Blulock Pty Ltd v Majic

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WINDEYER J THURSDAY 22 NOVEMBER 2001 4756/01 Blulock Pty Limited v John Majic and anor Judgment Issues 1 The question is whether the court should impose an easement over land owned by the first defendant in favour of the land owned by the plaintiff to give light and air to a building on the plaintiff's land which the plaintiff proposes to re-develop as residential units. Proceedings between the plaintiff and the second defendant have been resolved. At times I will refer to Mr Majic as the defendant. Facts 2 Blulock Pty Limited (Blulock) is the owner of property known as 47-53 Cooper Street, Surry Hills, being the land in Certificate of Title Folio Identifier 1/570031 which is Lot 1 in Deposited Plan 570031. I will refer to this land as Lot 1. 3 The first defendant, Mr Majic (Majic) is the owner of property 45 Cooper Street, being the land in Certificate of Title Folio Identifier 5/441196 being Lot 5 in Deposited Plan 441196. This land partly adjoins the Blulock property on the western side of Lot 1. I will refer to this land as Lot 5. Copies of DP 441198 and part of DP 570031 showing Lot 1 appear on the following page. Lot 5 does not include the clear non-hatched area of land where the words "site of right of" appear, but it does include the lightly hatched area where the words "way variable width" appear.

4 Lot 5 is one of a series of five terrace houses in Cooper Street running east of Holt Street. On lot 1 is erected a ten storey warehouse or commercial building, with a blank wall on its western side, which Blulock proposes to convert into sixty residential strata units and twenty two car spaces. It is proposed that some units will have windows and balconies on the western side facing Lot 5. 5 Lot 5 is burdened as to part by rights of way of variable width (but about eight feet wide) running along part of its eastern boundary. These easements are created by transfer 34092 and 45961 respectively. Lot 1 has the benefit of the right of way created by transfer 34092. This is a right of footway only. The land having the benefit of the right of way created by transfer 45961 was not made clear by the unreadable copy of the transfer put into evidence. Lot 5 also has the benefit of a right of way over land, the ownership of which is not established, but which is, in essence, an extension of the burdening right of way towards the south, also created by transfer 45961. That part of Lot 5 burdened by the right of way is in fact built upon above an open tunnel giving free access from Cooper Street. 6 The plaintiff's land does enjoy the benefit of a right of way over all the land shown as "site of right of way variable width". 7 Unfortunately neither side had given nearly enough attention to the actual titles and when the hearing commenced counsel for the plaintiff with the agreement of counsel for the defendant, handed up a marked copy of Deposited Plan 441196 incorrectly identifying Lot 5. Neither counsel had given sufficient attention to the terms of the rights of way benefiting and burdening the properties. The court should not be expected to deal with the serious question of whether or not an easement ought to be imposed without knowing the precise title information bearing on the properties involved in the proceedings. 8 The Council of the City of Sydney gave development approval for the project on 17 January 2001. This was modified on 23 April 2001 so as to vary an earlier easement requirement. The determination as modified set out a condition required to be satisfied prior to the consent becoming operative, the condition being in the following terms: EASEMENT FOR LIGHT AND AIR (1) A documentary Easement for Light and Air Variable Width (unlimited in height) is to be obtained for the length of the boundary along the western side of the proposed building, burdening the affected parts of the properties on the western side of the adjacent Laneway and appurtenant to the subject lot known as 47-53 Cooper Street, Surry Hills, being Lot 1 in D.P. 570031. Such easement is to project into the adjacent properties to the extent of 6 metres from the western boundary of the subject development site and is to exclude: (a) the laneway, (b) that part of the property of Strata Plan No.62478 that is built within the 6 metre easement alignment and (c) those parts of existing dwellings (defined in stratum) occupying the proposed easement. Evidence of registration of the easement at the NSW Office of Land and Property Information is to be submitted to Council within 12 months from the date of this "Deferred commencement" consent (modified 23 April 2001). 