Campbell v Crane

Court of Appeal (NSW)|2013-01-30|Before: Bathurst CJ, Barrett JA, Smart AJ

Judgment 1BATHURST CJ: I agree with Tobias AJA. 2BARRETT JA: I agree with Tobias AJA. 3TOBIAS AJA: This matter concerns a dispute between neighbours over a number of minor encroachments which has spawned litigation the costs of which, I would infer, are out of all proportion to the extent and impact of the encroachments. One of the sad, but concerning, things about the litigation is that not only has it lasted since 2007 but as it has progressed the relations between the parties have deteriorated to the point where every attempt to bring the matter to a close has been unsuccessful. 4The properties of the parties adjoin each other. That of the appellant is located at 15 xxx Belmont (the appellants' property) whereas that of the respondent is located next door at 17 xxx Belmont (the respondent's property). The appellants alleged that there were some ten specified encroachments by the respondent on the appellants' property. 5On 15 June 2007 the appellants commenced proceedings by way of summons seeking declarations that the respondent had encroached and trespassed upon their property and orders that the encroachments be removed and that the respondents pay the appellants damages including exemplary damages. 6In an Amended Statement of Claim filed on 16 December 2008 the appellants sought an order under s 3(2)(c) of the Encroachment of Buildings Act 1922 (NSW) (the Act) that the encroachments be removed and an order under s 3(2)(a) that the respondent pay the appellants compensation. On the same day the respondent filed a cross claim seeking, relevantly, an order pursuant to s 3(2)(b) of the Act that there be a conveyance, transfer or lease to him of that part of the appellants' land which was encroached upon and an order that no compensation was payable by the respondent to the appellants consequent upon the orders so sought. 7Proceedings for relief under the Act are required to be instituted in the Land and Environment Court. I assume that the present proceedings were commenced in the Common Law Division of the Supreme Court as the Summons contained claims for trespass and damages (including exemplary damages) which were considered to be beyond the jurisdiction of the Land and Environment Court. Those claims were pursued before Smart AJ and were successful in part. His Honour's findings with respect to those claims are not the subject of challenge. It would appear that no point was taken as to the power of the Supreme Court, as distinct from the Land and Environment Court, to grant relief under the Act. 8The proceedings were heard by the primary judge on 16 and 17 December 2008 and his Honour delivered judgment on 8 May 2009 (the May 2009 judgment). He found that as the encroachments were "minor", an order for their removal was not warranted. Rather, he considered that the appropriate relief under the Act was that the appellants should convey to the respondent a narrow strip 300 mm wide adjacent to and extending along the length of the western boundary of the appellants' land (the strip). 9His Honour also held that the appellants were entitled to compensation although the nature of that compensation and the manner in which his Honour expressed himself in ordering it have constituted the substantive issues to be determined on the appeal. In particular, an issue arose as to whether the compensation to which the appellants were entitled pursuant to the orders made by the primary judge and, later, by the Chief Judge in Equity, was the sum of $45,000 or $117,150. The final orders in respect of which the appeal is brought were made by the Chief Judge, in the unavailability of the primary judge, on 2 September 2011 when, relevantly, she ordered, in effect, that upon the transfer from the appellants to the respondent of the strip, the respondent was to provide to the appellants a bank cheque in the sum of $45,000 in their favour (Order 5). That was the order in respect of which the appeal was, in the main, brought although a number of other orders made by the primary judge, which were generally related to and pre-dated Order 5, were the subject of challenge.

The relevant statutory provisions 10Section 2 of the Act relevantly defines the expression "Adjacent owner" to mean the owner of land over which an encroachment extends. It defines the expression "Encroaching owner" to mean the owner of land contiguous to the boundary beyond which an encroachment extends. The expression "Subject land" is defined to mean that part of the land over which an encroachment extends and "Court" is defined to mean the Land and Environment Court. 11The substantive provisions of the Act with which the appeal is concerned are s 3 and s 4 which, relevantly, are in the following terms: 3 Encroachments (1) Either an adjacent owner or an encroaching owner may apply to the Court for relief under this Act in respect of any encroachment. (2) On the application the Court may make such orders as it may deem just with respect to: (a) the payment of compensation to the adjacent owner, (b) the conveyance transfer or lease of the subject land to the encroaching owner, or the grant to the encroaching owner of any estate or interest therein or any easement right or privilege in relation thereto, (c) the removal of the encroachment. (3) The Court may grant or refuse the relief or any part thereof as it deems proper in the circumstances of the case, and in the exercise of this discretion may consider amongst other matters: (a) . . . (b) the situation and value of the subject land, and the nature and extent of the encroachment, (c) . . . (d) the loss and damage which has been or will be incurred by the adjacent owner, (e) . . . (f) the circumstances in which the encroachment was made. (4) ... (5) ... 4 Compensation (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.

