Bottos v CityLink Melbourne Ltd
[2021] VSC 585
•16 September 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
MAJOR TORTS LIST
S CI 2018 01383
| NEILO STEFANO BOTTOS & ADRIAN LLOYD BOTTOS | Plaintiffs |
| v | |
| CITYLINK MELBOURNE LTD (ACN 070 810 678) | Defendant |
---
JUDGE: | Gorton J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 15–25 June, 13 July 2021 |
DATE OF JUDGMENT: | 16 September 2021 |
CASE MAY BE CITED AS: | Bottos v CityLink Melbourne Ltd |
MEDIUM NEUTRAL CITATION: | [2021] VSC 585 (First revision: 23 September 2021) |
---
REAL PROPERTY – Trespass – Adverse possession – Factual possession – Intention to possess exclusively – Subterranean incursion – Stratification of title by adverse possession – Adverse possession by tenant on behalf of landlord – Acknowledgment of title – Limitation of Actions Act 1958 (Vic) ss 8, 9, 14, 18, 24, 25.
TORTS – Trespass – Causation – Natural and probable consequence test – But for test.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr M Clarke QC and Mr M Sharkey | Antony Sdrinis & Co |
| For the Defendant | Mr S Horgan QC and Ms A Hando | Herbert Smith Freehills |
TABLE OF CONTENTS
A. Overview....................................................................................................................................... 1
B. The construction of the noise wall and the encroachments................................................. 2
C. The adverse possession legislation and an overview of the arguments........................... 4
D. The Bottos brothers’ preliminary arguments — the Crown and estoppel....................... 5
D.1.The role of the Crown — was CityLink dispossessing on behalf of the Crown, and if so can the Crown obtain title by adverse possession?............................................................... 5
D.2.Is CityLink otherwise unable to rely on its adverse possession defence?................... 6
E. Did CityLink dispossess the Bottos brothers?...................................................................... 11
E.1.The noise wall and its foundations.................................................................................. 11
E.1.1.Factual possession.................................................................................................. 11
E.1.2.Intention to possess................................................................................................ 13
E.1.3.‘Open and manifest’............................................................................................... 17
E.1.4.Adverse possession can cause unfairness.......................................................... 18
E.2.The spillage.......................................................................................................................... 19
F. Implications of the planning permit communications........................................................ 20
F.1.The relevant communications........................................................................................... 21
F.2.Was CityLink’s period of possession broken by the 2012 planning permit application? 25
F.3.Did CityLink, through VicRoads, acknowledge the Bottos brothers’ title?............... 26
G. Damages...................................................................................................................................... 30
G.1.Overview of the construction........................................................................................... 30
G.1.1.A promising beginning......................................................................................... 30
G.1.2.Discovery of the encroachments......................................................................... 32
G.1.3.Response to the encroachments........................................................................... 33
G.1.4.Completion of the construction........................................................................... 34
Dealing with the spillage..................................................................................... 34
Replacing the concreter and pouring the slabs................................................ 35
Amending the plans and obtaining an amended building permit............... 35
Problems with Vita Built and borrowing from Millbrook Finance.............. 36
Problems with further delays and refinancing................................................ 37
Finalisation of the project and sales of the units.............................................. 38
G.2. Assessment of loss.............................................................................................................. 39
G.2.1.Applicable principles and the relevant counterfactual.................................... 39
G.2.2.What delay did the spillage cause to the completion of the development?. 42
The role of delay in the assessment of damages.............................................. 42
Halt due to the spillage itself.............................................................................. 43
Did the spillage lead to the loss of the concreter and an associated further delay?................................................................................................................ 43
Did the spillage lead to Vita Built’s financial difficulties and any associated further delays?................................................................................................... 47
The expert evidence led by the Bottos brothers relating to delay................. 48
Conclusion on the period of delay for which CityLink is liable................... 49
G.2.3. CityLink’s attribution of liability to other persons............................................ 49
G.2.4.Financial cost of the spillage delay..................................................................... 50
Expert evidence led by the Bottos brothers on the valuation of their loss and the way the Bottos brothers put their case...................................................... 50
Cost of the additional work and materials required due to deterioration of the trenches................................................................................................. 52
Additional interest and other fees..................................................................... 56
Delay in the receipt of funds from sale of the units........................................ 59
Holding costs associated with the delay........................................................... 61
Conclusion on damages...................................................................................... 62
H. Conclusions and disposition................................................................................................... 62
ANNEXURE 1 – THE NOISE WALL............................................................................................ 64
ANNEXURE 2 – THE NOISE WALL FOUNDATIONS........................................................... 65
ANNEXURE 3 – PART OF THE SPILLAGE............................................................................... 66
HIS HONOUR:
A. Overview
CityLink Melbourne Ltd (‘CityLink’), the defendant, has built a noise wall that encroaches onto land owned by the Bottos brothers, the plaintiffs. The Bottos brothers discovered the encroachments when they were in the process of building units on the property. They had to make changes to the development to accommodate the encroachments. They seek damages for trespass and an order that CityLink remove the structure to the extent that it encroaches on their land. CityLink contended that, by reason of the long presence of the noise wall, it had adversely possessed the land taken up by the noise wall, and accordingly that it is not liable in trespass. It also disputed that the presence of the encroachments caused loss of the dimension claimed by the plaintiffs. In response to the adverse possession claim, the Bottos brothers:
(a) denied that the land was adversely possessed by CityLink;
(b) contended that CityLink was unable to rely on any period of adverse possession because it would have been possessing on behalf of the Crown and the Crown cannot adversely possess, and also that CityLink was estopped from asserting that the land was adversely possessed by reason of an earlier compromise of their claim against the State of Victoria; and
(c) contended that the process by which they obtained a planning permit in 2012 interrupted any period of adverse possession, or resulted in an acknowledgment by CityLink that they had title to the land.
At the hearing, I reserved for later determination the issue as to whether, if the Bottos brothers succeed in this claim, I ought to make an order that CityLink remove the structure to the extent that it encroaches on their land, in addition to awarding damages.
Both Neilo and Adrian Bottos gave evidence. Each was an impressive witness. Each was prepared to make concessions where appropriate and, I consider, was honest and doing his best to answer questions to the best of his recollection. Counsel for CityLink, sensibly in my view, did not say anything adverse to their credit.
B. The construction of the noise wall and the encroachments
The Bottos brothers have owned for many years the property at 9 McColl Court in Brunswick West.[1] That block runs in a generally north–south direction, with the Tullamarine Freeway and noise wall running at an angle across the back of it from the north-west corner of the block down in a south-easterly direction. The back (diagonal) boundary meets the east boundary approximately two-thirds of the way back from the front (south-east) corner of the block. The unusual shape of the block came about because part of the block had earlier been compulsorily acquired for the purpose of constructing the freeway. A copy of the map on the title plan is below.
[1]The land was initially purchased by the plaintiffs’ father and his business partner. The plaintiffs’ father took ownership on the death of his business partner. Although the land has since been held in different legal structures from time to time, the parties agreed that for the purpose of this case it could be treated as having been in the ownership of the plaintiffs at all relevant times. I will refer to the plaintiffs as the Bottos brothers.
Sometime in 1999, CityLink constructed a noise wall along the south-west side of the Tullamarine Freeway as it passed through Brunswick West. The structure is still there and consists of large panels set between eight-metre-high, steel, H-beam poles set in concrete. A photograph of the noise wall is at Annexure 1. Although the fence panels are on CityLink’s land, the steel poles are wider than the panels and they extend between 6–17 cm into the Bottos brothers’ land, according to one survey, and between 0.8–3.5 cm according to another survey. The steel poles are attached to square concrete bases that extend a further approximately 20 cm from the poles. Underneath the concrete bases are deep cylindrical concrete foundations of at least 60 cm diameter and which extend further still into the Bottos brothers’ land. A photograph of the noise wall and part of the concrete foundation is at Annexure 2.
There are 11 poles on that part of the noise wall that runs along the boundary of the Bottos brothers’ land. For the purpose of this case they have conveniently been numbered from 1 to 11, with number 1 being the steel pole nearest the top north-west corner, and number 11 being the pole nearest to the south-east corner where the diagonal rear boundary meets the eastern boundary.
It was common ground that, in constructing the noise wall, CityLink did not intend to encroach into the Bottos brothers’ land. The plan of the noise wall stamped ‘as constructed’ shows it set back a small but distinct distance from the relevant boundary. Also, where the noise wall passes other properties in the area, the lease boundary is set back about a metre from the relevant property.
When pole number 11 was being installed, a large amount of concrete spilt over underground in an irregular shape further into the Bottos brothers’ land, presumably when the concrete foundation for that pole was being constructed. This large irregular quantity of concrete was referred to as ‘the spillage’. It was about 3 metres long, 1.5 metres wide, and three quarters of a metre deep, and it encroached this amount further into the Bottos brothers’ land. A photograph of part of the spillage is at Annexure 3.
At the time the noise wall was constructed in 1999, there was a weatherboard house on the property with a large backyard. The Bottos brothers tenanted out the property, with plans always to develop it in due course. Whilst the property was tenanted, the Bottos brothers attended at the property on a regular basis to mow the lawn of the backyard. When they did so, they mowed right up to the noise wall and used a line trimmer to cut the grass alongside the noise wall. They said, and I accept, that the concrete supports for the steel beams were underground and not visible, that the spillage was underground and not visible, and that they assumed that the noise wall had been constructed along the boundary without encroaching onto their land.
C. The adverse possession legislation and an overview of the arguments
Section 8 of the Limitation of Actions Act 1958 (‘the Limitations Act’) requires an action to recover land to be commenced within fifteen years of the date on which the right of action accrued. Section 9 of provides that the right of action to recover land is deemed to have accrued on the ‘date of dispossession’. Section 14(1) provides that no right of action shall be deemed to accrue unless the land is in ‘adverse possession’, that is, in the possession of some person in whose favour the period of limitation can run. However, s 24 provides that if the adverse possessor ‘acknowledges’ the title of the true owner during the relevant period, then the right of action is deemed to accrue on the date of that acknowledgment. This means, in effect, that the 15-year period starts again. Section 25 requires that any such acknowledgment be signed and in writing and be made to the titleholder. Finally, s 18 provides that, at the expiration of the period prescribed for any person to bring an action to recover land, the title of that person to the land ‘shall be extinguished’.
