Byron Shire Council v Vaughan [No. 2]
[2000] NSWLEC 216
•10/20/2000
Land and Environment Court
of New South Wales
CITATION: Byron Shire Council v Vaughan & Anor [No. 2] [2000] NSWLEC 216 PARTIES: APPLICANT:
Byron Shire CouncilRESPONDENTS:
John Bernard Vaughan and Anne VaughanFILE NUMBER(S): 30164 of 1997 CORAM: Lloyd J KEY ISSUES: :- Estoppel:- estoppel by representation - boundaries - sewerage connection plan - whether such plan operates as an estoppel LEGISLATION CITED: Encroachment of Buildings Act 1922 s 3 CASES CITED: Byron Shire Council v Vaughan, Lloyd J NSWLEC, 17 July 1998, unreported;
Commonwealth v Verwayen (1990) 170 CLR 394;
Gillett v Holt [2000] 3 WLR 815;
Giumelli v Giumelli (1999) 196 CLR 101;
Legione v Hateley (1933) 152 CLR 406;
Low v Bouverie [1981] 3 Ch 82;
Vaughan v Byron Shire Council (1999) 103 LGERA 321;
Waltons Stores (Interstate) Limited v Maher (1988) 104 CLR 387DATES OF HEARING: 04/07/2000, 05/07/2000, 06/07/2000 and 07/07/2000 DATE OF JUDGMENT:
10/20/2000LEGAL REPRESENTATIVES:
APPLICANT:
Miss J H H Blackman (barrister)
with Ms L Byrne (barrister)
SOLICITORS:
Elliot & SochackiRESPONDENTS:
Ms R Sofroniou (barrister)
SOLICITORS:
Walters
JUDGMENT:
1
IN THE LAND AND Matters No: 30164 of 1997
ENVIRONMENT COURT Coram: Lloyd J
OF NEW SOUTH WALES Decision date: 20 October 2000
Byron Shire Council
Applicant
v
John Bernard Vaughan and Anne Vaughan
Respondents
REASONS FOR JUDGMENT [2]
Background
1. This is case about estoppel. Estoppel by representation (also known as estoppel by conduct) to be precise.
2. The case has had a long history. The applicant, Byron Shire Council (“the council”) is the owner of lots 6 and 7 in deposited plan 1623, both lots having a frontage to Manfred Street, Byron Bay. The respondents, Mr and Mrs Vaughan, are the owners of the adjoining parcel of land to the south, lots 3-5 in deposited plan 1623, which also fronts Manfred Street, Byron Bay. The respondents also own the adjoining land to the west, being lots 11 and 12 in deposited plan 1623. A house erected in the early 1950’s straddles the boundary of lots 5 and 6. That it to say, the house stands partly on the council’s lot 6 and partly on the respondent’s lot 5. Between sixty and sixty five percent of the house is on the respondent’s lot 5 and between thirty five and forty percent of the house is on the council’s lot 6. The respondents acquired lots 3-5 by a contract of sale dated 11 September 1987 from Mr A W Vidler, who had erected the house. They became registered as joint proprietors of lots 3-5 on 15 October 1987. The council acquired lots 6 and 7 on 5 November 1971.
3. The applicant council has brought a claim for relief under the Encroachment of Buildings Act 1922 (“the Act”) seeking an order for the removal of the encroachment or, alternatively, an order that the respondents pay compensation to the applicant council for the encroachment. The respondents claimed that a building cannot be an encroachment within the meaning of the Act where the building straddles the boundary as in the present case - there was no “encroaching owner ” nor an “ adjacent owner ” as defined in the Act. The respondents also claimed that the council was estopped by reason of its conduct from asserting any title over that part of lot 6 on which the portion of the house is constructed. The respondents also claimed adverse possession of lot 6.
4. The case was heard by me over two days in June 1998. In a reserved judgment given on 14 July 1998 I held that the respondents were encroaching owners, their house is an encroachment on lot 6 and the council is the adjacent owner within the meaning of the Act. I found against the respondents on the issues of estoppel and adverse possession. I made an order that the respondents remove that part of the house which encroaches onto lot 6. ( Byron Shire Council v Vaughan , NSWLEC, 14 July 1998, unreported).
5. The respondents appealed. The appeal was heard over two days in March 1999. In reserved judgment given on 15 July 1999 the Court of Appeal upheld my finding that the respondents were encroaching owners, their house is an encroachment on lot 6 and the council is an adjacent owner within the meaning of the Act. The Court also held, however, that there was evidence capable of establishing the elements of the defence of estoppel and that I had thus erred in exercising the court discretion under sub-sections 3(2) and (3) of the Act. It seems that my finding against the respondents on their claim for adverse possession was not challenged in the Court of Appeal. The Court of Appeal remitted the proceedings to this court for a new trial on the respondents’ defence of estoppel and on the appropriate exercise of the court’s discretion ( Vaughan v Byron Shire Council (1999) 103 LGERA 321).
