JEA Holdings (Aust) Pty Ltd v Registrar-General of New South Wales

Supreme Court of NSW|2023-08-02|Before: Richmond J

Background

By a contract for sale of land dated 17 December 2010, JEA purchased three adjoining parcels of land at Miller, New South Wales being the land identified in folio identifiers 2/545358, 2/219028, and 4/219028 from Gold Valley Investment Pty Ltd for $11.9 million. The land the subject of these proceedings is 4/219028 (Lot 4) which at the time of the sale was (and remains) vacant land comprising an open 'at grade' car park with 189 car spaces. Lot 4 adjoins the land identified in folio identifier 5/219028 (Lot 5). Lot 5 is owned by Awar Pty Ltd (Awar), which operates a hotel on the land.
Prior to 17 February 1964, Lots 4 and 5 formed part of the same parcel of land, being Lot 1 in deposited plan 214541, and were not created until the registration of deposited plan 219028 which occurred on 17 February 1964. Immediately before its subdivision the registered proprietor of the entire parcel was the Housing Commission of New South Wales. On 4 October 1963, the Housing Commission transferred the entire parcel to Green Valley Shopping Centre Pty Ltd by memorandum of transfer registered number J490511 which was registered on that day. That transfer contained the following covenant relating to the use of lots 1 to 5 in deposited plan 219028 (HC Covenant): 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.
On 10 October 1963, Green Valley Shopping Centre Pty Ltd executed a memorandum of transfer registered number J493622 (Transfer) by which it transferred Lot 5 to Tooth & Co Ltd. While dated 10 October 1963, the Transfer was not registered until 23 April 1964 following registration of deposited plan 219028. The Transfer contained what was described as a 'covenant', but ultimately determined in the Appeal Decision to be an easement, burdening Lot 4 and for the benefit of Lot 5 (the Easement). The terms of the 'covenant', which is extracted in full at [22] of the Appeal Decision, are relevantly (emphasis added): THE said Transferor for itself its successors and assigns and the owners for the time being of the land hereinafter mentioned (hereinafter called 'the parking area') HEREBY COVENANTS with the Transferee its successors and assigns and the owner for the time being of the land hereby transferred that the Transferor its successors and assigns and the owner for the time being of the parking area being Lot 4 in Deposited Plan 219028 will not use or permit or suffer any act matter or thing which might obstruct or prevent the use of the said parking area or any part thereof except for the purposes hereinafter mentioned or any of them and will not do permit or suffer any act matter or thing which might obstruct or prevent the use of the said parking area for such purposes or any of them … (a) That the parking area shall at all times be for the exclusive use (save that the Transferor its successors and assigns and the owner for the time being of the land having the burden of this covenant shall be permitted to erect over or under the said parking area such building or buildings at a height of not less than 12 feet which shall not obstruct or prevent the use of the said parking area for the purposes herein provided and which shall not obstruct the ingress or egress therefrom or therein) for the parking of motor vehicles by the Transferee its successors and assigns and the owner for the time being of the land hereby transferred and their respective tenants and lessees and it and their servants and invitees and the customers and patrons of the hotel to be erected on the land hereby transferred together with the Transferor its successors and assigns and the owner or owners for the time being of Lots 1 to 4 inclusive in Deposited Plan 219028 and their respective tenants and lessees and it and their servants and invitees and their customers. ... IT IS AGREED that the land to which the benefit of the foregoing covenant is appurtenant is the land hereby transferred being Lot 5 in Deposited Plan 219028. The land which is subject to the burden of the foregoing covenant is the said Lot 4 in Deposited Plan No 219028. The foregoing covenant may be released varied or modified only by agreement between the Transferor the Transferee and the Council of the City of Liverpool.

Relief claimed

At the commencement of the hearing on 1 August 2023, JEA filed an amended summons in court, with the consent of the Registrar-General, adding a claim for relief in relation to all legal fees incurred in relation to the proceedings before Windeyer AJ and the Court of Appeal.
The relief claimed is as follows: 1. A Declaration that the Registrar-General is liable to pay compensation to the Plaintiff pursuant to Section 129 Real Property Act out of the Torrens Assurance Fund as a result of the Plaintiff suffering loss or damage:- (a) By an act or omission of the Registrar-General in the execution or performance of his functions or duties under the Real Property Act in relation to the Plaintiff's land. (b) By the registration by some other person of an easement over the Plaintiff's land. 2. An Order that the Registrar-General pay to the Plaintiff an amount of compensation being an amount equal to the diminution in the value of the Plaintiff's land by reason of the registration of an easement over the Plaintiff's land in favour of Awar Pty. Limited and associated and consequential loss and damage caused by the commencement and continuation of the proceedings described in paragraph (4) below. 3. Costs. 4. Pre-judgment interest pursuant to Section 100 of the Civil Procedure Act 2005 (NSW) on those moneys:- (a) Paid by the Plaintiff to its solicitors, counsel and any other third parties in the Supreme Court proceedings in files numbered 2012/37706, CA 2013/184871 and High Court proceedings numbered S76 of 2015 relating to the imposition and recording of the easement in Folio Identifier 4/219028; (b) Paid by the Plaintiff to its solicitors, counsel, valuers, town planners and other experts in and associated with these proceedings; To date of judgment at the rates specified in UCPR 6.12.S(b) in respect of the period 1 July - 31 December in any year being 4% above the cash rate last published by the Reserve Bank of Australia before that period commenced.
JEA prepared a schedule which was attached to its written submissions setting out the amount of its legal costs in respect of the proceedings referred to in paragraph 4 of the amended summons (and a calculation of pre-judgment interest). The Registrar-General did not dispute the reasonableness of the legal costs claimed, or the calculation of pre-judgment interest, in that schedule.

