Cuzeno Pty Limited v The Owners - Strata Plan 65870
[2013] NSWSC 1385
•20 September 2013
Supreme Court
New South Wales
Medium Neutral Citation: Cuzeno Pty Limited v The Owners - Strata Plan 65870 [2013] NSWSC 1385 Hearing dates: 26-28 August 2013 Decision date: 20 September 2013 Jurisdiction: Equity Division Before: Darke J Decision: See paragraphs 133, 137, 145, 151 and 152
Catchwords: REAL PROPERTY - easements - implied - non-derogation from grant - first rule in Wheeldon v Burrows - requirement that quasi-easement be used by the grantor prior to grant - where surrounding circumstances indicate parties did not intend easement to pass
REAL PROPERTY - statutory easements - Conveyancing Act 1919 s 88K - whether easement reasonably necessary for the effective use of the land - whether all reasonable attempts made to obtain easement - whether court should refuse to grant easement on discretionary grounds - availability of alternate statutory dispute resolution mechanism for strata management schemes
REAL PROPERTY - statutory easements - Conveyancing Act 1919 s 88K - costs of application - whether conduct of defendant unreasonableLegislation Cited: Conveyancing Act 1919
Environmental Planning and Assessment Act 1979
Law of Property Act 1925 (UK)
Real Property Act 1900
Strata Schemes (Freehold Development) Act 1973
Strata Schemes Management Act 1996
Sydney Water Regulation 2006Cases Cited: Bloom v Lepre [2008] NSWSC 70
Campbell v McGrath [2005] NSWSC 496
City of Canterbury v Saad [2013] NSWCA 251
Horsfall v Braye (1908) 7 CLR 629
ING Bank (Australia) Ltd v O'Shea [2010] NSWCA 71
Kent v Kavanagh [2007] Ch 1
McGrath v Campbell (2006) 68 NSWLR 229; 2006 NSWCA 180
McKeand v Thomas [2006] NSWSC 1028
Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd [2012] NSWCA 445
Nelson v Walker (1910) 10 CLR 560
Westfield Management Ltd v Perpetual Trustee Company Ltd (2007) 233 CLR 528; [2007] HCA 45
Wheeldon v Burrows (1879) 12 Ch D 31
Williams v State Transit Authority (NSW) (2004) 60 NSWLR 286Texts Cited: Butt, Land Law (6th ed, 2010) Category: Principal judgment Parties: Cuzeno Pty Limited (First Plaintiff)
Topdaze Pty Limited (Second Plaintiff)
The Owners - Strata Plan 65870 (Defendant)Representation: Counsel:
L T Livingston (First and Second Plaintiff)
L Gor (Defendant)
Solicitors:
Michie Shehadie & Co (First and Second Plaintiff)
JS Mueller & Co (Defendant)
File Number(s): 2013/46290 Publication restriction: Nil
Judgment
Introduction
The first plaintiff in these proceedings, Cuzeno Pty Limited ("Cuzeno"), became the owner of Lot 47 in Strata Plan 85102 in May 2011 pursuant to a transfer from the Owners of Strata Plan 65870. Cuzeno subsequently transferred ownership of Lot 47 in Strata Plan 85102 to a related company, Topdaze Pty Ltd ("Topdaze"), which is the second plaintiff in the proceedings.
Lot 47 in Strata Plan 85102 ("Lot 47") is an area located on the ground floor of a mixed commercial and residential development in Belgrave Street, Kogarah. The development was a strata title development, the relevant Strata Plan being number 65870. The Owners - Strata Plan 65780 is named as the defendant to the proceedings.
Lot 47 is located on the corner of Kensington and Belgrave Streets in Kogarah. Since early 2009 a café business has been carried on from the area which is now Lot 47. That business has made use of a grease arrestor trap, which is located in basement level one of the development and connected to Lot 47 by means of various pipes. The grease arrestor trap, together with its associated pipes and vents, is located on the common property of Strata Plan 65870.
In these proceedings, the plaintiffs allege that the circumstances of the transfer of Lot 47 to Cuzeno gave rise to an implied easement, of the Wheeldon v Burrows-type, for the benefit of Lot 47 for the use of the grease arrestor trap and associated apparatus. Alternatively, an order is sought pursuant to s 88K of the Conveyancing Act 1919 imposing such an easement for the benefit of Lot 47.
Relevant Facts
It is necessary to recount in some detail the history of the development in so far as it concerns the area which is now Lot 47, and the dealings concerning the construction and subsequent use of the grease arrestor trap.
Cuzeno was the developer of the site. It obtained an approval (the terms of which are not in evidence) in 1998 to construct a building comprising three levels of underground parking, a ground floor and first floor for commercial use, and five floors of residential units. On 18 July 2001 the strata plan, being Strata Plan 65870, was registered. The original intention of Mr George Jabbour, who at all material times has been a director and, I infer, the controller of Cuzeno, was to utilise Lots 28 and 29 on the ground floor of the development for a restaurant and café. It was intended that an open area of common property adjacent to Lot 29, at the corner of Kensington and Belgrave Streets, would be used as an outdoor eating area.
Cuzeno commenced selling lots in the development "off the plan". However, due to a lack of interest in operating a restaurant on the ground floor level, Mr Jabbour decided that the outdoor area at the corner of Kensington and Belgrave Streets would be turned into a pathway and garden area.
The building was completed in about June 2001. The first annual general meeting of the Owners Corporation of Strata Plan 65870 took place on 19 June 2002. The minutes of that meeting, which were prepared by Ms Glenda Philpott of The Heights Strata Management Pty Ltd, record that resolutions were passed for three Special By-laws.
Special By-law 3 was recorded as being in the following terms:
Exclusive use of two areas highlighted on ground floor Strata Plan that are adjacent to Lot 45 at corner of Kensington and Belgrave be given to Lot 45. Lot 45 agrees to maintain this area at its own expense to a high standard in keeping with this prestige block.
The minutes record that the resolution was passed unanimously. The reference to Lot 45 may be explained by the fact that it was then proposed that most of the existing Lot 29 was to become Lot 45 in a further plan of subdivision. This occurred on 30 July 2002 when Strata Plan 68378 was registered. SP 68378 noted the existence of exclusive use by-laws, including the exclusive use given to the common property adjacent to Lot 45 at the corner of Kensington and Belgrave Streets.
The exclusive use by-law in respect of that area became By-Law 25, which was the subject of a registered Change of By-Law (No 8759891X).
By this time, both Lot 28 and Lot 45 (the former Lot 29) were being used as doctors' rooms.
Problems arose concerning the outdoor area at the corner of Kensington and Belgrave Streets. The area was affected by vandalism and was frequented by homeless people and drug users. Cuzeno proposed that a building be constructed in the area which could be used as a coffee shop.
On about 2 February 2006 a Development Application was lodged with Kogarah Council by Huntington and Macgillivray architects, presumably acting on instructions from Cuzeno, for a development described as "alterations to provide a coffee shop to space at ground level under existing building". The application did not identify any easements that might be involved with the proposed development.
The Development Application was accompanied by a letter dated 2 February 2006 signed by Ms Philpott of The Heights Strata Management Pty Ltd. The letter stated:
I am the strata manager for the Body Corporate at the above mentioned property, hereby authorise Huntington and Gillivray [sic] Architects to lodge a D.A. to the Council to use the common property on the street level.
I trust this will meet with your requirements.
However, the Council, by letters dated 27 February 2006 and 10 April 2006 to Huntington and Macgillivray architects, stated that the Development Application was deficient in a number of respects including that the consent of the Secretary of the Body Corporate would be required, as the consent of the Strata Manager was not considered adequate. This appears to have prompted the convening of an extraordinary general meeting of the Owners of the Strata Plan 65870. Notice was given of a motion to be put to such a meeting to be held on 3 June 2006.
There is a dispute as to what occurred at the meeting on 3 June 2006. That is a matter to which I will return. However, the minutes of the meeting, again prepared by Ms Philpott of The Heights Strata Management Pty Ltd, and signed by her as Secretary, record that it was resolved unanimously:
To authorise Cuzeno Constructions Pty Ltd to lodge an application to Kogarah Council for Development Approval and Construction Certificate to change use of part of its exclusive use from walkway and garden to proposed mixed development, coffee shop, at corner of Kensington Street and Belgrave Street, Kogarah.
The minutes also record that Cuzeno Constructions was to be responsible for the maintenance of the area, and that there was discussion about hours of opening, the possible installation of a fountain on the corner, and the type of shutters to be used for the shop.
The references in the minutes to Cuzeno Constructions Pty Ltd are erroneous. There is no such entity. It may be inferred that it was intended to refer to the company through which Mr Jabbour would pursue the coffee shop development. In any event, a copy of the minutes was provided to the Council on 24 July 2006.
In October 2006 By-Law 25 was amended so that the exclusive use rights benefiting the owner of Lot 45 would now benefit the owner of Lot 46. This change was made in connection with a sale of Lot 45 by Cuzeno. Cuzeno remained the owner of Lot 46. A similar change occurred in August 2008 when Cuzeno sold Lot 46. By-Law 25 was amended so that the exclusive use rights benefiting the owner of Lot 46 would now benefit the owner of Lot 34 which Cuzeno continued to own.
On 18 October 2006 Kogarah Council gave its consent to the Development Application for the conversion of the open area into a coffee shop. Various conditions were imposed, but none specifically concerned any grease arrestor trap. However, Standard Development Condition 12 provided:
The approved plans must be submitted to a Sydney Water Quick Check agent or Customer Centre to determine whether the development will affect any Sydney Water asset's [sic] sewer and water mains, stormwater drains and/or easements, and if further requirements need to be met.
An application for a Construction Certificate in respect of the proposed development was not made until April 2008. On 5 May 2008 the Council issued a Construction Certificate in respect of the coffee shop development, and on the same day an application was made to modify the Development Consent. A corner garden, which had been part of the original application, was sought to be deleted and replaced by an awning and outdoor seating. Ms Philpott signed the application and affixed the common seal of The Owners - Strata Plan 65870 to indicate the owners' consent to the modification.
