(b) The effect on the Alma Street property.
45 There can be no doubt that the Alma Street property would have been a difficult block to build on in the first place. It rises very steeply from Alma Street at its south and rises to a height practically level with the Adelaide Street property on its north. There is pedestrian access from Alma Street, leading up a steep set of steps to the house but there is presently no vehicular access to Alma Street.
46 In that respect, the Alma Street property is unusual when compared to the properties both to its east and to its west. The only other property on the northern side of Alma Street without vehicular access to Alma Street is the property adjoining it to the east. However, that property has access to Adelaide Street given that it stretches from Alma Street to Adelaide Street.
47 The other properties along the northern side of Alma Street all have some sort of vehicular access from Alma Street, but they have varying solutions to parking issues. Most of the properties have garages at the northern ends of driveways from Alma Street. Some driveways are steeper than others, depending upon the contours of the property in question. By contrast, one of the other properties has no garage or carport, but there is a hard stand area on which cars are parked. In the case of each of those properties (other than the Alma Street property and the property adjoining it to the east) it is necessary to climb further steps to the entrance of the residence on that property. It would appear that the contours of each parcel of land dictates the distance from the garage to the residence and the number of steps that have to be climbed.
48 There can be no doubt that the Easement substantially benefited the Alma Street property. It enabled the occupants of that property to drive into the garage situated on the Parking Area, which is at substantially the same level as the main living area of the house on the Alma Street property. Accordingly, there were few, if any, steps to negotiate when the occupants came home, perhaps carrying packages of groceries or other items.
49 There was a significant amount of evidence before me as to the effect on the Alma Street property in the absence of such an easement. The first issue to determine is whether the local council would approve an application by the occupier of the Alma Street property to create a driveway into that property from Alma Street. The experts seemed to agree that the answer to that issue would be in the affirmative, and indeed, Mr Grech, the town planning expert called by ING, went further by opining that the Council may indeed require that to occur to avoid further pressure on off-street parking in Alma Street.
50 Taking into account the foregoing evidence, as well as the streetscape of Alma Street, with the vehicular access from Alma Street being available to all but two of the properties along the northern side of the street, I find that the Council would not refuse permission for such access.
51 The second matter to determine is the likely nature of the off-street parking that might then be provided. The general consensus between the various experts appears to be that the appropriate course would be to erect a double garage somewhere near the eastern boundary of the Alma Street property, to which a driveway would lead from Alma Street. There was evidence before me as to how far from the southern boundary of Alma Street such garage would have to be set back, and indeed how far it would be most convenient to set it back. The factors bearing on that issue are the costs of the excavation that would be required, the costs of the driveway and the closeness of the garage to the house, which would have a bearing on the number of steps that would still have to be climbed in order to reach the house.
52 There was some evidence before me about the possibility of installing a lift from the garage to the house, but the evidence before me on that issue does not permit me to express any firm views.
53 There was also evidence before me as to the costs of erecting such a garage. Such evidence as is before me permits me to find, and I do find, that the cost of constructing a new double garage close to the eastern boundary of the Alma Street property and set back even further than six metres from Alma Street would be $119,020. This estimate includes professional costs, appropriate Council and other levies and fees, the demolition of the front fence, the repair and updating of existing pathways and steps, excavation, construction of a concrete driveway and footpath crossing, landscaping and the preparation of a pedestrian path and steps from the garage to access the existing house.
54 I should add that this amount does not include expenses which a developer might take into account, such as holding costs or developers' profits. I do not consider these amounts to be relevant, as I accept Mr Foley-Jennings' evidence that the Alma Street property would be of no interest to developers and will almost certainly be purchased by a proposed owner/occupier. Nor does this figure include the cost of a lift, because I am by no means satisfied that a lift would be necessary having regard to the proposed location of the garage.
55 What then is the overall effect on the Alma Street property of the loss of such an easement?
56 There is no doubt that the value of the Alma Street property would decrease without the benefit of the Easement or the Proposed Easement. I consider it likely that any purchaser would wish to install a garage of the kind to which have I referred at a cost of approximately $119,000. Other than that cost, and the undoubted temporary inconvenience that would accompany its construction, I do not consider that the Alma Street property would be detrimentally affected in any other substantial manner.
57 It was submitted on behalf of ING that the loss of the easement would mean that any purchaser would have to climb many more steps to reach the main living area of the house and that this would discourage people of a more advanced age who would not be able to cope with those additional steps.
