Midland Brick Company Pty Ltd v Welsh
[2006] WASC 122
•27 JUNE 2006
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: MIDLAND BRICK COMPANY PTY LTD -v- WELSH & ANOR [2006] WASC 122
CORAM: HASLUCK J
HEARD: 22, 23, 28 & 29 MARCH 2006
DELIVERED : 27 JUNE 2006
FILE NO/S: CIV 2605 of 2002
BETWEEN: MIDLAND BRICK COMPANY PTY LTD (ACN 008 674 224)
Plaintiff
AND
MARIAN CONCEPTA WELSH
First DefendantREGISTRAR OF TITLES
Second Defendant
Catchwords:
Property law - Restrictive covenant - Negative covenants included in contract of sale and subsequent deed - Covenants by purchaser not to subdivide the land being acquired and not to complain about emissions from brickworks on land retained by the vendor - Intention of parties as to benefit and burden not set out expressly - Issue as to whether covenants touch and concern land retained by vendor - Whether burden of covenants runs with the land the subject of the sale - Principles of interpretation - Parol evidence rule - Application of s 47 and s 48 of Property Law Act 1969 (WA)
Adequacy of caveat lodged to protect vendor's interest in the land - Whether restrictive covenant creates a caveatable interest in the land burdened by the covenant - Whether covenant not to subdivide can justify lodgment of an absolute caveat - Description of interest held to be inadequate
Legislation:
Law of Property Act (1925) (UK), s 11(1), s 78, s 79
Property Law Act 1969 (WA), s 47, s 48, s 49
Transfer of Land Act (1893) (WA), s 53, S 68, s 137, s 138, s 138C, s 138D(1)(e), s 139
Result:
Judgment for plaintiff
Category: A
Representation:
Counsel:
Plaintiff: Mr S G Leslie
First Defendant : Ms W F Buckley
Second Defendant : No appearance
Solicitors:
Plaintiff: Wilson & Atkinson
First Defendant : Anderson Kershaw
Second Defendant : No appearance
Case(s) referred to in judgment(s):
Abigail v Lapin (1934) 51 CLR 58
Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (1999) 21 WAR 425
Adamson v Hayes (1973) 130 CLR 276
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Baramon Sales Pty Ltd v Goodman Fielder Mills Ltd [2001] FCA 1672
Beswick v Beswick (1968) AC 58
Binningup Nominees Pty Ltd v Brogue Tableau Pty Ltd [2004] WASC 14
Blacks Ltd v Rix [1962] SASR 161
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Butler v Fairclough (1917) 23 CLR 78
Chambers v Randall [1923] 1 Ch 149
Clem Smith Nominees Pty Ltd v Farrelly & Farrelly (1978) 20 SASR 227
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Coles KMA Ltd v Sword Nominees Pty Ltd & Ors (1986) 44 SASR 120
Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520
Commonwealth v Verwayen (1990) 170 CLR 394
Crampton v French (1995) V ConvR 54‑529
Cruz v Osborne [1999] WASC 8
Dalgety Wine Estates Pty Ltd v Rizzon & Anor (1979) 141 CLR 552
Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129
Doherty v Allman (1878) 3 App Cas 709
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594; (1980) 1 All ER 371
Foran v Wight (1989) 168 CLR 385
Forestview Nominees Pty Ltd & Silkchime Pty Ltd v Perpetual Trustees (WA) Ltd (1998) 193 CLR 154
George v Biztole Corporation Pty Ltd (in liq) (1995) V ConvR 54‑519
Giacci Bros Pty Ltd v Tyrell, unreported; SCt of WA (Templeman J); Library No 980106; 18 February 1998
Graham v Chappell (1993) 9 WAR 157
Hamdan v Widodo [2004] WASC 123
Harrod v Palyaris Construction Pty Ltd (1973) 8 SASR 54
Hawkins v Clayton (1988) 164 CLR 539
Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326
Hooper v Australia & New Zealand Banking Group Ltd (1996) 5 Tas R 398; [1996] ANZ ConvR 400
Hughan v Gray [2002] WASC 164
J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546
Jandric v Jandric [1999] WASC 22
Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222
Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419
Leros Pty Ltd v Terara Pty Ltd (1991) 174 CLR 407
London County Council v Allen [1914] 3 KB 642
Marten v Flight Refuelling Ltd (1962) Ch 115
McGuigan Investments Pty Ltd v Dalwood Vineyards Pty Ltd [1970] 1 NSWR 686
Midland Brick Company Pty Ltd v Welsh & Anor [2002] WASC 248
Murphy v Wright [1992] NSW ConvR 55‑652
Neoform Developments & Interiors v Town & Country Marketing Pty Ltd [2002] NSWSC 344
New Zealand Mortgage Guarantee Co Ltd v Pye [1979] 2 NZLR 188
Newton Abbott Co‑Operative Society Ltd v Williamson & Treadgold Ltd [1952] Ch 286
Nichols Constructions Pty Ltd v Henry [1995] ANZ Conv R 192
Pindan Pty Ltd v Property Nominees Pty Ltd [2006] WASC 91
Pirie v Registrar General (1962) 109 CLR 619
Porter v McDonald & Registrar of Titles [1984] WAR 271
Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd [2004] WASC 30
Re Henderson's Caveat [1998] 1 Qd R 632
Re Nisbet & Potts Contract [1905] 1 Ch 391
Renals v Cowlishaw (1878) 9 Ch D 125
Sefton v Tophams Ltd [1967] 1 AC 60
Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board [1949] 2 KB 500
Sullivan v McMahon [1999] WASC 84
Tallerman & Co Pty Ltd v Nathans Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93
Tonks v Tonks (2003) 11 VR 124
Troncone v Aliperti (1994) 6 BBR 13 291; (1994) NSW ConvR 55‑703
Tulk v Moxhay (1848) 41 ER 1143
Vandyke v Vandyke (1976) 12 ALR 621
Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Woodberry v Gilbert (1907) 3 Tas LR 7
Case(s) also cited:
Accounting Systems 2000 (Developments) Pty Ltd & Anor v CCH Australia Ltd & Anor (1993) 114 ALR 355
Bahr v Nicolay (No 2) (1988) 164 CLR 604
Burke v Yurilla SA Pty Ltd (1991) 56 SASR 382
Coleman v Bone (1996) 9 BPR 16,235
Connell v Bond Corporation Pty Ltd (1992) 8 WAR 352
Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42
Depsun Pty Ltd v Tahore Holdings Pty Ltd [1990] ANZ ConvR 334
Equus Corp Pty Ltd & Anor v Glengallan Investments Pty Ltd (2004) 218 CLR 471
Farrell v Royal King's Park Tennis Club (Inc) [2006] WASC 51
Go-Tell Nominees Pty Ltd v Nichols, unreported; SCt of Vic (Cummins J); 7 February 1997
Hayes v O'Sullivan [2001] WASC 55; (2001) 24 WAR 40
Kitay as Liquidator of Allstate Mining Machinery Hire & Sales Pty Ltd v Strathfield Holdings Pty Ltd (1998) 27 ACSR 716
Maynard v Goode (1926) 37 CLR 529
Nudd v Official Trustee in Bankruptcy [2002] NSWSC 399
R J Finlayson v Elder Smith & Co Ltd [1936] SASR 209
Re Arcade Hotel Pty Ltd [1962] VR 274
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Spunwill Pty Ltd v BAB Pty Ltd (1994) 36 NSWLR 290
Sulinmo Properties Pty Ltd v Maloney [1985] ANZ ConvR 25
Tooth & Co Ltd v Barker [1960] NSWR 51
Ultra Marine Pty Ltd v Mission [1981] ANZ ConvR 229
HASLUCK J:
Introduction
The plaintiff, Midland Brick Company Pty Ltd, seeks a declaration that it has an interest in certain land owned by the defendant, Marian Concepta Welsh, being an interest capable of supporting a caveat registered pursuant to s 137 of the Transfer of Land Act 1893 (WA).
The first defendant, Marian Concepta Welsh, denies liability and, by way of counterclaim, seeks declaratory relief. Further, she seeks an order that Midland Brick remove Caveat No H450939. The caveat purports to forbid the registration of any instrument affecting the plaintiff's estate or interest in the subject land absolutely.
The Registrar of Titles was not represented at the hearing. I understand that the Registrar will abide whatever ruling is made by the Court. For ease of reference, I will refer to Marian Concepta Welsh as "the defendant".
Overview
Midland Brick says that it sold the subject land to the defendant pursuant to a contract made on or about 11 April 2000. The contract allegedly contained special conditions which were binding upon the defendant and her successors in title and operated for the benefit of neighbouring land retained by Midland Brick. The plaintiff company relies also upon a deed executed by the parties one month later on 10 May 2000.
According to Midland Brick the various documents comprising the subject contract, on their proper construction, establish that the subject land was not to be subdivided at any time without the written consent of Midland Brick first had and obtained and that the defendant and her successors in title would not complain about emissions from the brick‑making plant situated upon Midland Brick's neighbouring land. The plaintiff contends that these conditions give rise to an enforceable restrictive covenant which can be characterised as an estate or interest in the subject land justifying the registration of an absolute caveat.
The defendant resists this claim and contends that the contractual arrangements between the parties were not intended to and do not operate for the benefit of the neighbouring land owned by Midland Brick. There is a central issue between the parties as to how the documents in question should be construed. There are further issues between the parties as to whether extrinsic or parol evidence can be admitted in evidence as an aid to construction of the documents and as to whether the defendant is estopped from denying that the plaintiff has a caveatable interest of the kind contended.
Documents and related evidence from various witnesses were presented to the Court at the trial of the action bearing upon the negotiations between the parties. Most of the documents form part of an agreed bundle of documents. There was no dispute between the parties as to the authenticity of the documents in question. This evidence was received on a provisional basis and subject to a reservation of my ruling as to what part of the evidence, if any, was properly admissible, bearing in mind that, where the parties have recorded terms of their contract in a document, the parol evidence rule generally excludes the use of evidence of extrinsic terms which subtract from, add to, vary or contradict the language of a written instrument: Cheshire & Fifoot's Law of Contract (8th Aust ed) par 10.4. Further, the contested evidence is arguably admissible with respect to Midland Brick's estoppel plea.
I will deal with the issues concerning the contested evidence in due course. However, for the sake of an orderly exposition, I will refer to the various events and documents in chronological order as a means of understanding the respective positions of the parties. I proceed from the premise that a court may admit evidence of mutually known facts to identify the meaning of a descriptive term and of the genesis and aim of a transaction. What a court cannot do, however, is receive evidence from one party as to its intentions and construe the contract by reference to those intentions: DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 429.
Background
The Commercial Manager of Midland Brick, Robert Harvey, said in evidence that he took up his position in February 1999. He said that Midland Brick makes and sells bricks and pavers from a site at 102 Great Northern Highway, Middle Swan. In early 2000 it had five operating kilns making approximately 800,000 bricks and pavers per day.
