THE LOGOS OF LAND: ECONOMIC AND PROPRIETARIAN CONCEPTIONS OF STATUTORY ACCESS RIGHTS

Donald Scott Grattan

A thesis submitted in fulfilment of the requirements of the degree of Doctor of Philosophy

Faculty of Law University of New South Wales

2006 ABSTRACT

Legislation in various jurisdictions alters the common law right to control access to one’s land by allowing the imposition of rights of access in favour of one landowner over the land of another. The relevant legislation can be divided into two categories. The first-generation legislation (s 88K, Conveyancing Act 1919 (NSW) and s 180, Property Law Act 1974 (Qld)) permits the creation of easements over servient land to facilitate the development of dominant land. The second-generation legislation (the Access to Neighbouring Land Act of New South Wales, Tasmania and the United Kingdom) permits the creation of temporary rights of access over servient land to facilitate work on dominant land.

This thesis examines the extent to which this change in the law can be justified by three modes of ethical discourse: right-based, duty-based, and goal-based reasoning. An examination of the first-generation legislation and the cases in which it has been applied suggests that a form of goal-based reasoning can be used to justify its enactment. The legislation is needed to facilitate the efficient use of land where the existence of a bilateral monopoly and the possibility of strategic bargaining puts at risk the conclusion of a mutually beneficial agreement regarding access. A review of the second-generation legislation and the law reform reports and parliamentary debate that preceded its enactment indicates that the legislation can be justified by a form of duty-based reasoning. The legislation is needed to bring about a proper social ordering by imposing access rights where this would be consistent with the ideal of good neighbourliness.

The thesis concludes that although these goal-based and duty-based discourses make an arguable case for the enactment of both generations of the legislation, neither of them, in an unadulterated form, provides a conclusive justification. Rather, an eclectic approach that draws on both discourses is required. It proposes that the legislation’s compensation provisions be amended to reflect the commingling of the ideas of efficiency, a properly ordered society and intensive land use, and to allow the servient owner to share in the benefits generated by the imposition of access.

2 ORIGINALITY STATEMENT I hereby declare that this submission is my own work and to the best of my knowledge it contains no materials previously published or written by another person, or substantial proportions of material which have been accepted for the award of any other degree or diploma at UNSW or any other educational institution, except where due acknowledgement is made in the thesis. Any contribution made to the research by others, with whom I have worked at UNSW or elsewhere, is explicitly acknowledged in the thesis. I also declare that the intellectual content of this thesis is the product of my own work, except to the extent that assistance from others in the project's design and conception or in style, presentation and linguistic expression is acknowledged.

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COPYRIGHT STATEMENT I hereby grant the University of New South Wales or its agents the right to archive andtomakeavailablemythesisordissertationinwholeorpartintheUniversity libraries in all forms of media, now or here after known, subject to the provisions of the Copyright Act 1968. I retain all proprietary rights, such as patent rights. I also retain the right to use in future works (such as articles or books) all or part of this thesis or dissertation. I also authorise University Microfilms to use the 350 word abstract of my thesis in Dissertation Abstract International (this is applicable to doctoral theses only). I have either used no substantial portions of copyright material in my thesis or I have obtained permission to use copyright material; where permission has not been granted I have applied/will apply for a partial restriction of the digital copy of my thesis or dissertation.

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AUTHENTICITY STATEMENT I certify that the Library deposit digital copy is a direct equivalent of the final officially approved version of my thesis. No emendation of content has occurred and if there are any minor variations in formatting, they are the result of the conversion to digital format.

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3 ACKNOWLEDGEMENTS

This issues explored in this thesis are manifestations of the physical fact that parcels of land are never completely self-sufficient. My completion of this thesis is an indication that the same can be said about people. I am incredibly indebted to many individuals who have assisted me in various ways in relation to this project.

First and foremost, I owe much to my supervisor, Associate Professor Brendan Edgeworth. Brendan first introduced me to the wonders of property law and theory as an undergraduate at Macquarie University more years ago than he and I probably care to remember. I express my sincere gratitude for his wise guidance and his patient encouragement throughout my doctoral candidature. I will always appreciate Brendan’s unfailing generosity and kindness during the easy times and the difficult.

Professor Bruce Ziff, of the Faculty of Law at the University of Alberta has significantly influenced my thinking about property law issues generally. As a Visiting Professor in the Faculty of Law at the University of Wollongong in 1991 - 1992, Bruce designed the property law subjects that I was to teach on my appointment there in 1993. Bruce’s stimulating writing about property, and my discussions with him, have been sources of inspiration to me.

Many of my colleagues at the University of Wollongong have provided me with continuous encouragement and advice. To Margaret Bond, Andrew Kelly, Luke McNamara and Tom Musgrave in particular, my thanks for your steadfast friendship.

Finally, much of the day-to-day burden of me completing this thesis has fallen on two people: my wife, Louise, and my daughter, Georgia. Their accommodation of my demands—both reasonable and unreasonable—throughout this undertaking has benefited me immensely. For the years of their love and support, saying thank you hardly seems enough. But I thank them, my parents and all of my family nevertheless.

4 DETAILS OF PRIOR PUBLICATIONS

Parts of this thesis are based upon material that has been published. The details of this are as follows:

Chapter 1 – Scott Grattan, "Judicial Reasoning and the Adjudication of Airspace Trespass" (1996) 4 Australian Property Law Journal 128 - 145.

Chapter 2 – Scott Grattan, "The Name(s) of the Rose: Personality, Preferences and Court-Imposed Easements" (2004) 10 Canterbury Law Review 329-345.

Chapters3and4–ScottGrattan,"CourtingCouncils and Counselling Courts: Subjectivity and Objectivity in Section 88K Applications" (2005) 12 Australian Property Law Journal 126-156.

Chapter 5 – Scott Grattan, "Proprietarian Conceptions of Statutory Access Rights" in Elizabeth Cooke, Modern Studies in Property Law, vol 2 (2003) 353-374.

5 TABLE OF CONTENTS

Abstract...... i Certificate of Originality, Copyright Statement and Authenticity Statement...... ii Acknowledgements...... iii Details of Prior Publications...... iv

Introduction - Terminus a Quo ...... 1 I Background ...... 1 II Significance of Thesis ...... 8 III Methodology...... 10 IV Structure ...... 12 V Terminology...... 14

Chapter 1 - The Castle and The Cathedral: The Origin of Statutory Access Rights ...... 17 I Outline...... 17 II The Castle Image of Land...... 18 A The Legal Expression of the Castle Model...... 21 B Dworkin’s Taxonomy ...... 23 1 Right-Based Justifications...... 24 2 Duty-Based Justifications...... 26 3 Goal-Based Justifications...... 27 C Wealth Maximisation ...... 28 1 Wealth Maximisation as a Goal in Airspace Trespass Cases...... 32 III Dissatisfaction with the “Castle” Model...... 34 A The Jaggard v Sawyer Principles...... 36 B Reasoning in Support of Statutory Access Rights ...... 41 IV The “Cathedral” Model of Land...... 43 V Between the Castle and the Cathedral ...... 49 VI Summary...... 51

Chapter 2 - The Name(s) of the Rose: Personality, Preferences and Court-Imposed Easements ...... 52 I Introduction ...... 52 II Rose’s Typology ...... 54 III Rose’s Characters and their Economic Context ...... 57 A John Doe, King of the Mountain and Neo-Classical Law and Economics.. 57 B Mom/Good Citizen, Malice Aforethought and Behavioural Law and Economics ...... 60 IV Section 88K and Section 180 Cases ...... 62 A King of the Mountain...... 62 B Malice Aforethought ...... 70 C John Doe...... 76 V Conclusion ...... 81

6 Chapter 3 - Cranes, Drains and Automobiles: An Economic Analysis of Section 88K Decisions...... 82 I Outline of Chapter...... 82 II Preliminary Matters...... 83 III ‘The Court may make an order imposing an easement ...’: s 88K(1)...... 87 A The Relationship Between the Discretion and the Prerequisites ...... 88 B Approach of the Court to s 88K Applications...... 94 C Conclusion Regarding Discretion ...... 97 IV ‘Reasonably necessary’: s 88K(1)...... 98 A The Reasonably Necessary Enquiry and Personal Preferences ...... 99 B The Hodgson-Hamilton Debate ...... 102 C Reasonable Necessity and Detriment to the Putative Servient Land ...... 108 D Examples of the Reasonably Necessary Enquiry as a Cost-Benefit Analysis ...... 110 E Characteristics of the Court’s Reasonably Necessary Enquiry ...... 114 1 When is Reasonable Necessity Assessed? ...... 114 2 Adverse Effect on Third Parties...... 115 3 Significance of Current Mode of User of the Putative Servient Land ... 116 4 Existence of Alternative to the Easement Sought ...... 120 V ‘Not inconsistent with the public interest’: s 88K(2)(a) ...... 130 A The Economics of the Public Interest Requirement...... 135 VI ‘Grant of the easement must be adequately compensated for’: s 88K(2)(b) ...... 138 VII “All reasonable attempts have been made to obtain the easement ...’: s 88K(2)(c) ...... 143 A Negotiations for the Grant of the Easement...... 143 B Quantum of Compensation Offered to Purchase the Easement ...... 144 C Segregation of Issues in Dispute ...... 146 D Time at which Reasonableness of Attempts Assessed...... 147 E Availability of Other Putative Servient Land...... 150 F Final Comments Regarding s 88K(2)(c)...... 154 VIII Nature and Terms of the Easement: s 88K(3)...... 156 IX Compensation: s 88K(4)...... 159 A General Principles ...... 160 B Justice Young’s Heads of Loss ...... 161 C Mitchell v Boutagy ...... 163 D Exception to the Payment of Compensation...... 168 X Costs: s 88K(5) ...... 172 XI The Position of the Servient Owner under s 88K(4) and (5)...... 178 A Compensation for Loss of Bargaining Power...... 181 XII Conclusion...... 186

7 Chapter 4 - Courting Councils and Counselling Courts: Subjectivity and Objectivity in s 88K Applications...... 189 I Introduction ...... 189 II Subjective and Objective Preferences of Landowners...... 190 A Express Statements ...... 191 B Reasonable Necessity and the Use and Development of Land ...... 191 C Relevance of the Locality of the Land ...... 197 D The Preferences of the Putative Servient Owner ...... 200 III The Role of Councils in s 88K Applications...... 204 A Councils as Parties in s 88K Actions ...... 204 B Councils as Regulators of Land Use ...... 205 C Section 88K Cases...... 208 1 Significance of Council’s Deferred Development Consent ...... 208 (a) Scaffolding Cases...... 214 (b) Permanent Easement to Facilitate Non-Strata Development...... 216 (c) Permanent Easement to Facilitate Strata Development ...... 219 (d) Refusal to Grant an Easement where Council has Granted Development Consent ...... 224 2 The Significance of Council Action Outside s 88K(1) ...... 227 3 Council’s Refusal to Grant Development Consent ...... 230 IV Conclusion...... 237

Chapter 5 - Painting Woody’s Sign: A Proprietarian Conception of Statutory Access Rights ...... 239 I Introduction ...... 239 II First-Generation Legislation and the Public Interest ...... 243 A English Origins and the Public Interest...... 243 B The Public Interest Requirement in Queensland...... 246 C The Public Interest Requirement in New South Wales...... 249 III Second-Generation Legislation ...... 249 A Outline of the Legislation ...... 250 1 When May an Access Order be Granted? ...... 250 2 Conditions in Access Orders...... 255 3 Compensation...... 255 4 Effect of an Access Order ...... 258 B Proprietarian Justification for the Second-Generation Legislation ...... 258 1 England and Wales...... 261 2 Tasmania ...... 262 3 New South Wales...... 263 4 Particular Use of the Neighbour Concept ...... 266 5 The Rhetoric of Neighbourliness ...... 267 IV Neighbours in Law and in Practice ...... 268 A Neighbours and the Law of Torts ...... 268 B Mann’s Theory of Neighbourliness...... 270 C Ellickson’s Theory of Neighbourliness...... 272 V Conclusion ...... 276

Conclusion - Terminus ad Quem...... 279

8 Bibliography...... 288 I Books and Articles ...... 288 II Reports, Working Papers, Discussion Papers and Parliamentary Debates .... 291 III Cases...... 292 IV Legislation, Bills and Rules of Court ...... 294 V Other Material...... 295

9 INTRODUCTION Terminus a Quo1

IBACKGROUND A landowner who desires to improve or develop his or her land might need to make use of a neighbour’s land for that purpose. For example, as a practical matter a developing landowner might need to encroach into a neighbour’s airspace with a crane or with scaffolding in order to employ the cheapest construction method or to build right up to the boundary. Alternatively, the need for access might be legal: the relevant council might have granted consent to the development on condition that the developing landowner obtain an easement—in the form of a right of way, or for the flow of light and air, or for drainage—over neighbouring land.

At common law, whether the developing landowner could acquire these rights of use—or access, as this thesis will refer to them—in respect of a neighbour’s land is a matter that lies entirely within the gift of the neighbour. If the neighbour refuses to grant the necessary right of access to the developing landowner, or offers to grant access at an exorbitant price, the developing landowner had no recourse, no matter how unreasonable the neighbour’s conduct might be. If the developing landowner were to go ahead and attempt to gain access to the neighbour’s land without consent, the neighbour could exclude the developing landowner through an action in trespass.2

A landowner’s right to exclude others has been described as the most fundamental and logically prior of the bundle of rights of which property is comprised. It is fundamental because it is both necessary and sufficient for the existence of private property. It is logically prior to other incidents of property, such as the right to use, transfigure and transfer, because those other incidents can be deduced from the right

1 ‘For all easements there must be a terminus a quo [starting point] ...’: Finlayson v Campbell (1997) 8 BPR 15,703, 15,712 (Young J). See Sheila Bone (ed), Osbourn’s Concise Law Dictionary (9th ed, 2001) 375. 2 This occurred in John Trenberth Ltd v National Westminster Bank Ltd (1979) 39 P & CR 104. This case is considered in Chapter 1, nn 70-73 and accompanying text. 1 to exclude, but the converse does not hold.3 In this respect, the right to exclude can be seen as constituting a part of the logos of land, that is, a component of the ‘rational, intelligible, principle or structure’4 that pervades the concept of land ownership.

Despite the conceptual importance of the right to exclude to the concept of property, our attitude to the practical exercise of that right can be ambivalent. Epstein explains the reason for this attitude as follows.5

The right of an owner of property to exclude all others from his property is one of the most prized—and most feared—rights any civilization can confer on its members. From one point of view, a system that creates this right also allows individuals to harness their talents and to develop natural resources under their control, both to their maximum extent. But from another vantage point, the right to exclude is condemned as snobbish or nettlesome behavior that inconveniences or harms people left on the outside looking in.

We must note immediately that the common law institution of the easement of necessity does not provide a suitable solution for the developing landowner facing this predicament.6 Such an easement can be implied where a landowner disposes of a part of his or her land and retains another part, in circumstances in which the existence of an easement burdening one of the parcels is absolutely necessary for the use of the other. The time at which the absolute necessity is assessed is at the severance of the two parcels. Accordingly, where the necessity did not exist at that time, but arose later, no easement of necessity can be implied.7 This means that an easement of necessity cannot be implied to allow a landowner access to a

3 Thomas Merrill, ‘Property and the Right to Exclude’ (1998) 77 Nebraska Law Review 730, 740-745. 4 Ted Honderich (ed), The Oxford Companion to Philosophy (1995) 511. The alliterative title of this thesis parallels, but was developed independently of, Kevin Gray and Susan Francis Gray’s piece, “The Rhetoric of Reality” in Joshua Getzler (ed), Rationalizing Property, Equity and Trusts - Essays in Honor of Edward Burn (2003). 5 Richard Epstein, Principles for a Free Society (1998) 187. 6 Bradbrook has noted this in the related context of effecting access to landlocked land: Adrian Bradbrook, ‘Access To Landlocked Land: A Comparative Study of Legal Solutions’ (1983) 10 Sydney Law Review 39, 42-46. 7 Peter Butt, Land Law (5th ed, 2006) [1648], [1650]; Kevin Gray and Susan Francis Gray, Elements of Land Law (4th ed, 2005) [18.131]-[18.132].

Introduction 2 neighbour’s land in order to build a new structure on his or her own land, or to repair a structure that was built at some time after the two parcels passed into separate ownership. It is only where a landowner needs access to a neighbour’s land to repair a building that existed at the time the two parcels passed into separate ownership that an easement of necessity might be implied.8 Bradbrook notes that the limited circumstances in which an easement of necessity may be implied derives from the insistence that the easement gives effect to the actual or presumed intention of the original vendor and purchaser, and does not operate as an instrument of public policy to facilitate the use and development of land.9 According, a solution to the would-be developer’s predicament must be found in legislation that creates compulsory rights of access—in the sense of granting limited rights of enjoyment—over other people’s land.

In various jurisdictions in the United Kingdom and Australia, the common law position has been varied by legislation that empowers the relevant court to grant an applicant the right of access to another’s land (‘servient land’), without the consent of the owner of that land, for the purpose of facilitating the better use or enjoyment of other land (‘dominant land’). The legislation provides, in appropriate cases, for the payment of compensation by the applicant to the owner of the servient land for the imposition of this right. This legislation can be divided into three categories, which can be designated ‘first-generation’, ‘second-generation’ and third- generation.10

First-generation access legislation has been enacted in Queensland, in the form of s 180 of the Property Law Act 1974,11 in Tasmania, in the form of s 84J of

8 An easement of necessity was implied in Auerbach v Beck (1985) 6 NSWLR 424, 444 in this context. 9 Bradbrook, above n 6, 42-44, 56. Also see Peter Butt, Land Law, above n 7, [16151]; Gray and Gray, Elements of Land Law, above n 7, [8.134]. 10 Speaking extra-judicially, Justice Bryson referred to successive instances of ‘legislative intervention’: see John Bryson, Easements Ordered by the Court - s 88K of the Conveyancing Act 1919,(2002)LawlinkNSW [2]-[5] at 27 January 2006. 11 This provision reflects the recommendation of the Queensland Law Reform Commission in A Report of the Law Reform Commission on a Bill to Consolidate, Amend, and Reform the Law Relating to Conveyancing, Property, and Contract and to Terminate the Application of Certain Imperial Statutes, Report No 16 (1973) 102-103.

Introduction 3 Conveyancing and Law of Property Act 188412 and in New South Wales, in the form of s 88K of the Conveyancing Act 1919.13 The origins of the Australian first- generation legislation are to be found in the recommendations of the Law Commission for England and Wales (‘Law Commission’),14 although the United Kingdom does not have first-generation access legislation.

The hallmarks of the first-generation legislation are as follows. Firstly, it allows the creation of easements, rather than simply temporary rights of access.15 Easements that have been granted include rights of way, drainage easements, easements for the flow of light and air, and easements for encroaching structures. Using s 88K as representative, the first-generation statutory regimes provide for the imposition of an easement over the servient land in favour of the dominant land where: • the easement is reasonably necessary for the effective use or development of the dominant land; • that use or development would not be contrary to the public interest; • the owner of the servient land would be able to be adequately compensated for the imposition of the easement; and • the owner of the dominant land has made all reasonable attempts to acquire the easement but was unsuccessful.16

Secondly, the power of the court to impose the easement is not limited to the doing of some type of work on the land, but extends to facilitating the use or development

12 This provision was inserted by s 3 of the Conveyancing and Law of Property Act (No 2) 1978. See Bradbrook, above n 6, 47, and Adrian Bradbrook and Marcia Neave, Easements and Restrictive Covenants in Australia (2nd ed, 2000) [3.8]. There does not appear to be any reported case dealing with an application under this provision. A case in which it is mentioned in passing is Nation v Kingborough Council (No 2) (2003) 129 LGERA 447, 459-460 [29]. 13 The provision was inserted by s 3 of the Property Legislation Amendment (Easements) Act 1995, and is modelled on the Queensland provision: see New South Wales Land Titles Office, Review of Easements Discussion Paper (1990) 33-34, 35-36, 39-40. 14 Law Commission, Transfer of Rights: Appurtenant Rights, Working Paper No 36 (1971) 57-61, 118-119. 15 Property Law Act 1974 (Queensland) s 180(7): statutory right of user defined to include a right of way; Conveyancing and Law of Property Act 1884 (Tasmania) s 84J(2): statutory right of user defined to include an easement; Conveyancing Act 1919 (New South Wales) s 88K(1): express mention of easement. 16 Section 88K (1) and (2). In the context of Queensland’s s 180, the use of the dominant land must be consistent with the public interest, and the putative servient owner must have unreasonably refused to grant the easement: s 180(3)(a) and (c).

Introduction 4 of the land.17 Thirdly, the power has been enacted in the form of a section contained in the general property law statute of the jurisdiction. Fourthly, it is the Supreme Court of each jurisdiction that has been given the power to compulsorily impose the easement. This has meant that the cases in which the power has been invoked have usually been reported in authorised or specialist law reports.

Second-generation access legislation, styled in each jurisdiction as the Access to Neighbouring Land Act, has been enacted in the England and Wales,18 Tasmania19 and New South Wales,20 and has certain characteristics that distinguish it from the first-generation legislation. Firstly, it permits the imposition of rights of access to the servient land access (under an ‘access order’) only for the purpose of facilitating certain types of work on the dominant land, where such work could not be carried out, or would be substantially more difficult to carry out, without such access.21 For example, access might be needed so that a ladder can be placed on the servient land to enable a building on the dominant land to be painted,22 or have its gutters cleared.23 Or the access needed might be more substantial, such as the erection of scaffolding into the airspace of the servient land so that major repairs could be carried out to a building on the dominant land.24 These rights may also be obtained in the form of an easement under the first-generation legislation.25 However, the first-generation legislation is of wider operation in this respect as it also permits the

17 See below nn 26-27 and accompanying text. 18 Access to Neighbouring Land Act 1992 (UK). Although an Act of the parliament of the United Kingdom, s 9(3) provides that it extends only to England and Wales (s 9(3). It will accordingly be referred to below as the ‘E&W Act’. 19 Access to Neighbouring Land Act 1992 (referred to below as the ‘Tasmanian Act’). 20 Access to Neighbouring Land Act 2000 (referred to below as the ‘NSW Act’). 21 E&W Act s 1(1), (2); Tasmanian Act s 5(1), (2); NSW Act ss 7, 11, 15(a). 22 Chiu v Healey (2003) 11 BPR 21,241, 21,250 [61]. This case did not involve an application under the Access to Neighbouring Land Act, and the statement was, accordingly, obiter dicta. However, this is the only reported New South Wales case to refer to the Act, although it refers to it as the Access to Neighbouring Lands (sic) Act. 23 RT Oerton, ‘Gaining Access to Your Neighbour’s Land’ (1992) 136 Solicitors Journal 466, 466. 24 Such as in John Trenberth Ltd v National Westminster Bank Ltd (1979) 39 P & CR 104. 25 The overlap between s 88K of the Conveyancing Act 1919 (NSW) and the Access to Neighbouring Land Act 2000 (NSW) was pointed out by Young J in Chiu v Healey (2003) 11 BPR 21,241, 21,250 [61]. Section 5(2) of Access to Neighbouring Land Act 2000 initially provided that an application for access could not be made under the Act if access could be obtained under any other Act. However, that provision was amended, and s 7(4) was inserted, by the Statute Law (Miscellaneous Provisions) Act (No 2) 2000 (NSW) to allow an application to be made under the Act even though access could also be obtained by way of a s 88K easement. See Robert Stokes, ‘Thy Neighbour’s House: Quiet Enjoyment versus the Access to Neighbouring Land Act’ (2001) 7 Local Government Law Journal 106, 112.

Introduction 5 creation of easements to facilitate the development of the dominant land that does not require the doing of work within the meaning of the second-generation legislation. For example, the first-generation legislation authorises the imposition of rights of way to allow access to existing buildings,26 and easements for the flow of light and air to allow the conversion of an existing building from unitary title to strata title.27

Secondly, the rights of access under the second-generation legislation subsist for only for a limited period of time.28 Thirdly, the second-generation legislation takes the form of a stand-alone Act that was the result of an extensive law reform review process.29 Fourthly, the second-generation legislation is generally administered by lower courts,30 the decisions of which are not routinely reported. This means that there is a dearth of applicable case law in which the legislation has been considered.31

26 For example, Marshall v Council of the City of Wollongong (2000) 10 BPR 18,163. 27 For example, Pasade Holdings Pty Ltd v Sydney City Council (No 1) (2003) 11 BPR 21,001. 28 E&W Act s 2(1)(c); Tasmanian Act s6(1)(b);NSW Act s 17(c). 29 The E&W Act was preceded by the Law Commission, Rights of Access to Neighbouring Land, Working Paper No 78 (1980) and the Law Commission, Rights of Access to Neighbouring Land, Report No 151 (1985). The Tasmanian Act was preceded by the Law Reform Commission of Tasmania, Research Paper on Private Rights of Access to Neighbouring Land (prepared by WG Briscoe, 1983) and the Law Reform Commission of Tasmania, On Private Rights of Access to Neighbouring Land, Report No 42 (1985). The NSW Act was preceded by the New South Wales Law Reform Commission, Neighbour and Neighbour Relations, Discussion Paper No 22 (1991) and the New South Wales Law Reform Commission, Right of Access to Neighbouring Land, Report No 71 (1994). 30 In the United Kingdom, the High Court or a county court, although applications are to be commenced in the county court: E&W Act ss 7(2), 8(3); in Tasmania, a magistrate or the Magistrates Court: Tasmanian Act s 3; in New South Wales, the Local Court: NSW Act ss 7, 13(1). It is possible for the relevant lower court to fully or partially transfer the application to a higher court if, for example, an important or difficult question of law arises. See The Civil Procedure Rules 1998 (UK) rr 30.2, 30.3(2)(d) (transfer to the High Court); Tasmanian Act s 11(1) (transfer to the Supreme Court); NSW Act s 30 (referral of question of law to the Land and Environment Court). Additionally, in New South Wales if the payment of compensation is likely to exceed the jurisdictional limit of the local court in an action for the recovery of a debt, the issue of compensation must be transferred to the Land and Environment Court: NSW Act s 29(1). 31 The most fully reported case, dealing with the E&W Act, is the Court of Appeal’s decision in Dean v Walker (1996) 73 P & CR 366. In that case a two-member Court of Appeal upheld the judgment of a circuit court judge, which had upheld the judgment of a district court judge. The district court judge had granted an access order to an applicant to undertake repair work on a wall that the owner of the servient land argued was a party wall. The Court of Appeal held that even if the wall was a party wall, the definition of land in the E&W Act was wide enough to include a party wall between the dominant and the servient land. The only other ‘reported’ judgment is a summary of the decision in Williams v Edwards and Edwards (1997) Current Law Year Book 191-192. That case dealt with the issue of costs after the issue of access to the servient land had finally been agreed at trial. In New South Wales, there are no cases, either reported or unreported, that are generally available. See Bryson, above n 10, [4].

Introduction 6 Because of this, in this thesis heavy reliance will be placed on the published work of the law reform bodies in the relevant jurisdictions.

Third-generation access legislation has recently been enacted in New South Wales in the form of an amended version of s 40 of the Land and Environment Court Act 1979.32 What distinguishes this regime from those earlier enacted is its integration of statutory access rights with the planning process. As we will see in Chapter 4, several s 88K cases involved applications to the Supreme Court for the imposition of an easement, the acquisition of which was a condition of a development consent issued directly by the relevant council or on appeal by the Land and Environment Court. Section 40 rationalises this process by providing that where the Land and Environment Court has determined to grant development consent in respect of land on an appeal from a council’s refusal to grant that consent, a judge33 of the court may impose an easement in favour of the land in circumstances that are relevantly identical to the power of a judge of the Supreme Court to impose an easement under s 88K.

The purpose of the provision is to streamline the process by which an easement can be imposed in order to satisfy a condition of a development consent, so that the same tribunal can grant the consent to the proposed development and impose an easement that is reasonably necessary to make the development effective.34 Without the provision, a landowner who wanted to appeal a council’s refusal to grant development consent would need to appeal to the Land and Environment Court. If that court granted development consent subject to a condition that a particular easement be obtained, and if the grant of the easement could not be negotiated, the

32 The new version of this section was enacted by s 3 of the Land and Environment Court Amendment Act 2002 (NSW). The previous version of s 40 gave the court very limited powers regarding drainage easements: see Hornsby Shire Council v Gosper (1993) 82 LGERA 1, 11 (Shellar JA). 33 Although a commissioner of the court can grant a development consent on appeal, only a judge can impose an easement under the section: s 40(3). 34 See Report of the Land and Environment Court Working Party (2001) 81-82. The proposed s 40 received only passing comment in the Second Reading debate in the Legislative Council, even though other provisions of the amending legislation elicited lively discussion. See New South Wales, Parliamentary Debates, Legislative Council, 4 September 2002, 4506 (Hon Henry Tsang, Parliamentary Secretary), 4507 (Hon James Samios), 4510-4511 (Hon Dr Arthur Chesterfield-Evans), 4514 (Rev Hon Fred Nile). Also see New South Wales, Parliamentary Debates, Legislative Assembly 28 May 2002, 2116 (Mr Debus, Minister for the Environment); 5 June 2002, 2667 (Ms Moore).

Introduction 7 landowner would then need to apply to the Supreme Court for the imposition of the easement under s 88K. With the provision, the landowner can appeal to the Land and Environment Court against council’s refusal to grant development consent. If the court allows the appeal it could also impose an easement that is necessary to give effect to the proposed development, provided that the same prerequisites as apply to s 88K are met.35

Currently, there has not been a case in which s 40 has actually been applied; the cases decided so far have been concerned with the jurisdictional scope of the provision.36 However, it is likely that on the substantive question of whether an easement should be imposed, the Land and Environment Court will take the same approach under s 40 as the Supreme Court has taken in applying s 88K.37 Accordingly, s 40 will not be further discussed in this thesis.

II SIGNIFICANCE OF THESIS This thesis examines the significant alteration of a landowner’s common law right of exclusion brought about by the enactment of the first- and second-generation legislation. The primary focus will be on the New South Wales regimes in s 88K of the Conveyancing Act and the Access to Neighbouring Land Act.

A significant portion of the existing literature dealing with statutory access rights seeks to be purely descriptive and informative.38 Other pieces have attempted to

35 These are set out in Land and Environment Court Act 1979, s 40(2). 36 The leading case is Billgate Pty Ltd v Woollahra Municipal Council (2004)136 LGERA 356, in which Bignold J held (at 362-363 [15]-[17]) that s 40 gives the court jurisdiction to impose an easement once it had decided that development consent should be granted, even though no formal order to that effect has been made. This means that s 40 allows the Land and Environment Court to impose an easement and grant unconditional development consent where s 88K would not provide relief because the relevant Local Environmental Plan precludes the granting of a deferred development consent. The manner in which s 88K can be used when a council has granted a deferred development consent is discussed in Chapter 4, Section III(B). 37 Lloyd J expressed this view in obiter dicta in Becton Corporation Limited v Minister for Infrastrutcure, Planning and Natural Resources [2005] NSWLEC 197, [13]. 38 See, for example, Oerton, above n 23; BJ Council, ‘Access to Neighbouring Land Act’ (1993) 15 Liverpool Law Review 103; Peter Butt, ‘Forcing Easements Against Unwilling Owners’ (1996) 70 Australian Law Journal 525; Millie Yee, ‘Durack v De Winton: Section 88K of the Conveyancing Act (NSW) in Review’ (1998) 13 Australian Property Law Bulletin 52; Christopher Conolly, ‘New Legislation for Access to Neighbouring Land’ (2000) 38 Law Society Journal 34; Theresa Fearn,

Introduction 8 evaluate the desirability of the existence of the statutory access regimes. Most of these have done so on the basis that the legislation seeks to balance the conflicting private rights of the respective landowners.39 The majority of writers who have taken this perspective applaud the enactment of the legislation on the basis that it provides an incentive for the relevant parties to reach a negotiated agreement in which the owner of the land over which access is need cannot unilaterally dictate terms to the owner who needs access.40 A minority of writers who adopt the balancing of rights model have reservations about the legislation. They concede that the density of occupation in a modern urban environment creates difficulties in carrying out further land development. However, they believe that the legislation improperly erodes the privacy and security that underpin traditional conceptions of property ownership,41 or adversely impacts upon good neighbourly relations between landowners.42

Bradbrook takes a different evaluative approach from that noted above. Instead of characterising access legislation as adjusting the private rights of neighbouring landowners, he sees such regimes as advancing public policy. He postulates that it is ‘clearly in the public interest that land not lie unused and that its potential for development should be fully realised.’43 It is not only legislation that vests a discretion in courts to compulsorily impose rights of way to landlocked land that earns Bradbrook’s approbation in this respect. Rather, his approval extends to any legislation that grants rights of use over a parcel of land so that a neighbouring parcel may be used to its full potential. An example of such rights would be easements for the support of buildings and an easement for the flow of sunlight to solar panels.44

‘Traversing Neighbouring Property in NSW’ (2001) 15 Australian Property Law Bulletin 69; Izaz Khan, ‘Granting Easements Under Section 88K’ (2001) 39 Law Society Journal 55. Also see AW Barsby, ‘The Access to Neighbouring Land Act 1992’ (2000) 150 New Law Journal 1256, for a speculative treatment of how applicants might abuse the procedures under the E&W Act. 39 See Hyman Tarlo, ‘Forcing the Creation of Easements—A Novel Law’ (1979) 53 Australian Law Journal 254, 263. 40 John Adams, ‘Access to Neighbouring Land Act 1992’ (1992) 9226 Estates Gazette 136, 137; Note, ‘Please May We Have Our Ball Back?’ [1992] Conveyancer and Property Lawyer 225, 225-226, 230 -231; John Durack, ‘When a Neighbour Holds Your Client to Ransom’ (1998) 36 Law Society Journal 39; Lee Aitken, ‘Applications in Equity: The Statutory Easement Under s 88K of the Conveyancing Act 1919, and Licences Coupled With an Interest’ (2000) 20 Australian Bar Review 60, 69. 41 Christopher Wong, ‘Access to Neighbouring Land Act 2000 (NSW): A Case of Overstepping the Boundaries?’ (2001) 8 Australian Property Law Journal 239, 240-241, 248. 42 Stokes, above n 25, 106, 108, 112. 43 Bradbrook, above n 6, 56. 44 Ibid 59-60.

Introduction 9 Most of critiques of the desirability of the access legislation are characterised by their impressionistic nature, rather than by empirical or theoretical rigour. Assertions are made regarding exploitive conduct, good neighbourly relations and the effective use of resources, without exploring these concepts in any depth. In this way the previous scholarship provides this thesis with its point of departure. In addition to providing a detailed commentary on the relevant legislation, its law reform and parliamentary antecedence and its judicial exposition, this thesis will place the policy issues that underpin the various statutory access rights regimes in their philosophical context. The way in which it will do this is now explained.

III METHODOLOGY The thesis examines the extent to which the reforms effected by the enactment of the access rights legislation align with the three great modes of ethical discourse identified by Dworkin: right-based reasoning; duty-based reasoning; and goal-based reasoning.45 These modes of reasoning—which are outlined in Chapter 1—provide that a particular action (or institution) is justified if it is consistent with the exercise of a right, the observance of a duty or the maximisation of a goal.

All three of these forms of justification can be used to support the common law right of exclusion. Right-based reasoning, such as Blackstone’s conception of property,46 is antithetical to the existence of any form of statutory access rights regime; the unforgiving nature of this form of discourse provides scant leeway for undermining a landowner’s common law right of exclusion. However, the same is not necessarily true of the other forms of reasoning.

As we will see in Chapters 2 and 3, a form of goal-based reasoning can be derived from the cases dealing with the first-generation regime that supports the enactment of that legislation. This reasoning is based on the idea that the function of the law is to facilitate the efficient use of resources, or what Gregory Alexander calls the

45 Ronald Dworkin, Taking Rights Seriously (revised edition, 1978) 169-170 46 See Chapter 1, nn 1-2 and accompanying text.

Introduction 10 ‘property-as-commodity’ perspective.47 Although classical economic theory usually leaves it up to individuals to allocate property rights between themselves through consensual transactions, disputes over access to neighbouring land fall into a special category. Because these disputes take place in circumstances where there is a single potential buyer and a single potential seller (a bilateral monopoly), there is ample opportunity for each party to attempt to bargain strategically, that is, attempt to impose unfavourable terms on the other party in the hope that he or she will accept those terms rather than risk the possibility of no deal being reached. This means that there is a substantial danger that a potential agreement over access that would be mutually beneficial to both landowners will not be concluded because one or both of the parties bargained too hard in the mistaken belief that the other could be cowed into accepting a harsh agreement. To ameliorate this risk there needs to be a mechanism that forces an exchange of resources in circumstances where this would be efficient, but where private bargaining has failed. New South Wales’ s 88K and Queensland’s s 180 purport to provide such a mechanism.

Similarly, we will see in Chapter 5 that a form of duty-based reasoning was marshalled by the various law reform commissions and legislators involved in the enactment of the second-generation access legislation. The duty-based discourse that can be found in the relevant law reform reports and in the parliamentary debates is consistent with Alexander’s notion of ‘property as propriety’: the belief that property rights need to be allocated in such a way as to ensure a proper social ordering.48 The particular proper social ordering advocated is that of ‘good neighbourliness’. We will explore how the concept of being a good neighbour has been advanced to support the enactment of the access to neighbouring land legislation.

47 Gregory Alexander, Commodity & Propriety: Competing Visions of Property in American Legal Thought 1776-1970 (1997) 1. 48 Ibid.

Introduction 11 IV STRUCTURE The thesis will proceed as follows. Chapter 1 will identify the doctrinal and philosophical context in which the access rights legislation was enacted. It will note the importance of a landowner’s right to exclude others as a matter of legal principle and precedent. Dworkin’s taxonomy of rights-based, duty-based and goal-based reasoning will be introduced, and we will note how the right to exclude in airspace trespass cases has been justified in terms of each of these modes of reasoning. We will then note the various ways in which judicial dissatisfaction with the right to exclude in access cases has been manifest. Finally, we anticipate how duty-based and goal-based arguments can be marshalled to support the blunting of the right to exclude by the creation of statutory access rights regimes.

Chapters 2, 3 and 4 consider a goal-based argument for the existence of the first- generation legislation: that the legislation is needed to ensure the efficient allocation of resources in circumstances in which there is a real risk that private bargaining will not achieve that outcome. Chapter 2 tests the orthodox justification for the first- generation legislation: it is needed because the owners of the land over which access is needed tend to bargain strategically when the landowner who needs access seeks to purchase that right. The testing is done by examining the facts the s 88K and s 180 cases to establish whether in refusing to grant access the relevant landowner was motivated by the desire to obtain an exorbitant price, or whether there was some other explanation for the refusal. By applying Carol Rose’s typology of personality types,49 it will be seen that strategic bargaining provides an explanation for the refusal in some of the cases only. In others, the reason for the refusal is pre-existing bad relations between the neighbours, or a bona fide desire to enjoy one’s land without the inconvenience that allowing access would bring.

In Chapter 3 we move from the facts of the cases to the way in which courts have applied the legal prerequisites that must be satisfied before a easement granting the desired access can be granted under s 88K and s 180. It will be seen that in conducting the enquiry as to whether an easement should be imposed, the court is

49 Carol Rose, Property and Persuasion: Essays on the History, Theory and Rhetoric of Ownership (1994) 30-33.

Introduction 12 conducting an heuristic form of cost benefit analysis: will the benefit of granting rights of access outweigh the cost? If so, the imposition of the easement would be efficient, in the sense that its imposition and the payment of compensation would result in one or both of the parties being made better and neither party made worse off. Applications for the imposition of an efficient easement will be granted, while those for the imposition of an inefficient easement will be refused. In this chapter we will also note a subsidiary enquiry that must be established before the easement sought can be imposed: has the opportunity for bargaining between the parties been exhausted?

In Chapter 4 we will deepen our analysis of the efficiency justification for the existence of the first-generation legislation. The chapter does so by exploring how the concepts of subjectivity (judgments based on the actual views of a particular subject) and objectivity (judgments based on an assessment of external objects) are represented in the court’s cost-benefit calculus. Firstly, are the preferences of the respective landowners assessed on a subjective or objective basis: does the court respect what people do want or what they should want? Secondly, to what extent does the court cede authority over the cost-benefit analysis to councils (as the relevant subject with planning powers), rather than retaining the role (as the finder of objective fact) for itself? It will be shown that the preferences of the parties are assessed on an objective basis, and that although significant deference is paid to the view of councils regarding the desirability of the proposed development for which access is sought, ultimately the court makes an objective judgment on this issue as well. The consequences of the objective flavour of the efficiency enquiry are addressed in the Conclusion of this thesis.

In Chapter 5 our attention turns to the second-generation access legislation. It will be seen that the relevant law reform commission reports and parliamentary debates that argue for the enactment of the access to neighbouring land legislation are replete with references to the duty that neighbouring landowners owe to each other. A landowner who denies access to another (who needs it to undertake work on his or her land) is stigmatised as being guilty of unneighbourly conduct. Good neighbourliness requires waiving one’s legal right to exclude in certain

Introduction 13 circumstances. We turn to various strands of law and society scholarship— particularly the work of Robert Ellickson50—to give meaning to the norm of good neighbourliness. We will conclude that in the context of residential land, when one neighbour requires access to another’s land in order to maintain or repair a dwelling, there is something to be said for the existence of a duty to allow access. At least this is the case where the benefit of providing access outweighs the cost. By creating access rights in these circumstances, the second-generation regime gives legal expression to the ideal. However, in forcing a residential landowner to provide access to a commercial developer in order to facilitate the construction of a new building, the New South Wales second-generation legislation goes beyond what simple good neighbourliness requires.

Drawing upon the findings of Chapter 4 and 5 in particular, the thesis concludes that although these goal-based (economic) and duty-based (good neighbour) discourses make an arguable case for the enactment of the access rights legislation, neither of them, in an unadulterated form, provides a conclusive justification. Rather, an eclectic approach that draws on both discourses is required. This is because the economic argument that the legislation results in an efficient use of resources only works when the preferences that are advanced are objective, rather than actual, ones. Thus, the goal-based discourse in fact relies on the duty-based concept of a proper social ordering that is independent of actual preferences. (Preferences for uses of land that involve more intensive development are privileged over preferences for privacy, peace and quiet.) Conversely, the duty-based argument that good neighbours should act cooperatively, rather than reflexively relying on their strict legal rights, is qualified by the goal-based condition that such cooperation is efficient. Being a good neighbour does not require granting access where the burden of doing so outweighs the benefit.

V TERMINOLOGY As has been foreshadowed, in subsequent chapters of this thesis where a statutory access right has been imposed, the parcel of land having the benefit of the right of

50 Robert Ellickson, Order Without Law (1991).

Introduction 14 access will be referred to as the ‘dominant land’, and the parcel burdened by the right as the ‘servient land’. These terms have traditionally been used in relation to easements;51 they are also used in some of the statutory access legislation in a context that does not apply to,52 or is not limited to,53 easements. The terms ‘putative dominant land’ and ‘putative servient land’ will be used to refer to the applicable parcels of land before any statutory access right is imposed. Where there is more than one parcel of land that would provide the owner of the putative dominant land with suitable access, each of those parcels will be referred to as a ‘potential putative servient parcel’. (Fortunately, there will not be many occasions on which it will be necessary to use that unwieldy term!)

The owners of the parcels of land that have been, or might be, the subject of the imposition of a statutory access right will be referred to as the ‘dominant owner’, ‘putative dominant owner’, ‘servient owner’, ‘putative servient owner’, and ‘potential putative servient owner’, as appropriate. These terms will be used instead of plaintiff (or applicant) and defendant (or respondent) because they are more intuitive, and because in some cases the application for the imposition of the right was made as a cross-claim to an action by the putative servient owner against the putative dominant owner.54

The use in this thesis of the term ‘owner’ in relation to the general operation of the statutory access rights legislation is not intended to obscure the fact that persons other than the holders of the fee simple in each of the putative dominant and servient land can be parties to the application. In respect of the first-generation access legislation, a person who holds an interest in the putative servient land—such as a lease55 or a pre-existing easement56—should joined as a defendant because such a

51 For example, Re Ellenborough Park [1956] 1 Ch 131. 52 E&W Act s 1(1)(a); 53 Property Law Act 1974(Qld) s 180(1), (2) and Conveyancing and Law of Property Act 1884 (Tas) s 84J(1), (2). 54 See Tipler v Fraser [1976] Qd R 272, 273-274 and Goodwin v Yee (1997) 8 BPR 15,795, 15,797- 15,798, in which the putative servient owner sued the putative dominant owner in trespass, and O’Mara v Gascoigne (1996) 9 BPR 16,349, 16,349-16,350, in which the putative servient owner sought a declaration against the putative dominant owner that the putative servient land was not the subject of an existing easement. 55 Foster v Hidden Valley Owners’ Cooperative Society Ltd (2002) 11 BPR 20,899, 20,900 [8].

Introduction 15 person may be entitled to compensation if an easement is imposed on the putative servient land.57 In respect of the second-generation access legislation, the persons against whom an access order is sought should include any lessee of the putative servient land. This is because an access order does not create a property right in the applicant, and thus a lessee of the servient land who was not bound by the order could maintain an action in trespass against those entering the land under the access order.58

Additionally, persons other the holder of the fee simple in the putative dominant land may apply for the imposition of a statutory access right. Queensland’s s 180 allows anyone with an interest in the putative dominant land to apply for the imposition.59 The access to neighbouring land legislation permits anyone who desires to carry out work on the putative dominant land to apply for an access order.60 Tasmania’s s 84J(1) and New South Wales’ s 88K(1) allow anyone to apply for the imposition of a statutory access right over the putative dominant land. However, the first- and second-generation legislation require that any compensation awarded for the imposition of access be paid by the person who applied for the imposition.61 This will limit practically the persons (other than the putative dominant owner) who apply for the imposition of access to long-term lessees and, in the case of the second- generation legislation, to builders or engineers retained by the putative dominant owner to undertake work on the putative dominant land.62

56 McConachie v Manly Council [2002] NSWSC 434, [1]-[2]; Pasade Holdings Pty Ltd v Sydney City Council (No 3) (2003) 12 BPR 22,441, 22,442 [2]. 57 Pasade Holdings Pty Ltd v Sydney City Council (No 3) (2003) 12 BPR 22,441, 22,442 [2]. See Property Law Act 1974 (Qld) s 180(3)(b), (4)(a), (7); Conveyancing and Law of Property Act 1884 (Tas) s 84J(4); Conveyancing Act 1919 (NSW) s 88K(2)(b), (4), which deal with compensation payable on the imposition of an easement or statutory right of user, 58 Law Commission, Rights of Access to Neighbouring Land, Report No 151, (1985) [4.73]. Also see E&W Act s 1(1)(b); Tasmanian Act s5(1)(c),(4);NSW Act s 11(2)(a), which refer to the absence of the consent or agreement of those persons whose consent or agreement is necessary for entry to the putative servient land. 59 Property Law Act 1974 (Qld) s 180(1), (7). 60 E&W Act s1(1)(a);Tasmanian Act s 5(1)(a); NSW Act s 7(1), (2). However, the NSW Act requires that, unless waived by the court under s-s(3), if the applicant is not the putative dominant owner needs the consent of the putative dominant owner. 61 Property Law Act 1974 (Qld) s 180(4)(a); Conveyancing and Law of Property Act 1884 (Tas) s 84J(4); Conveyancing Act 1919 (NSW) s 88K(4); E&W Act s 2(4)(a); NSW Act s 26(1). Cf Tasmanian Act s 6(2)(g) which does not expressly provide by whom compensation is to be paid. 62 Oerton, above n 23, 466; Council, above n 38, 104.

Introduction 16 CHAPTER 1 The Castle and The Cathedral: The Origin of Statutory Access Rights

I OUTLINE In this chapter we consider the significance of legislation granting access rights over neighbouring land by examining the doctrinal and philosophical context in which the legislation was enacted. We commence in Section II by noting the image of land ownership as the most sacrosanct of property rights and how this image translates into legal doctrine. William Blackstone, who described property as ‘that sole and despotic dominion which one man claims and exercises over the external things of the world, in total exclusion of the right of any other individual in the universe’,1 went further in describing the particular legal significance of land ownership: ‘And the law of England has so particular and tender regard to the immunity of a man’s house, that it stiles (sic) it his castle, and will never suffer it to be violated with impunity.’2 We will call this conception of land the ‘Castle’ model. Section II notes the special level of protection afforded to interests in land, as opposed to that afforded to other forms of property, such as chattels. The Section also introduces Ronald Dworkin’s taxonomy of theories that can be used to assess the merits of a particular action or institution: right-based, duty-based and goal-based reasoning.3 We will see how courts have used each of these modes of reasoning in particular cases to endorse the adoption of the Castle model of land ownership by adopting the injunction as the primary remedy in an action for trespass.

Section III contends that courts, although still professing fealty to the Castle model, have at times guardedly expressed dissatisfaction with it. In particular, we will note

1 William Blackstone, Commentaries on the Laws of England (first published 1765, 9th ed, 1783) vol 2, 2 (emphasis added). The metaphor that a person’s home is their castle appears in some law reform commission reports and articles concerning the access to neighbouring land legislation, but without attribution to Blackstone. See Law Commission, Rights of Access to Neighbouring Land, Working Paper No 78 (1980) [3.5]; Law Commission, Rights of Access to Neighbouring Land, Report No 151 (1985) [3.16]; Note, ‘Please May We Have Our Ball Back?’ [1992] Conveyancer and Property Lawyer 225, 231 and Christopher Wong, ‘Access to Neighbouring Land Act 2000 (NSW): A Case of Overstepping the Boundaries?’ (2001) 8 Australian Property Law Journal 239, 248 2 Blackstone, above n 1,vol 4, 233 (emphasis added). Blackstone also stated (at vol 3, 288): ‘For every man’s house is looked upon by the law to be his castle of defence and asylum, wherein he should suffer no violence ...’. 3 Ronald Dworkin, Taking Rights Seriously (revised edition 1978) 169-173. 17 the courts’ unhappiness in having to award an injunction to protect a landowner’s (possibly unreasonable) refusal to sell rights of access to a neighbour when that neighbour requires access to facilitate the development of his or her own land. We will see how other forms of duty-based and goal-based—but not right-based— reasoning can be used to undermine the Castle model. These forms of reasoning will be applied in detail to the specifics of the first-generation and second-generation statutory access rights regimes, which will be examined in Chapters 2 - 5.

Section IV presents an alternate model of land ownership in which the level of protection afforded to land is nuanced—rather than monolithic—and dependent upon the ease with which the land in question can be made the subject of a mutually beneficial exchange. We will refer to this conception of land ownership as the ‘Cathedral’ model, after Calabresi and Melamed’s famous article in which they introduced the notions of property and liability rules as alternate ways of protecting proprietary entitlements.4 Under the Cathedral model, a court can grant damages in lieu of an injunction when a landowner unreasonably refuses to sell rights of access to a neighbour who requires that access to develop her or his own land.

Finally, in Section V we will note how the courts have shied way from comprehensively adopting the Cathedral model. The courts’ concerns about the stability of property rights and the perceived legitimacy of basing continuing rights of access upon an initial trespass has meant that it has been left to legislatures to enact a regime of statutory access rights. These regimes constitute a via media between the Castle and Cathedral alternatives.

II THE CASTLE IMAGE OF LAND The American property law theorist, Carol Rose, believes in the power of symbols. She claims that the way we think about the concept of property has been shaped by

4 Guido Calabresi and A Douglas Melamed, ‘Property Rules, Liability Rules and Inalienability: One View of the Cathedral’ (1972) 85 Harvard Law Rev 1089. The Cathedral referred to in the title of the article is the Cathedral at Rouen, which formed the subject of a series of Claude Monet’s paintings: 1090, n2 (contd).

Chapter 1 18 our choice of land as ‘the central symbol’ of the concept.5 Rose argues that the ‘rhetoric of property ... resound[s] with the notes of heroic autonomy’: I can do whatever I like with my property without regard to you.6 This assertion of the ‘awesome Blackstonian power of exclusion’7 derives, Rose claims, from the qualities of land as being ‘immovable’, ‘enduring’8 and ‘easily ... segregated’.9 How different our conception of property would be if we chose water—‘flowing and necessarily shared water’10—as representing property. If this were the case, we might think of property rights as ‘more fluid and less-fenced in’, as possessing the qualities of ‘flexibility, reasonableness and moderation, attentiveness to others, and co-operative solutions to common problems.’11

This narrative, with the notion of the autonomous landowner who possesses the despotic right to control the access of others to his or her land, is echoed in Stewart Sterk’s metaphor of the ‘geometric-box’ to describe the allocation of rights of land ownership. A legally discrete parcel of land is created by extending vertically, ‘rigid boundary lines’ which have been imposed on the surface of the earth. The allocation of one of these geometric-boxes to a person carries with it the right to pursue ‘private preferences, either through personal use or private exchange.’12 The allocation ‘generally permits landowners to avoid interaction with others, including neighbors, unless both the landowner and the other provide for interaction by explicit agreement.’13

5 Carol Rose, ‘Propter Honoris Respectum: Property as the Keystone Right?’ (1996) 72 Notre Dame Law Review 329, 351. 6 Ibid 365. 7 Ibid 351. 8 Ibid. 9 Ibid 365. 10 Ibid 351. 11 Ibid. 12 Stewart Sterk, ‘Neighbors in American Land Law’ (1987) 87 Columbia Law Review 55, 55. 13 Ibid 90. It is important to note Sterk’s use the ‘generally’ in the quotation. Sterk’s article is predominantly concerned with the departure from the ‘geometric-box’ model where limited rights regarding a parcel of land are given to the neighbour, rather than the landowner. Such departures arise in regard to easements by necessity, implication, estoppel and prescription, and in regard to ‘spite fences’. In these contexts, the relevant legal rules ‘reverse the societal preference for individualism and autonomy, by mandating a pattern of interaction between neighbors, absent explicit agreement to the contrary.’ (at 90) In these contexts, ‘the doctrinal framework suggests a conception of neighbors that includes continuing mutual dependence rather than a pattern of discrete and unrelated transactions.’ (at 95) These particular land law rules thus display Rose’s ‘water-like’ properties.

Chapter 1 19 An example of the ideological importance of the ownership of land can be found in the judgment of Kirby J in Fejo v Northern Territory.14 The case was concerned the issue of whether the grant by the Crown of a fee simple in certain land permanently extinguished native title in that land, so that the native title would not revive on the later resumption of the land by the Crown. In holding—as did all the other members of the court—that the grant of the fee simple did permanently extinguish native title, Kirby J relied on its ‘fragile’ nature and the fact that it had its origins outside the common law. Nevertheless, the following comments of his Honour regarding common law interests in land would seem to have wider application. Kirby J said:15 ... in every society, rights in land which afford an enforceable entitlement to exclusive possession are basic to the social peace and order as well as to economic investment and prosperity. Any significant disturbance of such established rights is therefore, ordinarily, a matter for the legislature not the courts.

Were the position otherwise, a serious element of uncertainty would be introduced into a body of the law which should be as clear and certain as the law can make it. ... The absolute nature of the fee simple is a central feature of Australia’s land system. It is not susceptible to alteration by the Court as a re- expression of the common law.

We can contrast Kirby J’s insistence of the absolute nature of property rights in land with the more flexible approach to other forms of property taken by the majority—of which Kirby J was part—in Yanner v Eaton.16 Like Fejo, Yanner v Eaton dealt with the question of whether native title had been extinguished. In Yanner, the issue was whether s 7(1) of the Fauna Conservation Act 1974 (Qld), which provided that all fauna ‘is the property of the Crown’, extinguished native title hunting rights with respect to fauna. The majority stated that ‘property’ is a comprehensive term and one that ‘can be used to describe all or any of very many different kinds of relationship between a person and a subject matter.’17 After reviewing the purpose of

14 (1998) 195 CLR 96. 15 Ibid 150, 156 [104], [112.4]. 16 (1999) 201 CLR 351. The other members of the majority were Gleeson CJ, Gaudron, and Hayne JJ. 17 Ibid 367 [20].

Chapter 1 20 the Act and the various powers of the Crown under it, the majority held that the section did not extinguish native title rights because the property that was vested in the Crown was not full beneficial, or absolute, property. Rather the Crown’s property was ‘no more than the aggregate of the various rights of control by the Executive that the legislation created’, governing such matters the right to take and possess fauna, and the right to receive a royalty payment for fauna taken.18

Accordingly, Fejo and Yanner provide a useful illustration of the exalted nature of the ownership of land, when compared to other forms of property. The economic and social importance of a stable system of land ownership compels the strict legal protection of that form of property. By contrast, the ownership of animals can, in certain circumstances, be subject to less rigorous protection. So, native title to land will be extinguished by the Crown granting a fee simple in land, but not by the Crown acquiring property in fauna. These two cases also neatly parallel Rose’s distinction between ‘land-like’ and ‘water-like’ rules. Private ownership of land excludes the co-existence of native title, but Crown ownership of fauna does not.

The views of Rose, Sterk and Kirby J regarding the primacy of the ownership of land operate as an expression of abstract principle. We must now see how this principle informs (constitutes the logos of) concrete legal doctrine.

A The Legal Expression of the Castle Model The inviolability of the ownership of land is reflected in the protection afforded to interests in land by both the common law and equity. Under both, the holder of an interest in land is (prima facie) entitled to the continued protection of the interest in specie, rather than losing that protection and receiving monetary compensation in the form of the payment of damages. The common law allows a real remedy to recover possession of land,19 whereas the owner of a chattel may bring an action in detinue, in which case the court has a discretion to order the return of the chattel or give

18 Ibid 370 [30]. 19 Supreme Court Act 1970 (NSW) s 79.

Chapter 1 21 damages in lieu.20 Equity’s treatment of land is similar. It is a basic principle that equity will only give specific relief where damages at law would be inadequate. And unlike the position in relation to personal property, damages for the breach of a contract to sell an interest in land (whether the fee simple or a lesser interest) and damages for tortious interference with land are normally so regarded.21 Accordingly, the grant of specific performance of a contract to sell an interest in land22 and the grant of a mandatory or prohibitive injunction in respect of trespass to land23 are prima facie applicable.24

In terms of specific performance of land contracts, Lord Nicholls of Birkenhead in Attorney-General v Blake25 confirmed the uniqueness of land: a particular parcel of land may have attributes which appeal to a particular buyer even though those attributes do not translate into a financial equivalent. In such circumstances, an ‘award of damages, based on strictly financial criteria, would fail to recompense a disappointed buyer for this head of loss.’26

By contrast, the approach taken in regard to the specific performance of contracts for the sale of other forms of property is set out in Dougan v Ley by Williams J as follows:27

20 McKeown v Cavalier Yacht Pty Ltd (1988) 13 NSWLR 303 at 307-308. Also see Supreme Court Act 1970 (NSW) s 93. 21 See ICF Spry, Equitable Remedies (6th ed, 2001) 61, 385. 22 In addition to below nn 25-26 and accompanying text, see Adderley v Dixon (1824) 1 Sim & St 607, 610; 57 ER 239, 240 and Loan Investment Corp of Australasia v Bonner [1970] NZLR 724 (Privy Council), 735 (Lord Pearson), 745 (Sir Garfield Barwick). Further, where an order for specific performance is available to enforce a contractual promise to sell an interest in land—whether a fee simple or a lesser interest—the purchaser takes an equitable interest in the land despite the fact that there has not been a formal transfer of that interest. See Lysaght v Edwards (1876) 2 Ch D 499, 506 and Chan v Cresdon Pty Ltd (1989) CLR 242, 252-254. 23 In addition to below nn 29-30 and accompanying text, see, for example, Harrow London Council v Donohue [1995] 1 EGLR 257, 259 and Di Napoli v New Beach Apartments Pty Ltd (2004) 11 BPR 21,493, 21,496 [28]. 24 Of course, an order for specific performance or an injunction can still be denied where damages are inadequate. The conduct of the plaintiff—such as being guilty of ‘unclean hands’, laches, or acquiescence—might make the granting of specific relief inappropriate. See RP Meagher, JD Heydon and MJ Leeming, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (4th ed, 2002) [3.110]-[3.135] and Chapter 36. Additionally, specific relief may be denied where it would cause hardship or oppression to the defendant. See below Part III(A). 25 [2001] 1 AC 268. 26 Ibid 282. 27 (1946) 71 CLR 142, 183. The case involved an application for a decree of specific performance of a contract for the sale of a taxi cab and the attendant registration.

Chapter 1 22 It is clear that the Court of Equity will not decree specific performance of a contract where a money payment, or in other words damages, will afford an adequate remedy for the breach, and that this is the position in the case of most forms of personal property, such as goods which can be readily purchased in the market and Government stock and shares in listed companies which can be readily purchased on the Stock Exchange. But it is equally clear that the Court of Equity will decree specific performance of contracts for the sale of chattels which are unique or have for some other reason a special or peculiar value. The contract [in this case] was not a mere contract for the purchase of a chattel. It was a contract for the purchase of a chattel adapted to carry on a particular business, and of the registration and licence without which that business could not be carried on.

Accordingly, for the purpose of the enquiry as to whether damages would be an adequate remedy, land is assumed to be unique. Chattels, however, are not, unless shown otherwise.28

The exalted nature of land ownership is also reflected in the judgment of Bryson J in theairspacetrespasscaseofBendal Pty Ltd v Mirvac Project Pty Ltd.29 In that case his Honour stated that Australian law regards the rights of freehold owners as being of an ‘absolute nature’ so that the infringement of them in the form of a trespass gives ‘relatively ready access to injunction remedies’.30 The airspace trespass cases are an important part of the origins of the access rights legislation and will be discussed in some detail shortly.

B Dworkin’s Taxonomy We now consider various types of reasoning that can be used to justify the right of exclusion that is possessed by property owners in general, and landowners in

28 Specific performance of a contract to sell a racehorse was granted in Borg v Howlett (1996) 8 BPR 15,535. Additionally, specific performance of a contract for the sale of shares will be available if the shares are held in a private company, or if all of the relevant shares are held by the vendor. See Wayne Covell and Keith Lupton, Principles of Remedies (3rd ed, 2005) [7.33]. Also see Lee Aitken, ‘When are Damages an Adequate Remedy?’ (2004) 78 Australian Law Journal 544, 547. 29 (1991) 23 NSWLR 464. 30 Ibid 469.

Chapter 1 23 particular. These modes of reasoning are drawn from Ronald Dworkin’s taxonomy of political theories: (a) right-based justifications; (b) duty-based justifications; and (c) goal-based justifications.31 In outlining the main features of each of these types of justification, we will see how each of them is represented in the airspace trespass jurisprudence. We do this for two reasons. Firstly, because the difficulties that s 88K of the Conveyancing Act 1919 (NSW) was designed to ameliorate included those faced by property developers whose construction methods required the use of the airspace of neighbouring land in order to accommodate encroaching cranes or scaffolding.32 Secondly, because the airspace trespass scenario is the quintessential example of the ability of a landowner to exclude others at his or her unfettered pleasure. The landowner may deny access to a developer even though the detriment to the landowner of granting access would be small (due to the minor and temporary nature of the encroachment), while the benefit to the developer of being granted access would be substantial (due to being able to construct a larger building or employing a cheaper construction method).

1 Right-Based Justifications A justification is right-based if it has as its base the concept of a right, that is an enforceable entitlement held by an individual to (i) act or refrain from acting in a particular manner without interference from others, or (ii) compel others to act or refrain from acting in a particular manner. An act that is consistent with an accepted right is unimpeachable, even though the exercise of the right would produce undesirable results. Conversely, an act that contravenes an accepted right is contemptible, even if the infringement would yield otherwise desirable results.33 Because right-based reasoning focuses on the inherent rightness or wrongness of the act itself, and ignores the consequences of the act, it is a form of deontological

31 Dworkin, above n 3, 169-170. For a review of Dworkin’s taxonomy, see Jeremy Waldron, The Right to Private Property (1988) 64-79 and David Lametti, ‘The (Virtue) Ethics of Private Property’ in Alastair Hudson (ed), New Perspectives on Property Law, Obligations and Restitution (2004) 51 n 43. 32 New South Wales, Parliamentary Debates, Legislative Council, 4 December 1995, 4000 (Hon JW Shaw, Attorney General), 4001 (Hon DF Moppett), 4001 (Rev Hon FJ Nile). 33 Dworkin, above n 3, 169; Waldron, above n 31, 62, 64, 68.

Chapter 1 24 reasoning.34 Dworkin states that the belief that it is the right of all people to possess the greatest possible liberty would be a right-based theory, and identifies Thomas Paine’s theory of revolution as a concrete example of this type of justification.35 Blackstone’s description of property as ‘that sole and despotic dominion’ is a right- based conception of property.

An example of right-based reasoning in the adjudication of an airspace trespass case can be found in Anchor Brewhouse Developments Ltd v Berkeley House (Docklands Developments) Ltd.36 In explaining why the encroachment of a tower crane upon the defendant’s land into the airspace of the plaintiff’s land constituted trespass, Scott J said:37 The tort of trespass represents an interference with possession or with a right to possession. A landowner is entitled, as an attribute of his ownership of the land, to place structures on his land and thereby to reduce into actual possession the airspace above his land. If an adjoining owner places a structure on his (the adjoining owner's) land that overhangs his neighbour's land, he thereby takes into his possession airspace to which his neighbour is entitled.

The action of the defendant is wrongful simply because it transgresses an accepted entitlement of the plaintiff. The consequences of the infringement are irrelevant: it does not matter whether or not the defendant has interfered with the plaintiff’s actual enjoyment of the right. Nor does it matter if the adverse consequences for the defendant in not being permitted to use the plaintiff’s airspace are severe.38

34 Richard Epstein, Principles for a Free Society (1998) 10; Joseph Singer, Entitlement: The Paradoxes of Property (2000) 116; James Grunebaum, Private Ownership (1987) 54 ff; Lametti, above n 31, 51 n 45. 35 Dworkin, above n 3, 171-172. 36 [1987] 2 EGLR 173. 37 Ibid 175. 38 These points were also made by Young J in Di Napoli v New Beach Apartments Pty Ltd (2004) 11 BPR 21, 493, 21,495 [18]. In that case his Honour granted a mandatory injunction ordering the defendant to remove from the subsoil of the plaintiff’s land rock anchors that the defendant had installed (without the plaintiff’s permission) as part of its construction of a building on its own land.

Chapter 1 25 2 Duty-Based Justifications Whereas right-based justifications are based on the existence of an enforceable entitlement, duty-based justifications centre on the existence of an enforceable obligation (or duty), which requires the subject individual to act, or refrain from acting, in a particular way.39 Despite this fundamental difference, duty-based justifications share with right-based justifications the characteristic of being a deontological form of reasoning: an act is wrongful if it breaches a duty, even if that breach would have otherwise beneficial results, and an act that is consistent with a duty is unimpeachable, even if that act would produce otherwise maliferous results.40

One objection that might be levelled against the distinction between right-based and duty-based justifications is that they are simply mirror images of one another: if X possesses a right that is exercisable against Y, then Y is under a duty that is owed to X. If this criticism is accepted, then one cannot properly argue that the two forms of justification are in fact distinct. Dworkin anticipated this criticism, however. He explained that although rights and duties are corresponding, they are not always correlative: one will often be derived from the other. For example, a person may have a right that I should not to lie to her or him, either (a) because they have a right not to be lied to, or (b) because I have a duty not to lie that is logically prior to another’s right not to be lied to. The former is an example of right-based reasoning; the latter, of duty-based reasoning.41 The difference is thus one of emphasis. Right- based reasoning focuses on the autonomy of the right-holder, and the constraint on the actions of others is simply a means achieving that end. By contrast, duty-based reasoning stresses the importance of the conformity of an individual’s actions with a code of conduct, with the independence of action afforded to others because of such observance being a secondary consideration.42

Dworkin gives as examples of duty-based justifications the belief that one is obliged to obey God’s will as expressed in the Ten Commandments, and Immanuel Kant’s

39 Dworkin, above n 3, 170. 40 Ibid; Lametti, above n 31, 44, 51 n 45. 41 Dworkin, above n 3, 171. 42 Ibid 172.

Chapter 1 26 Categorical Imperative.43 In our consideration in Chapter 5 of the rationale for the access to neighbouring land legislation, we will examine Robert Ellickson’s observations about the duty-based practice of behaving as a good neighbour.

In terms of the airspace trespass cases, a clear example of a duty-based justification can be found in Bendal Pty Ltd v Mirvac Project Pty Ltd.44 That case related to the encroachment into the airspace above the plaintiff’s land of the scaffolding used by the defendant company in the construction of a building on its land. Bryson J condemned the defendant’s encroachment in the following terms:45 In my view, the defendants have made an unfortunate choice based on economic considerations and have been caught poaching with the squire’s game tucked in their belts.

The resource represented by the plaintiff’s airspace is not available like the natural resources of the countryside for them to use as they find suitable, any more than they could count on using other people’s bricks or other resources. At the heart of the litigation is a very simple question of using or not using other people’s property, and this disqualifies the defendants from any real claim to consideration of hardships which they have incurred.

In this passage, the focus is on the obligation of the defendant to respect the property rights of the plaintiff, rather than upon the plaintiff’s entitlement of have its property rights respected.

3 Goal-Based Justifications Eschewing rights and duties as ends in themselves, goal-based justifications, which are also known as teleological46 or consequentialist47 theories, are based on the notion that a particular state of affairs is to be preferred to another state of affairs. The state

43 Ibid 171-172. 44 (1991) 23 NSWLR 464. 45 Ibid 472. 46 S Coval, JC Smith and Simon Coval, ‘The Foundations of Property and Property Law’ (1986) 45 Cambridge Law Journal 457, 459; Lametti, above n 31, 44. 47 Randy Barnett, ‘Foreword: Of Chickens and Eggs—The Compatibility of Moral Rights and Consequentialist Analyses’ (1989) 12 Harvard Journal of Law and Public Policy 611; Epstein, Principles for a Free Society, above n 34, 10.

Chapter 1 27 of affairs which is to be preferred is the ‘goal’ to which actions should be addressed. The rightness or wrongness of an action is to be determined by whether the results of the action will promote or hinder the achievement of the goal.48 What constitutes a desirable state of affairs (the ‘goal’) will depend upon the particular goal-based theory, but such goals have the common characteristic that their desirability is not assessed from a particular individual's perspective, but rather from the perspective of a particular society as a whole.49

There is significant scope for dispute among goal-based theorists as to what goals should be sought to be achieved, and thus provide the standard against which the consequences of various courses of action are to be measured. According to Dworkin:50 Goals may be relatively specific, like full employment or respect for authority, or relatively abstract, like improving the general welfare, advancing the power of a particular nation, or creating a utopian society according to a particular concept of human goodness or of the good life.

The best-known form of goal-based justification is utilitarianism, which seeks to maximise social welfare.51 However, even within utilitarianism there are differing views as to what is maximised: happiness, utility or wealth.52 For the purposes of this thesis, the goal-based justification that will be used to assess the common law right to exclude others from having access to one’s land, as well as the statutory departure from that right, is the economic concept of wealth maximisation. The basis tenets of this concept will now be outlined.

C Wealth Maximisation This belief system, primarily articulated by the doyen of the law and economics movement, Richard Posner, asserts that the law should facilitate the efficient use of resources by allowing the entitlement in a resource to move to the party who values

48 Ibid 169. 49 Ibid 172. 50 Ibid 169. 51 Ibid 171-172. 52 Epstein, Principles for a Free Society, above n 34, 10, 13.

Chapter 1 28 it most.53 In this respect, the value that a person assigns to a resource is measured by the highest amount that a person is willing to pay to acquire the resource (if she doesn’t have it) or the lowest amount at which she is willing to sell the resource (if she already has it).54

The starting point for shaping legal doctrine so as to achieve the goal of the efficient allocation of resources is the Coase Theorem, which is ‘abstracted from ... but not stated in’55 Ronald Coase’s famous article.56 This central tenet of the law and economics movement provides that the most efficient use of a resource will result, irrespective of the initial legal allocation of the entitlement to that resource, provided that transaction costs (that is, obstacles to bargaining) are zero. This is because where transaction costs are zero, parties can freely bargain to exchange the entitlement to a resource in a mutually beneficial transaction, so that the resource moves from a lower-valued to a higher-valued use. Accordingly, provided that bargaining is costless, the same final allocation of resources is reached, irrespective of which party initially held the relevant legal entitlement.57 Coase summarised his views in the following terms:58 But it has to be remembered that the immediate question faced by the courts is not what shall be done by whom but who has the legal right to do what. It is always possible to modify by transactions on the market the initial legal delimitation of rights. And, of course, if such market transactions are costless, such a rearrangement of rights will always take place if it would lead to an increase in the value of production.

The law and economics movement has developed technical language to describe the process of mutually beneficial exchange. This language is called ‘bargaining

53 Richard Posner, Economics of Justice (1981) 60-61, 64-65. Posner is at pains to point out that his wealth maximisation theory is different from, and in his view ethically superior to, classical utilitarianism’s concern with the promotion of happiness: at Chapter 3 passim. 54 For a critical analysis of the ‘offer/asking price’ distinction, see Duncan Kennedy, ‘Cost-Benefit Analysis of Entitlement Problems: A Critique’ (1981) 33 Stanford Law Review 387. 55 Robert Cooter, ‘The Cost of Coase’ (1982) 11 Journal of Legal Studies 1, 1. 56 Ronald Coase, ‘The Problem of Social Cost’ (1960) 3 Journal of Law and Economics 1 reprinted in Ronald Coase, The Firm, the Market and the Law (1988) 95 -156. 57 Ibid 97-104. 58 Ibid 114 (emphasis in original).

