McCormack v Qin

[2017] TASSC 67

[2017] TASSC 67

COURT:                   SUPREME COURT OF TASMANIA

CITATION:              McCormack v Qin [2017] TASSC 67

PARTIES:  McCORMACK, Andrew John
  McCORMACK, Christine Lynette
  CLARKSON, Robert Henry
  CLARKSON, Janet Rose
  CUPPARI, Michael
  CUPPARI, Meredith Anne
  TAPPING, Ralph Desmond
  TAPPING, Beverley Anne
  GRIGGS, Nicholas John
  GRIGGS, Janet Maree
  ATKINS, Walter George
  v
  QIN, Lihua
  SHI, Xiaomin
  RECORDER OF TITLES

FILE NO:  1010/2014
DELIVERED ON:  7 December 2017
DELIVERED AT:  Hobart
HEARING DATE:  6 July 2017
JUDGMENT OF:  Pearce J

CATCHWORDS:

Real Property – Easements – Easements generally – Creation – By express agreement or under statute – Statutory easements – Creation of statutory right of user – Determination of compensation and consideration.

Conveyancing and Law of Property Act1884 (Tas), s 84J.
Wengarin Pty Ltd v Byron Shire Council [1999] NSWSC 485, 9 BPR 16,985, applied.
Aust Dig Real Property [1475]

REPRESENTATION:

Counsel:
           Plaintiffs:  A Walker
           First and Second Defendants:     In person
           Third Defendant  No Appearance
Solicitors:
           Plaintiffs:  Dobson Mitchell & Allport
           First and Second Defendants:     In person
           Third Defendant  No appearance

Judgment Number:  [2017] TASSC 67
Number of paragraphs:  19

Serial No 67/2017

File No 1010/2014

ANDREW JOHN McCORMACK, CHRISTINE LYNETTE McCORMACK,
ROBERT HENRY CLARKSON, JANET ROSE CLARKSON,
MICHAEL CUPPARI, MEREDITH ANNE CUPPARI,
RALPH DESMOND TAPPING, BEVERLEY ANNE TAPPING,
NICHOLAS JOHN GRIGGS, JANET MAREE GRIGGS and
WALTER GEORGE ATKINS v LIHUA QIN, XIAOMIN SHI,
and RECORDER OF TITLES

REASONS FOR JUDGMENT  PEARCE J

7 December 2017

1. On 1 December 2016 I ordered the creation of a statutory right of user, in the nature of a right of carriageway benefitting land owned by the plaintiffs, over land at Opossum Bay owned by the defendants, Lihua Qin and Xiaomin Shi. The power to so order derives from the Conveyancing and Law of Property Act 1884 (the CLP Act), s 84J. As is required by s 84J(4), the order provided for payment of compensation by the plaintiffs to the defendants. This is the determination of the amount of that compensation.

Background facts

1. The land owned by the defendants is one of two titles which make up an area of land that has come to be known as Marsh Street. The part owned by the defendants is referred to as Lot A. The plaintiffs are some of the owners of land fronting onto Marsh Street. The action concerned their claim to rights of way over Lot A. That claim failed. However I ordered the creation of a statutory right of user benefitting the titles owned by each plaintiff and burdening the title to Lot A. The rights have since been registered by the Recorder of Titles. The CLP Act, s 84J, relevantly provides:

   "(3)  An order shall not be made under this section unless the Court is satisfied that the owner of the servient land can be adequately compensated in money for any loss or disadvantage that he may suffer from the operation of the order.

   (4)  An order under this section, unless the Court for special reasons determines otherwise, shall include provision for the payment by the applicant to such person or persons as may be specified in the order of such amount by way of compensation or consideration as in the circumstances appears to the Court to be just."

2. The combined effect of these provisions is that I should order payment by the plaintiffs to the defendant of such compensation as appears to me to be just, so as to adequately compensate the defendants in money for any loss or disadvantage they may suffer from the operation of the order. Detailed reasons for the order granting the right are given in the reasons published in the action on 21 November 2016: Clarence City Council v Howlin [2016] TASSC 61. The reasons describe the relevant land and the nature and history of the title to each lot. These reasons should be read in conjunction with those earlier reasons and follow from my findings of fact in that action.

