Jea Holdings (Aust) Pty Ltd v Registrar-General of NSW

Is the transfer capable of giving rise to an easement? 13The wording in Memorandum of Transfer J493622, which is additional to the transfer of land, is worded as a covenant rather than a grant of an easement. However, the litigation has proceeded on the basis that it is the effect of the document and not its description that is relevant (see Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1971) 124 CLR 73). 14Evershed MR, delivering the judgment of the English Court of Appeal in In re Ellenborough Park [1956] 1 Ch 131, identified the four characteristics of a valid easement (at 163): (1)There must be a dominant and a servient tenement; (2)An easement must "accommodate" the dominant tenement; (3)The dominant and servient owners must be different persons; and (4)A right over land cannot amount to an easement unless it is capable of forming the subject matter of a grant. 15The first three of these were not in dispute in these proceedings. If there is an easement then the plaintiff's land in Folio Identifier 4/219028 is the servient tenement and the second defendant's land is the dominant tenement. The easement accommodates the second defendant's land as the car park constitutes a benefit to its hotel business by allowing patrons to park there. The plaintiff and the second defendant are different persons. 16The plaintiff submitted that the fourth characteristic was absent from this purported easement as the right in respect of its land was incapable of forming the subject matter of a grant. In In re Ellenborough Park Evershed MR addressed this characteristic by considering three cognate questions (at 164): first, whether the rights purported to be given are expressed in terms too wide and vague in character; secondly, whether such rights would amount to rights of joint occupation or would substantially deprive the owner of proprietorship or legal possession; and thirdly, whether such rights constitute mere rights of recreation, possessing no quality of utility or benefit. Consideration of these three cognate questions was approved by Santow JA (with whom Mason P and Beazley JA agreed) in Clos Farming Estates Pty Ltd v Easton [2002] NSWCA 389; (2002) 11 BPR 20,605 at [35]; 20,611. The plaintiff submitted that the second of these was to be answered affirmatively as the rights given to the owner of the dominant tenement by Memorandum of Transfer J493622 in respect of the plaintiff's land were so extensive as to substantially deprive the plaintiff of proprietorship or legal possession. 17In Copeland v Greenhalf [1952] 1 Ch 488 Upjohn J rejected a claim for a prescriptive easement which would allow the owner of the dominant tenement to deposit objects including vehicles on a strip of land. His Lordship said that the rights claimed in that case could not form the subject matter of an easement because they amounted to a claim for joint user of the land by the dominant owner. Such rights were practically a claim for "the whole beneficial user of the strip of land" and that it was "virtually a claim to possession of the servient tenement, if necessary to the exclusion of the owner; or, at any rate, to a joint user" (at 498). 18London and Blenheim Estates Ltd v Ladbroke Retail Parks Ltd [1993] 1 All ER 307 was a claim for an easement giving a right of way and a right for customers of the dominant owner's business to park on a part of the servient tenement. Judge Paul Baker QC, in what was strictly speaking obiter dicta, held that as a matter of principle an easement for car parking can be a valid easement and attempted to reconcile Copeland v Greenhalf with the earlier and possibly inconsistent case of Wright v Macadam [1949] 2 KB 744 in which an easement to store coal in a coal shed was upheld. The judge said that the two cases could be distinguished because their difference was a matter of degree, saying (at 315): "A small coal shed in a large property is one thing. The exclusive use of a large part of the alleged servient tenement is another". That is, the impact of the easement on the entirety of the servient tenement, as opposed to simply the part of the land in fact burdened, is relevant as to whether the purported easement detracts from the servient owner's proprietorship. The judge then posited a test as to whether or not in fact a purported easement is invalid by reason of its detraction from the proprietorship of the servient owner. He said that the touchstone of an easement that was invalid for this reason was that "the right granted in relation to the area over which it is to be exercisable is such that it would leave the servient owner without any reasonable use of his land" (at 317). On the facts before him the easement in question did not so deprive the servient owner and so the judge said that there was a valid easement. This test was applied by the English Court of Appeal in Batchelor v Marlow [2003] 1 WLR 764. As I shall examine below, it has also been applied by a number of authorities in Australia, but it probably no longer represents the law in the United Kingdom as a result of the decision of the House of Lords in Moncrieff v Jamieson [2007] UKHL 42; [2007] 1 WLR 2620. 19In Evanel Pty Ltd v Nelson (1995) 39 NSWLR 209 Brownie J upheld the validity of an easement for a "right of footway" for the dominant owner that excluded the servient owner from the relevant area of land at all times except on one day of the year. The relevant area was used by the dominant owner as a garden. His Honour considered that the fact that for one day each year the servient owner was not excluded from the land demonstrated that exclusive use of the land was not given to the dominant owner. His Honour also observed that the phrase "right of footway" has a particular meaning by virtue of Schedule 8 of the Conveyancing Act 1919 and that this meaning limited the use to which the dominant owner could put the land. While Brownie J acknowledged that the exception to the servient owner's exclusive use for one day each year did not prevent the dominant owner from having practically exclusive use, the limitation on the manner in which that exclusive use could be exercised (the "right of footway") distinguished that case from the situation in Copeland v Greenhalf, in which the claimed easement placed negligible limitations on the dominant owner's user. The limitation on the dominant owner's user in Evanel Pty Ltd v Nelson meant that there was not a surrender of proprietorship by the servient owner and so his Honour declared there to be a valid easement. 