Grant, H.c. v Estill Holdings Pty Ltd

[1990] FCA 390

LIUDGMENT No. ...E!.??./...%g--

CATCHWORDS

REAL PROPERTY - Construction of a condition in an agreement for sale of a leasehold interest granting a right to use a function room at all reasonable times for no charge other than reimbursement of costs - whether clause confers a mere personal licence, an easement or a lease - whether the terms of the condition too uncertain to amount to an easement - whether the owner of the servient tenement Is under a positive obligation to spend money or provide services.

HOWARD CHARLES GRANT. JOHN WHITTON HASLEM. CECIL JOHN LOUTTIT and
LAURUS VANT WESTENDE V ESTILL HOLDINGS PTY. LTD.

SC172 of 1989

SYDNEY

LOCKHART J.

26 JULY 1990

IN THE SUPREME COURT OF THE	1 1
AUSTRALIAN CAPITAL TERRITORY	1 No. SC172 of 1989

BETWEEN: HOWARD CHARLES GRANT

JOHN WHITTON HASLEM
CECIL JOHN LOUTTIT and

LAURUS VANT WESTENDE

Plaintiffs

AND :  ESTILL HOLDINGS PTY. LTD.

Defendant

JUDGE MAKING ORDER:	LOCKHART J.
DATE ORDER MADE :	26 JULY 1990
WHERE ORDER MADE :	SYDNEY

MINUTE OF ORDER

THE COURT ORDERS THAT:

1.  The plaintiffs pay the costs of the defendant of and

incidental to the motion of 1 June 1990.

2.    Otherwise there be no order.

NOTE:	Settlement and entry of orders is dealt with in Order
36 of the Federal Court Rules.

IN THE SUPREME COURT OF THE

AUSTRALIAN CAPITAL TERRITORY NO. SC172 of 1989

BETWEEN: HOWARD CILARLES GRANT

JOHN WHITTON HASLEM
CECIL JOHN LOUTTIT and

LAURUS VANT WESTENDE

Plaintiffs

AND:  ESTILL HOLDINGS PTY. LTD.

Defendant

.l

26 July 1990

REASONS FOR JUDGMENT

LOCKHART J.

I gave judgment in this suit for specific performance on 5 February 1990. I then adjourned the matter to a date to be fixed so that the plaintiffs, who succeeded in the action, could bring in short minutes to give effect to the Court's reasons for judgment. This was done and on 19 February 1990 the Court made

the following orders:-

"1. The defendant specifically perform and carry to completion the Agreement for Sale made on 18 July 1986 between the plaintiffs and the defendant in so far as the same remains to be performed.

2.    The Registrar

(a)	fix a time and place for completion of the Agreement;
(b)	enquire and certify as to the sum which upon completion ought to be paid by the defendant to the plaintiffs; and
(c)	enquire and certify as to the documents which upon completion ought to be handed by the plaintiffs to the defendant.

3. (a) The defendant do attend at the time and place so fixed for completion and in default of signing any document required for completion of the Agreement the Registrar have full and lawful authority to sign the same for and on behalf of and in the name of the defendant.

(b) Upon the payment by the defendant

to the plaintiffs of the sum so

certified under Order 2(b) above, the plaintiffs deliver to the defendant the documents certified under Order 2(c) above.

4.    In addition to iny other sums payable by the defendant to the plaintiffs on completion of the Agreement the defendant pay to the plaintiffs interest on the balance of $475,000 payable thereunder calculated at the rate of Twenty Dollars ($20.00) per centum per annum from 28 July 1987 to the date of completion.

5.   The defendant pay to the plaintiffs costs of and incidental to this action including any reserved costs.

6. The defendant's counter-claim is
dismissed.

7.   Either party has liberty to apply on 7 days notice.

8.   Exhibits may be handed out unless an appeal is lodged from these orders within 21 days of today.

9.   Documents subpoenaed from any persons or corporations may be returned except those which are exhibits in which case they are governed by Order No. 8."

