Quadramain Pty Ltd v Sevastapol Investments Pty Ltd [1976] HCA 10; (1976) 133 CLR 390 (19 March 1976)

HIGH COURT OF AUSTRALIA

QUADRAMAIN PTY. LTD. v. SEVASTAPOL INVESTMENTS PTY. LTD. [1976] HCA 10; (1976) 133 CLR 390

Restraint of Trade

High Court of Australia
Barwick C.J.(1), McTiernan(2), Gibbs(3), Stephen(4), Mason(5), Jacobs(6) and Murphy(7) JJ.

CATCHWORDS

Restraint of Trade - Restrictive covenant running with land - Tulk v. Moxhay - Whether restraint of trade doctrine applies - Whether doctrine applies as between assigns of covenanting parties - Whether "contract in restraint of trade or commerce" within s. 45(1) of Trade Practices Act (Cth) - Whether section applies to equitable or other non-contractual proprietary rights - Significant effect on competition between parties to contract or on competition between those parties or any of them and other persons - No effect on competition where neither party to restrictive covenant retains interest in lands affected by covenant - Trade Practices Act 1974 (Cth), s. 45(1), (4).*

* Section 45 of the Trade Practices Act 1974 (Cth) provides, so far as is material: "(1) A contract in restraint of trade or commerce that was made before the commencement of this sub-section is unenforceable in so far as it confers rights or benefits or imposes duties or obligations on a corporation ... (4) A contract, arrangement or understanding that is not of the kind referred to in sub-section (3) is not in restraint of trade or commerce for the purposes of this Act unless the restraint has or is likely to have a significant effect on competition between the parties to the contract, arrangement or understanding or on competition between those parties or any of them and other persons."

HEARING

Sydney, 1975, November 26; 1976, March 19. 19:3:1976
CAUSE removed pursuant to s. 40A of the Judiciary Act 1903-1975 (Cth).

DECISION

1976, March 19.
The following written judgments were delivered:-
BARWICK C.J. I have has the advantage of reading the reasons for judgment the order sought by par. 1 of the plaintiff's summons should be made. (at p394)

2. I would do so for the single reason that no restraint of trade is involved, as between the parties to this case, in the restrictive covenant noted on the relevant certificate of title. The first named defendant, Sevastapol Investments Pty. Ltd., was not a party to that covenant or a privy of the actual covenantor. The land which the second named defendant, Metropolitan Investments Pty. Ltd., acquired by transfer from the then registered proprietor was at the time of acquisition subject to the covenant. The second named defendant's purchase was made subject to the covenant. The conclusion of the House of Lords in Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd. [1967] UKHL 1; (1968) AC 269 supports the conclusion that an existing covenant, to which the purchaser of the land subject to the covenant is not a party or a privy, is not a contract in restraint of trade. For my part, I prefer the reasoning of the majority for that proposition. It seems to me certain and free of ambiguity. Its application should not give rise to any difficulty. (at p394)

3. Being clearly of this opinion, I have no need to consider other questions which might have arisen had I taken a different view to that which I have indicated. Some of them have engaged the attention of my brother Gibbs but upon them I express no opinion. (at p395)

McTIERNAN J. The plaintiff is a company incorporated in New South Wales and is the registered proprietor of all the land comprised in certificate of title, vol. 11125 fol. 59, being lot 1 in deposited plan no. 537116, "the benefited land". The second defendant, Metropolitan Investments Pty. Ltd. is the registered proprietor of all the land comprised in certificate of title, vol. 11125 fol. 60, being lot 2 in deposited plan no. 537116, "the burdened land". By memorandum of transfer no. L554911 dated 22nd August 1969 Berowra Heights Hotel Pty. Ltd. transferred all its estate and interest in the burdened land to Holloway Sackville (Australia) Pty. Ltd. subject to the following covenant:-

"(b) The Transferee for itself and the owners and occupiers
for the time being of the land hereby transferred and
any building or buildings which for the time being are erected
thereon covenants with the Transferor and the owner and
occupier for the time being of Lot 1 Deposited Plan 537116
that the land hereby transferred and any building for the
time being erected thereon will not be the subject of any
application conditional or otherwise to the Licensing Court
or any other relevant Court or tribunal for the said land or
any such
building(i) To become licensed for any purpose under the provisions
of the Liquor Act 1912 as amended from time
to time.
(ii) To hold a permit to sell liquor in a restaurant.
(iii) To become registered as a Club under the provisions
of the said Act, or
(iv) Whereby any liquor may be sold or disposed of on or
from the said land or any such building or any part
thereof.
The land to which the benefit of this restriction is appurtenant
is the Lot 1 Deposited Plan 537116 and the land is
(sic) subject to the burden of this restriction is the land hereby
transferred." (at p395)

2. The said covenant is registered on the certificate of title of the burdened land. By memorandum of transfer no. M698028 dated 10th April 1972 Holloway Sackville (Australia) Pty. Ltd. transferred all its estate and interest in the burdened land to the second defendant. The second defendant then granted a lease over part of the burdened land to the first defendant, Sevastapol Investments Pty. Ltd. By memorandum of transfer no. P152271 dated 18th November 1974 Berowra Heights Hotel Pty. Ltd. transferred all its estate and interest in the benefited land to the plaintiff. (at p395)

3. On 10th February 1975 there was filed at the Licensing Court for the Metropolitan Licensing District, in accordance with provisions of the Liquor Act, 1912 (N.S.W.), as amended, on behalf of the first defendant, a notice of intention to apply for a conditional spirit merchant's licence in relation to premises known as Shop 16, The Village Centre, Turner Road, Berowra Heights, which premises form part of the burdened land. The plaintiff then commenced these proceedings in the Equity Division of the Supreme Court of New South Wales seeking orders - 1. that the defendants be restrained from making any application to the Licensing Court or any other relevant court or tribunal for a spirit merchant's licence under the provisions of the Liquor Act 1912, as amended, with respect to the burdened land and any buildings or part thereof for the time being erected thereon. 2. that the defendants be restrained from using the burdened land or any such building in any manner whereby any liquor may be sold or disposed of on or from the burdened land or any such building or any part thereof. In answer to this claim the first defendant alleged that the covenant is unreasonably in restraint of the first defendant's trade and is therefore void and further, that the covenant was unenforceable by virtue of s. 45 of the Trade Practices Act 1974-1975 (Cth) ("the Act"). In reply to the latter allegation the plaintiff claimed that the defence did not allege that the restraint has or is likely to have a significant effect on competition as provided by s. 45(4) of the Act. Further, that the covenant was not likely to have a significant effect on competition between the plaintiff and the defendants. The plaintiff also claimed in reply that s. 45 of the Act is invalid as being beyond the legislative power of the Commonwealth of Australia. (at p396)

4. The cause came on to be heard before the Full Court. After hearing argument on the common law restraint of trade doctrine and on whether s. 45 of the Act caught this covenant, the Court announced that it would not hear argument on the question of the constitutionality of s. 45 of the Act and would confine its decision to the matters already heard. (at p396)

5. It is not in doubt, on the authority of Tulk v. Moxhay (1848) 2 Ph 774 (41 ER 1143) , that a covenant between vendor and purchaser, on the sale or lease of land, that the purchaser or his assigns shall use or abstain from using the land in a particular way, will be enforced in equity against persons who were not parties to the original covenant or agreement, if they take with notice. In the present case the covenant was noted on the certificate of title. (at p396)

6. In my opinion the covenant in question - a Tulk v. Moxhay type of covenant - is not invalid by reason of the doctrine of restraint of trade. The House of Lords in Esso Petroleum Co. v. Harper's Garage (Stourport) Ltd. [1967] UKHL 1; (1968) AC 269 made it clear, albeit in dicta, that the doctrine does not apply to a Tulk v. Moxhay covenant. In that case Lord Reid said (1968) AC, at p 298 :

"It is true that it would be an innovation to hold that ordinary
negative covenants preventing the use of a particular site
for trading of all kinds or of a particular kind are within the
scope of the doctrine of restraint of trade. I do not think
they are. Restraint of trade appears to me to imply that a
man contracts to give up some freedom which otherwise he
would have had. A person buying or leasing land had no
previous right to be there at all, let alone to trade there, and
when he takes possession of that land subject to a negative
restrictive covenant he gives up no right or freedom which he
previously had."

