JEA Holdings (Aust) Pty Ltd v Registrar-General of New South Wales

1. [1]

   The plaintiff, JEA Holdings (Aust) Pty Limited (JEA) by amended summons seeks an order pursuant to s 129 of the Real Property Act 1900 (NSW) (Act) for compensation out of the Torrens Assurance Fund (Fund). The proceedings are brought against the Registrar-General as nominal defendant under s 132 of the Act. The basis for JEA’s claim is that the Registrar-General omitted an easement from the register affecting land that was purchased by JEA in 2010. JEA claims that following a correction to the register in 2015, it suffered loss that is compensable under s 129. The Registrar-General accepts that the failure to record the easement on the title to the land was a relevant “omission” for the purposes of s 129(1)(a) of the Act, but disputes that any compensation is payable out of the Fund.

2. [2]

   The easement was ultimately recorded on the register following a decision of the Court of Appeal, reported as Registrar-General of New South Wales v Jea Holdings (Aust) Pty Ltd (2015) 88 NSWLR 321; [2015] NSWCA 74 (Appeal Decision). The background included below is largely taken from that decision, supplemented where necessary by the materials provided to the Court by the parties.

Background

1. [3]

   By a contract for sale of land dated 17 December 2010, JEA purchased three adjoining parcels of land at Miller, New South Wales being the land identified in folio identifiers 2/545358, 2/219028, and 4/219028 from Gold Valley Investment Pty Ltd for $11.9 million. The land the subject of these proceedings is 4/219028 (Lot 4) which at the time of the sale was (and remains) vacant land comprising an open ‘at grade’ car park with 189 car spaces. Lot 4 adjoins the land identified in folio identifier 5/219028 (Lot 5). Lot 5 is owned by Awar Pty Ltd (Awar), which operates a hotel on the land.

2. [4]

   Prior to 17 February 1964, Lots 4 and 5 formed part of the same parcel of land, being Lot 1 in deposited plan 214541, and were not created until the registration of deposited plan 219028 which occurred on 17 February 1964. Immediately before its subdivision the registered proprietor of the entire parcel was the Housing Commission of New South Wales. On 4 October 1963, the Housing Commission transferred the entire parcel to Green Valley Shopping Centre Pty Ltd by memorandum of transfer registered number J490511 which was registered on that day. That transfer contained the following covenant relating to the use of lots 1 to 5 in deposited plan 219028 (HC Covenant):

3. [5]

   On 10 October 1963, Green Valley Shopping Centre Pty Ltd executed a memorandum of transfer registered number J493622 (Transfer) by which it transferred Lot 5 to Tooth & Co Ltd. While dated 10 October 1963, the Transfer was not registered until 23 April 1964 following registration of deposited plan 219028. The Transfer contained what was described as a ‘covenant’, but ultimately determined in the Appeal Decision to be an easement, burdening Lot 4 and for the benefit of Lot 5 (the Easement). The terms of the ‘covenant’, which is extracted in full at [22] of the Appeal Decision, are relevantly (emphasis added):

4. [6]

   Upon registration of deposited plan 219028, new certificates of title were issued in relation to each of Lots 4 and 5. Schedule 2 of each certificate of title contained the notation “covenant created by Transfer No J490511”. This is a reference to the HC Covenant, extracted at [4]. Schedule 2 of the certificate of title for Lot 5, the benefitted land, recorded the ‘covenant’ described at [5], but the certificate of title for Lot 4, the burdened land, did not.

5. [7]

   In 1970, the initial Lot 3 in deposited plan 219028 was subdivided to create lots 1 and 2 in deposited plan 545348. Subsequently, Green Valley Shopping Centre Pty Ltd transferred its land, with the exception of Lot 5, to Gold Valley Investment Pty Ltd.

6. [8]

   In 1988, as part of the introduction of computerised certificates of title, Lot 4 was given a new certificate of title and the folio identifier 4/219028. The Easement benefitting Lot 5, extracted at [5], was not registered on the new certificate of title for Lot 4. The consequence is that the land with the benefit of the Easement had the Easement recorded on the title but the burdened land did not.

7. [9]

   On 4 January 2001, Awar purchased Lot 5 (which had been given the folio identifier 5/219028).

8. [10]

   As noted earlier, in 2010 JEA entered into a contract to purchase Lot 2 in deposited plan 545358 and Lots 2 and 4 in deposited plan 219028 for a purchase price of $11.9 million. When JEA purchased these lots, it is not in dispute that the covenant described at [5] was not on the certificate of title for Lot 4. Completion occurred on 7 March 2011.

9. [11]

   On 10 January 2012, the Registrar-General served a notice on JEA pursuant to s 12A of the Act notifying JEA that he intended to record the burden of the ‘covenant’ contained in the Transfer on the certificate of title for Lot 4. That letter relevantly stated:

10. [12]

    On 3 February 2012, JEA commenced proceedings against the Registrar-General and Awar to restrain the recording of the ‘covenant’ on the Certificate of Title for Lot 4.

11. [13]

    On 21 May 2013, Windeyer AJ gave judgment for JEA, finding that while the Transfer was expressed as a covenant, it gave rise to an easement rather than a restrictive covenant, but the easement did not fall within the exception to indefeasibility for the “omission” of an easement from the title contained in s 42(1)(a1) of the Act: Jea Holdings (Aust) Pty Ltd v Registrar-General of NSW [2013] NSWSC 587. At [10], Windeyer AJ noted the following regarding the Registrar-General’s letter of 10 January 2012 extracted at [11] above:

12. [14]

    On 28 January 2015, JEA lodged a development application with Liverpool City Council (Council) in respect of all the land it had purchased under the contract referred to at [10] above. That development application described the proposed development as “demolish existing car parking and construction of retail and residential ‘shop top housing’ plus basement car parking, external works and relocation of Telstra communications tower”.