Mr Harvey said that the process of manufacturing bricks and pavers starts with the digging of clay from the clay pits situated elsewhere. The clay is transported to the Midland site where it is mixed and crushed. The movement of vehicles and bricks around the site creates dust. The manufacture of the bricks sometimes causes problems including the release of gases, sulphites and odours. The process is all regulated by the Environmental Protection Authority. The plant operates 24 hours a day with delivery trucks operating between 5 am and 6 pm. From time to time the brick‑making operation leads to complaints about noise, dust and odour.
In the course of his evidence Mr Harvey tendered an aerial photograph of the area around the Midland Brick site and a cadastral map showing the relationship between the properties owned by Midland Brick lying within the boundaries of the brick‑making site and other properties, acquired by Midland Brick, including the subject land (known as Mandalay), lying outside the site. The area covered by the photograph and map is traversed by the Swan River with the brick‑making site being situated on the southern bank of the river. The subject land is situated on the northern bank. The cadastral map was received in evidence as Exhibit 4.
The plaintiff's properties
I pause briefly to observe that Midland Brick pleaded at par 2 of its amended statement of claim that at all material times it was the registered proprietor of certain properties the title and particulars of which were listed at 2.1 to 2.12 of the statement of claim and were called the "plaintiff's properties". The plaintiff pleaded further at par 9 of the claim that the plaintiff's rights in relation to the subject land purchased by the defendant (that is, Mandalay) under the subject contract and the deed, materially affect and operate to the benefit of one or more of the properties comprising the plaintiff's properties.
Subsequently, in response to a request for particulars, Midland Brick pleaded further at par 3.1 of its answering particulars (as amended at the trial) that certain of the properties were benefited in that they were used as part of or in connection with the brickworks. The properties in this category were said to be the whole of the property described in par 2.2, the whole in par 2.7, part of the property in par 2.8, the whole of the property in par 2.11 and part of the property described in par 2.12. Evidence given by Mr Harvey at the trial and by his colleague, Mr Hyland, established that these properties lay within the boundaries of the area portrayed on the Exhibit 4 cadastral map as the Midland Brick site, being the area licensed for use as a brick‑making site. For ease of reference, I will call the properties described in par 3.1 of the plaintiffs particulars the "Midland Brick site" or the "site properties".
Midland Brick pleaded in par 3.2 of its particulars that the plaintiff's properties included a second category, being properties not within the boundaries of the Midland Brick site. These were properties acquired and maintained by Midland Brick for the express purpose of ensuring that the properties were not subdivided and/or occupied by other parties who might object to the activities conducted on or around the brickworks. In other words, these were properties that had been acquired and were maintained by Midland Brick as a kind of buffer zone with a view to averting or minimising complaints from landowners in the neighbourhood. For ease of reference, I will call these the "Midland Brick additional properties".
Mr Hyland said in the course of his evidence that as an aid to exposition he had marked up the Exhibit 4 cadastral map so as to show the exact location of the properties described as the "plaintiff's properties" in par 2 of the statement of claim. His marked up version of the Exhibit 4 cadastral map was received in evidence as Exhibit 4A. This latter exhibit becomes a convenient point of reference in providing an overview of the situation.
It appears from Exhibit 4A that the properties comprising the Midland Brick site are situated on the southern bank of the Swan River. Viewed collectively they comprise an oblong shape which in total area is considerably larger than the sum of the various additional properties lying outside the boundaries of the site. It is apparent from the aerial photograph that the site is, for the most part, occupied by improvements associated with the brick‑making operations.
Certain of the additional properties, namely, 2.1, 2.3, 2.4, 2.5 and 2.6 are quite small residential blocks which lie outside the eastern boundary of the Midland Brick site. Two of the additional lots, namely, 2.9 and 2.10 are situated on the northern bank of the Swan River, and although larger than the other additional lots are nonetheless much smaller than the Midland Brick site.
The subject land, known as Mandalay, is situated on the northern bank of the Swan River also and thus is across the river from the southern extremity of the Midland Brick site. It follows from this description, as appears from the aerial photograph and the Exhibit 4A map, that the subject land is separated from the Midland Brick site by the Swan River and therefore does not share a common boundary with the Midland Brick site although the two areas of land are in close proximity. It emerges from the evidence of the Midland Brick witnesses, Mr Harvey and Mr Hyland, that the subject land, like the additional lots, was acquired by Midland Brick as part of the buffer zone strategy.
For the sake of completeness, I feel obliged to mention that, as appears from the Exhibit 4A marked up map, a part of the 2.12 land lies outside the eastern boundary of the Midland Brick site. Likewise, a part of the 2.8 land does not form part of the site. The plaintiff's pleading in par 3.1 of the particulars reflects this reality by asserting that it is only part of 2.12 and part of 2.8 that lie within the Midland Brick site.
It follows from all of this that the brickworks on the Midland Brick site do not in fact comprise all the land owned by Midland Brick in the vicinity of the subject land (Mandalay). However, there can be little doubt, having regard to the aerial photograph (Exhibit 3), and the evidence given by various witnesses at the trial, that the brickworks being conducted on the Midland Brick site were clearly being used for an industrial purpose that was being conducted in close proximity to the subject land.
Mr Harvey's evidence
Mr Harvey said that in February 2000 he was contacted by the defendant, Marian Welsh, who asked about buying the Mandalay property on the other side of the river. He recalled telling the defendant that Midland Brick kept that land as a buffer and could not sell it unless the company was sure it would never be subdivided without Midland Brick's approval and the purchasers would never complain about the company's activities. He told the defendant that if she was still interested she should put her request in writing.
By letter dated 14 February 2000 the defendant wrote to Mr Harvey. She commenced by referring to "our telephone conversation today" and said that she was interested in purchasing Mandalay from Midland Brick. She referred to the fruits of her research as to the value of land in the area and other matters and to her understanding "that Midland Brick would want a written statement indicating that we would not pose a challenge to its activities". She went on to say that she and her husband wished to buy a property of sufficient size to carry 12 horses which are used for recreational purposes only. She said that they had no desire to subdivide the block into a housing estate or any commercial venture. It would be for private use only. She said that she needed to inspect the property before any definite offer could be made.
Mr Harvey was conscious that the Mandalay property, comprising three buildings, was run down. However, after speaking to the Divisional General Manager, Paul Arndt, he told the defendant that she was welcome to look over the property.
It emerged in the course of evidence that by letter dated 28 February 2000 the defendant offered to purchase Mandalay for $587,842 as a cash offer with settlement to suit Midland Brick (Exhibit 34). This would be a sale by private treaty without the involvement of an agent. The (Exhibit 34) letter concluded in this way:
"As indicated previously, the property would be for private use only – as a family of keen horse riders we keep 12 horses. We have no intention to subdivide the property for housing development or a commercial venture. We understand that Midland Brick will continue to operate in its current location and we would not oppose such activities. While we anticipate using the full area at present we would, however, like to reserve our right to subdivide the block into two or three areas – for one never knows what the future holds in store. We would naturally impose any covenants relating to housing development and 'no opposition to Midland Brick' clauses as the company would impose on us on any such farmlets. Hence Midland Brick's interests would be protected.
We could easily co‑exist with Midland Brick in a harmonious relationship.
My husband and I are keen purchasers and hope to hear from you soon."
Mr Harvey said in evidence that he could not recall the exact sequence of discussions he had with the defendant. He did have a couple of telephone discussions with her. It seems that the offer to purchase just mentioned was not taken further. However, in his evidence Mr Harvey went on to speak of receiving a formal offer on a REIWA form at a proposed price of $830,000 (Exhibit 6).
The Exhibit 6 offer was dated 20 March 2000 and was signed by the defendant only. It included three special conditions, namely, that the property be encumbrance free, that there be vacant possession, and Midland Brick have the property boundaries surveyed. According to Mr Harvey, the defendant sent with the offer the 1998 Joint Form of General Conditions for the Sale of Land.
I note in passing that the General Conditions were included in the agreed bundle of documents (Exhibit 7). Clause 24 of the General Conditions sets out the definition of various terms including the term "purchaser" which means "the party named and described as the purchaser in the contract and any person deriving title under that party". By cl 24(5) all warranties and representations contained in the contract will survive settlement and will not merge in the transfer of the land or be extinguished by the transfer or by settlement being effected.
Mr Harvey said in evidence that Midland Brick would not sell the land without conditions. This was to ensure that the land could not be subdivided and the owner would not complain about Midland Brick's use of the land. There was no point in him getting from the defendant and presenting to the management of Midland Brick an offer that did not contain these conditions. Accordingly, he wrote to the defendant on 23 March 2000, by handwritten facsimile, a note saying that he was attaching a counter offer.
The so‑called counter offer took the form of a typewritten letter dated 23 March 2000 on the letterhead of Midland Brick which (omitting the inessential parts) reads as follows (Exhibit 9):
"I refer to your letter dated 20 March 2000 re the above offer to purchase Mandalay.
Midland Brick Company Pty Ltd would like to make a counter offer to sell Mandalay for $900,000.
I also request your formal acknowledgement of the caveats we would append to the property.
(1)The property will not be subdivided without the written consent of Midland Brick Company Pty Ltd.
(2)The purchaser acknowledge that Midland Brick operates and manages brickmaking facilities at its Middle Swan site and that brickmaking is deemed as a noxious industry. The purchaser understands and agrees that they will not complain about emissions from the plant to any statutory authority."
Mr Harvey said in evidence that he met the defendant at the property once. To the best of his recollection this was on the morning of 24 March 2000 (that is, the day after the letter dated 23 March 2000 referring to the caveats). During the meeting at the property the defendant said she was not impressed with the property. She was introduced to the vet who occupied a clinic at the front of the property. When she asked if Midland Brick would let her subdivide the land for her children, Mr Harvey responded: "No. The land cannot be subdivided without our consent." She then asked whether Midland Brick could confirm, prior to purchase, that she could subdivide the land into four as an exception or as prior approval. Mr Harvey answered in the negative.
Mr Harvey said in evidence that he explained to the defendant that this was to protect Midland Brick from complaints. The policy was that the property could not be subdivided unless Midland Brick gave its approval and that the owner of the property had to agree that Midland Brick was a noxious industry, that it produced noise, dust and odours and that they could not complain about those matters, in particular to any environmental or regulatory authority. The company did not want the land developed because it did not want to build up the residences around the brickworks. The more people there were the greater the risk of complaint. He said that it was important that the defendant knew where Midland Brick was coming from. At the time, Midland Brick had another purchaser who was interested in buying the property for $900,000; having earlier made an offer for $600,000. That purchaser was agreeable to the two caveat conditions.
According to Mr Harvey, the defendant then sent a facsimile letter dated 24 March 2000 (Exhibit 10) referring to the Midland Brick counter offer and advising that caveat 2 was acceptable (that is, the requirement that the purchaser was to acknowledge that Midland Brick operated brick‑making facilities as a noxious industry). However, she said that the first caveat whereby the property was not to be subdivided without the written consent of Midland Brick, was not acceptable in its current form as it gave Midland Brick the unconditional right to either approve or otherwise any subdivision.
The Exhibit 10 letter repeated that the defendant had no current intention of subdividing the property but might in the future want to subdivide it up into three lots. The defendant's letter suggested an alternative form of caveat, namely, that the property will not be subdivided without the written consent, which will not unreasonably be withheld, of Midland Brick subject to any subdivision being no more than three blocks. The letter also suggested a revised price being half way between the defendant's initial offer of $830,000 and the Midland Brick counter offer of $900,000; that is, $865,000.
