[50] Thus in many cases, injury to intangible benefits and the imposition of intangible detriments, such as reduced amenity and enjoyment of property, and exposure to increased disruption and interference, may weigh heavily against a conclusion that the servient owner can be adequately compensated for the purposes of s 88K(2)(b). One such case, in which it was found that the servient owner could not be adequately compensated, was Blulock (although that case turned on the constraints which the easement would impose on future use of the servient land, rather than on intangibles). On the other hand, in Tregoyd Gardens , Hamilton J, at least implicitly, rejected a submission that, given the intangible benefits which the defendants in that case obtained from the presence of a palm tree, the viability of which might be jeopardised by the proposed easement, a sum of money in exchange for the tree could not be regarded as adequate, in circumstances where the injury was regarded as unlikely to eventuate, and would be relatively minor in the overall context if it did. "
66 The route of the proposed easement would run close to a site identified by Mr Brett Cornish as a site on which he would wish to construct a dwelling. Mr Brett Cornish is a son of Mr Leslie and Mrs Shirley Cornish, the directors of the defendant. As a child he had camped in a clearing where he later installed a caravan to create what he described as his informal bush retreat on the high ground in the clearing. It is a secluded area with dramatic views. It is his hope that he can make satisfactory arrangements with his sister and brother to allow him to construct a dwelling at the clearing through which the proposed easement would pass. It is not disputed that if a road were constructed through the presently secluded valley, that part of the defendant's land would cease to be a potential building site for prospective purchasers interested in acquiring a secluded private retreat. Mr Brett Cornish said:
" 32. The easement would change the whole nature of the site. Presently, it is an isolated, secluded and aesthetically beautiful location. Because it is 'the end of the road' it is totally private, giving it a 'secret valley' character. ...
...
34. People do not come through this part of the property. But, if the easement is imposed, the site becomes just another farm dwelling on a road in the valley. Its present aesthetic is therefore, in my opinion, destroyed.
35. There will be no point in my building the home I envisage because the point of doing so will be totally lost.
36. For many years I have envisaged spending my latter years rocking away on the veranda of my little cabin overlooking the creek and up at the rainforest, then when the time comes, being buried under the 400 year old box tree down by the creek. This vision would be totally destroyed by the proposed easement, with several of the routes going right over my gravesite, within metres of my veranda and then cutting in half my view of the rainforest. This is what I stand to lose.
37. No amount of compensation can recompense me for the loss of this site. "
67 The plaintiff did not dispute the genuineness of Mr Brett Cornish's statement of the aesthetic appeal which the land in its present state has to him. Nor is it disputed that that aesthetic appeal would be lost if a road were constructed along the proposed site of the easement. The plaintiff submitted that the question was not whether the feelings of Mr Brett Cornish, or those of other members of his family, could be adequately compensated, but whether the defendant could be adequately compensated for any loss or other disadvantage suffered by it as a result of the imposition of the easement. Counsel for the plaintiff submitted that a corporation has no feelings or aesthetic sense and that the loss or disadvantage it would suffer from the imposition of an easement would be any diminution in the value of its land. That and any other losses could be assessed and adequately compensated. It was submitted that Mr Brett Cornish's feelings were irrelevant.
68 Mr Brett Cornish is not a director of the defendant. His father, Mr Leslie Cornish, and his mother, Mrs Shirley Cornish, are the sole directors and shareholders of the defendant. Mr Leslie Cornish deposed that the defendant is the trustee of the Cornish Family Settlement, but there is no other detail of the nature of that trust or the identity of the beneficiaries. Mr Leslie Cornish said that if an easement were imposed on the land then "our ability to effectively manage intergenerational succession plans is impaired. No amount of compensation can adequately recompense us for the loss of that opportunity." It was submitted for the plaintiff that the impairment of intergenerational planning for the Cornish family was not a loss or disadvantage suffered by the defendant.
69 Section 88K(2)(b) addresses not only the question of whether the owner or other person having an estate or interest in land can be adequately compensated for loss suffered by them, but whether they can be adequately compensated for disadvantage from the imposition of the easement. This may or may not amount to monetary loss.
