Forestview Nominees Pty Ltd & Anor v Perpetual Trustees W.A. Ltd & Ors
[1995] FCA 922
•16 NOVEMBER 1995
CATCHWORDS
RESTRICTIVE COVENANTS - EQUITY - Owner of shopping centre also owned surplus adjoining land - owner sold shopping centre and part of surplus adjoining land - transfer of part of surplus adjoining land contained covenant restraining transferor as registered proprietor, and its successors in title as registered proprietors, from using "remaining land" for retail sale of goods, or as showrooms - applicants were subsequent sequential purchasers of remaining land and well aware of precise terms of restrictive covenant - whether second applicant bound by covenant - whether respondent as original covenantee and owner of adjoining land could enforce covenant against second applicant as assignee with notice - whether respondent's adjoining land capable of being benefited by the covenant regardless of whether covenant annexed to that land - whether covenant "touched and concerned" that land - whether covenant was annexed to either piece of land - whether on its true construction, covenant only binding on registered proprietors of remaining land - in particular whether lessees under unregistered leases would be bound by covenant.
Transfer of Land Act 1893 (W.A.) ss. 4, 68, 129A, 129B
Property Law Act 1969 (W.A.) ss.47, 48, 49
Tulk v. Moxhay (1848) 41 E.R. 1143
Taite v. Gosling (1879) 11 Ch. 273
Nicoll v. Fenning (1881) 19 Ch.D. 258
Mander v. Falcke [1891] 2 Ch.554
Rogers v. Hosegood [1900] 2 Ch. 388
Osborne v. Bradley [1903] 2 Ch 446
Re Nisbet and Potts' Contract [1905] 1 Ch. 391
London County Council v. Allen [1914] 3 K.B. 642
Hammond v. Prentice Bros. Ltd [1920] 1 Ch 201
Berton v. Alliance Economic Investment Co Ltd [1922] 1 KB 742
Allen v. Lawson [1926] VLR 1
Re Union of London and Smith's Bank Ltd's Conveyance (1933) Ch 611
Miles v. Easter [1933] 1 Ch. 611
Drake v. Gray [1936] Ch. 451
Newton Abbott Co-operative Society Ltd v. Williamson & Treadgold Ltd [1952] Ch 286
Lane Cove Council v. H & W Hurdis Pty Ltd (1955) 72 W.N. (N.S.W.) 284
Re Royal Victoria Pavilion (Ramsgate) [1961] 1 Ch. 581
Marten v. Flight Refuelling Ltd [1962] Ch 115
Re Arcade Hotel Pty Ltd [1962] V.R. 274 (Full Court)
Pirie v. Registrar-General (1963) 109 CLR 619
Tophams Ltd v. Sefton [1967] AC 50
McLean v. McKay L.R. 5 P.C. 327
McGuigan Investments Pty Ltd v. Dalwood Vineyards Pty Ltd [1971] NSWR 686
Brunner v. Greenslade [1971] 1 Ch. 993
Wrotham Park Estate Co Ltd v. Parkside Homes Ltd [1974] 1 WLR 798
Quadramain Pty Ltd v. Sevastapol Investments Pty Ltd (1976) 133 CLR 390
Federated Homes Ltd v. Mill Lodge Properties Ltd [1980] 1 All E.R. 371
Roake v. Chadha [1983] 3 All E.R. 503
J Sainsbury PLC and Haringay LBC v. Enfield LBC [1989] 1 WLR 590
P & A Swift Investments v. Combined British Stores Group P.L.C. [1989] 1 AC 633
Rhone v. Stephens [1994] 2 WLR 429
FORESTVIEW NOMINEES PTY LTD and SILKCHIME PTY LTD v.
PERPETUAL TRUSTEES W.A. LTD
PERPETUAL TRUSTEES W.A. LTD v. FORESTVIEW NOMINEES PTY
LTD, SILKCHIME PTY LTD and THE NATIONAL MUTUAL LIFE
ASSOCIATION OF AUSTRALASIA LTD
No. WAG 114 of 1994
CARR J.
PERTH
16 NOVEMBER 1995
IN THE FEDERAL COURT )
OF AUSTRALIA )
WESTERN AUSTRALIA )
DISTRICT REGISTRY ) No. WAG 114 of 1994
GENERAL DIVISION )
B E T W E E N: FORESTVIEW NOMINEES PTY LTD
First Applicant
and
SILKCHIME PTY LTD
Second Applicant
and
PERPETUAL TRUSTEES W.A. LTD
Respondent
and
PERPETUAL TRUSTEES W.A. LTD
Cross-claimant
and
FORESTVIEW NOMINEES PTY LTD,
SILKCHIME PTY LTD and THE NATIONAL MUTUAL LIFE ASSOCIATION OF
AUSTRALASIA LTD
Cross-respondents
CORAM: CARR J.
PLACE: PERTH
DATE: 16 NOVEMBER 1995MINUTE OF ORDERS
THE COURT ORDERS THAT:
If the parties can agree upon a minute of orders to reflect these reasons they shall file a short minute of orders by 30 November 1995.
If the parties are unable so to agree then each party is to file and serve a minute of proposed orders and short submissions in support of their respective minute by 30 November 1995.
NOTE: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT )
OF AUSTRALIA )
WESTERN AUSTRALIA )
DISTRICT REGISTRY ) No. WAG 114 of 1994
GENERAL DIVISION )
B E T W E E N: FORESTVIEW NOMINEES PTY LTD
First Applicant
and
SILKCHIME PTY LTD
Second Applicant
and
PERPETUAL TRUSTEES W.A. LTD
Respondent
and
PERPETUAL TRUSTEES W.A. LTD
Cross-claimant
and
FORESTVIEW NOMINEES PTY LTD,
SILKCHIME PTY LTD and THE NATIONAL MUTUAL LIFE ASSOCIATION OF
AUSTRALASIA LTD
Cross-respondents
CORAM: CARR J.
PLACE: PERTH
DATE: 16 NOVEMBER 1995
REASONS FOR JUDGMENT
Introduction
In this application, the first applicant Forestview Nominees Pty Ltd ("Forestview") and the second applicant Silkchime Pty Ltd ("Silkchime") seek declaratory relief in respect of the effect of a restrictive covenant ("the Covenant") registered on the Certificate of
Title to certain land of which Silkchime is the registered proprietor of an estate in fee simple. In summary, the declarations sought would enable the land to be used for the retail display and sale of goods contrary to what the respondent contends are the terms of the Covenant. The matter finds itself in this Court because the applicants allege that the Covenant is unenforceable by reason of the provisions of s.45B(1) of the Trade Practices Act 1974 (Cth). Orders have been made whereby that issue and another ground upon which the enforceability of the covenant is challenged are to be heard and determined as separate issues after this stage of the proceedings. The issue at this stage of the proceedings is whether the Covenant is otherwise enforceable and to what extent. Questions of law and construction of the Covenant are involved, together with a suit (by way of cross-claim) for rectification of the Covenant should it be held to be unenforceable.
Factual Background
Until 30 September 1993 the National Mutual Life Association of Australasia Ltd ("NML") was the registered proprietor in fee simple of an area of land at Warwick, a suburb of Perth. On part of that land, there was at the time (and still is) a shopping centre known as "Warwick Grove Shopping Centre". That land is referred to in the pleadings as "the Shopping Centre Land" and I shall refer to it in the same terms. NML also owned an adjoining area of some 4.9 hectares of land. In or about July 1993 (after some earlier correspondence and discussion) NML and the respondent/ cross-claimant, Perpetual Trustees W.A. Ltd ("Perpetual") entered into negotiations for the purchase by Perpetual of the Shopping Centre Land and an area of approximately one hectare to be subdivided out of the adjoining land. I shall refer to the area of approximately one hectare as "the Subdivided Land" and the remaining area of approximately 3.9 hectares as "the Remaining Land". In those negotiations Perpetual was represented by Mr Ian Frost and Mr Philip Edwards. Mr Frost is a director of Growth Equities Mutual Ltd ("GEM") which manages the GEM Retail Property Trust. Mr Edwards is GEM's Acquisitions Manager in Perth. Perpetual was the delegate of the trustee of the GEM Retail Property Trust for the purposes of acquiring the Shopping Centre Land and the Subdivided Land.
At this point I should mention that the applicant raised various objections to the admissibility of the evidence concerning what was said and done by the various individuals whom I name in this narrative. Those objections were based principally on matters of the authority of those individuals and the relevance of their evidence. I formed the impression that the objections were mainly in relation to the respondent's suit for rectification. The respondents acknowledged that the "actual intention" of the parties was otherwise irrelevant so far as construction of the Covenant was concerned save to the extent that it was expressed in or to be inferred from its terms. As will be seen, I have concluded that I do not need to consider the respondent's rectification suit. Accordingly there is no need to rule on the applicants' objections and most of the introductory part of these reasons may be taken as simply background narrative. However, where I consider it necessary to make a finding of fact I shall do so. For example, in the immediately following paragraph my summary of parts of Mr Frost's evidence may be taken as my findings of fact on the evidence. It has some relevance to the question whether the Covenant "touches and concerns" the Shopping Centre Land and the Subdivided Land.
Mr Frost's evidence was that because Perpetual was not going to take all of NML's land, he wanted to protect the Warwick Grove Shopping Centre from retail or commercial development on the Remaining Land. Furthermore, restricting the use of that land to residential purposes would, so Mr Frost believed, "generate more shoppers" to come to the Warwick Grove Shopping Centre. During the negotiations for sale, NML was represented by Mr Roger Hine and Mr Maurice Rousset of Hooker Corporate, a real estate agent. Mr Frost's evidence was that he told Mr Hine that it was a condition precedent to Perpetual's acquisition of the Shopping Centre Land and the Subdivided Land that NML would enter into a restrictive covenant ensuring that the Remaining Land could not be used for retail or commercial purposes. Neither Mr Frost nor any other of the respondent's witnesses were cross-examined on their witness statements. No witnesses were called to give oral evidence and the applicants did not tender any witness statements.
On 15 July 1993 Mr Frost wrote to Mr Rousset on the respondent's behalf offering to acquire the Shopping Centre Land and the Subdivided Land for a sum of $56.7 million of which $1 million was in respect of the latter. Paragraph numbered 12 of that letter read as follows:
"12.The vendor agrees to endorse a restrictive covenant on the balance of Part lot 738 after excision of the staff carpark and the hectare of land referred to in (1.) above to prevent the use of the remaining land for any retail sales, bulk goods sales, showroom uses or market stall opertations (sic)."
Mr Frost and Mr Hine then met to discuss the proposed transaction further. By letter dated 26 July 1993 Mr Hine responded to Mr Frost's letter of 15 July 1993 dealing with each of the numbered paragraphs in that letter. His response to paragraph 12 was:
"12.Noted and agreed."
In essence, this exchange of letters evidenced the parties' intention to enter into "due diligence" and discussions in respect of contractual terms for the proposed sale.