3. Ms Qin's husband, Darryl Howlin, owns the property called "Highbury" to the east of Marsh Street. I will refer Highbury as "the Howlin land". Marsh Street runs between Spitfarm Road and the Howlin land. Mr Howlin wishes to subdivide the Howlin land on terms suitable to him. Mr Howlin has contended for many years, unsuccessfully, that Marsh Street is a public road. It is not. If it were, it would provide public access from Spitfarm Road to the Howlin land and thus assist his attempts to develop his land by subdivision. Mr Howlin and his former wife became owners of Lot A in 2003. Between then and 2014 Mr Howlin became sole registered proprietor. By transfer registered 16 July 2014, he transferred the land to Ms Qin, and her daughter Ms Shi.

4. The genesis for what is now known as Marsh Street is the subdivision of land owned by Thomas George Charles Brown in and following 1945. I found that the subdivision of the land around Marsh Street has proceeded from when it commenced in 1945 with the common intention that the land be used for residences, and that access across Marsh Street should facilitate that use. Since then the owners of all of the land have proceeded in accordance with that intention. Marsh Street has always been used for access to those properties. The geography of the area and the subdivision plans, transfers and titles readily disclose why this is so. Without access through Marsh Street all of the properties, except for one which has some frontage to Spitfarm Road, are landlocked. None adjoin a public road and they are surrounded by privately owned land on all other sides. The facts are confirmed by the evidence of actual use. Marsh Street has been used as access to the properties from Spitfarm Road for a very long time. There is a substantial and well established gravel road running in an almost straight line through the centre of Marsh Street between Spitfarm Road and the Howlin land. There is a grass verge between the edge of the roadway and the boundary of the properties on each side. There are houses on each property adjoining Marsh Street. The orientation of the houses and outbuildings (including garages) built on each property is consistent only with the use of Marsh Street for access. The boundary between each of those lots and Marsh Street is fenced, but there are gates and driveways from Marsh Street onto each property and obvious evidence of constant vehicular traffic from the gravel road to the gates and driveways. Vehicles wishing to get to the various houses must travel over Marsh Street from Spitfarm Road. The owners have contributed time and resources to repair and maintain the road over the years.

5. The other part of Marsh Street is called Lot B. Each of the plaintiff owners has a registered right of carriageway over Lot B. However to get to their houses from Spitfarm Road, which is the only means of access, they also need to cross Lot A. In 1980, a right of way was created over Lot B in favour of the then registered proprietors of the Howlin land, and Mr Howlin now uses Marsh Street for access to that land.

6. Lot B is presently owned by Paul and Jenny-Ann Geappen. It forms only part of Mr and Mrs Geappen's land, which also includes, on the same title, one of the lots adjacent to Marsh Street, Lot 10. The Geappen land is now comprised in folio of the register vol 249718 folio 1. It is of considerable significance in the context of this assessment that, since 1954, the title to the Geappen land has had the benefit of a registered right of carriageway over the whole of Lot A. The burden of this easement is, and since its creation has been, registered on the title to Lot A. The defendants' submission that the easement burdens only part of Lot A is incorrect and should be rejected.

Entitlement to compensation

1. It follows from having granted the right to the plaintiffs that the Court was satisfied that the owners of the servient land "can be adequately compensated in money for any loss or disadvantage that they may suffer from the operation of the order": s 84J(3). Once the right is granted, the CLP Act, s 84J(4), provides that the payment of compensation is to be for "such amount of compensation or consideration as in the circumstances appears to the Court to be just". Although the terms of subs (4) do not confine the circumstances relevant to the assessment of compensation, the compensation it refers to is the compensation to which subs (3) refers, that is, any loss or disadvantage suffered from the grant of the right: Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795 per Windeyer J at 15,801. The operation of these provisions was considered by Young J in Wengarin Pty Ltd v Byron Shire Council [1999] NSWSC 485, 9 BPR 16,985 at [26]. After referring to Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845 and Goodwin v Yee Holdings Pty Ltd, his Honour set out the following general propositions:

   "[26](1)  The compensation referred to in subs (4) is the same compensation as is referred to in subs (2)(b), that is adequate compensation for loss or other disadvantage.

   (2)  The compensation is not a substitute for the price that could have been exacted if the section did not exist.

   (3)  The compensation is not just the diminished value of the affected land.

   (4)  Ordinarily the compensation will be:

   (a)the diminished market value of the affected land (including what is sometimes called the hope value, that is the potential use to which the subject land could have been put);

   (b)associated costs that would be caused to the owner of the affected land;

   (c)an assessment of the compensation for insecurity, loss of amenities such as loss of peace and quiet;

   (d)the compensation is to be less compensating advantages, if any.

