Gallagher v Rainbow

[1992] QCA 375

IN THE COURT OF APPEAL

[1992] QCA 375

SUPREME COURT OF QUEENSLAND

Appeal No. 47 of 1992

BETWEEN:

LORRAINE CHERYL GALLAGHER

Appellant (Plaintiff)

and Respondent by Cross Appeal

AND:

ALLAN ROY RAINBOW and

MAREE ELIZABETH RAINBOW

First Respondents (First Defendants)

and Appellants by Cross Appeal

AND:

OWEN PETER COALDRAKE and

LEE ANN COALDRAKE

Second Respondents (Second Defendants)

and Appellants by Cross Appeal

REASONS FOR JUDGMENT - THOMAS J.

Delivered the 3rd day of November 1992.

These proceedings involve an appeal and cross-appeal.

It will be convenient to refer to the parties as plaintiff and defendants. The parties are neighbours, although the plaintiff's property does not adjoin those of the defendants. The relevant allotments are within a recently developed estate at St. John's Wood, Brisbane. The plaintiff acquired her lot (Lot 14) in 1988 and built a substantial home upon it in 1991. The first defendants (Mr and Mrs Rainbow) are the owners of Lot 17 and the second defendants (Mr and Mrs Coaldrake) are the owners of Lot 16.

The appended plan (from ex. 1) will facilitate

description of the relevant allotments and their features.
Lots 14, 15, 16 and 17 are fairly large blocks (totalling in
all about five acres) and their only street access is to
Buckingham Street by means of narrow rectangles from each
lot, which collectively contribute to a driveway which is
for the most part about 5 metres wide. This provides a
private roadway of which each proprietor owns about a
quarter in fee simple and as to which reciprocal registered
easements have been given and taken by the owners of the
other lots. The relevant easements are in similar form.

The plaintiff purchased her lot from persons named Appleby and Mrs Rainbow (the female first defendant). The Applebys formerly owned Lot 16 but in 1987 sold it to the present owners, Mr and Mrs Coaldrake (the second defendants).

The catalyst for the present dispute was the decision by the defendants to effect further subdivision of Lots 16 and 17 into three parcels each. In the result, if the subdivision is completed, there will be eight parcels of land whose only access to Buckingham Street is via the private road whereas only four allotments are presently served by it.

The Applebys and Mrs Rainbow were joint venturers who in 1985 subdivided about sixteen acres of land in this area into twenty-three allotments, including Lots 14 to 17. The subdivisional approval obtained from the Council in 1985 was of course with respect to the twenty-three lots approved, and there was no particular condition limiting further subdivision by any owner of any lot at any future time.

However, on the evidence accepted by the learned trial judge, Mr. Appleby made certain representations to the plaintiff concerning Lots 14 to 17 before the plaintiff purchased Lot 14. These included the statement that the access road was designed in accordance with Council requirements, that there could only be four blocks, and that there could not be any further development. These are not precisely the representations contained in the statement of claim, but it has been accepted that the plaintiff was left with the impression that the land in question could not be further developed. His Honour further found that these statements by Mr. Appleby fell within the scope of the authority given to him by Mrs Rainbow, but that neither Mrs Rainbow nor her husband had personal knowledge of any such statements and that neither of them had been guilty of unconscionable conduct.

The intended subdivision has been approved by the Brisbane City Council and the subdivisional plan was sealed on 25th September, 1991, and on that day lodged for registration in the Department of Freehold Land Titles. All that remains to be effected is registration, which awaits the outcome of these proceedings.

In the action four principal issues arose, and briefly stated, His Honour determined them as follows:-

(1) What is the true construction of the easement documents? In particular, are the defendants' rights of easement over the designated part of the plaintiff's land limited so that further subdivision of Lot 16 or Lot 17 would exceed the terms of the grant?

Answer: On the true construction of the easements the grants do not contemplate subdivision of either Lot 16 or 17 for profit.

(2) If yes to (1), should an injunction be
granted restraining the defendants from
proceeding with the subdivision?
Answer: Notwithstanding the above construction of
the easement, an injunction restraining the
subdivision should be refused on the footing that
the plaintiff would not suffer any substantial
damages. His Honour opined that she might even

enjoy an advantage if the subdivision proceeded.

(3) Did a trust arise binding Mrs. Rainbow not to

subdivide Lot 17?

Answer: No trust arose.

(4) Has the plaintiff suffered any and, if so,

what damages?
Answer: There had been acts of trespass on the
plaintiff's property, but only nominal damages (of
$2.00) should be assessed for damages for
trespass, past and future.

It is unnecessary to set out the many issues which were raised by the appeal and the cross-appeal. On the hearing of the appeal counsel for the parties confined their arguments to the first three points, and it will be convenient to commence with the question of construction of the easements.

Construction of Easements

Exhibits 4, 6 and 9 are the easements that have been granted in favour of the owners of Lots 17, 16 and 15 over the relevant strip of the plaintiff's land.

