ING Bank (Australia) Ltd v O'Shea

[2010] NSWCA 71

New South Wales

Court of Appeal

CITATION:	ING Bank (Australia) Ltd v O'Shea [2010] NSWCA 71
HEARING DATE(S):	18 February 2010
JUDGMENT DATE:	13 April 2010
JUDGMENT OF:	Giles JA at [1]; Campbell JA at [58]; Young JA at [59]
DECISION:	The appeal is dismissed with costs.
CATCHWORDS:	REAL PROPERTY- easements- equity- relief against forfeiture- grantor with contractual right to have easement released if dominant tenement owner breached conditions- whether relief against forfeiture should be granted- whether requirement of unconscionable conduct on respondents' part- breaches caused substantial inconvenience and loss of amenity to the servient tenement- no error in trial judge refusing relief. REAL PROPERTY- easements- court imposed easement- whether regard had to the rights of the servient tenement owner in determining whether "reasonably necessary"- whether regard to effect on servient tenement proper in assessment of "reasonably necessary"- Conveyancing Act 1919, s 88K.
LEGISLATION CITED:	Conveyancing Act 1919, ss 88B, 88K Evidence Act 1995, s 55 Queensland Property Law Act 1974-5
CATEGORY:	Principal judgment
CASES CITED:	Bofinger v Kingsway Group Ltd [2009] HCA 44; 239 CLR 269 Calahorra Properties Pty Ltd v Nelson [1985] ANZ ConvR 352; Q ConvR 54-202 Commonwealth Development Bank of Australia v Eagle Hotels Pty Ltd [1990] ANZ ConvR 100; NSW ConvR 55-506 D & D Corak Investments Pty Ltd v Yiasemides [2006] NSWSC 1419; 13 BPR 24,103 Hanny v Lewis (1998) 9 BPR 16,205 House v The King [1936] HCA 40; 55 CLR 499 Katakouzinos v Roufir Pty Ltd [1999] NSWSC 1045; 9 BPR 17,303 Khattar v Wiese [2005] NSWSC 1014; 12 BPR 23,235 Leeds International Co-operative Society Ltd v Slack [1924] AC 851 Legione v Hateley (1983) 152 CLR 406 MI Design Pty Ltd v Dunecar Pty Ltd [2000] NSWSC 996; 10 BPR 18,387 Peachey v Somerset (Duke) (1721) 1 Strange 447; 93 ER 626 Re Seaforth Land Sales Pty Ltd's Land [1976] Qd R 190 Re Seaforth Land Sales Pty Ltd's Land (No 2) [1977] Qd R 317 Shiloh Spinners Ltd v Harding [1973] AC 691 Stern v McArthur [1988] HCA 51; 165 CLR 489 Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; 217 CLR 315 Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd [2010] VSC 2 Tillman v AG (NSW) [2007] NSWCA 327; 70 NSWLR 448 Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845 Woodland v Manly Municipal Council [2003] NSWSC 392; 127 LGERA 120 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1998) 43 NSWLR 504
PARTIES:	ING Bank (Australia) Limited (Appellant) John Emmet O'Shea and Elizabeth O'Shea (Respondents)
FILE NUMBER(S):	CA 2009/00298564
COUNSEL:	D P Robinson SC and P M Lane (Appellant) F Kunc SC, I Pike and E Bishop (Respondents)
SOLICITORS:	Gadens Lawyers (Appellant) J P O'Neill (Respondents)
LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC 2577/09
LOWER COURT JUDICIAL OFFICER:	Forster J
LOWER COURT DATE OF DECISION:	17 November 2009
LOWER COURT MEDIUM NEUTRAL CITATION:	O'Shea & Anor v Athanasakis & Ors [2009] NSWSC 1150

CA 2009/00298564
GILES JA
CAMPBELL JA
YOUNG JA


Tuesday 13 April 2010

ING BANK (AUSTRALIA) LIMITED v O’SHEA

Headnote

The appellant, ING Bank (Australia) Limited, was the mortgagee in possession of a property in Alma Street, Clontarf. The respondents, the O’Sheas, were the registered proprietors of an adjoining property fronting Adelaide Street to the North. Prior to 1986 there had been an informal family arrangement for vehicle access between the properties. Preparatory to a planned sale, an easement was registered in 1986 providing for limited rights of carriageway and footway to persons in possession of the Alma Street property over the Adelaide Street property. The easement was subject to conditions requiring the payment of an annual sum and precluding excessive user. Successive occupiers and owners of the dominant tenement breached both conditions. The respondents executed a release of the easement based on the breaches. However, the Registrar General was unwilling to register the respondent’s document without a court order. The respondents commenced proceedings and on 4 June 2009 Rein J made a consent declaration that the respondents were entitled to have the easement released. The appellant filed a cross-claim seeking in the alternative relief against forfeiture or the imposition by the court of an equivalent easement under s 88K Conveyancing Act 1919.

At trial, Forster J refused to grant relief against forfeiture. His Honour held that in all the circumstances the conduct of the respondents in relying on their right to the release the easement was not unconscientious because the payment of money would not be sufficient salve. Forster J also refused to grant an equivalent easement under s 88K. His Honour found that the easement had been convenient, and the Alma Street property would decrease without the benefit of the easement. However, an equivalent easement was not “reasonably necessary for the effective use or development of” the dominant tenement because its imposition would interfere with property rights by having a significant adverse affect on the servient tenement, and because of its limited value due to its restrictions, its “evanescent nature”, and the likelihood of council approval for driveway access on Alma Street.

On appeal, the appellant argued that the trial judge had applied the wrong test because the present case was one where relief against forfeiture could be given even if there was no unconscionable conduct on the respondents’ part. Further, the appellant challenged Forster J’s findings regarding the adverse effect on the Alma Street property in the absence of an easement, and submitted that his Honour erred by taking account of breaches by “successive occupiers” in finding an absence of unconscionable conduct, given that the appellant as a mortgagee had not personally committed any of the breaches, had tendered a cheque to cover the money defaults and had offered compensation for the other defaults.

The appellant submitted that the trial judge had misconstrued the words “reasonably necessary” in s 88K(1) by having regard to interference with property rights of the holder of the servient tenement in finding an absence of reasonable necessity for the effective use and development of the dominant tenement. Rather, it was argued that these considerations were only relevant to the exercise of the discretion conferred by the word “may” at the commencement of s 88K(1) and to considerations under s 88K(2). The appellants submitted that the trial judge never examined the discretion due to his erroneous construction.

The appeal involved three issues, viz:

(1) Whether relief against forfeiture is available to prevent the owner of a servient tenement from exercising a contractual right to put an end to an easement, and whether unconscientiousness is required before the court will grant relief.
(2) Whether the judge erred in finding an absence of unconscientious conduct on the part of the respondent.
(3) Whether the court should grant an equivalent easement under s 88K Conveyancing Act 1919.

The Court held, dismissing the appeal with costs:

(1) As to the nature of relief against forfeiture:

Giles JA (Campbell JA agreeing): the precondition of a breach of the terms of the easement to the right to release, vary, or modify the easement did not just operate to secure the owner of the dominant tenement’s compliance with its terms, but confined the servient tenement owners’ otherwise unfettered discretion. Even if the terms of the precondition were intended to give security for the production of a stated result, the basis of equity’s intervention remained the unconscientiousness of the respondent’s conduct in insisting on that right.

Whether, as in lease cases, the exercise of a legal right is generally unconscientious is a question for the individual case.

The present easement involved more than the mere payment of money. The breaches involving non-authorised user, which were likely to occur in the future, caused substantial inconvenience and loss of amenity. These were powerful considerations and release of the easement safeguarded the respondents’ proprietary rights.

Accordingly, there was no error in the primary judge taking unconscientiousness in the conduct of the respondents as the ultimate question. However, in determining unconscientiousness regard is had to the conduct of the party seeking relief and other relevant surrounding circumstances. The trial judge did not exclude these considerations.

Stern v McArthur [1988] HCA 51; 165 CLR 489; Legione v Hateley (1983) 152 CLR 406, applied; Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; 217 CLR 315, considered.

Young JA: Equity’s jurisdiction is not limited and there may be situations where the court will give relief against forfeiture where there is no unconscionable conduct on the part of the defendant. Nevertheless, in contrast to lease cases, while a special case is required in order for a court to give relief involving a contractual right in a contract for sale of land the basic principle is the same. Offers of compensation demonstrated cleanliness of hands and were relevant to whether the court might give or refuse relief. However, the basal consideration is not the conduct of the appellant, but whether the respondents have acted against good conscience in relying on what might appear to be their rights on the strict legal interpretation of a document conferring property or in contractual rights on another. The trial judge made no error in his determination of these issues.

