Supreme Court confirms the elements of a valid covenant

In a somewhat unusual case, the Supreme Court has ordered that a planning permit be varied to allow for the removal of a restrictive covenant in an appeal from VCAT pursuant to s148 of the Victorian Civil and Administrative Tribunal Act 1998.

In a decision welcome for its clarity, in Beman Pty Ltd v Boroondara City Council [2017] VSC 207 Emerton J overturned a finding by a legal member of the Tribunal that notwithstanding that the covenant expressed the intention that it would ‘run with the land’, it was essentially unenforceable because it did not specify which land should take the benefit.

In doing so, the Court provided a useful overview of one of the most common means of setting a covenant aside:

17                    The Tribunal’s decision turned upon the construction of the Covenant.  The issue for the Tribunal was whether the Covenant contained a personal promise from Mr Greenshields to Kate Lynch and Robert Byrne, enforceable only by Ms Lynch and Mr Byrne, or whether it contained a promise intended to benefit land owned by them.

18                    A restrictive covenant only runs with land to burden a successor in title if the following three elements are met:

(a)        the covenant must be negative;

(b)       the burden of the covenant must be intended to run with the land; and

(c)        the covenant must be given for the benefit of land, not simply for the benefit of the covenantee, and the covenant must touch and concern that land.[1]

19                    The applicant submits that the third element is not met in this case, as it is not possible to identify land sought to be benefited.

20                    In Fitt v Luxury Developments Pty Ltd,[2] Gillard J considered the passing of a benefit under a covenant and the need for the benefit of the covenant to be annexed to some land.  His Honour said:

Whether or not the benefit of the covenant is annexed to some land is a question depending upon the common intention of the original parties to the covenant.  It is necessary to construe the words of the covenant in their natural and ordinary meaning to determine the intention of the parties and whether they intended that the covenant was to be annexed to some land and run with it.  In carrying out this exercise the court may take into account the surrounding circumstances objectively known to the parties at the time.[3]

21                    As to how precisely the land must be identified, his Honour said:

Often the land to be protected is fully and accurately defined in the terms of the restrictive covenant.  However sometimes the covenant is expressed in general terms and refers to an area by a particular name.  It is well established that extrinsic evidence is admissible to explain the context in which the words were used.

It is not essential that the land to which the covenant is annexed should be expressly identified in the words of the covenant …  It is sufficient if the words define the land so as to make it open and ‘easily ascertainable’.[4]

22                    In Clem Smith Nominees Pty Ltd v Farrelly,[5] Bray CJ in the Full Court of the Supreme Court of South Australia sounded a warning about the use of extrinsic evidence to identify land entitled to the benefit of a restrictive covenant.  The Chief Justice opined that:

under the Torrens system it is essential before the burden of a restrictive covenant can be held to run with the land that the land entitled to the benefit of the covenant shall be capable of identification in some way from the registered document containing the covenant or, at least, from other related documents which can be discovered by a search in the Land Titles Office.  A prospective purchaser of land subject to a burden should be able to find out by a search whether the covenant  is a covenant in gross, which will not be binding on him if he purchases, or a covenant the benefit of which is attached to some parcel or parcels of land, which may be binding on him.[6]

23                    In the Tribunal, the Grace Park Residents Association submitted that it was possible to identify the beneficiaries of the Covenant by reference to the residual land in the area owned by Kate Lynch and James Byrne that still formed part of their landholding at the time the Covenant was created in October 1909.  The Tribunal accepted this submission, holding that the fact that the land sold in 1909 was a smaller part of a much larger residual landholding provided ‘some degree of counter-balance to the fact that the Covenant does not expressly identify the benefiting land’ and that this made it ‘more straightforward’[7] to infer that the residual landholding as at the date of sale in 1909 would benefit from the Covenant.

24                    In my view, the Tribunal erred in law in holding that the benefiting land had been sufficiently identified by this means.

25                    It is necessary to carefully consider the words in the Covenant to ascertain whether the benefiting land is identified, either expressly or by necessary implication.  The difficulty with the Covenant is that it does neither, even if surrounding circumstances are taken into account.

