Reported Decision : 64 NSWLR 1 New South Wales Supreme Court CITATION : Armidale Dumaresq Council v M & P (North Coast) Pty Ltd & Anor [2005] NSWSC 628 HEARING DATE(S) : 27/06/05 JUDGMENT DATE : 28 June 2005 JUDGMENT OF : Gzell J DECISION : Order that caveat be removed forthwith under the Real Property Act 1900, s 74MA. Optionees cross claim dismissed. Submissions to be made whether an inquiry as to compensation by an Assoicate Judge under s 74P should be ordered. CATCHWORDS : CONVEYANCING - Land Titles under the Torrens System - Caveats against Dealings - Call option to purchase land - Whether optionee can lodge caveat against land said to be servient tenement to land the subject of option - Land subdivided and one parcel transferred to local council for use as public car park - Whether right of way over car park for access to retained portion arises by implication from common intention - Claim that agreement for sale of car park by local council void - Community land reclassified by local council under the Local Government Act 1993, s 27 - Whether s 32 an exclusive code for reclassification of land dedicated to a local council under the Environmental Planning and Assessment Act 1979 - Whether optionee has standing Environmental Planning and Assessment Act 1979 Real Property Act 1900 Local Government Act 1993 LEGISLATION CITED : Funeral Funds Act 1979 Aboriginal Land Rights Act 1983 Land and Environment Court Act 1979 Wheeldon v Burrows (1879) 12 Ch D 31 Pwllbach Colliery Co Ltd v Woodman [1915] AC 634 Auerbach v Beck (1985) 6 NSWLR 424 Brown v Heffer (1967) 116 CLR 344 Legione v Hateley (1982-1983) 152 CLR 406 Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639 Tanwar Enterprises Pty Ltd v Cauchi (2003) 77 ALJR 1853 KLDE Pty Ltd v Commissioner of Stamp Duties (Qld) (1984) 155 CLR 288 Stern v McArthur (1988) 165 CLR 489 Chan v Cresdon Pty Ltd (1989) 168 CLR 242 CASES CITED : Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 Re Henderson's Caveat [1998] 1 Qd R 632 Forder v Cemcorp Pty Ltd (2001) 51 NSWLR 486 Buildev v Developments Pty Ltd v PicSales Pty Ltd [2003] NSWSC 1245 Re Paul (1902) 19 WN (NSW) 114 Aboriginal Community Benefit Fund Pty Ltd v Batemans Bay Local Aboriginal Land Council (1997) 41 NSWLR 494 Batemans Bay Local Aboriginal Land Council v The Aboriginal Community Benefit Fund Pty Ltd (1997-1998) 194 CLR 247 R v Wallis; Ex parte Employers Association of Wool Selling Brokers (1949) 78 CLR 529 Fairfield City Council v N & S Olivieri Pty Ltd [2003] NSWCA 41 Fitch v Shoalhaven City Council (1977) 67 LGRA 165 Armidale Dumaresq Council - Plaintiff PARTIES : M & P (North Coast Pty Ltd - First Defendant FILE NUMBER(S) : SC 3463/05 Mr G C Lindsay SC/ Mr M J Walsh - Plaintiff COUNSEL : Mr T Robertson SC/ Mr A Diethelm - First Defendant Mr A P Coleman - Second Defendant Phillip Fox Lawyers SOLICITORS : Landerer & Co Solicitors & Attorneys Middletons LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GZELL J TUESDAY 28 JUNE 2005 3463/05 ARMIDALE DUMARESQ COUNCIL v M & P (NORTH COAST) PTY LTD & ORS JUDGMENT Introduction 1 Armidale Dumaresq Council is the owner of land at 240 Beardy Street, Armidale in New South Wales. M & P (North Coast) Pty Ltd lodged a caveat claiming an equitable interest in the land by reason of an option to acquire all the lots in the adjoining land at 242 Beardy Street that had a right of access over 240. The Council sought a declaration that M & P had no right, title or interest in 240, an order that the caveat be withdrawn forthwith and an inquiry as to compensation. 2 West End Market Place Pty Ltd had contracted to purchase lands from the Council, including 240. It was joined as second defendant. West End had also contracted to purchase land from L S Piddington & Sons Pty Ltd and Voltana Pty Ltd. Piddington and Voltana have nominated 29 June 2005 as the date for completion of their contracts. West End has entered into a development agreement with Centro MCS Manager Ltd and Sanctuary Properties (Aust) Pty Ltd for the construction of a shopping centre. The development agreement contemplates that the contract between the Council and West End will be rescinded and Centro will enter into a contract with the Council to purchase the lands including 240. The sale of those lands to Centro must be completed by the date on which the Piddington and Voltana contracts are completed. Hence the urgency. 3 On the motion of M & P, I ordered that Depell Pty Ltd, the owner of 242, be joined as third defendant. Depell entered a submitting appearance except as to costs and except as to an alternative claim by the Council for extinguishment or modification of any easement over 240. The Council thereupon discontinued that claim for relief. 