Busways Management Pty Ltd v Milner

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4265/02 BUSWAYS MANAGEMENT PTY LTD v STANLEY WILLIAM MILNER JUDGMENT 1 HIS HONOUR: This is another episode in a long running dispute between owners of adjoining land concerning a very small subject matter. The plaintiff's land is Lot 1 Deposited Plan 839626 ("Lot 1") and the defendant's land is Lot 27 Section 5 Deposited Plan 744 ("Lot 27"). Both lots face Wellington Street, Riverston. On the plaintiff's land there is erected a large factory complex which is close to the common boundary of Lot 1 and Lot 27. On the defendant's land there is a brick building which is clear of that boundary. But there is no dispute that the footings of the factory complex encroach to some degree on to the defendant's land. 2 There was initially some dispute as to the correct location of the boundary and an application for the determination of the position of the boundary was made under s 135B of the Real Property Act 1900 ("the RPA"). That application was determined by the Director of Land Titles in 1999 and a plan showing the determination was forwarded to the parties. That plan indicates, by a star or asterisk, the position at which one footing of the factory complex encroaches by up to 0.12 metres on to the defendant's land. The surveyor's report on which the determination is based notes: "Other footing encroachments unknown." The difficulty in ascertaining the extent of the encroachments seems to be that the encroachments are at or probably below the surface level of the land. There is nothing to indicate that any of the encroachments on to the defendant's land is to a greater extent than 0.12 or 0.14 metres. 3 Before the determination of the application under s 135B of the RPA, the defendant filed an application in the Land and Environment Court seeking relief under ss 3 and 9 of the Encroachment of Buildings Act 1922 ("the EBA"). Section 3 provides by subss (1) and (2): "(1) Either an adjacent owner or an encroaching owner may apply to the Court for relief under this Act in respect of any encroachment.

(2) On the application the Court may make such orders as it may deem just with respect to: (a) the payment of compensation to the adjacent owner, (b) the conveyance transfer or lease of the subject land to the encroaching owner, or the grant to the encroaching owner of any estate or interest therein or any easement right or privilege in relation thereto, (c) the removal of the encroachment."

Section 4 of the EBA is as follows: "(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 land value of the subject land, and in any other case three times such land 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."

And s 9 of the EBA provides for the determination by the Land and Environment Court of questions as to the position of the boundary. 4 On 2 March 2000 the Director of Land Titles, at the defendant's request, referred the determination of the position of the boundary to the Land and Environment Court pursuant to s 135J of the RPA. Those proceedings and, therefore, the location of the boundary was finalised on 30 June 2000 by consent orders in the Land and Environment Court as follows: "(1) The proceedings be discontinued.

(3) The boundary between lot 26 in deposited plan 744 and lot 27 in deposited plan 744 be fixed as stated in the determination of the Registrar General dated 22 December 1999."

"Lot 26 in deposited plan 744" is undoubtedly a reference to the relevant portion of the plaintiff's land described in this judgment as Lot 1. The plan attached to the Director of Land Titles' determination has since that time been relied on by the parties as showing the true boundary and as showing the situation as to encroachments of footings. The defendant, who was represented by counsel in the Land and Environment Court, but who now appears in person in these proceedings, has reiterated before me his acceptance of that plan. 5 The first set of proceedings in the Land and Environment Court proceeded to trial before Talbot J on the issue of whether there should be a lease or the grant of an easement at the present defendant's suit under s 3 of the EBA. Judgment was delivered by his Honour on 2 October 2001: Milner v Busways Management Pty Ltd [2001] NSWLEC 231. It will be apparent from the terms of ss 3 and 4 of the EBA set out above and from the terms of s 88K of the Conveyancing Act 1919 ("the CA") as discussed below that the issues agitated before Talbot J and the issues agitated in this Court as to the quantum of compensation if an easement be granted were much the same. The proceedings were between the same parties and issue estoppels will result from many of the findings of Talbot J. However, I should say that, in essence, the evidence before me would lead to the same conclusions as his Honour came to. 6 The following portions of his Honour's judgment ought be set out: "23 If, however, the Court finds that the encroachment demands an assessment of compensation Mr Kinchington says compensation would be less than $100. ……… Determination

27 It is not in dispute that there is some encroachment by part of the footings installed during the construction of the building on the respondent's land. All of the available evidence confirms that the encroachment is slight and has no impact by way of a constraint on the applicant's present or future use of the land. Based on the survey information before the Court it is reasonable to assume that on the balance of probabilities the encroachment lies entirely outside a fence constructed 0.14 metres off the boundary and within the applicant's land. Even if the Brown Survey is accepted, which it is not, the encroachment, such as it is, can only be described as minimal. …… 30 The Court is not able to conclude that a lease of the subject land or the grant of an easement is required. Even so, the amount of compensation payable would be a minim.