Both NML and Perpetual retained Messrs Mallesons Stephen Jaques ("Mallesons") to be their solicitors in respect of the transaction. Each party was represented by a separate partner of that firm and his assistants. The two teams of solicitors negotiated the terms of a contract of sale ("the Contract of Sale") for the Warwick Grove Shopping Centre and the Subdivided Land which was executed as a deed on 16 September 1993, by their respective clients. Clause 3.5 of the Contract of Sale provided as follows:
"RESTRICTIVE COVENANT
3.5The Vendor acknowledges that the transfer instrument for the Land is to contain a restrictive covenant by which the Vendor as the registered proprietor of the balance of Lot 738 after excision of the Subdivided Land covenants not to use the balance of Lot 738 for any purpose involving the sale of goods (including bulk goods) by retail (including the use of market stalls) or any purpose involving the use of showrooms. The restrictive covenant is to bind both the Vendor as registered proprietor and all subsequent registered proprietors of the balance of Lot 738 and is to be given in favour of the Purchaser as registered proprietor of the Land and all subsequent registered proprietors of the Land. The restrictive covenant is to be in the form attached to this deed and marked Appendix 1."
Appendix 1 to the Contract of Sale was in the following terms:
APPENDIX 1
Restrictive Covenant (Clause 3.5)
"1. Restrictive Covenant
The Transferor as the registered proprietor of:
[the balance of part of Lot 738 remaining after excision of the Subdivided Land] ("Remaining Land")
COVENANTS with the Transferee as the registered proprietor of:
[the Subdivided Land] and [the Shopping Centre Land]
that it will not use the Remaining Land for any purpose involving:
(a)the retail sale of goods, including without limitation goods sold in bulk; or
(b)market stalls; or
(c)showrooms;
EXCEPT for the retail sale of minor convenience items such as newspapers, milk, bread and basic toiletries from a facility that is required as a condition of an approval given by a relevant authority for a medium density residential development on the Remaining Land (such as a retirement village) ("the development") and where:
(i)the facility is built within and remains part of the development; and
(ii)the facility is not open to the general public and its business is carried on for the sole purpose of providing minor convenience items to residents of the development; and
(iii)the facility and any sign advertising it is not visible from:
*any road outside the development; or
*any road within the development that is or becomes regularly used by persons who are not residents of the development for access between points outside the development.
2. Covenant binds Successors in Title
The covenants made in clause 1 made by the Transferor ("the Restrictive Covenant") are made for itself and its successors in title as the registered proprietor or proprietors of the Remaining Land or any part or parts of it with the intent that the Restrictive Covenant will enure for the benefit of the Transferee and its successors in title as the registered proprietor or proprietors of [the Subdivided Land] and [the Shopping Centre Land] or any part or parts of it or of any leasehold interest in [the Subdivided Land] and [the Shopping Centre Land].
3. No application for Retail use
The Transferor will not include in any development application with respect to the Remaining Land any request for a use prevented by the Restrictive Covenant or for the facility referred to in clause 1, but this does not require the Transferor to object to the requirement for such a facility if it is imposed as a condition of the approval.
4.Restrictive Covenant not to Apply to certain Land
4.1 From the time specified in clause 4.2, the Restrictive Covenant will not apply to any part of the Remaining Land that is a lot which:
(a)does not exceed 800 square metres in area; and
(b)is zoned residential and is not the subject of an application to be zoned for any use that the Restrictive Covenant prevents.
4.2The Restrictive Covenant will not apply from the time of the registration of the transfer of the lot referred to in clause 4.1 into the name of a purchaser who does not intend and is not able to use the lot for a purpose which would be prohibited by the Restrictive Covenant if it were not removed.
4.3If the then registered proprietor of the Remaining Land provides evidence which reasonably demonstrates that the registered proprietor intends to transfer a lot in accordance with clauses 4.1 and 4.2, the Transferee (or its successor) will execute and deliver to the registered proprietor any document prepared by the registered proprietor which is reasonably required by the registered proprietor to cause the Restrictive Covenant to be removed from the title to the lot immediately
prior to the registration of the transfer of the lot into the name of the purchaser referred to in clause 4.1."
The evidence shows that Appendix 1 had been the subject of several drafts and various amendments before being annexed in that form to the Contract of Sale. The drafts were referred to those who were instructing Mallesons on behalf of NML and Perpetual respectively and also to a Mr Gordon Howard of Silverton Ltd. Silverton Ltd is a wholly-owned subsidiary of NML which was thought at that time to be likely to acquire and develop the Remaining Land. Apparently Mr Howard's concern was to prevent problems arising from the Covenant if and when the Remaining Land was developed for residential purposes.
The purchase price payable under the Contract of Sale was $56 million. That contract provided for two settlements. At the first settlement all but $500,000 of the purchase price would be paid in exchange for title to the Shopping Centre Land. The second settlement was to take place as soon as the subdivision had been carried out to enable the Subdivided Land to be transferred.
On 29 September 1993 NML and Perpetual executed a deed of restrictive covenant ("the Deed"). The terms of the Deed were, so far as is relevant, identical to Appendix 1 of the Contract of Sale. On 30 September 1993 the first settlement took place and Perpetual became registered as the proprietor of the Shopping Centre Land. On the same date two caveats (Caveat F323414 and Caveat F323415) were registered on the Certificate of Title to the Remaining Land and the Subdivided Land. Caveat F323414 gave notice that Perpetual claimed an interest in fee simple as purchaser in portion of the land by virtue of the Contract of Sale. Caveat F323415 gave notice that Perpetual claimed an interest "as the holder of the benefit of an unregistered deed of restrictive covenant" in portion of the land by virtue of the Deed.
It would appear that thereafter the necessary steps were taken to obtain a subdivision so that the second settlement could take place whereby the Subdivided Land could be transferred from NML to Perpetual. Those procedures appear to have occupied nearly nine months.
In the meantime, the directors of the applicants started to express an interest in the Remaining Land. NML had retained Messrs Baillieu Knight Frank, and in particular Mr Barry Toms of that firm, to sell the Remaining Land. Mr Edwards' evidence was that Mr Norman Carey (a director of each of the applicants) approached him on a number of occasions between September 1993 and August or September of 1994 in relation to a proposed joint venture involving the Remaining Land and other adjoining land owned by a company of which Mr Carey was also a director. The first documentary evidence of any involvement by the applicants in this matter is a fax dated 27 January 1994 from Mr Toms to Mr Luke Saracini, another director of each of the applicants. Under cover of that fax Mr Toms sent a copy of a plan showing the dimensions of the Remaining Land and gave some very limited information concerning negotiations with Silverton Ltd.
On 31 January 1994 the State Planning Commission approved the subdivision and it would seem that by 14 April 1994 the Subdivided Land was available for dealing at the Land Titles Office. On 5 May 1994 Mallesons submitted a copy of the proposed transfer of the Subdivided Land (which included a covenant in relevantly identical terms to those in the Deed) to an Advice Officer at the Land Titles Office for approval.
At about the same time, there were developments in relation to the sale of the Remaining Land. On 9 May 1994 NML granted to Forestview an option to purchase the Remaining Land free from encumbrances other than certain specified encumbrances. One of the specified encumbrances was referred to as:
"(b)the restrictive covenant substantially in the terms attached to this Deed..."
The attachment was a copy of Appendix 1 to the Contract of Sale. The option was expressed to expire on 31 December 1994 and an option fee of $10,000 per month was payable pending exercise of the option.
On 10 May 1994 the Land Titles Office faxed Mallesons advice to the effect that the covenant endorsed on the proposed transfer appeared to be correct and was thus acceptable for registration. On 12 May 1994 Mr Carey (who it will be recalled is a director of both Forestview and Silkchime) met Mr Frost in Sydney. Mr Carey told Mr Frost that his group owned the Warwick Entertainment Centre which adjoins the Warwick Grove Shopping Centre and had "secured" the Remaining Land. They discussed the possibilities of co-operating in the development of their respective interests in land in the area.
On 17 May 1994 Mr Carey wrote to Mr Frost confirming that discussion. The letter included the following:
"Adjoining Land (3.8 Hectares)
We confirm that we have secured the adjoining 3.8 ha of land.
Consequence of Registering the Restrictive Covenant
We confirm our suggestion to you that you should not register the restrictive covenant on the new title until we have exhausted all possibilities for redevelopment of the adjoining land.
If this covenant is registered it would mean that all parties with an interest in land would need to agree to the further removal or modification of the restrictive covenant. The Department of Lands and Surveys have previously stated that under Section 129(b) of the Transfer of Land Act, Lessees of the Shopping Centre would have an interest in this land and would therefore need to agree.
You are currently fully protected by way of a caveat on this title."
At this point it should be noted that the option which had been granted by NML to Forestview (and any sale consequent upon exercise of the option) was expressly made conditional on the withdrawal of caveats F323414 and F323415 at or prior to settlement. The latter must have been the caveat which Mr Carey, in his letter, described as one which "fully protected" the respondent. There was no other relevant caveat. Mr Carey's letter of 17 May 1994 provided details of the group of companies of which he was the Managing Director and set out various "strategic alternatives" concerning the Warwick Grove Shopping Centre which Mr Carey said that he wished to discuss with Mr Frost. One of those alternatives included the sale of the Warwick Grove Shopping Centre to Mr Carey's group. According to Mr Frost's evidence, this had been discussed at their meeting on 12 May 1994.
There was other evidence that the matter of the restrictive covenant had been discussed at the meeting on 12 May 1994 in Sydney. Mr Stephen Calderwood, General Manager of a subsidiary of GEM was present with Mr Frost at that meeting. Mr Calderwood's unchallenged evidence was as follows:
"8.At that meeting, either Ian Frost or I said to Norm Carey words to the effect that there was a restrictive covenant over the Burdened Land and in favour of the Shopping Centre and the Subdivided Land which prevented any commercial retail development on the Burdened Land. Norm Carey said to Ian Frost and I words to the effect that if GEM did not agree to his proposal, he would either transfer the plot ratios from the Burdened Land to the Cinema Complex land or would get around the restrictive covenant and develop the Burdened Land so as to compete with the Shopping Centre. Norm Carey also said words to the effect that he had taken on Westfields in Adelaide and had beaten them. Norm Carey did not specify exactly how he proposed to have the covenant removed. However, in this regard, he said words to the effect that the restrictive covenant was a restraint on competition because of the premium rents GEM was able to charge tenants at the Shopping Centre."
On 12 May 1994 (the same date as the meeting with Mr Carey), Mr Calderwood sought Malleson's advice on the question whether the consent of tenants of the Warwick Grove Shopping Centre would be required to a surrender or variation of the Covenant. Mallesons advised that such consent would probably be required but that if GEM wished to avoid "this complication" the words "or of any leasehold interest in the Benefited Land" should be deleted from clause 2 of the Covenant.
The evidence was that NML and Perpetual reached agreement to modify the Covenant by the deletion of the above words.
On 15 June 1994 the second settlement took place and the transfer of the Subdivided Land, duly executed by NML as vendor and Perpetual as purchaser, was lodged at the Titles Office for registration. That transfer contained a restrictive covenant in terms
identical to the Covenant set out in Appendix 1 to the Contract of Sale save that the words "or of any leasehold interest in the Benefited Land" had been deleted from clause 2.