Construction of the coffee shop commenced in about June 2008. On 29 October 2008, during the course of construction, Mr Jabbour sent an email to Ms Philpott which attached detailed plans of the coffee shop "for your records". The email further stated:
We will be installing a grease arrestor pit in the location as shown. It will not impact on visitor car parking and will be well protected. Please confirm your permission.
An attached plan, apparently of an area in the basement, shows a grease arrestor pit with dimensions (presumably in millimetres) of 2150 x 700 located to the right of a concrete column. The pit, as depicted, would encroach upon a single visitor car space. A galvanised pipe and an exhaust is depicted adjacent to the concrete column.
Later on 29 October 2008 Ms Philpott convened a meeting of the Executive Committee of the Owners Corporation to be held on 3 November 2008. According to a notice of the meeting prepared by Ms Philpott, one of the items for discussion was to be "George's Coffee shop". The minutes of that meeting indicate that there was some discussion about the coffee shop at the meeting, including that the building was "nearly complete", but the minutes are silent as to whether there was any discussion about a grease arrestor trap.
There is no doubt that the grease arrestor pit which was installed is not at the location depicted in the plan sent to Ms Philpott on 29 October 2008. Rather, the grease arrestor pit is located to the left of the concrete column, is somewhat larger, and encroaches upon two visitor car spaces.
There is considerable dispute between the witnesses, and no little confusion, as to what information Cuzeno provided (if any) to the Owners Corporation (or the Executive Committee of the Owners Corporation) concerning the grease trap and, in particular, its location, and as to what (if any) approval Cuzeno obtained concerning the grease trap. These are matters to which I will return.
On 1 December 2008 Kogarah Council, pursuant to s 96 of the Environmental Planning and Assessment Act 1979, determined to modify the Development Consent. It did so subject to various conditions including the following:
1. To ensure that adequate provision is made for the cleanliness and maintenance of all food preparation areas all building work in connection with the occupation or use of the premises intended for the preparation and storage of food shall be designed and implemented in accordance with requirements of: -
(a) ...
...
(e) Sydney Water Corporation (Trade Waste Section);
...
Certification to this effect shall be provided by an appropriately qualified person and shall accompany the Construction Certificate.
...
3. To ensure that adequate provision is made for the treatment of wastewater from the premises, floor plans accompanying the Construction Certificate application shall include the provision for Sydney Water approved grease trap. The grease trap installation shall also comply with the requirements of Australian Standard AS3500 National Plumbing and Drainage Code and be capable of servicing all commercial sections of the development.
Certification from Sydney Water granting approval to the connection shall also be provided with the Construction Certificate.
...
8. Prior to the commencement of business a final inspection must be undertaken by Council's Environmental Health Officer to ascertain compliance with the above conditions...The inspection result must be satisfactory prior to the business commencing.
Construction of the coffee shop and associated works commenced in about June 2008 was completed in about January 2009. The grease trap itself was installed in about late November or early December 2008. The total cost of the development was approximately $240,000. When the coffee shop commenced operations in early 2009 the land upon which it was situated remained part of the common property of SP 65870. Cuzeno had the benefit of exclusive use of the coffee shop area pursuant to By-Law 25 (as amended). It is agreed that the grease arrestor trap, together with associated pipes and vents, was also located on the common property.
The coffee shop has at all times been operated by El Greco Pty Ltd. Initially, this was pursuant to a Licence Agreement entered into with Cuzeno. Since 1 June 2012, El Greco Pty Ltd has been in occupation pursuant to a registered lease entered into with Topdaze. By that time, the coffee shop area had become Lot 47 in Strata Plan 85102, and Topdaze had become the registered proprietor of that lot.
In about July 2009 a dispute arose concerning By-Laws 24 and 25. A number of lot owners sought the revocation of those by-laws. Adjudication was sought pursuant to s 157 of the Strata Schemes Management Act 1996. That application was dismissed on 22 December 2009. The lot owners sought to exercise rights of appeal against that decision, but before any appeal was heard, a Heads of Agreement was entered into between those lot owners, Cuzeno and Mr Paul Jabbour. The Heads of Agreement, which is dated 22 April 2010, recorded that the parties had agreed that:
(1) The common property hatched on the plan annexed hereto is to be subdivided into a lot and transferred to Cuzeno Pty Limited or its nominee, Paul Jabbour for the consideration of $80,000 payable to the Owners Corporation on registration of the Strata Plan of Subdivision by Cuzeno Pty Limited or Paul Jabbour.
...
(3) The Owners agree that they will vote in favour of resolutions for the execution and registration of the Strata Plan of Subdivision and execution and registration of the Transfer of the Lot to be created and if required by Council a Development Application for the subdivision.
...
(5) Subject to registration of the plan of subdivision a change of By-Laws repealing exclusive use by-law 25 as amended, will be registered and Cuzeno Pty Limited or Paul Jabbour shall consent to that registration.
(6) The Owners will vote in favour of a resolution to approve the execution of the Strata Plan of Subdivision and Transfer of the newly created lot in favour of Cuzeno (or its nominee Paul Jabbour) and shall do all acts and things reasonably necessary to permit the registration of the documents at the Department of Lands.
...
(10) The Owners will use their best efforts to do all things necessary to convene an Extraordinary General Meeting of the Owners Corporation on or before 20 May 2010 to consider motions referred to in paragraphs (3) and (5).
The Heads of Agreement was dated 22 April 2010 and appears to have been signed by all the parties to it.
On 25 May 2010 an Extraordinary General Meeting of the Owners Corporation was held, at which the resolutions envisaged by clauses 3 and 6 of the Heads of Agreement were passed unanimously. It also appears that a resolution was passed at that meeting for the repeal of By-law 25, as envisaged by clause 5 of the Heads of Agreement. It is not clear when Cuzeno provided its consent to the registration of the Change of By-Law.
On 10 August 2010, in the course of attending to the conveyancing tasks, the solicitor for Cuzeno, Mr Shehadie, was requested by Ms Crittenden, the solicitor for the lot owners who were parties to the agreement, to submit "a form of Transfer Granting Easement concerning the grease trap on common property which you wish the Owners Corporation to consider." The evidence does not disclose whether such a form was ever submitted. However, on 30 September 2010 Mr Shehadie sent to Ms Crittenden a "draft form of exclusive use by-law in respect of the grease trap for your client's consideration." Ms Crittenden in an email dated 30 September 2010 to Mr Chris Parker (of the Strata Manager, which was now Michael Roberts Strata Management Services Pty Ltd) and Mr Steve McNab (of the Executive Committee) noted that "the newly created Lot 47" would need to be created prior to the approval of the by-law. Ms Crittenden also stated that she would draft an amended by-law which would provide greater protection for the Owners Corporation. Such a draft was provided to Messrs Parker and McNab on the following day.
There was then some delay, by Cuzeno, in the preparation of the draft Strata Plan. It is apparent that this delay caused some frustration amongst members of the Executive Committee of the Owners Corporation. In any event, on 6 December 2010 the Owners Corporation passed resolutions for the steps to be taken to enable registration of the Strata Plan of Subdivision, which had by that time been finalised. There were then some further delays in the settlement of the matter, and on 17 December 2010 Ms Crittenden sent an email to Mr Shehadie in the following terms:
The Owners Corporation is planning to shut the tenant out of the common property presently used as a café if this matter has not settled by Wednesday, 22 December. There is no approval by the Owners Corporation for the use of the common property as a café, so they are entitled to resume possession pending settlement.
Would you please provide the settlement documents and cheque to me on Monday or Tuesday of next week so that the shut out can be avoided.
On 22 December 2010 Ms Crittenden again wrote to Mr Shehadie. In her letter, she referred to Cuzeno's failure to make an appointment to complete the transaction and referred to a resolution that was to be put to a meeting of the Executive Committee to be held on 4 January 2011. The resolution was to the effect that the Owners Corporation take immediate steps to take possession of the café premises. The letter also enclosed a letter which was to be hand delivered to the proprietors of the café on the following day. That letter also referred to the possibility of the possession of the café premises being taken on 4 January 2011.
I interpolate here that the Owners Corporation maintained that it had the right to recover possession of the café premises because By-law 25 had been repealed. This position had been put by Ms Crittenden to Mr Shehadie in her letter to him dated 24 September 2010.
On 23 December 2010 Mr Shehadie wrote to Ms Crittenden stating that his client was ready and able to complete the purchase of Lot 47 subject to the following issues:
1. Receipt of written confirmation of your verbal assurance on behalf of the Owners Corporation that no additional payment will be demanded by the Owners Corporation for granting of the by law to allow Lot 47 use of the grease trap (our client accepts that owner of Lot 47 will be responsible for the maintenance provided that is the only owner entitled to use it); and
2. Reduction of your costs to $3000...
A trust account cheque in the sum of $80,000 was enclosed "as a sign of our clients good faith". The receipt of the cheque caused Ms Crittenden to advise the Owners Corporation not to proceed with the threatened taking of possession of the café premises.
In an email dated 23 December 2010 to Mr Leiker of the Strata Manager, Ms Crittenden referred to the draft by-law relating to the grease trap which she had sent to Mr Parker on 1 October 2010. The letter continued:
There will need to be a meeting of the Owners Corporation to consider the motion once the strata plan of Subdivision has been registered. However, Cuzeno would like to know whether a by-law is likely to be approved without any additional payment by the owner of Lot 47 to the Owners Corporation. The motion for a by-law which I drafted does not require Cuzeno to pay money to the Owners Corporation. It just requires the owner of Lot 47 to repair and maintain the grease trap and renew or replace it when necessary.
At the meeting of the Executive Committee of the Owners Corporation on 4 January 2011 it was resolved that the managing agent instruct Ms Crittenden to write to Cuzeno requesting that the matter be finalised by 28 January 2011 and that "no further consideration will be given to the request for the Exclusive Use Bylaw for the grease trap or any other matter."