It follows from these provisions that if CityLink had, as it alleges, ‘dispossessed’ the Bottos brothers of the land occupied by the noise wall in 1999, and if the application in 2012 for a planning permit did not break that possession or result in an acknowledgment of title by CityLink, then time to commence a proceeding to recover that land would have run out in 2014. As such, CityLink contended that the Bottos brothers have lost title to the land occupied by the encroachments and are therefore unable to claim damages from CityLink for trespass on that land.[2]
[2]Re Jolly [1900] 2 Ch 616, 617–8 (Lord Alverstone MR); Mount Carmel Investments Ltd v Peter Thurlow Ltd [1988] 1 WLR 1078, 1088 (Nicholls LJ). Notwithstanding these cases, it may be arguable that the extinguishment of title ought not to preclude an action for any damages that were sustained before the extinguishment of title took place (assuming that the action were otherwise within time) – see Beaulane Properties Ltd v Palmer [2006] Ch 79, 142 [220] (Strauss QC). But this situation does not arise here, because in this case, if there were an extinguishment of title, the losses the subject of this proceeding were sustained after that extinguishment.
The Bottos brothers contended that:
(a) if CityLink were adversely possessing the land, then it was doing so on behalf of the State, and the State cannot adversely possess land;
(b) CityLink is estopped from contending that it adversely possessed the land;
(c) in any event, CityLink did not ‘dispossess’ the Bottos brothers and was not ‘in possession’ of the land occupied by the noise wall as those terms are to be understood; and
(d) any period of adverse possession was broken by the Bottos brothers’ application to the Council in 2012 for a planning permit, or by communications made by VicRoads in the course of that process that amounted to an acknowledgement of title made by it as agent for CityLink.
D. The Bottos brothers’ preliminary arguments — the Crown and estoppel
D.1. The role of the Crown — was CityLink dispossessing on behalf of the Crown, and if so can the Crown obtain title by adverse possession?
The Bottos brothers contended that the Land Acquisition and Compensation Act1986 (‘the LACA’), which permits the Crown to acquire land compulsorily on the payment of proper consideration, covers the field and by implication ousts any effective acquisition of land by the Crown under the Limitations Act. They referred to the fact that the LACA sets out a detailed process by which the Crown may acquire interests in land, and the presumption against an intention to interfere with established property rights. They ultimately contended that ‘there is little point in having a code which must be strictly complied with if the whole [LACA] may be simply avoided by acquisition of land by adverse possession by the Crown’.
The difficulty with this argument, though, is that s 32 of the Limitations Act, set out below, explicitly extends that Act to the Crown:
32 Application to the Crown
(1)Save as in this Act otherwise expressly provided this Act shall apply to proceedings by or against the Crown in like manner as it applies to proceedings between subjects …
The LACA empowers the State compulsorily to acquire land in accordance with its terms. As s 4 of that Act makes clear, it provides a mechanism that must be followed if a ‘special Act’ empowers an ‘Authority’ to acquire an interest in land by compulsory process. A ‘special Act’ is an Act that is expressed to be a special Act for the purposes of the LACA.[3] The Limitations Act is not a ‘special Act’. Accordingly, nothing in the LACA operates, on its face, to interfere with acquisitions of interests in land under the Limitations Act.
[3]Land Acquisition and Compensation Act1986 (Vic) s 3.
Also, in my view, there is not the sort of inherent inconsistency that would be required between the two Acts for me to conclude that Parliament intended by enacting the LACA to oust the clear statement in s 32 of the Limitations Act.[4] The existence of the power compulsorily to acquire land, and a process by which that must be done, is not, to my mind, inherently in conflict with the Crown also having the ability to retain possession of land that it has adversely possessed for at least 15 years. Had the legislature intended to preclude the Crown from ever acquiring land by adverse possession, I would have expected that intention to have been expressed, and s 32 of the Limitations Act to have been amended accordingly.
[4]See, eg, Metricon Homes Pty Ltd v Softley (2016) 49 VR 746, 763–4 [48] (Warren CJ).
In light of this conclusion, it is not necessary for me to consider whether, if the Crown were unable to rely on these provisions of the Limitations Act, CityLink would also be unable to rely on them on the basis that it was a tenant of Crown land.
D.2. Is CityLink otherwise unable to rely on its adverse possession defence?
The Bottos brothers also contended, as I understood it, that:
(a) the extinguishment of title provided for in s 18 of the Limitations Act does not operate automatically on the expiration of the limitation period, but only operates in the event that a party properly raises the limitation period in a defence to a claim against it;
(b) they had commenced proceedings against the Crown, the Crown had not raised the limitations defence, and they had since compromised their claim against the Crown. Accordingly, the Crown would not now be able to raise a limitations defence or assert that the Bottos brothers’ title had been extinguished by reason of the principles set out in Port of Melbourne Authority v Anshun (‘Anshun’);[5] and
(c) accordingly, CityLink, as a tenant of Crown land, is unable to contend in this proceeding that the Bottos brothers’ title has been extinguished to the land occupied by the noise wall, which is the basis of its defence to the claim in trespass.
[5](1981) 147 CLR 589.
I accept that s 18 of the Limitations Act, despite its wording, does not operate to extinguish title automatically on the expiration of the limitation period because, were it to do so, the established principle that limitation periods do not apply unless they are pleaded would be undermined.[6] Also s 18, if considered as effective in isolation, could extinguish title on the expiration of the limitation period even in a proceeding that had been initiated within time, which would be an absurd and unintended result. For this reason, s 18 only operates if the limitations period in s 8 of the Act has been raised.
[6]See, eg, Thursby v Warren (1628) Cro Car 159; 79 ER 738. See also Price v Spoor (2021) 95 ALJR 607, 616 [23]–[25] (Kiefel CJ and Edelman J), 631–2 [110]–[114], 633 [118] (Steward J).
The following propositions underlay the second part of the Bottos brothers’ argument set out in paras (b) and (c) above:
(a) there is a presumption that a tenant adversely possessing land is adversely possessing that land on behalf of its landlord;
(b) unless that presumption is rebutted, it is the landlord that obtains the benefits or protections given by the Limitations Act;
(c) because of this, it is only the landlord that can plead and take advantage of the Limitations Act;
(d) here, the presumption has not been rebutted, the Crown has not pleaded the Limitations Act , and indeed would now be estopped from doing so; and
(e) accordingly, CityLink is not able to rely on the protections given by the Limitations Act.
I accept the propositions set out in paras (a) and (b), at least in so far as the land occupied is adjacent to the leased premises. [7] But I do not accept that it follows that a tenant is not able to plead and take advantage of the Limitations Act in a proceeding brought against it. The presumption that an adversely-possessing tenant is doing so on behalf of its landlord is directed to the result at the end of the tenancy. The presumption means that the adversely possessed land is treated as part of the demised property rather than land being separately occupied by the tenant outside that tenancy arrangement. At the end of the tenancy, the tenant does not retain a right of possession as against the landlord; and the landlord, as against the registered title owner, is able to take advantage of the period of dispossession that took place during the tenancy. However, there is no presumption that the tenant is not possessing the land for its own purposes during the course of the tenancy. There is no reason to think that, so long as the tenancy continues, the tenant in possession does not or ought not have such protections as the Limitations Act provides.
[7]Kingsmill v Millard (1855) 156 ER 849; Tower Hamlets LBC v Barrett [2006] 1 P&CR 9, 139–40 [26]–[30] (Neuberger LJ).
It should be remembered that the principles governing adverse possession are focussed on possession and possessory titles, rather than registered titles. Disputes as to adverse possession may well arise between two people, neither of whom is a registered proprietor.[8] The fact that there is a registered proprietor with no present right to possession ‘in the background’ to a dispute between two parties, each of which claims the present right to possess land, ought not to affect, and in my opinion does not affect, the ability of those persons to rely on the Limitations Act in proceedings between them relating to or arising from that claimed possessory right.
[8]Taylor v Twinberrow [1930] 2 KB 16 is an example. It concerned a licensee of a subtenant who overstayed and obtained by adverse possession a right to remain enforceable against the subtenant, but not enforceable against the owner when the subtenancy ended. Similarly, in Tichborne v Weir (1892) 67 LT 735 an equitable mortgagee who assumed possession of tenanted premises obtained possessory rights as against the mortgagor without any involvement of the landowner.
The Bottos brothers note that s 18 of the Limitations Act ‘extinguishes the title’ to the possessed land and thus on its face directs attention to the registered titleholder. It is, perhaps, tempting to think that, because of the language of s 18, it ought to or does only apply to disputes where the party claiming to adversely possess is the titleholder who will ultimately benefit from the adverse possession, and that it ought not to apply for the benefit of mere tenants. But this is not so. Section 18 of the Limitations Act, where it applies, does not transfer an interest in land; rather, it operates only to extinguish ‘the title of the dispossessed against the dispossessor’.[9] Further, it operates as an adjunct once it has been established that the limitation period has expired, rather than as a controlling device governing when the expiration of a limitation period may be relied upon. As I see it, a ‘claim to recover land’ may be brought against a person in adverse possession, even if that person is a tenant of neighbouring land.[10] The adversely-possessing neighbouring tenant may then plead the limitations defence. If time had expired prior to issue, the limitations defence will defeat the claim to recover possession. The associated extinguishment, seen as an adjunct, will then operate to extinguish the title of the dispossessed against the adversely-possessing neighbouring tenant, and defeat any claim for damages for the trespass constituted by the adverse possession.[11] This may all happen without any involvement of the tenant’s landlord at all. The fact that, at the end of the tenancy, the landlord may obtain possession of the relevant land from the tenant, and can rely on the period of adverse possession by the tenant if an action were brought against it by the registered titleholder, does not remove the protections set out in the Limitations Act from the tenant in the meantime. Indeed, it would be an odd result if a long-term tenant’s ability to rely on the Limitations Act as a defence to a claim to recover land, or a claim in trespass, were to depend on the attitude of the tenant’s landlord.
[9]Price v Spoor (2021) 95 ALJR 607, 632 [114], 633 [118] (Steward J); Fairweather v St Marylebone Property Co Ltd [1963] AC 510. See also Taylor v Twinberrow [1930] 2 KB 16, 23 (Scrutton LJ); Tichborne v Weir (1892) 67 LT 735.
[10]Indeed, it would be surprising if the proceeding were brought against anyone else. See Tower Hamlets v Barrett [2006] 1 P&CR 9, 149 [83] (Neuberger LJ).
[11]At least for any trespass that post-dated the extinguishment. See Beaulane Properties Ltd v Palmer [2006] Ch 79, 142 [220] (Strauss QC).
Accordingly, it does not follow that, because the Crown as landlord has not raised the limitation defence, CityLink as tenant cannot contend, in its defence to the claim for damages against it:
(a) that the time limit in s 8 of the Limitations Act has expired; and
(b) that the Bottos brothers’ title as against it has been extinguished by s 18 of the Limitations Act sufficiently to prevent an action for trespass.