20Evanel Pty Ltd v Nelson appears to indicate that there can be a valid easement that excludes the servient owner from the area of land burdened by the easement if the dominant owner's permitted user of the easement is limited to be substantially less than proprietorship of the land. It is this limitation on user that permits the servient owner to retain proprietorship of the servient tenement despite being excluded from it: the right to enforce the limitation against the dominant owner is a measure of control over the land sufficient for the servient owner to retain proprietorship. This proposition is contrary to the test posited in London and Blenheim Estates Ltd v Ladbroke Retail Parks Ltd as on that test a servient owner who is excluded from the servient tenement lacks a reasonable use of the servient tenement and so there could not be a valid easement, even if the dominant owner's user were substantially curtailed. 21The proposition also appears to be contrary to later NSW Court of Appeal authority. Clos Farming Estates Pty Ltd v Easton was a case involving a purported easement for a vineyard that allowed the dominant owner to enter the land and control it by means of planting, maintenance, harvesting, marketing, packaging and selling products. Santow JA, with whom Mason P and Beazley JA agreed, said (at [45]; 20,614) that it was "necessary to assess the degree to which the rights conferred interfere with the servient owners' exclusive possession of the site". His Honour approved Harada v Registrar of Titles [1981] VR 743, which expressly followed Copeland v Greenhalf. In Harada v Registrar of Titles King J rejected a claim for an easement for overhead power lines because the particular easement claimed would leave the servient owner "with very few rights over her property and [she] could do little more with it than move over it and park cars on it" (at 753). 22Santow JA applied this in Clos Farming Estates Pty Ltd v Easton, concluding that the servient owner's rights were so attenuated that he lacked exclusive possession because he was left with "merely his rights of residual recreational activities that are totally subordinated to the over-arching rights of" the dominant owner (at [46]; 20,614). Hence the touchstone for a valid easement appeared to be that the servient owner retained substantive user of the servient tenement, so if Clos Farming Estates Pty Ltd v Easton reflects the current state of the law it is not easy to see how one can maintain the proposition in Evanel Pty Ltd v Nelson that a right in the servient owner to enforce a limitation on the manner of user of the dominant owner is sufficient for a valid easement when the servient owner is excluded from the land. 23The Court in Clos Farming Estates Pty Ltd v Easton did not attempt to formulate an all-encompassing test for whether a purported easement is valid by reason of its interference with the servient owner's proprietorship. The judgment in the Court of Appeal does not refer to London and Blenheim Estates Ltd v Ladbroke Retail Parks Ltd but it appears to regard as the touchstone of validity of an easement that the servient owner retains substantive rights over and user of the land, which is similar to the requirement of a servient owner maintaining a "reasonable use" of the servient land from the latter case. 24At this point it is worth drawing attention to how these cases conceptualise the scope of the land subject to an easement. The distinction drawn between Copeland v Greenhalf and Wright v Macadam in London and Blenheim Estates Ltd v Ladbroke Retail Parks Ltd was that the burden of the easement in the former affected the entirety of the servient tenement whereas in the latter it only affected a small area in a large estate. Hence when considering the effect of a grant of easement on a servient owner's proprietorship one ought to consider its effect on the servient owner's proprietorship of the entirety of the servient tenement. This would mean that some manner of user affecting a fixed area of land might be a valid easement if that area formed part of a larger servient tenement but the same user of the same fixed area of land could be invalid as an easement if it were part of a smaller servient tenement. 25Clos Farming Estates Pty Ltd v Easton tacitly accepted this proposition when (at [46]; 20,614) Santow JA rejected an argument that the easement was valid because the rights granted only touched part of the lot. His Honour said that this was insufficient to preclude a finding that the rights interfered too greatly with the servient owner's proprietorship and that the restrictions in the purported easement applied "to a very significant portion of the lot". If one ought not to look beyond the part of the servient tenement actually affected by the restriction then whether the purported easement affected a significant or insignificant portion of the land should not be a material consideration. The fact that the Court of Appeal did consider this matter indicates that the effect of the easement on the entirety of the servient tenement is relevant. 26Weigall v Toman [2006] QSC 349; [2008] 1 Qd R 192 also provides support for this proposition. This was an application for a declaration that an easement for the exclusive use of a garage on the servient tenement was invalid. Wilson J dismissed the application, holding that the easement was valid. His Honour considered Wright v Macadam and Copeland v Greenhalf and approved the distinction between them drawn by Judge Paul Baker QC in London and Blenheim Estates Ltd v Ladbroke Retail Parks Ltd - that they differed because of the relative impact of the burdened part of the servient tenement on the servient owner's enjoyment of the entirety of its land. Wilson J also approved the test posited by Judge Paul Baker QC that asks whether the servient owner by the grant of the purported easement is left with any reasonable use of its land. 27In White v Betalli (2007) 71 NSWLR 381 the NSW Court of Appeal considered the effect of a by-law in a strata plan where the by-law provided the right to store a small watercraft in a particular area. McColl JA, who dissented, considered that the validity of the by-law depended on whether the right created by the by-law was an easement or restrictive covenant. Santow JA, with whom Campbell JA agreed, did not consider this to be a requirement. There was no clear decision as to whether, when determining the validity of an easement, one looks to the effect of the purported grant on the entirety of the servient tenement or only its effect on that portion of the land affected by the grant. 