Lynn v Deguisa
[2017] SADC 78
•21 July 2017
District Court of South Australia
(Civil)
LYNN & ORS v DEGUISA & ANOR
[2017] SADC 78
Judgment of His Honour Judge Tilmouth
21 July 2017
REAL PROPERTY - TORRENS TITLE - RESTRICTIVE COVENANTS - ENFORCEABILITY AND EFFECT
The plaintiffs brought proceedings for an extension of a caveat over the defendants' property, lodged by the plaintiffs to enforce a restrictive covenant entered on the title. The restrictive covenant dates back to the mid 1960s when a large parcel of land was subdivided into 64 suburban allotments.
Held:
1. The covenant formed a component of a Common Building Scheme with respect to 62 of the 64 allotments.
2. Such schemes are recognized by law and the covenants are enforceable in equity.
3. Once registered on the title, subsequent purchasers are bound by it, and deemed to have notice.
4. With such notice, it is then for a subsequent purchaser to make further searches to ascertain the nature and extent of the Common Building Scheme.
5. The plaintiffs have standing in the within proceedings.
Austerberry v Corporation of Oldham (1885) 29 Ch D 750; Tulk v Moxhay (1848) 2 Ph 774; Haywood v Brunswick Permanent Benefit Building Society (1881) 8 QBD 403; Baramon Sales Pty Ltd v Goodman Fielder Mills Ltd (2002) V ConvR 54-654; Midland Brick Co Pty Ltd v Welsh (2006) 32 WAR 287; Blacks Ltd v Rix (1962) SASR 161; Real Property Act 1886 (SA) s 123, s 128; Town Planning Act 1929 (SA) s 11; Real Property Act 1886 (SA) s 49, s 41, s 69, s 77; Netherby Properties Pty Ltd v Tower Trust Ltd (1999) 76 SASR 9; Davies v Littlejohn (1923) 34 CLR 174; Allen v Lawson [1926] VLR 1; Elliston v Reacher [1908] 2 Ch 374; Re Barry and the Conveyancing Act (1961) 79 WN (NSW) 759; Pirie v The Registrar-General (1962) 109 CLR 619, referred to.
Burke v Yurilla SA Pty Ltd (1991) 56 SASR 382; Bursill Enterprise Pty Ltd v Berger Bros Tracking Co Pty Ltd (1979) 124 CLR 73, applied.
Vrakis v Mills (2007) V ConvR 54-733; Netherby Propertes Pty Ltd v Tower Trust Ltd (1999) 76 SASR 9; Re Dennerstein [1963] VR 688, distinguished.
Clem Smith Nominees Pty Ltd v Farrelly & Farrelly (1978) 20 SASR 227, discussed.
Lands Titles Office Formas and Practice Jessup 1963, considered.
LYNN & ORS v DEGUISA & ANOR
[2017] SADC 78Contents
Introduction
The parties
The lands
The encumbrance(s)
The nature and structure of the encumbrance(s)
The legal nature of encumbrances
Due execution of the encumbrances
Typed endorsement added afterwards
Incomplete effect
Identification of a common building scheme
Capacity to bring the proceedingsConclusion
Introduction
It may not be so well known as it once was, that there were a number of substantial land holdings devoted to market gardening and primary production for well over a decade following the Second World War, in and around the Western suburbs of metropolitan Adelaide. With increasing population growth and no doubt rising Council rates, most of these landholdings eventually succumbed to the economic pressure to sub-divide. All the same the ambition to own quarter acre blocks remain unquestioned. The properties involved in these proceedings are an example of that process.
The complexities of sub-division in the law of Real Property, come into sharp relief in these proceedings. They call into question legitimate conveyancing practices of the past, ill-suited to modern notions of urban development and renewal.
Stated briefly for the present, the plaintiffs’ desire to enforce encumbrances protecting restrictive covenants etched into the title of some 52 properties, including one belonging to the defendants. The covenants confine the nature and extent of the building permitted thereon. The defendants have planning approval to divide their property and erect two Townhouses, after demolishing an existing home. Taken at face value, this proposal is in breach of the restrictive covenant. The questions calling for determination are whether the restrictive covenant is valid, whether it is enforceable against the defendants, and if so, at the behest of the plaintiffs. These reasons explain why the action must succeed and why the encumbrance remains enforceable.
The parties
The three plaintiffs Ann Lynn, Christine Evans and Richard John Fielder Jr are the executors of the estate of the late Betty Joan Fielder. Betty Fielder was a party to the original restrictive covenants in question as one of the two encumbrancees. The other encumbrancee was Keith Oliver Ayton. Betty Fielder passed away in November 2014.
The defendants Nick Deguisa and Tori McKenzie are the registered proprietors of the land contained and described in Certificate of Title Register Book Volume 5804 Folio 557, situated at 538 Henley Beach Road, Fulham. They purchased the property as tenants in common for $340,000 in late 2007, from the executors and sons of the estate of the late Muriel McKenzie. The Memorandum of Transfer number T10859503 was registered on the title on 23 January 2008.[1] This land is subject to the registered restrictive covenant number 2675722.
[1] Exhibit D5.
This property and the other allotments involved are most conveniently identified in this judgment by reference to the Lot numbers in the Gaetjens Plan annexed and marked ‘Annexure A’ (the Gaetjens Plan). The defendants’ land is that referred to as Lot 3. An original title was held over the greater part of a large parcel of land bounded by Susan Street, Riverside Drive and the River Torrens to the North and the East (V2442 F85), from which four new titles were created, namely V3310 Folios 184-187. It would appear this took place in around 1965. These are the lots 1-4 on the Gaetjens Plan. Allotment 5 is contained in the Certificate of Title V3310 F182.
The endorsements on the ‘parent’ title demonstrate that Keith Ayton and Betty Fielder transferred and granted an encumbrance over the title V3310 F186 on 8 November 1965 at 11.10 am, to Giulio and Franca Boin. At the very same time, encumbrance No 2675722 in favour of the vendors was entered on the title. In turn the Boins transferred the property to John and Muriel McKenzie on 20 November 1967. Mr Fielder is the owner of two nearby parcels of land, namely Lots 5 and 35 on the Gaetjens Plan. Mr Fielder Snr was entered in the Register as Proprietor of Lot 5 on 13 April 1965.[2]
[2] Exhibit D6.
The plaintiffs’ case in a nutshell is that the original restrictive covenants contained and recorded in registered encumbrances, bind subsequent purchasers of each encumbered allotment. The defence case is that the encumbrances are invalid, unenforceable and ineffective at the behest of the current plaintiffs. Proceedings originally came before the court after the plaintiffs sought an extension of time on a caveat entered over the defendants’ property in July 2016. This caveat was lodged to protect the plaintiffs’ interest in enforcing the encumbrance over the defendants’ property.
