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High Court of Australia |
BARBA v. GAS & FUEL CORPORATION (VICT.) [1976] HCA 60; (1976) 136 CLR 120
Easements - Torrens System (Vict.)
High Court of Australia
Gibbs J.(1), Stephen(2) and Jacobs(3) JJ.
CATCHWORDS
Easements - Option to acquire - Consideration - Promise to pay stipulated sum on receipt of option agreement - Description of servient tenement - Location of easement to be agreed in future - Sufficiency of description - Grant - Registration - Sale of land by grantor between grant of option and grant of easement - Purchaser aware of terms of proposed grant but not of option - Torrens system title - Indefeasibility of title of grantee - Tenant in possession of land - Purchaser under contract in possession - Extent of interest to &which certificate of title subject - Effect of notice of agreement by vendor to grant easement.Torrens System (Vict.) - Indefeasibility of title - Certificate of title - Tenant in possession - Purchaser under contract in possession - Registered easement - Extent to &which subject to interest of tenant in possession - General law - Effect of notice of agreement by vendor to grant easement - Transfer of Land Act 1958 (Vict.), s. 42 (2) (e).
HEARING
Melbourne, 1976, September 30; October 1.DECISION
November 22.
2. The Option for Easement in its present form bears date 21st July 1975 and
its material provisions are as follows:
"The undersigned CRAIGIE (CLAYS) PTY. LTD.----------------------------------------------------------------------------
of 68 DAWSON ST., BRUNSWICK
(hereinafter called 'the Grantor') being the registered
proprietor (or entitled to become the registered proprietor) of
an estate in fee simple subject however to the encumbrances
and interests notified on the relevant Certificate of Title or
hereinafter specified in All That piece of land described in the
following Schedule (and which is hereinafter called 'the
Grantor's said land').
SCHEDULE OF TITLE
Parish Crown-----------------------------------------------------------------------
Allotment
or Portion Section Lot No.
Plan of
Sub-division
Number Volume Folio
Bylands 154 - 8529-563
Bylands 155 - 9028-391
IN CONSIDERATION of the sum of $10.00 now paid to the
Grantor (the receipt whereof is hereby acknowledged) by GAS
AND FUEL CORPORATION OF VICTORIA of 171 Flinders Street,
Melbourne (hereinafter called 'the Corporation' which
expression where the context so permits shall include its assigns)
Hereby Grant unto the Corporation an option to acquire an
easement for the Corporation to construct, maintain and
operate one or more pipelines for conveying liquid or gaseous
hydrocarbons, natural and artificial gas and any products or
by-products thereof and any other substance which may be
transported by pipeline on over under and/or through a strip
of land not to exceed 35m-115 feet in width across the
Grantor's said land and together with the right to construct,
maintain and operate the necessary surface and sub-surface
appliances, equipment and appurtenant facilities in
accordance with the specimen form of easement attached hereto
and marked 'A' for a sum calculated at the rate of $330.00 per
acre in respect of the land comprised in the said strip of land
(hereinafter called 'the easement purchase price'). The above
rate is based on the following schedule: - " (at p125)
3. There followed a schedule showing (inter alia) the price per acre to be
paid for the easement. Then there were set out a number
of conditions of which
those material were the following:
"1. The Grantor agrees that the Corporation and its
surveyors, engineers, servants, agents, licensees, contractors
and sub-contractors (hereinafter called 'the Corporation's
associates') may enter upon the Grantor's said land forthwith
for the purposes of a survey and other preliminary and
additional work necessary to determine the course and
location of the said pipeline or pipelines. The location and
dimensions of the said strip of land upon the Grantor's said
land are to be approximately in the position as located as a
result of the above work or in such other position upon the
Grantor's said land as the Corporation may with the prior
consent of the Grantor determine. The Corporation shall be
responsible for any damage caused by the Corporation and
the Corporation's associates to the Grantor's crops, timber,
pasture lands, live stock, improvements and other property in
the course of such survey or other work and shall compensate
the Grantor therefor in accordance with Clause 8 hereof.
2. This option being given for valuable consideration is to
be irrevocable until midnight on the 21st day of July, 1976
(hereinafter called 'the Option date').
3. This option may be exercised by the Corporation in
either of the following manners: -
(a) by notice in writing that this option is exercised, signed
on behalf of the Corporation by its Secretary or
Substitute Secretary for the time being, which notice
may be delivered to the Grantor by hand or forwarded
to the Grantor at his address herein specified by
ordinary prepaid letter at any time on or before but not
after the option date:
or
(b) by commencing operations upon the said land for the
laying of the pipeline before but not after the option
date.
4. Should this option not be exercised by the option date
then this option shall be deemed to have lapsed and the
aforesaid consideration paid for such option shall be forfeited
to the Grantor.
5. Upon and by virtue of the exercise of this option as
aforesaid and without any further act of the Grantor or the
undersigned holders of the undermentioned encumbrances
and interests the Corporation shall forthwith upon such
exercise have the immediate and continuing right to enter
upon the Grantor's said land and place its equipment and the
equipment of the Corporation's associates upon the Grantor's
said land and to commence and to continue the construction
of the said pipeline or pipelines and works in accordance
with the terms of the said form of easement annexed hereto
and marked 'A' and to exercise all the rights therein set out
in favour of the Corporation notwithstanding that the said
form of easement may not then have been executed.