6. The new trial was heard by me over a further four days in July 2000. The evidence in the first trial was tendered (including the affidavits and the transcript of evidence in those proceedings) together with additional evidence adduced by both parties.
The relevant facts
7. The basic facts are set out in both my previous judgment and in the judgments of the members of the Court of Appeal. The facts which I now describe are those which relate to the respondents’ defence of estoppel. I refer later to those facts which relate to the exercise of the court’s discretion.
8. The respondents’ solicitor, Mr A B Pagotto, furnished an affidavit which sets out the result of historical searches of both the council’s land and the respondents’ land. Lots 3, 4 and 5 were acquired by Mr A W Vidler from Mr S I Simmons and Mr C R Simmons by memorandum of transfer dated 20 April 1949. Mr Vidler built a house on the land within a few years of this date and most probably in the early 1950’s. That is the house which is the subject of these proceedings and which encroaches upon lot 6. A photograph annexed to the affidavit of Mr K A Vidler (the son of Mr A W Vidler) shows the house and a paling fence around it in the mid 1950’s.
9. Lot 6 and 7 were acquired by Mr R P Tulk from Mr S I Simmons and Mr C I Simmons by memorandum of transfer dated 27 April 1946. On 6 October 1950 Mr Tulk also acquired the adjoining parcel to the north, lot B. The acquisition by Mr Tulk of lot B had the effect of rectifying the encroachment of Mr Tulk’s house onto the said lot B. Lots 6 and 7, as well as lot B, were transferred from Mr Tulk to Mr S G Richardson by memorandum of transfer dated 21 September 1953.
10. Lot A, adjoining lot B to the north was subdivided in 1966 into lots 1 and 2 in deposited plan 521030. The deposited plan certified by a surveyor on 7 April 1966 and by the Council Clerk on 22 April 1966 shows fencing close to and parallel with the boundary between lot 6 and 7 (rather than the boundary between lot 5 and 6).
11. The council acquired lots 6 and 7 and lot B from Mr Richardson by memorandum of transfer dated 5 November 1971. The land was acquired by the council for unpaid rates and there is no evidence that a survey was obtained at the time of its acquisition.
12. According to the affidavit of Mr K A Vidler, a fence had been constructed by the previous owner of lot 6 and 7, Mr Tulk, which was believed to divide lots 5 and 6. The fence is shown on old photographs of the properties taken in the 1950’s and in the 1960’s and is in the same location as the present fence, that is to say, close to and parallel with the boundary between lot 6 and 7 (instead of the boundary between 5 and 6). Although the evidence is not entirely clear, it seems that after the council acquired Mr Richardson’s land the Vidler family constructed the fence along the Manfred Street boundary of both the council’s property and their own property to keep off illegal campers.
13. On 19 October 1981, Mr A W Vidler wrote a letter to the council in which he stated that he had a problem with illegal campers on the council’s land which adjoins his land and he sought a lease of the council’s land. On 21 December 1981, the council resolved that Mr Vidler’s request be not accepted. No mention is made by either Mr Vidler or the council that part of the land referred to was not correctly identified or that Mr Vidler’s northern fence line was actually adjacent to the boundary of lots 6 and 7 (rather than lots 5 and 6).
14. As noted above, by contract of sale dated 11 September 1987 Mr A W Vidler sold lots 3, 4 and 5 to the respondents. Both the vendor and the purchasers used the same solicitor, Mr J R Black of Byron Bay. The contact for sale included a number of attachments. One of the attachments was a sewerage connection plan issued by the council in its capacity as the local sewerage authority. It is this plan which the respondents say gives rise to the estoppel upon which they rely. The plan describes the land as lots 3-5 and shows the house wholly within the land, with a sewerage connection from Manfred Street to the house at a point 44 feet from what appears to be northern boundary of the combined parcel. The plan is dated “ 25.2.85 ” and states “ works as executed inspection date: 31.5.74 ”. The plan bears the council’s date stamp with the date “ 28/8/87 ” which suggests that it was issued on about that date to Mr Black for inclusion by him in the contract for sale. No survey of lots 3-5 was undertaken before completion of the sale.
15. The origin and purpose of sewerage connection plans were explained in the original proceedings heard in June 1998 by Mr B K Cooney, the council’s health and environment manager. Such plans are prepared after sewerage works have been carried out from field notes of the council’s inspectors prior to backfilling the tenches containing the pipes. The location of the pipes is fixed in relation to existing buildings or fences and not the surveyed boundaries. Such plans are prepared principally to enable plumbers attending sewer chokes or breaks in the drainage lines to quickly ascertain where any problem lies. Such plans are also sought by persons undertaking building extensions to avoid unforeseen damage to the drainage system.
16. Mr S A Thompson, a registered surveyor, said in evidence that he would not think of a sewerage connection plan as being accurate, but as a representation of what the connection is to the sewer. He would not treat it as an accurate survey. He also said in evidence:
As a surveyor, I wouldn’t use that to determine where the boundaries are.
- Q. And you would advise your client not to use that as to where boundaries are?