28As McColl JA took a view of the legislation that differed from that of the majority, it was necessary for her Honour to consider in detail whether the by-law created a valid easement. In contrast to Santow JA, McColl JA said that the by-law conferred on the purported dominant owner "exclusive use and enjoyment of the watercraft storage area" (at 417), and therefore it could not give rise to a valid easement because it attempted to convey on the dominant owner rights of occupation that would substantially deprive the servient owner of proprietorship. It is apparent that McColl JA considered the validity of the easement to turn on whether there was sufficient derogation from the servient owner's proprietorship of the portion of land actually affected by the easement, rather than the effect of that restriction on the entirety of the servient tenement. At [190] her Honour referred to the portion of the servient tenement affected by the easement and then said that the servient owner retained no use of "that section of [the servient owner's lot]" and that as a result there could not be a valid easement due to the detraction from the servient owner's proprietorship. 29Santow JA said that even if the by-law were required to give rise to a valid easement then he would have found it to create such a valid easement. His Honour said (at 389) that the area affected was a small one and that the by-law allowed "the continued use by the [servient owner] of the affected area, though subject to the [dominant owner's] right to store a small watercraft in the designated area" and therefore it was compatible with the servient owner's right of possession. The reference to the area burdened by the easement being a small one and the different language used in the extracted quote in referring to the servient owner's use of the "affected area" compared with the dominant owner's use of the "designated area" suggest that his Honour was thinking of a test akin to that in London and Blenheim Estates Ltd v Ladbroke Retail Parks Ltd in which one looked to the effect of the burden of the easement on the servient owner's proprietorship of the entirety of the servient tenement. However, the statement was obiter dicta and his Honour only briefly considered the point. On the other hand, McColl JA was dissenting. Hence it is difficult to extract from this case a clear statement as to what portion of the servient tenement one ought to consider when evaluating the validity of an easement. 30The law in the United Kingdom has apparently moved on since then. Moncrieff v Jamieson was a case before the House of Lords on appeal from the Scottish Court of Session. While the case concerned the Scottish law of servitudes, the relevant principles identified apply equally to easements. The servitude in question gave a right of access to the dominant tenement for pedestrian and vehicular traffic. It was argued by the dominant owners that accessory to this right was a right not merely to drive and stop on the servient tenement but also to park on the servient tenement. In order to answer whether such a right was accessory it was necessary to determine whether this right to park could exist as a matter of law. Each of their Lordships delivered a separate speech. They all accepted that as a matter of principle a servitude for car parking could exist. 31Lord Scott of Foscote disapproved of the attempt in London and Blenheim Estates Ltd v Ladbroke Retail Parks Ltd to reconcile Copeland v Greenhalf and Wright v Macadam on the grounds that the claimed easement in the former was the substantial part of the servient owner's land whereas in the latter it was only a small coal shed on a much larger block of land. His Lordship said at [57]; 2641-2642 that in considering whether a servitude (or an easement) was valid one should only look to the impact of the rights granted to the dominant owner on the servient owner's proprietorship of the part of the land that is actually subject to the restrictions of the servitude. This was because otherwise a servient owner could employ a "stratagem" of granting a servitude over part of its land and then selling the residue of the land not subject to the servitude so as to defeat the servitude. He said that such a stratagem would not work because one should focus on the land actually affected by the servitude and therefore the selling of the surrounding land is immaterial. However, I note that at [59]; 2642 his Lordship had regard to the potential for the servient owner to "build above or under the parking area". Strictly speaking the land subject to a servitude for parking, absent contrary intention, is the surface of the earth and sufficient air space to accommodate the vehicles that will park there, so it is not immediately obvious that the servient owner's ability to build above or below ought to be a relevant consideration on his Lordship's own criteria. 32Lord Scott went on to further disapprove the test in London and Blenheim Estates Pty Ltd v Ladbroke Retail Parks Ltd. His Lordship rejected the idea that for there to be a valid servitude there must remain to the servient owner a reasonable use of the servient tenement. While reserving some concerns about how one assesses what is a "reasonable" use, his Lordship's primary complaint about the test was essentially grounded in policy. In his view, a servient owner ought to be able to grant a servitude that deprives it of all reasonable use of the land in the sense that the servient owner should not be obliged to reserve to itself some substantive user of the land affected by the servitude. His Lordship seemed to consider it artificial and undesirable as a matter of policy that a right to park 19 cars in a space able to hold 20 cars could be a valid servitude but a right to park 20 cars in the same space would not be. His Lordship felt that once one accepted that a servitude for parking one car in a large area is valid then there is no reason why one should not also be able to validly grant a servitude that provides just sufficient room for the car without any additional space available for the servient owner in the affected area. His Lordship said that in this case the servient owner would remain the "owner of the land and in possession and control of it" (at [59]; 2642-2643). Thus the preferred test for validity of a servitude or easement would be "whether the servient owner retains possession and, subject to the reasonable exercise of the right in question, control of the servient land". 