Mills v Stokman

116 CLR 61

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(Judgment by: Barwick CJ)

Between: Daphne May Mills
And: Martin Cornelis Stokman

Court:

Judges:
Barwick CJMcTiernan J
Kitto J
Taylor J
Menzies J

Subject References:
Real Property
Profits a prendre
Whether sale of goods or grant of interest in land
Assignment
Whether authority to enter enforceable against new purchaser

Legislative References:
Sale of Goods Act 1923 (NSW) - s 5; s 22; s 23
Real Property Act 1900 (NSW) - s 42

Hearing date: 2 November 1966; 3 November 1966; 1967 November 1966; 3 April 1966; 19 May 1966
Judgment date: 19 May 1967

SYDNEY

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Judgment by:
Barwick CJ

Prior to 1931, a company had quarried slate for the purpose of forming and selling roofing slates on portion of seventy-six acres of land near Goulburn in the State of New South Wales. The title to portion of that land at all relevant times was under the provisions of the Real Property Act, 1900 and the remainder under the old system. The quarry and the greater part though not the whole of the dross from its working were situate upon portion of the land held under old system title and access to them was obtained directly from a road called the Middle Arm Road.

The dross from the quarrying operations consisted of dust, chippings and slabs of slate of varying shape and dimension. It resulted from the formation of slate tiles for roofing out of slate extracted from the land and thus represented unwanted material excavated in the course of obtaining slate suitable for making roofing tiles. As matters stood at the time of the quarrying operations, this dross would appear to have had no commercial value. Apparently it was cast on one side and in the course of time came to cover more than two acres of land to an average height of thirty feet, reaching at least fifty feet at its peak, even after some of it had been used to fill depressions, including portion of a creek bed, in parts of the land.

The quarrying operation was abandoned in 1931 since when, except for the events giving rise to this suit, the dross remained untouched except by the forces of nature, which no doubt progressively consolidated it into a mound or heap.

By 14th November 1955 the seventy-six acres had come into the ownership of Donald Albert Mills and his wife Winifred Katherine. By that time, apparently, slabs of slate for domestic paving, garden walls and other purposes of domestic decoration, were in considerable demand in the Australian Capital Territory. Some of the slate in the heap of dross was eminently suitable for these purposes and had thus acquired some commercial value. On that day Mr. Mills and his wife entered into an agreement with the respondent Warren which, after reciting their ownership of the land and the presence on the land of a considerable quantity of slate, provided as follows:

"(1)

The vendors will sell and the purchaser will buy all that the slate on the land hereinbefore referred to at or for the price or sum of four hundred pounds (PD400) which shall be paid on the execution hereof.

(2)

The purchaser shall have full and free power and authority for himself his servants agents and workmen to go to and return from the lands upon which the said slate is situated from the Middle Arm Road for the purpose of cutting or sawing up or carrying away the said slate at all times and also for any of the purposes aforesaid to employ horses wagons motor traction and other mechanical contrivances which may be necessary or convenient for the said purposes but any road used for this purpose shall be maintained by the purchaser at his expense and he will ensure that all gates are closed at all times.

(3)

The purchaser shall have the right to build a causeway or bridge over the Tarlo River but such causeway or bridge shall be constructed in such a manner so as not to divert the stream of the said river.

(4)

The vendors will not sell the land hereinbefore referred to without having inserted in the contract of sale for such lands a condition that such sale is subject to this agreement."

The purchaser Warren was an architect. For some time between 14th November 1955 and 19th February 1960 he made slate available to Martin Cornelis Stokman, a stonemason of Canberra, who apparently took slate from the heap of dross, and fashioned it for use in connection with dwellings in the Australian Capital Territory. On the last-mentioned date, Warren and Stokman entered into an agreement which, after reciting the agreement between Mills and his wife and Warren, provided:

"(1)

The vendor will sell and the purchaser will buy all the slate now on the land of the said Donald Albert Mills and Winifred Katherine Mills hereinbefore referred to at and for the price of five hundred and fifty pounds (PD550).