17. Miss M C Hole , a solicitor and an accredited specialist in property law, said in her affidavit that if the sewerage connection plan had come into her possession when acting for a purchaser, she would have advised her client not to rely upon it to determine the boundaries of the property. She also said in her affidavit that if such a document come into possession of the solicitor of prospective purchasers on a contract of sale, it would be necessary for that solicitor to give advice on the document; and in 1987 an ordinary competent solicitor would have advised his or her clients that the document did not accurately set out the boundaries of the property, and furthermore, if they wished to know what the boundaries of the property were it would be necessary to have an accurate survey carried out. In her oral evidence Miss Hole said that a sewerage connection plan is only an indication of where sewerage is connected to a building on some land, that it was not accurate and not intended to be accurate. Miss Hole’s evidence is consistent with the evidence given at original hearing of this case in June 1998, when the evidence of Mrs Dale established that it would not be reasonable for a solicitor to act on information in a sewerage connection plan as evidence that improvements were located within title boundaries. The reason why a competent solicitor should advise a client not to rely on a sewerage connection plan is explained by Miss Hole in the following evidence:
Q And you go further in paragraph 6 and say it would be necessary for a competent solicitor to give that advice on the document that you refer to in paragraph 5?
- A. That’s correct, yes.
Q. That would be, I’d suggest, to disabuse such purchaser client of any impression they might have that the sewerage diagram in fact does accurately set forth boundaries of the land they’re proposing to purchase?
A. It would have that effect, yes.
18. Miss Hole also gave the following evidence:
Q. From what you say in your affidavit, and indeed your knowledge, you don’t express any view at all do you, for the purpose of these proceedings, whether the lines drawn around what we’ve called the building, are in fact boundaries or not?
- A. I don’t think anybody could say they were boundaries.
19. The first respondent, Mr J B Vaughan, said in his affidavit in the original proceedings heard in June 1998 that at the time of his purchase of the property in 1987 he believed that the house was constructed in the middle of lots 3-5 as the council’s documentation supplied at that time had shown the house at that position. He did not discover that this was incorrect until 1996 when the council’s solicitors asked him to remove the encroachment. In his oral evidence in the original proceedings Mr Vaughan said that his solicitor, Mr Black, sent a copy of the sewerage connection plan to him in August 1987 (that is, before he signed contract to purchase the land). He was asked whether he read the contract and its annexures before he signed the contract and he said that he “ would have ” done so. Mr Vaughan did not himself speak to Mr Black in connection with the purchase. He was living in Melbourne at the time and had the assistance of Melbourne solicitor, Mr Smith, who reviewed the contract for him.
20. In a further affidavit relied upon in this re-hearing Mr Vaughan said that if anyone from the council had indicated to him, or if any document obtained from the council prior to the purchase of the property had indicated that there was any encroachment by the building, or that the boundaries of the property did not surround the building but in fact ran through the building, he would have deferred settlement of the purchase until the matter was resolved with the council.
21. In his oral evidence Mr Vaughan said that he had previously been involved in two or three purchases of other properties but he had never had a survey done on such occasions. Neither Mr Black nor Mr Smith had advised him to obtain a survey in connection with his purchase of lots 3-5 Manfred Street. Neither Mr Black nor Mr Smith advised him that a sewerage connection plan could not be relied upon as showing the property boundaries.
22. It is clear from the facts which I have described above that it is the sewerage connection plan which was issued by the council which is the foundation for the respondents’ claim for equitable estoppel. According to the respondents, the sewerage connection plan was a representation by the council that the house on lot 5 is wholly constructed on that lot, or alternatively, is wholly constructed within lots 3-5; the respondents relied on that representation to their detriment in purchasing the property; and, it would be unjust or unconscionable for the council to retain ownership of that part of lot 6 on which the portion of the house encroaches: that is to say, the council should be held to its representation.
The council’s submissions
23. Miss J H H Blackman, appearing for the council, made the following submissions. (1) The primary question is whether the sewerage connection plan is a “ representation ” since nothing can create an estoppel by representation which was never a representation at all. (2) The sewerage connection plan did not, neither did it purport to identify the property boundaries - it does not show the boundaries on each of lots 3, 4 and 5. (3) The representation to found an estoppel must have been a material representation reasonably capable of influencing the representee to act as he did. (4) The respondents’ understanding of the sewerage connection plan and their reliance upon it were not reasonable. (5) The sewerage connection plan was not a material representation because the respondents wanted to purchase the land in any event. (6) The evidence of Mrs Hole was that she did not think anybody could say that the plan depicted boundaries. (7) For a representation to found an estoppel there must be a clear intention that the representor intended that the representation be acted upon. (8) The was no such intention in the present case. (9) The principle by which an estoppel operates to prevent a party from resiling from its representation cannot apply here because the council does not seek to resile from its representation about sewerage connection locations, which prevents this from being an estoppel case. (10) A representation must be clear and unambiguous before it can found an estoppel and it cannot arise from inference, which would exclude the sewerage connection plan from operating as an estoppel.
