Westfield Management Limited v Perpetual Trustee Company Limited

[2007] HCATrans 148

[2007] HCATrans 148

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S486 of 2006

B e t w e e n -

WESTFIELD MANAGEMENT LIMITED

Applicant

and

PERPETUAL TRUSTEE COMPANY LIMITED

Respondent

Application for special leave to appeal

GLEESON CJ
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 24 APRIL 2007, AT 11.47 AM

Copyright in the High Court of Australia

MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friend, MR R.G. McHUGH, SC, for the applicant.  (instructed by Speed and Stracey Lawyers)

MR N.C. HUTLEY, SC:   If your Honours please, I appear with my learned friend, MR S. FLANIGAN, for the respondent.  (instructed by Deacons Lawyers)

GLEESON CJ:   Yes, Mr Walker.

MR WALKER:   Your Honours will have seen the graphic in our written submissions at page 93 of the application book.  The indicated easement, just above line 20, runs, as your Honours see, from King Street through the Glasshouse site to the closest boundary of the so‑called Skygarden site.  It is the capacity of my client to contemplate development of Skygarden, Imperial Arcade and Centrepoint together which has produced the controversy between the parties.  Your Honours have also seen that the text in question of the easement in standard terms uses ‑ ‑ ‑

GLEESON CJ:   Mr Walker, the respondent of this application manages some funds for me.  Is that a difficulty?

MR WALKER:   I do not think the case will cost that much, your Honour.

GLEESON CJ:   No, I have no reason to believe that they are invested in this, but ‑ ‑ ‑

MR WALKER:   There is no difficulty whatever, your Honour.  I am sorry.

GLEESON CJ:   Thank you.

MR WALKER:   Your Honours, the text of the instrument in question contains, as is standard, the important words “for all purposes” and the important connector “with” future actual personal users of the easement, namely that it includes persons authorised by the owner of the dominant tenement.  It follows that, as the circumstances show, it is the use of the easement across Glasshouse to access Skygarden and then to access both Imperial Arcade and Centrepoint, which is the excessive user found by the Court of Appeal, overturning Justice Brereton’s conclusion in our favour. 

At pages 78 and 79 of the application book, in paragraph 61 of Justice Hodgson’s reasons there are what are significantly called “circumstances,” see about line 36, set out, three in number.  In our submission, these being both common ground and on any view of the applicable law concerning the interpretation of the relevant kind of instrument, these are circumstances which may be called in aid.  They do not, as to any one of them, emerge from a reading of the text.  They are truly surrounding circumstances in a way indistinguishable in principle from the way they would be surrounding circumstances of an ordinary contract, that is, not a document of title. 

They are not, to use the language of an important part of the reasoning against us, manifest in the instrument, but they are (a) capable of proof, (b) proved in this case, and (c) of their nature the kind of setting against which for well over 100 years, close to 150 years, it has been held that such instruments ought to be construed.

GLEESON CJ:   I thought that Justice Brereton is said to have admitted and relied upon some evidence in addition to the surrounding circumstances.

MR WALKER:   That is certainly said in the written submission against us in this Court.  We have replied at pages 112 and 113 of the application book, paragraphs 2 and 3.  Those paragraphs [37], [38] and [41] are paragraphs which are referred to in the Court of Appeal at application book 78, paragraph 58.  They are relied upon by us only to the extent that they do “assist in ascertaining and understanding the objective circumstances”.  They are inadmissible for any further purpose.  We disavowed – sought to make appropriate concessions in the face of objections – at trial reliance on any of this material as to subjective intention.  There was argument concerning whether some of these passages went only to subjective intention as opposed to objective circumstances.  That argument was decided, relevantly for present purposes, in our favour in the Court of Appeal.  See paragraph 58.  In any event, paragraph 61 supported by ‑ ‑ ‑

HEYDON J:   As expressed by Justice Brereton, it does seem as though he is relying on unilateral dealings by Westfield’s predecessor, a dealing which was uncommunicated to Perpetual’s side.

