ABI-K Pty Ltd v Frank Shi – Power of the Court to Order an Easement

16/05/2016

The Supreme Court imposed a drainage easement on the property of Frank Shi (‘the servient tenement’), as is within its power under s 88 K of the Conveyancing Act 1919 (NSW). On Appeal the decision by the Trial Judge was upheld in that the easement was reasonably necessary for the effective use and development of land owned by ABI-K Pty Ltd (‘the dominant tenement’). The principles on the proper application of s 88 K in Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd were applied and clarified.

The Supreme Court Decision

On 12 July 2013 the dominant tenement received consent from the Council to redevelop, which was deferred until the creation of a one metre wide drainage easement over the downstream property.

By a summons filled on the 5 September the dominant tenement sought an order pursuant to s 88K of the Conveyancing Act 1919 (NSW) creating an easement (the “proposed easement”) to drain water one metre wide along the western boundary of the property owned by the servient tenement which was the downstream property.

S 88 K provides that the Court may make an order imposing an easement over land if the easement is reasonably necessary for the effective use or development of other land that will have the benefit of the easement. Kunk J restated the principles of the proper application of this section, as summarized in Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd [2012] NSWCA 445, (154-158).

‘Reasonable necessity’ requirements

The requirement that the easement be reasonably necessary requires more than just a desire or preference for the easement over another available means, however reasonable necessity does not mean absolute necessity. The proposed development must be one which is appropriate to the area in which the land is situated and is at lease an economically rational use of the land. In ABI-K Pty Ltd v Frank Shi the consent from the Council to redevelop was sufficient evidence that the proposed development was appropriate to the area, as well as not against inconsistent to public interest, pursuant to s 88 K 2A.

Following this requirement, consideration was given to the effect granting the easement would have on the servient tenement. No significant burden on the servient tenement was established. The proposed easement would only relate to the surface of the land and the subsurface and would not interfere with the servient tenement’s ability to carry out their own building developments. The easement in the boundary setback area was not considered an insurmountable barrier to the defendant to build in accordance with his current development application. It would also not sterilise the land from future development.

Alternative locations were considered, with evidence being presented from both a planner and an engineer to support the submission that there were no reasonable alternatives to the proposed easement running down the western boundary of the servient tenement. This satisfied the court that there were no reasonable alternatives from a practical point of view.

The statutory preconditions to making an order, set out in s 88 K(2) were addressed. The first that the benefit of the easement was not inconsistent with the public interest, the second that the servient tenement can be adequately compensated for any loss or other disadvantage that would arise from the imposition of the easement. A valuer gave his opinion that the sum of $21,500 would be adequate compensation. Whilst the first offer made to the servient tenement was $15,000 for compensation, the final amount offered was $40,000, subject to the servient tenement paying all the costs associated with obtaining and giving effect to the easement. The Court was satisfied that the dominant tenement had made reasonable attempts to obtain the proposed easement before proceedings commenced.

On all of these points considered together, the Judge granted the easement.

The main issue raised by the servient tenement was that the proposed easement was 100m wider that the set-back area, however the Judge did not consider that to be a practical or legal impediment to the imposition of the proposed easement.

The Court of Appeal decision

In Shi v ABI-K Pty Ltd [2014] NSWCA 293, the servient tenement challenged the orders made by the Judge on three bases: the denial of procedural fairness, the application of the requirements of s 88 K and that he should not have been ordered to pay the costs of the application to the Court.

In relation to the second ground for appeal, the order made by the Trial Judge was varied so that it did not include any area above the ground and did not exceed 900mm in width, being the set-back area within which no building would be approved. The NSW Court of Appeal upheld the trial judge’s finding that there was no sensible alternative to a mechanism for disposing of stormwater. Further, the compensation was adequate and the Trial Judge was entitled to rely on the consent granted by the Council to establish that there was no inconsistency with s 88 K (2)(a).

Effect of the Decision

The decision by the NSW Court of Appeal strengthens the case brought by dominant tenement’s to justify the necessity of an easement. However, this question involves making a value judgment about what is reasonable in the circumstances and will vary depending on the nature of the claim.

In Summary

ABI-K Pty Ltd v Rank Shi [2014] NSWSC 551, ABI-K was entitled to an order for a drainage easement. The plaintiff required the easement for Council development approval. The defendant did not consent. The respondent made a claim under s 88K. The order was granted at trial and upheld on appeal.

1. Council consent was sufficient to establish the easement was appropriate to the area.
2. No significant burden on the servient tenement was established. The proposed easement would only relate to the surface of the land and the subsurface. It would not be sterilising a part of the land which would otherwise have been available for building development.
3. The easement in the boundary setback area was not considered an insurmountable barrier to the defendant to build in accordance with his current development application.
4. No alternative location was found reasonable after evidence presented from both a planner and engineer in support of the easement.
5. The statutory preconditions in s 88K(2) were met:
   • (a) Council approval was sufficient to establish the benefit of the easement would not be inconsistent with the public interest
   • (b) And the Court was satisfied that the defendant could “be adequately compensated for any loss or other disadvantage that would arise from the imposition of the easement”

If you are faced with a similar situation please do not hesitate to contact Richard Watson a solicitor with in excess of 25 years experience who will be able to advise you.