JEA Holdings (Aust) Pty Ltd t/as Miller Shopping Centre v Registrar-General of New South Wales; Registrar-General of New South Wales v JEA Holdings

Court of Appeal (NSW)|2024-08-15|Before: Payne JA, Mitchelmore JA, Stern JA, Richmond J

Background to the appeal and cross appeal

The background facts are not in dispute and the following summary is taken largely from the primary judge's reasons.
Lot 4 and Lot 5 were originally part of the same parcel of land, being Lot 1 in deposited plan (DP) 214541, which was owned by the Housing Commission of New South Wales (Housing Commission). On 4 October 1963, the Housing Commission transferred the entire parcel of land to Green Valley Shopping Centre Pty Ltd (Green Valley Shopping Centre) by a memorandum of transfer with the registered number J490511. That memorandum of transfer contained the following covenant relating to the use of Lots 1 to 5, which were subsequently to be registered in DP 219028 (at [4]): "2. And the Transferee does further covenant for itself and its successors and its assigns that it will not use or permit to be used any Lot in Deposited Plan No. 219028 for any purpose whatsoever other than as follows: - Lot 1 for a Motor Service Station. Lot 2 for a Car Parking Area for free use by members of the public. Lot 3 for Retail Shopping and Commercial Area. Lot 4 for a Car Parking Area for free use by members of the public. Lot 5 for an Hotel."

The decision of the primary judge

The primary judge summarised the issues arising on JEA's amended summons as follows (at [56]): "(a) Can the Council in the granting of development approval suspend the operation of an easement (as distinct from a restrictive covenant), such that the restrictions in the easement no longer apply to the development? (b) Whether JEA is entitled to compensation under s 129(1) of the Act for the diminution in the value of Lot 4 caused by the registration of the Easement on the basis set out in [48] or [50] above. (c) Whether the costs incurred by JEA referred to in prayer 4 of the amended summons (plus pre-judgment interest) can be claimed as compensation under s 129(1) of the Act."
The first and second issues were inter-related and remain so on the appeal. The third issue is the subject of the cross appeal.
The primary judge accepted that subject to the resolution of the first issue, the parties' town planning experts agreed that the easement effectively precluded any form of development on Lot 4: at [43]. This was because the easement restricted the use of the ground level of Lot 4 to car parking, and thus served to preclude a shop top housing scheme, which was how the land was zoned under the Liverpool LEP: at [42]. The parties' valuers were also in agreement in relation to the calculation of the diminution in value of Lot 4 on the basis of two alternative valuation scenarios. In the first scenario, the easement prevented levels 1 and 2 of Lot 4 from being developed in accordance with the development consent: at [48]. In the second scenario, Lot 4 could only be used for car parking and thus had no development potential: at [50].
The primary judge considered that the appropriate time to assess the alleged diminution in value of Lot 4 by reason of the omission and subsequent registration of the easement was the date of the Court of Appeal's orders (27 March 2015), because that was when this aspect of JEA's loss crystallised: at [93]. Using that date, JEA's claim for compensation was $1,850,000 on the first scenario and, on the second scenario, $7,860,000 (together with pre-judgment interest): at [93]. However, his Honour found on the first issue that the easement did not prevent JEA from implementing the development consent. It followed that there was no diminution in the market value of Lot 4 due to the easement on either of the two scenarios for which JEA contended: at [98]-[100].
As to the third issue, the primary judge concluded that JEA's claim for compensation against the Torrens Assurance Fund should succeed in relation to the following costs, together with interest (at [101], [116]): 1. JEA's costs of the trial before Windeyer AJ and the costs in the Court of Appeal; 2. JEA's costs in seeking special leave to appeal to the High Court; 3. the costs paid or payable by JEA to third parties in the proceedings referred to in (1) and (2); and 4. JEA's costs in these proceedings, including the costs of solicitors, counsel, valuers and town planners.
The primary judge noted that the Registrar-General did not dispute the reasonableness of the amount of costs claimed by JEA, which left as the sole issue for determination whether the costs fell within s 129(1) of the Real Property Act: at [107]. His Honour found that it was necessary for JEA to bring the earlier proceedings in order to determine whether the Registrar-General was entitled to record the easement on the title, and that the application for special leave was not unreasonable: at [109]. In relation to JEA's claim for the costs of the proceedings before his Honour, the primary judge considered that those costs also fell within s 129(1) of the Real Property Act, relying on the decision of Bryson AJ in Chandra v Perpetual Trustees Victoria Ltd [2008] NSWSC 178 ("Chandra"): at [111]. The primary judge concluded that s 129(1)(a) applied, with the event that engaged it being the omission of the easement from the title of Lot 4: at [114].

