Attard & Anor v Canal & Anor

Boland v Yates Property Corp Pty Ltd (1999) 74 ALJR 209; Bronzel v State Planning Authority of SA (1979) 21 SASR 513; CASES CITED: Mark Dawkins v A R M Holdings Pty Limited (Pearlman J, NSWLEC, 14 April 1994, unreported); Morris v Thomas (1991) 73 LGRA 164; Vaughan v Byron Shire Council (1999) 103 LGERA 321

02/05/2005 DATES OF HEARING: 03/05/2005 04/05/2005

APPLICANTS: Mr A Pickles (barrister) SOLICITORS: Robilliard & Robilliard LEGAL REPRESENTATIVES: RESPONDENTS: Mr A Thompson (barrister) SOLICITORS: G Cerin

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

31227 of 2004 Frank Attard & Anor v Luigino Antonio Canal & Anor

JUDGMENT 1 Her Honour: This is a Class 3 application made pursuant to s 3 of the Encroachment of Buildings Act 1922 ("the Act"). The Applicants own land at 112-122 Selkirk Avenue, Cecil Park ("the Applicants' property"). The Respondents own land at 124-134 Selkirk Avenue, Cecil Park ("the Respondents' property"). Along the boundary between the Applicants' property and the Respondents' property is a large metal clad shed ("the encroaching shed") owned by the Applicants. A survey conducted on 28 September 2003 showed that the north-western wall of the shed encroaches 3.59m over the Respondents' boundary and the south-eastern wall of the shed 4.70m over the Respondents' property. A fence between the properties is situated on the boundary at the north-western end, but encroaches 8.68m over the Respondents' property on the south-eastern end (see Attachment 1).

2 The Applicants seek orders that the Respondents transfer 1,190sq m of land to the Applicants and that the Applicants pay an amount of compensation as assessed by the Court for the transfer of that land.

3 The Respondents filed a cross-claim alleging that the encroachment arose from the Applicants' negligence and sought an order that the Applicants remove the encroaching shed from the Respondents' property or, in the alternative, an order that the Applicants pay compensation pursuant to s 4(2) of the Act.

Relevant statutory provisions 4 "Adjacent owner" is defined in s 2 of the Act as "the owner of land over which an encroachment extends" (the Respondents). "Encroaching owner" is defined in s 2 of the Act as "the owner of land contiguous to the boundary beyond which an encroachment extends" (the Applicants).

5 "Encroachment" is defined in s 2 of the Act in the following terms: "Encroachment" means encroachment by a building, and includes encroachment by overhang of any part as well as encroachment by intrusion of any part in or upon the soil. 6 Section 3 of the Act provides: (1) Either an adjacent owner or an encroaching owner may apply to the Court for relief under this Act in respect of any encroachment. (2) On the application the Court may make such orders as it may deem just with respect to: (a) the payment of compensation to the adjacent owner, (b) the conveyance transfer or lease of the subject land to the encroaching owner, or the grant to the encroaching owner of any estate or interest therein or any easement right or privilege in relation thereto, (c) the removal of the encroachment. (3) The Court may grant or refuse the relief or any part thereof as it deems proper in the circumstances of the case, and in the exercise of this discretion may consider amongst other matters: (a) the fact that the application is made by the adjacent owner or by the encroaching owner, as the case may be, (b) the situation and value of the subject land, and the nature and extent of the encroachment, (c) the character of the encroaching building, and the purposes for which it may be used, (d) the loss and damage which has been or will be incurred by the adjacent owner, (e) the loss and damage which would be incurred by the encroaching owner if the encroaching owner were required to remove the encroachment, (f) the circumstances in which the encroachment was made. 7 Section 4 of the Act relates to the compensation to be paid to the adjacent owner. Section 4(1) of the Act states: The minimum compensation to be paid to the adjacent owner in respect of any conveyance, transfer, lease or grant to the encroaching owner shall, if the encroaching owner satisfies the Court that the encroachment was not intentional and did not arise from negligence, be the land value of the subject land, and in any other case three times such land value.

