CARLIN & ANOR v MLADENOVIC & ANOR No. SCGRG-98-1537 [2000] SASC 142

A house property is erected on each of the two allotments. On the northern side of the defendant's house a lean-to addition has been constructed. It houses bathroom, toilet and laundry facilities. It protrudes 0.9 metres into the plaintiffs' allotment. The position is depicted on the plan below.

It will be noticed that the encroachment is over the front one-third of the defendants' land. The plaintiffs have issued proceedings under the Encroachments Act seeking removal of the encroaching building.

The Besser block wall had been constructed in 1977 by the plaintiffs to screen the adjoining property and to provide support for extensive roofing over a carport area and a workshop area towards the rear of their allotment. The wall was constructed some nine years before the defendants purchased their land.

The plaintiffs have known of this encroachment for some 37 years at the date of the hearing. Yet they did not take any steps to remedy the situation until 1994. In addition, they had owned the defendants' allotment for three years between 1969 and 1972 and did not then remedy the situation. That is apparent from the history of the dealings in the two allotments.

(1) On 28 September 1961 the plaintiffs purchased their house and property at 8A Grayson Street. They have resided in the house ever since.

(2) The house and land at 8 Grayson Street, now owned by the defendants, was in 1961 owned by a Mrs Rice. She lived in the house with her husband.

(3) A wooden paling fence was erected between the two properties. When the plaintiffs purchased their land, they believed that the fence marked the true boundary. About four to five months after the plaintiffs had purchased their land, they became aware that the fence did not mark the true boundary and that part of the Rices' house encroached upon their land. The Rices' house was then configured in the same way as the house now owned by the defendants. The encroachment was a lean-to addition.

(4) The plaintiffs decided not to take any step to remedy the encroachment because the Rices were an elderly couple and Mr Rice was ill.

(5) The plaintiffs spoke to the Rices about purchasing their property. They secured some kind of informal right of first refusal. The terms of the agreement are of no consequence because the plaintiffs purchased the property in about August 1969. For some reason which was not explained, the transfer of the land was not registered until 8 March 1972.

(6) The plaintiffs intended to let 8 Grayson Street. They carried out renovations. However, they did not find a suitable tenant. They decided to sell the land. In August 1972 the land was sold at public auction to Messrs L and J Bigiolli. The plaintiffs say that notice of the encroachment was given at the auction.

(7) According to the plaintiffs, the Bigiollis resided in the house at 8 Grayson Street.

(8) In 1977 the plaintiffs erected the Besser block wall. It was erected along the line of the original fence which was then demolished, so that it was constructed 1.65 metres inside the boundary.

(9) On 23 September 1976 a notice under the Housing Improvement Act 1940 declaring the Bigiollis' house at 8 Grayson Street to be sub-standard was issued. It was served upon the Bigiollis and published in the Government Gazette on 23 September 1976. The notice is still current. I will refer later to the defects listed in the notice. Although the plaintiffs state that the Bigiollis did not occupy their house at 8 Grayson Street, they do not say the house was unoccupied. I infer from the fact that a notice was issued under the Housing Improvement Act that the house was occupied. That conclusion is reinforced by the fact that Mr Carlin said that the Besser block wall was erected in stages because the neighbours were "niggling". The question whether the house was or was not occupied has little relevance to the outcome since the plaintiffs could have taken steps to remedy the encroachment, particularly when they decided to erect the Besser block wall. However, they did not.

(10) On 25 May 1983, the Bigiollis sold 8 Grayson Street to Mr and Mrs Basic.

(11) On 20 June 1986 the Basics sold 8 Grayson Street to the defendants.

(12) Some time in 1988, the defendants erected a galvanised iron shed at the rear of their land. It encroached on part of the plaintiffs' land. Mr Carlin spoke to those constructing the shed stating that they were encroaching. He did not speak to the defendants. The plaintiffs took no other action.

(13) The plaintiffs say that they were not aware of the sale by the Bigiollis to the Basics but knew of the purchase by the defendants. The plaintiffs are unable to give any reason for taking no action to remove the encroachment either while they owned the encroaching property or at any other time.

