Supreme Court of WA|2004-08-30|Before: Jenkins J

Westpoint Corporation Pty Ltd v The Registrar of Titles & Anor [2004] WASC 189 (30 August 2004)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : WESTPOINT CORPORATION PTY LTD -v- THE REGISTRAR OF TITLES & ANOR [2004] WASC 189

BETWEEN : WESTPOINT CORPORATION PTY LTD (ACN 009 395 751)

MONTEATH PROPERTIES PTY LTD (RECEIVER & MANAGER APPOINTED) (IN LIQ) (ACN 009 458 093)

Real property - Caveat - Application by caveator for extension of caveat - Oral representations by vendor to purchaser not capable of founding a caveatable interest - Priority of registered mortgage over unregistered equity - Balance of convenience

Austerberry v Corporation of Oldham (1885) 49 JP 532

Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409

Forestview Nominees Pty Ltd & Silkchime Pty Ltd v Perpetual Trustees WA Ltd [1998] HCA 15; (1998) 193 CLR 154

Goldsbrough Mort & Co Ltd v Quinn [1910] HCA 20; (1910) 10 CLR 674

Halse v Embling, unreported; FCt SCt of WA; Library No 970734; 22 December 1997

Hamdan v Widodo & Anor [2004] WASC 123

IOOF Australian Trustees (NSW) Ltd v Tantipech [1998] FCA 924; (1998) 156 ALR 470

Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22; (1992) 174 CLR 407

Pirie v The Registrar General [1962] HCA 58; [1963] 109 CLR 619

Rhone v Stephens [1994] UKHL 3; [1994] 2 AC 310

Shepherd Homes Ltd v Sandham (No 2) [1971] 2 All ER 1267

Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] VicRp 47; [1994] 1 VR 672

Tulk v Moxhay (1848) 41 ER 1143

Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387

Australian Property & Management Pty Ltd v Devefi Pty Ltd (1997) 7 BPR 15

Blacks Ltd v R [1962] SASR 61

Custom Credit Corporation Ltd v Chellaston Pty Ltd, unreported; SCt of WA (Anderson J); Library No 930340; 10 June 1993

Dalgety Wine Estates Pty Ltd v Rizzon [1979] HCA 41; (1979) 141 CLR 552

Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129

Duncan v Andriopoulos, unreported; SCt of Vic (Beach J); 20 April 1994

Eng Mee Young v Letchumanan [1980] AC 331

Esther Investments Pty Ltd v Wilson International Pty Ltd [1982] ANZ ConvR 647

Handberg v Walter [2001] VSC 145

Handberg v Walter [2001] VSC 177

Hoyt's Pty Ltd v Spencer [1919] HCA 64; (1919) 27 CLR 133

Isakka v South Australian Asset Management Corporation [2002] QCA 549

J & H Just (Holdings) Pty Ltd v Bank of New South Wales [1969] 2 NSWR 318

J & H Just (Holdings ) Pty Ltd v Bank of New South Wales (1971) 125 CLR

J J Savage & Sons Pty Ltd v Blakney [1970] HCA 6; (1970) 119 CLR 435

Jandric v Jandric (1999) ANZ ConvR 614

KT & T Developments Pty Ltd v Richard Tay, Cotswold Holdings Pty Ltd (1995) 13 WAR 363

Lake Eerie Pty Ltd v Flair Realty Pty Ltd [1992] ANZ ConvR 627

Law Mortgagees Queensland Pty Ltd v Thirteenth Corp Pty Ltd [1999] VSC 360

Lewenberg & Pryles v Direct Acceptance Corporation Ltd [1981] VicRp 36; [1981] VR 344

Maddison v Alderson (1883) 8 App Cas 467

Maralinga Pty Ltd v Major Enterprises Pty Ltd [1973] HCA 23; (1973) 128 CLR 336

McBride v Sandland [1918] HCA 32; (1918) 25 CLR 69

McConville v Australian Telecommunications Commission (1991) NSW ConvR 55

Midland Brick Company Pty Ltd v Welsh [2002] WASC 248

NSW Medical Defence Union Ltd v Transport Industries Insurance Company Ltd (1986) 6 NSWLR 740

Porter v McDonald [1984] WAR 271

Re Stewart Fitzsimmons Projects Pty Ltd Caveat [1976] Qd R 187

Shepherd v The Council of the Municipality of Ryde [1952] HCA 9; (1952) 85 CLR 1

Walter v Handberg [2003] VSCA 122

1 JENKINS J: The plaintiff applies, pursuant to the Transfer of Land Act 1893, (WA) ("the Act"), s 138C for an extension of a caveat. The caveat, numbered I584816, was lodged by the plaintiff over the second defendant's land which is described as lots 18-36 on strata plan 36747 and being the whole of the land in certificates of title vol 2171 folios 818-836 ("the land"). The caveatable interest claimed by the plaintiff is as a "grantee of a restrictive covenant".

2 The second defendant denies the plaintiff has a caveatable interest in the land. Alternatively, if it is found that the plaintiff does have a caveatable interest, the second defendant contends that the balance of convenience lies in the removal of the caveat.

3 The first defendant abides the decision of the Court.

Objections to Evidence Filed in Support of the Application

4 The plaintiff relies upon a number of affidavits in support of the application. These include the affidavits of Norman Phillip Carey sworn 25 September 2003 and 31 May 2004. It also relies upon the affidavit of Graeme Rundle sworn 6 November 2003.

5 The second defendant objects to the affidavit of Mr Carey sworn 31 May 2004 and the affidavit of Mr Rundle on the basis that these affidavits were filed contrary to the orders of the court. In particular the affidavit of Mr Carey was sworn, filed and served on the Monday prior to the hearing of this matter on Wednesday, 2 June 2004.

6 However the second defendant did not seek an adjournment of this matter in order to meet the affidavit material. As I understand the second defendant's submissions it preferred to have the matter heard and determined as soon as possible.

7 Despite the late production of Mr Carey's affidavit, I am prepared to give the plaintiff leave to rely upon it. The weight that I give to the material in the affidavit takes into account that the second defendant has not had an opportunity to respond to it.

8 The second defendant also objects to the affidavit of Mr Rundle because it contains Mr Rundle's "understanding" of Mr Gamble's intentions rather than merely relating what Mr Gamble said and did.

9 In my opinion the affidavit is admissible as Mr Rundle's state of mind, even if unsupported by logic or fact, may help to explain why the plaintiff did or did not take certain actions. However, Mr Rundle's understanding of what Mr Gamble intended to do or not to do is of little weight in proving Mr Gamble's intentions. The second defendant had time to respond to Mr Rundle's affidavit but did not seek to do so.