6. In the event of the exercise of this option as aforesaid the
Grantor will within fourteen days of the written request of the
Corporation execute and deliver to the Corporation a creation
of easement (in duplicate) prepared by the Corporation in the
form annexed hereto and marked 'A' complete as to the date,
the name of the grantor, the particulars of the said easement
and the consideration and otherwise as may be necessary
and will within the time aforesaid execute and deliver to the
Corporation such further and other assurances in respect of
the said easement as may reasonably be required by the
Corporation and lastly will within the time aforesaid deliver
to the Corporation or forward to the Titles Office at
Melbourne the relevant Certificate(s) of Title or Crown
Grant(s) to enable the said easement to be registered. If the
Grantor's said land is not under the operation of the Transfer
of Land Act 1958 the form of easement to be submitted shall
contain the identical rights powers and obligations as are
contained in the said form of easement annexed hereto but the
form thereof shall be such as the Corporation may
reasonably require." (at p127)
4. The sum of $10 mentioned in the Option for Easement had not in fact been
paid at the time when that document was signed. On 20th
August 1975 a letter
signed by the property manager of the respondent was sent to Craigie. It read
as follows.
"We enclose a Corporation cheque in favour of yourThe letter was received by Craigie on 25th August 1975. (at p127)
Company being for the amount of $10.00 being the Option
Fee referred to in the Option for Easement document recently
delivered to the Corporation. Formal Creation of Easement
documents will be presented in the immediate future."
5. On 29th September 1975 a further letter, also signed by the property
manager, was sent from the respondent to Craigie. It contained
the following
paragraph:
"I refer to the Option the Company has granted to theThe Creation of Easement mentioned in this letter was in the form of the blank document which had been previously given by Mr. Daly to Mr. Nelson but the blanks were now completed. The document was signed and sealed by Craigie on 17th December 1975. It stated that Craigie thereby transferred and granted to the respondent, as appurtenant to land of which the respondent was the registered proprietor, an easement over all that land delineated and coloured red on the plans marked "A" and "B" annexed thereto, being parts of the subject land. The Creation of Easement was lodged at the Office of Titles on 12th January 1976; it was subsequently registered, and its registration dates from that day. (at p127)
Corporation in respect of the above-mentioned easement and
now enclose Creation of Easement, in duplicate, for execution
by the Company. Would you please have sealing clause
completed."
6. In the meantime, on 15th August 1975, the subject land had been put up for
auction. There was some conflict of evidence as to
what occurred at the sale,
but the findings of the learned trial judge on this question were not
challenged before us. He found that
at the auction there was available for
inspection a copy of a printed draft of the Creation of Easement, to which
copy survey plans
were attached showing the area proposed to be subject to the
easement. He further found that the auctioneer had marked out the measurements
of the proposed easement on an outline sketch of the land on his copy of an
advertising brochure, which was held up for those present
to see; it was
doubtful whether what was marked on the sketch could be seen, but the
auctioneer described the width and depth of
the proposed easement, and read
out the substantive part of the draft Creation of Easement. He read also the
special conditions from
the draft contract of sale that had been prepared by
the solicitors for the vendor (Craigie) and upon which the sale was to take
place, including special condition 8 to which reference will shortly be made.
(at p128)
7. The appellants purchased the subject land at the auction and on the same
day (15th August 1975) signed a contract of sale. The
contract acknowledged
that the agents for Craigie had sold the subject land to the appellants,
"Subject to all registered and appurtenant
easements and Creation of Easement
No. F698397 to Wallan Waterworks Trust and to the existing tenancy of Mr. L.
Pollack to the 1st
September 1975 ...", for the sum of $129,640. The contract
provided for the immediate payment of a deposit of ten per cent of the
purchase price and for payment of the residue as follows: forty per cent of
the purchase price at the expiration of sixty days from
the date thereof
(thereinafter in the contract referred to as "the date of possession"), the
further sum of twenty-five per cent
of the purchase price at the expiration of
eighteen months from the date thereof, and the balance at the expiration of
two years
and six months from the date thereof; the balance carried interest.
By condition 7, the appellants were entitled to vacant possession
of the
subject land or (if the land was sold subject to the rights of any tenant or
other occupier) to the rents and profits thereof
upon acceptance of title and
payment in full of the deposit money and a further sum equal to forty per cent
of the purchase price.
By condition 9, the appellants attorned tenant to
Craigie from quarter to quarter commencing on the date on which the appellants
became entitled to possession, at a rent equivalent to the interest and
instalments (if any) to be paid during a like period. Condition
8 of the
special conditions of the contract was in the following terms:
"The Vendor warrants that it has received notice from the
Gas and Fuel Corporation Ltd. calling for the creation of a
pipe line easement in favour of the Gas and Fuel Corporation.
