Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: GM Amalgamated Investments (Dulwich Hill) Pty Ltd v Mills [2014] NSWCA 202
• Hearing dates: 6/05/2014
• Decision date: 27 June 2014
• Before: Emmett JA at [1]; Gleeson JA at [57]; Sackville AJA at [58]

Decision

1 Appeal dismissed.

2 Appellants pay the respondent's costs of the appeal.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: REAL PROPERTY - easements - short form "easement to drain water" in Pt 3 of Sch 8 to the Conveyancing Act 1919 (NSW) - construction of proviso requiring the owners of the dominant tenement to restore the land to its "original condition" - whether proviso breached; LIMITATION OF ACTIONS - contracts, torts and personal actions - when time begins to run - whether the cause of action was founded on contract, quasi-contract or tort - whether the cause of action was founded on a deed owing to s 36(11) of the Real Property Act 1900 (NSW)
• Legislation Cited: Conveyancing Act 1919 (NSW) ss 88B, 181A, 195A, 195B, 195G; Sch 8, Pt 3; Conveyancing (General) Regulation 1998 (NSW), cl 27, Pt 3 Div 3; Limitation Act 1969 (NSW) ss 11(1), 14, 16; Real Property Act 1900 (NSW) ss 3, 36(11)
• Cases Cited: Abingdon Corporation v James [1940] 1 Ch 287; Aspden v Seddon (1876) 1 Ex D 496; Clifford v Dove [2003] NSWSC 938; 11 BPR 98,038; Fanigun Pty Ltd v Woolworths Ltd [2006] QSC 28; 2 Qd R 366; Goodhart v Hyett (1883) 25 Ch D 182 Government Insurance Office (NSW) v KA Reed Services Pty Ltd [1988] VR 829; Halsall v Brizell [1956] 1 Ch 169; Jalnarne Limited v Ridewood (1989) 61 P&CR 143; Jones v Dunkel [1959] HCA 8; 101 CLR 298; Rhone v Stephens [1994] 2 AC 310; Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324; (2008) NSW ConvR ¶56-200
• Texts Cited: AJ Bradbrook and SV MacCallum, Bradbrook and Neave's Easements and Restrictive Covenants (3rd ed 2011, LexisNexis Butterworths); Jonathan Gaunt and Justice Paul Morgan, Gale on Easements (19th ed 2012, Sweet & Maxwell)
• Category: Principal judgment
• Parties: GM Amalgamated Investments (Dulwich Hill) Pty Ltd (ACN 000 699 221) (First Appellant); JM Associated Investments (Dulwich Hill) Pty Ltd (ACN 000 699 212) (Second Appellant); Bernadette Mills (Respondent)
• Representation: Counsel: D Pritchard SC with AJ Macauley (First and Second Appellants); F Corsaro SC (Respondent); Solicitors: Somerset Ryckmans (First and Second Appellants); Mills Oakley Lawyers (Respondent)
• File Number(s): 2013/159286
• Publication restriction: Nil

Decision under appeal

• Citation: Bernadette Mills v GM Amalgamated Investments (Dulwich Hill) Pty Ltd [2013] NSWSC 519
• Date of Decision: 2013-05-09 00:00:00
• Before: Nicholas J
• File Number(s): 2008/282076

Judgment

1 EMMETT JA: This appeal arises out of damage occasioned to concrete paving constructed on a parcel of land situated at St Helens, New South Wales (the Servient Tenement). The Servient Tenement is owned by the respondent, Ms Bernadette Mills (the Servient Owner). The Servient Tenement is subject to an easement to drain water (the Easement) that is appurtenant to adjacent land (the Dominant Tenement). The Dominant Tenement is owned by the appellants, GM Amalgamated Investments (Dulwich Hill) Pty Ltd and JM Associated Investments (Dulwich Hill) Pty Ltd (together the Dominant Owners). The concrete paving was constructed over an area that included, but extended beyond, the portion of the Servient Tenement affected by the Easement.

2 The Easement is in the terms contained in Pt 3 of Sch 8 to the Conveyancing Act 1919 (NSW) (the Conveyancing Act) and, accordingly, is subject to a proviso that the Dominant Owners, and persons authorised by the Dominant Owners, will take "all reasonable precautions to ensure as little disturbance as possible to the surface" of the Servient Tenement and will "restore that surface as nearly as practicable to its original condition". In 2002, the Dominant Owners contracted Josa Pty Ltd (the Contractor) to replace existing drainage pipes located within the Servient Tenement (the 2002 Work) in the exercise of rights conferred by the Easement. The Servient Owner seeks to recover from the Dominant Owners the cost of repairing the damage occasioned to the concrete paving on the basis that it was caused by subsidence resulting from the 2002 Work.

The Proceedings before the Primary Judge

3 The Servient Owner commenced proceedings in the Equity Division of the Supreme Court against the Dominant Owners on 12 December 2008. In the proceedings, the Servient Owner claimed declarations that:

• the Dominant Owners are obliged to keep the drainage works constructed on the site of the Easement in good repair;
• the terms of the Easement are enforceable against the Dominant Owners as though they are terms in a deed between the Dominant Owners and the Servient Owner;
• the Dominant Owners have breached the covenants in the Easement;
• the rights granted to the Dominant Owners under the Easement were subject to a condition (the Condition) that the rights conferred by it must be exercised in a way that did not, inter alia, cause avoidable damage to the Servient Tenement;
• the Condition imposed a non-delegable duty (the Duty) on the Dominant Owners to ensure that the rights conferred by the Easement were exercised reasonably, in a way that did not, inter alia, cause avoidable damage to the Servient Tenement;
• the use of the Easement by the Dominant Owners was unlawful, in breach of the Condition, in breach of the Duty, and an actionable nuisance, in that the Dominant Owners used the Easement in a way that caused avoidable damage to the Servient Tenement.