(2)

The said sum of five hundred and fifty pounds (PD550) shall be paid by the purchaser to the vendor as follows:

A deposit of one hundred pounds (PD100) has already been paid by the purchaser to the vendor and the balance of four hundred and fifty pounds (PD450) will be paid by the purchaser to the vendor on the twenty second day of February one thousand nine hundred and sixty.

(3)

The vendor hereby appoints the purchaser his agent with full and free power and authority to go to and return from the lands upon which the said slate is situated from the Middle Arm Road for the purpose of cutting or sawing up or carrying away the said slate at all times and also for any of the purposes aforesaid to employ horses wagons motor traction and other mechanical contrivances which may be necessary or convenient for the said purposes but any road used for this purpose shall be maintained by the purchaser at his expense and he will ensure that all gates are closed at all times."

Thereafter for some time Stokman entered the subject lands and removed from the heap of dross such slate as he desired to use in the construction of pavements, fireplaces, garden walls or the like in connection with houses in Canberra.  

However, some time before the execution of the last-mentioned agreement, D. A. Mills and his wife left the seventy-six acres and went to live in Brisbane. Also, early in 1960 they entered into some arrangement with the appellant Daphne May Mills, the mother of D. A. Mills, for the sale of the seventy-six acres to her, the price to be paid over some period of time. Evidence of this transaction was given in the present suit in the most sketchy and unsatisfactory terms. Neither the documents by which the sale was effected nor the transfer or conveyance by which it was completed were before the primary judge. All we know is that the Commercial Bank of Australia Ltd on 6th August 1960 gave to the appellant notice of the assignment to it of the estate and interest sold to the appellant by D. A. and W. K. Mills in terms of a contract of sale dated 1st August 1960: and that the portion of the seventy-six acres held under the provisions of the Real Property Act were not transferred to the appellant till some time in 1963. It was assumed at the hearing of the suit that the purchase price was not wholly paid till 1963 and that the land held under old system title was not conveyed till then.  

Between some date in 1960, as to which there is conflicting evidence, when according to the appellant she first saw a person removing slate from the land, and 23rd January 1961 the respondent Stokman from time to time entered the land and removed slate from the heap. However, shortly before 23rd January 1961 the appellant, through her husband, Victor Albert Mills, disputed the respondent's right to remove slate. According to the evidence, the appellant, again through her husband, complained that she was "not getting any money out of the slate". After conversations, the details of which are in dispute, an agreement dated 23rd January 1961 was signed between the appellant and the respondent Stokman which, after reciting that that respondent was the owner by purchase of all the slate on and in (sic) the said land, provided that that respondent would employ Victor Albert Mills, or a person nominated by the appellant, to assist in the selection and loading of slate to be removed from the land and would pay to the appellant PD1 per load in respect of which such assistance was given. Clause 3 of this agreement is in the following terms:

"(3)

That Mrs. Mills on behalf of herself her heirs executors and assigns acknowledges and agrees that Mr. Stokman is the owner of all the slate situated on or in the land hereinbefore referred to and further ackowledges and agrees that she will not by herself her servants agents or workmen give bargain sell exchange bequeath or otherwise dispose of any part of the said slate without the prior written consent of Mr. Stokman.

Mrs. Mills further acknowledges and agrees that Mr. Stokman has full and free power and authority for himself his servants agents and workmen to go to and return from the said lands upon which the said slate is situated from the Middle Arm Road for the purpose of cutting or sawing up or carrying away the said slate at all times and also for any of the purposes aforesaid to employ horses wagons motor traction and other mechanical contrivances which may be necessary or convenient for the said purposes but any road used for this purpose shall be maintained by Mr. Stokman at his expense."

 

Thereafter the respondent Stokman removed slate from the said lands, being assisted in that connection from time to time by the appellant's husband. But in April or May 1964 the appellant refused to allow the respondent Stokman to enter the land and remove any further slate. A dispute had then arisen as to payment of the agreed sum in respect of a load of slate removed by Stokman, the appellant apparently insisting either on prepayment as a condition of entry upon the land or upon payment in cash at the time of loading the slate. A dispute also arose as to whether or not the appellant was at that time selling slate to other persons. This suit brought by the respondents followed these events.  