Shiloh Spinners Ltd v Harding [1973] AC 691; Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd [2010] VSC 2, considered.

Young JA: the Court may grant relief against forfeiture to a mortgagee where the mortgagor incurred the forfeiture.

Commonwealth Development Bank of Australia v Eagle Hotels Pty Ltd [1990] ANZ ConvR 100; NSW ConvR 55-506; (11 October 1989, BC8901607); MI Design Pty Ltd v Dunecar Pty Ltd and Others [2000] NSWSC 996; 10 BPR 18,387, applied.

Young JA: “forfeiture” means “liability to bring about a termination of an estate” not the actual termination of the estate. Relief can only be granted where the estate can be terminated by covenant, not where it automatically determines as a matter of the operation of the law. However, here the breaches merely entitled the servient owners to release the easement.

Peachy v Somerset (Duke) (1721) 1 Strange 447; 93 ER 626, approved.

(2) As to the finding of an absence of unconscientiousness on the part of the respondents:

Giles JA (Campbell JA agreeing):

The judge did not wrongfully aggregate the conduct of successive occupiers of the Alma Street because the breaches were not attributed to the appellant, but were part of the circumstances in which the conscientiousness of the respondents’ conduct was to be assessed. All breaches were also material to the assessment of the likelihood of future breaches. In the circumstances of a restricted easement, while past late payments of rent could be cured and were not a guide to the likelihood of future monetary breaches, past breaches of the terms of the easement other than the provision for the annual payment, could not.

Commonwealth Development Bank of Australia v Eagle Hotels Pty Ltd [1990] ANZ ConvR 100; NSW ConvR 55-506; BC8901607, distinguished.

Giles JA (Campbell JA agreeing): the impugned findings of fact and weight given by the trial judge disclosed no error on the evidence so far as they may have been material to his conclusion that relief from forfeiture should be refused.

Young JA: even if there were some factual errors in the judge’s assessment of questions subsidiary to the ultimate question of unconscientious conduct by the party against whom relief against forfeiture is sought, their minor effect did not vitiate the decision. Although unfairness could have resulted from the fact that the trial judge did not afford the appellant the opportunity to make submissions on findings of fact based on his observations, none of these findings went to the core of the trial judge’s decision.

(3) As to the imposition of an easement under s 88K Conveyancing Act 1919:

Giles JA (Campbell JA agreeing): No error was shown in the judge’s conclusion that there was not reasonable necessity for regarding the effective use or development of the dominant tenement within s 88K(1). The qualification “reasonably necessary” permits regard to matters beyond the relatively absolute concept of “necessity”, and requires an assessment of all relevant matters including the impact on the easement of the servient tenement and interference with the property rights of the owner of the servient tenement.

Calahorra Properties Pty Ltd v Nelson [1985] ANZ Conv R 352; Q ConvR 54-202 distinguished; 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1998) 43 NSWLR 504, considered; D & D Corak Investments Pty Ltd v Yiasemides [2006] NSWSC 1419; 13 BPR 24,103, applied.

Per Young JA: One cannot assess what is “reasonably necessary” without considering the whole picture, including the effect of the proposal on the servient land. Although, considered by itself, the grant of access might be considered “reasonably necessary” for the use of the applicant’s land, the court should take into account the effect on the neighbour and the fact that the necessity was created by the applicant himself. Further, the discretion inherent in the word “may” is not the only head under which these matters may be considered. Accordingly, the primary judge did not err in concluding that the proposed easement was reasonably necessary on the basis of the potential for interference with property rights.

Woodland v Manly Municipal Council

[2003] NSWSC 392; 127 LGERA 120; Katakouzinos v Roufir Pty Ltd [1999] NSWSC 1045; 9 BPR 17,303, approved;

Calahorra Properties Pty Ltd v Nelson

[1985] ANZ Conv R 352; Q ConvR 54-202, distinguished; Hanny v Lewis (1998) 9 BPR 16,205; Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845; Leeds International Co-Operative Society Ltd v Slack [1924] AC 851, referred to.

CA 2009/00298564
GILES JA
CAMPBELL JA
YOUNG JA


Tuesday 13 April 2010

ING BANK (AUSTRALIA) LIMITED v O’SHEA

Judgment

: The facts are described in the reasons of Young JA, and I will not unnecessarily repeat them. As his Honour notes, the two issues were whether relief against forfeiture in relation to the release of the easement should have been granted, and if not whether an order for an easement in the same terms should have been made. I agree that on both issues the appeal should be dismissed with costs.

Relief against forfeiture

2 It was not in issue that relief against forfeiture could be granted to the appellant as mortgagee of the dominant tenement.

3 The trial judge recorded that the parties agreed that whether relief against forfeiture should be granted was governed by the decision of the High Court in Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2003) 217 CLR 315. However, they differed upon what should be taken from that decision.

4 The appellant submitted to the effect that the majority in Tanwar Enterprises Pty Ltd v Cauchi distinguished relief against forfeiture in a vendor-purchaser case, as that case was, from relief against forfeiture when the promise breach of which brought forfeiture was given to secure a stated result. It submitted that there had been implicit endorsement that in the latter situation, such as a lease case, the approach articulated by Lord Wilberforce in Shiloh Spinners Ltd v Harding [1973] AC 691 at 723-4 should be followed. It said that the present case was analogous to a lease case. The point of the submission was to focus attention on the conduct of the appellant as the applicant for relief and on compensation for breach as a sufficient emollient.

5 The respondents submitted that, from the reasons of the majority in Tanwar Enterprises Pty Ltd v Cauchi, in all cases it was necessary that there be unconscionable or unconscientious behaviour on the part of the party against whom relief was sought. The appellant’s conduct and compensation were relevant, but the focus was on unconscientiousness of the respondents’ conduct.

6 The judge undertook an analysis of Tanwar Enterprises Pty Ltd v Cauchi and the preceding decisions of Legione v Hateley (1983) 152 CLR 406 and Stern v McArthur (1988) 165 CLR 489. He concluded -

“80 It seems to me that the common thread running through the analysis of the various decisions is that in order for the court to interfere with the contractual rights of the parties, the circumstances must be such that it is necessary to intervene to avoid injustice by relieving against unconscionable or unconscientious conduct.

…

87 The ultimate question, then, is whether the conduct of the party against whom relief against forfeiture is sought can properly be characterised as unconscionable or unconscientious, independently of whether such conduct consisted of causing or contributing to the circumstances leading to the forfeiture of an interest, or whether such conduct consisted of strictly insisting upon legal rights. It was in the context of answering that question that the court in Tanwar at [40] noted, with apparent approval, what Mason and Deane JJ had said in Legione at 152 CLR at page 449, namely:

‘In the ultimate analysis the result in a given case will depend upon the resolution of subsidiary questions which inevitably arise. The more important of these are: (1) Did the conduct of the vendor contribute to the purchaser's breach? (2) Was the purchaser's breach (a) trivial or slight, and (b) inadvertent and not wilful? (3) What damage or other adverse consequences did the vendor suffer by reason of the purchaser's breach? (4) What is the magnitude of the purchaser's loss and the vendor's gain if the forfeiture is to stand? (5) Is specific performance with or without compensation an adequate safeguard for the vendor?’


88 Although Legione, like Stern and Tanwar, involved disputes between vendors and purchasers, I do not see why the same principles would not apply in circumstances where the issue of relief against forfeiture arises between lessor and lessee or, as in the present case, between the owner of the servient tenement and the owner of the dominant tenement under an easement. If one substitutes for “the vendor” the owner of the servient tenement (here “the O’Sheas”), and for “the purchaser” the successive occupiers of the dominant tenement, (here “the successive occupiers”) the more important of the subsidiary questions would be, following what Mason and Deane JJ said in Legione , as follows:

(1) Did the conduct of the O’Sheas contribute to the breaches by the successive occupiers?

(2) Were the breaches of the successive occupiers:


(a) trivial or slight?; and

(b) inadvertent and not wilful?


(3) What damage or other adverse consequences did the O’Sheas suffer by reason of those breaches?

(4) What is the magnitude of the loss to the successive occupiers (in this context represented by ING) and the gain to the O’Sheas if the forfeiture is to stand?

(5) Is the re-imposition of the Easement with or without compensation an adequate safeguard for the O’Sheas?”