31 Having regard to the whole of the evidence and the submissions made on behalf of both parties and taking into account such of the matters specified in s 3(3) of the Encroachment of Buildings Act as are relevant the Court concludes that the proper exercise of its discretion in the circumstances is to refuse the relief that the applicant seeks. …… 34 Furthermore, the respondent has consistently offered to remedy the encroachment in response to the applicant's complaint by seeking to gain access for the purpose of removing the subterranean concrete intrusion into the applicant's land. These offers have not been accepted. The applicant does not seek that relief from the Court" 7 It will be seen from these passages that his Honour determined that the appropriate amount of compensation to be assessed was nil. His Honour did not have to proceed to a formal assessment of compensation because, taking into account the quantum of compensation be found appropriate, together with the other circumstances in evidence before his Honour, his Honour's conclusion was that there should be no grant of a lease or easement at the defendant's suit and the defendant's proceedings before his Honour ought be dismissed. 8 What has occurred since that time that has led the plaintiff to apply to this Court for an easement under s 88K of the CA is that the plaintiff has obtained from the relevant consent authority a consent for the strata subdivision of the factory complex on its land. It has in fact entered into contracts for the sale of a number of the units subject to the registration of the plan of strata subdivision. However, it has become apparent that the registration of that plan cannot be achieved without the existence of an appropriate easement in respect of the encroachment of the factory complex on to the defendant's land: see Strata Schemes (Freehold Development) Act 1973, s 8(1) and (2) and Schedule 1A item 4. 9 The plaintiff now applies for the grant of an easement under s 88K of the CA accordingly. That section, so far as material, provides: "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. …… (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." 10 As has been pointed out by Young J (as his Honour then was) in Hanny v Lewis (1999) NSW Conv R 55-879 at 56,874, there are four requirements to be established for the grant of a s 88K easement. They are: "(1) That the easement they seek is reasonably necessary for the effective use or development of their land;

(2) That the use of the dominant tenement in accordance with the easement will not be inconsistent with public interest;

(3) That the grant of the easement can be adequately compensated for;

(4) That all reasonable attempts have been made by the plaintiffs to obtain the easement but those attempts have been unsuccessful." 11 As to the first of these requirements, it was said in my judgment in Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845 that the provision does not require that there be an absolute necessity for the grant of an easement but that the need must go beyond mere desirability. Hodgson CJ in Eq (as his Honour then was) in 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1998) 43 NSWLR 503 at 508 - 509 analysed the meaning of reasonable necessity as follows: "What does 'reasonably necessary' mean?

It is clear that 'reasonably necessary' in s 88K(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 [sic] so, it would in my opinion certainly need to be at least reasonable."

