Clos Farming Estates v Easton & 1 Ors - [2002] NSWCA 389 - NSWCA 2002 case summary — Zoe

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Clos Farming Estates v Easton & 1 Ors

[2002] NSWCA 389

Court of Appeal (NSW)|2002-12-09|Before: Mason P, Beazley JA, Santow JA, Bryson J

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Court

Court of Appeal (NSW)

Decision date

2002-12-09

Before

Mason P, Beazley JA, Santow JA, Bryson J

Catchwords

(2) Appellant to pay Respondent's costs of appeal.

Source

Original judgment source is linked above.

Catchwords

(2) Appellant to pay Respondent's costs of appeal.

Judgment (16 paragraphs)

[1]

INTRODUCTION "The category of easements must alter and expand with the changes that take place in the circumstances of mankind"; Lord St Leonards in Dyce v Lady James Hay (1852) 1 Macq 305 at 312 - 313. Do the present circumstances create an easement, albeit novel? Or, is the right purportedly created not merely a permissible exercise in adaptive novelty, but one which falls outside the legal requirements for easements? 4 These issues and others arise in proceedings originating from an application by Graham Rush Easton and Stephen Arthur Hibbert ("the Respondents"). That application was to remove a caveat lodged by Clos Farming Estates Pty Limited ("Clos Farming"), the Appellant, from title to their land in the Le Clos Verdun Estate, a vine and grape growing enterprise. Proceedings before the Trial Judge, Bryson J concluded in favour of the Respondents, who successfully resisted extension of that caveat, on the basis that it protected no interest in land nor was there any right created in the nature of an easement so capable of protection. It therefore lapsed. 5 This appeal therefore raises two issues. First the Appellant challenges the Trial Judge's decision that the "easement for vineyard", so described, was not a valid easement. Second, the Appellant seeks in the alternative to have the Court declare that the "easement for vineyard", even if not a valid easement, is some other interest in land, capable of supporting a caveat. 6 If the appeal succeeds on either issue, then by reason of the Respondents' Notice of Cross-Appeal it becomes necessary to resolve the issue as to whether, on its true construction the "easement for vineyard" permits the carrying forward of losses from prior harvests.

[2]

NARRATIVE OF FACTS 7 These facts have been summarised from the judgment at first instance and the agreed statement of facts from the trial. 8 Gerard Cassegrain & Co Pty Limited developed "Le Clos Verdun" on the South Bank of the Hastings River at Sancrox near Wauchope NSW in the 1980's (Combined Book, 34 at A3). The development comprised 80 residential lots and 8 other lots. The developer retained lot 86 in Deposited Plan 79119 with Clos Farming as the Registered Proprietor (Combined Book, 34 at A2). The only improvements that have been made to lot 86 have been the construction of a machinery shed, a chemical shed and a brick farm office block. At all relevant times the lot has been used for storage of farm machinery (Combined Book, 36 at A11). 9 The estate was marketed as a version of the French Clos farming system. This system enables small, individual, yet adjoining farms to present a contiguous area for agricultural operation and production and was in this case used for viticulture (Combined Book, 149). Essentially, the multiple owners of the lots on the estate were to operate as a single viticulture production unit, with Clos Farming having the right to control and manage the operation and then sell the product, remitting the net proceeds of sale, less the cost of the operation, to the owners. 10 In or about June 1988, Messrs Easton and Hibbert agreed to purchase lot 27 from Clos Farming (Combined Book, 34 at A4). Messrs Easton and Hibbert thus remain the joint proprietors of lot 27 in Deposited Plan 79119 (Combined Book, 34 at A1). Lot 27 is divided into two parts. Part A, is 1542 square metres and has been described as the residential component of the property. Part B is 1.537 hectares and has been described as the farming part of the land and is where the grapevines were intended to be established. Part A and B are not contiguous, but are separated by a narrow strip subject to a right of footway. The other 79 residential lots have a similar configuration (Judgment at [3]). 11 On 28 June 1988, Messrs Easton and Hibbert entered a "Grape Sale and Purchase Agreement" with Cassegrain Vineyards. The effect of the agreement was that Cassegrain would purchase all grapes from lot 27 at certain prices for a term of ten years commencing on 1 July 1988 and ending on 30 June 1998 (Combined Book, 35 at A5). In return, Messrs Easton and Hibbert would follow Cassegrain's directions in relation to the growing and harvesting of the grapes. 12 Messrs Easton and Hibbert also entered a "Farm Development Agreement" with Clos Farming on 30 June 1988. Under this agreement Clos Farming Estates were to carry out certain works, including the establishment of grape vines on lot 27, by 30 July 1989 (Combined Book, 35 at A6). On the same day the two parties also entered a "Farm Maintenance Agreement", whereby Clos Farming agreed to maintain the grapevines established on the lot and to carry out further services for a five year term commencing 1 July 1998 and ending on 30 June 1992 (Combined Book, 35 at A7). Messrs Easton and Hibbert, under each agreement, were to pay specified fees for the services of Clos Farming under those agreements. 13 On 16 August 1989 Deposited Plan 79119, covering Le Clos Verdun estate, was registered pursuant to s88B of the Conveyancing Act 1919 (Combined Book, 35 at A8). Included in the s88B instrument was the Fourteenth Restriction, labelled "Easement for Vineyard". Lot 86, owned by Clos Farming, was the benefited lot and the 80 residential lots were the burdened ones, including lot 27. The instrument also contained other restrictions in relation to matters such as: tree preservation; building materials; and fences. As part of the Special Conditions of the Agreement for Sale executed on 30 June 1988, the purchaser acknowledged the Vendor's right to create and reserve easements and restrictive covenants (Combined Book, 69 at K). The terms of the Fourteenth Restriction are: "Free right for every person in whose favour this easement is created and every person authorised by him and either with or without vehicles, farming implements and machinery, to enter, go, pass, re-pass, turn around and remain upon that part of the lot burden marked "B" on the plan for the purpose of carrying vineyard establishment works, the planting and re-planting of grapevines and crops, the planting and harvesting of crops, spraying, slashing, vineyard and crop maintenance and the harvesting of grapes and crops together with the right from time to time to sell the produce of such harvest and to deduct therefrom and retain the costs of farm maintenance, harvesting, packaging, freight, agents commission, marketing and reasonable administration costs associated with such harvesting and the sale of such harvest" (Part 2, paragraph 13). 14 The "Easement for Vineyard" was designed to allow Clos Farming or authorised persons to enter or pass through the burdened property with or without vehicles, farming implements and machinery. Also to remain on the burdened property for the purposes of carrying out vineyard establishment works, the planting and replanting of vines and crops, the harvesting of crops and crop maintenance. In addition it sought to confer on Clos Farming a right from time to time to sell the produce of such harvest and to deduct from the proceeds of sale the costs of farm maintenance, marketing and administration of such sales. 15 The effect of the various agreements, the "Easement for Vineyard" and the other restrictions in relation to rights of way and tree preservation, planting and removal, was that it put Clos Farming in a position to conduct a single farming and viticulture operation on the estate (Judgment at [5]). 16 On 20 September 1989, Messrs Easton and Hibbert completed the purchase agreement and became the Registered Proprietors of lot 27 (Combined Book, 36 at A10). 17 The Farm Maintenance Agreement expired on 30 June 1992 and was never renewed (Combined Book, 36 at A12). 18 During the financial years ending 30 June 1994 to 1999, the plaintiff harvested grapes and claimed future costs for maintenance, the sale and marketing of the harvest. Each year during the period, Clos Farming claimed that such costs exceeded the proceeds of the harvest. In addition, they claimed that pursuant to the "Easement for Vineyard", costs not covered by the proceeds could be carried forward and reimbursed out of the proceeds of sale of subsequent harvests. (Combined Book, 36 at A13). 19 On 6 July 1995, Clos Farming lodged a caveat with the Land Titles Office on lot 27 purportedly to protect its rights, as previously described in the "Easement for Vineyard" (Combined Book, 36 at A15). 20 The Grape Sale Agreement expired on 30 June 1998 and was not renewed (Combined Book, 37 at A16). At this time the contractual infrastructure supporting the Clos farming system had ceased. 21 In April 2000, Messrs Easton and Hibbert took steps to have the caveat removed from the title to lot 27. Clos Farming subsequently sought a declaration that their interest as recorded in the caveat, was a caveatable interest. Messrs Easton and Hibbert cross-claimed seeking a declaration that the "Easement for Vineyard" was not a valid easement. Alternatively they sought a declaration that the right to deduct costs was not cumulative and that the caveat be removed. Since that time, no maintenance has been undertaken on the lot (Combined Book, 36 at A14). The vines are presently in a decrepit state (Appeal Transcript, 7.25 - .37).