8 Section 4(2) of the Act states: In determining whether the compensation shall exceed the minimum, and if so by what amount, the Court shall have regard to: (a) the value, whether improved or unimproved, of the subject land to the adjacent owner, (b) the loss and damage which has been or will be incurred by the adjacent owner through the encroachment and through the orders proposed to be made in favour of the encroaching owner, (c) the circumstances in which the encroachment was made. 9 The parties agreed that s 4(1) of the Act is not applicable because only negligence is being alleged by the Respondents, not intentional encroachment.

Circumstances in which the encroachment was made 10 Evidence was provided to the Court in the form of affidavit evidence from Mr Frank Attard, one of the Applicants, and Mr Luigino Canal, one of the Respondents. Mr Attard and Mr Canal also gave oral evidence to the Court.

11 The Applicants purchased their land in 1983. At the time, the land was vacant, but was fenced with rural style post and wire fences. The fence was not located on the boundary, but for most of its length was entirely on land now owned by the Respondents.

12 In 1984 the Applicants engaged a company called Trevene Homes Pty Limited ("Trevene Homes") to prepare a development application and plans for the erection of a dwelling on the Applicants' land. It was a term of the building agreement that Trevene Homes would determine the position of the house by a registered surveyor. There is no evidence that Trevene Homes obtained a survey and the construction of the dwelling proceeded without a survey being provided to the Applicants. In 1984 the Applicants constructed a small shed at the rear of their dwelling. No survey was done at that time, the Applicants relying on the position of the house. That shed does not encroach on the Respondents' property.

13 In 1999 the Applicants obtained approval from Fairfield City Council ("the Council") and constructed the encroaching shed to the rear of the smaller shed in alignment with a certain distance from the house. The encroaching shed is 30m long by 15m wide with a height of 5m to the eaves and 6m to the ridge. The encroaching shed lies on a concrete slab and consists of pre-fabricated walls and roof made of aluminium. The Applicants gave evidence that the encroaching shed cost approximately $75,590.00 to build in 1999.

14 The existence of the encroachment only came to light for both the Applicants and Respondents when a survey of the boundary, dated 28 September 2003, revealed the existence of the encroachment. Expert evidence 15 The parties engaged expert witnesses in the areas of structural engineering, valuation and quantity surveying. Engineering Evidence 16 The Respondents relied on a report provided by Mr Kevin Leedow, a structural engineer. The Applicants did not dispute the evidence provided by Mr Leedow. The report suggested and commented on two appropriate options for removing the encroachment: (i) Squaring up and shortening the encroaching shed by a uniform 4.70m on both the north-western and south-eastern wall ("the straight line method"); (ii) Dismantling and relocating the encroaching shed entirely ("the relocation method"). Quantity Survey Evidence 17 The Applicants relied on a report provided by Mr Ian Berson, a quantity surveyor, and the Respondents relied on a report provided by Mr Matthew Spicer, a quantity surveyor. The quantity surveyors also provided the Court with a joint report detailing costs associated with the options for removing the encroachment.

18 In their joint report Mr Berson estimated the cost of the straight line method to be $89,999.00, while Mr Spicer estimated the cost to be $44,289.00 plus contingencies. For the relocation method, Mr Berson estimated the cost to be $289,669.00 and Mr Spicer estimated the cost to be $131,741.00. The variation in the experts' estimations generally resulted from methodological differences in the experts' respective approaches. Key differences included whether the use of scaffolding was required, whether the fill would need to be imported, the amount of labour required and the industry rates applicable for construction and demolition works. Valuation Evidence 19 In their joint report, Mr Frank Carrapetta and Mr Graham Ryan agreed that the estimated value of the Applicants' and Respondents' properties is $65.00 per sq m, the encroachment totalling approximately $77,500. The valuers also agreed that the proposed boundary adjustment of 1,190sq m would not disadvantage the Respondents in a future subdivision as the Respondents' property would still be able to be subdivided into two allotments.

The Applicants' submissions Considerations under s 3(3) of the Act 20 The Applicants submitted that pursuant to s 3(3) of the Act the following matters should be considered by the Court in its discretion to grant or refuse relief: (a) Application made by encroaching owner 21 The Applicants submitted that the fact that the application was made by the encroaching owner is not, of itself, a significant matter in this case. However, the Applicants argued that the fact the Applicants had made an application and had taken steps to rectify the encroachment by seeking a transfer of land with compensation offered to the Respondents indicated that the Applicants had acted bona fides and with good intention. The Applicants argued that this factor favoured the grant of the relief sought by the Applicants. (b) Situation and value of the land and the extent of the encroachment 22 The Applicants argued that while the extent of the encroachment is substantial the extent of the encroachment represented only a small proportion of the Respondents' property.

