That note also accurately reflects a conversation which Mr McKeand and Mr Thomas had on 12 November 2004.
47 On 15 November 2004 Mr de Belin took the draft transfer granting easement, and plan, to the Thomas' home, and gave them to Mr Thomas. He also handed over a tax invoice, for a total of $198, which stated it was for "easement for services". The name of the recipient of that tax invoice was left blank - an event which would be understandable if it was the McKeands who were to pay for the drawing of the plan. Mr Thomas paid Mr de Belin the amount of that invoice on the spot, in cash.
48 Nothing that Mr Thomas said to Mr de Belin, in any of these dealings, gave Mr de Belin any reason to doubt that Mr Thomas knew what an easement was.
49 Though Mr Thomas told Mr McKeand on 19 November 2004 that "we will stick to the agreement", on 16 February 2005 Mr Thomas told Mr McKeand that Mrs Thomas would not sign the documents; "She says that you can leave it there but she doesn't want it dug up if something goes wrong."
50 Later on 16 February 2005, and also the next day, Mr Klinger, solicitor for Mr and Mrs Thomas, telephoned Mr McKeand. He made clear that his position was that his client said there was no agreement for the grant of an easement, and that if the McKeands wanted an easement they would have to make an application under section 88K Conveyancing Act 1919, which would involve them in paying both compensation, and the legal costs. Mr McKeand's immediate response was that there was an agreement, and that he would be seeking specific performance of it. Mr Klinger suggested that $30,000 would be an appropriate amount of compensation.
51 I accept that the events occurring after February 2002, which I have just recounted, support the plaintiffs' account of the agreement entered on 12 February 2002.
52 Mr Thomas gave evidence to the effect that, until Mr de Belin explained the ramifications of an easement to him on 15 November 2004, he thought than an easement was a sketch or plan indicating where services were, which needed to be drawn up so that relevant governmental authorities could have it for future reference. Mr Thomas had had some experience of easements in his previous building work, but it seems to me that his having had that experience is consistent with his having the understanding of an easement that he gave evidence about. On balance, I accept his evidence about his understanding of what an easement amounted to. That he had that understanding of what an easement is makes it all the more understandable that he would see no harm in agreeing to grant the McKeands an easement concerning his wife's property, without obtaining her prior permission.
53 There is no suggestion that either Mr or Mrs McKeand were aware that Mr Thomas had a defective understanding of what an easement was. In accordance with the objective theory of contract formation, when Mr Thomas agreed to grant an easement, the contract resulting was to grant the entity which the law recognises as an easement, not to grant what Mr Thomas thought an easement was: Powell v Smith (1872) LR 14 Eq 85 at 90.
54 I record that no attempt was made to attack the contract on the basis of mistake, or that it was vitiated in accordance with any equitable doctrine.
55 One further factor supports the conclusion that an agreement of the kind I have found was indeed made. The previous dealings between the Thomas' and the McKeands are likely to have taught the Thomas' that the McKeands were not slow to threaten litigation, and were prepared to actually litigate. Even though there had been friendly relations between the two men for some months, it still seems likely that Mr Thomas would seek the McKeands' permission before digging the trench for the cable, and laying the cable, if there was a risk that the work involved in that task might infringe on the McKeands' rights. When the cable was to be laid in the position it was, close to the boundary, that risk was real.
56 I should also record that an attack was made upon Mr de Belin's evidence because Mr McKeand had a role in the preparation of one of Mr de Belin's affidavits. That role consisted, however, in Mr McKeand being involved in placing into affidavit form, with no change of substance, a written statement which Mr de Belin composed as a piece of continuous prose. The resulting affidavit reproduced even obviously inadmissible passages that were included in Mr de Belin's statement. Mr McKeand should have known that it is better for a party to litigation to avoid any involvement in the obtaining of evidence, lest that involvement give rise to a doubt about whether the evidence has been contaminated. However, in the present case the tendering of Mr de Belin's original statement has demonstrated that no such contamination actually occurred.