Relevant provisions

Section 120 of the Act provides: (1) Any person who suffers loss or damage as a result of the operation of this Act in respect of any land, where the loss or damage arises from: (a) fraud, or (b) any error, misdescription or omission in the Register, or (c) the land being brought under the provisions of this Act, or (d) the registration (otherwise than under section 45E) of some other person as proprietor of the land, estate or interest, may commence proceedings in the Supreme Court for the recovery of damages. (2) Such proceedings may be taken only: (a) against the person whose acts or omissions have given rise to the loss or damage referred to in subsection (1), or (b) against the Registrar-General. (3) Proceedings against the Registrar-General are to be taken in accordance with Part 14.
Part 14 of the Act includes s 129 which sets out when compensation is payable from the Fund in proceedings brought against the Registrar-General (as nominal defendant). Subsections 129(1) and 129(2) provide relevantly: 129 Circumstances in which compensation payable (1) Any person who suffers loss or damage as a result of the operation of this Act in respect of any land, where the loss or damage arises from - (a) any act or omission of the Registrar-General in the execution or performance of his or her functions or duties under this Act in relation to the land (including any such act or omission of the authorised operator), or (b) the registration (otherwise than under section 45E) of some other person as proprietor of the land, or of any estate or interest in the land, or (c) any error, misdescription or omission in the Register in relation to the land, or (d) the land having been brought under the provisions of this Act, or (e) the person having been deprived of the land, or of any estate or interest in the land, as a consequence of fraud, or (f) an error or omission in an official search in relation to the land, or (g) any error of the Registrar-General in recording details supplied in the notice referred to in section 39 (1B), is entitled to payment of compensation from the Torrens Assurance Fund. (2) Compensation is not payable in relation to any loss or damage suffered by any person - (a) to the extent to which the loss or damage is a consequence of any act or omission by that person, or (b) to the extent to which the loss or damage - (i) is a consequence of any fraudulent, wilful or negligent act or omission by any solicitor, licensed conveyancer, real estate agent or information broker, and (ii) is compensable under an indemnity given by a professional indemnity insurer, or (c) to the extent to which that person has failed to mitigate the loss or damage, or …
Section 129A qualifies the entitlement to compensation under s 129(1) in circumstances where the person making the claim has been "deprived of land or any estate or interest in land". It provides: 129A Limits on amount recoverable generally The total compensation that is payable under this Part, in relation to loss or damage suffered by a person as a result of the person being deprived of land or any estate or interest in land, is limited to the market value of the land at the date on which compensation is awarded to that person plus any legal, valuation or other professional costs reasonably incurred by the person in making the claim.
Section 129A was inserted in 2009 by the enactment of Real Property and Conveyancing Legislation Amendment Bill 2009 (NSW). When introducing the Bill to Parliament, Mr Barry Collier, Parliamentary Secretary, said the following about s 129A: The Torrens Assurance Fund has always been an integral part of the Torrens system. The purpose of the fund is to compensate persons who, without any fault on their part, have been deprived of their property. The bill proposes a number of amendments to the Real Property Act 1900 with regard to the Torrens Assurance Fund by excluding certain claims. As members will see, these amendments will strengthen the Fund and allow it to operate as it was intended. The first of these amendments the bill seeks to make to the Real Property Act 1900 is to provide that any claim for compensation is limited to the market value of the land plus any legal valuation or other professional costs. There have been instances where a claim for compensation by a developer included future economic loss, insurance costs and depreciation costs of cars. The amendments contained in the bill make it very clear that these types of claims are not claimable under the Torrens Assurance Fund.

Evidence

The witnesses for JEA were Mr Melhem Hazzouri, the sole director and secretary of JEA and three experts: Mr Michael Osborne, a solicitor with expertise in property law, Mr David Hoy, an urban planner and Mr Mark Ellis, a valuer. The witnesses for the Registrar-General were two experts: Mr James Lidis, a town planner, and Mr Leigh Bridges, a valuer. A summary of their evidence follows.

(a) Mr Hazzouri

Mr Hazzouri gave evidence that prior to the purchase of Lot 4 he had no knowledge that Lot 4 was burdened by the Easement and that while he was aware of the HC Covenant at the time of the purchase, he had been advised that it could be removed because it was redundant. He also gave evidence that JEA had sought to negotiate with Awar on numerous occasions to modify the Easement but was unsuccessful, and that JEA had been advised after the Appeal Decision that it had very low prospects of having the Easement modified or extinguished under s 89(1) of the Conveyancing Act 1919 (NSW). This advice was not put into evidence, and ultimately, for the reasons which follow, nothing turns on whether an application to modify the Easement to permit the development of Lot 4 would be successful.
Mr Hazzouri also gave evidence, which was not contested, regarding the legal costs and disbursements incurred by JEA in the proceedings before Windeyer AJ and the Court of Appeal, the special leave application and the claim against the Fund. The total costs and expenses paid by JEA in the earlier proceedings (including the special leave application) were $421,456.58. The total costs and expenses of JEA in connection with the claim against the Fund comprise $121,449.59 for the administrative claim and $855,517.94 for these proceedings (excluding the costs of reports which have not been used in evidence in these proceedings).

(b) Mr Osborne

Mr Osborne expressed the opinion that if JEA had brought an application under s 89(1) of the Conveyancing Act 1919 to modify or extinguish the HC Covenant it is likely that it would have been successful. This opinion was given in a report prepared before the HC Covenant was released. The Registrar General did not dispute Mr Osborne's evidence. In cross-examination, Mr Osborne was asked if he had considered whether an application to modify or extinguish the Easement under s 89 is likely to succeed and he indicated that he had not considered it in any detail, as he had no information which would allow him to assess relevant matters, including whether a proposed modification or extinguishment of it would substantially injure Awar.

