Stephenson v Dwyer

[2008] NSWCA 123

New South Wales

Court of Appeal

CITATION:	Stephenson v Dwyer [2008] NSWCA 123
HEARING DATE(S):	14 February 2008
JUDGMENT DATE:	30 May 2008
JUDGMENT OF:	Mason P at 1; Hodgson JA at 72; McColl JA at 123
DECISION:	Appeal dismissed with costs.
CATCHWORDS:	CONTRACTS – EASEMENTS – Documents signed by neighbours containing terms for extinguishment of easement – Signatures expressed as signifying “in principle approval” – Whether binding agreement intended – If so, whether order under s 89 of the Conveyancing Act 1919 (NSW) should be made – Whether necessary, for such an order, that a mortgagee of dominant tenement agree or be joined as a party to the proceedings – Whether necessary, for such an order, that the party agreeing to extinguishment of the easement receive the consideration for that agreement.
LEGISLATION CITED:	Real Property Act 1900 (NSW) s 49(4), s 56 Conveyancing Act 1919 (NSW) s 54A, s 89
CATEGORY:	Principal judgment
CASES CITED:	Ashoil Holdings Pty Ltd v Fassoulas (2005) 12 BPR 23,525; [2005] NSWCA 80 Cacace v Bayside Operations Pty Ltd [2006] NSWSC 572 Chiu v Healey (2003) 11 BPR 21,241; [2003] NSWSC 857 Re Ellenborough Park [1956] Ch 131 Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 English Scottish and Australian Bank Ltd v Phillips (1937) 57 CLR 302 GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 Masters v Cameron (1954) 91 CLR 353 Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 Pieper v Edwards [1982] 1 NSWLR 336 Pralle v Scharka [1978] 2 NSWLR 450 Stephenson v Dwyer [2006] NSWSC 1439 Treweeke v 36 Wolseley Road Pty Ltd (1972) 128 CLR 274 Wolfe v Freijahs’ Holdings Pty Ltd [1988] VR 1017
TEXTS CITED:	Bradbrook and Neave, Easements and Restrictive Covenants in Australia 2nd ed, Butterworths, Sydney 2000 at §§19.2, 19.6 Gaunt, Gale, Morgan, Gale on Easements 17th ed, Sweet & Maxwell, London 2002 at §§12-13–12-18, §§19.125-19.127 Halsbury’s Laws of Australia, (2006) vol 355, para 12235
PARTIES:	Alan STEPHENSON (First Appellant) Valerie STEPHENSON (Second Appellant) Robert Stewart DWYER (First Respondent) Ruth Anne MADDIGAN (Second Respondent) Simon Paul POIDEVIN (Third Respondent) Paula BRUCE (Fourth Respondent)
FILE NUMBER(S):	CA 40047/07
COUNSEL:	D F JACKSON QC/V R W GRAY (Appellants) IN PERSON - submitting appearance – (First and Second Respondents) R C B SCOTT (Solicitor) - submitting appearance (Third Respondent) R E DUBLER SC/ P BOLSTER (Fourth Respondent)
SOLICITORS:	Peter M Wayne & Associates (Appellants) Surry Partners Lawyers (First and Second Respondents) Taylor & Scott (Third Respondent) Verekers (Fourth Respondent)
LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC 2105/05
LOWER COURT JUDICIAL OFFICER:	Biscoe AJ
LOWER COURT DATE OF DECISION:	22 December 2006
LOWER COURT MEDIUM NEUTRAL CITATION:	Stephenson v Dwyer [2006] NSWSC 1439

CA 40047/07
SC 2105/05

MASON P
HODGSON JA
McCOLL JA

30 MAY 2008

Alan STEPHENSON and Anor v Robert Stewart DWYER and 3 Ors

Headnote

Facts

1. The appellants, the Stephensons, sued the first and second respondents, the Dwyers, the third respondent, Mr Poidevin, and the fourth respondent, Ms Bruce, claiming an order under s 89 of the Conveyancing Act 1919 (NSW) to extinguish identified rights of footway. In the same proceedings, the Dwyers had brought a cross-claim against Mr Bruce, Mr Poidevin, and the Stephensons, seeking specific performance of the agreement for the release of Ms Bruce of certain rights of way.

2. The primary judge dismissed the Stephensons’ claim and the Dwyers’ cross-claim. The primary judge held that the parties’ intentions, objectively ascertained, was that the document did not constitute a binding contract. The Stephensons appealed.

Issues on appeal

3. Issues on appeal were:

(1) Whether the parties intended to be contractually bound by the terms of the document entitled “Proposal”.
(2) Whether there was consideration flowing from Stephenson to Ms Bruce for any release by her of her right of way.
(3) Whether the consideration to Ms Bruce from Mr Poidevin for his release of her land was illusory given the agreement between Dwyer and Poidevin, whereby Poidevin had already agreed to release No 172.
(4) Whether any alleged agreement was brought to an end by the repudiation of Poidevin, which was accepted by Ms Bruce.
(5) Whether the Stephensons should be denied relief under s 89(1)(b) Conveyancing Act 1919 on discretionary grounds.
(6) Whether an order affecting the land can be made without all parties interested in the land (specifically the mortgagee) being joined.


HELD (dismissing the appeal)

Per Mason P (dissenting):

(1) The parties reached a concluded and binding agreement when they amended and signed the Proposal document. The phrase “each property owner signifies their in principle approval by signing at the end of this proposal” indicated that the proposal would become an approved proposal if and when it was signed.

(2) The mortgagees’ consent is not required before the court can make an order under s 89(1). The mortgagee was not a party to the agreement, nor was it a person “entitled to the easement”. There is nothing to preclude s 89(1)(b) from applying to a conditional or executory contract.

Per Hodgson JA :

(1) There was no error by the primary judge in finding that there was no binding agreement. The wording “in principle approval” and “proposal” supports the view that there were no binding obligations. Further, the survey proposed in the document might disclose unexpected complications in respect of an encroachment issue that the parties would have contemplated might need to be the subject of consideration and negotiation.

(2) There was consideration to Ms Bruce in rectification of the encroachment issue, in the expense of surveys and instruments being borne by the Dwyers.

(3) The rights of the Dwyers, and through them of the Stephensons, could not be affected by dealings between Mr Poidevin and Ms Bruce. The Dwyers had assigned their rights to the Stephensons.

(4) Even if there had been an agreement intended to create legal obligations, the court may not have made an order under s 89. The appropriate way to overcome any problem caused by the outstanding encroachment issue and non-participation of mortgagees would be by proceedings for specific performance.

Per McColl JA :

(1) The question whether the parties intended to be bound turns on what reasonable people in the positions of the parties would have understood the Proposal to signify: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 (at [22]).

(2) A reasonable person in the parties’ position would not have concluded that they intended the Proposal to be contractually binding. Rather it was, as expressed, an agreement in principle which would only become binding when the steps it contemplated, including obtaining the mortgagees’ consent, were completed.

CA 40047/07
SC 2105/05

MASON P
HODGSON JA
McCOLL JA

30 MAY 2008

Alan STEPHENSON & Anor v Robert Stewart DWYER & 3 Ors

Judgment

1 MASON P: I have had the benefit of reading in draft the judgment of Hodgson JA.

2 In my opinion, the appeal should be allowed.

3 The primary facts ceased to be contentious with the findings of the primary judge. I adopt Hodgson JA’s summary of them. And I agree with his Honour’s rejection of the first three grounds in Ms Bruce’s Notice of Contention.

Was there a concluded agreement?

4 In my opinion the parties reached a concluded and binding agreement when they amended and signed the document at the meeting on 23 November 2003.