10 The following facts are taken from affidavits filed by the parties. On 16 July 1999 the second defendant became the registered proprietor of Lot 589 Spinnaker Boulevard, Port Geographe, Busselton being all of the land comprised in certificate of title, vol 2149 folio 685 ("the Bijou Marina Village"). On the same date three mortgages were registered over the Bijou Marina Village. The first mortgage was in favour of the Bank of Western Australia Ltd ("Bankwest") ("the first mortgage"). The first mortgage was to secure moneys lent to the second defendant to enable it to purchase and develop the Bijou Marina Village. It provides that the second defendant may not, without Bankwest's prior consent, grant a covenant which affects or benefits the Bijou Marina Village. The first mortgage was signed on 15 July 1999.

11 On the same date the second defendant and the plaintiff entered into a contract for the sale of what later became lot 816 of the strata title development of the Bijou Village Marina ("the plaintiff's lot").

12 On 1 September 1999 the second defendant had registered strata plan 36747 over the Bijou Marina Village. As a result of the registration of the strata plan, certificate of title volume 2149 folio 685 was cancelled and new certificates of title were issued for each strata lot on the strata plan. Certificates of title volume 2171 folios 801-817 were issued for what became known as stage 1 lots and certificates of title volume 2171 folios 818-36 were issued for what became known as stage two lots. The stage two lots also comprise the land. The first mortgage was noted as registered on all the titles to the land.

13 On 27 October 1999 the plaintiff's wholly owned subsidiary, Westpoint Constructions Pty Ltd ("Westpoint Constructions") entered into a building contract with the second defendant to build units on any unsold stage one lots ("the building contract").

14 In late 1999, during negotiations over the building contract, Mr Bruce Monteath, a director of the second defendant asked Mr Norman Carey, the director of the plaintiff, whether Westpoint Constructions would be interested in undertaking the construction works required to build stage one and stage two of the strata title development of the Bijou Marina Village. Mr Monteath provided Mr Carey with copies of plans for stage one and stage two. Mr Carey's view is that the construction works and standard of construction for stage one and stage two were essentially the same and of a very high standard. Mr Monteath advised Mr Carey in words substantially to the following effect:

"Although Monteath Properties will commit to a construction contract for the completion of the construction works for stage one and two, it will be necessary for the stage one construction works to be completed first." ("the first representation")

15 At some point Mr Monteath asked Mr Carey whether he or a company associated with the plaintiff would be interested in purchasing one of the apartments to be built on the strata titled lots. Mr Carey deposes that the purchase of the plaintiff's lot came about as a consequence of this approach.

16 Mr Carey's affidavit says that in or about late 1999 he had a further conversation with Mr Monteath. He says that this conversation occurred before the plaintiff agreed to purchase its lot, although, as I will later explain, I do not know how this can be as the contract for sale of the plaintiff's lot is dated 15 July 1999. Mr Carey says that Mr Monteath said words to him to the following effect:

"The value of the stage one apartments will increase significantly once stage two and stage three are completed. As you have seen from the plans and sales materials, Monteath Properties will develop stage two and stage three to the same standard and complementary to stage one so as to make an extremely prestigious development and the completion of each stage will enhance the value of the apartment you or Westpoint Corporation purchases." ("the second representation")

17 The plaintiff says that as a consequence of the first and second representations, together with the substance of plans and other sales material provided to it by the second defendant, it was induced to purchase its lot.

18 The plaintiff says that the plans and other sales material provided to it were to the effect that stage one and stage two would be constructed to a similar and complementary standard. Samples of the written material are annexed to Mr Carey's first affidavit. These samples are dated 2 October 1998 and 2 December 1998 respectively ("the sample written material").

19 The sample written material shows a similar style of development for stages one and two, however they do not include details of the quality or standard of the proposed buildings and the stage one lots are with some exceptions, substantially bigger than the stage two lots. The strata plan shows that the stage two lots range in size from 94 square metres to 126 square metres. The stage one lots range in size from 108 square metres to 379 square metres. The lots adjacent to the plaintiff's lot range from 162 square metres to 166 square metres. The buildings on the stage one lots are depicted as semi-detached, whereas the buildings on stage two are depicted as fully detached. Further, on the document dated 2 October 1998 the stage two lots have been divided in half and named as stage two and stage three.

20 The stage one lots, including the plaintiff's lot, comprises one side of a marina. The stage two lots comprise another side of the marina. However, the two stages do not have an adjoined side. They are separated by what was a car park and a lane or path. The plans dated 2 October 1998 show the car park as a proposed tennis court and car park, whereas the sample plans dated 2 December 1998 show it as an existing car park. There is no evidence before me as to who owns that land.

21 On the sample written material there are two identical notes in the following terms:

"This drawing(s) is an indication only of the future possible development. Neither the vendor, the selling agent nor any other person involved in the preparation of the drawing(s) warrants the development will be implemented in accordance with the drawing(s) or information, nor shall be liable for any consequences, loss or damage (whether contractual, tortious or on any other basis) which may result from any person acting or relying upon the drawing(s)."

22 On 5 November 1999 the plaintiff's lot was registered in the plaintiff's name. The registered proprietors of sold stage one lots, including the plaintiff, entered into similar building contracts with Westpoint Constructions for the construction of similar residential units on their lots. The plaintiff built a house on its lot in accordance with the building contract.

23 The second defendant defaulted under the terms of the first mortgage. On 29 December 2000 receivers and managers were appointed over assets of the second defendant. On 19 January 2001 Bankwest appointed Mr Ronald Gamble, chartered accountant, as receiver and manager pursuant to the terms of the first mortgage.

24 Westpoint Constructions refused to deliver up possession of unsold stage one lots and the stage two lots because it alleged that it was owed arrears under the building contract. On 26 July 2000 the plaintiff and Westpoint Constructions lodged a caveat over the unsold stage one lots and the stage two lots and claimed to be equitable mortgagees of those lots as a consequence of a mortgage dated 26 April 2000. On 19 January 2001 Westpoint Constructions lodged a caveat over the unsold stage 1 lots as chargee under the building contract. On 8 March 2001 Mr Gamble caused the second defendant to commence an action in this Court seeking a declaration that the second defendant was entitled to possession of the unsold stage one lots and the stage two lots to the exclusion of Westpoint Constructions ("the possession proceedings"). On 10 April Mr Gamble also caused the second defendant to commence proceedings in this Court under the Act, s 138 seeking an order that Westpoint Constructions and the plaintiff either withdraw or remove the caveats that they had lodged. Both proceedings were settled between the parties prior to trial. The terms of the settlement between the parties were recorded in a deed of settlement and release ("the settlement deed") dated 8 October 2001. Clause 4.1 of the settlement deed expressly required Westpoint Constructions and the plaintiff to withdraw the caveats that they had lodged over the unsold stage one lots and the stage two lots and further provided in cl 4.2 that:

"Following the execution of this deed, each of Westpoint Constructions and [the plaintiff] must not lodge fresh caveats over [the unsold stage one lots and stage two lots] or any part of the [unsold stage one lots and stage two lots] or do anything which prevents, restricts or hinders:

(a) [Mr Gamble] from exercising his powers and discharging his duties in relation to the property; or

(b) [Bankwest] from enforcing the [Bankwest] mortgage."

