Hampshire Automotive Centre Pty Ltd (ACN 064 799 328) v Centre Com (Sunshine) Pty Ltd (ACN 084 165 293) and Rayking Investments Pty Ltd (ACN 100 334 209)

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2018 0050

HAMPSHIRE AUTOMOTIVE CENTRE PTY LTD (ACN 064 799 328)	Applicant
v
CENTRE COM (SUNSHINE) PTY LTD (ACN 084 165 293)	First Respondent
and
RAYKING INVESTMENTS PTY LTD (ACN 100 334 209)	Second Respondent

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JUDGES:	TATE, NIALL and EMERTON JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	6 February 2019
DATE OF JUDGMENT:	9 April 2019
MEDIUM NEUTRAL CITATION:	[2019] VSCA 77
JUDGMENT APPEALED FROM:	Centre Com (Sunshine) Pty Ltd v Hampshire Automotive Centre Pty Ltd & Anor [2018] VCC 197 (Judge Morrish)

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REAL PROPERTY – Appeal – Easements – Easement by prescription arising from doctrine of lost modern grant – Preliminary question – Whether consent or authority of the head landlord is required to establish a prescriptive easement – Whether easement can be claimed on behalf of a head landlord who is a statutory corporation – Consent of the head landlord not required to establish or enforce an easement by prescription – No relevant facts relating to the creation, use, or abandonment of the easement before the Court – No finding made as to whether easement exists – Leave to appeal granted – Appeal allowed – Retrial ordered.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr I Upjohn QC with Mr J Barber	Mann Lawyers
For the Respondents	Dr K Weston-Scheuber	Nicholsons Lawyers & Consultants

TATE JA
NIALL JA
EMERTON JA:

Introduction and summary

The applicant, Hampshire Automotive Centre Pty Ltd, and first respondent, Centre Com (Sunshine) Pty Ltd (‘Centre Com’), are tenants of neighbouring commercial properties in Sunshine, Victoria. Between 1995 and 2014 the boundary of the two properties was separated by a fence. The applicant breached the fence and used the first respondent’s property for access and ingress from its own property and for storing motor vehicles that it used in its business.

In 2015, Centre Com sued the applicant in trespass. The applicant counterclaimed asserting that its use of the land had been pursuant to an easement created by prescription based on long user between 1975 and 1995.

During the course of the trial, the judge ordered that a preliminary question be tried namely: did the applicant have a right to sue for a declaration that it had acquired an easement when its landlord, a statutory corporation, did not give its consent to the suit?[1] The applicant did not have its landlord’s consent. The judge held that the consent of the owner was necessary to bring the counterclaim because the easement was ‘one for the benefit of the landlord’. The judge dismissed the counterclaim, and awarded damages, including exemplary damages, to the first respondent on the trespass claim. It is from those orders that the applicant seeks leave to appeal.
[1]The full terms of the preliminary question are set out at [27] below.

In seeking to reinstate its defence and counterclaim the applicant advanced three proposed grounds of appeal from the preliminary ruling. They each centred around the contention that an easement may be created by the use of a tenant independently of the landlord’s consent and enforced by a person in possession of the land. The applicant advanced a fourth proposed ground of appeal concerning the judge’s award of exemplary damages.

For the reasons that follow, we would grant leave to appeal and uphold the first, second and third proposed grounds. We would not decide the fourth proposed ground as we consider there will be a need for a retrial on liability. We would not affirm the judgment below on the grounds relied upon by the respondents in a Notice of Contention.

The Land

The Victorian Rail Track Corporation (‘VicTrack’) is a statutory corporation which has the function of owning and managing rail infrastructure in Victoria.[2] VicTrack is the registered proprietor of land situate at 134 Hampshire Road, Sunshine. That land has been owned by VicTrack, and its statutory predecessors, since at least August 1956. It is close to Sunshine Railway Station but has not been used for railway purposes for many years, if at all. The land has been leased to various commercial entities over that time including, most recently, to the applicant.
[2]VicTtrack was established under section 8 of the Rail Corporations Act 1996 and continued by s 116 of the Transport Integration Act 2010. See also Transport Integration Act 2010 ss 119 (Objects) and 120 (Functions).

The applicant first occupied the land owned by VicTrack pursuant to a sublease dated 30 June 1994 from Echuca Transport Company Pty Ltd. It entered into a lease over the land commencing 20 April 2005 and currently holds possession under that lease. It has used the land for the purpose of conducting a panel beating and car sales business. For convenience we shall call the land ‘the VicTrack land’.

Next door is 128 Hampshire Road, an irregularly shaped parcel of land, with a triangular portion, at one end, that shares a common boundary with the VicTrack land. 128 Hampshire Road is owned by the second respondent, Rayking Investments Pty Ltd (‘Rayking’). On 1 July 2014, Rayking entered into a lease with Centre Com. Centre Com operates a computer business from the land and, again for convenience, we shall call 128 Hampshire Road ‘the Rayking land’.

Since around 1995, the VicTrack land and the Rayking land were separated along their common boundary by a continuous chain link fence. On each side of the fence is a car park that services the respective properties.

In October 2014, a time that Centre Com was in possession of the Rayking land, the applicant breached the fence and committed what Centre Com alleges were two acts of trespass.

First, on 16 October 2014, the applicant removed a section of the fence separating the two properties and installed a padlocked gate. Between 16 October 2014 and 19 August 2016, the applicant used the gate for access to and egress from the VicTrack land for its employees, customers and invitees. It controlled access through the gate and took delivery of motor vehicles for its business, which were unloaded onto the Rayking land and then driven through the gate onto the VicTrack land. These acts were compendiously described as the first trespass.

On 30 October 2015, the applicant removed a further 16 metre section of the dividing fence, commencing from the northernmost corner of the Rayking land. On the same day, the applicant built a fence across the northern part of the Rayking land, effectively excising a parcel of land of approximately 66 square metres. Between 30 October 2014 and 20 October 2016, the applicant removed vegetation on the excised land, installed crushed rock, hung bunting over it and placed vehicles for the purpose of offering them for sale. During that period, the applicant assumed control of the excised land to the exclusion of Centre Com. It was this activity, comprising the excision and the use, that was described as the second trespass.

The County Court proceedings

On 2 April 2015, Centre Com commenced County Court proceedings against the applicant for damages, alleging trespass. Centre Com also sought declaratory relief and other orders to reinstate the land and prevent further trespass.

Although its pleadings took various iterations, the applicant, by way of defence to the trespass proceeding and by way of counterclaim, alleged an easement over the Rayking land in favour of the VicTrack land, allowing access, ingress and the use of the Rayking land to park, leave and store vehicles. It was said that the easement was created by prescription and invoked the doctrine of lost modern grant.

The defendants to the counterclaim were Centre Com and Rayking. VicTrack was not a party to the proceeding.

The applicant pleaded that it, or its predecessors in title, possession and ownership of the VicTrack land, had used the Rayking land for in excess of 20 years until around 1995, when the fence was constructed between the two properties. By way of particulars to that allegation, it alleged that from the late 1950s until 1995 the applicant, and its predecessors, had made use of the Rayking land for entrance, ingress, egress and storage and parking of motor vehicles; by installing and using signage and motor vehicles advertised for sale; by constructing a fence and gate; by storing chattels and motor vehicles; and by making improvements from time to time to the land.

The applicant then pleaded that Rayking’s predecessors had not taken any steps to exclude them from the alleged use of the Rayking land until 1995.

The applicant pleaded that, in or about 1995, Rayking’s predecessor in title constructed a fence with no gate between the two properties, thereby preventing the applicant from using the Rayking land in accordance with the easement as it was entitled to do. The applicant also alleged that, as a result of the construction of the fence, Rayking’s predecessor had dispossessed or otherwise deprived the applicant of the Rayking land to which the applicant claimed possessory rights by virtue of long user.

The applicant claimed an easement by prescription over the Rayking land ‘capable of giving rise to the right to legal registration of the right of way on [the] registered title to the [Rayking land]’.

