Brown v STA of NSW

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2962/99 EDWARD EARNEST BROWN v STATE TRANSIT AUTHORITY OF NEW SOUTH WALES - previously known as the Urban Transit Authority of New South Wales

1 HIS HONOUR: The only question outstanding in these proceedings is the question of costs, but that is not an entirely easy question. The nature of the proceedings is that they are proceedings under s 89 of the Conveyancing Act 1919 ("the CA") for the extinguishment of an easement registered on a title to Torrens title land. 2 In 1889 all the land at the corner of Alexander Street and Campbell Street Balmain and running down from Alexander Street to what was then the high water mark of Waterview Bay (now Mort Bay), was owned by the Milne family. In 1889 the family subdivided and distributed that land among various members of the family. The land at that time was all under old system title, and the transaction was effected by an indenture which was dated 4 December 1889 and registered No 121 Book 460 ("the indenture"). The effect of the transaction was to constitute the land at the corner of Campbell Street and Alexander Street (on which is now erected a building known as No 7 Alexander Street) as a separate lot and to create next to it in Alexander Street two house lots now known as No 5 and No 3 Alexander Street respectively. There were no buildings at No 5 and No 3 at the time, but subsequently on those pieces of land there were erected a rather handsome pair of late Victorian three-storey semi-detached houses, which are still there. The indenture created over the rear of No 7 a right of footway and of carriage way leading to the rear of No 5. So long as No 5 and No 3 were in common ownership the right of way gave access from Campbell Street to the rear of both those lots and, indeed, to the land further to the east of them. So long as the present houses at No 5 and No 3 are there, there is already access to their backyards, if desired, from Alexander Street, since the houses do not occupy the full width of their blocks. Nos 5 and 3 came into the ownership of the defendant in these proceedings in the 1980s, when it was already the owner of land lying in an L-shape to the east and to the north of them. The plaintiff has for many years been the owner of No 7. 3 The evidence does not positively show any use of the right of way since the day in 1889 when it was granted. Looked at from the other perspective, there is undisputed positive evidence that the right of way has not been exercised at all for about the last 40 years. A Mr Conway gave evidence that he was born in 1955 at No 5, and lived there for many years thereafter. As well as his evidence that he was aware of no use of the right of way, there is evidence that there had been for decades substantial impediments to any use. Decades ago there was a rough shed partly over the right of way where it entered No 7 from Campbell Street. For as long as Mr Conway can remember there has been a brick toilet erected partly over the right of way within No 7 further to the east. No 5 has been fenced off from No 7 by a solid fence without a gate at the end of the right of way for as long as Mr Conway can remember, and in about the mid-1980s that fence was renewed. The then owners of both No 5 and No 7 contributed to the cost of the renewed fence. 4 In 1995 the defendant, then being the owner of No 5 and No 3, as well as the L-shaped land encompassing them, procured a rezoning of No 5 and No 3 to facilitate their use as residences and procured a development consent for a subdivision which made it practicable for the two semi-detached houses I have mentioned to be sold separately as residences. That development consent has since been implemented, but the conditions which were required for it to be operative were not in fact met until some time during 1999. 5 In the meantime, the defendant gave consideration to various options as to what it should do with that portion of the property fronting Alexander Street. It should be said that on the water frontage portion of its property it conducts operations concerned with the slipping and mooring of some of its ferries. There are documents in evidence which comprehend a report from the Property Department prepared for the board of the defendant in early 1999 showing various options that were available, and a note recording the minutes of an inspection by members of the board of part of the premises on 25 March 1999. I shall not set the proposals out in detail, but it does not appear that any of them contemplated in any way a necessity for the use of the right of way or any intention to use it. At all times in the background, as a result of the development consent that had been obtained, was the