5 Months earlier, on 21 May 2003, Ms Bruce had written to Mr and Mrs Dwyer, stating (Blue 18):

[her] commitment to sorting out the rear lane situation. I am in agreement to relinquish the right of way and there is no reason why I shouldn’t. I support the formalising of this legally which should be of benefit to all of the terraces.

6 On 16 June 2003, she wrote again to the Dwyers requesting them to “ask Simon [Poidevin] if he would consider cross easements for support” (Blue 19).

7 Ms Bruce is a lawyer.

8 The multi-lateral arrangement spelt out in the document covered the parameters that had been discussed over the preceding months and at the meeting itself. It set out the tasks to be performed and assigned responsibility for taking them as between the parties. There was consideration for the mutual promises, indeed it was spelt out in the section headed Advantages for Each Property.

9 The document did not envisage the preparation and execution of a further agreement. The comparative simplicity of the arrangement meant that this was unnecessary and, unlike the sale of land, there is no convention or practice of such an arrangement being “subject to contract”.

10 Naturally, the document provides for the preparation of a survey, and the preparation and execution of registrable instruments to create easements for support and to release the right of footway. But these were documents to be prepared by professionals in accordance with the agreement itself. The survey would reflect an ascertainable status quo. The proposed easements for support were really easements to permit the continuation of minor, long-standing encroachments involving the walls of houses and a boundary fence. Each may well have been attainable under the Encroachment of Buildings Act1922. These were Coogee terrace houses of some antiquity.

11 Considering the document as a whole and reading it in context, I am left with the firm impression that the label “Proposal” and the reference to approval “in principle” reinforce rather than undermine the conclusion that the parties were representing to each other a commitment that became binding upon signature. This was a relatively simple, yet multi-lateral, arrangement. Nothing suggests that there was anything left to be discussed or agreed. What each party needed was the commitment of the others before embarking upon the expense of engaging the professional services of surveyors and conveyancing lawyers. It is evident that the nub of the agreement was already known to all parties before the meeting.

12 The expression Proposal at the heading of the document is explicable by the fact that the party who had assumed the carriage of the matter at that stage, apparently Mr Dwyer, was bringing to the meeting something that was proposed as the formal embodiment of what needed to be agreed to and thereafter performed in order to deliver to each property the advantages stipulated.

13 There was discussion about legal expenses that resulted in the hand-written amendment to clause 9 at the end of the document.

14 The section headed Steps to be Taken served a dual purpose. It listed in a logical sequence the matters needing to be attended to and it assigned the responsibilities for performance.

15 Clause 1 in that section had an additional function. It states that “each property owner signifies their in principle approval by signing at the end of the proposal”. This indicated that the proposal would become an approved proposal if and when the signatures were added (as they were).

16 The approval was to be “in principle”. It is not suggested that this expression has a fixed meaning. It can be found in both contractual and non-contractual contexts and its presence may convey different meanings in different contexts. The critical question here is whether the words negated the common intention of present legal commitment that the signed document would otherwise have conveyed.

17 In Cacace v Bayside Operations Pty Ltd [2006] NSWSC 572, Brereton J said (at 18) that the phrase “agreed in principle” is “often used by lawyers to indicate that, although consensus on a matter has apparently been reached, there is not yet a final agreement”. This observation accords with my understanding, but it does not deliver the knockout-blow contended for by Ms Bruce. Masters v Cameron (1954) 91 CLR 353 shows that one can have a presently binding agreement even if (unlike the present situation) a fuller, more formal one is in contemplation.

18 Reading the document in context, my firm impression is that each party who signed was representing a commitment if the others were prepared to do so. The parties knew what had to be done; no one indicated a wish to engage in further negotiations; and each knew that significant expenses would be incurred by the others once the ball was set rolling. If Ms Bruce is correct, then it would appear to follow that (absent a second formal document) any party might withdraw no matter how close to the end and regardless of motivation. This strikes me as unreasonable, bordering on the absurd.

19 The parties may not have had s54A of the Conveyancing Act1919 at the forefront of their thoughts. But they recognised the need for a signed agreement addressing the whole arrangement. They listed the steps needing to be taken, but without contemplation of a further overarching agreement.

20 The primary judge paid some regard to the certain correspondence passing between Ms Bruce and one of the parties, Mr Poidevin. This was over six months after the signed proposal; it did not involve all of the parties; and it was either repudiatory or equivocal on the question whether there was an existing binding agreement about the right of way.

Was Ms Bruce’s mortgagee “entitled to the easement”?

21 Ms Bruce has submitted that her mortgagee is one of the persons whose agreement had to be established before it would be open to the Court to make an order under s89(1)(b) of the Conveyancing Act extinguishing the easement over her land. I would reject that proposition.

22 Section 89 states:

Power of Court to modify or extinguish easements, profits à prendre and certain covenants
(1) Where land is subject to an easement or a profit à prendre or to a restriction or an obligation arising under covenant or otherwise as to the user thereof, the Court may from time to time, on the application of any person interested in the land, by order modify or wholly or partially extinguish the easement, profit à prendre, restriction or obligation upon being satisfied:
(a) that by reason of change in the user of any land having the benefit of the easement, profit à prendre, restriction or obligation, or in the character of the neighbourhood or other circumstances of the case which the Court may deem material, the easement, profit à prendre, restriction or obligation ought to be deemed obsolete, or that the continued existence thereof would impede the reasonable user of the land subject to the easement, profit à prendre, restriction or obligation without securing practical benefit to the persons entitled to the easement or profit à prendre or to the benefit of the restriction or obligation, or would, unless modified, so impede such user, or
(b) that the persons of the age of eighteen years or upwards and of full capacity for the time being or from time to time entitled to the easement or profit à prendre or to the benefit of the restriction, whether in respect of estates in fee simple or any lesser estates or interests in the land to which the easement, the profit à prendre or the benefit of the restriction is annexed, have agreed to the easement, profit à prendre, restriction or obligation being modified or wholly or partially extinguished, or by their acts or omissions may reasonably be considered to have abandoned the easement or profit à prendre wholly or in part or waived the benefit of the restriction wholly or in part,
(b1) in the case of an obligation:
(i) that the prescribed authority entitled to the benefit of the obligation has agreed to the obligation’s being modified or wholly or partially extinguished or by its acts or omissions may reasonably be considered to have waived the benefit of the obligation wholly or in part, or
(ii) that the obligation has become unreasonably expensive or unreasonably onerous to perform when compared with the benefit of its performance to the authority, or
(c) that the proposed modification or extinguishment will not substantially injure the persons entitled to the easement or profit à prendre, or to the benefit of the restriction or obligation.
(2) Where any proceedings are instituted to enforce an easement, profit à prendre, restriction or obligation, or to enforce any rights arising out of a breach of any restriction or obligation, any person against whom the proceedings are instituted may in such proceedings apply to the Court for an order under this section.
(3) The Court may on the application of any person interested make an order declaring whether or not in any particular case any land is affected by an easement, profit à prendre, restriction or obligation, and the nature and extent thereof, and whether the same is enforceable, and if so by whom.
(4) Notice of any application made under this section shall, if the Court so directs, be given to the council of the area (within the meaning of the Local Government Act 1993 ) in which the land is situated, and to such other persons and in such manner, whether by advertisement or otherwise, as may be prescribed by rules of Court or as the Court may order.
(5) An order under this section shall, when registered as in this section provided, be binding on all persons, whether of full age or capacity or not, then entitled or thereafter becoming entitled to the easement or profit à prendre, or interested in enforcing the restriction or obligation and whether such persons are parties to the proceedings or have been served with notice or not.
(6) This section applies to easements, profits à prendre and restrictions existing at the commencement of the Conveyancing (Amendment) Act 1930 , or coming into existence after such commencement.
(7) An order under this section affecting land not under the provisions of the Real Property Act 1900 may be registered in the General Register of Deeds. No such order shall release or bind any land until it is so registered.
(8) This section applies to land under the provisions of the Real Property Act 1900 , and the Registrar-General shall, on application made in the form approved under that Act, make all necessary recordings in the Register kept under that Act for giving effect to the order.
For the purposes of this subsection, a grant, certificate of title or duplicate registered dealing that is not in the possession of the Registrar-General shall be deemed to be wrongfully retained within the meaning of section 136 of the Real Property Act 1900 .
(9) In the case of land which is not under the provisions of the Real Property Act 1900 , a memorandum of such order shall be endorsed on such of the instruments of title as the Court directs.