[4]

RESOLUTION OF APPEAL Was the "Easement for Vineyard" a valid easement? 25 Did the rights described in the Fourteenth Restriction under the description "Easement for Vineyard" constitute an easement capable of being recognised at law, despite its novelty? Bryson J was of the view that in determining this question, it was necessary to consider the restriction in the context of all of the restrictions created by the s88B instrument. Thus the Trial Judge's assessment considered the meaning and effect not only of the restriction individually, but also within the scheme established by the s88B instrument. 26 The Trial Judge also considered the contractual infrastructure of the Clos farming scheme comprising the Grape Sale and Purchase Agreement, the Farm Development Agreement and the Farm Maintenance Agreement. It was recognised that the inter partes agreements, to a considerable extent, replicated the rights and obligations purportedly created by the Fourteenth Restriction. However, His Honour held that the meaning and effect of the Fourteenth Restriction must come from its own terms and could not be informed nor affected by the contractual arrangements. These by 1998 had in any event all expired (Judgment at [14]). In support, he noted that if effective, the Fourteenth Restriction created an incorporeal hereditament which would bind successors in title perpetually. It was therefore wholly different from a contractual obligation which would bind only the parties to the agreement and would expire within a stated period. In addition, Bryson J considered the factual context of the Restrictions, deeming that important. Thus the Restrictions purportedly created by the s88B instrument sought to burden not only lot 27, but in the same way sought to burden all of the other lots in the estate in favour of lot 86 (Judgment at [5]). 27 Bryson J then considered whether a valid easement was created. After a detailed review of the authorities, he concluded that the Fourteenth Restriction was not a valid easement (Judgment at [51]). He concluded that the scheme in its totality and the Fourteenth Restriction individually were of such novelty to Australian land law as to go beyond what the law of easements can achieve: "ownership of lots are nominally held under freehold title, but are subject to seigneurial rights which put all opportunities to carry out viticultural and agricultural activities in the hands of the dominant owner … and goes beyond what the law of easements can achieve" (Judgment at [50]). 28 Raised against the contention that the Fourteenth Restriction was a valid easement was the inference from Bryson J's judgment that the law of easements could not be used to "change the nature of freehold ownership" as (it was said) was attempted by this scheme. The scheme was characterised as leaving the servient owners in substance with sterile and nominal ownership only, with their proprietorship being no more than an historic relic (Judgment at [49]). Bryson J also emphasised that in the development of land law through the ages, an over-riding policy consideration has been that the law favours land being fully available for its owner to use and sell. The court has restricted the creation and operation of any interests which may seek unduly to subordinate the rights of exclusive possession (Judgment at [15]). Essentially, this reasoning is applicable where the right involved so great a restriction on the possessory rights of the servient owner as to render that right not capable of forming the (permissible) subject matter of a grant of easement, thus offending the so-called fourth requirement for the creation of a valid easement; see below. 29 Bryson J concluded that the easement was invalid because the Fourteenth Restriction failed both the second and fourth conditions for the creation of a valid easement first recognised in the classic judgment of Evershed MR in In Re Ellenborough Park [1956] Ch 131. In that case, four conditions were laid down for a valid easement. First, that there be a dominant and servient tenement. Second, that the easement must "accommodate" the dominant tenement. Third, that the same person must not own and occupy the dominant and servient tenements (the Real Property Act now allows an individual that owns both the dominant and servient tenements to create an easement through a s88B instrument). Fourth, that the right claimed as an easement must be capable of forming the subject matter of a grant. In the present case, conditions one and three were not in issue but conditions two and four were.