JEA relied on the evidence of Mr Hoy, who prepared three reports. The Registrar General relied on the evidence of Mr Lidis, who prepared one report. They also made a joint report (Planning JER) dated 30 May 2023.
The Planning JER states the matters about which they agreed, including relevantly the following: 1. The highest and best use of the land at the relevant dates can be broadly described as being a mixed use development comprising ground floor retail/commercial with residential apartments above and associated basement car parking with a maximum floor space ratio (FSR) of 1.7:1 and a maximum height of 21m. This is a form of development known as "shop top housing" defined in the Liverpool LEP to mean one or more dwellings located above ground floor retail premises or business premises. 2. There was no planning control in place at any of the relevant dates that set prescribed requirements for unit mix (ie. the proportions of one-, two- or three-bedroom units) and that the ultimate unit mix would be a function of financial feasibility and market advice. 3. The Development Consent did not achieve the maximum allowable FSR under Liverpool LEP with a FSR of 0.968:1 and it exceeded the maximum height with a height of 29.1m. The quantum of retail floor space at the ground floor was 426.69sqm (with the remaining area assigned to car parking). 4. As a stand-alone site and having no regard for either the HC Covenant or the Easement, the site was hypothetically capable of supporting between 2333sqm and 2345.3sqm of ground level commercial floor space. This floor space would be used for retail premises or business premises purposes in accordance with the definition of "shop top housing". 5. In addition, as a stand-alone site and having no regard for either the HC Covenant or the Easement, the site was hypothetically capable of achieving the maximum development potential permitted under Liverpool LEP, i.e. a maximum FSR of 1.7:1 FSR and maximum height of 21m.
In the Planning JER, Mr Hoy stated his view at [4.2.2] that "the Easement restricts the use of the ground level of Lot 4 to car parking and thus serves to preclude a shop top housing scheme". I infer that this opinion was based on the assumption he had been instructed to make that the Easement could not be suspended under cl 1.9A of the Liverpool LEP (CB 238). Mr Lidis did not address this opinion of Mr Hoy in the Planning JER, but subsequently did so in a letter dated 18 July 2023 which was tendered in evidence. In the letter, Mr Lidis refers to what was said by Basten JA in the Appeal Decision at [152]-[153] and the observations in the assessment report set out at [19] above and then continues: Following the approach above, I agree with the statement at Paragraph 4.2.2 of the Joint Report that the Easement restricts the use of the ground level of Lot 4 to car parking and thus serves to preclude a shop top housing outcome. However, I also note that, in accordance with the above, some structures at ground level would not be contrary to the terms of the Easement, eg. columns, fire stairs and lifts, because those elements would be needed to erect a building that is 12 feet above the surface of the land, as also permitted by the terms of the Easement. I also note that, in the event that s 3.17 [sic] of the Environment Planning and Assessment Act 1979 and Cl. 19A of Liverpool LEP 2008 cannot be relied on, I understand that an application may be made to the Supreme Court to set aside the restriction.
It was submitted for JEA that as a consequence, subject to the issue identified at [56(a)] below, the town planning experts were in agreement that the Easement effectively precludes any form of development of Lot 4. I accept that, given the qualification expressed, this submission is correct as it recognises that Mr Lidis' agreement with Mr Hoy was predicated on the correctness of the assumption made by Mr Hoy that the Council could not grant a development consent which suspended the Easement. The last paragraph of Mr Lidis' letter set out above is a reference to an opinion which Mr Lidis had previously given in his main report that it would have been open to the Council to rely on cl 1.9A of the Liverpool LEP to suspend the Easement entirely in its consideration of the development application, based on the instructions he was given that s 3.16 of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act) and cl 1.9A of the Liverpool LEP permitted this. He also expressed the view in his main report that any such suspension by the Council would have been dependent upon JEA replacing the existing parking on Lot 4 with equivalent car parking on basement levels: Lidis report at 7.59-7.60. Mr Hoy, in contrast, had been instructed that it was not possible for the Council to suspend the Easement under cl 1.9A and I infer that the opinion he gave in the Planning JER proceeded on the basis of that instructed assumption.
Mr Hoy and Mr Lidis were not required for cross-examination and thus the Court does not have the benefit of Mr Lidis' oral evidence to clarify the extent of his agreement with Mr Hoy regarding the effect of the Easement on the development of the land. However, in my view, it is clear that Mr Lidis' agreement with Mr Hoy that the Easement precluded a shop top housing development (and indeed any use of the ground level except for parking) was predicated on the correctness of Mr Hoy's instructed assumption that cl 1.9A of the Liverpool LEP would not apply to the Easement which is ultimately a question of law for determination by the Court.

(d) Valuation evidence: Mr Ellis and Mr Bridges

JEA relied on the evidence of Mr Ellis, who prepared four reports. The Registrar General relied on the evidence of Mr Bridges, who prepared two reports. They made a joint expert report dated 25 July 2023 (Valuation JER).
In the Valuation JER, both valuers agreed that: 1. the highest and best use of Lot 4 is as per the Development Consent 2. they had assumed that at all relevant dates the HC Covenant could have been removed from the title to Lot 4 through a legal process (ie pursuant to s 89 of the Conveyancing Act) 3. the loss suffered by JEA from the presence of the Easement can be calculated by determining the reduction in the developable gross floor area (GFA) for Lot 4 resulting from the Easement which can be calculated by taking the total GFA for Lot 4 under the Development Consent (13,618.5sqm) and deducting the GFA under the Development Consent attributable to level 1 (381sqm) and level 2 (2,084.6sqm).
The methodology stated in (c) above appears to be based on the assumption that if the Easement applies, level 1 and level 2 would not be able to be used for anything other than car parking. The reasoning of the valuers is stated in the following passage from the Valuation JER: 34. During our joint conferencing, we agreed that in order to assist the Court it would be beneficial to distill the numerous valuation scenarios into a single basis upon which to determine the actual financial loss resulting from registration of the Easement. In doing so, the main issue we have attempted to resolve is the effect on Market Value at each of the following dates: (i) 27 March 2015; (ii) 16 June 2016; and (iii) Current - July 2023. 35. The highest and best use of the subject Site being either burdened or unburdened by the Easement is as a mixed use development site as per the approved Development Application (DA-62/2015). 36. In carrying out our respective assessments, we recognise that the total approved developable Gross Floor Area (GFA) for the integrated holding is proposed to be constructed wholly on the subject Site. 37. Because of the Easement, we accept and agree that the maximum developable GFA for the subject Site will reduce to approximately 11,152.4 square metres. This area has been calculated by firstly establishing that the developable GFA for the Site unburdened by the Easement which as per the approved Development Application (DA-62/2015) is 13,618.5 sqm. The summary of floor areas included with the approved Development Application plans indicates a total area for the lower floors of the two proposed buildings is approximately 2,465.6 sqm (Level 1 - 381 sqm + Level 2 - 2,084.6 sqm). We therefore consider that as a consequence of the Easement these floors will not be developable, and hence the approximate developable GFA for the Site as burdened by the Easement is 11,152.9 sqm (13,618.5 sqm minus 2,465.6 sqm). 38. An extract of the DA approval contained on page 120 of the pdf of the Hoy Report is reproduced for reference.
In summary, the valuation experts have assumed that the highest and best use of the land is for development in accordance with the Development Consent and that the Easement will prevent levels 1 and 2 from being developed in accordance with the Development Consent because those levels take up the area from the ground level up to a height of 12 feet. They have then calculated the loss in developable GFA resulting from this as 2,465.6 sqm (being the developable GFA of levels 1 and 2 under the Development Consent). The outcome of this analysis is set out in a table on page 11 of the Valuation JER. The key elements of the table are set out below: Valuation Date Market Value (Unburdened) Market Value (Burdened) Adopted Market Value Diminution 27 March 2015 $10,210,000 $8,360,000 $1,850,000 16 June 2016 $11,230,000 $9,200,000 $2,030,000 1 July 2023 $12,590,000 $10,320,000 $2,270,000