Mr Harvey wrote to say that he had discussed her counter offer with senior management and Midland Brick could not accept any change to the proposed caveat terms (Exhibit 11).
I digress briefly to say that the Exhibit 11 letter dated 24 March 2000 on Midland Brick letterhead contains certain handwritten annotations that did not form part of Exhibit 11. These notes were subsequently identified by the defendant in the course of her evidence as notes made by her during a telephone conversation with Mr Harvey about the contents of his letter. The defendant's annotations on the Midland Brick letter were received as Exhibit 11A. For ease of reference, I will call these "the defendant's 24 March annotations".
Mr Harvey said in evidence that on the afternoon of 24 March 2000 the defendant responded by making changes to the Midland Brick letter dated 23 March 2000 (Exhibit 9) and faxing the letter back to him. She changed the sale price in the 23 March counter offer from $900,000 to $901,000 (and signed that change) and added the words "new offer $901,000. I acknowledge these caveats". She signed and dated those changes. She also added the words "Attention Bob Harvey Midland Brick". The 23 March letter with the defendant's annotations just mentioned was received as Exhibit 12.
Mr Harvey responded with a letter dated 24 March 2000. He pointed out that the defendant could not accept the Midland Brick counter offer of 23 March 2000 because she had already made two subsequent offers which had not been accepted. He told the defendant that Midland Brick would be accepting an offer from one of the two proposed purchasers that afternoon and gave her an opportunity to submit an additional offer prior to 5 pm. Mr Harvey's letter dated 24 March 2000 was received as Exhibit 13.
Later that afternoon, Mr Harvey received a facsimile from the defendant advising that she had spoken to her husband and that her final offer was $915,000 with the two caveats. The facsimile dated 24 March 2000 addressed to Mr Harvey (omitting the inessential parts) reads as follows (Exhibit 14):
"I have just spoken with my husband – finally we offer $915,000 for Mandalay – with caveats."
Mr Harvey discussed the offers from the two potential purchasers with his superior and then called the defendant to say that a recommendation would go to the Board of Midland Brick to accept her offer. Mr Harvey then wrote to the defendant by letter dated 24 March 2000 in these terms (Exhibit 15):
"This is to confirm my verbal advice that we will be recommending to the board that your offer for 'Mandalay' be accepted.
The basis of our recommendation will be:-
A sale price of $915,000.00.
With the following caveats to be appended to the property:
1.The property will not be subdivided without the written consent of Midland Brick Company Pty Ltd.
2.The purchaser acknowledge [sic] that Midland Brick operates and manages brick making facilities at its Middle Swan Site and that brick making is deemed as a noxious industry. The purchaser understands and agrees that they will not complain about emissions from the plant to any statutory authority."
Mr Harvey said in evidence that if the defendant had not agreed that the property could not be subdivided without the written consent of Midland Brick, or if she had not acknowledged that Midland Brick operated and managed brick‑making facilities at its site and that brick‑making was deemed as a noxious industry and that she would not complain about emissions from the plant to any statutory authority, or if she had not agreed to Midland Brick appending caveats to the property confirming those matters, then he would not have recommended the sale and Midland Brick would not have sold the property to her. The Midland Brick position was simply not negotiable.
Mr Harvey said in evidence that the defendant wrote to him that evening purporting to confirm acceptance by Midland Brick of her offer. The relevant letter reads as follows (Exhibit 16):
"Thanks for your call confirming my successful offer of $915,000 with the caveats as listed in your letter dated March 23 2000. I await the paperwork you indicated was coming. If possible can I have it this afternoon. As discussed, I need to advise the purchaser of my current property that I accept their offer."
Mr Harvey said that the Board of Midland Brick approved the sale. On 11 April 2000 he wrote to the defendant's solicitors confirming that the sale had been approved and that settlement could commence (Exhibit 17). Up to that point in time he had not taken any legal advice in relation to the contract or his negotiations. However, on 5 April 2000 he engaged the law firm Wilson & Atkinson to formalise the agreement and to prepare the caveat.
Mr Harvey referred to some toing and froing between the solicitors. I pause to note that this apparently involved the submission of a new form of offer and acceptance to the defendant and her solicitors containing more detailed provisions concerning the "no subdivision clause" and the "no complaint clause". On the defendant's case, a contract in the new form was not acceptable to the defendant. I will come to the details in that regard later when I turn to the defendant's evidence at trial. However, it is common ground between the parties that eventually, as a result of these exchanges, a deed dated 10 May 2000 was executed by the parties which was directed to the special conditions (Exhibit 19).
The Exhibit 19 deed contains a recital to the effect that Midland Brick has agreed to sell the subject land known as Mandalay on certain terms and conditions contained in an offer and acceptance dated 11 April 2000 including, inter alia, the right for the vendor to lodge a caveat against the property "for the purposes hereinafter referred to".
Clause 2.1 of the deed reads as follows:
"2.1The Purchaser irrevocably acknowledges and agrees that:
2.1.1the Property will not be sub‑divided at anytime without the written consent of the Vendor first had and obtained;
2.1.2the Purchaser acknowledges that the Vendor operates and manages brick making facilities adjacent to the Property and that brick making is deemed to be a noxious industry. On this basis the Purchaser understands and agrees that she will not complain about emissions from the Plant to any statutory authority;
2.1.3the Purchaser further acknowledges and agrees that the Vendor may lodge a caveat over the Property
as chargeeto protect its rights contained in this clause including, without limitation, its rights to prevent the Purchaser sub‑dividing the Property without the written consent of the Vendor first had and obtained."I will come to the circumstances in which the words "as chargee" were scored through in due course.
The sale of the subject land to the defendant was settled on the day after execution of the deed; that is, on 11 May 2000. The subject land was transferred into the name of the defendant. It is apparent from the certificate of title that simultaneously the National Australia Bank Ltd registered a first mortgage against the land.
Midland Brick lodged a caveat against the land ten days later on 22 May 2000. On that part of the form on which the caveator is required to specify the estate or interest being claimed, Midland Brick by its solicitor and agent wrote "as grantee". In the next panel on the form, where the caveator is required to specify the grounds on which the claim is made, the form was completed by typing in the words "a deed agreement dated 10 May 2000". As to the nature of the caveat the word "absolutely" appears on the form. In other words, Midland Brick purported to forbid the registration of any instrument affecting the estate or interest claimed by it in the subject land "absolutely".
Subsequent events
Mr Harvey said in evidence that two years later, on or about 14 June 2002, he received a letter from the defendant saying that she wished to take out a new mortgage over the property (Exhibit 21). Having found that the Midland Brick caveat, being an absolute caveat, prevented registration of the proposed mortgage, she requested that the caveat be removed.
Mr Harvey referred the matter to Midland Brick's solicitors. This gave rise to further exchanges between the parties in which Midland Brick contended that registration of an absolute caveat was justified but offered to remove the same at Midland Brick's expense and relodge the caveat.
A letter dated 22 July 2002 (Exhibit 23) from Wilson & Atkinson as solicitors for Midland Brick to the defendant asserted that it was always intended that the restrictions would run with the land as evidenced by the fact that during the pre‑contractual negotiations, in answer to a proposed "watering down" of the restrictions by the defendant, Midland Brick had said (in its Exhibit 11 letter of 24 March 2000) that there could be no changes to the restriction upon subdivision as that was required to protect both Midland Brick and the purchaser.
The Exhibit 23 letter dated 22 July 2002 contains this passage:
"Midland Brick acknowledges your complaints that the absolute caveat currently enables it to prevent any dealing in respect of the property, even those that have nothing to do with subdivision. A solution has been proposed, namely that Midland Brick will, at its own expense, prepare and execute a deed undertaking to permit and facilitate all dealings in respect of the property which do not breach the abovementioned restrictions. Furthermore, Midland Brick will undertake to pay the costs incurred in lifting and relodging the caveat, each time there is a dealing in respect of the property, limited to one such dealing per year (non‑accruable)."
The defendant's solicitors, Anderson Josland, by letter dated 29 July 2002 (Exhibit 26) referred to the fact that their client had recently built a house on the property and now wished to use the property as security for finance. In that letter the defendant's solicitors made these further observations:
"I do not think it necessary to reiterate to you the content of my letter to you of 8 May 2000. It was never agreed nor was it ever intended that your client be in a position to lodge an absolute caveat and therefore have control over my client's right to mortgage or deal with her property.
Your client has a contractual right only. That contractual right does not, nor was it intended to, bind my client's transferees or successors in title. Once again your client is attempting to bully my client into a position which is different to that which was agreed and intended at the time of the contract.
Unless your client removes its caveat within 7 days to allow my client to mortgage or otherwise deal with her title as she sees fit, then I am instructed to make application under section 138B to have the caveat removed."
It was against this background that the defendant arranged for a notice to be issued to Midland Brick. This meant that Midland Brick as caveator was obliged to take steps to have the operation of the caveat extended in the manner allowed for by s 138C of the Transfer of Land Act 1893 (WA).
The application to extend was brought on before me eventually and an order was made for the caveat to be extended in its existing form subject to Midland Brick commencing proceedings for declaratory or other relief within a prescribed time in order to substantiate its interest in the land and its claim to maintain a caveat in the present form: Midland Brick Company Pty Ltd v Welsh & Anor [2002] WASC 248.
In the proceedings to extend the caveat Midland Brick was only required to demonstrate that it had an arguable case. It follows, now that the required proceedings for declaratory relief have been commenced by Midland Brick, that a final determination has yet to be made, having regard to the pleaded cases of the respective parties, as to whether Midland Brick has a caveatable estate or interest in the land and is entitled to relief. I will turn to the pleadings in due course.
The cross‑examination of Mr Harvey
Before leaving the evidence of Mr Harvey I must draw attention to a number of points brought out in the course of cross‑examination (albeit subject to the reservation of my ruling at the hearing as to what matters or documents should be characterised as admissible evidence).
Counsel for the defendant established that noxious industrial activities were not being conducted on Midland properties lying outside the boundaries of the Midland site. Mr Harvey was not sure whether he showed the defendant an aerial photograph of the Midland Brick site. He seemed to recall that she came to the Midland Brick Administrative Office on the site on one occasion. He did not show her on a map the exact nature of the Midland Brick holding or tell her that Midland Brick owned 12 pieces of land. He did not give her the exact details of land owned by Midland Brick or of the site but he did tell her that the Midland Brickworks created dust and fumes. He did not take her on a tour of the site.
On Mr Harvey's account, it was he who raised the need for conditions and first mentioned the caveats. He did so without having obtained legal advice. This was not something being offered by the defendant. He agreed that the defendant did not say that she was contracting for anyone who might buy the subject land from her. He assumed that by telling the prospective purchaser that the land could not be subdivided this would ensure that the land could not be subdivided. In the end, on his account, Midland Brick got the contractual terms that it wanted.