Chapter 1 29 theory’.59 When a bargain is concluded, a resource moves from a party who values it less to a party who values it more, and a ‘cooperative surplus’ has been generated. This surplus results because the aggregate wealth of the parties after the exchange (the ‘cooperative solution’ state of affairs) exceeds the aggregate wealth of the parties before the exchange (the ‘non-cooperative solution’ state of affairs).60 So, if the current holder of a resource values it at $100, and another party values the resource at $120, a potential cooperative surplus of $20 exists, which will be realised if the current owner sells the resource to the other party at a price not less than $100 and not more than $120. The price at which the resource is finally sold/purchased, determines how the cooperative surplus is divided. If the price is $110, then the cooperative surplus has been divided equally, and each party is $10 better off than they were prior to the exchange. If the price is $115, then the seller receives 75% of the cooperative surplus, and the buyer 25%. Those proportions would be reversed if the price were $105. In any case, no matter how the cooperative surplus is divided, the consensual exchange leaves each party better off than they were prior to the exchange.

The Coasean inevitability of the efficient allocation of resources through the process of beneficial exchange assumes, as we have said, that transaction costs are insignificant. Accordingly, the concept of transaction costs is of central importance to this efficiency model of property rights.61 A transaction cost is any expense that must be incurred, or difficulty that must be overcome, before bargaining can be successfully concluded. Conventionally, transaction costs are said to include: (i) the cost of potential buyers and potential sellers locating each other (‘search costs’); (ii) the cost of negotiating an agreement between all the involved parties (‘bargaining

59 Robert Cooter and Thomas Ulen, Law and Economics (2nd ed, 1997) 72. 60 Ibid 73-74. 61 See Pierre Schlag, ‘The Problem of Transaction Costs’ (1989) 62 Southern California Law Review 1661, 1661-1664. Schlag argues that the notion of transaction cost is ‘too volatile’ (at 1699) to perform the role assigned to it as ‘one of the master concepts’ (at 1661) of law and economics. For a survey of specialist economic writing about transaction costs, see Douglas Allen, ‘Transaction Costs’ in Boudewijn Bouckaert and Gerrit De Geest (eds) Encyclopedia of Law and Economics, Volume 1: The History and Methodology of Law and Economics (2000) 893-926.

Chapter 1 30 costs’); and (iii) the cost of enforcing the concluded agreement (‘enforcement costs’).62

Orthodox law and economics analysis holds that transaction costs are lower, and private agreements about the allocation of proprietary entitlements much more likely to occur, when the number of parties bargaining over the entitlement to a resource is small. On the other hand, where a large number of parties are involved in the negotiations, such as in a nuisance dispute involving mass pollution, communication costs and bargaining costs are high, which militates against an agreement being reached, even when a transfer of the entitlement would be efficient. In particular, there is a very real possibility of some parties engaging in ‘strategic behaviour’ by misrepresenting their valuation of the resource so as in order to maximise their own personal benefit from any agreement.63

For example, assume that several factories lawfully discharge a large amount of pollution that adversely affects a large number of residents. The residents desire to pay the factories to eliminate (or at least reduce) the amount of pollution that the factories produce. We further assume that the residents would value the right to be free of pollution (or subject to a reduced level of pollution) more than the factories value the right to produce pollution (or at least to pollute at the current level). This would mean that the residents could purchase from the factories the factories’ right to pollute (or at least pollute at the current level) for an amount that would leave both the factories and the residents better off. However, because of the large number of parties involved, this efficient outcome might not be achieved. As the entitlement to pollute is held collectively by several potential sellers (the factories), each one has an incentive to ‘hold out’ when the other sellers have agreed to the sale in order to get a better deal for itself. Additionally, where there are a large number of persons who collectively desire to acquire the entitlement (the residents), there is an incentive for each of the potential buyers (the residents) to ‘freeride’ by refusing to pay his or her share of the purchase price in the belief that the other potential buyers will make up

62 Cooter and Ulen, above n 59, 84-85. Also see Coase, above n 56, 114; Schlag, above n 61, 1674- 1675. 63 Cooter and Ulen, above n 59, 85-86.

Chapter 1 31 for the shortfall by paying more than their fair share. The freerider hopes to gain the benefit of the transaction without paying for it.64

By contrast with the above example, the scenario involving bargaining about the right to encroach upon, or otherwise gain access to, a neighbour’s land (including the airspace above that land) is the quintessential low transaction cost event.65 Typically only two parties are involved: (i) the landowner who desires to make use of other land in order to facilitate the development of his or her own land; and (ii) the owner of that other land. Search costs and enforcement costs are negligible because of the close physical proximity of the parties. And because only two parties are involved, bargaining costs should also be low because there is not the same potential for holdout or freerider problems that there are with collective sellers and collective buyers. The low transaction costs in this situation would require that the entitlement of the neighbour should be protected by an injunction. This is because if the landowner who wishes to make use of the neighbouring land values that right of use more than the neighbour values the right to prevent such use, the low transaction cost setting for the negotiations should allow the parties to reach a mutually beneficial agreement that allows the use to take place.66

1 Wealth Maximisation as a Goal in Airspace Trespass Cases We now turn to the question of whether goal-based reasoning—where the relevant goal is the promotion of the efficient use of resources—is represented in the airspace trespass cases. Unlike the use of right-based and duty-based reasoning, where the reliance has been express, courts have not expressly alluded to the goal of moving resources to the party who values it more in upholding a landowner’s exclusive right to his or her airspace. Instead, courts have used the concept of certainty as a surrogate for efficiency in this regard. For example, in LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd, Hodgson J articulated the test for whether the

64 For a more detailed explanation of holdout and freerider problems, see Calabresi and Melamed, above n 4, 1106-1107 and Cooter and Ulen, above n 59, 101, 151. 65 See the sources cited in Sterk, above n 12, 56 n7. 66 See Thomas Merrill, ‘Trespass, Nuisance and the Costs of Determining Property Rights’ (1985) 14 Journal of Legal Studies 13, 19.

Chapter 1 32 encroachment by an object on the defendant’s land into the airspace above the plaintiff’s land constituted a trespass, in the following manner: 67

I think that the relevant test is not whether the incursion actually interferes with the occupier's actual use of the land at the time, but rather whether it is of a nature and at a height which may interfere with any ordinary uses of the land which the occupier may see fit to undertake. Such a rule has the advantages stated by Griffiths J in Bernstein of Leigh (Baron) v Skyviews & General Ltd (at 486): ‘...Adjoining owners then know where they stand; they have no right to erect structures overhanging or passing over their neighbours' land and there is no room for argument whether they are thereby causing damage or annoyance to their neighbours about which there may be much room for argument and uncertainty.’

This passage constitutes a significant departure from the right-based and duty-based reasoning referred to previously. The rationale for the breadth of the landowner's interest in the airspace above his or her land is not based on the existence of some inherent, inviolable right of the surface landowner, or some inherent, inescapable duty owed by the (encroaching) neighbour. Instead, the rationale for framing the rule is this way is to achieve certainty between the parties as to who has the right to use the airspace. And the goal of achieving certainty can be subsumed in the goal of maximising the efficient use of resources by promoting private bargaining. Under this rule for airspace trespass a potential defendant should know that she or he will need to purchase the right to encroach from the surface landowner. In this way, the clear delineation of who owns the entitlement reduces transaction costs associated with bargaining, and thereby facilitates an efficient exchange. The parties know which of them has the right—to enforce or to sell—and which of them must purchase it. Sterk describes the nexus between the clear initial delineation of an entitlement and a final efficient allocation of that entitlement as follows:68

67 (1989) 24 NSWLR 490, 495-496 (emphasis in original). 68 Sterk, above n 12, 56.

Chapter 1 33 Rules that reduce uncertainty to a minimum, like this rigid, ‘geometric-box’ allocation of rights have been championed as an ideal mechanism for facilitating market exchange. Rules that promote certainty assure that when more than one individual values a particular right, all will know who has the right to sell it. The individual who values it most...is likely to emerge with the right.

If the entitlement to the airspace were in any way uncertain, a defendant might be tempted to trespass and take his or her chances in court. The determinacy of the rule should force most potential defendants to the bargaining table instead.

The awarding of an injunction in respect of an airspace trespass can also be explained in terms of the goal of facilitating private bargaining. Thus, the thinking goes, an injunction is the appropriate remedy in a dispute over proprietary entitlements between a small number of parties. The grant of an injunction forces the person who has been injuncted to negotiate with the holder of the right. By granting an injunction, the court relieves itself of the difficulty of assessing damages and sends the parties back to the bargaining table. The award of an injunction should not end the bargaining process but spur its continuation.69

III DISSATISFACTION WITH THE ‘CASTLE’MODEL Bolstered by the use of right-based, duty-based and goal-based justifications, courts have granted injunctions preventing defendants from having access to a small portion of neighbouring land despite the fact that this would cause great inconvenience to the defendant, whereas allowing the desired access would cause little inconvenience to the plaintiff. For example, in John Trenberth Ltd v National Westminster Bank Ltd,70 the defendant bank, in order to repair its building that was in a dangerous condition and which the defendant had a duty to repair, had erected scaffolding on the plaintiff’s land. The defendant had sought the plaintiff’s permission for the erection of the scaffolding, but following the plaintiff’s refusal, the defendant went ahead

69 Cooter and Ulen, above n 59, 106-107. 70 (1979) 39 P &CR 104.

Chapter 1 34 because it was physically impossible to repair the building without scaffolding being located on the plaintiff’s land.71 Although expressing some sympathy for the defendant’s predicament, Walton J granted an injunction requiring the removal of the scaffolding from the plaintiff’s land. His Honour stated that the defendant did have an alternative to committing trespass: instead of repairing the building, the defendant could demolish it and build a new one. His Honour was not moved by the fact that this would be a much more expensive undertaking than repairing the building,72 nor by the fact that if the trespass were not restrained the damage and inconvenience suffered by the plaintiff ‘would hardly command the smallest coin in the realm’ by way of compensatory damages.73

Similarly, in Bendal Pty Ltd v Mirvac Project Pty Ltd the magnitude of the adverse consequences for the defendant if an injunction restraining the continuation of the encroachment were granted was held to be irrelevant. Byrson J granted an injunction even though doing so would delay the construction of the defendant’s building by nine weeks at a cost to the defendant of $4.5 million.74

This is not to say, however, that the courts have been uniform in their enthusiasm in granting an injunction preventing one neighbour from using another’s land in order to facilitate the development of his or her own land. There have been three ways in which a court has manifested its dissatisfaction with the injunction being the appropriate remedial response. Firstly, on at least one occasion in an airspace trespass case, an English75 andanAustraliancourt76 has imposed an injunction, but has expressed regret that there was no legislation in force that would allow it to grant the defendant a licence to encroach on the plaintiff’s land in return for the payment of a proper fee.

71 Ibid 104-105. 72 Ibid 105. 73 Ibid 106. The result in this case was cited by the Law Commission as a reason for the need of access to neighbouring land legislation discussed in Chapter 5. See Law Commission, Rights of Access to Neighbouring Land, Working Paper No 78, (1980) [3.4]. 74 (1991) 23 NSWLR 464, 477-478. 75 Anchor Brewhouse Developments Ltd v Berkley House (Docklands Developments) Ltd [1987] 2 EGLR 173, 178. 76 Meriton Apartments Pty Ltd v Baulderstone Hornibrook Pty Ltd (1992) 9 BPR 17,433, 17,439.

Chapter 1 35 Secondly, in several Australian airspace trespass cases the court has granted an injunction, but one tailored to allow the completion of the defendant’s building. In LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd, Hodgson J proposed the granting of an injunction, but one in a form that ‘would enable completion of an amended development which involves the absolute minimum of trespass on the ... plaintiff’s property.’77 In Dupen v KW Sanken Pty Ltd,BrysonJallowedthe defendant to effect a suspension of the injunction if he chose to pay the plaintiff a non-refundable amount on account of damages of $3,000.78 Similarly, in Meriton Apartments Pty Ltd v Baulderstone Hornibrook Pty Ltd, Young J proposed to suspend the injunction on the basis that no new scaffolding was placed on the plaintiff’s land and that the defendant pay the plaintiff compensation of $1,000 each day until the removal of the existing scaffolding.79

Thirdly, in Jaggard v Sawyer80 the England and Wales Court of Appeal articulated the basis on which a court may exercise its discretion to refuse to grant the plaintiff an injunction to restrain the defendant’s continuing trespass on the plaintiff’s land. Instead the court would order that the defendant pay equitable damages to the plaintiff for past and future trespasses. We now turn to the principles that were articulated in that case.

A The Jaggard v Sawyer Principles In Jaggard v Sawyer the plaintiff sought an injunction preventing the defendants from using a private road—in which the plaintiff had an interest—to gain access to a dwelling newly constructed by the defendants.81 The defendants believed, and were

77 (1989) 24 NSWLR 490, 497. 78 (Unreported, Supreme Court of New South Wales, 21 May 1986.) In a subsequent case, Bryson J, resiled from the appropriateness of this approach, describing it as highly expedient, but one that was not supported by principle: Bendal v Mirvac Project Pty Ltd (1991) 23 NSWLR 464, 471 79 (1992) 9 BPR 17,433, 17,438. 80 [1995] 2 All ER 189. 81 In the case the plaintiff also sought an injunction against the defendants for breach of covenant. The defendants had built a driveway on other land owned by them, in breach of a covenant to use that land as a garden only, in order to provide access from the private road to the new dwelling: at 192-195 (Sir Thomas Bingham MR, Kennedy LJ agreeing). The court applied the same principles to the application for the injunction for the breach of covenant as it did in respect of the application for an injunction in respect of the continuing trespass. According to Millett LJ (at 205): ‘The nature of the cause of action is immaterial; it may be in contract or tort.’ The Jaggard principles have been applied to award damages in lieu of an injunction in an action for a breach of covenant (Gafford v Graham

Chapter 1 36 encouraged by the local council to believe, that the road was a public road. The court applied the principles articulated by AL Smith LJ in Shelfer v City of London Electric Lighting Co82 as to when a court may refuse to award an injunction—being the remedy that is prima facie available for the interference with property rights— and instead award damages under the Lord Cairns’ Act. Basically, these can be reduced to two tests: whether the injury to the plaintiff could be adequately compensated by a small money payment; and whether the grant of an injunction would be oppressive to the defendant.83

The application of those principles to the facts of Jaggard led to an injunction being refused, and damages being awarded in substitution. The court readily adopted the finding of the trial judge regarding the ability to adequately compensate the plaintiff for the continuing trespass by means of a small money payment; there was no evidence that the construction and habitation of the defendants’ new dwelling would lead to anything other than a minimal increase of traffic on the private road, and the defendants had offered to contribute to the maintenance of the private road.84

The court found that the imposition of the injunction sought would be oppressive to the defendants: they had not acted ‘in blatant and calculated disregard of the plaintiff’s rights’,85 but had ‘acted openly and in good faith and in the not unreasonable belief that they were entitled to make use of [the road] for access to the house they were building.’86 Additionally, the plaintiff did not seek an interlocutory injunction at an early stage, when such relief would almost certainly have been granted, but had commenced the proceedings for an injunction when the construction

(1998) 77 P & CR 73 and Amec Developments Ltd v Jury’s Hotel Management (UK) Ltd (2001) 82 P & CR 286) and in an action for interference with an easement for light (Midtown Ltd v City of London Real Property Company Ltd [2005] EWHC 33, 2005 Westlaw 62265). 82 [1875] 1 Ch 287, 322-323. 83 Jaggard v Sawyer [1995] 2 All ER 189, 197-198 (Sir Thomas Bingham MR), 208 (Millett LJ). In Shelfer and Jaggard the inquiry was expressed as ‘(1.) If the injury to the plaintiff’s legal rights is small, (2.) And is one which is capable of being estimated in money, (3.) And is one which can be adequately compensated by a small money payment. (4.) And the case is one in which it would be oppressive to the defendant to grant an injunction ...’. Also see Frank Meisel, ‘Damages in Lieu of an Injunction under the Lord Cairns’ Act’ (1995) 14 Civil Justice Quarterly 16, 18. 84 [1995] 2 All ER 189, 203 (Sir Thomas Bingham MR). Millett LJ did not expressly address this aspect of the inquiry. 85 Ibid 203 (Sir Thomas Bingham MR). 86 Ibid 209 (Millett LJ).

Chapter 1 37 of the defendants’ house was well advanced.87 Although both the Master of the Rolls and Millett LJ saw the respective conduct of the plaintiff and the defendants as being highly relevant to the question of oppression, only Millett LJ directly addressed the issue of what actually constitutes oppression of a defendant. His Lordship stated that the imposition of the injunction would be oppressive if:88 it would subject the defendant to a loss out of all proportion to that which would be suffered by the plaintiff if it were refused, and would indeed deliver him to the plaintiff bound hand and foot to be subjected to any extortionate demand the plaintiff might make.

Millett LJ noted that in most of the past cases in which an injunction had been refused on the basis of oppression, the injunction sought was a mandatory one for the demolition of a building erected in infringement of a easement for the flow of light or in breach of a restrictive covenant. His Lordship concluded that although the grant of an injunction to restrain the trespassory use of the road to gain access to the defendants’ house would not result in the demolition of the building, it would nevertheless be oppressive because it would render it ‘landlocked and incapable of beneficial enjoyment.’89

The denial of an injunction in Jaggard did not leave the plaintiff without relief. In lieu of the injunction sought, the court awarded damages to the plaintiff for the defendants’ trespass. Unlike damages at common law, which could only be awarded for past loss, equity is able to award damages for the loss caused by past and future trespasses.90 Where this is the case, the quantum of damages is assessed on the basis of the amount that the plaintiff could have reasonably demanded for a grant to the defendant of the right to use the land in the manner desired. This amount is designed to compensate the plaintiff for the loss of the opportunity to bargain for such a payment, and will reflect the amount that the defendant would have reasonably been

87 Ibid 194-195, 203 (Sir Thomas Bingham MR), 209 (Millett LJ). 88 Ibid 208. 89 Ibid 208. 90 Ibid 196-197 (Sir Thomas Bingham MR), 204 (Millett LJ).

Chapter 1 38 prepared to pay in order to obtain the relevant right. This, in turn, would reflect the value of the right to the defendant.91

In withholding an injunction and granting ‘once and for all’ damages for past and future loss, a court prevents the plaintiff from suing in the future for any continuing trespass by the defendant. Any action commenced by the plaintiff or the plaintiff’s successor in title would, on the basis of the doctrine of res judicata,92 be struck out or dismissed: the plaintiff would have had already been compensated for that trespass.93 Accordingly, the practical effect of this remedial outcome is that the court has granted a licence to the defendant to commit future trespasses.94

The approach taken in Jaggard has been endorsed in later decisions of the Court of Appeal in applications for an injunction to restrain a continuing trespass. In Ketley v Gooden,95 a mandatory injunction to reinstate a ramp on the plaintiff’s land that had been demolished by the defendant, and to remove encroaching structures built by the defendant on the plaintiff’s land, was refused. Instead, damages were granted on the basis of the principles in Jaggard.InDasvLindenMewsLtd,96 an appeal against the decision of the trial judge that granted an injunction restraining a continuing trespass was upheld, and the matter remitted to that judge for reconsideration, because the judge did not satisfactorily apply the Jaggard principles. Additionally, the Jaggard principles were impliedly endorsed in obiter dicta by the Court of Appeal in Severn Trent Water Ltd v Barnes,97 and expressly endorsed in obiter dicta by Lord Nicholls of Birkenhead in the House of Lords decision of Attorney General v Blake.98

91 Ibid 202 (Sir Thomas Bingham MR), 212 (Millett LJ). In so doing, their Lordships applied the reasoning of Brightman J in Wrotham Park Estate Ltd v Parkside Homes Ltd [1974] 2 All ER 321, a case in which a mandatory injunction to demolish buildings erected in breach of covenant was refused and equitable damages for past and future loss awarded instead. However, basing damages for past and future loss on a proportion of the benefit that would flow to the defendant if the injunction were refused, leaves open the question of precisely what proportion of benefit should be used. See David Halpern, ‘Damages in Lieu of an Injunction: How Much?’ [2001] 65 The Conveyancer 453. 92 [1995] 2 All ER 189, 206 (Millett LJ). 93 Ibid 201 (Sir Thomas Bingham MR). 94 Ibid 206 (Millett LJ). 95 (1996) 73 P & CR 305, 309-313. 96 [2003] 2 P & CR 4, 67-69. 97 [2004] 2 EGLR 95, 98, 99 [31], [33]. This case concerned the quantum of damages available at common law for past injury due to a continuing trespass, rather than equitable damages for present and future loss in lieu of an injunction. 98 [2001] 1 AC 268, 281.

Chapter 1 39 Although undoubtedly of significant benefit to the particular defendants in Jaggard and Ketley v Gooden, the principles governing the award of damages in lieu of an injunction do not provide a comprehensive solvent for landowners who desire to use the land of a neighbour in order to facilitate development of their own land. This is because of the requirement that the grant of the injunction would be oppressive to the defendant. In Jaggard and Ketley the finding of oppression was based on the two common factors. First, each defendant did not act in blatant or reckless disregard of the plaintiff’s rights because the defendant believed that he had rights of use over the relevant part of the plaintiff’s land.99 Second, neither plaintiff sought to restrain the trespass before the defendant’s building work was substantially advanced.100

By contrast, in many situations neither of these conditions will be met, with the result that the imposition of an injunction would not be found to be oppressive. For example, in Daniells v Mendonca,101 one of the reasons given by the Court of Appeal for refusing to award damages in lieu of a mandatory injunction was that the injunction would not be oppressive to the defendant. The defendant had built an extension to his house that encroached to a small extent onto the plaintiff’s land while the plaintiff was out of the country. The court ordered that the defendant remove the encroaching section of the extension because to do so would not amount to oppression: the defendant had acted in a manner that was ‘careless, thoughtless and unrealistically hopeful’, and which had not given the plaintiff an opportunity to obtain an injunction before the extension was completed.102 Nor was oppression

99 In Jaggard v Sawyer the defendant believed that the roadway was a public road: [1995] 2 All ER 189, 193, 203 (Sir Thomas Bingham MR), (Millett LJ). In Ketley v Gooden the defendant believed that he was the owner of the relevant strip of land through either a (purported) conveyance or through adverse possession: (1996) 73 P & CR 305, 307-308, 312. Additionally in the two cases in which the Jaggard principles were discussed, but not finally applied, the respective defendants believed that their actions did not constitute a trespass. In DasvLindenMewsLtd, the defendant (mistakenly) claimed that the easement that permitted him to use the plaintiff’s driveway to gain access to his property in a mews development also allowed him to use the driveway to park his car on garden ground immediately adjacent to his property: [2003] 2 P & CR 4, 60. In Severn Trent Water Ltd v Barnes, the defendant water undertaker believed that the land owned by the plaintiff, under which it had laid part of its water main, was owned by a third party against whom the defendant had issued the requisite statutory notices: [2004] 2 EGLR 95, 95 [1]-[2]. 100 Jaggard v Sawyer [1995] 2 All ER 189, 194, 203 (Sir Thomas Bingham MR), 209 (Millett LJ); Ketley v Gooden (1996) 73 P & CR 305, 312, 313. 101 (1999) 78 P & CR 401. 102 Ibid 408-409.

Chapter 1 40 found in the recent airspace trespass cases (which were decided before Jaggard). In these cases injunctions were imposed on the basis that the defendant had consciously encroached upon the plaintiff’s airspace after seeking, but having been refused, permission to do so.103 Additionally, the court found that the plaintiff had not been guilty of delay in bringing the action to restrain the trespass.104

These cases demonstrate that a landowner cannot with any confidence trespass upon the land of a neighbour in order to undertake the development of their own land in the hope that a court would award the neighbour damages rather than an injunction. Accordingly, if the autonomy afforded to landowners to prevent the use of their own land by other landowners is deemed to produce undesirable results, we must also conclude that the potential solution offered by the general law has proved inadequate: a statutory access rights regime is required.

B Reasoning in Support of Statutory Access Rights We now note the two types of arguments that have been used to justify the legislative reforms that will be examined in detail in the following chapters of this thesis. These are variations of the duty-based and goal-based justifications outlined above that have been used to support the right of a landowner to exclude neighbours from enjoying access to her or his land. We should note that a right-based justification has

103 John Trenberth v National Westminster Bank Ltd (1979) 39 P & CR 104, 106 (defendant’s encroachment was a ‘flagrant invasion of another’s rights of property’); Anchor Brewhouse Developments Ltd v Berkley House (Docklands Developments) Ltd [1987] 2 EGLR 173, 178 (‘the defendants at no stage thought that it had [the] right’); LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1989) 24 NSWLR 490, 496-497 (‘the defendant knowingly put itself in [this] position [and] has not been taken by surprise’); BendalPtyLtdvMirvacProjectPtyLtd(1991) 23 NSWLR 464, 477 (‘I do not think that there was any cause for the supposed hardship except for the defendant’s own conduct and deliberate choice’); Meriton Apartments Pty Ltd v Baulderstone Hornibrook Pty Ltd (1992) 9 BPR 17,433, 17,437 (‘the plaintiff had continually ... made the defendant aware that the licence was revoked’). 104 John Trenberth v National Westminster Bank Ltd (1979) 39 P & CR 104, 108 (ex parte injunction sought); Anchor Brewhouse Developments Ltd v Berkley House (Docklands Developments) Ltd [1987] 2 EGLR 173, 174-175 (plaintiff commenced action within three weeks of first giving written refusal to permit the encroachment); LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1989) 24 NSWLR 490, 491, 492 (plaintiff commenced action two days after becoming aware of the encroaching scaffolding); BendalPtyLtdvMirvacProjectPtyLtd(1991) 23 NSWLR 464, 476 (‘the plaintiff’s proceedings have been reasonably expeditious. There were no facts on which the plaintiff ought reasonably to have approached the Court before August or perhaps several weeks earlier in July’); Meriton Apartments Pty Ltd v Baulderstone Hornibrook Pty Ltd (1992) 9 BPR 17,433, 17,435 (plaintiff commenced proceedings 6 days after revoking the licence permitting the defendant to encroach).

Chapter 1 41 not been used to support the enactment of a statutory access rights regime. This is not surprising given that the ‘flat assertions’ of the language of rights is ill equipped to mediate between conflicting interests.105 As Lametti has observed:106 At the conceptual level, a rights-based discourse does not capture the totality of the property picture, namely those aspects of the institution whose presence is not explainable or understandable in terms of rights. At the level of practice, there are quite specific and unique duties that attach to certain objects of social wealth that a formal or otherwise individual rights-based stance cannot explain. ... At the level of theory, rights-based justifications must resort to other types of non-rights-based arguments in order to account for the contours of private property—in particular, its scarcity, its allocative impact and its social aspect— in order to be persuasive.

The contour of private property that is represented by the second-generation of statutory reforms—the access to neighbouring land legislation—can be best explained by a duty-based argument based on the norm of a landowner being a good neighbour. A landowner must limit the exercise of his or her legal rights in a manner that does not unreasonably cause detriment to his or her neighbour. Because the access to neighbouring land legislation and this duty-based justification is dealt with in Chapter 5, we do not need to elaborate on this further at this time. It is sufficient now to note that in this context the duty is different from the duty of respecting the property rights of others that has been used to justify the right to exclude.

The contour of private property represented by the first-generation of access legislation—the statutory power to impose permanent easements (such as under s 88K of the Conveyancing Act 1919 (NSW))—is justified by the goal-based reasoning of promoting wealth maximisation through the efficient use of resources. The goal in this form of reasoning is, accordingly, the same goal used to justify the right to exclude outlined earlier in this chapter. As the first-generation legislation will be

105 Singer, above n 34, 115. 106 Lametti, above n 31, 43 (emphasis added). Singer agrees that seeing property simply in terms of entitlement is to ignore the other limb that gives the institution its stability—the obligation to use one’s property ‘in a manner that is not inimical to the legitimate interests of others’ Singer, above n 34, 204.

Chapter 1 42 considered in the next three chapters, we need to explain now how the same goal can be used to justify two contradictory legal rules, namely the common law entitlement of a landowner to exclude others from his or her land and the statutory entitlement (under certain circumstances) to use another’s land without that other’s consent.

IV THE ‘CATHEDRAL’ MODEL OF LAND We will recall that the economic justification for the right—which is to be protected by an injunction—of a landowner to prevent a neighbour from using his or her land in order to facilitate the development of the neighbour’s land is based upon an assumption. That assumption is that transaction costs of bargaining between those parties would be low, so that the parties could readily reach an agreement that would allow the neighbour access—where this would be efficient—through a mutually beneficial agreement. However, if this assumption is incorrect, and transaction costs in this setting are high, the transfer of resources through private bargaining may not be possible. This is because the potential cooperative surplus may be less than the costs of bargaining, and there may be no room for mutually beneficial exchange. This in turn means that the relevant resources—the landowner’s control over access and the neighbour’s money—could be ‘frozen’ in inefficient uses, because each of these will remain in the hands of a party who values it less than it is valued by the other.107

Indeed, there are a number of scholars who believe that transaction costs in the bargaining between neighbours over access to land are high, rather than low. This is because the scenario involves a ‘bilateral monopoly’: the party who wishes to purchase the right of access faces a market with only one seller, and the party who wishes to sell the right of access faces a market with only one buyer.108 According to Sterk, this creates serious obstacles to successful bargaining.109 The absence of competitive pressures on [the parties] removes constraints on the ... parties’ negotiating positions. Neither party need fear, within a relatively

107 Richard Posner, Economics of Justice (1981) 71. 108 Sterk, above n 12, 57-58. 109 Ibid 70.

Chapter 1 43 wide bargaining range, that the other will obtain substitutes elsewhere. Each party need only fear that an unfortunate original offer will result in an unfavourable selling price, or perhaps no sale at all. As a result, each party may engage in strategic behavior designed to maximise his own share of gains from trade resulting from a bargain — strategic behavior that the prospect of competitors (absent in the bilateral monopoly situation) would limit sharply.

In the bilateral monopoly situation there is the real danger that each party may ‘bargain’ so hard to maximise his share of the cooperative surplus that no agreement is reached. The resource in question may then be frozen in an inefficient use by remaining in the hands of the party who values it less. Other scholars who have come to the same conclusion as Sterk that transaction costs may indeed be high when neighbours bargain with each other include Ayres and Talley,110 Richard Epstein,111 and Carol Rose.112

The law and economics discipline advocates two basic responses to the issue about how a resource should be allocated between contending parties where the existence of high transaction costs militates against the possibility of successful bargaining. The first of these is articulated by Coase himself, and the second by Calabresi and Melamed in their ‘Cathedral’ article.113

Coase recognised that the bargaining solution to the resource allocation problem is not available when the costs of transacting are substantial. In such circumstances the court’s initial allocation of legal entitlements could determine the final allocation of resources because that initial allocation might not be altered through private bargaining.114 Accordingly, Coase approved of courts explicitly taking efficiency considerations into account when initially assigning legal entitlements.115 Legislation

110 Ian Ayres and Eric Talley, ‘Solomonic Bargaining: Dividing a Legal Entitlement to Facilitate Coasean Trade’ (1995) 104 Yale Law Journal 1027, 1029-1030. 111 Richard Epstein, ‘A Clear View of The Cathedral: The Dominance of Property Rules’ (1997) 106 Yale Law Journal 2091, 2094; Epstein, Principles for a Free Society, above n 34 (1998) 225-226. 112 Carol Rose, ‘The Shadow of The Cathedral’ (1997) 106 Yale Law Journal 2175, 2183-2184. 113 Calabresi and Melamed, above n 4. 114 Coase, above n 56, 119-120, 132-133. 115 Ibid 114-115.

Chapter 1 44 that empowers the courts to compulsorily grant rights of access can be seen as giving effect to this Coasean prescription.

Calabresi and Melamed suggest a different answer to this problem of resource allocation in a high transaction cost setting. They do this by shifting the focus from the allocation of the legal entitlement to a resource, to the legal remedies available for breach of that entitlement. They distinguish between remedies in the form of a property rule and remedies in the form of a liability rule.116

Where an entitlement is protected by a property rule, an infringement of the entitlement will lead to some form of specific relief, such as an injunction. The effect of this is that the legal system will not forcibly transfer the entitlement from the holder to the infringer; in order to acquire the entitlement, the (would-be) infringer must reach an agreement with the holder to purchase the entitlement on terms acceptable to the holder. By contrast, where an entitlement is protected by a liability rule, the remedial response to an infringement of the entitlement is the refusal of specific relief and the award of compensation in the form of damages. The effect of this is that the court is transferring the entitlement from the holder to the infringer in return for the infringer paying compensation to the (former) holder of the entitlement. The quantum of compensation is an amount that reflects the value of the entitlement to the (former) holder, so that she or he should be indifferent as between keeping the entitlement and receiving the compensation.117

Calabresi and Melamed propose that it is appropriate to protect an entitlement with a property rule where bargaining over the entitlement is possible because of low transaction costs. If we were to continue to assume that the cost of bargaining between neighbours about land access is low, then the common law position that a landowner’s right to exclude is to be prima facie protected by an injunction would fit the property rule limb of Calabresi and Melamed’s model.

116 Calabresi and Melamed, above n 4,1092. 117 Ibid.

Chapter 1 45 Where private bargaining is prohibited by high transaction costs, however, Calabresi and Melamed propose that the appropriate remedial response is to protect the entitlement by a liability rule. This would allow a person who values a resource more highly than its current holder to infringe upon the holder’s entitlement, obtain the resource and pay compensation. A forced transfer takes place, but this transfer is efficient as the infringer values the entitlement more highly than the compensation that he has to pay, and the (former) holder is indifferent between retaining the resource and receiving the compensation. In this way, the taking (by infringement) of the resource and the payment of compensation under a liability rule ‘mimics’ the result achieved by a consensual exchange.118

On the assumption that the transaction costs are high when neighbours bargain over rights of access, then the application of Calabresi and Melamed’s ‘Cathedral’ framework to this setting would require that a landowner’s right to exclude his or her neighbour be protected by a liability rule rather than a property rule. This would enable the party who desires a right of access to adjacent land to determine on a cost/benefit basis whether he or she should breach the landowner’s entitlement. The cost of doing so would be the amount of damages for which he or she would be liable; the benefit would be the profit accruing to him or her from obtaining the right of access. Assuming that the damages awarded to the landowner would represent the value to the landowner of the right lost, and that the profit to the neighbour exceeded the liability, then an efficient use of resources would result from the neighbour breaching the landowner’s entitlement, appropriating the right of access, and paying damages.

The high transaction cost model has been used to support the enactment of s 88K. In particular, the provision has been justified on the basis that, without it, a landowner (the putative servient owner) can engage in strategic behaviour, when approached by a neighbour (the putative dominant owner) who needs access to the putative servient land in order to develop the putative dominant land. In his Second Reading speech, in providing a rationale for the proposed s 88K the Attorney General outlined the elements of the typical airspace trespass case: the proposed construction of a building

118 Ibid 1106-1110, 1115-1120.

Chapter 1 46 requires access to the airspace of neighbouring land; the grant of access would have little or no detrimental effect upon the neighbour’s use of his or her land; the absolute right of the neighbour to refuse to grant access and to restrain any trespass by an injunction.119 In contrast to the language of the courts in the preceding airspace trespass cases that gave the moral high ground to the owner of the airspace, the Attorney General described the actions of the hypothetical airspace owner in highly pejorative terms:120 It may well be that, in cases like these the real motivation in seeking the injunction is not so much to prevent the actual trespass to air space, as to force the other party to pay an exorbitant amount for use of that air space. ... All that these provisions reflect is a realisation that private development may also be beneficial to the public, and that such developments should not be unreasonably frustrated or held to ransom.

Similar rhetoric was also used by Young J in Wengarin Pty Ltd v Byron Shire Council where his Honour said:121 The background to s 88K is that without it situations could develop ... where owners of adjoining land could hold developers to ransom by not granting access during building operations and the like. The purpose of the section was that the court should grant access on the basis of just compensation, rather than allowing people to be held to ransom in those circumstances.

The structure of the section seems to me to recognise that ordinarily the owner of a legal right is to receive a just sum and for (sic) value for what he or she has to give over, rather than being able to demand the earth.

119 New South Wales, Parliamentary Debates, Legislative Council, 4 December 1995, 4000 (Hon JW Shaw, Attorney General). 120 New South Wales, Parliamentary Debates, Legislative Council, 4 December 1995, 4000 (Hon JW Shaw, Attorney General) (emphasis added). 121 (1999) 9 BPR 16,985, 16,987. In Blulock Pty Ltd v Majic (2001) 10 BPR 19,143, 19,150 [19], Windeyer J also identified the purpose of s 88K as being ‘to enable the reasonable development of land ... without the developer being held to ransom by an adjoining owner.’

Chapter 1 47 We will explore the concept of strategic behaviour in detail in Chapter 2. We do this in order to identify the extent to which putative servient owners in the applications for an easements under New South Wales’ s 88K and Queensland’s s 180 have actually been guilty of holding neighbouring developers to ransom, as has been asserted.

If the negotiation between neighbours regarding access in order to facilitate development is a high transaction cost setting, then under the Calebresi and Melamed model a liability rule is the appropriate remedial response. We have seen that under the Jaggard v Sawyer principles, the awarding of damages rather than an injunction in respect of a continuing trespass will not be of much assistance in this regard. A more liberal approach was proffered by Hodgson J in LJP Investments v Howard Chia Investments. In that case his Honour said: 122 In such a case as the present, where one landowner is seeking to effect a commercial development of his land which is more profitable or less expensive if use can be made of the land of an adjoining owner, it is not unreasonable in my view for that adjoining owner to require payment which bears some relationship to the financial gain or saving which the developing landowner achieves by use of the adjoining land. It may be that if the [developing landowner makes such an offer and it is refused by the adjoining landowner] then there may be circumstances in which a court might find the adjoining owner's conduct unreasonable so that a mandatory injunction would be refused...What relationship the amount offered should have to the gain or savings made by the landowner effecting the development will depend upon all the circumstances: it could, I suppose, in some circumstances be as much as one half the gain or savings, although it may be some other and lesser proportion.

This approach seems to overcome the difficulty confronting would-be property developers who need access to neighbouring land that remains under the Jaggard v Sawyer principles. The LJP Investments approach does not require oppression; it simply requires the plaintiff to have acted unreasonably in refusing the defendant’s

122 (1989) 24 NSWLR 490, 497.

Chapter 1 48 offer to purchase the relevant access rights.123 However, Hodgson J’s approach has not garnered support and it does not seem to have been considered, let alone applied, in subsequent cases. For example, in Bendal Pty Ltd v Mirvac Project Pty Ltd, Bryson J—without referring to Hodgson J’s approach— rejected the defendant’s request to suspend the injunction on the basis of the defendant paying damages equal to the full amount of savings yielded by the encroaching construction method.124

V BETWEEN THE CASTLE AND THE CATHEDRAL Accordingly, judges have been unwilling to countenance the development of the common law to allow the award of damages in lieu of an injunction on any comprehensive basis in disputes over access. It has been left to parliament create an access rights regime through legislation. There is an obvious explanation for courts’ unwillingness to replace a liability rule for a property rule in this regard. Although the infringement of another’s property rights and payment of damages under a liability rule mimics a consensual exchange—in the sense that both result in an efficient transfer of resources and each party is at least as well off after the event as they were before it—it is not a consensual exchange. The classical liberal view of rights is that an entitlement protects autonomy, and not simply a level of welfare. A right is seen as giving a sphere of liberty: the holder of the right is empowered to choose between insisting that the right be observed, and waiving the right.125 Under this view, the loss of the right through the operation of a liability rule (even after the former holder’s level of welfare has been notionally restored through the receipt of damages) is qualitatively different from the loss of a right through voluntary action

123 As an aside, it appears that Hodgson J was prepared to take a generous view about when a plaintiff has acted reasonably in rejecting a defendant’s offer. In the proceedings for an injunction in LJP Investments, as the defendant did not provide any evidence as to what the value to it of the use of the airspace was, Hodgson J found that there were no grounds to find that the plaintiff had unreasonably refused to permit the defendant to use its airspace. Accordingly, his Honour issued an injunction rather than ordering the payment of damages: (1989) 24 NSWLR 490, 497. However, in subsequent proceedings brought by the plaintiff in order to recover damages for the past trespasses, Hodgson J found that the value to the defendant of the use of the plaintiff’s airspace was $15,000 and the avoidance of a six months delay in being able to sell its land. In light of this finding, his Honour was still not prepared to characterise the plaintiff’s offer to license its airspace to the defendant for a lump sum of $30,255 and a weekly fee of $570 (for the first 3 months) and $1,140 thereafter as clearly unreasonable. See (1989) 24 NSWLR 490, 492, 497 and (1989) 24 NSWLR 499, 509. 124 (1991) 23 NSWLR 464, 477-478. 125 Jules Coleman and Jody Kraus, ‘Rethinking the Theory of Legal Rights’ (1986) 95 Yale Law Journal 1335, 1339-1340.

Chapter 1 49 (by sale or waiver). Liability rules are inferior to property rules in this respect, as rights protected by property rules can only be lost through the voluntary action of the holder.

This deontological view of the inherent importance of autonomy can be complemented by an argument advanced by Epstein and Rose that is more teleological in nature. Although these scholars think that the (bilateral) monopolistic nature of the bargaining between neighbours about access means that there is ample scope for strategic behaviour, neither is prepared to advocate the abandonment of property rules in favour of liability rules in this context. Both believe that the adverse effects that would flow from allowing one neighbour to directly and unilaterally appropriate rights of access from another would outweigh the benefits. For Epstein, those adverse effects are primarily social;126 for Rose they are economic.127

The enactment of legislation that permits the non-consensual granting of access on the payment of compensation has a legitimacy that the common law awarding of damages does not. A statutory grant of access makes that access lawful. By contrast, where access has its genesis in the awarding of damages for past and future loss in lieu of an injunction, that access is not lawful: it simply deprives the landowner of his or her remedy to prevent the access.128 The fact that the power to grant access compulsorily is given to the court, rather than a would-be infringer

126 Epstein argues that liability rules threaten ‘the stability of possession and social expectations that are necessary for the growth of any complex social order’: Richard Epstein, ‘A Clear View of The Cathedral’, above n 111, 2120. 127 Rose argues that liability rules ‘may unfortunately come at the cost of careful management and investment in resources, because [they] preclude the investor’s capture of her investment ...’: Carol Rose, ‘The Shadow of The Cathedral’ above n 112, 2199 (footnote omitted). Sterk also refuses to endorse the liability rule solution. Instead, he gives qualified endorsement to the current state of American law in departing from the geometric-box model and directly awarding the right of access to the neighbour on the basis that the neighbour is likely to value the right more than the landowner. The qualification is that Sterk sees the respective valuations of the parties as socially contingent, and not as universally true: Sterk, above n 12, 103-104. Our analysis in Chapters 2 and 4 demonstrate that Sterk’s qualification is well made, and that in several cases the motivation for the putative servient owner’s refusal to grant access was a bona fide desire for privacy, peace and quiet, rather an attempt to maximise a share of the cooperative surplus through strategic behaviour. 128 In Jaggard v Sawyer [1995] 2 All ER 189, 206, Millet LJ stated: ‘Thereafter the defendant may have no right to act in the manner complained of, but he cannot be prevented from doing so.’

Chapter 1 50 under a liability rule, provides a legitimating institutional structure that should ensure public acceptance.129

Section 88K and the access to neighbouring land legislation are not liability rules as they do not give the would-be infringer a right to infringe on the payment of damages. Rather, the provisions allow the court to grant the easement and order the payment of compensation provided that certain criteria are satisfied. In this way they are a hybrid of a property rule and a liability rule, giving the court a choice between protecting the landowner’s entitlement with a property rule (by refusing to grant access) or a liability rule (by granting access and ordering the payment of compensation).

VI SUMMARY At common law a landowner who rejects a neighbour’s offer to purchase the access rights necessary to facilitate development routinely has the right to refuse access protected by the grant of an injunction. In vesting the court with the power to grant access to land in contravention of the wishes of the owner, provisions like s 88K and the access to neighbouring land legislation challenge the picture painted by Rose and Sterk of ownership that gives the landowner inviolable rights of exclusion and control. In allowing a departure from Sterk’s geometric-box, s 88K savours of one of Rose’s ‘water-like’ rules: it allows to others the reasonable use of a resource that cannot be prevented by the despotic exercise of autonomy that usually accompanies the ownership of land. Yet statutory access rights regimes do not substantially undermine the image of land as the quintessentially stable property right. In reserving to the court the right to impose access, those regimes have the potential of steering a course between the extremes of the Blackstonian castle and the Calabresian cathedral.

129 Epstein, Principles for a Free Society, above n 34, 240-241. Also see Chapter 3, n 96.

Chapter 1 51 CHAPTER 2 TheName(s)oftheRose: Personality, Preferences and Court-Imposed Easements

I INTRODUCTION What is the result when two individuals bargain over the distribution of a resource between them? The answer, according to the American property scholar, Carol Rose, will depend on the way in which each individual ranks his or her own welfare against the welfare of the other. Rose has developed1 a typology of six ideal personality types with differing sets of preferences that reflect the relative ranking of the person’s own welfare and the welfare of the other bargainer. Rose calls these types John Doe, King of the Mountain. Malice Aforethought, Mom/Good Citizen, Portnoy’s Mom and Hit Me.

The purpose of the chapter is to examine the representation of Rose’s personality types in the cases concerning the compulsory imposition of easements by the Supreme Court in New South Wales under s 88K of the Conveyancing Act and in Queensland under s 180 of the Property Law Act. As we saw in Chapter 1, the orthodox justification for the enactment of the first-generation access legislation is that it is needed to prevent the owner of the putative servient owner from demanding an extortionate payment from the putative dominant owner as the price for granting the easement.2 Because there is usually no other parcel of land available to provide an alternate easement,3 without the existence of provisions such as s 88K and s 180 the putative dominant owner is forced to pay that price, or to abandon altogether the project for which the easement is required. The enactment of these sections provides a third option to a putative dominant owner: to apply to the court for the imposition of an easement and, if successful, pay as compensation an amount determined by the court rather than by the putative servient owner.

1 Property and Persuasion: Essays on the History, Theory and Rhetoric of Ownership (1994) 30-33. 2 See Chapter 1, nn 119-121 and accompanying text. 3 This is not always the case. See below nn 101-102 and accompanying text. 52 We also noted in Chapter 1 that this view of role of the provisions can be seen in economic terms. Where the putative dominant owner values the right to an easement more than the putative servient owner values the right to be free of the easement, it is possible for them to agree to the grant of the easement in return for a money payment. Both parties would profit from the bargain. However, where either party seeks to capture an unfair share of the gains from trade, or the ‘cooperative surplus’,4 there is the possibility that a bargain will not be achieved. The orthodox justification for s 88K and s 180 contemplates that, absent the existence of the provision, it would be the putative servient owner who would seek to capture an excessive share of the cooperative surplus by demanding an extortionate price for granting the easement. However, there is no reason why the putative dominant owner could not also attempt to capture an excessive share of the gains from trade by offering a miserly price for the easement. In any case, where a mutually beneficial agreement can be achieved, but it has not because of the behaviour of one or both of the parties, the court can intervene by imposing the easement and ordering the payment of compensation.

The chapter will test the orthodox justification for the existence of the first- generation legislation against the actual facts of the cases in which it has been applied. This will be done by using Rose’s typology of personality types and their preferences as a template to characterise the behaviour of the parties to the s 88 and s 180 litigation. By doing this, we will see that although a substantial proportion of cases do support the orthodox justification for the statutory provisions, a sizeable proportion of other cases do not.5

The chapter will proceed as follows. Firstly, Rose’s typology will be outlined and explained. Secondly, Rose’s ideal characters will be located in a general economic debate about the nature of human behaviour. Thirdly, the factual settings of the s

4 See Chapter1, nn 59-60 and accompanying text. 5 We should note that there is a third category of cases, namely those in which the provisions were applied where actual bargaining between the putative dominant and servient owners was impossible, either because the putative servient owner could not be located (for example, Re Permanent Trustee Australia Ltd (1997) 8 BPR 15,551, 15,533) or was a corporation that effectively lacked capacity to grant the easement (Marshall v Council of the City of Wollongong (2000) 10 BPR 18,163, 18,167 [12]).

Chapter 2 53 88K and s 180 cases will be examined in detail in order to see which characters are represented.

II ROSE’S TYPOLOGY Rose contemplates how a resource (‘X’) might be divided between two people (‘I’ and ‘you’). The alternates she identifies, which are not meant to be exhaustive, are: • I get a lot of X and so do you; • I get pretty much of X (something in excess of 50% of a lot of X) and so do you; • I get a little of X and so do you; • I get a lot of X and you get nothing; • I get nothing and you get a lot of X.6

Whether the parties can agree on how X is to be divided between them depends upon how each party ranks his or her own welfare against the welfare of the other. Rose calls these rankings ‘preferences’, and the various ways in which these preferences are ordered define Rose’s six personality types. These personality types are: John Doe; King of the Mountain; Malice Aforethought; Mom/Good Citizen; Portnoy’s Mom; and Hit Me. The preferences of these characters for the relative weighting of their own and the other’s welfare are set out below.7

(A) John Doe Preference Amount of X Amount of X Ranking Iget: You get: 1 A lot A lot 2 A lot Nothing 3 Pretty much Pretty much 4 A little A little 5 Nothing A lot

(B) King of the Mountain Preference Amount of X Amount of X Ranking Iget: You get: 1 A lot Nothing 2 A lot A lot 3 Pretty much Pretty much 4 A little A little 5 Nothing A lot

6 Rose, above n 1, 30. 7 Ibid 31-32.

Chapter 2 54 (C) Malice Aforethought Preference Amount of X Amount of X Ranking Iget: You get: 1 A lot Nothing 2 A little A little 3 Pretty much Pretty much 4 A lot A lot 5 Nothing A lot

(D) Mom/Good Citizen Preference Amount of X Amount of X Ranking Iget: You get: 1 A lot A lot 2 Pretty much Pretty much 3 Nothing A lot 4 A lot Nothing 5 A little A little

(E) Portnoy’s Mom Preference Amount of X Amount of X Ranking Iget: You get: 1 Nothing A lot 2 A lot A lot 3 Pretty much Pretty much 4 A little A little 5 A lot Nothing

(F) Hit Me Preference Amount of X Amount of X Ranking Iget: You get: 1 Nothing A lot 2 A little A little 3 Pretty much Pretty much 4 A lot A lot 5 A lot Nothing

Using our own terminology, Rose’s personality types can be summarised as: • John Doe, who desires (primarily) to maximise his or her own welfare, and (secondarily) to maximise the welfare of the other. • King of the Mountain, who desires (primarily) to maximise his or her own welfare, and (secondarily) to minimise the welfare of the other. • Malice Aforethought, who desires (primarily) to minimise the other’s welfare, and (secondarily) to maximise his or her own. • Mom/Good Citizen, who desires (primarily) to maximise the joint welfare of herself or himself and the other (secondarily) to maximise the welfare of the other. • Portnoy’s Mom, who desires (primarily) to maximise the other’s welfare, and (secondarily) to minimise her or his own.

Chapter 2 55 • Hit Me, who desires (primarily) to minimise his or her own welfare, and (secondarily) to maximise the welfare of the other.

Rose articulates a distinction between a person’s preferences (what he or she wants) and that person’s welfare (what is good for him or her). Thus, Malice Aforethought prefers one state of affairs (‘I get a little of X, you get a little of X’) to another (‘I get pretty much of X, you get pretty much of X’), even though Malice Aforethought’s welfare is greater in the latter state than in the former. Similarly, Mom/Good Citizen, prefers the ‘I get nothing, you get a lot of X’ to the ‘I get a little of X, you get a little of X’ outcome.

Rose further entrenches this distinction between preference satisfaction and welfare improvement by rejecting the argument that if I care for you, your gains are my gains, and if I hate you, your losses are also my gains. Rose claims that this view trivialises the concept of a preference. If it were adopted, then there would only be one possible ordering of preferences with regard to a person’s share of a resource: (1) I get a lot; (2) I get pretty much; (3) I get a little; (4) I get nothing. A person would always prefer a lot as this would mean that the resource would be distributed as she or he wanted, rather than simply to that person. And if the distribution accorded with one’s preference, then one would always have a lot. Instead, Rose regards it as more meaningful to be able to speak about one’s share of a resource, divorced from the notion of our preference as to how the resource should be divided.8

This distinction between an individual’s actual preferences and that person’s objectively determined welfare anticipates a related distinction that we will pursue in Chapter 4: does the first-generation legislation aim to give effect to what people do want, or what they should want? For now, we are concerned with a different task: interrogating some of her characters to see to what extent they reflect economic thinking.

8 Ibid 33.

Chapter 2 56 III ROSE’S CHARACTERS AND THEIR ECONOMIC CONTEXT Rose claims that only John Doe and King of the Mountain sit comfortably with neo- classical economic thinking. (She intends this as a criticism of neo-classical thinking, and not of her typology.) This is because only these characters are consistent maximisers of their own welfare (or utility), which is one of the basic assumptions of this form of economics.9 The majority of Rose’s other characters— Malice Aforethought, Mom/Good Citizen and Portnoy’s Mom—are primarily ‘other- focused’, rather than ‘self-focused’. As Rose says, they are ‘distracted by interpersonal matters.’10 Hit Me is ‘self-focused’, but in a welfare minimising, rather than welfare maximising fashion. Thus, Hit Me is the character most out of accord with economic theory.11 We now turn to examine Rose’s assertions about how her characters align with economic assumptions about human behaviour. In so doing, we will note two versions of law and economic theory, one based on neo- classical economics and the other on behavioural economics.

A John Doe, King of the Mountain and Neo-classical Law and Economics Rose is certainly correct in her claim that something like the preference schedules of John Doe and King of the Mountain have loomed large in theoretical economic thinking. A prominent setting for this sort of analysis is the consideration of the explanatory power of the Coase Theorem. As we have addressed the substance of the Theorem in Chapter 1,12 it is sufficient here simply to note one leading expression of it:13 the structure of the law which assigns property rights and liability does not matter so long as transaction costs are nil; bargaining will result in an efficient outcome no matter who bears the burden of liability.

9 Ibid 33. For examples of the centrality of this assumption to economic theory, see Gary Becker, The Economic Approach to Human Behavior (1976), as extracted in Avery Katz, Foundations of the Economic Approach to Law (1998) 6; Cento Veljanovski, ‘The New Law-and-Economics: A Research Review’, as reproduced in Anthony Ogus and Cento Veljanovski (eds), Readings in the Economics of Law and Regulation (1984) 16; Robert Cooter and Thomas Ulen, Law and Economics (2nd ed, 1997) 10 -11; Paul Burrows and Cento Veljanovski, ‘Introduction: The Economic Approach to Law’ in Paul Burrows and Cento Veljanovski (eds), The Economic Approach to Law (1981) 3. 10 Rose, above n 1, 32. 11 Ibid 33. 12 See Chapter 1, nn 55-58 and accompanying text. 13 Robert Cooter, ‘The Cost of Coase’ (1982) 11 Journal of Legal Studies 1, 15.

Chapter 2 57 One of the areas of difficulty surrounding the perceived validity of the Coase Theorem is dividing the cooperative surplus, which is an integral part of the bargaining process. The fact that a buyer values a resource more than the seller creates the opportunity for successful bargaining and sets out the lower and upper ranges of the sale/purchase price. However, that does not uniquely indicate what the price should be. Assume that the putative servient owner values the right to be free of an easement at $100, and the putative dominant owner would value an easement burdening the putative servient land at $120. Provided transaction costs are low, the Coase Theorem suggests that the parties would reach an agreement whereby the easement would be granted for a price between $101 and $119. However, there is no authoritative rule for setting the price and thus dividing the cooperative surplus between the parties.14 If the parties agree on the price, an efficient use of resources (control over access to land, and money) results by the granting of the easement. But if they do not agree, because each wants to maximise his or her share of the cooperative surplus, then the resources will remain in an inefficient use and no easement will be granted.

The Coase Theorem impliedly takes an optimistic attitude to the problem of the distribution of the cooperative surplus. It assumes that rational parties will ultimately reach a mutually beneficial agreement.15 This attitude envisages that the participants to the bargaining process are John Doe characters. The participants are seen as willing to divide the resource between them in a way where both parties win. John Doe is likely to agree on a price that means a gain for himself or herself, rather than risk the deal not going ahead, which will leave both parties worse off.16

A more pessimistic view of the distribution problem is that the parties will not necessarily reach an agreement because one or both of them will try to capture as great a share of the cooperative surplus as possible. This is attempted by the use of threats of non-cooperation, by which one party attempts to convince the other that no

14 Donald Regan, ‘The Problem of Social Cost Revisited’ (1972) 15 Journal of Law and Economics 427, 429; Cooter, above n 13, 17. 15 Cooter, above n 13, 17. 16 On an opportunity cost basis, foregoing a benefit is equivalent to incurring a loss: see Burrows and Veljanovski, above n 9, 4; Cooter and Ulen, above n 9, 28.

Chapter 2 58 agreement will be reached unless the party’s terms are met.17 Economists refer to such conduct as ‘strategic behavior’.18 Central to the concept is the desire to keep one’s true intentions secret by misrepresenting the minimum amount of gain that is acceptable, in the hope of forcing the other to accept a lower share of the surplus.19 The danger of this strategy, however, is that it might lead to a failure to agree altogether because the other party is also engaging in strategic behaviour. Although a rational party who intends to engage in strategic behaviour will employ a strategy that is optimal against the possible range of the other party’s strategies, it may not be optimal against the particular strategy employed by that particular other party. The risk is that if either party is disguising his or her true intentions about the maximum price that he or she will pay, or the minimum price that he or she will accept, the whole deal will fall through.20

Cooter labels this pessimistic perspective of the distribution problem the ‘Hobbes Theorem’, because it is based on the assumption that people will make threats against each other and not cooperate unless forced to do so by a stronger third party. This Theorem holds that the efficient use of resources will not inevitably arise through private bargaining, even when transaction costs are low.21. Provisions such as s 88K and s180 are needed to achieve through coercion the result that should have been, but was not, achieved by bargaining.

Rose’s King of the Mountain character (‘KOM’) is the type of person who would participate in strategic behaviour. This is the means by which he or she maximises his or her share of the cooperative surplus at the expense of the other party. Unlike Malice Aforethought, KOM desires an agreement to be reached, as this is the only way in which he or she can ‘win’ (that is, improve his or her welfare). However, unlike John Doe, KOM is not content to divide the gains from trade in a manner that

17 See Regan, above n 14, 429. 18 See Stewart Sterk ‘Neighbors in American Land Law’ (1987) 87 Columbia Law Review 55. 70. 19 Cooter, above n 13, 23. In another piece, Rose refers to ‘parties who are closed-mouthed, poker- faced, strategically bargaining misanthropes’: Carol Rose, ‘The Shadow of The Cathedral’ (1997) 106 Yale Law Journal 2175, 2185. 20 Cooter, above n 13, 23. 21 Ibid 17-18.

Chapter 2 59 will make both parties happy. KOM wants to strike a deal that the other party accepts only grudgingly.

We have seen that Rose’s John Doe and KOM characters do act is such a way that is recognisable to neo-classical economic theory. We now turn to Mom/Good Citizen and Malice Aforethought to see if their preference schedules are, contrary to Rose’s view, also recognised in economic thinking.

B Mom/Good Citizen, Malice Aforethought and Behavioural Law and Economics We have made the point that the ‘other-focused’ preference schedules of these characters are out of step with the assumption made by traditional economics that people are rational maximisers of there own utility. However, just as the law is not a monolithic discipline, neither is the sub-discipline of the economic analysis of law. In recent times an alternate school of law and economics—known as behavioural law and economics—has gained more prominence. Like traditional law and economics, this approach seeks to advance an understanding of law through the application of the standard tools of economic analysis to legal issues. However, it differs from its traditional counterpart by eschewing the assumptions about human behaviour found in neo-classical economics. Instead, it adopts more realistic perspectives about actual human behaviour.22 Whereas traditional law and economics is based on the ideas of ‘utility maximizaion, stable preferences, rational expectations, and optimal processing of information’, behavioural law and economics accepts that people display ‘bounded rationality, bounded willpower,andbounded self-interest’.23 It is this last concept that is relevant to our exploration of the preference schedules of Mom/Good Citizen and Malice Aforethought.

Behavioural law and economics argues that individual self-interest is actually moderated by various factors. Some are these factors are self-focused, such as a person’s regard for their own reputation (how other’s regard them), and a person’s own conception of what kind of person they want to be (eg: an honest, principled

22 Christine Jolls, Cass Sunstein and Richard Thaler, ‘A Behavioral Approach to Law and Economics’ (1998) 50 Stanford Law Review 1471, 1473, 1547. 23 Ibid 1476 (emphasis in original).

Chapter 2 60 person; or someone who is neither a doormat nor a dupe).24 A person might be restrained in seeking to maximise their own welfare by these factors. Additionally, people have regard to the welfare of others, based upon the perceived fairness of the other’s actions. So, we are willing to sacrifice our own interests to promote the well- being of those who have been kind to us or whom we think have acted fairly towards us. Similarly, we are willing to sacrifice our own self-interest in order to punish those who have been unkind to us or whom we think have treated us unfairly.25 However, the limitation this places on the pursuit of self-interest is restricted by the tendency of people to distort the concept of fairness by seeing things in a light most favourable to themselves.26

We can see that behavioural law and economics can more comfortably accommodate Mom/Good Citizen and Malice Aforethought than can its neo-classical counterpart. Mom is someone who is willing to curb her own natural self-interest in response to her perceived fair treatment by others. Mom wants to promote the welfare of those who have been kind to her: a ‘one good turn deserves another’ philosophy. And perhaps Mom is someone who takes a generous view of what is fair, and is less likely to interpret what is fair from her own perspective.

Equally at home in behavioural law and economics is Malice Aforethought, who is someone who wishes to punish others because of some perceived grievance. For Malice Aforethought, punishing the other represents a gain to him, even though on an objective basis he has acted contrary to his self-interest. The emotion that we would most closely associate with Malice Aforethought—spite—is one that is familiar, at least on a professional level, to the behavioural economist. Behavioural

24 Ibid 1494-1495. 25 Ibid 1495. Jolls, Sunstein and Thaler seek to avoid the allegation that they are using the term ‘fair’ as a ‘vague and ill-defined catch-all.’ They claim (at 1496) that a person’s conception of what is fair in a particular context is based upon the compliance with, or deviation from, what that person envisages as the relevant reference transaction. This is an idealised transaction of the same type as that actually confronting the parties. Where the context is the division of a resource between bargainers who think that neither has a particular claim to the resource, then the reference transaction would be something like an even division. However, where the parties both believe that one of them has a stronger (moral?) claim, the reference transaction would involve a more one-sided division. Given the authors’ lack of further detail regarding how the reference transaction might be generated, it is not clear that this sort of reasoning in fact avoids the allegation that the concept of fairness in their analysis is a vague, ill-defined catch-all. 26 Ibid 1501.

Chapter 2 61 law and economics recognises that spiteful behaviour is a common response to a disagreement or argument. This is particularly so when litigation is involved, when it is extremely unlikely that parties will bargain around hard-won injunctive or damages orders.27 In our examination of the s 88K and s180 cases, we will see that this acrimony also extends to other post litigation dealings between the parties.

We now turn to examine the factual settings of the s 88K and s180 cases to see to what extent John Doe, King of the Mountain and Malice Aforethought are represented. We do so to test the orthodox justification for the provisions: that the putative servient owner is a King of the Mountain character who is bargaining strategically to capture an inordinate share of the cooperative surplus. Our analysis will not detect a party who is a Mom, Portnoy’s Mom or Hit Me. Such parties would grant the easement in an effort to promote the welfare of the other, even if this did not promote their own welfare, and thus no s 88K or s180 litigation would be arise.

IV SECTION 88K AND SECTION 180 CASES As the orthodox justification for the statutory provisions envisages the involvement of King of the Mountain, we will commence our analysis with that character. We will then move on to Malice Aforethought, who we might also expect to be unwilling to engage in mutually beneficial exchange. Lastly, we turn to John Doe, who we might expect to reach a mutually beneficial agreement regarding the grant of an easement without the need for the other party to resort to litigation.

A King of the Mountain There are numerous examples of the putative servient owner acting as a King of the Mountain character would act: engaging in strategic behaviour to maximise their share of the cooperative surplus. Where this occurred, the party was usually a commercial entity, either a company or the principal of a business. 28

27 Ibid 1495, 1498-1500. 28 Not all putative servient owners who are commercial entities engage in strategic bargaining. In Blulock v Majic (2001) 10 BPR 19,143 the putative servient owner, who owned land that was leased to commercial tenants, refused to grant an easement for the flow of light and air, claiming that he could not be adequately compensated if the easement were created. The reason given was the

Chapter 2 62 A usual prerequisite to a finding of strategic behaviour is the willingness of the putative servient owner to bargain over the grant of the easement. This is what occurred in Coles Myer NSW Ltd v Dymocks Book Arcade Ltd29 and Katakouzinos v Roufir Pty Ltd.30 Both of these cases involved an application under s 88K for the imposition of an easement allowing the temporary encroachment of scaffolding into the airspace over the putative servient land. The scaffolding was needed in order to facilitate construction on the putative dominant land. In each case the putative servient owner made a counter-offer following the putative dominant owner’s offer to purchase the easement.

In Coles Myer the putative dominant owner indicated that it would pay the putative servient owner $300,000 for the grant of the easement that was needed for putative dominant owner’s redevelopment to proceed.31 The putative servient owner indicated that it would require the staggering sum of $15,000,000.32 The court did impose the easement, but the issue of compensation was not dealt with, as the parties agreed that the putative servient owner could make a claim for specific compensation from time to time.33 In Katakouzinos v Roufir, at the time negotiations had broken down, the putative dominant owner had offered $500 per week to the putative servient owner for the grant of the easement, whereas the putative servient owner said that it would require $5,000 per day to do so.34 The easement was imposed and Hodgson CJ in Eq awarded compensation in the amount of $300 per day from the granting of the easement until 5 weeks after the removal of the scaffolding.

uncertain impact that the easement would have on the future development of his property. That this view was honestly held, and was not simply being used as a bargaining chip to increase the putative dominant owner’s price, is demonstrated by the putative servient owner’s actions at trial. While arguing that the easement should not be imposed, he did not dispute the putative dominant owner’s submission that if the easement were imposed, the appropriate amount of compensation would be $66,000: at 19,149. 29 (1996) 7 BPR 14,638. 30 (1999) 9 BPR 17,303. 31 This included not only granting an easement to allow hoarding and scaffolding to encroach upon the putative servient owner’s airspace, but also varying or releasing an easement for light which, assuming it was valid, benefited the putative servient land: (1996) 7 BPR 14,638, 14,650. 32 Ibid 14,649-14,650. 33 Ibid 14,655. 34 (1999) 9 BPR 17,303, 17,304-17,305.

Chapter 2 63 Although this was more than the putative dominant owner offered, it was much less than the amount demanded by the putative servient owner.

Strategic behaviour can also be seen in the context of the Queensland provision. In Nelson v Calahorra Properties Pty Ltd35 the parties owned neighbouring premises in the commercial sector of Cairns. The putative dominant owner sought an easement to provide vehicular access to the rear of her business premises. The easement was needed over various parcels of land, which were owned by the putative servient owners. The putative servient owners offered to grant the easement to the putative dominant owner for a payment to each of them of $24,333. The putative dominant owner was unwilling to pay this amount and applied for the grant of an easement under s 180. At trial and on appeal the putative dominant owner was granted the easement, and the compensation that was ordered to be paid to each putative servient owner was $12,000.36 The court clearly thought that the amounts demanded by the putative servient owners were exorbitant.37

Queensland also provides perhaps the clearest example of strategic behaviour: a case in which the putative servient owner admitted engaging in it. In Re Seaforth Land Sales Pty Ltd’s Land (No 2)38 negotiations for the grant of an easement had taken place between the owners of industrial land. The putative dominant owner company had purchased land and had partly constructed a factory on it, incorrectly believing that the land had the benefit of an easement over land owned by the putative servient owners. (Although an easement did exist over the putative servient land, the

35 (1985) Q ConvR ¶54-202. 36 Ibid 57,340, 57,343. 37 Strategic bargaining by a putative servient owner can also be seen in Lang Parade Pty Ltd v Peluso (2005) Q ConvR ¶54-623. In this case, the putative dominant owner sought a licence from the putative servient owners to allow a crane used in the construction of apartment blocks on the putative dominant land to encroach into the airspace above the putative servient land. The putative dominant owner made a series of offers to purchase this licence, culminating in an offer to pay the putative servient owner $35,000 plus legal costs. The putative servient owners rejected each of these offers, but without specifying a specific amount for which it would grant the licence, although at trial one of the putative servient owners suggested that $160,000 would be an appropriate amount: at 61,352 [13]- [16]. Douglas J characterised the conduct of the putative servient owners as ‘seeking to obtain a commercial result’: at 61,352, [16]. His Honour stated that he would grant the putative dominant owner’s application and award compensation in an amount of $20,000, on the basis that the encroachment was temporary and unlikely to adversely affect the putative servient land: at 61,355, 61,356 [38]-[40]. 38 [1977] Qd R 317.

Chapter 2 64 easement benefited other land rather than the putative dominant land.) When the putative dominant owner discovered the true position it approached the putative servient owners seeking the grant of an easement.39 The putative servient owners initially offered to grant the putative dominant owner an easement in return for a payment of $8,000. When the putative dominant owner indicated that it could not pay that amount, the putative servient owners’ offer increased to $12,000, and then $18,000 and two car-parking spaces on the putative dominant land.40 The putative dominant owner brought an action for the grant of the easement. The putative dominant owner was successful at trial41 and again on appeal. The amount of compensation ordered at trial was $3,500.42 This was increased on appeal to $8,000,43 but it was still substantially less than that ultimately demanded by the putative servient owners.

The trial judge and the Full Court held that the putative servient owners’ final offer to grant the easement was unconscionable, and constituted an unreasonable refusal to grant the easement.44 In cross-examination at trial one of the putative servient owners admitted that they were trying to extract as much money as possible from the putative dominant owner.45 In the Full Court Stable J characterised46 the putative servient owners’ actions as follows: In other words the [putative servient owners] evidently considered that they had the [putative dominant owner] company over a barrel and demanded what I would call an extortionate sum for compensation.

39 Ibid 318-19, 321 (Hanger CJ). 40 Ibid 327 (Stable J). 41 Re Seaforth Land Sales Pty Ltd’s Land [1976] Qd R 190. 42 Ibid 195. In holding that this was the appropriate amount, Douglas J admitted he was acting ‘somewhat arbitrarily’. 43 [1977] Qd R 317, 335 (DM Campbell J), 325 (Hanger CJ). Stable J dissented (at 328), seeing no reason to disagree with the trial judge’s assessment of compensation. It is not entirely clear why DM Campbell J allowed the putative servient owners’ appeal as to the amount of compensation ordered. The major reason underlying DM Campbell J’s finding in this respect is that Douglas J appeared to have mistakenly been influenced by the putative servient owners standing by ‘in ignorance of the fact that the [putative dominant owner] did not have a right of access’, while the putative dominant owner constructed its factory. DM Campbell J said (334-335) that any standing by the putative servient owners did not amount to acquiescence and that when the putative servient owners discovered the true position they did act sufficiently promptly to inform the putative dominant owner that it had no right of access across the putative servient land. 44 [1976] Qd R 190, 195; [1977] Qd R 317, 325 (Hanger CJ), 327-328 (Stable J), 333 (Campbell J). 45 [1977] Qd R 317, 327 (Stable J). 46 Ibid.

Chapter 2 65 What generally makes strategic bargaining possible is the private nature of each of the parties’ respective conceptions of the value of the resource to them; because neither party knows how much the other truly values the resource, each party is able to misrepresent their own valuation of the resource.47 Both Coles Myer v Dymocks Book Arcade and Katakouzinos v Roufir reflect the problem of private information and the tendency of ‘self-interested bargainers to misrepresent their private valuations so as to capture a larger share of the bargaining surplus.’48 In Coles Myer, during the negotiations for the grant of the easement, when the putative servient owner mentioned $15,000,000 as the payment required for granting the easement, putative dominant owner asked for a justification for that amount. The putative servient owner replied: ‘We are not prepared to provide a rationale for our price.’49

This form of strategic bargaining by the putative servient owner was also evident in Katakouzinos, where the putative servient owner seemed intent on keeping relevant information private, even during the trial itself. The putative servient owner, who conducted the business of a private hotel on its land, asserted that the grant of the easement would cause it financial loss in the order of $150,000 because many of the hotel’s rooms would not be able to be let at full price during the construction.50 The veracity of this figure depended on several factors, including the vacancy rate of the hotel. Hodgson CJ in Eq stated that during the trial the principal of the putative servient owner indicated that there was a book ‘from which the vacancies of particular rooms on particular days could be established’. This book was never produced at trial, despite the fact that its production was, in his Honour’s opinion, ‘required by a notice to produce served on the putative servient owner.’51 Hodgson CJ in Eq stated that the putative servient owner’s principal was evasive in the witness box and did not provide a satisfactory explanation for not producing the primary evidence regarding vacancy rates.52

47 Cooter and Ulen, above n 9, 84-85. 48 Ian Ayres and Eric Talley, ‘Solomonic Bargaining: Dividing a Legal Entitlement to Facilitate Coasian Trade’ (1995) 106 Yale Law Journal 1027, 1030. 49 (1996) 7 BPR 14,638, 14,649. 50 (1999) 9 BPR 17,303, 17,309. 51 Ibid 17,310. 52 Ibid 17,310.