The applicant sought a declaration as to the existence of the easement, a permanent injunction restraining either Rayking or Centre Com from interfering with the applicant’s use of the easement or, alternatively, damages. The declaration sought by the applicant in its counterclaim was:

A declaration that the owners from time to time of the property situate at and known as 134 Hampshire Road, Sunshine (‘the dominant tenement’) together with their tenants, sub-tenants, servants and agents have the benefit of an easement over the land marked orange on the Schedule hereto (‘the servient tenement’) entitling them to:
1. go, pass and repass at all times and for all purposes with or without animals and vehicles or both to and from the dominant tenement over the servient tenement,
2. park, leave and/or store vehicles on the servient tenement, and
3. install, display and utilize signage on the servient tenement advertising any business conducted on the dominant tenement.

In summary, the essential elements of the counterclaim were that an easement in favour of the VicTrack land over the Rayking land had been established by long user over the 20 year period ending in 1995. The form of the easement was one of a right of way and one permitting the storage of vehicles and advertising on the servient tenement.

It is immediately apparent that the applicant, with the exception perhaps of the final months of the 20 year period (given that it occupied the VicTrack land pursuant to a sublease dated 30 June 1994), did not rely on its own use in order to establish the easement. Further, the first articulation and reliance on the easement occurred in the context of defending the trespass claim in August 2016. For most of that near 20 year period between the construction of the fence in 1995 and the commencement of the first trespass on 16 October 2014, the fence between the properties prevented access onto the Rayking land. There is no suggestion in the pleading that either VicTrack or any of its tenants sought to use the easement during that period.

On day five of the trial, an officer of VicTrack, Mr Mark Harris, gave evidence under subpoena. Mr Harris was the leasing relationship manager at VicTrack and was familiar with the VicTrack land. He said that VicTrack did not claim any right for itself in relation to the Rayking land and that, until the issue of the subpoena, he was not aware that the applicant claimed a right to access and use the Rayking land.

He said that he had obtained instructions from the general manager of the property department within VicTrack and that VicTrack did not consent to any application being made on its behalf.

Although the witness was taken to the 1966 lease of the VicTrack land, it appears from his answers that he had no direct knowledge of this lease and was not in a position to give evidence about matters before 1995.

In answer to a question from the judge, the witness said that VicTrack was not claiming any easement over its neighbour’s land and would not be asking the Registrar of Titles to register an easement on its behalf.

The preliminary question

With the consent of the parties, the judge ordered the determination of a preliminary question in the following form: ‘Does [the applicant] have a right, as a matter of law, to seek a declaration that it has acquired an easement by prescription over the [Rayking land] when the landlord — namely Vic[T]rack — does not consent to such a claim being made on its behalf?’[3]
[3]Revised ruling (Ex tempore) of her Honour Judge Morrish given on 17 August 2016, 10 (‘Preliminary Issue Ruling’).

It is clear, from the terms of the question, that the ‘claim’ there referred to is a claim for a declaration as to the existence of the easement and relief for infringement. The judge expressly recorded that she did not address whether VicTrack had ‘power to claim an easement’ on the basis that the evidence of Mr Harris established that it did not seek an easement itself.[4]
[4]Ibid.

The judge answered the preliminary question in the negative, holding that the owner’s consent was required before the bringing of the action. The consequence was the applicant was unable to maintain its counterclaim, which was dismissed. That also meant that the applicant’s positive defence failed and the judge proceeded to determine whether the trespasses had been made out and the form of relief, including as to damages, that should follow.

In the result, the judge found the trespasses proven and ordered damages, including exemplary damages.[5] The quantum of exemplary damages is the subject of proposed ground 4 which we mention below but consider inappropriate to determine.
[5]Centre Com (Sunshine) Pty Ltd v Hampshire Automotive Centre Pty Ltd & Anor [2018] VCC 197 [384]–[385].

The judge’s ruling on the preliminary question

The judge regarded the preliminary question as requiring the application of the ‘basic principle, [that] if the easement is one for the benefit of the landlord and the landlord says, “I don’t want it, I’m not asking for it and I’m not authorising anybody to make such a claim on my behalf”, that is the end of the matter’.[6] Applying that principle the judge concluded as follows:

I therefore rule, on the strength of Mr Harris’ uncontested evidence that VicTrack does not consent to the easement and does not authorise any other person to make such application on its behalf, that the [applicant] has no right to make such an application to effectively force an easement down VicTrack’s neck unless VicTrack disavows it.[7]

[6]Preliminary Issue Ruling 18.

[7]Ibid 19.

In arriving at that conclusion, the judge identified a number of principles that were not in dispute. First, her Honour recorded that the parties agreed that a claim for an easement must be made either by an owner in fee simple against another owner in fee simple, or on behalf of an owner in fee simple.[8] In that respect, her Honour referred to Wheaton v Maple,[9] Kilgour v Gaddes,[10] Blackstone’s Commentaries on the Laws of England,[11] Simmons v Dobson,[12] Sunshine Retail Investments Pty Ltd v Wulff Sunshine Investments (‘Sunshine Retail’)[13] and Pugh v Savage.[14]
[8]Ibid 11.
[9][1893] 3 Ch 48.
[10][1904] 1 KB 457.
[11]William Blackstone, Commentaries on the Laws of England (Oxford, 23^rd ed, 1753) vol 2 (‘Blackstone vol 2’).
[12][1991] 4 All ER 25.
[13][1991] VSC 415.
[14][1970] 2 QB 373.

Second, the judge noted that, as was agreed by the parties, a prescriptive easement can accrue for the benefit of, or on behalf of, the landlord through the use made by a tenant.[15] The judge also noted, and it was not disputed before her, that a tenant cannot claim a prescriptive easement for itself because the claim attaches to the incorporeal hereditament and, as such, runs with the land and is only available to and against owners in fee simple.[16]
[15]Preliminary Issue Ruling 13.
[16]Ibid 14.

Proposed grounds of appeal

The applicant sought to challenge the judge’s ruling on the preliminary question on three proposed grounds of appeal. They were as follows:

1.The learned trial judge erred in law in holding that the [a]pplicant sub-tenant could not seek a declaration that it had acquired an easement by prescription or lost modem grant over the adjoining land of the [r]espondents without the consent or authority of the [a]pplicant’s head landlord (as it was at relevant times), VicTrack.
2. The learned trial judge erred in law in failing to hold that the [a]pplicant is entitled to rely on its right to use the easement by way of defence to the [r]espondents’ claim below and in support its counterclaim below regardless of the existence or non-existence of consent or authority of the [a]pplicant's head landlord VicTrack.
3. The learned trial judge erred in misconceiving the nature of the counterclaim:
(a) as having been brought ‘on behalf of' the [a]pplicant’s head landlord VicTrack … when no agency was involved, the counterclaim having in fact been brought for the benefit of the fee simple and the leasehold interests in the land; and
(b) as having sought registration of the easement on title, when only inter partes declaratory relief was sought.

Applicant’s submissions

The starting point for the applicant’s argument was that a tenant can acquire an easement by long user without the consent of its landlord and, that being so, it would be anomalous if the tenant cannot enforce that right in the absence of consent. It submitted that, although a tenant cannot gain a prescriptive right for itself, its use of the servient land does not require the consent or authority of the landlord and can give rise to a prescriptive easement in favour of the dominant tenement. The applicant submitted that the judge erred in holding that a tenant requires its landlord’s express consent or authority to acquire an easement by prescription or lost modern grant over adjacent land owned by third party.

The applicant relied on Pugh v Savage[17] as establishing that a tenant’s use of land can give rise to an easement and that the tenant can enjoy the benefit of the easement during the term of the tenancy.[18]
[17][1970] 2 QB 373.
[18]Ibid 380 (Cross LJ).

The applicant accepted that an easement by prescription runs for the benefit of the fee simple and that it is open to the landlord to renounce or disavow such rights. However, where the interest in the easement has been demised by lease, either by the terms of the lease or by operation of s 62 of the Property Law Act 1958, the landlord could not disavow the easement during the term of the lease, as to do so would constitute an impermissible derogation from the grant.

The applicant further submitted, in support of proposed ground three, that the rights of the tenant in relation to the easement are not those of an agent but of a principal on the basis that the tenant is in possession of the land under the lease and enjoys the benefit of the land, including any easements that are appurtenant to the land. For that reason, the applicant submitted that the judge erred in holding that any application to enforce an easement was for or on behalf of the landlord, and therefore required the consent or authority of the landlord to commence or maintain the action.

Respondents’ submissions

Whilst acknowledging that the question determined by the judge was not the subject of any express authority, the respondents submitted that the judge’s decision was consistent with recognised principles for the establishment of a prescriptive easement. The respondents submitted that a right to a prescriptive easement must be claimed in favour of the fee simple estate in the dominant tenement.