[5]

The second condition - "accommodating the dominant tenement" 30 In assessing whether the second condition was satisfied, namely that the easement "accommodate" the dominant tenement, attention was given to exactly what that entailed. This requirement did not become established until the mid-nineteenth century as Professor Holdsworth records in "An Historical Introduction to the Land Law" (Oxford, 1927) at 272. The case which definitively established that requirement was Ackroyd v Smith (1850) 10 CB 164; 138 ER 68 (CP). But what does "accommodation" mean in this context? 31 First, it requires there be a natural connection between the dominant and servient tenements. The right must be reasonably necessary for the enjoyment of the dominant tenement and not merely confer advantage on the owner of that tenement, as would a mere contractual right; Finlay 91 WN(NSW) 730 (DC). Reference was made by the Trial Judge to Hill v Tupper (1863) 2 H&C 121 and In Re Ellenborough Park (supra). Bryson J concluded that whether the right granted accommodated and served the dominant tenement depended on whether the right granted was connected with the normal enjoyment of the dominant tenement. That is a question of fact, dependent on the nature of the dominant tenement and the right granted. It was not enough that the land be a convenient incident to the right. Rather the nexus must exist in a real and intelligible sense (Judgment at [22]). Additionally, Bryson J recognised that facilitation of the business or commercial use in which the dominant land is involved may, in limited circumstances, be nonetheless sufficient to create the requisite nexus, provided the criteria for an easement is satisfied (Judgment at [36]). Bryson J concluded that in reality the Fourteenth Restriction did not accommodate lot 86 as a piece of land. This was because he concluded that there was no evidence supporting any "accommodation, advantage or enhancement of lot 86". Thus "Lot 86 could be a convenient incident to action under the Fourteenth Restriction: but that is not enough" (Red Book, 38 at para 47). 32 The Appellant submitted that his Honour erred in reaching this conclusion. It was submitted that the Fourteenth Restriction rendered lot 86 a more convenient place from which Clos Farming as dominant owner conducts its business of farm management and that this established a sufficient accommodation (Appellant's Submissions in Reply and Supplementary Outline of Submissions at para 48-50). It was submitted that the requirement that the easement sufficiently accommodate the dominant tenement is in effect a requirement that the easement make the property better and more convenient. This may be achieved, it was argued, as in this case, merely by benefiting some trade carried out on the property; In Re Ellenborough Park; Clapman v Edwards [1938] 2 All ER 507; Frater v Finlay (1968) 91 WN(NSW) 730; Moody v Steggles (1879) 12 Ch D 261, the latter was a case where the owner of a public house was empowered to affix a signboard on the wall of the defendant's house, that being held to be a valid easement. As Fry J reasoned (at 266): "It is said that the easement in question relates, not to the tenement, but to the business of the occupant of the tenement, and that therefore I cannot tie the easement to the house. It appears to me that that argument is of too refined a nature to prevail, and for this reason, that the house can only be used by an occupant, and that the occupant only uses the house for the business which he pursues, and therefore in some manner (direct or indirect) an easement is more or less connected with the mode in which the occupant of the house uses it." 33 Thus it was contended that in assessing whether the Fourteenth Restriction benefited the dominant tenement so as to accommodate it in the relevant sense, consideration of the contractual infrastructure supporting the Clos farming system was required (Appellant's Submissions in Reply and Supplementary Outline of Submissions at para 52). Counsel for the Appellant contended that the Fourteenth Restriction thus needed to be assessed in its commercial context. That in this way it became clear that the dominant tenement was benefited, through benefiting the trade and industry carried out on lot 86. In sum, the Appellant contended that as lot 86 was used for the purposes of carrying out farming and harvesting works, and the servient Clos farms were used for viticultural purposes, this clearly established the necessary nexus between the dominant and servient lots. 34 In written submissions in reply, counsel for the Respondent emphasised that the Appellant had not sought to challenge the long established principle that the dominant tenement, as land, must nonetheless be benefited by the easement (Respondents' Submissions in Reply at para 7). The Respondents acknowledged that a right benefiting a trade carried out on the dominant tenement may in appropriate circumstances be a valid easement. But this is provided that the conduct of the trade is a necessary incident to the normal enjoyment of the land, not merely an independent business exercise. The Respondents submit that in accordance with the authority dating back to 1863 (Hill v Tupper (supra)) lot 86 as the supposed dominant tenement was not relevantly benefited by the rights conferred by the Fourteenth Restriction. This was because it was merely a convenience and matter of efficiency that lot 86 be used for the purposes of farm management (Respondents' Submissions in Reply at para 12). Secondly it was put that there was no feature of lot 86 that rendered it the natural or only place from which to carry out harvesting and associated works. Highlighted was that, in the agreed statement of facts, there was no evidence which indicated that farm management, as distinct from storage, was actually carried out on that lot. The supposed connection was thus not a real one. I would agree.

[6]