Was the Conversation of 12 February 2002 Contractual?
57 The defendants submit that there was no intention to enter contractual relations. I do not agree. While the conversation was conducted in a friendly way, and between neighbours, it was still on a serious topic, and the agreement was one which was intended to be acted upon, without any formalisation, inside a matter of days. Performance of it involved, as a reasonable person in Mr Thomas' position ought to have realised, the McKeands in relying on the agreement to be able to have in their home electricity and telephone services, which any reasonable person realises are very important in current urban living conditions. The seriousness to the promisee of taking the steps envisaged by the contract is a proper matter to take into account in deciding whether an agreement is intended to be legally binding: Wakeling v Ripley (1951) 51 SR (NSW) 183 at 187; Riches v Hogben [1985] 2 Qd R 292 at 297; Riches v Hogben [1986] 1 Qd R 315 at 316-7, 329.
58 The defendants submit there was no consideration for the agreement, because the consent of the McKeands was not needed to do anything which was done. I do not accept that submission. In fact, as I have found, the digging of the trench for the cable involved what would have been, if the agreement had not been entered, a trespass upon the McKeands' land. As well, the McKeands' permission for the workmen to come onto their land in connection with the cabling work was consideration which can support a contract, regardless of whether that permission was ever used.
59 Ms Culkoff, for the defendants, submits, concerning the agreement on 12 February 2002:
"Given the legal ramifications and given [Mr McKeand's] superior legal knowledge, the defendants submit he was obliged to put her fully on notice and advise her to seek her own legal advice. He did nothing."
60 I can see no basis of principle or authority upon which Mr McKeand had any such obligation.
61 I conclude that, apart from the question of whether Mr Thomas had authority to enter it, the conversation of 12 February 2002 amounted to a contract.
Whether any Implied Easement Arises, or Terms Giving Greater Detail to an Express Agreement to Grant an Easement Arise, Pursuant to Wheeldon v Burrows (1879) 12 Ch D 31
62 The plaintiffs submitted that the terms of the easement which Mr Thomas agreed to grant could be given greater detail pursuant to the first rule in Wheeldon v Burrows (1879) 12 Ch D 31.
63 In Wheeldon v Burrows (1879) 12 Ch D 31 Thesiger LJ (with whom James LJ and Baggallay LJ concurred), at 49, stated two "rules":
"The first of these rules is, that on the grant by the owner of a tenement of part of that tenement as it is then used and enjoyed, there will pass to the grantee all those continuous and apparent easements (by which, of course, I mean quasi -easements), or, in other words, all those easements which are necessary to the reasonable enjoyment of the property granted, and which have been and are at the time of the grant used by the owners of the entirety for the benefit of the part granted. The second proposition is that, if the grantor intends to reserve any right over the tenement granted, it is his duty to reserve it expressly in the grant."
64 I accept the analysis of Barrett J in Campbell v McGrath [2005] NSWSC 496; (2005) 12 BPR 23,073; [2005] ANZ ConvR 435 at [44] that the first of these "rules",
" … operates where the following elements exist: first, "the grant by the owner of a tenement of part of that tenement"; second, grant of the part "as it is then used and enjoyed"; third, the existence of "continuous and apparent easements" or "quasi-easements"; fourth, that those easements "are reasonably necessary to the property granted"; and, fifth, that the easements "have been and are at the time of the grant used by the owners of the entirety for the benefit of the part granted".
65 The Court of Appeal, in McGrath & Anor v Campbell & Anor [2006] NSWCA 180 at [34] also accepted that analysis.
66 I also accept the explanation that Barrett J gave, in Campbell v McGrath at [46]-[48], of what is meant by "quasi-easements" in this rule:
"46 Thesiger LJ's reference to "quasi-easements" was explained by Isaacs J in Nelson v Walker (1910) 10 CLR 560 (at p.582) as follows:
"Quasi-easements are such things enjoyed de facto during unity of possession as would, had unity not existed, have been easements."