Mr Harvey did not accept, while under cross‑examination, that Midland Brick's solicitors, Wilson & Atkinson, tried to renegotiate the contract by sending a new contractual form containing a more detailed clause bearing upon the crucial conditions. Mr Harvey simply left it to the solicitors to do what was thought to be necessary. On his understanding the defendant agreed to enter into a deed "to action the contract" but he was not sure whether he was contacted about the deed by the solicitors or saw a copy of the draft deed. He could not recall whether the solicitors conveyed to him that the defendant would not agree to an absolute caveat or to mention being made of this in the deed. He simply understood that the sale was based on a condition that the land could not and would not be subdivided.
I must now turn to the evidence of Midland Brick's General Manager, Richard Hyland.
Mr Hyland's evidence
Mr Hyland said in his witness statement at trial that he is the General Manager – Commercial of Midland Brick and has been working in that position since about 1996. He confirmed that the land owned by Midland Brick around its site is a buffer zone. It was put in place, and is maintained, to create as much distance as possible between Midland Brick and people who could be adversely affected by noise, dust and smell from operations on the site. The company is particularly keen to put space between the site and private residences because they are more likely to get upset. Business and industry neighbours are less likely to complain. There was a strong media campaign to shut down the brickworks in the 1990s.
He said that in 1990 Boral Ltd acquired Midland Brick. Paul Arndt became the new Divisional General Manager in 1998. Mr Arndt was prepared to consider disposal of part of the buffer zone providing Midland Brick still had sufficient buffer and did not lose the benefits associated with the buffer zone if some land was sold. In particular, the property to be disposed of could not be subdivided and the purchasers had to accept Midland Brick's brick‑making operations and not make any complaints in relation to those operations. According to Mr Hyland, Midland Brick would not have sold the subject land to the defendant if she had not agreed that the property could not be subdivided without the written consent of Midland Brick, or if she had not acknowledged that Midland Brick operated and managed brick‑making facilities on the site and that brick‑making was characterised as a noxious industry and that she would not complain about emission from the plant to any statutory authority, or if she had not agreed to Midland Brick appending caveats to the property in respect of these matters.
During Mr Hyland's term as General Manager - Commercial the subject land was the only buffer sold by Midland Brick. He confirmed that he authorised Midland Brick's solicitors, Wilson & Atkinson, to send the Exhibit 23 letter dated 22 July 2002 to Ms Welsh indicating that Midland Brick was prepared to lift and relodge the caveat to allow for registration of dealings which did not interfere with Midland Brick's rights.
Under cross‑examination Mr Hyland said that he did not speak to the defendant in the course of negotiations. He was briefing Mr Harvey who conducted the negotiations on behalf of Midland Brick. In that regard, Mr Hyland took advice from Midland Brick's solicitors, Wilson & Atkinson, about using a caveat to secure Midland Brick's position prior to the contract being concluded, and passed on to Mr Harvey, as one of Midland Brick's requirements in the negotiations, that a caveat was needed. It was the mechanism whereby Midland Brick would ensure that no subdivision took place on the subject land and no complaints were made by the occupier of that land. Mr Hyland understood that an absolute caveat prevented any dealing with the land.
Mr Hyland was pressed about this aspect of his evidence. Reference was made to the absence of any mention of this matter in his witness statement and to Mr Harvey's evidence that no legal advice was obtained until the contract was concluded. Mr Hyland did not alter his position, notwithstanding this challenge. It was put to him also that after the negotiations had been concluded, as a consequence of legal advice being received, an attempt was made to have the defendant sign a revised form of offer and acceptance to which was annexed a more detailed form of the purposed purchaser covenants (Exhibit A). The proposed purchaser covenants were expressed in this way:
"4.PURCHASER COVENANTS
The Purchaser irrevocably acknowledges and agrees that:
4.1.1the Property will not be sub-divided without the written consent of the Vendor first had and obtained. The Purchaser further acknowledges that this consent may be withheld by the Vendor in its absolute discretion and without being required to give reasons to the Purchaser in respect of that decision;
4.1.2the Purchaser acknowledges that the Vendor operates and manages brick making facilities adjacent to the Property and that brick making is deemed to be a noxious industry. On this basis the Purchaser understands and agrees that she will not complain about emissions from the Plant to any statutory authority.
4.1.3the Purchaser further acknowledges and agrees that the Vendor may lodge an absolute caveat to protect its rights contained in this clause including, without limitation, its rights to prevent the Purchaser sub-dividing the Property without the written consent of the Vendor first had and obtained. In the event that the Purchaser wishes to sell or transfer the Property, then the Purchaser covenants and agrees not to sell or transfer the property until the intending purchaser has entered into a deed with the Vendor whereby the new purchaser covenants and agrees with the Vendor not to subdivide the Property, complain about emissions from the Plant and allow the Vendor to lodge a caveat on the same basis as set out above in Clause 4.1.1, 4.1.2 and 4.1.3 respectively hereof."
Mr Hyland referred to various exchanges between the parties but agreed that the negotiations were essentially conducted by Mr Harvey. He said that the Exhibit A offer and acceptance was what Midland Brick was intending to negotiate with the defendant but agreed that the document was never signed. When it was put to him that the defendant refused to sign the Exhibit A document he responded (TS 121):
"I'm aware that she asked for some changes to the wording."
His understanding was that in due course a deed was finalised as a means of facilitating lodgement of a caveat. The sending out of a draft deed was done under his instructions.
Mr Hyland conceded under cross‑examination that the defendant would not agree to certain words which were included in the first draft of the deed submitted to her. The draft deed in question was received in evidence as Exhibit B being an unsigned or earlier version of the document that was eventually signed as the deed dated 10 May 2000 (Exhibit 19).
I digress briefly to note that it emerges from a consideration of various amendments made to the Exhibit B draft deed and from a comparison of that version of the document with the terms of the Exhibit 19 deed dated 10 May 2000 (which was eventually executed by the parties) that certain terms included in the draft deed did not appear in the executed deed.
The recital to the Exhibit B draft deed in its original type‑written form included reference to a right for Midland Brick to lodge an absolute caveat against the property for the purposes hereinafter referred to. The words "an absolute" are scored through on the draft deed and do not appear in the executed deed which refers simply to a right for Midland Brick to lodge "a caveat" against the property.
By par 1.1.2 of the draft deed it was said that "Welsh shall mean Marian Concepta Welsh and her executors, personal representatives, transferees, successors and assigns". In the executed deed that provision has been truncated to read that "Welsh shall mean Marian Concepta Welsh".
In the draft deed the term "the contract" is said to mean the contract by way of offer and acceptance dated 20 March 2000. That date has been scored through on the draft deed to read "11 April" being a date reproduced in the executed deed. I pause here to note in passing that this alteration strongly suggests that the negotiations concerning the form of the deed commenced after the contractual negotiations had been concluded and were still on foot after 11 April 2000.
Under the heading "Acknowledgement" the draft deed made provision for the purchaser to irrevocably acknowledge and agree in cl 2.1.1 that the property would not be subdivided at any time without the written consent of the vendor first had and obtained. The clause continued: "the Purchaser further acknowledges that this consent may be withheld by the Vendor in its absolute discretion and without being required to give reasons to the Purchaser in respect of that decision". That sentence is scored through on the draft deed and does not appear in the executed deed.
Clause 2.1.3 of the draft deed in its original type‑written form reads as follows:
"2.1.3the Purchaser further acknowledges and agrees that the Vendor may lodge an absolute caveat over the Property to protect its rights contained in this clause including, without limitation, its rights to prevent the Purchaser sub‑dividing the Property without the written consent of the Vendor first had and obtained. In the event that the Purchaser wishes to sell or transfer the Property, then the Purchaser covenants and agrees not to sell or transfer the property until the intending purchaser has entered into a deed with the Vendor whereby the new purchaser covenants and agrees with the Vendor not to subdivide the Property, complain about emissions from the Plant and allow the Vendor to lodge a caveat on the same basis as set out above in Clause 2.1.1, 2.1.2 and 2.1.3 respectively hereof."
It is apparent from the draft deed that the words in the first and second lines: "an absolute" have been scored through. The draft deed also contains a handwritten note that seeks to add the words "as chargee" after the word "caveat" in line 2. In addition, the whole of the final sentence of the proposed 2.1.3 clause in the draft deed has been scored through; that is, the sentence whereby the defendant was to ensure that any person purchasing the land from the defendant would abide by the special conditions.
Clause 2.1.3 in the Exhibit 19 executed deed reflects these changes to some extent and reads as follows:
"2.1.3the Purchaser further acknowledges and agrees that the Vendor may lodge a caveat over the Property
as chargeeto protect its rights contained in this clause including, without limitation, its rights to prevent the Purchaser sub‑dividing the Property without the written consent of the Vendor first had and obtained."I will come back to the scoring through of the words "as chargee" in cl 2.1.3 of the executed deed a little later when I turn to the evidence of the defendant. For the time being, it is sufficient to note that, in essence, when pressed, Mr Hyland agreed in the course of cross‑examination that the final or executed deed was approved by him. When it was put to him (TS 125) that the final version of the document represented the position as agreed between the defendant and Midland Brick, he responded: "Certainly. That's why it is signed".
Counsel for Midland Brick objected to the reception of the Exhibit B draft deed, and evidence concerning it, but was informed that this would be dealt with by my reserved ruling as to the admissibility of evidence.
It emerged during the course of Mr Hyland's cross‑examination that a document or documents had been brought into existence reflecting his recommendation to the Board of Directors of Boral Ltd for approval to proceed with the sale. The bundle of documents comprising the Midland Brick submission to the Board was received in evidence as Exhibit C. The operative memorandum is dated 29 March 2000 and refers to a sale of Mandalay having been negotiated for a sale price of $915,000 upon special conditions which are expressed in the same terms as the key letter dated 23 March 2000 from Mr Harvey of Midland Brick to the defendant (that is, the Exhibit 9 letter) in which the special conditions appear to have been expressed in written form for the first time.
The Exhibit C approval memorandum contains an executive summary which was approved by Mr Hyland and indicated that Midland Brick no longer required the subject land as a buffer zone between itself and the wider community. Approval was sought to sell "with the following caveats attached, which had been agreed to by the purchaser" being the special conditions as expressed in the Midland Brick Exhibit 9 letter of 23 March 2000. The preferred option was said to be to sell Mandalay for $915,000 "with the caveats to protect future land use as agreed to by the purchaser".
The approval memorandum included also an extract from the UBD Road Directory showing Mandalay and the Midland Brick site coloured green. As to that latter document, the cross‑examiner pressed Mr Hyland about the fact that the Midland Brick site was not accurately represented. When compared to the Exhibit 4A marked up cadastral map, the UBD map suggested that the cl 12.1 land did not form part of the site. Mr Hyland responded to this by saying, in effect, that the UBD sketch map was simply an approximate representation for the purpose of the recommendation to the Board and did not purport to be precisely accurate. In saying to the Board that the subject land was no longer required as a buffer zone he may have chosen his words poorly but in his view it was being sold with the caveat protections in place. It was not proposed to just sell it without any qualification. He meant that it was the least required buffer zone. He said that the restrictive covenants were to benefit the land on which the plant sits. It was the operations of the plant that were foremost in his mind.