That passage has been quoted with apparent or express approval in a number of subsequent judgments: Durack v De Winton (1998) 9 BPR 16,403 at 16,448 - 16,449; Grattan v Simpson (1998) 9 BPR 16,649 at 16,651; Hanny v Lewis at 56,875; Kent Street Pty Ltd v Council of the City of Sydney (2001) 10 BPR 18,757 at [11], [12]; Blulock Pty Ltd v Majic (2001) 10 BPR 19,143 at [14]. 12 It is not necessary for me in this case to express a concluded view as to the degree of my agreement with his Honour's analysis in all its detail. I have some reservations. One is as to the posing of a bipartite rather than a single test (if that is the effect of what his Honour said, which, properly read, it may not be). The other is as to whether it is really necessary for a conclusion of the reasonable necessity of the easement that the proposed use or development "must be (at least) substantially preferable to the alternative situation or situations" (my italics). I am, however, content on this occasion to determine the matter on the basis of his Honour's analysis as set out above. 13 The existing use or development of the plaintiff's land is for a factory complex in unitary title. The proposed use for development is for the same factory complex but held in separate titles under a strata subdivision scheme. My view on the evidence is that that proposed use or development is reasonable as compared with the present use and it is, in my view, substantially preferable to the use or development without the easement. The reason for my saying that is that it is, in my view, reasonable for the strata subdivision to be carried out with the grant of an easement permitting the maintenance of the minimal encroachment of the footings. It is also substantially preferable, so far as the plaintiff is concerned, to be able to use and to sell its land either in globo or by reference to the separate strata titles, which will permit marketing in that fashion, or the sale by the plaintiff of some units and the retention of others if it desires. In assessing the reasonableness, I take into account, of course, the impact of the grant of the easement on the defendant. That is shown, both by the determination of the issues in the judgment of Talbot J and by the evidence before me, to be absolutely minimal. The encroachment is long standing and has caused no demonstrated inconvenience to date. It is not shown that it impedes either the use of the defendant's land in its present state or its development in any fashion which may be contemplated by the defendant. Furthermore, as it was found by Talbot J, the plaintiff had offered to enter the defendant's land and at its own expense remove the encroachment, but that this had been declined by the defendant. The evidence before me shows further offers since that time to remedy the situation in the same way, which have not been accepted by the defendant. Taking all of the above matters into account, it is my view that the requirement of reasonable necessity has been made out. 14 The second requirement is of lack of inconsistency with the public interest. What I have already said about the present and contemplated uses of the building; the fact that strata subdivision consent has already been granted conditionally for the development; and the material generally available about the uses of the properties, shows that there is no inconsistency of the grant of the easement with the public interest. 15 Again, so far as the question of reasonableness of attempts to obtain the easement is concerned, as I have said, the findings on those issues before Talbot J are to the effect that up to that time there had been attempts to obtain the easement from the defendant which were unsuccessful. The evidence before me shows further attempts to obtain the easement which, again, have been unsuccessful. 16 It is a requirement of s 88K(4) of the CA that the question of compensation for any easement granted should be dealt with in the same order as the grant of the easement. As I have already said, the question of the appropriate compensation under s 3 of the EBA was determined by Talbot J. During the course of argument I had some doubts as to whether the determination by Talbot J in this regard was of the same subject matter or of a subject matter so closely similar to that required under the CA that I should regard that as ending the matter, at least in conjunction with any further evidence that there was before me on this subject. A close consideration of the provisions of the two statutes has led me to the conclusion that in substance the requirements of the provisions are substantially identical. 17 The compensation required to be determined under s 4 of the EBA as it was in fact considered by Talbot J was in respect of the lease or the grant of an easement to the encroaching owner. By s 4(2) that required regard to the value, improved or unimproved, of the relevant land of the adjacent owner, the loss and damage to be incurred through the encroachment and through the proposed orders to be made and the circumstances in which the encroachment was made. The requirements of the provisions for an assessment of compensation under s 88K of the CA have been summarised as follows by Young J in Wengarin Pty Ltd v Byron Shire Council (1999) 9 BPR 16,985 at [26]. "(1) The compensation referred to in subs (4) is the same compensation as is referred to in subs (2)(b), that is adequate compensation for loss or other disadvantage: see Goodwin at 15,801.

(2) The compensation is not a substitute for the price that could have been exacted if the section did not exist: SJC Construction Co Ltd v Sutton London Borough Council (1975) 29 P&CR 322 at 326, a decision of the English Court of Appeal.

(3) The compensation is not just the diminished value of the affected land: [Re] Seaforth Land Sales [Pty Ltd's Land (No 2) [1977] QdR 317] at 334.