The grounds of appeal

The critical issue on the appeal is the first issue that the primary judge addressed. As I noted above, it is the subject of grounds 1 to 8 of the notice of appeal. The parties accepted that the second issue, which was the subject of the final ground of appeal (ground 9), would only arise if JEA succeeded on the first issue. As ground 9, the parties agreed that the compensation to be awarded would accord with the second of the valuation scenarios, calculated from the date of the Court of Appeal's decision in Registrar-General v JEA.
Whether the easement on Lot 4 was suspended for the purpose of enabling development to be carried out in accordance with the development approval involves considering the interaction of s 3.16 of the EPA Act and cl 1.9A of the Liverpool LEP. Section 3.16, which was formerly numbered s 28, provides: 3.16 Suspension of laws etc by environmental planning instruments (cf previous s 28) (1) In this section, regulatory instrument means any Act (other than this Act), rule, regulation, by-law, ordinance, proclamation, agreement, covenant or instrument by or under whatever authority made. (2) For the purpose of enabling development to be carried out in accordance with an environmental planning instrument or in accordance with a consent granted under this Act, an environmental planning instrument may provide that, to the extent necessary to serve that purpose, a regulatory instrument specified in that environmental planning instrument shall not apply to any such development or shall apply subject to the modifications specified in that environmental planning instrument. (3) A provision referred to in subsection (2) shall have effect according to its tenor, but only if the Governor has, before the making of the environmental planning instrument, approved of the provision. (4) Where a Minister is responsible for the administration of a regulatory instrument referred to in subsection (2), the approval of the Governor for the purposes of subsection (3) shall not be recommended except with the prior concurrence in writing of that Minister. (5) A declaration in the environmental planning instrument as to the approval of the Governor as referred to in subsection (3) or the concurrence of a Minister as referred to in subsection (4) shall be prima facie evidence of the approval or concurrence. (6) The provisions of this section have effect despite anything contained in section 42 of the Real Property Act 1900.
Although I have set out cl 1.9A(1) of the Liverpool LEP above, it bears repeating in the context of the clause as a whole, as in force at the date of the development approval: 1.9A Suspension of covenants, agreements and instruments (1) For the purpose of enabling development on land in any zone to be carried out in accordance with this Plan or with a consent granted under the Act, any agreement, covenant or other similar instrument that restricts the carrying out of that development does not apply to the extent necessary to serve that purpose. (2) This clause does not apply: (a) to a covenant imposed by the Council or that the Council requires to be imposed, or (b) to any prescribed instrument within the meaning of section 183A of the Crown Lands Act 1989, or (c) to any conservation agreement within the meaning of the National Parks and Wildlife Act 1974, or (d) to any trust agreement within the meaning of the Nature Conservation Trust Act 2001, or (e) to any property vegetation plan within the meaning of the Native Vegetation Act 2003, or (f) to any biobanking agreement within the meaning of Part 7A of the Threatened Species Conservation Act 1995. (3) This clause does not affect the rights or interests of any public authority under any registered instrument. (4) Under section 28 of the Act, the Governor, before the making of this clause, approved of subclauses (1)-(3).
In Coshott v Ludwig (1997) 8 BPR 15,519 ("Coshott"), Meagher JA (Giles and Simos AJJA agreeing) described the purpose of s 28 of the EPA Act as being "to nullify and remove all obstacles to the planning principles decided on by the council or the minister" (at 15,521). The role of the section, as his Honour described it, was to permit an environmental planning instrument to state what documents should be disregarded, while the relevant environmental planning instrument specified the documents.
In Application of Thompson (Supreme Court (NSW), 25 October 1993, unrep) ("Thompson"), McLelland CJ in Eq recognised that a scheme with the purpose described in Coshott could derogate from vested proprietary interests. Informed by that context, his Honour considered that a provision of an environmental planning instrument made pursuant to s 28 of the EPA "should not be construed in such a manner as to extend its operation in that regard further than its words clearly require, in accordance with well established principles relating to the construction of legislation and legislative instruments". The well-established principle to which his Honour expressly referred was stated by Barwick CJ in Wade v New South Wales Rutile Mining Company Pty. Ltd. (1969) 121 CLR 177 at 181; [1969] HCA 28: "The courts are not entitled, and ought not, to eke out a derogation of … private rights by implications not rendered necessary by the words used by Parliament but merely considered to be consistent with the policy which the courts conclude or suppose Parliament to have intended to implement."
JEA invoked that principle, stated more recently by French CJ in R & R Fazzolari Pty Limited v Parramatta City Council (2009) 237 CLR 603; [2009] HCA 12 at [41]-[43], in support of its appeal. It submitted that this approach to statutory construction required cl 1.9A(1) of the Liverpool LEP to be construed narrowly; and, so construed, the easement over Lot 4 did not fall within its terms. JEA advanced two related but alternative contentions, both of which the primary judge determined adversely to it: 1. the registered easement was not "an agreement, covenant or similar instrument" within the meaning of cl 1.9A(1); and 2. alternatively, if the transfer creating the easement did fall within the description in cl 1.9A, it did not restrict the carrying out of the development the subject of the approval.

Is the easement over Lot 4 within the scope of cl 1.9A(1) of the Liverpool LEP?