The May 2009 Judgment 12The primary judge dealt with a number of issues in the May 2009 judgment which are not the subject of challenge and are therefore not relevant to the issues on the appeal. As I have noted, once his Honour found that the encroachments had occurred, the appellants' submission to his Honour was that he should make an order pursuant to s 3(2)(c) of the Act that they be removed rather than that an order be made pursuant to s 3(2)(b) that a sliver of land over which the encroachments extended be conveyed to the respondent or an easement be granted over the same area. 13At [43] of his reasons, his Honour did not consider that an order for removal was warranted given that he regarded the encroachments as "minor". However, at [46], after referring to a subsoil drainage line the encroachment of which he considered should be removed, his Honour observed that relations between the parties were strained and that as they were unable to work together "[a] conveyance would probably lead to less disputes in the future. The better course is to order a conveyance of that small strip. Its loss will not affect, in any real way, the enjoyment by the [appellants] of their land." 14Accordingly, at [54] his Honour foreshadowed an order that the appellants convey to the respondent a narrow strip 300 mm wide adjacent to and extending the length of the western boundary of their property. With respect to the question of compensation, his Honour observed: [55] I am not satisfied that the encroachments did not arise from negligence in that a survey was not obtained when it was prudent to do so. Compensation is to be paid by the defendant to the plaintiffs in respect of the conveyance or transfer of the strip 0.3 metres wide in accordance with s 4 of the Encroachment of Buildings Act 1922. The parties should endeavour to agree on the compensation payable. In default of agreement, that issue should be referred to an expert valuer appointed by the Court. (The parties are to be at liberty to agree upon an alternate method of proceeding. I would prefer to avoid a situation where the costs of the valuation exercise are out of proportion to the compensation.) ... 15His Honour directed that the parties were to serve on each other draft Short Minutes to give effect to his Honour's judgment. He then listed the matter for further hearing on 1 June 2009 in order to settle those minutes and to "resolve any outstanding issues". 16The proceedings returned to his Honour on 1 June 2009 and on 2 June 2009 his Honour delivered a further judgment (the June 2009 judgment). It is apparent from that judgment that his Honour generally accepted the Short Minutes proffered by the appellants. Relevantly, proposed Orders 5, 7 and 8 of those Short Minutes provided as follows: 5. An order under section 3(2)(b) of the Encroachment of Buildings Act 1922 that the Plaintiffs convey to the Defendants a 0.3 metre strip of land running along, and abutting, the whole length of the Plaintiffs' western boundary. . . . 7. An order under sections 3(2)(a) and 4(1) of the Encroachment of Buildings Act 1922 that the Defendants pay to the Plaintiffs compensation for the subject land at three times the value of the parcel of land so conveyed, having regard to section 4(2) of the Encroachment of Buildings Act 1922. 8. Failing agreement between the parties on a figure representing three times the value of the land so ordered to be conveyed to the Defendants, the parties are to agree on a single expert to calculate a figure representing three times the value of the subject land (having regard to the factors contained in section 4(2) of the Encroachment of Buildings Act 1922) the costs of the expert to be borne by the Defendants; 17With respect to proposed Order 7, the primary judge made the following observations: [6] As for the order for compensation, it is the encroachments of the defendant which have led to the conveyance of the 0.3 metre strip along the boundary. There were some 10 encroachments and I took the view that having regard to the location of the encroachments along the boundary it was prudent to order the conveyance of the 0.3 metre strip along the whole of the boundary line. [7] I regard order 7 in the plaintiffs' short minutes as reflecting what I intended and as reasonable in the circumstances in accordance with the Encroachment of Buildings Act 1922. [9] It is important that the costs of this minor valuation appraisal be contained and that elaborate exercises not be undertaken. 18The primary judge then made Orders 5 and 7 as per the appellants' Short Minutes. Order 8 as made by his Honour was in the following terms: Failing agreement between the parties on a figure representing three times the value of the land so ordered to be conveyed to the defendants, the parties are to agree on a single expert to calculate a figure representing three times the value of the subject land (having regard to the factors contained in section 4(2) of the Encroachment of Buildings Act 1922). In default of agreement of the parties within 28 days as to the single expert to be appointed, it be referred to the President of the New South Wales Chapter of the Institute of Arbitrators to nominate an expert to make such valuation or appraisal. That person and any person agreed by the parties is to act as an expert and not as an arbitrator. Each party shall, within a period of 42 days of the expert entering upon his appraisal, nominate the figure which such party claims should be determined as compensation both to the expert and the opposite party. The agreed or appointed expert should give both parties the opportunity to make written submissions within 42 days of entering his appraisal but should not otherwise be bound to hear the parties. Each party shall make available to the other a copy of the party's submissions. The costs of the expert shall be borne equally in the first instance with each party depositing $1,000 by way of security for costs with the expert within 28 days of his being agreed or appointed. The parties with the concurrence of the expert are to be at liberty by mutual agreement to vary this arrangement. The expert is to determine in what proportions the costs are to be borne of such appraisal. 19The first sentence of Order 8 was in the form proposed in the appellants' Short Minutes with the deletion of the words "the costs of the expert to be borne by the Defendants". The balance of Order 8 was added by the primary judge at [10] of his reasons but it was not suggested that they were added by consent of the parties albeit that there was no objection made to them. Unfortunately, there is no transcript of the hearing on 1 and 2 June 2009 and none of the counsel who appeared on the appeal appeared at that hearing.