The defendant's evidence concerning the contract
The defendant said in her witness statement that in 1999 she and her husband were living on a 70 acre property on which they ran cattle. They decided to look for a property closer to Perth so she proceeded to research properties within the Swan Valley suitable for horses. Having identified Mandalay as a prospect she decided to contact Midland Brick. She first spoke to Mr Harvey on 14 February 2000 and did not speak to anyone else from Midland Brick in the course of the negotiations that followed. He said that Midland Brick would not like any challenge to its activities and would want a written statement to that effect.
According to the defendant, she knew that it would be difficult to subdivide the property. She told Mr Harvey that she was not buying the property for the purpose of high density housing. She then wrote him the Exhibit 5 14 February 2000 letter referring to their telephone conversation and noting that she and her husband had no desire to subdivide the block into a housing estate or any commercial venture. It would be for private use only. She was trying to make her offer attractive to Midland Brick.
She then arranged with Mr Harvey for an inspection of the property and was of the view that this took place close to 28 February 2000. The property and the buildings seemed dilapidated. However, after she had visited the property, she made an offer to Midland Brick of $597,842. This offer was reflected in her 28 February letter (Exhibit 34) in which she confirmed that there was no intention to subdivide the property for housing development or a commercial venture. It was in this letter (mentioned earlier) that she spoke of wishing to reserve the right to subdivide the block into two or three areas. It was in this letter that she said that "we would naturally impose any covenants relating to housing development and "no opposition to Midland Brick" clauses as the company would impose on us on any such farmlets. Hence Midland Brick's interests would be protected".
When the defendant next spoke to Mr Harvey on or around 20 March 2000 he said that her offer was too low. At that stage he had not said that there would be any conditions imposed by Midland Brick in the contract. They had only discussed the price and the conditions that she wanted to include in her offers.
The defendant said in evidence that on 20 March 2000 she made another offer to buy for $830,000. This offer is reflected in the Exhibit 6 offer and acceptance form which includes reference to the REIWA General Conditions for the Sale of Land. She received a fax from Mr Harvey enclosing the key Exhibit 9 23 March 2000 letter which included a reference to caveats and set out in writing for the first time the proposed special conditions. She responded by the Exhibit 10 letter dated 24 March 2000 to say that the caveat concerning no complaints was acceptable but the caveat concerning no subdivision without consent was not acceptable "in its current form as it gives Midland Brick the unconditional right to either approve or otherwise any subdivision". An acceptable redraft would be that the property was not to be subdivided without the written consent, which will not unreasonably be withheld, of Midland Brick subject to any subdivision being no more than three blocks.
The defendant said that she then received the Exhibit 11 letter dated 24 March 2000 from Mr Harvey informing her that Midland Brick would not accept any changes to the proposed caveat arrangements. This was to ensure a clear understanding of the obligations as to the property.
The defendant said in evidence that she rang Mr Harvey to discuss the caveats. She referred to the possibility that if she died her husband and children might want to subdivide the block. He said that Midland Brick was mainly concerned about the property being developed as a residential subdivision and that new owners may object to the brickworks. She said that any prospective purchaser could see the brick‑making facilities anyway. She said that her family would not complain about the operations. She said that she did not want Midland Brick to control the property after she had bought it. Mr Harvey said that the caveats would not do that and Midland Brick would not stop development. They would just know what was going on.
According to the defendant, Mr Harvey did not suggest that the caveats would stay on the title for ever or apply to any future owner. The suggestion that she could not subdivide did not worry her because she was buying it to build her own home and not to subdivide. It was unlikely the statutory bodies would allow subdivision and, in any event, she wanted the land particularly to include the waterfront.
I pause to note that the Exhibit 11 letter dated 24 March 2000 from Midland Brick to the defendant contains certain handwritten annotations (mentioned earlier). In the course of her evidence the defendant accepted that these notes were made by her contemporaneously with respect to the telephone conversation I have just described. They read as follows (Exhibit 11A):
"Bob Harvey
•can't see Midland getting upset with an inheritance upset
•That we won't complain about the operations
•If it gets developed the new owners may not agree to the Brick Works [therefore] MB wants a say in it
•This will not stop developt automatically they just need to give consent so they know what is happening and any new owners are aware also."
The defendant said that she wrote on the key Harvey/Exhibit 9 letter dated 23 March 2000 "new offer $901,000 I acknowledge these caveats". She sent that back to Mr Harvey marked for his attention. She also wrote her Exhibit 10 24 March letter accepting the counter offer. She had heard that there was another purchaser interested and she was becoming quite anxious to finalise as the purchaser for her existing property was making noises about withdrawing an offer on that property.
Mr Harvey then wrote to her by his Exhibit 13 letter dated 24 March indicating that other offers were in hand. She responded quickly by her Exhibit 14 fax dated 24 March 2000 saying that she would pay $915,000 for the property "with caveats". Mr Harvey responded in writing on the same day to say that he would recommend her offer to the Board. By her Exhibit 16 letter dated 24 March 2000 she confirmed "My successful offer of $915,000 with the caveats as listed in your letter dated March 23 2000". She went on to say that she awaited the paperwork.
It was common ground at the hearing before me that by the Exhibit 17 letter dated 11 April 2000 from Mr Harvey to the defendant's solicitors, Anderson Josland, concerning Mandalay, it was said on behalf of Midland Brick that "this letter is to advise that the sale of the above Lot to Marian Welsh has been approved and settlement may commence". It is for this reason, because the letter just mentioned marked the end of the exchanges, that Midland Brick pleaded (and the defendant by its statement of defence admitted) that on or around 11 April 2000 Midland Brick agreed to sell and the defendant agreed to purchase the subject land.
The defendant's evidence concerning post contract events
The defendant said in her witness statement that on 18 April 2000 she received the Exhibit A offer and acceptance form from Midland Brick which contained new conditions in relation to the caveats. She instructed her solicitors, Anderson Josland, to inform Midland Brick solicitors that she would not be signing another contract as there was already one in place. On or about 26 April 2000 she instructed her solicitor to say that she would not accept the further conditions included in the draft deed prepared by Midland Brick solicitors as she had already agreed the terms of the caveats with Mr Harvey. She would only sign a deed that had exactly the same terms as those which were in the contract and had been agreed between Mr Harvey and herself.
In essence, the defendant's evidence was that her stance led to the amendments to the draft deed I have described in earlier discussion and to the execution of the Exhibit 19 deed dated 10 May 2000 in its final form; that is, she would not accept the reference in the draft deed to an absolute caveat, she would not accept in the definition applicable to herself the words "and her executors, personal representatives, transferees, successors and assigns", she required the deletions mentioned earlier to cl 2.1.1 and cl 2.1.3 in the draft deed.
The defendant acknowledged that settlement was effected on 10 May 2000 at the National Australia Bank. She said that she attended with her solicitor. It was then that she deleted "as chargee" from the deed with she and her solicitor both initialling the deletion.
The defendant said that in early 2002 she wanted to refinance the property as she was thinking about changing banks and wanted to make another property investment. She needed to borrow some money. As a consequence of the lodging of the absolute caveat by Midland Brick she was unable to change banks or otherwise deal with the property. It seems that this brought about the steps taken on her behalf to remove the caveats.
According to the defendant, she has no intention of subdividing the property as it is currently her home. Midland Brick has put it to her that they will lift the caveat in return for another deed to be signed by her, the caveat being relodged as an absolute caveat and that they would be prepared to remove the caveat yearly if she wanted to deal with the property. She said in her witness statement that this was an unacceptable proposal as it still prevented her from dealing with the land generally.
The defendant said in evidence that since purchasing the property she had cleaned it up, pulled down the old house and refenced the property. She had built a new house and renovated the stables. She felt that the crossings out on the draft deed may have been made by her sister but she was not sure. She could not recall whether the deed had been signed by Midland Brick at the time she signed the document.
Cross‑examination of the defendant
Under cross‑examination the defendant agreed that the question of a caveat being lodged was discussed at considerable length. She had a problem about giving Midland Brick the right to lodge a caveat referable to a condition prohibiting subdivision because it was in the nature of an encumbrance and a purchaser such as herself did not want an encumbrance. She acknowledged that Mr Harvey made it clear that Midland Brick would not sell unless she agreed not to subdivide the property but she believed that her undertaking in that regard was in the nature of a personal undertaking.
The defendant was cross‑examined at length about the defendant's 24 March annotations (Exhibit 11A) and agreed that these notes were made while she was talking to Mr Harvey. She acknowledged that Midland Brick was seeking two caveats being a caveat not to complain and a caveat not to subdivide. In various ways, and over an extended period, she was pressed by the cross‑examiner about the passage in the annotations that refers to the Midland Brick need to give consent and the reference to "any new owners" being aware also. She said that she was not sure what exactly was meant by the reference to new owners.
In the course of cross‑examination this exchange then occurred concerning the fourth bullet point in the defendant's 24 March handwritten notations (TS 169 - 170):
"I put it to you that Mr Harvey made it clear to you that the purpose of both of these caveats was to protect Midland Brick's position in relation to subdivision and in relation to the noxious part of it – so both caveats was to bind you as purchaser and any new purchaser should you subdivide or sell?‑‑‑No, and that is quite obvious because it deliberately had all that extension removed from the deed.
No. We're talking about this point of time, not what happened later. At this point in time Bob Harvey made that clear to you in that discussion?‑‑‑No, he did not.
He did refer to new owners?‑‑‑New owners, being me or anyone else who was currently negotiating with - - -
I put it to you that 'new owners' is a reference to an owner acquiring the land from you?‑‑‑I disagree with you.
Either by way of subdivision or by sale as to a new owner acquiring the land from you or another purchaser, but you in particular?‑‑‑No. You're incorrect."
The defendant continued to assert that her understanding was that the discussion concerning the caveats gave rise to a commitment binding upon her only as a personal undertaking. However, counsel continued to press her about the handwritten annotations and the indication in the fourth bullet point that Midland Brick was concerned to ensure that any new or incoming owner would be committed in the same way. A further exchange occurred in these terms (TS 171 ‑ 172):
"Are you telling the court that Mr Harvey said to you that the caveats will only apply to the land while you owned the land?‑‑‑I had offered to give Mr Harvey - - I had given my word ‑ ‑ ‑
Are you telling the court that Mr Harvey said to you that the caveats will only remain on the property whilst you remain as registered proprietor?‑‑‑He never mentioned ‑ ‑ ‑
Are you telling the court that? ‑ ‑ ‑ I am saying that he never mentioned that they would run with the land and my ‑ ‑ ‑
No. Listen, please. Did you [sic] tell you that the caveats will only be registered by Midland Brick against the land whilst you owned the land?‑‑‑He certainly implied it.
Did he say it?‑‑‑He implied it.
Did he say it?‑‑‑I got very strong implications from his words, yes.
Are you saying he did say it?‑‑‑I'm saying that he implied it. In actual fact when I talked to him about my daughter's inheritance ‑ ‑ ‑
Just focus on the question please?‑‑‑No. That's part ‑ ‑ ‑
Let's just focus on the questions. You're saying he didn't say it but he did imply it?‑‑‑He implied it.