In June 1993 Mr Carlin saw a notice erected on the defendants' land advertising it for sale. The agent was LJ Hooker Limited. Mr Carlin wrote to the agent on 5 July 1993 informing him of the encroachment and asking that any intending purchaser be informed of it. The defendants were unable to sell the house.

In July 1993 the plaintiffs instructed a surveyor to survey the true boundary. They received the surveyor's report in August 1993. It confirmed the existence of the encroachment.

In October 1994 the plaintiffs instructed Haarsmas, a firm of solicitors, to act for them. On 28 October 1994 Haarsmas wrote to the defendants requiring the removal of the encroachment. The defendants did not then occupy the house. The letter was addressed to them at an address in West Croydon shown on their certificate of title. The defendants did not respond.

In March 1995 the plaintiffs instructed a different firm of solicitors who on 16 March 1995 wrote to the defendants informing them of the encroachment. The letter asked that the encroachment be removed and that a new fence be constructed along the true boundary. The defendants did not respond.

In April 1995 the plaintiffs again instructed Haarsmas who on 21 April 1995 again wrote requiring removal of the encroachment. The defendants did not remove the encroachment. On 25 July 1995 the defendants responded from Coober Pedy saying that they believed the wall between the respective properties to be in good order. They added, "if you have a dispute about the boundary we can discuss the matter in court". The defendants have been living and working in Coober Pedy for some time. It is not clear whether all of the previous letters written by the solicitors acting for the plaintiffs had been received by them.

In October 1995 the plaintiffs issued a summons out of the Port Adelaide Magistrates Court pursuant to the Fences Act 1975. The nature of the claim has not been proved. The trial in that matter was listed for hearing on 12 December 1995 but was adjourned and the matter has not been resolved.

In April 1996 the plaintiffs were advised to issue proceedings under the Encroachments Act. They again instructed Haarsmas. On 19 August 1998 Haarsmas wrote again to the defendants requesting removal of the part of the house which encroached upon the land and that part of the shed which encroached. The letter noted that the shed was being demolished and asked that it not be re-erected until the issues between the parties had been resolved. The letter warned that, if the defendants did not reply within 14 days, proceedings would be issued. The defendants did not reply. On 13 November 1998, the plaintiffs instituted this action, seeking removal of the encroachment.

Mr Carlin swore three affidavits in support of the plaintiffs' application and he gave oral evidence. The defendant, Mladenovic, also gave evidence. With the consent of the parties and pursuant to Rule 82, I appointed Mr B Maloney, a licensed valuer, to report on the encroachment and to value the land subject to it. I did this in order to avoid the costs to the parties if each had appointed a valuer. Mr Maloney's report was admitted by consent.

In his affidavit sworn on 23 October 1998 in support of the application, Mr Carlin said that the Besser block wall was in "urgent need of repair". He said that he wished to demolish the wall and erect a new fence on the true boundary. In an affidavit sworn on 23 October 1999, he repeated that he intended to demolish the wall and erect a new fence on the true boundary. He said that he wished to use the area as a vegetable garden and to plant mango trees. In his evidence at the hearing of this application on 27 October 1999, only four days after swearing the last affidavit, he gave yet another account of his intention. He said that he did not intend to demolish the wall. Instead, he and his wife intended to erect a double garage, that is to say a garage housing two cars side by side, at the front of their land. He said that the first 20 to 30 feet of the wall measured from the front of the land would be demolished to make room for the garage. He intended to plant mango trees along the rest of the land.

I do not accept his evidence that he and his wife intend to erect a double garage. No plans were produced. No approval from the Council was produced. The construction of the garage on the boundary might require the erection of a parapet wall. It is not clear whether the Council would approve the construction without such a wall. It is not clear whether there is sufficient room between the house and the true boundary to enable a double garage to be erected. At present the driveway is one car wide. It is likely that the Besser block wall will remain indefinitely. There is no evidence that it is in disrepair or is liable to fall down. It supports a roof covering a large carport and workshop area. The carport is used to store all kinds of articles in addition to motor cars. There is nothing to suggest that that use will not continue indefinitely. It is also doubtful whether mango trees or many other kinds of trees could grow in the area between the south side of this high wall and the fence on the true boundary since the trees would be shaded for the greater part of the day. But I do not have regard to that last fact. I think that the suggestion of the double garage is a recent invention, particularly as none of the affidavits sworn in support of the application make any mention of it. I therefore proceed on the footing that the Besser block wall will remain indefinitely and that no double garage will be constructed.