On 25 January 2011 Ms Crittenden replied to Mr Shehadie's letter of 23 December 2010. The letter stated:
It remains the Executive Committee's position that any motion for a special resolution relating to the grease trap which services Lot 47 will be considered at a general meeting held after the registration of the strata plan of subdivision by which Lot 47 is to be created. No assurance about the terms of a special resolution can be given before it has been approved by the Owners Corporation in general meeting.
On 9 February 2011 Kogarah Council gave its approval to the proposed subdivision subject to certain conditions. The relevant Strata Plan, being Strata Plan 85102, was registered on 27 May 2011. Lot 47, which was a product of that subdivision, was then transferred by the Owners of Strata Plan 65870 to Cuzeno. The transfer of Lot 47 from Cuzeno to Topdaze occurred in July 2011.
On 25 July 2011 there was a meeting of the Executive Committee of the Owners Corporation. The minutes of the meeting record that a resolution was passed in the following terms:
ILLEGAL CAFÉ GREASE TRAP the managing agent was asked to write a letter to the current owner of the café in the terms that the owners corporation would allow the grease trap structure to be legitimised if the owner was prepared to sign a licence agreement @ $100 per week plus annual CPI increases, all costs for preparing such an agreement to be borne by the owner.
On 18 November 2011 the Strata Manager wrote to Cuzeno. The letter included the following:
At the AGM in July of this year, the owners reported with concern that a greasetrap had been installed on common property without any express written request from the owners corporation. Given its proximity to the café and the nature of the café operation, we know that as owner and landlord of that lot, you are responsible for the installation of that greasetrap.
To this end the owners corporation has the right to demand that you remove this illegally installed greasetrap and if you refuse, then the owners corporation could have it removed. Further, it must be highlighted that you are financially benefiting from the use of common property in which you do not have any legally binding arrangement. As a compromise, the owners corporation are instead prepared to negotiate the terms of a licence agreement with you to legitimise the keeping, use and maintenance of the aforementioned greasetrap. To achieve this an extraordinary general meeting will be required to approve via special resolution, the terms of such a licence agreement...
The owners corporation are prepared to accept no less than a weekly rent of $110 incl GST with an annual increase of 5%. Other terms will be forthcoming for your perusal after the draft agreement is drawn up by Mueller's [the solicitors for the Owners Corporation].
Mr Shehadie, on behalf of Cuzeno, responded to that letter on 8 December 2011. That letter included the following:
Before constructing the coffee shop our clients provided the Owners' Corporation with detailed plans of the coffee shop including a plan showing the location of the grease arrestor pit.
After our clients had completed construction of the coffee shop, the Owners' Corporation tried to rescind the by law that gave our clients exclusive use of that area of the common property.
The efforts by the Owners' Corporation to rescind the by law giving our clients exclusive use of the area in which the coffee shop were rejected by the New South Wales Consumer Trader and Tenancy Tribunal.
Later at a mediation with various members of the Owners' Corporation (not the Owners' Corporation itself) agreement was reached that our clients would incur the expense of creating a new lot out of the area of common property that was subject to the exclusive use by law and that our clients would purchase that new lot from the Owners' Corporation.
...
On the basis of that agreement our clients then went to the expense of having the new lot created and completed the purchase of the new lot from the Owners' Corporation.
...
Our clients are not prepared to accept the demand of the owners corporation that they make any payment whatsoever for the use of the common property for the grease arrestor and in fact are of the view that either a bylaw or an easement should be created by the owners corporation at its own expense to ensure the future use by the owner of the new lot of the grease arrestor.
The Owners Corporation responded to that letter through their new solicitors, J S Mueller and Company, on 2 March 2012. In essence, Mr Mueller pointed out that the Owners Corporation had not given its approval to the installation or use of the grease trap, any such approval needing to be given by a special resolution passed at a general meeting of the Owners Corporation in accordance with s 65A of the Strata Schemes Management Act 1996. It was stated that it was not sufficient that the Owners Corporation had given its approval to the making of a development application or an application for a construction certificate. Mr Mueller stated that the Owners Corporation could apply for an order to require the removal of the grease trap and that his client would have no hesitation in doing so if the dispute could not be resolved on a fair and reasonable basis. The letter concluded with an offer to allow the grease trap to remain if Cuzeno agreed to, and the owners in general meeting consented to, a by-law in relation to the grease trap, the main features of which would include that the owner of Lot 47 would pay a weekly licence fee of $110 including GST payable from 1 January 2009, and increased annually by 5%. A response was called for within 14 days, failing which instructions were to be sought to apply for curial relief.
No response was forthcoming, and on 17 April 2012 Mr Mueller sent a further letter providing another 7 days in which to respond. Again, no response was forthcoming, and the Owners Corporation took the dispute to the Office of Fair Trading. A mediation was held but was unsuccessful. The dispute was then taken by the Owners Corporation to the Consumer Trader and Tenancy Tribunal.
The operator of the café, El Greco Pty Ltd, was made a party to those proceedings. The relief sought included an order restraining El Greco from using the grease trap, and orders that the grease trap be removed by Cuzeno or Topdaze.
In October 2012 Cuzeno and Topdaze indicated that they intended to institute proceedings in this Court concerning the subject matter of the dispute. A request was made that the Tribunal not proceed with the adjudication of the matter, but this request was not acceded to. In any event, on 5 December 2012 the Adjudicator (appointed pursuant to s 217 of the Strata Schemes Management Act) dismissed the Owners Corporation's application on jurisdictional grounds.
In the meantime, on 7 November 2012 Mr Shehadie sent a letter to Mr Mueller enclosing a copy of a valuation report of Mr James Doncas, which assessed reasonable compensation for the imposition of an easement for the use of the grease trap at $1500. An offer to pay that sum upon the grant of such an easement was made. A response was sought within seven days, and the intention to institute proceedings in this Court was reaffirmed. On 21 November 2012 Mr Mueller responded stating that the Owners Corporation required more time to consider the offer. In particular, it was pointed out that the Owners Corporation had not had the opportunity to obtain its own valuation report. A request was also made for a detailed plan showing the location of the proposed easement, and an indication as to whether Topdaze would be prepared to pay the costs of the Owners Corporation in obtaining its own valuation report. On 28 November 2012 Mr Shehadie sent a letter in reply. Enclosed with the letter was a copy of a draft plan of easement. Mr Shehadie's letter also set out some indicative terms of the proposed easement, and stated that Topdaze was prepared to pay $750 towards the Owners Corporation's costs of obtaining a valuation, or as an alternative the parties could jointly appoint a valuer to assess the compensation payable for the proposed easement.
There does not appear to have been any response to that offer. On 20 December 2012 the Owners Corporation lodged an appeal with the Consumer, Trader and Tenancy Tribunal against the adverse decision of the Adjudicator. Those proceedings have been adjourned pending the outcome of the proceedings in this Court, which were commenced on 14 February 2013.
The Grease Arrestor Trap
There was a lack of precision in the evidence concerning the location of the grease arrestor trap and its associated pipes and vents. However, this situation was largely rectified on the second day of the hearing by a view of the site and the giving of evidence at the site by Mr Bruce Perry, a qualified plumber, drainer and gas fitter with experience in the installation of grease traps. Mr Perry was the plumber who installed the trap in late 2008. The holding of the view, and the giving by Mr Perry of his evidence on site, was a course which was undertaken with the consent of all parties.
The evidence of Mr Perry clearly established that the trap and an associated pump were located close to a wall in basement level one across parts of two visitor car spaces. There are five visitor car spaces along that wall which runs along the Belgrave Street side of the development. The trap and pump encroach upon the second and third visitor car spaces from the right, as viewed when facing towards the wall. Plans of basement level one showing the car spaces can be found in exhibit A at pp 5,183 and 228. The plan at p 228 of exhibit A depicts the proposed easement area as an area 5.065 metres wide, with a depth of 0.5 metres to the inner face of the two structural concrete columns. The valuers who were called to give evidence agree that the depth of the proposed easement area is approximately one metre if measured all the way to the wall. Accordingly, the area of the proposed easement is approximately 5.065m2.
The photographs which form exhibit 10 show the trap and associated pump as well as the various pipes which lead to and from the installation. Those pipes connect the installation to the café which is located on the ground level above (although not directly above), and to the sewer pipes located in the basement area. Mr Perry explained that the black pipes were HDPE pipes which take the hot water and grease from the café above. There are three points of connection between those black pipes and the café above. Those three points are located on the basement ceiling.
Mr Perry also identified as vents the two white pipes which run away from the installation, pass into a nearby stairwell, and eventually extend up to the roof.
Mr Perry stated that the location of the trap was the most practical place to put it as "it was as close to the café as we could get it". He said that he looked at other possible locations, including at the opposite (and lower) end of basement level one, but he concluded that they were "too far away". It was put to Mr Perry, and he agreed, that it may have been technically possible to locate the trap at the lower end of basement level one, but he also stated that the distance involved would raise a concern about the waste water and grease solidifying along the way. It was further put to Mr Perry that it may be possible to overcome that concern by the use of "electrified pipes". Mr Perry said that he was not sure whether that would overcome the problem.
Mr Perry also gave evidence that, after the trap had been installed, it was inspected by a representative of Sydney Water and found to be acceptable.
Nevertheless, there was also evidence that the clearance between the top of the trap and an air conditioning duct above it of approximately 300 millimetres was insufficient to comply with relevant regulatory standards.
The Plumbing and Drainage Code of Practice for New South Wales provides in section 14.4.2 that, where required, arrestors and special units installed in internal locations shall, inter alia, "have internal measurements that will allow ready access to the arrestor or special unit for cleaning and maintenance and clearance above the arrestor equal to the depth of the arrestor". It is readily apparent that the requirement for clearance above the arrestor was not satisfied in this case. It was submitted on behalf of the defendant that the trap was thus an "illegal installation". In support of that submission reference was made to Sydney Water Regulation 2006 and in particular regulation 5 which mandates that a person must not do plumbing or drainage work otherwise than in accordance with the Plumbing and Drainage Code of Practice and imposes a penalty for contravention of its provisions. However, the commission of an offence against the regulation by a person doing plumbing work does not mean that the product of that work, in this case the trap, can itself be described as "illegal".
