Proceedings to proceed: Supreme Court of Queensland dismisses strike out application in proceedings concerning the proposed relocation of an easement finding the proceedings are not hypothetical or vexatious

In brief

The case of Body Corporate for Ye Olde Avalon Community Titles Scheme v Dorchester Nominees (No 1) Pty Ltd [2023] QSC 180 concerned an application by Dorchester Nominees Pty Ltd (Applicant) to the Supreme Court of Queensland (Supreme Court) to strike out the Second Further Amended Statement of Claim (2FASOC) of the Body Corporate for Ye Olde Avalon Community Titles Scheme 2787 (Plaintiff) or alternatively, paragraphs 16C to 16H of the 2FASOC, in proceedings concerning the proposed relocation of an easement granted over land in Albion, Brisbane.

The Applicant applied to strike out the 2FASOC pursuant to rules 171(1)(a), 171(1)(c), 171(1)(d), and/or 171(1)(e) of the Uniform Civil Procedure Rules 1999 (Qld) on the ground that paragraphs 16C to 16H of the 2FASOC "…have rendered the proceedings as showing no reasonable cause of action, being vexatious and oppressive and an abuse of process" (at [1]).

The Applicant alternatively applied to strike out paragraphs 16C to 16H of the 2FASOC on the ground that "…they are irrelevant to the relief sought by the plaintiff and are therefore unnecessary and disclose no reasonable cause of action, principally because the pleaded construction of clause 5 of the Instrument of Easement is incorrect" (at [2]).

The Plaintiff subsequently filed a cross-application for leave to file a Second Further Amended Claim and Third Further Amended Statement of Claim (3FASOC) (at [3]).

The Supreme Court had to determine the following issues, namely whether (at [46]):

"(a) the proceedings are now hypothetical in nature or an abuse of process or vexatious such that they should be struck out; and
(b) paragraphs [16C]–[16H] disclose no reasonable cause of action, such that they should be struck out."

The Supreme Court held that the proceedings were not hypothetical in nature or an abuse of power or vexatious (see [55] to [57]) and that the pleading in paragraphs 16C to 16H is not inarguable and does disclose a reasonable cause of action (see [76] and [80]).

The Supreme Court dismissed the strike out application (at [81]).

Background to the Planning and Environment Court proceedings

The Applicant is the registered proprietor of land situated in Albion (Land) that is burdened by an easement (Easement) benefitting the neighbouring property which is owned by the Plaintiff (at [5]). The Easement's purpose is "…to enable the plaintiff to repair, maintain and replace a retaining wall which was constructed along the boundary of the parties' properties in the 1990s" (at [6]).

Clause 5 of the registered instrument of easement (Instrument of Easement) relevantly provides as follows (at [7]):

"Redevelopment by the Grantor

The Grantor and Grantee hereby agree that this easement may be extinguished in the following circumstances:

(a)In the event that the Grantor proposes to redevelop part or all of the land comprising the Servient Tenement and in the event that the Servient Tenement shall be required by the Grantor for the construction of improvements of any sort rendering it impossible for the Grantee to exercise its right of way over the servient tenement; and
(b)The Grantor shall give to the Grantee previous written notice that it requires the Servient Tenement for the purposes of redevelopment; and
(c)The Grantor shall grant to the Grantee an easement over another part of its land to be substituted for this Grant of Easement, such easement to be granted on the same terms, covenants and conditions as this Grant of Easement and provided also that the Servient Tenement the subject of the alternative easement shall be of the same width so far as is nearly practicable as the Servient Tenement described herein."

On 15 June 2018, the Applicant notified the Plaintiff that it "…requires the Servient Tenement that is subject of the Easement for the purposes of a redevelopment" (First Notice) and attached a plan depicting a proposed replacement easement (Proposed Replacement Easement) (see [8] and [9]). The Plaintiff contested the legal validity of the First Notice on the basis that the Proposed Replacement Easement was too narrow (at [10]).

On 23 October 2018, the Applicant sent the Plaintiff a second notice (Second Notice) in response to which the Plaintiff raised "…several further alleged defects in the Proposed Replacement Easement" (see [11] to [12]). The Applicant did not respond to the Plaintiff's correspondence inviting the Applicant "..to issue a revised, final easement addressing the defects identified…" (see [13] to [14]).

On 26 April 2019, the Applicant submitted a development application seeking approval for the construction of a high-rise apartment building on the Land (Development Application).The accompanying plans assumed that the Easement had been replaced by the Proposed Replacement Easement in accordance with the Second Notice (at [14]).

The Brisbane City Council (Council) refused the Development Application and the Applicant appealed against this decision to the Planning and Environment Court of Queensland (Planning and Environment Court) (at [16]). In light of alterations made by the Applicant to the dimensions of the Proposed Replacement Easement during the Planning and Environment Court proceedings, the Council withdrew its opposition to the Development Application (at [16]).

The Planning and Environment Court proceedings were stayed pending determination of the Supreme Court proceedings, which stay was not opposed by the Applicant (see [16] to [17]).