possibility of Nos 5 and 3 being sold as residences. Some of the options to which I have referred involved the possibility of negotiations with the plaintiff for the defendant to acquire the portion of No 7 which had a water frontage so as to extend the defendant's waterfront uses in relation to its ferries. Indeed, various negotiations in fact took place. At the same time the plaintiff had in mind proposals to demolish the existing building on No 7 which appears, unlike the houses, to have no great inherent value, and to obtain permission from Leichhardt Council to build town houses upon its property. The parties seem to have circled one another in the course of negotiations involving their various proposals during 1999, perhaps to the turn of the year 2000. 6 In the middle of 1999 the plaintiff finally brought the present proceedings to obtain the extinguishment of the easement, which undoubtedly was an impediment to his development proposal. It should be said that the defendant had cooperated with the plaintiff in relation to this proposal, to the extent of inviting the Council to consider the application, despite the fact its right of way at the time still existed. What in fact then happened is that in March 2000 the houses, No 5 and No 3, were put to auction and sold by the defendant for prices in each case in excess of $1.4 million to purchasers who obviously intend to use them as dwellings. In the contracts that were in fact exchanged with those purchasers there were provisions which precluded the purchasers from taking any objection if the easements were lost in the present proceedings, or, indeed, if the defendant in its discretion chose to release the easements. The defendant's change of heart came to the plaintiff only through his becoming aware of advertisements of the auction and the defendant was not co-operative in giving any assurance that the sales at auction would not be in terms that might make the plaintiff's path to obtaining relief in these proceedings more difficult. 7 This led to an interlocutory application in these proceedings which, in reality, it seems was unnecessary in view of the clauses in the contracts to which I have already adverted. In my view, all that need be said about those interlocutory proceedings is that they were settled on the basis that the costs of the interlocutory application ought be costs in the proceedings. It has been suggested to me during the course of argument that that regime ought be revisited or somehow compensated for in the costs order that is now to be made, by reason of the rights and wrongs of the bringing of the interlocutory application. I shall say no more about it than that I reject that submission. The order means, so far as I am concerned, simply that there was an agreement that the costs of that application would go the same way as the costs of the proceedings ultimately went, for whatever reasons at the end seemed cogent in relation to the proceedings, whatever the rights and wrongs of the interlocutory proceedings. I do not intend to allow that result to be called in question in any way by the manner in which I deal with the current applications relating to the costs of the proceedings. 8 The contracts entered into at the auctions were completed in June 2000. No more is known about when the defendant's change of mind and determination to sell the houses as residences arose, save that one imagines that it must have occurred at the latest by early or mid January 2000, to permit advertising to take place and the auctions to proceed on 25 March 2000. After the completion of the sales the purchasers of No 5 agreed to release any rights they had in the right of way to the plaintiff. The right of way thereupon became utterly pointless and valueless so far as No 3 was concerned, since it could be exercised by the owners of No 3 only by their crossing No 5, and equally it became pointless and valueless so far as the defendant was concerned because, although the balance of their land technically had the benefit of it, again the rights could be exercised only by crossing No 5 and No 3, which the defendant no longer had any right to do. At that point these proceedings were "settled". The form which that took was that the defendant voluntarily delivered to the plaintiff an instrument releasing the right of way, and that without any consideration passing to the defendant. I have put the word "settled" in inverted commas because, on the one hand, the defendant has characterised it to me as a settlement, on the other hand, the plaintiff has characterised it as a capitulation. It is further the plaintiff's case that, even before that, the defendant's attempts to maintain the right of way were absolutely hopeless and the plaintiff had an