JEA's principal argument rested on the nature of an easement and the difference between it and an agreement or covenant, adopting for that purpose the following statement of Preston CJ LEC in William Lloyd Carey-Evans and Jennifer Anne Quist as Executors of the Estate of Robert Rufus Carey-Evans v Wenhao Wu [2022] NSWLEC 144 ("Wu") at [72]: "As Baalman thereafter explained, an easement is an incorporeal hereditament burdening the servient land and appurtenant to and benefiting the dominant land. The rights and obligations of the owners of the respective servient and dominant lands are regulated entirely by the law of property. A covenant or agreement, on the other hand, is regulated by the law of contract. If it is a covenant that restricts the user of land, such as an agreement not to build on the servient land, so as to obstruct a view from the dominant land, it will bind successive purchasers of the servient land in much the same way as a true easement would do, but only if the purchasers have notice of its existence: Baalman ["No easement for prospect" (1942) 16 ALJ 126] at 128 and see Leech v Schweder (1874) LR 9 Ch App 463 at 475."
JEA submitted that the distinction between an easement and an agreement or covenant led inexorably to the conclusion that the easement over Lot 4 was not an "agreement, covenant or similar instrument" within cl 1.9A of the Liverpool LEP. The terms "agreement" and "covenant" referred to interests in personam, while an easement was an interest in rem, running with the land. The primary judge's conclusion to the contrary involved reliance, JEA submitted, on the approach that Preston CJ LEC adopted in Wu which, in turn, rested on a misapplication of Coshott.
It is thus necessary to commence consideration with Coshott. In that case, the Ludwigs obtained development consent from Woollahra Municipal Council to carry out building work on their land in Vaucluse. A restrictive covenant contained in a memorandum of transfer that was registered on title in 1936 relevantly provided that any main building erected on the land "shall be a cottage with brick external walls…" (at 15,519). Meagher JA observed that the effect of the proposed building work to which the consent related "might be such that the building on [the Ludwigs' land] could no longer be described as a 'cottage'" (at 15,520).
The applicable environmental planning instrument was the Woollahra Local Environmental Plan 27 ("Woollahra LEP"), which provided, in cl 32(1): (1) For the purposes of enabling development to be carried out in accordance with a consent granted under the Act, any agreement, covenant or instrument imposing restrictions as to the erection or use of buildings for certain purposes or as to the use of land for certain purposes, to the extent necessary to serve that purpose, shall not apply to the development.
The issue in Coshott was whether the word "covenant" in s 28 of the EPA Act (now s 3.16) and in cl 32(1) of the Woollahra LEP extended to private covenants or was limited to covenants by public authorities. In rejecting the Coshotts' argument in support of the limited meaning, Meagher JA stated that taken literally, a "covenant" must refer to covenants executed by whomsoever, with no need to restrict its meaning. His Honour further observed, referring to the instruments included in the definition of "regulatory instrument" in s 28(1) of the EPA Act, that while rules, regulations, by-laws, ordinances and proclamations "comprise one genus, viz documents issued by public authorities", "agreements, covenants and instruments are manifestly not within the same genus". His Honour considered that the same result emerged "more clearly" if one approached the matter purposively.
Referring to Coshott in Wu at [80], which also involved properties in Vaucluse, Preston CJ LEC described the inquiry required by the equivalent clause of the Woollahra Local Environmental Plan 2014 (Woollahra LEP 2014) as necessitating the identification of "the instrument that creates the right or interest in or affecting lands, not the right or interest itself". JEA took issue with that formulation of the inquiry, submitting that it did not follow from the narrow issue decided in Coshott that a registered interest in land that limited development may fall within the terms of the environmental planning instrument and be disregarded simply because that interest was created by a "contract". It advanced a similar submission in reply, contending that the legislation was directed at an extant restriction or restraint on development, and not at a contract that was no longer enforceable by either party (such as was the case here). JEA submitted that if easements were intended to be captured by cl 1.9A, it would have been simple to include the word in the clause.
JEA's submissions in this regard did not address the point that Preston CJ LEC derived from Coshott, which was directed at the authorising statute, now s 3.16 of the EPA Act. As his Honour observed of s 28 in Cracknell & Lonergan Pty Ltd v Council of the City of Sydney (2007) 155 LGERA 291; [2007] NSWLEC 392 ("Cracknell") at [32], the focus of the section is the disapplication of a regulatory instrument (as defined), being an instrument that is specified in the applicable environmental planning instrument.
Cracknell serves to illustrate this point. The applicant in Cracknell lodged a development application on behalf of the owners of a block of land in Redfern, to construct an in-ground pool, associated fencing and minor landscape works (at [1]). The location of the proposed pool encroached some 2.5 metres upon a right of way which was created pursuant to a Deed of Indenture dated 25 January 1894 (at [5]). The Council refused the development application. On the applicant's appeal to the Land and Environment Court, the Council raised two questions of law. The first question was whether cl 44 of the South Sydney Local Environmental Plan 1998 (South Sydney LEP) operated pursuant to s 28 of the EPA Act. Clause 44 of the South Sydney LEP relevantly provided: 44 Suspension of covenants, agreements and instruments (1) For the purpose of enabling development to be carried out in accordance with this plan (as in force at the time the development is carried out) or in accordance with a consent granted under the Act, the operation of any covenant, agreement or similar instrument that purports to impose restrictions on the carrying out of development on the land to which this plan applies, to the extent necessary to serve that purpose, shall not apply to any such development. …
The second question, which arose in the event that the first question was answered in the affirmative, was: "Is the right of carriageway a 'covenant, agreement or similar instrument that purports to impose restrictions on the carrying out of development of the land' pursuant to cl 44 of the [South Sydney LEP]?" His Honour considered that question was incorrectly framed: "[33]…Clause 44 of [the South Sydney LEP] cannot apply directly to the right of way. A right of way itself is not a 'regulatory instrument' within the meaning of s 28 of the Act or a 'covenant, agreement or similar instrument' under cl 44 of the [South Sydney LEP]. A right of way is a right belonging to the dominant owner to use, in a particular manner and in connection with the dominant owner's land, the land belonging to the servient owner. It is true that a right of way might have been created by an agreement (although not necessarily - it could have been imposed by an order of the Court under s 88K of the Conveyancing Act 1919 (NSW)) or evidenced in a memorandum of transfer which is an instrument. But the right under the right of way is not the same thing as the agreement or instrument itself. The situation with an easement can be compared to a covenant. A covenant is an agreement that something has or has not been done or will or will not be done. A restrictive or negative covenant is an agreement which restricts the rights of the covenantor, for example, from using the covenantor's land in a particular way for a particular purpose. [34] The second question would be more correctly framed as: 'If the answer to 1 above is in the affirmative, is the right of way that burdens the subject site created by a 'covenant, agreement or similar instrument that purports to impose restrictions on the carrying out of development on the land' within the meaning of cl 44 of the [South Sydney LEP]?' [35] A question in these terms sets the relevant inquiry. An answer in the affirmative would mean that s 28 of the Act and cl 44(1) of [the South Sydney LEP] would operate so as to cause any such covenant, agreement or similar instrument creating the right of way not to apply to development carried out in accordance with [South Sydney LEP] or a development consent granted under the Act. An answer in the negative, however, would mean that s 28 and cl 44 would not have that operation and the covenant, agreement or similar instrument creating the right of way would apply in its terms."
