New South Wales Supreme Court CITATION : Gordon v Shaheen [2005] NSWSC 1328 HEARING DATE(S) : 15 December 2005 JUDGMENT DATE : 15 December 2005 JURISDICTION : Equity JUDGMENT OF : Hamilton J DECISION : Easement imposed on defendants' land under s 88K of the Conveyancing Act 1919. CATCHWORDS : REAL PROPERTY [409] - Easements - Easements generally - Creation - By express agreement or under statute - Other matters - Grant by Court - Reasonably necessary for effective use or development of land - Discretion of Court. LEGISLATION CITED : Conveyancing Act 1919 s 88K 117 York Street Pty Limited v Proprietors of Strata Plan 16123 (1998) 43 NSWLR 504 Khattar & Anor v Wiese [2005] NSWSC 1014 CASES CITED : Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,545 Woodland v Manly Municipal Council (2003) 127 LGERA 120 Philip Gordon (P1) Nicole Gordon (P2) PARTIES : Irene McAdam (P3) Melad Shaheen (D1) Leila Shaheen (D2) FILE NUMBER(S) : SC 5701/05 J S Drummond (Ps) COUNSEL : No appearance (Ds) Bateman Battersby (Ps) SOLICITORS : No appearance (Ds) LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J THURSDAY, 15 DECEMBER 2005 5701/05 PHILLIP GORDON & ORS v MELAD SHAHEEN & ANOR JUDGMENT 1 HIS HONOUR: This is an application by three plaintiffs for an order under s 88K of the Conveyancing Act 1919 ("the CA") over land owned by the defendants. The easement sought is a drainage easement for the drainage of stormwater. The defendants do not appear, so there is no opposition, but, of course, the Court must still take care to be satisfied of various matters before it exercises its function under s 88K to make what is, in its nature, a confiscatory order. 2 The issues which arise for determination in these proceedings are those recently defined by Brereton J in Khattar & Anor v Wiese [2005] NSWSC 1014 at [2] as follows: (1) Is the proposed easement reasonably necessary for the effective use or development of the plaintiffs' land (s 88K(1))? (2) Will the use of the plaintiffs' land be not inconsistent with the public interest (s 88K(2)(a))? (3) Can the owners of the land be adequately compensated for any loss or disadvantage that would arise (s 88K(2)(b))? (4) Have all reasonable attempts been made by the plaintiffs to obtain the easement or an easement having the same effect, but been unsuccessful (s 88K(2)(c))? (5) If yes to each of the foregoing, should the Court exercise its discretion to impose an easement (s 88K(1)) (6) What compensation should be imposed (s 88K(4))? 3 The circumstances of this case are as follows. The first two plaintiffs ("the Gordons"), who are husband and wife, own lot 721 in DP597503 and the third plaintiff owns lot 728 in DP253238. Both these blocks have street addresses in Irwin Street, Werrington, but both are battleaxe blocks which can be reached from Irwin Street only by separate but contiguous "handles", which the plaintiffs do not own, but over which they have rights of carriageway. 4 To the west of the Gordons' land is the land owned by the defendants, which is lot 720 in DP597503. Werrington Creek flows through that land. The plaintiffs wish to carry out a development, the nature of which I shall set out. They have obtained the development consent of the relevant authority, the Penrith City Council, but that development consent is conditional upon them obtaining over the defendants' land a right to drain stormwater to Werrington Creek. 5 It appears from the evidence that there are two possibilities for the site of the necessary drainage easement. One is that applied for over the defendants' land, the other is an adjacent site across the boundary in land owned by people named Wilkinson. A photograph which is in evidence, together with plans, appears to show that there are no gardens, trees or other features along this boundary on either side which would point to an easement on the other side being preferable. On the surface, it is hard really to pick as between the one and the other. Does this mean that the proposed easement is not reasonably necessary for the effective use or development of the plaintiffs' land because the corresponding portion of the Wilkinsons' land is equally available? 6 The Court has rejected the notion that the section should be interpreted in such a way as to foil its purpose by saying that, when there are two equally suitable sites for an easement, an easement can be granted over neither because of the availability of the other: see my judgment in Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,545 and Brereton J's judgment in Khattar supra. 7 The present state of development of the plaintiffs' properties is that there is a cottage upon each of the two lots. The development consent in its present form is dated 11 October 2004 and allows for the erection of 10 villas. It requires compliance with the condition as to stormwater drainage by 7 February 2006. There is considerable urgency so far as the plaintiffs are concerned because the Local Environmental Plan is soon to be changed. Under the changed plan, the access that the plaintiffs' properties have from Irwin Street, even combining the two handles of their separate battleaxes, will be too narrow to permit approval being granted at a later date for the development of ten villas as at present consented to, or any villa or multi dwelling development upon the plaintiffs' lots. It is therefore most important to the plaintiffs that they are able to meet the Council's condition by 7 February 2006. 