On 22 June 1994 the Land Titles Office raised a requisition in respect of the transfer. In essence, the Land Titles Office considered that the exceptions provided in clause 4 of the Covenant involved tests (for determining whether a particular lot was subject to those exceptions) which were too complex. Correspondence ensued between Mallesons and the Land Titles Office, all of which correspondence was eventually registered as part of the transfer.
This correspondence discloses that new clauses were substituted for clauses 2 and 4 as they originally appeared in the executed transfer. The new clause 2, headed "Covenant binds successors in title", was in the same terms as its predecessor save that another sentence was added to it which read:
"Without limiting the generality of this clause 2, the Restrictive Covenant will not enure for the benefit of any tenant for the time being of the Benefited Land or any part or parts of it."
Clause 4, as it originally appeared in the transfer, was replaced with a new clause 4 the terms of which did not involve the Registrar of Titles in the process of excluding lots in future from the operation of the Covenant. Another amendment referred to in the correspondence was the inclusion (in clause 4.4) of a covenant by the parties to the transfer that for the purpose of s.129B of the Transfer of Land Act the Covenant was for the benefit of the registered proprietor of the Benefited Land and its successors in title and not for the benefit of any other person. Clause 4.4 concluded with the sentence:
"Without limiting the generality of the foregoing, the Restrictive Covenant is not entered into for the benefit of any tenant for the time being of the Benefited Land."
In a letter dated 11 August 1994 to Mallesons, the Deputy Commissioner of Titles rejected that firm's submission that the amendment deleting reference to the holders of leasehold interests in the Benefited Land would have the effect of preventing those persons from having a statutory interest in the land for the purposes of s.129B of the Transfer of Land Act. Otherwise the proposed amendments were acceptable to the Land Titles Office. On 24 November 1994 the transfer was approved for registration in its amended form. The relevant Certificate of Title, Volume 1859 Folio 588 (now cancelled), shows the date of registration of the transfer (identified as Transfer F582167) as being 15 June 1994. The Certificate of Title to the Remaining Land, which itself is dated 15 June 1994 shows, as the second encumbrance listed in its Second Schedule: "Transfer F582167 contains a restrictive covenant. Registered 15.6.94 at 11.13 hrs." The following is a copy of the relevant portions of the transfer as registered, excluding the correspondence described above which was attached to and registered as part of that transfer.
In the meantime, on 29 July 1994, Messrs Martin Goff & Associates, town planning consultants for Mr Carey's group of companies, wrote to the City of Wanneroo (the local municipality) on behalf of that group. By letter of that date, Messrs Martin Goff & Associates applied to develop a shopping centre on the Remaining Land by way of an extension of the Warwick Grove Shopping Centre.
At the same time, negotiations continued between Mr Carey and those representing Perpetual. In essence, Mr Carey was urging some joint development of the Warwick Grove Shopping Centre with adjoining land owned by a company in Mr Carey's group. As late as 12 October 1994 there is evidence of correspondence from Mr Carey to Perpetual's representative dealing with the subject of a proposed joint development of the Warwick Grove Shopping Centre and adjoining land.
On 13 October 1994 Forestview lodged the present application in this Court seeking a declaration that the Covenant was unenforceable by reason of s.45B(1) of the Trade Practices Act. Alternatively, Forestview sought a declaration that the Covenant was, on its true construction, ineffective to create an interest binding on the Remaining Land and an injunction restraining Perpetual from enforcing the Covenant. In its statement of claim, filed with that application, Forestview referred to an agreement dated 26 March 1993 whereby Forestview acquired an option to purchase the Remaining Land. (This would seem to be intended as a reference to the option granted on 9 May 1994). Forestview pleaded that it wished to develop and sell or lease the Remaining Land for use as a retail shopping Centre but was precluded by the Covenant from so doing.
On 26 December 1994 Forestview executed a declaration of trust whereby it declared that it held the benefit of the option to acquire the Remaining Land on behalf of Silkchime. On 30 December 1994 Forestview exercised that option to purchase. Transfers of the Remaining Land, first to Forestview and then from Forestview to Silkchime were registered at the Land Titles Office on 27 January 1995. Each of those transfers referred to Transfer F582167 as being one of the encumbrances subject to which the Remaining Land was transferred.
The Pleadings
In those portions of their re-amended statement of claim which are relevant at this stage of the proceedings, Forestview and Silkchime seek declarations concerning the true construction of the Covenant. They seek a declaration that the Covenant, on its true construction, is not a restrictive covenant, does not bind the successors in title of NML to the Remaining Land and, alternatively, that the restrictive covenant does not bind those successors of title of NML who are not registered proprietors of the Remaining Land. In that regard, the applicants say that Silkchime may wish to grant leases for retail purposes to lessees who will not register those leases. As a further alternative, the applicants seek a declaration that the Covenant does not, on its true construction, preclude Silkchime from leasing the Remaining Land or any part of it to a third party which intends to construct a shopping centre on it or preclude Silkchime from leasing parts of the Remaining Land to third parties who wish to develop those parts and use them for retail sale of goods. As a final alternative, the applicants seek a declaration that the Covenant, on its true construction, is ineffective to create an interest binding the Remaining Land. The applicants seek an injunction restraining Perpetual from enforcing the Covenant. At the hearing, the applicants were granted leave to amend their statement of claim by adding a further allegation to the effect that the Covenant was void as being contrary to the public policy said to be reflected in the Town Planning and Development Act 1928 (W.A.) and the City of Wanneroo Town Planning Scheme No. 1. That issue and the issue of whether s.45B of the Trade Practices Act renders the Covenant unenforceable are to be heard and determined at a later date.
The respondent denies that the applicants are entitled to any of the relief which they seek and also makes a cross-claim against Forestview, Silkchime and NML for rectification of the Covenant if, on its proper construction, it is held to be ineffective in the manner contended by the applicants. In its cross-claim, Perpetual incorporates certain paragraphs of its defence which plead the negotiations between it and NML which led, so it is pleaded, initially to the making of either an oral agreement or the reaching by NML and Perpetual at a common intention that they would enter into a restrictive covenant which would bind all registered proprietors, occupiers and other successors in title to the Remaining Land to ensure that the Remaining Land was only used for residential purposes. In particular, Perpetual pleads that the agreement or common intention was to prevent the use by any and all persons, now or in the future, of the Remaining Land for any retail sales, bulk goods sales, showroom uses or market stall operations and that the Covenant would enure for the benefit of the Shopping Centre Land. Perpetual seeks a declaration that Transfer F582167 and the amended covenants endorsed on that document should be rectified to embody that agreement or common intention.
The respondent has given the Registrar of Titles notice of these proceedings. The Registrar has indicated, through counsel for the respondent, that he does not wish to be heard unless the Court proposes to make an order for rectification "that would impact upon the register".
NML, although a cross-respondent to Perpetual's cross-claim for rectification, has taken no part in the proceedings.
The Applicants' Contentions
The applicants' first series of contentions can be summarised as follows:
Section 129A of the Transfer of Land Act 1893 (W.A.) ("the Act") permits a restrictive covenant to be noted on the register. It is convenient at this point to set out the text of s.129A of the Act:
"129A. (1)Restrictive covenants may be created and made binding in respect of land under this Act so far as the law permits by instruments in the prescribed form, but no such covenant affecting land subject to a mortgage or charge shall be registered unless the mortgagee or annuitant has consented in writing thereto prior to the same being registered.
(2)Upon the registration of any instrument creating a restrictive covenant it shall not be obligatory on the Registrar to make any entry relating thereto on the certificate of title of any person entitled to the benefit thereof."
Registration of a covenant does not give it any greater effect than it would otherwise have under the common law. Accordingly, the applicants contend that before such a covenant will be enforced against a subsequent purchaser, the principles expounded in Tulk v. Moxhay (1848) 41 E.R. 1143 and subsequently developed by the cases must be complied with namely:
(a)that the covenant must be negative in its effect. There was no issue that the Covenant was negative in its effect;
(b)that it must touch and concern the Shopping Centre Land (now amalgamated in the one Certificate of Title with the Subdivided Land and as such referred to in the Covenant as "the Benefited Land" but hereinafter referred to as "the Amalgamated Shopping Centre Land"); i.e. that it must benefit that land as land by adding to the enjoyment or the amenity of the Amalgamated Shopping Centre Land as a parcel of land;
(c)that the covenant must, on its face, be "something which runs with the dominant tenement" and was thus annexed to that land; and
(d)the covenant must on its face run with and be attached to the Remaining Land.
The applicants submitted that a restrictive covenant is in the nature of an equitable easement and the restriction must be such on its face as to be an incident of the title to the dominant tenement, so that it passes with the dominant tenement in a manner whereby whoever has an interest in the dominant tenement, either under the law generally or by virtue of registration or otherwise, also has the right and interest in relation to the easement.
The essence of the applicants' argument, at this stage, was that two requirements of the doctrines developed in and from Tulk v. Moxhay were not satisfied in the present matter. First it was said that the Covenant did not touch and concern the Amalgamated Shopping Centre Land in the relevant sense and was for that reason not annexed to that land. Secondly the terms in which the Covenant was expressed were
such that, as a matter of construction, the Covenant was not annexed to either the Amalgamated Shopping Centre Land or the Remaining Land, so as to run with both those parcels of land.
As to the first branch of the argument, the applicants submitted that the Covenant was not one which by its nature benefited the Amalgamated Shopping Centre Land by adding to the enjoyment and amenity of it as a parcel of land. It was said to be simply a restraint intended to benefit the business carried on upon it, namely that of a shopping centre. The submission was that a restraint which is intended to benefit a particular proprietor because that is the trade or business which he carries on, is not one which touches and concerns the land in the relevant sense.
Mr A.R. Emmett QC, senior counsel (with Mr D.M. Stone) for the applicants, submitted that the Covenant was not given on behalf of and therefore did not bind anybody other than the registered proprietor for the time being. It did not, for example, in its terms, bind a lessee whose lease was not registered or any other occupier who might have a proprietary interest in the land. Secondly, and it was said, quite independently, there was expressly excluded from any benefit of the Covenant a category of persons having proprietary interests in the land including even lessees under registered leases. That, so it was submitted, was quite inconsistent with the concept of a restrictive covenant running with the Amalgamated Shopping Centre Land. Paragraph 4.1 of the Covenant was said to confirm that references to the registered proprietor were intended to refer only to the holder of the fee simple and not any lesser proprietary interest.
Each of the foregoing submissions was put as being independent and on the basis that if any one of them were made good then the Covenant was simply not enforceable.
As an alternative submission, the applicants argued that the Covenant only purported to restrain the registered proprietor from using the Remaining Land in the manner referred to but was not effective to restrain a lessee or anybody else from using that land in such manner. The verb "use" was not combined with words such as "permit or suffer".
