Steven M Clark No 3 Pty Ltd v Noack - [2004] SASC 249

SUPREME COURT OF SOUTH AUSTRALIA
(Land and Valuation Division)
STEVEN M CLARK NO 3 PTY LTD v NOACK
Judgment of The Honourable Justice Besanko
24 August 2004
REAL PROPERTY - FENCING AND BOUNDARIES OF LAND - ENCROACHMENT OF BUILDINGS AND PARTY WALLS
REAL PROPERTY - VALUATION OF LAND - METHODS OF VALUATION
Application by the plaintiff seeking compensation by way of the unimproved capital value of an encroachment for the transfer of the area of the encroachment to the defendant - where the area of the encroachment had been used in association with the defendant's land since approximately 1921 and until recently both the plaintiff's land and the defendant's land had been held by members of the same family - whether an order for the transfer of the encroachment to the defendant should be made on condition that the defendant pay the unimproved capital value of the encroachment to the plaintiff - discussion of the discretion to order the transfer of the encroachment to the defendant without ordering that the defendant pay compensation to the plaintiff - assessment of the valuation evidence as to the unimproved capital value of the encroachment called by the plaintiff and the defendant - held that the encroachment should only be transferred to the defendant on condition that he pay compensation, being the unimproved capital value of the encroachment fixed at $23,800.
Encroachments Act 1944 ss 4, 5; Development Act 1993, referred to.
Clarke v Wilkie (1977) 17 SASR 134, discussed.
Gladwell v Steen (2000) 77 SASR 310; Bunney v State of South Australia (2000) 77 SASR 319; Carlin v Mladenovic (2002) 84 SASR 155, considered.

STEVEN M CLARK NO 3 PTY LTD v NOACK
[2004] SASC 249
Land and Valuation Division

BESANKO J This is an application under the Encroachments Act 1944 (“the Act”). The plaintiff is Steven M Clark No 3 Pty Ltd and the defendant is Mr Gerhard Noack. Mr Steven Clark is a legal practitioner and he is a director of, and a shareholder in, the plaintiff. The plaintiff appeared by counsel and the defendant appeared in person. The defendant is 88 years old and he has a difficulty with his hearing. Without objection I allowed his daughter to assist him in the presentation of his case.
Background
The plaintiff is the registered proprietor of land at 1 Adelaide Road, Gawler, being the land comprised and described in certificate of title register book volume 5601 folio 592. There are a number of structures on the plaintiff’s land. Near Adelaide Road there is a structure commonly known as the “Flower Wagon”. It is presently unoccupied but it is an existing commercial use. Set back from Adelaide Road is a former residence which is now used as offices for a legal practice. Near the western boundary of the plaintiff’s land as it is presently used is a substantial stone and wooden structure which is used as a garage. It was previously used as a dairy and then for horticultural purposes.
The defendant is the registered proprietor of land at 16 Ninth Street, Gawler, being the land comprised and described in certificate of title register book volume 5554 folio 460. There is a substantial residence on the defendant’s land in which he and his wife have lived for many years.
The two pieces of land are contiguous parcels of land. The area of land which is said to be the subject of an encroachment is a rectangular piece of land on the north western boundary of the plaintiff’s land. For ease of reference I will refer to this as the western boundary of the plaintiff’s land and the other boundaries accordingly. The rectangular piece of land is approximately 5.2 metres wide and 34.14 metres in length and approximately 177.5 square metres in area. There are various improvements on the area of land in question which are used in conjunction with the defendant’s use of his property for residential purposes. The improvements include a driveway, carport and a building used as a garage and workshop. There are also services constructed underground. I will refer to this area of land with the improvements thereon as the “encroachment”.
