Netherby Properties Pty Ltd v Tower Trust Ltd

NETHERBY PROPERTIES PTY LTD v TOWER TRUST LTD
[1999] SASC 247

Civil

PERRY J The plaintiff, Netherby Properties Pty Ltd (“Netherby Properties”) challenges the validity and enforceability of restrictive covenants recorded in a Memorandum of Encumbrance registered on the title to an allotment of land (“the subject land”) situated at Netherby and purchased by it on 19 November 1998.
The defendant to the proceedings, Tower Trust Limited (“Tower Trust”) was formally known as Elders Trustee and Executor Company Limited (“Elders”) and later as Austrust Ltd (“Austrust”). As most of the relevant dealings were with the plaintiff when it was known as Elders, I will generally refer to it by that name.
Initially, the Registrar-General was joined as a defendant. Subsequently, the action was discontinued as against him.
Shortly before the hearing, an application seeking leave to intervene was lodged on behalf of Jeremy Randell who, together with his wife, is the owner of one of the allotments within the sub-division of which the subject land forms part. I gave leave in terms of his application. His counsel, Mr White, tendered an affidavit sworn by Mr Randell, and as well an affidavit sworn by John Freeman who occupies another two allotments within the sub-division.
The hearing proceeded on the basis of those affidavits and other affidavits tendered by the plaintiff. No oral evidence was called.
There is no dispute between the parties as to the essential facts upon which the matter falls to be decided. The following account of the relevant circumstances is drawn mainly from three of the affidavits which were tendered, sworn respectively by Mr Tom Doman, solicitor for Netherby Properties, Mr Donald Mackintosh, the Deputy Registrar-General, and Mr Andrew McLachlan, a solicitor employed by Tower Trust.

Factual Background

Elders was the executor and trustee of the will of Robert Henry Pulleine (“the deceased”) who died on 13 June 1936. At the time of his death the deceased was the registered proprietor of a parcel of land at Netherby. By his will, the deceased empowered Elders to subdivide the land.
Elders subdivided the land into 43 allotments. It did so in two stages. Allotments 1 and 3 to 8 (inclusive) were laid out in LTO Plan No 4273, deposited in the Lands Titles Office on 8 January 1949. The balance of the land, being allotments 2 and 9 to 43 (inclusive) were laid out in LTO Plan No 4500, deposited on 3 August 1950. In both plans, the sub-division is described as “Portion of the Township of Netherby”. Eventually, separate Certificates of Title were issued with respect to each allotment.
In November 1950, Elders sold 35 of the allotments by auction. The evidence does not establish when the remainder was sold. All of the allotments were sold subject to an encumbrance executed in favour of Elders by the purchaser, registered on the Certificate of Title relating to each allotment pursuant to s128 of the Real Property Act 1886 (“the Act”).
It is important to note the terms of the Memorandum of Encumbrance. In each case, the operative terms were the same and follow those set out in the Memorandum of Encumbrance registered on the title to the subject land, which was in the following form:
“SOUTH AUSTRALIA

MEMORANDUM OF ENCUMBRANCE
I/ FREDERICK JAMES
of 76 Ferguson Avenue Myrtle Bank Draftsman being registered or being entitled to be registered as the proprietor of an estate in fee simple subject however, to such encumbrances liens and interests as are certified by memorandum underwritten or endorsed hereon in that piece of land situated in the Hundred of Adelaide County of Adelaide being Allotment 33 of the subdivision of portion of Section 263 laid out as Netherby more particularly delineated in Lands Titles Office Plan No 4500 and being portion of the land comprised in Certificate of Title Register Book Volume 2095 Folio 193 and desiring to render the said land available for the purpose of securing to and for the benefit of Elder’s Trustee and Executor Company Limited of Currie Street Adelaide its successor and assigns the rent charge hereinafter mentioned DO HEREBY ENCUMBER the said land for the benefit of the said Elder’s Trustee and Executor Company Limited its successor and assigns with the perpetual yearly rent charge of the sum of one shilling (1/-) to be paid if demanded on the 30th day of June in each and every year to the intent that the said Elder’s Trustee and Executor Company Limited its successors and assigns shall hold the said perpetual yearly rent charge in fee simple AND IN CONSIDERATION of the transfer of the said land to me/us the said FREDERICK JAMES by the said Elder’s Trustee and Executor Company Limited I/ the said FREDERICK JAMES for myself/heirs executors administrators and assigns DO HEREBY COVENANT with the said Elder’s Trustee and Executor Company Limited its successors and assigns hereinafter all included in the term ‘the said Encumbrancee’ as follows namely:-
(a).... that I will not erect or permit to be erected on the said land more than one house with the usual domestic outbuildings
(b)that I will not erect or permit to be erected on the said land any house or building for use otherwise than wholly and solely as a single unit private residence or a domestic outbuilding in connection therewith and that any such building shall not be constructed of any material other than stone brick concrete blocks or reinforced concrete or such other material as the Encumbrancee may by writing approve
(c).... that I will not erect or permit to be erected on the said land any residence of the cost of less than the sum of 2,000 pounds exclusive of the cost of any garage and any other outbuilding or the fencing and laying out any garden in connection therewith
(d)that I will not resubdivide the said land
(e).... that I will not use or permit to be used the said land as a market garden or nursery or for any trade industrial or commercial purpose.