47 … Russell J in Hansford v Jago [1921] 1 Ch 322 (at p.335) [explained the interpolation which Thesinger LJ made in the first rule] …:
"and the interpretation there interposed [by Thesiger LJ's reference to 'quasi-easements'] is necessary, because, where the owner of two tenements grants one of them, there can be no easement at the moment of the grant over the other tenement, the two tenements having belonged to one and the same person, and an easement being a right over the land of somebody else."
48 An example of the existence of "quasi-easements" bearing a strong resemblance to the facts of this case is given at paragraph 10908 of Butterworths' "Conveyancing Service New South Wales":
"For example, suppose that First Street and Second Street are parallel streets, Blackacre faces First Street and Whiteacre faces Second Street, so that the rear of Blackacre and Whiteacre adjoin. Suppose too, that whilst Blackacre and Whiteacre are in common ownership there is an open and apparent path across Whiteacre from the rear of Blackacre to Second Street, and another path across Blackacre from the rear of Whiteacre to First Street. These paths are not easements because the lands are in the sole ownership.""
67 As Barrett J explains in Campbell v McGrath at [49]:
"The requirement that the user be "continuous and apparent" has been interpreted generously …: see Borman v Griffith [1930] 1 Ch 493 where Maugham J (at 499) held that a right of way will not fail the test in Wheeldon v Burrows for lack of continuous user. To qualify as "apparent", the use must have been discoverable upon an inspection of the servient tenement. In Hansford v Jago (above), Russell J said (at p.338):
"Now what is required in the case of a quasi-easement is the quality of being apparent. That quality may be arrived at in different ways, and, no doubt, the easiest case is that of a made-up road; it is most important, if not essential, that the road should be made up when it is sought to establish the apparency of a quasi-easement of way over an unenclosed piece of land. But when every other possible indication is present as here and they all point to a defined and enclosed strip having been set aside to provide an access to the rear of certain houses, I certainly decline to hold, unless compelled to do so by authority, that the absence of a made-up road prevented the establishment of an implied grant."
68 To similar effect, Ungoed-Thomas J in Ward v Kirkland [1967] 1 Ch 194 at 225 said:
" … the words "continuous and apparent" seem to be directed to there being on the servient tenement a feature which would be seen on inspection and which is neither transitory nor intermittent; for example drains, paths … "
69 In other words, the "continuous" part of the first rule in Wheeldon v Burrows is to do with the features of the servient tenement which indicate the existence of the quasi-easement being continuously in existence, rather than that the user of the quasi-easement is a continuous user.
70 Though the decision in Campbell v McGrath was reversed by McGrath & Anor v Campbell & Anor [2006] NSWCA 180 that reversal was on a point not involving the principles I have just set out, and does not, it seems to me, affect the correctness of those principles.
71 If one applies those principles to the facts of this case, the only thing which could be said to be a grant, by Mrs Thomas, of part of a tenement which she owned occurred when she sold Lot 2 to the McKeands, and retained the land next door. However at that time there were no "quasi-easements" relating to the provision of electricity and telephone services to Lot 2 through the land that Mrs Thomas retained. Further, at the time the McKeands purchased their land from Mrs Thomas, an easement relating to the provision of electricity and telephone services to Lot 2 through the land that Mrs Thomas retained was not discoverable upon inspection of the servient tenement. I conclude that the first rule in Wheeldon v Burrows would have no application in the present case, even if the lots in question were old system lots. Thus it is unnecessary to consider the complications concerning the application of the rule in Wheeldon v Burrows to Torrens Title land, which the Court of Appeal considered in McGrath & Anor v Campbell & Anor [2006] NSWCA 180.
Authority of Mr Thomas?
72 The plaintiffs submit that, in the conversation Mr Thomas had with Mr McKeand on 12 February, he had actual, or implied, or ostensible authority to agree to the grant of the easement on behalf of Mrs Thomas.
