Taluja v Shree Shirdi Sai Sansthan Sydney Limited

Court of Appeal (NSW)|2016-06-21|Before: McColl JA, Leeming JA, Sackar J

Background Facts

Three heritage buildings are located on the Property. Brundah Hall, a two storey, nine room building plus annexes, stands on Lot 4, the smaller of the two Lots. Brundah Hall includes dining rooms and a kitchen and has an area of about 538 m2.

The Lease

The Lease is in the form required for a lease of land under the Real Property Act 1990 (NSW) (Real Property Act). It is, however, common ground that the Lease is not in registrable form because, among other things, the land subject to the Lease is not precisely defined. Therefore the Lease could not have been effective to create a lease at law for a term of thirty years, but if specifically enforceable, would be effective to create such a lease in equity. [3]
The "Property leased" is described in the Lease as follows: "PART 4/7735323 AND PART 100/774567 Being 420 Liverpool Road, Strathfield NSW as shown as the hatched area in the plan annexed and marked Annexure "B" and being the Memorial Chapel and surrounding 800 square metres of land"
Annexure B comprises a plan of subdivision prepared in February 1998 showing Lots 4 and 100 and other lots included in the subdivision. The plan has a very small area crudely marked with a rectangle. The handwritten words "Memorial Chapel" are endorsed on the plan next to the mark, but the plan has no hatched area. The position of the rectangle suggests that the Chapel is located on Lot 100 close to Liverpool Road. In fact the Chapel is located on Lot 100 some distance to the south-west of the point marked on the plan, further away from Liverpool Road and separated from that road, as the plan indicates, by the driveway from Hill Street.
The cover sheet to the Lease states that the term of the lease is 30 years commencing on 5 August 2003, with the Lessee having an option to renew for a further term of 30 years as set out in cl 2 of Annexure A to the Lease. The cover sheet also states that the Lease includes an option to purchase set out in cl 12 of Annexure A and incorporates the provisions set out in Annexure A.
Annexure A includes the following provisions relevant to the appeal: "ANNEXURE 'A' 1. INTERPRETATION 1.1 The following words have these meanings unless the contrary intention appears. Item numbers refer to those in the Reference Schedule. Other definitions are on the cover sheet. 'Common Areas' means the Kitchen, toilets, parking areas in front and back of the Land, the garden, the area of the Whole Property in front of the Land, Brundah Dining Hall. 'Land' means the land including the building/chapel, described as such on this Lease. 'Our Property' means the Property at 420 Liverpool Road, South Strathfield NSW 2135 as comprised in the Whole Property. 'Permitted Use' means use as a chapel/temple, as a place of worship of Sai Baba and Durga Mataa and other Hindu Deities and school building, library and a place to carry on public activities as provided in your constitution or the Deed Setting Up SHRI SHIRDI SANSTHAN SYDNEY CHARITABLE FOUNDATION. 'Whole Property' means Lot 4 in Deposited Plan 7735323 and Lot 100 in Deposited Plan 774567. 'Term' means Thirty (30) years from the Commencement Date. 'We', 'Us', 'Our' and 'Ourselves' refers to DR NIRMAL TALUJA; and 'You', 'Your' and 'Yourselves' refers to Shree Shirdi Sai Sansthan Sydney Limited in its own capacity and as Trustee of SHRI SHIRDI SAI SANSTHAN SYDNEY CHARITABLE FOUNDATION. 'Your Business' means the business carried on from the Premises. 'Your Employees and Agents' means each of Your employees, officers, agents, contractors and invitees. 'Your Property' means Chapel including the 800 square metres Land which is situated within our Whole Property. 2. LEASE PERIOD 2.1 This Lease is for the Term. 2.2 You can renew this Lease for another thirty (30) years. 2.3 You can exercise the Option only if you serve on us a notice of exercise of Option not less than three (3) months and not more than twelve (12) months prior to the expiration of the Term; 2.4 A new lease will be the same as this Lease except for the Commencement Date and the Expiry Date and there will be no further Option. … 8. SECURITY DEPOSIT Upon Your executing this Lease, You will pay to us Australian Dollars Two Hundred Thousand ($200,000.00) and on or before 31 March 2004, an additional amount of Australian Dollars Fifty Thousand ($50,000.00) totalling Australian Dollars Two Hundred and Fifty thousand ($250,000.00) ('Security Deposit') as a Security Deposit in earnest of performance of Your obligations. Unless the Security Deposit is applied towards payment of the first instalment of the purchase price in terms of clause 12 of this Lease, the Security Deposit shall be refunded to You upon the expiry or early termination of this Lease or of the new Lease. 