Sydney Water v Besmaw

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40118 of 2001 L&EC 30050 of 1999

MEAGHER JA HODGSON JA IPP AJA

Friday, 31 May 2002 SYDNEY WATER CORPORATION v BESMAW PTY LTD

Besmaw, the respondent, is the owner of land and carries on the business of extracting and selling sand, and rehabilitating the land. Current ingress to the land is via Lindum Street, and egress is from the land onto Captain Cook Drive. Sydney Water Corporation, the appellant, constructed a sewer main through the sandhills off Captain Cook Drive. At trial, the respondent was awarded the sum of $1 530 122.10 in the Land and Environment Court for "disturbance" under s 59(f) of the Land Acquisition (Just Terms Acquisition) Act ; an amount of compensation which was awarded in relation to the disturbance caused by the compulsory acquisition of the easement by the appellant.

On resuming the easement for sewerage purposes over the respondent's land, Sydney Water Corporation entered on the land and laid a subterranean pipeline within the easement. This was done (a) on the basis that the surface of the land could withstand suitable traffic and (b) with an estimate life expectancy of 50 years without serious failure requiring maintenance.

Sydney Water Corporation repeatedly submitted on appeal, that the rights to block the respondent's access are merely theoretical. Any possible peril facing the respondent, it was suggested, could be prevented by obtaining relief under section 41 of the Sydney Water Act .

HELD: Per Meagher JA (Hodgson JA and Ipp JA agreeing) Section 41 only relates to the exercise by Sydney Water of its powers under Part 6 Division 4 of the Act. It would not apply to the exercise of the powers granted to Sydney Water under Memorandum 053501. The threat feared by the respondent, although remote, does exist and is neither theoretical nor hypothetical. The trial judge correctly held that the section seems directed only to physical damage to land or buildings, not to diminution in value of an incorporeal hereditament.

Insofar as the trial judge's conclusions amount to a finding of "reasonableness", they are findings of fact and are immune from appeal.

Per Hodgson JA The words "might reasonably be incurred" under s 59(f) of the Act must be taken as referring to the time as at which compensation is being assessed. Compensation is payable under this item only if the financial costs have actually been incurred or if it would, at the relevant time, be reasonable to incur them. There is no basis for overturning the trial judge's finding that it would be reasonable for the respondent now to incur the costs in question.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40118 of 2001 L&EC 30050 of 1999

MEAGHER JA HODGSON JA IPP AJA

Friday, 31 May 2002 SYDNEY WATER CORPORATION v BESMAW PTY LTD Judgment 1 MEAGHER JA: This is an appeal from Sheahan J in the Land and Environment Court as to the amount of compensation payable by the appellant Sydney Water to the respondent Besmaw. All items of compensation are either agreed or irrelevant except one: his Honour awarded Besmaw the sum of $1,530,122.10 for "disturbance" under s59(f) of the Land Acquisition (Just Terms Acquisition) Act 1991, which provides that the acquirer should pay to the owner of land acquired: "any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition". 2 The land owned by Besmaw consists of a block of approximately 160.45 hectares, situated in Kurnell (which is a suburb of Sydney). It is bounded on one side by the sea (at Bate Bay), on another side by Captain Cook Drive, and on a third by a street called Lindum Street. It carries on there the business of extracting and selling sand and rehabilitating the land. It also has the right to carry on recreational facilities on the land, although this right is currently unexploited and is irrelevant for the purposes of this litigation. Current ingress to the land is via Lindum Street, and egress is from the land onto Captain Cook Drive. 3 Sydney Water resumed an easement over this land for sewage purposes. It is 4.3 metres wide and contains 1527m². In these reasons it will be called "SE2", in order to distinguish it from a previous sewage easement ("SE1") over the Company's land. The terms of the new easement are contained in Memorandum 053501 lodged at the Land Titles Office. 4 Sydney Water has entered on the land and laid a subterranean pipeline within the easement (a) on the basis that the surface of the land can withstand suitable traffic, and (b) with an estimated life expectancy of 50 years without serious failure requiring maintenance. So far, neither Sydney Water nor Besmaw has done, or intends to do, anything which might upset the other. 5 However, what does upset Besmaw is that Sydney Water has the right to deny Besmaw access to Captain Cook Drive. If it exercised some of the powers contained in Memorandum 053501, it could undoubtedly do so. This is unlike the situation of SE1, when the instrument controlling the dominant tenement guarantees the servient tenement (Besmaw) a right of access to Captain Cook Drive. The correspondence admitted into evidence demonstrates a rejection of Besmaw's offer that the parties enter into a further agreement to guarantee Besmaw's right of access. In these circumstances, it ill behoves Sydney Water to keep repeating that the rights to block Besmaw's access which it refuses to disclaim are merely theoretical. In argument, Mr Ayling QC, learned senior counsel for Besmaw, pointed to the example of constructing and laying a new sewage line above ground along the length of the easement, as a possible peril for his client. 6 Mr Finch SC, learned senior counsel for Sydney Water, has submitted that this result could be prevented by Besmaw seeking relief under the provisions of s41 of the Sydney Water Act 1994. That enigmatic section is in the following terms: 41. Compensation

