Waugh v Attorney-General HC Auckland CIV 2002-404-002097
[2006] NZHC 352
•6 April 2006
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2002-404-002097
UNDER the Crown Proceedings Act 1950
BETWEEN JOHN CHRISTOPHER WAUGH AND KAREN ROBINSON
Plaintiffs
ANDTHE ATTORNEY-GENERAL OF NEW ZEALAND ON BEHALF OF THE NZDF Defendant
Hearing: 29, 30 and 31 August 2005
Appearances: BD Gray for Plaintiffs
MT Parker for Defendant
Judgment: 6 April 2006
JUDGMENT (No.2) OF COOPER J
This judgment was delivered by Justice Cooper on
6 April 2006 at 3.30 p.m., pursuant to r 540(4) of the High Court Rules
Registrar/Deputy Registrar
Date:
Solicitors:
Gary Lyons, PO Box 9003, Auckland
Crown Law Office, PO Box 5012, Wellington
Copy:BD Gray, PO Box 4338, Shortland Street, Auckland
WAUGH V A-G FOR NZDF HC AK CIV 2002-404-002097 6 April 2006
Introduction
[1] The principal base of the New Zealand Navy is at Devonport, on Auckland’s North Shore. The base comprises of two separate areas of land known as the South Yard and the North Yard.
[2] The South Yard abuts the northern shore of the Waitemata Harbour. There, there are wharves, offices and training facilities. The Yard lies to the south of Calliope Road.
[3] The North Yard is separated from the South Yard by, at its closest point, two blocks of residentially developed land. It extends from part way along Cautley Street in the south in a northerly direction up to Ngataringa Bay Access road. There are the naval supply depot, the transport pool, the defence scientific establishment, the gymnasium, the office of the Captain Fleet Support and other facilities.
[4] The North Yard is linked to the South Yard by means of a tunnel. It passes under public roads, and some 14 privately owned properties. The plaintiffs, Mr and Mrs Waugh own one of those properties, said to be the most affected by the presence of the tunnel. Their land is at 18 Rutland Road and was acquired by them on
22 March 1994. When they acquired it, they were unaware of the existence of the tunnel.
[5] They now allege that the on-going use of the tunnel by vehicles and pedestrians moving between the North and South Yards was a trespass to land. They seek damages, and elect to have damages assessed on the basis of the “profit” that the defendant has derived from the use of the tunnel over the period from 6 March
1996 down to 2 July 2004.
[6] The present proceeding was commenced on 6 March 2002. The date 6
March 1996, precisely six years earlier, has been chosen as the start date for the period to which the plaintiffs’ claim applies because of the provision of the
Limitation Act. On their argument, the trespass of which they complain was already taking place when they moved into the property in March 1994. The date of 2 July
2004, which marks the end of the period for which the plaintiffs’ claim is the date on which an easement authorising on-going use of the tunnel came into effect. The plaintiffs’ claim damages in the sum of $487,864, together with interest under the Judicature Act 1908.
[7] The Royal New Zealand Navy is part of the NZDF (“NZDF”) constituted under Part II of the Defence Act 1990. As a matter of law, it is the NZDF that has benefited from the use of the tunnel and there is no issue that the defendant is not properly sued. As a result of interlocutory proceedings it was agreed by the parties and orders were made by consent that use of the tunnel by the defendant had been initially authorised by reg 18 of the Defence Emergency Regulations 1941. However, that authority ceased to apply at a date which cannot be ascertained, but which preceded the plaintiffs’ acquisition of their land.
[8] The defendant joins issue with the plaintiffs alleging first that the plaintiffs acquiesced in any act of trespass and should now not be entitled for that reason to maintain a claim. It is, however, properly conceded that if that contention fails, there has been a trespass to the plaintiffs’ land over the period to which the claim relates. However, it is said that even if there is a claim, the plaintiffs’ calculation of damages is misconceived and that if any sum is to be awarded it should be in a much lower amount. On the approach of the registered valuer who gave evidence on its behalf, the NZDF says that for the period to which the plaintiffs’ claim relates, compensation should not be payable above the sum of $2,000 per annum over the
100 months or 8.34 years to which the claim relates. Any liability of the defendant would, therefore, be limited to the principal amount of $16,680.
Other proceedings
[9] Before turning to address in more detail the issues in this case it is appropriate to explain by way of further background that after a long negotiation between them, and eventually reaching agreement that an easement should be granted, the plaintiffs subsequently sold their property and they no longer reside
there. Nevertheless, I will refer to it as the plaintiffs’ property, for that is what it was at the relevant times.
[10] There are proceedings on foot in the Land Valuation Tribunal which will result in a figure being ascertained for compensation in respect of the acquisition by the defendant of the easement. The present proceeding is concerned only with the historic use between the period from 6 March 1996, and the effective date of the easement on 2 July 2004.
The issues
[11] There are only two ultimate issues between the parties. The first is whether the plaintiffs by their conduct showed that they acquiesced in the trespass and secondly, in the event that the plaintiffs can properly maintain a claim in trespass to land, what should be the quantum of the damages to which they are entitled.
[12] On the latter issue, both sides called expert valuation evidence and in addition the plaintiffs called evidence from a traffic engineer with relevant expertise to assess the cost benefit to NZDF of use of the tunnel as opposed to other means of travel between the North and South Yards. All of the expert witnesses called were well qualified and gave their evidence in a way which appropriately complied with the Fourth Schedule to the High Court Rules.
[13] However, the conclusions of the two valuers were poles apart. Essentially, that reflected the different basis upon which they had been instructed as to the manner in which damages of the kind sought by the plaintiffs should be assessed.
[14] As will emerge from the subsequent discussion in this judgment, although there are authorities which, on their own particular facts, set forth an appropriate approach to the calculation of damages for “wrongful use”, none of the cases to which I was referred concerned facts affording a very close parallel to those in this case and to that extent it has been necessary to proceed into uncharted territory.
[15] In part that is because of the way the plaintiffs’ case has been framed. As already mentioned, issues resulting from the grant of the easement upon which the parties ultimately agreed are to be determined in the Land Valuation Tribunal and the present case has been advanced not on the basis of the existence or presence of the tunnel, but rather, on the basis that the plaintiffs seek compensation for the use of the tunnel by vehicles and pedestrians.
[16] I turn now to deal with the issues, dealing first with the question of acquiescence.
Acquiescence
[17] As earlier noted, a principal contention relied on by the defendant was that the use of the tunnel by the NZDF, its agents and invitees, had been accepted by the Waughs, that they had in fact acquiesced in it. Mr Parker argued that, as a matter of law, if a person occupies another’s land, and the owner is aware of this but takes no step to prevent the occupation or use, then a Court may infer that the land owner accepts the entry or occupation and there will be no trespass in those circumstances. As I understand it, the submission was based simply on the proposition that although a trespass can arise as a result of entry onto land without permission, it is necessary then for the owner who becomes aware of it to take some positive action to prevent or stop the occupation or use. No authority was sited for that proposition, and I do not accept it.
[18] There may, however, be cases where, as Mr Parker submits, a Court could infer that land owners accept, or indeed consent to, the use of their land by third parties, with the consequence that they could not subsequently maintain a claim in trespass. That proposition must be correct: the Court would need to be satisfied however that, on the balance of probabilities, it had been the landowner’s intention to permit the use of the land. I do not consider that the facts of this case justify such a conclusion.
[19] Before dealing with the relevant facts I mention that the proceeding was commenced by notice of proceeding on an application by the plaintiffs for summary
judgment. The defendant responded by applying to strike out the statement of claim. Ultimately, neither application was pursued. There was a hearing on another interlocutory application which resulted in orders that I made for determination of certain questions prior to the trial. Again, a hearing on those questions did not eventuate, and an agreed position was able to be reached which it is not now necessary to discuss. The result of all this interlocutory activity however, was that various affidavits were filed, and in addition to the evidence that was given at the trial both parties invited me to refer to those affidavits and treat them as part of the evidence on the substantive issues.
[20] In an affidavit that he swore on 1 March 2002, Mr Waugh stated that:
We became aware of the tunnel shortly after taking possession in early 1994. This difficult[sic] to ignore given the constant road and foot traffic at the rear of our property. The existence of[sic] tunnel was without doubt an issue for us when we made this discovery, but not of high priority at the time as we had a two[sic] very young children, with a third child born in 1995. Our lives were then very busy with 3 children under the age of 4.
[21] It was in November 1996 that the Waughs and others in the area received a letter, dated 22 November, signed on behalf of the Chief of Defence Force. That letter read as follows:
Dear Sir/Madam
Proposed Designation Of Road Tunnel, Devonport Naval Base
A recent survey of the Naval Base undertaken to investigate compliance with the Resource Management Act identified the road tunnel which links the North and South Yards of the Naval Base as having never had appropriate legal provision made for it in terms of designation and sub-soil easements.