23 It can be seen that the concept of a person “entitled to the easement or profit a prendre or to the benefit of the restriction” appears in subsection (1)(b), (1)(c) and (5).

24 Ms Bruce owns the land being Lot C in DP445028. The Title Search of her land in evidence shows her as the registered proprietor subject to notifications that include the following:

3. H194577 (Lot B), H198382 (Lot A) Rights of way appurtenant to the land above described affecting the land shown in Vol 7786 Fol 17
4. H178227 H184952 H189952 Rights of way affecting part of the land above described shown so burdened in Vol 7786 Fol 17
5. AB29988 Mortgage to St George Bank Limited.

25 The rights of footway constituting the relevant easement were created in 1959 by the registration of Transfers H178227 and H194577. The Mortgage was created and registered later.

26 The first question that arises in this part of the appeal is whether it was necessary for the appellants to establish that Ms Bruce’s mortgagee was party to her agreement to extinguish the easement benefiting her land. In my view, it was not. Ms Bruce alone was the person “entitled to the easement” within s89(1)(b).

27 The interest of the St George Bank Limited is that of mortgagee over Ms Bruce’s land, including all rights appurtenant to that land (ie including the registered easement of which it is the dominant tenement). But it does not follow that the Bank was the party “entitled to the easement” within the scope of s89(1)(b).

28 The provision does not use the language of a “person having a registered estate or interest in land benefited by the easement”. In this sense s89 of the Conveyancing Act is to be contrasted with s49(4) of the Real Property Act 1900.

29 The Bank’s statutory charge embodied in its registered mortgage did not make it a person entitled to the easement, albeit that it has rights against that person and her land. In EnglishScottish and Australian Bank Ltd v Phillips (1937) 57 CLR 302, Dixon, Evatt and McTiernan JJ said (at 321):

… the statutory charge described as a mortgage is a distinct interest. It involves no ownership of the land the subject of the security. Like a lease, it is a separate interest in land which may be dealt with apart altogether from the fee simple or other estate or interest mortgaged.

30 At common law, an easement may be expressly released by deed or impliedly abandoned by conduct (Gaunt, Gale, Morgan, Gale on Easements 17th ed, Sweet & Maxwell, London 2002 at §§12-13–12-18; Bradbrook and Neave, Easements and Restrictive Covenants in Australia 2nd ed, Butterworths, Sydney 2000 at §§19.2, 19.6; Wolfe v Freijahs’ Holdings Pty Ltd [1988] VR 1017 at 1023-4). None of the cases referred to in the two textbooks referred to suggest that the need for a deed executed by, or the relevance of conduct, by persons other than the owner of the dominant tenement.

31 In Chiu v Healey (2003) 11 BPR 21,241; [2003] NSWSC 857 Young CJ in Eq said (at [36], underlining added) that:

… it is clear that one can abandon an easement; see Grill v Hockey (1991) 5 BPR 11421, where M McLelland J held that under both the common law and the Conveyancing Act an abandonment occurs when the dominant owner has made it clear that neither he nor his successors in title will make any use of the easement though it is not to be lightly inferred. His Honour was following the decision of the English Court of Appeal in Williams v Usherwood (1983) 45 P & CR 235, 256m, which quoted from a judgment of Buckley LJ in Gotobed v Pridmore noted in (1970) 115 SJ 78, what one must look for is evidence that there has been an implied (or lost modern deed of) release of the easement. Long non-user will be good evidence, but will not necessarily be sufficient to establish abandonment: Swan v Sinclair [1925] AC 227; Tweweeke v 36 Wolseley Road Pty Ltd (1973) 128 CLR 274 and PSP 9968 v PSP 11173 [1979] 2 NSWLR 605.

32 As to the deed, intention and/or conduct of the dominant owner being the proper focus of attention, see also Treweeke v 36 Wolseley Road Pty Ltd (1972) 128 CLR 274 at 284; Ashoil Holdings Pty Ltd v Fassoulas (2005) 12 BPR 23,525; [2005] NSWCA 80 at [29]; Halsbury’s Laws of Australia, (2006) vol 355, para 12235.

33 It is commonplace for land to be burdened with a myriad of interests, some registered others not, some legal, others equitable. These would include mortgages, leases and statutory charges such as the charge imposed by s550 of the Local Government Act 1993 with respect to outstanding rates. It is, to me, inconceivable that the framers of s89(1)(b) had persons with such interests in mind when referring to persons “entitled to the easement” etc.

34 I have not found any case establishing that persons having such lesser interests in a parcel of land have been viewed as “entitled to” the easement or the profit a prendre sought to be modified or extinguished or the “benefit” of the restriction sought to be modified or extinguished. If one looks at the case law discussed in Gale on Easements, op cit at 17th ed, 2002, Chapter 12 and Bradbrook and Neave, op cit at §§19.125-19.127 one finds the exclusive focus of attention upon the conduct of the person against whose title the easement, profit or restrictive covenant is registered.

35 The latter portion of s89(1)(b) deals with acts or omissions that may reasonably be considered to evince abandonment or waiver. Once again, it is difficult to conceive of a situation, and I am unaware of any decided case, in which any attempt was made to examine the conduct etc of chargees, lessees etc.

36 I have not overlooked that portion of s89(1)(b) stipulating that the paragraph extends to agreements, acts or omissions “whether in respect of estates in fee simple or any lesser estates or interests in the land to which the easement, the profit a prendre or the benefit of the restriction is annexed”. These words, however, have ample work to do when it is recognised that an easement may be annexed to an estate other than the fee simple, for example, a lease.

37 The present case did not involve any inquiry as to whether Ms Bruce’s conduct in agreeing to the proposal constituted a breach of her mortgage. I am not thereby implying that it did. However, for the reasons already stated, this would be irrelevant to the primary question whether s89(1)(b) was satisfied if Ms Bruce contracted to extinguish the easement.

The nature of the relief claimed by the appellants

38 The primary relief sought by the appellants in their amended statement of claim was an order under s89 of the Conveyancing Act. There was, however, an alternative claim for further or other relief, whether by way of declaration, specific performance, or otherwise as may be just.

39 The point was taken in submissions below that the absence of Ms Bruce’s mortgagee constituted an insurmountable hurdle to the proceedings; alternatively represented a reason why the court should withhold relief under s89, in its discretion.

40 The appellants’ response to the trial judge was that these points ought to have been raised in the pleadings, or at least before final address; and that it was open to the court to make an order limited to the situation of the owner (Black 151).

41 The learned primary judge dismissed the proceedings on the basis that the appellants had failed to prove a legally binding agreement. He had concluded, correctly in my view, that it was necessary to prove such an agreement under s89(1)(b). He added (at J30):

If that be wrong, and if the signed document in the present case did not amount to a legally binding agreement, I consider that, in the circumstances of the case, this would be such a powerful discretionary consideration that no order should be made under that provision.

