October 2007

Westfield easement case decided - financial implications & risks of easements on commercial property

The case

On 3 October 2007 the High Court of Australia delivered a unanimous judgement in Westfield Management Limited v Perpetual Trustee Company Limited [2007]HCA45. The High Court did not accept Westfield's argument that as owner of land benefited by a right of way it was entitled to allow persons or vehicles to use the right of way to access driveways, parking spaces and loading docks to be built on other adjacent land owned by Westfield.

The case highlights the need to exercise care when drafting easement terms and that the financial implications of having the benefit (or not) of an easement can be huge.

The facts

The properties involved are all iconic multi-storey commercial buildings fronting Pitt Street Mall in the heart of Sydney's CBD. Pitt Street Mall is a pedestrian precinct without ordinary vehicular access. Perpetual owns Glasshouse with frontage to both King Street and Pitt Street Mall. Westfield owns Skygarden which is located next door. To enable vehicular access to and from King Street, Skygarden has the benefit of a 6.6 metre wide right of way underneath Glasshouse. The right of way was created in the 1980's before either Perpetual or Westfield owned the properties.

Westfield also owns Imperial Arcade and Centrepoint which adjoin Skygarden. Westfield proposes to redevelop together all three of the sites and wanted to use the right of way under Glasshouse so parking spaces and loading docks to be built on the Imperial Arcade and the Centrepoint sites would have vehicular access to and from King Street.

The NSW Supreme Court agreed the right of way could be used in the manner Westfield proposed. The NSW Court of Appeal overturned that decision. Westfield appealed to the High Court to reinstate the Supreme Court's decision. Westfield was not successful with the appeal.

What do we get from the judgement?

  • On general principles of conveyancing, the grant of an easement carries with it those ancillary rights which are necessary for the enjoyment of the rights expressly granted. In this case it was not necessary for the enjoyment of the rights granted for access to the Skygarden land that those using that access be at liberty to pass beyond Skygarden onto other land. The use of an easement cannot be extended, beyond the scope of the grant, to impose a burden greater than that which the owner agreed to accept.
  • The words used in the easement document "to go, pass and re-pass at all times and for all purposes ... to and from the servient tenement or any such part thereof" suggest it is access to and from the land benefited which is the purpose of the easement and not access to other land which can be reached only by going across the land benefited by the easement. The Court accepted what Justice Hodgson (who gave the leading judgement in the Court of Appeal) said "if it had been intended that the grant extend to authorisation of others to go across the dominant tenement to further properties the words "and across" could readily have been added."
  • The words "for all purposes" extensive as they may be, must confer what the law regards as a benefit on the land benefited by making it a better and more convenient property. There must be some limit therefore to what "for all purposes" means.
  • It is consistent with the Torrens system that a third party inspecting the registered easement documents cannot be expected to look further for material which might establish facts or circumstances existing at the time of creation of the easement which might lead to additional land being entitled to the benefit of the easement.
  • Evidence is admissible to make sense of what the easement terms identify such as surveying terms and abbreviations on the relevant plan.
  • The easement document required the cost for repair and maintenance to be borne equally by Glasshouse and Skygarden. It might be considered unfair for Glasshouse to have to meet the costs associated with repair and maintenance arising from the use of the access to and from lots other than Skygarden.
  • The easement required Skygarden to maintain insurance and indemnify Glasshouse. It would be anomalous that Glasshouse should be required to suffer Imperial Arcade and Centrepoint using the access where there is no requirement for Imperial Arcade or Centrepoint to maintain insurance or provide an indemnity.

Where does Westfield go from here?

An organisation like Westfield no doubt has numerous options and contingency plans in play. The most obvious would be to negotiate a commercial arrangement with Perpetual to acquire a right of way which can be used in connection with the redevelopment of Imperial Arcade and Centrepoint. The price paid for that easement would no doubt be much more than would reflect a mere blot on title.

Authors: Peter Cahill & Nicholas Eckers

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