26                The Covenant, pared back to its essentials, provided that Mr Greenshields covenanted with Kate Lynch and James Byrne and ‘their transferees’ that certain things would be done on the land that was being transferred to him (the building materials covenant).  It also provided that certain things would not be done on that land (the Mary Street covenant) but granted Mr Greenshields and his transferees permission to do certain other things.  It then expressly recorded the parties’ intention that the Covenant be set out as an encumbrance at the foot of the Certificate of Title for Mr Greenshields’ land and that it would run with that land.

27                In my view, the words in the Covenant make it clear that the parties intended to burden the land acquired by Mr Greenshields.  As a result, the Covenant satisfies the first two elements of a restrictive covenant identified above.  Furthermore, the parties intended at least the first part of the Covenant to benefit persons taking title from Kate Lynch and James Byrne — ‘their transferees’.  However, even with the express acknowledgement that the Covenant (or at least the building materials covenant) was intended to benefit the transferees of Kate Lynch and James Byrne, the third element of a restrictive covenant remains unmet because it is unclear who are the relevant ‘transferees’ of Kate Lynch and James Byrne and therefore what land is to benefit from the Covenant.  The transferees of Kate Lynch and James Byrne might be persons to whom land was transferred by Kate Lynch and James Byrne prior to the date of the Covenant or they might be transferees to whom land was transferred after the date of the Covenant.  Indeed, they might be both.

28                The Tribunal accepted the submission that the ‘transferees’ in question were the transferees of the residual land in the area owned by Kate Lynch and James Byrne that still formed part of their main landholding at the time the Covenant was created in October 1909.  That may have been a reasonable assumption, having regard to the likelihood that Kate Lynch and James Byrne would seek to protect the value of the land that they continued to hold and would have had less interest in the value of the land that they had already sold off.  However, there is no compelling reason to limit the intended beneficiaries of the Covenant in this particular way.  The words of the Covenant, construed in context, do not require any such a conclusion.

The take home message from this decision is that, once again, restrictive covenants are often of varying quality and effectiveness. Although it may have been the drafter’s intention that the covenant run with the land, the passage of time and the demands of the Torrens system mean that the Courts are no longer prepared to enforce its terms.

The Court sounds a note of caution to ambitious developers

The Supreme Court has refused an application to modify a single dwelling covenant to allow a 21 apartment development over two lots (~1,400sqm) in 9 Highlands Road in Thomastown–notwithstanding the absence of objectors in Court to oppose the application.

The decision of Re Morihovitis [2016] VSC 684 is somewhat different to the decision of Re Jensen [2012] VSC 638 where the Court refused a relatively modest unopposed application because it was proposed amongst a relatively intact network of single dwellings. Rather, the application in Re Morihovitis was found to be simply too great a departure from what the covenant originally contemplated:

 The absence of a single dwelling covenant on no. 11 immediately exposes the peculiar and testing feature of this application.  Subject to planning laws and considerations, there is nothing on title to prevent the plaintiff as owner of no. 11 from building an apartment block, or at the least, there is no restrictive covenant getting in the way of a planning application to do so.  But the presence of the restrictive covenant on no. 9 Highlands Road obliges the responsible authority under the Planning and Environment Act to refuse to grant a planning permit unless the covenant over that land is removed or varied.  Thus, by this application Mr Morihovitis seeks under s 84(1) of the Property Law Act to modify the single dwelling covenant on no. 9 by deleting and adding words as shown in this way −

… not at any time hereafter excavate carry away or remove or permit to be excavated carried away or removed any earth clay stone gravel or sand from the said land hereby transferred except for the purpose of excavating for the foundations construction of any building and basement to be erected thereon and that not more than one dwelling house and outhouses shall be erected on the said lot hereby transferred

The Court therefore found it would alter the character of the neighbourhood:

The judgment to be made about ‘substantial injury’ turns on the nature and degree of the injury to those benefits.  Here, in my judgment, the location of the proposed development is not so removed from the residential area of the neighbourhood that it can be regarded as being sufficiently far away from it to say that such changes will not be seen and felt.  It will be a conspicuous part of the neighbourhood.  It will be the only apartment block in the neighbourhood.  The scale of the project and its departure from the scale of any existing residential developments in the neighbourhood, means that if it does not of itself create the sort of notorious problems of higher density living as I have identified them, it will in my judgment be the beginnings of altering the character of the neighbourhood.

