BUNNEY v THE STATE OF SOUTH AUSTRALIA No. SCGRG-99-209 [2000] SASC 141

Supreme Court of SA|2000-06-02|Before: Debelle J

The applicant decided to purchase the private road. He wrote to the bank. He then knew that the private road did not physically exist as a road. The applicant's initial intention was to purchase only that portion of the private road that abutted his land. However, the bank informed him that he would have to purchase the whole of the private road. The applicant instructed a valuer, Mr Sullivan. Enquiries made by the applicant and Mr Sullivan confirmed that the private road did not exist as a road or even as a laneway. That would have been obvious from physical inspection because, as already mentioned, most of the owners of land abutting the private road were using it as their own and had fenced it as part of their own allotment. In a number of cases minor improvements had been effected on the land including the erection of garden sheds, pergolas and the like. In most cases the land was used as part of the rear garden. The enquiries made by Mr Sullivan also disclosed that the Minister appeared to have erected a building directly over a substantial portion of the private road.

Mr Sullivan estimated the market value of the private road to be $1,000. The valuation was dated 22 July 1996. Mr Sullivan's report disclosed:

(a) The private road extended from Penfold Road to the Norwood-Morialta High School owned by the Minister of Education.

(b) The exact dimensions of the private road are difficult to define without a current survey. It would appear that the land is between 2.8 metres wide according to original surveys and possibly up to 3.23 metres wide where it directly fronts Penfold Road according to the more recent surveys, by depth of 409.52 metres. The site represents a narrow private road declining to a westerly direction away from Penfold Road with a site area of approximately 1,200 square metres.

(c) It appeared that the Minister may have constructed a building directly over a substantial portion of the private road.

(d) The majority of residents whose land adjoins the private road had taken possession of the land immediately to the rear of their existing allotment by fencing it and using it as their own. Some had erected improvements on the area of the private road.

Mr Sullivan's valuation was admitted to prove the fact of its existence and the material contained in it but not as proof of the value of the private road.

It is apparent from these facts and it is common ground that the applicant purchased the private road knowing that it did not physically exist as a road, that the Minister may have erected a building on the land, and that most of the owners of the land abutting the private road had fenced the private road and were using it as their own land.

The applicant purchased the private road in early 1997. By letter dated 27 March 1998 he informed the Minister that the Minister had encroached by building upon the private road. At some unspecified time he claimed some $20,000 to $30,000 from the Minister for the encroachment. The Minister rejected the claim and made a counter-offer of $1,000. On 26 February 1999 the applicant instituted this claim seeking orders under the Encroachments Act. The relief claimed includes an order that the land encroached upon be transferred to the Minister and that the Minister pay compensation in an amount equal to three times the unimproved capital value of the land.

On 18 November 1949 the Minister purchased two parcels of land on which the Norwood-Morialta High School is now erected. On 25 November 1958 the Minister purchased another parcel of land for the school. The land acquired by the Minister in 1958 enjoyed a right of way over the private road. It extended 43.76 metres into the land owned by the Minister. In 1996 the Minister subdivided the land he had purchased in 1958 into two lots, Lots 500 and 501. He sold Lot 501. Lots 500 and 501 are shown on the plan above. The Minister, nevertheless, retained a right of way over the private road. He is the holder of the dominant tenement. The searches conducted by the parties indicate that at the time of the hearing no other person enjoys a right of way over the private road. I refer later to the question of other interests.

A drawing prepared for the Minister by the Public Buildings Department showing this right of way bears a note "Fences, sheds, walls, garages, etc. appear to intrude upon this right of way". The plan was drawn on 13 November 1962. It is unlikely that all of those fences, sheds, walls and garages would have been erected in the two years preceding the drawing of that plan. All this points to the fact that the land has not been used as a private road for more than 40 years.

By at least 1969, the Minister knew of the existence and location of the private road. That is proved by several facts. Early in 1969 the Minister offered to purchase from the owners of Lot 15 which adjoined the school land the rear 65 feet of their land which included the private road. The Minister then erroneously believed that the private road formed part of their land. However, by January 1969 the Minister learned the correct position as a result of a survey which determined that the private road was not part of the land held by the owners of Lot 15 and that those owners were using the private road as their own land. In addition, by letter dated 23 June 1969, the Lands Department informed the Minister that the private road was not owned by him. Thus, by at least two means, the Minister was informed of the existence and location of the private road in 1969.

In 1961 the Minister had paved part of his land and part of the private road for use as a road and car park. There was no evidence that the Minister then knew of the private road. In any event, paving the private road does not constitute an encroachment. Indeed, paving the private road would facilitate its use as a road.

On 26 September 1969 the Minister purchased another parcel of land with a frontage to The Parade which abutted the private road to the south. As the Minister owned the land on the northern side of the private road, this had the effect that the private road intruded further into the Minister's land. Thus, in September 1969, and at the time when the applicant purchased the private road, the land extended 74.24 metres into the Minister's land. In addition, the road bordered Lot 500 and the Minister, as holder of the dominant tenement, could gain access to the road from any point along the common boundary between Lot 500 and the private road.

In 1969 the Minister commenced construction of an assembly hall on his land. The hall was completed in 1970. Part of the hall was built over the private road. In addition, three electricity cables, a gas pipe, two water pipes, and a telephone cable have been placed beneath the private road. Two concrete slabs which form part of the car parking arrangement have been laid on part of the private road. In 1996 a drama building was constructed as an extension to the assembly hall. Part of that drama building also was erected over the private road. In the result, the buildings erected by the Minister encroach upon part of the private road.