33Lord Neuberger of Abbotsbury supported Lord Scott's views, agreeing at [139]-[143]; 2663-2664 that there is no reason why a servient owner should not be able to subject its land to a servitude or easement where "the parties have chosen to identify a precise space in the area, over which the right is to be exercised, and the space is just big enough to hold the vehicle". However, his Lordship did express reservations (at [144]; 2664) about saying that exclusion of the servient owner from occupation, as opposed to possession, of the land subject to an easement would not prevent there being a valid easement. His Lordship was concerned that there might be unexpected consequences from such a decision that could "lead to the logical conclusion that an occupational licence should constitute an interest in land". 34The approached advocated in Moncrieff v Jamieson by Lord Scott and generally approved by Lord Neuberger differs substantively from that taken by the Court of Appeal in Clos Farming Estates Pty Ltd v Easton (and also the approach in London and Blenheim Estates Pty Ltd v Ladbroke Retail Parks Ltd). Two issues clearly emerge. The first issue is whether one examines the impact of the purported easement on the servient owner's proprietorship of only that part of the servient tenement that is actually affected by the easement or if instead one looks to the effect on the entirety of the servient tenement. The second is whether it is enough for a valid easement that the servient owner maintains possession and control or if this requires the servient owner to retain some substantive or reasonable use of the land. 35There does not appear to be a statement of authority in Australia since the decision of the House of Lords in Moncrieff v Jamieson that has determined which line of authority ought to be followed. The Court of Appeal of Western Australia considered an easement for car parking in The Owners of East Fremantle Shopping Centre West Strata Plan 8618 v Action Supermarkets Pty Ltd [2008] WASCA 180. Buss JA, with whom McLure JA and Murray AJA agreed, referred to the tests posed in London and Blenheim Estates Ltd v Ladbroke Retail Parks Ltd and Moncrieff v Jamieson (at [63]-[64]). His Honour noted that Lord Scott doubted the correctness of the former, but he did not attempt to decide which, if either, were correct. 36In Brydall Pty Ltd v Owners of Strata Plan 66794 [2009] NSWSC 819; (2009) 14 BPR 26,831 McDougall J upheld the validity of a claim for an easement for car parking. His Honour said that the right of parking claimed was not so extensive as to deprive the servient owner of its proprietorship. The area claimed to be subject to the easement was less than 15 per cent of the overall area of the servient tenement. One of the issues in dispute was whether the rights given to the dominant owner were exclusive rights over the relevant land. His Honour said that even if the rights did endow to the dominant owner exclusive user of the part of the servient tenement affected by the easement and that as a result the servient owner was deprived of the whole beneficial use of the land subject to the easement this was not necessarily a relevant consideration (at [15]; 26,833). He said that this was because Copeland v Greenhalf may overstate the principle and doubt was cast upon it in Moncrieff v Jamieson. His Honour also said that the trend in Australian authorities was to ask whether the rights asserted by the dominant owner under the easement impeded the reasonable use of the servient tenement as a whole, citing Weigall v Toman. The fact that the easement burdened less than 15 per cent of the servient tenement meant that it would not impede the reasonable use of the servient tenement as a whole. This would appear to support the approach in London and Blenheim Estates Pty Ltd v Ladbroke Retail Parks Ltd and be contrary to the comments of Lord Scott in Moncrieff v Jamieson, despite the fact that McDougall J referred to that case with apparent approval when disapproving Copeland v Greenhalf. 37In Ryan v Sutherland [2011] NSWSC 1397; (2011) 16 BPR 30,101 there was a claim for an easement for "full and free exclusive use" of a portion of the servient tenement by the dominant owner. Black J reviewed the authorities and noted the divergence between the test in London and Blenheim Estates Ltd v Ladbroke Retail Parks Ltd as applied in cases such as Weigall v Toman and Brydall Pty Ltd v Owners of Strata Plan 66794 on one hand and the statements of Lord Scott in Moncrieff v Jamieson on the other. His Honour did not attempt to decide which was the correct test but concluded that the rights in question would satisfy either test. In applying the former test, Black J identified that the burdened area was a relatively small part of the servient tenement and that the purported easement did not confer exclusive or unrestricted user of the whole of the servient tenement on the dominant owner as the servient owner retained possession and control of the part of the servient tenement not subject to the restriction. In applying the latter test, his Honour examined the limitations placed on the dominant owner's user of the easement, namely that it could only be used for recreation, gardening and erection and maintenance of facilities referrable to recreation and gardening. As his Honour put it, the dominant owner could not construct an industrial facility on the servient tenement. His Honour held that the servient owner retained possession and control of the part of the land subject to the easement and identified that one aspect of this retention of possession and control was "the ability to restrain the use of the land other than for the specified purposes" (at [23]; 30,108). This is similar to the line of reasoning adopted by Brownie J in Evanel Pty Ltd v Nelson. 38Insofar as Moncrieff v Jamieson is inconsistent with Clos Farming Estates Pty Ltd v Easton, I am bound to follow the latter. I do not think that the difference of opinion in White v Betalli renders that Court's earlier judgment in Clos Farming Estates Pty Ltd v Easton any less binding. Thus I am bound to follow the approach in Clos Farming Estates Pty Ltd v Easton and London and Blenheim Estates Pty Ltd v Ladbroke Retail Parks Ltd rather than Moncrieff v Jamieson. 