In the first of a series of responses to those contentions, the respondent points to the fact that Perpetual is the original covenantee named in the Covenant and as such is entitled to enforce it as against not only any registered proprietor of the Remaining Land but also as against any successor in title to that land, including any occupier or user of that land. It is convenient to express my conclusions on that issue so far as it concerns Silkchime and then progressively to deal with the other issues raised above.
Before doing so, I shall make some preliminary observations about some of the relevant law. Bradbrook & Neave in "Easements and Restrictive Covenants in Australia" at para. 1211 comment that:
"The law of restrictive covenants is a morass of technicalities, inconsistencies and uncertainties."
In a footnote to that comment there is a reference to this area of law (attributed to J.H. Beuscher) as being "... a blundering conceptualist jungle full of semantic swamps". I think that these descriptions are exaggerations, but not unduly so.
It seems clear that the burden of a restrictive covenant will not run with freehold land at law but only in equity in accordance with the rules in and developed from Tulk v. Moxhay (1848) 41 E.R. 1143. The benefit of a restrictive covenant may run with freehold land at law or in equity and may, even if not so annexed, in certain circumstances, be enforced by an assignee of the covenant.
Whether Perpetual May Enforce the Covenant Against Silkchime Regardless of Whether the Covenant is Annexed to the Amalgamated Shopping Centre Land?
In Rogers v. Hosegood [1900] 2 Ch. 388 a similar proposition was taken as being obviously correct. In that case, the defendant had purchased three pieces of land from persons claiming through the devisee of William, Duke of Bedford. The late Duke of Bedford had been party to restrictive covenants which were held, upon their proper construction, to prevent the erection of the block of flats which the defendant proposed to build. The defendant purchased with notice of those restrictive covenants. At p.394 Farwell J. observed:
"It is not contended that the burden of those covenants has not passed to the defendant; he is obviously bound, by reason of notice, whether the covenant as regards him runs with the land or not: Tulk v. Moxhay."
At p.403 the Court of Appeal in affirming Farwell J's judgment simply stated:
"No difficulty arises in this case as to the burden of the covenants. The defendant is the assignee of the covenantor in respect of the two plots of land comprised in the conveyances of May 31 and July 31, 1869, and he took with notice of the covenants now sought to be enforced."
In my view, the answer to the question posed above is: yes. Perpetual is the original covenantee. The applicants took their respective interests, one after the other on the same day, in the Remaining Land with express notice of the Covenant. Each of the successive transfers described the interest transferred as being subject to the encumbrance of the Covenant which was identified and described as an encumbrance in the appropriate "box" on each transfer. Perpetual owns the Amalgamated Shopping Centre Land which adjoins the Remaining Land and is quite clearly capable of being benefited by the Covenant. The benefit is not for some personal purpose or object of Perpetual, but for the benefit of the Amalgamated Shopping Centre Land in the sense that it would enable Perpetual to dispose of the land to greater advantage. In that regard, I refer to the evidence of Mr Gordon Jeanes which I summarise below and other evidence from which I make this inference. There may be a distinction between "land which is capable of being benefited" by a covenant and a covenant which "touches and concerns" the relevant land. It is not necessary for me to decide this because, as will be seen, I have come to the conclusion that the Covenant does "touch and concern" the Amalgamated Shopping Centre Land. In those circumstances it seems quite clear to me from the relevant case law that the Covenant is enforceable against Silkchime whether or not it is annexed to and thus runs with the Amalgamated Shopping Centre Land.
In Re Union of London and Smith's Bank Ltd's Conveyance (1933) Ch 611 at p.631, Romer L.J., in delivering the judgment of the Court of Appeal said:
"It is plain, however, from these and other cases, and notably that of Renals v. Cowlishaw (1878) 9 Ch.D. 125, that if the restrictive covenant be taken not merely for some personal purpose or object of the vendor, but for the benefit of some other land of his in the sense that it would enable him to dispose of that land to greater advantage, the covenant, though not annexed to such land so as to run with any part of it, may be enforced against an assignee of the covenantor taking with notice, both by the
covenantee and by persons to whom the benefit of such covenant has been assigned, subject however to certain conditions. In the first place, the `other land' must be land that is capable of being benefited by the covenant - otherwise it would be impossible to infer that the object of the covenant was to enable the vendor to dispose of his land to greater advantage."
This passage was cited with approval by McLelland J. in Lane Cove Council v. H & W Hurdis Pty Ltd (1955) 72 W.N. (N.S.W.) 284 at p.289. In that case, his Honour held that the covenant could not be enforced by the Council because it did not own any land which could reasonably be regarded as capable of being affected by its breach. It is clear from the judgment that if there had been such land the covenant would have been enforced (subject to other defences not here relevant) even though it may not have been annexed to that land. There had been a similar result in similar circumstances in London County Council v. Allen [1914] 3 K.B. 642 (C.A.).
In Osborne v. Bradley [1903] 2 Ch 446 a negative covenant was enforced in favour of an original covenantee against a purchaser of land with notice of the covenant granted by a previous owner. This was so even though it was held that the covenant was taken by the original covenantee for his own benefit. The case is even more favourable to Perpetual than others relied upon by it because it did not appear that Mr Osborne still owned any land in the vicinity which was capable of being benefited by the covenant. More recent cases are based on there being such a requirement. See, for example, Newton Abbott Co-operative Society Ltd v. Williamson & Treadgold Ltd [1952] Ch. 286 to which I return later in these reasons.
Another example is Marten v. Flight Refuelling Ltd [1962] Ch 115 where Wilberforce J. held that a negative covenant in a conveyance forbidding the use of certain land for other than agricultural purposes was enforceable provided that there was sufficient proof that the plaintiffs (who were together treated as being the original covenantees) owned land capable of being benefited by the covenant. The covenant was enforceable even though the conveyance did not "annex" or identify the land to be benefited by the covenant.
In Preston & Newsom "Restrictive Covenants Affecting Freehold Land" the following commentary (omitting citations) appears (at para. 1-17, p.12):
"(ii) Where the plaintiff is the original covenantee, and the defendant is a person, other than the original covenantor, who has the restricted land
Here the question is one of equity, since at law the burden of a covenant never runs with freehold land. In equity, however, anyone who has the restricted land for any interest is bound unless he is a purchaser for value of a legal estate without notice. But equity will not enforce covenants against the assigns of the covenantor except for the benefit or protection of land capable of being benefited thereby. Hence the plaintiff, even if he be the original covenantee, cannot succeed against the covenantor's assign unless he has land: see the part of L.C.C. v. Allen where the L.C.C. sued Allen's assign. Further, such land must be capable of being benefited by the covenant. In such an action the plaintiff is entitled to succeed if (a) he has protected land and (b) the defendant is subject to the burden of the covenant."
To hold Silkchime as being bound by the Covenant, being a negative covenant, (of which Silkchime had the clearest express notice when it acquired the Remaining Land) in favour of Perpetual as original covenantee which still owns the adjoining Amalgamated Shopping Centre Land, being land which the Covenant "touches and concerns", in my opinion accords with the basic equitable principles reflected in the above cases. In my view, it would be unconscionable in those circumstances for the Covenant to be unenforceable against Silkchime.
Strictly speaking, in view of this conclusion, there is no need to consider whether the Covenant is annexed to and runs with the Amalgamated Shopping Centre Land. The Covenant is enforceable by Perpetual against Silkchime and only the pure constructional points remain. However, in case my conclusion is wrong, in deference to the arguments submitted and in view of the likelihood that future assignees from Perpetual and Silkchime respectively will have an interest in the extent to which the Covenant is enforceable, I now proceed to that further issue.
Benefit - Does the Express Exclusion of Lessees from Taking the Benefit of the Covenant Preclude Annexation of the Covenant to the Amalgamated Shopping Centre Land?
I have set out above the various bases upon which the applicants put their argument that the benefit of the Covenant does not run with the Amalgamated Shopping Centre Land. I shall deal first with the proposition that the express exclusion of tenants from the benefit of the Covenant is quite inconsistent with the concept of a covenant running with the benefited land.
I was not taken to any authority in which a covenant has been held not to be enforceable as a restrictive covenant running with the covenantee's land because lessees of the dominant tenement were, by its terms, excluded from the benefit of the covenant. This seems to be a case of first impression.
The inconsistency referred to above was said to arise out of the fact that a restrictive covenant, so it was put, is in the nature of an equitable easement and therefore the restriction must be such that:
.on its face it is an incident of title to the dominant tenement; and
.it passes with the dominant title so that whoever has an interest in the dominant tenement under the law generally or by virtue of registration or otherwise, also has the right and interest in relation to the restrictive covenant.
It was submitted that like an easement, a restrictive covenant "... is a slicing out of the servient tenement of some proprietary right which is then attached to the dominant tenement."
Mr Emmett contended, by way of an example, that if an easement in the form of a right of way is granted over "Blackacre" in favour of "Whiteacre", any person who has an interest in "Whiteacre" has an interest in the right of way and therefore an interest in "Blackacre". Accordingly, so it was put, if a restrictive covenant is to be treated in the same way, it must follow that all persons who have an interest in the servient tenement must be bound by the restriction and also all persons who have an interest in the dominant tenement must be entitled to enforce the restriction.
The starting point for this submission is that a restrictive covenant is in the nature of an equitable easement. It is true that restrictive covenants have been so described, but the essential nature or characteristics of a restrictive covenant do not appear to have been settled. For example Preston and Newsom at para. 1-12 say this:
"As a matter of theory it is difficult to say exactly what place restrictive covenants occupy in the legal scheme of things. Although the present rules historically owe something to the common law as to covenants and something to the common law as to landlord and tenant, they are mainly equitable in origin and character. They must not be "constricted by technicalities derived from the law of landlord and tenant," and, if the result of "a relentless application of the law governing covenants is to
produce an unsatisfactory or unworkable result, some other basis must be sought." In practice, they should be treated as sui generis; that is, as a class of rights and obligations, originating in contract, but capable of having an operation between parties other than the contracting parties themselves, and bound by a special set of rules worked out for themselves alone by the court with little legislative assistance. The analogy with negative easements appears to be the most helpful. But it does not by itself provide all the answers to all the questions that arise, as was shown by the discussion of the consequences of unity of seisin between the land benefited and the burdened land which took place in Brunner v. Greenslade and Texaco Antilles Ltd v. Kernochan."
In Re Nisbet and Potts' Contract [1905] 1 Ch 391 at pp.396-397 Farwell J. at first instance described a covenant satisfying the rules of Tulk v. Moxhay as "... completely analogous to an equitable charge on a real estate created by some predecessor in title of the present owner of the land charged". On appeal ([1906] 1 Ch 386 at p.409) Cozens-Hardy L.J. said that "the benefit of a restrictive covenant of this kind is a ... right in the nature of a negative easement". See also London County Council v. Allen [1914] 3 K.B. 642 at pp.655-659 and the cases there cited. In that case (at p.667) Scrutton L.J. expressed the opinion that it did not matter whether the equitable doctrine developed from Tulk v. Moxhay proceeded on analogy to a covenant running with the land (at law) or on analogy to an easement.