He didn't say it?‑‑‑He implied it."
The defendant suggested that the comment after the first bullet point concerning the inheritance was an indication that any person owning the land after her could do what they liked with it and would not be bound. It was put to her that this note at the first bullet point meant no more than that Midland Brick was likely to give consent to a dealing with the land by a member of the family who had inherited, but the defendant disputed this view of the matter. She continued to assert that Mr Harvey clearly implied that the special conditions applied only to herself and not to any other owner. She was cross‑examined as to why this was not mentioned in her witness statement.
The defendant was also cross‑examined about events leading up to and bearing upon the writing of her first letter dated 14 February 2000 (Exhibit 5). She said initially that Mr Harvey did not refer to the special conditions in their first conversation or to any concern about people being too close to the Midland Brick site. However, when pressed, she acknowledged that her Exhibit 5 letter commences by referring to a telephone conversation and goes on to note that Midland Brick would want a written statement that there would be no challenge to its activities. Her letter confirms also that she had no desire to subdivide the block into a housing estate. When pressed, she conceded that the terms of the letter strongly suggested that he raised his concerns with her from the outset. She acknowledged also that she knew Midland Brick was being criticised for noxious activities. She said that the opening telephone conversation was brief and her letter was intended to make her offer sound attractive because she knew of Midland Brick's problems.
The defendant conceded that Mr Harvey may have referred to the need for caveats prior to his reference to them in the key Midland Brick Exhibit 9 letter dated 23 March 2000. However, according to her, it was in that letter that for the first time he formally or specifically made known his requirements.
The defendant was cross‑examined about the closing paragraphs of her letter to Mr Harvey dated 28 February 2000 (Exhibit 34) in which she mentioned her wish to reserve a right to subdivide the block into two or three areas but on the basis that "we would naturally impose any covenants relating to housing development and 'no opposition to Midland Brick' clauses as the company would impose on us on any such farmlets".
The defendant said that she understood a covenant meant a personal obligation. When pressed, she appeared to accept that in the Exhibit 34 letter she was offering to impose upon the farmlets what Midland Brick wished to impose upon her. She continued to affirm that Mr Harvey implied that the agreement was to be only with her. In her mind, what counted was that she did not intend to subdivide. It was not clear to her that Midland Brick was trying to bind any owner of her land as opposed to merely relying upon her promise. She sought legal advice as a consequence of receiving the Exhibit 5 letter dated 23 March 2000 and thereafter she was consistent in refusing to agree to an absolute caveat.
Let me now turn to the issues arising on the pleadings.
Statement of claim
In earlier discussion I referred to Midland Brick's plea (at par 2 of the statement of claim) that at all material times it was the registered proprietor of "the plaintiff's properties" being those properties described at 2.1 to 2.12 of the pleading. As a consequence of Midland Brick's answer to a request for particulars, it emerged that certain of the plaintiff's properties comprised the Midland Brick site (the details in that regard being apparent on the Exhibit 4A cadastral map). I called the balance of the plaintiff's properties the "additional properties" (that is, the properties lying outside the brick‑making site).
On the plaintiff's case, Midland Brick agreed to sell and the defendant agreed to purchase the subject land (known as Mandalay) on or around 11 April 2000. Particulars of the documents comprising the contract are set out at par 4 of the claim.
I note in passing, as confirmed to me by counsel on both sides on the final day of the trial, that it was common ground that the subject contract was comprised in the documents being Exhibit 6 (offer and acceptance dated 20 March 2000 signed by the defendant), Exhibit 7 (joint form of general conditions), Exhibit 9 (Midland Brick's faxed letter 23 March 2000), Exhibit 10 (defendant's fax 24 March 2000), Exhibit 11 (typed portion of Midland Brick's letter 24 March 2000), Exhibit 12 (fax 24 March 2000), Exhibit 14 (defendant's handwritten fax 24 March 2000), Exhibit 15 (Midland Brick's letter 24 March 2000), Exhibit 17 (Midland Brick's letter to defendant's solicitor dated 11 April 2000). It was common ground that the documents were exchanged between the parties in the same sequence as their exhibit numbers.
Midland Brick pleaded in par 5 of the claim that the contract was subject to certain express, alternatively implied, alternatively inferred, terms, being that the subject land would not be subdivided without the written consent of Midland Brick (par 5.1); that the defendant acknowledged that Midland Brick operated and managed brick‑making facilities at its Middle Swan site and that brick‑making was deemed a noxious industry. The defendant understood and agreed that she would not complain about emissions from the plant to any statutory authority (par 5.2). Further, that Midland Brick was entitled to protect its rights under the terms set out in par 5.1 and par 5.2 by lodging a caveat or caveats against the land (par 5.3).
Midland Brick went on to plead in par 5.4 that the defendant, as purchaser, contracted personally and on behalf of any person deriving title to the subject land from the defendant. Further, per par 5.5, that the covenants pleaded in pars 5.1, 5.2 and 5.3 ran with the land and bound successors in title to the land.
The particulars provided by Midland Brick in support of its par 5 plea were that the terms pleaded at pars 5.1, 5.2 and 5.3 were express terms contained in the correspondence between the parties forming part of the contract. The term pleaded in par 5.4 was an express term of the contract by reason of the definition of "purchaser" in condition 24(1) of the 1998 Joint Form of General Conditions for the Sale of Land. Further, and alternatively, the terms pleaded at par 5.4 and par 5.5 were implied by operation of law and by reason of s 48(1) of the Property Law Act 1969 (WA). Further, and alternatively, the terms pleaded at par 5.4 and par 5.5 were inferred as a matter of intention and to give effect to the terms pleaded at pars 5.1, 5.2 and 5.3.
I digress briefly at this point to touch on a query I raised with counsel in the course of the hearing as to the status of the so‑called inferred term. I understood counsel to be placing reliance upon reasoning of the kind reflected at pars 10.17 to 10.19 of Cheshire & Fifoot's Law of Contract (8th Aust ed) where a distinction is drawn between the actual terms of a contract, being those which the parties intend to be included in it, and implied terms which are not based on the actual intention of the parties but are implied or imputed upon the basis of hypothetical intention.
The actual terms of contract are usually those expressed in words by the parties themselves. However, the law recognises that the parties may have intended to include terms in their contract which were not articulated. A court may infer such an intention from the nature and context of the transaction as appears from the observations of Deane J in Hawkins v Clayton (1988) 164 CLR 539 at 570. In other words, there will be certain contracts with an unexpressed content which, it can be legitimately inferred, was actually intended by the parties. In essence, an inferred term is like an express term in that the term contended for can be ascertained by a careful reading of the words used in the contract, having regard to the explicit and inherent meaning of the words in question.
I note in passing that in response to the defendant's request for particulars of the inferred term Midland Brick said the terms pleaded in par 5.4 and par 5.5 are properly inferred from all the circumstances as having been included in the contract as a matter of actual intention. No particulars were sought or provided as to the implied terms alleged in the claim and thus there was no issue before me as to whether the terms conformed to the requirements specified in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 283.
Midland Brick pleaded that on 10 May 2000 the parties executed a deed restating, inter alia, certain of Midland Brick's rights under the contract. It was said in par 8 and par 8A of the claim that the defendant irrevocably acknowledged and agreed that she was bound by covenants of the kind described in par 5 of the claim save that , as to the par 5.3 covenant concerning caveats, it was agreed that Midland Brick was entitled to lodge a caveat over the land to protect its rights expressly including, without limitation, its right to prevent the defendant subdividing the land without the consent of Midland Brick first had and obtained.
Importantly, it was alleged in par 9 of the claim that Midland Brick's rights in relation to the subject land under the contract and the deed, materially affect and operate to the benefit of one or more of the properties comprising the plaintiff's properties.
I pause here to note, as indicated in earlier discussion, that a request for further and better particulars of par 9 concerning, in respect of each property, the alleged benefit of each and all of the par 5 covenants was answered at par 3 of Midland Brick's re‑amended answers in this way.
Midland Brick said that as to the properties comprising the Midland Brick site, being properties used as part of or in connection with the brickworks, the agreed terms or covenants directly affected and benefited such properties in that subdivision of the subject land would give rise to other proprietors and/or occupants of the subdivided parcels of land who may object to the activities being conducted by Midland Brick on the site and may interfere with the operations on the plaintiff's property ("Midland Brick's par 3.1 benefit plea").
As to the additional properties, Midland Brick pleaded that the par 5 agreed terms or covenants benefited such properties by ensuring that the properties were not subdivided and/or occupied by other parties who might object to Midland brick's activities conducted on or around the brickworks, and might interfere with the operations on the plaintiff's properties ("Midland Brick's par 3.2 benefit plea").
Midland Brick pleaded that the sale of the subject land to the defendant was settled on or around 11 May 2000. It pleaded that by virtue of the contract and the deed, Midland Brick was entitled to protect its rights under the par 5 covenants by the lodgement of a caveat against the subject land in favour of Midland Brick. It said that on or around 22 May 2000 Midland Brick lodged caveat No H450939 in protection of its interests claiming an estate or interest in the subject land as grantee by virtue of a deed agreement dated 10 May 2000 and forbidding the registration of any instrument affecting the said estate or interest absolutely. It lodged with the caveat a true copy of the deed. The caveat was registered on the certificate of title for the subject land on 22 May 2000.
Midland Brick went on to plead that prior to 23 August 2002 the defendant lodged an application pursuant to s 138B of the Transfer of Land Act as a consequence of which a notice to Midland Brick was issued requiring it to show cause why the caveat should remain registered against the land. Midland Brick pleaded that the defendant has evidenced an intention to deal with the subject land or to allow the land to be dealt with in a manner inconsistent with Midland Brick's rights under the contract and the deed.
A declaration is sought that Midland Brick has an interest in the land capable of being the subject of a caveat registered under s 137 of the Transfer of Land Act. It seeks a declaration that the caveat is valid and binding in its present form against the first defendant and her heirs, assigns and successors in title in respect of the subject land, and an order that the caveat be extended.
Further or in the alternative, Midland Brick seeks an injunction preventing the defendant or her heirs, assigns and successors in title from dealing with the subject land in any way inconsistent with Midland Brick's rights under the contract and/or deed, without the express written consent of Midland Brick first had and obtained or other order of the Court. Midland Brick seeks also such declaratory or other relief as the Court sees fit.
Statement of defence
The defendant by par 4 of its statement of defence admitted the allegations in pars 5.1 to 5.3 of the claim (that is, the making of covenants concerning no subdivision without written consent, no complaints about emissions and protection of Midland Brick's rights accordingly by caveat) but said that on a proper construction of the covenants the caveat which Midland Brick was entitled to lodge was a "subject to claim" caveat and not an absolute caveat. The defendant denied the allegations in par 5.4 and par 5.5 of the claim save to say that the contract provided that "purchaser" meant the party named and described as the purchaser in the contract and any person deriving title under that party.