The plaintiff presented its case on the assumption that it was agreed between the parties that the area identified as the encroachment on a survey plan tendered in evidence was part of its land as shown on the certificate of title for the plaintiff’s land. During the defendant’s closing submissions it emerged that that was not the case. I gave the plaintiff leave to call the licensed surveyor who had prepared the survey plan. The plaintiff called Mr Dennis Bleeze, a licensed surveyor, and he gave evidence that the survey plan was correct. He was cross-examined by the defendant’s daughter with a view to establishing that the area of the encroachment was not part of the plaintiff’s land. I accept Mr Bleeze’s evidence. I find that the area of the encroachment of approximately 177.5 square metres as shown on the survey plan is part of the plaintiff’s land as shown on the certificate of title for the plaintiff’s land.
There is a sharp drop in ground level at the western edge of the plaintiff’s property as it is presently used and the eastern boundary of the encroachment. There is a retaining wall and fence on or near the eastern boundary of the encroachment and a line of poplar trees near the eastern boundary of the encroachment.
The improvements on the area of the encroachment clearly constitute an “encroachment” within the meaning of that term in the Act (Clarke v Wilkie (1977) 17 SASR 134), and I did not understand the defendant to suggest otherwise.
In the plaintiff’s application, it sought (among other orders) the removal of the encroachment and the giving up of possession of the area of the encroachment by the defendant. However, at trial the plaintiff sought and obtained leave to amend its application. It now does not oppose an order that the area of the encroachment be transferred to the defendant, but it seeks an order that it be paid compensation by way of the unimproved capital value of the encroachment, an order that it be granted an easement enabling it to carry out necessary repairs and maintenance to the retaining wall and an order that the defendant pay all necessary costs associated with the transfer. The defendant opposes an order that he pay compensation to the plaintiff, and in the alternative, he challenges the amount of compensation sought by the plaintiff. Both parties called valuation evidence as to the unimproved capital value of the encroachment.
Mr Clark gave evidence on behalf of the plaintiff. He was an honest witness and I accept his evidence. I have already referred to the evidence of Mr Bleeze and the fact that I accept it. Mr Christodoulou, a qualified valuer with considerable experience, gave valuation evidence on behalf of the plaintiff.
The defendant gave evidence. There was no challenge to his credit and I accept his evidence insofar as it was relevant and admissible. Mr Robert Brooke, a qualified valuer with considerable experience, gave valuation evidence on behalf of the defendant.
The relevant sections of the Act are ss 4 and 5. They provide as follows:
“4. (1)    Either an adjacent owner or an encroaching owner may apply to the court for relief under this Act in respect of any encroachment
(2)    On the application the court may make such orders as it deems just with respect to –
(a) the payment of compensation to the adjacent owner;
(b)the conveyance transfer or lease of the subject land to the encroaching owner, or the grant to him of any estate or interest therein, or any easement, right, or privilege in relation thereto;
(c)the removal of the encroachment.
(3)    The court may grant or refuse the relief or any part thereof as it deems proper in the circumstances of the case, and in the exercise of this discretion may consider amongst other matters –
(a)the fact that the application is made by the adjacent owner or by the encroaching owner, as the case may be;
(b)the situation and value of the subject land, and the nature and extent of the encroachment;
(c)the character of the encroaching building, and the purposes for which it may be used;
(d)the loss and damage which has been or will be incurred by the adjacent owner;
(e)the loss and damage which would be incurred by the encroaching owner if he were required to remove the encroachment;
(f)the circumstances in which the encroachment was made;
(4)This section applies to encroachments made either before or after the commencement of this Act.
5.   (1)    The minimum compensation to be paid to the adjacent owner in respect of any conveyance, transfer, lease, or grant to the encroaching owner shall, if the encroaching owner satisfies the court that the encroachment was not intentional, and did not arise from negligence, be the unimproved capital value of the subject land, and in any other case three times such unimproved capital value.
(2)    In determining whether the compensation shall exceed the minimum, and if so, by what amount, the court shall have regard to –
(a)the value, whether improved or unimproved, of the subject land to the adjacent owner;
(b)the loss and damage which has been or will be incurred by the adjacent owner through the encroachment and through the orders proposed to be made in favour of the encroaching owner;
(c)the circumstances in which the encroachment was made.”