The respondents’ essential submission was that, because an easement is created for or on behalf of the owner in fee simple, enjoyment of the easement requires the owner of the land to join in, or at least authorise, the claim to the existence of a right appurtenant to its land.

The respondents further submitted that, in the case of an easement by prescription, a claim cannot be brought until the easement is ‘recognised’ by the owner in fee simple or established by the court, and any proceeding alleging an interference with the easement could not be brought in the absence of acknowledgement and consent by the landowner. In answer to a question from the bench as to who must recognise the prescriptive easement before it can be created, the respondents submitted that recognition by the owner of the dominant tenement is required. That proposition was further qualified so as to include recognition by an order of a court or by registration on title. In those cases, the requirement for knowledge of the easement was satisfied by a form of constructive knowledge. However, even in those cases, the respondents submitted that the landlord must consent to the bringing of the claim because, from its inception, it was an interest in land that was created for the benefit of the owner of the dominant tenement.

The respondents accepted that a prescriptive right may arise through use of land by a tenant, but the right that is acquired is for the landlord and inheres in the owner of the fee simple. In such circumstances, the acts of the tenant are taken to be for the benefit of the landlord and it is the estate of the landlord as owner that benefits from the easement thus created. Put another way, the leaseholder gets no rights as against the servient tenement and any action on the easement can only be brought for the benefit of, and with the consent of, the owner.

In substance, the respondents submitted that any rights held by a tenant were derivative and any claim required the consent or authority of the landlord.

In support of their submissions the respondents referred to a number of cases including Pugh v Savage,[19] Austin v Amhurst,[20] and Hamilton v Joyce.[21]
[19][1970] 2 QB 373.
[20](1877) 7 Ch D 689.
[21][1984] 3 NSWLR 279, 289–90.

The respondents referred to the analysis propounded in The Law of Real Property.[22] In that text, Sir Robert Megarry and Sir William Wade said that where it is the dominant tenement that is let, a tenant cannot make a claim by prescription to an easement as annexed to his own limited estate; if he claims an easement on the strength of his own user, he must necessarily claim for his landlord as well has himself.[23]
[22]Sir Robert Megarry and Sir William Wade, The Law of Real Property (Sweet and Maxwell, 3^rd ed, 1966).
[23]Ibid 837.

The respondents also relied on a passage in Gale on Easements,[24] addressing who may sue in nuisance for a disturbance of an easement.[25] The learned authors observed that the traditional view that the claimant must have a proprietary or possessory right in relation to the land was affirmed by the House of Lords in Hunter v Canary Wharf.[26] In a passage relied on by the respondents, it was said that ‘in the case of an easement which is then proven to exist, it would seem sufficient if the claimant has a proprietary or possessory right to the dominant tenement’.[27] The respondents fastened onto the requirement that the easement has been proven to exist as supporting their submission that the easement must be established before it can be enforced, adding that the easement must be acknowledged by the owner of the dominant tenement who must consent to the bringing of the proceeding.
[24]Jonathan Gaunt and the Honourable Mr Justice Morgan, Gale on Easements (Sweet and Maxwell Ltd, 19^th ed, 2012) (‘Gale on Easements 19^th edition’).
[25]Ibid [4–16].
[26]Ibid; [1997] AC 655.
[27]Gale on Easements 19^th edition, above n 24, [4–16] (emphasis added).

These submissions of the respondents were said to be buttressed by the legal fiction that underpins the doctrine of modern lost grant. It was said that the fiction hypothesises an agreement between the owners of the servient and dominant tenements, by which the owner of the servient tenement has granted rights over its land recorded in a grant which has been lost.

Finally, the respondents submitted that, even if an easement had been created, the rights of a tenant could only be those conferred by the landlord and a landlord could not pass to a tenant an interest in an easement that it did not know existed.

Analysis

It is convenient to commence by setting out some general principles in relation to easements by prescription.

An easement is a proprietary right in relation to land. In order for there to be a valid easement, there must be a dominant and servient tenement; the easement must accommodate the dominant tenement; the owners of the dominant and servient tenements must be different from each other; and the right or claim must be capable of being the subject matter of a grant.[28]
[28]Edward Burn and John Cartwright, Cheshire and Burns’ Modern Law of Real Property (Oxford University Press, 18^th ed, 2012) 636.

In Victoria, it has been established that an easement by prescription can arise where there has been an open and uninterrupted enjoyment of land for at least 20 years that is not explained by an express grant of an easement or permission to use the land.[29] In Sunshine Retail, Hedigan J identified the elements necessary to give rise to an easement by prescription as follows:
[29]Laming v Jennings [2018] VSCA 335 [81].

(a) the doing of an act by a person or persons upon the land of another;

(b) the absence of right to do that act in the person doing it;

(c) the knowledge of the person affected by it that the act is done;

(d) the power of the person affected by the act to prevent it, either by an act on his or her own part or by action in the courts;

(e) the abstinence by that person from interference for such a length of time which renders it reasonable for the court to say that it shall not afterwards interfere to stop the act being done.[30]

[30][1999] VSC 415 [76], citing Dalton v Henry Angus & Co (1881) 6 App Cas 740, 786.

The underlying premise is that, where there has been a long period of uninterrupted user amounting to an assertion of right and a corresponding acquiescence by the owner of the servient tenement in a position to prevent that user, there is a presumption that the use was pursuant to the conferral of a lawful title, thus the fiction of lost modern grant. The legal fiction is that the paper owner of the servient tenement has conferred a right by grant but the grant has been lost.

In the United Kingdom, an easement by prescription may arise in three contexts, being, common law prescription, the doctrine of lost modern grant and under the Prescription Act 1832 (UK).[31] At common law, acquisition of a prescriptive right depends upon the claimant establishing the requisite period of user leading to a presumed grant. The grant would be presumed only if the appropriate user had continued from time immemorial, fixed as the year 1189.[32] From that developed the doctrine of lost modern grant, in which a grant will be presumed after the effluxion of 20 years uninterrupted use. It is that doctrine that forms part of the law in Victoria and which forms the basis of the easement in the proceeding.[33]
[31]China Field Ltd v Appeal Tribunal (Buildings) (No 2) [2009] HKCFA 95 [41] (‘China Field’).
[32]Ibid.
[33]Laming v Jennings [2018] VSCA 335.

A number of points about the doctrine of lost modern grant are relevant. First, although it is based on a fictional grant, the making of the grant, and its corollary that the user has a legal authority, cannot be rebutted by evidence that in fact there had not been a grant.[34] As explained in Gale on Easements,[35] the presumption cannot be displaced by merely showing that no grant was in fact made.[36] The long enjoyment either estops the servient owner from relying on such evidence or overrides it when given,[37] and the court will make any possible presumption necessary to give that long enjoyment a legal origin.[38]
[34]Dalton v Angus (1861) 6 App Cas 740.
[35]Jonathan Gaunt QC and Sir Paul Morgan, Gale on Easements (Sweet and Maxwell Ltd, 20^th ed, 2017) (‘Gale on Easements’).
[36]Ibid [4-16], citing Dalton v Angus (1881) 6 App Cas 740.
[37]Ibid.
[38]Gale on Easements, above n 35, [4–16], citing Att Gen v Simpson [1901] 2 Ch 671, 698; East Stonehouse UDC v Willoughby Bros Ltd [1902] 2 KB 318, 332; Dawson v M’Groggan [1903] 1 IR 92, 98.

The second point to note is that the user is not pursuant to legal authority. In the case of an easement for a right of way, before the presumption applies at the expiration of 20 years of uninterrupted use, entry onto the servient tenement would constitute a trespass. It is the assertion of title by the dominant owner (which the user necessarily lacks) and the acquiescence by the servient owner that gives rise to the presumption.

The third general point is that it is not necessary that the 20 year period of uninterrupted use continue up to the point of claim. This may be contrasted with the position under the Prescription Act 1832 (UK), which requires that the period run continuously up to the point of action.[39] It follows that there may be a gap between the creation of the easement and any action to enforce it or prevent an infringement.
[39]Mills v Silver [1991] Ch 271; Gale on Easements, above n 35, [4–73].

