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Rural View Developments Pty Ltd v Fastfort Pty Ltd[2009] QSC 244

Reported at [2011] 1 Qd R 35

Rural View Developments Pty Ltd v Fastfort Pty Ltd[2009] QSC 244

Reported at [2011] 1 Qd R 35

 

SUPREME COURT OF QUEENSLAND

PARTIES:

FILE NO/S:

Trial

PROCEEDING:

Hearing

ORIGINATING COURT:

DELIVERED ON:

24 August 2009

DELIVERED AT:

Brisbane

HEARING DATE:

11 June 2009

JUDGE:

McMurdo J

ORDER:

The contract of sale dated 21 January 2008 between the plaintiff and the first defendant be specifically performed.

CATCHWORDS:

REAL PROPERTY – EASEMENTS – EASEMENTS GENERALLY – NATURE OF AN EASEMENT – where the grantor and grantee were each subject to a positive covenant to be responsible for one half of the costs of construction, repairs, maintenance and upgrading of the infrastructure of the easement – where the grant of the easement was not conditional upon the performance of any covenant by the grantee – where the general rule is that the burden of a positive covenant does not run with the land – whether a subsequent owner of the dominant tenement would be bound by this covenant

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – OTHER MATTERS – where the first defendant had contracted to buy certain land from the plaintiff conditional upon the registration of an easement “for access and/or services … required as part of the local authority conditions of approval” – where the contract did not provide that the easement was to contain no term that had not been required by the local authority – whether the covenant that each party be responsible for one half of the upkeep of the infrastructure of the easement so affected the benefit of the easement that it made it something other than the easement for which the parties had agreed

CONVEYANCING – MATTERS ARISING AFTER COMPLETION – COVENANTS – AGAINST ENCUMBRANCES – where the first defendant had contracted to buy certain land from the plaintiff subject to “nil” encumbrances – where the easement contained a covenant that each party be responsible for one half of the upkeep of the infrastructure of the easement – where the first defendant may choose not to take the benefit of the covenant – whether the covenant constitutes an encumbrance upon the land

CONVEYANCING – BREACH OF CONTRACT FOR SALE AND REMEDIES – VENDOR’S REMEDIES – SPECIFIC PERFORMANCE – where the purchaser claims that it is unable to raise finance from banks and lenders – where the purchaser is a shell company – where the purchaser’s ability to perform the contract was always dependent upon its ability to borrow the purchase price in full – where the purchaser is one of 50 or 60 companies in a property development group controlled by the second defendant – where the second defendant is also the purchaser’s guarantor – where the second defendant has a net worth “way in excess of [the purchase price]” – whether it would be futile, or whether it would cause undue hardship, to decree specific performance

Conveyancing Act 1919 (NSW), s 88BA

Land Title Act 1994 (Qld), s 81(1), s 82

Property Law Act 1974 (Qld), s 53, s 55, s 117, s 118

Austerberry v Corporation of Oldham (1885) 29 Ch D 750, cited

Cameron v Dalgety [1920] NZLR 155, distinguished

Clifford & Anor v Dove [2003] NSWSC 938, followed

E R Ives Investments v High [1967] 2 QB 279, cited

Fanigun Pty Ltd v Woolworths Limited [2006] 2 Qd R 366, distinguished

Frater v Finlay (1968) 91 WN (NSW) 730, disapproved

Gallagher v Rainbow (1994) 179 CLR 624, explained

Government Insurance Office (NSW) v K A Reed Services Pty Ltd [1988] VR 829, cited

Halsall v Brizell [1957] Ch 169, considered

Haywood v Brunswick Permanent Benefit Building Society (1881) 8 QBD 403 (CA), cited

Marquess of Zetland v Driver [1939] Ch 1, cited

Rhone v Stephens [1994] 2 AC 310, explained

Rufa Pty Ltd v Cross [1981] Qd R 365, distinguished

Ryan v Rouen [2000] NSWSC 468, cited

Thamesmead Town Ltd v Allotey [1998] 3 EGLR 97, followed

Tito v Waddell (No 2) [1977] 1 Ch 107, disapproved

COUNSEL:

D Atkinson for the plaintiff

T Bradley for the defendants

SOLICITORS:

McCullough Robertson for the plaintiff

Brian Bartley & Associates for the defendants

[1] The plaintiff owns vacant land in Mackay which it agreed to sell to the first defendant.  It has refused to complete its purchase, objecting to the terms of an easement registered in favour of the subject land.  The plaintiff seeks specific performance of the contract. 