58 I do not place too much weight on that submission. Having regard to the construction of the house itself, which takes full advantage of the views over Middle Harbour, there are already a substantial amount of stairs to be negotiated just by living in the house itself. For that reason alone, it would not be an ideal home for elderly people, people with physical disabilities or perhaps even people with very young children. In any event, it must be remembered that the Easement did not provide for it being used for pedestrian traffic. Accordingly, when the occupants of the Alma Street property or their visitors or guests wished to enter the house, they were always obliged to walk up the stairs from Alma Street, unless it was the occupants themselves, travelling by car. That of itself, must always have been a serious disincentive for any such person to have any interest in acquiring that property.
59 In my opinion, the Easement was always of limited value, the restrictions on its use being quite significant. Further, because it was so easy to breach with the consequence of it being lost, the Easement was in reality of a somewhat fleeting or evanescent nature. By comparison, a garage situated on the Alma Street property itself would have a degree of permanence which might be important to many potential purchasers.
60 In addition, the present appearance of the Alma Street property, viewed from Alma Street itself, is somewhat out of place when compared to the various other properties along the northern side of the street, all of which have tidy driveways leading to often quite attractive garages. The present appearance of the Alma Street property from Alma Street presents as neglected and overgrown, an appearance which in my opinion may well be ameliorated by the inclusion of a garage.
61 Finally, the garage which presently stands on the Parking Area, which admittedly would be deprived of any vehicular utility in the absence of the Easement would not be totally wasted. Being on the same level as the main living area of the house on the Alma Street property, it could be used as a convenient storage area or in some other useful way.
62 In the circumstances, while I am not in a position to calculate the precise diminution in the value of the Alma Street property should the Easement no longer be available to it, I do not consider that that diminution would be nearly as great as that calculated by Mr Edmonds, who attributed to that diminution a value of $650,000. In my opinion, having regard to the likely cost of erecting a garage, the diminution in the value of the Alma Street property would not be very different from the little over $111,000 which I have found represented the diminution in the value of the Adelaide Street property by reason of the existence of the Easement.
First issue: relief against forfeiture
63 Both parties agree that the resolution of this first issue, namely whether the Court should grant relief against forfeiture in respect of the release of the Easement, was governed by the decision of the High Court in Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315. Both parties submitted that that decision, particularly the reasons of the majority, comprising Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ, supported their respective client's position.
64 Mr Robinson SC for ING submitted that the decision in Tanwar distinguishes cases such as Shiloh Spinners Limited v Harding [1973] AC 691 (which dealt with the forfeiture of a lease) from cases such as Legione v Hateley (1983) 152 CLR 406, Stern v McArthur (1988) 165 CLR 489 and Tanwar itself, all of which dealt with situations involving the failure of a purchaser under a contract for the sale of land to complete the contract within time that had become of the essence. He submitted that there is a basic difference between a case where forfeiture is pursuant to an express provision of a contract contemplating its breach, and the case where forfeiture is the automatic consequence of termination by the innocent party, that is to say the party which is not in breach.
65 He submitted that in the former case, the contract is one of which the "primary object" is to secure a stated result, which a forfeiture clause is to promote. Forfeiture is not its "primary object"; it only encourages the attainment of a stated result, the most typical example occurring in the context of the landlord and tenant relationship, where the stated result is the payment of rent and the fulfilment of the lessee's various other obligations.
66 By contrast, in the latter situation, there is no express provision providing for forfeiture and hence forfeiture serves no function. It is the inevitable result of termination by the innocent party, occurring principally in cases of contracts for the sale of land.
67 Mr Robinson submitted that the case before me falls in the former category, being analogous to the lease cases in that the right to release the Easement had been added by way of security for the production of a stated result, namely compliance with its terms. In those circumstances, Mr Robinson SC submitted that the governing principles are those articulated particularly by Lord Wilberforce in Shiloh Spinners at [723-4] in the following terms:
"…it remains true today that equity expects men to carry out their bargains and will not let them buy their way out by uncovenanted payment. But it is consistent with these principles that we should reaffirm the right of courts of equity in appropriate and limited cases to relieve against forfeiture for breach of covenant or condition where the primary object of the bargain is to secure a stated result which can effectively be attained when the matter comes before the court, and where the forfeiture provision is added by way of security for the production of that result. The word 'appropriate' involves consideration of the conduct of the applicant for relief, in particular whether his default was wilful, of the gravity of the breaches, and of the disparity between the value of the property of which forfeiture is claimed as compared with the damage caused by the breach."