Lord Morris of Borth-y-Gest said (1968) AC, at p 309 :

"There is a considerable difference between the covenants
in the present case and covenants of the kind which might
be entered into by a purchaser or by a lessee. If one who
seeks to take a lease of land knows that the only lease which
is available to him is a lease with a restriction, then he must
either take what is offered (on the appropriate financial
terms) or he must seek a lease elsewhere. No feature of public
policy requires that if he freely contracted he should be
excused from honouring his contract. In no rational sense
could it be said that if he took a lease with a restriction as
to trading he was entering into a contract that interfered with
the free exercise of his trade or his business or with his
'individual liberty of action in trading'. His freedom to pursue
his trade or earn his living is not impaired merely because
there is some land belonging to someone else upon which he
cannot enter for the purposes of his trade or business. In such
a situation (that is, that of voluntarily taking a lease of land
with a restrictive covenant) it would not seem sensible to
regard the doctrine of restraint of trade as having application.
There would be nothing which could be described as interference
with individual liberty of action in trading. There is
a clear difference between the case where someone fetters his
future by parting with a freedom which he possesses and the
case where someone seeks to claim a greater freedom than
that which he possesses or has arranged to acquire. So, also,
if someone seeks to buy a part of the land of a vendor and
can only buy on terms that he will covenant with the vendor
not to put the land to some particular use, there would seem
in principle to be no reason why the contract should not be
honoured."

Lord Hodson, in the same vein said (1968) AC, at pp 316-317 :

"All dealings with land are not in the same category; the
purchaser of land who promises not to deal with the land
he buys in a particular way is not derogating from any right
he has, but is acquiring a new right by virtue of his purchase.
The same consideration may apply to a lessee who accepts
restraints upon his use of land; on the other hand, if you subject
yourself to restrictions as to the use to be made of your
own land so that you can no longer do what you were doing
before, you are restraining trade and there is no reason why
the doctrine should not apply."

Lord Pearce said (1968) AC, at p 325 : "It seems clear that covenants restraining the use of the land imposed as a condition of any sale or lease to the covenantor (or his successors) should not be unenforceable." Lord Wilberforce said (1968) AC, at p 335 :

"for over 100 years it has been part of the normal technique
of conveyancing to impose and to accept covenants
restricting the use of land, including the use for trades or for
trade generally, whether of that conveyed or of that retained
... One may express the exemption of these transactions from
the doctrine of restraint of trade in terms of saying that they
merely take land out of commerce and do not fetter the
liberty to trade of individuals; but I think one can only truly
explain them by saying that they have become part of the
accepted machinery of a type of transaction which is generally
found acceptable and necessary, so that instead of being
regarded as restrictive they are accepted as part of the structure
of a trading society." (at p398)

7. The Court of Appeal (Lord Denning M.R., Russell and Salmon L.JJ.) in Cleveland Petroleum Co. Ltd. v. Dartstone Ltd. (1969) 1 WLR 116; (1969) 1 All ER 201 applied the above dicta. Lord Denning said (1969) 1 WLR, at p 118; (1969) 1 All ER, at p 202 :

"The law on this subject was fully considered by the House
of Lords in Esso Petroleum Co. Ltd. v. Harper's Garage
(Stourport), Ltd. [1967] UKHL 1; (1968) AC 269 . I need not go through all the

judgments

today, but it seems plain to me that in three at least
of the speeches of their Lordships a distinction is taken between
a man who is already in possession of the land before
he ties himself to an oil company and a man who is out of
possession and is let into it by an oil company. If an owner
in possession ties himself for more than five years to take all
his supplies from one company, that is an unreasonable
restraint of trade and is invalid. But if a man, who is out of
possession, is let into possession by the oil company on the
terms that he is to tie himself to that company, such a tie
is good."

In Robinson v. Golden Chips (Wholesale) Ltd. (1971) NZLR 257 , the New Zealand Court of Appeal (North P., Turner and Richmond JJ.) followed the view expressed in Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd. [1967] UKHL 1; (1968) AC 269 . (at p399)

8. Section 45(1) of the Trade Practices Act 1974-1975 (Cth) provides:

"A contract in restraint of trade or commerce that was
made before the commencement of this sub-section is unenforceable
in so far as it confers rights or benefits or imposes
duties or obligations on a corporation." (at p399)

9. Since the covenant in question cannot be described as one in restraint of trade, this section has no application. (at p399)

10. I would find in favour of the plaintiff and make the order sought by par. 1 of the plaintiff's summons. (at p399)

GIBBS J. These proceedings were commenced in the Equity Division of the Supreme Court of New South Wales. The plaintiff, Quadramain Pty. Ltd. ("Quadramain"), is the owner of land at Berowra described as lot 1 in deposited plan 537116. The defendant Metropolitan Investments Pty. Ltd. ("Metropolitan"), which has taken no part in the proceedings, is the owner of adjoining land described as lot 2. Sevastapol Investments Pty. Ltd. ("Sevastapol"), which holds a lease of lot 2, has been substituted as a defendant for Robert George Howie, who was originally joined as a defendant because he was thought to be the lessee of that lot - he caused Sevastapol to be incorporated. Before 22nd August 1969 both lots 1 and 2 were owned by Berowra Heights Hotel Pty. Ltd., but on that date that company transferred lot 2 to Holloway Sackville (Australia) Pty. Ltd. The transfer was subject to a covenant in the following terms, which is registered on the certificate of title of lot 2:

"The Transferee for itself and the owners and occupiers
for the time being of the land hereby transferred and any
building or buildings which for the time being are erected
thereon covenants with the Transferor and the owner and
occupier for the time being of Lot 1 Deposited Plan 537116
that the land hereby transferred and any building for the
time being erected thereon will not be the subject of any
application conditional or otherwise to the Licensing Court
or any other relevant Court or tribunal for the said land or
any such building -
(i) To become licensed for any purpose under the provisions
of the Liquor Act 1912 as amended from time
to time.
(ii) To hold a permit to sell liquor in a restaurant.
(iii) To become registered as a Club under the provisions of
the said Act, or
(iv) Whereby any liquor may be sold or disposed of on or
from the said land or any such building or any part
thereof.

The land to which the benefit of this restriction is appurtenant
is the Lot 1 Deposited Plan 537116 and the land is (sic)
subject to the burden of this restriction is the land hereby
transferred."

