Supreme Court practice

A guide to mediating a restrictive covenant dispute

Posted by

2

At the second return of an application for the modification of a restrictive covenant (usually, the first hearing after notification to beneficiaries), the judge may ask whether you wish to set the matter down for mediation.

If one or both parties agree, the judge may add the following words into the draft orders:

– The proceeding be referred to a mediator to be agreed between the parties or in default of agreement to be appointed by the Court, such mediation is to take place by [date].
– The mediation must be attended by those persons who have the ultimate responsibility for deciding whether to settle the dispute and the terms of any settlement and the lawyers who have ultimate responsibility to advise the parties in relation to the dispute and its settlement.
– Subject to the terms of this order, the solicitor for the plaintiff must, after consultation with all parties, deliver to the mediator a copy of this order and copy of any other relevant information, and take all steps necessary to ensure that the mediation commences as soon as practicable.
– The mediator not later than 3 days after conclusion of the mediation, report back to the Court as to whether the mediation is finished.
– Subject to any further order, the costs of the mediation shall be paid in the first instance by the plaintiff.

For plaintiffs, the benefit of mediating is the prospect of an almost certain outcome in litigation that they are likely to end up financing. It also perhaps comes as the unwelcome news arrives that the case is going to be contested.

For defendants, it may also mean that an acceptable outcome may be achieved, without the expense and inconvenience of having to prepare for a contested hearing.

For both parties, mediation permits creative settlement opportunities that might not be possible in an otherwise binary decision making process. For instance, in Rosenwald v Hogg, Macaulay J observed:

This is a classic example of a case where the parties may well have been able to achieve a ‘compromise’ result, by negotiation and agreement,  which the court simply could not give them.  That opportunity was given to the parties at the commencement of this case when I pointed out the finely balanced difference between them having regard to their respective experts’ opinions.

One example may be the articulation of building envelopes as occurred in this case.

Another example might be the drafting of a side agreement, for instance, in relation to the retention of protection of vegetation during the development process. Bear in mind, however, that side agreements may be personal and of little use if the relevant land is subsequently sold. Covenants, of course, mostly run with the land.

A mediation will usually take only half a day. They normally commence with the mediator explaining that what is said in the mediation is ‘without prejudice’–that is, it cannot be referred to in open Court. And then the parties may take a few minutes each setting out what they hope to achieve from the mediation. The mediator may then take the parties aside to ‘caucus’ or endeavour to ascertain the underlying objectives of importance to each party. Identifying these underlying issues is likely to assist in achieving an outcome that is acceptable for everyone.

The choice of the mediator is important. Someone who has experience in the jurisdiction is more likely to be able to fairly and accurately assess the likely range of outcomes at a contested hearing. Three names include:

A mediator is not there to provide legal advice to act as a party’s advocate. That said, there may be some practical benefit in having a neutral third party explaining the process in objective terms. For unrepresented parties, and for those quite unfamiliar with the process of modifying a restrictive covenant, this may be of particular assistance.

For applicants, it is important to remember that simply because you have a mediated agreement doesn’t mean the Court will necessarily accept that agreement by modifying the covenant in the manner agreed. You may still need to convince a judge that you have established an absence of substantial injury on the totality of beneficiaries, and that there are no other reasons why the judge should exercise his or her residual discretion against the modification proposed. However, a mediated outcome, in most cases, will certainly assist in proving to the Court an absence of substantial injury and one might suggest that it’s still better to fail here, than after the expense of a contested hearing.

How to choose a lawyer to run your restrictive covenant case

Posted by

1

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

Posted by

1

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

Posted by

2

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.

The Supreme Court published information for objectors in December 2017.

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.

 

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

Posted by

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

Posted by

1

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

Posted by

1

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].

The Court reaffirms defendants’ right to costs, notwithstanding Calderbank offers

Posted by

1

The Supreme Court has reaffirmed the principle in Re: WIthers [1970} VR 319, that in restrictive covenant cases, defendants are ordinarily entitled to their standard costs, even if they lose the contested proceedings.

In a carefully considered decision, in Wong v McConville & Ors (No.2) [2014] VSC 282, AJ Derham rejected the plaintiff’s application for indemnity costs, notwithstanding that she made two “Calderbank offers”, or offers of compromise foreshadowing an application for indemnity costs should the defendants achieve a worse outcome at trial than the offer contained in the Calderbank letter.

