These proceedings concern a rectangle of land of 7.3657 square metres ("the subject rectangle") at the rear of two adjoining properties in Oxford Street, Woollahra.
The plaintiff, Mr Rauli Karkulahti, seeks the transfer to him of the subject rectangle. The Court infers that the defendant, Ms Irene Notaras, resists that transfer. She is not present at Court today. She was called outside the Court at the commencement of these proceedings and did not appear. She appears not to be legally represented. This is one reason the Court will be adjourning the proceedings today to enable her to present her case to the Court if she wishes.
In accordance with the customary practice of the Court, to avoid the risk of identity theft, as both of these properties are still in the ownership of the plaintiff and the defendant, these adjacent properties will only be referred to as the plaintiff's property and the defendant's property; no street addresses need be given.
In the Court's view, it is in the best interests of the parties for the proceedings to be adjourned for a period of approximately two weeks to allow the defendant to appear, either in person, or by telephone. This will provide an opportunity for the Court to raise with her the option of the Court referring the proceedings out to mediation under Civil Procedure Act 2005, s 26 before directions are made that will lead to more expenditure by both sides of this litigation. This is a case which, in the Court's opinion, is particularly well-suited for a court annexed mediation, which can take place at minimal cost to the parties.
The plaintiff filed his Summons on 2 December, 2019 and it was first returnable before the Court on 7 February 2020. Until a few days ago, the plaintiff was not legally represented. The plaintiff constructed the claim in his Summons and with supporting affidavit evidence. The claim is difficult to follow but the Court has interpreted it as one for specific performance of a March 1987 agreement to purchase the subject rectangle ("the March 1987 Agreement"). But it now appears that the claim will be pursued as one for alleged adverse possession. If it is to be pursued, the pleadings will need to be amended and the adequacy of the evidence examined.
The Court is satisfied that the defendant, Ms Notaras, has been served, and has notice of the hearing of the proceedings today. Apart from the affidavit evidence that she was served with originating process, it should be inferred that she is aware of today's hearing, not least because she has sent an email to my Associate yesterday indicating she is aware of it. Although the email also indicates that the defendant thought, from something that the plaintiff said to her, that the plaintiff was not going to continue with the action.
The Court's present intent is for the matter to come back to Court in two weeks, and for Ms Notaras then to be asked whether or not she consents to a referral of the matter to mediation. For that purpose, it is important for her, and for any lawyer she might engage, to have a clear understanding of the issues being pursued in the proceedings. So these reasons will summarise the issues as they now stand.
With that short introduction the Court will now briefly survey the facts and the legal issues that are thought to arise from them.
[2]
A Rectangle of Land and Two Properties in Oxford Street
Oxford Street runs in a generally east-west direction in the area of these two adjoining properties, which are on its northern side. The plaintiff's property and the defendant's property are both rectangular in shape. The eastern side of the plaintiff's property and the western side of the defendant's property are a common boundary. In the north-eastern corner of the plaintiff's property the subject rectangle has been carved out of the plaintiff's property and added to the immediately adjacent property of the defendant.
The subject rectangle has dimensions of 1.525 metres in width, and 4.83 metres in length; that makes it 7.3657 square metres. It is unclear why the subject rectangle was subtracted from the plaintiff's property and attached to the defendant's property. But although the certificates of title of neither property are in evidence, the subtraction of the subject rectangle from the plaintiff's property is quite clear from a survey of the plaintiff's property in 2007.
The relevant history commences in March 1987, when the defendant's property was in previous ownership ("the previous owner"). The plaintiff held discussions in 1987 with the previous owner about the plaintiff acquiring the subject rectangle from the previous owner. They reached an agreement, which was recorded in writing on 14 March 1987.
The plaintiff's evidence is that the March 1987 Agreement between them, which refers to the plaintiff by his former name, was as follows:
"Agreement Between: VENDOR: [the previous owner, the defendant's address]
PURCHASER: Raleigh Kyte
[the plaintiff's address]
Land Description: Rectangle of land on the North West corner of [the defendant's property] and adjoining [the plaintiff's property]. 1.525 metres X 4.83 metres.
Price: Five Hundred dollars ($500.00) to be paid in full on execution of this agreement.
Works: Works to be carried out by the purchaser; Construction of a driveway at [the defendant's property] and the erection of a brick fence between [the defendant and plaintiff's properties] at the southern end of the property.
Upon making this agreement for the sale of land the vendor agrees to sell and the purchaser agrees to buy the property described above for the price stated and upon and subject to the following conditions;
All the costs of clearing and fencing the subject property to be borne by the purchaser.
All the costs associated with the Council and Land Titles offices to be borne by the purchaser.
Al the costs of the works described above to be borne by the purchaser.
The time limitation for the completion of the works described above to be borne by the purchaser.
Benefit of possession to be given to the purchaser at the date of execution of this agreement.
Title details of [the defendant's property] to be provided by the vendor at execution of this agreement.
