Pollak v Milder and Ors. [1999] NSWSC 19 (2 February 1999)

Last Updated: 4 March 1999

NEW SOUTH WALES SUPREME COURT

CITATION: POLLAK v MILDER & ORS. [1999] NSWSC 19

CURRENT JURISDICTION: EQUITY

FILE NUMBER(S): 1355/98

HEARING DATE{S): 1 February 1999

JUDGMENT DATE: 02/02/1999

PARTIES:

WOLF POLLAK

v

DAN GEORGE MILDER (D1)

KAREN RUTH MILDER (D1)

ANZ BANKING GROUP LTD (D2)

JUDGMENT OF: Bryson J

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:

PLAINTIFF: MR V GRAY

FIRST DEFENDANTS: IN PERSON - UNREPRESENTED

SECOND DEFENDANT: SUBMITTING APPEARANCE

SOLICITORS:

PLAINTIFF: DENES EBNER

FIRST DEFENDANTS: IN PERSON - UNREPRESENTED.

SECOND DEFENDANT: NORTON SMITH & CO. - SUBMITTING APPEARANCE

CATCHWORDS:

TORRENS SYSTEM

restrictive covenant

transfer which created restrictive covenant in 1956 by mistake conferred benefit of covenant on land at Lambton NSW and not on land next door to the burdened land in Bellevue Hill

owner of burdened land claimed extinguishment but pending the hearing had the notification on his CT cancelled with the consent of the owner of the land at Lambton

owners of neighbouring land (in person) sought rectification so that Register would show their land as benefitted but failed because (1) they had no relationship with the plaintiff and no equity to rectification (2) s.42 of RPAct and (3) subs. 88 (1) of Conveyancing Act 1919 (which requires clear indication in the instrument creating restrictive covenant of the land benefitted and burdened.)

ACTS CITED:

Conveyancing Act 1919 s 88, ss88 (1), (3).

Real Property Act 1900 ss 42 (1).

Bahr v Nicolay [No 2] [1988] HCA 16; (1908) 164 CLR 604.

Double Bay Newspapers Pty Limited & ors v A W Holdings Pty Limited & ors (1997) 42 NSWLR 409.

DECISION:

SEE PARAGRAPHS 29 AND 32

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

BRYSON J

TUESDAY 2 FEBRUARY 1999

1355/98

WOLF POLLAK v DAN GEORGE MILDER & 2 ORS

JUDGMENT

1 HIS HONOUR : In the Torrens System of land title by registration interests and rights over land which exist only in equity do not appear on the register unless their registration is expressly authorised by legislation and when they do they have effect in accordance with legislation and not otherwise. Restrictive covenants have contractual effect between their original parties but they run with the land so as to impose the burdens and confer the benefits of them on the land while owned by others only if and in so far as legislation so provides. Subs 88 (3) of the Conveyancing Act 1919 authorises entry of notification of restrictive covenants in the register and the provisions of s 88 indicate the circumstances in which this is done and has effect.

2 The plaintiff, Mr Pollak, owns the house property at 22 Kulgoa Road, Bellevue Hill and the first and second defendants, Dr D G Milder and Dr K R Milder own the house next door at No 24 Kulgoa Road.

3 In the summons of 11 February 1998 the plaintiff claims an order extinguishing a restrictive covenant over his land created by transfer G555295, and names as defendants the Milders and their Bank. The Bank has taken no part in the proceedings. The land was referred to in the transfer by its title reference Certificate of Title volume 2981 folio 186. The transfer was dated 3 August 1956 and registered on 21 August 1956. The transferors were Annie McHardie and Mary McHardie and the transferees were Louis Goodman and Judith Goodman his wife as joint tenants. The restrictive covenant was in these terms:

"And the transferees covenants with the transferor's their successors entitled and assigns that the transferees their executors administrators and assigns shall not at any time cause to be erected on the subject land a building having more than a ground floor and that the building line of such main building shall be not closer than 40 feet from Kulgoa Road. The land to which the benefit of the restriction is appurtenant is the land in Certificate of Title volume 2754 folio 36. The land which is subject to the burden of the restriction is the land referred to in Memorandum of Transfer and the parties by whom or with whose consent the said covenant may be released varied or modified are the transferors their successors entitled and assigns.."