My conclusion is consistent with the conclusion in Hampshire Automatic Centre Pty Ltd v Centre Com (Sunshine) Pty Ltd[12] that a tenant does not require the consent of its landlord to establish an easement by prescription over neighbouring property, or the consent of its landlord to bring an action to prevent interference with the tenant’s enjoyment of that easement, notwithstanding that the easement ultimately crystallises into a proprietary interest of the owner and in that way enlarges the freehold title of the landlord. The Bottos brothers observed that it was decided in that case that the landlord should be joined because the tenant was seeking a declaration as to a proprietary interest in the landlord’s land.[13] I do not consider that that requirement prevents CityLink from relying on the Limitations Act in its defence in this proceeding. CityLink is not seeking a declaration to the effect that it or anyone else has obtained ownership of the land occupied by the noise wall, but is simply contending that the Bottos brothers’ title has been extinguished (by implication, as against CityLink) by reason of the Limitations Act, and the Bottos brothers are parties.
[12](2019) 60 VR 579, 595 [78]–[79], 597 [92], 598 [95], 600 [106] (Tate, Niall and Emerton JJA).
[13]Ibid 604 [128].
In these circumstances, it is not necessary to decide whether the Crown would be estopped from relying on the Limitations Act in any action brought against it by reason of the principles set out in Anshun. But I note that, in oral submissions, when asked what a tenant in CityLink’s position could do in the event that its landlord was not sued or did not wish for its own reasons to plead the limitations defence, counsel for the Bottos brothers suggested that the landlord could be made a third party or otherwise be required to plead the defence. Anshun estoppel, like other estoppels, will be applied or not depending on the reasonableness or otherwise of the relevant party’s conduct. If counsel’s answer were correct, it would mean, in my view, that the claimed Anshun estoppel would operate to create a disadvantage for CityLink when it was not involved in the compromise between the Bottos brothers and the Crown. It seems unlikely that this would be the case.
E. Did CityLink dispossess the Bottos brothers?
CityLink is required to establish that it dispossessed the Bottos brothers by going into possession of the land for the requisite period without their consent. The words possess and dispossess are to be given their ordinary meaning as informed by common law principles. It is established that there must be both an actual occupation or physical control of the land (called ‘factual possession’) and an ‘intention to possess’ (often referred to as the animus possidendi).[14] It is the intention to occupy and use the land as one’s own that transforms what might otherwise be mere occupation into possession.[15]
[14]Whittlesea City Council v Abbatangelo (2009) 259 ALR 56, 58 [5] (Ashley, Redlich JJA and Kyrou AJA); J A Pye (Oxford) Ltd v Graham [2003] 1 AC 419, 434 [36]–[37], 435–38 [40]–[46] (Lord Browne-Wilkinson).
[15]J A Pye (Oxford) Ltd v Graham [2003] 1 AC 419, 446 [70]–[71] (Lord Hope), 447 [75]–[76] (Lord Hutton).
I consider below first whether CityLink has been in possession of the land occupied by the noise wall and its foundations, and then whether CityLink has been in possession of the land occupied by the spillage.
E.1. The noise wall and its foundations
E.1.1. Factual possession
In my view, by building the noise wall, CityLink factually possessed, and factually dispossessed the Bottos brothers of, the space physically occupied by the noise wall and its support structures. CityLink used the land occupied by the structure as if it were its own.[16] This is not a case where the area under consideration was an open area upon which different people might wander, such as a field, or a piece of open land. It was a space actually, physically occupied by a solid structure. It is analogous, perhaps, to a piece of land enclosed by an impenetrable fence, which would effectively compel a finding of factual possession: ‘enclosure is the strongest possible evidence of adverse possession’.[17] Only one person can be in factual possession,[18] and, to my mind, it is self-evident that CityLink, and not the Bottos brothers, was in possession of this space. It is not to the point that the Bottos brothers had plans for the land and had not abandoned it.[19]
[16]Ibid 443 [61] (Lord Browne-Wilkinson).
[17]Powell v McFarlane (1979) 38 P&CR 452, 478 (Slade J), quoting Seddon v Smith (1877) 36 LT 168, 169 (Cockburn CJ).
[18]J A Pye (Oxford) Ltd v Graham [2003] 1 AC 419, 436 [41] (Lord Browne-Wilkinson), 445 [70] (Lord Hope).
[19]Ibid 437 [45] (Lord Browne-Wilkinson).
In this case, the metal poles encroached at the surface of the land, and the support structures encroached a further distance under the surface of the land. The Bottos brothers also contended that, even if CityLink possessed the land occupied by the metal poles, because the Bottos brothers continued to possess the surface of the block right up to the fence, they were not dispossessed of the underground land occupied by the support structures.
I accept that the Bottos brothers did continue to possess the surface of their block right up to the noise wall. Not only were they not denied access right up to the noise wall, but they entered onto that area when they mowed the grass. Normally, possession of the surface carries with it possession of the land underneath and the space above.[20] However, where one party possesses the surface and another party possesses a space under or above that surface, the physical space may be in concept divided; the possession of a part of three-dimensional space may amount to ‘adverse possession’ of that part notwithstanding that someone else is in actual possession of the three-dimensional space above or below. For example, in Midland Railway Company v Wright,[21] an adverse possessor of the surface of land was found not to be in possession of a tunnel underneath that land. Similarly, in Symes v Pitt,[22] it was held that a person was in adverse possession of the surface of a strip of land between two houses despite the fact that the eaves of the neighbour and true owner’s house extended over that strip. The practical result was that the dispossessor obtained rights to the strip of land, but subject to the true owner’s rights to the ‘cubical space’ occupied by the eaves.
[20]Midland Railway Co v Wright [1901] 1 Ch 738, 744 (Byrne J); Symes v Pitt [1952] VLR 412, 424 (Sholl J).
[21][1901] 1 Ch 738.
[22][1952] VLR 412.
The only case cited to me that supported the view that the ‘adverse possession’ of an underground space dispossessed the occupier of the surface of that underground space was Rains v Buxton.[23] In that case, the plaintiff had a cellar that went under the ground of his neighbour. It was apparent that the cellar had been there for more than the relevant period. The Court recognised that, by reason of the equivalent legislation then in force, the plaintiff was ‘entitled to that cellar’, and the Court enjoined the neighbour from performing works that would interfere with it. There is no real discussion in that case of the principles that apply in such circumstances. But in the later case of Symes v Pitt,[24] Sholl J stated as a principle of law:
A disseisor of … strata under the surface, or of other cubical spaces under the surface, acquires only that of which he takes actual possession.[25]
[23](1880) 14 Ch D 537.
[24][1952] VLR 412.
[25]Ibid 425 (Sholl J).
It is implicit in this expression of principle that a person who takes occupation of underground land is taking possession of that ‘cubical space’ (albeit only that space) for the purpose of the Limitations Act. I was not referred to any cases that disagreed with the statement of principle by Sholl J or that expressed principles that conflicted with it in a relevant context. This expression of principle, with which I respectfully agree, defeats the Bottos brothers’ contention that they were not factually dispossessed by the underground structures of the noise wall because they retained possession of the surface.
E.1.2. Intention to possess
The physical structure itself occupied the space and land it did. The Bottos brothers nevertheless contend that CityLink did not have the necessary ‘intention to possess’. I disagree.
The intention to possess is established if a person intends to exercise the custody and control they have on their own behalf and for their own benefit. That intention may be deduced from the physical acts of possession themselves.[26]
[26]J A Pye (Oxford) Ltd v Graham [2003] 1 AC 419, 435 [40] (Lord Browne-Wilkinson); Whittlesea City Council v Abbatangelo (2009) 259 ALR 56, 60 [6(b)] (Ashley, Redlich JJA and Kyrou AJA); Cervi v Letcher (2011) 33 VR 320, 336 [59] (John Dixon J).
In my view, the situation where the land under consideration is the space occupied by an actual physical structure is different to the situation where the land under consideration is an open piece of land. In the latter situation, a question may arise as to whether the use of that piece of land amounts to, and is intended to amount to, taking possession of that piece of land and dispossession of any paper titleholder. For example, using a piece of land to grow vegetables or to support livestock or as part of a garden, or even placing a fence around the perimeter of a piece of land, could, depending on the circumstances, be use of the land that is consistent with ongoing use also by the paper titleholder and thus might not amount to a dispossession of the paper titleholder.[27] This is where the requirement that there be an ‘intention to possess’ comes into play as part of an evaluation of whether the use amounts to the taking of possession by the user and associated dispossession of the paper titleholder, or a use short of the taking of possession. However, the actual and deliberate physical occupation of space by a bulk structure that is intended to be a permanent presence thereafter, in my view, not only effects an actual dispossession of others from that space, but would ordinarily carry with it the necessary associated intention to exclude others from that space. In my view, CityLink self-evidently did intend to possess, to the exclusion of others, the space physically occupied by the noise wall, both above and below the ground.
[27]These have been referred to as ‘casual acts of trespass’: Whittlesea City Council v Abbatangelo (2009) 259 ALR 56, 60 [6(g)] (Ashley, Redlich JJA and Kyrou AJA).
The Bottos brothers also submitted that CityLink did not have the necessary intention because the noise wall was not intended to be a boundary wall and because CityLink did not intend to build the noise wall other than on its own property. I accept that CityLink did not intend the noise wall to be a boundary wall and that CityLink did not intend to build the noise wall other than on its own property. But it does not follow that CityLink did not have the necessary intention to possess the land occupied by the noise wall. Both these arguments are related ways of saying that an occupier of another’s land does not have the intention to possess necessary to engage the Limitations Act unless the occupier is intending to possess land that it knows is owned by another. That is not the law. It is the existence of an intention to possess that matters, not whether the possessor was aware of the fact that the land was on another’s title.[28] As was observed by Brooking JA in Malter v Procopets,[29] most adverse possessions take place inadvertently. It is hard to see why accidental dispossessors ought to be treated less favourably than deliberate dispossessors. Indeed, the fact that CityLink believed that it had the right to possess the land occupied by the noise wall, if anything, assists CityLink in its argument that it intended to possess it.[30]
[28]Ibid 58 [5] (Ashley, Redlich JJA and Kyrou AJA).
[29](2000) V ConvR 54-624, 64,463 [5].
[30]See, eg, Tower Hamlets LBC v Barrett [2006] 1 P&CR 9 142 [42] (Neuberger LJ).