23 The Applicants considered that if the Court granted the transfer sought by the Applicants the cost to the Applicants would be the market value of the transfer for $77,500. The Respondents would suffer no cost. On the other hand, the Applicants submitted that relocation of the encroaching shed would cause them to suffer a significantly larger loss, including some costs that that could be quantified and other that would not be quantifiable, such as the inconvenience suffered by the Applicants and the effect on the amenity enjoyed by the Applicants. (c) Character of the encroaching building 24 The Applicants argued that while the encroaching shed could be relocated to another area, the costs and inconvenience of doing so outweighed the benefit. Similarly, the costs of undertaking a partial removal of the encroachment would require the Applicants to erect an entirely new shed because a shed reduced in size would be insufficient for the Applicants' business needs.

(d) Loss or damage suffered by reason of a transfer or easement 25 The Applicants submitted that there was no evidence that the Respondents would suffer any loss or damage as a result of a transfer of the land. The Respondents have never used the part of the land sought to be transferred and would not suffer any loss or damage because they would be adequately compensated.

(e) Loss and damage suffered by encroaching owner 26 On the other hand, the Applicants submitted that the loss and damage suffered by the Applicants in the event that they were required to remove the encroachment is substantial. In making this submission the Applicants considered that "loss and damage" included more than the simple arithmetic cost of the removal. The Applicants argued that "loss and damage" included all of the practical consequences of removing the encroachment including the relocation of the fence, and the consequential impact on the amenity of the Applicants' dwelling.

(f) Circumstances of the encroachment 27 The contract between Trevene Homes and the Applicants stated that: … 3. Position of house to be determined by registered surveyor. … The Applicants submitted that in the circumstances it was reasonable for them to assume that in accordance with the contract, Trevene Homes had obtained a registered survey and had properly situated the house in relation to the boundary.

28 Further, the Applicants argued that it was reasonable for the Applicants to assume that if further structures were built on the property their position could be determined by reference to the position of the house and that another survey was not needed. The Applicants argued accordingly that the circumstances of the encroachment favour a grant of the relief sought by the Applicants. Compensation under s 4 of the Act 29 The Applicants argued that if the Court was minded to grant the relief sought by the Applicants, in determining the amount of compensation for the transfer pursuant to s 4(2) of the Act, the Court should not exceed the minimum.

30 Relying on Hyam A, Valuation of Land in Australia (2003) Federation Press, 3rd edition at 280-281, the Applicants argued that as the land sought to be transferred had not been improved or unimproved, the remaining parcel would still be of sufficient size to be subdivided and there was no evidence that the land to be transferred would have been utilised by the Respondents, the land sought to be transferred did not have any special value and there was no basis for ordering an amount above the market value.

31 In relation to s 4(2)(b) of the Act the Applicants submitted that as no loss or damage would be suffered by the Respondents as a result of a transfer of 1,190sq m there is no basis for ordering an amount above the market value of the land.

32 In relation to s 4(2)(c) of the Act the Applicants argued that as the encroachment did not arise from negligence the compensation payable should be the amount of the value of the land. As the duty of care owed to the Respondents did not require that the Applicants obtain a survey every time a building was built it was reasonable for the Applicants to rely on the placement of the house by Trevene Homes in 1984 as accurate and use it as the means of aligning the subsequent sheds, including the encroaching shed.