The respondents’ submissions
24. Ms R Sofroniou, appearing for the respondents, made the following submissions. (1) Estoppel by representation may arise from a false representation innocently given, reasonably interpreted and relied upon by the representee to his or her disadvantage. (2) The sewerage connection plan is capable of reasonably inducing an interested purchaser to assume that the outer rectangle shown on the plan is a boundary. (3) The unconscionability of the council was in issuing the sewerage connection plan without due warning of its inaccuracy. (4) There is an absence of evidence to establish that the respondents’ reliance on the plan was unreasonable. (5) Miss Hole’s evidence confirms the natural understanding of a person looking at the plan; of the need to warn such a person against relaying upon it as accurately setting out the property boundaries; and of the need to obtain a survey for that purpose. (6) The respondents received no such advice. (7) The council was constructively aware as early as 1966 that the fences were displaced to the north as appears from the Council Clerk’s certification of deposited plan 521030 (which I have noted in paragraph 10 above). (8) Discretionary considerations include the fact that hardship to the council would be minimal if the encroachment were to remain together with a boundary adjustment, which would be easier than removing the encroachment or moving the house. (9) The council itself did not obtain a survey when it acquired lots 6 and 7.
Estoppel
25. It is convenient to set out my understanding of the elements of the estoppel relied upon by the respondents, derived from various sources to which I refer below.
(1) The fundamental principle upon which the estoppel is based is that equity
is concerned to prevent unconscionable conduct.
In essence, estoppel prevents a party to litigation from relying on or asserting as true a particular proposition of fact or law, whether or not the proposition is true . (Halsbury’s Law of Australia, vol 12, 359 021)
Estoppel by representation or conduct prevents a party from unjustly resiling from an assumed state of affairs which he or she has induced another party to adopt as the basis of some act or omission which, if the assumption were not adhered to, would operate to that other party’s detriment. (Halsbury’s Law of Australia, vol. 12, 359 021)
The element which both attracts the jurisdiction of a court of equity and shapes the remedy to be given is unconscionable conduct on the part of the person bound by the equity, and the remedy required to satisfy an equity varies according to the circumstances of the case . ( Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 at 419, per Brennan J)
The doctrine of estoppel by conduct is founded upon good conscience . ( The Commonwealth v Verwayen (1990) 170 CLR 394 at 440, per Deane J)
The central principle of the doctrine is that the law will not permit an unconscionable - or, more accurately, unconscientious - departure by one party from the subject matter of an assumption which has been adopted by the other party as the basis of some relationship, course of conduct, act or omission which would operate to that other party’s detriment if the assumption be not adhered to for the purposes of the litigation. ( The Commonwealth v Verwayen at 444, per Deane J)
Equitable estoppel is aimed at preventing unconscionable conduct and seeks to prevent detriment to the promisee . ( The Commonwealth v Verwayen at 501, per McHugh J)
(2) The statement upon which the estoppel is founded must be clear andMoreover, the fundamental principle that equity is concerned to prevent unconscionable conduct permeates all the elements of the doctrine. ( Gillett v Holt [2000] 3 WLR 815 per Robert Walker LJ)
unambiguous; and it must not arise from inference.
Now, an estoppel, that is to say, the language upon which the estoppel is founded, must be precise and unambiguous. That does not necessarily mean that the language must be such that is cannot possibly be open to different constructions, but that it must be such as will be reasonably understood in a particular sense by the person to whom it is addressed . ( Low v Bouverie [1981] 3 Ch 82 at 106 per Bowen LJ)
But in order to create an estoppel, the statement by which the Defendant is held bound must be clear and unambiguous. This is an ancient rule as to estoppel by statements in a deed, as appears from Rolle’s Abr.: “Estoppel” ((P) pl.1 and 7), and was acted on by Lord Cairns in Heath v. Crealock [Law Rep. 10 Ch. 22 ]. In General Finance, Mortgage, and Discount Company v. Liberator Permanent Benefit Building Society [10 Ch. D. 15; 27 W. R. 210] , Sir G. Jessel followed the last case, and intimated that, in his opinion, the doctrine ought not to be extended, there being no reason for preferring one innocent purchaser to another. That certainty of statement is also required to maintain an estoppel upon a statement not by deed appears from Freeman v. Cooke [2 Ex. 654] , where relief was refused upon the ground that no reasonable man would have acted on the faith of the statements made if they were taken altogether.