Chapter 2 66 These cases show that the orthodox justification for the statutory regimes allowing courts to impose easements does have merit. Some putative servient landowners will exaggerate the value to them of the land being free of the easement. Yet, the same can be said of putative dominant owners, who typically keep private their valuation of the easement’s worth by not publicising the full value of the easement to them.53 Thus the cases show that where the parties are prepared to bargain—the cases where the landowner is a commercial entity—both the putative dominant owner and the putative servient owner may engage in strategic bargaining. This suggests that some provision like s 88K and s180 is necessary to bring about an efficient allocation of resources. The section does this by testing the putative servient owner’s valuation of being free of the easement in court. It does this in two ways. The potential adverse impact of the easement on the putative servient owner is relevant, firstly, to the question of whether the easement should be imposed and, secondly, to the question of the amount of compensation that should be ordered.

At this point we should note that sometimes it is difficult to ascertain whether a party to the litigation is a King of the Mountain or a Malice Aforethought character. That is, it is hard to tell whether we are witnessing a fervent strategic bargainer willing to push the limits, or a spiteful party whose focus is on causing hurt to the other rather than capturing a benefit for themself.54 One such case is the Queensland case of De

53 Coles Myer v Dymocks Book Arcade seems the only case where the putative dominant owner explained to the servient landowner why a particular amount was being offered: (1996) 7 BPR 14,638, 14,649-1650. This veracity explanation was not tested at trial. 54 In addition to the two cases about to be discussed, we should note In the matter of an Application by Hodgskin and Hodgskin (1999) Q ConvR ¶54-535. In that case the putative dominant owners requested the grant by the putative servient owners of the right to use an existing easement across the putative servient land in favour of a third party. One of the obstacles to successful negotiation was that at an early stage the putative servient owners required the putative dominant owners to pay the putative servient owners’ capital contribution of $3,221.50 to the relevant authority for the supply of electricity to the putative servient land. The putative dominant owners seem to have refused, and a later offer by the putative dominant owners to purchase the easement for a specific amount was met with an outright refusal by the putative servient owners. (The failure to respond by making a counteroffer led the court to find that the putative servient owners had unreasonably refused to grant the easement: at 60,386-60,387.) The initial demand by the putative servient owner for the payment by the putative dominant owners of a collateral debt might be construed as an attempt at strategic bargaining: an effort to capture an excessive amount of the potential cooperative surplus. Alternatively, the putative dominant owners’ refusal to pay the debt might have been perceived by the putative servient owners as unfair, creating a feeling of acrimony towards the putative dominant owners. The failure to respond with a counteroffer could thus be construed as the spiteful act of a Malice Aforethought.

Chapter 2 67 Pasquale Bros Pty Ltd v NJF Holdings Pty Ltd.55 If the s 180 dispute between the parties is looked at in isolation from its wider context, the putative servient owner seems to be a classic Malice Aforethought character. In this case the putative dominant owner and the putative servient owner were owners of neighbouring commercial buildings. The putative dominant owner informed the putative servient owner that it was planning to conduct repair work on its building. The putative servient owner objected to the putative dominant owner’s plans on the basis that the repair work would damage its own building. The putative servient owner refused to cooperate with putative dominant owner, or even engage in negotiations about how the repair work might be carried out without damaging the putative servient owner’s building. The putative dominant owner managed to get the necessary council consent to undertake the work, but on the condition that the effect of the work on the putative servient owner’s building was monitored, and that work would immediately cease if it appeared that the putative servient owner’s building was being damaged.

The putative dominant owner offered to consult with the putative servient owner’s engineers with respect to the intended repair work and offered to pay $2,500 towards the putative servient owner’s consultancy costs. Again the putative servient owner refused to cooperate. When the putative dominant owner’s engineers sought access to the putative servient owner’s building to install monitoring devices and so comply with the consent condition, the putative servient owner refused access. The putative dominant owner then commenced proceedings for a statutory right of user under s 180 to allow the monitoring devices to be installed.

From the foregoing facts, the putative servient owner appeared to be single minded in its attempt to frustrate the putative dominant owner’s plans to repair its building,56 even at the expense of putting at risk the structural integrity of its own building. The sole purpose of the putative dominant owner seeking limited access for a temporary period was to protect of the putative servient owner’s building.57 The putative servient owner seems to have totally lost sight of its own self-interest in its attempt to inflict pain on the putative dominant owner.

55 (2000) Q ConvR ¶54-536. 56 Ibid 60,395. 57 Ibid 60,392.

Chapter 2 68 However, when the wider circumstances are taken into account, the putative servient owner might be viewed as the consummate strategic bargainer. When the putative dominant owner first informed the putative servient owner of its repair plans, the putative servient owner commenced an action against the putative dominant owner claiming compensation for already existing damage to the putative servient owner’s building allegedly caused by the putative dominant owner. Before this action and the s 180 proceedings were determined, the parties settled. The compromise allowed the putative dominant owner’s repair work to go ahead, provided that the putative dominant owner also undertook restoration and repair of the putative servient owner’s building.58 So, in the end, apart from having to pay the putative dominant owner’s costs in relation the originating summons of the aborted s 180 proceedings,59 the putative servient owner got what it wanted. The putative servient owner obtained an agreement for the repair of its building at the putative dominant owner’s cost, without having ever produced cogent evidence that the damage to its building was caused by the putative dominant owner.60 The putative servient owner was successful in capturing the lion’s share of the cooperative surplus.

Another case of hard bargaining by a party to a court-imposed easement action is Woodland v Manly Municipal Council (No 1) and (No 2).61 The case differs from De Pasquale, however, in two respects. Firstly, in Woodland, it was the putative dominant owner who was engaging in the strategic bargaining. Secondly, that strategic bargaining was spectacularly unsuccessful. The putative dominant owner unsuccessfully applied under s 88K for the imposition for a drainage easement over the putative servient owner council’s land.62 Before the disposition of the action the council had made a ‘Calderbank’ offer to the putative dominant owner. The offer was to grant the easement sought in return for the payment of council’s costs to date. The offer was without prejudice, but with the qualification that the offer could be produced to the court in relation to the issue of costs if the council was successful.

58 Ibid 60,391. 59 Ibid 60,396 60 See ibid at 60,394. 61 (2003) 11 BPR 20,903 and 20,915 respectively. 62 Ibid 20,913-20,914.

Chapter 2 69 This is what ultimately occurred when the putative dominant owner rejected the offer. The court declined to grant the easement and the putative dominant owner had to pay the council’s costs, including on an indemnity basis costs incurred after the date of the Calderbank letter.63

We have seen that the orthodox justification for the existence of the first-generation legislation finds support in several cases. These cases involve a King of the Mountain—almost always the servient putative owner—who is willing to agree to the grant of the easement, but only on terms that involve him capturing an excessive amount of the cooperative surplus. In these circumstances, a statutory regime allowing the court to impose an easement is justified. Although the scheme does militate against the realisation of King of the Mountain’s secondary purpose—having the other party lose—it does so in circumstances where seeking to achieve that secondary purpose prevents the realisation of the King’s primary purpose: the advancement of his own welfare.

However, there are other cases where King of the Mountain is not present. We now turn to these cases.

B Malice Aforethought It appears that in several cases the failure to reach an agreement for the grant of an easement may not have been the result of strategic bargaining, but rather animosity between the parties because of a problem in their pre-existing relationship. Frequently, this animosity was related to prior litigation between the parties.64

In Goodwin v Yee Holdings Pty Ltd, Windeyer J characterised the relationship between the parties as being marked by ‘a lack of goodwill’.65 The builders retained

63 Ibid 20,917-20,918. 64 Although we have classified Katakouzinos v Roufir Pty Ltd as a King of the Mountain case because of the strategic bargaining involved, the relationship between the parties was also acrimonious. Despite agreeing to allow the putative dominant owner’s scaffolding to encroach into its airspace during demolition of the putative dominant owner’s building, the putative servient owner refused to allow the scaffolding to remain during the construction phase. The putative servient owner claimed that its building and land had been damaged by the demolition of the putative dominant owner’s building. See (1999) 9 BPR 17,303, 17,304. 65 (1997) 8 BPR 15,795, 15,798.

Chapter 2 70 by the putative dominant owner had been engaged in January 1997, but had made no attempt reach agreement with the putative servient owners about access to the putative servient land until September, when the need for access was imminent if construction was to continue. On 1 September, the builders wrote to the putative servient owners requesting an easement to allow scaffolding to encroach into their airspace and asking for a response by 3 September. Windeyer J described this as indecent haste, and raised the possibility that this may have been one reason why the putative servient owners had refused to give access. Matters were also muddied by a dispute between the parties concerning access to the roof of the putative servient land so as to allow the builders to dismantle a chimney on the putative dominant land that joined the chimney on the putative servient land. The putative servient owners commenced an action in trespass against the putative dominant owner in the midst of the negotiations between the parties for the grant of the easement.66

In Durack v De Winton, the s 88K application was only one aspect of litigation between the parties. The putative servient owner to the s 88K application wished to construct a new dwelling on his land. The putative dominant owner sought to obstruct this on the basis that it would interfere with a drainage easement that burdened the putative servient land and benefited the putative dominant land. The putative servient owner tried to negotiate the relocation of the easement with the putative dominant owner so that the construction of the new dwelling could proceed. The putative dominant owner refused to consent to the relocation unless the putative servient owner agreed to the widening of a right of carriageway over the putative servient land in favour of the putative dominant land. The putative dominant owner told the putative servient owner that ‘he had always seen the [drainage] easement as a way of controlling the development of [the putative servient land]’. The putative servient owner accused the putative dominant owner of ‘blackmail’.67 The putative servient owner refused to widen the existing right of way and the putative dominant owner brought an action under s 88K for the court to do so.

66 The circumstances of the dispute are set out at ibid 15,797-15,798. 67 (1998) 9 BPR 16,403, 16,409.

Chapter 2 71 In Grattan v Simpson, Young J described the pre-existing relations between the parties, who were related to each other, as ‘bad’.68 This had led to the termination by the putative dominant owners of a lease over land in favour of the putative servient owner, and a ‘large amount of litigation’ between the parties, which included a Family Provision Act claim and apprehended violence order proceedings. The application under s 88K was for an easement that would have formalised access to the putative dominant land that had been enjoyed permissively until terminated by the putative servient owner at the time the putative servient owner’s lease had been terminated.69

Although there was no pre-existing litigation in Simpson v Bagnall, the relationship between the parties was described by Bergin J as ‘acrimonious and sometimes violent’.70 Firearms were discharged across the putative dominant owner’s property and damage was inflicted on the putative servient owners’ home, although there was not sufficient evidence for Bergin J to make a finding as to who was responsible for these acts 71

The dispute between the parties in North v Marina72 did not involve violence, but it was complex and prolonged. In this case the putative dominant owner sought the grant of an easement under s 88K over the putative servient land for the purpose of maintaining, repairing and replacing the waterproofing of a party wall between the putative dominant land and the putative servient land.73 The putative servient owner opposed this despite having created the circumstances that caused the need for the easement in the first place.

Without council approval, the putative servient owner began demolishing one of the structures on his land. This caused a breach in the party wall with the putative dominant land, thereby exposing parts of the interior of the ground floor of the

68 Ibid 16,649-16,650. 69 Ibid 16,650. 70 [2000] NSWSC 930, [1]. 71 Ibid [47]-[48]. 72 (2003) 11 BPR 21,359. 73 Ibid 21,366 [34].

Chapter 2 72 putative dominant owner’s house.74 After negotiations between the parties and council, council issued an order requiring: the demolition of the party wall; the construction of a new party wall by the putative dominant owner; the creation of cross easements for support; and the weatherproofing of the new party wall. The putative servient owner was to construct a wall entirely on his land that would provide the new party wall with protection from the weather. When the putative dominant owner constructed the new party wall, the putative servient owner refused to build the other wall on his own land as he was supposed to do. The putative dominant owner then sought the putative servient owner’s consent for access to the putative servient land in order to waterproof the new party wall. The putative servient owner refused.75 The putative servient owner also claimed that the new party wall had been built in the wrong place, although he had said nothing about this while the putative dominant owner was constructing the new party wall.76 The court found that the new party wall had been constructed in the right position and granted the putative dominant owner the easement sought.77

When the matter came to trial, the putative servient owner abandoned much of the hard line he had taken earlier. He no longer sought the demolition of the new party wall—although he still sought damages for it being constructed in the wrong place— and he conceded that some form of easement for waterproofing was needed, although he disputed the scope of that easement.78 All of this suggests that the initial dispute between the parties, and the intervention of council with which the putative servient owner was far from happy,79 created a feeling of acrimony in the putative servient owner towards the putative dominant owner. Until the matter actually came to trial, the putative servient owner seems to have been more concerned with escalating the dispute than with solving it. Given that the putative servient owner

74 Ibid 21,360-21,361 [11]. 75 Ibid 21,366 [32]. 76 Ibid 21,366, 21,367 [31], [35]. 77 Ibid 21,378, 21,380 [80], [91]. 78 Ibid 21,367, 21,378 [35], [82]. 79 The putative servient owner did not initially agree with council’s proposal for a resolution of the dispute; the putative servient owner disputed the validity of the council’s order; and the putative servient owner expressed a desire not to give council too much information. See ibid 21,361-21,362, 21,363, 21,366 [17], [22] and [32].

Chapter 2 73 initially caused the problem, the putative servient owner seems to have been acting on a self-serving concept of fairness referred to above.80

Queensland can also provide an example of a successful application for a court- imposed easement that was unable to be negotiated because of ill-feeling between the parties. In Tipler v Fraser,81 it was the putative dominant owners who could be characterised as Malice Aforethoughts. The putative dominant owners incorrectly insisted they had the right to use the putative servient land to gain access to their land and the putative servient owners disputed this. The putative servient owners offered to grant the putative dominant owner an easement without the need for payment of compensation. However, the putative dominant owners continued to insist that they already had an easement. In refusing to grant the easement when the matter came to trial,82 Matthews J held that the putative dominant owners’ attitude was responsible for the ill-feeling between the parties.83 The putative dominant owners were clearly acting against their own self-interest by not accepting the putative servient owners’ offer. The putative dominant owners seemed intent on inflicting humiliation on the putative servient owners.

A more conventional Malice Aforethought case—in the sense that it was the putative servient owner who was acting in a spiteful manner—is In the Matter of an Application by Kindervater.84 In that case the putative dominant owner sought the permission of the putative servient owner to use a driveway on the putative servient land to gain access to a carport on the putative dominant land. (When the putative dominant owner had purchased the land she mistakenly believed that she had the right to use the driveway.) One of the reasons for the putative servient owner refusing to grant an easement was because of the poor relationship that existed between the putative servient owner and the putative dominant owner’s tenant. The

80 See above nn 25-26 and accompanying text. 81 [1976] Qd R 272. 82 Matthews J held that the putative dominant owners had not shown that the grant of the easement was in the public interest, or that the putative servient owners’ refusal to grant the easement was unreasonable. See ibid 276. 83 Ibid. It should be noted that in the case the putative servient owners had initiated trespass proceedings against the putative dominant owners, and that the putative dominant owners applied for an order under s 180 by way of a defence. 84 [1996] ANZ ConvR 331.

Chapter 2 74 tenant was the brother of the putative servient owner’s former de facto wife. Additionally, the tenant and his visitors obstructed from time to time the putative servient owner’s driveway with their vehicles, which exacerbated an already tense situation.85 Section 180 was needed to overcome the intransigence of the putative servient owner brought about by his ill-will.

We have seen that most of the unambiguous Malice Aforethought cases, where the putative servient owner appeared focused on hurting the putative dominant owner rather than pursuing a potentially mutually beneficial exchange, involved disputes between residential neighbours. A variation on this theme is the case of Busways Management Pty Ltd v Milner.86 In this case the putative dominant owner was a company that owned a large factory complex. The putative dominant owner wanted to convert the complex into a strata subdivision. However, in order to do so the putative dominant owner needed to obtain an easement over neighbouring land owned by the putative servient owner, onto which the footings of the factory encroached by no more than 14 centimetres.

The facts of the case reveal that the putative servient owner was an individual; but they do not reveal the nature of the putative servient land, other than that there was a large brick building on it.87 As the building was not described as a house, this suggests that neither of the parcels of land were private residences. In any case, in refusing to grant the easement the putative servient owner was clearly influenced by acrimony towards the putative dominant owner. Not only was the encroachment minimal, and outside the fence on the putative servient land that ran inside the boundary, on numerous occasions the putative dominant owner had offered to remove the encroachment at its own cost, but the putative servient owner refused to allow access for this purpose.88 There appears no other explanation than that the putative servient owner was the classic Malice Aforethought, blinded by ill-will toward the putative dominant owner. The ubiquitous pre-existing legal dispute was also present in this case; the putative servient owner had previously brought

85 Ibid 331, 332 335. 86 (2002) 11 BPR 20,385. 87 Ibid 20,385-20,386. 88 Ibid 20,387.

Chapter 2 75 proceedings under the Encroachment of Buildings Act 1922 (NSW) against the putative dominant owner, but was unsuccessful in obtaining compensation.89

Without doubt, the concept of strategic bargaining cannot explain many of the s 88K and s 180 cases in which an easement was granted against the wishes of the servient owner. In many cases, the putative servient owner refused to grant an easement out of spite towards the putative dominant owner. (The presence of ill-will is, however, not a sufficient basis for granting the easement as in some cases the easement was not granted because of the failure to satisfy the relevant statutory prerequisites.90)In several cases, the ill-will arose because of, or was at least manifested by, prior litigation.

We have seen that the case for compulsorily imposing an easement against a King of the Mountain is justified; King of the Mountain wishes to act in his91 own interest, but his own conduct militates against this. Malice Aforethought, however, does not primarily wish to act in his own interest; his primary desire is to hurt others. Applying the statutory regime in this context requires a different justification. That justification must be based on the belief that it is better to promote the objective welfare of the parties (or at least promote the welfare of the dominant owner and leave the servient owner no worse off), rather than fulfilling their subjective preferences. This is a belief that many would share, especially when those subjective preferences are based on spite.92 In Chapter 5, we will see how the enactment of the second-generation legislation was supported by the argument that spite is often the motivation for one neighbour refusing to provide access to another.

C John Doe There are several cases where an easement was imposed by the court under s 88K or s 180 where the refusal of the putative servient owner to grant the easement cannot be attributed to strategic behaviour or any obvious acrimony. These cases can only

89 Ibid 20,386. 90 For example, Grattan v Simpson (1998) 9 BPR 16,649 and Simpson v Bagnill [2000] NSWSC 930. 91 The routine use of the masculine pronoun in this paragraph is for convenience. 92 Jolls, Sunstein and Thaler, above n 22, 1499.

Chapter 2 76 be explained on the basis that the putative servient owner sincerely believed that granting the easement would not increase his or her welfare, even after receiving compensation. What this means is that such people cannot be characterised as Kings of the Mountain or Malice Aforethoughts, but rather as John Does who place a higher value of peace, quiet and privacy than on financial gain.93

In most of these cases where the easement was imposed in circumstances where the putative servient owner did not engage in strategic behaviour, the putative servient owner was the owner and occupier of residential land.94 Although in both Tregoyd Gardens Pty Ltd v Jervis95 and King v Carr-Gregg96 there was negotiation about whether the easement would be granted, this negotiation did not involve strategic bargaining by the putative servient owner in order to secure a higher price.

In Tregoyd Gardens v Jervis the putative servient owners did engage in protracted negotiations with the putative dominant owner regarding the granting of the easement. The judgment of Hamilton J does not disclose what the putative servient owners were asking for, other than an initial request for the putative dominant owner to grant the putative servient owners a right of carriageway across the putative dominant land, which the putative dominant owner refused as impracticable.97

93 The objection may not necessarily be to the easement itself, but to the development that is to be facilitated by the easement. So, in Debbula Pty Ltd v The Owners-Strata Plan 6964, the objection was not so much to the proposed drainage easement, but to the proposed demolition of a single storey house and the construction of three two-storey units on the putative dominant land. The putative servient owner’s opposition to the s 88K action was funded by adjoining owners whose views would be adversely affected by the development. See (2003) 12 BPR 22,617, 22,617, 22,622 [3], [26]. 94 Ex parte Edward Street Properties Pty Ltd [1976] Qd R 86; Re Wooler (1990) Q ConvR ¶54-361; Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845; Wilson v Forrester-Babcock (2000) 10 BPR 18,377; King v Carr-Gregg [2002] NSWSC 379. In other cases this type of putative servient owner successfully avoided the imposition of the easement. One of the reasons given by the court for denying the easement in these cases was the infringement of the putative servient owner’s privacy that would be caused by the imposition of the easement. See Hanny v Lewis (1998) 9 BPR 16,205, 16,210 and Debbula v The Owners-Strata Plan 6964 (2003) 12 BPR 22,617, 22,624, 22,626 [41], [52]. It should be noted in Debbula that the managing agent of the putative servient owner initially agreed to the grant of the drainage easement in return for a payment of $6,000, but later withdrew its consent. The reason for the change in position was not trying to extract a higher payment, but because one member of the putative servient owner objected to the grant of the easement and lodged a caveat on the putative servient land. The basis of the caveat was that unanimity among members of the putative servient owner was needed to grant the easement. (See (2003) 12 BPR 22,617, 22,618, 22,619 [7], [12].) 95 (1997) 8 BPR 15,845. 96 (2002) NSWSC 379. 97 (1997) 8 BPR 15,845, 15,848.

Chapter 2 77 However, the judgment makes clear that negotiations broke down because the putative servient owners opposed the putative dominant owner’s proposed subdivision of the putative dominant land into 15 residential lots and because they feared the destruction of a Canary Island Palm on their land, to which they claimed sentimental attachment.98 This suggests a sincere and unambiguous rejection of the putative dominant owner’s proposal, rather than mere ‘haggling’. This conclusion is reinforced by the position taken by the putative servient owners on compensation. When Hamilton J suggested that $10,000 would be an appropriate amount of compensation payable to the putative servient owners if an easement were imposed, the putative servient owners stated that they would not seek a higher amount.99 In not objecting to this figure—even though the putative dominant owner had offered $15,000 in the negotiations leading up to its s 88K application100—the putative servient owners cannot be regarded as trying to maximise their share of the potential gains from trade.

There is another clear indication that the putative servient owners in Tregoyd were not trying to hold the putative dominant owner—a property developer—to ransom, but were sincere in the reasons they gave for refusing to grant the easement. There was another parcel of land available—not owned by the putative servient owners— that would provide a suitable alternate site for the drainage easement. Given that there was an alternate party with whom the putative dominant owner could bargain, this would have reduced the opportunity of the putative servient owners to engage in strategic behaviour. If the putative dominant owner valued the easement more highly than at least one of the set of neighbours valued the right to be free of the easement, then an efficient use of resources should have be attained through private agreement alone. However, the other potential grantor of the drainage easement— whose land was not subject to the s 88K application—rejected the putative dominant owner’s offer to purchase the easement and refused to enter into negotiations.101 This

98 Ibid 15,848-15,849. 99 Ibid 15,851-15,852. 100 Ibid 15,848. 101 Ibid 15,849.

Chapter 2 78 indicates that neither putative servient owner was trying to hold the putative dominant owner to ransom.102

In King v Carr-Greg, the putative servient owner was prepared to negotiate granting the putative dominant owner various permissive rights, rather than the easement requested by the putative dominant owner. The putative servient owner clearly was not attempting to achieve an extortionate amount of the potential gains from trade, but was sincere in desiring to retain his land free from the easement. Firstly, the putative servient owner was prepared to grant these rights without payment by the putative dominant owner.103 Secondly, at trial, on the issue of compensation payable to the putative servient owner because of the ‘blot’ on putative servient owner’s title caused by the easement, the valuation put into evidence by the putative servient owner was lower than the valuation put into evidence by the putative dominant owner.104 Again, the putative servient owner’s refusal had nothing to do with trying to maximise the price payable by the putative dominant owner.

There are possible exceptions to the proposed ‘rule’ that residential putative servient owners do not engage in strategic behaviour in order to maximise their share of the potential gains from trade. In 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123, there were negotiations for the grant of an easement that apparently failed because the putative dominant owner offered $23,000 for the easement, whereas the putative servient owner demanded $400,000.105 The building on the putative servient land consisted of residential strata title units, the majority of which were under lease: only two were owner occupied. However, we must note the following facts about the case. The putative servient owner’s building was located in the centre of Sydney;

102 The availability of alternate servient land was also present in Ex parte Edward Street Properties Pty Ltd. One potential servient parcel was owned by Moorhouse. The other alternative was for the easement to burden both of two parcels of land, one owned by Graham and the other by the Webbers. Moorhouse was not prepared to grant the easement. Graham was prepared to grant the easement, but this was irrelevant, as the Webbers were not. As in Tregoyd, neither Moorhouse nor the Webbers engaged in a haggling process to gain a large share of the potential cooperative surplus: [1976] Qd R 86, 86-87. Another alternative supply case is Woodland v Manly Municipal Council (No 1) (2003) 11 BPR 20,903, 20,909-20,910 [20]-[23]. 103 (2002) NSWSC 379, [24]-[25]. 104 Ibid [67]. The putative servient owner’s valuation was $20,000; putative dominant owner’s valuation was $27,000. The judge decided on an amount of $23,000. 105 (1998) 43 NSWLR 504, 511. Ultimately, Hodgson CJ in Eq imposed the easement and awarded compensation in the amount of $23,000 (at 517).

Chapter 2 79 the easement was sought over the common property of the strata development; and the owners’ corporation, rather than the owners of the units, conducted the negotiation.106 These factors can be seen as endowing the case with a commercial, rather than a residential, flavour.

Perhaps another possible exception to the rule that residential putative servient owners do not engage in strategic behaviour is Mitchell v Boutagy.107 In that case the putative servient land was residential in nature. Negotiations for the grant of an easement took place, but the judgment does not disclose the terms of those negotiations.108 On the issue of compensation at trial the putative dominant owner led evidence that the appropriate amount payable was $7,900; the putative servient owners’ figure was $83,000.109 Austin J held that $26,556 was the appropriate amount.110 This suggests that the putative servient owners were trying to maximise their own share of the cooperative surplus to an unreasonable degree.

It should be noted, however, that the putative servient owners were the executors of the estate of the deceased owner of the putative servient land. One can only speculate whether it was the fear of breaching their executorial duty that motivated them to seek an amount that was ultimately found to be excessive, or whether they were also beneficiaries of the estate, and thus had a self-interested reason for trying to obtain an excessive share of the cooperative surplus. In either case, unless the putative servient owners intended to live on the putative servient land, it is arguable that they were not in fact residential owners.

Thus the rule may remain intact that putative servient owners who are owners and occupiers of residential land rarely, if ever, engage in strategic behaviour, but rather genuinely place a high value on privacy. This being so, it is a major blow to the orthodox justification for the first-generation regime under which easements may be compulsorily imposed by the court. If the putative servient owner is not engaging in

106 Ibid 506, 511, 513. 107 (2001) 10 BPR 19,187. 108 Ibid 19,188. 109 Ibid 19,188. 110 Ibid 19,196-19,197.

Chapter 2 80 strategic bargaining, but is a John Doe who values the right to be free of the easement more than the putative dominant owner values the right to obtain the easement, then the granting of the easement by the court is not efficient, at least in terms of the actual preferences of the parties. The justification for imposing the easement in this context must rely on the promotion of the objective welfare of the parties. However, it is much harder to ignore the actual preferences of a John Doe than to ignore those of a Malice Aforethought. Unlike Malice Aforethought, John Doe seeks to maximise his or her own welfare, so there is nothing obviously perverse about his or her view of the state of affairs that would have this effect.

V CONCLUSION The orthodox justification for s 88K and s180 is that courts should be able to impose easements when it is efficient to do so, even when private bargaining fails because of strategic behaviour. That rationale is supported by some of the cases, but we have seen that only putative servient owners who are commercial entities engage in King of the Mountain behaviour. Further, a close examination of the cases shows that where the owner of the putative servient land is a residential owner, the reason for the failure of private bargaining is not the presence of strategic behaviour. Instead, the reason is either that (i) there is pre-existing hostility between the parties or (ii) the putative servient owner prefers privacy to economic gain. In the former case, the owner of the putative servient land can be characterised by as a Malice Aforethought, and in the latter, as a John Doe who values things other than money. Although there is a justification for extending the statutory scheme to the spiteful Malice Aforethought, extending it to the peace and quiet loving John Doe is more problematic.

In Chapter 4 we will see that in applying the first-generation legislation, the court is very willing to override the preferences of such a John Doe in favour of promoting the more intensive use of land. However, that revelation must await our examination in Chapter 3 of how the court generally approaches the question of whether the legal prerequisites for the imposition of an easement have been satisfied.

Chapter 2 81 CHAPTER 3 Cranes, Drains and Automobiles: An Economic Analysis of Section 88K Decisions

I OUTLINE OF CHAPTER In Chapter 2 we examined the factual setting of the s 88K and s 180 cases in light of the orthodox justification for the existence of these legislative regimes. That justification is that the court should impose an efficient allocation of resources where the strategic behaviour of the putative servient owner precludes a consensual exchange. We have seen that there is reason to doubt the universal applicability of this justification. Nevertheless, we now proceed to examine how the New South Wales Supreme Court has applied s 88K and whether that application is consistent with the economic imperative of bringing about an efficient allocation of resources that mimics a successful consensual bargaining outcome. We will do this by considering each of the elements of the regime in turn, namely: (1) the court’s discretion under s 88K(1) to withhold the grant of an easement even if all of the prerequisites for a grant have been satisfied; (2) the requirement under s 88K(1) that the easement sought must be reasonably necessary for the effective use or development of the putative dominant land; (3) the requirement under s 88K(2)(a) that the proposed use of the putative dominant land must not be inconsistent with the public interest; (4) the requirement under s 88K(2)(b) that the putative servient owner must be able to be adequately compensated if the easement were granted; (5) the requirement under s 88K(2)(c) that the putative dominant owner must have made all reasonable attempts to acquire the easement; (6) the conditions that can be included in the grant of the easement under s 88K(3); (7) the requirement under s 88K(4) that the (successful) dominant owner pay compensation to the (unsuccessful) servient owner for the loss arising out of the imposition of the easement; and (8) the requirement under s 88K(5) that the (successful) dominant owner pay the (unsuccessful) servient owner’s costs of the proceedings.

82 Section 88K(6)-(9) harmonise easements imposed under s 88K with the statutory regulation of easements generally. These provisions deal with the release, modification and extinguishment of the easement,1 the mechanics for the registration of the easement,2 and provide that the easement has the effect as if it were contained in a deed.3

II PRELIMINARY MATTERS Before we proceed as described above, three preliminary matters must be noted: (i) the difference in the breadth of the rights that might be, and have been, granted under s 88K and 180 of Queensland’s Property Law Act 1974; (ii) the nature of the terms that can be included in an easement imposed under s88K; and (iii) whether s 88K allows the imposition of an easement in gross.

In allowing the imposition of easements only, s 88K is narrower in scope than s 180 of Queensland’s Property Law Act 1974. The latter provision allows the imposition of a ‘statutory right of user’, which ‘may take the form of any easement, licence or otherwise.’4 This being said, however, the range of easements that have been granted under s 88K is much wider than the range of statutory access rights granted under s 180. Under s 88K, the easements granted include rights of way,5 easements for the flow of light and air,6 drainage easements,7 permanent easements for encroachment onto the servient land8 and temporary easements for encroachment onto the servient land in order to facilitate construction of a building on the dominant land.9

Despite the width of the Queensland provision, in the reported cases the statutory rights of user that have been imposed have all been easements, although on at least

1 Section 88K(6), (9). 2 Section 88K(7). 3 Section 88K(8). 4 See s 180(1), (2). There has been speculation as to whether the statutory right of user could take the form of a covenant: Hyman Tarlo, ‘Forcing the Creation of Easements—A Novel Law’ (1979) 53 Australian Law Journal 254, 255. 5 A recent example is Foster v Hidden Valley Owners’ Co-operative Society (2002) 11 BPR 20,899. 6 Most recently in Pasade Holdings Pty Ltd v Sydney City Council (No 2) [2003] NSWSC 584. 7 For example, King v Carr-Gregg [2002] NSWSC 379. 8 Most recently in Pasade Holdings Pty Ltd v Sydney City Council (No 4) [2003] NSWSC 1220, [11]- [15]. 9 For example, 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1998) 43 NSWLR 504 (crane); Wilson v Forrester-Babcock (2000) 10 BPR 18,377 (scaffolding).

Chapter 3 83 two occasions the court indicated that it was prepared to grant a statutory right of user in the form of a licence. Firstly, in Lang Parade Pty Ltd v Peluso,10 the putative dominant owner sought the imposition of a statutory right of user in the form of a licence to permit the encroachment of cranes on the putative dominant land into the airspace of the putative servient land. Douglas J stated that he was prepared to grant this licence,11 although it subsequently transpired that the putative dominant owner could complete the development of its land without using encroaching cranes, and no order was actually made.12 Had a statutory right of user been imposed, it could have been imposed either as a licence—as his Honour had proposed to do—or as a temporary easement.13 In fact, on occasions, Douglas J used the terms ‘licence’ and ‘easement’ interchangeably.14

Secondly, in De Pasquale Bros Pty Ltd v NJF Holdings Pty Ltd,15 a statutory right of user that was not an easement was referred to, but not actually imposed. In this case, Chesterman J said that had the matter proceed to a determination, he would probably have granted the putative dominant owner’s summons for s 180 relief.16 The statutory right of user initially sought was for the putative dominant owner’s engineers to have access to the putative servient land for the purpose of monitoring the effect on the putative servient owner’s building of remedial work being conducted on the putative dominant land. His Honour pointed out that the right of entry sought would have been for the benefit of the putative servient land, rather than for the benefit of the putative dominant land.17 As will be seen later, his Honour’s reasoning would preclude the right as being characterised as an easement because it failed to meet the accommodation requirement.18

Further, divergence between the potential scope of the Queensland provision and its practical application can been seen in the limited range of easements that have

10 (2005) Q ConvR ¶54-623. 11 (2005) Q ConvR ¶54-623, 61,350, 61,356 [1]. [42]. 12 Lang Parade Pty Ltd v Peluso [2005] QSC 133, BC200503587, 2 13 See above n 9 and accompanying text. 14 (2005) Q ConvR ¶54-623, 61,352, 61,355 [17]. [38]. 15 (2000) Q ConvR ¶54-536. 16 Ibid 60,396 [38]. 17 Ibid 60,392 [10]-[12]. 18 See below nn 69-73 and accompanying text.

Chapter 3 84 actually been granted. These have almost always been rights of way to facilitate the existing use of the dominant land.19 The only other types of easements that have been imposed are an easement for the provision of utilities,20 and an easement for the encroachment of scaffolding during the construction of a building on the dominant land.21 Accordingly, it can be said that the experience with s 180 largely bears out the Queensland Law Reform Commission’s statement that the provision was needed ‘not so much in the of sphere of estate development ... but in relation to individual residential or commercial properties requiring access to or for utilities and services or to public highways.’22 This is very different from the position under s 88K, where easements have frequently been imposed to allow the subdivision of the dominant land.23

The second matter of note is that an easement granted pursuant to s 88K may include such ancillary provisions under s 88K(3) as are reasonably necessary for the enjoyment of the easement. This was made clear in subsidiary proceedings in 117 York Street Pty Ltd v Proprietors of Strata Plan 16123.24 In the primary proceedings, the dominant owner sought and was granted an easement allowing a crane to encroach into the airspace over the servient land.25 However, it transpired that the dominant owner also needed the development consent of the Sydney City Council for the erection of the crane, and that such consent could not be sought without the servient owner giving its written consent to the making of the dominant

19 Recent examples include BogartvWahDay(No1)[2000] QSC 371, BC200006477; Bogart v Wah Day (No 2) [2001] QSC 229, BC200103686; Noyea Park Country Club Pty Ltd v Body Corporate for Noyea Riverside Village [2004] QSC 197, BC200403957. 20 In addition to rights of way, easements for the supply of utilities were also imposed in Re Seaforth Land Sales Pty Ltd’s Land (No 2) [1977] Qd R 317, 325-326 (Hanger CJ), 326 (Stable J), 330 (Campbell J) and in Re Wooler (1990) Q ConvR ¶54-361, 58,740. Additionally, in Hutchinson v Lemon (1983) Q ConvR ¶54-072, 56,437, Connolly J said that had he not found that an easement for the transmission of electricity already existed, he would have imposed one under s 180. 21 Re Samitem (Byrne J, 14 October 1992), as cited in Carmel MacDonald et al, Real Property Law in Queensland (1998) 631. Also see above nn 10-14 and accompanying text for our discussion of Lang Parade Pty Ltd v Peluso. 22 Queensland Law Reform Commission, A Report of the Law Reform Commission on Report on a Bill to Consolidate, Amend, and Reform the Law Relating to Conveyancing, Property, and Contract and to Terminate the Application of Certain Imperial Statutes, Report No 16 (1973) 102. 23 For example, Mitchell v Boutagy (2001) 10 BPR 19,187 and McConachie v Manly Council [2002] NSWSC 434. 24 (1998) 43 NSWLR 504, 520 ff. 25 Ibid 518.

Chapter 3 85 owner’s development application.26 In subsidiary proceedings Hodgson CJ in Eq considered the precise form that the orders foreshadowed in the primary proceedings should take. His Honour held that the easement granted under s 88K should include a provision requiring the servient owner to give written consent to the dominant owner’s development application. Although such a condition would be implied in the grant of the easement—as without it the easement would not be effective—it would be appropriate to include it as an express term of the grant.27

The third matter of note is that it is clear that s 88K cannot be used to create an easement in gross. Although an easement for the supply of a utility service to the public can exist in favour of a council even though there is no dominant land,28 such an easement cannot be created through a s 88K application. This is demonstrated in the case of Bonvale Enterprises Pty Ltd v Halfpenny Investments Pty Ltd.29

In this case the plaintiff company sought the imposition of a drainage easement over the putative servient land in favour of the local shire council. It appears that the plaintiff owned land that would be able to take advantage of the easement should a drainage system be constructed. The plaintiff argued that the reference in s 88K to the ‘land that will have the benefit of the easement’ and similar expressions should not be interpreted technically to mean the land to which the easement was appurtenant. Such an interpretation would repeat the common law requirement that there be dominant land and this would cause the plaintiff’s application to fail. Instead, the plaintiff argued that the concept of land having the benefit of the easement should be taken to include land that would, as a matter of fact, receive a benefit from the easement. In this context, this would include the plaintiff’s land, which would be drained through the council’s drainage easement.30

26 The council took the view that the putative servient owner’s written consent was required by s 77(1) of the Environmental Planning and Assessment Act 1979 (NSW). The putative dominant owner agreed with this view. (See 1998) 43 NSWLR 504, 521. 27 (1998) 43 NSWLR 504, 522. 28 Conveyancing Act 1919 (NSW) s 88A. 29 (2005) 62 NSWLR 698. 30 Ibid 699, 704-705 [1]-[2], [7]-[8].

Chapter 3 86 Burchett AJ rejected this construction of s 88K and stated that the references demonstrated ‘the adherence of section 88K to the essential nature of a true easement’.31 His Honour gave three reasons for holding that s 88K required the presence of dominant land that was benefited by the easement. First, his Honour relied on the canon of construction that the words in a statutory provision should be given their legal meaning unless a contrary intention appears.32 Second, Burchett AJ thought that if all parcels of land that would be serviced by the drainage easement were to be regarded as land having the benefit of the easement, then the enquiry as to whether the easement was reasonably necessary for the use or development of the land, and the enquiry as to whether the use of that land would not be inconsistent with the public interest, would cause practical problems of identification.33 Thirdly, and most importantly, his Honour relied on s 88K(6)(a), which stated that the easement imposed could be ‘released by the owner of the land having the benefit of it.’ This could only mean the owner of the dominant land; if the legislature had intended that an easement in gross could be imposed under s 88K, the provision would have allowed release by the prescribed authority for whose benefit the easement was imposed.34

III ‘THE COURT MAY MAKE AN ORDER IMPOSING AN EASEMENT ...’: S 88K(1) It is clear that even if all of the preconditions of s 88K are satisfied, the court retains a discretion as to whether or not to grant an easement.35 In this section, we will firstly examine the relationship between the existence of the discretion and the

31 (2005) 62 NSWLR 698, 705 [11]. 32 Ibid 705 [10], citing Lord Wilberforce in Ashfield Municipal Council v Joyce [1978] AC 122, 134. 33 Ibid 704-705 [8]. 34 Ibid 706 [13]. 35 O’Mara v Gascoigne (1996) 9 BPR 16,349, 16,358; Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845, 15,855; Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795, 15,799; 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1998) 43 NSWLR 504, 511; Katakouzinos v Roufir Pty Ltd (2000) 9 BPR 17,303, 17,308 [39]; Marshall v Council of the City of Wollongong (2000) 10 BPR 18,163, 18,168 [18]; Simpson v Bagnall [2000] NSWSC 930, [100]; Blulock Pty Ltd v Majic (2002) 10 BPR 19,143, 19,150 [20]; Busways Management Pty Ltd v Milner (2002) 11 BPR 20,385, 20,391 [22]; Debbula Pty Ltd v The Owners-Strata Plan 6964 (2003) 12 BPR 22,617, 22,625 [47]; Woodland v Manly Municipal Council (No 1) (2003) 11 BPR 20,903, 20,909 [19]; Pasade Holdings Pty Ltd v Sydney City Council (No 1) (2003) 11 BPR 21,001, 21,004 [8]; Khattar v Wiese [2005] NSWSC 1014, [59]. In the Queensland cases, the court’s discretion as to whether or not a grant should be made has received little attention. One of the few cases to refer to discretion is Pacific Coast Investments Pty Ltd v Cowlishaw (2005) Q ConvR ¶54-367, 61,482[14], where the existence of the discretion was identified, but otherwise not explored in any depth.

Chapter 3 87 prerequisites in s 88K(1) and (2) that must be satisfied before an easement can be imposed. Secondly, we will consider the predisposition of the court in considering the question of whether or not to impose an easement: should the court approach its task with eagerness or caution?

A The Relationship Between the Discretion and the Prerequisites In three cases, the court relied on the discretionary nature of the power as one of the grounds for refusing to grant an easement. In these cases, however, the court also found that not all of the preconditions of s 88K had been satisfied, and the reasons given for the exercise of the discretion in the negative substantially reproduced those given for why the preconditions were not satisfied.

Firstly, in O’Mara v Gascoigne,36 the putative dominant owner sought the imposition of a right of way across the putative servient land in order to provide access to a shed on the putative dominant land. The substantive reason given Hulme J for exercising the discretion to refuse to grant the easement was that the putative dominant owner could rebuild the front of the shed so that access to it could be achieved across the putative dominant land, rather than across the putative servient land.37 This reason was nothing more than a reproduction of the reason his Honour gave earlier for finding that the easement sought was not reasonably necessary for the effective use of the putative dominant land.38

Secondly, in Blulock Pty Ltd v Majic,39 the exercise of the discretion to refuse to grant the easement corresponded with the failure to satisfy the requirement that the owner of the servient land must be able to be adequately compensated for loss or other disadvantage caused by a grant. Windeyer J found that granting the easement would substantially curtail future development of the putative servient land, and this fact meant that not only had 88K(2)(b) not been satisfied, but also that the discretion

36 (1996) 9 BPR 16,349. 37 Ibid16,358. 38 Ibid 16,357-16,358. See below nn 157-158 and accompanying text. 39 (2001) 10 BPR 19,143.

Chapter 3 88 should be exercised in the negative.40 Windeyer J said that these issues will often ‘overlap and lead to the same result.’41

Thirdly, in Woodland v Manly Municipal Council (No 1),42 the reasons given for the exercise of the discretion in the negative were the same as those given for finding that the putative dominant owner had failed to satisfy s 88(1) and s 88K(2)(a). Hamilton J was not satisfied that the granting of the proposed drainage easement would not exacerbate the existing water ponding problems in the area. His Honour relied on this finding to hold that: (i) the easement sought was not reasonably necessary for the effective development of the putative land; (ii) the putative dominant owner had not shown that the proposed use of the dominant land would not be inconsistent with the public interest; and (iii) the court should exercise its discretion against making the grant.43

A case in which the court expressly considered the issue of its discretion and then decided to impose the easement sought is Pasade Holdings Pty Ltd v Sydney City Council (No 1).44 In granting an easement for the flow of light and air that burdened an undeveloped strip of land that was used as a passageway, Bryson J held that that was nothing about the case that warranted the easement being refused on discretionary grounds. The owner of the putative servient land could not be identified and neither that owner nor its predecessor in title had done anything in relation to the putative servient land for 163 years. Additionally, as development of the putative servient land was not practicable, imposing the easement would impose only the slightest of burdens.45

What is notable about this case is that the reasons Bryson J gave regarding the exercise of the court’s discretion were not the same as his Honour gave in relation to his finding that the proposed easement was reasonably necessary for the effective use

40 (2001) 10 BPR 19,143, 19,150-19,151 [18], [21]-[22]. 41 Ibid 19,150 [20]. In a similar vein, Simpson v Bagnall [2000] NSWSC 930, [100] Bergin J included in the matters to be taken into account regarding the exercise of the discretion is ‘whether the easement would impose a heavy burden’ on the owner of the putative sevient land. 42 (2003) 11 BPR 20,903. 43 Ibid 20,913-20,194 [35]-[36]. 44 (2003) 11 BPR 21,001. 45 Ibid 21,004 [8].

Chapter 3 89 and development of the putative dominant land. However, that is because in addressing s 88K(1), his Honour addressed only the benefits that would flow to the putative dominant land if the easement were granted, rather than also looking at the costs that would be incurred by the putative dominant land.46 As we shall see, this is not the usual approach, as it is commonplace that the costs and benefits of imposing the easement are both considered in relation to the reasonably necessary enquiry.47 However, in looking at the benefits in relation to that enquiry, and the costs in relation to the discretion issue, the substance—although not the form—of Bryon J’s approach is consistent with the view articulated earlier in regard to the cases in which the discretion was exercised in the negative: in considering the discretion issue the court simply relies on the same facts that it considered in s 88K (1) and (2), without taking anything different into account.

There is, however, a narrow context in which the court’s discretion does operate in manner that adds to, rather than duplicates, the s 88K prerequisites. This is where it is the conduct of the putative dominant owner that is responsible for the easement being reasonably necessary. In 117 York Street, Hodgson CJ in Eq stated that if the cause of the easement sought being reasonably necessary is the ‘previous unreasonable conduct by the plaintiff’, then such a fact was relevant to the exercise of the court’s discretion.48 His Honour expressed the same view in Katakouzinos v Roufir Pty Ltd.49 In each of these cases the putative servient owner argued that the alleged necessity for the easement was, at least in part, due to the putative dominant owner committing itself to the current construction method without first securing the easement. This meant that substantial expense and delay would result if the putative dominant owner had to redesign the project so that construction could take place without the need for the easement. In 117 York Street, there was no evidence of the precise cost or delay that would result from a change in construction methods. In

46 Ibid 21,003 [7]. 47 See below Part IV(C). 48 (1998) 43 NSWLR 504, 511. 49 (2000) 9 BPR 17,303, 17,307-17,308 [39]. The statement was also endorsed by Bergin J in Simpson v Bagnall [2000] NSWSC 930, [100]. Although Bergin J did later characterise some of the putative dominant owner’s actions as unreasonable (at [108]), it appears that her Honour did so in the context of whether the putative dominant owner had made reasonable attempts to obtain the easement, as required by s 88K(2)(c): at [105]-[109]. Thus, although Bergin J cites the statement of Hodgson CJ in Eq regarding the matter of the court’s discretion, it does not appear that her Honour applied it in the case before her.

Chapter 3 90 Katakouzinos the uncontested evidence presented on behalf of the putative dominant owner was that if a new development that did not need an easement were to be undertaken, this would result in the expenditure of $20,000 in redesign costs and a delay of four to six months while new council approvals were obtained. 50

In both cases, Hodgson CJ in Eq held that the putative dominant owner had not acted unreasonably in commencing construction without first obtaining the putative servient owner’s consent to any encroachment. In 117 York Street, his Honour’s based his conclusion on the following facts: the easement sought would not impose a heavy burden on the putative servient owner; the putative dominant owner had commenced negotiations with the putative servient owner nearly a year before the hearing; and the inability to secure the putative servient owner’s agreement appeared to be the result of a difference of opinion over the appropriate level of compensation.51 In Katakouzinos, Hodgson CJ in Eq simply said that he did not find it unreasonable that the putative dominant owner waited to obtain the requisite council development and building approvals before seeking the putative servient owner’s consent.52

What is significant about his Honour’s judgment, however, is that although he considered the actions of the putative dominant owner in committing itself to a construction process that required an easement, at a time when no easement had been obtained, as potentially unreasonable, his Honour ultimately relied on this conduct as conducing a finding that the easement was reasonably necessary under s 88K(1). Hodgson CJ in Eq included in the list of factors that together made the easement reasonably necessary the ‘significant delay and significant cost in re-design’ that would follow if a development that did not involve encroachment was now undertaken.53 Thus, not only was the putative dominant owner’s going ahead on the

50 117 York Street (1998) 43 NSWLR, 510-511; Katakouzinos (2000) 9 BPR 17,303, 17,307 [34]. Also see Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795, 15,797, where the refusal to grant the easement would require the redesign of putative dominant owner’s proposed building and a substantial increase in construction costs. 51 (1998) 43 NSWLR 504, 511. 52 (2000) 9 BPR 17,303, 17,308 [39]. 53 Ibid 17,308 [41]. See below nn 114-120 and accompanying text.

Chapter 3 91 assumption that the easement would be granted not a reason for refusing to grant the easement, it was in fact a reason for granting the easement.

Of course, as we will see, it is prudent for a putative dominant owner to gain council’s consent to a proposed development before the commencement of a s 88K action to obtain the easement necessary for the development.54 This does not mean, however, that it is reasonable for a putative dominant owner to commence construction prior to an easement being obtained through negotiation with, or litigation against, the putative servient owner. Accordingly, a putative dominant owner should not derive from Hodgson CJ in Eq’s decisions in 117 York Street and Katakouzinos v Roufir Pty Ltd the belief that it will never be unreasonable to commence construction prior to securing the necessary easement. Indeed in Hanny v Lewis, Young J warned that that s 88K ‘does not exist for people to build right up to the boundary of their property ... and then expect others to make their land available for access’.55 Yet despite this sensible view, the fact remains that the court has not thus far denied an application in a s 88K case on the basis that the putative dominant owner was the author of his or her own predicament.

From an economic perspective, it is important that resources are allocated efficiently going forward, despite what has occurred in the past, except where ignoring past events provides an incentive to act inefficiently in the future. Assume that a developer has a choice between two developments, development X, which does require the acquisition of an easement in order to proceed, and development Y, which does not require an easement. Further, assume that development X would be more profitable for the developer, but that once the costs that would be incurred by a neighbour of the developer because of the imposition of the easement are taken into account, development Y has a greater net benefit than development X. If the developer were to apply for the imposition of an easement under s 88K before commencing the construction associated with development X, then the court would refuse to impose the easement as to do so would not be efficient.

54 For an explanation of the relevance to a s 88K application of council having issued a development consent, see Chapter 4, Part III(B) and (C)(1). 55 (1998) 9 BPR 16,205, 16,209.

Chapter 3 92 Let us change our assumption so that the developer commences the construction associated with development X before applying for the imposition of the easement, so that at the time of the s 88K application the net benefit (once costs to the developer and the neighbour are taken into account) of completing development X now exceeds the net benefit of bringing development Y to fruition.56 (For example, the cost of realising development Y might include the cost of removing part of the construction undertaken as a part of development X.) If this were the case, then prima facie, the court should grant the easement that would allow development X to be completed. However, the court needs to be aware that imposing the easement in these circumstances may provide an incentive to developers to act inefficiently in the future in order to promote their own interests. That is, a developer might commence the construction associated with a development that would promote its own preferences, but would be inefficient once the preferences of the putative servient owner are considered, so that by the time the developer commenced the s 88K action, the developer’s preferred development is more efficient than the alternative development.

The court therefore faces a choice between (a) bringing about an efficient result in the individual case and (b) not providing an incentive for putative dominant owners to act inefficiently. It is probably best for a court to take a case-by-case approach to this issue, and have regard to the reasonableness of the putative dominant owner’s conduct. The existence of a discretion under s 88K(1) to refuse a grant provides a suitable vehicle for this approach. Where the putative dominant owner has the acted in good faith, and has not intended to force the court’s hand, the court may feel able to impose what is, at that point, the efficient solution. However, if the putative dominant owner has deliberately attempted to back the court into a corner, then a court might believe that the efficient result in the specific case should be sacrificed in favour of a outcome that will send a warning to other putative dominant owners not to employ the same strategy in the future.

56 We should note that it is very unlikely that either 117 York Street or Katakouzinos v Roufir Pty Ltd would satisfy this condition. In those cases it is almost certain that the development involving construction up to the boundary would have been more efficient than a set back building. Therefore, it was not necessary for the Hodgson CJ in Eq to rely on the costs of redesign to reach the conclusion that easement was reasonably necessary.

Chapter 3 93 The existence of a discretion in the court to refuse to impose an easement where a putative dominant owner has purposely manufactured circumstances of reasonable necessity might be a valuable tool in deterring inefficient behaviour. Additionally, thus far this seems to be the only area in which an independent role for the discretion has been foreshadowed. Otherwise, the discretion appears to duplicate the enquiry as to whether the prerequisites in s 88K(1) and (2) have been satisfied.57

B Approach of the Court to s 88K Applications The second major point to be made about the discretion to refuse to grant an easement relates to the general attitude with which the court has approached the exercise of its s 88K power. It can be seen that the court has taken a range of views—from caution to eagerness—on this matter. In O’Mara v Gascoigne,in addition to the reason given by Hulme J for the exercise of the discretion in the negative considered above, his Honour gave another reason. His Honour said:58 Because the exercise of the power under s 88K involves the forcible appropriation of one person’s property rights for the benefit of another the court should not readily exercise the power. In Ex parte Edward St Properties the court required that the applicant’s case be ‘clear and persuasive’.

Although not framed in context of the court’s discretion, similar thoughts were expressed in Durack v De Winton. Einstein J said: 59 The application should be approached with caution, having regard to the fact that a compulsory change of registered property rights is sought and that this is not lightly to be undertaken ....

57 Cf Khattar v Wiese [2005] NSWSC 1014, [61], where Brereton J stated that as the enquires regarding the necessity of the easement, the ability of the putative servient owner to be compensated, and the attempts made to acquire the easement, all incorporate the concepts of reasonableness or adequacy, the factors relevant to those enquires cannot be considered a second time in relation to the court’s discretion. His Honour did not go on to identify clearly the factors that could be considered in relation to the court’s discretion. 58 (1996) 9 BPR 16,349, 16,358. Ex parte Edwards St Properties concerned an application under s 180 of Queensland’s Property Law Act 1974. The citation for the case has been omitted from the quotation. 59 (1998) 9 BPR 16,403, 16,449. Also see the statements of Young J in Hanny v Lewis (1998) 9 BPR 16,205, 16,209 and in Grattan v Simpson (1998) (9) BPR 16,649, 16,551.

Chapter 3 94 Windeyer J has articulated a different approach to s 88K applications. In Blulock v Majic, far from believing that the provision should be applied with caution, his Honour J said, ‘there ought generally be a predilection towards a grant’, as the purpose of the provision is to enable land to be used to the fullest extent.60

In addition to the diametrically opposed caution-predilection perspectives, there appears to be another view that can be contrasted with each of the other two. Hamilton J expressed this apparent via media in Tregoyd Gardens Pty Ltd v Jervis:61 The nature of the statute must be borne in mind, so as to require firm proofs of the reasonable necessity for the easement. The force of the statute should not otherwise be read down by reference to its confiscatory nature. It is plain from the second reading speech, that the New South Wales Act was passed as enabling legislation to permit, in effect, confiscation of some proprietary rights, so that purely private developments may proceed on other land in circumstances where they would not be able to proceed without the acquisition of those rights, against the provision for compensation to be made.

Two things should be noted about this statement. Firstly, it is not sufficient for a putative dominant owner to provide proof of the prerequisite of reasonable necessity; indeed, ‘firm’ proof of reasonably necessity is required in order for a grant to be made. Secondly, like Windeyer J in Blulock, Hamilton J relied on a purposive interpretation of s 88K to rebut the view articulated in O’Mara v Gascoigne and Durack v De Winton that the confiscatory nature of the section required it be applied somewhat reluctantly.

60 (2001) 10 BPR 19,143, 19,151 [21]. Windeyer J indicated that this predilection would be strongest where the easement sought was either a temporary one allowing access to facilitate development, or a permanent drainage easement that would be located underground and adjacent to a boundary, and thus one that would not generally preclude re-development of the servient land: at 19,150 [19]. In the case before him, the easement sought was a permanent one for the flow of light and air and one that would preclude re-development of the servient land, and thus the predilection was overborne. See below n 126 and accompanying text. 61 (1997) 8 BPR 15,845, 15,854. Hamilton J again endorsed this approach in Busways Management Pty Ltd v Milner (2002) 11 BPR 20,385, 20,392 [22] and in Woodland v Manly Municipal Council (No 1) (2003) 11 BPR 20,903, 20,908, 20,909 [16], [19]. (Also see his Honour’s judgment in Pasade Holdings Pty Ltd v Sydney City Council (No 4) [2003] NSWSC 1220, [10].) In Khattar v Wiese [2005] NSWSC 1014, [27], Brereton J impliedly endorsed the ‘firm proof’ requirement.

Chapter 3 95 This passage does not provide support for the view that there is a predilection towards a grant, and therefore is not as ‘pro-grant’, as the statement in Blulock appears to be. However, another aspect of Hamilton J’s statement suggests that his Honour’s view is not as ‘anti-grant’ as the view of Hulme J in O’Mara v Gascoigne and Einstein J in DurackvDeWinton. Hamilton J seems to limit the caution with which a court is to approach a s 88K application to ‘firm’ proof of the requirement of reasonable necessity and, by extrapolation, the other requirements enumerated in s 88K(2). What Hamilton J appears to be suggesting is that once there is firm proof of the matters that the putative dominant owner is required by s 88K to prove, the easement should be granted as a matter of course. By contrast, the statements in O’Mara and Durack quoted above would appear to allow the court to refuse to grant an easement, even where firm proof of the section’s requirements has been provided, on the basis of some factor not enumerated in s 88K.62

If this interpretation of Hamilton J’s statements is correct, then his Honour does not endorse the presumption in favour of a grant, as articulated by Windeyer J in Blulock, and only endorses a presumption against a grant to the limited extent of requiring the plaintiff to provide compelling proof of the matters referred to in the section. Hamilton J does not, as Hulme and Einstein JJ appear to do, identify a discretion in the court to refuse a grant on the basis of a factor not enumerated in s 88K. However, given the breadth of the matters set out in s 88K (1) and (2), including the effect of the grant of the easement on both the putative servient owner and the public interest, it is unlikely that there would be any factor relevant to a s 88K application that is not expressly contemplated in the section.

The issue of the nature of the court’s discretion under s 88K is made even more complex by statements made by Young J in Wilson v Forrester-Babcock. In this

62 This reading of O’Mara and De Winton is based on the generality of the language that the court used to identify the existence of its discretion, and the absence of a statement restricting what the court can take into account in exercising its discretion, rather than on the actual application of the discretion to the facts of the relevant case. In neither case did the court avert to a matter that was not set out in s 88K as a possible reason for refusing to impose the easement sought. However, the statement in the passage quoted from O’Mara (see above n 58 and accompanying text) that the putative dominant owner’s case must be ‘clear and persuasive’ could be interpreted as expressing the view that the court’s discretion is limited to considering the matters set out in s 88K, in which case Hulme J could be seen as agreeing with Hamilton J in Tregoyd.

Chapter 3 96 case, the argument put on behalf of the putative servient owner as to why the easement should not be granted was essentially that the putative dominant owners ‘had not discharged the onus of proof on them and ... had not produced the appropriate amount of evidence.’ 63 This argument strongly resembles the ‘firm proof’ concept put forward by Hamilton J in Tregoyd. However, it did not find favour with Young J who, in characterising the argument as one unlikely to appeal, said that ‘[v]ery few cases in [the Equity Division] are decided on onus of proof. The court usually looks to the merits.’64

Elsewhere in the judgment Young J repeated the view he had expressed in earlier decisions that the court should not readily interfere with the property rights of putative servient owners.65 Yet it is difficult to conceive how a court is to give due regard to this warning, other than to require the plaintiff to provide a compelling case, which Young J seems to reject as a requirement. Young J seems to endorse a presumption against a grant, but without articulating how this presumption should be overcome.

C Conclusion Regarding Discretion This analysis shows that the court’s discretion not to impose an easement even if all the prerequisites of the provision have been satisfied has not played a significant, or even coherent, role in the s 88K jurisprudence. When the courts have purportedly used the existence of the discretion as a ground for refusing to grant the easement, they have done so only to bolster (and indeed reproduce) their reasoning that the requirements of s 88K have not been made out. There are contradictory statements as to whether there is a presumption against a grant and whether the putative dominant owner need prove the requirements of the section beyond the standard usually required.

From an economic perspective, it appears that the existence of a discretion to refuse to grant the easement, even if all of the requirements of the section have been made

63 (2000) 10 BPR 18,377, 18,379. [17]. 64 Ibid18,379. [17]. 65 Ibid 18,379 [20]. See the cases referred to in above n 59.

Chapter 3 97 out, is of little value. It might be thought that such a discretion would be valuable as it would allow the court to have regard to all the circumstances of the case and so make an more informed judgment as to whether it would be efficient to grant the easement. However, as we will now see, the requirements of s 88K(1) and (2) have been interpreted in a manner that allow the court to reach a conclusion as to what is efficient in this regard, without having to rely on other factors not listed in the section or to couch its decision in terms of a presumption for or against a grant. The only qualification that needs to be made is that the discretion to withhold a grant of the easement sought, even when the s 88K prerequisites have been satisfied, might be useful when the putative dominant owner has manufactured reasonable necessity through his or her own conduct.

IV ‘REASONABLY NECESSARY’: S 88K(1) The court can only impose the easement sought if that easement is reasonably necessary for the effective use or development of the putative dominant land. This requirement is the primary component of s 88K in terms of securing an efficient allocation of resources. The court has interpreted this provision as requiring a cost- benefit analysis: the easement sought will be imposed if the benefit of the imposition to the owner of the putative dominant land would be greater than the cost of the imposition to the owner of the putative servient land. This cost-benefit analysis is potentially consistent with the bargaining theory described in Chapter 1,66 in which the benefit to the putative dominant owner can be seen in terms of what that party would be prepared to pay in order to acquire the easement, and the cost to the putative servient owner can be viewed as the amount that party would be prepared to pay in order to remain free of the easement. The qualification, ‘potentially’ has been used because, as we will see in Chapter 4, the court does not enquire into what each of these parties would actually be prepared to pay; instead, the court assesses costs and benefits on the basis of what a reasonable person in the respective position of the putative dominant and servient owners would be prepared to pay in regard to the potential imposition of the easement. In any case, the approach taken by the court

66 See Chapter 1, nn 59-60.

Chapter 3 98 under s 88K(1) is designed to ascertain whether an easement can be imposed in circumstances which, after the payment of compensation, will leave the putative dominant owner better off and the putative servient owner no worse off. If this can be done, the imposition of the easement will generate a ‘transactional surplus’, because the aggregate wealth of the parties has been increased.67

Our discussion will proceed as follows. Firstly, the relationship between the reasonably necessary requirement and the concept of the satisfaction of personal preferences will be explained. Secondly, the debate between Hodgson CJ in Eq and Hamilton J about the meaning of ‘reasonable necessity’ will be analysed. Thirdly, the significance to the reasonably necessary enquiry of the detriment that the proposed easement would have upon the putative servient land will be noted. Fourthly, some examples of how the court conducts the enquiry in terms of a cost- benefit calculus will be given. Finally, we will identify various characteristics of the reasonably necessary enquiry. The two most important of these are (a) the significance of the current mode of user of the putative servient land and (b) the significance of other ways in which the desired use of the putative dominant land can be achieved without the imposition of the easement.

A The Reasonably Necessary Enquiry and Personal Preferences A preliminary question that must be addressed is the nature of the entities that are targeted by the cost-benefit calculus: is it the welfare of the respective owners, or the welfare of the respective parcels of land, that is relevant? Although the court does not explicitly deal with this distinction, the contention of this thesis is that from an economic perspective the court’s analysis can be seen as targeting the respective landowners, rather than the respective parcels of land as abstracted entities. The benefit of imposing the easement would be identified by determining what the owner of the putative dominant land would be prepared to pay in order to acquire the easement, and the cost of imposing the easement would be identified by determining

67 In this way, a transactional surplus mirrors a cooperative surplus (see Chapter 1, n 60), but differs in that it arises from a non-consensual, rather than a consensual, transaction.

Chapter 3 99 what the owner of the putative servient land would be prepared to pay in order to remain free from the easement.68

Of course, it is well known that one of the requirements for the creation of an easement is that it accommodates the dominant land, and that it must not be for the personal benefit of the owner of the dominant land.69 This requirement was applied in Clos Farming Estates Pty Ltd v Easton.70 In this case the New South Wales Court of Appeal held that a purported ‘Easement for Vineyard’ was not a valid easement. The purported dominant land (Lot 86) was a small parcel of land in a winery estate on which a machinery shed, chemical shed and a farm office were constructed, and which was used to store farm machinery. The alleged easement purportedly allowed the dominant owner the right to carry out various acts associated with a viticulture operation (such as planting and maintaining vines, and harvesting grapes) on the 80 purported servient tenements, each of which were in separate individual ownership.71 The court held that no valid easement had been created because the right purportedly created did not benefit the dominant tenement, in the sense of being reasonably necessary for the normal use and enjoyment of the dominant tenement. Instead, the right benefited the owner of Lot 86 in its personal capacity. In this way, as in Hill v Tupper,72 the land was merely a convenient incident to the enjoyment of the right. There was no benefit to Lot 86 as a parcel of land by the conduct of the viticulture business. Lot 86 was incidental to the business rather than the business being incidental to the land.73

However, the accommodation requirement does not mean that easements benefit and burden land to the exclusion of the preferences of the respective landowners. As far as easements that are expressly created are concerned, a servient owner will only be prepared to grant an easement if the cost to the servient owner is less than the benefit that she or he receives from the dominant owner as consideration for the grant of the

68 See Chapter 1, nn 53-54 and accompanying text. 69 This is the second of Dr Cheshire’s four requirements for an easement, as expounded in Re Ellenborough Park [1956] 1 Ch 131, 163-164. 70 (2002) 11 BPR 20,605. 71 Ibid 20,606-20,607 [8]-[10]. 72 (1863) 2 H&C 121. 73 (2002) 11 BPR 20,605, 20,610-20,611, 20,613 [30]-[34], [43]-[44].

Chapter 3 100 easement. And, conversely, the dominant owner will only pay that consideration if she or he believes that the benefit that she or he receives from the grant of the easement exceeds the cost of paying the consideration. Accordingly, the law of express easements is about satisfying people’s preferences rather than benefiting land as an abstracted entity. The function performed by the requirement that the easement must accommodate the dominant land is to limit the type of preferences that can be advanced by the consensual creation of easements: only the preferences of the dominant owner that are also seen as being sufficiently connected to the land can be entrenched by an easement. The preferences of the dominant owner that cannot be so related to the land can only be advanced through contract. But to say that it is the dominant land, rather than its owner, that benefits from the grant of an easement makes as much sense as asserting that it is the contract, rather than the parties to it, that benefit from its creation.

The fact that the law makes a distinction between interests that can be advanced through the institution of property, and those that can be advanced through the institution of contract, is a function of public policy as Bryson J made clear at first instance in Clos Farming Estates Pty Ltd v Easton.74 His Honour explained that the common law strictly controls the type of property interests—including easements— that can be created. This limitation, which has been styled the numerus clausus principle,75 allows people to more easily ascertain the rights and obligations that attach to a particular parcel of land. Because property rights operate in rem, rather than being limited by the contractual doctrine of privity, without the limitation on the types of property rights that can be created it would be extremely difficult for people to know the encumbrances that burden a particular parcel of land.76 Thomas Merrill and Henry Smith explain that the principle serves to limit transaction costs and

74 (2001) 10 BPR 18,845. 75 Bernard Rudden, ‘Economic Theory v Property Law: The Numerus Clausus Problem’ in John Eekelaar and John Bell (eds) Oxford Essays in Jurisprudence (1987). 76 (2001) 10 BPR 18,845, 18,853-18,854 [28]-[30], citing Keppell v Bailey (1834) 2 Mylne & Keen 517, 536 -537, 39 ER 1042 (Lord Brougham LC). Although this justification holds less weight in the context of a comprehensive system of land registration, such as the Torrens system, where the content of a registered interest in land can be easily ascertained through a search of the register. See Brendan Edgeworth, ‘Profits à Rendre: a Reincarnation?’ (2006) 12 Australian Property Law Journal 200, 209.

Chapter 3 101 promote exchange, by limiting the burden on third parties in ascertaining and processing the scope of another’s property rights:77

By permitting a significant number of different forms of property but forbidding courts to recognize new ones, the numerus clausus strikes a balance between the proliferation of property forms, on one hand, and excessive rigidity on the other. Proliferation is a problem because third parties must ascertain the legal dimensions of property rights in order to avoid violating the rights of others and to assess whether to acquire the rights of others. Permitting free customization of new forms of property would impose significant external costs of third parties in the form of higher measurement costs.

We have seen that the accommodation requirement does not mean that express easements have nothing to do with the respective preferences of the owners of the dominant and servient land. The existence of the accommodation requirement for court-imposed easements does not alter the fact that in determining whether an easement should be imposed under s 88K, what the court is assessing is the impact— both beneficial and detrimental—that the easement would have upon the putative dominant and servient owners. If the joint benefit outweighs the joint detriment, the easement will be granted; if not, no grant is made.

B The Hodgson-Hamilton Debate At its heart, the enquiry as to whether the proposed easement is reasonably necessary for the effective use or development of the putative dominant land involves a comparison between the use and development of the land that would be possible with the easement (‘State A’) and the use and development of the land that is available without the easement (‘State B’). The costs and benefits for both the putative dominant and servient owners are tallied for State A and State B respectively. This raises the question, however, as to what is the degree by which the State A must be

77 Thomas Merrill and Henry Smith, ‘Optimal Standardization in the Law of Property: The Numerus Clausus Principle’ (2000) 110 Yale Law Journal 1, 69. Also see Thomas Merrill and Henry Smith, ‘What Happened to Property in Law and Economics?’ (2001) 111 Yale Law Journal 357, 385-388.

Chapter 3 102 better than State B before it can be said that the imposition of the easement is reasonably necessary?

It has been recognised that the content of the reasonably necessary concept ‘can be construed with varying degrees of stringency’.78 It is accepted that the easement need not be ‘absolutely necessary’ for the effective use or development of the land, but that the existence of the easement must be more than merely desirable or preferable when compared to the state of affairs where no easement existed.79 The weight of authority supports Hodgson CJ in Eq’s statement in 117 York Street v Proprietors of Strata Plan 16123,80 that for the imposition of the easement to be reasonably necessary, State A81 ‘must be (at least) substantially preferable’ to State B82. This proposition has been endorsed in various cases by Justices Einstein,83 Young,84 Barrett,85 Windeyer86 and Brereton,87 by Acting Justice Foster,88 and by Macready M.89 Additionally, Douglas J has used the ‘substantially preferable’ test as the appropriate standard for the imposition of the easement under s 180 of the Property Law Act 1974(Qld).90

Standing alone in questioning the correctness of Hodgson CJ in Eq’s construction of the reasonably necessary criterion is Justice Hamilton. His Honour has said that a

78 Foster v Hidden Valley Owners’ Cooperative Society Ltd (2002) 11 BPR 20,899, 20,901 [17] (Campbell J). 79 Tregoyd Gardens (1997) 8 BPR 15,845, 15,854 (Hamilton J), endorsing the interpretation of s 180 of Queensland’s Property Law Act, 1974 by Derrington J In the Matter of an Application by Kindervater [1996] ANZ ConvR 331. Hamilton J’s statement has been approved by Windeyer J in Goodwin v Yee Holdings (1997) 8 BPR 15,795, 15,799 and by Young J in Hanny v Lewis (1998) 9 BPR 16,205, 16,209. Hamilton J has reiterated this view in Busways Management Pty Ltd v Milner (2002) 11 BPR 20,385, 20,388 [11] and in Woodland v Manly Municipal Council (No 1) (2003) 11 BPR 20,903, 20,909 [19]. 80 (1998) 43 NSWLR 504, 509. His Honour was reaffirmed by his Honour in Katakouzinos v Roufir (2000) 9 BPR 17,303, 17,307-8 [38], [41]. 81 That is, the use or development of the land possible with the easement. 82 That is, the use or development of the land possible without the easement. 83 DurackvDeWinton(1998) 9 BPR 16,403, 16,449. 84 Hanny v Lewis (1998) 9 BPR 16,205, 16,209 and Grattan v Simpson (1998) 9 BPR 16,649, 16,651. 85 Kent Street Pty Ltd v Council of the City of Sydney (2001) 10 BPR 18,757, 18,759 [12]. 86 Blulock v Majic (2001) 10 BPR 19,143, 19,148 [14]. 87 Khattar v Wiese [2005] NSWSC 1014, [26]. 88 King v Carr-Gregg [2002] NSWSC 379, [41]. 89 Debbula Pty Ltd v The Owners—Strata Plan 6964 (2003) 12 BPR 22,617, 22,620-22,620 [19]. Master Macready was exercising the powers of an Acting Judge. 90 Noyea Park Country Club [2004] QSC 197, BC200403957, [10], [14] and Lang Parade Pty Ltd v Peluso (2005) Q ConvR ¶54-623, 61,353 [23].