[Signature of the previous owner of the defendant's property]"
In consideration for the plaintiff's acquisition of the subject rectangle, the plaintiff says he paid the expressed $500 consideration to the previous owner. This payment was recorded in a separate documentary receipt which was signed by the previous owner, according to the plaintiff's account.
As this contract for sale, and the receipt of the $500, are both signed by the previous owner and upon appropriate proof that the signature is that of the previous owner, the contract may have been enforceable soon after March 1987 by an action for specific performance against the previous owner. The parcel being sold was sufficiently well described in the written agreement. It would have been possible to craft a transfer of the subject rectangle so that it was conveyed from the previous owner to the plaintiff, so as to make the plaintiff's land a whole rectangle again.
But the plaintiff did not seek specific performance of the March 1987 Agreement against the previous owner. This parcel of land was not then transferred to the plaintiff, who did nothing more to pursue his rights to the subject rectangle for a long time.
It appears, from what the Court has been told, rather than from what is in evidence, that the plaintiff may have fenced off the subject rectangle sometime after March 1987, and used it, so the plaintiff claims, for many years up until the death of the previous owner of the defendant's land.
The Court has been told from the bar table that the previous owner of the defendant's land died in 2015, and the defendant acquired the defendant's property from her estate. Although there was no present evidence of these matters, this would explain how the defendant came to be the registered proprietor of the land next door to the plaintiff.
The evidence otherwise suggests that from between about 2015 up to the present time the plaintiff has had a number of conversations with the defendant in which the plaintiff has requested the transfer of the subject rectangle to him but the defendant has not acknowledged that he has any entitlement to this parcel of land and has resisted its transfer to the plaintiff.
[3]
Analysis - Specific Performance, Adverse Possession and Costs Proportionality
The plaintiff's case has been prepared largely by the plaintiff himself. His present legal representative, Mr Camille Dezarnaulds, only became involved on his behalf in the proceedings in the last few days. It is partly for that reason that the evidence lacks fundamental elements, which the Court would have expected to see in a case such as this. For example, the evidence does not even include a copy of the certificates of title of the plaintiff's land or the defendant's land.
But the Court has been told, and has no reason to doubt, that the defendant's land does not presently record a caveat in the plaintiff's favour, claiming an equitable interest arising out of the March 1987 contract for sale signed by the previous owner. The consequence of a failure to caveat what appears to be, on the face of it, a potential claim of an equitable interest against the previous owner, is that when the defendant purchased the land from the previous owner's estate, and that transfer was registered in the defendant's name, she acquired an indefeasible title under Real Property Act 1900, s 42 free of that claim. It is a fundamental tenet of the Torrens system of title by registration rather than registration of title, that when the defendant's title was so registered, it was taken free of all other claims and encumbrances, other than those notified on the title: Breskvar v Wall (1971) 126 CLR 376; [1971] HCA 70. In this case, nothing is recorded on the defendant's title so she must have become registered proprietor of the land including the subject rectangle entirely free of the plaintiff's claim. This would seem to be a complete answer to any claim for specific performance against the defendant.
When the Court first read the Summons and the evidence in these proceedings, it appeared to the Court that this was a claim for specific performance of the March 1987 Agreement. But such a claim could not possibly succeed for two reasons. First, the March 1987 Agreement is not enforceable against the defendant. She has indefeasible title in answer to the claim and she is not bound in Equity to do anything under the contract made with the previous owner. But the evidence also gives no coherent explanation as to why it was that the plaintiff did not seek to enforce the March 1987 Agreement for some 33 years before these proceedings were filed. During those 33 years the previous owner has died. The witness to the March 1987 Agreement may well have died, or become uncontactable. Evidence of the payment of the $500 would be difficult both to prove and to dispute.
The passage of time in a case such as this is likely to be highly prejudicial to the defendant, and would be a strong reason why the Court would not grant a decree of specific performance. But when in submissions this was pointed out to Mr Dezarnaulds, he indicated to the Court that his instructions were that if a specific performance case was not maintainable, that the case, would be conducted as a claim to the subject rectangle based upon the plaintiff's adverse possession of the area.
Such a claim does not obviously appear from the Summons, or indeed the evidence in support. Mr Dezarnaulds says that the subject rectangle was enclosed it with the plaintiff's land by a fence and separated it from the rest of the defendant's land. He says that it has been that way for a very long time, since prior to the death in 2015 of the previous owner.
That may well be so. But if it is, it does not appear clearly from the evidence. And of course such a claim about the fencing of the subject rectangle may well be disputed. Adverse possession claims in respect of Torrens title land are available but they are rare, and they can be very difficult to prove: Real Property Act, ss 45C, 45D and 45E and McFarland v Gertos (2018) 98 NSWLR 854; (2018) 019 BPR 38969; [2018] NSWSC 1629; Refina Pty Ltd v Binnie (2010) 15 BPR 28,633; [2010] NSWCA 192. On the evidence filed so far in these proceedings it is not possible even to venture an opinion whether such a claim is potentially available.
