In my opinion: (1) the proposed easement must be reasonably necessary either for all reasonable uses or developments of the land, or else for some one or more proposed uses or developments which are (at least) reasonable as compared with the possible alternative uses and developments; and (2) in order that an easement be reasonably necessary for a use or development, that use or development with the easement must be (at least) substantially preferable to the use or development without the easement.
The first of those requirements may seem contrary to a statement by Hamilton J in Tregoyd Gardens (at 14) that the Court "is not to judge upon the reasonableness of the particular development". However, that statement is qualified by the words "at least in this case". If there are some possible reasonable uses or developments of the land for which a proposed easement is not reasonably necessary, then it seems to me that the easement cannot be "reasonably necessary for the effective use or development" of the land, at least unless there is some proposed use or development, for which the proposed easement is reasonably necessary, which is itself a reasonable use or development. It may be that the particular proposed use or development would need also to be preferable to the alternatives; but whether or not that it so, it would in my opinion certainly need to be at least reasonable.
The evidence as to this, at least so far as the affidavit evidence is concerned, is almost non-existent. It consists of an affidavit of Mr Danny Goldberg, a director and secretary of the plaintiff company, the only relevant part of which sets out the council condition of development consent requiring the easement to be created by 17 January 2002. Mr Goldberg did give some oral evidence which really showed that the plaintiff company had purchased the land and embarked on its proposed development without giving nearly sufficient attention to the possible requirements of the council. For instance, his original proposal was to develop the building by converting it into one bedroom apartments without ascertaining in advance that council would require a mixture of one, two and three bedroom apartments in the building. He had not known that there would be a requirement that light and air be guaranteed if there were reasonably large openings on the western side and it seemed that he just assumed after conversations with council that there would be no difficulty in obtaining the easement. It follows from this that there is no evidence of any other possible use or development of the site, but there is evidence that the area of Surry Hills where the properties are situated, having been what was described as a rag trade area in earlier times, is now predominantly a residential area and that there is a demand for residential accommodation but no demand for commercial type or office type or small industry type accommodation, which was provided by the building as originally constructed. In other words, if the existing building is to be maintained on its site, then it will need to be re-conformed and turned into residential units. There is no evidence that it would not be physically possible to re-construct the existing building so that, for instance, from the height above the height of the buildings on Lot 5 the western wall could be set back, but of course if it were to be set back it would presumably have to be set back by three metres and possibly by six metres, although in view of the existence of the laneway a three metre set back in conformity with the existing condition would presumably be considered sufficient by council. There is no evidence about any of this nor of the costs of an alternative plan. All that it is possible to say is that from the point of view of the plaintiff, the best use of its property is one under which the existing building is maintained and converted to strata residential units and that can only be done if the easement is imposed.
15 While I do not think it is necessary for the purpose of satisfying the requirements of s88K(1) that detailed evidence be given to the court of alternative plans there is little doubt that as the court retains a discretion as to whether or not an easement ought to be imposed, one would at least expect there to be some view expressed by the developer or an architect or a planner that the proposed development is a sensible and reasonable development as compared with some other development which would involve a set back on the western side or some development where council would not require the easement the subject of the present condition. Where an existing building is to be completely gutted and transformed the court should not be too ready to assume the easement sought is reasonably necessary for effective development. I am not satisfied on the evidence that the requirements of s88K(1) are made out.
16 It follows that the summons should be dismissed but I shall deal with the other arguments in case I am wrong.
Compensation
17 The next question is whether or not the owner of Lot 5 can be adequately compensated for any loss or disadvantage arising from the imposition of the easement. This is not an easy matter. There is adequate valuation evidence of the value of the interest in the land which will be lost to Mr Majic if the easement is imposed. That value has been agreed. In spite of that Mr Majic opposes the imposition of the easement. He would rather have his land unaffected by it than have it imposed and receive the sum of $66,000. He is 86 years of age. His property is at present let out to commercial tenants. He says, through his wife, that he does not think he could be adequately compensated because of the uncertainties of the impact of the easement on any future development of his property, whether on its own or in association with properties to its west, albeit the effect on potential for future development was taken into account by Mr Hyam, the defendant's valuer when considering the question of compensation. The evidence of Mr Hyam was not altogether easy to understand, because he seemed to value the stratum of the defendant's property above the existing improvements as being the same as the value of the easement. What he meant by this, as I understood it, was that the land was really worth nothing if it was subject to the easement. That may be difficult to accept, as at least light and air is maintained, but as the valuation was accepted by the plaintiff for compensation purposes, I do not think it is necessary to go into this any further. The importance of the evidence is to show the extent of the burden sought. I do not consider the subjective opinion evidence of Mr Majic is relevant to take into account on this question of compensation. It is really evidence pointing out by way of argument the disadvantage which Mr Majic considers he will suffer if the easement is imposed.