70 I do not accept the submission that where the affected land is owned by a company, a diminution of the land's aesthetic appeal which cannot be adequately compensated by money is irrelevant because the company, as distinct from the persons occupying the land, can have no aesthetic sense. No authority was cited for this proposition. It is not self-evident. The mind and will of an individual may be imputed as the directing mind and will of a company where the individual is the embodiment of the company such that his or her action is the action of the company, and his or her mind is the mind of the company. The company's liability is personal and not vicarious (Tesco Supermarkets Ltd v Nattrass [1972] AC 153 at 170-171; Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705 at 713-714).
71 As the knowledge, intention and will of a person who is the directing mind and will of a company can be imputed to it for the purposes of civil and criminal liability, there is no reason that the aesthetic senses of such a person cannot be imputed to a company for the purposes of asking, pursuant to s 88K(2)(b), whether the company can be adequately compensated for the loss of intangible benefits, where the person is the embodiment of the company in its use and enjoyment of the land. However, Mr Brett Cornish is not the embodiment of the defendant within these principles.
72 A substantial part of the disadvantage from the imposition of the easement would be from the adverse effect on Mr Brett Cornish's expectations and plans. In the family setting, those expectations are realistic, even though he has no legal right against the owner of the land. His position would have to be considered in any event in the exercise of the residual discretion under s 88K(1), even if it were irrelevant under s 88K(2)(b). There is also a disadvantage to the directors of the defendant, Mr and Mrs Cornish, in the impairment of intergenerational succession plans for the farm. That would also have to be considered in exercising the discretion under s 88K(1), even if it were irrelevant under s 88K(2)(b).
73 It is possible (although difficult) to assess the diminution of the market value of the defendant's land from the imposition of the proposed easement. But the defendant may not wish to realise the land for its market value. Prima facie, it would be a proper corporate object for the defendant to deal with its land in a way the directors considered best for the next generation of the Cornish family, in securing family harmony and happiness. The impairment of that object is a disadvantage to the defendant and not only to the family members. I accept that there is such a disadvantage to the defendant arising from the matters to which Mr Brett Cornish and Mr Leslie Cornish deposed set out above. It is not possible to redress that disadvantage by monetary compensation.
74 For these reasons, s 88K(2)(b) is not satisfied.
Section 88K(2)(c)
75 The defendant submitted that the plaintiff had not satisfied s 88K(2)(c), which required him to make all reasonable efforts to obtain the easement, or an easement having the same effect.
76 The plaintiff's solicitors corresponded with the defendant's solicitors and with the solicitors for Mr and Mrs Goldfinch in late 2004. At that time the plaintiff's surveyor had identified the alternative routes of access to the plaintiff's land known as routes A, B, C and D.
77 On 24 August 2004 the defendant's solicitor advised that the defendant was prepared to grant a right of way in favour of the plaintiff's land over the existing track shown as option C, on certain conditions. This route traversed the defendant's land for a short distance before crossing the creek to the Goldfinch's land and continuing on the Goldfinch's land up to the point of the tributary to Broughton Creek.
78 Mr and Mrs Goldfinch refused point blank to enter into any negotiation.
79 The plaintiff reasonably took the view that of the routes then proposed, those known as options A or B would be less disruptive to the defendant than would route C or D to Mr and Mrs Goldfinch. The latter routes would either pass relatively close to the residence, or would traverse a central cleared area creating problems for stock control and would be highly visible.
80 At that time, the plaintiff would have been unaware of the intention of Mr Brett Cornish to develop the site of the caravan and of the objections of the Department of Water and Energy to the route known as option B. It was not until after the commencement of these proceedings that the Department's attitude became known.
81 In any event, there was nothing more the plaintiff could do to negotiate with either the defendant or with Mr and Mrs Goldfinch. The latter refused any communication. The plaintiff did all he reasonably could to negotiate with the defendant. Counsel for the defendant did not suggest that the plaintiff could have made any offer involving construction of a road over the defendant's land to Broughton Creek which would have been acceptable to it.
82 I am satisfied that the plaintiff has made all reasonable attempts to obtain the easement, or one to the same effect, and has been unsuccessful.
