Buchholz v Kempsey Shire Council [2005] NSWSC 235

New South Wales Supreme Court

CITATION : Buchholz v Kempsey Shire Council [2005] NSWSC 235

HEARING DATE(S) : 18 March 2005

JUDGMENT DATE : 18 March 2005

JURISDICTION : Equity

JUDGMENT OF : Austin J

DECISION : Summons dismissed

CATCHWORDS : EQUITY - allegation of equitable easement based on Walsh v Lonsdale - proprietary estoppel - allegations fail on facts

Adamson v Hayes (1973) 130 CLR 276 Amalgamated Investment and Property Co (in liq) v Texas Commerce International Bank Ltd [1981] 3 All ER 577 Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 Commonwealth v Verwayen (1990) 170 CLR 394 Crabb v Arun District Council [1975] All ER 865 Frater v Finlay (1968) 91 WN (NSW) 730 CASES CITED : Jones v Bradley (No 2) [2003] NSWCA 258 London & Blenheim Estates v Ladbroke Retail Parks Limited [1993] 4 All ER 157 Ramsden v Dyson (1866) LR 1HL 129 Riches v Hogben (1985) 2 Qd R 292 State of New South Wales v Scharer [2003] NSWCA 328 Walsh v Lonsdale (1882) 21 Ch D 9 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

Gemma Lee Buchholz (P) PARTIES : Kempsey Shire Council (D)

FILE NUMBER(S) : SC 4922/04

C Taylor (P) COUNSEL : G E Underwood (D)

Paul Stubbs Law Office (P) SOLICITORS : Howard Sheridan Cooney Harvey (D)

LOWER COURT JURISDICTION :