The Vendor has concurred in the granting of the said
easement and the Purchaser acknowledges having read a
true copy of the proposed creation of easement document
prior to the signing of this Contract AND IT IS HEREBY
ACKNOWLEDGED by the parties hereto that all monies paid or
to be paid by the said Gas and Fuel Corporation by way of
compensation in respect of the granting of the easements
shall be paid to and shall belong to the vendors herein." (at p129)
8. The appellants entered into possession of the subject land on 3rd November
1975 and have since been in possession. (at p129)
9. There is no evidence that on 15th August 1975, when the appellants
purchased the subject land, they had any knowledge or means
of knowledge that
Craigie had granted the option. It was not suggested that the auctioneer had
been informed of the grant of the
option and the proper inference from the
evidence is that nothing was said to the appellants about an option before
they signed the
contract. Subsequently, on 18th November 1975 Mr. Daly called
upon the male appellant in accordance with the respondent's practice,
which
was to inspect and report on properties before entering them. The male
appellant then told Mr. Daly that he "hadn't sighted
an option document on the
property" and that he considered that the respondent was not entitled to
proceed with the work. On the
following day Mr. Daly again went to the subject
land, this time taking with him a copy of the Option for Easement to give to
the
male appellant. However, the male appellant was not at the property, and
Mr. Daly went instead to a firm of solicitors, who had acted
for the
appellants in connexion with the purchase, and delivered the copy of the
Option for Easement to their office. There is no
evidence that the solicitors
showed the appellants the document which Mr. Daly left at their office. (at
p129)
10. On 20th November 1975 Mr. Daly returned to the subject land and this time
saw the male appellant. Mr. Daly again had with him
a copy of the Option for
Easement and he handed it to the male appellant who however would not take it.
The male appellant said that
nobody was allowed on the property and that
anyone entering it would be shot. He requested Mr. Daly to relocate the line
of the easement.
(at p129)
11. On 29th November 1975 a pipeline inspector employed by the respondent saw
the male appellant at the subject land and told him
that it was proposed to
put temporary gates in his fences so that work could be done on the pipeline.
The male appellant refused
permission for this work to be done and threatened
to shoot at the first vehicle that entered his property. Apparently no work
was
done by the respondent's workmen on that day, but on the following Tuesday
(2nd December 1975) the respondent's workmen returned
and began taking topsoil
off the subject land. However, the male appellant fired some shots from a
shot-gun and the workmen thereafter
desisted from their attempts to work on
the subject land. It appears that the only work done by the respondent's
workmen on the subject
land was to strip the topsoil for some 300 feet to a
depth of six to eight inches, and "some minimal fencing work". Since 2nd
December
1975 the respondent's workmen have not attempted to do any work on
the subject land. The work of laying the pipeline was carried
out to within a
short distance of the southern boundary of the subject land and was begun
again beyond the northern boundary. The
respondent alleges that the fact that
it was prevented from continuing the pipeline across the subject land, and the
necessity to
return to complete it will put the respondent to great expense.
(at p130)
12. On 18th December 1975 the respondent commenced the present action. The
only relief sought by the statement of claim as first
delivered was an
injunction. An application for an interlocutory injunction was made and
refused. Thereafter the statement of claim
was amended to claim further
relief. The action was subsequently tried and on 18th June 1976 the Supreme
Court ordered as follows:
"1. Whereby it is declared that the Plaintiff was entitled toIt is from this judgment that the present appeal is brought. (at p130)
have registered the Creation of Easement dated the 17th day
of December 1975 duly executed by Craigie (Clays) Pty. Ltd.
and the Plaintiff.
2. Whereby the Defendants themselves, their servants or
agents shall be and they are hereby restrained from
preventing, hindering, obstructing or delaying the Plaintiff,
its servants or agents or contractors from enjoying the benefit
of the Easement referred to in the said Creation of Easement.
3. For damages in the sum of Twenty Two Thousand Two
Hundred and Forty Five Dollars Ninety Three Cents.
4. Whereby it is ordered that the Plaintiff's costs including
reserved costs and the costs of recorded notes be taxed, and
when so taxed be paid by the Defendants." (1976) VR 755, at pp 766, 767
13. The appeal raises two broad questions. The first is whether the actions
of the male appellant, in refusing to allow the respondent's
workmen to enter
the subject land on 29th November and 2nd December 1975, gave the respondent
the right to recover damages quantified
by reference to the additional cost
which it is estimated will be incurred in completing the pipeline. The second
is whether, since
the execution and registration of the Certificate of
Easement, the respondent has been entitled as against the appellants to the
rights which that instrument purported to create. It was not argued before us
that the learned judge was wrong in declaring that
the respondent was entitled
to have the Certificate of Easement registered but it was submitted that the
appellants are tenants in
possession of the subject land and that their rights
prevail over those conferred by the easement by virtue of s. 42 (2) (e) of the
Transfer of Land Act 1958 (Vict.). (at p131)
14. It is convenient first to consider whether Craigie granted to the
respondent an option which was valid and binding. No point
was made of the
fact that the dates were inserted in the blank spaces after Craigie had signed
the document; it was apparently accepted
that the respondent was authorized to
do so. However, it was submitted on behalf of the appellants that the option
which Craigie
purported to grant to the respondent was unsupported by
consideration and, since it was not under seal, was not binding. Although
the
Option for Easement acknowledged receipt by Craigie of the sum of $10, that
amount had not in fact been paid. The acknowledgment
of payment did not create
an estoppel against Craigie (Petersen v. Moloney [1951] HCA 57; (1951) 84 CLR 91, at p 100 ).
It was evidence
against
Craigie that payment had been made but it was evidence
that could not be accepted
in the light of the proved facts. An acknowledgment
that a payment has been made does not in itself amount to a promise to pay,
since
an erroneous statement that acts have been done
in the past is not a
promise that those acts will be done in the future (cf. Lowe
v. Lombank Ltd.
(1960) 1 WLR 196, at p 204 ). Accordingly
it was submitted that since the
option was expressed to be in consideration
of a payment acknowledged to have
been made, when none
in fact had been made, there was no consideration and the
option imposed no
contractual obligations on Craigie. An unreported decision
of Street J. (as he then was) in Lydia Court Pty. Ltd. v. Panousis Supreme
Court of NSW, 7th September 1973. was cited in support
of this submission. It
is unnecessary to consider the correctness of that
decision because in this
case there are additional circumstances
which do not appear to have been
present in the case decided by
Street J. Here there is evidence of an oral
agreement that the $10
was to be paid when the respondent received the option.
