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Easements under section 88K of the Conveyancing Act 1919 (NSW) and the position in relation to the legal and costs payable by the person seeking the Easement

23/03/2020

When one landowner seeks an Easement over a neighbour's property if the matter cannot be resolved, the person seeking the Easement can approach the Court, usually the Supreme Court of New South Wales to seek an Easement over the neighbour’s land for a specific purpose for example, to drain water (stormwater easement).  In such an application it is:

  • almost invariably that compensation is ordered to be paid by the person seeking the Easement for the imposition of the Easement over the neighbour’s land; and
  • usually the case that the costs of court proceedings are payable by the applicant.

However, there is a tension between the usual orders as to costs and the Court rules encouraging the settlement of disputes in particular, the rules dealing with the making of Calderbank Offers and Offers of Compromise.

For example, in a damages context, if a plaintiff seeks damages of $100,000, and serves an Offer of Compromise whereby the Plaintiff proposes to accept $50,000 plus costs in full and final settlement of his cause of action.  If the offer is rejected by the Defendant and the case proceeds to a final hearing and the Plaintiff recovers a verdict greater than $50,000 he can rely on the service of the Offer of Compromise, and the failure of the defendant to accept it, as a circumstance entitling him to a special order for costs on the indemnity basis.

This means that he may recover more of his costs that would otherwise be the case under the usual order for costs.

In effect, that system rewards an applicant for making a reasonable offer of settlement, and punishes a respondent for not accepting it.

In Easement cases, the person seeking the benefit of the Easement being the Plaintiff in the proceedings were, for some time, and still are, in the habit of trying to serve settlement offers (whether Calderbank offers or formal Offers of Compromise) making an offer to pay the Defendant a particular sum in compensation and the Defendant’s legal costs in an attempt to try to avoid the prospect of having to pay the Defendant’s costs of the proceedings.

In one case, in 2014, a trial judge made an order that the costs of the party seeking the Easement be paid by the party over whose property the Easement was to be granted.

In that case, the facts were as follows:

  • The Plaintiff had offered $40,000 to the Defendant, together with an assurance that the Plaintiff would bear all of the costs associated with obtaining or giving effect to the Easement.
  • In contrast, the Defendant offered to accept payment of the sum of $250,000 plus costs by way of compensation.
  • The trial Judge ultimately ordered the Easement be created, and ordered the applicant to pay the respondent compensation of $21,500.
  • The sum award was about half of what the Plaintiff had offered to pay and about one tenth of what the Defendant offered to receive.

The trial Judge considered that the Defendant was unreasonable in not accepting the Plaintiff’s offer made and in the circumstances, considered that the reasoning behind offers of compromise could apply by way of analogy to allow the Court to make a cost order different to that usually made under section 88K(5) namely, that the Plaintiff would pay the Defendant’s legal and other costs of the proceedings. The Court ordered the Defendant to pay the Plaintiff’s costs of the proceedings.

On appeal, the Court of Appeal set aside that order, and clarified the position that generally applies as follows:

  • Such proceedings are not a claim for damages, or any analogous form of compensation: it was a claim for an interest in property, for which appropriate compensation was required to be paid. The ordinary rule, that the applicant pay the costs of any proceeding, reflects the fact that an applicant for such an order has no right to the grant of an Easement over the property of another.
  • The statutory scheme is not consistent with the proposition that an applicant can obtain a right to costs by offering more than the compensation ultimately ordered to be paid as a condition of the Easement. The property owner is entitled to refuse to consent to the Easement, thereby requiring the applicant to satisfy a court as to the various preconditions, including questions of the public interest, and that the grant of the Easement is reasonably necessary in the sense provided by the section.
  • Unless it has done more than reject reasonable offers of compensation, the property owner should not be put at risk of an adverse costs order in those circumstances.

As a result of that decision, there needs to be some unreasonableness demonstrated beyond merely failing to accept an offer of compromise for the court to order other than that the applicant for the Easement pay the costs of the respondent over whose land the Easement is sought to be imposed.

Just precisely how much additional unreasonableness is required is not clear.

Some examples may be the following:

  • unreasonably bringing about legal costs or increased legal costs.
  • relying on experts for valuation and quantity surveying whose evidence is for the most part without foundation.
  • undue prolongation of the case by groundless contentions.
  • making the proceedings more expensive, or presenting patently false evidence or manufacturing a case.
  • possibly, a situation where the case for an Easement is so strong and the claim for compensation by the owner is so extravagant that the owner's failure to accede to the application should displace the ordinary rule under s.88K(5) - note: this requires more than just a strong case in the applicant.

In each case, consideration should be given carefully to the matter.

Most often, the costs involved in Easement proceedings will outweigh the compensation that may be ordered for the grant of an Easement.

However usually costs payable are on the ordinary basis.  This can still leave a Defendant neighbour significantly out of pocket.

This highlights the desirability of settling such matters without litigation if possible for all concerned

At Watson & Watson our highly experienced Commercial Litigation Solicitors can provide advice and assist you with seeking, and opposing, the grant of Easements for example, under s.88K of the Conveyancing Act 1919.  If you have any issues in relation to such Easements, please contact Richard Watson Accredited Specialist Building & Construction or his Personal Assistant Shereen Da Gloria to discuss your matter and obtain appropriate advice as to your circumstances.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.

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