The plaintiff does not claim that the encroachment was intentional or arose from negligence, and its claim for compensation is for the unimproved capital value of the encroachment which it says is $23,800.00. It accepted that if the circumstances warranted it, I had a discretion to order the transfer of the area of the encroachment to the defendant without ordering that he pay compensation to the plaintiff. No doubt in taking this position it had in mind decisions of this Court in Gladwell v Steen [2000] SASC 143; (2000) 77 SASR 310, Bunney v State of South Australia [2000] SASC 141; (2000) 77 SASR 319 and Carlin v Mladenovic [2002] SASC 206; (2002) 84 SASR 155. However, it submits that such an order is not justified in the circumstances of this case.
The defendant submits that this is an appropriate case for an order for the transfer of the area of the encroachment without an order for the payment of compensation. His case is that having regard to the circumstances surrounding the establishment of the encroachment and the fact that it has been there for many years, this is an appropriate case not to order the payment of compensation. Alternatively, he submits that the unimproved capital value of the encroachment is $1,593.00.
There are therefore two issues in this action. First, if an order for the transfer of the encroachment to the defendant is made should it be made on condition that the defendant pay the unimproved capital value of the encroachment to the plaintiff? Secondly, if the answer to the first question is yes, what is the unimproved capital value of the encroachment?
Should an order for compensation be made?
The defendant put forward evidence as to the history of the use of the encroachment and the ownership of his land, the plaintiff’s land and land immediately to the north of his land which I will refer to as part block 17. There are some gaps in the evidence which means that it is not possible to make precise findings in some areas. Nevertheless, there is sufficient evidence before me to enable me to decide if it is appropriate to make an order for the payment of compensation.
It is convenient to refer to the land at 16 Ninth Street, Gawler, as the defendant’s land and the land at 1 Adelaide Road, Gawler, as the plaintiff’s land, although clearly they have not always been the owners of those respective pieces of land. There is evidence that the area and configuration of the plaintiff’s land and part block 17 has changed over the years, but those changes are not material to the present issue and there is no need for me to refer to them.
The plaintiff did not challenge the defendant’s evidence as to the history of the use of the encroachment and the ownership of the various pieces of land and what follows are my findings of fact.
The plaintiff’s land, the defendant’s land and part block 17 have been held by members of the defendant’s family for many years.
The defendant’s father purchased the plaintiff’s land in early September 1921. I cannot decipher the name of the vendor as shown on the copy of the certificate of title tendered in evidence. Later in that same month the defendant’s father and his wife purchased the defendant’s land and part block 17 from a Mr and Mrs Schmidt. The defendant was about six years old at the time his father purchased the three blocks of land. His knowledge of the use of the area of encroachment in 1921 must be very limited. He said that there was a post and rail fence covered by a hedge in the same position as the fencing which exists on the western boundary of the plaintiff’s land today. I am prepared to find that in 1921 there was a post and rail fence covered by a hedge on or near the eastern boundary of the encroachment as shown on the survey plan, but I am not able to make findings as to its precise location, the length of the fence, the circumstances in which it was constructed or the use of the area of the encroachment before 1921. It is likely that there was some sort of drop in the ground level between the fence and the land to the west but it is not possible to make precise findings.
The defendant’s father transferred the defendant’s land to the defendant in 1947 and he has held it ever since. It appears that the defendant was given the right to use the land some four or five years prior to the transfer. The defendant is 88 years old and he and his wife, who is 90 years old, have lived on the defendant’s land for approximately 60 years. At some stage the defendant’s father used part block 17 as a milking shed and cow yards and in about 1942 the defendant allowed his father to use his driveway and part block 17 as a dairy.