Although the Plaintiff endeavoured to make the most of the absence of objectors, the Court pushed back on any suggestion it would give the Plaintiff a free rein:

No objectors have attended Court.  However, it is established in the legal authorities on these applications that the absence of objectors does not necessarily satisfy the onus of proof, and it certainly does not amount to implied assent. But as is commonly submitted in these applications, the absence of objectors ought go some way to overcome a court’s caution.  In this case, it was submitted that the absence of objectors willing to advance their objection to a substantial development such as this was especially significant, meaning to say I think the Court should not be overly cautious or assailed by the scale of the development in the assessment of substantial injury.  The submission went a little further.  It was submitted that known cases where such applications were refused were, or tended to be, opposed applications on which the Court could act on grounds of resistance from a beneficiaries according to evidence adduced by them.  In this case, although it was said that the Court has to play devil’s advocate, it was submitted the Court should, in the absence of objectors or any other evidence, act on the plaintiff’s evidence.     

I do not accept the amplitude of that submission.

Ultimately, the Plaintiff was held to the contract he struck when he purchased his land, at least insofar as the present development was concerned:

To put it in plain terms, Mr Morihovitis has bought land knowing of a negative covenant on it which binds him as if he made it by private contract.  He cannot use the land in defiance of that contract.  By statute this Court might discharge that obligation or modify it if doing so will not cause substantial injury to those to whom the promise was made.  That cannot be done by saying or assuming that the planning authority will ensure that the apartment development is in accordance with planning laws and regulations.  The question for the Court is whether the landowner should be relieved of his promise and allowed to build an apartment block in the first place, before it is subjected to planning scrutiny.  For the reasons I have given, in my judgment the plaintiff has not shown that the proposed modification will not cause substantial injury to those to whom the covenant was given.

How to choose a lawyer to run your restrictive covenant case

Choosing a lawyer to run your application to either modify or remove a restrictive covenant, or to defend such an application, can have considerable bearing on both the substantive outcome of the proceedings and, of course, costs.

In this sub-specialty of property law, only a relatively small number of law firms have had much recent experience, particularly in contested applications.

Getting your choice of lawyer wrong can mean up to twelve months lost by pursuing the wrong type of application or perhaps losing an opportunity to recover a proportion of your costs.

The best means of choosing the right solicitor (or barrister) is to look through recent published cases to see: who has been acting for who, where the relevant land was located; and in which jurisdiction the case was run.

The following search from the independent Australian Legal Information Institute lists all Victorian cases (Supreme Court proceedings, VCAT hearings and panel hearings) using the search phrase “restrictive covenant”:

http://www.austlii.edu.au/cgi-bin/sinosrch.cgi?method=phrase&query=restrictive+covenant&meta=%2Fau&mask_path=au%2Fcases%2Fvic

The following is a similar search narrowed to Supreme Court proceedings:

http://www.austlii.edu.au/cgi-bin/sinosrch.cgi?method=phrase&query=restrictive+covenant&meta=%2Fau&mask_path=au%2Fcases%2Fvic%2FVSC

And the following is a similar search narrowed to VCAT proceedings:

http://www.austlii.edu.au/cgi-bin/sinosrch.cgi?method=phrase&query=restrictive+covenant&meta=%2Fau&mask_path=au%2Fcases%2Fvic%2FVCAT

However, be careful about making predetermined judgements about which jurisdiction in which to commence your application. The decision to pursue an application under the Planning and Environment Act 1987 vis a vis the Property Law Act 1958 may prove to be of considerable importance and you should be confident your lawyer is familiar with the advantages and disadvantages of both avenues.

Dealing with deregistered companies referred to in restrictive covenants

Restrictive covenants in Victoria often give development discretion to companies that have long been deregistered. A good example is the series of covenants affecting the area around Altona that may provide:

… nor will I or my heirs executors administrators or transferees use any material other than brick and/or stone for the main walls of any such shop or dwelling house without the consent in writing of the said Altona Beach Estates Limited

Altona Beach Estates Limited, the original developer of the land, has long ceased to exist.