It is not necessary, for present purposes, for me to select one or other of the characterisations as being supported by the preponderant weight of authority. I simply point to a degree of divergence on the subject. In those circumstances it seems to me, with all due respect to Mr Emmett's submissions to the contrary, to be illogical to start by attempting to put restrictive covenants into a particular category of property interest and then proceed to dictate that any covenant which lacks an element said to be an essential feature of that type of property cannot be a restrictive covenant which runs
with the benefited land. A straightjacket is no place for Equity. Given the divergence on the matter of the juridical nature of restrictive covenants, a more appropriate course is to search the case law to see whether, in the development of this particular area of Equity, any principle has been laid down which requires that the benefit of a restrictive covenant must enure for the benefit of not only the proprietor of the fee simple but also for every person having an interest in the land. I engage in this exercise on the assumption that the parties' intention to exclude lessees from the benefit of the Covenant had legal effect notwithstanding the provisions of s.47 of the Property Law Act 1969 (W.A.). I return to that question later in these reasons.
In Rogers v. Hosegood (at p.404) the Court of Appeal dealt with an argument that the covenants involved in that matter were made with the mortgagors only i.e. persons having only the equitable estate, with the legal estate being in the mortgagees of the land (the land was not registered land). The manner in which the Court of Appeal disposed of that technical difficulty has, in my view, some bearing on the applicants' submission that because lessees of the dominant tenement in this matter do not have the benefit of the Covenant, therefore the benefit did not become annexed to the land. The Court of Appeal said this:
"That a court of equity, however, would not regard such an objection as defeating the intention of the parties to the covenant is clear; and, therefore, when the covenant was clearly made for the benefit of certain land with a person who in the contemplation of such a court was the true owner of it, it would be regarded as annexed to and running with that land, just as it would have been at law but for the technical difficulty."
I must acknowledge that in the covenants with which that case was concerned, there was no express exclusion of the type found in Clauses 2 and 4 of the Covenant.
However, I regard the approach taken by the Court of Appeal as most helpful in explaining how Equity approaches the matter of giving effect to the intentions of the parties to such a covenant. See also the observations, to like effect, of Megarry J. in Brunner v. Greenslade [1971] 1 Ch. 993 at pp.1005-6.
The applicants relied on passages in Rogers v. Hosegood at pp.407-408 and in Pirie v. Registrar-General (1963) 109 CLR 619 at 628 as authority for the proposition that the interest (the restrictive covenant) created by the relevant instrument must be such as to be capable of passing as an incident of the title to the dominant tenement. I see nothing in those cases which requires that the benefit of a restrictive covenant must enure for future lessees before it can run with the dominant land. As mentioned above, no authority directly in point was cited for that proposition.
It is true that in the first of the passages cited from Rogers v. Hosegood (at p.407) the Court of Appeal describes the benefit of the covenant as passing to a purchaser of the benefited land not because the conscience of either party is affected but "... because the purchaser has bought something which inhered in or was annexed to the land bought". That comment should be regarded in the context of the Court's earlier observations (at p.403) to the effect that no difficulty arose as to the burden of the covenants, because the defendant assignee had taken with notice of the covenants. The question for decision was whether the benefit of the covenants had passed to an assign of the original purchaser/covenantee who had no knowledge of the covenants when he bought. However, the question whether the holders of lesser estates in the land might be excluded from the benefit of such a covenant simply did not arise on the facts of
that case. The Court of Appeal was more concerned with stressing the difference between mere personal covenants and covenants which are annexed to the land. In my opinion, nothing said in Rogers v. Hosegood is inconsistent with the proposition that the benefit of a restrictive covenant, the terms of which make the intention of the parties clear, may become inhered in and annexed to a piece of land even though its very terms of creation and annexation exclude lessees from any rights of enforcement. In those circumstances, lessees would enjoy the benefit only to the extent that the owner/lessor saw fit. This could result from the owner/lessor choosing to enforce the covenant or agreeing to a lease the terms of which conferred rights to enjoy that part of the fee simple estate constituted by the benefit of the restrictive covenant. In each such circumstance, the lessee's right to have the covenant enforced would be a derivative one; in the latter case derived through personal contract with the lessor requiring him to enforce the covenant.
This raises, in the present context, the position of those lessees holding interests under registered leases of parts of the Warwick Grove Shopping Centre. Are they to have the benefit of the Covenant on the basis that they hold leases of a property in respect of which the estate in fee simple has, subsequent to the grant of the leases, become enlarged by the Covenant's annexure to that estate? I think that the above reasoning dictates that the answer must be: no. The enlargement of the fee simple estate has built into it the limit that, while it must enure for all registered proprietors of the fee simple estate, its enjoyment by enforcement at the suit of lessees is expressly and emphatically excluded. All of this is, as I have mentioned, subject to the operation of s.47 of the Property Law Act.
Instead of using Clauses 2 and 4 of the Covenant to exclude lessees from its benefit, there would have been nothing to prevent the registered proprietor of the Amalgamated Shopping Centre Land from demising premises on that land in terms which excluded from the property demised any interest in the property comprised by the benefit of the restrictive covenant. So far as future tenants are concerned there does not appear to be any equitable principle which would preclude the registered proprietors of the dominant and servient tenements respectively from agreeing to achieve this in advance. So far as existing lessees of parts of the Amalgamated Shopping Centre Land are concerned (even those holding registered or registrable leases) there seems to be no reason why Equity would require their leasehold estate to be enlarged by this additional proprietorial incident of the fee simple estate before the benefit of the Covenant becomes, in equity, part of the registered fee simple estate either in possession or in reversion. It was quite clearly the intention of both NML and Perpetual that existing lessees (as well as future lessees) were not to have the benefit of the Covenant. The "slicing" process, to which the applicants referred, simply produces a slightly thinner slice, or, perhaps more accurately, a slice which is not thinner, but one which is not grafted onto all the estates which may exist in the land.
Another method of testing the conclusion that there is no reason why, as a matter of principle, lessees may not be excluded from the benefit of a true restrictive covenant is to return to Mr Emmett's "Blackacre"/"Whiteacre" analogy concerning the creation of an easement of way. The grantor of such an easement might be prepared to grant a permanent right of way to the owners of the fee simple in the proposed dominant tenement, on the basis that the volume of traffic generated by such owners alone would probably be tolerable or that the consideration offered for the grant would compensate for that degree of inconvenience. Just as the grant could be limited in terms of excluding, say the passage of the grantee's heavy articulated trucks over the right-of-way, why should the easement not be expressly limited so that its enjoyment, although annexed as an incident of the dominant fee simple, was not to be extended to the grantee's tenants? In Hammond v. Prentice Bros. Ltd [1920] 1 Ch 201 Eve J. had to construe a grant of way "... to the grantees, their heirs and assigns, and their servants, customers, and workmen, and the tenants and occupiers". The question was whether the benefit of the right of way extended to licensees of the owner of the dominant tenement. As can be seen at pp.214-215, his Lordship decided the case on the basis that a grant using the words "AB his heirs and assigns" includes AB's licensees. The additional words in the grant in question did not operate restrictively. Nevertheless, the following passage at p.216 is helpful:
"Parties may, of course, so frame the grant as to demonstrate their intention that it is to be limited in its application to particular objects, but when the grant is in general terms, and there are no circumstances subsisting at the date of the grant and nothing in the grant itself sufficient to point in an opposite direction, I think the proper inference is that the added words are not intended to be read as exhaustive, but rather as illustrative of the individuals or classes of individuals entitled to use the way."
If the applicants' submissions were correct then, for example, in Taite v. Gosling (1879) 11 Ch. 273 there would have been no need for Fry J. to construe the word "assign" in the covenant in that case to decide whether it included a lessee under a 99 year lease. His Lordship did not rely on the nature of a restrictive covenant to find that the lessee could enforce the covenant. This passage, at p.277, suggests that it was open to exclude a lessee expressly from such a right:
"The word `assign' used in such a case as this includes a lessee in ordinary legal language, and no sufficient reason has been produced to show that it ought not to have a similarly wide meaning here."
Even if a restrictive covenant is a quasi-easement, I can see no reason in law or equity why tenants of the dominant land cannot be excluded from enjoying its benefit. In my view, an interest in property may be created by a restrictive covenant which annexes its benefit to the dominant land by words which make it clear that the grant is in favour only of the registered proprietor of the fee simple for the time being and his successors as registered proprietors of that interest. That is what Perpetual and NML have done in the present matter, subject always to the assumption (referred to above) concerning s.47 of the Property Law Act.
When considering the question why Equity might require the benefit of a restrictive covenant to enure for every holder of an interest in the dominant land, certainty is an important factor to be taken into account. That theme runs through the cases and the commentaries alike [see for example D.J. Hayton "Restrictive Covenants as Property Interests" (1971) 87 Law Quarterly Review 539 at that page]. It is important that those who are entitled to the benefit and thus entitled to enforce a restrictive covenant be readily identifiable. However, the Covenant raises no such difficulty; in fact by excluding lessees the task of identifying the persons so benefited is made, if anything, somewhat easier.
As I have mentioned above, the applicants relied on Pirie v. The Registrar-General. In that case the appellants contended that the covenant notified on the certificate of title to their land should be removed because it was not binding upon them. Their single ground of objection (see p.625) was that, when the covenant was granted by their predecessor in title, it did not describe the land to which the benefit was intended to be appurtenant. Kitto J. observed that:
.there was no intention expressed in the covenant that the benefit of the covenant should be annexed to any land or that it was made with the original covenantee in the capacity of owner of any land;
.the only reference to any other land was to the fact that the land being transferred was a lot on a deposited plan; and
.there was nothing to suggest the existence of a building scheme.
I set out below, for other reasons, the whole of the passage from his Honour's judgment at p.628 which was cited by the applicants. The presently relevant portions of that passage are those where his Honour states that a restriction cannot burden a piece of land unless it is so created
"... that the benefit of it is annexed to other land - conferred so as to amount to an added incident of the title and accordingly to pass upon and by virtue of a transfer without any need of specific assignment...".
It is difficult to ascertain the ratio decidendi of Pirie v. The Registrar General, given the manner in which its ultimate outcome was dictated by Windeyer J's conclusions which (so far as here relevant) varied from those of Kitto J. (with whom Owen J. agreed). The central focus of the case was s.88 of Conveyancing Act 1919 (NSW). It is not necessary for present purposes to analyse the decision other than to note that:
.the case was not concerned with a restrictive covenant which limited the classes of persons who might enforce it; and
.three of the five judges were not prepared to deny enforceability to the covenant merely because it did not contain language which identified the land to which the benefit was intended to be appurtenant - see Taylor J.
at p.634, Menzies JJ at pp.643-644 and Windeyer J. at p.649.
I see nothing in Pirie's case which conflicts with my view that, providing the rules in and developed from Tulk v. Moxhay are complied with a covenant will run with the burdened land and the fact that holders of leasehold estates in the land are excluded from the benefit of the covenant does not prevent it from being a restrictive covenant which will run with the benefited land. I now turn to the question whether the benefit of the Covenant was annexed to the Amalgamated Shopping Centre Land.