The tunnel was constructed during the second world war at first as an air raid shelter, then as a pedestrian link and later as a vehicle link to the storage area which was developed in what is now known as the North Yard.
In order to remedy the legal shortcomings associated with the tunnel, it is proposed that a Ministerial requirement for a designation for Defence Purposes be served on the North Shore City Council, and that sub-soil easements be concluded with private landowners whose properties overlie the tunnel.
It is in relation to these matters that I am writing to you as your property is one of those which overlie the road tunnel, as shown on the attached plan.
The position of the tunnel has routinely been depicted on plans of the naval Base over a number of years, so it is possible that you may have been aware of their existence, but not necessarily aware of the precise location in respect of your property.
In order to further discuss the matter you may wish to meet with Commander Karl Hutton, RNZN, or Duncan McKenzie of McKenzie Planning Consultants Limited, the firm which is preparing the material associated with the notice of requirement to designate. Should you wish to meet to discuss the matter, would you please contact Bernice Meyle at the Command Works Office, HMNZ Naval Base, on telephone 4455 319 to arrange a convenient time.
Yours faithfully
PMMcKEOWN Lieutenant Commander
For Chief of Defence Force
[22] That letter was followed by another dated 16 December 1996, on Royal New
Zealand Navy letterhead, signed on behalf of the “Maritime Commander” and dated
16 December 1996. The text of that letter was as follows:
To the Householder
Dear Sir/Madam,
PROPOSED DESIGNATION OF ROAD AND SERVICE TUNNELS, DEVONPORT NAVAL BASE
In a letter dated 22 November you were notified of the intention of the Minister of Defence to serve a notice of requirement to designate parts of the RNZN’s road and service tunnels which underlie Calliope Road and nearby private properties. Residents were invited to contact the Navy to arrange meetings to discuss the proposal. Some residents have taken up the invitation.
Surveying of the tunnels has been completed, but surveying of the land surface has been delayed pending notification of affected parties. It is now proposed that this be undertaken. As many titles are limited as to parcels there may be a need to enter properties to define where the existing boundaries are relative to the tunnels below. This information may potentially be of value to individual property owners should they wish to undertake any survey work in the future as the survey information will be lodged at the office of the chief surveyor and will be in the public domain.
A structural survey of the road and service tunnels is underway. The information will be made available to affected parties in the new year.
Once again, should you have any enquiries you are welcome to contact
Bernice Meyle, the RNZN’s Planning Officer, to arrange a meeting with
either Cdr Karl Hutton, the Command Works Officer, or Mr Duncan McKenzie, the planner involved in drafting the Ministerial notice. The telephone number is 4455 319.
Yours faithfully, Bernice Meyle
For Maritime Commander
[23] Mr Waugh replied to these two letters on 24 December 1996. His letter amounted in part, to a request for further information. However, he did refer to the “obvious detrimental impact” on the plaintiff’s property value were an easement to be granted and pointed out that when the property had been purchased, the Land Information Memorandum that had been sought from, and provided, by North Shore City Council had made no mention of the existence of any other interest in the property. The letter observed also that:
As we do not intend to grant the easement there is also no consent available to enter our property and survey the land surface.
[24] By letter dated 25 February 1997, again on Royal New Zealand Navy letterhead, the Waughs (and other affected land owners) were advised of receipt by the Navy of a report prepared by Woodward Clyde (NZ) Ltd. The report had described the geology of the area and assessed the stability of the tunnels. In relation to the road tunnel, which was considered to be stable, it was observed in the letter that the report recommended that certain restrictions should apply to the use of land above the tunnel. The letter explained:
These are that there be no work involving piles, bore holes or wells to a depth greater than seven metres below the existing surface and no work involving the excavation of material greater than three metres below natural ground level.
[25] It was about this time that Mr Waugh organised a number of local residents’ meetings and as he put it “became involved in trying to ascertain exactly what was going to happen, and how we will be compensated”. On 17 March 1997 he wrote to his affected neighbours in the following terms:
To The Householder
Re: TUNNELS
Thanks for the high level of response to the mail drops and to those who were able to attend our first meeting.
I have spoken to Brian Sawyer at R.A.F.T. and am arranging a meeting for this week to formally request that those affected by the service and road tunnels can join with R.A.F.T.
For the Minister of Defence to be able to serve his notice of Redesignation (ie Residential “A” to “Defence Purposes”) on the North Shore City Council a survey must be completed of all private properties.
Whilst to date this has been on a voluntary basis for those of us who have refused consent we must anticipate compulsion via the provisions of the Public Works Act.
To avoid that you can serve a simple Trespass Notice, by registered mail on the Navy and a copy to the Police.
Our aim must be to stay in control of the situation and force negotiation and fairness to all.
Also attached is a list of neighbours’ addresses, names and phone numbers for your files.
I’ll report to you all after the meeting. John Waugh
[26] On the following day he wrote to the Maritime Commander of the Navy, invoking s 4 of the Trespass Act 1980. The full text of that letter was as follows:
18 March 1997
John & Karen Waugh
18 Rutland Road
Devonport
AUCKLAND
Bernice Meyle
Maritime Commander New Zealand
Maritime Headquarters
Naval Base
Private Bag 32901
Auckland
We, the above, give warning to the NZDFs and/or its contractors and/or its servants, under Section 4 of the Trespass Act 1980 to stay off our property as described above.
Signed: …………………………… John & Karen Waugh
cc: New Zealand Police
Takapuna
[27] Apparently, as a result of Mr Waugh’s initiative, other affected land owners wrote to the Navy in similar terms. Ms Bernice Meyle was, at the time, employed at the Devonport Naval Base as the Environmental Planning Manager within the Naval Land and Facilities Group, the department within the navy responsible for all planning, environmental, land and facilities management and maintenance work for the naval estate. She gave evidence to the effect that seven residents, including Mr Waugh, had sent trespass notices with effectively the same wording at that time. She observed, however, that neither the Waugh’s notice, nor any of the other notices referred to the tunnel itself or its use by the navy; and she expressed the opinion that the letters had been “clearly aimed at preventing Woodward Clyde and the surveyors from entering onto the surface of the properties concerned to undertake the necessary investigations”.
[28] Perhaps understandably, in view of the immediate genesis of the trespass notices, the navy took them simply as refusal of access for surveyors to the affected properties, notwithstanding the fact that the actual wording of the letters would have been broad enough, as I see it, to prevent on-going use of the tunnel itself. The point now emphasised by Mr Parker is that the context in which the notice was given was that of the proposed survey. Further, Mr Parker submitted that the notice was subsequently withdrawn, never relied on or referred to in any of the subsequent correspondence between the parties (notwithstanding that the use of the tunnel continued unabated), and that, having been issued under the Trespass Act 1980, the notice must have expired two years’ after it was issued under s 4(4) of that Act.
[29] Overall, it was Mr Parker’s submission that the record of correspondence between the parties, and of their discussions at various meetings, showed that the plaintiffs had always been willing to grant an easement (although they might perhaps have preferred the NZDF to purchase their entire interest in the property), but were merely concerned about the adequacy of compensation and any restrictions that the
grant of an easement might cause for their use of the property. Mr Parker submitted that the records show that as the negotiations for the grant of the easement continued, the plaintiffs were quite content for the Navy’s use of the tunnel to continue.
[30] Mr Parker relied in particular, on a letter that Mr Waugh had written to a Captain Franklin of the Navy, on 8 December 1997. By that stage, as the letter confirmed, the plaintiffs had indicated consent to both survey and engineering assessment of their property. That letter was responding to a letter that Captain Franklin had written to Mr Lyons, on 5 December 1997. Mr Lyons was the plaintiffs’ then solicitor. In the Franklin letter, there had been mention of the extent to which the Crown would pay the Waugh’s costs associated with the acquisition of an interest in their land, and the letter had also confirmed that the Crown would pay legal costs, provided however, that any payment was “predicated on a landowner being willing to negotiate”. In the letter of 8 December 1997, signed by Mr Waugh, he said that he and his wife accepted that the payment of reasonable legal costs by the Crown was predicated on their willingness to negotiate. Mr Parker’s point is that the letter was not expressed to be in any sense conditional upon the Navy not using the tunnel, or paying for its past use.
[31] Next, Mr Parker referred to a meeting that had taken place on 22 January
1999. In his brief of evidence read to the Court Mr Waugh placed this meeting in mid-1998, but he accepted under examination by Mr Gray that the meeting in fact occurred in early 1999. It was Mr Lucie-Smith’s evidence that the meeting took place on 22 January 1999 and he referred to notes that he took at the meeting bearing that date. I accept his evidence in that respect. Mr Lucie-Smith said that at no stage during the meeting had Mr Waugh raised the issue of trespass by the Navy by virtue of its use of the tunnel, nor had he stated that that use must cease.