42 This statement only addressed the hypothesis of a non-binding agreement. Nothing was said as to a discretionary basis for withholding or qualifying relief to take account of the position of the mortgagee in the event that the signed proposal were found to constitute a binding agreement.

43 Mr and Mrs Dwyer had filed a Cross-Claim in which the primary relief sought by them was the specific performance of the agreement. That cross-claim was dismissed and there is no appeal from it by Mr and Mrs Dwyer.

44 The Dwyers and Mr Poidevin have adopted a submitting stance in the litigation at this stage. Ms Bruce alone opposes the making of an order under s89.

45 The relief sought in the notice of appeal is:

1. Appeal allowed.
2. Set aside the orders made by Acting Justice Briscoe dated 22nd December 2006.
3. Order that the right of way over part of the property of the Appellants known as 174 Beach Street, Coogee, NSW, appurtenant to the properties of the Third and Fourth Respondents respectively known as 170 and 172 Beach Street, Coogee, NSW, be extinguished.
4. Order that, subject to the terms of the said Proposal, that the Respondents at their own expense do all such acts and execute all such documents as may be required to register under the Real Property Act 1900 an instrument extinguishing the said right of way to be prepared by the Appellants.
5. Costs.
6. Such further or other orders as may be just.

46 In paras 4(a) and 5 of her Notice of Contention (Red 48), Ms Bruce raises two points by reference to the position of her mortgagee. She asserts that no order under s89 affecting the land can be made without all parties interested in it being joined, including the mortgagee on title. And she contends that relief under s89(1)(b) should be denied on discretionary grounds because the alleged agreement (if binding) was at the date of trial executory and/or subject to a condition precedent such that she was not bound to release her right of way until she had the consent of her mortgagee, something which had not happened by the time of trial.

Was Ms Bruce’s mortgagee a necessary party to the proceedings?

47 In my opinion, neither of the remedies sought by the appellants at first instance required the joinder of Ms Bruce’s mortgagee.

48 As regards the primary claim for an order under s89, the mortgagee was not a party to the alleged agreement, nor was it a person “entitled to the easement”. If an order were made to extinguish the easement then it would not bind Ms Bruce’s land until registered (see s89(7)).

49 The litigation did not present any issue as to:

(a) whether Ms Bruce’s agreement to extinguish breached her mortgage or otherwise over-reached the interest of her registered mortgagee;

(b) the appellants’ capacity, without the consent of the mortgagee, to obtain registration of the court’s order, whether conditionally or unconditionally, immediately or at some time in the future; or

(c) priorities between the registered mortgagee and a later registered court order.

50 In these circumstances, procedural fairness did not require the court to withhold otherwise appropriate relief when a late point was taken by Ms Bruce about the mortgagee not being a party.

51 Section 89(5) of the Conveyancing Act provides:

An order under this section shall, when registered as in this section provided, be binding on all persons, whether of full age or capacity or not, then entitled or thereafter becoming entitled to the easement or profit à prendre, or interested in enforcing the restriction or obligation and whether such persons are parties to the proceedings or have been served with a notice or not.

52 This subsection allows a registered order to bind all persons, even those entitled to the easement etc whether or not they were parties to the proceedings or were served with notice of them. This, of course, is not a licence knowingly to breach the principles of procedural fairness. However, since the focus of the subsection is the binding effect of a registered order upon persons who are entitled to the easement etc, the provision is really silent about the position of parties such as lessees or mortgagees of the dominant tenement or land having the benefit of the profit à prendre or restrictive covenant.

53 Nor did the alternative claim for orders in the nature of specific performance require the joinder of the mortgagees of the respective properties.

54 Pralle v Scharka [1978] 2 NSWLR 450 is cited by Ms Bruce in support of the proposition that no order affecting land can be made without all parties interested in the land being joined. The case does not support the proposition stated which, if correct, would require lessees and mortgagees to be joined in any proceedings for specific performance of a contract for sale of land. Pralle was a claim by a purchaser for specific performance of a contract for the sale of a one-half interest in land. The registered proprietors were joint tenants and an order to enforce the contract would have the effect of making the plaintiff a tenant in common. The order sought would therefore affect the legal rights of the other joint tenant and for this reason his joinder was found to be necessary.

55 If the registered proprietor of freehold land enters into a binding contract to sell it, then that contract can be specifically enforced against the vendor without the need to join the vendor’s mortgagee. The order will have the effect of requiring the vendor to discharge the mortgage as one of a myriad of steps necessary to give effect to the vendor’s binding promise. If this normal incident of a sale of land is to be varied then it is for the vendor to stipulate a qualification in the contract itself.

56 When and if registered, the order will bind the land. Whether it overreaches the Bank’s interest is an interesting question, but it simply does not arise in these proceedings.

The executory nature of the agreement

57 There was unchallenged evidence from Mr Dwyer that he arranged for the necessary surveys and the s88B Instrument to release the right of way to be drawn up (Blue 16, 17, 215).

58 These matters were pointed out forcefully in a letter of demand to Ms Bruce’s solicitor not long before the proceedings were commenced (Blue 36). Ms Bruce’s response on 21 May 2003, in effect, was that she was not bound to release the right of way (Blue 38).

59 Ms Bruce’s Defence to Amended Statement of Claim pleaded that the document did not constitute an enforceable agreement, and it alleged repudiation by Mr Poidevin. No other issue was raised in opposition to the appellants’ claims. Nor did Ms Bruce raise any claim of her own as to to non-performance. At the start of the hearing at first instance, a point was taken about the non-joinder of Ms Bruce’s mortgagee (Black 12), but that was all.

60 In the present case, the signed Proposal includes in the Steps to be Taken:

6. Each party obtains approval from their mortgagees to the release of right of footway and easements for support.

61 Clause 6 is one of the lastmentioned “steps to be taken”. It does not preclude a finding that there was a legally binding agreement, quite the reverse. At most, it imposed some obligation upon the parties to take some subsequent step perceived necessary to obtain registration of the instruments that were in contemplation.

62 Beyond this, there is an unpleaded and unlitigated issue as to the scope of this provision. The possibilities include the clause being construed as imposing a duty on each relevant party to obtain approval from his or her mortgagee; alternatively, an obligation to use best endeavours. There is also a possible issue about the consequences of approval not being obtained as regards the proposal continuing to bind the parties, subject to any rights of their mortgagees.

63 As indicated, these issues were not raised in the pleadings, were belatedly and barely explored during addresses at first instance and were unnecessary to be addressed as the primary judge viewed the matter.

64 Nevertheless, Ms Bruce contends in this Court that relief under s89 is unavailable, or alternatively should be withheld in the court’s discretion, because Mr Poidevin has not yet executed the documents contemplated to be executed by him and because there is no proof that Ms Bruce’s mortgagee has given approval.

65 It would appear that Ms Bruce has taken no steps to obtain approval from the mortgagee. This is consistent with her stance that there is no binding agreement. But it is hardly a matter precluding enforcement of her agreement with the appellants. The point bears the hallmark of a party seeking to rely upon his or her own wrong, something to which the law is generally averse.

66 The court should naturally avoid a futility, but I can see nothing futile in making an extinguishment order if s89(1)(b) is established. The parameters of the contractual dispute were defined by the pleadings below. Merely because one of the appellants’ prayers for relief in the Equity Division was for specific performance did not relieve Ms Bruce of the obligation to plead and raise any specific basis for the non-enforcement of the agreement sued upon by the appellants and (at first instance) by the Dwyers. A fortiori where Mr Poidevin adopted a submitting role below (Black 23). When and if registered, the order will bind the land. Whether it overreaches the Bank’s interest is an interesting question, but it simply does not arise in these proceedings.

