Antipas v Kutcher & Anor

117 York Street Pty Ltd v Proprietors of Strata Plan 16123 (1998) 43 NSWLR 504; 98 LGERA 171; Coles Myer NSW Ltd v Dymocks Book Arcade Ltd (1996) 7 BPR 14638; Electricity Commission of New South Wales v Arrow (1994) 85 LGERA 418.; Hannay v Lewis [1998] NSWSC 385; Joyce v Northern Electric Authority (Qld) (1974) 1 QLCR 171; CASES CITED: Khattar v Wiese [2005] NSWSC 1014; Longeranong Pty Ltd v Electricity Trust (SA) (1990) 55 SASR 493; 71 LGRA 316; Marshall v Wollongong City Council [2000] NSWSC 137; Mitchell v Boutagy (2001) 118 LGERA 249; Mobbs v The Minister (1960) 5 LGERA 276; Treygoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15845; Wengarin Pty Ltd v Byron Shire Council [1999] NSWSC 485

APPLICANT: Mr G Newport (barrister) SOLICITORS: N/A LEGAL REPRESENTATIVES: RESPONDENT: Mr M C Fraser (barrister) SOLICITORS: Shaw Reynolds Lawyers

JUDGMENT:

• 15 - IN THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

GEORGE ANTIPAS v DAVID KUTCHER and ROSALINE KUTCHER [2006] NSWLEC 42

JUDGMENT 1 HIS HONOUR: On 23 June 2003, Commissioner Brown determined merit issues relating to the applicant's development application for the erection of a mixed residential and commercial development at Nos. 35-41A Penshurst Street, Penshurst. The commissioner determined to grant the application pending the grant of an easement for access required by condition 3 which he intended to impose: 3. Right of Carriageway : A Right of Carriageway shall be created 3.05m wide over the property adjoining the subject site (known as 33a Penshurst Street) to allow access to and from Victoria Avenue. The Right of Carriageway over the corner allotment (known as 33 Penshurst Street) shall be increased to 6m in width to allow for a passing bay. The passing bay will be 6m wide with a 2m transition from the 3.05m wide section of the Right of Way (being that section over the allotment known as 33a Penshurst Street). The Right of Carriageway shall benefit the whole of the subject site, known as 35-41A Penshurst Street.

In this regard the applicant is to submit documentary evidence prior to the issue of a Construction Certificate that the whole development has the benefit of a Right of Carriageway from Victoria Avenue and that such Right of Carriageway is in the dimensions prescribes in this condition. 2 The present proceeding is an application by the applicant, Mr George Antipas, under s 40 of the Land and Environment Court Act 1979 ("the Court Act') for an order imposing an easement over the adjoining property owned by the respondents, David and Rosaline Kutcher, so as to comply with the condition. 3 Mr Antipas is the owner of Nos. 35-41A Penshurst Street, known as lots 31 and 32 in deposited plan 1399. The respondents own the adjoining property, No. 33A Penshurst Street, known as lot A in deposited plan 332036. Mr Antipas owns the next property, No. 33 Penshurst Street, known as lot 1 in deposited plan 186197, which is on the corner of Penshurst Street and Victoria Avenue, Penshurst. Lots A and 1 are subject to a right of way in favour of lot 32, but not lot 31. The position is best understood by reference to the diagram annexed to this judgment. 4 The present application is to extend the benefit of the existing right of way which burdens the respondents' land, to lot 31, so that the whole of Mr Antipas' development site will have the benefit of the right of way rather than only lot 32.

The questions for determination 5 The parties have raised the following issues, which need to be satisfied before the court may make an order imposing an easement under s 40 of the Court Act:

(i) whether the easement is reasonably necessary for the development to have effect in accordance with the consent (s 40(2)(a));

(ii) whether all reasonable attempts have been made by the applicant for the order to obtain the easement (s 40(2)(d);

(ii) whether the respondents can be adequately compensated for any loss or other disadvantage what will arise from the imposition for the easement, and if so, what compensation is appropriate (ss 40(2)(c) and (7));

(iv) whether the court should exercise its discretion to grant the easement.