The Servient Owner also claimed damages by reason of:

• unlawful use of the Easement;
• breach of the Condition;
• negligence for breach of the Duty; and
• actionable nuisance or trespass.

On 9 May 2013, for reasons published on that day, a Judge of the Equity Division ordered that there be a verdict for the Servient Owner against the Dominant Owners in the sum of $106,323.15 and judgment accordingly, and ordered that the Dominant Owners pay the Servient Owner's costs of the proceedings.

4 It may well be that the construction of the concrete pavement over the part of the Servient Tenement that is subject to the Easement (the Easement Land) constituted a wrongful interference with the enjoyment of the Easement by the Dominant Owners. That is to say, the construction of concrete paving over the Easement Land would constitute a significant impediment to the exercise of the rights conferred by the Easement to enter upon the Servient Tenement for the purpose of laying, inspecting, cleansing, repairing, maintaining or renewing the pipeline (see [12] below). The Dominant Owners are entitled to require the Servient Owner not to make the exercise of the rights conferred by the Easement practically impossible or substantially more difficult. If, as a consequence of the actions of the Servient Owner, the Dominant Owners no longer have a reasonable means of access for the purpose of exercising the rights conferred by the Easement, the Servient Owner has done something that interferes with their rights. Accordingly, the Dominant Owners may well have been entitled to an injunction to restrain the laying of the concrete pavement over the Easement Land. They could conceivably have been entitled to a mandatory injunction requiring removal of the concrete paving (see Abingdon Corporation v James [1940] 1 Ch 287 at 293-5 and Goodhart v Hyett (1883) 25 Ch D 182 at 187).

5 However, the Dominant Owners did not raise that matter by way of answer to the claims made by the Servient Owner. The Dominant Owners have apparently made no complaint at all in that regard, perhaps for reasons associated with dealings between the parties that have not been the subject of evidence. Whether the Dominant Owners would be entitled to any remedy in the future in relation to the concreting of the Easement Land is not presently in issue.

The Appeal

6 By notice of appeal filed on 9 August 2013, the Dominant Owners appealed from the orders made by the primary judge. An amended notice of appeal was filed on 31 October 2013. The issues raised by the appeal may be summarised as follows:

• Whether the primary judge erred in concluding that it was the Dominant Owners rather than the Contractor who were responsible for the restoration of the surface of the Easement Land;
• Whether the primary judge erred in concluding that there was a failure to comply with the proviso in the terms of the Easement, when the 2002 Work was carried out by the Contractor;
• Whether the primary judge erred in concluding that the claim by the Servient Owner was not barred by the operation of the Limitation Act 1969 (NSW) (the Limitation Act).

Before dealing with the issues, it is desirable to say something further about the Easement and the 2002 Work.

The Easement and the Dominant and Servient Tenements

7 Each of the Dominant Tenement and the Servient Tenement is land under the provisions of the Real Property Act 1900 (NSW) (the Real Property Act). Until July 2001, the Dominant Tenement and the Servient Tenement were parts of a single parcel owned by the Dominant Owners. The Dominant Tenement and the Servient Tenement were created as separate parcels, and the Easement was created, by the registration, under Div 3 of Pt 23 of the Conveyancing Act 1919 (NSW) (the Conveyancing Act), of Deposited Plan 1030519, on 4 July 2001.

8 Division 3 of Pt 23 of the Conveyancing Act deals with the lodgement of plans of subdivision and the form and content of such plans. Under s 195A, where a plan of a subdivision of land is required to be registered, the plan must be lodged in the office of the Registrar-General for registration under Div 3. Under s 195G, where the Registrar-General is satisfied that a plan so lodged is in registrable form, the Registrar-General must register the plan. Where the land comprised in the plan is under the provisions of the Real Property Act, the Registrar-General may create such folios of the Register kept under the Real Property Act as the Registrar-General considers appropriate.

9 Section 88B(2)(c) of the Conveyancing Act relevantly provides that a plan must not be lodged for registration under Div 3 of Pt 23 unless it indicates what easements are intended to be created appurtenant to, or burdening, land comprised in the plan. Section 88B(3)(c) relevantly provides that, on registration, under Div 3 of Pt 23, of a plan upon which any easement is indicated in accordance with s 88B(2)(c), any easement so indicated as intended to be created is to be created and, without any further assurance, is to vest in the owner of the land benefited by the easement.

10 Under s 195B of the Conveyancing Act, the Registrar-General may refuse to accept lodgement of a plan that does not comply with a requirement made under the Conveyancing Act. The Conveyancing (General) Regulation 1998 (NSW) (the Regulation), the regulation in force at the relevant time, deals with plans. Under cl 27 of the Regulation, a deposited plan that, on registration, is intended to create an easement pursuant to s 88B of the Conveyancing Act must be accompanied by an instrument (a section 88B instrument) that complies with Div 3 of Pt 3 of the Regulation.