[32] Mr Waugh did not give evidence to the contrary. However, he said that Mr Lyons, who had been at the meeting, towards its end, leaned forward across the table at which the Waughs and Naval representatives had been gathered, saying that the Navy appeared not to understand that it had no legal interest in their property and had no right to use it.
[33] It was Mr Lucie-Smith’s evidence that he could not recall Mr Lyons making those comments, but he stopped short of denying that the comments had been made. Ms Meyle, was also present at the meeting. It was her evidence also that she could not recall the comments made by Mr Lyons, but again her evidence stopped short of maintaining that he had not made the remarks. Again, in other respects, Ms Meyle’s evidence was consistent with that of Mr Lucie-Smith to the effect that at the meeting there had been no assertion made by Mr Waugh that the Navy was trespassing by using the tunnel, or that he required the Navy to cease its use. I accept the account given by all three witnesses. They are not necessarily inconsistent, and each of them appeared to me to be honestly expressing their recall of the discussion. I find that, although there was no specific mention of trespass, there had been an assertion by Mr Lyons that the Navy had no right to use the tunnel.
[34] Mr Parker next referred to a facsimile that had been sent by Mr Lyons on 16
July 1999. The facsimile had been addressed to Ms Meyle. It was in this letter that it was recorded that Mr Waugh was quite amenable to access being provided, “provided it is for survey purposes only”. Mr Parker’s submission, which I accept, is that the fundamental issue raised by the facsimile concerned the nature of the restrictions to the use of the Waugh property arising from the arrangements under discussion to authorise its future use.
[35] Next, Mr Parker referred to a letter dated 3 October 2000 that Mr Waugh had written to Phillips Fox who were advising NZDF in relation to legal means by which the existence of the tunnel could be formalised. Mr Parker emphasised observations that Mr Waugh had made in the letter to the effect that the Waughs had “always been willing to reach an agreed position”. He also pointed to the suggestion made in the letter (reflecting previous discussions) that the plaintiffs’ property should be subdivided, with NZDF acquiring the northern portion of the land in order to “protect” the tunnel, with a lease back in perpetuity to the Waughs with appropriate restrictions or covenants in the lease.
[36] Mr Parker also referred to letters of 19 February and 5 March 2002 that had been written by Mr Thomas, a barrister by then employed on behalf of the plaintiff. Both letters were addressed to Phillips Fox. The former contained a number of
comments about the detail of the wording of easement transfers that had been made available in draft. The latter dealt with the terms of a restrictive covenant, a memorandum of encumbrance and the relinquishing of the Waughs’ “right of resumption” under s 40 of the Public Works Act. Mr Parker’s point was that both letters were in furtherance of negotiations for a resolution of the issue.
[37] Again, Mr Parker referred me to a facsimile dated 12 August 1998 which had been sent by Mr Lyons to Mr Lucie-Smith. That letter contained the following statement:
Let me make it clear at the outset that there has never been any suggestion of legal proceedings to prevent the NZDF from using the road tunnel.
[38] Referring to questions that had been put to Mr Lucie-Smith in cross- examination, Mr Parker maintained that the discussions between Mr Lyons and Mr Lucie-Smith had not involved any suggestion that the plaintiffs had an intention of seeking damages for trespass. While that had been a matter that Mr Lucie Smith had rightly considered as a possibility, there was no threat and no proceedings had been contemplated until Mr Thomas became involved in the matter and he pointed out that the effective delay in raising the issue of trespass had, of course, been to maximise the plaintiffs’ claim for damages.
[39] Mr Thomas had first entered the lists for the plaintiffs in a letter that he wrote on 2 November 2000 to Phillips Fox. At the conclusion of that letter, which had in large part been directed to the draft easement documentation, he wrote as follows:
… my clients will be seeking a licence fee for the unlawful use of their land since the date of their purchase, which I understand commenced in 1992. Such payment may be claimed under the line of authority culminating in Nissan v A-G [1970] AC 179 (HL) and Inverugie Investments Ltd v Hackett[1995] 1 WLR 713 (PC). It may be appropriate for independent valuation to assess the amount payable, but I will have to seek instructions in this regard.
Obviously the payment of a licence fee (as a consequence of the trespass) and compensation for the taking (under the Public Works legislation) are two separate matters. The fee is mentioned at this stage to ensure this issue is not lost sight of in the ensuing negotiations.
[40] Mr Parker’s submission was that not only had there been acquiescence up until that point, but the letter itself did not amount to a withdrawal of such acquiescence. That was based on the propositions that there was no request to stop using the tunnel, and that the letter by Mr Thomas essentially “ignored the previous dealings and conduct”. Further, the letter made no reference to the trespass notice, nor to the acknowledgement that Mr Lyons had made in August 1998 that there had never been any suggestion of legal proceedings to prevent NZDF from using the tunnel.
[41] In addition, Mr Parker submitted that while the issue of proceedings in March
2002 could be evidence of a withdrawal of consent, he pointed out that negotiations between the parties had continued thereafter with the plaintiffs signing an agreement to grant an easement in July 2002 and then acknowledging in February 2004 that the terms of the easement had been settled so that the valuation exercise could not take place. He submitted that the plaintiffs could not have it both ways, both offering to grant an easement and acknowledging that the terms are settled, whilst at the same time asserting trespass.
[42] I do not consider that the plaintiffs’ stance may properly be described as an attempt to “have it both ways”. It seems to me that once the plaintiffs became aware of both the existence of the tunnel and the fact that NZDF had no proper authority for the use of the tunnel, they maintained a consistent stance which was that in return for proper compensation, they would do what was necessary to give lawful authority to NZDF for the presence and use of the tunnel. Negotiations became protracted and ultimately led to the issue of the present and other proceedings. However, it was not inconsistent for the plaintiffs to negotiate about and grant an easement which would have the effect of authorising the future use of the tunnel whilst wanting to be compensated for the fact that hitherto the tunnel had not been lawfully on their land nor lawfully used by NZDF.
[43] The correspondence and discussions on which Mr Parker relied do not in my view establish that the tunnel was either present or used by NZDF with the acquiescence of the Waughs. With particular reference to the matters on which Mr Parker relied, I observe that:
a) Although the context of the trespass notice of 18 March 1997 was, as Mr Parker submitted, a request that had been made by NZDF for access to the Waugh and other affected properties for the purposes of survey, nevertheless the notice that was sent was plainly on its face a trespass notice. The sending of that notice is inconsistent with the suggestion that the Waughs were intending to consent to on-going use of the tunnel or accepting that that use should occur. Nor do I think the Waughs’ later agreement to give access to their property, for survey purposes only, can be inferred to be acquiescence to on-going use of the tunnel.
b)The subsequent expiry of the trespass notice (by operation of s 4(4) of the Trespass Act 1980) and the lack of subsequent reference to it do not assist the defendant. Those facts, together with on-going negotiations and discussions in relation to the grant of an easement authorising the use of the tunnel do not indicate acquiescence by the plaintiffs, but simply that they were prepared to negotiate suitable arrangements pursuant to which the on-going use of the tunnel could be properly and lawfully provided for. The Waughs’ stance that they were prepared to reach an agreement is not inconsistent with the desire on their part to be appropriately compensated, including compensation for past use.
c) Forbearance to sue also cannot be equated with acquiescence. As Mr Gray pointed out, it would not have been possible to obtain an injunction against the Crown. In any event, Mr Lyons’ facsimile of
12 August 1998 advising that there had never been any intention to bring legal proceedings to prevent the use of the tunnel is not to be seen as advice that the plaintiffs consent to the ongoing use. The statement is by no means inconsistent with a desire to be paid for the use of their property, in return for which past trespasses would be forgiven.
d)None of the other matters to which Mr Parker referred are sufficient, taken either singly or together to justify an inference that the Waughs accepted or consented to the on-going use of the tunnel. I accept that they indicated that they would not take proceedings to prevent the NZDF from using the tunnel. I do not accept that that was equivalent to consenting to the on-going use.
[44] In the circumstances, I reject the defendant’s argument that the plaintiffs’ conduct was such as to prevent them alleging bringing a claim of trespass to land against the defendant for the period from 6 March 1996 down to 2 July 1996.
Damages
[45] In the amended statement of claim, the plaintiffs seek, amongst other things, damages of $487,864, said to be “reasonable compensation for the use of the tunnel by the defendant” over the period from 6 March 1996 down to 2 July 2004, together with interest on that amount. That following particulars were given in paragraph 7 of the amended statement of claim:
1. Compensation should be paid for the period between 6
March 1996 and 2 July 2004.
2. Compensation to all landowners affected for use of the tunnel should be assessed at 50% of the benefit to the defendant of that use. The plaintiffs’ claim in respect of the benefit to the defendant of use of the tunnel is Column 1 in Schedule 1 and calculation of 50% in Column 3 in Schedule 1.