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

AUSTIN J

FRIDAY 18 MARCH 2005

4922/04 GEMMA LEE BUCHHOLZ V KEMPSEY SHIRE COUNCIL JUDGMENT (Ex tempore; revised 22 March 2005) 1 HIS HONOUR: By a summons filed on 6 September 2004 the plaintiff sought by way of final relief a declaration and an injunction with respect to a property at 2 Memorial Avenue, South West Rocks, New South Wales. The property at 2 Memorial Avenue contains a block of some 12 residential holiday flats entitled Boomerang Flats. Between the front boundary of the property and the road, Memorial Avenue, there is a strip of land, part of which has been used as a parking area for the tenants of the holiday flats. I shall refer to the area so used as the "parking area". 2 The plaintiff sought a declaration that as proprietor of the subject property, she had the benefit of an easement, being a right to park motor vehicles over the parking area for the benefit of herself and all persons authorised by her to park motor vehicles in that area at all times. In other words, the declaration was intended to recognise, for the benefit of the plaintiff as registered proprietor of Boomerang Flats, an easement in perpetuity for the parking the motor vehicles in the parking area. The plaintiff also sought an injunction to restrain the defendant from imposing any motor vehicle parking restrictions with respect to the parking area or otherwise impeding access to the carpark. She claimed damages, interest and costs. 3 The road now called Memorial Avenue, formerly called Sturt Street, and the strip of land between the road and the front boundary of Boomerang Flats was Crown land from 1885 until 1993. The evidence before me indicates that all of that land is now vested in fee simple in the local council, Kempsey Shire Council, by virtue of s 145(3) of the Roads Act 1993 (NSW) which came into force that year. 4 Boomerang Flats was constructed in the early 1960s. At that time South West Rocks was a small fishing village. It has gradually grown in popularity as a holiday destination and, of course, that has led to some substantial property development. Boomerang Flats was an early manifestation of that development. At the time it was built it was a new concept in holiday accommodation in the area and was regarded as one of the larger residential buildings for multi-occupation residences. Apart from the single garage used by the manager, there is no other parking facility within the building or the land on which the building stands. 5 Boomerang Flats is a well situated building almost directly opposite the beach and adjacent to the shopping and commercial area of South West Rocks. In consequence, as the town has grown and its popularity as a holiday destination has increased, parking within the area has been sought after by shoppers and day visitors to the village and the beach and the occupants of the flats. 6 Between the time of construction of Boomerang Flats early in the 1960s and 1972, the holiday tenants of the flats were in the habit of parking their motor vehicles on the strip of land between the road and the front boundary of the property, which was a grass verge. At that time the road was not kerbed and guttered. It is not suggested that the predecessor in title of the plaintiff had any right as against the Crown or the Council, as the relevant public authority, for that strip of land to be used for parking purposes. To the extent that it was so used, it can only have been either by virtue of an authority pursuant to some form of licence, or without authority. 7 In 1971 or 1972 the Macleay Shire Council, then the relevant municipal authority, developed a plan for the kerbing and guttering of Memorial Avenue in a manner which I will recount in more detail. There were discussions between representatives of the Council and the then owners of Boomerang Flats, Mr and Mrs Twaddell, as to the impact that the kerbing of the street would have on the parking practices to which I have referred. 8 Eventually, the Council constructed kerbing so that it was indented for a length more or less approximating to the width of the subject property and the kerbing was constructed behind the indented part so as to allow cars to be parked without it being necessary for them to run over the kerb and on to the grass. Mr and Mrs Twaddell paid the cost of kerbing at both of the indented ends of that part of the kerbing and also the cost of surfacing the parking area with bitumen. Thereafter, the holiday tenants followed the practice of parking their vehicles in the parking area. In 1972 Mr and Mrs Twaddell sold Boomerang Flats to Mr and Mrs Duke and Ms Evill. 9 In 1975 there was an amalgamation of councils with the consequence that the relevant council became the Kempsey Shire Council in place of the Macleay Shire Council. That is relevant to note because there is evidence that at that time many of the pre-1975 files of Macleay Shire Council were either destroyed or lost. 10 In the period from 1979 to about 1999 the use of the parking area as described continued and there is no evidence that any objection was raised during that time by or on behalf of the Council. Indeed, during that time there were line markings and numbers painted on the sealed concrete and kerbing corresponding with the unit numbers of Boomerang Flats signifying that occupants of units with those respective numbers were to use the car parking areas so designated. 