67 It is unnecessary to determine whether cl 6 was a promise on Ms Bruce’s part to use best endeavours or to procure the requisite approval. Either way, s89(1)(b) is satisfied. There is nothing in its text to preclude it from applying to a conditional or executory agreement. It is capable of application to an agreement to extinguish or modify that is part of a larger transaction. This said, the court’s discretion to make or withhold an order would carry the power to frame relief that is consistent with the details of the relevant contract.

68 The Dwyers and Mr Poidevin were submitting parties in this Court. They have indicated their desire to support the appellants in carrying the proposal into fruition.

69 The appellants point out that the court’s powers under s89 are wide enough to by order “modify” or to “wholly or partly extinguish” the easement (s89(1)); and to declare the nature and extent of the easement and whether it is enforceable, and if so by whom (s89(3)). I see no reason in principle why such relief could not be framed as subject to appropriate conditions, including conditions designed to give effect to the detailed terms of the agreement itself. Since, however, no issue was raised below as to the agreement being executory or unperformed on the part of any party other than Ms Bruce, there is really no call for a qualified order to be made as regards the appellants..

70 Section 75A(10) of the Supreme Court Act enables this Court to give any judgment which ought to have been given or which the nature of the case requires. I would reserve liberty to apply to the Equity Division in case something emerges that calls for any additional documents to be executed by any party to this appeal. This is consistent with the fourth prayer for relief in the notice of appeal.

71 I therefore propose the following orders:

1. Appeal upheld.

2. Orders made by Biscoe AJ on 22 December 2006 set aside.

3. Order that the right of way over part of the property of the Appellants known as 174 Beach Street, Coogee, NSW, appurtenant to the properties of the Third and Fourth Respondents respectively known as 170 and 172 Beach Street, Coogee, NSW, be extinguished.

4. Liberty to apply to the Equity Division.

5. Fourth respondent to pay appellants’ costs of the proceedings at first instance and in the Court of Appeal and the costs of the other respondents (on a submitting basis) and to have a certificate under the Suitor’s Fund Act 1951 .

72 HODGSON JA: On 22 December 2006, Biscoe AJ, sitting in the Equity Division of the Supreme Court, gave his decision in proceedings in which the appellants (the Stephensons) had sued the first and second respondents (the Dwyers), the third respondent (Mr Poidevin) and the fourth respondent (Ms Bruce) claiming an order under s 89 of the Conveyancing Act 1919 (NSW) (the Act) extinguishing identified rights of footway, and also claiming such other relief (including relief by way of specific performance) as may be just and costs. In the same proceedings, the Dwyers had brought a cross-claim against Ms Bruce, Mr Poidevin and the Stephensons, seeking specific performance of an agreement entered into in or about November 2003 for the release by Ms Bruce of certain rights-of-way, and also seeking associated relief.

73 By his decision, the primary judge dismissed the Stephensons’ claim with costs, and dismissed the Dwyers’ cross-claim with costs.

74 The Stephensons have appealed from this decision. No appeal has been brought by the Dwyers from dismissal of their cross-claim.

Circumstances

75 The case concerns an easement, being a right of footway, that traverses the properties 168, 170, 172, 174 and 176 Beach Street Coogee, giving access from Dudley Street to the rear yards of properties 166, 168, 170, 172 and 174 Beach Street. 176 Beach Street is on the corner of Beach and Dudley Streets. The three properties particularly concerned in these proceedings are 174 Beach Street (now owned by the Stephensons and previously owned by the Dwyers), 172 Beach Street (owned by Ms Bruce) and 170 Beach Street (owned by Mr Poidevin).

76 In April 2003, Ms Bruce exchanged contracts to purchase No 172; and in April or May 2003, she met the Dwyers, who then owned No 174, at their house. There was then a discussion concerning Ms Bruce’s building plans and the extinguishment of the easement. Ms Bruce then met Mr Poidevin at his home, and they discussed her building plans and an encroachment of a building of his on her land.

77 Completion of Ms Bruce’s purchase occurred on 20 May 2003. On 21 May 2003 she wrote the following letter to the Dwyers:

I thought it may be a good thing to put in writing to you my commitment to sorting out the rear lane situation. I am in agreement to relinquish the right of way and there is no reason why I shouldn’t. I support the formalising of this legally which should be of benefit to all of the terraces. I obviously need some limited access during external renovation work and would therefore ask that any alteration to title be affected from the time that these works are concluded.

The builder has asked for access to cart out demolition material and I have told him it is not possible and to go through the front of the house. Any work that occurs in the back courtyard area may require some access. I will endeavour to give you notice and discuss protection of your area and also discuss length of access for works. I hope this would not be intrusive.

My mobile no is XXXX XXXXX X. Please phone me at any time if there is a problem during the renovation works.

78 On about 3 June 2003, the Dwyers visited Ms Bruce and gave her a copy of a proposal concerning the relinquishment of the easement.

79 Internal building work on Ms Bruce’s house commenced in June 2003, and required a complete gutting of her house. On 16 June 2003, she wrote a second letter to the Dwyers:

Sorry it has taken me a while to get back to you. I wonder if you could ask Simon if he would consider cross easements for support. Whereas his building and gate encroach my land the back fences cross both boundaries at points and therefore have minor encroachments which go both ways.

I have had verbal approval from the council for work at the front of the house. I now need written approval, prices from builders and a time schedule. I am hoping the present builder will continue with all the work which should save time. I should be able to commit to something more definite re time as soon as I confirm the builder for the outside work.

80 In early October 2003, Ms Bruce moved into No 172, and shortly afterwards she learned that the Dwyers were intending to sell No 174.

81 At some time in November or December 2003, Ms Bruce had Mr Poidevin’s access gate to the right-of-way crossing her property bricked up. The primary judge found that this occurred in early November, in anticipation of a contract to extinguish the right-of-way.

82 On or about 12 November 2003, Mr Dwyer’s solicitors sent him a facsimile enclosing an amended proposal concerning relinquishment of the easement; and it was this document, with one amendment, that was signed at a meeting at the Dwyers’ house on about 23 November 2003. The document was in the following terms:

PROPOSAL
RIGHT OF FOOTWAY OVER PROPERTIES AT
BEACH STREET COOGEE


Current Status

1. A right of footway up to 1.1 metres wide passes through 172 Beach Street (Bruce Property) and 174 Beach Street (Dwyer Property),

2. The Bruce Property and 170 Beach Street (Poidevin Property) have the right to use the footway.

3. The above rights have been legally created and are shown on the titles to each of these properties.

4. A wall and fence from the Poidevin Property encroaches on to the Bruce Property by up to 0.47 m.

5. A fence from the Bruce Property encroaches on to the Poidevin Property.

Proposal

1. The Bruce Property releases the Dwyer Property from the right of footway.

2. The Poidevin Property releases the Dwyer Property from the right of footway.

3. The Poidevin Property releases the Bruce Property from the right of footway.

4. The Bruce Property grants the Poidevin Property an easement for support for the encroachment on to its property.

5. The Poidevin Property grants the Bruce Property an easement for support for the encroachment on to its property.

6. The Dwyers and Poidevins share equally the costs of preparing the survey plans and the documents to release the right of footway and create the easements for support.

Advantages for Each Property

1. The Poidevin Property — the encroachment issue is rectified.

2. The Bruce Property — the right of footway is removed from their title and the encroachment issue is rectified.

3. The Dwyer Property — the right of footway is removed from their title.

Steps to be Taken

1. Each property owner signifies their in principle approval by signing at the end of the proposal.

2. The Dwyers arrange for the survey to be drawn up identifying the location of the easements for support.

3. The Dwyers arrange for the easements for support and the release of the right of footway to be drawn up.

4. All parties sign release of right of footway.

5. The Poidevins and Ms Bruce sign the easements for support.

6. Each party obtains approval from their mortgagees to the release of right of footway and easements for support.

7. Each party arranges for their certificates of title to be produced at the Land & Property Information Office.

8. The Dwyers lodged the release of footway and easements for support for registration.

9. All parties pay their own legal expenses. The Dwyers and Poidevins reimburse Ms Bruce for her reasonable legal expenses and share the survey and other expenses equally .