The easements are registered easements under the Real Property Acts, pursuant to which the grantor has granted to the grantee an easement for the purpose of right of way with respect to which certain covenants are recorded. It is sufficient for present purposes to quote from ex. 4., which contains the following covenants:-

"1. The grantor and the grantee covenant and it is a condition of this easement that for the duration of the easement the grantor will maintain and repair the servient tenement in a proper state of repair fair wear and tear excluded.

2.    The grantor and the grantee covenant and it is a condition of this easement that the costs of maintenance and repair of the servient tenement shall be borne by the registered proprietors for the time being of Lots 14, 15, 16 & 17 on Registered Plan No. 209227 Parish of Enoggera, County of Stanley as to one quarter each respectively.

3.    The grantor and the grantee covenant and it is a condition of this easement that if the condition of the servient tenement deteriorates to such an extent as to necessitate or require replacement thereof the registered proprietors for the time being of Lots 14, 15, 16 & 17 on Registered Plan No. 209227, Parish of Enoggera, County of Stanley, shall bear the costs of replacement as to one quarter each respectively.

4.   If there is any dispute relating to the need to carry out work under this grant of easement, the nature of the work, its reasonable cost or the parties' contribution to the costs, that dispute shall be determined on the application of either the grantor or the grantee by a single person appointed by the president for the time being of the Institution of Engineers Australia Queensland Division.

The person appointed shall be a member of the Institution of Engineers Australia Queensland Division having at least five years standing and he shall act as an expert and not as an arbitrator. Each party shall pay its own costs of the determination and the person appointed shall nominate which party or parties shall bear his costs. The determination of the person appointed shall be conclusive and binding on the parties.
...

6.   And it is hereby further agreed and declared that the expression 'the grantor' shall where context so admits or requires include Clive Sydney Appleby and Merril Lucienie Appleby and Maree Elizabeth Rainbow and the transferees and assigns of the grantor and the registered proprietor or proprietors owner or owners (and their respective successors executors administrators and assigns as the case may be) and the occupier or occupiers for the time being of the servient tenement and the expression 'the grantee' shall where the context so admits or requires include the transferees and assigns of the grantee and the registered proprietor or proprietors owner or owners (and their

respective successors executors

administrators and assigns as the case may be) and the occupier or occupiers for the time being of the dominant tenement."

The description of the purpose of the easement is in these terms:-

"A right of way for the grantee and the registered proprietors and occupiers for the time being of the dominant tenement and all persons authorised by them together with all others having the same rights as the grantee but in common with the grantor and every other person who is for the time being the registered proprietor of the servient tenement at all times day or night and for all purposes ordinary incidental to or connected with domestic use and enjoyment of the dominant tenement or any part thereof with or without animals carriages wagons motor vehicles and all vehicles of any other description whatsoever, laden or unladen to pass and repass over along or across the servient tenement."

The easements were contemporaneous and were plainly intended to be reciprocal. Each allotment provides approximately one-quarter of what is intended to be a composite right of way, and the proprietor of each lot is obliged to meet one-quarter of the costs of maintenance, repair or replacement of each servient tenement. Counsel for the defendants placed considerable reliance upon the submission that it was intended that there should be only four users (or their agents, assigns or successors) and that the effect of the proposed subdivision would be that each new lot owner would be liable for one-twelfth of the maintenance etc. whilst the owners of Lots 14 and 15 would remain liable for one-quarter each. It was submitted that it should be presumed that there would be a similar amount of use proceeding from each of the new allotments, and that an unfair burden would be imposed upon the owners of the original unsubdivided lots. It was further submitted that dispute resolution would become more complex and less certain.

On the other hand there is no express prohibition upon further subdivision. If the defendants are not legally prevented from subdivision neither is the plaintiff, and there is no legal inequality. Subject to the constraints of domestic use in the purpose covenant, there is no restriction upon the intensity of the use, or the number of co-owners or the number of persons who might come and go from each lot. The same areas will remain liable for the same proportion of maintenance costs. Apart from the circumstance that there would be an intensification of domestic use of Lots 16 and 17, the argument based on lack of symmetry is not convincing.

It is possible to find words expressly consistent with the prospect of subdivision. The easement is granted "for all purposes ordinary incidental to or connected with domestic use and enjoyment of the dominant tenement or any part thereof.." (emphasis added). There is therefore a grant of a right of way for prescribed domestic use of dominant tenements 16 and 17 or any part thereof. This would encompass the consequences of subdivision. Further, the grantee is defined to include the transferees and assigns of the grantee and the registered proprietor or proprietors and the occupier or occupiers of the dominant tenement. This is appropriate to cover new owners after subdivision.

The proposed subdivision is residential and its completion would not prima facie infringe the requirement of domestic use although it would intensify it. However in terms of the easement the various parts of Lots 16 and 17 would continue to be used for purposes ordinarily incidental to or connected with the domestic use and enjoyment of those lots. The new lots will simply be parts of dominant tenements that are currently identified in the titles office as Lot 16 and Lot 17.