AND IT IS HEREBY AGREED AND DECLARED between the said Encumbrancee and the said FREDERICK JAMES that the said FREDERICK JAMES and his successive assigns shall be respectively released and discharged from the payment of the said rent charge and from the observance and performance of the covenants conditions and restrictions hereinbefore contained forthwith upon the said Frederick James and such respective successive assigns respectively ceasing to be registered as the proprietor of the said land to the intent that the said rent charge and covenants conditions and restrictions shall be binding on the registered proprietor or proprietors for the time being of the said land or any part thereof AND subject as aforesaid the said Encumbrance shall be entitled to all powers and remedies given to an encumbrancee by “The Real Property Act 1886-1945”.
DATED the thirtieth day of May 1951.
SIGNED by the said FREDERICK JAMES (signed)
in the presence of M. Anthony (signed)
[Common seal of Elders affixed against sealing clause]”

Most of the encumbrances were granted by purchasers of a single allotment and related only to that allotment.
However, in some instances, encumbrances were granted in relation to more than one allotment. In one case, for example, an encumbrance was granted over four named allotments by a single purchaser of them.
In some instances subsequent purchasers of an allotment sought a discharge of the encumbrance, usually to enable another instrument, commonly a mortgage, to be registered in priority to it. When this occurred, the usual practice of Elders was to require the purchaser to execute another Memorandum of Encumbrance in the same form, to be registered in succession to whatever other instrument had been registered ahead of it.
In his affidavit, Mr McLachlan concedes that this practice was not followed in one instance when, through inadvertence, Austrust, as it then was, omitted to require the purchaser to execute another Memorandum of Encumbrance, after consenting to the discharge of the original encumbrance.
Mr McLachlan exhibits to his affidavit a copy of a brochure which was distributed by Elders in conjunction with the auction sale held in November 1950. The brochure includes a plan of the subdivision detailing all of the allotments, and under a heading in bold type “protected building conditions”, a statement which reads in part as follows:
“With a view to stimulating development on lines in keeping with the neighbourhood and for the mutual protection of buyers, each site will be sold subject to suitable Building Conditions incorporated in a Memorandum of Encumbrance to be registered on the Certificates of Title: a copy of this encumbrance may be seen at the offices of F.W. Bullock & Co & Keith Wilkinson. The main provisions are:-
(a).... Residences only, with the usual domestic outbuildings, may be built; such residences and outbuildings to be constructed either of stone, brick (including cement bricks), concrete blocks or reinforced concrete, or such other materials as may be approved by the Vendor.
(b)Each residence to cost not less than 2,000pounds, exclusive of the cost of garage and other outbuildings, fencing and laying out the garden.
(c).... Only one single-unit Residence on each Allotment: no maisonettes or flats.
(d)No Allotment may be re-subdivided.
(e).... No Allotment shall be used for market gardening, a nursery, or for any other trade, commercial or industrial purpose.”
The evidence does not disclose from whom Netherby Properties purchased the allotment now in question, or what knowledge Netherby Properties had at the time of purchase of the existence and terms of the encumbrance. But given the fact that the encumbrance was registered on the title, Netherby Properties must be presumed to have been aware of the existence of the encumbrance and of its terms.
Before it had purchased the land, on 19 August 1998 Netherby Properties, by its director Christopher Spyropoulos, applied to the Corporation of the City of Mitcham for approval to sub-divide the land into two allotments. Approval was duly granted by the Council on 26 October 1998.
After that approval had been given, pursuant to Part XIXAB of the Act, Netherby Properties applied to have the plan of sub-division deposited in the Lands Titles Registration Office, and requested that a certificate of title issue for each allotment formed by the plan. It also prepared and tendered to Tower Trust a “Certificate of Consenting Parties” which was in a form which, if it had been executed by Tower Trust, would have constituted formal consent to the deposit of the plan of sub-division in the Lands Titles Registration Office. Tower Trust refused to execute the certificate.
By letter dated 4 January 1999, the Registrar-General indicated that in the absence of Tower Trust’s consent, it would reject the application for deposit of the plan of sub-division. That letter was followed by the issue on 2 February 1999 by the Registrar-General of a requisition requiring Netherby Properties to secure the consent of Tower Trust “to the land division” under pain of its rejection if the requisition was not complied with within two months (s 220(3b) of the Act).
Against that background, the proceedings were instituted in this Court on 4 March 1999.
I should say something of the intervener, Mr Randell, and of Mr Freeman, whose affidavit Mr Randell tendered.
Mr Randell and his wife purchased their property in 1996. A copy of the encumbrance made by the original purchaser in favour of Elders was attached to the contract of purchase.
Mr Freeman and his wife purchased their properties in Heather Avenue, Netherby, approximately forty years ago. In his affidavit, Mr Freeman states, inter alia:
“At the time of purchase of the Heather Avenue properties I was aware that they were part of a development which was subject to a scheme of encumbrances restricting the uses to which the Heather Avenue properties and surrounding properties could be put.”
To his affidavit he annexes a copy of the brochure to which I have already referred, summarising the “building conditions”. He further states:
“I understand the ‘building conditions’ mentioned in the promotional material referred to a scheme of interlocking Encumbrances affecting all properties within the sub-division. The existence of such a scheme of Encumbrances was a factor which influenced me in favour of purchasing the Heather Avenue properties.”
A later affidavit of Mr Freeman refers to a meeting of a number of local residents which he convened, held on 12 May 1999. At the meeting, much opposition was voiced to Netherby Properties’ application to this Court. The meeting passed a unanimous resolution expressing “support for the enforceability of the scheme of restrictive covenants”, and confirming the fact that those attending the meeting had purchased their properties in reliance upon the scheme of restrictive covenants.
At the trial, I admitted the affidavits of Mr Randell and Mr Freeman de bene esse.
I now rule that they are admissible only to the limited extent of proving that there was in existence at the time of the creation of the sub-division a building scheme within the meaning of that concept in the law relating to restrictive covenants.
I have recorded the opposition of the local residents who wish to preserve the integrity of that scheme, as I did not wish them to feel shut out of the proceedings, which quite understandably they regard as having implications as to the enforceability of the restrictive covenants attaching to their own allotments. Furthermore, I permitted submissions to be made by Mr White on behalf of Mr Randell, who advanced a most helpful argument as to the difficult legal questions involved.
However, I make it plain that, at the end of the day, Netherby Properties is entitled to have its claim determined upon the basis of the evidence relating to the allotment which it has purchased and that alone. The other evidence is admitted only on the footing that it goes only to the question whether or not there was a building scheme.
Moreover, however understandable it may be that other residents oppose the making of an order which threatens the integrity of the scheme, the wishes of other local residents who might be affected by any precedent established by the outcome of these proceedings, cannot be allowed to influence that outcome.