Before construction of the assembly hall, the Minister knew of the existence and location of the private road and that he had a right of way over it, which benefited all his land including Lot 500. The Minister concedes that he cannot contend that the encroachments he has erected did not arise from negligence.

In 1998, after the private road had been purchased by the applicant, the Minister carried out trenching works on the private road for the purpose of laying cables to another development. On 11 May 1998 the applicant informed the Minister of his concern that the building work was being carried out on the private road. On 17 July 1998 the Minister directed that no further work be carried out on the private road.

The buildings erected by the Minister do not encroach over all of that part of the private road which intrudes into the Minister's land. They encroach upon less than two-thirds of that land. The pipes and cables which have been placed beneath the road are not encroachments as defined. Nevertheless, it is common ground that the applicant should transfer portion of the private road at its western end. The land is 74.24 metres long, measured from the western boundary. At this point the subject land is 2.82 metres wide. The area is in the order of 210 square metres. The Minister is prepared to consent to extinguish his right of way over the land in return for the transfer of the land.

The private road is marked as a right of way on the relevant certificates of title and on plans deposited at the Lands Titles Office. DP 843, drawn in 1878, shows the right of way. However, the plan does not clearly show the holder of the dominant tenement, nor is there any evidence as to the manner in which this right of way was created. The searches conducted by the parties show that, at the date when the applicant purchased the private road, there were two persons holding the dominant tenement, namely, the Minister and Elderly Citizens Homes of SA Inc, and the action proceeded on that footing. However, the searches were not so extensive that they excluded the possibility that others may hold a dominant tenement in respect of this right of way. It would be necessary to go to the original certificates of title and deposited plans to exclude that possibility. In addition, DP 843 shows fourteen allotments which are bordered at the front by The Parade and at the rear by the right of way. It is not clear whether the registered proprietors of those allotments enjoy a right of way over the private road. In about July 1998 the applicant paid Elderly Citizens Homes the sum of $200 to extinguish its interest as one holder of the dominant tenement in the right of way.

As already noted, it is common ground that the subject land should be transferred to the Minister. The Minister accepts that he should pay whatever costs are necessary to enable the division of the land and registration of the transfer. The issue in this action was whether the Minister should pay compensation to the applicant and, if so, how much.

The applicant had initially claimed some $10,762.99 for his costs and expenses incurred in tracing the registered proprietors of the private road and for the costs incurred in obtaining the transfer to him. In the course of the hearing, his counsel advised that he did not press the claim. The concession was properly made since they are not losses caused by the encroachment but are costs of a capital nature incurred by the applicant in purchasing the land.

The issue whether compensation was payable sparked a debate as to the relationship between s 4 and s 5 of the Encroachments Act and the ambit of the court's discretion. I turn to examine those questions.

As is apparent from the terms of s 4, the court has a very wide discretion when determining what orders should be made. That discretion is found in subsections (2) and (3) of s 4 which provide:

"(2) On the application the court may make such orders as it deems 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 him 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 he were required to remove the encroachment; (f) the circumstances in which the encroachment was made."

Several points relevant to the discretion would have been noticed. First, subsection (2) invests the court with a discretion to "make such orders as it deems just". Secondly, subsection (3) states that the court may grant or refuse leave "as it deems proper". When read together, these provisions confer a very wide discretion. Thirdly, subsection (3) lists a number of factors to which the court may have regard. But the list is not exclusive and the facts listed in subsection (3) are not in any respect the only factors affecting the exercise of the discretion. The court may have regard to those and to any other relevant factors. Thus, the court has a very wide discretion fettered only by the fact that the discretion must be exercised having regard to the scope and objectives of the Act.

Mr Roder, who appeared for the applicant, contended that the court could not order the transfer of the subject land to the Minister without payment of compensation. The issue arose because it was the Minister's case that, in the particular circumstances of this case, the subject land should be transferred to him without payment of compensation. Section 5 provides:

"5. (1) 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 unimproved capital value of the subject land, and in any other case three times such unimproved capital value. (2) 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."

Mr Roder contended that the fact that the terms of s 5(1) state that the powers for determining the minimum compensation to be paid on a conveyance of the land to the encroaching owner required the conclusion that compensation must be paid. Section 5(1), he said, came into operation once the court had decided to make an order pursuant to s 4(2)(b) to convey the subject land to the encroaching owner. That argument is, I think, inconsistent with the purpose of the Act and the terms of s 4.

The purpose of the Act is to provide a fair means of adjusting rights where an encroachment has occurred to avoid innocent and sometimes not so innocent people from being held to blackmail as a result of surveying error or building errors which were not their fault: Hardie v Cuthbert (1998) 65 LGRA 5 at 6 and 7. (Although the decision in that case was reversed on appeal, those observations were not adversely commented upon.) See also Googoorewon Pty Ltd v Amatek Ltd (1991) 25 NSWLR 330 at 333 - 334. The Act is remedial in character: Hardie v Cuthbert (supra); Re Melden Homes (No 2) Pty Ltd's Land [1976] Qd R 79 at 81. The remedial character of the Act was also emphasised by Wells J in Clarke v Wilkie (1977) 17 SASR 134 at 139:

"In my judgment, the Act was plainly remedial and innovative in character, and was designed to set at rest the depressing, and often prolonged, disputes between neighbours over boundary lines and alleged encroachments that are both substantial and permanent. Such disputes are age-old and invariably, in the protagonists, cause intense emotion and the suspension of rational thought. It is not without good reason that the draftsman in Deuteronomy in the Bible was moved to write, 'Cursed be he that removeth his neighbour's landmark.' The Act should accordingly receive a fair, large and liberal construction. (See also s. 22 of the Acts Interpretation Act, 1915, as amended). The Court should not, in my judgment, be astute to restrict the beneficial work of the Act, by placing unreasonable limits on the jurisdiction conferred by it."

