Druskovich v BA Trustees Limited HC Auckland CIV 2003-404-6617

[2010] NZHC 1667

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2003-404-6617

BETWEEN  IVAN AND VESNA DRUSKOVICH Plaintiffs

ANDBA TRUSTEES LIMITED Defendant

Hearing:         15 September 2010

Appearances: Ms J McCartney SC for plaintiffs

Mr A Sorrell for defendant

Judgment:      15 September 2010

(ORAL) JUDGMENT OF LANG J

[on application by defendant to adduce further evidence]

Solicitors/Counsel:

Zel Unkovich, Newmarket
Rainey Collins Wright, Auckland

Ms J McCartney SC, Auckland

Mr A Sorrell, Auckland

DRUSKOVICH V BA TRUSTEES LTD HC AK CIV-2003-404-6617  15 September 2010

[1]      In  this  proceeding  the  plaintiff  sought  relief  in  respect  of  an  apartment situated on the first floor of a building.  The apartment was landlocked because it had no means of pedestrian or vehicular access.

[2]      The application for relief was tried before Simon France J.   In a decision delivered on 14 June 2005, the Judge upheld the plaintiff’s claim that the premises were landlocked.   He granted relief in the form of an easement in favour of the plaintiffs and also granted compensation to the defendant in the sum of $12,500.

[3]      The defendant appealed against the Judge’s decision.  The Court of Appeal rejected the appeal so far as it related to the Judge’s finding that the apartment was landlocked.  It varied the relief to be granted to the plaintiffs by reducing the term of the easement to 18 years.  It also excluded from the easement a pharmacy located on the ground floor of the premises:  BA Trustees Ltd v Druskovich [2007] NZCA 131.

[4]      The Court of Appeal acknowledged (at [71]) that its finding on the issue of relief would impact on the compensation to be paid to the defendant.   It therefore remitted that issue to this Court for resolution in the light of any further submissions that the parties wished to make.

[5]      The hearing in this Court to determine the outstanding issue of compensation is now scheduled to commence on 2 November 2010.  Counsel for the defendant has signalled, however, that the defendant wishes to adduce further evidence at that hearing in relation to the value of the compensation to be paid.  The plaintiff objects to new evidence being adduced.  I have therefore heard submissions today in relation to that issue.

[6]      In  my view  the  answer  to  the  application  lies  in  the  way in  which  the defendant has advanced its case to date.  The plaintiff called valuation evidence at the trial before Simon France J to establish what it considered to be the appropriate level of any compensation to be paid.  The defendant elected to call no evidence in relation to that issue.  Instead, counsel for the defendant submitted that the issue of compensation should be determined by the Court based on further evidence to be adduced in the future.

[7]      The Judge rejected that submission.  He said:

[76]      I reject Mr Collins’ request to defer the issue of compensation.  It is part of the hearing, there was no agreement between the parties to defer it, and the plaintiff has provided evidence from a valuer as to the difference in value of the land with and without access from the right-of-way.  It is in the order of $210,000 with pedestrian access, and $250,000 with pedestrian and vehicular access.  I am not convinced that further material would assist the process, but in any event if there was evidence to be had of significant detriment  to  the  defendant  it  should  have  been  called.    Further,  such detriment would have been relevant not only to compensation but also the balancing exercise a Court must undertake when considering relief, and for that reason also I would have expected it to be called.

[8]      The Judge’s refusal to deal with the issue of compensation in this way was one of the grounds that the defendant advanced in its appeal to the Court of Appeal. The Court of Appeal rejected this ground of appeal.  The Court said:

[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.

[9]      Counsel for the defendant submits that the issue of compensation is now essentially at large, and that the Judge who determines that issue on 2 November

2010  will  not  be  constrained  by the  methodology that  Simon  France  J  used  in reaching his decision.

[10]     It is appropriate to digress at this point and to consider the way in which the

Judge dealt with the issue of compensation.

[11]     The Judge determined the issue on the basis that, if pedestrian and vehicular access was available, the capital value of the apartment would increase by approximately $250,000.   He then considered what, in arms length and amicable negotiations, the person who granted the easement and the person who owned the apartment would agree was an appropriate price to pay for the easement.  He noted at [78] that the person who gave the easement, namely the defendant, was unaffected by the new access to the apartment.  The person who was receiving the benefit of the easement, namely the plaintiffs, were, however, receiving something of real value because of the increase in the value of their apartment in the event that access was granted.   He considered that, on a willing seller/willing buyer basis, the plaintiffs would have been prepared to pay the provider of the easement five per cent of the increase in value that the apartment would gain if access was granted.   He fixed compensation in the sum of $12,500 using that methodology.

[12]     The defendant did not challenge the Judge’s methodology in its appeal to the Court of Appeal.  Its only challenge in relation to the issue of compensation was in respect of the Judge’s refusal to allow that issue to be determined at a future date. That being the case, I consider that it is not now open to the defendant to challenge, or ask the Court to alter, the methodology that the Judge applied.  The only issue for the Court at the renewed hearing will be whether, applying that methodology, the amount of compensation that the Judge awarded should be altered to reflect the reduction in the scope of relief that the Court of Appeal ordered.

[13]     I therefore do not accept the submission for the defendant that the Judge will have free reign to reconsider competing methodologies when he or she comes to consider the issue of compensation.

[14]     The   evidence  that   the   defendant   wishes   to   adduce   is   based   on   an extrapolation of rental that the apartment could have received over the period for which the easement has been granted.  That is clearly a different methodology to that applied by Simon France J.   It was, of course, open to the defendant to place this

evidence before Simon France J so that he could have taken it into account when assessing which methodology to use.  The defendant did not do that, however, and it is now left with the consequences of that decision.

[15]     I take the view that the evidence that the defendant wishes to adduce is not relevant in terms of s 7 of the Evidence Act 2006 because it will not assist the Court to address an issue that it is required to determine.  For that reason the application cannot succeed and is dismissed.

[16]     The plaintiffs are entitled to costs on a category 2B basis, together with disbursements as fixed by the Registrar.

Lang J