11 Division 3 of Pt 3 of the Regulation provides that a section 88B instrument must repeat each statement of intention to create an easement in the same form as set out in the relevant plan. The section 88B instrument must also contain a schedule setting out the lot numbers of the lots burdened by the easement and the numbers of the lots intended to receive the benefit of the easement. If the statement in the section 88B instrument is in the form of the words "easement to drain water", it must not set out the text of the easement. That is to say, the terms of an easement that is in the short form contemplated by s 181A of the Conveyancing Act should not be set out, unless it is intended that the meaning attributed to that expression in Pt 3 of Sch 8 to the Conveyancing Act is to be modified by the section 88B instrument.

12 Section 181A of the Conveyancing Act relevantly provides that, in an instrument that purports to create a drainage easement, the expression "easement to drain water" has effect as if the words attributed to that expression in Pt 3 of Sch 8 of the Conveyancing Act were inserted instead. The words in Pt 3 of Sch 8 that are deemed to be inserted instead of the words "easement to drain water" are, so far as presently relevant, as follows:

Full and free right ... to drain water ... together with the right to use, for the purposes of the easement, any line of pipes already laid within the servient tenement for the purpose of draining water or any pipe or pipes in replacement or in substitution therefor ... and together with the right for the grantee and every person authorised by the grantee ... to enter upon the servient tenement and to remain there for any reasonable time for the purpose of laying, inspecting, cleansing, repairing, maintaining, or renewing such pipe line or any part thereof and for any of the aforesaid purposes to open the soil of the servient tenement to such extent as may be necessary provided that the grantee and the persons authorised by the grantee will take all reasonable precautions to ensure as little disturbance as possible to the surface of the servient tenement and will restore that surface as nearly as practicable to its original condition [emphasis added].

13 Deposited Plan number 1030519 (DP1030519) was registered on 4 July 2001. DP1030519 and the section 88B instrument that was lodged with it identified an easement to drain water 1.5 metres wide. The section 88B instrument stated that the lot to be benefited by that easement was Lot 2113 and that the lot to be burdened was Lot 2101. Lot 2101 is the Servient Tenement and Lot 2113 is the Dominant Tenement. Lot 2113 is an irregular shaped parcel, and DP1030519 shows the easement to drain water as located along the northern boundary of Lot 2101.

14 During 2000, a 150 mm diameter pipeline was laid in that part of the Servient Tenement that is subject to the Easement, that is, the Easement Land. Thus, the Easement was created after the construction of the 150 mm diameter pipeline under the Easement Land, at a time when both the Servient Tenement and the Dominant Tenement were owned by the Dominant Owners. In late 2001, the Servient Owner and the Dominant Owners entered into a contract for sale and purchase in relation to the Servient Tenement. The contract for sale and purchase was completed during May 2002, when the Servient Owner became the registered proprietor of the Servient Tenement.

15 On 23 October 2002, Grinsell & Johns Pty Ltd, the engineers who designed and undertook the subdivision that created the Servient Tenement and the Easement (the Engineers), wrote to the Servient Owner informing her of the need to increase the diameter of the pipeline. In their letter, the Engineers said that they needed to "upsize" a portion of the pipeline laid within the Easement Land. The Engineers gave notice that those works would be undertaken under the terms of the section 88B instrument creating the Easement. Clearly enough, that was a reference to the terms of the Easement that entitled the Dominant Owners to enter upon the Servient Tenement, and to remain there for any reasonable time, for the purpose of laying or renewing the pipeline and to open the soil of the Servient Tenement to such extent as may be necessary. On 20 November 2002, Sheraton Homes Pty Ltd (Sheraton), which is related to and acted on behalf of the Dominant Owners, wrote to the Contractor confirming acceptance of a quote to construct a 225 mm diameter pipeline on the Servient Tenement.

16 On 5 December 2002, Sheraton wrote to the Contractor confirming the "written advice" given to the Servient Owner that the land surface and boundary fence would be restored as nearly as practicable to the "original condition prior to the commencement of the [2002 Work]". In its letter to the Contractor, Sheraton said that it was important that "the trench is well compacted after back filling" and that, should the Contractor have any further enquiry, it should not hesitate to contact Sheraton. On the same day, Sheraton wrote to the Servient Owner saying that, upon completion of "the implementation of the common drainage line", the surface and boundary fence would be restored as nearly as practicable to "the original condition prior to work commencing".

17 In November and December 2002, the Contractor carried out on the Servient Tenement the work of replacing the 150 mm diameter pipeline with a 225 mm diameter pipe, being the 2002 Work. The Servient Owner gave evidence about the 2002 Work. She gave her evidence by affidavit and was cross-examined on it. Her evidence was, perhaps understandably given the length of the intervening time period, somewhat vague. In cross-examination, the Servient Owner said that November 2002 was the best she could recall as to when the 2002 Work started and finished. The following is a summary of her evidence in chief.

18 Construction of a new house on the Servient Tenement was completed on 14 December 2002 and, on 15 December 2002, the Servient Owner received the keys to the house. Colorbond fencing was erected on the south and western sides of the Servient Tenement on 16 December 2002, and carpet was installed in the house on 17 December 2002. The Servient Owner and her family moved into the new house on 17 December 2002. Arrangements had been made for the 2002 Work to be completed over a weekend period. In cross-examination, the Servient Owner said that "the easement work" continued right up to and after they moved in, and that the Contractor was working around the perimeter of the Servient Tenement for at least four weeks, although not necessarily on the 2002 Work. (There were further easements other than the Easement the subject of these proceedings that also burdened the Servient Tenement.)

19 The Servient Owner stated in her evidence in chief that she was present at the Servient Tenement for part of almost every day that the 2002 Work was carried out. She observed that the northern boundary was dug up to a depth of greater than two metres. She said that, while the 2002 Work was being done, there were "huge dirt mounds" and uneven beds of dirt along the northern boundary. She described the height or level of the dirt on the Servient Tenement as "somewhat raised" after the 2002 Work was finished.