(1) The Corporation, in exercising its functions under this Division, is to do as little damage as practicable and is, subject to this Division, to compensate all persons who suffer damage by the exercise of the functions. (2) Compensation may be made by reinstatement, repair, construction of works or payment. (3) If the Corporation installs a sewer on land in exercise of powers under this Division, the Corporation is required to pay compensation only if the sewer damages, or interferes with, a building or other structure on the land or causes other physical damage to property or if an access chamber or main ventilator is constructed on the land.

He said that, if the worst came to the worst, Besmaw could always obtain an order under the section that a new access to Captain Cook Drive be constructed. Apart from the difficulties of obtaining a mandatory injunction from a judge exercising a discretionary jurisdiction, there are still more formidable difficulties in this submission. One is that s41 only relates to the exercise by Sydney Water of its powers under Part 6 Division 4 of the Act; it would not apply to the exercise of the powers granted to Sydney Water under Memorandum 053501. Another is, as his Honour held, that the section seems directed only to physical damage to land or buildings, not to diminution in value of an incorporeal hereditament. 7 It follows, in my view, that the threat feared by Besmaw does exist; and that, although it may be remote, it is neither theoretical nor hypothetical. 8 The next submission which Mr Finch SC made was that, in any event, the injury claimed does not come within s59(f) of the Land Acquisition Act. I have already set out the relevant terms of that paragraph. This submission concentrates on the word "reasonably". There were, we were told, three aspects of reasonableness involved. First, the works claimed (i.e. in this case, the construction of a new access) had to be "reasonable". That presents no problem. If one is threatened with the loss of or right of access, construction of a new one must be reasonable. Secondly, the monetary quantum must be reasonable. In the present case that involves no problem, since the quantum was agreed. Thirdly, it must be reasonable to build the new access now, or at any rate in the near future. The oral evidence before his Honour was to the effect that the construction of the new access would commence as soon as the compensation money was available. His Honour's conclusions include the following: "Besmaw, is therefore, in my view, entitled to do what is reasonably necessary to avoid what is an inevitable consequence of the full exercise of the corporation's rights under the easement."

and "Such access is not guaranteed in this case, by either the instrument or the relevant correspondence between the (current) parties, and I have concluded that the substantial disturbance claim in dispute should be determined in favour of the company." I might add that insofar as his Honour's conclusions necessarily amount to a finding of "reasonableness" wherever required, they are findings of fact and therefore immune from appeal. 9 I would dismiss the appeal with costs. 10 HODGSON JA: I agree with Meagher JA. 11 As noted by Meagher JA, s.59(f) of the Land Acquisition (Just Terms) Act provides that the acquirer should pay to the owner of the land acquired "any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition". 12 At first sight, the provision might seem unreasonable, and in need of a narrow construction, because the mere possibility that financial costs might reasonably be incurred at some time in the future seems hardly to justify an immediate payment of the full amount of those costs. 13 In my opinion, the answer to that consideration is that "might reasonably be incurred" must be taken as referring to the time as at which compensation is being assessed; so that compensation is payable under this item only if the financial costs have actually been incurred or if it would, at the relevant time, be reasonable to incur them. The primary judge found to the effect that it would be reasonable for the respondent now to incur the costs in question, and there is no basis for overturning that finding. 14 One other submission made by Mr. Finch SC for the appellant was that the respondent was adequately protected by a provision of the Memorandum incorporated into the acquired easement to the effect that Sydney Water would "so far as shall be reasonably practicable make good and remedy all damage caused to the said land by reason of or arising out of the exercise of the aforesaid rights, powers and authorities or any of them". As pointed out by Mr. Ayling SC for the respondent, this only relates to damage to the "said land", that is, the land occupied by the easement, not other land of the respondent which might be affected by the easement; and the limitation to what is "reasonably practicable" further reduces any protection given by this provision. Thus it does not impact on the reasonableness of the incurring of the costs in question in this case. 15 IPP AJA: I agree with Meagher JA and Hodgson JA.

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