Oral evidence
was admissible to prove that the written instrument was in
truth
given for valuable consideration: In re Holland; Gregg v. Holland
(1902) 2 Ch
360, at p 388 ; Frith v. Frith (1906) AC 2548
at pp 258-259 . The promise to
pay the sum of $10 was sufficient consideration
for the grant of an option.
(at p132)
15. The question that then arises is whether the option sufficiently defined
the site of the easement. Cases concerned with rights
of way have held that
where a right of way is created, but the way itself is not defined, the
grantee cannot insist on going wherever
he chooses, but the grantor may
indicate the line by which the way granted is to be enjoyed: Deacon v.
South-Eastern Railway Co.
(1889) 61 LT 377, at p 379 ; Bolton v. Bolton (1879)
11 Ch D 968 . If the owner of the servient tenement does not point out the
way,
the grantee must take the nearest way he can: Wimbledon and Putney
Commons Conservators v. Dixon (1875) 1 Ch D 362, at pp 369-370
. Although in
some respects a right of way obviously differs from a pipeline easement,
similar considerations should in my opinion
apply to the latter case if the
parties have not regulated the matter by agreement. Here the parties have
expressly dealt with the
question; the option granted by Craigie to the
respondent was to acquire an easement "on over under and/or through a strip of
land
not to exceed 35m - 115 feet in width". The fact that there is not an
exact equivalence between the metres and feet thus specified
is not material,
since it is the maximum width of the strip which is thus described. The
dimensions (other than the width) of the
strip and its location are to be
determined in the manner set out in cl. 1 of the option. That clause commences
by giving the respondent
a licence to enter upon the subject land "forthwith
for the purposes of a survey and other preliminary and additional work
necessary
to determine the course and location of the said pipeline or
pipelines". The clause then states: "The location and dimensions of
the said
strip of land upon the Grantor's said land are to be approximately in the
position as located as a result of the above work
or in such other position
upon the Grantor's said land as the Corporation may with the prior consent of
the Grantor determine." It
was not argued that there was any uncertainty in
this clause itself. However, the express provision in the option as to the
manner
in which the location and dimensions of the strip were to be determined
would appear to exclude any implication which might otherwise
have been made
that they should be determined in some other way. Clause 1 provided two ways
by which the location and dimensions
of the strip were to be determined.
First, they were to be "approximately in the position as located as a result
of the above work".
The power to "locate" the position of the strip appears to
have been given to the respondent, but since the respondent's act was
intended
to define the position of an easement over Craigie's land, it should in my
opinion be concluded that the strip could only
be "located" when the
respondent in some way communicated to Craigie where its position was intended
to be. Moreover, the respondent's
power to fix the position of the strip was
not unlimited; the strip was to be located "as a result of the above work".
Those words
can only mean as a result of the work done pursuant to the licence
given by the first sentence of cl. 1, i.e. work done after the
grant of the
option for the purpose of determining the course and location of the pipeline.
But no such work was ever done. In fact
the survey that was made had been
carried out before the option was signed. The work done in making that survey
did not answer the
description "the above work" in cl. 1. Of course, if the
doing of work after the grant of the option was a condition of the
respondent's
right to "locate" the strip, it would have been open to Craigie
to waive that condition. Indeed, it may be right to say that the
condition was
purely for the benefit of the respondent, and that the respondent might itself
have waived it. But what was necessary
on any view was that before the option
could be exercised the respondent should have finally fixed the position of
the strip for
the purposes of cl. 1, and communicated to Craigie the fact that
it had done so, because once the strip had been finally located
in that way
the respondent's power to determine its position unilaterally would have gone,
and thereafter the position of the strip
could have been altered only by
agreement. (at p133)
16. The respondent relies heavily on the facts that the position of the strip had been marked out with pegs before the option agreement was made (although there is no evidence that Craigie knew of this) and that the plans which accompanied the Option for Easement when it was delivered to Craigie on 15th May 1975 showed the position of a proposed easement. There was nothing on the face of the documents delivered to Craigie on 15th May 1975 to connect the plans either with the blank form of Creation of Easement or with the Option for Easement. There was no evidence that any person acting on behalf of Craigie was informed that the plans were intended to determine conclusively the site of the proposed easement. Mr. Nelson said no more than that Mr. Daly left with him the plans of the proposed route. Mr. Daly did not remember that he had the plans available; he thought (apparently wrongly) that he had no more than a parish map marked to show the general direction in which the pipeline was to go. He swore that when he saw Mr. Nelson he had no idea as to where the easement was going to go across the property, except its general direction, but that evidence may also have been mistaken. Although it would have been natural for Mr. Nelson to conclude that it was intended by the respondent that the pipeline should follow the route shown on the plans left with him, it was also possible that the plans were intended to be merely provisional. In any case the option plainly expresses the intention that the easement to be granted is over a strip of land whose position is to be fixed in the future. The evidence of the circumstances existing when the option was granted, although admissible to resolve an ambiguity or identify something referred to in the agreement, does not entitle the Court to disregard the actual words used by the parties and make a new agreement for them. The conclusion that the position of the strip was not "located", for the purposes of the Option for Easement, at the time when that document was executed, may be tested by considering what the position would have been if, subsequently, the respondent had wished to obtain an easement over a strip of land different from that shown on the plans and if Craigie had then refused its consent. The words of cl. 1 of the option would appear quite clearly to have entitled the respondent in those circumstances to enter upon the land, make another survey and then locate the position of the strip of land. (at p134)
17. There can be little doubt that the letter of 29th September 1975
enclosing the Certificate of Easement for execution, would
have served to
indicate to Craigie that the respondent wished to obtain an easement over the
strip shown in the plans annexed to
the Certificate of Easement. However, the
question is whether that letter fixed the position of the strip for the
purposes of the
option. It did not purport to do so, and in my opinion it was
not intended to do so. The respondent may have thought, wrongly, that
the
position of the strip had already been fixed by the pegging of the land and
the delivery of the plans before the option was signed.