9 The effect of this condition, so far as the Majic property is concerned, is that all the land within the six metre line not built upon would be burdened by the proposed easement from ground level up and where the land is built upon, at least while the existing buildings are in position, would be limited so as to commence from the height of the existing buildings. The easement as required by the council is stated to exclude the whole of the area of the right of way, even that part which burdened the defendant's land and which is built over. 10 The frontage of Lot 5 to Cooper Street is 24 feet 4 ½ inches or 7.43 metres. Thus the 6 metre easement required by council, extends over most of the Lot 5, or at least eighty percent of it at its widest part and somewhat less than that where it narrows towards the south. Legislation 11 Section 88K of the Conveyancing Act 1919 is as follows: 88K. Power of Court to create easements (1) The Court may make an order imposing an easement over land if the easement is reasonably necessary for the effective use or development of other land that will have the benefit of the easement. (2) Such an order may be made only if the Court is satisfied that: (a) use of the land having the benefit of the easement will not be inconsistent with the public interest, and (b) the owner of the land to be burdened by the easement and each other person having an estate or interest in that land that is evidenced by an instrument registered in the General Register of Deeds or the Register kept under the Real Property Act 1900 can be adequately compensated for any loss or other disadvantage that will arise from imposition of the easement, and (c) 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. (3) The Court is to specify in the order the nature and terms of the easement and such of the particulars referred to in section 88 (1) (a)--(d) as are appropriate and is to identify its site by reference to a plan that is, or is capable of being, registered or recorded under Division 3 of Part 23. The terms may limit the times at which the easement applies. (4) The Court is to provide in the order for payment by the applicant to specified persons 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. (5) The costs of the proceedings are payable by the applicant, subject to any order of the Court to the contrary. (6) Such an easement may be: (a) released by the owner of the land having the benefit of it, or (b) modified by a deed made between the owner of the land having the benefit of it and the persons for the time being having the burden of it or (in the case of land under the provisions of the Real Property Act 1900) by a dealing in the form approved under that Act giving effect to the modification. (7) An easement imposed under this section, a release of such an easement or any modification of such an easement by a deed or dealing takes effect: (a) if the land burdened is under the Real Property Act 1900, when the Registrar-General registers a dealing in the form approved under that Act setting out particulars of the easement, or of the release or modification, by making such recordings in the Register kept under that Act as the Registrar-General considers appropriate, or (b) in any other case, when a minute of the order imposing the easement or the deed of release or modification is registered in the General Register of Deeds. (8) An easement imposed under this section has effect (for the purposes of this Act and the Real Property Act 1900) as if it was contained in a deed. (9) Nothing in this section prevents such an easement from being extinguished or modified under section 89 by the Court. 12 The plaintiff seeks an order under s88K(1). It is clear, and it is admitted, that the requirements of s88K(2)(a) and (c) have been met. In addition to this the plaintiff has offered to pay the sum of $66,000 as compensation to the plaintiff for the imposition of the easement. While Majic contends that he cannot be adequately compensated for the loss or disadvantage which would arise from imposition of the easement, nevertheless, it is agreed and accepted that if the court determined otherwise, then the sum of $66,000 is the figure which should be awarded as compensation. 13 The plaintiff has put forward a form of easement which it seeks to have imposed over the land as required by council and in terms as follows: Full and free right to the uninterrupted flow, access, transmission and enjoyment of light and air to, through and for the windows and apertures of any building now or hereafter erected on the dominant tenement. This easement would be created pursuant to s88B of the Conveyancing Act upon registration of a plan showing the said easement. The easement is described on the plan prepared for the purpose as follows "easement for light and air limited in depth to RL41.5 (A.H.D.) and unlimited in height". The draft s88B instrument provides that the person having the authority to release, vary or modify the easement is the Council of the City of Sydney. This provision conflicts with s88K(6) but it would be possible for the court to specify in accordance with s88K(3) and s88(1)(d) that the consent of the Council is required for release or modification. Is the easement reasonably necessary? 14 The first question for decision is whether the requirements of s88K(1) have been met, namely whether the easement is "reasonably necessary for the effective use or development of other land that will have the benefit of the easement". The requirements to satisfy this provision were discussed by Hodgson CJ in Eq in 117 York Street Pty Limited v Proprietors of Strata Plan No 16123 (1998) 43 NSWLR 504 at 508-9 in the following passage which I adopt:

What does "reasonably necessary" mean? It is clear that "reasonably necessary" in s88K(1) does not mean "absolutely necessary", and thus that the requirement may possibly be satisfied even when the plaintiff's land could be effectively used or developed without the easement: Tregoyd Gardens v Jervis (Hamilton J, 25 September 1997, unreported); Goodwin v Yee Holdings Pty Ltd (Windeyer J, 6 November 1997,unreported); Re Seaforth Land Sales Pty Ltd's Land [No 2] [1977] Qd R 317.

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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