Restrictive Covenants and Building Schemes

Recognition of the enforceability of restrictive covenants is generally regarded as dating from the decision of the Court of Chancery in Tulk v Moxhay.[1] In its original formulation by Cottenham LC[2] the basis of the rule was that a subsequent purchaser of land who had notice of a restrictive covenant would be bound in equity to comply with it. As initially formulated, the rule in Tulk v Moxhay, as it came to be known, was not based upon the view that such a covenant ran with the land. Rather, it was a question whether, having regard to the contract of sale and the terms of the notice of the restriction on the use of the land attaching to the purchaser, equity would enforce the restriction.
[1] (1848) 2 Ph 774, 41 ER 1143.
[2] See (1848) 2 Ph 777-778, 41 ER 1144.
Eventually, however, the courts took the view that such a covenant should be regarded as something in the nature of an easement. It was the emergence of that view which precipitated the need to be able to identify land to which the benefit of the covenant attached. A covenant in gross was binding only on the original purchaser.
The history of that development is traced by Bray CJ in Clem Smith Nominees Pty Ltd v Farrelly and Ors.[3] In that case, he concluded:[4]
“In my view the law is now clear in Australia that the burden of restrictive covenants will only run with the land in equity against a subsequent holder of the land with notice of the covenant when the covenant is entered into for the benefit of some parcel of land, or possibly some interest in land. The burden of the covenant in gross will not so run; such a covenant only binds the original covenantor.”
[3] (1978) 20 SASR 227 at 232-237.
[4] Ibid 235.
Eventually the law came to distinguish between three different forms of restrictive covenant. They have been described in the following ways:[5]
“(i)... a covenant which is taken for the benefit of specified land of the covenantee which is defined in the transfer containing the covenant;
(ii)a covenant which is not expressed to be for the benefit of defined land but which, if it is to have any operative effect, derives that effect solely from the existence of a building scheme; and
(iii).. a covenant which is expressed to be for the benefit not only of defined land still retained by the covenantee but also of land formerly owned by him but transferred in allotments subject to restrictions which affect all allotments.”
[5] Voumard The Sale of Land in Victoria, 4th ed The Law Book Company Ltd (1986) at 528.
The relevant category for the purposes of this case is (ii).
The rationale underlying the recognition of the enforceability of restrictive covenants when they are part and parcel of a building scheme was explained in one of the early cases in this way:[6]
“The principle which appears to me to be deducible from the cases is that where the same vendor selling to several persons plots of land, parts of a larger property, exacts from each of them covenants imposing restrictions on the use of the plots sold without putting himself under any corresponding obligation, it is a question of fact whether the restrictions are merely matters of agreement between the vendor himself and his vendees, imposed for his own benefit and protection, or are meant by him and understood by the buyers to be for the common advantage of the several purchasers. If the restrictive covenants are simply for the benefit of the vendor, purchasers of other plots of land from the vendor cannot claim to take advantage of them. If they are meant for the common advantage of a set of purchasers, such purchasers and their assigns may enforce them inter se for their own benefit.
One circumstance which has always been held to be cogent evidence of an intention that the covenants shall be for the common benefit of the purchasers is that the several lots have been laid out for sale as building lots, as in Mann v Stephens;[7] Western v Macdermott;[8] Coles v Sims;[9] or, as it has been sometimes said, that there has been ‘a building scheme:’ Renals v Cowlishaw.[10]”    (emphasis added)[11]
[6]    See Nottingham Patent Brick and Tile Co v Butler (1885) 15 QBD 261 per Wills J at 268.
[7] 15 Sim 377.
[8] Law Rep 2 Ch 72.
[9]    Kay 56; 5 D.M. & G.I.
[10] 11 Ch D 866, 867.
[11] See on appeal to the same effect (1986) 16 QBD 778 per Lord Esher MR at 784.
In Spicer v Martin,[12] Lord Macnaghten explained the principle in this way:[13]
“The site was laid out in accordance with the building scheme. The houses were to be built as private houses, and to be used for no other purpose: a covenant to that effect was imposed on the builder who bought the ground, and intended to parcel it out and sell it, or let it again ... . Every lessee must have known that ever other lessee was bound to use his house as a private residence only. This restriction was obviously for the benefit all the lessees on the estate; they all had a common interest in maintaining the restriction. This community of interest necessarily, I think, requires and imports reciprocity of obligation.”
[12] (1888) 14 App Cas 12.
[13] Ibid 25.
Parker J in Elliston v Reacher[14] offered a four-point formulation of the principle which has subsequently been referred to favourably by courts both in Australia and the United Kingdom. He said:[15]
“In my judgment, in order to bring the principles of Renals v Cowlishaw[16] and Spicer v Martin[17] into operation it must be proved (1.) that both the plaintiffs and defendants derive title under a common vendor; (2.) that previously to selling the lands to which the plaintiffs and defendants are respectively entitled the vendor laid out his estate, or a defined portion thereof (including the lands purchased by the plaintiffs and defendants respectively), for sale in lots subject to restrictions intended to be imposed on all the lots, and which, though varying in details as to particular lots, are consistent and consistent only with some general scheme of development; (3.) that these restrictions were intended by the common vendor to be and were for the benefit of all the lots intended to be sold, whether or not they were also intended to be and were for the benefit of other land retained by the vendor; and (4.) that both the plaintiffs and the defendants, or their predecessors in title, purchased their lots from the common vendor upon the footing that the restrictions subject to which the purchases were made were to enure for the benefit of the other lots included in the general scheme whether or not they were also to enure for the benefit of other lands retained by the vendors.”
[14] (1908) 2 Ch 374.
[15] Ibid 384.
[16] 9 Ch D 125; 11 Ch D 866.
[17] 14 App Cas 12.