Although the Act should receive a liberal construction, regard must be had to its terms. For the reasons which follow, when s 4 and s 5 are read together, it is apparent that the intention is to invest the court with a wide discretion to fashion appropriate relief. The court therefore has a wide discretion as to the circumstances in which compensation will be ordered.

Section 4 gives an overall discretion whether or not to award compensation. Subsection (2)(a) lists compensation as one form of relief and then in para (b) lists, among other things, a transfer of the land to the encroaching owner as yet another form of relief. Thus, compensation is clearly identified as a separate item of relief which may or may not be ordered when the court orders a transfer of an interest in the land to the encroaching owner. It is implicit in s 4(2) that the court may order, say, a transfer of the land without payment of compensation. What is implicit in subsection (2) is made explicit by subsection (3) which authorises the court to grant or refuse relief or any part thereof "as it deems proper in the circumstances of the case". The court may, therefore, order a transfer without necessarily being obliged to order compensation. However, if the court decided to order compensation, s 5 prescribes a method by which that compensation shall be assessed. It will be the minimum as provided in s 5(1) with a discretion to order an amount in excess of the minimum by reference to the factors listed in s 5(2).

Furthermore, there is nothing to prevent the court ordering compensation even where there is no transfer of any interest to the encroaching owner. It may be fair to order compensation to be paid to the adjoining owner when an encroachment has been removed. For example, the removal of the encroachment may require remedial work to be done to the adjoining owner's land or building. Thus, compensation is a form of relief which is not necessarily linked to a transfer of interest in the land to the encroaching owner.

The decided cases provide a number of instances where it has been necessary to create an interest in or to transfer an interest to the encroaching owner but compensation has not been ordered. That usually occurs when the land transferred has represented an insignificant part of the land held respectively by the encroaching owner and the adjoining owner: see Re Melden Homes (No 2) Pty Ltd's Land (supra), Morris v Thomas (1991) 73 LGRA 164, Butland v Cole (1995) 87 LGERA 122 and Anagnostou v Vinicio [1995] NSWLEC 104; (1995) 87 LGERA 232. It is possible to envisage circumstances where, through mistake, a relatively large parcel of land has physically appeared to be part of another parcel and successors in title of both the adjoining owner and encroaching owner have believed it to form part of the encroaching owner's land. That parcel may have a value ascribed to it and have been paid for by the encroaching owner. It would be inequitable to require the encroaching owner to pay again for the land encroached upon. In short, payment of compensation is not mandatory: Morris v Thomas at 169. Unreasonable conduct on the part of the adjoining owner may also lead the court to conclude that no order for compensation should be made: Re Melden Homes (No 2) Pty Ltd's Land at 81. It might be added that it is possible to envisage circumstances where compensation will be ordered despite the fact that no interest in land is transferred. These cases serve to illustrate both that the discretion vested in the court by s 4 extends to orders for compensation and the width of that discretion.

A further question is whether the court has a discretion not to order payment of an amount equal to three times the unimproved capital value of the land in cases where the encroachment was intentional or resulted from negligence. That question does not directly arise in this case and I prefer to leave it for later consideration.

While discussing matters of general principle, it is convenient to deal with two other matters. The first is that the adjoining owner is under a duty to mitigate his loss: Re Melden Homes (No 2) Pty Ltd's Land.

The second is the meaning of the expression "unimproved capital value" in s 5 of the Act. That expression is not defined in the Encroachments Act. In my view, it means the market value of an unencumbered estate in fee simple in the land assuming that there are no improvements upon the land. That definition might be more comprehensively expressed by reference to definitions in the Valuation of Land Act 1971, as being the capital amount that an unencumbered estate in fee simple in the land might reasonably be expected to realise upon sale assuming that there are no improvements on the land. That is a definition consistent with the definition of "capital value" and "unimproved value" in s 5 of the Valuation of Land Act. Although a definition in one statute does not necessarily apply in another, these terms frequently are used in valuation practice and have a consistent meaning. I acknowledge also that a word may have a special meaning in one statute or a meaning different from its usual meaning. But there is nothing to suggest that the meaning in the Encroachments Act should differ from that of the Valuation of Land Act.

The market value will be the price a willing but not anxious purchaser would have to pay to induce a willing but not anxious vendor to sell, both having regard to ordinary business considerations: see Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418 per Griffiths CJ at 432:

"In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e., whether there was in fact on that day a willing buyer, but by inquiring 'What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?' ... The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together."

"To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property."

The definition is consistent with the evidence of the valuers called by the parties. As it will be seen, there are particular business considerations to which the Minister would have regard as a prudent purchaser.