In practical terms, the clearance above the trap is likely to impinge on the ease and efficiency with which the tasks of emptying and cleaning the trap can be undertaken. Mr Taylor, a plumber, drainer and gas fitter with experience in servicing and repairing grease traps, gave evidence concerning the size of the hoses needed for emptying and cleaning grease traps. He stated that he "couldn't guarantee" that there was adequate room above the grease trap to insert such hoses once the lid of the grease trap had been slid across, and did not agree that there is ready access for the purposes of cleaning and maintenance. However, he did concede that the hoses would probably fit inside the trap. There was no direct evidence concerning the actual emptying and cleaning of the trap, but in circumstances where the trap has been in satisfactory operation for approximately four and half years, I would infer that it has been periodically emptied and cleaned as required albeit that the ease and efficiency of such tasks is likely to be adversely affected by the restricted clearance.
The EGM Held on 3 June 2006
The defendant denies that the resolution as recorded in the minutes of the extraordinary general meeting of 3 June 2006 was validly passed, or even passed at all, at the meeting. Mr Sotirios Antonopoulos, who attended the meeting, deposes that the subject of the development application came up for discussion and that Mr Jabbour said words to the following effect:
I want to change the use of the common garden and walkway area on the corner of Kensington Street and Belgrave Street. I want to build a coffee shop in that area. The area is currently used by vagrants or drug addicts. Having a coffee shop would be good for the building. I have applied to Kogarah Council for the development approval for the coffee shop.
Mr Antonopoulos further deposes that there was some, albeit brief, discussion about the motion but it was never put to a vote. He also complains that there were insufficient owners present to constitute a quorum and that no valid proxies were given for voting.
It was put to Mr Antonopoulos in cross-examination that the motion was in fact put to a vote at the meeting. Reference was made to a Statutory Declaration made by Mr Antonopoulos on 24 August 2012 which contains the following statement (in paragraph 24):
I thought that I was voting to allow Cuzeno to submit a development application to Kogarah Council to obtain Council approval to build to the coffee shop but I did not believe that I was voting to approve the construction of the coffee shop itself (or anything else). I thought that Cuzeno would need to provide more detailed plans to the owners corporation and have a by-law passed in order for the owners corporation to approve the construction of the coffee shop.
It was put to Mr Antonopoulos that, at the time of the making of the Statutory Declaration, he had a recollection of voting at the meeting. Mr Antonopoulos accepted that proposition. He also stated that he was not opposed to the objective of making the area a coffee shop, but he expected that more information would be provided before any approval could be given to actual construction. Other evidence given by Mr Antonopoulos suggests that he had no objection to the concept of the coffee shop itself but was concerned about matters such as the cost of the resultant electricity and water usage.
The suggestion that the motion was not put to a vote at the meeting was put to Mr Jabbour in cross-examination. He maintained that the resolution was put to the meeting. The suggestion was not, however, put to Ms Philpott who was present at the meeting and signed the minutes as Secretary.
The likelihood is that the motion, which was undoubtedly the subject of discussion, was put to the meeting for discussion, although not formally put to a vote, and that in the absence of any opposition to its substance it was then recorded as having been resolved unanimously. It seems to be the case that the notion of replacing the open area with a coffee shop was seen to be beneficial by all parties concerned. In essence, Cuzeno was given approval to proceed with the proposal at least to the point of obtaining a construction certificate. I agree with the submission made by the defendant that the approval did not extend so far as an approval for any particular construction.
Approval for the Grease Arrestor Trap
The issue as to whether Cuzeno obtained any approval for the installation of the grease trap must be viewed in the context of the overall construction work for the café which was taking place during 2008. That construction, which was taking place on the common property of Strata Plan 65870, was obvious. It would also have been obvious, to anyone who gave any thought to the matter, that the construction of the coffee shop would require connections to existing services including electricity, water and sewage.
It is clear that the installation of a grease trap to service the café was a matter being pursued by Cuzeno prior to the determination, made by Kogarah Council on 1 December 2008, to approve the modification of the development consent. It is likely that the installation of a grease trap was a requirement of Sydney Water in accordance with Standard Development Condition 12 of the original consent. Such a requirement would have been consistent with the Plumbing and Drainage Code of Practice (section 14.3.2.3) which was introduced in July 2006, and in accordance with Mr Taylor's experience. However, as noted earlier, the evidence as to what, if any, approval was obtained from the Owners Corporation was very confused. It can only be stated with confidence that Cuzeno did not obtain any written approval or formal resolution from the Owners Corporation concerning the installation of the grease trap.
Mr Jabbour, in his affidavit, referred to the original plans for the building which showed a grease arrestor below the ground floor, but in a location well away from the area where the café is now located. He deposes that, after he sent the email of 29 October 2008 to Ms Philpott together with the plan of the location of the trap, he met with members of the Executive Committee of the Owners Corporation and Ms Philpott on the site and showed them where the trap was now to be located. He further deposes that he said to the members of the committee (which included Mr Antonopoulos) words to the effect:
We can't get enough fall to locate it in the original location. If we locate it here behind the visitor car parking spaces it will not interfere with anything or anyone.
Mr Jabbour states that no objection was raised at the meeting about the location of the grease trap and Cuzeno then proceeded to have the trap installed in its present location, which, according to the affidavit, is the location indicated in the plan which accompanied the 29 October 2008 email. As mentioned earlier, that is not correct. The trap is located to the left of the location depicted on the plan and occupies an area somewhat larger than that depicted on the plan.
Mr Jabbour added to that account during the course of his cross-examination. He gave evidence that there had been a meeting with members of the Executive Committee prior to 29 October 2008 at which the trap and its location had been discussed and verbally agreed to by members of the committee. Mr Jabbour stated that he thought this meeting occurred in April 2008. Later Mr Jabbour gave evidence that there were several meetings with Executive Committee members at which the trap was discussed and that no objections were raised against it. He stated that he sought confirmation of the approval on 29 October 2008 for "abundant caution". He also stated that it did not occur to him that the approval of a general meeting would be required for the trap.
Ms Philpott also gave evidence on this issue. She deposed that, during the course of construction of the café, she attended a meeting between Mr Jabour and members of the Executive Committee. She deposed that the participants assembled in the foyer of the building and then proceeded to the basement area. Once in that area Mr Jabbour indicated an area between some visitor car parking spaces and the wall of the basement and said words to the effect:
We would like to put the grease trap there. It is out of the way and it will not interfere with the use of the car spaces. We can't put it where it is shown on the original plans.
Ms Philpott deposes that there was no objection from any member of the Executive Committee to that proposal.
However, during her cross-examination she stated that the members of the Executive Committee looked at a sloped driveway area of the basement as a possible location for the trap. She stated that some plans were shown to the Executive Committee by Mr Jabbour but not the plan which accompanied the 29 October 2008 email. She further stated that two locations along the driveway were looked at as possible locations for the trap. Mr Jabbour, in his cross-examination, stated that it was not the case that he showed members of the Executive Committee a location on an inclined driveway as a possible location for the trap.
Mr Antonopoulos deposed that no approval for the installation (or use) of the trap was ever given by the Owners Corporation or its Executive Committee. He denied attending any meeting such as that described in Mr Jabbour's affidavit concerning the location of the trap. He also deposes that Mr Jabbour made no mention, during the Executive Committee meeting of 3 November 2008, that it was proposed to install a trap in basement level one.
In his cross-examination he denied that he had been present with other members of the Executive Committee when Mr Jabbour pointed out an area next to visitor car spaces in the upper basement level and told those present that the trap was to be located in that area instead of the original location.
The evidence of both Mr Jabbour and Ms Philpott on this issue was undoubtedly confused and to some extent inconsistent. Nevertheless, I am not persuaded that I should reject their evidence to the extent of finding that there was no discussion with members of the Executive Committee concerning the installation of a trap in basement level one. I formed the impression that Mr Jabbour, and also Ms Philpott, were attempting to give their honest recollections of the events of 2008. In addition, the terms of the email 29 October 2008 which speak of a confirmation of permission provides some support for the view that the location of the trap had at least been the subject of some earlier discussion, and is inconsistent with the suggestion that Cuzeno was completely ignoring the Owners Corporation on the issue. It was in Cuzeno's own interests to obtain the approval (even if only an informal or tacit approval) of the Owners Corporation to the location of the trap on the common property. Proceeding in any other way would only be likely to give rise to problems for Cuzeno. For these reasons, I conclude that there was an occasion when Mr Jabbour, accompanied by members of the Executive Committee and Ms Philpott, indicated in general terms that it was proposed that a grease trap be located near the wall near the visitor car spaces at or close to the position where the trap was actually installed. I further find that no opposition was voiced by any member of the Executive Committee on that occasion, and that Cuzeno was thus justified in proceeding on the basis that it at least had the informal approval of the Executive Committee for the installation of a trap in that area of basement level one for the use of the coffee shop.
It is possible, and perhaps likely, that Mr Antonopoulos was not present on that occasion. However, if he was present it follows from my findings above that I would reject his evidence to the effect that such an event did not take place.
It was clear to Mr Antonopoulos and presumably to other members of the Executive Committee in late November or early December 2008 that a grease trap was being installed on basement level one. There is no evidence of any complaint being made at the time by Mr Antonopoulos or any other member of the Executive Committee, or any other owner, about such installation. This further reinforces the view that members of the Executive Committee had at least given an informal or tacit approval to the trap.
Wheeldon v Burrows
The plaintiffs allege that the circumstances of the transfer of Lot 47 to Cuzeno in May 2011 gave rise to an implied easement for the benefit of Lot 47 for the use of the grease arrestor trap and associated apparatus. It is contended that the implied easement arose in accordance with the first rule laid down by Thesiger LJ in Wheeldon v Burrows (1879) 12 Ch D 31 at 49 where it was stated:
The first of these rules is, that on the grant by the owner of a tenement of part of that tenement as it then used and enjoyed, there will pass to the grantee all those continuous and apparent easements (by which, I mean, quasi easements), or, in other words, all those easements which are necessary to the reasonable enjoyment of the property granted and which have been and are at the time of the grant used by the owners of the entirety for the benefit of the part granted.