Similarly, the fact that the Bottos brothers were not aware of the fact that the noise wall and its foundations encroached a small distance into their land is not a reason to conclude that they were not dispossessed by it.[31]
[31]Rains v Buxton (1880) 14 Ch D 537; Whittlesea City Council v Abbatangelo (2009) 259 ALR 56, 59 [6(a)] (Ashley, Redlich JJA and Kyrou AJA).
Finally, the Bottos brothers contended that CityLink did not have ‘the requisite intention to maintain a claim for adverse possession’, or, presumably, that CityLink is simply unable to rely on the principles of adverse possession, because:
(a) s 38 of the Melbourne City Link Act 1995 empowered CityLink to acquire an interest in land by agreement or compulsory process and provided that the Melbourne City Link Act 1995 was a ‘special Act’ for the purposes of the LACA;
(b) the LACA provided:
An Authority which is empowered under a special Act to acquire an interest in land by compulsory process must not acquire that interest by compulsory process or by agreement except in accordance with this Part. …
The Authority must not commence to acquire any interest in land under the provisions of the special Act unless the land has been first reserved by or under a planning instrument for a public purpose. …
[I]f the Authority intends to acquire an interest in land for the purposes of the special Act, the Authority must serve upon each person who has an interest in the land … a notice of intention to acquire the … interest.[32]
(c) s 17 of the Melbourne City Link Act 1995 provided that if (among other things) the concession deed was inconsistent with a provision of an enactment or any other law of Victoria, the provisions of the concession deed prevail and the enactment or other law of Victoria is to the extent of the inconsistency modified accordingly; and
(d) the concession deed compelled CityLink to comply with the compulsory acquisition procedure in the LACA if it required land owned by private individuals.
[32]Land Acquisition and Compensation Act 1986 (Vic) ss 4, 5(1), 6.
I do not agree that these provisions were directed at or interfered with the law as it applies to adverse possession. Section 38(1) of the Melbourne City Link Act 1995 provided that the Authority ‘may acquire an interest in land by agreement or by compulsory process’, but did not provide in terms that CityLink was unable to obtain land otherwise or that the principles of adverse possession were excluded. Further, ‘acquire’ is defined in the LACA to mean to acquire ‘by compulsory process’ or by agreement.[33] I do not consider that this definition encompasses the imposition of a limitations period for the commencement of a proceeding for the recovery of land and the associated extinguishment of title provided for in the Limitations Act. It follows, in my view, that the creation by the LACA of an obligatory process to be followed by CityLink for the acquisition of land by compulsion or agreement does not mean that CityLink cannot have had the necessary intention to possess for the purposes of the Limitations Act (even assuming a subjective intention was required), or that it cannot rely on the defences and principles that apply under the Limitations Act.
E.1.3. ‘Open and manifest’
[33]Ibid s 3.
The Bottos brothers also contended that there was no adverse possession because the encroachment by the noise wall, but particularly by the underground foundations, was not ‘manifest and open’.
There are suggestions in the authorities that the adverse possessor must have made his or her intention to possess ‘clear to the world’,[34] and that there is a requirement that the possession be open and manifest, or words to that effect.[35] The rationale for such a requirement would be the understandable view that a party ought not to lose their interest in land unless they have failed to act reasonably in protection of their own interests.[36] There is, however, nothing in the text of the Limitations Act that imposes an additional requirement that the possession be open and manifest or clear to the world, and the more recent authoritative expressions of principle are more confined. In J A Pye (Oxford) Ltd v Graham, Lord Browne-Wilkinson, with whom the other Law Lords agreed, said:
The question is simply whether the defendant squatter has dispossessed the paper owner by going into ordinary possession of the land for the requisite period without the consent of the owner.[37]
[34]Powell v McFarlane (1977) 38 P&CR 452, 472 (Slade J).
[35]Re Riley and the Real Property Act [1965] NSWR 994, 1000 (McLelland CJ); Abbatangelo v Whittlesea City Council (2008) V ConvR 54-750, 63,359 [6] (Pagone J).
[36]See, eg, Abbatangelo v Whittlesea City Council (2008) V ConvR 54-750, 65,359 [6] (Pagone J).
[37][2003] 1 AC 419, 434 [36].
In Whittlesea City Council v Abbatangelo,[38] the Court of Appeal of this Court referred to the above passage with approval when setting out the relevant legal principles, and did not refer to any additional requirement that the acts of dispossession be ‘open and manifest’.
[38](2009) 259 ALR 56, [6] (Ashley, Redlich JJA and Kyrou JA).
I doubt that there is, in truth, a separate requirement that the dispossession be ‘open and manifest’.[39] Rather, the extent to which the acts relied upon are open and manifest is something to be considered, depending on the circumstances, when evaluating whether there was factual possession and an intention to possess by the adverse possessor. For example, someone who quietly under the cover of night grazes stock on the land of his or her neighbour is probably not, in part due to the lack of openness, in fact taking possession of, or intending to exclude others from, that land.
[39]If a dispossessor has acted fraudulently, including by taking steps to prevent the dispossessed from discovering the dispossession, then, of course, it would be open for the dispossessed titleholder to contend that by reason of s 27 of the Limitation of Actions Act 1958 the period of limitation has not begun to run. But that is not this case.
In any event, I consider that (with the exception of the spillage, considered below) the taking of possession by the noise wall was ‘open and manifest’. The wall is a massive structure and there was nothing secretive about it. The fact that the encroachments were of small dimension and that a survey undertaken in 2012 did not identify them does not mean that they were not open and manifest. Further, although the precise design and location of the foundations could not be seen because the foundations were underground, the fact that there would be significant foundations was apparent. Nobody suggested that the foundations as constructed were of a surprising design or size. In those circumstances, I consider that the wall, including the associated foundations, were ‘open and manifest’.
E.1.4. Adverse possession can cause unfairness.
I appreciate that, viewed from the Bottos brothers’ perspective, these conclusions on the operation of the law seem unfair. The fact that a careless builder can obtain effective ownership of land without paying for it if it builds on another’s land and its trespass remains undetected for a sufficient period can lead to unfairness to the dispossessed. The broad availability of the provisions has been criticised, particularly where land is subject to the Torrens system where the register is supposed to be an accurate record of ownership. In that regard, adverse possession may be seen to be acquisition by possession as of wrong, rather than as of right.[40] I respectfully share the observations made by Strauss QC in Beaulane Properties Ltd v Palmer[41] that the provisions of the Act can lead to expropriation of land without adequate compensation in a way that does not advance the legitimate aims of the legislation or which is disproportionate. However, the imposition of any entirely-inflexible time limit for the bringing of an action is open to similar criticisms, and the legislature has, it must be assumed, balanced these considerations against a broader public interest in there being certainty as to ownership of property possessed when enacting the provisions found in the Limitations Act.[42] In any event, I am bound to apply the provisions of that Act.
E.2. The spillage
[40]Buckinghamshire County Council v Moran [1990] Ch 623, 644 (Nourse LJ).
[41][2006] Ch 79, 136 [196].
[42]Cf Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541, 551-3 (McHugh J); Haward v Fawcetts [2006] 1 WLR 682, 690 [32] (Lord Scott).
The situation with the spillage is different. This was a large extrusion of concrete that spilled out some further distance into the Bottos brothers’ land, again underground, when the concrete foundations were being laid. This seems to have happened at only one of the 11 posts supporting that part of the noise wall that ran along the boundary. It was not an encroachment that was needed to support the noise wall. I infer that it was an accidental extrusion.
In these circumstances, I do not consider that CityLink took possession of the space occupied by the spillage insofar as the concept of possession is understood for the purposes of the Limitations Act. This accidental extrusion, unlike the intended permanent underground foundations necessary to support the fence, did not unequivocally carry with it the necessary intention to exclude others from the space it occupied. It was not an act claiming or assuming ownership of the land occupied. It was not laid with the intention that it remain there for the benefit of CityLink. Rather, the extrusion of the spillage was consistent with an intention to occupy that part of the land until it was needed by the true owner (at which time it would be removed), rather than an intention to possess that part of the land and thereafter to exclude all others.[43] It was laid by mistake, and I am not prepared to conclude that there was any intention attributable to CityLink other than to remove it, if asked, as in fact (and quite properly) occurred. The extrusion was at best equivocal, and where the entry is equivocal in the sense that it does not by itself betoken an intention to claim the land, there must be some other evidence to establish the necessary intent.[44]
[43]Cf J A Pye (Oxford) Ltd v Graham [2003] 1 AC 419, 437 [45] (Lord Browne-Wilkinson).
[44]Ibid 447 [77] (Lord Hutton), quoting Powell v McFarlane (1977) 38 P&CR 452, 472 (Slade J).
To the extent that there is a requirement that an act of occupation be ‘manifest and open’, it could not be said that the spillage was such, as it could not reasonably have been found unless someone were to be expected to dig around each of the eleven poles just in case there was some unexpected accidental extrusion of concrete.
The point may be demonstrated by considering a different scenario. Suppose that CityLink, when constructing the noise wall, mistakenly left one of the large vertical panels lying on the Bottos brothers’ land, and that it lay there undetected for 12 years, because, say, some creeping plant such as ivy had spread over it. Could it really be contended that CityLink then obtained the right to possess the land upon which the panel lay, that the Bottos brothers were dispossessed, and that they would be trespassers if they stood on the land upon which the panel was lying? It could not, and the reason for this is that the act of mistakenly leaving material on another’s land is not an act by which a party intentionally takes possession of part of that land.
CityLink contended that no distinction could be drawn between the spillage and the foundation because the spillage was spilled at the same time that the foundation was being laid, and was part of the same quantity of concrete, and in that sense formed part of the same ‘act of possession’. I am not persuaded by this. I do not see why the fact that the spillage occurred at the time that the foundation was being poured should mean that it cannot be treated separately. Both the foundations and the spillage were made of concrete, but they were otherwise separable objects without a common purpose: the foundation was necessary for the stability of the noise wall and was laid with the intention that it remain in place occupying land; the spillage served no purpose and was laid by mistake and thus without a relevant intention that it remain in place occupying land. If it were necessary to be able to draw a fine line between the two, the line could easily enough be identified by reference to the design drawing of the foundation.
F. Implications of the planning permit communications
The Bottos brothers contend that, by reason of communications relating to the planning process that occurred in September and October 2012:
(a) the period of possession by CityLink was broken; and
(b) CityLink ‘acknowledged’ their title to the land.