From that statement of the relevant principles, it will be seen that to the extent that the law requires the benefit of the restrictive covenant to attach to a quasi dominant tenement if the burden is to run with the land, in the case of a building scheme, the quasi dominant tenement is to be regarded as the balance of the allotments within the sub-division for which the benefit of the covenant is to operate. The significance of the existence of a building scheme is that it is a circumstance from which the inference may be drawn that the intention of the grantor of any particular covenant was to benefit the other allotments included in the scheme, an intention to benefit other land being an essential prerequisite to the creation of a restrictive covenant running with the land.
The other essential prerequisite to the creation of a restrictive covenant running with the land is that the land which is to benefit, that is, the quasi dominant tenement, must be clearly identified. Early authorities tend to suggest that it was necessary for the property to be benefited by the restrictive covenant to be identified in the covenant itself. See, for example, Renals v Cowlishaw[18] where James LJ observed:
“To enable an assign to take the benefit of restrictive covenants there must be something in the deed to define the property for the benefit of which they were entered into.” (emphasis added)
[18] (1879) 11 Ch D 866 at 868.
To the same effect in the context of a case involving an alleged building scheme are the observations of Farwell J in Osborne v Bradley:[19]
“It seems to me impossible to impute such an intention (to create a building scheme) in the present case where the covenant itself is silent, and where no property is defined as subject to the scheme.” (emphasis added)
[19] [1903] 2 Ch D 446 at 454.
In Australia, a question arises as to how the restrictive covenant may be notified on the title of the registered proprietor of the quasi servient tenement.
Bray CJ in Clem Smith v Farrelly and Ors[20] answered that question in the following way:
“Whatever may ultimately be held to be the law of England, however, I am of opinion that under the Torrens System it is essential before the burden of a restrictive covenant can be held to run with the land that the land entitled to the benefit of the covenant shall be capable of identification in some way from the registered document containing the covenant or, at least, from other related documents which can be discovered by a search in the Lands Titles Office (see Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd[21]). A prospective purchaser of land subject to an burden should be able to find out by a search whether the covenant is a covenant in gross, which will not be binding on him if he purchases, or a covenant the benefit of which is attached to some parcel or parcels of land, which may be binding on him. It was so held by Hudson J in the Supreme Court of Victoria in In Re Dennerstein.[22] With respect I agree.”
[20] Ibid 237.
[21] (1971) 124 CLR 73.
[22] [1963] VR 688.
As to the means by which notification is to be given on the register of the existence of a restrictive covenant, in South Australia, the technique commonly utilised by conveyancers has been to register an encumbrance on the title, pursuant to s128 of the Act. That section provides:
“Whenever any land is intended to be charged or made security in favour of any person the registered proprietor shall execute a mortgage in the appropriate form; and whenever any land is intended to be charged with, or made security for, the payment of an annuity, rent charge, or sum of money, in favour of any person, the registered proprietor shall execute an encumbrance in the appropriate form.” (emphasis added)
The particular form of encumbrance commonly utilised for this purpose is that which creates a rent charge. It will have been seen that that was the device used in this case.
The encumbrance in this case is in a similar form to that which was the subject of the decision of Napier CJ in Blacks Ltd and Ors v Rix and Ors.[23]
[23] [1962] SASR 161.
That case concerned a sub-division laid out as Springfield. Every purchaser of the land was obliged to give an encumbrance in favour of the company responsible for the sub-division in the form of a perpetual yearly rent charge for a nominal sum (one shilling) in consideration of which the encumbrancer covenanted with the developer in terms of a number of restrictive covenants, including a covenant which confined the purchaser to erect on the land no “more than one house with the usual domestic outbuildings”.
Napier CJ considered that the facts entitled him to conclude that there was a “building scheme”, and furthermore, that the scheme satisfied the four points mentioned by Parker J in Elliston v Reacher (supra).
In his judgment, Napier CJ does not deal with the question of identification of the quasi dominant tenement, although he observed:
“... the restrictions were obviously for the benefit of all the purchasers, they all had a common interest in maintaining the restrictions ...”[24]
[24] Ibid at 164.
Relying on the comment of Lord Macnaughten in Spicer v Martin (supra), he concluded that:
“This community of interest necessarily requires an import of reciprocity of obligation.”
He then dealt with what he described as “the question that remains”, namely, whether or not any of the provisions of the Real Property Act precluded the enforcement of the “equitable right”. In concluding that there was nothing in the Act to prevent enforcement of the covenant, he relied upon s249 which relevantly provides:
“Nothing contained in this Act shall affect the jurisdiction of the Courts of law and equity in cases of actual fraud or over contracts or agreements for the sale or other disposition of land or over equities generally.
And the intention of this Act is that ... all contracts and other rights arising from unregistered transactions may be enforced against such proprietors in respect of their estate or interest therein, in the same manner as such contracts or rights may be enforced against proprietors in respect of land not under ... this Act: Provided that no unregistered estate, interest, contract, or agreement shall prevail against the title of any bona fide subsequent transferee, mortgagee, lessee, or encumbrancee, for valuable consideration, duly registered under this Act.”
Napier CJ’s reliance upon s249 to justify the course which he took has been severely criticised. See, for example, Bradbrook and Neave Easements and Restrictive Covenants in Australia:[25]
“Napier CJ’s interpretation of s249 appears to run counter to the indefeasibility principle and in particular to the basic tenet that a registered proprietor does not take subject to an unregistered interest (or in this case an interest which arguably should not have been registered) simply because he has notice. The purpose of s249 appears to be to ensure that contracts entered into, and equitable interests created, by the registered proprietor himself will be enforceable against him. Napier CJ’s judgment seems heretical in this respect. Unregistered equitable interests cannot be enforced against a registered proprietor even if he takes with notice. Although the restrictive covenants were contained in an encumbrance which was registered, they were not themselves registered. If the decision in Blacks Ltd v Rix ... is regarded as being based upon s249 of the South Australian legislation, and upon the fact that the purchasers of the land from the covenantors had notice of the covenant, it is unlikely to be followed.”
[25] Butterworths (1981) at [1714].
There is much in that criticism. As the learned authors point out in the same work, mere knowledge of the existence “of any unregistered estate, interest, contract, or trust” is not of itself evidence of such want of bona fides as to affect the title of any registered proprietor (s72 of the Act), that title being “absolute and indefeasible” except in the case of fraud or where one or more of the other qualifications which are set out in s69, applies.
