Weekly property law round-up, 20 Nov - 26 Nov 2023
- Hamish Williamson
- Nov 29, 2023
- 10 min read
Overview
The latest instalment in a weekly summary of cases involving property law in the State and Territory Supreme Courts, the County Court of Victoria, and the Land and Environment Court of NSW.
Selected judgments from last week:
A dispute about a small road in Sorrento, between the registered proprietor, and a neighbour who alleged that the road was either a public highway or subject to an easement by prescription. The decision involved an interesting, albeit unsuccessful, argument that the 20 year countdown for an easement by prescription starts again whenever registered title changes hands (Valmorbida v Les Denny Pty Ltd [2023] VSC 680).
A contested application for termination of a strata scheme, in circumstances where the building subject to the scheme had become uninhabitable due to defects (The Owners – Strata Plan No 80877 v Lannock Capital 2 Pty Ltd [2023] NSWSC 1401).
Aside from the above summaries, I’ve also prepared some brief catchwords for some other property decisions this week, in case any of them are of interest. The cases are listed at the end of the article.
Supreme Court of Victoria (Gorton J)
EASEMENTS AND PUBLIC HIGHWAYS – Whether registered proprietor dedicated land as a public highway – Whether plaintiff’s use of defendants’ land created easement
Background facts
This dispute concerned land in Sorrento, Victoria, a short walk from picturesque Diamond Bay. In particular, the case was about a small strip of land between houses on a residential street, which allowed access to the sides of those houses, and to a much larger block of land at the rear.
The plaintiff owned lot 4 in the map below. The defendant owned lot 7, the large block to the rear of lots 1-6. The disputed land is part of lot 7, and consists of a small strip jutting out from the main block. This strip of land is labelled ‘A’ in the map below, but was generally referred to in the local area as Stevens Court.
The dispute
The gist of the dispute was that the plaintiff said that she and her visitors had, for many years, used Stevens Ct for access to her property, and for parking. On the other hand, the defendant wanted to use Stevens Ct as a private driveway to access their lot from Ivanhoe St.
The plaintiff sought declaratory relief and orders to amend the register, based on two claimed interests in the land: (a) Stevens Ct was a ‘public highway’ at common law, that is, a road used by members of the public; or (b) she had an easement over the land.
Easements 'by prescription'
As a refresher, an easement allows a person to use land belonging to another person – most commonly, easements are used for access (roads, paths, laneways), utilities/services, and drainage. In this case, the claimed easement was for the plaintiff and visitors to drive over and park on Stevens Ct, i.e. what is usually called a ‘carriageway’ easement, or easement of ‘way’.
The easement claimed was an easement by prescription, which differs from an ordinary easement. While an ordinary easement is based on some express or implied agreement for the claimant to use the land, an easement by prescription occurs where a person uses land for 20 years, whether or not there was any agreement.
This rule is often called the doctrine of ‘lost modern grant’, in the sense that the Court acts as though there was a grant of an easement at some point in the past, but this grant has been forgotten (‘lost’). However, the law has changed over the years, such that even if the registered proprietor proves that an easement was never granted, this will not defeat a claim for an easement if the claimant proves 20 years of continuous use. As such, the idea of some ‘lost grant’ is recognised in the case law to be a legal fiction. In a sense, the doctrine is to easements what the doctrine of adverse possession is to possession (see paras [12]-[15] of the judgment for the summary of the relevant principles).
As a side note, in writing this summary, I tried in vain to find an authoritative source for why the word ‘modern’ is used in ‘lost modern grant’, as the word seems to contradict the notion of some lost grant at a forgotten point in time. As a last resort, ChatGPT provided an answer that at least *sounds* correct:
In this context, "modern" doesn't refer to contemporary times as we commonly use the term today. Instead, it refers to a relatively recent period in legal history when the use of written documents and formal records became more prevalent. The doctrine assumes that if the landowner has been using the land in a certain manner for a long time without any written evidence of a grant, it is likely that there was a lost modern grant—an undocumented grant made during a time when written documentation of land rights was common.