MR WALKER:   If your Honours were to go to pages 27 and 28 of the application book, paragraph 50 of Justice Brereton’s reasons, there was communication – see paragraph 51 in particular – of the purpose of obtaining the bonus floor space ratio by ensuring that the easement was proposed and granted and the way actually constructed over Glasshouse with a view to assisting the relevantly notorious governmental project of pedestrianising the precinct by permitting internal access to all the properties in the strip.  I am not sure whether that fully addresses Justice Heydon’s question, but certainly we do not rely on anything that would be understood by the learned trial judge to turn critically on the acceptance of any purely subjective intention.  We could not advance that and we do not. 

Paragraph 52 in the trial judge’s reasons at page 28 of the application book nonetheless shows that his Honour reached his conclusion, we would submit, clearly on grounds which did not depend crucially on any evidence which might be seen as going only to subjective intention.  At paragraph 61 of the reasons of Justice Hodgson, pages 78 and 79 of the application book, those three circumstances are not circumstances which depend for their finding on any purely subjective – that is, kept secret, confidential or uncommunicated – circumstance. 

It was notorious that there was a bonus system in place.  It is clear from the correspondence, to which we have referred in Justice Brereton’s reasons in answer to Justice Heydon, that there was communication concerning that project; communication including through the intermediary position of the counsel itself.  The first of those elements was the physical provision that had been or was being made.  That is an indication – literally by concrete block as opposed to reinforced concrete – as to the nature of the way in question whereby traffic could go through not only Skygarden but beyond.

The second one are the objective circumstances which includes the publicly notorious creation of Pitt Street Mall; in the developer’s world, the notorious circumstances of the pedestrianisation project which would include equally notoriously the cooperation of owners from time to time for the creation of easements.  The third is the concrete box in place of reinforced concrete being able to lead over Skygarden for, in turn, access onto Imperial Arcade and Centrepoint.  The question is correctly posed in paragraph 62 and in paragraph 63 his Honour notes that there is positive support, that is, in our favour, from “the physical adaptation of the premises” – literally concrete and clearly objective and from what his Honour refers to as “the wording of the grant”, including the phrases with which I opened, namely, “for all purposes” and the words “every person authorised by it”.

The “stronger indications”, which are the ratio against us in paragraph 64, in particular include distinctions between various ways in which the owner of a dominant tenement may use or derive benefit from an easement over neighbouring land to gain access to it.  In particular, when one refers to line 47:

use a tollway, or perhaps as a means for bargaining with the council for planning concessions.

There are there given examples which show that there was no rule of law, Harris v Flower or any other authority, which prevented as a matter of principle relevant benefit for the purpose of the fundamental principle of the law of the easements being derived from the owner of this dominant tenement by having access onto its land for the future possibility of further access onto neighbouring land, a future possibility replete with obvious commercial attractiveness in relation to the property itself and replete with obvious functional attractiveness if ownership or a right to use could be held in common in the future between that block and the two more remote blocks which are in question in this case.  His Honour then concludes in the last sentence of paragraph 64 over to the top of page 80, that:

It seems unlikely to me that the parties intended that the dominant tenement have the benefit of the right of way for those purposes.

So that his Honour, apparently from objective circumstances which did not include the notion of tollway or bargaining for planning concessions, eliminated two ways in which there might be benefit, but that reasoning, of course, does not deal with the obvious way in which there could be benefit, namely, the use of the land as one side of an integrated development, whether or not in the same ownership, in a way which would permit access in accordance with the council’s clearly announced policy of keeping traffic off Pitt Street.

