BETWEEN : MIDLAND BRICK COMPANY PTY LTD (ACN 008 674 224)

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

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

Abigail v Lapin [1934] UKPCHCA 1; (1934) 51 CLR 58

Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (1999) 21 WAR 425

Adamson v Hayes [1973] HCA 6; (1973) 130 CLR 276

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99

Baramon Sales Pty Ltd v Goodman Fielder Mills Ltd [2001] FCA 1672

Beswick v Beswick [1967] UKHL 2; (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] HCA 9; (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] HCA 24; (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] HCA 35; (2000) 201 CLR 520

Crampton v French (1995) V ConvR 54-529

Cruz v Osborne [1999] WASC 8

Dalgety Wine Estates Pty Ltd v Rizzon & Anor [1979] HCA 41; (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] HCA 12; (1978) 138 CLR 423

Federated Homes Ltd v Mill Lodge Properties Ltd [1979] EWCA Civ 3; [1980] 1 WLR 594; (1980) 1 All ER 371

Foran v Wight [1989] HCA 51; (1989) 168 CLR 385

Forestview Nominees Pty Ltd & Silkchime Pty Ltd v Perpetual Trustees (WA) Ltd [1998] HCA 15; (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

Heid v Reliance Finance Corporation Pty Ltd [1983] HCA 30; (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] HCA 57; (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 [1992] HCA 22; (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

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] HCA 58; (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] HCA 10; (1957) 98 CLR 93

Tonks v Tonks [2003] VSC 195; (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] HCA 7; (1988) 164 CLR 387

Woodberry v Gilbert (1907) 3 Tas LR 7

Accounting Systems 2000 (Developments) Pty Ltd & Anor v CCH Australia Ltd & Anor (1993) 114 ALR 355

Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604

Burke v Yurilla SA Pty Ltd (1991) 56 SASR 382

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] HCA 55; (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] HCA 4; (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] VicRp 41; [1962] VR 274

Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (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

1 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).

2 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.

3 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".

4 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.

5 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.

6 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.

7 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.

8 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] HCA 12; (1978) 138 CLR 423 at 429.

9 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.

10 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.

11 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.

12 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.

13 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".

14 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".

15 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.

16 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.

17 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.

18 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.

19 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.

20 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.

21 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.

22 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.

23 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.

24 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."

25 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).

26 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.

27 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.

28 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.

29 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."

30 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.

31 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.

32 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.

33 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.

34 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).

35 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".

36 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.

37 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.

38 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."

39 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:-

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."

40 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.

41 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."

42 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.

43 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).

44 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".

"2.1 The Purchaser irrevocably acknowledges and agrees that:

2.1.1 the Property will not be sub-divided at anytime without the written consent of the Vendor first had and obtained;

2.1.2 the 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;

2.1.3 the Purchaser further acknowledges and agrees that the Vendor may lodge a caveat over the Property as chargee 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."

46 I will come to the circumstances in which the words "as chargee" were scored through in due course.

47 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.

48 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".

49 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.

50 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.

51 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.

52 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)."

53 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."

54 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).

55 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.

56 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.

57 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).

58 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.

59 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.

60 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.

61 I must now turn to the evidence of Midland Brick's General Manager, Richard Hyland.

62 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.

63 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.

64 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.

65 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.

66 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:

4.1.1 the 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;

4.1.2 the 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.

4.1.3 the 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."

67 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."

68 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.

69 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).

70 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.

71 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.

72 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".

73 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.

74 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.

75 Clause 2.1.3 of the draft deed in its original type-written form reads as follows:

"2.1.3 the 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."

76 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.

77 Clause 2.1.3 in the Exhibit 19 executed deed reflects these changes to some extent and reads as follows:

"2.1.3 the Purchaser further acknowledges and agrees that the Vendor may lodge a caveat over the Property as chargee 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."

78 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".

79 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.

80 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.

81 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".

82 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

83 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.

84 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.

85 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".

86 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.

87 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.

88 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.

89 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.

90 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.

91 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):

• can't see Midland getting upset with an inheritance upset

• 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."

92 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.

93 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.

94 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

95 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.

96 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.

97 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.

98 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.

99 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.

100 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.

101 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.

102 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.

103 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."

104 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."

105 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.

106 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.

107 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.

108 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".

109 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.

110 Let me now turn to the issues arising on the pleadings.

111 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).

112 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.

113 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.

114 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).

115 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.

116 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.

117 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.

118 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.

119 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.

120 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.

121 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.

122 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.

123 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").

124 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").

125 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.

126 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.

127 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.

128 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.

129 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.

130 The defendant admitted that on 10 May 2000 the parties executed the deed but did not admit that the effect of the deed was as contended for by Midland Brick.

131 Importantly, by par 9 of its statement of defence the defendant denied that Midland Brick's alleged rights materially affected and operated to the benefit of the plaintiff's properties as alleged and said further that on a proper construction of each of the contract and the deed it was not thereby intended that the covenants therein contained would operate for the benefit of Midland Brick's properties or any of them.

132 Further, by par 10 the defendant was not prepared to admit that Midland Brick was entitled to lodge a caveat to protect its rights pursuant to the special conditions and said that, on a proper construction of the contract and the deed, the promises made by the defendant were in the nature of personal covenants only and did not create an interest in the land. If, which was not admitted, Midland Brick was entitled to lodge a caveat, the defendant denied that Midland Brick was thereby entitled to lodge an absolute caveat.

133 The defendant in par 15 of its statement of defence denied that she had evidenced an intention to deal with the subject land, or to allow the subject land to be dealt with, in a manner inconsistent with Midland Brick's rights under the contract and the deed. It was said that further, and in any event, the caveat failed to specify the estate or interest claimed, as required by s 137 of the Transfer of Land Act and was thereby invalid. The defendant denied that Midland Brick is entitled to the relief claimed.

134 By her counterclaim the defendant seeks a declaration that on its proper construction the deed does not entitle the plaintiff to lodge an absolute caveat. She seeks an order that the plaintiff remove the caveat.

135 Midland Brick by its reply joined issue with the defendant on her statement of defence. It then referred in par 2 of its reply to various facts and matters which were said to give rise to an estoppel whereby the defendant was estopped from denying the creation of a caveatable interest in the land in favour of Midland Brick and Midland Brick's entitlement to protect its rights by caveat as pleaded in par 10 of the statement of claim.

136 I will not set out the matters relied on by Midland Brick in support of its estoppel plea in their entirety. However, in essence, it is said that by her letter dated 14 February 2000 the defendant represented to Midland Brick that she understood that if the land was sold to her Midland Brick would want a written statement indicating that she would not pose a challenge to the company's activities. Further, she and her husband had no desire to subdivide the land into a housing estate or any commercial venture and if she purchased the land she would use the land for private use only.

137 It is said further that by a facsimile from the defendant to Midland Brick dated 24 March 2000 (comprising part of the contract) the defendant expressly acknowledged caveats which Midland Brick intended to lodge, namely, that the property would not be subdivided without the written consent of Midland Brick and that the defendant acknowledged that Midland Brick operated brick-making facilities on its site, and agreed not to complain about emissions.

138 Midland Brick then referred to various of the other documents exchanged between or executed by the parties and alleged that the defendant expressly, alternatively impliedly, alternatively by inference, represented to Midland Brick and agreed that the terms of the contract between the parties would give rise to a caveatable interest in the subject land in favour of Midland Brick once it was transferred to the defendant, and further that Midland Brick could lodge caveats against the land.

139 Midland Brick went on to allege that in reliance upon such matters, and induced thereby, Midland Brick entered into the contract and the deed and settled the sale of the subject land to the defendant. It is said that Midland Brick will suffer loss and detriment if the defendant resiles from the representations and denies or does not admit the caveatable interest and Midland Brick's entitlement to protect its rights by caveat. Particulars of the loss and detriment are that Midland Brick became a party to the contract and the deed and sold the subject land to the defendant when it would not otherwise have acted in that manner save for the representations.

140 Midland Brick denies that the defendant is entitled to the relief sought pursuant to her counterclaim or any relief.

141 I will look at the relevant legal principles in more detail later. However, described in general terms, those principles suggest that for Midland Brick to be successful in obtaining the relief sought it must establish as a first step that it was granted an estate or interest in the defendant's land sufficient to support a caveat. The decided cases indicate that it is only a person who has or claims a legal or equitable interest in land in the nature of an estate or equitable claim who can lodge a caveat. The conventional wisdom in various Australian jurisdictions is that caveats may only be lodged to protect proprietary interests in land: see Bradbrook MacCallum & Moore, "Australian Real Property Law" (2nd ed) at par 4.83.

142 In the circumstances of the present case Midland Brick's plea for relief proceeds from the premise that it is the holder of an unregistered restrictive covenant conferred by the par 5 special conditions which materially affect and operate to the benefit of one or more of the properties comprising the plaintiff's properties. On the plaintiff's case this is an equitable interest in the land which may be protected by a caveat because the special conditions were intended to be and are binding not only upon the defendant as purchaser but upon her successors in title. The special conditions give rise to a proprietary interest in the land because the burden of the restrictive covenant contended for runs with the subject land. Midland Brick contends that upon a proper construction of the contract and the deed the par 5 special conditions will be found to exist and comply with the legal requirements applicable to a restrictive covenant.

143 It follows that I must give consideration to the requirements of a restrictive covenant. I must then determine whether the position contended for by Midland Brick can be achieved upon a proper construction of the contract or of the deed. In doing so, it will also be necessary to determine whether the provisions of the contract and of the deed are of the same force and effect and/or whether the special conditions have merged in the deed.

144 If the position contended for by Midland Brick can be achieved upon a proper construction of the relevant documents then it will not be necessary to consider the parol evidence. However, I will be required to proceed further and to determine whether the restrictive covenant allowed for by the agreement between the parties is sufficient to support an absolute caveat of the kind lodged by Midland Brick and whether the caveat is in an appropriate and enforceable form.

145 On the other hand, if the position contended for by Midland Brick cannot be arrived at upon a proper construction of the documents without resort to parol evidence, it will then become necessary to determine whether parol evidence is admissible in the circumstances of the present case and, if so, to make certain findings as to what was agreed by the parties, having regard to the surrounding circumstances. Again, findings about these matters may or may not require me then to proceed to the further question of whether the caveat was in an appropriate form.

146 If the position contended for by Midland Brick has not been made out pursuant to any of the avenues of relief just mentioned, it will be necessary to deal with Midland Brick's estoppel plea.

147 If it be found upon a proper construction of the relevant documents (with or without the aid of parol evidence) that the agreement in its terms cannot be regarded as giving rise to an enforceable restrictive covenant because the restraint does not run with the land and is binding upon the defendant only, or because the agreement does not confer a sufficiently defined benefit affecting Midland Brick's properties, then it will not be necessary to proceed further and consider the form of the caveats. A finding of this kind will establish that Midland Brick does not have a caveatable interest in the subject land. Such a finding will defeat Midland Brick's claim for relief and will allow for findings in favour of the defendant on her counterclaim.

148 It emerges, then, that I must now turn to the legal principles bearing upon the nature of a restrictive covenant, the nature of a caveatable interest in land, the construction of contractual documents and the application of the parol evidence rule.

149 I will deal with the principles bearing upon Midland Brick's estoppel plea and the form of the caveat at a later stage if it becomes necessary to do so.

150 The common law rules concerning privity of contract establish that as between a covenantor (in this case the defendant) and a covenantee (in this case Midland Brick) a covenant is enforceable as a matter of contract law, but it cannot be enforced by or between successors to the original contracting parties unless it runs with the land; that is, unless it possesses a proprietary as distinct from a mere contractual nature.

151 It emerges from earlier discussion that the central question in the present case is whether the covenants relied upon by Midland Brick should be characterised simply as personal covenants or whether they can be characterised as restrictive covenants running with the land. Section 129C of the Transfer of Land Act 1893 allows for restrictive covenants to be made binding in law against land by registration of an instrument entered into by the parties in a approved form. There is no such instrument in the present case. However, both parties appeared to recognise that if the covenants in question were intended to run with the land and to bind the defendant's successors in title then, being enforceable in equity, the covenants would create an estate or interest in the subject land which was vested in Midland Brick. There is authority to the effect that an unregistered restrictive covenant is an equitable interest in the land which may be protected by caveat: Blacks Ltd v Rix [1962] SASR 161.

152 This brings me to the nature of a restrictive covenant and the way in which it can be enforced.

153 A restrictive covenant is a promise restricting land use, given for the benefit of other land, the benefit and burden of which will run in equity provided that certain conditions are satisfied. Individuals who sell part of their land, but intend to continue living on the retained section, may require the purchaser to enter into restrictive covenants, so that the amenity of the retained land is protected. Such covenants have been used to prohibit erection of flats, to impose height limits on buildings, to restrict land use to, for example, residential purposes, to prohibit use of certain building materials, to prevent building on the land without consent and for a variety of other purposes. A restrictive covenant creates an interest in land: see Bradbrook & Neave: Easements and Restrictive Covenants in Australia (2nd ed) at par 12.8.

154 The principles developed from Tulk v Moxhay (1848) 41 ER 1143 establish that special conditions designed to protect the amenity or value of land retained by the vendor can be enforced in the case of a covenant which satisfies three conditions: that it is negative in nature, that it benefits the land retained by the covenantee, that the burden of the covenant was intended to run with the covenantor's land.

155 As to the second condition, when the covenant is found to "touch and concern" identifiable land of the covenantee and an intention to benefit the land in question by providing for the benefit to run with the land is established, the benefit is said to be annexed to the land of the covenantee. For the restrictive covenant to be binding on subsequent registered proprietors, they must take the land with notice of the restriction; hence, the importance of a caveat in the present case where the restrictive covenant contended for is not registered against the title of the subject land as an encumbrance.

156 In most cases, the documentation containing the covenant endeavours to eliminate any ambiguities by defining the benefited land and the burdened land with precision (sometimes by reference to sketches or maps). It purports to annex the benefit to the retained land of the covenantee by stating expressly that the covenant is made with the intent that it will enure for the benefit of the vendor as proprietor of the benefited land and his or her successors in title. The decided cases indicate that the courts will generally give effect to the covenantee's opinion that the covenant is of benefit to his land as long as that opinion is reasonably held.

157 Where the benefit of a covenant has not been expressly annexed to land retained by the vendor questions may arise as to whether evidence can be admitted to resolve ambiguities in the relevant documentation and as to whether annexation of the benefit can be inferred from the circumstances under which the covenant was made. I will look at decided cases bearing upon such issues in due course.

158 I note in passing that there are questions to be addressed also as to what use can be made of certain statutory provisions bearing upon these issues.

159 Section 47(1) of the Property Law Act 1969 (WA) (which corresponds to s 78 of the Law of Property Act 1925 (UK) and s 70(1) of the Conveyancing Act 1919 (NSW)) deals with benefits of covenants relating to land. It provides that a covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successors in title and the persons deriving title under him or them, and, has effect as if those successors and other persons were expressed.

160 Section 48(1) of the Property Law Act (which corresponds with s 70A(1) of the Conveyancing Act (NSW)) deals with the burden of covenants relating to land. It provides that unless a contrary intention is expressed, a covenant relating to any land of a covenantor or capable of being bound by him, shall be deemed to be made by the covenantor on behalf of himself, his successors in title and the persons deriving title under him or them, and, has effect as if those successors and other persons were expressed.