The defendant’s father transferred the plaintiff’s land to another son, Mr Eric Noack, in 1953. Mr Eric Noack held the plaintiff’s land until about 2000 (the precise date is not clear on the evidence) when he sold it to a Mr and Mrs Fry. Mr and Mrs Fry sold the plaintiff’s land to the plaintiff in late 2002.
I am satisfied that since 1921 or a short time thereafter the area of the encroachment (or the greater part of it) has been used in association with the defendant’s land, and probably part block 17 and not in association with the plaintiff’s land. The precise area of the encroachment and how it was used over the years is not entirely clear. The level of the driveway on the defendant’s land was about the same in the 1940s as it is today. In the late 1940s or early 1950s, the stone and wooden structure on the plaintiff’s land near the western boundary was used by the defendant for the purposes of his business and he installed a sliding door and a loading ramp because of the difference in the ground level between the plaintiff’s land and the defendant’s land. It seems that in the late 1950s a stone retaining wall was built by the respective owners of the defendant’s land and the plaintiff’s land at or about the place where the post and rail fence covered by the hedge had previously existed. Also in the late 1950s work was done on the access to the defendant’s land and the line of poplar trees which are near the western boundary of the plaintiff’s land as it is presently used were planted.
It is not possible to make a precise finding as to when each of the improvements on the area of the encroachment was made. Clearly they have been there for some time. The driveway and retaining wall were probably constructed in the late 1950s. It is likely, having regard to this history, that as the three blocks of land were held by members of the same family, not a great deal of consideration (if any) was given over the years to the precise boundaries of each block of land.
I come now to more recent events and, in particular, how the fact of the encroachment or possible encroachment came to light.
In the late 1990s Mr Eric Noack, the owner of the plaintiff’s land at that time, instructed Mr Bleeze to carry out a survey in relation to an unrelated matter in the area. Mr Bleeze’s survey revealed a possible problem with the area of the encroachment. Mr Bleeze was then instructed by Mr Fry to carry out a survey of the area of the encroachment and that led to the identification of the encroachment. Mr Bleeze could not remember if Mr Fry instructed him shortly before or shortly after Mr and Mrs Fry purchased the plaintiff’s land.
Mr and Mrs Fry instructed a solicitor and that solicitor corresponded with the defendant seeking to resolve the problem. In October 2002 the defendant offered to pay compensation of $9,302.00 to Mr and Mrs Fry on condition that they transferred the encroachment to him.
The plaintiff bought the plaintiff’s land knowing of the problem with the encroachment. Mr Clark said however, that he negotiated a price for the land without any specific deduction being allowed having regard to the encroachment. I accept that evidence.
It has not been established that either Mr and Mrs Fry or the plaintiff acquiesced in the use of the encroachment by the defendant.
Having regard to the above matters, should I exercise the discretion to order the transfer of the encroachment to the defendant without ordering that the defendant pay compensation to the plaintiff?
In Clarke v Wilkie (supra), Wells J said that the Act was remedial and innovative in character, and that one of the principal aims of the Act was “to place in the hands of the Court adequate and flexible powers to enable it to do more nearly complete justice between adjoining owners than was formerly possible” (at 317). It seems to me that those considerations mean that there are no hard and fast rules as far as the exercise of the discretion not to order compensation is concerned. Nevertheless, I think that in the ordinary case an order for the payment of compensation should be a condition of an order for the transfer of the encroachment to the encroaching owner. Any other approach is likely to make it difficult for the parties to settle a claim under the Act without proceeding to trial.
However, that cannot be the decisive consideration. The proper approach is to be determined having regard to the terms of the Act. Section 5 is to the effect that the amount of the compensation is to be three times the unimproved capital value of the encroachment unless the encroaching owner satisfies the Court that the encroachment was not intentional and did not arise from negligence, and if the encroaching owner does so satisfy the Court then the minimum compensation is the unimproved capital value of the encroachment. Leaving aside the issue of the onus, the fact is that the Act envisages the payment of compensation even if the encroachment is not intentional or does not arise from negligence. In my opinion, the payment of compensation should be the ordinary rule. That does not mean that the encroaching owner must show exceptional circumstances in order to avoid the payment of compensation or that the discretion is not a broad one to be exercised having regard to the particular circumstances of each case.