At the date of the covenant lot 1 was used for the purposes of a hotel; it is still so used. Lot 2 was at that date intended to be used as part of a shopping centre, and now has a shop erected upon it. On 10th April 1972 lot 2 was transferred by Holloway Sackville (Australia) Pty. Ltd. to Metropolitan, which has since granted a lease to Sevastapol. On 18th November 1974 lot 1 was transferred by Berowra Heights Hotel Pty. Ltd. to Quadramain. On 10th February 1975 there was filed at the Licensing Court, on behalf either of Howie or Sevastapol, a notice of intention to apply for a conditional spirit merchant's license in relation to the shop which forms part of lot 2. By par. 1 of its summons Quadramain seeks to restrain the defendants, their servants and agents from making any application, conditional or otherwise, to the Licensing Court or any other relevant court or tribunal for a spirit merchant's licence under the provisions of the Liquor Act, 1912 (N.S.W.), as amended, with respect to the whole of lot 2 and any building or part thereof for the time being erected thereon. By way of defence to this summons it is asserted that the covenant relied on is unreasonably in restraint of Sevastapol's trade and is therefore void, and further that the covenant is unenforceable by virtue of the provisions of s. 45 of the Trade Practices Act 1974-1975 (Cth). The material provisions of that section (which came into operation on 1st February 1975) are as follows:

"(1) A contract in restraint of trade or commerce that
was made before the commencement of this sub-section is
unenforceable in so far as it confers rights or benefits or
imposes duties or obligations on a corporation.
...
(4) A contract, arrangement or understanding that is not
of the kind referred to in sub-section (3) is not in restraint
of trade or commerce for the purposes of this Act unless the
restraint has or is likely to have a significant effect on competition
between the parties to the contract, arrangement or
understanding or on competition between those parties or
any of them and other persons." (at p400)

2. In reply to the second of these defences Quadramain claimed, inter alia, that s. 45 is invalid as being beyond the legislative power of the Commonwealth, and because this claim gives rise to a question as to the limits inter se of the constitutional powers of the Commonwealth and those of the States, the proceedings have been removed to this Court by virtue of s. 40A of the Judiciary Act. (at p401)

3. Both defences raised by Sevastapol must in my opinion fail. In the first place, I consider that the rules relating to restraints of trade have no application to the present case. Of course it is now settled that those rules are not limited to particular kinds of restraint. "The categories of restraint of trade are not closed": Petrofina (Gt Britain) Ltd. v. Martin (1966) Ch 146, at p 169 . Indeed, the rules are not confined to contractual arrangements but apply to all restraints of trade, howsoever imposed: Dickson v. Pharmaceutical Society of Great Britain (1970) AC 403, at p 440 ; Buckley v. Tutty [1971] HCA 71; (1971) 125 CLR 353, at pp 375-376 . It is also settled that the rules apply to a restraint which extends only to the use of a particular piece of land: Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd. [1967] UKHL 1; (1968) AC 269 ; Amoco Australia Pty. Ltd. v. Rocca Bros. Motor Engineering Co. Pty. Ltd. [1973] HCA 40; (1973) 133 CLR 288, at p 288 . Nevertheless, in Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd. [1967] UKHL 1; [1967] UKHL 1; (1968) AC 269 all the members of the House of Lords who took part in that decision agreed that the rules do not apply to a covenant given by a purchaser or lessee restricting the use to which the land purchased or leased may be put: see per Lord Reid (1968) AC, at p 298 ; Lord Morris of Borth-y-Gest (1968) AC, at pp 308-309 ; Lord Hodson (1968) AC, at pp 316-317 ; Lord Pearce (1968) AC, at p 325 ; Lord Wilberforce (1968) AC, at pp 332-335 . In such a case the covenantee is not required to establish that the covenant is reasonable; the covenant is not subject to the doctrine. Different reasons were given by their Lordships in support of this conclusion. The view of the majority (Lords Reid, Morris of Borth-y-Gest and Hodson) was that the doctrine only applies where a person gives up some freedom which he already possesses, and that a person who buys or takes a lease of land subject to a negative restrictive covenant gives up no freedom which he previously had. Lord Wilberforce adopted a more flexible test which may in time come to be preferred; he said that the exemption of these transactions from the doctrine of restraint of trade should be explained "by saying that they have become part of the accepted machinery of a type of transaction which is generally found acceptable and necessary, so that instead of being regarded as restrictive they are accepted as part of the structure of a trading society" (1968) AC, at p 335 . His Lordship continued: "If in any individual case one finds a deviation from accepted standards, some greater restriction of an individual's right to 'trade', or some artificial use of an accepted legal technique, it is right that this should be examined in the light of public policy." It is unnecessary, for present purposes, to consider whether either of these statements of principle correctly defines the limits of the doctrine. The conclusion that the rules relating to restraint of trade do not apply to restrictive covenants given by a person purchasing or leasing land should be accepted as correct, at least as a general rule. The doctrine of restraint of trade is based on public policy. When a purchaser, with a view to obtaining a particular piece of land, which he could not otherwise acquire, or could acquire only on paying a greater price, freely gives to the vendor a covenant, for the benefit of other land of the vendor, that he will not use the land purchased for the purpose of trade generally or for the purpose of a particular trade, there is, speaking generally, no possible reason of public policy that would require such a covenant to be invalidated. The same is true where a purchaser or lessee chooses to buy or lease land already subject to a restrictive covenant. Indeed, as Lord Pearce said in Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd., "It would be intolerable if, when a man chooses of his own free will to buy, or take a tenancy of, land which is made subject to a tie (doing so on terms more favourable to himself owing to the existence of the tie) he can then repudiate the tie while retaining the benefit" (1968) AC, at p 325 . Where the public policy has no possible operation, the rules founded on it have no application. (at p402)

4. As was pointed out in Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd. [1967] UKHL 1; (1968) AC 269 , there have been many cases in which it appears to have been assumed that the rules relating to restraint of trade have no application to restrictive covenants given by purchasers and lessees. Further examples may be found in Australia: for example, Allen v. Lawson (1926) VLR 1 . The view expressed in Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd. has been followed in New Zealand: Robinson v. Golden Chips (Wholesale) Ltd. (1971) NZLR 257 . (at p402)

5. Lord Morris of Borth-y-Gest pointed out in Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd. (1968) AC, at p 306 , that in some cases it does not matter whether it is said that the doctrine relating to restraint of trade does not apply or whether it is said that a restraint would so obviously pass the test of reasonableness that no one would be disposed even to seek to invoke the doctrine. It would be possible to decide the present case by holding that if there is a restraint of trade it is a reasonable one, but both on authority and principle it seems to me that it should be held that there is no restraint within the meaning of the doctrine. (at p403)

6. In support of the second defence advanced it was submitted that s. 45 of the Act applies to any covenant in restraint of trade, even to a reasonable restraint. If that is so, the section, if valid, would have the drastic result that a contract to which the section applies will be invalid even though it is demonstrably reasonable both in the interests of the parties and in the interests of the public. However, I find it unnecessary to consider whether that is the proper construction of the section, for I have reached the clear conclusion, for a number of different reasons, that the section has no application whatever to the present case. In the first place, for the reasons already given, in my opinion the covenant in question cannot properly be described as one in restraint of trade or commerce. Secondly, s. 45(1) has the effect of rendering unenforceable only contracts in restraint of trade or commerce; it has no effect on restraints which are not contractual. However, in the present case Quadramain is not suing Sevastapol in contract. There is no privity of contract between the parties, and Quadramain's interest is of a proprietary nature. In In re Nisbet and Potts' Contract, Farwell J. said (1905) 1 Ch 391, at pp 396-397 :

"Covenants restricting the enjoyment of land, except of
course as between the contracting parties and those privy
to the contract, are not enforceable by anything in the nature
of action or suit founded on contract. Such actions and suits
alike depend on privity of contract, and no possession of the
land coupled with notice of the covenants can avail to create
such privity: Cox v. Bishop (1857) 8 De GM & G 815 (44 ER 605) . But if

the
coventants be negative, so as to restrict the mode of use and enjoyment of

the land, then there is called into existence an equity attached
to the property of such a nature that it is annexed to and
runs with it in equity: Tulk v. Moxhay (1848) 2 Ph 774 (41 ER 1143) .