13. [15]

    On 27 March 2015, the Court of Appeal upheld the Registrar-General’s appeal from that decision and made orders for the Easement to be recorded on the certificate of title for Lot 4: Appeal Decision [144]. In essence, the Court of Appeal affirmed Windeyer AJ’s decision that the Transfer created an easement but held that the easement had been “omitted” from the title in the relevant sense, and therefore fell within the exception in s 42(1)(a1).

14. [16]

    Bathurst CJ and Beazley P gave joint reasons and Basten JA gave separate reasons concurring in the result. Basten JA made certain observations regarding the nature of the restrictions imposed by the Easement on JEA’s rights in relation to Lot 4 which were referred to when the Council considered JEA’s development application for the land. His Honour said:

15. [17]

    On 18 September 2015, following a failed application for special leave to appeal to the High Court of Australia, the Easement was registered on the certificate of title for Lot 4.

16. [18]

    On 29 June 2016, the Council gave a conditional consent to JEA’s development application (the Development Consent). The Development Consent granted approval for the redevelopment of the site described as follows:

17. [19]

    The granting of the Development Consent was in accordance with an assessment report issued by the Sydney West Joint Regional Planning Panel (the determining authority under the EPA Act) which recommended approval of the development application. The assessment report rejected a submission made to the Council by Awar that the development application should not be granted due to the Easement and the Appeal Decision. After setting out Basten JA’s observations in the Appeal Decision at [153]–[153], the assessment report states that the Council had sought and received legal advice on the matter and continued:

18. [20]

    A number of observations can be made about the assessment report. First, it recognised that the development application was inconsistent with the terms of the Easement but considered that, based on the legal advice received, this did not preclude the granting of the approval. The report then addressed (in the passage set out above) why, based on planning considerations, it was appropriate that the approval be granted.

19. [21]

    Second, the assessment report regarded the development application as being consistent with the requirements for “shop top housing” despite the fact that only part of the ground floor would be used for retail and most for car parking.

20. [22]

    Third, the assessment report makes no mention of the HC Covenant and based on the evidence before the Court it appears that the Council simply ignored it. The assessment report refers to cl 1.9A of the Liverpool Local Environmental Plan 2008 (Liverpool LEP) discussed below, but only for the purpose of temporarily suspending the Easement during the construction phase of the development when there would be no car parking possible on Lot 4.

21. [23]

    On 10 August 2018, JEA filed a summons seeking compensation from the Fund.

22. [24]

    On 20 September 2018, Awar commenced proceedings seeking to permanently restrain JEA from breaching the Easement by carrying out works pursuant to the Development Consent (Awar Proceedings).

23. [25]

    On 8 March 2019, Darke J made orders by consent discontinuing the Awar Proceedings. The parties in the Awar Proceedings agreed to the discontinuance of the proceedings on the condition that JEA would provide Awar with 28-days’ notice of any intention to develop Lot 4 in accordance with the Development Consent.

24. [26]

    On 29 October 2021, JEA wrote to the successor to the Housing Commission, the Land and Housing Corporation, seeking for the removal of the HC Covenant from the certificate of title for Lot 4. The Housing Commission agreed to the removal of the HC Covenant on 16 December 2021, and it was removed from the register on 14 January 2022.

25. [27]

    The Development Consent stated that it would lapse on 29 June 2021 (unless physically commenced prior to that date). The Court was informed by senior counsel for JEA that while the Development Consent was extended for 2 years, it had lapsed prior to the hearing (presumably on 29 June 2023).

26. [28]

    Prior to the commencement of these proceedings, JEA made an administrative claim on the Fund under s 131 of the Act which was unsuccessful in resolving the claim.

Relief claimed

1. [29]

   At the commencement of the hearing on 1 August 2023, JEA filed an amended summons in court, with the consent of the Registrar-General, adding a claim for relief in relation to all legal fees incurred in relation to the proceedings before Windeyer AJ and the Court of Appeal.

2. [30]

   The relief claimed is as follows:

3. [31]

   JEA prepared a schedule which was attached to its written submissions setting out the amount of its legal costs in respect of the proceedings referred to in paragraph 4 of the amended summons (and a calculation of pre-judgment interest). The Registrar-General did not dispute the reasonableness of the legal costs claimed, or the calculation of pre-judgment interest, in that schedule.

Relevant provisions

1. [32]

   Section 120 of the Act provides:

2. [33]

   Part 14 of the Act includes s 129 which sets out when compensation is payable from the Fund in proceedings brought against the Registrar-General (as nominal defendant). Subsections 129(1) and 129(2) provide relevantly:

3. [34]

   Section 129A qualifies the entitlement to compensation under s 129(1) in circumstances where the person making the claim has been “deprived of land or any estate or interest in land”. It provides:

4. [35]

   Section 129A was inserted in 2009 by the enactment of Real Property and Conveyancing Legislation Amendment Bill 2009 (NSW). When introducing the Bill to Parliament, Mr Barry Collier, Parliamentary Secretary, said the following about s 129A:

Evidence

1. [36]

   The witnesses for JEA were Mr Melhem Hazzouri, the sole director and secretary of JEA and three experts: Mr Michael Osborne, a solicitor with expertise in property law, Mr David Hoy, an urban planner and Mr Mark Ellis, a valuer. The witnesses for the Registrar-General were two experts: Mr James Lidis, a town planner, and Mr Leigh Bridges, a valuer. A summary of their evidence follows.

2. [37]

   Mr Hazzouri gave evidence that prior to the purchase of Lot 4 he had no knowledge that Lot 4 was burdened by the Easement and that while he was aware of the HC Covenant at the time of the purchase, he had been advised that it could be removed because it was redundant. He also gave evidence that JEA had sought to negotiate with Awar on numerous occasions to modify the Easement but was unsuccessful, and that JEA had been advised after the Appeal Decision that it had very low prospects of having the Easement modified or extinguished under s 89(1) of the Conveyancing Act 1919 (NSW). This advice was not put into evidence, and ultimately, for the reasons which follow, nothing turns on whether an application to modify the Easement to permit the development of Lot 4 would be successful.