It may have assumed
that Craigie was not particularly concerned with the position of the strip,
and that it was unnecessary to locate
it for the purposes of the option before
having the Certificate of Easement signed. The letter did not in my opinion
amount to an
exercise of the power to locate the position of the strip. If the
Certificate of Easement had not been signed, the sending of the
letter by the
respondent to Craigie would not without more have bound either the respondent
or Craigie to the position of the strip.
Of course once the Certificate of
Easement was signed it became immaterial, so far as future rights were
concerned, what had been
done under the option. But in so far as the
respondent needs to show that it had acquired rights under the option itself,
it must
show that any condition of the existence of those rights has been
fulfilled. As I shall endeavour to show, there was no right to
commence
operations on the subject land on 2nd December 1975 unless the position of the
strip of land had been fixed under cl. 1.
(at p135)
18. There is no evidence that the respondent, with the prior consent of
Craigie, determined the site of the easement at any time
before the Creation
of Easement was executed on 17th December 1975. It is no doubt highly probable
that both the respondent and Craigie
contemplated that the easement granted
would be over the strip of land marked on the plans. There is, however, no
evidence of any
agreement to that effect before 17th December 1975. (at p135)
19. The learned trial judge appears to have proceeded on the assumption that
the position of the strip of land over which it was
intended that an easement
should be granted was sufficiently "located" as a result of the work done
before the option was granted.
However, for the reasons given I would hold
that the position of the strip was never "located" in accordance with the
terms of the
option at any time before 17th December 1975. (at p135)
20. The next question that arises is whether the option was ever exercised.
It is clear on any view that it had not been exercised
at the time of the sale
of the land from Craigie to the appellants on 15th August 1975. The learned
trial judge made no express finding
on the subject of the exercise of the
option. In his judgment there appears the following passage:
"It may be remarked that the only documents that it isIt is not clear whether the learned trial judge was saying that the letters amounted to an exercise of the option, or that the option was exercised on 2nd December 1975, or whether he did not intend to make a finding on the subject at all. In my opinion the option was not exercised by either of the letters of 20th August 1975 and 29th September 1975. It may be assumed that those letters indicated an intention to exercise the option, although another possible view is that they expressed the erroneous belief that the option had in fact already been exercised. However, cl. 3 of the option specified the manner in which the option might be exercised. One permissible mode of exercise was by notice in writing "signed on behalf of the Corporation by its Secretary or Substitute Secretary for the time being". Neither letter was signed by the secretary or substitute secretary of the respondent. The letters therefore did not comply with the requirements contained in cl. 3 as to the manner in which the option was to be exercised, and were ineffective to amount to an exercise of the option. (at p136)
suggested amount to an exercise of the option are two letters
written not by the secretary or substitute secretary of the
corporation but by its property officer. In neither letter is the
option exercised in express terms, but language is used from
which no other inference can be drawn than that the
corporation was exercising its option to acquire the easement.
Those letters are dated 20th August 1975 and 29th September
1975 respectively. Work in relation to the construction of the
pipeline commenced on the defendants' land on 2nd
December 1975. At that time no easement had been created
and no permission had been given to the plaintiff to enter
upon the land for such a purpose. Certainly, the option
conferred no express right to go upon the land in order to
commence pipe laying operations, but the absence of such an
express right in conjunction with a permissible exercise of
option by the commencement of operations must mean that
the option agreement impliedly conferred upon the grantee a
licence to enter upon the land in order to commence work."