4 There was an earlier covenant in transfer A 498801 and a covenant relating to fencing but those do not give rise to dispute.

5 The restrictive covenant was intended to contribute to amenity by preventing development close to Kulgoa Road and much more significantly by preventing development higher than one storey at a height which would impact on the views from nearby land. The impact which a second story could well have on the views from number 24 Kulgoa Road can be gauged in a general way from photograph annexure B produced by Mr Valuer Stamoulis. It seems plain that the amenity of land at 24 Kulgoa Road would be significantly enhanced if that land had the benefit of a covenant restraining construction of a building having more than a ground floor.

6 Wholly on the footing of what is expressed by the transfer G 555295 there is no doubt about which land is the land intended to be benefited. It is the land in certificate of title volume 2754 folio 36. The terms of the transfer do not raise any doubts about this: such as for example would be raised by referring to the benefited land as the land of the transferors or as land in Kulgoa Road or as land adjacent to the burdened land.

7 However a different understanding of the transfer appears if it is taken in conjunction with some surrounding circumstances. The terms of transmission application G 533083 by which Annie McHardie and Mary McHardie applied for transmission of title to themselves under the will of a relative show that they owned and lived in number 24 Kulgoa Road and that its certificate of title was volume 2754 folio 236. Search of certificate of title volume 2754 folio 36 shows that it relates to a small parcel of land in Second Street Lambton near Newcastle about one hundred miles from Kulgoa Road, and that the Misses McHardie have never owned that land. These circumstances make it probable to the point of fair certainty that the parties to transfer G 555295 intended to annex the benefit of the restrictive covenant to the land in certificate of tile volume 2754 folio 236: there was a mistake in the terms of transfer.

8 When transfer G 555295 was registered on 21 August 1956 the Registrar-General did not make any notification of its registration on the certificate of title relating to the land having the benefit of the restriction: it was not the Registrar-General's practice to do so. It was not a responsibility of the Registrar-General to consider or decide whether what the transfer said about identifying the land benefited was correct or effectual, or whether it could be improved on. No notification of the restrictive covenant appeared on either of the certificates of title volume 2754 folio 36 and folio 236. However on the same date, 21 August 1956, a notification was made on certificate of the title volume 2981 folio 186 saying: "The above mentioned transfer number G 555295 contains a restrictive covenant". There was nothing on the certificate of title to indicate which land had the benefit of the restrictive covenant, and to find that out it was necessary to inspect the memorandum of transfer; a searcher who did that would find nothing to identify the benefited land except the reference to certificate of title volume 2954 folio 36. The searcher would not find any indication that the land in certificate of title volume 2954 folio 236, or that the land at 24 Kulgoa Road Bellevue Hill (however described), was benefited. In particular the transferors' address did not appear on the memorandum of transfer.

9 The position did not materially change although number 22 Kulgoa Road passed through several hands. Mrs Judith Goodman became sole registered proprietor as surviving joint tenant on 1 July 1971. Then Mr N C Todd and Mrs S G Todd became joint tenants by a transfer registered on 29 August 1984. At this point that certificate of tile was cancelled but reference to the restrictive covenant was carried forward in later editions. Mr Pollak agreed to purchase number 22 Kulgoa Road from the Todds on 2 August 1997 and became the registered proprietor at some time before the issue of his summons. Number 24 Kulgoa Road also went through several ownerships and was acquired by the Milders in 1989. They did not then know of the restrictive covenant but learnt of it several years later.