This

equity, although created by covenant or contract, cannot be sued on
as such, but stands on the same footing with and is 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 judgment of Farwell J. was affirmed in the Court of Appeal, Cozens-Hardy L.J. said that "the benefit of a restrictive covenant of this kind is a ... right in the nature of a negative easement" (In re Nisbet and Potts' Contract (1906) 1 Ch 386, at p 409 ), and the same opinion has been expressed in later cases, including Newton Abbot Co-operative Society Ltd. v. Williamson & Treadgold Ltd. (1952) Ch 286, at p 296 . The covenant in the present case created a contractual obligation between the original parties to the sale, but so far as Quadramain is concerned it is enforceable only as an interest in the land. Section 45(1) does not have any effect on equitable or other proprietary rights and has no application to the present proceedings. Thirdly, the effect of s. 45(4) is that if, apart from that subsection, it could properly be said (contrary to my opinion) that Quadramain was seeking to enforce a contract in restraint of trade, the covenant is not a contract in restraint of trade or commerce for the purposes of the Act. The "contract" is not of the kind referred to in sub-s. (3). Sub-section (1) does not refer to arrangements or undertakings; they are dealt with by sub-s. (2) which has no relevance to the present case. The effect of sub-s. (4) is that a contract will not be in restraint of trade or commerce for the purposes of the Act unless the restraint has, or is likely to have, a significant effect on competition between the parties to the contract, or on competition between those parties or any of them and other persons. However, the parties to the covenant were Berowra Heights Hotel Pty. Ltd. and Holloway Sackville (Australia) Pty. Ltd. Neither of those companies now has any interest in either piece of land and the restraint has no effect whatever on competition between those companies or between them or either of them and anyone else. It is unnecessary to consider whether the restraint has, or is likely to have, a significant effect on competition between Quadramain and Sevastapol because they are not parties to the contract. For all these reasons it is apparent that s. 45 has no effect on the rights of the parties to the present proceedings. It is therefore unnecessary to consider the important question whether the section is a valid exercise of the legislative power of the Commonwealth. (at p404)

7. This is another of those cases in which the question which caused the proceedings to be removed into this Court does not in the event need to be decided. It provides another example of the way in which s. 40A of the Judiciary Act can have the unfortunate result that cases are needlessly removed to this Court. (at p405)

8. For the reasons I have given, I hold that the defences raised by Sevastapol cannot be sustained. I would make the order sought by par. 1 of the plaintiff's summons. (at p405)

STEPHEN J. In this case it is unnecessary to explore the precise limits of application of the doctrine against restraints of trade or the principles upon which those limits depend. The present covenant is a covenant restricting, in favour of the retained dominant land, the lawful use which may be made of the servient land, albeit in an indirect form; it was imposed by the then owner of both lands on the occasion of his sale of the servient land and the burden and benefit of the covenant are expressed to run with the respective lands. (at p405)

2. The covenant is thus pre-eminently such a restrictive covenant as was referred to in a number of the speeches of their Lordships in Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd. [1967] UKHL 1; (1968) AC 269 as an instance of that to which the doctrine has no application. When the facts of a particular case require it, it will be time enough to consider the position of covenants imposed in other circumstances; for instance in leases, as in Robinson v. Golden Chips (Wholesale) Ltd. (1971) NZLR 257 or, although imposed on the sale of land, which do not possess all the features here present, as in McGuigan Investments Pty. Ltd. v. Dalwood Vineyards Pty. Ltd. (1970) NSWR 686 . (at p405)

3. I accordingly agree with the conclusion arrived at by Gibbs J., whose reasons for judgment I have had the advantage of reading, that the doctrine against restraint of trade does not apply to this covenant. (at p405)

4. Upon the second question raised in this appeal, the interpretation and application of s. 45(1) of the Trade Practices Act 1974-1975 (Cth), I consider that the effect of sub-s. (4), which is set out in the reasons for judgment of Gibbs J., is to exclude from the scope of sub-s. (1), if ever otherwise within it (as to which I say nothing), a contract which imposes no restraint having or being likely to have a significant effect on competition between those whom the sub-section identifies, namely "parties to the contract" or one such party and third parties. (at p405)

5. Sub-section (4) operates so as to deprive contracts of the character of being in restraint of trade or commerce, the character which they must possess if sub-s. (1) is to apply to them, unless the restraint imposed is of a particular kind, namely one that produces a significant effect on competition between two or more persons, at least one of whom must have been a party to the contract. In the present case, there were only two parties to the covenant and at a time before s. 45(1) came into operation - see s. 2(4) of the Act - each had ceased to have any interest whatever in either of the two lands in question; thereafter neither was in a position in which competitive forces to which he might be subject could be in any way affected by the covenant. The sub-section accordingly makes s. 45(1) wholly inapplicable to this covenant. (at p406)

6. For these reasons I would hold that the defences raised by Sevastapol cannot be sustained; an order should be made as sought in par. 1 of the plaintiff's summons. (at p406)

MASON J. Subject to one reservation, I am in agreement with the reasons for judgment which have been prepared by Gibbs J. Whether s. 45(1) of the Trade Practices Act 1974 has no application to the restraint created by the covenant because there is no privity of contract between the parties and Quadramain's interest is of a proprietary kind is a question which I do not find it necessary to decide. However, in all other respects I am in agreement with what Gibbs J. has written and I would accordingly hold that the defences raised by Sevastapol cannot be sustained and I would make the order sought in par. 1 of the plaintiff's summons. (at p406)

JACOBS J. I must confess that I have found the extraction of the principles to be applied in this case a matter of considerable difficulty. There is on the one hand the established principle of the common law that restraints of trade are contrary to public policy and void unless stringent conditions of reasonableness are met. On the other hand there is the well established principle that covenants imposing restrictions on the use of land may be valid even though the restriction may totally prohibit the carrying on of trade upon the land made subject to the restrictive covenant. It is the reconciliation of the two lines of authority which causes the difficulty. If the law on restraint of trade were regarded as wholly applicable to the law on covenants restricting the use of land, restrictions which have long been regarded as permissible would be found to run contrary to the conditions which the common law requires to be satisfied in respect of restraints of trade before they will be treated as valid. Covenants framed in order to preserve the amenity of a neighbourhood by prohibiting all trade or certain trades which by general or special description are likely to cause offence would not be permissible. But they are permissible. Covenants imposed as part of a development scheme so that a wide but balanced coverage of trades could service the whole development or neighbourhood would hardly be permissible. But they are well recognized. Cf. Nicoll V. Fenning, where Bacon V.-C. said (1881) 19 Ch D 258, at pp265-266 :

"The bargain between them and Collins was that they,
'their heirs and assigns, should not thereafter sell or convey
any portion of the estate without requiring the purchaser to
enter into a covenant with them not to allow any building to
be erected thereon to be used as a public-house, tavern, or
beer-shop.' Every person to whom they afterwards sold was
entitled to the benefit of that covenant; and it was as much
for their benefit as for that of Collins and the vendors that
the restrictive covenant was imposed upon them against interfering
with, spoiling, or damaging the general property by
establishing any other beerhouse or public house upon it, one
having been thought sufficient. Whether for convenience sake,
for police purposes, or otherwise, it was at all events agreed
that the vendors should sell one lot only for a public-house,
and they bound themselves not to sell any other portion of
the land unless impressed with the burden of the restrictive
covenant."

