Barba v Gas & Fuel Corporation of Victoria

High Court of Australia|1976-07-01|Before: Gibbs J, Jacobs JJ

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.

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.

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 land 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 Burke v. Dawes [18] Dixon J. discussed as follows the effect of an earlier Victorian statutory provision which corresponded to s. 42 (2) (e): 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 [19] ; Sandhurst Mutual Permanent Investment Building Society v. Gissing [20] , a lessee in respect of an option of purchase contained in his lease (McMahon v. Swan [21] ) and a wife in respect of an equitable life interest claimed under an unsigned separation agreement made with her husband (Black v. Poole [22] ). 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. Similar views were expressed by Latham C.J. [23] and by Evatt J. [24] . McTiernan J. agreed with the remarks of Dixon J. [25] . 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 [26] . 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 [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. [27] and per Starke J. [28] . 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 [29] : In my opinion the effect of the exception in favour of every tenant of the land is to deprive the proprietor of the registered 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. 1. (1938) 59 C.L.R. 1, at pp. 17-18. 2. (1870) 1 V.R. (E.) 11. 3. (1889) 15 V.L.R. 329. 4. [1924] V.L.R. 397. 5. (1895) 16 A.L.T. 155. 6. (1938) 59 C.L.R., at p. 8. 7. (1938) 59 C.L.R., at p. 24. 8. (1938) 59 C.L.R., at p. 27. 9. (1938) 59 C.L.R., at pp. 12-13. 10. (1938) 59 C.L.R. 1, at pp. 17-18. 11. (1938) 59 C.L.R., at p. 18. 12. (1938) 59 C.L.R., at p. 13. 13. (1938) 59 C.L.R., at p. 25.

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 [30] , 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.

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.

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.

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.

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 immediatley 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.

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.

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.

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.

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.

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.

I therefore agree that the award of damages should be set aside. The injunction should stand for the reasons expressed by Gibbs J.

High Court of Australia Gibbs J. Stephen and Jacobs JJ. Barba v Gas & Fuel Corporation of Victoria [1976] HCA 60

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