F.1. The relevant communications
In September 2011, which was within the 15-year limitation period, the Bottos brothers applied to the City of Moreland for a planning permit. The application was prepared by their town planner, Mr Lawrence Li, who worked with LWY & Associates.[45] The application attached a planning submission report, a copy of the certificate of title and copies of architectural drawings for the proposed development. The planning submission report indicated that unit 6 and part of unit 5 were to be built with boundary walls, that is, built to the boundary where the noise wall was. The certificate of title recorded the Bottos brothers as the registered owners of the land identified on the title. The architectural drawings showed, as expected, boundary walls at unit 6 and part of unit 5. The City of Moreland notified VicRoads of the application because VicRoads was ‘an adjoining land owner’.
[45]Mr Li was unwell and did not give oral evidence. A redacted statement from him was tendered with the consent of CityLink. Mr Li said in that statement that at no time was he aware that the noise wall or its foundations encroached upon the Bottos brothers’ land, or that there was any concrete spillage on the Bottos brothers’ land.
On 5 September 2012,[46] VicRoads wrote to the City of Moreland, advising that it considered further information to be ‘necessary to enable any impacts on the CityLink Road Reservation to be properly considered and assessed’. The required information included the certificate of title of the property and a ‘scaled plan showing title boundary of the property in relation to the existing noise wall including all features and columns’. The letter also informed the City of Moreland that VicRoads had an ‘initial concern’ that it was ‘necessary to provide a gap between [the] noise wall and the property boundary line for maintenance purposes’.
[46]The lengthy delay between the application and the response was not explained in the evidence. But it does not matter.
On 13 September 2012, the City of Moreland sent LWY & Associates a copy of the 5 September 2012 letter from VicRoads.
On 19 September 2012, VicRoads emailed Mr Martin Hecht,[47] a qualified lawyer who was then the commercial affairs manager for CityLink, and said:
I would like to identify if there are necessary set back between the noise wall and the proposed development and any other additional requirements to ensure that there will be no detrimental impact the wall or the development [scil. on the wall by the development].
[47]Mr Hecht gave oral evidence. He had little recollection of the communications and no recollection of anything beyond what was revealed by the documentation he was shown, which was entirely understandable.
I interpret this email as VicRoads asking CityLink whether CityLink considered that the proposed development ought to be set back from the noise wall, rather than enquiring whether there would be space between the development and the noise wall if the development were built to the boundary.
The email attached the correspondence referred to above, as well as the title plan and the architectural drawings. Shortly afterwards, also on 19 September 2012, Mr Hecht forwarded the email from VicRoads to various other persons at CityLink, including senior people in operations and maintenance, a senior engineer and the general manager, asking for them to advise him of their feedback so that he could ‘pass back to VicRoads’.[48] Mr Hecht attached to his email the planning application material, including the plans that showed the build to the boundary and the certificate of title.
[48]I have corrected a typographical error in the email.
On 28 September 2012, the head of maintenance and operations at CityLink replied to Mr Hecht, copying the others in, stating:
Investigations so far indicate that our Lease area should extend 1 metre behind the noise wall whereas the drawings indicate less than 300mm. …
It would be nice to have more land to maintain the wall (not that this seems likely as the current Lease Boundary alignment will prevail) but if we have services that need to be protected, do you know if we would be able to get an easement? My guess is – no (without compensation) …
I interpret this email as indicating that CityLink believed that the noise wall was still on CityLink’s land, albeit closer to the boundary than was desirable from CityLink’s point of view.
Also on 28 September 2012, Mr Hecht replied to that email, saying:
If there are no current easements registered on the title then, yes, you are correct that any new easement would need to be a commercial negotiation with the owners (of course, leaving aside the commercials, it might not be practical in any case if what they are building involves structures right up to the boundary).
On 1 October 2012, the environment, health and safety manager at CityLink replied to the above email to Mr Hecht in the following terms:
From our lease plans it appears that the lease boundary is the actual noise wall where it abuts the 9 McColl Court … The lease boundary is off-set by 1 meter on the properties either side of 9 McColl Court. Why 9 McColl Court is different is not clear. …
However, it is essential that some access is maintained along the fence line so CityLink can inspect and maintain the footings of the noise wall. One meter should be sufficient to do this. The decision on whether to try to do this as a planning condition or through negotiation with the owners I will leave to you.
My suggested planning conditions would include;
1.At all times a 1 meter width clearance is to maintained along the boundary between the property and the … noise wall.
I interpret this email as indicating that it was now believed that the noise wall was actually on the boundary, rather than within CityLink’s land.
On 2 October 2012, Mr Hecht repeated these paragraphs in an email he sent to VicRoads.
On 3 October 2012, VicRoads replied to Mr Hecht, asking:
[C]an you please provide the following information:
·Has the noise wall foundation width been taken into consideration?
·Can you please provide a copy of the noise wall foundation details/Design (i.e type, width or diameter, depth)
Mr Hecht made the necessary enquiries and, on 5 October 2012, replied to VicRoads. The reply email attached ‘drawings and plans’, including of different noise wall foundations, and said that it could not be ascertained which plan was used without an ‘infield survey’. A foundation with a diameter of 600mm was thought the most likely. The alternative was a diameter of 900mm. One of the drawings was said to show that the 9 McColl Court property ‘backs onto’ the noise wall. The contents of this email were also copied from an email sent to Mr Hecht from the environment, health and safety manager at CityLink, who was someone with the necessary expertise.
It was put to Mr Hecht that he must have appreciated by this point that the foundations of the noise wall could have encroached onto the Bottos brothers’ land. He said, and I accept, that he was really only facilitating the various communications and that he himself did not appreciate this fact. However, I am prepared to infer from these communications that the other more technical people involved from CityLink probably did appreciate by this stage that because the noise wall was on the boundary, rather than inside the boundary, its foundations might or probably did encroach into the Bottos brothers’ land.
Then, on 8 October 2012, VicRoads wrote back to the City of Moreland, and advised as follows:
VicRoads has reviewed the application and associated plans and does not object to the application with the following recommended conditions being included in any Notice of Decision to issue a Planning Permit:
1.Before the development starts, amended plans must be submitted to and approved by the Responsible Authority & VicRoads to show the northern fence line set back by 1.0 metre from the existing noise wall columns for maintenance purposes.[49]
[49]There was a second proposed condition, which is not relevant here.
The City of Moreland forwarded the 8 October 2012 letter from VicRoads to Mr Li and asked how he felt about the conditions being included in the notice of decision. On 12 October 2012, Mr Li replied to the City of Moreland, strenuously objecting to the condition that VicRoads had proposed. He asserted that any requirement for a setback would be plainly unreasonable. There was nothing in his letter that suggested that it had occurred to him that the noise wall or its foundations might be encroaching. Then, on 19 October 2012, Mr Li wrote another letter asking the City of Moreland to issue a notice of decision without the condition that VicRoads sought. On 7 November 2012, the City of Moreland issued a notice of decision to grant a planning permit without the requested conditions. VicRoads did not lodge an application to have the decision reviewed by the Victorian Civil and Administrative Tribunal. On 5 December 2012, a planning permit was issued in accordance with the notice of decision to grant a planning permit.
There were further communications that took place in 2016 when an application was made to amend the planning permit, but I do not see these as taking the matter any further.
F.2. Was CityLink’s period of possession broken by the 2012 planning permit application?
Section 14(2) of the Limitations Act provides that if land ceases to be in adverse possession the right of action is no longer ‘deemed to have accrued’ and that no fresh right of action is deemed to accrue until the land is again taken into adverse possession. It follows that if the Bottos brothers regained possession, even for a short period, the time period would have started again. It was submitted that, by reason of the application for and grant of the planning permit, the 15-year period of possession by CityLink of the Bottos brothers’ land was interrupted and that no right has as yet accrued.
I do not agree. The adverse possession by CityLink of the land occupied by the noise wall could not cease unless there were a change in the possession of that land from possession by CityLink to possession by the Bottos brothers.[50] Possibly, a change in CityLink’s intent would be enough. But neither change took place. The encroachments stayed, and CityLink did not abandon its intention to possess the land occupied by the wall and foundations. Nothing changed ‘on the ground’, as it were. The Bottos brothers did not, by applying for and obtaining a planning permit, in fact regain possession of the land, even though the planning permit provided for construction of units right to the title boundary. Even if the application for a planning permit amounted to an assertion of title, that, without taking possession, would be insufficient. It must be borne in mind that this area of the law is concerned with a limitation period for the commencement of legal proceedings to recover land. It would undermine the imposition of the limitation period if a mere assertion of title were sufficient to stop time running.
[50]Bligh v Martin [1968] 1 WLR 804, 812 (Pennycuick J); Symes v Pitt [1952] VLR 412, 430–2 (Sholl J); Zarb v Parry [2012] 1 WLR 1240, 1253 [43] (Arden LJ), 1258 [71], 1259 [74] (Lord Neuberger MR).
Further, s 16 of the Limitations Act provides that a ‘formal entry’ does not amount to possession under the Act, and that the making of a claim upon land does not preserve any right to recover the land. This provision is consistent with the proposition that an action by a paper titleholder short of retaking actual possession, even if only for a short period, is insufficient to discontinue a period of adverse possession by another.
Accordingly, I consider that CityLink’s period of dispossession was not broken by the 2012 planning permit application process.
F.3. Did CityLink, through VicRoads, acknowledge the Bottos brothers’ title?
The more difficult issue is whether the agreement by VicRoads to the granting of the planning permit, so long as a condition were imposed, amounted to an acknowledgement in writing of the Bottos brothers’ title. If it did, the questions arise as to whether, in making that acknowledgment, VicRoads was acting as CityLink’s agent and whether the acknowledgment was made to the Bottos brothers or to their agent. If so, then, by operation of s 24(1) of the Limitations Act , time would start to run again from the date of that acknowledgment. Section 24(1) provides as follows:
Where there has accrued any right of action (including a foreclosure action) to recover land or any right of a mortgagee of personal property to bring a foreclosure action in respect of the property, and—
(a) the person in possession of the land or personal property acknowledges the title of the person to whom the right of action has accrued; or
(b) in the case of a foreclosure or other action by a mortgagee, the person in possession as aforesaid or the person liable for the mortgage debt makes any payment in respect thereof, whether of principal or interest—
the right shall be deemed to have accrued on and not before the date of the acknowledgment or payment.