25 Westpoint Constructions and the plaintiff withdrew their caveats. Mr Gamble then caused the construction of units on the unsold stage one lots to be completed and the lots to be marketed for sale. As of 24 October 2003, the date Mr Gamble swore his affidavit, in opposition to this application, two of the unsold stage one lots had since been sold. The cost of constructing and completing the units on the unsold stage one lots was approximately $3.24 million. Apparently no construction has taken place on the land, being the stage two lots.

26 In 2002 Mr Gamble decided to advertise the stage two lots for sale either as separate strata lots or as a single freehold lot. As a consequence of advice he received he came to the view that the stage two lots might offer a superior marketing proposition if they were sold as a single freehold lot. He set out to make arrangements to convert the stage two lots into a single freehold lot. His plan was for the second defendant to transfer the stage two lots to the strata company of the Bijou Marine Village as common property. This common property could then be transferred to a purchaser as a single freehold lot. Mr Gamble believed this plan to be consistent with the provisions of the Strata Titles Act 1985 (WA), ss 18 and 19.

27 In pursuance of his plan, on 11 June 2002 Mr Gamble caused a notice of extraordinary general meeting of the owners of the Bijou Marina Strata Plan 36747 ("the strata company") to be issued. The extraordinary general meeting was held on 26 June 2002. Mr Gamble chaired the meeting. Mr Graeme Rundle, the plaintiff's company secretary, represented the plaintiff which has an interest in the strata company by virtue of the ownership of its lot. The following resolution was passed at the meeting, without dissent:

"(i) That the survey-strata lots being Lots 18 to 36 [Stage 2 Lots] be converted into a common property lot [New Lot] and transferred to the Strata Company as trustee for Monteath Properties Pty Ltd (Receiver and Manager Appointed) [Monteath] with no monies payable.

(ii) That the Proprietors of Lots 1 to 17 [Stage 1 Lots] will each hold an interest in the New Lot on trust for the benefit of the owner of Stage 2 Lots, Monteath until the New Lot is at the election of Monteath either transferred to Monteath or to a third party.

(iii) (Subject to resolutions (i) and (ii) being passed and the conversion becoming effective), that the Strata Company as trustee for Monteath immediately transfers the New Lot to Monteath or if directed by Monteath transfer the New Lot to a third party.

(iv) That the Proprietors of the Stage 1 Lots and Strata Company acknowledge and agree that:

(A) no consideration is payable by the Strata Company on the transfer of the Stage 2 Lots to the Strata Company

(B) no consideration is payable to the Strata Company on the transfer of the New Lot to Monteath or to a third party if directed by Monteath

Monteath is entitled to all proceeds from the sale and transfer of the New Lot, and the Strata Company and the Proprietor of the Stage 1 Lots do not acquire a beneficial interest in the New Lot.

(v) The Strata Company is authorized to execute under the common seal of the Strata Company a transfer of land and all other documents including without limitation all consents, certificates and applications required under the Transfer of Land Act of the Strata Titles Act necessary for and incidental to:

(A) the conversion of the Stage 2 Lots into common property;

(B) the transfer of the New Lot to Monteath or direct to a third party purchaser (if required by Monteath).

(vi) Monteath is responsible for the costs and expense relating to conversion of the Stage 2 Lots and the creation of the New Lot and the transfer of the New Lot to Monteath or to a third party and at no cost to other existing owners, including no related increase in Strata levies."

28 This resolution was substantially in the same terms as the proposed resolution in the agenda sent with the notice of the meeting. Also included in the agenda was background information which stated:

"[The second defendant] may not proceed with the development of the stage two lots and may wish to amend the strata plan 36747 by converting the stage two lots into common property and creating a new single lot for the stage two lots and transfer the new lot 10 [the second defendant] or as it directs."

The last sentence of the above paragraph contains a typographical error. A plain reading of the paragraph suggest that the last half of that sentence should read: "transfer the new lot to [the second defendant] or as it directs".

29 Mr Rundle recalls Mr Gamble explaining the requirement for resolution 7.1.1 in the following manner:

"[Bankwest] will not itself develop or fund the construction of stage two. Accordingly it will be necessary to sell the stage two lot to a developer. As it may be more attractive to a developer to purchase one lot rather than 18 separate lots, it is proposed, if necessary, stage two be amalgamated into one single lot."

30 Mr Rundle deposes that at no time did Mr Gamble say that the new lot was to be sold as a single lot without any control in respect of the development of it. Mr Rundle says that from the explanation given by Mr Gamble he understood that the new lot was to be presented for sale to a developer on the basis that it would be developed in accordance with previous representations made in relation to the standard and complementary nature of any development on the stage two lots.

31 On 18 October 2002 Mr Gamble caused a notice of an extraordinary general meeting of the strata company to be held on 4 November 2002 to be issued. Mr Gamble was elected chairman of the meeting on 4 November 2002. The plaintiff did not send a representative to the meeting. Instead it appointed Mr Gamble as its proxy and directed him to vote in favour of all the resolutions outlined in the notice of the meeting. At the meeting, without dissent, and in substantial accordance with the proposed resolution sent with the agenda for the meeting a resolution was passed in the same terms as that passed on 26 June 2002.

32 In reliance on and following the approval of the strata company, Mr Gamble caused the Stage two lots to be advertised for sale by public tender in various newspapers. The advertisement said that the stage two lots were being offered for sale either as 19 vacant strata lots or a single freehold lot at the discretion of the tenderer.

33 On 16 January 2003 Mr Gamble caused the second defendant to enter into an agreement with Lowe Pty Ltd ("Lowe") whereby Lowe agreed to purchase all of the stage two lots as a single freehold lot.