It follows from these matters, as was explained in Laming v Jennings,[40] that whether an easement by prescription has been created depends on an examination of the issue from the perspective of both landowners.[41] From the perspective of the claimant, its acts and conduct must manifest an assertion of right to do the thing claimed.[42] In relation to prescription by long user, the long enjoyment must have been ‘neither by violence, nor by stealth, nor by leave asked from time to time’.[43] From the other perspective, the servient owner must have knowledge of the acts that constitute the claimed assertion of title and the power to stop them.[44]
[40][2018] VSCA 335.
[41]Ibid [83].
[42]Ibid.
[43]Ibid, quoting Mills v The Mayor, Alderman, and Burgesses of Colchester (1867) LR 2 CP 476, 486. The Latin phrase ‘nec vi, nec clam, nec precario’ is commonly used.
[44]Laming v Jennings [2018] VSCA 335 [86].

Once created, the owner of the dominant tenement enjoys an enforceable proprietary right to the benefit of the easement and the title of the servient land is correspondingly burdened. Such an easement may be unregistered. Section 42(2)(d) of the Transfer of Land Act1958 provides a relevant exception to the indefeasibility of title. It provides that registered land is subject to any easements howsoever acquired subsisting over or upon or affecting the land. It is not presently necessary to consider the question left unresolved in Laming v Jennings[45] as to whether a period of user relied on to establish an easement by prescription is affected by a change in ownership of the servient tenement.
[45][2018] VSCA 335.

Because an easement by prescription relies on use in the form of an assertion of title and acquiescence by the servient owner, questions may arise where either, or both, the dominant and servient tenements are subject to lease and occupied by a tenant during the putative period of long user. Those questions include: whether an easement can be created where the servient tenement is held by a tenant; the extent to which use by a tenant can give rise to an easement; and whether the easement, once created, forms part of the rights conferred by a lease and is thus capable of being enjoyed by the tenant in possession.

The preliminary question considered by the judge did not grapple with all of those questions, but asked whether the applicant had a right to ‘seek a declaration that it has acquired an easement by prescription over [the Rayking] land’.[46] In her ruling, the judge framed the issue as being whether the applicant as a tenant could ‘claim’ an easement that had been acquired by prescription.[47]
[46]Preliminary Issue Ruling 10.
[47]Ibid.

There were a number of problems with the course that was adopted by the judge, with the consent of the parties.

First, it may be said that the framing of the question, and the argument that proceeded on it, tended to elide two distinct issues. The first relates to the circumstances in which an easement by prescription can arise where the dominant tenement is subject to a lease and occupied by a tenant. The second is whether, if an easement by prescription exists, a tenant requires the consent or permission of the landlord in order to commence a proceeding alleging interference with the easement. The question as formulated, and the reasons given by the judge, were directed to the second of those two issues. The judge held that the tenant could not ‘claim’ the easement or seek a declaration as to its existence in the absence of the consent of the landlord.[48]
[48]Ibid 19.

Initially, in its written case, the applicant sought to establish, as the starting point for resolving the question determined by the judge, that the landlord of the dominant tenement does not need to consent or authorise the particular use that is said to give rise to the easement by prescription. However, in oral argument, the applicant retreated from that position and said it was not necessary for this Court to resolve that anterior question. The respondents in oral argument also submitted that it was not necessary for this Court to resolve the anterior question.

Upon proper analysis, it seems impossible to avoid a consideration of the anterior question of whether the dominant owner must consent to, or have knowledge of, the use by a tenant in order for an easement to arise. That is because both parties sought to answer the preliminary question, at least in part, by reference to the principles that attend the creation of the easement.

Second, there were no findings of fact, either found or assumed, as to use of the land during the 20 year period 1975 to 1995. There were no findings of fact, either found or assumed, as to the knowledge of the person affected by that use, the power of that person to prevent it, or any attempts by that person to interfere with that use — elements (c), (d) and (e) identified by Hedigan J in Sunshine Retail as required for the creation of an easement by prescription. There were no findings of fact as to whether, during that 20 year period, the leave of the owner of the servient tenement was asked for, and given, from time to time.[49] Given that it is necessary to consider the circumstances in which an easement by prescription might be created by the use of the servient land by a tenant of the dominant land, it would have been preferable for those questions to be examined not as steps along the way to the preliminary question but on a clear factual basis, either assumed or found. Approaching the proceeding by means of a preliminary question means that there has been no adjudication of the issue of whether an easement has been created over the Rayking land by prescription through long user between 1975 and 1995. This issue remains undetermined.
[49]See [57] above.

Third, if an easement had been created in 1995 through long user, there was no consideration of whether the easement formed part of the lease that was entered into by the applicant, which commenced in 2005, and under which it held possession of the VicTrack land.

The problem was compounded here by the respondents, who sought to agitate, by means of a Notice of Contention (which we discuss below) potential defences against the counterclaim, namely abandonment and lack of statutory power, which were not determined by the judge and which themselves are sensitive to the factual context.

The matters just mentioned highlight the unsatisfactory nature of the preliminary question. Answering the preliminary question did not follow any determination of whether there was a period of long user between 1975 and 1995, the state of knowledge or conduct of the respective owners of the Rayking land and the VicTrack land during that time or whether, as a matter of law, an easement could have come into existence in 1995 independently of the knowledge of the owner of the VicTrack land.

Notwithstanding the above deficiencies, neither party submitted before the judge or in this Court that it was inappropriate for the judge to determine the preliminary question and we are satisfied that there is a sufficient factual basis to answer the question posed. In those circumstances, it is desirable that we proceed to resolve the proposed grounds of appeal relating to the preliminary question.

The cause of action

In order to analyse the first three proposed grounds of appeal, it is convenient to commence with the cause of action pleaded by the applicant in its defence and counterclaim. It is then necessary to consider whether that cause of action, when brought by a tenant and in relation to an easement created by prescription, requires the consent of the owner in fee simple.

The critical elements of the counterclaim are set out above. To reiterate, the applicant sought to establish, and claim infringement of, an easement created by prescription in or around 1995. It was said that Rayking, or its predecessors, had interfered with the enjoyment of that easement by the erection of a fence that prevented access from the VicTrack land over the Rayking land. The applicant sought declaratory relief, an injunction or alternatively damages.

Although not expressly stated, the cause of action pleaded in the counterclaim was one of private nuisance. Nuisance is a tort directed against the plaintiff’s enjoyment of rights over land and extends to conduct that interferes with rights over land of another by way of easement or profit.[50] In an article setting out the history of the law of nuisance, Professor Newark observed that ‘[i]nterference with a private right of way over another’s tenement was undoubtedly nuisance.’[51]
[50]Hunter v Canary Wharf Ltd [1997] AC 655, 702 (Lord Hoffmann); Brown v Tasmania (2017) 261 CLR 328, 452 [385] (Gordon J); F H Newark, ‘The Boundaries of Nuisance’ (1949) 65 LQR 480, 482.
[51]F H Newark, above n 50, 482.

In Victoria Park Racing and Recreation Grounds Co Ltd v Taylor,[52] Dixon J described the essence of a wrong that is amenable to an action in private nuisance as being ‘the detraction from the occupier’s enjoyment of the natural rights belonging to, or in the case of easements, of the acquired rights annexed to, the occupation of land’.[53] His Honour went on to say that ‘the law fixes those rights’.[54]
[52](1937) 58 CLR 479.
[53]Ibid 507.
[54]Ibid.

In order to bring an action for private nuisance, it is necessary for the plaintiff to establish possession of the land because the tort is concerned with interference with land rather than interference with personal rights. Accordingly, the House of Lords in Hunter v Canary Wharf Ltd[55] refused to uphold a claim in nuisance brought by persons who were affected by the use of land, but who themselves did not possess an interest in land.
[55][1997] AC 655.

Subject to one exception, Lord Goff concluded that it had been settled that a person who has no right in the land cannot sue in private nuisance.[56] The exception, founded in the judgment of the English Court of Appeal in Foster v Warblington Urban District Council,[57] extended to a person who was in de facto possession even though they did not hold lawful title.[58] Importantly for present purposes, Lord Goff observed that an action of private nuisance will usually be brought by the person in actual possession of the land affected, either as the freeholder or tenant of the land in question, or even as a licensee with exclusive possession of the land.[59]
[56]Ibid 688.
[57][1906] 1 KB 648.
[58]Hunter v Canary Wharf [1997] AC 655, 659–60.
[59]Ibid 688.