4 By its cross claim, West End sought similar relief to that claimed by the Council. By a second cross claim, M & P sought a declaration against the Council that persons entitled to an interest in the lots on 242 were entitled to a right of way over 240, an order that the Council execute an instrument in registrable form granting that right of carriageway and a declaration that the contract of sale between the Council and West End was void so far as it purported to sell any estate or interest in 240. The easement 5 Predecessors in title to Depell owned 240 and 242 as one block. They constructed a car park on portion of the land as a condition of development approval for a nearby arcade. In accordance with the condition, the land was subdivided and 240, on which the car park had been constructed, was transferred to the Council to be used as a public car park. 6 There was a block of residential flats on 242 with landscaping at the frontage to Beardy Street behind a retaining wall that elevated ground level above footpath level. There was no access to a street on the other sides of 242. There was a break in the fence between 240 and 242 and a car park for residents of the flats at the rear of 242. Access to that car park was through the gap in the fence onto 240 and thence to Beardy Street. Originally the gap in the fence was gated but that condition was deleted by the Council to enable vehicles in the car park to turn by reversing into the opening. The condition of Council was then to provide a painted speed bump between the two car parks and the words "private parking only" painted in the parking area on 242. There were notes on the Council file that access to car parking for the flats would be via 240 which was to vest in the Council for public access. Access to the public car park was from Beardy Street and, in order to improve sight lines and for ease of turning out of the public car park, there was a splay in the alignment between 240 and 242 at Beardy Street. 7 There was no creation of an easement on the title to 240 when it was transferred to the Council. It was submitted that the lack of a grant of an easement was explicable because the rights of the inhabitants of 242 were the same as the public to use the public car park. But the use of the public car park was by way of licence and a non-exclusive licence to residents of 242 to drive through the car park does not constitute an easement. 8 M & P asserted an implied easement arose in Depell's predecessors in title over 240 for the benefit of 242. 9 In Wheeldon v Burrows (1879) 12 Ch D 31 it was held that upon the grant of part of a tenement, the grantee obtained all continuous and apparent easements over the other part of the tenement that were necessary to the enjoyment of the part granted and had been used with it. As a general rule, however, there was no corresponding implication in favour of the grantor. An implication in favour of the predecessors in title to Depell could not, therefore, arise under this rule. 10 It was submitted on behalf M & P that there were exceptions to this principle, one with respect to easements of necessity, another with respect to easements by common intention. 11 As to any easement by necessity, there is a strip of land on 242 between the residential flat building and the alignment with 240 that might constitute a driveway to Beardy Street. Evidence was adduced on behalf of M & P by a town planner that, by reason of the adjacent splay, the use of such a driveway would inevitably conflict with vehicles leaving the public car park creating a fundamental traffic hazard problem. The former owners of 242 agreed to a further subdivision of their land to transfer a one metre strip of land along the alignment of 240 to the Council. It was submitted that if there were an intention to put in a driveway along the boundary, consent to the transfer of the one metre strip would never have been given. There was evidence, however, that Depell had agreed to alternative access to 242 by means of such a driveway and the approval of the Council to these works had been obtained. 12 It was submitted on behalf of M & P that an easement over 240 should be implied as the common intention of the Council and Depell's predecessors in title. Reference was made to Pwllbach Colliery Co Ltd v Woodman [1915] AC 634 at 646-647 and to Auerbach v Beck (1985) 6 NSWLR 424 at 443-444. It was submitted that because 240 was conveyed to the Council pursuant to conditions of a development consent under the Environmental Planning and Assessment Act 1979 in 1988, the land became inalienably vested in the Council as a public car park and the common intention of the parties was expressed through the conditions to the consent to the development applications and the noted access through the car park. 13 I doubt that this evidence is sufficient to raise an implication of common intention on the part of the Council and Depell's predecessors in title that their transfer of 240 would be subject to an easement in favour of 242. The Council was to utilise 240 as a public car park. There is no indication that it agreed to restrict its right of user for the benefit of residents of 242. The fact that the Council expected and permitted residents of 242 to traverse its car park to Beardy Street is more consistent with a non-exclusive licence to cross its property than with the burdening of the property with an easement. The caveatable interest 14 It is unnecessary for me to decide the easement by implication issue because of the view I take that M & P lacked any interest in 240 sufficient to ground a caveat. 