In a supplementary written submission Mr. Fraser for the plaintiff referred to the covenant to contribute to the maintenance and repair of the servient tenement, which he submitted conferred a benefit on the grantees. The submission continues that if Lot 16 is subdivided and loses the benefit of the easement there will be no one to bear the burden of contributing to the costs currently imposed upon the registered proprietor of that lot. In my view the underlined premise is an unsound assumption. The assigns and successors in title of the registered proprietor will continue to be bound by the covenant that obliges the current proprietor to contribute his or her quarter.

The easements are all registrable and have been duly registered. The covenants therein are covenants appropriate to be found in a memorandum of easement, and the relevant certificates of title are endorsed with and subject to the relevant easements. The registered proprietor holds his estate subject to such interests as are notified by these entries in the register book (Real Property Act 1861 as amended, s.44). Section 51 expressly requires the registrar to enter a memorial of the instrument creating an easement "upon the folium of the register book constituted by the existing grant or certificate of title of such other land when such instrument is produced to him for registration".

There is no doubt that in the case of registered leases various covenants (including a right to renew the lease) run with the land and bind assigns and successors (Mercantile Credits Ltd. v. Shell Co. of Australia Ltd. 1975-76 136 C.L.R. 326). No case has been cited on the question whether obligations contained in covenants in registrable easements continue to bind subsequent parties, but it is difficult to see why they should not, particularly in relation to covenants of the present kind. The composite arrangement under which the relevant easements were created makes the continuity of the obligation to contribute to costs of repair etc. an essential part of the continuation of the right.

The easements are, in the words of Barwick C.J. in the Mercantile Credits case, "registrable instruments in their entirety" (p.337), and "none of the covenants could be said .. to be other than covenants appropriate to be found" in such a memorandum. The memorandum, so far as it affects any estate or interest in land, obtains priority and indefeasibility (ibid. p.339). The main task in the present matter is to characterise the covenants.

"Speaking generally, the Act would not appear to be intended to render indefeasible a personal right created by a covenant, which, although contained in a registered instrument, in no way affects the estate or interest in land with which the instrument deals. An example is a covenant of guarantee contained in an instrument of mortgage." (ibid. per Gibbs J. p.343)

The covenants in the present matter are not in my view mere personal rights that fail to affect the relevant estate or interest. In the context of leaseholds, covenants have been held to fall into one or other of two classes, those which are personal to the contracting parties, and those which touch and concern the land.

"If the covenant has direct reference to the land, if it lays down something which is to be done or is not to be done upon the land, or, and perhaps this is the clearest way of describing the test, if it affects the landlord in his normal capacity as landlord or the tenant in his normal capacity as tenant it may said to touch and concern the land." (Cheshire's Modern Real Property 10th ed. pp.405-6)

Thus covenants by the tenant to repair (Martyn v. Clue 1852 18 Q.B. 661) or by the lessor to supply water to the demised house (Jourdain v. Wilson 1821 4 B.& Ald. 266) have been held to touch and concern the land (cf. Spencer's case 1583 5 Co.Rep. 16a, 16b, 77 E.R. 72, 74).

There is no compelling reason why a similar approach should not be taken in relation to a grant of an easement over land and the covenants therein. It may further be noted that s.53 of the Property Law Act 1974 as amended operates consistently with the above notions, and facilitates the enforcement of such covenants by and against those deriving title from the original covenantors and covenantees.

It follows that the new owners, as assignees of parts
of the dominant tenement, will remain bound by the covenant.
It would seem that as between themselves the new owners

would have a right of contribution, but it is unnecessary to

pursue that point.

On a practical level the evidence shows that it is a condition of the Brisbane City Council approval of the subdivision that reciprocal access easement rights be granted over access strips to enable access from the proposed additional lots to Buckingham Street. Evidence was not given of the conveyancing by which this will be achieved or of the practice of the Titles Office in relation to the carrying forward of the benefits and burdens of the existing easements into a new plan of subdivision. But irrespective of the form in which the existence of the reciprocal easements may be noted on the new title deeds, the substance of the matter will be that the benefit of the existing easements over Lot 14 will continue in favour of all persons to whom the subdivided parts of Lots 16 and 17 are assigned, and so that such persons remain collectively liable for the burdens of the existing easement; and the existing easements in relation to which Lots 16 and 17 are the servient tenements will continue in favour of the proprietors of Lot 14 who will remain liable for their quarter contribution to the repair and maintenance.

I do not find it necessary to address further the extensive arguments which have been advanced on both sides on this question. It is a matter of construction and the dominant considerations have already been set out. These considerations are not displaced by less relevant factors set out in the written arguments. In my view the easement neither expressly nor impliedly prohibits the subdivision of any of the lots viz. Lot 14, Lot 15, Lot 16 or Lot 17. In particular exs. 4, 6 and 9 which grant an easement over part of the plaintiff's land are not to be read as limited to enure for the benefit of the proprietors of Lots 15, 16 and 17 only whilst those lots remain intact and unsubdivided.