Chapter 3 103 finding that State A must be substantially preferable to State B should not be a precondition to a holding of reasonable necessity. To require a finding of substantial preferability would be to create a misleading gloss on the statute. Instead, the words should be given their natural meaning.91

The only case in which it can be said that the court did impose an easement when it was not satisfied that the substantial preferability criterion was met is the Queensland case of Re Seaforth Land Sales Pty Ltd’s Land (No 1). In this case, Douglas J imposed the easement having been satisfied, ‘by a somewhat narrow margin’, that it was reasonably necessary.92 On appeal, the Full Court did not comment on this aspect of Douglas J’s finding. Their Honours simply said that the appellants had not shown that the trial judge was wrong on this issue;93 that there was no reason to interfere with his findings;94; and that the finding was open on the evidence.95

An argument that the something approaching substantially preferability should be required for a finding of reasonable necessity under s 88K(1) can be found in the work of Richard Epstein. Epstein is only prepared to countenance the compulsory acquisition of property rights for private purposes where the advantage of such an acquisition is so manifest as to be undeniable. Although this may mean that some forced acquisitions that would be (marginally) efficient will not be achieved, in only allowing acquisitions that are obviously efficient the public opposition to the legislative regime that might otherwise prevail will be diminished.96 Accordingly, the substantially preferable construction of s 88K(1) can be viewed as ensuring that

91 Woodland v Manly Municipal Council (No 1) (2003) 11 BPR 20,903, 20,905-6, 20,909 [9], [19]. Also see, his Honour’s judgment in Busways Management Pty Ltd v Milner (2002) 11 BPR 20,385, 20,389 [12]. 92 [1976] Qd R 190, 195. 93 Re Seaforth Land Sales Pty Ltd’s Land (No 2) [1977] Qd R 317, 322 (Hanger CJ). 94 Ibid 327 (Stable J). 95 Ibid 331 (DM Campbell J). 96 Richard Epstein, Principles for a Free Society (1998) 241. Epstein based this conclusion in part on the operation of a legislative regime in nineteenth-century America under which land could be compulsorily acquired in order to establish privately owned power mills. That regime provided for the payment of compensation to the landowner adversely affected by the acquisition in an amount equal to the market value of the land taken plus a premium of 50%. Epstein (at 239-241) viewed this compensation premium as acting as a surrogate for a large social advantage that rendered the otherwise private acquisition valid under the American Constitution. In Part XI(A) below, we will see that no compensation premium is payable to the servient owner under s 88K(4) for the imposition of the easement. Of course, in Australia there is no constitutional limitation that a State may only authorise the acquisition of property for some public purpose.

Chapter 3 104 easements are not imposed too carelessly, thus limiting the circumstances in which the sanctity of property rights is overridden.97

Before we examine how the courts have actually conducted the reasonably necessary enquiry in s 88K cases, we should pause to note another area of apparent disagreement between Hodgson CJ in Eq and Hamilton J: whether the court should consider the reasonableness of the proposed use of the putative dominant land for which the easement is sought.

In Tregoyd Gardens v Jervis, Hamilton J said that, at least in the circumstances of that case, the court was not concerned with the reasonableness of the proposed use or development of the putative dominant land.98 Hodgson CJ in Eq took the opposing view in 117 York Street, stating that the proposed use must be reasonably necessary for all uses of the land, or at least reasonably necessary for a proposed use that is reasonable when compared to alternate uses.99 In this respect, Hamilton J was indicating a difference between s 88K and s 180 of the Queensland Property Law Act, which expressly requires that the desired use of the proposed dominant land with the proposed statutory right of user must be reasonable.100 By contrast, the effect of Hodgson CJ in Eq’s interpretation is to bring s 88K into line with the Queensland provision; not only must the easement be reasonably necessary as the means of bringing about the desired use or development of the putative dominant land, that proposed use must be reasonable as an end in itself. So, if an easement was reasonably necessary for the use of the putative dominant land as, for example, a residential dwelling, gold mine or amusement park, under Hodgson CJ in Eq’ s test the relevant court would have to assess whether this was a reasonable use, when compared to other possible uses.

97 This theme is also reflected in statements about the caution with which a court should approach a s 88K application: see above Part III(B). 98 (1997) 8 BPR 15,845, 15,854. 99 (1998) 43 NSWLR 504, 508-509. 100 (1997) 8 BPR 15,845, 15,854. Hamilton J based this divergence upon the inclusion in s 88K of the term ‘development’, which does not appear in the Queensland provision. His Honour interpreted the use of this term as referring to any development permitted by law.

Chapter 3 105 Hodgson CJ in Eq found that this requirement was satisfied in 117 York Street and in Katakouzinos v Roufir, where the proposed development was the construction of a multi-storey building up to the boundary with the putative servient land.101 His Honour’s identification of the requirement has been endorsed in other cases, which will be considered in detail in Chapter 4.102

However, it seems that the divergence of opinion between Hodsgon CJ in Eq and Hamilton J in this regard is one of form rather than substance. In Busways Management Pty Ltd v Milner, Hamilton J expressed his reservation as to the utility of a bipartite approach to the question of reasonable necessity, that is a test that requires that the proposed use of the putative dominant land made possible by the imposition of the easement be both reasonable and (substantially) preferable to those uses that are possible without the easement.103 Hamilton J went so far as to hypothesise that Hodgson CJ in Eq was in fact proposing a single barrelled test. Hamilton J did not flesh out his reasoning in this regard, and went on to apply Hodgson CJ’s bipartite approach to the reasonably necessary enquiry.104 However, it seems probable that Hamilton J’s thinking was that the existence of a separate test for the reasonableness of the proposed use of the putative dominant land is redundant. This is because the reasonableness of the prospective use of the putative dominant land would form part of the consideration of whether that use would be preferable to the use that would be possible without the easement. If the proposed use of the putative dominant land that would be made possible by the easement was not a reasonable use of the land, then it could not be said that that use of the land with the easement would be substantially preferable to the use of the land without the easement. A reasonable use must always be preferable to an unreasonable one.

101 117 York Street (1998) 43 NSWLR 504, 506, 509 (commercial building); Katakouzinos v Roufir Pty Ltd (1999) 9 BPR 17,303, 17,303, 17,307, 17,308 [1], [34], [38], [40] (residential building). 102 DurackvDeWinton(19998) 9 BPR 16,403, 16,449-16,450 (Einstein J); Blulock v Majic (2001) 10 BPR 19,143, 19,148-19149 [14] (Windeyer J); Debbula Pty Ltd v The Owners-Strata Plan 6964 (2003) 12 BPR 22,617, 22,620 [19] (Macready M). Also see Khattar v Wiese [2005] NSWSC 1014, [25]-[26] (Brereton J). 103 (2002) 11 BPR 20,385, 20,389 [12]. 104 Ibid.

Chapter 3 106 In fact, Hodgson CJ in Eq seems to have reached the same conclusion in 117 York Street, when his Honour stated: 105 If there are some possible reasonable uses or developments of the [putative dominant] land for which a proposed easement is not reasonably necessary, then it seems to me that the easement cannot be ‘reasonably necessary for the effective use or development’ of the land, at least unless there is some proposed use or development, for which the proposed easement is reasonably necessary, which is itself a reasonable use or development.

This passage is consistent with the view that the proposed use of the putative dominant land with the easement cannot be substantially preferable to the use of the land without the easement, unless that proposed use is reasonable. If there is a use of the putative dominant land that is reasonable and is possible without the easement, then no potential use of the land which requires the easement, but which would be unreasonable, can be preferable to the reasonable use of the land for which the proposed easement is not required. Accordingly, there is no room for the cumulative operation of the reasonable use requirement, although it might provide a useful filter to exclude automatically applications for the imposition of an easement based upon a potential use of the land that would be unreasonable.

That Hodgson CJ in Eq’s formally bipartite approach to the reasonably necessary enquiry can be reduced a single test of substantially preferability is demonstrated in his Honour’s treatment of s 88K(1) in Katakouzinos v Roufir Pty Ltd. His Honour saw the enquiry as boiling down to the following single question based on the preferability of contending states of affairs:106 The real question is whether there are alternatives to going ahead with the building as planned, which do not require these easements and which are such that the easements needed for the building as planned should not be considered as reasonably necessary for the effective use or development of the plaintiff’s land.

105 (1998) 43 NSWLR 504, 509 (emphasis in original). 106 (1999) 9 BPR 17,303, 17,307 [33].

Chapter 3 107 The issue of reasonableness here collapses into the issue of preferability. Additionally, the same thing occurred when Hodgson CJ in Eq addressed each of the limbs separately. In so doing, his Honour substantially relied on the same fact to satisfy both limbs. The easement to permit encroaching scaffolding would allow a larger building to be constructed than would have been possible without the benefit of the easement.107

C Reasonable Necessity and Detriment to the Putative Servient Land The reasonably necessary enquiry is thus based on a comparison between the use and development of the land that would be possible with the easement (‘State A’) and the use and development of the land that is available without the easement (‘State B’). However, this does not mean that the comparison is concerned only with the effect of the imposition of the easement upon the dominant land. The cases make clear that the court also considers the adverse effect that the easement would have on the putative servient land. In Katakouzinos v Roufir Pty Ltd, Hodgson CJ in Eq stated:108 reasonable necessity has to be assessed havingregardtotheburdenwhichthe easement would impose. In general terms, the greater burden the stronger the case needed to justify a finding of reasonable necessity.

Hamilton J endorsed this proposition in Woodland v Manly Municipal Council (No 1),109 as did Brereton J in Khattar v Wiese.110

Despite some approaches to the contrary,111 the unambiguous position of the Full Court of the Supreme Court of Queensland is that under that State’s regime the detriment that would flow to the putative servient land if the easement were imposed

107 Ibid 17,308 [40]-[41]. This will be discussed in below nn 116-117 and accompanying text. 108 (1999) 9 BPR 17,303, 17,308 [42]. 109 (2003) 11 BPR 20,903, 20,909 [19]. 110 [2005] NSWSC 1014, [27]. 111 In the earlier case of Ex parte Edward Street Properties Pty Ltd [1977] Qd R 86, 89-90, the court did conduct the reasonably necessary enquiry under s 180(1) without regard to the adverse effect of the easement on the putative servient land. It did, however, take that adverse effect into account in determining whether the putative servient owner could be compensated under s 180(3)(b). Similarly, in the later case of In the Matter of an Application of Kindervater [1996] ANZ ConvR 331, 333-334, 335, the court took into account the adverse effect of the proposed easement upon the putative servient land in determining whether the putative servient owner’s refusal was unreasonable under s 180(3)(c), rather in regard to the reasonably necessary enquiry.

Chapter 3 108 is also a key component of the reasonably necessary enquiry. In Nelson v Calahorra Properties Pty Ltd, McPherson J, speaking for the Full Court, said:112 It seems to me to be both impossible and impracticable to attempt to determine the question of what is reasonably necessary for the effective use ‘in any reasonable manner’ of particular land without having regard to the implications or consequences of such use on the other land likely to be affected by that use. A use of land that in some places, times or circumstances might be effective may nevertheless not be a use of it in a reasonable manner when considered from the aspect of the particular adjoining land and the activities conducted upon it by the owners thereof.

From an economic perspective, it is vital that the reasonably necessary enquiry takes into account the cost to the putative servient owner, as well as the benefit to the putative dominant owner, of the imposition of the easement. The only way of determining whether the imposition of the easement would be efficient, and would thus generate a transactional surplus113 that mimics the outcome of a mutually beneficial exchange, is to determine the effect upon both putative owners. If the cost of the proposed imposition to the putative servient owner is left out of the equation there is the danger that one party will be left worse off from the imposition. If the benefit of the imposition of the easement to the dominant owner is less than the cost of the imposition to the servient owner, and if the compensation paid by the successful dominant owner to the (unsuccessful) servient owner under s 88K(4) does fully compensate the servient owner, then the dominant owner will be left worse off by the imposition of the easement and the payment of compensation. If, on the other hand, the servient owner is under-compensated by the s 88K(4) payment, then it will be the servient owner who is left worse off by the imposition of the easement.

112 (1985) Q ConvR ¶54-202, 578,342 (Andrews ACJ and Demack J concurring). This approach has been applied by Wilson J In the Matter of an Application by Hodgskin and Hodgskin (1999) Q ConvR ¶54-535, 60,386 [18] and by Douglas J in Lang Parade Pty Ltd v Peluso (2005) Q ConvR ¶54-623, 61,353 [23]. 113 See above n 67 and accompanying text.

Chapter 3 109 D Examples of the Reasonably Necessary Enquiry as a Cost-Benefit Calculus We now proceed to consider some examples of how the court has gone about assessing the potential benefit to the putative dominant owner and the potential cost to the putative servient owner from the imposition of the easement as a part of the s 88K(1) enquiry. Several additional examples will be considered in Chapter 4, when we look at the question of whether the court takes a subjective or an objective view in conducting the s 88K calculus.

It will be recalled that in 117 York Street Pty Ltd v Proprietors of Strata Plan 16123,114 and in Katakouzinos v Roufir Pty Ltd,115 easements were sought to allow temporary encroachments by a crane or by scaffolding during the construction of a new building on the putative dominant land. This would allow the putative dominant owner to construct the building up to the boundary of the land, as opposed to one set back from the boundary. The larger building would result in a substantial economic benefit to the owner.

In these cases, Hodgson CJ in Eq calculated the benefit of the imposition of the easement to the putative dominant owner as follows. In 117 York Street, the grant of the easement would yield a benefit to the putative dominant owner of between $260,000 and $430,000. This was the amount that the putative dominant owner would have had to expend in additional construction costs by siting the crane inside the building as it was being constructed, as opposed to being site outside the building, as the proposed easement would allow.116

In Katakouzinos v Roufir, the grant of the easement to encroach upon the airspace of the putative servient land would enable the putative dominant owner to construct a building with seventeen rather than thirteen apartments, with four of the apartments in the larger building each having more bedrooms than they would have had in the smaller (non-easement) building.117 This would undoubtedly be much more

114 (1998) 43 NSWLR 504, 509, 511. 115 Katakouzinos v Roufir Pty Ltd 9 BPR 17,303, 13,307, 17,308 [34], [42]. 116 (1998) 43 NSWLR 504, 514. 117 (1999) 9 BPR 17,303, 17,307 [34].

Chapter 3 110 profitable for the putative dominant owner. In addition to preventing such a ‘significant loss in residential accommodation’, the imposition of the easement would also avoid the need to redesign the building at a cost of $20,000 in fees, and a delay of four to six months while a fresh development and building approval was secured. Such a delay would render the project financially marginal.118

After cataloguing the benefits that would accrue to the putative dominant owner in each case through the imposition of the easement, Hodgson CJ in Eq then had to consider the detriment that would be incurred by the putative servient owner if the easement were imposed. His Honour characterised the detriment that each putative servient owner would suffer by the encroachment during the construction as temporary and, although not insignificant,119 not heavy.120 As the respective benefits of the imposition of the easement significantly outweighed the respective costs, the easement sought was granted in both cases.

A recent example of the application of a cost-benefit analysis in respect of proceedings under the equivalent Queensland regime121 is Noyea Park Country Club Pty Ltd v Body Corporate for Noyea Riverside Village.122 The putative dominant owner in this case sought a right of way over the putative servient land that would provide direct access to the putative dominant land by means of a driveway on the putative servient land. The existing means of access to the putative dominant land was by a circuitous route that was located, in part, around various boundaries of the putative servient land. The court enumerated the benefits of granting the right of way in terms of remedying the following problems: • the existing route was prone to flooding; • the existing route was circuitous and disrupted the amenity of the putative servient land; • the existing route was not suitable to permit a higher density use of the putative dominant land.

118 Ibid 17,308 [41]. 119 Katakouzinos v Roufir Pty Ltd (1999) 9 BPR 17,303, 17,308 [43]. 120 117 York Street Pty Ltd v Proprietors of Strata Plan 16123 (1998) 43 NSWLR 504, 511. 121 Property Law Act 1974 (Qld) s 180. 122 [2004] QSC 197, BC200403957.

Chapter 3 111 Conversely, the court had this to say about the alleged costs of imposing the new easement: • the fear that the easement would lead to an increased number of strangers crossing the putative servient land was unfounded, as the existing means of access involved people travelling a much greater distance in more secluded parts of the putative servient land; and • the slight increase in traffic movement along the already existing driveway would not involve a significant risk to pedestrians.

Taking the benefits and costs together, the court found that the use of the putative dominant land with the easement would be substantially preferable to its use without the easement and that the grant would not unnecessarily diminish the proprietary rights of the putative servient owner. The easement was accordingly granted.123

At this stage we should note a statement by Windeyer J that might be regarded as a judicial denial that the court does engage in a cost-benefit analysis when conducting the reasonably necessary enquiry under s 88K(1). In Blulock Pty Ltd v Majic,124 Windeyer described the purpose of s 88K as allowing the wishes of the putative servient owner to be free of an easement to be overborne in appropriate cases so as to allow land to be used to its fullest extent. His Honour then said of the process that ‘it is not necessarily a case of weighing up competing interests ...’.125

If by this statement, Windeyer J meant that the court does not conduct a cost-benefit analysis in carrying out the reasonably necessary enquiry, then, with respect, the assertion is incorrect. The cases we have examined clearly establish that court looks at the benefit that would flow to the owner of the putative dominant land, and the detriment that would flow to the owner of the putative servient land, through the imposition of the easement. In dicta in Blulock, Windeyer J himself noted the difference in the court’s preparedness to impose easements under s 88K depending on the magnitude of the adverse impact of the grant on the putative servient land. His

123 Ibid [27]. 124 (2001) 10 BPR 19,143. 125 Ibid 19,150-19,151 [21].

Chapter 3 112 Honour identified that the court will readily grant easements of a temporary duration, and drainage easements that because of their location will have little effect on the use, enjoyment and redevelopment of the putative servient land. By contrast, the court is more wary in respect of applications to impose easements for the flow of light and air, which can significantly affect the putative servient land’s potential for redevelopment.126 Such matters need to be taken into account in determining whether the potential benefit that would accrue to the putative dominant owner should be realised through the imposition of the easement. This does require a weighing of costs and benefits.

Finally, we must understand that the court conducts the cost-benefit analysis on an intuitive or impressionistic basis. The court does not usually assign a specific monetary value to both the costs and benefits that would arise from the imposition of the easement. Of course, where the easement is imposed and compensation is awarded to the servient owner for the loss suffered through the imposition of the easement under s 88K, that quantum of compensation would be the cost of imposing the easement. However, in the three cases that we have considered, the issue of the appropriate amount of compensation payable was dealt with after the reasonably necessary enquiry had been conducted and resolved in favour of the putative dominant owner.127 Further, as we will see later in this chapter,128 in some cases the court imposed the easement without finally settling the amount of compensation payable.

Accordingly, the informal methodology of the court in conducting the cost-benefit analysis stands in contrast to the definite and all-encompassing mathematics that we see in the work of economists when they approach the question about the efficient

126 (2001) 10 BPR 19,143, 19,150 [20]. Presumably, the temporary easements that his Honour had in mind were easements for the encroachment of scaffolding or cranes needed in the construction process. 127 117 York Street Pty Ltd v Proprietors of Strata Plan 16123 (1998) 43 NSWLR 504, 512 (easement found to be reasonably necessary), 513-517 (assessment of compensation); Katakouzinos v Roufir Pty Ltd (1999) 9 BPR 17,303, 17,308 [43] (easement found to be reasonably necessary), 17,309-17,311 [57]-[73] (assessment of compensation); Noyea Park Country Club Pty Ltd v Body Corporate for Noyea Riverside Village [2004] QSC 197, BC200403957 [14] (easement found to be reasonably necessary), [19]-[20] (consideration of compensation issue). 128 See below nn 225-228 and accompanying text.

Chapter 3 113 allocation of resources in a particular context.129 We must recognise, of course, that the court is constrained in its approach by the evidence that is put before it by the parties, and hence it lacks the omniscience of the academic economist who deals with hypothetical scenarios. Given that the court has to deal with actual disputes with limited information and within a limited time frame, its intuitive approach might be more efficient than employing a more exact, technical approach in which all costs and benefits. Such an approach would certainly be more costly and time consuming. One might venture to say that the costs of a more costly cost-benefit calculus would outweigh the benefits.

E Characteristics of the Court’s Reasonably Necessary Enquiry We now highlight four aspects of the court’s approach to the reasonably necessary enquiry and note their economic significance. These concern: (1) the time at which reasonable necessity is ascertained; (2) the relevance of the adverse effect that the proposed easement would have on third parties; (3) the significance of the current mode of user of the putative servient land; and (4) the relevance of other alternatives to the imposition of the easement sought. The first two of these questions will be noted briefly, as they intersect with other topics that are dealt with elsewhere in this chapter. The third and fourth questions will be considered in detail in this section.

1 When is Reasonable Necessity Assessed? Hodgson CJ in Eq has made clear that whether the easement sought is reasonably necessary for the effective use or development of the putative dominant land is to be considered is the time of the proceedings.130 As we have seen in our discussion of 117 York Street and Katakouzinos v Roufir Pty Ltd, the calculation of the benefits to the putative dominant owner of the imposition of the easement will include the avoidance of costs that would otherwise have been incurred by that party if the easement were not imposed. And this is true even though those costs would be incurred on the assumption that the putative dominant owner has acted in a particular

129 See, for example, Ronald Coase, ‘The Problem of Social Cost’ (1960) 3 Journal of Law and Economics 1 reprinted in Ronald Coase, The Firm, the Market and the Law (1988) 97-104; Robert Cooter and Thomas Ulen, Law and Economics (2nd ed, 1997) 97- 100. 130 117 York Street Pty Ltd v Proprietors of Strata Plan 16123 (1998) 43 NSWLR 504, 511. Katakouzinos v Roufir Pty Ltd (1999) 9 BPR 17,303, 17,307 [39]. Also see Pacific Coast Investments Pty Ltd v Cowlishaw (2005) Q ConvR ¶54-637, 61,485 [25].

Chapter 3 114 way because he or she has assumed that the relevant easement would be obtained. Because of this, the court retains a discretion to refuse to impose the easement where the reasonable necessity of the easement is brought about because of the unreasonable conduct of the putative dominant owner.131

2 Adverse Effect on Third Parties As we will see later in this chapter,132 there are cases in which the potential adverse impact of the proposed easement upon unidentified members of the public was considered under the s 88K(2)(a) requirement. Additionally, in McConachie v Manly Council,133 the court considered the possible adverse effect of the proposed easement upon a neighbouring landowner who had a right of way over the putative servient land in order to see if compensation should be paid to that landowner under s 88K(4). That case is discussed in our consideration of that provision later in this chapter.134

A case which differs from these two scenarios is Hanny v Lewis,135 which examined the potential adverse effect of the proposed easement upon identified persons who did not have a proprietary interest in the putative servient land. In this case, Young J refused to impose an easement for an inclinator because its proposed location on the putative servient land would infringe upon the privacy of a neighbour of the putative servient owner, rather than upon the privacy of the putative servient owner.136 This case will be examined in detail in Chapter 4, Part II(B), in our discussion of whether the cost-benefit calculus through which the reasonably necessary enquiry is conducted is based upon the actual (subjective) or imputed (objective) preferences of the relevant parties.

As we have said, most of the cases dealing with the significance of assessing the adverse effect of the easement sought upon third parties involve questions about inconsistency with the public interest under s 88K(2)(a). Because of this, we will defer our consideration of the economic reasons for taking into account the interests

131 See above nn 48-53 and accompanying text. 132 See below nn 195-196 and accompanying text. 133 [2002] NSWSC 434. 134 See below nn 294-295 and accompanying text. 135 (1998) 9 BPR 16,205. 136 Ibid 16,208-16,209.

Chapter 3 115 of third parties under the reasonably necessary enquiry, until our discussion of that provision.

3 Significance of the Current Mode of User of the Putative Servient Land There are three contexts in which the court has used the fact that the putative servient land is being used in a particular manner to support the imposition of the proposed easement. These contexts are: firstly, where the easement is sought to regularise the putative dominant owner’s pre-existing, but unauthorised, use of the putative servient land; secondly, where the easement would give the putative dominant owner the right to use the putative servient land in the same manner as it is being used by third parties; and thirdly, where the easement would give the putative dominant owner the right to use the putative servient land in the same manner as it is being used by the putative servient owner. We will consider each of these situations in turn.

There have been numerous cases in which an easement was imposed to legally endorse the putative dominant owner’s pre-existing factual enjoyment of the putative servient land. For example, in the Queensland case of Nelson v Calahorra Properties Pty Ltd,137 the putative dominant owner used a laneway that ran across neighbouring parcels of land in order to gain access to the rear of the business premises on her land. The putative dominant owner had used the laneway in this manner since 1977 in the belief—shared by the respective putative servient owners— that the putative dominant land had the benefit of an easement over the laneway. In 1984 it was discovered that no such easement existed for the benefit of the putative dominant land, and after failed negotiations with the putative servient owners, the putative dominant owner applied for the imposition of an easement under s 180.138 In upholding the trial judge’s imposition of the easement, the Full Court stated that it in conducting the reasonably necessary enquiry it was appropriate to have regard to the putative dominant owner’s pre-existing factual, albeit unauthorised, use of the laneway for a number of years. In speaking for the Full Court, McPherson J said:139

137 (1985) Q ConvR ¶54-202. 138 Ibid 57,338-57,340. 139 Ibid 57,342.

Chapter 3 116 The circumstances that a supposed but legally non-existent right has been persistently exercised in the past with the acquiescence of other land owners provides some evidence that the corresponding use of the land is both effective and can take place in a reasonable manner.

In New South Wales there have been several cases in which the court has, as part of its cost-benefit analysis that led to the imposition of the proposed easement, relied on the fact that the easement would regularise the status quo.140 Firstly, there are a number of cases in which a right of way has been imposed over the putative servient land where that land had been used as a de facto means of providing access to the putative dominant land. Additionally, in King v Carr-Gregg,141 the easement sought was one for drainage through pipes that had been in place and through which the drainage had been effected for a period of 25 years. In finding that the easement was reasonably necessary, Forster AJ relied on the fact that there was no need to carry out any work on the putative servient land to install the pipes and that the drainage through the pipes had not caused any apparent harm to the putative servient land in the past.142 Similarly, in Busways Management Pty Ltd v Milner,143 Hamilton J imposed an easement permitting the encroachment of footings of the building on the putative dominant land into the subsoil of the putative servient land. In finding that the adverse impact of imposing the easement upon the putative servient owner would be ‘absolutely minimal’, his Honour pointed out that the encroachment was longstanding and had not yet caused any demonstrated inconvenience.144

If we are to use efficiency as a yardstick in the imposition of easements under s 88K, then this approach is worthwhile. The fact that the putative dominant owner has made longstanding use of the putative servient land in a particular manner without

140 Re Permanent Trustee Australia Ltd (1997) 8 BPR 15,551, 15,553 (laneway used since 1930s); Marshall v Council of the City of Wollongong (2000) 10 BPR 18,163, 18,164 [6] (use of track for in excess of 50 years); Kent Street Pty Ltd v Council of the City of Sydney (2001) 10 BPR 18,757, 18,759 [13] (use of laneway for as long as the building on putative dominant land has existed). 141 [2002] NSWSC 379. 142 [2002] NSWSC 379, [42], [59]. 143 (2002) 11 BPR 20,385. 144 (2002) 11 BPR 20,385, 20,389 [13]. Another case in which an easement authorising a longstanding encroachment was imposed is Pasade Holdings Pty Ltd v Sydney City Council (No 4) [2003] NSWSC 1220, [13] (encroachment by window ledges of a heritage listed building into the airspace of other land). This case is considered in Chapter 4, nn 116-118.

Chapter 3 117 objection by the putative servient owner suggests that the putative servient owner does not place a very high value on his or her land being free from that use. And as the putative owner does not regard the existing factual circumstances as being unduly burdensome, it is probable that formalising this arrangement would not truly burden the putative servient owner to any significant degree. Accordingly, only a low value should be entered into the column listing the costs that would be incurred if the easement were imposed.

Similarly, in addition to the current use made of the putative servient land by the putative dominant owner, the court also has regard to the current use of the putative servient land made by third parties. That is, if the putative servient land is currently burdened by an easement in favour of a third party, the court regards this as a factor in favour of the imposition of a similar easement in favour of the putative dominant owner. There have been several Queensland cases in which the court imposed an easement in favour of the putative dominant land where the site of that easement was the subject of a pre-existing right of way in favour of other land.145 Thesameresult was achieved in the New South Wales context in McConachie v Manly Municipal Council.146 We must, however, add a caveat: this outcome assumes that the imposition of the later easement does not substantially alter the burden upon the putative servient land. In Re Seaforth Land Sales Pty Ltd’s Land (No 1),147 Douglas J imposed a right of carriageway under s 180 in addition to the existing right of carriageway. His Honour was content to do so because although this would cause mild inconvenience to the putative servient owner by slightly increasing the volume of traffic on its land, it would not otherwise create additional difficulties. Douglas J indicated that he would not impose the additional easement if to so would create new and different problems for the putative servient owner, such as the inability for

145 Re Seaforth Land Sales Pty Ltd’s Land (No 1) [1976] Qd R 190, 191-192, affirmed in Re Seaforth Land Sales Pty Ltd’s Land (No 2) [1977] Qd R 317; Nelson v Calahorra Properties Pty Ltd (1985) Q ConvR ¶54-202, 57,340; Re Towerpoint Pty Ltd & Re Diridge Pty Ltd (1991) Q ConvR ¶54-389, 58,951-58,952; In the Matter of an Application by Hodgskin and Hodgskin (1999) Q ConvR ¶54-535, 60,386 [21]. 146 [2002] NSWSC 434 [2]. 147 [1976] Qd R 190.

Chapter 3 118 vehicles to pass each other on the right of carriageway, where no such difficulty existed before.148

The most direct articulation of why the existence of an easement in favour of other land should be relevant to whether an easement benefiting the putative dominant land should be imposed is to be found in Nelson v Calahorra Properties Pty Ltd.149 In that case, McPherson J stated that the pre-existing use (exploitation) of the putative servient land by a third party, in the same manner as the use (exploitation) proposed by the putative dominant owner, is evidence that the proposed use (enjoyment) of the putative dominant land can take place in a reasonable manner, so far as the adverse impact on the putative servient land is concerned.150

It might be thought that the court, in construing the pre-existence of an easement in favour of a third party as evidence of the reasonableness of the putative dominant owner’s intended use, must believe that the putative servient owner does not in truth oppose that use to any great degree. We must note, however, that it makes little difference to the court’s position in this context if the putative servient owner does oppose the continuation of the pre-existing easement. In Re Towerpoint Pty Ltd & Re Diridge Pty Ltd, the putative servient owner not only opposed the proposed imposition of the easement in favour of the putative dominant owner under s 180, but also applied for the statutory extinguishment of the existing easement in favour of the third party.151 In imposing the additional easement and refusing to extinguish the original one, Thomas J clearly indicated that he was not really concerned with the magnitude of putative servient owner’s actual dissatisfaction with the existing and prospective easements. Rather his Honour’s concern was with whether that dissatisfaction was reasonable in the circumstances of the case. This issue of whether the court is concerned with the actual or reasonable preferences of the parties is dealt with in detail in Chapter 4.

148 [1976] Qd R 190, 194-195. 149 (1985) Q ConvR ¶54-202. 150 Ibid 57,342, Andrews ACJ and Demack J concurring. The parenthesised terms have been added to clarify his Honour’s meaning in this passage. 151 (1991) Q ConvR ¶54-389, 58,954.

Chapter 3 119 Finally, we note that in certain circumstances the court is inclined to impose an easement where the putative dominant owner intends to use the putative servient land in the same manner as the putative servient owner is using its land. In the Matter of an Application by Kindervater,152and in Noyea Park Country Club Pty Ltd v Body Corporate for Noyea Riverside Village,153 the court imposed a right of carriageway in favour of the putative dominant land across an established driveway on the putative servient land that was being used as such by the putative servient owner. Again, this is an example of how the court extrapolates from the fact that the putative servient land is currently being used in a particular manner to conclude that the proposed use of the putative servient land by the putative dominant owner in the same manner would be reasonable. However, the same caveat would apply in this context as in that of pre-existing easements in favour of third parties. The easement would only be imposed if to do so would not create a new and significant burden upon the putative servient owner.

Tacking stock, we have seen that in numerous cases the putative dominant owner has sought an easement to use the putative servient land in the same manner as the putative dominant owner, a third party or the putative servient owner is currently using it. In these cases, the court uses this fact in a heuristic manner as indicating that easement sought is reasonably necessary, in so far as it adverse impact upon the putative servient land is concerned.

4 Existence of Alternative to the Easement Sought We have said that the reasonably necessary enquiry boils down to a cost-benefit analysis comparing (a) the state of affairs in which the easement sought exists, with (b) the state of affairs in which the easement sought does not exist. This is not to say, however, that the only relevant comparison is between the state of affairs where the easement exists and the state of affairs that currently exists. Instead, the court is concerned to ascertain whether there is any state of affairs that is preferable—in terms of the costs and benefits that accrue to the putative dominant and servient owners—to that which would exist if the proposed easement were granted. This

152 [1996] ANZ ConvR 331, 334. 153 [2004] QSC 197, BC200403957 [3].

Chapter 3 120 means that even if the state of affairs that would exist if the easement were granted is preferable to the status quo, the easement sought will not be imposed if there is some other state of affairs that is preferable to the state of affairs with the easement. As we will see, in most cases this means that the court will refuse to impose an easement, although in a few cases the court has imposed an easement, but one that is less burdensome upon the putative servient owner than the easement sought.

Subject to the qualification to be noted in our discussion of s 88K(4) and (5), an economic reading of what the court is doing in this context is seeking an outcome that is both Pareto superior to the status quo and Pareto optimal, rather than one that is simply Pareto superior to the status quo. A Pareto superior outcome is one in which the parties are moved from the status quo (S1), to another state of affairs (S2), so that the move to S2 leaves at least one of the parties better off than they were in S1, and neither of the parties worse off in S2 than they were in S1. By contrast, a Pareto optimal outcome is being in a state of affairs from which a Pareto superior move is impossible. So even if S2 is Pareto superior to S1, S2 is not Pareto optimal if another state of affairs (for example, S3) is Pareto superior to S2.154

Pareto superiority and Pareto optimality are measures of efficiency. It will be recalled that we have defined an allocation of a resource as efficient if the resource is held by the party who values it the most.155 If S2 is Pareto superior to S1, then the allocation of resources in S2 is more efficient than their allocation in S1, as no party prefers S1 more than S2. Whether S2 is the most efficient state of affairs depends upon whether S2 is Pareto optimal If S3 is Pareto superior to S2, then the allocation of resources in S2 is not (the most) efficient (possible) as at least one of the relevant parties prefers S3 to S2.156

We now apply this scheme to the reasonably necessary enquiry under s 88K(1). Firstly, let us assume that the state of affairs (T2) that would prevail if the easement

154 See Jules Coleman, ‘Efficiency, Utility, and Wealth Maximization’ (1980) 8 Hofstra Law Review 509 512-513. 155 Chapter 1, nn 53-54 and accompanying text. 156 Jeffrie Murphy and Jules Coleman, Philosophy of Law (1990) 182-184; Frank Stephen, The Economics of the Law (1988) 41-43.

Chapter 3 121 were granted and appropriate compensation and costs were paid by the putative dominant owner to the putative servient owner under s 88K(4) and (5), is Pareto superior to the current state of affairs (T1). This is because the putative dominant owner would be better off in T2 than in T1, and the putative servient owner would be no worse off in T2 than in T1. Assume further that there is another state of affairs (T3) in which the easement is not imposed (and no payment made to the putative servient owner), but which is nevertheless Pareto superior to T2. This is because either (or both) of the putative dominant and servient owners is better off in T3 than in T2, and neither owner is worse off in T3 than in T2. In such circumstances, the court does not impose the easement because the imposition of the easement (and payment of compensation) would not be Pareto optimal.

We now examine the s 88K cases that support this thesis. Firstly, we look at the cases in which the easement sought was refused outright, because the court identified a preferable alternative that did not require an easement. Secondly, we consider the cases in which the court does impose an easement, but not exactly the easement that was the subject of the s 88K application.

There have been two cases in which an application for the imposition of a right of way under s 88K was rejected because the court identified a way in which access could be achieved without the imposition of the easement. In O’Mara v Gascoigne,157 the putative dominant owner sought the imposition of a right of way over the putative servient land in order to gain access to a shed used in the putative dominant owner’s business. Hulme J refused to impose the easement because it was possible for the shed to be altered so as to allow access to it from the front of the putative dominant land, rather than from across the putative servient land. His Honour did so in the face of the putative dominant owner’s submission that this option should not be pursued, as the cost to him of making the relevant alterations to the shed would be between $36,000 and $39,000. However, Hulme J rejected this submission, stating that even accepting that this amount was correct, it did not seem ‘unduly onerous’ having regard to previous alterations made by the putative

157 (1996) 9 BPR 16,349.

Chapter 3 122 dominant owner to the shed to take advantage of the permissive access across the putative servient land.158

A similar result occurred in Grattan v Simpson,159 in which the putative dominant owners sought the imposition of an easement across the putative servient land in order to provide access to their rural property from a public road. Young J refused to impose the easement as an alternate means of access could be created without the need for the easement at a cost to the putative dominant owner of $10,000.160

It must be acknowledged that in these two cases the court did not expressly compare (a) the cost to the putative dominant owner of achieving access with the easement with (b) the cost to the putative servient owner of imposing the easement.161 A strict application of the Pareto superior and Pareto optimal criteria to this aspect of the reasonably necessary enquiry would require such a comparison. This is because if the cost to the dominant owner of achieving an alternate means of access would exceed the cost to the putative owner of imposing the easement, the alternate means of securing access would not be Pareto superior to the imposition of the easement; in fact the opposite would be true. The putative dominant owner would prefer to have the easement imposed and pay the appropriate amount of compensation and costs under s 88K (4) and (5), than to pay the (higher) cost of securing alternate access without the easement. Having received appropriate compensation and costs, the putative servient owner would be no worse off if the easement were imposed than if it were not imposed (and no payment of compensation and costs received). In such a case, imposing the easement would be Pareto superior to the alternative, and in the absence of any better alternative, Pareto optimal as well.

158 Ibid 16,358. O’Mara can be contrasted with the Queensland case of In the Matter of an Application by Kindervater, in which Derrington J imposed an easement under s 180 of the Property Law Act 1974 (Qld) in order to provide road access to an otherwise inaccessible carport on the putative dominant land. In so doing, Derrington J stated that the only issue was whether there was alternate access to the existing carport, and that it was irrelevant that there would be access to a carport constructed on a different part of the putative dominant land: [1996] ANZ ConvR 331, 334. 159 (1998) 9 BPR 16,649. 160 Ibid 16,651. 161 In O’Mara v Gascoigne, Hulme J did not accept the evidence put forward by the putative dominant owner, and thus made no finding, as to the adverse effect that the imposition of the easement would have on the putative servient land. See (1996) 9 BPR 16,349, 16,359.

Chapter 3 123 Having said this, in determining whether the costs of effecting access without the easement would be reasonable, the court in O’Mara v Gascogne and Grattan v Simpson, can be regarded as engaging in an impressionistic form of comparison between the costs of the competing means of access. In Grattan v Simpson, Young J said:162 The cases show that the mere fact there is some other means of access to the property does not of itself preclude an order being made under [s 88K]. However, where there are alternate means of access the evidence must show that in order to appropriate someone else’s property [by imposing an easement] there must be a considerable advantage in obtaining the easement rather than developing an alternate access.

This passage in particular, and the general attitude taken by the court as to the reasonableness of the costs of achieving access, is consistent with the court being cognisant of the need to determine whether the presence of an alternate means of access is preferable to imposing the easement. If the court is to make a principled determination, then it must, however intuitively, take into account whether the cost of requiring the putative dominant owner to gain access without an easement is too high, when compared to the adverse effect that the easement would have on the putative servient land, which is in any case is to be compensated.

This economic reading of the cases is fortified when equivalent Queensland cases are examined. In these cases the court did impose an easement despite the putative dominant owner being able to create an alternative means of access without the easement. In these cases, however, the cost to the putative dominant owner of creating such access was seen as unreasonable. In Nelson v Calahorra Properties Pty Ltd, the easement was granted because the cost of securing an alternate means of access to the putative dominant land involved the demolition of a building at a cost of $28,000 and thus reducing the value of the land by $80,000. Compensation of $12,000 was awarded to each of the owners of the four parcels of land over which

162 (1998) 9 BPR 16,649, 16,551.

Chapter 3 124 the easement was imposed.163 This meant that the imposition of the easement was a more cost-effective way of achieving access to the putative dominant land than demolishing the building.

Similarly, In the Matter of an Application by Hodgskin and Hodgskin, the easement sought was imposed because the alternative means of access to the putative dominant owners’ parcel of rural land would require the construction of a road at a cost that would impose on the putative dominant owners ‘a very substantial financial burden out of all proportion to the unimproved value’ of their land.164 Although Wilson J made no finding as to the exact cost, an amount of $20,000 was put forward by the putative servient owner, and an amount of $300,000 by the putative dominant owners.165 The issue of the appropriate amount of compensation payable on the imposition of the easement was adjourned, with the putative dominant and servient owners producing evidence of loss of $4,050 and $11,360 respectively.166

Taken together, these right of way cases from New South Wales and Queensland show that the potential availability of access without the need to impose an easement is relevant to the reasonably necessary enquiry. However, in deciding whether the ability to secure such access precludes the imposition of the easement sought, the court compares the cost to the putative dominant owner of creating alternate access and the cost to the putative servient owner if the easement were imposed. This comparison is done impressionistically, without definite numerical values being assigned to the competing costs, with the court deciding what is reasonable in the circumstances of each case.

Where the easement sought under s 88K is a drainage easement, the consideration of alternatives takes the form of a comparison between a gravity drainage system through pipes, for which the easement is required, and an electric pump-out system,

163 (1985) Q ConvR ¶54-202, 57,340-57,341, 57,343. Also see Re Towerpoint Pty Ltd & Re Diridge Pty Ltd (1991) Q ConvR ¶54-389, 58,951, where Thomas J dismissed the alternative of demolishing part of the existing premises on the putative dominant land as ‘uneconomic and wasteful, particularly given the presence of the existing rear laneway’ on the putative servient land. 164 (1999) Q ConvR ¶54-535, 60,386 [20]. 165 Ibid 60,383, 60,384 [11], [13]. 166 Ibid 60,384, 60,387 [16], [24].

Chapter 3 125 for which an easement is not required.167 As we will see in our discussion of the relevant cases in Chapter 4, the court usually follows the decision of the local council as to which of these alternatives is preferable.168

A very instructive case dealing with the consideration of alternative means by which the proposed use of the putative dominant land can be achieved without the imposition of an easement is Blulock Pty Ltd v Majic. In this case the putative dominant owner sought the grant of an easement for the flow of light and air over the putative servient land in order to fulfil a condition imposed by the relevant council for its consent to the conversion of an existing building into residential units.169 Windeyer J said that the proposed use of the building for residential accommodation was a reasonable use of the land, thus satisfying the first leg of Hodgson CJ in Eq’s construction of the reasonably necessary test.

However, his Honour held that the putative dominant owner had not provided any evidence that it would not be possible to reconstruct the building—for example, by setting back the upper part of the building—so that the easement sought need not be imposed. This meant that the putative dominant owner had not established that the easement was reasonably necessary.170 Although the first limb of Hodgson CJ in Eq’s construction was satisfied, the second limb was not. Because the putative dominant owner had not shown that the proposed conversion of its building could not occur without the easement, it cannot be said that the use and development of the land with the easement was substantially preferable to that use and development without the easement.

Blulock demonstrates that a s 88K application may not be granted if there is evidence before the court of a way the intended use of the dominant land could be realised without the need for the easement. The tenor of Windeyer J’s judgment is that in these circumstances it is not sufficient for the putative dominant owner to remain

167 Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845, 15,854; King v Carr-Gregg [2002] NSWSC 379 [43] -[57]; Woodland v Manly Municipal Council (No 1) (2003) 11 BPR 20,903, 20,912 [30]-[31]. 168 See Chapter 4, nn 68, 100 and 147 and accompanying text. 169 (2001) 10 BPR 19,143, 19,143-19,146 [1]-[8]. 170 Ibid 19,148-19,149 [14]-[15].

Chapter 3 126 silent on this issue; rather, if the application is to succeed, the putative dominant owner must present some evidence that the desired end cannot be reached at a reasonable cost without the imposition of the easement.

We have looked at the cases in which the court refused to impose an easement because there existed another way in which the proposed use of the putative dominant land could be achieved without the easement, in circumstances where the cost to putative dominant owner of pursuing the alternative would be reasonable. We now need to note the few cases in which the court did impose an easement, but not to the fullest possible extent.

In DurackvDeWinton,171 the putative dominant owner sought under s 88K the widening of an existing right of way for vehicular access. The application was for a widening of the right of way along its full length or, in the alternative, for a widening of the right of way along part of its length. Einstein J held that only the putative dominant owner’s alternate application should succeed, as this limited widening was reasonably necessary for the purposes of s 88K(1).172 The limited widening would allow a vehicle smaller in size than an 85-percentile car ‘to negotiate [access to the dominant land] without extreme difficulty.’173 Presumably, widening the easement along its full length was not required for this purpose.

In Busways Management Pty Ltd v Milner,174 the court imposed an easement authorising the continued encroachment of the footings of the putative dominant owner’s building into the subsoil of the putative servient land. During the course of the hearing, the putative dominant owner had sought to enlarge the application for the easement to include the right to enter the putative servient land to maintain the footings. Hamilton J rejected this part of the application, holding that such a right was not reasonably required. Firstly, the footings of the building could be removed at any time without damage to the building. Secondly, such a right of entry ‘might impair the [putative servient owner’s] rights of use (including future development) in

171 (1998) 9 BPR 16,403. 172 Ibid 16,449-16,450. 173 Ibid 16,449. 174 (2002) 11 BPR 20,385.

Chapter 3 127 a way which the easement [without the right of entry] does not.’175 This case provides a very clear example of the court analysing the costs and benefits to both the putative dominant and servient owners associated with a potential range of easements, rather than confining the calculus to a comparison between the specific easement sought and the status quo.

Finally, in Pasade Holdings v Sydney City Council (No 4), Hamilton J imposed an easement that permitted the continuing encroachment into the putative servient owner’s airspace of, among other things, a sprinkler system attached to the putative dominant owner’s building. In so doing, his Honour said:176 Bearing in mind the confiscatory nature of the statute, it is important in my view that the easements should be restricted to the minimum necessary to accommodate the existing encroachments. I am not minded, for instance, to grant an easement over an envelope extending for some distance out from the southern side of the building to accommodate some future sprinkler or fire protection system.

These cases in which an easement was granted are consistent with the application of the Pareto optimality criterion. Although the state of affairs that would exist with imposition of the easement of a wider scope (S2) might be Pareto superior to the status quo (S1), if the state of affairs that would exist with the imposition of an easement of a narrower scope (S3) would be Pareto superior to S2, then the narrower easement would be imposed: S2 is not Pareto optimal. This situation would occur when the benefit that would accrue to the putative dominant owner through the imposition of the wider easement (rather than the narrower one) would be less than the detriment that would flow to the putative servient owner through the imposition of wider easement (compared to the narrower one). In such a case, the additional compensation that the putative dominant owner would have to pay to the putative servient owner for the imposition of the wider easement (rather than the

175 Ibid 20,392 [24]. 176 [2003] NSWSC 1220 [17]. The same reasoning appears to underpin Campbell J’s decision in North v Marina, where his Honour imposed an easement permitting the encroachment of the waterproofing of a wall. His Honour limited the width of the easement to 2 cm beyond the face of the wall: (2003) 11 BPR 21,359, 21,380 [91].

Chapter 3 128 compensation payable for the narrower one), would mean that the putative dominant owner would prefer the imposition of the narrower easement, while the putative servient owner would be indifferent to which easement would be imposed, given the payment of appropriate compensation under s 88K(4).

Our analysis of the court’s construction of the reasonably necessary enquiry has shown that the court is concerned with allocating resources in the most efficient way practicable. An easement is imposed where the putative dominant owner values the acquisition of the easement more than the putative servient owner values the right to be free of the easement. In such circumstances, the imposition of the easement and the payment of compensation generates a transactional surplus: the benefit of imposing the easement so as to allow the putative dominant land to be used in a more efficient manner outweighs the cost to the putative servient owner of imposing the easement. This outcome leaves the putative dominant owner better off, and the servient owner no worse off after the payment of compensation and costs, than if the s 88K order had not been made. However, where there is another way of allowing the putative dominant land to be used in the desired way without the imposition of the easement, and the cost to the putative dominant owner of achieving this is less than the cost to the putative servient owner of imposing the easement, then the easement will not be imposed.

In Chapter 4, we will return to the reasonably necessary requirement to examine in detail whether the court conducts the enquiry on a subjective or objective basis. This will involve an analysis of the extent to which the court relies on the actual preferences of the putative dominant and servient owners, as well as those of councils, about the desirability of a proposed land use, as opposed to the court deriving its own conclusion on the matter without regard to the actual views of the parties or council.

Chapter 3 129 V ‘NOT INCONSISTENT WITH THE PUBLIC INTEREST’: S 88K(2)(a) Whereas the equivalent Queensland provision requires consistency with the public interest,177 s 88K(2)(a) provides that for an easement to be imposed, the proposed use of the putative dominant land must not be inconsistent with the public interest. It has been quite common for a putative servient owner not to contest this requirement.178 However, Campbell J has expressed the belief that regardless of the position taken by the putative servient owner, it is incumbent upon the court to satisfy itself, on the evidence before it, that the use of the putative dominant land with the easement would not be inconsistent with the public interest.179

In the Queensland case of In the Matter of an Application by Kindervater, Derrington J stated that the nature of the public interest enquiry focuses on the proposed use of the putative dominant land, and not on the granting of the easement per se.180 However, in Woodland v Manly Municipal Council (No 1),181 Hamilton J stated that the enquiry related to the use of the putative dominant land with the easement in place. In that case this meant considering whether the use of the putative dominant land ‘as a subdivided cottage lot with drainage of waters from it through a pipe in the proposed easement’ was inconsistent with the public interest.182 This means that the requirement does not relate to the proposed use of the putative dominant land in the abstract, but does take into account the actual enjoyment of the easement.

177 Property Law Act 1974, s 180(3)(a). The Queensland Law Reform Commission recommended that the requirement be amended to one of not being inconsistent with the public interest: A Working Paper of the Law Reform Commission on a Bill to Amend the Property Law Act 1974-1985, Working Paper No 30 (1986) 15. This recommendation was not adopted. The Queensland cases dealing with the public interest requirement will be considered in Chapter 5. 178 See, Coles Myer NSW Ltd v Dymocks Book Arcade Ltd (1996) 7 BPR 14,638, 14,641; Goodwin v Yee (1997) 8 BPR 15,795, 15,799; Wengarin Pty Ltd v Byron Shire Council (1999) 9 BPR 16,985, 16,987 [11]; Wilson v Forrester-Babcock (2000) 10 BPR 18,377, 18,378 [10]; Beekman v Gray (2002) NSW ConvR 56-016, 58350 [20]; Mitchell v Boutagy (2000) 10 BPR 19,187, 19,189 [10]; Blulock Pty Ltd v Majic (2001) 10 BPR 19,143, 19,147 [12]; King v Carr-Gregg [2002] NSWSC 379, [37]; North v Marina (2003) 11 BPR 21,359, 21,380 [88]; Khattar v Wiese [2005] NSWSC 1014, [47]. 179 North v Marina (2003) 11 BPR 21,359, 21,380 [88]. Having said this, Campbell J was quick to conclude that this requirement was satisfied. 180 [1996] ANZ ConvR 331, 334. 181 (2003) 11 BPR 20,903. 182 (2003) 11 BPR 20,903, 20,908 [14]. This element of the decision is considered in Chapter 4, nn 145-148 and accompanying text.

Chapter 3 130 In the majority of cases in which s 88K(2)(a) has been considered, the court found that it had been satisfied because the easement would allow the putative dominant land to be used more intensively. This equating of the efficient use of resources with the public interest is particularly prominent where the putative dominant land was otherwise inaccessible without the creation of an easement. In Marshall v Council of the City of Wollongong, Bryson J said:183 Other public interest considerations ... strongly support the grant of the easement, as without one the continued use and redevelopment of the [putative dominant land] as a dwelling house, for which it has long been used, would be difficult to the point of being impracticable, and the value of [the putative dominant land] and the dwelling would be neutralised. No public interest would be served by neutralising the worth of [the putative dominant land] or by substantially impeding its use or development.

His Honour expressed the same belief in McConachie v Manly Council,184 in which he held that it was in the public interest that ‘there not [be] a sterilisation of a valuable piece of land otherwise available for residential use.’ And in Hanny v Lewis, Young J stated (in obiter dicta) that it ‘is the public interest that landlocked land be utilised.’185

This identification of the public interest with the more intensive use of land has not been limited to the imposition of rights of way. The clearest statement of a perceived nexus between economic efficiency and the public interest appears in Pasade Holdings Pty Ltd v Sydney City Council (No 1), where Bryson J dealt with the s 88K(2)(a) requirement as follows:186 To my observation the only public interest involved is the public interest in maximising the utility of resources including privately owned resources, which strongly favours a decision which facilitates the [putative dominant owner’s] proposed development without any strongly countervailing disadvantage to

183 (2000) 10 BPR 18,163, 18,168 [20]. 184 [2002] NSWSC 434, [19]. 185 (1998) 9 BPR 16,205, 16,209. 186 (2003) 11 BPR 21,001, 21,004 [9].

Chapter 3 131 anyone. Creation of the easement for light and air would have no discernable adverse impact on the public interest.

The same relationship between the more intensive use of land and the public interest can be found in Busways Management Pty Ltd v Milner,187 where Hamilton J imposed an easement to permit the continuing encroachment of the footings of the putative dominant owner’s building into the subsoil of the putative servient land. Such an easement was required so that the putative dominant owner could convert the building to strata title. In holding that the imposition of the easement was reasonably necessary for the effective use of the land within the meaning of s 88K(1), Hamilton J conducted a cost-benefit analysis that showed the economic desirability of converting the building to strata title.188 His Honour then dealt with the public interest requirement, by primarily relying on his findings on the s 88K(1) issue,189 thereby conflating the reasonably necessary and public interest enquiries.190

Although the court sees an increase in the intensity of the use of the putative servient land as being prima facie consistent with the public interest, we must recognise that it regards other factors as also relevant to the enquiry. Some of these factors contribute to a finding that the proposed use of the putative dominant land is consistent with the public interest, while others result in the opposite finding. We will discuss each of these situations in turn.

In Foster v Hidden Valley Owners’ Cooperative Society Ltd,191 environmental concerns were central to Campbell J’s finding that the use of the putative dominant land with the proposed easement would be consistent with the public interest. His Honour found that if the easement sought were imposed, access to the putative dominant land could be achieved with significantly less environmental impact than if

187 (2002) 11 BPR 20,385. 188 Ibid 20,389 [13]. This aspect of the case will be considered in Chapter 4, nn 109-110 and accompanying text. 189 Ibid 20,389 [14]. In this passage Hamilton J also relied on the fact that council had conditionally granted consent to the strata subdivision in finding no inconsistency with the public interest. 190 Douglas J did the same in Noyea Park Country Club Pty Ltd v Body Corporate for Noyea Riverside Village [2004] QSC 197, BC200403957 in granting an application under s 180 of the Property Law Act 1974. His Honour listed substantially the same factors for the public interest enquiry (at [16]) as he had previously for the reasonably necessary enquiry (at [14]). 191 (2002) 11 BPR 20,899.

Chapter 3 132 either of the alternate access routes were adopted. Those alternatives would involve substantial drainage and road stabilisation works, or the clearing of creek banks, the construction of a bridge and 500 metres of concreting.192

Although Foster is the only case in which a factor other than a more intensive user of the land was adopted as a reason for holding s 88K(2)(a) to be satisfied, there are other cases that follow a similar theme. In Pasade Holdings Pty Ltd v Sydney City Council (No 4), Bryson J held that an easement that would permit the continued encroachment of various parts of the putative dominant owner’s building into the airspace above the putative servient land was reasonably necessary for the effective use and development of the building. One of the reasons relied upon by his Honour was that to remove the encroachments would be to unnecessarily interfere with the heritage nature of the building.193 And in Goodwin v Yee Holdings Pty Ltd, Windeyer J considered what could be construed as the public interest in determining whether the grant of the easement was ‘reasonably necessary’ under s 88K(1). His Honour granted a scaffolding easement that allowed the owner to build up to the boundaries of the putative dominant land. One of the reasons Windeyer J gave for this was that it would be consistent with council’s policy of not leaving useless gaps between buildings, and so create—somewhat optimistically in his Honour’s opinion—a ‘Parisian style’ street frontage.194

We now turn to the cases in which the court identified, or could have identified, facts that would justify the finding that the putative dominant owner had failed show that the s 88K(2)(a) requirement had been satisfied. In these cases the primary reason for reaching such a finding was that the use of the putative dominant land as facilitated by the easement would adversely impact on third parties.

192 Ibid 20,900-20,901 [14]-[16], [18]. Although no reference was made to the equivalent provision in the Queensland legislation, environmental concerns played a vital role in determining the site of the easement in Bogart v Wah Day (No 1) [2000] QSC 371, BC200006477. Jones J imposed a right of way in favour of the putative dominant land, but (at [9]) refused to site it where the putative dominant owner requested because that would require the destruction of mangroves and other interference with an ecologically sensitive area. 193 [2003] NSWSC 1220, [13], [15]. 194 (1997) 8 BPR 15,795, 15,796, 15,799.

Chapter 3 133 In Woodland v Manly Municipal Council (No 1), one of the grounds given by Hamilton J in denying the application to impose a drainage easement was that the putative dominant owner had not satisfied the public interest requirement. His Honour found that draining water through the putative servient land into Ross Street as contemplated by the proposed easement would exacerbate pre-existing water ponding problems in the street. Hamilton J accepted that this ponding could be a threat to motorists using Ross Street.195

The same theme of danger to third parties can be seen in Katakouzinos Pty Ltd v Roufir Pty Ltd. Hodgson CJ in Eq implied that if the presence of scaffolding as contemplated by the imposed easement would create a fire hazard, or would otherwise give rise to a risk of danger to health, the easement would be inconsistent with the public interest. However, his Honour was satisfied that any potential threat of fire danger could be mitigated by the imposition of conditions on the use and enjoyment of the easement.196

A case in which the adverse impact of the proposed easement on third parties could have been—but was not—used to deny the imposition on the basis of s 88K(2)(a) is Debbula Pty Ltd v The Owners-Strata Plan 6964.197 In this case a drainage easement was sought so that the putative dominant land could be developed by the construction of three storey units. The council had refused to grant development consent for the proposal because of, among other things, the adverse impact upon the ocean views of neighbouring properties. Master Macready refused to grant the easement on the basis that as development consent had not been, and was unlikely to be, granted, the easement was not reasonably necessary for the development of the land as required by s 88K(1).198 Although the Master initially flagged the relevance of s 88K(2)(a),199 he did not make any finding on this issue. He did, however,

195 (2003) 11 BPR 20,903, 20,910-20,911, 20,913 [25]-[26], [36]. This factor was also taken into account in the reasonably necessary inquiry under s 88K(1): at 20,913 [35]. 196 (1999) 9 BPR 17,303, 17,308-17,309 [44]-[55]. By contrast, Hodgson CJ in Eq stated (17,309 [55]) that the easement would not be inconsistent with the public interest simply because it caused financial loss to the defendant’s business. 197 (2003) 12 BPR 22,617. 198 Ibid 22,625, 22,626 [44], [51]-[52]. This aspect of the case will be considered in Chapter 4, nn 149-158 and accompanying text. 199 Ibid 22,620 [18],

Chapter 3 134 characterise council’s refusal to consent to the proposed development because of the adverse impact on the views of neighbouring properties as involving the public interest.200

We must note one final factor that leads to a finding of inconsistency with the public interest. If the enjoyment of the easement would involve illegality, the imposition of the easement would be inconsistent with the public interest. However, where the illegality would be removed by a third party giving consent, then an order may be made imposing the easement, but the order must preclude the actual enjoyment of the easement until the appropriate consent is obtained.201

A The Economics of the Public Interest Requirement These cases dealing with s 88K(2)(a), as well as Hanny v Lewis,202 demonstrate that the adverse impact of the proposed easement upon someone other than the putative servient owner is relevant to the cost-benefit calculus through which s 88K applications are decided. If the economic model of property rights is accepted, this makes sense. This is because the enquiry as to whether a resource is allocated efficiently also depends upon the impact of the allocation on third parties who do not voluntarily agree to the impact. To better understand this point, we need to consider the economic concept of externalities.

An externality is an event that does not feature in a person’s decision-making process because it affects a third party (or parties), rather than that person. Externalities may be either negative or positive, depending upon whether the effect on the third party is harmful or beneficial.203 Negative externalities are a problem because unless forced to do so, the owner of a resource will not take into account the potential adverse

200 Ibid 22,624 [41] 201 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1998) 43 NSWLR 504, 522. This represents a change from the view taken by Hodgson CJ in Eq earlier in the proceedings, where his Honour proposed to deal with the illegality issue by staying the order imposing the easement until the consent was obtained. See at 513, 518. 202 In which the adverse effect of the proposed easement upon the privacy of a neighbour of the putative dominant and servient owner was taken into account in respect of the reasonably necessary enquiry. See above nn 135-136 and accompanying text. 203 Murphy and Coleman, above n 156, 187; Cooter and Ulen, above n 129, 38.

Chapter 3 135 effects that will result from exercising rights of ownership over the resource.204 For example, in determining how best to operate a factory, a factory owner will have regard to his or her own (private) costs and benefits, but not necessarily the (social) costs incurred by third parties. Accordingly, the fact that third parties suffer from pollution caused by the factory will not be something that the factory owner takes into account in determining how much pollution the factory should cause. This may lead to the factory generating more than an efficient amount of pollution.205

The economic approach to law sees the role of law as increasing social wealth, which is comprised of the satisfaction of the total aggregation of individual preferences, rather than simply satisfying any particular individual’s preferences.206 This means externalities must be internalised, thereby forcing the owner of a resource to take social as well as private costs into account in exercising ownership rights. Ronald Coase has provided the seminal neo-classical economic response to externalities.207 Coase suggested that if property rights were clearly delineated, and if there were no significant obstacles to bargaining, then the externality problem would disappear, as all of the relevant parties could agree on an efficient allocation of resources through private bargaining.208 Further, as we saw in Chapter 1, the Coase Theorem holds that if bargaining is costless, the same final allocation of resources is reached, irrespective of which party initially held the relevant legal entitlement.209

However, Coase himself recognised that the bargaining solution to the externality problem is not available when the costs of transacting are substantial. In such circumstances the court’s initial allocation of legal entitlements could determine the final allocation of resources because that initial allocation might not be altered through private bargaining.210 Accordingly, Coase approved of courts explicitly

204 Ibid 38-39, 139; Harold Demsetz, ‘Ownership and the Externality Problem’ in Terry Anderson and Fred McChesney (eds), Property Rights: Cooperation, Conflict, and Law (2003) 283. 205 Cooter and Ulen, above n 129, 39. 206 Richard Posner, Economics of Justice (1981) 60-61. 207 Coase, above n 129, 95 -156. 208 Ibid 97-104. 209 See Chapter 1, nn 55-58 and accompanying text. 210 Coase, above n 129, 119-120, 132-133.

Chapter 3 136 taking efficiency considerations into account when initially assigning legal entitlements.211

As we saw in Chapter 1,212 because of the existence of a bilateral monopoly, private bargaining does not always produce an efficient outcome in disputes between neighbours about land use. Accordingly, in s 88K applications it is necessary for the court to take into account the interests of third parties who may be adversely affected by the imposition of the easement, so as not to impose the easement where it would be inefficient. If the imposition of the easement would create a transactional surplus if the benefit and costs of the putative dominant and servient owners alone were taken into account, that surplus would nevertheless need to be discounted if the use of the putative dominant land facilitated by the easement would adversely affect the views of neighbours, or create a health or safety risk to the public, or otherwise create a negative externality. If the adverse impact on third parties were sufficiently great, the easement would need to be refused on efficiency grounds.

Of course, the public interest requirement marks a profound difference between easements consensually created and those imposed by the court under s 88K. A servient and dominant owner are free to negotiate the express grant an easement without regard to the potential negative effect upon neighbours or other third parties. Unless the enjoyment of such an easement constituted a nuisance, or was otherwise unlawful, those third parties would have no legal recourse. Accordingly, underlying s 88K is the belief that the two contexts are entirely different. Because the imposition of the easement against the wishes of the putative servient owner under s 88K involves the exercise of the coercive power of the state, it is appropriate to have regard to the public interest. By contrast, where servient and dominant owners consensually exercise their private property rights to create the easement, they need not concern themselves with the interest of third parties.

211 Ibid 114-115. 212 See Chapter 1, nn 108-109 and accompanying text.

Chapter 3 137 Having noted how s 88K(2)(a) deals with the issue of negative externalities, we need to briefly mention how this provision and the reasonably necessary enquiry have been employed to internalise positive externalities.

Positive externalities arise in this context where the use of the putative dominant land facilitated by the easement would benefit someone other than the putative dominant owner, for example by advancing an environmental, heritage or aesthetic policy that people or institutions value. The full effect of such a beneficial outcome does not enter into the calculation of the putative and servient owners because they do not fully capture it. The social benefits of the imposition of the easement—in the form of the benefits that would accrue to third parties from the imposition of the easement—must be added to the private benefits of the putative dominant owner in the cost-benefit analysis. Unless the beneficial (social) effects on third parties are included in the cost-benefit calculus, an otherwise efficient easement might not be imposed.

In Foster v Hidden Valley, Pasade Holdings v Sydney City Council (No 4) and Goodwin v Yee, the private benefits to the putative dominant owner alone were probably sufficient to outweigh the private costs of the putative servient owner. Nevertheless, in conducting the public interest and reasonably necessary enquires in these cases, the court identified environmental, heritage and aesthetic factors which were used to bolster the conclusion that the easement should be imposed.213 In this way the court internalised what otherwise would have been positive externalities.

VI ‘GRANT OF THE EASEMENT MUST BE ADEQUATELY COMPENSATED FOR’: S 88K(2)(b) The court may not impose an easement under s 88K unless it is satisfied that the putative servient owner and other persons having an interest in the putative servient land can be adequately compensated for the loss or disadvantage caused by the imposition of the easement. The most useful analysis of this requirement is found in

213 See above nn 191-194 and accompanying text.

Chapter 3 138 Blulock v Majic. In that case Windeyer J reasoned his way to a negative definition of the provision as follows.214 It seems to me that all property can be valued. Thus the diminution in value to [the putative servient land] caused by the creation of the easement could be ascertained. It follows from this that ‘adequate compensation for loss or disadvantage’ arising from the carving out of [the] easement interest is not necessarily equivalent to the difference between the property without the easement and the value with [the] easement imposed plus on occasions some element for solatium.

As we have mentioned in relation to the court’s discretion under s 88K(1),215 Windeyer J went on to conclude that as the imposition of the easement for the flow of light and air sought would constitute ‘a serious interference with property rights’.216 The proposed easement would preclude any future improvements being built on the putative servient land that would be greater in height than the existing structures. Additionally, a strict reading of its terms would prohibit the replacement of any building currently located on the site of the easement if those buildings were demolished. For Windeyer J, the magnitude of this burden on the putative servient land and its owner meant that the putative servient owner could not be adequately compensated for the imposition of the easement, as required by s 88K(2)(b).217

Windeyer J had also considered the operation of this provision (by way of obiter dicta) in the earlier case of Goodwin v Yee Holdings. His Honour said that he did not believe that a putative servient owner who was forced to vacate the premises because the imposition of the easement made occupation untenable could be adequately compensated.218 These statements of Windeyer J show that his Honour believes that there comes a point where the owner’s bundle of rights in the putative servient land

214 (2001) 10 BPR 19,143, 19,150 [18]. 215 See aboove nn 39-41 and accompanying text. 216 (2001) 10 BPR 19,143, 19,150 [21]. 217 Ibid 19,150-19,151 [18], [21]. 218 (1997) 8 BPR 15,795, 15,798-15,799.

Chapter 3 139 would be so impaired by the imposition of the easement that monetary compensation is no longer a substitute for what is lost.219

It is submitted that interpreting s 88K(2)(b) so that an easement cannot be granted if it would have a very serious adverse impact upon the putative servient land makes sense from an economic perspective. If the nature of the putative servient owner’s loss is such that he or she would be worse off after the easement had been granted, even after the payment of compensation, then there would be no transactional surplus from the imposition. The imposition would not be efficient.

Before leaving our analysis of s 88K(2)(b), it is necessary to consider how that section was applied in O’Mara v Gascoigne220 as one of the bases for denying the application in that case. Hulme J stated that in order for s 88K(2)(b) to be satisfied, the court must be able to assess the appropriate amount of compensation payable under s 88K(4) at the time that the order imposing the easement is made. His Honour based this conclusion on the requirement in s 88K(4) that compensation be ordered at the same time as the court orders the imposition of the easement. His Honour went on to find that on the evidence he was not satisfied as to what the appropriate amount of compensation would be and that he was thus not satisfied that the putative servient owner could be adequately compensated.221

In that case a valuer retained by the putative dominant owner gave evidence as to the difference in the value of the putative servient land with and without the easement. However, Hulme J found that because of the particular circumstances of the case, this was not the appropriate measure of compensation payable to the putative servient owner. The putative servient owner had contracted to sell the land to a developer. The sale was subject to the developer obtaining development approval, so that if approval were not obtained the developer would have a right to rescind the contract. Hulme J stated that the evidence suggested that the right to rescind had

219 The equivalent provision in the Queensland regime (s 180(3)(b)) was used by Andrews J in Ex parte Edward Street Properties Ltd [1977] Qd R 86, 88 as a basis for refusing to impose an easement. This case is considered in Chapter 4, nn 45-48 and accompanying text. 220 (1996) 9 BPR 16,349. 221 Ibid 16,358.

Chapter 3 140 arisen, but that no evidence had been given as to the appropriate amount of compensation that should be paid to the putative servient owner if an easement were imposed under s 88K and if the developer did rescind the contract. As the court was not in a position to include in the order granting the easement the appropriate amount of compensation to be paid by the putative dominant owner, the requirement that the court must be satisfied that the owner could be adequately compensated had not been met.222

In Katakouzinos v Roufir Hodgson CJ in Eq accepted that the onus was on the putative dominant owner to show what loss would be caused by the imposition of the easement, and that such loss could be adequately compensated. However, his Honour went on to say that ‘in deciding whether this onus has been discharged, it is appropriate to take into account that the relevant facts are essentially within the knowledge of the [putative servient owner].’223 Given this qualification, the result in O’Mara appears to be quite unfair, as the magnitude of the loss that would be suffered by the putative servient owner if the contract of sale were rescinded would more likely be within the knowledge of that party, rather than within the knowledge of the putative dominant owner.224 Further, from an economic perspective, Hulme J’s reasoning in O’Mara would seem to lead to an inefficient result: the putative servient owner would be able to bear the cost of providing that information more cheaply than the putative dominant owner.

It will be recalled that the conclusion reached by Hulme J regarding s 88K(2)(b) was based on the requirement in s 88K(4) that the court is to provide for the payment of appropriate compensation in the order imposing the easement. However, in several

222 Ibid16,358. 223 (2000) 9 BPR 17,303, 17,310 [66]. 224 Brereton J’s reasoning in the recent decision of Khattar v Wiese [2005] NSWSC 1014 contradicts Hulme J’s approach in O’Mara. In that case Brereton J stated (at [51]) that the putative servient owner could be adequately compensated (as required by s 88K(2)(b)) if an easement were imposed notwithstanding that the putative servient owner desired to sell her land and that this would be more difficult if the easement were imposed. His Honour stated that the putative servient owner’s loss would be the difference between the price that would be obtained if the putative servient land were sold without the easement and the price that would be obtained if it were sold with the easement. The putative servient owner would also be entitled to compensation for any disadvantage she would suffer while a sale was effected.

Chapter 3 141 cases an easement has been imposed under s 88K without the compensation payable under s 88K(4) being finalised.