In the same case, Lord Hoffmann noted that nuisance is a tort against land, including interests in land such as easements and profits, and that a plaintiff must therefore have an interest in the land affected by the nuisance.[60] It is clear from his Lordship’s speech that possession based upon, or derived through, title would provide a sufficient foundation to bring an action in nuisance.[61] Lord Hoffmann also noted that even possession which is wrongful against the true owner can found an action for trespass or nuisance against someone else.[62] The limiting principle is that the plaintiff must be enjoying or asserting exclusive possession of the land.[63]
[60]Ibid 702.
[61]Ibid 703.
[62]Ibid.
[63]Ibid.

As a matter of general principle, the applicant, as tenant of the VicTrack land, was in possession and was entitled to the benefit of any easement that attached to the land and included, expressly or impliedly, in the lease. In this context it is useful to consider s 62 of the Property Law Act, which provides that a conveyance of land, including a lease, ‘shall be deemed to include and shall by virtue of [the Property Law Act], operate to convey … all … privileges, easements, rights and advantages whatsoever, appertaining or reputed to appertain to the land’ at the time of conveyance.[64]
[64]See [109] below.

There is no rule or principle that a person in possession of land, and entitled to the benefit of an easement appurtenant to the land, requires the consent of its landlord to bring an action to prevent interference with the enjoyment of possession. The respondent did not embrace such a rule, no authority can be found in support of such a general proposition and it would be entirely inconsistent with exclusive possession, which is the legal right to control the land.

Indeed, the authorities to which we have referred confirm the contrary proposition and identify the tenant as a person who may sue for an infringement of an easement appurtenant to land in its possession. Indeed, the landlord may be in an inferior positon, in that it may not maintain an action for an interference with the enjoyment of an easement unless the nuisance will, or might, continue to a time when the reversioner falls into possession.[65]
[65]Mayfair Property v Johnston [1894] 1 Ch 508, 516–19; Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287, 312 (Lord Halsbury), 317–18 (Lindley LJ), 324 (AL Smith LJ).

The respondents contended for a special rule in relation to unregistered easements arising by prescription. In support of this contention, the respondents made the following points: the ‘fee simple rule’ means that an easement is created for the benefit of the owner of the dominant tenement and that any rights of a tenant are derivative; an easement does not exist until it is recognised by the owner of the fee simple of the dominant tenement, in part because it reflects an implied agreement between the owners of the dominant and servient tenements; an easement carries with it obligations that ought not be imposed without the agreement or consent of the owner; and an easement cannot be transmitted under a lease if the owner is unaware of its existence.

We turn to consider whether those propositions reflect the law and if so, whether they alone, or in combination, support the special rule contended for.

The fee simple rule

The basal principle relied on by the respondents as underpinning the fee simple rule, is that user must be by, or on behalf of, a fee simple owner against a fee simple owner.[66] It follows, so it was submitted, that a tenant of the dominant tenement, through its own use of the servient tenement, does not obtain any proprietary rights over the servient land. Put another way, the use of the tenant goes to enlarging the proprietary interest of its landlord, not that of the tenant. As a necessary corollary, any right claimed by prescription must not be claimed as annexed to the land for a term of years, but runs with the land in perpetuity.[67]
[66]Simmons v Dobson [1991] 4 All ER 25, 27 (Fox LJ).
[67]Wheaton v Maple & Co [1893] 3 Ch 48, 63 (Lindley LJ); Kilgour v Gaddes [1904] 1 KB 457.

Pugh v Savage[68] concerned an easement for a right of way arising by prescription over two contiguous blocks of farmland. In that case, the primary judge rejected the easement because the period of long user on the servient tenement included a period in which the servient land was in the possession of a tenant under a lease.[69] The English Court of Appeal overturned the decision of the primary judge, holding that that the occupation of the servient land by a tenant did not interrupt the period of use, at least where the land was in the possession of the owner at the time the relevant use commenced.[70]
[68][1970] 2 QB 373.
[69]Ibid 382 (Cross LJ).
[70]Ibid 383–5 (Cross LJ), 386 (Harman LJ).

Although Pugh v Savage[71] was concerned with the circumstances in which the servient tenement is under lease, Cross LJ also referred to user by tenants of the dominant tenement. His Lordship did not regard that as disqualifying, explaining that ‘a tenant cannot by use gain a prescriptive right of way for himself as tenant; but by user over land of a stranger he can gain a prescriptive right of way in fee for his landlord which he can use while he is tenant and which his landlord can grant to a subsequent tenant’.[72]
[71][1970] 2 QB 373.
[72]Ibid 380 (Cross LJ).

In Austin v Amhurst,[73] the plaintiffs were occupiers of land who claimed an interest in funds that had arisen from the sale of part of the land to a railway company. Justice Fry held that the plaintiffs, as occupiers, had insufficient interest to claim rights by prescription.[74] The only estate in the land that gave rise to the funds was that of the landlord. The occupiers could not claim an interest on their own behalf because they held no estate, nor could they do so on behalf of the owner because, in effect, that would entail the landlord making a claim against itself.
[73](1877) 7 Ch D 689.
[74]Ibid 692.

It has also been established that the dominant and servient owners must be different persons. That is, an owner or occupier of land cannot subject it to an easement in favour of other land also owned and occupied by himself. Similarly, a tenant cannot obtain an easement over other land of his landlord. This is because a tenant can only prescribe in right of his landlord. Thus, where there is unity of ownership in the dominant and servient tenement, there can be no claim by prescription over the servient land based on user by the owner or tenant of the dominant land.

This approach has been criticised in Hong Kong, where land is invariably held under long leases rather than in fee simple. In China Field[75] Lord Millet NPJ concluded that this doctrine should not be applied in Hong Kong and that a tenant can acquire an interest in land by its own use, which it holds during the term of the tenancy. Lord Millet NPJ said:

It is true that the tenant is only able to exercise rights over the servient tenement because he is in possession of the dominant tenement, and that his possession of the dominant tenement is with the consent of his landlord. But he does not derive the rights over the servient tenement from his landlord under his lease as part of the demised premises, nor does he acquire it with the landlord’s consent, but by separate (albeit fictitious) grant presumed from long user against land not comprised in his lease and without his landlord’s consent.[76]

[75][2009] HKCFA 95.

[76]Ibid [68].

The analysis adopted there was that the law should recognise a fictional grant of title to the tenant by reason of its long use. That approach entailed a rejection of long standing English authority, which also underpins acceptance of the doctrine in Australia, that there is a fictional grant to the owner in fee simple.

As Morgan J persuasively demonstrated in Metropolitan Housing Trust Ltd v RMC FH Co Ltd (‘Metropolitan Housing’),[77] that approach does not accord with the common law of England and amounts to a rejection of the fundamental principle that an easement accrues for the benefit of the owner in fee simple.[78]
[77][2018] Ch 195.
[78]Ibid 204–5.

In Metropolitan Housing,[79] Morgan J held that where a dominant tenement is subject to a lease, then the acts of user by the lessee, which are relied upon to support a claim to an easement acquired by prescription, are treated as acts of user by the

freehold reversioner and will lead to the acquisition of an easement appurtenant to the freehold.[80]

[79][2018] Ch 195.

[80]Ibid 203–4 [29], citing Gayford v Moffatt (1868) LR 4 Ch App 133, 135; Pugh v Savage [1970] 2 QB 373, 380.

Pugh v Savage[81] supports the view that a tenant can enjoy the benefit of a prescriptive right of way during the lease and that the landlord may grant rights in respect of the easement to a subsequent tenant.[82] In Hamilton v Joyce,[83] Powell J reached a similar conclusion.[84] In Metropolitan Housing,[85] Morgan J also accepted that where the prescription arises during a lease, the easement, when acquired, is treated as being demised to the head lessee.[86]
[81][1970] 2 QB 373.
[82]Ibid 380 (Cross LJ).
[83][1984] 3 NSWLR 279.
[84]Ibid 289–90.
[85][2018] Ch 195.
[86]Ibid 204–5 [30]–[33].

The fact that user by a tenant can give rise to an easement, that the easement, once created, forms part of the leasehold and that the tenant in possession may benefit from any easement appurtenant to the land, all support the conclusion that the fee simple rule does not preclude the creation of an easement, even though the dominant land owner is ignorant of the user and does not consent to the creation of the easement. Further, once the easement has been created, fidelity to the fee simple rule does not require the landlord’s consent in order to sue for a declaration that an easement has been created or for an infringement of the easement.