3. The plaintiffs should receive as compensation 36.75% of the amount the defendant should pay to all landowners for use of the tunnel. The proportion payable to the plaintiffs is determined by reference to:
(a) Inability of the to[sic] plaintiffs to subdivide or otherwise develop and enjoy their land by reason of the location of the tunnel in relation to their land;
(b) Traffic noise; (c) Vibration;
(d)Subsidence and the risk of subsidence to the plaintiffs’ land by reason of the tunnel; and
(e) The risks associated with possible carriage through the tunnel of dangerous goods.
The plaintiffs’ claim for compensation is calculated in Column 3 of
Schedule 1 attached to this statement of claim.
4. The plaintiffs are entitled to receive as additional compensation for the presence of services in the tunnel an amount equivalent to a services easement rental. This is shown as Column 4 in Schedule.
Any rental would have been paid monthly in advance. Interest in respect of compensation should run at the applicable rate set out in the Judicature Act 1908 from the date on which each rental payment would have been made.
A registered valuer, called by the plaintiffs, Mr Walker, stated that the correct figure for the purposes of paragraph 3 of those particulars would be 36.2 per cent, not 36.75 per cent. The result would be a slight reduction in the quantum of the plaintiff’s claim, were they otherwise successful. I will return to that matter later.
Legal basis of the claim
[46] As earlier explained, the claim was based upon the clear choice made by the plaintiffs to seek damages assessed on the basis of the benefit received by the defendant as the trespasser rather than on the more usual tortious basis of compensation for loss or injury.
[47] The availability of that option in cases of trespass to land (and in some other claims) has long been recognised. There is a succinct and useful summary of the circumstances in which such compensation is appropriate in Attorney-General v Blake [2001] 1 AC 268. At 278, Lord Nicholls said:
As with breaches of contract, so with tort, the general principle regarding assessment of damages is that they are compensatory for loss or injury. The general rule is that, in the oft quoted words of Lord Blackburn, the measure of damages is to be, as far as possible, that amount of money which will put the injured party in the same position he would have been in had he not sustained the wrong: Livingstone v Rawyards Coal Co (1880) 5 AppCas 25,
39. Damages are measured by the plaintiff’s loss, not the defendant’s gain. But the common law, pragmatic as ever, has long recognised that there are
many commonplace situations where a strict application of this principle would not do justice between the parties. Then compensation for the wrong
done to the plaintiff is measured by a different yardstick. A trespasser who enters another’s land may cause the landowner no financial loss. In such a case damages are measured by the benefit received by the trespasser, namely, by his use of the land. The same principle is applied where the wrong consists of use of another’s land for depositing waste, or by using a path across the land or using passages in an underground mine. In this type of case the damages recoverable will be, in short, the price a reasonable person would pay for the right of user: see Whitwham v Westminster BrymboCoal and Coke Co[1896] 2 Ch 538, and the "wayleave" cases such as Martin v Porter(1839) 5 M & W 351 and Jegon v Vivian (1871) LR 6
ChApp 742. A more recent example was the non-removal of a floating dock, in Penarth Dock Engineering Co Ltd v Pounds[1963] 1 Lloyd’s Rep 359.
[48] Lord Nicholls went on to note that the same principle was applied in the case of wrongful detention of goods noting that:
… the principle has a distinguished ancestry. The Earl of Halsbury LC famously asked in The Mediana [1900] AC 113, 117, that if a person took away a chair from his room and kept it for 12 months, could anybody say you had a right to diminish the damages by [2001] 279 1 AC A-G v Blake (HL(E)) Lord Nicholls of Birkenhead showing that I did not usually sit in that chair, or that there were plenty of other chairs in the room? To the same effect was Lord Shaw's telling example in Watson, Laidlaw & Co Ltd v Pott, Cassels and Williamson (1914) 31 RPC 104, 119. It bears repetition:
"If A, being a liveryman, keeps his horse standing idle in the stable, and B, against his wish or without his knowledge, rides or drives it out, it is no answer to A for B to say: 'Against what loss do you want to be restored? I restore the horse. There is no loss. The horse is none the worse; it is the better for the exercise.'"
Lord Shaw prefaced this observation with a statement of general principle: "wherever an abstraction or invasion of property has occurred, then,
unless such abstraction or invasion were to be sanctioned by law, the law ought to yield a recompense under the category or principle ...
either of price or of hire."
That was a patent infringement case. The House of Lords held that damages should be assessed on the footing of a royalty for every infringing article. (Ibid 278-279)
[49] An illustration of the approach in the case of trespass to land may be seen in the decision of the Court of Appeal in Whitwham v Westminster Brymbo Coal and Coke Co. [1896] 2 Ch 538. There the defendant had tipped refuse from a colliery on their land onto a neighbouring property which, at the trial, was declared to be land belonging to the plaintiffs. An injunction was granted to restrain the defendants from further tipping, they were ordered to deliver up possession of the land to the plaintiffs and an inquiry was directed into the damages sustained by the plaintiffs by
virtue of the defendants’ trespass. Subsequently, it was held that an amount should be paid representing diminution in the value of the land caused by the trespass, and also a sum calculated on the basis of the reasonable value of the land to the defendant for tipping purposes over the period that they had used it. At 541-542
Lindley LJ said:
It is unjust to leave out of sight the use which the defendants have made of this land for their own purposes, and that lies at the bottom of what are called the way-leave cases. Those cases are based upon the principle that, if one person has without leave of another been using the other’s land for his own purposes, he ought to pay for such user.
[50] At 543, Rigby LJ observed:
We cannot take an account of the profits derived by the defendants from such user; and in fact it is a matter of indifference whether the defendants make a profit or loss out of the transaction … the principle is that a trespasser shall not be allowed to make use of another person’s land without in some way compensating the other person for that user. Where the trespass consists in using a way over the plaintiff’s land, a convenient way of assessing damages may be an inquiry as to way-leave, which, when there is a customary rate of charge for way-leave in the locality, may furnish a convenient measure of damages; but the principle is that in some way or another, if you can do nothing better than by rule of thumb, the trespasser must be charged for the use of the land.
[51] More recent illustrations of the principle may be seen in Penarth Dock Engineering Co. Ltd v Pounds [1963] 1 Lloyd’s Rep 359, Swordheath Properties v Tabet [1979] 1 WLR 285, Stoke-on-Trent City Council v W & J Wass Ltd [1988] 1
WLR 1406 and Inverugie Investments Ltd v Hackett [1995] 1 WLR 713.
[52] In New Zealand the leading relevant authority is Roberts v Rodney District Council [2001] 2 NZLR 402, and on this case Mr Gray placed considerable reliance. In that case the council had placed a rising sewerage main on the plaintiff’s land, an act which was found to constitute a trespass.
[53] An injunction requiring the council to remove the pipe was refused in the Court’s discretion. However, Barker J, referring to many of the authorities which I have already cited, held that damages for wrongful use were available to a victim of trespass to land in New Zealand. He further held that a plaintiff in such a case must make an election, prior to the judgment, between damages to compensate loss on the
one hand, and damages for wrongful use on the other. The distinction between the two kinds of damages emerges clearly at paragraphs [25] and [27] of the judgment in which it was said:
[25] Where there is actual damage to a person’s land, the award of the cost of reinstatement or diminution in value is based upon the compensation principle which requires that the victim of a tort be placed in the same position as he or she would have been placed had the tort not been committed. Thus, the award is designed to compensate the plaintiff for the loss suffered at the hands of the tortfeasor.
[26] Damages for wrongful use, on the other hand, are sometimes said to rest upon a user principle: “if one person has without leave of another been using that other's land for his own purposes, he ought to pay for such user” (Whitwham v Westminster Brymbo Coal and Coke Co [1896] 2 Ch 538 at pp
541–542 per Lindley LJ). See Salmond and Heuston on The Law of Torts
(21st ed, 1996) p 50. See also McGregor on Damages (16th ed, 1997) p
1507.
[27] An essential difference between compensatory damages and wrongful use damages is that recovery of the latter does not require the plaintiff to prove loss. Thus, it is not necessary for the plaintiff to demonstrate that he or she would have applied the land to some other use and earned income therefrom. See Penarth Dock Engineering Co Ltd v Pounds at p 361; Swordheath Properties Ltd v Tabet; Stoke-on-Trent City Council v W & J Wass Ltd [1988] 3 All ER 394 at p 402; Inverugie Investments Ltd v Hackett. In that sense, damages for wrongful use do not fit neatly with the compensation principle which governs the assessment of damages in most areas of tort law.