9. PLAN We and You agree that the total area of the Land shall be eight hundred (800) square metres. The Plan is only an approximate plan and the area shall be surveyed and a final plan shall be prepared by Us at Your expense within a reasonable time. We agree to provide necessary assistance and facilities in this respect. 10. DISPUTE RESOLUTION 10.1 If any disagreement arises in connection with the Plan either We or You may refer the disagreement to expert determination by an Expert appointed by the President of the Institute of Surveyors to the intent that the final plan shall consist of eight hundred (800) square metres. 10.2 The Expert's decision will be final, conclusive and binding on the parties and the costs of the expert determination must be borne by the party or parties who the expert determines is or are to bear the costs. 11. EXPIRY OR TERMINATION 11.1 You may terminate this Lease at any time after two (2) years from the date hereof by giving Us twelve (12) months notice in writing. Notwithstanding the giving of such notice, You may exercise the Option to Purchase within that twelve (12) months period. 11.2 The Lease shall become terminated upon Your purchasing the Land in terms of the Option to Purchase granted hereunder. 11.3 We may terminate this Lease by giving twelve (12) months notice after five (5) years from the date hereof. Notwithstanding the giving of such notice, You may exercise the option to purchase within twelve (12) months period. 12. OPTION TO PURCHASE 12.1 If You are desirous of purchasing the Land (including the reversion in fee simple in the Land) ('the Demised Premises') and if You give, at any time, one month notice before twelve (12) months prior to the expiry date of the Lease of such desire, We will, upon the expiration of such notice, transfer to You in fee simple. We will carry out all steps necessary for transfer including registration of the transfer and where necessary Contract for Sale on the usual terms and conditions. You shall pay Australian Dollars Seven Hundred Thousand ($700,000.00) for such transfer. The price shall be paid in six instalments: i) First instalment of Australian Dollars Two Hundred and Fifty Thousand ($250,000.00) - upon transfer as stated in clause 8 herein; ii) Second instalment of Australian Dollars Ninety Thousand ($90,000.00) - upon first anniversary of the date of the transfer; iii) Third instalment of Australian Dollars Ninety Thousand ($90,000.00) - upon the second anniversary of the date of the transfer; iv) Fourth instalment of Australian Dollars Ninety Thousand ($90,000.00) - upon the third anniversary of the date of the transfer; v) Fifth instalment of Australian Dollars Ninety Thousand ($90,000.00) - upon the fourth anniversary of the date of the transfer; and vi) Sixth instalment of Australian Dollars Ninety Thousand ($90,000.00) - upon the fifth anniversary of the date of the transfer. The deposit of Australian Dollars Two Hundred and Fifty Thousand ($250,000.00) shall be treated by Us and Yourselves as payment of the first instalment on the date of the transfer. 12.2 Prior to the transfer, We will cause subdivision of the Whole Property and cause the Land which is to be transferred to You as a separate lot of the Whole Property. 12.3 We will provide right of use over the Common Areas and Right of Way to the Land prior to the Transfer other than the Brundah Dining Hall. 13. LICENCE 13.1 We grant to You, Your Agents and Employees a non-exclusive licence to use the Common Areas subject to the terms and conditions hereof. 13.2 You shall be entitled to receive keys to the Common Areas and shall have the right to enter upon the Common Areas from time to time and use them and allow others to use them. 13.3 You, Your Agents and Employees shall be entitled to access through the Whole Property to the Land. 14. DEVELOPMENT Subject to Council approvals, You shall be entitled to build construct or develop buildings for purposes of any of the Permitted Use for any related activities at the Land. 15. The Lease is being executed by Shree Shirdi Sai Sansthan Sydney Limited both in its own capacity as trustee for the foundation."

