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[2024] QCA 47
This appeal concerned an agreement entered into in 2009 by the respondent and NBT Pty Ltd. The respondent and NBT owned adjoining cattle properties. Their agreement allowed each of them to use a portion of the other’s land. NBT sold its land to the appellant in 2022. A dispute arose as to whether the agreement ran with the land, either at law, in equity, or under statute. The Court held that the agreement was personal in nature such that the obligations under it did not run with the land. On that basis, the appellant was not entitled to the benefit of the agreement.
Mullins P, Dalton JA and Applegarth J
3 April 2024
Consolidated Pastoral Company Pty Ltd (“CPC”) and NBT Pty Ltd (“NBT”) owned adjoining cattle properties. [2]–[3]. In 2009, CPC and NBT entered into an agreement known as the “2009 Agreement”. [4]. The 2009 Agreement defined the parties to the agreement as being NBT and CPC. By clauses 1 and 2, the parties each agreed to grant the other the use of specified areas of each other’s land. [5]. Clause 3 of the agreement made clear that there was to be no surrender of title, but that the agreement was:
“simply an arrangement between neighbours under which both parties will benefit from the cost savings associated with the construction and maintenance of a ‘boundary’ fence that follows a less rugged course than that of the legal boundary…”
Clause 6 of the agreement required a party disposing of its land to draw the agreement to the attention of the incoming purchaser “and have them enter into a similar arrangement with the continuing party.” [4].
In 2022, NBT sold its land to Bellevue Stations Pty Ltd (“Bellevue”). [5]. Under the sale agreement, Bellevue was notified of the 2009 Agreement, and was required to enter into an agreement with CPC on similar terms to the 2009 Agreement. [5]. CPC refused to sign any new agreement with Bellevue. [5]. A dispute arose as to whether Bellevue was entitled to the benefit of the covenants in the 2009 Agreement. At trial it was held that Bellevue was not so entitled. On appeal Bellevue raised three key arguments. Dalton JA gave the leading judgment with Mullins P agreeing. Applegarth J gave separate reasons but agreed in the result and largely in the reasoning.
First, Bellevue contended that under the 2009 Agreement, CPC was under an implied obligation under clause 6 of the 2009 Agreement to enter into a contract with an incoming party on similar terms to the 2009 Agreement. [14]. The Court rejected this submission. [16]. The asserted implied term was neither obvious nor necessary to give business efficacy to the contract. [16]–[17]. In fact, it was foreseeable that the continuing party would find it commercially undesirable to enter into an arrangement with the new purchaser. [17].
To support the asserted implied term, Bellevue sought to rely on the general rule that a party is obligated to do all that is necessary to enable the other party to gain the benefit of the contract. [21]. The Court rejected this argument as well. [22]. Contracting with the incoming purchaser was not something that ensured the outgoing party obtained benefit under the 2009 Agreement. [22].
In any event, Mullins P and Dalton JA were satisfied that a term requiring the continuing party to enter into a “similar arrangement” with the incoming purchaser would be void for uncertainty. [18]. As the agreement was to be long term, the passage of time may make the original agreement unsuitable as between the continuing owner and the incoming purchaser. [18]. As such, “a similar arrangement” cannot be taken to mean “the same arrangement”. [18]. Instead, clause 6 was an agreement to agree and was unenforceable. [19]. Notably, Applegarth J preferred not to decide this point. [56].
Second, Bellevue sought to avoid the privity of contract issues in its case by relying on s 55 Property Law Act 1974 (“PLA”). Under that provision:
“A promisor who, for a valuable consideration moving from the promisee, promises to do or to refrain from doing an act or acts for the benefit of a beneficiary shall, upon acceptance by the beneficiary, be subject to a duty enforceable by the beneficiary to perform that promise.”
The Court held that s 55 did not apply. That was, because there was no promise by CPC to enter into a contract with the incoming purchaser and even if there was such a promise, it would be void for uncertainty. [26]. In addition, the Court found that the promise to enter into a similar arrangement was not a “benefit” being given to a beneficiary within the meaning of the provision. [26]. Although Bellevue considered that it would receive a benefit by entering into an agreement similar to the 2009 Agreement, such an agreement would also impose obligations. [28]. Entry into the arrangement would not be an “unequivocal benefit”. [28]. Whether entry into the arrangement provided a benefit may change over time and depend on the circumstances of the particular incoming purchaser. [28].
Third, Bellevue contended that the benefits given under the 2009 agreement were covenants relating to land, and on that basis ran with the land by operation of s 53 PLA. [43]. That provision applies to “[a] covenant relating to any land of the covenantee…”. [43]. It was unnecessary for the Court to determine whether a “covenant” was limited to promises made under deed because the Court was satisfied that the promises in the 2009 agreement were not in relation to land. [45]–[46].
A covenant will relate to land if it touches or concerns the land. [47]. Clause 6 of the 2009 Agreement was “antithetical” to the notion that the agreement touched or concerned the land. [49]. It expressly contemplated that the agreement would not be binding on successors in title. [49]. In addition, the 2009 agreement imposed obligations on both parties to maintain fencing and give indemnities for any damage caused to the other’s land. [50]. These obligations must attach personally and not to the land. [50]. As such the obligations under the 2009 Agreement were personal in nature and did not run with the land. [53].
For those reasons, Bellevue was not entitled to the benefit of the covenants under the 2009 Agreement.
L Inglis