[54] In the following paragraphs Barker J discussed some more recent English authorities and in particular Ministry of Defence v Ashman [1993] 2 EGLR 102 in which Hoffman LJ described damages for wrongful use as restitutionary in nature. The same approach was taken in McGregor on Damages (17th ed, 2003) at para.12-
011. Barker J took a different view in Roberts on the basis that it was not necessary
for it to be shown that a defendant had profited from the wrongful use. He preferred what had been said by Lord Lloyd of Berwick in Inverugie Investments Ltd v Hackett, supra, at 845:
The plaintiff may not have suffered any actual loss by being deprived of the use of his property. But under the user principle he is entitled to recover a reasonable rent for the wrongful use of his property by the trespasser. Similarly, the trespasser may not have derived any actual benefit from the use of the property. But under the user principle he is obliged to pay a reasonable rent for the use which he has enjoyed. The principle need not be characterised as exclusively compensatory, or exclusively restitutionary; it combines elements of both.
[55] Barker J’s approach has effectively been endorsed by the observations of
Lord Nicholls in Attorney-General v Blake, supra at 279:
Recently there has been a move towards applying the label of restitution to awards of this character: see, for instance, Ministry of Defence v Ashman [1933] 2 EGLR 102, 105 and Ministry of Defence v Thompson [1933] 2
EGLR 107. However that may be, these awards cannot be regarded as conforming to the strictly compensatory measure of damage for the injured person’s loss unless loss is given a strained and artificial meaning. The reality is that the injured person’s rights were invaded but, in financial terms, he suffered no loss. Nevertheless the common law has found a means to award him a sensibly calculated amount of money. Such awards are probably best regarded as an exception to the general rule.
[56] In assessing damages for wrongful use, Barker J held that although it is not necessary for a plaintiff to prove loss, nor to show that the trespasser benefited from the commission of the tort, actual profit and actual loss are relevant to the assessment of damages. The correct starting point should be the price that a reasonable person would pay to purchase a right allowing him or her to do that which would otherwise be a trespass. The reasonable price for such a right will ordinarily be its market value (Swordheath Properties Ltd v Tabet, per Megaw LJ, supra at 242). Consideration should then be given as to whether there are factors which might cause the Court to move from that figure in an upwards or downwards direction. It is at that point that a plaintiff’s actual loss and a defendant’s actual gain might be relevant. Barker J continued:
These factors will likely assume a greater significance in cases where there is no readily definable market value. The absence of market value suggests that there is no developed market for the right in question. Where there is no developed market, the bargaining power of the respective parties becomes more important in determining the hypothetical price for the right in issue.
[57] Barker J spoke of the need for a Court to weigh up the competing factors in the parties’ circumstances in order to come to an assessment of damages which “reflects the justice of the case” (para.[33]).
This Case
[58] Mr Gray submits that the Roberts approach should be applied here. As in that case, he submits that in order to determine a reasonable price for the right to use
the plaintiff’s land it will be necessary to take into account the expense of other options available to the defendant. Thus, Barker J had held at paragraph [38] of Roberts that this would be the “principle criterion to determine the reasonable price of the right of passage”. That meant, in accordance with Barker J’s judgment, that the different expenses associated with each option had to be considered on the basis that a cost saving could be regarded as a “profit” to the defendant and the amount of that “profit” would be relevant to determining what the defendant would pay to acquire the right.
[59] Mr Gray however also conceded, in accordance with Barker J’s judgment in Roberts, that particular vulnerability of the trespasser arising from the construction of the balance of the facility will not be relevant. Thus a reasonable price for the right of passage is one that would be negotiated before construction of the tunnel had begun. Subsequent events, which might have the effect of increasing the plaintiffs’ bargaining power should not be taken into account. With that qualification, Mr Gray submitted that:
a) The difference between the total cost of the trespassing facility and the total cost of the next least expensive option was the potential profit of the defendant;
b)the trespasser cannot reduce its liability by saying that had it exercised its statutory powers properly then it would have been in a stronger bargaining position and so should pay less; and
c) a fair and reasonable proportion of the profit the trespasser should be obliged to pay was 50 per cent.
[60] The last point was subject to the qualifications properly made, that the Waughs in this case could not seek an entitlement to the full 50 per cent of the “profit”, i.e. the benefit to NZDF accruing from the use of the tunnel. That is because, as has previously been explained, theirs was only one of a number of properties under which the tunnel passed, albeit that (as I will later discuss) it was probably the most affected because, under it, the tunnel was closest to the surface.
[61] Mr Parker submitted that the facts of Roberts were such that the case could readily be distinguished, and that its approach should not be repeated on the present facts. He submitted that Roberts had proceeded on the basis of an assessment of damages as to the reasonable price that would be paid to purchase the permission to commit the trespass and to “purchase a permanent right of passage”, based on the value of an easement. Here however, the latter issue is the matter to be determined separately between the present parties in the Land Valuation Tribunal proceedings. Further, Mr Parker argued that in Roberts there had been no regard to the actual use of the sewerage pipe. Rather, that case had proceeded on the basis of analysis of the comparative costs of building the sewer in a different location than the one chosen by the council, i.e. a one-off capital payment for the right to construct a pipe.
[62] As was recognised by Barker J at paragraph [35] of the Roberts decision, the starting point must always be to define the right for which the plaintiff seeks compensation. Here, the statement of claim plainly proceeds (and Mr Gray put the plaintiffs’ case solely on this basis) on the basis that the compensation sought is for use of the tunnel in the period from 6 March 1996, down to the date on which easement took effect, 2 July 2004. A claim based on the construction of the tunnel has not been mounted, presumably because that was an event which preceded by many years the plaintiffs’ acquisition of the property. Similarly, the plaintiffs have not sought to pursue their claim on the basis of the continuing presence of the tunnel which in itself might be regarded as an on-going trespass of the kind that was the subject of compensation in Roberts.
[63] However, I do not consider that the principles discussed in Roberts can be limited only to circumstances that parallel the facts of that case. The decision is simply one illustration of a claim for “wrongful use” damages, and the cases show that such claims have been successfully mounted in a variety of circumstances and that the compensation awarded has been for a variety of activities. That is hardly surprising, since trespass to land can be based on interference of a wide variety of kinds. What is necessary in each case is that the Court ascertains what it is that the defendant would have been prepared to pay to purchase a right allowing him or her to commit the act of trespass on which the plaintiff relies. Here, that is the right to
use the tunnel constructed on the plaintiffs’ land over the period of a little over eight years during which that use continued.
[64] In assessing that price, however, care must be taken to ensure that the right is not calculated on the basis of the amount that would have been potentially paid in respect of purchase of a permanent right of passage. Future use is to be pursuant to an easement, and compensation for the grant of the easement is to be assessed in proceedings in the Land Valuation Tribunal, as Mr Parker sought to emphasise. However, the fact that the parties have reached agreement on the grant of the easement with the effect of authorising the on-going presence of the tunnel on the land, and its use, does not mean that the plaintiffs have lost a right to be compensated in respect of the use of the tunnel that occurred prior to the effective date of the grant of the easement.
[65] Having acknowledged that the approach must avoid any double-counting, and must only compensate the plaintiffs in respect of a limited period for which the claim is advanced, I do not see any reason why a claim for wrongful use damages should not succeed in the present case.
The defendant’s approach
[66] Without pointing to any authority justifying such an approach, Mr Parker submitted that if the plaintiffs were entitled to any damages (which, of course, the defendant disputed), then any amount payable should be calculated on the basis of a reasonable licence fee calculated in the normal way on the basis of the area included in the licence and the value of the land being used. Consistent with his submissions, the evidence that was called by the defendant from Mr Dean, valued the right in accordance with the methodology that I will now summarise.
[67] First, he calculated the total easement area necessary for the tunnel as 3,060 square metres. He noted that the tunnel itself is considerably narrower than this, but it was his opinion that for practical purposes the easement width should be used in the calculation. Then, he calculated that the area of the plaintiffs’ land subject to the
easement is 255 square metres. That amounted to some 8.33 per cent of the total area of the easement footprint.
[68] Next, Mr Dean maintained, as a “matter of logic”, that in the case of a tunnel, every square metre is as important as every other square metre because with just one of them removed, the tunnel would cease to function, and there could be no right of passage.
[69] On this basis, Mr Dean suggested that there were two possible bases which would provide a proper value for the right in question. The first, was to take the value of what he described as a typical small site in this locality, which he said was about $520 per square metre. He then expressed the view that that should be adjusted downwards by 75 per cent. This was because 25 per cent of the per square metre value of the surface land was, if anything, generous since in the “normal course of events, subsurface rights are generally worthless”. That left him with a figure of $130 per square metre. Then, he postulated a rental rate of 6.5 per cent of that sum to arrive at an annual rental value of $8.45 per square metre. To that he applied the multiplier of 255 square metres derived as I have earlier described, to arrive at $2,155 per annum as the value of the right.