When one comes then to paragraph 69 on page 81 of the application book one finds where, in our submission, the principles of law earlier discussed have led to error on the part of the Court of Appeal.  In summary his Honour says, at about line 20, that “the error” so called by Justice Brereton:

resulting from a preparedness to look for the intention or contemplation of the parties outside what was manifested by the grant itself –

If one pauses there then, with respect, there is something correct and something arguably incorrect in that proposition.  It is certainly correct that subjective intentions may not be looked for.  It is certainly true that the text governs.  But it is the next phrase which, in our submission, is unanswered by the unsatisfactory reasoning in paragraphs 61 to 64 to which I have already taken your Honours, namely, that the grant must be construed in the circumstances.  The admission of evidence for the purpose of proving objective circumstances is not, however, the only kind of evidence which the understanding of a text of this kind is permitted to be accompanied by.

The other important matter of principle that we have argued in our written submission is that you can give evidence objectively of the commercial matrix or purpose of the agreement between the parties which produces the grant itself.  That purpose, in our submission, clearly included the facilitation to the extent that Glasshouse could of access to Skygarden for the purposes of achieving on its part the bonus floor space that would come not by simply giving access to Skygarden, but by creating to the extent it could create it the future possibility of integrated use, development and thus access from King Street to Imperial Arcade and Centrepoint as well. 

That having been proved, in our submission, and found by his Honour in a way that is not susceptible to factual dispute were special leave to be granted, the case presents an ideal vehicle to test whether there really is anything so absolute as it is sometimes described as the rule in Harris v Flower.  In our submission, the answer must be no, bearing in mind the possibilities that Justice Hodgson considered himself, in paragraph 64, possibilities which were not available on the facts of this case but would show that access to remoter sites by use of an easement could well be a real, palpable, commercial benefit by the owner of a dominant tenement.

GLEESON CJ:   On page 95 in the paragraph [45] which is part of a quotation there is a proposition of fact.  Do you see that, “[Glasshouse] obtained”?

MR WALKER:   Yes, your Honour.

GLEESON CJ:   Is that in dispute, that factor?

MR WALKER:   No, it is not.  The bonus was gained, I stress, not for simply giving it an easement over Glasshouse to Skygarden, but because that kept open a possibility which the council wished – not always very effectively implemented by council but we submit was in this case – to keep open and not literally blocked off by modern relatively permanent developments of a kind which would preclude the physical construction of an access way on private land from King Street rather than along Pitt Street.  It was leaving open that future possibility which would then depend upon occasions arising when the council could impose conditions of consent for various development of other lots, which was the expedient, politically and by regularity fashion sought to be encouraged by the council, taken advantage of in a perfectly proper way by the then owner of the servient tenement. 

In our submission, that alone as an objective circumstance extends to the commercial matrix or purpose of the agreement which produced the grant in a way which suggests that the following question of principle arises.  Is there really a distinction between the well‑accepted principles

concerning contractual interpretation, which include the reception of evidence going to the commercial matrix or purpose of the transaction, and that which is applicable in construing a grant which is a document of title?  In our submission, when one looks at the old, well‑established law as to the way in which one construes the extent of user of an easement, the reference to the circumstances and the nature of the user as contemplated by the parties at the time of the grant are relevantly indistinguishable from the way in which the modern law of contract and its interpretation has also developed. 

It is for those reasons, in our submission, that there is an important question of principle to see whether there is a smaller scope of material outside the terms of the grant permitted to be referred to by a court construing an easement than would be so if the court were construing, for example, the antecedent contract which called, for example, for the execution of the easement.  In our submission, there is no reason in principle why there should be such a dichotomy and it is a matter appropriate for the grant of special leave in this Court.  May it please the Court.

GLEESON CJ:   Thank you, Mr Walker.  Yes, Mr Hutley.

MR HUTLEY:   At the relevant time the four properties with which we are concerned were each in the ownership of four different parties.  The servient tenement, the predecessor of my client, the dominant tenement, the predecessor of my learned friend’s client, the Imperial Arcade and the Centrepoint in different ownership.  There is no doubt that there was contemplation of a possibility at some future date that, in the event of redevelopment of Imperial Arcade and Centrepoint, there could be an extension of the physical right of way to the other properties and there might at that time be, depending on a whole lot of circumstances, grants of way in respect of them. 