8 An easement over either the defendants' land or the Wilkinsons' land to drain stormwater to Werrington Creek is vital to the carrying out of the development. The reason for this is that the land in the vicinity slopes generally both to the north and to the west so that it is only through such an easement that gravity disposal of stormwater is possible. At present, with their single cottages, the lands of the plaintiffs have no provision for the disposal of stormwater. The stormwater simply is absorbed in or percolates off their land. Whilst there is no suggestion that this has been the cause of any trouble, the Council will not permit the multi dwelling development proposed without a provision for piped disposal of stormwater through an easement. There is already an existent drainage easement along, but on the other side of, the southern boundary of the plaintiffs' lands. However, the Council will not permit any uphill pumping of stormwater. This means that the stormwater from the development cannot be pumped uphill, even within the plaintiffs' own lands, to reach the currently existent drainage easement. That is why the obtaining of an easement under s 88K is absolutely vital to the proposed development. 9 The plaintiffs have made various communications over a period of years with the defendants to attempt to obtain an easement by consent. Initially they corresponded with a Ms Hanna, a solicitor employed by the defendants. Ms Hanna responded to the original request for an easement simply with the information that her clients would not consent to it, with no reason. An offer of $6,000 compensation had been made. There was no statement in the response indicating that there was some problem in the defendants' use of their land if the easement were granted, nor was it suggested that the offer of compensation was inadequate and that the grant of an easement would be considered if greater compensation were offered. By the time the plaintiffs had come to the conclusion that they needed to make the present application to the Court, Ms Hanna had ceased to act for the defendants. Communications to the defendants since January of this year have met with no response at all, save in one telephone conversation to which I shall come. 10 The summons in these proceedings was personally served on both the defendants. Personal service of subsequent documents has proved impossible because, despite four calls by a process server, the defendants could not be located at home. Letters have been posted to them and have not been returned by the postal authorities. 11 However, it is quite plain that the defendants know of the hearing before the Court today because the first plaintiff, Phillip Gordon, succeeded in speaking yesterday by telephone to the female defendant. Unhappily, her only response to him was that her husband was sick and had been sick for a month. It was clear from the terms of the conversation that the defendants did not intend to participate today. However, it should be recorded that they had made no earlier response over a period of months, during which there is no reason to think that the male defendant was ill. They had previously employed a solicitor and, had they desired to do so, it is plain that they could have employed a solicitor to request an adjournment if they wanted one, or themselves made a request to the plaintiffs or their representatives for an adjournment. No such thing has occurred. The defendants have simply not appeared. There is nothing for the Court to do, particularly in view of the urgency of the situation from the plaintiffs' point of view, but to proceed to an ex parte hearing of the plaintiffs' application. 12 The plaintiffs have presented their evidence to the Court. The plaintiffs' offer of compensation had risen from $6,000 to $11,000. The plaintiffs have presented the Court with the evidence of David Lunney, a valuer, which they say supports the figure of $11,000 as the appropriate compensation. However, during the hearing, the Court perceived and Mr Drummond, of counsel for the plaintiffs, conceded that there was another basis of calculation of compensation that appeared from Mr Lunney's evidence, which would produce the higher figure of $16,000 as the appropriate compensation. I shall discuss that basis in due course. 13 Against that background, I turn to the questions as formulated in [2] above. (1) Is the proposed easement reasonably necessary? 14 This question has been discussed in a number of cases including the decision of Hodgson CJ in Eq (as his Honour then was) in 117 York Street Pty Limited v Proprietors of Strata Plan 16123 (1998) 43 NSWLR 504 and my decisions in Tregoyd Gardens supra and Woodland v Manly Municipal Council (2003) 127 LGERA 120. 15 A useful recent summary of the principles to be applied in this regard is set out in the judgment of Brereton J in Khattar at [24] – [27]: "[24] Conveyancing Act, s 88K(1) requires that the proposed easement be 'reasonably necessary for the effective use or development' of the land to be benefited. It does not require that the easement be absolutely necessary for that use or development, nor that the proposed use or development be the only reasonable use of the land to be benefited; thus the requirement may possibly be satisfied even when the applicant's land could be effectively used or developed without the easement [ Tregoyd Gardens Pty Limited v Jervis (1997) 8 BPR 15,845 (Hamilton J); Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795 (Windeyer J); Re Seaforth Land Sales Pty Ltd's Land (No 2) [1977] Qd R 317; 117 York Street Pty Limited v Proprietors of Strata Plan 16123 (1998) 43 NSWLR 504, 508G-509D; Katakouzinos v Roufir Pty Limited (2000) 9 BPR 17,303; [1999] NSWSC 1045, [38]]. [25] The proposed easement must be reasonably necessary, either for all reasonable uses or developments of the land, or else for some one or more proposed uses or developments which are (at least) reasonable