The statement of claim treated the heap of dross as slate at grass and a chattel, the ownership of which passed to the respondent Stokman by the agreement of February 1960. The respondents grounded their claim upon the two agreements, that of 1955 and that of 1960, and claimed as their principal relief injunctions to restrain the appellant from preventing them or either of them from entering upon and returning from the appellant's land for the purpose of cutting, sawing up or carrying away the slate situate upon that land, and to restrain the appellant from selling or permitting the removal of the said slate from the land without the permission of the respondents or of one of them. By amendment made during the course of the hearing, the prayers of the statement of claim were amended to claim declarations that the respondent Stokman was the owner of the slate at grass and entitled to use and enjoy the rights over the appellant's land granted by the agreement of 1955 to the respondent Warren.  

The agreement of 1961 was tendered at the hearing by the respondents, without objection, presumably to establish notice in the appellant of the respondents' rights. The appellant sought to establish by cross-examination and by evidence given chiefly by her husband that the execution of that agreement was obtained by misrepresentation.  

The learned primary judge was of opinion that none of the slate in the heap of dross was a chattel but that on the contrary the whole heap formed part of the land. He felt fortified in this conclusion by Boileau v Heath. ^[F1] But he held that the right given by the agreement of 1955 to the respondent Warren to enter the land and remove the slate from the heap was not, nor was it intended to be, assigned to the respondent Stokman. As that respondent claimed to be entitled in his own, as distinct from the respondent Warren's, right to enter the land and sought an injunction to protect that right, the primary judge because that respondent was not an assignee of the right of entry, was prepared to dismiss the suit. As a further ground of decision, his Honour held that, even if the agreement of 1955 amounted to the grant of a profit a prendre the respondent was a purchaser for value of the land without notice and thus not bound by that agreement. He did dismiss the suit.  

From that dismissal, the respondents appealed. The Supreme Court (Court of Appeal Division) allowed the appeal. It made a declaration that the respondent Stokman was the owner of the slate at grass and granted an injunction restraining the appellant from selling or permitting the removal from the land of the said slate without the written permission of the respondents or of either of them. The Supreme Court held that the pieces of slate in the heap were chattels, upon the footing that, having been severed from the land by the process of quarrying, no more appeared than that they rested upon the land by their own weight. As a further reason for concluding that the respondent Stokman was the owner of the slate in the heap, by virtue of the two agreements of 1955 and 1960, the Supreme Court on the footing that the heap formed part of the land held that the slate was agreed to be severed from the land under the agreement of 1955 and that, therefore, it came within the definition of goods in s. 5 (1) of the Sale of Goods Act, 1923. Consequently, by dint of the agreement of 1955 and ss. 22 and 23, r. 1 of the Sale of Goods Act, the property in that slate passed to the respondent Warren under the agreement of 1955 and thereafter to the respondent Stokman under the agreement of 1960.  

In my respectful opinion, the primary judge was right in concluding on the material before him that the heap of slate as at 14th November 1955 formed part of the realty. Whilst there is a paucity of evidence as to the circumstances in which and the purpose for which the quarrying company placed the pieces of slate in or on the heap, it is clear that they were then unwanted for the purposes of the persons who quarried them and that they had no commercial value, neither then nor in prospect. According to the evidence, the heap had been upon the land in 1931, being then of substantially the same size as it was during the events leading to this suit. Nothing was proved as to the estate or interest of the quarrying company in the land nor as to the devolution of the title to the land up to the time it came into the possession of D. A. and W. K. Mills. We do not know by what transaction or transactions the quarrying company terminated its interest in the land, or in the heap of dross. But there is nothing to suggest nor reason to suppose that the heap had at any time been dealt with separately from the title to the land.  