The plaintiff of course has the right to seek to restrain the use of the easement for purposes that are not incidental to or connected with domestic use. Had the application for subdivision been accompanied by an attempt to rezone or to introduce a non-domestic use, the resulting use would no doubt infringe the terms of the grant. Persons attempting to make a non-domestic use of the easement could be restrained, and (subject to discussion under the next heading) the defendants could be restrained from proceeding with a scheme calculated to bring about such infringements.

However the present subdivisions are not of that kind, and in my view there is nothing in the relevant easements which limit the grant by an implied condition that the dominant tenements remain unsubdivided.

Whether an injunction should be granted

Having come to a different conclusion from that of His Honour as to the construction of the easement, the principal basis for the injunction disappears, and it is unnecessary to deal with the main basis of the injunction sought in question no. 2. It must be said however that on the construction adopted by His Honour it is difficult to see any proper basis upon which an injunction could have been refused. On the footing that the subdivision would create a situation which would inevitably infringe the plaintiff's proprietary rights, there would have been a sufficient basis for the grant of an injunction and no sufficient basis for refusal was shown. Such infringements are almost invariably restrained (Graham v. K.D. Morris & Co. Pty. Ltd. 1974 Qd.R. 1, 5; cf. Mayfair Trading Co. Pty. Ltd. v. Dreyer 1958 101 C.L.R. 428, 451.)

It is unnecessary to pursue the alternative question
whether His Honour's construction recognised an implied
covenant, breach of which might be restrained by injunction.
Having rejected His Honour's view of the construction

point, the principal basis for the injunction sought by the

plaintiff disappears.

There are however further arguments to the effect that the plaintiff is entitled to a more limited form of restraint in order to enforce the "domestic" limitations of the easement against the defendants. In particular it is alleged that the act of subdivision and the proposed construction and sale of houses built on the additional allotments will exceed these limitations.

An injunction was sought in the following terms:-

"An injunction to restrain the defendants by themselves, their servants and agents or otherwise from using easements D, E, F and G on Registered Plan 209227 for the purpose of carrying out surveying, building or other development activities directed to carrying out the subdivision, sale or marketing or disposal of Lots 16 and 17 or either of them save as undivided lots."

It was submitted that the first defendants are builders and that as they propose to build houses on the new allotments and sell them, they will in effect be dealing in trading stock and will thereby infringe the domestic limitations of the easement. I have some doubt as to whether this particular issue was adequately litigated, but it must be decided on the available material. The essential submission is that the making of profits through subdivision is not domestic use or incidental or connected with it, and similarly that "spec" building is not "domestic". No authorities have been referred to which cast light on the problem. It is however well established that the words "connected with" and "incidental to" have a very wide coverage, and that in various contexts a casual connection is sufficient (Rothmans of Pall Mall (Aust.) Ltd. v. Australian Broadcasting Tribunal 1985 58 A.L.R. 675, 691; Berry v. F.C.T. 1953 89 C.L.R. 653, 659).

The construction of a house consistent with its use for domestic purposes would not, in my view, amount to a use of the land exceeding domestic purposes and I should think it immaterial whether the building was constructed by a professional builder, or by the owner himself. The fact that an owner happened to be a professional builder and saw fit to build houses on the newly subdivided allotments would not mean that the domestic limitation was infringed. In all of these instances the passing and repassing of the servants or agents of the builder for such a purpose would be within the purpose contemplated by the easement.

Similarly the sale of a house designed for domestic use is prima facie an act incidental to or connected with domestic use of the tenement. The passing or repassing of real estate agents or other persons who endeavour to effect such a sale would in turn be a "purpose... incidental to or connected with domestic use .. of the .. tenement". I am unable to see how the design or construction of a house for domestic purposes on the dominant tenement, or the making of arrangements for the sale or resale of such a house can infringe the stated purpose of the easement.

In short the words "incidental to domestic use" must include the construction of houses for domestic use and reasonable arrangements for their sale and resale.

The taking of the legal steps necessary to effect the subdivision of the allotments is not in itself a use of the land for any purpose. The act of the defendants in obtaining the necessary approval and effecting the necessary registrations are not infringements of the easement. However the physical use of the easement by servants or agents of the defendants for this purpose might be a use that cannot be characterised as incidental to domestic use.

It seems to have been accepted at trial, and on the appeal, that trespass was committed by servants and agents of the defendants who used the easement area in the course of doing work connected with the proposed subdivisions (including surveying work). The basis of this is that use of the easement area for work related to the effecting of a subdivision is not a domestic use of the land. Such work could not be regarded as incidental to domestic use either.

This seems to have been the principal basis for the finding of trespass and the assessment of nominal damages. However there is no imminent prospect of further acts of that kind, and no question arises at this stage of any entitlement to restrain such activity by injunction. No basis is shown for the assessment of more than nominal damages.

For the above reasons the plaintiff is not entitled to any injunction, either on the basis of non-domestic use or on the wider basis that subdivision is impliedly inconsistent with the terms of the easements.