7 Having addressed the facts, particularly through the subsidiary questions so formulated, his Honour said -

“98 In all the circumstances, I do not discern in the conduct of the O’Sheas, either before commencing these proceedings or in persisting in their right to release the Easement, anything that approaches unconscionable or unconscientious conduct. I do not consider that they are seeking to take advantage of any undeserved windfall or that they are causing ING to suffer a loss of an interest that is, in the overall context of these two properties, such as to make the O’Sheas’ conduct unconscientious. I do not consider that it would be appropriate to grant relief against forfeiture but require ING, as a condition of granting such relief, to make some monetary payment to the O’Sheas. Such monetary payment would not solve the problem. In his evidence, which I accept, Mr O’Shea made it clear that he was not wishing to receive a financial benefit, only the peace that would come about as a result of the Easement being released.

99 For those reasons, I do not propose to grant ING relief against the forfeiture of the Easement.”

8 On appeal, the appellant submitted that the majority in Tanwar Enterprises Pty Ltd v Cauchi recognised a particular category of case where the promise was given as security to achieve a stated result. The appellant said that this appeared from their Honours’ observation -

“ [55] The five "subsidiary questions" stated by Mason and Deane JJ in Legione , and set out above, reflect the treatment by Lord Wilberforce in Shiloh Spinners Ltd v Harding (a lease case) of the ‘appropriate’ considerations guiding the exercise of equity's jurisdiction to relieve against forfeiture for breach of covenants added by way of security for the production of a stated result. His Lordship said:

‘The word 'appropriate' involves consideration of the conduct of the applicant for relief, in particular whether his default was wilful, of the gravity of the breaches, and of the disparity between the value of the property of which forfeiture is claimed as compared with the damage caused by the breach.’”

9 The appellant referred also to Stern v McArthur at 527-8, where Deane and Dawson JJ said -

“One situation in which equity has traditionally granted relief is where provision for forfeiture has been made to secure the payment of money and the party in default seeks relief upon the basis of payment of the amount owing together with the appropriate compensation. In that situation the object of the provision is achieved and it would be unconscientious for the other party to seek to take advantage of the forfeiture. An obvious application of this principle (although it may have emerged separately) is the equity of redemption in the case of a mortgage. There, no proof of fraud, mistake, accident or surprise is required to establish the equity because the very nature of the transaction is such that the court, acting upon conscience, will grant relief: see Turner, The Equity of Redemption (1931), Ch II. This distinction was adverted to by Lord Wilberforce in Shiloh Spinners Ltd v Harding, at 722, when he identified two heads of jurisdiction to grant relief:

First, where it is possible to state that the object of the transaction and of the insertion of the right to forfeit is essentially to secure the payment of money, equity has been willing to relieve on terms that the payment is made with interest, if appropriate, and also costs. … Secondly, there were the heads of fraud, accident, mistake or surprise, always a ground for equity's intervention, the inclusion of which entailed the exclusion of mere inadvertence and a fortiori of wilful defaults.

In the case of transactions falling under the first head relief may be granted because conscience requires that there should be no forfeiture. No doubt where the question is, not whether the jurisdiction exists, but whether it should be exercised, having regard to the breach of an essential stipulation with respect to time by the party seeking relief, exceptional circumstances in the form of fraud, accident, mistake or surprise may suffice to justify intervention. But those elements are not the basis of the jurisdiction and the circumstances which will suffice to support its exercise despite the breach of an essential term are not confined. In particular, it is not necessary, in our view, for the party claiming relief to show unconscionable or unconscientious behaviour of an exceptional kind.”

10 The appellant submitted that the present case fell into the particular category. It submitted that it was not guilty of any misconduct itself and had offered to compensate the respondents, and that the judge had “lost sight of equity’s regard for achieving the stated result” and had erred in focussing upon the conduct of the respondents.

11 An initial difficulty in the appellant’s submissions is that the right to release the easement was not a provision for forfeiture upon breach of a promise given as security for the production of a stated result.

12 The terms of the s 88B instrument are set out in the reasons of Young JA. The appellant relied on the words in the description of the persons having the right to release, vary or modify the easement -

“ … provided that the said right shall not be exercised unless there has been a breach of the terms of the right of carriageway set out herein”.

13 Those words do not transform the right to release, vary or modify the easement into a security right. As a pre-condition to release, variation or modification of the easement, there must have been a breach of its terms. But that is a concession in favour of the owner of the dominant tenement, by way of qualification of the right to release, vary or modify the easement. There can not be release, variation or modification at the whim of the owner of the servient tenement. Indeed, the language of “breach” of the terms is not, at least in relation to the so-called terms expressing the permissible use of the carriageway, entirely appropriate. Those terms were the expression of the extent of the rights granted to the owner of the dominant tenement. User was either within the extent of the rights or not within it. There was no promise that, for example, passage by foot would only be for the purpose of putting out the garbage.

14 The words on which the appellant relied did not make the right to release, vary or modify the easement something to be held over the head of the owner of the dominant tenement in order to secure compliance with its terms. They confined the owner of the servient tenement in exercising what would otherwise be an unfettered right to release, vary or modify the easement.

15 Even if the precondition of breach of the terms of the easement made the right to release, vary or modify the easement analogous to a contractual right exercisable upon breach of a promise given as security for the production of a stated result, that did not divert the basis of equity’s intervention from unconscientiousness of the respondents’ conduct.

16 In Stern v McArthur, above, Deane and Dawson JJ explained that where the provision for forfeiture is to secure the payment of money and payment plus compensation is offered, “the object of the provision is achieved and it would be unconscientious for the other party to seek to take advantage of the forfeiture”. Their Honours said that relief may be granted “because conscience requires that there should be no forfeiture”. The basis for the relief remains unconscientiousness, being found in insistence on the right of forfeiture although payment plus compensation is forthcoming.

17 In its jurisdiction to relieve against forfeiture, equity acts on the conscience; see Legione v Hateley at 444 per Mason and Deane JJ, referring to -

“ … the fundamental principle according to which equity acts, namely, that a party having a legal right shall not be permitted to exercise it in such a way that the exercise amounts to unconscionable conduct.”

18 In some circumstances, such as in lease cases (where there is now also statutory intervention), the exercise of a legal right has come to be seen as generally unconscientious. But it is a question for the individual case. In Tanwar Enterprises Pty Ltd v Cauchi at [5], by constructing a hypothetical pleading, the majority identified as the essential question, whether there had been unconscientious use by the vendors of their contractual right to terminate upon failure by the purchaser to complete at the appointed time. This is not the essential question only in a vendor-purchaser case.

19 Unconscientiousness does not mean attention is given only to the conduct of the person exercising the right, and regard is had to the conduct of the party seeking relief and to other matters providing the circumstances in which the unconscientiousness of the exercise of the right must be judged. But it remains the ultimate question.

20 In the present case much more than payment of money was involved. The easement was quite restricted, and breach of its terms (to continue the inapt language) could significantly affect the amenity of the owner of the servient tenement. The judge found that the respondents had suffered substantial inconvenience and loss of amenity by the breaches over the years, apart from failure to pay the annual amount. His Honour described the easement as “easy to breach”, and found it likely that breaches would occur in the future.

21 Release of the easement when there had been a history of substantial inconvenience and loss of amenity, and when it was likely that the inconvenience and loss of amenity would continue, went to safeguard the respondents’ proprietary rights. Whether it was unconscientious for them to exercise their right to release the easement was not to be judged only in money terms. Leaving them to likely further inconvenience and loss of amenity was a powerful consideration. Even on the present assumption of analogy with a right of forfeiture as security for production of a particular result, there was no error in the judge taking the ultimate question as one of unconscientious conduct of the respondents. And it should be said that his Honour did not do so to the exclusion of regard to the conduct of the appellant and its offer of compensation.

22 The appellant then submitted that the judge had erred in a number of respects in coming to his answer to the question.

23 First, it was submitted that his Honour had wrongly aggregated the conduct of successive occupiers of the Alma Street property constituting breaches of the terms of the easement. It was said that only the breaches since 1999, when the mortgagor to the appellant acquired the Alma Street property, could be attributed to it when addressing the subsidiary questions.

24 His Honour plainly did not treat the appellant as personally responsible for any breaches since it became mortgagee, at least until it entered into possession. Its status as mortgagee was clear. However, the judge did refer globally to breaches of the successive occupiers, at his [88] set out above and in other paragraphs of the reasons.

25 I do not think that there was or is any question of attributing breaches to the appellant. The breaches by successive occupiers were part of the circumstances in which the conscientiousness or otherwise of the respondents’ conduct was to be assessed. Breaches prior to 1999, and the guidance all breaches gave to the likelihood of breaches in the future, were material to that assessment. I do not think that the judge erred in his regard to them.