The Encroachments Act does not specify the date at which the unimproved capital value should be assessed. Generally speaking, the assessment should be made as at the date when the claim under the Act is made. If compensation is payable in this case, I will assess it at the date when the claim was made. However, there may be circumstances where, in the exercise of its discretion, the court will fix a different date. For example, if an adjoining owner is aware of the encroachment but takes no action for several years and land values rapidly increase in that time, the delay of the adjoining owner may cause the court to fix a date earlier than the date of the claim as the date for assessing the unimproved capital value. That date might, for example, be the date when the adjoining owner first became aware of the encroachment. In other words, in the exercise of its discretion when determining the date when value should be assessed, the court will have regard to the conduct of the applicant and the duty to mitigate any loss.

The question whether the Minister should pay compensation to the applicant is not simply answered. There are competing considerations. I deal first with those which tell against such an order.

The fact which tells most against an order is that the applicant purchased the land knowing that the Minister may have encroached on a substantial part of the subject land. That fact is agreed. In his evidence, the applicant sought to distance himself from the agreed fact and reduce its significance. But the agreed fact stands. Furthermore, I would, in any event, have found that the applicant was aware of that fact when he purchased the land. That is apparent from Mr Sullivan's valuation which unequivocally refers to the existence of the encroachment. The valuation had been prepared before the applicant had completed the transaction. The applicant may not have been aware of the extent of the encroachment but, it seems, that was not a matter of concern to him. There are two reasons for that conclusion. The first is that his intent was to acquire the land so that he could increase the width of his own allotment on Penfold Road. The second is that, had the encroachment been a matter of concern, the applicant would have ascertained the extent of it before proceeding to purchase the private road.

It is a corollary of the above that the existence of the encroachment was a fact bearing upon the value ascribed to the land by Mr Sullivan. That is apparent from the fact that Mr Sullivan includes the Minister's encroachment as one of the factors affecting the value of the land. Those factors appear in his valuation under the heading "Valuation Considerations". It is reasonable to infer that Mr Sullivan reduced the value to reflect the fact of the encroachment. The extent to which it affected the value is not known. Mr Sullivan was not called to give evidence. But it is unnecessary to determine the extent to which the value was reduced. It is sufficient to note that regard was had to the fact of the encroachment. It is, therefore, reasonable to infer as I do that the applicant did not thereby suffer any loss. In short, the defects of the land and the fact he was under no compulsion to purchase are reflected in the price paid by the applicant.

The applicant was prepared to purchase the land notwithstanding the existence of the encroachment. He purchased the land with all its problems and those problems reduced its value. In other words, he seeks compensation for a problem of which he was aware at the time of the purchase.

The encroachment does not adversely affect the use or enjoyment of either the applicant's land or the balance of the right of way over the private road. The encroachment is a little less than 350 metres from the applicant's land and so it cannot have any conceivable effect upon it. The encroachment is at the extreme western end of the private road and does not hinder any use of the private road even if it could be used as a right of way. At this end of the private road the Minister holds the land on either side of the encroachment and is the only person capable of being adversely affected by the encroachment. It cannot be said that the applicant has lost the ability to sell the land since that ability remains notwithstanding the encroachment and it is common ground that the Minister is the only realistic purchaser. The only loss to the applicant is the fact that the Minister has trespassed upon his land and the trespass continues. I will examine that issue in a moment. The encroachment does not therefore cause any loss to the applicant.

The applicant is not able to point to any loss to him caused by the encroachment other than the fact that part of the private road has been encroached upon. Indeed, it is difficult to identify any loss since the private road is not and cannot be used for that purpose and, in any event, the only person who could enjoy any benefit from the use of the private road is the Minister. Furthermore, the applicant's land is at one end of the road and the Minister's land is at the other end, some 350 metres distant.

The National Westminister Bank and Mr Tweedie had taken no action to prevent land owners bordering the private road from using the land as their own and had allowed the position to remain for at least 40 years. The Minister, or any one of the persons who were using the private road as their own land, could have made an application under Part VIIA of the Real Property Act 1886 for possessory title. The success of the application would have depended upon whether Mr Tweedie or the bank, as the executor of his estate, would have lodged a caveat: see s 80f of the Real Property Act. But even if Mr Tweedie or the bank had lodged a caveat and had remained a registered proprietor of the private road, it cannot be certain that they would have been able to claim compensation from those who have encroached upon, or used the land as their own. While the facts and circumstances relating to each parcel of land would have to be separately examined, the overriding consideration in all cases would be the fact that Mr Tweedie and the bank had acquiesced in the situation for a very long period of time. A court might, therefore, have refused to require those owners to surrender the land. In addition, the court might have ordered no compensation or only nominal compensation.

There is also the operation of s 215 of the Real Property Act to be considered which bars any action or proceeding for compensation for any deprivation, loss or damage to the land taken after a period of 20 years from the time when the right to take action first accrued. It is doubtful whether the applicant could place himself in any better position than that of the bank.

The applicant is under a duty to mitigate his loss. He acknowledged in his evidence that he could have avoided any loss if, after purchasing the private road, he had agreed with the Minister that he should transfer to the Minister the land encroached upon, the Minister paying any fees for a survey, conveyance, registration, and any other costs relating to the division of the land.

I summarise the factors pointing to an exercise of discretion that no compensation is payable:

(1) At the time he purchased the private road, the applicant knew

(b) that the private road was subject to a right of way in favour of the Minister, and

(c) that the private road did not physically exist as a road since adjoining owners were using it as part of their own land.