The implementation of Order 8 20The parties failed to agree on a figure representing three times the value of the land the subject of Order 7. They further failed to agree on a relevant expert to calculate that value. Accordingly, the President of the NSW Chapter of the Institute of Arbitrators nominated a Mr Michael Whelan as the relevant expert. Mr Whelan, a registered surveyor (and not a valuer), made his "Expert Determination" on 23 April 2010. His report, amongst other things, summarised the submissions made to him on behalf of each of the parties. He ultimately determined that the value of the strip was $15,000 so that three times that value was the sum of $45,000. 21However, he noted that the appellants' submissions had included a report by a Mr James Shepherd dated 7 August 2009. Mr Shepherd was a licensed builder and was in the business of providing building reports. He considered that as a consequence of the boundary between the two properties being moved 300 mm closer to the western wall of the building erected upon the appellants' land, the necessity arose, particularly if a fence was erected upon the new boundary, for an air conditioning unit on that wall to be relocated; a spa pump, filter pipework and enclosure to also be relocated; an existing surcharge gully to be demolished and a new surcharge point provided and an alternative electricity meter cover to be provided. He costed the work involved in carrying out the above items in the total amount of $8,450. 22In addition, Mr Shepherd opined that a further impact caused by the movement of the boundary between the two properties was that the wall and eves of the building upon the appellants' land would be closer to the new boundary than the minimum boundary set backs required by Lake Macquarie City Council (the Council) and, in particular, by the provisions of the Building Code of Australia (the BCA). He considered that it would therefore be necessary to fire rate the western wall of the appellants' building including the access to the sub-floor area, the existing windows and the eves and gutters. He costed this work in the sum of $63,700. Accordingly, if Mr Shepherd's report was accepted as the appellants submitted it should be, they were entitled to compensation over and above three times the value of the strip in the sum of $72,150. 23In his report, Mr Whelan also expressed the opinion that all costs associated with the proposed movement of the boundary between the two properties should be paid by the respondent to the appellants. He further opined that the proposed boundary adjustment was a sub-division and therefore required the consent of the Council and had to be carried out in accordance with the Lake Macquarie Local Environmental Plan 2004 which required that: All building works must be carried out in accordance with the provisions of the Building Code of Australia (BCA) and the Environmental Planning and Assessment Act 1979 (as amended). He expressed the opinion that moving the boundary to the east by 300 mm "may mean" that the appellants' existing building would breach the set back provisions in the BCA and possibly the planning provisions in regard to the minimum width and area of the adjusted allotment. 24Mr Whelan further noted that the respondent's valuation expert, Ms Joy Garland, had in her report which was part of the respondent's submission to him, acknowledged that if the dividing fence was to be moved closer to the appellants' residence then compensation should include the cost of the works which Mr Shepherd had determined would be necessary to be carried out for the total amount of $8450. 25In fact Mr Whelan was in error when he suggested that the carrying out of Order 5 made by the primary judge would involve a sub-division and, therefore, would require Council consent. By letter dated 25 May 2010 the Registrar General confirmed that as the plan for boundary adjustment purposes was based on Order 5, a completed subdivision certificate was not required. All that was required was a plan of identification to record the new boundary. 26As I have indicated, Mr Whelan's report contained a summary of the submissions made to him on behalf of each of the parties. He recorded the following with respect to the submissions on behalf of the appellants: 5.2 The compensation to be paid is at three times the value of the land and is to be assessed in accordance with Sections 4(2)(a), (b) and (c) of the Encroachment of Buildings Act 1922. 5.3 Section 4(2)(a) provides that the value is to reflect the value of the land to the plaintiffs themselves. 27On the other hand, he recorded a submission on behalf of the respondent that "the value of the subject land should not be subject to increases under s 4(2) of the Encroachment of Buildings Act 1922."

The appellants seek the adoption of Mr Whelan's Report 28As the respondent continued to maintain that the only compensation which was the subject of the primary judge's Order 7 was an amount equivalent to three times the value of the land conveyed, on 22 September 2010 the appellants filed a Notice of Motion seeking an order under r 20.24(1) of the Uniform Civil Procedure Rules (the UCPR) that Mr Whelan's report dated 23 April 2010 "pursuant to the reference made by this Court to him" be adopted and that additionally, or alternatively, that judgment be entered for the appellants against the respondent in the sum of $117,150. 29That Notice of Motion came on for hearing before the primary judge on 29 March 2011. His Honour delivered judgment with respect to the Motion on 6 April 2011 (the April 2011 judgment) in which he declined to adopt Mr Whelan's report or to order the respondent to pay the appellants the sum of $117,150 in respect of their claim under the Act. He therefore dismissed the appellant's Notice of Motion. His Honour did not deal with the question of costs of the Motion but these costs were dealt with by the Chief Judge on 2 September 2011 when she ordered that they be paid by the appellants. The present appeal extends to the order made by the primary judge on 6 April 2011 dismissing the Notice of Motion and the consequential order for costs made by the Chief Judge on 2 September 2011.