Signed by each of the parties.

The Dwyers .

The Poidevins .

Ms Paula Bruce

83 The words shown as struck out in the last paragraph were typed, to be replaced with the words “all parties pay their own legal expenses”, which were handwritten. The remainder of the document was typed, it being the document that had previously been sent by facsimile to Mr Dwyer. The document as altered was signed by the Dwyers, Mr Poidevin and Ms Bruce.

84 According to Mr Dwyer’s affidavit, he then arranged for the survey to be drawn up by a surveyor Mr Kimber; and on receipt of the survey he arranged with his lawyer to draw up the s 88B instrument to release the right-of-way. Mr Dwyer was not cross-examined on those assertions.

85 On 10 April 2004, builders engaged by the Dwyers commenced bricking up the access gate to the right-of-way from Ms Bruce’s property. This activity ceased when Ms Bruce objected.

86 On 22 April 2004, solicitors acting for Mr Poidevin wrote to Ms Bruce alleging an agreement entered into on about 12 November 2003, and alleging that in breach of that agreement Ms Bruce had not signed the necessary s 88B instrument, but had obstructed their client’s access to the right-of-way. The letter enclosed the document purporting to be a s 88B instrument releasing the easement over her property; and it gave notice that if Ms Bruce did not sign the document, Mr Poidevin may take action which could include commencing proceedings for removing the obstruction of his access to the right-of-way.

87 Solicitors acting for Ms Bruce replied on 27 April 2004 to the effect that there appeared to be no binding agreement, and expressing Ms Bruce’s intention to remove the obstruction to Mr Poidevin’s access to the right-of-way.

88 On 14 May 2004, solicitors acting for the Dwyers wrote to Ms Bruce’s solicitors seeking to resolve misunderstandings.

89 On 30 May 2004, Mr Poidevin wrote to Ms Bruce requesting that she restore his access to the right-of-way, alleging it was illegally blocked; and in subsequent correspondence Ms Bruce and her solicitors acknowledged her obligation to do so.

90 On 28 June 2004, the solicitors for the Dwyers wrote to Ms Bruce’s solicitors alleging the existence of an enforceable agreement, and advising that they had instructions to seek appropriate court orders unless the matter could be resolved. Ms Bruce’s solicitors responded the next day challenging the allegation that there was an enforceable agreement.

91 On 23 July 2004, the Dwyers entered into a contract to sell No 174 to the Stephensons. The contract included a term by which the Dwyers assigned to the Stephensons their rights against Ms Bruce to have the right of footway released.

92 These proceedings were commenced in 2005.

93 A search of Ms Bruce’s title dated 14 December 2006, tendered in evidence in the proceedings, showed that it was subject to a mortgage to the St George Bank Limited.

94 At the trial, after the reading of the affidavits and the taking of oral evidence, counsel for the Stephensons tendered what he described as a diagram of what was said to be the encroachment between Nos 170 and 172, and this was admitted without objection. This document appears to be a document prepared by the surveyor Mr Kimber on 28 January 2004, for use with a s 88B instrument releasing the subject rights of footway and creating an easement in favour of Mr Poidevin’s land over Ms Bruce’s land for an encroaching brick building and eve and gutter overhang. The document shows no encroachment by Ms Bruce’s land onto Mr Poidevin’s land, and it provides for no easement in favour of Ms Bruce’s land over Mr Poidevin’s land.

Decision of Primary Judge

95 In his judgment, the primary judge resolved certain factual disputes, particularly concerning what occurred at the meeting of 23 November 2003. He accepted that Mr Poidevin and Ms Bruce, as well as the Dwyers, had copies of the proposal at the meeting, and that Mr Dwyer read it aloud before it was signed.

96 However, the primary judge decided that, although the signed document evidenced a consensus, the parties’ intention, objectively ascertained, was not that this should constitute a binding contract. In so finding, he relied particularly on indications in the document itself, namely the expressions “proposal” and “in principle approval”, and the circumstance that the document required further documents to be drawn up, executed and registered, and also provided that all parties pay their own legal expenses (reflecting a need for legal advice at a stage when documents affecting legal rights were drawn).

97 The primary judge considered that these indications were supported by the fact that the proposal was drawn up by Mr Dwyer’s lawyer, by the informal circumstances of its execution, and by the subsequent correspondence between Mr Poidevin and Ms Bruce.

98 Accordingly, the primary judge made the orders indicated earlier.

Grounds of Appeal

99 The Stephensons relied on one ground of appeal:

The judge was in error in concluding that the parties did not intend to be contractually bound by the terms of the document entitled “Proposal” they all executed on or about 23rd November 2003.

100 Ms Bruce has put on a notice of contention relying on the following grounds:

1. That in the alternative that the document alleged by the Appellants ("the Stephensons") to constituted an immediately binding agreement is unenforceable by either the Stephensons or the First Respondent ("Dwyer") on the bases that no consideration for the release flowed from the Stephensons, as promisees, to the Fourth Respondent ("Bruce"), as promisor, for any release by her of her right of way over their land.

2. Further, the alleged consideration to Bruce from the Third Defendant ("Poidevin") for his release of her land was illusory given the agreement or understanding between Dwyer and Poidevin, whereby Poidevin had already agreed to release 172 Beach Street, Coogee from the burden of his right of way.

3. Further, any alleged agreement was brought to an end by the repudiation of Poidevin which was accepted by Bruce.

4. Further, the Stephensons should be denied relief under section 89(1)(b) of the Conveyancing Act 1919 on discretionary grounds, including the following:


(a) The alleged agreement if binding (which is denied) was at the date of trial executory and/or subject to conditions precedent such that Bruce was not bound to release her right of way until she had the benefit of easements in support and a release executed by the Poidevins, and the consent of her mortgagee, all of which had not happened by the time of trial.

(b) The Stephensons were not parties to the alleged agreement, were on notice that the alleged agreement was disputed by Bruce prior to purchase, may not be enforceable against Bruce, had not been performed by any of the parties to it and the Stephensons did not pay a premium for the benefit of the releases by Poidevin and Bruce when purchasing the property.

5. Further, no order affecting the land can be made without all parties interested in the land being joined which included the mortgagee on title.

Statutory Provisions

101 The decision in this case requires reference to s 56 of the Real Property Act 1900 (NSW), as well as to s 89 of the Act. The relevant parts of those provisions are as follows:

Real Property Act 1900 No 25

56 Lands under this Act: how mortgaged or encumbered

(1) Whenever any land or estate or interest in land under the provisions of this Act is intended to be charged with, or made security for, the payment of a debt, the proprietor shall execute a mortgage in the approved form.

……

(4) In a mortgage or charge there may be expressed to be included as appurtenant to the land mortgaged or charged any easement or profit à prendre over other land of which the mortgagor or charger is the registered proprietor and which is specified in the mortgage or charge.

(5) When an easement or profit à prendre is so expressed to be included the Registrar-General shall on registration of the mortgage or charge make such recording in the Register with respect to the easement or profit à prendre as the Registrar-General thinks fit.