I have come to think that the proper inference from what is known by evidence in the suit is that the heap represented unwanted dross cast on one side with the intention that it should remain on the land indefinitely, and, by implication, that it should form part of it. In my opinion, the proper inference from its continuous association with the land in the meantime is that it had been dealt with as realty by succeeding owners. Those inferences are enough within the authorities to warrant the conclusion that the heap of dross was on 14th November 1955 part of the realty. Reference to Holland v Hodgson ^[F2] is sufficient to indicate the relevant principles in this connection; for my part, I find no need to rely on or to discuss particular instances such as Boileau v Heath, ^[F3] whose differentiating circumstances may need to be regarded. In my respectful opinion, it is not correct to regard this heap of dross as comparable to some separate substance attached to the land by no more than its own weight. In the course of time, like a heap of earth, it had no doubt become integrated at its base with the subjacent soil. Nor, in my opinion, is it correct to ignore the intention which the quarrying company must have had of abandoning to the land the unwanted and worthless dross of its operations.  

So far as the reasons of the Supreme Court founded on the Sale of Goods Act are concerned, it is sufficient, in my respectful opinion, to point out that there was in truth no agreement on the part of either D. A. or W. K. Mills or of the respondent Warren to sever the slate from the land. The agreement of 1955 went no further than to purport to sell the slate to that respondent and to give him a right to enter and remove it. He did not agree to do so. No doubt it is implicit in the terms of the agreement that both parties thought that the slate was already severed: they did purport to deal with it as if it were a chattel interest. But an agreement to sever cannot be constructed out of that assumption on the part of the parties. In my respectful opinion, the Supreme Court was in error in regarding s. 5 (1) and ss. 22 and 23, r. 1 of the Sale of Goods Act as applicable to the slate or the agreement of 1955.  

It follows that the declaration as to the ownership of the heap of dross made by the Supreme Court cannot be sustained. However, so to decide does not dispose of the case. As in my opinion the heap formed part of the land, the agreement of 1955, supported by consideration, is capable of creating an equitable profit a prendre . It contains an express grant of the right to enter and to remove the slate in the heap. In my opinion, that agreement did amount, in equity, to the grant of a profit à prendre and thus created an interest in the land which in the case of land held under common law title would be binding upon a purchaser with notice.  

However, with respect, I find myself unable to agree with the primary judge that the appellant was a purchaser for value without notice of the equitable interest created by the agreement of 1955. The time at which to test the question whether or no she was such a purchaser was not, in my opinion, the date of the agreement to buy, whatever date that may have been. The appellant did not take title to the land till 1963, by which time not only had she seen the respondent Stokman removing slate from the land and learnt of his claim to do so as of right, but she had entered into the agreement in 1961. At that time she quite clearly knew the basis of the respondent Stokman's claim to enter the land. It seems to me nothing to the point that neither party regarded the heap of dross as realty but rather regarded the slate in it as personalty. The appellant knew that the respondent Stokman claimed to deduce the rights he claimed through the respondent Warren and the agreement of 14th November 1955. Indeed, the terms of that agreement had been specifically drawn to the appellant's attention by a solicitor's letter of 19th October 1960. There was no evidence at the hearing that in October 1960 or in 1961 she had paid the purchase price, or if it matters, any part of it. She was not therefore a purchaser for value without notice.  

The heap of dross being part of the land and the agreement of 1955 having created in the respondent Warren an equitable interest in the land, namely, a profit a prendre the slate, of which the appellant had notice, what significance has the agreement of 1960? It affected to sell the slate on the footing that it was a chattel. It did not sell or transfer the equitable interest in the land which, in my view, the respondent Warren then had. But it did appoint the respondent Stokman for value the agent of the respondent Warren to go upon the land and remove the slate. That authority was irrevocable, being for value and intended to secure to the respondent Stokman the means of obtaining the slate in the heap of dross. The property in the slate when removed would, in my opinion, pass to the respondent Stokman by virtue of the sale of it which the agreement sought to effect. It would not matter, in my opinion, in this connection, that the parties thought that the property in the slate could and would pass before removal or that the sale in terms was of the slate in the heap. It seems to me, therefore, that the appellant, being bound by the interest in the land which the agreement of 1955 had created in Warren, was not entitled to prevent the respondent Stokman from exercising as agent of the respondent Warren the rights which such interest in the land held on common law title gave that respondent. There is no allegation nor any evidence that the appellant by fraud obtained the registration as proprietor of the land, held under the Real Property Act. Therefore, she holds that land according to the certificate of title free of such an interest as a profit a prendre not created by herself and not endorsed thereon.  