26 In that connection, the appellant referred to Commonwealth Development Bank of Australia v Eagle Hotels Pty Ltd ((1900) ANZ Conv R 100), in which the mortgagee of a lease obtained relief against forfeiture consequent upon the lessees’ defaults. Cohen J’s reasons included -

“There had been a number of breaches by the lessees in the past, mainly arising out of the late payment of rent. There is nothing to suggest that the plaintiff was aware of these breaches and it had no responsibility to make any direct payments itself. I do not consider that the past acts or omissions of the lessees in this regard should have any adverse effect on the plaintiff’s claim for relief.”

27 The past late payments of rent could be cured. The past breaches of the terms of the easement, other than the provision for the annual payment, could not. The late payments of rent were not, in the same manner as the present case, a guide to the likelihood of breaches in the future because of the restricted nature of the easement. The circumstances were quite different. I do not think Commonwealth Development Bank of Australia v Eagle Hotels Pty Ltd assists the appellant.

28 Then it was submitted that his Honour had made a number of factual errors. The judge made a number of findings in the earlier part of his reasons, expressed as findings which might not be necessary having regard to the conclusions he had reached but for assistance to an appellate court should his conclusions be found incorrect. The findings of which the appellant complained were in connection with the adverse effect on the Alma Street property of absence of the easement.

29 The first finding was part of the judge’s response to a submission that loss of the easement would discourage purchasers of more advanced age because they would have to climb many more steps to reach the living area of the house on the Alma Street property. His Honour said, the complaint being as to the emphasised part -

“58 I do not place too much weight on that submission. Having regard to the construction of the house itself, which takes full advantage of the views over Middle Harbour, there are already a substantial amount of stairs to be negotiated just by living in the house itself. For that reason alone, it would not be an ideal home for elderly people, people with physical disabilities or perhaps even people with very young children. In any event, it must be remembered that the Easement did not provide for it being used for pedestrian traffic. Accordingly, when the occupants of the Alma Street property or their visitors or guests wished to enter the house, they were always obliged to walk up the stairs from Alma Street, unless it was the occupants themselves, travelling by car . That of itself, must always have been a serious disincentive for any such person to have any interest in acquiring that property.”

30 The appellant said that it was not correct that the easement required that visitors or guests walk up the stairs from Alma Street. It is not clear that this played a material part in his Honour’s decision that relief against forfeiture should be refused. Be that as it may, with any regard to reality it was substantially correct.

31 The double garage to which the right of carriageway led did not have any kind of forecourt. An authorised visitor, who could not walk up the easement, could not drive up the easement unless his or her vehicle could be parked within the garage. The appellant submitted that the occupant of the Alma Street property might have only one car in the garage, or that in anticipation of visitors he or she could remove a car or both cars, so that a visitor or two visitors could park within the garage. (The occupant, of course, would have to re-enter his or her house by the stairs from Alma Street, and only a limited number of visitors could be accommodated in this way.) The point the judge was making, however, was that the restriction whereby the easement could not be used for pedestrian traffic (save for putting out the garbage) was a serious disincentive for purchasers of the Alma Street property. On an available forecast of how people would act, it was sound.

32 The second finding was in the paragraph following that last set out, the complaint being as to the emphasised part -

“59 In my opinion, the Easement was always of limited value, the restrictions on its use being quite significant. Further, because it was so easy to breach with the consequence of it being lost, the Easement was in reality of a somewhat fleeting or evanescent nature . By comparison, a garage situated on the Alma Street property itself would have a degree of permanence which might be important to many potential purchasers.”

33 The appellant accepted that the easement was a right liable to be divested. It said that it was not so easy for a disciplined person to breach it, that breach did not inevitably lead to loss, and that the easement was not properly described as fleeting or evanescent.

34 History supported the likelihood of future breach. Some occupants of the Alma Street property were not even aware of the restrictions in the terms of the easement. The apparent access from Adelaide Street to the double garage would lead tradesmen, delivery persons or visitors to use the easement, and even the occupiers of the Alma Street property had used it for access beyond the terms of the easement without proper regard to the limitations. It was easy to breach in that breaches could readily come about. The judge was not saying that breach would inevitably lead to loss, but it would expose the easement to loss, and the description “somewhat fleeting or evanescent” was less than a categorical denigration. To the extent to which it mattered in coming to his Honour’s conclusion, in my opinion it was open to him to describe the easement as he did.

35 The third finding was the emphasised portion of a paragraph -

“60 In addition, the present appearance of the Alma Street property, viewed from Alma Street itself, is somewhat out of place when compared to the various other properties along the northern side of the street, all of which have tidy driveways leading to often quite attractive garages. The present appearance of the Alma Street property from Alma Street presents as neglected and overgrown, an appearance which in my opinion may well be ameliorated by the inclusion of a garage .”

36 The judge had a view, and it was accepted that at that time the property presented as neglected and overgrown. The appellant said that the opinion as to amelioration was “without justification from the evidence”. It was, however, an opinion to which it was well open to his Honour to come from his observation of the property, in the light of the evidence concerning where a garage could be located with entry from Alma Street.

37 The fourth finding was in the paragraph -

“61 Finally, the garage which presently stands on the Parking Area, which admittedly would be deprived of any vehicular utility in the absence of the Easement would not be totally wasted. Being on the same level as the main living area of the house on the Alma Street property, it could be used as a convenient storage area or in some other useful way.”

38 The appellant accepted that this was factually correct. It said that it failed to give proper weight to the wastage of the garage, in that a substantial double garage would add considerably to the value of the Alma Street property.

39 However, the wastage of the garage was taken up when his Honour arrived at a diminution in the value of the Alma Street property should the easement no longer be available to it, which he broadly equated with the diminution in the value of the Adelaide Street property by reason of the existence of the easement. Subject to what I next say, there was no challenge to the respective diminutions in value as found by his Honour on the evidence of the valuers. Due weight was thus given to the wastage of the garage.

40 The fifth finding was his Honour’s conclusion, having found that a new double garage entered from Alma Street for the Alma Street property would cost $119,000, that -

“62 In the circumstances, while I am not in a position to calculate the precise diminution in the value of the Alma Street property should the Easement no longer be available to it, I do not consider that that diminution would no longer be available to it, I do not consider that that diminution be nearly as great as that calculated by Mr Foley-Jennings, who attributed to that diminution a value of $650,000. In my opinion, having regard to the likely cost of erecting a garage, the diminution in the value of the Alma Street property would not be very different from the little over $111,000 which I have found represented the diminution in the value of the Adelaide Street property by reason of the existence of the Easement.”

41 Mr Foley-Jennings was the appellant’s valuer. Mr Edmonds was the respondents’ valuer. The appellant submitted that the rough equation was not soundly based, because Mr Edmonds “did not see the two alternatives as roughly equal because access from Alma Street was an inferior solution in terms of value”. The evidence to which the appellant referred did not support the submission. Mr Edmonds considered that the value of the Alma Street property with the garage (and a lift) but no easement would be equivalent to its value with the easement.

42 In my opinion, no error has been shown in the judge’s factual findings, so far as they may have been material to his conclusion that relief from forfeiture should be refused.

An order under s 88K of the Conveyancing Act 1919

43 The relevant provisions of s 88K are set out in the reasons of Young JA. It is convenient to repeat s 88K(1) -

“(1) The Court may make an order imposing an easement over land if the easement is reasonably necessary for the effective use or development of other land that will have the benefit of the easement.”

44 The appellant applied for an order imposing an easement in the same terms as that granted in 1986. The judge held that while it had been convenient or nice to have, such an easement was not “reasonably necessary for the effective use or development of” the Alma Street property.

45 The appellant submitted that in so holding the judge had wrongly imported into reasonable necessity the two matters to which he referred in saying, as part of the reasoning to his conclusion -

“122 I am also conscious of the fact that while the imposition of the Proposed Easement may be convenient for the occupants of the Alma Street property, such imposition would result in a significant adverse impact on the Adelaide Street property and, in accordance with established principles, I am reluctant to interfere with the property rights of others.”

46 The appellant submitted that neither adverse impact on the servient tenement nor interference with the property rights of the owner of the servient tenement was relevant to reasonable necessity for the effective use or development of the dominant tenement. They could arise, it said, once reasonable necessity had been found, in deciding whether or not to make an order imposing an easement in the exercise of the discretion conferred by “may” at the commencement of s 88K(1). But the judge did not get to that point, because he found against reasonable necessity. It was submitted that he erred in taking the two matters into account at the earlier point.

47 As Young JA points out, a long course of first instance decisions in this State stands against the appellant’s submission. In my opinion the submission should not be accepted, quite apart from regard to the decision of the Queensland Court of Appeal in Calahorra Properties Pty Ltd v Nelson (1985) ANZ Conv R 352. That decision may be distinguished because the additional words “in a reasonable manner” in s 180(1) of the Property Law Act 1974 (Qld) were taken as the occasion for having regard to the effect of use of the easement on other land, and they do not appear in s 88K(1).