JEA submitted that s 3.16 does not direct any analysis to the dealing that created the regulatory instrument. It submitted that "the issue the primary judge should have considered was whether the 'environmental planning instrument' (in this instance Clause 1.9A of the Liverpool LEP) specified a registered interest in land (such as the Easement) as not applying to the proposed development".
In evaluating that submission, the nature of the easement as a registered interest in land is of significance. Section 41(1) of the Real Property Act provides: (1) No dealing, until registered in the manner provided by this Act, shall be effectual to pass any estate or interest in any land under the provisions of this Act, or to render such land liable as security for the payment of money, but upon the registration of any dealing in the manner provided by this Act, the estate or interest specified in such dealing shall pass, or as the case may be the land shall become liable as security in manner and subject to the covenants, conditions, and contingencies set forth and specified in such dealing, or by this Act declared to be implied in instruments of a like nature.
As Preston CJ LEC observed in Wu, s 41(1) illustrates that "the Torrens system established a system of title by registration rather than one of registration of title" (emphasis in original): at [20], citing Westfield Management Limited v Perpetual Trustee Company Limited (2007) 233 CLR 528; [2007] HCA 45 at [5] and Deguisa v Lynn (2020) 268 CLR 638; [2020] HCA 39 at [4]. Consistently with that system, where an easement is created by private parties s 46(1) requires the execution of a transfer by the registered proprietor of the land benefited and the land burdened. Section 47(1) requires particulars of a dealing that creates an "affecting interest", defined in s 47(1A) to mean "an easement, profit à prendre or restriction on the use of land", in the folio of the Register for the land burdened and, where the affecting interest is, relevantly, an easement, the folio of the Register of the land benefited.
The dealing is thus the instrument that upon registration creates the interest. Consistently with that characterisation, the analysis of Preston CJ LEC in Cracknell, and in Wu, focussed, in my view correctly, on the dealing, and whether its content met the terms of the regulatory instrument(s) specified in the particular clause of the environmental planning instrument. The fact that the instrument in issue in the present case confers an interest in land in the form of an easement does not, of itself, take it outside the scope of cl 1.9A of the Liverpool LEP.
JEA submitted that the construction of cl 1.9A for which it contended, such that it did not extend to an easement, was consistent with comments made by Preston CJ LEC in Cracknell, at [42], in which his Honour stated: "The transfer of the freehold, the grant of a lease, or the grant of an easement in relation to land may prevent development on that land for practical reasons but the instruments effecting such dealings do not in terms impose restrictions on development…"
However, what his Honour was there addressing, and in the subsequent paragraphs on which JEA also relied, was whether the instrument in that case, which created a right of way, satisfied the description in cl 44(1) of the SS LEP. Significantly for present purposes, that clause operated to disapply "the operation of any covenant, agreement or similar instrument that purports to impose restrictions on the carrying out of development on the land to which this plan applies" (emphasis added). Assuming that the Deed of Indenture evidencing the right of way was either an "agreement or similar instrument", Preston CJ LEC concluded in Cracknell that it was not an agreement or similar instrument that met the emphasised description (at [37]). Relying on Thompson, his Honour considered that an agreement or instrument did not "impose" a restriction on development unless the restriction was expressly stated or necessarily implied (at [38]).
Preston CJ LEC used an agreement or instrument granting a lease to illustrate the proposition that cl 44 of the SS LEP only operated to make not applicable an agreement or instrument that in its terms imposed restrictions on development: "[45] A lease of property would not prevent the owner of the freehold reversion from applying for and obtaining development consent to carry out development on the leased property (s 78A(1) of the Environmental Planning and Assessment Act and cl 49 of the Environmental Planning and Assessment Regulation 2000(NSW)) without the consent of the tenant who is not treated as the owner of the land for this purpose: see s 4(1) definition of 'owner' and Local Government Act 1993 (NSW) Dictionary: definition of owner para (b). If development consent was granted, the lease would be an agreement or instrument which prevented the landlord from carrying out on the leased property development which interfered with the tenant's rights. [46] It would be remarkable if cl 44 could operate to avoid or forfeit the lease in such circumstances. If cl 44 had that operation, it would expropriate or destroy the rights of the lessee without compensation. The clause should not be given this operation if another construction is fairly open on its language: Wade v New South Wales Rutile Mining Co Pty Ltd (1969) 121 CLR 177 at 181; Application of Thompson, at 4. Another construction is fairly open. The clause can and should be confined to restrictions of a negative nature imposed on development arising from the language of the agreement or instrument. It has no application where the agreement or instrument confers positive rights of ownership or use which would be interfered with by the development." (Emphasis added.)
Preston CJ LEC observed that his approach was consistent with "all but one of the judicial decisions" on clauses of environmental planning instruments made pursuant to s 28 of the EPA Act, most of which involved restrictive covenants (at [47]). The exception was the decision of Cowdroy AJ in Doe v Cogente Pty Ltd (1997) 94 LGERA 305 ("Doe v Cogente"), which held that a provision of an environmental planning instrument made under s 28 could make a right of way not applicable to a development. His Honour considered that the part of the decision in which Cowdroy AJ dealt with this issue was obiter (at [52]), and in any event it was wrong (at [58]).
There is one aspect of Preston CJ LEC's reasoning in relation to Doe v Cogente that bears considering for present purposes. In concluding that the clause of the relevant environmental planning instrument applied, Cowdroy AJ stated that since rights of way and restrictive covenants both had their source in an agreement, covenant or instrument, there was no reason why s 28 should not apply to a restriction on land, such as a right of way (see [60(c)]). Of that reasoning, Preston CJ LEC stated (at [64]): "As to (c), the concept of a restriction on land (which a right of way by operation of law effects on the servient tenement) is not the same as the concept of a restriction on development (the relevant inquiry under s 28 of the Act and cl 26(1) of Leichhardt Local Environmental Plan). Section 28 of the Act and a provision of an environmental planning instrument such as cl 26(1) made under s 28, do not apply to a 'restriction on land' but rather to a 'restriction on development'. Hence s 28 of the Act or a provision such as cl 26(1) will not apply to an agreement or instrument creating a right of way merely because such agreement or instrument by operation of law effects a restriction on land; the agreement or instrument must go further and, on a proper construction of the agreement or instrument, impose restrictions on development of the land."
When Preston CJ LEC returned to these issues in Wu, the terms of the environmental planning instrument were different, as were the terms of the registered dealing. The property of Mr Wu was downhill and closer to Sydney Harbour than the property belonging to the late Mr Carey-Evans (of whose estate the plaintiffs were the executors), so that the latter's property overlooked the former. That overlooking was, as Preston CJ LEC noted, protected by rights for light, air and prospect across and above a specified horizontal plane, recorded in a dealing and benefiting the property of Mr Carey-Evans and a neighbouring property and burdening Mr Wu's property (at [3]). By the dealing, which was recorded in the Register and dated 15 May 1929, the then owner of Mr Wu's property granted to the then registered owner of land now including, relevantly, Mr Carey-Evans' property, certain rights, including (at [11]-[12]): "(B) Full and free right (1) to the uninterrupted passage access transmission and enjoyment of light and air over and across the horizontal plane abovementioned to the dominant land and every part thereof and to the windows and openings of any residence erected or to be erected thereon and (2) to an uninterrupted prospect over and across the said horizontal plane from the dominant land and every part thereof and from the windows and openings of any residence erected or to be erected thereon."