34 On 2 May 2003 the second defendant and the owners of stage one lots, including the plaintiff, entered into a declaration of trust. The deed recited that the second defendant had agreed to sell the stage two lots to Lowe as a single green title lot. It further recited that the second defendant must transfer the stage two lots to the strata company as agent for the owners of the stage one lots ("the trustees"), which must then transfer the new lot, as a single green title lot, to Lowe, that transfer of the stage two lots to the strata company vested legal ownership of the land in the trustees and that they agreed to hold their interest in the land on trust for the second defendant. The trustees acknowledged and agreed that no beneficial interest in the land was to pass to the trustees pursuant to the declaration. The plaintiff, as one of the trustees, acknowledged that it would hold its interest in the land, on trust, momentarily, for the sole purpose of enabling the second defendant to transfer the land to Lowe as a single green title lot and that it did not receive any consideration for acting as trustee in accordance with the terms of the deed. The strata company entered into a similar deed on 28 April 2003.

35 In furtherance of his plan Mr Gamble attempted to obtain the consent of all the persons concerned to the transfer of the stage two lots to Lowe as a single freehold lot pursuant to the Strata Titles Act 1985 (WA), s 19(2). He obtained the consent of the mortgagee of the plaintiff's lot. The plaintiff had lodged caveats over two of the sold stage one lots as a chargee under a building contract between the registered owners and it dated 29 October 1999. Mr Gamble attempted to obtain the plaintiff's consent to the transfer of those lots. The plaintiff refused to provide that consent without offering any written explanation. Settlement of the contract of sale with Lowe was delayed as a consequence of the plaintiff's refusal to provide its consent. Subsequently the proprietors of those lots discharged their liability to the plaintiff and the plaintiff withdrew its caveats on 11 August 2003.

36 On 8 August 2003 the plaintiff lodged the caveat the subject of this proceeding. As I have already stated the caveat is over lots 18-36 inclusive on strata plan 36747 or, in other words, the stage two lots. The estate or interest being claimed is that of a "grantee of a restrictive covenant". The plaintiff claims this estate by virtue of the grounds set out in a statutory declaration of Mr Carey dated 29 August 2003. That statutory declaration is referred to in the caveat. The caveat forbids the registration of any interest affecting the estate or interest unless such instrument be expressed to be subject to the caveator's claim.

37 The statutory declaration of Mr Carey recites background facts consistent with the earlier paragraphs of this judgment. It alleges that "in or about late 1999 and before [the plaintiff] agreed to purchase [its lot]" Mr Monteath made the second representation. The first representation is declared also to have been made subsequent to an approach by Mr Monteath to Mr Carey "in late 1999".

"(h) Westpoint Corporation was induced to purchase Apartment 16 in Stage 1 of the development on the basis of the representations made by Monteath Properties:

(i) from the plans and other sales material provided being to the effect Stage 1 and Stage 2 (and Stage 3) would be constructed to a similar and complementary standard;

(ii) that Stage 1 and Stage 2 would be of a similar and complementary standard and, accordingly, once both were completed they would enhance the value of the apartments in the whole development."

39 The statutory declaration asserts that the representations referred to in (h), (i) and (ii), constitute collateral contractual warranties pursuant to which the second defendant agreed it would fulfil the warranties if the plaintiff or Mr Carey purchased a stage one lot. It asserts that in these circumstances the plaintiff is entitled to an order under the Trade Practices Act 1974 (Cth) or Fair Trading Act 1987 (WA) requiring the second defendant to register on the title to the land a restrictive covenant to the effect that the development of stage two is restricted to being developed to a similar or complementary standard with stage one. Alternatively it asserts that the plaintiff is entitled to an order for specific performance of the warranties requiring the second defendant to register a restrictive covenant in the same terms.

40 Mr Gamble was unsuccessful in persuading the plaintiff to withdraw the caveat. Consequently, the second defendant requested the first defendant to serve the plaintiff with a notice to the effect that unless the plaintiff took action to obtain an order from this Court extending the operation of the caveat, the caveat would lapse. The plaintiff then commenced these proceedings.

41 The plaintiff has received a letter, dated 17 March 2004, from the Shire of Busselton enclosing an application to amend District Town Planning Scheme No 20 for rezoning of the proposed new single lot from residential density specification R20 to residential density specification R40. The Court has no further information regarding this application and, in particular, whether the plaintiff has objected to the rezoning. In approximately March 2004 Mr Carey attended a meeting of the strata company at which, he deposes, the proprietors of the stage one lots were advised that Lowe had prepared a new development application for the land. Mr Carey is of the view that this means that there is likely to be a significant increase in the number of apartments to be built upon the land and a potentially significant reduction of the open space and amenities compared to the original plan. However, there is no evidence before the Court as to this new development plan.

42 Mr Carey has annexed a draft writ of summons, including a statement of claim against the first and second defendants, to his affidavit sworn 31 May 2004. It seeks rectification of the contract of sale of the plaintiff's lot to include as written terms the following representations:

(a) the second defendant would develop the strata lots contained in the stage one lots as an extremely prestigious development with building works of a very high standard;

(b) the second defendant would develop the lots within the stage two lots to a commensurate and complementary standard to the stage one lots;

(c) the development of the stage one lots and the stage two lots would be in conformity with the plans and other sales and marketing material provided to the plaintiff by the second defendant;

(d) as a result, the development of the stage one lots and stage two lots would enhance the value of the plaintiff's lot.

43 Alternatively it pleads that these representations constitute collateral contractual warranties. It further seeks a declaration that the plaintiff is entitled to have the first defendant register on the certificates of title for each of the stage one lots and the land a restrictive covenant to restrict the Bijou Marina Village being developed other than in accordance with the express covenants contained in the contract of sale of the plaintiff's lot and the representations referred to in the previous paragraph. The express terms relied upon are as follows:

(a) the plaintiff would enter into a building contract with Westpoint Constructions for Westpoint Constructions to build on the plaintiff's lot a house in accordance with the specifications and finishes specified in the building contract;

(b) the second defendant would ensure that similar building contracts as entered into by the plaintiff would be entered into by the purchasers of each other strata lots of the Bijou Marina Village;

(c) the second defendant would enter into a building contract for building works to be undertaken to construct and add finishes pursuant to agreed plans and specifications to all common property within the Bijou Marina Village.

44 The statement of claim also seeks an injunction to restrain the second defendants from acting in breach of the express covenants, or representations. No remedies are sought under the Trade Practices Act 1974 (Cth) or the Fair Trading Act 1987 (WA). The express terms contained in the contract of sale of the plaintiff's lot are not relied upon in the caveat or Mr Carey's statutory declaration. Consequently they cannot be the basis of this application for extension of the caveat.