See also Jones V. Bone (1870) LR 9 Eq 674, at p 676 ; Earl of Zetland V. Hislop (1882) 7 App Cas 427, at pp 449-450, 460 ; Labone V. Litherland Urban District Council (1956) 1 WLR 522, at p 525; (1956) 2 All ER 215, at p 219 ; Rother V. Colchester Corporation (1969) 1 WLR 720; (1969) 2 All ER 600 . (at p407)

2. On the other hand, if covenants restrictive of the use of land were regarded as wholly outside the common law principles governing restraints of trade, the purposes of the common law principle could be frequently defeated by framing the covenant or contract in restraint of trade so that it attached to the use of land. (at p407)

3. Covenants in leases requiring or governing the mode of carrying on business on leased land, particularly "tie" covenants, cause special difficulty. Such covenants have long been enforced. They have commonly been regarded as running with the land so as to bind successors of the covenantor because they affect the use to which leased land may be put. But they have not always been so regarded. In Feilden V. Slater (1869) LR 7 Eq 523, at p 528 it was expressly conceded that they did not run with the leased land. If such covenants be regarded as outside the doctrine of restraint of trade altogether, agreements offensive to the common law concept could be made and enforced regardless thereof. (at p408)

4. In Esso Petroleum Co. Ltd. V. Harper's Garage (Stourport) Ltd. [1967] UKHL 1; (1968) AC 269 it was argued that the common law doctrine on restraint of trade had no application when the subject matter of an agreement or covenant was the use of land. Here, it was argued, was a mortgage and the covenants related to the manner of use of the mortgaged premises; therefore they were not subject to scrutiny by application of the common law doctrine of restraint of trade. The House of Lords refused to accept the argument. I shall return to their Lordships' reasons hereafter. (at p408)

5. The problems are not made any easier by the fact that the law on restraint of trade and the law on restrictive covenants have been greatly and concurrently developed over the last hundred years or so. It is useful to bear in mind that prior to the decision of the House of Lords in Nordenfelt V. Maxim Nordenfelt Guns and Ammunition Co. Ltd. (1894) AC 535 it was commonly thought that validity of a restraint on trade depended on a doctrine that there was an essential distinction between a general and a partial restraint. Since a covenant restricting the use of particular land was of necessity a restraint limited in space and since such a covenant, at least in the case of leases, was limited in time (in so far as this was relevant: see Davies V. Davies, per Bowen L.J. (1887) 36 Ch D 359, at p 390 ) it was hardly necessary to consider the relation of the principles governing covenants restricting the use of land to the doctrines of restraint of trade. (at p408)

6. At the same time there was some lack of certainty on the nature of the equitable doctrine known as the rule in Tulk V. Moxhay (1848) 2 Ph 774 (41 ER 1143) . Until the decision of the Court of Appeal in London County Council V. Allen (1914) 3 KB 642 it was commonly thought that an owner of land was bound by a restrictive covenant entered into by a predecessor in title, if he purchased with notice, even though the covenantee did not have other land for the benefit of which the covenant was entered into. See for example per Byrne J. in Holloway Brothers Ltd. V. Hill (1902) 2 Ch 612, at p 616 . For a review of previous authorities, see per Buckley L.J. in London County Council V. Allen (1914) 3 KB, at pp 654-658 . This was particularly important in respect of burdened freeholds. (at p408)

7. The result before Nordenfelt's Case (1894) AC 535 on the one hand and London County Council V. Allen (1914) 3 KB 642 on the other was that restrictive covenants, whether in respect of leasehold land or freehold hold land, being limited in space, would most likely be regarded as valid restraints on trade and the equitable doctrine on restrictive covenants could burden freehold lands in the hands of a successor in title taking with notice even though no lands of the covenantee or his successor had the benefit of the covenant: Catt V. Tourle (1869) LR 4 Ch App 654 . See also Jay V. Richardson [1862] EngR 507; (1862) 30 Beav 563 (54 ER 1008) for an earlier application of this view and Holloway Brothers Ltd. V. Hill (1902) 2Ch612, at p 616 and Luker V. Dennis (1877) 7 Ch D 227 for later examples. Thus in the case not only of leasehold lands by means of covenants regulating the use to which the lands could be put but also freehold lands there could be restrictive covenants in the form of business restraints, which were in effect restraints on trade. There was seldom any need to consider the relationship of the law on restraint of trade and the law on restrictive covenants the burden and benefit of which passed to successors in title. But sometimes the law on restraint of trade was considered in relation to a Tulk V. Moxhay (1848) 2 Ph 774 (41 ER 1143) type covenant, e.g. in Catt V. Tourle (1869) LR 4 Ch App 654 . (at p409)

8. However, there were decisions which made the matter less clear. Covenants in leases might be held to be collateral and therefore not to "touch or concern" the demised land so that they ran with the lands in the possession of a successor, an assignee of a lease. In that case there would be no privity of estate in respect of the particular covenant but only privity of contract between the original lessor and lessee: Spencer's Case [1583] EWHC J53 (KB); [1583] EWHC J53 (KB); (1583) 5 Co Rep 16a (77 ER 72) . However restrictions on the use of land, including "ties", were generally, though not always, regarded as "touching or concerning" the leased land and therefore binding on successors. But a covenant by a lessor of a public house not to build or keep any house for the sale of spirits or beer within half a mile of the demised premises was held in Thomas V. Hayward (1869) LR4Ex311 to be collateral and not to run with the land because it was for the benefit of the lessee's trade on the leased land and not for the benefit of the land itself. That case was decided in the same year as Catt V. Tourle (1869) LR 4 Ch App 654 was decided in equity. In Catt V. Tourle there was a covenant by purchasers of a piece of land that the vendor should have the exclusive right of supplying beer to any public house erected on the site. The defendant bought with notice of the covenant which was construed as an implied negative covenant not to purchase beer elsewhere. The restriction was held to be enforceable in equity against a successor in the title of the original purchasers even though it did not appear that any land of the covenantee was intended to be benefited. There was probably no conflict between the 1869 decisions as the law was then understood to be, because it was not established at that date that a purchaser with notice would only be bound by the burden of a covenant if the covenant was intended for the benefit of land of the covenantee and was capable of benefiting that land: London County Council V. Allen (1914) 3 KB 642 where Catt V. Tourle (1869) LR 4 Ch App 654 was disapproved on this point. Once this necessity was established there was a conflict. As the covenant had to be intended for the benefit of land of the covenantee before Tulk V. Moxhay (1848) 2 Ph 774 (41 ER 1143) would apply, the covenant would only be good in run at law. Such a covenant must be intended for the protection of, and be capable of protecting, that is to say, it must "touch or concern", the land to be benefited before the benefit of the covenant will be annexed to the land and run with the land. Similarly, under the law now established in London County Council V. Allen (1914) 3 KB 642 , before land will be burdened in equity in the hands of a successor in title to the original covenantor the covenant must have been imposed for the benefit of other land and be capable of benefiting that other land. The test for "touching and concerning" and that for "imposition for the benefit of" can hardly be distinguished. See per Wilberforce J. in Marten V. Flight Refuelling Ltd. (1962) Ch 115, at pp 136-139 . Therefore if the covenant in Thomas V. Hayward (1869) LR 4 Ex 311 did not run with the land, the covenant in Catt V. Tourle (1869) LR 4 Ch App 654 likewise was not of a kind which was capable of running with land. It would not have satisfied the Tulk V. Moxhay (1848) 2 Ph 774 (41 ER 1143) rule even if that rule had been properly understood at that date. (at p410)

9. Sir Lancelot Elphinstone in his book published in 1946, Covenants affecting Land, Arts. 51 and 52(1), (2) , pp. 55-56, stated the law to be as follows:

"51. A covenant is not considered to be capable of protecting
land belonging to the covenantee unless it 'touches or
concerns' that land, that is, unless the covenant -
(i) physically affects the land of the covenantee;
(ii) of itself, without the aid of other circumstances, affects
the nature, quality or value of the land; or
(iii) maintains or increases the enjoyment of the land by the
successive occupiers, without regard to any benefit
resulting to an occupier from the nature of his profession
or business or his special requirements.
52. (1) Where the benefit of a covenant (not being between
lessor and lessee) is capable of running with the land
intended to be protected, the question whether a person
deriving title under the covenantee is entitled to the benefit
of the covenant depends on the intention of the covenanting
parties expressed in the instrument creating the covenant
when construed in the light of all relevant evidence.
(2) The true construction of the instrument may be that a
person deriving title under the covenantee shall not have the
benefit of the covenant unless it is expressly assigned to him."