10 Late in 1991 Mr Todd approached the Milders and sought their approval of plans for a second storey at the rear of number 22 Kulgoa Road. The Milders signed the plans to indicate their consent, not then being aware that there was a restrictive covenant which might have some bearing on the matter. They say in evidence that they saw the Todds' project as being (as indeed it was) one in which building and town planning controls required the neighbours to be consulted. The Todds' plans were later approved by council, but the Todds did not build the second storey and the approval has lapsed. The Milders first learnt of the restrictive covenant in 1992 when Mr Todd first asked them to sign some documents. The terms of the documents are not shown but whatever they were this caused them to know of the existence of the restrictive covenant. Mr Todd offered them financial compensation for extinguishment of the covenant, although no agreement was reached. I infer from his attempts to have the covenant extinguished that Mr Pollak has some building plans or wishes to have the opportunity to build upwards.

11 The contract (exhibit 2) by which Mr Pollak bought his house from the Todds includes an acknowledgment in special condition 29.1 that a copy of transfer G 555295 was annexed: it was and the restrictive covenant clearly appeared in it. The contractual effect was that as between himself and the Todds Mr Pollak was clearly fixed with notice of the existence and terms of the restrictive covenant when he purchased the property and could make no objection to completing his purchase on the basis that it existed. However, what he was told was the exact terms of the restrictive covenant including its annexation to the land in certificate of tile 2754 folio 36: he was not told in the contract and so far as evidence shows he was not told in any way that this reference was wrong, or that the benefit was actually annexed to some other land or to number 24 Kulgoa Road, or that the Milders had any entitlement. Further he did not in his contract with the Todds give any contractual or other undertaking or promise to observe or respect or in any way to attend to any rights of the Milders relating to the restrictive covenant or to anything else. There is no possible view of the facts in which Mr Pollak gave a contractual promise or undertaking to the Todds the benefit which was to be held on trust for the Milders or which in any way related to the Milders.

12 The restrictive covenant when understood according to the literal terms of the transfer must be extinguished because it could not possibly benefit land at Second Street Lambton and so understood it was invalid from the start.

13 Evidence before me did not explain why the Milders were joined as defendants and Mr Pollak in evidence could not explain this, but their conduct of the proceedings shows that they have been active to maintain that they have the right to enforce the restrictive covenant. The probabilities are that in some way it became known to Mr Pollak or those representing him that it was likely that there would be some measure of attempted enforcement from the Milders' quarter and that it was for this reason that they became defendants. Their conduct in the litigation amply shows that they asserted an interest in whether or not the restrictive covenant was to be extinguished.

14 At some time about October or November 1998, and it would seem for the first time, an approach was made on behalf of Mr Pollak to the registered proprietor of the land at Lambton. Naturally enough that person consented to the extinguishment of the restrictive covenant, and an application by Mr Pollak led to the notification of the restrictive covenant being cancelled on 31 December 1998 when the Registrar-General removed the notification on certificate of title volume 2981 folio 186 for number 22 Kulgoa Road. This was done by administrative steps and not by any order or step in the litigation then pending in the Court; the Milders were not told that such steps were being taken, nor was the Court.

15 At the hearing before me on 1 February 1999 Mr Pollak by his counsel took the position that the restrictive covenant now has been extinguished and effectively so, and that Mr Pollak has no need to press further for judicial decision but should have leave to discontinue.

16 Dr R G Milder and Dr K R Milder who each appeared in person both opposed leave to discontinue and Dr R G Milder pressed three applications by notice of motion, one of 10 September 1998 and two of 1 February 1999, in which he asked in several different formulations that transfer G 555295 be rectified and that the Registrar-General's action which led to the removal of the notification of the restrictive covenant be set aside. Dr K R Milder supported these positions.

17 I find on the basis of the circumstances I have mentioned that the parties to transfer G 555295 intended to annex the benefit of the restrictive covenant to the land at 24 Kulgoa Road which the Milders now own and the reference to folio 36 was a mistake.