11 In 1997 Boomerang Flats was purchased by the plaintiff. She appointed John Popple as the letting agent for the property. He gave evidence based on the experience he acquired in that capacity that a facility for parking was a matter of importance for prospective holiday tenants. 12 In November 2001 the defendant imposed a two-hour parking restriction with respect to the parking area without making any exception or allowance for tenants of Boomerang Flats. Mr Popple gave evidence that this adversely affected the lettings of Boomerang Flats. After complaints were made, the defendant removed the parking restrictions in December 2001. Then on about 1 August 2003 the defendant reintroduced time restricted parking with respect to the parking area, again making no exception or allowance for the tenants of Boomerang Flats. Mr Popple's evidence was as follows: "I believe that if the two hour parking restriction is enforced in such a way that it becomes apparent that anyone who does park in breach of the signs will be given an infringement notice then the business of the Boomerang Flats will be very severely affected. It is my opinion that there will be very few tenants who would be prepared to lease units at Boomerang Flats where there was no designated or permanent parking available. More recently constructed units are obliged by the Council to provide permanent parking. Older style units such as Boomerang Flats cannot compete. Any tenant who leased a unit without such parking would have no guarantee that they could park within several hundred metres of the units given the traffic situation of the immediate area of the units themselves." 13 It seems to me that the resolution of this dispute depends on a close analysis of the plaintiff's evidence as to what precisely was the arrangement, if any, between the then owner of Boomerang Flats and the Council in 1972. The evidence is found in the affidavits of Richard Twaddell and Kevin Ball. Mr Ball was the proprietor of the local butcher shop and a member of the Macleay Shire Council in 1972. I have no reason not to believe any of that evidence. 14 It appears that in about 1971, while Mr Twaddell was at the property, an officer from Macleay Shire Council approached him and told him the Council intended to kerb and gutter Memorial Avenue. The Council officer said: "That will affect parking for your units. Council would be prepared to make some arrangement for parking for your tenants when the work is done." 15 Mr Ball said that Mr Twaddell approached him in his butcher shop and told him that if the Council were to put kerb and guttering in front of Boomerang Flats, tenants would not be able to park their vehicles the way they were. Mr Twaddell said there was not enough parking in front of the building and he asked Mr Ball whether something could be done. Mr Ball's evidence is he arranged a meeting between Mr Twaddell and the Shire Engineer, Mr Ray Berthold. 16 Mr Twaddell said that he had several discussions with Mr Berthold. During the course of those discussions Mr Berthold said, "We will provide a parking area in front of the units so that tenants' vehicles do not have to park on the grass", and "they will be able to park outside their units in similar fashion to the way they normally park". Mr Berthold also told Mr Twaddell that he would have to meet the cost of the Council doing the extra work providing the parking and Mr Twaddell said that he understood that would be so. 17 Mr Twaddell gave evidence of a later meeting between Mr Berthold, and himself and his wife, in which Mr Berthold laid out a plan on their kitchen table and they all studied it. He said the plan showed an indented parking area adjacent to the bitumen road immediately in front of Boomerang Flats and he said that Council had made provision for the kerb to be varied to provide vehicular access to the garage used by the manager. During that meeting he said Mr Berthold told him, "You will have to meet the entire costs of the fill for the parking area, the kerbing and bitumen surface", but no amounts were mentioned. 18 Mr Twaddell said Mr Berthold told him that "the area will be reserved for parking by tenants of your units" and Mr Twaddell understood that to mean that Council was setting aside the parking area exclusively for the tenants of Boomerang Flats. Mr Twaddell said in his affidavit: "There was no discussion between my wife and myself and the engineer or any other officer of the Council which suggested that the parking rights, which I believed we were paying for, were to be limited for some period of time or at all." 19 Mr Ball recalled attending a meeting of Council in his capacity as councillor at which an item on the Council agenda as part of the business papers recommended the adoption of an arrangement between Mr Berthold and Mr Twaddell concerning the kerbing of Memorial Avenue in front of Boomerang Flats. He said he could recall that the business paper set out the terms of the arrangement and that they were for Mr Twaddell to pay all costs associated with a construction of a layback adjacent to his premises to be used by tenants of his flats for car parking. Mr Ball said the motion to accept the recommendation was passed without dissent. 