A question is then raised: how will the Australian Securities & Investments Commission (ASIC) exercise its discretion if it is called upon to act in the capacity of the deregistered company pursuant to section 601AE(2) of the Corporations Act 2001?

Helpfully, ASIC has produced a practice note of sorts to explain its policy in relation to such requests.

This policy states that ASIC may consider applications for consent under an encumbrance (e.g. plans of subdivision where there is no specific prohibition to subdivision in the encumbrance; construction of a fence within the restrictions/conditions of the encumbrance) and may consider applications to discharge expired encumbrances. However, ASIC will not otherwise vary the restrictions/conditions of an encumbrance or discharge a current encumbrance.

It is not then, as some might have you believe, a fait accomplis that the discretion will be exercised in the applicant’s favour.

The policy can be found here: http://asic.gov.au/for-business/closing-your-company/effects-of-deregistration/property-of-deregistered-companies/there-is-an-encumbrance-also-known-as-a-covenant-or-restrictive-covenant-over-my-property-in-favour-of-a-deregistered-company/

Objecting to an application to modify or discharge a restrictive covenant

If you own land with the benefit of a restrictive covenant, you may receive a letter by mail or see a sign on land giving notice of an application to modify or discharge it pursuant to s84 of the Property Law Act 1958.

If you wish to contest this application you may wish to:

  • write an objection; and/or
  • appear in court to support that objection.

The first step is to ascertain whether you have the benefit of the covenant. Because covenants are essentially contracts that run with the land, the law generally says that if you are not party to a contract you have no standing to enforce it.

If you have received written notice of the application, the chances are that your land has been identified as having the benefit of the covenant. If you have simply seen the sign on the land and live nearby, someone may have formed the view that your land either does not have the benefit of the covenant or that the modification or removal will not affect you. Or it may mean that the address for correspondence on your land title is out of date. This is surprisingly common.

If you are unsure whether your land has the benefit of a covenant, the cheapest and quickest option is to contact an experienced title searcher such as Dinah Newell from Feigl & Newell on (03) 9629-3011 or info@feiglnewell.com.au This is a specialised task and it is risky to leave it to someone who hasn’t done it before.

Once you have established a benefit, the question might then be what to write in your objection. Two decisions of the Victorian Supreme Court provide some guidance. The first is Prowse v Johnston in which Justice Cavanough listed the concerns of residents that he accepted were reasons a single dwelling covenant was not obsolete:

108 The objections of the defendants are set out in the various affidavits sworn by them. They are summarised in their written outline of submissions as follows:

(a) Loss of character of the residential estate being an estate with large single dwelling family homes and substantial gardens;

(b) Loss of privacy and overlooking into neighbouring private outdoor living areas and gardens;

(c) Bulk and dominance of proposed building particularly when viewed from adjoining residences and property;

(d) Loss of large, spacious Edwardian family home on the burdened land and surrounding mature trees and established garden;

(e) Loss of family neighbourhood with front and rear garden;

(f) Loss of spaciousness, beauty and privacy;

(g) Construction of a three-storey building with basement car parking over virtually the entire site in conflict with the prevalent single dwelling residential character of the area;

(h) Additional noise, traffic, parking and access issues associated with 18 units and 33 [actually 36] basement car spaces;

(i) This is the “thin end of the wedge” and the precedent effect of the removal of a covenant for the construction of a large unit development would be very significant;

(j) The character of the Coonil Estate has been maintained for over 90 years and should be preserved;

(k) Much of the Coonil Estate is a recognised heritage overlay area which should be preserved;

(l) The proposed development will be an isolated “eye sore” in stark contrast to the many period and heritage homes surrounding the burdened land; and

(m) The plaintiff’s land was purchased as part of the Coonil Estate, and has benefited from the reciprocal covenants given by others.

109 I accept that these are all admissible objections, though some are stronger than others. They are relevant to show that the covenant is not obsolete. They are also relevant for other purposes, to which I will come. The covenant is not obsolete. The purposes of the covenant are still being achieved throughout the Estate and on the burdened land, with a contribution in that respect from the covenant on the burdened land.