68 By contrast, Mr Pike submitted that the High Court in Tanwar took a more restrictive approach to the availability of relief against forfeiture, in that in all cases it required, as a condition of such relief, some form of unconscionable or unconscientious conduct on the part of the party against whom such relief is sought.
69 It is therefore necessary to review the decision in Tanwar carefully to understand where the law stands. In order to do so, it is necessary first to go back to the decision in Legione, which involved a vendor-purchaser dispute. In that case, a statement made on behalf of the vendor's solicitors had helped lull the purchasers into the belief that the vendor would agree to late completion. In reliance on that statement, the purchasers effected improvements to the property, only to find that the vendor sought to rescind the contract for sale.
70 The High Court dealt with the dispute principally on the basis of promissory or equitable estoppel. As to the alternative issue of whether there ought to be relief against forfeiture, the order made by the High Court was only that the issue be remitted to the Supreme Court of Victoria for determination.
71 The decision in Legione was distinguished the following year by the High Court in Ciavarella v Balmer (1983) 153 CLR 438. In that case, the appellant before the High Court sought leave to amend his notice of appeal so as to claim relief against forfeiture, invoking in support of his application the then very recent decision in Legione. That application was refused but the reasoning for such refusal by a unanimous court comprised of Gibbs CJ, Mason, Wilson, Deane and Dawson JJ is most instructive. Their Honours placed significance on the presence or absence of unconscionable conduct. They said at pages 453-4:
"…in Legione v Hateley, the material in evidence strongly indicated unconscionable conduct on the part of the vendor in seeking to insist on the rescission of the contract in circumstances where the statement of the vendor's solicitors had helped lull the purchaser into a belief that the vendor would accept completion, provided it took place within a few days and where the consequence of rescission was that the vendor would reap the benefit of the very valuable improvements which the purchaser had effected to the property. Here there is a different situation. Far from acting precipitately the vendor refrained from making time of the essence for a period of nine months approximately. In that period the purchaser might at any time have completed the contract. True it is that the controversy as to the amount actually payable on 3 June 1979, after other matters were taken into account, was still alive between the parties. But this circumstance, of itself, constitutes no ground for saying that the vendor was guilty of unconscionable conduct in giving the notice of termination on 28 April 1980."
72 The decision in Legione came under further consideration in Stern. In that case, another vendor-purchaser dispute, a contract for the sale of land provided for the payment of the balance of the purchase price by monthly instalments. The contract also provided that default by the purchasers entitled the vendors to determine the contract and forfeit the deposit, and also that on default in the payment of any instalment, the balance of the purchase price became due and payable. Pursuant to the terms of the contract, the purchasers had gone into possession and with the vendor's knowledge, built a house on the land. They subsequently defaulted in the payment of a number of instalments, although thereafter the instalments were resumed. The vendor then gave the purchasers a notice to complete, which was not complied with. As a consequence, the vendors brought the contract to an end, based on the purchasers' failure to complete.
73 By a majority comprised of Deane, Dawson and Gaudron JJ (Mason CJ and Brennan J dissenting) the Court held that the purchasers were entitled to relief against forfeiture of their interest in the land. It is unnecessary to review all of the judgments in that case, having regard to the fact that the majority in Tanwar at [36] upheld the views expressed by Mason CJ in Stern.
74 In Stern, Mason CJ dealt with this issue particularly at pages 500-504. His Honour first dealt with the well established principles in Shiloh Spinners and noted that, as Lord Wilberforce had observed, "in appropriate and limited cases" the court will relieve against forfeiture for breach of a covenant or condition where the primary object of the bargain is to secure a stated result which can effectively be attained by the terms of a court order, and where the forfeiture provision is added by way of security for the achievement of that result. Once a forfeiture has occurred it is then for the court to determine whether the circumstances of the case are appropriate for the grant of relief.
75 His Honour then went on to note that until Legione, courts had refused to relieve against forfeiture outside those established situations, and specifically that they had refused to relieve against forfeiture of a purchaser's interest under a contract for the sale of real estate where there had been a valid rescission. However, his Honour characterised Legione as demonstrating that equity will relieve against an unconscionable exercise of legal rights. He considered the message conveyed by Legione to be that if a vendor's insistence on his legal rights is, in the circumstances of the case, unconscionable, there can be no unfairness in depriving the vendor of the benefit of the forfeiture of the purchaser's interest. His Honour concluded, at page 501, that:
"…the actual exercise of the jurisdiction depends upon the existence of circumstances which make it unconscionable for the vendor to insist on rescission and forfeiture of the purchaser's interest."