It is to be recalled that the incursion onto the servient tenement that gives rise to the easement is not pursuant to a legal authority held by the dominant owner. The application of the doctrine of lost modern grant is concerned with the creation of proprietary rights and not with their exercise. Although the user by a tenant gives rise to a proprietary interest in favour of its landlord, the user is not derivative in the sense of relying on a lawful entitlement of the landlord. For that reason, it would be anomalous to prevent the creation of an easement because the landlord has not given consent to the use, in circumstances where the landlord has no legal entitlement to authorise that use. Different considerations may apply where the interference with the servient tenement is inconsistent with a lease or where the easement, once created, is not demised to a future tenant.

Further, the requirement to prove knowledge and consent of the dominant owner is also inconsistent with the legal presumption based on user. Once evidence of user has been adduced, and the necessary elements for the creation of an easement by prescription have been satisfied, evidence is not admissible to rebut the presumption underpinning the fictional grant that the user has occurred with the lawful authority of the servient owner. The fictional grant cannot be rebutted by showing that in fact the grant was not made. If rebuttal evidence was admissible, it would undermine the presumption by requiring an examination of the knowledge and state of mind of the servient owner. Against that background, it would be anomalous if evidence of the knowledge and state of mind of the dominant owner was admissible. The relevant inquiry is whether the user (which may be by the dominant owner or its tenant) is objectively an assertion of title to use the land.

Although the language with which the fee simple rule is expressed talks of the easement being for the benefit of the landlord and not the tenant, that goes no further than emphasising that the easement enlarges the freehold title and does not create any independent rights in the tenant. The analysis of Lord Millet in China Field[87] posits a grant of title to the tenant for the currency of the lease. That does not represent the law in Australia. In Australia the user of the tenant ultimately crystallises into a proprietary interest of the owner. However, the user is not undertaken as the owner’s agent. Agency has no role to play.
[87][2009] HKCFA 95.

The fee simple rule does not require a special principle that the consent of the owner in fee simple is obligatory for either the creation or enforcement of an easement by prescription. It is not necessary for creation because it is the act of user not its authority that is important. Indeed, one of the defining elements of the creation of an easement by prescription is the absence of any right to engage in the act of user by the person doing it, as Hedigan J acknowledged in Sunshine Retail.[88] None of the cases that admit that user by a tenant is sufficient to create an easement suggest a further qualification that it must be user with the knowledge or consent of the owner. There is no reason in principle to require it.
[88]See [51] above.

Once the easement is created it gives an interest in land that is enforceable by the party in possession. The fee simple rule is not relevant to the enforceability of the easement once created.

As the case of Foster v Warblington Urban District Council[89] in the English Court of Appeal established, as an exception to the normal rule that a person who has no right in the land cannot sue in private nuisance, an action in nuisance can be brought by a person in occupation if they are in de facto possession of the land, even though they have no right to possession as against the owner.[90] The right of the party in possession of land to bring an action to vindicate its enjoyment of that land is not derivative in the sense that it depends on the consent or approval of the owner in fee simple, but is an incident of the legal rights that it enjoys under the lease. As Dixon J observed in Victoria Park Racing and Recreation Grounds Co Ltd v Taylor,[91] the law fixes those rights.[92]
[89][1906] 1 KB 648.
[90]Ibid 659–60.
[91](1937) 58 CLR 479.
[92]Ibid 507.

Recognition by the dominant landowner

The respondents also submitted that an easement by prescription does not exist until it is recognised by the dominant landowner. Again, this is not supported by any authority.

The passage from Gale on Easements 19^th edition[93] relied on by the respondents does not go as far as the respondents would have it. To recap, the relevant passage says that, in the case of an easement which has been proven to exist, the party in possession has a sufficient right to sue for infringement.[94] That passage cross-references later analysis dealing with the need to prove title in the easement.[95] In that further passage, the authors refer to the requirement in earlier authorities that the person seeking to enforce the easement allege title with sufficient detail. The authors go on to note that, by subsequent decisions, it appears to have been held that in all actions for disturbance of an easement, whether the action be brought against the servient owner or a stranger, a general allegation of right is sufficient.[96] However, the party claiming an easement is obliged to set out the particular title upon which it relies, whether by grant or prescription.[97]
[93]See n 24 above.
[94]Ibid [4-16].
[95]Ibid [14-47]–[14-49].
[96]Ibid [14-47].
[97]Ibid.

That passage does not support the respondents’ argument.

In any event, even if, as a necessary step to establish infringement, a plaintiff had to establish the existence of the easement, it does not follow that the two processes must occur independently, in the sense of requiring two proceedings.

In Barba v Gas & Fuel Corporation of Victoria,[98] Jacobs J emphasised that in order to succeed on a claim regarding interference to an easement, the plaintiff must allege and establish that, at the time of the interference, it was in possession of the land and entitled to the benefit of the easement.[99] There is nothing in his Honour’s reasons that would preclude a plaintiff from alleging and establishing title in the same proceeding as that in which the interference is alleged and in respect of which a remedy is sought. There is no requirement that the dominant owner recognise that an easement has been created before any proceeding can be brought.
[98](1976) 136 CLR 120.
[99]Ibid 142.

Usually, the dominant owner will be aware of the existence of an easement over the servient tenement before any action is taken to enforce the easement, but that is not always the case.

In Shelmerdine v Ringen Pty Ltd,[100] Brooking J gave the example of statutory easements when he said that the easements created by the operation of the legislation, unlike easements created by express grant or in consequence of uninterrupted user for the necessary period, are, generally speaking, unlikely to be known to those entitled to enjoy them.[101] In that case, the issue arose, as it does in the present case, as to whether an easement could be abandoned by an owner of the dominant tenant who is ignorant of the easement’s existence. Justice Brooking held that, because abandonment of an easement depends on intention, abandonment could not be found unless the dominant owner has knowledge of his rights.[102] It is a necessary corollary of that reasoning that an easement can exist even though the dominant owner is unaware of its existence. Again, given that the relevant user can be that of the tenant, there is nothing in principle that would preclude the creation of an easement even though the landlord is unaware of the relevant user.
[100][1993] 1 VR 315.
[101]Ibid 337.
[102]Ibid.

Further, there is no compelling reason to refuse to recognise an easement in the absence of the consent of the land owner of the dominant tenement. The land owner is free to abandon or disavow the easement.

Implied agreement

The respondents further contended that to conclude that an easement can be created independently of the knowledge or agreement of the dominant landlord, would be inconsistent with the fictional basis of an implied agreement or grant between the dominant and servient tenement owners. The problem with this submission, as we see it, is that it seeks to import the need for knowledge by reference to a legal fiction. The fiction is not based on any actual or implied agreement, but reflects a legal construct manufactured to explain what would otherwise be an inexplicable use of land. The essence of the principle upon which a modern lost grant is presumed, is that the state of affairs is otherwise unexplained.[103] The court presumes a lawful origin for the right in question. The fictional nature of the grant, and its basis in use rather than legal title, does not provide any sound basis for imposing a requirement that the dominant tenement must consent to the use and to the enforcement of the right once created.

Not demised in the lease

[103]Gale on Easements, above n 35, [4–18].

It was submitted by the respondents that a landlord could not include an easement in a lease if it did not know the easement exists. In our view, the question of whether an easement is included in a lease is a question of construction of the lease in the relevant statutory setting.

The applicant, in response, submitted that there was nothing in the terms of the lease that excluded the easement from the demise. This was said by the applicant to be the effect of s 62 of the Property Law Act. Section 62(1) provides as follows:

A conveyance of land shall be deemed to include and shall by virtue of [the Property Law Act] operate to convey, with the land, all … privileges, easements, rights and advantages whatsoever, appertaining or reputed to appertain to the land, or any part thereof, or, at the time of conveyance, demised, occupied or enjoyed with, or reputed or known as part of parcel of or appurtenant to the land or any part thereof.

The terms of the lease are determined objectively and in the light of s 62 of the Property Law Act. It is not necessary for the landlord to recognise the existence of an easement before it may be included in a lease.

Further, the applicant submitted that, as a ‘very simple point’, VicTrack could not disclaim the easement because VicTrack had already demised it for the term of the lease.