Principles Governing the Extension of Caveats

45 In Hamdan v Widodo & Anor [2004] WASC 123, I have recently stated the principles relating to the extension of caveats. In that case, at [17] - [19], I said:

"Section 137 of the Act enables a person claiming any estate or interest in land to lodge a caveat forbidding the registration of any dealing affecting the claimed estate or interest. The purpose of a caveat is to act as a statutory injunction to the Registrar General 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 or she may have against any person lodging a dealing for registration: J & H Just (Holdings) Pty Ltd v Bank of New South Wales [1971] HCA 57; (1971) 125 CLR 546 at 552 per Barwick CJ.

In 1996 the Act was amended to provide that the proprietor of land in respect of which a caveat has been lodged may apply for the caveator to be served with a notice to the effect that unless the caveator applies to extend the operation of the caveat it will lapse within 21 days. Section 138C of the Act provides that on the hearing of such an application this Court, if satisfied that the caveator's claim has or may have substance, may, amongst other things, make an order extending the operation of the caveat.

It is clear from the statutory scheme that in an application under s 138C of the Act the onus is upon the caveator to satisfy the court that the caveator's claim has or may have substance. This has been interpreted as an onus to satisfy the court that there is a serious question to be tried as to whether a caveatable interest exists. The caveator must also satisfy the court that the balance of convenience favours the retention of the caveat. However, if there is a serious question to be tried it will be unusual for the balance of convenience to lie in the refusing of an application to extend a caveat: Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42."

46 Contrary to what I have previously held, the plaintiff submits that the test is not whether there is a serious question or issue to be tried. In support of its submission it relies upon the dicta in Halse v Embling, unreported; FCt SCt of WA; Library No 970734; 22 December 1997. That case is not authority for the proposition that the test is other than whether there is a serious question to be tried. Halse's case discusses the meaning of the phrase "serious issue to be tried" but I do not read it as suggesting that there is another test.

47 As to the meaning of the phrase "serious issue to be tried" Parker J in Halse's case, in the context of an application under the Act, s 138 said:

"While the analogy with an interim injunction may be convenient and useful, it is to be observed that for present purposes the issue arises precisely in the context of a statutory scheme which enables a caveat to be lodged if supported by a declaration which identifies a caveatable interest, with an interim safeguard provided by s138 by which the caveator may be summoned to show cause before a Judge why the caveat should not be removed. But if the caveator is able to show an arguable case of a caveatable interest, the ordinary course is for the caveat to remain and the disputed question to be left for trial in the ordinary way. In this context it would appear to me that while the process of judicial enquiry on a s138 application may parallel in many respects that appropriate to the question whether an interim injunction might issue, there is reason to think that the degree of persuasion necessary to demonstrate an arguable case will not be as high as is appropriate for at least some types of alleged right for which interim relief by way of injunction might be sought.

Subject to the views just expressed, it seems clear from the authorities that a caveator's claim must, in fact and law, be more than merely frivolous or vexatious and it must be made to appear from evidence led before the Judge on the s138 application, that the plaintiff might ultimately succeed in establishing the interest on which the caveat purports to be founded."

48 Although these comments were made in the context of an application under the Act, s 138, which places the onus on the caveator to show cause why a caveat should not be removed, I see no reason why the same principles would not be applicable to an application pursuant to the Act, s 138C, which gives the court a discretion to extend a caveat if the court is satisfied that the caveator's claim has or may have substance.

Principles Relating to the Existence of Restrictive Covenants

49 I will discuss the relevant principles relating to restrictive covenants before dealing with specific issues raised in this case.

50 At common law the benefit of a covenant, whether positive or negative, made with a coventee having an interest in land to which it relates runs with the land but the burden of a covenant does not, except in the case of a lease. However equity recognises the burden of a covenant or promise, given for the benefit of other land will run with the land provided that certain conditions are satisfied. This is called a restrictive covenant.

51 From its terms one of the conditions is that a covenant must be restrictive or negative. In the historic decision of Tulk v Moxhay (1848) 41 ER 1143 the relevant covenant contained both positive and negative elements. In Austerberry v Corporation of Oldham (1885) 49 JP 532 the English Court of Appeal decided that the Tulk v Moxhay doctrine did not apply to positive covenants which did not run with the land at law. The High Court in Forestview Nominees Pty Ltd & Silkchime Pty Ltd v Perpetual Trustees WA Ltd [1998] HCA 15; (1998) 193 CLR 154 said that the Act, s 129A, accommodated the principle of indefeasible title by registration and the equitable doctrine from Tulk v Moxhay. Section 129A(1) states:

"(1) Restrictive covenants may be created and made binding in respect of land under this Act so far as the law permits by instruments in an approved form, but no such covenant affecting land subject to a mortgage or charge shall be registered unless the mortgagee or annuitant has consented in writing thereto prior to the same being registered."

52 In order to determine whether a covenant is negative or positive it is necessary to look at the substance of the promise not its wording: Shepherd Homes Ltd v Sandham (No 2) [1971] 2 All ER 1267 per Megarry J. A negative covenant is one that restrains a person from dealing with his or her land in a certain way.

53 Thus, in Pirie v The Registrar General [1962] HCA 58; [1963] 109 CLR 619 at 625 - 626 Kitto J was of the view that clauses that stipulated that all buildings erected on the land should be detached or semi-detached, that the buildings should cost at least a specified sum, that there be no more than one main building on the land and that the buildings not be used for certain purposes were restrictive in nature. This was because the covenants did not require, in form and substance, the doing of anything upon the land which required the expenditure of money. Whereas his Honour was of the view that clauses requiring the land to be fenced and built on within a certain time were positive in nature and therefore unenforceable. Kitto and Owen JJ (who agreed with Kitto J) expressed these views. The remaining three justices did not have to decide this point.

54 The requirement for negativity has been partially overcome in respect to strata title developments by legislation. For example, the Strata Titles Act 1985 (WA), s 5C allows for a management statement containing by-laws and s 5D allows for the creation of easements on a strata plan. By-laws and easements can contain some forms of positive covenants. However neither device was used in this case to accommodate what the plaintiff asserts were the covenants between it and the second defendant.

55 The plaintiff submits that any requirement of equity for the covenant to be negative in nature has been modified by the Property Law Act 1969 (WA), s 49 which states:

(1) It is hereby declared that when the benefit of a restriction as to the user of or the building on any land is or has been annexed or purports to be annexed by any instrument to other land the benefit shall, unless it is expressly provided to the contrary, be deemed to be and always to have been annexed to the whole and to each part of that other land capable of benefiting from the restriction.

(2) In this section 'land' includes land that is under the provisions of the Transfer of Land Act 1893."

56 The English equivalent to this section was considered in Rhone v Stephens [1994] UKHL 3; [1994] 2 AC 310 and the English Court of Appeal determined that, subject to an exception which was not argued before me, the provision did not alter the law which was that equity would enforce negative covenants but has no power to enforce positive covenants.