The Respondents' submissions Considerations under s 3(3) of the Act 33 The Respondents submitted that pursuant to s 3(3) of the Act the following matters should be considered by the Court in its discretion to grant or refuse relief: (a) Application made by encroaching owner 34 The Respondents submitted that while the application is made by the encroaching owner this fact is not significant as the parties negotiated for a significant period before the hearing to attempt to settle the matter. (b) Situation and value of the land and the extent of the encroachment 35 The Respondents submitted that the Court should exercise its discretion to refuse relief on the basis that the encroachment on the Respondents' property of 1,190sq m is a significant encroachment. The Respondents also argued that the encroachment jarred in the context of the area's rustic setting and had the effect of moving the boundary 5m closer to the Respondents' dwelling (and any dwelling erected on a future subdivided lot). (c) Character of the encroaching building 36 The Respondents argued that as the character of the encroaching shed is of a bulky, industrial warehouse building for the storage and distribution of produce a reduction in size would significantly benefit the amenity afforded to the Respondents. The Respondents argued that conversely, the Applicants would suffer no great disadvantage caused by a reduction in the size of the encroaching shed.

(d) Loss or damage suffered by reason of a transfer or easement 37 In response to the Applicants' argument that no loss would be suffered by the Respondents because they did not know of the area of their land when they purchased the property, the Respondents argued that they would suffer loss or damage. The Respondents submitted that had they known that they owned the 1,190sq m they may have used the land. In addition, the Respondents argued that as they paid for it they were entitled to enjoy the five and three-quarter acres of land. The Respondents also submitted that they suffered loss and damage because the area was unique and an area of similar size could not be purchased or replaced.

(e) Loss and damage suffered by encroaching owner 38 In submissions, the Respondents considered that it was important for the Court to have regard to the cost to the encroaching owner of the removal of the encroachment and the cost of transferring the land. As the removal of the encroachment (estimated to be as little as $44,289 by Mr Spicer) was less than the cost of transferring the land (estimated to be $77,500) this was a ground for favouring the refusal of relief sought by the Applicants and making an order for removal.

(f) Circumstances of the encroachment 39 The Respondents argued that the circumstances in which the encroachment was made provided grounds for refusing relief sought by the Applicants. Relying on Vaughan v Byron Shire Council (1999) 103 LGERA 321 at 324, the Respondents argued that it was not reasonable for the Respondents to rely on the contract with Trevene Homes as the basis upon which to assume that the fence was located on the boundary between the properties. The Respondents submitted that as the Applicants had acted negligently, or at least acted with reckless indifference or inadvertence in failing to properly locate the encroaching shed within their own property, the Applicants actions weighed heavily against them. Findings 40 The question of whether to grant or refuse relief will now be considered in relation to the factors listed in s 3(3) of the Act. Considerations under s 3(3) of the Act (a) Application made by encroaching owner 41 In relation to the first consideration I agree with the Respondents that it is not particularly significant that the application is made by the Applicants. I do not place any weight on either of the submissions made. (b) Situation and value of the land and the extent of the encroachment 42 I agree with the submissions of the Applicants that while the size of the encroachment is large, the significance of the encroachment should be considered in relation to the remainder of the Respondents' property. In my opinion the value and extent of the encroachment is not particularly significant. The physical property boundaries will continue to be in the same place they have been since at least 1983. Those boundaries are the same as when the Respondents purchased their property. In other words, the physical delineation of the respective properties on this boundary remain unchanged. The encroachment does not significantly alter the relative distance of the Respondents' dwelling (or any dwelling erected on a future subdivided lot) from the boundary, that is, no adverse amenity impacts are likely to be suffered by the Respondents, if the land is transferred. 43 Further, the Respondents' land immediately adjoining the area proposed to be transferred is largely vacant for a considerable distance so that there is no current use of the land likely to be impacted upon if the transfer of land sought by the Applicants is made. 44 I consider that the size of the encroachment is not particularly significant in terms of the value of the land given the evidence provided by the valuers that if a transfer of the encroaching land is ordered the Respondents will still be able to subdivide their property into two allotments. In other words, the Respondents will not suffer any particular loss of value for the remainder of their property. (c) Character of the encroaching building 45 The encroaching shed is used to store machinery such as tractors and attachments, and a large truck used in the Applicants' egg delivery business. Palettes of eggs are stored inside the encroaching shed and loaded onto the truck. An office and cool room are also located inside the shed. Mr Attard's evidence is that he had ordered the size of shed in order to accommodate the large truck entirely within the shed. It is highly desirable that this fit inside the shed and be locked up on some nights. His evidence was that he would prefer to remove and build another shed elsewhere rather than partially remove the encroaching shed as the smaller shed will not be useful to him. I accept the evidence provided by Mr Attard that the Applicants would be unable to utilise the encroaching shed to park and secure goods in their truck and would be unable to carry out some works inside the encroaching shed.