161 The conventional view of s 47 is that it has no relevance to the issue of express annexation of a benefit to the retained land but simply precludes the need to mention the covenantee's successors in title, if a covenant is annexed: see Bradbrook & Neave (supra) par 13.19. As to s 48, it has been suggested that this section does not overcome the common law rules concerning privity in that if a covenant cannot be made to bind successors in title by express agreement it cannot do so any the more where by force of this statutory provision it is merely deemed to be made on behalf of the covenantor and his successors in title. In other words, it is no more than a statutory shorthand provision intended to make it clear that a covenantor remains contractually liable for the acts or defaults of his successors.

162 I will look at decided cases bearing upon the effect of these statutory provisions at a later stage also. However, in the meantime, it will be useful to begin by looking at provisions bearing upon the interpretation of the special conditions in the present case.

163 Bongiorno J held in Tonks v Tonks [2003] VSC 195; (2003) 11 VR 124 that the construction of a restrictive covenant is approached by the Court in the same way it would approach the construction of any other document recording an agreement between the parties. The object of interpretation is to discover the intention of the parties as revealed by the language they used in the document in question. Accordingly, let me turn to the rules concerning the interpretation of contractual documents.

164 The primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. The whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must, if possible, be construed so as to render them more harmonious one with another. If the words used are unambiguous the Court must give effect to them, notwithstanding that the result may appear unreasonable, and not withstanding that it may be suspected that the parties intended something different. The Court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109.

165 Where the parties have recorded terms of their contract in a document, the so-called parol evidence rule excludes the use of evidence of extrinsic terms which subtract from, add to, vary or contradict the language of a written instrument. However, in certain circumstances extrinsic evidence is admissible if the text in dispute is ambiguous.

166 The classic exposition of the law concerning extrinsic evidence is that of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 352:

"The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.

It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification."

167 Justice Mason then went on to make these further observations which have to be carefully considered in the circumstances of the present case:

"Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.

There may perhaps be one situation in which evidence of the actual intention of the parties should be allowed to prevail over their presumed intention. If it transpires that the parties have refused to include in the contract a provision which would give effect to the presumed intention of persons in their position it may be proper to receive evidence of that refusal. After all, the court is interpreting the contract which the parties have made and in that exercise the court takes into account what reasonable men in that situation would have intended to convey by the words chosen. But is it right to carry that exercise to the point of placing on the words of the contract a meaning which the parties have united in rejecting? It is possible that evidence of mutual intention, if amounting to concurrence, is receivable so as to negative an inference sought to be drawn from surrounding circumstances."

168 A consideration of these principles concerning the construction of contracts brings me to another issue. It will be apparent from earlier discussion that in the course of exchanges between the parties leading to the making of the subject contract on or around 11 April 2000 whereby Midland Brick agreed to sell the subject land to the defendant, a good deal of attention was focused upon the special conditions. The parties then (prior to settlement) executed the deed dated 10 May 2000 in which the special conditions were also given expression. A question therefore arises as to whether the special conditions are to be regarded as defined by the deed only.

169 I will endeavour to resolve that issue in due course. For the moment, I note that in Tallerman & Co Pty Ltd v Nathans Merchandise (Victoria) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93 Taylor J observed at 144 that the parties to an agreement may vary some of its terms by a subsequent agreement. They may, of course, rescind the earlier agreement altogether, and this may be done either expressly or by implication, but the determining factor must always be the intention of the parties as disclosed by the later agreement. Variation may involve partial rescission but this does not completely destroy the contractual relationship between the parties. It merely modifies that relation by cutting out part of the rights and obligations involved therein, with or without the substitution of new rights and obligations in their place. Partial rescission is not the extinction of the contract but the variation of it.

170 In Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520 Gleeson CJ, Gaudron, McHugh and Hayne JJ said at 533:

"When the parties to an existing contract enter into a further contract by which they vary the original contract, then, by hypothesis, they have made two contracts. For one reason or another, it may be material to determine whether the effect of the second contract is to bring an end to the first contract and replace it with the second, or whether the effect is to leave the first contract standing, subject to the alteration. For example, something may turn upon the place, or the time, or the form, of the contract, and it may therefore be necessary to decide whether the original contract subsists."

171 I must now return to the circumstances of the present case.

172 The special conditions forming part of the subject contract and the special conditions as defined by the deed are similar in their terms. However, in each case, Midland Brick is confronted by certain difficulties in seeking to persuade the Court that the special conditions satisfy the requirements of a restrictive covenant. Counsel for the defendant indicated by her written submissions that there is no issue that the covenants are negative in their form. The parties are in dispute as to whether any covenant was given for the benefit of the land owned by Midland Brick and as to whether any covenant imposes a burden on the defendant's land in that it was intended to run with the land and bind the defendant's successors in title.

173 At a first glance, the special conditions do not expressly identify any land retained by Midland Brick as vendor which is to be benefited by the covenant or say that the covenants are to benefit any such land upon the basis that the benefit will run with the land and be available to Midland Brick's successors in title. For example, cl 2.1.2 of the deed simply contains an acknowledgement by the defendant as purchaser that the vendor (Midland Brick) "operates and manages brick making facilities adjacent to the property". The purchaser agrees that the subject land will not be subdivided at any time without the written consent of the vendor first had and obtained (cl 2.1.1); that she will not complain about emissions from the plant to any statutory authority (cl 2.1.2). The defendant agreed that the vendor may lodge a caveat over the land to protect its rights contained in this clause (cl 2.1.3).

174 Moreover, the special conditions do not purport to say expressly that the conditions or covenants impose a burden on the land being acquired by the defendant pursuant to the subject contract of sale that is intended to run with the subject land and be binding upon the defendant's successors in title.

175 Bradbrook & Neave (supra) observe at par 13.29, in the context of discussion concerning the passing of the benefit in equity, that annexation has historically required a clear expression of intention in the instrument creating the covenant that it should run with the land for the benefit for which it is given. Words must indicate that the purpose of the covenant was to benefit the land, not merely the covenantee. Although no particular form of words is required to achieve this effect, two formulae are commonly used. Either the covenant is expressed to be made for the benefit of specified land, or the covenant is expressed to be made with the covenantee, and the covenantee's heirs and assigns, in the covenantee's capacity as owner of the land.

176 The learned authors go on to say that if the covenant is simply made with the covenantee and his or her heirs and assigns, and the document contains no indication that the covenant is intended to benefit the property, as distinct from its owners, the traditional view is that benefit of the covenant will not pass by express annexation, although in certain circumstances it may be expressly assigned, or may pass because the burdened and benefited land are part of a scheme of development.

177 The learned authors say further that where there is no express annexation the Court will usually regard the covenant as imposed simply to protect the covenantee while he or she holds the land, or to enable the covenantee to dispose of the land, together with an express assignment of the benefit of the covenant, more advantageously: Chambers v Randall [1923] 1 Ch 149 at 155.

178 The learned authors say at par 13.30 that where the benefit of a covenant has not been expressly annexed, it is doubtful whether courts will ever infer annexation, solely from the circumstances under which the covenant was made. However, the decided cases suggest that there might be some circumstances in which the words of the agreement might be ambiguous on the issue of express annexation. In such a case the court might read the words in the context of surrounding circumstances to determine whether annexation was intended.

179 Accordingly, it will now be useful to look at a number of previously decided cases that might be thought to have a particular relevance to the circumstances of the present case.

180 There are a number of decided cases which suggest that it is necessary for the instrument creating the covenant to contain a clear verbal formula annexing the benefit of the covenant to the land. In Pirie v Registrar General [1962] HCA 58; (1962) 109 CLR 619 a majority of the High Court consisting of Kitto, Windeyer and Owen JJ were of the view that the covenants under consideration could not be enforced as a proprietary interest in that they were not shown to be restrictions the benefit of which was by express language annexed to the protected land, or the benefit of which was annexed to the protected land by virtue of a building scheme or the benefit of which was assignable with the protected land.

181 Kitto J observed at 627 that the fact that a covenant had been entered into which curtailed the covenantor's rights with respect to the user of land was not enough by itself to be enforceable in equity under the doctrine of Tulk v Moxhay (supra). The restriction must be a burden upon the land; that is to say, it must be enforceable not merely as a contractual obligation, but as an interest in the land. He was of the view that in the case before him there was nothing either in the instrument containing the covenant or in the evidence which had been adduced, to identify any land as being land which the covenant was designed to benefit.

"But the fact that the instrument containing the restrictive covenant did not by its language annex the benefit of the restrictions to land retained by the covenantee is, in my opinion, by itself a reason for reaching the same conclusion, because s 88(3), as I would construe it, relates only to a restriction of the same description as that to which sub-section (1) of the same section is directed, that is to say a restriction (as to the user of land) the benefit of which is intended to be annexed to other land."

183 However, Pirie's case (supra) has to be approached with care because the legislation in New South Wales makes the situation more complex than in the other States. Section 88(1) of the Conveyancing Act 1919 (NSW), which refers to a restriction arising under covenant (the benefit of which is intended to be annexed to other land), arguably requires that these words apply only in cases of express annexation: see Bradbrook & Neave (supra) at par 17.49 to par 17.71. There are other cases, and certain observations in Renals v Cowlishaw (1878) 9 Ch D 125 at 129 (affirmed in the Court of Appeal (1879) 11 Ch D 866), which suggest that a covenant conferring a benefit need not be express, for this may be gathered from the language of the instrument or inferred from the nature of the transaction.

184 In Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board [1949] 2 KB 500 a covenant by a water authority to keep river banks in repair was held to run with the land. It is not apparent whether words or express annexation were used, and none of the Lord Justices mentioned this as a requirement. It was thought to be sufficient that the language or the agreement was such that it affected the value of the land and showed an intention that the obligation should attach thereto. It was said also that the covenant must touch and concern the land to be benefited. Further, the land which is benefited by the covenant must be ascertainable by reference to the terms of the deed or relevant document read in the light of surrounding circumstances. In that case, Tucker LJ indicated at 508 that extrinsic evidence will be admissible to prove the extent and situation of the lands of the respective landowners.

185 In Newton Abbott Co-Operative Society Ltd v Williamson & Treadgold Ltd [1952] Ch 286 a vendor, who carried on the business of an ironmonger on premises known as Devonia, of which she was the owner, conveyed property opposite to those premises to a purchaser in 1923. The conveyance contained a covenant by the purchaser (who was then carrying on the business of a grocer on part of the premises) not to carry on the business of an ironmonger on those premises. Twenty-five years later the vendor's successor in title assigned the business of an ironmonger carried on by him at Devonia to a co-operative society, together with the benefit of the restrictive covenant. Soon afterwards, the owners and occupiers of the land opposite began selling items of ironmongery and hardware. Steps were then taken to enforce the restrictive covenants.

186 It was held by Upjohn J that the plaintiffs were entitled to succeed in the action and to an injunction enabling them to enforce the restrictive covenant upon the basis that the benefit had passed by assignment.

187 The plaintiffs had submitted that the benefit of the restrictive covenant was annexed to Devonia so as to pass with the assignment of Devonia in equity without any express mention in that subsequent assignment; in other words, that the covenant runs with the land. Alternatively, the plaintiffs contended that as they were the express assigns of the benefit of the covenant, they were, as such, entitled to enforce it. Upjohn J observed that in this difficult branch of the law one thing was clear, namely, that in order to annex the benefit of a restrictive covenant to land, so that it runs with the land without express assignment on a subsequent assignment of the land, the land for the benefit of which it is taken must be clearly identified in the conveyance creating the covenant. In the case before him, as he could find nothing in the 1923 conveyance which identified the land, the benefit of which the covenant was alleged to be taken, that was insufficient to annex the benefit of the covenant to those premises, and the plaintiffs therefore failed as to the first of their contentions.

188 However, in dealing with the second submission, namely, that the plaintiffs were express assigns of the benefit of the restrictive covenant, he was of the view, having regard to observations made in Renals v Cowlishaw (supra), that it was permissible to look at the attendant circumstances.

"Apart from the fact that Mrs Mardon is described as of Devonia, there is nothing in the conveyance of 1923 to define the land for the benefit of which the restrictive covenant was taken, and I do not think that carries one very far; but, for the reasons I have given, I am, in my judgment, entitled to look at the attendant circumstances to see if the land to be benefited is shown 'otherwise' with reasonable certainty. That is a question of fact and, on the admitted facts, bearing in mind the close juxtaposition position of Devonia and the defendant's premises, in my view the only reasonable inference to draw from the circumstances at the time of the conveyance of 1923 was that Mrs Mardon took the covenant restrictive of the user of the defendant's premises for the benefit of her own business of ironmonger and of her property Devonia where at all material times she was carrying on that business, which last mentioned fact must have been apparent to the purchasers in 1923."

190 In that case, a further ground relied upon for opposing the relief sought, was that there was no dominant tenement. It was argued that the covenant was taken not for the benefit of any land, but for the benefit of the vendor's business. It emerges from the passage I have just quoted that Upjohn J rejected the challenge to the validity of the covenant on this ground. He was of the view that the vendor might well have had in mind that she might want ultimately to sell her land and that she would get an enhanced price by selling to someone intending to carry on the business of an ironmonger who, if he obtained the benefit of the covenant, could prevent competition from the premises opposite.

191 In Marten v Flight Refuelling Ltd [1962] Ch 115 the farm in question was a portion of a large agricultural estate. The purchaser of the farm entered into certain restrictive covenants with the vendors and their successors in title. The terms of the conveyance did not expressly annex the covenants to the benefited land. Nor did the conveyance identify the land benefited. The purchaser's successor in title brought an action for certain declarations concerning the covenant which forbade the user of the land allegedly burdened for any but agricultural purposes without the previous written consent of the plaintiffs. It was said that the user of the land as an aerodrome was in breach of the covenant, although the plaintiffs conceded that the use and maintenance of the aerodrome by statutory authority could not be interfered with.

192 Wilberforce J held that since it could be shown with reasonable certainty, having regard to the circumstances surrounding the conveyance in 1943, that the covenant was taken for the benefit of the land of the vendors, being the estate as a single agricultural unit, it was immaterial that the conveyance did not "annex" or identify the land to be benefited by the covenant; that the agricultural estate as a whole was capable of being benefited by the covenant; that the plaintiffs together represented the whole legal and equitable interest in the covenant; and that, therefore the plaintiffs were entitled to a declaration that they were entitled to the benefit of the covenant.

193 The learned Judge referred to the defendants' contentions that there must appear from the terms of the deed itself an intention to benefit some land and that the precise land to be benefited must also be stated in the deed, or at least must be capable of ascertainment from the terms of the deed by evidence which is admissible in accordance with the normal rules of interpretation of documents. He noted that the defendants submitted that the decision of Upjohn J in Newton Abbott (supra) which appeared to admit parol evidence for the purpose of identifying the land to be benefited, went too far. He noted also (at 130) that it is well established by the authorities that the benefit of restrictive covenants can pass to persons other than the original covenantee, even in the absence of annexation, provided that certain conditions are fulfilled. He went on to say (at 133) that he saw nothing in Newton Abbott (supra) which was contrary to the principles which appear to be securely laid down. He then made these observations about that case at 133:

"Here were two shops in common ownership facing each other in the same street, one of them, Devonia, an ironmonger's shop. The shops opposite are sold with a covenant against carrying on an ironmonger's business. What could be more obvious than that the covenant was intended for the protection or benefit of the vendor's property Devonia? To have rejected such a conclusion would, I venture to think, have involved not only an injustice but a departure from commonsense. So far from declining the authority of that case, I welcome it as a useful guide."