The fourth condition 35 The fourth condition from In Re Ellenborough Park requires that the right be capable of forming the subject matter of a grant. Evershed MR explained that the resolution of whether condition four is satisfied is to be answered by posing three cognate questions. First, whether the rights purported to be given are expressed in terms too wide and vague in character. Second, whether such rights would amount to rights of joint occupation or would substantially deprive the park owners of proprietorship or legal possession. Third, whether such rights constitute mere rights of recreation, possessing no quality of utility or benefit (In Re Ellenborough Park at 163-164). In the present case Bryson J held that the first and third of the cognate questions were adequately resolved in favour of the right satisfying condition four though that did not suffice; Judgment at [23] and [25]. 36 In relation to that second question Bryson J held that the rights purportedly conferred by the Fourteenth Restriction on its own and in conjunction with the scheme of restrictions, deprived the title-holders to the burdened lots from any real proprietorship over the burdened land, such that the rights sought to be conferred on the farm managers were inconsistent with the proprietorship and possession by the servient owners (Judgment at [49]-[50]). In support for this conclusion Bryson J highlighted that although the servient owners own the vines, that is the uppermost limit of their rights of ownership. In contrast, the dominant owner has a plethora of rights, such as rights to: cultivate and harvest the vines; take and sell and the produce; prevent the titleholder from using the land for other agricultural purposes; to exclude others from the lot; and limit the recreational usage of the lot. Most significantly, the production and accumulation of profits from use of the land is wholly within the control of the dominant owner, with the servient owners having minimal capacity to exercise any control over the agricultural produce and economic use of the land (Judgment at [59]). In this regard reference was made to the fact that under the Fourteenth Restriction there were minimal rights reserved to the servient owners to hold the dominant owners accountable for the conduct of the commercial enterprise through the web of restrictions on the rights of the servient owners (Judgment at [52]). 37 The Appellant submitted that the Trial Judge erred in finding that the Fourteenth Restriction did not satisfy the fourth condition. It was suggested that the Fourteenth Restriction did not purport to leave the owners of the servient tenement with a "mere shadow of ownership". For they were entitled to use part B of the lot in any way that they liked provided only that the use was neither inconsistent nor an interference with rights conferred (on the dominant owner); Appellant's Submissions in Reply and Supplementary Outline of Submissions at para 59-62; Appellant's Submissions in Reply and Submissions of Cross Respondent at para 7 and 10). In making this argument it was acknowledged that an easement cannot be used as a grant of exclusive possession of the whole of the servient lot. But in assessing whether the grant has exceeded the boundaries of easements it is a matter of degree (Appellant's Submissions in Reply and Supplementary Outline of Submissions at para 59). The Appellant submitted that there was a sufficient residue of activities for the servient owners, such as the ability to plant roses and picnic and take walks amongst the vines, so that the Fourteenth Restriction did not so attenuate exclusive possession of the agricultural land as to render it illusory. 38 The counter argument to this was that the uses of the land consistent with the dominant owner's purported rights, as listed by the Appellant, accentuate "the sterility and nominal character" of the rights of ownership and occupation remaining for the servient owner (Respondents' Submissions in Reply at para 29). The land subject to the Fourteenth Restriction is rural land. The servient owners are effectively precluded from engaging in any real farming or agricultural type activities attendant on its possession. The mere fact that the owners could engage in recreational activities is of little utility when the predominant and accepted use and value of the land derives from it being rural land suitable for agricultural purposes (Respondents' Submissions in Reply at para 27). 39 One issue that did not appear to be considered at first instance, but which was suggested at the appellate hearing, was the effect and consequences of the fact that although the restriction was on the title to each subservient lot, the effect of the restriction was that it was only effective upon Part B of the lots (Appeal Transcript at page 5). At the hearing of the appeal it was asked of counsel whether the restriction imposed on each servient lot by the Fourteenth Restriction applied to the entirety of the lot or merely applies to Part B of each lot, the land set down to be used for agricultural purposes. If the Fourteenth Restriction were merely limited to Part B, this then leaves Part A free for the Respondents to use as they wish for residential purposes. The Appellant adopted this possible line of argument and submitted that the fact that Part A was unburdened was an "ameliorative factor" (Appeal Transcript at page 6 line 1). The Respondents rejected this argument on the ground that the perceived degree of intervention was not lessened by the fact that in reality only Part B of the lot was burdened. It was submitted that Part B was five times the size of part A and that the lot in its entirety does remain sterilized, so that the Respondents' reasonable enjoyment of the land was severely restricted by the operation of the Fourteenth Restriction (Respondents' Submissions in Reply at para 31).

[7]

Summing Up 40 Bryson J's conclusion that the Fourteenth Restriction was not a valid easement should be upheld. On any assessment of the Fourteenth Restriction it is clear that the rights in toto, when given effect, are not merely novel; they breach what is fundamental to constituting an easement at law in the two respects identified. The Rights purportedly granted by the Fourteenth Restriction are extensive leaving little by way of residue, including as they do rights to: enter; plant; maintain; harvest; market; package and then sell any produce from the vines. In addition those Rights purport to confer an entitlement to deduct from the proceeds of sale the costs of, and associated with, the harvest. 41 Certainly the novelty of the Fourteenth Restriction per se should not be detrimental to the claim to easement. Novelty alone is insufficient as bar to the recognition of the creation of an easement. This proposition is well established and most recently received consideration by the Northern Territory Court of Appeal in City Developments Pty Limited v Registrar General (NT) [2001] NTCA 7. There it was again stated that the category of easements is not closed: see Attorney General of Southern Nigeria v John Holt & Co [1915] AC 599; Commonwealth v Register of Titles for Victoria (1918) 24 CLR 348. This proposition was pressed at the appeal. Nevertheless, it is still necessary that the character of the new right be capable of meeting and satisfying the conditions for easements as propounded in In Re Ellenborough Park. 42 The Fourteenth Restriction was correctly rejected as an easement because, as found by Bryson J, it failed both the second and fourth limbs of In Re Ellenborough Park. 43 In relation to the second condition, the arguments put by the Appellant do not show that Bryson J made any error in finding that there was not a sufficient accommodation of the dominant tenement. The Appellant was unable to establish that the connection between the land and the industry carried out on the land was more than just a mere convenience as required to establish the requisite accommodation. There was nothing particular about lot 86 which made it the only or even the most appropriate lot of land in the estate to carry out farm maintenance works. It was merely one of many lots which could have been designated for this use at the time of the creation of the estate and registration of the s88B instrument which brought the Fourteenth Restriction into existence. Nor was there any evidence that lot 86 was genuinely so used; in fact evidence such as there was is to the contrary. It may be granted that physical contiguity of lot 86 to the servient tenement is not necessary, if (as here) sufficiently close to be sensibly described as appurtenant. But here any supposed connection between lot 86 and the supposed servient tenement went no further than to render the latter but "a convenient incident to the exercise of the right", were it exercised at all, yet constituted incongruously by that vastly expansive congeries of entitlements. 44 Moreover, the suggestion cannot be sustained that accommodation of the dominant tenement should be found in the supposed commercial necessity on the part of the owners (and likewise the liquidators) of Clos Farming to ensure that the rights that they purportedly hold have economic value. Even if correct, pure commercial interests of themselves, though not necessarily incompatible with an easement, are not sufficient to justify, and may even militate against, the creation of such a right in rem. For such a right, if allowed as an easement, would endure in perpetuity (unless validly removed) even if the right had long ceased to be exercised. Considering the extensive character of the rights conferred under the Fourteenth Restriction, finding such a perpetual right in rem, as distinct from a mere contractual right, would clearly run counter to the commercial interests of the servient owners. This is because, while the dominant owner has numerous entitlements, the servient owners, have no entitlement to compel Clos Farming to exercise its rights and the servient owners have exceptionally limited rights of supervision. In truth, the only way they could seek to ensure that the farming enterprise is carried out in an efficient and proper way is by seeking to have the rights expunged from the title by making either an application to the court or to the Registrar General. Thus the imperatives of the commercialisation of the viticulture system cannot be seen as necessarily supporting a finding that the rights conferred do sufficiently accommodate the dominant tenement. 45 In relation to the fourth condition, it is necessary to assess the degree to which the rights conferred interfere with the servient owners' exclusive possession of the site. In Australia, Harada v Registrar of Titles [1981] VR 743 expressly followed Copeland v Greenhalf [1952] Ch 488 (and not the earlier inconsistent Wright v Macadam [1949] 2 KB 744 (CA)), in rejecting the easement claimed by the SEC in favour of an overhead power line transmitting electricity over the plaintiff's land. No pylon was located on the plaintiff's land and the Commission owned no land in the vicinity. Though these are distinguishing features, what is relevant here is the statement of principle by King J (at 753), applicable here, which emphasised that the rights sought to be acquired went much further than what were needed for SEC to enjoy its rights of power transmission: "the restriction on the owner not to build on the easement area and not to erect any structure thereon goes much further than a prohibition of interference with the enjoyment by the SEC of its rights. I think that if the rights the subject of the [alleged easement] were acquired the plaintiff would be left with very few rights over her property and could do little more with it than move over it and park cars on it. I think that the rights sought to be acquired by the SEC do not fall within the category of a common law easement. They would really amount to rights to joint user by the SEC of the plaintiff's land." 46 I would conclude that Bryson J's determination in regard to this requirement was clearly correct. The fact that the rights only touch part of the lot is insufficient to preclude the finding that the rights so vastly interfere with the servient owners' rights, were they exercised, as to preclude them constituting an easement. The Fourteenth Restriction, independent of any further restrictions comprising the system, applies to a very significant portion of the lot. It leaves the owner with merely his rights of residual recreational activities that are totally subordinated to the over-arching rights of Clos Farming. When the Fourteenth Restriction is placed in its context of those further restrictions that apply to the lot in total, the servient owner's rights are so attenuated as no longer to meet the description of exclusive possession. 47 The Appellant argues that nomenclature should not be definitive and that in assessing whether rights had been conferred it was necessary to look more closely to what lies behind the description assigned. But that closer look only justifies the finding that the Fourteenth Restriction is not an easement: see Appellant's Submissions in Reply and Supplementary Outline of Submissions at para 17 and also Bursill Enterprises Pt Limited v Berger Bros Trading as Pty Limited (1971) 124 CLR 73 and Wik Peoples v Queensland (1996) 187 CLR 1.