A problem then arose with respect to the carrying into effect of Order 2 in the following circumstances. On 6 April 1990 the plaintiff submitted to the solicitors then acting for the defendant a draft deed designed to give effect to Special Condition 31 of the agreement dated 18 July 1986 whereby the plaintiffs agreed to sell to the defendant for $500,000 the residue unexpired of the registered lease in respect of Unit 3 in Units Plan No. 451 in the Australian Capital Territory. Special Condition 31 is in these terms:

"The Seller acknowledges that the Buyer shall have the use of the Function Room on the ground floor of Block 84 Section 37, as identified in the plan annexed 'C' at all reasonable times and at no charge other than reimbursements of power, cleaning, breakages and repairs and the Seller acknowledges that they will enter into a Deed of Agreement in relation thereto on or before completion

thereof. "

The plaintiffs contend that the deed to be executed is to be solely personal between the plaintiffs as licensors and the defendant as licensee. The defendant contends that the Special Condition 31 envisages the deed as being either a lease or an easement over the Function Room.

The earlier hearing before me concerned a large number of issues between the parties which I resolved in my judgment of 5 February 1990. Those issues included arguments with respect to Special Condition 31, though the primary issue at the trial with respect to that Special Condition was whether the plaintiffs were ready, willing and able to enter into the deed referred to therein.

With a view to resolving the dispute about Special Condition 31 which arose after 5 February 1990 I gave telephone directions on 29 May 1990 in Sydney, counsel for the plaintiffs and the defendant being in Canberra. I gave leave to the plaintiffs to file and serve a notice of motion seeking directions with respect to the execution of the deed, to the defendant to file and serve affidavits in opposition to the motion, to the plaintiff to file and serve affidavits in reply and to both the plaintiffs and the defendant to file and serve written submissions with respect to the issues raised by the notice' of motion.

The plaintiffs then filed a notice of motion seeking a direction that the Registrar execute for and on behalf of the defendant the form of document being annexure "A" to the affidavit of Gregory Phillip Walker sworn 28 May 1990, a further direction that the Registrar proceed to enforce and put into effect Order 2 of the orders made on 19 February 1990, and an order that the defendant pay the costs of a hearing which took place before the Registrar on 10 April 1990 which led to the

notice of motion and the costs of and incidental to the motion. The defendant filed and served an affidavit of Howard Liu sworn 8 June 1990, Mr. Liu being a solicitor and a director of the defendant. The plaintiffs filed two affidavits in reply one by Gregory Phillip Walker of 19 June 1990 and the other by Howard Charles Grant, one of the plaintiffs, sworn 18 June 1990. There is perhaps some question as to whether these two lastmentioned affidavits are strictly in reply to Mr. Liu's affidavit or not, but nothing turns on this.

The plaintiffs and the defendant filed written submissions and the plaintiffs filed further written submissions in reply to those of the defendant.

The plaintiffs and the defendant have now placed before the Court separate draft deeds which they assert are appropriate to give effect to Special Condition 31, the essential difference being that the form of deed for which the plaintiffs contend confers a mere licence upon the defendant and the form of deed for which the defendant contends confers a right akin to an easement entitling the owner for the time being of Unit 3 to the use of the Function Room "at all reasonable times and at no charge other than reimbursement of power, cleaning, breakages and repairs". It is common ground between the parties that the defendant is not entitled to exclusive possession or use or occupation of the Function Room, a fact found by me in my earlier

reasons for judgment. Plainly the purpose of the Function Room	is to enable owners of units in Deakin House to use it as a
function or entertainment room together with others who have the same entitlement.
The first matter I propose to deal with is the admissibility of Mr. Liu's affidavit of 8 June 1990, the material parts of which read as follows:

"1. I am a Director of the defendant company and as such I am cognisant of the facts and circumstances surrounding this matter and I am duly authorised to make this affidavit.