73 Mr Thomas had experience in the building industry. A company with which he was involved had carried out one building development project, but he did not repeat that experiment. Mrs Thomas entrusted much of the administration of the building project for her new home and associated matters to him. It was Mr Thomas who was the principal contact with the builder. In the course of a fax to the builder on 27 December 2001 making a complaint, Mr Thomas described the builder's attitude as "aggravating to me, the customer", and said, "I am not prepared to authorise any further building works until we have sorted out the stage we are currently at." It was Mr Thomas, not Mrs Thomas, who dealt with the builder concerning variations, site meetings, progress claims and making complaints. In December 2002 he signed a Certificate of Practical Completion over the word "owner" even though that certificate identified "Ms Raphael" as being the owner. Mr Thomas was the person who dealt with Mr McKeand concerning obtaining the McKeands' approval to a variation in the Thomas' house plans, and the person who had contact with Mr de Belin about surveying matters. He discussed what he was doing with his wife regularly.
74 While Mr Thomas had a broad authority concerning matters connected with the building work, that authority did not extend, in my view, to authority to agree to transfer any interest in his wife's real estate. She never authorised him, in so many words, to grant an easement to the McKeands, or in any way to transfer an interest in her real estate. Transferring an interest in real estate seems to me to be an activity different in kind to carrying out the managerial or project supervision tasks which Mr Thomas carried out in connection with building the house, notwithstanding that he agreed to grant the easement for a purpose which was connected with the building of the house. Having authority to administer a contract is not the same as having authority to enter a contract: State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 at 194 per McHugh JA.
75 While the house was intended to be a home for both Mr and Mrs Thomas, their marriage was a second marriage for Mrs Thomas, and they both understood that, considered as an item of property, it was hers alone. As Mrs Thomas explained in cross-examination, her house was one which she had obtained after going through a very difficult divorce, it "represents my childrens' future and their inheritance", and in the course of her marriage with Mr Thomas "we have kept many things separate". Mr Thomas brought very little property into the marriage. At the time of the conversation in February 2002 Mr and Mrs Thomas had been married for less than four years. In these circumstances, and given the difference in kind which seems to me to exist between transferring an interest in real estate and carrying out managerial or project supervision tasks, I do not infer that Mrs Thomas conferred authority on Mr Thomas to grant an easement to the McKeands, or in any way to transfer an interest in her real estate.
76 Ostensible authority arises from the person who is alleged to be the principal having held out the agent as having a particular type of authority: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503; Crabbtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72 at 78; Di Bello & Anor v De Costi Seafoods (Holdings) Pty Ltd [2005] NSWCA 267, at [24]-[25]. Mrs Thomas had not held out Mr Thomas, to Mr and Mrs McKeand, as having any authority to agree to part with an interest in her real estate.
77 I conclude that Mr Thomas did not have the authority of Mrs Thomas to enter the agreement which he entered with Mr McKeand on 12 February 2002.
Did Mrs Thomas Ratify the Agreement?
78 I accept Mrs Thomas' evidence that shortly after the cabling work was completed she had a conversation with her husband to the following effect:
MR THOMAS: "Ross asked if he could lay their cables in our trench to improve the appearance of their property and I let him."
MRS THOMAS: "I have a strong gut feeling Fred that this is not a good idea. I think I would have said 'no'. I don't think it's a good idea to get involved with neighbours, particularly as he forced us to go to the Land and Environment Court and cost us $25,000 in legal fees. I would not have been inclined to do him any favours."
MR THOMAS: "It's not doing any harm. It's just a cable inside a pipe beside ours."
MRS THOMAS: "I suppose I am being petty."
79 Her evidence continues:
"I also thought it would be embarrassing for Fred to ask the McKeands to remove it after all the work had been done.
There was no mention of an "easement" at the time. There was no mention of any alleged agreement whereby the McKeands would obtain a legal right over the title of my property."
80 Mrs Thomas expanded on that evidence in cross-examination:
"A. Fred explained to me that he'd just done it to be friendly. It had happened quickly, spontaneously, and I felt as though it would have embarrassed him to have to go back and say my wife said you can't have it here, you have to pull it out. He convinced me it was nothing more than this cable lying in the trench, it won't be any harm to us, so I felt as though I was just being mean spirited about it because I don't like them so I said "Fine, we'll leave it there."