194 The learned Judge then concluded (at 134) in respect of the case before him that the covenant was taken for the benefit of land of the vendors, that land being the Crichel Estate. In reaching that conclusion he was not going outside such surrounding or attendant circumstances as, in accordance with the authorities, it was legitimate for the Court to take into account. He said that a decision based on the mere wording of cl 2 of the conveyance would, in his judgment, be unduly narrow and indeed technical, and would go far to undermine the usefulness of the rule which equity courts have evolved that the benefit of restrictive covenants may be capable of passing to assigns of the "dominant" land or of the covenant in cases other than those of annexation.

195 In answer to the question of whether the land was capable of being benefited by the covenant, the learned Judge observed (at 136) that if an owner of land, on selling part of it, thinks fit to impose a restriction on user, and the restriction was imposed for the purpose of benefiting the land retained, a court would normally assume that it is capable of doing so. There might, of course, be exceptional cases where the covenant was on the face of it taken capriciously or not bona fide, but a covenant taken by the owner of an agricultural estate not to use a sold off portion for other than agricultural purposes could hardly fall within either of those categories.

196 In Federated Homes Ltd v Mill Lodge Properties Ltd [1979] EWCA Civ 3; [1980] 1 WLR 594; (1980) 1 All ER 371, the plaintiffs, who were successors in title to the covenantees, sought to enforce a restrictive covenant against the covenantor. The covenant was not expressly annexed to the land for the benefit of which it was given, and with respect to part of the land held by the plaintiffs there was no complete chain of assignment of the benefit of the covenant. Nevertheless, the Court of Appeal held that the plaintiffs could enforce the covenant. Brightman J took the view that the benefit of the covenant had passed by virtue of s 78(1) of the Law of Property Act 1925 (UK) (which, as I have noted, is the equivalent of s 47(1) of the Property Law Act in this State) and placed some reliance also upon the Smith and Snipes Hall farm case (supra). He held also that, if on the proper construction of a document a restrictive covenant was annexed to land, prima facie, it was annexed to every part of the land.

197 The learned Judge said that in his judgment the benefit of the covenant was annexed to the retained land as a consequence of s 78 of the Law of Property Act which provides that a covenant relating to any land of the covenantee should be deemed to have been made with the covenantee and his successors in title. He made these observations about defence counsel's submissions concerning s 78 at 378:

"One view, which he described as 'the orthodox view' hitherto held, is that it is merely a statutory shorthand for reducing the length of legal documents. A second view, which was the one that counsel for the defendants was inclined to place in the forefront of his argument, is that the section only applies, or at any rate only achieves annexation, when the land intended to be benefited is signified in the document by express words or necessary implication as the intended beneficiary of the covenant. A third view is that the section applies if the covenant in fact touches and concerns the land of the covenantee, whether that be gleaned from the document itself or from evidence outside the document.

For myself, I reject the narrowest interpretation of s 78, the supposed orthodox view, which seems to me to fly in the face of the wording of the section. Before I express my reasons I will say that I do not find it necessary to choose between the second and third views because, in my opinion, this covenant relates to land of the covenantee on either interpretation of s 78. Clause 5(iv) shows quite clearly that the covenant is for the protection of the retained land and that land is described in clause 2 as 'any adjoining or adjacent property retained by the vendor'. This formulation is sufficient for annexation purposes. See Rogers v Hosegood (1900) 2 Ch 388.

There is in my judgment no doubt that this covenant 'related to the land of the covenantee', or, to use the old fashioned expression, that it touched and concerned the land, even if counsel for the defendants is correct in his submission that the document must show an intention to benefit identified land."

198 The learned Judge then went on to make these further observations at 379:

"If, as the language of s 78 implies, a covenant relating to land which is restrictive of the user thereof is enforceable at the suit of (1) a successor in title of the covenantee, (2) a person deriving title under the covenantee or under his successors in title and (3) the owner or occupier of the land intended to be benefited by the covenant, it must, in my view, follow that the covenant runs with the land, because ex hypothesi every successor in title to the land, every derivative proprietor of the land and every other owner and occupier has a right by statute to the covenant. In other words, if the condition precedent of s 78 is satisfied, that is to say, there exists a covenant which touches and concerns the land of the covenantee, that covenant runs with the land for the benefit of his successors in title, persons deriving title under him or them and other owners and occupiers."

199 It is noted in Bradbrook & Neave (supra) at par 13.37 that it remains to be seen whether Australian courts will take a similar view of the effect of s 78 as that of the Court of Appeal in Federated Homes (supra).

200 In Forestview Nominees Pty Ltd & Silkchime Pty Ltd v Perpetual Trustees (WA) Ltd [1998] HCA 15; (1998) 193 CLR 154 a restrictive covenant over land was expressed to enure only for the benefit of the transferee and its successors in title as the registered proprietor or proprietors, and not to enure for the benefit of any tenant for the time being, of the benefited land. The High Court held that the clear intention of the parties as evinced by the terms of the restrictive covenant was to deny the benefit of the covenant to parties lacking privity of estate with the covenantee with the result that tenants were not able to avail themselves of the benefit of the covenant as they had been expressly excluded by the language of the instrument.

201 It is immediately obvious that this decision does not bear directly upon the circumstances of the present case. However, the case contains some useful observations as to the rationale underlying the Tulk v Moxhay (supra) doctrine. It was the unanimous view of the High Court (at par 23) that the preferable explanation as to the passing of the burden of restrictive covenants is that the burden is imposed upon successors to the covenantor upon the same principle that the grantee of a guilty trustee is bound to convey the res to the cestui que trust. There would be the like injustice, if the purchaser with notice, or the volunteer, were allowed to profit at the expense of the cestui que trust or the covenantee by ignoring the Trust or the restrictive agreement. Accordingly, equity imposes upon the successor to the covenantor "a constructive duty" which is "co-extensive" with the express duty of the covenantor to the covenantee. The position of successors to the covenantor with respect to the burden of the covenant thus rests not upon any legal principle of privity of estate but upon the equitable principle of privity of conscience.

202 Further, the High Court was of the view (at 169) that the requirement in equity that the benefit of the restrictive covenant was intended to run with the land concerned expresses, in particular, the conclusion that equity did not, by analogy, import the common law requirement of privity of estate. The requirement is an expression, rather than a denial, of the preference of equity for intention over form and to giving effect to the intention evinced in the terms of the restrictive covenant in question. It has rightly been said that the question of the intention of the parties is at the heart of the matter.

203 It was said finally that the resolution of the dispute before the Court made it unnecessary to consider the alternative submission that, in any event, the deficiency which the appellant sought to expose would be made good by s 47 of the Property Law Act 1969 (WA). It was said that no occasion arose to consider whether the reasoning of the English Court of Appeal in the Federated Homes case (supra) was applicable to the construction of s 47 and, if so, whether it should be followed.

204 It appears, then, that this issue as to the manner in which s 47 operates has been left open by the High Court. Nonetheless, it will be useful to look at some other Australian cases which appear to bear upon the circumstances of the present case.

205 In Clem Smith Nominees Pty Ltd v Farrelly & Farrelly (1978) 20 SASR 227 a motor racing circuit was operated on certain land owned by Mallala Motor Racing Co Pty Ltd at Mallala. In 1971 another company, Adelaide International Raceway Pty Ltd, acquired control of the Mallala company and constructed a new site for motor race meetings at Virginia about 30 to 35 kilometres from the first-mentioned site. Later, the Mallala company transferred the Mallala land to F subject to a covenant expressed to be for the benefit of the Adelaide company that F would not thereafter use the land for any form of motor sport. In due course, F's successor in title to the Mallala land applied for a declaration that the covenant was unenforceable.

206 The Full Court in South Australia held that the burden of a restrictive covenant 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 other land. This meant that the covenant was unenforceable because there was nothing in the relevant documents which suggested that the benefit of the restrictive covenant was meant to attach to any land or which would enable any land entitled to the benefit of the covenant to be identified or defined. It was a covenant in gross relating not to the Virginia land but to the business conducted on it. Moreover, although it might not be necessary that the quasi-dominant tenement and the quasi-servient tenement should be strictly contiguous, the land at Virginia was too far away for it to be regarded as a quasi-dominant tenement.

207 Bray CJ acknowledged, having regard to Newton Abbott (supra) (where parcels of land on opposite sides of the road were held to carry the benefit and the burden respectively of the covenant) that the dominant and servient tenements did not have to be strictly contiguous. However, in his view, it was hard to see how a burden on one parcel of land could benefit or "touch or concern" another parcel 35 kilometres away. Thus, even if the Adelaide company as the owner of the Virginia land could be regarded as the owner of a quasi-dominant tenement, in the opinion of the learned Chief Justice, the benefit, if any, was meant to attach, not to the Virginia land, but to the business conducted on it.

208 Bray CJ then proceeded to make these observations at 236:

"Next, not only is there absolutely nothing in the encumbrance from which any land entitled to the benefit of a covenant can be identified or defined, there is absolutely nothing to suggest that the covenants were imposed for the benefit of any land at all. I do not think they were intended to be so imposed. I think what was intended was a covenant in gross.

There has been a controversy in England as to whether the land entitled to the benefit of the restrictive covenant under the rule in Tulk v. Moxhay (supra) must be identified in the conveyance or other document containing the restriction or whether it can be identified by extrinsic evidence. There are two comparatively recent decisions by single Judges of great eminence that extrinsic evidence is admissible for this purpose: see the Newton Abbot case (supra); Marten v. Flight Refuelling Ltd. (supra)

...

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 Pty. Ltd [1971] HCA 9; (1971) 124 CLR 73. ...

I hold, therefore, that the Virginia land cannot be a quasi-dominant tenement sufficient to attract the rule in Tulk v. Moxhay (supra), qualified as it is by London County Council v. Allen [1914] 3 KB 642."

209 In summary, then, the learned Chief Justice doubted whether there was ever any intention to attach the restrictive covenants to any land or any interest in land. In his view, they were simply intended to stand as covenants in gross for the protection of the business of the Virginia companies wherever they may happen to carry it on. Before dealing with a restraint of trade argument, he observed that the covenants in question were mere personal contracts binding on F, but not on F's successor in title, and that they were therefore not enforceable against the latter. I note in passing that his reasoning was influenced to some extent by the provisions of the Torrens system in South Australia concerning indefeasibility and the registration of interests in land.

210 In the same case Hogarth J arrived at essentially the same conclusion as the Chief Justice. He observed (at 249) that the rule in Tulk v Moxhay (supra) originated where the land of the covenantor was part of land originally owned by the covenantee, and adjoining what remained in the ownership of the covenantee. However, in his view, it was no longer necessary, as in the Newton Abbott case (supra), that the two parcels of land should be actually contiguous. However, at least the dominant land had to be sought "in the neighbourhood" of the servient land. The land at Mallala was too far removed from the land of the Adelaide company at Virginia to come within that classification.

211 Zelling J observed (at 254) that what was being contended for were unregistered equitable interests in land which, however enforceable they may have been against F, were not enforceable against a purchaser for value from F such as the plaintiff. The indefeasibility provisions of the Torrens system established that no unregistered estate or interest or agreement prevails against the title of any bona fide subsequent transferee for valuable consideration duly registered under the statute.

212 I digress here briefly to observe that both parties in the present case proceeded from the premise that Zelling J's observation concerning an unregistered equitable interest in the subject land (arising from a restrictive covenant of the kind contended for) represented the law in this State. According to counsel for Midland Brick, this underlined the importance of the vendor being able to lodge an absolute caveat in order to protect its unregistered equitable interest in the subject land. Without such a caveat, it was said, the indefeasibility provisions of the Transfer of Land Act 1893 (WA) and the common law rules concerning privity of contract meant that Midland Brick would not be able to insist upon a performance of the special conditions if the subject land were sold by the defendant to a third party.

213 As I have indicated, the operative document in the Clem Smith case (supra) did not contain any words expressly annexing the benefit of the covenant to any particular piece of land. The memorandum of encumbrance simply purported to reflect F's desire to render the said land available for the purpose of securing to and for the benefit of the Adelaide company the payment of a sum of money and performance of the covenant in question.

214 Zelling J observed (at 255) that it was clear from a perusal of the document that there was no land to which the benefit of the covenant was annexed. He said that if he was entitled to look at outside evidence on both points, that is both as to the annexation and as to the identity of the land, then it was clear that the Virginia land was intended to be benefited. As to the use of outside evidence he noted that reliance was placed upon Newton Abbott (supra) and the Marten case (supra) but noted also that these had been the subject of academic criticism. His Honour then made these observations at 255:

"In my opinion, the judgment of Richards J. in R. J. Finlayson Limited v Elder Smith & Company Limited [1936] SASR 209 at 240 states the position correctly. He said: 'The position appears to be that surrounding circumstances cannot annex the benefit of a covenant to land; the instrument containing the covenant must itself show an intention to annex it, and then circumstances may be used in order to identify the land to which the parties intended to annex it.' ...

In my opinion, the covenants here were not annexed to any land and there is no intention deducible from the encumbrance to show the intention to annex them. The circumstances to which I have referred would have been sufficient in my opinion to identify the land to which the parties intended to annex the covenants, but that does not get Mr Williams' clients over the first hurdle that the instrument containing the covenants does not itself show an intention to annex the benefit of the restrictive covenants to any land. On this point also therefore Mallala and International Raceway must fail."

215 In McGuigan Investments Pty Ltd v Dalwood Vineyards Pty Ltd [1970] 1 NSWR 686 Dalwood Vineyards Pty Ltd as the owner of a property known as Dalwood conveyed it to McGuigan Investments Pty Ltd. The vendor company was a wholly owned subsidiary of Penfold Wines Australia Ltd which had an interest in another vineyard known as Penfold Vale about 17 miles from Dalwood. The conveyance to McGuigan Investments contained a covenant whereby the purchaser for the benefit of the land Penfold Vale covenanted that the property known as Dalwood would not be used for the purposes of a business carried on under a name in which the word "Dalwood" was used.

216 Hope J of the Supreme Court of New South Wales held that the covenant neither touched and concerned nor benefited the land at Penfold Vale in that a restriction of the use of the name Dalwood in connection with the single property Dalwood in the Hunter Valley would not in any way enhance the value of Penfold Vale. Accordingly, the purported annexation of the benefit of the covenant to the property Penfold Vale was ineffective.

"In many cases the observance of the covenant is intended to and does benefit the relevant land because it enables the covenantee the better to enjoy his land, and in other cases the relevant land is benefited because the observance of the covenant enhances the value of that land. The land to which the benefit of the subject covenants is expressed to be attached is a property called Penfold Vale situated some 17 miles and on the opposite side of the Hunter Valley from the land conveyed to the plaintiff. It is accordingly not suggested that the observance of the covenants will enable the defendant the better to enjoy its land, but it is said that their observance will enhance the value of that land. ... I do not think that the covenant does touch and concern Penfold Vale or that in any relevant sense it can benefit that land. On the view I have taken as to the proper construction of covenant (a) the only limitation which is imposed on the use of the land by either limb of that covenant relates to the use of the name 'Dalwood', and I am satisfied that a restriction of the use of this name in connexion with this one single property in the Hunter Valley would not in any way enhance the value of Penfold Vale. The two properties are 17 miles apart and they are both in the Hunter Valley where a large amount of land is available and is in fact used for wine production purposes."

218 His Honour went on to make these further observations at 691:

"Such a covenant has nothing to do with the allegedly benefited land, and is quite different from a covenant not to carry on upon the land conveyed to the covenantor a business which would compete with that carried on upon the nearby land retained by the covenantee (see eg Newton Abbott Co-Operative Society Ltd v Williamson & Treadgold Ltd (supra)) for in this class of case the covenantee is benefited in relation to the use of the land to which the covenant is annexed, and hence also in relation to the value of that land. Accordingly I do not think that covenant (a) touches and concerns Penfold Vale, and it follows that the purported annexation of the benefit of the covenant to that property was ineffective."