Whether this suit is treated as in Equity or at Law, the essence of the Plaintiff’s case must be that he was misled by the statement. The Court must be satisfied of this. If there was fraud, and the statement was intended to mislead, its ambiguity would not be a defence; but where no fraud is alleged, it is essential to shew that the statement was of such a nature that is would have misled any reasonable man, and that the Plaintiff was in fact misled by it . ( Low v Bouverie at 113 per Kay LJ)
First, it has long been recognised that a representation must be clear before it can found an estoppel in pais (Low v. Bouverie [[1891] 3 Ch.82, at pp.106, 113] ; Newbon v. City Mutual Life Assurance Society Ltd. [(1935) 52 C.L.R. 723, at p. 738] ; Woodhouse A.C. Israel Cocoa Ltd A.A. v. Nigerian Produce Marketing Co. Ltd. [[1972] A.C., at pp. 755-756, 768, 771]. ‘Every estoppel, because it concludeth a man alleadge the truth, must be certaine to every intent, and not be taken by argument or inference’ (Coke’s Littleton, 352b). In Western Australian Insurance Co. Ltd. v. Dayton [ (1924) 35 C.L.R. 355, at p. 375] , Isaacs A.C.J., referring to the requirement that a representation must be “unambiguous” if it is to found an estoppel in pais said:It is often said that to found a valid estoppel it is necessary to prove a representation that is clear and unambiguous. This does not mean that the representation must be one positively incapable of more than one possible interpretation; but where more than one construction is possible, the meaning relied upon must clearly emerge in the context and circumstances of the case, although it may be argued that in other contexts or other circumstances the same words might possibly have borne a different construction. It must moreover be shown - and the onus of proof in this regard is on him who sets up the estoppel - that the representation was reasonably understood by the representee in a sense, whether primary or secondary, materially inconsistent with the allegation against which the estoppel is now set up. Where the representation is by words only (as, for instance, where it is explicitly contained in the text of a document) there will obviously be few occasions indeed where there is room for an estoppel founded upon a construction reasonably put upon the words by the representee, if another, different, construction appears reasonably arguable as an alternative . (Spencer Bower and Turner: The Law Relating to Estoppel by Representation, third edition, (1997), 82-83).
“The word ‘unambiguous’ is to explained by Kay L.J. in Low v. Bouverie [(1924) 35 C.L.R. 355, at p. 375] , the word and its explanation occurring on the same page. The Lord Justice says: ‘It is essential to shew that the statement was of such a nature that it would have misled any reasonable man, and that the plaintiff was in fact misled by it’. Bowen L.J. says [[1891] 3 Ch., at 106] : ‘It must be such as will be reasonably understood in particular sense by the person to whom it is addressed’. This is confirmed in George Whitechurch Ltd. V. Cavanagh [[1902] A.C., at p. 145] by Lord Brampton and in Bloomenthal v. Ford [[1987] A.C., at p.166] by Lord Herschell.
(3) The representation upon which the estoppel is founded must have been( Legione v Hateley (1933) 152 CLR 406 at 435-436 per Mason and Deane JJ)
reasonably capable of influencing the representee to act as he did.
The representation must have been one reasonably capable of inducing the alteration of position which the representee sets up as its actual consequence. It must have been “of a nature”, and in that sense “calculated”, or of which the tendency or natural and probable result is, to induce the particular representee, in the circumstances of the individual case, or alter his position in the manner alleged. The representation must be shown, if the matter is challenged, to have been reasonably capable of influencing the representee to act as he did, and not merely to have been in fact the precursor in point of time of his alteration of position; just as, in the analogous sphere of defamation, a publication must not only have in fact injured a person’s reputation, but must also have had a defamatory tendenc y. (Spencer Bower and Turner at 97)
(4) The representation upon which the estoppel is founded must be such as will
be reasonably understood in a particular sense by the representee.
( Low v Bouverie at 106 and 113, quoted under proposition (2) above)
(5) The question of unconscionability includes consideration of the
reasonableness of the representee in acting on the assumed state of affairs.
Ultimately, however, the question whether departure from the assumption would be unconscionable must be resolved not by reference to some preconceived formula framed to serve as a universal yardstick but by reference to all the circumstances of the case, including the reasonableness of the conduct of the other party in acting upon the assumption and the nature and extent of the detriment which he would sustain by acting upon the assumption if departure from the assumed state of affairs were permitted. ( The Commonwealth v Verwayen at 445 per Deane J, referred to in Giumelli v Giumelli (1999) 196 CLR 101 at 123 by Gleeson CJ, McHugh, Gummow and Callinan JJ)
(6) It is not necessary that the representation upon which the estoppel is
founded should be the sole or exclusive cause of the representee altering his
position; it is enough that it is a cause for his doing so.
It is not necessary that the representation should be the sole or exclusive cause of the representee altering his position; it is enough that it is a cause of his doing so, provided that a real causal nexus is established. And where the action taken by the representee is obviously a natural consequence of his assuming the truth of the representation a prima facie inference may be drawn in favour of a causal connection without more . (Spencer Bower and Turner, at 103)
There must be a sufficient causal link between the assurance relied upon and the detriment asserted. (Gillett v Holt , at 836, per Robert Walker LJ )
(7) Estoppel, unlike fraud, may arise from false representations innocently
made.
The contention which from time to time has been advanced on behalf of a representor that his honesty and innocence of intention ought to exempt him from liability to estoppel, as it does from liability to an action for fraud, is based on a hopeless confusion between a cause of action based on fraud and a rule of evidence, and has always been rejected, for the obvious reason that what is material is, not the state of representor’s morals, but the effect of representation on the mind and will of the representee. (Spencer Bower and Turner, at 155-156, referred to by Handley JA in the Court of Appeal at 326)
Application of the doctrine of estoppel to the present case.
