Judgment No. [2000] SASC 143

[2000] SASC 143

DEBELLE J. This is an application under the Encroachments Act 1944.

The plaintiff, Mr Gladwell, is the registered proprietor of a house property at 5 Steventon Drive, Banksia Park. The defendants, Mr and Mrs Steen, are the registered proprietors of a house property at 3 Steventon Drive. Banksia Park is within the area and subject to the planning control of the Corporation of the City of Tea Tree Gully.

The front of each house property faces due north. The parties share a common boundary which runs in an approximate north-south direction. There is a galvanised iron fence extending from the southern boundary of each property a good distance northward along the common boundary. That fence is erected on the true boundary. The fence stops at about the southern edge of a carport erected on the Steens' land. The apparent boundary between the two properties as one proceeds northward is designated by a fence alongside the carport and thereafter, from the northern end of the carport the frontage of each property, by a concrete driveway constructed on the Steens' land. The driveway provides access to the carport from the street. The area of the carport is paved with concrete. The carport and driveway are on the eastern side of the Steens' land. It is possible to drive from the front of the Steens' land through the carport to a garage which has been erected in the back yard of the Steens' land. The present disposition and appearance of the Steens' land suggests that the carport and garage are presently used for storage purposes but there is nothing to prevent both the carport and the garage from being used to house motor vehicles in the future.

In addition to the boundary fence, a substantial galvanised iron fence more than two metres high has been erected on the Steens' land. There is no evidence as to the reason for the erection of that fence. As it is within the boundary of the Steens' land, it has no relevance to the issues in this action and I have no regard to it.

A small portion of the carport and a narrow strip of the driveway each encroach upon the Gladwell land. The area of the encroachment by the carport is three square metres. The area of the driveway which encroaches is 17 square metres being a strip about 1.5 metres wide. Thus, the total area of the encroachment is 20 square metres. Both the carport and the driveway are encroachments as defined by the Encroachments Act: see s 2 of the Act and Clarke v Wilkie (1977) 17 SASR 134.

The encroachment was constructed before either Mr Gladwell or the Steens purchased their respective allotments. Mr Gladwell purchased his allotment in June 1993 from a Mr and Mrs Shirley who had been the registered proprietors of the allotment since June 1968. The Steens purchased their allotment in September 1990 from a Mr and Mrs Thomas who had been the registered proprietors since June 1976.

The Steens proved a building approval issued by the City of Tea Tree Gully to erect a carport on their allotment. The approval was granted to Mr Thomas and is dated 16 April 1980. It is obvious that the carport currently erected on the Steens' land has been added at some stage after the dwelling had been constructed. I find that the building approval is for the carport which now exists on the Steens' land. It is reasonable, therefore, to infer that the carport was erected in about 1980 and that the driveway was constructed at about the same time.

I accept the evidence of Mrs Steen that neither she nor her husband were aware of the encroachment when they purchased their land and that they were informed of it by Mr Shirley. Similarly, Mr Gladwell was not aware of the encroachment when he purchased his land. Indeed, the contract for the sale and purchase of the land expressly stated that the vendors were not aware of the existence of any encroachment. I accept Mr Gladwell's evidence that, some time after he had purchased his allotment, Mrs Steen told him of the encroachment. His evidence was that she told him that the carport had been erected pursuant to a "gentleman's agreement" between the previous owners of each allotment.

Although there is no document which evidences this agreement, the present disposition of each allotment is consistent with some kind of agreement or arrangement having been made between the previous owners of each allotment. The dwelling on the Steens' land has been constructed to a point about one metre from the western boundary so that it is not possible to provide a driveway on the western side of the dwelling. The driveway along the eastern boundary of the Steens' land is the only available area for a driveway. There is also a driveway on the eastern side of the Gladwell land. Thus, the Shirleys, as the previous owners of the Gladwell land, may have consented to the Thomases using a small part of the Shirleys' land for the carport and driveway. In this respect, it is relevant to note that the Gladwell land has a frontage which is noticeably wider than the frontage of the Steens' land, even when allowance is made for the drainage easement on the eastern boundary of the Gladwell land. Alternatively, the Thomases inadvertently encroached upon the Shirleys' land when constructing the carport and driveway and, when the encroachment was discovered, the Shirleys did not object. Other alternatives are possible. Whatever the true facts might be, the fact remains that the situation was allowed to continue by the Shirleys and the Thomases and it was not until the latter part of 1996 that the question of the encroachment became an issue between Mr Gladwell and the Steens.

In 1995 Mr Gladwell purchased another house property in which he lives with his family. At present, he lets his land at Steventon Drive. He intends to sell it.