Section 24 of the Limitations Act applies in circumstances where the adverse possession is continuing, but the dispossessed person’s ‘title’ is acknowledged. The word ‘title’ is not defined. It cannot be limited to a certificate of title, as the person being dispossessed may only have a leasehold interest. Given that the legislation is concerned with rights to possession, it seems to me that what is required is an acknowledgment of the dispossessed person’s right to possess the land in question. Of course, a broader acknowledgment of general ownership of the land in question would ordinarily include an acknowledgement of the right to possess that land. Further, an unqualified acknowledgment of another’s ownership of land as described in a certificate of title could carry with it an acknowledgment of that person’s associated right to possess that land.[51]
[51]Bearing in mind, also, that the paper titleholder is, prima facie, in possession of the land: see Powell v McFarlane (1977) 38 P&CR 452, 470 (Slade J), quoted with approval in Whittlesea City Council v Abbatangelo (2009) 259 ALR 56, 58 [5] (Ashley, Redlich JJA and Kyrou AJA).
Just as a person may adversely possess land without realising it, it seems to me that a person may ‘acknowledge title’ without intending to do so, or without realising that they are doing so, or without realising that by so doing they are bringing to an end a period of adverse possession. Were it otherwise, the section would talk in terms of acknowledging another’s ‘right of action’, or ‘claim to possession’, or some equivalent term, rather than simply the other’s ‘title’. Similarly, there is no implied requirement that the acknowledgment must take place in circumstances where it is appreciated that the acknowledger is or may be in adverse possession. It is sufficient, it seems to me, that a party perform an act that amounts, objectively speaking, to an acknowledgement of the other party’s legal right to possess land that includes the land that the acknowledger is, whether they appreciate it or not, adversely possessing.[52]
[52]Complexities may arise, which I do not have to consider, if a party who is dispossessing a tenant of land acknowledges the landlord’s title.
Take the simple example of a person who writes a letter to his or her neighbour saying that he or she acknowledges that the neighbour was the owner of such land as is set out in an identified certificate of title. Such a letter would, in my view, amount to an acknowledgment of title that would bring to an end any period of adverse possession by that person of the neighbour’s land. This would be so even if the letter were written without there being at the time any dispute between them as to whether land was being adversely possessed, or any awareness that some land was being adversely possessed, or indeed whether or not either party knew of the concept of adverse possession.
Here, CityLink was presented with documents including the Bottos brothers’ certificate of title and their plans to build to the boundary of that title. The Bottos brothers were assuming, and by implication asserting, their ownership rights to all the land as set out in their certificate of title, including the land right up to the boundary, to all those in receipt of their documents, including CityLink. CityLink, I have inferred, was aware of the prospect that the foundations of its noise wall encroached a small distance into the Bottos brothers’ land — that is, that it was possessing some part of the Bottos brothers’ land. The prospect of there being some unfavourable interaction between the proposed build and foundations for a development that went to the boundary was a reason (along with the need for maintenance) for which CityLink sought that a condition be imposed that the build be altered so that it did not come within a metre of the noise wall. The communications are to be interpreted in this context.
Clearly, this was an opportunity for CityLink to inform the Bottos brothers that there was a potential difficulty with the build if it were to go to the boundary, or to inform the Bottos brothers that CityLink was likely adversely possessing some of the land identified on their certificate of title. But CityLink did not avail itself of this opportunity. It did not communicate to the Bottos brothers that the proposed build would or might come into conflict with the foundations of the noise wall, or that the Bottos brothers did not in fact have possession of all of the land identified on their certificate of title. The issue, which is not straightforward, is whether in these circumstances the failure by CityLink to inform the Bottos brothers that they may be mistaken in their assumption and that they may not in fact have possession of all of the land identified on their certificate of title, operated as an implied acknowledgement of the Bottos brothers’ title to that land.
It is necessary first to consider what it is that has to be acknowledged for the section to operate. Although an offer to purchase land operates as an acknowledgment of title, because it is quite clearly saying that as between the two of them the offeree has a better title,[53] it is otherwise not possible to lay down any general rule as to what constitutes an acknowledgment.[54]
[53]Edginton v Clark [1964] 1 QB 367, 376 (Upjohn LJ).
[54]Tower Hamlets LBC v Barrett [2006] 1 P&CR 9, 149 [79] (Neuberger LJ).
I have concluded, after some hesitation, that in the circumstances of this case the communication by VicRoads set out in para 68 above did not amount to an acknowledgement of the Bottos brothers’ title. It seems to me, at its heart, that an acknowledgment of the Bottos brothers’ right to possess the land right to the boundary could only be implied if the communication were inconsistent with there being a question as to who was in possession of or had the right to possess land at the boundary. Perhaps, if by the letter VicRoads had communicated to the Bottos brothers that CityLink did not object to the Bottos brothers constructing units to the boundary, that would have amounted to an implied acknowledgment that the Bottos brothers had the right to possess the land to the boundary. But here, the letter made it clear that CityLink sought a condition that the build be at least a metre away from the boundary. This allowed for the possibility of a dispute as to who had actual possession of or had the right to possession of the land at the boundary occupied by the noise wall and its foundations. Thus, in my view, it did not impliedly acknowledge that the Bottos brothers had that right.
In light of the above conclusion, it is not necessary for me to decide whether:
(a) any acknowledgment that arose by implication from the written document (and in particular, the phrase: ‘VicRoads has reviewed the application and associated plans and does not object to the application’) would be an ‘acknowledgment … in writing’ as required by s 25(1) of the Limitations Act. Probably, an acknowledgment that arises by implication from a written document is an acknowledgment in writing, but the issue is not simple; or
(b) VicRoads was CityLink’s agent when it wrote the letter to the City of Moreland; or
(c) the requirement was met that it be sent ‘to’ the Bottos brothers or its agent (Mr Li) in circumstances where it was sent to the Moreland City Council but was, as may have been expected, forwarded by the Council to Mr Li.[55]
G. Damages
[55]It is not clear whether an acknowledgment may be made ‘to’ someone if the relevant document is received by that person, even if the maker of the acknowledgment did not intend to communicate it to that person: StageClub Ltd v Millers Hotels Pty Ltd (1981) 150 CLR 535, 566 (Wilson J), cf 579 (Brennan J).
The development had to be altered following the discovery of the encroachments. This caused additional expenses and various delays, which themselves led to further losses. The parties are in dispute as to what costs, delays and associated losses may be attributed to the various encroachments. In order to understand the way the damages may be assessed, it is necessary first to have an understanding of the construction and how it progressed following the discovery of the encroachments.
G.1. Overview of the construction
G.1.1. A promising beginning
On 8 November 2016, the Bottos brothers engaged Vita Built to build the units in accordance with plans drawn by LWY & Associates. Mr Yang of LWY & Associates was also to act as project manager. The building contract required Vita Built to build the units within 360 days of commencement for $1.65 million plus GST.
On 23 December 2016, the Bottos brothers obtained a permit to demolish the weatherboard house. On 28 March 2017, the Bottos brothers granted Richard Rose of Jellis Craig an exclusive sale authority for the six units. On 19 May 2017, Matrix Engineers prepared structural drawings for the development. On 22 May 2017, Peter Farren, a surveyor, surveyed the property and put down pegs for the builder. His survey did not identify the encroachments. Also on 22 May 2017, the Bottos brothers obtained a building permit. The architectural plans, the engineers’ plans, the planning permit and the building permit all anticipated that the construction would be built along the title boundary adjacent to the noise wall.
The Bottos brothers sought funding for the development from Australian Unity. On 2 June 2017, Australian Unity obtained a ‘Quantity Surveying Initial Report’ from Charter Keck Cramer. Charter Keck Cramer informed Australian Unity that it knew Vita Built, the builder, and expressed its view that the builder was ‘capable of delivering this project’. Charter Keck Cramer also looked into the qualifications of LWY Constructions and expressed its conclusion that ‘the project manager possesses the competency to manage the delivery of the proposed residential development’. It further stated that the contract price of $1.65 million ‘appears to be an adequate amount for carrying out the contract works as currently documented’.[56] It is apparent that Charter Keck Cramer considered the 360 days provided for in the building contract to be an adequate time frame within which the development could be completed.
[56]I am prepared to assume, for present purposes, that LWY Constructions may be identified with LWY & Associates.
On 4 July 2017, Australian Unity offered a loan facility of $2.2 million, which sum represented $1.65 million as a construction cost, with the balance relating to land costs, contingency allowances, interest and management fees, finance costs and other fees, including for marketing, selling and project management. A formal facility agreement with Australian Unity was later entered into, together with a ‘building multi-party deed’ to which Vita Built was a party. These documents made it clear that Australian Unity would only provide funds as and when approved by its quantity surveyor, and that it would only pay for works actually completed. Australian Unity appointed Charter Keck Cramer as its quantity surveyor. The loan facility was for a term of 16 months from initial drawdown. The initial drawdown was 21 August 2017, so the loan was repayable on 21 December 2018.
The progress reports prepared by Charter Keck Cramer give a contemporaneous record of what was happening with the development from time to time. As at 13 November 2017, the date of its first progress report, works of some $225,000 had been completed, the formal commencement date was agreed to have been 31 August 2017, and the practical completion date was expected to be 25 August 2018.
A problem had developed, however, with the legal point of discharge for the sewerage system, causing a significant delay. The building contract with Vita Built did not include the connection to sewerage. On 9 October 2017, Vita Built ceased work pending resolution of this plumbing problem. At least one sewer pump had to be added, and further construction and plumbing work undertaken by other contractors. Vita Built recommenced works on 15 January 2018. They sought an extension of time to complete the works to 9 February 2018 but this was not agreed to. Neilo Bottos said, and I accept, that they paid the amounts required to fix up the legal point of discharge.
As at 12 February 2018, Charter Keck Cramer’s second progress report reveals that the issue with the sewer had been resolved, and that works of some $310,000 had been completed. The piling (that is, the construction of deep vertical piers that support other parts of the foundations) had been completed, inspected and approved, but work had otherwise not yet commenced on the foundations. Vita Built’s ‘master programme’ attached to that progress report indicated at that stage that the ground floor slab was to be completed on 5 March 2018, and that the whole build was expected to be completed by 3 December 2018. The associated construction cashflows were consistent with completion by 3 December 2018. Significantly, Charter Keck Cramer thought that that completion date was achievable. That date was, notwithstanding the delay that had been experienced due to the problem with the sewerage connection, still within the 16-month loan period.
G.1.2. Discovery of the encroachments
On 22 or 23 February 2018 the spillage was discovered. It was about 40 cm below the surface and, as noted above, substantial in size. Immediately prior to its discovery, the trenches had been dug, steelwork had been inserted, the membrane was in place, and the plan was to pour the concrete imminently.
On 21 March 2018, Mr Farren re-surveyed the property, and then prepared a
re-establishment plan that revealed, for the first time, the encroachments by the metal poles. This was the first time that it was appreciated that parts of the noise wall encroached upon the property. By this time, the Bottos brothers had also observed that there were underground foundations that extended further into their land than the metal posts themselves.