as compared with the possible alternative uses and developments; and in order that an easement be reasonably necessary for a use or development, that use or development with the easement must be (at least) substantially preferable to the use or development without the easement [ 117 York Street , 508G-509D; Katakouzinos v Roufir , [38]; Blulock Pty Limited v Majic (2001) 10 BPR 19,143; (2002) NSWConvR ¶56-012; [2001] NSWSC 1063, [14] (Windeyer J)]. [26] Accordingly, where, as in a case such as the present, a particular proposed use or development is in contemplation, the first question is whether that proposed use or development is a reasonable one (in comparison with the possible alternatives); and the second is whether that use or development with the proposed easement is substantially preferable to that use or development without the proposed easement. [27] The authorities repeatedly point to the confiscatory nature of s 88K as requiring firm proof of the reasonable necessity for the easement, and that the court bear in mind that property rights are valuable rights not lightly to be taken away [ Re Seaforth Land Sales Pty Limited v Land [1976] Qd R 190, 193 (Douglas J); Nelson v Calahorra Properties Pty Limited (QSC, Thomas J, 5 December 1984; affirmed [1985] QConvR ¶54-202); Ex parte Edward Street Properties Pty Limited [1977] Qd R 86, 91 (Andrews J); Re Worthston Pty Limited [1987] 1 QdR 400, 402 - 3 (Carter J); Tregoyd Gardens , 15,853-4; Durack v D E Winton (1998) 9 BPR 16,403, 16,449 (Einstein J); Hanny v Lewis (1999) 9 BPR 16,205; (1999) NSWConvR ¶55-879, 56,875; Woodland v Manly Municipal Council (2003) 127 LGERA 120, [2003] NSWSC 392, [15] – [18] (Hamilton J)]. The extent of the burden of the proposed easement on the servient property is a relevant consideration, to the effect that the greater the burden, the stronger is the case needed to justify a finding of reasonable necessity [ Katakouzinos v Roufir , [42]; Woodland v Manly Municipal Council , [12]]. 16 With those statements in his Honour's judgment, I agree with only one reservation. As I have said previously, I have always been troubled by the modification of the word "preferable" by the word "substantially" in the formulation by Hodgson CJ in Eq. However, there is no need to pause to consider that matter further here as, realistically, no question arises in this case as to whether or not that modification is adopted. The facts of the matter in this case are that both the first and second plaintiffs' land and the third plaintiff's land are currently used as single cottage blocks. The Council, subject to the obtaining of the easement sought, has approved the development of their land in an amalgamated lot by the erection of 10 villas. As I have already indicated, that development is possible at the moment within a window of opportunity which may disappear with modification of the Local Environmental Plan. It is certainly preferable, and, if it matter, substantially preferable, from the plaintiffs' point of view that the land be able to be used in conjunction with an easement granted by the Court to carry out that development. That is, in planners' or valuers' terms, a higher and better use of the land. It is one that is obviously economically advantageous to the plaintiffs. I shall apply myself to the words of the statute rather than to those of any proposed gloss. In my view, an easement is reasonably necessary for the effective use or development of the lands of the plaintiffs. 17 Whilst equal suitability of two sites could not be allowed to frustrate the purpose of the statute, in fact it does appear from the evidence that there is a reason of substance for preferring the easement sought over the defendants' land rather than an easement over the Wilkinsons' land. When the drainage pipe reaches Werrington Creek, it is necessary for the discharge to take place down a head wall, which is a device intended to prevent erosion of the creek bank. The relevant portion of the head wall is, in fact, on the defendants' land rather than the Wilkinsons' land, so that, even if the drainage pipe proceeded for most of its length through the Wilkinsons' land, it would have to enter the defendants' land at its western end to permit discharge down that head wall. In those circumstances, it is an easier and more advantageous course that the drainage line follow a straight course through the defendants' land throughout its entire length. For that reason, it is preferable to grant the easement over the defendants' land rather than over the Wilkinsons' land. (2) Will the proposed land use be not inconsistent with the public interest? 18 I see no reason why the use should not be characterised as not inconsistent with the public interest. On the evidence there is no identified or identifiable public interest which would be affected. It is plain that land in the vicinity is now zoned so as to permit multi dwelling use and the implementation of multi development uses is proceeding. The actual development proposed by the plaintiffs has been approved by the Council as the consent authority. There is no public interest that will be impinged upon. (3) Can the defendants be adequately compensated for any loss or other disadvantage that would arise? 19 The valuation evidence indicates a minimal disturbance of the use of their land by the defendants. The defendants' block is large, the site of the easement is along the back boundary. Because of its location, it will not diminish the development potential of the defendants' land. The disturbance during the construction phase, in which a pipe is laid in the easement, will be short and not highly intrusive. Thereafter, the pipe, through which the purpose of the easement will be achieved, will be underground. Entry for the purpose of maintenance or repair of the pipe will be infrequent and, again, should not cause any great disturbance. Monetary compensation will be adequate to recompense the defendants for these disadvantages (4) Have all reasonable attempts been made to obtain the easement or an easement having the same effect but been unsuccessful? 