15 M & P has a call option to purchase 242 from Depell. It had sought the inclusion of provisions in its contract with Depell relating to access through the public car park, including a proposed requirement that Depell lodge a caveat over 240 to protect its interest in its right, permission or ability to use 240 to access 242. The inclusion of such provisions was rejected. Instead, in special condition 32.2(d)(2), M & P warranted that it was not induced to enter into the contract and did not rely on any representations or warranties by Depell or its agents about the subject matter of the contract including vehicular or the other access to the property. In cl 32.2(e)(5), M & P warranted that it had taken appropriate independent advice and was satisfied about vehicular and other access to the property and any possible restriction of such access by any relevant statutory authority or third party. The call option is dated 20 May 2005. It will expire in 12 months from that date. 16 There is a conflict in the authorities as to the nature of the interest held by a purchaser under a conditional contract. In Brown v Heffer (1967) 116 CLR 344 at 351, Windeyer J took the view that while the vendor was not at liberty to enter into any transaction inconsistent with an obligation to perform his contract with the purchaser, the purchaser's rights to have the vendor do nothing to his prejudice were enforceable in equity by injunction, but that did not create an equitable interest in the land. A similar view was expressed by the other members of the court at 349-350. 17 In Legione v Hateley (1982-1983) 152 CLR 406 at 446, Mason and Deane JJ, having referred to Brown, said: "The competing view - one which has much to commend it – is that the purchaser's equitable interest under a contract for sale is commensurate, not with her ability to obtain specific performance in the strict or primary sense, but with her ability to protect her interest under the contract by injunction or otherwise ( Tailby v Official Receiver (1888) 13 App Cas 523 at pp 546-549; Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84 at p 96; Hoysted v Federal Commissioner of Taxation (1920) 27 CLR 400 at p 423; Pakenham Upper Fruit Co Ltd v Crosby (1924) 35 CLR 386 at pp 396-399; Jordan, Chapters on Equity , 6th ed (1945), p 52, n(e)). If this view were to be adopted and applied, the respondent's inability to obtain specific performance in the primary sense would not entail the loss of her equitable interest. She would retain that interest so long as she was entitled to make out a case for relief against forfeiture." 18 Sir Frederick Jordan had said in Chapters on Equity that an agreement for valuable consideration for the assignment of property operated in equity to transfer the equitable title to the property to the promisee under the maxim that equity considered done that which ought to be done and that the principle was effective only in so far as the court of equity would grant specific performance of the agreement. His footnote was as follows: "Specific performance in this sense means not merely specific performance in the primary sense of the enforcing of an executory contract by compelling the execution of an assurance to complete it, but also the protection by injunction or otherwise of rights acquired under a contract which defines the rights of the parties." 19 That proposition was criticised by Meagher JA in Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639 at 654-655. His Honour pointed out that it could hardly be accurate, with regard to the transfer of purely equitable property, because if the entire beneficial interest went upon agreement, nothing remained in the vendor's hands even if no purchase money had been paid. That criticism was noted without comment by the High Court in Tanwar Enterprises Pty Ltd v Cauchi (2003) 77 ALJR 1853 at 1863. 20 Nonetheless, the broader approach to the concept of specific performance was adopted by the High Court in KLDE Pty Ltd v Commissioner of Stamp Duties (Qld) (1984) 155 CLR 288 at 297, Stern v McArthur (1988) 165 CLR 489 at 522 and in Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 253. 21 Thus it has been held that the holder of an option to purchase land has, prior to its exercise, a sufficient equitable interest to support a caveat (Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 at 75, Re Henderson's Caveat [1998] 1 Qd R 632, Forder v Cemcorp Pty Ltd (2001) 51 NSWLR 486, Buildev Developments Pty Ltd v PicSales Pty Ltd [2003] NSWSC 1245). 22 Equity intervenes because it would be unconscionable to allow the other party to act inconsistently with its obligations under the contract of sale or the call option. 23 In my view, therefore, M & P was entitled to lodge a caveat against 242. What it did, however, was to lodge a caveat against 240 on the basis that Depell held an easement and the owner of a dominant tenement is entitled to lodge a caveat over the servient tenement (Re Paul (1902) 19 WN (NSW) 114). 24 But the equitable interest of purchaser or optionee upon execution of the agreement does not subrogate that party to the rights of the vendor. Equity acts in personam against the vendor to prevent unconscionable conduct. It goes no further and the equitable interest is thus limited. Whether or not Depell was entitled to lodge a caveat over 240, M & P did not possess that right. 25 The position is not cured by the joinder of Depell as a defendant. It has entered a submitting appearance. It has not supported M & P by lodging a caveat over 240. 26 M & P has no interest in 240. The Real Property Act 1900, s 74MA(1) provides that any person who is, or claims to be, entitled to an estate or interest in land described in a caveat lodged under s 74F may apply to the court for an order that the caveat be withdrawn. Under s 74MA(2) the court may, upon satisfaction that a copy of the application has been served on the person who would be required to withdraw the caveat, order the caveator to withdraw the caveat within a specified time. I propose to act under that provision. 