39If the applicable test is whether there remains to the servient owner a reasonable use of the servient tenement in its entirety then I think that the purported easement under consideration here must be capable of being validly granted. It is true that the vast majority of the surface area of the land is affected by the easement. However, the plaintiff is permitted to build above the surface area into the airspace and also to use the subterranean space. The plaintiff thereby enjoys a very substantial user of the land. 40Moreover, even limiting consideration to the use of the surface of the land, the plaintiff is not excluded from the land but remains able to use the land in conjunction with the second defendant. The plaintiff can do as it pleases with the surface of the land insofar as this does not disturb the rights of the second defendant to park on the land. The plaintiff, its agents and its invitees and so on can park on the land. It is true that the second defendant and its patrons could entirely fill the car park and leave the plaintiff without any car spaces. This would no doubt substantially detract from the plaintiff's user of the land if this were to occur. But the practical reality is that both parties will use the car park simultaneously to a greater or lesser extent. An easement inherently involves tempering the servient owner's user of the servient tenement so as to accommodate the dominant owner's user. In a case such as this where the purported easement enables both the dominant and servient owners to share a resource, it is necessary to have regard to how the easement will be used as a matter of practice rather than focus unduly on the rights available to one party should the other exercise its rights to the maximum extent available if such an event is unlikely to occur. The plaintiff is able to use the car park and from a practical perspective the extent of its user is substantial in that there are 198 car spaces available for the patrons of both the plaintiff's and the second defendant's businesses to share. The plaintiff has far more than nominal proprietorship. 41Counsel for the plaintiff relied on Copeland v Greenhalf to impugn this easement by arguing that the ability of both the plaintiff and the second defendant to use the land amounted to a claim for joint ownership and was therefore an impermissible claim for beneficial ownership of the land. I do not think that the rights claimed in this easement rise as high as joint ownership as the second defendant is only able to use the land for car parking. In Copeland v Greenhalf the purported easement was claimed to arise by prescription, which meant that the extent of the dominant owner's user had to be determined from its practice over the years in how it used the land. The extent of user sought by the claimant was very broad and with reasonably insubstantial limitation. This was said by Upjohn J to be effectively a claim for joint ownership and I understand that that might be so where the dominant owner can use the land affected by the easement as it likes, because then the dominant owner's rights in the servient tenement have practically the incidents of ownership. But where the rights of the dominant owner are restricted such that it can only enjoy the servient tenement in a limited way and so the dominant owner's user is subject to the servient owner's right to enforce those limitations then that element of control in the servient owner means that there cannot be joint ownership. The plaintiff's right to limit the second defendant's user of the land to car parking means that the second defendant in no way could be said to have rights approaching joint ownership of the land. 42In saying that there is no claim for joint ownership when the servient owner has the right to restrict the dominant owner's user in this way, I recognise that Clos Farming Estates Pty Ltd v Easton is inconsistent with the proposition in Evanel Pty Ltd v Nelson that it is sufficient for a valid easement if there is a right in the servient owner to enforce a limitation on the dominant owner's user of the servient tenement despite the exclusion of the servient owner from the land. However, I think that this right to enforce a limitation on user is a relevant consideration when the servient owner is not excluded from the land, but is able to share use of the land with the dominant owner. Clos Farming Estates Pty Ltd v Easton does not bear upon that situation. 43In the event that the approach in Moncrieff v Jamieson ought to be applied as the test of the validity of this easement, I am still inclined to think that this is capable of being a valid easement as the plaintiff remains in possession and control of the land. It is not excluded from the land and it can use the land as a car park simultaneously with the second defendant. Moreover, the ability of the plaintiff to enforce the limitation on the second defendant's user - that it is limited to using the land as a car park - constitutes an ability in the plaintiff to control the land such that the defendant's rights do not derogate impermissibly from servient owner's proprietorship: see Evanel Pty Ltd v Nelson and Ryan v Sutherland (assuming in this situation that Clos Farming Estates Pty Ltd v Easton was not applicable authority). 44Even if Moncrieff v Jamieson is correct, the plaintiff's ability to use the airspace and subterranean space is relevant and points in the direction of a valid easement. As I noted above, Lord Scott referred to the use of the airspace as a relevant consideration despite his view that one should only look to that part of the land actually affected by the servitude. The ability to use the airspace and subterranean space is relevant because it bears upon how the plaintiff can use the surface of the land, being the part of the land subject to the easement. The plaintiff has the ability to use the surface of the land to support whatever developments it might choose to engage in above or below the surface. This is a very real user of the surface of the land and it demonstrates both a use of the land open to the plaintiff and the fact that the plaintiff remains in possession and control of the land. 45I conclude that the wording in the document could on registration give rise to an easement.