3. [38]

   Mr Hazzouri also gave evidence, which was not contested, regarding the legal costs and disbursements incurred by JEA in the proceedings before Windeyer AJ and the Court of Appeal, the special leave application and the claim against the Fund. The total costs and expenses paid by JEA in the earlier proceedings (including the special leave application) were $421,456.58. The total costs and expenses of JEA in connection with the claim against the Fund comprise $121,449.59 for the administrative claim and $855,517.94 for these proceedings (excluding the costs of reports which have not been used in evidence in these proceedings).

4. [39]

   Mr Osborne expressed the opinion that if JEA had brought an application under s 89(1) of the Conveyancing Act 1919 to modify or extinguish the HC Covenant it is likely that it would have been successful. This opinion was given in a report prepared before the HC Covenant was released. The Registrar General did not dispute Mr Osborne’s evidence. In cross-examination, Mr Osborne was asked if he had considered whether an application to modify or extinguish the Easement under s 89 is likely to succeed and he indicated that he had not considered it in any detail, as he had no information which would allow him to assess relevant matters, including whether a proposed modification or extinguishment of it would substantially injure Awar.

5. [40]

   JEA relied on the evidence of Mr Hoy, who prepared three reports. The Registrar General relied on the evidence of Mr Lidis, who prepared one report. They also made a joint report (Planning JER) dated 30 May 2023.

6. [41]

   The Planning JER states the matters about which they agreed, including relevantly the following:

7. [42]

   In the Planning JER, Mr Hoy stated his view at [4.2.2] that “the Easement restricts the use of the ground level of Lot 4 to car parking and thus serves to preclude a shop top housing scheme”. I infer that this opinion was based on the assumption he had been instructed to make that the Easement could not be suspended under cl 1.9A of the Liverpool LEP (CB 238). Mr Lidis did not address this opinion of Mr Hoy in the Planning JER, but subsequently did so in a letter dated 18 July 2023 which was tendered in evidence. In the letter, Mr Lidis refers to what was said by Basten JA in the Appeal Decision at [152]–[153] and the observations in the assessment report set out at [19] above and then continues:

8. [43]

   It was submitted for JEA that as a consequence, subject to the issue identified at [56(a)] below, the town planning experts were in agreement that the Easement effectively precludes any form of development of Lot 4. I accept that, given the qualification expressed, this submission is correct as it recognises that Mr Lidis’ agreement with Mr Hoy was predicated on the correctness of the assumption made by Mr Hoy that the Council could not grant a development consent which suspended the Easement. The last paragraph of Mr Lidis’ letter set out above is a reference to an opinion which Mr Lidis had previously given in his main report that it would have been open to the Council to rely on cl 1.9A of the Liverpool LEP to suspend the Easement entirely in its consideration of the development application, based on the instructions he was given that s 3.16 of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act) and cl 1.9A of the Liverpool LEP permitted this. He also expressed the view in his main report that any such suspension by the Council would have been dependent upon JEA replacing the existing parking on Lot 4 with equivalent car parking on basement levels: Lidis report at 7.59-7.60. Mr Hoy, in contrast, had been instructed that it was not possible for the Council to suspend the Easement under cl 1.9A and I infer that the opinion he gave in the Planning JER proceeded on the basis of that instructed assumption.

9. [44]

   Mr Hoy and Mr Lidis were not required for cross-examination and thus the Court does not have the benefit of Mr Lidis’ oral evidence to clarify the extent of his agreement with Mr Hoy regarding the effect of the Easement on the development of the land. However, in my view, it is clear that Mr Lidis’ agreement with Mr Hoy that the Easement precluded a shop top housing development (and indeed any use of the ground level except for parking) was predicated on the correctness of Mr Hoy’s instructed assumption that cl 1.9A of the Liverpool LEP would not apply to the Easement which is ultimately a question of law for determination by the Court.

10. [45]

    JEA relied on the evidence of Mr Ellis, who prepared four reports. The Registrar General relied on the evidence of Mr Bridges, who prepared two reports. They made a joint expert report dated 25 July 2023 (Valuation JER).

11. [46]

    In the Valuation JER, both valuers agreed that:

12. [47]

    The methodology stated in (c) above appears to be based on the assumption that if the Easement applies, level 1 and level 2 would not be able to be used for anything other than car parking. The reasoning of the valuers is stated in the following passage from the Valuation JER:

13. [48]

    In summary, the valuation experts have assumed that the highest and best use of the land is for development in accordance with the Development Consent and that the Easement will prevent levels 1 and 2 from being developed in accordance with the Development Consent because those levels take up the area from the ground level up to a height of 12 feet. They have then calculated the loss in developable GFA resulting from this as 2,465.6 sqm (being the developable GFA of levels 1 and 2 under the Development Consent). The outcome of this analysis is set out in a table on page 11 of the Valuation JER. The key elements of the table are set out below:

14. [49]

    The market value in the second column is the developable GFA of Lot 4 under the Development Consent (13,618.5sqm) multiplied by the market value rate per sqm of GFA (derived from comparable sales data) on each of the identified valuation dates if the Easement did not burden the land. The market value in the third column is the developable GFA assuming that the Easement requires level 1 and level 2 to be used for car parking only (11,152.4sqm) multiplied by the same market rate per sqm of GFA used for column 2. The fourth column is the difference between columns 2 and 3 and this is the loss claimed by JEA depending on which of the alternative valuation dates applies.