[8]

If not a valid easement did the Fourteenth Restriction nevertheless create an interest in land? 48 Bryson J concluded that the Fourteenth Restriction created no interest in the land at all. His Honour emphasised that the s88B instrument had intended, but was ineffective, to create a legal interest, specifically an easement, and not an equitable interest, a licence or a profit à prendre (Judgment at [40]). Notably, the Trial Judge held that new interests in land, beyond the limits of recognised categories, could not be created in Torrens Title land (Judgment at [40]). That proposition attracted much debate in the submissions at appeal. Central to it was whether novel interests could be recognised and then recorded on and removed from the title of Torrens Title land and if so, how. 49 Counsel for the Appellant submitted that the general approach of Bryson J to this issue was misguided. It was submitted that what Bryson J did was find that because Clos Farming had used the "verbiage" of easement and that as no easement had actually been created, no interest in land at all was created (Appellant's Submissions in Reply and Supplementary Outline of Submissions at para 16-21). Further it was submitted that the fact that the right created was novel and inconsistent with the label ascribed to it did not prevent the creation of an interest in land (Appellant's Submissions in Reply and Supplementary Outline of Submissions at para 21). Support for this approach of "substance over form", by determining what right is conferred by assessing the true import of the instrument as opposed to the label given to the right, is found in Bursill Enterprises Pty Limited v Berger Bros Pty Limited (supra); Glenwood Lumber Company v Phillips [1904] AC 405; Wik Peoples v Queensland (supra). 50 In seeking to give a legal character to the rights purportedly conferred, counsel for the Appellant suggested that the rights alternatively were in the nature of a profit à prendre or in the nature of a profit à rendre or in the nature of a license coupled with a grant.

[9]