Interim orders were made extending the time for the removal of the caveat pending resolution of these proceedings. Soon after orders were made for the early trial of the matter, and by filing points of claim and response in lieu of pleadings and for evidence to be taken by way of affidavit. Short oral evidence was later given by Mr Fielder and the plaintiffs’ solicitor, Mr Morgan, at the request of the defendants.
The lands
Lots 3, 5 and 35 are small portions of a much larger area of approximately 68 acres comprising in all 54 allotments. These lots were originally owned by Richard Fielder’s maternal grandfather, Oliver George Ayton, a dairy farmer who died in 1960. This is apparent from the original ‘parent’ title V2442 F85. The entire estate was bequeathed to Richard Fielder’s mother, Betty Joan Fielder and her brother, Keith Oliver Ayton.
It appears that an initial subdivision occurred sometime prior to 1960, but nothing of consequence turns on this. A second more substantial subdivision occurred in the mid-1960s. Each of the blocks involved were sold and burdened with encumbrances with the exception of Lots 5 and 21. All 52 encumbrances remain on the respective Titles to the present day. For reasons unknown, the unnumbered Lot in the Gaetjens Plan at the corners of Henley Beach Road and Susan Street was never part of the Scheme.[3] The respective land titles and the registered encumbrances are exhibited to the affidavit of David Morgan dated 12 April 2017.[4]
[3] See generally Exhibit D1.
[4] FDN 12.
Richard Fielder professes to be a claimant in his own right, as the owner of Lots 5 and 35. The female plaintiffs join these proceedings in order to preserve the memory of Betty Fielder and the way she considered the land should develop.[5] They are Betty Fielder’s daughters. Neither have a direct legal interest in the subject properties. Nor does their mother’s estate. This action is brought for the enforcement of the restrictive covenants within what is claimed to be a Common Building Scheme. The disadvantage to the female plaintiffs is said to be the inability to enforce the encumbrance for their mother’s sake. Richard Fielder’s separate interest is claimed to be as a participant in the Common Building Scheme by dint of his ownership of two allotments.
[5] T186.2-.5, T128.2-.14.
The encumbrance(s)
The Memorandum of Encumbrance in respect of Lot 3 provides in clause 3, in common with all the other encumbrances:
That the Encumbrancer will not at any time erect or permit or suffer to be erected upon the said land or any part thereof any block or blocks of flats home units or other multiple dwellings.
This is the specific interest the plaintiffs seek to uphold in these proceedings.
The common mechanism employed to enforce the covenants was expressed thus in respect of the encumbrance and defendants’ lot:
… and DESIRING to render the said land available for the purpose of securing to and for the benefit of KEITH OLIVER AYTON of 544 Henley Beach Road Fulham Farmer and BETTY JOAN FIELDER of Henley Beach Road Fulham Married Woman their executors administrators and assigns the payment of the sum of money and the performance and observance of the covenants on the part of the Encumbrancer hereinafter contained and as part of the consideration for the transfer by the said Keith Oliver Ayton and Betty Joan Fielder to the Encumbrancer of the said land DO HEREBY ENCUMBER the said land for the benefit of the said Keith Oliver Ayton and Betty Joan Fielder with the payment of the annual sum or yearly rent charge of One Shilling (1/-) if demanded on the Thirtieth day of June next to the intent that the said Keith Oliver Ayton and Betty Joan Fielder shall hold the said yearly rent charge in fee simple and with the performance or observation of the covenants by the Encumbrancer hereinafter contained AND the Encumbrancer HEREBY COVENANTS with the said Keith Oliver Ayton and Betty Joan Fielder (in addition and without prejudice to the covenants on the part of the Encumbrancer and the powers rights and remedies of the said Keith Oliver Ayton and Betty Joan Fielder as Encumbrancees implied herein under and by virtue of the provisions of “The Real Property Act 1886-1963” and amendments thereof for the time being in force except insofar as the same are hereby expressly or impliedly negatived or modified) in manner following, that is to say: …
This particular Memorandum of Encumbrance dated 4 November 1965 was lodged for registration on 8 November 1965 at 11:10 am, upon payment of Land Titles Office fees of 40 shillings. A hand written endorsement on the backing sheet of the instrument of registration read:[6]
Is this encumbrance part of a common
building scheme? If not to what
land is it appurtenant.
Refer ALR 9/11Given that the Memorandum of Encumbrance was date stamped with the fee paid on 8 November 1965, there can be little doubt that ‘9/11’ is a reference to the following day. The handwritten endorsement appears to be made by way of requisition by a Lands Titles Officer examiner, having the initials ‘ALR’.
[6] This page is Annexure 'B' to these reasons.
The encumbrance was registered at the very same time as the Memorandum of Transfer from Keith Ayton and Betty Fielder as vendors, transferors and encumbrancees to Giulio and France Boin as purchasers, transferees and encumbrancors, on 19 November 1965. The encumbrancees did not execute the Memorandum of Encumbrance, whereas the encumbrancors did.
The back sheet of the Encumbrance was further endorsed with a signed certificate of A and H.F. Gaetjens Pty Ltd, reading:
A. & H.F. GAETJENS PTY. LTD.
Correct for the purposes of “The Real Property Act, 1886”
(Signed)
Licensed Land Broker.Finally, there is on the same backing sheet a typed endorsement referencing that ‘(T)his encumbrance forms portion of a common Building Scheme’, signed by a Licensed Land Broker. This would appear to be a response to the requisition referred to earlier and re-lodged on 17 November 1965, before registration on 19 November 1965.
The nature and structure of the encumbrance(s)
The encumbrances were drafted in conformity with contemporaneous conveyancing practice, as will become very apparent. The defendants do not dispute their liability to pay the rent charge of 10c per year if demanded by the plaintiffs. This mechanism was consistent with the Form then contained in the Tenth Schedule to the Real Property Act 1886 (SA) entitled ‘Memorandum of encumbrance for securing a sum of money’. This instructed the user to:[7]
… here state the times appointed for payment of the sum … the interest, if any … the events on which such sum … shall become payable, also any special covenants or powers and any modification of the powers and remedies given to an encumbrance by [the RPA] …
[7] The Tenth Schedule was removed in 1979 by s 35 of Act 51 of 1979.
The Form borrows heavily from the form of encumbrance recommended in the contemporary 1963 Edition of Jessup’s Lands Titles Office Forms and Practice as follows:[8]
[8] At p 148.
MEMORANDUM OF ENCUMBRANCE
I, A.B., of [insert address and description as registered, or identify as “formerly”] being registered as the proprietor of an estate in fee simple (or as Lessee, or Mortgagee under and by virtue of Memorandum of Lease or Mortgage No. ) subject however to such encumbrances liens and interests as are notified by Memorandum underwritten or endorsed hereon in the whole of the land comprised in Certificate of Title (or Crown Lease) Register Book Volume Folio
And desiring to render the said land available for the purpose of securing to and for the benefit of C.D. of [insert address and description] the annuity (or sum of money) hereinafter mentioned do hereby encumber the said land for the benefit of the said C.D. (hereinafter designated the encumbrancee) with an annuity (or sum of money) of [insert amount in words] ( ) payable to the said encumbrance by equal yearly payments on the day of in every year the first of such payments to be made on the day of 19
And to continue during the life of the said encumbrance [here state any special covenants].
