If so, when and what was the probability of that risk occurring?”

The next question was whether the risk was not insignificant. The risk of a pipe bursting above the townhouse complex was significant. It had already been proved as such by the 2010 incident. That the earlier incident had a different cause is beside the point. The earlier incident showed that a burst pipe, for whatever reason, could cause significant damage through the flooding of the townhouses.

Next is whether a reasonable person in the defendant’s position would have taken appropriate precautions. This question brings into play s 5B(2) of the CLA. The massive amount of water that would emanate from a burst pipe under full pressure indicates that harm would occur if precautions were not taken. The volume of water rushing through the townhouses would be likely to cause serious harm. As stated by Mr Fennell, the burden of taking precautions to avoid the risk was minimal. It could have been achieved by simply turning off the water, diverting the water or reducing the pressure.

The social utility of the pipeline is obviously a point in favour of the defendant if the role of the pipeline is to provide users with access to water. The point is neutralised however, by the availability of the other two pipes to take up the work of DN 500. This was referred to as the redundancy in the system.

Thus far I would have concluded that there had been negligence under the general principles set out in s 5B. It is now necessary to consider ss 42 and 43A of the CLA. These sections state:

In respect of s 42 of the CLA the defendant primarily relied upon the statement of Mr Robert Main dated 4 November 2024. Mr Main’s evidence was not challenged, and he was not cross-examined. Mr Main is the Acting Group Manager, Planning and Engineering. Mr Main describes the defendant’s functions in respect of “collection, storage, treatment, transportation and delivery of drinking water” and also in respect of sewerage and run-off surface water.

Mr Main states that the area in which the above functions occur cover about 5,366 km² wherein there is a population of about 600,000 people. Within the area there are 19 wastewater treatment works, 78 service reservoirs, 85 water pumping stations, 441 wastewater pumping stations, 5,115 km of sewer mains and 5,080 km of water mains. In carrying out its functions concerning drinking water, the defendant is subject to a number of quality controls.

Mr Main says that the defendant has to apply a number of “policies, plans and procedures” as well as strategies. He describes the “Critical Watermain Risk Management Framework” as well as of the “Strategic Condition Assessment Program and Watermain Prioritisation Model”. Under the Prioritisation Model the defendant takes into account a number of factors including the water main’s failure history and the operating pressure of the water main. There are other factors listed by Mr Main, but I have mentioned these two because they are the first two in his list and they refer to factors which I think had an impact on my findings on nuisance.

Of equal significance is that Mr Main states “the Prioritisation Model did not consider the potential failure of watermains in the vicinity of residential units as a weighted factor”. This somewhat surprising policy seems to suggest that water mains in residential areas will be allowed to fail before any remedial work takes place.

Mr Main also describes the defendant’s “Budgetary Framework.” He says that under the framework, funds are allocated for watermain maintenance or replacement according to the presentation of a business case for new large capital works and reactions to unforeseen needs for maintenance. If funds are required for maintenance or replacement of a water main, it is necessary for there to be a Project Development Plan which requires approval by a manager and then the entry into a tendering and procurement process.

Quite clearly the defendant’s responsibilities fall within the ambit of s 42 of the CLA. It does seem unusual that funds are allocated retrospective to a failure rather than prospectively to a possible failure. Nevertheless, the defendant, like other public authorities, no doubt has to manage a specific budget which is not necessarily overly generous.

Turning to s 43A of the CLA, the defendant submitted that the higher standard required by the section amounted to, in effect, “gross negligence”. I was referred to the decision of Giles JA in Allianz Australia Insurance Ltd v Roads and Traffic Authority of New South Wales; Kelly v Roads and Traffic Authority of New South Wales [2010] NSWCA 328, at [87]:

In Bankstown City Council v Zraika; Roads and Maritime Services v Zraika [2016] NSWCA 51, Leeming JA said, at [109]:

And then at [110]:

In Curtis v Harden Shire Council; (2014) 88 NSWLR 10; [2014] NSWCA 314 Basten JA described the test to be applied as follows at [277]-[279]:

It was a function of the defendant pursuant to the licence granted under the HWA to repair and maintain the water mains within its jurisdiction. I think this amounts to the exercise of a special statutory power as defined in s 43A(2) of the CLA.