219 In Baramon Sales Pty Ltd v Goodman Fielder Mills Ltd [2001] FCA 1672 Finklestein J was concerned with an action to determine the validity of two restrictive covenants. Special condition 5 of the relevant contract of sale stated that the transfer of land was to contain a restrictive covenant providing that the land could not in the future be used for purposes associated with the milling of flour. This was said to be unsatisfactory because a restrictive covenant had to identify both the land that takes the benefit and the burden of the restriction. Steps were taken to rectify the problem by substituting a new and sufficient covenant pursuant to the rule that in a contract each party by implication agrees to do all that is necessary on his part to enable the other party to have the benefit of the contract. These steps made it strictly unnecessary for his Honour to consider the challenge to the validity of the original covenant but his Honour felt obliged to make certain observations in case he was wrong in his conclusion that the first covenant had been discharged.

220 His Honour noted that in order to establish the existence of a Tulk v Moxhay (supra) covenant, three conditions must be satisfied being first, the covenant must be negative in nature, second, it must be made for the protection of land retained by the covenantee and third, the burden of the covenant must have been intended to run with the covenantor's land. According to his Honour, it was once thought that the benefited land must be clearly defined in the covenant, or in the deed in which the covenant is found, or must be capable of ascertainment from the terms of the deed, which may be explained where necessary by extrinsic evidence. However, he went on to say that there are cases where it has been held that extrinsic evidence is admissible to establish both that there is an intention to benefit land kept by the covenantee, and also to identify that land. The cases include Newton Abbott (supra, Marten v Flight Refuelling Ltd (1962) Ch 115 and, in Australia, Clem Smith (supra).

221 Justice Finklestein then made these observations at par 12:

"There is evidence to show that the parties intended the covenant to benefit the Kensington land. The Kensington land was referred to as the land to be benefited in correspondence between the solicitors, written after the Registrar had delivered her requisition to Baramon. The benefited land is expressly identified in the substitute covenant, a covenant which was drafted by Baramon's solicitors. In these circumstances I infer that the parties intended to annex the covenant to the Kensington land at the time of their contract."

222 His Honour made further observations to the effect that there can be no hard and fast rule concerning the maximum distance between the benefited and burdened land. The only relevant rule is that the benefited land must be benefited by the covenant. Further, there was no reason why a restrictive covenant should not be taken for the protection of trade carried on upon the benefited land. His Honour cited in support of the latter proposition the case of Newton Abbott (supra).

223 It appears from the reasoning of Finklestein J in Baramon (supra) that if an owner imposes a restriction on use and the restriction is imposed for the purposes of benefiting retained land, the Court will usually assume that it is capable of doing so; that is, the covenant is capable of conferring a benefit.

224 In Troncone v Aliperti (1994) 6 BBR 13 291; (1994) NSW ConvR 55-703 it was held that where the parties have agreed that a caveat can be lodged to protect rights arising under an agreement between the parties this can lend support to a conclusion that the rights being conferred are in respect of a proprietary estate. However, an agreement to lodge a caveat cannot, without more, be effective to create an interest in land: Graham v Chappell (1993) 9 WAR 157; Neoform Developments & Interiors v Town & Country Marketing Pty Ltd [2002] NSWSC 344.

225 The decided cases establish also that the burden of the covenant must be intended to run with the land. If the covenant is intended to impose a purely personal obligation upon the covenantor (in this case the defendant), and is not intended to control the use of the land, the covenant will not bind successors in title to the covenantor.

226 Usually, the intention that the burden of the covenant should run is expressed by covenantors covenanting on behalf of themselves and their successors in title. Legislation in most States (being s 48 of the Property Law Act in this State) now provides that covenants affecting land are deemed to be made on behalf of the covenantor and successors in title in the absence of an intention to the contrary: Bradbrook & Neave (supra) at par 14.26.

227 It is immediately apparent that in the circumstances of the present case, as with the issue of whether there is an intention to benefit land retained by Midland Brick as vendor, there is an issue to be resolved as to whether the special conditions disclose an intention to burden and run with the subject land. Section 48(1) of the Property Law Act, as I have indicated, provides that unless a contrary intention is expressed, a covenant relating to any land of a covenantor or capable of being bound by him, shall be deemed to be made by the covenantor on behalf of himself, his successors in title and the persons deriving title under him or them, and has effect as if those successors and other persons were expressed.

228 Counsel for the defendant submitted that this provision is not decisive in the circumstances of the present case in that a deeming provision cannot overcome the common law rules concerning privity of contract. It was said further, and in any event, that in this case the deed was the operative point of reference, as it was intended to encapsulate the agreement reached between the parties as to the special conditions, and the deed, properly interpreted, in the manner allowed for by s 48(1) of the Property Law Act expressed "a contrary intention"; that is, an intention that the defendant as covenantor did not intend that the burden of the alleged restrictive covenant would run with the land and bind her successors in title. It was a personal covenant only.

229 In support of those submissions it was said that there was no express covenant that the burden of the covenant should run with and affect the subject land in either the contract or in the deed. (For instance, there was no requirement for the defendant to obtain the agreement of any purchaser from her to the terms of the covenants she had made). Moreover, as a matter of construction, it was proper to take into account that the parties themselves had agreed to the deletion of the words "and her executors, personal representatives, transferees, successors and assigns" from the definition of the defendant as purchaser in cl 1.1.2 of the deed.

230 As to the latter point, reliance was placed upon the final passage of the reasoning of Mason J in Codelfa (supra) at 352 in which he said: "If it transpires that the parties have refused to include in the contract a contract which would give effect to the presumed intention of persons in their position it may be proper to receive evidence of that refusal".

231 In other words, in this passage (which, for ease of reference, I will call the "final passage" from the judgment of Mason J in Codelfa (supra)) his Honour suggested that evidence of the actual intention of the parties may be admissible to avoid the adoption of a presumed intention that is contrary to the true intention of the parties concerning the matter in question.

232 It was said on behalf of the defendant that evidence of actual intention that the burden of the covenants was never intended to run with the land was arguably provided by the parties agreeing to the deletion from the deed of words from cl 2 that the defendant be obliged to have any purchaser from her enter into a deed on the same basis as that contained in the deed.

233 I pause to note that as to this aspect of the matter, counsel for Midland Brick placed some reliance upon Harrod v Palyaris Construction Pty Ltd (1973) 8 SASR 54 in which contracts were made upon printed forms upon which there had been, in a number of places, deletions or alterations of both printed passages and of written passages inserted in blank spaces in the printed form. It was held by Jacobs J that it was not permissible to have regard to the printed or written words or phrases which had been deleted as an aid to interpreting words or phrases which had been substituted in their place. He observed that the words struck out are no part of the contract which the parties have made, and it may well be possible to suggest a number of reasons for any particular alteration. Wide ranging speculation on such possible reasons is not likely to be a useful aid to interpretation.

234 These observations appear to be consistent with the reasoning of Mason J in the initial passage of his judgment in Codelfa (supra) at 352 in which he said with respect to a contract reduced to writing that statements made in the course of negotiations are generally not receivable because they are referable to the contract the parties hoped to make, and are superseded by, or merged in, the contract actually made which must generally be construed by reference to the presumed intention of the parties.

235 On the other hand, the defendant by her counsel placed some reliance upon the reasoning of Owen J in Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (1999) 21 WAR 425. His Honour observed at par 27 that there is conflicting authority in Australia as to whether deletions from a printed document can be taken into account in construing what remains. His Honour indicated that he would proceed on the view of the law expressed in "Chitty on Contracts" (25th ed) Vol 1 par 782 to the effect that where an instrument appears to have been altered while the parties were negotiating, the court cannot look at it as it originally stood compared with the alterations which were made in it, to see whether those alterations throw any light on the question of intention. However, when the parties use a printed form, and delete parts of it, regard may be had to what was deleted as part of the surrounding circumstances in the light of which the meaning of the words which they chose to leave in is to be ascertained. But it is doubtful whether the court can look at the words deleted except to resolve an ambiguity in the words retained.

236 Owen J then made these further observations at par 29:

"In other words, regard may be had to words that have been deleted where it is permissible to admit extrinsic evidence of the factual matrix or surrounding circumstances as an aid to interpretation. Looked at in this way, the proper test to be applied is that described by Mason J in Codelfa at 352. The text of the relevant dicta is set out a little later in these reasons."

237 I take Owen J to be approving the view expressed by Mason J in Codelfa (supra) that evidence of subjective intention is not admissible. If extrinsic evidence of the surrounding circumstances is admitted, it can be used only for an objective assessment of what a reasonable person, armed with the knowledge that the parties actually had, would have understood the words to mean. However, there may be one situation in which evidence of the actual intention of the parties should be allowed to prevail over their presumed intention, namely, if it transpires that the parties have refused to include in the contract a provision which would give effect to the presumed intention of the parties in their position, it may be proper to receive evidence of that refusal in order to resolve an ambiguity or to determine what was intended by the parties.

238 Let me now apply these principles and statutory provisions concerning covenants to the circumstances of the present case.

239 I must begin by turning to par 7 of the statement of claim in which it is alleged that on 10 May 2000 (that is, on the day before settlement pursuant to the contract of sale) Midland Brick and the defendant executed a deed "restating", inter alia, certain of Midland Brick's rights under the contract. I remind myself that the defendant, by her statement of defence, admitted execution of the deed but did not otherwise admit what was alleged in par 7 of the claim. This was sufficient to raise an issue at trial as to the status and effect to be given to the deed.

240 It is not entirely clear what is meant by the Midland Brick plea that the deed "restated" certain of Midland Brick's rights. In essence, the case presented by the plaintiff at trial proceeded from the premise that the contract between the parties remained in force and thus the nature of the rights and duties arising under the special conditions were to be determined by construing both the contract and the deed. Counsel for the defendant said at par 7 of her written submissions that in determining if the restrictive covenant in this matter is for the benefit of land owned by Midland Brick and burdens land owned by the defendant it is necessary to construe both the contract and the deed.

241 I noted in earlier discussion concerning Tallerman's case (supra) and Sara Lee's case (supra) that where parties to an agreement make a further agreement, this does not necessarily distinguish the prior contract or destroy the contractual relations between the parties. It is open to the Court to find that there has been simply a modification of the rights of the parties, which leaves the first contract standing subject to the alterations. The determining factor must always be the intention of the parties as disclosed by the later agreement.

242 It is apparent from the evidence, and I so find, that Midland Brick by Mr Harvey was only prepared to sell the subject land to the defendant upon certain protective conditions. These conditions, which, for ease of reference, I have called the "special conditions", were first expressed in written form in Mr Harvey's Exhibit 9 letter dated 23 March 2000 in which he requested the defendant's formal acknowledgement "of the caveats we would append to the property", being, first, that "the property will not be subdivided without the written consent" of Midland Brick and, second, that "the purchaser acknowledges that Midland Brick operates and managers 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".

243 In this letter the word "caveats" is arguably being used in a double-edged, and thus slightly ambiguous, way to stand for both the conditions or restrictions which are being insisted upon and the registrable document called a caveat which will be appended to or applied to the subject land. This generalised or rather loose usage of the term "caveats" was repeated on both sides in the exchanges that followed.

244 When one turns to the provisions of the deed it is immediately apparent from the recital that the presence of the earlier contract is recognised and there is nothing in the recital or the deed which suggests that any attempt is being made by the parties to the deed to set aside or rescind the contract. I have noted in earlier discussion, although this is not mentioned in the recital to the deed, that both parties agree that the contract described in the recital to the deed as the "contract by way of acceptance dated 11 April 2000" comprises the written exchanges between the parties pleaded in par 4 of the statement of claim including the Exhibit 9 23 March 2000 letter.

245 Having referred to the contract and the agreement to sell the subject land, the recital then refers specifically to the so-called "right for Midland to lodge a caveat against the property for the purposes hereinafter referred to".

246 It then emerges from a perusal of the deed itself that the only substantive matter being dealt with by the deed (in cl 2) is the special conditions. The clause in question, being comprised of cl 2.1.1 to cl 2.1.3 (which I summarised a little earlier), broadly described, echoes the special conditions set out in the Exhibit 9 23 March 2000 letter save that on this occasion it seems that an attempt is being made to remove the former generalised usage of the term "caveat" by defining (in cl 2.1.1 and cl 2.1.2) the special conditions and providing for (in cl 2.1.3) lodgement of a caveat in respect of the rights arising under the preceding clauses. In other words, it might be said, that the terms referred to in the Exhibit 9 23 March 2000 letter are being clarified by distinguishing the restrictive conditions from the process of protecting the rights referable to those conditions by lodgement of a caveat, these being the two distinct concepts that had formally been covered by the loose and rather generalised notion of "the caveats we would append to the property".

247 There is some difference in the wording between the second condition in the Exhibit 9 23 March 2000 letter and cl 2.1.2 of the deed in that the former speaks of the facilities at Midland Brick's "Middle Swan site" while the latter speaks of "facilities adjacent to the property", but otherwise it is essentially in cl 2.1.3 concerning the lodgement of a caveat that there is a significant difference between the two documents. Unlike the Exhibit 9 23 March 2000 letter, it is said in the deed that the vendor may lodge a caveat over the property to protect its rights contained in this clause "including, without limitation, its rights to prevent the purchaser subdividing the property without the written consent of the vendor first had and obtained".

248 This analysis leads me to find after a close reading of the deed that the intention of the parties was simply to express more exactly what the agreement between them was in respect of the special conditions but otherwise not to rescind or depart from the terms of the previously made contract which had not yet been carried into effect by settlement. As to the special conditions part of the contract, as pleaded by Midland Brick, there was a "restatement" (in a more exact form) of the agreement that had been made by the parties and reduced to writing.

249 It follows from this finding that, in my view, the special conditions are defined exclusively by the deed and that the deed becomes the sole point of reference in determining what the rights of Midland Brick are in respect of that matter. It follows also that the intention of the parties was to keep all other provisions of the contract in force so long as they were consistent with the provisions of the deed.

250 I pause here to note in passing that it is clear from the pleadings and, in any event, I so find, that the contract included the standard form general conditions. By cl 24 of those conditions the term "vendor" is defined to mean "the party named and described as the vendor in the contract and person deriving title under that party". Similarly, the term "purchaser" is defined to mean "the party named and described as the purchaser in the contract and any person deriving title under that party".

251 The terms "vendor" and "purchaser" are used in cl 2 of the deed but are not defined in the deed itself. It follows from my earlier observations that, prima facie, those terms have the meanings assigned to them by the contract. There appears to be nothing inconsistent with or overriding such an approach in the language of the deed itself. The definition of "Midland", which is the vendor, is consistent with the definition of the term in the contract because the phrase in the deed "its transferees, successors and assigns" falls within and is encompassed by the general phrase in the contract "any person deriving title" under the vendor. The definition of "Welsh" in the deed, simply identifies the party to the deed by her full name without any words of qualification or extension that might be thought to be inconsistent with the definition of the term "purchaser" in the contract.

252 Accordingly, having determined that the special conditions are defined exclusively by cl 2 of the deed, I must now turn to the relevant provisions in order to ascertain whether Midland Brick has made out the requirements of an enforceable restrictive covenant as I have described them in earlier discussion.

