Mikitasov v Little [2012] NZHC 1100; (2012) 13 NZCPR 271 (22 May 2012)

Last Updated: 25 May 2012

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV-2011-488-000564 [2012] NZHC 1100

UNDER the District Courts Act 1947, section 72

IN THE MATTER OF an appeal against the decision of the

District Court at Kaikohe

BETWEEN IGOR MIKITASOV Appellant

AND ALFRED NEWTON LITTLE First Respondent

AND JAMES LOUIS VEZEY, MAHMOOD KHAN AND KAYE THERESA VEZEY Second Respondents

Hearing: 1 December 2011

Counsel: J A Browne for the Appellant

R C Mark for the Respondents

Judgment: 22 May 2012

_{JUDGMENT OF DUFFY J}

This judgment was delivered by Justice Duffy on 22 May 2012 at 4.00 pm, pursuant to

r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Solicitors: Henderson Reeves Connell Rishworth P O Box 11 (DX AP24505) Whangarei 0140 for the Appellant

_{R C Mark P O Box 172 Kerikeri 0245 for the Respondents}

MIKITASOV v LITTLE and ORS HC WHA CIV-2011-488-000564 [22 May 2012]

[1] The appellant, Igor Mikitasov, was successful in obtaining an order from the District Court extinguishing an easement creating a right of way across land that he owns in the Bay of Islands. The first and second respondents, who were the holders of the dominant tenement, did not oppose the extinguishment of the easement but they did seek compensation. Mr Mikitasov objected to paying this. The District Court ordered him to pay compensation of $12,000 each, plus related costs, to the first and second respondents. He now appeals against the awards of compensation. The appeal is opposed.

Facts

[2] The easement created a 1.83m wide right of way over a block of land owned by the appellant. It still extends over a separate adjacent block of land owned by the appellant’s wife. The best appreciation of the impact of the easement on the subject land and the neighbouring properties that held the dominant tenement can be seen from viewing the “plan of easements and areas” that was part of the affidavit of Kaye Vezey and which is now attached to this judgment. The appellant’s block of land is the lot marked “F” on the plan and his wife’s block is the lot marked “G”.

[3] Technically, the easement gave the holders of the dominant tenement the right of access to an esplanade reserve bordering the foreshore. But in fact their ability to enjoy having access to the foreshore was significantly hampered by illegal intrusions caused by building work carried out by a previous owner of lot F, as well as naturally occurring damage to the esplanade reserve that had caused the local territorial authority to decide against repairing a stairway giving access from the reserve to the foreshore. These obstacles meant that there was little likelihood of the right of way being used.

Appellate principles

[4] The parties are agreed on the principles applicable to an appeal of this nature. They each acknowledge that this is an appeal against the exercise of a discretion and, accordingly, the appellant must demonstrate that the Judge took into account irrelevant factors, failed to take account of relevant factors, erred in principle, or was

plainly wrong: see Blackstone v Blackstone [2008] NZCA 312, (2008) 19 PRNZ 40 (CA); May v May [1982] 1 NZFLR 165 (CA).

Analysis

Should compensation have been awarded?

[5] The reasons the District Court gave for awarding compensation are set out at [24]-[33] of the judgment. The Judge applied an analogous legal principle to arrive at the conclusion that whilst an award of compensation is discretionary, it will usually be equitable to do so and, in doing so, to assess it on the footing of what a willing grantor and grantee of the easement or vendor and purchaser of the fee simple would agree in friendly negotiation: see [31] of the judgment and the reference therein to Jacobsen Holdings Ltd v Drexel [1986] 1 NZLR 325 (CA) at

329. I consider this reasoning by analogy was well made.

[6] In short, the Judge considered that here, Mr Mikitasov would enjoy enhanced benefits of ownership once the easement was extinguished. I consider that this was an appropriate and correct conclusion to reach. Whilst the practical use of the easement was certainly most difficult, given the illegal intrusions on it, Mr Mikitasov (or any future owner of the property) could not have legally prevented any holder of the dominant tenement from attempting to exercise rights of access. Whilst the easement remained in existence, Mr Mikitasov was legally vulnerable to any such attempts and this in turn would have affected the property’s value as future owners may also have been alive to this possibility. Once the easement was extinguished, Mr Mikitasov obtained enhanced security and privacy; he and future owners of the property gained the peace of mind of knowing that from then on, no determined persons seeking to exercise rights of access could ever legally do so.