Mr Wu wished to redevelop his property, and obtained development consent to demolish the existing house and build a new house that would be higher than the horizontal plane specified in the dealing (at [1], [4]). The first question was whether cl 1.9A of the Woollahra LEP 2014 operated to cause the dealing not to apply to the extent necessary to serve the purpose of enabling the development to be carried out in accordance with the consent (at [7]). Clause 1.9A(1) of the Woollahra LEP 2014 was in identical terms to cl 1.9A(1) of the Liverpool LEP.
The executors for Mr Carey-Evans submitted that the dealing did not fall within the description in cl 1.9A(1) for two reasons: (i) the dealing was not "any agreement, covenant or other similar instrument"; and (ii) the dealing itself did not restrict the carrying out of development in accordance with the Woollahra LEP or with the consent granted under the EPA Act (at [46]). In determining that the dealing answered the description in cl 1.9A(1) of the Woollahra LEP, Preston CJ LEC stated that the question of the applicability of cl 1.9A involved three steps (at [60]): "…first, identifying what interest is created by the instrument that is the Dealing; second, ascertaining whether the Dealing creating that interest is 'any agreement, covenant or other similar instrument'; and third, determining whether the Dealing 'restricts the carrying out of that development', being development in accordance with the consent granted by the Council. The first step is necessary in order to undertake the second step, and the second step is necessary in order to undertake the third step."
His Honour noted that the dealing at issue in that case referred both to covenants and easements without identifying which of the rights were covenants and which were easements (at [62]). His Honour concluded that the grant of the right to "the uninterrupted passage, access, transmission and enjoyment of light and air … to the dominant land and every part thereof and to the windows and openings of any residence erected or to be erected thereon" constituted the valid grant of an easement (at [67]). The right of prospect, however, was not as clear, with his Honour ultimately deciding that although it was stated to be the subject of a grant, the right of prospect was acquired by agreement (at [70]) and was better described as a restrictive covenant (at [73]).
In relation to whether the dealing evidencing the easement for light and air and the covenant for prospect was an instrument answering the description in cl 1.9A, his Honour noted that the dealing was an agreement in the form of a transfer, creating both the easement for light and air and the covenant for prospect (at [81]). His Honour continued at [82]: "The easement and covenant created by the Dealing were not effectual until the Dealing was registered (s 41 of the Real Property Act), but became effectual when the Dealing was registered and the Registrar-General recorded particulars of the Dealing creating the easement and the covenant restricting the use of the land in the folios of the Register for the land burdened and the lands benefited (s 47(1) of the Real Property Act). The estates of the registered proprietors of the land burdened and the lands benefited were thereby recorded in the respective folios of the Register as being subject to the easement and covenant evidenced by the Dealing (s 40(1), (1A), (1B) of the Real Property Act). This fact that the easement and covenant created by the Dealing were not effectual until registered does not take away from the fact that the Dealing creating the easement and covenant is an agreement. That is the operative characteristic of the Dealing for the purpose of ascertaining whether it is an instrument answering the description of 'any agreement' in cl 1.9A of WLEP. The Dealing, or at least that part of the Dealing creating the easement and the covenant, is such an agreement for the purposes of cl 1.9A of WLEP."
Preston CJ LEC also considered that the part of the dealing creating the covenant for prospect was "similar" to a "covenant" in cl 1.9A, while the dealing creating the easement and the covenant also fell within the description of "other similar instrument", as it was clearly an "instrument" and was similar to an agreement (at [84]). As to the third step, his Honour noted that the words "that development" in cl 1.9A of the Woollahra LEP 2014 included development to be carried out in accordance with a consent granted under the EPA Act (at [86]). His Honour stated: "[87] The Dealing creating the easement and the covenant clearly restricts the carrying out of that development. The right acquired by the grant of the easement is to 'the uninterrupted passage, access, transmission, enjoyment of light and air above and across the horizontal plane abovementioned to the dominant land'. The erection of the dwelling house above that horizontal plane will interrupt, at least to some degree, the passage, access, transmission and enjoyment of light and air to the dominant land. The dominant owner's enforcement of this right to light and air would restrict the carrying out of the development in accordance with the consent. In this way, the Dealing restricts the carrying out of that development. [88] The right acquired by agreement is to 'an uninterrupted prospect over and across the said horizontal plane from the dominant land'. The erection of the dwelling house above that horizontal plane would interrupt, at least to some degree, the prospect over and across the servient land from the dominant land."
The executors in Wu had relied on Cracknell in support of their case. In describing that reliance as misplaced, Preston CJ LEC noted the difference in language between cl 1.9A of the Woollahra LEP 2014 and cl 44 of the SS LEP. As the instrument in Cracknell created a right of way, "a positive easement", and did not expressly or by implication purport to impose restrictions on the carrying out of development on land burdened by the right of way, the instrument did not fall within the terms of cl 44 (at [89]). The situation in Wu was different (at [90]): "In the present case, not only is the language of cl 1.9A of WLEP different but the easement and covenant created by the relevant instrument, the Dealing, are different. The easement for light and air is a negative easement, giving the dominant owner the right to stop the servient owner from building on the servient land above the specified horizontal plane and interrupting the flow of light and air, and the covenant is restrictive of the user of the servient land, also giving the dominant owner the right to stop the servient owner building above the specified horizontal plane and interrupting the prospect from the dominant land. In terms, the Dealing creating the easement and the covenant does restrict the carrying out of development on the servient land in these ways."
The question in the present case was whether the dealing creating the easement over Lot 4 fell within the terms of cl 1.9A(1), as an "agreement, covenant or other similar instrument that restricts the carrying out of" the development of the lot. I have set out the relevant terms of the memorandum of transfer above (at [10]). By the part of the transfer in (a), the owner of Lot 4 (as the transferor) conferred a right on the owner of Lot 5 (as the transferee) to the exclusive use of Lot 4 for the parking of motor vehicles to be exercised "together with" the transferor and the respective tenants, lessees, invitees and customers of Lots 1-4 (subject to permitting the transferee to develop the land above and below ground level). In (b), the transferor conferred on the transferee full right and liberty to pass and repass with or without motor vehicles and to park such motor vehicles. The introductory part of the transfer contains what is effectively an ancillary restriction on the transferor's use of Lot 4, so as not to obstruct or prevent the use of the land as a parking area.
In my view, having regard to its terms, the memorandum of transfer satisfies the description of an "agreement, covenant or other similar instrument". The primary judge was correct so to conclude.
In rejecting JEA's argument to the contrary, the primary judge considered that the fact that an easement created an interest in land was beside the point, noting that the benefit of a restrictive covenant also creates an equitable interest in the burdened land: at [84]. I agree with the primary judge that in so far as the easement created by the transfer was an interest in land, that was not, of itself, determinative, although I would not go so far as to say that the nature of an easement would always be "beside the point".