Subsequent Events

There is no dispute that Sansthan paid amounts totalling $250,000 to Dr Taluja as contemplated by cl 8 of Annexure A.
Sansthan purported to execute the option to purchase contained in Annexure A by a notice dated 13 September 2006. As I have noted, on 6 November 2009 Dr Taluja purported to terminate the Lease.
As the primary Judge observed, the parties have been more or less in dispute since 2006. It is fair to say that the parties have not shown any particular urgency in resolving their dispute.
The primary Judge concluded that the Lease is not void for uncertainty. He also held that Sansthan was entitled to an order for specific performance. On this basis, he invited the parties to bring in short minutes of order giving effect to his reasons for judgment.

Primary Judgment

The primary Judge rejected Dr Taluja's argument that the Lease is void for uncertainty for the following reasons: [4] "[120] It is clear that the general location of the Chapel is marked on the plan and is clearly discernible. However the area of 800 square metres surrounding the Chapel is not hatched on the plan attached as Annexure B. [Sansthan] fairly concedes that the general location of the Chapel would not be enough to identify the land for the purposes of either a lease or a contract of sale. [121] However, [Sansthan] correctly points to the mechanism within the lease document by which the precise boundaries of the land are to be fixed. Clause 9 of the lease document requires [Dr Taluja] to prepare a final plan following a survey, admittedly at [Sansthan's] expense, within a reasonable time. Such a plan was never prepared by [Dr Taluja]. [122] Furthermore, if a disagreement arose between the parties as to the plan prepared as a result of a survey, the determination of such a dispute was to be made pursuant to clause 10 … . [123] As the authorities make clear, a Court will endeavour to avoid finding a contract void for uncertainty, particularly when the contract has been at least partly performed. … [I]n the present case it is [Dr Taluja] herself who has not complied with her obligation under clause 9 to prepare a final plan. She cannot fail to fulfil her contractual obligations in such a manner and then seek at a later point to have the contract declared void for uncertainty on the basis of that failure. [124] The authorities … are clear that parties may leave terms, even essential terms, to be determined by a third person. In this case, I am satisfied that the contract clearly provided for any uncertainty as to the precise area that was the subject of the lease document to be resolved, both by the preparation of a plan by [Dr Taluja] in reasonable time and by the provision of a mechanism for resolving any dispute arising from a proposed final plan."

Easement Judgment

The parties were unable to agree on short minutes of order because of a dispute as to whether the term "right of use" in cl 12.3 of Annexure A is to be construed as granting an easement (rather than a licence) to Sansthan. The primary Judge listed the matter for further argument on this issue.
Sansthan submitted to the primary Judge that the right of use, like the "Right of Way" created by cl 12.3 (as to which there was no dispute), should be construed to create an easement in its favour. It would follow from this submission that the area subject to the Lease is the dominant tenement and the Retained Land is the servient tenement. Sansthan argued that if the right of use is to be effective, it must be capable of being registered as an interest on the title Retained Land, so as to bind not only Dr Taluja but her successors in title.
Dr Taluja submitted that cl 12.3 is intended merely to grant a contractual licence. This would allow Sansthan to continue to use the Retained Land as it had prior to its exercise of the option, but not to acquire a proprietary interest in the Retained Land.
The primary Judge preferred the construction proposed by Sansthan: [5] "[13] The notion of an easement is that one tenement has rights over another; one tenement is benefited, the other is in some way afflicted. Although a right of way is a particular, identified type of easement, I am not satisfied this militates against the construction of 'right of use' as granting an easement over the land in question. Easements (eg. riparian rights or an easement for sewerage) are not restricted to rights of way - a right of way is merely one species of usage. [14] In this case, I am satisfied that the phrase 'right of use' is apt to be construed as granting an easement. The 'right of use' in question in this case is no different to a right to use particular parts of a servient tenement for parking or similar. I do not think, in this context, that the parties intended to confer an easement for right of way but merely a licence for use. As pointed out by [Sansthan], the only way of securing this interest as binding successors in title is for it to be a registrable interest. [15] I am also cognisant of the poor drafting of the lease agreement and, as such, I accept that little can be drawn from the difference in capitalisation. I consider that both parts of cl 12.3 should be construed as granting easements. Similarly, I consider that the ambiguity concerning the timing of the grant of the easement is attributable to the drafting."