In the more recent decision of Oostemeyer v Powell Justice Riordan set out in paragraphs [36] to [45] the evidence he relied upon to reject an application to modify a covenant made pursuant to s84(1)(c) of the Property Law Act 1958 the so-called “substantial injury” test.

Once you have registered your opposition to the application to modify or remove the covenant you may be required to appear in the Supreme Court to support your objection. That is not to say the court will not consider your objection if you don’t appear. The Court generally reads every objection closely. However, in the standard form notice in the Court’s Guide for practitioners, the court makes it clear that “Written objections without an attendance may not be considered.”

Once at court, the Judge in charge of the list will set the matter down for a contested hearing.

It’s a matter of judgement at what point you wish to get a solicitor and/or barrister involved, if at all. Oostemeyer v Powell (above) demonstrates that unrepresented residents can succeed in fending off an attack on a covenant. However, it is relatively rare that objectors represent themselves in a contested hearing, partly because of the complexity of the proceedings and the time involved; and partly because objectors are typically reimbursed most of their costs, even if they are unsuccessful, in accordance with the principle in Re Withers.

Download a .pdf of this note.

Matthew Townsend
Owen Dixon Chambers
http://www.vicbar.com.au/profile?3183
townsend@vicbar.com.au (04) 1122 0277
Liability limited by a scheme approved under Professional Standards Legislation.

 

Case database relevant to restrictive covenant advice and litigation

The following cases are for use in litigation and advice work. Some of these are available on Austlii, others are not.

If you have any interesting or significant cases that I’ve missed, please email them to me at townsend@vicbar.com.au

A duplicate file may suggest different varying formats (for example .doc and .pdf).

The suffix (ocr) suggests the file has been scanned for optical character recognition.

Matthew Townsend
Owen Dixon Chambers
http://www.vicbar.com.au/profile?3183
townsend@vicbar.com.au (04) 1122 0277
Liability limited by a scheme approved under Professional Standards Legislation

Supreme Court issues “Guide to Practitioners” appearing in covenant cases

The Supreme Court has prepared a Guide to Practitioners for lawyers preparing appearing in applications to modify or discharge a restrictive covenant pursuant to s84 of the Property Law Act 1958.

It provides a useful checklist for the preparation of evidence and includes three helpful precedents that reveal how the Court would like draft orders to be prepared.

Matthew Townsend
Owen Dixon Chambers
http://www.vicbar.com.au/profile?3183
townsend@vicbar.com.au (04) 1122 0277
Liability limited by a scheme approved under Professional Standards Legislation

 

Brick no longer means ‘double-brick’ in building materials covenants

In Clare & Ors v Bedelis [2016] VSC 381 AsJ Derham found that a house built using a wooden sub-frame, did not breach a building materials covenant preventing the construction of a dwelling house “other than one having walls of brick or stone.”

In doing so, the Victorian Supreme Court effectively set aside the approach that has been in place since the 1956 decision of Sholl J in Jacobs v Greig VLR 597 that has often been said to require houses subject to such building materials covenants to be double brick construction:

113 In my unaccompanied view of the Land and neighbourhood, it became apparent that the bulk of the houses were constructed with an external appearance of brick.  Some had upper levels that included timber.  But the overall appearance of the neighbourhood was that the houses were substantial in size and built of brick, whether that was solid brick or brick veneer could not be seen.  Apart from the decision in Jacobs v Greig, there is no warrant in this case for the conclusion that the requirement, in effect, that the dwelling house on the Land be constructed with walls of brick or stone has the purpose of anything more than the aesthetic appearance of the house and the avoidance of low quality materials.  As I have said, I am not prepared to take judicial notice that strength, durability or any other matter forms a part of the purpose of the Covenant.  The evidence before Sholl J in Jacobs v Greig is not before me.  In any event, that decision was merely an interlocutory decision arrived at on the basis that there was a prima facie case that the construction of the covenant required solid or cavity brick and not brick veneer.  …

119 The evidence in this case clearly shows that the house has walls of brick, albeit brick veneer.  There is nothing in the covenant that requires the roof to be supported by the brick walls as distinct from the timber frame.  There is no evidence produced by the plaintiffs to establish that the meaning of the expression ‘walls of brick or stone’ in 1956 or indeed at any other time, does not embrace brick veneer walls.  I am therefore not satisfied that the house under construction is in breach of the covenant because it is constructed with walls of brick veneer.