Does the transfer creating the easement restrict the carrying out of the development the subject of approval?

JEA submitted that by contrast with a restrictive covenant, the easement does not, by its terms, purport to restrict the carrying out of the development. Rather, it conferred on the owner of Lot 5, being Awar, a right of way together with use of the land for car parking. Properly characterised, JEA submitted, the easement was a positive easement, thereby distinguishing it from the dealing that Preston CJ LEC considered in Wu.
The primary judge considered that the question of whether an easement falls within cl 1.9A turns not upon its characterisation as positive or negative but rather upon ascertaining whether the instrument that creates it operates, expressly or by necessary implication, to restrict the carrying out of the development of the land in accordance with the Liverpool LEP or under a development consent: at [83]. In my view, the character of an easement as positive or negative may impact on the answer to that question. The fact that Preston CJ LEC was addressing a differently-worded environmental planning instrument in Cracknell does not detract from the force of his Honour's observations about the nature of a positive easement.
At the same time, it is necessary to recognise and give effect to the difference in the wording of the environmental planning instrument in Cracknell and the wording of cl 1.9A(1) of the Liverpool LEP. As the Registrar-General submitted, cl 1.9A(1) of the Liverpool LEP, like cl 1.9A of the Woollahra LEP 2014 that Preston CJ LEC considered in Wu, does not require an agreement, covenant or other similar instrument to "purport to impose restrictions" on the carrying out of the development, but simply to restrict the carrying out of development. The language of cl 1.9A of the Liverpool LEP is broader, capturing an agreement, covenant or other similar instrument that "restricts" the carrying out of development to which the clause refers. In its terms, the transfer, with its express limitations on the transferee's use of Lot 4, meets that description: it restricts the carrying out of development in accordance with the Liverpool LEP or (more relevantly for present purposes) with a consent (or approval) granted under the Act.
I do not accept in this regard JEA's attempt to characterise the restrictions in the transfer as doing no more than delimiting the extent of the rights conferred on Lot 5. As the primary judge concluded, the terms of the memorandum of transfer were quite different from the right of way in Cracknell, and went beyond conferring a mere right of way: at [82].
If the primary judge was correct, JEA submitted that it followed as a matter of logic that an easement imposed on the owner of land by the Court, pursuant to s 88K of the Conveyancing Act 1919 (NSW), and for which compensation is paid, could be suspended by an application for development approval and without any compensation being paid. That will not be the case as a matter of course. As in the cases to which I have referred, ultimately the issue will rest on the terms of the instrument in question and the terms of the environmental planning instrument. That s 3.16 and any environmental planning instrument authorised by the Governor may have such a result is recognised by s 3.16(6) which, as the Registrar-General emphasised, gives primacy to planning principles over real property rights.
I note that in Natva Developments Pty Ltd v McDonald Bros Pty Ltd [2004] NSWSC 777; 12 BPR 22,287 ("Natva Developments"), on which the primary judge placed some reliance, Palmer J stated that "[cl] 26(1) may operate upon any covenant, agreement or instrument as long as the rights arising thereunder have the effect, unless modified, of restricting the development for which the consent is to be given" (emphasis in original). As the primary judge acknowledged, however, the parties in Natva Developments were in agreement as to that position. It is thus of limited assistance and I have not relied on it in the above analysis.
In its written submissions on grounds 7 and 8, JEA also submitted that the development of Lot 4 was not specifically prohibited by the terms of the easement. Instead, development was restricted by the application of the Council zoning, which required "shop-top" housing, operating in conjunction with the easement. I do not accept that submission. As JEA acknowledged, the terms of the easement precluded the ground floor being used for anything other than car parking. It was the easement that restricted development in accordance with the Liverpool LEP.
JEA also contended in this regard that Wu should not be followed. In Wu, Preston CJ LEC distinguished the case from Cracknell because of differences in the language of the two "regulatory instruments". JEA submitted that his Honour's analysis did not consider the terms of the enabling legislation; there was no relevant functional difference between the two forms of subsidiary legislation and the terms should have been construed as having the same meaning as the term in Wu, being "any covenant, agreement or similar instrument that restricts the carrying out of that development". If this were accepted then the effect of those provisions was that the covenant or agreement could only be subject to the statutory restriction if the covenant or agreement expressly restricted development or it was a necessary implication of that legislation, which was not the situation in Cracknell or in the present case.
JEA's submission that Wu should not be followed rests on a premise that I do not accept, namely that there was a difference between his Honour's approach in Wu as compared with Cracknell. In both cases, the outcome was the product of his Honour considering the instrument that conferred the interest in issue and whether it fell within the terms of the applicable provision of the relevant environmental planning instrument. His Honour appropriately gave effect to the terms of cl 44 of the South Sydney LEP in Cracknell, and the different terms of cl 1.9A of the Woollahra LEP 2014 in Wu, the latter of which is identical to cl 1.9A of the Liverpool LEP.