20 In early 2003, the Servient Owner caused a concrete pavement to be laid across the Easement Land, to form a driveway along a narrow strip of the Servient Tenement that gave access to a public road. Shortly after the concrete had cured, it developed surface cracks. Subsequently, other cracks continued to develop with differing degrees of severity. It is common ground that that damage resulted from inadequate compacting of soil on the Easement Land after the 2002 Work was done.

21 Mr John Forrest, a structural engineer whose business includes forensic engineering investigations, provided a report dated 27 July 2011 (the Forrest Report). The Forrest Report was based on his observations of the Servient Tenement between 2004 and 2011, and the evidence of the location of the concrete pavement immediately after construction. The Forrest Report, which was admitted into evidence without objection, said that there was severe movement in the external pavement, landscaping and fences along the northern boundary of the Servient Tenement immediately adjacent to the Easement Land. The Forrest Report expressed the opinion that, having regard to the type of defects that Mr Forrest observed, the movement in the pavement was attributable to the lack of adequate compaction of backfill material within the Easement Land, "as a consequence of the [2002 Work]".

22 The Forrest Report said that the areas immediately adjacent to the Easement Land and the excessive movement in those areas were indicative of inadequate compaction of fill material. It said that it appeared that the 2002 Work was likely to have impacted upon the performance of the sub-grade below the pavement, landscaping and boundary fence adjacent to, and immediately above, the Easement Land. The Forrest Report said that it was clear that "inadequate performance of the backfill material" within the Easement Land was the predominant cause of the defects to the improvements along the northern boundary of the Servient Tenement. Mr Forrest recommended that the compaction of the fill material that replaced the material taken from the trench dug within the Easement Land be assessed and re-compacted or consolidated, to ensure that the impact on the improvements was minimised.

The Contractor as a Person Authorised

23 Clearly enough, the Contractor was an independent contractor of the Dominant Owners. The Dominant Owners contend that, even if there was a failure to comply with the obligation arising as a result of the proviso in the terms of the Easement, it was the Contractor, rather than the Dominant Owners, who has any responsibility for the failure to restore the surface of the Easement Land to its original condition. They say that the Contractor carried out the 2002 Work under the licence granted by the Easement to persons authorised by them. Accordingly, they say, it is the Contractor who was under the obligation to restore the surface of the Easement Land to its original condition. That contention must be rejected.

24 The terms of the Easement permit the Dominant Owners to authorise persons other than themselves to enter upon the Servient Tenement and to remain there for any reasonable time for the purposes of laying or renewing the pipeline and, for such purposes, to open the soil of the Servient Tenement. Without the grant of that right to the Dominant Owners, and the authorisation by the Dominant Owners of the Contractor to enter upon the Servient Tenement, the actions of the Contractor would have constituted a trespass.

25 Further, it is unquestionable that the Contractor carried out the 2002 Work at the behest of the Dominant Owners, for the better enjoyment by them of the Dominant Tenement. It may be that the Contractor was in breach of an obligation that it owed to the Dominant Owners to restore the surface of the Easement Land to its original condition. However, that is not an issue in these proceedings. The question is whether or not the obligation arising under the proviso has been discharged by the Dominant Owners. The 2002 Work was carried out at their behest and for their benefit, through the exercise of the rights conferred on them as owners of the Dominant Tenement. It was incumbent upon them, once the surface of the Servient Tenement had been opened, to restore the surface to its original condition. That obligation rested on the Dominant Owners. They failed to discharge that obligation. The fact that the 2002 Work was carried out by the Contractor does not detract from the obligation on the Dominant Owners consequent upon the 2002 Work having been carried out by reason of their having authorised the Contractor to do so.

26 In the case of an easement for a right of way, the dominant owner will be presumed, in the absence of a contrary intention, to have the right to license visitors to use the easement, in order to secure for the owner of the dominant tenement all that is necessary for the reasonable enjoyment of the dominant tenement. So long as visitors use the right of way to visit the dominant tenement with the licence of the dominant owner, there will be no trespass. However, the dominant owner cannot avoid responsibility for the actions of his licensees and will be vicariously responsible for those actions (see Jalnarne Limited v Ridewood (1989) 61 P&CR 143 at 160). Similarly, in the present case, the Dominant Owners cannot avoid vicarious responsibility for the conduct of the Contractor, whose actions on the Servient Tenement, so far as they went, were carried out with the express authority of the Dominant Owners.

The Proviso in the Terms of the Easement

27 The Easement permits the Dominant Owners, and persons authorised by them, to enter upon the Servient Tenement for the purpose of laying or renewing a pipeline, and to open the surface of the Easement Land, subject to the proviso described above. The proviso has two limbs, each of which might be characterised as a condition of the exercise of the rights conferred by the Easement. The proper characterisation of the conditions, however, is not without difficulty.

28 The first condition is that all reasonable precautions must be taken to ensure as little disturbance as possible to the surface of the Easement Land. The effect of that condition would be that any purported exercise of the rights conferred by the Easement, by, for example, opening the surface of the Easement Land, would constitute a trespass to the extent that reasonable precautions were not taken to ensure as little disturbance as possible to the surface in exercising the rights. That is because, in the ordinary course, where the actions of the owner of a dominant tenement, carried out in purported exercise of rights conferred by an easement, exceed the terms of that easement, the actions will constitute a trespass (see Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324; (2008) NSW ConvR ¶56-200 at [20]; Jonathan Gaunt and Justice Paul Morgan, Gale on Easements (19th ed 2012, Sweet & Maxwell) at [9-118]). The cause of action for that trespass would first accrue when work was done that went beyond that limit. It has not been suggested that that condition was not satisfied in the present case, in that the Servient Owner has not alleged that the 2002 Work caused any greater disturbance than was necessary.