57 Although the issue has not been authoritatively considered in Australia I see no reason to differ in view from that expressed in Rhone v Stephens (supra). This is especially as the High Court in Forestview v Perpetual Trustees (WA) (supra) at 160 endorsed the statement by Kitto J in Pirie v The Registrar General (supra) at 628 that:

"It is basic to the doctrine of Tulk v Moxhay that it applies only to a restriction created to preserve the value of other land, and that the restriction is not enforceable against derivative owners except for the protection of that other land."

58 The other relevant aspect of a restrictive covenant is that it must be expressed in writing. This is clear from the Act, s 129A(1). Also relevant to this requirement is the Property Law Act 1969 (WA), s 34(1)(a) which states:

(1) Subject to the provisions hereinafter contained in this Act with respect to the creation of interests in land by parol ¾

(a) no interest in land is capable of being created or disposed of except by writing signed by the person creating or conveying the interest, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law."

59 The plaintiff submits that despite the lack of writing, equity would recognise and enforce the agreement to create the covenant because it has fulfilled its obligations under the agreement by entering into the agreement to purchase its lot and then building a house to the required standard on it.

60 There is no need for me to go into the details of the doctrine of part performance as the second defendant does not dispute these principles. However the second defendant says that no order for specific performance which required it to register an instrument creating a restrictive covenant could be made because such registration requires prior written consent of Bankwest, pursuant to the Act, s 129A(1) and Bankwest has deposed that it would not consent.

61 The plaintiff also submits that the law of estoppel would apply to estop the second defendant from seeking to avoid its obligations under the covenant: Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 at 431-433, 445-446. Again it is not necessary for me to go into details with respect to the principles of the law of estoppel. The second defendant says that if the relevant principles applied it would prevent it from denying that there was a valid agreement to grant a restrictive covenant. It says that it would not mean that specific performance would be ordered to require the registration of an interest which affects Bankwest's interest.

62 There was a general issue between the parties as to whether Bankwest took its interest subject to notice of the alleged restrictive covenant. I should decide this matter on the basis of the evidence before me. There is no evidence that Bankwest was aware of the alleged restrictive covenant at the time of the registration of the first mortgage.

63 Whilst it is for the plaintiff to satisfy me that the caveat should remain, it is easiest for me to deal with this matter by reference to the second defendant's objections to the application.

Alleged representations made after date of contract of sale for plaintiff's lot

64 Before I deal with the issues raised by the second defendant there is one issue which was not relied upon by the second defendant but which I believe is of some moment. It is that the plaintiff's case is based on an assertion that the first and second representations induced the plaintiff to enter into the contract to purchase its lot on 15 July 1999. By no stretch of the imagination could mid-July be described as late 1999. Yet, the statutory declaration made by Mr Carey in support of the caveat and the affidavits filed by Mr Carey in support of this application all refer to the representations being made in late 1999. It is only the draft statement of claim annexed to the latest affidavit of Mr Carey that does not refer to "late 1999" but says that the oral representations were made prior to the plaintiff entering into the contract. In my opinion I should not put any weight to the draft statement of claim in light of the statutory declaration and affidavit material that has preceded it.

65 I do not understand how post contract representations can be said to have induced the plaintiff to enter into the contract of 15 July 1999. No attempt was made at the hearing of this matter to explain the inconsistency in the dates or to explain why par 9 of the draft statement of claim annexed to Mr Carey's affidavit sworn 31 May 2004 appears to depart from the earlier material. Yet I feel that it is a matter that the plaintiff and its solicitors must have been aware of given its significance to the plaintiff's case and the fact that the statement of claim does not refer to "late 1999". On this basis alone I would be prepared to find that there is no serious issue to be tried. However, because I did not have the benefit of the parties' submissions on this point, I will consider the objections raised by the second defendant.

66 The first matter raised by the second defendant is that the disclaimers written on the sample written material provided to Mr Carey by the second defendant clearly state that the sample written material was an indication only of future possible development and that the second defendant did not thereby warrant that the development would be implemented in accordance with that material.

67 The plaintiff submits that the disclaimers were not intended to release the second defendant from liability should there be a radical or total change in the plans such that the depiction in the plans would not occur at all but would be replaced by a totally different development proposal.

68 I do not believe that the argument of the plaintiff in this respect is tenable. The words of the disclaimer are clear and there is nothing in them to indicate that they were intended to cover only minor discrepancies in the fulfilment of the depiction in the plans.

69 The plaintiff also relies upon the case of IOOF Australian Trustees (NSW) Ltd v Tantipech [1998] FCA 924; (1998) 156 ALR 470 at 475, 478-480. However, the IOOF case is not of assistance to the plaintiff. It and the case referred to in it, are authorities for the proposition that where an agreement is obtained by misrepresentation, a disclaimer or exclusion clause in the document itself containing the agreement cannot bar the claim. This is not a case where the disclaimer was contained in a document or in the terms of an oral agreement by which the restrictive covenant is said to have been created. Rather the disclaimer is on the very document which is said to be the representation. The presence of the disclaimer on that document affects and diminishes the status of the sample written material.

70 Further, I note that the principle enunciated in the IOOF case is in relation to actions under the Trade Practices Act 1974 (Cth). No such action is contained in the draft statement of claim annexed to the most recent affidavit of Mr Carey. Neither did the plaintiff, in this application, attempt to support its claim to a restrictive covenant by relying upon alleged rights in the Trade Practices Act, 1974 (Cth).

71 Lastly, as I have already noted the sample written material shows the development on the land in very general terms. The generality of the material is such that of itself it does not support the proposition that the parties intended that the land would be developed "to a similar or complementary standard with stage one" as alleged in the statutory declaration supporting the caveat.

72 Thus I am not satisfied that the plaintiff has proved that the sample written material is evidence of itself sufficient to show that the plaintiff's claim has or may have substance.

73 The next matter raised by the second defendant is that even if Mr Monteath's oral statements were representational and/or contractual they imported a positive obligation to develop the land to a standard conforming to the stage one development. Thus they are not in the nature of a negative or restrictive covenant.

74 It is important in this respect to look at the nature of the restrictive covenant alleged by the plaintiff. A person searching the title to the land should be able to look at the caveat and the statutory declaration supporting it to ascertain the substance of the interest claimed by the plaintiff. Relevantly, the statutory declaration states that the plaintiff is entitled to a restrictive covenant to the effect that the development of stage two is restricted to being developed to a similar or complementary standard with stage one.

75 The affidavit of Mr Carey sworn 25 September 2003 at par 7(l) is to the same effect. The nature of the restrictive covenant pleaded in the draft statement of claim is a lot more extensive but is also expressed as a restriction on the style of development.