After Mr Gladwell had purchased his land, he occupied this house with his family. The relationship between the Gladwells and Mrs Steen was at first cordial. Mr and Mrs Steen had separated and Mrs Steen lived in the house with her son. However, following an incident in mid 1996, the relationship soured and the encroachment became an issue between them. Mrs Steen instructed solicitors who sent two letters, one on 12 November 1996 and the other on 31 December 1996, to Mr Gladwell advising that Mrs Steen would commence proceedings under the Encroachments Act. Mrs Steen sought a transfer of the land the subject of the encroachment without payment of compensation. Mr Gladwell rejected the proposal. Mr Gladwell later proposed a mediation but that was rejected. Mrs Steen's solicitors wrote to Mr Gladwell again on 16 April 1997. However, Mrs Steen did not commence proceedings. In 1997 Mr Gladwell instructed solicitors to act on his behalf. By letter dated 7 January 1998, his solicitors proposed that, at his own cost, Mr Gladwell remove the carport and fence the correct boundary. The letter said nothing about the driveway. Mrs Steen rejected the proposal. Mr Gladwell's solicitors wrote again on 2 June 1998 but no compromise was reached. In the result, Mr Gladwell commenced this action.

Mr Gladwell has caused a survey to be made which shows the extent of the encroachment. The surveyor's fees are $560. He also caused a valuation to be made of the unimproved capital value of the land encroached upon. Its value is $1,335. The Steens accept the survey and valuation. The valuer's fees are $250.

At the hearing of this trial, Mr Gladwell sought orders that the Steens remove the encroachment and that he be permitted to fence the true boundary. He sought to be compensated for the costs he had incurred in engaging a surveyor, valuer and for his legal fees. In the course of submissions, his counsel said that if the land were to be transferred to the Steens, they should pay minimum compensation of three times the unimproved value of the land pursuant to s 5(1) of the Encroachments Act. Mrs Steen said that she was willing for Mr Gladwell to remove, at his cost, the carport and part of the driveway which encroached. Her preferred option was to retain the land the subject of the encroachment but she was not willing to pay three times the unimproved value of the land. She acknowledged that it was fair that she pay one half of the costs of the surveyor's and valuer's fees incurred by Mr Gladwell. I note also that a judge of this Court conducted a mediation but that did not result in any compromise. Of course, I know no more than the fact that the mediation was held and that it failed.

The first question to be determined is whether the encroachment should be removed and the true boundaries restored, or whether the land the subject of the encroachment should be transferred to the Steens and, if so, on what terms. A number of factors bear on this question.

(a) The encroachment was constructed before either the Steens or Mr Gladwell purchased their respective parcels of land and in that respect the Steens and Mr Gladwell have had the present situation foisted upon them.

(b) The Steens and Mr Gladwell purchased their respective properties believing that the land, now known to be the subject of the encroachment, formed part of the Steen land.

(d) The encroachment had existed for some 13 years before Mr Gladwell purchased his parcel of land and the question of the encroachment did not become an issue between him and the Steens for about another three years.

(e) It seems that the predecessors on the title of the Steens and Mr Gladwell were prepared to accept the fact of the encroachment.

(f) The garden on the Gladwell land has been laid out so as to conform to the boundary as delineated by the carport and concrete driveway. A row of cypress pines has been planted by Mr Gladwell along the edge of the concrete driveway and they provide a further delineation of the boundary as marked by the driveway.

(g) When inspected, the land the subject of the encroachment appears to be part of the Steens' land and the impression immediately created by an inspection suggests that the proper resolution of the dispute is to transfer the land the subject of the encroachment to the Steens.

(h) The area of the encroachment is quite small and forms a narrow strip about one metre wide on one side of each parcel of land. The houses respectively owned by Mr Gladwell and the Steens are so disposed on the land, that the existence of the encroachment is not readily apparent.

(i) The existence of the encroachment causes no inconvenience nor does it prejudice the use of the Gladwell land. If the boundary is made to accord with the existing situation, the western boundary of Mr Gladwell's land will not be entirely straight but take a dog-leg form. I do not believe that it is likely to create any difficulty in fencing or to cause any undue difficulty to successors in title.

(j) The removal of the carport and part of the driveway will, in all probability, mean that it will not be possible to have a driveway along the side of the Steen land or, if a driveway exists, it will not be a driveway which could be conveniently used by a conventional motor car. The ability to have such a driveway is a common feature of residential development in the form of single dwellings on individual allotments which is the manner in which this residential subdivision has been developed. It is unrealistic to expect that the carport could or should be relocated to the front of the Steens' land. There is not a large distance between the front of the Steens' house and the street frontage. It is doubtful whether the City of Tea Tree Gully would dispense with its building set back requirements to allow construction of a carport at the front of the house. In that respect, the loss of the driveway will diminish the value of the Steens' land in circumstances where the Steens believed that they were purchasing the land on which the carport and driveway were constructed.