It was said by Mason CJ, Dawson and McHugh JJ in Leros (supra) at 422 that the purpose of requiring the caveator to "specify" the estate or interest claimed is to enable the registered proprietor to know, or find out, the claim which he or she will have to meet. It has been said also that another purpose is to enable the Registrar to determine whether a dealing lodged for registration is inconsistent with the estate or interest claimed by the caveator. However, in evaluating the significance of that purpose, regard must be had to the power of the Registrar to require the caveator to provide a statutory declaration stating the nature of the estate or interest in the title thereto. In the ultimate analysis, the term "specify" should be understood in the sense of "mentioned definitely or explicitly".
Counsel for Midland Brick submitted further, and in the alternative, that if the caveat was defective, the defect was made good by the lodging of the deed with the caveat. Reliance on the deed was manifested in the assertion at Note 6 that the caveator claimed the estate or interest specified "by virtue of" the deed dated 10 May 2000. Counsel submitted further that technical deficiencies in the form and content of a caveat should not be allowed to deprive a bona fide claimant from the benefit of a caveat: Sullivan v McMahon [1999] WASC 84 at par 33; Hooper v Australia & New Zealand Banking Group Ltd (1996) 5 Tas R 398; [1996] ANZ ConvR 400 at 404.
Counsel submitted further that if the Court decided that Midland Brick had a caveatable interest and ought to be allowed to lodge a caveat against the property, but that the caveat in question was defective in its current form, then the Court should order that the caveat be amended. It was said that in addition to any inherent jurisdiction the Court is empowered to amend caveats under s 138 of the Transfer of Land Act and, more particularly, s 138C(2)(a)(iii) and s 138C(2)(c) of the Act. An amendment should be allowed because Midland Brick, as caveator, is not seeking to change the interest claimed (in the sense of making it a different interest) but simply seeks to amplify the interest being claimed.
Finally, counsel for Midland Brick submitted that if the Court was persuaded to find against the company in relation to the caveat the defendant should be restrained by injunction from dealing with her land in any way inconsistent with her covenant not to subdivide without Midland Brick's approval. It was said that there are many examples of interlocutory injunctions being granted pending determination of the underlying dispute, as in Giacci Bros Pty Ltd v Tyrell, unreported; SCt of WA (Templeman J); Library No 980106; 18 February 1998; Hughan v Gray [2002] WASC 164; Jandric v Jandric [1999] WASC 22; Hamdan v Widodo [2004] WASC 123.
Decided cases concerning form of the caveat
It will be useful to look first at Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419. In that case the purchasers of two home units in a recently completed block lodged a caveat in which the description of the land affected referred to a portion only of the relevant title without greater particularity. The Full Court held that the caveat was in a sufficient form in that it was substantially in the prescribed form, although it might well have been desirable for the Registrar to have required a statutory declaration exhibiting a copy of the strata plan referred to in the caveat. If, on examination, a caveat is found to be defective in that it fails to identify the relevant land or that the claim or interest to an estate cannot be made out, it does not necessarily follow that the caveat has been lodged without reasonable cause.
In Re Henderson's Caveat [1998] 1 Qd R 632 the caveator claimed an interest as beneficiary under the Will of the named deceased and an estate in fee simple as purchaser of part of the land "being an area of two acres on the north‑western corner or, alternatively, an equitable interest in the said two acres".
The Full Court held that a claimed interest in land as a purchaser under a conditional contract was capable of supporting a caveat, because an equitable interest in land could exist when the claimant was entitled to something less than a full decree of specific performance, provided that the claimant was entitled to equitable relief by way of injunction or other remedy to maintain and protect that interest. That where there was a claimed interest in a portion of a lot, the claimant's caveat asserting an interest in the whole of the lot would not be removed as being too wide in circumstances in which precise identification of the boundaries of the portion had not yet occurred.
In the Giacci case (supra) the caveat referred to the estate or interest being claimed "as holder of a profit à prendre". The caveat also included reference to the matters set out in a statutory declaration. An application to extend the operation of the caveat was opposed on the grounds that the interest could not be said to have been sufficiently specified in the caveat unless it was said that the profit à prendre related to the extraction of gravel pursuant to a particular agreement and for a particular term. It was said that the statutory declaration could not cure the defect in the non‑specificity of the description. Templeman J held that no proper caveat had been lodged.
However, the learned Judge went on to say that it was open to him, even if the caveat was of doubtful validity, to make an order restraining the registered proprietor from dealing with the land, pending the resolution of the dispute in an appropriate manner, because under s 138C(2)(a)(iii) the Court had a broad jurisdiction to make such orders as it thought fit concerning the caveat or the land in respect to which the caveat was lodged. He was of the view that in the final analysis the claim to a profit à prendre might have substance and that the dispute should be resolved at an early trial. He considered that it was appropriate to grant the injunction sought so as to maintain the status quo pending the resolution of the dispute in the expedited list.
In Jandric v Jandric (supra) Commissioner Buss QC came to a similar conclusion. In that case, he held that the caveat was defective in that it merely stated that the plaintiff claimed "an equitable interest" and did not specify the nature or extent of the interest as required by the approved form. He was of the view, having regard to the decision of Templeman J in Giacci (supra) that a statutory declaration which supports the lodgement of a caveat cannot cure defects in the form of the caveat. He concluded that the caveat, being defective in form, should not be extended, and nor was it appropriate to grant the plaintiff leave to lodge a further caveat in proper form under s 138D(1) of the Act. However, he was prepared to grant an injunction.
In Cruz v Osborne [1999] WASC 8 the caveatable interest specified was that of "equitable interest" and this was supported by a statutory declaration. McKechnie J held that the caveat was defective in that it was not sufficiently explicit or detailed because the term "equitable interest" was impossibly wide. However, he went on to consider whether regard could be had to the statutory declaration to make good the omission contrary to the earlier decision of the Court in Giacci (supra).
His Honour was of the view that a defect in the actual caveat could be remedied by a statutory declaration because the declaration was available to search by interested parties and was allowed for by the legislation. When regard was had to the statutory declaration read with the caveat, a sufficient estate or interest was identified. The further question then had to be considered whether the facts and matters relied upon supported the claim made. Ultimately, he held that the application for relief should be dismissed because there was no substance in the claim of the caveators as specified in the caveat read with the statutory declaration.
Let me now return to the circumstances of the present case.
Findings as to the form of caveat issue
It emerges from earlier discussion that there is a divergence of judicial opinion as to the correct characterisation of rights arising under a restrictive covenant. There is some support for the notion that the rights are analogous to an equitable charge and support for the notion that the rights are in the nature of a negative easement. It follows that there is bound to be a degree of difficulty in formulating a short and sufficient description of the estate or interest being claimed for the purpose of completing a caveat form. Nonetheless, the primary requirement, as spelt out by the High Court in Leros (supra) is that the estate or interest should be specified in the sense of being mentioned definitely or explicitly. This will enable the registered proprietor to ascertain the nature of the claim he has to meet and will permit the Registrar to determine whether a dealing lodged for registration is inconsistent with the estate or interest being claimed by the caveator.
When the matter is considered in this light, and having regard to the decided cases, I am of the view that the description of the estate "as grantee" was not a sufficient specification of the estate or interest being claimed by Midland Brick. I will not purport to formulate an appropriate description. However, in essence, I consider that Midland Brick was obliged to convey to any person perusing the caveat that the caveator claimed an equitable estate in the subject land as grantee pursuant to restrictive covenants which ran with the land and were binding upon the registered proprietor's successors in title, such covenants being to the effect that the land could not be subdivided without consent and the owner would not complain of emissions.
I digress briefly to say that, in my view, for the reasons given by McKechnie J in Cruz v Osborne (supra) the description of the estate being claimed can be supported in certain cases by reference to the deed or instrument mentioned in the caveat from which the estate or interest is said to arise. However, I do not consider that such an approach is of assistance to Midland Brick in the circumstances of the present case. It is apparent from earlier discussion that the deed does not expressly purport to annex the benefit of the covenants to land retained by the caveator or establish that the burden runs with the subject land. I have only been able to arrive at conclusions to that effect after a protracted process of interpretation, and having regard to extrinsic evidence. The Registrar or any other person perusing the deed referred to in the caveat would have difficulty in establishing the nature of the estate or interest which Midland Brick was said to hold "as grantee" in the absence of any knowledge of the surrounding circumstances (for it is only by reference to the surrounding circumstances that I have been able to complete the process of interpretation). It is the failure to specify the limited nature of the equitable interest being claimed that weighs against the caveator in the present case: George v Biztole Corporation Pty Ltd (in liq) (1995) V ConvR 54‑519.
Accordingly, I am of the view that, for the reasons pleaded by the defendant at par 16 of her statement of defence, the caveat was defective in that it failed to specify the estate or interest being claimed. A further question then arises as to whether the caveat should be treated as being invalid and of no effect.
Counsel for Midland Brick sought to persuade me that if it be held (as I have held) that Midland Brick had a caveatable estate or interest in the subject land, but the caveat was defective as alleged, that the Court should make orders providing for amendment of the caveat in order to correct the defect.
The power to amend caveats was considered recently by Le Miere J in Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd [2004] WASC 30. His Honour noted that s 138 of the Transfer of Land Act provides that the registered proprietor may summon the caveator to attend before the Supreme Court to show cause why the caveat should not be removed and on such an application the Court may make such order as to the Court may seem fit. The preponderance of authority favours the view that on the return of such a summons the power to make such orders as to the Court seems fit includes a power to order that the caveat be amended: Porter v McDonald & Registrar of Titles [1984] WAR 271 at 275.
However, as to the case before him, his Honour noted that it was not an application for the removal of a caveat under s 138. It was an application brought under s 138C for an order extending the operation of the caveat. The relevant provision did not vest in the Court a discretion to make "such order as it thinks fit". In New Zealand Mortgage Guarantee Co Ltd v Pye [1979] 2 NZLR 188 at 198 and Nichols Constructions Pty Ltd v Henry [1995] ANZ Conv R 192 at 194, it was held that legislation similar to s 138C conferred no power to amend a caveat to claim a different estate.
His Honour went on to say that further, and in any event, the power conferred by s 138C(1)(a)(iii) to make such orders concerning the caveat or the land in respect of which the caveat was lodged was conditioned by the requirement that the Court be satisfied that the caveator's claim may or may have substance. If the caveator's claim in the caveat has no substance then the Court does not have power under that provision to amend the caveat to claim a different estate. The interest that justified the lodging of the caveat no longer existed. On the facts before him, the plaintiff was seeking to amend the caveat by substituting for the estate or interest claimed in the existing caveat an entirely different estate or interest arising from a different instrument and a different transaction and set of circumstances.
I am conscious that the present proceedings are not brought pursuant to s 138 of the Transfer of Land Act. I am not satisfied that the conditions precedent to the exercise of the statutory power have been satisfied, even if it be the case that the power allows for amendment in certain circumstances.
I note also that there is authority to the effect that in any event a power to amend the prohibitory provisions of a caveat does not extend to amending the provisions defining the interest claimed. The defect in the caveat in the present case concerns the definition of the interest claimed. This too suggests that there is no power to remedy the defect by amendment: Hamdan v Widodo (supra) at par 43.
Accordingly, I am not persuaded that I am at liberty to make orders for amendment of the kind contended for by Midland Brick.