(2) None of the above factors and, in particular, the encroachment was a matter of concern to the applicant when he purchased the private road.

(3) The applicant was prepared to purchase the land with all its disabilities including the encroachment.

(4) The existence of the encroachment was reflected in the price paid for the private road so that its encroachment has not caused any financial loss to the applicant.

(5) The reason why the applicant purchased the land was to increase the area of his own allotment.

(6) The encroachment causes no impairment of the use of the rest of the private road.

(7) The private road has no value as a road to the applicant. It is a road to nowhere so far as he is concerned.

(8) Essentially, the subject land is of value only to the Minister.

(9) The long period of acquiescence by Mr Tweedie and the National Westminister Bank in the effective closure of the private road and the question whether the applicant should be in any better position than the bank, particularly as he purchased the private road knowing of the encroachment and all other impediments to its use as a private road.

The claim has all the hallmarks of opportunism on the part of the applicant. He paid little for the private road and purchased it only because he wanted to add part to his land. Yet, he seeks to exploit the fact that the land has not been used as a right of way for the past 40 years. While he is entitled to seek to put his land to the best advantage, it does not entitle him to an exorbitant selling price. His claim fails to have sufficient or any regard for the limitations upon the value of the land in his hands.

The only factor which favours an order for compensation is the fact that the Minister has trespassed on the applicant's land by building over part of the subject land.

It is apparent from a number of departmental minutes that the Minister was aware of the existence of the private road before building the encroachment. In 1969 it was decided not to pursue enquiries for the purpose of purchasing that part of the private road which projected into the Minister's land. Yet, the Minister proceeded to erect a building across a private road while knowing of its existence. At the time he was not aware of the identity of the registered proprietor or even if a registered proprietor existed. He may have been induced to act in this way because the private road had not been used as such for a long time and it was quite apparent that other land owners further east had appropriated the private road to their own land. That may explain but does not excuse the Minister's conduct. As Mr Roder said, although the purpose of the Encroachments Act is to prevent people who have encroached from being held to ransom, it is not the purpose of the Act to encourage conduct of this kind. However, I do not suggest that compensation is to be awarded as a penalty. The essential purpose of the Act is to compensate the adjoining owner, not punish the encroaching owner, although it must be acknowledged that the provision in s 5(1) for payment of three times minimum compensation in the case of a deliberate or negligent encroachment in s 5(1) has a punitive element designed to act as a deterrent. But, if there were no other reason to award compensation, it would not be appropriate to do so merely as a penalty. By constructing the assembly hall and its additions, the Minister not only trespassed upon the private road but has also appropriated part of this private road for his own use.

The factors already listed provide compelling reasons why the applicant should not recover compensation. I refer, in particular, to the fact that the applicant purchased the private road knowing of the encroachment and to the fact the encroachment does not cause any diminution of the price paid for the private road. This is an unusual and difficult case. There have been occasions when I have almost reached the conclusion that the applicant was not entitled to any compensation. He could easily have mitigated his loss by transferring the land to the Minister for nominal consideration, the Minister paying all necessary costs. Instead he has chosen to pursue what I find to be an exaggerated claim. However, not without considerable misgivings, I conclude that the applicant is entitled to compensation. I do so because the Minister has, without payment, appropriated to his own use land which now belongs to the applicant. The Minister should, therefore, pay the applicant the value of the land. As Gibbs J noted in Haddans Pty Ltd v Nesbitt (1962) QWN 44, when a judge of the Supreme Court of Queensland, "it would be a rare and exceptional case in which the court would make an order under this Act in favour of a person who, with full knowledge, encroached on his neighbour's land. The court would indeed be reluctant to set its seal upon a deliberate trespass". As the Minister erected the assembly hall and its extensions across the private road with knowledge that that part of the private road was not his land, he committed a deliberate trespass. The building is substantial. It is quite inappropriate to order its removal. The court should not be seen to be acting in a manner which would appear to endorse the Minister's appropriation of this land without payment. In an action for trespass the applicant would be entitled to damages for the loss: Swordheath Properties Ltd v Tabet [1979] 1 WLR 285 at 288 approved in Inverugie Investments Ltd v Hackett [1995] 1 WLR 713 at 717. Those damages would be the unimproved capital value of the land. In this way, the principles of the Encroachments Act and the principles of the law of trespass coincide and produce the same result.

For these reasons, the applicant is entitled to compensation. I turn to examine the amount of compensation to be paid by the Minister. It was common ground that if compensation was to be paid, it should reflect the value of the subject land.

Each of the parties called one valuer. There is no other evidence of value. As already mentioned, the earlier valuation of Mr Sullivan was not admitted to prove current market value.

The applicant's valuer, Mr Morgan, determined that the highest and best use of the land was for residential subdivision. In his view, the Minister was the only likely purchaser for that portion of the private road which projected into the Minister's land. He believed that, while the land would not be surplus to the Minister's requirements for many years, its best ultimate development was for residential purposes. He went so far as to describe the land as "ripe" for residential development. He believed that the fact that the private road intruded into the Minister's land would represent a barrier to the complete development of the land. He thought that was evidenced in part by the fact that the Minister had built across one end of the road. Removal of the private road would, he said, remove an impediment to residential development in the future. Since acquisition of the private road would benefit the use of the whole of the land, he believed it attracted a premium of one-quarter to one-third over and above its ordinary market value. Using sales of substantial parcels sold for residential subdivision, he determined that the land had a value of $130 per square metre realising an overall value of $27,560. He added a premium of 25 per cent which resulted in a value of $34,450. He rounded the value up to $35,000 on the footing that the addition of 212 square metres might enable the creation of an additional allotment in any future residential subdivision. Thus, the value of the land unencumbered by the Minister's entitlement to enjoy the right of way was $35,000. Mr Morgan believed that the value should be discounted by one-third in recognition of the Minister's capacity to enjoy the right of way, producing a value of $23,000.