In the course of oral argument, the respondents referred to a number of clauses of the lease of 20 April 2005 between the applicant and VicTrack, under which the applicant is in possession. That lease is for a term of 15 years. It incorporates terms and conditions contained in a standard lease.

By clause 4 of the lease, the tenant is required to maintain, replace, repair and keep the whole of the premises (which for the purpose of clause 4 includes improvements) in good and tenantable repair, order and condition. The tenant covenants, at its own expense, to make good any breakage, defect or damage to the premises or to any adjoining premises occasioned by want of care, misuse or abuse on the part of the tenant.

The tenant further covenants that it will not, without the prior written consent of VicTrack, make any alteration, addition or installation to the premises. ‘Improvements’ are defined to include the buildings, structures, fences and fixtures.

The respondents submitted that, based on clause 4, the lease prohibited the applicant, without the prior written consent of VicTrack (which it did not have), from altering or removing the fence (an alteration, addition, or installation to the premises) running between the VicTrack land and the Rayking land. Given the existence of the fence and the prohibition on removing or altering it, it was submitted that the lease did not confer any right or entitlement on the tenant to use the easement over the Rayking land.

Given the ruling on the preliminary question, the judge did not determine whether the easement formed part of the demise under the lease. In our view, this Court should not determine that question. Although the lease was in evidence, the operation of s 62 of the Property Law Act is not the subject of any ground of appeal and was not developed in argument before us. Further, it is possible that evidence of surrounding circumstances might be relevant to the objective facts known to the parties to the lease and to its construction. It may be relevant that the applicant had been in possession before the current lease was entered into, having occupied the VicTrack land pursuant to a sublease dated 30 June 1994.

If an easement exists, and it is not excluded from a tenancy, then the tenant has the benefit of the easement and, as a party in possession of the relevant land, may take steps, including by suit, to enforce the rights against an infringing party, including the owner of the servient land. Those rights flow from possession and do not require any additional consent from the landlord. However, as just explained, whether, if an easement over the Rayking land was created in 1995 through long user, the easement formed part of the lease between the applicant and VicTrack, which they entered into on 20 April 2005, has not yet been determined and we consider that it is not for this Court to make that determination

Conclusion on grounds 1, 2 and 3

Ground 1 asserts that the judge erred in holding that the applicant could not seek a declaration that it had acquired an easement by prescription. It is clear that the tenant does not ‘acquire’ an easement and, to that extent, the ground is infelicitously expressed. The submissions of the applicant were premised on an acceptance that the easement was appurtenant to the land and was held by VicTrack. Its argument was twofold; first, consent was not required for creation and, second, because it was in possession of the land, it was entitled to enforce the rights conferred by the easement.

That being so, in order to make out its defence and counterclaim, the applicant had to establish that an easement had been created by long user over the 20 year period ending in 1995, that it was entitled to the benefit of the easement under the lease and, therefore, it was entitled to bring an action in nuisance claiming an unlawful interference with the land. It did not require the consent of the landlord to do so.

It follows from our reasons that the judge was wrong to conclude that the consent of the owner was required in order for a tenant to enforce an easement appurtenant to the land. In reaching that conclusion, we are persuaded that the knowledge or consent of the dominant owner is not required in order to create an easement by prescription by long user.

If an easement was created, it conferred rights to an interest in land in favour of the dominant landowner. As a right appurtenant to land, it was capable of being enjoyed by the person in possession, subject to the terms of the lease and the potential operation of s 62 of the Property Law Act.

Our conclusion means that the judge’s determination of the defence and counterclaim was wrong. Furthermore, this leaves unresolved a number of important questions. They include whether there was long user of the Rayking land during the relevant period of time pleaded; whether the other elements identified by Hedigan J in Sunshine Retail necessary for the creation of an easement by prescription were satisfied; whether any long user was consistent with the terms of the lease under which the VicTrack land was held during the relevant period (1975–1995) and, if it was not, what consequences, if any, flow from that conclusion; whether, if an easement had been created by prescription, it was included in the lease under which the applicant subsequently held possession of the VicTrack land; and whether VicTrack has disavowed or abandoned its interest in the easement.

Each of those matters involve questions of fact and law. None of the facts have been found by the primary judge in the light of her orders dismissing the counterclaim.

We consider that the course taken by the judge was regrettable although no doubt it occurred because of the judge’s concern to simplify the matter to assist the parties. The judge was faced with a shifting factual substratum during the trial; the applicant originally alleged a continuous right of user based on 50 years of uninterrupted use and access to the Rayking land until 2013, but this was amended in the early days of the trial ultimately to refer to usage in excess of 20 years until around 1995 supported by particulars of use from the late 1950’s uninterrupted until 1995.[104] The judge was also faced with the applicant adopting shifting positions on matters of substance. The applicant originally conceded that if a representative of VicTrack gave evidence that it was not claiming an easement and did not want it, the applicant would fail in its counterclaim.[105] The applicant later insisted that what was critical was not absence of consent but disavowal.[106] In the circumstances, it is understandable that the judge chose the course of conduct she did but, her answer to the preliminary question being in error, this, unfortunately, leaves all the important questions we have identified still to be determined.
[104]See [16] above.
[105]Preliminary Issue Ruling 15.
[106]Ibid.

Ground 4 — Exemplary damages

As a result of the error in answering the preliminary question, the applicant’s defence and counterclaim, based on an alleged easement, have not been determined on the facts. In those circumstances, the judgment below, including as to damages, cannot stand.

We consider that there will be a need for a retrial. Given that there is to be a retrial, in which different evidence may be adduced, it would be inappropriate to determine the application for leave in relation to the exemplary damages.

Proper Parties

Before turning to the Notice of Contention it is necessary to address the proper parties to the proceeding.

In our view, at least where the easement has not been recognised by the owner of the dominant tenement and the tenant seeks a declaration as to the existence of the easement, the owner should be joined as a party to the proceeding. The orders sought by the applicant are plainly apt to affect the legal interests of VicTrack. VicTrack should be bound by the judgment.

Further, where, as here, it is to be contended that the easement does not exist or has been abandoned it is important that the party with the legal interest in the fee simple be a party to the proceeding. The applicant submitted that it was not necessary to join VicTrack and that, as a party in possession, the applicant was the only necessary party in relation to the dominant tenement. We do not agree.

In John Alexander v White City[107] the High Court held that where a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined.[108] The declaration sought was as to a proprietary interest in the land owned by VicTrack; it was thus not simply a suit that affected the applicant and the respondents. Further, as we have discussed above and do so further below, an issue remains as to whether, on the assumption an easement was created and has not been abandoned (both of which directly affect VicTrack) the easement was included in the lease to the applicant. A suit that determines the terms of a lease is plainly apt to affect the legal interests of the parties to the lease.
[107](2010) 241 CLR 1.
[108]Ibid 46 [131].

Notice of Contention

By Notice of Contention, the respondents sought to uphold the orders of the judge dismissing the counterclaim on two bases. The first contended that a prescriptive easement cannot be claimed in circumstances where there has been abandonment of the easement by the owner of the dominant tenement. The second asserted that a prescriptive easement cannot be claimed on behalf of the landlord who is a statutory corporation with limited statutory powers, including those in relation to the acquisition of property.

Abandonment

The factual basis of the claim of abandonment is said to be undisputed evidence that, at least from the time Rayking acquired the Rayking land, there was a continuous fence between the Rayking land and the VicTrack land. This fence precluded entry or use of the Rayking land in accordance with the easement.

The respondents submitted that, even if the prescriptive easement had been established in 1995, any rights of use had been extinguished by the failure of the applicant to assert its right for a period of almost 20 years. The respondents accepted that a long period of non-user does not give rise to a presumption of abandonment. It is submitted that, at the least, it called for an explanation by the applicant to negate an inference of abandonment.

The respondents also submitted that an affected party may bring an action where a right of way is barred, but only if it has not acquiesced in or submitted to the obstruction for one year. However, as the applicant pointed out, this principle flows from the operation of s 4 of the Prescription Act 1832 (UK) and has no common law analogue. Accordingly, it does not form part of the law of Victoria and can immediately be dismissed.

The applicant, in answer to the claim of abandonment, submitted that abandonment was not pleaded by the respondents at trial, whether by way of reply to the applicant’s defence or in their defence to the counterclaim, and cannot be raised on appeal. Further, it submitted that abandonment is a question that depends on the intention of the owner of the dominant tenement and is to be determined from the whole of the facts. In circumstances where the judge had, in effect, struck out the applicant’s defence and dismissed the counterclaim on the basis that the applicant could not maintain it in the absence of consent, the question of abandonment was not the subject of evidence.