Equity Division Orders

The primary Judge did not make orders in the Easement Judgment, which was delivered on 21 August 2015. It appears that, following delivery of judgment, the parties filed consent short minutes of order. Orders in conformity with the short minutes were duly made by his Honour in chambers on 27 August 2015.
The orders made by the primary Judge are as follows: "The Court: 1. Declares that [Sansthan] has validly exercised its option pursuant to clause 12 of the lease document entered into between the parties in August 2003, to purchase part of the land at 420 Liverpool Road, Strathfield, being part of the land contained in [Lot 4 and Lot 100], and comprising the Memorial Chapel and surrounding land, a total area of 800 square metres. 2. Orders that the agreement arising from [Sansthan's] exercise of the option be specifically performed and carried into execution under the control and direction of the Court. 3. To give effect to order 2, orders that [Dr Taluja] do all things and sign all documents reasonably necessary to transfer the land to [Sansthan], including and without limitation the following: (i) Within a reasonable time and at the expense of [Dr Taluja], prepare a final plan defining the boundaries of the land, as required by clause 9 of the lease document. Any disagreement arising in connection with the plan is to be resolved in accordance with clause 10 of the lease document; (ii) Prepare a plan in registrable form creating a separate lot in respect of the land; (iii) Provide a right of way to the land; (iv) Provide an easement for use of the 'common areas', other than Brundah Dining Hall, as defined in annexure 'A' to the lease document; (v) Apply for and do all within her power to obtain the consent of the Strathfield Council and of any other authority, corporation or person whose consent is required to the subdivision; (vi) Secure a discharge of any mortgage over the land; (vii) Effect registration of the plan with the Land and Property Management Authority; (viii) Execute and deliver to [Sansthan] a transfer in registrable form (subject to the payment of stamp duty) of the land as created on registration of the plan; (ix) Deliver to [Sansthan] the certificate of title for the land; and (x) Effect with [Sansthan] in the customary fashion adjustments of the statutory outgoings on the Land. 4. Orders that should [Dr Taluja] default in complying with order 3, a registrar of the Court be empowered to do all things and sign all documents for the purposes set forth in in that order." [Emphasis added.] Other orders dismissed Dr Taluja's cross-claim, reserved for further consideration Sansthan's claim for damages and reserved liberty to the parties to apply in relation to the implementation of the orders.
It will be seen that these orders leave important issues unresolved. For example Order 3(iii) does not identify the location of the proposed right of way and does not specify who is entitled to use the right of way or for what purposes. Order 3(iv) does not specify the precise areas of the Retained Land that are subject to the "right of use". This is a significant matter as the definition of "Common Areas" in the Lease does not identify the location of "parking areas in front and back of the Land" or provide a precise description of "the area of the Whole Property in front of the Land". Nor does Order 3(iv) state who is entitled to exercise the right of use or the restrictions, if any, that apply to an exercise of the right over the Retained Land.
The failure to address these matters may be attributable to the fact that the dimensions of the land to be transferred to Sansthan upon exercise of the option to purchase had not been ascertained at the time the Orders were made. Nevertheless, it is clear that in the absence of agreement between the parties, a number of issues remain to be resolved concerning the "right of use". I return to this question later.
There is no stay in force pending the outcome of this appeal. However, it appears that no steps have been taken to implement the Orders made by the primary Judge. His Honour noted that Sansthan "has remained in possession of the relevant property" [6] and that is apparently still the position.

The Validity of the Lease

Mr Smark SC, who appeared for Dr Taluja, did not dispute that, as the primary Judge held, courts strive to construe commercial agreements so as to ensure that they are valid. He submitted, however, that the absence of any hatching on the plan in Annexure A is fatal to the validity of the Lease.
Mr Smark contended that cl 9 of Annexure A imposes an obligation on Dr Taluja to prepare a "final plan" only if the Lease annexes a plan showing the approximate dimensions and location of the leasehold land. He submitted that the parties could not have intended that the boundaries of the leasehold land would simply be selected by Dr Taluja without the guidance provided by an approximate plan.
According to Mr Smark, cl 10 of Annexure A carries the matter no further. In order for there to be a "disagreement arising in connection with the plan" within cl 10.1, there must first be a plan showing the approximate location of the leasehold land, as contemplated by the description of the "Property leased" on the cover page of the Lease. In the absence of such a plan there cannot be a divergence between the approximate plan and the "final plan" prepared by Dr Taluja and therefore there cannot be a disagreement of the kind that enlivens cl 10.1 of Annexure A and that provision cannot be invoked. In short, the parties had failed to reach a final and concluded agreement on an essential term of a lease, namely identification of the leasehold land.
Mr Murr SC, who appeared with Mr Einstein for Sansthan, submitted that the inclusion of hatching on the plan in Annexure B, although contemplated by the Lease, is not essential to the validity of the Lease. Clause 9 obliges Dr Taluja to prepare the final plan, regardless of whether a plan with hatching is annexed to the Lease. The Lease contains sufficient indications to enable the plan to be prepared. If there is a disagreement between the parties as to the final plan, cl 10.1 creates a procedure for the disagreement to be resolved.