Although a number of aspects of his Honour’s judgement turned on the particular facts of the merits hearing (see Wong v McConville & Ors [2014] VSC 148), the decision underscores the difficulty Plaintiffs face when endeavouring to settle an application to modify or remove a restrictive covenant prior to a contested hearing.

Some principles emerge from the case:

Calderbank offers are unlikely to be effective before all relevant evidence has been circulated:

There are usually no pleadings in cases of this kind, and there were none in this case. At the time the offer was made, and closed, the defendants had not, and had not been required to, file their evidence, including expert evidence. Nor had significant evidence in response to the evidence of the defendants, notably the Supplementary Report of Mr Easton, been filed or served. Thus the stage at which the offer was made preceded a full consideration of the relevant material. The prime focus of that material was the expert opinion of Mr Gattini, upon whose views the defendants were well entitled to depend in considering the offer, and Mr Easton’s response to it in October 2013. Another important element of the defendants’ evidence was the evidence of Mr Zhang concerning the effects of the proposed modification on the amenity of his, and his family’s, occupation of the neighbouring land. The defendants were entitled to consider the entirety of the evidence when considering their position. [Emphasis added]

Additional time, relative to ordinary proceedings, should be allowed to consider a Calderbank offer given the difficulty of getting instructions from a large group of objectors:

30… 14 days was allowed. Considered in isolation, that time is not umeasonable. This factor, however, must be considered in this case in conjunction with the first factor. The ability of the defendants, as a group, to consider the offer and arrive at a reasoned view must necessarily have been affected by the fact that they are brought together as neighbours. They were apparently not otherwise associated with one another. They lived at quite separate locations within the subdivision. They were encouraged by the Court’s orders to combine their resources so as to reduce costs. This, I infer, was likely to make it more difficult and time consuming to arrive at a decision. This is a matter that the plaintiff’s advisers ought to have known. Having regard to the state of the evidence at the time, either the offer was made too early, or insufficient time was given for them to consider the offer. [Emphasis added]

A good deal of ingenuity will be needed to devise an offer that is both attractive to defendants, but that will bind future owners of the land

35. The submission by the defendants that the concessions offered by the plaintiff in relation to setbacks and landscaping, in each of the 8 August and 10 October offers, could not form any part of an order of the Court modifying the covenant, has particular significance in this case. In this regard, the plaintiff submitted that the setback provision in the offer of 8 August could be made the subject of a negative stipulation (for example, that any dwelling at the rear of the burdened land shall not be closer than three metres to the southern boundary). The plaintiff’s counsel also submitted that the other elements of the offers could also be the subject of negative stipulations. I do not think that this is correct. It is, in my view beyond human ingenuity to turn a positive agreement to plant tall screening plants along the western and southern boundaries of the land into a negative stipulation. It must be remembered in this context, that it is immaterial whether the wording of the covenant is positive or negative. What is essential is that the covenant is negative in substance: Shepherd Homes Ltd v Sandham (No 2). [Emphasis added]

Read as a whole, the decision does not suggest Calderbank letters will be of no use in restrictive covenant cases. Rather, it perhaps suggests that they are unlikely to be effective much earlier than immediately before trial and that considerable efforts will be needed to devise an offer that is unreasonable for the defendants to reject on the merits. Solicitors will need to do far more than offer to reimburse the defendants’ costs in exchange for their collective capitulation.

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

An overview of the process for modifying a restrictive covenant under the Property Law Act 1958 with precedents

Posted by

1

Originating motion in support of an application to modify or remove a restrictive covenant

If you are yet to decide which process to follow to modify or remove a restrictive covenant, you should read this article first. If you have already elected to pursue the Property Law Act 1958 or Supreme Court process, then the following discussion is an overview, along with some precedents you may wish to use. These are updated regularly.

To begin, when applying to remove or modify a covenant in the Supreme Court, an Originating Motion will need to be prepared, setting out the relief sought. Most applications will only need a simple Originating Motion such as this, this, this or this. More complex examples that incorporate applications for declarations can be found here, here, here and here.