And subject as aforesaid the said C.D. shall be entitled to all the powers and remedies given to encumbrances by The Real Property Act 1886-1963.Dated the day of 19 .
Signed by the said A.B. )
In the presence of )The legal nature of encumbrances
An encumbrance creates a form of proprietary right held over the real property, limiting the ways in which the property encumbered may be used or dealt with: Davies v Littlejohn.[9] The tenement benefitting from an easement is referred to as the dominant tenement and that subject to it, the servient tenement.
[9] (1923) 34 CLR 174.
A restrictive covenant relating to land may be enforced at law or in equity, even when one or both parties are strangers to it: Austerberry v Corporation of Oldham.[10] In that event, it becomes necessary for the benefit and the burden of the covenant to pass to assignees in equity, despite the general rule against perpetuities: Tulk v Moxhay.[11] A further qualification is that equity does not enforce positive covenants between non-contracting parties: Haywood v Brunswick Permanent Benefit Building Society.[12]
[10] (1885) 29 Ch D 750.
[11] (1848) 2 Ph 774, 41 ER 1143.
[12] (1881) 8 QBD 403.
This principle is explained in Baramon Sales Pty Ltd v Goodman Fielder Mills Ltd in these terms:[13]
[9] To establish the existence of a Tulk v Moxhay covenant, three conditions must be satisfied: (a) The covenant must be negative in nature; (b) It must be made for the protection of land retained by the covenantee; and (c) The burden of the covenant must have been intended to run with the covenantor's land.
[10] Baramon says that the first covenant is not a Tulk v Moxhay covenant for two reasons, the first being that the covenant was not intended to run with the Sunshine land. This reason can be dismissed without much ado. Once the covenant is read in the manner in which it was intended to be written, it provides that it will bind Baramon's successors, that it will appear as an encumbrance on the certificate of title for the Sunshine land (presumably to notify any prospective purchaser of the existence of the covenant) and finally that "it should run with the [Sunshine] land". I cannot imagine what more is necessary to satisfy the third condition.
[11] The second basis for denying to the covenant the character of a Tulk v Moxhay covenant is its failure to identify the land for the benefit of which the covenant was given. It is clear that the basis of a Tulk v Moxhay convenant is that the covenantee has land which will benefit by the covenant, except in the case of a building or development scheme where different considerations apply: Elliston v Reacher [1908] 2 Ch 665. It was once thought that the benefited land must be clearly defined in the covenant, or in the deed in which the convenant is found, or must be capable of ascertainment from the terms of the deed, which may be explained when necessary by extrinsic evidence. This seems to be the position that is still taken in the most recent edition of Preston & Newsom, "Restrictive Covenants Affecting Freehold Land" 1998 9th ed at p22-p23. On the other hand, there are cases which I should follow where it has been held that extrinsic evidence is admissible to establish both that there is an intention to benefit land kept by the covenantee, and also to identify that land. The cases include Newton Abott Co-Operative Society Ltd v Williamson & Treadgold Ltd [1952] Ch 286 and Marten v Flight Refuelling Ltd [1962] Ch 115. In Australia see Clem Smith Nominees Pty Ltd v Farrelly (1978) 20 SASR 227.
The latter aspect of the decision in Baramon Sales was accepted and applied by Hasluck J in Midland Brick Co Pty Ltd v Welsh.[14]
[13] (2002) V ConvR 54-654; [2001] FCA 1672.
[14] (2006) 32 WAR 287, [259], [264], [275].
Restrictive covenants such as those involved here are expressed negatively, in that they require the covenantor to refrain from using the burdened land in a manner prohibited by the covenant. Accordingly, enforcement against a successor in title to an original covenator is permitted in equity when the above equitable requirements for passing the benefit are met: Allen v Lawson.[15]
[15] [1926] VLR 1, 5-6, 9.
Building schemes such as those said to be involved here, are recognised and enforced by means of easements. For example in Blacks Ltd v Rix,[16] restrictive covenants creating a building scheme were recognised against a successor in title to the original encumbrancer. Napier CJ held:[17]
In these circumstances the restrictions were obviously for the benefit of all the purchasers, they had a common interest in maintaining the restrictions, and, in the court of equity, this community of interests necessarily requires and imports reciprocity of obligation (see per Lord Macnaghten in Spicer v. Martin). The question that remains is whether the Court is precluded, by the provisions of the Real Property Act, from enforcing this equitable right against the defendants. (Footnote omitted).
…
It appears that the defendants bought or acquired their registered titles subject to the encumbrance, that is to say, well knowing that the land had been bought on the faith of the restrictive covenants, as covenants running with the land, and enuring to the benefit of all the purchasers under the building scheme.
[16] [1962] SASR 161.
[17] Ibid, 164-165.
Another building scheme came before the Full Court in Clem Smith Nominees Pty Ltd v Farrelly & Farrelly.[18] The enforcement mechanism of the encumbrance involved was for all practical purposes, indistinguishable from what is at stake here.[19] Bray CJ observed that the rent of $1 was a ‘rent charged’ within the meaning of s 128 of the Real Property Act and took effect as a security under s 123 thereof.[20] The former Chief Justice considered the ‘restrictive covenants … are in no way linked with the rent charge’.[21] The highly respected Chief Justice continued:[22]
In my view the law is now clear in Australia that the burden of restrictive covenants will only run with the land in equity against a subsequent holder of the land with notice of the covenant when the covenant is entered into for the benefit of some parcel of land, or possibly some interest in land. The burden of a covenant in gross will not so run; such a covenant only binds the original covenantor.
[18] (1978) 20 SASR 227, 237.
[19] Ibid 229.
[20] Ibid 281.
[21] Ibid 232.
[22] Ibid 235.
His Honour concluded:[23]
I am of opinion that under the Torrens system it is essential before the burden of a restrictive covenant can be held to run with the land that the land entitled to the benefit of the covenant shall be capable of identification in some way from the registered document containing the covenant or, at least, from other related documents which can be discovered by a search in the Land Titles Office (see Bursill Enterprises Pty Ltd v. Berger Bros Trading Pty Ltd). A prospective purchaser of land subject to a burden should be able to find out by a search whether the covenant is a covenant in gross, which will not be binding on him if he purchases, or a covenant the benefit of which is attached to some parcel or parcels of land, which may be binding on him. It was so held by Hudson J in the Supreme Court of Victoria in In re Dennerstein. With respect I agree.
[23] Ibid 237.