Of course, that criticism is valid only if the covenants, as opposed to the rent charge, are not to be regarded as registered. The learned authors of Easements and Restrictive Covenants in Australia make it clear from the passage which I have just quoted that they did not regard the restrictive covenants in Blacks Ltd v Rix, as opposed to the encumbrance, as registered.
In another case which concerned restrictive covenants said to burden land which arguably was part of a building scheme, namely, Burke v Yurilla SA Pty Ltd,[26] Debelle J made certain comments which are apposite:[27]
“The device which has been adopted has been to register an encumbrance which included the restrictive covenants. The encumbrance charged the land with a nominal annual rent charge and then went on to include the restrictive covenants. The encumbrance was in the form of the encumbrance provided in the Tenth Schedule to the Real Property Act and so was registrable. The form contained in the Tenth Schedule provided for the inclusion of ‘any special covenants’ and this was the means adopted to include restrictive covenants creating a building scheme. The intention was to ensure registration of the encumbrance and thus registration of the covenants so as to enable enforcement against a subsequent registered proprietor.
There can be little doubt that an encumbrance of this kind in so far as it encumbers the land with the payment of $1 as a rent charge is registrable since it complies with s128 of the Tenth Schedule of the Act. The fact that the encumbrance includes other covenants which may or may not be enforceable does not affect the registrability of the encumbrance: see Perpetual Executors & Trustees Association of Australia Ltd v Hosken (Registrar of Titles);[28] Mahony v Hosken (Registrar of Titles);[29] Clem Smith Nominees Pty Ltd v Farrelly.[30]:
[26] (1991) 56 SASR 382.
[27] Ibid at 386.
[28] (1912) 14 CLR 286.
[29] (1912) 14 CLR 379.
[30] (1978) 20 SASR 227.
I agree that there is no doubt about the registrability of the encumbrance insofar as it deals with the rent charge, which is a type of charge expressly referred to in s128 of the Act. Furthermore, it has clearly been established that the fact that particular covenants may not be enforceable, does not necessarily affect the validity of the registration of the rent charge itself. That will be so, however, only where the covenants are not “linked” with the rent charge. See Bray CJ’s comments in Clem Smith Nominees Pty Ltd v Farrelly & Ors:[31]
“The restrictive covenants, however, are in no way linked with the rent charge. The liability to pay is in no way dependent in whole or in part on the performance or non-performance of the covenants.”
[31] (Supra) 20 SASR at 232.
In this case, the form of the Memorandum of Encumbrance does not link the performance of the covenants with the enforceability of the charge. On the contrary, as will have been seen, the memorandum creates a yearly rent charge in perpetuity, which is in no way defeasible by reason of the breach of any of the covenants. Furthermore, the consideration expressed in the Memorandum of Encumbrance for the covenants (as opposed to the rent charge) is the transfer of the land. So that the covenants stand alone, unrelated to the rent charge.
In my opinion, in such circumstances, the covenants, as opposed to the rent charge, cannot properly be regarded as registered.
If, contrary to that view, they were properly to be regarded as effectively registered, it would be possible to use the device of registration of a rent charge as a means to secure registration of any interest whatsoever, even if the interest was otherwise clearly not registrable under the Act. It would be possible by that means seriously to erode the principle of indefeasibility, which ordinarily operates to preclude unregistered equities from taking effect against the title of a registered proprietor, even where he or she acquires title with notice of the equity.
The situation is different in those States where there is express provision for the registration of an encumbrance on the title, not limited to categories such as those referred to in s128 of the Act, as for example is the case in Victoria.[32]
[32] See the Land Transfer Act (1988) (Vic), s88(1), and the discussion in Voumard (op cit) at 527 et seq.
My conclusion that in this case the covenants, as opposed to the rent charge, are not registered is supported by the judgment of the Full Court in Burke v Yurilla (supra). In that case, Debelle J (with whom King CJ and Cox J concurred) was of the same view with respect to the covenants there in question. He cites with approval a passage from C.A. Jessup Forms and Practice of the Lands Titles Office of South Australia, which includes the following:[33]
“4..... The object of an encumbrance is to secure a money payment not being a debt ... The encumbrance has been used to give notice of a restrictive covenant, eg building restriction ...” (emphasis added)
[33] 56 SASR at 393, citing Jessup op cit at 147.
Later in his judgment, Debelle J observes:[34]
“... the practice of registering an encumbrance for the purpose of giving notice of a building scheme had been long standing even before the decision in Blacks Ltd v Rix.”
[34] Ibid at 396.
Accepting then that the registration of the encumbrance in this case served only to give notice of the covenants, which are not in any sense registered on the title, for the reasons which I have already given, I am of the view that the title of the registered proprietor, Netherby Properties, is unaffected by them.
Putting it another way, the mere knowledge acquired by Netherby Properties of the existence and terms of the rent charge to which was annexed the restrictive covenants in question in this case, being the knowledge which must be imputed to it by reason of the registration of the encumbrance on the title, was not such as could operate to impair the title which Netherby Properties obtained upon registration of the transfer of the land to them.
But I have to accept that the actual decision in Burke v Yurilla SA Pty Ltd prevents me from giving effect to that view. In that case, Debelle J concluded:[35]
“There is nothing in the operation of the Real Property Act which renders the covenants contained in the encumbrance, the subject of this action, unenforceable against the plaintiff.”
[35] 56 SASR at 396.
I am bound by the decision of the Full Court in that case, notwithstanding that it is contrary to the view which I have expressed, and notwithstanding that the reasoning which leads me to that view does not appear to have been discussed in that case.
However, for other reasons which I come to, I am led to the conclusion that the covenants in this case are unenforceable against Netherby Properties.
Before coming to those other reasons, I do not overlook the fact that in Clem Smith v Farrelly and Ors (supra) Bray CJ found another reason to doubt the correctness of the decision in Blacks Ltd v Rix, by reference to the provisions of s97 of the Act. It is not necessary for me to deal with that further basis of criticism of the decision.[36]
[36] See Clem Smith v Farrelly and Ors, 20 SASR per Bray CJ at 35.
I further note that Zelling J criticised the decision in Blacks Ltd v Rix on a different basis again. During the course of his judgment he said:[37]
“In my opinion, the judgment of Richards J in R.J. Finlayson Limited v Elder Smith & Company Limited[38] states the position correctly. He said:
‘The position appears to be that surrounding circumstances cannot annex the benefit of a covenant to land; the instrument containing the covenant must itself show an intention to annex it, and then circumstances may be used in order to identify the land to which the parties intended to annex it.’