[2] Completion of the sale was conditional upon the registration of an easement providing access to this land.  An easement was registered prior to the date for completion.  But the first defendant says it was not the easement required by the contract, because it contained a covenant purporting to bind any owner of the dominant tenement to pay one half of the cost of any construction, repairs, maintenance or upgrading required to the servient tenement.  Accordingly, the first defendant says, the condition was not fulfilled and it was not bound to complete the contract.  It says that the plaintiff’s failure to amend the easement (the plaintiff being also the owner of the servient tenement) so as to delete that covenant constituted a repudiation of the contract of sale, entitling it to terminate the contract.  Further, it argues that the covenant amounts to an encumbrance upon the land to be sold.  Lastly, it argues that specific performance should be refused upon the discretionary grounds of hardship or futility, because it has no assets and claims that it is unable to perform the contract. 

The subdivision

[3] In February 2007, the plaintiff purchased land at Kidston Avenue, Rural View in Mackay.  The land was subject to a development approval from the Mackay City Council which allowed for its subdivision into lots 200 and 300, and for a child care centre to be located on lot 200.  It is lot 200 which became the subject of the contract of sale.  The proposed lot 300 had a battle-axe shape, with its handle having a frontage to Kidston Avenue of about 9.5 metres.  At the other end of lot 300, it was to abut two roads.  But according to the development approval the only access to lot 300 was to be from Kidston Avenue.

[4] The initial approval, granted by the Council in 2003, was for a different configuration, with that handle being part of lot 200 and with an easement over it for the benefit of lot 300.  That was revised in November 2005, and the terms of the approval came to include the following:

“(a)The approved Plan of Development shall be amended to show proposed Lot 300 extended to join Kidston Avenue, the extension being a corridor 9.5 metres wide abutting the Council parkland to the north.

(b)The approved Plan of Development shall be amended to show and [sic] easement for access purposes in favour of proposed lot 200 over the extended part of Lot 300.

Please note that a Drainage easement will be necessary over the access handle to accommodate existing and proposed stormwater flows …

In particular, it is advised that underground stormwater drainage, construction of driveways, within the access handle and intersection lighting must be completed prior to the endorsement of a Survey Plan in relation to this approval.”

The easement in favour of lot 200 was to be over “the extension” in lot 300, or, in other words, what I have called the handle of that lot.  The handle was to have an area of 647 m2 and was to abut one side of lot 200 which was to be 2728 m2.  The balance of lot 300 was to be 1.383 ha.

The contract

[5] The subject contract is dated 21 January 2008.  The land to be sold was described as the proposed lot 200.  It was to be sold subject to “nil” encumbrances.  The price was $750,000 “plus GST”.  That was payable by a deposit of $37,500 plus GST and the balance upon completion. 

[6] Completion of the sale was conditional upon the local authority sealing the plan of subdivision within 210 days of the date of the contract, the registration of that plan within 240 days of that date and registration of an easement.  In that last respect, special condition 1(d) made completion conditional upon:

“(d)An easement for access and/or services registered in favour of proposed lot 200 within 240 days of the Contract Date required as part of the local authority conditions of approval.”

Clearly the “conditions of approval” were those which I have set out.  Special condition 2 of the contract provided as follows:

“If any of the above conditions are not satisfied within the time prescribed then the Seller or the Buyer may by notice in writing to the other party terminate this Contract.  All moneys paid by the Buyer on account of the deposit shall be refunded to the Buyer.  For clarification, the Seller is responsible for all costs associated with the creation of [a] separate title for the Land including but not limited to the cost of complying with any conditions of the local authority with respect to the sealing of the Survey Plan and the registration of the Survey Plan.”

By a further special condition, it was agreed that completion would take place 30 days after notice in writing that the plan of survey had been registered, and that if completion did not take place on or before the expiration of 270 days from the date of the contract, the contract might be cancelled at the option of either party.  A proposed plan of subdivision, corresponding with the plan later registered, was included in the contract.  It accorded with the subdivision described in the Council’s approval.