Was the Benefit of the Covenant Properly Annexed to the Amalgamated Shopping Centre Land?
The applicants contended that the benefit of the Covenant does not run with the Amalgamated Shopping Centre Land because, as a matter of construction, it was not so annexed. It was said that there had been a failure to use adequate express words annexing the covenant to the dominant tenement. The applicants relied upon the decision in J Sainsbury PLC and Haringay LBC v. Enfield LBC [1989] 1 WLR 590 at pp.595, 598. The covenant in that case was originally expressed in terms of "... do hereby covenant with the said Alfred Walker that ..." but Morritt J. applied s.58(1) of the Conveyancing and Law of Property Act 1881 [the equivalent of s.47 of the Property Law Act 1969 (W.A.)] so that the relevant words were taken as reading "... do hereby covenant with the said Alfred Walker, his heirs and assigns that ...". His Lordship reviewed the authorities and held, in my respectful opinion correctly, that the relevant intention must be manifested in the conveyance in which the covenant was contained, when construed in the light of surrounding circumstances, including any
necessary implication in the conveyance from those surrounding circumstances. His Lordship rejected the defendant's claim that such intention may be inferred from surrounding circumstances falling short of those which would necessitate an implication in the conveyance itself (see pp.595-596).
His Lordship then examined the surrounding circumstances which were very different to the present matter. The circumstances were such that the covenantee might well have intended the benefit of the covenants to remain with him rather than run with the land, so that he might exploit that benefit in due course either by express assignment to particular purchasers or by exacting further payments from the owners of the land bound by the covenants, as the price for their release wholly or partially. At p.597 there appear the following observations:
"There is no indication in the covenant itself that it was made with Alfred Walker Junior in his capacity as owner of the retained land. ...
If it had been intended to annex the benefit of the purchasers' covenants to the retained land it is remarkable that there is no reference to the retained land or to Alfred Walker Junior's successors in title in that covenant."
His Lordship then concluded that there were no words in the conveyance indicating any intention to annex the benefit of the purchasers' covenants to the retained land and nor did the surrounding circumstances necessitate any such implication.
By way of contrast, I turn to the terms of the Covenant and note the following factors which, when accumulated, lead, in my opinion, to the opposite result to that which occurred in Sainsbury:
.the Covenant is expressed to be with the transferee as the registered proprietor of both the land transferred (the Subdivided Land) and four other identified pieces of land (which in these reasons I have referred to as the Warwick Grove Shopping Centre Land);
.Clause 2 expresses "the intent that the restrictive covenant will enure only for the benefit of the transferee and its successors in title as the registered proprietor or proprietors of the Benefited Land or any part or parts of it"; (emphasis added). The use of the words "or any part or parts of it" in itself provides cogent evidence of an intent that the Covenant should be annexed to the Amalgamated Shopping Centre Land. Such terminology is a well-known conveyancing device to overcome the problem that a covenant might well run with the whole of the land but not pass (in the absence of express assignment of the covenant) to a subsequent assignee of part of the land. See, for example Drake v. Gray [1936] Ch. 451 and Re Arcade Hotel Pty Ltd [1962] V.R. 274 (Full Court), but see also s.49 of the Property Law Act;
.Clause 4.4 provides that "for the purposes of section 129B of the Transfer of Land Act 1893, the registered proprietor of the Benefited Land for the time being and the registered proprietor of the Burdened Land for the time being covenant with each other that the Restrictive Covenant is entered into for the benefit of the registered proprietor of the Benefited Land and its successors in title and is not entered into for the benefit of any other person"; (emphasis added)
.the surrounding circumstances must at least include the correspondence which forms part of the transfer and that correspondence (see in particular a letter dated 1 August 1994) clearly expresses an intention that any arrangements for the removal of the restrictive covenant are to be made in future between the respective owners of the two parcels of land at that time. The correspondence also explains the circumstances giving rise to the attempted exclusion of the lessees of the Amalgamated Shopping Centre Land from the benefit;
.the circumstances that the Amalgamated Shopping Centre Land was then being used as a shopping centre and the very terms of the Covenant are evidence of a design to prevent competition with the shopping centre by preventing the use of the adjoining Remaining Land for such competitive purposes; and
.the very fact that the parties chose to embody the Covenant in a registrable transfer of the land.
In Re Union of London and Smith's Bank Ltd's Conveyance, Miles v. Easter [1933] 1 Ch 611 at pp.634-5 the Court of Appeal contrasted the terminology used in the drafting of certain vendors' covenants with those on the purchasers' part:
"In the indenture are contained certain restrictive covenants on the part of the vendors as to the user of the land coloured green, and those covenants are expressed to be made with the `purchasers their heirs and assigns or other the owner or owners for the time being of the land coloured pink or any part or parts thereof'. These are apt words to ensure that the benefit of the covenant should run with the pink land and every part of it..."
The Covenant describes the character in which the covenantee and its successors in title receive the Covenant (as registered proprietors) and expressly declares that the covenant is taken for their benefit as registered proprietors of the Benefited Land or any part or parts of it, thus following one of the "familiar methods" referred to by Greene L.J. in Drake v. Gray [1936] 1 Ch. 451 at p.466. The principles are usefully summarised in Megarry and Wade "The Law of Real Property" (5 ed) at p.782:
"The benefit will be effectively annexed to the land so as to run with it if in the instrument the land is sufficiently indicated and the covenant is either stated to be made for the benefit of the land, or stated to be made with the covenantee in his capacity of owner of the land; for then in either case it is obvious that future owners of that land are intended to benefit. A classic formula is "with intent that the covenant may enure to the benefit of the vendors their successors and assigns and others claiming under them to all or any of their lands adjoining." It will be noted that this formula indicates the benefited land only in general terms, so that precise definition is not required. On the other hand, to covenant merely with "the vendors their heirs executors administrators and assigns" is insufficient, for no reference is made to any land, and the reference to executors and others is so wide that it indicates no particular purpose."
In my view, the Covenant contains language sufficient to disclose the intention that the benefit of the restrictive covenant should pass to the respondent and its successors in title as owners of the Amalgamated Shopping Centre Land and thus be annexed to that land.
I have reached the foregoing conclusion without having to refer to s.47 of the Property Law Act 1969 (W.A.). In my opinion that section operates as additional reinforcement for that conclusion. The section provides:
"Benefits of covenants relating to land
47(1)A covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successors in title and the persons deriving title under him or them, and has effect as if those successors and other persons were expressed.
(2)For the purposes of subsection (1) in connection with covenants restrictive of the user of land, "successors in title" shall be deemed to include the owners and occupiers for the time being of the land of the covenantee intended to be benefited.
(3)This section applies only to covenants made after the coming into operation of this Act."
The applicants submitted that where, as here, the parties to a covenant demonstrate by its language an intention that the covenant will not impose a restriction on all subsequent occupiers, s.47 does not operate to annex the covenant to the dominant tenement in defiance of their wishes. Mr Emmett pointed to Federated Homes Ltd v. Mill Lodge Properties Ltd [1980] 1 All E.R. 371 at p.381 and Roake v. Chadha [1983] 3 All E.R. 503 at p.508 as authorities for that proposition.
I must say that I have difficulty reading anything in Federated Homes which would prevent the application of s.47 in the present matter. It is true that the case involved s.78 of the Law of Property Act 1925 (U.K.) which was in substantially identical terms to s.47. In the passage relied upon by the applicants (at p.381) Brightman L.J., with whom Browne L.J. and Megaw L.J. agreed, said:
"I find the idea of the annexation of a covenant to the whole of the land but not to a part of it a difficult conception fully to grasp. I can understand that a covenantee may expressly or by necessary implication retain the benefit of a
covenant wholly under his own control, so that the benefit will not pass unless the covenantee chooses to assign; but I would have thought, if the benefit of a covenant is, on a proper construction of a document, annexed to the land, prima facie it is annexed to every part thereof, unless the contrary clearly appears."
The problem to which Brightman L.J. was referring was not the problem which is said to arise in the present matter by the express exclusion in the Covenant of lessees from being entitled to its benefit. The result in Federated Homes was that s.78 was applied to cause the benefit of the restrictive covenant in question to run with the land.
I regard Federated Homes as a most useful decision which assists in deciding the present matter. It is only necessary to refer to that aspect of the case which concerned what was called "the red land". The Court of Appeal disagreed with the conclusion of the judge at first instance that s.78 had not annexed the benefit of the covenant to the red land. The trial judge regarded s.78 as "simply a statutory shorthand for the shortening of conveyances" and that annexation of the benefit of a restrictive covenant depended upon appropriate drafting. The Court of Appeal rejected the suggestion that s.78 was simply a statutory shorthand. At p.379 Brightman L.J. said:
"For myself, I reject the narrowest interpretation of s.78, the supposed orthodox view, which seems to me to fly in the face of the wording of the section. Before I express my reasons I will say that I do not find it necessary to choose between the second and third views because, in my opinion, this covenant relates to land of the covenantee on either interpretation of s.78. Clause 5(iv) shows quite clearly that the covenant is for the protection of the retained land and that land is described in cl 2 as `any adjoining or adjacent property retained by the Vendor'. This formulation is sufficient for annexation purposes: see Rogers v. Hosegood."
I consider that it is appropriate to apply the same reasoning in the above passage to the present matter. The terms of the Covenant show quite clearly that it is for the
protection of the Amalgamated Shopping Centre Land and that land is specifically identified in the Covenant. A further reason for applying s.47 is that in my view, for the reasons which I set out below, the Covenant "touches and concerns" that land and is thus, for that reason also, "related to the land of the covenantee".
In Roake v. Chadha the relevant covenant expressly stipulated that it would not enure for the benefit of any owner or subsequent purchaser of the covenantee's land unless the covenant were expressly assigned. Judge Paul Baker QC (sitting as a Judge of the High Court) held that merely because s.78 of the English Act deemed the covenant to be made with the covenantee and his successors in title, it did not follow that the benefit of the covenant ran with the land. At p.508 his Honour said:
"The true position as I see it is that, even when a covenant is deemed to be made with successors in title as s.78 requires, one still has to construe the covenant as a whole to see whether the benefit of the covenant is annexed. Where one finds, as in the Federated Homes case, the covenant is not qualified in any way, annexation may be readily inferred; but, where, as in the present case, it is expressly provided that `this covenant shall not enure for the benefit of any owner or subsequent purchaser of any part of the Vendor's Sudbury Court Estate at Wembley unless the benefit of this covenant shall be expressly assigned' one cannot just ignore these words. One may not be able to exclude the operation of the section in extending the range of covenantees, but one has to consider the covenant as a whole to determine its true effect. When one does that, then it seems to me that the answer is plain and in my judgment the benefit was not annexed. That is giving full weight to both the statute in force and also what is already there in a covenant."
I respectfully agree with his Honour's approach. Unlike the stipulation in Roake v. Chadha, the restriction expressed in the Covenant against the benefit passing to lessees does not, in my view, amount to an expressed intention that the Covenant should not be annexed to the land.