The market value in the second column is the developable GFA of Lot 4 under the Development Consent (13,618.5sqm) multiplied by the market value rate per sqm of GFA (derived from comparable sales data) on each of the identified valuation dates if the Easement did not burden the land. The market value in the third column is the developable GFA assuming that the Easement requires level 1 and level 2 to be used for car parking only (11,152.4sqm) multiplied by the same market rate per sqm of GFA used for column 2. The fourth column is the difference between columns 2 and 3 and this is the loss claimed by JEA depending on which of the alternative valuation dates applies.
The Valuation JER then deals with a scenario where Lot 4 can only be used for car parking so that it has no development potential. The premise of this scenario is that this is the effect of the Easement. On that basis, the valuers agree that the market value of Lot 4 would be $2,350,000 on 27 March 2015, $2,350,000 on 16 June 2016 and $3,100,000 on 1 July 2023. JEA submits that the loss suffered by JEA as a consequence of the land being burdened by the Easement if Lot 4 can only be used for car parking is the difference between these amounts for the relevant valuation date, and the valuers' agreed value of Lot 4 if it was unburdened by the Easement for that valuation date (set out in [48] above). JEA's submission is summarised in the following table: Valuation Date Market Value (Unburdened) Market Value (If no development potential) Loss 27 March 2015 $10,210,000 $2,350,000 $7,860,000 16 June 2016 $11,230,000 $2,350,000 $8,880,000 1 July 2023 $12,590,000 $3,100,000 $9,490,000

Parties' submissions

In the present case, JEA relies on s 129(1)(a) of the Act, contending that it has suffered loss or damage arising from the act or omission of the Registrar-General in the execution of his functions under the Act, being the delay in registering the Easement on the title to Lot 4, because prior to the Easement being registered on the title to Lot 4 the market was not aware of the existence of the Easement and this was effectively a latent defect in title.
The loss or damage claimed by JEA falls into two categories. The first is the diminution in the value of the land because the development potential of the land is affected by the recording of the Easement. The second is the costs incurred by JEA in the unsuccessful proceedings brought by it against the Registrar-General to contest its decision to record the Easement on the title to Lot 4 and the costs of its claim against the Fund.
The Registrar-General accepts that the failure to record the Easement on the title to Lot 4 until after JEA acquired that land was an "omission" for the purposes of s 129(1)(a) but disputes that JEA has suffered loss or damage as a result of that omission. It does so for essentially three reasons. First, it submitted that the recording of the Easement on the title to Lot 4 did not subject the land to a new restriction to which it was not already subject.
Second, the Registrar-General pointed out that JEA was not claiming that it suffered a loss because it would have paid less for Lot 4 had it been aware of the Easement (through it being recorded on the title). Rather, the claim was that the recording of the Easement precluded JEA from achieving the development potential of Lot 4. That contention should be rejected because s 3.16 of the EPA and cl 1.9A of the Liverpool LEP enabled JEA to obtain a development consent which overrides the Easement, as indicated by the development consent it did in fact obtain. Further, to the extent that the Easement was an impediment to the development of the land, it is likely that an order for the modification of extinguishment of the Easement could be obtained under s 89(1)(c) of the Conveyancing Act.
Third, in so far as JEA's claim for compensation extended to the costs of the previous proceedings and the claim against the Fund, those costs were not caused by any of the events set out in s 129(1) as the proceedings were misdirected: Kirkland v Quinross Pty Ltd [2008] NSWSC 286 at [85]-[86]; Perpetual Trustees (Victoria) Limited v Cipri [2009] NSWSC 335 [58]-[62].

Issues

The issues which arise are as follows: 1. 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? 2. 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. 3. 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.