Q. And you were prepared to leave it there for 2002, 2003, 2004, is that right? 2005?
A. I'd have been prepared to leave it there for two hundred years as long as it didn't cause any trouble.
Q. By "trouble", do I take it that what you mean is as long as it didn't require them to enter for the purposes of fixing anything, is that right? What do you mean by "trouble"?
A. Well, I wouldn't have been prepared to have them digging up the garden or claiming some kind of right to the piece of land it involved.
Q. What about if the right to come on to the land to excavate carried with it an obligation to ensure minimum damage and complete reinstatement at their own cost? Would that have mattered?
A. I wouldn't have wanted them to have any rights over my property."
81 Where someone has purported to enter a contract on behalf of a principal, at a time when they do not have actual authority to enter that contract on behalf of the principal, it is open to the principal to ratify the entering of the contract. If ratification occurs, the person who entered the contract is treated as having had authority to do so, at the time of entering the contract. In other words, the ratification relates back to the time of making the contract: Union Bank of Australia Ltd v McClintock [1922] 1 AC 240 at 248, where Lord Sumner alludes to the maxim Omnis ratihabitio retrotrahitur et mandato priori aequiparatur - every ratification of an act already done has a retrospective effect, and is equal to a previous request to do it. See also Dal Pont, Law of Agency (Butterworths Australia 2001) para [5.38]. The plaintiffs submit that Mrs Thomas has ratified Mr Thomas' action in entering the contract with the McKeands.
82 Before a person can ratify a contract which has been purportedly entered in their name, that person must have full knowledge of the material circumstances, or else must intend to adopt the entering of the contract regardless of what the material circumstances might be: The Phosphate of Lime Company, Limited v Green and Anor (1871) 7 CP 43 at 56-57; Taylor v Smith (1926) 38 CLR 48 at 54-55, 59, 60, 62; Marsh v Joseph [1897] 1 Ch 213 at 246-7 per Lord Russell of Killowen CJ, Lindley and AL Smith LJJ; Bank of Montreal v Dominion Gresham Guarantee and Casualty Company, Limited [1930] AC 659 at 666; Australian Blue Metal Ltd v Hughes & Ors (1961) 79 WN (NSW) 498 at 515 (affirmed on a different point Australian Blue Metal Ltd v Robert Frank Hughes & Others [1963] AC 74); Wilton and another v Commonwealth Trading Bank of Australia; Model Investments Pty Ltd (Third Party) [1973] 2 NSWLR 644 at 674; Brockway v Pando (2000) 22 WAR 405 at [115]-[116], 433.
83 Mrs Thomas' assent to the cables staying on her land does not amount to a ratification of the whole of the agreement Mr Thomas had made with Mr McKeand. There is no reason to conclude she intended to adopt Mr Thomas' actions regardless of what the material circumstances might be - before giving consent, she tried to find out from Mr Thomas what the implications would be, and only when he had given his account of the implications did she agree. And she did not at that time have full knowledge of the material circumstances, because Mr Thomas did not tell her about a critical element of the agreement, namely that an easement would be granted.
84 When an easement has been granted, the law regards the grant as bringing with it such ancillary rights as are reasonably necessary for the exercise or enjoyment of the easement which has been granted: Hemmes Hermitage Pty Ltd v Abdurahman & Anor (1991) 22 NSWLR 343 at 348, 354-5; The Owners of SP 48754 v Anderson [1999] NSWSC 580, (1999) 9 BPR 17,119 at [21]-[30]. In consequence, the owner of the dominant tenement is entitled to enter upon the land over which the easement exists and carry out there such work as is necessary to enable the activities expressly permitted on the easement to continue to occur. This attribute of the law of easements is, in my view, one which was material for Mrs Thomas to know. The onus of proving the elements of a ratification rests upon the person who asserts that there has been a ratification. It is not shown that Mrs Thomas was aware of this attribute of the law of easements.