   (5)  There may be some exceptional cases which fall outside the net of s 88K(2)(b) yet are cases where it is extremely difficult to assess the compensation, but it is clear that the applicant is to derive a considerable benefit from the application. In such circumstances it may be appropriate to assess the compensation on a percentage of the profits that would be made." (citations omitted)

2. Young J's statements have been consistently applied in New South Wales and Queensland in cases dealing with equivalent legislation: see for example Mitchell v Boutagy [2001] NSWSC 1045, 10 BPR 19,187 at [28], Owners Strata Plan 13635 v Ryan [2006] NSWSC 221, 12 BPR 23,485; Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd [2012] NSWCA 445, 16 BPR 31,257; Peulen v Agius [2015] QSC 137; Govindan-Lee v Sawkins [2016] NSWSC 328, 18 BPR 35,883. I think I should also apply the propositions stated by his Honour.

3. There is some difference of judicial opinion, referred to in Peulen v Agius at [82] and following, about the extent to which a benefit to the dominant tenement as a result of the operation of the order may be the subject of compensation. In Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd the Court of Appeal in New South Wales dealt with a case in which it was suggested that the owners of the dominant tenement may obtain some profit from the grant. At [236] the Court expressed doubt about whether compensation could be ordered as a result of some type of account of profits:

   "Neither party suggested in this case that if compensation was to be payable it should be assessed as a percentage of profits earned by Tanlane as a result of the imposition of the easement. In these circumstances it is not necessary to finally determine whether subpar (5) of par [26] of his Honour's judgment in Wengarin is correct. For our part, however, we have some difficulty with this approach. Section 88K(4) will only be reached if the Court has determined under s 88K(2)(b) that the owner of the servient tenement can be adequately compensated. If it can be, even with difficulty, the Court is required by s 88K(4) to order the compensation it considers appropriate. It does not seem to us that that can be done by in effect awarding an account or partial account of profits. It is inconsistent with the approach to compensation in compulsory acquisition cases referred to by Dixon J, as his Honour then was, in Nelungaloo Pty Ltd v The Commonwealth [1947] HCA 58; (1948) 75 CLR 495 at 571, cited with approval by the High Court in Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259 at [34]."

4. In Queensland, courts have suggested that benefit to the dominant tenement may be relevant in calculating the "compensation or consideration" payable: see the cases referred to in Peulen v Agius at [83]-[86]. Like Queensland, and unlike New South Wales, the Tasmanian legislation in s 84J(4) refers to consideration as well as compensation.

The evidence

1. Counsel for the plaintiffs correctly identified some of the factual considerations relevant to the assessment of compensation:

   ·    The 1945 survey diagram shows that Lot A was always intended to be the road access to lots 1-10 of the original subdivision;

   ·    Lot A has been used as the sole access to the subdivision lots since the first lot (lot 9) was transferred to James Purden dated 31 October 1945. That is, it has been used as the sole access for over 71 years;

   ·    Lot A is constructed as an access, and has not been used for any other purpose;

   ·    Since 8 July 1954 a full width right of carriageway has been recorded over Lot A in favour of lot 10, part of the Geappen land;

   ·    There is no practical use to which Lot A could be put other than as an access to other properties;

   ·    Lots 1-9 have, for decades, had the benefit of a full width right of carriageway over Lot B, which is the second part of the proposed roadway shown in the original survey diagram;

   ·    Without access over Lot A, each of lots 1-9 are landlocked;

   ·    The grant of the statutory rights of carriageway has not intensified any use of Lot A, but has simply formalised the existing use that has been occurring for over 71 years.

2. The registration of the right of way over Lot A in favour of the Geappen land means that Lot A cannot be used for any purpose other than a right of way. It is possible that the current or future owners of the Geappen land may agree to removal of their right of way or development of Lot A, despite the existence of the right of way. I regard the possibility that this may occur as so unlikely that it may be discounted. The Geappen land depends on access over Lot A. Another reason that Lot A would not be used for any other purpose is the relationship between the defendants as owners of Lot A, and Mr Howlin, the owner of the Howlin land. Mr Howlin uses Lot A, in combination with his registered right of way over Lot B, as access to the Howlin land. Development of Lot A would prevent access to or development of the Howlin land.

3. The defendants adduced no expert valuation evidence about the effect of the grant of the right on their land. I allowed the defendants to tender an affidavit from a valuer, Adrian Jessup. Mr Jessup is now retired but has been a valuer in private practice and, before that, was a valuer in the office of the Valuer-General. The defendants did not produce Mr Jessup so he could be cross-examined. I give the contents of his affidavit considerably less weight as a result. In any event, Mr Jessup expresses no opinion about the defendants' land other than that, as an unencumbered residential lot, it is worth about $200,000. That opinion has no relevance because Lot A is not, and will not be, an unencumbered residential lot.