Issue 1: Suspension of the Easement

This issue concerns the operation of s 3.16 of the EPA Act and cl 1.9A of the Liverpool LEP in relation to easements.
Section 3.16 of the EPA Act provides: 3.16 Suspension of laws etc by environmental planning instruments (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.
It will be seen that s 3.16(2) permits an environmental planning instrument to provide that, to the extent necessary to serve the purpose of enabling development to be carried out in accordance with that environmental planning instrument, 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.
The relevant environmental planning instrument in the present case is the Liverpool LEP. Clause 1.9A of the Liverpool LEP is the provision of that LEP which specifies the kinds of "regulatory instruments" which are not to apply to the development of land under that LEP pursuant to s 3.16(2) of the EPA Act, and provides (emphasis added): 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 relevant instrument within the meaning of section 13.4 of the Crown Land Management Act 2016, 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 3.16 of the Act, the Governor, before the making of this clause, approved of subclauses (1)-(3).
It is not in dispute that none of the exclusions in cl 1.9A(2) are relevant and that, as recorded in cl 1.9A(4), the requirement for approval by the Governor stated in s 3.16(3) of the EPA Act was satisfied.
Previously, s 3.16 of the EPA Act was found in s 28 of the EPA Act which was in substantially the same terms. That provision in conjunction with cl 32 of Woollahra Local Environmental Plan 27 (which was in similar terms to cl 1.9A of the Liverpool LEP) was considered in Coshott v Ludwig (1997) 8 BPR 15,519. In that case, the Court of Appeal upheld the decision of Bryson J at first instance that cl 32 of Woollahra Local Environmental Plan 27 and s 28 of the EPA Act between them nullified, or rendered ineffective, the restrictive covenant contained in a memorandum of transfer. Meagher JA (whom Giles AJA and Simos AJA agreed) said at 15,121 (emphasis added): The first argument advanced by Mr and Mrs Coshott was that the word "covenant" where it appears in s 28(1) of the Act or in cl 32(1) of LEP 27 does not refer to so-called "private" covenants, but only to covenants by public authorities. In support of this view, we were asked to focus on the words "by or under whatever authority made", which, it was said indicated that the Act and LEP 27 were only referring to documents created pursuant to authority, a concept which has meaning if one is referring to documents executed on behalf of public bodies, but is wholly alien to documents between private persons. As to the meaning of "covenants", I am of the view that, if taken literally, it must refer to covenants executed by whomsoever. It is a well known word. Restrictive covenants are an established feature of conveyancing practice, and are usually made between private parties. There is no need to restrict its meaning if its meaning is clear. Rules, regulations, by-laws, ordinances and proclamations comprise one genus, viz documents issued by public authorities; but agreements, covenants and instruments are manifestly not within the same genus. If one departs from a literal interpretation and approaches the matter from a purposive interpretation, the same result emerges, but more clearly. The self-evident purpose of s 28 of the Act and cl 32 of LEP 27 is to nullify and remove all obstacles to the planning principles decided on by the council or the minister. In this context s 28 of the Act is stating, in effect, "an environmental planning instrument may state what documents should be disregarded", and cl 32 of LEP 27 is stating that one type of document to be disregarded is a document creating a restrictive covenant. As to the argument about the words "by or under whatever authority made", I am of the view that, although chosen without conspicuous felicity, they mean no more than "howsoever created".
The effect of cl 1.9A(1) of the Liverpool LEP, read with s 3.16(2) of the EPA Act, is that where a development consent is given by the Council under the Liverpool LEP for the development of land, "any agreement, covenant or other similar instrument that restricts the carrying out of that development" will, to the extent necessary to serve the purpose of enabling that development, be suspended for so long as that development consent remains in effect: Natva Developments Pty Ltd v McDonald Bros Pty Ltd (2004) 12 BPR 98097; [2004] NSWSC 777 at [56]-[64].
The parties are in dispute as to whether the Easement is an agreement, covenant or other similar instrument that restricts the carrying out of the development of Lot 4. Registrar General contends that it is, relying on the decision of Preston CJ 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 (Carey-Evans). JEA contends that it is not, relying on the decision of the same judge in the earlier case of Cracknell and Lonergan Pty Limited v Council of the City of Sydney (2007) 155 LGERA 291; [2007] NSWLEC 392 (Cracknell).
In Cracknell, the applicant had lodged a development application with the respondent Council for the construction of an in-ground swimming pool at a property in Redfern. The development would encroach approximately 2.5 metres upon an easement for a right of way created by a deed dated 25 January 1894.
Cl 44 of the South Sydney Local Environmental Plan 1998 (NSW) 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. (2) Nothing in subclause (1) affects the rights or interests of any public authority under any registered instrument. (3) Pursuant to section 28 of the Act, before the making of this clause the Governor approved of subclauses (1) and (2).
The respondent Council refused the development application. The applicant appealed that decision to the Land and Environment Court. The parties agreed that there were two questions of law to be determined in the proceedings: first, whether cl 44 operates pursuant to s 28 of the EPA Act; and second, if so, is the right of way a covenant, agreement, or instrument that purports to impose restrictions on the carrying out of development on the land, pursuant to clause 44 of the LEP, for the purpose of enabling development to be carried out?
Preston J, as his Honour then was, answered the first question in the affirmative (at [20]) and considered that the second question should be reframed as (at [34]): "…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 South Sydney Local Environmental Plan?"
His Honour determined that the answer to that question was no. This was because, while it could be assumed that the deed which created the right of way was "an agreement or similar instrument", it was not an agreement or similar instrument that "purports to impose restrictions on the carrying out of development on the land": [37]. His Honour's reasoning to that conclusion was as follows: [38] An agreement or instrument does not "impose" a restriction on development unless the restriction is expressly stated or necessarily implied in the agreement or instrument: see Application of Thompson, at 4. [39] This conclusion is reinforced by the use in cl 44 of South Sydney Local Environmental Plan of the word "purports" in the phrase "any covenant, agreement or similar instrument that purports to impose restrictions on the carrying out of development". To "purport" is "to profess or claim" or "to convey in the mind as the meaning or thing intended; express; imply": Macquarie Dictionary. Hence, in order for an agreement or instrument to purport to impose restrictions, the agreement or instrument must profess or claim to impose restrictions or convey to the reader that as the meaning or thing intended. This demands that the restriction be expressly stated or necessarily implied in the agreement or instrument. [40] In this case, the Deed evidencing the right of way does not expressly state or necessarily imply a restriction on the carrying out of development on the servient tenement. [41] At best, the existence of the dominant owner's rights gives rise to a correlative duty on the servient owner to observe the dominant owner's rights in relation to the right of way. However, it is not sufficient to attract the operation of cl 44 of South Sydney Local Environmental Plan that in its application to a particular physical situation, or in combination with other requirements of the law, the incidental effect of the right of way would be to inhibit or prevent development inconsistent with the dominant owner's rights: see Application of Thompson, at 4. [42] 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 within the meaning of cl 44 of South Sydney Local Environmental Plan.
At [38] of this passage, his Honour refers to the decision of McLelland CJ in Eq in Application of Thompson (unreported, Supreme Court of NSW, 25 October 1993) which concerned cl 19 of State Environmental Planning Policy No. 25 which provided that "for the purpose of enabling the subdivision of dual occupancy development to be carried out in accordance with this Part … any agreement, covenant or instrument imposing restrictions as to the erection or use of more than one dwelling house or dwelling on an allotment of land … to the extent necessary to serve that purpose do not apply to that development." McClelland CJ in Eq said of the word "imposing" in that provision (at page 4): In my opinion, for the purposes of CL19, a covenant cannot be said to "impose" a restriction of the described kind, unless such a restriction is expressly stated or necessarily implied in the covenant. It is not sufficient to attract the operation of CL19 that in its application to a particular physical situation, or in combination with other requirements of the law, the incidental operation of the covenant would be to inhibit or prevent the erection of more than one dwelling house on a particular allotment. Since the effect of CL19 is to derogate from vested proprietary interests (of which the benefit of a restrictive covenant is one form) it 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. It is sufficient to cite the following authoritative statement: "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 the Parliament to have intended to implement." (Wade v NSW Rutile Mining Co 121 CLR 177 at 181 per Barwick CJ
In Carey-Evans the applicants owned land in Vaucluse that overlooked Sydney Harbour. The respondent owned an adjoining property downhill from the applicants' property towards Sydney Harbour. In a dealing registered on the title of both properties, which benefited the applicants' property and burdened the respondent's property, there was an easement for light, air and prospect across and above a specified horizontal plane over the respondent's property. The respondent obtained development consent to construct a new house that was higher than his existing house and higher than the horizontal plane specified in the dealing. The applicants sought an injunction to restrain the respondent from developing his property in accordance with the development consent as it would be a breach of their easement.
The respondent cross-claimed seeking a declaration that cl 1.9A of the Woollahra Local Environmental Plan 2014 (WLEP) applied and suspends the operation of the dealing insofar as it restricted the development. Cl 1.9A provided: 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.
Preston CJ determined that cl 1.9A of the WLEP operated to suspend the operation of the dealing insofar as it restricted the carrying out of development in accordance with the development consent, and consequently the respondent succeeded. His Honour said (at [60]) that the question whether cl 1.9A of the WLEP operated to suspend the operation of the dealing involved three steps:

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.