In Campbell v McGrath [2005] NSWSC 496 Barrett J said (at [44]) that this rule:
... operates where the following elements exist: first, the grant by the owner of a tenement of part of that tenement; second, grant of the part "as it is then used and enjoyed"; third, the existence of "continuous and apparent easements" or "quasi-easements"; fourth, that those easements "are reasonably necessary to the property granted"; and fifth, that the easements "have been and are at the time of the grant used by the owners of the entirety for the benefit of the part granted".
An appeal from the decision of Barrett J in Campbell v McGrath (supra) was allowed, but the Court of Appeal accepted his Honour's analysis of what may described as "the first rule in Wheeldon v Burrows" (see McGrath v Campbell (2006) 68 NSWLR 229; 2006 NSWCA 180 at [34]; see also McKeand v Thomas [2006] NSWSC 1028 at [64] - [65] per Campbell J).
The plaintiffs submit that each of the five elements identified by Barrett J in Campbell v McGrath (supra) is present in this case. In my view, however, at least the fifth element is not satisfied in this case. Even if it is assumed that the use of the grease trap since early 2009 amounted to a "continuous and apparent easement" or "quasi-easement" I do not think it can be said that such easement had been, and was at the time of the grant of Lot 47 to Cuzeno, "used by the owners of the entirety for the benefit of the part granted". The giving by the Executive Committee of the Owners Corporation of an informal or tacit approval to the construction and subsequent use of the trap by the operator of the café business does not amount to use of the easement by the Owners of Strata Plan 65870.
Professor Butt in Land Law (6th ed, 2010) in the course of discussing the rule in Wheeldon v Burrows states at [16 56]:
The principle assumes that, at the time of the severance, the land is not only in common ownership but also in common possession. It does not apply, for example, where the land granted is held under a lease and the tenant is exercising rights over the part retained.
Professor Butt cites Kent v Kavanagh [2007] Ch 1 in support of that proposition. In that case Chadwick LJ at [44] - [46] touched upon the question of whether the rules identified in Wheeldon v Burrows can have any application in a case where, at the time of the conveyance, the land conveyed and the land retained, although in common ownership, were not in common occupation. At [45] Chadwick LJ, after referring to s 62 of the Law of Property Act 1925 (UK) (which may be compared to s 67(1) of the Conveyancing Act 1919), stated:
It seems to me an unnecessary and artificial construct to hold that the grantor, as common owner and the landlord of the land conveyed, is himself using the rights over the retained land which his tenant enjoys under the lease.
In the present case, there was of course no lease over that part of the common property upon which the café had been constructed. Rather, that area was the subject of By-law 25 which operated to confer upon Cuzeno the exclusive use of the area. Despite that difference, I do not think that it can be said in the circumstances of this case that the owner of the common property had been, or was at the time of the grant of Lot 47 to Cuzeno, using any quasi-easement for the use of the grease arrestor trap. It is not sufficient in my view, that the owners may have, in an indirect sense, obtained some benefit from the use of the grease arrestor trap by the operator of the café business.
In addition to that point, the defendant raised numerous matters in submissions in opposition to the contention that a Wheeldon v Burrows easement arose in this case.
These submissions included contentions to the effect that a Wheeldon v Burrows-type easement was incompatible with the statutory scheme for land held under strata title; that there could be no in personam exception to the indefeasibility provisions of the Real Property Act 1900 in circumstances where the beneficial ownership of the common property of the strata scheme has altered since the date of the grant of Lot 47 to Cuzeno; that the suggested easement was not reasonably necessary to the property granted, namely Lot 47; and that the principle could not operate in this case because the circumstances showed that it could not have been the intention of the parties to the grant that the grant would carry with it the suggested easement.
It is not necessary to deal with each of those submissions. I have concluded that, in addition to the inability to satisfy the fifth requirement for the implication of such an easement, the principle does not operate in the present case because the circumstances surrounding the making of the grant make it impossible to conclude that the parties must have intended that the grant would carry with it an easement for the use of the grease arrestor trap.
The first rule in Wheeldon v Burrows is essentially founded upon the principle that a grantor shall not derogate from his grant. Thesiger LJ stated as much in Wheeldon v Burrows itself (at 49).
In considering whether the rule applies it is necessary to identify the presumed intention of the parties to the grant. In McGrath v Campbell (supra) Tobias JA (with whom Giles JA and Hodgson JA agreed) stated at [75]:
... the rule in Wheeldon v Burrows by which a grantor is bound, when he retains the putative servient tenement, to recognise any implied easement over that retained land in favour of the grantee of the land benefited, is based upon the presumed intention of the grantor to transfer to the grantee "all those continuous and apparent easements" which the grantor has himself created when the putative dominant and servient tenements were in the one ownership. The grantor is thus not permitted to derogate from his own grant, and, accordingly, the provision of the easement is an implied term of the grant.
In this context, it is permissible, in ascertaining the presumed intention of parties to the grant, to have regard to the circumstances surrounding the grant. In Horsfall v Braye (1908) 7 CLR 629 Griffith CJ (with whom Barton J agreed) stated at 645:
There was much discussion at the bar on the question of admissibility of evidence of the surrounding circumstances for the purpose of interpreting the contract and the conveyance.
First with respect to the contract: - That document is silent as to any incorporeal rights. It is clear, therefore, that any rights which can be founded upon it are based upon implication. Now the foundation of the doctrine of implied contract or grant is that the stipulation set up must necessarily have been intended by the parties, so that without the implication the manifest intention would be defeated. If, then, it appears from admitted or proved facts that the implication set up is inconsistent with the actual circumstances attendant on the making of the contract the implication is excluded. This is very clearly pointed out in the case of Birmingham, Dudley & District Banking Company v Ross 38 Ch D 295.
It should be noted, however, that Horsfall v Braye (supra) was not a case concerning a Wheeldon v Burrows-type implication, but was rather concerned with an implication arising from the terms of the contract and the conveyance itself. Nevertheless, in Nelson v Walker (1910) 10 CLR 560, Isaacs J in the course of discussing Wheeldon v Burrows stated at 583 that:
The next case I shall refer to is Beddington v Atlee 35 Ch D 317 where Chitty J indicates how an implied grant arises. He says: - "Now I go to the question which has been so much argued, as to the grant to be implied on the conveyance. The first observation I make is this: on reading the conveyance no implication whatever arises. It is not like the case of an implied grant when, upon reading the instrument, you say the terms employed mean so-and-so; and it is necessary, in order to give effect to the intention, as manifested by the deed, to imply something which is not expressed in so many words. In this case, in order to raise any implied grant, it is necessary to look outside the deed of conveyance, and to consider the surrounding circumstances;" and then he proceeds to illustrate his meaning.
Then comes the leading case of Birmingham, Dudley and DistrictBanking Company v Ross 38 Ch D 295 at 308 - 309, in 1888, where Cotton LJ in a passage which I read during the argument, and which is ever since the decision recognised at law, states the true meaning and foundation of the "implied obligation" to which he referred in Rigby v Bennett 21 Ch D 559. Bowen LJ confirms that statement of the law in language conspicuous for its clearness. He says of this obligation that it is not an express obligation at all, and proceeds: - "It is not an obligation that arises simply from the interpretation of the deed as read by the light of the circumstances outside. It is a duty that arises from the outside circumstances having regard to the relation of grantor and grantee which the deed creates. Supposing you take the deed alone, no amount of construction could evolve from the deed itself the protection which the grantee of the deed desires ... It is only by looking outside the deed that the implication of a duty arises."
Griffith CJ had earlier stated in Nelson v Walker (supra) at 572:
The foundation of the doctrine of implied grant in the case of a conveyance of part of a parcel of land, the vendor retaining the rest, is that, having regard to all the circumstances of the case it must (not may) have been in the contemplation of the parties that the grantor should not use the land which he retains in such a way as to preclude any use of the land which he sells, or that use for which he knows he is selling it to the purchaser: Broomfield v Williams (1897) 1 Ch 602.
In reaching my conclusion that the Wheeldon v Burrows principle does not operate in this case, I have assumed that in determining whether a Wheeldon v Burrows-type easement has arisen it is legitimate, in ascertaining the presumed intention of the parties, to take into account relevant circumstances surrounding the making of the grant. That approach is supported by the statements quoted above from Horsfall v Braye and Nelson v Walker and does not appear to be foreclosed by the decision of the High Court in Westfield Management Ltd v Perpetual Trustee Company Ltd (2007) 233 CLR 528; [2007] HCA 45.
The latter case concerned the construction of a registered easement over Torrens system land. The Court stated at [37] that the rules of evidence concerning the construction of contracts inter partes of the nature explained by cases such as Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 did not apply to the construction of the easement. The Court proceeded (at [38]) to again stress the importance, in litigation respecting title to land under the Torrens system, of the principle of indefeasibility. However, those considerations do not have direct application to a case such as the present which concerns an implied easement that, if established, might give rise to rights which may be enforced in personam by the grantee against the grantor (see McGarth v Campbell (supra) at [4] and [108], where it is made clear that the circumstances which at general law would give rise to a Wheeldon v Burrows easement do not necessarily amount to a personal equity enforceable against the registered proprietor of land under the Real Property Act 1900).
There are unresolved questions in this area concerning the extent to which implied easements, including Wheeldon v Burrows-type easements, are capable of enforcement as in personam exceptions to the indefeasibility provisions of the Real Property Act. That was a question which was left open in McGrath v Campbell (supra) at [118], although Tobias JA said that there was much force in Professor Butt's observations to the effect that if, as held by the Court of Appeal in Williams v State Transit Authority (NSW) (2004) 60 NSWLR 286, prescriptive easements do not overcome the indefeasibility provisions, then there must logically be some doubt about the in personam enforceability of implied easements. Nonetheless, I have proceeded on the assumption, favourable to the plaintiff, that implied easements of the Wheeldon v Burrows-type are capable of enforcement as in personam exceptions to the indefeasibility provisions of the Real Property Act.