26. In Waltons Stores (Interstate) Limited v Maher , Brennan J set out (at 428-429) the matters which he considered necessary for a plaintiff seeking to set up the estoppel to prove. Brennan J’s analysis of the elements to be proved was expressly adopted by McHugh J in The Commonwealth v Verwayen (at 502). Brennan J said:
In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant’s property, a diminution of his rights of an increase in his obligations and he, knowing that the plaintiff’s reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.
27. In applying the facts in the present case, with an understanding of the elements of the estoppel described above, to Brennan J’s list of matter to be proved, I draw the following conclusions.
28. (1) The representees assumed that a particular legal relationship then existed between them and the representor or expected that a particular legal relationship would exist between them and, in the latter case, that the representor would not be free to withdraw from the expected legal relationship.
The legal relationship is one of representor and representee (representee being a prospective land owner), and later, one of adjoining land owners. The council as the local sewerage authority issued a sewerage connection plan which on its face suggests that the house on lots 3-5 Manfred Street is wholly within those lots. Moreover, the plan led Mr Vaughan to believe that the boundaries of the land were approximately in the position of the fences which existed on the land.
29. I am prepared to accept the fact the plan was issued to Mr and Mrs Vaughan’s solicitor, Mr Black, on or about 28 August 1987 as appears from the council’s date stamp on the plan which is annexed to the contract for sale from Mr Vidler to Mr and Mrs Vaughan.
30. As Handley JA said in the Court of Appeal: “ The fact that the plan did not purport to show the accurate location of the property boundaries does not mean that it was incapable of conveying a representation.” (at 324).
The fact that the plan was capable of indicating the position of the house in relation to the property boundaries is confirmed by the evidence of Miss Hole, who said that it would be necessary to give advice on the document; namely, that it did not accurately set out the boundaries of the property and that a survey should be carried out if a prospective purchaser wanted to know where the boundaries are. According to the evidence of Miss Hole such advice would be necessary “ to disabuse such purchaser client of any impression they might have ” that the plan in fact accurately set out the boundaries of the property. Mr Vaughan said that he received no such advice from either Mr Black of Byron Bay nor from his other solicitor, Mr Smith in Melbourne. He said that he believed the house was constructed in the middle of lots 3-5 and had he believed otherwise he would have deferred settlement of his purchase until the matter was resolved.
31. I have no reason to disbelieve Mr Vaughan. His understanding of the plan is confirmed by both Mrs Hole and Mrs Dale. I am satisfied by their evidence that the representation on the face of the plan was sufficiently clear and unambiguous, that it was reasonably capable of influencing Mr and Mrs Vaughan to act as they did in completing their purchase of the land without further inquiry, that the plan was reasonably understood by them in the sense conveyed by representation and that they acted reasonably, in an absence of any evidence to the contrary, in reliance on the assumed state of affairs. Miss Hole recognised the need for a solicitor “ to disabuse such purchaser client ” of the impression conveyed by the plan.
32. The Vaughans’ understanding of the representation was, in my opinion, reasonable. There was nothing in the sewerage connection plan to suggest any kind of irregularity or difference between the fence line and the boundaries. There was nothing in the plan to suggest that there was the existence of any encroachments - the house is shown in about the middle of lots 3-5, which is not even near any boundary. The reasonableness of the Vaughans’ reliance on the plan is further reinforced by the fact that it was issued by a body with powers over the use and development of land. It is reasonable to expect that a layperson would believe that the council was fully aware of the location of buildings in relation to the boundaries of land within its area.
33. The evidence of Mr Vaughan establishes a sufficient causal link between the representation on the plan and the purchase of a property having then an unsuspected encroachment. I refer to the statement in Mr Vaughan’s affidavit that he would have otherwise deferred settlement of the purchase until the matter was resolved had he been aware of the true position.
34. It is irrelevant that sewerage connection plans are prepared to show the location of sewerage pipes by reference to existing buildings or fences and not by reference to the surveyed boundaries. I accept the fact that the representations in this case were innocently made. That fact does not, however, exempt the council from being subject to the estoppel relied upon.
35. The legal relation between the parties so far as concerns the present case arose on and from 5 November 1971 when the council became the owner of the adjacent land upon which the house encroached. The council itself did not obtain a survey of the boundaries of lots 6 and 7 when it acquired that property and it thus perpetuated the original misconception relating to where the boundaries are located. It further perpetuated the misconception when it issued the sewerage connection plan on or about 28 August 1987 to Mr Black, who was acting for the purchasers of lots 3-5, Mr and Mrs Vaughan.
36. (2) The representor has induced the representee to adopt that assumption or expectation.
The evidence to which I have referred under (1) above establishes that the sewerage connection plan induced Mr and Mrs Vaughan to adopt the assumption that the house was located wholly within lots 3-5 Manfred Street. Moreover, as noted above, the assumption was reasonably capable of inducing such belief on the part of Mr and Mrs Vaughan and was reasonably understood by them in the particular sense which I have described.