Summary
83 Neither s 88K(1) nor s 88K(2)(b) is satisfied. If both had been satisfied I would nonetheless not exercise the discretion to make an order under s 88K(1). That is because of the absence of a definite proposal for the construction of a house on the plaintiff's land, the uncertainty of development consent being obtained (even if, contrary to my view, there is a real chance of its being obtained), the insufficiency of the assessment of the environmental impact of the proposal, the adverse impact on the rainforest environment at Broughton Creek, and the adverse effect on the members of the Cornish family which could not be adequately compensated for in money. To refuse to grant an easement, even if the grounds for doing so were established, would not create a true hardship to the plaintiff. When he bought the land he knew there was no right of way to a public road. No doubt the purchase price reflected that. A right of carriageway, (as distinct from a right of footway if he were refused a licence to traverse the defendant's land on foot), would substantially interfere with the amenity of the defendant's land.
84 As indicated earlier in these reasons, the plaintiff could not identify the precise route of a right of carriageway, and is not able at this stage to formulate an order under s 88K(3).
85 Nor was the plaintiff able at this stage to specify the amount of compensation he contended was appropriate if the easement were imposed. That was because the extent of the disturbance to the defendant's land could not yet be assessed. Nonetheless, I was invited to determine what in other respects was appropriate compensation for the imposition of the easement. On my earlier findings, that question does not arise. But in case my earlier findings are wrong, I will indicate my findings on the issues of valuation, so far as they can presently be determined.
Compensation: Loss of Market Value of Defendant's Land
86 The defendant's land consists of various lots and has an area of about 76.2 hectares. There is a residence on the lot known as portion 96 on the northern side of Free Selectors Road. Other lots include portions 122, 127, 128 and 129. The caravan site is in a secluded valley on portion 127.
87 Clauses 11 and 34 of the Kiama LEP provide that in the relevant zone for the defendant's land a dwelling house may be erected with the consent of the Council if the land has an area not less than 40 hectares. The town planners retained by the plaintiff and the defendant agreed that it would be open to the defendant to seek approval for a dwelling house to be erected on an aggregate allotment comprising portions 127, 128 and 129 which would together comprise an area in excess of 40 hectares, notwithstanding that the remainder of the defendant's land on which the existing residence is constructed would be less than 40 hectares.
88 The valuers retained by each party (Mr Wall and Mr Dobrow) ultimately agreed that the existing land value of the defendant's land is $3,100,000 being $1,700,000 for the existing site and residence of approximately 37 hectares, and $1,400,000 for the vacant site of approximately 40 hectares. Mr Wall and Mr Dobrow were in profound disagreement as to the effect of the imposition of the easement upon that second site. They agreed that if a road were to be constructed on the proposed easement running directly through the secluded valley where the caravan is presently situated, the development would mean that a prospective purchaser who required a home site looking for privacy and seclusion would not be interested in that land.
89 In Mr Dobrow's view, there is no other potential site for a dwelling house on the aggregated parcel which would have the same appeal.
90 The aggregated parcel includes not only the caravan site but also a large cleared area on high ground to the north of Free Selectors Road and also to the south of Free Selectors Road. These sites, particularly a site on portion 128 to the south of Free Selectors Road, command sweeping views to the sea. Mr Wall was of the opinion that the market would not consider the caravan site to be the optimal position for a house. Rather, in his view, the higher value rural lifestyle property sales in the area were for elevated home sites with expansive views. He considered that the market would prefer potential dwelling sites to the north and south of Free Selectors Road. Hence the construction of a road along the proposed route of option F would not, in his view, significantly affect the market value of the aggregated parcel.
91 Whereas Mr Dobrow thought that the imposition of the easement would reduce the value of the aggregated parcel from $1,400,000 to $850,000, Mr Wall considered the value of the land would not be materially affected by the imposition of the easement. He allowed only $14,000 on this count.
92 The valuers also disagreed on the effect of the imposition of the easement on the value of the remaining 37 hectares, including the existing dwelling. Mr Dobrow considered that it would be reduced in value by $100,000. Mr Wall thought that the effect would only be $20,000.