overwhelming case that the easement should be extinguished either as obsolete or as abandoned under the relevant paragraphs of s 89(1) of the CA. 9 Why I said at the beginning of these reasons that the question of costs in this case is not entirely easy arises from the particular nature of proceedings. Proceedings for the extinguishment of an easement are not entirely conventional litigation, and there are a number of strains which need to be considered in determining questions of costs in such proceedings. The first principle that needs to be borne in mind is the usual rule as to costs that prevails in settled proceedings, that is proceedings which have been brought to an end by a compromise between the parties. That is that there should be no order as to the costs of those proceedings: see the judgment of McHugh J sitting as a single justice of the High Court in Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622 and my own decision in DCT v Bowen [1999] NSWSC 881. Other strains which must be taken into consideration on costs in proceedings under s 89 of the CA were discussed by Long Innes CJ in Eq in Re Rose Bay Bowling and Recreation Club Ltd (1935) 52 WN (NSW) 77 at 78-79: "There remains the question of costs. I am not aware that this precise question has come before the Court under all the circumstances now present. Certain cases have been determined under this section. The first case, and perhaps the only case in this Court which has been reported, is that of In re Spotswood (26 SR 522; 43 WN 146). In that case the objections were made by persons who had been served with notice of the application and who had been asked to consent. The Full Court held that they had in fact nor right in law to object, but, having been served and having been asked to consent, although they had no rights in the matter, they were entitled, by analogy to the 'two guineas' rule to £2 2s 0d, for being asked to consider the matter and peruse the papers, and as they had not been tendered the £2 2s 0d they were entitled to another £2 2s 0d for coming to the Court on the hearing to ask for that sum. In a recent application, which has been brought to my attention, in respect to a restrictive covenant, Street J held that the application failed and the unsuccessful applicant had to pay his own costs as well as the costs of the successful objectors. In a case recently before me In re Edwards (unreported 17th April, 1935) the matter was brought before the Court by reason of the action of the Registrar-General who took the view that the applicant was not legally entitled to a declaration under s 89(3) of the Act that the subject land had by virtue of a certain deed of release been effectively discharged from the restrictions imposed by a particular covenant: the summons was opposed by a corporation which was interested and which supported the view taken by the Registrar-General and whose opposition failed; in that case I took the view that as soon as the cudgels were taken up by the objector the matter fell into the realm of adverse litigation and that costs should follow the event. This case is a case in which the applicant has succeeded and the objectors have failed. The legal right, however, of the objectors is clear and admitted, unlike the case of In re Edwards where the objector in fact was held to have no rights at all. Having a clear right which was attacked by the applicant I think they were entitled to put their views before the Court. That they have put their views before the Court in a proper manner cannot be disputed, and I do not think that any costs have been unnecessarily or unreasonably incurred by their presence. The applicant in this class of cases, where the objectors have a clear legal right which is being attacked and which is sought to be cut down, is in fact undertaking the task of satisfying the Court that the proposed modification of the restriction will not cause substantial injury to the persons entitled to the restriction, and it is difficult to see how the Court can be satisfied of that fact except after argument or without considering all the material evidence. The applicant cannot be expected to adduce evidence to cut down his own case, nor to argue contrary to his own interests; and consequently in such a case the reasonable and proper costs incurred by the objectors must, I think, be regarded as necessarily incident to such an application, and where those circumstances are present I think it is only right and proper that the applicant should pay all costs reasonably or necessarily incurred by reason of the application, including the proper costs of the objectors. I am of opinion, therefore, that in this case the applicant should bear the costs as between party and party of the objectors."