The provenance of the grant of Lot 47 to Cuzeno lies in the Heads of Agreement which the company entered into with certain of the lot owners on 22 April 2010. The Owners Corporation was not a party to the agreement, but the agreement contemplated that resolutions would be put to an Extraordinary General Meeting of the Owners Corporation, and that if such resolutions were passed the Owners Corporation would take certain steps in relation to the common property, including the registration of a plan of subdivision and the execution and registration of a transfer of the newly created lot.
After the passing, in May 2010, of the requisite resolutions, Cuzeno and the Owners Corporation dealt with each other through their respective solicitors Mr Shehadie and Ms Crittenden. On 10 August 2010, the latter requested the former to submit "a form of Transfer Granting Easement concerning the grease trap on common property which you wish the Owners Corporation to consider". On 30 September 2010, Mr Shehadie forwarded to Ms Crittenden a "draft form of exclusive use by-law in respect of the grease trap for your client's consideration."
On 23 December 2010, after the Owners Corporation had passed further resolutions to enable registration of the plan of subdivision, and when the Owners Corporation was pressing for completion of the transfer of the new lot, Mr Shehadie informed Ms Crittenden that Cuzeno was ready to proceed to completion subject to certain matters including receipt from Ms Crittenden of "written confirmation of your verbal assurance" that no additional payment would be demanded by the Owners Corporation for the granting of a by-law to allow Lot 47 to use the grease trap. On 25 January 2011, Ms Crittenden responded in terms that made it clear that no assurance was given by the Owners Corporation about the terms of any special resolution concerning the grease trap which may be put to a general meeting.
The communications of 10 August, 30 September, 23 December 2010 and 25 January 2011 are not in the nature of negotiations. Neither are they mere statements of subjective intention. In my view they form part of the circumstances, outside the grant itself, which, in accordance with the authorities cited earlier, may be taken into account in ascertaining the presumed intention of the parties to the grant. These communications are consistent with the notion that the question of rights to use the grease trap was one which the parties expected would be the subject of consideration and decision by Owners Corporation, and that, if such rights were to be conferred, it would be done through either a Transfer Granting Easement or an exclusive use by-law. The parties were at all relevant times proceeding on the basis that any rights which may be conferred on the owner of the newly created lot as to the use of the grease trap were not to be conferred by the transfer itself, but were rather to be conferred (if at all) by other means. In the circumstances, a refusal by the Owners Corporation to allow Lot 47 the benefit of the use of the grease trap would not amount to a derogation from the grant of Lot 47. The facts do not establish that the parties must have intended that an easement to use the grease trap would pass, in the absence of further action on the part of the Owners Corporation, with the grant of Lot 47. For this reason also, the plaintiffs' claim based on Wheeldon v Burrows is not made out.
As noted earlier (at [93] above), even if a Wheeldon v Burrows easement would have been implied at general law, a question would remain as to whether a personal equity would arise which could be enforced against the defendant as the registered proprietor of the common property. It is not necessary to answer that question, but I think that it must be considered doubtful that the conduct of the Owners Corporation in this case would give rise to a personal equity in favour of Cuzeno (and its successor, Topdaze). It is true that the Owners Corporation at least initially supported the concept of the coffee shop and, as I have found, its Executive Committee gave an informal or tacit approval to the installation of the grease trap in basement level one. When that approval was given it must have been contemplated, at least in general terms, that once the café business commenced the operator of the business would make use of the grease trap. However, the terms upon which such use would take place was not the subject of discussion, and none of the formal steps required under the applicable strata titles legislation for the creation of easements or exclusive use rights were ever embarked upon. In addition, when the subject of rights to use the grease trap was raised in the period prior to the transfer of Lot 47 to Cuzeno, the position of the Owners Corporation was that it would give consideration to the grant of an easement or the passing of an exclusive use by-law, but no assurances were given. In these circumstances, it is difficult to see why it would be unconscionable on the part of the defendant to subsequently to insist upon its legal rights and assert that the owner of Lot 47 did not have the benefit of any easement to use the grease trap.
Section 88K of the Conveyancing Act
By s 88K(1) of the Conveyancing Act 1919 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. Such an order may be made only if the Court is satisfied of the matters set out in s 88K(2) of the Act. Those matters may be summarised as:
(a) the use of the land having the benefit of the easement will not be inconsistent with the public interest;
(b) the owner of the land to be burdened by the easement can be adequately compensated for any loss or other disadvantage that will arise from imposition of the easement; and
(c) all reasonable attempts have been made by the person seeking the easement to obtain the easement (or an easement having the same effect) but have been unsuccessful.
The relevant principles concerning whether an easement is "reasonably necessary" within the meaning of s 88K(1) were considered by the Court of Appeal in Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd [2012] NSWCA 445 at [154] - [159]. The Court of Appeal there stated:
[154] The requirement that the easement be reasonably necessary for the effective use and development of the land means something more than mere desirability or preferability over the alternative means available: Rainbowforce Pty Ltd v Skytone Holdings Ltd [2010] NSWLEC 2 at [76]. However, reasonable necessity does not mean absolute necessity. The correct approach to the question, in our opinion, was stated by Hodgson J (as his Honour then was) in 117 York Street Pty Ltd v Propritors of Strata Plan No 16123 (1998) 43 NSWLR 504 as follows:
"It is clear that 'reasonably necessary' in s 88K(1) does not mean 'absolutely necessary', and thus that the requirement may possibly be satisfied even when the plaintiff's land could be effectively used or developed without the easement.
In my opinion: (1) the proposed easement must be reasonably necessary either for all reasonable uses or developments of the land, or else for some one or more proposed uses or developments which are (at least) reasonable as compared with the possible alternative uses and developments; and (2) in order that an easement be reasonably necessary for a use or development, that use or development with the easement must be (at least) substantially preferable to the use or development without the easement.
The first of those requirements may seem contrary to a statement by Hamilton J in Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845 that the Court 'is not to judge upon the reasonableness of the particular development'. However, that statement is qualified by the words 'at least in this case'. If there are some possible reasonable uses or developments of the land for which a proposed easement is not reasonably necessary, then it seems to me that the easement cannot be 'reasonably necessary for the effective use or development' of the land, at least unless there is some proposed use or development, for which the proposed easement is reasonably necessary, which is itself a reasonable use or development. It may be that the particular use or development would need also to be preferable to the alternatives; but whether or not that is so, it would in my opinion certainly need to be at least reasonable."
[155] In Rainbowforce above, Preston CJ of the Land and Environment Court, gave a relatively wide meaning to the concept of effective use and development (at [72]) stating that if use or development of land for some planning purpose such as residential, commercial or industrial cannot be achieved without the creation of the easement, the easement is reasonably necessary for such use or development to be effective. To the extent that Preston CJ was suggesting that subject to the other matters which he stated required consideration, an easement would be reasonably necessary for the effective use and development of the land if it was required for any proposed development, regardless of the development's desirability or economic effect, the proposition, with respect, is too wide. That approach would not take adequate account of the word effective. Equally, we do not believe, as suggested by Moorebank, that it is necessary to show that the easement is necessary to achieve the highest and best use of the land. In a case such as the present, where the easement is said to be necessary for the commercial development of the land, it is sufficient in our opinion to show that the proposed development is one which is appropriate to the area in which the land is situated and is at least an economically rational use of the land. That in our opinion is consistent with what was said by Hodgson J in 117 York Street above in the passage which we have cited above (see also Lonergan v Lewis [2011] NSWSC 1133 at [22]).
[156] That is not to say that an easement will always be granted in these circumstances. As we have indicated the authorities have established that the concept of reasonable necessity requires consideration of the effect of the grant of the easement on the servient tenement: ING Bank Australia Ltd v O'Shea [2010] NSWCA 71 above. Further, it is correct in our opinion, that the greater the burden on the servient tenement, the stronger the case needed to justify a finding of reasonable necessity...
[158] The determination of whether an easement is reasonably necessary for the use or development of the land also involves consideration of the alternative methods by which such use or development could be achieved. That is implicit in the concept of reasonable necessity. In the present case it involves the consideration of whether there is alternative access to give effect to the development.
[159] None of the factors to which we have referred above can be considered in isolation from the others. Ultimately the question of whether an easement is reasonably necessary for the use or development of the land will be determined by an evaluation of those factors in conjunction with each other.
The reference to the earlier Court of Appeal decision in ING Bank (Australia) Ltd v O'Shea [2010] NSWCA 71 was to the judgment of Giles JA (with whom Campbell JA agreed) at [48] - [49] where the point was made that it was the necessity of the easement, not the use or development of the land, which was subject to the qualification of reasonableness. At [49] Giles JA continued:
[49] ... Qualification whereby the necessity must be reasonable is apt to, and in my opinion does, permit regard to matters beyond the relatively absolute necessity for the effective use or development of the dominant tenement. It calls for an assessment of that necessity having regard to all relevant matters, according to the criterion of reasonableness. The impact of the easement on the servient tenement, and the fact that ordering an easement detracts from the property rights of the owner of the servient tenement, are matters readily to be taken into account in that assessment. It is difficult to see how reasonable necessity for an easement for the use or development of a dominant tenement, as distinct from necessity, can be arrived at without regard to the effect on the enjoyment of the servient tenement and on the property rights of the owner of the servient tenement.
More recently, that portion of the judgment of Giles JA was cited and relied upon by the Court of Appeal in City of Canterbury v Saad [2013] NSWCA 251 at [29].
In support of the submission that the requirement of reasonable necessity was satisfied in this case, it was contended on behalf of the plaintiffs that the use of the grease trap was reasonably necessary for the operation of a café from Lot 47. A number of items of evidence were relied upon, including Condition 3 of the modified development consent issued by Kogarah Council on 1 December 2008, the Plumbing and Drainage Code of Practice (section 14.3.2.3), and the evidence given by Mr Taylor in cross-examination to the effect that it was consistent with his experience that a café or restaurant which operates a commercial kitchen is required to have a grease trap that complies with the minimum requirements set out in the Sydney Water document concerning trade wastewater (exhibit E at page 21). Reference was also made to paragraph 4 of a written submission made by the defendant in October 2012 to the CTTT to the effect that the grease trap was "an integral part" of the business operated by El Greco.