There remain several matters. First, the case was argued by the respondents according to the terms of the judgment of the primary judge upon the footing that the slate in the heap was a chattel and that the licence to enter given to Warren by the agreement of 1955 was by the agreement of 1960 assigned to the respondent Stokman. These positions of the respondents were taken deliberately, their counsel at the hearing declining to treat the case as in the alternative, that is, either as a claim by the respondent Stokman that he was the assignee of the right to enter, or as a claim by the respondent Warren that the right to enter remained effective against the appellant and that the respondent Stokman was his agent to exercise that right.  

But the statement of claim relied upon the agreements themselves and the original prayers of the statement of claim sought an injunction to restrain the appellant from preventing the respondents or either of them, their servants or agents from entering upon and returning from the land for the purpose of cutting up and carrying away the slate situated on the land. The interpretation of those agreements which the statement of claim asserted was that the slate was a chattel and the respondent Stokman the owner and the assignee of a right to enter the land and remove the slate. But, notwithstanding this interpretation, and whatever argumentative basis for establishing the respondents' claim to relief may have been put forward by counsel, neither the basis of the statement of claim in the agreements themselves nor the prayers for the injunction to which I have referred were abandoned. It therefore seems to me that the course taken by counsel did not relieve the primary judge of the obligation to make a decision according to the pleadings and the evidence. In my respectful opinion, he ought to have granted injunctions as asked in the first and second prayers of the statement of claim, and ordered an inquiry as to damages as sought in the third prayer.  

The second matter touches the agreement of 1961. I have not found it necessary to refer to that agreement as a source of the rights of the parties or of either of them. But the appellant, in case the Court should be of opinion that that agreement was a significant source of right in the respondent Stokman, sought a rehearing to enable her to set up defences to claims based upon that agreement which his counsel claimed would have been inappropriate to the respondents' claims as pleaded and argued at the hearing. The appellant seeks to assert that the agreement of 1961 terminated any rights which the respondent Stokman theretofore may have had and became after its execution the sole source of his rights. The appellant upon the basis of this assertion desired to set up that that agreement was induced by misrepresentation and that in any case it was discharged by breach before the commencement of the suit, or if not so discharged, would not in the circumstances be enforced in equity.  

In my opinion, the agreement of 1961 cannot be regarded as intended to bring to an end existing rights. Nothing in its language supports such a view and much of that language is against it. Rather it appears to settle a dispute as to those rights by recognizing them and creating a collateral promise for the employment and payment of a person to assist in the loading of slate to be selected and carried away in pursuance of those rights. It was not set up by the respondents as itself a source of new rights-a matter which would have been particularly relevant in the case of the land held under the Real Property Act. In any case, in my opinion, that agreement did not itself create a profit a prendre . There is therefore no basis for the appellant's request for a rehearing of the suit. But, in any case, it would have been open to the appellant to have set up in the suit as the case was pleaded and conducted, that the agreement of 1961 terminated the rights which the suit was brought to enforce. Further, there seems to me to be no substance in the appellant's claim that that agreement was discharged by breach and no relevant consequence in her claim that its execution was induced by misrepresentation.  

In the result, although I cannot agree with the declaration made by the Supreme Court on appeal, nor with the reasons of that Court for granting the injunction and ordering the inquiry as to damages, I am of opinion that this appeal should be dismissed.  

Whilst it would seem that a good deal of confusion was unnecessarily introduced into the case by the submission made by counsel for the respondents before the primary judge, I do not think that that submission affords a reason for depriving the respondents of any costs either of the hearing or of either of the appeals.