18 It is easy to suppose that there was probably some contractual relationship between the parties to the transfer other than the transfer itself (which in its own terms shows that it was a transfer for value), and that either by referring to the terms of their contract or simply by reasoning from the circumstances the McHardies as transferors in proceedings brought against the Goodmans, the original transferees, were at one time able to obtain rectification of the transfer and registration of the transfer as rectified. It is not, however, possible to be certain that this was so or to examine properly the rights between those parties in view of the time which has passed and the many changes in circumstances including the identity of the parties affected. It is not possible to know whether there were or ever came to be any effective defences available to the transferees against a claim for the rectification of the transfer: the remedy is discretionary, delay is important, hardship is a defence and the terms of their contract or later dealings may have affected the decision in some way which the Milders cannot now show.

19 There is no relationship whatever between the Milders and Mr Pollak which would confer on the Milders an equity against Mr Pollak for the rectification of the transfer. In no sense are the Milders assignees of the claim for rectification or authorised to act in the names or on behalf of the original covenantees: they have not suggested there has ever been an attempt to assign such a claim to them (and I interpose that assignment of such a claim may not have been possible). The Milders did not even know that there was a restrictive covenant let alone that the original transferors might have had a rectification claim until some years after they bought number 24 Kulgoa Road and until thirty-five years after the covenant was given. There is no basis either on which the burden of or liability to a rectification claim could pass to Mr Pollak.

20 The Milders have no equity against Mr Pollak to rectification of the transfer. This is so for a number of reasons. There was no contractual relationship between them, no contractual obligation of Mr Pollak to confer or confirm a restrictive covenant, and no other undertaking of any kind by Mr Pollak to do any equivalent act, with or without consideration. The parties are simply not relevantly related in any way which would confer an equity to obtain rectification on the Milders.

21 In my opinion a claim for rectification of a conveyance of land is a mere equity and not an equitable interest, and the law relating to notice including constructive notice of equitable interests in land and the obligations to respect equitable interests which may fall on persons who take conveyances do not apply to protect mere equities including rectification claims. I have stated my views that mere equities do not participate in such competitions in Double Bay Newspapers Pty Limited & ors v A W Holdings Pty Limited & ors (1997) 42 NSWLR 409.

22 In any event there is, in my view, no basis on the facts for a finding that Mr Pollak took title to the land with actual or constructive notice that the Milders or the land which the Milders owned had the benefit of a restrictive covenant whether duly created or arising out of a claim for rectification of a transfer. Quite to the contrary the copy of the transfer annexed to the contract and the search which the evidence shows Mr Pollak carried out at about the time he bought his land showed him that the benefit of the covenant was annexed to the land at Lambton and did not show (but contradicted) that the benefit was annexed to the Milders' land. The information available to Mr Pollak definitely showed that the Milders did not have the benefit of a restrictive covenant. There was no notice to him that they had any claim to have one up to the time when he completed his purchase and paid for it: or indeed until much later when their position emerged from their affidavits in these proceedings.

23 The reasons I have given thus far do not deal with what I regard as the most important source of Mr Pollak's protection, subs 42 (1) of the Real Property Act 1900, the effect of which is that Mr Pollak owned his land "...subject to such other estates and interests and such entries, if any, as are recorded ... and absolutely free from all other estates and interests not so recorded..." Subs 42 (1) goes on to nominate some exceptions none of which relate to this case and none of which relate to restrictive covenants at all.

24 There is no indication in the evidence of anything which could rationally be regarded as fraud in any sense on the part of Mr Pollak. Dr D G Milder suggested that there was, but this suggestion, which was not properly considered and should have been made, depended on reasoning to the effect that it should have been clear to Mr Pollak when he bought the land from his knowledge of the transfer that the neighbouring land in Kulgoa Road was intended to be benefited. The suggestion that there was any fraud was quite wrong in fact and utterly baseless. There is no possible element of a personal equity enforceable against Mr Pollak such as was considered by the High Court in Bahr v Nicolay [No 2] [1988] HCA 16; (1908) 164 CLR 604.