76 In my opinion, the restrictive covenant so expressed is negative in nature. It does not require the expenditure of money on the land or the performance of particular acts. There is nothing in the restrictive covenant that is proposed that would require the land to be developed. Only if it was to be developed it would have to be developed as stage one.

77 However, the representations upon which the plaintiff relies to create the restrictive covenant are positive in nature. If these representations were relied upon for the proposition that the restrictive covenant requires the second defendant to develop the land or requires it to ensure that it is developed in accordance with the standards of stage one then I would regard this as being a positive covenant and one that could not be recognised by the principles relating to restrictive covenants.

78 On the basis that that is not what the caveat claims the plaintiff to be entitled to I would not be prepared to find that the plaintiff's claim does not have substance because the alleged restrictive covenant is positive as opposed to negative in character. However, it is a moot point whether a caveator can turn positive assertions into a restrictive covenant in this manner.

79 Another submission made by the second defendant is that the alleged restrictive covenant is void because it is not in writing.

80 The sample written material is in writing but for the reasons given earlier, in my opinion, it does not give rise to a serious issue to be tried as to the existence of a caveatable interest in the land.

81 There is no doubt that the general requirement is that a restrictive covenant must be created by an instrument in writing. Disregarding the sample written material, the other representations relied upon by the plaintiff are not in writing and thus, on the face of it, the plaintiff's claim does not and could never have substance.

82 The plaintiff seeks to overcome this impediment by relying upon various remedies.

83 The plaintiff's case contained in the statutory declaration made in support of the caveat, is that the first and second representations constitute collateral contractual warranties which the second defendant said it would fulfil if the plaintiff purchased its lot. In these circumstances the plaintiff says that it is entitled to orders under the Trade Practices Act 1974 (Cth) or the Fair Trading Act 1987 (WA) to register a restrictive covenant on the title to the land. This latter assertion was not relied upon by the plaintiff at the hearing and therefore I need not deal with it.

84 Alternatively the plaintiff says, in the statutory declaration, that it is entitled to "an order for specific performance of the warranties requiring [the second defendant] to register a restrictive covenant".

85 The difficulty with this claim is that the representations or warranties relied upon are all positive in nature. On the most beneficial reading of the statutory declaration it is not alleged that the second defendant represented that it would create a restrictive covenant restricting development of the land to a similar or complementary standard to stage one. Rather it is alleged that the second defendant said that it would develop the stage one and stage two lots to a certain standard and that once the development was completed it would enhance the value of the whole of the development. An order for specific performance of these warranties or representations would be an order requiring the second defendant to carry out the development to the required standard, as it allegedly promised it would; Goldsbrough Mort & Co Ltd v Quinn [1910] HCA 20; (1910) 10 CLR 674 at 697. I cannot foresee that a court would order specific performance by requiring the second defendant to execute a restrictive covenant to restrict the nature of the development on the land, when it did not represent or warrant that it would create such a restrictive development.

86 In the plaintiff's draft statement of claim it puts its case rather differently. There is a pleading that the second defendant is estopped from denying that the plaintiff is entitled to have a restrictive covenant registered over both the stage one and stage two lots, a claim for rectification of the building contract to include the terms of the first and second representations and the sample written material, a claim for a declaration that the plaintiff is entitled to have the first defendant register a restrictive covenant over the stage one and stage two lots and an application for an injunction preventing the second defendant from acting in breach of the terms of the first and second representations and the sample written material.

87 It does not seem to me that I should have regard to these claims. The caveat and the supporting material filed with it should mention definitely or explicitly the nature of the estate or interest claimed in the caveat: Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22; (1992) 174 CLR 407. Consequently it is not appropriate for me to have to have regard to external material to understand the nature of the plaintiff's claim, particularly where that material asserts a different legal basis for the interest claimed.

88 However, if I am wrong in this view, it seems to me that another difficulty the plaintiff has is that the claim in the statutory declaration for specific performance and the claims in the draft statement of claim are not caveatable interests.

89 In Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409 at 425 Bryson J, after detailed analysis of the relevant authorities said:

"... a mere equity, meaning a claim to have an equitable interest which can only be enforced by succeeding in some claim to a court for equitable relief (such as a claim for rectification or ... (as I think) a claim the enforcement of which depends upon the doctrine of part performance), does not participate in competitions of priorities with equitable interests which have been acquired in good faith, for valuable consideration and in a manner which can be clearly shown without obtaining any decision of the court upholding them."

90 I would respectfully agree with his Honour's conclusion. However, I acknowledge that it is a different question as to whether "a mere equity" in the above sense, is an equitable estate or interest that can be protected by a caveat.

91 There is a thorough discussion of the authorities as to whether a restrictive covenant is a caveatable interest in Bradbrook A & Neave M, "Easements and Restrictive Covenants in Australia", 2nd ed, Butterworths 2000 at [17.24] - [17.34]. The conclusion of the authors is that under the general law a restrictive covenant is a caveatable interest. However there are authorities to the contrary. In Western Australia, given the statutory provisions in the Act, ss 1-9A and Pt IVA, it is probably beyond doubt that a restrictive covenant is a caveatable interest. Clearly that conclusion does not settle the question as to whether "a mere equity" or, in other words, a claim to have an equitable interest which can only be enforced by succeeding in an action for rectification or some other equitable relief is an "estate or interest" in the land that has or may have substance. This being the issue for me pursuant to the Act, ss 137 and 138C. Insofar as my discretion to extend the caveat is grounded upon me being satisfied that the caveator's claim has or may have substance, I interpret this as requiring me to be satisfied that the caveator's claim that it presently has an equitable interest, has or may have substance. I do not regard it as sufficient for the caveator to satisfy me that its claim to have an equitable interest has substance or may have substance, if at some future time a court rectifies a contract or otherwise provides some relief to the caveator. To hold otherwise would blur the distinction between a proprietary interest in land and the ability to invoke the assistance of equity in proceedings concerning land: Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] VicRp 47; [1994] 1 VR 672 at 681.

92 It is clear to me, on the basis of the principles discussed in the Double Bay Newspaper's case and the Swanston Mortgage case, that the plaintiff does not presently have an estate or interest in the land. This is because there is no document creating a restrictive covenant. For the reasons previously given the sample written material does not create a restrictive covenant. Neither does the contract for sale and purchase of the plaintiff's lot create such a restrictive covenant of the nature claimed by the plaintiff. To the extent that the plaintiff relies upon oral representations, the plaintiff has or may have a mere equity. The plaintiff's submissions in reply to the second defendant's submissions, in effect, concede that it requires relief from a court to establish the existence of a restrictive covenant. Without that relief it does not have or possibly have an equitable interest in the land that is able to be protected by a caveat.