Did a trust arise binding Mrs. Rainbow not to subdivide Lot
17?

The allegation that a trust arose in favour of the plaintiff is made only against the female defendant Mrs. Rainbow. The allegations are that Mr. Appleby acted on Mrs. Rainbow's behalf in effecting the sale of Lot 14 to the plaintiff. The essential findings in relation to the representations made by Mr. Appleby to the plaintiff have already been set out, together with the fact that these representations were not authorised by Mrs. Rainbow, and that she was not aware that they had been made. It is alleged that the plaintiff, operating under the belief induced by the representations, built a substantial dwelling house to take advantage of the privacy and amenity she expected to be preserved, and that further subdivision would substantially interfere with this privacy and amenity. In the premises Mrs. Rainbow is said to be bound by a trust not to subdivide Lot 17.

On Mrs. Rainbow's behalf it was submitted that Appleby's representations were merely statements of belief, opinion or law, and that they were not representations as to present fact. His Honour was of the view that those submissions had merit, but did not pursue them because a more fundamental point made it unnecessary to do so. His Honour's reasoning was as follows:-

"But in any event, even if that submission is incorrect, it is difficult to see how a trust can arise against the female first defendant whose personal conduct has not been impugned. I accept the submission on her behalf that no identifiable equity can in these circumstances arise against her based merely on an agency concept.

It is clear that the female first defendant had no personal knowledge of any such statements. Nor did her husband who had very close and intimate dealings with Appleby. There is no demonstrated personal action on her part, no unconscionable conduct and no wrong-doing such that equity would impose on her the trust sought to be established by the plaintiff. She in no way gained a benefit or any rights from any statements which Appleby (as her agent) made to the plaintiff and which she seeks to enforce to the plaintiff's detriment;

see Walton Stores (Interstate) Ltd. v. Maher (1988) 164 C.L.R. 387; Wilson v. Brisbane City Council [1931] St. R. Qd. 360 at 379; Ashburner's Principles of Equity (2 Ed.) p. 59; Sheldon v. Cox (1764) 2 Ed. 224; 28 E.R. 884; Rolland v. Hart (1871) 6 Ch. App. 678 at 681-682."

On the appeal it was submitted by counsel for the plaintiff that Mrs. Rainbow was responsible as principal for the actions of her agent Mr. Appleby, even though she was not aware of his representations. No case was cited to support this far-reaching submission. Reference was confined to Welch v. Handcock (1907) S.R. (N.S.W.) 404 (a case of fraud by an agent in which the principal was not permitted to adopt the benefit of part only of a contract that her agent had purported to make), Shepperd v. The Council of the Municipality of Ryde (1951-52) 85 C.L.R. 1 (a case involving collateral warranties), O'Brien v. A.N.Z. Bank 1971 5 S.A.S.R. 347 (a case of equitable fraud leading to the setting aside of a guarantee and mortgage), Timbertop Realty Pty. Ltd. v. Mullins 1974 V.R. 312 (a constructive trust case arising out of equitable fraud where material knowledge was possessed by both parties), and Bahr v. Nicolay 1987-88 164 C.L.R. 604, 651-655, (where a constructive trust was held to arise in favour of a third party on an express undertaking by a purchaser before transfer, which trust was held to continue after registration of the transfer).

The cases cited are of little assistance on the point at issue. On general principle it is difficult to see how the conscience of Mrs. Rainbow can be bound, or how her actions can be regarded as unconscionable so that a constructive trust arises, unless the knowledge of the selling agent can by some process be imputed to her. There is no suggestion in the present case that Mrs. Rainbow was "lying by", or that there was any calculated abstention from enquiry on her part, or even of negligence or personal fault in her dealings in this matter. There is no evidence of the kind that the High Court considered necessary to create a constructive trust in Consul Development Pty. Ltd. v. D.P.C. Estates Pty. Ltd. 1974-75 132 C.L.R. 373. In considering whether a constructive trust arose against a party, the evidence in that case (similarly to the present one) failed to show that the relevant party had wilfully shut his eyes to the truth for fear of learning of the dishonesty of his servant. Stephen J. observed:-

"Absent, then, both actual knowledge and calculated abstention from enquiry, Consul will only be liable as a constructive trustee if recourse may be had to the doctrine of constructive notice.. " (ibid. p.408).

His Honour then concluded at p.412:-

"In my view the state of the authorities as they existed before Selangor did not go so far, at least in cases where the defendant had neither received nor dealt in property impressed with any trust, as to apply to them that species of constructive notice which serves to expose a party to liability because of negligence in failing to make inquiry. If a defendant knows of facts which themselves would, to a reasonable man, tell of fraud or breach of trust the case may well be different, as it clearly will be if the defendant has consciously refrained from enquiry for fear lest he learn of fraud. But to go further is, I think, to disregard equity's concern for the state of conscience of the defendant."

It is true that a person who is given authority to sell a property has the implied authority of his principal to state facts or circumstances concerning the land, and that there is a "general rule that the employer will be responsible for misrepresentations made by (the agent)". (Petersen v. Moloney and Anor. 1951 84 C.L.R. 91, 94).