In Durack v De Winton, Einstein J reached the conclusion that an easement should be granted, but adjourned the matter so that the parties could make final submissions regarding the payment of compensation.225 In Tregoyd Gardens, Hamilton J concluded that a drainage easement should be granted but, at the request of the parties, deferred making the order until the parties had agreed on the terms of the easement. His Honour indicated that when he made the appropriate order, he would order that compensation be paid in the amount of $10,000, but that he would reserve leave for applicant to apply for additional compensation if a palm tree on the dominant land were damaged in the process of laying the pipes that were the subject of the easement. Hamilton J said that he believed this course to be permissible under s 88K(2)(b).226 In 117 York Street, Hodgson CJ in Eq endorsed this approach. His Honour stated that although s 88K(4) requires that a monetary figure be specified in the order, leave could be given for the putative servient owner to apply for additional compensation if an unexpected event occurred.227 In Busways Management Pty Ltd v Milner, Hamilton J stated that s 88K(4) requires the question of compensation to be dealt with in the same order as the grant, but did not cast any doubt on the approach taken in these cases. 228

In none of the later cases has Hulme J’s interpretation of s 88K(2)(b) been referred to. The flexibility with which the court has approached the issue of compensation is inconsistent with the very narrow view put forward in O’Mara. For reasons of both fairness and efficiency, the flexible view is the better one. Accordingly, the imposition of an easement should only be refused on the basis of the s 88K(2)(b)

225 (1998) 9 BPR 16,403, 16,452, 16,453. 226 (1997) 8 BPR 15,845, 15,851-15,852; 15,856. In Re Permanent Trustee Australia Ltd (1997) 8 BPR 15,551, 15,554 and Kent Street Pty Ltd v Council of the City of Sydney (2001) 10 BPR 18,757, 18,761 [28], where the owner of the servient land could not be identified, the court reserved leave for that owner to apply, a later time for compensation for any loss or disadvantage caused by the imposition of the easement. 227 (1998) 43 NSWLR 504, 516. Also see Coles Myer NSW Ltd v Dymocks Book Arcade Ltd (1996) 7 BPR 14,638, 14,655, where Simos J gave effect to an agreement between the parties that s 88K(4) did not require the quantum of compensation to be specified in the order granting the easement, and that it would be permissible for the court to consider the question of compensation from time to time on the application of the servient owner. 228 (2002) 11 BPR 20,385, 20,390 [16].

Chapter 3 142 requirement if the imposition would have a profound deleterious effect on the putative servient land, such as by making it uninhabitable—whether temporarily or permanently—or by precluding its future development. The provision should not be invoked simply because there are difficulties in assessing the quantum of compensation under s 88K(4).

VII ‘ALL REASONABLE ATTEMPTS HAVE BEEN MADE TO OBTAIN THE EASEMENT ... ‘: S 88K(2)(c) The court’s interpretation of this provision has meant that it is not difficult for the putative dominant owner to satisfy this prerequisite for the imposition of the easement sought. Firstly, the court does not require the putative owner to conduct significant negotiations with the putative servient owner. Secondly, the court has not given clear principles governing the minimum amount of compensation that the putative dominant owner must offer to the putative servient owner for the purchase of the easement. Thirdly, in assessing the reasonableness of the putative owner’s attempts to acquire the easement, the court segregates from the enquiry other issues in dispute between the putative dominant and servient owners. Fourthly, the court will have regard to the conduct of the putative dominant owner after the commencement of proceedings in determining whether all reasonable attempts have been made to acquire the easement. Lastly, the court does not apply the s 88K(2)(c) requirement in a significantly more rigorous manner where there is more than one parcel of land that could serve as the site of the easement. We will consider each of these aspects of the court’s interpretation of s 88K(2)(c) in turn.

A Negotiations for the Grant of the Easement The leading case on this point is still Coles Myer NSW Ltd v Dymocks Book Arcade Ltd. In that case Simos J held that in order to be eligible for a s 88K order, the putative dominant owner is obliged to ‘sufficiently inform’ the putative servient owner about the proposal to obtain the easement and to give that owner ‘an opportunity to consider its position and its requirements thereto.’229 After that, the putative dominant owner is not required ‘to continue to negotiate ... by making more

229 (1996) 7 BPR 14,638, 14,654.

Chapter 3 143 and more concessions ... until consensus [is] reached to the satisfaction of the [putative servient owner].’ According to Simos J: 230 once it appears from an objective point of view that it is extremely unlikely that further negotiations will produce a consensus within the reasonably foreseeable future, it may be concluded that all reasonable attempts have been made to obtain the easement ...

The provision thus seems to have a formal, rather than a substantive function: it does not require the putative dominant owner to give ground at all. Again in the words of Simos J, the section does not ‘require either party to make any concession in the course of negotiation which that party does not consider to be in its best interests to make.’231

B Quantum of Compensation Offered to Purchase the Easement This statement of Simos J in Coles Myer must be read in light of Young J’s pronouncement in Hanny v Lewis, that ‘in almost every case’, in order to have made reasonable attempts to obtain the easement, the putative dominant owner must have made some offer of monetary payment to the owner of the putative servient land in return for the grant of the easement. As his Honour put it, ‘one knows from experience that one does not get negotiations rolling until someone has made an offer that can be tested.’232 Windeyer J took the same approach in Beekman v Gray.233 His Honour expressed the view that ordinarily the court would not regard the putative dominant owner as having made reasonable attempts to acquire the easement if the proposal was that the servient owner should bear part of the cost of providing the easement. However, in the circumstances of that case, the putative dominant owners has made reasonable attempts to acquire the drainage easement having offered to

230 Ibid. These statements were endorsed in Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845, 15,854. Also see Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795, 15,800. 231 (1996) 7 BPR 14,638, 14,644. 232 (1998) 9 BPR 16,205, BPR 16,210. Also see Grattan v Simpson (1998) 9 BPR 16,649, 16,651, where Young J impliedly criticised the putative dominant owners for trying to obtain the easement without having to pay compensation unless it was ordered by the court. 233 (2002) NSW ConvR ¶56-016.

Chapter 3 144 have the necessary pipe installed at their own cost and under the supervision of engineers nominated by the putative servient owners.234

These statements of Young and Windeyer JJ can be seen as providing an indication as to when bona fide bargaining has not been attempted because of strategic behaviour by the putative dominant owner. If the putative dominant owner has not offered to compensate the putative servient owner for the grant of the easement, there is no reason to think that bargaining would not be successful if appropriate compensation were offered. And this being the case, there is no need for the putative dominant owner to seek the compulsory imposition of the easement under the provision that is designed to mimic the result of successful bargaining.

The necessary quantum of consideration that the putative dominant owner must offer to the putative servient owner for the purchase of the easement in order to have made all reasonable attempts to obtain the easements has not been subjected to any useful analysis. The only case to address the issue at all is Simpson v Bagnall.235 One of the reasons given by Bergin J in that case for finding that 88K(2)(c) had not been satisfied was that the putative dominant owner had only offered $1 for a right of access across the putative servient land.236 Given that the amount offered was not only inadequate, but was also nominal, the decision, although undoubtedly correct, provides limited guidance as to how much a putative dominant owner needs to offer the putative servient owner in return for the grant of the easement in order to satisfy s 88K(2)(c).

As a matter of principle, we can say that if the purpose of s 88K is to mimic the outcome of successful bargaining, then the lowest offer that the putative dominant owner could reasonably make in order to purchase the easement would be an amount which would place the putative servient owner in the same position as if no easement were granted. Unless the amount offer matches or exceeds the level of utility experienced by the putative servient owner prior to the imposition of the easement,

234 Ibid 58351 [28]. The putative dominant owners do not appear to have offered additional compensation to the putative servient owners. 235 [2002] NSWSC 930. 236 Ibid [106], [108].

Chapter 3 145 there is no reason to believe that bargaining, if properly attempted, would not be successful.

So far we have considered only the monetary aspect of the putative dominant owner’s conduct in terms of s 88K(2)(c). In passing, we should note that Simpson v Bagnall also dealt with the non-monetary facet of that conduct. The reasoning of Bergin J supports the view that the putative dominant owner will not be regarded as having made reasonable attempts to obtain the easement where that person’s conduct has been such as to exacerbate pre-existing difficulties with the putative servient owner. In Simpson,itwillberecalled,237 the putative dominant owner sought access across a track on the putative servient land to facilitate access to a road. The fact that the putative dominant owner had in the past engaged in ‘unreasonable conduct in the manner he had used the [track]’, in combination with his offer to pay only $1 to the putative servient owner in return for the right to use it, led to a finding that the he had not satisfied s 88K(2)(c).238 The conduct of the putative dominant owner that Bergin J found to be unreasonable was ‘wild behaviour [that] included the use of foul language [and] the tooting of car horns at night’.239

C Segregation of Issues in Dispute What we have so far noted about the requirements of s 88K(2)(c) shows that the provision does not impose a very heavy burden on a putative dominant owner. That owner also receives a significant advantage through the willingness of the courts to permit a putative dominant owner to focus on the narrow issue of obtaining the easement, and to separate out issues that the putative servient owner regards as inextricably linked to the question about whether the easement should be granted. In Coles Myer, the putative servient owner did not wish to negotiate about granting an airspace easement to the putative dominant owner unless those negotiations also dealt with a dispute between the parties about the alleged existence of an easement for the flow of light to the putative servient owner’s building. The court held that the putative dominant owner had made all reasonable attempts to acquire the easement

237 See Chapter 2, nn 70-71 and accompanying text.. 238 [2002] NSWSC 930, [108]. 239 Ibid [48].

Chapter 3 146 even though it insisted that these issues be dealt with separately.240 For the putative servient owner, however, these issues were inseparable as they both related to how the putative dominant owner’s proposed redevelopment would affect the putative servient owner and its tenants’ enjoyment of its building.

Similarly, in Katakouzinos v Roufir Pty Ltd,241 the putative servient owner’s building had allegedly been damaged by the demolition of the putative dominant owner’s building. The putative dominant owner sought an airspace easement for its encroaching scaffolding during the construction of its new building. The putative servient owner wanted the issue of compensation for the previous damage to its building dealt with before any agreement regarding the easement was finalised. The court laid the failure to reach agreement regarding the easement at the door of the putative servient owner. Hodgson CJ in Eq said:242 ... the substance of the impasse that occurred was that the defendant was requiring the plaintiffs to accede to all its demands, without adjudication of their justification, before the defendant would address the question of the grant of an easement or licence. I do not think that the plaintiffs’ unwillingness to accede to the defendant’s complaints without adjudication of their merit was unreasonable, and in those circumstances I am satisfied that the plaintiffs have made all reasonable attempts to obtain the easement.

D Time at which Reasonableness of Attempts Assessed Yet another way in which s 88K(2)(c) has been construed to the advantage of the putative dominant owner concerns the time at which the ‘all reasonable attempts’ requirement is assessed. Although the court has on occasions criticised the putative dominant owner for not commencing negotiations to obtain the easement until shortly before it was needed,243 it has been held that the appropriate time for considering whether reasonable attempts have been made was not necessarily the

240 (1996) 7 BPR 14,638, 14,654-14,655. 241 (2000) 9 BPR 17,303. 242 Ibid 17,312 [77]. 243 Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795, 15,797; Wilson v Forrester-Babcock (2000) 10 BPR 18,377, 18,379 [15].

Chapter 3 147 date at which the s 88K proceedings were instituted. Instead, the court may have regard to subsequent events, including those up to the date of the order.244 In Goodwin v Yee Holdings, Windeyer J accused the putative dominant owner of ‘indecent haste’ in giving the putative servient owners only two days to consider an offer to purchase an easement,245 and stated that he had not made all reasonable attempts to obtain the easement at the time the s 88K action was instituted.246 However, his Honour held that by the date of the hearing the putative dominant owner had made a sufficiently detailed offer, which included adequate compensation. As the putative servient owners had unequivocally rejected the offer, s 88K(2)(c) had been satisfied. The initial delay of the putative dominant owner was not fatal to his application, although it was relevant to the question of costs.247

This is not to say, however, that the putative dominant owner can rely with impunity on the offer to obtain an easement in the form that it is made at trial. In PD Consultants Pty Ltd v Childs,248 the putative dominant owner offered to purchase an easement for electricity transmission from the putative servient owner. That easement would have involved the construction of overhead power lines that would run very close to the site on which the putative servient owner intended to build a house. Brownie AJ characterised this proposal as ‘unthinkable’ for the purposes of s 88K because of the extent to which the proposed development of the putative servient land would have been compromised.249 However, at the hearing, the putative dominant owner abandoned this proposal, and instead sought an easement that would have far less adverse impact on the development potential of the putative servient land. Because this proposal had not been put to the putative servient owner prior to trial, and as that owner had come to court to oppose the original offer, Brownie AJ held that the putative dominant owner had not made all reasonable

244 Coles Myer NSW Ltd v Dymocks Book Arcade Ltd (1996) 7 BPR 14,638, 14,655 (Simos J); Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795, 15,800 (Windeyer J). The same approach has been taken in Queensland in regard to s 180(3)(c): Pacific Coast Investments Pty Ltd v Cowlishaw (2005) Q ConvR ¶54-637, 61,485 [25]. 245 (1997) 8 BPR 15,795, 15,798. 246 Ibid 15,800. 247 Ibid 248 [2004] NSWSC 1076. 249 Ibid [4]-[5], [8]-[9].

Chapter 3 148 attempts to obtain the easement. His Honour adjourned the matter so that the parties could negotiate upon the revised proposal.250

The result in PD Consultants can be contrasted with that in the Queensland case of Noyea Park Country Club Pty Ltd v Body Corporate for Noyea Riverside Village.251 In this case, the offer that was made to and rejected by the putative servient owner prior to the institution of proceeding was, from the perspective of the putative servient owner, more generous than the proposal put forward by the putative dominant owner at trial.252 In granting the easement in the form that it had been sought at trial, Douglas J held that the failure to put the revised offer to the putative servient owner for consideration before trial did not preclude the prerequisites to a grant from being satisfied. The two proposals had a common core—a right of way across an existing driveway—and the fact that the latter proposal was less generous meant that it would face certain rejection by the putative servient owner.253

From an economic perspective, the differing results in PD Consultants and Noyea make sense on their respective facts. In the former case, the court could not be satisfied that private bargaining had failed as the putative dominant owner had in effect met the putative servient owner’s rejection of the original offer with a more generous one. There was no need for the court to mimic the outcome of a successful negotiation as it had not been shown that a successful negotiation could not be concluded, given more time. In the latter case, it was clear that private bargaining had failed because the putative dominant owner was not prepared to meet the putative servient owner’s rejection with an improved offer. Because of this, the court could appropriately allocate resources through a cost-benefit analysis.

The putative dominant owner receives a significant boon by being able to submit a less generous proposal to acquire the easement during the s 88K proceedings and still satisfy s 88K(2)(c). A putative servient owner must foresee that if he or she refuses a

250 Ibid [6], [10], [11]-[12]. 251 [2004] QSC 197. 252 Ibid [21]. The later proposal required a greater area for the site of the right of way and offered less compensation than the original offer. 253 Ibid [23]-[24].

Chapter 3 149 pre-litigation offer to purchase an easement, an easement on less generous terms may be imposed in subsequent s 88K proceedings.

E Availability of Other Putative Servient Land Our final concern regarding the interpretation of s 88K(2)(c) is its function where there is more than one parcel of land that would be an appropriate site for the desired easement. In this situation, it is clear that the availability of an alternate source of ‘supply’ does not compel the conclusion that the desired easement is not reasonably necessary for the effective use or development of the putative dominant land.254 However, s 88K(2)(c) obliges the putative dominant owner to make all reasonable attempts to obtain the easement sought in the action ‘or an easement having the same effect.’ Although this does not require the putative dominant owner to institute s 88K proceedings against each the owners of all of the respective potential putative servient parcels,255 the putative dominant owner must make all reasonable attempts to obtain an easement in respect of each of those parcels of land.256

On the face of this requirement, it would seem that just as in the case of a true bilateral monopoly—where there is only one putative servient parcel—the putative dominant owner must make a specific monetary offer to purchase an easement from each of the potential putative servient owners. However, this is not the case. In Tregoyd Gardens, the court held that the putative dominant owner had discharged its obligation under s 88K(2)(c) despite the fact that it had not attempted to negotiate with the other potential putative servient owner after receiving an unambiguous rejection of its initial approaches.

Similarly, in DurackvDeWinton,257 Einstein J granted the s 88K application to widen an existing right of carriageway over the putative servient land, despite the fact that the putative dominant owner had not even attempted to negotiate the acquisition of an alternate easement with the owner of a third property. His Honour

254 Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845, 15,854; DurackvDeWinton(1998) 9 BPR 16,403, 16,446; Pacific Coast Investments Pty Ltd v Cowlishaw (2005) Q ConvR ¶54-637, 61,485 [25]; Khattar v Wiese [2005] NSWSC 1014, [32]. 255 DurackvDeWinton(1998) 9 BPR 16,403, 16,446. 256 Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845, 15,855. 257 (1998) 9 BPR 16,403.

Chapter 3 150 justified this conclusion on the two bases. Firstly, Einstein J thought that this alternative (proposed) easement was not one that would have had the same effect as the easement sought at trial. Secondly, as the local council was considering whether the widening of the existing right of way should be made a condition of council’s consent to a proposed development of the putative servient land, the owner of the third property could reasonably put off negotiating with the putative dominant owner until council had made its decision in this respect.258

In Tregoyd, Hamilton J stated that whether a putative dominant owner had taken all reasonable steps to obtain the desired easement as required by s 88K(2)(c) is ‘a matter of degree’.259 What that case and Durack v De Winton demonstrate is that where there is more than one potential putative servient parcel, equally vigorous negotiation is not required in relation to all of the respective owners.260 This does somewhat undermine the orthodox justification for the existence of a statutory access rights regime: that it is needed to prevent the putative servient owner from holding the putative dominant owner to ransom. If there is an alternate means of supply, the ability of the putative servient owner to engage in strategic bargaining is limited. This is yet another example of how s 88K(2)(c) allows a putative dominant owner to avoid offering the putative servient owner or owners an amount of compensation that would make the grant of the easement an attractive option.

258 Ibid 16,421, 16,446-16,448. 259 (1997) 8 BPR 15,845, 15,856. 260 The recent decision of Khattar v Wiese [2005] NSWSC 1014 might signal a reversal of this liberal approach. In that case, one of the reasons given by Brereton J for refusing to impose the drainage easement sought in the proceedings was that the putative dominant owner had not made all reasonable attempts to obtain an easement having the same effect as that easement: (at [80]). In addition to the putative servient land that was the subject of the s 88K application, there were two other alternative sites for the drainage easement. One of these alternatives was unsuitable because it would require a much longer easement than the one applied for and would result in significantly greater cost to the putative dominant owner. Brereton J held that because of the ‘manifest disadvantages’ of such an easement, the putative dominant owner was justified in not making any attempt to acquire that easement through negotiation: (at [55]-[56]). However, the same could not be said of the second alternative. This would involve the acquisition of an easement over two parcels of land, and the owner of the first of these parcels had indicated that he would be prepared to grant the easement. Although the construction of this easement would affect a building on the second of the parcels (at [12]), Brereton J held that the disadvantages of this alternative, when compared to the easement that the putative dominant owner was seeking under s 88K, were not so great as to excuse the putative dominant owner from making all reasonable attempts to obtain an easement from the owner of the second parcel: (at [58]). The putative dominant owner’s attempts to do so were not reasonable, but ‘at best perfunctory’, as there was no evidence of any formal approach, written offer or particular offer of compensation being made to the owner of the second parcel: (at [57]).

Chapter 3 151 This theme is reflected in Foster v Hidden Valley Owners’ Cooperative Society Ltd.261 In this case, the putative servient land over which the putative dominant owner sought a right of way was subject to a lease, with the freehold being held as a tenancy in common among over 200 people. In granting the easement sought, Campbell J held that that the putative dominant owner had made all reasonable attempts to obtain the easement, but did not describe what those steps were. His Honour was clearly influenced by the fact that the fee simple in the putative servient land was held by more than 200 people.262 However, this reasoning seems to neglect the ability of any tenant in common to grant an easement over land; the consent of all of the tenants in common is not needed.263 With the potential to bargain with any one of over 200 individuals, the putative dominant owner should have had no trouble in securing the easement through private bargaining.

Despite the s 88K(2)(c) requirement, Tregoyd, DurackvDeWintonand Foster v Hidden Valley show that the existence of a bilateral monopoly is not a necessary condition for the imposition of an easement under s 88K. Nor is the existence of a bilateral monopoly a sufficient condition for a grant. In fact, on the current case law, it does not appear that the likelihood of the section being invoked is in anyway proportional to the inherent bargaining difficulties faced by the putative dominant owner. In Hanny v Lewis,264 the putative dominant owners appeared to face a double bilateral monopoly; it appeared that without a grant under s 88K they needed the agreement of both of two other parties to convert an existing right of footway into a right of carriageway to allow access to the putative dominant land by inclinator. These parties were the putative servient owner and a neighbour whose land, in addition to the putative dominant land, had the benefit of the right of footway.265 Presumably, the neighbour’s consent was necessary because the installation of the inclinator would render the right of footway practically unusable. Young J refused to

261 (2002) 11 BPR 20,899. 262 Ibid 20,901-20,902 [21]. 263 Peter Butt, Land Law (5th ed, 2006) [1448]; Adrian Bradbrook, Susan MacCallum and Anthony Moore, Australian Property Law (3rd ed, 2002) [11.23]. The consent of other co-owners is only needed when the easement would interfere with their enjoyment of the land. This was not the case here, where the putative servient land was a rural parcel of approximately 300 ha and the easement was sought over what was an old road with an area of approximately 0.3 ha. See (2002) 11 BPR 20,899, 20,899 [1]-[3]. 264 (1998) 9 BPR 16,205. 265 Ibid 16,206, 16,210.

Chapter 3 152 impose the easement because it was not reasonably necessary for the enjoyment of the putative dominant land.266 His Honour also thought that the putative dominant owners had not made all reasonable attempts to obtain the easement by negotiation.267

An even more extreme case of the refusal to impose a s 88K easement in circumstances of bilateral monopoly is Simpson v Bagnall.268 In this case the putative dominant owner sought the imposition of a right of way over the putative servient land in order to gain access to a public road. However, even with the right of way, in order to reach the road the putative dominant owner would need the consent of at least two other parties who owned parcels of land that lay between the putative servient land and the road. One of the reasons given by Bergin J for denying the grant of an easement was that in order to satisfy the requirement of reasonable necessity in s 88K(1), the putative dominant owner had to demonstrate that the easement applied for would ‘facilitate access’ to his land. Her Honour found that this had not been established, as the putative dominant owner would still have to ‘await … his neighbours’ pleasure to grant him access’ in order to get to the road.269 Although another remedy was available to the putative dominant owner in the case,270 the decision shows that the availability of relief under s 88K may be indirectly proportional to the bargaining difficulties facing that party.271

266 Ibid 16,209. This aspect of the case is fully dealt with in Chapter 4, Part III(B). 267 Ibid 16,210. There are at least two Queensland cases where an easement has been imposed where the putative dominant owner has faced a multiple bilateral monopoly in respect of the same parcel of land. In the Matter of an Application by Kindervater [1996] ANZ ConvR 331, 331 and Noyea Park Country Club [2004] QSC 197, BC200403957, [4], [7], the putative servient land was owned by a body corporate, consisting of some members who were in favour of granting the easement and of others who were not. 268 [2000] NSWSC 930. 269 Ibid [110]-[112]. 270 The opening of an additional public road through all of the intervening properties between the putative dominant land and the existing public road was in the process of being finalised. See ibid [115]-[116]. 271 Cf Nelson v Calahorra Properties Pty Ltd (1985) Q ConvR ¶54-202, where s 180 of the Queensland legislation was used to impose a right of way over the three parcels of land needed to give access to the putative dominant land.

Chapter 3 153 F Final Comments Regarding s 88K(2)(c) There is a strong economic justification for the existence of s 88K(2)(c): the parties should be left to efficiently allocate resources between them unless their ability to bargain has broken down. Only then should the task of efficiently allocating the right of access/exclusion move to the court. However, we have seen that the court has taken a reasonably generous approach to s 88K(2)(c). The putative dominant owner must make an offer to purchase the easement, but it is not clear what the quantum of this offer must be. Additionally, the putative dominant owner need not revise the offer if the putative servient owner rejects it. We have also seen that the construction of the provision does not always align with economic theory. In some cases the easement is imposed irrespective of an alternate source of supply. In another case, the presence of insuperable bargaining difficulties was one of the reasons given for a grant being refused.

Having noted the liberal way in which s 88K(2)(c), has been interpreted, it is useful to close our discussion of the provision by comparing it to its Queensland equivalent. Section 180(3)(c) of the Property Law Act 1974 (Qld) provides that for a statutory right of user to be imposed, the putative servient owner must have unreasonably refused to grant the easement. On its face, s 180(3)(c) constitutes a greater obstacle to a grant than s 88K(2)(c) because under this latter provision an easement can be imposed even though both the putative dominant and servient owners have acted reasonably in their negotiations regarding the proposed easement. However, when one examines the Queensland cases in which s 180(3)(c) was given as a reason for denying the imposition of the easement, we can see that the Queensland Supreme Court has not given the provision a great deal of prominence: when it has held that the putative servient owner’s refusal to grant the easement was reasonable, the court has primarily relied on other reasons for not imposing the easement.

In Tipler v Fraser,272 Matthews J found that putative dominant owner had failed to show that the proposed use of the putative dominant land would be in the public interest. His Honour also held that the putative servient owner’s refusal to grant the

272 [1976] Qd R 272.

Chapter 3 154 easement sought was reasonable because the putative dominant owner had not offered compensation in return for the grant and had insisted up until trial that an easement already existed.273 However, the putative dominant owner’s conduct was so egregious in this regard that it clearly would have not have constituted reasonable attempts under the more lenient New South Wales provision.

In Ex parte Edward Street Properties Pty Ltd,274 the primary reason given by Andrews J in denying the imposition of the easement was that the putative servient owner could not be adequately compensated in money for the imposition of the easement.275 His Honour’s finding276 that the putative servient owner’s refusal to grant the easement was not unreasonable was very much a subsidiary issue.

In Re Worthston Pty Ltd,277 in finding that the putative servient owner’s refusal to grant the easement was reasonable, CarterJstatedthatonlyinveryspecial circumstances would it be unreasonable for one property developer to refuse to grant an easement to another property developer where that easement would allow a competing development to take place.278 This would appear to constitute a substantive difference between the New South Wales and the Queensland provisions, because under the New South Wales regime if the putative dominant owner had offered a fair price for the easement, there would be no reason to find that it had not made all reasonable attempts to obtain the easement. However, in denying the application, Carter J also relied on the fact that the local council had not consented to the putative dominant owner’s subdivision plans.279 As we will see in Chapter 4, this probably meant that the same result would have been reached in New South Wales on the basis that the easement was not reasonably necessary for the use and development of that land.280

273 Ibid 276. 274 [1977] Qd R 85. 275 Ibid 90-91. 276 Ibid 91. 277 [1986] Qd R 399. 278 Ibid 406. 279 Ibid 407-408. 280 See Chapter 4, Part III(C)(3).

Chapter 3 155 We can conclude, then, that nothing of significance has turned on the difference in the wording of the New South Wales and Queensland provisions, and that in neither jurisdiction has the requirement proved a difficult obstacle for putative dominant owners to navigate. The court appears willing to impose an easement where a cost- benefit analysis indicates that this would be efficient, despite the absence of prolonged negotiations between the parties prior to proceedings being instituted. PD Consultants v Childs is the only case in which the court gave as its primary reason for refusing to impose an easement the putative dominant owner’s failure to take appropriate steps to obtain a voluntary grant of the easement from the putative servient owner.

VIII NATURE AND TERMS OF THE EASEMENT: S 88K(3) This provision provides that in its order the court is to specify the nature and terms of the easement,281 including the times at which the easement applies.282 We have seen that in 117 York Street Hodgson CJ in Eq relied on s 88K(3) to insert into the easement a term requiring the servient owner to consent to the dominant owner lodging a development application for the erection of the encroaching crane.283 The inclusion of such a term was desirable because it made clear that the servient owner was not to have the ability to veto unilaterally the proposed development by preventing the dominant owner from lodging a development application that would affect the servient land. It was this power of (putative) servient owners to veto a prospective development that s 88K was designed to extinguish.

In several cases where an easement was granted to allow an encroachment into the airspace of the servient land in order to facilitate construction on the dominant land,

281 Section 180(4)(b) of Queensland’s Property Law Act 1974 provides that the order imposing the statutory right of user may include ‘terms and conditions as may be just’. For example, in Bogart v WahDay(No1)[2000] QSC 371, BC200006477, 12, the court ordered that the right of carriageway imposed be fenced to a standard that would protect the servient owner’s aquaculture business from contamination. Additionally, in Pacific Coast Investments Pty Ltd v Cowlishaw, the right of way imposed by the court included terms prohibiting its use by trucks over two tonnes, and requiring the dominant owner to maintain it: (2005) Q ConvR ¶54-637, 61,486 [34]. 282 For example, in Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795, 15,800, the duration of the easement was limited to six months. 283 See above nn 24-27 and accompanying text.

Chapter 3 156 conditions were included in the order granting the easement or in the easement itself. These conditions required the dominant owner to indemnify the servient owner against damage to the servient land caused by the enjoyment of the easement, or by the construction process for which the easement was reasonably necessary, and to obtain insurance coverage or provide security in terms of the prospective liability.284 Additionally, in Katakouzinos v Roufir, conditions were imposed that had the effect of reducing the risk of fire damage to the building on the servient land, such as by specifying the type of material that could be used in the scaffolding.285

The court also imposed conditions upon the owner of the dominant land in King v Carr-Gregg. As explained above,286 this case involved an application to grant an easement in respect of a drainage system thatwasalreadyinsitu.Ingrantingthe application, Foster AJ was concerned that the system should be able to cope with the discharge of water involved in a rainstorm of a one hundred year average recurrence interval. His Honour found that the existing system did not meet this standard,287 and that as a consequence there would be some flooding on the dominant and servient lands.288 Accordingly, his Honour imposed conditions on the grant of the easement that required the dominant owner to perform work on his land so that the system met the appropriate standard.289

Other than the condition in 117 York Street requiring that the servient owner consent to the dominant owner’s development application, in these cases the court did not expressly rely on s 88K(3) as the source of its power to impose the conditions. In

284 Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795, 15,800; 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1998) 43 NSWLR 504, 516; Katakouzinos v Roufir (1999) 9 BPR 17,303, 17,312 [80]. Similar, but less burdensome, conditions are implied into an easement for overhang expressly created after the commencement of Schedule 1(16) to the Property Legislation Amendment (Easements) Act 1995 (NSW). Except to the extent that the instrument creating the easement provides otherwise, the dominant owner must: keep the overhanging structure in good repair and safe condition; ensure that all work reasonably necessary for the purposes of the easement is done properly; cause as little inconvenience as practicable to the servient owner; restore the servient land as nearly as practicable to its former condition; and make good any collateral damage. See Conveyancing Act 1919 (NSW) s 181A(2), (3) and Schedule 8, Part 1. 285 (1999) 9 BPR 17,303, 17,309, 17,312 [53], [79]. 286 See above nn 141-142 and accompanying text. 287 [2002] NSWSC 379, [62]. 288 Ibid [52]. 289 Ibid [63]-[66]. The conditions were imposed in the form of undertakings to be given by the dominant owner to the court, rather than as terms of the easement itself.

Chapter 3 157 Goodwin v Yee Holdings, Windeyer J preferred to locate the court’s authority to impose conditions in an agreement between the parties, rather than in s 88K(3).290 From an economic perspective, it is extremely desirable that the court has the power to impose conditions upon the enjoyment of the easement even if one of the parties does not agree with those conditions. This is because the existence of the power facilitates the achievement of an efficient result. The power can be used to impose conditions that would reduce the negative impact of the easement upon the servient owner by an amount that exceeds the corresponding burden that the conditions would impose on the dominant owner. Where the condition takes the form of an indemnity for damage caused to the servient land, this provides an incentive to the dominant owner to avoid incurring an inefficient level of liability. By internalising the loss caused by the dominant owner that would otherwise be absorbed by the servient owner, the dominant owner has an incentive only to cause loss to the servient owner in circumstances where the benefit to the dominant owner exceeds the loss. In this way, the power to impose conditions adds another, and finer-grained, cost-benefit analysis to that required by subsections (1) and (2).291

Lee Aitken notes the utility of the court being able to impose conditions in respect of easements imposed under s 88K. However, he also raises the possibility that the imposition of conditions might mean that the loss to the servient owner caused by the imposition may not be able to be compensated in money.292 The implication of Aitken’s point is that in such a case s 88K(2)(b) would not be satisfied, and the court would not have the power to grant the easement. It is submitted that this view is mistaken. Rather than asking the question as to whether the servient owner’s loss can be compensated in money before the conditions to be imposed are identified—to which the answer may be ‘no’—one should ask the question after the conditions to be imposed have been identified, in which case the answer may be ‘yes’. If the

290 (1997) 8 BPR 15,795, 15,800. 291 Section16oftheAccess to Neighbouring Land Act (NSW) expressly gives the Local Court power to impose conditions in an access order, including those that have the purpose of avoiding or minimising loss, damage or injury, inconvenience or loss of privacy. This Act is considered in Chapter 5. 292 ‘Applications in Equity: The Statutory Easement Under s 88K of the Conveyancing Act 1919, and Licences Coupled With an Interest’ (2000) 20 Australian Bar Review 60, 68.

Chapter 3 158 conditions imposed are seen as a part of the easement itself, then the loss caused by the easement must be identified taking the existence of the conditions into account.

IX COMPENSATION: S 88(4) Section 88K (4) provides that where the court imposes an easement, the dominant owner is to pay such compensation as the court ‘considers appropriate’, except where the special circumstances of the case require that no compensation be paid. It has been held that the compensation payable under the provision is the same compensation as referred to in s 88K(2)(b): that is, compensation ‘for any loss or other disadvantage that will arise from the imposition of the easement.’293

The obligation of the dominant owner under s 88K(4) is not limited to the payment of compensation to the owner of the servient land, but extends to the payment of compensation to any other person who has an interest in the servient land and who suffers loss or disadvantage from the imposition of the easement. Accordingly, in McConachie v Manly Council, Bryson J had to consider whether the successful dominant owners needed to pay compensationtoMrsRainsford,whoheldan existing right of carriageway across the servient land.294 As it transpired, his Honour held that no compensation was payable to Mrs Rainsford as the imposition of another right of carriageway in favour of the dominant owners would not cause her any loss. Mrs Rainsford’s entitlement to use her right of carriageway would continue unaffected and, in any case, the servient owner was capable of granting further easements provided that this did not unreasonably impede the enjoyment of pre- existing rights. Additionally, Bryson J held that Mrs Rainsford would receive the benefit of the paving and signage work in relation to the easement imposed under s 88K that the dominant owners were obliged to undertake by their development consent. 295

293 Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795, 15,800. Also see Wengarin Pty Ltd v Byron Bay Shire Council (1999) 9 BPR 16,985, 16,988 [26]. 294 [2002] NSWSC 434. 295 Ibid [21]-[22]. [23].

Chapter 3 159 A General Principles Before considering how the courts have assessed the compensation payable under s 88K(4), we should note that the compulsory nature of the imposition of the easement upon the servient owner is not relevant to the assessment of compensation. In Mitchell v Boutagy, counsel for the servient owner argued that the easement was being ‘foisted’ upon the servient owner in circumstances in which the dominant owner would financially gain from the development of the dominant land that the easement would allow. Because of this, counsel submitted that the court should ‘err on the side of a generous order for compensation rather than a miserly one.’296 Austin J rejected this submission, stating that the provision was for the payment of ‘adequate compensation’, and that the court should be neither generous nor miserly in this regard.297

As Austin J identified, the s 88K cases show that the methodology used by the courts in assessing compensation depends upon whether the easement imposed is of temporary duration or is permanent.298 So far the courts have been consistent in their approach within each context.

In the construction cases, where the easement imposed is a temporary one allowing the encroachment of a crane or scaffolding into the airspace over the servient land, the compensation ordered has been an amount equal to the diminution in the rent at which the servient land could be let because of the imposition of the easement.299 This has been done even in relation to owner-occupied premises,300 or where the occupant of the premises was not paying rent.301 In these cases, basing the compensation payable on the loss of potential rental income was to compensate for loss of amenity or non-financial disadvantage.

The court has taken a more compartmentalised approach where the easement imposed is a permanent one. In Tregoyd Gardens v Jervis, Hamilton J saw the heads

296 (2001) 10 BPR 19,187, 19,192 [30]. 297 Ibid 19,192 [31]. 298 Ibid 19,192-19,193 [32]. 299 Katakouzinos v Roufir Pty Ltd (2000) 9 BPR 17,303, 17,309-17,311 [58]-[73]. 300 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1998) 43 NSWLR 504, 517. 301 Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795, 15,797, 15,801.

Chapter 3 160 of loss for which compensation should be awarded in the case as: (i) the loss of the proprietary right caused by the imposition of the drainage easement; (ii) the disturbance caused by carrying out the initial work on the servient land pursuant to the easement; and (iii) the future disturbance caused by maintenance of the drainage line.302

B Justice Young’s Heads of Loss The most comprehensive statement of the applicable heads of compensation under s 88K(4) for the imposition of a permanent easement appears in Wengarin v Byron Shire Council. Young J stated that, ordinarily, compensation will be: 303 (a) the diminished market value of the land (including what is sometimes called the hope value, that is the potential use to which the subject land could have been put);304 (b) associated costs that would be caused to the owner of the affected land; (c) an assessment of ... insecurity, loss of amenities such as loss of peace and quiet; (d) ... less compensating advantages, if any.

Although differently expressed, the compensable heads of loss as set out by Hamilton J in Tregoyd and by Young J in Wengarin are basically consistent. Hamilton J’s loss of proprietary right head corresponds to Young J’s diminished market value concept. Hamilton J’s second and third heads—relating to initial and future disturbance—correspond to Young J’s third head. Young J’s second head— associated costs incurred by the owner of the servient land—may not appear to have a direct analogue in Hamiton J’s taxonomy. However, Young J cited as authority for

302 (1997) 8 BPR 15,845, 15,851. 303 Wengarin Pty Ltd v Byron Shire Council (1999) 9 BPR 16,985, 16,989 [26] (references omitted). This passage was referred to in Mitchell v Boutagy (2001) 10 BPR 19,197, 19,192 [28], and in Busways Management Pty Ltd v Milner (2002) 11 BPR 20,385, 20,390 [17] 304 An example of compensation being awarded in respect of the diminished ‘hope’ value of the servient land is found in King v Carr-Gregg [2002] NSWSC 379, [69]. Foster AJ awarded compensation of $4,000 under this head in response to ‘some sketchy evidence’ of the possible future development of the servient land in conjunction with neighbouring land, where the imposition of the drainage easement would cause problems for the development. His Honour was ‘not particularly impressed’ by the evidence, but was prepared to award the amount. Interestingly, the award of the $4,000 had the effect of increasing the compensation ordered to the nice round total of $30,000.

Chapter 3 161 this head the statement of Hamilton J in Tregoyd in which his Honour stated that he was reserving leave for the owner of the servient land to apply for additional compensation if a palm tree on the servient land were damaged by the initial work authorised by the easement.305 Thus it is only Young J’s statement that compensation should be reduced by any compensating advantages that has no equivalent to anything said in Tregoyd.

Although Tregoyd and Wengarin are the leading cases in terms of setting out the various heads of loss for which compensation can be claimed, neither case provides a sterling example of how compensation is actually determined under each of the heads. In Tregoyd, Hamilton J suggested a global figure of $10,000 as compensation for all heads of loss taken together.306 In Wengarin, Young J found that the only head of loss that was applicable was the diminished market value of the land as the easement imposed was a right of way over an existing road: nothing needed to be done to the land. Young J then ascertained the value of the servient land based on its ‘maximum potential’, which his Honour stated was as a building block. Young J then found that the road over which the right of carriageway was granted covered one third of the area of the servient land. However, given that the road was there already, and given that the council as owner of the servient land had formally passed a resolution to grant the dominant owner a right of carriageway over the road but had not subsequently done so, Young J found that the amount of compensation should be reduced to one quarter of the value that the servient land would have as a building block.307 From both Tregoyd and Wengarin it can be seen that the assessment of compensation is an art, not an exact science.

305 See Wengarin Pty Ltd v Byron Shire Council (1999) 9 BPR 16,985, 16,989 [26], citing Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845, 15,856. 306 (1997) 8 BPR 15,845, 15,851. 307 (1999) 9 BPR 16,985, 16,989-16,990 [32]-[33]. In Marshall v Council of the City of Wollongong (2000) 10 BPR 18,163, 18,168-18,169 [21], a case with similar facts to Wengarin, Bryson J, in assessing compensation for the diminished value of the servient land caused by the imposition of a right of way over an existing track, accepted valuation evidence produced by the servient owner. That evidence was that compensation should be: (i) 80% of the value of that part of the servient land actually forming the track; and (ii) 20% of that part of the servient land severed from the main part of the block by the track.

Chapter 3 162 C Mitchell v Boutagy A very instructive case in which compensation was assessed in relation to various heads of loss is Mitchell v Boutagy.308 This case involved a successful application for a drainage easement. In assessing compensation, Austin J approached the issue of the heads of loss in respect of which compensation could be granted using language that, while somewhat blending the concepts of Hamilton J in Tregoyd and Young J in Wengarin, favours the former.

The first head of loss dealt with by Austin J was compensation for loss of proprietary rights, or for the ‘blot on title’, caused by the imposition of the easement. His Honour gave the rationale for compensation for this head of loss as follows. I accept evidence that some buyers would be discouraged from bidding for a property containing an easement of this kind in a market where there may be properties available with no such easement, and buyers would expect some discount in purchase price because of the presence of the easement.309

Both the parties had retained valuers and put into evidence the respective valuations. The dominant owner’s valuer estimated compensation for loss of proprietary rights at $3,000.310 By contrast, the servient owner’s valuer estimated compensation for loss of proprietary rights at $23,000, although this amount included, inappropriately in Austin J’s view, an amount for loss of amenity and utility. The valuer obtained this amount by taking 2% of the value of the servient land; the multiple of 2% was chosen because this allegedly reflected the multiple used in negotiated outcomes for compensation.311

Austin J decided that $20,000 should be awarded as compensation for loss of proprietary rights. His Honour did not explain why he chose this amount other than saying that he had to do ‘the best I can’ to come up with an appropriate amount that was less than the servient owner’s figure and more than the dominant owner’s

308 (2001) 10 BPR 19,187. 309 Ibid 19,194 [41]. 310 Ibid 19,194 [40]. 311 Ibid 19,190, 19,194 [13]-[14], [40], [42].

Chapter 3 163 figure.312 Although his Honour said that the evidence provided by the servient owner’s valuer as to the 2% multiple reflecting negotiated settlements was weak,313 it seems that Austin J substantially accepted the approach of taking a percentage of the value of the servient land. The amount decided on by his Honour is very close to the figure estimated by the servient owner’s valuer, which needed to be reduced in any case as it inappropriately contained a component for loss of utility. This conclusion is fortified by what Austin J said generally about the valuation provided on behalf of the dominant owner. His Honour said that $5,600, being the total amount put forward by the dominant owner as compensation for all relevant heads of loss, was simply implausible given that the land value of the servient parcel exceeded $1,000,000.314

The second head of loss dealt with by Austin J was disturbance, both initial and future, caused by the installation and maintenance of the drainage pipes that were to be the subject of the easement.315 The installation of the pipes would involve the use of jackhammers on the servient land, would take about three to four weeks and would involve the owner not being able to use the garage for some of that time. The valuer retained by the servient owner gave an estimate of $20,000 as appropriate compensation for initial and future disturbance, but did not provide a clear rationale for this amount. The valuer retained by the dominant owner put forward an amount of $2,600 as appropriate compensation for initial disturbance on the basis that this was the fair rental value of the servient land for a four-week period. Austin J accepted this approach as it had been adopted in the temporary easement cases. To this he added a figure of $2,000 in case future maintenance was needed, which his Honour thought was not very likely as PVC piping was to be used.316

The final head of loss allowed by Austin J was an amount of $1,956 agreed on by the parties for the replacement of shrubs and plants that would be damaged in the

312 Ibid 19,194 [43]. 313 Ibid 19,194 [42]. 314 Ibid 19,193-19,194 [37]. 315 It should be noted that in using the term ‘disturbance’ rather than ‘loss of amenities such as peace and quiet’, Austin J adopted the terminology of used by Hamilton J in Tregoyd, rather than that of Young J in Wengarin.AlsoseeKing v Carr-Greg [2002] NSWSC 379, [68]. 316 (2001) 10 BPR 19,187, 19,194-19,195 [44]-[48].

Chapter 3 164 installation of the drainage pipe.317 Although Austin J did not cite the second of Young J’s heads in Wengarin, this element of the compensation is consistent with the ‘associated costs’ head articulated by Young J.

Austin J expressly considered Young J’s fourth element in the compensation calculus: that compensation should be reduced by any advantages the imposition of the easement would have for the owner of the servient land. The dominant owner argued that the installation of the drainage line would advantage a future developer of the servient land by providing an existing sewer line into which to tap. Austin J refused to reduce the compensation otherwise payable because the evidence was not sufficient to establish a compensating advantage as Young J had used the concept. There was no evidence to identify the practical and legal considerations of tapping into the sewer line, nor whether that method of sewerage would be preferable to another method.318 Implicit in Austin J’s reasoning is that the compensating advantage factor will only be invoked where there is clear evidence of a real, rather than a speculative, advantage to the servient owner.319

From an economic perspective, the avoidance of overcompensating the servient owner by being cognisant of an advantage that would accrue to the servient owner through the imposition of the easement is not a crucial matter as long as an efficient allocation of resources is achieved. This is because the payment of compensation is simply a matter of dividing the transactional surplus. The most important thing is to include the advantage to the servient owner in the initial calculus of considering whether the easement should be imposed, so that the opportunity of an efficient transaction is not missed. The only circumstance in which it would be important not to overcompensate the servient owner would be in the extremely unlikely event where the payment of compensation without a deduction of compensating advantage would render the proposed development of the putative dominant land financially

317 Ibid 19,190, 19,196 [15], [57]. 318 Ibid 19,196 [53]-[54]. 319 Although not expressly identified. Young J’s compensating advantage concept appears to have been at work in McConachie v Manly Council [2002] NSWSC 434, [11], [21], [23]. See above n 295 and accompanying text.

Chapter 3 165 disadvantageous for the putative dominant owner. In such a case, the putative dominant owner would not bring the action to have the easement imposed.320

The last aspect of Mitchell v Boutagy that needs to be considered is the servient owner’s argument in that case that compensation under s 88K(4) should include a component for ‘injurious affectation’. The grant of the easement sought over the servient land was one of council’s conditions of consent for the dominant owner’s proposal to subdivide the dominant land and erect a dwelling house on the front lot created by the subdivision in place of an old, existing cottage. The dominant owner had contracted to sell the land to a purchaser who intended to erect a dwelling on the rear lot created by the subdivision, although development consent had not be granted in respect of this second proposal. There was evidence that if a house were constructed on the proposed rear lot, its location and elevation would affect the privacy of the backyard of the servient land. It was this prospective loss of privacy which the servient owner relied on as constituting injurious affectation and for which the servient owner claimed compensation in the amount of $40,000.321

Austin J rejected the servient owner’s claim for injurious affectation on the basis of a ‘common sense approach’ to the issue of causation: his Honour did not believe that the grant of the easement would cause the loss of privacy. There was, indeed, a ‘tangible probability’ that the imposition of the easement would result in the granting of development consent for the construction of the second dwelling on the rear of the dominant land that ‘may well’ interfere with the privacy of the servient land. However, his Honour found that ‘one cannot be sure of the outcome of any of the steps that will need to be taken before privacy is interfered with.’ For instance, if the owner of the servient land were to object vigorously to council, council might

320 Assume that an owner of land desires to develop that land, but that an easement over other land is required in order for the development to proceed. If the development were undertaken, the putative dominant owner would make a profit of $100 before any compensation was paid to the putative servient owner. Further, assume that the ‘gross loss’ the servient owner would suffer from the imposition of the easement would be $105, but that the ‘net loss’ after the assessment of compensating advantage to the servient owner would be $95. In such a case, unless the compensating advantage were taken into account in the assessment of compensation, there would be no incentive for the putative dominant owner to the apply for a s 88K easement. This would mean that the development, which would be efficient, would not take place. 321 (2001) 10 BPR 19,187, 19,188, 19,190 [5], [18].

Chapter 3 166 impose conditions on the development that would minimise the loss of privacy to the servient land.322

His Honour’s conclusion is consistent with the way compensation was assessed in Katakouzinos v Roufir, a decision to which Austin J does not appear to have been referred. In that case Hodgson CJ in Eq, in assessing compensation paid in respect of an easement to allow encroaching scaffolding, stressed that compensation could only be ordered for the loss caused by the presence of the scaffolding, and not for the financial loss due to the building work carried out on the dominant land.323 The results in Mitchell v Boutagy and Katakouzinos v Roufir in this context can be seen as an application of a principle of remoteness: only loss that arises directly from the imposition of the easement, and not consequential loss, can be compensated under s 88K(4). This principle is consistent with the obiter statement of Hulme J in O’Mara v Gascoigne, that if an easement were imposed compensation would have to be paid for the ‘depreciating effect’ caused to the owner of the servient land caused by trucks using the right of carriageway.324 This would be a direct result of the imposition of the easement. By contrast, we can surmise that in accordance with the remoteness principle, no compensation would have been payable for any loss of amenity in relationtotheservientlandcausedbyanincreased level of manufacturing on the dominant land, even though this increased level was made possible because of the imposition of the easement.

The unavailability under s 88K(4) of compensation of injurious affectation marks a divergence between the compensation regime and the ideal of mimicking the outcome that would have been achieved by private bargaining in the absence of strategic behaviour. This is because a (putative) servient owner negotiating the grant of the easement would take into account all the adverse impacts flowing from the grant of the easement, whether or not these were too remote to be compensated under

322 Ibid 19,195-19,196 [51]. 323 (1999) 9 BPR 17,303, 17,311 [71]. This was also the view of the Law Commission in its recommendations for the compensation regime to be included in access to neighbouring land legislation. See the Commission’s Rights of Access to Neighbouring Land, Report No 151 (1985) [4.51]. The access to neighbouring land legislation in force in England and Wales, New South Wales and Tasmania is considered in detail in Chapter 5. 324 (1996) 9 BPR 16,349, 16,359.

Chapter 3 167 s 88K(4). The significance of this potential undercompensation will be discussed at the end of this chapter.325

D Exception to the Payment of Compensation The obligation of the dominant owner under s 88K(4) to pay compensation for the loss caused by the imposition of the easement is subject to the exception set out in the provision. That exception is that no compensation is payable if the court determines that none should be paid ‘because of the special circumstances of the case’.

The first case to consider the applicability of the exception was Wengarin v Byron Shire Council.326 In this case the (putative) dominant owners sought a right of way over an existing road on the council’s land in order to access their own land, in circumstances where the original means of access had become impassable due to forces of nature. The easement sought was granted, and the dominant owners argued that they should not be ordered to pay compensation because the special circumstances exception applied. They submitted that the special circumstances were constituted by two factors. Firstly, the cessation of access to the dominant land was not their fault, but had been caused by natural forces: the original means of access had either been reclaimed by the ocean, covered by sand dunes or made impassable because of erosion. Secondly, everyone concerned had been under the impression that the dominant owners had the right to use the existing road on the council’s land to access the dominant land.327

In rejecting the dominant owner’s submissions, Young J stated that it would be unwise to define the meaning of special circumstances because the term is ‘incapable of precise definition and delineation’.328 However, his Honour went on to say that the exception should generally only be invoked where the owner of the servient land had ‘brought about the scenario which now causes the problem’ or had been

325 See below Part XI. 326 (1999) 9 BPR 16,985. 327 Ibid 16, 986 [3], 16,988 [19]. 328 Ibid 16, 987 [14],

Chapter 3 168 ‘completely obstructive to any reasonable attempts to solve [the] problem.’329 Obviously, the council was not responsible for the natural causes that had brought about the cessation of access. Nor had the council been deliberately obstructive to the dominant owners’ attempt to achieve access to their land, being guilty only of ‘masterly inaction.’330

Young J did not explain why he reached this latter conclusion, although his earlier summary of the facts sheds light on his Honour’s finding in this respect. Two years prior to the commencement of proceedings the council had resolved to grant the easement, but it had not done so. However, this seems to have been a result of various issues relating to the grant—such as the indemnification of council if the proposed right of way became affected by erosion—rather than a deliberate policy of council. Additionally, the council appeared to have cooperated in the dominant owners bringing the s 88K action, and had conceded that the prerequisites for a grant under the provision had been met.331

There are several cases in which the court has applied the special circumstances exception in holding that the dominant owner was not liable to pay compensation to the servient owner. In nearly all of these cases the court found that the easement would have a minimal adverse financial impact upon the servient land, so in these cases the practical impact of the application of the exception was slight.332

In five of the cases in which the special circumstances exception was applied, no compensation was ordered because the state of the title of the servient land meant that its owner could not be identified and joined as a defendant in the action. In the first two of these—Re Permanent Trustee Australia Ltd333 and Kent Street Pty Ltd v

329 Ibid 16,988 [20]. 330 Ibid 16,988 [21]. 331 Ibid 16,987 [9]-[11]. 332 See the cases referred to below in nn 333-346 and accompanying text. Additionally, in Wilson v Forrester-Babcock (2000) 10 BPR 18,377, 18,379 [16], a temporary easement for the encroachment by scaffolding was granted without an order for compensation because the servient owner had not proffered any evidence of loss. Young J did not refer to the special circumstances exception in this case. 333 (1997) 8 BPR 15,551, 15,554.

Chapter 3 169 Council of the City of Sydney334—this factor led the court to invoke the exception, but reserved leave for the (currently unidentified) servient owner to apply for compensation at a future time.335 In the most recent three cases, however—Pasade Holdings v Sydney City Council (No 1), (No 2) and (No 4)336—the court did not reserve leave for the (currently unidentified) servient owner to claim compensation at a later time. The court held that the inactivity in relation to the servient land by any of its owners for a period of 163 years permanently disentitled the current owner from compensation.337 The Pasade cases are consistent with Young J’s view of the special circumstances exception in Wengarin. In failing to assert its proprietary rights in its land, the servient owner did not make itself available to negotiate the grant of an express easement, and thus obstructed the solution of the dominant owner’s problem.

There are two other cases in which the court identified the personal fault of the servient owner as a factor in denying compensation under the special circumstances exception. The first of these is Busways Management Pty Ltd v Milner.338 It will be recalled that in this case the court granted an easement permitting the continued encroachment of the footings of the dominant owner’s building into the subsoil of the servient land. Hamilton J held that the dominant owner was not liable to pay any compensation to the servient owner because of the special circumstances of the case. Like all of the cases discussed previously, these included the fact that the easement would have only the most minimal impact on the servient land: the encroachment would not result in any diminution in the value of the servient land and would not cause any loss of amenity.339 More relevant for our present purposes, however, is his Honour’s condemnation of the servient owner’s conduct in rejecting the dominant owner’s offer, made prior to the s 88K action, to enter the servient land and remove

334 (2001) 10 BPR 18,757, 18,760, 18,761 [20]-[24], [28]. 335 This course has also been taken in Queensland in similar circumstances: Re Trask Development Corporation (No 3) Pty Ltd [2003] QSC 115, [11]. 336 (2003) 11 BPR 21,0001, 21,004 [10]; [2003] NSWSC 584, [1]; [2003] NSWSC 1220, [16]. 337 Ibid. Also see Pasade (No 1), 21,004 [8]. 338 (2001) 11 BPR 20,385. 339 Ibid 20,391 [20]-[21].

Chapter 3 170 the encroaching footings at the dominant owner’s cost.340 Without a doubt, the actions of the servient owner could be seen as an unreasonable obstruction to the resolution of the dispute.

The second case in which the unreasonable conduct of the servient owner was held to justify the withholding of compensation is North v Marina.341 The need for an easement in this case arose because the servient owner had undertaken unauthorised demolition work on his land that caused a breach in the party wall between the dominant and servient land. After negotiations between the parties and council, council issued an order requiring the construction and waterproofing of a new party wall. The owner of the dominant land commenced s88K proceedings to obtain an easement enabling her to maintain the waterproofing of the new wall, and at trial the servient owner finally conceded that such an easement was necessary.342 Campbell J granted the easement, but refused to grant compensation to the servient owner because of the special circumstances of the case.

Campbell J gave a number of reasons why no compensation was payable under s 88K(4) because of the special circumstances of the case. Firstly, the need for the easement arose solely because of the servient owner carried out demolition work in contravention of his development consent.343 This reason fits squarely with Young J’s first ground in Wengarin: the servient owner has created the need for the easement. Secondly, Campbell J held that the payment by the dominant owner of the cost of the erection of a new wall constituted a separate and sufficient ground for refusing to award compensation.344 Thirdly, his Honour stated that the servient owner’s concession that the effect of council’s order was to require the grant of the easement was a strong, but not decisive, reason for finding the existence of special circumstances.345 Although the second and third reasons may not come directly within the wording of Young J’s gloss on the special circumstances exception, they

340 Ibid 20,391 [21]. An additional factor on which his Honour could have relied in this context was that the servient owner had made ascertaining the extent of the encroachment impossible because of his unwillingness to allow a full investigation of his land: at 20,391 [20]. 341 (2003) 11 BPR 21,359. 342 Ibid 21,260-21,363, 21,366 [11], [19]-[21], [34]. 343 Ibid 21,380-21,381 [92]-[94]. 344 Ibid. 345 Ibid 21,381 [94].

Chapter 3 171 certainly share with Young J’s view the notion that special circumstances can arise where the conduct of the servient owner clearly lacks merit when compared to that of the dominant owner.

The last aspect of North v Marina that we need to note is that in denying compensation to the servient owner, Campbell J accepted, but did not rely on, the fact that the effect of the encroaching waterproofing material was minimal.346 Although his Honour did not address the issue, it seems likely that the right of the dominant owner to enter the servient land to maintain the waterproofing would not cause much inconvenience to the servient owner. Thus, it is probable that the amount of compensation that would have been payable but for the exception would have been modest.

Accordingly, all of the cases in which the exception was invoked were cases in which the servient owner would not have otherwise been entitled to substantial compensation. The only case in which the s 88K(4) exception was argued for, but refused, is Wengarin, where the compensation that was ordered was $12,500. But of course, our analysis has shown that the result in that case can be explained on the basis that the servient owner had not been guilty of manifestly unreasonable conduct.

X COSTS: S 88K(5) Under s 88K(5), the putative dominant owner, whether successful or not, is to pay the putative servient owner’s costs, unless the court determines otherwise. This legislative policy reflects the general rule that where a party seeks the indulgence of the court, that party should bear the costs of the proceedings, irrespective of the outcome.347 In its specific context, the provision is based on the belief that, except where she or he has acted unreasonably, the putative servient owner is entitled to test

346 Ibid 21,380-21,381 [92]-[93]. 347 Woodland v Manly Municipal Council (No 2) (2003) 11 BPR 20,915, 20,916 [2].

Chapter 3 172 whether the imposition of the easement under s 88K is appropriate and to have appropriate compensation assessed at the cost of the putative dominant owner.348

The courts have implemented a range of outcomes in relation to costs. In the early s 88K cases where the court did not find a reason to criticise the servient owner’s conduct in opposing the easement, it awarded the fullest measure of costs: indemnity costs.349 Where the court found the servient owner’s conduct to be at fault in some way, but not sufficiently ‘outside the pale’,350 the servient owner was awarded costs, but not on an indemnity basis. Examples of conduct of the servient owner that the court found to be wanting in this respect include: pursuing a bona fide but misplaced claim for excessive compensation;351 acting unreasonably in relation to particular evidentiary matters;352 basing its case simply on the balance of proof and the sanctity of property rights;353 and unreasonably refusing to grant an easement in respect of pre-existing pipes.354 Exceptionally, where the servient owner put on evidence in relation to a discrete issue, but that evidence was without foundation, the court refused the servient owner’s costs with respect to that issue.355

In none of the recent s 88K cases has the court awarded indemnity costs against the successful dominant owner. This may indicate a trend away from awarding indemnity costs as the courts become more comfortable granting applications under s 88K; the court may be losing its reticence in interfering with the property rights of the servient owner. Further, as s 88K actions become more commonplace, what the

348 117 York Street (1998) 43 NSWLR 504, 523. Also see Mitchell v Boutagy (2001) 10 BPR 19,187, 19,197 [60]. 349 Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845, 15,856 (Hamilton J). This was so despite the servient owner being awarded compensation that was less than the amount that the dominant owner had offered for the grant of the easement before trial. In Coles Myer v Dymocks Book Arcade (1996) 7 BPR 14,638, Simos J also appears to have awarded the servient owner indemnity costs. Although the report does not expressly indicate what order was made for costs, it does state (at 14,656) that Simos J made the orders set out in the Short Minutes of Order placed with the papers. In Tregoyd Gardens, Hamilton J said (at 15,856) that he had been told by counsel that in Coles Myer Simos J awarded indemnity costs. 350 Wilson v Forrester-Babcock (2000) 10 BPR 18,377, 18,379. 351 117 York Street (1998) 43 NSWLR 504, 523-524 (a claim for compensation for loss of bargaining position); Mitchell v Bougaty (2001) 10 BPR 19,187, 19,197-19,198 [66]-[68] (a claim for compensation for injurious affectation). 352 Katakouzinos v Roufir (2000) 9 BPR 17,303, 17,312 [82]-[83]. 353 Wilson v Forrester-Babcock, (2000) 9 BPR 16,985, 18,379 [22]-[23]. 354 King v Carr-Gregg [2002] NSWSC 379, [71]. 355 Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795, 15,802.

Chapter 3 173 court expects as reasonable conduct from the putative servient owner in protecting its interests becomes clearer, which in turn impacts upon the magnitude of costs awarded under s 88K(5). This is reflected in Pasade Holdings Pty Ltd v Sydney City Council (No 3).356

In earlier litigation,357 the dominant owner had been successful in its application for the imposition of easements for the flow of light and air to the windows of its inner city office building over two vacant strips of land. The strips of land were used as a passageway from the building to a nearby street. Although the owner of the strips of land could not be identified, the owner of a nearby building (‘RSL Club Trustees’) was joined as a defendant because its land had the benefit of a right of way over one of the strips. In Pasade (No 3), the RSL Club Trustees brought an action before Bryson J against the successful dominant owner for costs. The amount claimed was $24,783.58, comprising nearly 30 hours of attendances by solicitors (both before and after the commencement of proceedings), costs of retaining counsel ($17,666.00), costs of retaining a surveyor ($431.75) and other disbursements ($652.33).358

Bryson J was scathing in this comments about the magnitude of the RSL Club Trustees claim, branding it as ‘scandalously high, obviously completely unjustified and an affront to [the court’s] readiness to give consideration of the question.’359 His Honour noted that the RSL Club Trustees owned a valuable city building and that they were entitled to seek appropriate legal advice about the impact of the easement sought upon their own easement. However, as confirmed by the surveyor’s report, the imposition of an easement for the flow of light and air could have no adverse impact upon their right of way. This meant that they had no reason to oppose the s 88K application and there was no prospect of them being awarded compensation.

Accordingly, Bryson J held that there was no need for the RSL Club Trustees to retain counsel and that only seven hours of solicitors’ attendances were required to

356 [2003] NSWSC 913. 357 Pasade Holdings Pty Ltd v Sydney City Council (No 1) (2003) 11 BPR 21,001 and Pasade Holdings Pty Ltd v Sydney City Council (No 2) [2003] NSWSC 584. 358 (2003) 12 BPR 22,441. 359 Ibid 22,445 [17].

Chapter 3 174 give advice and to conduct the formalities of dealing with the s 88K application. His Honour was prepared to allow the RSL Club Trustees total costs in the amount of $3,036.58, including the cost of retaining a surveyor and other disbursements.360 His Honour stated that he was not indicating that $3,000.00 was an appropriate sum for the costs of a defendant who had no reason to oppose an 88K action. In fact, Bryson J said that but for extremely high value of the RSL Club Trustee’s city building, the costs allowed would have been lower. His Honour issued a warning to the legal profession that if they could not perform work of this kind for a reasonable amount, ‘[t]hey risk being challenged and replaced by someone who can’.361

Of course, what was crucial in Pasade (No 3) was that the easement sought would not have any adverse impact upon the property rights of the defendant. This will not ordinarily be the case, as in the vast majority of cases the defendant will be the owner of the putative servient land. Nevertheless, it is submitted that the forthright language of Bryson J gives a warning that even in the usual case, where the easement will have an adverse impact upon the putative servient land, the prima facie rule that the dominant owner is to pay the servient owner’s costs is not a licence for the servient owner, or more relevantly that owner’s legal representatives, to run up costs recklessly.

From an economic perspective, the recent trend away from awarding indemnity costs, and to limit the costs recoverable to a reasonable amount, is desirable. The accrual of legal costs can be seen as limiting the amount of the transactional surplus that is generated through the imposition of an easement that would be efficient. Limiting the amount of legal costs that can be recovered by the servient owner provides an incentive to a putative servient owner to grant the easement (where this would be efficient) without the need for wasteful litigation.

Indeed, it must be recalled that the payment by the successful dominant owner of the unsuccessful servient owner’s costs under s 88K(5) can be displaced in appropriate

360 Ibid 22,444-22,445 [12]-[16]. Bryson J also noted (at 22,443 [8]) that attendances of solicitors prior to the commencement of proceedings were not ‘costs of the proceedings’ and therefore could not be claimed under s 88K(5). 361 Ibid 22,445 [17].

Chapter 3 175 circumstances. This means that if the conduct of the servient owner is blatantly unreasonable, that owner must bear his or her own costs. There have been only two cases in which the court has expressly dealt with the issue of costs and has ordered that the servient owner pay its own costs. The first of these is McConachie v Manly Council. This case does not shed much light on the circumstances in which the s 88K(5) presumption will be displaced as the servient owner did not oppose the application and appeared only to ensure that effect was given to a pre-trial agreement with the dominant owner as to the quantum of compensation.362 As Bryson J said nothing else about why the servient owner had to bear its own costs, it is probable that this formed part of the agreement between the parties.

A more instructive case is Busways Management Pty Ltd v Milner,whichwe discussed in relation to compensation payable under s 88K(4).363 In this case, Hamilton J held that each party should bear its own costs, thus displacing the s 88K(5) presumption. The reason given by his Honour for the dominant owner not having to pay the servient owner’s costs was that the servient owner had represented himself during the action.364 Although not mentioned by Hamilton J as a factor relevant to his conclusion on costs, it would seem likely that his Honour was also influenced by the unreasonableness of the servient owner in simultaneously refusing to grant an easement authorising the encroachment, while denying the dominant owner permission to enter his land to remove it. This factor constituted one of the special circumstances of the case that led no compensation being awarded under s 88K(4), and there would seem to be no logical reason for it not to be taken into account in relation to s 88K(5).

Another aspect of Busways that we should note is the rejection by Hamilton J of the dominant owner’s argument that the servient owner should pay the dominant owner’s costs. Firstly, although successful in the proceedings, the dominant owner had nevertheless sought the indulgence of the court. Secondly, the conduct of the dominant owner could be stigmatised. Prior to the s 88K proceedings, the servient owner had brought an action under the Encroachment of Buildings Act 1922 seeking

362 [2002] NSWSC 434, [24]-[25]. 363 See above nn 338-340 and accompanying text. 364 (2002) 11 BPR 20,385, 20,392 [26].

Chapter 3 176 compensation for the encroaching footings. Hamilton J found at the time of those proceedings the dominant owner had contemplated undertaking a strata subdivision of its building. Despite the need for an easement for this purpose, and despite having an opportunity to apply for an easement in the proceedings, the dominant owner did not make such an application.365

Busways thus demonstrates that the court is inclined to use its discretion regarding the awarding of costs to provide a disincentive to the parties to act inefficiently. The court takes a dim view of resources being wasted in the pursuit of pointless litigation. In Busways, the servient owner had unreasonably opposed the s 88K action by refusing to allow the removal of the encroachment. The dominant owner acted unreasonably by bringing the s 88K action, when an easement could have been sought in earlier proceedings.

Thus far we have looked at how costs have been awarded when the s 88K application was successful. For the sake on completeness, we should note that where the action was unsuccessful, the court has almost always awarded costs to the owner of the servient land,366 but on a party-party, rather than on an indemnity, basis.367 Perhaps the rationale for this is that as the putative servient owner has not had to suffer the forced imposition of the easement, the recovery of reasonable costs is sufficient. The single case where costs were awarded to the successful putative servient owner on an indemnity basis is Woodland v Manly Municipal Council (No 2).368 In this case, although the council as the putative servient owner had initially refused to grant the easement, it subsequently offered to grant the easement in return for the putative dominant owner paying council’s costs to date. The putative dominant owner

365 (2002) 11 BPR 20,385, 20, 392-20,393 [27]. 366 An unusual case in this regard is Lang Parade Pty Ltd v Peluso [2005] QSC 133, BC200503587. In this case, Douglas J was prepared to grant a statutory right of user permitting the encroachment of cranes on the putative dominant land into the airspace of the putative servient land. However, before an order was made, it transpired that the encroachment was no longer necessary. In proceedings for costs, Douglas J awarded costs to the unsuccessful putative dominant owner, on the basis that the putative servient owner had acted unreasonably in refusing to sell the putative dominant owner a licence when it was thought that the encroachment was necessary: at BC200503587 [7]. 367 Hanny v Lewis (1998) 9 BPR 16,205, 16,210; Grattan v Simpson (1998) 9 BPR 16,649, 16,652; Beekman v Gray (2002) NSW ConvR ¶56-016, 58351 [32]; Blulock v Majic (2001) 10 BPR 19,143, 19,151 [23]; Debbula Pty Ltd v Owners-Strata Plan 6964 (2003) 12 BPR 22,617, 22,626 [52]; Khattar v Wiese [2005] NSWSC 1014, [78]. 368 (2003) 11 BPR 20,915.

Chapter 3 177 refused, and continued with the action, which it lost. Hamilton J held that it was unreasonable for the putative dominant owner to prolong the litigation by rejecting council’s offer. His Honour ordered that the putative dominant owner pay the council’s costs: on a party-party basis up to the date on which the offer was made, and on an indemnity basis from that date.369 In so doing, Hamilton J rejected the (unsuccessful) putative dominant owner’s submission that the council itself had acted unreasonably in that (i) its officers initially encouraged the putative servient owner to commence the s 88K application; and (ii) the evidence led by council with respect to the adequacy of the drainage easement sought was a ‘moveable feast’ that prolonged the course of the trial.370

XI THE POSITION OF THE SERVIENT OWNER UNDER S 88K(4) AND (5) On a prima facie reading, the policy behind ss 88K(4) and 88K(5) appears clear. After the imposition of the easement and the payment of compensation and costs, the servient owner is to be put in the same position in which she or he would have been if the easement had not been imposed. In other words, the servient owner is to be indifferent between (i) being free of the easement; and (ii) being subject to the easement but receiving compensation and costs. Accordingly, an efficient allocation of resources has resulted: the dominant owner, who values the easement more than the servient owner values the right to be free of the easement, now has the easement. The imposition is a Pareto superior one, in that the dominant owner is better off, and the servient owner is no worse off, than if the easement had not been granted.

However, as our analysis of s 88K(4) and (5) has shown, it is possible, and indeed likely, that the amount received by the servient owner under these provisions will not

369 Ibid 20,917-20,918 [9]-[13]. The council’s offer was a Calderbank offer, that is, an offer of settlement made on a without prejudice basis, but on the basis that the fact that offer was made can be put before the court in relation to the issue of costs once the substantive issues have been adjudicated: at 20,917 [10]-[11]. 370 (2003) 11 BPR 20,915, 20,916-20,917 [4]-[7]. Hamilton J’s response to the first argument is considered in Chapter 4, nn 139-142 and accompanying text. His Honour rejected the second argument on the basis that it is inherent in litigation that the focus of the evidence changes in the course of the trial. The issue of the evidence concerning the respective merits of the putative dominant owner’s and the council’s preferred drainage methods are also considered in Chapter 4, nn 147-148 and accompanying text.

Chapter 3 178 be sufficient to put the servient owner in the position in which he or she would have been had the easement not been imposed. Firstly, and least controversially, the court has the express power to refuse to order the payment to the servient owner of compensation or costs. As we have seen, this departure from the Pareto ideal can be justified on the basis of deterring the servient owner from engaging in wasteful conduct. Additionally, we have seen that this power has only be invoked where the compensation that otherwise would have been payable was minimal,371 or where the servient owner represented himself in the proceedings.372 Secondly, the servient owner is compensated only for the loss that arises from the imposition of the easement itself, rather than the loss that arises from the more intensive use of the dominant land.373 Finally, the court is increasingly reluctant to award the servient owner indemnity costs, which means that the servient owner will be out of pocket with regard to his or her legal costs.374

The reality of the court’s approach to s 88K(4) and (5) means that the servient owner can be left worse off after the easement is imposed than if the easement had not been imposed. Given this, if we are to retain efficiency as the norm justifying the statutory imposition of easements, we must de-couple the concept of efficiency from the criteria of Pareto superiority and optimality. This can be done by the adopting a contending version of efficiency: the Kaldor-Hicks criterion.375

Under the Kaldor-Hicks criterion, a state of affairs (‘S2’) is efficient when compared to another state of affairs (‘S1’), if the person whose welfare increases in the move fromS1toS2could fully compensate the party whose welfare has diminished in the move from S1 to S2, so that at least one person would be better off, and no party worse off, in S2 than in S1. The difference between the Kaldor-Hicks and the Pareto versions of efficiency is that under the Kaldor-Hicks conception no compensation need actually be paid by the person whose welfare has improved to the person whose welfare has diminished in the move from S1 to S2, whereas under the Pareto version

371 See above n 332 and accompanying text. 372 See above n 364 and accompanying text. 373 See above nn 321-325 and accompanying text regarding the inability of the putative servient owner to receive compensation for injurious affectation. 374 See above nn 349-356 and accompanying text. 375 For various interpretations of the term ‘efficiency’, see Coleman, above n 154, 512.