(d) Loss or damage suffered by reason of a transfer or easement 46 In oral evidence Mr Canal explained that he would suffer loss and inconvenience by reason of a transfer of the encroaching land because he considered the land to be unique and he wished to enjoy the full extent of the five and three-quarter acres he had paid for. As the particular size of encroaching land could not be replaced and could not be bought, the Respondents submitted that the encroaching land had some value over and above the market value. The Respondents' valuer, while agreeing on $77,500 as the approximate market value, stated in his report that a "fair and equitable" amount was in fact $185,000, a figure chosen by the valuer between $289,669 and $77,500. No basis for selection of this sum is provided in the report and I reject it in the absence of any explanation for how it was calculated.

47 The Applicants submitted, in contrast, that the encroaching land did not have any special value. In support of this, the Applicants relied on Bronzel v State Planning Authority of SA (1979) 21 SASR 513 and Boland v Yates Property Corp Pty Ltd (1999) 74 ALJR 209 cited in Valuation of Land in Australia at 280-281. In Bronzel, Wells J held at 525 that the "value" of the land is to be determined objectively and does not include the subjective or emotional involvement of the owner. In Boland, Callinan J considered that the "special value" of the land extended only to the additional economic advantage that the owner obtained from the land by reason of its ownership. The Applicants argued accordingly that as the encroaching land was not used and could not be used for a particular purpose that gave rise to an additional economic advantage, there was no special value in the encroaching land and Mr Canal would not suffer any loss or damage by reason of its transfer.

48 I agree with the submissions of the Applicants. I consider that the value of the land must be objectively determined. The parties agreed that the Miscellaneous Acts (Rating and Valuation) Amendment Act 1981 amended the definition of "land value" in the Act to equate with the definition of "land value" in s 6A of the Valuation of Land Act 1916. This is supported by the evidence given by the valuation experts who agreed that the market value of the encroaching land was $77,500 and that a transfer would not affect Mr Canal's ability to subdivide his land. Accordingly, I accept the submission that there is no evidence from the Respondents that they would suffer any loss or damage by reason of a transfer of the land upon which the encroachment occurs subject to the payment of adequate compensation as assessed by the valuers.

(e) Loss and damage suffered by encroaching owner 49 The expert quantity surveyors gave evidence to the Court in relation to the costs involved in the partial removal and total relocation of the encroaching shed. However, I do not find the estimates provided by the experts particularly useful as the estimates differ significantly. There is no clear basis presented on which the Court can choose between the two given that there is no clear guidance in Pt 4.3, Div 6 of the Occupational Health and Safety Regulation 2001 as to the requirement to use scaffolding when working at heights.

50 I consider, nevertheless, that the loss and damage that would be incurred by the encroaching owner if the Court ordered the removal of the encroachment would be significant. In this sense I agree with the Applicants' submissions that "loss and damage" includes more than just the economic loss or damage suffered by the Applicants. The words "loss and damage" are unconfined and can include consequential losses and inconveniences arising from the removal (see Mark Dawkins v ARM Holdings Pty Limited (Pearlman J, NSWLEC, 14 April 1994, unreported)).

51 Total relocation of the encroaching shed would result in a cost in the order of approximately $130,000.00 and $290,000.00. The option to partially remove the encroachment would result in a cost to the Applicants of an amount in the order of approximately $45,000.00 to $90,000.00. In addition to this, the Applicants would not be able to utilise the encroaching shed to park and secure goods in their truck, would be unable to carry out some works inside the encroaching shed and have to move out goods when the work was being done. There was a significant difference in the estimated time that would be needed to either partially remove the encroachment or relocate the encroaching shed between the respective experts. On Mr Berson's estimate it would be many days. In both situations the Applicants would also be required to bear the costs of replacing the dividing fence, the loss of trees and shrubs planted on the encroaching land and suffer the adverse consequences of very narrow or nil setbacks from the boundary as the shed if partially removed will be very close to or on the boundary. 52 It is also unclear what the Council's attitude to such a proposal might be. Presumably development consent would be necessary. If a certain setback from the boundary was required that would further reduce the size of the shed, assuming development consent was otherwise forthcoming.