In relation to the first step, Preston CJ determined that there was a single easement for light and air and a restrictive covenant for the right of prospect: [67], [73]. This is not an issue in the current proceedings as the nature of the dealing in the present case (the Transfer) has already been determined by the Court of Appeal.
In relation to the second step, Preston CJ noted at [80] that the focus is on the dealing that creates the right or interest in or affecting land, not the right or interest itself, and the question is whether that dealing is an "agreement, covenant or other similar instrument". In that case the dealing was the memorandum of transfer that created the easement and restrictive covenant: [81]. This was properly described as an agreement and also fell within the scope of the phrase "other similar instrument": [82], [84].
In relation to the third step, Preston CJ found that the dealing restricted the carrying out of the development to be carried out in accordance with the development consent. His Honour said (emphasis added): [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.
His Honour saw no inconsistency between this conclusion and his earlier decision in Cracknell, drawing attention to the difference in language of the LEP in Cracknell compared to cl 1.9A of the WLEP and the difference in the terms of the relevant dealings. His Honour said: [89] The language of the clause suspending the regulatory instruments there considered was different to the language of cl 1.9A of WLEP. There, the clause provided that "the operation of any covenant, agreement or similar instrument that purports to impose restrictions on the carrying out of development on the land… shall not apply to any such development". Here, clause 1.9A of WLEP provides that "any agreement, covenant or other similar instrument that restricts the carrying out of that development does not apply…". The language of the clause in Cracknell and Lonergan Pty Ltd v Council of the City of Sydney that the regulatory instrument "purports to impose restrictions on the carrying out of development" led me to hold that the restriction on development must be expressly stated or necessarily implied in the covenant, agreement or similar instrument. That was not the case there. The instrument created a right of way, a positive easement, and did not expressly or by necessary implication purport to impose restrictions on the carrying out of development on land burdened by the right of way. [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.

Issue 2: Claim for diminution in the value of Lot 4

As noted, Kunc J in Lancu v Registrar-General [2019] NSWSC 568 at [105]-[106], the determination of a claim under s 129 invites a two stage inquiry: first, the plaintiff must establish that it has suffered a loss or damage as the result of the operation of the Act "arising from" one of the events referred to in one of the sub-paragraphs of s 129(1); and, second, if so, then compensation will be payable unless it is shown that it falls within one of the exclusions in s 129(2). If none of these exclusions is applicable (and none was relied upon by the Registrar-General in the present case), a third inquiry is required which is the determination of the quantum of the loss or damage which "arises from" the relevant event under the applicable sub-paragraph of s 129(1).
The first question which arises in the present case is whether there has been an omission within the meaning of s 129(1)(a) and if so whether that omission caused loss or damage to JEA. The causation requirement is imported by the words "arising from", and is determined by the application of the common sense test laid down in March v E&MH Stramare Pty Ltd (1991) 171 CLR 506 at 515, under which the identification of the cause of a particular occurrence is a question of fact which must be determined by applying common sense to the facts of the particular case: Registrar-General v Cleaver (1996) 41 NSWLR 713 at 717. It was not in dispute that the omission of the Easement from the title to Lot 4 was an "omission" within the meaning of s 129(1)(a).
I accept JEA's submission that when it purchased Lot 4 it believed that the land was not subject to any easement in favour of Lot 5, but it was then subject to a latent defect in title which only crystallised into an actual defect in title when the Appeal Decision was delivered. That was when the loss or damage occurred because until the Registrar-General became entitled to record the Easement on the title to Lot 4, JEA could have resold Lot 4 for its full market value and successfully avoided any economic loss: Cleaver at 720-721, 724 and 725; see also Christopoulos v Angelos (1996) 41 NSWLR 700. JEA suffered loss by reason of the omission and subsequent registration of the Easement because the land became subject to (ie. burdened by) a proprietary interest (the Easement) in favour of a third party after JEA's purchase of the land, and this was caused, approaching the matter in a common-sense way, by the Registrar-General's omission of the Easement from the title.
The next question is to determine whether JEA has established the quantum of its loss from that omission. Section 129(1) like former s 126(1) does not specify the measure of compensation payable under s 129(1). As a matter of principle, but subject potentially to the limitation in s 129A, the compensation payable should be commensurate with the loss that the plaintiff has sustained and be such as will put the plaintiff in the same position, so far as money can do it, as if the wrongful act complained of had not been done: Registrar of Titles (WA) v Spencer (1909) 9 CLR 641 at 645 and 653; Parker v Registrar-General [1977] 1 NSWLR 22 at 29; Registrar-General v Behn [1980] 1 NSWLR 589 at 597 [34].
In the case where the "wrongful act" is the omission of an easement from the title, the measure of the loss will be the difference between the market value of Lot 4 without the burden of the Easement and its market value with it: Christopoulos v Angelos at 703 and 711; see also Electricity Commission of New South Wales v Arrow (1994) 85 LGERA 418 at 421; Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd [2012] NSWCA 445 at [238] and [245].
A question arises as to whether the date for assessment of the diminution in the market value of the land by reason of the Easement is the date the Easement was ordered to be placed on title (27 March 2015), the date the development consent was granted (June 2016) or the date of the hearing. JEA submitted that the appropriate date was the third of these alternatives, relying on Registrar-General v Behn [1980] 1 NSWLR 589 at 597-598; Northside Development Pty Ltd v Registrar-General (1987) 11 ACLR 513 at 525.