15. [50]

    The Valuation JER then deals with a scenario where Lot 4 can only be used for car parking so that it has no development potential. The premise of this scenario is that this is the effect of the Easement. On that basis, the valuers agree that the market value of Lot 4 would be $2,350,000 on 27 March 2015, $2,350,000 on 16 June 2016 and $3,100,000 on 1 July 2023. JEA submits that the loss suffered by JEA as a consequence of the land being burdened by the Easement if Lot 4 can only be used for car parking is the difference between these amounts for the relevant valuation date, and the valuers’ agreed value of Lot 4 if it was unburdened by the Easement for that valuation date (set out in [48] above). JEA’s submission is summarised in the following table:

Parties’ submissions

1. [51]

   In the present case, JEA relies on s 129(1)(a) of the Act, contending that it has suffered loss or damage arising from the act or omission of the Registrar-General in the execution of his functions under the Act, being the delay in registering the Easement on the title to Lot 4, because prior to the Easement being registered on the title to Lot 4 the market was not aware of the existence of the Easement and this was effectively a latent defect in title.

2. [52]

   The loss or damage claimed by JEA falls into two categories. The first is the diminution in the value of the land because the development potential of the land is affected by the recording of the Easement. The second is the costs incurred by JEA in the unsuccessful proceedings brought by it against the Registrar-General to contest its decision to record the Easement on the title to Lot 4 and the costs of its claim against the Fund.

3. [53]

   The Registrar-General accepts that the failure to record the Easement on the title to Lot 4 until after JEA acquired that land was an “omission” for the purposes of s 129(1)(a) but disputes that JEA has suffered loss or damage as a result of that omission. It does so for essentially three reasons. First, it submitted that the recording of the Easement on the title to Lot 4 did not subject the land to a new restriction to which it was not already subject.

4. [54]

   Second, the Registrar-General pointed out that JEA was not claiming that it suffered a loss because it would have paid less for Lot 4 had it been aware of the Easement (through it being recorded on the title). Rather, the claim was that the recording of the Easement precluded JEA from achieving the development potential of Lot 4. That contention should be rejected because s 3.16 of the EPA and cl 1.9A of the Liverpool LEP enabled JEA to obtain a development consent which overrides the Easement, as indicated by the development consent it did in fact obtain. Further, to the extent that the Easement was an impediment to the development of the land, it is likely that an order for the modification of extinguishment of the Easement could be obtained under s 89(1)(c) of the Conveyancing Act.

5. [55]

   Third, in so far as JEA’s claim for compensation extended to the costs of the previous proceedings and the claim against the Fund, those costs were not caused by any of the events set out in s 129(1) as the proceedings were misdirected: Kirkland v Quinross Pty Ltd [2008] NSWSC 286 at [85]–[86]; Perpetual Trustees (Victoria) Limited v Cipri [2009] NSWSC 335 [58]–[62].

Issues

1. [56]

   The issues which arise are as follows:

Issue 1: Suspension of the Easement

1. [57]

   This issue concerns the operation of s 3.16 of the EPA Act and cl 1.9A of the Liverpool LEP in relation to easements.

2. [58]

   Section 3.16 of the EPA Act provides:

3. [59]

   It will be seen that s 3.16(2) permits an environmental planning instrument to provide that, to the extent necessary to serve the purpose of enabling development to be carried out in accordance with that environmental planning instrument, a "regulatory instrument" specified in that environmental planning instrument shall not apply to any such development or shall apply subject to the modifications specified in that environmental planning instrument.

4. [60]

   The relevant environmental planning instrument in the present case is the Liverpool LEP. Clause 1.9A of the Liverpool LEP is the provision of that LEP which specifies the kinds of "regulatory instruments" which are not to apply to the development of land under that LEP pursuant to s 3.16(2) of the EPA Act, and provides (emphasis added):

5. [61]

   It is not in dispute that none of the exclusions in cl 1.9A(2) are relevant and that, as recorded in cl 1.9A(4), the requirement for approval by the Governor stated in s 3.16(3) of the EPA Act was satisfied.

6. [62]

   Previously, s 3.16 of the EPA Act was found in s 28 of the EPA Act which was in substantially the same terms. That provision in conjunction with cl 32 of Woollahra Local Environmental Plan 27 (which was in similar terms to cl 1.9A of the Liverpool LEP) was considered in Coshott v Ludwig (1997) 8 BPR 15,519. In that case, the Court of Appeal upheld the decision of Bryson J at first instance that cl 32 of Woollahra Local Environmental Plan 27 and s 28 of the EPA Act between them nullified, or rendered ineffective, the restrictive covenant contained in a memorandum of transfer. Meagher JA (whom Giles AJA and Simos AJA agreed) said at 15,121 (emphasis added):

7. [63]

   The effect of cl 1.9A(1) of the Liverpool LEP, read with s 3.16(2) of the EPA Act, is that where a development consent is given by the Council under the Liverpool LEP for the development of land, "any agreement, covenant or other similar instrument that restricts the carrying out of that development" will, to the extent necessary to serve the purpose of enabling that development, be suspended for so long as that development consent remains in effect: Natva Developments Pty Ltd v McDonald Bros Pty Ltd (2004) 12 BPR 98097; [2004] NSWSC 777 at [56]–[64].

8. [64]

   The parties are in dispute as to whether the Easement is an agreement, covenant or other similar instrument that restricts the carrying out of the development of Lot 4. Registrar General contends that it is, relying on the decision of Preston CJ in William Lloyd Carey-Evans and Jennifer Anne Quist as Executors of the Estate of Robert Rufus Carey-Evans v Wenhao Wu [2022] NSWLEC 144 (Carey-Evans). JEA contends that it is not, relying on the decision of the same judge in the earlier case of Cracknell and Lonergan Pty Limited v Council of the City of Sydney (2007) 155 LGERA 291; [2007] NSWLEC 392 (Cracknell).

9. [65]

   In Cracknell, the applicant had lodged a development application with the respondent Council for the construction of an in-ground swimming pool at a property in Redfern. The development would encroach approximately 2.5 metres upon an easement for a right of way created by a deed dated 25 January 1894.