There were then three problems associated with the encroachments:
Mr Smith was not asked to express an opinion on the losses associated with the period of delay from the discovery of the spillage on 22 February 2018 to 16 April 2018. His opinion assumed that CityLink was liable for all the interest and other costs associated with the additional finance required, at least until 15 December 2019, and that CityLink was liable for the fact that Vita Built had to be replaced, at greater cost, with another builder. In light of my conclusion that CityLink is only responsible for a 55-day delay up to 16 April 2018, and that CityLink is not responsible for the financial difficulties that emerged with Vita Built, I do not consider that I can act upon Mr Smith’s conclusions. In my view, the assumptions underlying his opinion have not been established.
The Bottos brothers submitted that, if CityLink were only liable for the consequences of the spillage (and not the other encroachments), then the period of compensable delay would be from 14 December 2018 to 8 September 2019. They then addressed the various components referred to in Mr Smith’s report and adjusted his figure by removing various expenses, including costs that were incurred after 8 September 2019. They reached a figure of $687,671, compared to Mr Smith’s figure of $786,305, plus interest. Again, because I have concluded that CityLink is only responsible for the delay over the 55-day period up to 16 April 2018, and that CityLink is not responsible for the financial difficulties that emerged with Vita Built, I do not accept this calculation.
However, I am satisfied that the delay has caused real loss to the Bottos brothers, albeit of a smaller dimension. The below sets out my assessment of what the Bottos brothers’ loss was due to the presence of the spillage on their land until its removal by CityLink on 16 April 2018.
Cost of the additional work and materials required due to deterioration of the trenches
I accept that the spillage added to the concreting costs of the build. The site was essentially ready for the pour of unit 6 and almost ready for the pour of unit 5 when the encroachments were discovered. The original concreter had been paid for this work. I accept the evidence that the delay whilst the spillage was being removed resulted in the deterioration of the trenches that had been prepared and that work had to be done to remediate them. The evidence to this effect not only made sense, but was supported by photographs and a contemporaneous email that Neilo Bottos sent to CityLink’s engineer on 4 April 2018, in which he asked CityLink to accept responsibility for remedial work that would be required due to ‘deepening of the trenches arising from the delay and/or from the water used in the cutting of the concrete overflow’. This is also consistent with the evidence given by Adrian Bottos that unit 6 was poured in July 2018, before the amended permits were obtained, at some risk, in order to prevent any further deterioration in the trenches.
Further, I accept that the deterioration meant that the additional work had to be done by the new concreter, Imperial. The work included trying to backfill the trenches to reduce the amount of concrete required, which Neilo Bottos described as an ‘exceptionally difficult job’, and installing additional formwork. Neilo Bottos said that steelwork had to be removed and either fixed or replaced and that the new concreter had to ‘pull out the old works and try and make good the damage to the shoulders of the trenches’. He said that Imperial was engaged, among other things, to ‘fix the mounds or the damage to the foundation trenches and proceed with pouring the concrete’. Mr Yang confirmed that work was done to the trenches and steel for unit 6 before the 13 July 2018 pour. Adrian Bottos said:
[The concreters] had put a lot of effort into trying to repair the mounds as best they could. There’s a lot of timber still buried around that job actually. They put fitted headboards in which are basically sheets of ply backed up with timber to stiffen it and they are pushed in to replace where the soil has crumbled away behind just to hold the concrete in. Sometimes they will put a timber piece in and then plastic over the top and rely on the plastic to retain the concrete to stop it spilling out.
The deterioration also meant that more concrete was used in the pour for unit 6 than would otherwise have been necessary. CityLink’s delay expert, Mr Watson, accepted that, if trenches were dug in February but the concrete was not poured until July, some remediation or additional work would have been required, which could include additional bracing, and also that additional concrete may have been required. Adrian Bottos said, by reference to the deterioration that had had occurred, that when the slab for unit 6 was poured it consumed ‘a ridiculous amount of concrete’.
The Bottos brothers also contended that the removal of the spillage led to water entering their property from behind the noise wall and that this contributed to the damage to the trenches. CityLink disputed this, not by direct evidence but by contending that this was inherently unlikely. CityLink also contended that any claim for damage based on water entering the Bottos brothers’ land from its land had to be brought in VCAT under the Water Act 1989. It seems to me, however, that the Bottos brothers are entitled to damages to compensate them for the deterioration to the trenches due to their exposure to the elements over the period of delay attributable to the spillage, and they do not lose this entitlement because some of the deterioration may have been contributed to by water moving from the other side of the noise wall.
It is not a simple matter, though, to quantify this additional cost. There was no evidence led that identified with precision the amount by which these matters increased the costs to the Bottos brothers. This is an observation rather than a criticism. It is probably not realistic to expect that the Bottos brothers would, now, be in a position to give detailed evidence on this issue. The work was performed by a contractor of its builder Vita Built. The relationship between the Bottos brothers and Vita Built has broken down. I was not asked to draw an inference against the Bottos brothers from the fact that they did not call evidence from Vita Built or from Imperial. That said, it is apparent that they did suffer a real loss of some dimension. Difficulty in assessing that loss is, as noted above, not a reason not to do so.
The following factors are relevant to the assessment of this part of the Bottos brothers’ loss:
(a) As at 12 February 2018, Charter Keck Cramer’s report established that the bulk excavation and site cut had been completed, but that the ‘foundation & slab’ had not been completed. The report identified $90,000 as the ‘cost to complete’ the foundation and slab, and 5 March 2018 as the ‘finish’ date for this work. As noted above, Charter Keck Cramer thought this was feasible. Certainly, there was no evidence that it was unrealistic.
(b) On 2 March 2018, Vita Built’s ‘action plan’ for the removal of the spillage stated that, as at 22 February 2018, the concrete foundations for units 5 and 6 had been completed and that they were ‘ready to pour’.
(c) On 27 March 2018, Vita Build prepared a variation order that included a claim for $22,000 for:
Additional two bored piers and reinstate the works that has been done on site up to date slabs 4, 5 and 6 due to exposure and soil erosion;
and $25,000 for:
Original concreter cancellation, lost of deposit, and reinstating new concreter with increase price, waste material removal …
(d) This variation was not accepted. However, at some stage, a variation was allowed by Charter Keck Cramer for ‘Transurban sound wall foundation encroachment into Unit 6 foundation’. The amount of the variation as approved was $16,000, or $14,545.45 plus GST.
(e) On 31 May 2018, Imperial provided a quote for $104,650. This quote included, without allocating a separate price, the item: ‘Make good of existing unit 6, 5 & 4 slabs.’ This quote was accepted. On 5 June 2018, the Bottos brothers paid a deposit to Imperial of $31,350, being 30% of its quote for the entire job.
(f) On 16 July 2018, which was shortly after the pour of unit 6, Imperial prepared an invoice for $16,000, which was paid.
(g) On 17 July 2018, Mr Neilo Bottos sought $25,000 from the financier, indicating an intention to pay Imperial $20,900 plus GST.
(h) The Bottos brothers, ultimately, paid $138,724 for concreting, which was well above the initial $90,000 allowance.
However, damages are only payable for the additional concreting costs caused by the spillage alongside unit 6, and not for the additional concreting costs caused by the other encroachments or issues that arose in the development generally. As such, they cannot be assessed by simply comparing the budgeted cost for concreting of $90,000 with the asserted actual concreting costs of $138,724.
In the circumstances, I consider that $16,000, or $14,545.45 plus GST, is a fair estimate of the increased cost to which the Bottos brothers were put by reason of the compensable deterioration in the trenches. This is equivalent to the accepted variation to the concreting costs. The variation was for the encroachment into unit 6, not units 5 and 6, which suggests that it related to the effects of the spillage. This figure is also close to the difference between the budgeted cost of $90,000 and the quote first obtained from Imperial of $104,650.
There is, of course, some uncertainty attended with this figure. The fact that this was the amount of the approved variation is not conclusive. It is, however, broadly consistent with the fact that Imperial invoiced the Bottos brothers $16,000 on 16 July 2018, which was at the time unit 6 was poured, and this invoice was paid. The figure may be too high because it may have included costs associated with constructing an additional pile. On the other hand, the fact that concreting costs were substantially higher than anticipated or as reflected in Imperial’s initial quote is consistent with a conclusion that the actual cost to the Bottos brothers from the spillage may have been more than $16,000. It may be that some of the work that would form part of the $90,000 estimate was already done by the time the spillage was discovered, which would also suggest that the additional concreting costs incurred might have been higher. However, at least some of the work that resulted in the costs exceeding the Imperial quote probably related to changes to the trenches to accommodate the other encroachments.
On balance, it seems to me that the approved variation is the best starting point, and that, given the uncertainty with the evidence, it is also the appropriate ending point. I appreciate that this assessment of damages is somewhat unsatisfactory, but I have no doubt that the presence of the spillage did add something to the increased concreting costs that the Bottos brothers had to pay. I am, in all the circumstances, of the view that this is a fair amount to compensate them for that portion of those increased costs that were caused by the presence of the spillage.
Additional interest and other fees
CityLink accepted that the Bottos brothers ought to be compensated for interest costs that they incurred during the period whilst the spillage was being removed. CityLink accepted that these came to $7,892. This amount should be allowed.
Prior to the discovery of the spillage, the Bottos brothers were able to capitalise the management fees and interest on their loan from Australian Unity. However, on 23 March 2018, Australian Unity informed the Bottos brothers that they could no longer meet those obligations by drawing down on their loan with it. This was during, and because of, the suspension of works whilst the spillage was being removed. Also, as noted above, a new concreter had to be obtained and the new concreter required a deposit, which was to be paid by the Bottos brothers directly. The facility with Australian Unity did not permit drawdowns to pay deposits.
The attitude of Australian Unity meant that, by reason of the presence of the spillage, the Bottos brothers had to obtain some other source of funds to pay the interest and fees payable to Australian Unity. However, before they had done so, on 19 April 2018, Vita Built informed the Bottos brothers that it was having liquidity problems and needed financial assistance. On 15 May 2018, the Bottos brothers sent a letter to Vita Built, offering to establish a float of $250,000 to assist it with its cash flow problems so that it could continue with the development. On 18 May 2018, they received a letter of offer from Millbrook Finance for a ‘principal advance’ of $250,000. It is apparent that the Bottos brothers must have been in negotiations with Millbrook Finance prior to making the offer to Vita Built. The loan with Millbrook Finance was then finalised on 1 June 2018 for $250,000, together with fees and charges of $9,000.