(4) Ordinarily the compensation will be: (a) the diminished market value of the affected land (including what is sometimes called the hope value, that is the potential use to which the subject land could have been put: Re Bowden's Application (1983) 47 P&CR 455 at 457); (b) associated costs that would be caused to the owner of the affected land: Tregoyd at 15,856; (c) an assessment of the compensation for insecurity, loss of amenities such as loss of peace and quiet; Tregoyd at 15,856; SJC at 326; and see Preston and Newsom Restrictive Covenants Affecting Freehold Land, 8th ed, Sweet & Maxwell, London, 1991, p 284; (d) the compensation is to be less compensating advantages, if any. (5) There may be some exceptional cases which fall outside the net of s 88K(2)(b) yet are cases where it is extremely difficult to assess the compensation, but it is clear that the applicant is to derive a considerable benefit from the application. In such circumstances it may be appropriate to assess the compensation on a percentage of the profits that would be made." 18 It certainly seems to me that Talbot J made a binding finding in relation to the value of the relevant portion of the land to the adjacent owner. It must be taken that his Honour accepted the valuer's evidence that the diminution in value by the encroachment of the footings was less than $100 and could be characterised, in his Honour's colourful word, as a "minim". It is implicit in the orders that his Honour made that there should be no order for compensation by the application of the maxim de minimis non curat lex - that is, the law takes no notice of very small things. 19 The only thing that has led me to careful consideration as to whether his Honour's finding should be binding in this situation or whether, bearing in mind his Honour's finding and the other evidence before me, I can come to a conclusion as to the appropriate amount of compensation, is that it might be said that there is a difference in the subject matter before his Honour and before this Court. In reality I do not think that there is, because the grant of an easement necessitating compensation and the assessment of appropriate compensation was before his Honour, albeit at the defendant's suit and not at the plaintiff's suit as in this Court. The only thing that could be said to be different is that, if this Court grants an easement, it may specify an area within which the encroachments must fall if they are to have the benefit of that easement. It may be arguable that the actual creation of that easement on the title may be what has been described in some of the cases as a "blot on the title" which may justify some compensation. 20 However, I have come to the conclusion that this is not so. If I grant an easement, the easement will be only for the maintenance on the defendant's land of the presently existent footings of the factory complex on the plaintiff's land. In my view I should, in the creation of that easement, require the specification of an area within which encroachments protected by the easement may occur, but the easement will not affect all of the land within the indicated area but only such of the land within the indicated area as actually contains footings. Any encroachment of footings beyond the indicated area will not be protected by the easement to be granted. This may to some extent seem a strange result, but it is necessitated by the form of the evidence led before me by the plaintiff, which is identical with the form of the evidence led in this regard before Talbot J. Further definition of the actual extent of the footings has been prevented by the defendant's unwillingness to permit a full investigation upon his land. Bearing in mind the minimal nature of the intrusion into the defendant's property rights and the fact that that minimal nature will be apparent on the face of the title, there will in my view be no "blot on the title" which requires compensation. In those circumstances, if I grant an easement, bearing in mind that the easement will cover only the minimal actual encroachments by footings; that this will be made clear upon the face of the easement; and both the findings of Talbot J and the conclusions that flow from the evidence before me that there is no inconvenience or restriction of user imposed on the defendant, my assessment of the diminution of the market value of the land by the imposition of the easement is nil. Furthermore, on the evidence there will be no associated costs caused to the defendant and, bearing in mind my conclusion in [24] below, there will on all the evidence be no disturbance of the defendant which could constitute insecurity or loss of amenities. 21 The specification of compensation in an order granting an easement under s 88K can be dispensed with only if there are special circumstances. The nature of the expression "special circumstances" in this provision was considered by Young J in Wengarin supra at [14]. Its meaning was more generally discussed by me in Expile Pty Ltd v Jabb's Excavations Pty Ltd [2002] NSWSC 851. Special circumstances in short are circumstances of the instant case which are different from the normal case. The special circumstances in this case are as follows. The appropriate compensation for diminution of value of the land is nil. There are no associated costs, insecurity or loss of amenities to be compensated for. The defendant has not accepted the plaintiff's offers to enter and remove the encroachments at no expense to the defendant. By reason of those special circumstances I determine that compensation is not payable. 22 The four requirements mentioned by Young J having been fulfilled, I turn now to the general exercise of discretion involved in the grant of a s 88K easement. A number of matters were put to me by Mr Milner, appearing in person. Most of them did not have relevance to the exercise of the Court's discretion under s 88K. However, there was one reason that he advanced when asked his reason for opposition which does undoubtedly have cogency. He said, "It's my land, I have paid for it." As is apparent, both from general principle and from statements made in the various judgments of this Court relating to the exercise of its discretion (Tregoyd at 15,854; Durack at 16,449; Hanny at 56,875) it must always be borne in mind in exercising the discretion that this is an expropriatory statute which trenches upon rights of private property. Although it is not mentioned until now, I have not at any time lost sight of this important, indeed basic, principle in my approach to the evidence and the decision in this case. Nonetheless, as I made plain in Tregoyd, if the requirements of s 88K are fulfilled the jurisdiction under that section is enlivened and, subject to the exercise of the Court's discretion, then the right of private property must pro tanto yield to the dictates of the section. 23 The conclusion I have come to on all the matters before me in this case, including the reasonableness of the requirement and the conduct of the respective parties, is that an easement ought be imposed in favour of the plaintiff under s 88K of the CA. As I have already indicated, the easement should be limited to the maintenance of the encroachments constituted by the presently existing footings and it should be further constrained by definition of the relevant footings as footings falling within a strip 150 mm wide along the common boundary adjacent to the factory complex. I have determined that compensation should not be payable. 24 At one stage Mr Bedrossian, of counsel for the plaintiff, applied to enlarge the application by including an easement to go on the defendant's land to maintain the footings. However, the evidence does not show any need to maintain the footings insofar as they encroach on the defendant's land. It is clear on the evidence they could be removed without any harm to the factory complex. Such an easement might impair the defendant's rights of use (including future development) in a way which the easement I propose to grant does not. I shall not grant any such easement. 25 Short minutes may be brought in before me to give effect to this decision.