If that statement be correct then a covenant would not be enforceable under Tulk v. Moxhay (1848) 2 Ph 774 (41 ER 1143) where the intention was to benefit a business conducted on land not to benefit the land itself. If a covenant restricting trade on land could no longer be imposed for the benefit of the covenantee's business so as to bind successors in title of the covenantor, but only for the protection of his land, it is understandable that any application to restrictive covenants of the doctrines of restraint of trade still did not arise for consideration even after the Nordenfelt Case (1894) AC 535 . A covenant for the protection of a business conducted on land would not bind successors in title to the land of a covenantor and it is with this kind of case that the law on restrictive covenants is mainly concerned. The covenant restricting use of land imposed for the protection of the covenantee's business would both at law and in equity be a personal covenant only. However, in principle, unless the mere fact that, though a personal covenant, it related to the use of land took it outside the doctrine, a view decisively rejected in Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd. [1967] UKHL 1; (1968) AC 269 , it would be subject to scrutiny as a restraint on trade. (at p411)

10. However, in 1951, Upjohn J. (as he then was) in Newton Abbot Co-operative Society Ltd. v. Williamson & Treadgold Ltd. (1952) Ch 286 held that a covenant not to carry on the business of an ironmonger on certain premises could be enforced in equity against successors in title of the covenantor. The other land in the vicinity was not expressly described in the instrument; therefore the benefit of the covenant was not annexed to the land so as to pass to a purchaser on a conveyance. But it was ascertainable by extrinsic evidence and Upjohn J. held that this was sufficient in the case of an express assignee of the benefit of a covenant who seeks to enforce it in equity. Upjohn J. found that the covenant was not taken solely to protect the goodwill of the vendor's business carried on on other land in the vicinity. I think that I should set out his reasons for this conclusion in full. Mrs. Mardon was the vendor and Devonia was the property retained by her.

"In 1923 Mrs. Mardon was carrying on the business of an
ironmonger at Devonia. No doubt the covenant was taken
for the benefit of that business and to prevent competition
therewith, but I see no reason to think, and there is nothing
in the conveyance of 1923 which leads me to believe, that
that was the sole object of taking the covenant. Mrs. Mardon
may well have had it in mind that she might want ultimately
to sell her land and the business and the benefit of the covenant
in such manner as to annex the benefit of the covenant
to Devonia for, by so doing, she would get an enhanced
price for the totality of the assets which she was selling;
a purchaser would surely pay more for a property which
would enable him to sue in equity assigns of the defendants'
premises taking with notice and to pass on that right, if he
so desired, to his successors, than for a property which would
only enable him to sue the original covenantor, for that is the
result of the view urged on me by Mr. Bowles.
Further, Mrs. Mardon may well have thought that her own
business might ultimately be closed down, or the goodwill
thereof sold to someone who was going to carry it on on
some other premises. She would then be left with Devonia,
and Devonia could be sold at an enhanced price to someone
intending to carry on the business of an ironmonger, because,
if, as part of the sale transaction, he obtained the benefit of
the covenant, he could prevent competition from the defendants'
premises opposite in the trade.
In my judgment, it was always open to Mrs. Mardon, when
she desired to dispose either of the land or the business, to
assign the benefit of the covenant with the one or the other
or both as she chose. By taking this covenant, she was thereby
enabled to sell her premises, or her business, to better
advantage as she thought fit. In my judgment, Mrs. Mardon
was in the position of the vendor in the example given by
Cozens-Hardy M.R. in Reid v. Bickerstaff (1909) 2 Ch 305, at p 320 , where

he

says: 'For example, I sell a piece of land with a covenant
that no public-house shall be erected thereon. I sell the adjoining
lot to a purchaser who is ignorant of the existence of
the covenant. I am at full liberty to release the covenant, or
to assign the benefit of it to any particular purchaser, or to
deal with the rest of my land as I think fit.'
Accordingly, in my judgment, the defendants fail on this
point." (1952) Ch, at pp 293-294

When Upjohn J. referred to the possibility that Mrs. Mardon might wish to assign the benefit of the covenant to a purchaser of her business who was not also a purchaser of "Devonia" he cannot be taken to have suggested that the purchaser of the business could enforce the covenant in equity against a successor in title of the covenantor. That would be contrary to London County Council v. Allen (1914) 3 KB 642 . He must have been referring to an assignment which would enable the assignee of the business to sue the original covenantor. Otherwise the restrictive covenant could be enforced in equity by an express assignee who had no interest in the land, benefit to which is a condition precedent to enforcement in equity under the rule in Tulk v. Moxhay (1848) 2 Ph 774 (41 ER 1143) . But the fact that assignment of the benefit to a purchaser of the business and not of the land could be contemplated raises a question in my mind whether the covenant was indeed for the benefit of the land retained by Mrs. Mardon rather than for the benefit of Mrs. Mardon as the owner of the land and the business. The value of the land was not enhanced as land in the hands of any owner; nor was it enhanced throughout the whole time that the covenant was enforceable, but at the most only until the benefit thereof was assigned to a stranger to the land, a purchaser of the business who did not also purchase the land. Certainly if such a covenant were assigned to a purchaser of the business and not of the land it would be a covenant against competition unsupported by any benefit to land and I can think of no reason why then the doctrine of restraint of trade should not apply to it. (at p413)

11. If Newton Abbot Co-operative Society Ltd. v. Williamson & Treadgold Ltd. (1952) Ch 286 is correctly decided, the law relating to restrictive covenants does not contain within itself principles sufficient to prevent undue restraints of trade and the position now appears to be as follows: restraint of competition may increase the value of the land upon which the business sought to be protected is carried on; the restraint may perpetually encumber the land on which the restriction is imposed and the owners thereof from time to time in the carrying on of a competing trade; the fact that the restraint is necessarily limited in point of space is no longer of itself a source of validity of the restraint. The purpose of the common law in prohibiting restraints designed simply to protect a business from its competitors is defeated. (at p413)

12. The developments in the two doctrines had thus led to a greater need for some convergence or reconciliation between them, and that was the question which the House of Lords faced in Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd. [1967] UKHL 1; (1968) AC 269 . It should be mentioned that the covenant the subject of the decision was essentially a personal covenant; it was not suggested otherwise. But it did affect land and that was the basis of the argument with which their Lordships dealt. It was held that it was no answer to a claim that a covenant was in restraint of trade to say that it was a covenant affecting the use of land. This enunciation threw up the question how far covenants restricting the use of land for trade or for a particular trade or in the manner of carrying on a trade, including product "ties", were subject to the doctrine of restraint of trade. Lord Reid said (1968) AC, at p 298 :

"It is true that it would be an innovation to hold that
ordinary negative covenants preventing the use of a particular
site for trading of all kinds or of a particular kind are within
the scope of the doctrine of restraint of trade. I do not think
they are. Restraint of trade appears to me to imply that a
man contracts to give up some freedom which otherwise he
would have had. A person buying or leasing land had no
previous right to be there at all, let alone to trade there, and
when he takes possession of that land subject to a negative
restrictive covenant he gives up no right or freedom which
he previously had."