37. (3) The representee acts or abstains from acting in reliance on the assumption or expectation.
The undisputed evidence of Mr Vaughan, as noted above, is that if the true situation had been known he would have refrained from settlement of the purchase until the resolution of the matter. I accept the principle that a relevant consideration is the reasonableness of the representee in acting on the assumed state of affairs, again, the evidence of Mrs Hole and Mrs Dale to which I have referred confirms the impression conveyed by the sewerage connection plan and the need for a solicitor “ to disabuse ” such purchaser client of the impression.
38. (4) The representor knew or intended him to do so.
There is no evidence that the council intended Mr and Mrs Vaughan to rely upon the sewerage connection plan. The council did, however, issue the plan to the Vaughans’ solicitor, Mr Black on or about 28 August 1987. It is common knowledge that such plans are issued to solicitors for inclusion in contracts for the sale of land. I am prepared to infer that the council knew that when it issued the plan to Mr Black it would be used either for that purpose or for some other purpose. It does not really matter what purpose was intended to be served by the issuing of the plan. It is sufficient, in my view, that the council must have known that in issuing the plan it was going to be used or relied upon for some purpose and that the information which it contained would be relied upon. As I have noted, it is irrelevant that the representation on the plan was innocently made. It is sufficient that the council knew that it would be relied upon in some way.
39. (5) The representee’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled.
The obvious detriment if the estoppel is not established is that the council would be entitled to relief under the Act. Such relief may be either the removal of the encroachment, the payment of compensation to the adjacent owner (the council), a transfer of land to Mr and Mrs Vaughan (with, presumably, a payment by them therefor) or the grant of an easement, right or privilege to Mr and Mrs Vaughan (with presumably a payment by them therefor). In other words, if the estoppel is not established the detriment would be a cost to the Vaughans.
40. (6) The representor has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.
The council could have protected itself by a suitable warning or disclaimer on the sewerage connection plan. It could have stated, for example, that fence lines only were shown on the plan and that distances were to fence lines and not to property boundaries, which should be independently checked. The fact that the council issued the plan without any such warning or disclaimer does not mean that it is estopped in every instance where it issues a sewerage connection plan which is relevantly inaccurate. It would only be estopped in the relatively unusual case where the council is also the owner of the adjacent land. The council compounded the problem in itself neglecting to obtain a survey when it acquired the adjacent property in 1971. Mr and Mrs Vaughan subsequently carried out renovations and improvements to the house, which included the addition of verandas or decking and which confirms, in my opinion, their understanding of the plan. It is unlikely that they would expend money on improvements to a house which stands partly on land which they do not own.
41. It follows from my conclusions I have written above that the respondents have established the defence of estoppel in this case.
Discretionary considerations
42. Since the fundamental principle upon which the estoppel is based is to prevent unconscionable conduct, the court must decide what is the minimum equity to do justice between the parties. ( Walton Stores at 419 per Brennan J; The Commonwealth v Verwayen at 411-412 per Mason CJ, 445-446 per Deane J, 487 per Gaudron J, 501 per McHugh J; Giumelli at 113 per Gleeson CJ, McHugh, Gummow and Callinan JJ, 127-128 per Kirby J; Gillett v Holt at 139 per Robert Walker LJ).
43. This was expressly referred to in the context of the application under the Act by Fitzgerald JA in the Court of Appeal (at 331-332).
A respondent to an application under the Encroachment of Buildings Act who is alleged to be an “encroaching owner” can obviously defend such an application on the footing that there is no encroachment because he or she is entitled, by estoppel or otherwise, to the land on which there is alleged to be an encroachment. However, the Vaughans’ claim to title by estoppel to part of lot 6 oversimplified the position and failed to give effect to the principle – which they acknowledged – an estoppel would only entitle them to rights in relation to lot 6 to the extent necessary to do justice between them and the council: see, for example, Giumelli v Guimelli (1999) 73 ALJR 547. Any estoppel favouring the Vaughans can, and should if possible, be accommodated in the order made on the council’s application under the Encroachment of Buildings Act.
(See also Handley JA at 326)
44. The discretionary considerations include, inter alia , the status of council’s land, the fact that Mr and Mrs Vaughan expended money on improvements to the house, the cost of removing the encroachment – the suggested way of doing so being by moving the whole house back onto lots 3-5 – together with the cost of doing so, a boundary adjustment, or an easement for support.
45. The classification of the council’s land. Following the commencement of the Local Government Act 1993, a special meeting of the council held on 9 May 1994 resolved to adopt “ as a draft document for public exhibition purposes, a register classifying public land as either ‘community’ or ‘operational’” . In the 1994 Draft Land Register, both lots 6 and 7 are classified as operational for the purposes of the Local Government Act.
46. As advised by the council solicitors, Wilshire Webb, and reported in a report of the Director of Environmental Planning Services titled Review and Reclassification of Council Owned Land and Draft Byron Local Environmental Plan (“the LEP”), the 1994 Draft Land Register was not formally adopted in 1994. Under the Local Government Act, Schedule 7, clause 6(2), all public land not formally classified as operational one year after the operation of the Act is automatically classified as community. For this reason, on 1 July 1994 the official classification of lots 6 and 7 became “ community ”.