18 There is no evidence of any value as to what might be a possible future development of Lot 5. According to Mr Majic's son-in-law there was some discussion about possible construction of additional office or commercial space over that part of the land which is at present vacant. Certainly it seems likely, if council maintains its present requirements, that any future development incorporating the defendant's land and the properties to the west of it would require some six metre gap between the eastern wall of such development and the wall of the next building to the east. On that basis, according to the plaintiff, Mr Majic would get $66,000 for something which he would be required to provide in any event. None of this is certain and it has no more certain basis that possibility. It seems to me that all property can be valued. Thus the diminution in value to Lot 5 caused by the creation of the easement could be ascertained. It follows from this that "adequate compensation for loss or disadvantage" arising from the carving out of easement interest is not necessarily equivalent to the difference between the value of the property without the easement and the value with easement imposed plus on occasions some element for solatium. The encumbrance on the title if the imposition went ahead so affects the estate and interest of the owner of Lot 5 that I conclude the requirements of s88K(2)(b) have not been met.
19 The purpose of s88K is to enable reasonable development land. In many cases this can be achieved by the imposition of easements for a restricted period of time so that access over adjoining land can be obtained to enable a development to proceed in a reasonable manner without undue expense and without the developer being held to ransom by an adjoining owner. Many applications are for permanent easements for drainage and the like required as a result of sub-division of land into a number of blocks, creating additional problems of rain water run off as a result of more land being built over which water might have just sunk into the ground had there been no improvements erected. In such cases it is often reasonable to impose a drainage easement over lower lands to allow water to be taken to municipal drains. Generally speaking these can be imposed underground and adjacent to boundaries so that they would have little or no effect on possible re-development of the burdened land and little effect on its continued use or enjoyment so that there is little question of adequate compensation for loss of disadvantage not being available. The present case is very different from such examples.
Discretion
20 It seemed to be accepted during argument that the court has a discretion as to whether it should exercise the power to grant an easement if the pre-condition of reasonable necessity in s88K(1) and satisfaction in accordance with s88K(2) were met. That seems to have been accepted in 117 York Street Pty Limited and perhaps somewhat hesitantly by Hamilton J in Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 97688. I consider that to be correct, although in many cases the considerations of discretion and adequate compensation for disadvantage may overlap and lead to the same result, as I think they did here.
21 The easement sought would prevent any improvements being built on Lot 5 higher than those there at the present time and it affects by far the greater part of Lot 5. In fact, on the strict terms required by Council it would prevent any building on the six metre strip if the existing buildings were demolished. This is a serious interference with property rights and it is therefore a case where the court should consider the question of discretion. It is necessary to bear in mind that, as a general rule, a developer is required to have enough land to enable a proposed development to be satisfactorily brought to fruition, albeit that some temporary right might be required over additional land to enable a particular development to be completed. Yet while it may be perfectly reasonable for a property owner to wish to maintain that property unencumbered rather than to be paid compensation for the encumbrance, the purpose of s88K is to enable that wish to be overborne in appropriate cases in the interest of enabling land to be used to its fullest extent. Thus it is not necessarily a case of weighing up the competing interests and there ought generally be a predilection towards a grant, which I bear in mind in this case. The fact is, however, that the imposition of the easement sought would have the effect of precluding almost any future change to the present structures on that land. The future cannot really be foretold. Planning schemes are varied from time to time. One cannot tell to what use Lot 5 might be put in the future. In addition, so far as future development on consolidation of lots is concerned, it could well be said that Lot 5, subject to the easement, would not add much to the proposed development because all it would do would be to provide a required gap of land between adjoining buildings, which gap was, in any event, already in place.
22 I am therefore of the view, that as a matter of discretion, this is a case where it would not be proper for the court to exercise its undoubted power to impose the easement. The disadvantage to the defendant and the impact on the title to his property by an easement as is proposed would, in my view, be such that it would not be proper exercise of discretion to burden the defendant's land with the easement sought.
23 For all these reasons the proceedings against the first defendant should be dismissed with costs.
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