Matthew Townsend
Owen Dixon Chambers
http://www.vicbar.com.au/profile?3183
townsend@vicbar.com.au (04) 1122 0277
Liability limited by a scheme approved under Professional Standards Legislation

Construing a covenant: a restatement of principles

In the decision of Clare & Ors v Bedelis [2016] VSC 381 AsJ Derham has usefully restated the principles for construing or interpreting a covenants:

(a)               subject to the qualifications mentioned below, the ordinary principles of interpretation of written documents apply.[1]  The object of interpretation is to discover the intention of the parties as revealed by the language of the document in question;[2]

(b)               the words of a restrictive covenant:

(i)     should generally be given their ordinary and everyday meaning and not be interpreted using a technical or legal approach.[3]  Evidence may be admitted, however, as to the meaning of technical engineering, building or surveying terms and abbreviations;[4]

(ii)  must always be construed in their context, upon a reading of the whole of the instrument,[5]  and having regard to the purpose or object of the restriction;[6]

(c)                importantly, the words of a restrictive covenant should be given the meaning that a reasonable reader would attribute to them.[7]   The reasonable reader may have knowledge of such of the surrounding circumstances as are available.[8]   These circumstances may be limited to the most obvious circumstances having regard to the operation of the Torrens system and the fact that the covenant is recorded in the register kept by the Registrar of Titles.[9]  As the High Court held in Westfield:

The third party who inspects the Register cannot be expected, consistently with the scheme of the Torrens system, to look further for extrinsic material which might establish facts or circumstances existing at the time of the creation of the registered dealing and placing the third party (or any court later seized of a dispute) in the situation of the grantee…[10]

(d)              the words of the covenant should be construed not in the abstract but by reference to the location and the physical characteristics of the properties which are affected by it,[11] and having regard to the plan of subdivision and, depending on the evidence, possibly having regard to corresponding covenants affecting other lots in the estate;[12]

(e)               because the meaning of particular words depend upon their context (including the purpose or object of the restriction in a covenant) cases that consider similar words provide no more than persuasive authority as to the meaning of words in a different document.[13]  Further, the decisions upon an expression in one instrument are of very dubious utility in relation to another;[14]

(f)                 the rules of evidence assisting the construction of contracts inter partes, of the nature explained by Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales,[15] do not apply to the construction of easements and covenants;[16]

(g)               if the meaning remains in doubt after other rules of interpretation have been applied, as a last resort or ‘very late resort,’ the covenant should be construed contra proferentem, that is, against the covenantor;[17]

(h)               whether a covenant has been breached or not is a question of fact to be determined according to the facts of the case and in the light of the actual language in which the restrictive covenant is framed;[18] and

(i)                 generally speaking, the proper construction of an instrument intended to have legal effect is a question of law, not fact.[19]  On the other hand, the meaning of a particular word or expression in such an instrument may be a question of fact, particularly where the Court has already determined as a matter of construction that the word or expression is used in its ordinary and natural meaning.[20]

Matthew Townsend
Owen Dixon Chambers
http://www.vicbar.com.au/profile?3183
townsend@vicbar.com.au (04) 1122 0277
Liability limited by a scheme approved under Professional Standards Legislation

[1]               Bradbrook and Neave’s Easements and Restrictive Covenants, AJ Bradbrook and SV MacCallum, 3rd Ed, (‘Bradbrook & Neave’), [15.3].

[2]               Bradbrook & Neave; But see Prowse v Johnston & Ors [2012] VSC 4 at [55]–[58] (‘Prowse’).

[3]               Re Marshall and Scott’s Contract [1938] VLR 98, 99; Ferella v Otvosi (2005) 64 NSWLR 101 at 107 (‘Ferella’); Ex parte High Standard Constructions Limited (1928) 29 SR (NSW) 274 at 278 (‘High Standard’); Prowse at [52].

[4]               Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 at [157]-[158](‘Phoenix); Westfield Management Limited v Perpetual Trustee Company Limited, (2007) 233 CLR 528 at [44] (‘Westfield’).