Mr Taylor was the valuer called on behalf of the Minister. He pointed to the fact that the private road has a very limited utility, especially for use by motor vehicles. If the Minister's land is disregarded, there is no area at the western end which would permit motor vehicles to turn. He believed that the price of $1,000 paid by the applicant for the private road approximated its true value. In his view, the right of way held by the Minister was a serious limitation on the value of the land. As he saw it, the factors limiting the value of the land were its shape and size, its very limited utility, the fact that it was subject to the right of way, and the difficulties in selling it which would include the costs associated with obtaining a plan or plans of division to enable a sale to each adjoining owner. Those costs would include surveying costs and conveyancing costs in transferring the land. In his view, the greater part of the price paid by the applicant was attributable to the applicant's allotment so that the balance of the private road had a nominal value. He assessed the value of the land encroached upon in the sum of $100.

I do not accept Mr Morgan's approach. I think that it is flawed in the following respects. First, as he acknowledged, there is no reasonable prospect of residential development of this site in the foreseeable future. I accept Mr Taylor's evidence that the school is well established and substantial expense has been incurred in getting it to its present condition. A substantial new building was erected as recently as 1996. The Minister has, in 1997, sold Lot 501 believing it to be surplus to requirements. This suggests that the Minister has consolidated the site. Common experience indicates that secondary schools, as a general rule, continue to exist on their sites indefinitely into the future. Thus, in all likelihood, the Norwood-Morialta High School would remain on the site indefinitely. The land is not ripe for residential subdivision. I agree with Ms Murphy, who appeared for the Minister, that any assessment based on residential subdivision of this land is speculative and unreliable. The highest and best use of the land is as school land.

Secondly, Mr Morgan agreed that if the whole of the private road was sold to adjoining owners, the total value of the road would be in the order of $153,000 which would include the value of the subject land. The evidence shows that vacant residential allotments created from the subdivision of Lot 501 sold by the Minister were in July and August 1997 selling for prices between $92,000 and $152,000, prices ranging up to $215 per square metre. There is one sale of a residential allotment in David Street from May 1999 for $174,000 which represented a price of $269 per square metre. Even if that sale suggests that in the period of almost two years between July 1997 and May 1999 prices in the area increased from $215 per square metre to $269 per square metre, an increase of 12.5 per cent per annum, the value ascribed by Mr Morgan to this private road results in the private road having a value equivalent to vacant residential allotments. It is, I think, quite unrealistic to suggest that this long, narrow and unusable allotment has a value equivalent to that of a useable, vacant residential allotment. The fact that the area of the private road is some 1200 square metres, which is considerably larger in area than most residential allotments in this vicinity, does not, I think, explain the fact that this private road with all its defects has a value approaching that of a vacant residential allotment in the area.

Thirdly, I accept Mr Taylor's evidence that the fact that the subject land juts into the Minister's land does not cause it to have a premium over and above ordinary market value. As he said, a design of any future residential subdivision would be able to work around it. Although the acquisition of this small parcel of land would be of benefit to the Minister, it was not of such a benefit as to warrant a premium.

Fourthly, the fact that the land is not to be valued as residential land removes the capacity for a premium. Furthermore, the Minister has no incentive to purchase the land. He has been able to use the land for about 40 years without apparent difficulty. Although he has paved part of the private road, that is not an encroachment. Rather, it facilitates the use of the private road. The Minister is not, therefore, an anxious purchaser - another factor with which Mr Morgan agreed. The Minister does not require the road for access as he has a good frontage to The Parade. Realistically, he is the only purchaser and, as such, is able to dictate the terms of any agreement to buy the land, a further fact acknowledged by Mr Morgan. The Minister's bargaining power is increased by the fact that the applicant will be unable to sell any part of the private road to others unless he has first obtained the consent of the Minister. Although the Minister is prepared to relinquish his right of way in exchange for the land, he does not have to do so to rid the land of the right of way. Once he purchases the subject land, the right of way will be extinguished as the Minister will hold both the dominant and servient tenements in relation to that of the private road which is to be transferred to the Minister: Roe v Siddons (1888) 22 QBD 224; Margil P/L v Stegul Pastoral P/L [1984] 2 NSWLR 1, 9. Clearly, the Minister is in a strong bargaining position. He will not pay a ransom for this land. As Mr Morgan said, he is in a position to dictate the terms.

To summarise, the Minister would be aware of the following factors:

(1) that while he held his interest in the right of way, the land is of little value to the applicant;

(2) that the right of way has been no burden to him for the past 40 years. To the contrary, it has been a benefit in that it has provided an additional parcel of land available for use at least as a paved area;

(3) that he would not be prepared to pay any more for the land than any purchaser further to the east;

(4) that he would know that he could use his interest in the right of way to bargain for a reduced price for the land; and

(5) that the land would be used indefinitely as a school.