The test described by Basten JA in Curtis does not require an investigation of whether or not there was gross negligence as seems to be suggested by the defendant. Prof Melchers described the approach taken to maintenance by Sydney Water which ranged from a system of fixing the leaks “when they occurred” to a program “with lots of different people involved, to try and detect water as best they can, and as soon as they can, because that’s a warning sign that, in time, and it may be 10 or 15 years later, the pipe might be in the position where it would burst”.

Prof Melchers then described the system in Queensland where sniffer dogs are used “to try and identify where chloride or fluoride was coming up with the water that was leaking out of the pipe…” This is again a proactive system.

Basten JA emphasised that there might be “a range of opinions as to what might constitute a reasonable act or reasonable failure to act” and it is necessary to see whether the actions of the defendant fall within the range. Clearly the approach taken by Sydney Water is at one end of the range, perhaps followed by the system in Queensland. However, it is impossible for me to say that the system adopted by the defendant, namely the ‘fix it when it breaks’ policy is outside the range. It might be at the other end of the range but that does not make it outside the range.

It follows that I could not make a finding that the defendant was not entitled to the protection provided by s 43A. In other words, while I think the defendant was in breach of the principles set out in s 5B of the CLA it nevertheless was not negligent because of the higher standard required by s 43A.

Accordingly, I would have found against the plaintiffs on negligence.

In respect of causation, had I found negligence on the part of the defendant, I would also have found in favour of the plaintiffs on causation. The onus is of course always on the plaintiffs, but I think that onus was discharged.

Based on my finding that the defendant should have turned off, diverted or reduced the pressure in the pipe and that the effect of the pressure in the uncovered pipe was to cause the burst, then I think it follows that the defendant’s failure caused the damage. Put another way, but for the defendant failing to take precautions when leaving the pipe exposed and the water pressure unaltered, the pipe would not have burst and the damage to the complex would not have occurred.

There are two parts to the damages claim: physical damage caused by the descending water and the diminution of the value of each lot within the strata plan.

As noted above, the first part was agreed in the sum of $1,161,841.92. The second part was entirely disputed.

The plaintiffs’ diminution claim, of $20,000 per lot, was styled as the loss derived from the stigma (of flooding) attached to the properties. The stigma had two elements. Firstly, prospective purchasers would pay less for the lots because of its flooding history, and secondly, they would pay less because the quarterly levies were higher as a result of the flooding history. The levies were higher because of the increased insurance costs arising from the flooding history.

The plaintiffs’ case was based on the two reports of Mr Michel Hermiz, a professional property valuer. Mr Hermiz was cross-examined. He was a particularly impressive witness. He made appropriate concessions, and he successfully rebuffed attacks on his reports through his close knowledge of their detail and his area of expertise.

His major concession under cross-examination was already contained in his second report. He stated:

Mr Hermiz accepted that recent sales might have exceeded his valuations, but he pointed out that the recent drop in interest rates might have spurred prices. There is also of course no way of knowing if the recent purchasers had taken the flooding history or higher strata levies into account. Perhaps they would have paid even more!

Mr Hermiz thought the premiums were about 60% or 70% higher than they should have been. He described his methodology in this way:

Using Unit 67 as a base for his calculations, Mr Hermiz said this unit was paying levies of $5,315 per annum. He subtracted the levies from comparable units (outside the complex) to arrive at a difference of about $2,000 per annum. He inspected a balance sheet (for May to December 2023) which showed insurance premiums were about $1,966 per annum which is roughly equal to the difference between the strata levies.