10. [66]

    Cl 44 of the South Sydney Local Environmental Plan 1998 (NSW) provided:

11. [67]

    The respondent Council refused the development application. The applicant appealed that decision to the Land and Environment Court. The parties agreed that there were two questions of law to be determined in the proceedings: first, whether cl 44 operates pursuant to s 28 of the EPA Act; and second, if so, is the right of way a covenant, agreement, or instrument that purports to impose restrictions on the carrying out of development on the land, pursuant to clause 44 of the LEP, for the purpose of enabling development to be carried out?

12. [68]

    Preston J, as his Honour then was, answered the first question in the affirmative (at [20]) and considered that the second question should be reframed as (at [34]):

13. [69]

    His Honour determined that the answer to that question was no. This was because, while it could be assumed that the deed which created the right of way was "an agreement or similar instrument", it was not an agreement or similar instrument that "purports to impose restrictions on the carrying out of development on the land": [37]. His Honour's reasoning to that conclusion was as follows:

14. [70]

    At [38] of this passage, his Honour refers to the decision of McLelland CJ in Eq in Application of Thompson (unreported, Supreme Court of NSW, 25 October 1993) which concerned cl 19 of State Environmental Planning Policy No. 25 which provided that "for the purpose of enabling the subdivision of dual occupancy development to be carried out in accordance with this Part … any agreement, covenant or instrument imposing restrictions as to the erection or use of more than one dwelling house or dwelling on an allotment of land … to the extent necessary to serve that purpose do not apply to that development." McClelland CJ in Eq said of the word "imposing" in that provision (at page 4):

15. [71]

    In Carey-Evans the applicants owned land in Vaucluse that overlooked Sydney Harbour. The respondent owned an adjoining property downhill from the applicants' property towards Sydney Harbour. In a dealing registered on the title of both properties, which benefited the applicants' property and burdened the respondent's property, there was an easement for light, air and prospect across and above a specified horizontal plane over the respondent's property. The respondent obtained development consent to construct a new house that was higher than his existing house and higher than the horizontal plane specified in the dealing. The applicants sought an injunction to restrain the respondent from developing his property in accordance with the development consent as it would be a breach of their easement.

16. [72]

    The respondent cross-claimed seeking a declaration that cl 1.9A of the Woollahra Local Environmental Plan 2014 (WLEP) applied and suspends the operation of the dealing insofar as it restricted the development. Cl 1.9A provided:

17. [73]

    Preston CJ determined that cl 1.9A of the WLEP operated to suspend the operation of the dealing insofar as it restricted the carrying out of development in accordance with the development consent, and consequently the respondent succeeded. His Honour said (at [60]) that the question whether cl 1.9A of the WLEP operated to suspend the operation of the dealing involved three steps:

18. [74]

    In relation to the first step, Preston CJ determined that there was a single easement for light and air and a restrictive covenant for the right of prospect: [67], [73]. This is not an issue in the current proceedings as the nature of the dealing in the present case (the Transfer) has already been determined by the Court of Appeal.

19. [75]

    In relation to the second step, Preston CJ noted at [80] that the focus is on the dealing that creates the right or interest in or affecting land, not the right or interest itself, and the question is whether that dealing is an "agreement, covenant or other similar instrument". In that case the dealing was the memorandum of transfer that created the easement and restrictive covenant: [81]. This was properly described as an agreement and also fell within the scope of the phrase "other similar instrument": [82], [84].

20. [76]

    In relation to the third step, Preston CJ found that the dealing restricted the carrying out of the development to be carried out in accordance with the development consent. His Honour said (emphasis added):

21. [77]

    His Honour saw no inconsistency between this conclusion and his earlier decision in Cracknell, drawing attention to the difference in language of the LEP in Cracknell compared to cl 1.9A of the WLEP and the difference in the terms of the relevant dealings. His Honour said:

22. [78]

    JEA made three submissions regarding the application of cl 1.9A of the Liverpool LEP to the Easement affecting Lot 4. First, JEA contended that it was an easement of the same kind as the one at issue in Cracknell, and the reasoning in that case applied equally here. Second, JEA contended that while in Carey-Evans Preston CJ accepted that a negative easement could be within a provision in materially the same terms as cl 1.9A of the Liverpool LEP, he distinguished it from a positive easement (such as the right of way considered in Cracknell) which does not expressly or by necessary implication restrict or purport to restrict development. It was submitted that the Easement here is a positive easement and one which expressly permits the development (above 12 feet and below ground level) of Lot 4, and consequently Carey-Evans is distinguishable. Third, JEA contended that an easement is not a "regulatory instrument" within the meaning of the definition in s 3.16(1) of the EPA Act, in particular because an easement is not "an agreement, covenant or instrument" but rather is an interest in land, and consequently it cannot fall within cl 1.9A of the Liverpool LEP.

23. [79]

    In my view, the correct approach to this issue is the three-step approach adopted by Preston CJ in Carey-Evans. As to the first step, the interest created by the Transfer is an easement. As to second step, the Transfer is properly regarded as either an agreement (it is a memorandum of transfer), a covenant (as that is how it is expressed) or a similar instrument to an agreement or covenant.

24. [80]

    As to the third step, whether the Transfer restricts "the carrying out of that development" requires a consideration of the development to be carried out in accordance with a consent granted under the EPA Act and determining whether the Transfer restricts the carrying out of that development, either expressly or by necessary implication. In my view, on the basis that the relevant development consent is the Development Consent, the Transfer clearly restricts the carrying out of that development, because it requires that the ground level up to a height of 12 feet must be exclusively used for parking (see the words in bold in [5] above). This is inconsistent with the Development Consent which enables the use of levels 1 and 2 for retail and commercial space as well as parking.

25. [81]

    For these reasons, in my view, cl 1.9A permitted the Council to suspend the Easement when granting the Consent, and would permit the Council to grant a development consent which suspended the Easement entirely (a possibility adverted to by Mr Lidis in his main report as noted at [43] above). I reject the submissions advanced by JEA to the contrary.