(6) The easement or profit à prendre so expressed to be included shall, when the mortgage or charge is registered, be deemed to be an easement or profit à prendre appurtenant to the land mortgaged or charged for the purpose of enjoyment leasing or transfer by the mortgagee or chargee, or of foreclosure, and so that upon foreclosure by the mortgagee or lease or transfer by the mortgagee or chargee such easement or profit à prendre shall, unless expressly excluded, be created by the order for foreclosure or the lease or transfer and registration thereof.

……


Conveyancing Act 1919 No 6

89 Power of Court to modify or extinguish easements, profits à prendre and certain covenants

(1) Where land is subject to an easement or a profit à prendre or to a restriction or an obligation arising under covenant or otherwise as to the user thereof, the Court may from time to time, on the application of any person interested in the land, by order modify or wholly or partially extinguish the easement, profit à prendre, restriction or obligation upon being satisfied:

(a) that by reason of change in the user of any land having the benefit of the easement, profit à prendre, restriction or obligation, or in the character of the neighbourhood or other circumstances of the case which the Court may deem material, the easement, profit à prendre, restriction or obligation ought to be deemed obsolete, or that the continued existence thereof would impede the reasonable user of the land subject to the easement, profit à prendre, restriction or obligation without securing practical benefit to the persons entitled to the easement or profit à prendre or to the benefit of the restriction or obligation, or would, unless modified, so impede such user, or
(b) that the persons of the age of eighteen years or upwards and of full capacity for the time being or from time to time entitled to the easement or profit à prendre or to the benefit of the restriction, whether in respect of estates in fee simple or any lesser estates or interests in the land to which the easement, the profit à prendre or the benefit of the restriction is annexed, have agreed to the easement, profit à prendre, restriction or obligation being modified or wholly or partially extinguished, or by their acts or omissions may reasonably be considered to have abandoned the easement or profit à prendre wholly or in part or waived the benefit of the restriction wholly or in part,
(b1) in the case of an obligation:
(i) that the prescribed authority entitled to the benefit of the obligation has agreed to the obligation’s being modified or wholly or partially extinguished or by its acts or omissions may reasonably be considered to have waived the benefit of the obligation wholly or in part, or
(ii) that the obligation has become unreasonably expensive or unreasonably onerous to perform when compared with the benefit of its performance to the authority, or
(c) that the proposed modification or extinguishment will not substantially injure the persons entitled to the easement or profit à prendre, or to the benefit of the restriction or obligation.


……

(5) An order under this section shall, when registered as in this section provided, be binding on all persons, whether of full age or capacity or not, then entitled or thereafter becoming entitled to the easement or profit à prendre, or interested in enforcing the restriction or obligation and whether such persons are parties to the proceedings or have been served with notice or not.

……

(8) This section applies to land under the provisions of the Real Property Act 1900, and the Registrar-General shall, on application made in the form approved under that Act, make all necessary recordings in the Register kept under that Act for giving effect to the order.

For the purposes of this subsection, a grant, certificate of title or duplicate registered dealing that is not in the possession of the Registrar-General shall be deemed to be wrongfully retained within the meaning of section 136 of the Real Property Act 1900.

……

Did the parties intend to be contractually bound?

102 It was submitted for the appellants that the primary judge gave excessive significance to individual words and phrases in the text of the document and insufficient consideration to the context in which it was executed. It was true that, as drawn, the document was a “proposal”; but, it was submitted, acceptance by signature made it a binding agreement. It was unrealistic to expect that any party would incur the expense of a survey and preparation of a s 88B instrument, unless he or she was assured that other parties were committed. There was a consensus on every material issue, and the document was signed at a meeting in which each party had a copy of the document. The document was in the nature of a commercial arrangement, rather than a social or domestic arrangement; so that there was a heavy onus on any party contending that what appeared to be an agreement was not binding.

103 It was further submitted for the appellant that the expression “in principle approval” did not negative the intention to create a binding agreement; and particularly having regard to its position in the document, it signified no more than that the parties could challenge actions taken or documents prepared on the ground that they did not accord with the “proposal” document. The intention to be contractually bound was not negatived because the precise location and extent of easements “for support” would not be known until a survey was made; nor by the circumstance that there was provision for legal costs, because there has been an opportunity for parties to consult lawyers before the meeting. It was further submitted that the primary judge was wrong to place any significance on the subsequent correspondence.

104 In my opinion, there was nothing in the later correspondence between Mr Poidevin and Ms Bruce that supported the primary judge’s finding that there was no intention to be contractually bound; but in my opinion the primary judge did not treat the subsequent correspondence as a material factor in reaching his conclusion. In my opinion, his reference to subsequent correspondence would not vitiate his decision.

105 The question whether an intention to be contractually bound was shown is largely a question of inference from facts that were either undisputed or clearly established; although the question of what intention was objectively manifested by the conduct of persons at a face to face meeting could possibly be influenced by the court’s assessment of those persons, and of how they appeared and behaved in the witness box. To that extent, the primary judge had a slight advantage over an appeal court. However, in my opinion this is a case where the Court of Appeal would substitute its own decision if it considered the primary judge’s conclusion wrong, even if no particular error was demonstrated. However, I am not satisfied that the primary judge’s conclusion was wrong; and indeed I would reach the same conclusion myself.

106 In my opinion, the word “proposal”, and particularly the words “in principle approval” are significant. The placing of the wording “in principle approval” supports the view that there was no intention to create binding obligations, because the wording of the document clearly conveyed that all that the parties were doing by signing the document was signifying “in principle approval”. Further, for both Mr Poidevin and Ms Bruce, a significant part of the advantages proposed by the document was the rectification of the “encroachment issue”; and in my opinion, it would have been in the contemplation of the parties that the survey could disclose unexpected complications of that issue that might need to be the subject of consideration and perhaps negotiation.

107 My view that the primary judge is not shown to be in error, in reaching the view that no intention to be contractually bound was established, is sufficient reason to dismiss the appeal. Had it been necessary for this Court to reach its own view, I would have reached the same conclusion, for the above reasons and those given by McColl JA, with which I agree.

Were the Stephensons entitled to an order under s 89?

108 There was significant argument as to whether, even if there had been an intention to be contractually bound, an order should have been made. In my opinion, it is appropriate to deal briefly with that question. In approaching it, it is important to note that the only part of s 89 relied on was s 89(1)(b), in its application where persons entitled to the easement “have agreed to the easement … being modified or wholly or partially extinguished”. The Notice of Contention raised a number of grounds, in particular:

(1) absence of consideration,

(2) repudiation by Mr Poidevin accepted by Ms Bruce,

(3) the Stephensons were not parties,

(4) non-fulfilment of conditions precedent, and

(5) non-joinder of the mortgagee.

109 In my opinion, there is no substance in (1), (2) or (3). There was consideration for Ms Bruce in rectification of the encroachment issue, and in the expense of necessary surveys and instruments being borne by the Dwyers. The rights of the Dwyers, and through them of the Stephensons, could not be affected by dealings between Mr Poidevin and Ms Bruce. Although the Stephensons were not parties, the Dwyers had assigned their rights under the agreement to them.

110 As regards (4), there is a real question whether a court could or should make an order under s 89 against Ms Bruce and Mr Poidevin, where consent of mortgagees had not been obtained, and where other aspects of the agreement were unperformed, notably the grant of easements concerning encroachments and the extinguishment of Mr Poidevin’s easement over Ms Bruce’s land. I will consider the position of mortgagees in relation to the next point, and deal with the other problem here.

111 I first note that there could in addition have been a question whether a survey identifying the location of easements for support had been drawn up; because it would appear that the only survey prepared does not deal with the encroachment by a fence from the Bruce property identified in para 5 of the “current status” part of the document and para 5 of the “proposal” part of the document. However, as pointed out by Mr Jackson QC for the Stephensons, that point was not taken below, and Mr Dwyer’s evidence that he had “the survey” drawn up and the s 88B instrument drawn up was not challenged; and so it would now be too late to suggest that the Dwyers had not complied with paras 2 and 3 of the “steps to be taken” part of the document.