2.    The defendant company is willing to perform and carry to completion the Agreement for Sale made on 18th July 1986 ('the Agreement')

3.    In answer to paragraph 5 of the affidavit of Gregory Phillip Walker sworn the 28th May 1990 and filed herein the defendant says that it is the plaintiffs ' obligation to produce to the defendant any draft document to give effect to Condition 31 of the Agreement. The said documents must be in,a form the effect of which is registrable at the'land Titles Office Canberra and capable of being endorsed on Certificate of Title Volume 1049 Folio 53 and the Title of the plaintiffs over which the right will be created.

4.   At the time of the negotiations between the plaintiff and the defendant and prior to the execution of the Agreement I spoke to M r Len Stoken an employee of Messrs Raine & Horne and agent for the plaintiff. He said to me words to the effect "You will get the use of the conference room when you need it free of charge. It will also be an advantage on resale".

5.   At the time of the negotiations I also spoke to Paul Smith the principal of Raine & Horne Manuka. He said to me words to the effect 'All owners will be able to use the functions room when its needed and no fee will be payable for its use".

6.   I refer to paragraph 4 of the affidavit of John Whitton Haslem sworn the 7th July 1989 and I agree that the said John Whitton Haslem said to me words to the effect 'All occupiers will have the right to use the functions room free of charge as they require . . . l . Prior to that conversation I had said to John Whitton Haslem words to the effect 'Garry and I will be running our practice from Unit 3'. The plaintiffs subsequently consented to the defendant taking possession of Unit 3 to Gary Robb and myself entering into possession of Unit 3 and carrying on the business of a legal practice.

7.    The said draft document referred to as Annexure 'A' in the affidavit of Gregory Phillip Walker sworn the 28th May 1990 is deficient in that it does not confer on the defendant and its assigns the rights, title and interest contemplated by condition 31 of the Agreement in that it does not

(a) Grant an interest that will run with the . .

land

(b)	Grant an interest that is registrable under the provisions of the Real Property Act
(c)	Confer on the defendant or the registered proprietor for the time being of Unit 3 an indefeasible right and title to use the function room for the duration of the Crown Lease and a right of carriageway to the said functions room.
(d)	Grant an interest which can be conferred on

any occupier of Unit 3 (apart from the

defendant) whether by lease from the defendant or otherwise.
(e)	An interest which is enforceable against the

plaintiff successors in title."

No objection is taken by the plaintiffs to paragraphs 1 and 2 but objection is taken to the remaining paragraphs on various grounds.

Paragraph 3 is plainly argumentative rather than evidentiary
and is inadmissible. Even if it was admissible its contents

would not affect the result of the proceeding at all. There is,

vitiates paragraphs 4, 5 and 6, namely, that the trial which	however, a more fundamental vice in the paragraph which also
culminated in my judgment of 5 February 1990 was the occasion for the giving of evidence touching the issues between the parties with respect to Special Condition 31. It is true that no dispute was in fact aired at the trial, as I recall it, as to whether Special Condition 31 conferred a licence, lease or an easement or some other form of interest in property, but it was open to the parties to contend whatever they wished within the framework of the pleadings. They chose to conduct the case the way they did. There must be certainty and conclusiveness about a trial of large numbers of disputes of fact and law between parties to litigation. For this reason alone I reject the evidence offered in paragraphs 4, 5 and 6 of Mr. Llu's affidavit
However, even if this fundamental objection to the evidence were to be ignored by me I would still reject paragraphs 4 and
5 of Mr. Liu's affidavit. They'purport to give evidence, not of
the circumstances surrounding the execution of the agreement in suit, but of the antecedent oral negotiations and expectations of the parties. In Secured Income Real Estate (Australia1 Limited v St. Martins Investments Ptv. Limited (1979) 144 CLR 596
Mason J., with whose reasons for judgment Barwick C. J., Gibbs J., Stephen J. and Aickin J. agreed, said at 606:

"The respondent also sought to rely on the oral testimony given by officers of the appellant and the respondent as to what was said and done during the course of

contract, with a vlew to demonstrating that	negotiations leading up to the making of the
the parties had 'commercial' leases in mind. This was said to be evidence of surrounding circumstances to which recourse could be had in interpreting the contract. In truth the evidence is not evidence of surrounding circumstances; it is evidence of the antecedent oral negotiations and expectations of the parties and as such it cannot be used for the purpose of construing the words of a written contract intended by the parties to comprehensively record the terms of the aareement which thev have made. As Lord ~ilberforce said in ~ren; v Simmonds
[l9711 1 NLR 1381 at p 1385:

' . . . evidence of negotiations, or

of the parties ' intentions . . .

ought not to be received, and evidence should be restricted to evidence of the factual background known to the parties at or before the date of the contract, including evidence of the 'genesis' and objectively the 'aim' of the transaction.

As to the circumstances, and the object of the parties, there is no controversy in the present case. The agreement itself, on its face, almost supplies enough, without the , necessity to supplement it by outside evidence.'"

In my opinion the evidence which is sought to be proffered in paragraphs 4 and 5 of Mr. Liu's affidavit falls into the area prohibited by the principle adverted to by Mason J.

The last sentence of paragraph 6 of Mr. Liu's affidavit is
inadmissible for a separate reason, namely, that it is not

evidentiary; it is the statement of a conclusion without the

prmary evidence to support it being present.

Paragraph 7 of Mr. Liufs affidavit is plainly inadmissible as it is solely argumentative.

However, the conclusion which I have reached in this case is not affected by anything said by Mr. Liu in those paragraphs or indeed any other paragraphs of his affidavit.

Plainly Special Condition 31 cannot be construed as intending to create a lease. Whether a lease was intended depends on whether it was intended to confer the right to exclusion possession of the relevant premises for a term in favour of the person asserting that he is the lessee. There are many authorities in support of this proposition. It is necessary for me to refer only to Radaich v Smith (1959) 101 CLR at 209 per Taylor 3. at 217-8, Menzies J. at 220 and Windeyer J. at 222.

The real question is whether the parties envisaged that the right or interest conferred on the defendant by Special Condition 31 would be a mere licence personal to them or an interest in the nature of an easement.

Although the terms upon which the defendant was to have the use of the Function Room (namely at all reasonable times and at no charge other than reimbursement of power, cleaning, breakages and repairs) are not precise and depend upon assessments being

made of "all reasonable times" and of the charges incurred,	presumablybythe plaintiffs, for "power, cleaning, breakages and
repairs", they are not so uncertain that an objection can fairly be made based upon uncertainty.
In my opinion it was intended by the parties that the rights to be conferred by Special Condition 31 were more than a mere personal licence of the defendant. The evidence before the Court at the principal hearing made it clear that the right to use the
Function Room was a right to be enjoyed by all occupiers of Deakin House at all reasonable times free of charge subject to the reimbursement of the expenses to which reference has already been made. Whether rights of this kind have in fact been conferred upon other occupiers of Deakin House is a separate question. Indeed, it appears from Mr. Grant's affidavit of 18 June 1990 that no other written agreements akin to Special Condition 31 have been entered into by the plaintiffs with any occupant of any unit in the bbilding. The fact is that the plaintiffs and the defendant did however agree upon the matters expressed in Special Condition 31. I do not accept on the whole of the evidence before the Court that it was intended to be a merely an interest in the nature of a licence that was to be enjoyed by the defendant so long as it remained the owner of Unit 3 and the plaintiffs remained the owners of the Function Room. The defendant accepts that the Function Room is to be shared with others. There is no evidence which persuades me that the personal nature or standing of any of the directors of the
defendant had any bearing upon the expectation of the plaintiffs in agreeing to grant the rights conferred by Special Condition
31. The right to use the Function Room was plainly an incident of the sale to the defendant of unit 3.
In my opinion it was the intent of the parties as reflected in Special Condition 31 that the defendant would be granted a right which had all the requisite characteristics of an easement. I am satisfied that unit 3 was intended to be the dominant tenement and the Function Room the servient tenement. The right to be conferred by the deed was to be appurtenant to the former and calculated to enhance its beneficial use and enjoyment. As was observed in Miller v Emcer Products Limited [l9561 Ch 304 by Romer L.J. at 316, with whose reasons for judgment Evershed M.R. and Birkett L.J. agreed,