Chapter 3 179 compensation must actually be paid in these circumstances. In this way, under the Kaldor-Hicks criterion the payment of compensation is hypothetical. This means that under the Kaldor-Hicks version of efficiency, a move from one state of affairs to another can be efficient, even if someone is left worse off by the change.376

Accordingly, the imposition of an easement under s 88K will be (Kaldor-Hicks) efficient if after the imposition (i) the dominant owner could pay compensation to servient owner so as to put the servient owner in the position that the servient owner would have been in had the easement not been imposed; and (ii) after that payment, the dominant owner would be in a better position than if the easement had not been imposed. If these conditions are met, the fact that the payment to the servient owner of compensation and costs under s 88K(4) and (5) leaves the servient owner worse off than if the easement had not been granted, does not mean that the imposition is inefficient. The imposition will still be (Kaldor-Hicks) efficient, if the amount by which the dominant owner is better off as a result of the imposition would allow the dominant owner to pay to the servient owner an amount that would leave the servient owner no worse off than if the easement had not been imposed, and still be better off himself or herself.

From an economic perspective, the issue of the payment of compensation and costs is an ambiguous one. If the Pareto conception of efficiency is adopted, then the payment of full compensation and costs is vital. Unless the servient owner is put in the same position as if the easement had not been imposed, then the imposition of the easement will not be a Pareto superior outcome: the dominant owner is better off following the imposition, but the servient owner is worse off. However, under the Kaldor-Hicks version of efficiency, the imposition of the easement can be efficient if the amount by which the dominant owner is better off after the imposition would allow that owner to fully compensate the servient owner for the imposition, even if the compensation that is actually paid by the dominant owner, if any, would not.

However, the use of either the Kaldor-Hicks or Pareto conceptions of efficiency is problematic if one perceives the imposition of an easement under s 88K as

376 Murphy and Coleman, above n 156, 186-187; Stephen, above n 156, 57-59.

Chapter 3 180 mimicking private bargaining, rather than simply achieving an efficient result. The difficulty is that even if the servient owner has been fully compensated for the imposition of the easement, and so is placed in the same position as he or she would have been if no easement were imposed, the transactional surplus that has arisen has been appropriated in its entirety by the dominant owner. The servient owner has not secured any benefit from the transaction. The ideal of bargaining is to leave both parties better off, rather than one of them indifferent between the pre-bargain and post-bargain state of affairs.

A Compensation for Loss of Bargaining Power This fact has certainly not escaped the notice of servient owners in s 88K proceedings, who have attempted to capture a share of the transactional surplus for themselves. They have done this by submitting that as s 88K(4) requires the compensation of the ‘other disadvantage’ as well as the ‘loss’377 that arises from the imposition of the easement, servient owners should be compensated for the loss of the ability to bargain with the dominant owner. This argument goes that without the imposition of the easement under s 88K, the dominant owner would have had to pay the servient owner in return for the voluntary grant of an easement an amount that reflects the benefit of the easement to the dominant owner because of, for example, reduced construction costs or additional profits.378 Such an argument parallels the position in regard to a plaintiff’s action against a defendant for continuing trespass, nuisance (for the interference with an easement) or breach of covenant, where the court exercises its discretion to deny specific relief and instead award equitable damages for past and future loss. Such an order has the effect of the plaintiff granting an easement (in the case of an action in trespass), or discharging the easement or covenant, in return for a payment by the defendant based on the quantum of the benefit received by that party.379

377 These words are found in s 88K(2)(b). It is accepted that the compensation payable under s 88K(4) is the adequate compensation referred to in s 88K(2)(b): Wengarin Pty v Bryon Shire Council (1999) 9 BPR 16,985, 16,988 [26]. 378 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1998) 43 NSWLR 504, 514-515. Also see Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795, 15,801. 379 Chapter 1, nn 81, 90-94 and accompanying text.

Chapter 3 181 The court has rejected this argument by servient owners on the basis that the wording of ss 88K(2)(b) and (4) provides that the servient owner is to be compensated for loss and disadvantage arising from the imposition of the easement. In Goodwin v Yee Holdings, Windeyer J said that for the purpose of s 88K the loss to be compensated was limited to:380 the loss of property arising from the taking out of the freehold estate the incorporeal proprietary interest of the easement. It is not compensation to be equated with or apportioned out of the gain to the dominant owner as a result of the imposition.

The most detailed rejection of the position that s 88K(4) allows for the payment of compensation to the servient owner for loss of bargaining power is found in 117 York Street, in which Hodgson CJ in Eq gave various reasons for this conclusion. The most straightforward explanation given by his Honour proceeded as follows. Section 88K only provides for compensation of the loss and disadvantage that arises from the imposition of the easement. The servient owner’s loss of bargaining power was a result of the enactment of s 88K, and not the imposition of the particular easement granted in the proceedings. Accordingly, loss of bargaining power is not compensated under s 88K(4).381

Hodgson CJ in Eq supplemented this justification with more esoteric arguments to the effect that it is both circular and recursive to submit that the payment of compensation lies for loss of bargaining power. Firstly, his Honour stated that the ability of the court to award damages for the servient owner’s loss of bargaining position assumes that a putative dominant owner would have offered to purchase the easement from the putative servient owner for an amount that would exceed the other loss or disadvantage that the servient owner would suffer from the imposition of the easement. However, a putative dominant owner could only be expected to offer to pay such an amount if the court would award compensation for loss of bargaining position. Thus, the availability of compensation for loss of bargaining position only

380 (1997) 8 BPR 15,795, 15,801. 381 (1998) 43 NSWLR 504, 516. Nor does compensation for loss of bargaining position appear to be available in Queensland: Lang Parade Pty Ltd v Peluso (20050 Q ConvR ¶54-623, 61,354, 61,354 [30]-[33], [36].

Chapter 3 182 makes sense if we presuppose that the head of loss is available, because if it is not, a putative servient owner has no bargaining position.382

Secondly, Hodgson CJ in Eq considered a potential response to his circularity argument. The counterargument is that a putative dominant owner might be prepared to purchase the easement for an amount that exceeds the compensation otherwise obtainable under s 88K. The putative dominant owner might do this in order to guard against the possibility that in the s 88K action the court might incorrectly refuse to grant the easement or incorrectly order the payment of excessive compensation. His Honour rejected this reasoning on the basis that it would have a recursive effect. The substance of his Honour’s reasoning is this.

Assume that a court would correctly order compensation for the imposition of an easement in the amount of $A, and that this does not include a component for loss of bargaining position. However, the putative servient owner might be prepared offer to purchase the easement before the s 88K proceedings for $(A+B), where $B is the additional amount that the putative dominant owner is prepared to pay in order to guard against the possibility that if a s 88K action were commenced, the court may incorrectly order excessive compensation. Accordingly, instead of simply awarding $A as compensation under s 88K(4), the court should award $(A+B) as compensation to reflect the loss of the servient owner’s bargaining power. However, that order for compensation must take into account that the putative dominant owner would offer to purchase the easement for an amount of $(A+B+C), where $C is the additional amount that the putative dominant owner is prepared to pay in order to guard against the possibility that if a s 88K action were commenced, the court may incorrectly order excessive compensation. Accordingly, instead of simply awarding $(A+B) as compensation under s 88K(4), the court should award $(A+B+C) as compensation to reflect the loss of the servient owner’s bargaining power. However, the previous reasoning also applies to that potential order for compensation, so an additional amount of compensation should be ordered, and so on ad infinitum.383

382 (1998) 43 NSWLR 504, 515. 383 Ibid 516. What Hodgson CJ in Eq actually said (emphasis in original) was this: Furthermore, to allow greater compensation [for loss of bargaining power] on this basis would have a recursive effect: an additional amount justified by loss of the chance of extracting

Chapter 3 183 Austin J also considered the issue of compensation for loss of bargaining power in Mitchell v Boutagy.384 In addition to citing Goodwin v Yee Holdings and 117 York Street as authority for the proposition that s 88K(4) does not authorise the payment of compensation to the servient owner for this purported head of loss,385 Austin J also cited Wengarin v Pty Ltd v Byron Shire Council.386 The reference to Wengarin in this context appears to be correct, notwithstanding Young J’s statement in that case that in exceptional circumstances where it is difficult to assess compensation, compensation could be awarded on the basis of a percentage of the profits derived by the dominant owner through the imposition of the easement.387 It appears that although Young J proposed the use of the same metric as is used for assessing compensation for loss of bargaining power—that is, the profit made by the dominant owner—his Honour was not suggesting that loss of bargaining power should be compensated. Rather what Young J had in mind was the awarding of compensation for the established heads of loss, such as diminished market value and disturbance. This is made clear by his Honour’s reference elsewhere in his judgment388 to SJC Construction Co Ltd v Sutton London Borough Council,389 which dealt with an application under English legislation for the discharge of a restrictive covenant. Unlike the s 89 of the Conveyancing Act 1919 (NSW), compensation was payable by the applicant in respect of the discharge. The court in SJC endorsed the assessment of compensation based upon a proportion of the profits what would be derived by the applicant due to the discharge, but only where the discharge would cause actual loss to the servient owner. The court said that compensation would not be payable where there was no loss to the servient owner other than loss of bargaining position.390

money against the possibility of a wrong decision would be included in what might be anticipated as a correct compensation order; and the servient owner would lose the chance of extracting more than this against the possibility of a wrong decision, so that if that kind of loss of a chance is to be compensated, a further amount would need to be added; and so on. 384 (2001) 10 BPR 19,187. 385 Ibid 19,193 [33]. 386 (1999) 9 BPR 16.985. 387 Ibid 16,989 [26]. 388 Ibid 16,988 [26]. 389 (1975) 29 P&CR 322. 390 Ibid 326. Douglas J appears to have adopted a similar approach in Lang Parade Pty Ltd v Peluso (2005) Q ConvR ¶54-623, 61,355-61,356 [40]. After holding that compensation for loss of bargaining position was not available (see above n 381), Douglas J went on to award compensation of $20,000 to the putative servient owner. In his Honour’s view, this was the amount that reasonable persons

Chapter 3 184 Accordingly, we can conclude that Goodwin v Yee Holdings, 117 York Street, Wengarin and Mitchell v Boutagy clearly prevent a court awarding compensation to the servient owner for loss of bargaining position under s 88K(4). However, an argument can be constructed to the effect that a court cannot impose an easement under s 88K without the putative dominant owner having offered to purchase the easement from the putative servient owner for an amount that reflects the benefit that the easement would provide to the putative dominant owner. Such an argument is based upon a combination of the wording s 88K(2)(c) and, coincidentally, a passage in the judgment of Hodgson J in a pre-s 88K airspace trespass case. Section 88K(2)(c), it will be recalled, requires the dominant owner to have made ‘all reasonable attempts ... to obtain the easement’ before the court can impose the easement. In LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd, Hodgson J said:391 In a case such as the present, where one landowner is seeking to effect a commercial development of his land which is more profitable or less expensive if use can be made of the land of an adjoining owner, it is not unreasonable in my view for that adjoining owner to require payment which bears some relationship to the financial gain or saving which the developing landowner achieves by use of the adjoining land.

On the basis of Hodgson J’s statement, a putative dominant owner who applies for the imposition of an easement under s 88K without having first offered to purchase the easement from the putative servient owner for an amount which bears some relationship to the value of the benefit that will be derived from the easement, has not made all reasonable attempts to obtain the easement. As s 88K(2)(c) would not have been satisfied, the court could not impose the easement, and the restrictive interpretation of ss 88K(2)(b) and (4) could be avoided.

negotiating a licence for the use of the airspace would have agreed was the quantum of the putative servient owner’s loss or disadvantage caused by the encroachment into the airspace. Because the assessment of that loss or disadvantage was otherwise difficult—there was no significant loss of rental income—Douglas J used a hypothetical negotiation to ascertain the actual loss of the putative servient owner, rather than the price that could have been negotiated by that owner under a mutually beneficial transaction. 391 (1989) 24 NSWLR 490, 497 (emphasis added).

Chapter 3 185 Of course, this argument would require the court to adopt a much stricter interpretation of s 88K(2)(c) than it has done thus far. However, this reinterpretation would be consistent with the wording of the provision, and perhaps more so than the gloss placed on the provision by the court to date, which requires very little to be done by the putative dominant owner. Further, this interpretation more closely aligns with the paradigm of mutually beneficial exchange, which is the paragon of the efficient allocation of resources.392

XII CONCLUSION In this chapter we have seen that the way in which the court has applied s 88K does track fairly closely the ideal of an efficient allocation of resources. The reasonably necessary enquiry under s 88K(1) effects a cost-benefit analysis, although mostly this is done on an impressionistic basis, without definite monetary values being given to those costs and benefits. Usually, the benefit that would accrue to the putative dominant owner through the imposition of the easement—being able to use the land in a way not currently available—is compared to the detriment that would flow to putative servient owner through the imposition of the easement. However, if there is a way of achieving the proposed use of the putative dominant land without imposing the easement, for example by altering the putative dominant land in some way, then the cost of the putative dominant owner of pursuing that alternative is compared to the cost that the putative servient owner would suffer if the easement were imposed. In either case, however, if the imposition of the easement would result in the putative servient land being uninhabitable or incapable of future development, the putative servient owner is deemed not to be able to be compensated, and the easement will not be imposed because of s 88K(2)(b).

We have seen that the court has a discretion under s 88K(1) to refuse to grant the easement where the benefit that would flow to the putative dominant owner is the

392 As we will see in Chapter 5, Access to Neighbouring Land Act 1992 (UK) s 2(5) and (6) provides that in certain circumstances compensation can be awarded to reflect the financial benefit that accrues to the dominant owner by the making of an access order.

Chapter 3 186 avoidance of costs that would otherwise arise because of the putative dominant owner’s own conduct. Such conduct might be committing to a particular construction method that requires the acquisition of an easement before that easement has in fact been acquired. We have also seen that the adverse effect of the imposition of the easement upon third parties is factored into the cost-benefit analysis under the consistency with the public interest requirement of s 88K(2)(a). Less commonly, if there are benefits that would flow to third parties through the imposition of the easement, these can be included in the cost-benefit calculus under the reasonably necessary enquiry.

Where the cost-benefit analysis results in a finding that the state of affairs that would prevail with the easement is not substantially preferable to the state of affairs without the easement, then no easement is imposed. This result of the calculus means that the putative servient owner values the right to be free of the easement more than the putative dominant owner values the acquisition of the easement, and that the current allocation of resources is efficient. However, where the cost-benefit analysis results in a finding that the state of affairs that would prevail with the easement is substantially preferable to the state of affairs without the easement, this means that the putative dominant owner values the acquisition of the easement more than the putative servient owner values the right to be free of the easement. Accordingly, the imposition of the easement would generate a transactional surplus: the combined utility of the parties after the imposition of the easement is greater than their joint utility before the imposition. The existence of such a transactional surplus satisfies the Kaldor-Hicks conception of efficiency: the (successful) dominant owner is in a position to compensate fully the (unsuccessful) servient owner for the imposition of the easement, and still be better off than if no easement were imposed.

As to whether the dominant owner is obliged to fully compensate the servient owner, so that the servient owner is indifferent between (i) suffering the imposition of the easement but receiving compensation (and costs) and (ii) remaining free of the easement, we have seen that s 88K(4) and (5) does not necessarily compel such a Pareto superior result. This is not usually because the court has aggressively exercised its power to order that the payment of compensation or costs be withheld.

Chapter 3 187 In fact, the court has been quite conservative in this regard, having only made this order where the servient owner has not suffered any significant loss, or has not incurred legal costs. Rather, it is the court’s increasing tendency to order that the servient owner’s costs be paid on a party-party basis, and not on an indemnity basis, that will leave the putative servient owner out of pocket. Additionally, the court’s refusal to award compensation for the loss of amenity to the servient land that is caused by the increased intensity of use of the dominant land, rather than by the easement itself, can result in the servient owner being worse off than if the easement had not been imposed. This would preclude the imposition from being styled ‘efficient’ from the perspective of Pareto superiority criterion, although it would still be efficient under the Kaldor-Hicks conception.

Finally, what are we to conclude about the fidelity of the court’s application of s 88K to the ideal of mimicking the outcome of successful private bargaining between the dominant and servient owners? The first thing we noted in this regard is the court’s willingness to find that the putative dominant owner has made all reasonable attempts to acquire the easement, thus satisfying the s 88K(2)(c) requirement. Because the putative dominant owner is not obliged to offer to purchase the easement from the servient owner for an amount that reflects the value of the easement to dominant owner, or engage in negotiations over a substantial period of time, an observer cannot always be confident in concluding that an agreed outcome would not have been possible. Secondly, even if one is prepared to concede that resort to the regime is justified, the refusal of the court to countenance the awarding compensation to the servient owner for loss of bargaining power means that the dominant owner captures the entire transactional surplus. A specific bargain that leaves one party better off and the other indifferent between the bargain and no bargain at all, is of course possible, but hardly representative of the more general notion of what a bargain is. Yet this is the paradigm that s 88K mimics because of the court’s interpretation of what constitutes adequate compensation under s 88K(4).

Chapter 3 188 CHAPTER 4 Courting Councils and Counselling Courts: Subjectivity and Objectivity in s 88K Applications

I INTRODUCTION In Chapter 3 we demonstrated that the court’s decision whether or not to impose an easement under the first-generation access legislation is essentially conducted through a cost-benefit analysis: the benefit to the putative dominant owner of imposing the easement is weighed against the cost to the putative servient owner of imposing the easement. Using s 88K as representative of the first-generation access regimes, we saw that this cost-benefit calculus takes place primarily in the enquiry required by s-s (1).1 That enquiry is whether the easement is reasonably necessary for the effective use or development of the putative dominant land. The broadest purpose of this chapter is to ascertain whether the court’s cost-benefit calculus is conducted on an objective or subjective basis. An explanation of these concepts is required.

An objective judgment concerns the status of objects: the truth or falsity of the judgment is independent of what a person believes about it. By contrast, a subjective judgment concerns the status of subjects, by which we mean entities (usually people) that hold opinions.2 The truth or falsity of a subjective statement is dependent upon the state of mind of the relevant subject. Accordingly, the assertion that a particular parcel of land is ‘landlocked’ is an objective one. Whether or not the parcel adjoins on all sides other parcels of privately owned land, rather than a public street, depends upon the status of objects in the external world. However, the claim that access to a particular parcel of land is ‘difficult’ is a subjective one, as its truth or falsity depends upon the state of mind of the subject asked. One subject may truthfully say that he finds the access difficult; while another may truthfully say that she does not.

1 See Chapter 3, Part IV. 2 This explanation is taken from the definition of ‘objectivism and subjectivism’ in Ted Honderich, The Oxford Companion to Philosophy (1995) 631. For the application of a slightly different conception of the subjective-objective dichotomy to an area of law very different from court-imposed easements, see Gerald Frug, ‘The Ideology of Bureaucracy in American Law’ (1984) 97 Harvard Law Review 1277. 189 This is not to say that all subjects (people) will come to the same judgment (conclusion) based on the same set of objective facts. This is, of course, how we get subjective judgments. Two individuals might see the same things when they look at the means of access to the same parcel of land. They might agree on the same facts: the gradient of the slope; the texture of the surface; the distance to be travelled. However, one person might (subjectively) conclude that the access is quite easy; the other, that the access is quite difficult.

This chapter will address the objective-subjective distinction as it relates to s 88K applications in the following manner. Firstly, Part II will consider whether in determining if an easement is reasonably necessary, the court has regard to the actual preferences of the putative dominant and servient owners, or the preferences that reasonable persons in those positions would hold. If it is the former, then the test would be a subjective one, because it is based upon the actual state of mind of particular subjects. If it is the latter, then the test is an objective one, as it is not based upon what the particular subjects actually want or think. Part III of the chapter will address the extent to which the court bases its decision upon the opinions held by local councils, which have statutory powers to regulate the use and development of land. If the court adopts the opinion of a council, simply because it is the opinion of council, then the court’s reasoning in subjective in nature. However, if the court examines the facts of the case unmediated by the view of council, then the court has adopted an objective mode of reasoning, even if the court happens to reach the same opinion as council.

II SUBJECTIVE AND OBJECTIVE PREFERENCES OF LANDOWNERS An analysis of the s 88K cases shows that, overwhelmingly, the courts take an objective approach to the cost-benefit analysis as to how the imposition of the proposed easement would affect the parties. There are several features of the cases that indicate this. Firstly, there are express statements that the approach is an objective one. Secondly, there are statements that reasonable necessity is to be judged with regard to what is reasonably necessary for the use of the putative dominant land, rather than for the enjoyment of the current owner of the land.

Chapter 4 190 Thirdly, there are unambiguous indications that what is reasonably necessary for the use and development of the land is to be ascertained with reference to the area in which the land is located. Fourthly, there are various statements to the effect that the actual preferences of putative servient owner are irrelevant. Each of these features will be considered in turn.

A Express Statements In two cases it has been stated that the test of reasonable necessity is to be determined objectively.3 What precisely is meant by this term is not explained, other than that the enquiry is to take into account the factual position at the time of the making of the order, and is not limited to the position prevailing at the commencement of the action.4 Accordingly, we must look at other aspects of the jurisprudence to see how the concept of objectivity has been used.

B Reasonable Necessity and the Use and Development of Land A significant milestone in the s 88K jurisprudence is Young J’s statement in Hanny v Lewis that:5 It is to be noted that what is reasonably necessary is use or development of the land itself, not the enjoyment of the land by any of the persons who, for the time being, are the proprietors. Accordingly, evidence as to the particular problems that any one of the existing proprietors may have, or that because of those problems that person has to pay rent for premises, or that person has a mortgage, does not to my mind enter into the equation at all.

The first sentence of this passage has been expressly6 or implicitly7 endorsed in several cases.

3 In the Matter of an Application of Kindervater [1996] ANZ ConvR 331, 333 (Derrington J); Durack vDeWinton(1998) 9 BPR 16,403, 16,449 (Einstein J). 4 DurackvDeWinton(1998) 9 BPR 16,403, 16,449. In Kindervater, Derrington J did not elaborate on what he meant by the term. There is nothing in the citation given by his Honour in support of that proposition—Re Seaforth Land Sales Pty Ltd’s Land (1976) Qd 190, 194—that helps in this regard, other than perhaps Douglas J’s reference in the cited case to what is reasonably necessary ‘in the abstract’. 5 (1998) 9 BPR 16,205, 16,209. 6 Kent Street Pty Ltd v Council of the City of Sydney (2001) 10 BPR 18,757, 18,759 [12] (Barrett J); Woodland v Manly Municipal Council (No 1) (2003) 11 BPR 20,903, 20,909 [19] (Hamilton J);

Chapter 4 191 On first reading, this passage might be interpreted as simply articulating the requirement that an easement must accommodate the dominant land, rather than subsisting for the personal benefit of the owner of that land. However, this is clearly not the case. In the two cases where the theme of the passage actually arose on the facts, it is clear that the rights sought by the putative dominant owner to be compulsory imposed could have been made the subject of an express grant of an easement, had the putative servient owner agreed.

In Hanny v Lewis itself, the entitlement sought by the putative dominant owners was the right to construct an inclinator on the putative servient land in order to gain access to their own steeply sloping land. In denying the application on the basis that an inclinator was not reasonably necessary for the use of the land, Young J expressly stated that such an easement ‘might, of course be granted by agreement.’8 Additionally, his Honour said that the ability to gain access by an inclinator, rather than the presently existing 51 step wooden staircase, would affect the value of the putative dominant land. Where an alleged easement does enhance the value of the land, this is a suggestive, although not decisive, indicator that the accommodation requirement has been met.9

So, although the right sought could have been granted as an express easement, it could not be imposed under s 88K. The obstacle to the imposition was a quantitative rather than a qualitative one. Although it would have been desirable for the use of land to have access by an inclinator, it was not reasonably necessary to have such access.10 Young J’s warning about focusing on the enjoyment of the land by the owner for the time being is not a simple echoing of the accommodation requirement.

Debbula Pty Ltd v The Owners-Strata Plan 6964 (2003) 12 BPR 22,617, 22,623-22,624 [36] (Macready M). 7 In Bogart v Day (No 2) [2001] QSC 229, BC200103683, 7, Jones J said: ‘I must have consideration to the nature and potential of the property rather than the needs of the present owner.’ In PD Consultants Pty Ltd v Childs [2004] NSWSC 1076, [11], Brownie AJ impliedly approved the distinction between what ‘is reasonably necessary for the effective use or development of the plaintiff’s land’ and what would promote ‘the more enjoyable use of the land by the plaintiff ...’. 8 (1998) 9 BPR 16,205, 16,209. 9 Peter Butt, Land Law (5th ed, 2006) [1614]; Kevin Gray and Susan Francis Gray, Elements of Land Law (4th ed, 2005) [8.40]. 10 (1998) 9 BPR 16,205, 16,209.

Chapter 4 192 Support for this reading is found in PD Consultants Pty Ltd v Childs.11 In that case the easement sought was for the supply of electricity across the putative servient land through above ground transmission lines. The putative servient owner argued that the putative dominant owner had not demonstrated that the supply of electricity was reasonably necessary for the effective use and development of the land, as opposed to being for the personal benefit of the present owner of the land. Brownie AJ stated that this argument could not ‘be lightly waved aside’, but did not ultimately need to decide this issue.12 However, it is well established that an easement for the supply of electricity can be established by an express grant by the servient owner.13 This necessarily means that an easement for the supply of electricity can accommodate the putative dominant land, as opposed to being for the personal benefit of the owner of that land. Brownie AJ was thus concerned with something other than the accommodation requirement.

Accordingly, the distinction drawn by Young J in Hanny v Lewis between (i) that which is reasonably necessary for the use and development of the land and (ii) that which merely promotes the enjoyment of the land by its current owner, does not simply articulate requirement that an easement must accommodate the putative dominant land. We must now ask: what is the role of the distinction? It is useful firstly to consider this question is negative terms: what is excluded from the reasonably necessary enquiry?

The second sentence of Young J’s statement was: Accordingly, evidence as to the particular problems that any one of the existing proprietors may have, or that because of those problems that person has to pay rent for other premises, or that the person has a mortgage, does not to my mind enter into the equation at all.

11 [2004] NSWSC 1076. 12 [2004] NSWSC 1076, [11]. 13 See, for example, Commonwealth v The Register of Titles for Victoria (1918) 24 CLR 348, 354 (Griffith CJ) and Conveyancing Act 1919 (NSW) s 181A(2) and Schedule 8, Part 9.

Chapter 4 193 The significance of this in the context of Hanny v Lewis was that one of the owners of the putative dominant land argued that his health problems made access to the land by the existing wooden stairs so difficult that he could not live there. So, even though he was burdened by a mortgage over the putative dominant land, he had to live in rented premises elsewhere.14 Young J rejected this argument on the basis that none of these factors were relevant to the question of what was reasonably necessary for the use of the land.

What this tells us is that the actual (subjective) motivations of the putative dominant owner in seeking the easement are not relevant to the enquiry as to whether the easement is reasonably necessary. This is not to say that the enquiry is one that is abstracted from the preferences of landowners, however. Rather, the test is an objective one; the court looks at the extent to which a reasonable person in the position of the putative dominant owner would desire the acquisition of the easement. The clearest expression of this is found in Noyea Park Country Club Pty Ltd v Body Corporate for Noyea Riverside Village.15 In that case Douglas J concluded that the imposition of the easement sought was reasonably necessary for the effective use in a reasonable manner of the putative dominant land, because ‘the imposition of such an easement is something that a reasonable and prudent owner would do’.16

The requirement that the easement sought must be reasonably necessary for the effective use or development of the putative dominant land has a qualitative and a quantitative component. The qualitative component relates to the effective use or development of the land. We have seen from the preceding discussion in this section that this is to be determined objectively, so that consideration is given to the factors that would influence a reasonable and prudent owner of the land. The quantitative

14 (1998) 9 BPR 16,205, 16,207. 15 [2004] QSC 197 BC200403957. See the discussion of this case in Chapter 3, nn 122-123 and accompanying text. 16 [2004] QSC 197, [14]. Also see Re Seaforth Land Sales Pty Ltd’s Land (No 2) [1977] Qd R 317, 322 (Hanger CJ), where his Honour quoted a passage from the judgment of Buckley J in Standford v Roberts [1901] 1 Ch 440. That passage included the statement: ‘The second point is whether this is an alteration ‘reasonably necessary or proper’ to enable the property to be let. I understand ‘reasonably necessary or proper’ to mean something which, although not absolutely necessary, a reasonable and prudent owner of property, if he were the absolute owner, would do.’ (emphasis added)

Chapter 4 194 component relates to the meaning of ‘reasonably necessary’. As we saw in Chapter 3, the weight of authority supports the proposition that in order for the easement sought to be reasonably necessary for the use or development of the putative dominant land, the use or development of the land that would be possible with the easement must be substantially preferable to the use and development of the land that is possible without the easement.17

It will be useful now to see the interrelationship between the qualitative and quantitative elements of the reasonably necessary enquiry as that enquiry was conducted in Hanny v Lewis. If he was to be believed—and the fact that he did not live on his land suggests that he should—the putative dominant owner placed an extremely high subjective value on obtaining the easement. However, the cost- benefit analysis in regard to s 88K(1) is to be conducted on an objective basis: what would a reasonable and prudent owner want? This did not mean that no weight was given to the putative dominant owner’s preference in this regard. Instead, the preference for an inclinator was given the weight that would be given to it by a reasonable and prudent owner. Implied in this reasoning is that such a person would not have the health difficulties of the putative dominant owner. Because of this, Young J concluded that the imposition of the easement would be desirable rather than reasonably necessary,18 thus failing to clear the quantitative hurdle imposed by the provision.

As has been noted previously, the cost-benefit calculus requires the preferences of the person adversely affected by the proposed action to be considered.19 It is only then that a conclusion can be reached as to whether the state of affairs with the easement is substantially preferable to the state of affairs without the easement. In Hanny v Lewis the adverse impact upon the interests of a neighbour of the putative servient owner was taken into account. This was because the geophysical situation of the putative dominant land, the putative servient land and the neighbour’s land meant that if the inclinator were installed, it would pass very close to the kitchen

17 See Chapter 3, nn 80-90 and accompanying text. 18 (1998) 9 BPR 16,205, 16,209. 19 See Chapter 3, Part IV(C).

Chapter 4 195 window of the neighbour’s house. The neighbour was concerned about a lack of privacy caused by people using the easement looking into his house.20

Two aspects of this reasoning are noteworthy. Firstly, the adverse impact of the easement upon someone other than the putative servient owner is relevant to the cost- benefit calculus. If the economic model property rights is adopted, this makes sense. This is because the enquiry as to whether a resource is allocated efficiently depends upon the impact of the resource allocation on third parties who do not voluntarily agree to the impact.21 Secondly, Young J’s reasoning shows that a landowner’s concern for privacy is one of which the courts will be cognisant in the cost-benefit enquiry: it is one that is regarded as objectively valid. This will be discussed further below.22

We now need to identify the type of preferences of the putative dominant owner that are given the imprimatur of being objectively valid. The most common of these is the putative dominant owner’s desire to use the land in a more intensive, and thus financially rewarding, manner. As Macready M stated in Debbula Pty Ltd v Owners- Strata Plan 6964, the reasonably necessary enquiry ‘will involve debate about the best economic use and development of the [putative dominant] land’.23 Similarly, we have noted that in relation to the requirement in s 88K(2)(a), an easement that facilitates the more intensive use of land is prima facie regarded as not being inconsistent with the public interest.24 Accordingly, in most of the cases in which an easement was imposed under s 88K, the easement sought was either a permanent one that was needed to permit the subdivision (including the strata subdivision) of the

20 (1998) 9 BPR 16,205, 16,206, 16,209. 21 See Chapter 3, Part V(A). 22 See below Part II(D). 23 (2003) 12 BPR 22,617, 22,624 [38]. 24 See Chapter 3, nn 183-190 and acompanying text.

Chapter 4 196 putative dominant land,25 or a temporary easement for the encroachment by scaffolding or a crane to enable the construction of a larger building on the land.26

The analysis in this section has demonstrated that the requirement that the proposed easement must be reasonably necessary for the effective use or development of the land has been applied in an objective manner. The preferences that are entered into the cost-benefit calculus are those that a reasonable and prudent owner would hold in regard to the use or development of the land. And once in the calculus, those preferences are given the weight that they would be given by the same reasonable and prudent owner. The actual preferences of the putative dominant owner that do not match these objectively valid preferences are excluded from the cost-benefit process.

C Relevance of the Locality of the Land In addition to the preference for using the putative dominant land in a more intensive manner, there is another preference of putative dominant owners that courts have endorsed as being objectively valid. That preference is for the land to be used in a manner that is consistent with the character of the neighbourhood. If the putative owner desires the imposition of the easement in order to use the land in the same manner as neighbouring parcels are used, this will weigh in favour of the easement being found to be reasonably necessary. Presumably, using the putative dominant land in this way will increase its financial value.

In Blulock v Majic27 the putative dominant owner had council’s consent to develop the commercial warehouse on the land into residential strata units. The consent was

25 Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845; Kent Street Pty Ltd v Council of the City of Sydney (2001) 10 BPR 18,757; Mitchell v Boutagy (2001) 10 BPR 19,187; King v Carr-Gregg [2002] NSWSC 379; McConachie v Manly Council (2002) NSWSC 434; Busways Management Pty Ltd v Milner (2002) 11 BPR 20,385; Pasade Holdings Pty Ltd v Sydney City Council (No 1) (2003) 11 BPR 21,001; Pasade Holdings Pty Ltd v Sydney City Council (No 2) [2003] NSWSC 584; Pasade Holdings Pty Ltd v Sydney City Council (No 4) [2003] NSWSC 1220. 26 Coles Myer Ltd v Dymocks Book Arcade Ltd (1996) 7 BPR 14,638; Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795; 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1998) 43 NSWLR 504; Katakouzinos v Roufir Pty Ltd (1999) 9 BPR 17,303. In Wilson v Forrester-Babcock (2000) 10 BPR 18,377 and North v Marina (2003) 11 BPR 21,359, easements were imposed to facilitate the renovation or repair of residential dwellings. 27 (2001) 10 BPR 19,143.

Chapter 4 197 conditional upon an easement for the flow of light and air being obtained over a parcel of neighbouring land.28 A factor in favour of such as easement being reasonably necessary for the effective use or development of the putative dominant land was that:29 the area of Surry Hills where the properties are situated, having been what was described as a rag trade area in earlier times, is now predominantly a residential area and that there is a demand for residential accommodation but no demand for commercial type or office type or small industry type accommodation, which was provided by the building as originally constructed. In other words, if the existing building is to be maintained on its site, then it will need to be re- conformed and turned into residential units.

Conversely, if the putative dominant owner seeks an easement in order to use the land in a way that does not conform with the use of neighbouring properties, this militates strongly against a finding of reasonable necessity. In DurackvDeWinton, one of the easements sought by the putative dominant owner was for ‘parking rights’ over an existing right of way, so visitors to the putative dominant land would be able to park off the street. The putative dominant owner argued that this was reasonably necessary, as to provide additional off street parking on the putative dominant land itself would require the removal of trees, a pergola and landscaping.30 Rather than weighing the actual preferences of the parties in this regard, Austin J looked at the issue in a manner that was unmediated by the actual preferences of the putative dominant owner. This involved consideration of what is the usual local practice in this regard. In refusing to grant an easement for parking rights, his Honour said:31 Here again the question is one of fact but it has been clearly proved before me that the plaintiff’s land in Paddington is situate in an area where there are many residences which do not have off-street parking at all, which are occupied successfully by their occupants, and that there are many properties in

28 Ibid 19,145-19,146 [4], [8]. 29 Ibid 19,148 19,149 [14]. Ultimately, however, the easement was not granted because the putative dominant owner had not shown that the building could not have been converted into residential units without the benefit of the particular easement. This is discussed below in the text accompanying nn 131-132. 30 (1998) 9 BPR 16,403, 16,450-1. 31 Ibid 16,450.

Chapter 4 198 Paddington and Woollahra that have only enough room in their yards to get one car off the street and that this is often at the expense of using their backyards for what would otherwise be a garden area. It has been clearly established that Paddington is an area in which owners of residences, in many cases, make a value judgment that they would rather have their car off the street and on the property than have a garden comprised of lawn and that there are many properties which are successfully landscaped so that backyards can fulfil a dual function of partly being a place to park cars and partly being used for recreation.

A similar case can be found in the Queensland context. In Lynch v White32,the putative dominant owner sought the imposition of a right of way over the putative servient land that would provide flood free access to the putative dominant land from the public highway. However, the Full Court refused to grant the easement because having flood free access to the putative dominant land would be simply convenient, rather than reasonably necessary for the effective use of that land. Difficulties in wet weather were not uncommon in that part of rural Queensland. De Jersey J said:33 Now it is the fact that other established property owners in the area experience difficulties with access in times of heavy or prolonged rainfall, yet persist with the management of their properties. The position of the respondent is not unique.

We have seen that in considering the reasonably necessary requirement for the compulsory imposition of an easement, the courts conduct a cost-benefit analysis comparing the benefits that would accrue to the putative dominant owner, with the costs that would accrue to the putative servient owner (and others), if the easement were imposed. We have also seen that the benefits that would flow to the putative dominant owner are assessed on an objective, rather than a subjective, basis. That is, rather than taking into account the actual preferences of the putative dominant owner, the courts are concerned with what a reasonable and prudent owner of the dominant land would want. And what such an owner is deemed to want is to make the land

32 (1987) Q ConvR ¶54-257. 33 Ibid 54-257.

Chapter 4 199 more financially valuable, either through using it more intensively, or in a manner that is consistent with the use of neighbouring properties.

We now must examine how the preferences of the putative servient owner are construed.

D The Preferences of the Putative Servient Owner Again, Hanny v Lewis contains a useful statement of the type of reasons why a putative servient owner might object to the imposition of the easement. As a part of his Honour’s description of the general approach that should be taken to s 88K applications, Young J said:34 It is not unreasonable for a defendant to show that he or she has a legitimate economic advantage in the status quo, nor is it unreasonable for a defendant to say for privacy or other personal reasons that there would be such an interference with his or her property rights that no compensation in money could make up for it, and no order could be made.

In our discussion above, we saw that in Hanny v Lewis the interest of the neighbour of the putative servient owner in maintaining privacy wasakeyreasonforthecost- benefit analysis resulting in the easement not being imposed. By contrast, in Blulock v Majic,35 we see that the adverse impact that the easement would have on the financial interests of the putative servient owner can also lead to the refusal to grant the easement. Indeed, this case is generally instructive about how the subjective- objective distinction relates to the preferences of the putative servient owner.

In Blulock the owners of the putative dominant and servient land both agreed that if the court did impose the easement, the appropriate amount of compensation would be $66,000. However, in an effort to convince the court not to impose the easement, the putative servient owner argued that given (i) he was 86 years old, (ii) the property

34 Hanny v Lewis (1998) 9 BPR 16,205, 16,209-16,210 (reference omitted). It should be noted that despite Young J’s reference to situations where a money payment would not sufficiently compensate for the interference with the putative servient owner’s rights, his Honour did not appear to be referring to s 88(2)(b). Young J certainly did not cite the provision and, as stated, his Honour was laying down a general approach to s 88K. 35 See above nn 27-29.

Chapter 4 200 was let to commercial tenants, and (iii) the uncertain impact that the easement would have on the development potential of the land, he would rather have the property free from the easement. Windeyer J was unimpressed by this argument, holding:36 I do not consider the subjective opinion evidence of Mr Majic [the putative servient owner] is really relevant to take into account on this question of compensation. It is really evidence pointing out by way of argument the disadvantage which Mr Majic considers he will suffer if the easement is imposed.

The implication of this is clear. It is not the detriment that the putative servient owner thinks that she or he will suffer from the imposition of the easement that feeds into the cost-benefit calculus. Rather, it is those things that a reasonable owner of the putative servient land would regard as being detrimental that form the basis of the costs that are to be weighed against the benefits of imposing the easement. The first two factors argued by Mr Majic—his age and the fact that the property was tenanted—would have been excluded from the objective conception of preferences articulated by Young J in Hanny v Lewis.37 The third reason given by the putative servient owner—the effect of the easement on the future development of the putative servient land—was used by Windeyer J in refusing to impose the easement.38 This is consistent with what we have said in the context of the preferences of the putative dominant owner that are regarded as objectively sound. Just as a preference for the more intensive use of the putative dominant land (where that use would be facilitated by the imposition of the easement) counts as a benefit in the calculus, a preference for the more intensive use of the putative servient land (where that use would be retarded by the imposition of the easement) counts as a cost.

There is one passage in Blulock, however, that might be interpreted as rejecting the notion that the reasonably necessary enquiry is to be conducted on a basis of

36 (2001) 10 BPR 19,143, 19,149 [17]. 37 See above n 5 and accompanying text. Of course, Young J was referring to the preferences of the putative dominant owner. By parity of reasoning, the same restrictions should apply to the putative servient owner. 38 (2001) 10 BPR 19,143, 19,150 [21].

Chapter 4 201 comparing the objectively determined costs and benefits that would flow from the imposition of the easement. This is where Windeyer J said:39 Yet while it may be perfectly reasonable for a property owner to wish to maintain that property unencumbered rather than to be paid compensation for the encumbrance, the purpose of s 88K is to enable that wish to be overborne in appropriate cases in the interests of enabling land to be used to its fullest extent.

His Honour’s reference to overbearing the putative servient owner’s ‘reasonable’ desire to be free from the easement might be construed as disavowing the view that preferences are construed objectively. However, this is not the case. The fact that the putative servient owner’s preference is ‘reasonable’ means that it can be included in the cost-benefit comparison. It does not mean that it will automatically outweigh the objectively defined preferences of the putative dominant owner. We can therefore conclude that Blulock is perfectly consistent with the notion of a cost- benefit analysis based on objectively defined and weighted preferences.

Tregoyd Gardens Pty Ltd v Jervis40 is another case that supports the view that it is the objectively construed preferences of the putative servient owner that are relevant to the cost-benefit analysis. In this case, Hamilton J rejected the argument that the actual preferences of the putative servient owners were relevant to the exercise of the court’s discretion as to whether an easement should be imposed under s 88K. His Honour said that in regard to that issue, it was not appropriate to take into account the putative servient owners’ ‘simple reluctance to make the grant for whatever reason’.41 Additionally, one of the reasons given by the putative servient owners for their objection to the imposition of a drainage easement across their land was that the work needed to give effect to the easement would inevitably destroy a Canary Island palm tree on their land. The putative servient owners claimed that the palm was of aesthetic value, that it provided privacy and was of sentimental significance, and that no money payment could adequately compensate them for the loss of the palm.42

39 Ibid 19,150-19,151 [21]. 40 (1997) 8 BPR 15,845. 41 Ibid 15,855. 42 Ibid 15,848-15849, 15,853.

Chapter 4 202 The easement was imposed against these objections, and the way in which Hamilton J dealt with the issue of the palm indicates a clear preference for the objective facts, rather than the subjective state of mind of the putative servient owners. Firstly, Hamilton J accepted the (objective) evidence of the experts—the (subjective) fears of the putative servient owners notwithstanding—that it was likely that the work on the putative servient land could be done in a manner that would not damage the palm.43 Facts, rather than belief, determined this issue. Secondly, his Honour stated that if it transpired that the palm was damaged, the putative servient owners could apply to the court for additional monetary compensation.44 This indicates that his Honour thought that monetary compensation would be a valid substitute for the sentimental attachment that the putative servient owners had to the palm. Again, this demonstrates that Hamilton J was concerned with reasonable preferences, rather than actual ones: a reasonable owner could be compensated through a money payment.

The last case we need to examine in this context is the Queensland case of Ex parte Edward Street Properties Pty Ltd.45 The putative dominant land was a small parcel of land that had inadvertently became landlocked when the putative dominant owner sold off other land through which access had been obtained. The putative dominant owner applied for the imposition of a right of way over either of two neighbouring properties.46 One of those neighbours argued against the imposition of the right of way over his land because it would require the destruction of his vegetable garden and would preclude his building a larger garage on that part of the land. He claimed that to impose the right of way would be to ‘defeat the purpose for which he had bought the property.’47 Ultimately, the court refused to grant the easement over either parcel of land. One of the reasons for this was that neither neighbour could be adequately compensated for the imposition for the easement. In so holding, Andrews J said:48

43 Ibid 15,851. 44 Ibid 15,852. 45 [1977] Qd R 86. 46 Ibid 86-87. 47 Ibid 88. 48 Ibid 91.

Chapter 4 203 I do not intend to be understood as attempting to lay down that evidence of value alone would decide the issues relevant to the question of compensation. Personal factors are relevant to such issues ...

The reference to ‘personal factors’ in contradistinction to ‘value’ in this context could be regarded as endorsing a subjective conceptions of preferences. That is, in conducting the cost-benefit enquiry, Andrews J might be seen as having regard to the actual value put by the neighbour on being free of the easement, rather than the value that would be placed on this by a reasonable owner of the land. However, given the area of the putative servient land that would need to be cleared to form the right of way, it can equally be argued that a reasonable owner would have placed such a value on being free of the easement so as not to be adequately compensated by a money payment. In this respect, a distinction can be drawn between the preference of the putative servient owner in this case, and the sentimental attachment of the putative servient owner to the palm in Tregoyd Gardens.

Given the equivocal statement in Edward Street Properties, and the clearer reasoning in Blulock and Tregoyd Gardens, we can conclude that it is the objectively construed preferences of the putative servient owner that are used in the cost-benefit calculus to determine whether the easement is reasonably necessary. Accordingly, the preferences of both parties are construed objectively; the putative dominant and servient owners are deemed to want what reasonable persons in their respective positions would want. We now proceed to the second major concern of this chapter: the role of councils in s 88K applications and how that role aligns with the objective- subjective distinction.

III THE ROLE OF COUNCILS IN S 88K APPLICATIONS Before we proceed to examine the role of councils qua council in applications to impose easements, we must note that councils can be parties to these applications.

A Councils as Parties in s 88K Actions In the majority of cases where the council was the owner of the land over which the easement was imposed, that land was vacant land and the easement imposed was a

Chapter 4 204 right of way.49 A different case is Woodland v Manly Municipal Council (No 1),in which the application was for the imposition of a drainage easement over land owned by the council and on which a child care centre was being developed.50 In considering whether to the impose the easement, Hamilton J made it clear that the fact that the putative servient owner was a council and that the putative servient land was to be put to a public use were not to count against the putative dominant owner’s application. Rather, for the purposes of the cost-benefit analysis, the council was to be regarded as a private landowner. His Honour said:51 I do not think it weighs heavily against the plaintiff’s proposal that the land over which the easement is asked is a public authority, namely, the defendant. It is said that this is an improper compromise of public land. However, in reality, although a function of public utility will be conducted on the land, in my view it is more important in this instance simply to regard the defendant as another landowner whose rights will be interfered with.

Although there has been no such case, it is possible for a council to use s 88K to seek the imposition of an easement to benefit land owned by the council. However, as we have seen, a council cannot use the provision to apply for an easement in gross for its benefit. 52

B Councils as Regulators of Land Use The focus of this part of the Chapter will be on the role of councils as the consent authority with the power to regulate development of land.53 There are two conceptual bases that justify councils being given this role. Firstly, councils employ officers with appropriate expertise in dealing with development issues.54 Secondly, councils are controlled by officials who have been elected to represent the views of

49 Wengarin Pty Ltd v Byron Shire Council (1999) 9 BPR 16,985; Marshall v Council of the City of Wollongong (2000) 10 BPR 18,163; McConachie v Manly Council [2002] NSWSC 434. 50 (2003) 11 BPR 20,903, 20,903 [1]-[2]. 51 Ibid 20,913 [34]. This attitude aligns with the general approach that we saw in Chapter 3, Part V of equating the public interest with private profit. 52 Refer to our consideration of Bonvale Enterprises Pty Ltd v Halfpenny Investments Pty Ltd (2005) 62 NSWLR 698 in Chapter 3, nn 29-34 and accompanying text. 53 Environmental Planning and Assessment Act 1979 (NSW) Part 4. Also see Local Government Act 1993 (NSW) s 68. 54 Local Government Act 1993 (NSW) Chapter 11 and s 355.

Chapter 4 205 their constituents.55 However, it is not always the case that the technocratic and democratic aspects of councils work in harmony. An example of this is what occurred in Abdo v Wyong Shire Council.56

This case involved an appeal to the Land and Environment Court against council’s refusal to grant development approval for the erection of five residential flat buildings comprising 40 units and a basement car park in a semi rural locality. The development application had been supported by council’s Director of Health and Development and by council’s Development Management Panel and Development Assessment Panel. But after public opposition, council rejected the application for a range of reasons, including: non-compliance with relevant Development Control Plans; adverse impact on social amenity; and council’s refusal to grant an easement for vehicular access over a drainage reserve.57

In dismissing the appeal against council’s refusal to grant development consent, Commissioner Nott preferred the views of the elected councillors to those of council’s staff regarding the lack of recreational facilities available to support the future population of such a large development. In stressing the democratic pedigree of the councillors, the Commissioner said:58 In matters of amenity and in many other matters, the councillors are well- equipped to decide these matters about which clearly there can be differences of opinion. No doubt the councillors were influenced by the large numbers of objections to the proposed development because of its residential flat building character, which is out of character with the other residences in the locality. In the public interest, it is nevertheless a relevant consideration to take into account the desires and wishes of other members of the existing community.

55 Local Government Act 1993 (NSW) Chapter 9, Part 2, Divisions 1-3, and Chapter 10. Also see Paul Lalich and Scott Neilson, ‘Review of the Land & Environment Court Jurisdiction: Discussion of issues relating to the Working Party review and reform of the court’ (2001) 7 Local Government Law Journal 49, 50-51 and Jeff Kildea, ‘A Review of the Report of the Land and Environment Court Working Party’ (2001) 7 Local Government Law Journal 67, 70. 56 [2004] NSWLEC 176. 57 Ibid [1], [3], [8]-[10]. 58 Ibid [47].

Chapter 4 206 As we shall see, many of the s 88K cases concerned an application to obtain an easement where the acquisition of such an easement over the putative servient land was a condition of council granting development consent in respect of the putative dominant land. Most commonly, this type of condition is imposed as a deferred commencement condition under s 80(3) of the Environmental Planning and Assessment Act, so that the development consent does not operate until the applicant has satisfied the council that the condition has been fulfilled.59 Additionally, s 80(1)(a) and s 80A(4) of the Act provide alternate bases for councils to grant development consent subject to conditions.60 It has been held that a grant of development consent subject to the condition that the applicant acquire under s 88K a right of carriageway over neighbouring land cannot be impeached on the basis that the consent is not final and certain, or that it defers an essential matter for later consideration.61

Courts have justified the ability of councils to grant development consents conditionally in the following terms. When someone wishes to develop their land, in addition to development consent of council, that person may also require the permission, consent or licence of one or more governmental instrumentalities or neighbours in order for the development to proceed. If council were precluded from assessing the planning merits of the application while all other consents were obtained, ‘the planning system of this State would descend into chaos.’62 The s 88K cases show many examples of the need to obtain permission from a neighbour, in the form of an easement over the putative servient land, in order to satisfy council’s deferred development consent. Further, in some of these cases, in addition to obtaining the easement, it was also necessary to obtain the permission of a

59 There are numerous examples of where the Land and Environment Court has, pursuant to s 97 of the Environmental Planning and Assessment Act, allowed an appeal against a council’s actual or deemed refusal to grant development consent by granting a deferred development consent that was to operate on the applicant obtaining an easement over neighbouring land. See, for example, Songkal Pty Ltd v Warringah Council (2001) 117 LGERA 237, 255 [88] (right of carriageway); Young v Gosford City Council (2001) 120 LGERA 243, 249 [11] (right of carriageway) Touma v Holroyd City Council [2004] NSWLEC 225, [37]-[39] (drainage easement); Trueclad Pty Ltd Baulkam Hills Shire Council [2004] NSWLEC 252, [29] (right of carriageway); MPN Nominees Pty Ltd v North Sydney Council [2004] NSWLEC 604, [3] (drainage easement). 60 Young v Gosford City Council (2001) 120 LGERA 243, 257-258 [40]-[44]. 61 Ibid 258-259 [45]-[50]. 62 Songkal Pty Ltd v Warringah Council (2001) 117 LGERA 237, 249 [46]. Also see Young v Gosford City Council (2001) 120 LGERA 243, 259 [47].

Chapter 4 207 governmental instrumentality to do such things as erect a crane on a public road,63 or to carry out work in an ecologically sensitive area.64

C Section 88K Cases We now examine the influence of councils, in their capacity as the regulator of the development of land, in the outcome of s 88K applications. We will consider the following matters: (1) the significance of council granting a deferred development consent in relation to the reasonably necessary enquiry under s 88K(1); (2) the significance of the actions of council other than granting a deferred development consent upon the requirements of s 88K(2), (4) and (5); and (3) the significance of council not granting a development consent in relation to the reasonably necessary enquiry. Although the actions of councils do not feature prominently in applications under the equivalent Queensland regime, we will note the relevant Queensland case law as appropriate.

In considering the influence of councils in the outcome of s 88K cases we will use the objective-subjective distinction. Where the court determines an issue on the basis that council has or has not taken a certain action, then the court has used subjective reasoning; it has adopted the judgment of the council as the relevant subject. However, where the court relies on the raw facts of the case in reaching its decision—without specific reference to the council’s view of those facts—then it has employed objective reasoning. We will see that there are examples of both types of reasoning in the cases, and at times the court has used both simultaneously in order to bolster its finding. However, the primary form of reasoning that emerges from these cases is objective.

1 Significance of Council’s Deferred Development Consent Many of the s 88K cases involve an application to obtain an easement as a means of satisfying a condition precedent to the commencement of a development consent

63 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1998) 43 NSWLR 504, 510, where council’s consent was needed. 64 Bogart v Wah Day (No 1) [2000] QSC 371, BC200006477, 3-4 and Bogart v Wah Day (No 2) [2001] QSC 229, BC200103683, 10, where the consent of the Department of Primary Industry might have been needed, depending upon the site of the easement.

Chapter 4 208 issued by a council in respect of the proposed development of the putative dominant land. The natural starting point for determining the significance of this factual scenario upon the court’s enquiry as to whether the easement is reasonably necessary for the effective use or development of the land is the divergence in the views of Hamilton J and Hodgson CJ in Eq.65 On at least one occasion Hamilton J has taken a subjective view of the enquiry so far as council’s conditional development consent is concerned. By contrast, Hodgson CJ in Eq has primarily taken an objective view of the s 88K(1) enquiry in this context.

In Tregoyd Gardens Pty Ltd v Jervis, Hamilton J said this of s 88K(1):66 The New South Wales Act requires the easement to be ‘reasonably necessary for the effective use or development of the land’, whereas the Queensland Act requires it to be ‘reasonably necessary in the interests of the effective use in any reasonable manner of any land.’ ...[I] think that the insertion of the word ‘development’ in New South Wales emphasises that the Act may be enlivened if the easement is reasonably necessary for any development that is within the law. This court is not to judge upon the reasonableness of the particular development, at least in the circumstances of this case.

Hamilton J’s interpretation of s 88K(1) places great importance on what a council considers an appropriate development of the land. The court is not to assess the reasonableness of the development; it is enough that the development be one permitted by law. Council had given consent to the subdivision of the putative dominant land into 15 residential lots on condition that the owner obtained an easement to pipe stormwater into council’s stormwater system in the street.67 Thus, the proposed development was one permitted by law, provided the easement was obtained. Implicit in his Honour’s reasoning is that the easement was reasonably necessary for the effective development of the land because without it the proposed development could not take place.

65 See Chapter 3, Part IV(B). 66 (1997) 8 BPR 15,845, 18,854. See Chapter 3, nn 98, 100 and accompanying text. 67 Ibid 18,847-18,848.

Chapter 4 209 For Hamilton J, the actual (subjective) view of the council as to what constitutes an effective development of the land was determinative in the case. In addition to what has just been said about the way in which his Honour construed s 88K (1), we should note one other aspect of the case. When asked by the putative servient owner to consider ways in which the subdivision could proceed without the need for an easement, Hamilton J noted that the only alternative would be for the mechanical pumping of water uphill from the putative dominant land. This option was dismissed because it was, in his Honour’s words, something that ‘the council will not countenance.’68 Hamilton J did not enter into an objective analysis of the relative merits of the mechanical pump and drainage easement methods: the fact that council endorsed the latter was enough.

Hodgson CJ in Eq’s construction of s 88K(1) is significantly different in principle. Under what is regarded as the first limb of his Honour’s construction of the provision, the court does have a role in assessing the reasonableness of the proposed use of the putative dominant land.69 In 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123, his Honour said that a necessary requirement for the satisfaction of s 88K(1) is that:70 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 ...

As a matter of principle, therefore, it is not enough under this approach that the easement is sought for a use for which council has given deferred development consent; the court must assess the reasonableness of that proposed development as against other possible developments.71 The question is assessed on an objective basis,

68 Ibid 18,854. 69 See Chapter 3, nn 99-102 and accompanying text. 70 (1998) 43 NSWLR 504, 508-509 (emphasis in original). 71 The qualifier in ‘principle’ is used because there has not been a case in which the court has rejected a s 88K application—where an easement was being sought to fulfil the condition of a development consent—on the basis that the proposed use is not reasonable as against other possible uses. Where an easement has been refused on the basis of s 88K(1), it has been because the second limb of Hodgson CJ in Eq’s test has not been satisfied, namely that the use or development of the land with the easement must be substantially preferable to the use or development without the easement. Also see

Chapter 4 210 where the all the circumstances of the case are considered, rather than simply noting what council has approved. Hodgson CJ in Eq explained the reason for this as follows:72 If there are some possible reasonable uses or developments of the land for which a proposed easement is not reasonably necessary, then it seems to me that the easement cannot be ‘reasonably necessary for the effective use or development’ of the land, at least unless there is some proposed use or development, for which easement is reasonably necessary, which is itself a reasonable use or development.

When we see how Hodgson CJ in Eq implemented this requirement in 117 York Street, the objective nature of the enquiry becomes slightly less clear. His Honour dealt with the first limb of his construction of the reasonably necessary test as follows:73 In the present case, the proposed development involves the erection of a multi- storey building covering the whole site, for which appropriate council approvals have been given. It seems clear that this is a reasonable development and (other things being equal) financially much preferable to any alternative which does not involve the erection of a multi-storey building or which involves a building not covering the whole site. There was no submission made to the contrary.

We can note a mixture of subjective and objective judgments in this passage. Reference is made to the actual (subjective) view of council—in the form of granting development consent—as well as the objective factor of the financial advantage that would accrue from the proposed development when measured against the existing use of the land. Additionally, because the putative servient owner did not argue that the proposed development was not a reasonable one, Hodgson CJ in Eq did not need to consider the issue more fully.

the discussion of the relationship between the two limbs in Chapter 3, nn 103-107 and accompanying text. 72 (1998) 43 NSWLR 504, 509 (emphasis in original). 73 Ibid.

Chapter 4 211 The second limb of his Honour’s construction of s 88K(1) requires that the putative dominant owner demonstrate that the proposed use or development with the easement sought is substantially preferable to the use or development available without the easement.74 Let us see how the concepts of subjectivity and objectivity are represented in the application of this requirement to the specific facts of 117 York Street.

This case involved an application for the imposition of three easements. Firstly, an easement for the temporary encroachment of scaffolding by two metres into the airspace of the putative servient land; secondly, for the permanent encroachment of a gutter on the proposed building on the putative dominant land by 20 centimetres into the airspace above the building on the putative servient land; and thirdly, for the temporary encroachment of the tail of a crane in an arc of 7 metres over the building on the putative servient land.75

Hodgson CJ in Eq held that the easement for the scaffolding was reasonably necessary as the evidence indicated that it was necessary to facilitate the construction of the external wall of the proposed building.76 His Honour did not elaborate on the content of this evidence; however, as there was no reference to any council requirement in this regard, we can assume that it related to safety issues in the construction process and was thus ‘objective’ in nature. By contrast, council had imposed as an express condition of its grant of development consent the construction of an encroaching gutter to collect rainwater from the proposed building. This subjective opinion of council was sufficient for Hodgson CJ in Eq to hold that an easement to allow the encroaching gutter was reasonably necessary within the meaning of s 88K(1).77 Thus, both objective and subjective reasoning are present in his Honour’s finding on these non-contentious easements.78

74 Ibid. 75 Ibid, 506-507. 76 Ibid 509. 77 Ibid 507, 509. 78 These easements were not contentious in the sense that the putative servient owner did not submit that they were not reasonably necessary for the use or development of the putative dominant land.

Chapter 4 212 More informative with regard to the subjective-objective dichotomy is his Honour’s reasoning regarding the third easement: an easement allowing the encroachment into the airspace of the putative servient land by the tail of the crane that was to be used in the construction process. The putative dominant owner had applied to council to erect the crane on a public street in order to move construction material to the building site. Council had refused to grant consent for the erection of the crane because the putative servient owner had not consented to the tail of the crane passing through the airspace of its land.79 The putative dominant owner applied for the imposition of an easement over the putative servient land that would allow the passage of the tail of the crane, in the hope that this would convince council to consent to the erection of the crane on the street. However, the grant of the easement would not compel council to approve the erection of the crane. The council remained the consent authority and would need to consider the development application relating to the crane on its merits.80

The reasoning that Hodgson CJ in Eq used in imposing the easement was clearly objective in nature. His Honour found that council’s opposition to the erection of the crane was not dispositive of the matter. Instead, his Honour engaged in a cost- benefit analysis based on the objective facts of the case. As a crane was needed in the construction process, it had to be erected either where the putative dominant owner submitted (in the public street), or within the building as it was being constructed. Hodgson CJ in Eq found that to site the crane within the building would require the re-design of the existing concrete slab floor, the various costs associated with which would amount to at least $250,000.81 By contrast, his Honour found that it would not impose ‘a heavy burden’ on the putative servient owner to impose the easement and thereby allow the crane to pass through its airspace.82

The two cases we have just considered—Tregoyd and 117 York Street—can be considered the paradigmatic representations of the subjective and objective modes of reasoning where a council had granted development consent conditional upon the

79 (1998) 43 NSWLR 504, 506, 510. 80 Ibid 518. 81 Ibid, 510 82 Ibid 511.

Chapter 4 213 acquisition of an easement. Our examination of other cases will see examples of both sorts of reasoning. Our analysis of the cases will proceed by grouping them together on the basis of the type of development for which the easement was sought: (a) an easement for the encroachment of scaffolding used during the construction process; (b) a permanent easement in respect of a non-strata development; and (c) various permanent easements in respect of a strata subdivision.83 We will then consider (d) the cases in which the court refused to impose an easement that was required as a condition of council’s development consent.

(a) Scaffolding Cases Although in these cases the grant of an easement to permit the temporary encroachment of scaffolding was not an express condition of a council’s development consent, it appears that as a practical matter scaffolding that encroached into a neighbour’s airspace was necessary to construct the building as approved by the council. We have seen that this form of easement was granted by Hodgson CJ in Eq in 117 York Street, on the basis of an objective rationale: that is, no reference was made to council’s opinion that the easement was required.

Hodgson CJ in Eq also used objective reasoning to impose the same type of easement in Katakouzinos v Roufir.84 With regard to the first limb of the ‘reasonably necessary’ enquiry, his Honour held that the proposed development to erect a five storey building was a reasonable development when compared to the only developments that would not require a scaffolding easement, namely the original building (which had been demolished), or a building that was set back from the boundary by at least 0.9 metres.85 Nor in Hodgson CJ in Eq’s consideration of the second limb was there any reference to council’s views. His Honour found that the proposed development with the scaffolding easement was substantially preferable to a development without the easement for the following reasons. Firstly, only a smaller building could be constructed without the easement, which would mean

83 This division has been chosen purely for convenience. It allows us to gain some insight into the factual context of the cases in a concise manner. It is not suggested that the court is necessarily more likely to use either objective or subjective reasoning in one of these categories than in the others. 84 (1999) 9 BPR 17,303. 85 Ibid 17,308 [40]

Chapter 4 214 significantly fewer residential apartments than in the proposed building: there would be thirteen apartments rather than seventeen. Secondly, re-designing the development would render the project financially marginal due to re-design costs of $20,000 and a delay of four to six months in gaining development and building approval. Thirdly, setting back the proposed building would leave a gap between the building and the boundary that would be of little practical use.86

A useful contrast with the objective reasoning in Katakouzinos is Goodwin v Yee.87 In this case the owner of the putative dominant land obtained development and building approval to erect a nine-storey residential apartment building in place of an existing cottage. The proposed building was to abut the building on the putative servient land, so that no gap was left between the buildings. In order to achieve this, safety scaffolding used in the construction of the building on the putative dominant land had to encroach into the airspace above the servient owner’s building. The putative dominant owner applied for an easement under s 88K to permit the encroachment.88

Windeyer J stated that it was clear that a building other than the one proposed, and which would not require a scaffolding easement, could be constructed on the putative dominant land. This did not mean, however, that the easement sought was not reasonably necessary for the effective development of the putative dominant land. His Honour noted that it was council’s policy that buildings be built up to the boundary so as to avoid narrow gaps between them. The existence of that policy, together with the fact that development and building approval had been given for a building that required the easement, meant that the easement was reasonably necessary within the meaning of s 88K.89 Although his Honour said that the fact that development approval had been granted was not determinative of the issue, and that the court had a discretion in relation to s 88K, Windeyer J was clearly heavily

86 Ibid 17, 307 [34], 17,308 [41]. 87 (1997) 8 BPR 15,795. 88 (1997) 8 BPR 15,795, 15,796. 89 Ibid 15,796, 15,799, 15,800.

Chapter 4 215 influenced by council’s policy on the matter.90 The case therefore supports a subjective interpretation of s 88K.

(b) Permanent Easement to Facilitate Non-Strata Development There are few cases in which a permanent easement has been applied for under s 88K in order to facilitate the non-strata development of land. The three cases in which the grant of such an easement was a condition of council’s deferred development consent, and where the court did grant the easement, will now be considered.

The first case that fits our requirements is Mitchell v Boutagy.91 Council had granted a deferred development consent for the subdivision of the putative dominant land into two allotments and for the erection of a house on the front allotment. The consent was conditional upon the putative dominant owner obtaining an easement to drain the site through the putative servient land. In the s 88K action, the putative servient owner agreed that an easement for the drainage of stormwater and sewerage through the putative servient land was reasonably necessary for the effective development of the putative dominant land, and the only live issue was the quantum of compensation.92 Thus, the case does not shed light on the subjective-objective distinction in the court’s approach to s 88K(1).

A slightly more helpful case is McConachie v Manly Council.93 Council granted development consent for the subdivision of the putative dominant land subject to a number of conditions. One of these was that a right of carriageway be obtained across land owned by the council so that the western lot of the proposed subdivision

90 Ibid 15,799. A Queensland case in which alleged council policies were given very little weight in an application for the compulsory imposition of an easement is Re Towerpoint Pty Ltd & Re Diridge Pty Ltd (1991) Q ConvR ¶54-389. In that case, the putative servient owner argued that a right of way should not be imposed because it would prevent future development of the putative servient land with 100% site coverage. The putative servient owner led town planning evidence—some of which Thomas J regarded as tenuous—that such development was consistent with current planning trends. His Honour rejected this argument and imposed the right of way saying the fact that ‘the view of planning experts and even ... those who work within Council, is not a decisive consequence in the present case, it is simply one relevant factor.’: at (1991) Q ConvR ¶54-389, 58,952. Unlike Windeyer JinGoodwin, Thomas J applied objective reasoning. However, the two cases do differ in that in Goodwin, the policies of council had crystallised in the form of development and building approvals, whereas in Re Towerpoint they had not. 91 (2001) 10 BPR 19,187. 92 Ibid 19,188-19,189 [4]-[10]. 93 [2002] NSWSC 434.

Chapter 4 216 would have street access. In the 88K action to obtain such an easement, the council—as the putative servient owner—did not raise any significant objections regarding the application, which was granted.94 Nevertheless, Bryson J felt moved to consider expressly the issue of whether the easement was reasonably necessary for the effective development of the putative dominant land. In deciding the issue in the affirmative, his Honour said:95 To my mind, it is altogether clear that there is such a necessity, as otherwise there can be no subdivision, and the westernmost part of [the putative dominant land] will remain sterilised from further significant development, in particular from residential development.

So far as the subjective-objective distinction is concerned, Bryson J’s statement is somewhat ambiguous. On one interpretation, his Honour could be taken to mean that without the easement the subdivision could not go ahead because council would not consent to it; this would be a subjective justification. Alternatively, his Honour could simply be referring to the undoubted practicality of the situation: no development of the proposed western lot could take place if there was no street access to it. Thus, the case is one that does not clearly favour either a subjective or an objective line of reasoning over the other.

The most instructive case in which a permanent easement was granted to facilitate the non-strata development of land is King v Carr-Gregg.96 The putative dominant owner had received deferred development consent from council to replace the existing house, to construct a swimming pool and to upgrade the existing tennis court on the putative dominant land. The consent was subject to a condition that the putative dominant owner obtain a deed of agreement with the putative servient owner in respect of an existing drainage pipe running underneath the putative servient land. That pipe had been laid some 25 years previously, before the (current) putative dominant and servient owners were the owners of their respective parcels of land.

94 Ibid [1], [7]-[11], [24]. It should be noted that the judgment implies, rather than expressly states, that the acquisition of a right of carriageway was a condition of council’s development consent. See at [12]-[16]. 95 Ibid [17]. 96 [2002] NSWSC 379.

Chapter 4 217 The pipe had been laid pursuant to a condition of council’s consent to the subdivision of land of which the putative dominant land formed part. However, the easement that was needed in respect of the pipe had never been formally created.97

The putative servient owner refused to enter into the agreement regarding the drainage pipe that was required by the putative dominant owner’s development consent. The putative dominant owner applied under s 88K for the imposition of a drainage easement in respect of the putative servient land that would regularise the presence of the existing pipe. In light of the application, council varied its approval from (a) a deferred development consent subject to the condition precedent of obtaining a deed of agreement in respect of the existing pipe, to (b) a consent that would allow the development to proceed, subject to a condition subsequent that an easement in respect of the existing drainage pipe be obtained within 2 years from the issue of a construction certificate. At the time of s 88K action was heard, the development of the putative dominant land had been completed.98

In the s 88K proceedings the putative servient owner argued that the drainage easement sought was not reasonably necessary for the effective use or development of the putative dominant land because the putative dominant owner could install an electric pump out system that would obviate the need for discharging water through the existing pipe. However, council had a policy that prohibited the use of such an electric system in these circumstances.99 In concluding that the easement was reasonably necessary, Forster AJ primarily adopted a subjective justification: council had made the acquisition of the easement a condition of granting development consent, and despite the fact that the development had been completed, that condition remained unfulfilled. Additionally, his Honour referred to the regulatory authority of council in stating that he was not persuaded that council would allow the installation of an electronic pump out system in any case.100

97 Ibid [10]-[13], [17], [23], [26]. 98 Ibid [23]-[26], [32]-[33], [47]. 99 Ibid [43]-[44], [46]. 100 Ibid [47]-[48].

Chapter 4 218 If Forster AJ had left the matter there, the case would have been an unqualified endorsement of the subjective approach: council has spoken and the matter is closed. However, his Honour felt obliged to supplement his reasoning by engaging in an objective analysis of the merits of the two competing drainage systems. After acknowledging that the expert evidence led by each side was of questionable weight,101 Forster AJ concluded that he was completely unpersuaded that the electronic pump out system would provide ‘a viable alternative to the use of the existing pipe.’102 Thus, King v Carr-Gregg provides strong, but not complete, support for the subjective approach to s 88K where a council has made the acquisition of an easement a condition of development consent.

(c) Permanent Easement to Facilitate Strata Development There are three cases in which the court has granted an easement in circumstances where the acquisition of the easement was a condition of the relevant council’s consent to the strata development of the putative dominant land. The first of these is Kent Street Pty Ltd v Council of the City of Sydney, in which council’s consent to a proposed strata subdivision was conditional upon the acquisition of a right of carriageway, a drainage easement and an easement for light and air over a privately owned laneway abutting the putative dominant land.103 In holding that these easements were reasonably necessary for the effective development of the putative dominant land, Barrett J adopted the objective mode of reasoning. His Honour made no reference to the fact that council required the existence of the easements in order for the strata subdivision to go ahead, but rather relied on the raw, unmediated facts of the case. His Honour said:104 It is clear in this case that the building on the [putative dominant land] ... has been constructed and is used on an implicit assumption that the laneway is to all intents and purposes a public road. The vehicle entrance, fire exit doors, windows and roof water drainage system of the [putative dominant owner’s] property have been installed and are used on that footing. ...

101 Ibid [55]. 102 Ibid [56]. 103 (2001) 10 BPR 18,757, 18,757-18,758 [3]-[4]. 104 Ibid 18,759 [13]-[14].

Chapter 4 219 It would be a very heavy burden indeed for the [putative dominant owner] now to have to rearrange things so as to avoid using the laneway in a way in which it is currently used. The use of the [putative dominant land] with the current arrangements for vehicle access, emergency egress, natural light and roof water drainage must be substantially preferable to its use without those arrangements.

The objective approach was also taken in Busways Management Pty Ltd v Milner, where council had granted consent for the strata subdivision of the building on the putative dominant land. However, the footings of the building encroached into the subsoil of the neighbouring land.105 This meant that the proposed strata plan could not be registered until an easement permitting the encroachment was obtained in respect of the putative servient land.106

The judgment of Hamilton J states that council’s strata subdivision consent was given conditionally, but does not state what those conditions were.107 The headnote to the case assumes that these conditions included the grant of an easement in respect of the encroaching footings, but this is not expressly stated in the judgment. Additionally, one can reasonably infer from what Hamilton J did say that this was not the case.108 However, irrespective of whether or not the requirement of an easement was expressly identified by council as a condition of its subdivision consent, Busways is still an instructive case in terms of the subjective-objective enquiry. This is because of the intersection between council’s consent and the reasonably necessary enquiry as required by s 88K(1).

