Daar Pty Ltd v FEZA Foundation Limited

[2001] NSWSC 949

Reported Decision: (2002) NSW ConvR 55-996

New South Wales

Supreme Court

CITATION:	DAAR PTY LTD v. FEZA FOUNDATION LIMITED [2001] NSWSC 949
CURRENT JURISDICTION:	EQUITY
FILE NUMBER(S):	SC 3962/2001
HEARING DATE(S):	19/10/2001
JUDGMENT DATE:	26 October 2001
PARTIES :	Daar Pty Limited - Plaintiff Feza Foundation Limited - Defendant
JUDGMENT OF:	Bryson J at 1

COUNSEL :	N.G. Kerz - Plaintiff M.R. Lawson - Defendant
SOLICITORS:	Milad S Raad & Associates - Plaintiff Michael E. Rogers - Defendant
CATCHWORDS:	LANDLORD AND TENANT - Access - implied terms - quasi-easement - Rule in Wheeldon v. Burrows - on the facts there was no implied easement to cross the lessor's land from the foot of the stairs which were leased.
CASES CITED:	Codelfa Construction Pty Ltd v. State Rail Authority (NSW) (1982) 149 CLR 337 Wilcox v. Richardson (1997) 43 NSWLR 4 Wheeldon v. Burrows [1879] 12 Ch D 31 Nelson v. Walker (1910) 10 CLR 560
DECISION:	Proceedings dismissed with costs.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

3962/2001
BRYSON J.
Friday 26 October 2001

DAAR PTY LIMITED v. FEZA FOUNDATION LIMITED

Judgment

: The plaintiff seeks to establish that it has an implied right of access over the defendant’s property appurtenant to a leasehold interest over a small part of the defendant’s property. In 1985 the plaintiff owned (and still owns) the office building called Queen’s Court at 19 Queen Street, Auburn. The office building is built on and appears to occupy fully a rectangular parcel of land with its only street frontage to Queen Street on the south-west. In 1985 adjoining property to the north-west in Queen Street was owned by Auburn Municipal Council and occupied by the Municipal Library. The Library land was also approximately rectangular but it was a much deeper block and ran right through to Kerr Parade, with a frontage and access to Kerr Parade as its north-eastern boundary. The Library building did not fully occupy the Library land. The Library land was open and unfenced at both street frontages, and it was physically possible for persons on foot to pass through from Queen Street to Kerr Parade; of course they could also reach the Library building. There is no evidence however that the Library land or any part of it was subject to any dedication or right of the public to pass across it. As well as impliedly licensing persons to cross this land to reach the Library building on foot the Council must be taken to have licensed or tolerated use of its land for passage between the two streets.

2 The Library land was then the subject of three Certificates of Title covering different parts of the land and together making up the whole rectangle. Lease X9529 was granted by the Council to the plaintiff and created a lease term of 20 years from 10 December 1986 to 9 December 2006 at an annual rent of $100 with Consumer Price Index escalation. The rent is little more than nominal. The land leased was a small rectangle adjoining the plaintiff’s land on which there was to be constructed (and soon was constructed) a stairway of about 10 steps leading down from the level of the first floor of the plaintiff’s building to the grounds of the Library. Dimensions are not given in the plan annexed to the lease or elsewhere, but the rectangle of land on which the stairway was constructed appears to be about 2 metres long along the property boundary and about 1 metre wide into the Library land. The stairway is, again approximately, about four metres from the Queen Street frontage. In the description of the land out of which the lease was granted and to which the benefit of the lessee’s covenants was annexed all three Certificates of Title are given; it seems extremely unlikely however that the rectangle leased was part of the land in each of the three Certificates of Title.

3 The land demised was described as “the premises” which by a definition in cl.1.01 referred to Item 3 in a Reference Schedule: “DESCRIPTION OF PREMISES. The structure consisting of a stairway erected upon the land which stairway is edged with a heavy black line and hatched in black on the plan annexed hereto and marked with the letter ‘A’”. By cl.4.01 the use to which the lessee could put the land leased was restricted to the following use stated in Reference Schedule Item 11: “USE OF PREMISES. For the purpose of providing access to premises known as No. 19 Queen Street Auburn.”

Other provisions of the lease showed that the hours of access were “at all times”.

4 The definition of “building” in s.1 of the Lease includes among many other things all appurtenances of the premises. I am unable to see any point in the Lease where the premises leased were described as a building so as to catch this extension.