112 However, returning to the other problem, there was evidence in the agreement itself that there was in fact encroachment by a fence from the Bruce property onto the Poidevin property, and there was no evidence that there was no such encroachment; and to get an easement for this encroachment was a significant part of the consideration to be received by Ms Bruce. Accordingly, if entitlement to an order under s 89 depended on the persons agreeing to modification or extinguishment of the easement having actually received the consideration for that agreement, this was not shown to be satisfied in this case. This point was not raised in Ms Bruce’s Defence, in circumstances where specific performance had been claimed against her in the Amended Statement of Claim. However, it was raised by the Notice of Contention, and specific performance was not sought on the appeal. No submission was made that the case would have been conducted differently if this point had been raised in the Defence.

113 There is no need to finally decide this question; but my tentative view is that if an order under s 89 depends on an agreement, and if in substance such an order amounts to an enforcement of that agreement, it would be necessary to show that there was no substantial consideration outstanding which had not been received by the person making the agreement. If there were substantial consideration outstanding, I think the appropriate remedy would be specific performance rather than an order under s 89.

114 As regards point (5), having regard to the search of Ms Bruce’s property and the reference to mortgagees in the document, I would infer that, at all material times, her property was subject to a mortgage. There is no evidence as to what if any money was secured by the mortgage, but the existence of a mortgage supports an inference that the mortgagee did have some interest in the property. The mortgagee was not party to the proceedings, and there was no evidence that the mortgagee had agreed to modification or extinguishment of the easement or that the mortgagee had been notified of the proceedings.

115 Mr Jackson submitted that there was no evidence that the easement was expressed to be appurtenant to the land mortgaged, in accordance with s 56(4) of the Real Property Act. He submitted that agreement by or notification to the mortgagee was not necessary, referring to s 89(5) of the Conveyancing Act. He submitted that Ms Bruce could not rely on her own breach of the agreement, in not obtaining the mortgagee’s consent, in order to resist an order under s 89. And he submitted that, in any event, the Court could mould its order so that it was without prejudice to the rights of the mortgagee.

116 I will deal with these points in turn.

117 In my opinion, s 56(4) of the Real Property Act has no application. That provision is dealing with a situation where a mortgagee wishes to have, as part of the security, the benefit of an easement over other land owned by the mortgagor. What s 56(4), (5) and (6) addresses is the point that, because a mortgage is only a charge, it would be difficult to give effect to a right in the nature of an easement over other land owned by the mortgagor, in the absence of statutory provisions such as these. In relation to easements that are appurtenant to the mortgaged lands and are over land owned by other persons, in my opinion the benefit of those easements is automatically included in an ordinary mortgage.

118 Turning to s 89 of the Conveyancing Act, in my opinion the words of s 89(1)(b), where they refer to “persons … entitled to the easement …, whether in respect of estates in fee simple or any lesser estate or interest in the land to which the easement … is annexed”, are apt to include mortgagees; and this suggests that mortgagees may need to join in the agreement in order that the conditions for operation of this aspect of s 89(1)(b) be satisfied. The circumstance that, pursuant to s 89(5), an order under the section is binding on all persons tends to confirm that mortgagees should be parties to the agreement relied on, and also to proceedings in which the order is sought. However, there is also merit in the view expressed by Mason P that these words in s 89(i)(b) apply only to cases where the easement is annexed to some interest other than the fee simple; and since it is not necessary for my decision in this case, I will not express a concluded view on this matter.

119 While I would accept that Ms Bruce could be in difficulty relying on her own breach of agreement, if it were such, in opposing any order insofar as it affected her interests, in my opinion this could not affect her reliance on a submission that the court must take into account the interests of mortgagees. If it were specific performance being sought, and not an order under s 89, Ms Bruce could be ordered, as part of specific performance, to seek the consent of a mortgagee.

120 I am doubtful that s 89 would authorise, as a mode of modification or partial extinguishment of an easement, an order that the easement be extinguished as against a person who has agreed to its extinguishment, but that this should be without prejudice to the rights of a mortgagee who has not agreed. Even if the words of s 89 could be construed to justify an order of that kind, in my opinion the court as a matter of discretion would probably not make such an order, as it would introduce unnecessary complexity into the titles of the relevant properties. The appropriate way to overcome any problem caused by the non-participation of mortgagees would be by proceedings for specific performance.

121 Accordingly, even if there had been an agreement intended to create legal obligations, in my opinion the Court may not in this case have made an order under s 89 of the Conveyancing Act, as distinct from an order for specific performance of the agreement.

CONCLUSION

122 For those reasons, in my opinion the following order should be made:

Appeal dismissed with costs.

123 McCOLL JA: I have had the benefit of reading in draft the reasons of Mason P and Hodgson JA. Hodgson JA has set out the facts in terms I adopt. I agree with the orders Hodgson JA proposes for the following reasons.

124 The question whether the parties intended to be contractually bound turns on what reasonable people in the positions of the parties would have understood the Proposal to signify: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 (at [22]) per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ; see also Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 (at [25]) per Gaudron, McHugh, Hayne and Callinan JJ.

125 The transaction concerned attempts by suburban neighbours to resolve the situation concerning a right-of-way which benefited all the parties’ properties respectively, and burdened the appellants’ and Ms Bruce’s property. Each of the parties to the Proposal was, accordingly, the proprietor of a “dominant tenement”: Re Ellenborough Park [1956] Ch 131. The Proposal did not involve the southern–most property which was burdened by the right-of-way: see Stephenson v Dwyer [2006] NSWSC 1439 (at [3], [29]). The right-of-way was a proprietary right which enhanced the value and utility of each dominant property, and was not to be “lightly taken away”: Pieper v Edwards [1982] 1 NSWLR 336 (at 341) per Hutley JA.

126 The primary judge’s textual analysis of the Proposal was criticised by the appellant but, in my view, it underlined the conditional nature of the Proposal. It was written in language, and contemplated steps to be taken, which underlined why the words “in principle” were inserted.

127 In addition to the textual considerations to which the primary judge referred, the Proposal required steps to be taken involving surveys and preparation of releases. Each party also had to obtain their mortgagee’s approval to the release of the right-of-way and to the proposed easements for support. The Bruce property, at least, was burdened by a mortgage.

128 On the primary judge’s findings (see [25]) the Proposal was distributed on a Sunday morning at a meeting of Mr Dwyer’s house. Mr Dwyer’s solicitor had prepared it. Neither Mr Poidevin nor Ms Bruce had had the opportunity to submit it to a lawyer. It is not to point, with respect, to Mason P (at [7]) that Ms Bruce was a lawyer. First, she practiced as a family law mediator. Secondly, the well-worn aphorism about “fools” and “clients” springs to mind.

129 Significantly under the heading “Steps to be taken”, the Proposal advised:

“1 Each property owner signifies their in principle approval by signing at the end of the proposal”.
This emphasised that the signatories were not making a binding agreement but were giving in principle approval to steps to be taken which may lead to a binding agreement: cf GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631.

130 In my view a reasonable person in the parties’ position would not have concluded that they intended the Proposal to be contractually binding. Rather it was, as expressed, an agreement in principle which would only become binding when the steps it contemplated, including obtaining mortgagees’ consent, were completed.

131 This conclusion is sufficient to dispose of the appeal. I do not, therefore, proffer any views about the interesting questions which arise under s 89(1) of the Conveyancing Act 1919.

132 In my view the primary judge did not err in concluding that, in executing the Proposal, the parties did not intend to be contractually bound.

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