SUBMISSIONS AS TO COSTS 26 The question of the costs of these proceedings has been debated before me. There is a statutory provision that the plaintiff should bear the costs of proceedings of this nature except where otherwise ordered: s 88K(5). In any event, one would think that the Court would, even without such a provision, normally follow that course, bearing in mind that it is an indulgence or advantage that the plaintiff seeks by the bringing of these proceedings against an unwilling defendant. The plaintiff in this case has submitted to me that, not only ought there not be any question of it bearing the defendant's costs, but the defendant ought be ordered to pay the plaintiff's costs of these proceedings. That was the result as to costs in the proceedings before Talbot J but, of course, they were proceedings of a different nature. They were proceedings brought by the plaintiff to seek the imposition of a lease or easement and to recover compensation at his suit from the plaintiff and it is entirely understandable that his Honour should have ordered the present defendant to pay the present plaintiff's costs when the defendant's proceedings failed. 27 The manner in which I propose to exercise my discretion in these proceedings is that there be no order as to costs. In my view the statutory presumption, if I may call it that, should be displaced. It remains the situation that the plaintiff is seeking an indulgence in these proceedings in which it is the moving party. The other factors that I take into account in exercising the costs discretion are as follows. The defendant has incurred no legal costs in this matter. The appearance in the matter was entered by the defendant in person and it is the defendant who has appeared before me on all occasions. Furthermore, I note that the plaintiff took no steps in relation to the disposition by Talbot J of the proceedings before his Honour to encourage his Honour to grant an easement in those proceedings, whatever his Honour may have done about compensation. Mr Bedrossian cannot demonstrate to me from the evidence the time at which the strata subdivision was first contemplated, nor the time at which formal application was made to the consent authority for that consent, but the evidence shows that the subdivision certificate was issued on 6 November 2001, only a month after Talbot J's decision and less than two months after the hearing before Talbot J. It seems to me inconceivable that the strata subdivision application would not have been before the Council by the time that Talbot J was seized of the matter or, at the very least, that the strata subdivision application was in contemplation at that time. The statutory requirement of the Strata Schemes (Freehold Development) Act 1973 concerning the necessity for an easement were there to be seen at all times. Certainly no evidence is led before me which would lead to the conclusion that contemplation of the strata scheme arose after the hearing before and the decision of Talbot J. Yet the plaintiff appears to have made no application to Talbot J or taken any steps to suggest to his Honour that the granting of an easement would be appropriate, whatever conclusion his Honour came to on the compensation, or otherwise to procure in those proceedings the grant of the easement it requires. 28 As I have said, the decision I have come to on a consideration of all those matters is that the appropriate order in this case is that there should be no order as to costs of the proceedings to date. **********

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