5 In 1999 Auburn Council built large new Council Chambers nearby on the opposite side of Queen Street. The Council now conducts its library there. The defendant bought the Library building and land from Auburn Council at an auction sale on 16 December 1999, and later obtained Development Consent and Building Approvals for use of the Library building as a primary school, and for works to make the building suitable. As the Lease is a registered lease the defendant is bound by its terms, including its implied terms. One of the conditions of Development Consent, now expressed in a Notice of Modification dated 6 August 2001, requires the defendant to construct security and ornamental fencing a minimum of 1.5 metres high across the whole of the Queen Street frontage of the defendant’s land, with return fencing along the boundaries on each side. This condition does not provide for a gate for pedestrian access. The Council gave as the reason for imposing this condition “To provide security for the school play area and to eliminate pedestrian access for safety reasons.” Conceivably there may be traffic control implications. When this condition is complied with it will have the effect of restricting access to the school land to access from Kerr Parade, and it will prevent foot traffic through the property. Unless restrained by injunction it is likely that the defendant will comply with this condition and erect fencing which will make it impracticable to proceed from the foot of the stairs to the Queen Street frontage. The defendant has already erected tall metal fencing, with a gate, across the Kerr Parade frontage, making it difficult to proceed from the stairs to Kerr Parade. The defendant wishes to close off pedestrian access to its land in the interests of the safety of pupils, to prevent children from proceeding to Queen Street and to prevent trespassers from entering the school grounds.

6 The plaintiff claims a declaration that pursuant to the lease the plaintiff is entitled to enjoy a right of access across and through the Library land. The plaintiff also seeks an injunction restraining the defendant from carrying out works which would have the effect of interfering with means of access, and alternatively damages.

7 Before the hearing I inspected the properties from the Queen Street frontage, and I inspected the defendant’s property from the Kerr Parade frontage; I did not enter. The inspection has been of assistance to me in understanding the effect of the evidence including the photographs.

8 Apart from access to the plaintiff’s building by the stairway, access is available by another stairway proceeding directly from the plaintiff’s building to the footpath of Queen Street. This is readily accessible four or five metres away from the stairway. Vehicle access to the building is available by a ramp from Queen Street down to a large parking area on the ground floor and it is, I suppose, possible to gain access to the building on foot by way of the ramp. It is not and has not at any time been necessary, in any sense of what is necessary, for persons approaching the plaintiff’s building on foot to proceed across any part of the Library land or now the school land to reach the building.

9 When the lease was granted and the stairway was constructed the stairway contributed to the amenity of owning and using the plaintiff’s building because it gave access to the land surrounding the Library, which Council then permitted all persons, whether approaching the plaintiff’s building or not, to walk across, either to approach the Library or to reach one of the streets, or to pass between the two streets. There is no inconvenience at all about approaching the plaintiff’s building by the steps from Queen Street, and there never was, but the approach through the Library land had some advantage in terms of amenity. The plaintiff’s evidence is that that approach was the principal route of pedestrian access to the plaintiff’s building from 1985 on. Mr Crane a director has given evidence in these terms: “That access is an expansive park like thoroughfare which operates as an enhancement of the presentation and appearance of the Plaintiff’s building which the Plaintiff wishes to enjoy for the balance of its leasehold term”. What Mr Crane says is illustrated by the third and fourth photographs at page 50 of the affidavit of Mr Aydogan, a Director of the defendant; these illustrate that there is some degree of amenity in approaching the plaintiff’s building on a made footway through the Library land, past an area of lawn and some trees and other vegetation; the approach by this route is more pleasant than the starkly direct approach from Queen Street.

10 The difficulty arises from the lease’s not having defined the access which it said it was the purpose of the use of the stairway to provide. (Of course the references to access to the plaintiff’s building in the Lease are references to both ingress to the building and egress from the building; this was not disputed and could not be). To avoid absurdity it must be understood that parties to the Lease contemplated that more would be done to the stairway than to go up and down it; it must have been contemplated that on reaching the foot of the stairway, a walker would have lawful authority to go somewhere, necessarily involving crossing some part of the Library land. However a conclusion that the Lease created a right or quasi-easement over the Library land for the purpose of access depends on implication; there is no express conferral of any such right, and there is no reference in the Lease to the existence of any such right. In the circumstances which existed in 1985 when the Lease was granted the plaintiff and persons using its stairway had no need for any implied easement or other rights to walk across the Library land because the land was unfenced and open to passage by leave and licence of the Council, although it was not subject of any right arising by dedication as a public way.