93 Mr Dobrow assumed that the Council would be likely to approve the construction of a house in the vicinity of the caravan. Mr Wall assumed that the construction of a house on one of the elevated locations would be approved by the Council. No particular proposal for the construction of any house on the defendant's land has been formulated. There is considerable uncertainty on both counts. Mr Wall identified a number of possible locations for a house to the north or south of Free Selectors Road which would command sweeping views either to the sea or to the Illawarra escarpment. All but one of the sites are on a steep slope, apparently with gradients exceeding 20 percent and are outside the Council guidelines for the construction of rural dwellings in the area. One of the identified potential sites was on less steep ground but close to a house on an adjoining property. That would make the site less attractive to a potential purchaser and would be contrary a council guideline that a new dwelling and associated outbuildings be located at least 100 metres from another dwelling. There are issues for all potential sites in this area in relation to minimum asset protection zones, that is, the distance between the dwelling and the edge of bushland, needed as a protection against fire. The minimum required distances vary according to topography. If a house were to be constructed on a steep slope above the edge of the bush, a distance of up to 50 metres would be required. No exact proposed locations were identified and no precise measurements were taken, but this was a significant potential problem to obtaining development consent to the construction of a dwelling at any of the locations identified by Mr Wall.
94 There are also water courses in the area. Effluent disposal areas have to be set back at least 40 metres from a water course which would be another potential obstacle to obtaining development consent. The town planners and engineers were not able to express concluded views on the probability of development consent being given or refused in relation to any particular site.
95 There are similar issues with respect to the construction of a house at the caravan site. It appears that a potential house site would lie outside the area of high conservation value. The site is on relatively level ground at the foot of a hill. Even so, there would have to be a 20-metre setback from the edge of the bush. Mr Richardson said that he thought that there was a finger of land on which a building might be able to be constructed outside that 20-metre setback without putting the dwelling on the floodplain. However, it was not a matter which he or any other witness had investigated in detail. Nor had he investigated in detail where an effluent disposal site for a dwelling in the vicinity of the caravan site could be situated consistently with its being at least 40 metres from the creek. An access road to a dwelling in the vicinity of the caravan site would be needed. Because that site is more than 200 metres from a public through road, an alternative access road would also be needed.
96 Not too much should be made of these potential difficulties because the valuers were agreed, albeit for different reasons, that in its present state, without the imposition of an easement, a willing but not anxious purchaser would be prepared to pay $1.4 million for the aggregated 40-hectare parcel. The valuers had different views as to the likely characteristics of such a purchaser, but such a person is to be taken to have weighed the difficulties of obtaining development consent to the construction of a dwelling at his or her preferred location. I would not reject either valuer's opinion on the basis that his assumption that the type of purchaser he had in mind (either a purchaser looking for a secluded site for a home in the vicinity of the caravan, or a purchaser looking for an elevated position with sweeping views) would be deterred by the uncertainties of obtaining development consent.
97 As Mr Wall said, the best evidence of the effect of the imposition of the easement on the market value of the land would be for the subject property, or a similar property, to sell and resell before and after an easement was created. However, there is no such comparable sale and resale. Mr Wall found support for his estimate of a minimal reduction on the value of the property before and after the imposition of an easement from the price paid by an owner of land outside the nearby town of Gerringong to his neighbour for the grant of a right of way over the neighbour's property. The price paid was $44,000 and the transaction was negotiated in November 2007. The inquiries by the valuers revealed that the vendor and purchaser were good friends as well as neighbours, and they negotiated the price without valuation advice. The right of way is largely shielded from the house on the servient tenement. The owner of the servient tenement did not consider that the right of way affected the value of her land. There was an inspection of the property and the right of way. In my view, the right of way over the Gerringong property is not comparable in its impact on the servient tenement with the easement sought over the defendant's land. I agree with Mr Dobrow that it is not a comparable transaction.
98 The impact of the proposed right of way would be very much reduced for a purchaser of the aggregated parcel of land who proposed to build on either the elevated part of portion 127 to the north of Free Selectors Road or on the elevated part of portions 127 or 128 to the south of Free Selectors Road.
99 Mr Dobrow was of the view that the aggregated parcel of land has a value of $1.4 million because of its potential to a purchaser wanting seclusion and who would wish to build in the vicinity of the caravan. He deposed that such purchasers are "premium" purchasers. He supported that opinion by inquiries of local real estate agents. He said that typically the market is made up of artists, professionals in the entertainment business, and business professionals from Sydney, and that the uses of the properties range from weekenders to lifestyle properties. He said that the real estate agents identified the most important attributes of a property from the perspective of such purchasers as being in order privacy, seclusion, views and access to natural water.