105 (2002) 11 BPR 20,385, 20,385-23,386, 20,287 [1]-[3], [8]. 106 Ibid 20,387 [8]. For the relevant statutory provision, see below n 108. 107 Ibid 20,389 [14]. 108 At ibid 20,387 [8], Hamilton J said (emphasis added): ‘What ... has led the [putative dominant owner] to apply to this court for an easement under s 88K ... is that the [putative dominant owner] has obtained from the relevant consent authority a consent for the strata subdivision of the factory complex on its land. It has in fact entered into contracts for the sale of a number of the units subject to the registration of the plan of strata subdivision. However, it has become apparent that the registration of that plan cannot be achieved without the existence of an appropriate easement in respect of the encroachment of the factory complex on to the [putative servient owner’s] land: see Strata Schemes (Freehold Development) Act 1973 (NSW) s 8(1), (2) and Sch 1A item 4.’ There are two aspects of this passage that suggest that council’s consent did not expressly require that an easement be obtained. Firstly, the italicised words indicate that the putative dominant owner only became aware that an easement was required at some time after council had given its consent. Secondly, the only obstacle cited by his Honour for the registration of the strata subdivision plan in the absence of an easement was the relevant legislative provision, and not council’s conditions.

Chapter 4 220 In conducting the reasonably necessary enquiry, Hamilton J engaged in a cost-benefit analysis by comparing (a) the state of affairs that would prevail if the easement were granted: namely, the conversion of the putative dominant owner’s building to strata title with (b) the state of affairs that would prevail without the easement: namely, the retention of the building in a unitary title. In this calculus his Honour did not rely on the fact that council had given its consent to the registration of the strata plan. Instead, Hamilton J relied on the advantages as objectively identified. These included the flexibility afforded by a strata scheme to the putative dominant owner in being able to market the lots individually and to sell some and retain others.109

The objective nature of Hamilton J’s analysis also pervaded the assessment of the cost of imposing the easement on the putative servient land. Rather than simply saying that the easement was necessary to give effect to what council regarded as an appropriate use of the land—as he had in Tregoyd—Hamilton J concluded that the impact on the putative servient land was minimal by looking at the facts as existing independently of the state of mind of any other subject (decision-maker). The encroachment of the footings was marginal, long-standing and the source of no demonstrated past inconvenience. Neither the past use of the putative servient land, nor the prospect of its future development, was adversely affected by the encroachment.110

A very similar, although not identical, approach was employed in Pasade Holdings Pty Ltd v Sydney City Council (No 1).111 The putative dominant owner in this case proposed to redevelop its city office building and subdivide it into strata lots. The council approved the development and strata subdivision application on condition that the putative dominant owner acquire an easement for light and air to the windows of the building in respect of a vacant strip of land adjacent to the building. The strip was used as a passageway, had no street frontage, and its owner could not

109 Ibid 20,389 [13]. 110 Ibid. 111 (2003) 11 BPR 21,001.

Chapter 4 221 be identified. The putative dominant owner brought an action for the imposition of such an easement under s 88K.112

Like Hamilton J in Busways, in determining whether the easement was reasonably necessary as required by s 88K(1), Bryson J in Pasade (No 1) assessed the benefits that would flow from the conversion of the building to strata title in objective terms. Rather than simply endorsing the council’s conclusion that the implementation of a strata scheme would be an appropriate use of the putative dominant land, Bryson J had regard to the objective facts of the case. His Honour was satisfied that the valuation evidence supported what was otherwise obvious: the conversion to strata title would be an economically effective way of developing the building and would greatly enhance the value of the land.113

In determining that the cost to the putative servient owner caused by the imposition of the easement would only be slight, Bryson J, again like Hamilton J in Busways, had regard to the circumstances of the case unmediated by the views of any other subject. The identity of the putative of the putative servient owner was unknown; there was no evidence of use of the passageway by its owner, or the owner’s predecessor in title, for over 163 years; and development of the passageway was not practicable.114

However, unlike in Busways, Bryson J bolstered his conclusion regarding the reasonably necessary enquiry with subjective reasoning: the strata plan could not be registered unless council’s requirement regarding the easement was satisfied.115 Unlike the easement permitting the encroachment in Busways, the easement for light and air in Pasade (No 1) was not a legislative requirement; rather it was only a requirement because council choose to make it a condition of its development consent. Accordingly, Bryson J endorsed the right of council to impose conditions that it regarded as proper, and then included council’s view in the cost-benefit analysis used to determine whether the s 88K(1) requirement had been met.

112 Ibid 21,001-21,002 [1]-[4]. 113 Ibid 21,003 [7]. 114 Ibid 21,004 [8]. 115 Ibid 21,003 [7].

Chapter 4 222 Although the easement for light and air was imposed by the court under s 88K, thereby satisfying the conditions of council’s approval of the strata subdivision, it transpired that Land and Property Information NSW (‘LPI’)—as the statutory authority empowered to register the strata plan—refused to do so. The reason for this was that there were three encroachments by parts of the putative dominant owner’s building into the airspace above a second passageway that was adjacent to the building. The LPI required that easements be acquired that would permit these encroachments before the strata plan could be registered. This meant that the putative dominant owner had to commence further s 88K proceedings in order to obtain these easements. This action was dealt with in Pasade Holdings Pty Ltd v Sydney City Council (No 4).116

The encroachments into the airspace above the second passageway identified by the LPI were: parts of a sprinkler system; eleven rows of window ledges; and a ventilation pipe. Hamilton J used a cost-benefit analysis based on objective facts to conclude that the easements were reasonably necessary and should be granted. His Honour found that the removal of the window ledges would be difficult, would create a risk of water penetration and would alter the fabric of the building in a way that would significantly affect its heritage status. Although it was physically possible to remove the sprinkler system and ventilation pipe, this would also affect the heritage nature of the building. Imposing the easement would have the benefit of preventing these adverse outcomes, while allowing the conversion of the building to strata title and thus realising all of the benefits that this would entail.117 On the other side of the ledger, the imposition of easements permitting the encroachments would have little effect on the second passageway; easements for light and air had already been imposed over it, precluding any development that would otherwise have been possible. The encroachment easements would make little difference.118

116 [2003] NSWSC 1220, [5]. In an earlier action—Pasade Holdings Pty Ltd v Sydney City Council (No 2) [2003] NSWSC 584—Bryson J had granted an easement for light and air in favour of the putative dominant land in respect of that second passageway. For the sake of completeness, we should note that Pasade Holdings Pty Ltd v Sydney City Council (No 3) (2003) 12 BPR 22,441 involved a dispute over costs arising out of the earlier proceedings. 117 [2003] NSWSC 1220, [12]-[15]. 118 Ibid [15] and see n 116 above.

Chapter 4 223 It is apparent that Hamilton J in Pasade (No 4), as he did in Busways, relied on purely objective reasoning in the reasonably necessary enquiry. Unlike Bryson J in Pasade (No 1), Hamilton J placed no reliance on the actual (subjective) views of either council or the LPI in carrying out the cost-benefit analysis. The conditions imposed by these bodies gave rise to the need to obtain the easements, but they did not provide a reason why those easements should be granted.

From this analysis we can conclude that in imposing an easement that satisfies an actual or implied condition of council’s development consent, the court has rarely relied on a subjective line of reasoning alone to justify the imposition of the easement. Tregoyd and Goodwin are probably the only instances of this. On a few occasions the court has used subjective reasoning to support the same conclusion reached through objective reasoning.119 The dominant form of reasoning has been objective.120

(d) Refusal to Grant an Easement where Council has Granted Development Consent We have examined the cases in which the court, through either subjective or objective reasoning, granted an easement that was necessary to give effect to a council’s development consent. We now turn to the cases in which the court refused to grant an easement despite the fact that the acquisition of the easement was a condition of the development consent. As in these cases the court acted other than in conformity with what the relevant council viewed as an appropriate use of the putative dominant land, the court has, by definition, employed an objective approach to the reasonably necessary enquiry.

There are two cases that fall within this category. The first is Beekman v Gray,121 in which the putative dominant owners were two couples that owned the land as tenants in common. There were two separate houses on the putative dominant land and each house was occupied by one of the couples. Those owners sought the council’s

119 King v Carr-Gregg; Pasade (No 1). 120 117 York Street; Katakouzinos; Kent Street; Busways; Pasade (No 4). 121 (2002) NSW ConvR ¶56-016 (not a full report of the case); [2001] NSWSC 531.

Chapter 4 224 approval to subdivide the land so that each house would have its own title. Council consented to the subdivision request, but subject to the condition, among other things, that a drainage easement be acquired over two downstream properties for the benefit of the putative dominant land and two upstream properties.122 The putative dominant owners brought an action under s 88K for the imposition of drainage easements over each of the relevant downstream parcels in order to satisfy the council’s condition. Before trial, the putative dominant owners negotiated a drainage easement with one of the downstream owners in favour of the putative dominant land and one of the upstream parcels. At trial, the putative dominant owners continued to seek the grant of a drainage easement against the other downstream owner.123

In a judgment that was delivered shortly after the hearing was completed,124 Windeyer J denied the application. His Honour was of the view that although the proposed subdivision would be an effective use and development of the land, the imposition of the easement sought was not reasonably necessary for that purpose.125 His Honour said that as the putative dominant land had an effective drainage easement over one of the downstream properties, the imposition of an easement over the other downstream property was not reasonably necessary for that use of the land.126 This was especially so because the subdivision was to formalise the status quo, and would not result in the construction of any new dwelling.127

The refusal to grant the easement sought meant that the condition required by the council for the proposed subdivision had not been met. Accordingly, Windeyer J reserved to the court the right to determine for itself, on objective criteria, the question of whether the easement was reasonably necessary within the meaning of s 88K(1). The fact that council required the granting of an easement as a condition for the exercise of its regulatory power was not determinative of the issue. Windeyer J was no doubt aware that by refusing to grant the easement he was denying the putative dominant owners their development consent. His Honour mused that in the

122 [2001] NSWSC 531, [7]-[10]. 123 Ibid [16]-[17]. 124 Ibid [1]. 125 (2002) NSW ConvR ¶56-016, 58350 [21]. 126 Ibid 58350-58351 [22]-[29]. 127 Ibid 58350-58351 [25].

Chapter 4 225 light of his judgment council might vary the condition and not require the easement over the second downstream property to be obtained. However, in his Honour’s words that ‘is a matter between the plaintiffs and the council and the Court cannot take the matter any further.’128

The second case that is a clear example of a court regarding itself as not being bound by council’s subjective view of what is a desirable state of affairs is Blulock Pty Ltd v Majic. It will be recalled that in this case council granted the owner of the putative dominant land consent to redevelop its building into residential units on condition that an easement for light and air be acquired that burdened the putative servient land. The putative dominant owner brought an action under s 88K before Windeyer J for the imposition of such an easement.129

We have seen130 that Windeyer J relied on the objective circumstances of the case— without deferring to council’s view—to conclude that the proposed use of the putative dominant land was the only reasonable use for the land. This satisfied the first limb of Hodgson CJ in Eq’s test for whether the proposed easement was reasonably necessary. However, the putative dominant owner was unable to satisfy the second limb of the test, that is, that the use and development with the easement was substantially preferable to the use and development that would be possible without the easement. For Windeyer J, there were two shortcomings in the case made by the putative dominant owner in this regard.

Firstly, the putative dominant owner had not demonstrated that the redevelopment could not be carried out without the benefit of the easement sought. The putative dominant owner had not presented evidence that it was not feasible to reconfigure its building so that it would be sufficiently set back at the level above the height of the buildings on the putative servient land. If the building could be so set back, this would have guaranteed an adequate flow of light and air and no easement would be needed.131

128 Ibid 58350 [25]. 129 (2001)10 BPR 19,143, 19,143, 19,146 [1], [8]. . 130 See above n 29 and accompanying text. 131 (2001) 10 BPR 19,143, 19,149 [14]-[15].

Chapter 4 226 Secondly, Windeyer J held that imposition of the easement sought would constitute a serious interference with the property rights of the putative servient owner, as it would prohibit almost any change to the existing structures on the putative servient land. The easement would clearly prohibit any improvements being built on that land above the height of those already existing. Additionally, a strict reading of the terms of the proposed easement would prohibit replacing any of the buildings currently located on the site of the easement if they were demolished. For Windeyer J, the magnitude of this burden on the putative servient land and its owner meant that the putative servient owner could not be adequately compensated for the imposition of the easement, as required by s 88K(2)(b). It also meant that the court’s discretion under s 88K(1) as to whether an easement should be granted should be exercised in the negative.132

Accordingly, Blulock,likeBeekman, unequivocally demonstrates an objective approach by the court to the reasonably necessary enquiry. Despite the fact that council required the acquisition of the relevant easement as a condition of its development consent, the court looked to the objective circumstances of the case and, unmediated by council’s own opinion, found that the easement was not reasonably necessary for the effective use and development of the putative dominant land.

2 The Significance of Council Action Outside s 88K(1) We have reviewed the cases in which the court had to consider the significance of a council’s development consent as a part of the reasonably necessary enquiry under s 88K(1). We will now briefly consider the cases in which an action of a council, other than the grant of development consent, has been regarded by the court as being relevant to the requirements of s 88K, other than s 88K(1).

Section 88K(2)(a) provides that an easement can only be granted if the court is satisfied that the proposed use of the putative dominant land will not be inconsistent

132 Ibid 19,149-19,151 [17]-[22].

Chapter 4 227 with the public interest.133 In Busways, in addition to relying on the objective circumstances of the case, Hamilton J cited council’s grant of a conditional development consent in regard to the proposed development of the putative dominant land as evidence that the proposed use would not be inconsistent with the public interest.134

Section 88K(4) requires that owner of the dominant land pay to the servient owner appropriate compensation for the imposition of the easement unless the court determines that compensation is not warranted because of the special circumstances of the case.135 North v Marina is one such case in which the court concluded that there were special circumstances. Campbell J ordered that compensation not be paid and in so doing relied on the views of council as to the merits of the case. The need for an easement arose because the servient owner had undertaken unauthorised demolition work on his land that caused a breach in the party wall between the dominant and servient land. After negotiations between the parties and council, council issued an order requiring the construction and waterproofing of a new party wall. The owner of the dominant land commenced s88K proceedings to obtain an easement enabling her to maintain the waterproofing of the new wall, and at trial the servient owner finally conceded that such an easement was necessary.136 Campbell J granted the easement, but refused to grant compensation to the servient owner. One of the factors that strongly influenced his Honour finding of special circumstances was that the parties had agreed that the effect of council’s order required the granting of the easement.137 The court was thus influenced by council’s actual (subjective) views of the merits of the dominant owner’s claim.

Section 88K(5) requires that the costs of s 88K proceedings, including the putative servient owner’s costs, be paid by putative dominant owner, unless the court makes

133 See Chapter 3, Part V. 134 (2002) 11 BPR 20,385, 20,389 [14]. A link between council’s approval powers and the public interest was also made in Debbula Pty Ltd v The Owners—Strata Plan 6964 (2003) 12 BPR 22,617, 22,624 [41] and in the context of the Queensland provision in Re Worthston Pty Ltd [1987] 1 Qd R 400, 404. 135 See Chapter 3, Part IX. 136 (2003) 11 BPR 21,359, 21,260-21,363, 21,366 [11], [19]-[21], [34]. 137 Ibid 21,380-21,381 [92]-[94].

Chapter 4 228 an order to the contrary.138 In Woodland v Manly Municipal Council (No 2),139 the putative dominant owner, who had been unsuccessful in obtaining an easement over council’s land in the main proceedings,140 argued that he should not have to pay the council’s costs on the basis that the council had acted unreasonably in relation to the claim. The alleged unreasonable conduct consisted, in part, of encouragement given by some of council’s officers to the granting of the easement over council’s land and the commencement of s 88K proceedings.141 Hamilton J rejected this argument in the following terms:142

As to this, it must be said that it is a notorious fact that democratically elected councils at times act contrary to the recommendations or advice of their officers. Furthermore, while such conduct may in some instances be unreasonable, there are many instances in which it is not at all unreasonable for a council, as a democratically elected and the ultimate deciding body, to act in that way. In my view in this case there is nothing in the council’s conduct which could be said to be such as to cause a deviation from the usual rule as to costs.

What his Honour’s reasoning demonstrates is a conceptualisation of a council as a discrete corporate entity—as distinct from a collection of individuals—with the capacity to form a single (subjective) view. The court had regard to the official view of council in opposing the easement and did not penalise council—in the form of denying it costs—despite the actual (objective) conduct of individual officers.

These cases show a preparedness of the court to accept a council’s subjective views in the issues relevant to s 88K other than the reasonably necessary enquiry. What Hamilton J said in Busways about the relevance of a council’s grant of development consent to the public interest question has significant potential for future cases. As it is not uncommon in s 88K actions that the putative servient owner is a council, what

138 See Chapter 3, Part X. 139 (2003) 11 BPR 20,915. 140 Woodland v Manly Municipal Council (No 1) (2003) 11 BPR 20,903. 141 (2003) 11 BPR 20,915, 20,916 [4]-[5]. 142 Ibid 20,916 [5].

Chapter 4 229 Hamilton J said in Woodland (No 2) regarding the costs issue could be very relevant to future cases. By contrast, it is unlikely that there will be many more cases in which council’s will express its view of the merits of the case in a formal order. Accordingly, what Campbell J said in North v Maria on the compensation issue is unlikely likely to have much significance.

Thus far our consideration of the subjective-objective distinction has addressed the relevance of some positive action of council (usually the issue of a development consent in respect of the putative dominant land) to the s 88K prerequisites (usually s 88K(1)). Our analysis has shown that there are only limited cases in which a court has relied heavily on a subjective form of reasoning, that is, one that defers to council’s views of a particular matter. We now examine the situation where a putative dominant owner applied for the imposition of an easement in circumstances in which council had refused to grant development consent for the proposed development. We will see that in this context, the court has been influenced by the purposeful omission of council and has more readily employed a subjective form of enquiry in refusing to impose the easement.

3 Council’s Refusal to Grant Development Consent On first examination there appear to be three s 88K cases that fall within this category; in fact there is only one.143 The decision in 117 York Street does not come within this category of cases. Although Hodgson CJ in Eq granted an easement that would permit encroachment of the crane in the face of council’s refusal to grant development consent for its use, two factors take the case outside the category with which we are here concerned. Firstly, his Honour made an order preventing the erection of the crane until council had given development consent for this.144 Secondly, and more importantly for our present purposes, council had given development consent for the construction of the building on the putative dominant land. This was not a case where the court had to pass judgment on the

143 Although there are other cases in which a related theme is present. See below nn 162-169 and accompanying text. 144 (1998) 43 NSWLR 504, 522.

Chapter 4 230 reasonableness of the development as a whole without having the benefit of council’s endorsement of it.

Another case that might be considered as a ‘red herring’ in this regard is Woodland v Manly Municipal Council (No 1).145 In this case the putative dominant owners sought to subdivide their land and applied under s 88K for the imposition of a drainage easement through land owned by the council in order to effect the drainage of the proposed rear block. At one time the putative dominant owners had secured council’s development consent for the subdivision, subject to a condition that an easement to drain storm water through an adjoining property was acquired. However, the development consent had lapsed. In the s 88K proceedings, council argued that the easement sought should not be granted, but rather water from the rear block should be electronically pumped through the front block into a drainage system under the street.146

Hamilton J refused to grant the easement requested, but not because the putative dominant owners did not have an active development consent for the proposed subdivision of the putative dominant land. His Honour thought it likely that council would grant a fresh development consent for the subdivision, but on the condition that storm water from the proposed rear block be disposed of by an electronic pump out system.147 The reason why Hamilton J refused to grant the easement was because, on a cost-benefit analysis, the easement sought by the putative servient owners was inferior to the electronic pump out system argued for by council. The adoption of council’s alternative would cost the putative dominant owners between $10,000 and $20,000 more than if the easement were granted. However, in his Honour’s view, this would be more than off-set by the fact that disposing of storm water through the requested easement would exacerbate the already existing water pooling problems in the area, particularly in the context of a one in twenty year rain event.148

145 (2003) 11 BPR 20,903. 146 Ibid 20,903, 20,910 [1]-[2], [22]. 147 Ibid 20,910 [23]. 148 Ibid 20,911-20,912, 20, 913 [29], [35].

Chapter 4 231 Because Hamilton J was prepared to assume that council would consent to the subdivision of the putative dominant land, we can conclude that Woodland (No 1) is just another example of the court engaging in an objective form of analysis in determining whether the grant of the easement was reasonably necessary. It was the facts of the case—established by expert evidence—rather than council’s opposition itself that led the court to its conclusion. This is another case where the court’s objective reasoning reached the same result as reached by council. In most of these cases council’s opinion was that there should be an easement; in this case council’s opinion was that there should not.

This leaves Debbula Pty Ltd v The Owners—Strata Plan 6964149 as the only s 88K case in which it was council’s absolute opposition to the proposed development of the putative dominant land that led the court to refuse to grant the easement sought. In this case the putative dominant owner proposed to demolish the existing single- storey house on its land and erect three two-storey units. Council had refused to grant development consent for this proposal on two occasions because the height of the proposed development would have an unacceptable impact on the views of neighbouring properties. Despite council’s refusal, the putative dominant owner commenced a s 88K action to acquire an easement to drain water from the putative dominant land through the putative servient land. Such an easement would be required if the development proceeded because council opposed the use of any mechanical drainage system in relation to the land.150

In the action before Master Macready,151 the putative dominant owner argued that the need for the easement satisfied the first limb of Hodgson CJ in Eq’s construction of the reasonably necessary test, and made two submissions in this regard. Firstly, no reasonable use or development of the land could be carried out without the easement. Secondly, if the first submission was incorrect, the proposed development was reasonable when compared to other uses or developments of the land that did not require the easement.152

149 (2003) 12 BPR 22,617. 150 Ibid 22,617-22,618 [1]-[11]. 151 The Master was exercising the power of an acting judge: ibid 22,618 [1]. 152 Ibid 22,621-22,622 [23]-[26].

Chapter 4 232 Master Macready rejected both of these submissions. In regard to the first, the Master held that the existing use of the putative dominant land, as the site of a single residential dwelling, was a reasonable use of the land. That use did not require the easement sought, as the existing drainage arrangements were sufficient. This conclusion was not diminished by the fact that the zoning of the land permitted the erection of residential flat buildings.153

It is Master Macready’s response to the putative dominant owner’s second submission that is directly relevant to the subjective-objective dichotomy. The Master expressed concern that in having to decide whether the proposed development was a reasonable development of the land in circumstances where the council had not given development consent, the court was being asked to perform council’s town planning function. This was a ‘difficult and delicate task’ that the court was not equipped to perform as it required the balancing of the interests of one landowner against those of another. In the normal course of events it is desirable that council first consider the appropriateness of a development, including whether the grant should be made conditional on the acquisition of an easement, before the court is asked to consider whether an easement should be imposed under s 88K. To reverse the procedure requires the court to second-guess whether council would ultimately consent to the development proposal.154

In the Land and Environment Court case of Becton Corporation Pty Ltd v Minister for Infrastructure, Planning and Natural Resources, Lloyd J expressed the view that Debbula was authority for the proposition that the Supreme Court will refuse a s 88K application where the proposed development has not received council’s development consent.155 However, this is not correct. Master Macready, citing 117 York Street as authority, rejected the putative servient owner’s submission that the grant of

153 Ibid 22,624 [37]-[38]. 154 Ibid 22,622 [26]-[28]. Macready M expressed (at 22,625-22,626 [49]) the hope that in the future this situation would be avoided because of amendment to s 40 of the Land and Environment Court Act 1979 (NSW). For a brief description of that provision, see Introduction, nn 32-37 and accompanying text. 155 [2005] NSWLEC 197, [11].

Chapter 4 233 development consent was a precondition to making a grant under s 88K.156 The Master made it clear that the court is prevented from making a grant only where the court believes that it is unlikely, or that there is no reasonable likelihood, that council will consent to the development. This is because in such circumstances the court cannot be satisfied that the easement is reasonably necessary for a use or development that may not proceed because of a lack of development consent.157

On the facts before him, Macready M concluded that it was unlikely that council would consent to the development. Council had twice refused to do so because of the substantial impact on the views of the neighbouring properties. Accordingly, the Master refused to grant the easement.158

What Debbula indicates is that the court will consider itself bound by council’s conclusion that the proposed development of the putative dominant land is one that should not proceed. In this respect, this is a clear endorsement of a subjective form of reasoning: council is the relevant entity (subject) that is to decide the issue.159

In the Queensland context, the decision in Re Worthston160 parallels this view. In this case a commercial property developer, who wished to have its land rezoned to allow its subdivision, applied for the grant of a right of carriageway over land owned by another property developer in order to give its proposed lots access to a public street. The council had not given rezoning or subdivision approval, and the court dismissed the application for an easement on the basis that it was an impermissible attempt to pre-empt the decision of council as the competent planning authority. Although it was desirable for the putative dominant land to be subdivided at some time, council should not be fettered in deciding when this should occur.161

156 (2003) 12 BPR 22,617, 22,625 [46]-[47]. 157 Ibid 22,624-22,625 [39], [44]. 158 Ibid 22,624-22,626 [44], [51]. 159 Yet this too might be explained in objective terms. The power of councils to regulate land use can be seen as simply another element in the objective factual matrix: if no development consent can be obtained then there will be no benefit in granting the easement. The absence of benefit makes the cost-benefit calculation an easy one to conduct. 160 [1987] 1 Qd R 400, 161 Ibid 402, 407-408.

Chapter 4 234 The recent decision in Khattar v Wiese162 can be interpreted as an extension of the principle articulated in Debbula, although that case was not cited. In Khattar, council had issued a set of deferred development consents in respect of the putative dominant land, the effect of which was that existing structures could be demolished, the land subdivided and new dwellings constructed on the resultant parcels. The development consent was conditional upon the putative dominant owner obtaining over adjoining downstream properties a drainage easement that was 1.25 metres wide and that would not disturb the structure or root zones of existing trees on the servient land.163 The putative dominant owner brought s 88K proceedings for the imposition of a drainage easement over the putative servient land, but the easement applied for was only 1.20 metres wide and its construction would disturb the root zones of trees on the putative servient land.164 Brereton J refused to impose the easement because it was not reasonably necessary for the effective use or development of the putative dominant land. The only argument for the easement being reasonably necessary was that it was required so that the proposed development could proceed. However, as the imposition of the easement sought would not satisfy the condition of the deferred development consent, the development could not proceed even if that easement were imposed.165 Brereton J was also careful to point out that although it was possible that the council might vary the condition to accept on easement of 1.20 metres in width, there was no evidence to suggest that council would accept the acquisition of an easement that would disturb existing root zones.166

Like Debbula, Khattar demonstrates the respect that a court has for the (subjective) determination of a council that a particular development should not proceed. In Debbula the council’s prohibition of the proposed development was absolute; in Khattar the prohibition was conditional, in the sense that the development could not proceed unless a particular easement was acquired. In Khattar the conditional prohibition metamorphosed into an absolute one, as it transpired that the putative

162 [2005] NSWSC 1014. 163 Ibid [4]-[6]. 164 Ibid [36], [44]. 165 Ibid [44]-[45]. [79]. As we saw in Chapter 3, n 260 the other reason given by Brereton J for refusing to impose the easement sought was that the putative dominant owner had not made all reasonable attempts to acquire an easement having the same effect as that easement. 166 [2005] NSWSC 1014, [44].

Chapter 4 235 dominant owner was unable, or unwilling, to apply for the imposition of the particular easement required by council. In both cases the court regarded itself as bound by council’s prohibition of the proposed development proceeding, and accordingly refused to impose an easement that would be of no use.

A useful counterpoint to Khattar is the Queensland case of Re Trask Development Corporation (No 3) Pty Ltd.167 In this case, council issued development consent in respect of the putative dominant land on condition that the putative dominant owner secure the surrender of the putative servient land and its dedication as a road reserve. However, as the putative servient owner could not be identified from the state of the title, the putative dominant owner applied for the imposition of a statutory right of user in the form of a right of way over the putative servient land.168 In imposing the easement sought, McMurdo J acknowledged that it would not satisfy the terms of council’s conditional development consent, and that to activate the consent the putative dominant owner would need to convince council to vary the condition. However, unlike the position in Debbula and Khattar, McMurdo J clearly thought that this was a distinct possibility. Council had determined that access to the developed putative dominant land should be through the putative servient land— albeit by means of a public road rather than by a right of way—and council had been given the opportunity to oppose the application for the imposition but had not done so. 169

Accordingly, both Re Trask Development Corporation and Khattar are consistent with Debbula and Re Worthston. Where there is no reasonable prospect that council will formally consent to a proposed development of the putative dominant land, the court will not impose an easement that would otherwise be needed to facilitate that development. Similarly, where there is no reasonable prospect that council will formally consent to a proposed development of the putative dominant land without also requiring that a particular easement be acquired, the court will not impose a (different) easement that would not satisfy council’s condition. In neither case would the easement sought under s 88K (or s 180) be regarded as reasonably

167 [2003] QSC 115. 168 Ibid [6]-[7], [12]. 169 Ibid [7].

Chapter 4 236 necessary for the use or development of the putative dominant land as the proposed use or development could not be realised even if the easement were imposed. It would be otherwise, however, if the court thought that there was a reasonable prospect that council could be convinced that consent to the proposed development should be granted if the easement sought in the proceedings were imposed. In such a case the court can impose the easement,170 provided that it is satisfied on objective criteria that the prerequisites of the relevant statutory provision are satisfied.171

IV CONCLUSION This chapter has demonstrated that the cost-benefit analysis by which the court determines whether the easement sought is reasonably necessary for the effective use or development of the land is conducted, overwhelmingly, on an objective basis. That is, the court will consider all of the circumstances of the case, unmediated by the views of any subject (party or council), in order to ascertain whether the state of affairs that would exist if the easement were imposed is (substantially) preferable to the state of affairs that would exist if no easement were imposed.

In concrete terms this means the following. Firstly, the cost-benefit analysis is conducted on the basis that the preferences included in the calculus are those that would be held by a ‘reasonable and prudent landowner’. Secondly, those preferences are given the weight that would be given to them by the same reasonable and prudent landowner. Thirdly, the actual preferences of the putative dominant and servient owners do not feature in the cost-benefit process except to the extent that they conform by content and weight to the (objectively valid) preferences of a reasonable and prudent landowner. Fourthly, a preference for a particular development of the putative dominant land is regarded as objectively valid if it would increase the financial value of the land. Such a development would usually involve a more intensive use of the land, or a use that conforms to the way in which neighbouring properties are used.

170 See the discussion of Re Trask Development Corporation, above nn 167-169 and accompanying text. 171 See the discussion of Woodland v Manly Municipal Council (No 1), above nn 145-148 and accompanying text.

Chapter 4 237 As part of its commitment to an objective mode of reasoning, the court regards itself as free to look behind a council’s development consent that is conditional on the acquisition of an easement. In most of the cases, where a council has determined that a proposed use of the putative dominant land is a desirable one if a particular easement is acquired, but that the proposed use is not desirable if that easement is not acquired, the court has agreed with the council. There are some cases in which the court has not agreed. Nevertheless, in the majority of cases where the court has agreed with the council, the court felt obliged to justify its conclusion, either fully or in part, by producing a cost-benefit analysis of the objective facts that reached the same conclusion as that of the council.

There is an important exception to the finding that the court employs an objective, rather than a subjective, mode of reasoning. This is when the putative dominant owner seeks the imposition of an easement to facilitate a development of the putative dominant land that has been denied development consent by the relevant council. Where that refusal occurs in circumstances that suggest that it is unlikely that consent will be forthcoming in future, the court will defer to the view of the council as the relevant subject and refuse to impose the easement.

The court’s adoption of an objective, rather than a subjective, approach to the cost- benefit analysis that determines whether an easement is imposed is significant. Of course, an approach that seeks to satisfy what the parties should want is as much a goal-based approach as one that seeks to satisfy want the parties do want. However, in choosing between which of these goals should be maximised, and in equating what people should want with the more intensive use of land, this interpretation of the first-generation access legislation begins to resemble another mode of reasoning. That is, it starts to look like the duty-based form of reasoning that people have an obligation—despite their actual preferences—to act in a way that brings about a proper social ordering. In Chapter 5 we will see how this form of duty-based reasoning has been used to justify the enactment of the second-generation access rights regime. After that chapter, in the Conclusion we will consider how these forms of goal-based and duty-based reasoning intersect.

Chapter 4 238 CHAPTER 5 Painting Woody’s Sign: A Proprietarian Conception of Statutory Access Rights

As I went walking I saw a sign there And on the sign it said ‘No Trespassing’. But of the other side it didn’t say nothing, That side was made for you and me. Woody Guthrie, This Land is Your Land1

I INTRODUCTION The sign to which Woody Guthrie refers neatly captures the uni-directional nature of the duties that revolve around access to land. The landowner is free to issue a command denying access to his or her land and everyone else is under the duty to obey that command. But the landowner is not under any duty to exercise this power in a restrained or reasonable manner: the sign is painted on one side only.

In previous chapters we have seen how the first-generation access legislation—under which the Supreme Court can impose rights of access in the form of easements burdening the servient land in order to facilitate the use or development of dominant land—constitutes a significant qualification of a landowner’s ability to control access. The reasoning used to justify the enactment of this legislation is goal-based: the statutory regime is needed to ensure the efficient allocation of resources where the existence of a bilateral monopoly means that private bargaining can easily fail because of the parties engaging in strategic behaviour.2 As we will see in this chapter, the second-generation access legislation3—under which a lower court can grant temporary rights of access over servient land in order to facilitate work on the dominant land—can also be seen through the lens of economic efficiency.

In reading the first-generation and second-generation legislation in these economic terms, one holds the view that the legislation is ultimately designed to satisfy

1 Woody Guthrie, This Land is Your Land (1956 version) The Woody Guthrie Foundation and Archives at 19 February 2006. 2 See Chapter 1, Part IV. 3 Access to Neighbouring Land Act 1992 (UK); Access to Neighbouring Land Act 1992 (Tas); Access to Neighbouring Land Act 2000 (NSW). 239 individual preferences: the right to control access goes to the person who values it the most.4 In this way, one is subscribing to what Gregory Alexander calls the ‘property-as-commodity’ view. As Alexander says:5 Property satisfies individual preferences most effectively through the process of market exchange, or what lawyers call market alienability. The exchange function of property is so important … that property is often thought to be synonymous with the idea of market commodity.

Of course, the imposition of access rights by the courts under the legislation is the antithesis of free exchange. The granting of access constitutes an exchange nonetheless, as a valuable resource—access— has moved from a person who values it less to a person who values it more. This movement has not taken place through the market, but by a process that mimics the market.

However, for Alexander, the economic view of property as a commodity constitutes only ‘one-half of a dialectic’. The other half is the concept of ‘property as propriety’, which conceives of property as ‘the material foundation for creating and maintaining the proper social order’.6 Alexander describes the ‘proprietarian conception of property’ in this way. At its core, however, is the idea that the proper society is more than just whatever emerges from market relations. The properly ordered society may coincide with the market society, but the two are not identical. The market view of society is essentially empty. It can and historically has yielded many different forms of society. The proprietarian, by contrast, is always committed to some particular substantive view of how society should be ordered. 7

The substantive content of the proper social ordering involved in a proprietarian conception of property changes over time in response to the changing ‘social, political, and economic conditions of modernity’.8 The proprietarian conception of

4 Although as we saw in Chapter 4, Part II, these preferences are assessed on an objective basis. 5 Gregory Alexander, Commodity & Propriety: Competing Visions of Property in American Legal Thought 1776-1970 (1997) 1 (emphasis in original). 6 Ibid. 7 Ibid 2. 8 Ibid 14.

Chapter 5 240 property that most interests Alexander is that of civic republicanism, with its tenet of the appropriate subordination of private interests to ‘the common welfare of the polity’.9 In order for this ideal to be realised, the citizenry of the Republic had to maintain a particular moral character associated with virtue, which enabled the subordination of the self to the common good. Such virtue was constantly threatened by the possibility of corruption. The institution of property had a central place is sustaining virtue and holding corruption at bay.10 [R]epublicans conceived of property as necessary to facilitate a publicly active, self-governing citizenry. Republicans believed that ownership of property provides the necessary foundations of virtue, enabling citizens to pursue the common welfare. JGA Pocock has succinctly stated the republican function of property: ‘The citizen possessed property in order to be autonomous and autonomy was necessary for him to develop virtue or goodness as an actor within the political, social and natural realm or order. He did not possess it in order to engage in trade, exchange or profit: indeed these activities were hardly compatible in the activity of citizenship.’11

Baron and Dunoff offer a similar description of the main characteristics of civic republicanism:12 ... civic republicanism has a negative and a positive component. The negative component includes a sustained critique of the dominant ‘pluralist’ view that politics appropriately consists of the trading and satisfaction of constituent preferences. More narrowly ... republicans target the use of cost-benefit analysis for generating and evaluating all public policies. Finally, the negative component of the republican project details the ways in which the use of economic concepts and rhetoric distorts the political realm. ...

In the affirmative part of their project, republicans detail an alternative conception of politics as collective deliberation about the public interest.

9 Ibid 29. 10 Ibid 29-30. 11 Ibid 30-31 (reference omitted). 12 Jane Baron and Jeffrey Dunoff, ‘Against Market Rationality: Moral Critiques of Economic Analysis in Legal Theory’ (1996) 17 Cardozo Law Review 431, 452.

Chapter 5 241 Through politics, so conceived, individuals develop moral virtues such as empathy and solidarity. Moreover, through this dialogue process individuals become citizens and discover their collective values.

In this chapter we will demonstrate that the justification for the second-generation access legislation, but not that for its first-generation equivalent, has been advanced in explicitly proprietarian terms.13 The proper social order that the legislation seeks to secure is of course not the one envisioned by the civic republicans of revolutionary America, namely a natural social and political order dominated by the citizen- freeholder.14 Rather, it is contended that the second-generation legislation is built on a normative vision of a proper relationship between neighbours, where, in certain circumstances, the interests of an individual landowner have to be subordinated to the interests of her or his neighbour. This subordination is required in order to maintain a harmonious relationship between them. Such a harmonious relationship is the proper—natural—state of affairs that will flourish from the virtue of right- thinking and right-acting neighbours. However, it is always possible that this virtue will be subject to corruption, where one neighbour will put her or his own narrow interests first. It is the role of the second-generation (access to neighbouring land) legislation to defeat corruption and restore virtue by bringing about a proper state of affairs by forcing access where appropriate.

The proprietarian conception of a proper social ordering—whether based upon civic republicanism or the ideal of being a good neighbour—is a species of Dworkin’s duty-based reasoning.15 This is because under the proprietarian vision each individual has a duty to act in a way to bring about the common good, regardless of whether that individual’s personal interests would be promoted by so acting.

Part II of this chapter will revisit one particular aspect of the first-generation access legislation. It will argue that despite the references to public policy and public

13 In the Conclusion to this thesis we will note that although the explicit justification for the first- generation legislation is economic (or goal-based), there are specific aspects of the legislation that are proprietarian in nature as they are based on certain assumptions about what constitutes a proper social ordering. 14 Alexander, above n 5, 4. 15 See Chapter 1, Part II(B)(2).

Chapter 5 242 interest in the justifications given for its enactment, the first-generation access regime predominantly manifests an economic, and not a proprietarian, spirit. In Part III, we will examine the access to neighbouring land legislation—and the law reform reports and parliamentary debates that preceded its enactment—to identify its explicit proprietarian purpose. Part IV will evaluate the proprietarian credentials of the second-generation access legislation by comparing the core provisions of the legislation with material that articulates the meaning of being a good neighbour.

II FIRST-GENERATION LEGISLATION AND THE PUBLIC INTEREST Although the United Kingdom does not have first-generation legislation, the recommendations of the Law Commission for England and Wales (‘Law Commission’) provided the genesis for the enactment of such legislation in Queensland and New South Wales.16 Accordingly, we commence our analysis of the meaning given to the ‘public interest’ in the first-generation legislation by beginning with the blueprint for this legislation laid down by the Law Commission. We then consider the Queensland (s 180) and the New South Wales’ (s 88K) provisions. Although s 180 will be addressed in some detail (as we have not done so previously), the public interest requirement of s 88K has been fully dealt with elsewhere,17 and will be only briefly touched upon again.

A English Origins and the Public Interest The Law Commission’s recommendation for the enactment of access rights legislation was a part of the Law Commission’s wide-ranging proposals for the rationalisation of the law of easements, restrictive covenants and other rights appurtenant to land through the introduction of the concept of ‘Land Obligations’.18 One of these proposals was to give the Lands Tribunal the power to compulsorily

16 Queensland Law Reform Commission, A Report of the Law Reform Commission on a Bill to Consolidate, Amend, and Reform the Law Relating to Conveyancing, Property, and Contract and to Terminate the Application of Certain Imperial Statutes, Report No 16 (1973) 103 (‘These safeguards are based substantially on the recommendations of the Law Commission Paper...’); New South Wales Land Titles Office, Review of Easements Discussion Paper (1990), 39 (‘It is recommended that similar legislation to that of Queensland or Tasmania be introduced in NSW ...’) 17 See Chapter 3, Part V. 18 Law Commission, Transfer of Land: Appurtenant Rights Working Paper No 36 (1971) Part IV(C),

Chapter 5 243 impose a Land Obligation over servient land. This could be done in order to make ‘effective’ a desired ‘specific development’ or ‘specific change of the use’ of dominant land. Under the proposal the Land Tribunal could impose such a Land Obligation if it were satisfied that: (i) it would be in the public interest for the putative dominant land to be developed in the desired manner; (ii) the putative servient owner could be ‘adequately compensatedinmoneyforanylossor disadvantage’ caused by the imposition; and (iii) the refusal of the putative servient owner to agree to the imposition was unreasonable in all the circumstances, or alternatively, no competent putative servient owner could be located. 19

The Law Commission gave this example of where the compulsory imposition of a Land Obligation might be necessary.20 Let it be supposed that in a particular case it would be in the public interest that a housing estate should be built on a particular site, and, further, that such a development would require the acquisition of drainage rights over neighbouring land. It is always to be hoped that the developer will obtain those rights from his neighbour by agreement; but what if he cannot? The probable consequence will be that the developer’s land will not be put to optimum use, unless the development is carried out by some body having compulsory powers.

Perhaps the most interesting aspect of this statement is the nexus that is drawn between the optimum use of land and the public interest. The same nexus is drawn in another passage. The Law Commission stated that the proposal ‘is, essentially, an instrument of public policy’, and that:21 the time may have come for the law, in the public interest,togosomeway towards helping an owner to acquire such rights as are essential to enable him to put his land to better use.

At first blush it might be thought that the linking of the increased development of land with the public interest is consistent with a proprietarian view of property

19 Ibid Proposition 15(1) (p 118). 20 Ibid [116] (emphasis added). 21 Ibid [119] (emphasis added).

Chapter 5 244 rights. The proposal seems to require the subordination of individual interests (the ability of the servient owner to exclude others) to a particular vision of the wider social good. However, a moment’s reflection shows that the proposal is firmly within the tradition of property as commodity: it is based on the belief that resource ownership should satisfy individual preferences.

Identifying a nexus between increasing the value of resources and the public good, brings us very close to Posner’s ethical system of wealth maximisation.22 Posner argues that the value of a resource is simply a function of the value that a person places on that resource.23 When a resource is transferred from someone who values it less, to someone who values it more, then society as a whole is wealthier. Central to this view is that the public interest (or greater good) is simply an aggregate of the extent to which individuals’ preferences are satisfied.24 Posner expresses this idea as follows:25 money, to an economist, is not wealth, but just a measure of one’s entitlement to houses, cars, rewarding work, leisure, privacy, and countless other ‘things’ that constitute a person’s wealth; everyone’s wealth added together constitutes the nation’s wealth. The wealth of a nation is the present value of the flow of benefits, measured as suggested above, from the consumption of goods and services, tangible and intangible, by its people.

The Law Commission adopted the position that access rights should be compulsorily imposed because more intensive development of land is desirable. The reason for this must be that such development is what individuals do (or should) want. The netting off of what people want is then equated with the public interest. The view that the public good is simply an aggregation of individual preferences can be described as a thin view of the public interest. Support for the assertion that the Law Commission takes such a view of the public interest can be found in the

22 See Richard Posner, Economics of Justice (1981) 60-103. See Chapter 1, Part II(C). 23 Ibid 60-1, 64-5. 24 Ibid 61. Also see Dworkin’s summary of Posner’ thesis: Ronald Dworkin, ‘Is Wealth a Value?’ (1980) 9 Journal of Legal Studies 191, 192: ‘Society maximizes its wealth when all the resources of that society are so distributed that the sum of all … individual valuations is as high as possible.’ 25 Richard Posner, ‘Wealth Maximization Revisited’ (1985) 2 Journal of Law, Ethics & Public Policy 85, 86-7.

Chapter 5 245 Commission’s statement that ‘[w]e do not think that it would be necessary or desirable to define “the public interest”’.26 It is submitted that such a definition would only be unnecessary if the term lacks an independent content.

What we can conclude from this discussion is that the rationale given by the Law Commission for its recommendation is consistent only with the view that property rights should be shaped to bring about the efficient use of resources. The Law Commission has no other vision as to what constitutes a proper social ordering. The compulsory access regime it proposed had no additional proprietarian function.

B The Public Interest Requirement in Queensland Section 180(3)(a) of the Property Law Act requires that in order for a statutory right of user to be imposed, the proposed use of the putative dominant land must be ‘consistent with the public interest.’27 There has been some debate regarding the meaning of this requirement. In particular it has been asked whether the requirement is that the putative dominant owner must positively show that the use of the putative dominant land would be consistent with the public interest, or whether it is sufficient to show that the use would not be inconsistent with the public interest.28

In one Queensland case the concept of the public interest was thought to have a content over and above the aggregation of individual preferences. In Tipler v Fraser Matthews J found that the condition of s 180(3)(a) had not been satisfied because:29 the onus is on the [putative dominant owners] to satisfy me that the order proposed by them is consistent with the public interest. It is certainly consistent with their interest and, I would think not inconsistent with the public interest but that is not what is required by the sub-section. I am left in the position of just not knowing or not being able to conclude that it is consistent

26 Law Commission, above n 18, [119] (reference omitted). 27 The public interest requirement of section 84J(1) of the Conveyancing and Law of Property Act 1884 (Tasmania) is also expressed in terms of consistency. 28 The former view was taken in Tipler v Fraser [1976] Qd R 272,276 and the latter view in Ex parte Edward Street Properties Pty Ltd [1977] Qd R 86,90. For an outline of the cases dealing with requirement, see Hyman Tarlo, ‘Forcing the Creation of Easements—A Novel Law’ (1979) 53 Australian Law Journal 254, 269-270; Adrian Bradbrook and Marcia Neave, Easements and Restrictive Covenants in Australia (2nd ed, 2000) [3.11]-[3.12]. 29 [1976] Qd R 272, 276.

Chapter 5 246 with the public interest that the servient land should be used in the manner proposed.

Exactly what substantive content Matthews J would give to the concept of public interest, we cannot say. What we can say, though, is that his Honour regarded the public interest as being something other the personal preferences of the parties.

However, when one looks at the specific findings of consistency with the public interest in the majority of the Queensland cases, one discovers that the public interest is thought of as being a function of the productive, or efficient, use of resources. So in Ex parte Edward Street Properties Pty Ltd, Andrews J stated the public interest requirement was satisfied because ‘I am of the view that it is against the public interest that there be dead land, or landlocked land’.30 In Re Worthston Pty Ltd, Carter J found that the subdivision of the dominant land into suburban allotments would be consistent with the public interest ‘since there is a demand for such allotments’. More generally, his Honour thought that it was in the public interest for land to be used for the purpose for which it is zoned or for which it may be appropriately rezoned.31 Additionally, In the Matter of an Application by Kindervater, Derrington J said:32 It is generally of public benefit that the whole allotment of land be used for residential purposes ... The use of this relevant part of the land for car accommodation is certainly not in any way adverse to public interest, and on the contrary it serves a useful purpose in enabling the resident’s vehicle to be parked off the street. Further, the public interest in the avoidance of waste of the existing building structure is also a valid feature.

What these passages demonstrate is that the courts have generally envisaged the public interest issue as simply asking whether the use of the putative dominant land with the right of access would be more productive than the current use of the

30 [1977] Qd R 86, 90. Andrews J stated that this in fact went beyond the minimum that the applicant had to show, as his Honour did not think that ‘the legislative intention is to put a burden upon the owners of servient land to advance the public interest by submitting as in this case to easements.’ 31 [1987] 1 Qd R 400,404. 32 [1996] ANZ ConvR 331, 334 (emphasis added).

Chapter 5 247 dominant land without the right of access. This being so, the cases demonstrate that the public interest question adds little to the inquiry under s 180(1) as to whether the statutory right of access is reasonably necessary for the effective use of the land. This appears to have been acknowledged by Douglas J at first instance in Re Seaforth Land Sales Pty Ltd’s Land.33 After discussing the s 180(1) issue of whether the grant of the statutory right of user was reasonably necessary, his Honour’s disposed of the public interest question with the statement: ‘The requirements of s 180 (3) (a), I feel are answered by the above discussion.’

Also revealing is the statement by Carter J in Re Worthston. His Honour stated that the s 180(3)(a) enquiry:34 is not to be seen as one to be resolved as if the issue was one between, on the one hand, the public interest and on the other, the proprietary interests of an individual landowner.

The reason why the issue cannot be thought of in this way is because the Queensland courts have taken the attitude that, at least for this purpose, the public interest has no substantive content over and above the productive use of resources.

The attitude of the Queensland Supreme Court towards the meaning of the public interest thus echoes that of the Law Commission. In equating the public interest with the efficient use of resources, the enquiry as to whether the proposed use of the putative dominant land would be consistent with the public interest does not involve anything more than netting off the preferences of the individuals of which society is composed. There is no vision of how society should be ordered which underpins the analysis, and thus no proprietarian dimension to the operation of the Queensland access provision in this regard.

33 [1976] Qd R 190,195. On appeal — Re Seaforth Land Sales Pty Ltd’s Land (No 2 )— none of the members of the Full Court criticised Douglas J’s approach: 325 (Hanger CJ), 327 (Stable J), 333 (Campbell J). 34 [1987] 1 Qd R 400, 403.

Chapter 5 248 C The Public Interest Requirement in New South Wales Section 88K(2)(a) of the Conveyancing Act 1919 does not require that the proposed use of the putative dominant land be consistent with the public interest, but rather that it not be inconsistent with the public interest. This appears from the beginning to mute the possibility that the concept of the public interest has a substantive content other than the satisfaction of the individual preferences of the concerned parties. And as we have seen, this is the position that has transpired. The New South Wales cases, like those in Queensland, have adopted the view that the more intensive use of resources is in the public interest.35

*** *** *** Our analysis has shown that neither the law reform process that led to the enactment of the first-generation legislation, nor the cases in which the legislation has been applied, support a proprietarian vision of its operation. The reference to the public interest does not involve a substantive vision of how the preference of individuals should be subordinated to a conception of a proper social ordering. Rather, the conception of the public interest is seen as a function of the efficient or productive use of resources. As both Alexander and Posner explain, this conception of property as commodity is based upon giving the maximum possible effect to individual preferences.

III SECOND-GENERATION LEGISLATION We now turn to the Access to Neighbouring Land Act 1992 (UK) (‘E&W Act’),36 the Access to Neighbouring Land Act 1992 (Tas) (‘Tasmanian Act’) and the Access to Neighbouring Land Act 2000 (NSW) (‘NSW Act’) in order to assess their proprietarian credentials. After identifying (in Section A) the major features of the legislation, we will (in Section B) closely examine the justification given by the law reform bodies and legislatures for its enactment: the need to promote good neighbourly behaviour. Finally, (in Section C) we will look at legal and sociolegal expressions of what it means to be a good neighbour.

35 See Chapter 3, Part V. 36 As the Act only extends to England and Wales: s 9(3).

Chapter 5 249 A Outline of the Legislation The starting point for understanding the access to neighbouring land legislation is the provision enabling a person to apply for an ‘access order’.37 A person who desires38 entry to adjoining or adjacent land for the purpose of carrying out work on other land may apply to the relevant court for an access order. Although persons other than putative dominant owner can apply for an access order, and persons other than the putative servient owner can be a respondent in such an application, for the purposes of explaining the operation of the legislation it will be assumed that the application is brought by the owner of putative dominant land against the owner of the putative servient land, who also occupies that land.39

1 When May an Access Order be Granted? Under the E&W Act and Tasmanian Act an access order can only be granted in respect of work that is for the ‘preservation’ of the dominant land.40 A number of activities are expressly included within the concept of works of preservation.41 These activities include the repair, maintenance or renewal of buildings42 and, where this is reasonably necessary for the preservation of the land, the alteration, adjustment, improvement or demolition of a building.43 The NSW Act does not limit the types of

37 E&W Act ss 1(1), 8(3); Tasmanian Act ss 3, 5; NSW Act ss 3, 7, 11(1). The NSW Act uses the term ‘access order’ to mean both a ‘neighbouring land access order’ and a ‘utility service access order’. This second type of order allows a person who is entitled to the use of a utility service (such as a sewerage, water, gas electricity or telephone service), but who is not the owner of the land on which the utility service is located, to enter that land in order to carry out work on or in connection with the utility service. See ss 8, 13. This chapter will not consider utility service access orders, and a reference to an ‘access order’ under the NSW Act, will be limited to a neighbouring land access order. 38 UK Act s 1(1)(a). Section 5(1)(a) of the Tasmanian Act and s 7(1) of the NSW Act use ‘requires’, rather than ‘desires’. This is consistent with cl 1(1)(a) of the draft bill (referred to below as the ‘Law Commission’s draft bill’) attached to the Law Commission’s Rights of Access to Neighbouring Land, Report No 151 (1985) (referred to below as the ‘E&W Report’). Although there is nothing in the explanatory note to clause 1(1) of the Law Commission’s draft bill that deals with the meaning of ‘requires’, for the same reasons as given in below nn 50-52 and accompanying text, it is clear that ‘requires’ is to be read in the subjective sense of ‘desires’, and not is the objective sense of access being essential for the undertaking of the work. 39 See Introduction nn 58, 60-62 and accompanying text. 40 E&W Act s 1(2)(a); Tasmanian Act s5(2)(a). 41 E&W Act s1(4);Tasmanian Act s 5(3). 42 E&W Act s 1(4)(a); Tasmanian Act s5(3)(a). 43 E&W Act s1(5);Tasmanian Act s 5(3)(a). The requirement that these activities must be incidental to the preservation of the land is expressly set out in the E&W Act s 1(5). Although there is no such express statement in the Tasmanian Act to the same effect, it is submitted that any fair reading of the Act means that s 5(3)(a) is subject to s 5 (2)(a). Additionally, s 5(2)(a) and s 5 (3)(a) exactly duplicate cl 1(2)(a) and cl 1(4)(a) of the Law Commission’s draft bill respectively. The explanatory notes for those clauses, as well as the E&W Report itself (at [4.6], [4.8]), make it abundantly clear that an

Chapter 5 250 work for which an access order can be granted,44 and the non-exhaustive list of work includes ‘construction’ of buildings and other structures.45

Although somewhat different in form and detail, the various access to neighbouring land acts provide for a common approach to be taken by the court in determining whether an access order should be granted. As we will see, this approach centres on comparing the costs and benefits that would result from the granting of the access order sought.

The E&W Act and the Tasmanian Act require the court to have regard to three matters in this regard. Firstly, whether the work in respect of which an access order is sought is ‘reasonably necessary for the preservation’ of the putative dominant land,46 and secondly, whether the work ‘cannot be carried out, or would be substantially more difficult to carry out’ without access to the putative servient land.47 If the answer to either of these questions is ‘no’—either because the desired work is not reasonably necessary for the preservation of the putative dominant land, or because that work, although being so necessary, can be reasonably undertaken without the need for access to the putative servient land—then the benefits of imposing access would not be sufficiently significant for the court to go further. However, if the answer to both of questions is ‘yes’, then there would be sufficient benefits from the granting of the access order for the court to proceed to the next stage of the enquiry. That stage (and the third matter that the court is to consider) is for the court to ascertain the costs associated with the imposition of the access order.

access order cannot be granted in respect of improvements and alterations to the land undertaken for their own sake. In this respect the Tasmanian Act does not reflect the recommendations of the Law Reform Commission of Tasmania that access should be allowed for new building work. See the Commission’s On Private Rights of Access to Neighbouring Land, Report No 42 (1985) (referred to below as the ‘Tasmanian Report’), 7 (Recommendations 3, 12.) and Research Paper on Private Rights of Access to Neighbouring Land (prepared by WG Briscoe, 1983) [5.11]. 44 Section 12(2). 45 Section 12(1)(a). This gives effect to the recommendation of the New South Wales Law Reform Commission, Right of Access to Neighbouring Land, Report No 71 (1994) Chapter 5, [5.4] and Recommendation 3. It is interesting to note that the draft bill annexed to the Report does not mention ‘construction’ (see cl 10(1)(a)) even though it was the intention of the Commission that access orders be granted to facilitate new construction. This must be regarded as an oversight. 46 E&W Act s 1(2)(a); Tasmanian Act s5(2)(a). 47E&W Act s1(2)(b);Tasmanian Act s 5(2)(b). The Tasmanian provision includes the words ‘or expensive’ after ‘difficult’ in the quoted passage. The Tasmanian Act follows the Law Commission’s draft bill (cl 1(2)(b) in this regard whereas the E&W Act does not.

Chapter 5 251 This takes the form of asking whether entry under an access order would cause unreasonable hardship to any person affected by the order. If the answer to that question is ‘yes’, the court is not to make the access order.48

The NSW Act also directs the court to address three matters in determining whether an access order should be granted. The first of these is whether for the purposes of carrying out the desired work, access ‘is required ... and that it is appropriate to make the order in the circumstances of the case.’49 This requirement differs from its analogue in the E&W Act and the Tasmanian Act, each of which, as we have just noted, provides that the work must be reasonably necessary for the preservation of the putative dominant land. The reason for this difference is the fact that the work for which an access order can be imposed under the NSW Act is not limited to preservation work. This not only explains the omission of the term preservation in the relevant provision of the NSW Act, but also its use of requires, rather than reasonably necessary as in the E&W Act and the Tasmanian Act.TheE&W Act and the Tasmanian Act use reasonably necessary to denote the requisite degree of connection the proposed work must have with the preservation of the putative dominant land. Because the NSW Act does not have the limiting concept of preservation, it does not need the relational concept of reasonably necessary. This is not to say that under NSW Act the court will be uninterested in the desirability of the work to be conducted on the putative dominant land. Such an issue is relevant to that part of the enquiry about whether ‘it is appropriate to make the order in the circumstances of the case.’ No doubt if the court considered that the proposed work lacked merit, the court would not be satisfied that in the circumstances it would be appropriate to grant an access order.

48 E&W Act s1(3);Tasmanian Act s 5(2). There is a divergence in the drafting between the E&W Act and the Tasmanian Act here. The Tasmanian provision takes the form outlined in the text. The provision in the E&W Act is expressed differently and would require the court not to grant an access order if entry in accordance with the order would cause (a) the putative servient owner or any other person unreasonable interference with, or disturbance of, their use or enjoyment of the putative servient land; or (b) the putative servient owner or any other person in occupation of the putative servient land unreasonable hardship. It is submitted that the difference in drafting would not cause a difference in result, as it is unlikely that ‘interference’ or ‘disturbance’ adds anything to ‘hardship’. 49 Section 11(1) (emphasis added).

Chapter 5 252 Further, the use of required—as opposed to reasonably necessary—does not mean that under the NSW Act the court must be satisfied that it is physically impossible to carry out the work without having access to the putative servient land. The provision enacts clause 9(1) of the draft bill annexed to the New South Wales Law Reform Commission’s Report,50 and none of the recommendations in that report give any indication that the test is something approaching absolute necessity. On the contrary, the NSW Report states that ‘an alternative means of access should not automatically exclude the right to access under consideration in this Report.’51 Additionally, the second issue that the court is to consider under the NSW Act would be redundant if ‘requires’ were to be given that meaning. We now turn to that second issue.

As is the case under the E&W Act and the Tasmanian Act, the court must have regard to the importance of the right of access to the proposed work. The court must consider ‘whether the work cannot be carried out or would be substantially more difficult or expensive to carry out without access’ to the putative servient land.52 There would be no role for this test to play if undertaking the work would be physically impossible without access to the putative servient land.

The third matter that the court must consider is whether the access would cause ‘unreasonable hardship to a person affected by the order.’53 This again mirrors the E&W Act and the Tasmanian Act.

The position under each of the E&W Act,theTasmanian Act and the NSW Act is that the relevant court is required to undertake a form of cost-benefit analysis: would the benefit to the putative dominant owner of obtaining a right of access outweigh the detriment to the putative servient owner? An access order will be granted if: (i) desirable work would be substantially more difficult to carry out without a right of access than it would be with such a right; and (ii) the putative servient owner would not suffer unreasonable hardship if the right of access were imposed. In such

50 New South Wales Law Reform Commission, Right of Access to Neighbouring Land, Report No 71 (1994), referred to below as the ‘NSW Report’. 51 NSW Report, Chapter 5, Recommendation 2 (p 36). 52 Section 15(a). 53 Section 15(b).

Chapter 5 253 circumstances the benefit of imposing the right of access would outweigh the cost.54 However, an access order would not be granted if either: (i) work (even though desirable) would not be substantially more difficult to undertake without access to the putative servient land than with it; or (ii) the imposition of the right of access would cause unreasonable hardship to the putative servient owner. In such circumstances the cost of imposing access would outweigh the benefit.55 Interpreted this way, the Acts are consistent with the perceived role of the first-generation legislation that has been described in Chapters 2 and 3: rights of access should be allocated so as to secure the efficient use of resources. Our task is to ascertain whether the second-generation legislation can also be seen as performing a proprietarian function, but we must postpone that question for a little longer while we continue to outline the mechanics of the access to neighbouring land acts.

What we have looked at so far is how the physical reality of the proposed access would impact upon the parties, and how this is relevant to the question of whether an access order should be made. We should also note an additional requirement of the Tasmanian Act and the NSW Act, but not the E&W Act, which must be met before an access order can be granted.

The Tasmanian Act and the NSW Act provide that for an access order to be granted the putative dominant owner must have given the putative servient owner notice56 and to have ‘made a reasonable effort to reach agreement’ with him or her regarding

54 Strictly, under the Tasmanian Act and the NSW Act the court still retains discretion as to whether or not to grant an order even if the two limbs of the enquiry suggest that an order should be granted. Section 5(2) of the Tasmanian Act and Section 11(2) of the NSW Act state that the court may make an access order. By contrast, section 1(2) of the E&W Act states that the court shall make an access order if it is satisfied that the prerequisites to a grant have been satisfied. 55 Theoretically, under the NSW Act an access order could still be granted even if there were a finding of unreasonable hardship to the putative servient owner. This is so because s 11(1) states that the court may make an order ‘if it is satisfied that it is appropriate to make the order in the circumstances of the case’, and because s 15 makes the unreasonable hardship of the putative servient owner a factor to be considered, and not an automatic reason for refusing the order, as is the case under the E&W Act and Tasmanian Act. 56 Under the Tasmanian Act s 5(4)(a), the notice must describe the proposed work and the conditions that the putative dominant is prepared to accept. Under the NSW Act ss 10 and 11(2)(b), the putative dominant owner must give the putative servient owner twenty-one days notice ‘of the lodging of the application and the terms of any order sought’.

Chapter 5 254 access.57 The E&W Act does not provide for a preliminary notice or negotiation procedure that needs to be undertaken by the putative dominant owner. This is in accordance with the recommendation of the Law Commission that rules of court could be developed to require the parties ‘to state their respective positions fully in writing in advance of any hearing.’58 In any event, the court’s discretion in awarding costs gives wide scope for the court to have regard to conduct of the parties prior to litigation.59

2 Conditions in Access Orders All three of the Acts give the court wide discretion in including in the access order conditions that are designed to avoid or minimise loss, damage or injury to any person,60 and to minimise ‘inconvenience or loss of privacy’ to the servient owner or any other person.61 Such conditions might include the manner in which the work is to be carried out, the days and hours during which the work may be carried out, precautions and safeguards, and the taking out of insurance.62 In addition, unless varied by the court, the access order automatically requires the dominant owner to: (i) ensure that the servient land is made good so far as is reasonably practicable; and (ii) indemnify the servient owner against damage to the land or goods.63

3 Compensation An important aspect of the second-generation legislation is the regime for the payment of compensation by the dominant owner to the servient owner. All three of the Acts provide for the payment of compensation in respect of any ‘loss, damage or

57 NSW Act s 11(2)(a). Section 5(4)(b) of the Tasmanian Act requires the putative dominant owner to ‘have made reasonable efforts to reach agreement’ with the putative servient owner regarding any counter proposal to the proposal put by the putative dominant owner in the notice referred to in s 5(4)(a). 58 E&W Report [4.96], [4.121] 59 E&W Report [4.116]. 60 E&W Act s2(2)(a);Tasmanian Act s 6(2)(a); NSW Act s 16(2)(a). The Tasmanian and New South Wales provisions also refer to loss, damage or injury to other land or personal property. 61 E&W Act s2(2)(b);Tasmanian Act s6(2)(b);NSW Act s 16(2)(b). 62 E&W Act s 2(3), (4)(b) Tasmanian Act s 6(2)(c)-(f); NSW Act s 16(2)(c), (d) and (f). 63 E&W Act s 3(3)-(5); Tasmanian Act s 7(2), (3); NSW Act ss 16(2)(e), 21. The provisions of the E&W Act expressly require the removal of waste from the servient land. The removal of waste from the servient land by the dominant owner is authorised, but not expressly required by s 7(1)(c) of the Tasmanian Act and s 20(c) of the New South Wales Act. It is likely that the obligation to make good the servient land would require the removal of waste in so far as that is reasonably practicable.

Chapter 5 255 injury’ to the servient owner arising from the access.64 Under the Tasmanian Act and the NSW Act compensation is not payable for loss of privacy or inconvenience suffered by the servient owner that is solely caused by the access authorised by the order.65 This prohibition follows the recommendation of the Law Commission in denying compensation for inconvenience caused by the authorised access.66 By contrast, the E&W Act does allow for the awarding of compensation ‘for substantial loss of privacy or other substantial inconvenience’ caused by reason of the authorised access.67 It will be recalled that the first-generation access legislation requires the payment of ‘just compensation’68 or compensation that the court ‘considers appropriate’69 on the granting of the easement. This has been held to include compensation for loss of amenities such as peace and quiet.70

The E&W Act is also more generous than its Tasmanian and New South Wales counterparts in that it allows for the payment to the servient owner of an amount ‘by way of consideration for the privilege of entering’ the servient land. Such a payment

64 E&W Act ss 2(4)(a)(i); Tasmanian Act s6(2)(g);NSW Act s 26(1). The provisions of the Tasmanian Act and the NSW Act expressly include ‘damage to personal property, financial loss and personal injury’ to the putative servient owner. 65 Tasmanian Act s6(3);NSW Act s 26(2). The provision in the Tasmanian Act goes against the recommendations Law Reform Commission of Tasmania that the heads of compensation payable should not be closed, and should include compensation for ‘nuisance and inconvenience’: Tasmanian Report 7 (Recommendation 8). In the debate of the Access to Neighbouring Land Bill 1992 in the Tasmanian Legislative Council, the Government justified not following this recommendation on the basis of not wishing to be seen as possibly creating a new tort of inconvenience. Similarly, the Government did not want to be seen as possibly creating a new tort of loss of privacy. See Tasmania, Parliamentary Debates, Legislative Council, 22 July 1992, 1000, 1019 (Mr Fletcher, Deputy Leader for the Government). However, this argument does not explain why some heads of loss, such as damage to property and financial loss, are compensable, but why loss of privacy and inconvenience are not. It is clearly possible for these heads to be compensable under the statutory scheme without creating new torts of general application. The E&W Act is evidence of this. 66 E&W Report [4.54] and see cl 2(5) of the Law Commission’s draft bill. The basis for the recommendation was twofold. Firstly, it would be difficult to quantify damages for inconvenience. Secondly, it may encourage the owner of the putative servient land to hold out for an unreasonable sum in initial negotiations regarding access. The overriding concern is not to provide an incentive to the putative servient owner to refuse to agree to access. Also see NSW Report [4.9]. 67 Section 2(4)(a)(ii). Although this departs from the recommendation of the Law Commission in its Report, it is consistent with the provisional view of the Law Commission expressed in Rights of Access to Neighbouring Land, Working Paper No 78 (1980) [5.15]. That view was that compensation should be payable for actual, but not trivial inconvenience. Examples given of where compensation would be appropriate include the blocking of a driveway, penetration of dust into living accommodation and temporary removal of a greenhouse. 68 Property Law Act 1974 (Queensland), s 180(4). 69 Conveyancing Act 1919 (NSW), s 88K(4). On the difference between the compensation payable under s 88K and the NSW Act, see Robert Stokes, ‘Thy Neighbour’s House: Quiet Enjoyment versus the Access to Neighbouring Land Act’ (2001)7 Local Government Law Journal 106, 108-109. 70 See Chapter 3, n 303 and accompanying text.

Chapter 5 256 can only be made where the dominant land is not residential in nature. The quantum payable is that ‘as appears to the court to be fair and reasonable having regard to all the circumstances of the case.’ In particular, the court is to have regard to the degree of inconvenience suffered by the servient owner and, more significantly, the financial advantage of the access order to the dominant owner.71 By providing for the payment of ‘compensation’ by the dominant owner for the privilege of access, and for the financial benefit flowing from such access, the E&W Act directly goes against the recommendations of the Law Commission.72 This provision is also more generous than the position under the first-generation legislation, which does not allow for compensation for loss of bargaining power.73

Finally, we need to note another difference between the first- and second-generation legislation. Whereas the former contains a presumption that the successful dominant owner is to pay the costs of the unsuccessful servient owner,74 the access to neighbouring land legislation does not. The E&W Act and the Tasmanian Act are silent on the issue of costs,75 which means that the general position prevails: the unsuccessful party must pay the successful party’s costs unless the court orders otherwise.76 The NSW Act provides that costs are payable at the court’s discretion, and that the court may take into account the actions of the respective parties in attempting to negotiate access.77 Accordingly, an unsuccessful servient owner is in a weaker position under the second-generation legislation than under the first- generation legislation so far as the payment of costs is concerned.

71 Section 2(5). Under s 2(6) the financial benefit of the access order to the applicant is to be the greater of (i) the likely increase in value of the dominant land reasonably attributable to the undertaking of the works specified in the order, less the likely cost of undertaking those works; and (b) if it were possible to carry out the works without entering the servient land, the likely cost of carrying out the works without access to the servient land less the likely cost of the works with the benefit of the access order. 72 E&W Report [4.55], [4.59]. The rationale for this view is that the servient owner should only be compensated for actual loss, as to do otherwise could very well encourage the servient owner to litigate, in the hope of receiving a better payment than could be achieved through negotiation. Also see NSW Report [4.19]. 73 See Chapter 3, Part IX(A). 74 See Chapter 3 nn 347-348 and accompanying text. 75 Other than to provide that an access order may provide for the reimbursement of expenses reasonably incurred by the servient owner that are not recoverable as costs: E&W Act s2(9)(a); Tasmanian Act s 6(4)(a). 76 The Civil Procedure Rules 1998 (Eng) r 44.3(2); Magistrates Court (Civil Division) Rules 1998 (Tas)r138. 77 Section 27.

Chapter 5 257 4 Effect of an Access Order An access order authorises the dominant owner and others78 to enter79 the servient land for the purpose of carrying out work on the dominant land. The servient owner who was a party to the proceedings,80 and in the United Kingdom and New South Wales a successor in title to a party to the proceedings,81 is required to allow the dominant owner access to the servient land in accordance with the order.82 In addition to any other applicable remedy, the dominant owner has a statutory right to damages against the servient owner if that person does not allow the dominant owner access as required by the order.83 In Tasmania and New South Wales, failure to comply with an access order is a criminal offence subject to the imposition of a fine.84

B Proprietarian Justification for the Second-Generation Legislation The main contention of this chapter is that the second-generation access legislation is based upon a proprietarian vision of property rights. However, it must be admitted that as the second-generation legislation uses a form of cost-benefit analysis to determine whether access should be granted it can, like the first generation legislation, be seen as promoting the satisfaction of private preferences through facilitating the productive use of resources. This view of the access to neighbouring land legislation certainly comes through in the statements of the law reform authorities and of the legislators that preceded its enactment. And just as with the

78 Those servants, agents and other persons authorised by the dominant owner as are ‘reasonably necessary’ to undertake the work in respect of which access has been granted: E&W Act s 3(1), (2), (7); Tasmanian Act s 7(1); NSW Act s 20(a). 79 In addition to authorising entry to the servient land, an access order authorises the dominant owner to bring onto and leave on the servient land ‘such materials, plant and equipment as are reasonably necessary’ for carrying out the permitted work. See E&W Act s3(2);Tasmanian Act s7(1);NSW Act ss 18, 20. 80 E&W Act s 8(3) (definition of ‘the respondent’); Tasmanian Act s 12(1); NSW Act s23. 81 E&W Act 4(1) (but subject to the provisions of the Land Charges Act 1972 and the Land Registration Act 1925); NSW Act s 23(2). In allowing for a person who was not a party to the access proceeding to be bound by the order and allowing for the registration of the access order (s 5), the E&W Act departs from the recommendations of the Law Commission (see E&W Report [4.106] and cl 7 of the Law Commission’s draft bill). On the other hand, the Tasmanian Act adopts the position of the Law Commission in providing that only a person who was a party to the proceedings is bound by an access order 82 E&W Act s3(1);Tasmanian Act s 7(2); NSW Act s 22. 83 E&W Act s6(2);Tasmanian Act s 8(1); NSW Act s 28(3). 84 Tasmanian Act s8;NSW Act s 28(1).