20 Evidence was given by the Director of Engineering for Kempsey Shire Council to the effect that he had caused his staff members at Kempsey Shire Council to undertake a search of the minutes of the Macleay Shire Council during 1971. He identified the minute book, which has been tendered. The plaintiff has not pointed to any record in the minute book to reveal any reference to the section of Memorial Avenue in front of Boomerang Flats, which I have called the parking area. Having regard to the tender, Mr Finnie's affidavit and oral evidence, my conclusion on that point is that there are no extant records of the decision of Council as to which Mr Ball gives affidavit evidence and, consequently, the only evidence of what the Council decided is Mr Ball's affidavit. 21 Additionally, Mr Finnie's attention was drawn to a minute of the decision of Kempsey Shire Council on 23 January 1989. It appears at that time the then owners of Boomerang Flats made an application for the construction of an additional unit to the flats. The report to Council, presumably prepared by an officer of the Council, refers to "an existing parking area for 12 cars" that was "provided within the roadway". Having noted the car parking requirement under the Council's interim flat policy, the officer noted that "as the existing parking arrangements are not causing any problems (a fact supported by the South West Rocks police) the existing parking should be accepted as sufficient". 22 Having regard to Mr Finnie's evidence, in my view it is not appropriate for the Court to infer from this record any prior determination by the Council to recognise some form of perpetual or indefinite right to use part of the Council's roadway for private parking purposes. Nor does the evidence before me enable me to reach any firm conclusions with respect to Mr Berthold's authority to bind the Council to any indefinite or long term arrangement to allocate part of the Council's property for exclusive parking purposes attached to Boomerang Flats. I shall return to the question of authority later. 23 On those facts the plaintiff submits that equitable rights have arisen in their favour of two kinds. First, she says she is entitled to an equitable easement arising by the application of the rule in Walsh v Lonsdale (1882) 21 Ch D 9. The plaintiff submits it was open to the Court to find on the evidence there was an agreement in 1972 between the then owner of Boomerang Flats and Mr Twaddell and the defendant whereby they paid the costs associated with partial kerbing and guttering of the parking area and the cost of applying bitumen to it in consideration of being granted a right to parking on the parking space indefinitely. In my opinion, the evidence does not provide a proper foundation for this submission. 24 One starts with the proposition that until an arrangement was made with Mr and Mrs Twaddell and the Council in 1972, tenants of the holiday flats were using the Council land for parking purposes without any conferral of a right in the nature of an easement, or otherwise of a proprietary right on the owner of Boomerang Flats for that purpose. 25 In those circumstances, it appears to me that the Council officer and Mr Twaddell, when they had their initial discussion, should be taken to be referring to some arrangement to enable the status quo to continue substantially after the kerbing and guttering of the street. That is why the Shire Engineer, Mr Berthold, referred to "some arrangement for parking for your tenants when the work is done", and also their being able to "park outside their units in similar fashion to the way they formerly parked". Mr Berthold later said that the area would be "reserved for parking by tenants of your units". But it seems to me in the circumstances, that was not on its proper construction tantamount to any grant of a proprietary interest, or any promise, or representation intending to operate in perpetuity. 26 The arrangement appears to me to have been that Mr and Mrs Twaddell were paying for part of the construction work that was to be undertaken by the Council so as to maintain after completion of the construction work the arrangements that were in place before the construction work commenced, that is to say, arrangements under which the holiday tenants were able to park on the Council's land without the owner of Boomerang Flats having any general proprietary or other long term right to secure the continuance of the arrangement. 27 It follows, in my view, that the arrangements could not be described, as the plaintiff's submissions seek to do, as an agreement in consideration of the plaintiff being granted a right to park on the parking space, and a fortiori could not be described as conferring a right to park on the parking space indefinitely. 28 In my view, the foundation for the application of Walsh v Lonsdale, assuming for the moment that it is otherwise applicable, namely, the presence of a specifically enforceable agreement to confer an interest, is not supplied by the evidence because the evidence does not show any agreement to confer an interest on the owner of Boomerang Flats. Other arguments were made by the defendant to the effect that Walsh v Lonsdale could not be applied in these circumstances. Thus, it was submitted, that the rule in Walsh v Lonsdale has not been applied outside situations involving agreements to lease and that the rule had no application except in situations where specific performance would be granted almost as of right. It is unnecessary for me to decide whether those propositions are correct. 