Neither Mr Morgan nor Mr Taylor had regard in their valuations to the possibility that the Registrar-General might extinguish the easement. The applicant may apply to the Registrar-General pursuant to s 90b of the Real Property Act to extinguish the easement. Although the Registrar-General is required to consider the interests of the holder of the dominant tenement, power exists to extinguish the right of way, notwithstanding that the holder of the dominant tenement does not consent. The Registrar-General may extinguish the easement if satisfied that the Minister's interest in the dominant tenement will not be detrimentally affected by the extinguishment: s 90b(2). The fact that the land has not been used as a private road for at least 40 years will obviously be a significant factor pointing in favour of the extinguishment of the right of way. However, the Minister has the entitlement to use that part of the western right of way upon which he has not encroached as a car park and that part of the private road which abuts Lot 500. That usage may be sufficient to cause the Registrar-General not to extinguish the right of way since it would leave the Minister liable to trespass in respect of that part of the right of way he continues to enjoy. As the land will continue to be used for school purposes indefinitely, the Registrar-General may be loath to impair the rights presently enjoyed by the Minister.

Even if the right of way were to be extinguished, it is unlikely that the land would have significant value. The fact that it is very long and narrow deprives it of any utility. Its only value lies in the fact that the applicant can add part to his land and can sell other parts to the adjoining owners who are using it together with their own land. As the private road is at the rear of those allotments, its value is unlikely to be high.

There are further factors which could result in the applicant being unable to sell the land, notwithstanding that he is the owner of the land. In the present state of the evidence, there must be a degree of uncertainty whether other persons, in addition to the Minister, enjoy a right of way over the land. Admittedly, the fact that the right of way has not been exercised for some 40 years and the fact that the right of way is of no immediate benefit to any person other than the Minister may defeat the entitlement of those who hold the right of way.

More significantly, it is not entirely clear whether the persons who own allotments which are bounded at the front by either The Parade or David Street and at the rear by the private road enjoy a right of way over the private road. While none of the certificates of title for these allotments refer to the right of way when describing the interest in the land, the plan which forms part of the certificate of title shows that the land is bounded on one side by the right of way. It is not known whether those allotments once formed part of a larger allotment of land which held a dominant tenement over the private road. The new allotments created by subdivision of the large allotment would, in all likelihood, be entitled to a right of way over the private road unless this were to result in an additional burden on the private road: Gallagher v Rainbow [1994] HCA 24; (1994) 179 CLR 624. In this case, the creation of the subdivision does not impose an additional burden on the private road. The right of way may have been omitted from the certificate of title but, nevertheless, be available by reason of s 69 IV of the Real Property Act. The fact that the solicitors for the parties were unable to trace the complete history of the right of way means that it is not possible categorically to discount this possibility. These are all interesting questions. In the absence of all relevant facts, it is not possible to determine them. It is sufficient to note that, viewed together, they combine to create a doubt whether other easements might exist and therefore reduce the value of the subject land in the hands of the applicant.

Mr Taylor took as a comparable sale the sale of a right of way in May 1999. The right of way is an L-shaped narrow strip of land which runs off Wakeham Street and is in the Town Acre of the City of Adelaide. Wakeham Street is near King William Street and runs in a north-south direction between Carrington Street and Halifax Street. The width of this right of way varied from 3.28 metres at its frontage to Wakeham Street and thereafter narrowed to 1.58 metres. Its area was approximately 123 square metres. It appears that the right of way was residual land remaining after various parcels of a larger holding had been sold subject to the right of way. The right of way abuts the rear or the side of some 14 properties, eight of which have a frontage to Wakeham Street and six to Harriett Street. Some of those allotments have a right of way and others do not. Public Trustee, as the administrator of a deceased estate, arranged for the sale of the right of way. Public Trustee offered the right of way for a sale by tender. Owners of allotments adjoining the right of way were contacted. Only one adjoining owner, Mr S T Lane, offered to purchase the right of way. It was sold to him for $1,200. The transfer was registered in May 1999. This sale was the only evidence of the sale of a right of way found by either Mr Taylor or Mr Morgan.

Although the transfer to Mr Lane was registered in May 1999, the negotiations leading to the sale appear to have been protracted commencing in about 1994. There is no evidence when Public Trustee finally accepted Mr Lane's offer but it is reasonable to infer that it was fairly late in the negotiations. The sale therefore gives some indication of the value of land subject to rights of way. One limitation on its utility as a comparable sale is that the right of way continued to exist as such after the sale to Mr Lane. It appears that Mr Lane purchased the right of way in order to gain access to it as his land was one of the allotments which did not benefit from the right of way. By contrast, after the sale of the subject land, the Minister will enjoy it free of the right of way as holder of both the dominant and servient tenements. However, that last observation must be balanced against the fact that Mr Lane wanted to gain access to the right of way which he did not enjoy. The right of way provided the only means of access to business premises on his land. It therefore had significant value to Mr Lane. In addition, Mr Lane's right of way was in the City of Adelaide but the subject land adjoins school land some seven kilometres from the City. Although the sales are not wholly comparable, the sale to Mr Lane demonstrates the price paid by the applicant when he purchased the private road approximated its true value.