Exception to indefeasibility 46If I am correct in my conclusion that the content of Memorandum of Transfer J493622 is capable of forming the subject matter of a grant and so could be a valid easement it is next necessary to determine whether the exception to indefeasibility provided by s 42(1)(a1) applies. This exception is set out above in para [11]. 47This exception has two requirements. First, there must be an omission of the easement. Secondly, the easement must have been validly created under the Real Property Act (no other Act being relevant to the creation of the easement in question). As will be seen, the relevant question to consider in addressing both requirements in the instant case is whether the easement has been registered, and this will in turn require an analysis of what it means for an easement to be registered. 48By way of background, the former s 42(1)(b) provided an exception to the registered proprietor's indefeasibility: "in the case of the omission or misdescription of any right-of-way or other easement created in or existing upon any land." There was no requirement that the easement was "validly created", but rather that it was "created in" any land. 49In Australian Hi-Fi Publications Pty Ltd v Gehl [1979] 2 NSWLR 618 the NSW Court of Appeal held that for an easement to be omitted under s 42(1)(b) it must be absent from the register as a result of fault or neglect on the part of the Registrar-General (at 622). This interpretation was overruled by that Court in the later case of Dobbie v Davidson (1991) 23 NSWLR 625 in which it was said that an easement was omitted when it was simply absent from the register. 50The plaintiff accepted this understanding of the word "omission" but submitted that s 42(1)(a1) imposes an additional requirement to enliven the exception to indefeasibility in that the easement must be "validly created". Drawing on Professor Butt's Land Law, 6th ed (2009) Lawbook Co at [20-86], the plaintiff argued that the requirement that the easement was "validly created" under the Real Property Act meant that it must have been registered as registration is the manner in which easements are created under that Act. The second defendant submitted that an easement was "validly created" if it complied with s 88 of the Conveyancing Act. For the reasons that follow that submission ought to be rejected and the plaintiff's submission ought to be accepted. 51In my opinion Professor Butt is correct to state that an easement is "validly created" under the Real Property Act by its registration. It does not exist at law before registration (except where it was created while the land was under Old System title or it was created by another Act of Parliament). Thus the relevant question is whether the easement has been registered. Contrary to the second defendant's submissions, s 88 of the Conveyancing Act does not create an easement if it complies with the requirements in subs (1). The subsection relates to enforceability of easements rather than their creation. Moreover, that subsection provides that an easement is unenforceable against a person interested in the land "unless" its requirements are satisfied. The word "unless" means that the requirements of subs (1) are necessary but not sufficient for an enforceable easement. 52Before I consider whether the easement in question has been registered, I should refer to the recent decision of the High Court in Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd [2013] HCA 11. That case bears upon the interpretation of the word "omission" in s 42(1)(a1) and as a result it will also be necessary for the purposes of considering that part of the exception to determine whether the easement has been registered. 53The joint judgment of Hayne, Crennan, Kiefel and Bell JJ considered the requirements of s 42(1)(a1) of the Real Property Act (Gageler J wrote a separate judgment in which his Honour did not find it necessary to confront the issue). In the joint judgment at [22]-[25] their Honours considered the meaning of an "omission" of an easement and drew attention to the fact that "omission" presupposes that the easement exists in the first place and so the exception to indefeasibility provides for the continuation of its existence. Hence the statement in Dobbie v Davidson that "omission" of an easement means that the easement is absent from the register was correct on the facts of that case because the easement had already been created when the land was under Old System title: the presupposition that the easement existed was fulfilled. It is likewise in the case of an easement created by an Act of Parliament other than the Real Property Act where the easement thereby created is not recorded on the register. In that situation that other Act provides for the existence of the easement and therefore the preliminary requirement of "omission", that the easement exists, is met. 54Their Honours then went on to say at [24] that the understanding of "omission" as meaning "not there" was: "capable of application to easements created under the RPA, at least in the case of an easement created by registration [31] of the relevant dealing under the RPA but not recorded on the folio relating to the servient tenement. The easement in that case continues to exist because it has been registered and not removed from the Register." Footnote 31 in that extract says: "Section 36(6A) provided that registration occurs "when the Registrar-General has made such recording in the Register with respect to the dealing as the Registrar-General thinks fit"." 55It is apparent from the extracts above that their Honours were of the opinion that an easement could be created under the Real Property Act by registration but without it being recorded on the servient tenement, at least as that Act presently stands. Two important points emerge from these extracts. First, registration is identified as the requirement for creation of an easement under the Real Property Act (the fact that an easement had been created being the necessary presupposition for "omission" of the easement). Secondly, s 36(6A) specified the requirements for registration to have occurred. 56It follows that registration of the easement is necessary for both requirements of s 42(1)(a1) - that there has been an "omission" of the easement and that the easement has been "validly created". However, this leaves the question of what it means for an easement to be registered. Section 36(6A) was not in force at the relevant time at which the easement under consideration here was purportedly created. The predecessor to that subsection is the now repealed s 35. That section relevantly provided: "... every memorandum of transfer or other instrument purporting to transfer or in any way to affect land under the provisions of this Act, shall be deemed to be so registered so soon as a memorial thereof, as hereinafter described, has been entered in the register-book upon the folium constituted by the existing grant or certificate of title of such land ..." Section 37 provided: "Every memorial entered in the register-book shall state the nature of the instrument to which it relates and such other particulars as the Registrar-General directs, and shall be signed by the Registrar-General." 