[7] The contract was in the standard form adopted by the REIQ and the Queensland Law Society for commercial land and buildings and contained other special conditions which need not be discussed.  The second defendant is the sole director of the first defendant.  Attached to the contract is a guarantee, signed and sealed by him, of the purchaser’s performance.

[8] On 8 July 2008, the plaintiff asked the defendants to agree to extend the time for registration of the plan and the easement to 20 October 2008, and for completion to occur no later than 19 November 2008.  On 11 July 2008, the defendants so agreed.

[9] The plan of subdivision and easement were registered by 22 September 2008.  On 3 October 2008, the plaintiff’s solicitors wrote to the defendants’ solicitors advising of the registration of the plan and stating that pursuant to the contract, completion was due no later than 3 November 2008.  On 13 October 2008 the defendants sought an extension of the completion date to 15 January 2009.  The stated purpose for that request was to provide more time to obtain finance, because the first defendant was “having difficulty funding the purchase through the banks in the current financial environment”.  The second defendant gave evidence, which is unchallenged in this respect, that at that time

“the banks and other lenders with whom the Ingles Group usually dealt were not generally prepared to lend further funds to the Group but were requiring debt reduction and asset sales instead.”

On the same date the defendants’ request was refused. 

[10] On 17 October 2008, the defendants received a report from their valuers that lot 200 was worth but $615,000, which no doubt made them very reluctant to complete.

[11] On 28 October 2008, the defendants’ solicitors wrote to the plaintiff’s solicitors as follows:

“We note that Easement No. 711935678 is registered in favour of the subject lot for access and drainage purposes.

 

We assume this is intended to be the easement referred to in special condition 1(d) of the contract.  Please provide evidence that this easement was “required as part of the local authority conditions of approval” as contemplated by special condition 1(d).

 

Secondly we note the easement includes an obligation on the owner of the subject lot from time to time to pay your client ‘one half of the cost of any construction, repairs, maintenance or upgrading required to the roadway, drains, pipes or culverts or other improvements on the Easement’.

 

This provision is objectionable and is not acceptable to our client.  Our client did not agree to contribute to the cost of construction of the road or pipes or to pay your client any ongoing maintenance costs for improvements on your client’s land.  This is quite clear from special condition 2 which requires your client to be responsible for all costs associated with the subdivision.

 

Please confirm Easement No. 711935678 will be removed from the title for the subject property and replaced with an easement in a form complying with the contract prior to settlement.”

[12] On the following day the plaintiff’s solicitors replied, setting out the terms of the Council’s 2005 approval which related to the easement, and asserting that the easement as registered was as required by that approval.  As to special condition 2 of the contract, the plaintiff’s solicitors said that their client had complied with that term because the relevant work had been performed and paid for by it.  On the same day they wrote again, enclosing a settlement statement for completion of the contract on 3 November 2008.  On 30 October 2008 the defendants’ solicitors wrote asserting that the plaintiff’s response was a repudiation of the contract, and stating that the first defendant accepted that repudiation and elected to terminate the contract.  The plaintiff continued to call for completion.  Apart from the issue as to the easement, there is no question that the plaintiff is ready, willing and able to perform.

The easement

[13] The easement named the plaintiff as both the grantor and grantee, it being the then registered owner of both the dominant tenement (lot 200) and the servient tenement (lot 300).  The expressed purpose of the easement was “access and drainage”.  The grant was in these terms:

“The Grantor for the above consideration[1] grants to the Grantee the easement over the servient tenement for the purpose stated … and the Grantor and Grantee covenant with each other in terms of the attached schedule.”

Clause 1 of the schedule conferred upon the grantee “the full right of access and use to the Grantee of the Easement” and

“the unrestricted right and licence to enter upon the Easement to effect repairs, lay roadways, causeways, drainage (including pipes or culverts) or amend the said road on the Easement.”

By cl 4, the rights of the grantee were granted “into” perpetuity unless altered by agreement.

[14] The critical clause of the easement is this covenant:

“5.The Grantor and Grantee shall each be responsible for one half of the cost of any construction, repairs, maintenance or upgrading required to the road way, drains, pipes or culverts or other improvements on the Easement.”