[70] The second method suggested by Mr Dean was by reference to compensation parameters determined for other properties where the easement area is of comparable size. Here, Mr Dean was referring to a separate valuation exercise which had been carried out in relation to easements granted and valuations arrived at in respect of other properties under which the tunnel passes. Analysis of the compensation figures paid in five of those cases, showed valuations ranging from $102.56 per square metre of easement area to $140.18 per square metre. However, as his evidence explained, those figures of compensation had been based on assessed loss of saleability, and had been based on the capital values of the properties concerned, that is, the valuations had taken into account improvements. In order to arrive at a value for the land alone, it was Mr Dean’s evidence that it would be generous to assume that the element of the value attributable to the land was approximately 60 per cent of the capital value. On this basis, an average compensation rate for
improved property of $122.43 per square metre would give a value of $73.46 per square metre attributable to the land.
[71] Again, applying a rental factor of 6.5 per cent to such a rate would result in
$4.77 per square metre, and by applying the 255 square metre multiplier for the area of the Waughs’ property within the tunnel easement, an annual rental of $1,218 per annum would be derived.
[72] Mr Dean mentioned yet a third method, which he was rather inclined to discount. That was to consider other examples where easements had been granted other than over the surface of the land. He mentioned two in particular, one being a subsurface easement in respect of the Auckland Casino, and the other concerning a development that had been constructed, also in Auckland City, with balconies overhanging a public road subsequently authorised under an easement. Adapting the example of those two cases would yield figures between $2,353.65 per annum to
$9,080 per annum in the present case, but as I have mentioned, Mr Dean was doubtful that this was an appropriate approach, and the plaintiffs did not call evidence to the contrary.
The plaintiffs’ approach
[73] The approach taken by the plaintiffs’ valuer, Mr Walker, was very different. To a significant extent, it was underpinned by an analysis carried out by another witness called by the plaintiffs, Mr John Parlane. Mr Parlane is a traffic engineer and transportation planner with some 17 years’ experience, whose expertise includes evaluation of the economic benefits of road and rail projects. It is convenient to begin with a summary of his evidence which in its central conclusions was unchallenged.
[74] Essentially, Mr Parlane’s brief had been to assess the traffic benefits of the tunnel under the plaintiffs’ land. In order to carry out that task, Mr Parlane analysed the travel time and vehicle operating cost benefits of the tunnel. That exercise involved him identifying alternative routes that would be available to NZDF to link the North and South Yards of the Naval Base were the tunnel not there, and
assessing their benefits and costs in comparison with the tunnel. The three alternative routes that he analysed may conveniently be referred to as the Victoria Road, Kiwi Road and Cautley Street options (taking their names from streets that would be used for alternative routes of travel between the two yards).
[75] His work involved a number of assumptions, which he set out in paragraphs
4.2 to 4.4 of his brief of evidence as follows:
4.2I have assumed that the Navy needs to have a secure ring fence around the perimeter of their activities. Furthermore I have assumed that there is also a need to be able to stop and even search vehicles entering and leaving the dockyards. I consider that this need for security could result in delays at times as it could be necessary occasionally to stop and search all vehicles when security is required at a high level. This could result in traffic entering or leaving the site having to wait in a queue.
4.3I have assumed that the value of time for people working and not at work is the same to the Navy as it is to the rest of the Community. This assumption means that the data available in the Transfund Project Evaluation Manual for travel time benefits can be applied to this study.
4.4I have assumed that there would be no change in the number of people travelling between the North and South Dockyards if the tunnel was not available. I have also assumed that the current choice of travel mode would also be unchanged if the tunnel was not available. These assumptions mean that my study is confined to evaluating the impact of longer or shorter trips and excludes additional costs or benefits that might arise from increasing car travel or from having to forgo travel between the two dockyards as a result of the tunnel not being available.
[76] Mr Parlane carried out a survey of traffic through the tunnel on 24 May 2005. He used the data so obtained as well as information that he gathered from a report that had been prepared by another traffic engineer, Mr Selwyn Green, for the NZDF in 1994. A summary of the data obtained in both cases was set out in his Table 1 as follows:
Table 1 – Surveyed Traffic Flow Using the Tunnel
Survey Date
Cars/ Motorcycles
Trucks
Bicycles
Pedestrians
Total
Movements
24/05/05
624
42
77
290
1033
10/06/94
544
23
165
399
1131
All data is 7am to 5pm
[77] Mr Parlane reviewed the location of the existing entrances to both the North and South Yards. In his view, the travel time benefits of the tunnel were properly to be estimated from the change in travel time between the alternative routes and the travel time of using the tunnel. The travel times for the alternative routes were estimated by him on the basis of an average speed of 22.5 kilometres per hour within the dockyards and actual average speeds on the alternative routes as driven by him. Trip lengths were calculated on the basis of central points in the southern and northern yards respectively. He illustrated on a figure in his brief of evidence the travel paths that he had considered as well as the central points within each of the yards that he measured distances from. He calculated the value of travel time in dollars per hour on the basis of the Transfund New Zealand Project Evaluation Manual (which is apparently in common use by those required to assess road and transport projects) and on the assumptions that
a) all truck trips between the bases would be work-related;
b) all car, motorcycle, bicycle and pedestrian trips occurring between
8.00 a.m. and 4.00 p.m. would be work trips; and
c) all trips occurring prior to 8.00 a.m. and after 4.00 p.m. would be non- work trips.
[78] He then calculated travel time values for 2004 based on the data provided in the most recent version of the Project Evaluation Manual and 1994 values from an
earlier version of the Manual. The results of his calculations were given in Table 4 of his brief of evidence which again I set out below:
Table 4 – Travel Time Costs in $/Year
Option
Year
Travel Time cost per Year
The Tunnel 1994 $311,373 2005 $301,772 Using Victoria
Road
1994 $560,444 2005 $595,562 Using Kiwi
Road
1994 $547,918 2005 $577,041 Using the
Cautley St
Entrance
1994 $485,288 2005 $484,435
[79] As to vehicle operating costs, on the basis of Mr Parlane’s calculations these would have been $16,843 and $19,778 for the tunnel in 1994 and 2005 respectively. That was a significant benefit in the use of the tunnel compared with other options which ranged from $40,703 to $69,008 in 1994 and $47,797 to $81,035 in 2005. Mr Parlane’s next step was to carry out what he described as a straight line interpolation to obtain values for each of the calendar years between 1994 and 2005 and subtracting the tunnel option from the alternative options so as to obtain the benefits for each year. Adding the benefits for each alternative over the period covered by the plaintiffs’ claim gave $2,751,370 as the benefits of the tunnel over the Victoria Road option, $2,556,359 as the benefits of the tunnel over the Kiwi Road option, and $1,707,092 as the benefits over the Cautley Street option. In the absence of any significant challenge to these conclusions, and there being no contrary evidence, I accept Mr Parlane’s evidence about the benefits of the alternative routes.
[80] Mr Parlane discounted the option involving the Cautley Street Gate because in his opinion the Cautley Street Gate would not be suitable for use by large numbers of cars and trucks.
[81] Mr Parlane also referred to other benefits arising from the use of the tunnel which he could not quantify, either because he did not have sufficient information or because it would be difficult in any event to attribute to them a monetary value.
[82] Such benefits include the fact that the two yards are in use 24 hours, seven days a week with the result that benefits would accrue from their use at times for which Mr Parlane did not have data: after 5.00 p.m. or on weekends. Further, he referred to the fact that dangerous goods could be moved through the tunnel which might be more difficult on local streets which are predominantly residential in nature. Third, he mentioned the fact that there might be occasions of emergencies when the value of trips through the tunnel would not remain at the “constant” figure which he had used for the purposes of analysis. Fourth, the tunnel enables NZDF to maintain a secure perimeter, effectively allowing the two yards to function as a single area and without the need for multiple trips in and out of security gates. Finally, there was no doubt a benefit from the NZDF’s point of view in the possibility afforded by the tunnel for unobserved movements between the two dockyards. He was of the opinion that each of these considerations would tend to increase the value of travel within the tunnel to NZDF beyond the values that he had calculated. I accept his evidence to that effect.
[83] The plaintiffs’ valuer, Mr Walker essentially adopted the figures used by Mr Parlane insofar as the overall cost benefit to the Navy of the use of the tunnel in the years in question was concerned. He then expressed his opinion that there was no reason to depart from what he described as the 50 per cent apportionment of the “cost benefit” between the parties that had been adopted in the Roberts case (as pleaded in paragraph 7 of the amended statement of claim). Essentially, he saw the question simply as one of ascertaining the proportion of the 50 per cent claimable by the Waughs as owners of one of the 14 privately owned properties and the public roads under which the tunnel passed.