However the agent has no authority, actual or ostensible, to warrant on behalf of his principal. (Hill v. Harris 1965 2 Q.B. 601; cf. Halsbury's Laws of England 4th ed. Vol. I para.740). Moreover when it is sought to make a principal liable for fraudulent misrepresentations it is not enough to show even that the principal knew or ought to have known the true facts. It has been held that one cannot combine an innocent principal with a fraudulent agent so as to produce dishonesty or to make the principal liable for the dishonesty (Armstrong v. Strain 1952 1 K.B. 232). It is not necessary to pursue further the position at common law. The analogies are not on the whole helpful to the plaintiff.

Counsel for the defendants referred to Walton Stores (Interstate) Ltd. v. Maher 1988 1 64 C.L.R. 387. This case of course was concerned with the question of proprietary estoppel. Reference was made to Mason C.J.'s adoption in that case of a test that it needs to be shown that "the other party to the transaction has played such a part in the adoption of the assumption that it would unfair or unjust if he were left free to ignore it" (p.404). That passage hardly bears upon the present question, although it is a statement that may be taken to imply the need for some personal involvement or knowledge in the relevant party. In a number of constructive trust cases it would seem that the High Court has preferred the notion of unconscionable conduct as the underlying basis for equitable intervention to the alternative basis of unjust enrichment advocated by some academic writers. As Deane J. suggested in Muschinski v. Dodds 1986 160 C.L.R. 583, 616-618, the notion of unconscionable conduct is the underlying basis for most categories of equitable intervention. The doctrines of proprietary estoppel, secret trusts, mutual wills, and common intention constructive trusts seem to be based, in Australia at least, on that principle (cf. Baumgartner v. Baumgartner 1987 164 C.L.R. 137). This fortifies my provisional view that some personal fault, misconduct or unconscionable action on the part of Mrs. Rainbow would need to be shown to exist before the postulated trust could be said to arise against her.

The learned trial Judge's rejection of the alleged trust was correct.

In the event there is no reason to disturb any of the orders made by the learned trial Judge. It is true that this court has come to different views with respect to the disposition of questions 1 and 2, but in the result the refusal of injunctions will stand. There is insufficient reason to interfere with the limited order for costs which was made in favour of the plaintiff with respect to the trial, as the plaintiff succeeded to a limited extent.

In the result the appeal will be dismissed with costs.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 47 of 1992

Before the Court of Appeal

Mr Justice McPherson
Mr Justice Pincus

Mr Justice Thomas

BETWEEN:

LORRAINE CHERYL GALLAGHER

Appellant (Plaintiff)

and Respondent by Cross Appeal

AND:

ALLAN ROY RAINBOW and
MAREE ELIZABETH RAINBOW

First Respondents (First Defendants)

and Appellants by Cross Appeal

AND:

OWEN PETER COALDRAKE and

LEE ANN COALDRAKE

Second Respondents (Second Defendants)

and Appellants by Cross Appeal

REASONS FOR JUDGMENT - THOMAS J.

Delivered the 3rd day of November 1992.

MINUTE OF ORDER

Appeal is dismissed with costs.

CATCHWORDS:

Real property - easements - whether implied restriction against subdivision - whether burdens and benefits pass to subsequent owners after subdivision - purposes incidental to domestic use -whether construction of spec housing infringes such limitation -subdivisional work held to exceed limitation - nominal damages.

Trusts - whether trust may be implied against vendor whose agent misrepresents to purchaser - vendor innocent of wrong- doing - no trust arising.

Counsel:	Peter Lyons Q.C. and Don Fraser for Appellant John Haydon for First and Second Respondents
Solicitors:	Bayliss Rodgers for Appellant
Sly & Weigall Cannan & Peterson for First and Second Respondents

Hearing Date: 29 July 1992
IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 47 of 1992

BETWEEN:

LORRAINE CHERYL GALLAGHER

Appellant (Plaintiff)

and Respondent by Cross Appeal

AND:

ALLAN ROY RAINBOW and

MAREE ELIZABETH RAINBOW

First Respondents (First Defendants)

and Appellants by Cross Appeal

AND:

OWEN PETER COALDRAKE and

LEE ANN COALDRAKE

Second Respondents (Second Defendants)

and Appellants by Cross Appeal

JUDGMENT OF PINCUS J.A.

Delivered the Third day of November 1992

I have had the advantage of reading the reasons of Thomas J. I am substantially in agreement with his Honour's views. It seems to me, however, desirable that I should set out, in brief, my own reasons as to some of the points argued. I do not propose to repeat the explanation of the facts and nature of the issues which is to be found in the reasons of Thomas J.