Background to the Supreme Court proceedings

In the Supreme Court, the Plaintiff sought a declaration that the Proposed Replacement Easement does not comply with clause 5 of the Instrument of Easement or, alternatively, that a wider easement be imposed by the Supreme Court pursuant to section 180 of the Property Law Act 1974 (Qld).

Paragraphs 16C to 16H of the 2FASOC, the subject of the strike out application made by the Applicant, relevantly provides as follows (at [19]):

"(i) the [Applicant] purported to give notice pursuant to clause 5(b) of the Instrument of Easement on 15 June and 23 October 2018;
(ii) the [Applicant] does not intend to undertake the proposed redevelopment of the Land or require the servient tenement for the construction of improvements of sort;
(iii) the [Applicant] intends to sell the Land after obtaining development approval for the proposed development and after relocating the Easement;
(iv) the commercial purpose for the [Applicant] issuing the First and Second Notices is to move the Easement so as to improve the value of the Land for the purpose of sale; and
(v) in the premises of the above:

(A)  the [Applicant] was not and is not entitled to invoke cause 5 of the Instrument of Easement; and
(B)  the Proposed Replacement Easement does not comply with clause 5 of the Instrument of Easement."

Supreme Court finds that the Plaintiff's amended case is not hypothetical or an abuse of process or vexatious

The Plaintiff alleged that several assertions made in the Applicant's Second Notice are incorrect because the Applicant did not and "…does not propose to redevelop the Land or require the Land for construction of improvements, with the result that the Second Notice is void and of no legal effect" (at [50]). As a consequence, the Plaintiff argued that clause 5 of the Instrument of Easement was not validly invoked (at [51]).

The Applicant contended that the Plaintiff's amended case "…is an abuse of process, which the Supreme Court has an inherent power to deal with by striking out or staying the proceedings" (at [52]).

The Applicant submitted that the Plaintiff's allegation the subject of paragraphs 16C to 16H of the 2FASOC "…transforms the present questions for consideration by the Court into hypothetical ones because, if the development does not occur, the Proposed Replacement Easement will not be granted, the question of width of the Proposed Replacement Easement will not matter, the statutory right of user will not be required, and no purpose will be served by the relief sought" (at [52]).

The Supreme Court identified that the Applicant purported to exercise a contractual right in the Instrument of Easement and so distinguished the present case from one where a declaration was sought regarding "…contractual consequences of a future event that may or may not occur where the contractual power had not been exercised" (at [54]). The Court identified that the exercise of contractual rights has occurred and the Plaintiff has challenged the validity of that exercise under clause 5(a) of the Instrument of Easement (at [54]).

Supreme Court finds that the Applicant's action sought to be challenged by paragraphs 16C to 16H of the 2FASOC is not deprived of sufficient immediacy and reality

The Supreme Court had to consider "…whether the controversy between the parties will have adverse legal impacts of sufficient immediacy and reality to warrant the making of a declaration…" (at [55]).

Although the Applicant argued that the First Notice and Second Notice could not themselves extinguish the Easement because of the requirements of section 90 of the Land Title Act 1994 (Qld), the Plaintiff argued, and the Supreme Court agreed, that the Easement might still be regarded as extinguished in equity (see [39] and [55]).

The Applicant invoked clause 5 of the Instrument of Easement and relied on the Proposed Replacement Easement for the purposes of its Development Application and although it might not proceed with the Proposed Development if it obtained a development approval, the Supreme Court was of the view "…that does not mean the question before the Court is hypothetical" (at [56]).

Furthermore, the Supreme Court found that the Applicant has "…by issuing the notices elected to take some course and the plaintiff has by its amendments sought to challenge that the basis for doing so under clause 5(a) did not exist and that the notices are invalid as they stand" (at [56]).

The Supreme Court found that (at [56]):

"While the actual documents for extinguishing the Easement and registering the Proposed Replacement Easement have not been issued by the [Applicant] to the plaintiff for signing, and there is uncertainty whether it will do so in the future, that does not deprive the [Applicant's] actions sought to be challenged by the plaintiff in paragraphs [16C]–[16H] of a sufficient immediacy and reality and establish that the question is hypothetical such that the proceedings should be regarded as frivolous or an abuse of process."

The Supreme Court was not satisfied that "…on the basis of the case as pleaded by the plaintiff in the 2FASOC and 3FASOC…the declarations sought are hypothetical and inutile such that the proceedings should be struck out or regarded as an abuse" (at [57]).

The Supreme Court noted that "[i]f the plaintiff is successful, that will likely have an impact on the utility of the appeal proceeding in the Planning and Environment Court given the Development Application is premised on the ability of the [Applicant] to relocate the Easement presently on the basis of the Proposed Replacement Easement" (at [58]).