His Honour's remarks highlight the tension in deciding the costs of s 89 applications between on the one hand the holder of the right's costs of asserting his right being met by the applicant as part of the inherent costs of the application, and the award of costs on the ordinary basis of adversary litigation where there is a contest going beyond the simple assertion of the right, a characterisation which is a matter of value judgment. The line is not always easy to draw. 10 On 30 May 2000 Tress Cocks and Maddox, solicitors for the defendant, wrote to Cowley Hearne, solicitors for the plaintiff, a letter suggesting that the plaintiff discontinue. On 3 July 2000 Tress Cocks & Maddox wrote a letter referring to the dispute as to costs and offering to settle that on the basis that each party pay his own or its own costs. 11 The stance taken by the defendant is in accordance with the offer it made early in July that there should be no order as to costs leaving each party bearing that party's own costs. It draws attention to the fact that the proceedings are in nature expropriatory or at least destructive of a proprietary right which it held. It ought to be regarded as reasonable on its part to defend that proprietary right to the last. It says that there may have been occasion for reactivation of the right depending on what finally happened as to the future use of the land right up to the time of sale to purchasers intending residential use in March 2000, under contracts which disentitle those purchasers from making any claim to have the use of the right of way, and, indeed, even further up to the time of settlement of those contracts in June 2000, since it was always possible that the contracts, though entered into, would not be completed. It says that shortly after that, in early July, it made the offer to settle on the basis of no order as to costs and that its conduct has at all times been reasonable. 12 On the plaintiff's behalf it is said, on the contrary, that the plaintiff has always had an overwhelming case to have the easement extinguished on the history which has been shortly set out above, on the ground of its being either obsolete or abandoned. The only reasonable thing for the defendant to do in those circumstances was what it did in the end, namely, hand over an instrument of cancellation without consideration. The plaintiff says that the defendant's conduct in not proceeding in this way was unreasonable and that the plaintiff ought have his costs of the proceedings. 13 Proceedings of this nature, particularly in relation to rights of way are often difficult to decide. They are difficult because, on the one hand, when rights of what have not been exercised for a long time and have had longstanding obstructions upon them, the view may well be taken that they are useless as a practical matter and impediments upon the title which ought to be removed. On the other hand, there is a strong strain in the law that rights of property ought be upheld and that no person's right of property ought lightly be destroyed. One thing that flows from these counter pressures is that the view has been taken by the courts that the person claiming that an easement is obsolete or abandoned must bear an onus to provide strong and clear proof of the obsoleteness or abandonment. 14 One can see the resolution in one sense of this contest in the recent decision of the Court of Appeal in Durian (Holdings) Pty Limited v Cavacourt Pty Limited [2000] NSWCA 28 where the Court of Appeal constituted by Mason P, Meagher and Stein JJA held a right of way obsolete in circumstances having some similarity to the present. One distinction between the two cases is that Durian is perhaps stronger than this case, in that there were not only long disuse and physical barriers, but there was a policy of the traffic authority which would prevent vehicular egress from the right of way into the street into which it debouched, and a refusal by the local Council, on traffic considerations, of development applications for the use of the right of way for the passage of vehicles. There was no such clear resolution of the vehicular use problem in this case. The engineering evidence, which I have referred to above, was unclear as to the practicalities of building and using a roadway on the right of way. And the local Council had not been tested as to its view on the problem of vehicles debouching into Campbell Street, which, in any event, one would think is a much less busy street at that point than the street involved in Durian. 15 Resolution in the other sense is seen in a case again having some similarity to the present in the decision of the High Court in Treweeke v 36 Wolseley Road Pty Limited (1973) 128 CLR 274. To show the difficulty of drawing the line in these cases, in that case the High Court divided, McTiernan and Mason JJ holding that, despite obstruction of parts of the right of way there concerned, and limited usage over a long time, the right of way ought not be extinguished, whereas Walsh J in a strong dissenting judgment took the opposite view. Similarly, in Grill v Hockey 29 April 1991 NSWSC unreported McClelland J (as his Honour then was) refused to infer abandonment, although the right of way had been unused for 40 years since its creation in 1950 and had been substantially obstructed. In coming to this conclusion his Honour said: "Both at common law and in the application of the statutory provision, the following principles apply: 'To establish abandonment of an easement the conduct of the dominant owner must ... have been such as to make it clear that he had at the relevant time a firm intention that neither he nor any successor in title of his should