85 I conclude that Mrs Thomas did not ratify Mr Thomas' entering into of a contract to grant an easement.
86 Counsel for the plaintiffs referred me to a principle contained in Bowstead & Reynolds on Agency, 17th edition, article 17 that: "the adoption of part of a transaction operates as a ratification of the whole." They submitted that part of what Mr Thomas agreed was that the cables could stay in the ground, that Mrs Thomas ratified that part of what he had done, and therefore that she should be treated as having ratified the whole of the contract which he made.
87 I do not accept that that conclusion follows. The way in which the principle works is illustrated by Republic of Peru v Peruvian Guano Company (1887) 36 Ch D 489. The Peruvian Guano Company had been the agent of the Republic of Peru for the sale of guano. Disputes arose about whether it had adequately accounted for the proceeds of sale. At a time when no de jure government existed in Peru, but a dictator was running a de facto government, a representative of that government entered into a settlement agreement with the Company concerning the disputes, under which the Company paid £260,000. The Republic passed a resolution ratifying this agreement, but did so in ignorance of certain facts which gave it the right to avoid the agreement of compromise. Chitty J held, at 498, that, because the Republic did not then know all the material facts the resolution was not an effective ratification. However, after the election of a new de jure government, and when the facts vitiating the agreement were known, that new government passed a resolution that it did not accept the £260,000 except as a part-payment on account, and that it accepted the agreement of compromise only in that sense. Chitty J said, at 499-500:
"The effect of this resolution is plain. It is an attempt to affirm in part and disaffirm in part. A principal must act consistently; he cannot, as was stated by Lord Kenyon (4 TR 217) blow hot and cold; or, to use Lord Cairns' expression, derived from the Scotch phraseology, he cannot approbate and reprobate at the same time: he must adopt entirely or repudiate entirely. It is scarcely necessary to cite any authority for these propositions. I may refer to Wilson v Poulter (1 Str 859, 861) where the Court was clearly of opinion that the seizing of parts of certain bonds was an affirmance of the defendants' act in laying out the money, and that the plaintiff could not avow the act as to part and disavow it as to the rest. I refer also to Smith v Hodson (4 TR 211) where Lord Kenyon gave the judgment to which I have referred, and says (ibid, 217):
"Although the assignees may either affirm or disaffirm the contract of the bankrupt, yet if they do affirm it, they must act consistently throughout; they cannot, as has often been observed in cases of this kind, blow hot and cold; and as the assignees in this case treated this transaction as a contract of sale, it must be pursued through all its consequences."
I refer also to Prince v Clarke (1 B & C 186, 189) where Abbott CJ said that it was the duty of the principal to notify his objection to the goods within a reasonable time after he received intelligence of the purchase which had been made not in accordance with the authority he had from the agent. Now the resolution here is ambiguous, but that act of the Republic in retaining the £260,000 is plain and unambiguous. … The Republic, then, with full knowledge of the facts, deliberately insist on retaining the money paid as the consideration for the release. A merchant who instructs an agent to buy goods, when the goods are bought not in accordance with the authority, cannot retain the goods; he must return, or at all events offer to return them within a reasonable time; if he does not, he adopts the transaction."
88 This principle can come to operate only at a time when the person in the name of whom the contract was entered has full knowledge of the material facts. If, with such knowledge, that person chooses to keep some of the benefits flowing under the contract, he or she will be held to have ratified the whole of the contract: Australian Blue Metal Limited v Hughes (1961) 79 WN (NSW) 498 at 515 per Jacobs J, Dal Pont, Law of Agency para [5.28]. In the present case, Mrs Thomas never came to be in the position of having full knowledge of the material facts about the contract which her husband had entered, and so the occasion for her ratifying that contract did not arise.
Ratification of Consent for Cables to Remain
89 The defendants' counsel submits that:
"Mrs Thomas ratified her husband's unauthorised act to allow the cables to remain - under a licence only and not an easement." (Defendants' Further Written Submissions, page 7)