In a separate concurring judgment, Zelling J was arguably more strident as to the obligation to identify the land to be benefited:[24]
Mr Angel argued in the alternative that if this were not so and the equitable jurisdiction still survived as I have held it cannot, then in any event these restrictive covenants were invalid because there was no land to which the benefit of the covenants was expressly annexed by the document and the identity of the land to be benefited was neither stated in nor directly ascertainable from the documents. Taking these in order, it is clear from a perusal of the document that there is no land to which the benefit of the covenants is annexed. If I am entitled to look at outside evidence on both points, that is both as to the annexation and as to the identity of the land, then it is clear that it is intended that the land of International Raceway at Virginia is intended to be benefited.
…
In my opinion, the judgment of Richards J in R J Elder Smith & Company Limited,[25] states the position correctly. He said:
‘The position appears to be that surrounding circumstances cannot annex the benefit of a covenant to land; the instrument containing the covenant must itself show an intention to annex it, and then circumstances may be used in order to identify the land to which the parties intended to annex it.’
…
In my opinion, the covenants here were not annexed to any land and there is no intention deducible from the encumbrance to show the intention to annex them. The circumstances to which I have referred would have been sufficient in my opinion to identify the land to which the parties intended to annex the covenants, but that does not get Mr Williams' clients over the first hurdle that the instrument containing the covenants does not itself show an intention to annex the benefit of the restrictive covenants to any land. On this point also therefore Mallala and International Raceway must fail.
[24] Ibid 255-256.
[25] [1936] SASR 209, 240.
For his part, Hogarth J adverted to the submission that the ‘dominant tenement … must be identified in the document creating the equitable easement itself’.[26] Whilst acknowledging the principle that the covenant originally expressed to be for the benefit of land must be ‘sufficiently identified’, his Honour appears to have considered it unnecessary to resolve the point in light of his conclusion that since the respective titles were too far removed from each other:[27]
… there was no dominant tenement effective to support the restrictive covenant in the hands of an assignee of the covenantor, even though the assignee took with notice of the covenant.
In this respect the three judges were at one.[28]
[26] Ibid 249.
[27] Ibid 284.
[28] Bray CJ at 239 and 240, Zelling J at 256.
A similar scheme next came before the Full Court in Burke v Yurilla SA Pty Ltd.[29] Debelle J (with whom King CJ and Cox J agreed), noted ‘the intention of the encumbrance is to create … a building scheme … and to bind each allotment’ continued:[30]
The device which has been adopted has been to register an encumbrance which included the restrictive covenants. The encumbrance charged the land with a nominal annual rent charge and then went on to include the restrictive covenants. The encumbrance was in the form of the encumbrance provided in the Tenth Schedule to the Real Property Act and so was registrable. The form contained in the Tenth Schedule provided for the inclusion of “any special covenants” and this was the means adopted to include restrictive covenants creating a building scheme. The intention was to ensure registration of the encumbrance and thus registration of the covenants so as to enable enforcement against a subsequent registered proprietor.
There can be little doubt that an encumbrance of this kind in so far as it encumbers the land with the payment of $1 as a rent charge is registrable since it complies with s 128 and the Tenth Schedule of the Act. The fact that the encumbrance includes other covenants which may or may not be enforceable does not affect the registrability of the encumbrance: see Perpetual Executors & Trustees Association of Australia Ltd v Hosken (Registrar of Titles) (1912 14 CLR 286; Mahoney v Hosken (Registrar of Titles) (1912 14 CLR 379; Clem Smith Nominees Pty Ltd v Farrelly (1978) 20 SASR 227.
[29] (1991) 56 SASR 382.
[30] Ibid 386-7.
After considering a number of criticisms of the decision in Blacks Ltd v Rix, Debelle J’s judgment continued:[31]
… But it is not necessary to decide whether or not Napier CJ was correct in his use of s 249. There is, I think, another ground on which the decision could have been determined.
Where a building scheme is found to exist in the case of land under the general law and the successor in title has notice of the covenants, the courts of equity will enforce the common interest in maintaining the restrictions. To use Lord Macnaghten's words in Spicer v Martin (1888) 14 App Cas 12 at 25, the community of interests necessarily requires and imports reciprocity of obligation. In the case of land under the Real Property Act, the enforcement of the equitable right will depend on whether a person dealing bona fide with the registered proprietor will be deemed to have notice of the restrictive covenants contained in a registered encumbrance. If he is, the courts will be able to enforce the equitable interest.
…
It can be stated, therefore, that a person who deals with a registered proprietor is deemed to have notice of and will be bound by a restrictive covenant which runs with the land which is contained in a registered encumbrance noted on the original Certificate of Title. Covenants which are intended to establish a building scheme will ex hypothesi be for the benefit of other parcels of land. Provided the land entitled to the benefit of the covenant can be identified from the Register, those entitled to the benefit of the covenant will be able to enforce the covenant by equitable remedies. Those criteria are satisfied here and the covenants are enforceable against the plaintiff.
[31] (1991) 56 SASR 382, 389-390.
Debelle J acknowledged the conveyancing practice with respect to building schemes in South Australia was ‘well established’:[32]
[32] Ibid 393-394.
The decision in Blacks Ltd v Rixsuggests that the practice had existed for some time before and it might not be unreasonable to infer from at least 1928, when the encumbrance in that case was created. Certainly, the first edition of C A Jessup, then entitled Forms and Practice of the Lands Titles Office of South Australia, and published in 1940 while Mr Jessup was Deputy Registrar-General of Deeds in Adelaide, expressly mentions the practice with implicit approval in these terms (p 147):
“4.The object of an encumbrance is to secure a money payment not being a debt … The encumbrance has been used to give notice of a restrictive covenant, eg building restriction, the party entering into the covenant executing an encumbrance securing a yearly charge of a nominal amount, say 1s. The object is to obtain registration and thus serve as notice — otherwise such a covenant cannot be shown on the certificate of title. Thus, in a variety of ways the encumbrance may be employed where the land is intended to be charged with some burden not being a debt. It is very important to note that in all cases the encumbrance must secure a money payment.”