Issue (i): is the easement reasonably necessary for the development to have effect? 6 Section 40(2)(a) of the Court Act allows the court to make an order imposing an easement over land if it is satisfied that: "the easement is reasonably necessary for the development to have effect in accordance with the consent". 7 Mr M C Fraser, appearing for the respondents, submits that only lots 31 and 32 are the subject of the development consent and the development does not relate to the respondents' land, lot A, at all: nothing applied for by the applicant justifies a finding that the development cannot have effect in accordance with the consent. Mr Fraser further submits that the legislature could not have intended an outcome which could deprive a private landowner of the right of veto of development over his land. 8 Although the development application did not relate to the respondents' land, the plans of the development, however, clearly show that access to the car parking within it is proposed by means of the right of way. Moreover, condition 3, noted above, will clearly require the creation of "a right of carriageway" over the respondents' land to benefit the whole of the applicant's land, Nos 35-41A Penshurst Street (being lots 31 and 32). 9 The position is similar to those kinds of conditions which are imposed upon development consents and which require the carrying out of work outside the development site, such as a roundabout on the public road, or the provision of a turning lane in the public road, or even traffic lights. Although the particular development for which consent is sought relates to a nominated parcel of land, it is also necessary for the conditions to be complied with if the development is to have effect. 10 Similarly, in the present case, it will be necessary for condition 3 to be complied with for the development to have effect in accordance with the consent. 11 Section 40 of the Court Act, like s 88K of the Conveyancing Act 1919, is a beneficial and facultative provision which should, as a consequence, be given a generous application. I thus reject the submission that this outcome is not one which the legislature could have intended. I find, therefore, that the extension of the easement to benefit lot 31 is reasonably necessary for the development to have effect in accordance with the consent.

Issue (ii): have all reasonable attempts been made by the applicant for the order to obtain the easement? 12 Section 40(2)(d) of the Court Act allows the Court to make an order imposing an easement over land if it is satisfied that "all reasonable attempts have been made by the applicant for the order to obtain the easement or an easement having the same effect but have been unsuccessful."

13 The respondents contend that the negotiations the applicant has had with them have been inadequate to satisfy the court that all reasonable attempts have been made to obtain the easement. 14 As submitted by both the applicant's and the respondents' respective counsel, cases on s 88K of the Conveyancing Act 1919 can assist in informing the question of whether "all reasonable attempts" have been made. The tests adopted in the Supreme Court said to be of particular relevance to this case are:

a) The applicant need not negotiate exhaustively to a consensus which involves concessions he may deem not to be in his best interests (Coles Myer NSW Ltd v Dymocks Book Arcade Ltd (1996) 7 BPR 14638 at 14644.2) b) The applicant is not required to demonstrate a willingness to meet any demand, even an unreasonable demand, to satisfy the court that all reasonable attempts to obtain the easement have been made (Coles Myer NSW Ltd v Dymocks Book Arcade Ltd (1996) 7 BPR 14638 at 14643.8). c) The court should make a determination on the basis of the whole circumstances of the case ((Coles Myer NSW Ltd v Dymocks Book Arcade Ltd (1996) 7 BPR 14638 at 14643.2). d) The test requires an objective assessment (Coles Myer NSW Ltd v Dymocks Book Arcade Ltd (1996) 7 BPR 14638 at 14643.8). e) The requirement is satisfied when objectively it is extremely unlikely that further negotiations will produce a consensus within the reasonably foreseeable future (Treygoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15845) 15 The respondents contend that the only negotiating undertaken by the applicant was a letter of 19 July 2005 offering $5,000 for usage of the right of way. However, the evidence submitted by the applicant does not support this contention. Indeed, the evidence of dealings between the parties indicates a fairly lengthy process of negotiation. Notably, before grant of development consent, on 19 January 2004, Mr. George Antipas sent an email to Mr David Kutcher offering $200,000 to intensify usage of the easement to benefit Lot 31 and to obtain a three metre widening of the easement, which was rejected. Further negotiations followed by email, written correspondence, and in person, but unfortunately, the positions of both parties were ultimately irreconcilable. 16 Any further attempts to find consensus would objectively appear to have required the applicant to make concessions he deemed not to be in his best interests, or to meet unreasonable demands. Therefore, based on the circumstances of the case viewed as a whole, it appears from an objective point of view that continued attempts to negotiate by the applicant were extremely unlikely to have produced consensus within the reasonably foreseeable future. 17 The respondents further contend that the relevant time to apply s 40(2)(d) of the Court Act is prior to the commencement of proceedings. If this is correct and one were to disregard the negotiations that occurred subsequently, it would still appear from an objective point of view that the applicant had made all reasonable attempts to obtain the easement. 18 As to the loss of bargaining position contended by the respondents, negotiations for this non-monetary advantage were attempted but were unsuccessful. Again, in accordance with Treygoyd Gardens, this cannot be taken to indicate that "all reasonable attempts" have not been made by the applicant to obtain the easement.