This brings me finally to Midland Brick's prayer for relief and to the defendant's counterclaim. The central issue in the case is thrown up by Midland Brick's plea at par 15.1 of the prayer for relief that there be a declaration that Midland Brick has an interest in the land capable of being the subject of a caveat registered under s 137 of the Transfer of Land Act. It follows from earlier discussion that I am satisfied that such a declaration should be made, but I am not satisfied that orders of the kind sought in par 15.2 and par 15.3 of the prayer for relief should be made declaring that the subject caveat is valid in its present form and should be extended. It emerges also (as a corollary) that I am not prepared to make orders of the kind sought in the defendant's counterclaim, namely, that a declaration be made that on its proper construction the Deed does not entitle the plaintiff to lodge an absolute caveat. However, as to the relief claimed secondly by the defendant in her counterclaim that Midland Brick be required to remove the subject caveat, there appears to be some justification for such an order because the caveat has been characterised as defective in its form and I have found that there is no power to remedy the defect by amendment.
Midland Brick in its prayer for relief sought also, in the alternative, at par 15.4, an injunction restraining the defendant from dealing with the subject land inconsistently with Midland Brick's rights. It seems to me that the question of whether relief by way of injunction should be afforded to Midland Brick and/or an order be made for removal of the subject caveat pursuant to the counterclaim must be dealt with having regard principally to my finding in favour of Midland Brick on the central issue. It would surely be unjust, having made such a finding, to provide for removal of the caveat pursuant to a finding in favour of the defendant on an ancillary issue (which might expose Midland Brick to the risk that its unregistered interest in the land was defeated or postponed by a transaction involving a third party due to the momentary absence of a caveat), especially in circumstances where the defendant is before the Court and accepts that at least she is bound personally by the special conditions.
Let me draw this together.
I have found that Midland Brick has a caveatable estate or interest in the land and is entitled to lodge an absolute caveat against the subject land. Midland Brick's prayer for relief allows for declaratory relief to be provided which would substantiate Midland Brick's claim and its entitlement to lodge an absolute caveat. In my view, it follows from this that in circumstances where the dispute arises directly between the two parties to the deed and third parties are not affected by the dispute (possibly due to the presence of the caveat), there is a basis for asserting that the declaratory relief should be accompanied by an injunction restraining the defendant from dealing with the land until a fresh and sufficient caveat has been lodged by Midland Brick or other mutually satisfactory arrangements are made by the parties.
Order 18 rule 16 of the Rules of the Supreme Court1971 (WA) provides that the Court may make binding declarations of right whether or not any consequential relief is or could be claimed. The prospect of an injunction being issued has been in contemplation on both sides since an order was made for an extension of the caveat.
I must take into account also s 24(7) of the Supreme Court Act 1935 (WA) which provides that the Court, in the exercise of the jurisdiction vested in it by the Supreme Court Act, in every cause or matter pending before it, shall have power to grant, and shall grant, either absolutely or on such reasonable terms and conditions as shall seem just, all such remedies whatsoever as any of the parties thereto may appear to be entitled to in respect of any and every legal or equitable claim properly brought forward by them in such cause or matter; so that, as far as possible, all matters so in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of such matters avoided.
An injunction to restrain a breach of contract or contravention of a negative covenant lies within the auxiliary jurisdiction of equity. The plaintiff in such cases must usually show that a legal right of a proprietary nature has been infringed or is under threat of infringement, that the infringement is likely to continue or to be repeated and that damages would be an inadequate remedy.
In Doherty v Allman (1878) 3 App Cas 709 Lord Cairns LJ said at 719:
"My Lords, if there had been a negative covenant, I apprehend, according to well settled practice, a Court of Equity would have had no discretion to exercise. If parties, for valuable consideration, with their eyes open, contract that a particular thing shall not be done, all that a Court of Equity has to do is to say, by way of injunction, that which the parties have already said by way of covenant, that the thing shall not be done; and in such a case the injunction does nothing more than give the sanction of the process of the Court to that which already is the contract between the parties. It is not then a question of the balance of convenience or inconvenience, or of the amount of damage or of injury – it is the specific performance, by the Court, of that negative bargain which the parties have made, with their eyes open, between themselves."
This statement has been frequently cited with approval and suggests that the courts are willing to order a defendant not to breach the negative terms of a covenant, even though the agreement as a whole is not subject to specific performance. However, it is clear from the reasoning of the High Court in Dalgety Wine Estates Pty Ltd v Rizzon & Anor (1979) 141 CLR 552 that the statement made by Lord Cairns puts the position too strongly. The correct position is that if a negative term exists, then prima facie it is to be enforced by injunction but the courts have a discretion to refuse an injunction if good reasons exist for doing so.
In Dalgety's case (supra) a lessee of licensed premises, in breach of a covenant in the lease that he would not do any act which would prevent the lessor from obtaining the renewal of the licence, applied to the Licensing Court for the removal of the licence to other premises. The High Court held that the Supreme Court had been correct in refusing equitable relief on the grounds that the grant of an injunction would have deprived the Licensing Court of the opportunity of exercising its discretion in dealing with the matter.
Gibbs J made these observations at 560:
"The stipulation implied in the underlease was clearly negative in substance - it imposed on the respondents the duty to refrain from taking action to remove the licence. To make and pursue the application to the Licensing Court was a breach of that covenant. In J. C. Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282, Dixon J said at 299:
'If, however, a clear legal duty is imposed by contract to refrain from some act, then, prima facie, an injunction should go to restrain the doing of that act. It appears to be of little importance now whether the duty is imposed by a term of the contract expressed in negative or affirmative language.'
It is sometimes said, in reliance upon a dictum of Lord Cairns LC, in Doherty v Allman (supra), that the court has no discretion to withhold the grant of an injunction to restrain the breach of a negative covenant. That appears to be an overstatement, but, in the present case, where it was accepted by both parties that the Court had a discretion to exercise, it is unnecessary to pursue that question."
In the end, Gibbs J, in the course of his dissenting judgment, concluded that there was no ground on which the Supreme Court could properly exercise its discretion by refusing relief to the plaintiff. The appropriate relief was an injunction, not damages. If an injunction were granted, declaratory relief would be unnecessary.
Mason J, as a member of the prevailing majority, was of the view that an injunction should be refused. However, as to the important issue as to whether there was a discretion to refuse an injunction, he made these observations at 573:
"The final questions, then, are whether the Supreme Court had a discretion to refuse an injunction to restrain a breach of the negative covenant and, if so, whether in the circumstances of this case the Court should have exercised its discretion against the applicant.
Lord Cairns LC in Doherty v Allman said that a court of equity has no discretion to exercise when an injunction is sought to enforce a negative covenant in a contract. His Lordship drew a distinction between 'a negative covenant' and a covenant which is affirmative only. The distinction so drawn was, I think, not one deriving from the language or form in which a covenant happened to be expressed, but one arising from the substance of the obligation imposed by the covenant (see, eg, Wolverhampton and Walsall Railway Co v London and North-Western Railway Co (1873) 16 Eq 433 at 440, per Lord Selborne LC).
There has been general agreement that Lord Cairns' statement that a court of equity has no discretion to refuse an injunction restraining a breach of a negative covenant is not accurate. In Doherty v Allman itself Lord Blackburn, who, like Lord Selborne LC in the Wolverhampton Case, was inclined to repudiate the notion that a distinction should be made between negative and affirmative words, considered that there were cases in which a court of equity would refuse to enforce a negative covenant on discretionary grounds.
However, there has been general disagreement as to how Lord Cairns' statement should be reformed if it is to accurately express the true principle. The reason for this is that it is quite impossible to formulate an illuminating statement of principle which is capable of universal application. There is no limit to the number and to the kind of negative stipulations, express or implied, which the courts may be asked to enforce. It is not surprising, therefore, that it has emerged from a long line of judicial decisions that the attitudes of the courts to the enforcement of negative stipulations have varied according to the nature of the stipulation, the nature of the contract in which it is found, the effect which enforcement will have on the relationship of the parties under the contract and the character of the order required to enforce the stipulation. "
When I apply the reasoning in these cases to the circumstances of the present case, I accept that it is a matter of discretion as to whether an injunction should be granted to enforce the negative stipulations reflected in the special conditions. However, it is clear from the evidence and the contentions at trial that there is a hardcore dispute between the parties as to whether the burden of the covenants runs with the land and is binding not only upon the defendant but also upon her successors in title. The defendant has said that there is no immediate likelihood that the land will be subdivided or that there will be complaints about emissions. However, she asserts an entitlement to deal with the land by charging the same to raise finance and it must follow from her position at trial that any dealing with the land would be upon the basis that the burden of the covenants does not run with the subject land. There is evidence before me also that Midland Brick wishes to protect the commercial usage of the benefited land and is of the view that the special conditions are necessary for that purpose. The decided cases indicate that in a situation of this kind, in the absence of compelling evidence to the contrary, weight must be given to the estimation of a party as to the value of the benefit.
Accordingly, having regard to these considerations, I am of the view that in circumstances where the statutory procedure to protect an unregistered equitable interest in the subject land may not be sufficient to protect that interest owing to a defect in the form of the caveat a restraining order by way of injunction should be made in favour of Midland Brick as a means of holding the defendant to what I have found to be her bargain. It will be necessary to hear from the parties as to the form of the orders to be made in that regard.
There is also the prospect of any declaratory relief and other relief of the kind sought by Midland Brick being accompanied by an order for a stay of execution so that steps can be taken for lodgement of a further caveat. If leave to lodge a fresh caveat is required pursuant to s 138D(1)(e) of the Transfer of Land Act then I am prepared to grant the necessary leave.
I am of the view that I ought to hear further argument from the parties as to all of these matters concerning the appropriate form of relief before proceeding to provide for removal of the subject caveat or to finalise any restraining orders or orders for a stay. It is desirable also that the orders for declaratory relief be expressed with precision in order to give effect to the findings made in this judgment. Accordingly, I consider that I should hear from the parties also as to the form in which any declaratory relief provided should be expressed.
Summary
I consider that Midland Brick, as plaintiff, is entitled to a declaration pursuant to par 15.1 that it has an interest in the subject land capable of being the subject of a caveat registered under and by virtue of s 137 of the Transfer of Land Act. As to par 15.2. of Midland Brick's claim, for the reasons I have given, I am not persuaded that caveat number H450939 is valid and binding in its present form with the result that no declaration to that effect will be made. However, as to par 15.4. of the prayer for relief I consider that Midland Brick is entitled to obtain an injunction preventing the defendant or her heirs, assigns and successors in title from dealing with the subject land in any way inconsistent with Midland Brick's rights under the deed without the express written consent of Midland Brick first had and obtained. It may be that a stay or an injunction allowing sufficient time for a fresh caveat to be lodged by Midland Brick will be sufficient.
The defendant's counterclaim will be dismissed as to par 1 of the prayer for relief. Subject to resolution of the matters just mentioned and the question of whether a stay should be granted, I am satisfied as to par 2 of the counterclaim that the subject caveat is not valid in its present form and should be removed from the register. I will hear further from the parties as to the exact form of the orders to be made and as to whether any further orders or directions are required.
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