A cautionary note: as any lawyers who have tinkered with generative AI before could tell you, ChatGPT has a remarkable ability to cite legislative provisions and case law that looks syntactically correct, until you discover that they don’t exist (as in this case). So any explanations of legal doctrine should likewise be taken with a handful of salt.
The factors relied on by the plaintiff in support of a public highway or easement
Returning to the case, the plaintiff first relied on a number of factors said to support the claim that Stevens Ct was a public highway. The Court first looked closely at the plan of subdivision and other title documents (at [22]-[32]). It held that the documents did did not evince an intention on the part of the former landowners (who had arranged for the land to be subdivided in 1967) to dedicate Stevens Ct to the public.
The plaintiff also relied on similar roads in the area that were used by the public, maps of the local area that included Stevens Ct, and the placement of a chain by the former owners of lot 7 blocking passage between the lot and Stevens Ct.
The Court holds: an easement, but no highway
After considering the above, and also the use of the land over the last few decades, the Court concluded (at [74]) that Stevens Ct was not dedicated as a public highway – its function when the land was originally subdivided was instead to allow access to lot 7.
However, the plaintiff did manage to establish that she had used Stevens Ct continuously for 20 years, for access and parking. As such, she satisfied the doctrine of lost modern grant, and was prima facie entitled to an easement by prescription over the land (at [88]).
Even if there was a prima facie easement, was it defeated by the defendant's registered title?
The defendant made a final argument (at [89]-[96]) that section 42 of the Transfer of Land Act 1958 (Vic), which makes registered interests indefeasible in many situations, operated to either extinguish any easement, or prevent it from being enforceable. Per s 42(2)(d), land may be subject to any easements ‘subsisting over or upon or affecting the land’, even if those easements unregistered. Put more simply, easements are an exception to the indefeasibility of registered title.
The defendant relied on the word ‘subsisting’ in s 42(2)(d) to argue that, as lot 7 changed hands in April 2015, and the claimed 20 year period ran from 1996 to 2016, the easement did not yet exist at the time the transfer was registered, and so was overridden by the registered title. The Court observed that the practical implication of this argument was that, any time registered title changed hands, time ‘began again’ on the 20 year countdown for the creation of any easement by prescription (at [105]).
Ultimately, the Court was not convinced by this argument: it observed that legislation in Victoria has ‘deliberately removed easement interests, of all types, from the purchaser’s ability to rely on the Register as a complete record of legal interests in the property at the time of purchase. Quite simply, in Victoria, easements are an exception to the principle of indefeasibility of title’ (at [106]). It held that the defendant held lot 7 subject to an easement of way, in favour of lot 4, over Stevens Ct, despite what was registered on the title (at [113]).
Supreme Court of New South Wales (Peden J)
STRATA TITLE – Application to terminate strata scheme – Termination opposed by some parties – Owners corporation owes debts to unsecured lender – Whether registered mortgagees should be paid first from proceeds of sale if strata scheme terminated – Whether strata title should instead be sold, and funds used to discharge debts
Background facts
This decision concerned two tower blocks in the Sydney suburb of Mascot, which despite only having been built in 2009, were so riddled with defects as to be uninhabitable. The blocks were subject to a strata scheme, and the plaintiff owners corporation (‘OC’) applied for an order to terminate the scheme pursuant to section 136 of the Strata Schemes Development Act 2015 (NSW) (‘SSDA’), and for directions for the winding up of the scheme.
For Victorian readers, the legislation here is quite different, with a range of orders relating to owners corporations being available under Part 5 of the Subdivision Act 1988 (Vic), including the option to apply to VCAT for an order to wind up an owners corporation.
After attempts to remedy the defects, at considerable expense, the owners corporation seeks to terminate and sell up
The OC had initially resolved to remediate the defects, with the help of a drawdown finance facility with the first defendant, Lannock Capital 2 Pty Ltd. They also resolved to explore a collective sale of the property pursuant to Part 10 of the SSDA, via expressions of interest.