The respondent submitted that s.47 of the Property Law Act was mandatory in its terms and not subject to the expression of any contrary intention. Counsel for the respondent pointed to the contrasting introductory words of s.48 of the Property Law Act dealing with the burden of covenants relating to land "unless a contrary intention is expressed ...". Judge Baker referred to that question in Roake v. Chadha without answering it and decided the case on the assumption (in respect of which he was far from satisfied) that the English section equivalent to s.47 had a mandatory operation.
The evidence discloses that at the time when the Covenant was created, there was constructed on the Amalgamated Shopping Centre Land a shopping centre which had recently changed hands for $55.5 million. As part of the bargaining process leading to that sale, the purchaser stipulated for a restrictive covenant to prevent the Remaining Land from being used for retail or showroom purposes. I refer to Mr Frost's evidence summarised above. Then there is Mr Jeanes' evidence, summarised above, concerning the vacant shops in the Warwick Grove Shopping Centre. If the owner of the adjoining Remaining Land were allowed to use it for retail and display purposes (i.e. shops and showrooms) what is the probable effect of that on the prospect of either letting those premises or the rent likely to be obtained for those premises or for that matter the premises which are leased but which may come up for renewal in future? In that regard I refer to Mr Carey's statement to Mr Calderwood concerning the premium rents being paid at the Warwick Grove Shopping Centre. I do not need to find whether or not premium rents are in fact being obtained. The reasonably held views of those concerned are sufficient. Mr Carey was initially not one of those concerned, but he is, in my opinion, close enough to the matter for his views to have a bearing on whether the views taken by those representing NML and Perpetual were reasonably taken. I am prepared to infer from that evidence and I do so infer, that the value of the Amalgamated Shopping Centre Land is enhanced by the Covenant. On the authorities, to which I refer below, this means that the Covenant "touches and concerns" that land. The applicants say that if the Amalgamated Shopping Centre Land were not a shopping centre but were some other form of use then the Covenant might well be detrimental to the land. There are two answers to that submission. First, those are not the facts of the present matter. Secondly, if the use of the
Amalgamated Shopping Centre Land changed so that it became advantageous for the Remaining Land to be used for retail or showroom purposes then there is no risk of detriment to the land. The reality is that the Covenant would probably either be released or simply not enforced. The Covenant enhances the value of the Amalgamated Shopping Centre Land by conferring control, in the traditional and requisite negative manner, over certain uses of the Remaining Land which might create competition for the use being made of the Amalgamated Shopping Centre Land. In terms of Tulk v. Moxhay, the benefit to Mr Tulk in preventing building on the field in Leicester Square was that at the relevant time his land was used as a residential property. If his residence had been pulled down or converted into licensed premises, then there may have been a distinct advantage in having a densely populated piece of land adjoining rather than a field in Leicester Square. The applicants' argument boils down to the proposition that simply to stop a particular business from being carried on does not necessarily benefit land "as land". The submission was that to be valid, the restraint had to be something which enhanced the amenity or enjoyment of the land as a parcel of land rather than simply something that stops competition with the business carried on upon that land.
In my view, the cases demonstrate that for a covenant to "touch and concern" the dominant land it is sufficient that, at the time of its creation, the covenantee reasonably held the view that the restriction added value to the land being acquired, even if this was achieved by preventing competing business from an adjoining servient tenement. That was the approach taken by Brightman J. in Wrotham Park Estate Co Ltd v. Parkside Homes Ltd [1974] 1 WLR 798 at p.808:
"If a restriction is bargained for at the time of sale with the intention of giving the vendor a protection which he desires for the land he retains, and the restriction is expressed to be imposed for the benefit of the estate so that both sides are apparently accepting that the restriction is of value to the retained land, I think that the validity of the restriction should be upheld so long as an estate owner may reasonably take the view that the restriction remains of value to his estate, and that the restriction should not be discarded merely because others may reasonably argue that the restriction is spent. I think that this accords with the judgment of Sargant J. in the Northbourne case [1922] 2 Ch. 309 and of Wilberforce J. in the Marten case [1962] Ch. 115."
One test whether a covenant touches and concerns the land or is merely collateral is whether its benefit depends upon the covenantee being the owner of the land. If the covenant is beneficial to the covenantee regardless of whether he is the owner of the dominant land then it is a mere collateral covenant - see the observations of Lord Oliver of Aylmerton in P & A Swift Investments v. Combined British Stores Group P.L.C. [1989] 1 AC 633 at pp.640-641. Admittedly that case concerned a covenant in a lease but their Lordships reviewed and approved a line of cases which included Rogers v. Hosegood without drawing any distinction, on this aspect, between covenants contained in leases and covenants in conveyances of freehold estates. This test for distinguishing simply collateral covenants was referred to with apparent approval by Lord Macnaghten in Dyson v. Forster [1909] AC 98 at p.102.
The respondent also relied on the decision of Upjohn J. in Newton Abbott Co-operative Society Ltd v. Williamson & Treadgold Ltd [1952] Ch 286. In that case, a covenant in restraint of trade was held to be enforceable by the successor in title to the grantee of the covenant. This was not because the benefit was annexed to the dominant premises. It is quite clear from p.290 of the report that because the dominant premises were not identified in the relevant conveyance, the benefit of the covenant was not annexed to
those premises. His Lordship held that the covenant could be enforced because, although not so annexed, the benefit was capable of passing by express assignment and operation of law. It formed part of the original covenantee's personal estate and on her death passed as such under her will. It was enforceable against the assigns of the original covenantor, taking with notice, because when the original covenantee took the covenant in 1923 she retained other lands capable of being benefited by the covenant. Those lands, although not defined in the conveyance, were otherwise indicated with reasonable certainty by the attendant circumstances. The reason those lands were capable of being benefited was because the covenant added value to both the land and the ironmongers business then being carried on upon it by the original covenantee (see pp.293-294). In the Royal Victoria Pavilion case (at p.590) Pennyquick J. would have followed the decision in Newton Abbott Co-operative had his Lordship not held the covenant to be a personal one. The Newton Abbott Co-operative case was referred to with apparent approval but distinguished on the facts in McGuigan Investments Pty Ltd v. Dalwood Vineyards Pty Ltd [1971] NSWR 686. In McGuigan, Hope J. prefaced his consideration of the point in these terms:
"Warrington, L.J., has said that in order to determine the question whether the covenant does touch and concern the land of the covenantee it must appear that the land to which the benefit purports to be attached may be reasonably regarded as capable of being affected by the performance or the breach of the obligation in question: Kelly v. Barrett, [1924] 2 Ch. 379, at p.410; [1924] All E.R. Rep. 503. In many cases the observance of the covenant is intended to and does benefit the relevant land because it enables the covenantee the better to enjoy his land, and in other cases the relevant land is benefited because the observance of the covenant enhances the value of that land."
In Quadramain Pty Ltd v. Sevastapol Investments Pty Ltd (1976) 133 CLR 390 at pp.413-419 Jacobs J. distilled the ratio of the Newton Abbott Co-operative case
(although his Honour expressed some reservations about the correctness of the decision) in the course of the following observations:
[at p.413]"If Newton Abbot Co-operative Society Ltd v. Williamson & Treadgold Ltd is correctly decided, the law relating to restrictive covenants does not contain within itself principles sufficient to prevent undue restraints of trade and the position now appears to be as follows: restraint of competition may increase the value of the land upon which the business sought to be protected is carried on; the restraint may perpetually encumber the land on which the restriction is imposed and the owners thereof from time to time in the carrying on of a competing trade; the fact that the restraint is necessarily limited in point of space is no longer of itself a source of validity of the restraint. The purpose of the common law in prohibiting restraints designed simply to protect a business from its competitors is defeated."
[at p.418]"... the question first arises whether the benefit of that restriction [the restriction in issue in Quadramain was to the effect that the land would not be the subject of an application for a liquor licence] is appurtenant to the land of the covenantee. If its only purpose and effect is to protect the business carried on upon that land from competition, that is not enough. If Newton Abbot Co-operative Society Ltd v. Williamson & Treadgold Ltd was correctly decided it may be sufficient if as a result the value of the land is necessarily affected. "It is old law that in cases not between lessor and lessee the benefit of a covenant will pass if and in so far as it necessarily affects the value of the land, in this sense, that the owner of the land would get more for his land by reason of the covenant being attached to and annexed to it": per Cozens-Hardy M.R. in Forster v. Elvet Colliery Co Ltd; affd. sub nom. Dyson v. Forster.
In Newton Abbot Co-operative Society Ltd v. Williamson & Treadgold Ltd Upjohn J. was able to find in the particular circumstances that the value of the land was in fact increased. In Allen v. Lawson there was no dispute that the value of the land would be affected according as to whether the covenant against carrying on the business of a milliner was held to be enforceable or not."
Jacobs J. was in dissent in Quadramain. All of the other judges forming the majority approached the matter on the basis that the covenant was a restrictive covenant which ran with the dominant and servient land respectively: see Barwick C.J. at p.394, McTiernan J. at p.396, Gibbs J. at pp.403-404, Stephen J. at p.405, and Mason J. at
p.406. If the majority had agreed with Jacobs J. that the covenant did not run with the dominant land, they would not have had to consider whether the doctrine of restraint of trade had any application.
Allen v. Lawson [1926] VLR 1 involved a covenant in a transfer whereby the transferee covenanted on his part and on the part of successive registered proprietors not to carry on the business of a milliner on the land. At first instance Weigall A-J said (at p.6):
"The whole question reduces itself to this: whether this covenant is in any real sense a covenant for the protection or for the benefit of the land retained and contiguous to or in the neighbourhood of the land transferred. It was for the benefit of the land retained in this sense, that the existence of such a covenant was clearly intended to preserve from diminution the business value of this land retained by preventing anyone from starting on the land transferred some similar and rival business. It seems to me, therefore, that this covenant was a covenant not merely expressed to be for the protection of the land retained, but actually for its protection in a sense which is, I think, one of the senses in which the term is used in the authorities which establish the principle that restriction is enforceable by the owner for the time being of the land retained.
Mr Walker has argued that such a restriction does not "touch and concern" the land retained. I think it does in one sense, in the sense of the authorities expounding the principle of Tulk v. Moxhay, and in the sense which alone has here to be considered. I think that this restriction is enforceable by any owner for the time being of the land retained as against any person who, with notice of the restriction, is occupying any part of the land transferred, and is using it contrary to the restriction."
An appeal to the Full Court was dismissed. In London Country Council v. Allen Buckley L.J. (at p.654) explained the rationale of Tulk v. Moxhay in these terms:
"The reason given is that, if that [enforceability of the covenant] were not so, it would be impossible for an owner of land to sell part of it without incurring the risk of rendering what he retains worthless."
In Pirie v. Registrar-General (1962) 109 CLR 619 at p.628 Kitto J. observed:
"But it is basic to the doctrine of Tulk v. Moxhay that it applies only to a restriction created to preserve the value of other land, and that the restriction is not enforceable against derivative owners except for the protection of that other land."