253 It was put to me by defence counsel in the course of her closing address that the two promises must be considered separately, for in the absence of express words of annexation the content of each promise was likely to have a bearing on the question of whether the promise was intended to benefit only Midland Brick's business activities, not its land. For example, a covenant not to complain about emissions, by its very nature, might be thought to apply only to the vendor's business activities.

254 I see merit in this contention. However, in the end, I consider that the promises underlying the special conditions set out in cl 2.1.1 and cl 2.1.2 of the deed were essentially of the same nature, being referable to the operation of the vendor's "brick making facilities adjacent to the Property", and must be viewed in the same light. I will therefore refer to the promises in question and the related undertaking in cl 2.1.3 concerning lodgement of a caveat as the special conditions or covenants.

255 The cl 2.1.1 covenant by the "purchaser" (that is, the defendant) not to subdivide the subject land without consent and the cl 2.1.2 covenant not to complain of emissions are negative in form. In my view, these covenants conform to the first requirement of the Tulk v Moxhay doctrine (supra), and this was accepted by the defendant at the trial. In the absence of any controversy as to this aspect of the matter I have little difficulty in finding that this requirement of the doctrine has been satisfied.

256 Midland Brick is then required to establish that the covenants comprising the special conditions touch and concern identifiable land owned by Midland Brick as covenantee and reflect an intention to benefit the land in question by providing for the benefit to run with the land allegedly benefited.

257 As I have indicated, this gives rise to certain difficulties in the circumstances of the present case. The parties reduced their agreement concerning the special conditions to writing, then finalised the exact form of those special conditions in the deed (in the light of my earlier finding). The principles of interpretation establish that the primary duty of the Court is to discover the intention of the parties from the words of the relevant instrument save that evidence of surrounding circumstances is admissible if the language used is ambiguous or susceptible of more than one meaning. When the issue is which of two or more possible meanings should be approved the Court must look to the presumed intention of the parties within the objective framework of facts.

258 It is immediately obvious that cl 2 of the deed does not expressly purport to identify land allegedly benefited or expressly purport to annex a benefit to land owned by Midland Brick. At a first glance, Midland Brick is described in cl 2 of the deed only as the "vendor" being a party that operates and manages brick-making facilities adjacent to the subject land. This seems to open up an avenue to the defendant's contention at trial that upon the proper construction of the deed, having regard to the language used and the presumed intention of the parties, the covenant purports to benefit the vendor not as the owner of retained land in the vicinity of the subject land but simply as the operator of a business. In other words, the covenant does not satisfy the second requirement of the Tulk v Moxhay doctrine (supra) because it was not intended to benefit land nearby but, rather, to benefit a vendor in its role as the operator of a business.

259 As I indicated in the course of my review of the decided cases, it was thought at one stage that the absence of any express words of annexation of the benefit of the covenants to land owned by the covenantee could be fatal to a claim to enforce the covenant in equity. However, to my mind, it is apparent from previously decided cases such as Smith Snipes Hall Farm (supra), Marten (supra), Baramon (supra) and Forrestview (supra) that in more recent times the absence of any express annexation of the benefit is not necessarily fatal to the claim. The crucial question is whether the relevant instrument (properly interpreted) identifies land belonging to the covenantee which was allegedly to be benefited and discloses an intention by the parties to benefit the land in question. As the High Court observed in Forrestview (supra) the intention of the parties is at the heart of the matter, for the preference of equity is for intention over form.

260 It follows that the Court must look closely at the language used in the whole of the deed in order to discover the intention of the parties, not only the language used in the crucial clause. It is true that Midland Brick is not described expressly as the owner of land adjacent to the "property" (that is, the subject land) but simply as a vendor which "operates and manages brickmaking facilities adjacent to the property". However, as I have indicated, in the absence of any definition of the term "vendor" one must look to the contract for the meaning of that term. It means the party named in the contract as vendor and any person deriving title under that party. Thus, it is immediately apparent from the term "vendor" and the definition of that term that Midland Brick is being spoken of as the proprietor of the subject land being sold to the defendant as purchaser and that special conditions have been formulated which are designed to confer a benefit on the vendor and which are thought to be sufficient to support a caveat; that is, a proprietary interest in the subject land is being created in favour of the vendor as the party disposing of the land.

261 It is against this background that one turns to the language in which the special conditions are expressed in order to understand more exactly the nature of the benefit to be conferred. The benefit is clearly referable to the vendor's operation and management of brick-making "facilities" adjacent to the subject land, but there is a degree of ambiguity as to what is encompassed by the words "facilities adjacent to the property". These words are susceptible to two or more possible meanings. They might refer simply to the operation of a plant. On the other hand, they might be thought to embrace Midland Brick's entire industrial complex including its ownership of the Midland Brick site and of the Midland Brick additional properties comprising the buffer zone.

262 I am of the view that this ambiguity justifies the reception of parol evidence to explain what is meant. I find support for this view in the initial passage of the reasoning of Mason J in Codelfa's case (supra) to the effect that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. It is upon this basis, that I make the ruling (previously reserved) that evidence of the various documents comprising the contract (as pleaded in par 4 of the claim) are admissible in order to assist the interpretation of the deed, notwithstanding my earlier ruling that the deed must be regarded as the restatement in a more exact form of what was intended by the parties concerning the special conditions. In addition, upon the same basis, I consider that the evidence given by the witnesses at trial, namely, Mr Harvey, Mr Hyland and the defendant, bearing upon the surrounding circumstances, is admissible in order to resolve the ambiguity as to what was intended, including their observations in and about the additional documents provisionally adduced in evidence at the trial such as the defendant's 24 February 2000 letter reflecting her initial approach to Midland Brick (Exhibit 34), the defendant's 24 March annotations (Exhibit 11A) and the photograph, maps and sketches depicting the relationship of the subject land to land nearby owned and retained by Midland Brick as at 11 April 2000.

263 Having made that ruling, I am satisfied, and so find, that the words used in cl 2 of the deed to give expression to the special conditions were intended by the parties to refer to at least that part of the retained land known as the Midland Brick site. There was evidence before me that the industrial complex on the site was extensive, the defendant had been to it, she had done some research and knew or presumed that it was owned by Midland Brick. A close reading of cl 2.1.2 of the deed, having regard to the relevant parol evidence, establishes that there was an acknowledgement by the purchaser that Midland Brick was the owner of adjacent land in the sense of land contiguous to or lying near the subject land.

264 I pause here to say that, having regard to cases such as Newton Abbott (supra) I am of the view that the Tulk v Moxhay doctrine (supra), does not require that the land allegedly benefited should share common boundaries with the land allegedly burdened. As appears from Marten's case (supra) and the dicta in Baramon (supra), the crucial issue is whether the benefited land is sufficiently near to be capable of being benefited as to amenity or enhancement of value. If an owner imposes a restriction on use for the purpose of benefiting retained land, the Court will usually assume that the covenants in question are capable of conferring a benefit, and do so. In the present case, there is no reason or evidence before me to suggest that Midland Brick was acting capriciously in seeking to obtain the benefit of protective conditions.

265 Moreover, as in Newton Abbott (supra), one can readily assume that steps taken to ensure that an industrial complex will be able to continue its operation within a partly rural and residential area is likely to enhance the value of the land if it be on-sold to another brick-maker or industrial concern that requires an immunity of sorts in order to carry on its operation.

266 Thus, I am able to assume, and I so find, that the Midland Brick site was capable of and would be benefited by the special conditions if it be held that upon the proper interpretation of the deed the special conditions contained in cl 2 were intended to benefit the land retained by Midland Brick as vendor by providing for the benefit to run with that land.

267 To my mind, it is clear from the deed that the special conditions were intended to confer a benefit, but the crucial question is whether, having regard to the language of the deed, and bringing to account the ambiguity I have mentioned, the intention was to confer a benefit simply upon Midland Brick as the operator and manager of a business upon the Midland Brick site or whether the intention was to confer a benefit that would run with Midland Brick's land.

268 I noticed in earlier discussion that although no particular form of words is required to effect an annexation of benefit to land, two formulae were often used. Either the covenant was expressed to be made for the benefit of specified land or the covenant was expressed to be made with the covenantee in his capacity as the owner of neighbouring land and with his successors in title.

269 It follows from my earlier observations and ruling that when parol evidence is received as an aid to interpretation, it becomes apparent that what was being spoken of was facilities on brick-making land owned by Midland Brick adjacent to the subject land. Midland Brick as "vendor" is being spoken of as an owner of land. Further, the definition of "Midland Brick" in the deed establishes that "Midland" shall mean "Midland Brick Company Pty Ltd and its transferees, successors and assigns". This is a clear pointer to a conclusion that the covenant made by the defendant was intended to benefit not only Midland Brick but any party deriving title from Midland Brick. This of itself is a persuasive indication that the special conditions were intended to benefit the land retained by Midland Brick, and not simply to benefit Midland Brick as the operator of a business.

270 For all these reasons, I consider that the special conditions contained in the deed were intended to benefit land owned and retained by Midland Brick at the time of the sale and to run with the land. Decided cases such as Marten (supra) and Federated Homes (supra) permit me to find that a covenant made with the intention of benefiting retained land will benefit all of the land retained by the vendor, being, in this case, the Midland Brick site and the additional properties. I will make that finding. The finding is supported by s 49 of the Property Law Act which declares that when the benefit of a restriction as to the user of land has been annexed to other land the benefit shall be deemed, unless it is expressly provided to the contrary, to be annexed to the whole of the land capable of benefiting from the restriction.

271 Moreover, even if my application of the principles of interpretation had led me to a contrary view, I am of the opinion, having regard to the reasoning in Marten (supra) and Federated Homes (supra) that there are two further reasons why I should find that the benefit is annexed to Midland Brick's land. First, an intention to benefit the Midland Brick site and additional properties can be inferred from the circumstances of the transaction. Second, and in any event, the benefit is annexed as a consequence of s 47(1) of the Property Law Act. Let me deal with each of these matters in turn.

272 As to the first matter, the defendant contends that in the present case, in the absence of any express words of annexation, one can reasonably suppose that the special conditions were not intended to benefit land retained by the vendor but simply to benefit the vendor as the operator of a business for the time being on land nearby. Thus, on this view of the matter, it might be said that the present case resembles the Clem Smith case (supra) where, in the Court's view, the intention was not to benefit the land in question but, rather, to benefit the plaintiff as the proprietor of a racetrack some distance away by ensuring that the land allegedly burdened by the covenant could not be used for racing by a competitor. A similar conclusion was arrived at in the McGuigan case (supra). See also Woodberry v Gilbert (1907) 3 Tas LR 7 in which it was held that a personal covenant not to carry on the business of a livery stable keeper did not create an interest in the subject land.

273 However, to my mind, the outcome in those cases is eclipsed by the reasoning of Wilberforce J in Marten's case (supra). The learned Judge said that in circumstances where the covenant was clearly intended for the benefit of the vendor's property a decision based simply on the absence of express words of annexation in the conveyance would be unduly narrow and undermine the usefulness of the rule which courts had evolved concerning the benefit of restrictive covenants.

274 In the present case, it is apparent from the exchanges between the parties, as I have found, that from the outset Midland Brick insisted upon the special conditions. These were clearly intended to prevent complaints by nearby landowners that the use being made of the land retained by the vendor was interfering with the enjoyment of neighbouring land; that is, an endeavour was being made by Midland Brick to avert complaints in the nature of an action for nuisance. Midland Brick was clearly contracting as an owner of land and with an intent to create an immunity for itself in its role as the owner of retained land. Midland Brick's insistence upon its entitlement to lodge a caveat adds weight to the inference that it was seeking to protect a proprietary interest. For all these reasons, I am persuaded to follow Marten's case (supra) and hold that, in addition to what I have said previously about the proper interpretation of the provisions of the deed, this is a case, as pleaded by Midland Brick at par 5 of the claim, in which the intention to benefit the land retained by Midland Brick in the manner contended for in par 3 of Midland Brick's particulars of claim can be inferred from the circumstances surrounding the transaction.

275 I note in passing that this view of the matter is consistent with the reasoning of Finklestein J in Baramon (supra). It is consistent also with the rationale for the Tulk v Moxhay doctrine (supra) given by the High Court in Forrestview (supra) where mention was made of the preference of equity for intention over form.

276 This brings me to the second matter, namely, the application of s 47(1) of the Property Law Act to the circumstances of the present case. That provision states that a covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successors in title and the persons deriving title under him or them, and has effect as if those successors and other persons were expressed.

277 It is a well-known fact that the enactment of the Property Law Act 1969 (WA) brought this State into line with the other States of Australia (with the exception of Queensland) and the Law of Property Act 1925 (UK). It is apparent from the ruling of the House of Lords in Beswick v Beswick [1967] UKHL 2; (1968) AC 58 concerning the privity of contract provision corresponding to s 11(1) of the Property Law Act that the United Kingdom legislation was viewed as a consolidation of the law, although the history of the legislation shows that it consolidated statutes which themselves were amending Acts. On the other hand, the Property Law Act in this State was described as "An Act to amend [emphasis added] and consolidate the law relating to property and for incidental purposes". To my mind, it should not be thought surprising if the provisions of the Property Law Act effected significant changes to the law.

278 At a first glance it might certainly be thought that s 47 and s 48 of the Property Law Act (which correspond to s 78 and s 79 of the Law of Property Act (UK)) have altered substantially the rules of common law concerning the passing of the benefit and the burden of covenants. Indeed, in Adamson v Hayes [1973] HCA 6; (1973) 130 CLR 276, where it was accepted by the High Court that the Property Law Act created rules additional to those contained in the Statute of Frauds 1677 (Imp) concerning the creation of interests in land, Gibbs J observed at 301 that the word "deemed" is sometimes used to impose for the purpose of a statute an artificial construction of a word or phrase that would not otherwise prevail. That prompted him to give effect to a provision which was clearly intended "to alter what would otherwise have been the position". Such an approach might be thought to assist an interpretation of s 47 (where the word "deemed" is used) to the effect that the benefit of a covenant is intended to run with the land although the instrument in question does not specifically mention the covenantee's successors in title.

279 However, as I indicated in earlier discussion, these provisions can arguably be regarded as merely word-saving devices and do no more than render it unnecessary in the description of the parties to a conveyance to add after the covenantee's name "his executors, administrators and assigns" and after the covenantor's name "and his successors in title": Sefton v Tophams Ltd [1967] 1 AC 60 at 73.

280 Nonetheless, Brightman J arrived at a view to the contrary, in Federated Homes (supra) and this was the view adopted at first instance by Carr J in the Forrestview case (supra) where, after a lengthy review of the decided cases, Carr J made these observations at (1995) 133 ALR 465 at 487:

"In my view, the covenant contains language sufficient to disclose the intention that the benefit of the restrictive covenant should pass to the respondent and his successors in title as owners to the amalgamated shopping centre land and thus be annexed to that land.

I have reached the foregoing conclusion without having to refer to s 47 of the Property Law Act 1969 (WA). In my opinion that section operates as additional reinforcement for that conclusion."

281 When the case was taken on appeal to the High Court the question of whether s 47(1) of the Property Law Act could be used to support a conclusion that the benefit of a covenant was annexed to the land adjoining land the subject of a conveyance was left open. Nonetheless, having regard to the language of the provision, and its presence in a statute which was enacted not only to consolidate but also to amend I consider that the provision lends support to Midland Brick's contention in the present case.

