Perpetual Trustees Victoria Ltd v Suncorp Metway Ltd and Amer El Nachar

Encroachment of Buildings Act 1922 LEGISLATION CITED: Land and Environment Court Rules 2007 Uniform Civil Procedure Rules 2005

APPLICANT Mr S Stierli Hicksons Lawyers FIRST RESPONDENT LEGAL REPRESENTATIVES: Mr P James James Legal Pty Ltd

SECOND RESPONDENT No appearance

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

30263 of 2009 Perpetual Trustees Victoria Ltd v Suncorp-Metway Ltd and Amer El Nachar

JUDGMENT 1 Commissioner: In this application made pursuant to the Encroachment of Buildings Act 1922 (the Act) the applicant is seeking orders for the removal of encroachments constituted by a carport, laundry shed and overhanging gutters and eaves. The background to the matter is outlined in my previous decision: Perpetual Trustees Victoria Ltd v Suncorp-Metway Ltd & Anor [2009] NSWLEC 1326. In those earlier reasons I set out my reasons for findings that the carport and shed should be removed with the applicant and first respondent to share the costs of doing so. The parties were given an opportunity to attempt to reach agreement as to that basis on which that could be done. The matter was re-listed for mention on 21 October 2009 and on that occasion the parties stated that they had been unable to reach agreement. 2 The applicant and first respondent filed draft orders reflecting their respective positions. In summary, the applicant is seeking orders that: -The applicant and first respondent are restrained from transferring any part of the subject land other than to another party to the proceedings prior to the removal of the encroachments; -The applicant and first respondent each obtain a quote from a licensed and appropriately insured builder for the cost of the removal of the encroachments; -The first respondent to instruct the builder providing the most cost efficient quote to undertake the work; -The first respondent to pay the builder's costs on receipt of the builder's invoice; and -The applicant to pay to the first respondent 8% of the sum paid by the first respondent to the builder. 3 The orders sought by the first respondent are in summary: -The applicant to instruct Mr M Khaicy to remove the encroachments; -The applicant to pay the builder's costs of removal of the encroachments; and -The first respondent to pay to the applicant 50% of the sum paid by the applicant to the builder. 4 It was common ground that both applicant and first respondent would provide access to the builder and subcontractors to enable the work to be carried out. The essential differences are as to which party is to contract the builder to carry out the work, and whether that builder should be Mr Khaicy (who provided an estimate considered in the substantive proceedings) or the lower of two fresh quotes; and the basis on which the costs of the works are to be divided. 5 Directions were made for the filing and serving of written submissions addressing the matters in dispute, including the question of costs. The applicant and first respondent provided submissions and submissions in reply in accordance with the agreed timetable, by 25 November 2009. 6 In considering the competing contentions of the parties, the relevant provisions are those in s3(2) and (3) of the Act: (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) the fact that the application is made by the adjacent owner or by the encroaching owner, as the case may be, (b) the situation and value of the subject land, and the nature and extent of the encroachment, (c) the character of the encroaching building, and the purposes for which it may be used, (d) the loss and damage which has been or will be incurred by the adjacent owner, (e) the loss and damage which would be incurred by the encroaching owner if the encroaching owner were required to remove the encroachment, (f) the circumstances in which the encroachment was made. Costs of removal of encroachments 7 Both parties were agreed that the usual order is for the encroaching party to remove the encroachment at its expense and make good the land affected. The applicant supports its submission that it pay 8% of the costs of removal of the encroachments on the following basis: (a) the value of the Driveway Lot was found to be in the order of $20,000 to $40,000; (b) the evidence was that the value of the House Lot was in the order of $330,000 to $390,000; (c) this would indicate that the Driveway Lot has a value of between 6% and 10% of the value of the House Lot; (d) to apportion the costs of removal of the encroachment on a 50/50 basis would not be equitable because the cost of removal and making good the properties would be significantly higher percentage of the value of the Driveway Lot as compared to the percentage of value of the House Lot. 8 In response to the first respondent's submissions the applicant further submits that the encroachments were erected primarily for the benefit of the House Lot and the first respondent should bear the entire expense of removal of the encroachments and making good the properties. 9 The first respondent supports its submission that the costs of removal of the encroachments should be shared equally on the following basis: (a) the laundry/shed is located 50% on each lot and the carport is located approximately 35% on the Driveway Lot and 65% on the House lot; (b) it has always been the first respondent's position that the removal of the encroachments ordered will be prejudicial to both the applicant and first respondent in their attempts to sell each lot; (c) as the encroaching structures affect both lots the only just and practical approach is for the parties to share the costs of removing the encroachments equally. 10 In response to the applicant's submissions, the first respondent submits: (a) the valuation of the applicant's land against the cost of removal of the encroachments is irrelevant as the applicant's case is that it benefits from the removal of the encroachments on the Driveway lot and enables the applicant to sell the property to the world at large and is not limited to a sale to the purchaser of the House lot; (b) the applicant admits to being aware that these proceedings have resulted in substantially greater prejudice to the first respondent; (c) before commencing the proceedings the applicant did not consider the value of its land as compared to the cost of removing the encroachments and cannot now argue that it would be inequitable or unjust for the Court to apply to the applicant the same principles that it sought to have the Court apply to the first respondent. (d) it is the first respondent's position that in the event that the purchaser of the House lot is also the purchaser of the Driveway lot, then by removing the encroachment both lots are less valuable to the purchaser and both parties are prejudiced by the orders. 11 Having considered the matters set out in s3(3) of the Act I conclude that the appropriate course is for the applicant and first respondent to share the costs of removal of the encroachments equally. Both parties are an "encroaching owner" as defined in s2 of the Act, and the encroachments affect both lots. The encroachments occupy a significant part of the Driveway lot, and while, for the reasons set out in my earlier decision, I accept that the most realistic purchaser of the Driveway lot would be a purchaser of the House lot, the encroachments would constitute a significant impediment to the sale of the Driveway lot to anyone other than such a purchaser. Removal of the encroachments would enable the applicant to sell the Driveway lot to someone other than the purchaser of the House lot, and thus be of greater benefit to the applicant than to the first respondent. Neither the applicant nor first respondent was responsible for the creation of the encroachments, which became such only when the unity of title that existed from 1984 ended in 2008, and the appropriate outcome is that each, as encroaching owner, share in the cost of removing the encroachments and making good the property. Removal of the encroachments 12 The applicant seeks an order that each party obtain a quote from a licensed and insured builder for the cost of removal of the encroachments and making good the affected portion of the respective properties, and that the first respondent instruct the builder who provides the most cost efficient quote. The first respondent agrees that it would be appropriate for fresh quotes to be obtained, and submits that it would be preferable for both applicant and first respondent to enter into the building contract. The first respondent submits that access to the encroachments is only possible through the Driveway lot, and it would normally follow that the applicant is the preferable party to enter into a building contract; however, in order for home warranty insurance to be available to the first respondent, the first respondent must also be a party to the same building contract. In reply, the applicant submits that home warranty insurance is not required by the applicant as all the structures on the Driveway lot are to be removed. 13 I accept that the quote for removal of the encroachments provided by Mr Khaicy included works not required by paragraph 40 of my earlier reasons, and on that basis the appropriate order is that each party obtain a fresh quote and that the work be done by the builder providing the most cost efficient quote. The applicant will be required to provide access to the builder to enable the work to be done. I accept that for reasons of access and to enable appropriate home warranty insurance to be maintained it is appropriate that both applicant and first respondent enter into the building contract, on the basis that each is liable for half the contract amount. Other orders 14 The applicant sought an order that the applicant and first respondent be restrained from transferring any part of the subject land other than to another party to these proceedings prior to the removal of eh encroachments. The first respondent submits that such an order is beyond the power of a Commissioner, being specifically excluded by reg 3.10(b) (iii) of the Land and Environment Court Rules: 3.10 Court functions not exercisable by Commissioners