29 The second condition is that, once the rights conferred by the Easement have been exercised, an obligation arises to restore the surface of the Easement Land "as nearly as practicable to its original condition". Having entered upon the Servient Tenement and opened the soil of the Easement Land, in the exercise of the rights conferred by the Easement, the Dominant Owners were under an obligation to restore the surface of the Easement Land as nearly as practicable to its original condition. The licence conferred by the Easement was coupled with a corresponding obligation imposed upon the Dominant Owners, having exercised the licence subject to that obligation, to restore the surface: qui sentit commodum sentire debet et onus (he who enjoys the benefit ought to bear the burden: see Aspden v Seddon (1876) 1 Ex D 496 at 504, Halsall v Brizell [1956] 1 Ch 169 at 183 and Rhone v Stephens [1994] 2 AC 310 at 322). In the present case, this was said to raise two issues of principle.

30 The first question said to be raised is whether the term its original condition refers to the condition of the Easement Land at the time when the Easement was created or the condition at the time immediately before the 2002 Work was commenced. The second question is when the cause of action for breach of the obligation first accrued, for the purposes of the application of the Limitation Act. It is then necessary to determine, as a matter of fact, what the condition of the surface of the Easement Land was at the relevant time and when the breach of the obligation occurred.

The Original Condition of the Easement Land

31 An easement is intended to operate indefinitely. Accordingly, it would often be quite impracticable for the owner of a dominant tenement to be required to restore the surface of a servient tenement to its condition at the time of creation of the easement. An easement may have been created many, many years, perhaps more than a century before the carrying out of works that required the restoration. Common sense would suggest that an easement in the form in Pt 3 of Sch 8 to the Conveyancing Act should be construed as requiring restoration of the surface to the condition of the surface immediately prior to the relevant works.

32 In the event, it became unnecessary to resolve the question. The parties accepted that the factual question would be the same, whether the condition was to be assessed at the date of creation of the Easement or immediately before the commencement of the 2002 Work. They did so because the Easement was created in 2001, after the 150 mm pipeline had been installed under the Easement Land in 2000.

33 In relation to the factual question, the Dominant Owners contend that the Servient Owner failed to discharge the onus of establishing that the surface of the Easement Land has not been restored to its original condition, being the condition immediately before the carrying out of the 2002 Work. They say that the condition of the surface prior to the commencement of the 2002 Work must be assessed in the light of the evidence that the 150 mm diameter pipeline had been installed under the Easement Land in 2000. They point to the fact that the Servient Owner adduced no positive evidence as to the condition of the surface immediately prior to the commencement of the 2002 Work.

34 More particularly, the Dominant Owners assert that it was incumbent upon the Servient Owner to show that there was adequate compaction of the soil on the Easement Land following the installation of the original 150 mm diameter pipeline in 2000. They say that the Servient Owner has failed to demonstrate that the condition of the surface after completion of the 2002 Work was different from the condition of the surface prior to the commencement of the 2002 Work. They say that it is as likely as not that the soil had not been adequately compacted after the installation of the 150 mm diameter pipeline in 2000. That contention must fail for three reasons.

35 First, there is nothing to suggest that the work carried out in 2000, when the 150 mm diameter pipeline was laid, was carried out otherwise than in a good and workmanlike manner, with adequate compaction. Rather, an inference was open that the laying of the 150 mm diameter pipeline was in accordance with appropriate standards, and that the soil had been adequately compacted when that work was done. That inference can more easily be drawn in circumstances where no evidence was called by the Dominant Owners to indicate the condition of the surface of the Easement Land prior to the transfer of the Servient Tenement to the Servient Owner. At the time when that work was done, the Servient Owner had no interest in the Servient Tenement. Rather, the Dominant Owners owned the Servient Tenement until completion of the transfer to the Servient Owner. The condition of the Easement Land was within the knowledge of the Dominant Owners and not within the knowledge of the Servient Owner. That enables an inference favourable to the Servient Owner to be more easily drawn (see Jones v Dunkel [1959] HCA 8; 101 CLR 298 at 312).

36 Secondly, the Forrest Report clearly indicated Mr Forrest's opinion that the movement in the concrete pavement was attributable to a lack of adequate compaction of backfill as a consequence of the upgrade works and that the upgrade works were likely to have impacted on the performance of the pavement. Mr Forrest was not cross-examined as to those opinions.

37 Thirdly, the fact that the Dominant Owners gave specific instructions to the Contractor to ensure that the Easement Land was properly compacted supports the inference that prior to the 2002 Work, the soil on the Easement Land was properly compacted. Moreover, the evidence shows that the reason for the 2002 Work had nothing to do with deficiencies in the work laying down the 150 mm pipeline in 2000. The 2002 Work was necessitated because of the requirement to upgrade the capacity of the pipeline.

38 On the basis of that evidence, I am persuaded that it is more probable than not that the Easement Land was adequately compacted following the installation of the 150 mm diameter pipeline in 2000. It follows that there was a failure, following the completion of the 2002 Work in November and December 2002, to restore the surface of the Servient Tenement to its original condition, within the meaning of the Easement. There was no error on the part of the primary judge in that regard.