29 There was also contention between the parties as to the significance of absence of writing. The defendant submitted that the plaintiff was attempting to use Walsh v Lonsdale to circumvent s 23C(1)(a) of the Conveyancing Act 1919 (NSW) and contended that authority did not support so doing (citing Adamson v Hayes (1973) 130 CLR 276). The plaintiff relied in reply on 54A(2) of the Conveyancing Act and the doctrine of part performance. Again, it is unnecessary for me to decide whether the absence of writing constituting or providing evidence of the arrangement between the plaintiff and the Council would have been fatal to the plaintiff's case if otherwise the content of the arrangements as alleged by the plaintiff had been made out, and it is unnecessary for me to decide what effect the apparent loss of Council records might have had on this matter. 30 The plaintiff's second contention was that equitable proprietary rights arose in her favour by virtue of the application of what her counsel referred to in submissions as proprietary estoppel. The law of equitable estoppel has been developed extensively, particularly by the decision of the High Court in such cases as Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 and Commonwealth v Verwayen (1990) 170 CLR 394 and also decisions of the lower courts including the Court of Appeal judgment in Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582, and relevantly to the present facts, the decision of the Supreme Court of Queensland McPherson J in Riches v Hogben (1985) 2 Qd R 292. Until those cases, it appeared necessary, or at least appropriate, to subdivide the world of equitable estoppel into promissory estoppel and proprietary estoppel, and to divide the latter category into cases of encouraged expenditure on the one hand and acquiescence on the other. On the old analysis the present facts would be closest to a case of acquiescence than any of the other sub categories. The leading case in that area was Ramsden v Dyson (1866) LR 1HL 129 where Lord Kingsdown set out, in a famous passage frequently approved in later cases (though, in fact, a dissenting decision) the rule of law applicable to such cases: "If a man under a verbal agreement with a landlord for a certain interest in land, or, what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest takes possession of such land with the consent of the landlord, and upon the face of such promise or expectation, with the knowledge of the landlord and without objection by him lays out money upon the land, a court of equity will compel the landlord it give effect to such promise or expectation." 31 It is evident from that quotation that in cases of acquiescence, the plaintiff's equity does not arise purely by virtue of the acquiescence. It arises by virtue of some circumstances which have encouraged the plaintiff to engage in conduct or organise his or her affairs upon the basis that a certain state of affairs exists. Once that is shown, it is relevant to the plaintiff's equity to demonstrate that the defendant's acquiescence with knowledge of the plaintiff's conduct contributes to the establishment of the equity. As Priestley JA said the Austotel case at 610: "For equitable estoppel to operate there must be the creation or encouragement by the defendant in the plaintiff of an assumption that a contract will come into existence or a promise be performed or an interest granted to the plaintiff by the defendant, and reliance on that by the plaintiff, in circumstances where departure from the assumption by the defendant would be unconscionable." 32 Counsel for the plaintiff referred to the observations of Lord Denning in Amalgamated Investment and Property Co (in liq) v Texas Commerce International Bank Ltd [1981] 3 All ER 577 at 584, and Crabb v Arun District Council [1975] All ER 865 at 871. Although his Lordship spoke in slightly more sweeping terms, nothing in those observations is inconsistent with the precise analysis offered by Lord Kingsdown and Priestley JA. 33 The first requirement for the establishment of an estoppel of this variety is to point to some circumstances which amount to the creation or encouragement by the defendant of an expectation in the plaintiff that a proprietary interest will follow. What happened in the present case was simply an arrangement whereby a predecessor in title of the plaintiff paid for sealing and some kerbing and guttering so that the existing parking arrangements might continue. There was no foundation for any expectation that the new arrangements would continue on any other basis than the old, and nothing in the evidence to suggest that the owner's payment would procure for that owner or any successor in title some indefinite entitlement to use the parking area for private parking purposes or any proprietary entitlement of any kind. It follows, in my view, that the submission based on proprietary estoppel is unsuccessful. 34 I should say that if that requirement for making out a case of equitable estoppel could have been overcome, there may well have been other obstacles in the plaintiff's path. The defendant's submissions asserted that if there was an arrangement of the kind the plaintiff is alleging, it nevertheless had not been shown that the defendant was aware of it, and there could not have been any standing by or acquiescence in the absence of that knowledge. That seems to me to be an accurate submission on the evidence before me. 35 It is not necessary for me to describe with precision the terms of the arrangements made between Mr and Mrs Twaddell and the Council and the defendant in 1972, but only to say that whatever precisely was the arrangement, it did not give rise to an indefinite right or proprietary right such as could be asserted by the present plaintiff in this proceeding. 