What my learned friend’s submission is is that the parties to the grant – that is Skygarden and the Glasshouse – contemplated by the grant to Skygarden that Skygarden would be entitled to use the way it was granted for access to and from the remoter properties which at that time it was not even contemplated would be owned by the owners of Skygarden.  That is a serendipitous factor which arrived subsequently.  It was against that objective background that one had to construe the easement.  Then one came to the question of the terms of the easement. 

The easement had numerous provisions which distributed the burdens of usage associated with the easement between the owners of Glasshouse and Skygarden.  The terms of the easement can be seen at application book page 56, paragraph 13 and following.  Broadly speaking, there was a series of provisions which distributed the burdens on the basis of equality with respect to ordinary wear and tear or losses from invitees, but the burden with respect from losses arising from servants or agents were to be borne by the grantor and the grantee respectively. 

If one sat back and looked at the matter commercially at the time that grant was entered into, that was a perfectly reasonable distribution of burdens between a grantor and a grantee where what was contemplated was that the servient tenement would bear the burden of usage from the dominant tenement in circumstances where the right of way led to a driveway which also serviced the servient tenement.  In other words, the parties agreed that they would split the costs of ordinary usage or invitees generally between them but the servants and agents of each would be the responsibility of each. 

What the construction advanced by our learned friends is that it was contemplated by the parties that in the event that there be redevelopment of two remoter sites – my learned friend has taken your Honours to the plan and it is clear that those remoter sites are in sum much greater in extent than the two sites with which we are concerned – in that event and in the event that the owner of the dominant tenement could, as it were, do a deal to act as a through point for the owners of the remoter properties, they could throw upon my client an obligation to split the costs of such usage on a 50/50 basis without even the benefit of getting an indemnity with respect to the servants and agents of the owners of the remoter properties. 

They were part of the terms which had to be construed in the objective circumstances.  The Court of Appeal at paragraphs 61 and following dealt with the those matters in the context of construing the grant as a whole and they are particularly taken up from the bottom of paragraph 65 and following, but it is against that background that the sentence in paragraph 64 to which my learned friend drew your Honours attention, “It seems unlikely to me”, et cetera, is to be understood.  What their Honours held as a matter of construction that when one looked at the grant in its entirety, it simply was highly unlikely that it would be construed to confer this extraordinary benefit on the dominant tenement in the circumstances which we have outlined. 

In our respectful submission, looking at this as a commercial instrument, which in effect it was, that conclusion is wholly unremarkable.  In fact, the contrary conclusion would require the court to conclude that, in effect, the servient tenement was prepared to expose itself to an unidentified, unquantifiable risk of burden at an indeterminate future event, namely, when, if at all, there was a redevelopment of Centrepoint and Imperial Arcade in a manner highly unforeseeable without any

compensation at all and we just split the difference with the owners of Skygarden. 

In our respectful submission, the conclusion which was arrived at as the construction by the Court of Appeal is the only reasonable conclusion which would be arrived at whatever one might say about the admissibility of evidence, and this material really would not be determinative one way or another when one views it in the context of the commercial instrument which these parties entered into.  For those reasons, in our respectful submission, this is not an appropriate case for a grant of special leave because it simply has no reasonable prospects of success because the construction which is sought to be advanced is one which is wholly unreasonable. 

Although Justice Brereton at first instance came to the contrary conclusion, as observed by the Court of Appeal, he failed to address the true construction of the clauses and their true import.  That was one of the principal means by which his Honour was led into error.  Those are our submissions.

GLEESON CJ:   Thank you, Mr Hutley.  Yes, Mr Walker.