57Section 35 refers to a memorandum of transfer that affects land and deems it to be registered when a memorial is entered on the certificate of title of "such land", meaning the land that the transfer purports to affect. A grant of an easement affects the servient tenement as it is an encumbrance upon that land. Hence s 35 provides that a necessary precondition for an easement to be registered is that a memorial of the memorandum of transfer creating the easement has been recorded on the servient tenement. In the absence of a recording of the memorandum of transfer creating the easement on the servient tenement, the easement has not been registered and therefore it cannot be said to have been created. Consequently, such an easement is neither omitted (not meeting the presupposition identified in Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd) nor validly created. The memorial would normally be in terms of "easement created by transfer no ...", but on the law as stated in Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd it would be sufficient if the easement were stated to be a covenant. 58The defendants challenged this line of reasoning. It was their submission that s 35 must be read in the context of s 47, which at the relevant time provided: "Whenever any easement or any incorporeal right other than an annuity or rent-charge in or over any land under the provisions of this Act is created for the purpose of being annexed to or used and enjoyed together with other land under the provisions of this Act, the Registrar-General shall enter a memorial of the instrument creating such easement or incorporeal right upon the folium of the register-book, constituted by the existing grant or certificate of title of such other land." This section expressly provided that the Registrar-General was to enter a memorial of an easement on the dominant tenement, being the "other land" to which the easement is annexed. The defendants submitted that it was sufficient for the s 42(1)(a1) exception to be enlivened if the Registrar-General had discharged his duties under s 47 by recording the easement on the dominant tenement, as then the failure to record the easement on the servient tenement (as per s 35) was an omission of the easement. 59To support this submission, the defendants referred to the judgment of Wootten J in Papadopoulos v Goodwin [1983] 2 NSWLR 113. They referred to his Honour's statement at 118 that: "In my view all this creates a sufficient duty on the Registrar to record an easement on the folio relating to the servient tenement to make his failure to do so an "omission" within the meaning of s 42(1)(b)." This was cited with approval by Hope JA in Christopoulos v Kells (1988) 13 NSWLR 541 at 547. The defendants said that this statement meant that a failure to record the easement on the servient tenement was an "omission", and so an easement that was recorded on the dominant tenement but not the servient tenement existed but was omitted and thus enlivened the s 42(1)(a1) exception. 60I note that Wootten J and Hope JA proceeded on the understanding of "omission" derived from Australian Hi-Fi Publications Pty Ltd v Gehl that the absence of the easement must result from fault by the Registrar-General, which reflected the law before Dobbie v Davidson was decided. Wootten J said that despite s 47 only imposing an express obligation on the Registrar-General to record the easement on the dominant tenement, if there were no obligation on the Registrar-General to record the easement on the servient tenement then there could be no fault in failing to so record the easement and so the exception would be otiose. That is, his Honour understood "omission" to require fault and there could be no fault without an obligation to record. Thus it was reasoned that the legislative scheme gave rise to an implied obligation on the Registrar-General to record the easement on the servient tenement. His Honour then went on to say at 117: "Section 36(6A) provides that a dealing is registered when the Registrar-General has made such recording in the register with respect to the dealings as he thinks fit. In view of the definition of register in s 31B(2) this does not in terms require a recording of the dealing on the relevant folio, but the Registrar could not refuse to make a record on a folio that was necessary for the protection of a properly created estate or interest under s 42(1)." His Honour then made the statement I have extracted above at para [59] and upon which the defendants rely. Having regard to the reasons for which Wootten J made this statement, I do not think that it supports the defendants' argument in the instant case. First, it is based on an understanding of "omission" that has since been overruled in Dobbie v Davidson, which was in turn further developed recently in Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd. Secondly, and more importantly, his Honour expressly based his reasoning on the terms of ss 36(6A) and 31B(2) insofar as these sections do not require an easement to be recorded on the servient tenement before the instrument creating it is deemed to be registered. Thus in the case before his Honour the easement could be created (and hence omitted) by being recorded on the dominant tenement alone as this was sufficient for registration. Wootten J acknowledged that the situation would be different if, as in this case, ss 36(6A) and 31B(2) were not in force but rather s 35 applied. His Honour said at 121 that in such a case: "It would follow that the transfer, in so far as it purported to affect what is now the defendants' [servient owners'] land, was not deemed to be registered until it was entered on the certificate of title of that land. Hence it is to be regarded as an unregistered instrument." For these reasons the authorities referred to by the defendants do not aid their argument as the legislation applicable at the relevant time in this case was markedly different. 61The defendants' submissions reverse the roles of ss 35 and 47. They say that for there to be an omission, there must be compliance with s 47 for the easement to exist but non-compliance with s 35 for it to be omitted. However, registration of the easement by recording it on the servient tenement pursuant to s 35 is the requirement for existence of the easement. Section 35 makes it quite clear that a memorandum of transfer affecting land is registered when recorded on the affected land, which in the case of an easement means the servient tenement. As Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd makes clear at [24], for an easement to be omitted it must satisfy the presupposition of existence. In the joint judgment their Honours said that for the easement to exist as a result of being created under the Real Property Act it must be registered, and then they referred to s 36(6A) as providing the relevant criterion for whether a dealing has been registered. As s 36(6A) was not in force at the relevant time, the content of this requirement is instead provided by s 35, and so s 35 provides the necessary precondition for the existence of an easement, rather than s 47 as advocated by the defendants. Indeed, s 41 provides that the instrument (or "dealing" as the Act now provides) is of no effect to pass any estate or interest in land until it is registered in accordance with the provisions of the Act. If the requirements of registration under s 35 are not fulfilled then I cannot see how the easement can exist. 