Strata complex owners have won a $1 million damages lawsuit after a burst water main flooded their townhouses, but they have lost an argument involving their increased insurance premiums.

The NSW Supreme Court agrees Hunter Water created a “nuisance” when the flooding interfered with the owners’ use and enjoyment of their land.

But while it accepts the $1.16 million demand for the physical damage, it has rejected a “stigma claim” based on the properties’ values falling because of their flood history and related higher insurance premiums and strata fees.

Hunter Water had denied it caused a nuisance, was negligent or in any way liable for damages or compensation.

The homes in Newcastle were flooded in September 2017, and the 119 complainants ran their case under the NSW Civil Liability Act relating to public or other authorities with special statutory powers.

The owners said there was water discharge the previous month, and the day before the flood Hunter Water employees excavated and exposed the water main overnight. They argued the water should have been turned off.

They said their property values had fallen because potential buyers would know there was a history of flooding and this had increased their insurance premiums. In seeking damages, they argued their townhouse values had fallen by $20,000, or about $2.24 million in total.

Acting Justice Michael Elkaim said there was no document from an insurer, broker or the body corporate linking the owners’ higher premiums to the flooding, so any claim based on increased insurance costs must fail.

In awarding damages for the physical loss, he said Hunter Water acted unreasonably in leaving the pipe exposed overnight without shutting it off, diverting the water flow or reducing the pressure in it.

Read the judgment here.

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