In determining how to phrase the modification sought, you should seek the minimum change necessary to achieve your objectives. That is, if you are after a dual occupancy, seek to replace ‘one dwelling’ with ‘two dwellings’ or draft a variation to allow a particular form of development. Although a practice has been to vary covenants with the addition of the following words “… but this covenant will not prohibit the construction of any development generally in accordance with the development described in the plans prepared by ABC Architects dated 1 July 2016 numbered A00 to A30”, this technique known as the ‘proviso’ has recently fallen out of favour with the Court because it means attaching plans to an instrument of transfer that may sit in the Office of Titles for decades to come. For this reason, orders that incorporate a simple building envelope are preferred. The broader point, however, is that if you ask for removal of the covenant and you don’t actually need it, you may attract unwarranted opposition. Moreover, the Court is increasingly unwilling to allow the complete removal of anything but obsolete covenants.

No summons is required at this time given that the first hearing will ordinarily be ex parte.

While the schedules of parties may have been removed from the attached examples, such a schedule is ordinarily not added until after the first return of the application, for the identity of the Defendants is not likely to be known until that time.

Overarching Obligations Certification and Proper Basis Certification should also be provided.

The Court will also want an application form completed.

A helpful Guide for Practitioners has also been prepared by the Supreme Court. This provides a checklist for applications and some draft precedents. This version was updated by the Court in December 2016, but to be prudent, download the latest version from the Supreme Court website. As at March 2018, it is understood that a review is presently underway.

Affidavit in support of and in opposition to an application to remove a single dwelling covenant

Current practice is to include an affidavit from the Plaintiff setting out the intended use and development for the property. If the land is to be sold, that should be disclosed and the Court given a realistic understanding as to how the land might be used or developed. An example of a Plaintiff’s affidavit can be found here. Traditionally, solicitors would give this information to the Court on instructions, but the emerging best practice is to hear from the applicant directly.

The Court will also want to know whether there has been previous applications to modify or remove a restrictive covenant on the land.

If the land is under contract, full details of that should be out too. Indeed, there is an argument to suggest that the application should be made under the name of the owner, even if the land is under contract.

The objective is to provide the Court with reliable information about the covenant; its purpose; the identification of land with the benefit of the covenant; and any relevant circumstances surrounding the application. Ensure you have an up-to-date certificate of title for the land and that the application is made on behalf of that party or those parties.

If relying on a map showing the location of beneficiaries, ensure the map is clear and legible and accurately reflects the location of beneficiaries.

The quickest and most cost-effective means of establishing who has the benefit and the burden of the relevant covenant is to call a professional title searching service such as Feigl and Newell on (03) 9629 3011. Dinah Newell should be able to provide you with a colour-coded cadastral plan such as this. However, you should double-check any advice you receive to identify transcription or other errors. Mistakes made at this point of the process can be expensive to fix later on.

Evidence in support and in opposition to the modification of a covenant

Once you have the above information, you can provide it to a town planner for the preparation of a planning report. Two further examples can be found here and here. This version was in support of an application to modify a covenant restricting the height of a dwelling and was praised by the Court for its clarity.

A letter instructing a town planner in a s84 application can be found here. If you want the names of planners to prepare evidence in support of (or against) an application to modify or remove a covenant, find someone who has given evidence in a contested s84 application. You can look through Supreme Court cases in relation to restrictive covenants here. Unfortunately, all too often, planners approach the task as if it were a common or garden planning application in VCAT relying on principles of public policy rather than analysing impacts on proprietary rights. This evidence will almost certainly be useless. Just as importantly, a ‘cheap’ planning report may end up becoming expensive once it becomes clear how much additional work it will create for the lawyers to fix it up. Applicants are reminded that the Supreme Court is not the Victorian Civil and Administrative Tribunal where the tribunal member can patch up evidentiary gaps with their own knowledge and experience. In the Court, judges are confined to the evidence and if your planner does not adequately address the merits of the application in his or her written evidence, at trial, any significant omissions can be fatal.

A planning report should include photographs of the neighbourhood so the Court can gain a clear understanding of the context in which the application is being made.

It should also identify land within the parent title that has been varied since the time of the original subdivision, whether this is by order of the Court, planning permission or simply a breach that has gone unchallenged. Evidence demonstrating how that change has occurred, should be annexed to the planning report when available. Often this will be the pivotal evidence in the hearing and it must be done with precision.

Applicants are sometimes keen to lodge the application without planning evidence to save costs or time, but this risks the application being dismissed for being improperly supported. Any planning evidence should be before the Court at or before the first return of the application.