11 The possibilities about what the parties contemplated, when the Lease was granted, would be the place to which access was gained from the stairs was not spelt out in the Lease. The possibilities I have seen are that there would be access to:

(a) the Library premises;
(b) the Queen Street frontage by way of the formed path;
(c) the Queen Street frontage by the shortest and most direct route, or by any practicable route which the Council might provide; and
(d) both the Queen Street frontage and the Kerr Parade frontage.

12 Argument presented related to implied terms in commercial documents and to the general law, as expressed in Codelfa Construction Pty Ltd v. State Rail Authority (NSW) (1982) 149 CLR 337, on the circumstances which terms are implied in contracts. In relation to quasi-easements in leases there is a body of authority dealing more specifically with the circumstance in which implications are made, and it is that body and not to Codelfa that I should refer.

13 The Court does not readily accept that a commercial agreement has a meaning which is impractical or achieves nothing or is absurd, and although such a conclusion may have to be accepted, construction of a commercial agreement has to be approached with the understanding that it is very unlikely that parties to a written agreement did not intend that their agreement should be effectual. In relation to quasi-easements and other implied ancillary rights under leases the case law and its relation to Codelfa were considered in the judgment of Handley JA in Wilcox v. Richardson (1997) 43 NSWLR 4 at pp12-15. The rule in Wheeldon v. Burrows [1879] 12 Ch D 31 was stated by Thesiger LJ at 49, in a passage cited by Handley JA at 13-14, in these words: “… on the grant by the owner of a tenement of part of that tenement as it is then used and enjoyed, there will pass to the grantee all those continuous and apparent easements (by which, of course, 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.”

14 In relation to the present facts, the significant question to be abstracted from this passage is whether an implied right of way over the Library land was necessary for the reasonable enjoyment of the leasehold interest in the stairway, in the conditions of 1985. As observations and citations by Handley JA at 14 and 15 showed, the rule in Wheeldon v. Burrows is an illustration in relation to leaseholds of ordinary rules governing implications in contracts. The rule in Wheeldon v. Burrows is well entrenched in Australian law. The workings of the rule and the concept of necessity involved in it were dealt with in Nelson v. Walker (1910) 10 CLR 560 at 586 by Isaacs J. Authorities cited by Isaacs J at 586 illustrate the concept of necessity and show that it is not a concept of absolute necessity but of strong probability, excluding the probability of an opposite intention.

15 At first impression there seemed to be an element of absurdity in the defendant’s position in which the only thing which the plaintiff has a right to do under the Lease is to go up and down the stairs, and there is no right to go any further after reaching the bottom. However the impression of absurdity is dispelled by consideration of the surrounding circumstances and the alternative means available for access to the plaintiff’s building, by another set of stairs only a few footsteps away.

16 In considering whether an implication should be made, the state of the land and the factual setting in which the Lease was granted are relevant. In the circumstances in which this Lease was granted in 1985, and having regard to the terms of the Lease, my view is that it was not reasonably necessary that the grant of a leasehold of the stairs should carry with it any implied easements or quasi-easements of passage over the Library land. One consideration is that it is extremely unlikely that the parties intended, and very artificial to impute to them an intention that the plaintiff and persons having access to its building should have the right to go wherever they chose on the Council land. If it was intended that they were to have any rights in the matter it obviously needed to be stated where they were entitled to go. As there were pathways the means were ready at hand to define rights restricted to the pathways, if rights were to be conferred. Means were also ready at hand to make it clear whether there was to be a right to go through the Library land to both street frontages, or only to one, and to state which. A more forceful consideration than implications from the silence of the parties is that the plaintiff’s building had completely open and unrestricted access to Queen Street frontage by its own stairway four or five metres, a few steps away, and there was no discernible need for a further right to access from the side. The means of access directly from the Queen Street frontage were entirely unobstructed and did not compete with any other use which might be expected. The means of access directly from Queen Street were of at least as good a standard of accessibility and amenity as is accepted generally for office buildings. Advantages from means of access by the stairway at the side, and from passage through the Library land to and from the stairway, were advantages in terms of amenity only, and even in those terms they were only slight advantages; a very minor short cut for persons approaching from the north-west along Queen Street, and the minor advantage of the amenity of a short approach through a little greenery. These advantages were worth having and worth bargaining for, and in the judgment of the parties, worth paying $100 a year for, but they cannot, on any realistic view, support the implication, as a matter of reasonable necessity, that there must have been some implied contractual right to walk across the Library land for the purpose of getting those advantages. For land which was otherwise landlocked, or to which the access was in some serious way otherwise inconvenient, an implication would readily be made, particularly having regard to the reference to access in Item 13. That is not the present case. If there is any element of absurdity in the case it would be the absurdity of the law creating an implied right to cross the Library land to reach a building which is perfectly accessible a few steps away.

