Easements under section 88K of the Conveyancing Act 1919 (NSW) and how Compensation is Assessed

21/04/2020

As we have considered in another article, when one landowner applies for an Easement over a neighbour's property, it is:

• almost invariably the case that compensation is ordered to be paid for the imposition of the Easement; and
• usually the case that the costs of Court proceedings are payable by the applicant.

How is Compensation generally assessed?

S 88K(2)(b) of the Conveyancing Act provides (emphasis added in bold):

“Such an order may be made only if the Court is satisfied that:

…

(b) the owner of the land to be burdened by the Easement and each other person having an estate or interest in that land that is evidenced by an instrument registered in the General Register of Deeds or the Register kept under the Real Property Act 1900 can be adequately compensated for any loss or other disadvantage that will arise from imposition of the Easement, and”

s 88K(4) of the Conveyancing Act provides (emphasis added in bold):

“The Court is to provide in the order for payment by the applicant to specified persons of such compensation as the Court considers appropriate, unless the Court determines that compensation is not payable because of the special circumstances of the case.”

In Stanley Robert Gordon and Anor v Allen John Lever, Sackar J held:

“Read together, sections 88K(2)(a) and 88K(4) require the owner of the servient tenement be “adequately compensated for any loss or other disadvantage that will arise from the imposition of an Easement’ and for an amount ‘as the Court considers appropriate.”

In Muhibbah Engineering (M) BHD v Giuseppe Vartuli, Brereton J held:

“The compensation referred to in s 88K(4) is the same compensation or loss or disadvantage that will arise from imposition of the Easement as mentioned in s 88K(2)(b) ... The Court's task, therefore, is to assess appropriate compensation for the imposition of the Easement measured as adequate compensation for loss or any other disadvantage that will arise" ... The approach to assessment of compensation in cases of this type was described by Young J (as his Honour then was) … and by Hamilton J …:

(1)    Ordinarily, such compensation includes any diminution in market value of the affected land (including the potential use to which it could have been put);

(2)    Any associated costs caused to the owners of the affected land;

(3)    Provision for insecurity and loss of amenities such as peace and quiet;

(4)    In the case of a permanent Easement such as one to drain storm water, loss of the proprietary rights taken by the Easement; and

(5)    Compensation for the disturbance affected by carrying out the initial work and subsequent repair and maintenance.

In some of the cases provision has also been made for compensation in the nature of an allowance for "blot on title".[1]

In that case, the Court was considering the granting of an Easement for drainage of water, where land liable to flood was affected in part.

Valuers for each of the parties gave different values to different parts of the land.

In the case of the Valuer relied upon by the plaintiff, the valuation was $55,000.

In case of the Valuer relied upon by the defendant, the valuation was $124,851. To that, the defendant's Valuer proposed an additional allowance of $25,000 be added for “blot on title”, disturbance and inconvenience during construction, and from the ongoing right of access of the dominant owner, producing all up a round figure of $150,000.

The Valuers then conferred and identified a number of areas of agreement and difference. One of those areas they concluded could be resolved if necessary by a surveyor. In order to resolve those issues capable of resolution by survey, the Court appointed a single party's expert surveyor, who undertook a survey and provided a report.

Ultimately, the Court then granted an Easement and assessed compensation in the sum of $72,116.26, as follows:

“In respect of the part of the Easement in the 1 in 100 year flood zone which is 562 square metres at 50% of $125 per square metre, the sum of $10,500;

In respect of the part above the 1 in 100 year flood zone but within the PMF zone which is 238.5 square metres at 50% of $225 per square metre, the sum of $25,206.25;

In respect of the flood free zone, which is 165.5 square metres at 80% of $275 per metre, the sum of $36,410.”

In Rainbowforce Pty Limited v Skyton Holdings Pty Limited and Ors, Preston CJ held:

“… ordinarily, compensation will have three elements: (a) the diminished market value of the affected land; (b) associated costs that would be caused to the owner of the affected land, and (c) an assessment of compensation for insecurity and loss of amenities, such as loss of peace and quiet. Against these losses and disadvantages should be allowed, as an offset, any compensating advantages…”

At Watson & Watson our highly experienced building and construction Solicitors can provide advice and assist you with seeking and/or opposing the Grant of Easements under the Conveyancing Act 1919.  If you have any issues or concerns in relation to Easements, please contact Richard Watson Accredited Specialist Building and Construction or his Personal Assistant Shereen Da Gloria to discuss your matter and obtain appropriate advice as to your circumstances.