27 The Real Property Act 1900, s 74P(1) provides that any person who without reasonable cause lodges a caveat is liable to pay to any person who sustains pecuniary loss thereby, compensation with respect to that loss. I will hear the parties on whether I should direct an associate judge to conduct an inquiry as to any such compensation due to the Council and to West End. 28 I propose to dismiss paragraphs 1 and 2 of M & P's cross claim. M & P's standing to allege invalidity of contract 29 As already indicated, M & P seeks a declaration that the contract of sale between the Council and West End is void in so far as it purports to sell any estate or interest in 240 because it is inalienable community land in terms of the Local Government Act 1993. 30 M & P seeks to enforce a public restriction upon the Council. In Aboriginal Community Benefit Fund Pty Ltd v Batemans Bay Local Aboriginal Land Council (1997) 41 NSWLR 494 the appellant conducted a contributory funeral benefit scheme for aboriginals. It sought injunctions to restrain the respondents, who were considering commencing business in competition, from contravening the Funeral Funds Act 1979 and the Aboriginal Land Rights Act 1983. At 509 it was held that the rule for determining whether a plaintiff has standing to bring an action to prevent the violation of a public right is flexible. What has to be shown is a special interest in the subject matter of the action. At 512 it was held that standing is not to be denied on the ground that the effect upon commercial interest is not direct or the duty, the performance of which is sought to be upheld, is not a duty intended for the plaintiff's protection. 31 On appeal, the High Court held that because it was highly probable that, if not restrained from commencing and conducting their fund activities, the appellants would cause severe detriment to the respondent's business, the respondent had a sufficient interest to seek equitable relief (Batemans Bay Local Aboriginal Land Council v The Aboriginal Community Benefit Fund Pty Ltd (1997-1998) 194 CLR 247). 32 242 is zoned for commercial use. It can readily be inferred that the residential flats are not its highest and best use and that, if upon sale of 240, access to Beardy Street is limited to the proposed driveway within 242, its commercial interests are affected and, in my view, M & P has established a special interest sufficient to give it standing, subject to any legislative restriction. 33 The Land and Environment Court Act 1979, s 20(1)(e) provided that the Land and Environment Court had jurisdiction to hear and dispose of proceedings referred to in s 20(2). That subsection provided that the Court had the same civil jurisdiction as the Supreme Court to hear and dispose of proceedings to enforce any right, obligation or duty conferred or imposed by a planning or environmental law, to review, or command, the exercise of a function conferred or imposed by a planning or environmental law and to make declarations of right in relation to any such right, obligation or duty or the exercise of any such function. Section 71(1) provided that proceedings of the kind referred to in s 20(1)(e) could not be commenced or entertained in the Supreme Court. 34 In -it was held that the proceedings to restrain contravention of the Funeral Funds Act 1979 or the Aboriginal Land Rights Act 1983 did not fall within the embargo. The appellant was not seeking to enforce any right, obligation or duty imposed by the Aboriginal Lands Rights Act 1983 but was contending that the respondents had undertaken to do something they had no legal capacity to do, and accordingly something unlawful. 35 In my view, M & P has standing to seek the declaration in question. It asserts that the Council has attempted to sell 240 but it has no legal capacity to do so and the contract is, accordingly, unlawful. That is not an attempt to enforce any right, obligation or duty, to review or command the exercise of a function conferred or imposed by, or to make a declaration of right in relation to any such right, obligation or duty or the exercise of any such function under, the Environmental Planning and Assessment Act 1979. 36 Nor are the proceedings for an order to remedy or restrain a breach of the Environmental Planning and Assessment Act 1979, with respect to which s 123(1) provides that such proceedings may be brought in the Land and Environment Court. If they were, the question would still arise whether that provision excluded the jurisdiction of the Supreme Court. Contractual invalidity 37 The Local Government Act 1993, sch 7 cl 6(3) provided that within one year of the commencement of that Act, a council might by resolution classify as community land or operational land any public land that was vested in it or under its control that was not classified by subclause (2). The Council purported to act under this provision in classifying 240 as operational land. But cl 6(2) provided that on the commencement of the Act specified land vested in or under the control of a council was taken to have been classified as community land. The specification included land dedicated as a condition of a development consent under the Environmental Planning and Assessment Act 1979, s 94 and land subject to a trust for a public purpose, both of which applied to 240. 