Conclusion on the appeal

It follows that I would dismiss grounds 1 to 8 of the notice of appeal. It is unnecessary to determine ground 9, which as I noted above would only arise if the issue the subject of the first eight grounds were determined in JEA's favour.

The cross appeal

The Registrar-General brought a cross appeal in respect of three of the orders that the primary judge made in relation to costs, namely, orders that the Registrar-General pay certain of JEA's costs in relation to the proceedings before the primary judge (Orders 2(e)-(g)). The Registrar-General did not take issue with other orders that his Honour made as to JEA's costs, in relation to the proceedings that led to the Court of Appeal's decision in Registrar-General v JEA and the special leave application from that decision (Orders 2(a)-(d)).
The Registrar-General advanced three grounds of cross appeal, each of which took issue with the primary judge's decision to award JEA's claim for compensation in respect of its legal costs, town planner's costs, valuer's costs and other costs incurred after 29 June 2016, being the date on which the Council granted development consent. The Registrar-General contended that those costs and expenses were not reasonably incurred in circumstances where the primary judge concluded that there was no diminution in the value of Lot 4 by reason of the operation of cl 1.9A of the Liverpool LEP. The central submission was summarised by counsel for the Registrar-General in his oral submissions as follows: "And the submissions on the cross-appeal are very brief. And they are that, in circumstances where the appellant was unsuccessful in the Court below, in that it couldn't prove it had suffered any damages at all because it had lodged a development application which had been granted which allowed development of - which the experts on both sides agreed, and his Honour found was the highest and best use for the property, it was unreasonable for the appellants to have embarked upon this litigation and done anything after the development approval was obtained. This situation is markedly different to that considered by Bryson J in Chandra."
As JEA submitted, and counsel for the Registrar-General accepted, the Registrar-General did not put this argument below. The primary judge noted in the reasons that the Registrar-General did not raise any issue regarding the reasonableness of the costs that JEA claimed: at [107].
In any event, the point is without merit. As JEA submitted, it did not follow from the fact that JEA was unsuccessful in its claim for a diminution in value that it was unreasonable for JEA to have advanced that claim, so as to disentitle it to its costs of the proceedings. JEA had obtained a measure of success and it was not reasonable to dissect each part of the claim for legal or other costs of the proceedings. As Bryson J observed in Chandra (at [4]), of a similar submission that the Registrar-General there advanced, in which the plaintiffs had brought a claim against the Registrar‑General in relation to moneys purportedly secured by a fraudulent mortgage, I do not regard the first issue as having been so clear that JEA should not have brought this aspect of its claim.

Conclusion

I propose the following orders: 1. The appeal is dismissed with costs. 2. The cross appeal is dismissed with costs.
STERN JA: I agree with Mitchelmore JA.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 October 2024

Environmental Planning and Assessment Regulation 2000(NSW)