In this case, the area of the encroachment is substantial. Having regard to the findings I have made, this is not a case where the plaintiff will receive a “windfall” if an order is made for the payment of compensation. I do not think the evidence permits me to make a finding of acquiescence by the owner of the plaintiff’s land before 1921, and any acquiescence after 1921 was in the context of the relevant properties being owned by members of the same family.

In my opinion, the area of the encroachment should only be transferred to the defendant on condition that he pay compensation, being the unimproved capital value of the encroachment, to the plaintiff.
The Unimproved Capital Value of the Area of the Encroachment
Both Mr Christodoulou and Mr Brooke are experienced valuers and there was no challenge to their qualifications.
Each valuer followed a series of steps in reaching his conclusion as to the unimproved capital value of the encroachment and it was only at the last step that their approaches differed.
In the Development Plan made under the Development Act 1993, the bulk of the plaintiff’s land is shown as being in a Town Centre (Fringe) Zone. The northern boundary of the plaintiff’s land is the centre of Para River, and an area of land near the northern boundary is shown as being in a Special Uses Zone.
The first step in Mr Christodoulou’s valuation is to fix a value of the plaintiff’s land with improvements. To determine that value he relies primarily on the price the plaintiff paid to purchase the land in late 2002, namely, $545,000.00. Mr Brooke adopts the same approach.
Mr Christodoulou’s next step is to estimate the value of the improvements on the plaintiff’s land. His estimate of the value of the improvements is $150,000.00 and he deducts that sum from the figure of $545,000.00. Mr Brooke also adopts this approach, but his estimate of the value of the improvements is $170,000.00. There is little to choose between the valuers on this point. Both are well qualified and both were trying to do their best in circumstances where neither carried out a detailed analysis. I accept the evidence of Mr Christodoulou on this point, but only because I think his overall approach is sound whereas I reject the last step in Mr Brooke’s valuation.
Mr Christodoulou’s next step is to place a value on that part of the plaintiff’s land in the Special Uses Zone. The total area of the property is 4130 square metres and of that area approximately 1500 square metres is in the Special Uses Zone. The area in the Special Uses Zone is set aside for preservation and conservation rendering it of little commercial use. Mr Christodoulou attributes 20 per cent of the rate per square metre to the land in the Special Uses Zone. Mr Brooke takes a similar approach but he attributes 10 per cent of the pro rata value of the whole of the land to the area in the Special Uses Zone. Again, there is little to choose between the valuers on this point. I accept the evidence of Mr Christodoulou on this point, but again only because I think his overall approach is sound whereas I reject the last step in Mr Brooke’s valuation.
Mr Christodoulou calculates a figure of $134.26 per square metre for that part of the plaintiff’s land in the Town Centre (Fringe) Zone including the area of the encroachment. He applies that figure to the area of the encroachment (177.5 square metres) and reaches a value of $23,800.00 for unimproved capital value of the encroachment. Mr Christodoulou is of the opinion that the area of the encroachment has a commercial use as part of an expanded commercial use of the land.
Mr Brooke calculates a figure of $136.70 per square metre for that part of the plaintiffs land in the Town Centre (Fringe) Zone including the area of encroachment. However, he is of the opinion that the area of the encroachment is of considerably less value than the balance of the land in the Town Centre (Fringe) Zone and he applies the rate he had determined for that part of the plaintiff’s land in the Special Uses Zone (ie, $9.00 per square metre) to the area of the encroachment and reaches a value of $1,593.00 for the area of the encroachment. Mr Brooke identified four reasons why he took this approach, and I turn now to examine those reasons.