[84] He then calculated an appropriate proportion of compensation payable to the Waughs as 35.2 per cent of the 50 per cent. He arrived at the 35.2 per cent after considering the facts that in the case of the majority of properties under which the tunnel passes it does so at a depth considerably greater than where it passes under the
Waughs’ property and, in reliance on certain evidence given by Mr Waugh, he referred to the effects of vehicle movements at the tunnel entrance, noise, vibration, subsidence and loss of enjoyment. In the latter category, he pointed out that it is only the Waugh property which now has an easement which purports to restrict use of the surface of the land. In that respect, part of the rear portion of the site is subject to a restriction on excavation and building activity is limited by reference to requirements for “light structures” and also requires permission of the Navy. The same applies to any excavation work on the property, and any application for consent must be accompanied by a registered engineer’s report and plans. Mr Walker expressed the opinion that the restrictions arising from the easement and the risks and costs associated with any development, meant that the development potential of the land was compromised. It was also his evidence that without restrictions imposed by the tunnel easement, the rear part of the property would have been suitable for subdivision into a separate lot..
[85] The easement to which Mr Walker referred did not, of course, exist until a point outside of the period for which the plaintiffs’ presently seek compensation. Further, Mr Waugh’s evidence about adverse effects on the land arising from the use of the tunnel was not convincing. Moreover, there was uncontested evidence from Mr Giles, a civil engineer specialising in soil and rock mechanics that the tunnel had not had any detrimental influence on the land in terms of global stability, settlement or subsidence, vibration effects or in other respects.
[86] Evidence was also admitted by consent from Mr Nevil Hegley, a well qualified and experienced civil engineer specialising in acoustics. As a result of noise measurements which he carried out, he expressed the view that there was no unreasonable noise attributable to the use of the tunnel. Further, had it been suggested that the noise level was unreasonable then it would have been practicable to reduce the noise level significantly by constructing a solid fence on the boundary of the Waugh property or within the Navy’s site.
[87] Mr Gray explained that the plaintiffs did not challenge Mr Hegley’s conclusion that the noise level was reasonable. The significant point for present purposes was not the absolute level of the noise, but the fact that the plaintiffs’
property was more exposed to noise than other properties under which the tunnel passed. There remains, moreover, the potential impact on the development potential of the Waugh property in respect of which Mr Walker’s evidence was not effectively countered by the defendant. Mr Dean accepted that the plaintiffs’ property was the only one to suffer restrictions on the use of the land attributable to the presence of the tunnel, and in the separate exercise that he had carried out to ascertain compensation for the grant of easements over the affected properties, he had arrived at an apportionment of 32.57 per cent for the Waugh property, based on the comparative impact of the tunnel on the salability of the affected properties.
[88] In any event, as I have earlier mentioned, NZDF had previously accepted that the Waugh property was the most affected of all those properties under which the tunnel passed. Notwithstanding my reservations about the evidence of Mr Waugh about adverse effects on the amenities of the plaintiffs’ property caused by the presence and use of the tunnel, I accept on the balance of probabilities that the plaintiffs’ property is more affected than the others, and that a percentage of about
35 per cent would be an appropriate apportionment figure to reflect the extent of the effect, in comparison with other properties affected.
[89] Having arrived at the apportionment percentage of 35.2 per cent, Mr Walker then applied that percentage to the half share of the benefit ( in accordance with the Roberts approach) as ascertained by Mr Parlane. He carried out a separate exercise so as to make allowance for the services passing through the tunnel. He observed that a proportion of 50 per cent of the land value of the easement area was typically used for pipeline easement valuations, but in the present case, because the services form part of the tunnel, he was of the view that a 25 per cent proportion should apply. To the value so derived he then applied a rental factor to determine the annual rental applying to that easement value. The rental factor that he adopted was seven per cent (which is close to Mr Dean’s figure of 6.5 per cent) of the land value. The total rental income on this analysis would, in each year, be the total of the amounts so established for use of the tunnel, and the services easement. He then added an interest factor calculated on the basis of monthly payments of rental in advance using simple interest calculations at 7.7 per cent to arrive at the amount that should have been payable on an annual rental basis.
[90] The result of these various calculations led Mr Walker to the conclusion that compensation should be payable to the Waughs, depending on which alternative route was selected, as follows:
a) The Victoria Road Option - $648,051 (excluding GST)
b) The Kiwi Road Option - $602,966 (excluding GST)
c) The Cautley Street Option - $406,810 (excluding GST).
[91] The plaintiffs’ claim was apparently advanced on the basis that it was the Victoria Road option that would have been chosen as offering the most advantages. The claim as pleaded, however, was for $487,864, in accordance with a schedule attached to the amended statement of claim. That schedule showed that the total had been derived by adding $481,484 for the assessed “tunnel rental” to $6,380 for the notional services easement. It appears that the figure for the “tunnel rental”:
a) was exclusive of GST, and
b) was based on an apportionment of compensation to the Waughs at
36.75 per cent. That figure was altered downwards to 35.2 per cent by Mr Walker when he gave evidence, but no formal amendment was sought to the statement of claim.
[92] Even so, making those adjustments does not lead to the lower amount of
$487,864 pleaded in the statement of claim. Mr Gray explained in his closing submissions that calculations made had included a property occupied by a church and that an adjustment needed to be made downwards so as to ensure that the sum claimed was referable only to the Waughs’ property.
[93] Although Mr Parker cross-examined Mr Parlane on some of the details of his methodology he did not successfully challenge its essentials. Nor was any evidence led by the defendant which questioned the approach that Mr Parlane had adopted to the assessment of costs and benefits. Rather, the defendant’s position was essentially that the analysis undertaken by Mr Parlane, on which Mr Walker had
relied to arrive at his overall compensation figures, was simply wrong. That was because it was based on the approach adopted in Roberts v Rodney County Council which Mr Parker, for reasons that I have earlier summarised, submitted could not be applied on the present facts.
Discussion
[94] As in Roberts, the right in question here cannot legitimately be assessed on the basis that there is a market value for it, and the valuation exercise must depend on considerations that are unique to the land and the parties’ situations. That is one reason that satisfies me that the defendant’s approach, which essentially rests on the area of the easement and its per square metre land value, must be rejected.
[95] The second reason that leads me to that view is that the defendant’s approach runs contrary to the authorities earlier reviewed which are clear in their thrust that a plaintiff may elect to seek damages based not on loss sustained, but on the basis of the benefit derived by the defendant from a wrongful act. The defendant’s approach encapsulated in the methodology of Mr Dean that I have earlier summarised, takes no account of that benefit.
[96] Equally, however, I consider that there are difficulties which prevent the complete application of Barker J’s reasoning in Roberts to the present facts. Unlike that case, there is here no issue raised on the plaintiffs’ claim about the construction of the tunnel. Here, at issue is simply the value of a right of user, the tunnel having already been constructed. Yet it is said by the plaintiffs, relying on the decision in Roberts, that the value of the right of passage should be assessed on the basis of what would have been negotiated before construction of the tunnel had begun.
[97] Mr Gray argued that that would be so because it was necessary to discount the particular negotiation vulnerability of the defendant arising from construction of the balance of the facility. Putting aside the cost of construction of the tunnel may very well have the effect of removing any element that reflects the particular vulnerability of the defendant; but in the present case it also distorts the cost benefit analysis by leaving out of account the considerable costs of construction of the
tunnel. On the plaintiffs’ approach, the alternative options examined and costed by Mr Parlane involve the use of existing public streets for which the defendant would not need to incur any capital costs. If the present case is approached on the notional basis that the tunnel construction has not yet begun, it would seem artificial, however, not to take into account construction costs, because they would inevitably affect the amount that the defendant might be prepared to pay for the right of user. Putting that another way and assuming the kind of arm’s length negotiations prior to any steps being taken toward construction of the tunnel (see Knowles v Henderson (No.2) (1992) 2 NZ Conv C 191,355, which is referred to by Barker J in Roberts at para [41]), the defendant as the notional willing purchaser of the right would no doubt have been considering not only the cost of the right of user, but the cost of construction of the tunnel as well. Any other basis of comparing the options then confronting it would, with respect, be unreal.
[98] The plaintiffs’ approach on this issue was based on what Barker J said at [40]
of Roberts:
It is true that once the council commenced work on the Ardern option, the right of passage across the plaintiff’s land became more valuable to it in the sense that the other options were now more expensive to complete. But does it necessarily follow that the reasonable price for this right should increase? In my view, it does not. None of the authorities contemplates such an approach. I consider that a reasonable price for the right of passage is one which would be negotiated before construction on the Ardern option began. Thus, events which occur after negotiation and which would have the effect of increasing the plaintiff’s bargaining power, ordinarily, should not be taken into account.
[99] It seems to me that Barker J expressed himself in that way only because he was dealing with a situation where the comparison of options involved options which included both a capital cost of construction, and user in the sense of the on- going exercise of the right to conduct sewerage through the pipe in question. I do not consider that the same approach is appropriate where, as in the present case, it is necessary because of the way the plaintiffs’ case has been framed to ascertain an appropriate price to be paid for the right of passage alone. In a case such as this, putting aside the notional cost of construction artificially shifts the goal posts in the plaintiffs’ favour. Nor is this a case where, as in Roberts, it is necessary to consider
the implication of a partially commenced work and the fact that once work had been partially completed, other options might for that reason become more expensive.