47. Despite the formal “ community ” classification of lots 6 and 7, there is no evidence that the council regarded the land as simply non-operational and there is evidence of council’s intention to regard it as “ operational ”.
48. The minutes of a meeting of the Finance, Works and Enterprise Committee of the council held on 18 June 1996 and 24 June 1996 contain a resolution that the council include a sale of land, including lots 6 and 7, in its 1996-1997 Budget.
49. By letter dated 23 August 1996 sent to the council, the solicitors acting for a company named Essential Pty Limited made an offer on that company’s behalf to purchase lots 6 and 7 (and the original lots 8 - 10 of deposited plan 1623) for a price of $1,000,000. The letter also said that purchaser would pay for sand dune stabilisation in front of Manfred Street and in front of the respective lots purchased.
50. By letter dated 22 October 1996 addressed to the solicitors for Essential Pty Limited, the council’s Acting General Manager stated that the council had resolved not to accept the offer as it was conditional upon certain development application approvals and invited the company to make an unconditional offer in the future.
51. The adoption of a Land Register was only formally addressed on 23 March 1999 when the council resolved to amend the LEP to reclassify the land from community to operational in accordance with the “ intended ” 1994 Land Register.
52. A resolution action sheet of the council dated 4 April 2000 shows that the council resolved to adopt the Land Register 2000 for public exhibition together with the amended LEP. The council’s 2000 Draft Land Register shows lots 6 and 7 to be classified as operational land. A further resolution action sheet dated 17 May 2000 shows the council had resolved to classify lots 6 and 7 as operational land.
53. Improvements made to the house. Since the purchase of the house in 1987 Mr and Mrs Vaughan carried out renovations, repairs and improvements to it, including the addition of decking and/verandas.
54. Removing the encroachment . A plan prepared by Mr S A Thompson, a registered surveyor, tendered in evidence, shows a number of services for electricity supply, water, sewerage and telephone within lot 3. The positioning of such services renders lot 3 unusable for purposes of development over approximately a quarter of its area. If the encroachment were to be removed by moving the house so that it stands wholly within lots 3-5 then care would have to be taken to avoid placing it over such services.
55. Mr P Vryenhoek, a house mover, gave evidence for the respondents regarding the expense and difficulty of moving the encroaching house. Mr Vryenhoek furnished a quotation in the sum of $55,000 to move the house and reconnect services thereto. Mr W Bertram, a building inspector employed by the council, gave evidence to the effect that the house could be moved relatively easily and estimated the cost of doing so in the order of $15,000. It is not clear, however, if Mr Bertram’s figure included the disconnection and reconnection of services and the removal and reassembly of two verandas/decking. Mr Vryenhoek had moved the respondents’ other house on the neighbouring lot 11-14 and said that the cost of doing so had been about $50,000, but that this house is considerably larger than the encroaching house. The evidence relating to the costs of moving the respondents’ house so that it stands wholly within lots 3-5 was inconclusive. In the absence of further evidence I am inclined more towards Mr Vryenhoek’s estimate and to accept a figure of about $40,000.
56. Moving the house was a remedy favoured by Fitzgerald JA in the Court of Appeal. His Honour said (at 333-334):
In my opinion, the circumstances found by the Land and Environment Court are such that the position should be regularised by the removal from lot 6 of the portion of the house constructed on that lot, but the Vaughans should not bear the entire costs of removal. Both parties contributed to the problem, and I consider that neither is significantly more or less responsible than the other. In my opinion, they should be equally liable for the costs of removal of the portion of the house constructed on lot 6 from that lot.
57. The reference by Fitzgerald JA to both parties contributing to the problem is, I think, a reference to the failure of both parties to obtain a survey upon their acquisitions of the respective land in each case.
58. Other considerations . I do not accept Ms Sofroniou’s submission that the council had simply received its the land in lieu of unpaid rates and thereby the manner of the council’s acquisition of lots 6 and 7 was far from burdensome. The council had forgone money owing to it in exchange for its acquisition of the land. There is no evidence to suggest that the land was thus acquired by the council at an undervalue. There is no evidence before me to show the amount of rates which the council had forgone. Neither am I also to accept Ms Sofroniou’s submission that the hardship to the council should be understood to be minimal in the event that it were to lose title over lot 6, or over part of lot 6.
59. It may be that either the approach suggested by Fitzgerald JA or, alternatively, the granting of an easement for support may well satisfy the minimum equity to do justice between the parties. The parties, however, asked me to make a finding on the defence of the estoppel and to defer the question of the appropriate form of relief, if any, so that they may each then consider their position. Accordingly, in accordance with the parties’ request I refrain at this stage from coming to a firm conclusion on the appropriate remedy and refrain from making any formal orders. In publishing these reasons I reserve such questions as well as the question of costs for further argument, if necessary, on a date to be fixed.
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