38 The mistake having been brought to the attention of the Council, it resolved that a draft amendment to Armidale LEP 1988 be prepared to classify 240 amongst other lands as operational land. In so doing the Council purported to act under the Local Government Act 1993, s 27 which was in the following terms: "(1) The classification or reclassification of public land may be made by a local environmental plan. (2) The classification or reclassification of public land may also be made by a resolution of the council under section 31, 32 or 33." 39 It was submitted on behalf of M & P that the Council's purported reclassification of 240 was invalid because it should have been reclassified under the Local Government Act 1993, s 32 which was in the following terms: "(1) A council may resolve that land dedicated in accordance with a condition imposed under section 94 of the Environmental Planning and Assessment Act 1979 is to be reclassified as operational land. (2) A council may make such a resolution only if it is satisfied that the land has been found to be unsuitable for the provision, extension or augmentation of public amenities and public services because of any one or more of the following: • the size of the land • the shape of the land • the topography of the land • the location of the land • the difficulty of providing public access to the land. (3) The council must specify in the resolution the grounds on which it is satisfied the land is unsuitable. (4) Before making the resolution, the council must give public notice of the resolution. The public notice must specify a period of not less than 28 days during which submissions may be made to the council. (5) The net proceeds of sale by a council of any land dedicated in accordance with a condition imposed under section 94 of the Environmental Planning and Assessment Act 1979 must be dealt with under that section as if those net proceeds were a monetary contribution paid instead of the dedication." 40 Following the public hearing required by the Environmental Planning and Assessment Act 1979, s 68, amendment 17 to the Armidale LEP 1988 was made by the Minister for Urban Affairs and Planning on 24 June 1997 and published in the Government Gazette on 4 July 1997. It reclassified 240 as operational land. 41 It was submitted that the maxim expressum facit cessare tacitum applied and that the enactment of section 32 the Local Government Act 1993, in affirmative words appointing a course to be followed, should be understood as importing a negative, namely, that the same matter was not to be done according to some other course (R v Wallis; Ex parte Employers Association of Wool Selling Brokers (1949) 78 CLR 529 at 550). But that maxim cannot apply in the face of the alternative courses specified in s 27 unless the reference to the Environmental Planning and Assessment Act 1979, s 94 is to be construed as providing an exclusive method of reclassification for land dedicated under that section. 42 It is to be noted that the public is to be involved in a reclassification whether made under the Local Government Act 1993, s 32 or s 27. It might be thought that the added requirement of Ministerial consent meant that the procedure under s 27 was more onerous and what was offered under s 32 was a less onerous mechanism available only with respect to land dedicated under s 94 of the Environmental Planning and Assessment Act 1979. 43 In Fairfield City Council v N & S Olivieri Pty Ltd [2003] NSWCA 41 Spigelman CJ considered the power to impose a condition requiring dedication of land free of cost to a council under s 94 of the Environmental Planning and Assessment Act 1979, which Stein J had held to be an exclusive source of power in this regard in Fitch v Shoalhaven City Council (1977) 67 LGRA 165, and the power in the then s 91(3)(f) to impose a condition requiring the carrying out of works relating to any matter referred to in s 90(1) applicable to the development, the subject of consent. At [24] the Chief Justice took the view that there was no warrant for reading down the reference to "works" in s 91(3)(f) by giving the exclusive operation of s 94 a scope extended beyond that referred to in Fitch. 44 In my view, there is no warrant for reading down the alternative specified in s 27 of the Local Government Act 1993 and treating s 32 as an exclusive source of reclassification of land dedicated in accordance with a condition imposed under s 94 of the Environmental Planning and Assessment Act 1979. In my judgment M & P fails in its claim to the declaration in paragraph 3 of its cross claim. Conclusion 45 The Council is entitled to an order under the Real Property Act 1900, s 74MA that the caveat lodged by M & P over 240 be withdrawn forthwith. I will hear the parties on whether I should direct an Associate Judge to conduct an inquiry as to any compensation due to the Council and to West End as a result of the lodgement of the caveat in terms of the Real Property Act 1900, s 74P. M & P's cross claim should be dismissed. I will hear the parties on the terms of the appropriate orders. I will hear the parties on costs. I direct the parties to bring in short minutes of orders reflecting these reasons. ********** 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.