The conclusion is inevitable, it seems to me, that this facility was entered into for the amount it was, and when it was, for the purpose of providing the float to Vita Built. Because I have not accepted that the spillage was responsible for Vita Built’s liquidity problems, I do not accept that the spillage caused the Bottos brothers to obtain this facility. Put another way, given Vita Built’s financial situation, in my view, the Bottos brothers would have obtained this facility and incurred the additional expenses associated with obtaining this facility even if the spillage had not existed. The fact that the float was to be used in part to pay the replacement concreter does not alter this conclusion. Accordingly, CityLink is not liable to compensate the Bottos brothers for the fees and expenses they incurred by reason of their obtaining the Millbrook Finance facility.
I note that if the evidence had allowed a conclusion that, because of the spillage, the facility was entered into at a different cost or at a different time or for a different amount to that which would otherwise have taken place, then it may have been possible to attribute some identifiable cost to the presence of the spillage. However, this approach is not available, it seems to me, when the facility was entered into for the amount of the float agreed to be provided to Vita Built and at or about the time that the float was agreed to be provided to Vita Built.
However, I accept that the Bottos brothers did use the Millbrook Finance facility to make some interest payments to Australian Unity that, but for the spillage, they would have been able to capitalise. This came at some cost to the Bottos brothers because the interest payable on the Millbrook Finance facility was 22% per annum, whereas the interest payable on the Australian Unity facility was either 7.75% or 12.75%. I am prepared to assume that, but for the spillage, the Bottos brothers would have had to pay only the lower amount of 7.75% on the Australian Unity facility and that, by reason of the spillage, they instead had to fund the interest paid at the higher rate of 22% payable on the Millbrook Finance facility. Mr Smith, the expert accountant called by the Bottos brothers, appended to his report a table setting out movements on the Australian Unity loan facility. This established that, between 1 June 2018 (being the date upon which the facility with Millbrook Finance was established) and 1 October 2018, the Bottos brothers paid interest that would otherwise have been capitalised on that facility totalling $19,930.33.[68] The funds from the refinancing of the Millbrook Finance facility with Manda Capital were disbursed on 29 June 2019. I consider that from that point any increased interest expenses cannot be attributed to the spillage. If the total interest figure paid to Australian Unity after the Millbrook Finance facility had been obtained is taken to have been paid at the mid-point of 1 June 2018 and 1 October 2018 (that is, on 1 August 2018) and a 14.25% per annum interest rate differential is applied to that sum for the period from 1 August 2018 to 29 June 2019 (being 332 days), the result is $2,583. This amount, in my view, is recoverable by the Bottos brothers as the cost to them of having to fund those interest payments from the Millbrook Finance facility, rather than being able to capitalise them on the Australian Unity facility.
[68]On my reading of the table, interest obligations after this date were in fact met by loan advances, rather than cash payments.
The Bottos brothers also incurred other costs putting in place an arrangement to the satisfaction of Australian Unity whereby they could use the funds from Millbrook Finance to pay contractors up front, as a float, to assist Vita Built. However, because I am not satisfied that the presence of the spillage caused Vita Built’s financial problems, in my view, these costs do not flow from the presence of the spillage and so are not recoverable from CityLink.
The Bottos brothers also incurred costs refinancing their loan with Australian Unity. That loan was repayable in December 2018. The delay associated with the spillage meant that the expected completion date was pushed back into early 2019, and this created the possibility that the Bottos brothers might have to refinance. However, Neilo Bottos said that, as at October 2018, Australian Unity was still prepared to extend its loan through to about June 2019 so long as satisfactory progress was made being made by the builder at that time. Australian Unity did not formally demand payment until 15 February 2019, and the Bottos brothers did not refinance until 29 June 2019. The need to refinance ultimately came about because the builder ceased working in late 2018 and had to be replaced by another builder and also because of the delays caused by the need to obtain an amended building permit. In these circumstances, I am not prepared to conclude that the spillage delay was responsible for the Bottos brothers incurring the additional costs in June 2019 associated with having to refinance the Australian Unity loan.
Finally, the Bottos brothers also claimed damages for fees that they incurred relating to the loan from Manda Capital. As I do not consider that the spillage delay led to the need to refinance with Manda Capital, I do not consider that they are entitled to damages for those costs.
Delay in the receipt of funds from sale of the units
As noted above, units 1 and 2 were purchased ‘off the plan’ in 2017 for $829,650 and $709,000 respectively. Unit 5 was sold ‘off the plan’ on 26 June 2020 for $781,000. Unit 3 was sold on 27 April 2021. Unit 4 was sold on 4 May 2021. Unit 6 remains unsold. The presence of the spillage was not responsible for the change in the size and design of unit 5 and so cannot be blamed for any change in the price for which it was sold. The contracts for the sale of units 1, 2 and 5 required a 10% deposit, with the balance to be paid 14 days after the vendors gave the purchasers notice in writing that an occupancy permit had been issued or that the plan of subdivision had been registered. A certificate of occupancy was issued for all the units on 20 November 2020. The plan of subdivision was registered on 12 January 2021.
The Bottos brothers’ forensic accountant, Mr Smith, included in his calculations of loss a comparison between the interest and financing fees that the Bottos brothers had to pay, and the interest and financing fees that they would (on his assumptions) otherwise have paid. As part of his calculation in his first report, Mr Smith assumed that all units would settle at completion, which at the time of his first report was expected to be 15 September 2020, and compared that with the situation that would have occurred had the units been sold and settled by 21 December 2018. In his second report, he assumed that all units would have been sold by 15 December 2019. That is, in assessing the increased interest expenses to the Bottos brothers that the encroachments caused, he assumed a delay of approximately 21 months (first report) or 12 months (second report) in the receipt of funds from the sale of the units and their use on receipt to pay down debt. He calculated that the additional interest that the Bottos brothers had to pay amounted to $659,461 or $301,763. As noted above, I have not accepted the assumptions that underlay either of his calculations, and so I do not accept his final conclusions.
However, I am satisfied that the progress of the development did come to a halt during the spillage delay, after which time work started on preparing the amended plans and other documents required to deal with the remaining encroachments. I conclude that the effects of this delay persisted and caused a delay of 55 days in the ultimate completion of the project. To the extent that this caused the Bottos brothers to receive the proceeds of sale of any units later than they otherwise would have received those proceeds, then the Bottos brothers have suffered loss for which CityLink is liable, albeit at a lesser scale than that calculated by Mr Smith.
Units 3 and 4 were not sold until some months after the development was finished. The point at which they were able to be sold and the price they obtained would have been influenced by market conditions. In the absence of any evidence directed at the issue, I am not prepared to conclude that the delay caused by the spillage caused these units to be sold later, or for less, than they otherwise would have been sold. The same applies to unit 6, which remains unsold. However, the situation is different with the units that had been sold ‘off the plan’. The date of settlement for those contracts depended on the date of completion of the development. Accordingly, I conclude that, by reason of the spillage, the Bottos brothers received the proceeds of the sale of units 1, 2 and 5 some 55 days later than they otherwise would have.
The sum of the purchase prices for units 1, 2 and 5 is $2,319,650. Mr Rose, the real estate agent, charged a commission of 2.75%, half of which was payable on settlement. The sum of the purchase prices for each unit sold ‘off the plan’, less the 10% deposit and half the commission, is $2,055,790. Mr Smith in his calculations also reduced the sum received by an amount representing the GST that was payable on the sale of the units, calculated in accordance with the ‘GST Margin Scheme’. He calculated the GST payable at an amount that was equal to 5.28% of the contract price. He did not differentiate between the units that were sold ‘off the plan’ and the units that were not. I consider that I ought to follow his approach. Applying this percentage, the GST payable on the sale of units 1, 2 and 5 amounts to $122,478. The amount of money that the Bottos brothers received 55 days later than they otherwise would have due to the presence of the spillage, and which would have been available to them to retire the debt on the construction loan, was therefore $1,933,312.
By at least 29 June 2019, the Bottos brothers were funding the development with a facility with Manda Capital. They were paying interest on this facility at 14%. I conclude that a fair assessment of the loss to the Bottos brothers from the delayed receipt by them of the balances owing on the units sold ‘off the plan’ is $40,785, which represents 55 days of a 14% per annum charge on $1,933,312.
Holding costs associated with the delay
The Bottos brothers seek damages for the additional ‘holding costs’ incurred by reason of the delay in the development. The main components of the holding costs claimed are the rates and taxes charged by the local council and utilities. The Bottos brothers’ approach was to claim each such cost incurred following the date by which, they said, the construction would have been completed had the noise wall not encroached. This creates difficulties where I have concluded that the building was delayed for 55 days during the spillage delay, and not from December 2018 to 8 September 2019. Again, however, I am satisfied that the spillage delay did add to the holding costs, and so some allowance should be made for it.
The Bottos brothers identified ‘additional holding costs’ amounting to $12,372.50 that were incurred during the 2019 year. This figure included a claim for $596 paid to ASIC to renew registration. The rates and taxes charged on the land came to $11,776.50. I do not consider that the payment to ASIC can be attributed to the spillage delay. In the absence of more focused evidence, I consider that a fair assessment is a pro rata amount based on the rates and taxes charged, referable to the spillage delay alone. This comes to $1,775.
Conclusion on damages
For the above reasons, I assess the Bottos brothers’ damages at $69,035. This comprises $16,000 for additional concreting costs (para 162 above), $7,892 in additional interest (para 165 above), $2,583 for non-capitalised interest payments (para 170 above), $40,785 for the delayed receipt of the units sold off the plan (para 179 above), and $1,775 in additional holding costs (para 181 above).
H. Conclusions and disposition
There should be judgment for the plaintiffs for the claim in so far as it relates to the spillage, and an order that CityLink pay them damages of $69,035.
In light of my conclusion that the plaintiffs are no longer able to bring an action to recover the land encroached upon by the poles of the noise wall and their foundations, I will dismiss the plaintiffs’ application for an order that CityLink remove the poles of the noise wall and their foundations from the plaintiffs’ land. It is not necessary to determine whether, if the plaintiffs were able to maintain an action to recover the land occupied by those structures, it would be appropriate to order CityLink to remove them.
I will hear the parties on the questions of what interest, if any, is payable in the circumstance that I have found established. I will also hear the parties in the event that they consider that my calculations (rather than my approach) are mathematically incorrect. I will also hear the parties on the question of costs.
ANNEXURE 1 – THE NOISE WALL
ANNEXURE 2 – THE NOISE WALL FOUNDATIONS
ANNEXURE 3 – PART OF THE SPILLAGE
8
4
0