19 I am thus satisfied that, under s 40(2)(d) of the Court Act, all reasonable attempts have been made by the applicant to obtain the easement.

Issue (iii): can the respondents be compensated for any loss or other disadvantage and, if so, what compensation is appropriate? 20 Section 40(2)(c) of the Court Act allows the court to make an order imposing an easement over land if it is satisfied that "the owner of the land burdened by the easement can be adequately compensated for any loss or other disadvantage that will arise from the imposition of the easement." 21 The respondents have identified the following impacts for which, it is submitted, the payment of money will be inadequate compensation: additional noise and traffic on a permanent basis; associated increase in noise, fumes, dust and interruption to business; the possible loss of tenants and associated difficulty in finding new tenants; loss of quiet enjoyment of the property; subjective but real worry about the possibility of accidents; and loss of bargaining position and the legitimate economic advantage in maintaining the status quo. Mr Fraser relies, in this context, upon Khattar v Wiese [2005] NSWSC 1014, a judgment of Brereton J on an application for an easement under s 88K of the Conveyancing Act 1919. 22 In Khattar, Brereton J observed, at par [49], that ordinarily, damages are not a sufficient remedy for a substantial interference with intangible benefits, because the loss is not one which is capable of being estimated in money. His Honour noted that views are the paradigm case of intangible benefits. Brereton J further noted, at par [50], that in many cases injury to intangible benefits and the imposition of intangible detriments, such as reduced amenity and enjoyment of property, and exposure to increased disruption and interference, may weigh heavily against a conclusion that the servient owner can be adequately compensated for the purpose of s 88K. 23 In the present case, however, the respondents' land is already subject to the burden of a right of way in favour of lot 32. That lot could be redeveloped in isolation, resulting in increased traffic volumes within the right of way, which the respondents would be unable to resist. It is only the extension of the benefit of the right of way to lot 31 and the impact of the development on the combined lots 31 and 32 with which this case is concerned. 24 A right of way is a physical blot on the respondents' title. It is not like a view. The impact of the additional traffic within the right of way was considered by Commissioner Brown in the earlier proceedings, in which the respondents were parties and represented by counsel. The adverse impacts, of which they now complain, were considered by the commissioner, who concluded that the impacts were acceptable, subject to conditions. In so doing, the commissioner accepted the conclusions of a traffic engineer, Mr C McLaren. The conditions imposed by the commissioner include the approval of a construction management plan designed to minimise construction impacts, inter alia. 25 The impacts of which the respondents complain are largely physical impacts rather than intangible ones and which can be adequately compensated. As I have observed, their land is already burdened by a right of way in favour of lot 32. The impact of the additional loss of quiet enjoyment can be compensated by, for example, including an allowance for the double glazing of the office windows facing the right of way as part of the compensation to be paid by the applicant. The subjective worry about traffic conflict is allayed by the conclusions of Mr McLaren, whose views were accepted by the commissioner. As to loss of bargaining position, the respondents have already attempted to use their bargaining position without success. As far as maintaining the status quo is concerned, the legislation, like s 88K of the Conveyancing Act, reflects a legislative policy that the court might be empowered to require the respondents to grant an easement to the applicant against their will: Mitchell v Boutagy (2001) 118 LGERA 249 at [60]. 26 I conclude, therefore, that the respondents can be adequately compensated for any loss or other disadvantage which will arise from the extension of the benefit of the existing right of way to the whole of both lots 31 and 32. 27 Section 40(7) of the Court Act states: The Court is to provide in the order for payment by the applicant for the order to such persons as the Court specifies of such compensation as the Court considers appropriate, unless the Court determines that compensation is not payable because of the special circumstances of the case. 28 There is no material difference between s 40 of the Court Act and s 88K of the Conveyancing Act relating to compensation. The principles of determining compensation under s 88K may thus be applied to the determination of compensation under s 40. 29 The onus of proof for the question of the appropriate amount of compensation is upon the applicant: 117 York Street Pty Ltd v Proprietors of Strata Plan 16123 (1998) 43 NSWLR 504 at 576; 98 LGERA 171 at 182-183, Mitchell v Boutagy at par [34]. 30 In Wengarin Pty Ltd v Byron Shire Council [1999] NSWSC 485, Young J, drawing upon cases decided in the Supreme Court of Queensland, set out, at par [26], a number of general principles which apply in considering the question of compensation:

