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This plaintiff discovered that a building on the defendant’s land encroached onto the plaintiff’s adjoining property by about 34cm, 3.5m underground. The defendant had been unaware of the encroachment, which had existed at the time the defendant acquired the property. The plaintiff sought compensation under ss 184, 185 and 186 Property Law Act 1974 (“PL Act”) for loss or damage resulting from the encroachment, including the cost of variations under a construction contract and other building related costs and expenses. The claim was defended in part on the basis that compensation under ss 185 and 186 PL Act did not comprehend consequential loss of the kind claimed by the plaintiff, and that matter was subsequently set down for separate determination. Bowskill J concluded that compensation for consequential loss is not outside of the ambit of ss 185 and 186.
8 November 2019
The plaintiff and defendant owned adjoining blocks of land. . In 2014, the plaintiff discovered that a building on the defendant’s land encroached upon the plaintiff’s property by about 34cm, 3.5m underground. –, . The defendant was not aware of the encroachment, which had existed at the time that the defendant purchased the land. , –. The plaintiff commenced proceedings seeking compensation under ss 184, 185 and 186 Property Law Act 1974 (“PL Act”) for loss or damage suffered by reason of the encroachment, including loss or damage in the form of variations under a construction contract and other building related costs and expenses. .
After the claim was defended in part on the basis that an award of compensation under ss 185 and 186 PL Act did not comprehend consequential loss or damage of the kind claimed, that question was set down for separate determination pursuant to r 483 Uniform Civil Procedure Rules 1999. –. The defendant argued inter alia that s 185(1)(a) PL Act authorised compensation for loss or damage in respect of a transfer of title in accordance with s 186(1) PL Act, or for other loss or damage to the plaintiff’s title or interest in the land, but did not extend to broader consequential loss or damage. . The plaintiff maintained that s 185 PL Act gave the court a broad discretion to award compensation which was not limited by s 186 PL Act or otherwise. .
Whether compensation under ss185 and 186 PL Act comprehends consequential loss
After reviewing the text and history of the relevant provisions, Bowskill J identified that the purpose of Pt 11 Div 1 PL Act, which contains ss 185 and 186 PL Act, is to provide “a means of resolving questions or disputes as between owners of contiguous parcels of land in relation to encroachment”. –, –. Having regard to the breadth of the discretion to award compensation under s 185(1)(a) PL Act, and to the means of assessing compensation set out in s 186 PL Act, her Honour concluded that any award of compensation under s 185(1)(a) must be calculated in accordance with s 186. –. However, her Honour stressed that the court nevertheless retains discretion to determine whether any compensation at all should be awarded in each case. –.
Her Honour observed that where the court is minded to award compensation, s 186(1) PL Act specifies the method for calculating the minimum sum of compensation that is to be paid. . Section 186(2) PL Act in turn sets out the matters that the court “shall have regard to” when determining whether any award of compensation should then exceed the minimum. . Bowskill J did not consider that the text and context of the sections in question indicated that the phrase “loss or damage” as it appears in s 186(2)(d) PL Act is limited so as to exclude consequential loss or damage. –. Her Honour emphasised however, that in considering the matter of compensation under ss 185 and 186 PL Act, the court is obliged to have regard to the circumstances in which the relevant encroachment was created. –.
Bowskill J underscored that it would be particularly important in the present case that the defendant was not responsible for the encroachment and had no means of knowing of its existence before it was discovered by the plaintiff. . Her Honour explained that s 186(2) PL Act does not form an exclusive list of matters that the court may have regard to when considering whether any award of compensation might exceed the minimum under s 186(1) PL Act. . In that regard, it was significant that a person in the position of the defendant would not be liable for damages for nuisance, and as such any compensation awarded might not reflect the entirety of the loss or damage suffered by the plaintiff by reason of the encroachment. . In the circumstances, Bowskill J concluded that compensation under ss 185 and 186 PL Act does not exclude consequential loss or damage, but noted that any compensation awarded to the plaintiff may still be limited in some of the ways contemplated by the defendant upon the facts of the case. –.
In the result, her Honour made no declaration concerning the power to award compensation, and ordered that the parties be heard as to costs. –.