Australia: Construing multiple easements: What lies beneath?

BACKGROUND

Sydney Water and the Tempe Recreation (D.500215 and D.1000502) Reserve Trust (Tempe Trust) have been in dispute for several years over the amount of compensation which should be paid to the Tempe Trust following Sydney Water's compulsory acquisition of four easements over parts of the Tempe Recreation Reserve (Tempe Reserve).

Tempe Trust is a corporation established under the Crown Lands Act as the trustee of the Tempe Reserve. The terms of the four easements granted to Sydney Water, known as easements A, B, C and D, were all contained in a single Memorandum and registered in accordance with the Real Property Act. The easements are used for pipelines in connection with the desalination plant at Kurnell. Those pipelines were, in fact, constructed prior to the creation of the easements. With the exception of some above ground structures on easement D, and a number of concrete slabs on the surface of easement B, the pipelines are located entirely below ground.

THE ISSUE

The litigation concerned the level of compensation payable to the Tempe Trust on the acquisition of the easements by Sydney Water. The key issue in the case was whether the terms of the easements permitted Sydney Water to construct above ground structures within the boundaries of the easements, particularly easements B and C (which overlapped sporting fields and a public car park). If Sydney Water were permitted to do so, Tempe Trust claimed there would be significant reduction in public benefit from the loss of public open space, a loss which Tempe Trust quantified at $5 million. On the other hand, Sydney Water argued that it was not permitted under the terms of easements B and C to construct above ground structures there (thereby limiting the scope of the rights acquired by the easements), such that the compensation payable to Tempe Trust ought be a much lower amount, namely, $106,000.

COURT'S DECISION

On 24 December 2013, the trial judge found in favour of Sydney Water.¹ Tempe Trust appealed. On 19 December 2014, the New South Wales Court of Appeal unanimously dismissed Tempe Trust's appeal.² Both the judgments of the trial judge and the Court of Appeal provide a useful insight into the approach taken by Courts when construing the terms of an easement.

COULD SYDNEY WATER BUILD ON TOP OF EASEMENTS B AND C?

The case turned on the proper construction of the easements, and in particular, what Sydney Water could or could not do under the terms of easements B and C.

The terms of each easement were contained in separate schedules to a single Memorandum. The schedules followed a similar structure, and each made reference to various defined terms which were used throughout the Memorandum. However, there were differences in the wording used to describe the works which were permitted to be carried out by Sydney Water within the boundaries of each easement, as follows:

1. easement A was a "Land in Stratum" expressly allowing for "Water Supply Works" below ground;
2. easement B permitted "Works (Trenched)", which was defined to mean "infrastructure works used for water supply purposes situated at, upon, on or below but not above the surface of the Land" (emphasis added);
3. easement C permitted "Works (Mounded)", which was defined to mean "the water supply pipeline used for water supply purposes situated within the mound which together are at, upon, above or below the surface of the Land, provided however the water supply pipeline is not above the surface of the mound" (emphasis added);
4. easement D permitted "Works", which was defined to mean works "situated upon, above or below the surface of the Land" (emphasis added).

Tempe Trust argued that if nothing is permitted to be constructed above the surface of the land the subject of easements B and C, then the definitions of the works permitted there could have simply referred to works "at but not above" the surface, but the addition of the words "on" or "upon" suggest otherwise. The trial judge and the Court of Appeal rejected this argument and concluded that the words "at", "on" or "upon" in this context were "substantially interchangeable", and were in any event "reinforced by the subsequent words "but not above" to indicate that there is to be no substantial projection above the surface".

The Court of Appeal also held that it was permissible to use the terms of easement D (and the rest of the Memorandum more generally) to aid in the construction of the terms of easements B and C, given that all the easements were interrelated and contained within the same document. In this case, easement D expressly allowed Sydney Water to carry out works above the surface, whereas easements B and C expressly prohibited Sydney Water from doing so.

Finally, the Court of Appeal re-iterated the general rule that "materials outside the Torrens register may not be used in construing registered instruments such as an easement, but that does not rule out reliance on evidence of the physical characteristics of the land". In this case, the fact that the pipeline (which was constructed before the easements were created) is entirely below ground through easements B and C, merely served to confirm the conclusion already reached above.

CONCLUSION

In Emmett JA's judgment in the Court of Appeal, his Honour commented that "the drafting of the Memorandum is not something of which the author should be particularly proud". Given that the Courts are inclined to look at legal documents as a whole when construing the meaning of particular provisions, it is important to ensure that an instrument creating multiple easements is a coherent document and internally consistent.

Footnotes

¹ Tempe Recreation (D.500215 & D.1000502) Reserve Trust v Sydney Water Corporation [2013] NSWLEC 221.

² Tempe Recreation (D.500215 & D.1000502) Reserve Trust v Sydney Water Corporation [2014] NSWCA 437.

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