Apart from the discretionary defence to a decree of specific performance, the defendants’ case is in all respects premised upon the enforceability of this covenant against the first defendant and any subsequent owner of lot 200.  It appears to be common ground that the terms “Grantor” and “Grantee” in this clause are not to be limited to the original grantor and grantee, because cl 5 would then be meaningless. 

[15] The question then arising is whether a subsequent owner of the dominant tenement would be bound by this covenant, given that it would not be contractually bound.  The general rule is that the burden of a positive covenant does not run with the land unless the covenant itself amounts to the grant of some easement, rent, charge or some estate or interest in the land.  In particular, “a mere covenant to repair, or to do something of that kind, does not … run with the land in such a way as to bind those who may acquire it”.[2]  The rule was confirmed by the House of Lords in 1994 in Rhone v Stephens.[3]  The position is different in the case of landlord and tenant, where the benefit and burden of a covenant which touches or concerns the land is enforceable by and against an assignee of the reversion or the leasehold, as a result of legislation which in this State is s 117 and s 118 of the Property Law Act 1974 (Qld). 

[16] The position is also different in equity, in relation to negative covenants; but equity would not enforce a covenant of a positive nature, and in particular a covenant to repair, against a successor in title of the covenantor.[4]

[17] By s 55 of the Property Law Act 1974 (Qld), the benefit of a contractual promise in the circumstances there described may be enforced by someone who was not privy to the contract.  Section 53(2) of that Act provides as follows:

“A covenant relating to any land of a covenantor or capable of being bound by the covenantor, shall, unless a contrary intention is expressed, be deemed to be made by the covenantor on behalf of the covenantor, the covenantor’s successors in title and the persons deriving title under the covenantor or the covenantor’s successors in title, and, shall have effect as if such successors and other persons were expressed.”

As was held in Rhone v Stephens in relation to an equivalent provision, this section facilitates the drafting of documents by making it unnecessary to refer to successors in title, but it does not make such persons subject to the burden of a positive covenant.[5]

[18] An apparently similar question arose in a case in the Full Court in Rufa Pty Ltd v Cross.[6]  In that case, from 1957 a party wall had been in existence on the common boundary between shop premises upon adjoining allotments of land.  By mutual deeds made in 1959, the then owners granted to each other and to subsequent owners and occupiers of the grantee’s land an easement over the area occupied by the wall including any extension of that wall.  Those easements were registered.  Each contained covenants as follows:

Clause 4 provided that:

“… either party hereto shall be a liberty to extend the said wall perpendicularly or longitudinally PROVIDED that the party so desiring to extend the said wall shall before commencing the work give to the other party thirty days notice of his intention so to do.”

 

Clause 9 was:

“The party extending the said wall shall in the first place pay all construction costs.”

 

Clause 10 was:

“In the event of the other party desiring at any subsequent time to use any part of the said extension he shall give to the party who extended the wall thirty days written notice of such desire and shall before he commenced to use such extension pay to the other party one half of the value (calculated as provided in the next succeeding Clause) of such portion of the extension as he proposes to use.”

Some time prior to 1978, a predecessor in title of the respondent had extended the party wall and it was found that the appellants thereafter “used” that extension, whilst refusing to pay to the respondent a half share of the cost in accordance with cl 10.  The appellants’ use of this extension of the wall was by, amongst other things, installing flashing from the roof of their building across the wall to the respondent’s side of it.  Each member of the Full Court agreed that the appellants were liable to pay one half of the value of the extension under cl 10. 

[19] It is convenient to discuss first the judgment of Kneipp J.  His Honour referred to the New Zealand case of Cameron v Dalgety,[7] where there was a grant of the right to receive the flow of water through a water race, and there was a covenant by the grantor to keep the race in repair.  It was held that the covenant bound the assignees of the grantor and benefited the assignees of the grantee.  Kneipp J accepted the correctness of that result, on the basis that “the grant there was not only to the use of a water race, but to the use of a continuously maintained water race”.[8]  But in Rufa, as in the present case, the relevant covenant was by the grantee. Kneipp J then referred to a decision in the District Court of New South Wales in Frater v Finlay.[9]  In that case the grantee of an easement for a water pipe covenanted to keep the pipe in repair, and Newton DCJ held that the covenant was enforceable against an assignee of the grantee.  He held that the grantor’s covenant in Cameron v Dalgety was analogous.  Newton DCJ concluded that:

“…[T]he obligation of the grantee of the easement to contribute half the cost of repairs formed part of the easement and therefore binds the successors in title, and therefore the plaintiff is entitled to recover one half of such moneys as he is able to prove were expended by him within the terms of the grants.”[10]

Kneipp J disagreed, saying that he could not see “that a covenant by the grantee can be regarded as part of the grant”.[11]  But his Honour held that the grantee was obliged to pay its share of the value of the extension of the wall upon another basis, which was that a party taking the benefit of the deed is bound by a condition contained in it although that party has not executed the deed.[12]  As one example of that proposition, Kneipp J cited the judgment of Upjohn J in Halsall v Brizell.[13]

[20] In Halsall v Brizell, land had been sold as individual building lots, with the vendors retaining the roads and sewers together with a promenade and a sea wall.  By a deed made in 1851 between the vendors and the then owners of the lots, the owners covenanted that they and their successors in title would pay a proportion of the expenses of the maintenance of the road, sewers, promenade and sea wall.  Upjohn J held that successors in title could not be sued on those covenants, one reason being that such a positive covenant could not run with the land.  But he held that they could not take the benefit of the roads and sewers without undertaking the obligation to pay a proportion of the cost of their maintenance.  The relevant deed was not in the form of a grant of easement:  rather the deed recited that the land retained by the vendors was intended to be held upon trust to be used and enjoyed by the owners of the lots and their successors in title.  In that context, Upjohn J concluded as follows:

“Therefore, it seems to me that the defendants here cannot, if they desire to use this house, as they do, take advantage of the trusts concerning the user of the roads contained in the deed and the other benefits created by it without undertaking the obligations thereunder.  Upon that principle it seems to me that they are bound by this deed, if they desire to take its benefits.”[14]

[21] Referring to this case in Rhone v Stephens, Lord Templeman said:

“Conditions can be attached to the exercise of a power in express terms or by implication.  Halsall v Brizell was just such a case and I have no difficulty in wholeheartedly agreeing with the decision.  It does not follow that any condition can be rendered enforceable by attaching it to a right nor does it follow that every burden imposed by a conveyance may be enforced by depriving the covenantor’s successor in title of every benefit which he enjoyed thereunder.  The condition must be relevant to the exercise of the right.  In Halsall v Brizell there were reciprocal benefits and burdens enjoyed by the users of the roads and sewers.  In the present case clause 2 of the 1960 conveyance imposes reciprocal benefits and burdens of support but clause 3 which imposed an obligation to repair the roof is an independent provision.  In Halsall v Brizell the defendant could, at least in theory, choose between enjoying the right and paying his proportion of the cost or alternatively giving up the right and saving his money.”[15]

[22] In Rufa, D M Campbell J substantially agreed with the conclusion below[16] that:

“[T]he covenant was part of the essential fabric of an easement binding upon any successors in title who choose to make use of the extension.”[17]

He said:

“The right to extend the existing party wall is clearly a right capable of forming the subject matter of grants of easements.  In my opinion, the right to use the extended portion of the wall provided the neighbour seeking to use it contributes half its value is a right of the same character.”[18]

However, his Honour added:

“If I am wrong and the covenant to contribute does not run with the easement, there is another view open based on Halsall v Brizell which is the view taken by Kneipp J and which is supported by some remarks of Lord Denning MR in E.R. Ives Investments Ltd v High [1967] 2 QB 379 at p 394.  For myself I prefer the former view.”[19]

[23] The third member of the Court, Lucas SPJ, referred to the other judgments and concluded:

“On the whole, I prefer the view of D M Campbell J, although I certainly do not disagree with that taken by Kneipp J.”[20]

[24] Rufa was discussed by Bryson J in Clifford & Anor v Dove.[21]  He described the effect of D M Campbell J’s judgment as follows:

“In my understanding his Honour was of the view that the meaning and effect of the grant of easement were that the right to use the extended portion of the wall was conditional upon contributing half its value:  see 368B.  This conclusion does not uphold the ruling in Frater v Finlay, to which Lucas SPJ and D M Campbell J did not refer.”[22]

I respectfully agree with that summary.  Indeed there was support for the view in Rufa from Halsall v Brizell, as that case was explained in the above passage from Rhone v Stephens.  The appellant in Rufa did not have to use the newly constructed extension of the wall.  It was given a right to opt to use that extension if it first bound itself to pay its share.  This is what D M Campbell J was describing in his reference to the covenant being “binding upon any successors in title who choose to make use of the extension”.  Their Honours did not accept the broad proposition advanced in Frater v Finlay.