With respect to the construction of the grants of easement which, according to the argument for the appellants, are so framed as to restrict subdivision of the dominant tenements, it does not appear to me that anything sufficiently strong can be found in their terms to justify that conclusion. One would expect to find so important a restriction expressly stated, if that were the parties' intention: see "Servitudes" by Hall and Kellaway (1973) at p.82-83 setting out the position in South Africa. The case the authors cite, Louw v. Louw 1921 C.P.D. 320, contains a reference to Justinian's Digest, which supports the view the court adopted, namely that each allotment in a subdivided dominant tenement ordinarily has the same right over the servient tenement as had the original, unsubdivided dominant tenement.

That is consistent with the conclusion expressed in J.L. Goddard's work on the Law of Easements, 8th ed., 1921 at p.392, namely -

"... if a dominant tenement is divided between two or more persons, a right of way appurtenant thereto becomes appurtenant to each of the severed portions, if such distribution of the easement is not at variance with the actual or presumed grant under which the right has been acquired ...".

A similar opinion is to be found in or at least deduced from what Jessel M.R. said in Newcomen v. Coulson (1877) 5 Ch. D. 133. That concerned the effect of an award under an Inclosure Act which included a right of way. The question was whether a change of use from agricultural purposes to the erection of villa residences on the dominant tenement was permissible. In discussing that, Jessel M.R. (James L.J. and Baggallay J.A. agreeing) said:

"Where the grant is in respect of the lands and not in respect of the person, it is severed when the lands are severed, that is, it goes with every part of the severed lands ... It never could have been contemplated in the case of an award like this that the property was never to be divided, nor is it to be contended that if a man died and left two or three daughters co-heiresses, and they partitioned the estate, the right of way was lost, and their allotments forever deprived of access to the highway" (141).

It is true that there is authority in favour of the view that if the dominant tenement is land of many acres and is described in the grant as a field then in pasture or in corn, subdividing it so as to fill the land with "small cottages" would destroy the right of way: Allen v. Gomme (1840) 113 E.R. 602 at 607, 608. But that has been criticised: Grinskis v. Lahood [1971] N.Z.L.R. 502 at 509, Flavell v. Lange [1937] N.Z.L.R. 444 at 449. In any event, nothing of that kind is in issue here.

It will be seen from the portions of Exhibit 4 quoted in the reasons of Thomas J. that the drafting does not appear to contemplate the possibility of subdivision of any of Lots 14, 15, 16 or 17. Had the draftsman intended to provide for subdivision, Covenants 2 and 3 would presumably have been rather differently worded; at least, there would have been a more elaborate explanation of the mode of distribution of the burden of the expenses mentioned in them. That burden is expressly placed on the proprietors of Lot 14, 15, 16 and 17 as to a quarter each. The language does not deal with the possibility of the creation of additional lots, which could occur either by further subdivision within the boundaries of one or more of those four lots, or by the creation of new lots straddling those boundaries.

The fact that the grants do not deal with that problem does not, to my mind, sufficiently indicate an intention to prohibit subdivision. The circumstance that the wording is likely to give rise to difficulty in determining the liability for these expenses, in the event of subdivision, is at least as likely to be due to lack of foresight on the part of the draftsperson as to an agreement that subdivision should not occur.

The expression "for all purposes ordinary incidental to or connected with domestic use and enjoyment of the dominant tenement", on which the primary judge relied for his conclusion should not, in my view, be read as intended to prohibit subdivision. It is true that the process of subdivision could be expected to involve the passage along the easement of people engaged to effect the subdivision;

that is not, in my opinion, a domestic use or enjoyment of the dominant tenement or incidental to or connected with such use. But to say that people may not use the easement to effect a subdivision is not the same as to say that the dominant land may not be subdivided. It might be possible to subdivide without bringing anyone onto the easement for that purpose; for example, the surveyor could be carefully kept off the strip with which the Court is presently concerned or there could be arranged other means of access in order to survey the property. The case has been conducted on the assumption that those involved with the survey used the relevant strip; that assumption is plainly a reasonable one and their use was unlawful. But the illegality does not, so to speak, infect the subdivision so as to make it unlawful. In my opinion, registration of the subdivision plan is not prohibited by the terms of the easement.

It should be added that I have spoken of the possibility of the subdivision being prohibited. It is more accurate to state the point as being whether, if subdivision occurs, the easement is available to the proprietors of the new lots. They are not any of Lots 14, 15, 16 and 17 mentioned in the document, but the expression "grantee" is defined so as to mean, prima facie, the transferees and assigns of the grantee. Here, the context does not appear to exclude the result which one would expect to flow from an assignment of one of the subdivided lots, namely that the transferees would have the rights previously held by the proprietors of the original lot. If the parties had intended a stipulation against subdivision, one would have expected them to say so fairly clearly.

My conclusion on this aspect of the matter is, then, that the use of the easement for the purposes of effecting a subdivision was not one of the permitted uses; the terms of the easement do not, however, prohibit subdivision of the land constituting the dominant tenement and the owners of the subdivided lots acquire rights as dominant tenement owners. It is unnecessary to consider, in the present case, whether subdivision into much smaller lots than those with which we are concerned would produce a different result.

