Clifford Chance

Construction delays can be such a nuisance!

In Hunt Leather Pty Ltd v Transport for NSW [2023] NSWSC 840, the NSW Supreme Court has just held that construction delays in the Sydney Light Rail project gave rise to liability of the Owner (Transport for NSW) for private nuisance to local shop owners. You can find the full judgment here.

Liability in nuisance generally requires substantial and unreasonable interference in an owner or occupier's enjoyment of their land. However, the Court held that while the nature of the construction works that affected the shop owners in this case did not constitute an unreasonable interference per se, delays to the completion rendered that interference unreasonable. In other words, there came a point in time when the hitherto reasonable interference became unreasonable. [see para.201 of the summary and paras. 1125-1129]. On that basis, the shopkeepers were entitled to recover losses incurred due to the works.

Interestingly, while establishing nuisance generally does not require establishing negligence, the court considered negligence (taking into account the Owner's risk allocation under the construction contract) to be relevant, if not determinative, of liability in nuisance.

The judgment seems to leave open the question of whether Contractors (as well as Owners) can also be potentially liable for nuisance due to delayed construction works. The court noted that it did not know why the Contractor was originally joined to the proceedings and why it was no longer a party, other than that there had been a settlement. [para. 26]

So the question arises as to whether in the future Contractors or Owners could potentially face claims in nuisance directly from third parties arising out of delays to construction works, or claims from owners in relation to the Owner's liabilities to third parties arising out of delays to construction works. The contractual risk allocation between the Contractor and Owner is likely to be a factor that is relevant to this question. This case also raises interesting questions on a range of issues including remedies, the scope of delay liability regimes, insurability and risk allocation generally.

We are not aware of judgments in other common law jurisdictions which have upheld liability in private nuisance on this particular basis.

Contractor and Owners may wish to review their contractual risk allocations and delay mitigation plans in the light of the potential risks arising out of this new development in the law.