1 Feb 2024A recent Supreme Court judgment may open the way for businesses to claim damages from the government if they lose income due to business disruption as a result of major road works.
Construction of light rail causes significant business disruption
Two Sydney small business owners took Transport for NSW to court after they lost income due to the lengthy construction of the 12-kilometre light rail which runs through the city and on to Randwick.
Hunt Leather store in George Street and Ancio Investments, which owns a Thai and an Italian restaurant, led a class action lawsuit by 300 retailers and residents against the state’s transport agency.
The businesses claimed that the five years of noise and disruption alongside the trackwork had caused financial losses and personal trauma. (Please see Hunt Leather Pty Ltd v Transport for NSW [2023] NSWSC 840.) The court ruled that the two lead plaintiffs had succeeded in proving the construction caused substantial and unreasonable business disruption.
Business disruption “far in excess of what was planned or promised”
The court found the disruption to businesses along the route was “far in excess of what was planned or promised” when the long-delayed project was first announced.
The court ruled the businesses would not be compensated for losses incurred for the entire period of construction, as some interference during work was “reasonable”. (Please see NSW government found liable for business financial loss after light rail construction delays, ABC News, 19 July 2023.)
However, the court found compensation could be awarded for the period where avoidable construction delays caused the resulting inconvenience to be “unreasonable”. This was one year for the leather shop and 18 months for the restaurants. The amount of compensation was to be determined at a later hearing.
The success of the damages claim by the two businesses does not mean the ruling will apply to every business along the light rail route. The judge said the extent of “unreasonable interference” would vary depending on the type of business and its location on the route.
The legal basis for the success rested on the law of torts and what is termed “private nuisance” in that the roadworks “unduly interfered with a neighbour in the comfortable and convenient enjoyment of his or her land”.
Implications for contractors and construction owners who cause business disruption
The judgment raises the possibility that contractors or construction owners could be potentially liable to pay compensation for financial loss or “nuisance” due to foreseeable or avoidable delays in construction works.
This is a significant case and will likely have wide-ranging implications for businesses and individuals affected by major roadworks and other major infrastructure projects.
Even if a business does not have an interest in the land subject to acquisition, its proximity to an infrastructure project may entitle an entity to seek damages from the government under the tort of nuisance, particularly where the project will substantially and unreasonably interfere with the operation of a business.
After this judgment about Sydney’s light rail, and the many more compensation claims to follow, it would be wise to seek expert legal advice if you experience business disruption due to nearby prolonged construction works.
The decision will have implications for infrastructure projects throughout NSW, especially where construction delays are avoidable.