48 “Reasonably necessary” is a composite phrase, in which the necessity is qualified so that it must be a reasonable necessity. Necessity is quite an absolute concept. The qualification is not of the use or development, so that it must be reasonable, although no doubt reasonableness of the use or development comes into reasonable necessity for that use or development. It is of the necessity.

49 A qualification which did no more than reduce the necessity to a less absolute level is unlikely, and if that were intended some other word could have been used such as “convenient”. Qualification whereby the necessity must be reasonable is apt to, and in my opinion does, permit regard to matters beyond the relatively absolute necessity for the effective use or development of the dominant tenement. It calls for an assessment of that necessity having regard to all relevant matters, according to the criterion of reasonableness. The impact of the easement on the servient tenement, and the fact that ordering an easement detracts from the property rights of the owner of the servient tenement, are matters readily to be taken into account in that assessment. It is difficult to see how reasonable necessity for an easement for the use or development of a dominant tenement, as distinct from necessity, can be arrived at without regard to the effect on the enjoyment of the servient tenement and on the property rights of the owner of the servient tenement.

50 The appellant then submitted that too stringent a notion of reasonable necessity had been applied, in that the judge had held that it was not sufficient that it would be convenient or nice to have the easement and that “[i]t is appropriate to look for a requirement that is far closer to necessity than it is to convenience” (at [121]). The appellant relied on what was said by Hodgson CJ in Eq (as his Honour then was) in 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1998) 43 NSWLR 504 at 508-9 -

“It is clear that ‘reasonably necessary’ in s 88 K (1) does not mean ‘absolutely necessary’, and thus that the requirement may possibly be satisfied even when the plaintiff's land could be effectively used or developed without the easement: Tregoyd Gardens v Jervis (Hamilton J, 25 September 1997, unreported); Goodwin v Yee Holdings Pty Ltd (Windeyer J, 6 November 1997, unreported); Re Seaforth Land Sales Pty Ltd's Land [No 2] [1977] Qd R 317.

In my opinion: (1) the proposed easement must be reasonably necessary either for all reasonable uses or developments of the land, or else for some one or more proposed uses or developments which are (at least) reasonable as compared with the possible alternative uses and developments; and (2) in order that an easement be reasonably necessary for a use or development, that use or development with the easement must be (at least) substantially preferable to the use or development without the easement.”

51 The appellant had relied on the same passage below, and had submitted that it was sufficient that the use of the Alma Street property with the easement was substantially preferable to its use without the easement. The judge did not accept the submission, saying amongst other things that Hodgson CJ in Eq should not be understood as saying that meeting the two requirements he stated was sufficient for reasonable necessity.

52 The judge referred to other cases standing against the submission, in particular the decision of Young J (as his Honour then was) in D & D Corak Investments Pty Ltd v Yiasemides [2006] NSWSC 1419 where it was said at [13] that the cases -

“ … indicate that the word ‘necessary’ does not mean absolutely necessary, but it does mean more than something that is convenient or nice to have and that one must look for a requirement that is far closer to necessity than it is to convenience”.

It is apparent that his Honour took up these words from the decision of Young J.

53 In my opinion, in 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 Hodgson CJ in Eq was not saying that it was sufficient that use or development with the easement was substantially preferable to use or development without the easement. That appears in particular from the parenthetic “at least”. The words of s 88K(1) must be applied, rather than some substituted words. Although qualified by “reasonable”, the requirement is necessity, and I respectfully agree with Young J’s emphasis on (reasonable) necessity. In my opinion, reasonable necessity can not be reduced to substantial preference.

54 It was not entirely clear whether the appellant otherwise complained of the judge’s conclusion that an easement in the terms requested was not reasonably necessary for the use of development of the Alma Street property. It may have done so in its written submissions, which included after an historical account that the reasons for what was done in 1986 “are still applicable and provide strong support for the finding of reasonable necessity”.

55 However, more now falls for consideration than the reasons for what was done in 1986. There is no longer the family connection between the owners of the dominant tenement and the owners of the servient tenement. There is the history of breaches of the terms of the easement. The family connection may explain the restricted grant of rights under the easement, and the restrictions make it difficult now to see an easement in those terms as a real benefit to the occupant of the Alma Street property. That must itself reflect adversely on reasonable necessity, which must be judged as at the present time.

56 In my opinion, no error has been shown in the judge’s conclusion that there was not reasonable necessity for the purposes of s 88K.

Orders

57 The appeal should be dismissed with costs.

58 CAMPBELL JA: I agree with Giles JA.

59 YOUNG JA: This is an appeal from a decision of Forster J in the Equity Division involving an easement over land at Clontarf.

60 The appellant is the mortgagee in possession of land in Alma Street (referred to in the judgment below and in these reasons as the “Alma Street Property”). The respondents are the registered proprietors of property which adjoins that property to the North and which fronts Adelaide Street. This was referred to below and in these reasons as the “Adelaide Street Property”.

61 Prior to July 2009, the Alma Street property enjoyed a registered right of carriageway and restricted right of footway over the Adelaide Street property.

62 That easement was subject to conditions, breach of which would enable the proprietors of the Adelaide Street property to have the easement released. The conditions were of two types: (a) requiring the payment of an annual sum part of which was to cover a proportion of the rates on the Adelaide Street property; and (b) conditions to preclude excessive user which would interfere with the amenities of the Adelaide Street property.

63 It is common ground that breaches were committed, breaches of both types of condition.

64 The respondents executed a release of the easement basing their entitlement to do so on those breaches.

65 However, the Registrar General indicated an unwillingness to register that document without a court order.

66 The respondents then commenced proceedings for a declaration that they were entitled to have the easement released.

67 On 4 June 2009, by consent, Rein J made such a consent declaration.

68 However, the appellant filed a cross-claim seeking in the alternative relief against forfeiture or the imposition by the court of an equivalent easement under s 88K of the Conveyancing Act 1919.

69 The appellant wishes to sell the Alma Street property. It has consultants who have advised it that the price likely to be obtained for the Alma Street property with the easement is likely to be considerably more than if it is sold without the easement.

70 It was this cross-claim which was determined against the appellant by Forster J and in respect of which this appeal is brought.

71 On appeal, Mr D Robinson SC with Ms P Lane appeared for the appellant and Mr F Kunc SC with Mr I Pike and Ms E Bishop appeared for the respondents.

72 This appeal raises two and only two discrete issues, namely: (1) whether relief against forfeiture should be given; and (2) if not, whether the court should grant an equivalent easement under s 88K. I first deal with the nature of this appeal and then with each of those issues issue in turn, finishing with my view as to the result of the appeal.

1. The Nature of the Appeal

73 As noted above, the appeal has two limbs. A decision to refuse relief against forfeiture is usually a discretionary decision. An appeal court does not interfere with the exercise of discretion unless the case is within the principles set out in House v The King [1936] HCA 40; 55 CLR 499.

74 The appeal on this ground appears to be against a discretionary judgment although the case was determined below principally on the application of principle (which the appellant disputes) to the facts of the case.

75 The appeal concerning s 88K of the Conveyancing Act 1919 in the instant case is not an appeal against a discretionary judgment. The primary judge dismissed the claim without entering into discretionary considerations. The facts were unchallenged: the appellant complains as to the primary judge’s construction of the relevant statute.

76 As will appear, there is little point in discussing the exact test to be applied as whatever it is, the appellant must demonstrate some appealable error.

2. Relief against forfeiture

77 It is useful to consider this aspect of the appeal under two sub-heads, viz:

(a) The nature of relief against forfeiture, including whether relief against forfeiture is available in cases such as the present;

(b) Whether the primary judge erred in refusing relief against forfeiture in this case.

78 (a) It must be remembered that, technically, “forfeiture” in this situation means “liability to bring about a termination of an estate” not the actual termination of the estate. Thus, in lease cases, “forfeiture” means breach of a covenant that entitles the landlord to determine the lease. The landlord may enforce the forfeiture by re-entry or equivalent, or may expressly or impliedly waive the forfeiture.

79 Thus, the principle is only applicable where the estate can be terminated by covenant, not where it automatically determines as a matter of the operation of the law: see Peachy v Somerset (Duke) (1721) 1 Strange 447; 93 ER 626 per Lord Macclesfield LC.

80 It was, however, common ground that in the present case, the easement did not come to an end on breach of the conditions, but those breaches entitled the servient owners to release it.