For all of these reasons, the loss of the carport and driveway would cause greater loss to the Steens than would the loss to Mr Gladwell of the land the subject of the encroachment. In one sense, Mr Gladwell does not suffer any loss since he did not believe that he was purchasing the land the subject of the encroachment. He believed that the carport and the driveway formed part of the Steens' land. Nothing in the evidence or submissions satisfies me that it is more appropriate or more reasonable to remove the encroachment and restore the true boundary.

Ms Kelly submitted that, as Mrs Steen knew of the existence of the encroachment, she should have alerted intending purchasers from the Shirleys and, in particular, should have alerted Mr Gladwell of that fact. I reject that submission. It is quite unrealistic to seek to impose such an obligation on Mrs Steen or her husband. The Shirleys were obliged to make full disclosure and the Steens were entitled to rely on that fact.

The next question is whether the Steens should pay compensation for the transfer of the land. Three alternatives are possible. First, the Steens pay no compensation; secondly, that they pay $1,335, the unimproved value of the land; or, thirdly, that they pay three times the unimproved value of the land. It is necessary to consider the terms of s 5(1) of the Act which 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."

Ms Kelly, who appeared for Mr Gladwell, submitted that compensation should be paid and that, as Mrs Steen had not proved the encroachment was not intentional and did not arise from negligence, the Steens must pay three times the unimproved capital value of the land.

Ms Kelly reminded me of my remarks in Farrow Mortgage Services Pty Ltd (In Liquidation) v Boscaini Investments Pty Ltd & Ors (1996) 189 LSJS 337 at 340, where I said:

"In order to avoid paying three times the unimproved capital value of the land, Farrow [the encroaching owner] must discharge the onus of proving to the satisfaction of the Court that the encroachment was neither intentional nor caused by negligence. There is nothing in either s 5(1) or in any other part of the Act which qualifies the onus which must be discharged by an encroaching owner who ascertains that an encroachment exists and the encroachment has been caused by a predecessor in title. As this case vividly illustrates, the burden of proof might be very difficult to discharge in such a case."

I then held that the plain terms of s 5(1) could not be ignored with the consequence that, notwithstanding the apparent hardship for a successor in title to the owner who initially caused the encroachment in discharging the onus of proof, it was incumbent on the encroaching owner to prove that the encroachment was neither intentionally nor negligently caused. I did, however, recognise that the court might not order compensation in the exercise of a wide discretion vested in it by s 4(3).

On further reflection and for the reasons which follow, I do not think my approach was entirely correct. Certainly, there is nothing in s 5(1) which qualifies the onus which must be discharged by the encroaching owner. But having regard to the overall intention of the Act and the very wide discretion vested in the court by s 4(3), I think that 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 a court in the exercise of its discretion to award either that no compensation be paid, or that only the unimproved capital value be paid, or that three times the unimproved capital value be paid for the transfer of the land the subject of the encroachment. Which alternative is appropriate will depend upon the circumstances of each individual case. However, in those circumstances where the encroaching owner at the time of the application is a person who created the encroachment, it is likely that effect will have to be given to s 5(1) and, if the encroaching owner is unable to discharge the onus provided in s 5(1), he may well be ordered to pay minimum compensation of three times the unimproved capital value of the land the subject of the encroachment.

There are at least three policy reasons for this conclusion. First, if the encroaching owner did not construct the encroachment, he may not be able to prove that the encroachment was not intentional and did not arise from negligence. The person or persons who constructed the encroachment may have died or cannot be traced. It would be quite inequitable for the encroaching owner to be required to pay minimum compensation of three times the unimproved value of the land in circumstances where he is prevented from obtaining any evidence as to the circumstances in which the encroachment occurred.

Secondly, it is quite a common occurrence for the purchaser of the land encroached upon not to be aware of the encroachment at the time of purchase. The fact of the encroachment is usually ascertained at some time after purchase. The purchaser is likely to have determined the price he is willing to pay by reference to what he perceives to be the attributes of the property he has inspected and not by reference to the precise dimensions of the land as disclosed in the certificate of title. That conclusion is amply demonstrated by the fact that purchasers do not, in the ordinary course, cause a survey of the land to be made before purchase. Thus, in that sense, the encroachment does not cause any diminution in the value to the purchaser. I acknowledge that the value of a parcel of land is frequently expressed as a dollar amount per square metre determined by dividing the value of the land by the area as noted on the certificate of title. However, it is unrealistic to assume that a purchaser, particularly a purchaser of a house property who intends to use it as a dwelling, has determined the price to be paid by calculating the price per square metre of the land as shown on the certificate of title. The usual case is that the purchaser has paid a price determined by his inspection and is in the end what he is willing to pay to induce the vendor to sell the property: cf. Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418 per Griffith CJ at 432.