Could the interest be in the nature of a profit à prendre or a profit à rendre ? 51 At first instance Counsel for Clos Farming, suggested as an alternative to the easement argument, that the interest in land was in the nature of a profit à prendre. That is, while not a true profit, it was by nature a quasi profit. In rejecting that the Fourteenth Restriction could be classified as either a profit à prendre or a right in the nature of a profit à prendre, Bryson J briefly analysed the meaning of a profit à prendre. He expressed it as a right to take something off another person's land where the thing taken must be capable of ownership and be either soil or minerals from the tenement, natural produce or animals ferae naturae (Judgment at [59]). In delineating this concept, Bryson J noted that a profit à prendre could not include a right to carry out processes of cultivation or harvesting (Judgment at [68]). He held that the rights of the Fourteenth Restriction could not be characterised as a profit à prendre, as the right to enter, establish and carry out vineyard works, cannot be seen as a right to take part of the land (at [68]). Likewise, he rejected that the Fourteenth Restriction conferred rights sufficiently analogous to a profit à prendre to be an interest in land (Judgment at [70]). 52 On Appeal, counsel for the Appellant, submitted that it was beside the point whether or not what was created was a true profit à prendre. This was because the notion of an interest in land, akin but not identical to a profit, has a distinguished pedigree: Mills v Stokman (1966-67) 116 CLR 61, Australian Softwood Forests v Attorney General (1981-82) 148 CLR 121. The Court was referred to Mason J's judgment in Australian Softwood Forests v Attorney General (supra) at 132-133 where he held: "I have not been able to discover a case in which an obligation to take something off a person's land has been considered to be a profit à prendre . But I do not think that this negates the possibility that the grower's rights amount to an interest in the nature of a profit à prendre ." 53 Mason J, as Bryson J points out, was prepared to require the interest in pine trees under the contractual arrangements there in question as "… something in the nature of a profit à prendre, if not a profit à prendre". The effect of the arrangement in that case was, in Mason J's view, that property in the trees passed to the grower before planting, their growth in the ground was for his benefit, he had an interest in land and a licence to enter the land in order to take possession of the fruits of his interest, and he had an obligation rather than a right to cut and move them at maturity. At first instance in Corporate Affairs Commission v Australian Softwood Forest Pty Ltd [1978] 1 NSWLR 150 Helsham CJ in Eq was of the view that there was no profit à prendre. 54 Reasoning by analogy it was submitted that it is only a small step to recognising that the rights in this present case are also of this nature. A factor supporting this conclusion was that in Australian Softwood Forests v Attorney-General the fact that the parties had intended to create an interest in land was important. Likewise in this present case, Counsel for the Appellant emphasised that in the creation of the s88B instrument there was a discernible intention to make the rights conferred by the Fourteenth Restriction an interest in land (Appellant's Submissions in Reply and Supplementary Outline of Submissions at para 39). 55 In assessing whether the right is analogous to, or in the nature of, a profit à prendre, it is necessary to consider first principles. In Permanent Trustee Australia Ltd v Shand (1992) 27 NSWLR 426, Young J gave an overview of the fundamental principles to satisfy this category. First, the profit must come from the land itself, with it not being sufficient that the user of the land can make a profit out of trading on it (at 431). Second, the right must be to take something from the land. A right to tend or to grow cannot be considered a right to take (at 431). Third, the right must only allow the removal of a crop that does not require attention after initial planting. This rules points to the importance of the distinction between fructus industriales and fructus naturales (at 431). 56 Bryson J (at [63]) clearly delineates that distinction: "63 It seems that literal translation does not establish the exact distinction between fructus naturales and fructus industriales . The exposition given by Campbell CJ in Race v Ward & Ors (1855) 4 Ellis & Blackburn 702, 119 ER 259 at 709, 262 was not apparently an attempt at an exhaustive statement but it is of some use; his Lordship said, while distinguishing claims of a right in respect of water in a river and open running stream or in a spring: 'This is no part of the soil, like sand, or clay, or stones; or the produce of the soil, like grass, or turves, or trees. … they all come under the category of profit à prendre, being part of the soil or the produce of the soil: … '. It seems unlikely that his Lordship was referring to trees produced as a process of plantation and cultivation. In Lowe (Inspector of Taxes) v J W Ashmore Ltd [1971] 1 Ch 545 Megarry J, whose reputation in land law is very high, said at 557 ' As for the definition of a profit as a right to take something off the land of another, it is clear that this, indeed, it is. But the converse does not hold: not all such rights are profits. To be a profit, the right must be a right to take part of the land or the creatures on it; what is taken must, when taken, be susceptible of ownership; and the right must be created by a transaction capable of creating an interest in land. A profit in the soil, giving the right to take sand, gravel and so on, is a well-known form of profit, and so is a profit of turbary, giving the right to dig and take turf or peat for fuel. '

[10]

Although the use of Latin does not, in this instance, facilitate understanding, the concept that a tree or the fruit of a plant growing wild is a natural product of the soil or fructus naturalis , while a cultivated tree or plant or its fruit or product is not, relates fairly readily to the classic concept referred to in Race v Ward and Lowe v Ashmore ." 57 Consideration of other cases highlights other important factors which limit the types of rights which may fall within the category of profit à prendre. In Clayton v Corby (1843) 5 QB 415 Lord Denman CJ delivering judgment for the Court held that a right to enter a property, dig up clay, sand, gravel earth, soil and turf and then to take it away, was not valid. It was held that such rights must have limits and restrictions in order to be valid. The right cannot be valid if it purports to allow the user to take all of the property. This decision was affirmed in the later case of Lord Chesterfield v Harris [1908] 2 Ch 397. Accordingly, it is necessary that there be some restriction on the rights of the holder of the profit à prendre in relation to the extent of the right to take from the property. This rule, though not well developed in recent times, may indicate that, like an easement, a profit à prendre cannot sterilise and neutralise the servient owner's rights. 58 Considering these features of profit à prendre, the essential defect with the argument that the rights conferred by the Fourteenth Restriction are in the nature of a profit à prendre is that the restriction is far more extensive than allowing or requiring the Appellant to enter the land and take natural product of the land from the property. The Fourteenth Restriction is not just analogous to a profit à prendre. In some respects it is entirely at odds with that category altogether. As found by Bryson J, the rights pursuant to the Fourteenth Restriction are extensive and highly intrusive. They confer not just limited rights of entry to take away natural property, but include rights to enter and plant and tend the vines and the right to recover payment for the costs associated with such works and the sale of any produce. The rights considered as a whole are far greater than any rights contemplated in the traditional concept of a profit à prendre. Moreover, it is difficult to see how an analogy can be drawn with the concept of an interest "in the nature of" a profit à prendre as recognised in Australian Softwoods Forests v Attorney-General. The specific right to recover costs (the essence of the value of the Clos farming system) goes far beyond anything contemplated in the notion of an interest "in the nature of" a profit à prendre. Further, as the Respondents argued, the concept of an interest in the nature of a profit à prendre as developed by the line of authorities referred to by the Appellant is not analogous to the present case. For instance in Mills v Stokman (supra) the interest was a profit à prendre. But it had not been registered on the title and so could only take effect in equity as an equitable profit à prendre. In Australian Softwoods Forests v Attorney-General the case was not concerned with whether the rights involved were interests recognised by the Real Property Act. Rather it was whether they amounted to an interest in land for the purposes of the Companies Act 1961 (NSW) dealing with the requirement for a prospectus. 59 As a variation of the profit à prendre argument, Counsel for the Appellant raised for consideration the concept of a profit à rendre. Such a profit is a right or obligation to enter land to put there something of benefit to the land (Butt, P. "Land Law", 4th ed (2001)). Young J in Permanent Trustee Australia Ltd v Shand (supra) at 431, defined a profit à rendre as an incorporeal hereditament being "….a right to go onto the land and to put on it something of benefit to it…". It was suggested that the rights of the Fourteenth Restriction may also fall into this category. 60 One difficulty with analysing the present rights as forming part of this category is that such a profit à rendre is not commonly used in modern times to the point where they may have become obsolete; Halsbury's Laws of England, 4th ed, Vol 14, para 240 cited by Butt "Land Law" (supra) at [1689] but who indicates more recent authority to the contrary. There has been recent judicial dicta that the category may still be alive, if an endangered species, awaiting future use and consideration by the courts (see Permanent Trustee Australia Ltd v Shand at 431B-C. In Hornsby Council v Roads and Traffic Authority (1997) 41 NSWLR 151 at 155, Meagher JA lists the profit à rendre alongside other estates of easements and profit à prendres). 61 In Permanent Trustee Australia Ltd v Shand it was said that the benefit to be given needed to be a benefit to the land and not just a benefit for the user. Again, the right to recover payment seems at odds with such concept. 62 I would conclude that the Trial Judge was correct in concluding that not only was this not a profit à rendre but that it was not a profit à prendre, being a process of industry rather than a natural process and not one constituting, in the words of Megarry J "the right to take part of the land or the creatures on it" (Lowe (Inspector of Taxes) v J W Ashmore Ltd (1971) 1 Ch 545 at 557. Bryson J correctly adds a further reason for so concluding, found in "the nature of the other acts [distinct from cultivation and harvesting such as the right to costs] authorised by the easement" (para [68]).