"It is true that during the tlmes when the dominant owner exerqised the right, the owner of the servient tenement would be excluded, but this in greater or less degree is a common feature of many easements (for example, rights of way) and does not amount to such an ouster of the servient owner's

rights as was held by Upjohn J. to be incompatible with a legal easement in Coueland v Greenhalf [l9521 Ch 488. No case precisely in point on this issue was brought to our attention, but the right to use a lavatory is not dissimilar, I think, to the right to use a neighbour's kitchen for washing, the validity of which as an easement was assumed without question in Hevwood v Mallalieu (1883) 25 Ch D 357."

The easement to which reference was made by Romer L.J. in upper floors in a London building which were occupied by a third	Miller's Case was the right of a tenant to use two lavatories on
party. See also Megarry & Wade, The Law of Real Pro~erty 5th ed at pp. 834-842.
Counsel for the plaintiffs submittedthat the subject matter of the agreement could not amount to the grant of an easement. He submitted that under the terms of the agreement made in Special Condition 31 the plaintiffs are obliged to provide certain services (power and cleaning) and in the first instance to pay the costs of those, although subject to later reimbursement. Reliance was placed on Marquess of Zetland v Driver [l9391 1 Ch 1 for the proposition that the grant of an easement cannot require the positive obligation of the expenditure of money by the proprietor of the servient tenement. Counsel further submitted that a right in the defendant to services cannot be made the subject of an easement.
These submissions misconstrue the effect of Speclal Condition 31. The plaintiffs are not under a positive obligation to spend money or provide services. Rather, the defendant is under an obligation to reimburse the plaintiffs for any money it does in fact spend on power, cleaning, breakages and repairs. That such an obligation may be the subject of an easement was settled in the classic case of Ellenborouah Park [l9561 Ch 131 where it was held that a grant of the right to the full enjoyment of a pleasure ground subject to the payment of a fair and just
proportion of the costs, charges and expenses of keeping it in good order and condition constituted the grant of an easement.
In these circumstances the form of draft deed submitted by the solicitors for the plaintiff to the solicitors for the defendant is inappropriate as it is based on the assumption that the interest conferred by Special Condition 31 was to be a mere licence. The draft deed referred to in the written submissions of counsel for the defendant of 22 June 1990 (see pp. 4-6 inclusive) appears to me to be in accord with the interest which was intended to be conferred upon the defendant by Special Condition 3 1 and is an appropriate instrument to confer that interest. The plaintiffs have not pointed to any particular portion of that draft which is unacceptable to them.
In reaching my conclusion I have not taken into account any of the contents of Mr. Liu's affidavit.
I do not think it is appropriate for the Court to direct the Registrar to execute for and on behalf of the defendant any particular form of document to give effect to Special Condition
31. My reasons for judgment make it plain what the appropriate
document should be. It will now be for the Registrar to give the appropriate direction in the absence of common sense prevailing between the parties.
So far as the costs of the motion are concerned, as the defendant has succeeded in substance on the motion the plaintiffs should pay the defendant the costs of and incident to the notice
of motion of 1 June 1990.

I certify that this and the preceding thirteen (13) pages are a true copy of the reasons for judgment herein of the Honourable

Mr. Justice Lockhart.

I

Dated: 26 July 1990

Counsel for the Plaintiffs:	Mr. T.M. Johnstone
Solicitors for the Plaintiffs:	Crossin Power Haslem
Counsel for the Defendant:	Mr. Napper
Solicitors for the Defendant:	Elrington Boardman Allport
Date of Judgment:	26 July 1990