Thirdly, the main reason why s 5(1) empowers the court to order minimum compensation at three times the unimproved capital value of the land is to provide an incentive to owners of land to take all reasonable steps to ensure that they do not encroach upon adjoining land when constructing any building or wall. Compensation of three times the unimproved capital value is a kind of penalty for those who do not take due care in locating any building on their land or intentionally encroach upon the land of their neighbour. It would be unfair to impose that kind of penalty upon an innocent successor in title who has purchased the land unaware of the encroachment.

Fourthly, the adjoining owner might have been aware of the encroachment for many years and might have acquiesced in the situation. An example is Carlin v Mladenovic [2000] SASC 142, delivered at the same time as this judgment.

Finally, the policy of the Act is to facilitate the resolution of disputes when an encroachment has occurred. The Act is remedial legislation and the court will accord to the Act a fair, large and liberal interpretation: see s 22 of the Acts Interpretation Act 1915. In Clarke v Wilkie (supra) at 139, Wells J described the purpose of the Act in these terms:

"[T]he Act was plainly remedial and innovative in character, and was designed to set at rest a depressing, and often prolonged, disputes between neighbours over boundary lines and alleged encroachments that are both substantial and permanent. Such disputes are age-old and invariably, in the protagonists, cause intense emotion and suspension of rational thought. It is not without reason that the draftsmen in Deuteronomy in the Bible was moved to write, 'cursed be he that removeth his neighbour's landmark'."

Earlier, at page 136, Wells J had said that one of the principal aims of the legislation was to place in the hands of the court adequate and flexible powers to enable it to do more nearly complete justice between adjoining owners than was formerly possible. To like effect were the observations of Young J in Hardie v Cuthbert (1988) 65 LGRA 5 at 6, when commenting on legislation in like terms:

"The Act has not been before the courts for consideration on very many occasions. This, it would appear, in fact fulfils what the legislature intended because the Ministers when introducing the Act made it clear that the Government thought that 99 percent of cases would be settled because neighbours would know that the Court had an overriding duty to do what was fair, people would accept themselves what was fair and not try and blackmail their neighbours. Those half a dozen or so cases which have come before the courts have, almost without exception, shown that the Court is construing this legislation in a purposive and beneficial way."

Although that decision was reversed on appeal, the appeal concerned other issues and the Court of Appeal did not adversely comment on those remarks. In short, the Act vests in the court power to balance the respective interests of the parties to determine whether compensation should be paid and, if so, to decide what is reasonable and fair compensation. In the exercise of that power, the court has a wide direction limited only by the terms of s 5(1) in those instances where the encroaching owner is the person who created the encroachment. In this respect, I refer also to my reasons in Bunney v State of South Australia [2000] SASC 141.

The transfer of the land encroached upon is doing no more than remedying a situation which has existed for some years. Furthermore, when the Steens purchased their land, they believed they were acquiring all of the land on which the carport and driveway are constructed. Similarly, when Mr Gladwell purchased his land, he did not believe that he was purchasing the land on which any part of the carport or driveway is constructed. He believed he was purchasing the land east of the driveway and carport. To require the Steens to pay compensation is to require them to pay for land which they thought had been included in the purchase price. Similarly, Mr Gladwell would receive a kind of windfall if compensation is paid. The error of the encroachment is no more than 20 square metres. It is quite small when compared with the land owned respectively by the Steens and Mr Gladwell.

I therefore think that no compensation should be paid to Mr Gladwell for the transfer of the land the subject of the encroachment. As the Steens obtain the benefit of the transfer of that land, it is fair that they should pay the costs involved with the registration of the transfer. It was necessary for Mr Gladwell to meet the costs of the survey and valuation but the Steens also benefited in that the survey and valuation established the extent of the encroachment and the value of the land encroached upon. That was necessary evidence for the purpose of this litigation. It is fair and reasonable that the costs of the survey and valuation should be shared equally by the Steens and Mr Gladwell.

For these reasons, there will be orders as follows:

(1) that Mr Gladwell transfer to the Steens the land encroached upon;

(2) that Mr and Mrs Steen pay all necessary costs involved in registering the transfer; and

(3) that the parties share equally the costs of the survey and of the valuation.

I will hear the parties as to the detailed terms of the order and any orders ancillary thereto.