76 His Honour then went on to repeat that the Court in both Legione and Ciavarella had made it clear that relief against forfeiture, particularly in cases involving vendor and purchaser, would only be granted in exceptional circumstances which amounted to unconscionable conduct on the part of the vendor. His Honour continued at page 503:
"…to accept the [purchasers'] submission and extend relief against forfeiture to instances in which no exceptional circumstances are established would be eviscerate unconscionability of its meaning. The doctrine is a limited one that operates only where the vendor has, by his conduct, caused or contributed to a situation in which it would be unconscionable on the vendor's part to insist on the forfeiture of the purchaser's interest…[T]he jurisdiction to grant relief against forfeiture does not authorise a court to reshape contractual relations into a form the court thinks more reasonable or fair where subsequent events have rendered one side's situation more favourable". (Emphasis in the original)
77 His Honour then went on at page 504 in the following terms:
"In the ultimate analysis therefore the fate of the appeal turns on the question whether the [vendor's] insistence on maintaining their rescission and forfeiture of the [purchasers'] interest in the land amounts, in the circumstances of the case, to unconscionable conduct."
78 In my opinion, the foregoing passages indicate that (at least in the vendor-purchaser context) in order for relief against forfeiture to be granted, it is fundamental that the party against whom such relief was being sought had acted in an unconscionable way.
79 Returning then to the majority decision in Tanwar, while their Honours at [36] expressed their preference for what Mason CJ had said in Stern, at [38] they noted that what his Honour had said may have represented a contraction of what had been said in the earlier cases. Yet at [39], they also extended the circumstances in which equity will relieve against forfeiture to cases other than where the vendor's conduct caused or contributed to a circumstance rendering it unconscionable for the vendor to insist upon its legal rights. They expressed the view that cases falling within the heads of mistake or accident will not necessarily be the result of unconscionable conduct on the part of the vendor, and yet relief against forfeiture may be given.
80 It seems to me that the common thread running through the analysis of the various decisions is that in order for the court to interfere with the contractual rights of the parties, the circumstances must be such that it is necessary to intervene to avoid injustice by relieving against unconscionable or unconscientious conduct.
81 This can occur where the party against whom relief against forfeiture is sought caused or contributed to the circumstances which lead to relief against forfeiture being sought (as was the case in Legione). Relief against forfeiture may also be granted in circumstances where the situation has come about without any contribution on the part of that party, but where the strict insistence on legal rights by that party itself constitutes unconscionable or unconscientious conduct (as was found to be the case by the majority in Stern).
82 In my opinion, it is in this latter class of case that the lessor-lessee cases, and those referred to in Shiloh Spinners fall. Where a lessee fails to make a payment of rent and the lessor seizes upon that single instance in order to re-enter the demised premises, it is that re-entry and the lessor's strict insistence upon his legal rights that constitutes the unconscionable or unconscientious conduct against which a court will relieve against forfeiture.
83 In other words, I do not consider that the lessor-lessee cases constitute a different genus for the application of the principle of relief against forfeiture.
84 The existence of fraud, mistake, accident, surprise or other similar conditions merely makes it easier for the party seeking relief against forfeiture to establish his entitlement to it. The existence of such circumstances is simply a factor that a court takes into account in determining whether, in all the circumstances, the conduct of the other party is unconscionable or unconscientious.
85 That is not to say that for the court to grant relief against forfeiture the circumstances have to be "exceptional".
86 In Tanwar at [59] the Court implicitly approved what was said by Deane and Dawson JJ in Stern at 165 CLR at page 526, where they referred to what had been said by Mason and Deane JJ in Legione at 152 CLR at page 449 in the following terms:
"Mason and Deane JJ were not saying that there must be unconscionable conduct of an exceptional kind before a case for relief can be made out. Rather, what was being said was that a court will be reluctant to interfere with the contractual rights of parties who have chosen to make time of the essence of the contract. The circumstances must be such as to make it plain that it is necessary to intervene to avoid injustice or, what is the same thing, to relieve against unconscionable - or, more accurately, unconscientious - conduct."