25 In my finding the interest relating to the restrictive covenant recorded in the register relating to 22 Kulgoa Road was an interest the benefit of which was annexed in purport (although without effect) to the land at Lambton and on no basis could it be known from reading the Register, including reading both the certificate of title and the transfer referred to in the notification, or could it be supposed at all that the benefit was annexed to the Milders' land. Nor should the Register have made this known: the transfer as lodged was duly registered and everything that it purported to do was made known to those who duly searched. Whether or not the notification had been cancelled on 31 December 1998 Mr Pollak was exempt from the Milders' claim. I do not think that the fact that the notification was written off on 31 December 1998 is of any real importance for the rights of the parties to these proceedings, although it was a signal for the plaintiff to desist from asking the Court to determine those rights.

26 In my opinion Mr Pollak is entitled to a further protection having regard to the terms of s88 of the Conveyancing Act 1919 as they stood in 1956 and as they are now: the amendments in the interim are not significant for what I now say. Subs 88 (1) provides to the effect that a restriction arising under a covenant:-

"... shall not be enforceable against a person interested in the land claimed to be subject to the covenant or restriction, and not being a party to its creation, unless the instrument clearly indicates:-

(a) the land to which the benefit of the covenant

or restriction is appurtenant..."

and other matters.

27 The protection created relates to what is clearly indicated by the instrument itself and not what is indicated by the instrument when indications are also taken from surrounding circumstances which show that the terms of the instrument are incorrect. In my view the subsection enacts an additional reason why rectification of an instrument creating a restrictive covenant cannot be granted against a person other than a party to its creation.

28 For these reasons I am of the view that the Milders are not entitled to any of the relief claimed in Dr D G Milder's three notices of motion. It was in retrospect inappropriate for him to make these claims by notices of motion as they claim principal and not interlocutory relief. However proper consideration of the plaintiff's application for leave to discontinue required that they be addressed.

29 The orders are:

1. The plaintiff has leave to discontinue the proceedings.

2. Direct that notice of discontinuance be filed within two

days.

3. The first defendant's notice of motion of 10 December

1998 and two notices of motion of 1 February 1999 are dismissed.

30 I turn to the questions of costs. Dr K R Milder filed an appearance in person on 11 May 1998 and has never been represented on the record by any solicitor although in fact Mr Southwick of counsel attended instructed by a solicitor for the second defendant before the Registrar on 11 May 1998. Dr D G Milder filed an appearance in person on 13 March 1998. Mr Goodman solicitor went on the record as his solicitor on 16 June 1998 and so continued until notice of Dr D G Milder's intention to act without a solicitor was filed on 9 September 1998.

31 In my view they are entitled to an order for costs for the professional attendances on their behalf at those stages in the proceedings, having regard to the discontinuance. The costs orders which I make should be so understood. The attendances at court on 1 February 1999 and today are largely attributable to resistance to the application for leave to discontinue and to the hearing of Dr D G Milder's notice of motion and that resistance and the notices of motion were altogether unsuccessful. In my view the plaintiff should recover the costs of them.

32 The costs orders are as follows:

1. I order the plaintiff pay the legal professional costs of the

proceedings incurred by the defendants D G Milder and K R Milder.

2. I order that the defendant D G Milder pay the plaintiff's

costs of the Notice of Motion of 10 September 1998 and the two Notices of Motion of 1 February 1999 and of the attendances on 1 and 2 February 1999.

3. I order that the plaintiff pay the costs of Australia and

New Zealand Banking Group Limited as a submitting defendant.

I hereby certify that paragraphs 1-32 are the reasons for judgment of the Honourable Justice John Bryson.

Dated 3 March 1999. (H D LEWIS)

Associate.

LAST UPDATED: 04/03/1999