The April 2011 Judgment 30At [8] of the April 2011 judgment the primary judge noted that the orders made by him on 2 June 2009 and in particular Order 8, did not state under which provision of the UCPR they were made; nor did they use unambiguous language conveying that there was a reference at all. Nevertheless, the appellants submitted to his Honour that there had been a reference under UCPR Part 20, Division 3. Their application for his Honour to adopt Mr Whelan's report was therefore made, so it was asserted, pursuant to UCPR Part 20.24(1)(a). 31At [16] his Honour referred to [55] of the May 2009 judgment and observed that the Court was contemplating that there would be a reference. However, at [36] of the April 2011 judgment he did not find it necessary to decide whether the orders made on 2 June 2009 amounted to a reference under UCPR Part 20, Division 3 or whether those orders amounted to "otherwise ordering" under UCPR Part 20.23. This was because his Honour was not prepared to adopt Mr Whelan's report for the following reasons: (a) As mentioned the Court was not told of and did not envisage the possible difficulties mentioned in Mr Whelan's report on p 7 and the factors mentioned in Mr Shepherd's report (and reproduced in Mr Whelan's report in substance). If the Court had been told of, or had envisaged, such factors, the case may have been decided differently and other orders may have been made. [the difficulties referred to by Mr Whelan on page 7 would appear to relate to the possible breach of the set back provisions under the BCA and which were the subject of Mr Shepherd's report requiring fire rating of the western wall of the building upon the appellant's land.] (b) No adjournment was sought on 2 June 2009 to investigate the consequences of the foreshadowed order for the conveyance (transfer) of the strip of 0.3 metre along the western boundary of number 15. (c) The Court envisaged that the expert appointed would have carried out a valuation appraisal of the 0.3 metre strip of land and multiplied it by three times and not gone further. (d) The amount of compensation assessed by Mr Whelan as payable appears disproportionate to what the Court had envisaged when it made its orders of 2 June 2009 on the material then available. (e) The requirements of the Lake Macquarie City Council and the application of the Lake Macquarie Environmental Plan 2004 including the Building Code of Australia (BCA) need to be investigated and determined. 32As I have indicated, at [37] his Honour said that he would dismiss the appellants' motion. He then added the following: I was asked by the defendant to confirm that the defendant is to pay $45,000.00 as the total sum required for the transfer of the 0.3 metre strip of land. The parties have agreed that the strip should be valued at $15,000.00. Three times that value is $45,000.00. That is the sum payable under operative orders 5 - 7 of the orders of 2 June 2009. This is subject to any variation, if the plaintiffs should successfully apply to reopen, as to which I express no opinion or any order of the Court of Appeal. It may be useful if the parties approached the Lake Macquarie City Council to ascertain its approach to the proposed transfer. It is to be noted that the appellants did not apply to reopen their case for the purpose of calling evidence, such as from Mr Shepherd, to support a case for compensation to exceed the minimum provided for by s 4(1) of the Act.

Did Order 8 amount to a reference under UCPR Rule 20.14? 33Although the primary judge did not answer this question, in my view it cannot be gainsaid that there was no such reference. There is an obvious distinction between a referee appointed under UCPR Part 20 Division 3 and an expert who is not to act as an arbitrator as Order 8 provided. Furthermore, the clear implication from UCPR 20.14 and 20.15 is that the Court is required to appoint a particular person as a referee whose suitability and qualifications it can assess as appropriate to determine the question or issue to be referred. Order 8 did not comply with those rules. According, and quite properly, on the appeal the appellants did not seek to support the proposition that there was any such reference.