Mr Jessup later became Registrar-General. He retired in September 1961. The fourth edition of his work was published in 1963 shortly after Blacks Ltd v Rix had been decided and it was edited by Mr Jessup. In the fourth edition, the note in relation to encumbrances, quoted above, was expanded and Blacks Ltd v Rix was referred to as being of particular interest because it upheld this type of encumbrance. The relevant parts of the commentary in the fourth edition (p 149) read:
“4.The object of an encumbrance is to secure a money payment not being a debt … The encumbrance has been used to give notice of a restrictive covenant, eg building restriction, the party entering into the covenant executing an encumbrance securing a yearly charge of a nominal amount, say 1s, with liquidated damages set out in case of any breach. Somewhat the same procedure has been used to secure a covenant in partial restraint of trade. The object is to obtain registration and thus serve as notice — otherwise such a covenant cannot be shown on the certificate of title; see Elliston v Reacher [1908] 2 Ch 374; Ampol Petroleum Ltd v Mutton (1952) 53 SR (NSW) 1 and R J Finlayson v Elder Smith & Co Ltd [1936] SASR 209; Langdale Pty Ltd v Sollas [1959] VR 634, J Baalman, ‘Restrictive Covenants (NSW): Common Building Schemes’(1948) 22 ALJ 71, J Baalman; ‘Common Building Schemes and the Torrens System’(1953) 27 ALJ 366 and E H Coghill, ‘Real Property’(1953) 27 ALJ 516. It is advisable to annex the covenant to defined land and every part of it, see Miles v Easter [1933] Ch 611 and Re Arcade Hotel Pty Ltd [1962] VR 274, and Re Barry and The Conveyancing Act (1961) 79 WN (NSW) 759; but see, however, Newton Abbott Co-operative Society Ltd v Williamson and Threadgold [1952] 1 Ch 286. As to the restriction to build only as a private dwelling house, the erection of flats was upheld to be a breach, see Re A R Wilson and The Conveyancing Act 1919 (1949) 49 SR (NSW) 276 and Re Derham’s Application [1961] VR 174. Blacks Ltd v Rix and others [1962] SASR 161 is of particular interest because it upheld an encumbrance containing a restrictive covenant of a type freely employed in South Australia for many years.”
The current edition, namely, the seventh, in par 2306 in substance repeats the same commentary and includes references to some more recent decisions. Thus the practice has not only stood for at least 50 years, but has been acted upon, if not with the approval, at least without apparent disapproval by the Registrar-General.
In conclusion Debelle J considered that since the practice was of long standing, to hold otherwise:[33]
… would jeopardise, if not invalidate, many building schemes already in existence … This court should not now overrule the decision, even if it was satisfied that the decision was wrong.
[33] Ibid, 396.
With the recitation of the facts complete, and the principles applicable outlined in the authorities referred to above, attention is now directed to the various grounds upon which the defendants seek to impugne the enforcement of the restricted covenant in issue here.
Due execution of the encumbrances
The encumbrancees Keith Ayton and Betty Fielder did not execute the Memorandum of Encumbrance. Moreover, it would appear that when the Boins executed the Memorandum of Transfer on 4 November 1965, the reference to a building scheme was not as yet endorsed on it. The plaintiffs contend there was no need for either, as due registration is sufficient for enforcement. None of the Forms developed over time required signatures by the encumbrancee. Although the building scheme note was not present, once the application was recognised as sufficient by the Lands Title Office and registered, it became enforceable upon its terms. Having executed the encumbrance the Boins must have appreciated that this was its purpose, as the restitution would otherwise make no sense.
Typed endorsement added afterwards
The Memoranda of Transfer and Encumbrance were registered on what has become the defendants’ title, at precisely the same time. The square stamped numbers ‘26757231’are a cross-reference to the Memorandum of Transfer. The letters ‘ODR’ apparently mean ‘other document retained’, almost certainly referring to the Memorandum of Transfer.[34] The nature and structure of the encumbrance itself is only sensibly referable to a common building scheme.
[34] T174.31-.34.
Of significance in this context is that the original Title to Lot 3, V2442 F85 contained four endorsements on the Certificate of Title itself, of approvals to ‘(R)e-subdivision’ under s 11 of the Town Planning Act 1929 (SA) in 1954, 1963 and 1964 (twice). Despite a number of amendments to s 11 over time, it always required prior Town Planning approval before a plan of sub-division or re-subdivision could be lodged or accepted by the Lands Title Office. The Town Planning Act was wholly replaced by the Planning and Development Act 1966 which came into effect on 1 July 1967. Accordingly this aspect of the defence case must fail.
Incomplete effect
Atypically of the general scheme, it is to be recalled that there were no encumbrances in respect of Lots 5 and 21. These were not sold to strangers or at arm’s length as were the others. Lot 5 was transferred to Keith Ayton by Betty Fielder in January 1965. Lot 21 was initially registered in the name of K.O. Ayton Pty Ltd on 23 June 1981 and transferred to Keith Oliver Ayton and Brian Kingsley Ayton in June 1984, who immediately sold it.
Defence counsel described the situation as ‘anomalous’ and indicative of an intention that the original transferor did not subject themselves or their land to the same restrictions as were imposed on the others who bought into the subdivision. Thus it was submitted, the situation was inconsistent with the notion of a properly identified Common Building Scheme.
To make good this point, defence counsel relied on the decision of Hargrave J in Vrakis v Mills.[35] This concerned an application for the discharge or modification of a restrictive covenant restricting the owner to one dwelling house. The respondents as current owners of land in the vicinity which previously comprised lots in a plan of subdivision entitled to the benefits of restrictive covenant, successfully opposed the application. None of the parties were an original covenantee. After acknowledging the principle that in order to establish a Common Building Scheme or development, the restrictive covenants must be intended for the benefit of all the lots to be sold, Hargrave J turned to the facts of the case. Of relevance was the fact that four lots in the subdivision were not subject to the restrictive covenant.
[35] (2007) V ConvR 54-733, [2006] VSC 463.
His Honour rejected the submission that the scheme failed because not all allotments were subject to the restrictive covenant:[36]
[33] The third element requires proof that Ms Robinson, and later her executors, intended the restrictions in the restrictive covenant to be for the benefit of all of the lots in the Robinson subdivision which were sold. As I have said, all of the lots were sold and the Robinson head title has been cancelled. It was submitted on behalf of the plaintiffs that this element has not been established because four of the lots in the Robinson subdivision, including the final two which were sold, were not sold subject to the restrictive covenant. I do not accept this submission. Once again, the fact that the identical form of restrictive covenant was imposed on 56 of the 60 lots, over a period of 20 years, provides strong evidence of the necessary intention. The four exceptions are isolated instances, two before the death of Ms Robinson and two after her death. It is important to note that the first three sales after Ms Robinson’s death, including the sale of Lot 372 which comprises the majority of the plaintiff’s land, were sold subject to the restrictive covenant.
[34] Furthermore, such an argument was considered and rejected in Re Mack and the Conveyancing Act [1975] 2 NSWLR 623. In that case, nine of 115 lots in a plan of subdivision were sold without the imposition of the common form restrictive covenant. Notwithstanding this, a scheme of development was found to exist. Wootten J reviewed the relevant authorities and concluded that the intention which is relevant is that of the vendor existing at the time of establishing the scheme.
[36] Ibid, [33]
The situation is much the same here. Of the 54 lots involved, 52 were subject to identical easements, sold over a period approximately between six and seven years, from 25 September 1964 (Lot 27) to 31 March 1970 (Lot 1). Lot 3 was encumbered early on in the sequence of events on 4 November 1965. It is not readily apparent why covenants were not imposed in respect of Lots 5 and 21, assuming that to be the case. The ascribed motivation is a matter of unproven supposition. Mr Fielder was not questioned about this aspect of the matter by defence counsel. Putting these considerations aside, the fact is that the vendor intended identical forms of restrictive conditions on the overwhelming portion of the allotments during the course of what appears to be at least four re-subdivisions. It appears therefore to be the case that Lots 5 and 21 were simply not intended to form parts of the Common Building Scheme.