26. [82]

    As to the first of those submissions, the terms of the Transfer are quite different from the right of way in Cracknell, and go beyond conferring a mere right of way

27. [83]

    As to the second submission, for the reasons given above, in my view an easement can be within cl 1.9A and whether it is or not turns not on classifying the easement as a positive or a negative easement but rather ascertaining whether the instrument which creates it operates, expressly or by necessary implication, to restrict the carrying out of the development of the land in accordance with the Liverpool LEP or under a development consent. The Transfer does so.

28. [84]

    As to the third submission, while an easement creates an interest in land that is beside the point. The benefit of a restrictive covenant also creates an equitable interest in the burdened land: Ryan v Sutherland [2011] NSWSC 1397 at [8]–[9]; Midland Brick Co Pty Ltd v Welsh (2006) 32 WAR 287; [2006] WASC 122 at [153]; Bradbrook & Neave, Easements and Restrictive Covenants in Australia (3rd ed, 2011) at [17.26]

29. [85]

    The conclusion that an easement can be within cl 1.9A is also supported by Natva Developments Pty Ltd v McDonald Bros Pty Ltd (2004) 12 BPR 98097; [2004] NSWSC 777. While Palmer J records at [43] that the parties in that case were in agreement that the right of way was a "covenant … imposing restrictions on development" within the scope of cl 26(1) of the Blacktown LEP, his Honour appears to accept that their agreement is correct at [56]–[58].

Issue 2: Claim for diminution in the value of Lot 4

1. [86]

   As noted, Kunc J in Lancu v Registrar-General [2019] NSWSC 568 at [105]–[106], the determination of a claim under s 129 invites a two stage inquiry: first, the plaintiff must establish that it has suffered a loss or damage as the result of the operation of the Act “arising from” one of the events referred to in one of the sub-paragraphs of s 129(1); and, second, if so, then compensation will be payable unless it is shown that it falls within one of the exclusions in s 129(2). If none of these exclusions is applicable (and none was relied upon by the Registrar-General in the present case), a third inquiry is required which is the determination of the quantum of the loss or damage which “arises from” the relevant event under the applicable sub-paragraph of s 129(1).

2. [87]

   The first question which arises in the present case is whether there has been an omission within the meaning of s 129(1)(a) and if so whether that omission caused loss or damage to JEA. The causation requirement is imported by the words “arising from”, and is determined by the application of the common sense test laid down in March v E&MH Stramare Pty Ltd (1991) 171 CLR 506 at 515, under which the identification of the cause of a particular occurrence is a question of fact which must be determined by applying common sense to the facts of the particular case: Registrar-General v Cleaver (1996) 41 NSWLR 713 at 717. It was not in dispute that the omission of the Easement from the title to Lot 4 was an “omission” within the meaning of s 129(1)(a).

3. [88]

   I accept JEA’s submission that when it purchased Lot 4 it believed that the land was not subject to any easement in favour of Lot 5, but it was then subject to a latent defect in title which only crystallised into an actual defect in title when the Appeal Decision was delivered. That was when the loss or damage occurred because until the Registrar-General became entitled to record the Easement on the title to Lot 4, JEA could have resold Lot 4 for its full market value and successfully avoided any economic loss: Cleaver at 720–721, 724 and 725; see also Christopoulos v Angelos (1996) 41 NSWLR 700. JEA suffered loss by reason of the omission and subsequent registration of the Easement because the land became subject to (ie. burdened by) a proprietary interest (the Easement) in favour of a third party after JEA’s purchase of the land, and this was caused, approaching the matter in a common-sense way, by the Registrar-General’s omission of the Easement from the title.

4. [89]

   The next question is to determine whether JEA has established the quantum of its loss from that omission. Section 129(1) like former s 126(1) does not specify the measure of compensation payable under s 129(1). As a matter of principle, but subject potentially to the limitation in s 129A, the compensation payable should be commensurate with the loss that the plaintiff has sustained and be such as will put the plaintiff in the same position, so far as money can do it, as if the wrongful act complained of had not been done: Registrar of Titles (WA) v Spencer (1909) 9 CLR 641 at 645 and 653; Parker v Registrar-General [1977] 1 NSWLR 22 at 29; Registrar-General v Behn [1980] 1 NSWLR 589 at 597 [34].

5. [90]

   In the case where the “wrongful act” is the omission of an easement from the title, the measure of the loss will be the difference between the market value of Lot 4 without the burden of the Easement and its market value with it: Christopoulos v Angelos at 703 and 711; see also Electricity Commission of New South Wales v Arrow (1994) 85 LGERA 418 at 421; Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd [2012] NSWCA 445 at [238] and [245].

6. [91]

   A question arises as to whether the date for assessment of the diminution in the market value of the land by reason of the Easement is the date the Easement was ordered to be placed on title (27 March 2015), the date the development consent was granted (June 2016) or the date of the hearing. JEA submitted that the appropriate date was the third of these alternatives, relying on Registrar-General v Behn [1980] 1 NSWLR 589 at 597-598; Northside Development Pty Ltd v Registrar-General (1987) 11 ACLR 513 at 525.

7. [92]

   In Behn, the plaintiff suffered loss as a result of a fraud perpetrated by the agent of a company by which the company procured the transfer to it of land owned by the plaintiff and then granted a mortgage over the land to a bank to secure loans which exceeded the value of the land. Mahoney JA (with whom Moffit P and Samuels JA agreed) held that the date for assessment of compensation payable to the plaintiff for deprivation of the land should be assessed by reference to the value of the land at date of judgment and not when it was taken. However, his Honour added that this did not mean that in all cases compensation was to be assessed at the date of judgment. His Honour said at 597 [34]:

8. [93]

   In my view, on the facts of this case the appropriate time to assess the diminution in the value of the Land by reason of the omission and subsequent registration of the Easement is the time when the orders were made by the Court of Appeal (27 March 2015) because that is when this aspect of the loss suffered by JEA crystallised. This view is supported by Glensaugh Pty Ltd v Registrar-General [2001] NSWSC 1114 at [59]–[60]. Therefore, the claim by JEA is for compensation of either $1,850,000 if [48] applies or $7,860,000 if the alternative in [50] applies (together with pre-judgment interest).