Was there an agreement between the parties to submit the matter to an expert? 34The appellants submitted that there was such an agreement. In my view there was not. That part of Order 8 which was added by the primary judge applied in default of the parties themselves agreeing on the appointment of a single expert. But as I noted at [19] above, it was not added either with the consent or at the request of the parties albeit that it would appear that neither party objected to it being added by his Honour to Order 8 in the form proposed in the appellants' draft Short Minutes. Furthermore, and significantly, there is nothing in that part of Order 8 added by the primary judge which signifies that the parties had agreed to be bound by the determination of the expert. 35Pursuant to s 3(2) of the Act a discretion is vested in the Land and Environment Court to make such orders as it may "deem just" with respect to, amongst other things, the payment of compensation to the owner of the land over which an encroachment extends. The matters that may be taken into account in the exercise of that discretion are referred to in s 3(3). Where an order is made in accordance with s 3(2)(b), then s 4(1) provides for the payment of minimum compensation being the value of the land over which an encroachment extends or, in an appropriate case, three times that value. Section 4(2) then empowers the Court to determine whether compensation should exceed that minimum and if so, by what amount. In exercising that discretion the Court is bound to have regard to the three factors set out in the sub-section. 36There is no doubt that it would be open to the Court to refer the issue raised by, for instance, s 4(2)(b) to a referee for determination provided that ultimately the Court, upon receiving the referee's report, is prepared to adopt it and otherwise determine in its discretion whether compensation should be paid which exceeds the minimum provided for by s 4(1) and if so by what amount. Equally, it is possible that the parties could, by agreement, determine that compensation should be assessed by a third party by whose decision they would be bound. Neither of those processes occurred in the present case. In particular, as the respondent submitted, there is no evidence that the parties agreed to refer to a third party what was an open-ended, unlimited and unchallengeable discretionary judgment. 37In my respectful opinion, the "arrangements" which his Honour provided for in Order 8 were beyond power. This conclusion accords with the submissions of the appellants. They therefore submitted that Order 8 should be set aside and that the matter of compensation payable under s 4 should be remitted to (presumably) the Land and Environment Court for further determination. 38However, as the respondent submitted, any such remitter could not be so confined. The primary judge made it clear in the April 2011 judgment that had he been made aware during the course of the hearing and at the time he made the orders of 2 June 2009 that Order 5 would have the impacts and consequences asserted in Mr Shepherd's report, then he may well have made a different order to that encompassed by Order 5. Thus at [27] of the April 2011 judgment his Honour observed: Neither during the hearing or settling of the orders on 2 June 2009 was I made aware of the factors mentioned in the report of Mr Peter Shepherd of 7 August 2009. The claim for fire rating to the western wall of the building on number 15 said to justify an expenditure of $63,700.00 would require detailed examination of the relevant requirements and possibly expert evidence. The relevant requirements could include those in the Lake Macquarie Local Environmental Plan 2004, those of the Land and Property Management Authority, those of the Building Code of Australia (BCA) and those as to subdivisions. If I had been aware of the matters referred to in Mr Shepherd's report, I may have made different orders. 39It follows in my view that if there were to be a remitter it would be necessary for all issues to be re-determined and not just the question of compensation upon the assumption that Order 5 made by his Honour on 2 June 2009 remained on foot. However, as will appear, in my view it would be inappropriate for there to be any remitter as now sought by the appellants.

The conduct of the trial by the appellants on the issue of compensation 40As noted at [19] above, none of the counsel who appeared on the appeal appeared before the primary judge in 2008 and 2009. However, it is necessary to refer to parts of the transcript of 16 and 17 December 2008 to understand the case that the appellants' counsel was then making. It is also necessary to refer to one exchange relating to the provision of the words in Order 7 "having regard to section 4(2) of the Encroachment of Buildings Act 1922" and in Order 8 "(having regard to the factors contained in section 4(2) of the Encroachment of Buildings Act 1922)". The effect of the addition of those words to what would, in their absence, be an unambiguous order that the only compensation to which the appellants were entitled was the minimum compensation under s 4(1) thus needs to be considered. 41In the transcript of 16 December 2008 (at Black 10-11) the appellants' then counsel stated the following: LAWSON: Yes. Your Honour, I may be able to cut across the need for these affidavits altogether - and if Mr Holmes objects to what I'm about to say, he should interrupt me - but we had discussions about what would happen if we came to a position where your Honour thought that a particular remedy was appropriate for this situation, but there was no information upon which your Honour could quantify that remedy, like if your Honour considers an order that a sliver of land be conveyed by the plaintiff to the defendant, or if your Honour considers that an easement should be granted to accommodate the encroachments in situ. Mr Holmes and I discussed that if we come to that position, then there would be no issue with referring that particular matter out for a valuation, because once we get to that point it seems that, subject to the valuation, the rest of the issues will fall away. Now that's what Mr Holmes and I discussed. And if we do get to that point of course your Honour won't need to consider whether Mr Holmes' client has been diligent or not diligent in coming to court with the appropriate evidence and would simply refer it out for a valuation. And I would need to get some formal instructions from my client that they are content with that position. But that certainly is a practical solution, if we ever arrive at that point. ... If your Honour does arrive at the point where your Honour is considering either a conveyance or an easement, then of course there can't be a conveyance of an irregular shape, and I will be submitting at the end of the day it makes great sense if your Honour is at that position to require a conveyance or an easement over a .3 metre wide strip of land running along the western boundary so that there is a regular shape, not to cause the Land Titles Office undue distress, and that can be quantified much more readily than arguing about what is the total square metrage encroached upon, because it would simply be a matter of multiplying .3 by the length of the particular common boundary. (Emphasis added) Counsel for the respondent agreed with the foregoing. 