4. The defendants enjoy no compensating advantages as a result of the grant. I accept that the creation of the right in favour of the plaintiffs over Lot A is necessarily a further impediment to the defendants' proprietary right. However, for the reasons I have explained, the order corrects what I have concluded is an accident of history. The consideration expressed on the transfer of Lot A to the defendants in 2014 was $1,000. When the land was transferred to Mr Howlin in 2003 the consideration expressed on the transfer was $2,000. I find that, to the knowledge of the defendants and Mr Howlin, the value of Lot A has always been affected by the factors I have referred to. The creation of the right does not cause any disturbance to the defendants, does not cause any material injury to any tangible or intangible benefit they previously enjoyed, does not disrupt or interfere with their enjoyment of Lot A or their peace and quiet, or reduce any opportunity for development or sale of Lot A. Nor does the creation of the right put the defendants to any loss or expense. Compensation is not to be assessed by reference to the loss of any bargaining position they may have had, had s 84J not been enacted: SJC Construction Co Ltd v Sutton LBC (1975) 29 P & CR 322 at 326; Goodwin v Yee Holdings Pty Ltd at 15,801; 117 York Street Pty Limited v Proprietors of Strata Plan 16123 (1998) 43 NSWLR 504 at 515-516; Wengarin Pty Ltd v Byron Shire Council at 16,988; Mitchell v Boutagy (above) at [33]. To the extent that the defendants suggest the loss of a bargaining position, their evidence and submissions are irrelevant.

5. The plaintiffs adduced affidavit and oral evidence from a valuer, Paul Wilson. His evidence does suggest some diminution in value of the defendants' land, which he assesses at $10,000. In Mr Wilson's opinion Lot A has no value as residential land. The reasons for that emerge from the circumstances I have already stated. He assesses the diminution in value by two methods, first by apportionment of the freehold and right of way interests, and secondly by a before and after approach. Mr Wilson assessed the market value of the defendants' freehold interest in Lot A, encumbered by the pre-existing right of way in favour of the Geappen land, at $20,000. He apportions a reduction in value by creation of the right in favour of seven other lots at $11,700. Mr Wilson assesses market value of the encumbered freehold interest after the grant of the seven additional rights at $10,000. He applies the latter figure. I accept Mr Wilson's evidence.

6. There remains the question of whether benefit to the dominant land should be taken into account. A real estate agent, Mr Robert Goyne, gave evidence in the form of an affidavit and was called as a witness. Mr Goyne did not give evidence about the defendants' land, but gave evidence about the difficulty involved in selling the properties on Marsh Street, including some of those owned by the plaintiffs, due to uncertainty concerning their access. Mr Goyne was not aware of the grant of the right, or its effect on the entitlement of the owners to access over Lot 1. It may be inferred from what he says that resolution of the uncertainty will increase the value of the land owned by the dominant owners because it will be easier to sell, either at all or without reduction in value. Mr Jessup deposed to the potential reduction in value of properties without access. He said that the current procedure within the office of the Valuer-General for land "adversely affected by access issues is a 50% reduction in land (site) value from that of a similar unencumbered allotment (as a starting point) then adjusted for the particular access circumstance pertaining to the property under review".  Mr Jessup went on to refer to other properties, unrelated to this action, the value of which has been reduced by access problems. 

7. Section 84J(3) is directed to the loss or disadvantage suffered by the owner of the servient land, not advantage to the dominant land. I think it is inevitable that there will be some undefined increase in value of the plaintiffs' land directly attributable to the grant of the right. There is no question of "profit" in the commercial sense, although resolution of the uncertainty concerning the legal right of access to the plaintiffs, in my judgment, may result in an increase (or more correctly, prevent a decrease) in the value of the dominant land. However, I do not regard this as one of the unusual cases contemplated by Young J in Wengarin Pty Ltd v Byron Shire Council in which allowance should be made for an increase in the value of the plaintiff land or a benefit to the plaintiff owners. In the very unusual circumstances of this case, allowance of compensation to the defendants by reference to quantification of a benefit to the plaintiffs, as owners of the dominant land, would be in the nature of a windfall and would not be just.

Result and orders

1. For the foregoing reasons I assess the compensation and consideration payable by the plaintiffs to the defendants under s 84J in the sum of $10,000.