On 21 September 2011, Justice Bergin of the Supreme Court of New South Wales delivered her judgment in Gales Holdings Pty Limited v Tweed Shire Council1. Bergin J upheld a damages claim by Gales Holdings Pty Limited (Gales) against Tweed Shire Council (Council) for nuisance caused by untreated stormwater runoff from Council drains onto undeveloped land owned by Gales.
Gales successfully argued that increased stormwater runoff onto its land resulted in the occurrence of 'ephemeral ponding of water' on the land, which led to the development of Wallum Froglets (Crinia tinnula) habitat. The Wallum Froglets are a vulnerable species under the Threatened Species Conservation Act 1995 (NSW).
In considering the case, Bergin J dismissed claims by Council that certain statutory defences under the Civil Liability Act (2002) (CLA), the Roads Act (1993) (Roads Act) and the Local Government Act (1993) (LGA), aimed at protecting government authorities that perform statutory duties, provided Council immunity. Rather, Bergin J found that based on Council's actions (or lack thereof), these defences did not apply for various reasons, including that Council failed 'to take reasonable steps to eliminate the foreseeable risk of damage' (at 346).
Damages in the amount of $600,000 were awarded together with several other orders to abate the nuisance that had occurred since May 2004. In awarding damages, the Court ruled that compensation was not payable for the loss of value on the land to be used for Wallum Froglet habitat.
Background and facts
Gales owned a 27 hectare parcel of undeveloped land in Kingscliff, New South Wales (Land), which it had been intending to develop for many years for the purpose of a shopping centre. Gales sought to develop the Land in 1974. At this time, Council informed Gales that flood studies were to be completed. Development on surrounding land was permitted at various times by Council and in 1998, Gales enquired with Council as it was considering obtaining development consent to fill the Land. At the time, Council was aware of the cause of the drainage problems, however did not inform Gales of the cause.
The relationship between the parties was initially co-operative, with Gales providing funding for drainage studies and conducting various drainage works. Over the years the relationship deteriorated, with litigious action later being taken by Gales to enable it to fill and develop the Land: Gales Holdings Pty Limited v Tweed Shire Council  NSWLEC 85; Gales Holdings Pty Limited v Tweed Shire Council2.
In 2004, Gales' solicitor wrote to Council alleging that Council's conduct and the resulting ponding from stormwater runoff, constituted actionable nuisance. Gales published pamphlets in 2006 alleging Council had manipulated the results and recommendations of particular reports on major projects in the area. Gales later informed Council of its continued willingness to meet Council with a genuine view to resolving the resolving the issues between the parties to enable the development of the Land for the benefit of the community.
Council responded by requesting Gales publicly apologise for the information published and pay outstanding legal fees owed to Council before it would enter into any discussions.
Development consent to fill the Land was ultimately granted by the Land and Environment Court, subject to the production of a 'Wallum Froglet management plan' and implementation of monitoring and reporting of specific environmental matters: Gales Holdings Pty Limited v Tweed Shire Council3.
The proceedings and issues raised
In 2005, Gales commenced proceedings against Council for nuisance and negligence for the drainage problems, consequential ecological changes and difficulties in developing the land as a result of Council's actions (and lack of action).
Gales sought an injunction to restrain Council from allowing stormwater runoff to be discharged onto the Land and causing the nuisance and an order requiring Council to carry out specific works and damages. Ultimately, Gales abandoned its claim in negligence.
The nuisance claim alleged that since 1994, Council had caused or allowed (and continued to cause or allow) untreated and polluted stormwater runoff to discharge directly and indirectly onto the Land, and further that Council had permitted surrounding development that resulted in an unreasonable increase in stormwater flowing onto the Land.
The parties agreed that since 1994, there had been an increase in the stormwater runoff flowing onto the Land. The question was whether the increase in stormwater runoff caused an unreasonable interference with the enjoyment of Gales Land giving rise to an action in nuisance against Council.
In this regard, Gales claimed that foreseeable consequences of the increase in stormwater runoff included increased ponding of water and more frequent flooding on the Land, that the stormwater runoff was prevented and obstructed from flowing away from the Land and ultimately, a habitat that was suitable for Wallum Froglets was created. Gales claimed it would lose that portion of the Land for development and incur the burden of maintaining the habitat. Council submitted that the presence of the stormwater runoff did not cause an unreasonable interference with the enjoyment of the Land as the Land was merely a 'dormant' development site.
Gales further argued that once becoming aware of the nuisance, Council failed to take positive action to eliminate the nuisance, and has failed to react appropriately to the continuing nuisance.
Council sought to rely upon statutory defences in the CLA, Roads Act and LGA in the event that the nuisance action alleged by Gales was successful. Specifically, Council relied on
- sections 5 and 5A of the CLA which prescribes the circumstances when a person is liable for claims for damages for harm resulting from negligence;
- section 42 of the CLA which sets out the principles for determining when a public or other authority that is subject to certain civil liability claims has breached its duty of care in exercising its functions;
- section 43A of the CLA that provides that a special (statutory) power does not give rise to civil liability unless the act or omission was so unreasonable that no authority could properly consider the act or omission to be a reasonable exercise or failure to exercise its power; and
- section 45 of the Roads Act which states that civil liability does not attach to a roads authority for harm arising from a failure of the authority to carry out road work unless the authority had actual knowledge of the particular risk, the materialisation of which resulted in the harm.
Council further relied on the defence under section 733 of the LGA which provides an exemption from liability with respect to flood liability land.