Supreme Court finds that the disputed validity of the First Notice and Second Notice does not negate the utility of the proceedings

The Supreme Court had to consider whether the First Notice and, in particular, the Second Notice were validly given under clause 5(a) of the Instrument of Easement. In doing so, the Supreme Court considered and contrasted an appeal against a decision to refuse an application where there was no pre-existing authority to build as part of the approval process that could have been allowed upon the condition that the relevant authorities be obtained, with the fact that, if the Plaintiff is successful in establishing that the Applicant must intend and, as a question of fact, lacked that intention, to redevelop the Land in order to exercise the power in clause 5 of the Instrument of Easement, that is a matter which may not be overcome in the future (at [61]).

The Supreme Court found that "[t]he fact that clause 5 is contained in the Instrument of Easement, and may be sought to be exercised again in the future by the [Applicant] but perhaps on a different basis, does not establish the lack of utility of the proceedings", nor "…does it negate the fact that the Planning and Environment Court's consideration of the Development Application may be rendered futile if the plaintiff is successful in these proceedings" (at [61]).

The Supreme Court held that "[t]he amendments in the 2FASOC and 3FASOC do not…render the continuation of the proceedings vexatious and oppressive" (at [61]) and, in particular, that "[t]he inclusion of paragraphs [16C]-[16H] in the 2FASOC has not rendered these proceedings unnecessary", but rather "...expanded the basis upon which the legality of the Proposed Replacement Easement is challenged" (at [62]).

Supreme Court finds that compliance with clause 5(c) of the Instrument of Easement remains a live issue

As a result of its expert report, the Plaintiff's case changed from asserting the Proposed Replacement Easement must be 12 metres wide to asserting it ought to be five metres wide (at [21]).

Consequently, the Applicant contended that the narrowed scope of the Supreme Court proceedings in relation to the alleged non-compliance of the Proposed Replacement Easement renders the Supreme Court proceedings unnecessary, as the Planning and Environment Court could consider the dimensions and location of the Proposed Replacement Easement (at [68]).

The Supreme Court distinguished these considerations from the "…underlying question of whether the Proposed Replacement Easement complies with clause 5(c) of the Instrument of Easement at all and is valid under the Instrument of Easement" (at [68]). The Supreme Court identified that the validity of the Proposed Replacement Easement directly impacts the Planning and Environment Court proceedings and is capable of rendering the Development Application futile (at [68]).

The Supreme Court found that the narrowed scope of the Plaintiff's case does not detract from its need to be determined by the Supreme Court and that its "…determination has a direct legal effect in terms of the Proposed Replacement Easement underlying the Development Application and the utility of that application" (at [69]).

The Supreme Court held that the issue of compliance of the Proposed Replacement issue with clause 5(c) of the Instrument of Easement remains a live issue and should not be struck out (at [69]).

The Applicant made the Development Application without the Plaintiff's consent on the basis that the proposed premises were "excluded premises" under the Planning Act 2016 (Qld) (Planning Act) because the Development Application was consistent with the Easement. If the Supreme Court were to find that the Proposed Replacement Easement did not comply with clause 5(c) of the Instrument of Easement, that might mean the premises were not "excluded premises" under the Planning Act (see [15] and [70]). However, the Supreme Court stated that it was for the Planning and Environment Court to determine whether the Plaintiff's consent would have been required in these circumstances (at [70]).

As a result, the Supreme Court concluded that it was not "…satisfied that the proceedings should be struck out in their entirety and the proceedings dismissed" (at [73]).

Supreme Court finds that paragraphs 16C to 16H of the 2FASOC disclose a reasonable cause of action

The Applicant applied, in the alternative to its application to strike out the whole of the proceedings, to strike out paragraphs 16C to 16H of the 2FASOC on the ground that "…they are irrelevant to the relief sought by the plaintiff and are therefore unnecessary and disclose no reasonable cause of action…" (at [2]).

The Supreme Court reiterated that ”…there is at least an arguable case justifying the relief in terms of the other matters the subject of the declaration which are sought" (at [75]). The Court found that "…the pleading in paragraphs [16C]-[16H] is not irrelevant and does disclose a reasonable cause of action" (at [76]).

The Supreme Court rejected the Applicant's contention that the basis of the pleaded case in paragraphs 16C to 16H of the 2FASOC is incapable of success because the Applicant's intention is irrelevant given the ordinary meaning of "propose" (at [77]).

The Supreme Court considered the Macquarie Dictionary's definition of "propose" and opined that "[t]he meaning of 'proposes' has to be determined in the context of the clause in which it appears" (at [79]). The Supreme Court accepted the Plaintiff's contention that the latter part of clause 5(a) "…does lend support to a construction of clause 5 whereby a reasonable businessperson would have understood that to propose to redevelop includes an actual intention to redevelop…" (at [79]).

The Supreme Court held that the pleading in paragraphs 16C to 16H of the 2FASOC is not inarguable and discloses a reasonable cause of action (at [80]).

Conclusion

The Supreme Court held that the strike out application ought to be dismissed and granted the Plaintiff leave to file the Second Further Amended Claim and the 3FASOC, subject to the Plaintiff inserting the words "if the defendant proposed to carry out the proposed development" after "alternatively" in paragraph 17 to make clear the basis of the alternative argument (see [81] to [82]).