(f) Circumstances of the encroachment 53 Few authorities in this Court have dealt with the issue of negligence on the part of the encroaching owner. In Morris v Thomas (1991) 73 LGRA 164, Bignold J stated at 168: It can be stated categorically that any prudent owner/developer carrying out any development on or adjoining a property boundary would be expected to exercise due care to ensure that his development did not encroach beyond his boundary.

Conduct of the parties, and particularly conduct giving rise to the encroachment, is in my judgment a very important consideration in the exercise of the statutory discretion conferred by s 3.

54 I completely agree with these observations as a general principle but the circumstances of each case must be considered. In Vaughan, relied on by the Respondents, the encroaching owner relied on a sewerage plan that showed the encroaching owner's house as located wholly within their lot. This case was not decided on the basis of negligence, but rather on the basis of estoppel. I do not consider that Vaughan supports either of the parties in this matter. I consider that the facts of Vaughan differ to those in present circumstances.

55 It is clear from the evidence given by Mr Attard and Mr Canal that the Applicants and Respondents were simply not aware that the existing fence line did not accurately represent the boundary between the two properties until 28 September 2003 when a survey was obtained. Mr Attard was mistaken in his understanding that the condition in the contract with Trevene Homes made in 1984 meant that a survey of the boundary was done in order to place the house four metres away. Rather, that company relied on the existing fenceline to determine the position of the house, an approach also consistent with the wording in the condition. The clause is somewhat ambiguous in its wording in any event. I agree that there is no obligation on an owner to obtain a survey every time a building is constructed on his or her property provided that the basis for assuming that the building is on his or her property is reasonable. In this case I consider that it is. 56 I reject the submission made by the Respondents that the Applicants' behaviour was unreasonable and that the encroachment that occurred was foreseeable and a breach of their duty of care. The Applicants acted mistakenly but did not act negligently by placing a large structure partially on adjoining land. I consider that in this case the Applicants acted reasonably in the circumstances and have not been negligent.

Exercise of discretion to grant or refuse relief 57 The powers of the Court to make orders in these circumstances are set out in s 3(2) of the Act which states as follows: On the application the Court may make such orders as it may deem just with respect to: (a) the payment of compensation to the adjacent owner, (b) the conveyance transfer or lease of the subject land to the encroaching owner, or the grant to the encroaching owner of any estate or interest therein or any easement right or privilege in relation thereto, (c) the removal of the encroachment. 58 On the basis of my consideration of the factors contained in s 3(3) of the Act I consider that it is appropriate to grant the relief sought by the Applicants as provided for in s 3(2). In accordance with the words of Pearlman J in Dawkins, "the essence of the present proceedings is to find a balance between the loss and damage to either party if the other party is to succeed". In my view the character of the encroaching shed is such that the benefits of partial or total removal of the encroaching shed are outweighed by the costs. The exercise of the discretion necessarily involves a balance between the disturbance to amenity, cost and inconvenience to the Applicants with the cost and damage suffered by the Respondents. As I have found that the loss and damage suffered by the Respondents is far less when compared to the loss and damage likely to be suffered by the Applicants it follows that I should order that the Respondents transfer the encroaching land to the Applicants.

Compensation under s 4 of the Act 59 Given my finding that no loss or damage would be suffered by the Respondents as a result of a transfer of 1,190sq m and my finding that the Applicants acted reasonably in the circumstances there is no basis for ordering an amount above the market value of the land pursuant to s 4(2)(b) and (c) of the Act. That value has been agreed as $77,500.

60 As there has been no discussion in relation to the timing of my orders, I will give the parties opportunity to address me on this. The draft of the orders I otherwise intend to make are as follows:

1. The Respondents transfer to the Applicants 1,190sq m of land currently forming part of Lot 119 DP 31359 between the Colorbond fence and the boundary of Lot 118 DP 31359 from the boundary at Selkirk Avenue, Cecil Park to the rear of the allotment, as shown in Attachment 1;
2. The Applicants pay the Respondents $77,500.00 as compensation for the transfer of land referred to in Order 1;
3. The question of costs be reserved; and 4. Exhibits to be returned.

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