[25] Thus according to Rufa, Halsall v Brizell, as explained in Rhone v Stephens, can apply to a registered easement where the grantee’s rights can be seen to be conditional upon the performance of the covenant.  There was no consideration in Rufa of the question of whether the reasoning in Halsall v Brizell could be applied to a covenant over Torrens land, which would warrant consideration by a court not bound by Rufa, for reasons explained by P J Grimes in (1957) 31 ALJ 22.

[26] Three things may be noted about the facts in Rufa.  The first is that the relevant right was one which did not take effect immediately, because this was the grant of a right to use something which was yet to be constructed.  Secondly, the respondent had a real choice as to whether it would use any extension of the wall, and if so what part of it.  It was bound to contribute only if it opted to use that structure.  Thirdly, the relevant payment was a once only payment, to be made prior to the payer’s use of the structure.  Accordingly, under that instrument there could not be the difficulty of assessing whether the grantee’s performance or otherwise of a condition of a registered easement had resulted in some way in a suspension or loss of the grantee’s right. 

[27] Those features do not occur in the present case.  Most importantly, this grant is not expressed to be conditional upon the performance of any covenant by the grantee.  The mere fact that the grant of an easement is expressed to be “subject to” another provision does not mean that the right to enjoy the easement is conditional on compliance.[23]The easement is created by the registration of the instrument[24] and took effect immediately.  It was not dependent upon some decision by the grantee.  And the covenant in this easement is one which might have to be performed on several occasions rather than once only and prior to the exercise of the grantee’s rights as in Rufa.  These factors make it difficult to construe this easement as granting rights of “access and drainage” conditionally upon the continuous performance of the covenant in cl 5. 

[28] A further consideration here is that having regard to the terms of the development approval, the use of this easement was necessary for the effective use of lot 200.  Mr Venn, a town planner, said that without such an easement, the proprietor of lot 200 could not “guarantee compliance with the Conditions of the Approval”.  If the easement was to be suspended from time to time because of a short or late payment of the grantee’s contribution under cl 5, there could be a consequent impact on the lawfulness of the use of lot 200.  That makes it more difficult to interpret the terms of the easement as intending to affect that the grantee’s rights at any time according to its performance of cl 5. 

[29] Therefore, the easement here is quite different from that in Rufa.  As was observed by Peter Gibson LJ in Thamesmead Town Ltd v Allotey,[25] in Halsall v Brizell Upjohn J expressed his reasoning as dependent on the choice of the defendants there, so that if they did not desire to take the benefit of the deed they could not be made liable.  In the circumstances of the present case, it could not be suggested that there is such a choice.  The lawful use of lot 200 as approved by the Council is effectively dependent upon the exercise of the rights granted by the easement.

[30] In his dissenting judgment in Gallagher v Rainbow,[26] McHugh J said:

“Furthermore, the successor in title to a person bound by a deed may be bound by obligations in the deed if the successor in title takes a benefit conferred by the deed:  Rhone v Stephens; Halsall v Brizell; E.R. Ives Investments Ltd v High; Frater v Finlay; Rufa Pty Ltd v Cross.” 

But that observation simply noted the effect of those judgments, and particularly that of Kneipp J in Rufa, without suggesting any wider “benefit and burden” principle as distilled by Megarry V-C in Tito v Waddell (No 2).[27]  That broader principle was not accepted in Rhone v Stephens and it has been rejected by Australian courts in Government Insurance Office (NSW) v K A Reed Services Pty Ltd,[28] Ryan v Rouen[29] and Clifford v Dove, where Bryson J said that:

“In [the] context of positive obligations under easements Rhone v Stephens appears to have concluded against any such principle.”[30]

[31] In Fanigun Pty Ltd v Woolworths Limited,[31] Mullins J held that the easement there in question was conditional in the sense of Halsall v Brizell as described in Rhone v Stephens.  But it is the easement in the present case and the circumstances of its operation which must be considered.