Identification of a Common Building Scheme
The endorsement on the registered encumbrance with respect to the defendants’ Lot 3, that it ‘forms part of a common Building Scheme’, is if anything, coincidentally a reference to the land schematically depicted in the Gaetjens Plan. It is not suggested this plan forms a recognised component of the Lands Title Office documentation. It simply provides a convenient reference for descriptive purposes throughout these reasons. Its provenance is not however in any doubt. Mr Fielder told the court that after his mother died, he went through a desk containing her personal belongings, in which he found the plan.[37] He recalled seeing it earlier ‘floating around’, but that ‘it had no relevance to us at that stage’.[38] The telephone number of Gaetjens on the plan (235600) serves to confirm historical provenance.
[37] T125.34-126.4.
[38] T127.1-.8.
As the encumbrance was registered, it is apt to attract and become protected by the indefeasibility principles established under s 69 of the Real Property Act 1886 (SA). So far as presently relevant, this provides:
Part 6—The title of registered proprietors
69—Title of registered proprietor indefeasible
The title of every registered proprietor of land shall, subject to such encumbrances, liens, estates, or interests as may be notified on the certificate of title of such land, be absolute and indefeasible:
…The primary position of the plaintiffs is accordingly, that the encumbrance is unassailable. Expressed at its simplest, the position of the plaintiffs distils into the proposition that the mere notation of the words ‘common building scheme’ on the Encumbrance is sufficient to identify the benefitted lands.
As with the other 52 allotments, the encumbrance is noted on the Title together with the encumbrance number. Defence counsel maintained that state of affairs is insufficient to identify the Common Building Scheme, and that the requisite ‘mutual benefit’ is not exposed. In order to assess the merits of these competing propositions, it is first necessary to identify the principles engaged with respect to Common Building Schemes.
The law recognises a form of restrictive covenant that is not expressed to be for the benefit of defined land, but which derives its validity solely from the existence of a building scheme for the common advantage of a group of purchasers: Netherby Properties Pty Ltd v Tower Trust Ltd.[39]
[39] (1999) 76 SASR 9, [36].
Parker J in Elliston v Reacher set out the conditions necessary to establish a Common Building Scheme:[40]
… it must be proved (1.) that both the plaintiffs and defendants derive title under a common vendor; (2.) that previously to selling the lands to which the plaintiffs and defendants are respectively entitled the vendor laid out his estate, or a defined portion thereof (including the lands purchased by the plaintiffs and defendants respectively), for sale in lots subject to restrictions intended to be imposed on all the lots, and which, though varying in details as to particular lots, are consistent and consistent only with some general scheme of development; (3.) that these restrictions were intended by the common vendor to be and were for the benefit of all the lots intended to be sold, whether or not they were also intended to be and were for the benefit of other land retained by the vendor; and (4.) that both the plaintiffs and the defendants, or their predecessors in title, purchased their lots from the common vendor upon the footing that the restrictions subject to which the purchases were made were to enure for the benefit of the other lots included in the general scheme whether or not they were also to enure for the benefit of other lands retained by the vendors.
[40] [1908] 2 Ch 374, 384.
As seen, the Memorandum of Encumbrance does not expressly identify any land said to be entitled to the benefit by the encumbrance. And as revealed above, the original parent title was cancelled ‘as regards portion of the within land and four new Certificate of Title issued, one now belonging to the defendants. The title is endorsed with the encumbrance No 2675722 to Keith Ayton and Betty Fielder. It contains these endorsements of relevance:[41]
[41] The Exhibit is noted ‘Edition Issued 23/1/2008).
Registered Proprietor
NICK DEGUISA
OF 538 HENLEY BEACH ROAD FULHAM SA 5024
1/2 SHARETORI MCKENZIE
OF 538 HENLEY BEACH ROAD FULHAM SA 5024
1/2 SHAREDescription of Land
ALLOTMENT 77 FILED PLAN 119295
IN THE AREA NAMED FULHAM
HUNDRED OF ADELAIDE
Easements
NIL
Schedule of Dealings
Dealing Number Description
2675722ENCUMBRANCE TO KEITH OLIVER AYTON AND BETTY JOAN FIELDER AS JOINT TENANTS
10859504MORTGAGE TO COMMONWEALTH BANK OF AUSTRALIA
These do not at face value, appear to completely comply with the recommendation contained in note 4 of the 1963 Edition of Jessup:[42]
It is advisable to annex the covenant to defined land and every part of it, see Miles v Easter (1933) 1 Chanc. 611 and re Arcade Ltd. (1962) V.R. 274, and re Barry & Conveyancing Act (1961) 79, Weekly Notes (N.S.W.) 759, but see, however, Newton Abbott Co-operative Society Ltd. v. Williamson and Threadgold, (1952) 1 Chanc. 287. As to the restrictive covenant of a type freely employed in South Australia for many years. Sec. 249 of The R.P.A. which preserves the right of the Court over equities generally was applied. In this case a caveat was lodged against the successor in title of a convenantor, and thus was notice, by the medium provided for by the R.P.A., of an equity, held to arise under what was a common building scheme.
[42] At pp 149-150.
The (3rd) Edition of Jessup published in 1957 did not make this recommendation, but it did provide this note:[43]
The encumbrance may be executed to secure an annuity to two people for their joint lives, or for their joint lives and for the life of the survivor of them … The encumbrance has been used to give notice of a restrictive covenant, e.g. building restriction, the party entering into the covenant executing an encumbrance securing a yearly charge of a nominal amount, says 1s., with liquidated damages set out in case of any breach. Somewhat the same procedure has been used to secure a covenant in partial restraint of trade. The object is to obtain registration and thus serve as notice – otherwise such a covenant cannot be shown on the certificate of title; see Ellister v. Reacher (1980) 2 Chancery 374, Ampol Petroleum Ltd. V. Mutton (1952) 53 State Reports (N.S.W.) 1 and R. J. Finlayson and others v. Elder Smith and Company Limited 1936 S.A.S.R. 209.
[43] At p 149.
A clearer example of a covenant duly identifying the benefitted land can be found in Re Barry and the Conveyancing Act in these terms:[44]
... and it is hereby declared that the benefit of this covenant is intended to be appurtenant to the whole of the land in Bland Street aforesaid shown on the said Deposited Plan ....
[44] (1961) 79 WN (NSW) 759.
The conveyancer for the defendants must have seen the Title in its present form and hence the reference to the encumbrance, before settlement. They were therefore, directed to the subject encumbrance 2675722. Furthermore, the title annexes the plan 7593. That plan is referable at face value to all lots from 7 and above, but in the end apparently to Lots 7-23 as well as 40-54 inclusive, with the exception of Lot 47.[45]
[45] See plan 8199. Both plans are contained in Exhibit D1 and Exhibit D4 (1st page).