81 Because of the consent order, it was conceded that the occasion for giving a release had occurred and thus there was no need to consider whether on the proper construction of the easement the breaches were sufficiently serious on which to base the release. Nor was it necessary to consider whether the covenant to pay money as a condition of an easement runs with the land (see Gale on Easements, 18th ed [1-106]), nor how one enforces other conditions of an easement in the absence of an express provision (Gale op cit [1-93]), which is fortunate as the learned editors of Gale say there is a dearth of authority in this area of the law. These matters were mentioned during the argument: I merely mention them here in case some academic commentator or subsequent decision maker might make unwarranted assumptions.

82 Generally speaking, relief against forfeiture is granted where it would be against the conscience of the defendant to permit him or her to rely on what might appear to be his or her rights on the strict legal interpretation of a document conferring property, or in some cases, contractual, rights on another. In this regard, it must be remembered that something is not necessarily against the conscience just because a judge might subjectively consider conduct “unfair”: Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd [2010] VSC 2 at [110] ff and Bofinger v Kingsway Group Ltd [2009] HCA 44 ; 239 CLR 269, 301 at [94].

83 The most common case of the application of the principle is where a court of equity can see that a right to elect to enforce a forfeiture was inserted in a document as security for the payment of money. If the default with respect to the payment of money is made good and the circumstances are such that similar defaults are unlikely to reoccur, the court will ensure that the parties fulfil their intended bargain and restrain termination of the estate. This is usually done as the right to terminate was intended only to be activated if the money default continued.

84 The case was put to the primary judge on the basis that the decision of the High Court in Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; 217 CLR 315 was determinative of the matter and the primary judge considered the matter in that light.

85 It was common ground that it was competent for a court of equity to grant relief against forfeiture in the present case.

86 (b) As the primary judge pointed out, the basic facts were not in dispute. It is unnecessary to deal with these as fully as were set out in the primary judgment, but I will take from the primary judge’s summary what factual material is necessary to consider on this appeal.

87 The combined lots were, prior to about 1956, owned by Mrs O’Shea’s parents. In that year the large lot was subdivided and the Adelaide Street Property was transferred to Mrs O’Shea and the Alma Street property to Mrs O’Shea’s sister, Mrs Palme and her husband.

88 In 1956, the Palmes lodged a building application with the Manly Council for the erection of a dwelling on the Alma Street property.

89 The Alma Street property is at substantially the same level for approximately one half of its area, being the area closest to the Adelaide Street property, but then falls steeply to the south towards Alma Street. Having regard to the slope in question, it was made clear in the Palmes’ 1956 building application that their vehicular access would be through the Adelaide Street property, substantially over the same area as that over which the easement came to extend after 1986.

90 The council approved the application and the Palmes entered into occupation of their dwelling on the Alma Street property in 1957.

91 Subsequently, the O’Sheas also lodged a development application with Manly Council to build a dwelling on the Adelaide Street property and in about 1962 they moved into the dwelling erected on the Adelaide Street property.

92 Ever since the Palmes commenced occupying their dwelling on the Alma Street property, they used the Adelaide Street property as their sole means of vehicular access. They parked their vehicles on a small area located on the south-eastern corner of the Adelaide Street property, adjacent to the Alma Street property (“the Parking Area”). The Adelaide Street property being substantially flat, the Parking Area was more or less on the same level as Adelaide Street (which the Adelaide Street property fronted) but it was at a significantly higher level than Alma Street. Indeed, it would have been, as it still is, virtually impossible to drive a vehicle from the Parking Area to Alma Street.

93 Given the close family relationship between the O’Sheas and the Palmes, this form of vehicular access continued to be made available to the Palmes by the O’Sheas on an informal basis until 1986. In that year, the Palmes decided to sell the Alma Street property. They were advised that in order to maximise the price they would obtain for it, they would need to obtain a formal recognition of a right to access Adelaide Street from the Parking Area.

94 In order to assist the Palmes, and for no monetary consideration, the O’Sheas transferred the Parking Area to the Palmes, whereupon it became incorporated into, and thereafter formed part of, the Alma Street property. At the same time, they agreed to the creation of the easement in favour of the Alma Street property.

95 Under the terms of the Instrument created pursuant to s 88B of the Conveyancing Act 1919 (“the Instrument”), which was registered on 27 November 1986, the terms of the easement were stated to be as follows:

(1) Full and free right for every person who is at any time entitled to an estate or interest in possession in the lot benefited (herein called “the benefited owner”) and every person who is at any time authorised by him, to pass and repass over the carriageway;
o (a) by a motor vehicle not exceeding 6 metres in length;

o (b) by foot but only for the purpose of putting out household refuse for collection.

(2) No motor vehicle shall stop whilst on the carriageway except that the benefited owner shall not at any time prevent, impede or otherwise obstruct or attempt to prevent, impede or otherwise obstruct any person who is at any time entitled to an estate or interest in possession in the lot burdened (herein called “the burdened owner”) from parking any motor vehicle on the carriageway for the purpose of loading or unloading the said motor vehicle.

(3) No more than two motor vehicles shall use the carriageway at any one time.

(4) so long as the benefited owner shall be entitled to pass and repass over the carriageway, he shall pay to the burdened owner—

o (a) on 1st January of each and every year commencing from 1st January 1987, the sum of $500.00;

o (b) on demand, 20% of the amount by which the rates and taxes are increased above the basic amount of rates and taxes levied in respect of the lot burdened;


For the purpose of this Clause:

o (i) “rates and taxes” shall mean all rates, taxes and charges of any shire or municipal council and Water Board levied in respect of the lot burdened.

o (ii) “basic amount of rates and taxes” means:

(a) in respect of municipal rates, the sum of $1,583.37,

(b) in respect of Water Sewerage & Drainage rates the sum of $818.32.

96 In the instrument, the reference to “the lot benefited” is a reference to the Alma Street property and the reference to “the lot burdened” is a reference to the Adelaide Street property.

97 The instrument provided the persons having the right to release, vary or modify the right of carriageway as being:

The registered proprietor for the time being of Lot 1 in the abovementioned plan of subdivision, namely the registered proprietor for the time being of the Lot burdened, provided that the said right shall not be exercised unless there has been a breach of the terms of the right of carriageway set out herein.

The reference to “Lot 1” is a reference to the Adelaide Street property.

98 Shortly thereafter, the Palmes entered into a contract to sell the Alma Street property to a Mr and Mrs Russo, and by transfer dated 1 April 1987, they completed the sale.

99 Shortly after their acquisition of the Alma Street property, the Russos lodged a building application with the Manly Council for various improvements to the dwelling, including the addition of a further bedroom and a swimming pool. The application also provided for the erection of a double garage on the Parking Area. Until that time, there had been a single carport and a single garage located on the Parking Area.

100 The council approved the application, and its chief health and building surveyor’s report noted that vehicular traffic from Alma Street property would be through a “vehicular right-of-way from Adelaide Street”. The Russos then proceeded to further develop the Alma Street property in accordance with the council’s approval.

101 The Russos remained in occupation of the Alma Street property until 1994, when they transferred it to Mr and Mrs Athanasakis. In March 1999 Mr Athanasakis left and transferred his interest in the Alma Street property to Mrs Athanasakis. From about that time, Mrs Athanasakis also ceased to occupy the Alma Street property but rented it to a series of tenants.

102 Later Mrs Athanasakis defaulted under her mortgage and the present appellant entered into possession. It wishes to sell the Alma Street property and has already cancelled one proposed auction because of the problems that are considered in this litigation.

103 In addition to the basic facts, the primary judge found additional facts which he noted might be unnecessary, I will note a few of these.

104 At [43] the primary judge recorded his opinion that the psychological effect of not having exclusive possession of one’s home would have to be given greater weight than might be the case were the Adelaide St property a commercial or industrial site.

105 At [44] the primary judge estimated that the injurious affection on the Adelaide St property occasioned by an easement in the terms of the easement would be $110,000 or perhaps a little more.

106 The judge said at [48] that there can be no doubt that the easement substantially benefited the Alma Street property. It enabled the occupants of that property to drive into the garage situated on the Parking Area, which is at substantially the same level as the main living area of the house on the Alma Street property. Accordingly, there were few, if any, steps to negotiate when the occupants came home, perhaps carrying packages of groceries or other items.

107 The primary judge then passed at [49] and following to consider the effect on the Alma Street property in the absence of such an easement.

108 He first considered whether the local council would approve an application by the occupier of the Alma Street property to create a driveway into that property from Alma Street. He noted that the experts seemed to agree that the answer to that issue would be in the affirmative.

