Wardanski & Anor v Mawby & Anor

This case concerned a dispute between neighbours about structures on the defendants’ land which encroached slightly on the plaintiffs’ land. The plaintiffs sought orders for the removal of the encroachment. Those orders would have required the defendants to demolish and reconstruct parts of their garage and remove some other structures. The defendants sought orders for the transfer of that part of the plaintiffs’ land covered by the encroachment. The plaintiffs argued that the orders sought by the defendants would have left them without enough space to build a double garage, which they had always planned to do. Justice Crowley, in a detailed judgment, held that the subject land should be transferred, and compensation should be paid to the plaintiffs. In doing so, His Honour gave extensive reasons interpreting ss 184 – 186 Property Law Act 1974 which gives the court power to make orders in encroachment disputes.

Crowley J

18 August 2023

Background

The plaintiffs purchased land in Springwood in 2003. [1]. The defendants purchased the adjoining property in 2014 and took up residence in 2017. [1], [52]. A fence, which was built before 2003, separates the two properties. [3]. For reasons unknown, the fence does not mark the true boundary of the properties. [6]. In fact, a long, thin wedge-shaped area of land belonging to the plaintiffs is on the defendants’ side of the fence. [58]. The total area of that land is 19m². [58]. As a result of the misaligned fence, various structures on the defendant’s land encroached on the plaintiffs’ land. These structures included the defendants’ garage, which encroached by 7m², as well as some retaining walls, stormwater structures, a rendered block wall and a garden shed which collectively encroached by 1.25m². [78], [83]. The defendants became aware of the encroachment in July 2017, while carrying out renovations to their property. [101]–[102].

Relevant Provisions of the Property Law Act 1974

The plaintiffs brought a claim under s 184 Property Law Act 1974 (“PLA”) which allows applications to be made in respect of any encroachment. [12], [20]. Under s 185, the court may make “such order as it deems appropriate with respect to”:

“(a)the payment of compensation to the adjacent owner; and

(b)the conveyance, transfer, or lease of the subject land to the encroaching owner…”

Under s 186(1) PLA:

“The minimum compensation to be paid to the adjacent owner in respect of any conveyance, transfer, lease, or grant under section 185 to the encroaching owner shall, if the encroaching owner satisfies the court that the encroachment was not intentional and did not arise from negligence, be the unimproved capital value of the subject land, and in any other case 3 times such unimproved capital value.”

His Honour made four key findings about the proper interpretation of these provisions. First, although s 185 PLA grants a broad discretion as to the orders the court may make, if the court determines that compensation should be granted for a conveyance of the subject land under s 185(1)(b), the court must apply s 186(1). [36].

Second, s 186(1) sets the minimum compensation by reference to whether the encroachment was made negligently, intentionally or otherwise. [37]. As in this case, it may be difficult for encroaching owners who inherit the encroachment from a predecessor in title to prove that the encroachment was, when made, neither intentional nor negligent. [38].

Third, the conduct of the parties in attempting to resolve the encroachment dispute is relevant to the proper exercise of discretion under s 185 and s 186 PLA. [29], [375].

Finally, s 185 PLA, allows the court to order the transfer of the “subject land”, being the land over which the encroachment extends. The court cannot, under s 185, order the conveyance of land additional to the land actual encroached upon. [447].

Factual Issues

In large part, the evidence centred on the conduct of the parties in their dealings with each other, after the defendants discovered the encroachment. [84]. Ultimately, His Honour found that both parties had acted unreasonably at times. [378]–[379]. [381]–[385]. His Honour found that after the defendants had discovered the encroachment, they conducted building works in the area of the encroachment. [388]. However, most of the work merely replaced existing structures in the encroachment, and to the extent that new structures were built, the impact on the encroachment was de minimis. [388].   

Second, the plaintiffs asserted that they had, for many years, intended to build a large double garage on their property. [187]. They claimed that after the encroachment was discovered they realised that their plan would be impossible if the encroachment was not removed. [293]. The defendants asserted that the plaintiffs invented their plan to build the garage to inflate the loss that they would suffer if the subject land was transferred to the defendants. [188]. Justice Crowley accepted that the plaintiffs had long intended to build the garage, but rejected the plaintiffs’ case that doing so would be impossible if the encroachment was not removed. [383].

Appropriate Orders

His Honour found that, in the circumstances of this case, the most appropriate order under s 185 PLA, was to require the plaintiffs to transfer the subject land to the defendants with the costs of the transfer to be paid by the defendants. [422]. The plaintiffs were the owners of the land, and their property rights were not to be interfered with lightly. [423]. However, his Honour was satisfied that the prejudice that would be caused to the defendants by an order for removal of the encroachment outweighed the prejudice caused to the plaintiffs if no such order was made. [423].

Compensation

Given that the subject land was to be transferred to the defendants, and the defendants were unable to establish that the encroachment had not been caused intentionally or negligently, the minimum compensation payable under s 186(1) PLA was three times the unimproved capital value of the land. [426]. That amounted to $16,087.50. [426]. In addition, because only the subject land could be transferred, the transfer would cause a crooked boundary line between the two properties. This would cause a diminution in the value of the plaintiff’s land of $5,000, which his Honour also ordered in compensation. [422]. The court also ordered compensation in respect of advice the plaintiffs received about the encroachment, and the cost of an identification survey paid for by the plaintiffs. [428].

The plaintiffs also claimed compensation on three other bases, each of which the court rejected. First, the plaintiff claimed the costs of obtaining advice and assistance with the design of their proposed garage. His Honour found that those costs were not reasonably incurred, particularly because the designs were produced on the assumption that the encroachment would be removed. [427].

Second, the plaintiffs claimed the additional costs of building their proposed garage if the encroachment was not removed. [430]. His Honour did not consider that these additional costs were made out on the evidence. [431].

Finally, the plaintiffs claimed $194.14 in council rates paid by the plaintiffs in respect of the 19m² area that was on the defendants’ side of the fence. His Honour held that those costs were necessarily incurred before the encroachment was discovered and the defendants bore no responsibility for them. [429].  

L Inglis