21. It is then necessary to consider whether the option was exercised in the
manner indicated by cl. 3 (b). In this respect the
option manifests the
peculiarity to which the learned trial judge adverted in the passage to which
I have just referred. The option
document itself conferred no express power to
enter the land for the purpose of commencing operations for the laying of the
pipeline;
obviously the provisions of cl. 1, which have already been
discussed, did not have that effect. It is however no doubt right to assume
that cl. 3 (b) impliedly conferred such power. Once the option had been
exercised, even if the exercise simply consisted in commencing
operations as
described in cl. 3 (b), the respondent was immediately to become entitled to
all the rights given to it by the Creation
of Easement notwithstanding that
that document had not then been executed: see cl. 5. Immediately on the
exercise of the option the
respondent would become entitled to an equitable
easement. But of course the rights under cl. 5 did not arise until the
easement
was exercised and whether there was an exercise in the present case
depends on the meaning of the words "operations upon the said
land for the
laying of the pipeline" in cl. 3 (b). Those words, in my opinion, refer to
work done for the purpose of laying the pipeline
on the strip of land over
which the easement was to be granted. They cannot be understood as referring
to operations done anywhere
on Craigie's land, for if they had that effect
they would impliedly give the respondent the right to commence operations
anywhere
it wished, regardless of whether the work being done was or was not
within the strip located in accordance with cl. 1. The provisions
of the
option must be construed so as to make them harmonious, and cl. 3 (b) must be
read in the light of cl. 1. In the present case
there is no evidence that the
work done on 2nd December 1975 was on the strip of land shown on the plans,
but even if it be assumed
that the work was done within the strip so shown,
that strip was not, for the reasons already given, "located" in the manner
mentioned
in cl. 1 of the option. There is thus no evidence that the
respondent ever commenced "any operations upon the said land for the laying
of
the pipeline", within the meaning of cl. 3 (b). There is no formal finding
that the option was exercised on 2nd December 1975
and in my opinion there was
no evidence that it was then exercised. (at p137)
22. I have discussed in Laybutt v. Amoco Australia Pty. Ltd. [1974] HCA 49; (1974) 132 CLR
57, at pp 71-76 the different views
that have been expressed
as to the nature
of an option to purchase, but whichever
view be accepted it is clear that an
option to
purchase gives the grantee
an equitable interest in the land. In
London and South
Western Railway Co. v. Gomm (1882) 20 Ch D 562,
at p 581
Jessel M.R. said:
"The right to call for a conveyance of the land is anSee also Wright v. Dean (1948) Ch 686, at p 693 ; In re Button's Lease; Inman v. Button (1964) Ch 263, at p 271 and Commissioner of Taxes (Q.) v. Camphin [1937] HCA 30; (1937) 57 CLR 127, at pp 132-134 . The equitable interest so created is a contingent interest which will become an absolute interest when the contingency is fulfilled: Griffith v. Pelton (1958) Ch 205, at p 225 ; Du Sautoy v. Symes (1967) Ch 1146, at p 1163 . It was held in Morland v. Hales and Somerville (1910) 30 NZLR 201 that the equitable interest which passes to the grantee when an option is granted prevails over the rights of a person who, after the grant of the option but before its exercise, has contracted to purchase the land without notice of the existence of the option. It may be assumed that the principles stated in those cases apply to the case of an option to acquire an easement. However, until the option is exercised the interest which it confers remains contingent and the grantee cannot call for a conveyance or demand to exercise any of those rights to which he is contingently entitled. In the present case, at 2nd December 1975 the option had not been exercised and the respondent therefore had no right to enter the land pursuant to the provisions of cl. 5 of the option, and had no more than a contingent equitable interest in the land. (at p138)
equitable interest or equitable estate. In the ordinary case of
a contract for purchase there is no doubt about this, and an
option for repurchase is not different in its nature. A person
exercising the option has to do two things, he has to give
notice of his intention to purchase, and to pay the
purchase-money; but as far as the man who is liable to convey is
concerned, his estate or interest is taken away from him
without his consent, and the right to take it away being
vested in another, the covenant giving the option must give
that other an interest in the land."
23. Great reliance was placed by counsel for the respondent upon condition 8
of the special conditions of the contract. Those provisions
do not, in my
opinion, assist the respondent in relation to this aspect of the matter. The
condition commences by setting out a warranty
by Craigie that it has received
notice from the respondent calling for the creation of a pipeline easement.
This so-called warranty
is an inaccurate statement of the actual facts and
suggests rather that Craigie has been given a notice under statutory authority
requiring it to grant an easement than that Craigie and the respondent have
entered into voluntary contractual relations. That is
perhaps unimportant.
Then follows the part of the condition to which the respondent attaches
particular importance: "The Vendor has
concurred in the granting of the said
easement and the Purchaser acknowledges having read a true copy of the
proposed creation of
easement document ..." The intention of these words is
somewhat obscure. I shall return later to consider their effect once the
easement
had been granted. I am at present concerned with their effect, if
any, in relation to the option. It may be assumed that the statement
that the
vendor had concurred in the granting of the easement should be understood as
meaning that Craigie had entered into a binding
contract to grant an easement,
although the words do not in terms make such an assertion. It may also be
assumed that the only contract
which would answer the description contained in
the condition so understood was that constituted by the option. If, on these
assumptions,
it be concluded that special condition 8 subjects the rights of
the appellants to those given to the respondent by the option, the
fact
remains that on 29th November and 2nd December 1975 the only rights of entry
given to the respondent by the option (other than
rights that were merely
contingent) were the right to enter for the purposes of a survey and other
preliminary work, under cl. 1,
and the implied right to exercise the option
under cl. 3 (b) by commencing operations for the laying of the pipeline upon
the strip
of land "located" in accordance with cl. 1. (at p138)
24. For the reasons which I have given, I conclude that the respondent had no
right, on either 29th November or 2nd December 1975,
to enter the subject land
for the purpose of commencing operations upon it for the laying of the
pipeline, except within the strip
of land located in accordance with cl. 1 of
the option. Since at those dates the strip of land had not been so located,
the respondent
had no right to enter the land for the purpose of laying the
pipeline. It has therefore not been established that the male appellant
infringed any right of the respondent in refusing to allow the respondent's
workmen to enter the subject land on 29th November and
2nd December 1975. It
should be added that in any case there is no evidence that would render the
female appellant responsible for
the acts of her husband on those days; it was
not proved that he was acting as her agent in denying the respondent's workmen
access
to the land. (at p139)
25. For the reasons I have given, I conclude that there was no justification
for an award of damages against the appellants in favour
of the respondent and
that the appellants must succeed on the first branch of the case. The question
whether the award of damages
could have been sustained if it had been held
that the strip of land had been located, and the option effectively exercised,
presents
difficulties that need not be discussed. However, although the
question was not fully argued I feel bound to say that it appears
that in the
assessment of damages the learned trial judge has not had regard to the duty
of the respondent to mitigate its damages.