The defendants' house is a small cottage of four main rooms which appears to have been constructed in about 1880 of stone and brick. It is generally in poor condition. The notice under the Housing Improvement Act lists the following defects:

Some rooms have inadequate natural light and ventilation

When I viewed the land, the yard was no longer overgrown. However, the rest of the house was still in poor condition. I inspected the house for the purpose of noting the general condition. I agree with Mr Maloney that, generally speaking, it is in very poor condition. I did not inspect it for the purpose of verifying the extent of the defects listed in the notice.

The defendant Mladenovic gave evidence. He said that the house had been let from time to time. That evidence was not challenged. But it does not appear that it has been occupied recently. He and his wife are currently living and working in Coober Pedy. They intend to return to Adelaide and live in the house. He said that he and his wife were not aware of the encroachment when they purchased the property. I accept his evidence.

It is apparent that the encroachment does not affect the present use and enjoyment of the plaintiffs' land. As they have not before 1994 attempted to remedy the situation, it is reasonable to infer that it has not affected their use and enjoyment of the land for the previous 33 years. There is nothing to suggest that it has affected the use of the land between 1994 and the present. The encroachment will, of course, prevent them from developing up to the boundary of their land in the future. But there is no evidence of any intended use beyond that of the double garage, evidence which I do not accept.

It is common ground that the defendants were not aware of the encroachment when they purchased their cottage. Indeed, the existence of the substantial wall on the plaintiffs' land would cause any purchaser to believe that the wall marked the true boundary. There was nothing to suggest the contrary.

The plaintiffs seek removal of the encroachment. For several reasons I am not prepared to order removal of the encroachment which will, in fact, require demolition of the whole of the lean-to addition. First, as Mr Maloney reports, the removal of the lean-to will involve considerable other work, namely,

(a) the sealing off and enclosure of the doorway currently providing access to the lean-to area;

(b) the enclosure of and the upgrading of the existing switchboard and electric meters which are presently within the lean-to addition and which would be on an outside wall if the addition were to be demolished;

(c) the making good of the exposed wall to seal it off and to provide a weatherproof coating of the wall;

(d) the demolition would require gutters to be fixed at the ends of the existing roofline, together with the provision of appropriate downpipes;

(e) the demolition would result in the cottage having no bathroom, toilet or laundry amenities and it will be necessary to replace them.

Mr Maloney estimated the cost of this work would be some $27,500. His assessment was not questioned by either party.

Secondly, the defendants intend to return and live in the house. Plainly, they will have to make it habitable. Mr Goodall, who appeared for the plaintiffs, submitted that the defendants' cottage will have to be demolished sometime, or at least that the bathroom, toilet and laundry areas could be located elsewhere. However, there is no obvious place to relocate them. Further, although the defendants' cottage is in a poor condition, there is no evidence that it cannot be renovated and restored to make it habitable so that the notice under the Housing Improvement Act would be removed. Furthermore, s 23 of the Housing Improvement Act empowers a Council to order demolition of a house if it is unfit for human habitation. This notice does not require demolition.

Thirdly, the plaintiffs have stood by and allowed this position to remain for at least 33 years without taking any steps to remove the encroachment. They could easily have removed it when they owned what is now the defendants' land. As they had not then erected the Besser block wall, the plaintiffs could have erected a fence or wall along the true boundary when they were the owners of that land. Although the plaintiffs gave notice of the encroachment to the Bigiollis, no subsequent purchaser had notice. In short, the plaintiffs have been aware of the true situation and have acquiesced in it for such a long time that it would be inequitable to order removal of the encroachment.

In the course of his evidence, Mr Carlin said that he had paid for the land encroached upon and wanted it back. That is an understandable reaction. But, in truth, it is not entirely correct to say that Mr Carlin paid for the land. As he admitted, he and his wife were not aware of the encroachment until some four to five months after they had purchased it. When they paid for the land, Mr and Mrs Carlin believed that they were purchasing what was contained within the four fences surrounding their land. They did not believe that they were purchasing this strip of land. By contrast, it could be said that the defendants believed that they were purchasing all of the land up to the Besser block wall. In truth, they did not, yet they have had to pay for the cost of that land.