[7] Whilst Mr Mikitasov had argued that he was unaware of the easement when he purchased the property, such arguments must carry little weight as they are inconsistent with the Torrens title system of registration that is applied in New Zealand. This system relies on knowledge of such encumbrances on titles being given to the world at large through registration on a property’s title. A party’s

failure to understand the workings of New Zealand’s registration of title to land can never be a reason for departing from well settled principles, including those relating to when compensation will be payable for loss of benefits that form part of this system.

[8] Looked at overall, I am satisfied that the Judge’s reasoning in this regard cannot be faulted and that Mr Mikitasov has failed to make out the basis for when an appellate court will interfere with the exercise of a discretion.

Quantum of compensation payable?

[9] I now turn to consider the quantum of the compensation that the Judge ordered Mr Mikitasov to pay. The Judge heard valuation evidence from two registered valuers: a Mr Malone for Mr Mikitasov; and a Mr McNally for the respondents. There was a wide difference of opinion between these valuers.

[10] At [37]-[70], the Judge traversed the valuation evidence, and identified the underlying reasons for each valuer taking the approach that he did. The Judge’s approach was carefully reasoned. He expressed his reasons for rejecting Mr Malone’s approach and for preferring Mr McNally’s approach.

[11] It appears to me that the Judge considered that Mr Malone had taken too abstract a view of valuing the loss of the easement. For example, Mr Malone had worked from a position that only valued the affected land and so he had paid no regard to the value of the dwelling-house or other improvements on the property. He was also criticised for focusing almost entirely on a theoretical value of the affected land without looking at other relevant factors such as the nature of the usage allowed by the easement, its location in relation to the present dwelling-house and outdoor living area and the wider effects of such usage in this location of the property. The Judge considered that if Mr Mikitasov were being forced to give up land for an easement, all these factors would be relevant and so they were also relevant in the present case where the extinguishment of the easement would remove the disadvantages attached to it. I see no flaw in the Judge’s assessment of Mr Malone’s evidence.

[12] At [67], the Judge referred to the wide diverging valuation evidence that was before him. He then recognised, appropriately and correctly, that his task in assessing the quantum of compensation required him to reach a decision “informed by” the valuation evidence, rather than simply to rely upon the evidence he preferred.

[13] At [68]-[69], the Judge set out the legal approach that he was adopting. I consider that the Judge properly applied the correct legal approach to the question that was before him. At [70], he summarised his reasons for preferring the evidence of Mr McNally to that of Mr Malone, but then adjusted the values of Mr McNally downwards in view of the totality of the evidence before the Court. In cases such as this, the way in which a Judge arrives at a figure for an award of compensation is not an exact science. In the end, the Judge was required to assess reasonable compensation. This will always involve an element of discretion when it comes to the actual sum awarded. Provided the way in which the figure is arrived at is well reasoned and in accordance with well settled legal principles, it is not for an appellate court to interfere by finding that the award is not reasonable.

[14] In the present case, the respondents have clearly lost valuable, recognisable legal rights. Their rights were registered on the title of the servient tenement for everyone to see. The explanation Mr Mikitasov has given for why he did not understand the existence of those rights, and his arguments that the retention of the easement on “Area G” might allow some hope for the easement on Mr Mikitasov’s land to be regained some time in the future were rightly disposed of by the Judge. What is of relevance here are the present enhanced benefits that Mr Mikitasov now enjoys and the corresponding present loss of benefits that the respondents have suffered. I am satisfied that the result the District Court reached in this case was one that was reasonably and properly open to the Court to reach. It follows that the appeal is unsuccessful and accordingly is dismissed.

Result

[15] The appeal is dismissed.

[16] The respondents have been successful in their opposition to the appeal and are, therefore, entitled to an award of costs and reasonable disbursements. In a Minute dated 3 October 2011, Heath J categorised the appeal as category 2 for the purposes of costs.

[17] If the parties are unable to agree on the appropriate sum for costs and reasonable disbursements, they have leave to file memoranda on costs

Duffy J

ANNEXURE