It follows that in my opinion the case of Blacks Limited v Rix[39] was wrongly decided in so far as it allowed evidence to be adduced which linked up all the matters required to prove the building scheme then before the Court. The actual decision may not necessarily have been wrong in the result because it does not appear from the statement of facts at page 163 of the report whether the defendant Edna Eileen Rix was a transferee for value, and if she was not, then the actual decision was correct.”
[37] 20 SASR at 255.
[38] [1936] SASR 209 at 240.
[39] [1962] SASR 161.
I proceed to deal with the other basis upon which I would hold the restrictive covenants unenforceable in this case.
The problem for the defendant in that respect is that the Memorandum of Encumbrance in question encumbers the land “... for the benefit of the said Elders Trustee and Executor Company Limited its successor and assigns ...”, but makes no reference either to a building scheme or to the covenants attached to the rent charge enuring for the benefit of the remaining allotments in the building scheme.
I have no doubt at all that there was in this case a building scheme in the sense in which that expression has been used in this context. But whether or not a building scheme is in existence, it is nonetheless essential if the covenants are to be enforceable by subsequent purchasers of the land said to be burdened by them, that the Memorandum of Encumbrance be in terms which identifies the land intended to be benefited by the covenants, or that in the case of Torrens System land, the identity of the quasi dominant tenement be identifiable by a search of the register. I have already referred to the passage in the judgment of Bray CJ in Clem Smith v Farrelly and Ors which makes that clear.
The same point was made in the earlier decision of Hudson J in the Supreme Court of Victoria in Re Dennerstein,[40] cited by Bray CJ in Clem Smith Nominees v Farrelly and Ors. Dennerstein concerned a building scheme affecting land situated at South Yarra, a suburb of Melbourne. Under s74 of the Transfer of Lands Act (1890) (Vic), which was in force at the relevant time, an encumbrance might be registered upon a certificate of title to land. Apparently a practice grew up in that jurisdiction similar to that which I have described here, of notifying restrictive covenants as encumbrances.
[40] [1963] VR 688.
In his judgment in that case, after referring to the judgment of Sholl J in Re Arcade Hotel Pty Ltd,[41] Hudson J said:
“[Sholl J] pointed out that there may be no objection in principle to the annexation of restrictions arising under a building scheme, provided they are expressed in a form of covenant (notified as an encumbrance) which sufficiently identifies the land in favour of which the restrictions are imposed, and this, I think, may be conceded. But can the notification as an encumbrance of the covenant which contains no such identification be effective? In the Canadian case of Re Campbell & Cowdy[42] (to which Adam J referred), the view was expressed by Orde J that it can not. He said, at p.1037:
‘I very much doubt whether the existence of a building scheme which is not clearly defined as to the lands for whose benefit the restrictive condition is imposed in the certificate of ownership, is consistent with the intention and meaning of the Land Titles RSO 1927 c 158. The whole object of the Act is to define the nature and extent of the title as registered, and so that the certificate of ownership shall disclose the full title of the owner with whatever charges liens and other encumbrances may be registered against it. A purchaser under such a certificate ought not to be put upon inquiry as to anything beyond what the certificate itself discloses. Here the certificate discloses a condition implemented by a covenant apparently for the benefit of the Suydam Realty Co, and it alone There is nothing on its face to suggest that the restriction is for the benefit of any parcel of land whatsoever. To give to others rights which are not spread upon the face of the register is, in my opinion, quite opposed to the whole intention of the Act. And I think that when restrictive conditions are registered under s99 of the Act, if those who impose the conditions intend the benefit of these to attach to and run with other lands, those other lands ought to be clearly defined and set forth in the register and the certificate of ownership.’
The views here expressed appear to be appropriate in the consideration of a similar question arising under the Victorian Transfer of Land Acts. A similar view has been expressed in an article by Mr Baalman in 27 ALJ 366, ‘Common Building Schemes and the Torrens System’. ... What has been notified is simply a covenant by the transferee with his transferors their executors, administrators and transferees. Upon its true construction this has been held to be a covenant which fails to identify any land in favour of which the benefit thereof is to be annexed. It is only when resort is had to an inquiry as to the circumstances under which the covenant was entered into, that it may be inferred that it was to give effect to a building scheme to which the owners of lands affected by the scheme were parties; only when this has been done can it be postulated that the benefit and the burden of the restrictions were intended to pass to and bind subsequent registered proprietors. No reference to the existence or the extent of such a scheme is contained in the covenant, and, for all that appears in it, the covenant may have been intended to have no greater effect than what the law would give it.
But it was contended by Mr Searby on behalf of the objectors that from the transfer it would appear that the land was transferred out of a certificate of title which comprised an area of land known as the ‘Como’ estate, that from an inspection of the lodged plan of sub-division of this estate the lots therein could be identified and by searches of the transfers of those lots, it could be ascertained as a matter of reasonable inference that the transfers were made pursuant to a common building scheme and what were the lands affected thereby and subjected to the burden and entitled to the benefit of the restrictions imposed by the scheme.
In my view, a purchaser of land under the Transfer of Land Act is not bound to prosecute inquiries and searches and make deductions such as would be involved if Mr Searby’s contentions were accepted. Even when all the materials and evidence in relation to the circumstances under which an estate has been subdivided and sold are available it is not by any means easy to determine whether the sale of allotments in the estate has been made under or pursuant to a common building scheme. To require a person interested in purchasing one of those allotments to make this determination after obtaining the necessary evidence perhaps years after the original sale if it is available would render conveyancing a hazardous and cumbersome operation, and, in the case of dealings in land under the operation of the Transfer of Land Act, would defeat the object of the Act and destroy in large measure the efficacy of the system sought to be established thereby.
I have reached the conclusion that, even assuming there is power under the Act to notify as encumbrances on a certificate of title restrictions arising under a building scheme, such a notification will not be effective to bind transferees of the land unless not only the existence of the scheme and the nature of the restrictions imposed thereunder, but the lands affected by the scheme (both as to the benefit and the burden of the restriction) are indicated in the notification, either directly or by reference to some instrument or other document to which a person searching the register has access.” (emphasis added)
[41] [1962] VR 274 at 286-7.
[42] [1928] 1 DLR 1034