[100] It is to be observed in this connection that at [45] of his decision in Roberts, Barker J observed:
To determine the reasonable price which the council would pay to purchase a right of passage, I think the council would compare the total cost of the Matheson option with the total cost of the Ardern option. The difference between those two figures represents what the council could save by taking the Ardern option and is in effect a measure of profit.
[101] In the present case, I have not been given any evidence about construction costs. I know simply that, as Mr Parlane conceded in cross-examination, and as is indeed common sense, the cost of constructing the tunnel would be significant, and would involve a capital outlay by NZDF that it would not have to meet in the case of any of the alternative options. The notional “profit” that it would make therefore, by pursuing the tunnel option would be correspondingly reduced.
[102] The other consideration which applies here, but did not in Roberts, is that the plaintiffs seek to be compensated for use of the tunnel for a limited and specified period of some 3,045 days. By contrast, in Roberts what was at stake was purchase of the right to construct and use a sewer indefinitely.
[103] Ultimately, the aim must be to arrive at an assessment of damages which reflects the overall justice of the case. Here, to replicate the Roberts approach in its entirety would, for the reasons I have mentioned, be to proceed on an artificial basis, and result in an award which would, I think, be over-generous to the plaintiffs. Yet for reasons that I have also mentioned, the approach for which the defendant contends would not result in an appropriate outcome either because it would not properly reflect the benefit accruing to NZDF from use of the tunnel.
[104] The difficulty that must then be confronted is to find some principled and fair basis on which to calculate the quantum of damages at a figure that falls between the two outcomes for which the parties here contend. It is as well to acknowledge that the task cannot involve the application of precise criteria, for none exist, and that
while principles able to be derived from the authorities assist to some extent, they do not directly yield the answer in the unique factual setting of the present case.
[105] In the present circumstances, the approach that I consider should be adopted is one that:
a) Recognises that there is a distinct benefit to the defendant arising from NZDF’s use of the tunnel. That benefit has been calculated in this case by the work undertaken by Mr Parlane that I have earlier summarised.
b)Realistically takes into account the extent of the benefit, in assessing the amount that the defendant would notionally have been prepared to pay to all the owners of the properties affected, as a willing purchaser of the right to pass along the tunnel.
c) Realistically takes into account, as well, the land value of the properties affected, recognising that ultimately the defendant could have exercised powers of compulsory acquisition and would not have agreed to pay as rent a sum that would be much more than the annual value of the land, seven per cent of the land value according to Mr Walker, 6.5 per cent according to Mr Dean.
[106] I also consider it legitimate for there to be a discount to reflect the fact that the tunnel is underground. Both valuers have referred to 25 per cent of the surface value for that purpose. In Mr Walker’s case that was the approach that he adopted in valuing that part of the compensation which he considered payable which was referable to the placement of services within the tunnel. I agree with Mr Dean that there is no logical justification to value a separate amount for services if they are to be within a space which is already to be the subject of an easement granting access to vehicles and persons. But the methodology of reducing by 75 per cent the value of the surface land for the purpose of valuing a right exercised under the ground can, I think, appropriately be applied for the purposes of assessing damages here.
[107] One justification for doing so is that any detriment to the plaintiffs is much less than would be the case had the surface of their land been used. It is also logical to do so because of the issue that I have mentioned in sub-paragraph (c) of paragraph [106] above. The reality is that if NZDF had not been able to achieve its purpose by negotiation, it could have resorted to Public Works Act powers. Those powers could have been exercised by purchase of the entire property of the plaintiffs, creation of the necessary easement for the tunnel, and re-sale of the property with the easement in place. The possibility of that end result being reached indicates that an approach which values the area occupied by the tunnel as having an intrinsic worth of 75 per cent less than the surface of the land is not inappropriate. The majority of the land’s value would remain, in the area above the tunnel.
[108] I accept that, in Roberts, an argument based on the Council’s Public Works Act powers was rejected by Barker J, but the context in which he did so there was different, and I do not consider that it is inappropriate to refer to that Act here. I do not think that the plaintiffs can be notionally disadvantaged by that approach, because the legislation involves the concept of fair market value being paid. Ultimately, I do not consider that it would not be right to proceed on the basis that persons in the position of the plaintiffs are entitled to some payment beyond what might fairly have been required as the value of the right
[109] I think that the exercise, in addition, can assume that any sum paid to the plaintiffs would be about 35 per cent of the total compensation that NZDF would have been willing to pay to all of the affected land owners. I have already discussed the basis of that approach. The plaintiffs’ property can be differentiated from the others not on the basis that it is affected in any substantial way other than in terms of a saleability impact as was conceded by Mr Dean.
[110] Mr Dean gave evidence that Mr Walker had been wrong to approach the apportionment issue by considering only the private properties and roads under which the tunnel passed. He expressed the view that consideration should also be given to substantial parts of the tunnel actually within NZDF land in the vicinity of the tunnel’s southern portal. The result would be a much longer tunnel footprint, and on Mr Dean’s approach, a much smaller proportion of the tunnel passing under the
Waughs’ property. I do not consider that to be correct. I think it overlooks the nature of the exercise to be performed here, which is to analyse what should be paid for a right of user of land not owned by NZDF. The properties are either privately owned (including a church) or owned by the North Shore City Council (the roads). It makes no sense to consider land owned by the Crown within the Naval base for the purpose of ascertaining a proportionate amount notionally payable as between those owners.
[111] Mr Walker’s evidence gave land values for all of the properties across which the tunnel runs. The land value that he gave for the plaintiffs’ land was $810,000, as at 2004. Mr Dean did not give an opinion as to what the land value was, and indeed said in answer to a question posed by Mr Gray that he had not valued it. Despite that, as already mentioned, he referred to what he described as a typical small site, (400 to 500 square metres) as having a land value of about $520 per square metre. In the absence of any explanation of how he had arrived at the figure, or any suggestion by him that Mr Walker’s $810,000 value for the plaintiffs’ land was incorrect, I accept Mr Walker’s valuation. I add that it is close to the average of $770 per square metre which Mr Walker also referred to in his evidence, another figure that was not contradicted by Mr Dean.
[112] The plaintiffs’ property has a land area of 1,012 square metres. So the value is approximately $800 per square metre. This compares, as I have noted, with the average value of properties affected given in Mr Walker’s evidence at $770 per square metre. From that starting point I think a logical way of applying the approach that I have outlined above is to ascertain the annual rental that would be paid for the whole property. Adopting Mr Walker’s seven per cent figure one arrives at $56,700. Then that amount should be multiplied by the period to which the plaintiffs’ claim relates. I have mentioned above that the claim is for 3,045 days which is approximately 100 months or 8.34 years. Multiplying $56,700 by 8.34 years gives a total of $472,878.
[113] That total should then be divided by four, as discussed above, to reflect the fact that the right exercised was below the surface of the land. The result is a sum of
$118,220 (the rough equivalent of $1,182 per month).
[114] The justification for that approach rests ultimately in the fact that, as I have mentioned, the NZDF could have exercised powers of compulsory acquisition to purchase the land. It seems to me that that must have affected its stance in any negotiation for the right to use the area occupied by the tunnel for a little over eight years. An annual rental value assessed on the basis of the sum that would be paid to rent the whole property is the best basis that I can think of to ascertain the upper limit of the amount that NZDF would have been prepared to pay as a willing purchaser of the right.
[115] Mr Walker’s calculations included amounts for interest on the basis that monthly payments would have been made had the parties reached agreement at the outset on a sum to be paid for the use of the tunnel during the period to which the plaintiffs’ claim relates. There is an element of supposition in that approach and where, as in the present case, no demand for monthly payments was made I do not think that there would be any justification for adding an amount to reflect that concept. However, I do consider that it would be fair in the circumstances to require the defendant to pay interest on the sum of $118,220 for the period from 3 July 2004 down to the date of this judgment.
[116] The outcome thus reached is, of course, considerably less than the compensation figures assessed by Mr Walker. That reflects the fact that in my judgment, NZDF would not have agreed to pay any more than a sum based on the annual rental value of the property, for reasons that I have already given.
[117] The sum so ascertained is also considerably more than the compensation figure assessed by Mr Dean. That in turn reflects the fact that on the authorities to which I have referred, NZDF must pay an amount that takes into account in an appropriate way the benefit it derived from its unlawful use of the plaintiffs’ land.
Result
[118] For the reasons I have given the plaintiffs are entitled to judgment in the sum of $118,220, together with interest on that amount at the “prescribed rate” under the Judicature Act, from 3 July 2004 down to the date of this judgment.
[119] They are also entitled to costs. The costs should be calculated on the basis that the proceeding is in Category 2 and that Band B applies. If costs cannot be agreed I will receive memoranda on that subject, from the plaintiffs within 15 working days from delivery of this judgment and from the defendant within 15 working days of receipt of the plaintiffs’ memorandum.
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