In Behn, the plaintiff suffered loss as a result of a fraud perpetrated by the agent of a company by which the company procured the transfer to it of land owned by the plaintiff and then granted a mortgage over the land to a bank to secure loans which exceeded the value of the land. Mahoney JA (with whom Moffit P and Samuels JA agreed) held that the date for assessment of compensation payable to the plaintiff for deprivation of the land should be assessed by reference to the value of the land at date of judgment and not when it was taken. However, his Honour added that this did not mean that in all cases compensation was to be assessed at the date of judgment. His Honour said at 597 [34]: I, therefore, do not think that what was said in Spencer's case and Crowle's case should be seen as limiting damages in all cases to the value of the land at the date when the plaintiff was deprived of it. I do not mean by this that, in every case, damages under the statutory count are to be assessed by reference to the value of the land of which the plaintiff was deprived at the time of judgment. Each case must, in my opinion, be considered according to its own facts, and the damages awarded must be "commensurate with the loss he (the plaintiff) has sustained", and such as will put him "in the same position, so far as money can do it, as if the wrongful act complained of had not been done": Registrar of Titles (WA) v Spencer.
In my view, on the facts of this case the appropriate time to assess the diminution in the value of the Land by reason of the omission and subsequent registration of the Easement is the time when the orders were made by the Court of Appeal (27 March 2015) because that is when this aspect of the loss suffered by JEA crystallised. This view is supported by Glensaugh Pty Ltd v Registrar-General [2001] NSWSC 1114 at [59]-[60]. Therefore, the claim by JEA is for compensation of either $1,850,000 if [48] applies or $7,860,000 if the alternative in [50] applies (together with pre-judgment interest).
It was not in dispute that the determination of market value for this purpose should be by reference to the Spencer test, namely the value is the price which a hypothetical willing but not anxious seller could reasonably expect to obtain and a hypothetical willing but not anxious buyer could reasonably expect to pay after proper negotiations between them have concluded and without overlooking any ordinary business consideration: Spencer v The Commonwealth (1907) 5 CLR 418 at 441; Commissioner of State Revenue v Placer Dome Inc (2018) 265 CLR 585; [2018] HCA 59 at [17]. As noted by Issacs J in Spencer at 441, this test must be applied by reference to the most advantageous purpose for which the land is adapted (referred to as "the highest and best use").
As at 27 March 2015, Lot 4 was subject to both the HC Covenant and the Easement. In light of the conclusion reached above on Issue 1, the market value of Lot 4 on that date should be determined on the basis that the Council could suspend both the HC Covenant and the Easement in its consideration of the development application which had been lodged before that date, or any other development application. In addition, I accept Mr Osborne's evidence that it was likely at that time that the HC Covenant would be removed if an application was made under s 89 of the Conveyancing Act. I do not accept the Registrar-General's submission that the same can be said for the Easement, because this Court does not have sufficient evidence in these proceedings to determine that question, noting that Awar is not a party.
Both town planning experts expressed the view that the highest and best use of Lot 4 is a mixed-use development, comprising ground floor retail or commercial premises with residential apartments above and all carparking located in the basement of the building. If this is treated as the highest and best use of Lot 4, the loss of JEA would be the difference between the market value of Lot 4 without the burden of the Easement and on the basis that it could be developed in accordance with that highest and best use, less its market value with the burden of the Easement. It is conceivable that the market value of Lot 4 without the burden of the Easement would be greater than its market value with the burden of the Easement even assuming that cl 1.9A allows the Liverpool Council to suspend the Easement when granting development approval. The Development Consent permits a development which does not achieve the highest and best use identified by the town planning experts. Further, in view of the evidence of Mr Lidis, had the Council relied on cl 1.9A to suspend the Easement entirely in its consideration of a development application, it would likely have required JEA to replace the existing parking on Lot 4 with additional parking at basement level. Consequently there are a number of possible kinds of development of Lot 4 with the burden of the Easement which might be regarded as less advantageous than its potential development without the burden of the Easement.
However, there is no valuation evidence which addresses the quantification of JEA's loss on the basis of the town planning experts' view of highest and best use, and this was not the basis on which JEA brought its claim. Accordingly, it is not necessary to say anything more about that potential approach.
JEA relied on the approach taken by the valuation experts, who proceeded on the basis that the highest and best use of Lot 4 is a development of the land in accordance with the Development Consent. If that is the highest and best use, as both valuers agreed, then in my view, there is no diminution in the market value of Lot 4 due to the Easement. This is because the Easement did not prevent JEA from implementing the Development Consent, for the reasons explained in dealing with Issue 1.
Accordingly, in my view, JEA has not established an entitlement to compensation in accordance with either of the alternatives at [48] or [50] above. As to [48], this proceeds on the basis that the highest and best use of the land is a development in accordance with the Development Consent. That development can proceed whether or not the land is burdened by the Easement. Consequently, the market value of the land both burdened and not burdened by the Easement, will be the same. In relation to the alternative at [50], this is because the premise on which it is based is that the Easement restricts the use of the ground level of Lot 4 to a carpark and that is not correct. It is contradicted by the Development Consent (which contemplates the development of Lot 4 on the basis that the ground level will be partly commercial space and partly carpark). Further, for the reasons explained in dealing with Issue 1, the Council had power to suspend the Easement in the way it did under cl 1.9A of the Liverpool LEP (even though the assessment report does not refer to cl 1.9A for this purpose) or indeed to permit a development without any carparking on the ground level.
For the above reasons, JEA has not established an entitlement to compensation for diminution in the value of Lot 4 as a consequence of the Easement.