109 He held at [50] that the council would not refuse permission for such access.

110 The primary judge’s conclusion at [56] was that there is no doubt that the value of the Alma Street property would decrease without the benefit of the easement or the proposed easement. It is likely that any purchaser would wish to install a garage at a cost of approximately $119,000. Other than that cost, and the undoubted temporary inconvenience that would accompany its construction, he did not consider that the Alma Street property would be detrimentally affected in any other substantial manner.

111 It will have been observed that the principal value of the easement was the ability to drive one or two cars from Adelaide Street into the garage erected on the Parking Area. However pedestrian access was very limited virtually to taking the garbage bin to Adelaide Street and back.

112 The primary judge noted at [59] that the easement was always of limited value, the restrictions on its use being quite significant. Further, because it was so easy to breach with the consequence of it being lost, the easement was in reality of a somewhat fleeting or evanescent nature. By comparison, a garage situated on the Alma Street property itself would have a degree of permanence which might be important to many potential purchasers.

113 There was no challenge to what I have termed the basic facts and limited challenges to the additional facts on this appeal.

114 However, I should make one comment on the fact finding exercise below. Under s 55 of the Evidence Act 1995, what a judge sees on a view is evidence in the case. As I understand it, the practice I adopted in equity is now fairly standard and that is that, after the view, the judge hands down a draft note of his or her observations at the view, hears counsel before settling the final version and then records that note in the transcript or as an exhibit. In that way, everyone knows what facts the judge has taken in as a result of the view.

115 It would seem in the instant case that that process was commenced and a draft note produced, but then the process was abandoned. As a result it is understandable that a person against whom a finding of fact is stated in the reasons for judgment to have been derived from the view may justly consider that there has been unfairness.

116 In the instant case, there were some findings in this category. However, none of these went to the core of the decision and any problem here is no reason to disturb the decision.

117 The primary judge then proceeded to consider the application for relief against forfeiture on these facts and, as I have already noted, on the basis that the key legal consideration was the High Court’s decision in Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; 217 CLR 315.

118 The primary judge conducted a thorough analysis of Tanwar and associated authorities and ruled that the common thread running through the analysis of the various decisions is that in order for the court to interfere with the contractual rights of the parties, the circumstances must be such that it is necessary to intervene to avoid injustice by relieving against unconscionable or unconscientious conduct.

119 The principal associated authorities are Shiloh Spinners Ltd v Harding [1973] AC 691; Legione v Hateley [1983] HCA 22; 152 CLR 406 and Stern v McArthur [1988] HCA 52; 165 CLR 489.

120 The primary judge continued:

[81] This can occur where the party against whom relief against forfeiture is sought caused or contributed to the circumstances which lead to relief against forfeiture being sought (as was the case in Legione ). Relief against forfeiture may also be granted in circumstances where the situation has come about without any contribution on the part of that party, but where the strict insistence on legal rights by that party itself constitutes unconscionable or unconscientious conduct (as was found to be the case by the majority in Stern ).

[82] In my opinion, it is in this latter class of case that the lessor-lessee cases, and those referred to in Shiloh Spinners fall. Where a lessee fails to make a payment of rent and the lessor seizes upon that single instance in order to re-enter the demised premises, it is that re-entry and the lessor’s strict insistence upon his legal rights that constitutes the unconscionable or unconscientious conduct against which a court will relieve against forfeiture.

[83] In other words, I do not consider that the lessor-lessee cases constitute a different genus for the application of the principle of relief against forfeiture.

[84] The existence of fraud, mistake, accident, surprise or other similar conditions merely makes it easier for the party seeking relief against forfeiture to establish his entitlement to it. The existence of such circumstances is simply a factor that a court takes into account in determining whether, in all the circumstances, the conduct of the other party is unconscionable or unconscientious.

[87] The ultimate question, then, is whether the conduct of the party against whom relief against forfeiture is sought can properly be characterised as unconscionable or unconscientious, independently of whether such conduct consisted of causing or contributing to the circumstances leading to the forfeiture of an interest, or whether such conduct consisted of strictly insisting upon legal rights. It was in the context of answering that question that the court in Tanwar at [40] noted, with apparent approval, what Mason and Deane JJ had said in Legione at 152 CLR at p 449, namely:


In the ultimate analysis the result in a given case will depend upon the resolution of subsidiary questions which inevitably arise. The more important of these are: (1) Did the conduct of the vendor contribute to the purchaser’s breach? (2) Was the purchaser’s breach (a) trivial or slight, and (b) inadvertent and not wilful? (3) What damage or other adverse consequences did the vendor suffer by reason of the purchaser’s breach? (4) What is the magnitude of the purchaser’s loss and the vendor’s gain if the forfeiture is to stand? (5) Is specific performance with or without compensation an adequate safeguard for the vendor?

[88] Although Legione , like Stern and Tanwar , involved disputes between vendors and purchasers, I do not see why the same principles would not apply in circumstances where the issue of relief against forfeiture arises between lessor and lessee or, as in the present case, between the owner of the servient tenement and the owner of the dominant tenement under an easement. If one substitutes for “the vendor” the owner of the servient tenement (here “the O’Sheas”), and for “the purchaser” the successive occupiers of the dominant tenement, (here “the successive occupiers”) the more important of the subsidiary questions would be, following what Mason and Deane JJ said in Legione , as follows:
(1)Did the conduct of the O’Sheas contribute to the breaches by the successive occupiers?

(2)Were the breaches of the successive occupiers:

o (a) trivial or slight?; and

o (b) inadvertent and not wilful?

(3) What damage or other adverse consequences did the O’Sheas suffer by reason of those breaches?

(4) What is the magnitude of the loss to the successive occupiers (in this context represented by ING) and the gain to the O’Sheas if the forfeiture is to stand?

(5) Is the re-imposition of the Easement with or without compensation an adequate safeguard for the O’Sheas?

121 The primary judge then addressed each of these questions, answered them favourably to the O’Sheas and dismissed the claim.

122 However, on appeal, Mr Robinson took the position that Tanwar was more or less irrelevant to the instant case. He complained of some alleged factual errors in the judge’s assessment, but, to my mind even if there were some errors as suggested (and I tend to agree with Mr Kunc that they did not exist) they were of such minor effect on the decision as not to vitiate it.

123 Mr Robinson put that Shiloh Spinners made it clear that there were cases where relief against forfeiture could be given even if there was no unconscionable conduct on the defendant’s part.

124 It is true that Equity’s jurisdiction is not limited and that there may be situations where the court will give relief against forfeiture where there is no unconscionable conduct on the part of the defendant; see eg Shiloh Spinners and the essay ”Relief Against Forfeiture in the High Court of Australia” by Tolhurst and Carter in (2004) 20 JCL 74, 83 and, more recently, the discussion by Croft J in Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd [2010] VSC 2 at [104] ff.

125 It is also clear that the Court may grant relief against forfeiture to a mortgagee where the forfeiture was incurred by the mortgagor: Commonwealth Development Bank of Australia v Eagle Hotels Pty Ltd, Cohen J, [1990] ANZ ConvR 100; (1990) NSW ConvR 55-506 (BC8901607) applied in MI Design Pty Ltd v Dunecar Pty Ltd [2000] NSWSC 996; 10 BPR 18,387 per Santow J.

126 The primary judge did not accept that there were different classes of the equity to relieve against forfeiture. He saw the present as a more or less typical case and looked for unconscionable conduct or any other reason for equity to come to the aid of the appellant and found none.

127 No case was cited to us involving a court being requested to prevent the owner of a servient tenement putting an end to an easement. This may well be because it is not a common event in the ordinary experience of mankind.

128 It is true that special learning has grown up with respect to lease cases, but this is principally because they are the most numerous type of case to come before the courts. Moreover, statute law has now picked up many of the traditional equitable doctrines with respect to “curing” defaults in payment of rent. Thus, where the default is made good with costs, normally relief is given. On the other hand, when considering whether to give relief involving a contractual right in a contract for the sale of land, a special case must be made out. However, despite this, the basic principle is the same.

129 In my view the primary judge made no error in his determination of this issue.

130 The Court did not call on Mr Kunc for detailed oral submissions, but was assisted by his written submission both those in the Orange Book and those handed up during the morning of the hearing.

131 Mr Robinson sought comfort in the fact that the appellant was a mortgagee and had not personally committed any of the breaches of which the respondents complained and had tendered a cheque to cover the money default and offered reasonable compensation for the other defaults.

132 However, whilst the cleanliness of the hands of the appellant is relevant as to whether the court might give or refuse relief, the basal consideration is not the conduct of the appellant, but whether the respondents have acted against good conscience.