thereafter make use of the easement ... . Abandonment is not ... to be lightly inferred. Owners of property do not normally wish to divest themselves of it unless it is to their advantage to do so, notwithstanding that they may have no present use for it'. ( Williams v Usherwood (1983) 45 P and Cr 235, 256 quoting Gotobed v Pridmore (1970) not fully reported, and see Tehidy Minerals v Norman [1971] 2 QB 528, 553; PSP No 9968 v PSP No 11173 (1979) 2 NSWLR 605, 617.) There is nothing in the decision of the High Court in Treweeke v 36 Wolsely [sic] Road 128 CLR 274 inconsistent with these principles. By reason of the use to which Mrs Anasson put the property there was no real occasion for her to use her rights of carriageway, and by reason of the first plaintiff's alternative means of vehicular access it was unnecessary for him to do so. In the circumstances the absence of any use or attempted use by them of the easements over a period of 17 years has little probative force. Furthermore the existence of the physical obstructions and their acquiescence therein during this period has little weight, having regard to the nature of those obstructions, none of which was of such a substantial and permanent kind as to give rise to a presumed intention that the rights would never be exercised again, and I would be of the same opinion if the corrugated iron which formed the eastern side of the shed on No 179 had not been hinged but had been a fixed structure, in accordance with the appearance it gave, at least to some, in the latter years." 16 The reason that I have considered those matters at some length is to assist in coming to a conclusion as to whether or not the plaintiff here could be said to have an overwhelming case. The view I have come to is that, whilst its case must be regarded as very strong, I do not take the view that its case was overwhelming, until the point at which the properties were sold as residential properties under contracts which dispensed with the need for the right of way. In my view, once that had occurred, the plaintiff's case was overwhelming, as was witnessed by the course that the defendant ultimately followed. However, I reiterate that, although not overwhelming until that point of time, the plaintiff's case was strong. 17 Whilst I have needed to traverse the evidence at some length to determine the question of costs, I have not, of course, tried the case, and it is not in my mind entirely clear what result I should have come to if I had. The facts would have been traversed in greater detail, witnesses perhaps cross-examined and various of the numerous facts and issues further extrapolated, had a trial proceeded. I do not need to come to a conclusion, and I do not propose to come to a conclusion, on the traverse of the material I have made, as to the decision which I should come to as to whether this easement was either obsolete or abandoned on the facts as they stood up to March 2000. Beyond findings of fact, as the authorities make plain, there is also a discretionary element to a decision under s 89(1): Pieper v Edwards [1982] 1 NSWLR 336; and see Bradbrook and Neave, Easements and Restrictive Covenants in Australia (2nd Ed, 2000) [19.62]. Not even having found the factual substratum I do not, of course, come to make a decision as to the manner in which I should have exercised my discretion based upon the factual substratum had I tried the case in full. 18 In these circumstances I do not think that it can be said, before the point of time that I have mentioned, that the plaintiff's case was overwhelming or the defendant's conduct in seeking to uphold a proprietary right, albeit one that was seriously threatened, was unreasonable. I bear in mind also in exercising my discretion as to costs, the expropriatory nature of the proceedings, and the fact that in all cases it is reasonable for the defendant to have at least the costs of taking advice and considering its position when threatened with proceedings such as the present. My conclusion, taking into consideration all these matters, is that basically the appropriate exercise of discretion as to costs in this matter is that there should be no order as to costs of the proceedings. 19 However, there is an important exception to this. It already appears from what I have said that the situation in my view changed radically when the defendant, early this year decided to sell No 5 and No 3 to outside purchasers, for residential purposes, and that under contracts, which provided that the purchasers could have no claim to the right of way that still subsisted. From that point of time it seems to me the plaintiff's claim to have the right of way extinguished was overwhelming. I do not propose to go in full detail into the correspondence that then succeeded. I have mentioned a couple of items above. Suffice it to say that the defendant upon taking that decision in about February 2000, did not frankly reveal its decision to the plaintiff, and indicate to the plaintiff that the time had come when it would give up the right of way. It is all very well for it now to say that it did not know what the situation would finally be and that the right of way would be of no possible further use until completion of the contracts. Once it had taken the decision to sell it could very easily have approached the plaintiff and said in effect: "We have decided to sell these properties to home owners. We are precluding in the contracts their having any benefit of the right of way from the time of sale. On that basis those terms the right of way is of no further use to us and we will surrender it. Of course this situation will not be set in concrete until the auctions are successful and the contracts are completed. May the matter please stand over until then, but if that occurs you will have your extinguishment. May we suggest at this point of time that the appropriate regime as to costs is that each party bear its costs of the proceedings and in light of what we have now said, please do your best to incur no further costs." 