The $2,000 increased premium over the ten-year period used by Mr Hermiz produced the claimed loss of $20,000 per lot.

There is a fundamental problem with the claim based on increased insurance premiums.

Mr Hermiz said he had not seen any document stating the higher insurance premiums were related to the flooding, but he said:

Mr Hermiz stated:

The problem is that there is no document linking the increased premium to the flooding. There is no statement to that effect from any lot owner or from a representative of the body corporate. There is no document from an insurer or broker and there is no minute from a body corporate meeting linking higher premiums to the flooding. This exchange occurred with counsel for the plaintiffs:

Mr Hermiz says insurers assess risk based on claims history. I have no doubt that is correct, but it is not the evidence here. There is simply no evidence linking the insurance premiums for these properties to the flooding. I do not think I can draw an inference to that effect. It is not the only rational inference available. There could be many other reasons for a higher premium which may or may not include the flood events. The claim based on increased insurance premiums must fail. The claim based on the general stigma had already been effectively discounted to zero by Mr Hermiz.

There is accordingly nothing left in the stigma claim to found any damages.

Section 22 states:

In my decision on the plaintiffs’ application to amend the statement of claim (Owners Strata Plan 16460 v Hunter Water Corporation [2025] NSWSC 947) I set out why I thought the compensation claim under s 22 faced difficulties. However, I was persuaded to permit the amendment because it did not involve any further evidence and revolved around the construction of s 22. Counsel for the plaintiffs told me that he would endeavour to persuade me to accept a different construction to that which I had contemplated.

Central to my view, and it accords with the approach taken by the defendant, is that the right to compensation only arises when the corporation has entered into another person’s land and caused damage.

The basis for the alternative construction arises from s 19(2) of the HWA, which states:

The plaintiffs submitted that the work contemplated by s 19(2) was not restricted to entry on another person’s land and therefore, because s 19(2) falls within the same Division as s 22, compensation is payable if the damage has occurred when the Corporation is performing one of the acts referred to in s19(2). For present purposes this would include “repair” and “maintain”.

The plaintiffs then went on to distinguish the authorities seemingly against the plaintiffs on the basis that the legislation relevant to each of the cases had important differences with the HWA.

For example, in Rushcutters Investments Pty Ltd v Water Board (1989) 68 LGRA 128 the relevant legislation was the Water Board Act 1987 (NSW) and the relevant section is specifically headed “Entry on land to carry out works.”

In Sleeman v SPI Electricity Pty Ltd [2014] VSCA 243 the applicable legislation was the Electricity Industry Act 2000 (Vic) which similarly specifically referred to entry onto land.

It followed, submitted the plaintiffs, that because s 22 of the HWA did not have an ‘entry onto land’ qualification it would apply whenever damage arose from one of the activities described in s 19.

The defendant submitted that s 22 was confined to situations where there had been an entry onto land to perform works. The defendant said the history of the section was important and referred to the provisions of the Metropolitan Water, Sewerage and Drainage Act 1924 (NSW) which had an equivalent provision in s 32. This provision had been considered by the High Court in Metropolitan Water, Sewerage and Drainage Board v OK Elliott Ltd (1934) 52 CLR 134; [1934] HCA 57. Starke J said at 143:

In Rushcutters Investment reference was made to OK Elliott and also to Graham v Board of Water Supply & Drainage (1891) 12 NSWLR 287, at 129:

In my view the remedy open to the plaintiffs in this case is through the common law and that is the path that has been taken by the plaintiffs. They have succeeded in nuisance (a common law remedy) and therefore cannot also succeed under s 22. I reject the claim for compensation under s 22.

There will be a verdict for the plaintiffs in the agreed sum of $1,161,841.92. The plaintiffs are not equally entitled to the same share of this amount. The parties agreed that I approach the matter on the basis of a judgment for the plaintiffs, noting the plaintiffs which suffered property damage. A schedule identifying the property damage according to the individual plaintiffs is attached.

I make the following orders: