B A Trustees Ltd v Druskovich

[2007] NZCA 131

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA142/05 [2007] NZCA 131

BETWEEN  B A TRUSTEES LIMITED Appellant

ANDIVAN DRUSKOVICH VESNA DRUSKOVICH Respondents

Hearing:         28 June 2006

Court:            William Young P, Chambers and Arnold JJ Counsel: A C Sorrell and W F Wright for Appellant

J McCartney for Respondents

Judgment:      17 April 2007         at 3 pm

JUDGMENT OF THE COURT

A        Leave to adduce the further evidence referred to in [52] is granted. B     The appeal is allowed in part.

CIn place of the order made in the High Court granting the respondents an easement, an order is made that there be an easement over the appellant’s land in favour of the first floor apartment on Lot 2 on DP22812 (“the first floor apartment”) upon the following terms:

(1)      The easement will terminate on the earlier of:

B A TRUSTEES LIMITED V IVAN DRUSKOVICH AND ANOR CA CA142/05  17 April 2007

(a)One year after the date on which the existing lease between the respondents and Grey Lynn Amcal Pharmacy Limited dated 4 June 2004 terminates; or

(b)      30 September 2019;

(2)      The easement is not available for the benefit of Grey Lynn Amcal

Pharmacy Limited or any assignee;

(3)      In all other respects, the easement is on the terms fixed in the

High Court;

(4)Any dispute about the terms of the easement, whether in terms of s 129B(8)-(11) of the Property Law Act 1952 or otherwise, must be resolved in the High Court; and

(5)Pending completion of easement formalities, the respondents and any  lessee  of  the  first  floor  apartment  and  the  invitees  and licensees of any of them may use the right-of-way to the first floor apartment on the terms hereof.

DThe order for compensation made in the High Court is set aside.   The question of compensation is remitted to the High Court for redetermination in light of the more qualified easement now granted to the respondents.

E        There is no order as to costs in this Court.

REASONS OF THE COURT

(Given by Arnold J)

Table of Contents

Para No

Introduction  [1] Background   [5] Section 129B of the Property Law Act  [13] Jurisdiction   [20] Is the apartment a “piece of land”?  [21]

Was the apartment an authorised use?  [35] Relief  [44] Should relief have been granted?  [46]

What type of relief?  [59] Compensation  [68] Costs  [72] Decision  [76]

Introduction

[1]      The appellant owns a block of land (Lot 1) which is adjacent to two blocks of land (Lots 2 and 3) owned by the respondents.  There is a right-of-way across Lot 1 to Lot 3.  The right-of-way runs alongside the boundary of Lot 2.  As a matter of law, the right-of-way is for the benefit of Lot 3.  As a matter of fact, however, it has been used for many years by the occupants of Lot 2 as well.

[2]      The appellant began the construction of a fence which would have prevented access  from  the  right-of-way  to  Lot  2  and  to  part  of  Lot  3.    As  a  result  the respondents applied to the High Court for various orders, including for an order under s 129B of the Property Law Act 1952 that they be granted “reasonable access” by means of the right-of-way to Lot 2.

[3]      Simon France J granted the application for access to Lot 2, ordering that both pedestrian and vehicular access be provided.  The Judge ordered the respondents to pay the appellant $12,500 by way of compensation.  The Judge also ordered that the owners of Lot 2 and Lot 3 be equally responsible for the maintenance and upkeep of the right-of-way: Druskovich v BA Trustees Ltd (2005) 6 NZCPR 321 (HC).   The Judge made an order for costs against the appellant.

[4]      The appellant appeals against the  grant of  any access to  Lot  2  over  the right-of-way or, in the alternative, against the extent of the relief granted, particularly

the grant of vehicular access.  It also challenges the order for compensation and the

Judge’s costs order in favour of the respondents.

Background

[5]      The Judge prepared what he described as a “rough and ready” diagram to explain the nature of the proceedings.  We produce it below in modified form.

Great North Road

Part Lot 1

(Commercial

Building)

Lot 2

(Pharmacy)

Lot

(Dairy)

3

(Fish Shop)

Part Lot 1 (Right-of-Way)  Garage

Part Lot 1

(Carpark)

[6]      As can be seen from this diagram, Lot 1 comprises a site containing a commercial building, the right-of-way and a carpark.  The appellant purchased Lot 1 in August 2003.  Mr McClure, a director and shareholder of the appellant, handled the transaction for the appellant.   He was aware from his enquiries before the purchase that the right-of-way was for the benefit of Lot 3 alone.

[7]      Lot 2, which is owned by the respondents, contains a two-storey building with a small yard and garage at the rear, opening onto the right-of-way.   On the ground floor of the building there is a pharmacy fronting onto Great North Road.  On the upper floor there is an apartment.  Originally there were two shops on the ground floor, and access to the apartment could be gained from Great North Road via an internal stairway.   At some point in the past the internal stairway was removed, so that  from  that  time  the  only  access  to  the  apartment  has  been  via  an external stairway at the rear of the building.   Access to the stairway is from the

right-of-way.  The Judge found that the internal stairway had been removed in the

1960s or possibly even earlier.  In 2003 the two shop premises on the ground floor were  amalgamated to  create a single shop, the pharmacy.   The  operator  of  the pharmacy, Grey Lynn Amcal Pharmacy Limited, has a lease which was effective from 1 October 2003 and will run to 30 September 2018, assuming the rights of renewal available are exercised.

[8]      Lot 3, also owned by the respondents, contains a two-storey building housing two shops on the ground floor, a dairy and a fish shop.  There is an apartment above each shop.  Access to those apartments is from Great North Road.  There is a small yard and a garage at the rear of Lot 3 behind the dairy and the fish shop respectively.

[9]      The respondents’ connection with the area goes back to the 1960s when Mr Druskovich delivered fish to the fish shop.  In 1971 he purchased the fish shop business and rented the accommodation above the fish shop until he and his wife acquired their own home in 1982.  In 1990, the respondents purchased Lot 2 from its owner, who also owned Lot 1.   They have maintained the right-of-way since that time.  In 1993 they purchased Lot 3.

[10]     Mr Druskovich said in evidence that from the time that he first delivered fish to the fish shop in the 1960s, the occupants of Lots 2 and 3 had used the right-of-way as a matter of course.  This is perhaps explicable by the fact that for all or most of the period from the 1930s (when the right-of-way in favour of Lot 3 was created) until

1990, when the respondents purchased Lot 2, Lots 1 and 2 had the same owner.

[11]     The question of access to Lot 2 came to the fore when the appellant began to build a fence along the boundary between the right-of-way and Lot 2 and part of Lot 3.  The effect of this was to prevent access to the area at the rear of the pharmacy from the right-of-way, including the external stairway to the first floor apartment. This led to the respondents’ application.

[12]     The Judge summarised his central findings of fact as follows (at [15]):

(a)Lot 2 has enjoyed essentially unhindered use of, and access off, the right-of-way for at least 40 years;

(b)At least until Mr McClure became owner of Lot 1 Mr Druskovich has maintained the right-of-way since purchasing Lot 2 in 1990;

(c)       At least since some time in the late 1960’s/early 1970’s there has been no internal access between the Apartment and the ground floor of the building on lot 2.  In other words, the Apartment has only had access out the back;

(d)Until the recent dispute, Mr Druskovich was unaware of the limited extent of access rights to Lot 2;

(e)       Mr McClure was aware when buying Lot 1 that the right-of-way gave access only to Lot 3.

Section 129B of the Property Law Act

[13]     Section 129B relevantly provides:

129B.   Reasonable access may be granted in cases of landlocked land – (1)     For the purposes of this section, –

(a)       A piece of land is landlocked if there is no reasonable access to it:

(b)“Owner”,  in  relation  to  any  landlocked  land,  means  the owner of the legal estate in fee simple, except where the landlocked land is leased to any person for a term of not less than 21 years, in which case the term “owner” means that other person:

(c)“Reasonable access” means physical access of such nature and quality as may be reasonably necessary to enable the occupier for the time being of the landlocked land to use and enjoy that land for any purpose for which the land may be used in accordance with the provisions of any right, permission, authority, consent, approval, or dispensation enjoyed  or  granted  under the  provisions  of  the  Resource Management Act 1991.

(2)The owner of any piece of land that is landlocked (in this section referred to as the landlocked land) may apply at any time to the Court for an order in accordance with this section.

(3)      On an application made under this section –

(a)The owner of each piece of land adjoining the landlocked land shall be joined as a defendant to the application:

(b)Every person having any estate or interest in the landlocked land, or in any other piece of land (whether or not that piece of land adjoins the landlocked land) that may be affected if

the application is granted, or claiming to be a party to or to be entitled to any benefit under any mortgage, lease, easement, contract, or other instrument affecting or relating to any such land, and the local authority concerned, shall be entitled to  be heard in  relation  to  any application  for  or proposal to make any order under this section.

(4)       The applicant shall, as soon as practicable after filing his application in Court, serve a copy of it on the local authority concerned.

…

(6)In considering an application under this section the Court shall have regard to –

(a)The  nature  and  quality  of  the  access  (if  any)  to  the landlocked land that existed when the applicant purchased or otherwise acquired the land;

(b)The circumstances in which the landlocked land became landlocked;

(c)The conduct of the applicant and the other parties, including any   attempts   that   they   may   have   made   to   negotiate reasonable access to the landlocked land;

(d)The hardship that would be caused to the applicant by the refusal to make an  order in  relation to  the  hardship that would be caused to any other person by the making of the order; and

(e)      Such other matters as the Court considers relevant.

(7)If, after taking into consideration the matters specified in subsection (6) of this section, and all other matters that the Court considers relevant, the Court is of the opinion that the applicant should be granted reasonable access to the landlocked land, it may make an order for that purpose –

(a)       Vesting in the owner of the legal estate in fee simple in the landlocked land the legal estate in fee simple in any other piece of land (whether or not that piece of land adjoins the landlocked land):

(b)Attaching and making appurtenant to the landlocked land an easement over any other piece of land (whether or not that piece of land adjoins the landlocked land).

(8)Any order under this section may be made upon such terms and subject to such conditions as the Court thinks fit in respect of –

(a)The payment of compensation by the applicant to any other person; and

(b)The exchange of any land by the applicant and any other person; and

(c)The fencing of any land, and the upkeep and maintenance of any fence; and

(d)The upkeep and maintenance of any land over which an easement is to be granted; and

(e)The carrying out of any survey that may be required by the District Land Registrar before he will issue, in respect of any piece of land affected by the order, a certificate of title free of any limitations as to title or parcels within the meaning of Part 12 of the Land Transfer Act 1952; and

(f)       The time in which any work necessary to give effect to the order is to be carried out; and

(g)      The execution, stamping, and delivery of any instrument;

and

(h)      Such other matters as the Court considers relevant.

(9)Every order made under subsection (7) of this section shall provide that the reasonable cost of carrying out any work necessary to give effect to the order shall be borne by the applicant for the order, unless the Court is satisfied, having regard to the matters specified in paragraphs (b) and (c) of subsection (6) of this section, that it is just and equitable to require any other person to pay the whole or any specified share of the cost of such work.

….

[14]     We make four points about this provision.

[15]     First, the provision is remedial in nature and is one of several provisions in the Property Law Act which, in effect, create exceptions to the principle of indefeasibility of title contained in s 64 of the Land Transfer Act 1952.  Given its remedial purpose it is not appropriate to approach the section on the basis that there is a presumption in favour of non-interference with another’s title.  As McKay J said, delivering the judgment of this Court in Cleveland v Roberts [1993] 2 NZLR 17 at

23-4:

Mr Shaw next submitted that in considering whether the land was landlocked as having no reasonable access, there must be a presumption in favour of non-interference with the land of a defendant.  He submitted that there is a presumption that where an applicant’s land is reasonably capable of being upgraded so as to provide reasonable access, the land of the defendant ought not to be subject to interference by an order under s 129B.  We find no basis

in the section for any such presumption.  The section can only apply to land to which there is no reasonable access.  The onus is on the applicant to show that this is the case. The onus is similarly on the applicant to show that, after taking into consideration the matters referred to in subs (6), he should be granted reasonable access to his landlocked land.  Although the onus is on the applicant, there is no justification in a remedial statute for reading down the provision or approaching it with hostility, as Mr Shaw contended.

[16]     Second, this Court stated in Kingfish Lodge (1993) Ltd v Archer  [2000]

3 NZLR 364 at [38]: “It is implicit in some of those criteria [in s 129B(6)] that inadvertance or historical accident will make it easier to secure relief.” As Elizabeth Toomey notes, most cases where there have been successful applications under s 129B have involved historical accident or oversight: “Landlocked Land: A Real Threat to Indefeasibility in the 21st Century” in Grinlinton (ed), Torrens in the Twenty-First Century (2003) 177 at 186-8. However, as this Court also said in Kingfisher Lodge at [38], successful applications are not limited to such situations and factors such as changed circumstances may lead to the

grant of relief (see, for example, Mitchell v Rands (1982) 1 NZCPR 430 (HC)).

[17]     Third, the provision is structured so as to create a jurisdictional “gate” (ie, an application must be made by the “owner” of a “piece of land” that is “landlocked”) and provides a list of factors which a Judge must consider in deciding whether to grant relief (s 129B(6)).   While the terms “owner” and “landlocked” are defined, “piece of land” is not.  The remedial nature of the section, and the breadth of the factors in s 129B(6), suggest that Parliament intended that a broad approach be taken to the interpretation of the jurisdictional “gate”, to the extent that the language permits.  As Ms McCartney submitted for the respondents, too narrow an approach may result in the elimination of cases deserving of relief.

[18]     Fourth, and related to the point just made, although the Judge found that the apartment on the first floor of the building on Lot 2 was a “piece of land” for the purpose  of  s  129B(2),  he  also  considered  the  application  on  the  basis  that  the relevant piece of land was Lot 2 as a whole.  The lot had two authorised uses – as a shop and as an apartment.   The question was whether the lot as a whole had reasonable access for those uses.  The Judge said:

[48]      Some support for this approach can be found in a note on Cleveland v Roberts written by Andrew Butler – [1993] NZLJ 77.  At p 78 the learned author observes:

To some  extent,  however, one  must  wonder  whether  the dispute over the definition of “piece of land” is not misconceived.  If, “the central issue [in s 129B applications] is reasonable access to land”   (High Court No 1, p 14, approved by the Court of Appeal, at p 10), then surely consideration of the “piece of land” issue prior to a consideration of what access is required by the applicant, and to which part of his land access is required, is to put the cart before the horse.  For instance, let us assume that “the wide  test”  had  been  adopted  by  the  Court  of  Appeal. Assume further, that the applicant as in the instance case, shows that there is no reasonable access to a woolshed on his back block.   In such a case, the s 129B application would still succeed, notwithstanding the wide test, because the applicant would be in a position to establish , in the words of subs (1)(c), that he or she does not have “physical access of such nature and quality” as is reasonably necessary to enable him or her to use all of his land for wool collection (a use of his land  which is  presumably lawful  under  the  Resource Management Act).   This approach best accords with the acknowledged centrality of “reasonable access”, and demonstrates that the dispute over the definition of “piece of land” is a distraction.

[49]      This passage in effect echoes Ms McCartney’s submission.  It may seem to lead to a potentially very wide application, but then reference need only be had to the outcome in Kingfish Lodge (1993) Ltd v Archer [2000] 3

NZLR 364 to appreciate that the analysis will always be very fact specific. In that case the conclusion was that a lodge was not landlocked because

water access by the sea was still available and was reasonable.  Support for

the plaintiff’s approach can also be found in an NZLS Symposium Paper by F Bradley and R Cross [“The keys to unlocking land and updating

titles” NZLS Property Law Conference 2004].  The focus in that paper is

on the potential of s 129B to unlock and make usable land.  It suggests this is   a   positive   development,   rather   than   a   negative   in-road   into indefeasibiilty.

[50]      I  am  attracted  to  this  approach  without  needing  to  rely  on  it. Improper in-roads into indefeasibility are better controlled by the appropriate exercise of the broad discretion in s 129B than by unduly hindering remedial legislation with a strict threshold test.   The Bradley paper suggests (on the basis admittedly of a loose polling of local authorities) that the so-called more liberal approach to s 129B allegedly adopted in two more recent High Court decisions has not seen any increase in applications to unlock land.  If that is so, it would be, I suggest, because of a recognition that mere convenience is unlikely to be a sufficient basis for relief, and the onus to demonstrate that relief is appropriate remains significant.  In the present case I would have, if necessary, held the land as a whole was landlocked because a long established lawful use had become prevented by a change in circumstances.

[19]     Like the Judge, we are attracted to this approach.   However, it is not the approach adopted by this Court in Cleveland v Roberts.  For that reason, and because the focus of the argument before us was on whether the apartment was a “piece of land” for the purpose of s 129B, we propose to consider the case on the basis of the orthodox analysis.

Jurisdiction

[20]     Under this heading we address two arguments raised by Mr Sorrell, who appeared for the appellant in this Court but not at trial.  The first is that the apartment was not a “piece of land” for the purposes of s 129B.   The second is that the respondents had not established that the apartment was an “authorised use”, as required by the definition of “reasonable access” in s 129B(1)(c).

Is the apartment a “piece of land”?

[21]     “Land” is defined in s 2 of the Property Law Act as “including all estates and interests, whether freehold or chattel, in real property”.  The apartment was rented on a monthly tenancy.   On the face of it, a leasehold interest of this type meets the definition.

[22]     However, Mr Sorrell argued that a narrower interpretation of “land” was intended in s 129B.  He noted that only the owner of the legal estate in fee simple or a lessee under a lease of at least 21 years duration could apply for relief under s 129B (s 129B(1)(b) and 129B(2)).  He said:

Section 129B applies to a “piece of land”.   The ordinary meaning is  a defined area on the surface of the earth: see Mowat v Federated Farmers of New Zealand (Waikato Provincial District) Inc [1980] 2 NZLR 585 at 588 (lines 28-30). The inclusive definition in s 2 allows for other meanings but it seems land should be given its ordinary meaning. The application is to relate to the legal estate in fee simple of the piece of land. This interpretation follows from the reading of the section as a whole. If the statutory intention were otherwise there is no logic in the restricted classes of applicants.

A building may become part of the land where it is sufficiently annexed to the land. …   It is submitted, however, that a part of a building does not naturally fall within the meaning of the words “piece of land”.   The PLA uses “building” when referring to a building.  See ss 129, 129A (which refer

to a building on a piece of land) and s 129C.  If s 129B(1)(a) was intended to apply to parts of a building the drafters… would have said so.

[23]     Mr Sorrell cited Re Lehrer and the Real Property Act 1900-1956 (1960) SR (NSW) 365, a decision of Jacobs J of the Supreme Court of New South Wales. That case concerned the upper floor of a building, which had been leased separately from the ground floor. The Local Government Act 1919-1958 prohibited the subdivision of land other than in accordance with the Act. “Subdivide” was defined to mean “dividing land into parts”. One of the questions in the case was whether the separate leasing of the upper floor constituted a subdivision, which depended upon whether the upper floor was “land”. “Land” was not defined in the Local Government Act, although there was a broad definition of the word in s 21(e) of the Interpretation Act 1897.

[24] The Judge accepted that the upper floor of a building “can be severed by conveyance from the soil upon which the building rests and can be dealt with as real property in English law”. While a separate estate in part of a building would be “land” as defined in the Interpretation Act, that definition did not apply to “land” in the Local Government Act. Rather, the ordinary meaning applied. On its ordinary meaning, “land” was not apt to describe part of a building (at 418-420).

[25]     Finally,  Mr  Sorrell  sought  to  gain  support  from  a  comment  on  Simon

France J’s decision by Elizabeth Toomey ((2005) 11 BCB 176 at 179):

The conclusion that the apartment was a “piece of land” and could therefore be considered landlocked could be said to stretch the statutory provision well beyond its original intent.

Mr Sorrell said that it was only where some quality of the “piece of land” in its natural state meant that there was no reasonable access that the Court’s discretion should arise.

[26]     We  reject  these  submissions.    We  consider  that  part  of  a  building  may constitute a “piece of land” for the purposes of s 129B, at least in some situations.

[27]     We deal first with Cleveland v Roberts.   That case concerned a substantial block of farmland, extending over several valleys.  The Court rejected an argument

that the farm should be viewed as a whole, so that if there was adequate access to part there must be adequate access to the whole, all the land being contiguous. McKay J said (at 23):

As Jeffries J points out, it is significant that the legislation uses the general phrase “a piece of land”, rather than referring to the land in an allotment or in a title.  He said:

“It seems that Parliament chose the word ‘piece’ because it wished   to   avoid   the   arbitrariness   of   strictly   defined boundaries when the central issue is reasonable access to land.”

The ordinary meaning of the words used suggests that land is to be regarded as landlocked if it does not in a practical sense have reasonable access.  The section confers a discretion to be exercised after consideration of all relevant factors, and it would seem contrary to the remedial purpose of the legislation to adopt an artificially limited view as to what is a piece of land.   We, therefore, reject Mr Shaw’s contention that Mr Roberts’ land must be viewed as a whole, and that as at least some of it has reasonable access, the balance being contiguous must be similarly regarded.   We similarly reject his alternative argument that “A piece of land” means the land as defined by title boundaries.   Part of CT 4/112, namely the pan handle where Mr Roberts’ woolshed is located, is an area of flat land in Todds Valley that is physically separated from the rest of the land in that title by a steep hillside.  It would be wholly artificial to regard it as having reasonable access because it is part of a single title which extends into the next valley and has a frontage on Little Todds Valley Road.

[28]      The Court accepted that an applicant for relief could not artificially divide his or her land so as to make part of it landlocked: see Mowat v Federated Farmers of New Zealand (Waikato Provincial District) Inc [1980] 2 NZLR 585 at 588(HC)). As to the scope of the term “piece of land”, McKay J said (at 23):

There must be a “piece of land” which is a distinct and separate whole in the sense that the contours or character of the terrain are such that it should be so regarded.

[29]     Unlike Cleveland v Roberts the present case does not involve a substantial block of land.  However, while not “terrain”, an apartment on an upper floor of a building could be described as being a “distinct and separate whole”.  This would be particularly  so  if  there  was  a  separate  certificate  of  title  for  the  apartment. Strata titles can be registered under the Land Transfer Act.  Such a title could relate to a part of a building containing an  apartment or  a suite of offices (although, according to Hinde and others Hinde, McMorland & Sim Land Law in New Zealand

(Looseleaf  ed)  at  [14.004]  –  [14.005],  this  mechanism  has  been  little  used  in New Zealand as a result of conveyancing difficulties in defining rights to common areas).  In principle, we see no reason why a part of a building in respect of which a strata title has been issued should not be regarded as “a piece of land” for the purposes of s 129B.

[30]     There are also stratum estates under the Unit Titles Act 1972.   That Act provides for unit subdivisions and deals among other things with issues relating to areas of common property and the rights of the unit title holders in respect of such areas.  It is conceivable that an area that should have been designated as common property in a unit subdivision could, through error or oversight, be included within a particular unit title.  In principle, we consider that the holders of other unit titles in the development should be able to apply under s 129B for relief.   However, the position is complicated by the fact that the forms of relief available to the Court under s 129B(7) do not sit comfortably with the provisions of the Unit Titles Act.

[31]     Mr Sorrell accepted in his written submissions that where there was a strata or unit title in relation to part of a building, that part would constitute a “piece of land” for the purposes of s 129B.   This was because it would be a “distinct and separate whole”. But if Mr Sorrell is correct on this point, “land” must have a broader meaning than simply an area of ground.

[32]     We agree that a part of a building that is subject to a strata or unit title would constitute a “piece of land” in terms of s 129B.  However, we do not consider that the existence of a separate title in respect of a part of a building is a prerequisite to that part being regarded as a “piece of land”.  In the present case, there is a separate and identifiable area (the first floor apartment) to which there will, as a matter of fact, be no access if the fence is completed as planned.     As a practical matter, the apartment will be “landlocked”.  It is consistent with the remedial purpose of s 129B to treat the apartment as a “piece of land”.

[33]     Mr Sorrell relied on the definition of “owner” in s 129B(1)(b) to argue that the application of s 129B was limited to “the owner of a legal estate in fee simple or the holder of a leasehold estate of at least 21 years”.   However, the restriction of

those who may apply for relief to owners as defined does not, in our view, limit the meaning of “piece of land”.  As a matter of policy it makes little sense to allow a person occupying an apartment under a short-term tenancy to apply for relief under s

129B given the range of powers available to a Judge where relief is granted.  These include the power to order the payment of compensation and to impose responsibilities  as  to  maintenance  costs.    Such  orders  cannot  sensibly  be  made against those occupying under short-term tenancies.  There are, then, good reasons for limiting the range of potential applicants, but those reasons have nothing to do with limiting the scope of the phrase “piece of land”.

[34]     In the result, we see nothing in the language of the section or the authorities to preclude a finding that the apartment constitutes a “piece of land”.  The definition of “land” in s 2 supports such an interpretation.   Accordingly, we agree with the conclusion reached by the Judge.

Was the apartment an authorised use?

[35]     The Judge was clear in his view.  He said at [30]:

An integral component of the statutory concept of reasonable access is whether a piece of land has reasonable access for any authorised use.  The Apartment is an authorised use of long standing.

[36]     Mr Sorrell argued that the respondents had not established that the apartment was an authorised use, particularly because the legality of the apartment was contingent on the apartment continuing to have adequate lawful access.  Mr Sorrell emphasised that the right-of-way appurtenant to Lot 3 was subject to a condition that “no buildings be erected having a frontage wholly to the right-of-way”.  He said that “the apartment use also offended against the intent of the [condition] as now constituting  a  building  (separate  level)  having  frontage  wholly  to  the  ROW”. Mr Sorrell relied on the decision of this Court in Wright v Tan [2004] 2 NZLR 735.

[37]     As we see it, Mr Sorrell faced three difficulties in pursuing this argument.

[38]     First,  it  is  not  an  argument  which  was  pressed  before  Simon  France  J. Although the appellant’s statement of defence to the second amended statement of

claim denied at paragraph 5(b) that the letting of the apartment was lawful “in terms of  the  local  authority’s  planning  and  resource  management  requirements”,  the legality of the use does not seem to have been a point of significant contention at trial.

[39]     A valuer called by the respondents gave evidence that the relevant zoning allowed residential uses in an existing building, and there was in evidence a letter from the Auckland City Council setting out the results of an investigation it had undertaken  following  receipt  of  a  complaint  from  Mr  McClure.    Part  of  the complaint concerned, as Ms McCartney highlighted, whether the residential activity on the floor above the pharmacy complied with the District Plan.   The Council’s letter indicated that the Council considered that the apartment was an authorised use. In addition, the Council was served with the proceedings, albeit belatedly, as contemplated by s 129B(4).  The Council did not intervene, which suggests that it did not consider that the application related to an unauthorised use of the building. Further, Mr McClure said under cross-examination that he did not dispute that the apartment was an authorised use.

[40]     Second, Mr Sorrell attempted to challenge the Judge’s finding by referring to planning documents and other material, some of which was not before the Judge, but which was in any event incomplete and equivocal.  Had the material been put before the Judge, further lines of enquiry may have been opened up and further evidence adduced.  Quite apart from this process concern, the material to which he drew our attention would not enable us to conclude that the Judge’s finding was wrong.

[41]     Third, in relation to the “no building having a frontage wholly onto the right-of-way” condition, this Court said in Wright v Tan (at [3]):

Such conditions may be thought to reflect an attitude towards the use of rights-of-way, also seen in the legislation of that time, which is no longer current.

[42]     Ms McCartney said in her submissions that it is not now the practice of local authorities to require such conditions in grants of rights-of-way.   We have no evidence of the current attitude of the Auckland City Council to such conditions. What is clear, however, is that the Council was aware from the complaint made by

Mr McClure of the access issue in relation to the apartment, but continued to regard the apartment as an authorised use.   Moreover, there is no logical reason why a condition attaching to the right-of-way in relation to Lot 3 should also attach to a right-of-way in relation to Lot 2.  In those circumstances we do not see the condition as assisting the appellant’s argument on this point.

[43]     In view of these difficulties we see no basis for interfering with the Judge’s finding that the apartment was an authorised use.

Relief

[44]     We turn now to relief.  There are two issues: should relief have been granted? and if so, should relief of the type granted by the Judge have been granted?   The latter involves two questions – whether vehicular access should have been granted and the duration and scope of the right-of-way granted.  We deal with each in turn.

[45]     We note that we are dealing with the exercise of a Judge’s discretion, so that the Court will interfere only if there is an error of principle, a failure to take some relevant consideration into account, reliance on an irrelevant consideration or the decision is “plainly wrong”.

Should relief have been granted?

[46]     Section 129B(6) identifies the considerations to which the Judge must have regard  in  considering  the  issue  of  relief.     Simon  France  J  addressed  each consideration in turn (at [52] – [69]).

[47]     Mr  Sorrell’s  argument  that  the  respondents  were  not  entitled  to  relief focussed on two points:

(a)The lack of access to the apartment came about as a result of the removal of the internal staircase, which had given access to the apartment from Great North Road, and this could be rectified by the construction of a new internal staircase.

(b)The respondents were at fault for not undertaking (either personally or through their solicitor) a sufficient check of the position concerning the right-of-way before they purchased Lot 2.

[48]     There is a preliminary point.  Mr Sorrell sought to argue that the staircase had been removed at some date in the (late) 1990s.    This was contrary to the Judge’s finding that it was removed sometime before 1970.   We accept Ms McCartney’s submission that the material referred to in support of this argument was far from convincing and does not provide a sufficient basis for us to depart from the Judge’s finding.

[49]     The factors to which a Judge must have regard in considering relief (as set out in s 129B(6)) include the nature and quality of the access to the property that existed when the applicant purchased it, the circumstances in which the landlocked land became landlocked and the conduct of the applicant and other parties.

[50]     Accordingly, if the respondents had removed the internal staircase for their own purposes, it might be said that they had artificially created the landlocked land and so should be denied relief, as in Mowat v Federated Farmers.  But the Judge’s findings preclude such a conclusion.  He found that the staircase had been removed in the 1960s or earlier, certainly well before the respondents purchased the property in 1990.  Further, from the time when Mr Druskovich began delivering fish to the fish shop on Lot 3 in the late 1960s, the occupants of Lot 2 had freely used the right- of-way.  Indeed, the Judge noted that Mr Druskovich thought that he had acquired rights to the right-of-way when he purchased Lot 2.

[51]     The fact that the owner of landlocked land could create access over his or her own land as an alternative to the access sought in the application is not a bar to relief, but it is a relevant consideration: see Cleveland v Roberts at 24. Where the owner could create access to the landlocked land relatively easily through his or her own land, relief could properly be denied under s 129B, particularly if granting access through a neighbour’s land would involve some hardship for the neighbour. But in the present case:

(a)There would clearly be considerable difficulty for the respondents in attempting to create internal access to the apartment, given their lease commitments to the pharmacist;

(b)The occupants of Lot 2 have used the right-of-way for over 40 years, so the grant of access via the right-of-way will simply recognise what has been occurring as a matter of fact for a long time;

(c)      The right-of-way must in any event remain for the benefit of the owners of Lot 3, so that there is no hardship to the appellant to that extent.

[52]     In this context, the appellant sought leave to adduce further documentary evidence  that  was  not  formally  produced  at  trial,  inadvertently  according  to Mr Sorrell.  The evidence related to the intention of the registered proprietor of Lots

1 and 2 in 1977 to adjust the boundaries between Lot 1 and Lot 2 so as to provide access from the rear of Lot 2 to Great North Road.   For whatever reason, this adjustment was never made.   Mr Sorrell said that this material showed that the failure to provide a right-of-way from Lot 2 to Tuarangi Road was neither accidental nor inadvertent.

[53]     The documentary material was referred to in the brief of evidence prepared by Mr McClure for trial and was in the bundle of documents before the Court. However, objection was taken to various portions of Mr McClure’s brief, including the paragraphs in which these documents were referred to.   The evidence in these paragraphs was not led, on the basis that the matters covered were matters of submission rather than of evidence.   As a consequence the documents were not formally produced although it is clear from the notes of evidence that they were drawn to the Judge’s attention.

[54]     In these circumstances we are prepared to admit the evidence, but we do not see it as assisting the appellant’s case.  The suggested alteration to the boundaries pre-dates the respondent’s acquisition of Lot 2 by 13 years, there is no evidence that

the respondents were aware of the proposal and the evidence is clear that the occupants of Lot 2 used the right-of-way unhindered all through this period.

[55]     As to the failure to enquire point, the fact that a purchaser acquires property knowing that there are access difficulties does not preclude that purchaser from obtaining relief under s 129B in respect of those difficulties: see Brankin v MacLean [2003] 2 NZLR 687 at [59]-[61] (HC). Accordingly, a failure to enquire will not be a disqualification from relief, although it may be a relevant consideration which, in an appropriate case, would support the refusal of relief.

[56]     In the present case, the respondents, and particularly Mr Druskovich, had long experience of the locality.  There was nothing in that experience to cause them to suspect that there was any issue in relation to access to Lot 2.  To the contrary, they thought that they had a right of access.  It is understandable that they made no enquiry when they purchased Lot 2.

[57]     It may be that their solicitor should have checked the position, although even that is not self-evident.  In any event, if there was any such failure in this case, it is not sufficient to outweigh the factors favouring the grant of relief.  In essence, this is a case of historical accident or oversight which is understandable in the circumstances.

[58]     In  the  result,  we  consider  that  the  Judge  turned  his  mind  to  the  factors identified in s 129B(6). We see nothing in the points raised which would justify this Court’s intervention in his discretionary decision.  Indeed, we consider that the Judge was entitled to conclude that this was an appropriate case for relief.

What type of relief?

[59]     There are two issues concerning the type of relief granted by the Judge, namely,  whether  vehicular  access  should  have  been  granted,  and  whether  there should have been limits on the access granted in terms of duration and scope.

[60]     As  to  vehicular  access,  the  respondents  sought  pedestrian  and  vehicular access in their statement of claim.  Under cross-examination Mr Druskovich said that the respondents would be happy with pedestrian access only. The Judge granted vehicular access as well.  The appellant says that the grant of vehicular access goes beyond what is required for “reasonable access”.

[61]     As  Mr  Sorrell  rightly  said,  reasonable  access  under  s  129B  does  not necessarily include vehicular access.   The access must be reasonable, not the best that could be achieved.  What is “reasonable” must be determined in light of factors such as the characteristics of the locality (residential, commercial, mixed etc), the topography of the area and contemporary requirements in relation to transportation. See Wild J’s helpful summary of the relevant principles in Asmussen  v  Hajnal (2005) 6 NZCPR 208 at [57]-[58] (HC).

[62]     In the present case there is a garage on the back of Lot 2 and vehicles have accessed Lot 2 from the right-of-way for many years.  The right-of-way must remain in order to provide vehicular access to Lot 3.  The Judge conducted a site visit, and so was fully acquainted with the physical layout.  In those circumstances we see no reason to interfere with the Judge’s conclusion that vehicular access should be granted.

[63]     Further, the extra detriment to the appellant from having vehicles use the right-of-way is greatly diminished by the following considerations:

(a)      We intend to limit the duration and scope of the easement in the manner indicated below;

(b)Vehicular    accessibility     will    be    limited     given    the    physical configuration of the properties.

[64]     As to the duration and scope of the relief, while Mr Sorrell did not address the point in any detail, he did argue that the relief granted should be confined to the period that the apartment will remain landlocked.   Assuming that the pharmacy exercises  its rights of renewal,  its lease will expire on 30 September 2018.  At that

stage the respondents will be able to reinstate access to the apartment through the shop frontage onto Great North Road. As we note at [51] above, the fact that a landowner could create his own access will not prevent a finding that his or her land is landlocked; but it may go to relief.

[65]     The respondents would gain a significant benefit as a result of the relief granted  by the  Judge.    Not  only would  the  pharmacy,  whose  premises  are  not landlocked, have the benefit of the easement, but it would remain for the benefit of the owners of Lot 2 even if circumstances changed so that the first floor no longer needed access from the right-of -way.  The easement would remain for the owner’s benefit even if the building was demolished and rebuilt.