282 For the reasons I have just given, I consider that the special conditions "relate" to the retained land of Midland Brick as the covenantee. In the absence of any decisive ruling to the contrary, I consider that I should follow the reasoning of Brightman J in Federated Homes (supra) in holding that the benefit of the covenant is intended to run with the land because Midland Brick, as owner of the retained land and its successors in title, have been given a statutory right to enforce the covenant. For this further reason, I am able to conclude that there was an intention to benefit land retained by the vendor being the Midland Brick site and the additional properties.

283 I must now turn to a further requirement of the Tulk v Moxhay doctrine (supra), which is of particular significance in the present case, namely, that the burden of the special conditions was intended to run with the covenantor's land; that is, the special conditions were binding upon the defendant as the purchaser of the subject land and her successors in title.

284 I referred in earlier discussion to my conclusion that in cl 2 of the deed the parties sought to express the special conditions more exactly but did not otherwise purport to rescind or modify the terms of the contract of sale. I noted also that in the absence of any definition of the terms "vendor" and "purchaser" in the deed, it was necessary to look at the way in which those terms were defined by the general conditions, being one of the documents comprising the contract of sale. I noted that the term "purchaser" was defined by the general conditions to mean "the person named and described as the purchaser in the contract and any person deriving title under that party".

285 All of this points to a conclusion that when, by cl 2 of the deed, the defendant as purchaser agreed to the special conditions the intention of the parties was that she was contracting on her own behalf as covenantor and upon behalf of her successors in title. The covenants comprising the special conditions were intended to run with and burden the subject land.

286 I pause here to observe that this conclusion is consistent with s 48(1) of the Property Law Act which provides that unless a contrary intention is expressed a covenant relating to any land of a covenantor or capable of being bound by him, shall be deemed to be made by the covenantor on behalf of himself, his successors in title and the persons deriving title under him or them, and, has effect as if those successors and other persons were expressed. If this provision is applicable to the circumstances of the present case then it appears to support the provisional conclusion that I have just arrived at.

287 However, the defendant submitted that there are certain facts and matters which weigh against the provisional conclusion. It is said, having regard to the observations of Mason J in the final passage of his judgment in Codelfa's case (supra), that when the issue is which of two or more possible meanings is to be given to contractual provisions there is one situation in which the Court is entitled to and should look at evidence concerning the actual intention of the parties in order to discover what was intended. This is the situation where the parties have refused to include in the contract a provision which would give effect to the presumed intention of parties in their position.

288 It is said that in construing cl 2 of the deed there is a degree of ambiguity as to the meaning of the term "purchaser", and thus two or more possible meanings are available as to whom was to be bound by the covenant.

289 The ambiguity is said to arise in this way. It is true that the term "purchaser" is not expressly defined by the deed. However, it is clear from the deed, considered as a whole, that the defendant, Marian Concepta Welsh, is the purchaser. Moreover, there is a "definitions and interpretations" part of the contract which goes on to state abruptly that "Welsh shall mean Marian Concepta Welsh". This suggests that upon a careful construction of the deed as a whole the purchaser should be characterised as Marian Concepta Welsh and no other person or persons (such as her successors in title). It is said that this reading of the deed has the effect of overriding or displacing any meaning of the term "purchaser" contained in the contract of sale which might be thought to embrace both Marian Concepta Welsh and her successors in title.

290 In this situation, where two or more possible meanings are available, the defendant places reliance not only upon the reasoning of the final passage of Mason J in his judgment in Codelfa's case (supra) but also upon what was said by Owen J in Acorn (supra). It is said that regard may be had to what was deleted from the operative documents (being both the contract and the deed) as part of the surrounding circumstances in order to determine what was intended by the parties. Reliance is placed upon that part of the defendant's evidence at trial in which she said that she refused to sign or enter into a contract containing a more detailed expression of the special conditions, and to her evidence that, in the course of negotiating the final form of the deed, the word "absolute" in relation to the word "caveat" was deleted. Further, it is said that certain words were deleted from the deed in cl 1 and cl 2 which might otherwise have had the effect of extending the meaning of the term "purchaser" to include the defendant's successors in title; the parties agreed to the deletion from the deed of proposed words in cl 2 whereby the defendant would be obliged to have any purchaser from her enter into a deed with Midland Brick on the same basis as that contained in the subject deed.

291 In other words, to use the language of s 48(1) of the Property Law Act the covenants were not intended to be binding upon the defendant's successors in title or to run with the subject land because a contrary intention was shown.

292 As to this line of argument, I am not persuaded that the exception to the usual rule allowed for by Mason J in Codelfa (supra) and Owen J in Acorn (supra) fits the circumstances of the present case. The usual rule was put succinctly and applied by Jacobs J in Harrod's case (supra). He said that words struck out do not form part of the contract and wide-ranging speculation as to the final state of the contract is not usually regarded as an aid to interpretation.

293 To my mind, the circumstances of the present case cannot be compared to the deletion of words from a printed form. In the present case, having regard to the extensive negotiations and the controversy that preceded the making of the final contract, and to the proximity of the forthcoming settlement, I am of the view that when the deed was finalised both parties were not prepared to depart from the terms of what had been agreed to any significant extent so as to avoid the risk of creating any fresh controversy. This was acknowledged by the defendant in the course of her evidence when she said that 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.

294 To my mind, the surrounding circumstances do not permit any clear or reasonable inference to be drawn as to what the parties intended which might weigh against my provisional conclusion, namely, that the term "purchaser" was defined by the contract and the language of that definition established a presumed intention pursuant to normal principles of interpretation that the burden of the covenant was intended to bind the defendant's successors in title and to run with the land. Speculation as to why certain words were not included should not be allowed to override the normal rules of interpretation. I note in passing that Midland Brick may have been prepared to agree to the deletion concerning the defendant's successors in title not because of any acceptance that the defendant was providing a personal covenant only but simply because of a perception that such words were surplusage, and therefore unnecessary, having regard to s 48(1) of the Property Law Act which, prima facie, provides that a covenant will be binding on the covenantor's successors in title.

295 However, even if I be wrong in the view I have just expressed, and it is permissible to take account of parol evidence and the surrounding circumstances (including the deletions) in order to resolve the alleged ambiguity, I consider that, in any event, the parol evidence in question weighs against the defendant's case.

296 I am of the view that the evidence as a whole shows that the defendant was aware from an early stage of the negotiations that Midland Brick was seeking to ensure that any obligation or burden imposed upon the defendant as covenantor would be imposed also upon any person or new owner who inherited or purchased the land from the defendant; that is, her successors in title.

297 This is apparent from the defendant's Exhibit 34 letter dated 24 February 2000 in which the defendant wrote to Mr Harvey soon after one of their early conversations explaining 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". To my mind, upon a fair and commonsense reading of what was said by the defendant in that letter, she appears to be accepting that any of those who acquired subdivided portions of the subject land from her would be bound in the same way that she was bound.

298 It is important to remember also that in the key Exhibit 9 23 March 2000 letter from Midland Brick to the defendant, in which the special conditions were articulated by Midland Brick in writing for the first time, Midland Brick said that it would request the defendant's formal acknowledgement of the caveats that Midland Brick would "append" to the subject land.

299 I observed in earlier discussion that in the exchanges that followed the word "caveats" was being used, it seems, to embrace both the notion of the conditions that would be imposed by Midland Brick and the lodgement of the document known as a caveat to protect those conditions. However, as to the issue immediately before me, I am inclined to give weight to the use of the words "append to the property" as words used by a layman to signify an intention that the obligation he is speaking of would apply to and run with the property. It would not simply be a personal covenant binding upon the defendant as purchaser alone. It would be an encumbrance attached or "appended" to the property.

300 I find support for this view of the matter in Murphy v Wright [1992] NSW ConvR 55-652. The grantor in that case expressly gave the lender in the event of default a right to attach any debt to the assets of the guarantor and to register a caveat against any real property of the guarantor. There was no express charging term.

301 The Court of Appeal held that a registered proprietor cannot by contract confer a right to lodge a caveat where no caveatable interest exists. However, the use of the word "attached" pointed to an agreement to create an equitable charge that was a proprietary interest. In other words, the presence of a so-called right to attach suggested that the lender was intended to have an equitable charge which would support a caveat.

302 Moreover, this view of the matter is borne out by subsequent events in the present case. In the course of my review of the evidence I looked in detail at the cross-examination of the defendant concerning the so-called 24 March annotations (Exhibit 11A). These were annotations made by the defendant in her own hand upon the Exhibit 11 letter dated 24 March 2000 from Midland Brick. They show that the matter under discussion was future ownership of the subject land.

303 It seems to me that this is apparent from a fair and commonsense reading of the annotations themselves. The annotations commence with a reference to whether inheritance will cause any upset, and this is clearly a reference to inheritance by members of the defendant's family, being a matter that, as she agreed in her evidence at trial, was of concern to her. The annotations go on to say that if "it", meaning the subject land, gets developed "the new owners may not agree to the brickworks" and therefore Midland Brick wants a say in it. This note by the defendant appears to be echoing a concern by Mr Harvey that Midland Brick needed to ensure that the special conditions would apply to "new owners" in the sense of those who might purchase the subject land from the defendant.

304 The final passage in the annotations is to the effect that the special conditions will not stop development automatically but Midland Brick needs to give consent "so they know what is happening and any new owners are aware also".

305 As I indicated in earlier discussion, the defendant was cross-examined at length about these annotations. It was put to her by the cross-examiner in various ways that in this conversation Mr Harvey made it clear to her that the proposed special conditions, supported by a caveat, were designed to ensure that the subject land could not be subdivided in any way whatsoever and that Midland Brick was determined to ensure that this would be binding not only upon the purchaser but upon any member of her family or any other persons (or "new owners") who derived title from her. It was put to her that she knew that this was what Midland Brick was insisting upon and in the end, albeit reluctantly, she agreed to the special conditions upon this basis.

306 In the course of the cross-examination, the defendant denied that she accepted the conditions upon this basis. She said on several occasions that Mr Harvey "implied" that the caveats would only be registered against the subject land while she owned it. However, her denials and her evidence in that regard were unconvincing. She endeavoured to deflect the line of questioning by saying that she was not sure what exactly was meant by the reference to "new owners" when, to my mind, it was quite clear, for the reasons I have given, that the persons being talked about were new owners in the sense of those deriving title from the defendant should that eventuality occur. She was unable to specify any words used by Mr Harvey which might amount to an assertion that she was to be regarded as giving a personal promise only and that the caveat would only apply so long as the land was owned by her. She withdrew to the position she expressed on a number of occasions that he had "implied it". It is material to note also that there is no clear assertion by the defendant in any of the documents that the special condition should be regarded simply as a personal undertaking binding upon her alone.

307 It follows, then, that for the reasons I have given, I consider that the various requirements of the Tulk v Moxhay doctrine (supra) have been established and that the effect of the deed was to confer upon Midland Brick enforceable rights by way of restrictive covenants in respect of the special conditions, and that this gave rise to an enforceable equitable estate in the subject land. However, before I turn to issues concerning the sufficiency of the caveat lodged by Midland Brick in the present case, I must digress briefly to address Midland Brick's estoppel plea for the sake of completeness.

308 Midland Brick by its reply pleaded various facts and matters which were said to give rise to an estoppel whereby the defendant was estopped from denying the creation of a caveatable interest in the land in favour of Midland Brick and Midland Brick's entitlement to protect its rights by caveat. In essence, it was alleged that representations made by the defendant to Midland Brick in the course of the negotiations gave rise to an assumption that the special conditions would be binding upon the parties in the manner contended for by Midland Brick including that the burden of the covenants would run with the subject land and that Midland Brick would have a caveatable interest in the land. It was said that, in reliance upon the defendant's representations, Midland Brick was induced to enter into the contract and the deed and will suffer loss and detriment if the defendant resiles from the representations.

309 In Walton Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 Mason CJ and Wilson J noted that for many years there was a reluctance to allow promissory estoppel to become a vehicle for the positive enforcement of a representation by a party that he would do something in the future. It was thought to be a defence of equity. Generally speaking, they said, a plaintiff cannot enforce a voluntary promise because the promisee may be expected to appreciate that, to render it binding, it must form part of a binding contract. They went on to accept, however, that in some circumstances promissory estoppel may extend to the enforcement of a right not previously in existence when the defendant has encouraged in the plaintiff a belief that it will be granted and has acquiesced in action taken by the plaintiff in that belief. What gave rise to the need for the Court to intervene was the defendant's unconscionable attempt to go back on the assumptions which were the foundation of their dealing.

310 Mason CJ and Wilson J, espousing the majority view, summarised their reasoning in this way at 404:

"One may therefore discern in the cases a common thread which links them together, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has 'played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it': per Dixon J in Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641 at 675. Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption."

311 It is apparent from this passage and the reasoning of other members of the High Court in Walton's case (supra) that the purpose of the doctrine of estoppel is to preclude parties relying on strict rights where to do so would be unconscionable. It is also apparent from later decisions of the High Court in Commonwealth v Verwayen (1990) 170 CLR 394 and Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 that the assumption being referred to in this line of reasoning may be one as to a legal as well as to a factual state of affairs. In other words, a representation as to the effect of a legal agreement or the adequacy of arrangements made between the parties can give rise to an estoppel.

312 It follows from my earlier findings that, in strict analysis, it is not necessary to make a ruling upon Midland Brick's estoppel plea. I have found that upon its proper interpretation the deed and the preceding contract confer enforceable rights upon Midland Brick in equity pursuant to the Tulk v Moxhay doctrine (supra) and give rise to an interest in the land which may be protected by caveat. However, if it be held that I am wrong in the findings I have made, a question arises as to whether, in any event, Midland Brick is entitled to enforce its claim pursuant to the estoppel plea.

313 In my view, Midland Brick's estoppel plea cannot be sustained in the circumstances of the present case, because there is an insufficient causative link between the alleged representations and Midland Brick's decision to enter into the contract and the deed. In circumstances in which the parties negotiated over an extended period and arrived at a final position which was reduced to writing, first in the contract of sale, then in the deed, the decision to proceed was clearly based not upon any assumption created by the defendant's representations but on the assumption that the relevant documentation adequately encapsulated the agreement made between the parties.

314 It is true that a dispute has now arisen between the parties as to the meaning and effect of the relevant instruments but, in the absence of persuasive evidence that the defendant's stance was prompted by caprice or an improper purpose, it is difficult to infer that the defendant has embarked upon an unconscionable attempt to go back on the assumptions which were the foundation of the dealings between the parties. She is simply contending for an interpretation of the contractual documents which is disputed by Midland Brick.

315 Moreover, in a situation in which, as I have noted, the relevant documents do not contain any express words of annexation as to the benefit of the covenants, or express words acknowledging that the burden of the covenants runs with the subject land, it becomes difficult for Midland Brick to suggest that the defendant is acting in an unconscionable manner or departing from assumptions created by dealings between the parties. This is simply a case of contractual documents, which were put together by lay parties initially, being somewhat ambiguous due to a lack of precision. On my findings, this led in turn to a decision to spell out the arrangements made between the parties with greater precision in a subsequently executed deed. By then, both parties accepted that the deed had to be confined to a restatement of what had been agreed previously, without introducing words or concepts that might lead to further controversy.

316 Accordingly, in my view, Midland Brick's estoppel plea is misconceived. It does not provide Midland Brick with an avenue for relief, even if I be wrong in the interpretation I have given to the contract of sale and the deed.

317 It follows that I must now return to the question of whether the steps taken by Midland Brick to protect its rights under the contract and the deed by lodgement of a caveat were effective.