(1) The following functions of the Court are not exercisable by a Commissioner dealing with proceedings pursuant to a direction under section 36 of the Act: … (b) the functions conferred on the Court by any of the following provisions of the Uniform Civil Procedure Rules 2005: … (iii) Part 25 (the power to make orders with respect to the preservation of property),

15 Part 25 of the Uniform Civil Procedure Rules includes: 25.3 Preservation of property (1) In proceedings concerning property, or in which any question may arise as to property, the court may make orders for the detention, custody or preservation of the property. 16 I agree with the first respondent that I have no power to make the order as sought by the applicant. 17 Both applicant and first respondent sought an order that the other pay its costs of the proceedings. I invited the parties to consider and make submissions as to whether s14 of the Act confers power to make an order for costs, and if so to make submissions as to what such orders should be, or whether such an order is beyond the power of a Commissioner, by operation of reg 3.10(1)(a)(iv) of the Land and Environment Court Rules. Both parties were in agreement that the matter should be referred to a Registrar or Judge for the making of an appropriate costs order. The applicant included in its submissions, submissions in support of its claim that the first respondent pay its costs. The first respondent indicated that it intends to file an affidavit detailing offers of settlement and other matters to support its application for costs.

Conclusion 18 The appropriate form of orders is that provided in draft form by the first respondent with its submissions filed on 18 November 2009, subject to the deletion of draft Order 9. The parties are to file an agreed set of orders including amended dates by Wednesday 23 December 2009, and orders will be made in chambers. Any application for costs is to be made by Notice of Motion filed in the proceedings by Wednesday 23 December 2009.

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.