The defendants insist there was no obligation on them or their agents at the time of purchase to prosecute searches of long since cancelled Certificates of Title from which the current title derives, or to embark upon exhaustive consequential searches. Even if they did so, the Common Building Scheme was not clearly notified in any event. Mr Ross-Smith for the plaintiffs, retorted that the defendants were on notice to make enquiries simply by reason of the endorsement of the registered encumbrance on the title. By reference to s 49, 51 and 77 of the Real Property Act which speak of ‘... memorials affecting the land included in the certificate of title ...’ and ‘... memorials of all subsisting ... encumbrances ...’, due notification of a registered encumbrance was achieved by a memorial on the Certificate of Title, by stating the nature and Land Titles Office designated number of the instrument. Be that as it may, the defendants’ point is not focussed on the note or memorial on the Certificate of Title, but on the failure to identify the benefitted land.
Both counsel referred to the decision in Re Dennerstein.[46] In that case Hudson J concluded on the material before him that there was a scheme of development. As there was no notice in the Register that the restrictive covenant arose under the scheme, or identifying the land to which the benefit of the scheme was attached, his Honour held that the plaintiff was not bound by the restrictive covenant. His Honour’s reasoning was this:[47]
In my view, a purchaser of land under the Transfer of Land Act is not bound to prosecute inquiries and searches and make deductions such as would be involved if Mr Searby’s contentions were accepted. Even when all the materials and evidence in relation to the circumstances under which an estate has been subdivided and sold are available it is not by any means easy to determine whether the sale of allotments in the estate has been made under or pursuant to a common building scheme. To require a person interested in purchasing one of these allotments to make this determination after obtaining the necessary evidence perhaps years after the original sale if it is available would render conveyancing a hazardous and cumbersome operation, and, in the case of dealings in land under the operation of the Transfer of Land Act, would defeat the object of the Act and destroy in large measure the efficacy of the system sought to be established thereby.
…
I have reached the conclusion that, even assuming there is power under the Act to notify as encumbrances on a certificate of title restrictions arising under a building scheme, such a notification will not be effective to bind transferees of the land unless not only the existence of the scheme and the nature of the restrictions imposed thereunder, but the lands affected by the scheme (both as to the benefit and the burden of the restriction) are indicated in the notification, either directly or by reference to some instrument or other document to which a person searching the register has access.
[46] [1963] VR 688.
[47] Ibid 296-297.
The plaintiffs sought to distinguish Re Dennerstein. The defendants sought to adopt it, on account of its apparent acceptance in both Burke v Yurilla,[48] and Clem Smith v Farrelly.[49] In both cases however, Dennestein is cited for the base proposition that the purchaser ‘is able to identify the land which is entitled to the benefit of the covenant whether from the encumbrance or from other related document which can be discovered on a search of the Lands Title Office’. So much may be readily accepted. There is no reference in either case at those points, covering the extent to which such searches must go. Mr Henry SC pointed out that in Burke v Yurilla there was a single encumbrance registered over an entire area of 11 allotments of a building scheme applied to ‘each allotment of the land hereby encumbered’, and that all allotments were contained in a single Certificate of Title, thus the encumbrance served to sufficiently identify the extent of the scheme and the individual allotments within it.
[48] (1991) 56 SASR 382, 391.
[49] (1978) 20 SASR 227, 237.
The circumstances prevailing here are distinguishable from those in Netherby Properties Pty Ltd v Tower Trust Ltd.[50] In that case the Memorandum of Encumbrance made no reference to a building scheme. Perry J was unprepared to conclude on the particular facts of the case, that the quasi dominant tenement could be identified by a search of the Register. In that respect it might be noticed that even though Perry J adverted in passing to the prospect of identifying the benefitted land (by reference to the judgment of Bray CJ in Clem Smith v Farrelly), his Honour did not return to that issue. Nor did he make reference to or apply the discussion of that topic by Debelle J in Burke v Yurilla.
[50] (1999) 76 SASR 9.
If this conclusion is incorrect, then I consider that I am bound by the latter decision of the Full Court for reasons now explained. The solution to this aspect of the case is to be found in the following observations of Debelle J in Burke v Yurilla SA Pty Ltd:[51]
In practice, the decision in Bursill's case (supra) should not lead to difficulty in the case of encumbrances which include restrictive covenants which run with the land. The practice of the Registrar-General is to endorse on the Certificate of Title an entry to the effect that the land is subject to an encumbrance. As can be seen from the terms of the endorsement in this case, the endorsement conveys little more information than the fact that the encumbrance exists. Apart from any obligation which the decision in Bursill's case might impose on a person intending to deal with the registered proprietor, the paucity of information disclosed by the endorsement will make it necessary in any event to search the Register to ascertain the precise terms and effect of the encumbrance. If the encumbrance is discharged, an endorsement to that effect is noted on the title. It would not be difficult, therefore, for any person searching the Register to ascertain whether the encumbrance is current. Provided that the person intending to deal with the registered proprietor is able to identify the land which is entitled to the benefit of the covenant either from the encumbrance or from other related documents which can be discovered on a search of the Lands Titles Office, the purchaser would have notice from the Register itself of the restrictive covenant and its terms: see per Bray CJ in Clem Smith Nominess Pty Ltd v Farrelly and Re Dennerstein [1963] VR 688.
[51] (1991) 56 SASR 382, 391.
The reference to Bursill’s case in the passage just quoted is to Bursill Enterprise Pty Ltd v Berger Bros Tracking Co Pty Ltd.[52] Barwick CJ observed therein:[53]
… it is inescapable that a person dealing with the registered proprietor would be bound to search the registered dealing …’
and Windeyer J added:[54]
… no prudent person, seeing to reference to … [an encumbrance] … would neglect to ascertain what exactly was the nature of the … [encumbrances] … the land subject to it, the persons who could avail themselves of it, for what purpose, in what manner … .
[52] (1971) 124 CLR 73, 79.
[53] Ibid 93.
[54] Ibid 93.
In this particular instance the original ‘parent’ Title contained references to four sub-division approvals, with cross-references to docket numbers. The replacement title V3310 F186 equally contained a reference to the Lands Title Office Plan 7593, which incorporated substantial portions of the entire 54 allotments, as described on the Gaetjens Plan, as noted earlier. In addition the electronic Title to Lot 3 contained the reference to the encumbrance 2676722, and to filed plan 119295, a copy of which is contained in Exhibit D4, at page 3. This is a diagrammatic reference to the defendants’ land, describing either side as ‘PT Sec 433’ and ‘DP 7593’. Plan 7593 depicts the allotments referred to earlier.
It appears tolerably clear in any event that the defendants’ block of land was the subject of a separate release of four blocks, Lots 2–5 on Henley Beach Road, contemporaneously with release of the corresponding four new titles referred to earlier, carved out of the original title. There was in fact an approval of re-subdivision on those four allotments given on 20 May 1964.[55] In other words, the basic documents retained by the Lands Title Office inevitably take the searcher to subdivisions. Whichever way the searcher was directed, all take the searcher to subdivisions around the defendants’ Lot 3.