Once it had appeared that the
respondent's right to enter the land was doubtful, it seems to me that it
would have been reasonable
for the respondent to seek to obtain an easement by
compulsory acquisition. It might well be thought, in the absence of evidence
to the contrary, that such an easement could have been speedily procured, and
this would have put beyond doubt the respondent's right
to enter the land and
lay the pipeline. (at p139)
26. On 17th December 1975 the Creation of Easement was executed by Craigie,
and on 12th January 1976 the respondent became registered
as the proprietor of
the easement. As I have already said, there is no challenge to the validity of
that registration in the present
case. However, it is argued that the
appellants are tenants in possession of the land and that their interest as
such prevails over
the rights given by the registered easement. Section 42 (2)
of the Transfer of Land Act 1958 (Vict.) provides (inter alia):
"Notwithstanding anything in the foregoing the landIn Burke v. Dawes [1938] HCA 6; (1938) 59 CLR 1, at pp 17-18 Dixon J. discussed as follows the effect of
which is included in any Crown grant certificate of title or
registered instrument shall be subject to -
...
(e) the interest (but excluding any option to purchase) of a
tenant in possession of the land;
...
"In Victoria these words have received an interpretation;
and an application as a result of which any person in actual
occupation of the land obtains as against any inconsistent
registered dealing protection and priority for any equitable
interest to which his occupation is incident, provided that at
law his occupation is referable to a tenancy of some sort,
whether at will or for years. Thus, a purchaser under a
contract of sale, who at law is in possession as tenant at will
of the vendor, has been held protected in respect of his
equitable ownership as purchaser (Robertson v. Keith (1870) 1 VR (E.) 11
Sandhurst Mutual Permanent Investment Building Society v.Similar views were expressed by Latham C.J. (1938) 59 CLR, at p 8 and by Evatt J. (1938) 59 CLR, at p 24 . McTiernan J. agreed with the remarks of Dixon J. (1938) 59 CLR, at p 27 . The fifth member of the Court, Starke J., was perhaps not so definite in the expression of his opinion but he did not disagree with what the majority of the Court said on this point (1938) 59 CLR, at pp 12-13 . This question should therefore be regarded as settled. The interest of the appellants under the contract of sale from Craigie was within the protection given by s. 42 (2) (e). However, it was decided in Burke v. Dawes [1938] HCA 6; (1938) 59 CLR 1, at pp 17-18 that s. 42 (2) (e) does not give to a tenant in possession any greater protection than he would have had if the land were under the general law: see per Dixon J. (1938) 59 CLR, at p 18 and per Starke J. (1938) 59 CLR, at p 13 . Evatt J., who dissented in the result, but whose views on this point were not in my opinion different from those accepted by the majority, said (1938) 59 CLR, at p 25 :
Gissing (1889) 15 VLR 329 , a lessee in respect of an option of purchase
contained in his lease (McMahon v. Swan (1924) VLR 397 ) and a wife in
respect of an equitable life interest claimed under an
unsigned separation agreement made with her husband
(Black v. Poole (1895) 16 ALT 155 ).
a'Beckett J. decided the last named case
in deference to previous decisions and against his own
opinion, which he stated to be that 'those words were intended
to refer to a tenancy as ordinarily understood arising out of
an agreement under which the person in possession was
allowed to occupy in consideration of some kind of rent or
service of which the proprietor was to have the benefit.' The
cases are collected and criticised by the late Dr. Donald Kerr
in his work on The Australian Lands Titles (Torrens) System
(1927), at pp. 75 et seq. But the interpretation has stood for
nearly seventy years, and it would, I think, be most
undesirable now to undertake the re-examination of its
correctness."
"In my opinion the effect of the exception in favour of every
tenant of the land is to deprive the proprietor of the registration
interest of the paramountcy which registration would
normally confer. It follows that, in determining the
competition between the tenant and the proprietor of the registered
interest, the latter must be regarded as having been stripped
of the benefit conferred by the fact of registration and as
having been remitted to the position of holding an
unregistered interest." (at p141)
27. In the present case the respondent is deprived by s. 42 (2) (e) of the
paramountcy which registration would otherwise have conferred. It then becomes
necessary to consider whether, apart
from registration, the interest of the
respondent under the Creation of Easement will prevail over that which vested
in the appellants
by virtue of the contract of sale. This question depends on
the effect of special condition 8 of the contract of sale. When an owner
of
land contracts to sell it to a purchaser there is no reason in principle why
he should not reserve the right to grant an easement
over the property sold or
why he should not make the sale subject to the easement to be granted. If this
is done effectively the
easement when created will take priority over the
equitable interest which was granted subject to it. Under the general law,
apart
from registration, the right of the owner of the easement will prevail
over that of the purchaser, notwithstanding that he is in
possession, and the
provisions of s. 42 (2) (e) will not give the purchaser any greater right. In
Chesterfield v. Pitisano (1964) VR 709, at p 713 , Smith J. said that a
mortgage granted pursuant to a right reserved to the vendor by a contract of
sale would take priority over the equitable interest
of the purchaser, and
that the rights of the mortgagee on registration would not be rendered subject
by s. 42 (2) (e) to the interest of the purchaser as a tenant in possession. I
respectfully agree with his conclusion on this point. The question
therefore
is whether special condition 8 did make the sale subject to the easement to be
granted. In my opinion the condition did
have that effect. It is true that it
did not in terms reserve the right to grant an easement, nor did it state that
the sale was
subject to the easement to be granted. However, the clause
expressly stated that it was proposed to create an easement, and that
the
vendor should be entitled to the compensation paid when the easement was
granted, and in my opinion these provisions plainly
implied that the easement
when granted was to be effective. The clause would be meaningless if the
rights of the purchasers prevailed
over the easement when it was created. In
my opinion the effect of special condition 8 was that the Creation of Easement
- not the
option, as I have already explained - prevailed over the rights of
the appellants. Section 42 (2) (e) did not alter this position. (at p142)
28. It follows that the respondent became entitled to enter the subject land
for the purpose of constructing the pipeline on 17th
December 1975 when the
Creation of Easement was signed, but it was not entitled to enter for that
purpose before that date. The acts
of the male appellant which were said to
give rise to a claim for damages occurred before that date. The respondent was
accordingly
not entitled to recover damages, and the award of damages should
be set aside. The declaration that the plaintiff was entitled to
have the
Creation of Easement registered was not strictly appropriate, but may be
allowed to stand. I would not disturb the injunction.