The Cause of Action and the Limitation Act

39 In their defence, the Dominant Owners asserted that the causes of action pleaded by the Servient Owner did not accrue within six years before the commencement of the proceedings and that her causes of action are therefore statute barred. Section 14 of the Limitation Act relevantly provides that neither an action on a cause of action founded on contract (including quasi-contract), nor an action on a cause of action founded on tort, is maintainable if brought after the expiration of a limitation period of six years running from the date on which such cause of action first accrues to the plaintiff. However, that provision does not apply to a cause of action founded on a deed. Under s 16, an action on a cause of action founded on a deed is not maintainable if brought after the expiration of a limitation period of 12 years running from the date on which the cause of action first accrues to the plaintiff.

40 As I have said, the proceedings in the Equity Division were commenced on 12 December 2008. If any cause of action relied on by the Servient Owner were founded on contract, on quasi-contract, or on tort, it was barred if it first accrued to her prior to 12 December 2002. On the other hand, it would not be barred if it was founded on a deed or if it accrued on or after 12 December 2002. The Dominant Owners accepted that they have the onus of establishing that any cause of action relied upon by the Servient Owner is barred by the operation of the Limitation Act.

41 The cause of action to enforce the obligation arising under the second limb of the proviso in the terms of the Easement is by no means clear. In her statement of claim, the Servient Owner claims damages for unlawful use of the Easement, breach of the Condition, negligence for breach of the Duty and actionable nuisance or trespass. Subject to the contention that the cause of action is founded on a deed, each of the causes of action on which the Servient Owner relies is a cause of action founded on contract or tort. The question is when any such cause of action first accrued to the Servient Owner.

42 The Dominant Owners contend that the only cause of action available to the Servient Owner is one founded on trespass. However, in the present case, the actions of the Contractor are not alleged to have exceeded the licence conferred by the Easement. Rather, it is the failure to satisfy the obligation contained in the proviso that arose concomitantly with the exercise of that licence.

43 It is not disputed that, if the surface of the Easement Land was not restored to its original condition, a cause of action accrued to the Servient Owner. The question is what that cause of action was and whether it was barred by the Limitation Act.

44 The Servient Owner contends that the obligation to restore gave rise to a cause of action founded on a deed. Under s 3 of the Real Property Act, any instrument that is registrable or capable of being made registrable under the provisions of that Act is a dealing. The Dominant Owners accept that the relevant section 88B instrument is a dealing for the purposes of the Real Property Act. Under s 36(11) of the Real Property Act, upon registration, a dealing is to have the effect of a deed duly executed by the parties who signed it. The Servient Owner contends that upon registration of the relevant section 88B instrument, it had the effect of a deed. The section 88B instrument was executed by the Dominant Owners under common seal. The words in Pt 3 of Sch 8 to the Conveyancing Act are deemed to be inserted in the section 88B instrument in lieu of the words "easement to drain water". Accordingly, the Servient Owner contends, the obligation arising under the proviso in the terms of the Easement is an obligation arising under a deed and therefore her cause of action is founded upon a deed.

45 While there may be some merit in the contention that a promise contained in a section 88B instrument is a covenant in a deed, there is no promise contained in the instrument the registration of which created the Easement. Rather, the proviso in the terms of the Easement, which was created by the registration of the section 88B instrument, gave rise to an obligation to restore, by reason of the exercise of the rights conferred by the Easement. The obligation did not arise by reason of any promise made by the Dominant Owners. I would be disposed to conclude that the Servient Owner can draw no comfort from the provisions of s 16 of the Limitation Act. However, having regard to the conclusion I have reached below as to the application of s 14 of the Limitation Act, it is not necessary to decide that question.

46 The Servient Owner's cause of action has been described as being either an action on the case or an action in assumpsit (Aspden v Seddon at 503). That is to say, it must be founded on tort or contract, including quasi-contract. The cause of action is not one founded in tort since, at the time of opening the soil of the Easement Land and excavating, in order to carry out the 2002 Work, that action was licensed. At the time when the 2002 Work was carried out, the actions of the Dominant Owners, acting through the Contractor, were authorised by the terms of the Easement. The failure to restore did not have the effect, ex post facto, of rendering the action of carrying out the 2002 Work a trespass.

47 Further, the cause of action is not one founded on an express contract, since there was no express promise to restore. Rather, by exercising the rights conferred by the Easement, the Dominant Owners must be taken to have undertaken an obligation to restore. That may suggest an implied promise, the consideration for which was the grant of the Easement. However, that would pose a problem where the exercise of rights was by a successor in title of the Dominant Owners.

48 It appears to follow that the relevant cause of action is an action in quasi-contract, within the meaning of that term as used in s 14 of the Limitation Act. Such a cause of action would be barred if it first accrued to the Servient Owner before 12 December 2002. The cause of action is for recovery of damages by reason of the failure to perform the obligation to restore. That is to say, the matter about which the Servient Owner complains is the failure by the Dominant Owners to restore the surface of the Easement Land to its original condition. The Dominant Owners contend that the failure occurred at the moment when the Contractor completed the work of renewing the pipeline and backfilling the trench dug for the purpose of removing the original pipeline and replacing it with the 225 mm diameter pipeline. However, even if that were the relevant time, the Dominant Owners are unable to identify with precision when that occurred.