[55] Exhibit D3.
Both parties were at some pains to explain how easy or difficult it might prove to search the Lands Title Office in order to ascertain the exact identity and extent of the benefitted lands. Mr Morgan himself explained how he identified the exposed allotments by commencing with the historical alphabetical list of vendors kept by the Lands Title Office, which resulted in ‘two or three pages … two or three years in a row … of the encumbrance names’, which he considered easily ascertainable.[56]
[56] T116.33-.34, and Exhibit P1.
It is understandable that counsel might endeavour to explore the potential search difficulties that might be involved, in light of Hudson J’s missive in Re Dennerstein,[57] that searches might become ‘hazardous and cumbersome’. Nevertheless this is not the kind of exercise Debelle J had in mind in Burke v Yurilla.
[57] [1963] VR 688, 696.
The fact of the matter is that before purchase, the defendants were clearly on notice of the existence of an encumbrance over their land. Any reasonable and simple search in the Lands Title Office reveals the existence of nearby subdivisions at the very least, even if more had to be done in order to precisely identify the benefitted properties. As noted earlier, the terms of the encumbrance itself are typical of the language used where subdivision is involved and therefore suggestive in itself, of little else than subdivision.
The position is, as it was held to be in Burke v Yurilla SA Pty Ltd,[58] that a person dealing with a registered proprietor is deemed to have notice and will be bound by a restrictive covenant contained in a registered encumbrance endorsed on the Certificate of Title. This is so even when, as here, ‘the endorsement conveys little more information than the fact that the encumbrance exists’: Burke v Yurilla.[59] In that event the defendants were in a position to ‘identify the land which is entitled to the benefit of the covenant either from the encumbrance or from other related documents which can be discovered on a search of the Land Titles Office.[60] Moreover as Debelle J emphasised:[61]
… the paucity of information disclosed by the endorsement will make it necessary in any event to search the Register to ascertain the precise terms and effect of the encumbrance.
[58] (1991) 56 SASR 382, 389.
[59] (1991) 56 SASR 382, 391.
[60] Ibid 391.
[61] Ibid.
Moreover it is impossible to suppose that a reasonably prudent conveyancer searching the Title on behalf of the defendants as prospective purchasers, would not make further inquiry to ascertain the exact nature of the encumbrance. It is equally inconceivable that a reasonably prudent purchaser would pay a relatively large sum for a property the subject of encumbrance, without knowing precisely what was involved. For that reason it is not necessary to draw an adverse inference from the defendants’ failure to adduce evidence on the topic. In the first place. they are deemed to have acquired such knowledge, and in the second it is an inexorable inference to be drawn from the objective circumstances.
Capacity to bring the proceedings
We have seen that the female plaintiffs retain no extant proprietary interest to protect in these proceedings. They are however, caveators over the subject property. Mr Morgan who is, coincidently, the solicitor for the estate of Betty Fielder, considered that the plaintiffs bring the proceedings as executors of her estate.[62] He conceded there were no assets remaining in the estate, or any extant interest held by it over the subject lands.[63] For his part Richard Fielder Jnr has an additional direct stake in the proceedings as the registered owner of Lots 5 and 35. It is to be recalled that Lot 5 is atypical in that it is not subject to the common encumbrance, whereas Lot 35 is.
[62] T112.12-.17.
[63] T112.18-.114.19.
Defence counsel took exception to the plaintiffs’ standing to bring these proceedings. It might be noted in passing that in Blacks Ltd v Rix,[64] Napier CJ appears to have assumed the original developer in 1928 was ‘entitled to enforce the covenants’, even though it was not apparent that it continued to hold an interest in the properties – it would appear that the point was simply not taken. On the other hand, in both Clem Smith Nominees Pty Ltd v Farrelly and Burke v Yurilla SA Pty Ltd the plaintiffs were the registered owners of related properties. Such was the situation in Re Dennerstein,[65] Netherby Properties Pty Ltd v Tower Trust Ltd,[66] and Baramon Sales Pty Ltd v Goodman Fielder Mills.[67] The decision of the High Court in Pirie v The Registrar-General,[68] is the authority for the proposition:
… that a restriction will be no longer enforceable against an owner of the subject land (other than the covenantor) once the person entitled to the benefit of the covenant has become a stranger in title to the land benefited.
[64] (1962) SASR 161, 163
[65] [1963] VR 688.
[66] (1999) 76 SASR 9.
[67] [2002] V ConvR 54-654.
[68] (1962) 109 CLR 619, 628.
Even so, the female plaintiffs as recent encumbrancers are entitled to enforce the encumbrances, by means of s 191(1) of the Real Property Act 1988. This section enables any person ‘interested … in equity … howsoever … to lodge a caveat over land’. An application for the removal of a caveat under s 191(1)(e) may then be made, in which case the Registrar-General is required to give notice of the application to the caveator(s).
Still further as caveators, all three plaintiffs are permitted to bring actions to enforce caveats entered by them once recognised by the Registrar-General. In so doing, they render themselves amenable to adverse orders for costs if the court considers the caveat should be removed pursuant to s 191(b)(c) of the Real Property Act, but that is another matter. They are accordingly entitled to bring these proceedings in the capacity of caveators. Mr Fielder’s capacity to sue cannot be doubted, given his ownership of an allotment in the Common Building Scheme, which remains subject to identical restrictive covenants as the defendants’ land.
Conclusion
It will be quite apparent from the history of this sub-division that restrictive covenants enforced by registered easements in respect of Common Building Schemes devised decades ago are not necessarily compatible with modern notions of urban development and renewal. All the same, they were recognised by two successive decisions of the Full Court, one comparatively recently and by which this court is plainly bound. These cases demonstrate that once an encumbrance is registered on a Title, subsequent purchasers are bound by it and deemed to have notice of it. It then behoves the purchaser to conduct further searches in order to ascertain the nature and extent of the Common Building Scheme.
For the above reasons, the plaintiffs demonstrate the Title of the defendants derives from a common vendor, who at that time intended to impose restrictions on the nature of buildings that could be erected thereon. Consistent with the Common Building Scheme, the restrictions were imposed for the benefit of all 52 Lots within it, even though 54 were re-subdivided. The defendants as predecessors in Title purchased in the knowledge – deemed and actual – that a restrictive covenant was in place over the property and had the means and obligation to ascertain precisely what was involved. The plaintiffs as caveators are statutorily entitled to enforce the caveat and so have standing to bring these proceedings.
The parties should now be heard on the terms of the appropriate orders consistent with these reasons and as to costs. The plaintiffs are directed to file and serve draft minutes of order for this purpose.
Annexure A – Gaetjens Plan
Annexure B – Backsheet of Memorandum of Encumbrance
7
1