42Given its context, the impression is that the appellants' then counsel was asserting that in the event that his Honour determined to order that there be a conveyance of a strip of land 300 mm wide running along the western boundary of the appellants' land, then it would be an easy matter for that land to be valued by a valuer to whom that exercise could be referred. 43In address counsel for the appellants referred to s 4 of the Act in the following exchange (at Black 93-94): Your Honour may recall that s 4 of the Encroachment of Buildings Act dealing with compensation doesn't state positively that the compensation is to be the value of the land, or three times if there's negligence involved, but it says that the "minimum compensation" is to be the value of the land, or three times the value of the land if negligence is involved. HIS HONOUR: And then you go over to (2), which is over the page. LAWSON: 4(2)? HIS HONOUR: 4(2), yes. That tells you what you've got to "have regard to". LAWSON: And (2)(b) is quite relevant: "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." Now, if your Honour takes the view that an order for support of this wall may - if the wall is demolished or there are improvements made on the property - necessitate the plaintiffs bringing an application to have that easement dissolved or otherwise modified; then that is clearly a loss that "will be incurred by the adjacent owner" "through the orders proposed to be made in favour of the encroaching owner". So your Honour may arrive at this position. Your Honour may order the demolition of all of the structures apart from the footings supporting the wall. Your Honour may grant an easement .3 metres wide for the length of that particular wall which is supported. Your Honour then may order compensation for the encroachment to be - assuming your Honour finds negligence on the part of the defendants - three times the value of the particular block of land carved out by the easement. But your Honour would also, in my submission, add a buffer to that to reflect the possibility - indeed the probability, on my case - that it will be necessary for the Campbells to do something and it will probably be necessary for them to apply under the Conveyancing Act, I think it is, to have an easement varied sometime in the future. What buffer your Honour allows for that would have to be of course a buffer that reflects the cost of a relatively simple suit in today's dollars, discounted perhaps for the possibility that it may not be necessary. In my submission your Honour would be considering a buffer of between 15 and 20 thousand dollars. In my submission such a buffer is clearly contemplated by 4(2)(b) of the Encroachment of Buildings Act. 44Two points should be made with respect to the above exchange. The first is that it would appear that the primary judge, with the concurrence of counsel for the appellants, considered that in determining the value of the strip for the purposes of s 4(1), the valuer was to have regard to the factors set out in s 4(2). It is that part of the above exchange between counsel and his Honour that in my view explains why in the Short Minutes proffered to his Honour on 1 June 2009, Order 7 included the words "having regard to s 4(2) of the Encroachment of Buildings Act 1922", which were repeated in slightly different terms at the end of the first sentence of Order 8. 45It may be that his Honour had in mind when he referred to s 4(2) the factor set out in s 4(2)(a), namely, the value of that part of the land over which the encroachment extended to the owner of that land. In other words, to borrow from a different but related area of discourse, namely, the determination of compensation on the compulsory acquisition of land, it was thought that regard to that factor might reveal that the strip had a "special value" to the appellants which might justify compensation exceeding the minimum determined pursuant to s 4(1) by the addition of that "special value" to what would otherwise be the ordinary value of the strip. 46However, it should be emphasised that any such determination of "special value" would not affect the determination of the value of the strip for the purpose of s 4(1) but would only be relevant to the exercise of the Court's discretion to determine whether compensation should exceed the minimum and, if so, by what amount. 47If the foregoing is correct, it follows that Order 7 is in part in error in so far as it seems to provide that the determination of value for the purpose of s 4(1) is to be influenced by having regard to the factors set forth in s 4(2). As I have indicated, in my view the s 4(1) value of the strip was to be determined separately from any "special value" assessed having regard to s 4(2)(a). The latter was relevant only to the exercise of the Court's discretion to determine whether compensation should exceed the minimum provided by s 4(1). The error in Orders 7 and 8 is that they appear to have conflated the two matters. 