133 I do not consider that the primary judge made any error with respect to this aspect of the case and the appeal against his conclusion must be dismissed.

3. Section 88K of the Conveyancing Act 1919

134 Section 88K of the Conveyancing Act 1919 came into effect on 1 August 1996 as a result of amending Act 71 of 1995. It was slightly amended in 1999.

135 Sub-sections (1) –(4) of the section reads as follows:

o (1) The Court may make an order imposing an easement over land if the easement is reasonably necessary for the effective use or development of other land that will have the benefit of the easement.

o (2) Such an order may be made only if the Court is satisfied that:

(a) use of the land having the benefit of the easement will not be inconsistent with the public interest, and

(b) the owner of the land to be burdened by the easement and each other person having an estate or interest in that land that is evidenced by an instrument registered in the General Register of Deeds or the Register kept under the Real Property Act 1900 can be adequately compensated for any loss or other disadvantage that will arise from imposition of the easement, and

(c) all reasonable attempts have been made by the applicant for the order to obtain the easement or an easement having the same effect but have been unsuccessful.

o (3) The Court is to specify in the order the nature and terms of the easement and such of the particulars referred to in section 88(1)(a)–(d) as are appropriate and is to identify its site by reference to a plan that is, or is capable of being, registered or recorded under Division 3 of Part 23. The terms may limit the times at which the easement applies.

o (4) The Court is to provide in the order for payment by the applicant to specified persons of such compensation as the Court considers appropriate, unless the Court determines that compensation is not payable because of the special circumstances of the case.

136 We have been referred to the Second Reading Speeches when the legislation was introduced. The spur for the legislation was the inadequacy of the then law to deal with situations where the rights of an owner extended to prevent by injunction even the passage of a crane jib through his or her airspace as a trespass. However, its operation is clearly wider than that situation.

137 The legislation followed the Queensland Property Law Act 1974-5 the test of which can be seen in the report of Re Seaforth Land Sales Pty Ltd’s Land (No 2) [1977] Qd R 317, 320.

138 The Queensland legislation differs from that introduced in NSW in one significant respect. In Queensland, sub-section (1) at all relevant times read:

o (1) Where it is reasonably necessary in the interests of effective use in any reasonable manner of any land…that such land…should… in respect of any other land…have a statutory right of user…the Court may…impose upon the servient land…an obligation …to permit such user in accordance with the order.

139 Many hundreds, if not thousands, of applications under the section have been made under the NSW section and many under the corresponding section in Queensland. It seems fairly certain that all but two of these applications have been finally determined by single Supreme Court Judges. The two exceptions are the Seaforth case noted above and Calahorra Properties Pty Ltd v Nelson [1985] ANZ Conv R 352; (1985) Q ConvR 54-202, both decisions of the Full Supreme Court in Queensland.

140 In Tillman v AG (NSW) [2007] NSWCA 327; 70 NSWLR 448, this Court held that on the ground of comity as between intermediate appellate courts, the Court should adopt the interpretation given by an interstate Court of Appeal which has dealt with substantially similar legislation.

141 However, the fact that the Queensland legislation contains the significant additional words “in any reasonable manner of any land” means that a court might be justified in taking the view that the legislation in Queensland was not substantially similar to s 88K.

142 Mr Robinson says that, despite the way the section has been interpreted by almost all the judges in equity in NSW and the Queensland judges, it is an error to take into account the property rights of the holder of the servient land when enquiring into whether the easement sought by an applicant is “reasonably necessary”.

143 The primary judge tackled the problem by looking at each element in sub-sections (1) and (2) separately. Mr Robinson says that his Honour found the matters in sub-section (2)(a), (b) and (c) in his client’s favour and that his client only failed because the judge misconstrued the words “reasonably necessary”.

144 Mr Robinson truly says that because his Honour took that view he never got to examining the discretion which he admits is implicit in the word “may”.

145 The Court asked what it should do if it found the question of construction in the appellant’s favour. Mr Robinson replied that a view would be necessary, the matter should go back to the Equity Division. However, that question was left open should this Court take the unusual course of consenting to have a view itself in order to save costs.

146 It is true that virtually all prior decisions have approached applications under the section by looking at each element in turn. However, when one looks at the section as a whole, it can be seen that there is overlap between some of the elements and anything not strictly within one of the elements may well be relevant to issue of discretion. Thus, the effect on the proposed easement on the holder of the servient land will impact on the court’s decision on the factors referred to in sub-sections (2) and (3) and, if the common way of approaching the term “reasonable necessity” is followed, then on that as well additionally to discretion.

147 Mr Robinson submits that, although there are a number of decisions of the Equity Division indicating that a court can take into account the effect of the proposal on the proposed servient tenement, those decisions are an unwarranted gloss on the statute.

148 I do not need to list even the principal cases where the point has been considered. A good list is provided by Brereton J in Khattar v Wiese [2005] NSWSC 1014; 12 BPR 23,235, 23,241 [24] ff.

149 The point was made by JA Douglas J in one of the earliest cases, the first instance decision in Re Seaforth Land Sales Pty Ltd’s Land [1976] Qd R 190, 193, that courts start with the premise that one should not interfere readily with proprietary rights of an owner of land.

150 This thought permeates the cases. The cases recognise the confiscatory aim of the legislation but say that because of the principle noted by JA Douglas J, they must tread carefully.

151 In Woodland v Manly Municipal Council [2003] NSWSC 392; 127 LGERA 120,129 at [19], Hamilton J stated as his proposition (8):

“In my view, the impact of the use with the easement on the burdened land should also be considered in relation to the assessment of reasonable necessity under subs (1). The greater the impact the less likely the conclusion that there is reasonable necessity.”

152 In making that statement, Hamilton J drew from the judgment of Hodgson CJ in Eq (as his Honour then was) in Katakouzinos v Roufir Pty Ltd [1999] NSWSC 1045; 9 BPR 17,303,17,308 at [42]. I respectfully agree with both.

153 Mr Robinson puts that the statute when authorising the imposition of an easement over land employs the words “reasonably necessary for the effective use or development of other land”, the words clearly mean that the court for this element looks to the reasonable necessity for us of that “other land”. Detrimental effect on the proposed servient tenement is addressed in sub-section (2).

154 Thus, when the primary judge found the matters in sub-section (2) in the applicant’s favour, he was not justified in considering the effect of the proposal under the head “reasonably necessary” in sub-section (1).

155 I am not convinced by this argument. It seems to me that one cannot assess what is reasonably necessary unless one considers the whole picture including the effect of the proposal on the servient land.

156 A good illustration as to why this is so is provided by those cases where in a closely settled area, a person builds on the whole of his or her land and then seeks an access strip over neighbouring land (see eg Hanny v Lewis (1998) 9 BPR 16,205). Although, if considered by itself, the grant of access might be considered “reasonably necessary” for the use of the applicant’s land, in my view the court would take into account the effect on the neighbour and the fact that the necessity was created by the applicant himself.

157 Mr Robinson’s riposte is that that sort of case is to be dealt with under the discretion inherent in the word “may”. I respectfully disagree that that is the only head under which the matter may be considered.

158 The cases in equity over the past ten years or so have all proceeded on the basis that Mr Robinson’s view is incorrect. Putting aside my own first instance decisions on the point (to which I adhere) it is a matter of significance that so many judges in a specialist court have reached the same result, even allowing for the fact that comity may have resulted in some of them accepting previous decisions on their face.

159 The Queensland Full Court in Calahorra Properties clearly rejected the submission (see McPherson J with whom Andrews ACJ and Demack J agreed) at p 354. However, whilst this is a Full Court decision with a judgment from one of the wisest judges of the 20^th century, the words of the Queensland statute impinge on its value in this State. However, it must be noted that Hamilton J in Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845, 15,854 did not consider the differences sufficient to preclude him from following the learning derived from the Queensland authorities.

160 Mr Robinson says that it is just wrong to emphasise the fact that property rights are sacred. The whole purpose of the legislation is to override property rights so long as adequate compensation can be awarded.

161 However, when compensation for loss of land rights is being considered, one must always bear in mind the aphorism of Lord Sumner cited by Campbell JA during the oral argument:

“I doubt …whether it is complete justice to allow the big man…to have his way, and to solace the little man for his darkened and stuffy little house by giving him a cheque that he does not ask for.”

[ Leeds International Co-Operative Society Ltd v Slack [1924] AC 851, 872].

162 In my view, the court should reject Mr Robinson’s submission.

163 The primary judge did take this factor into consideration. He analysed the facts and came to the decision of fact that the proposed easement was not reasonably necessary. I can see no error in his approach.

4. The result of the Appeal

164 It follows that the appeal should be dismissed with costs.

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