[11]

Could the interest be characterised as a licence coupled with a grant? 63 A third alternative suggested by the Appellant was that the Fourteenth Restriction created an interest in land that was a licence coupled with a grant. At first instance Bryson J rejected this argument because there was a complete absence of any basis for viewing the arrangement as a licence coupled with a grant (Judgment at [71]). That is, there was no basis to view Clos Farming as having a licence to enter the property yet treating their rights on the property as the subject of a grant of an interest in the land. On Appeal, this argument was not extensively pressed but, like the following argument, it was argued that such a finding would give effect to the clear intention to create an interest in land expressed by the s88B instrument. 64 Having regard to the language of the Fourteenth Restriction it is clear that the developer had no intention of creating a licence coupled with a grant, Bryson J's reasoning on this point is clearly right. Considering the words of the instrument, it is difficult to see how the language of the Fourteenth Restriction betrays any intention to create a licence, and then coupling it with a grant of an interest in property. Second, it is important that what is granted is capable of being a property right. In National Provincial Bank v Ainsworth [1965] AC 1175, Lord Wilberforce stated the test: "Before a right or an interest in land can be admitted into the category of property, or of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties and have some degree of permanence or stability." 65 Thus in relation to the second element required for this part of the argument, "the grant", it is still necessary that the right be capable of being classed as proprietary. The difficulty of considering the various rights under the Fourteenth Restriction in totality as property is that the right to costs is not definable nor identifiable by third parties and cannot be treated as permanent or stable. In the course of the argument, the issue of severance was not raised. Indeed the very idea of severing the dominant owner's right to the costs of any works would be inimical to the Appellant's interests, as the Fourteenth Restriction would lose all commercial utility and be stripped of value completely. Hence even if the other rights of entry, harvesting and maintenance, could be characterised as proprietary, they would be of little value without a right to reimbursement for costs incurred. Thus the Fourteenth Restriction only makes sense in its totality and so cannot be characterised as proprietary.

[12]

The interest as sui generis ? 66 The final alternative that had been argued was that the Fourteenth Restriction created a sui generis interest which should be recognised as an interest in land. Considering the foregoing argument and conclusions, it is clear that the rights, if they were to be recognised as an interest in land at all, fall outside the established categories of interests in land. They are like some supposed distant star hypothesised and satisfying no known physical laws, nor clearly observable as such. Yet what was observable was said to be capable of no other explanation than that this was indeed a star. The Appellant thus submitted at the point of last retreat that it is possible within the statutory confines of the Real Property Act and Conveyancing Act for new interests in land to be created and recorded on title (Appellant's Submissions in Reply, para 15 and 16 and Appellant's Submissions in Reply and Submissions of Cross Respondent at para 19-21). Counsel for the Appellant submitted that it was necessary for the court to consider the effect of the instrument. That as there was a plain intention to create a legal interest in land, it was unnecessary to engage in a categorisation process for the Fourteenth Restriction. In relation to the procedure for interests in Torrens Title land, the Appellant contended that a caveat would be able to protect and notify individuals who may seek to deal with the land in question of the Appellant's interest. 67 The Respondents rejected this argument in its entirety and submitted that it is not possible within the existing statutory scheme for new interests in land (as distinct from novel easements) to be recognised (Respondents' Submissions in Reply at para 49). To support this conclusion the Respondents highlighted that the purpose of the Real Property Act is to define on the register all of the interests in land (Respondents' Submissions in Reply at para 50). Second, it was argued that there was no mechanism within the statutory scheme for the creation, modification, release or removal of such supposed sui generis interests (Respondents' Submissions in Reply at para 51). Finally, the Respondents seek to have the claim that the interest be recognised as a sui generis right rejected because the Appellant has been unable to move beyond the pure assertion that it has an interest in land and that a caveat would be capable of appropriately noting the existence of the interest (Respondents' Submissions in Reply at para 55). 68 This argument that the Fourteenth Restriction, although not conforming to any of the basal principles for recognised interests in land, should nevertheless be accepted as a sui generis interest in land must also fail. This is primarily because the Appellant was unable to establish in law or by evidence any reason why the Court should allow the Fourteenth Restriction to have potentially perpetual effect as an incorporeal hereditament, aside from the claim that it was the clear intention of the developer that the rights were to have effect as an interest in land. But fervent wish is not enough. If such an argument were accepted, then it would be possible for many ordinary commercial arrangements to be given perpetual effect in rem merely because the original parties or the original developer possessed and made clear such an intention. The reluctance of Courts to recognise rights and interests in land that too greatly interfere with and limit owners' rights of exclusive possession strongly militates against such a result.

[13]