62On the construction of ss 35 and 47 advanced by the defendants the existence of an easement did not depend on whether it was recorded on the servient tenement so long as it was recorded on the dominant tenement. This is contrary to the decision in Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd. Windeyer J said (at 88): "The question for us is what rights, if any, Bursill has in respect of the building over the passage. That depends primarily on Bursill's [the servient owner's] certificate of title, not on a right appurtenant to Berger's [the dominant owner's] land appearing in Berger's certificate of title." That case concerned a grant of what was purportedly an easement but in fact on its true construction was broader. Nonetheless, it demonstrates that the general principle applicable when s 35 was in force was that the existence of an easement depended pre-eminently on the content of the register corresponding to the servient tenement rather than the dominant tenement. 63Furthermore, even if I am wrong in my conclusions as to the interaction of ss 35 and 47 and the requirements for creation and omission of easements, the defendants' arguments still do not address the requirement in s 42(1)(a1) that the easement be "validly created" and Professor Butt's point that this means that the easement must have been registered. Where s 35 provides the criterion for registration of an easement I think the inescapable conclusion is that if the easement has never been recorded on the servient tenement then it was never registered and so was not validly created. 64As I have concluded that due to an absence of registration on the servient tenement there was neither "omission" of the easement nor was it "validly created", the exception in s 42(1)(a1) is not enlivened. 65I note that in argument no party took any point challenging the applicability of the now repealed s 35 to the instant case. For completeness, I observe that in Papadopoulos v Goodwin Wootten J said at 121: "... to determine whether a dealing is registered in the manner provided by the Act for the purposes of s 41, I think that it is necessary to look at the provisions in force at the time that the acts relied on as registration were performed." I agree. However, I think that in determining whether an exception to indefeasibility is enlivened one should look to the presently enacted s 42 and thus have regard to s 42(1)(a1) rather than the now repealed s 42(1)(b). Again, no party took any point on this matter and it was assumed in argument that s 42(1)(a1) was the applicable exception. 66As the foregoing reasons dispose of the case it is only necessary to touch briefly on one other matter I raised when I relisted the matter for further submissions. At the relevant time, s 46 of the Real Property Act provided: "When land under the provisions of this Act or any estate or interest in such land is intended to be transferred or any right-of-way or other easement is intended to be created or transferred, the registered proprietor may execute a memorandum of transfer in the form of the Fifth, Sixth, or Seventh Schedule hereto, which memorandum shall, for description of the land intended to be dealt with, refer to the grant or certificate of title of such land, or shall give such description as may be sufficient to identify the same, and shall contain an accurate statement of the estate, interest, or easement intended to be transferred or created, and a memorandum of all leases, mortgages, and other encumbrances to which the same may be subject." 67It was held in Crowley v Templeton (1914) 17 CLR 457 that although the section says that the registered proprietor "may" execute a memorandum of transfer in the applicable form this really means "must" as the provisions "although in form permissive or facultative, are in effect peremptory and exclusive" (at 463). I referred counsel to the passage in Baalman and Wells, The Practice of the Land Titles Office (New South Wales), 3rd ed (1952) Lawbook Co at 110-111 which quotes from Crowley v Templeton and concludes: "Therefore an instrument in the form of a covenant will not be registered under the RP Act as an easement." 68Easements lie in grant, not in contract. A transfer is equivalent to a grant. Where land is transferred and an easement granted in favour of the land transferred over land held by the transferor the appropriate course is to adopt the form in Schedule 5 so that after the transfer of land the easement is created by the words commencing "together with" or "and the transferor hereby grants". In the present case the covenant-type wording does not conform with the requirements of s 46. Thus it could not be registered as an easement and would therefore not have been validly created. It is not necessary to consider this further as it has not been registered. 69Finally, I must express some disquiet at the attitude of the Registrar-General and his representatives in this action. First, the Registrar-General notified the plaintiff that he intended to register the "covenant" on the title to the plaintiff's land. If it were a covenant, and presumably the Registrar-General thought it was, there was no such right. Secondly, so far as the evidence shows the Registrar-General did not suggest to the plaintiff that he regarded the instrument as a grant of an easement. Thirdly, until I brought the matter to the attention of the parties the Registrar-General did not draw attention to s 35 of the Real Property Act as it then stood. Although the plaintiff should have done so, the Registrar-General as custodian of titles was obliged to do so. Finally, attention was not drawn to the matters I have referred to in paras [67] and [68] of this judgment. I consider that even if the plaintiff did not draw attention to this then the Registrar-General ought to have done so.

Orders 70For the above reasons I make the following declaration and orders.

1. Declare that the plaintiff holds its interest as registered proprietor of the land in Certificate of Title Folio Identifier 4/219028 free of any easement or restrictive covenant purportedly created by Memorandum of Transfer J493622 dated 10 October 1963 between Green Valley Shopping Centre Pty Ltd as transferor and Tooth & Co Ltd as transferee.
2. Order that the first defendant be restrained from registering any easement or restrictive covenant purportedly created by Memorandum of Transfer J493622 on Certificate of Title Folio Identifier 4/219028.
3. Order that the defendants pay the plaintiff's costs. 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: 21 May 2013