318 The recital to the deed dated 10 May 2000 refers to the terms and conditions of the contract of sale including the right for Midland Brick to lodge a caveat against the subject land. Clause 2 of the deed reflects the special conditions whereby the land was not to be subdivided without the written consent of Midland Brick and no complaints were to be made about emissions. By cl 2.1.3 the defendant, as purchaser, agreed that Midland Brick as vendor "may lodge a caveat over the property to protect its rights contained in this clause".

319 This suggests that Midland Brick was entitled to lodge a caveat against the subject land, notwithstanding the defendant's plea at par 10(a) of the statement of defence, and her case at trial, that the special conditions were in the nature of personal covenants only and did not create an interest in the land. As to that issue, I have made findings in favour of Midland Brick and must now proceed upon the basis that Midland Brick was the holder of an unregistered equitable estate in the land pursuant to the restrictive covenants in question.

320 Section 137 of the Transfer of Land Act provides that a caveat can be lodged where a person claims "any estate or interest" in the subject land. It is only a person who has or claims a legal or equitable estate in land who can lodge a caveat. Bradbrook & Neave (supra) observe at par 17.28 and par 17.34 that although there is some New Zealand authority to the contrary, dicta in a number of Australian cases supports the view that restrictive covenants are caveatable interests, even under legislation requiring the caveator to have an estate or interest in land. I noted in earlier discussion that there is authority to the effect that an unregistered restrictive covenant is an equitable interest in the land which may be protected by a caveat: Blacks Ltd v Rix (supra). I find that Midland Brick is and was at all material times entitled to lodge a caveat against the subject land after settlement in order to protect its interest. See also Crampton v French (1995) V ConvR 54-529.

321 However, it will be apparent from my review of the pleadings, that further questions arise in the present case as to the exact nature of Midland Brick's entitlement to lodge a caveat (the "scope of the caveat issue") and as to whether the caveat in fact lodged by the company was in the appropriate form (the "form of the caveat issue"). It will be recalled that Midland Brick purported to lodge a caveat known as an absolute caveat (in that it purported to forbid the registration of any instrument affecting the estate or interest being claimed by Midland Brick "absolutely"), notwithstanding an insistence by the defendant when the terms of the deed were being finalised that the word "absolute" be removed from those passages in the deed concerning lodgement of a caveat.

322 In order to resolve these further issues, I must begin by looking at the provisions of the Transfer of Land Act with a view to understanding the function of caveats under the Torrens system and the provisions as to form.

323 The structure of the Act resembles similar legislation in other parts of Australia in that indefeasibility of title is secured by provisions whereby judicial notice is to be taken of instruments and entries purporting to be authenticated by the Registrar of Titles. The title of a registered proprietor is declared to be indefeasible (except in a case of fraud) subject to the qualifications noted on such title. Every certificate issued by the Registrar of Titles is conclusive evidence that the person named in such certificate is entitled to the estate or interest specified therein.

324 More particularly, s 53 of the Act provides that the Registrar shall register instruments in the order of presentation. Instruments purporting to affect the same estate or interest have priority as between each other according to the time of registration. Upon registration the estate or interest shall pass or, as the case may be, the land shall become liable in the manner specified in the instrument.

325 Section 68 provides that the proprietor of land shall, except in case of fraud, hold the same subject to such encumbrances as may be notified on the registered certificate of title for the land, but absolutely free from all other encumbrances save that the land shall be deemed to be subject to, inter alia, any public rights of way and to any easements acquired by enjoyment or user or subsisting over or upon or affecting such land. By s 134, except in the case of fraud, no person contracting with a person who is the proprietor of any registered land shall be required to ascertain the circumstances under which the proprietor or any previous proprietor became registered or shall be affected by notice actual or constructive of any trust or unregistered interest.

326 Section 137 of the Act provides that any beneficiary or other person claiming an estate or interest in land under any unregistered instrument may lodge a caveat with the Registrar in an approved form forbidding the registration of any person as transferee or proprietor of and of any instrument affecting such estate or interest either absolutely or after notice of the intended registration be given to the caveator or unless such instrument be expressed to be the subject to the claim to the caveator as may be required in such a caveat.

327 The statutory provision goes on to refer to other requirements as to the form of the caveat. I will return to these later. However, I note in passing, as the High Court observed in Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22; (1991) 174 CLR 407 that the words in s 137 of the Act "or unless such instrument be expressed to be subject to the claim of the caveator" have no counterpart in the equivalent statutory provisions in New South Wales, Queensland and Tasmania.

328 Section 138 of the Act and related provisions provide a mechanism whereby the caveator can be called upon to substantiate his claim. Section 139 provides that so long as any caveat remains in force prohibiting any registration or dealing the Registrar shall not enter any transfer or other instrument purporting to transfer or otherwise deal with or affect the estate or interest in respect to which such caveat may be lodged.

329 It is apparent from these provisions that the basic concept is that a person who acquires land under the Torrens system, bona fide and for consideration, will be subject only to those interests he or she can discover from a search of the register. The principal exception to this concept of indefeasibility is fraud.

330 It is against this background that it will be useful to look at certain decided cases bearing upon the entitlement to lodge a caveat, and the consequence of failing to do so.

331 In Abigail v Lapin [1934] UKPCHCA 1; (1934) 51 CLR 58 the Privy Council said at 64 that the Torrens system is a system for the registration of title. The statutory form of transfer gives a title in equity until registration, but when registered it has the effect of a deed and is effective to pass the legal title. No notice of trusts may be entered in the register book, but it has long been held that equitable claims and interests in land are recognised under the system. The legislation provides that a caveat may be lodged by any person claiming under any unregistered instrument. The effect of the caveat is that no instrument will be registered while the caveat is in force affecting the land, estate or interest until after a certain notice to the person lodging the caveat. Thus, though the legal interest is in general determined by the registered transfer, and is in law subject only to registered mortgages or other charges, the register may bear on its face a notice of equitable claims, so as to warn persons dealing in respect of the land and to enable the equitable claimant to protect his claim by enabling him to bring an action if his claim be disputed.

332 I pause here to note that by s 129A of the Act restrictive covenants may be created and made binding in respect of land by instruments in an approved form. However, consistently with the reasoning in Abigail v Lapin (supra), it is clear that an unregistered instrument containing restrictive covenants of the kind created in the present case can give rise to an equitable estate in land, and be protected by caveat.

333 In the earlier case of Butler v Fairclough [1917] HCA 9; (1917) 23 CLR 78 Griffith CJ said that under the Australian system of registration of titles to land the courts will recognise equitable estates and rights except so far as they are precluded from doing so by the statute. This recognition is, indeed, the foundation of the scheme of caveats which enable such rights to be temporarily protected in anticipation of legal proceedings. In dealing with such equitable rights the courts in general act upon the principles which are applicable to equitable interests in land which is not subject to the Act. In the case of a contest between two equitable claimants the first in time, all other things being equal, is entitled to priority. But all other things must be equal, and the claimant who is first in time may lose his priority by any act or omission which had or might have had the effect of inducing a claimant later in time to act to his prejudice.

334 It is apparent from the reasoning of the Chief Justice that the effect of the provisions is not to enlarge or add to the existing proprietary rights of the caveator upon which the caveat is founded, but to protect those rights, if the caveator has any. It was held in Butler v Fairclough (supra) that the plaintiff by omitting to lodge a caveat in respect of his unregistered equitable interest before the defendant paid the purchase money and obtained his transfer, had lost the priority which might otherwise have been available to the plaintiff as a result of his equitable interest having been created first in point of time. In other words, the failure to lodge a caveat amounted to an omission which had the effect of inducing a claimant later in time to act to his prejudice with the result that the interest of the latter obtained priority.

335 However, in J & H Just (Holdings) Pty Ltd v Bank of New South Wales [1971] HCA 57; (1971) 125 CLR 546 it was held that the failure of the holder of an equitable estate or interest in land to lodge a caveat does not necessarily involve the loss of priority which the time of the creation of the equitable interest would otherwise give. Thus, in that case, the fact that the bank holding the earlier equitable interest had possession of the duplicate certificate of title, which prevented dealing with the land, was sufficient to displace the rules concerning priority as between unregistered equitable interests described in Butler v Fairclough (supra). See also Heid v Reliance Finance Corporation Pty Ltd [1983] HCA 30; (1983) 154 CLR 326 at 339; Pindan Pty Ltd v Property Nominees Pty Ltd [2006] WASC 91.

336 Barwick CJ observed in Just's case (supra) at 552 that the purpose of a caveat is to act as an injunction to the Registrar-General to prevent registration of dealings with the land until notice has been given by the caveator. This enables the caveator to pursue such remedies as he may have against the person lodging the dealing for registration which is of concern to the caveator. The purpose of the caveat is not to give notice to the world or to persons who may consider dealing with the registered proprietor of the caveator's estate or interest though if noted on the certificate of title it may operate to give such notice.

337 It will be apparent from discussion to this point, having regard to the reasoning in Butler v Fairclough (supra), that if Midland Brick had failed to lodge a caveat following transfer of the title to the subject land to the defendant upon settlement its equitable interest in the land would have been put at risk. If the defendant, as the incoming registered proprietor, had proceeded to sell the subject land to a bona fide purchaser for value without notice then such a purchaser, in the absence of any restrictions noted on the title, or of which notice had been given, would take the land free of encumbrances. Moreover, if the registered proprietor sold or charged the land and a third party holding an unregistered instrument of equitable estate in the land proceeded to lodge a caveat before any caveat was lodged by Midland Brick then, pursuant to the reasoning in Butler v Fairclough (supra), the holder of an equitable estate created in that way would obtain priority, notwithstanding that Midland Brick's equitable estate in the land was the first in time.

338 These considerations arguably suggest that in construing cl 2.1.3 of the deed concerning Midland Brick's entitlement to "lodge a caveat over the property to protect its rights" the presumed intention of the parties was to allow to Midland Brick a means of ensuring that its equitable interest in the land was not defeated or postponed as a consequence of any of the circumstances I have just described. I noted in earlier discussion that use of the word "caveat" indicated, of itself, that the burden of the covenants was intended to run with the land because a person must have a caveatable interest in the land before a caveat can be lodged.

339 All of this might be thought to suggest in turn that Midland Brick was entitled to lodge an absolute caveat because it is arguably only a caveat in that form, forbidding the registration of any instrument affecting the estate or interest of Midland Brick "absolutely", which would prevent Midland Brick's estate or interest in the land being defeated or postponed.

340 Put shortly then, Midland Brick's case proceeds from the premise that the intention of the parties as revealed by the language of cl 2.1.3 of the deed was that the vendor was to lodge whatever form of caveat was sufficient to protect its rights under the covenants by the defendant not to subdivide the subject land without consent and not to complain of emissions upon the basis that the burden of these covenants ran with the land and conferred upon Midland Brick an equitable estate or interest in the land. Midland Brick contends, having regard to the reasoning in Butler v Fairclough (supra) and related rules of equity, that an absolute caveat is the only form of caveat that will afford sufficient protection by giving notice of Midland Brick's equitable estate in the land and preventing a dealing inconsistent with its rights; that is, any proposed dealing will be prevented unless and until Midland Brick as caveator is afforded an opportunity to enforce its rights under the deed.

341 It is said also that any other form of caveat will not be enough to prevent subdivision taking place and, at most, will simply leave Midland Brick with a claim for damages against the party subdividing after the subdivision has taken place. In support of this contention Midland Brick placed reliance upon Exhibit 31 being an extract from Crane: Land Titles Registration Practice in Western Australia (4th ed) concerning subdivisional practice, especially at par 6.160. This was said to show that if Midland Brick lodged only a "subject to claim" caveat it would be open to the defendant or a successor in title to apply for and obtain a plan of subdivision in order for dealings and transfer the new lots to third parties, albeit lots subject to the restrictive covenants. It is said that an absolute caveat would prevent this happening because even though an application for subdivision is not an "instrument" affecting the caveator's estate the subsequent transfer of subdivided lots to new owners would be barred by such a caveat. It is said that the other forms of caveat would be inadequate. The Exhibit 31 Titles Practice document suggests that a subdivision followed by conveyances of the new lots could be effected consistently with the presence of a notice caveat or subject to claim caveat. The transfers would be expressed to be subject to Midland Brick's claim to an equitable estate or interest in the land, and the new owners, by taking with notice that a prior equitable estate existed, would be duty bound in equity to give effect to the prior estate. By then, however, the unwanted subdivision would have been completed.

342 On the other hand, the defendant pleaded at par 10(b) of her statement of defence that if (which was not admitted) Midland Brick was entitled to lodge a caveat upon the basis that the special conditions created an interest in land, Midland Brick was not entitled to lodge an absolute caveat. Counsel for the defendant submitted that such a caveat exceeded the entitlement of Midland Brick. The rule is that the caveator may not lodge a caveat which goes beyond the legitimate claim necessary to protect the caveator's rights: Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129 at 131; Vandyke v Vandyke (1976) 12 ALR 621 at 624; Binningup Nominees Pty Ltd v Brogue Tableau Pty Ltd [2004] WASC 14 at par 35.

343 Accordingly, a caveat in an absolute form was not appropriate or permissible because it would have the practical effect of purporting to forbid, and thus preventing, dealings with the subject land which were not actually inconsistent with or likely to affect the caveator's interest, because it was in the nature of the interest claimed by Midland Brick that it ran with and was binding upon the registered proprietor's successors in title. Moreover, the parties had agreed to the deletion from the deed of words entitling Midland Brick to lodge an absolute caveat. Pursuant to the final passage of Mason J's judgment in Codelfa (supra) the evidence to this effect should be treated as both admissible and decisive; that is, evidence of the actual intention of the parties as evidenced by a refusal to include the word "absolute" should take precedence over a presumed intention.

344 Counsel made this submission also at par 38 of her written submissions:

"It is an irony in this matter that an absolute caveat, indeed any type of caveat, would be ineffective to prevent the effecting of a subdivision. Caveats only prevent the registration of 'a person as transferee or of any instrument affecting their estate or interest'. An application relating to subdivision is not an instrument within the meaning of that term in the Transfer of Land Act ('TLA'): see s.4 and s.137 TLA. Even an absolute caveat cannot prevent subdivision."

345 As to this, I digress briefly to observe that I am inclined to view this latter submission with caution. It appears from par 6.110 of the Titles Practice exhibit that as a basic rule any encumbrancer who may be disadvantaged by the creation of the new subdivision must consent to the application. It is said also that examples where consent will be required are "a caveat lodged protecting an unregistered instrument, which will become unregisterable on the creation of the new subdivision". Moreover, the defendant's submission does not address or dispose of the argument that even if a subdivisional plan be approved as in order for dealings, an absolute caveat will forbid and prevent the transfer of lots to new owners, and this factor is likely to dissuade a land owner such as the defendant from applying for subdivisional approval. A subdivision in the sense of new lots being vested in new owners would not in fact be effected.

346 It will now be useful to look at some previously decided cases bearing upon these issues.

347 It is not entirely clear from the decided cases as to how an estate or interest in land arising under a restrictive covenant should be characterised. It appears to be a category of rights and obligations referable initially to a contractual relationship (as in the circumstances of the present case) but capable of having an operation between parties other than the contracting parties as a consequence of equitable rules. This suggests that equitable rights arising under a restrictive covenant should be treated as creating a discrete category of enforceable rights. It follows that there is bound to be a degree of uncertainty as to the appropriate shorthand description to be used for these rights on a caveat form.