MR WALKER:   Your Honours, could I take you to page 20 to make good this proposition that what my learned friend is relying upon is an outcome that says, “Yes, our predecessor in title assured the council that it had done that which it could do by way of grant of an easement to facilitate remoter access in the future across Skygarden, but now we wish to be in a position by reference to the cost sharing that was possible when there were only Glasshouse and Skygarden as party to the use”.  We wish to say, “All bets may be off.  We go back to taws in relation to negotiating whether we will facilitate or not”. 

On page 20 one sees that Donald Crone & Associates, the spokesman for Glasshouse, in paragraph 28 is explaining a possibility concerning Glasshouse for its vehicle ramp from King Street to the council.  One sees the reference just at about line 24 to the, “possible vehicular connection to adjoining properties along the southern boundary”, a very plain contemplation communicated to the council by Donald Crone & Associates for Glasshouse.  Paragraph 29 has a finding by Justice Brereton which is not challenged as to the outcome of that and related documents. 

Page 21, paragraph 32, Donald Crone & Associates were also the spokesman for Skygarden at relevantly the same time.  Skygarden, when originally lodged as to its plans for approval, did not have the Glasshouse ramp being used and had that which council deprecated as a matter of planning politics, namely, “vehicular access via Castlereagh Street”.  Page 22, one could be forgiven for thinking that Donald Crone & Associates were themselves facilitating, in any event, Glasshouse developers approached the owners of Skygarden and they proposed the access to Skygarden over the Glasshouse ramp.  Between letters 20 and 30, the owner of Glasshouse instructs, and this is, I stress, an internal instruction, that:

I want to be [in] a position to say to the Council –

that is, he wants to be able to deal externally –

that should the tunnel be constructed vehicles wishing to access and leave the Imperial Arcade and Centrepoint can use the vehicle ramp in the Glasshouse building.

GLEESON CJ:    Is the proposition that construing the easement as you would construe it produces for Glasshouse a result that is not as commercially improbable as your opponent suggests?

MR WALKER:   Quite so.  Furthermore, we go a step further; that it is precisely what they intended and they understood that the attractive feature which would get them there and then their commercial benefit, the floor space bonus, required the possibility of future access to remoter sites, not the possibility of a new ransom style negotiation for access to future sites, but the facilitation to the extent that they could facilitate.  Your Honours have seen how that was then put into action by deed, paragraph 36 on page 22, and how the planning and bonus space transaction unfolded.  See page 23, paragraphs 38 and 39 and 41. 

Indeed, through Donald Crone & Associates acting for both owners in various different guises, Glasshouse makes the request explicitly on the basis that there would be permitted access through to Imperial Arcade and Centrepoint.  So when one comes to page 26, paragraph 46, in our submission, that is a finding which is unshiftable by any appellate argument.  It was certainly not shifted by argument in the Court of Appeal.  The purpose was of gaining the bonus FSR motivated the transaction.  That is a transaction which was inter‑parties.  It was by an arrangement reached between them.  It involved saying, “You will be able to use the easement not only to come onto your land but in the future, if it is so turns out, to go onto the remoter sites as well.” 

Now, your Honours, the cost sharing 50/50 is easily explained, bearing in mind, as my friend says, whether this was ever going to happen in the future was uncertain.  The cost sharing is easily explained.  It is only Glasshouse and Skygarden that could reach terms binding between them as

to the sharing of costs.  They could not involve in their cost sharing regime for the easement being granted anything about future owners, let alone present owners, of Imperial Arcade and Centrepoint.  One is entitled to say a practical possibility, clearly contemplated by the idea of access being permitted across Skygarden to Imperial Arcade and Centrepoint, was that there may be a consolidation of sites and there would still be an appropriately commercial way in which a 50/50 split was appropriate for the future, not just the present.

GLEESON CJ:   In this matter there will be a grant of special leave to appeal.

AT 12.19 PM THE MATTER WAS CONCLUDED