The first finance facility was quickly exhausted by the cost of rectification works, and another was obtained. The OC considered various options, including only rectifying up to a ‘make safe’ standard, so that a collective sale of the property could go ahead. Another possible way forward was to terminate the strata scheme.
Eventually, at an extraordinary general meeting, the termination was voted on, but the OC was unable tor reach a unanimous decision – leading to the application (see summary of facts at [2]-[21]).
The dispute and the parties
The Court observed that ‘only a small number of applications for termination [of a strata scheme] have been brought’, and that in all those cases the owners corporation did not appear to have significant liabilities, and the application was brought with unanimous consent (at [31]).
By contrast, here the Court was faced with a large number of parties with different interests in the outcome of the proceeding:
The first defendant was the company that had financed the rectification works, Lannock Capital, which was owed $9.42m under the first finance facility, and $6.28m under the second, by the owners corporation.
The second defendant was a lot owner, who supported the grant of a termination order, but favoured different directions to any liquidator to be appointed to sell the OC’s assets.
The fourth defendant was a lessor of one of the lots, and sought directions protecting its lease interest if a termination order was made.
The third, and fifth through ninth, defendants were banks that held registered mortgages over around 110 units in the blocks.
The Court declines to order termination, but gives an indication of how money would be distributed on a termination and sale
The Court did not grant the orders sought by the OC, and instead left it to the parties to either reach agreement or seek directions from the Court at a later date. However, it made some findings as to the respective entitlements of the parties on a termination and collective sale that are interesting.
Of particular note was the supposed ‘priority dispute’ between the banks, who had a secured interest over individual lots, and Lannock Capital, which had loaned money to the OC that was not secured against any OC property.
Lannock Capital had sought directions that part of the proceeds of sale from any collective sale of the property should be earmarked to pay the unsecured debt owed by the OC. The Court rejected this direction, finding that the lender had no interest in the proceeds of sale, as the liabilities were owed by individual lot owners. The direction sought would do more than preserve Lannock Capital’s position on a termination, and would in fact improve it (at [111]).
The Court concluded (at [129]) that after termination, the proceeds of a sale of the property would need to be distributed in the following order:
Each lot owner would be entitled to their portion, representing their original unit entitlement.
However, that portion would be charged to the extent of any registered mortgagee’s security.
Any remaining portion would be allocated to the lot owner.
Each lot owner would separately be liable to contribute in their respective proportions to the OC’s debts, in a similar way to how OC levies are raised to pay expenses. This could mean that lot owners owed personal liabilities for the OC’s debts that exceeded their share of the proceeds of the collective sale.
In all, a rough result both for the unsecured lender who will need to chase up multiple unsecured debts against lot owners, and for the lot owners themselves, who remain personally liable for the loans that were used to undertake the never-completed rectification works. Secured creditors, as usual, are in a much more favourable position.
Other property law decisions last week
Supreme Court of South Australia (Kimber J)
RESIDENTIAL LEASES – Landlord obtained order from South Australian Civil and Administrative Tribunal (SACAT) for vacant possession due to breaches of lease, namely failing to remove rubbish from property – Decision upheld on review by senior member of SACAT – Tenant sought leave to appeal on basis that senior member’s decision infected by error – Appeal dismissed – Mostly turns on own facts
Supreme Court of New South Wales (Davies J)
LAND LAW – Application for order for possession of land – Plaintiffs are executors – One beneficiary in will has remained in possession – No appearance by defendant – Default judgment
Supreme Court of New South Wales (Slattery J)
SALE OF LAND BY TRUSTEE – Three brothers held land as tenants-in-common – Unable to agree on sale – Two brothers successfully applied for appointment of trustee to sell land – Land was sold – Dispute arose regarding trustee remuneration – How does Court assess and approve trustee remuneration?
Supreme Court of New South Wales (Slattery J)
LAND LAW – Striking out of application for easement – Plaintiff has not prepared survey documentation, and cannot demonstrate ability to fund payment of compensation to defendants for any grant of statutory easement (as required under Conveyancing Act 1919 (NSW) s 88K).