(i) The compensation referred to in sub-s (4) [cf sub-s (7) of s 40] is the same compensation as is referred to in sub-s 2(b) [cf sub-s 2(c) of s 40], that is, adequate compensation for loss or other disadvantage.

(ii) The compensation is not a substitute for the price that could have been exacted if the section did not exist.

(ii) The compensation is not just the diminished value of the affected land.

(iv) Ordinarily the compensation will be: (a) the diminished market value of the affected land; (b) associated costs that would be caused to the owner of the affected land; (c) an assessment of the compensation for insecurity and loss of amenities such as loss of peace and quiet; (d) the compensation is to be less where there are advantages to be taken into account.

(v) There may be some exceptional cases which fall outside the net of the section where it is extremely difficult to assess the compensation, but it is clear that the applicant is to derive a considerable benefit from the application. In such circumstances it may be appropriate to assess the compensation on a percentage of the profits that would be made. 31 In the present case Mr Antipas contends for a sum of nil or alternatively, for a sum of $13,000; whilst the respondents contend for a sum of $200,000. Mr Antipas relies upon the evidence of a valuer, Mr K Gothard. The respondents rely upon the evidence of another valuer, Mr W Dobrow. The valuers were unable to agree on either the appropriate method of valuation or on the amount of compensation. 32 The respondents' contention for a sum of $200,000 is based upon the final principle explained by Young J in Wengarin, that is, an assessment of compensation on a percentage of the profits that would be made. Mr Fraser submits that this is appropriate because of the irrevocable differences between the valuers and the obvious difficulty in assessing fair compensation, inter alia. 33 The figure of $200,000 is that which Mr Antipas offered the respondents on 19 January 2004 in return for widening the existing right of way from 3.05 metres to 6 metres and extending the benefit of the right of way to lot 31. The respondents rejected the offer. In Mr Fraser's submission it nevertheless represents the commercial value that Mr Antipas placed on obtaining the kind of access that would be acceptable to the consent authority for the purpose of obtaining his development consent. It is submitted that this is, in effect, a share of the profits that Mr Antipas was prepared to pay to the respondents for the extremely valuable advantage of gaining access to lot 31 and thereby obtain development consent. This is said to represent the percentage of profits upon which the Court can rely to fix the amount of compensation in accordance with the final principle set out by Young J. 34 I am unable to accept the submission. The offer was made by Mr Antipas before he had obtained development consent for the purpose of supporting his development application, believing that a 6 metre wide right of way would be necessary to obtain consent. In the appeal which came before Commissioner Brown, however, the commissioner determined that the existing 3.05 metre wide right of way was sufficient, and all that was required was to extend the benefit of the right of way to include lot 31. Having now obtained a favourable determination from the commissioner, Mr Antipas is understandably no longer prepared to pay $200,000 for a 6 metre wide right of way. 35 There is no evidence as to what profits will be made by Mr Antipas and the Court is in no position to determine what percentage of any such profits would be appropriate for compensation to the respondents. The final principle adopted by Young J seems to me to be a principle of last resort, where it is "extremely difficult to assess the compensation". In the present case, however, despite the absence of any agreement between the parties' respective valuers, it is possible in a rational way to resolve their different approaches to the problem of determining compensation. 36 The parties' valuers have attempted to determine the diminished market value of the respondents' land as a consequence of the extension of the benefit of the right of way to lot 31. As noted above, they have each adopted a different approach to the assessment, with different results. 37 The applicant's valuer, Mr Gothard, is of the view that the right of way should be assessed against the value of the land only and relies upon amounts of compensation allowed upon the acquisition of easements in other cases. In this way he derives a value of $13,000 for the easement, which represents the applicant's alternative contention as to the appropriate amount of compensation. 38 The respondents' valuer, Mr Dobrow, has adopted a different approach. He has adopted a "before and after" method of valuation - that is, by asking what a willing but not anxious purchaser would pay for the property without the right of way benefiting lot 31, and then asking what such a purchaser would pay for the property burdened by the right of way benefiting lot 31. In Mr Dobrow's view, the hypothetical purchaser would most likely be an investor, in which case the appropriate method of valuation is by capitalisation of the net returns on a "before and after" basis. 