9. [94]

   It was not in dispute that the determination of market value for this purpose should be by reference to the Spencer test, namely the value is the price which a hypothetical willing but not anxious seller could reasonably expect to obtain and a hypothetical willing but not anxious buyer could reasonably expect to pay after proper negotiations between them have concluded and without overlooking any ordinary business consideration: Spencer v The Commonwealth (1907) 5 CLR 418 at 441; Commissioner of State Revenue v Placer Dome Inc (2018) 265 CLR 585; [2018] HCA 59 at [17]. As noted by Issacs J in Spencer at 441, this test must be applied by reference to the most advantageous purpose for which the land is adapted (referred to as “the highest and best use”).

10. [95]

    As at 27 March 2015, Lot 4 was subject to both the HC Covenant and the Easement. In light of the conclusion reached above on Issue 1, the market value of Lot 4 on that date should be determined on the basis that the Council could suspend both the HC Covenant and the Easement in its consideration of the development application which had been lodged before that date, or any other development application. In addition, I accept Mr Osborne’s evidence that it was likely at that time that the HC Covenant would be removed if an application was made under s 89 of the Conveyancing Act. I do not accept the Registrar-General’s submission that the same can be said for the Easement, because this Court does not have sufficient evidence in these proceedings to determine that question, noting that Awar is not a party.

11. [96]

    Both town planning experts expressed the view that the highest and best use of Lot 4 is a mixed-use development, comprising ground floor retail or commercial premises with residential apartments above and all carparking located in the basement of the building. If this is treated as the highest and best use of Lot 4, the loss of JEA would be the difference between the market value of Lot 4 without the burden of the Easement and on the basis that it could be developed in accordance with that highest and best use, less its market value with the burden of the Easement. It is conceivable that the market value of Lot 4 without the burden of the Easement would be greater than its market value with the burden of the Easement even assuming that cl 1.9A allows the Liverpool Council to suspend the Easement when granting development approval. The Development Consent permits a development which does not achieve the highest and best use identified by the town planning experts. Further, in view of the evidence of Mr Lidis, had the Council relied on cl 1.9A to suspend the Easement entirely in its consideration of a development application, it would likely have required JEA to replace the existing parking on Lot 4 with additional parking at basement level. Consequently there are a number of possible kinds of development of Lot 4 with the burden of the Easement which might be regarded as less advantageous than its potential development without the burden of the Easement.

12. [97]

    However, there is no valuation evidence which addresses the quantification of JEA’s loss on the basis of the town planning experts’ view of highest and best use, and this was not the basis on which JEA brought its claim. Accordingly, it is not necessary to say anything more about that potential approach.

13. [98]

    JEA relied on the approach taken by the valuation experts, who proceeded on the basis that the highest and best use of Lot 4 is a development of the land in accordance with the Development Consent. If that is the highest and best use, as both valuers agreed, then in my view, there is no diminution in the market value of Lot 4 due to the Easement. This is because the Easement did not prevent JEA from implementing the Development Consent, for the reasons explained in dealing with Issue 1.

14. [99]

    Accordingly, in my view, JEA has not established an entitlement to compensation in accordance with either of the alternatives at [48] or [50] above. As to [48], this proceeds on the basis that the highest and best use of the land is a development in accordance with the Development Consent. That development can proceed whether or not the land is burdened by the Easement. Consequently, the market value of the land both burdened and not burdened by the Easement, will be the same. In relation to the alternative at [50], this is because the premise on which it is based is that the Easement restricts the use of the ground level of Lot 4 to a carpark and that is not correct. It is contradicted by the Development Consent (which contemplates the development of Lot 4 on the basis that the ground level will be partly commercial space and partly carpark). Further, for the reasons explained in dealing with Issue 1, the Council had power to suspend the Easement in the way it did under cl 1.9A of the Liverpool LEP (even though the assessment report does not refer to cl 1.9A for this purpose) or indeed to permit a development without any carparking on the ground level.

15. [100]

    For the above reasons, JEA has not established an entitlement to compensation for diminution in the value of Lot 4 as a consequence of the Easement.

Issue 3: Claim for costs

1. [101]

   JEA also claims as compensation under s 129(1) the following costs (together with pre-judgment interest) so that it is not left out of pocket by reason of the omission of the Easement from the title to Lot 4:

2. [102]

   In Chandra v Perpetual Trustees Victoria Ltd [2008] NSWSC 178 a forged mortgage was registered on the title for the plaintiffs’ house in favour of Perpetual Trustees Victoria, which claimed that loans totalling $750,000 were secured by the mortgage and took steps towards its enforcement. The plaintiffs commenced the proceedings against Perpetual Trustees Victoria and the Registrar-General. In the case of the former to restrain threatened enforcement action and in the case of the latter to seek compensation. Perpetual Trustees Victoria brought a cross-claim in which it sought compensation from the Registrar-General under s 129(1) of the Act. The plaintiffs were successful in establishing that the mortgage was unenforceable and did not secure the loans, and Perpetual Trustees Victoria was successful in its claim that it was entitled to compensation under s 129(1) for the loans so lost. The plaintiffs obtained an order for costs against Perpetual Trustees Victoria, and those costs by agreement were paid by Perpetual Trustees Victoria to the extent of 75% and the plaintiffs claimed that they should be entitled to recover the remaining 25% of their costs as compensation under s 129(1).

3. [103]

   Bryson AJ held that the plaintiffs were entitled to recover their costs of the litigation, after giving credit for costs otherwise recovered under s 129(1). In relation the costs claimed by Perpetual Trustees Victoria, these fell into four categories, one of which was the difference between the actual costs incurred by Perpetual in pursuing its cross-claim against the Registrar-General and the party-and-party costs which the Registrar-General had been ordered to pay Perpetual Trustees Victoria pursuant to his Honour’s earlier decision.