[66]     We consider that this outcome is manifestly unfair.   It confers too great a benefit on the respondents and imposes too great a burden on the appellant, given the nature of the landlocked land.   Accordingly, we consider that the relief should be limited to the period during which the apartment will remain landlocked.  That will be the period that the lease remains in force plus an additional period (which we assess at one year) to allow the respondents to create an alternative access from the apartment through the ground floor premises to Great North Road.

[67]     We also consider that the relief should be limited to the apartment.   That, after all, is the landlocked piece of land.  We see no reason why the pharmacy should have the benefit of the easement as its ground floor premises are not landlocked.

Compensation

[68]     The  appeal  against  compensation  is  brought  on  the  basis  that  the  Court should have allowed a valuer to be appointed to assess the appropriate amount of compensation, as the appellant sought at trial.

[69]     The Judge declined the appellant’s request to defer the issue of compensation for ultimate resolution by a valuer.   He noted that the respondents had adduced expert evidence going to the value of the land with and without access from the right-of-way and said that he was not convinced that further evidence would have

assisted.  The Judge noted that the appellant had had the opportunity to lead evidence going to compensation if it wished.   He also said that issues of detriment to the appellant (which might be relevant to compensation) were in any event relevant to the exercise of his discretion by virtue of s 129B(6) and so should have been raised in that context.  Accordingly, the Judge went on to fix compensation.  He did so on a “willing  seller/willing  buyer”  basis,  consistently  with  what  this  Court  said  in Lowe v Brankin (2005) 6 NZCPR 607 at [38].

[70]     As we have said, the appellant’s challenge to this aspect of the judgment is based simply on process.  We consider that the Judge was entitled to refuse to defer the fixing of compensation.  The question of compensation was clearly at issue in the proceedings  and  the  respondents  led  valuation  evidence  on  that  aspect.    The appellant was free to challenge that evidence and to lead appropriate expert evidence itself.  It chose not to do so.

[71]     However, that does not resolve the valuation issue.  As we have indicated, we propose to vary the relief ordered by the Judge.  Clearly that will have an impact on the compensation assessed.  Accordingly, we remit the matter back to the High Court for resolution by that Court, in the light of any further submissions that the parties wish to make.  We note, however, that the amount of compensation payable will in all  probability  be  modest.    We  encourage  the  parties  to  attempt  to  agree  an appropriate figure themselves.

Costs

[72]     The Judge awarded 2B scale costs to the respondents.  The appeal against the award is based on the fact that the point in issue in this case – whether an apartment on the upper floor of a building was a “piece of land” for the purposes of s 129B - was novel.  Since it was at the heart of the Judge’s decision, no (or a reduced) award of costs should have been made.

[73]     Furthermore, we must also consider whether our decision to vary the relief granted by the Judge should affect the costs award made by the Judge.

[74]     The Judge acknowledged in his costs decision that this was a novel point and did not lend itself to an easy application of established principle: HC AK CIV-2003-

404-6617  13  July  2005.  He  referred  to  McGechan  on  Procedure  where  it  is suggested that in a proceeding raising a novel issue, necessitating additional preparation and argument, “the successful party should be awarded “normal” costs, but that the unsuccessful party should not be visited with the higher costs burden resulting from the novelty” (at HR46Intro.15). Having considered that aspect, and a number of other relevant factors, the Judge made his order as to costs.  Apart from our decision to vary the relief granted, there is no proper basis for this Court to interfere with that order.

[75]     We have considered whether we should remit the question of costs back to the High Court, given our decision to vary the relief granted by the Judge.  We have concluded that we should not.  The hearing before the Judge focussed on issues on which the appellant did not succeed, and has not succeeded in this Court.   The question  of  the  form  of  the  relief  granted  did  not  seem  to  attract  significant argument, other than on the point of vehicular access, on which the appellant did not succeed either in the High Court or in this Court.  The respondents were substantially successful in the High Court and were entitled to an award of costs.

Decision

[76]     Leave to adduce the further evidence referred to in [52] is granted.   The appeal is allowed in part.  In place of the order made in the High Court granting the respondents an  easement,  an  order  is  made  that  there  be  an  easement  over  the appellant’s land in favour of the first floor apartment on Lot 2 on DP22812 (“the first floor apartment”) upon the following terms:

(1)      The easement will terminate on the earlier of:

(a)        One year after the date on which the existing lease between the respondents and Grey Lynn Amcal Pharmacy Limited dated 4 June 2004 terminates; or

(b)        30 September 2019;

(2)      The easement is not available for the benefit of Grey Lynn Amcal

Pharmacy Limited or any assignee;

(3)      In  all  other  respects,  the  easement  is  on  the  terms  fixed  in  the

High Court;

(4)Any dispute about the terms of the easement, whether in terms of s 129B(8)-(11)  of  the  Property  Law  Act  or  otherwise,  must  be resolved in the High Court; and

(5)Pending completion of easement formalities, the respondents and any lessee of the first floor apartment and the invitees and licensees of any of them may use the right-of-way to the first floor apartment on the terms hereof.

[77]     The  order  for  compensation  made  in  the  High  Court  is  set  aside.    The question of compensation is remitted to the High court for redetermination in light of the more qualified easement now granted to the respondents.

[78]     As to costs in this Court, although the relief granted has been varied the appellant did not succeed on the major issues advanced on the appeal.  Accordingly we make no award of costs.

Solicitors:

Rainey Collins Wright, Auckland for Appellant

Zeljan Unkovich, Auckland for Respondent