48However, of greater relevance for present purposes is that in the exchange extracted at [43] above, counsel for the appellants drew his Honour's attention to s 4(2)(b). It was not suggested that the additional compensation determined by Mr Whelan over and above the sum of $45,000 representing three times the value of the strip was determined otherwise than pursuant to that provision. However, counsel for the appellants did not seek s 4(2) compensation in a form that accorded with Mr Whelan's assessment. He did no more than seek what he referred to as a "buffer" on the assumption that his Honour did not accede to there being a conveyance of the strip but only an easement over the same area. 49Although the primary judge noted at [31] of the April 2011 judgment that the appellants may not have appreciated the possible ramifications of Order 5 until they received Mr Shepherd's report of August 2009, the fact remains that first, the respondent was by its cross-claim seeking a conveyance of the strip; secondly, in the exchange referred to at [41] above, counsel for the appellants seemed to consider that there was merit in that approach; and thirdly, being fully aware that a conveyance of the strip was being sought, no attempt was made for the purposes of enabling his Honour to determine compensation under s 4(2) to lead evidence as to the impact or consequences of such an order as later determined by Mr Shepherd. In other words, if Mr Shepherd was to be relied upon for this purpose, he should have been called in either the December 2008 or June 2009 hearing. No explanation was forthcoming as to why he could not have been called to provide appropriate evidence of the nature of that contained in his August 2009 report. 50Furthermore, his Honour made it clear when he published the May 2009 judgment that he proposed to order conveyance of the strip and then stood the matter over until 1 June 2009 to settle Short Minutes and to "resolve any outstanding issues". One of those outstanding issues was clearly the impact that his Honour's order for a conveyance would have upon the appellant's property. Yet no step was taken by the appellants to lead evidence to support a claim for additional compensation as a consequence of any alleged loss or damage of the nature of that referred to in s 4(2)(b). 51In the June 2009 judgment, his Honour also made it clear that the process of valuation that was contemplated by Order 8 was to be a "minor valuation appraisal" which was to be "contained and that elaborate exercises not be undertaken". Those statements by his Honour should have sent a clear message to the appellants and their advisors that what his Honour had in mind was no more than an exercise involving the valuation of the strip and did not include an assessment of any loss or damage pursuant to s 4(2)(b). 52Yet, as his Honour noted in the April 2011 judgment, the appellants could have applied to re-open but never did. In this respect the onus was clearly upon the appellants to claim and prove any such loss or damage. Contrary to the appellants' submission on the appeal, there was no obligation on the primary judge to consider whether any such loss or damage had been or would be incurred unless the issue was raised by the appellants and supported by evidence. 53On the hearing of the appellants' Notice of Motion seeking an order that Mr Whelan's report be adopted, senior counsel for the respondent made the point that the appellants' case at trial was not run on the basis that they were entitled to compensation of the nature of that now sought based on Mr Shepherd's report. In this respect, the respondent relied upon an affidavit of Ernest Neil Scott, the respondent's solicitor, sworn 25 March 2011 in which he deposed as follows: 21. I record that when Duncan Cotterill on behalf of the Defendant was preparing to nominate a figure representing the value of the Subject Land to the Expert, Duncan Cotterill did so specifically in relation to the Orders and reasons in the Judgment at Tabs 1 & 2 of the Exhibit. It was on this basis that Duncan Cotterill obtained the Valuation Report on the Subject Land annexed and marked "K" as described above. 22. I record that Duncan Cotterill did not obtain evidence on or address building works, plumbing and electrical works, building code compliance or additional claims for compensation for the purposes of submissions to the Expert, as according to my understanding, none of those matters formed part of the Expert's determination. 23. I record that when the issues in this matter were argued before the Court, there was no affidavit evidence or expert reports on the expenses of building works, plumbing and electrical works, building code compliance or additional claims for compensation by the Plaintiffs. I further record that at no stage was there any indication or consideration that the Defendant would be exposed to additional costs associated with the transfer of the Subject Land, over and above the costs of determining the value and the costs of transfer. 24. I am instructed by the Defendant and I verily believe that had it been addressed in Court that Defendant would be required to pay in excess of $117,000.00 for the conveyance of the Subject Land, which has a market valuation of $15,000 according to the Valuation Report annexed and marked "K", then the Defendant would have given instructions for: a. Evidence against the quantum of costs claimed by the Plaintiff. b. Submissions against any order requiring conveyance of the land on the grounds that that remedy would be disproportionate to the extent of the encroachment. c. Submissions in favour of orders where the costs are more proportionate to the damage claimed. These paragraphs of Mr Scott's affidavit were admitted by his Honour (at Black 122 E-F) on the basis that Mr Scott was entitled to give an explanation as to why the respondent did not lead any particular evidence on the s 4(2)(b) issue. 54The point was made in oral argument at the hearing on 29 March 2011 by senior counsel for the respondent when he said (at Black 135): Your Honour ought not with respect go back to your Honour's changes and attempt to work out questions that really ought to have been the subject of evidence in the proceedings before your Honour where they could have been tested. Your Honour there was an opportunity for that to occur and the Act is quite explicit in the way it operates and your Honour can see from some of the decisions your Honour has seen this morning that that's the way that matters do proceed which is that if someone wants to make a claim for loss and damages as part of a claim under this Act they can do so and it is the subject of evidence before the court and there is usually the testing of that evidence and there is a determination made. 55Senior counsel alternatively submitted that the proper course was for the appellants to make application to his Honour to re-open their case in order to call evidence to support the claim for additional compensation now being made. An issue would arise if such an application was made as to whether it ought to be granted but the matter was academic as no such application to re-open was or ever has been made. 56Later during the course of the respondent's argument at the same hearing the following exchange took place (at Black 140): HIS HONOUR: Mr Sirtes, I am just thinking back to the way the case was