348 In Re Nisbet & Potts Contract [1905] 1 Ch 391 at 396 Farwell J at first instance described a covenant conforming to the Tulk v Moxhay doctrine (supra) as "completely analogous to an equitable charge on a real estate created by some predecessor in title of the present owner of the land charged". When the case was taken on appeal Cozens-Hardy LJ said that "the benefit of a restrictive covenant of this kind is a ... right in the nature of a negative easement.": (1906) 1 Ch 386 at 409. In London County Council v Allen [1914] 3 KB 642 at 667 Scrutten LJ expressed the opinion that it did not matter whether the equitable doctrine developed from Tulk v Moxhay (supra) proceeded on analogy to a covenant running with the land (at law) or on analogy to an easement.

349 In reviewing these differences of opinion it strikes me that the characterisation of the rights conferred by a restrictive covenant may at least partly depend upon the intention of the parties reflected in the instrument or agreement in question. However, for the time being, it is sufficient to note that in circumstances in which there is a degree of divergence as to the appropriate characterisation of the rights it is likely to be of advantage to the caveator to have the nature of his rights determined at an early stage if an issue arises as to the definition and scope of the rights in question.

350 In Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222 Holland J affirmed the precept enunciated in Just's case (supra) that the right to caveat is given by the statute, not for the purpose of giving notice to the world of a claim by the caveator to an estate or interest in the land, but for the purpose of prohibiting the caveator's interest from being defeated by the registration of a dealing without the caveator having had an opportunity to invoke the assistance of the Court to give effect to his interest. A caveat may be regarded as nothing more than a statutory injunction to keep the property in status quo until the Court has had an opportunity of discovering what are the rights of the parties. His Honour went on to hold that from this it follows that a caveator has no right to prohibit registration of a dealing to which his alleged interest in the land would not entitle him to object, if he were to invoke the assistance of the Court.

351 In Coles KMA Ltd v Sword Nominees Pty Ltd & Ors (1986) 44 SASR 120 the defendants were purchasers under a contract for sale expressed to be subject to the plaintiff's lease. Before settlement the plaintiff lodged a caveat forbidding the registration of any dealing unless expressed to be subject to the plaintiff's claim. A memorandum of transfer was so expressed, and settlement duly took place. The purchasers sought declarations that they were not bound by the lease. It was held by the Full Court in South Australia that the lodging of the permissive caveat (allowed for by the legislation in that State) and the registration of the memorandum of transfer expressed to be subject to the plaintiff's claim in the caveat were effective to preserve as against the purchasers the plaintiff's claim as lessee under the unregistered lease.

"I would put it that equity acting in personam will override the position at law and prevent the defendants from ignoring the fact that a caveat was lodged and notified on the original certificate. The defendants knew what interest the caveat claimed to protect. They accepted the memorandum of transfer subject to that interest. They must recognise and abide by the terms of the indenture of lease. They have their title as proprietors in fee simple. No one defeats that title. But they have it subject to notations on the original certificate. The caveat is not a memorial of an interest. But it is notice of any interest which equity recognises. If the principles of equity did not exist the defendants could no doubt ignore the interest claimed in the caveat. But equity forbids them so to ignore it."

353 In Leros (supra), being a case arising under the legislation in this State, the land was subject to a lease with an option of renewal for a further term of 7 years. Land was transferred to another who took subject to the lease (because it was for a term not exceeding 5 years) but it was common ground that he did not take subject to the option because the lease was not at that time registered or protected by a caveat. A bank in its capacity as lender to the lessee then lodged a caveat purporting to claim an estate or interest as mortgagee of leasehold by sub-demise. No explicit reference was made to the existence of the option. The caveat forbade the registration of any instrument affecting the interest claimed by the bank unless such instrument was expressed to be subject to the caveator's claim.

354 The High Court held that the requirement of s 137 and the 18th Schedule of the Transfer of Land Act that a caveat specify the interest claimed should be understood as requiring that the caveat mention that interest explicitly. The bank's caveat did sufficiently specify its interest as mortgagee since it was not necessary to state the amount of the security, but it did not sufficiently specify the option and hence the option was not protected by s 137. It was said that the registration of a transfer which is expressed to be subject to a caveat within the concluding words of s 137 of the Act does not validate the estate or interest claimed in the caveat but simply prevents the registration from destroying the estate or interest claimed, if it is valid.

"The essence of a caveat is that it claims an estate or interest in land. And a claim having been made, the interest is protected because, in the case of an absolute caveat, it operates to forbid registration of a subsequent dealing until the caveator has had an opportunity to establish his or her claim. And, in the case of a 'subject to claim' caveat, the interest is protected by forbidding registration of a dealing which does not acknowledge that the claim has been made and, if established, will bind the person or persons taking subject to it."

356 Mason CJ, Dawson and McHugh JJ said this at 420:

"This brings us to a consideration of the effect of Terara's caveat as a 'subject to claims' caveat and the fact that the caveat was noted as an encumbrance in the instrument of transfer from Western to Leros. As appears from s 137 of the Act, a caveator may lodge a 'subject to claims' caveat or 'permissive' caveat as it is known in South Australia, instead of a caveat forbidding the registration of dealings. If, in conformity with such a caveat, an instrument of transfer, expressed to be subject to the caveat, is registered, the title of the transferee is subject to the rights of the caveator. In South Australia, that view has been taken by Olsson J in Andrews v South Australian Superannuation Fund Investment Trust (1985) 124 LSJS 153, where his Honour, referring to the effect of registration of a transfer expressed to be subject to 'an existing valid caveat', stated that 'the effect is to preserve the rights of the caveator'. In Coles KMA Ltd v Sword Nominees Pty Ltd Bollen J (with whose judgment Jacobs J expressed his substantial agreement) cited those remarks with approval."

357 Their Honours then went on to make these further observations at 420:

"However, the effect of the registration of such a caveat is not to validate the estate or interest claimed by the caveat. All that registration in that form, in conformity with the caveat, achieves is to prevent the registration from destroying or defeating the prior unregistered interest claimed by the caveator, assuming it to be valid and enforceable. Whether the interest so claimed is valid and enforceable remains a matter for resolution after registration. The 'subject to claims' caveat and registration is a procedure which enables resolution of that question to occur after, if not before, registration. The registered proprietor takes, under such a transfer, subject to the caveat, that is, subject to the claim made by the caveator; the proprietor does not take subject to the interest claimed by the caveator. The form of the registration in the present case illustrates the point. It is the caveat that is noted in the memorandum of encumbrances. And a caveat is not a defect in title or an encumbrance."

358 Let me now return to the circumstances of the present case.

359 It follows from earlier discussion that I am not persuaded by the defendant's submission that evidence concerning deletion of the word "absolute" in the deed as an adjective qualifying the word caveat should be treated as decisive. The word "absolute" did not appear in the key Exhibit 9 23 March letter when the special conditions were first articulated in writing. In my view, the deed was intended by the parties to restate what had been agreed previously as to the special conditions. This serves to explain why the word "absolute" was not included, because it was not used in the course of the negotiations. Speculation about this or other possibilities is not usually allowed as an aid to interpretation. Accordingly, notwithstanding the final passage in the judgment of Mason J in Codelfa's case (supra), I am of the view that the intention of the parties must be discovered by looking at the language used in the deed.

360 To my mind, it is clear from cl 2.1.3 that Midland Brick was entitled to lodge whatever form of caveat was necessary to protect its rights in respect of the special conditions. This meant, having regard to my previous findings, it was entitled to lodge a caveat sufficient to protect its equitable estate or interest in the land. The crucial characteristics of that estate were an entitlement to enforce a covenant that the land not be subdivided without consent and a covenant that there be no complaint as to emissions. It follows from earlier discussion that there is a degree of divergence in the decided cases as to whether the burden created by the restrictive covenants should be compared to an equitable charge or to a negative easement, but importantly (on my previous findings) Midland Brick had the entitlement to insist upon the covenants being observed by successors in title because the burden of the covenants ran with the land.

361 It might be said, having regard to the reasoning of the Full Court in the Coles' case (supra) that it would be sufficient for Midland Brick to lodge a subject to claim caveat because in that case an interest in land was found to be enforceable against a successor in title. However, to my mind, the answer to this issue is to be found in returning to basic principles of the kind reflected in Just's case (supra) and in Leros (supra). It emerges from those cases that an essential feature of the caveat system is to afford an opportunity to the caveator to make out its claim. Moreover, 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. It is important to understand also that the presence of the caveat does not in any sense validate the underlying claim. Thus, even if a transfer to a third party purchaser from the registered proprietor is expressed as being subject to the caveat, the incoming proprietor does not take subject to the interest claimed but simply subject to the caveat; that is, subject to the claim made by the caveator.

362 All of this suggests to me that the scope of the caveat must be such as to allow to the caveator an opportunity to establish its claim, if it can, against a party with which it initially contracted, even though its interest is said to run with the land and be binding upon successors in title. This will be so especially in circumstances where it is difficult to characterise in law or in equity the exact nature of the equitable estate or rights which are said to be vested in the caveator.

363 In other words, if the land is transferred to a third party, albeit subject to the caveator's claim, the prospect of the caveator enforcing its estate or interest will arguably be diminished. Further, and in any event, if there is any flaw or limitation in the estate being claimed it will be important to the caveator that this be brought to light at an early stage. One must keep steadily in mind the precept enunciated in Leros (supra) that a transferee does not take subject to the interest described in the caveat. He simply takes subject to a claim that has not yet been substantiated. As in the circumstances of the present case, a caveator will obviously wish to substantiate its claim when it is first asserted that the covenants do not run with and burden the land.

364 Accordingly, for these reasons I consider that from the point of view of a party such as Midland Brick claiming a proprietary interest in the subject land under and by virtue of a restrictive covenant prohibiting subdivision, the only satisfactory and sufficient form of protection was to lodge an absolute caveat which would permit the caveator to establish at an early stage whether his rights were likely to be affected by the proposed dealing. I consider that this was allowed for by the provisions of the deed.

365 Further, I see merit in Midland Brick's contention that if Midland Brick lodged only a subject to claim caveat that would expose Midland Brick to the risk that an application for subdivision might be approved without an opportunity being afforded to the caveator to object, because such an application, having regard to the language of the statute, cannot be regarded as an "instrument" affecting the subject land. For this reason also, I am of the view that Midland Brick was entitled to lodge an absolute caveat in the circumstances of the present case in order to protect its rights.

366 I find support for the conclusion I have just expressed by looking at the situation from the point of view of the Registrar, bearing in mind, as I mentioned earlier, that an important feature of the caveat system is the duty placed upon the Registrar to determine whether a dealing is inconsistent with the estate or interest claimed by the caveator.

367 In the case of a restrictive covenant prohibiting subdivision, where it may be difficult to determine the exact juridical nature of the caveator's claim, there is less likelihood of a prejudicial error being made where an absolute prohibition is imposed by a caveat, than in the case of a "permissive" or "subject to claim" caveat where it might be thought that the dealing does not intrude upon the caveator's claim. If the intention of the parties was, in accordance with my earlier findings, to provide a full protection to Midland Brick by allowing for the lodgement of a caveat to protect its rights "without limitation", then the risk of prejudice to the caveator's position I have just described suggests that Midland Brick's entitlement was to lodge an absolute caveat as a means of eliminating or reducing the risk.

368 Let me now turn to the form of the caveat issue.

369 Midland Brick pleaded at par 10 of the statement of claim that it was entitled to protect its rights arising from the special conditions by the lodgement of a caveat against the subject land in favour of Midland Brick. It pleaded further that on or around 22 May 2000 (that is, after settlement) Midland Brick lodged caveat registered number H450939 at the Department of Land Administration against the subject land in protection of its interests, claiming an estate or interest in the 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 said that lodged with the caveat was a true copy of the deed.

370 I pause here to note that the caveat in question was received in evidence as Exhibit 20 and reflects the details mentioned in the pleading.

371 There is no controversy about the description of the subject land, as land affected by the caveat, or concerning the identity of the parties. The estate or interest being claimed (Note 5) is put in this way: "as grantee". The description of the grounds upon which the estate or interest is claimed is given as "a deed agreement dated 10 May 2000". The caveat (Note 7) forbids the registration of any instrument affecting the estate or interest "absolutely".

372 Midland Brick in its prayer for relief, seeks not only a declaration that it has an interest in the subject land capable of being the subject of a caveat registered under s 137 of the Transfer of Land Act but seeks also a declaration that the caveat is valid and binding, in its present form, against the defendant and her heirs, assigns and successors in title in respect of the land.

373 Midland Brick seeks also (in par 15.3) an order that the caveat be extended until the further order of the Court. Further, or in the alternative, an injunction preventing the defendant or her heirs, assigns and successors in title in respect of the land from dealing with the land in any way inconsistent with Midland Brick's rights under the contract and/or the deed, without the express written consent of Midland Brick first had and obtained, or other order of the Court. Further, or alternatively, an order is sought in par 15.5 of the prayer for relief that an order be made that the caveat be amended on such terms as the Court sees fit. Midland Brick seeks in par 15.6 such declaratory or other relief as the Court sees fit.

374 The defendant by par 16 of her statement of defence pleaded that the caveat fails to specify the estate or interest claimed, as required by s 137 of the Act, and is thereby invalid.

375 I have found that Midland Brick had a caveatable interest under and by virtue of the restrictive covenants contended for. However, as appears from the defendant's pleading, it is said that the caveat is irregular on its face because it does not recite the nature of the interest claimed. The defendant submitted that it was insufficient for the estate or interest being claimed to be described simply "as grantee" by virtue of "a deed agreement dated 10 May 2000".

376 It was common ground at the hearing before me that a copy of the deed was lodged with the caveat. However, it is common ground also that the deed cannot be searched at the Department of Land Administration. No statutory declaration was lodged with the caveat. It was submitted therefore that no-one searching the register could tell from the body of the caveat the nature of the interest claimed.

377 I noted in earlier discussion that by s 137 a person claiming an estate or interest may lodge a caveat with the Registrar in an approved form. The provision goes on to state that every such caveat shall state the name and address of the person by whom or on whose behalf the same is lodged and shall be signed by the caveator or by his agent. The person lodging such caveat shall, if required by the Registrar, support the same by statutory declaration stating the nature of the estate or interest claimed and the title thereto and may withdraw any such caveat.

378 Counsel for Midland Brick submitted at the trial that the Form C1 used by Midland Brick was the approved form. Counsel submitted that, having regard to cases such as Leros (supra) and Just (supra), the description of the estate or interest being claimed was sufficient, bearing in mind the power given to the Registrar to require a caveator to provide additional evidence of the nature of the estate or interest claimed. As I have indicated in earlier discussion, it emerges from Just's case (supra) that in the opinion of the High Court the purpose of a caveat is to act as an injunction to the Registrar to prevent registration of dealings with the land until notice has been given to the caveator. This enables the caveator to pursue such remedies as he may have against the person lodging the dealing for registration. The primary purpose of a caveat against dealings is not to give notice to the world of an interest.

379 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".

380 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.

381 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.

382 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

383 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.

384 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".

385 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.

386 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.

387 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.

388 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.

389 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).

390 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.

391 Let me now return to the circumstances of the present case.

392 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.

393 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.

394 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.

395 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.

396 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.

397 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.

398 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.

399 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.

400 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.

401 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.

402 Accordingly, I am not persuaded that I am at liberty to make orders for amendment of the kind contended for by Midland Brick.

403 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.

404 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.

406 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.

407 Order 18 rule 16 of the Rules of the Supreme Court 1971 (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.

408 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.

409 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.

410 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."

411 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] HCA 41; (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.

412 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.

"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] HCA 15; (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."

414 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.

415 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. "

416 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.

417 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.

418 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.

419 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.

420 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.

421 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.