4. [104]

   Bryson AJ held that Perpetual Trustees Victoria was entitled to compensation under s 129(1) for that amount. His Honour said at [14]:

5. [105]

   His Honour approached the matter on the basis that the costs bringing proceedings against the various third parties against which claims were made and also the costs of bringing the claim for compensation were recoverable under s 129(1) provided that they satisfied the causation test in s 129(1), as to which he said at [20]:

6. [106]

   On this basis, while his Honour allowed the costs incurred by Perpetual Trustees Victoria in pursuing its cross-claim, it was necessary for a process of assessment to be undertaken to establish the extent to which the claimed costs were reasonable, having regard to this causative test: see [24]–[26].

7. [107]

   In the present case, there is no dispute by the Registrar-General that the amount of costs claimed by JEA in respect of the four categories set out at [101] above are reasonable, and the only issue is whether they fall within s 129(1).

8. [108]

   The time for determining whether JEA is entitled to compensation for loss of this kind is the date of the hearing reflecting the nature of the loss, and bearing in mind the compensatory principle being applied (see [89] above).

9. [109]

   In so far as the costs of the earlier proceedings are concerned (being categories (a)-(c), in my view the incurring of those costs was entirely reasonable. It was necessary for JEA to bring the earlier proceedings in order to determine whether the Registrar-General was entitled to record the Easement on the title to Lot 4. By the bringing of those proceedings was necessary to determine whether JEA had suffered any loss or damage. Had JEA not brought those proceedings, it might have been said that it had failed to mitigate its loss: s 129(2)(c). It is significant that the Registrar-General’s letter dated 10 January 2012 set out at [11] above, did not contend that the covenant was an easement, rather than a restrictive covenant and had it been a restrictive covenant JEA’s case would have been very strong (see [13] above). In any event, JEA was successful before Windeyer AJ. While JEA was unsuccessful in its application for special leave to appeal from the Appeal Decision, in my view it cannot be said that it was unreasonable for it to have sought special leave.

10. [110]

    The Registrar-General submitted that JEA’s claim is analogous to the claims for costs which were not allowed in Kirkland v Quinross Pty Ltd [2008] NSWSC 286 at [85]–[86] and Perpetual Trustees (Victoria) v Cipri [2009] NSWSC 335 at [58]–[62]. In my view, both of those decisions are distinguishable on the basis that the costs for which compensation was claimed related to claims which had no reasonable basis. In my view, the costs falling within categories (a)-(c) did have a reasonable basis.

11. [111]

    In relation to category (d), the Registrar-General did not dispute that the amount claimed is reasonable, but contended that the costs do not fall within s 129(1). In my view, that submission is not correct for the reasons given by Bryson AJ in Chandra at [16]–[20].

12. [112]

    This conclusion is consistent with s 129A which, in cases to which applies, limits the amount of compensation payable under s 129(1) to the “market value of the land at the date on which compensation is awarded to that person plus any legal, valuation or other professional costs reasonably incurred by the person in making the claim.” The inference from the fact that the provision limits the compensation payable to these amounts is that they would otherwise be recoverable under s 129(1).

13. [113]

    In my view, s 129A is not applicable in the present case, and I note that the Registrar-General did not contend that it was. My reasons for this view can be shortly stated. Section 129A is expressed to apply only where the loss or damage is suffered “as a result of [the plaintiff] being deprived of land or any estate or interest in land”. The circumstances in which compensation is payable under s 129(1) are not limited to the situation where the plaintiff has been deprived of land or an estate or interest in land. Indeed, it is only s 129(1)(e) which makes deprivation of land or an estate or interest in land a pre-condition to the entitlement to compensation. Given that context, the restriction of s 129A to the situation where the plaintiff has been deprived of land or an estate or interest in land and not to all cases where compensation is payable under s 129(1) appears to be deliberate.

14. [114]

    In the present case, it is s 129(1)(a) rather than s 129(1)(e) which applies. The event which engages s 129(1)(a) is the omission of the Easement from the title to Lot 4. The recording of that Easement following the Appeal Decision involved the recognition of an interest in the land held by Awar (being the benefit of the Easement) which was created out of the land but cannot be said to have been part of the land before its creation: Kirby v Inspector of Taxes, Thorn EMI Plc [1988] 1 WLR 445 at 450; Hepples v Federal Commissioner of Taxation (1992) 173 CLR 492 at 501-505 per Brennan J and 546–549 per McHugh J; Federal Commissioner of Taxation v Cooling (1990) 22 FCR 42 at 63–64 per Hill J. The word “deprived” in this context refers to land or an estate or interest in land being taken away from the owner: Parker v Registrar-General [1977] 1 NSWLR 22 at 26. While the creation and subsequent recording of an easement may diminish the market value of the land burdened by the easement, it is not correct to characterise this as a taking away from the owner of the land of the interest in the land which was newly created when the easement was granted, but never previously belonged to the owner of the land: see also Commissioner of Taxes (Qld) v Camphin (1937) 57 CLR 127 at 133–134.

15. [115]

    If, contrary to the conclusion reached above, s 129A does apply in the present case, in my view the result is the same. It can be said that the amounts referred to in [101(a)–101(d)] comprise “legal, valuation or other professional costs reasonably incurred by [JEA] in making the claim”. While the costs relating to the previous proceedings are separate from the claim against the Registrar-General, they were reasonably incurred in making the claim for the reason given at [109] above. In so far as category [101(d)] is concerned, they are clearly covered by s 129A: see Pedulla v Panetta (No 2) [2011] NSWSC 1533 at [8]–[10].

Conclusion

1. [116]

   For the above reasons, the plaintiff’s claim against the Torrens Assurance Fund for compensation should succeed to the extent of the claim for costs, together with interest, referred to at [101].

2. [117]

   As it will be necessary for a recalculation of the pre-judgment interest to be made, I will direct the parties to consult and bring in short minutes of order to give effect to these reasons.