HEADNOTE [This headnote is not to be read as part of the judgment] JEA Holdings (Aust) Pty Ltd (JEA) is the owner of land in Miller, New South Wales (Lot 4). Lot 4 is burdened by an easement granted in favour of adjoining land, Lot 5, which is owned by Awar Pty Ltd. Although the easement was granted in 1963 by a memorandum of transfer, it was not recorded on the register of title of Lot 4, including at the time when JEA purchased the land. The easement was registered on 18 September 2015 following a Court of Appeal decision which found that the easement was omitted from the title of Lot 4 and fell within the exception in s 42(1)(a1) of the Real Property Act 1900 (NSW). On 10 August 2018, JEA brought proceedings in the Equity Division against the Registrar-General of New South Wales (Registrar-General) for compensation under s 129 of the Real Property Act. JEA claimed that it suffered loss or damage flowing from the correction of the register to include the easement, including by reason of the diminution in the value of Lot 4. The Registrar-General accepted that the failure to record the easement was an "omission" within s 129(1)(a) of the Real Property Act but disputed that any compensation was payable. Although the primary judge accepted that JEA suffered loss by reason of the omission and subsequent registration of the easement and that the loss was caused by the Registrar-General, his Honour found that the quantum of JEA's loss was limited to the costs it had incurred in the relevant legal proceedings. His Honour did not accept that there had been diminution in the value of Lot 4 by reason of the registration of the easement, on the basis that cl 1.9A of the Liverpool Local Environment Plan 2008 (Liverpool LEP) permitted the council to suspend the operation of the easement when granting development consent. JEA's central contention on appeal was that the primary judge erred in finding that the easement fell within the terms of cl 1.9A. Alternatively, JEA contended that the development controls in the Liverpool LEP, in conjunction with the easement, restricted the development of Lot 4. The Registrar-General's cross-appeal challenged some of the orders allowing JEA's claim for compensation in respect of costs JEA had incurred in the proceedings before the primary judge, on the basis that the costs were not reasonably incurred in circumstances where the primary judge found that there was no diminution in the value of Lot 4. The Court (Mitchelmore JA; Payne and Stern JJA agreeing), dismissing the appeal and cross-appeal, held: (1) Under cl 1.9A of the Liverpool LEP, the focus should be on the dealing, being the instrument that upon registration created the interest, and whether its content falls within the terms of the regulatory instrument(s) specified in the particular clause of the environmental planning instrument. The fact that the dealing confers an interest in land in the form of an easement does not, of itself, take it outside the scope of cl 1.9A of the Liverpool LEP: at [51]. The primary judge was correct to conclude that the memorandum of transfer, being the dealing creating the easement, satisfied the description of an "agreement, covenant or other similar instrument" in cl 1.9A of the Liverpool LEP: at [65]. Cracknell & Lonergan Pty Ltd v Council of the City of Sydney (2007) 155 LGERA 291; [2007] NSWLEC 392; William Lloyd Carey-Evans and Jennifer Anne Quist as Executors of the Estate of Robert Rufus Carey-Evans v Wenhao Wu [2022] NSWLEC 144 applied. Coshott v Ludwig (1997) 8 BPR 15,519; Application of Thompson (Supreme Court (NSW), 25 October 1993, unrep); Wade v New South Wales Rutile Mining Company Pty. Ltd. (1969) 121 CLR 177; R & R Fazzolari Pty Limited v Parramatta City Council (2009) 237 CLR 603; [2009] HCA 12 considered. (2) The terms of the easement precluded the ground floor from being used for anything other than car parking. It followed that it was the easement that restricted the development in accordance with the Liverpool LEP: at [73]. William Lloyd Carey-Evans and Jennifer Anne Quist as Executors of the Estate of Robert Rufus Carey-Evans v Wenhao Wu [2022] NSWLEC 144 considered. Cracknell & Lonergan Pty Ltd v Council of the City of Sydney (2007) 155 LGERA 291; [2007] NSWLEC 392 distinguished. (3) In relation to the cross-appeal, it was noted by the primary judge, and accepted by the Registrar-General, that the Registrar-General did not raise any issue below regarding the reasonableness of the costs that JEA claimed: at [79]. In any event, it did not follow from JEA's unsuccessful claim for a diminution in value that it was unreasonable for JEA to have advanced that claim. The issue was not so clear that JEA should not have brought this aspect of its claim: at [80]. Chandra v Perpetual Trustees Victoria Ltd [2008] NSWSC 178 applied.

JUDGMENT

PAYNE JA: I agree with Mitchelmore JA.
MITCHELMORE JA: JEA Holdings (Aust) Pty Ltd (JEA) is the owner of land in Miller, New South Wales with the folio identifier 4/219028 (Lot 4). Lot 4 is burdened by an easement granted in favour of the land identified in folio identifier 5/219028 (Lot 5), which is owned by Awar Pty Ltd (Awar). Although the easement was granted over Lot 4 in 1963, when Lot 5 was transferred from common ownership of both lots, it was not recorded on the register of title of Lot 4, including at the time that JEA purchased the land. The easement was ultimately recorded on the title of Lot 4 following a decision of the Court of Appeal in Registrar-General of New South Wales v JEA Holdings (Aust) Pty Ltd (2015) 88 NSWLR 321; [2015] NSWCA 74 ("Registrar-General v JEA").
Following registration of the easement, JEA brought these proceedings against the respondent, the Registrar-General of New South Wales (Registrar-General) for compensation under s 129 of the Real Property Act 1900 (NSW). By its amended summons, JEA claimed that it had suffered loss or damage flowing from the correction of the register to include the easement, including by reason of the diminution in the value of Lot 4. The Registrar-General accepted that the failure to record the easement was an "omission" within s 129(1)(a) of the Real Property Act but disputed that any compensation was payable.
The primary judge accepted that JEA suffered loss by reason of the omission and subsequent registration of the easement, because Lot 4 became subject to a proprietary interest in favour of a third party after JEA purchased the land. His Honour also accepted that the loss was caused by the Registrar-General's omission of the easement from the title. However, his Honour found that the quantum of JEA's loss was limited to the costs it had incurred in the various legal proceedings associated with the omission of the easement and correction of the register. His Honour did not accept that there had been any diminution in the value of Lot 4 by reason of the registration of the easement, on the basis that cl 1.9A of the Liverpool Local Environment Plan 2008 (NSW) (Liverpool LEP) permitted the Council to suspend the operation of the easement when granting development consent.
His Honour's conclusion regarding the application of cl 1.9A of the Liverpool LEP is the focus of these proceedings. Clause 1.9A(1) provides: (1) For the purpose of enabling development on land in any zone to be carried out in accordance with this Plan or with a consent granted under the Act, any agreement, covenant or other similar instrument that restricts the carrying out of that development does not apply to the extent necessary to serve that purpose.

(2007) 155 LGERA 291

(2012) 186 LGERA 366

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (9 paragraphs)

Legislation Cited (5)

Cases Cited (20)