In all the circumstances
it seems to me that there should be no order as to the costs of the action in
the Supreme Court. (at p142)
29. I would allow the appeal. (at p142)
STEPHEN J. I have had the advantage of reading the reasons for judgment
prepared by Gibbs J. and agree both with his conclusions
and with his reasons
for judgment. (at p142)
JACOBS J. I have had the advantage of reading the reasons for judgment
prepared by Gibbs J. I agree with his conclusion and the
reasons which he has
given. There is little that I wish to add. (at p142)
2. The claim to damages must be regarded as one based on wrongful
interference with an easement, a private nuisance. A private nuisance
is an
injury done to a person in possession of property in land by which his
enjoyment of that property is adversely affected. In
an action for nuisance
arising from interference with an easement, the existence of the easement must
be established before any redress
can be obtained. See Halsbury's Laws of
England, 4th ed., vol. 14, par. 132. It was therefore necessary for the
respondent to establish
that its rights, although they might be either legal
or equitable, were vested in possession at the time when the alleged wrongful
act of the appellants was done. Although an option to take an easement creates
an equitable interest in the land, it is a contingent
equitable interest, as
explained by Gibbs J. in his reasons. The rights thereunder do not become
vested until the option is exercised.
Further, the grantee does not become
entitled in possession until the legal interest is created or until the time
when under the
agreement for creation of the easement he is to be regarded as
in or immediately entitled to possession or enjoyment. In this connexion,
cl.
5 of the option provided that on exercise of the option the respondent would
be entitled to possession of the easement notwithstanding
that the legal form
of easement had not been executed. Thus upon exercise of the option and not
before, the respondent became entitled
to redress by way of damages for injury
to its rights. (at p143)
3. The option could not be exercised so as to entitle the respondent to
possession of the easement until the site of the easement
was located. Even
assuming but certainly not deciding that the licence under cl. 1 of the option
though not coupled with a presently
existing interest could create a right for
which damages could be claimed against a third party who interrupted the
exercise of the
licence, the first named appellant did not interrupt the
exercise of that licence. The claim against him was that he had interfered
with the respondent's right to possession and enjoyment of the easement. (at
p143)
4. I agree with Gibbs J. that the site of the easement was not finally fixed
in terms of the option at the time of the alleged wrongful
act of the first
named appellant. The option therefore could not at that stage be exercised
pursuant to cl. 3 (b) of the option in
order to create a right in possession
to the easement, whether or not the work done on the land was otherwise
sufficient to constitute
an exercise of the option pursuant to cl. 3 (b). I
therefore agree that as at 2nd December 1975 the option had not been exercised
and therefore the respondent had no right to enter the land pursuant to an
equitable easement under cl. 5 of the option. (at p143)
5. Although in many instances where equitable relief is sought, the
application of various rules of equity may obviate the necessity
for a strict
examination of the question whether a right is vested or contingent or
inchoate, when damages are claimed of a kind
which could previously be only
claimed for breach of a legal right, this strict examination is necessary in
order to ensure that
the party claiming damages in equity establishes every
constituent of the right which he claims to have been infringed except the
title at law. Here the respondent did not establish its right to immediate
possession under an easement, legal or equitable. It was
therefore not
entitled to damages. (at p144)
6. As to condition 8 of the contract of sale, I also do not see that it
assists the respondent on the question whether at 2nd December
1975 the option
had been exercised. Condition 8 did not itself create any rights in the
respondent against the appellants for breach
of which the appellants could be
made liable in damages. (at p144)
7. In these circumstances it is unnecessary to consider whether the absence
in the option agreement or its annexures of a description
of any proposed
dominant tenement could be cured by parol evidence identifying the dominant
tenement. (at p144)
8. I therefore agree that the award of damages should be set aside. The
injunction should stand for the reasons expressed by Gibbs
J. (at p144)
ORDER
Appeal allowed with costs.
Judgment of the Supreme Court of Victoria varied by setting aside the order
that the defendants pay damages to the plaintiff and
the order as to costs,
and by substituting the following: 3. That the Plaintiff's claim for damages
be dismissed; 4. That there be
no order as to the costs of action."
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