See also per Lord Morris of Borth-y-Gest (1968) AC, at pp 309-310 , Lord Hodson (1968) AC, at pp 315-317 , and Lord Pearce (1968) AC, at p 325 . Lord Wilberforce approached the question somewhat differently. He said (1968) AC, at p 335 :

"One may express the exemption of these transactions from
the doctrine of restraint of trade in terms of saying that they
merely take land out of commerce and do not fetter the
liberty to trade of individuals; but I think one can only truly
explain them by saying that they have become part of the
accepted machinery of a type of transaction which is generally
found acceptable and necessary, so that instead of being
regarded as restrictive they are accepted as part of the structure
of a trading society. If in any individual case one finds
a deviation from accepted standards, some greater restriction
of an individual's right to 'trade,' or some artificial use
of an accepted legal technique, it is right that this should be
examined in the light of public policy. An example of this
process in a lease (a lessor's covenant as to trading) may be
found in Hinde v. Gray [1840] EngR 554; (1840) 1 Man & G 195 (133 ER 302) , and, in a

conveyance,

in the Scottish case of Aberdeen Varieties Ltd. v. James F. Donald
(Aberdeen Cinemas) Ltd. (1939) SC 788 ."

(at p414)

13. This different approach is important in the present case. The basis adopted by the majority of their Lordships presents, if I may respectfully say so, difficulties which the reasoning of Lord Wilberforce does not. One particular difficulty which I feel is that covenants restricting the carrying on of all or any particular trades need not arise out of a transaction of purchase or lease of land. For instance, a man may wish to preserve the amenity of his land by obtaining from existing owners covenants restricting the carrying on of all trades or of particular trades on their adjoining or neighbouring lands. The covenants go on the respective titles and have in the past not been regarded differently from those imposed at the time of a sale or lease of lands to a covenantor. They have not been regarded as covenants which need to satisfy the principles governing restraint of trade. (at p415)

14. It appears to me that the basis upon which certain covenants restricting the use of land for all trades or any particular trade have been treated as falling outside the application of the restraint of trade doctrine is that the latter doctrine only applies to covenants which are imposed in a trade or commercial context or for a trade or commercial purpose, present or future. I use those words very widely, particularly bearing in mind recent decisions such as Pharmaceutical Society of Great Britain v. Dickson (1970) AC 403 and Buckley v. Tutty [1971] HCA 71; (1971) 125 CLR 353 . There is nothing narrow about the doctrine of restraint of trade and its categories are never closed. But it is not all embracing. So far as I am aware it has never been applied outside the context of commercial purposes, within which words I include personal employment of skills and labour, as an employee or otherwise, as well as commercial transactions of business. (at p415)

15. There is a public interest not only in persons exercising their capacity to work but also in the carrying on of trade generally. It is against the policy of the law that a person should not be able freely to sell his labour and freely to buy and sell goods in the course of his trade and put his labour to profit in the course of his business. Therefore agreements in restraint of trade, as we call them, are against public policy and are prima facie void. But there are exceptions. Restraints which do not offend against the policy which is the basis of the doctrine will be held valid. But stringent conditions must be fulfilled before covenants in restraint of trade will be held not to offend against the policy. Briefly, the covenants must be reasonable between the parties and not contrary to the public interest. (at p415)

16. The doctrine of restraint of trade comes into operation when the restraint is imposed in a context and for a purpose which impinges on what Lord Wilberforce called "the structure of a trading society". If that context and purpose be found then no "artificial use of an accepted legal technique" (again to use his words) will take the case outside the application of the doctrine. Lord Wilberforce would except from particular scrutiny in each individual case certain restraints, for example, some trading "ties", because they "under contemporary conditions, may be found to have passed into the accepted and normal currency of commercial or contractual or conveyancing relations" (1968) AC, at pp 332-333 . He continued as follows:

"That such contracts have done so may be taken to show
with at least strong prima force that, moulded under the
pressures of negotiation, competition and public opinion,
they have assumed a form which satisfies the test of public
policy as understood by the courts at the time, or, regarding
the matter from the point of view of the trade, that the trade
in question has assumed such a form that for its health or
expansion it requires a degree of regulation. Absolute exemption
for restriction or regulation is never obtained: circumstances,
social or economic, may have altered, since they
obtained acceptance, in such a way as to call for a fresh
examination: there may be some exorbitance or special feature
in the individual contract which takes it out of the
accepted category: but the court must be persuaded of this
before it calls upon the relevant party to justify a contract of
this kind." (at p416)

17. I take these words to mean that the doctrine of restraint of trade is always there, waiting to be applied if necessary; but the courts by a line of decision which may still properly be applied to contemporary conditions make proof that the restraint is not contrary to public policy unnecessary in the particular case. I would respectfully adopt this approach but would expressly limit the application of it to covenants imposed in the context of a trading purpose. I do not think that Lord Wilberforce intended otherwise. I do not think that the doctrine is applicable where the purpose and effect is, for example, the protection of the amenity of land. An alternative view is that covenants imposed for such purposes could conceivably be subject to the doctrine but that proof that the restraint is not contrary to public policy is usually not necessary, as Lord Wilberforce explained. (at p416)

18. I now turn to the covenants in the present case. The purpose and effect of them is clear, namely, the protection of the business of the covenantee from competition. In my opinion these circumstances at once bring the covenant within the scope of the doctrine of restraint of trade whether or not a consequence of the protection from competition is that thereby the value of the land on which the business is carried on will be increased. But first the covenant should be examined in order to see whether it falls within the principles allowing the enforcement of restrictions as to the user of land under a covenant against a person not being a party to the creation of the restriction. If it does not, no question of its unenforceability as a restraint of trade arises. By virtue of the rule in Tulk v. Moxhay (1848) 2 Ph 774 (41 FR 1143) as established by London County Council v. Allen (1914) 3 KB 642 and, in New South Wales, by virtue of the formal requirements in s. 88 of the Conveyancing Act, 1919, a restriction will not be enforceable against a person not a party to the creation of the restriction unless the restriction is as to the user of land and the instrument creating the restriction clearly indicates, inter alia, land to which the benefit of the restriction is appurtenant and land which is subject to the burden of the restriction. (at p417)

19. The covenant was in these terms:

"(b) The Transferee for itself and the owners and occupiers
for the time being of the land hereby transferred and
any building or buildings which for the time being are erected
thereon covenants with the Transferor and the owner and
occupier for the time being of Lot 1 Deposited Plan 537116
that the land hereby transferred and any building for the time
being erected thereon will not be the subject of any application
conditional or otherwise to the Licensing Court or any
other relevant Court or tribunal for the said land or any
such building -
(i) To become licensed for any purpose under the provisions
of the Liquor Act 1912 as amended from time
to time.
(ii) To hold a permit to sell liquor in a restaurant.
(iii) To become registered as a Club under the provisions
of the said Act, or
(iv) Whereby any liquor may be sold or disposed of on or
from the said land or any such building or any part
thereof.
The land to which the benefit of this restriction is appurtenant
is the Lot 1 Deposited Plan 537116 and the land is
subject to the burden of this restriction is the land hereby
transferred."