If the encroachment is not to be removed, what is the appropriate remedy? There are three other alternatives. The first is to recognise the existing position and transfer the strip along the whole of the currently fenced boundary. As Mr Goodall said, that would be tantamount to a de facto acquisition of the plaintiffs' land. That may be so but the plaintiffs have allowed the situation to remain for more than 30 years.

The second is to allow the plaintiffs to fence the true boundary but with a cut-out around the encroachment. That would result in a wholly undesirable situation. Apart from being a most irregular and impracticable boundary, it is necessary to leave an amount of useable land for access and other purposes around the lean-to addition. I reject this as an appropriate resolution.

The third is to allow the status quo to continue for a distance measured from the frontage to Grayson Street and then return to the true boundary some suitable distance east of the lean-to addition. While this will produce an irregular boundary, it allows for a reasonable accommodation of the interests of both the plaintiffs and the defendants in that it avoids an acquisition of all of the plaintiffs' land and allows a reasonable use of the lean-to addition.

The fact that the plaintiffs have acquiesced in the situation and made no attempt to seek to remove the encroachment for 33 years is a compelling reason for adopting the first alternative. But regard must also be had to the fact that the defendants are using a fairly wide strip of land which is owned by the plaintiffs. The strip is 1.65 metres wide and about 39.23 metres long. Had it been a narrow strip of land, I would unhesitatingly have refused to make any order in favour of the plaintiffs. The width of the strip leads me to adopt the third alternative. I will therefore order that the boundaries of the two allotments be redefined to follow the southern side of the Besser block wall to a point midway along the common boundary. The rest of the boundary will be the true boundary as shown in the respective certificates of title.

The next question is whether the defendants should pay compensation to the plaintiffs. The plaintiffs' long acquiescence in this situation is a compelling reason why I should exercise the wide discretion vested in me by ordering that no compensation be paid. Parties who know of an encroachment, who are in a position to remedy it, and who stand by taking no action for many years, should, generally speaking, not be entitled to compensation. As I have already said, the inaction of the plaintiffs caused the defendants to pay a price for land, part of which they now find they do not own. It represents about nine per cent of the land the defendants thought they were purchasing. To require them to pay compensation would be to require them to pay again for part of this land.

Mr Goodall referred to s 5(1) of the Encroachments Act and submitted that, as the defendants had not proved that the encroachment was neither intentionally nor negligently caused, they must pay compensation in an amount equal to three times the unimproved capital value of the land. Section 5(1) 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."

I adopt what I have said in Bunney v State of South Australia [2000] SASC 141 and Gladwell v Steen [2000] SASC 143, both delivered at the same time as this judgment, concerning the width of the court's discretion and the relationship between s 4 and s 5 of the Encroachments Act. Certainly, there is nothing in s 5(1) which qualifies the onus to be discharged by the encroaching owner. However, having regard to the overall intention of the Act and the very wide discretion vested in the court by s 4, in those instances where the encroaching owner at the time of the application is not the person who constructed the encroachment, it is open to the court in the exercise of its discretion to decide not to award compensation. This case provides an especially striking example of why the discretion in s 4 should qualify orders made under s 5, particularly as the plaintiffs were for three years owners of both parcels of land.

When the defendants purchased this land they believed that they were purchasing all of the land up to the Besser block wall. They paid for the land on that footing. I do not think it is equitable for them to be required to pay for this land again, particularly as the plaintiffs have so long acquiesced in the situation. Indeed, the construction of the Besser block wall along the incorrect boundary was tantamount to the plaintiffs creating a situation which induced the defendants to believe that they were purchasing land up to the Besser block wall. In the exercise of my discretion, I order that no compensation should be paid.

It will be necessary for a survey to be done to give effect to these reasons. Plans will have to be lodged and new certificates of title issued. I think that it is equitable for the parties to bear these costs equally.

I will hear the parties as to the terms of the orders which will be necessary to give effect to these reasons.