To summarise, I do not accept the valuation of Mr Morgan. His valuation is, I think, unrealistic in that it values the land as residential land ripe for subdivision. That results in a value for this narrow and rather useless private road which is equivalent to the value of a vacant residential allotment. His valuation fails to have regard to all the limitations on the value of the private road which have been identified. By contrast, Mr Taylor's valuation acknowledges those limitations and I think that his approach is to be preferred to that of Mr Morgan. With one qualification I accept it.

The factors which limit the value of this land reinforce the conclusion that Mr Taylor's assessment is to be preferred. They are:

(1) The private road is a long and narrow strip of land.

(2) The private road lacks utility, particularly for use by motor vehicles.

(3) The subject land is at the western end of the private road. As the land on both sides is owned by the Minister, the Minister is the only realistic purchaser.

(4) Since the private road is subject to a right of way, it has very little value to the applicant. The value of the subject land resides more in the Minister as the holder of the dominant tenement than in the applicant as the holder of the servient tenement, particularly as this is such a narrow parcel of land. The land has value to the applicant only if the Minister as holder of the dominant tenement is prepared to surrender his interest.

(5) The only value of the private road to the applicant is his capacity to sell portions to those who have used it and to use that portion which adjoins his own land. However, the Minister as a willing but prudent purchaser would know that the applicant cannot sell the land until the Minister relinquishes his right of way.

(6) The fact that the applicant may apply to extinguish the right of way does not adversely affect the Minister's bargaining power. It amounts to no more than a caution to the Minister not to overplay his hand. Mr Taylor agreed that the fact that the easement might be extinguished would result in the subject land having more than a nominal value. I accept that evidence. But that does not mean that the value will markedly increase. It certainly does not have a consequence that I should accept Mr Morgan's valuation since that valuation is flawed for the reasons already given. Instead, it has the consequence that I must consider whether it is necessary to adjust Mr Taylor's assessment.

I accept Mr Taylor's evidence that the applicant paid a realistic price for the private road. Mr Taylor's conclusion receives support from the purchase by Mr Lane of the right of way in the City of Adelaide. But the true purchase price to the applicant was more than $1,000. In addition, the National Westminister Bank required the applicant to pay the expenses it had incurred. Those expenses totalled $4,518.94. It was reasonable to add those expenses to the price paid by the applicant for the land as they are, in effect, part of the consideration. It is not, however, appropriate to add costs incurred by the applicant in tracing the ownership of land. Nor is it appropriate to add the cost of the valuation by Mr Sullivan, registration fees and the like, since they are costs not infrequently incurred by purchasers of land and do not form part of the consideration for the transfer. Thus, it is reasonable to say that the price paid for the land was $5,500.

The length of the subject land is about 18 per cent of the whole of the private road. If one determined the value of the subject land by simply calculating 18 per cent of that price the result is $990. But that is an overly simplistic approach. It ignores the fact that the major factor in the value of the private road to the applicant is as an addition to his allotment. It also ignores all of the other limitations upon the value of the land and, in particular, it ignores:

(1) that the private road is subject to a right of way in favour of the Minister;

(2) that the Minister is able to bargain with the fact that he is the holder of the dominant tenement;

(3) that the land is at the western end of the private road and causes no inconvenience to any other person;

(4) that the land is very long and narrow and has very limited utility.

For all of these reasons, the value of $990 must be substantially reduced. I agree with Mr Taylor that as the subject land is at the western end of the private road its value is thereby significantly reduced. Having regard to the fact that the Minister is a prudent purchaser aware of his superior bargaining position and that he can trade his relinquishing of the right of way against the price sought by the applicant, I think that the value of the subject land is no higher than $300. I therefore assess its unimproved capital value at $300.

As the Minister has conceded that he acted negligently in encroaching on to the subject land, the minimum compensation must, by virtue of s 5(1), be increased to $900. I do not think that the applicant is entitled to compensation on any other ground, particularly as he was aware of the encroachment when he purchased the land.

Section 12 of the Encroachments Act authorises the court to give notice of the application to any interested person and to join interested persons as parties. I had been informed that the applicant was seeking to sell to those persons, whose land adjoined the private road, the respective portions of the private road which they were using as their own. It was readily apparent that those persons had a legal, as well as a commercial, interest in the outcome of these proceedings. I therefore decided to give notice to those persons pursuant to s 12. The notice informed them that, if they wished to be heard, they should apply to the court. In the result, an order was made granting 12 persons leave to intervene in the action. Those persons appointed one of their number, Mr Wessel, to act as their spokesman. He asked some questions in cross-examination and made some submissions. Other intervenors made submissions. These intervenors did not unduly protract the hearing. There is no reason to make an order as to costs either in favour of or against the intervenors.

For these reasons, I will make orders to the following effect:

1. That the applicant transfer to the Minister part of the land comprised and described in Certificate of Title Register Book Volume 5516 Folio 686 being the whole of that portion of allotment 246 which is subject to a right of way measured 74.24 metres from the western boundary of the said allotment.

2. The Minister will pay all of the costs necessary to effect the said transfer.

3. That the Minister pay $900 to the applicant as compensation.

I will hear the parties as to the precise terms of the order and as to interest and costs.

Encroachments Act 1944s 4, s

Valuation of Land Act 1971s 5

Real Property Act 1886s 69

Encroachments Act 1944s 4, s

Valuation of Land Act 1971s 5

Real Property Act 1886s 69

Judgment No. [2000] SASC 141

At a glance

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Judgment (109 paragraphs)

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Cases Cited (7)