So the question arises as to what should be done now. The Court has several options. It could finalise the hearing of this matter today based on the current evidence. But the plaintiff has only just become legally represented and deserves a chance to put his house in order. Were this case to be determined today on the current evidence, the Court has indicated to Mr Dezarnaulds, that there is every prospect that the Court would dismiss the proceedings. But dismissing the proceedings would solve nothing. The plaintiff would remain able to bring a claim for adverse possession. Mr Dezarnaulds seeks an adjournment to put on more evidence to make out the adverse possession claim in these proceedings.
The Court will allow the adjournment for that purpose, but the Court is concerned that pursuing such a case, which will likely involve specialist advisors on both sides, will be expensive. To prove an adverse possession claim involves a considerable degree of precision and specialist legal expertise. To resist such a claim requires just as much precision and expertise. Such claims are normally pleaded and the plaintiff needs to ready himself for the expense of complying with an order that his potential adverse possession claim be pleaded.
When this matter was being managed by Justice Darke in the Real Property List, his Honour referred the plaintiff to the pro bono Legal Aid scheme conducted by the Law Society Bar Association, but the plaintiff declared that his actual financial means meant that he did not qualify to take advantage of the scheme. It may be that the defendant is in the same position, as the owner of the property next door.
But conducting this case may be too expensive for both sides. The Court is required by Civil Procedure Act, s 60 to implement the practice and procedure of the Court "with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject matter in dispute".
What is the amount in issue here? It is nothing more or less than the value of the land. With parties negotiating at arms-length in March 1987 the subject rectangle was thought to be worth $500. The website of the Reserve Bank of Australia provides an inflation calculator which shows that over the 32 years, between 1987 and 2019, at an average inflation rate of 2.9 percent, the original $500 in 1987 dollars would be $1,239.90 now. But everyone who lives in Sydney knows that real estate market values rise at a rate higher than inflation, and it may be that the subject rectangle is worth considerably more than that. But given where the subject rectangle is, at the back of the property, it may nevertheless still not be worth more than a few thousand dollars. All that can be said is it is probably worth something more than its inflation value. But it is highly likely that if both sides lawyer-up in this case, that the amount they will spend on their lawyers will quickly exceed the amount in issue.
So mindful of this, the Court has decided that the best course, before the parties spend any more money, is to attempt to mediate this dispute. So the Court will adjourn the proceedings for approximately two weeks so that the defendant can be given an opportunity to appear, to indicate to the Court whether or not she agrees to attend a mediation of these issues. But the Court has the power to order a mediation whether or not the defendant agrees.
The plaintiff, through his counsel, has indicated to the Court that there is, notwithstanding these differences, a reasonable relationship between these two neighbours. And for that very reason it is desirable that mediation take place, so that the parties are not forced into an expensive dispute which may ruin whatever relationship they now have.
But if mediation is not successful, the Court may well order that the plaintiff and the defendant will have to put on more detailed evidence, and to prepare this matter with pleadings for the hearing on an adverse possession case.
But for now the Court will not make any other directions requiring the plaintiff to invest further financial resources in this matter. But I will direct my Associate to forward a copy of this judgment to the defendant with an invitation for her to appear in person at the adjourned hearing. But the Court understands the defendant is in her 80s, and given the current COVID-19 public health restrictions, she may not wish to venture out to Court in person. The Court will certainly permit her to appear by telephone, and those details will be provided to her as well, if she contacts my chambers.
So with those observations in mind, the Court will then make the following orders and directions: the Court will adjourn the proceedings to Thursday 26 November at 9.30am; and I will request my Associate to forward a copy of the published judgment in these proceedings, and the orders made today to the defendant. She will be requested to appear on 26 November, if she chooses, by telephone at the hearing due to her age.
Although it is expensive for the defendant to obtain legal advice, that is what the plaintiff has now done, and appropriately so. For a case of this potential complexity, it is difficult for the parties to propound or to contest a case about the claimed adverse possession of property without the assistance of lawyers.
The Court cannot give legal advice, and will not, to either party. But the Court will for the purpose of indicating how the Court's procedures can work most efficiently, state that: this is a case where the parties on both sides would be greatly assisted if they were to engage lawyers. The efficient and fair conduct of the proceedings will be difficult without such assistance, but the Court is also mindful that the costs should be kept to the minimum.
[4]
Conclusion and Orders
Accordingly, his Honour makes the following orders and directions:
1. Adjourn these proceedings before me this at 9.30am on 26 November 2020 for mention.
2. Note that my Associate will forward a copy of the published judgment and the orders to the defendant, with an invitation to her to appear by audio-link.
[5]
Amendments
17 November 2020 - [34] "Wednesday" to "Thursday"
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Decision last updated: 17 November 2020