In some cases, lay evidence may be sufficient, at least in opposition to a modification or removal application. For instance, in Gardencity v Grech, the defendants were successful despite the absence of any expert evidence, for the Court found the plaintiff had failed to prove the absence of substantial injury. Evidence from the defendants in that case can be found here, here and here. An example of an expert report in support of an application to oppose a modification can be found here.

For a separate discussion about what to include in an objection, look here.

The first return of the application

At the first hearing of an application, which is usually done ex parte, the Court is likely to make further orders, similar to the following for a sign to be placed on the land and for direct notice to be given to the closest beneficiaries. This raises a tactical question for applicants for it may be prudent to suggest to the Court that all beneficiaries be notified directly rather risk attracting the attention of non-beneficiaries via a sign on the land.

On the other hand, the Court has been known to be content with simply a sign on the land and no direct notification if there are no nearby beneficiaries.

The Court now also directs applicants to notify the beneficiary at the address indicated on title and at the street address, if different.

As always, practitioners should attend the Court with draft orders, preferably forwarded to the Court a few days beforehand. The Court is now directing the attachment of Information for Objectors to the draft orders. An example can be found here.

The normal standards expected of practitioners in ex parte applications apply, and you should disclose to the Court any necessary countervailing facts even if they are not helpful to your case. For instance, if your client is running a simultaneous application to modify a covenant elsewhere (which isn’t a good idea), the Court will want to know about it.

The second return–if the application is opposed

Once advertising has been carried out, an affidavit should be prepared that describes the process undertaken, the nature of responses received and whether any beneficiaries objected. This is a short example and a more comprehensive example. Leave sufficient time to complete this as it may be time consuming.

A sample letter sent should be included in the affidavit–not a copy of each letter sent.

In answering queries from third parties, including beneficiaries, avoid giving advice about who has the benefit of the covenant. Inquirers need to make their own investigations about their entitlement to participate in the proceedings and the answer is not always clear. Record details of all phone calls and emails as a summary should also be included in the affidavit of compliance.

The Court may then make orders providing for the further provision of evidence and the listing of the matter for hearing. Two examples can be found here and here. The schedule of parties may have been removed.

Increasingly, covenant cases are being set down for mediation.

The second return–if the application is not opposed

If no person seeks to become a Defendant, draft orders should be provided to the Court along with an affidavit to that effect (see examples above). Try to get the papers to the court three or four days in advance of the directions hearing so that the judge has time to read them before the hearing. Two examples can be found here and here.

Significantly, you may find that despite the absence of any defendants, you may still need to make out your argument for modification on the basis of the evidence provided. For instance, in Re Jensen, and Re: Morihovitis the Court refused relief despite the absence of any objectors.

A written outline of argument setting out why the variation or removal of the covenant should be provided to the Court, preferably in advance of the hearing. Two examples can be found here and here.

Submissions in support and in opposition to application to modify a single dwelling covenant

If the matter runs to a contested hearing, you will need to prepare a more comprehensive outline of argument. Submissions in support of a modification application can be found here: from Wong v McConville (opening); Wong (closing) and Re: Milbex. Submissions in opposition to a modification application can be found here from Re Pivotel; Suhr v Michelmore; and Prowse v Johnstone; and Re: Morrison.

To improve your client’s costs position in the litigation, a Calderbank letter or offer of compromise may be appropriate to disturb the defendants’ presumption that their costs will be reimbursed by the Plaintiff at the conclusion of the proceedings, irrespective of the outcome. A Calderbank letter needs to be drafted with precision and according to established principles if it is to be effective. Examples can be provided upon request.

Needless to say, all applications are different and great care should be taken to ensure that the relevant matters are placed before the Court.

Matthew Townsend
Owen Dixon Chambers
https://www.vicbar.com.au/profile/6975
townsend@vicbar.com.au (04) 1122 0277
Liability limited by a scheme approved under Professional Standards Legislation.

The importance of Calderbank letters in restrictive covenant cases

Posted by

The final orders in Suhr v Michelmore are a timely reminder of the importance of Calderbank letters in restrictive covenant cases, with the court ordering solicitor/client costs after an offer of compromise (in the form of a Calderbank letter) was made and rejected before the commencement of the merits hearing.

An informative paper on Calderbank offers and Offers of Compromise is attached, with thanks to my colleagues Daryl Williams SC and Andrew Downie.