93 Another submission made by the second defendant is that the plaintiff's alleged interest in the land cannot prevail over the interests of Bankwest, being the registered first mortgagee, when there is no evidence that Bankwest took its interest with notice of the plaintiff's claim and the first mortgage was registered years before the caveat was lodged.

94 The chronology shows that the first mortgage was signed on 15 July 1999 and registered on 16 July 1999. The contract for sale of the plaintiff's lot was entered into on 15 July 1999. The restrictive covenant which the plaintiff claims, has never been registered and was the subject of a caveat for the first time on 8 August 2003.

95 The plaintiff's reply to the second defendant's submission is that Bankwest's due diligence prior to entering into the mortgage would have discovered the contract to purchase its lot. It says that Bankwest must have had notice of the restrictive covenant and that on the basis of such notice the first mortgage would be subject to the alleged restrictive covenant.

96 In this respect it says that by an order of the court it was not permitted to obtain discovery from Bankwest which discovery it says, may establish that Bankwest took the first mortgage with notice.

97 The first thing I note is that the current state of the evidence does not disclose that Bankwest had notice of the contract for sale of the plaintiff's lot as at 15 or 16 July 1999. Secondly, I note that even if Bankwest did take the mortgage with notice of the contract there is no evidence that it had notice of the alleged restrictive covenant which is not contained within the express terms of the contract. Thirdly, I reject the plaintiff's submission that it is entitled to maintain a caveat in the hope that third party discovery, which it may be able to obtain in subsequent litigation, may reveal evidence to support its priority and that equity may intervene to create a restrictive covenant and its priority over the first mortgage. Its obligation is to persuade me that there is a serious issue to be tried on the basis of the evidence before me.

98 The Act, s 68 states that except in the case of fraud and some exceptions which are not relevant, a proprietor of any estate or interest in land under the Act holds its interest subject only to such encumbrances as are notified on the registered certificate of title but free from all other encumbrances whatsoever. The term "proprietor" is defined to include a mortgagee in relation to freehold land. The term "encumbrances" is defined to include all prior estates, interests, rights, claims and demands which can or may be had made or set up in to upon or in respect of land.

99 In Leros Pty Ltd v Terara Pty Ltd (supra) at 418, Mason CJ and Dawson and McHugh JJ said, after referring to a quote from a text book:

"This passage supports the view that the effect of the registration of a subsequent dealing bringing about the registration of proprietorship of an estate or interest in land is to extinguish all prior unregistered estates or interests which, but for that registration, would have conflicted with the proprietor's estate or interest or encumbered that estate or interest, unless the prior unregistered estate or interest falls within the exceptions to indefeasibility of title mentioned in s 68. In other words, a person seeking to preserve an unregistered interest not falling within those exceptions must register that interest in advance of the registration of a subsequent inconsistent dealing or prevent such registration by caveat or otherwise, and thereby enable registration of the unregistered interest. Once that interest is defeated by registration of a subsequent inconsistent dealing bringing about the registration of a new proprietor, the first interest is extinguished for all purposes and cannot be asserted against any later proprietor. The first interest does not become an inchoate interest capable of being asserted against a later proprietor or an interest which remains in suspension so that it is capable of subsequent revival against such a proprietor."

100 This authoritative statement appears to settle this issue in favour of the second defendant. There is no suggestion that Bankwest took its interest as a consequence of fraud. Consequently once Bankwest registered the first mortgage free of the alleged restrictive covenant it was entitled to exercise its rights under the first mortgage also free of the alleged restrictive covenant. The alleged restrictive covenant cannot now be asserted against it or any later proprietor.

101 The allegation that the priority of registration of the first mortgage can be defeated if the plaintiff could prove that Bankwest had prior notice of the plaintiff's alleged restrictive covenant seems to rest on a submission that because of such notice equity would intervene to give the plaintiff's interest priority. The second defendant submits that equity cannot overcome the requirement of the Act, s 129A(1) that requires Bankwest's consent in writing prior to the registrations of a restrictive covenant or the Act, s 68 giving Bankwest priority over any unregistered interest in the land. Whatever be the strengths of the second defendant's submissions in these respect I am of the view that for the three reasons given earlier in this section the plaintiff has not established that there is a serious question to be tried that it has or may have an equitable interest that has priority over Bankwest's interest in the land.

102 For the foregoing reasons I am not satisfied that the plaintiff's claim has or may have substance or in other words I am not satisfied that there is a serious question to be tried as to whether a caveatable interest exists.

103 The second defendant also submits that even if there is a serious question to be tried the balance of convenience lies in refusing the application to extend the caveat because of the plaintiff's delay in lodging the caveat and pursuing its claim, the second defendant's contractual obligation to Lowe and the financial penalty it is suffering through not being able to mitigate its loss under the first mortgage. In light of the conclusions that I have reached it is unnecessary for me to determine where the balance of convenience lies. However, for the sake of completeness I will express my views about this issue.

104 The chronology shows that in late 1999 oral representations were made to Mr Carey. The plaintiff says that these oral representations induced the plaintiff to enter into a contract to purchase its lot on 15 July 1999. During the course of these proceedings no attempt was made by the plaintiff to clarify how that could logically be the case.

105 The plaintiff did nothing to protect its alleged restrictive covenant until August 2003, that is four years after the representations were made. In the meantime, the plaintiff agreed, by the settlement deed, not to lodge fresh caveats over the titles to the land and not to hinder the receiver from exercising his powers of sale under the first mortgage. Further, the plaintiff participated, to the extent of voting in favour of, the amalgamation of the land into the new lot for the purpose of sale to a single purchaser. It is not alleged, on behalf of the plaintiff, that anything was said by the second defendant or Mr Gamble to the effect that that new lot would be subject to the plaintiff's alleged restrictive covenant. Nonetheless the plaintiff endorsed Mr Gamble's plan to proceed to sell the new lot to a single purchaser.

106 As it was entitled to, given the support of the plaintiff and others with an interest in the Bijou Marina Village, the second defendant, by its receiver, entered into a contract to sell the new lot, free of the alleged interest of the plaintiff, in order to mitigate its substantial and growing losses under the first mortgage.

Westpoint Corporation Pty Ltd v The Registrar of Titles & Anor [2004] WASC 189

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Judgment (210 paragraphs)

Westpoint Corporation Pty Ltd v The Registrar of Titles & Anor [2004] WASC 189 (30 August 2004)

Alleged representations made after date of contract of sale for plaintiff's lot

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Legislation Cited (5)

Cases Cited (20)