Bergin J found there had been a 200% increase in the quantity of untreated polluted stormwater draining onto the Land between 1974 and 2009, and that on the balance of probabilities, the additional flows were caused by, amongst other things, the inadequate capacity of drains and the failure to construct culverts on adjoining land, which impeded stormwater runoff from flowing away from the Land.
Her Honour also held that Council's failure to install adequate drainage resulted 'in the 'wetting up' of the Land and at times ephemeral ponding suitable for the breeding of Wallum Froglets' and further, that the 'wetting up' caused the vegetation to change in such a way that the Wallum Froglet habitat was established.
Her Honour rejected Council's characterisation of the Land as 'dormant' and held there had been a 'very serious' and unreasonable interference with Gales' right to enjoy the Land. The interference included the partial loss of the Land (as it was covered in water), the need to engage consultants to prepare a drainage plan and the need to construct drains, both at a cost to Gale.
Accordingly, her Honour held that the increased stormwater runoff from Council's drains onto the Land owned by Gales constituted an actionable nuisance from May 2004. Bergin J found that the nuisance continued following major storm events or in the alternative there was a separate (and potentially an additional nuisance), despite the construction of various drains towards the end of 2004.
As to Council's conduct, the Court considered whether Council sought to remedy the nuisance upon becoming aware of it, without undue delay4. Further and relying upon Robson v Leischke5 , Bergin J stated that:
"If the defendant knew or ought to have know of the nuisance and the real risk of reasonably foreseeable consequential damage to the plaintiff, it had an obligation to take such positive action as a reasonable person in its position and circumstances would consider necessary to eliminate the nuisance".
It was held that whilst being aware of the nuisance created, the Council had not taken any steps to eliminate it. Further, that it was reasonably foreseeable in the circumstances of the case that Gales would incur harm from the stormwater runoff and the need to find a method for accommodating the additional water.
In relation to the statutory defences under sections 5 and 5A of the CLA, Bergin J held that the breach of duty of the tort of nuisance, namely the failure of Council to take reasonable steps to eliminate the foreseeable risk of damage from the nuisance, was different from 'negligence' as defined in section 5. As such, the defences under these sections did not apply.
Bergin J also rejected the defence pleaded by Council under section 42 of the CLA in finding that the evidence did not indicate any 'real financial constraints' on Council, and held that Council's actions could not be excused on the basis of any financial constraint on Council. Her Honour stated:
As to the defence under section 43A of the CLA, Bergin J was satisfied that no reasonable council would act in the manner that Council had acted after it had become aware that Gales was no longer willing to tolerate the additional stormwater runoff onto the Land.
Bergin J was also satisfied that to decide on proposed stormwater augmentation works to eliminate the nuisance but not implement it or take any other steps to eliminate the nuisance was so unreasonable that Council could not rely on the defence to justify or excuse its conduct. Importantly, the conduct of Council after being notified of the nuisance was the relevant conduct taken into account by the Court, which included the fact Council had not advised Gales of the cause of the drainage problems; Council had not offered to compensate Gales; and Council had requested that Gales fund expert surveys on drainage of the area.
With respect to section 45 of the Roads Act, Bergin J stated that assuming Council was a roads authority and the proposed stormwater augmentation works comprised 'road works', Council knew 'that there was a risk that harm to the Land by the increased stormwater on it would result from its failure to carry out the road work'. As such, Council's conduct could not be justified by this defence.
As to the final defence pleaded under section 733 of the LGA, Bergin J disagreed with Council that it had acted in good faith at all times in relation to the drainage works. Specifically, her Honour held that Council's conduct after the nuisance was brought to its attention 'was lacking in good faith', specifically, the fact that after Gales approached Council in a 'conciliatory fashion' in an attempt to resolve the issues between the parties regarding drainage, Council responded by calling for a public apology and payment of its costs, despite Council continuing to use Gales' Land as a retention basin at no cost to Council. Accordingly, Council could not rely on section 733 as a defence to the nuisance claim.
Orders of the Court
Bergin J awarded Gales an amount of $600,000 in damages to compensate it for the need to install a drainage system across the Land to accommodate the additional stormwater runoff.
The Court also ordered damages (to be determined at a later date) for the costs of the expert advice and assistance provided in constructing a drain in 2004 and the costs of constructing the drain, as well as other costs relating to remedial actions relating to the drains that discharge stormwater onto the Land.
Further, Bergin J held that should Gales be required to maintain the Froglet habitat, Gales is entitled to recover 30 percent of any costs of treating the stormwater to make it suitable for the Froglet habitat (up to the date certain rectification works are carried out on the Land).
However, Bergin J held Gales was not entitled to recover damages for the loss of the value of the Land to be used for the Wallum Froglet habitat on the basis that ephemeral ponding that enabled the Froglet to "take hold" had occurred during late 2002 to early 2003, before the initial nuisance.
Government authorities should be aware that statutory immunities, including those available under the CLA, aimed at protecting government authorities that perform statutory functions, will not shield actions considered to be unreasonable, in certain circumstances.
Relevant considerations to be taken into account include the financial position of the particular government authority and the procedures and guidelines under which it operates.
For individuals and companies, as well as government authorities, this case demonstrates the importance of exercising reasonable care and skill when carrying out functions. If an action of nuisance is alleged, the Court will consider the conduct of the parties and whether reasonable steps were taken to eliminate foreseeable risks of damage to the claimant's land.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
1 NSWSC 1128
2 NSWLEC 212
3 NSWLEC 209
4Sutherland Shire Council v Becker (2006) 150 LGERA 184;  NSWCA 344 at 226 
5(2008) 72 NSWLR 98;  NSWLEC 152