The Right of Use

Mr Smark submitted that the primary Judge should have construed the right of use conferred by cl 12.3 of Annexure A as a continuation of the licence conferred by cl 13. This construction, so he argued, recognised that the Lease can be terminated in accordance with cl 11 of Annexure A and that, upon termination, the licence conferred by cl 13 also ceases.
Mr Smark said that it would be surprising if the parties had agreed to an arrangement which would allow a purchaser of the leasehold land from Sansthan (after Sansthan had become the proprietor) to enforce the right of use over the Retained Land. He pointed out that the purchaser might be an adherent of a different religion or association, yet if cl 12.3 creates an easement Dr Taluja would be bound in effect to allow the purchasers (and their successors in title) to use parts of her residence to support their own practices.
Mr Murr essentially supported the reasoning of the primary Judge in concluding that cl 12.3 creates an easement over the Retained Land.

Leave to Appeal

The parties disagreed as to whether the Orders made by the primary Judge were interlocutory or final. Sansthan contended that although the declaration in Order 1, considered in isolation, finally determined the parties' rights in relation to the exercise of the option to purchase, the Orders as a whole were interlocutory and thus Dr Taluja requires leave to appeal. [7] Mr Murr contended that the order for specific performance did not finally dispose of the rights of the parties because specific performance of the agreement remained under the control of the court. He relied on the judgment of the High Court in Computer Edge Pty Ltd v Apple Computer Inc [8] for the proposition that where a judgment includes both final and interlocutory orders, the judgment as a whole is interlocutory as it does not finally determine all the rights of the parties at issue in the proceedings.
Dr Taluja submitted that since the declaration was a final order, an appeal lay as of right notwithstanding that some ancillary matters might need to be resolved.
I think that the better view is that the Orders as a whole were interlocutory, either because the reasoning in Computer Edge applies or because the declaration should be seen as a "declaration of a matter along the way to reaching the final situation". [9] It is to be borne in mind that the Orders reserved for further consideration Sansthan's entitlement to damages, not merely the assessment of damages. [10]
It is not necessary to express a final view on this question. Mr Murr did not dispute that if leave to appeal is acquired, the Court should grant leave. Given the importance of the issues to the parties and the risk of injustice to Dr Taluja if leave is refused I consider that, to the extent necessary, the Court should grant leave to appeal.

Principles of Construction

Dr Taluja's written submissions said that the validity of the Lease turned on whether "a contract arose between the parties in circumstances where [the Lease] did not identify the land the subject of that contract". The submissions later identified the relevant question to be whether the Lease was "sufficiently certain as to subject matter".
It is trite law that an agreement that does not amount to a concluded bargain does not create an enforceable contract. [11] An agreement is incomplete if the parties have not agreed on a term which is essential as a matter of law to the creation of a valid and enforceable contract. [12] A lease of land, in order to be valid, must describe the demised premises in a manner that is certain or enables the boundaries to be identified and ascertained with certainty. [13]
A lease satisfies the requirement that the demised land must be identified or identifiable if the lease provides for a third party, or even one of the parties to the lease, to determine the precise boundaries of the land. The general principle is that a contract, including a lease, is not invalid because an essential term remains to be determined, provided that the determination does not depend on further agreement between the parties. The High Court applied this principle in deciding that an agreement for the sale of land which contemplated the execution of a further agreement containing such other conditions as the vendor's solicitors might "reasonably require" was binding on the parties. [14] Similarly, an agreement for a lease was held to be binding where it was "in terms and to contain such special clauses as the Landlord may require". [15]
There is a separate principle that a court is reluctant to conclude that an agreement intended to be binding in the parties is void because it is too uncertain. [16] For this reason, courts are astute to construe an agreement in a manner that preserves its validity as a contract. [17] Courts are particularly reluctant to hold that an essential provision in a contract is void for uncertainty where it has been partly performed and is therefore no longer executory. [18]
Although the parties used the language of "uncertainty" in their submissions, I do not think that the issue in this case is whether the Lease is too uncertain to constitute an enforceable contract. It is more accurate to identify the issue as whether the parties have agreed on a term of the Lease that identifies the leasehold land with precision that enables the leasehold land to be so identified without further agreement between the parties. [19] If so, the Lease is valid and enforceable. If not, the parties have not agreed on a term that is essential to the creation of a valid lease.
However the issue is to be characterised, Mr Smark and Mr Murr were at one in accepting that the court will strive to adopt an interpretation of the Lease that preserves its validity.