The common law principles relating to the abandonment of easements are well-established.[109] As the applicant submitted, it turns on the intention of the owner of the dominant tenement. Mere non-user, even for an extended period of time, is not conclusive evidence of abandonment of a right of way, although it may provide evidence of abandonment. The relevant question is whether the owner of the dominant tenement, or its predecessors in title, intended to forever forego the rights provided by the easement and not assert them again.
[109]Wolfe v Freijahs’ Holdings Pty Ltd [1988] VR 1017, 1023 (Tadgell J); Bookville Pty Ltd v O’Loghlen [2007] VSC 67.

While each case must depend on its own facts, the decision of the High Court in Treweeke v 36 Wolseley Rd Pty Ltd (‘Treweeke’)[110] demonstrates the need for unequivocal evidence establishing an intent to forever abandon the enjoyment of the easement. In Treweeke,[111] the High Court considered a right of way between two properties in Sydney. Over time, the right of way had become impassable by reason of an impenetrable bamboo plantation, the subsequent installation on the servient tenement of a swimming pool and the erection of an iron fence between the two properties.
[110](1973) 128 CLR 274.
[111]Ibid.

Many years later an occupant of the dominant tenement discovered the existence of an express right of way. The owner of the servient tenements sought a declaration of abandonment by reason of non-use, in circumstances where the right of way had been made impassable. The High Court held that there had not been an abandonment. The non-use was explained because there was an alternative, and more congenial, passage that had been used by the owners and occupiers of the dominant tenement over time. The majority held that the preference of the owner of the dominant tenement to use the alternative route could not give rise to an inference of intention to thereby forever abandon the right to enjoy the right of way, notwithstanding that the owner of the servient tenement had blocked access over a number of years.[112] This case affords a stark example of the principle that a court will not lightly infer abandonment by the owner of the dominant tenement.
[112]Ibid 284–5 (McTiernan J), 303–4 (Mason J).

In the light of these principles, there are a number of circumstances that make it inappropriate for this Court to determine the question of abandonment here. First, as noted, the respondents did not plead that any easement that had been created by 1995 had been abandoned by VicTrack as the owner of the dominant tenement or its tenants.

Second, and perhaps more fundamentally, by reason of the course that the trial took, evidence was not led on the question of abandonment.

Third, it is not easy to accommodate abandonment in a context where the easement is one created by prescription through the use of a tenant and the owner remains ignorant of that use. Consideration of that question should only proceed once all the facts relating to use including the knowledge, or opportunities for knowledge, that the owner had of that use.

It follows that we will not determine the first ground of the Notice of Contention. The question of abandonment will be for the judge on remittal.

Statutory power

In relation to the second basis on which the respondents sought to affirm the decision of the judge, they first described the statutory powers of VicTrack, as the owner of the dominant tenement, and its predecessors and, second, outlined their submissions to the effect that a statutory agency cannot acquire property outside the scope of, or inconsistent with, its legislative powers.

VicTrack was established under s 8 of the Rail Corporations Act 1996 and is continued by s 116 of the Transport Integration Act 2010. Its powers to compulsorily acquire and purchase land or an interest in land (including an easement) are contained in the Transport Integration Act.[113]
[113]Transport Integration Act ss 36, 121, 122, 125.

The respondents contended that the acquisition of an easement that relates to property owned by VicTrack, without its knowledge or consent, would be inconsistent with its functions. In support of this contention, the respondents referred to section 120(1)(j) of the Transport Integration Act which provides that one of VicTrack’s functions is ‘to maintain accurate and accessible data in respect of transport-related land, infrastructure and assets’ which it could not perform if it had an easement over land it knew nothing about.

VicTrack also has powers to enter land for certain purposes, contingent on consent and notice requirements. Accordingly, the respondents contended that the Registrar of Titles must make any relevant records in the register if VicTrack acquires any private right of way or easement.[114]
[114]Transport Integration Act s 42; Railways Act 1958 ss 39(2), 40, 79, 80; Railway Lands Acquisition Act 1958 s 5.

The respondents sought to contend that the position of a public agency created by statute is analogous to that of a company with limited powers. They referred to the fact that, where the owner of the servient tenement is a company with limited powers and the grant of an easement by the company would be ultra vires, no prescriptive title arises, as the necessary ‘grant’ of easement cannot be presumed. In support of its contention, the respondents referred to the fact that this principle has been applied to defeat a claim of profit a prendre made in relation to land owned by the Crown[115] as well as in the case of a statutory company claiming the benefit of a prescriptive easement.[116]
[115]Mill v New Forest Commissioner (1856) CB 60.
[116]National Guaranteed Manure Co v Donald (1859) 4 H&N 7, 737, 741–2; Trail v McAllister (1890) 25 LR 524.

In response, the applicant contended that the authorities relied on by the respondents were not relevant to the question at hand, as they address the converse question of whether a prescriptive easement can be acquired against a statutory corporation or trustee lacking power to grant an easement.

VicTrack is a government agency created for particular purposes. The respondents contended that that a public authority may only do what the legislature has expressly authorised or what is fairly regarded as incidental to what is authorised. This means that any action outside the terms of its statutory powers is ultra vires.[117]
[117]London City Council v AG [1902] AC 165; Melbourne Water Corporation v Domus DesignPty Ltd (2007) 16 VR 539.

The respondents contended that the basis for the prescriptive easement claimed here (being the exercise of right of way or access in relation to the use of a car sales yard) is outside the purposes and functions prescribed by the Transport Integration Act.

In response to this contention, the applicant submitted that the effect of the demise does not depend on the statutory objects, powers and functions of VicTrack and, accordingly, the respondents’ contention mistakes the effect of a demise by lease. The applicant stated that, should the effect of the demise depend on VicTrack’s statutory objects, powers and functions, the applicant would be unable to use the VicTrack land for the purpose of its motor vehicle repair and sales business, such a purpose not being included within the identified statutory functions of VicTrack

Finally, we note that the applicant referred to more recent authority that it contended establishes that, if an easement over land can be lawfully granted by the landowner, then such an easement can be acquired by lost modern grant regardless of whether the use is illegal, whether in the criminal or tortious sense.[118] We express no view on that conclusion.
[118]Bakewell Management Ltd v Brandwood [2004] 2 AC 519, 544-5 [47].

We would not uphold this ground of contention.

VicTrack had authority to own land. It was the registered proprietor in fee simple. As the owner of the estate in fee simple over the VicTrack land, it enjoyed the right to occupy subject to any statutory prohibitions.[119] It also had authority to lease land to third parties, including business entities who would use the land for commercial purposes. Where it decided to lease land, there was no obligation on it to lease the land to an entity that performed the same functions or type of functions as VicTrack, assuming that such an entity otherwise exists. The use of the land by a tenant of VicTrack was not circumscribed by any limitation on the functions or powers of VicTrack.
[119]New South Wales Aboriginal Land Council v Minister Administering the Crown Lands Act (2016) 260 CLR 232.

Section 122 of the Transport Integration Act expressly contemplates that VicTrack may acquire an easement and that this may, but need not, occur compulsorily.[120] The acquisition of an easement by VicTrack, through the user of a tenant, would not involve a claim for adverse possession. It would not involve VicTrack exercising any statutory powers beyond the general power to hold land. Nor would it involve VicTrack acting inconsistently with its powers or functions. We do not consider that the status of VicTrack as a statutory authority precluded the applicant from claiming the creation of an easement by prescription. As we have observed, the question of whether an easement by prescription was in fact created, in the circumstances of this case, must await determination at the remittal.
[120]Transport Integration Act s 122(3).

Conclusion

We would grant leave to appeal on grounds 1, 2 and 3 and allow the appeal. We would remit the matter to the County Court and order a retrial to be heard before a different judge to avoid any appearance of pre-determination. VicTrack should be joined as a party.

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Citations

Hampshire Automotive Centre Pty Ltd (ACN 064 799 328) v Centre Com (Sunshine) Pty Ltd (ACN 084 165 293) and Rayking Investments Pty Ltd (ACN 100 334 209) [2019] VSCA 77

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[2019] VSCA 77

9 April 2019