[5]               Ferella at 107; High Standard at 278;  Prowse at [52].

[6]               Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22], 462 per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Phoenix at [148]-[149].

[7]               Phoenix at [157]-[158].   

[8]               These are limited by the decision in Westfield and subsequent decisions: see Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324; Berryman v Sonnenschein [2008] NSWSC 213; Shelbina Pty Ltd v Richards [2009] NSWSC 1449; Neighbourhood Association DP No 285220 v Moffat [2008] NSWSC 54; Fermora Pty Ltd v Kelvedon Pty Ltd [2011] WASC 281 at [33]-[34]; Prowse at [58].

[9]               Westfield at [37]-[42]; Sertari at [15]; Phoenix at [148]-[158].

[10]             Westfield at [39].

[11]             Richard van Brugge v Hare [2011] NSWSC 1364 at [36]; Big River Paradise Ltd v Congreve [2008] NZCA 78 at [23].

[12]             Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324 at [16]; See Fermora Pty Ltd v Kelvedon Pty Ltd [2011] WASC 281 at [33]; Prowse at [58].

[13]             Bradbrook & Neave at [15.4] citing Christie & Purdon v Dalco Holdings Pty Ltd [1964] Tas SR 34 at 41.

[14]             Ferella at [17]; In Re Marshall and Scott’s Contract [1938] VLR 98, at 100 where Mann CJ observed that small differences of language can be of great importance and that the decision often turns on them; Prowse at [54].

[15]             (1982) 149 CLR 337.

[16]             Westfield; Ryan v Sutherland [2011] NSWSC 1397 at [10]; Prowse at [57].

[17]             Ferella at [21]; Bradbrook & Neave’s at [15.6].

[18]             Per Herring CJ in In Re Bishop and Lynch’s Contract [1957] VLR 179 at 181; Prowse at [53].

[19]             See, in relation to statutes, S v Crimes Compensation Tribunal [1998] 1 VR 83 at 88 (J D Phillips JA).  See, in relation to written contracts, FAI Insurance Co Ltd v Savoy Pty Ltd [1993] 2 VR 343 at 351 (Brooking J); O’Neill v Vero Insurance Ltd [2008] VSC 364 [10] (Beach J); Prowse at [53].

[20]             See S v Crimes Compensation Tribunal [1998] 1 VR 83 at 88; cf Phoenix at [158]; Prowse at [53].

Regularising a longstanding breach of a covenant

There is a little known provision in the Planning and Environment Act 1987 (Act) that has been interpreted to allow the modification of a covenant without notice if the covenant has been breached for a period of two years or more. Section 47(2) of the Act provides:

(2)          Sections 52 and 55 do not apply to an application for a permit to remove a restriction (within the meaning of the Subdivision Act 1988) over land if the land has been used or developed for more than 2 years before the date of the application in a manner which would have been lawful under this Act but for the existence of the restriction.

Section 52 of the Act deals with advertising of applications for permits to potentially affected third parties and section 55 deals with referral to bodies such as DELWP, Telstra, VicRoads and so on.

In Hill v Campaspe SC [2004] VCAT 1399, the Tribunal explained:

26           My conclusion is that if part of a covenant is breached, and the breach continues for 2 years without any action on the part of those having the  benefit of the covenant, it is reasonable that no notice should be given of  an application to vary by removal part of the covenant of which there is a breach.  But this exemption from notice pursuant to section 47(2) of the Act should not extend to the removal of any aspect of a covenant of which there is no breach.

Although the proper interpretation of this provision is not free from doubt, this decision suggests that if a use or development has been in breach of a covenant for more than two years, a permit can be granted to remove or modify the covenant to regularise the use or development. If you rely on this provision, the relevant responsible authority under the Act should issue the permit to remove or amend the covenant without notifying other beneficiaries. However, as DP Gibson cautions, the power is limited, so any application should be judiciously drafted.

Matthew Townsend
Owen Dixon Chambers
http://www.vicbar.com.au/profile?3183
townsend@vicbar.com.au (04) 1122 0277
Liability limited by a scheme approved under Professional Standards Legislation