Chapter 5 258 first-generation legislation, this is often equated with the public interest. A few examples in relation to the second-generation legislation will demonstrate this.

The justifications put forward by the Law Commission for the enactment of the access to neighbouring land legislation included: Property that is deteriorating as a result of disrepair will, even if the deterioration is only beginning, command a lower price than a similar property properly repaired and maintained and with no continuing access difficulties.85

there is also to be borne in mind the argument based on the public’s interest in maintaining the country’s stock of buildings in good repair. Inability to do this through denial of necessary access must result in a waste of resources.86

there is the public interest factor ensuring that the nation’s stock of housing and other accommodation can be kept available for use, an interest which the law already recognises insofar as it confers on public authorities a limited right of access for the purpose of executing works on neighbouring land.87

During parliamentary debate regarding the Access to Neighbouring Land Bill 1992 in Tasmania, the following comments were made: If no right is created, the landowner may have to accept the risk of deterioration inherent in the non-repair of his property. This can lead to financial loss, and the risk of property becoming a danger to the health and safety of the landowner and others. Without such a right, properties throughout the State are liable to deteriorate for want of repair and maintenance.88

85 E&W Report [3.14] (emphasis added). 86 Ibid [3.15] (emphasis added). 87 Ibid [3.23]. Also see Law Commission, Rights of Access to Neighbouring Land, Working Paper No 78 (1980) (referred to below as ‘E&W Working Paper’), [3.8]. 88 Tasmania, Parliamentary Debates, House of Assembly, 28 May 1992, 1639 (Mr Cornish, Minister for Justice).

Chapter 5 259 We are saying that in a very limited range of situations it might be necessary to override the individual landowner’s rights for the common good or for the good of certain buildings when preservation is required.89

The New South Wales Law Reform Commission justified its recommendation for the enactment of the second-generation access legislation by stating: Modern living conditions, the desire of property owners and that of the public generally to keep properties maintained or developed ... are among the reasons why property related rights need to be reassessed.90

By favouring and protecting the right of a landowner to deny entry, even in the most unreasonable circumstances, the law would seem to operate against the public interest, where those who wish to develop sites in the city and suburban areas are prevented from doing so.91

Yet side by side with statements that link the satisfaction of individual preferences (through the productive use of resources) with the public interest, are justifications that Alexander would call truly proprietarian. These justifications do subordinate individual preferences to a substantive vision of a proper social order. The social ordering that is envisioned is one of a harmonious relationship between neighbours: a relationship where one neighbour voluntarily puts his or her own interest behind that of the other. This view is consistent with Alexander’s notion of property rights being shaped so as to promote virtue, rather than wealth. Neighbours interact not merely as buyers and sellers in a quasi-market—in which rights of access are the quasi- commodities—but as people in a continuing relationship of mutual dependence. The second-generation legislation is designed to ensure that there is no departure from the natural order of things.

89 Tasmania, Parliamentary Debates, Legislative Council, 22 July 1992, 1005 (Mr Fletcher, Deputy Leader for the Government). 90 NSW Report [1.7] (emphasis added). 91 Ibid [2.19] (footnote omitted and emphasis added).

Chapter 5 260 1 England and Wales Examples of the Law Commission employing this form of proprietarian justification for access legislation include: It is probable that, unless the work involved real inconvenience or risk of damage, most neighbouring owners would allow access whether or not they were legally obliged to do so. ... [However, the] situation in all such cases is necessarily precarious and therefore unsatisfactory, because it requires no more than a small change in circumstances, such as a breakdown in a good neighbourly relationship, for real difficulty to arise. We must remember, too, that even though a neighbour may allow access, he is entitled under the present law to demand an exorbitant price for doing so.92

reasonable neighbours do not in practice object to access for repairs on the ground that such access would be a major erosion of their rights. The fact that most people do not object to temporary incursions by their neighbours at times of need shows that such incursions are not generally considered to be objectionable. ... [T]he proposed scheme would enable any good objective reason that B [the owner of the servient land] might have for refusing access to be considered by the court when hearing A’s application [for access]; and if B had no such reason, we think he should be required to allow the access. It appeared from the consultation that when access was refused, the immediate cause of the refusal was often some existing ill-feeling between neighbours,the origins of which lay in some incident unconnected with the request for access. In these cases, the purpose of the refusal was to spite A rather than to protect B’s rights.93

From the evidence the Commission has received, it is plain that, in most cases, there is no dispute: a combination of good-neighbourliness and enlightened self-interest leads to [the owner of the servient land] granting access ...94

92 E&W Working Paper [3.3] (emphasis added). 93 E&W Report [3.24] (emphasis added). 94 Ibid [3.50] (second emphasis added).

Chapter 5 261 During parliamentary debate, the following jusifications were given for the enactment of the legislation. Sadly, the Bill is all too necessary to regulate disputes between neighbours if agreement cannot be reached between them. There is also protection by the courts against unnecessary intrusion. Both these safeguards are unfortunately necessary since bad relations sometimes exist between neighbours. The root cause of the disagreement may have been lost in the mists of time and totally forgotten by both parties. Time can cause quite irrational positions to be taken over what may appear to be quite unimportant matters.95

Generally speaking, however, reliance for access rests on good neighbourly relationships in which two or possibly more neighbours come to amicable arrangement ...Unfortunately, not all owners of land, in the broadest sense, are all that amenable. It could be claimed by some that their boundary should remain inviolable, whatever the discomfort to their neighbours.96

What emerges very strongly from these passages is that it is natural that a spirit of good will exists between neighbours and that one neighbour should not unreasonably refuse access to another. However, these passages suggest that it is also quite common for the reality to depart from the ideal. A spirit of ill will may exist between neighbours.97 This state of affairs is regarded as a perversion of the proper order, however. The second-generation legislation is designed to provide a corrective mechanism and, as Alexander might say, to protect virtue against corruption

2 Tasmania The same theme runs through the parliamentary debate that preceded the enactment of the Tasmanian Act:

95 United Kingdon, Parliamentary Debates, House of Lords, 16 July 1991, Vol 531, col 173 (Lord Carmichael of Kelvingrove) (emphasis added). His Lordship also referred to disputes between neighbours regarding access as reflecting ‘distressing social breakdowns’: at Vol 531 col 172. 96 United Kingdon, Parliamentary Debates, House of Lords, 11 December 1991, Vol 553, col 821 (Lord Murton of Lindisfarne) (emphasis added). 97 We considered the way in which spite inhibits mutually beneficial bargaining in Chapter 2, n 27 and accompanying text.

Chapter 5 262 The right of access will only apply subject to any terms imposed by the magistrate and only in a limited class of case in which reasonable people would normally think it proper to permit access ...98

it is a sensible piece of legislation. Most of the time neighbours can come to an agreement if they are reasonable people but there are those–certainly I have had enough of them in my office—who unfortunately just seem to be at loggerheads with each other all the time. In those circumstances we need legislation like this as a last resort.99

3 New South Wales The concept of ‘neighbourliness’ as an axiom strongly permeates the arguments of the New South Wales Law Reform Commission (‘NSWLRC’) for the enactment of the second-generation legislation. One of the reasons for this is that NSWLRC’s examination of the need for reform in this area initially grew out of a general reference on relations between neighbours in the context of residential land, rather than the discrete issue of access to neighbouring land. In its initial examination, the issue of access was bundled together with areas of concern such as problems caused by trees and noise.100 The primary concern of the NSWLRC was to consider ‘the issues of dispute resolution and the availability of appropriate remedies and forums to deal with conflicts between neighbours.’101 The NSWRLC identified disputes between neighbours as frequently having their origin in the ‘continuous and ... broadly based’ relationship between the parties which arises out of their close proximity and frequent interaction.102 As a consequence of this:103 a dispute which ends up in court is often simply a by-product or symptom of a more wide-ranging problem in the relationship. Disputes about personalities,

98 Tasmania, Parliamentary Debates, House of Assembly, 28 May 1992, 1639 (Mr Cornish, Minister for Justice) (emphasis added). 99 Ibid 1643 (Dr Bates, Member for Franklin) (emphasis added). In their contributions to the second reading debate, Mrs Jackson and Mr Michael Hodgman (both members for the electorate of Denison) remarked on how common disputes between neighbours are: at 1640-1641, 1642. 100 New South Wales Law Reform Commission, Neighbour and Neighbour Relations, Discussion Paper No 22 (1991)[1.1], [1.3]-[1.4]. 101 Ibid [1.2]. 102 Ibid [7.2]-[7.3]. 103 Ibid [7.3] (emphasis added).

Chapter 5 263 interest, manners and lifestyles and values are transformed into disputes about issues which are recognised at law when legal action is taken.

This passage suggests a view that disputes against neighbours is something akin to an illness, and certainly a deviation from the proper order. The primary focus is on how the parties relate to each other, rather than on the productive use of resources, as was justification for the first-generation legislation.

After its initial analysis of access issues as part as a global examination of the relationship between residential neighbours, the NSWLRC next dealt with the issue of access in a separate report. However, in narrowing its enquiry in this manner, the NSWLRC simultaneously broadened it in another respect; it extended its consideration from issues involving residential neighbours to issues involving neighbours of all types. The NSWLRC thus intended its recommendations to apply to ‘commercial neighbours’ and their attendant problems of oversailing cranes used in commercial development.104 The legitimacy of applying arguments developed in the context of the resolution of disputes between residential neighbours to disputes involving one or more commercial entities will be discussed later in this chapter.105

One example of how the NSWLRC employed the concept of neighbourliness in the NSW Report is as follows:106 In practical terms, the number of occasions on which the lack of access to a neighbouring property actually causes problems may not be great. Neighbours may be able to negotiate a solution themselves, perhaps involving the payment of money by the landowner seeking access. Unfortunately, the spirit of compromise will not exist between all neighbours and a refusal of access may not only lead to a deterioration of the relationship between the neighbours, but also of the property, which in turn may risk the health and safety of those neighbours.

104 NSW Report [1.4]. 105 See below n 149 and accompanying text. 106 NSW Report [1.8] (emphasis added). The last part of the quotation is more consistent with the ‘property-as-commodity’ justification than the ‘property as propriety’ justification. This shows how in the second-generation legislation these visions are often placed side by side.

Chapter 5 264 The parliamentary debate leading to the enactment of the NSW Act also prominently featured the concept of neighbourliness as an ideal that militates, in moral terms, against the unfettered right of a landowner to refuse access to a neighbour. There are numerous references to the need to resolve the conflict between neighbours that results from the unreasonable refusal to give access. This is seen as a departure from how neighbours should behave.107 A particularly revealing statement in this respect was:108 Sadly, disputes between neighbours seem to be an inevitable part of modern living. Some neighbours cannot see eye to eye on anything. But there are times when a person needs to enter upon a neighbour’s property to effect repairs to the person’s property. This bill provides a remedy in such circumstances. It provides a method of resolution of a common kind of dispute not at present able to be resolved by the courts. This bill allows a Local Court to grant a party access over a neighbour’s land in order to do work benefiting that party’s own land. This facility allows the resolving of a matter that otherwise might have been the subject of a never-ending dispute between parties, a dispute that may result in the complete breakdown of relationships between them.

There are two aspects of this passage that portray the refusal to give access as a departure from the natural order. Firstly, there is the characterisation of the refusal as sad. Secondly, and more importantly, there are numerous references that equate

107 ‘[The bill] is about building-in a mechanism to head off conflict between neighbours’: New South Wales, Parliamentary Debates, Legislative Assembly, 5 April 2000, 4160 (Mr Amery, Minister for Agriculture, and Minister for Land and Water Conservation); ‘Frequently the neighbour will not provide ... access and can be quite unco-operative’ and ‘[t]he legislation ... provides a mechanism for avoiding or resolving conflicts between neighbours’: New South Wales, Parliamentary Debates, Legislative Assembly, 11 April 2000, 4452, 4454: (Mr DL Page, Member for Ballina); ‘The essence of this legislation is that it forces neighbours to act reasonably’: at 4455 (Mr Collier, Member for Miranda); ‘The bill obviously recognises the fact that in many cases neighbours do not get on.’: at 4458 (Mr Bartlett, Member for Port Stephens); ‘[The bill] will facilitate negotiations between neighbours where those negotiations have not been able to be completed in an informal way.’ and ‘On occasions it is difficult to negotiate with neighbours the terms and conditions on which access could be granted.’: New South Wales, Parliamentary Debates, Legislative Council, 13 April 2000, 4638 (The Hon DF Moppett); ‘We believe [the bill] can only promote better harmony and co-operation.’: at 4638 (Reverend the Hon FJ Nile). 108 New South Wales, Parliamentary Debates, Legislative Assembly, 11 April 2000, 4454 (Mr Collier, Member for Miranda).

Chapter 5 265 the resolution of the dispute with the granting of access. There is no reason to regard the compulsory granting of access by the court against wishes of the servient owner as any more a resolution of the dispute than the application by the court of the common law rule that the servient owner is entitled to refuse to allow access without question. There is no axiomatic reason to think that the long-term relationship between the neighbours will be strengthened by a compulsory granting of access than by a compulsorily refusal of access. It is only the preconception about the appropriateness of a landowner saying ‘yes’, rather than ‘no’, to a neighbour’s request for access that leads to this conclusion.

One of the few parliamentarians in any jurisdiction to question whether the access to neighbouring land legislation will have the effect of creating good neighbourly relations is Lord Wilberforce. His Lordship characterised the bill as ‘an attempt to put into a straitjacket of legal procedures what are essentially rules of good neighbourly behaviour’,109 and noted the incongruity of trying to ‘bring about good neighbourly conduct’ through a ‘formidable structure of legal obligations, precautions and qualifications ...’.110

4 Particular Use of the Neighbour Concept The above discussion has shown how law reform authorities and legislators have relied on the concept of neighbourliness to justify the enactment of the second- generation legislation: legal redress is seen as needed when actual behaviour does not measure up to the ideal of how good neighbours should act. The central role of the concept of neighbourliness is encapsulated by the following example. As previously noted, there is a divergence between the jurisdictions about whether access should be allowed for preservation work only, or for preservation work and new building work. Both sides of the debate invoked the concept of neighbourliness to support its position. The Law Commission justified its recommendation to limit the type of work for which access could be compulsorily ordered in this way:111

109 United Kingdom, Parliamentary Debates, House of Lords, 16 July 1991, Vol 531, col 176. 110 United Kingdom, Parliamentary Debates, House of Lords, 11 December 1991, Vol 824, col 824. 111 E&W Working Paper [5.3] (emphasis added). Also see E&W Report [4.6].

Chapter 5 266 although the line between new building work and preservation work may be difficult to draw with precision, the difference between the two is in principle a difference in kind and not merely in degree. To see this one has only to ask whether good neighbourly relations would normally be enough at present to ensure that access was given. In relation to preservation work, we think the answer is, Yes. In relation to new building work, we think it is more probably, No.

However, for the Law Reform Commission of Tasmania the inclusion of new building work in an access regime was perfectly consistent with the concept of neighbourliness. The United Kingdom Law Commission also proposed to specifically exclude from their scheme applications for rights of access in order to carry out new building work. It is submitted that there is not sufficient reason to exclude new building work from the scheme. It has even been argued that an extension of a right of access to new building work may be instrumental in encouraging a more co-operative attitude on the part of adjoining property owners.112

5 The Rhetoric of Neighbourliness It should not be thought that it is only law reform authorities and legislators who ascribe to the view that conflict between neighbours, while inevitable, is still unnatural. The same view can be seen in a legal text on how the law regulates relationships between neighbours. According to John Pugh-Smith, practitioners regard disputes between neighbours as ‘the pariah of litigation’ due to the ‘complex, emotionally charged and protracted proceedings’ involved. Pugh-Smith ironically thanks ‘all those “neighbours” without whom the reasons for writing this book would never had arisen.’113 Clearly, the author thinks that neighbours should treat each other more favourably than strangers, yet he recognises that this is often not the case.

112 Tasmanian Report [12] (emphasis added). As stated in above n 40 and accompanying text, the Tasmanian Act does not extend the access regime to new building work. The parliamentary debate preceding the enactment of the Tasmanian Act did not avert to the departure from the Tasmanian Commission’s recommendation in this respect. The NSWLRC endorsed the recommendation of the Law Reform Commission of Tasmania without explaining why it preferred its position to that of the Law Commission (NSW Report [4.5]). The NSW Act is faithful to the recommendation of the NSWLRC. 113 John Pugh-Smith Neighbours and the Law (1988), v, vi.

Chapter 5 267 The use of quotation marks in the second quoted passage is instructive, indicating that many neighbours do not act in neighbourly ways. Pugh-Smith clearly envisages a perversion of the natural order as being commonplace.

One significant point is that none of the second-generation access statutes use the term ‘neighbouring’ except in the title. Indeed, unlike the law reform and parliamentary material, the second-generation legislation does not employ the term ‘neighbour’ at all. Instead, the legislation refers to ‘adjoining or adjacent land’.114 We must assume that ‘neighbour’ and ‘neighbouring’ are not sufficiently precise to employ in the language by which rights, duties, privileges and immunities are created.115 The question thus arises: why is the term ‘neighbouring’ used in the title of the legislation? The answer must be that because the term is rhetorically powerful, and adds to the sense of the naturalness of the legislation. On this basis, we now proceed to unpack the concept of neighbour to see to what extent the second-generation legislation is faithful to it.

IV NEIGHBOURS IN LAW AND IN PRACTICE In this Part we firstly consider how the idea of being a neighbour has been used as a foundational concept in the law of torts. We then turn to two significant pieces of law and society scholarship that deal with norm of being a good neighbour.

A Neighbours and the Law of Torts The moral force carried by the concept of being a neighbour is demonstrated by Lord Atkin’s use of it in Donoghue v Stevenson116 to justify the imposition of a general duty to take reasonable care to avoid injury to others. According to the extra-judicial writing of one Canadian judge—Mr Justice Linden— the ‘neighbour principle’

114 E&W Act 1(1); Tasmanian Act s 5(1)(b); NSW Act s 7(1). The Law Commission, which uses ‘adjoining or adjacent’ in cl 1(a) of its draft bill, states (E&W Report [4.14]) that ‘neighbouring’ does not mean contiguous, but means ‘any land access to which is required by [the applicant] in order to carry out the work’. 115 The same appears to be the case for Pugh-Smith, above n 113. A perusal of his book suggests that ‘neighbour’ is not used outside the Preface. The term certainly does not appear in the Index. 116 [1932] AC 562.

Chapter 5 268 transformed the law of torts ‘into a moral force, as well as a tool for compensation and deterrence.’117 His Honour said: For me, [the neighbour principle] (or at least its spirit) plays a role in the law not unlike the role the Bible plays for Christians, or the Torah plays for Jews, or the Koran for Moslems. It inspires those noble thoughts and deeds of which we need more in the modern world, not less. It challenges us to dream of a beautiful world where people care about one another, feel responsible for one another, and even—dare I say it—love one another.118

Yet other commentators have questioned the utility of trying to deduce particular legal rules from the neighbour principle outside of the ‘legitimate realm of preventing physical harm.’119 In particular, JC Smith points out that the neighbour principle does not, and should not, impose a ‘prima facie duty to prevent foreseeable harm that you are in no way responsible for causing.’120 Moral philosophy and common sense tell us that there is a fundamental difference between the things that we ought to do and the things we have an obligation or duty to do. While we ought to do the things that we have a duty to do, it does not follow that we have a duty to do the things we ought to do. Saintly acts and behaviour must remain voluntary. The price of enforced saintly conduct is the paralytic loss of freedom of action. ... If we recognise a duty to prevent foreseeable harm and to compensate what we do not prevent, then our lives will not be our own, nor can any of us retain any property or resources.121

This point is particularly apposite to the question of court-ordered access to neighbouring land. After all, where a building on the putative dominant land is falling into disrepair, the owner of the putative servient land cannot be said to be causing the loss by refusing to grant access where access is needed, any more than a

117 Allen Linden, ‘Viva Donoghue v Stevenson!’ in Peter Burns and Susan Lyons (eds), Donoghue v Stevenson and the Modern Law of Negligence (1991) 230. 118 Ibid 228. 119 JC Smith, ‘The Good Neighbour Still on Trial: Is Paisley’s Decayed Snail the Pilgrim’s Holy Grail?’ in Peter Burns and Susan Lyons (eds), Donoghue v Stevenson and the Modern Law of Negligence (1991) 259. 120 Ibid 258. 121 Ibid 258-259.

Chapter 5 269 bystander who fails to throw a lifeline to a drowning person can be said to have caused the outcome. Certainly, like the bystander, the putative servient owner is able to assist in the prevention of the loss: by providing access. Yet, by compelling the servient owner to grant access to allow the repair of a building on the putative dominant land, the servient owner is being compelled to act, as she or he is being forced to make resources available to another. This abandons the longstanding distinction in tort between misfeasance and nonfeasance.122 The result of this is that the concept of neighbourliness is being used to justify the second-generation legislation in a manner that goes beyond the way it is used in tort.

Of course, it must be recognised that as a foundational concept in the law of torts, the idea of being a ‘neighbour’ is being employed metaphorically, as close physical proximity is not required in order to impose a duty of care.123 In the context of the second-generation legislation, however, we are referring to people who live in close proximity. It may be that this makes a difference when one tries to define the content of a duty to be a good neighbour. We must therefore turn to a body of material that sheds some light on what it means to be a good physical, as opposed to metaphorical, neighbour. The material to be used is taken from law and society scholarship, with its heavy emphasis on empirical fieldwork and detailed reading of historical documentary evidence. A central part of this task will be to examine, at the appropriate stages, the important differences between the E&W Act, Tasmanian Act and the NSW Act.

B Mann’s Theory of Neighbourliness The first of these law and society pieces to be used is Bruce Mann’s Neighbors and Strangers,124 which examines the transformation of the ways in which disputes were resolved in seventeenth and eighteenth century Connecticut. Mann argues that in the seventeenth century the model of dispute resolution that was employed was fundamentally ‘communal’ or ‘neighborly’ in nature.125 The methods of adjudication—arbitration proceedings, church tribunals and even the legal system

122 Ibid 258. 123 Linden, above n 117, 229-230. 124 Bruce Mann, Neighbors and Strangers (1987). 125 Ibid 9-10

Chapter 5 270 itself—had the goal of acknowledging the individuality of disputes by fully airing the grievances of the parties. What was sought was a solution that allowed the parties to ‘reconcile their differences in a manner that allowed them to resume their sometimes quarrelsome, but mutually dependent neighborly relations.’126

By contrast, the eighteenth century saw the rise of a hegemonic legal system based on a paradigm of ‘generalizable, predictable rules and results.’127 Such a system subordinated the analysis of the specific facts of disputes to a process designed to yield predictable outcomes. This was a system that treated neighbors as strangers in an effort to achieve uniformity and certainty through the application of universal, abstract rules.128

The transformation noted by Mann can be seen to mirror a transformation from the common law to the statutory regimes governing access to land, except that (as might be appropriate for a ‘mirrored’ phenomenon) the transformation has been in the opposite direction. As we saw in Chapter 1, the common law rules governing trespass to land are inflexible and unforgiving. The motivation, extent and even effect of the incursion are irrelevant to the outcome of the dispute: liability is strict and the outcome is certain.129

The access to neighbouring land legislation is fundamentally different to the common law rule of trespass. This difference is not just in outcome—at times permitting access without consent—but also in technique. The statutes are receptive to the richness of the particular facts of the dispute. In this respect we must recall the test of ‘reasonable necessity’, which is fundamental to the question of whether access should be granted, as well as the myriad of conditions which can be imposed to minimise the adverse impact upon the servient owner.130 Both of these mechanisms have the aim of balancing the interests of the parties and reaching a result that will allow them to live, in Mann’s words, ‘if not in peace, then at least in a truce.’131

126 Ibid 163 127 Ibid 168. 128 Ibid 9-10, 167. 129 See Chapter 1, Part II. 130 See Chapter 3, Parts IV and VIII. 131 Mann, above n 124, 164.

Chapter 5 271 C Ellickson’s Theory of Neighbourliness The other law and society piece is one of the most famous recent works in the area. In his Order Without Law,132 Robert Ellickson conducted a detailed study of how the residents of rural Shasta County in California resolved disputes concerning straying cattle. Ellickson found that in the vast majority of cases, disputes were resolved by the parties concerned, not only without recourse to legal processes, but without regard to the underlying formal legal rules that supposedly ‘governed’ the dispute. Instead, the parties involved applied informal norms to regulate their relationships in situations of potential conflict.133 The various informal norms that were applied in specific situations were found to be a function of the ‘overarching substantive norm ... that one should be a “good neighbor”.’ This was ‘a general call for cooperative behavior’,134 which above all meant ‘no law suits’.135

A major aspect of Ellickson’s study was how the residents of Shasta County dealt with the common problem of cattle trespass. What makes the study of the resolution of cattle trespass in Shasta County such an interesting subject from the law and society perspective is that different legal regimes applied in different areas of the county. In ‘open range’ areas the owner of livestock is generally not liable for damage caused by straying cattle to unfenced land, even when the event was caused by the negligence of that owner. In ‘closed range’ areas the owner is strictly liable for damage caused by straying cattle.136 What Ellickson found, however, was that the owner of the straying cattle and the owner of the damaged crops typically dealt with the event in the same way, irrespective of whether it occurred on an open or closed range. Most rural residents are consciously committed to an overarching norm of cooperation among neighbors. In trespass situations, their applicable particularized norm, adhered to by all but a few deviants, is that an owner of livestock is responsible for the acts of his animals. Allegiance to this norm

132 Robert Ellickson, Order Without Law (1991). 133 Ibid 1. 134 Ibid 185. 135 Ibid 251. 136 Ibid 3, 44.

Chapter 5 272 seems wholly independent of formal legal entitlements. Most cattlemen believe that a rancher should keep his animals from eating his neighbor’s grass, regardless of whether the range is open or closed.137

The application of the norm of neighbourly co-operation would work this way. The owner of the damaged crops, on discovering the situation, would telephone the owner of the trespassing cattle. The owner of the cattle would retrieve the straying cattle and apologise for the occurrence. At this stage, another subsidiary norm would commonly come into play. Instead of insisting on monetary or in-kind compensation, the owner of the damaged crops would frequently ‘put up with (“lump”) minor damage’ resulting from the event.138 Further, if it were inconvenient or impractical for the cattle owner to retrieve the cattle speedily, the crop owner would board the cattle at his or her own cost, ‘even for months at a time.’139

Ellickson claims that this practice of ‘reciprocal restraint’ arises out of the fact that, over time, most residents will be both the perpetrators and victims of cattle trespass. Because the risks associated with cattle trespass are symmetrical, a practice under which the victims routinely bear losses means that, in the long run, losses will even themselves out without the need to waste time and spend money in the resolution of disputes.140

From this study and others Ellickson formulated the following general hypothesis:141 members of a close-knit group develop and maintain norms whose content serves to maximise the aggregate welfare that members obtain in their workaday affairs with one another. [S]tated more simply, the hypothesis predicts that members of tight social groups will informally encourage each other to engage in cooperative behaviour.

137 Ibid 52-3. 138 Ibid 53. 139 Ibid 54. 140 Ibid. 141 Ibid 167 (emphasis in original; references omitted).

Chapter 5 273 Central to Ellickson’s hypothesis are the concepts of ‘close-knit groups’ and ‘workaday affairs’. The latter concept refers to ‘ordinary matters conducted on the stage that the ground rules have set.’142 Ellickson defines a close-knit group as a social network in which people have continuing relationships, have a credible supply of information about other members’ past behaviour, and the ability to impose sanctions on another member for a breach of the norm of co-operative behaviour.143 Such sanctions may be as mild as spreading negative gossip about the wrongdoer, but may extend to physical, and even violent, self-help.144

Having outlined Ellickson’s thesis, we now need to apply it to the justification for the second-generation legislation based upon good neighbourliness. That is, to what extent is the argument put forward by law reform authorities and legislatures that there is a naturalness about one neighbour allowing access to another consistent with Ellickson’s empirically-derived hypothesis?

As a starting point, we can note that like the (real) neighbours in Shasta County, the neighbours envisioned by the various law reform bodies and legislators are loath to rely on their legal rights, or what at common law were their legal rights, to deny access. To rely on those rights where granting access would not be burdensome is seen as unreasonable and poor form. Additionally, the provisions of the legislation precluding, or providing a hurdle to, the payment of compensation for inconvenience and loss of privacy can be seen as requiring an absorbing or ‘lumping’ of losses in a way analogous to the practice in Shasta County. The law reform authorities state that a ‘measure of inconvenience is something that simply must be endured’145 as an ‘inevitable consequence of modern social and physical proximity’.146 This echoes the justification given by the ranchers of Shasta County for the practice: the principle of ‘live and let live’.147 Yet, for the operation of the second-generation legislation to be consistent with Ellickson’s hypothesis, we must also show that:

142 Ibid 176. 143 Ibid 177, 181, 284. 144 Ibid 130, 143. 145 E&W Report [4.54]. 146 NSW Report [4.19]. 147 Ellickson, above n 132, 154.

Chapter 5 274 • for a landowner to allow access to a neighbour is part of a pattern of mutually beneficial behaviour; • allowing access will form part of the ‘workaday’ affairs of the landowner and the neighbour; and • the landowner and the neighbour form part of a close-knit group.

In the context of routine maintenance of residential dwellings (and perhaps owner- occupied commercial buildings, too), it appears that Ellickson’s three criteria are met. Even if the requirement of access is not reciprocal —where A needs access to B’s land in order to effect repairs, but B can effect repairs without needing access to A’s land—the neighbours will still have ample scope for mutually beneficial co- operation in other matters. These include the mutually-dependent issues of ‘fencing, trees, drainage, security, noise and street parking’.148 Allowing access would simply be one piece of the puzzle. With respect to Ellickson’s other criteria, the routine maintenance of a building and the preservation of land can fairly be described as a workaday affair, and neighbours constitute a close-knit group, as their physical proximity ensures the flow of information and allows for retaliation for un- neighbourly acts.

This means that the Tasmanian Act and the E&W Act can lay claim to underscoring a ‘natural’ neighbourliness in accordance with Ellickson’s hypothesis. These Acts only allow access for the purpose of the workaday activity of preservation works. The provision of the E&W Act which allows compensation for substantial inconvenience and substantial loss of privacy can be seen as being useful in circumstances in which the preservation work is of such a nature that it goes somewhat beyond the commonplace. In such circumstances, being a good neighbour may not reasonably require a lumping of the adverse effects of the work.

The NSW Act is in a different position. As the Act allows access for the purpose of undertaking new work, such as the construction of a new building, the activities of the dominant owner cannot be described as workaday. The extended time that this

148 Ibid 271. This is one of the reasons why Ellickson concludes that his hypothesis applies to neighbours even in urban settings: at 270-271.

Chapter 5 275 construction is likely to take, and the measure of inconvenience to the servient owner that is likely to result, means that this activity cannot be described as an ordinary day to day event in respect of which it is natural for neighbours to co-operate. An equally important fact is that, typically, such new construction work will be undertaken by a property developer, rather than an owner-occupier. This means that there will not be the potential for long-term interaction between the owners of the dominant and servient land so as to give them common membership of Ellickson’s close-knit group. Put another way, there is simply too much ‘social distance’149 between the parties for them to be regarded as neighbours in anything other than the physical sense.

This extended reach of the NSW Act cannot be justified on the basis of preventing a departure from a natural spirit of neighbourliness. If the second-generation legislation is to extend to this situation, one must rely on an economic, rather than a proprietarian, justification. In that case it would be appropriate to include in the NSW Act a provision that allows for the payment of compensation to the servient owner to reflect the financial value of the access right to the dominant owner. It will be recalled that such a provision exists in the E&W Act in relation to dominant land that is not residential in nature.150 This would result in the payment of a proper amount of compensation in circumstances where that the granting of access would not otherwise be required because no state of neighbourliness subsisted between the parties.

V CONCLUSION In one of her numerous stimulating pieces about property, Carol Rose identifies the role of storytelling in the classical justifications for the institution of private property.151 Rose argues that narratives are need to ‘slide smoothly’ over a gap that

149 Ibid 256. Also see David Engel, ‘The Oven Bird’s Song: Insiders, Outsiders, and Personal Injuries in an American Community’ (1984) 18 Law & Society Review 551. Engel identified as one of the defining distinctions between the insiders and outsiders of a particular community the readiness of outsiders to sue for personal injuries: outsiders sued but insiders did not. 150 Section 2(5). 151 Property and Persuasion: Essays on the History, Theory and Rhetoric of Ownership (1994) 37.

Chapter 5 276 exists in the theories of Locke and Blackstone between the self-interested nature of individuals and the very existence of a system of private property. In short, there is a gap between the kind of self-interested individual who needs exclusive property to induce him to labor and the kind of individual who has to be there to create, maintain, and protect a property regime. The existence of a property regime is not in the least predictable from a starting point of rational self-interest; and consequently, from that perspective, property needs a tale, a story, a post hoc explanation.152

It seems that there is a similar gap with regard to justifications for legislation that creates access rights. How do we reconcile our endorsement of the freedom that private property affords to self-interested individuals with our desire to avoid such property rights being exercised unreasonably?153 The answer is that the justifications given by the law reform authorities and legislators responsible for the enactment access legislation have a narrative quality that glosses over the irreconcilable nature of the problem. We have seen that the first-generation legislation, though couched in the discourse of public interest, is simply based on the efficient use of resources. This boils down to setting-off the respective private preferences of different individuals. By contrast, the dominant narrative adopted for the justification of the second-generation legislation is bona fide proprietarian. The narrative involves the subordination of the private preferences of the servient owner to a vision of a proper social ordering: the co-operative and harmonious relations between neighbours. We are told that it is unnatural for neighbours to rely on their strict legal rights with respect to access issues. The work of Ellickson has been examined in order to flesh out the concept of what is involved in good neighbourly behaviour. We have demonstrated that the E&W Act and the Tasmanian Act do conform to Ellickson’s theoretical model of mutually beneficial co-operative behaviour among members of a close knit group with respect to their everyday affairs. However, the NSW Act,in

152 Ibid 38. 153 This phenomenon of seeking to hold two contradictory beliefs is revealed in a statement made by one speaker in the second reading debate for the Access to Neighbouring Land Bill 2000 (NSW). The speaker said that while he supported the bill, he was ‘philosophically oppose[d to] the principle of court’s (sic) giving people the right to come onto freehold without the owner’s permission.’ New South Wales, Parliamentary Debates, Legislative Assembly, 11 April 2000, 4461 (Mr RHL Smith, Member for Bega).

Chapter 5 277 allowing access for major new building projects, does not. Rather, it is something akin to a Trojan Horse; hidden inside the harmless looking vehicle of neighbourly behaviour is the harsh iron of compulsory access for commercial development. Using Alexander’s terminology, some might call this the triumph of corruption over virtue.

Chapter 5 278 CONCLUSION Terminus ad Quem1

In effecting a departure from the common law right of a landowner to control access to his or her land, the first- and second-generation legislation share a common rationale: rights of access may be granted to the dominant owner where the servient owner’s conduct departs from a particular norm.

In respect of the first-generation legislation—under which the Supreme Court can impose a permanent or temporary easement burdening the servient land in order to facilitate the use or development of the dominant land—the relevant norm is the willingness to participate frankly and forthrightly in the negotiations needed to bring about a mutually beneficial exchange. We have seen that in New South Wales the parliamentary debate that preceded, and the judicial exposition that immediately followed, the enactment of s 88K justified the provision on the basis that it was necessary to prevent putative servient owners from engaging in strategic behaviour.2 Such behaviour is intended to maximise one’s share of the transactional surplus that would arise from an agreement about access, but actually militates against such an agreement being concluded. In terms of Rose’s typology examined in Chapter 2, s 88K (and its Queensland equivalent, s 180) is designed to correct the behaviour of a putative servient owner who is a King of the Mountain character: a person motivated by greed.3

In respect of the second-generation legislation—under which a lower court can impose a temporary right of access burdening the servient land in order to facilitate work undertaken on the dominant land—the norm sought to be replicated is acting as a good neighbour. As we have seen, the law reform commission reports and parliamentary debates that preceded the enactment of the various access to neighbouring land acts are replete with references about access disputes being

1 ‘For all easements there must be a ... terminus ad quem [finishing point]’: Finlayson v Campbell (1997) 8 BPR 15,703, 15,712 (Young J). See Sheila Bone (ed), Osbourn’s Concise Law Dictionary (9th ed, 2001) 375. 2 See Chapter 1, nn 119-121 and accompanying text. 3 See Chapter 2, Parts II, III(A) and (IV)(A). 279 frequently caused by bad neighbourly relations.4 In terms of Rose’s typology, this legislative regime is designed to correct the behaviour of a putative servient owner who is a Malice Aforethought character: a person motivated by spite.5

The first- and second-generation legislation were thus enacted to respond to the departure from two different norms. Drawing on Dworkin’s taxonomy,6 we have seen that distinct types of reasoning have been advanced to justify the corrective function of the two generations of access rights legislation.

The first-generation legislation has been justified through the use of goal-based reasoning: the legislation allows the court to impose an easement where this would be efficient. As we saw in Chapter 3, the court engages in an impressionistic form of cost-benefit analysis that compares (i) the benefit that would result to the putative dominant owner if the easement were imposed with (ii) the detriment that would result to the putative servient owner from the imposition. This cataloguing of the respective costs and benefits takes place under the reasonably necessary enquiry,7 although other provisions also allow this.8 Where the cost of imposing the easement would outweigh the benefit, no easement will be imposed. However, where the benefit would outweigh the costs, then the easement will normally be imposed, and the dominant owner must pay compensation to, and the costs of, the servient owner. Granting the easement in these circumstances would be a Pareto superior act, as the dominant owner would be left better off by receiving the benefit of the easement (even after the payment of compensation and costs) than if the easement had not been granted, and the servient owner (after receiving compensation and the payment of costs) would be no worse off than if the easement were not imposed.9 An exception to this general position is where the proposed use of the land can be

4 See Chapter 5, Part III(B)(1)-(3). 5 See Chapter 2, Parts II, III(B), and (IV)(B). 6 See Chapter 1, Part II(B). 7 Subsection (1) of s 88K and s 180. See Chapter 3, Part IV. 8 That is, the public interest requirement (s 88K(2)(a) and s 180(3)(a)) and the adequate compensation requirement (s 88K(2)(b) and s 180(3)(b)). Additionally, in New South Wales the costs and benefits that would attend the imposition have been incorporated into the exercise of the court’s discretion to withhold the grant of an easement even if the pre-requisites to a grant have been satisfied. See Chapter 3, Parts III and V and VI. 9 We have seen that even if the servient owner does not receive full compensation, or does not have his or her costs paid, the imposition of the easement can be justified by the Kaldor-Hicks conception of efficiency. See Chapter 3, Part XI

Conclusion 280 achieved without the imposition of the easement: for example, through the alteration of the putative dominant land. In such circumstances, the costs and benefits that would flow from the adoption of the alternative are compared with the costs and benefits that would result from the imposition of the easement, with the easement only being imposed where this would be superior to the alternative. In taking this approach the court is seeking a Pareto optimal outcome rather than merely a Pareto superior one: the court is seeking to maximise the use of resources by realising a state of affairs that is Pareto superior to all others, rather than a state of affairs that is Pareto superior to the status quo.10

Whereas the justification for the first-generation legislation has been articulated in these goal-based terms, the rationale for the second-generation legislation has been couched in duty-based terms: one landowner has a duty to act as a good neighbour in providing the access that will allow another landowner to carry out work on his or her own land. As we saw in Chapter 5, this justification has a distinct proprietarian complexion. One landowner must subordinate his or her own private interests in order to bring about a proper social ordering by reproducing the state of affairs that would have prevailed if good relations between neighbours had existed. In seeking to bring about this substantive vision of the public good, rather than simply netting of the private preferences of the putative dominant and servient owners, the rationale for the second-generation legislation differs from that of the first-generation legislation.11

The course of this thesis has demonstrated, however, that the view of a simple opposition between the goal-based reasoning used to justify the first-generation legislation and the duty-based reasoning used to justify the second-generation is problematic. This is because there are particular features of the first-generation legislation that cannot be justified in purely goal-based terms, and must be explained by reference to the duty-based norm of bringing about a proper social ordering.

10 See Chapter 3, Part IV(E)(4). 11 In Chapter 5, Part II we saw that the reference in the first-generation legislation to the public interest does not mean that the legislation has an explicit proprietarian focus. Rather, the courts have generally regarded this requirement as being coextensive with the enquiry as to whether the imposition of the easement would be efficient.

Conclusion 281 Similarly, although the second-generation legislation has been regularly justified on duty-based grounds, one prominent requirement for the imposition of an access order can only be explained on the basis of the advancement of the goal of facilitating the efficient use of resources. In this way, the respective justifications for both generations of the access rights legislation require the addition of what Derrida refers to as a ‘dangerous supplement’. That is, the justifications in their pure form are deficient and require the additional of a supplement to give them greater explanatory power. However, the supplement is dangerous because its addition undermines the validity of the primary justification.12

We turn first to the supplementary aspect of the second-generation legislation. This aspect is present in the cost-benefit calculus that must be conducted before access can be compulsory imposed. In Chapter 5 it was demonstrated that an access order will only be granted if the benefit of the order to the putative dominant owner (in terms of allowing desirable work to be undertaken that would be substantially more difficult to perform without access) would outweigh the cost to the putative servient owner (in terms of the hardship suffered because of the access).13 As we saw throughout Chapter 3 in relation to the first-generation legislation, a cost-benefit analysis is the means through which an efficient allocation of resources is achieved. Accordingly, although the dominant rationale for the existence of the second- generation legislation is expressed in duty-based terms—the putative servient owner is obliged to act as a good neighbour ought—this duty is a qualified one. Rather than requiring a putative servient owner to put the putative dominant owner’s interests ahead of his or her own by providing access in all circumstances, a putative servient owner is only obliged to do so when this would be efficient. Indeed, we saw that in the law reform commission reports that preceded the enactment of the access to neighbouring land acts, the goal-based justification of facilitating the efficient use of resources appeared alongside the proprietarian justification of bringing the actual behaviour of the putative servient owner into line with the ideal of good neighbourliness.14

12 See the explanation of Derrida’s concept in Gerald Frug, ‘The Ideology of Bureaucracy in American Law’ (1984) 97 Harvard Law Review 1277, 1288. 13 See Chapter 5, nn 54-55 and accompanying text. 14 See Chapter 5, nn 85-91 and accompanying text.

Conclusion 282 This combination of duty-based and goal-based practice is also clearly evident in the work of Ellickson, which we used as a lens to examine the second-generation legislation. For Ellickson, the norms of good neighbourliness that a close-knit group generates to govern the everyday interaction of its members operate to maximise the aggregate welfare of the group.15 This relationship has led one critic to accuse Ellickson of reducing ‘social life ... to a calculus of welfare-maximisation’ and ‘offer[ing] us only a souped-up version of economic-man’.16

Just as the second-generation legislation has an explicit and dominant justification as well as a less prominent and subsidiary one, so does the first-generation legislation. In the case of the first-generation legislation, the primary goal-based rationale of facilitating the efficient use of resources partially obscures the fact that the precise way in which the statutory regime is applied can be read in proprietarian terms. This can be seen in the way in which: (a) objective, rather than subjective, preferences of the parties are used to determine whether or not the imposition of the easement would be efficient; and (b) the compensation awarded for the imposition of the easement excludes a share of the transactional surplus generated by the imposition. Each of these characteristics will now be considered.

In Chapter 2 our analysis of the s 88K and s 180 cases demonstrated that there are three broad reasons for a putative servient owner refusing to grant an easement to the putative dominant owner: the desire to extract an extortionate price in return for the grant of the easement (King of the Mountain); ill-will or spite (Malice Aforethought); and a bona fide preference for privacy, peace and quiet rather than economic gain (John Doe). The sincerity of the putative servient owner’s refusal in the last category of cases was evident from the availability of another parcel of land that could have served as the site of the easement, the refusal to enter into negotiations about payment, or in not opposing the measure of compensation

15 See Chapter 5, n 141 and accompanying text. 16 Barbara Yngvesson, ‘Beastly Neighbors: Continuing Relations in Cattle Country’ (1993) 102 Yale Law Review 1787, 1800. Also see Lewis Kornhauser, ‘Are There Cracks in the Foundations of Spontaneous Order?’ (1992) 67 New York University Law Review 647, 648. For a more sympathetic analysis of Ellickson’s thesis, see Robert Cooter, ‘Against Legal Centrism” (1993) 81 California Law Review 417.

Conclusion 283 proffered by the putative dominant owner in the proceedings for the imposition of the easement.17 Yet despite the sincerity of the putative servient owner’s conception of his or her own welfare, an easement was imposed in several of these cases.

Further, in Chapter 4 we saw that in conducting the cost-benefit analysis to establish whether or not the imposition of the easement was reasonably necessary, the court identified and weighted the advantage that would flow to the putative dominant owner and the detriment that would flow to the putative servient owner through the imposition of the easement on an objective, rather than a subjective, basis. That is, whether the imposition of the easement would be efficient is determined by what the parties ought to prefer, rather than on what they actually desire. And what parties are deemed to want more is the productive and intensive use of the putative dominant land, rather than the enjoyment of the amenity of the putative servient land unburdened by the easement.18

The use of either objective or subjective preferences in determining whether resources are allocated efficiently can be comfortably accommodated within economic thought. This is because of the ambiguity of the term ‘welfare’ in the context of determining whether a move from State A to State B is efficient in the sense of increasing the welfare of at least one person without reducing the welfare of any other person. There are differing opinions as to the role of a person’s actual state of mind in determining whether a move from one state of affairs to another increases, decreases, or does not affect, that person’s welfare. For example, a move from State A to State B might leave a person, X, healthier, wealthier and wiser (so to speak), but because of the way some other person is treated in State B, X prefers State A to State B. From an objective perspective, the move from State A to State B would increase X’s welfare, but from a subjective perspective X’s welfare would be decreased.19

17 See Chapter 2, Part IV(C). 18 See Chapter 4, Part II(B)-(D). 19 Guido Calabresi, ‘The Pointlessness of Pareto: Carrying Coase Further’ (1991) 100 Yale Law Journal 1211, 1215-1217. Also see James Buchanan, ‘Rights, Efficiency, and Exchange’ in Steven Medema (ed), The Legacy of Ronald Coase in Economic Analysis (1995) vol 2, 178, 187. Although Calabresi and Buchanan identify the objective as well as the subjective conceptions of welfare (and efficiency), they both prefer the subjective conception. Rose, by contrast, endorses the objective conception of welfare that differs from actual preference satisfaction. This is evident from her typology of personality types that we considered in Chapter 2, Part II. Some of her characters—most

Conclusion 284 In terms of identifying the goal to be advanced, we are confronted with a choice between the satisfaction of objective or subjective preferences. The decision of the courts in the s 88K and s 180 cases in favour of objective preferences is not itself an objective one, in the sense that it is not determined by the external facts of the world, rather than the actual state of mind of the decision-maker. Accordingly, the choice must be explained by the (proprietarian) belief that a properly ordered society tends to favour the development of land rather than its quite enjoyment.

The second way in which the first-generation legislation can be interpreted in a proprietarian fashion relates to the way in which the compensation payable to the servient owner for the imposition of the easement is assessed. We have seen20 that courts have refused to include in the compensation an amount that reflects the loss of the servient owner’s bargaining power due to the enactment of the legislation. This means that, at best, the servient owner is placed in the same position in which he or she would have been if no easement were imposed, and that the dominant owner captures the entire transactional surplus from the imposition of the easement. To force an exchange of resources where one party is indifferent between: (i) losing control over access to his or her land and receiving compensation; and (ii) retaining control over that access and not receiving compensation, cannot be seen as a realistic mimicking of a successful bargaining outcome that leaves both parties better off.

Instead, such an outcome must be based upon a different belief about who should profit from the increased social wealth generated by the development of the dominant land that is facilitated by the imposition of the easement. That belief is that the gain should go exclusively the dominant owner whose active efforts realised the development, rather than to the servient owner who plays the passive role of being subject to the imposition of the easement. The proprietarian character of the first- generation legislation is thus made manifest by two interrelated values: a properly

notably Malice Aforethought and Mom/Good Citizen—prefer a state of affairs in which they receive less of a good to a state of affairs in which they receive more of a good. However, Rose regards their welfare as being greater in the latter state. 20 Chapter 3, Part XI.

Conclusion 285 ordered society (i) favours the intensive use of land and (ii) rewards the landowner who brings about that more intensive use.

Although the logos of land—as constituted by the common law right to exclude— could be justified by each of the exercise of a right,21 the observance of a duty,22 or the advancement of a goal,23 the logos of land that subsists with the existence of statutory access rights cannot. The overt goal-based justification of the first- generation legislation obscures a proprietarian regard for the intensive use of land. Similarly, the second-generation legislation’s appeal to the duty of being a good neighbour is subject to the qualification that a good neighbour will only postpone his or her own private interests where this is economically efficient.

Given the interdependence of the goal-based and duty-based justifications in the context of both generations of the access rights legislation—namely the promotion of the efficient use of land in a way that conforms to society’s expectations about the proper distribution of costs and benefits—it is submitted that the compensation provisions of England and Wales’ Access to Neighbouring Land Act 1992 provide a suitable model for the first- and second-generation legislation of other jurisdictions. Allowing the court to include in the compensation paid by a dominant owner conducting a commercial development a component that reflects the benefit to that owner of obtaining a right of access,24 would strike a balance between allowing an efficient development of the dominant land to proceed, and rewarding both parties for their contribution to that result. The dominant owner, who conceived of the project, bore the attendant risk and brought the development to fruition, would receive the lion’s share of the transactional surplus. However, the servient owner, who contributed an essential ingredient to the outcome—in the form of access— would also receive a share of the surplus.25

21 See Chapter 1, nn 36-38 and accompanying text. 22 See Chapter 1, nn 44-45 and accompanying text. 23 See Chapter 1, Part II(C)(1). 24 See Chapter 5, nn 71-72, 150 and accompanying text. 25 Also see Chapter 3, n 96 and accompanying text.

Conclusion 286 Under such a regime, if the court believed that the servient owner had refused to grant access in order to obtain an extortionate price, or out of spite, it could decide not to include in the compensation order an amount that would reflect the existence of a transactional surplus. However, if the servient owner refused to grant access because of a bona fide desire to be free of the inconvenience and loss of privacy that the imposition of access would cause, then such a component could be included in the compensation order. This would constitute an acknowledgement that the preferences of the servient owner being overridden by the imposition of access were sincerely and reasonably held.

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I BOOKS AND ARTICLES Adams, John, ‘Access to Neighbouring Land Act 1992’ (1992) 9226 Estates Gazette 136 Aitken, Lee, ‘Applications in Equity: The Statutory Easement Under s 88K of the Conveyancing Act 1919, and Licences Coupled With an Interest’ (2000) 20 Australian Bar Review 60 Aitken, Lee, ‘When are Damages an Adequate Remedy?’ (2004) 78 Australian Law Journal 544 Alexander, Gregory, Commodity & Propriety: Competing Visions of Property in American Legal Thought 1776 - 1970 (1997) Allen, Douglas, ‘Transaction Costs’ in Boudewijn Bouckaert and Gerrit De Geest (eds), Encyclopedia of Law and Economics, Volume 1: The History and Methodology of Law and Economics (2000) Ayres, Ian, and Talley, Eric, ‘Solomonic Bargaining: Dividing a Legal Entitlement to Facilitate Coasean Trade’ (1995) 104 Yale Law Journal 1027 Barnett, Randy, ‘Foreword: Of Chickens and Eggs—The Compatibility of Moral Rights and Consequentialist Analyses’ (1989) 12 Harvard Journal of Law and Public Policy 611 Baron, Jane, and Dunoff, Jeffrey, ‘Against Market Rationality: Moral Critiques of Economic Analysis in Legal Theory’ (1996) 17 Cardozo Law Review 431 Barsby, AW, ‘The Access to Neighbouring Land Act 1992’ (2000) 150 New Law Journal 1256 Becker, Gary, The Economic Approach to Human Behavior (1976), as extracted in Katz, Avery, Foundations of the Economic Approach to Law (1998) Blackstone, William, Commentaries on the Laws of England (first published 1765, 9th ed, 1783) Bone, Sheila (ed), Osbourn’s Concise Law Dictionary (9th ed, 2001) Bradbrook, Adrian ‘Access To Landlocked Land: A Comparative Study of Legal Solutions’ (1983) 10 Sydney Law Review 39 Bradbrook, Adrian, MacCallum, Susan, and Moore, Anthony, Australian Property Law (3rd ed, 2002) Bradbrook, Adrian and Neave, Marcia, Easements and Restrictive Covenants in Australia (2nd ed, 2000) Bryson, John, Easements Ordered by the Court - s 88K of the Conveyancing Act 1919, (2002) Lawlink NSW [2] - [5] at 27 January2006 Buchanan, James, ‘Rights, Efficiency, and Exchange’ in Steven Medema (ed), The Legacy of Ronald Coase in Economic Analysis (1995) vol 2, 178 Burrows, Paul, and Veljanovski, Cento, ‘Introduction: The Economic Approach to Law’ in Paul Burrows and Cento Veljanovski (eds), The Economic Approach to Law (1981) Butt, Peter, ‘Forcing Easements Against Unwilling Owners’ (1996) 70 Australian Law Journal 525 Butt, Peter, Land Law (5th ed, 2006)

288 Calabresi, Guido, ‘The Pointlessness of Pareto: Carrying Coase Further’ (1991) 100 Yale Law Journal 1211 Calabresi, Guido, and Melamed, A Douglas, ‘Property Rules, Liability Rules and Inalienability: One View of the Cathedral’ (1972) 85 Harvard Law Rev 1089 Coase, Ronald, ‘The Problem of Social Cost’ (1960) 3 Journal of Law and Economics 1 reprinted in Ronald Coase, The Firm, the Market and the Law (1988) Coleman, Jules, ‘Efficiency, Utility, and Wealth Maximization’ (1980) 8 Hofstra Law Review 509 Coleman, Jules, and Kraus, Jody, ‘Rethinking the Theory of Legal Rights’ (1986) 95 Yale Law Journal 1335 Conolly, Christopher, ‘New Legislation for Access to Neighbouring Land’ (2000) 38 Law Society Journal 34 Cooter, Robert, ‘The Cost of Coase’ (1982) 11 Journal of Legal Studies 1 Cooter, Robert, ‘Against Legal Centrism” (1993) 81 California Law Review 417 Cooter Robert, and Ulen, Thomas, Law and Economics (2nd ed, 1997) Council, BJ, ‘Access to Neighbouring Land Act’ (1993) 15 Liverpool Law Review 103 Coval, S, Smith, JC, and Coval, Simon, ‘The Foundations of Property and Property Law’ (1986) 45 Cambridge Law Journal 457 Covell, Wayne, and Lupton, Keith, Principles of Remedies (3rd ed, 2005) Demsetz, Harold, ‘Ownership and the Externality Problem’ in Terry Anderson and Fred McChesney (eds), Property Rights: Cooperation, Conflict, and Law (2003) Durack, John, ‘When a Neighbour Holds Your Client to Ransom’ (1998) 36 Law Society Journal 39 Dworkin, Ronald, Taking Rights Seriously (revised edition, 1978) Dworkin, Ronald, ‘Is Wealth a Value?’ (1980) 9 Journal of Legal Studies 191 Edgeworth, Brendan, ‘Profits à Rendre: a Reincarnation?’ (2006) 12 Australian Property Law Journal 200 Ellickson, Robert, Order Without Law (1991) Engel, David, ‘The Oven Bird’s Song: Insiders, Outsiders, and Personal Injuries in an American Community’ (1984) 18 Law & Society Review 551 Epstein, Richard, ‘A Clear View of The Cathedral: The Dominance of Property Rules’ (1997) 106 Yale Law Journal 2091 Epstein, Richard, Principles for a Free Society (1998) Fearn, Theresa, ‘Traversing Neighbouring Property in NSW’ (2001) 15 Australian Property Law Bulletin 69 Frug, Gerald, ‘The Ideology of Bureaucracy in American Law’ (1984) 97 Harvard Law Review 1277 Gray, Kevin and Gray, Susan Francis, “The Rhetoric of Reality” in Joshua Getzler (ed), Rationalizing Property, Equity and Trusts - Essays in Honor of Edward Burn (2003) Gray, Kevin and Gray, Susan Francis, Elements of Land Law (4th ed, 2005) Grunebaum, James, Private Ownership (1987) Halpern, David, ‘Damages in Lieu of an Injunction: How Much?’ [2001] 65 The Conveyancer 453 Honderich Ted (ed), The Oxford Companion to Philosophy (1995) Jolls, Christine, Sunstein, Cass, and Thaler, Richard, ‘A Behavioral Approach to Law and Economics’ (1998) 50 Stanford Law Review 1471

Bibliography 289 Kennedy, Duncan, ‘Cost-Benefit Analysis of Entitlement Problems: A Critique’ (1981) 33 Stanford Law Review 387 Kildea, Jeff, ‘A Review of the Report of the Land and Environment Court Working Party’ (2001) 7 Local Government Law Journal 67 Khan, Izaz, ‘Granting Easements Under Section 88K’ (2001) 39 Law Society Journal 55 Kornhauser, Lewis, ‘Are There Cracks in the Foundations of Spontaneous Order?’ (1992) 67 New York University Law Review 647 Lalich, Paul, and Neilson, Scott, ‘Review of the Land & Environment Court Jurisdiction: Discussion of issues relating to the Working Party review and reform of the court’ (2001) 7 Local Government Law Journal 49 Lametti, David, ‘The (Virtue) Ethics of Private Property’ in Alastair Hudson (ed), New Perspectives on Property Law, Obligations and Restitution (2004) Linden, Allen, ‘Viva Donoghue v Stevenson!’ in Peter Burns and Susan Lyons (eds), Donoghue v Stevenson and the Modern Law of Negligence (1991) MacDonald, Carmel et al, Real Property Law in Queensland (1998) Mann, Bruce, Neighbors and Strangers (1987) Meagher, RP, Heydon, JD, and Leeming, MJ, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (4th ed, 2002) Merrill, Thomas, ‘Trespass, Nuisance and the Costs of Determining Property Rights’ (1985) 14 Journal of Legal Studies 13 Merrill, Thomas, ‘Property and the Right to Exclude’ (1998) 77 Nebraska Law Review 730 Merrill, Thomas, and Smith, Henry, ‘Optimal Standardization in the Law of Property: The Numerus Clausus Principle’ (2000) 110 Yale Law Journal 1 Merrill, Thomas, and Smith, Henry, ‘What Happened to Property in Law and Economics?’ (2001) 111 Yale Law Journal 357 Meisel, Frank, ‘Damages in Lieu of an Injunction under the Lord Cairns’ Act’ (1995) 14 Civil Justice Quarterly 16 Murphy, Jeffrie, and Coleman, Jules, Philosophy of Law (1990) Note, ‘Please May We Have Our Ball Back?’ [1992] Conveyancer and Property Lawyer 225 Oerton, RT, ‘Gaining Access to Your Neighbour’s Land’ (1992) 136 Solicitors Journal 466 Posner, Richard, Economics of Justice (1981) Posner, Richard, ‘Wealth Maximization Revisited’ (1985) 2 Journal of Law, Ethics & Public Policy 85 Pugh-Smith, John, Neighbours and the Law (1988) Regan, Donald, ‘The Problem of Social Cost Revisited’ (1972) 15 Journal of Law and Economics 427 Rose, Carol, Property and Persuasion: Essays on the History, Theory and Rhetoric of Ownership (1994) Rose, Carol, ‘Propter Honoris Respectum: Property as the Keystone Right?’ (1996) 72 Notre Dame Law Review 329 Rose, Carol, ‘The Shadow of The Cathedral’ (1997) 106 Yale Law Journal 2175 Rudden, Bernard, ‘Economic Theory v Property Law: The Numerus Clausus Problem’ in John Eekelaar John Bell (eds), Oxford Essays in Jurisprudence (1987) Schlag, Pierre, ‘The Problem of Transaction Costs’ (1989) 62 Southern California Law Review 1661

Bibliography 290 Singer, Joseph, Entitlement: The Paradoxes of Property (2000) Smith, JC, ‘The Good Neighbour Still on Trial: Is Paisley’s Decayed Snail the Pilgrim’s Holy Grail?’ in Peter Burns and Susan Lyons (eds), Donoghue v Stevenson and the Modern Law of Negligence (1991) Spry, ICF, Equitable Remedies (6th ed, 2001) Stephen, Frank, The Economics of the Law (1988) Sterk, Stewert, ‘Neighbors in American Land Law’ (1987) 87 Columbia Law Review 55 Stokes, Robert, ‘Thy Neighbour’s House: Quiet Enjoyment versus the Access to Neighbouring Land Act’ (2001) 7 Local Government Law Journal 106 Tarlo, Hyman, ‘Forcing the Creation of Easements—A Novel Law’ (1979) 53 Australian Law Journal 254 Veljanovski, Cento, ‘The New Law-and-Economics: A Research Review’, as reproduced in Anthony Ogus and Cento Veljanovski (eds), Readings in the Economics of Law and Regulation (1984) Waldron, Jeremy, The Right to Private Property (1988) Wong, Christopher, ‘Access to Neighbouring Land Act 2000 (NSW): A Case of Overstepping the Boundaries?’ (2001) 8 Australian Property Law Journal 239 Yee, Millie, ‘Durack v De Winton: Section 88K of the Conveyancing Act (NSW) in Review’ (1998) 13 Australian Property Law Bulletin 52 Yngvesson, Barbara, ‘Beastly Neighbors: Continuing Relations in Cattle Country’ (1993) 102 Yale Law Review 1787

II REPORTS,WORKING PAPERS,DISCUSSION PAPERS AND PARLIAMENTARY DEBATES Law Commission, Transfer of Rights: Appurtenant Rights, Working Paper No 36 (1971) Law Commission, Rights of Access to Neighbouring Land, Working Paper No 78 (1980) Law Commission, Rights of Access to Neighbouring Land, Report No 151 (1985) Law Reform Commission of Tasmania, Research Paper on Private Rights of Access to Neighbouring Land (prepared by WG Briscoe, 1983) Law Reform Commission of Tasmania, On Private Rights of Access to Neighbouring Land, Report No 42 (1985) New South Wales, Parliamentary Debates, Legislative Council, 4 December 1995 New South Wales, Parliamentary Debates, Legislative Assembly, 5 April 2000 New South Wales, Parliamentary Debates, Legislative Assembly, 11 April 2000 New South Wales, Parliamentary Debates, Legislative Council, 13 April 2000 New South Wales, Parliamentary Debates, Legislative Assembly, 28 May 2002 New South Wales, Parliamentary Debates, Legislative Council, 4 September 2002 New South Wales Land Titles Office, Review of Easements Discussion Paper (1990) New South Wales Law Reform Commission, Neighbour and Neighbour Relations, Discussion Paper No 22 (1991) New South Wales Law Reform Commission, Right of Access to Neighbouring Land, Report No 71 (1994) Queensland Law Reform Commission, A Report of the Law Reform Commission on a Bill to Consolidate, Amend, and Reform the Law Relating to Conveyancing,

Bibliography 291 Property, and Contract and to Terminate the Application of Certain Imperial Statutes, Report No 16 (1973) Queensland Law Reform Commission, A Working Paper of the Law Reform Commission on a Bill to Amend the Property Law Act 1974-1985, Working Paper No 30 (1986) Report of the Land and Environment Court Working Party (2001) Tasmania, Parliamentary Debates, House of Assembly, 28 May 1992 Tasmania, Parliamentary Debates, Legislative Council, 22 July 1992 United Kingdon, Parliamentary Debates, House of Lords, 16 July 1991 United Kingdon, Parliamentary Debates, House of Lords, 11 December 1991

III CASES 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1998) 43 NSWLR 504 Abdo v Wyong Shire Council [2004] NSWLEC 176 Adderley v Dixon (1824) 1 Sim & St 607; 57 ER 239 Amec Developments Ltd v Jury’s Hotel Management (UK) Ltd (2001) 82 P & CR 286 Anchor Brewhouse Developments Ltd v Berkeley House (Docklands Developments) Ltd [1987] 2 EGLR 173 Ashfield Municipal Council v Joyce [1978] AC 122 Attorney-General v Blake [2001] 1 AC 268 Auerbach v Beck (1985) 6 NSWLR 424 Becton Corporation Limited v Minister for Infrastructure, Planning and Natural Resources [2005] NSWLEC 197 Beekman v Gray (2002) NSW ConvR ¶56-016, [2001] NSWSC 531 Bendal Pty Ltd v Mirvac Project Pty Ltd (1991) 23 NSWLR 464 Billgate Pty Ltd v Woollahra Municipal Council (2004) 136 LGERA 356 Blulock Pty Ltd v Majic (2001) 10 BPR 19,143 Bogart v Wah Day (No 1) [2000] QSC 371, BC200006477 Bogart v Day (No 2) [2001] QSC 229, BC200103683 Bonvale Enterprises Pty Ltd v Halfpenny Investments Pty Ltd (2005) 62 NSWLR 698 Borg v Howlett (1996) 8 BPR 15,535 Busways Management Pty Ltd v Milner (2002) 11 BPR 20,385 Chan v Cresdon Pty Ltd (1989) CLR 242 Chiu v Healey (2003) 11 BPR 21,241 Clos Farming Estates Pty Ltd v Easton (2001) 10 BPR 18,845 (SC) Clos Farming Estates Pty Ltd v Easton (2002) 11 BPR 20,605 (CA) Coles Myer NSW Ltd v Dymocks Book Arcade Ltd (1996) 7 BPR 14,638 Commonwealth v The Register of Titles for Victoria (1918) 24 CLR 348 Daniells v Mendonca (1999) 78 P & CR 401 Das v Linden Mews Ltd [2003] 2 P & CR 4 De Pasquale Bros Pty Ltd v NJF Holdings Pty Ltd (2000) Q ConvR ¶54-536 Dean v Walker (1996) 73 P & CR 366 Debbula Pty Ltd v The Owners-Strata Plan 6964 (2003) 12 BPR 22,617 Di Napoli v New Beach Apartments Pty Ltd (2004) 11 BPR 21,493 Donoghue v Stevenson [1932] AC 562

Bibliography 292 Dougan v Ley (1946) 71 CLR 142 Durack v De Winton (1998) 9 BPR 16,403 Dupen v KW Sanken Pty Ltd (Unreported, Supreme Court of New South Wales, Bryson J, 21 May 1986 Edward Street Properties Pty Ltd, Ex parte [1976] Qd R 86 Ellenborough Park, Re [1956] 1 Ch 131 Fejo v Northern Territory (1998) 195 CLR 96 Finlayson v Campbell (1997) 8 BPR 15,703 Foster v Hidden Valley Owners’ Cooperative Society Ltd (2002) 11 BPR 20,899 Gafford v Graham (1998) 77 P & CR 73 Goodwin v Yee (1997) 8 BPR 15,795 Grattan v Simpson (1998) 9 BPR 16,649 Hanny v Lewis (1998) 9 BPR 16,205 Harrow London Council v Donohue [1995] 1 EGLR 257 Hill v Tupper (1863) 2 H&C 121 Hodgskin and Hodgskin, In the Matter of an Application by (1999) Q ConvR ¶54- 535 Hornsby Shire Council v Gosper (1993) 82 LGERA 1 Hutchinson v Lemon (1983) Q ConvR ¶54-072 Jaggard v Sawyer [1995] 2 All ER 189 John Trenberth Ltd v National Westminster Bank Ltd (1979) 39 P & CR 104 Katakouzinos v Roufir Pty Ltd (1999) 9 BPR 17,303 Keppell v Bailey (1834) 2 Mylne & Keen 517, 536 -537, 39 ER 1042 Kent Street Pty Ltd v Council of the City of Sydney (2001) 10 BPR 18,757 Ketley v Gooden (1996) 73 P & CR 305 Khattar v Wiese [2005] NSWSC 1014 Kindervater, In the Matter of an Application by [1996] ANZ ConvR 331 King v Carr-Gregg [2002] NSWSC 379 Lang Parade Pty Ltd v Peluso (2005) Q ConvR ¶54-623 and [2005] QSC 133, BC200503587 Loan Investment Corp of Australasia v Bonner [1970] NZLR 724 (Privy Council), LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1989) 24 NSWLR 490 and (1989) 24 NSWLR 499 Lynch v White (1987) Q ConvR ¶54-257 Lysaght v Edwards (1876) 2 Ch D 499 McConachie v Manly Council [2002] NSWSC 434 McKeown v Cavalier Yacht Pty Ltd (1988) 13 NSWLR 303 Marshall v Council of the City of Wollongong (2000) 10 BPR 18,163 Meriton Apartments Pty Ltd v Baulderstone Hornibrook Pty Ltd (1992) 9 BPR 17,433 Midtown Ltd v City of London Real Property Company Ltd [2005] EWHC 33, 2005 Westlaw 62265 Mitchell v Boutagy (2001) 10 BPR 19,187 MPN Nominees Pty Ltd v North Sydney Council [2004] NSWLEC 604 Nation v Kingborough Council (No 2) (2003) 129 LGERA 447 Nelson v Calahorra Properties Pty Ltd (1985) Q ConvR ¶54-202 North v Marina (2003) 11 BPR 21,359 Noyea Park Country Club Pty Ltd v Body Corporate for Noyea Riverside Village [2004] QSC 197 BC200403957

Bibliography 293 O’Mara v Gascoigne (1996) 9 BPR 16,349 Pacific Coast Investments Pty Ltd v Cowlishaw (2005) Q ConvR ¶54-367 Pasade Holdings Pty Ltd v Sydney City Council (No 1) (2003) 11 BPR 21,001 Pasade Holdings Pty Ltd v Sydney City Council (No 2) [2003] NSWSC 584 Pasade Holdings Pty Ltd v Sydney City Council (No 3) (2003) 12 BPR 22,441 Pasade Holdings Pty Ltd v Sydney City Council (No 4) [2003] NSWSC 1220 PD Consultants Pty Ltd v Childs [2004] NSWSC 1076 Permanent Trustee Australia Ltd, Re (1997) 8 BPR 15,551 Seaforth Land Sales Pty Ltd’s Land, Re [1976] Qd R 190 Seaforth Land Sales Pty Ltd’s Land (No 2), Re [1977] Qd R 317 Severn Trent Water Ltd v Barnes [2004] 2 EGLR 95 Shelfer v City of London Electric Lighting Co [1875] 1 Ch 287 Simpson v Bagnall [2000] NSWSC 930 Songkal Pty Ltd v Warringah Council (2001) 117 LGERA 237 Standford v Roberts, [1901] 1 Ch 440 SJC Construction Co Ltd v Sutton London Borough Council (1975) 29 P&CR 322 Tipler v Fraser [1976] Qd R 272 Touma v Holroyd City Council [2004] NSWLEC 225 Towerpoint Pty Ltd & Re Diridge Pty Ltd, Re (1991) Q ConvR ¶54-389 Trask Development Corporation (No 3) Pty Ltd, Re [2003] QSC 115 Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845 Trueclad Pty Ltd Baulkam Hills Shire Council [2004] NSWLEC 252 Wengarin Pty Ltd v Byron Shire Council (1999) 9 BPR 16,985 Williams v Edwards and Edwards (1997) Current Law Year Book 191 Wilson v Forrester-Babcock (2000) 10 BPR 18,377 Woodland v Manly Municipal Council (No 1) (2003) 11 BPR 20,903 Woodland v Manly Municipal Council (No 2) 11 BPR 20,915 Wooler, Re (1990) Q ConvR ¶54-361 Worthston, Re [1987] 1 Qd R 400 Wrotham Park Estate Ltd v Parkside Homes Ltd [1974] 2 All ER 321 Yanner v Eaton (1999) 201 CLR 351 Young v Gosford City Council (2001) 120 LGERA 243

IV LEGISLATION,BILLS AND RULES OF COURT Access to Neighbouring Land Act 2000 (NSW) Access to Neighbouring Land Act 1992 (Tas) Access to Neighbouring Land Act 1992 (UK) Access to Neighbouring Land Bill 2000 (NSW) Access to Neighbouring Land Bill 1992 (Tas) Civil Procedure Rules 1998, The (UK) Conveyancing Act 1919 (NSW) Conveyancing and Law of Property Act 1884 (Tas) Encroachment of Buildings Act 1922 (NSW) Environmental Planning and Assessment Act 1979 (NSW) Fauna Conservation Act 1974 (Qld) Land and Environment Court Act 1979 (NSW) Land and Environment Court Amendment Act 2002 (NSW)

Bibliography 294 Land Charges Act 1972 (UK) Land Registration Act 1925(UK) Local Government Act 1993 (NSW) Magistrates Court (Civil Division) Rules 1998 (Tas) Property Law Act 1974 (Qld) Property Legislation Amendment (Easements) Act 1995 (NSW) Statute Law (Miscellaneous Provisions) Act (No 2) 2000 (NSW) Supreme Court Act 1970 (NSW)

V OTHER MATERIAL Guthrie, Woody, This Land is Your Land (1956 version) The Woody Guthrie Foundation and Archives at 19 February 2006

Bibliography 295