17 If contrary to my finding an implication should be made in accordance with the test of reasonable necessity, it could only support a right of access by a direct route to the nearest public street namely Queen Street, and it would be open to Council and now to the defendant to provide that access by way of a short strip of land immediately adjacent to the plaintiff’s land; there would be no commitment to the paths as they existed in 1985 or to any other means of access so long as there was no unreasonable obstruction to passage on foot. These considerations further illustrate the general lack of utility of an implied right. The concept that the access contemplated was to the Library building has little to commend it, but for what force it had, that is now spent. There is no possible room for a view that there was a reasonable necessity to walk practically the full length of the Library land to reach Kerr Parade. Anyone wishing to reach Kerr Parade from the plaintiff’s land can walk a short way around the block by the footpaths of the public streets. In evidence and submissions the plaintiff referred to the advantage of reaching Kerr Parade for car parking for visitors to Queen’s Court. Car parking in Kerr Parade is somewhat easier than in Queen Street, but as there is car parking in the plaintiff’s basement and in Council premises on the other side of Queen Street, reaching Kerr Parade for car parking is not a significant factor.

18 I do not think that the description in the Lease by reference to three Certificates of Title carries any implication to the effect that there was an implied right of access to all three parcels of land. The plaintiff’s solicitor submitted that even without making any implication of a term or quasi-easement, the Lease confers on the plaintiff an entitlement to access to all three parcels of land, and that in consequence the rights of the plaintiff include a right to walk through the school premises to Kerr Parade. I do not accept this reasoning; there is no expression in the Lease which suggests that there is a right of access to or over all parts of the land, and it is still necessary to address whether any right which was not expressly conferred arises as a matter of reasonable necessity in relation to the enjoyment of the rights which were expressly conferred. As a practical matter, the three parcels of land were and are committed to use together for one building and the surrounding curtilage, and only a person who owned them all in common could in any effectual sense be the owner of the building or exercise rights of ownership such as granting leases.

19 My conclusion then is that the lease confers on the plaintiff no relevant right apart from that literally conferred, that is to use the stairway for access; but a right to proceed beyond the foot of the stairs must be found elsewhere, and as the leave and licence of the proprietor of the Library land is no longer available, there is none.

20 In submissions alternative to his principal case the defendant’s counsel asked that any implied easements be extinguished under powers in subs.89(1) of the Conveyancing Act 1919. He contended that this should be done having regard to the present circumstances as the use of the Library land has changed, the public no longer has access and passage over the Library land, and development as a school has brought with it serious inconvenience arising from the alleged implied easement. This application could in my opinion be supported under paras.(a) and (c) of subs.89(1). It was accompanied by an offer to accept terms under which entitlements of the defendant under the Lease to rent would not be enforced and the defendant would be prepared to release any other obligations under the Lease. The application to extinguish is very strongly supported by the necessity to comply with the condition requiring fencing imposed by Council on Development Consent for use as a school. However it is not necessary for me to act on this basis.

21 If it were the correct view that the Lease does create a quasi-easement and a right of passage over the Library land, specific enforcement of those rights by injunction or other equitable remedies would confer little real benefit on the plaintiff and impose very significant hardship on the defendant having regard to the state of its arrangements, its actual conduct of the school, the practical need for secure fencing and the need to comply with the conditions of Council’s Development Consent by erecting the fence. By comparison, the deprivation of the plaintiff’s rights of passage would involve very little real inconvenience, well represented by the very small amount of rent and the short remaining term of the lease, and in my view the proper course for the Court to take would be to withhold injunctions or other equitable remedies, allow the defendant to fence off its land including the area of the stairs, and to let the parties pursue their rights in terms of any damages payable, which in the circumstances are unlikely to be large.

22 This litigation has been a particularly unfortunate instance of parties involving themselves in an equity suit over small circumstances. When the controversy arose in January 2001 in correspondence it should not have been difficult for the parties to have found some resolution of the relatively small interests involved and relatively short term of the Lease remaining in an arrangement which would have released both sides from any further rights and obligations. It is most unfortunate that this did not happen and that significant sums have been spent on this litigation. I recommend to the parties that they turn their minds to some arrangement under which the rights and obligations of both sides under the Lease can be brought to an end now.

23 In my opinion the proceedings should be dismissed with costs. As it was indicated to me during the hearing that there was a wish to make some particular submissions about costs, I am prepared to reconsider costs if a written submission raising some special consideration is lodged at my Chambers within seven days.

25 1. The proceedings are dismissed with costs.

********

Last Modified: 11/15/2001