I agree with the views of Thomas J. with respect to the basis on which the primary judge refused an injunction. I also agree with Thomas J. that the use of the easement for the purpose of building a house on the dominant tenement is permitted by the terms of the easement and that, there being no threat at present of use of the easement for the purpose of further subdivisional work, there is no occasion for the grant of an injunction to restrain such use.

The remaining question is whether a trust arose in favour of the plaintiff. The question raised is whether Mr. Appleby's statements that there could only be four blocks and could be no further development created a trust in favour of the appellant against the respondent, Mrs. Rainbow. It seems clear that Mr. Appleby had authority to make representations of this kind, although he did not have authority to make the specific representations found by the primary judge to have been made. It was contended that Mrs. Rainbow could not be affected by Mr. Appleby's statement because of his lack of specific authority to say what he did. An agent performing the task which Mr. Appleby had has a general authority to state matters which may affect the value of the property sold and if such a statement is false, the principal must in general suffer the consequences:

Mullens v. Miller (1882) 22 Ch. 194. That was a claim for specific performance which failed on the ground of false representation. If equity will hold a principal to be defeated in such a suit on the ground of the agent's misstatement, I do not see why a constructive trust cannot in appropriate circumstances be built upon a statement which, although not specifically authorised, is within general authority. We were referred to no case, nor have I myself found any, in favour of the proposition that statements made by a vendor with respect to the characteristics - for example subdivisibility - of land which the vendor owns in the vicinity of that being sold create a trust in respect of the former land. Sometimes a promise as to the nature of future use of land might create a trust, as in Brisbane City Council v. A.G. for Queensland [1979] A.C. 411. But here, there was no promise, but merely an assertion by Mr. Appleby with respect to what he claimed to understand to be the permissibility of future subdivision. What Appleby said was incorrect, but it was neither alleged nor found to have been fraudulent; see Cauduro v. Perpetual Trustee Company Ltd. (1975) 1 B.P.R. 9337 at 9344 per Waddell J., as his Honour then was.

It was, in effect, suggested that it would be unfair not to hold Mrs. Rainbow to the restraint which would have affected her if Mr. Appleby's statement had been true. I am not prepared to hold that the degree of unfairness is such as to create a trust based on unconscionable conduct. One reason for my view is that which I have just mentioned:

there appears to me to be no general rule that incorrect statements made to a purchaser of land, as to the legal or factual position of other of the vendor's land, create a trust in favour of the purchaser. Secondly, any unfairness is mitigated by the circumstance that Mrs. Rainbow was personally innocent of any wrongdoing. Thirdly, it is not possible to create a trust without adversely affecting the interests of Mr. A.R. Rainbow, Mrs. Rainbow's co-proprietor, against whom nothing is alleged.

I agree that the judgment for nominal damages should stand and with the other orders proposed by Thomas J.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 47 of 1992

BETWEEN:

LORRAINE CHERYL GALLAGHER

Appellant (Plaintiff)

and Respondent by Cross Appeal

AND:

ALLAN ROY RAINBOW and

MAREE ELIZABETH RAINBOW

First Respondents (First Defendants)

and Appellants by Cross Appeal

AND:

OWEN PETER COALDRAKE and

LEE ANN COALDRAKE

Second Respondents (Second Defendants)

and Appellants by Cross Appeal

_______________________________________________

Mr. Justice Pincus
Mr. Justice McPherson

Mr. Justice Thomas

_______________________________________________

Judgment delivered on 3rd November, 1992.
Separate reasons of Pincus J.A. and Thomas J.
McPherson J.A. agreeing with both Pincus J.A.
and Thomas J. All concurring as to the

proposed order.

_______________________________________________

APPEAL DISMISSED WITH COSTS

_______________________________________________

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 47 of 1992

Before the Court of Appeal
Mr. Justice Pincus
Mr. Justice McPherson

Mr. Justice Thomas

BETWEEN:

LORRAINE CHERYL GALLAGHER

Appellant (Plaintiff)

and Respondent by Cross Appeal

AND:

ALLAN ROY RAINBOW and

MAREE ELIZABETH RAINBOW

First Respondents (First Defendants)

and Appellants by Cross Appeal

AND:

OWEN PETER COALDRAKE and

LEE ANN COALDRAKE

Second Respondents (Second Defendants)

and Appellants by Cross Appeal

JUDGMENT OF PINCUS J.A.

Delivered the Third day of November 1992

MINUTE OF ORDER:	The appeal is dismissed with costs.
CATCHWORDS:

EASEMENTS AND PRESCRIPTIONS - TORRENS SYSTEM - Plaintiff affected by subdivision of defendants' land - whether implied restriction against subdivision - whether burdens and benefits pass to subsequent owners - whether purposes incidental to domestic use - whether construction of specific housing infringes such limitation.

Counsel:	P. Lyons Q.C., with him D. Fraser for the Appellant J. Haydon for the First and Second Respondents
Solicitors:	Bayliss Rodgers for the Appellant Sly & Weigall Cannan & Peterson for the First and Second Respondents
Hearing Date(s):	29 July 1992