[32] There have been many suggestions within judgments and commentaries for legislative reform in order to make positive covenants run with the land.[32]  That call has been met in New South Wales by the enactment in 1995 of s 88BA of the Conveyancing Act 1919 (NSW).  As I am about to discuss, a term such as cl 5 appears to be reasonable and in some ways is more beneficial to the grantee than the general law.  But the terms of this easement and the relevant circumstances for the exercise of rights under it do not bring it within the exception to the general rule that such positive covenants do not run with the land.

[33] It follows that cl 5 of the easement is of no consequence and provided no justification for the first defendant’s failure to perform the contract.  As I have said, each of its arguments, apart from the discretionary argument, was premised upon the enforceability of the covenant. 

[34] Had cl 5 been enforceable, nevertheless I would not have been persuaded by the defendants’ case.  Special condition 1(d) required the registration of an easement for access and/or services as required as part of the local authority’s conditions of approval.  The easement which was registered meets that description in all respects.  The defendants argued that it did not, because the enjoyment of the rights created by the easement is conditional upon the grantee’s compliance with cl 5.  Special condition 1(d) did not provide that the easement was to contain no term which had not been required by the Council.  It allowed for other terms, as long as the easement which was registered could be said to meet the description within the special condition.  The question would be whether cl 5, if enforceable, so affected the benefit of this easement that it made it something other than the easement for which the parties had agreed.  In my view it did not, at least for two reasons.

[35] The first is that by the special condition, the parties have defined the required easement according to its compliance with the Council’s approval.  The evident commercial purpose of that was to ensure that the purchaser would be able to use the land lawfully as a childcare centre.  It was not argued that the insertion of cl 5 had the effect of breaching the relevant condition of approval. 

[36] Secondly, the practical operation of cl 5 would not be to the disadvantage of the grantee, compared with its position absent such a covenant.  Under the general law the grantee would have a right to repair the servient tenement, including by the performance of road works, but if that right was exercised, there would be no right to contribution from the servient owner to the costs incurred in the absence of an agreement to that effect.[33]  Again, apart from any express agreement, the owner of a servient tenement is not ordinarily bound to execute any repairs necessary to ensure the enjoyment of the easement by the owner of the dominant tenement, but if the owner of the servient tenement does effect such repairs, he is generally not entitled to a contribution from the dominant owner.[34]  Clause 5 is limited to such construction, repairs, maintenance or upgrading which is required to the roadway, drains, pipes or culverts or other improvements.  If the owner of lot 300 did nothing, absent cl 5 the required works would have to be performed entirely at the cost of the owner of lot 200.  But with the benefit of cl 5, one half of the cost could be claimed from the dominant owner.  In practice, the dominant owner would have an interest in maintaining the roadway on the easement because it would also provide access to its land.  Under the general law however, it would not be obliged to do so. 

[37] It was argued for the defendants that cl 5 would oblige the first defendant to meet one half of the cost of the construction which was completed prior to the registration of the easement.  It was said that this was inconsistent with special condition 2 of the contract, so that at least on that basis, the easement is outside special condition 1(d).  If that were the effect of cl 5, it would be inconsistent with special condition 2.  But that is not the effect of cl 5.  In my view the construction, repairs, maintenance or upgrading which are the subject of cl 5 must be something which occurs after the creation of the easement.[35]  The driveways etc were constructed prior to the registration of the survey plan, as required by the Council’s conditions of approval.  In any case, the plaintiff could not claim a contribution to those works, having regard to its agreement within special condition 2, and it has never sought to do so. 

[38] It was also argued that cl 5, if enforceable, constituted an encumbrance, and the first defendant was entitled to the land free of any encumbrance.  If cl 5 were enforceable, that could be only because the easement was to be construed as conditional upon the performance of cl 5, and, as already discussed,[36] that could only be upon the basis that the grantee had the option of not exercising its rights under the easement.  If the grantee had the option of avoiding the impact of cl 5, it could hardly be said that the grantee’s land was in some way encumbered by it.  Further, it is not clear that a potential liability (under cl 5) to pay money would constitute an encumbrance.[37]

[39] Accordingly, had cl 5 been enforceable, it would not have provided any basis for the first defendant’s non-performance. 