49 The Dominant Owners contend that an inference is available that the 2002 Work was completed on the weekend of 7 and 8 December 2002. They contend that that inference should be drawn from the fact that the Servient Owner referred to an arrangement for the work to be completed over a weekend. As indicated above, Sheraton wrote to the Servient Owner on 5 December 2002, confirming that, upon completion of the implementation of the common drainage line, the surface and boundary fence would be restored "as nearly as practical to the original condition prior to work commencing". 5 December 2002 was a Thursday. The Dominant Owners say that, on the balance of probabilities, the 2002 Work was completed over the following weekend, namely, 7 and 8 December 2002.

50 The correspondence of 5 December 2002 indicates quite clearly that the 2002 Work had not been completed at that date. The evidence of the Servient Owner indicates that the Contractor continued working on the Servient Tenement for some weeks after the Servient Owner and her family moved into occupation of the Servient Tenement, although not necessarily on the installation of the 225 mm diameter pipeline.

51 In one affidavit, the Servient Owner said that she received the keys to her new house on 15 December 2002 and that she and her family moved in on 17 December 2002. In another affidavit, however, she said that she moved in on 15 December 2002. If her recollection that she moved in on a weekend is correct, 17 December cannot be the correct date. Those facts rather suggest that the 2002 Work may not have been completed until the weekend of 14 and 15 December 2002. Having regard to the terms of the letters of 5 December 2002, and the evidence given by the Servient Owner, I would not be persuaded, on the balance of probabilities, that the 2002 Work was completed before 12 December 2002. The onus is clearly on the Dominant Owners to establish when the 2002 Work was completed. They have not discharged the onus of establishing, on the balance of probabilities, that the 2002 Work was completed before 12 December 2002.

52 In any event, restoration as contemplated by the proviso in the terms of the Easement could not have been carried out until the work of renewing the pipeline had been completed. There would be no failure to satisfy the obligation to restore the surface of the Easement Land to its original condition until a reasonable period had elapsed after the work of renewing the pipeline was completed. Even if that work were completed over the weekend of 7 and 8 December 2002, I am not persuaded that the intervening three days or so would have been a reasonable period within which to restore the condition of the surface to its original condition, such that the Dominant Owners were in default. I am not persuaded that any cause of action on the part of the Servient Owner founded on contract, quasi-contract or tort accrued to her prior to 12 December 2002.

53 The primary judge held that the Limitation Act did not bar the claim by the Servient Owner. His Honour found that the situation of subsidence of the concrete pavement and the subsoil, resulting from the 2002 Work, was a continuous state of affairs and that the Dominant Owners had suffered the work carried out by the Contractor to remain defective, having taken no steps to remedy it. His Honour concluded that, since the subsidence of the Servient Tenement, and the risk of further subsidence, continues, a continuing breach of the conditions of the Easement by the Dominant Owners had been established. Consequently, his Honour held that the cause of action accrued continuously, such that the limitation period did not apply.

54 I do not consider that the fact that the failure to restore the surface of the Easement Land is continuing has a bearing on when the relevant cause of action accrued to the Servient Owner. Having caused the 2002 Work to be carried out by the Contractor, the Dominant Owners came under an obligation to restore the surface of the Easement Land within a reasonable time after the work of relaying the pipeline was completed. The cause of action of the Servient Owner to recover damages by reason of that failure accrued at the expiration of a reasonable time after the work of relaying was complete. Since that time expired less than six years before the commencement of the proceedings in the Equity Division, there was no error on the part of the primary judge in concluding that the Servient Owner was not barred from recovering damages from the Dominant Owners for breach of the obligation that arose by reason of the exercise of the rights conferred by the Easement. However, the justification for that conclusion is not that the cause of action accrued continuously but, rather, that the evidence establishes on the balance of probabilities that the cause of action accrued to the Servient Owner after 12 December 2002.

55 It was agreed before the primary judge that the amount of damages to be awarded to the Servient Owner for the cost of remediation of the concrete pavement was the sum of $106,323.15. That agreement may have been the result of a misconception. The obligation of the Dominant Owners was to restore the Easement Land to its original condition. Clearly, there was no concrete pavement constructed over the Easement Land at the time when the 2002 Work was carried out. The obligation of the Dominant Owners was to carry out adequate compaction of the soil replaced in the trench after the relaying of the pipeline. In circumstances where the laying of the concrete pavement may well have constituted an infringement of the Easement on the part of the Servient Owner, it is by no means clear that the proper measure of damages is the cost of the remediation of the concrete pavement. However, in the light of the agreement between the parties, and the absence of any ground of appeal relating to the quantum of damages, the judgment would stand.

Conclusion

56 It follows from the above that the appeal should be dismissed. The Dominant Owners should pay the Servient Owner's costs of the appeal.

57 GLEESON JA: I agree with Emmett JA.

58 SACKVILLE AJA: I agree with the orders proposed by Emmett JA and, subject to the following observations, with his Honour's reasons. I use the same abbreviations as in his Honour's judgment.

59 The appeal proceeded on the basis that the Servient Owner was entitled to damages if she could establish that the Dominant Owners had failed to restore the surface of the Servient Tenement "as nearly as practicable to its original condition", subject to the Dominant Owners' contention that the cause of action was statute barred (the limitation question).

60 The limitation question was said to depend on whether the Servient Owner's cause of action, however characterised, had accrued before 12 December 2002 (as the Dominant Owners asserted). For the reasons given by Emmett JA, the limitation question must be resolved against the Dominant Owners because, on the evidence, the Servient Owner's action has not been shown to have accrued prior to 12 December 2002. There was no suggestion that the relevant limitation period was shorter than six years.