The Cross Appeal - if the "Easement for Vineyard" did create an interest in land, did it confer a cumulative right? 69 As it has been found that the easement for vineyard did not create any interest in land, the question from the cross-appeal does not become an issue, as was the case in the court below. Bryson J considered this question of whether the right to deduct costs was cumulative, even though it was unnecessary because of his judgement that the Fourteenth Restriction created no interest in land at all. He held that it necessarily followed that the right was not cumulative, when regard is had to the precise terms of the Restriction. They referred to being able to deduct costs "therefrom … associated with such harvesting and the sale of such harvest" and that it was a right from "time to time" to make such deduction. The Appellant submitted that, pursuant to Royal Botanical Gardens & Domain Trust v South Sydney Council (2002) 76 ALJR 436 the court was required in construing the clause to have regard to both the internal linguistic considerations as well as the context in which the clause was to operate, in order to discern the objectives of the parties. They submitted that what was intended was an elaborate viticulture operation in which the costs of establishment and development would not be recoverable on a yearly basis at all. Rather it would be recoverable over time as the vines mature and become more productive (Appellant's Submissions in Reply and Submissions of Cross Respondent at para 32-34). 70 However, the court is only required to consider the factual circumstances if the clause in question is ambiguous. Bryson J's construction of the clause was based on its terms. The drafting of the clause is clear enough. The Appellant has submitted that "harvest" is ambiguous and can mean either the annual harvest or the total yield from time to time (Appellant's Submissions in Reply and Supplementary Outline of Submissions at para 33). But the clause cannot be claimed as ambiguous merely because the holder of the right is unhappy with the effect of the right. In the present case, the use of the term "such harvest" appears to be a clear reference to annual harvests. Nevertheless, even if one were to consider that there was some ambiguity in the clause, the Court is left with the task of determining the objective of the parties. The difficulty in the present case is that the factual context does not seem to be consistent or supportive of that asserted interpretation. In effect, what the Appellant is seeking to do is to have the Court ignore the clear wording of the clause in deference to what would be a more appropriate commercial outcome for the Appellant.

[14]

The competency of the appeal 71 The Respondents have consistently contended that the appeal was not competent. This was said to be because the Notice of Appeal did not seek to challenge an "operative judicial act" but rather was brought against the opinions and reasons given in the judgment (Respondents' Submissions at para 3-5). It is said that the effect of such an appeal would be a nullity. The Appellant was given leave to amend the Notice of Appeal during the hearing. The Respondents contend that the competency problem was not overcome as the Appellant was seeking additional relief not sought below. This is because, in the Amended Summons, the Appellant as Plaintiff sought orders in relation to a caveat that was in existence at the time of hearing and which was specifically identified. The Plaintiff had sought unsuccessfully to have caveat 032655 extended until further court order, coupled with a declaration that the interest recorded in the caveat is a caveatable interest. In contrast, the Further Amended Notice of Appeal seeks a range of orders including a declaration that the Appellant's interest is an estate or interest in land; a declaration that the interest is a caveatable interest; that the Appellant's interest is a valid easement. In addition leave was sought after the hearing to add a further prayer for relief to the Summons, being a declaration that the Appellant's interest is an estate or interest in land. In the alternative the Appellant seeks to have the proceedings remitted to the Equity Division for the issue to be determined. Further the Respondents have highlighted that the prayer for relief in relation to a caveat is of no utility as the caveat the subject of the proceedings at first instance has lapsed and no longer exists. The Appellant has not provided the terms of any such caveat or how the interest if it is to be recognised can be recorded on the title. 72 I am satisfied that the appeal was competent. The operative judicial act is manifest in the orders and declaration made; Red, 56. The Court ordered judgment for the defendant and declared that, on the cross-claim, the "Easement for vineyard" shown in the Deposited Plan was not a valid easement. The cross-claim has provided the principal subject matter of this appeal as also the question of whether the relevant rights constituted an interest in land. On both these issues, the Appellant has not succeeded.

Parties

Applicant/Plaintiff:

Clos Farming Estates

Respondent/Defendant:

Easton & 1 Ors

Legislation Cited (1)

Companies Act 1961(NSW)

Cases Cited (9)

CITATION : Clos Farming Estates v Easton & 1 Ors [2002] NSWCA 389 FILE NUMBER(S) : CA 40505/01 HEARING DATE(S) : 20/06/2002 JUDGMENT DATE : 9 December 2002

COUNSEL : S Rares, SC/ M B J Lee (Appellant) S Finch, SC/ T G R Parker (First and Second Respondents) SOLICITORS : Corrs Chambers Westgarth (Appellant) Allens Arthur Robinson (First and Second Respondents) CATCHWORDS : REAL PROPERTY - easements - accommodation of the dominant tenement - right capable of forming subject matter of a grant - novel easements - REAL PROPERTY - profit a prendre - profit a rendre - sui generis interest in land - novel interests in land - PRACTICE AND PROCEDURE - competency of appeal - whether appeal against an operative judicial act LEGISLATION CITED : Conveyancing Act 1919 s88B Ackroyd v Smith (1850) 10 CB 164; 138 ER 68 (CP) Attorney General of Southern Nigeria v John Holt & Co [1915] AC 599 Australian Softwood Forests v Attorney General (1981-82) 148 CLR 121 Bursill Enterprises Pt Limited v Berger Bros Trading as Pty Limited (1971) 124 CLR 73 City Developments Pty Limited v Registrar General (NT) [2001] NTCA 7 Clapman v Edwards [1938] 2 All ER 507 Clayton v Corby (1843) 5 QB 415 Commonwealth v Register of Titles for Victoria (1918) 24 CLR 348 Copeland v Greenhalf [1952] Ch 488 Corporate Affairs Commission v Australian Softwood Forest Pty Ltd [1978] 1 NSWLR 150 Dyce v Lady James Hay (1852) 1 Macq 305 In Re Ellenborough Park [1956] CH 131 Finlay 91 WN(NSW) 730 (DC) CASES CITED: Frater v Finlay (1968) 91 WN(NSW) 730 Glenwood Lumber Company v Phillips [1904] AC 405 Harada v Registrar of Titles [1981] VR 743 Hill v Tupper (1863) 2 H&C 121 Hornsby Council v Roads and Traffic Authority (1997) 41 NSWLR 151 Lord Chesterfield v Harris [1908] 2 CH 397 Lowe (Inspector of Taxes) v J W Ashmore Ltd (1971) 1 Ch 545 Mills v Stokman (1966-67) 116 CLR 61 Moody v Steggles (1879) 12 Ch D 261 National Provincial Bank v Ainsworth [1965] AC 1175 Permanent Trustee Australia Ltd v Shand (1992) 27 NSWLR 426 Royal Botanical Gardens & Domain Trust v South Sydney Council (2002) 76 ALJR 436 Wik Peoples v Queensland (1996) 187 CLR 1 Wright v Macadam [1949] 2 KB 744 (CA) DECISION : (1) Appeal and Cross-Appeal dismissed; (2) Appellant to pay Respondent's costs of appeal.

[2001] NTCA 7

(1971) 124 CLR 73

(1918) 24 CLR 348

(1997) 41 NSWLR 151

(1992) 27 NSWLR 426

(2002) 76 ALJR 436

(1996) 187 CLR 1

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