Is the Lease Binding?

The difficulty in the present case arises because the "hatched area" referred to in the definition of "Property leased" is omitted from the plan reproduced in Annexure B to the Lease. Despite the omission, and the imprecise identification of the location of the Chapel on the plan, the terms of the Lease make it clear that the leasehold land is to have the following characteristics: (i) the area is to be 800 m2; (ii) the area is to include the Chapel; (iii) the balance of the leasehold land is to surround the Chapel; and (iv) the leasehold land is to extend over both Lot 4 and Lot 100. Despite the annexed plan placing the Chapel in the wrong location, the correct location of the Chapel has at all times been readily ascertainable.
Clause 9 reaffirms that the total area of the leasehold land is 800 m2. The clause then says that the "Plan", by which is clearly meant to be the plan in Annexure B, is "only … approximate": "and the area shall be surveyed and a final plan shall be prepared by [Dr Taluja] … within a reasonable time." Clause 9 also provides that Sansthan agrees to pay the costs of preparing the final plan and to provide all necessary assistance and facilities "in this respect".
Clause 9 states that a "final plan" shall be prepared by Dr Taluja within a reasonable time. This language strongly suggests that Dr Taluja is under an obligation to prepare a plan. Clause 9 does not say that Dr Taluja's obligation is conditional on the plan in Annexure B including a hatched area. Nor did Mr Smark suggest that Dr Taluja would have any particular difficulty in complying with the obligation, even without the benefit of hatching on the annexed plan. The Lease contemplates that the "final plan" is to be prepared by Dr Taluja in conformity with the parameters set by the terms of the Lease.
It is true that cl 9 is drafted on the assumption that the plan in Annexure B incorporates a hatched area showing the approximate boundaries of the leasehold land. But that fact does not demonstrate that Dr Taluja is relieved of the express obligation to prepare a "final plan" if the hatching happens to be omitted from the plan in Annexure B. The process contemplated by cl 9, upon which the validity of the Lease depends, is perfectly workable without a hatched plan being included in the Lease. In the absence of language making Dr Taluja's obligation conditional on the existence of hatching on the Annexure B plan, in my opinion there is no good reason to construe cl 9 as imposing such a condition.
Independently of the principle that courts strive to uphold the validity of contracts, I would construe cl 9 of the Lease as requiring Dr Taluja to prepare a "final plan" within a reasonable time, regardless of the absence of hatching on the plan in Annexure B. This conclusion seems to me to be irresistible once the principle that courts strive to construe agreements so as to preserve validity is taken into account.
Clause 10.1 of the Lease establishes a mechanism for resolving any disagreement that arises "in connection with the Plan". Mr Smark and Mr Murr agreed that in view of the inconsistencies in the drafting of the Lease, no significance can be attached to the capitalisation of the initial letter of "Plan" in cl 10.1. In these circumstances, the natural reading of cl 10.1 is that if there is a disagreement in relation to the "final plan" prepared by Dr Taluja (which on any view is not necessarily a truly final plan) the disagreement is to be referred to an expert for final determination. That the expert is to be appointed by the President of the Institute of Surveyors indicates that the expert's principal focus will be on ensuring that the area of the leasehold land is precisely 800 m2. However, there is no reason why the expert should be precluded from determining other issues that necessarily arise in determining the precise dimensions of the leasehold land, taking Dr Taluja's "final plan" as the starting point.
For these reasons I conclude that the Lease establishes the mechanism that enables the location and dimensions of the leasehold land to be ascertained without further agreement between the parties. The Lease is therefore valid and his Honour was correct to conclude, in the absence of any other challenge, that Sansthan validly exercised the option to purchase in November 2009.