I have set out that long quotation from the judgment of Hudson J as it seems to me to be directly in point. Furthermore, what Hudson J said in that case was expressly approved by Bray CJ in the passage which I have already cited from his judgment in Clem Smith v Farrelly and Ors.[43] The point is put beyond doubt in the judgment of Debelle J in Burke v Yurilla Pty Ltd and Ors,[44] being a judgment in which King CJ and Cox J agreed. Debelle J said:[45]
“Before it can be held that the burden of restrictive covenant will run with the land under the Torrens System, it is necessary to establish that the land entitled to the benefit of the covenant is capable of identification from the registered document or from the register.”
[43] 20 SASR at 237.
[44] (1991) 56 SASR 382.
[45] Ibid 389.
He then goes on to cite the passage which I have quoted above from the judgment of Bray CJ in Clem Smith Nominees Pty Ltd v Farrelly and Ors, concluding with Bray CJ’s acceptance of the decision of Hudson J in Re Dennerstein. Debelle J continues:
“It can be stated therefore that a person who deals with the registered proprietor is deemed to have notice of and will be bound by a restrictive covenant which runs with the land which is contained in a registered encumbrance noted on the original Certificate of Title. Covenants which are intended to establish a building scheme will ex hypothesi be for the benefit of other parcels of land. Provided the land entitled to the benefit of the covenant can be identified from the Register, those entitled to the benefit of the covenant will be able to enforce the covenant by equitable remedies. Those criteria are satisfied here and the covenants are enforceable against the plaintiff.” (emphasis added)
When Debelle J uses the expression “provided the land entitled to the benefit of the covenant can be identified from the Register”, given that this immediately follows his citation, with apparent approval, of what Bray CJ said in Clem Smith Nominees Pty Ltd v Farrelly and Ors, it must follow that what is envisaged is that the quasi dominant tenement can be readily identified from the register, without a complex inquiry of the kind referred to by Hudson J.
Furthermore, when he uses the expression “covenants which are intended to establish a building scheme”, details must appear in the encumbrance or on the certificate of title upon which the encumbrance is registered, from which the nature and extent of the scheme, and the identity of the land to be benefited, must clearly appear.
In that respect, the observations by Hudson J in Dennerstein are apposite. The test cannot be regarded as satisfied if, years after a building scheme has been implemented, in this case some 38 years afterwards, there are registered encumbrances of the kind now in question, being covenants, in which there is no reference to a building scheme or to the land to be benefited by the covenants. In such circumstances, a purchaser is put to “prosecute inquiries and searches and make deductions”[46] which would necessarily involve a most extensive inquiry locating the plan of the sub-division and piecing together the picture which may be obtained by tracking down the individual titles and the encumbrances noted upon them. Here, there was not even anything on the face of the restrictive covenant or on the face of the title to alert a purchaser of the land to the fact that it might have been part of a building scheme. The encumbrance is expressed simply to be in favour of Elders, and it is, for all intents and purposes, a mere covenant in gross.
[46] See Hudson J in Dennerstein v Dennerstein [1963] VR at 696.
I note in parenthesis that it is not at all clear how it was that in Burke v Yurilla the court was satisfied that the quasi dominant tenement was in fact adequately identified in that case. But that is nothing to the point. The principle is clear, and it was clearly affirmed in Burke v Yurilla.
It was affirmed more recently by Olsson J in City of Mitcham v Clothier and Ors.[47] That case involved an application to restrain the processing of a development application to subdivide land said to be burdened by a restrictive covenant which prevented that course.
[47] (1974) 62 SASR 394.
Once again, that case concerned covenants attached to a rent charge. While in that case Olsson J was not persuaded that there was a “building scheme in the relevant sense”, he found that in any event the land said to benefit from the covenant was not properly identified. He said:[48]
“It is impossible to perceive any identification, in the instrument constituting the encumbrance, of any specific land intended to be benefited by it, this being a requirement - even in a building scheme.”
[48] Ibid 400.
Mr Hall, in his most helpful argument put forward on behalf of the defendant, correctly pointed out that neither in Clem Smith Nominees Pty Ltd v Farrelly and Ors or in Burke v Yurilla has the Full Court gone so far as to overrule the decision of Napier CJ in Blacks Ltd v Rix.
He further contended that if Blacks Ltd v Rix has not been overruled, the decision in that case means that the covenants now in question should be held enforceable against Netherby Properties.