The draftsmanship appears defective. Sub-clause (i) sensibly follows on the preceding words of the clause, but sub-cll. (ii), (iii) and (iv) hardly do so. However, sub-cl. (i) is wide enough in its terms to cover a spirit merchant's licence under ss. 14 and 15A of the Liquor Act, 1912 (N.S.W.) and the alleged breach of the restriction is an application for such a licence (or "license" as the Act would have it). (at p417)

20. The first question which arises in my mind but which was not argued is whether the covenant imposes a restriction on the use of the land sold. A spirit merchant's licence is an authority to an individual to sell liquor on the conditions prescribed by s. 15A of the Liquor Act on the premises specified in the licence. By s. 3 "licensed premises" is defined to mean the premises in respect of which a licence granted under the Liquor Act is in force. An application for a licence in respect of premises is not a use of land. It is a statutory requirement which, if it is met, will enable the buildings on the land to be lawfully used for the purpose set forth in the licence. It is true that a result of the covenant may be that buildings on the land will not be able to be used for any of the purposes for which a liquor licence is required as a condition of such use but that does not make any application for a licence a user of the land. (at p418)

21. Apart from this consideration and assuming that the restriction can be interpreted as a restriction on user of the land for the purpose of conducting any trade for which a licence is required under the Liquor Act, the question first arises whether the benefit of that restriction is appurtenant to the land of the covenantee. If its only purpose and effect is to protect the business carried on upon that land from competition, that is not enough. If Newton Abbot Co-operative Society Ltd. v. Williamson & Treadgold Ltd. (1952) Ch 286 was correctly decided it may be sufficient if as a result the value of the land is necessarily affected. "It is old law that in cases not between lessor and lessee the benefit of a covenant will pass if and in so far as it necessarily affects the value of the land, in this sense, that the owner of the land would get more for his land by reason of the covenant being attached to and annexed to it": per Cozens-Hardy M.R. in Forster v. Elvet Colliery Co. Ltd. (1908) 1 KB 629, at p 635 ; affd. sub nom. Dyson v. Forster (1909) AC 98 . (at p418)

22. In Newton Abbot Co-operative Society Ltd. v. Williamson & Treadgold Ltd. (1952) Ch 286 Upjohn J. was able to find in the particular circumstances that the value of the land was in fact increased. In Allen v. Lawson (1926) VLR 1 there was no dispute that the value of the land would be affected according as to whether the covenant against carrying on the business of a milliner was held to be enforceable or not. Even if I accept the correctness of the approach in these cases, I am not satisfied that the user of land for the business of a spirit merchant necessarily affects the value of land upon which an hotel business is conducted. If common knowledge be an allowable element I should say that in a centre such as Hornsby a publican's licence is so valuable compared with a spirit merchant's licence which is by comparison easily obtained that, though a possible diminution in bottle sales might affect the price of sale of the publican's licence, it would have no appreciable effect on the value of the land upon which the publican's business was licensed to be conducted. But I doubt whether common knowledge should be relied on either way. Certainly on the evidence as it stands an effect on the value of the hotel land cannot be assumed and is not established. (at p419)

23. Even if the restriction relates to the user of the burdened land and is proved to benefit the hotel land the question remains upon the approach which I have earlier expressed whether or not it is an unreasonable restraint of trade; for the purpose of the restriction was clearly a purpose in and of the trade or business carried on upon the adjoining land. The fact that the owner of the land sought to be burdened came to the land with knowledge of the restriction and the fact that the predecessor in title purchased the land upon the condition that the restriction was imposed do not provide an answer although they may be relevant considerations. It is here that I think the decision of the Privy Council in Vancouver Malt and Sake Brewing Co. Ltd. v. Vancouver Breweries Ltd. (1934) AC 181 is an important authority to be borne in mind. (at p419)

24. The appellants held a brewer's licence, in respect of their premises in Vancouver City, but had never brewed any liquor other than sake. Under a similar licence the respondents carried on a brewing business in the same city, but brewed beer only. By an agreement made in 1927 the appellants purported to sell and assign to the respondents for $15,000 all the goodwill of their brewer's licence or any renewal thereof (except so far as related to the manufacture of sake), and to covenant that for fifteen years they would not engage in the trade or business of manufacturing or selling beer, and that if they should sell their licence the sale should be made subject to the foregoing conditions. It was held that there was a bare covenant against competition and "so far as their Lorships are aware there is no case in the English Law Reports, and certainly none was cited at the bar, in which a bare covenant not to compete has been upheld. The covenants restrictive of competition which have been sustained have all been ancillary to some main transaction, contract, or arrangement, and have been found justified because they were reasonably necessary to render that transaction, contract or arrangement effective" (1934) AC, at p 190 . It could be said that this covenant was not a covenant restricting the use of land and that therefore the case is not apposite; but when the words of Lord Wilberforce in Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd. (1968) AC, at p 335 are borne in mind that artificial use of an accepted legal technique will not avail, the same result surely would have followed if the covenant had expressed an annexation of the benefit thereof to the brewery premises of Vancouver Breweries Ltd. and the burden thereof on the brewery premises of the Vancouver Malt and Sake Brewing Co. Ltd. The same practical purpose and effect would have been achieved. (at p420)

25. On my approach to the present case I would apply the reasoning in the Vancouver Case (1934) AC 181 . The covenant in the present case was not reasonably necessary to render the sale of the land effective. The purchaser of the land, the covenantor, was not selling any business the goodwill of which might be affected by him carrying on a similar business on adjoining land. It was simply that the vendor wanted to protect his own business from competition and that is prima facie an insufficient reason for holding a restraint on trade to be valid. I find nothing to rebut this prima facie invalidity. (at p420)

26. The plaintiff therefore is not in my opinion entitled to succeed in his proceedings. I have not in reaching my conclusion needed to rely on the particular provisions of the Trade Practices Act 1974-1975 (Cth) s. 45. However, I should express my view that, whether or not I am correct in my opinion that the common law doctrine relating to restraint of trade falls to be applied to the present covenant, it is a contract in restraint of trade within s. 45(1) unless it is excepted under s. 45(4). The covenantor agreed not to engage in certain trade or commerce on the land in question and that agreement restrains that trade and commerce. It would be a question of fact whether or not it was likely to have a significant effect on competition between the parties to the agreement, or on competition between those parties or any of them and other persons. Though it is the contract between the original parties which needs to be examined in the application of s. 45, if on that examination it were found that it was unenforceable between the parties neither any rule of equity such as that in Tulk v. Moxhay (1848) 2 Ph 774 (41 ER 1143) nor s. 88 of the Conveyancing Act, 1919 (N.S.W.) could operate to make the contract binding upon successors in title. The starting point for a covenant restricting the use of land binding on a successor in title of an original covenantor in favour of a successor in title of an original covenantee is that there was a covenant which as a personal covenant validly bound the original covenantor and covenantee. (at p421)

27. The proceedings were removed to this Court under s. 40A of the Judiciary Act. It is not clear whether the hearing before us should be regarded as a final hearing or a hearing on preliminary matters of law. If it be regarded as a final hearing I would on the evidence before us dismiss the summons. If, however, it be regarded as a preliminary hearing and assuming that the question is not raised whether the restriction sought to be imposed is a restriction on the user of land (a question which I would answer in the negative) I would remit the matter for the hearing and determination of the issue whether the restraint of trade is contrary to public policy and void. (at p421)

MURPHY J. I agree with the judgment of Jacobs J. (at p421)

ORDER

Order that the defendants be restrained in the terms of par. 1 of the summons.

Defendants to pay plaintiff's costs of the proceedings.