Right of Use

There is a degree of artificiality about the way in which the issue concerning the correct classification of the "right of use" in cl 12.3 of Annexure A was presented in this Court. The nature of the "right of use" arose for consideration by the primary Judge in the context of the dispute between the parties as to the form of orders required to give effect to the Primary Judgment. Presumably because the issue arose after delivery of the Primary Judgment, the question was not fully debated before his Honour. In particular, no argument was put to his Honour that the "right of use" was incapable of being classified as an easement. Understandably, his Honour dealt briefly in the Easement Judgment with the construction arguments put to him.
The notice of appeal challenges his Honour's holding that cl 12.3 is intended to create an easement and contends that his Honour should have held that the right in question is merely a contractual licence. The notice of appeal does not challenge the implicit determination by the primary Judge that the right of use provided for in cl 12.3 is capable of constituting an easement.
Clause 12.3 refers to a "right of use over the Common Areas … other than the Brundah Hall Dining Room". There is no further elaboration of the nature of the permitted use over each of the Common Areas; the persons entitled to exercise the right of use; or the precise parts of the Retained Land affected by the right of use.
The definition of "Common Areas" in Annexure A of the Lease gives rise to a host of issues. What were "the parking areas in front of" the leasehold land at the time the Lease was executed? [20] What is meant by "the area of the Whole Property in front of" the leasehold land? Is it intended that the right to use the garden is to be capable of exercise by all devotees who attend the Chapel? If so, does the right of use extend beyond enjoying the garden and include conducting outdoor meetings or gatherings? [21] What limits, if any, are there on the right to use the "area of the whole Property in front of the leasehold land? [22] Does the right of use of parts of the Retained Land expand in scope if Sansthan constructs buildings on the leasehold land as permitted by cl 14 of Annexure A, thereby perhaps allowing many hundreds of devotees to participate in ceremonies at the same time?
A further difficulty, not adverted to by the parties, is created by s 88(1) of the Conveyancing Act 1919 (NSW) (Conveyancing Act), which states that: "an easement expressed to be created by an instrument … shall not be enforceable against a person interested in the land claimed to be subject to the easement … and not being party to its creation unless the instrument clearly indicates: (a) the land to which the benefit of the easement … is appurtenant; [and] (b) the land which is subject to the burden of the easement …" Section 88(3) provides that s 88 applies to land under the Real Property Act.
Since the Lease is not in registrable form and is not executed as a deed it would seem not to be an "instrument" for the purposes of s 88(1) of the Conveyancing Act. [23] But if cl 12.3 of Annexure A is intended to confer a right in the nature of an easement once Sansthan exercises its option to purchase, it must have been contemplated that the right of use would be incorporated in an instrument capable of registration under the Real Property Act. Apart from the other issues I have referred to, it is hard to see how the right of use could be incorporated in a registrable instrument that complies with s 88(1) of the Conveyancing Act, unless the instrument identifies more precisely the land burdened by each element of the right of use. [24] It is not clear how that could be done without further agreement between the parties. [25]
Although Dr Taluja did not submit in this Court that the right of use conferred by cl 12.3 is incapable of being classified as an easement, Mr Smark did submit that the uncertain scope and possible issues as the enforceability of the right against Dr Taluja's successors in title militate against classifying the right as an easement. In my view, this submission has considerable force. The submission receives support from the apparent width of the right of use conferred by cl 12.3. It is difficult to accept that the right was intended to enure for the benefit of Sansthan's successors in title (who, as Mr Smark pointed out, might be adherents of a different religion). It is also difficult to accept that it was intended to bind Dr Taluja's successors in title, given that an easement co-extensive with the right of use would impose very extensive and burdensome constraints on the Retained Land. [26] While relations between Dr Taluja and Sansthan (and its principals) obviously have soured, the Lease was executed at a time when Dr Taluja was a supporter of adherents of Baba. [27]
Clause 12.3 should be construed to create a licence in favour of Sansthan similar in scope (but not necessarily identical) to the licence created by cl 13. A plausible reason for including the right of use in cl 12.3 is to avoid the possibility that the existing licence might be terminated on Sansthan's exercise of the option to purchase or as a result of unilateral action by Dr Taluja. Whether and in what circumstances the licence created by cl 12.3 can be terminated is not a matter arising in these proceedings.
For these reasons I conclude that the primary Judge erred in including in the orders for specific performance of the option to purchase an order requiring the creation of an easement of use over the Common Areas of the Retained Land.

Orders

The following orders should be made:
To the extent that the appellant (Dr Taluja) requires leave to appeal, leave is granted.
Allow the appeal in part.
Set aside Order 3(iv) made by Sackar J on 27 August 2015.
Otherwise dismiss the appeal.
The major issue in the appeal was whether the Lease and therefore the Option was valid. Sansthan has succeeded on that issue, but Dr Taluja has succeeded on the subsidiary issue concerning the "right of use". In my view Dr Taluja should pay 50 per cent of Sansthan's costs of the appeal, including the costs of the application for leave to appeal.