The difficulty with that argument is that the decision in Blacks Ltd v Rix has nothing to say about the requirement for the quasi dominant tenement to be identifiable if the restrictive covenants are to be held enforceable against subsequent purchasers. The point does not appear to have been argued in the case. It should not be overlooked that Blacks Ltd v Rix was a judgment given on a motion for judgment in default of defence. An argument was presented only by the plaintiffs. There is no mention of any consideration being given in that case to the requirement that the land to benefit from the covenants must be capable of being readily ascertainable from a search of the Certificate of Title, a point made clear in Clem Smith Nominees v Farrelly and confirmed in Burke v Yurilla.
True it is that Bray CJ in Clem Smith Nominees Pty Ltd v Farrelly and Ors said, after referring to Blacks Ltd v Rix:
“I accept the decision as an authority that an equitable interest under the rule in Tulk v Moxhay[49] will be recognised as an interest capable of protection like other equitable interests under the South Australian Real Property Act, subject to any specific provision of that statute.” (emphasis added)
[49] (1848) 2 Ph 774, 41 ER 1143.
But the expression of that view of the effect of the decision in Blacks Ltd v Rix did not prevent Bray CJ from emphasising the requirement that the quasi dominant tenement must be clearly ascertainable from the Register.
In Burke v Yurilla, the Full Court regarded Blacks Ltd v Rix as an authority sanctioning the use of the device of registration of an encumbrance as effective to give notice of the existence of restrictive covenants. That was the point upon which the Court in that case felt disinclined to overturn a conveyancing practice which had been accepted for so long. See the judgment of Debelle J in that case, where he observes:[50]
“The decision in Blacks Ltd v Rix was that of a single judge of this Court and is, of course, capable of being overruled by a Full Court of this Court. But where a decision has stood for a long time and a commercial or conveyancing practice has developed on the footing that the decision is correct, the court will be slow to overrule the previous decision ...”
[50] 56 SASR 382.
It is one thing to sanction a long-standing conveyancing practice by which notice of the existence of restrictive covenants is given by tacking them on to a registrable encumbrance in the form of a rent charge. But that cannot render such covenants enforceable against subsequent purchasers of the land if the legal requirements necessary to produce that result are not complied with. A central requirement is that the identity of the quasi dominant tenement be made clear in the instrument creating the covenants, or that it be readily ascertainable from the Register. To sanction a situation in which that requirement was not met would be to erode one of the pivotal features of the Torrens system.
In any event, the principles relating to the need to identify the quasi dominant tenement where it is sought to create restrictive covenants which will run with the land have been spelled out and emphasised by the courts in cases dating from well before the turn of the century. If conveyancers have not heeded the clear expression of those principles in the cases, it is not for the courts to impair the efficacy of the system of registration of title enshrined in the Real Property Act by attempting to rescue them from their shortcomings.
So that it seems to me that the requirement that the identify of the quasi dominant tenement must be ascertainable from the covenants themselves or from the Register is not to be regarded as put aside by the decision in Blacks Ltd v Rix. The case did not deal with the point. Subsequent decisions of the Full Court, binding upon me, and the decision of Olsson J in City of Mitcham v Clothier and Ors (supra) cover the matter adversely to Mr Hall’s argument.

Conclusions

If it was open for me to decide the case on that basis, I would hold that the effect of registration of the transfer to Netherby Properties had the result that Netherby Properties took free of any equities which might have arisen from the restrictive covenants in question. However, the decision of the Full Court in Burke v Yurilla precludes that course.
But the covenants in question are unenforceable for another reason.
In this case, the restrictive covenants must be regarded as covenants in gross, given that the identity of the land intended to benefit from the covenants is not ascertainable from the covenants themselves, or readily ascertainable from the Register.
It follows that Netherby Properties is entitled to a declaration that the covenants contained in the Memorandum of Encumbrance registered No 1678946 are unenforceable against it.
In its summons, Netherby Properties seeks a declaration that both the Memorandum of Encumbrance and the covenants contained in it are void and/or unenforceable against the plaintiff. That is expressed too widely. For the reasons I have given, the encumbrance is a valid encumbrance insofar as it creates a rent charge, but the restrictive covenants are unenforceable against the plaintiff for the reasons which I have given.
Furthermore, it would be wrong to declare the covenants void, as they were operative as between the original vendor and purchaser of the land.
I will hear the parties as to the precise form of the judgment and order and as to costs.

[1999] SASC 247

17 June 1999