20 I conclude from the evidence that all reasonable attempts have been made to obtain the easement from the defendants. The evidence shows that the plaintiffs also approached the Wilkinsons for an easement on the alternative site mentioned above. At least, on the evidence, the Wilkinsons appear to have given rather more consideration to the request, but, in the end, without any result that was more successful from the plaintiffs' point of view. I am satisfied that all reasonable attempts have been made by the plaintiffs to obtain the easement or an easement having the same effect, but have been unsuccessful. (5) Should the Court exercise its discretion to impose an easement? 21 It seems to me clear, from the various factual matters set out above, that there are no reasons why the Court should exercise its discretion against the imposition of an easement and considerable reasons why the easement should be imposed. I propose to exercise the Court's discretion in favour of the imposition of an easement. (6) What compensation should be imposed? 22 The considerations that Mr Lunney took into account in coming to the conclusion that $11,000 was a reasonable consideration were as follows. He concluded that recent sales of medium density residential land reflect values ranging from $333 to $416 per square metre. However, he did not base his assessment on those figures. He based them instead upon an option which was granted by the defendants to two of the plaintiffs to purchase, in 2002, a portion of the defendants' lot 720, being a portion immediately adjacent to, and to the west of, the Gordons' lot 721. The option was not exercised. The price agreed if the option had been exercised was $300,000, which reflected a rate of $213 per square metre. This somewhat deflated value reflected the fact that the block which was being purchased was a landlocked block which was only of value to a neighbour, because it had no street access and, therefore, no development potential. Mr Lunney then increased that 2002 value by 20 per cent to allow for the general rise of land values in the area between 2002 and 2005. It was from a unit value calculated in this way that Mr Lunney extrapolated a land value of $10,000 which, with $1,000 for compensation for disturbance added to it, presented the $11,000 figure that he brought forward. 23 However, I do not think that this was the correct basis on which to proceed, rather than extrapolating from the up-to-date square meterage figures for medium density residential land. The reason for that is that the defendants' land as it stands is not a landlocked block like that the subject of the option, but is a large block with a frontage of more than 20 metres to Irwin Street and does not have its value as a potential development site consequently depressed. In those circumstances, it seems to me, and Mr Drummond does not argue against this, the compensation should be assessed on the basis of current values for medium density residential land. The median figure in the range $333 per square metre to $416 per square metre is $374 per square metre. This does not need to undergo a 20 per cent uplift, as it is not a 2002 land value, but a current value. I agree with Mr Lunney's estimate that the compensation should be only half the land value, since the defendants are not deprived of the fee simple in the relevant land, but merely have it encumbered by an easement which will permit the laying and maintenance of an underground pipe. 24 In those circumstances, in my view, the appropriate allowance for diminution of land value is $15,000. I am prepared to accept Mr Lunney's estimate of $1,000 for the comparatively small amount of disturbance involved, producing, in my view, an appropriate figure of $16,000 compensation to be embodied in the order as required by the section. 25 The conclusion of the Court is, therefore, that an easement will be imposed over a site on the defendants' land generally indicated in the plaintiffs' evidence. Despite the urgency of the plaintiffs' obtaining an order, that order cannot be made today. The reason for this is that the Court's order is, in effect, a conveyancing document, being the document that actually creates the easement, which is then required under the Real Property Act 1900 to be entered by the Registrar General upon the certificate of title. The trouble is that neither the survey plan exhibit A, nor the engineering plan exhibit B, indicates the site of the easement in sufficient detail for that plan to be attached to the order and to form the basis of the entry by the Registrar General of the easement on the title documents. 26 Equally, the section requires the specification in the order of the nature of and terms of the easement and such of the particulars referred to in s 88(1)(a) - (d) of the CA as are appropriate. Indeed, it is that subsection that requires the identification of the site of the easement by reference to a plan that is or is capable of being registered or recorded under Division 3 of Part 23. 27 I propose to stand the matter over before me on 30 January 2006 at 11am for the bringing in of documents which will permit me to make an order in a form which complies with s 88K(3) to give effect to this decision. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.