36 Other matters were raised in submissions which I should note briefly. There was contention as to whether Mr Berthold would have had authority to bind the defendant to any such arrangement as alleged by the plaintiff. The defendant referred to s 530A of the Local Government Act 1919 (NSW) to support the proposition that the Shire Engineer could not have been given authority to bind the defendant to such an arrangement. It seems to me unlikely that s 530A would have had any application had the plaintiff made out her primary case, because it refers to leasing or surrender of land or other property or the granting of any lease or land. What is alleged here was the creation of equitable proprietary rights by an informal arrangement. It may be that the very scanty evidence before me would have been sufficient for me to conclude, if the plaintiff's primary case had been made out, that Mr Berthold had at least ostensible authority to make such arrangement or, in the absence of authority, the arrangement was ratified by the Council's decision. I am inclined to the view, therefore, the argument based on lack of authority would not have assisted the defendant. 37 There was a contention as to whether the easement alleged by the plaintiff was capable of being regarded as an easement as a matter of law. One of the requirements for the grant of an easement, according to the well known authority of Re Ellensborough Park [1956] 1 Ch D 131, that the easement accommodate the dominant tenement. The defendant cited an observation by Newton DCJ in Frater v Finlay (1968) 91 WN (NSW) 730 at 736. Counsel for the plaintiff drew my attention to English authorities which indicate that a right to park is, however, capable of constituting a valid easement: see London & Blenheim Estates v Ladbroke Retail Parks Limited [1993] 4 All ER 157 at 161. In principle, the latter authority seems to me to be correct. 38 There was contention as to whether an easement can be created over Crown land otherwise than in accordance with s 52 of the Crown Land Act 1989 (NSW), but it seems to me that this provision would not stand as an obstacle to the recognition of equitable rights had they been validly created. 39 I was referred to State of New South Wales v Scharer [2003] NSWCA 328 for the proposition that no estoppel can lie against Crown land. It appears to me that this decision is distinguishable, because the contention here is that the present owner of the land, namely, the Council rather than the Crown, created equitable rights against itself by virtue of its conduct prior to its acquisition of the land but at a time when it had statutory authority with respect to the conduct of roads on the land. It does not seems to me that there is any legal obstacle to making out an estoppel against a municipal council in such circumstances. 40 Part of the plaintiff's contention relied upon acquiescence by the Council in the period from 1997 when the plaintiff acquired the land until 2001 when the parking restrictions were introduced, but it does not seem to me that such acquiescence alone would be sufficient to generate any equitable rights. 41 While, therefore, my view is that the fact that the land was at one stage Crown land does not in principle prevent the estoppel case being made out against the Council, the case fails on the facts for the reasons I have indicated. 42 Issues were raised by the defendant in supplementary submissions with respect to the application of the indefeasibility provisions of Real Property Act 1900 (NSW), and as to the significance of the removal and "easement exception" by an amendment taking effect in 1 August 1996. It seems to me that this question raises difficult issues that will need to be addressed by the Court in a case where resolving them is necessary to the decision. Here the plaintiff fails on the facts and it is unnecessary to consider the indefeasibility provisions. 43 My decision is that the plaintiff has not made out an entitlement to the declaratory relief sought in the summons. It follows the plaintiff is not entitled to an injunction or damages as sought. Therefore, the summons ought to be dismissed. 44 On the question of costs, the defendant made an offer at 3.01pm yesterday that it would be content if an order were made in its favour and the plaintiff were to agree to pay the defendant's costs as agreed or assessed. The letter said if the plaintiff did not accept the offer and proceeded to the hearing and the defendant was successful, then the defendant would seek indemnity costs. 45 The correct approach of the Court to indemnity costs was explained by the Court of Appeal in Jones v Bradley (No 2) [2003] NSWCA 258. The Court has a discretion to order that costs be paid on an indemnity basis and the tendering of a Calderbank letter of the kind before me now will sometimes lead to an indemnity order being made. 46 In the present circumstances, however, it seems to me the offer was made too late for it to be appropriate for me to make an order that indemnity costs be paid, either for the period of yesterday afternoon and today or for today alone. It seems to me that the correct and reasonable course in the present circumstances, when it can be assumed the plaintiff's preparation for today's hearing was well advanced by 3 o'clock yesterday, is that the costs be dealt with on the normal basis. 47 My orders are: (1) Summons dismissed. (2) The plaintiff to pay the defendant's costs as agreed or assessed. (3) Exhibit B1 be returned to the defendant.