conducted before me, and the real issue that was fought about between the parties was whether there ought to be a conveyance or whether there ought to be some form of removal of all the encroachments and questions of costs didn't really arise terribly much for my consideration. I don't think I encouraged that. I think that the way the case was fought was either conveyance or possibly easement or removal of all the encroachments. That was the way the case was fought. I don't know that the defendant would have anticipated that it had to meet a case based on the cost of fire proofing. SIRTES: Your Honour, the defendant certainly didn't understand or apprehend that that was part of the case the plaintiff was running, because it wasn't part of the case that the plaintiff was running. And indeed, your Honour, it was raised as part of this single expert exercise which we would submit, your Honour, despite the wording of order 8, was intended by your Honour to be limited to a simple valuation exercise of how much the parcel of land was worth. 57The point was then made by senior counsel (at Black 142) that the only issue that was before his Honour at the original hearing in 2008 was the effect of s 4(2)(a) on value and not any loss or damage which may have been sustained by the appellants in terms of s 4(2)(b). 58In reply counsel for the appellants reminded his Honour that the cross-claim of the respondent seeking a conveyance of the strip was only filed on the first day of the hearing in December 2008. On that basis, it was submitted that, in effect, there was no opportunity for the appellants to run a case in the December hearing as to the effect of such a conveyance, if ordered, in terms of s 4(2)(b). This may be so but it does not explain three matters. The first is that on the first day of the hearing counsel for the appellants seemed to consider that the conveyance of a "sliver of land" over which the encroachments extended was appropriate and that he and his opposing counsel had discussed the matter. Secondly, it was not suggested by counsel that he was taken by surprise by the filing of the cross-claim. Thirdly, his Honour did not deliver judgment until May 2009. During the period between the conclusion of the hearing and the handing down of judgment, there was ample opportunity for the appellants to seek to re-open their case in order to call evidence to support a claim pursuant to s 4(2)(b) based on the proposed conveyance of the strip. Furthermore, as already noted, that opportunity was further available between the time of judgment (8 May 2009) and the time when the final orders were made on 2 June 2009. 59As the High Court observed in University of Wollongong v Metwally (No 2) [1985] HCA 28; [1985] 59 ALJR 481 at 483 it is elementary that a party is bound by the conduct of his case: see also Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1 at 7; Grant v YYH Holdings Pty Ltd [2012] NSWCA 360 at [60]. In the present matter the appellants conducted their case over an extensive period of time being aware first, that an order was sought by the respondent that the appellants convey to the respondent a 300 mm wide sliver of their land and, secondly, that by 8 May 2009 his Honour proposed to make such an order. 60If the appellants intended to claim more than the minimum compensation payable pursuant to s 4(1) of the Act, it behoved them to seek his Honour's leave to re-open their case for the purpose of proving that they had sustained loss or damage of the nature of that referred to in s 4(2)(b) so as to justify his Honour exercising his discretion to award compensation in excess of the minimum. This they failed to do. I do not accept that the appellants did not consider that it was necessary to re-open their case to prove such loss or damage because Orders 7 and 8 made on 2 June 2009 made it clear that that was a matter which the expert could and should address. The giveaway is the opening words of Order 8 which I repeat for convenience: Failing agreement between the parties on a figure representing three times the value of the land so ordered to be conveyed to the defendants . . . 61No question of appointing an expert would have arisen had there been agreement on the value of the land to be conveyed. The opening words of Order 8 as well as the reference in Order 7 to s 4(1) made it patently clear that his Honour was only ordering compensation based upon the value of the land conveyed together with, possibly, any "special value" which that land may have to the appellants. Had there been any ambiguity with respect to the terms of Orders 7 and 8 as to whether they were intended to encompass compensation in excess of the minimum due to the order for conveyance causing loss and damage to the appellants within the meaning of s 4(2)(b), then it would have been open to the appellants to seek clarification from his Honour in accordance with the rules. 62I appreciate and am conscious of the fact that it is easy to be wise after the event. However, justice requires that the position of the respondent be considered as well as that of the appellants when determining whether the appellants should be bound by the manner in which they conducted their case below over an extended period of time. Although as the primary judge pointed out in the April 2011 judgment at [15], neither he nor either counsel envisaged the problems which have now arisen as a consequence of Mr Whelan's report, the fact remains that it is axiomatic or, as the High Court has indicated, elementary, that a party is bound by the manner in which they conduct their case and if that case is conducted in a manner which overlooks what I would respectfully regard as a fairly obvious issue, then that party must bear the consequences. This is particularly so where in the present case to do otherwise would cause the respondent to incur unnecessary but substantial costs due to no fault on his part.

Conclusion 63For the foregoing reasons in my opinion it is not now open to the appellants to seek to set aside Order 5 made by the Chief Judge on 2 September 2011. In the absence of that order being set aside, no basis exists for setting aside Order 1 made on 6 April 2011 or Order 10 made on 2 September 2011. Nor, in my view, is it appropriate to set aside Orders 7 and 8 made on 2 June 2009. 64It accordingly follows that the appeal fails. I would therefore propose that it be dismissed with costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 March 2013

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (11 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (4)