Introduction

Since the introduction of the Torrens title system, the certificate of title held by the owner of land has been considered as the final evidence of the owner’s rights to their land.

There are limited exceptions set out in the Real Property Act 1886 (“the Act”) but most purchasers of land would consider that the title they obtain from the land agent can be relied upon without further investigation. However, a recent decision in the Supreme Court of South Australia highlights the need for caution.

Private easements give rights to neighbours to use adjoining land for particular purposes. For example, a drainage easement held over part of the neighbour’s land allows the property owner to install and maintain drains under that part of the neighbour’s land. Usually, easements are clearly marked on the title of the owner and on the title of the neighbour so that both parties are fully informed as to their rights.

Background

In 2010, Stratco purchased land next door to Hanag. Stratco is now redeveloping its land by constructing substantial new buildings.

Hanag’s title showed it held an easement (“the Hanag Easement”) over part of the Stratco Land. The notation on Hanag’s title regarding the Hanag Easement referred to Transfer Document 3956708. The Hanag Easement had been created in 1976 under the terms of an agreement recorded in the transfer document, which also recorded a number of other easements.

Stratco’s title also showed it was subject to an easement over the same area of land as the Hanag Easement but the adjacent reference was to Transfer Document 3956707. This was an easement granted to the Minister for Infrastructure which the Minister had recently agreed to relinquish. Stratco’s title included other easements that did refer to Transfer Document 3956708 but none of these accurately described the Hanag Easement.

When Hanag found that Stratco was about to build on the Hanag Easement, it applied to the Supreme Court for an injunction to restrain Stratco from proceeding with the building works. The building work over the Hanag Easement had commenced by the time Hanag filed its proceedings.

Injunctions

Usually a party seeking an injunction does so by seeking an interim injunction and a subsequent final injunction. Interim injunctions are orders of the Court that are made pending a full determination of the debate as to whether a final injunction should be granted.

A party can approach the Court seeking an urgent interim injunction and, depending on the situation, the Court will often decide whether to make the order within a day or two.

This update reports on the interim injunction stage in the case between Hanag and Stratco.

When a Court considers whether to make an interim injunction, it relies on the principles set out by the High Court in ABC v O’Neill1. In that case, the High Court said that there are
two principal tests:

  1. Has the applicant for the interim injunction made out a prima facie legal case; and
  2. Is the balance of convenience in favour of making of the order?

In Hanag’s case, His Honour Justice Kourakis said the first question was of central importance and quoted the following passage from the High Court’s reasons in ABC v O’Neill.

“How strong the probability [of Hanag ultimately succeeding at trial] needs to be depends, no doubt, upon the nature of the rights [Hanag] asserts and the practical consequences likely to flow from the order [Hanag] seeks”.

Hanag’s Primary Case

The primary case put by Hanag relied upon the provisions of the Act. In brief, Hanag said that even though the Hanag Easement was not accurately described or was omitted from the Stratco title, the fact that the Transfer Document 3956708 was noted on the Stratco title alongside descriptions of other easements was sufficient to bind Stratco and make its title subject to the Hanag Easement created under that document.

The Court’s decision 

In his reasons, Justice Kourakis set out the relevant sections from the Act. We set out below a roadmap to His Honour’s reasoning:

  • the Act defines “certificate” to include all plans and entries on the title (s3);
  • the certificate is in two parts: the original in the Register Book and the duplicate given to the owner (s48);
  • the Registrar General is required to record on each original certificate all “memorials” affecting the land (s49);
  • every memorial must state the nature of the document and refer to it by number; (s51);
  • a certificate of title may contain a statement to the effect that it has an associated easement (s81);
  • a statement on a certificate of title about an easement must be true and accurate or, alternatively, must refer to the registered instrument that created the easement (s82)
  • an owner is not bound by an easement unless it is entered on the original and the duplicate certificate of title (s84);
  • while a title is generally “indefeasible” (final proof of the ownership) there is an exception if an easement is “omitted or mis-described” (s69(d)).

There is a possible tension between these last two propositions unless the meaning of “entered” can be taken to include the notation of the number of a transfer document even though the easement created by the transfer document is not described on the title in any other way.

His Honour found that Hanag had made out its prima facie case and referred to Bursill Enterprises2, a High Court case originating in NSW, where a party was bound by an old transfer document noted but inaccurately recorded on a certificate of title. In that case, a subsequent purchaser of land found that the neighbour enjoyed rights to a building on its land even though the rights were not detailed on the certificate of title.

His Honour found that Hanag had made out an arguable case and turned to the balance of convenience issue. His Honour noted that if the injunction was granted, Stratco’s building works would be delayed along with its proposed trading activities. On the other hand, Hanag could not point to any immediate effect on its use of the Hanag Easement. However, once a permanent structure was erected on the Hanag Easement, this would significantly affect any future redevelopment by Hanag.

His Honour noted that property rights are generally highly regarded and strongly protected by law. Ultimately, His Honour considered that the interim injunction should be granted because of his assessment of the relative strength of Hanag’s claim and the proprietary nature of its interest.

Conclusion

When purchasing land, the purchaser should thoroughly investigate all references to other documents on the certificate of title. Where the title refers to transfer documents that potentially create rights or obligations, it is not adequate to rely on the summary of those rights as found on the certificate of title itself.

A prudent purchaser will obtain copies of the original documents to check the nature and extent of the rights and obligations they created. Otherwise, at the very least, there is a risk of delay and inconvenience.

Contributor: Tom Grace

1 (2003) 227 CLR 57
Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1971) 124 CLR 73