The defendant, for its part, submitted that the requirement of reasonable necessity was not met in circumstances where the plaintiffs did not lead any evidence of alternative uses (that is, uses other than a café) so as to establish that use of Lot 47 with the easement is substantially preferable to its use without the easement, and also failed to adduce evidence to show that possible alternative easements were not viable.
In my opinion, for the reasons which follow, the easement sought by the plaintiffs is reasonably necessary for the effective use of Lot 47 within the meaning of s 88K(1).
It is clear that the use of Lot 47 for a coffee shop is at least a reasonable and appropriate use of the land as compared with possible alternative uses. The valuation evidence establishes that the relevant area is zoned "B4 - Mixed Use" under the Kogarah Local Environmental Plan 2012. Mr Keen, the valuer called by the defendant, expressed the opinion, in relation to Lot 47, that whilst there are alternative retail uses for which Lot 47 could be used without a grease arrestor connection, "the best use of the premises is for a coffee shop with grease arrestor connection".
There can be little doubt that an easement of the type sought is reasonably necessary for the use of Lot 47 as a coffee shop. The terms of Condition 3 of the modified consent of 1 December 2008 require a "Sydney Water approved grease trap", and it is likely, having regard to Mr Taylor's evidence as well as section 14.3.2.3 of the Plumbing and Drainage Code of Practice, that the provision of a grease arrestor trap for the use of the coffee shop was also required pursuant to the terms of the original consent. It was not practical to place the grease trap in Lot 47 itself. Mr Perry gave evidence to the effect that, due to space restrictions and the need for gravity to assist draining, it was not practical to locate the grease trap on the ground floor. Put simply, the use of Lot 47 as a coffee shop without an easement of the type sought would not comply with the applicable planning requirements.
Moreover, the effect which the grant of the proposed easement would have upon the servient tenement (that is, the parts of the common property affected by the grease trap and its associated apparatus) is in my view relatively minor. This case is a long way away from a situation where the imposition of the easement would sterilise the servient tenement so far as its development or use is concerned (see Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd (supra) at [157]; Bloom v Lepre [2008] NSWSC 70 at [38]). The grease trap itself takes up part of the area of two visitor carapaces in basement level one. In essence, the presence of the trap reduces the effective length of each of those car spaces from approximately 5.5 meters to approximately 4.5 meters.
That reduction was brought to the attention of Kogarah Council by the defendant's solicitors in July 2013. It was suggested that the reduced length of the spaces contravened relevant parking codes. However, on 26 July 2013 Kogarah Council replied, stating that a Council Traffic Engineer had inspected the area in question and advised that the visitor parking spots adjacent to the grease trap "are considered to be satisfactory, as the manoeuvring space to the rear of the spots have ample room and still meet the objectives of the code". The reply also stated that the Council has "no reasonable grounds to take any action in relation to the grease trap as currently installed".
The photographs which were in evidence (exhibit D) show that there is sufficient space in an affected parking bay to satisfactorily accommodate a commercial delivery van. In addition, there was evidence given by Mr Doncas, the valuer called by the plaintiff, to the effect that the reduction in the length of the spaces was to some extent ameliorated by the fact that the aisle which runs past the spaces is about 1.4 meters wider than the width specified in the applicable Australian Standard. It was the opinion of Mr Doncas that the affectation brought about by the presence of the grease trap did not impinge on the utility of the affected car spaces in a significant way. Mr Keen expressed the opinion that the car spaces "remain functional but have reduced amenity due to the reduced length". In the course of his cross-examination, he was shown the photographs (exhibit D) and he agreed that a standard-sized van would fit comfortably in one of the affected spaces. In re-examination, he made the point that vans of a larger size would protrude into the aisle, thereby posing something of a safety risk.
There is no evidence that the pipes and vents associated with the grease trap (all of which are upon the common property) restrict or inhibit the use of the common property in any significant way. Mr Keen stated that the pipe work linking the grease trap to Lot 47 did not inhibit the functional use of the area "on a day to day type basis". There was no evidence that the vents, which pass out of basement level one into a stairwell, and then proceed up to the roof of the building, brought about any deleterious effect.
There was evidence, of a limited nature, going to the question of possible alternative means by which Lot 47 could be used as a coffee shop. In practical terms, such alternative means would have to be an alternative grease trap, given that the provision of such is a condition of the development consent.
The defendant adduced some evidence, through Mr Taylor, to the effect that it might be feasible to locate a grease trap in some privately owned car spaces at the lower end of basement level one. Those car spaces, which are owned by Cuzeno, are adjacent to the wall which is opposite the wall where the grease trap has been located. These car spaces are a considerable distance from that part of the basement ceiling which is directly below the café area. Accordingly, if a grease trap was located in those car spaces the pipes which connect the café to the grease trap would have to be much longer than the pipes that are presently in place. There was no evidence of the actual measurements that would be involved, but an indication of the greater length of pipes required can be gained from the floor plans of basement level one.
Mr Taylor gave evidence that he was aware of the existence of grease traps which were connected to pipes of lengths greater than 50 metres. He also stated that it is possible for an electric current to be put through pipes in order to increase their temperature and thus facilitate the flow of grease through the pipes. He also made mention of the availability of decongestants or solvents which can be used to break down solidified fat within pipes.
Mr Perry explained in his evidence that he installed the grease trap in its present location because:
It was the most practical place to put it. It was as close to the café as we could get it.
He stated that other locations were considered "right down the bottom" but these were "too far away". It was put to him in cross-examination that it would be possible to run the pipes to a grease trap at the lower end of basement level one and overcome problems concerning solidified grease by using electrified pipes. Mr Perry was not sure whether that would be a solution to such problems. He maintained that the present location is the most practical and most convenient place for the grease trap. He also stated that Sydney Water recommends that a grease trap be installed as close as possible to the source of the grease to minimise the possibility of grease clogging the pipes before reaching the grease trap.
It should also be noted that Mr Jabbour gave evidence that he sought technical advice about the location of the grease trap and was told that it had to be as close as possible to the draining area. It is not clear whether the technical advisor he was referring to was Mr Perry or someone else.
It seems to me that whilst it may be possible to locate the grease trap in the car spaces at the lower end of basement area one, and connect the café with such trap by means of lengthy pipes which may need to be electrified, that alternative is both technically inferior and undoubtedly more costly than the existing trap. The intrusion (such as it is) brought about by the pipes which travel along the ceiling of the basement would also be increased. Against that, however, the useable length of the two visitor car spaces at the upper end of basement level one would be increased by approximately one metre. Overall, given that a one metre increase in the length of the visitor car spaces would bring about only a small increase in the utility of those spaces, I do not think that the possible availability of an alternative location for a grease trap for use by the café is a factor of much significance.
It is appropriate to evaluate all of the above matters in conjunction with each other (see Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd (supra) at [159]; see also ING Bank (Aust) Ltd v O'Shea (supra) at [146] per Young JA). In my view the above matters, including the appropriateness of the use of Lot 47 as a coffee shop, the requirement of a grease trap for such use, the limited effect which the grease trap and its use has upon the common property, and the appropriateness of the location of the grease trap, lead me to conclude that an easement for the use of the grease trap is reasonably necessary for the effective use or development of Lot 47.
I turn now to the matters specified in s 88K(2). In my opinion the use of Lot 47 as a coffee shop having the benefit of the proposed easement will not be inconsistent with the public interest. It is not clear whether the defendant's submission that the grease trap was an "illegal installation" was relied upon in support of a submission to the contrary. There was no other suggestion that the use of Lot 47 as a coffee shop with the benefit of the proposed easement would be inconsistent with the public interest. It seems to me that such use would be quite consistent with the public interest given that such use is a lawful and appropriate use of the land and, further, that the grease trap serves to protect the environment generally.
I am also of the opinion that the defendant, as the owner of the land to be burdened by the easement sought, can be adequately compensated for any loss or other disadvantage that will arise from imposition of the easement. It was submitted on behalf of the defendant that the location of the grease trap on common property gives rise to the possibility that the Owners Corporation may face an indeterminate liability to third parties who may be injured or suffer loss as a result of a malfunction, and that in the absence of some form of indemnity from the plaintiffs "no adequate compensation is possible". However, in my view, that issue can be dealt with appropriately through the terms of any easement imposed.
The evidence given by the valuers clearly shows that, aside from that issue, compensation for the imposition for the easement sought is capable of calculation. The question of appropriate compensation is dealt with separately below.
The third matter referred to in s 88K(2) is whether all reasonable attempts have been made by the applicant to obtain the easement sought (or an easement having the same effect) but have been unsuccessful. The defendant submitted that this requirement had not been satisfied because the plaintiffs had not identified, with sufficient particularity, the terms upon which use of the trap and its associated apparatus was sought. I do not accept that submission. On 28 November 2012, Mr Shehadie sent a letter to Mr Mueller, which enclosed a draft plan of easement showing the area in basement level one where the grease trap is located. The letter also contained suggested terms for an easement to allow use of a grease trap in that area. Those terms included:
2. The grantor may make reasonable rules about the use of the easement site by the grantee and authorised users, such rules to be not inconsistent with the grant of this easement.
3. The grantee must at its cost
a. Operate, maintain, repair and replace the grease arrestor;
b. Arrange for regular pump outs of the grease arrestor; and
c. Comply with the requirements of government agencies for grease arrestors.
...
5. The grantee and authorised users must repair damage which they cause to the grease arrestor or the easement site.
6. The grantee and authorised users must not
a. Obstruct the use [of] the lot burdened; or
b. Litter, soil or damage the easement site.
That offer, to which the Owners Corporation did not respond, provides a reasonably detailed description of the easement sought. Certainly it was a more than adequate basis upon which negotiations could have proceeded further.
