Shree Shirdi Sai Sansthan Sydney Limited v Nirmal Taluja (No 2)

On 19 December 2014 I delivered the primary judgment in this matter: Shree Shirdi Sai Sansthan Sydney Limited v Taluja [2014] NSWSC 1825 (primary judgment). Terms defined in that judgment bear the same meaning in this judgment. The parties asked for the matter to be relisted due to a dispute over the proposed final orders.

The background facts to this matter are set out at [4]-[18] of the primary judgment. In brief, the matter concerned a dispute in relation to an option agreement regarding 800 square metres of land surrounding a chapel (known as the Memorial Chapel). The plaintiff is a religious organisation devoted to the worship of an individual named Shirdee Sai Baba, whom it regards as a saint. The defendant is the registered proprietor of the property the subject of the dispute.

The plaintiff and defendant entered into a lease agreement which included an option to renew (cl 2 of Annexure A) and an option to purchase (cl 12 of Annexure A). The primary dispute concerned whether the plaintiff exercised the option to purchase. The issue now exciting the attention of the parties is whether the term “right of use” in cl 12.3 of the lease should be construed as granting an easement. Clause 12.3 is in the following terms:

The plaintiff submits that cl 12.3 was intended to be an adjunct to the exercise by the plaintiff of the option to purchase granted by cl 12.1. The plaintiff argues that the right of way and right of use provided by cl 12.3 are important ancillary rights to enable effective use of the land.

The plaintiff argues that the right of way provided by cl 12.3 is an easement that benefits the land that is the subject of the option. They say that it is enforceable against the defendant and any subsequent proprietors of the servient tenement. They also say that, similarly, the right of use should be construed to be an easement because, in order for such a right to be effective, the parties must have intended that it benefit and bind successors in title. It can only do so, they submit, if it is a registered interest in the land.

The plaintiff submits that the Court should not regard the capitalisation of the phrase “Right of Way” as significant when compared to the non-capitalised “right of use” in the context of construing the clause. The plaintiff suggests that the former may have been capitalised because it is a type of easement with a particular and distinctive designation. Alternatively, the plaintiff points out that the lease is poorly drafted and says it would be wrong to attach significance to minor inconsistencies in style or usage. Neither “Right of Way” nor “right of use” is a defined term.

The plaintiff accepts that the defendant cannot provide the plaintiff with an easement of any kind prior to the plaintiff becoming registered proprietor of the land to be the dominant tenement. However, the plaintiff points out that the right of way is unquestionably an easement and, as such, the reference to providing a right of way prior to the transfer cannot be a reference to completing the process of providing a registered right of way. The plaintiff says the same must be true of the right of use. The expression “prior to Transfer”, the plaintiff argues, must relate to conveyancing matters and express the parties’ intention that all formalities, pre-conditions to the provision of the right of use and right of way, are complete by the time of transfer.

The defendant submits that what was intended was the grant of a contractual licence. The defendant argues that there was no occasion to provide any further details because the licence would be coterminous with the plaintiff’s ownership of the land, as with any personal right predicated upon ownership. The defendant says that the extent of the right was sufficiently defined in cl 1.1 of Annexure A of the lease which defined “Common Areas”. The defendant submits that it is self-evident that the “right of use” was to be non-exclusive, otherwise the defendant would have been effectively assigning the Common Areas.

The defendant says that the use of the phrase “right of use” rather than “non-exclusive licence to use” (as appears in cl 13.1) is not of any real significance given the drafting of the document. The defendant submits this terminology is short-hand for the right in question. It submits that it is more significant that the plaintiff previously enjoyed this sort of right as tenant, and argues that the term “right of use” seems apt to refer to the same right to be enjoyed after the end of the tenancy.

The defendant says that the words “prior to Transfer” should be construed according to their ordinary meaning, and that if an easement were to be granted the expectation would be that it would be conveyed as part of the transfer, not before it. In the case of a licence, though, the defendant says that there is every reason the parties might wish to ensure the grant took place prior to the transfer (as a personal right would not be part of the transfer).

The defendant submits that a construction which supplies a congruent operation of the various components of the contract as a whole should be preferred. The defendant relies on the authorities as collected by Leeming JA in Sigiriya Capital Pty Ltd v Scanlon (2013) 97 ACSR 183; [2013] NSWCA 401 at [30]:

The defendant says “provide”, in this context, clearly means “grant”, and as such the difficulties concerning the timing of the transfer substantially or wholly disappear if the defendant’s construction is preferred.

The notion of an easement is that one tenement has rights over another; one tenement is benefited, the other is in some way afflicted. Although a right of way is a particular, identified type of easement, I am not satisfied this militates against the construction of “right of use” as granting an easement over the land in question. Easements (eg. riparian rights or an easement for sewerage) are not restricted to rights of way – a right of way is merely one species of usage.

In this case, I am satisfied that the phrase “right of use” is apt to be construed as granting an easement. The “right of use” in question in this case is no different to a right to use particular parts of a servient tenement for parking or similar. I do not think, in this context, that the parties intended to confer an easement for right of way but merely a licence for use. As pointed out by the plaintiff, the only way of securing this interest as binding successors in title is for it to be a registrable interest.

I am also cognisant of the poor drafting of the lease agreement and, as such, I accept that little can be drawn from the difference in capitalisation. I consider that both parts of cl 12.3 should be construed as granting easements. Similarly, I consider that the ambiguity concerning the timing of the grant of the easement is attributable to the drafting.

I am satisfied the term “right of use” should be construed as granting an easement. The defendant should bear the costs of the motion.