Discretionary argument

[40] I have referred already to the second defendant’s evidence that in late 2008 his company was unable to raise finance from “the banks and other lenders with whom the Ingles Group usually dealt”.  But the question is whether it is now impossible for the first defendant to perform the contract.  The second defendant did not give evidence that it was impossible.  He did say that the company has no assets or sources of income.  That has always been the case.  Its ability to perform this contract was always dependent upon its ability to borrow the purchase price in full.  The second defendant’s evidence was that this company is one of several companies owned and/or controlled by him which have been engaged in property development since 1980.  In oral evidence he said that there were “50 or 60” companies which he presently controlled which were involved in property development.  He conceded that his net worth was “way in excess of $750,000” and that he had the capacity last year and still to pay that sum.  Accordingly, it is not demonstrated that the first defendant could not borrow from him or otherwise from within the Group.  I infer that it could do so.  If specific performance is decreed, I infer that it would do so because the second defendant has guaranteed the performance of this contract.  It would not be futile to decree specific performance, nor would there by any hardship.  It is not sufficient for the purchaser to point simply to the land being now worth less than the purchase price.

Conclusion

[41] It will be ordered that the contract of sale dated 21 January 2008 between the plaintiff and the first defendant be specifically performed.  The parties should prepare minutes of order to give effect to that decree.  I will hear the parties as to costs.

Footnotes

[1] Stated to be $1.

[2] Austerberry v Corporation of Oldham (1885) 29 Ch D 750 at 781 per Lindley LJ.

[3] [1994] 2 AC 310.

[4] See, e.g., Haywood v Brunswick Permanent Benefit Building Society (1881) 8 QBD 403 (CA); Marquess of Zetland v Driver [1939] Ch 1.

[5] [1994] 2 AC 310 at 322.

[6] [1981] Qd R 365.

[7] [1920] NZLR 155.

[8] [1981] Qd R 365 at 370.

[9] (1968) 91 WN (NSW) 730.

[10] (1968) 91 WN (NSW) 730 at 737.

[11] [1981] Qd R 365 at 370.

[12] [1981] Qd R 365 at 371.

[13] [1957] Ch 169.

[14] [1957] 1 Ch 169 at 183.

[15] [1994] 2 AC 310 at 322-3.

[16] B M McLoughlin DCJ on appeal from a Magistrate.

[17] [1981] Qd R 365 at 367.

[18] [1981] Qd R 365 at 368.

[19] [1981] Qd R 365 at 368.

[20] [1981] Qd R 365 at 366.

[21] [2003] NSWSC 938.

[22] [2003] NSWSC 938 at [66].

[23] Gale on Easements (2008, 18th ed), [1-94].

[24] Land Title Act 1994 (Qld), s 82.

[25] [1998] 3 EGLR 97 at 99.

[26] (1994) 179 CLR 624 at 647-8 (citations omitted).

[27] [1977] 1 Ch 107.

[28] [1988] VR 829 at 830-841.

[29] [2000] NSWSC 468 at [73].

[30] [2003] NSWSC 938 at [67].

[31] [2006] 2 Qd R 366 at 385.

[32] See, e.g., Bryson J in Clifford v Dove [2003] NSWSC 938 at [69]; Thamesmead Town Ltd v Allotey [1998] 3 EGLR 97 at 100; Butt, Peter, ‘Positive Covenants Do Not Run’ (1994) 68 ALJ 900 at 901.

[33] Gale on Easements (2008, 18th ed), [1-94].

[34] Gale on Easements (2008, 18th ed), [1-95].

[35] By its registration s 82(1) of the Land Title Act 1994 (Qld).

[36] Above at [25].

[37] See the discussion in Wikrama-Nayake, Voumard The Sale of Land (1995, 5th ed) at [7120].

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Editorial Notes

  • Published Case Name:

    Rural View Developments P/L v Fastfort P/L & Anor

  • Shortened Case Name:

    Rural View Developments Pty Ltd v Fastfort Pty Ltd

  • Reported Citation:

    [2011] 1 Qd R 35

  • MNC:

    [2009] QSC 244

  • Court:

    QSC

  • Judge(s):

    McMurdo J

  • Date:

    24 Aug 2009

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2011] 1 Qd R 3524 Aug 2009-

Appeal Status

No Status

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