Applying the principles reflected in the above cases to the present matter, I find that the Covenant was clearly intended to prevent the Amalgamated Shopping Centre Land from the risk of diminution in value which was perceived as being likely to result if the owner of the adjoining remaining land were free to use it for competing retail and display purposes. The evidence was that Perpetual bought the Amalgamated Shopping Centre Land as delegate of the trustee for the GEM Retail Property Trust. That land had been specifically developed as the Warwick Grove Shopping Centre, the premises in which were leased (except for at least four of the shops referred to above). The shopping centre itself was legally part of that land. A major function of the land so developed (if not the primary function) was to generate rental income usually associated with leased shopping centre premises. Doubtless part of the purchaser's duties as the trustee's delegate was to protect the capital value of the property. In my view the Covenant was intended to preserve the income-generating capacity of the shopping centre erected on and forming part of that land and to maintain the capital value of the land. Such a covenant is not to be characterised as "collateral" but, in my opinion, touches and concerns the land as such.
What Restraint Does the Covenant Create?
The applicants' final contention was that if I found against them in respect of all of the above propositions (as I have) that the Covenant, on its proper construction, only bound the registered proprietors of interests in the land. The applicants sought declarations that the Covenant:
.does not bind those successors in title of NML who are not registered proprietors of the Remaining Land. [This declaration was sought so that Silkchime may grant leases for retail purposes to lessees who will not register those leases];
.does not preclude Silkchime from leasing the Remaining Land or any part of it to a third party which intends to construct a shopping centre on it or who might wish to develop the Remaining Land and use it for retail sale of goods.
Mr Emmett submitted that the Covenant was expressed in terms which bound the registered proprietor not to use the Remaining Land for the particular purposes stipulated but that the word "use" does not mean "suffer or permit to be used". The Covenant would not preclude Silkchime, so it was put, divesting itself temporarily of the exclusive right to occupy the Remaining Land by a lease, and if the lessee used that land in a particular way then it was not Silkchime who was so using the land. I was referred to the House of Lords decision in Tophams Ltd v. Sefton [1967] AC 50. In that case the Earl of Sefton conveyed Aintree racecourse to Tophams Ltd by a conveyance which contained a covenant on the purchaser's part "... not to cause or permit the land to be used otherwise than for the purpose of horseracing and agricultural purposes ...". The covenant was expressed as being binding on Tophams Ltd only during the Earl's lifetime and in terms that the company would not remain liable for a breach of the covenant occurring on or in respect of the land after it should have parted with all its interest therein. Tophams Ltd entered into a contract to sell the land to Capital & Counties Property Co Ltd ("Capital"), a development company. Tophams Ltd knew that Capital intended to develop the land as a housing estate and there was reference in the sale agreement to the appointment of a planning consultant to prepare a planning scheme on which to base an application for outline planning permission. At first instance, and in the Court of Appeal, the Earl of Sefton was successful in obtaining an injunction restraining Tophams Ltd from conveying the land to Capital. The House of Lords, by majority, allowed Tophams Ltd's appeal. Their Lordships held that one cannot permit that which one does not control. By parting with the land, Tophams Ltd would divest themselves of any authority in respect of it and it could not be said that by the conveyance to Capital, Tophams Ltd as vendor permitted the subsequent user of the land by Capital. On the question of "causing" the prohibited use, Mr Emmett referred me to a passage in Lord Guest's speech at p.68 where his Lordship contrasted a real effective cause with a causa sine qua non, the latter being merely a preceding incident in the history of events. In that passage Lord Guest cited Berton v. Alliance Economic Investment Co Ltd [1922] 1 KB 742, a case upon which the applicants also relied as being "perhaps a more apt case". Berton v. Alliance Economic Investment Co Ltd involved the question whether certain conduct of the assignees of a lease in relation to weekly tenants of a sub-lessee amounted to the breach of a covenant not to permit certain premises to be used for any purpose other than as a private dwelling house. The passage relied upon by the applicants was in the reasons for judgment of Atkin L.J. at p.759:
"It is clear that a person under a covenant not to use premises in a particular way cannot commit a breach of the covenant except by his own act or that of his agent. The same is true of a covenant not to permit. The user in one case and the permission in the other must be something which can be predicated of the defendant or the defendant's agent. It is not sufficient to show that the premises have been used in a way which would constitute a breach of the covenant; it must further be shown that the user is by the defendant or his agent, or that it is permitted by the defendant or his agent."
The applicants went so far as to say that even if the burden of the Covenant ran with
the land, the promise contained within it binds only registered proprietors.
In my opinion there are two answers to that submission. The first is that the Covenant, in equity, binds the Remaining Land. I have held that the burden of the Covenant runs with that land. In those circumstances the authorities, to which I will come in a moment, show that such a covenant binds any lessee or occupant, even a person holding title by adverse possession. Even without the authorities, as a matter of construction, there is nothing in the language expressing the extent of the burden of the Covenant which, in my view, requires a construction restricting those bound to only those who are registered proprietors. It would require express words of exclusion to cut down the well-recognised generality of the effect achieved by the formula used in the first part of Clause 2 of the Covenant. The effect to which I refer is that the burden of the Covenant runs with the Remaining Land. The draftsperson can be seen, from the wording chosen, to have understood that problem when making the attempt to restrict the extent of the objects on the benefit side. On that side the draftsperson referred to the generality of what had gone before, used the word "only" before referring to the Transferee and its successors in title as registered proprietor or proprietors and endeavoured expressly to exclude tenants from the benefit of the Covenant. In those circumstances, my opinion is that there is no room for implying such a restriction in respect of the objects of the burden of the Covenant.
I now turn to some of the authorities. The case of Mander v. Falcke [1891] 2 Ch. 554 concerned a house which was being used as a brothel, contrary to the terms of a covenant in the head lease. There was a sub-lease but it was not the sub-lessee who was conducting the brothel. The brothel was being run by the sub-lessee's father who appeared not to have any proprietorial interest in the sub-lease. The father advanced the argument, both at first instance and on appeal, that because he had no legal or equitable interest in the house, he could not be sued and be made the subject of an injunction. In argument Bowen L.J. asked counsel for the father the following:
"Is a person who goes into a house with notice of an agreement that it shall not be used in a particular way in a better position as regards that agreement because he has no title?"
Lindley L.J., in short reasons for judgment, answered that question along the following lines:
"I treat him simply as an occupier managing the business. He may be neither an assignee nor purchaser, but he is in occupation, and that is enough to affect him, he having notice of the covenants in the lease. I have not followed all the cases from Tulk v. Moxhay but in Wilson v. Hart Law Rep. 1 Ch 463 it was held that a tenant from year to year was bound in equity by a restrictive covenant of which he had express notice, and though I cannot say that it has been decided that a mere occupier is in the same position, I am satisfied on principle that a simple occupier comes within the decision of Lord Cottenham in Tulk v. Moxhay. The appeal will be dismissed."
Bowen L.J. agreed, and said:
"If a man by the leave of a person who is bound by a restrictive covenant as to the use of land enters into possession of the land with notice of the covenant, he will be restrained from violating that covenant."
I must acknowledge that the restrictive covenant in Mander v. Falcke was contained in a lease and that the decision was an interlocutory one. Nevertheless the Court applied Tulk v. Moxhay in a manner which I regard as being most helpful in the present case and the Court comprised Lindley L.J. and Bowen L.J. Farwell J. referred to Mander
v. Falcke in Re Nisbett v. Pott's Contract [1905] 1 Ch. 391 in the context of deciding whether a restrictive covenant forbidding the erection of shops on land (together with other negative restraints) had been extinguished by a subsequent possessory title and transfer without notice. At p.398 Farwell J. rejected the proposition that a person to be bound by the restrictive covenant running with the land must derive title from the covenantor. It is implicit that his Lordship would have had no doubt that a person deriving title from the covenantor would have been bound unless that person could prove that they were a purchaser of the legal title without notice. Farwell J's judgment was affirmed in the Court of Appeal and the case was cited with apparent approval by Gibbs J. in Quadramain Pty Ltd v. Sevastapol Investments Pty Ltd.
Secondly, the applicants in their written submissions concede that, save where a contrary intention is expressed, s.48 of the Property Law Act extends the burden of a covenant running with the land to owners and occupiers for the time being of the servient land. I have held that there was no such contrary intention.
In my view, both as a matter of construction and in equity, the Covenant would bind any lessee or occupier of the Remaining Land whether taking a registered or an unregistered interest in that property. As Lord Cottenham said in Tulk v. Moxhay itself (at p.777):
"... if an equity is attached to the property by the owner, no-one purchasing with notice of that equity can stand in a different situation from the party from whom he purchased."
In my view, the same principle applies to a lessee. The Covenant can not be rendered
nugatory by the simple expedient of granting, say, an unregistered 99 year lease to a shopping centre developer. The words of Lord Bacon V.C. in Nicoll v. Fenning (1881) 19 Ch.D. 258 at p.266 come to mind:
"The functions of a Court of Equity are to prevent the commission of frauds of any sort, and it is the duty of the Court to suppress chicanery or ingenious devices for the purpose of evading a plain distinct obligation. It has been objected that the proviso was not in the usual form. It is unnecessary to inquire whether this was the first or the ten-thousandth time it had been used."
It is not necessary for me to decide whether Silkchime would breach the Covenant by granting a lease with actual knowledge that the lessee intended to use the land in contravention of the Covenant.
Strictly speaking, it is also not necessary for me to add this further constructional point, and I do so only because there might be something in it which should perhaps be considered if the matter proceeds to a higher level. It concerns the particular language of restriction used in the Covenant i.e. "... will not use the Burdened Land for any purpose involving: (a) retail sale of goods...". I consider that there is considerable merit in the proposition that by, for example, granting a lease to a shopping centre developer, Silkchime would be using the land for the purpose of generating income by way of rent. In the circumstances posited, given the width of meaning inherent in "involving", the carrying out of that purpose would involve the retail sale of goods. However, I do not decide this case on that basis.
Rectification
In view of the conclusions which I have reached above, it is not necessary to decide the suit for rectification which the respondent brought in its cross-claim. The cross-claim was brought only to rectify the Covenant if I came to contrary conclusions to those which I have expressed above about the extent of its enforceability.
I was asked not to make any formal orders until the parties had an opportunity to consider my reasons for judgment. Accordingly, I request the parties to confer with a view to reaching agreement as to appropriate orders reflecting these reasons. In default of such agreement each party is to file and serve upon the other a minute of proposed orders and short submissions in support of those orders, within 14 days.
I certify that this and the preceding seventy-nine
(79) pages are a true copy of the Reasons for
Judgment of Justice Carr.
Acting Associate:
Date: 16 November, 1995
Counsel for the Applicant: Mr A.R. Emmett QC
(with Mr D.M. Stone)
Solicitors for the Applicant: Williams & Hughes
Counsel for the Respondent: Mr W.S. Martin QC
(with Mr B. Dharmananda)
Solicitors for the Respondent: Mallesons Stephen Jaques
Date of Hearing: 4, 5, 6 September 1995
Date of Judgment: 16 November, 1995
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