First, Mr Brooke refers to the fact that although the plaintiff’s land is in the Town Centre (Fringe Zone), it is also within the Gawler South Historic (Conservation) Policy Area, an area within that zone. However, I am not satisfied that that fact constitutes a restriction which justifies the approach taken by Mr Brooke. The fact identified by Mr Brooke would be reflected in the purchase price paid for the plaintiff’s land.
Secondly, Mr Brooke refers to the fact that the area of the encroachment is a considerable distance from the main uses on the land. Although that fact is correct, in cross-examination Mr Brooke accepted that by itself it would not affect the value of the area of the encroachment. In my opinion, if the area is otherwise capable of being used I do not think its distance from the main uses on the land affects the unimproved capital value of the area of the encroachment.
Thirdly, Mr Brooke referred to the line of poplar trees near the area of the encroachment and said that these trees could not be removed, or it was likely that they could not be removed, and therefore the area of the encroachment could not be put to a commercial use such as car parking. It is true that the retention of the existing line of poplar trees is a condition of the development approval granted to the plaintiff in early 2003, but the defendant did not identify any provision which prevents the removal of the trees in appropriate circumstances. I do not think the presence of the line of poplar trees justifies Mr Brooke’s approach.
Fourthly, and this was no doubt the most important fact from Mr Brooke’s point of view, he refers to the fact that there was a considerable drop in the level of the ground from the western edge of the plaintiff’s land, as it is presently used, and the eastern boundary of the area of the encroachment. Mr Brooke said that in its present state it would be difficult, if not impossible, to use the area of the encroachment for car parking associated with a use on the plaintiff’s land. Before that could be done the retaining wall would need to be removed and there would need to be a certain amount of infilling. With the consent of the parties I took a view of the two properties and Mr Brooke’s observations are, broadly speaking, accurate. Mr Brooke said that there was another way of looking at the issue which justified his approach. Mr Brooke said that in his opinion the cost of bringing the area of the encroachment into a state in which it could be used for commercial purposes is in the order of $20,000.00. If this figure is deducted from Mr Christodoulou’s valuation, the two valuers are not far apart. Mr Brooke did not provide any details of his estimate of $20,000.00 and on the evidence before me I would not be prepared to find that that was the cost of any necessary works. In fairness to Mr Brooke, he made it clear the estimate of $20,000.00 was only a very general estimate and it was not his primary method of valuation.
I reject Mr Brooke’s approach in relation to the consideration I have just mentioned. Ordinarily, a part of one property is not valued separately because of the physical features of that part as compared with the balance of the property. I accept that there may be circumstances in which it may be appropriate to value a part of the property at a lesser rate per metre value than the balance of the property because of the extreme physical features of that part. However, that is not this case. The difference in ground level does not justify a special and lower value for the area of the encroachment.
Before leaving Mr Brooke’s evidence, there is a further matter he mentioned which I must deal with. He suggested that it was relevant to the issue of the compensation to be awarded that the plaintiff paid less for the land because of the encroachment. I reject that suggestion because I do not think the fact is established. It is true that the plaintiff was aware of the encroachment before it purchased the land, but in light of the evidence of Mr Clark that he negotiated a price for the land without any specific deduction being allowed having regard to the encroachment, I am not prepared to find that the plaintiff paid a lesser price for the land because of the encroachment. As I have already said, I accept Mr Clark’s evidence on this point.
I accept the valuation evidence of Mr Christodoulou, and I find that the unimproved capital value of the encroachment is $23,800.00.
Conclusions
Subject to one matter, I am prepared to make an order that the plaintiff convey the area of the encroachment to the defendant on condition that the defendant pay the plaintiff compensation which I fix at $23,800.00. The one matter is that I will hear from the parties on whether the plaintiff should be granted an easement to repair and maintain the retaining wall and the terms of any such easement. I will also hear from the parties on the question of costs and any other order. The plaintiff should bring in minutes of order which give effect to these conclusions.