100 In Mr Wall's opinion, the sales evidence indicates that the highest value properties are those with excellent views and good access. He does not dispute that a segment of the market consists of those seeking seclusion. Whilst Mr Wall did not accept that a house could not be built near the caravan site if the road along the easement to the plaintiff's property were constructed, he did accept that such a road would make that site unattractive to such purchasers. This is only common sense.
101 Both valuers considered that the sale of a property at 189 Free Selectors Road, Foxground was an important comparable sale. This property is located to the south of Free Selectors Road. It adjoins the defendant's land on that side of Free Selectors Road. It was sold in August 2008 for $1.6 million. It had been valued by Mr Wall in March 2008 at $1.45 million. He valued the improvements at $200,000 giving a land value, in his view, as at March 2008, of $1,250,000.
102 Mr Dobrow valued the improvements at $380,000 giving a land value of $1,220,000. The property was used as a dairy farm and has an area of 34.89 hectares. Mr Dobrow calculated that 12.2 percent of the land was bushland and the rest was usable rural land. He assessed the value of bushland to be about $2,000 per hectare. He calculated the value of the usable rural land at $41,288 per hectare. Mr Dobrow used this sale to assess a value for the potential aggregated lot on the defendant's land by opining that a home site on one of the elevated positions of about 3.5 hectares would have a value of $600,000. This figure was said to be supported by four sales of other properties in Foxground of between one and two hectares which provided an "entry price" into the Foxground locality. Mr Dobrow then calculated the area of bushland and the area of usable rural land on the remainder of the aggregated parcel. He calculated that there were 29.336 hectares of bushland, which he valued at $2,000 per hectare. He valued two hectares of usable rural land at $41,288 per hectare based on his analysis of the sale at 189 Free Selectors Road. He applied half that value to the remaining rural land (5.36 hectares) to allow for its steepness. These calculations gave a value of $850,000 to the aggregated parcel.
103 I have difficulty with this part of Mr Dobrow's analysis. The first difficulty is with his selection of a figure of $600,000 as the value of the home site arrived at by reference to sales of other properties in different parts of Free Selectors Road. Whilst these sales indicated an "entry price" for the Foxground area, I cannot accept Mr Dobrow's view that their situation or views were comparable to those from the defendant's land. Mr Dobrow said that in reaching the figure for $600,000 he made adjustments to the four lots and thought that the four lots might be preferred by some purchasers. He believed that some purchasers would prefer to be down where the four lots were, as opposed to the higher areas. No doubt these are matters of subjective opinion, but I could not agree that the location of the four lots could be considered superior or equal to the location of the elevated site on the defendant's land.
104 The sales ranged from between $540,000 to $710,000 on sites of about 1 hectare, or in one case, 1.8 hectares. The sales were of cleared open paddocks with a building right. They were relatively close together or to other properties. Although they had views of the Foxground area, none had a comparable view to that obtainable from the defendant's land. At one point of his evidence, the most that Mr Dobrow was prepared to concede was that the subject property had an "ocean glimpse or view, if you were to term it that way". I regret to say that this part of his evidence lacked objectivity. If the land value of the "entry point" sales in Foxground from one to two hectare sites was between $540,000 and $710,000, the land value for a comparable area on the subject site must be considerably higher, if a house could be built on the property. In my view, a value of $600,000 would only be justified on the basis of uncertainties in obtaining development consent, but Mr Dobrow did not seek to make any assessment of those uncertainties.
105 The second difficulty I have with Mr Dobrow's approach is in his valuation of the bushland. No doubt a purchaser whose primary interest was in using the land as a productive farm would heavily discount the value of the bushland. But it does not follow that a purchaser primarily interested in the site for its lifestyle and natural beauty would discount the value of the bushland in the same way. Mr Wall said that:
" Many of the rural lifestyle parcels are purchased for weekender, affectively living purposes. They are not purchased for any rural pursuits apart from, you know, perhaps cattle to keep the cleared land cleared. The provision of bushland brings privacy, shelter and just the natural beauty of the native timbered areas. So it is a positive factor in rural lifestyle. ... Many of the sales have a significant component of bushland. "