It was also submitted by the defendant that the Court should not be satisfied that the plaintiffs had made all reasonable attempts to obtain the easement in circumstances where more appropriate dispute resolution procedures are available under Chapter 5 of the Strata Schemes Management Act. By way of example, s 158 of that Act provides that an Adjudicator is in certain circumstances empowered to make an order prescribing the making of a by-law which gives rights of exclusive use and enjoyment over the common property. However, I do not think that the failure of the plaintiffs to pursue that path means that they have not made all reasonable attempts to obtain the easement they seek. It was not unreasonable for the plaintiffs to come to this Court following the break down of negotiations in November 2012, particularly in circumstances where the plaintiffs also had a claim that a Wheeldon v Burrows-type easement had arisen by implication and was enforceable against the defendant.
In my opinion all reasonable attempts have been made by the plaintiffs to obtain the easement sought (or an easement having the same effect), but without success. The position of the Owners Corporation appears to have been (during the period from July 2011 to at least November 2012) that it would be prepared to accept an easement provided that it received in return a weekly fee of $110 (including GST), such fee to be increased annually by an amount of 5%. The value of such an income stream would appear to vastly exceed the amounts of compensation assessed by both of the valuers called to give evidence in this case.
According to the affidavit sworn by Mr Antonopoulos, the Executive Committee was not prepared to recommend that the Owners Corporation accept the easement as proposed in Mr Shehadie's letters of November 2012 because: (a) inadequate compensation was offered; (b) there was a failure to specify the precise terms of the proposed easement; and (c) the site of the proposed easement (which I take to be a reference to the easement depicted on the draft plan submitted) did not refer to the pipes which service the grease trap.
As noted earlier, it is my view that the offers made in November 2012 provided sufficient detail to amount to a firm basis upon which to continue negotiations. The inadequacies perceived by the Executive Committee are unconvincing.
It follows from the above that I am satisfied as to each of the matters referred to in s 88K(2).
It is next necessary to consider whether the Court should proceed to exercise the discretion it has to make an order imposing the easement sought.
On the question of discretion, the defendant submits that the discretion should not be exercised in favour of the plaintiffs because they have acted unreasonably and illegally. It is put that Cuzeno installed the grease trap and associated apparatus on common property without the defendant's approval and thereby contravened By-law 5(1) which provides that an owner must not damage or deface any structure that forms part of the common property except with the written approval of the Owners Corporation, and also s 65A of the Strata Schemes Management Act which states that an owner may alter the common property only if a special resolution has first been passed authorising the alteration. It was also submitted that Cuzeno acted unreasonably by permitting El Greco to use the grease trap without obtaining any approval from the Owners Corporation.
It is true that Cuzeno did not obtain any formal (or written) approval from the defendant for the construction of the café or the grease trap itself. At most, Cuzeno had the benefit of the authority, given at the Extraordinary General Meeting of 3 June 2006, to lodge applications for development approval and a construction certificate in respect of the proposed coffee shop development. At least initially, the proposed development was seen as beneficial by all parties concerned. The fact that Cuzeno was pursuing that proposal became obvious (if it was not already so) when construction commenced in about June 2008. As far as the evidence discloses, Cuzeno was openly building upon the defendant's property in pursuit of the proposed development and no objection to this course was raised by the defendant. Moreover, as I have found, Cuzeno at least obtained tacit or informal approval from the Executive Committee of the Owners Corporation to the installation of the grease trap on basement level one.
Cuzeno undoubtedly proceeded in an informal manner, but it was not, in my view, acting in either a high handed or underhand manner. It was openly pursuing the coffee shop proposal and in doing so was incurring expenditure and making improvements to the property of the defendant. Given the absence of any objection to Cuzeno's conduct I do not think its failures to obtain formal (or written) approval from the defendants affords a good reason to decline to exercise the discretion in favour of imposing the easement sought. Rather, in circumstances where the requirements of s 88K(1) and (2) have been satisfied, and bearing in mind the legislative purpose of facilitating the reasonable development of land whilst ensuring that just compensation is paid for any erosion of private property rights, the Court should exercise its discretion in favour of imposing an easement as sought by the plaintiffs.
As to the terms of the easement to be imposed, the plaintiffs submit that the terms (apart from the question of compensation) be those proposed in Mr Shehadie's letter of 28 November 2012. However, as the defendant has pointed out, the proposed plan of easement deals only with the grease trap itself, not the associated pipes and vents. I agree that it is necessary to properly identify the site of the easement which in this case includes the pipes and vents.
I referred earlier to the concern expressed by the defendant about possible liabilities to third parties arising out of the grease trap. I agree that the terms of the easement should include appropriate protection for the defendant in this respect, either by an agreement to provide insurance or else a direct indemnity.
Otherwise, it seems to me that the terms of the easement should be substantially in accordance with the indicative terms set forth in Mr Shehadie's letter of 28 November 2012. I do not accept the defendant's submission that such a grant would be tantamount to a conferral of exclusive possession of part of the common property, such that it is not truly an easement.
I will direct the parties to bring in short minutes of order which reflect these reasons and include a draft order which satisfies the requirements of s 88K(3). In drafting the terms of the easement the parties should consider the provisions of Schedule 1B to the Strata Schemes (Freehold Development) Act 1973 concerning easements for services.
I turn now to the question of appropriate compensation for the imposition of the easement.
Mr Doncas approached the question of compensation under three heads, namely, loss of proprietary right, compensation for blot on title, and disturbance. He assessed total compensation at $4,930, this amount being made up of $2,026 for loss of proprietary right, and $2,904 for disturbance. No compensation was allowed for blot on title.
Mr Keen assessed compensation at $12,210, this amount being made up of $8,800 for diminished value, $2,860 for disturbance, and $550 for blot on title.
The main difference between the valuers concerned the assessment of the effect on value which would be caused by the imposition of the easement. Mr Doncas, by reference to three sales in developments in Kogarah in 2010, applied an amount of $4,000/m2 to the easement area (5.065m2) to arrive at a figure of $20,260. To that figure he applied a 10 per cent "affectation rate" to reach his valuation of $2,026.
Mr Keen, by reference to five sales of car spaces in nearby suburbs in 2012 and 2013, adopted a rate of $2,200/m2, which he applied to an easement area of 5m2, resulting in a figure of $11,000. Mr Keen expressed the opinion that the proposed easement diminishes the value of the easement area by 80 per cent, which percentage, when applied to the $11,000, results in a valuation of $8,800.
I do not regard either approach as entirely satisfactory. When it comes to the rate per square metre I prefer the rate adopted by Mr Keen, given that it is based upon sales of car parking spaces. The approach taken by Mr Doncas is, as he stated in cross-examination, "more than fair and reasonable". However, I do not think that it would be appropriate to adopt Mr Keen's figure of 80 per cent for diminished value. As the evidence discussed earlier shows, a loss of about one metre from the length of each of the visitor car spaces does not significantly detract from the utility of those car spaces. It was put to Mr Keen in cross-examination, but not accepted by him, that a figure closer to 50 per cent would be reasonable. In my view, and bearing in mind the point made by Mr Doncas in cross-examination that the two visitor car spaces are unlikely to ever be sold, it would be appropriate to apply a figure of about 50 per cent rather than the 80 per cent used by Mr Keen. On that basis, Mr Keen's figure for diminished value would be $5,500.
Mr Keen would allow a further nominal amount of $550 for blot on title. The evidence of Mr Doncas was that because the easement only affected the common property, namely, two visitor car spaces, no allowance should be made for blot on title. I agree that no allowance should be made in that respect. An allowance of $2,900 should be made for disturbance.
I conclude, therefore, that appropriate compensation to take into account both diminished value and disturbance would be $8,400. An order for compensation to be paid in that amount by the plaintiffs to the defendant will be made pursuant to s 88K(4).
That leaves the issue of the costs of the proceedings. The plaintiffs failed on their primary case based on Wheeldon v Burrows, but suceeeded in having an easement imposed pursuant to s 88K. Section 88K(5) provides that the costs of the proceedings (for the imposition of an easement) are payable by the applicant subject to any order of the Court to the contrary.
In Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd (supra) at [254] it was stated by the Court of Appeal that s 88K(5) has been construed as creating an entitlement on the part of the person affected by the imposition of the easement to have the costs of the court determining whether circumstances appropriate to the grant of the easement have been made out, together with the costs of assessing the appropriate compensation. The Court of Appeal further stated that the entitlement is only lost by unreasonable conduct.
The plaintiff submitted that the conduct of the defendant was sufficiently unreasonable as to justify a departure from the usual order under s 88K(5). It was submitted that it was unreasonable of the defendant to demand a weekly fee of $110 in return for the easement in circumstances where the easement would only have a minimal impact on the common property, and where there was no objective justification for such a fee. It was also submitted, that as late as the commencement of the hearing, the defendant was unreasonably maintaining that the pipes and vents associated with the grease trap might impinge upon the property of other lot owners.
I do think that the defendant's attitude to the negotiations in respect of the easement borders on the unreasonable. In particular, the weekly fee it sought has no apparent justification as a measure of reasonable compensation, and in November 2012 it effectively walked away from further negotiations for reasons which I find unconvincing. It is also true that the point taken about the pipes and vents possibly intruding upon the property of other lot owners was readily abandoned once the view of the basement area was undertaken. It became clear very quickly at the view that the pipes and vents were located only on the common property. Nonetheless, I do not think the taking of that point added any significant time to the hearing. The need for a view was largely the result of deficiencies in the plaintiff's evidence concerning the grease trap.
It should also be noted that a great deal of the evidence which was relevant to the s 88K case was also relevant to the Wheeldon v Burrows case.
Overall, given that the aspects of the defendant's conduct which might be described as unreasonable did not cause the hearing of the proceedings to be any more difficult or lengthy than would have otherwise have been the case, I decline to make any order to the contrary pursuant to s 88K(5). Accordingly, the appropriate order is that the plaintiffs pay the defendant's costs of the proceedings.
I direct the parties to bring in short minutes of order which reflect these reasons for judgment.
Decision last updated: 24 September 2013
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