39 Mr Gothard agreed, in cross-examination, that the respondents' property is an investment property rather than a potential development site. The difficulty I have with Mr Gothard's approach is that the comparable cases in which easements have been acquired, upon which he relies, are not truly comparable. With a few exceptions, they are mainly cases involving the acquisition of drainage easements through residential properties, for which the compensation payable under s 88K of the Conveyancing Act has varied from about $12,000 to about $30,000. A drainage easement is not, in my opinion, comparable to a right of way. Once drainage pipes have been laid and covered over, there is no ongoing interference with the surface of the land within the easement. A right of way, on the other hand, involves an ongoing disturbance in the form of vehicles coming and going which is both visible and generates noise and fumes and it limits the use to which the surface of the land may be put. 40 Mr Gothard places particular reliance, however, on one case involving a right of way at Taren Point Road, Caringbah. That was an intensification of a right of way through a commercial property, where the parties negotiated a price of $10,000 for the additional right. Mr Dobrow, however, states that this is an unreliable indicator: it was an intensification of an existing right of way, the price was negotiated between the parties and was not an amount determined by the court. 41 In my opinion, the approach of Mr Dobrow is to be preferred. Since both valuers have agreed that a hypothetical purchaser of the respondents' land would view it as an investment property, the "before and after" method of valuation involving capitalisation of net returns is a legitimate and reliable method of valuation. It is a method which is well supported by authority in cases involving the acquisition of an easement: Mobbs v The Minister (1960) 5 LGERA 276; Joyce v Northern Electric Authority (Qld) (1974) 1 QLCR 171; Longeranong Pty Ltd v Electricity Trust (SA) (1990) 55 SASR 493; 71 LGRA 316; Electricity Commission of New South Wales v Arrow (1994) 85 LGERA 418. 42 Mr Dobrow considers that the rentals of the shops and office in the respondents' property will be reduced following the imposition of the easement. Tenants will be affected at peak times and would negotiate for a lower rental in the order of about five per cent. Mr Gothard, however, considers that there would be no reduction in the shop rentals due to their remoteness from the right of way. I am, however, persuaded by the logic of Mr Dobrow's reasoning - tenants of the shops will want to come and go at peak times, which will coincide with the peak times of use of the right of way. 43 Mr Dobrow has based his calculations on current market rentals in the area. Mr Gothard disputes this and says that the actual rental being paid at present should be used as the basis for any calculation. Again, I am persuaded that Mr Dobrow's approach is more reliable. The present shop rentals were obviously negotiated some time ago and are due to be reviewed this year. A prudent hypothetical purchaser would, in my opinion, have regard to the rents likely to be obtained, namely, current market rent. 44 The valuers both agreed that if one were to employ the capitalisation of net rentals in the "before" or present situation, then the appropriate capitalisation rate is seven per cent. Mr Dobrow, however, would increase the rate to 7.5 per cent in the "after" situation, because, according to him, the property may take longer to rent and if so it may become "stigmatised". In that case, Mr Dobrow says that a hypothetical purchaser would look for a higher yield of 7.5 per cent rather than seven per cent. Again I am persuaded by the logic of Mr Dobrow's approach. 45 Accordingly, I prefer the evidence of Mr Dobrow to that of Mr Gothard. I adopt Mr Dobrow's figures: a value of $1,010,000 in the "before" situation and a value of $895,500 in the "after" situation, resulting in a compensation figure of $114,500. 46 Mr G Newport, appearing for Mr Antipas, submits that such a sum is out of step with sums that have been awarded in other cases involving the acquisition of a right of way, in particular, Wengarin ($12,000) and Marshall v Wollongong City Council [2000] NSWSC 137 ($13,600). In both of these cases, however, the right of way was created over vacant land, and in the case of Marshall there was a resultant benefit to the servient tenement. I do not derive any assistance from these cases. 47 Both valuers agreed that the determination of compensation is not merely a calculation exercise. One also needs to step back, look at it realistically and compare the figure with actual sales. Since there are no truly comparable sales, however, I am prepared to adopt Mr Dobrow's figure of $114,500. 48 The respondents also seek other items of compensation, such as the need for double glazing, additional cleaning costs and surge protection. One of the benefits of adopting the "before and after" method, however, is that it takes into account all the adverse consequences in the "after" situation, so that no special items need to be further considered.