20 Had the defendant done something to that effect, the generality of the order that there be no order as to costs would not need to be disturbed. However, it conducted itself differently. There is no doubt from what I know of the conduct of the litigation the plaintiff incurred further costs after that time. The proceedings had not been set down for trial at that time, they came before the Registrar and were fixed for trial before me, without the real situation being revealed or acted upon by the defendant. It was only when the matter came on for trial that I was informed that the continuation of the proceedings had become unnecessary except as to costs. It was, indeed, only in Court at the commencement of the proceedings today that the instrument of cancellation was handed over. 21 In those circumstances, in my view, the defendant ought be ordered to pay the plaintiff's costs of the proceedings from an appropriate date. The date I have in mind is 1 March 2000, about between three and four weeks before the auction, but if either side wants to put anything to me on the date, I shall hear it. …oOo… 22 I have permitted a re-opening of the plaintiff's case. A letter has now been tendered from the defendant's property manager to the estate agents of 4 February 2000, inviting proposals as to the basis on which the agents would act upon the sale. It is plain from that letter that the defendant had resolved by that time to sell the properties as houses. Whilst it is put to me by Mr Dempsey, of counsel for the defendant, that the date of change of the costs regime should be postponed to 25 March 2000 when the houses were sold at auction, there is nothing in the evidence to suggest that these properties would be difficult to sell as houses. They were both sold under the hammer on 25 March for almost $1,500,000 each. The decision to dispose of them as houses having been taken, it would, in my view, have been reasonable for the defendant to indicate the course being followed to the plaintiff at that stage, as outlined above. Had such an approach been made to the plaintiff, and the plaintiff been unwilling to accommodate that, the result might be different to the present, but that did not occur. In the circumstances, in my view there ought to be no order for the costs of the proceedings prior to 5 February 2000 but the defendant ought be ordered to pay the plaintiff's costs of the proceedings from and including 5 February 2000. …oOo… 23 Further argument has taken place. It may be that some difficulty could arise as to the extent of the interlocutory costs which were agreed to be the parties' costs in the proceedings. The complication arises from the fact that I have made a split or bipartite order as to how the costs of the proceedings should be dealt with. However, the agreement as to the costs of the interlocutory proceedings was made on 25 March 2000, the morning of the auction. It seems to me unlikely that the plaintiff would have been proceeding with its interlocutory application had the defendant dealt with the matter as I have expressed the view it ought to have dealt with it, once the defendant's decision was taken to sell the houses as residences. If, of course, it had made the offer and the plaintiff had continued with some interlocutory application at the time, the situation may have been quite different, but again that is not what occurred. 24 I make it quite plain in these reasons for judgment that the regime as to costs, which the order of 25 March 2000 as to the interlocutory costs ought follow, is the regime which under my decision prevailed at the time, namely, the regime that as at that time the defendant ought pay the plaintiff's costs of the proceedings. …oOo… 25 Up to the time I delivered the foregoing reasons for judgment, no debate or submission had taken place on the question of whether the costs ought be ordered on the ordinary or on the indemnity basis. Mr Burchett, of counsel for the plaintiff, now submits to me that the costs which the defendant is ordered to pay ought be ordered on the indemnity basis. The matter, in addition to the matters already mentioned in my reasons for judgment, that I ought take into account in coming to that conclusion, is, as he says, that the evidence "indicated an attempt to extort money from [his client] during the course of negotiations by the use of the existence of the right of way". I do not agree with his use of the word "extort". There is some suggestion in the evidence that, while the defendant was attempting to defend its threatened proprietary right, it did in some way attempt to use the right of way as a bargaining chip in the negotiations which I have indicated were occurring. However, neither that factor, insofar as it existed, nor any of the other factors, to which I have adverted or which are shown in the evidence, in my view takes the matter out of the ordinary course, so as to justify the order for costs I propose to make in the plaintiff's favour being made on the indemnity basis. 26 I make the following orders: (1) I order that there be no order as to the costs of these proceedings prior to 5 February 2000. (2) I order that the defendant pay the plaintiff's costs of the proceedings including the costs of the interlocutory proceedings from and including 5 February 2000. …oOo…

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