Endnotes

Shree Shirdi Sai Sansthan Sydney Limited v Taluja [2014] NSWSC 1825 (Primary Judgment).
Shree Shirdi Sai Sansthan Sydney Limited v Taluja (No 2) [2015] NSWSC 1180 (Easement Judgment).
See Taluja v Australian International Academy of Education [2011] NSWCA 416 at [50] (Young JA, Beazley and Macfarlan JJA agreeing). This case involved a challenge to the validity of an unregistered lease of Leigh College Hall to the school.
Primary Judgment at [120]-[124].
Easement Judgment at [13]-[15].
Primary Judgment at [61].
Supreme Court Act 1970 (NSW), s 101(2)(e).
[1984] HCA 47; 54 ALR 767 at 767-768 (Gibbs CJ, Murphy and Wilson JJ agreeing); see also Anying Group Pty Ltd v Wang [2012] FCA 702 (Flick J) at [8] ff.
Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd [2012] NSWCA 61 at [29] (Young JA).
Cf Camberwell City Council v Camberwell Shopping Centre Pty Ltd [1994] 1 VR 163.
May & Butcher Ltd v The King [1934] 2 KB 17 at 21 (Lord Dunedin).
Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd [1982] HCA 53; 149 CLR 600 at 604 (Gibbs CJ, Murphy and Wilson JJ); Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 at [61]-[63] (Sackville AJA, Macfarlan and Gleeson JJA agreeing) and cases cited there.
Goldsworthy Mining Ltd v Federal Commissioner of Taxation [1973] HCA 7; 128 CLR 199 at 211-212 (Mason J).
Godecke v Kirwan [1973] HCA 38; 129 CLR 629 at 641-643 (Walsh J, Mason J agreeing); see also Axelsen v O'Brien [1949] HCA 18; 80 CLR 219 at 225 (Latham CJ, Rich J agreeing).
Powell v Jones [1968] SASR 394 (Bray CJ). Powell v Jones was cited with approval by Walsh J in Godecke v Kirwan (1973) 129 CLR 629 at 641-642.
See K Lewison and D Hughes, The Interpretation of Contracts in Australia (2012, Lawbook Co) at [8.12].
Meehan v Jones (1982) 149 CLR 571 at 589 (Mason J, Wilson J agreeing); Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8; 118 CLR 429 at 436-437 (Barwick CJ, McTiernan, Kitto and Windeyer JJ agreeing); Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184; 89 NSWLR 633 at [55]-[56] (Leeming JA, Ward and Emmett JA agreeing)
K Lewison and D Hughes, note 16 above, at [8.13].
See Helmos Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235 at [82] (Young CJ in Eq, Hodgson JA and Stein AJA agreeing).
As to the right to park as an easement, see AJ Bradbook and SV MacCallum, Bradbrook and Neave's Easements and Restrictive Covenants (3rd ed 2011, LexisNexis Butterworths) at [1.44].
Cf Re Ellenborough Park [1956] Ch 131 (CA); Riley v Penttila [1974] VR 547 (Gillard J).
Among other requirements, an easement must accommodate the dominant tenement and must be capable of forming the subject matter of a grant: Clos Farming Estates Pty Ltd v Easton [2002] NSWCA 389; 11 BPR 20,605 at [30]-[35] (Santow JA, Mason P and Beazley JA agreeing).
See the definition of "instrument" in Conveyancing Act, s 7(1); see also Conveyancing Act, s 38, which sets out the requirements for a deed.
In Maurice Toltz Pty Ltd v Macy's Emporium Pty Ltd [1970] 1 NSWR 474, at 480-481, Hope J seemed to proceed on the basis that, where the easement affects only a portion of a lot, it is not sufficient to satisfy s 88(1)(b) merely to identify the whole of the lot as the dominant tenement.
Registered easements under the Real Property Act are not construed in the same way as agreements inter partes: see Westfield Management Ltd v Perpetual Trustee Co Ltd [2007] HCA 45; 233 CLR 528 at [37] per curiam.
I leave to one side the question of how an "easement" which is not in a form complying with s 88(1) of the Conveyancing Act can be enforced against successors in title to the grantor of the easement.
Even though the evidence indicates that she was an adherent of a different saint or deity. 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: 08 July 2016

Real Property Act 1990(NSW)

Solicitors: Penhall & Co Lawyers (Appellant) Rickards Legal (Respondent) File Number(s): 2015/273825 Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2014] NSWSC 1825 [2015] NSWSC 1180 Date of Decision: 19 December 2014 27 August 2015 Before: Sackar J File Number(s): 2010/375468

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Cases Cited (19)