61 It follows that there is no need to express a view as to whether the action brought by the Servient Owner is an "action on a cause of action founded on a deed" for the purposes of s 16 of the Limitation Act 1969 (NSW) (in which case a 12 year limitation period would apply). While I do not wish to express a final opinion on this question, I think that there is a reasonably arguable case that the Servient Owner's cause of action was founded on a deed.

62 As Emmett JA has pointed out (at [44]), s 36(11) of the Real Property Act 1900 (NSW) provides that upon registration a dealing is to have the effect of a deed duly executed by the parties who signed it. There is no dispute that the plan lodged under s 88B of the Conveyancing Act 1919 (NSW) (s 88B Instrument), upon registration, had the effect of a deed. Nor is there any dispute that the s 88B Instrument was executed under seal by the Dominant Owners.

63 The s 88B Instrument in the present case recorded an intention to create an "easement to drain water". By virtue of s 181A of the Conveyancing Act this short form of words incorporated the language set out in Pt 3 of Sch 8 to that Act. The full terms of the Easement have been reproduced by Emmett JA at [12] above. The effect of s 88B(3)(c) of the Conveyancing Act is that on registration of the s 88B Instrument the Easement was created without any further assurance.

64 The Easement entitled the Dominant Owners, as against the owners for the time being of the Servient Tenement, to enter the Servient Tenement and to open the soil for the purpose of laying pipes. This entitlement, however, was subject to the proviso. The proviso required the Dominant Owners or persons authorised by them, if they entered upon the Servient Tenement for the permitted purpose, to:

● take all reasonable precautions to ensure as little disturbance as possible to the Servient Tenement; and

● restore that surface as nearly as practicable to its original condition.

65 The threshold question in determining the nature of the Servient Owner's cause of action seems to be whether s 36(11) of the Real Property Act and s 88B(3)(c) of the Conveyancing Act, when read together, deem the Easement (and not merely the s 88B Instrument) to be a deed. If so, it may well be that an action by the Servient Owner to enforce obligations imposed by the proviso against the Dominant Owners is an action founded on a deed. Although s 36(11) says that upon registration a dealing is to have the effect of a deed, s 11(1) of the Limitation Act defines "deed" to include "an instrument having the effect of a deed under the law of New South Wales".

66 I do not think that an insuperable difficulty is created by the fact that the Dominant Owners' obligations under the proviso are enlivened only when they exercise their right to enter the Servient Tenement for the purposes permitted by the Easement. The two obligations created by the proviso, particularly the obligation to restore the surface of the Servient Tenement, seem to be positive obligations which, if they were contained in a deed, would be capable of enforcement in an action brought by the Servient Owner.

67 These observations do not necessarily mean that an action to enforce the obligations created by the proviso in the standard easement to drain water can be brought by the owner of the servient tenement for the time being against an owner of the dominant tenement for the time being who exercises his or her right of entry to lay pipes on the servient tenement. The general principle is that, in the absence of statute, a positive covenant affecting land cannot be enforced against a successor in title to the covenantor: Rhone v Stephens [1994] 2 AC 310 at 321 (Lord Templeman, with Lords Oliver, Woolf, Lloyd and Nolan agreeing); Clifford v Dove [2003] NSWSC 938; 11 BPR 98038 at [61]-[63] (Bryson J). Attempts to circumvent this principle by relying on the proposition that a person taking the benefit of a covenant or agreement must be taken as subject to the burden, have generally not met with approval in Australia: see Government Insurance Office (NSW) v KA Reed Services Pty Ltd [1988] VR 829 at 831-841 (Brooking J, O'Bryan and Nicholson JJ agreeing); AJ Bradbrook and SV MacCallum, Bradbrook and Neave's Easements and Restrictive Covenants (3rd ed 2011, LexisNexis Butterworths) at [14.8]-[14.13].

68 Nonetheless, an owner of the dominant tenement who exercises his or her right to enter the servient tenement under an easement to drain water may become subject to an enforceable obligation to comply with the terms of the proviso, regardless of whether the dominant owner was a party to the creation of the easement. The relevant principle is that where an easement is created subject to a condition, the burden imposed by that condition is enforceable against the owner for the time being of the dominant tenement, if the condition is relevant to the exercise of the dominant owner's rights under the easement: Rhone v Stephens at 322; Fanigun Pty Ltd v Woolworths Ltd [2006] QSC 28; [2006] 2 Qd R 366 at [98] (Mullins J). This principle applies even if the current owner of the dominant tenement against whom the obligation is sought to be enforced is not the party in whose favour the easement was originally created: that is, even if he or she is a successor in title to the original owner of the dominant tenement. Whether an obligation imposed on the owner of the dominant tenement is a condition of the rights conferred by the easement on the owner of the dominant tenement or is an independent obligation is a question of construction.

69 In the present case, the Dominant Owners executed the s 88B Instrument, but the Servient Owner (who had not acquired her interest in the Servient Tenement at the time) did not. The Dominant Owners were therefore parties to the creation of the Easement. Perhaps for this reason no submission was made by the Dominant Owners that the Servient Owner could not enforce against them the positive obligations created by the proviso. Little consideration was therefore given in argument to the proper characterisation of the obligations imposed by the proviso, in particular whether they constitute conditions attached to the grant of the Easement. In the absence of full argument and because it is not necessary to resolve the issue, I prefer to express no view on it. I merely note that it may become significant in a case where the contest is between successors in title to the original owners of the dominant and servient tenements.

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Decision last updated: 27 June 2014