Issue (iv): whether the court should exercise its discretion to grant the easement 49 The respondents submit that valuable property rights should not be lightly interfered with (citing Hannay v Lewis [1998] NSWSC 385); that what is sought is an extremely valuable right; that the respondents will lose a commercial opportunity to negotiate a right of way across the applicant's land for a possible future re-development of their own land; and that these circumstances call for the preservation of the status quo. 50 I have found, however, that the respondents can be adequately compensated. In particular, their land is already burdened by the existing right of way in favour of lot 32. That lot can be developed in isolation. The extension of the benefit of the right of way to lot 31 cannot be viewed in the same light as the creation of a new easement where none previously existed. It is, as I have found, necessary for the applicant's development to have effect. This is the object or purpose of provisions such as s 88K of the Conveyancing Act and s 40 of the Court Act, provided the conditions in sub-s (2) are satisfied. In all the circumstances the Court's discretion will be exercised in favour of the grant.

Conclusion 51 I therefore determine that the application to extend the benefit of the existing right of way so as to include lot 31 in deposited plan 1399 should be granted. I also determine the appropriate amount of compensation under s 40(7) of the Court Act in the sum of $114,500. 52 Section 40(8) states that the costs of the proceedings are payable by the applicant for the order, subject to any order of the court to the contrary. This is consistent with the general principle that the party seeking the court's indulgence should pay the costs. Mr Newport submits that the applicant should not have to bear the costs in the present case because of the negative attitude adopted by the respondents in the applicant's attempts to negotiate an agreed outcome. I have noted under issue (i) above the parties' failed attempts at a negotiated outcome. It seems to me that both parties were not prepared to shift from their respective positions. There is nothing arising in the circumstances of this cases to disturb the policy reflected in both s 88K and s 40 that the costs should be borne by the applicant: Khattar v Wiese [2005] NSWSC 1014 at par [77]. 53 I direct the applicant to bring in short minutes of order to give effect to this judgment, the matter to be re-listed for this purpose by arrangement with my associate.

I hereby certify that the preceding 53 paragraphs are a true copy of the reasons for judgment herein of the Honourable Mr Justice D H Lloyd.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.