Issue 3: Claim for costs

JEA also claims as compensation under s 129(1) the following costs (together with pre-judgment interest) so that it is not left out of pocket by reason of the omission of the Easement from the title to Lot 4: 1. JEA's costs of the trial before Windeyer AJ and the costs in the Court of Appeal; 2. costs in seeking special leave to appeal to the High Court; 3. costs paid or payable by JEA to third parties in the proceedings referred to in (a) and (b); 4. JEA's costs in these proceedings, including costs of solicitors, counsel, valuers and town planners.
In Chandra v Perpetual Trustees Victoria Ltd [2008] NSWSC 178 a forged mortgage was registered on the title for the plaintiffs' house in favour of Perpetual Trustees Victoria, which claimed that loans totalling $750,000 were secured by the mortgage and took steps towards its enforcement. The plaintiffs commenced the proceedings against Perpetual Trustees Victoria and the Registrar-General. In the case of the former to restrain threatened enforcement action and in the case of the latter to seek compensation. Perpetual Trustees Victoria brought a cross-claim in which it sought compensation from the Registrar-General under s 129(1) of the Act. The plaintiffs were successful in establishing that the mortgage was unenforceable and did not secure the loans, and Perpetual Trustees Victoria was successful in its claim that it was entitled to compensation under s 129(1) for the loans so lost. The plaintiffs obtained an order for costs against Perpetual Trustees Victoria, and those costs by agreement were paid by Perpetual Trustees Victoria to the extent of 75% and the plaintiffs claimed that they should be entitled to recover the remaining 25% of their costs as compensation under s 129(1).
Bryson AJ held that the plaintiffs were entitled to recover their costs of the litigation, after giving credit for costs otherwise recovered under s 129(1). In relation the costs claimed by Perpetual Trustees Victoria, these fell into four categories, one of which was the difference between the actual costs incurred by Perpetual in pursuing its cross-claim against the Registrar-General and the party-and-party costs which the Registrar-General had been ordered to pay Perpetual Trustees Victoria pursuant to his Honour's earlier decision.
Bryson AJ held that Perpetual Trustees Victoria was entitled to compensation under s 129(1) for that amount. His Honour said at [14]: The costs incurred by Perpetual Trustees Victoria in pursuing its cross-claim against the Registrar General in my opinion fall readily within s 129(1)(a); some, perhaps most of those costs, are in any event are payable by the Registrar-General under my earlier costs order, but while credit should be given for any amounts paid, and the question of quantum has to be considered, the costs incurred by Perpetual Trustees Victoria, in pursuing its cross-claim against the Registrar-General are a loss for which Perpetual Trustee Victoria should receive compensation.
His Honour approached the matter on the basis that the costs bringing proceedings against the various third parties against which claims were made and also the costs of bringing the claim for compensation were recoverable under s 129(1) provided that they satisfied the causation test in s 129(1), as to which he said at [20]: … the legal costs must, in the context of the relationship between the client and the client's solicitor, have been reasonably incurred in litigation relating to the operation of the Act in respect of the land. While the costs which pass the causation test are no doubt ample, they are not uncontrolled or limitless. Aspects of the legal work on the litigation which were futile and unproductive fall outside it. It must have been reasonable to perceive that the work should be done and that the charges should be made in the interests of the client and in the circumstances of time.
On this basis, while his Honour allowed the costs incurred by Perpetual Trustees Victoria in pursuing its cross-claim, it was necessary for a process of assessment to be undertaken to establish the extent to which the claimed costs were reasonable, having regard to this causative test: see [24]-[26].
In the present case, there is no dispute by the Registrar-General that the amount of costs claimed by JEA in respect of the four categories set out at [101] above are reasonable, and the only issue is whether they fall within s 129(1).
The time for determining whether JEA is entitled to compensation for loss of this kind is the date of the hearing reflecting the nature of the loss, and bearing in mind the compensatory principle being applied (see [89] above).
In so far as the costs of the earlier proceedings are concerned (being categories (a)-(c), in my view the incurring of those costs was entirely reasonable. 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 to Lot 4. By the bringing of those proceedings was necessary to determine whether JEA had suffered any loss or damage. Had JEA not brought those proceedings, it might have been said that it had failed to mitigate its loss: s 129(2)(c). It is significant that the Registrar-General's letter dated 10 January 2012 set out at [11] above, did not contend that the covenant was an easement, rather than a restrictive covenant and had it been a restrictive covenant JEA's case would have been very strong (see [13] above). In any event, JEA was successful before Windeyer AJ. While JEA was unsuccessful in its application for special leave to appeal from the Appeal Decision, in my view it cannot be said that it was unreasonable for it to have sought special leave.
The Registrar-General submitted that JEA's claim is analogous to the claims for costs which were not allowed in Kirkland v Quinross Pty Ltd [2008] NSWSC 286 at [85]-[86] and Perpetual Trustees (Victoria) v Cipri [2009] NSWSC 335 at [58]-[62]. In my view, both of those decisions are distinguishable on the basis that the costs for which compensation was claimed related to claims which had no reasonable basis. In my view, the costs falling within categories (a)-(c) did have a reasonable basis.
In relation to category (d), the Registrar-General did not dispute that the amount claimed is reasonable, but contended that the costs do not fall within s 129(1). In my view, that submission is not correct for the reasons given by Bryson AJ in Chandra at [16]-[20].
This conclusion is consistent with s 129A which, in cases to which applies, limits the amount of compensation payable under s 129(1) to the "market value of the land at the date on which compensation is awarded to that person plus any legal, valuation or other professional costs reasonably incurred by the person in making the claim." The inference from the fact that the provision limits the compensation payable to these amounts is that they would otherwise be recoverable under s 129(1).
In my view, s 129A is not applicable in the present case, and I note that the Registrar-General did not contend that it was. My reasons for this view can be shortly stated. Section 129A is expressed to apply only where the loss or damage is suffered "as a result of [the plaintiff] being deprived of land or any estate or interest in land". The circumstances in which compensation is payable under s 129(1) are not limited to the situation where the plaintiff has been deprived of land or an estate or interest in land. Indeed, it is only s 129(1)(e) which makes deprivation of land or an estate or interest in land a pre-condition to the entitlement to compensation. Given that context, the restriction of s 129A to the situation where the plaintiff has been deprived of land or an estate or interest in land and not to all cases where compensation is payable under s 129(1) appears to be deliberate.
In the present case, it is s 129(1)(a) rather than s 129(1)(e) which applies. The event which engages s 129(1)(a) is the omission of the Easement from the title to Lot 4. The recording of that Easement following the Appeal Decision involved the recognition of an interest in the land held by Awar (being the benefit of the Easement) which was created out of the land but cannot be said to have been part of the land before its creation: Kirby v Inspector of Taxes, Thorn EMI Plc [1988] 1 WLR 445 at 450; Hepples v Federal Commissioner of Taxation (1992) 173 CLR 492 at 501-505 per Brennan J and 546-549 per McHugh J; Federal Commissioner of Taxation v Cooling (1990) 22 FCR 42 at 63-64 per Hill J. The word "deprived" in this context refers to land or an estate or interest in land being taken away from the owner: Parker v Registrar-General [1977] 1 NSWLR 22 at 26. While the creation and subsequent recording of an easement may diminish the market value of the land burdened by the easement, it is not correct to characterise this as a taking away from the owner of the land of the interest in the land which was newly created when the easement was granted, but never previously belonged to the owner of the land: see also Commissioner of Taxes (Qld) v Camphin (1937) 57 CLR 127 at 133-134.
If, contrary to the conclusion reached above, s 129A does apply in the present case, in my view the result is the same. It can be said that the amounts referred to in [101(a)-101(d)] comprise "legal, valuation or other professional costs reasonably incurred by [JEA] in making the claim". While the costs relating to the previous proceedings are separate from the claim against the Registrar-General, they were reasonably incurred in making the claim for the reason given at [109] above. In so far as category [101(d)] is concerned, they are clearly covered by s 129A: see Pedulla v Panetta (No 2) [2011] NSWSC 1533 at [8]-[10].

Conclusion

For the above reasons, the plaintiff's claim against the Torrens Assurance Fund for compensation should succeed to the extent of the claim for costs, together with interest, referred to at [101].
As it will be necessary for a recalculation of the pre-judgment interest to be made, I will direct the parties to consult and bring in short minutes of order to give effect to these reasons.

Amendments 23 February 2024 - Corrected numbering. 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: 23 February 2024

JUDGMENT

The plaintiff, JEA Holdings (Aust) Pty Limited (JEA) by amended summons seeks an order pursuant to s 129 of the Real Property Act 1900 (NSW) (Act) for compensation out of the Torrens Assurance Fund (Fund). The proceedings are brought against the Registrar-General as nominal defendant under s 132 of the Act. The basis for JEA's claim is that the Registrar-General omitted an easement from the register affecting land that was purchased by JEA in 2010. JEA claims that following a correction to the register in 2015, it suffered loss that is compensable under s 129. The Registrar-General accepts that the failure to record the easement on the title to the land was a relevant "omission" for the purposes of s 129(1)(a) of the Act, but disputes that any compensation is payable out of the Fund.
The easement was ultimately recorded on the register following a decision of the Court of Appeal, reported as Registrar-General of New South Wales v Jea Holdings (Aust) Pty Ltd (2015) 88 NSWLR 321; [2015] NSWCA 74 (Appeal Decision). The background included below is largely taken from that decision, supplemented where necessary by the materials provided to the Court by the parties.

(2007) 155 LGERA 291

(2012) 186 LGERA 366

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